-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WK/D5atMdOMFIC1eF6cTidDCCKp9bEytOZHpo3dAKC5AOylXEiIVkhkigeAkkbwH Mf9GbiRo5Uyo4eGlE+T3lQ== 0001024739-98-000378.txt : 19980415 0001024739-98-000378.hdr.sgml : 19980415 ACCESSION NUMBER: 0001024739-98-000378 CONFORMED SUBMISSION TYPE: SC 13E4 PUBLIC DOCUMENT COUNT: 13 FILED AS OF DATE: 19980414 SROS: NASD SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: MISSISSIPPI VIEW HOLDING CO CENTRAL INDEX KEY: 0000933404 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTION, FEDERALLY CHARTERED [6035] IRS NUMBER: 411795363 STATE OF INCORPORATION: MN FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: SC 13E4 SEC ACT: SEC FILE NUMBER: 005-45477 FILM NUMBER: 98592715 BUSINESS ADDRESS: STREET 1: 35 E BROADWAY CITY: LITTLE FALLS STATE: MN ZIP: 56345 BUSINESS PHONE: 6126325461 MAIL ADDRESS: STREET 1: 35 EAST BROADWAY CITY: LITTLE FALLS STATE: MN ZIP: 56345-3093 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: MISSISSIPPI VIEW HOLDING CO CENTRAL INDEX KEY: 0000933404 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTION, FEDERALLY CHARTERED [6035] IRS NUMBER: 411795363 STATE OF INCORPORATION: MN FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: SC 13E4 BUSINESS ADDRESS: STREET 1: 35 E BROADWAY CITY: LITTLE FALLS STATE: MN ZIP: 56345 BUSINESS PHONE: 6126325461 MAIL ADDRESS: STREET 1: 35 EAST BROADWAY CITY: LITTLE FALLS STATE: MN ZIP: 56345-3093 SC 13E4 1 SCHEDULE 13E4 =============================================================================== SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 -------------------- SCHEDULE 13E-4 ISSUER TENDER OFFER STATEMENT (PURSUANT TO SECTION 13(e)(1) OF THE SECURITIES EXCHANGE ACT OF 1934) MISSISSIPPI VIEW HOLDING COMPANY -------------------------------- (Name of Issuer) MISSISSIPPI VIEW HOLDING COMPANY -------------------------------- (Name of Person Filing Statement) Common Stock, Par Value $0.10 per Share --------------------------------------- (Title of Class of Securities) 605785 10 4 ----------------------------------- (CUSIP Number of Class of Securities) Thomas J. Leiferman President and Chief Executive Officer Mississippi View Holding Company 35 East Broadway Little Falls, Minnesota 56345-3093 (320) 632-5461 With Copies to: Lloyd H. Spencer, Esq. Malizia, Spidi, Sloane & Fisch, P.C. One Franklin Square 1301 K Street, N.W. Suite 700 East Washington, DC 20005 (202) 434-4660 ---------------------------------- (Name, Address and Telephone Number of Persons Authorized to Receive Notices and Communications on Behalf of Persons Filing Statement) April 13, 1998 -------------------------------------------------------------------- (Date Tender Offer First Published, Sent or Given to Security Holders) CALCULATION OF FILING FEE =============================================================================== Transaction Valuation* Amount of - --------------------- --------- $4,773,000 $954.60 =============================================================================== * For purposes of calculating fee only. Based on the Offer for 222,000 shares at the maximum tender offer price per share of $21.50. [ ] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing. Amount Previously Paid: N/A Filing Party: N/A Form or Registration No.: N/A Date Filed: N/A =============================================================================== This Issuer Tender Offer Statement (the "Statement") relates to the tender offer by Mississippi View Holding Company, a Minnesota corporation (the "Company"), to purchase up to 222,000 shares of common stock, par value $0.10 per share (the "Shares"), at prices not greater than $21.50 nor less than $19.50 per Share upon the terms and subject to the conditions set forth in the Offer to Purchase, dated April 13, 1998 (the "Offer to Purchase") and the related Letter of Transmittal (which are herein collectively referred to as the "Offer"). The Offer is being made to all holders of Shares, including officers, directors and affiliates of the Company. Item 1. Security and Issuer. (a) The name of the issuer is Mississippi View Holding Company, a Minnesota corporation. The address of its principal executive office is 35 East Broadway, Little Falls, Minnesota 56345-3093. (b) The classes of securities to which this Statement relates are the Shares. The information set forth in "Introduction" in the Offer to Purchase is incorporated herein by reference. (c) The information set forth in "Introduction" and "The Offer--Price Range of Shares; Dividends" in the Offer to Purchase is incorporated herein by reference. (d) This statement is being filed by the Issuer. Item 2. Source and Amount of Funds or Other Consideration. (a)-(b) The information set forth in "The Offer--Source and Amount of Funds" in the Offer to Purchase is incorporated herein by reference. Item 3. Purpose of the Tender Offer and Plans or Proposals of the Issuer. (a)-(j) The information set forth in "Introduction", "Special Factors--Background of the Offer" and "--Purposes of and Reasons for the Offer," and" The Offer--Number of Shares; Proration", and "--Effects of the Offer on the Market for Shares; Registration under the Exchange Act" in the Offer to Purchase is incorporated herein by reference. Item 4. Interest in Securities of the Issuer. The information set forth in "Special Factors--Interest of Directors and Executive Officers; Transactions and Arrangements Concerning Shares" in the Offer to Purchase is incorporated herein by reference. Item 5. Contracts, Arrangements, Understandings or Relationships With Respect to the Issuer's Securities. The information set forth in "Introduction", "The Offer--Number of Shares; Proration", "--Effects of the Offer on Market for Shares; Registration under the Exchange Act" "Special Factors--"Background of the Offer", "--Purposes of and Reasons for the Offer," and "--Interest of Directors and Executive Officers; Transactions and Arrangements Concerning Shares" in the Offer to Purchase is incorporated herein by reference. 2 Item 6. Persons Retained, Employed or to be Compensated. The information set forth in "The Offer--Fees and Expenses" in the Offer to Purchase is incorporated herein by reference. Item 7. Financial Information. The information set forth in "Certain Information Concerning the Company-- Selected Consolidated Financial Information" and "--Unaudited Pro Forma Financial Information" and Annex II in the Offer to Purchase is incorporated herein by reference. Item 8. Additional Information. (a) Not applicable. (b) The information set forth in "Miscellaneous" in the Offer to Purchase is incorporated herein by reference. (c) The information set forth in "The Offer--Effects of the Offer on the Market for Shares; Registration Under the Exchange Act" in the Offer to Purchase is incorporated herein by reference. (d) Not applicable. (e) The information set forth in the Offer to Purchase and the related Letter of Transmittal, copies of which are attached hereto as Exhibits (a)(1) and (a)(2), respectively, is incorporated herein by reference in their entirety. Item 9. Material to be Filed as Exhibits. (a)(1) Form of Offer to Purchase dated April 13, 1998. (a)(2) Form of Letter of Transmittal. (a)(3) Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees dated April 13, 1998. (a)(4) Form of Letter to Clients from Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees dated April 13, 1998. (a)(5) Form of Notice of Guaranteed Delivery. (a)(6) Form of Letter to Stockholders from the Chief Executive Officer of the Company dated April 13, 1998. (a)(7) Form of press release issued by the Company dated April 13, 1998. (a)(8) Form of Letter to Participants in the Community Federal Savings and Loan Association of Little Falls Employee Stock Ownership Plan dated April 13, 1998. 3 (a)(9) Form of Letter to Participants in the Community Federal Savings and Loan Association of Little Falls Profit Sharing Plan dated April 13, 1998. (a)(10) Form of Letter to Participants in the Community Federal Savings and Loan Association of Little Falls Management Stock Bonus Plan dated April 13, 1998. (b) Not applicable. (c)(1) Mississippi View Holding Company Stock Employee Compensation Trust Agreement (c)(2) Common Stock Purchase Agreement (d) Not applicable. (e) Not applicable. (f) Not applicable. 4 SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: April 10, 1998. MISSISSIPPI VIEW HOLDING COMPANY By: /s/ Thomas J. Leiferman ----------------------- Name: Thomas J. Leiferman Title: President and Chief Executive Officer INDEX OF EXHIBITS (a)(1) Form of Offer to Purchase dated April 13, 1998. (a)(2) Form of Letter of Transmittal. (a)(3) Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees dated April 13, 1998. (a)(4) Form of Letter to Clients from Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees dated April 13, 1998. (a)(5) Form of Notice of Guaranteed Delivery. (a)(6) Form of Letter to Stockholders from the Chief Executive Officer of the Company dated April 13, 1998. (a)(7) Form of press release issued by the Company dated April 13, 1998. (a)(8) Form of Letter to Participants in the Community Federal Savings and Loan Association of Little Falls Employee Stock Ownership Plan dated April 13, 1998. (a)(9) Form of Letter to Participants in the Community Federal Savings and Loan Association of Little Falls Profit Sharing Plan dated April 13, 1998. (a)(10) Form of Letter to Participants in the Community Federal Savings and Loan Association of Little Falls Management Stock Bonus Plan dated April 13, 1998. (b) Not applicable. (c)(1) Mississippi View Holding Company Stock Employee Compensation Trust Agreement (c)(2) Common Stock Purchase Agreement (d) Not applicable. (e) Not applicable. (f) Not applicable. EX-99.(A)(1) 2 OFFER TO PURCHASE MISSISSIPPI VIEW HOLDING COMPANY Offer to Purchase For Cash Up to 222,000 Shares of its Common Stock at a Purchase Price not in excess of $21.50 nor less than $19.50 Per Share THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 5:00 P.M., EASTERN TIME, ON MONDAY, MAY 11, 1998, UNLESS THE OFFER IS EXTENDED. Mississippi View Holding Company, a Minnesota corporation (the 'Company'), invites its shareholders to tender shares of its common stock, $0.10 par value per share (the 'Shares') at prices not in excess of $21.50 nor less than $19.50 per Share in cash, as specified by shareholders tendering their Shares, upon the terms and subject to the conditions set forth herein and in the related Letter of Transmittal (which together constitute the 'Offer'). The Company will determine the single per Share price, not in excess of $21.50 nor less than $19.50 per Share, net to the seller in cash (the 'Purchase Price'), that it will pay for Shares validly tendered pursuant to the Offer, taking into account the number of Shares so tendered and the prices specified by tendering shareholders. The Company will select the lowest Purchase Price that will allow it to buy 222,000 Shares (or such lesser number of Shares as are validly tendered at prices not in excess of $21.50 nor less than $19.50 per Share). All Shares validly tendered at prices at or below the Purchase Price and not withdrawn will be purchased at the Purchase Price, upon the terms and subject to the conditions of the Offer, including the proration provisions. All Shares acquired in the Offer will be acquired at the Purchase Price. THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THE COMPANY OBTAINING THE FUNDS NECESSARY TO CONSUMMATE THE OFFER AND TO PAY ALL RELATED FEES AND EXPENSES. THE OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF SHARES BEING TENDERED. SEE 'THE OFFER--CERTAIN CONDITIONS OF THE OFFER.' The Shares are traded in the over-the-counter market ('OTC'). On March 31, 1998, the last full trading day in the OTC on which a sale was reported prior to the commencement of the Offer, the closing per Share sales price was $18.50. Shareholders are urged to obtain current market quotations for the shares. FOR INFORMATION REGARDING RECENT TRADING IN THE SHARES, SHAREHOLDERS MAY CALL MACKENZIE PARTNERS, INC. AT 1-800-322-2885. See 'The Offer--Price Range of Shares; Dividends.' Any shareholder wishing to tender all or any part of his or her Shares should either (a) complete and sign a Letter of Transmittal (or a facsimile thereof) in accordance with the instructions in the Letter of Transmittal and either mail or deliver it with any required signature guarantee and any other required documents to Registrar and Transfer Company (the 'Depositary'), and either mail or deliver the stock certificates for such Shares to the Depositary (with all such other documents) or tender such Shares pursuant to the procedure for book-entry delivery set forth in 'The Offer--Procedures for Tendering Shares,' or (b) request a broker, dealer, commercial bank, trust company or other nominee to effect the transaction for such shareholder. Holders of Shares registered in the name of a broker, dealer, commercial bank, trust company or other nominee must contact that broker, dealer, commercial bank, trust company or other nominee if such shareholder desires to tender such Shares. Any shareholder who desires to tender Shares and whose certificates for such Shares cannot be delivered to the Depositary or who cannot comply with the procedure for book-entry delivery or whose other required documents cannot be delivered to the Depositary, in any case, by the expiration of the Offer must tender such Shares pursuant to the guaranteed delivery procedure set forth in 'The Offer--Procedures for Tendering Shares.' SHAREHOLDERS MUST PROPERLY COMPLETE THE LETTER OF TRANSMITTAL INCLUDING THE SECTION OF THE LETTER OF TRANSMITTAL RELATING TO THE PRICE AT WHICH THEY ARE TENDERING SHARES IN ORDER TO EFFECT A VALID TENDER OF THEIR SHARES. THE BOARD OF DIRECTORS OF THE COMPANY, BASED ON, AMONG OTHER THINGS, THE UNANIMOUS RECOMMENDATION OF A SPECIAL COMMITTEE OF NON-EMPLOYEE DIRECTORS OF THE BOARD, HAS UNANIMOUSLY APPROVED THE OFFER, HOWEVER, NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO ANY SHAREHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING SHARES. EACH SHAREHOLDER MUST MAKE THE DECISION WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER AND AT WHICH PRICE OR PRICES. Questions and requests for assistance or for additional copies of this Offer to Purchase, the Letter of Transmittal or the Notice of Guaranteed Delivery may be directed to MacKenzie Partners, Inc. (the 'Information Agent'), at its address and telephone number set forth on the back cover of this Offer to Purchase. ------------------------ The Date of this Offer to Purchase is April 13, 1998 SUMMARY This general summary is solely for the convenience of the Company's shareholders and is qualified in its entirety by reference to the full text and more specific details in this Offer to Purchase. Purchase Price.......................................... The Company will select a single Purchase Price which will be not more than $21.50 nor less than $19.50 per Share. All Shares purchased by the Company will be purchased at the Purchase Price even if tendered at or below the Purchase Price. Each shareholder desiring to tender Shares must specify in the Letter of Transmittal the minimum price (not more than $21.50 nor less than $19.50 per Share) at which such shareholder is willing to have his or her Shares purchased by the Company. Number of Shares to be Purchased........................ 222,000 Shares (or such lesser number of Shares as are validly tendered). How to Tender Shares.................................... See "The Offer--Procedures for Tendering Shares." Call the Information Agent or consult your broker for additional assistance. Brokerage Commissions................................... None. Stock Transfer Tax...................................... None, if payment is made to the registered holder. Expiration and Proration Dates.......................... Monday, May 11, 1998, at 5:00 p.m., Eastern time, unless extended by the Company. Payment Date............................................ As soon as practicable after the termination of the Offer. Position of the Company and its Directors............................................. Neither the Company nor its Board of Directors makes any recommendation to any shareholder as to whether to tender or refrain from tendering Shares. The Company has been advised that none of its directors or executive officers intends to tender any Shares pursuant to the Offer. Withdrawal Rights....................................... Tendered Shares may be withdrawn at any time until 5:00 p.m., Eastern time, on Monday, May 11, 1998, unless the Offer is extended by the Company, and, unless previously purchased, after 12:00 Midnight, Eastern time, on Monday, June 8, 1998. See "The Offer--Withdrawal Rights." Odd Lots................................................ There will be no proration of Shares tendered by any shareholder owning beneficially less than 100 Shares as of April 8, 1998, who tenders all such Shares at or below the Purchase Price prior to the Expiration Date and who checks the "Odd Lots" box in the Letter of Transmittal. See "The Offer--Number of Shares; Proration."
2 NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION ON BEHALF OF THE COMPANY AS TO WHETHER SHAREHOLDERS SHOULD TENDER OR REFRAIN FROM TENDERING SHARES PURSUANT TO THE OFFER. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THE OFFER OTHER THAN THOSE CONTAINED HEREIN OR IN THE RELATED LETTER OF TRANSMITTAL. IF GIVEN OR MADE, ANY SUCH RECOMMENDATION OR ANY SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. -------------------------- TABLE OF CONTENTS
PAGE ---- INTRODUCTION..........................................................................................................4 SPECIAL FACTORS.......................................................................................................5 1. Background of the Offer..............................................................................5 2. Purposes of and Reasons for the Offer ...............................................................8 3. Fairness of the Offer ...............................................................................9 4. Opinion of Financial Advisor .......................................................................10 5. Plans for the Company After the Offer ..............................................................16 6. Certain Effects of the Offer........................................................................16 7. Interest of Directors and Executive Officers; Transactions and Arrangements Concerning Shares................................................................................17 8. Certain Federal Income Tax Consequences.............................................................18 9. Dissenters' Rights..................................................................................20 THE OFFER............................................................................................................20 1. Number of Shares; Proration.........................................................................20 2. Procedures for Tendering Shares.....................................................................22 3. Withdrawal Rights...................................................................................26 4. Price Range of Shares; Dividends....................................................................27 5. Purchase of Shares and Payment of Purchase Price....................................................28 6. Certain Conditions of the Offer.....................................................................28 7. Extension of the Offer; Termination; Amendment......................................................30 8. Source and Amount of Funds..........................................................................30 9. Certain Information Concerning the Company..........................................................31 10. Effects of the Offer on the Market for Shares; Registration under the Exchange Act...........................................................39 11. Fees and Expenses...................................................................................39 ADDITIONAL INFORMATION...............................................................................................40 MISCELLANEOUS........................................................................................................40 Schedule A................. Certain Information Concerning the Directors and Executive Officers of the Company Annex I.................... Opinion of FinPro, Inc. Annex II................... Financial Statements of Mississippi View Holding Company and Subsidiary
3 To the Holders of Common Stock of Mississippi View Holding Company: INTRODUCTION Mississippi View Holding Company, a Minnesota corporation (the "Company"), invites its shareholders to tender shares of its common stock, $0.10 par value per share (the "Shares") at prices, net to the seller in cash, not in excess of $21.50 nor less than $19.50 per Share, as specified by shareholders tendering their Shares, upon the terms and subject to the conditions set forth herein and in the related Letter of Transmittal (which together constitute the "Offer"). The Company will determine the single per Share price, not in excess of $21.50 nor less than $19.50 per Share (the "Purchase Price"), that it will pay for Shares validly tendered pursuant to the Offer, taking into account the number of Shares so tendered and the prices specified by tendering shareholders. The Company will select the lowest Purchase Price that will allow it to buy 222,000 Shares (or such lesser number of Shares as are validly tendered). All Shares acquired in the Offer will be acquired at the Purchase Price. All Shares validly tendered at prices at or below the Purchase Price and not withdrawn will be purchased at the Purchase Price, net to the seller in cash, upon the terms and subject to the conditions of the Offer, including the proration provisions. The Offer is conditioned upon, among other things, the Company obtaining the funds necessary to consummate the Offer and to pay all related fees and expenses (the "Financing Condition"). The Offer is not conditioned on any minimum number of shares being tendered. See "The Offer--Certain Conditions of the Offer." Upon the terms and subject to the conditions of the Offer, if at the expiration of the Offer more than 222,000 Shares are validly tendered at or below the Purchase Price and not withdrawn, the Company will buy Shares first from all Odd Lot Holders (as defined in "The Offer--Number of Shares; Proration") who validly tender all their Shares at or below the Purchase Price and then on a pro rata basis from all other shareholders who validly tender at prices at or below the Purchase Price (and did not withdraw them prior to the expiration of the Offer). See "The Offer--Number of Shares; Proration." All Shares not purchased pursuant to the Offer, including Shares tendered at prices greater than the Purchase Price and not withdrawn and Shares not purchased because of proration, will be returned at the Company's expense to the shareholders who tendered such Shares. The Purchase Price will be paid net to the tendering shareholder in cash for all Shares purchased. Tendering shareholders will not be obligated to pay brokerage commissions, solicitation fees or, subject to Instruction 7 of the Letter of Transmittal, stock transfer taxes on the purchase of Shares by the Company. HOWEVER, ANY TENDERING SHAREHOLDER OR OTHER PAYEE WHO FAILS TO COMPLETE, SIGN AND RETURN TO THE DEPOSITARY THE SUBSTITUTE FORM W-9 THAT IS INCLUDED IN THE LETTER OF TRANSMITTAL MAY BE SUBJECT TO REQUIRED BACKUP FEDERAL INCOME TAX WITHHOLDING. SEE "THE OFFER--PROCEDURES FOR TENDERING SHARES" OF THIS OFFER TO PURCHASE AND INSTRUCTION 12 OF THE LETTER OF TRANSMITTAL. The Company will pay all fees and expenses of Registrar and Transfer Company (the "Depositary") and MacKenzie Partners, Inc. (the "Information Agent") incurred in connection with the Offer. See "The Offer--Fees and Expenses." The Company is the sponsor of three employee benefit plans (the "Stock Plans") which hold Shares: the Community Federal Savings and Loan Association of Little Falls Employee Stock Ownership Plan ("ESOP"); the Community Federal Savings and Loan Association of Little Falls Management Stock Bonus Plan ("MSBP"); and the Community Federal Savings and Loan Association of Little Falls Profit Sharing Plan ("Profit Sharing Plan"). Participants in each plan have the right to direct the Trustee to tender Shares in their accounts, to specify the price at which such Shares (if any) are to be tendered and to receive tender offer materials in connection therewith. THE BOARD OF DIRECTORS OF THE COMPANY, BASED ON, AMONG OTHER THINGS, THE UNANIMOUS RECOMMENDATION OF A SPECIAL COMMITTEE OF NON-EMPLOYEE DIRECTORS OF THE BOARD (THE "SPECIAL COMMITTEE"), HAS UNANIMOUSLY APPROVED THE 4 OFFER. HOWEVER, NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO ANY SHAREHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING THEIR SHARES. EACH SHAREHOLDER MUST MAKE THE DECISION WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES AND AT WHICH PRICE OR PRICES. On April 2, 1998, the Board of Directors of the Company approved the creation of a stock employee compensation trust (the "Trust") for the purpose of enabling the Company to pre-fund a portion of its obligations under certain of its employee benefit plans and to make an ongoing commitment to such employee benefit plans and the employees participating in them. Pursuant to its terms, the Trust is restricted from funding any liabilities of the Company related to future benefit plans which benefit directors of the Company. Pursuant to an agreement between the Company and the Trust dated April 10, 1998, the Company will sell to the Trust, in exchange for a note in an aggregate principal amount of $1,214,750 issued by the Trust to the Company, the number of Shares having a value of $1,214,750 based on the Purchase Price subject, however, to the Trust not purchasing more than 9.9% of the outstanding Shares. It is currently anticipated that the consummation of the sale of Shares to the Trust will occur on the day immediately following the Expiration Date. Assuming the maximum 222,000 Shares are purchased pursuant to the Offer and the sale of Shares to the Trust immediately after the Expiration Date, officers, directors, the ESOP, the MSBP and the Trust, in the aggregate, will own approximately 49.5% of the outstanding Shares. Consequently, the officers and directors will be able to exert greater control over the business affairs and management of the Company than that which they were able to exert prior to the Offer. In addition, it will be more difficult to remove directors and change the management. See "Special Factors--Certain Effects of the Offer." The Special Committee was formed on April 2, 1998, for the purpose of reviewing and considering the creation of a stock employee compensation trust and stock repurchases by the Company. FinPro, Inc. ("FinPro"), financial advisor to the Special Committee and the Board, has delivered its opinion to the Special Committee and the Board of Directors to the effect that the Offer is fair, from a financial point of view, to the shareholders of the Company. A copy of this opinion is attached hereto as Annex I. Shareholders should read the full text of FinPro's opinion for a description of the assumptions made, matters considered and procedures followed in rendering such opinion. See "Special Factors--Opinion of Financial Advisor." See "Special Factors--Fairness of the Offer" for the various factors considered by the Special Committee in approving the Offer and in unanimously recommending that the Board approve the Offer. As of April 9, 1998, there were 736,864 Shares outstanding held by approximately 199 holders of record, and 92,860 Shares issuable upon exercise of stock options under the Company's stock option plans. The 222,000 Shares that the Company is offering to purchase pursuant to the Offer represent approximately 30% of the outstanding Shares. The Shares are traded in the over-the-counter market ("OTC") with quotations available through the OTC Electronic Bulletin Board. Shareholders are urged to obtain current market quotations for the Shares. For trading information regarding the Shares, shareholders may call MacKenzie Partners, Inc. at 1-800-322- 2885. See "The Offer--Price Range of Shares; Dividends." SPECIAL FACTORS 1. Background of the Offer The Company was organized in November 1994 at the direction of Community Federal Savings and Loan Association of Little Falls (the "Association") in connection with the Association's conversion from the mutual to stock form (the "Conversion"). On March 23, 1995, the Association completed the Conversion and became a wholly owned subsidiary of the Company. The Conversion generated, through the issuance of common stock of the Company, $7.6 million of new capital to the Company, of which approximately $3.8 million was contributed to the Association, whose capital ratios prior to the Conversion had significantly exceeded all minimum federal 5 regulatory capital requirements. Prior to the Conversion, the Association's total risk-based capital ratio was 20.08% which exceeded the minimum regulatory capital requirement of 8% by 12.08%. After the Conversion as of March 31, 1995, the Association's total risk-based capital ratio was 32.07%, exceeding the minimum regulatory capital requirement by 24.07%. The additional capital was raised through the Conversion due to regulations (the "Conversion Regulations") promulgated by the Office of Thrift Supervision (the "OTS") governing conversions from the mutual to stock form by savings associations. After the Conversion, the cash proceeds were invested in U.S. Government and federal agency securities. Due to the Offering of stock of the Company in connection with the Conversion and pursuant to the Conversion Regulations, the Company's common stock was registered under Section 12(g) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). In addition, the Conversion Regulations have required the Company to maintain such registration for a period of no less than three years from the consummation of the Conversion on March 23, 1995. Since the Conversion, management has attempted to deploy the additional capital in such a manner so as to maximize earnings. However, due to limited loan demand within the Association's market area, management has been unable to substantially increase the Association's loan portfolio. As of September 30, 1994, the Association's loans receivable, net was $44.2 million compared with $44.5 million as of December 31, 1997. Consequently, the cash proceeds from the Conversion have either been invested in mortgage-backed securities or have remained in U.S. Government and federal agency securities. Both mortgage-backed securities and U.S. Government securities typically have lower yields than substantially all loans contained in the Association's loan portfolio. The inability to invest the Conversion proceeds in higher yielding assets such as loans has adversely affected the Company's return on average equity. For the three months ended December 31, 1997, the Company's annualized return on average equity was 6.37% compared to 7.35% for the Comparable Group. For more information regarding the Comparable Group, see " --Opinion of Financial Advisor." The Company has considered the use of the excess capital to fund growth of the Association through branch acquisitions and/or acquisitions of other financial institutions. However, the Company has been unable to identify potential institutions and transactions which would meet the strategic goals of the Company or with terms which were acceptable. The Company may still consider such acquisitions after the Offer. In light of the above, the Company has taken efforts to reduce capital through the payment of dividends and the implementation of open market repurchase programs during the past three years. In fiscal years 1996 and 1997, the Company paid annual cash dividends of $0.16 per share. In addition, as of December 31, 1997, the Company had repurchased approximately 27% of the common stock sold in the Conversion. While such efforts have reduced capital, the Company still has excess capital which is adversely affecting the return on average equity. As of December 31, 1997, the Association's total risk-based capital ratio was 33.09%. In February 1998, management discussed with the Board of Directors a proposal to repurchase stock by means of an issuer tender offer. The Board discussed the matter at such meeting and instructed management to obtain further information from counsel regarding the structure, timing and costs of such an offer. At the Board of Director's meeting in March 1998, the Board was advised of management's review of issuer tender offers and provided a memorandum from counsel. The Board considered that the Conversion Regulations have restricted the amount and timing of stock repurchases conducted by the Company during the past three years and that such restrictions would be lifted on March 23, 1998, the third anniversary of the consummation of the Conversion. Absent such restrictions, the Board discussed the possibility of a one-time repurchase of a large block of stock in order to reduce excess capital and possibly save costs. Management also discussed with the Board of Directors a proposal to create a stock employee compensation trust ("SECT") to fund existing stock compensation plans and future stock compensation plans. The Board instructed management to consult with counsel regarding the advantages, disadvantages and mechanics of such a trust. After the meeting, management had further discussions with counsel regarding issuer tender offers and SECTs. 6 On April 2, 1998, the Board of Directors of the Company established the Special Committee. The members appointed to the Special Committee were Peter Vogel and Wallace R. Mattock. In addition, the Board authorized management to create a SECT on behalf of the Company. In so authorizing management, the Board considered the anticipated effects on future compensation expenses and on the voting power to be held by affiliates resulting from the creation of a SECT. Based on a review of liquidity, the average rate on earning assets and return on equity as well as other factors, the Board authorized management to prepare terms of an issuer tender offer and propose such terms to the Special Committee for its review and consideration. The Special Committee met on April 8, 1998 to act on organizational matters and review and consider the proposed transaction. At that meeting the Special Committee ratified the selection of FinPro, as financial advisor, and directed counsel to, and counsel did by letter dated April 10, 1998, instruct the Board that any proposals from third parties relating to an acquisition of the Company should be referred to the Special Committee for its consideration and recommendation. The Special Committee then invited a representative from FinPro into the meeting, by teleconference, and received an analysis from FinPro of the estimated trading value of the Shares based on a comparable trading analysis, acquisition analysis and a discounted cash flow analysis. FinPro then presented an analysis of multiples to trading value for comparable issuer tender offers by similar financial institution holding companies. Members of the Special Committee asked questions of counsel and FinPro regarding the methodologies used by FinPro, the ramifications of third party offers and the effect on the value of Shares held by remaining shareholders. The Special Committee then invited a representative of management into the meeting and discussed the potential need for financing and the likelihood of obtaining financing, the possibility of increasing the dividend to the Company from the Association and the need for regulatory approval and the size of the repurchase in light of aggregate costs. On April 9, 1998, the Special Committee met with FinPro, counsel and a management representative. At such meeting FinPro presented a booklet containing its analysis of the Company, the Offer and the methodologies it employed. The Special Committee asked questions regarding FinPro's presentation regarding the extent to which growth potential was considered, the adjustments made to FinPro's acquisition analyses and the effect of the Offer on future earnings per Share. FinPro provided the Special Committee with its recommendation regarding the pricing of the Offer and the Special Committee questioned FinPro's analyses regarding the selection of members of the comparable groups, the effect of the current illiquidity in the Shares and the short-term and long-term Share price potential after successful completion of such an offer. FinPro stated that it was prepared to render its opinion that the Offer (based on the range it recommended) was fair from a financial point of view to the shareholders of the Company. The Special Committee, by unanimous vote, determined to accept FinPro's recommended pricing and to recommend that the Board of Directors approve the Offer as fair and in the best interests of the Company and its shareholders. The Board of Directors met after the Special Committee meeting on April 9, 1998, with all directors in attendance. The proposed offer with a price range of $19.50 to $21.50 was presented. The Board reviewed the opinion of FinPro, the recommendation of the Special Committee and the terms of the Offer, including the sale of Shares to the Trust, and determined to approve the Offer as fair and in the best interests of the Company and its shareholders. 7 2. Purposes of and Reasons for the Offer The Company is making the Offer to promote its long-term objectives of (1) remaining a locally owned financial institution committed to the convenience and needs of the communities served by the Association, and (2) providing a fair financial return to its shareholders as well as providing those shareholders who desire to sell their Shares an opportunity to do so at a fair price. The Company has recognized that since the Shares were delisted from the Nasdaq SmallCap Market on March 17, 1998, there is no established market for the Shares and limiting opportunities for shareholders to sell their Shares. The Company also believes that its purchase of Shares represents an attractive long-term investment that will benefit the Company and its remaining shareholders. The Offer is designed to reposition the Company's balance sheet to increase return on equity and earnings per share by redeploying a portion of the Company's equity capital. In addition, the Offer will offset the earnings per share dilution which would otherwise result from the issuance of Shares to the Trust, as referred to above. Following completion of the Offer, the Company and the Association, will continue to have strong capital positions and will continue to qualify as "well capitalized" institutions under the prompt corrective action scheme enacted by the Federal Deposit Insurance Corporation Improvements Act of 1991. On a pro forma basis as of December 31, 1997, giving effect to the Offer at the maximum Purchase Price of $21.50 per Share and assuming acceptance of the maximum number of Shares in the Offer, the Company would have had an equity to assets ratio of 12.07%, and the Association would have had a total risk-based capital ratio of approximately 20.10% and a leverage ratio of approximately 10.38%. The Offer will enable shareholders to sell a portion of their Shares while retaining a continuing equity interest in the Company if they so desire. The Offer may provide shareholders who are considering a sale of all or a portion of their Shares the opportunity to determine the price or prices (not greater than $21.50 nor less than $19.50 per Share) at which they are willing to sell their Shares and, if any such Shares are purchased pursuant to the Offer, to sell those Shares for cash without the usual transaction costs associated with open-market sales. In addition, Odd Lot Holders whose Shares are purchased pursuant to the Offer not only will avoid the payment of brokerage commissions but also would avoid any applicable odd lot discounts in a sale of such holder's Shares. To the extent the purchase of Shares in the Offer results in a reduction in the number of shareholders of record, the costs of the Company for services to shareholders may be reduced. For shareholders who do not tender, there is no assurance that the price of the stock will not trade below the price currently being offered by the Company pursuant to the Offer. For shareholders who do tender, the trading price of stock may increase as a result of the Offer or an unexpected acquisition at a premium could occur in the future. Finally, the Offer may affect the Company's ability to qualify for pooling-of-interests accounting treatment for any acquisition transaction for approximately the next two years. THE BOARD OF DIRECTORS, BASED ON, AMONG OTHER THINGS, THE UNANIMOUS RECOMMENDATION OF THE SPECIAL COMMITTEE, HAS UNANIMOUSLY APPROVED THE OFFER. HOWEVER, NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO ANY SHAREHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING ANY OR ALL OF SUCH SHAREHOLDER'S SHARES AND HAS NOT AUTHORIZED ANY PERSON TO MAKE ANY SUCH RECOMMENDATION. SHAREHOLDERS ARE URGED TO EVALUATE CAREFULLY ALL INFORMATION IN THE OFFER, CONSULT THEIR OWN INVESTMENT AND TAX ADVISORS AND MAKE THEIR OWN DECISIONS WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER AND THE PRICE OR PRICES AT WHICH SHARES SHOULD BE TENDERED. Shares the Company acquires pursuant to the Offer will be held in the Company's treasury and will be available for the Company to issue without further shareholder action (except as required by applicable law). Such Shares could be issued without shareholder approval for such purposes as, among others, the acquisition of other businesses or the raising of additional capital for use in the Company's business. 8 3. Fairness of the Offer The Company. The Special Committee of the Board, designated by the Board on April 2, 1998, and the Board upon the recommendation of the Special Committee, each unanimously approved the Offer as fair and in the best interests of the Company and its shareholders. The Special Committee took into account a number of factors, including the following, in concluding to approve the Offer: (i) The opinion delivered to the Special Committee by FinPro, financial advisor to the Special Committee, that the consideration to be received in the Offer is fair, from a financial point of view, to the Company's shareholders, and the oral and written presentations of FinPro supporting this opinion. A copy of FinPro's opinion is attached to this Offer to Purchase as Annex I and should be read in its entirety by each shareholder. For a description of the information presented by FinPro to the Special Committee, see "--Opinion of Financial Advisor" (ii) The financial condition and results of operations of the Company, including the earnings per Share and capital levels of the Company for fiscal year 1997 and the first three months of fiscal year 1998. (iii) The capital of the Company and the Association after the payment of a dividend to the Company by the Association and the Company's purchase of 222,000 Shares in the Offer would remain significantly in excess of minimum capital requirements. The following table sets forth (a) the Association's capital ratios as of December 31, 1997 and as adjusted to give effect to the purchase of 222,000 Shares, and (b) the minimum capital ratios for savings associations required by the OTS; As of December 31, 1997 ----------------------- Ratio Historical As Adjusted Minimum ----- ---------- ----------- ------- Tangible capital ratio 16.36% 10.38% 1.50% Leverage capital ratio 16.36 10.38 3.00 Total risk-based capital ratio 33.09 20.10 8.00 (iv) The percentage by which the per Share price to be paid in the Offer exceeds recent trading prices and estimated trading values. See "--Opinion of Financial Advisor." (v) Various financial ratios of the Company compared to those of comparable companies, including particularly comparisons of return on equity and equity-to-assets ratio. See "--Opinion of Financial Advisor." (vi) The likelihood that the transaction would be consummated. (vii) The fact that the public shareholders would be able to participate in the Offer by selling a portion of their Shares and have the opportunity to participate in any future growth of the Company following consummation of the Offer. The Special Committee also is aware that certain members of management of the Company will benefit from any increase in the value of the Company following the Offer by virtue of the equity interest they will have in the Company following the Offer. The Special Committee recognizes that because of the equity interests in the Company which certain members of management of the Company have or are expected to acquire following the Offer, such persons have 9 conflicts of interest in connection with the Offer. See "Interests of Certain Persons in the Offer." Accordingly, the Special Committee considered the Company's results of operations and future growth opportunities in light of these factors. (viii) The Company's payment of a dividend to the Company to purchase Shares in the Offer would not require prior approval by the OTS. Among the reasons for the Special Committee reaching its decision to approve the Offer were the following: that recent return on average equity of the Company had not shown substantial improvement; that the future prospects of the Company, particularly low growth potential; that the per Share consideration in the Offer was at a premium over the recent trading price and such premium, on a percentage basis, appeared generally comparable to, or in excess of, premiums, in other recent issuer tender offers; that based in part upon the written and oral presentations of FinPro, including the opinion of FinPro referred to above, the Special Committee concluded that the consideration in the Offer was fair to the shareholders of the Company; that based upon the various financial ratios of the Company compared to those of comparable companies in the FinPro presentation, the consideration in the Offer was fair to the shareholders of the Company; that based upon the Offer is a voluntary transaction in which shareholders of the Company may or may not participate; that the use of all-cash consideration means that the value of the consideration received by the shareholders would not be dependent on the future performance of the Company; and that, given the financial condition and capital levels of the Association, there is a significant likelihood that the Offer would be consummated. The Special Committee did not take into consideration the book value of the Company because it believed that book value did not reflect the fair value of the Company and because book value was substantially lower than the values resulting from any of the analyses of FinPro. In making its determination that the Offer is fair and in the best interests of the shareholders of the Company, the Board considered, among other things, the opinion of FinPro, the recommendation of the Special Committee, and the factors considered by the Special Committee. In view of the wide variety of factors considered in connection with its evaluation of the Offer, each of the Special Committee and the Board has found it impractical to, and therefore has not, quantified or otherwise attempted to assign relative weights to the specific factors considered in reaching a decision to approve the Offer. The Offer does not require the approval of a majority of unaffiliated security holders. All directors, including the directors who are not employees of the Company, have approved the Offer. The non-employee directors, who comprise a majority of the Board of Directors, have not retained an unaffiliated representative to act solely on behalf of the unaffiliated shareholders for purposes of negotiating terms of the Offer. It is expected that if Shares are not accepted for payment by the Company in the Offer, the Company's current management, under the general direction of the Company's Board of Directors, will continue to manage the Company as an ongoing business. The Trust. The Trust believes that the Offer is fair to shareholders. This determination is based upon the conclusions as to fairness reached by the Special Committee, the Board of Directors, and FinPro's fairness analysis and opinion. 4. Opinion of Financial Advisor As of April 2, 1998 the Company retained FinPro, a financial consulting firm, on the basis of its experience, to render a written fairness opinion to the Board of Directors and shareholders of the Company. FinPro, Inc. has been in the business of consulting for the banking industry for ten years, including the appraisal and valuation of banking institutions and their securities in connection with mergers, acquisitions and other securities transactions. FinPro has knowledge of and experience with the banking and thrift market on a national and regional 10 level. FinPro reviewed the terms of the Offer including governance matters. Except as described herein, FinPro is not affiliated in any way with the Company or its respective affiliates. On April 9, 1998, in connection with its consideration of the Offer, FinPro issued an Opinion to the Board of Directors of the Company that, in its opinion as financial consultants, the terms of the share repurchase as provided in the Offer are fair and equitable, from a financial perspective, to the Company and its shareholders. This opinion is based upon conditions as they existed on April 2, 1998. A copy of the opinion is attached as Annex I to this Offer to Purchase and should be read in its entirety by the Company shareholders. FinPro's written opinion does not constitute an endorsement of the Offer or a recommendation to any shareholder to tender their shares. In rendering its opinion, FinPro reviewed certain publicly available information concerning the Company, including its audited financial statements and annual reports. FinPro considered many factors in making its evaluation. In arriving at its Opinion regarding the fairness of the transaction, FinPro reviewed: (i) the Offer; (ii) the most recent external auditor's reports to the Boards of Directors; (iii) the December 31, 1997 Report of Condition and Income; (iv) the most recent regulatory report, compliance report and Community Reinvestment Act Report; (v) the most recent annual report (10k); (vi) the internal loan classification list, OREO list and Delinquency list; (vii) details on stock price performance; (viii) the budget and long range operating plan; and (ix) details on the ESOP and MSBP. FinPro conducted an off-site review of the Company's historical performance and current financial condition. In addition, FinPro discussed with the management of the Company the relative operating performance and future prospects for the Company, primarily with respect to the current level of their earnings and future expected operating results, giving weight to FinPro's assessment of the future of the banking industry and the Company's performance within the industry. FinPro compared the results of operation of the Company with the results of operation of all Minnesota thrifts and to those of a Comparable Group selected by FinPro on the basis of similarity with the Company. 11
At or For the Three Months Ended December 31, 1997 -------------------------------------------------------------- The Company Comparable Group Median National Median ----------- ----------------------- --------------- Balance Sheet Data Gross Loans to Deposits......................... 82.66% 107.56% 96.56% Total Net Loans to Assets....................... 66.10 73.28 69.92 Deposits to Assets.............................. 79.96 69.59 71.94 Borrowed Funds to Assets........................ 0.00 9.58 12.83 Capital Equity to Assets................................ 18.18 18.26 10.51 Tangible Equity to Assets....................... 18.18 18.26 10.45 Intangible Assets to Equity..................... 0.00 0.00 0.00 Regulatory Core Capital to Assets............... 16.36 15.12 9.16 Equity + Reserves to Assets..................... 19.44 18.47 11.19 Total Capital to Risk Adjusted Assets........... 33.09 26.83 17.62 Growth Asset Growth.................................... (7.20) 4.77 8.35 Loan Growth..................................... 1.39 11.99 10.87 Deposit Growth.................................. (2.62) 2.60 5.38 Asset Quality Non-Performing Loans to Loans................... 0.65% 0.27% 0.62% Reserves to Non-Performing Loans................ 290.24 64.36 122.13 Non-Performing Assets to Assets................. 0.43 0.23 0.49 Non-Performing Assets to Equity................. 2.38 1.17 4.41 Reserves to Loans............................... 1.90 0.44 0.81 Profitability Return on Assets................................ 1.08 1.25 0.92 Return on Equity................................ 6.37 7.35 8.22 Income Statement Net Interest Margin............................. 3.91% 3.59% 3.48% Interest Income to Average Assets............... 7.48 7.35 7.39 Interest Expense to Average Assets.............. 3.62 3.83 4.14 Net Interest Income to Average Assets........... 3.85 3.49 3.31 Noninterest Income to Average Assets............ 0.25 0.19 0.33 Noninterest Expense to Average Assets........... 2.35 2.36 2.18 Efficiency Ratio................................ 57.68 55.45 58.36
- --------------- Source: SNL Securities as of April 2, 1998 with financial data from the most recent quarter available 12 Many variables affect the value of banks, not the least of which is the uncertainty of future events, so that the relative importance of the valuation variable differs in different situations, with the result that appraisal theorists argue about which variables are the most appropriate ones on which to focus. However, most appraisers agree that the primary financial variables to be considered are earnings, equity, dividends or dividend-paying capacity, asset quality and cash flow. In addition, in most instances, if not all, value is further tempered by non-financial factors such as marketability, voting rights or block size, history of past sales of the banking company's stock, nature and relationship of the other shareholdings in the bank, and special ownership or management considerations. FinPro analyzed the total purchase price on a cash equivalent fair market value basis using the standard evaluation techniques (as discussed below) including comparable trading multiples, comparable sales multiples, net present value, return on investment and the price equity index based on certain assumptions of projected growth, earnings and dividends and a range of discount rates from 10% to 12%. Net Asset Value. Net asset value is the value of the net equity of a bank, including every kind of property and value. This approach normally assumes liquidation on the date of appraisal with the recognition of securities gains or losses, real estate appreciation or depreciation, adjustments to the loan loss reserve, discount to the loan portfolio and changes in the net value of other assets. As such, it is not the best approach to use when valuing a going concern, because it is based on historical costs and varying accounting methods. Even if the assets and liabilities are adjusted to reflect prevailing prices and yields (which is often of limited accuracy because readily available data is often lacking), it still results in a liquidation value for the concern. Furthermore, since this method does not take into account the values attributable to the going concern such as the interrelationship among the company's assets and liabilities, customer relations, market presence, image and reputation, and staff expertise and depth, little weight is given by FinPro to the net asset value method of valuation. Market Value. Market value is generally defined as the price, established on an "arms-length" basis, at which knowledgeable, unrelated buyers and sellers would agree. The market value is frequently used to determine the price of a minority block of stock when both the quantity and the quality of the "comparable" data are deemed sufficient. However, the relative thinness of the specific market for the stock of the banking company being appraised may result in the need to review alternative markets for comparative pricing purposes. The "hypothetical" market value for a small bank with a thin market for its stock is normally determined by comparison to the average price to earnings, price to equity and dividend yield of local or regional publicly-traded bank issues, adjusting for significant differences in financial performance criteria and for any lack of marketability or liquidity. The market value in connection with the evaluation of control of a bank is determined by the previous sales of banks in the state or region. In valuing a business enterprise, when sufficient comparable trading data is available, the market value deserves greater weight than the net asset value and similar emphasis as the investment value as discussed below. FinPro maintains substantial files concerning the trading prices and acquisition prices paid for thrifts and banking institutions nationwide. The database includes transactions involving national thrift organizations, Minnesota thrift organizations and thrift organizations in the Midwest region of the United States over the last five years. Organized by different peer groups, the data presents averages of financial performance, trading levels and purchase price levels, thereby facilitating a valid comparative pricing analysis. In analyzing the transaction value of the Company, FinPro has considered the market approach and has evaluated price to equity and price to earnings multiples of all national, Minnesota, the Comparable Group and Regional banking organizations with assets less than $100 million. a. Comparable Trading Multiples. FinPro calculated an "Adjusted Book Value" of $23.06 per share, based on the Company's fully diluted December 31, 1997 equity and the median price to book multiple of 136.85% for Comparable savings organizations using trading data as of April 2, 1998. FinPro calculated an "Adjusted Book Value" of $27.16 per share, based on the Company's fully diluted December 31, 1997 equity and the median price to book multiple of 161.16% for national savings organizations using trading data as of April 2, 1998. FinPro calculated an "Adjusted Book Value" of $22.55 per share, based on the Company's fully diluted December 31, 1997 13 equity and the median price to book multiple of 133.81% for Minnesota savings organizations using trading data as of April 2, 1998. FinPro calculated an "Adjusted Book Value" of $21.25 per share, based on the Company's fully diluted December 31, 1997 equity and the median price to book multiple of 126.12% for institutions less than $100 million in asset size using trading data as of April 2, 1998. FinPro calculated an "Adjusted Earnings Value" of $18.01 per share, based on the Company's fully diluted unadjusted last twelve months earnings ending December 31, 1997 and the median price to earnings multiple of 18.96 for Comparable savings organizations using trading data as of April 2, 1998. FinPro calculated an "Adjusted Earnings Value" of $19.77 per share, based on the Company's fully diluted unadjusted last twelve months earnings ending December 31, 1997 and the median price to earnings multiple of 20.81 for national savings organizations using trading data as of April 2, 1998. FinPro calculated an "Adjusted Earnings Value" of $18.65 per share, based on the Company's fully diluted unadjusted last twelve months earnings ending December 31, 1997 and the median price to earnings multiple of 19.63 for Minnesota savings organizations using trading data as of April 2, 1998. FinPro calculated an "Adjusted Earnings Value" of $21.86 per share, based on the Company's fully diluted unadjusted last twelve months earnings ending December 31, 1997 and the median price to earnings multiple of 23.01 for institutions less than $100 million in asset size using trading data as of April 2, 1998. The financial performance characteristics of the regional banking organizations vary, sometimes substantially, from those of the Company. When the variance is significant for relevant performance factors, adjustments to the price multiples are appropriate when comparing them to the transaction value. b. Comparable Sales Multiples. FinPro calculated an "Adjusted Book Value" of $26.68 per share, based on the Company's fully diluted December 31, 1997 equity and the median price to book multiple of 158.33% for Comparable savings organizations sold between April 2, 1997 and April 2, 1998. FinPro calculated an "Adjusted Book Value" of $31.27 per share, based on the Company's fully diluted December 31, 1997 equity and the median price to book multiple of 185.60% for national savings organizations sold between April 2, 1997 and April 2, 1998. FinPro calculated an "Adjusted Book Value" of $25.55 per share, based on the Company's fully diluted December 31, 1997 equity and the median price to book multiple of 151.65% for savings organizations less than $100 million in asset size sold between April 2, 1997 and April 2, 1998. FinPro calculated an "Adjusted Earnings Value" of $24.02 per share, based on the Company's fully adjusted last twelve month ended December 31, 1997 earnings and the median price to last twelve months earnings multiple of 25.28 for Comparable savings organizations sold between April 2, 1997 and April 2, 1998. FinPro calculated an "Adjusted Earnings Value" of $21.26 per share, based on the Company's fully adjusted last twelve month ended December 31, 1997 earnings and the median price to last twelve months earnings multiple of 22.38 for national savings organizations sold between April 2, 1997 and April 2, 1998. FinPro calculated an "Adjusted Earnings Value" of $21.25 per share, based on the Company's fully adjusted last twelve month ended December 31, 1997 earnings and the median price to last twelve months earnings multiple of 22.37 for savings organizations less than $100 million in asset size sold between April 2, 1997 and April 2, 1998. The financial performance characteristics of the regional banking organizations vary, sometimes substantially, from those of the Company. When the variance is significant for relevant performance factors, adjustments to the price multiples are appropriate when comparing them to the transaction value. Investment Value. The investment value is sometimes referred to as the income value or earnings value. One investment value method frequently used estimates the present value of an enterprise's future earnings or cash flow. Another popular investment value method is to determine the level of current annual benefits (earnings, cash flow, dividends, etc.), and then capitalize one or more of the benefit types using an appropriate capitalization rate such as an earnings or dividend yield. Yet another method of calculating investment value is a cash flow analysis of the ability of a banking company to service acquisition debt obligations (at a certain price level) while providing sufficient earnings for reasonable dividends and capital adequacy requirements. In connection with the cash flow 14 analysis, the return on investment that would accrue to a prospective buyer at the transaction value is calculated. The investment value methods which were analyzed in connection with this transaction were the net present value analysis, and the return on investment analysis, which are discussed below. a. Net Present Value Analysis. The investment of earnings value of any banking organization's stock is an estimate of present value of the future benefits, usually earnings, cash flow or dividends, which will accrue to the stock. An earnings value is calculated using an annual future earnings stream over a period of time of no less than ten years and the residual value which assumes the sale of the organization in the tenth year, and an appropriate capitalization rate (the net present value discount rate). FinPro's computations were based on an analysis of the banking industry, the economic and competitive situations in the Company's market area, its current financial condition and historical levels of growth and earnings. Using a net present value discount rate of 12%, an acceptable discount rate considering the risk-return relationship most investors would demand for an investment of this type as of the valuation date, the "Net Present Value of Future Earnings," equaled $20.00 per share. b. Return on Investment Analysis. Return on investment (ROI) analysis assumes the formation of a bank holding company and analyzes the ten year ROI of an equity investment equal to the Company's book value at December 31, 1997, assuming a constant return on equity of 5.96%, with a liquidation at book value in the year 2007, as opposed to a sale at 25.7 times projected earnings for the year 2007. This ROI analysis provides a benchmark for assessing the validity of the fair market value of a majority block of stock. The ROI analysis is one approach to valuing a going concern, and is directly impacted by the earnings stream, dividend payout levels and levels of debt, if any. Other financial and non-financial factors indirectly affect the ROI; however, these factors more directly influence the level of ROI an investor would demand from an investment in a majority block of stock of a specific bank at a certain point in time. The ROI, assuming a constant return on equity of 5.96% with liquidation at book value in 2007, is 5.96%, and sale at 25.7 projected earnings in 2007, is 9.86%. Price Equity Index Analysis. Furthermore, a price level indicator, the equity index, may be used to confirm the validity of the transaction value. The equity index adjusts the price to equity multiple in order to facilitate a truer price level comparison with comparable banking organizations, regardless of differing levels of equity capital. The equity index is derived by multiplying the price to equity multiple by the equity-to-assets ratio. The following table sets forth the average price equity indexes for all Minnesota public thrifts, for all Comparable public thrifts, and for the Company for the years 1997, 1996 and 1995. 1997 1996 1995 equity index equity index equity index ------------ ------------ ------------ Mississippi View 0.2008 0.1510 0.1506 Comparables 0.1963 0.1790 0.2080 Minnesota 0.2026 0.1716 0.1506 Purchase Price at $19.50 0.2038 Purchase Price at $21.50 0.2247 Finally, another test of appropriateness for the transaction value of a majority block of stock is the net present value-to-transaction value ratio. Theoretically, an earnings stream may be valued through the use of a net present value analysis. In FinPro's experience with majority block community bank stock valuations, it has determined that a relationship does exist between the net present value of an "average" community banking organization and the transaction value of a majority block of the banking organization's stock. The net present value-to-transaction value ratio ranges between and 102.56% (at $19.50 per share) to 93.02% (at $21.50 per share) for the Company, which falls within FinPro's expected range. There are many other factors to consider, when valuing a going concern, which do not directly impact the earnings stream and the net present value but which do exert a degree of influence over the fair market value of a going concern. These factors include, but are not limited to, the general condition of the industry, the economic and competitive situations in the market area and the expertise of the management of the organization being valued. 15 When the net asset value, market value and investment value methods are subjectively weighed, using the appraiser's experience and judgment, it is FinPro's opinion that the proposed transaction is fair. FinPro considered this transaction as a trading valuation rather than a merger or a purchase. Consideration was given to the levels of earnings per share, equity per share and dividends per share appreciation or dilution percentages. To justify the fairness of the transaction for the Company shareholders, it is important to project, based upon realistic projections of future performance, a positive impact for the Company shareholders. FinPro projected that the Company shareholders will have a higher level of earnings per share, equity per share and dividends per share after the transaction. The primary focus has been on short-term and long-term earnings per share, equity per share and dividends per share appreciation potential for the Company shareholders. The Company did not impose any limitations upon the scope of the investigation to be performed by FinPro in formulating its Opinion. In rendering its Opinion, FinPro did not independently verify the asset quality and financial condition of the Company, but instead relied upon the data provided by or on behalf of the Company to be true and accurate in all material respects. For its services as independent financial analyst of the transaction, including the rendering of its Opinion referred to above, the Company has paid FinPro aggregate fees of approximately $20,000 including out-of-pocket expenses. 5. Plans for the Company After the Offer It is expected that following the Offer, the business and operations of the Company will be continued by the Company substantially as they are currently being conducted by management. Except for the Offer and as otherwise described in this Offer to Purchase, the Company does not have any present plans or proposals which relate to or would result in an extraordinary corporate transaction, such as a merger, reorganization, liquidation, relocation of any operations of the Company or sale or transfer of a material amount of assets involving the Company or any of its subsidiaries, or any changes in the Company's capitalization or any other change in the Company's corporate structure or business or the composition of its management. However, the Company will continue to review its business plan and strategic direction and in such process may develop strategies for internal growth through expansion of products and services or growth through acquisitions and/or branching. Following completion of the Offer, the Company may repurchase additional Shares in the open market, in privately negotiated transactions or otherwise. Any such purchases may be on the same terms or on terms which are more or less favorable to shareholders than the terms of the Offer. Rule 13e-4 under the Exchange Act prohibits the Company and its affiliates from purchasing any Shares, other than pursuant to the Offer, until at least ten business days after the Expiration Date. The Company expects to obtain an exemption from the Commission from compliance with the requirements of Rule 13e-4 to the extent necessary to permit the sale of Shares to the Trust at or shortly after the Expiration Date. Any possible future purchases by the Company will depend on many factors, including the market price of the Shares, the results of the Offer, the Company's business and financial position and general economic and market conditions. 6. Certain Effects of the Offer Impact on Tendering Shareholders. Shareholders who sell Shares to the Company in response to the Offer will receive the Purchase Price in cash. The sale of Shares in response to the Offer will have federal income tax consequences to the selling shareholders and may have tax consequences under applicable federal, state, local and other tax laws. See "--Certain Federal Income Tax Consequences." Impact on Non-Tendering Shareholders. The purchase of Shares as a result of the Offer will decrease the Company's shareholders' equity per Share because the Purchase Price will be greater than the Company's 16 shareholders' equity per Share of $16.85 at December 31, 1997. The Shares purchased by the Company pursuant to the Offer will be held in the Company's treasury and will constitute authorized but unissued Shares. If the Company purchases Shares pursuant to the Offer with funds received as dividends from the Association, the capital ratios of the Association will be reduced but will continue to exceed the minimum capital ratios required by the OTS. See "--Fairness of the Offer." To the extent the Company utilizes borrowings to purchase Shares pursuant to the Offer, the consolidated indebtedness of the Company following the Offer will be greater than that of the Company prior to the Offer. The Company does not anticipate any change to the current dividend policy, however, there can be no assurance that dividends will be paid in the future. Any payment of cash dividends in the future will depend upon the financial condition, capital requirements and earnings of the Company, regulatory restrictions applicable to financial institutions, as well as other factors the Board of Directors may deem relevant. The purchase of Shares by the Company will increase the percentage ownership of Shares held by non-tendering shareholders. The Offer may reduce the number of Shares that might otherwise be traded publicly and, depending upon the number of Shares purchased pursuant to the Offer, could adversely affect the liquidity and market value of the remaining Shares held by the public. The Shares were delisted from the Nasdaq SmallCap Market on March 17, 1998. The Shares are currently traded in the over-the-counter market with quotations available on the OTC Electronic Bulletin Board. Consummation of the Offer will further reduce the liquidity of the Shares. There can be no assurance that shareholders will be able to find willing buyers for their shares after the Offer. The Company is required to file periodic reports with the Commission pursuant to Section 13 of the Exchange Act. Regardless of the results of the Offer, the Company plans to apply to the Commission to suspend this duty since the number of its shareholders is currently less than 300 holders of record. Termination of the Company's reporting duty would substantially reduce the public information available concerning the Company. The reduction of such public information may adversely effect option holders' ability to exercise their options or resell such underlying securities as well as the ability of affiliates of the Company to resell Shares held by them. Such termination will, however, decrease the Company's non-interest expenses. To the extent that officers and directors of the Company do not tender their Shares, the percentage ownership in the Company represented by their Shares will increase in proportion to the reduction in the number of Shares outstanding. See "Schedule A--Directors and Executive Officers." It is currently expected that after consummation of the Offer the officers, directors, the ESOP, the MSBP, and the Trust will own, in the aggregate, 49.5% of the outstanding Shares. Therefore, the Company's officers and directors will be able to exert greater control over the business affairs and management of the Company than that which they were able to exert prior to the Offer's consummation. After the Offer, it will be more difficult to remove directors and change the Company's management. 7. Interest of Directors and Executive Officers; Transactions and Arrangements Concerning Shares. As of April 9, 1998, the Company's directors and executive officers as a group beneficially owned (including pursuant to options) an aggregate of 209,894 Shares (approximately 28.48% of the outstanding Shares including Shares issuable upon the exercise of options held by directors and executive officers). Such ownership includes 92,860 Shares as of April 9, 1998 subject to stock options which are held by executive officers and directors. Except as set forth in "Schedule A--Certain Transactions Involving Shares," neither the Company, nor any subsidiary of the Company nor, to the best of the Company's knowledge, any of the Company's directors or 17 executive officers, nor any affiliates of any of the foregoing, had any transactions involving the Shares during the 40 business days prior to the date hereof. Except for outstanding options to purchase Shares granted from time to time over recent years to certain employees (including executive officers) and directors of the Company pursuant to the Company's stock option plans and except as otherwise described herein, neither the Company nor, to the best of the Company's knowledge, any of its directors or executive officers, is a party to any contract, arrangement, understanding or relationship with any other person relating, directly or indirectly, to the Offer including, but not limited to, any contract, arrangement, understanding or relationship concerning the transfer or the voting of any such securities, joint ventures, loan or option arrangements, puts or calls, guaranties of loans, guaranties against loss or the giving or withholding of proxies, consents or authorizations. The officers and directors have advised the Company that they do not intend to tender any Shares pursuant to the Offer. Assuming the Company purchases 222,000 Shares pursuant to the Offer and the sale of Shares to the Trust, the percentage of Shares outstanding held by executive officers, directors, the ESOP, the MSBP and the Trust would be approximately 49.5% of the outstanding Shares immediately after the Offer (including Shares issuable upon exercise of options held by executive officers and directors). 8. Certain Federal Income Tax Consequences General. The federal income tax discussion set forth below summarizes the principal federal income tax consequences to domestic shareholders of sales of stock pursuant to the Offer and is included for general information only. The discussion does not address all aspects of federal income taxation that may be relevant to a particular shareholder nor any relevant foreign, state, local or other tax laws. Certain shareholders (including, but not limited to, insurance companies, tax-exempt entities, foreign persons, financial institutions, broker dealers, employee benefit plans, personal holding companies and persons who acquired their Shares upon the exercise of employee stock options or as compensation) may be subject to special rules not discussed below. The discussion is based on laws, regulations, rulings and court decisions currently in effect as of the date of this Offer to Purchase, all of which are subject to change. The Company intends that, under the terms of the Offer, sales of Shares will be completed in 1998 and shareholders will receive payment for purchased Shares in 1998. In that event, shareholders will report the sale of Shares pursuant to the Offer in 1998 for tax purposes. In the event that sales are not completed this year and/or shareholders receive payments for Shares in 1999, shareholders may be required to report the sale of Shares pursuant to the Offer in 1999 for tax purposes. The Company has neither requested nor obtained a written opinion of counsel or a ruling from the Internal Revenue Service (the "Service") with respect to the tax matters discussed herein. Prior to tendering any Shares pursuant to the Offer, each shareholder is strongly advised to consult with their own tax advisor as to the particular tax consequences of the Offer to such shareholder, including the application of foreign, state, local, or other tax laws. In general, a sale of Shares pursuant to the Offer will be a taxable transaction for federal income tax purposes. Such sale will constitute a "redemption" within the meaning of Section 317 of the Internal Revenue Code of 1986, as amended (the "Code"). Each tendering shareholder will recognize either gain or loss from a sale of Shares or dividend income, depending upon the application of Section 302 of the Code to the shareholder's particular facts and circumstances. If the redemption qualifies as a sale of Shares under Section 302, the cash received pursuant to the Offer will be treated as a distribution from the Company in part or full payment in exchange for the Shares surrendered ("Sale Treatment"). Sale Treatment will result in the shareholder's recognizing gain or loss equal to the difference between (i) the cash received pursuant to the Offer and (ii) the shareholder's tax basis in the Shares surrendered. If the redemption does not qualify for Sale Treatment, the shareholder will not be treated as having sold Shares but will be treated as having received a dividend taxable as ordinary income, in an amount equal to the cash received pursuant to the Offer ("Dividend Treatment"). 18 Sale Treatment. Under Section 302 of the Code, a sale of Shares pursuant to the Offer will be treated as a sale of such Shares for federal income tax purposes if such sale of Shares (i) results in a "complete redemption" of all of the shareholder's stock in the Company, (ii) is a "substantially disproportionate redemption" with respect to the shareholder, or (iii) is "not essentially equivalent to a dividend" with respect to the shareholder. In determining whether any of these three tests under Section 302 is satisfied, shareholders must take into account not only Shares that they actually own, but also any Shares that they are deemed to own pursuant to the constructive ownership rules of Section 318 of the Code. Pursuant to these constructive ownership rules, shareholders will be treated as owning a certain amount of (i) Shares held by certain family members, including the shareholder's spouse, children, grandchildren, and parents, (ii) Shares owned by certain trusts of which the shareholder is a beneficiary, (iii) Shares owned by an estate of which the shareholder is a beneficiary, (iv) Shares owned by any partnership or "S corporation" in which the shareholder is a partner or shareholder, (v) Shares owned by any non-S corporation of which the shareholder owns at least 50% in value of the stock and (vi) Shares that the shareholder can acquire by exercise of an option or similar right. A shareholder's sale of Shares pursuant to the Offer will generally result in a "complete redemption" of all the shareholder's stock in the Company if, pursuant to the Offer, the Company purchases all of the Shares actually owned by the shareholder and subsequently the shareholder does not constructively own any Shares. If the shareholder's sale of Shares pursuant to the Offer would satisfy the complete redemption requirement but for the shareholder's constructive ownership of Shares held by certain family members, such shareholder may, under certain circumstances, be entitled to waive such constructive ownership, provided the shareholder complies with the provisions of Section 302(c) of the Code. If the shareholder actually owns no Shares after selling his or her Shares pursuant to the Offer, constructively owns only Shares owned by certain family members, and the shareholder qualifies to and does waive constructive ownership of Shares owned by certain family members, that redemption of Shares would generally qualify as a "complete redemption." A shareholder's sale of Shares pursuant to the Offer will generally be a "substantially disproportionate redemption" with respect to the shareholder if the percentage of Shares actually and constructively owned by the shareholder compared to all the outstanding Shares of the Company immediately following the sale of Shares pursuant to the Offer (treating as not outstanding all Shares sold by all the shareholders pursuant to the Offer) is less than 80% of the percentage of Shares actually and constructively owned by the shareholder compared to all the outstanding Shares of the Company immediately before the sale of Shares pursuant to the Offer (treating as outstanding all Shares sold by the shareholders pursuant to the Offer). If the Trust Shares were treated as outstanding immediately after the redemption, then the sale of Shares pursuant to the Offer would be "substantially disproportionate" with respect to a stockholder only if such stockholder's actual and constructive ownership of the voting stock of the Company after the sale of Shares pursuant to the Offer (treating the Trust Shares as outstanding) were also less than 80% of the stockholder's actual and constructive percentage ownership of the voting stock of the Company immediately before the purchase of Shares pursuant to the Offer and the issuance of the Trust Shares. This test will be applied to each shareholder individually, regardless of the effect of the redemption on the other shareholders. A shareholder's sale of Shares pursuant to the Offer will generally "not be essentially equivalent to a dividend" if, as a result of the sale of Shares pursuant to the Offer, the shareholder experiences a "meaningful reduction" in his proportionate interest in the Company, including the shareholder's voting rights, participation in earnings, and liquidation rights and taking into account the constructive ownership rules. The Service has indicated in a published ruling that even a small reduction in the proportionate interest of a small minority shareholder who does not exercise any control over company affairs may constitute a "meaningful reduction" in the shareholder's interest in the company. The fact that the redemption fails to qualify as a sale pursuant to the other two tests is not taken into account in determining whether the redemption is "not essentially equivalent to a dividend." Shareholders should be aware that their ability to satisfy any of the foregoing tests may be affected by proration pursuant to the Offer. Therefore, a shareholder can be given no assurance, even if he tenders all of his 19 Shares, that the Company will purchase a sufficient number of such Shares to permit him to satisfy any of the foregoing tests. Shareholders should also be aware that it is possible that, depending on the facts and circumstances, an acquisition or disposition of Shares in the market or to other parties as part of an integrated plan may be taken into account in determining whether any of the foregoing tests is satisfied. Shareholders are strongly advised to consult with their own tax advisors with regard to whether acquisitions from sales to third parties, including market sales, may be so integrated. Subsequent open market purchases by the Company may also be taken into account in determining whether any of the foregoing tests is satisfied. It is also possible that the issuance of the Trust Shares will be taken into account. If any of the above three tests is satisfied by a tendering shareholder, such shareholder will recognize gain or loss equal to the difference between the amount of cash received by the shareholder pursuant to the Offer and the shareholder's tax basis in the Shares sold. Such gain or loss must be determined separately for each block of Shares sold (i.e., Shares acquired at the same time in a single transaction), and will be capital gain or loss, assuming the Shares were held by the shareholder as a capital asset. Capital gain or loss will qualify as long-term capital gain or loss if, at the time the Company accepts the Shares for payment, the Shares were held by the shareholder for more than eighteen (18) months. Dividend Treatment. If none of the three foregoing tests are satisfied, the tendering shareholder generally will be treated as having received a dividend, taxable as ordinary income, in an amount equal to the total cash received by the shareholder pursuant to the Offer, provided the Company has sufficient accumulated or current earnings and profits. The Company expects that its current and accumulated earnings and profits will be sufficient to cover the amount of all distributions pursuant to the Offer, if any, that are treated as dividends. To the extent that the purchase of Shares from any shareholder pursuant to the Offer is treated as a dividend, such shareholder's tax basis in any Shares which the shareholder actually or constructively retains after consummation of the Offer will be increased by the shareholder's tax basis in the Shares surrendered pursuant to the Offer. Treatment of Dividend Income for Corporate Shareholders. In the case of a corporate shareholder, if the cash received for Shares pursuant to the Offer is treated as a dividend, the dividend income may be eligible for the dividends-received deduction under Section 243 of the Code. The dividends-received deduction is subject to certain limitations and may not be available if the corporate shareholder does not satisfy certain holding period requirements with respect to the Shares or if the Shares are treated as "debt-financed portfolio stock." The Company believes that the Offer will not result in a pro rata distribution to all shareholders. Consequently, dividends received by corporate shareholders pursuant to the Offer will probably be treated as "extraordinary dividends" as defined by Section 1059 of the Code. Corporate shareholders should consult their tax advisors as to the availability of the dividends-received deduction and the application of Section 1059 of the Code. SEE "THE OFFER--PROCEDURES FOR TENDERING SHARES" WITH RESPECT TO THE APPLICATION OF BACKUP FEDERAL INCOME TAX WITHHOLDING. 9. Dissenters' Rights No dissenters' rights are available to shareholders in connection with the Offer under applicable Minnesota law. THE OFFER 1. Number of Shares; Proration. Upon the terms and subject to the conditions of the Offer, the Company will purchase up to 222,000 Shares or such lesser number of Shares as are validly tendered (and not withdrawn in accordance with "--Withdrawal Rights") prior to the Expiration Date (as defined below) at prices not in excess of $21.50 nor less than $19.50 net 20 per Share in cash. The term "Expiration Date" means 5:00 p.m., Eastern time, on Monday, May 11, 1998, unless and until the Company, in its sole discretion, shall have extended the period of time during which the Offer will remain open, in which event the term "Expiration Date" shall refer to the latest time and date at which the Offer, as so extended by the Company, shall expire. In the event of an oversubscription of the Offer, Shares tendered at or below the Purchase Price prior to the Expiration Date will be subject to proration except for Odd Lots as explained below. The proration period also expires on the Expiration Date. The Company will, upon the terms and subject to the conditions of the Offer, determine the Purchase Price (not greater than $21.50 nor less than $19.50 per Share) that it will pay for Shares validly tendered pursuant to the Offer taking into account the number of Shares so tendered and the prices specified by tendering shareholders. The Company will select a single per Share Purchase Price that will allow it to buy 222,000 Shares (or such lesser number as are validly tendered at prices not greater than $21.50 nor less than $19.50 per Share) pursuant to the Offer. The Company reserves the right, in its sole discretion, to purchase more than 222,000 Shares pursuant to the Offer. If (i) the Company increases or decreases the price to be paid for Shares, increases the number of Shares being sought and any such increase in the number of Shares being sought exceeds 2% of the outstanding Shares, decreases the number of Shares being sought, or incurs dealer manager soliciting fees and (ii) the Offer is scheduled to expire less than ten business days from and including the date that notice of such increase or decrease is first published, sent or given in the manner specified in "--Extension of the Offer;Termination; Amendment," the Offer will be extended for at least ten business days from and including the date of such notice. For purposes of the Offer, a "business day" means any day other than Saturday, Sunday or federal holiday and consists of the time period from 12:01 a.m. through 12:00 midnight, Eastern time. This Offer is conditioned upon, among other things, the Company obtaining the funds necessary to consummate the Offer and to pay all related fees and expenses. The Offer is not conditioned on any minimum number of shares being tendered. See "--Certain Conditions of the Offer." In accordance with Instruction 5 of the Letter of Transmittal, shareholders desiring to tender Shares must specify the price, not in excess of $21.50 nor less than $19.50 per Share, at which they are willing to sell their Shares to the Company. Shares validly tendered pursuant to the Offer at or below the Purchase Price and not withdrawn will be purchased at the Purchase Price, subject to the terms and conditions of the Offer, including the proration provisions. All Shares tendered and not purchased pursuant to the Offer, including Shares tendered at prices in excess of the Purchase Price and Shares not purchased because of proration will be returned to the tendering shareholders at the Company's expense as promptly as practicable following the Expiration Date. Priority of Purchases. Upon the terms and subject to the conditions of the Offer, if more than 222,000 Shares (or such greater number of Shares as the Company may elect to purchase) have been validly tendered at prices at or below the Purchase Price and not withdrawn prior to the Expiration Date, the Company will purchase validly tendered Shares on the basis set forth below: (a) first, all Shares tendered and not withdrawn prior to the Expiration Date by any Odd Lot Holder (as defined below) who: (1) tenders all Shares beneficially owned by such Odd Lot Holder at a price at or below the Purchase Price (tenders of less than all Shares owned by such shareholder will not qualify for this preference); and (2) completes the box captioned "Odd Lots" on the Letter of Transmittal and, if applicable, on the Notice of Guaranteed Delivery; and 21 (b) second, after purchase of all of the foregoing Shares, all other Shares validly tendered at prices at or below the Purchase Price and not withdrawn prior to the Expiration Date, on a pro rata basis (with appropriate adjustments to avoid purchases of fractional Shares) as described below. Odd Lots. For purposes of the Offer, the term "Odd Lots" shall mean all Shares validly tendered prior to the Expiration Date at prices at or below the Purchase Price and not withdrawn by any person (an "Odd Lot Holder") who owned, beneficially or of record, as of the close of business on April 8, 1998 and as of the Expiration Date, an aggregate of fewer than 100 Shares and so certified in the appropriate place on the Letter of Transmittal and, if applicable, on the Notice of Guaranteed Delivery. In order to qualify for this preference, an Odd Lot Holder must tender all such Shares in accordance with the procedures described in "--Procedures for Tendering Shares." As set forth above, Odd Lots will be accepted for payment before proration, if any, of the purchase of other tendered Shares. This preference is not available to partial tenders or to beneficial or record holders of an aggregate of 100 or more Shares, even if such holders have separate accounts or certificates representing fewer than 100 Shares. By accepting the Offer, an Odd Lot Holder would not only avoid the payment of brokerage commissions but also would avoid any applicable odd lot discounts in a sale of such holder's Shares. Any shareholder wishing to tender all of such shareholder's Shares pursuant to this Section should complete the box captioned "Odd Lots" on the Letter of Transmittal and, if applicable, on the Notice of Guaranteed Delivery. The Company also reserves the right, but will not be obligated, to purchase all Shares validly tendered by any shareholder who tendered all Shares owned, beneficially or of record, at or below the Purchase Price and who, as a result of proration, would then own, beneficially, an aggregate of fewer than 100 Shares. If the Company exercises this right, it will increase the number of Shares that it is offering to purchase by the number of Shares purchased through the exercise of the right. Proration. In the event that proration of tendered Shares is required, the Company will determine the proration factor as soon as practicable following the Expiration Date. Proration for each shareholder tendering Shares, other than Odd Lot Holders, shall be based on the ratio of the number of Shares tendered by such shareholder to the total number of Shares tendered by all shareholders, other than Odd Lot Holders, at or below the Purchase Price. Because of the difficulty in determining the number of Shares validly tendered (including Shares tendered by guaranteed delivery procedures, as described in Section 3) and not withdrawn, and because of the odd lot procedure, the Company does not expect that it will be able to announce the final proration factor or to commence payment for any Shares purchased pursuant to the Offer until approximately seven over-the-counter ("OTC") trading days after the Expiration Date. The preliminary results of any proration will be announced by press release as promptly as practicable after the Expiration Date. Shareholders may obtain such preliminary information from the Information Agent and may be able to obtain such information from their brokers. This Offer to Purchase and the related Letter of Transmittal will be mailed to record holders of Shares and will be furnished to brokers, banks and similar persons whose names, or the names of whose nominees, appear on the Company's shareholder list or, if applicable, who are listed as participants in a clearing agency's security position listing for subsequent transmittal to beneficial owners of Shares. 2. Procedures for Tendering Shares. Valid Tender of Shares. For Shares to be validly tendered pursuant to the Offer, (a) the certificates for such Shares (or confirmation of receipt of such Shares pursuant to the procedures for book-entry delivery set forth below), together with a properly completed and duly executed Letter of Transmittal (or manually signed facsimile thereof) including any required signature guarantees and any other documents required by the Letter of Transmittal, must be received prior to 5:00 p.m., Eastern time, on the Expiration Date by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase or (b) the tendering shareholder must comply with the guaranteed delivery procedure set forth below. 22 IN ACCORDANCE WITH INSTRUCTION 5 OF THE LETTER OF TRANSMITTAL, SHAREHOLDERS DESIRING TO TENDER SHARES PURSUANT TO THE OFFER MUST PROPERLY INDICATE IN THE SECTION CAPTIONED "PRICE (IN DOLLARS) PER SHARE AT WHICH SHARES ARE BEING TENDERED" ON THE LETTER OF TRANSMITTAL THE PRICE (IN MULTIPLES OF $.125) AT WHICH THEIR SHARES ARE BEING TENDERED. SHAREHOLDERS WHO DESIRE TO TENDER SHARES AT MORE THAN ONE PRICE MUST COMPLETE A SEPARATE LETTER OF TRANSMITTAL FOR EACH PRICE AT WHICH SHARES ARE TENDERED, PROVIDED THAT THE SAME SHARES CANNOT BE TENDERED (UNLESS VALIDLY WITHDRAWN PREVIOUSLY IN ACCORDANCE WITH THE TERMS OF THE OFFER) AT MORE THAN ONE PRICE. IN ORDER TO VALIDLY TENDER SHARES, ONE AND ONLY ONE PRICE BOX MUST BE CHECKED IN THE APPROPRIATE SECTION ON EACH LETTER OF TRANSMITTAL. In addition, Odd Lot Holders who tender all such Shares must complete the box captioned "Odd Lots" on the Letter of Transmittal and, if applicable, on the Notice of Guaranteed Delivery, in order to qualify for the preferential treatment available to Odd Lot Holders as set forth in "--Number of Shares; Proration." Signature Guarantees and Method of Delivery. No signature guarantee is required on the Letter of Transmittal (i) if the Letter of Transmittal is signed by the registered holder of the Shares (which term, for purposes of this Section 3, shall include any participant in The Depository Trust Company or The Philadelphia Depository Trust Company (collectively, the "Book-Entry Transfer Facilities") whose name appears on a security position listing as the owner of the Shares) tendered therewith and such holder has not completed either the box entitled "Special Delivery Instructions" or the box entitled "Special Payment Instructions" on the Letter of Transmittal; or (ii) if Shares are tendered for the account of a member firm of a registered national securities exchange, a member of the National Association of Securities Dealers, Inc. or a commercial bank or trust company having an office, branch or agency in the United States. In all other cases, all signatures on the Letter of Transmittal must be guaranteed by an eligible guarantor institution (bank, stockbroker, savings and loan association or credit union with membership in an approved signature guarantee medallion program) pursuant to Rule 17Ad-15 promulgated under the Exchange Act (an "Eligible Institution"). See Instruction 1 of the Letter of Transmittal. If a certificate for Shares is registered in the name of a person other than the person executing a Letter of Transmittal, or if payment is to be made, or Shares not purchased or tendered are to be issued, to a person other than the registered holder, the certificate must be endorsed or accompanied by an appropriate stock power, in either case, signed exactly as the name of the registered holder appears on the certificate, with the signature on the certificate or stock power guaranteed by an Eligible Institution. In all cases, payment for Shares tendered and accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of certificates for such Shares (or a timely confirmation of a book-entry transfer of such Shares into the Depositary's account at one of the Book-Entry Transfer Facilities as described above), a properly completed and duly executed Letter of Transmittal (or manually signed facsimile thereof) and any other documents required by the Letter of Transmittal. The method of delivery of all documents, including certificates for Shares, the Letter of Transmittal and any other required documents, is at the election and risk of the tendering shareholder. If delivery is by mail, registered mail with return receipt requested, properly insured, is recommended. Book-Entry Delivery. The Depositary will establish an account with respect to the Shares for purposes of the Offer at each Book-Entry Transfer Facility within two business days after the date of this Offer to Purchase, and any financial institution that is a participant in a Book-Entry Transfer Facility's system may make book-entry delivery of the Shares by causing such facility to transfer Shares into the Depositary's account in accordance with the Book-Entry Transfer Facility's procedures for transfer. Although delivery of Shares may be effected through a book-entry transfer into the Depositary's account at a Book-Entry Transfer Facility, either (i) a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof) with any required signature guarantees and any other required documents must, in any case, be transmitted to and received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase prior to the Expiration Date, or (ii) the 23 guaranteed delivery procedure described below must be followed. Delivery of the Letter of Transmittal and any other required documents to a book-entry transfer facility does not constitute delivery to the Depositary. Backup Federal Income Tax Withholding. To prevent backup federal income tax withholding on payments made to shareholders for Shares purchased pursuant to the Offer, each shareholder who does not otherwise establish an exemption from such withholding must provide the Depositary with the shareholder's correct taxpayer identification number and provide certain other information by completing the substitute Form W-9 included in the Letter of Transmittal. Foreign shareholders may be required to submit Form W-8, certifying non-United States status, to avoid backup withholding. See Instructions 12 and 13 of the Letter of Transmittal. For a discussion of certain federal income tax consequences to tendering shareholders, see "Certain Federal Income Tax Consequences." Withholding For Foreign Shareholders. The Depositary will withhold federal income taxes equal to 30% of the gross payments payable to a foreign shareholder or his agent unless the Depositary determines that an exemption from or a reduced rate of withholding is available pursuant to a tax treaty or an exemption from withholding is applicable because such gross proceeds are effectively connected with the conduct of a trade or business in the United States. In order to obtain an exemption from or a reduced rate of withholding pursuant to a tax treaty, a foreign shareholder must deliver to the Depositary a properly completed Form 1001 (or any related successor form). For this purpose, a foreign shareholder is a shareholder that is not (i) a citizen or resident of the United States, (ii) a corporation, partnership or other entity created or organized in or under the laws of the United States, any State or any political subdivision thereof or (iii) an estate or trust the income of which is subject to United States federal income taxation regardless of the source of such income. In order to obtain an exemption from withholding on the grounds that the gross proceeds paid pursuant to the Offer are effectively connected with the conduct of a trade or business within the United States, a foreign shareholder must deliver to the Depositary a properly completed Form 4224 (or any related successor form). The Depositary will determine a shareholder's status as a foreign shareholder and eligibility for a reduced rate of, or an exemption from, withholding by reference to any outstanding certificates or statements concerning eligibility for a reduced rate of, or exemption from, withholding (e.g., Form 1001 or Form 4224) unless facts and circumstances indicate that such reliance is not warranted. A foreign shareholder who has not previously submitted the appropriate certificates or statements with respect to a reduced rate of, or exemption from, withholding for which such shareholder may be eligible should consider doing so in order to avoid excess withholding. A foreign shareholder may be eligible to obtain a refund of tax withheld if such shareholder meets one of the three tests for sale treatment described in "Certain Federal Income Tax Consequences" or is otherwise able to establish that no tax or a reduced amount of tax is due. Backup withholding generally will not apply to amounts subject to the 30% or treaty-reduced rate of withholding. Guaranteed Delivery. If a shareholder desires to tender Shares pursuant to the Offer and such shareholder's Share certificates are not immediately available (or the procedures for book-entry delivery cannot be completed on a timely basis) or if time will not permit all required documents to reach the Depositary prior to the Expiration Date, such Shares may nevertheless be tendered, provided that all of the following conditions are satisfied: (a) such tender is made by or through an Eligible Institution; (b) the Depositary receives by hand, mail, telegram or facsimile transmission, on or prior to the Expiration Date, a properly completed and duly executed Notice of Guaranteed Delivery substantially in the form the Company has provided with this Offer to Purchase (specifying the price at which the Shares are being tendered), including (where required) a signature guarantee by an Eligible Institution; and (c) the certificates for all tendered Shares, in proper form for transfer (or confirmation of book-entry delivery of such Shares into the Depositary's account at one of the Book-Entry Transfer Facilities), together with a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof) and any required signature guarantees or other documents required by the Letter of Transmittal, are received by the Depositary within three OTC trading days after the date of receipt by the Depositary of such Notice of Guaranteed Delivery. 24 If any tendered Shares are not purchased, or if less than all Shares evidenced by a shareholder's certificates are tendered, certificates for unpurchased Shares will be returned as promptly as practicable after the expiration or termination of the Offer or, in the case of Shares tendered by book-entry delivery at a Book-Entry Transfer Facility, such Shares will be credited to the appropriate account maintained by the tendering shareholder at the appropriate Book-Entry Transfer Facility, in each case without expense to such shareholder. Employee Stock Ownership Plan. As of April 9, 1998, the ESOP owned 80,639 Shares of which 24,192 Shares were allocated to the accounts of the participants. Shares allocated to participants' accounts will, subject to the limitations of the Employee Retirement Income Security Act of 1974, as amended, and applicable regulations thereunder ("ERISA"), be tendered by the Trustee of the plan according to the instructions of participants to the Trustee. Decisions as to whether to tender Shares not allocated to participants' accounts will be made by the Trustee subject to the terms of the plan and ERISA. The Trustee will make available to the participants whose accounts hold allocated Shares all documents furnished to the shareholders in connection with the Offer generally and will provide additional information in a separate letter with respect to the operations of the Offer to the participants of the ESOP. Each participant will also receive a form upon which the participant may instruct the Trustee regarding the Offer. Each participant may direct that all, some or none of the Shares allocated to the participant's account be tendered. Participants will also be afforded withdrawal rights. See "--Withdrawal Rights." Under ERISA the Company will be prohibited from purchasing any Shares from the ESOP (including Shares allocated to the accounts of participants) if the Purchase Price is less than the prevailing market price of the Shares on the date the Shares are accepted for payment pursuant to the Offer. Company Stock Bonus Plan. As of April 9, 1998, the MSBP owned 28,629 Shares of which 17,534 Shares were allocated to the accounts of the participants. Shares allocated to participants will, subject to the limitations of ERISA, be tendered by the Trustee of the plan according to the instructions of participants to the Trustee. Decisions as to whether to tender Shares not allocated to participants' accounts will be made by the Trustee subject to the terms of the plan and ERISA. The Trustee will make available to the participants whose accounts hold allocated Shares all documents furnished to the shareholders in connection with the Offer generally and will provide additional information in a separate letter with respect to the operations of the Offer to the participants of the MSBP. Each participant will also receive a form upon which the participant may instruct the Trustee regarding the Offer. Each participant may direct that all, some or none of the Shares allocated to the participant be tendered. Participants will also be afforded withdrawal rights. See "--Withdrawal Rights." Company Stock Option Plans. The Company is not offering, as part of the Offer, to purchase any of the options outstanding under the Company's stock option plans and tenders of such options will not be accepted. In no event are any options to be delivered to the Depositary in connection with a tender of Shares hereunder. An exercise of an option cannot be revoked even if Shares received upon the exercise thereof and tendered in the Offer are not purchased in the Offer for any reason. 401(k) Profit Sharing Plan. Participants in the Profit Sharing Plan who wish to have the plan's trustees tender Shares attributable to their participant-directed investment accounts should so indicate by completing, executing and returning to the Depositary the election form included in the notice sent to such participants. Participants in the plan may not use the Letter of Transmittal to direct the tender of the Shares attributed to their accounts, but must use the separate election form sent to them. Participants in the plan are urged to read the separate election form and related materials carefully. Determination of Validity; Rejection of Shares; Waiver of Defects; No Obligation to Give Notice of Defects. All questions as to the number of Shares to be accepted, the price to be paid therefor and the validity, form, eligibility (including time of receipt) and acceptance of any tender of Shares will be determined by the Company, in its sole discretion, and its determination shall be final and binding on all parties. The Company reserves the absolute right to reject any or all tenders of any Shares that it determines are not in appropriate form or the acceptance for payment of or payment for which may be unlawful. The Company also reserves the absolute right to waive any of the conditions of the Offer or any defect or irregularity in any tender with respect to any particular 25 Shares. No tender of Shares will be deemed to have been validly made until all defects or irregularities have been cured by the tendering shareholder or waived by the Company. None of the Company, the Depositary, the Information Agent or any other person shall be obligated to give notice of any defects or irregularities in tenders, nor shall any of them incur any liability for failure to give any such notice. Tendering Shareholder's Representation and Warranty; Company's Acceptance Constitutes an Agreement. A tender of Shares pursuant to any of the procedures described above will constitute the tendering shareholder's acceptance of the terms and conditions of the Offer, as well as the tendering shareholder's representation and warranty to the Company that (a) such shareholder has a net long position in the Shares being tendered within the meaning of Rule 14e-4 promulgated by the Commission under the Exchange Act and (b) the tender of such Shares complies with Rule 14e-4. It is a violation of Rule 14e-4 for a person, directly or indirectly, to tender Shares for such person's own account unless, at the time of tender and at the end of the proration period, the person so tendering (i) has a net long position equal to or greater than the amount of (x) Shares tendered or (y) other securities convertible into or exchangeable or exercisable for the Shares tendered and will acquire such Shares for tender by conversion, exchange or exercise and (ii) will cause such Shares to be delivered in accordance with the terms of the Offer. Rule 14e-4 provides a similar restriction applicable to the tender or guarantee of a tender on behalf of another person. The Company's acceptance for payment of Shares tendered pursuant to the Offer will constitute a binding agreement between the tendering shareholder and the Company upon the terms and subject to the conditions of the Offer. 3. Withdrawal Rights. Except as otherwise provided in this Section 4, the tender of Shares pursuant to the Offer is irrevocable. Shares tendered pursuant to the Offer may be withdrawn at any time prior to the Expiration Date and, unless theretofore accepted for payment by the Company pursuant to the Offer, may also be withdrawn at any time after 12:00 midnight, Eastern time, on Monday, June 8, 1998. For a withdrawal to be effective, a notice of withdrawal must be in written, telegraphic or facsimile transmission form and must be received in a timely manner by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase. Any such notice of withdrawal must specify the name of the tendering shareholder, the name of the registered holder, if different, the number of Shares tendered and the number of Shares to be withdrawn. If the certificates for Shares to be withdrawn have been delivered or otherwise identified to the Depositary, then, prior to the release of such certificates, the tendering shareholder must also submit the serial numbers shown on the particular certificates evidencing the Shares to be withdrawn and the signature on the notice of withdrawal must be guaranteed by an Eligible Institution (except in the case of Shares tendered by an Eligible Institution). If Shares have been tendered pursuant to the procedure for book-entry delivery set forth in "-- Procedures for Tendering Shares," the notice of withdrawal also must specify the name and the number of the account at the applicable Book-Entry Transfer Facility to be credited with the withdrawn Shares and otherwise comply with the procedures of such facility. None of the Company, the Depositary, the Information Agent or any other person shall be obligated to give notice of any defects or irregularities in any notice of withdrawal nor shall any of them incur liability for failure to give any such notice. All questions as to the form and validity (including time of receipt) of notices of withdrawal will be determined by the Company, in its sole discretion, which determination shall be final and binding on all parties. Withdrawals may not be rescinded and any Shares withdrawn will thereafter be deemed not validly tendered for purposes of the Offer. However, withdrawn Shares may be retendered prior to the Expiration Date by again following one of the procedures described in "--Procedures for Tendering Shares." If the Company extends the Offer, is delayed in its purchase of Shares or is unable to purchase Shares pursuant to the Offer for any reason, then, without prejudice to the Company's rights under the Offer, the Depositary may, subject to applicable law, retain tendered Shares on behalf of the Company, and such Shares may not be withdrawn except to the extent tendering shareholders are entitled to withdrawal rights as described in this Section 4. 26 4. Price Range of Shares; Dividends. Until March 17, 1998, the Shares were listed and quoted on the on the Nasdaq SmallCap Market. The Shares currently trade in the over-the-counter market with quotations available through the OTC Electronic Bulletin Board. The following table sets forth, for the periods indicated, the high and low closing per Share sales price as published by the Nasdaq statistical report, (except for information subsequent to March 17, 1998) and the cash dividends paid per Share in each such fiscal quarter. Dividends Paid Fiscal Year High Low Per Share - ----------- ---- --- --------- 1996: 1st Quarter............................. $12.00 $11.00 $ -- 2nd Quarter............................. 12.25 11.25 0.08 3rd Quarter............................. 12.00 11.00 -- 4th Quarter............................. 12.75 10.75 0.08 1997: 1st Quarter............................. 12.75 11.75 -- 2nd Quarter............................. 15.50 12.25 0.08 3rd Quarter............................. 15.63 14.00 -- 4th Quarter............................. 17.50 14.50 0.08 1998: 1st Quarter............................. 19.75 16.38 -- 2nd Quarter............................. 20.00 17.00 0.08 3rd Quarter (through April 9, 1998)..... 18.50 18.50 -- On March 31, 1998, the last full trading day on which a sale was reported prior to the commencement of the Offer, the closing per Share sales price was $18.50. Shareholders are urged to obtain current market quotations for the Shares. For trading information regarding the Shares, shareholders may call MacKenzie Partners, Inc. at 1-800-322-2885. 27 5. Purchase of Shares and Payment of Purchase Price. Upon the terms and subject to the conditions of the Offer, the Company will determine the Purchase Price it will pay for the Shares validly tendered and not withdrawn prior to the Expiration Date, taking into account the number of Shares so tendered and the prices specified by tendering shareholders, and will accept for payment and pay for (and thereby purchase) Shares validly tendered at prices at or below the Purchase Price as promptly as practicable following the Expiration Date. For purposes of the Offer, the Company will be deemed to have accepted (and therefor purchased) Shares which are tendered at or below the Purchase Price and not withdrawn (subject to the proration provisions of the Offer) when, as and if it gives oral or written notice to the Depositary of its acceptance of such Shares for payment pursuant to the Offer. Upon the terms and subject to the conditions of the Offer, promptly following the Expiration Date the Company will accept for payment and pay a single per Share Purchase Price for 222,000 Shares (subject to increase or decrease as provided in "--Extension of the Offer; Termination; Amendment") or such lesser number of Shares as are validly tendered at prices not in excess of $21.50 nor less than $19.50 per Share and not withdrawn as permitted in "--Withdrawal Rights." The Company will pay for Shares purchased pursuant to the Offer by depositing the aggregate Purchase Price therefor with the Depositary, which will act as agent for tendering shareholders for the purpose of receiving payment from the Company and transmitting payment to the tendering shareholders. In the event of proration, the Company will determine the proration factor and pay for those tendered Shares accepted for payment as soon as practicable after the Expiration Date; however, the Company does not expect to be able to announce the final results of any proration and commence payment for Shares purchased until approximately seven OTC trading days after the Expiration Date. Certificates for all Shares tendered and not purchased, including all Shares tendered at prices in excess of the Purchase Price and Shares not purchased due to proration, will be returned (or, in the case of Shares tendered by book-entry delivery, such Shares will be credited to the account maintained with the Book-Entry Transfer Facility by the participant therein who so delivered such Shares) to the tendering shareholder as promptly as practicable after the Expiration Date without expense to the tendering shareholders. Under no circumstances will interest on the Purchase Price be paid by the Company by reason of any delay in making payment. The Company will pay all stock transfer taxes, if any, payable on the transfer to it of Shares purchased pursuant to the Offer. If, however, payment of the Purchase Price is to be made to, or (in the circumstances permitted by the Offer) if unpurchased Shares are to be registered in the name of, any person other than the registered holder, or if tendered certificates are registered in the name of any person other than the person signing the Letter of Transmittal, the amount of all stock transfer taxes, if any (whether imposed on the registered holder or such other person), payable on account of the transfer to such person will be deducted from the Purchase Price unless evidence satisfactory to the Company of the payment of the stock transfer taxes, or exemption therefrom, is submitted. See Instruction 7 of the Letter of Transmittal. ANY TENDERING SHAREHOLDER OR OTHER PAYEE WHO FAILS TO COMPLETE FULLY, SIGN AND RETURN TO THE DEPOSITARY THE SUBSTITUTE FORM W-9 INCLUDED IN THE LETTER OF TRANSMITTAL MAY BE SUBJECT TO REQUIRED BACKUP FEDERAL INCOME TAX WITHHOLDING. SEE "-- PROCEDURES FOR TENDERING SHARES" AND INSTRUCTION 12 OF THE LETTER OF TRANSMITTAL. ALSO SEE "-- PROCEDURES FOR TENDERING SHARES" REGARDING FEDERAL INCOME TAX CONSEQUENCES FOR FOREIGN SHAREHOLDERS. 6. Certain Conditions of the Offer. Notwithstanding any other provision of the Offer, the Company shall not be required to accept for payment, purchase or pay for any Shares tendered, and may terminate or amend the Offer or may postpone the acceptance 28 for payment of, or the purchase of and the payment for Shares tendered, subject to Rule 13e-4(f) under the Exchange Act (see "-- Extension of the Offer; Termination; Amendment"), if (i) the Financing Condition has not been satisfied or (ii) at any time on or after April 13, 1998 and prior to the time of payment for any such Shares any of the following events shall have occurred (or shall have been determined by the Company to have occurred) which, in the Company's reasonable judgment in any such case and regardless of the circumstances giving rise thereto (including any action or omission to act by the Company), makes it inadvisable to proceed with the Offer or with such acceptance for payment or payment: (a) there shall have been threatened, instituted or pending any action or proceeding by any government or governmental, regulatory or administrative agency or authority or tribunal or any other person, domestic or foreign, or before any court or governmental, regulatory or administrative authority or agency or tribunal, domestic or foreign, which: (1) challenges the making of the Offer, the acquisition of Shares pursuant to the Offer or otherwise relates in any manner to the Offer or (2) in the Company's reasonable judgment, could materially affect the business, condition (financial or other), income, operations or prospects of the Company and its subsidiaries, taken as a whole, or otherwise materially impair in any way the contemplated future conduct of the business of the Company or any of its subsidiaries or materially impair the Offer's contemplated benefits to the Company; or (b) there shall have been any claim, action or proceeding threatened, pending or taken, or any consent, license, authorization, permit or approval withheld, or any law, statute, rule, regulation, judgment, order or injunction threatened, proposed, sought, promulgated, enacted, entered, enforced or deemed to be applicable to the Offer or the Company, by or before any court or any government or governmental, regulatory or administrative agency or authority (federal, state, local or foreign) or tribunal, domestic or foreign, which, in the reasonable judgment of the Company, could or might directly or indirectly (i) make the acceptance for payment of, or payment for, some or all of the Shares illegal or otherwise restrict or prohibit the consummation of the Offer, (ii) delay or restrict the ability of the Company, or render the Company unable, to accept for payment or pay for some or all of the Shares, (iii) materially affect the business, condition (financial or other), income, operations or prospects of the Company and its subsidiaries, taken as a whole, or otherwise materially impair in any way the contemplated future conduct of the business of the Company or any of its subsidiaries, or (iv) materially impair the contemplated benefits of the Offer to the Company; or (c) there shall have occurred any of the following events: (i) the commencement of any state of war, international crisis or national emergency; (ii) the declaration of any banking moratorium or suspension of payments by banks in the United States or any limitation on the extension of credit by lending institutions in the United States; (iii) any general suspension of trading or limitation of prices for securities on any securities exchange or in the over-the-counter market in the United States; (iv) any significant adverse change in the market price of the Shares or any change in the general political, market, economic or financial conditions in the United States or abroad that could have a material adverse effect upon the trading of the Shares; (v) in the case of any of the foregoing existing at the time of the commencement of the Offer, in the reasonable judgment of the Company, a material acceleration or worsening effect thereof; or (vi) any decline in either the Dow Jones Industrial Average or the Standard and Poor's Index of 500 Industrial Companies by an amount in excess of 10% measured from the close of business on April 9, 1998; or (d) a tender or exchange offer with respect to some or all of the Shares (other than the Offer), or a merger or acquisition proposal for the Company, shall have been proposed, announced or made by another person or shall have been publicly disclosed, or the Company shall have learned that any person or "group" (within the meaning of Section 13(d)(3) of the Exchange Act), shall have acquired or proposed to acquire beneficial ownership of more than five percent of the outstanding Shares, or any new group shall have been formed that beneficially owns more than five percent of the outstanding Shares; or (e) there shall have occurred any event which, in the reasonable judgment of the Company, has resulted in an actual or threatened material adverse change in the business, financial condition, assets, income, operations, prospects or stock ownership of the Company or which may adversely affect the value of the Shares; 29 and, in the reasonable judgment of the Company, such event makes it inadvisable to proceed with the Offer or with acceptance for payment of or payment for any Shares. The foregoing conditions are for the sole benefit of the Company and may be asserted by the Company regardless of the circumstances (including any action or inaction by the Company) giving rise to any such condition, and may be waived by the Company, in whole or in part, at any time and from time to time in its sole discretion. The Company's failure at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right and each such right shall be deemed an ongoing right which may be asserted at any time and from time to time. Any determination by the Company concerning the events described above will be final and binding on all parties. 7. Extension of the Offer; Termination; Amendment. The Company expressly reserves the right, in its sole discretion, at any time and from time to time, and regardless of whether or not any of the events set forth in "-- Certain Conditions of the Offer" shall have occurred or been determined by the Company to have occurred, (a) to extend the period of time during which the Offer is open by giving oral or written notice of such extension to the Depositary and making a public announcement thereof no later than 9:00 a.m., Eastern time, on the next business day after the previously scheduled Expiration Date, and (b) to amend the Offer in any respect (including, without limitation, by increasing or decreasing the range of prices it may pay for Shares or the number of Shares being sought in the Offer) by giving oral or written notice of such amendment to the Depositary and, as promptly as practicable thereafter, making a public announcement thereof. If (i) the Company increases or decreases the price to be paid for Shares, increases or decreases the number of Shares being sought in the Offer or incurs dealer manager soliciting fees and, in the event of an increase in the number of Shares being sought, such increase exceeds two percent of the outstanding Shares and (ii) the Offer is scheduled to expire at any time earlier than the expiration of a period ending on the tenth business day from, and including, the date that such notice of an increase or decrease is first published, sent or given in the manner specified in this Section 7, the Offer will, at least, be extended until the expiration of such period of ten business days. The Company also expressly reserves the right, in its sole and absolute discretion, to terminate the Offer and not to accept for payment or pay for Shares upon the occurrence of any of the conditions specified in "--Certain Conditions of the Offer" by giving oral or written notice of such termination to the Depositary and, as promptly as practicable thereafter, making a public announcement thereof. Without limiting the manner in which the Company may choose to make a public announcement, except as required by applicable law (including Rule 13e- 4(e)(2) under the Exchange Act), the Company shall have no obligation to publish, advertise or otherwise communicate any such public announcement other than by making a release to the Dow Jones News Service. The rights reserved by the Company in this paragraph are in addition to the Company's rights under "--Certain Conditions of the Offer." Payment for Shares accepted for payment pursuant to the Offer may be delayed in the event of proration due to the difficulty of determining the number of validly tendered Shares. See "--Number of Shares; Proration" and "--Purchase of Shares and Payment of Purchase Price." 8. Source and Amount of Funds. Assuming that the Company purchases 222,000 Shares pursuant to the Offer at a price of $21.50 per Share, the cost to the Company (including all fees and expenses relating to the Offer), is estimated to be approximately $4,858,000. The Company plans to obtain substantially all the funds needed for the Offer from a dividend from the Association of $4,650,000. The Association filed a Notice of Capital Distribution (the "Notice") with the OTS, regarding the dividend, on April 7, 1998. Pursuant to OTS regulations, the OTS could object to the dividend within 30 days of the filing of the Notice. The Company intends to obtain the remaining funds necessary to consummate the Offer through short-term borrowings. The terms of any short-term borrowings will depend upon market conditions and other factors prevailing at the time or times of borrowing. The Company expects that, under current circumstances and market conditions, such short-term borrowings (i) would have a maturity of between approximately six and nine months, (ii) would involve an effective interest cost to the Company of approximately 10.25% per annum, and (iii) would be repaid from dividends from the Association paid out of earnings or from the proceeds of other borrowings by the Company. 30 9. Certain Information Concerning The Company General. The Company is the holding company for the Association which was originally chartered in 1934. The Association is primarily engaged in the business of attracting deposits from the general public and using those deposits, together with other funds, to originate loans secured by first mortgages on owner-occupied, one-to four-family residences in its market area, and to purchase investment securities. The Association's loan portfolio predominantly consists of both adjustable-rate and fixed-rate mortgage loans secured by single family residences, and to a much lesser extent, the Association also originates commercial mortgage, construction and consumer loans. The business of the Association is conducted through its only office in Little Falls, Morrison County, Minnesota. The Association is subject to examination by the OTS and the Federal Deposit Insurance Corporation. The Company, as a federal savings and loan holding company, is subject to examination by the OTS. SELECTED CONSOLIDATED FINANCIAL INFORMATION Set forth below is certain selected consolidated financial information with respect to the Company, excerpted or derived from the audited financial statements for the years ended September 30, 1997 and 1996 and from the unaudited financial statements for the three months ended December 31, 1997 and 1996 included in Annex II to this Offer to Purchase. The selected information below is qualified in its entirety by reference to such consolidated financial statements and the financial information and related notes contained therein. Mississippi View Holding Company Summary Historical Financial Information
At December 31, At September 30, --------------------------------------------------------------------------------------- 1997 1996 1997 1996(1) --------------------------------------------------------------------------------------- (Dollars in thousands) Selected Financial Condition and Other Data Total assets......................... $68,619 $70,329 $68,546 $70,011 Loans receivable, net................ 44,493 43,857 44,475 43,070 Mortgage-backed securities........... 4,318 4,543 5,064 4,857 Investment securities................ 14,538 17,139 15,956 17,323 Cash and cash equivalents............ 3,471 2,898 1,105 2,584 Deposits............................. 54,867 56,342 55,184 56,531 Total shareholders' equity........... 12,476 13,035 12,068 12,440
31
Three Months Ended December 31, Year Ended September 30, ------------------------------------------------------------------------------------- 1997 1996 1997 1996(1) ------------------------------------------------------------------------------------- (Dollars in thousands, except per share amounts) Interest income...................... $1,272 $1,293 $5,165 $5,173 Interest expense..................... 626 634 2,502 2,531 Net interest income.................. 646 659 2,663 2,642 Provision for credit losses.......... -- -- -- 4 Noninterest income................... 42 38 202 351 Noninterest expense.................. 402 439 1,667 2,056 Income tax expense................... 109 84 458 374 Net income .......................... 177 173 740 559 Net income per share................. 0.27 0.22 0.96 0.66 Dividends per share.................. -- -- 0.16 0.16 Book value per share................. 16.85 15.25 16.30 14.17
At or For Three Months Ended At or For Year Ended December 31, September 30, ---------------------------------------------------------------------------------------------- 1997(1) 1996(1) 1997 1996(2) ---------------------------------------------------------------------------------------------- Selected financial ratios: Return on average assets............. 1.07% 1.00% 1.08% 0.80% Return on average equity............. 6.36 5.64 6.18 4.23 Dividend payout ratio................ Shareholders' equity/total assets.... 18.18 18.53 17.61 17.77 Allowance for loan losses/loans receivable, net...................... 1.94 2.00 1.93 2.03 Ratios of Earnings to Fixed Charges(3): Excluding interest on deposits..... -- -- -- -- Including interest on deposits..... 0.46x 0.41x 0.48x 0.37x
(footnotes on following page) 32 - ------------------ (1) The ratios for the three month periods are annualized. (2) The Federal Deposit Insurance Corporation has imposed a special assessment on the Savings Association Insurance Fund members based on deposits as of March 31, 1995. The Association paid an assessment of $362,000 on September 30, 1996, which was required to be accrued and expended for the quarter ended September 30, 1996. (3) The consolidated ratio of earnings to fixed charges has been computed by dividing income before income taxes, cumulative effect of changes in accounting principles and fixed charges by fixed charges. Fixed charges represent all interest expense (ratios are presented both excluding and including interest on deposits). There were no amortization of notes and debentures expense nor any portion of net rental expense which was deemed to be equivalent to interest on debt. Interest expense (other than on deposits) includes interest on notes, federal funds purchased and securities sold under agreements to repurchase, and other funds borrowed. 33 SELECTED PRO FORMA FINANCIAL INFORMATION The following unaudited pro forma financial information of the Company for the three months ended December 31, 1997 and the fiscal year ended September 30, 1997 show the effects of (i) the purchase of 222,000 Shares pursuant to the Offer and (ii) the sale of Shares to the Trust equal to the Purchase Price in exchange for a Note in an aggregate principal amount of $1,214,750. The balance sheet data give effect to the purchase of Shares pursuant to the Offer as if it had occurred as of the date of the balance sheet. The pro forma financial information should be read in conjunction with the audited financial statements and related notes thereto for the year ended September 30, 1997 and the unaudited financial statements for the three months ended December 31, 1997 contained in Annex II to this Offer to Purchase. The pro forma financial information does not purport to be indicative of the results that would actually have been attained had the purchases of the Shares and the issuance of Shares to the Trust been completed at the dates indicated or that may be attained in the future. Mississippi View Holding Company UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME Three Months Ended December 31, 1997 (Dollars in thousands, except per share data) Shares Purchased at ---------------------------- $19.50 $21.50 per Share per Share --------- --------- Interest income.................................. $ 1,216 $1,212 Interest expense (3)............................. 626 631 --- --- Net interest income......................... 590 581 Provision for credit losses...................... -- -- ---- ---- Net interest income after provision for credit losses......................... 590 581 Noninterest income............................... 42 42 Noninterest expenses............................. 402 402 ----- ----- Income before income taxes....................... 230 221 Income tax expense (3)........................... 87 83 ----- ----- Net income.................................. $ 143 $ 138 ====== ====== Basic earnings per share.................... $ 0.29 $ 0.28 ====== ====== Diluted earnings per share.................. $ 0.26 $ 0.25 ====== ====== Weighted average shares outstanding (2).......... 489,441 489,441 Ratio of earnings to fixed charges Excluding interest on deposits............... -- 41.4x Including interest on deposits................... 0.37x 0.35x See Notes to Unaudited Proforma Financial Information on page 38 34 Mississippi View Holding Company UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME Year Ended September 30, 1997 (Dollars in thousands, except per share data) Shares Purchased at -------------------------- $19.50 $21.50 per Share per Share --------- --------- Interest income..................................... $ 4,900 $ 4,884 Interest expense (3)................................ 2,502 2,523 ------- ------- Net interest income............................ 2,398 2,361 Provision for credit losses......................... -- -- ------ ------ Net interest income after provision for credit losses........................... 2,398 2,361 Noninterest income.................................. 202 202 Noninterest expenses................................ 1,668 1,668 ------- -------- Income before income taxes.......................... 933 895 Income tax expense (3).............................. 352 337 ------ ------ Net income..................................... $ 581 $ 558 ====== ======= Basic earnings per share....................... $ 0.96 $ 0.92 ====== ======= Diluted earnings per share..................... $ 0.92 $ 0.88 ====== ======= Weighted average shares outstanding (2)............. 604,372 604,372 Ratio of earnings to fixed charges Excluding interest on deposits................... -- 42.0x Including interest on deposits................... 0.37x 0.35x See Notes to Unaudited Proforma Financial Information on page 38 35 Mississippi View Holding Company UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET December 31, 1997 (Dollars in thousands, except per share data)
Shares Purchased at ------------------------------- $19.50 $21.50 per Share per Share --------- --------- ASSETS Cash and cash equivalents (3)................................... $ 580 $ 655 Certificates of Deposit in other financial institutions......... 4,755 4,755 Mortgage backed securities held to maturity .................... 1,924 1,924 Securities available for sale (3)............................... 7,553 7,232 Mortgage backed securities available for sale................... 2,394 2,394 Loans receivable, net........................................... 44,493 44,493 Other assets.................................................... 2,450 2,450 ------- ------- Total assets............................................... $64,149 $63,904 ====== ====== LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities Deposits...................................................... $54,867 $54,867 Borrowings (3)................................................ -- 208 Other liabilities............................................. 1,253 1,250 ------- ------- Total liabilities.......................................... 56,120 56,325 Shareholders' equity Common stock.................................................. 101 101 Paid in capital............................................... 7,566 7,566 Retained earnings (7)......................................... 7,881 7,875 Unrealized loss on securities available for sale.............. 1,287 1,287 Treasury stock (1)(2)(4)...................................... (6,917) (7,248) Unearned ESOP/MSBP............................................ (787) (787) Unearned stock compensation (8)............................... (1,102) (1,215) -------- -------- Total shareholders' equity................................. 8,029 7,579 -------- ------- Total liabilities and equity............................... $ 64,149 $ 63,904 ======= ======= Shareholders' equity/total assets............................ 12.52% 11.86% Book value per common share.................................. $13.97 $13.19
See Notes to Unaudited Proforma Financial Information on page 38 36 Mississippi View Holding Company UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET September 30, 1997 (Dollars in thousands, except per share data)
Shares Purchased at ---------------------------------- $19.50 $21.50 per Share per Share --------- --------- ASSETS Cash and cash equivalents (3)..................................... $ 505 $ 552 Certificate of Deposit in other financial institutions............ 4,755 4,755 Mortgage backed securities held to maturity ...................... 2,650 2,650 Securities available for sale (3)................................. 6,471 6,150 Mortgage backed securities available for sale..................... 2,413 2,413 Loans receivable, net............................................. 44,610 44,610 Other assets...................................................... 2,463 2,463 ------- ------- Total assets................................................. $ 63,867 $ 63,594 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities Deposits........................................................ $ 55,184 $ 55,184 Borrowings (3).................................................. -- 208 Other liabilities............................................... 1,189 1,174 ------- ------- Total liabilities............................................ 56,373 56,566 Shareholders' equity Common stock.................................................... 101 101 Paid in capital................................................. 7,540 7,540 Retained earnings (7)........................................... 7,578 7,556 Unrealized loss on securities available for sale................ 1,111 1,111 Treasury stock (1)(2)(4)........................................ (6,917) (7,248) Unearned ESOP/MSBP.............................................. (816) (816) Unearned stock compensation (8)................................. (1,102) (1,215) ------- ------- Total Shareholders' equity................................... 7,495 7,028 ------- ------- Total liabilities and equity................................. $ 63,867 $ 63,594 ======= ======= Shareholders' equity/total assets................................ 11.74% 11.05% Book value per common share...................................... $ 13.04 $ 12.23
See Notes to Unaudited Proforma Financial Information on page 38 37 Mississippi View Holding Company NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION (1) The proforma financial information reflects the repurchase of 222,000 Shares of stock at $19.50 and $21.50 per Share, as appropriate. (2) The balance sheet data give effect to the purchase of Shares as of the balance sheet date. The income statement data give effect to the purchase of Shares as of the beginning of each period presented. (3) The funds used to purchase Shares were considered to have been obtained from cash and cash equivalents and securities available for sale. In addition, borrowings will be obtained if Shares are purchased at $21.50 per Share. The pro forma data assumes a rate of interest of 4.47% for cash and cash equivalents, 6.13% for securities available for sale, a borrowing at a rate of 10.25% and a tax rate of 40%. The income statement data reflects the decrease in investment income as if cash was used to purchase the common stock at the beginning of the period. (4) Effect has been given to costs to be incurred in connection with the Offer, which are estimated to be $85,000. Such costs will be capitalized as part of the costs of the stock purchased. (5) Reflects the sale of Shares having a value of $1,101,750 and $1,214,750, based on a Purchase Price of $19.50 and $21.50 per Share, respectively, to the Trust. The obligation of the Trust to the Company is reflected in shareholders' equity as unearned compensation in the accompanying pro forma financial information. (6) Net income after tax effect on earnings as a result of pro forma effect of repurchase. (7) After tax effect of reduced earnings due to the loss of interest income resulting from the sale of cash and cash equivalents and securities available for sale. (8) Assumes purchase of 56,500 shares by the Trust. 38 10. Effects of the Offer on the Market for Shares; Registration under the Exchange Act. The Shares are not currently "margin securities" under the rules of the Federal Reserve Board. The Company believes that, following the purchase of Shares pursuant to the Offer, the Shares will continue to not be "margin securities" for purposes of the Federal Reserve Board's margin regulations. The Savings and Loan Holding Company Act and the Change in Bank Control Act each set forth thresholds with respect to the ownership of voting shares of a savings and loan holding company of 5% to 10%, respectively, over which the owner of such voting shares may be determined to control such savings and loan holding company. If, as a result of the Offer, the ownership interest of any shareholder in the Company is increased over these thresholds, such shareholder may be required to reduce its ownership interest in the Company or file a notice with regulators. Each shareholder whose ownership interest may be so increased is urged to consult the shareholder's own legal counsel with respect to the consequences to the shareholder of the Offer. The Company is required to file periodic reports with the Commission pursuant to Section 13 of the Exchange Act. Regardless of the results of the Offer the Company plans to apply to the Commission to suspend this duty since the number of its shareholders is currently less than 300 holders of record. Termination of the Company's reporting duty would substantially reduce the public information available concerning the Company. Such termination will, however, decrease the Company's non-interest expenses. 11. Fees and Expenses. The Company has retained MacKenzie Partners, Inc. to act as Information Agent and Registrar and Transfer Company to act as Depositary in connection with the Offer. The Information Agent may contact holders of Shares by mail, telephone, telegraph and personal interviews and may request brokers, dealers and other nominee shareholders to forward materials relating to the Offer to beneficial owners. The Information Agent and the Depositary will each receive reasonable and customary compensation for their respective services and will be reimbursed by the Company for certain reasonable out-of-pocket expenses, including attorneys' fees. No fees or commissions will be payable to brokers, dealers or other persons (other than fees to the Information Agent and the Depositary as described above) for soliciting tenders of Shares pursuant to the Offer. The Company will, however, upon request, reimburse brokers, dealers and commercial banks for customary mailing and handling expenses incurred by such persons in forwarding the Offer to Purchase and related materials to the beneficial owners of Shares held by any such person as a nominee or in a fiduciary capacity. No broker, dealer, commercial bank or trust company has been authorized to act as the agent of the Company, the Information Agent or the Depositary for purposes of the Offer. The Company will pay or cause to be paid all stock transfer taxes, if any, on its purchase of Shares except as otherwise provided in Instruction 7 in the Letter of Transmittal. The estimated costs and fees to be paid by the Company in connection with the Offer are as follows: Financial advisor fees................ $20,000 Accounting fees....................... 600 Legal fees............................ 30,000 Commission filing fees................ 955 Printing and mailing expenses......... 18,000 Depositary fees....................... 7,500 Information agent fees................ 5,000 Miscellaneous......................... 2,945 ------ Total................................. $85,000 ======= 39 ADDITIONAL INFORMATION The Company is currently subject to the informational filing requirements of the Exchange Act and, in accordance therewith, is obligated to file reports and other information with the Commission relating to its business, financial condition and other matters. Information, as of particular dates, concerning the Company's directors and officers, their remuneration, options granted to them, the principal holders of the Company's securities and any material interest of such persons in transactions with the Company is required to be disclosed in proxy statements distributed to the Company's shareholders and filed with the Commission. Such reports, proxy statements and other information are available for inspection at the public reference facilities of the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549; and for inspection and copying at the regional offices of the Commission, located at Suite 1400, Citicorp Center, 14th Floor, 500 West Madison Street, Chicago, Illinois 60661; and 7 World Trade Center, Suite 1300, New York, New York 10048. Copies of such material may also be obtained by mail, upon payment of the Commission's customary charges, from the Commission's principal office at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission also maintains a Web site on the World Wide Web at http:\www.sec.gov that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Commission. MISCELLANEOUS The Company is not aware of any jurisdiction where the making of the Offer is not in compliance with applicable law. If the Company becomes aware of any jurisdiction where the making of the Offer is not in compliance with any valid applicable law, the Company will make a good faith effort to comply with such law. If, after such good faith effort, the Company cannot comply with such law, the Offer will not be made to (nor will tenders be accepted from or on behalf of) the holders of Shares residing in such jurisdiction. Pursuant to Rule 13e-3 and Rule 13e-4 under the Exchange Act, the Company has filed with the Commission a Rule 13e-3 Transaction Statement and an Issuer Tender Offer Statement on Schedule 13E-4 which contain additional information with respect to the Offer. Such Schedule 13E-3 and Schedule 13E-4, including the exhibits and any amendments thereto, may be examined, and copies may be obtained, at the same places and in the same manner as is set forth in "Additional Information" with respect to information concerning the Company. Mississippi View Holding Company April 13, 1998 40 Schedule A 1. Directors and Executive Officers The following table sets forth certain information about the Company's directors and executive officers as of March 31, 1998.
Number of Shares Percent of Percent of Shares Name and Address(1) Principal Occupation Beneficially Owned Shares After Offer ------------------- -------------------- ------------------ ---------- ----------- DIRECTORS Neil Adamek Farmer 27,169(2)(4)(5)(9) 3.69% 4.76% Thomas J. Leiferman Bank & Company President 68,526(2)(8) 9.30 11.99 Wallace R. Mattock Retired (past Bank President) 17,869(2)(3)(4)(5) 2.43 3.13 Gerald Peterson Businessman 40,944(2)(4)(5)(6) 5.56 7.17 Peter Vogel Attorney 9,719(2)(4)(5)(7) 1.32 1.70 NON-DIRECTOR EXECUTIVE OFFICERS Larry D. Hartwig Treasurer & Controller of 34,672(10) 4.71 6.07 Bank & Company Mary Ann Karnowski Secretary of Bank & 22,103(11) 3.00 3.87 Company
- -------------- (1) The address of the individuals listed above is 35 East Broadway, Little Falls, Minnesota. Each of the individuals listed above is a citizen of the United States of America. (2) Excludes 80,639 Shares of Common Stock (56,447 currently unallocated) held under the ESOP Committee for which such specified individual (or certain individuals in the named group) serves as a member of the ESOP Committee or as an ESOP Trustee. Excludes 28,629 unvested and unawared Shares of Common Stock held by the MSBP for which such specified individuals (or certain individual in the named group) serves as member of the MSBP Committee or as an MSBP Trustee. Such individuals disclaim beneficial ownership with respect to such Shares held in a fiduciary capacity. (3) Includes 75 Shares jointly owed by Mr. Mattock with his son, which Mr. Mattock may be deemed to beneficially own. (4) Includes 2,015 and 4,389 options each to purchase Shares of Common Stock pursuant to 1995 and 1997 stock option plans, respectively, exercisable within 60 days of March 31, 1998. (5) Includes 1,209 Shares each of restricted Common Stock granted, but not vested, pursuant to the MSBP. (6) Includes 6,250 Shares owned by the spouse of Mr. Peterson, and 25 Shares held in trust by Mr. Peterson under the Uniform Gifts to Minors Act for the benefit of Mr. Peterson's minor grandchild, which Mr. Peterson may be deemed to beneficially own. (7) Includes 50 Shares held in trust by Mr. Vogel under the Uniform Gifts to Minors Act for the benefit of Mr. Vogel's minor children, which Shares Mr. Vogel may be deemed to beneficially own. (8) Includes (i) 1,050 Shares held in trust by Mr. Leiferman under the Uniform Gifts to Minors Act for the benefit of Mr. Leiferman's minor children; (ii) 4,881 Shares held in an individual retirement account for the benefit of Mr. Leiferman; (iii) 6,508 Shares held in the ESOP and allocated for the benefit of Mr. Leiferman; and (iv) 7,407 Shares held in a 401(k) Trust for the benefit of Mr. Leiferman, which Mr. Leiferman may be deemed to beneficially own. Includes 10,079 and 21,943 options to purchase Shares of Common Stock pursuant to the 1995 and 1997 stock option plans, respectively, exercisable within 60 days of March 31, 1998 and 6,047 Shares of restricted Common Stock granted, but not vested, pursuant to the MSBP. (9) Includes 402 Shares owned by Mr. Adamek's spouse, which Shares Mr. Adamek may be deemed to beneficially own. (10) Includes (i) 600 Shares held in trust by Mr. Hartwig under the Uniform Gifts to Minors Act for the benefit of Mr. Hartwig's minor children; (ii) 4,323 Shares held in an individual retirement account for the benefit of Mr. Hartwig; (iii) 2,780 Shares held in the ESOP and allocated for the benefit of Mr. Hartwig; and (iv) 5,920 Shares held in a 401(k) Trust for the benefit of Mr. Hartwig, which Mr. Hartwig may be deemed to beneficially own. Includes 5,039 and 10,971 options to purchase Shares of Common Stock pursuant to the 1995 and 1997 stock option plans, respectively, exercisable within 60 days of March 31, 1998 and 3,023 Shares of restricted Common Stock granted, but not vested, pursuant to the MSBP. (11) Includes (i) 25 Shares jointly owned by Ms. Karnowski with her son, (ii) 1,000 Shares held in an individual retirement account for the benefit of Ms. Karnowski; (iii) 2,080 Shares held in the ESOP and allocated for the benefit of Ms. A-1 Karnowski; (iv) 2,159 Shares held in a 401(k) Trust for the benefit of Ms. Karnowski, which Ms. Karnowski may be deemed to beneficially own. Includes 4,031 and 8,777 options to purchase Shares of Common Stock pursuant to the 1995 and 1997 stock option plans, respectively, exercisable within 60 days of March 31, 1998, and 2,419 Shares of restricted Common Stock granted, but not vested, pursuant to the MSBP. 2. Principal Shareholders The following table lists the name and address of each person who, to the best knowledge of the Company, owned beneficially (as determined in accordance with the rules and regulations of the Commission) more than 5% of the Common Stock as of March 31, 1998.
Name and Address Number of Shares Beneficially Owned Percent of Class ---------------- ----------------------------------- ---------------- John Hancock Advisers, Inc. 85,000(1) 11.54% 101 Huntington Avenue Boston, Massachusetts 021199 Wellington Management Company 89,200(1)(2) 12.11% 75 State Street Boston, Massachusetts 02109 Community Federal Savings and Loan 80,639(3) 10.94% Association of Little Falls Employee Stock Ownership Plan ("ESOP") 35 East Broadway Little Falls, Minnesota 56345
- -------------- (1) Based on a Schedule 13G filed in February 1998. (2) Includes 89,200 shares of Common Stock beneficially owned by Bay Pond Partners, L.P. which maintains the same business address as Wellington Management Company. (3) The ESOP purchased such shares for the executive benefit of plan participants with funds borrowed from the Company and are held in trust. In addition to Shares held by the directors and officers of the Company, the MSBP holds 28,629 Shares, or approximately 3.89% of the Common Stock outstanding. 3. Certain Transactions Involving Shares During the 40 business days prior to April 13, 1998, the Company and its executive officers and directors effected transactions in the Shares as follows:
Person Who Number Average Price Effected of Per Date Transaction Shares Share Nature of Transaction ---- ----------- ------ ----- --------------------- March 19, 1998 Company 3,379 $17.75 Open market stock repurchase
A-2 4. Previous Stock Repurchases Since October 1, 1995, the Company has purchased 271,128 Shares of Common Stock at a range of prices of $11.25 to $17.75. The average purchase price for each quarterly period since October 1, 1995 is disclosed below. Fiscal Year Average Purchase Price ----------- ---------------------- 1996: 1st Quarter.................................... N/A 2nd Quarter.................................... $12.04 3rd Quarter.................................... 11.56 4th Quarter.................................... 11.76 1997: 1st Quarter.................................... 11.96 2nd Quarter.................................... 12.38 3rd Quarter.................................... N/A 4th Quarter.................................... 17.18 1998: 1st Quarter.................................... N/A 2nd Quarter.................................... 17.75 A-3 Annex I [FINPRO LETTERHEAD] April 9, 1998 Board of Directors Mississippi View Holding Company 35 East Broadway Little Falls, Minnesota 56345 Members of the Board: You have requested our opinion, as an independent financial analyst to the common shareholders of Mississippi View Holding Company and its wholly owned subsidiary Community Federal Savings and Loan Association of Little Falls, Little Falls, Minnesota (the "Bank"), as to the fairness, from a financial point of view to the common shareholders of the Bank, of the terms of the proposed Tender Offer. As part of its banking analysis business, FinPro, Inc. is continually engaged in the valuation of bank, bank holding company and thrift securities in connection with mutual-to-stock conversions, stock repurchases and mergers and acquisitions nationwide. In rendering its opinion, FinPro reviewed certain publicly available information concerning the Company, including it's audited financial statements and annual reports. FinPro considered many factors in making its evaluation. In arriving at its Opinion regarding the fairness of the transaction, FinPro reviewed: (i) the Tender Offer; (ii) the most recent external auditor's reports to the Boards of Directors; (iii) the December 31, 1997 Report of Condition and Income; (iv) the most recent regulatory report, compliance report and Community Reinvestment Act Report; (v) the most recent annual report (10k); (vi) the internal loan classification list, OREO list and Delinquency list; (vii) details on stock price performance; (viii) the budget and long range operating plan; and (ix) details on the ESOP and RRP plans. FinPro conducted an off-site review of the Company's historical performance and current financial condition. We have also had discussions with the management of the Bank regarding its financial results and have analyzed the most current financial data available on the Bank. We also considered such other information, financial studies, analyses and investigations, and economic and market criteria which we deemed relevant. We also considered: (a) a transaction summary of the financial terms of the Modified Dutch Auction, including the aggregate consideration relative to fully diluted book value, fully diluted earnings, fully diluted assets, and deposit liabilities of the Bank; (b) the financial terms, financial condition, operating performance, and market areas of other recently completed mergers and acquisitions of comparable financial institution entities, including evaluating Midwest transactions both generally and specifically, along with trading and financial multiples of comparable institutions; and (c) discounted cash flow analyses for the Bank, incorporating the current business plan and future prospects. We also considered the reduced marketability characteristics of the Bank's Common Stock and the earnings in the future. The results of these analyses and the other factors considered were evaluated as a whole, with the aggregate results indicating a range of financial parameters utilized to assess the consideration as described in the Tender Offer. I-1 We have not independently verified any of the information reviewed by us and have relied on its being complete and accurate in all material respects. In addition, we have not made an independent evaluation of the assets of the Bank. In reaching our opinion we took into consideration the financial benefits of the proposed transaction to all the Bank's shareholders. Based on all factors that we deem relevant and assuming the accuracy and completeness of the information and data provided to us by the Bank, it is our opinion as of April 9, 1998, that the proposed transaction is fair and equitable to all of the Bank's shareholders from a financial point of view. Respectfully submitted, FinPro, Inc. Liberty Corner, New Jersey By /s/Donald J. Musso ---------------------------- Donald J. Musso President I-2 Annex II INDEX TO FINANCIAL STATEMENTS Mississippi View Holding Company First Quarter 1998 Financial Statements Consolidated Statements of Financial Condition (Unaudited) as of December 31, 1997 and December 31, 1996............................II-2 Consolidated Statements of Income (Unaudited) for the Three Months Ended December 31, 1997 and 1996....................II-3 Consolidated Statements of Cash Flows (Unaudited) for the Three Months Ended December 31, 1997 and 1996...............................................II-4 Notes to Consolidated Financial Statements (Unaudited)...................................................II-6 Annual Financial Statements Independent Auditor's Report..............................................II-8 Consolidated Statements of Financial Condition as of September 30, 1997 and 1996........................................II-9 Consolidated Statements of Income for the Years Ended September 30, 1997, 1996, and 1995................................................................II-10 Consolidated Statements of Shareholder's Equity for the Years Ended September 30, 1997, 1996 and 1995.....................................................II-11 Consolidated Statements of Cash Flows for the Years Ended September 30, 1997, 1996 and 1995...........................................................II-12 Notes to Consolidated Financial Statements...............................II-14 II-1 MISSISSIPPI VIEW HOLDING COMPANY AND SUBSIDIARY CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1997 SEPTEMBER 30, (UNAUDITED) 1997 ------------ ------------- ASSETS Cash and cash equivalents: Cash and due from banks.......................................................... $ 407,159 $ 214,934 Interest bearing deposits with banks............................................. 3,063,423 889,660 Securities available for sale, at fair value....................................... 11,526,081 12,963,344 Securities held to maturity, at amortized cost..................................... 6,679,180 7,405,466 FHLB stock, at cost................................................................ 650,700 650,700 Loans held for sale................................................................ -- 135,550 Loans receivable, net of allowance for loan losses of $861,953 in 1998 and $861,170 in 1997................................................................. 44,493,413 44,474,809 Accrued interest receivable........................................................ 426,913 437,548 Premises and equipment............................................................. 785,805 806,900 Other assets....................................................................... 586,117 567,539 ------------ ------------- Total assets................................................................ 68,618,791 68,546,450 ------------ ------------- LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Demand deposits.................................................................. $ 4,329,750 4,408,558 Savings deposits................................................................. 14,325,889 14,525,018 Time deposits.................................................................... 36,211,228 36,250,011 Total deposits.............................................................. 54,866,867 55,183,587 Advances from borrowers for taxes and insurance.................................. 52,239 107,038 Accrued income taxes............................................................. 67,245 66,352 Deferred tax liability........................................................... 650,869 525,353 Other liabilities................................................................ 505,446 596,216 ------------ ------------- Total liabilities........................................................... 56,142,666 56,478,546 ------------ ------------- Shareholders' equity: Serial preferred stock, no par value; 5,000,000 shares authorized, no shares issued........................................................................ -- -- Common stock, $.10 par value, 10,000,000 shares authorized; 1,007,992 shares issued; 656,629 and 653,151 shares outstanding................................ 100,799 100,799 Paid in capital.................................................................. 7,565,816 7,540,218 Treasury stock (267,749 and 267,749 shares), at cost............................. (3,605,111) (3,605,111) Retained earnings, substantially restricted...................................... 7,914,162 7,737,458 Unearned ESOP shares (56,447 and 58,463 shares), at cost......................... (483,330) (498,012) Unearned MSBP shares (27,167 and 28,629 shares), at cost......................... (303,206) (317,954) Unrealized appreciation on available-for-sale securities, net of tax............. 1,286,995 1,110,506 Total shareholders' equity.................................................. 12,476,125 12,067,904 ------------ ------------- Total liabilities and shareholders' equity.................................. $ 68,618,791 $ 68,546,450 ------------ ------------- ------------ -------------
The accompanying notes are an integral part of these consolidated financial statements. II-2 MISSISSIPPI VIEW HOLDING COMPANY AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED DECEMBER 31, -------------------------- 1997 1996 ----------- ----------- Interest income: Loans receivable................................................................. $ 973,457 $ 942,489 Securities available for sale.................................................... 171,696 173,997 Securities held to maturity...................................................... 126,754 176,451 ----------- ----------- Total interest income....................................................... 1,271,907 1,292,937 ----------- ----------- Interest Expense: Demand deposits.................................................................. 9,451 9,973 Savings deposits................................................................. 102,312 94,223 Time deposits.................................................................... 514,287 530,099 ----------- ----------- Total interest expense...................................................... 626,050 634,295 ----------- ----------- Net interest income.............................................................. 645,857 658,642 ----------- ----------- Provision for loan losses........................................................ -- -- Net interest income after provision for loan loss........................... 645,857 658,642 ----------- ----------- Noninterest Income: Other fees and service charges................................................... 17,458 13,989 Gain on sale of loans............................................................ 2,535 2,246 Other............................................................................ 22,196 21,282 ----------- ----------- Total noninterest income.................................................... 42,189 37,517 ----------- ----------- Noninterest expense: Compensation and employee benefits............................................... 257,785 225,574 Occupancy........................................................................ 22,771 21,933 Deposit insurance premium........................................................ 14,677 38,185 Data processing.................................................................. 18,541 21,402 Advertising...................................................................... 6,828 8,086 Real estate owned expense, net................................................... 335 346 Other............................................................................ 81,213 123,294 ----------- ----------- Total noninterest expense................................................... 402,150 438,820 ----------- ----------- Income before income taxes......................................................... 285,896 257, 339 Income tax expense................................................................. 109,192 84, 074 Net income......................................................................... $ 176,704 $ 173,265 Basic earnings per share........................................................... $ 0.27 $ 0.22 Diluted earnings per share......................................................... $ 0.24 $ 0.22 Dividends declared during the period............................................... $ -- $ --
The accompanying notes are an integral part of these consolidated financial statements. II-3 MISSISSIPPI VIEW HOLDING COMPANY AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED DECEMBER 31, -------------------------- 1997 1996 ----------- ----------- Cash flows from operating activities: Interest received on loans and investments....................................... $ 1,273,811 $ 1,256,833 Interest paid.................................................................... (626,012) (634,127) Other fees, commissions, and income received..................................... 58,664 61,506 Cash paid to suppliers, employees and others..................................... (438,359) (781,205) Contributions to charities....................................................... (1,727) (3,749) Income taxes paid................................................................ (94,037) -- Loans originated for sale........................................................ (232,783) (170,400) Proceeds from sale of loans...................................................... 370,868 231,391 Net cash provided by operating activities................................... 310,425 (39,751) ----------- ----------- Cash flows from investing activities: Purchases of available-for-sale securities....................................... (882,527) -- Proceeds from maturities of available-for-sale securities........................ 2,610,643 632,860 Purchases of held-to-maturity securities......................................... (889,000) (988,000) Proceeds from maturities of held-to-maturity securities.......................... 1,615,033 1,951,990 Loan originations and principal payments on loans, net........................... (21,535) (677,459) Purchases of property and equipment.............................................. (3,621) (12,266) Net cash provided by (used in) investing activities......................... 2,428,993 907,125 ----------- ----------- Cash flows from financing activities: Net increase (decrease) in non-interest bearing demand and savings deposit accounts...................................................................... (278,075) 247,000 Net (decrease) increase in time deposits......................................... (38,682) (436,058) Net (decrease) increase in mortgage escrow funds................................. (54,800) (88,154) Acquisition of treasury stock.................................................... -- (275,000) Net increase in unearned MSBP shares............................................. (1,873) (912) Net cash used by financing activities....................................... (373,430) (553,124) ----------- ----------- Net (decrease) increase in cash and cash equivalents............................... 2,365,988 314,250 Cash and cash equivalents at beginning of year..................................... 1,104,594 2,583,654 ----------- ----------- Cash and cash equivalents at end of year........................................... $ 3,470,582 $ 2,897,904 ----------- ----------- ----------- -----------
The accompanying notes are an integral part of these consolidated financial statements. II-4 MISSISSIPPI VIEW HOLDING COMPANY AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS--(CONTINUED)
FOR THE THREE MONTHS ENDED DECEMBER 31, -------------------------- 1997 1996 ----------- ----------- RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES Net Income....................................................................... $ 176,704 $ 173,265 Adjustments: Provision for losses on loans and real estate................................. -- -- Depreciation.................................................................. 24,716 20,951 Non-cash dividends............................................................ (1,385) (1,319) ESOP fair value adjustment.................................................... 11,515 4,451 Amortization of ESOP compensation............................................. 14,681 14,359 Amortization of MSBP compensation............................................. 16,622 16,622 Tax benefit of MSBP vesting activities........................................ 14,083 3,052 Net amortization and accretion of premiums and discounts on securities........ 4,934 993 Net loan fees deferred and amortized.......................................... 2,932 10,334 Net mortgage loan servicing fees deferred..................................... 430 363 (Increase) decrease in: Loans held for sale......................................................... 135,550 58,745 Accrued interest receivable................................................. 10,634 (26,552) Prepaid income tax.......................................................... -- (71,640) Deferred tax asset.......................................................... -- 163,903 Other assets................................................................ (19,008) 31,873 Increase (decrease) in: Accrued interest payable.................................................... 38 168 Accrued income taxes........................................................ 8,749 (8,272) Other liabilities........................................................... (90,770) (431,047) ----------- ----------- Net cash provided by operating activities..................................... $ 310,425 $ (39,751) ----------- ----------- ----------- ----------- SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES Noncash dividends................................................................ $ 1,385 $ 1,319 ----------- ----------- ----------- -----------
The accompanying notes are an integral part of these consolidated financial statements. II-5 MISSISSIPPI VIEW HOLDING COMPANY AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1997 (UNAUDITED) NOTE 1: PRINCIPLES OF CONSOLIDATION The unaudited consolidated financial statements as of and for the three month period ended December 31, 1997, include the accounts of Mississippi View Holding Company (the 'Company') and its wholly owned subsidiary Community Federal Savings & Loan Association of Little Falls (the 'Association'). All significant intercompany accounts and transactions have been eliminated in consolidation. NOTE 2: BASIS OF PRESENTATION General: The accompanying unaudited interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and instructions per Form 10-QSB. Accordingly, they do not include all information and disclosures required by generally accepted accounting principles for complete financial statements. The accompanying consolidated financial statements do not purport to contain all the necessary financial disclosures required by generally accepted accounting principles that might otherwise be necessary in the circumstances and should be read with the fiscal 1997 consolidated financial statements and notes of Mississippi View Holding Company and Subsidiary included in their annual audit report for the year ended September 30, 1997. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for fair presentations have been included. The results of operations for the three month period ended December 31, 1997, are not necessarily indicative of the results that may be expected for the entire fiscal year or any other period. Reclassification: Certain items previously reported have been reclassified to conform with the current period's reporting format. NOTE 3. RECENT ACCOUNTING PRONOUNCEMENTS SFAS No. 130, 'Reporting Comprehensive Income'--issued June 1997, establishes standards for reporting and displaying comprehensive income and its components in general-purpose financial statements. Comprehensive income includes net income and several other items that current accounting standards require to be recognized outside of net income. This statement requires entities to display comprehensive income and its components in the financial statements with presentation of the accumulated balances of other comprehensive income reported in stockholder's equity separately from retained earnings and additional paid-in capital. SFAS No. 130 is effective for fiscal years beginning after December 15, 1997. Reclassification of financial statements for earlier periods that are presented for comparative purposes is required. SFAS No. 131, 'Disclosures about Segments of Enterprise and Related Information'--issued June 1997, requires public business enterprises to report information about their operating segments in a complete set of financial statements to shareholders. This statement also requires entities to report enterprise-wide information about their products and services, their activities in different geographic areas, and their reliance on major customers. Certain segment information is also to be reported in interim financial statements. The basis for determining an enterprise's operating segments is the manner in which management operates the business. Specifically, financial information is required to be reported on the basis that is used internally by the enterprise's chief operating decision maker in making decisions related to resource allocation and segment performance. SFAS No. 131 is effective for financial statements for years beginning after December 31, 1997. Management believes adoption of the above-described Statements will not have a material effect on financial position and the results of operations, nor will adoption require additional capital resources. II-6 MISSISSIPPI VIEW HOLDING COMPANY AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) DECEMBER 31, 1997 (UNAUDITED) EARNINGS PER SHARE In 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 128, Earnings per Share. Statement 128 replaced the previously reported primary and fully diluted earnings per share with basic and diluted earnings per share. Unlike primary earnings per share, basic earnings per share excludes any dilutive effects of options, warrants, and convertible securities. Diluted earnings per share is very similar to the previously reported fully diluted earnings per share. All earnings per share amounts for all periods have been presented, and where necessary restated, to conform to the Statement 128 requirements. The following tables set forth the computation of basic and diluted earnings per share:
FOR THE THREE MONTHS ENDED DECEMBER 31, -------------------- 1997 1996 -------- -------- Numerator: Net income--Numerator for basic earnings per share and diluted earnings per share--income available to common shareholders............................. $176,704 $173,265 Denominator: Denominator for basic earnings per shares--weighted-average shares............ 654,941 771,742 Effect of dilutive securities: stock options and employee stock-based compensation............................................................. 68,243 8,760 Denominator for diluted earnings per share--adjusted weighted-average shares and assumed conversions.................................................... 723,184 780,502 Basic earnings per share........................................................ $ 0.27 $ 0.22 Diluted earnings per share...................................................... $ 0.24 $ 0.22
II-7 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Shareholders Mississippi View Holding Company and Subsidiary Little Falls, Minnesota 56345 We have audited the accompanying consolidated statements of financial condition of Mississippi View Holding Company and Subsidiary (the Company) as of September 30, 1997 and 1996, and the related consolidated statements of income, changes in shareholders' equity, and cash flows for the two years then ended. These financial statements are the responsibility of management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Mississippi View Holding Company and Subsidiary as of September 30, 1997 and 1996, and the consolidated results of their operations and their cash flows for the two years then ended, in conformity with generally accepted accounting principles. BERTRAM COOPER & CO., LLP Waseca, Minnesota October 29, 1997 II-8 MISSISSIPPI VIEW HOLDING COMPANY AND SUBSIDIARY CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
SEPTEMBER 30, -------------------------- 1997 1996 ----------- ----------- ASSETS Cash and cash equivalents: Cash and due from banks.......................................................... $ 214,934 $ 317,777 Interest bearing deposits with banks............................................. 889,660 2,265,877 Securities available-for-sale, at fair value....................................... 12,963,344 12,235,145 Securities held-to-maturity, at amortized cost (fair value of $7,470,314 for 1997 and $9,320,741 for 1996)......................................................... 7,405,466 9,294,092 FHLB stock, at cost................................................................ 650,700 650,700 Loans held for sale................................................................ 135,550 178,663 Loans receivable, net of allowance for loan losses of $861,170 in 1997 and $877,094 in 1996................................................................. 44,474,809 43,070,281 Accrued interest receivable........................................................ 437,548 450,327 Premises and equipment............................................................. 806,900 788,846 Deferred tax asset (net of valuation allowance).................................... -- 163,903 Other assets....................................................................... 567,539 595,208 ----------- ----------- Total assets.................................................................. $68,546,450 $70,010,819 ----------- ----------- ----------- ----------- LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Demand deposits.................................................................. $ 4,408,558 $ 4,471,137 Savings deposits................................................................. 14,525,018 14,087,832 Time deposits.................................................................... 36,250,011 37,972,225 ----------- ----------- Total deposits................................................................ 55,183,587 56,531,194 ----------- ----------- Advances from borrowers for taxes and insurance.................................... 107,038 138,530 Accrued income taxes............................................................... 66,352 -- Deferred tax liability............................................................. 525,353 -- Other liabilities.................................................................. 596,216 900,850 ----------- ----------- Total liabilities............................................................. 56,478,546 57,570,574 ----------- ----------- Shareholders' equity: Serial preferred stock, no par value, 5,000,000 shares authorized, no shares issued........................................................................... -- -- Common stock, $.10 par value, 10,000,000 shares authorized; 1,007,992 shares issued, 653,151 and 776,713 outstanding.......................................... 100,799 100,799 Paid in capital.................................................................... 7,540,218 7,510,397 Treasury stock (267,749 and 130,278 shares), at cost............................... (3,605,111) (1,536,689) Retained earnings, substantially restricted........................................ 7,737,458 7,116,646 Unearned ESOP shares (58,463 and 66,527 shares) at cost............................ (498,012) (566,736) Unearned MSBP shares (28,629 and 34,474 shares) at cost............................ (317,954) (387,412) Net unrealized gain on available-for-sale securities, net of tax of $740,337 in 1997 and $135,494 in 1996........................................................ 1,110,506 203,240 ----------- ----------- Total shareholders' equity.................................................... 12,067,904 12,440,245 ----------- ----------- Total liabilities and shareholders' equity.................................... $68,546,450 $70,010,819 ----------- ----------- ----------- -----------
The accompanying notes are an integral part of these consolidated financial statements II-9 MISSISSIPPI VIEW HOLDING COMPANY AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEAR ENDED SEPTEMBER 30, ------------------------ 1997 1996 ---------- ---------- Interest income: Loans receivable.................................................................... $3,817,212 $3,703,652 Securities available-for-sale....................................................... 740,781 528,912 Securities held-to-maturity......................................................... 606,933 940,865 ---------- ---------- Total interest income............................................................ 5,164,926 5,173,429 ---------- ---------- Interest expense: Demand deposits..................................................................... 36,963 37,345 Savings deposits.................................................................... 394,811 330,357 Time deposits....................................................................... 2,070,092 2,163,841 ---------- ---------- Total interest expense........................................................... 2,501,866 2,531,543 ---------- ---------- Net interest income................................................................. 2,663,060 2,641,886 Provision for loan losses........................................................... -- 3,725 ---------- ---------- Net interest income after provision for loan losses.............................. 2,663,060 2,638,161 ---------- ---------- Noninterest income: Other fees and service charges...................................................... 79,022 70,603 Gain on sale of loans............................................................... 17,372 74,142 Net gain on sale of foreclosed real estate.......................................... 12,848 17,394 Contingency recovery................................................................ -- 81,023 Other............................................................................... 92,818 107,516 ---------- ---------- Total noninterest income......................................................... 202,060 350,678 ---------- ---------- Noninterest expenses: Compensation and employee benefits.................................................. 963,690 919,565 Occupancy........................................................................... 94,829 87,856 Deposit insurance assessment........................................................ -- 362,557 Deposit insurance premiums.......................................................... 76,073 150,091 Data processing..................................................................... 83,254 75,996 Advertising......................................................................... 27,201 30,787 Foreclosed real estate expense, net................................................. 1,415 5,053 Other............................................................................... 421,081 424,066 ---------- ---------- Total noninterest expense........................................................ 1,667,543 2,055,971 ---------- ---------- Income before income taxes............................................................ 1,197,577 932,868 Income tax expense.................................................................... 457,862 374,100 ---------- ---------- Net income............................................................................ $ 739,715 $ 558,768 ---------- ---------- ---------- ---------- Earnings per share of common stock.................................................... $ 0.96 $ 0.66 ---------- ---------- ---------- ---------- Weighted averages common shares outstanding........................................... 746,484 851,025 ---------- ---------- ---------- ----------
The accompanying notes are an integral part of these consolidated financial statements II-10 MISSISSIPPI VIEW HOLDING COMPANY AND SUBSIDIARY CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
RETAINED UNALLOCATED ADDITIONAL EARNINGS COMMON COMMON PAID-IN TREASURY SUBSTANTIALLY STOCK HELD STOCK CAPITAL STOCK RESTRICTED BY ESOP -------- ---------- ----------- ------------- ----------- Balance, September 30, 1995............................. $100,799 $7,494,971 $ -- $ 6,697,907 $(644,441) Treasury stock acquired............................... -- -- (1,536,689) -- -- Net earnings for the year ended September 30, 1996.... -- -- -- 558,768 -- Dividend paid $0.16/share............................. -- -- -- (140,029) -- Fair value adjustment of ESOP shares net of taxes of $10,284............................................. -- 15,426 -- -- -- Allocated ESOP shares................................. -- -- -- -- 77,705 MSBP shares acquired, net of earned shares in the amount of $71,217................................... -- -- -- -- -- Net change in unrealized gain on available-for-sale securities, net of taxes of $46,318................. -- -- -- -- -- -------- ---------- ----------- ------------- ----------- Balance, September 30, 1996............................. $100,799 $7,510,397 $(1,536,689) $ 7,116,646 $(566,736) -------- ---------- ----------- ------------- ----------- Treasury stock acquired............................... -- -- (2,068,422) -- -- Net earnings for the year ended September 30, 1997.... -- -- -- 739,715 -- Dividend paid $0.16/share............................. -- -- -- (118,903) -- Fair value adjustment of ESOP shares net of taxes of $17,846............................................. -- 26,769 -- -- -- Allocated ESOP shares................................. -- -- -- -- 68,724 MSBP shares earned.................................... -- -- -- -- -- Effect of tax adjustment for vested MSBP shares....... -- 3,052 -- -- -- Net change in unrealized gain on available-for-sale securities, net of taxes of $740,337................ -- -- -- -- -- -------- ---------- ----------- ------------- ----------- Balance, September 30, 1997............................. $100,799 $7,540,218 $(3,605,111) $ 7,737,458 $(498,012) -------- ---------- ----------- ------------- ----------- -------- ---------- ----------- ------------- ----------- UNREALIZED UNALLOCATED GAIN ON COMMON SECURITIES STOCK HELD AVAILABLE FOR MSBP FOR SALE TOTAL ----------- ---------- ----------- Balance, September 30, 1995............................. $ -- $ 133,763 $13,782,999 Treasury stock acquired............................... -- -- (1,536,689) Net earnings for the year ended September 30, 1996.... -- -- 558,768 Dividend paid $0.16/share............................. -- -- (140,029) Fair value adjustment of ESOP shares net of taxes of $10,284............................................. -- -- 15,426 Allocated ESOP shares................................. -- -- 77,705 MSBP shares acquired, net of earned shares in the amount of $71,217................................... (387,412) -- (387,412) Net change in unrealized gain on available-for-sale securities, net of taxes of $46,318................. -- 69,477 69,477 ----------- ---------- ----------- Balance, September 30, 1996............................. $(387,412) $ 203,240 $12,440,245 ----------- ---------- ----------- Treasury stock acquired............................... -- -- (2,068,422) Net earnings for the year ended September 30, 1997.... -- -- 739,715 Dividend paid $0.16/share............................. -- -- (118,903) Fair value adjustment of ESOP shares net of taxes of $17,846............................................. -- -- 26,769 Allocated ESOP shares................................. -- -- 68,724 MSBP shares earned.................................... 69,458 -- 69,458 Effect of tax adjustment for vested MSBP shares....... -- -- 3,052 Net change in unrealized gain on available-for-sale securities, net of taxes of $740,337................ -- 907,266 907,266 ----------- ---------- ----------- Balance, September 30, 1997............................. $(317,954) $1,110,506 $12,067,904 ----------- ---------- ----------- ----------- ---------- -----------
The accompanying notes are an integral part of these consolidated financial statements II-11 MISSISSIPPI VIEW HOLDING COMPANY AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED SEPTEMBER 30, -------------------------- 1997 1996 ----------- ----------- Cash flows from operating activities: Interest received on loans and investments........................................ $ 5,146,533 $ 5,212,957 Interest paid..................................................................... (2,499,878) (2,532,101) Other fees, commissions, and income received...................................... 285,085 299,433 Cash paid to suppliers, employees and others...................................... (1,704,523) (1,350,252) Contributions to charities........................................................ (29,482) (7,869) Income taxes paid................................................................. (298,000) (643,219) Loans originated for sale......................................................... (1,744,089) (2,455,977) Proceeds from sale of loans....................................................... 1,742,622 4,487,415 ----------- ----------- Net cash provided by operating activities...................................... 898,268 3,010,387 ----------- ----------- Cash flows from investing activities: Purchases of available-for-sale securities........................................ (5,311,916) (6,547,147) Proceeds from maturities of available-for-sale securities......................... 6,074,554 1,356,285 Purchases of held-to-maturity securities.......................................... (4,755,000) (4,694,532) Proceeds from maturities of held-to-maturity securities........................... 6,641,854 9,295,315 Loan originations and principal payments on loans, net............................ (1,375,500) (2,123,430) Purchases of property and equipment............................................... (109,049) (10,936) Proceeds from sale of foreclosed real estate...................................... 12,848 17,394 ----------- ----------- Net cash provided by (used in) investing activities............................ 1,177,791 (2,707,051) ----------- ----------- Cash flows from financing activities: Net increase in non-interest bearing demand and savings deposit accounts.......... 375,500 398,025 Net (decrease) increase in time deposits.......................................... (1,722,125) 1,213,396 Net (decrease) in mortgage escrow funds........................................... (31,492) (49,168) Dividend on unallocated ESOP shares............................................... 10,322 11,612 Acquisition of treasury stock..................................................... (2,068,422) (1,536,689) Acquistion of unearned MSBP shares................................................ -- (453,899) Dividends paid.................................................................... (118,902) (140,029) ----------- ----------- Net cash used by financing activities............................................... (3,555,119) (556,752) ----------- ----------- Net (decrease) in cash and cash equivalents......................................... (1,479,060) (253,416) Cash and cash equivalents at beginning of year...................................... 2,583,654 2,837,070 ----------- ----------- Cash and cash equivalents at end of year............................................ $ 1,104,594 $ 2,583,654 ----------- ----------- ----------- -----------
The accompanying notes are an integral part of these consolidated financial statements II-12 MISSISSIPPI VIEW HOLDING COMPANY AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS--(CONTINUED)
FOR THE YEAR ENDED SEPTEMBER 30, -------------------------- 1997 1996 ----------- ----------- RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES Net income..................................................................... $ 739,715 $ 558,768 Adjustments: Provision for losses on loans and real estate................................ -- 3,725 Depreciation................................................................. 90,995 83,771 Federal Home Loan Bank stock dividends....................................... -- (12,800) Reinvested dividends......................................................... (5,421) (5,071) ESOP fair value adjustment................................................... 26,768 15,426 Amortization of ESOP compensation............................................ 58,403 66,092 Amortization of MSBP compensation............................................ 66,487 66,487 Tax benefit of MSBP vesting activities....................................... 3,052 -- Net amortization and accretion of premiums and discounts on securities................................................................ 28,466 38,211 Net (gains) on sales of foreclosed real estate............................... (12,848) (17,393) Net loan fees deferred and amortized......................................... 32,924 14,291 Net mortgage loan servicing fees deferred.................................... 2,112 (11,611) Net increase in unearned MSBP shares......................................... 2,971 -- Contingency recovery......................................................... -- (81,023) (Increase) decrease in: Loans held for sale....................................................... (18,839) 2,014,650 Accrued interest receivable............................................... 12,780 78,598 Prepaid income tax........................................................ 23,892 (23,892) Deferred tax asset........................................................ 163,903 (119,721) Other assets.............................................................. 1,664 (6,639) Increase (decrease) in: Accrued interest payable.................................................. (983) (558) Accrued income tax........................................................ (13,139) (115,222) Other liabilities......................................................... (304,634) 464,298 ----------- ----------- Net cash provided by operating activities................................. $ 898,268 $ 3,010,387 ----------- ----------- ----------- ----------- SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES Federal Home Loan Bank stock dividends......................................... $ -- $ 12,800 Refinancings of sales of foreclosed real estate................................ -- 37,200 Transfers from loans to real estate acquired through foreclosure............... -- 4,989 Reinvested dividends........................................................... 5,421 5,071 Transfer of debt securities to available-for-sale from securities held-to-maturity............................................................. -- 2,449,446 Transfers of loans held for investment to loans held for sale.................. -- 2,135,339
The accompanying notes are an integral part of these consolidated financial statements II-13 MISSISSIPPI VIEW HOLDING COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1997 AND 1996 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The following summarizes the significant accounting policies Mississippi View Holding Company (the Company) follows in presenting its financial statements. Principles of Consolidation--The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary Community Federal Savings and Loan Association (the Association). All significant intercompany transactions and balances are eliminated in consolidation. Certain amounts in the financial statements for the prior year have been reclassified to conform to current financial statement presentation. Nature of Business--The Company is a unitary thrift holding company whose subsidiary provides financial services. The Association's business is that of a financial intermediary and consists primarily of attracting deposits from the general public and using such deposits, together with borrowings and other funds, to make mortgage loans secured by residential real estate and other consumer loans. At September 30, 1997, the Association operated one retail banking office in Minnesota. The Association is subject to significant competition from other financial institutions, and is also subject to regulation by certain federal regulatory agencies and undergoes periodic examinations by those regulatory agencies. Use of Estimates--In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheets, and income and expenses for the period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for losses on loans and the valuation of real estate acquired in connection with foreclosures or in satisfaction of loans. In connection with the determination of the allowance for losses on loans and foreclosed real estate, management obtains independent appraisals for significant properties. A substantial portion of the Association's loans are collateralized by real estate in local markets (see Note 13). In addition, foreclosed real estate is located in the same market area. Accordingly, the ultimate collectibility of a substantial portion of the Association's loan portfolio and the recovery of a substantial portion of the carrying amount of foreclosed real estate are susceptible to changes in local market conditions. While management uses available information to recognize losses on loans and foreclosed real estate, future additions to the allowances may be necessary based on changes in local economic conditions. In addition, regulatory agencies, as an integral part of their examination process, periodically review the Association's allowance for losses on loans and foreclosed real estate. These agencies may require the Association to recognize additions to the allowance based on their judgments about information available to them at the time of their examination. Cash Equivalents--Cash equivalents of $300,000 and $1,000,000 at September 30, 1997 and 1996, respectively, consist of certificates of deposit, and funds due from banks. For purposes of the statements of cash flows, the Association considers all highly liquid debt instruments with original maturities of three months or less to be cash equivalents. Investment Securities--The Company classifies its investments, including debt securities, marketable equity securities, mortgage-backed securities, and mortgage related securities in one of three catagories: held-to-maturity, trading and available-for-sale. Debt securities that the Company has the positive intent and ability to hold to maturity are classified as held-to-maturity and reported at amortized cost. The Company does not engage in securities trading, therefore, the balance of its debt securities and all equity securities are classified as available-for-sale. The Company classifies debt securities as available-for-sale when it determines that such securities may be sold at a future date or if there are foreseeable circumstances under which the Company would sell such securities. II-14 MISSISSIPPI VIEW HOLDING COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) SEPTEMBER 30, 1997 AND 1996 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED) Securities designated as available-for-sale are recorded at fair value. Changes in the fair value of securities available-for-sale are included in shareholders' equity as unrealized holding gains or losses net of the related tax effect. Unrealized losses on available-for-sale securities or held-to-maturity securities reflecting a decline in value judged to be other than temporary are charged to income. Realized gains or losses on available-for-sale securities are computed on a specific identification basis. Premiums and discounts on debt and mortgage-backed securities are amortized to expense or accreted to income over the estimated life of the respective security using a method that approximates the level yield method. The Association, as a member of the Federal Home Loan Bank System, is required to maintain an investment in capital stock of the Federal Home Loan Bank of Des Moines. Because no ready market exists for this stock, and it has no quoted market value, the Association's investment in this stock is carried at cost. Loans Held for Sale--Mortgage loans originated and intended for sale in the secondary market are carried at the lower of cost or estimated market value in the aggregate. Net unrealized losses are recognized through a valuation allowance by charges to income. Loans Receivable--Loans receivable that management has the intent and ability to hold for the forseeable future or until maturity or pay-off are reported at their outstanding principal balance adjusted for any charge-offs, the allowance for loan losses, and any deferred fees or costs on originated loans and unamortized premiums or discounts on purchased loans. Discounts and premiums on purchased residential real estate loans are amortized to income using the interest method over the remaining period to contractual maturity, adjusted for anticipated prepayments. Discounts and premiums on purchased consumer loans are recognized over the expected lives of the loans using the level yield method. The allowance for loan losses is increased by charges to income and decreased by charge-offs (net of recoveries). Management's periodic evaluation of the adequacy of the allowance is based on the Association's past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower's ability to repay, estimated value of any underlying collateral, and current economic conditions. Loans are considered impaired if full principal and interest payments are not anticipated to be made in accordance with the contractual terms. Impaired loans are carried at the present value of expected future cash flows discounted at the loan's effective interest rate or at the fair value of the collateral if the loan is collateral dependent. A portion of the allowance for loan losses is allocated to impaired loans if the value of such loans is deemed to be less than the unpaid balance. If these allocations cause the allowance for loan losses to require an increase, such an increase is reported as a component of the provision for loan losses. Uncollectible interest on loans contractually past due for three months is charged off or an allowance is established based on management's periodic evaluation. The allowance is established by a charge to interest income equal to all interest previously accrued and income is subsequently recognized only to the extent cash payments are received until, in management's judgment, the borrower's ability to make periodic interest and principal payments returns to normal, in which case the loan is returned to accrual status. Loan origination fees and certain direct origination costs are capitalized with the net fee or cost recognized as an adjustment to interest income using the interest method. Mortgage Servicing Rights--The Association adopted Statement of Financial Accounting Standards (SFAS) No. 125, 'Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities' for transactions entered into after December 31, 1996. SFAS No. 125 established accounting and reporting standards for transfers and servicing of financial assets and extinguishments of liabilities based on the consistent application of the financial-components approach. This approach requires the recognition of financial assets and servicing assets that are controlled by the reporting entity, and the derecognition of financial assets and liabilities II-15 MISSISSIPPI VIEW HOLDING COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) SEPTEMBER 30, 1997 AND 1996 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED) when control is extinguished. Liabilities and derivatives incurred or obtained by transferors in conjunction with the transfer of financial assets are measured at fair value, if practicable. Servicing assets and other retained interests in transferred assets are measured by allocating the carrying amount between the assets sold and the interest retained, based on their relative fair value. The adoption of SFAS No. 125 did not have a material effect on the Association's operations for the year ended September 30, 1997. Foreclosed Real Estate--Real estate properties acquired through, or in lieu of, loan foreclosure are initially recorded at the lower of the related unpaid loan balance or fair value of the property, less estimated costs to sell, at the date of foreclosure. Costs relating to development and improvement of property are capitalized, whereas costs relating to the holding of property are expensed. Valuations are periodically performed by management and an allowance for losses is established by a charge to operations if the carrying value of a property exceeds its estimated fair value less estimated costs to sell. Premises and Equipment--Land is carried at cost. Building, furniture and equipment are carried at cost less accumulated depreciation. Depreciation is computed by the straight-line method over the estimated useful lives of the assets, which range from five to forty years. Income Taxes--Deferred income taxes are recognized for the tax consequences of temporary differences by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts and the tax basis of existing assets and liabilities. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date. The measurement of deferred tax assets is reduced, if necessary, by the amount of any tax benefits that, based on available evidence, are not expected to be realized. The effect of a change in the beginning-of-the-year balance of a valuation allowance that results from a change in judgment about the realizability of deferred tax assets is included in income. The Company files consolidated income tax returns with the Association and they have entered into a tax sharing agreement which provides that the Association will pay to the Company, or receive a refund from the Company, as if the Associations portion of income tax liability or benefit was separately determined based on the Association's taxable income or loss. Earnings Per Share--Earnings per share of common stock has been determined by dividing net income by the weighted average number of shares of common stock and common stock equivalents outstanding during the year. Stock options are regarded as common stock equivalents computed using the treasury stock method. Shares acquired by the employee stock ownership plan are not considered in the weighted average shares outstanding until shares are committed to be released to an employee's individual account or have been earned. The difference between primary and fully diluted earnings per share is not material. Treasury Stock--Treasury stock is recorded at cost. In the event of a subsequent reissue, the treasury stock account will be reduced by the cost of such stock on the average cost basis with any excess proceeds credited to addional paid-in capital. Treasury stock is available for general corporate purposes. Stock-Based Compensation--SFAS No. 123, 'Accounting for Stock-Based Compensation,' establishes a new fair value-based accounting method for stock-based compensation plans. As permitted by SFAS No. 123, management has elected to continue measuring compensation costs based on the intrinsic value method as prescribed by APB Opinion No. 25, 'Accounting for Stock Issued to Employees.' See Footnote No. 10 for proforma disclosure of net income and earnings per share as if the fair value method had been adopted. Fair Values of Financial Instruments--SFAS No. 107, 'Disclosures about Fair Value of Financial Instruments,' requires disclosure of fair value information about financial instruments, whether or not recognized in the statement of financial condition. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are II-16 MISSISSIPPI VIEW HOLDING COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) SEPTEMBER 30, 1997 AND 1996 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED) significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimated cannot be substantiated by comparison to to independent markets and, in many cases, could not be realized in immediate settlement of the instruments. SFAS No. 107 excludes certain financial instruments and all nonfinancial assets and liabilities from its disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company. The following methods and assumptions were used by the Company in estimating its fair value disclosures, as presented in Note 12: Cash and cash equivalents: The carrying amounts of cash and cash equivalents approximates fair value. Debt and equity securities: Fair values for debt and equity securities are based on quoted market prices, where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments. FHLB stock: The carrying amount of FHLB stock approximates fair value. Loans: For variable-rate loans that reprice frequently with no significant change in credit risk, fair values are based on carrying amounts. The fair values for other loans (for example, fixed rate commercial real estate, rental property mortgage loans, and commercial and industrial loans) are estimated using discounted cash flow analyses, based on interest rates currently being offered for loans with similar terms to borrowers of similar credit quality giving consideration to estimated prepayment and credit loss factors. Loan fair value estimates include judgments regarding future expected loss experience and risk characteristics. Fair values for impaired loans are estimated using discounted cash flow analysis or underlying collateral values, where applicable. Accrued interest receivable: The carrying amount of accrued interest receivable approximates fair value. Deposits: The fair values disclosed for demand deposits are, by definition, equal to the amount payable on demand at the reporting date (that is, their carrying amounts). Fair values for time deposits are estimated using a discounted cash flow calculation that applies interest rates currently offered on certificates to a schedule of aggregated expected monthly maturities on time deposits. The carrying amount of accrued interest payable approximates fair value. Advance payments by borrowers for taxes and insurance (escrow accounts): The carrying amount of escrow accounts approximate fair value. Loan commitments: Commitments to extend credit were evaluated and fair value was estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. For fixed-rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates. The carrying value and fair value of commitments to extend credit are not considered material for disclosure. II-17 MISSISSIPPI VIEW HOLDING COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) SEPTEMBER 30, 1997 AND 1996 NOTE 2. DEBT AND EQUITY SECURITIES The amortized costs and fair values of debt and equity securities are summarized as follows:
GROSS GROSS AMORTIZED UNREALIZED UNREALIZED FAIR COST GAINS LOSSES VALUE ----------- ---------- ---------- ----------- SEPTEMBER 30, 1997: Securities available-for-sale: Debt securities: U.S. Government and agency obligations.... $ 8,566,851 $ 36,481 $(12,322) $ 8,591,010 Mortgage-backed securities................ 2,401,673 11,657 (19) 2,413,311 ----------- ---------- ---------- ----------- Subtotal............................. 10,968,524 48,138 (12,341) 11,004,321 ----------- ---------- ---------- ----------- Equity securities: Mutual fund.................................. 92,325 596 -- 92,921 Stock in FHLMC............................... 51,653 1,814,449 -- 1,866,102 ----------- ---------- ---------- ----------- Subtotal............................. 143,978 1,815,045 -- 1,959,023 ----------- ---------- ---------- ----------- Total........................................ $11,112,502 $1,863,183 $(12,341) $12,963,344 ----------- ---------- ---------- ----------- ----------- ---------- ---------- ----------- Securities held-to-maturity: Certificates of deposit...................... $ 4,755,000 $ -- $ -- $ 4,755,000 Mortgage-backed securities................... 2,650,466 87,715 (22,867) 2,715,314 ----------- ---------- ---------- ----------- Total........................................ $ 7,405,466 $ 87,715 $(22,867) $ 7,470,314 ----------- ---------- ---------- ----------- ----------- ---------- ---------- ----------- SEPTEMBER 30, 1996: Securities available-for-sale: Debt securities: U.S. Government and agency obligations.... $10,361,165 $ 21,133 $(47,513) $10,334,785 Mortgage-backed securities................ 1,396,690 -- (19,107) 1,377,583 ----------- ---------- ---------- ----------- Subtotal............................. 11,757,855 21,133 (66,620) 11,712,368 ----------- ---------- ---------- ----------- Equity securities: Mutual fund............................... 86,903 -- (33) 86,870 Stock in FHLMC............................ 51,653 384,254 -- 435,907 ----------- ---------- ---------- ----------- Subtotal............................. 138,556 384,254 (33) 522,777 ----------- ---------- ---------- ----------- Total..................................... $11,896,411 $ 405,387 $(66,653) $12,235,145 ----------- ---------- ---------- ----------- ----------- ---------- ---------- ----------- Securities held-to-maturity: U.S. Government and agency obligations....... $ 1,749,672 $ 172 $ (2,031) $ 1,747,813 Certificates of deposit...................... 4,065,000 -- -- 4,065,000 Mortgage-backed securities................ 3,479,420 75,648 (47,140) 3,507,928 ----------- ---------- ---------- ----------- Total........................................ $ 9,294,092 $ 75,820 $(49,171) $ 9,320,741 ----------- ---------- ---------- ----------- ----------- ---------- ---------- -----------
There were no sales of securities during the two years ended September 30, 1997 and 1996. The amortized cost and estimated market value of debt securities at September 30, 1997, by contractual maturity, are shown below. Mortgage-backed securities have been aggregated and disclosed separately, rather II-18 MISSISSIPPI VIEW HOLDING COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) SEPTEMBER 30, 1997 AND 1996 NOTE 2. DEBT AND EQUITY SECURITIES--(CONTINUED) than allocated over several maturity groupings, since they lack a single maturity date and because borrowers retain the right to prepay the obligation.
HELD-TO-MATURITY AVAILABLE-FOR-SALE ------------------------ -------------------------- ESTIMATED ESTIMATED AMORTIZED FAIR AMORTIZED FAIR COST VALUE COST VALUE ---------- ---------- ----------- ----------- Due in one year or less................................ $ -- $ -- $ 5,200,006 $ 5,214,434 Due from one to five years............................. -- -- 2,510,207 2,528,845 Due from five to ten years............................. -- -- 501,291 501,961 Due after ten years.................................... -- -- 355,347 345,770 ---------- ---------- ----------- ----------- Subtotal............................................. -- -- 8,566,851 8,591,010 Mortgage-backed securities............................. 2,650,466 2,715,314 2,401,673 2,413,311 ---------- ---------- ----------- ----------- Total................................................ $2,650,466 $2,715,314 $10,968,524 $11,004,321 ---------- ---------- ----------- ----------- ---------- ---------- ----------- -----------
NOTE 3. LOANS RECEIVABLE Loans receivable at September 30, 1997 and 1996 consist of the following:
1997 1996 ----------- ----------- Secured by 1-4 family residences............................... $39,863,763 $37,623,209 Secured by other real estate................................... 2,831,392 3,964,195 Construction................................................... 953,265 626,900 Consumer and other............................................. 2,053,921 1,916,165 Loans secured by deposits...................................... 212,790 281,115 ----------- ----------- Total loans receivable....................................... 45,915,131 44,411,584 Less: Undisbursed portion of mortgage loans........................ (309,781) (227,762) Allowance for loan losses.................................... (861,170) (877,094) Deferred loan fees........................................... (269,371) (236,447) ----------- ----------- Loans receivable, net..................................... $44,474,809 $43,070,281 ----------- ----------- ----------- -----------
A summary of the activity in the allowance for loan losses is as follows:
YEARS ENDED SEPTEMBER 30, -------------------- 1997 1996 -------- -------- Balance, beginning of period.......................................... $877,094 $962,086 Provision for losses.................................................. -- 3,725 Charge offs........................................................... (17,017) (92,213) Recoveries............................................................ 1,093 3,496 -------- -------- Balance, end of period................................................ $861,170 $877,094 -------- -------- -------- --------
In the ordinary course of business, the Association has granted loans to certain executive officers, directors and their related interests. Related party loans are made on substantially the same terms as those prevailing at the time for comparable transactions with unrelated persons and do not involve more than the normal risk of collectibility. The aggregate dollar amount of these loans was approximately $124,000 and $140,000 at September 30, 1997 and 1996, respectively. II-19 MISSISSIPPI VIEW HOLDING COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 4. FORECLOSED REAL ESTATE Foreclosed real estate acquired in settlement of loans consists of the following:
SEPTEMBER 30, -------------------- 1997 1996 -------- -------- Real estate acquired by foreclosure............................................. $ 15,700 $ 15,700 Less allowance for losses....................................................... 15,700 15,700 -------- -------- Foreclosed real estate, net................................................... $ -- $ -- -------- -------- -------- --------
Activity in the allowance for losses on foreclosed real estate is as follows:
YEARS ENDED SEPTEMBER 30, -------------------- 1997 1996 -------- -------- Beginning balance............................................................... $ 15,700 $ 25,187 Provision charged to income..................................................... -- -- Charge-offs..................................................................... -- (9,487) Recoveries...................................................................... -- -- -------- -------- Ending balance.................................................................. $ 15,700 $ 15,700 -------- -------- -------- --------
NOTE 5. LOAN SERVICING Mortgage loans serviced for others are not included in the accompanying consolidated statements of financial condition. The unpaid principal balance of loans serviced for others was $2,351,000 and $2,823,000 at September 30, 1997 and 1996, respectively. Custodial escrow balances maintained in connection with the foregoing loan servicing, and included in demand deposits were approximately $4,700 and $13,300 at September 30, 1997 and 1996, respectively. Capitalized mortgage servicing rights included in other assets are summarized as follows:
YEARS ENDED SEPTEMBER 30, -------------------- 1997 1996 -------- -------- Beginning balance, net of accumulated amortization.............................. $ 11,600 $ -- Amounts capitalized............................................................. -- 12,700 Amortization.................................................................... 2,100 1,100 Valuation adjustments........................................................... -- -- -------- -------- Balance, end of period.......................................................... $ 9,500 $ 11,600 -------- -------- -------- --------
NOTE 6. ACCRUED INTEREST RECEIVABLE Accrued interest receivable at September 30, 1997 and 1996 is summarized as follows:
1997 1996 -------- -------- Investment securities........................................................... $152,279 $164,382 Mortgage-backed securities...................................................... 38,569 41,500 Loans receivable................................................................ 246,700 244,445 -------- -------- Total......................................................................... $437,548 $450,327 -------- -------- -------- --------
II-20 MISSISSIPPI VIEW HOLDING COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 7. PREMISES AND EQUIPMENT Premises and equipment at September 30, 1997 and 1996 consists of the following:
1997 1996 ---------- ---------- Land........................................................................ $ 98,840 $ 98,840 Office building............................................................. 797,008 790,702 Furniture and equipment..................................................... 541,618 463,914 ---------- ---------- Total..................................................................... 1,437,466 1,353,456 Less accumulated depreciation............................................... (630,566) (564,610) ---------- ---------- Premises and equipment, net............................................... $ 806,900 $ 788,846 ---------- ---------- ---------- ----------
NOTE 8. DEPOSITS The aggregate amount of certificates of deposit with a minimum denomination of $100,000 was approximately $2,489,000 and $2,434,000 at September 30, 1997 and 1996, respectively. Deposited amounts in excess of $100,000 per account are not insured by the Savings Association Insurance Fund. At September 30, 1997, the scheduled maturities of time deposits, for the fiscal years ended, are as follows: 1998................................................................. $27,624,960 1999................................................................. 8,424,248 2000................................................................. 99,744 2001................................................................. 101,059 Thereafter........................................................... -- ----------- Total.............................................................. $36,250,011 ----------- -----------
Deposits by related parties were approximately $1,014,000 and $803,000 at September 30, 1997 and 1996, respectively. The Association provides collateral to various local governmental units as required by State statute on savings and certificate accounts with balances greater than $100,000. The collateral pledged against these deposits consisted of mortgage-backed securities totaling $961,363 and $1,101,623 as of September 30, 1997 and 1996, respectively. NOTE 9. INCOME TAXES Income tax expense (benefit) applicable to operations include current and deferred taxes as follows:
YEARS ENDED SEPTEMBER 30, ---------------------- 1997 1996 -------- -------- CURRENT Federal.................................................................... $279,700 $367,539 State...................................................................... 93,750 126,283 -------- -------- Subtotal................................................................ 373,450 493,822 -------- -------- DEFERRED Federal.................................................................... 63,310 (89,790) State...................................................................... 21,102 (29,932) -------- -------- Subtotal................................................................ 84,412 (119,722) -------- -------- Total income tax provision................................................... $457,862 $374,100 -------- -------- -------- --------
II-21 MISSISSIPPI VIEW HOLDING COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 9. INCOME TAXES--(CONTINUED) The State of Minnesota follows the Internal Revenue Code for the determination of taxable income in connection with temporary differences. The State portion of deferred tax assets and liabilities is approximately 25%. Temporary differences between financial statement carrying amounts and the tax basis of assets and liabilities that create deferred tax assets and liabilities are as follows:
SEPTEMBER 30, ----------------------- 1997 1996 ---------- --------- Deferred tax assets: General loan loss allowance................................................ $ 278,044 $ 350,838 Deferred loan fees......................................................... 107,748 94,579 Deferred compensation...................................................... 140,875 129,278 Accrual adjustments........................................................ 16,847 -- SAIF assessment............................................................ -- 145,023 ---------- --------- 543,514 719,718 Less valuation allowance..................................................... (68,679) (162,000) ---------- --------- Subtotal................................................................... 474,835 557,718 ---------- --------- Deferred tax liabilities: Excess tax reserves........................................................ 115,768 115,768 Unrealized gains on available-for-sale securities.......................... 740,337 135,494 FHLB stock dividends....................................................... 99,680 99,680 Mortgage servicing assets.................................................. 3,800 4,644 Depreciation and basis adjustment.......................................... 40,604 38,229 ---------- --------- Subtotal................................................................... 1,000,189 393,815 ---------- --------- ---------- --------- Net deferred tax (liability) asset........................................... $ (525,354) $ 163,903 ---------- --------- ---------- ---------
The Association has paid sufficient income taxes in prior carryback years which would enable it to recover the balance of the net deferred tax assets, therefore, no additional valuation allowance was required at September 30, 1997 and 1996. Actual income tax expense varied from 'expected' tax expense (computed by applying the United States federal corporate income tax rate of 34 percent to earnings before taxes) as follows:
YEARS ENDED SEPTEMBER 30, ---------------------- 1997 1996 -------- -------- Computed 'expected' tax expense:............................................. $407,000 $317,200 Increase (reduction) in income tax resulting from: State income taxes, net of federal tax benefit............................. 76,000 63,600 Other (net)................................................................ (25,138) (6,700) -------- -------- Total income tax expense..................................................... $457,862 $374,100 -------- -------- -------- --------
Savings and loan associations were allowed a bad debt deduction, in determining income tax for tax purposes, based on specified experience formulas or a percentage of taxable income before such deduction. On August 21, 1996 legislation was signed into law which repealed the percentage of taxable income method for the tax bad debt deduction. The repeal is effective for the Association's taxable year beginning October 1, 1996. In addition, the legislation requires the Association to include in taxable income its tax bad debt reserves in excess of its base year reserves (pre-1988 reserves) over a six, seven, or eight year period depending upon the attainment of certain loan origination levels. Since the percentage of taxable income method for the tax bad debt deduction and the corresponding increase in the tax bad debt reserve in excess of base year have been recorded as temporary differences, this change in the tax law will not effect the Company's statement of operations. II-22 MISSISSIPPI VIEW HOLDING COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 9. INCOME TAXES--(CONTINUED) Retained earnings at September 30, 1996, includes approximately $1,459,000 of pre-1988 reserves, for which no deferred income tax liability, approximately $584,000, has been recognized. This amount represents an allocation of income to bad debt deductions for tax purposes only. Reduction of amounts so allocated for purposes other than tax bad debt losses or adjustments from carryback of net operating losses would create income for tax purposes only, which would be subject to the then current corporate income tax rate. NOTE 10. EMPLOYEE BENEFIT PLANS Salary Continuation Plan The Association has adopted a directors' consultation and retirement plan. Benefits related to services are expensed under the plan vesting schedule. The Association adopted an insured executive supplemental retirement plan and the estimated benefits will be accrued over the expected remaining years of employment. The compensation expense related to these plans amounted to $31,663 and $29,892 for the years ended September 30, 1997 and 1996, respectively. Salary Reduction Plan The Association maintains a salary reduction plan (401(k) Plan) which covers qualifying all full time employees. Company contributions are determined anually by the Board of Directors. The Company's expense related to this plan was $-0- and $1,042 for the years ended September 30, 1997 and 1996, respectively. Employee Stock Ownership Plan The Association established an Employee Stock Ownership Plan (ESOP) covering all employees over the age of 21, with at least one year of service who work at least 1,000 hours during the plan year. The ESOP borrowed funds from the Company to purchase a total of 80,639 shares of the Company's common stock. The loan is collateralized by the common stock. Contributions by the Association are used to repay the loan with shares being released from the Company's lien proportional to the loan repayment. Annually, on December 31, the released shares are allocated to the participants in the same proportion as their wages bear to the total compensation of all of the participants. The Company presents these financial statements in accordance with the AICPA Statement of Position (SOP) No. 93-6, 'Employers' Accounting for Employee Stock Ownership Plans.' The price of the shares issued and unreleased are charged to unearned compensation, a contra-equity account, and shares released are reported as compensation expense equal to the current market value price of the released shares. Dividends paid on allocated shares are charged to retained earnings and those on unallocated shares are charged to expense. The following table presents the components of the ESOP shares:
SEPTEMBER 30, -------------------- 1997 1996 -------- -------- Allocated shares................................................................ 16,128 8,064 Commited to be released shares.................................................. 6,048 6,048 Unreleased shares............................................................... 58,463 66,527 -------- -------- Total ESOP shares............................................................... 80,639 80,639 -------- -------- -------- -------- Fair value of unreleased shares................................................. $993,871 $848,219 -------- -------- -------- -------- Compensation expense recorded................................................... $105,127 $ 94,003 -------- -------- -------- --------
II-23 MISSISSIPPI VIEW HOLDING COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 10. EMPLOYEE BENEFIT PLANS--(CONTINUED) Management Stock Bonus Plan (MSBP) The Company has adopted a MSBP for directors and management to enable the Association to attract and retain experienced and capable personnel in key positions of responsibility. A total of 29,224 shares were awarded in the form of restricted stock payable over a five year vesting period and 11,095 shares were reserved for future awards. The Company acquired the MSBP shares in fiscal 1996 in an open market purchase at a cost of $458,629, which was initially recorded as unearned compensation in a contra shareholders' equity account. The Company recognizes compensation expense pro rata over the vesting period which amounted to $66,663 and $66,487 for fiscal 1997 and 1996, respectively. Stock Option Plan In September, 1995 the Company adopted a stock option plan, the 1995 Stock Option Plan (the SOP). During 1995, options exercisable for 73,072 shares of the Company's common stock were granted to certain officers and directors at an exercise price of $11.375 per share. The options vest over a five year period and may be exercised within 10 years of the grant date. In January 1997, a second option plan, the 1997 Stock Option and Incentive Plan was adopted. In 1997, options exercisable for 63,636 shares of the Company's common stock were granted to certain officers and directors at an exercise price of $13.00 per share. The options vest over a two year period and may be exercised within 10 years of the grant date. All options granted in the 1997 Stock Option Plan have dividend equivalent rights associated with such options. The Company uses the intrinsic value method as described in APB Opinion No. 25 and related interpretations to account for its stock incentive plans. Accordingly, no compensation cost has been recognized for the fixed option plan. There are no charges or credits to expense with respect to the granting or exercise of options since the options were issued at fair value on the respective grant dates. Had compensation cost for the Company's stock-based plans been determined in accordance with the fair value method recommended by SFAS No. 123, the Company's net income and earnings per share would have been reduced to the proforma amounts indicated below:
1997 1996 -------- -------- Net income: As reported................................................................... $739,715 $558,768 Pro forma..................................................................... 614,602 519,471 Earnings per common share and common share equivalent: As reported................................................................... $ 0.96 $ 0.66 Pro forma..................................................................... 0.82 0.61
The above disclosed pro forma effects of applying SFAS No. 123, to compensation costs, may not be representative of the effects on reported pro forma net income for future years. The fair value for each option grant is estimated on the date of the grant using the Black Scholes Model. The model incorporates the following assumptions:
1997 1996 ------ ------ Risk-free interest rate............................................................ 5.60% 6.08% Expected life...................................................................... 10 Yrs. 10 Yrs. Expected volatility................................................................ 19.00% 20.00% Expected dividends................................................................. 2.00% None
II-24 MISSISSIPPI VIEW HOLDING COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 10. EMPLOYEE BENEFIT PLANS--(CONTINUED) The fair value of the granted 1995 options granted in 1995 was $4.48 per option. The fair value of the options granted in 1997 was $3.51 per options. A summary of stock option activity under the SOP's are detailed below:
WEIGHTED OPTIONS AVERAGE AVAILABLE OPTIONS EXERCISE FOR GRANT OUTSTANDING PRICE --------- ----------- -------- September 30, 1994.................................................. None None -- Plan adopted........................................................ 100,799 -- $11.375 Granted September 27, 1995.......................................... (73,072) 73,072 11.375 --------- ----------- -------- September 30, 1995.................................................. 27,727 73,072 11.375 Exercised........................................................... -- -- -- Forfeited........................................................... -- -- -- --------- ----------- -------- September 30, 1996.................................................. 27,727 73,072 11.375 Plan adopted........................................................ 87,771 -- 13.000 Granted January 22, 1997............................................ (63,636) 63,636 13.000 Exercised........................................................... -- -- -- Forfeited........................................................... -- -- -- --------- ----------- -------- September 30, 1997.................................................. 51,862 136,708 $12.131 --------- ----------- -------- --------- ----------- --------
The following table summarizes information about stock options outstanding at September 30, 1997:
OPTIONS OUTSTANDING - ------------------------------------------ WEIGHTED AVG. OPTIONS REMAINING EXERCISABLE NUMBER EXERCISE CONTRACTUAL ------------------ OUTSTANDING PRICE LIFE IN YEARS NUMBER PRICE - ----------- -------- ------------- ------ ------- 73,072 $ 11.375 8.0 Yrs. 29,224 $11.375 63,636 $ 13.000 9.1 Yrs. 31,813 $13.000 - ----------- ------ 136,708 61,037 - ----------- ------ - ----------- ------
NOTE 11. COMMITMENTS Loans serviced for FNMA, in the amount of $480,474 at September 30, 1997, were sold subject to recourse provisions which require the Association to buy back any loan which is delinquent more than ninety days. The Association also sold loans and related servicing subject to recourse provisions which expire in March 1998 in the amount of $910,350 at September 30, 1997. The Association has not incurred any losses on loans sold with recourse provisions. NOTE 12. FINANCIAL INSTRUMENTS The Association is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments are commitments to extend credit and involve, to varying degrees, elements of credit risk in excess of the amount recognized on the balance sheet. The Association's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit is represented by the contractual amount of those instruments. The Association uses the same credit policies in making commitments as it does for on-balance sheet instruments. II-25 MISSISSIPPI VIEW HOLDING COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 12. FINANCIAL INSTRUMENTS--(CONTINUED) Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Commitments to extend credit which represent credit risk totaled $660,750 for loans ($481,650 at fixed rates and $179,100 at adjustable rates) and $1,292,196 unused lines of credit at September 30, 1997. Commitments to sell loans amounted to $237,300 at September 30, 1997. The estimated fair values of the Company's financial instruments are as follows:
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996 -------------------------- -------------------------- CARRYING FAIR CARRYING FAIR AMOUNT VALUE AMOUNT VALUE ----------- ----------- ----------- ----------- Financial assets: Cash and cash equivalents............... $ 1,104,594 $ 1,104,594 $ 2,583,654 $ 2,583,654 Investment securities................... 20,368,810 20,433,657 21,529,237 21,555,886 FHLB stock.............................. 650,700 650,700 650,700 650,700 Loans receivable........................ 44,610,359 46,246,918 43,248,944 44,201,216 Accrued interest receivable............. 437,548 437,548 450,327 450,327 Financial liabilities: Deposits................................ 55,183,587 55,209,196 56,531,194 56,538,374 Advance payments by borrowers (escrows)............................ 107,038 107,038 138,530 138,530
NOTE 13. SIGNIFICANT GEOGRAPHIC CONCENTRATION OF CREDIT RISK A significant portion of the Association's loans receivable are to borrowers located in Little Falls, Minnesota, and the surrounding counties. This geographic concentration amounted to approximately 95% of the total loans receivable balance for the years ended September 30, 1997 and 1996. NOTE 14. STOCKHOLDERS EQUITY AND REGULATORY MATTERS On March 23, 1995, the Association converted from a mutual association to a stock association pursuant to a Plan of Conversion, (the Conversion) via the issuance of common stock. In conjunction with the Conversion, the Company sold 1,007,992 shares of common stock which, after giving effect to offering expenses of $471,714, resulted in net proceeds of $7.6 million which included an order for 20,159 shares of stock in the amount of $161,272 from the Employee Stock Ownership Plan (ESOP). Pursuant to the Conversion, the Association transferred all of its outstanding shares to its newly organized holding company. On March 24, 1995 the Association's ESOP purchased an additional 60,480 shares in the open market, in the amount of $529,200. The ESOP's purchases were funded through a loan from the Company. Upon the Conversion, the preexisting liquidation rights of the mutual stock association members were unchanged. Such rights will be accounted for by the Company for the benefit of such depositors in proportion to their liquidation interests as of either the Eligibility Record Date or the Supplemental Eligibility Record Date as defined in the Conversion. Subsequent to the Conversion, neither the Company nor the Association may declare or pay cash dividends on any of their shares of common stock if the effect would be to reduce shareholders' equity below applicable regulatory capital requirements or if such declaration of payment would otherwise violate regulatory requirements. II-26 MISSISSIPPI VIEW HOLDING COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 14. STOCKHOLDERS EQUITY AND REGULATORY MATTERS--(CONTINUED) The Association is subject to various regulatory capital requirements administered by the Office of Thrift Supervision (OTS). Failure to meet minimum capital requirements can initiate certain mandatory--and possible additional discretionary--actions by regulators that, if undertaken, could have a direct material effect on the Association's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Association must meet specific capital guidelines that involve quantitative measures of the Association's assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The Association's capital amounts and classification are also subject to qualitative judgements by the regulators about components, risk weightings and other factors. Quantitative measures established by regulation to ensure capital adequacy require the Association to maintain minimum amounts and ratios (set forth in the following table) of total and Tier 1 capital (as defined in the regulation), to risk-weighted assests (as defined), and of tangible and Tier 1 capital (as defined) to adjusted total assets (as defined). Management believes, as of September 30, 1997, that the Association meets all of capital adequacy requirements to which it is subject. As of September 30, 1997 and 1996, the most recent notification from the OTS categorized the Association as 'well capitalized' under the regulatory framework for prompt corrective action. To be categorized as well capitalized the Association must maintain minimum total risk-based, Tier 1 risk-based, Tier 1 leverage ratios as set forth in the table. There are no conditions or events since that notification that management believes have changed the Association's category. The Association's actual regulatory capital amounts, with reconcilation to the Company's capital investment in the Association determined in accordance with generally accepted accounting principles (GAAP), and ratios as of September 30, 1997 and 1996, are also presented in the following tables (in thousands):
TO BE WELL CAPITALIZED UNDER FOR CAPITAL PROMPT CORRECTIVE ACTUAL ADEQUACY PURPOSES ACTION PROVISION ------------------ ----------------- ----------------- AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT ------- ------- ------ ------- ------ ------- GAAP capital, September 30, 1997............. $11,998 Less: Unrealized gains on securities available-for-sale......................... (1,111) Excess mortgage servicing rights............. (1) ------- Tangible capital and ratio to adjusted total assets..................................... $10,886 16.3% $1,000 1.50% ------- ------- ------ ------- Tier 1 (Core) capital and ratio to adjusted total assets............................... $10,886 16.3% $2,000 3.0% $3,335 5.0% ------- ------- ------ ------- ------ ------- Tier 1 capital and ratio to risk-weighted assets..................................... $10,886 31.9% $1,365 4.0% $2,047 6.0% ------- ------- ------ ------- ------ ------- Tier 2 capital, allowance for loan losses.... 432 ------- Total risk-based capital and ratio to risk- weighted assets, September 30, 1997........ $11,318 33.2% $2,730 8.0% $3,412 10.0% ------- ------- ------ ------- ------ ------- ------- ------- ------ ------- ------ -------
II-27 MISSISSIPPI VIEW HOLDING COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 14. STOCKHOLDERS EQUITY AND REGULATORY MATTERS--(CONTINUED)
TO BE WELL CAPITALIZED UNDER FOR CAPITAL PROMPT CORRECTIVE ACTUAL ADEQUACY PURPOSES ACTION PROVISION ------------------ ----------------- ----------------- AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT ------- ------- ------ ------- ------ ------- GAAP capital, September 30, 1996............. $10,643 Less: Unrealized gains on securities available-for-sale......................... (238) Excess mortgage servicing rights............. (1) ------- Tangible capital and ratio to adjusted total assets..................................... $10,404 14.9% $1,046 1.50% ------- ------- ------ ------- Tier 1 (Core) capital and ratio to adjusted total assets............................... $10,404 14.9% $2,092 3.0% $3,487 5.0% ------- ------- ------ ------- ------ ------- Tier 1 capital and ratio to risk-weighted assets..................................... $10,404 30.5% $1,366 4.0% $2,049 6.0% ------- ------- ------ ------- ------ ------- Tier 2 capital, allowance for loan losses.... 430 ------- Total risk-based capital and ratio to risk- weighted assets, September 30, 1996........ $10,834 31.7% $2,733 8.0% $3,416 10.0% ------- ------- ------ ------- ------ ------- ------- ------- ------ ------- ------ -------
NOTE 15. EFFECTS OF NEW FINANCIAL ACCOUNTING STANDARDS SFAS No. 128, 'Earnings Per Share'--issued February 1997, establishes standards for computing and presenting earnings per share (EPS). It simplifies prior standards by replacing primary earnings per share with basic earnings per share and by altering the calculation of diluted EPS, which replaces fully diluted EPS. SFAS No. 128 is effective for financial statements issued after December 15, 1997, including interim periods. SFAS No. 130, 'Reporting Comprehensive Income'--issued June 1997, establishes standards for reporting and displaying comprehensive income and its components in general-purpose financial statements. Comprehensive income includes net income and several other items that current accounting standards require to be recognized outside of net income. This statement requires entities to display comprehensive income and its components in the financial statements with presentation of the accumulated balances of other comprehensive income reported in stockholders' equity separately from retained earnings and additional paid-in capital. SFAS No. 130 is effective for fiscal years beginning after December 15, 1997. Reclassification of financial statements for earlier periods that are presented for comparative purposes is required. SFAS No. 131, 'Disclosures about Segments of Enterprise and Related Information'--issued June 1997, requires public business enterprises to report information about their operating segments in a complete set of financial statements to shareholders. This statement also requires entities to report enterprise-wide information about their products and services, their activities in different geographic areas, and their reliance on major customers. Certain segment information is also to be reported in interim financial statements. The basis for determining an enterprise's operating segments is the manner in which management operates the business. Specifically, financial information is required to be reported on the basis that it is used internally by the enterprise's chief operating decision maker in making decisions related to resource allocation and segment performance. SFAS No. 131 is effective for financial statements for years beginning after December 31, 1997. Management believes adoption of the above-described Statements will not have a material effect on financial position and the results of operations, nor will adoption require additional capital resources. II-28 MISSISSIPPI VIEW HOLDING COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 16. PARENT ONLY CONDENSED FINANCIAL INFORMATION This information should be read in conjunction with the other Notes to Consolidated Financial Statements. On March 23, 1995 the Company issued $7.6 million of common stock and contributed one-half of the net proceeds to the Association as equity capital. Shareholders' equity differs from the consolidated statements primarily by the amount of consolidating ESOP adjustments. STATEMENT OF FINANCIAL CONDITION
SEPTEMBER 30, -------------------------- 1997 1996 ----------- ----------- ASSETS Cash and cash equivalents.......................................................... $ 24,203 $ 61,525 Investment in Association subsidiary............................................... 11,998,136 10,642,889 Loan to Association subsidiary..................................................... 65,000 1,725,000 Loan to Association ESOP........................................................... 542,056 609,813 Tax benefit due from subsidiary.................................................... 40,781 33,235 Total.................................................................... 12,670,176 13,072,462 LIABILITIES AND SHAREHOLDERS EQUITY Other liabilities.................................................................. $ 111,961 $ 70,210 Shareholders' equity............................................................... 12,558,215 13,002,252 Total.................................................................... $12,670,176 $13,072,462
STATEMENT OF INCOME
FOR THE YEAR ENDED SEPTEMBER 30, -------------------------- 1997 1996 ----------- ----------- Interest from: Association's subsidiary loan.................................................... $ 80,148 $ 151,949 Association's ESOP loan.......................................................... 47,137 54,101 Dividends from Association subsidiary............................................ 450,000 200,000 ----------- ----------- Total income............................................................. 577,285 406,050 Expenses: Non-interest expenses............................................................ 272,672 234,402 Income tax (benefit)............................................................. (58,435) (11,679) ----------- ----------- Total expenses........................................................... 214,237 222,723 ----------- ----------- Income before equity in undistributed net income of Association subsidiary......... 363,048 183,327 Equity in undistributed net income of Association subsidiary....................... 828,442 577,217 ----------- ----------- Net income......................................................................... $ 1,191,490 $ 760,544 ----------- ----------- ----------- -----------
II-29 MISSISSIPPI VIEW HOLDING COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 16. PARENT ONLY CONDENSED FINANCIAL INFORMATION--(CONTINUED) STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED SEPTEMBER 30, -------------------------- 1997 1996 ----------- ----------- Net income.......................................................................... $ 1,191,490 $ 760,544 Adjustments: Equity in undistributed net income of subsidiary.................................. (828,442) (577,217) ESOP fair value adjustment, net of taxes.......................................... 26,768 15,426 Increase in income tax benefit due from subsidiary................................ (3,499) (33,235) Increase in deferred income taxes................................................. (4,047) -- (Decrease) in accrued income taxes................................................ -- (160) Increase in other liabilities..................................................... 41,750 70,210 ----------- ----------- Net cash provided by operations..................................................... 424,020 235,568 ----------- ----------- Cash flows from investing activities: Subsidiary loan proceeds.......................................................... 1,660,000 1,375,000 Purchase of treasury stock........................................................ (2,068,422) (1,536,689) ----------- ----------- Net cash used in investing activities............................................. (408,422) (161,689) ----------- ----------- Cash flows from financing activities: Payment of cash dividend.......................................................... (120,677) (141,804) Principal received on ESOP loan................................................... 67,757 80,660 ----------- ----------- Net cash used in financing activities............................................... (52,920) (61,144) ----------- ----------- (Decrease) increase in cash and cash equivalents.................................... (37,322) 12,735 Cash and cash equivalents Beginning of year................................................................. 61,525 48,790 ----------- ----------- End of year....................................................................... $ 24,203 $ 61,525 ----------- ----------- ----------- -----------
II-30 Manually signed photocopies of the Letter of Transmittal will be accepted from Eligible Institutions. The Letter of Transmittal and certificates for Shares and any other required documents should be sent or delivered by each shareholder or his or her broker, dealer, commercial bank, trust company or nominee to the Depositary at one of its addresses set forth below. THE DEPOSITARY FOR THE OFFER IS: REGISTRAR AND TRANSFER COMPANY By Mail/Overnight Delivery: By Hand Only: 10 Commerce Drive c/o The Depository Trust Co. Cranford, New Jersey 07016 Transfer Agent Drop 55 Water Street, 1st Floor New York, New York 10041-0099 By Facsimile Transmission: (Eligible Institutions Only) (908) 497-2313 Any questions or requests for assistance or additional copies of this Offer to Purchase, the Letter of Transmittal or the Notice of Guaranteed Delivery may be directed to the Information Agent at the telephone numbers and location listed below. Shareholders may also contact their local broker, dealer, commercial bank or trust company for assistance concerning the Offer. THE INFORMATION AGENT FOR THE OFFER IS: MACKENZIE PARTNERS, INC. LOGO 156 Fifth Avenue New York, New York 10010 (212) 929-5500 (Call Collect) Call Toll Free (800) 322-2885 EX-99.(A)(2) 3 LETTER OF TRANSMITTAL LETTER OF TRANSMITTAL TO ACCOMPANY SHARES OF COMMON STOCK OF MISSISSIPPI VIEW HOLDING COMPANY TENDERED PURSUANT TO THE OFFER TO PURCHASE DATED APRIL 13, 1998 THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 5:00 P.M., EASTERN TIME, ON MONDAY, MAY 11, 1998, UNLESS THE OFFER IS EXTENDED. TO: REGISTRAR AND TRANSFER COMPANY, DEPOSITARY By Mail/Overnight Delivery: Facsimile Transmission: By Hand Only: 10 Commerce Drive (908) 497-2313 c/o The Depository Trust Co. Cranford, New Jersey 07016 (for Eligible Institutions Only) Transfer Agent Drop 55 Water Street, 1st Floor New York, New York 10041-0099
DESCRIPTION OF SHARES TENDERED (SEE INSTRUCTIONS 3 AND 4) NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) CERTIFICATE(S) TENDERED (PLEASE FILL IN EXACTLY AS NAME(S) APPEAR(S) ON CERTIFICATE(S)) (ATTACH SIGNED LIST IF NECESSARY) NUMBER OF SHARES NUMBER OF CERTIFICATE REPRESENTED BY SHARES NUMBER(S)* CERTIFICATE(S)* TENDERED** TOTAL SHARES TENDERED * Need not be completed if Shares are delivered by book-entry transfer. ** If you desire to tender fewer than all Shares evidenced by any certificates listed above, please indicate in this column the number of Shares you wish to tender. Otherwise, all Shares evidenced by such certificates will be deemed to have been tendered. See Instruction 4.
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN THOSE SHOWN ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN ONE OF THOSE LISTED ABOVE DOES NOT CONSTITUTE A VALID DELIVERY. This Letter of Transmittal is to be used only (a) if certificates for Shares (as defined below) are to be forwarded with it (or such certificates will be delivered pursuant to a Notice of Guaranteed Delivery previously sent to the Depositary) or (b) if a tender of Shares is to be made by book-entry transfer to the account maintained by the Depositary at The Depository Trust Company ('DTC') or Philadelphia Depository Trust Company ('PDTC') (collectively, the 'Book-Entry Transfer Facilities') pursuant to 'The Offer--Procedures for Tendering Shares' of the Offer to Purchase. Stockholders whose certificates are not immediately available or who cannot deliver their certificates for Shares and all other required documents to the Depositary before the Expiration Date (as defined in the Offer to Purchase) or whose Shares cannot be delivered on a timely basis pursuant to the procedure for book-entry transfer must tender their Shares according to the guaranteed delivery procedure set forth in 'The Offer--Procedures for Tendering Shares' of the Offer to Purchase. See Instruction 2. Delivery of the Letter of Transmittal and any other required documents to one of the Book-Entry Transfer Facilities does not constitute delivery to the Depositary. / / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE DEPOSITARY WITH ONE OF THE BOOK-ENTRY TRANSFER FACILITIES, AND COMPLETE THE FOLLOWING: Name of Tendering Institution:_____________________________________________ Check Box of Applicable Book-Entry Transfer Facility: / / DTC / / PDTC Account Number:____________________________________________________________ Transaction Code Number:___________________________________________________ / / CHECK HERE IF CERTIFICATES FOR TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY, AND COMPLETE THE FOLLOWING: Name(s) of Registered Holder(s):___________________________________________ Date of Execution of Notice of Guaranteed Delivery:________________________ Name of Institution Which Guaranteed Delivery:_____________________________ Check Box of Applicable Book-Entry Transfer Facility and Give Account Number if Delivered by Book-Entry Transfer: / / DTC / / PDTC Account Number:_________________________________________________________________ ODD LOTS (SEE INSTRUCTION 9) To be completed ONLY if Shares are being tendered by or on behalf of a person owning beneficially, as of the close of business on April 8, 1998, an aggregate of fewer than 100 Shares. The undersigned either (check one box): / / was the beneficial owner as of the close of business on April 8, 1998, and will continue to be the beneficial owner as of the Expiration Date, of an aggregate of fewer than 100 Shares, all of which are being tendered; or / / is a broker, dealer, commercial bank, trust company or other nominee which: (a) is tendering, for the beneficial owners thereof, Shares with respect to which it is the record holder; and (b) believes, based upon representations made to it by such beneficial owners, that each such person was the beneficial owner as of the close of business on April 8, 1998 and each such person will continue to be the beneficial owner as of the Expiration Date, of an aggregate of fewer than 100 Shares and is tendering all of such Shares. Ladies and Gentlemen: The undersigned hereby tenders to Mississippi View Holding Company, a Minnesota corporation (the 'Company'), the above described shares of the Company's common stock, par value $0.10 per share (the 'Shares') at the price per Share indicated in this Letter of Transmittal, net to the seller in cash, upon the terms and subject to the conditions set forth in the Company's Offer to Purchase dated April 13, 1998, receipt of which is hereby acknowledged, and in this Letter of Transmittal (which together constitute the 'Offer'). Subject to, and effective on acceptance for payment of the Shares tendered hereby in accordance with, the terms of the Offer (including, if the Offer is extended or amended, the terms or conditions of any such extension or amendment), the undersigned hereby sells, assigns and transfers to or upon the order of the Company all right, title and interest in and to all Shares tendered hereby or orders the registration of such Shares tendered by book-entry transfer that are purchased pursuant to the Offer to or upon the order of the Company and hereby irrevocably constitutes and appoints the Depositary as attorney-in-fact of the undersigned with respect to such Shares, with full power of substitution (such power of attorney being an irrevocable power coupled with interest), to: (a) deliver certificates for such Shares, or transfer ownership of such Shares on the account books maintained by a Book-Entry Transfer Facility, together in either such case with all accompanying evidences of transfer and authenticity, to or upon the order of the Company, upon receipt by the Depositary, as the undersigned's agent, of the Purchase Price (as defined below) with respect to such Shares; (b) present certificates for such Shares for cancellation and transfer on the Company's books; and (c) receive all benefits and otherwise exercise all rights of beneficial ownership of such Shares, subject to the next paragraph, all in accordance with the terms of the Offer. The undersigned hereby represents and warrants that: (a) the undersigned understands that tenders of Shares pursuant to any one of the procedures described in 'The Offer-- Procedures for Tendering Shares' of the Offer to Purchase and in the Instructions hereto will constitute the undersigned's acceptance of the terms and conditions of the Offer, including the undersigned's representation and warranty that (i) the undersigned has a 'net long position' in Shares or 'equivalent securities' at least equal to the Shares tendered within the meaning of Rule 14e-4 promulgated under the Securities Exchange Act of 1934, as amended, and (ii) such tender of Shares complies with Rule 14e-4. (b) when and to the extent the Company accepts the Shares for purchase, the Company will acquire good, marketable and unencumbered title to them, free and clear of all security interests, liens, charges, encumbrances, conditional sales agreements or other obligations relating to their sale or transfer, and not subject to any adverse claim; (c) on request, the undersigned will execute and deliver any additional documents the Depositary or the Company deems necessary or desirable to complete the assignment, transfer and purchase of the Shares tendered hereby; and (d) the undersigned has read and agrees to all of the terms of the Offer. The names and addresses of the registered holders should be printed, if they are not already printed above, exactly as they appear on the certificates representing Shares tendered hereby. The certificate numbers, the number of Shares represented by such certificates, the number of Shares that the undersigned wishes to tender and the purchase price at which such Shares are being tendered should be indicated in the appropriate boxes on this Letter of Transmittal. The undersigned understands that the Company will, upon the terms and subject to the conditions of the Offer, determine a single per Share price (not greater than $21.50 nor less than $19.50 per Share) that it will pay for Shares validly tendered and not withdrawn pursuant to the Offer (the 'Purchase Price'), taking into account the number of Shares so tendered and the prices specified by tendering stockholders. The undersigned understands that the Company will select the lowest Purchase Price which will allow it to buy 222,000 Shares (or such lesser number of Shares as are validly tendered and not withdrawn at prices not greater than $21.50 nor less than $19.50 per Share) pursuant to the Offer, or such greater number of Shares as the Company may elect to purchase. The undersigned understands that all Shares validly tendered and not withdrawn at prices at or below the Purchase Price will be purchased at the Purchase Price, net to the seller in cash, upon the terms and subject to the conditions of the Offer, including the proration provisions, and that the Company will return all other Shares, including Shares tendered at prices greater than the Purchase Price and Shares not purchased because of proration. The undersigned recognizes that under certain circumstances set forth in the Offer to Purchase, the Company may terminate or amend the Offer or may postpone the acceptance for payment of, or the payment for, Shares tendered or may not be required to purchase any of the Shares tendered hereby or may accept for payment fewer than all of the Shares tendered hereby. In either event, the undersigned understands that certificate(s) for any Shares not tendered or not purchased will be returned to the undersigned at the address indicated above, unless otherwise indicated under the 'Special Payment Instructions' or 'Special Delivery Instructions' below. The undersigned recognizes that the Company has no obligation, pursuant to the Special Payment Instructions, to transfer any certificate for Shares from the name of their registered holder, or to order the registration or transfer of such Shares tendered by book-entry transfer, if the Company purchases none of the Shares represented by such certificate or tendered by such book-entry transfer. The undersigned understands that acceptance of Shares by the Company for payment will constitute a binding agreement between the undersigned and the Company upon the terms and subject to the conditions of the Offer. The check for the Purchase Price for such of the tendered Shares as are purchased will be issued to the order of the undersigned and mailed to the address indicated above unless otherwise indicated under 'Special Payment Instructions' or 'Special Delivery Instructions' below. All authority conferred or agreed to be conferred in this Letter of Transmittal shall survive the death or incapacity of the undersigned, and any obligations of the undersigned under this Letter of Transmittal shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned. Except as stated in the Offer to Purchase, this tender is irrevocable. NOTE: SIGNATURES MUST BE PROVIDED BELOW PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY PRICE (IN DOLLARS) PER SHARE AT WHICH SHARES ARE BEING TENDERED IF SHARES ARE BEING TENDERED AT MORE THAN ONE PRICE, USE A SEPARATE LETTER OF TRANSMITTAL FOR EACH PRICE SPECIFIED. (SEE INSTRUCTION 5) CHECK ONLY ONE BOX. IF MORE THAN ONE BOX IS CHECKED, OR IF NOBOX IS CHECKED (EXCEPT AS OTHERWISE PROVIDED HEREIN), THERE IS NO VALID TENDER OF SHARES. / / $19.500 / / $20.125 / / $20.625 / / $21.125 / / 19.625 / / 20.250 / / 20.750 / / 21.250 / / 19.750 / / 20.375 / / 20.875 / / 21.375 / / 19.875 / / 20.500 / / 21.000 / / 21.500 / / 20.000
SPECIAL PAYMENT INSTRUCTIONS (SEE INSTRUCTIONS 1, 4, 6, 7 AND 8) To be completed ONLY if certificates for Shares not tendered or not purchased and/or any check for the Purchase Price of Shares purchased are to be issued in the name of and sent to someone other than the undersigned. Issue / / Check / / Certificates to: Name .......................................................................... (PLEASE PRINT) Address ....................................................................... ........................................................................ (INCLUDE ZIP CODE) ............................................................................... (TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER) SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 1, 4, 6 AND 8) To be completed ONLY if certificates for Shares not tendered or not purchased issued in the name of the undersigned and/or any check for the Purchase Price of Shares purchased issued in the name of undersigned are to be sent to someone other than the undersigned or to the undersigned at an address other than that shown above. Deliver / / Check / / Certificates to: Name .......................................................................... (PLEASE PRINT) Address ....................................................................... ............................................................................... (INCLUDE ZIP CODE) STOCKHOLDER(S) SIGN HERE (SEE INSTRUCTIONS 1 AND 6) (PLEASE COMPLETE SUBSTITUTE FORM W-9 ON BACK PAGE) Must be signed by the registered holder(s) exactly as name(s) appear(s) on certificate(s) or on a security position listing or by person(s) authorized to become registered holder(s) by certificate(s) and documents transmitted with this Letter of Transmittal. If signature is by attorney-in-fact, executor, administrator, trustee, guardian, officer of a corporation or another acting in a fiduciary or representative capacity, please set forth the full title. See Instruction 6. ............................................................................... (Signature(s)) Dated .................................................................. , 1998 Name(s) ....................................................................... ........................................................................ (Please Print) Capacity (full title): ........................................................ ............................................................... Address: ...................................................................... ...................................................................... ...................................................................... Area Code and Telephone Number: ............................................... Tax Identification or Social Security Number(s) ............................... Dated: ................................................................. , 1998 GUARANTEE OF SIGNATURE(S) (See Instructions 1 and 6) Authorized Signature .......................................................... Name: ......................................................................... (Please Print) Title: ........................................................................ Name of Firm: ................................................................. Address: ...................................................................... ............................................................................... ............................................................................... (Including Zip Code) Area Code and Telephone Number: ............................................... Dated: ................................................................. , 1998 Tax Identification or Social Security Number(s) ................................ INSTRUCTIONS FORMING PART OF THE TERMS OF THE OFFER 1. Guarantee of Signatures. No signature guarantee is required if either: (a) this Letter of Transmittal is signed by the registered holder of the Shares (which term, for purposes of this document, shall include any participant in a Book-Entry Transfer Facility whose name appears on a security position listing as the owner of Shares) exactly as the name of the registered holder appears on the certificate tendered with this Letter of Transmittal unless such holder has completed either the box entitled 'Special Payment Instructions' or the box entitled 'Special Delivery Instructions'; or (b) such Shares are tendered for the account of a member firm of a registered national securities exchange, a member of the National Association of Securities Dealers, Inc. or a commercial bank or trust company having an office, branch or agency in the United States. See Instruction 6. In all other cases the signature(s) must be guaranteed by an eligible guarantor institution (bank, stockbroker, savings and loan association or credit union with membership in an approved signature guarantee medallion program), pursuant to Rule 17Ad-15 promulgated under the Exchange Act (an 'Eligible Institution'). See Instruction 6. 2. Delivery of Letter of Transmittal and Certificates; Guaranteed Delivery Procedures. This Letter of Transmittal is to be used only if certificates are delivered with it to the Depositary (or such certificates will be delivered pursuant to a Notice of Guaranteed Delivery previously sent to the Depositary) or if tenders are to be made pursuant to the procedure for tender by book-entry transfer set forth in 'The Offer-Procedures for Tendering Shares' of the Offer to Purchase. Certificates for all physically tendered Shares, or confirmation of a book-entry transfer into the Depositary's account at a Book-Entry Transfer Facility of Shares tendered electronically, together in each case with a properly completed and duly executed Letter of Transmittal or duly executed facsimile of it, and any other documents required by this Letter of Transmittal, should be mailed or delivered to the Depositary at the appropriate address set forth herein and must be delivered to the Depositary on or before the Expiration Date (as defined in the Offer to Purchase). Stockholders whose certificates are not immediately available or who cannot deliver Shares and all other required documents to the Depositary before the Expiration Date, or whose Shares cannot be delivered on a timely basis pursuant to the procedure for book-entry transfer, may tender their Shares by or through any Eligible Institution by properly completing (including the price at which the Shares are being tendered) and duly executing and delivering a Notice of Guaranteed Delivery (or a facsimile of it) and by otherwise complying with the guaranteed delivery procedure set forth in 'The Offer-Procedures for Tendering Shares' of the Offer to Purchase. Pursuant to such procedure, the certificates for all physically tendered Shares or book-entry confirmation, as the case may be, as well as a properly completed Letter of Transmittal and all other documents required by this Letter of Transmittal, must be received by the Depositary within three over-the-counter trading days after receipt by the Depositary of such Notice of Guaranteed Delivery, all as provided in 'The Offer- Procedures for Tendering Shares' of the Offer to Purchase. The Notice of Guaranteed Delivery may be delivered by hand or transmitted by telegram, facsimile transmission or mail to the Depositary and must include a guarantee by an Eligible Institution in the form set forth in such Notice. For Shares to be validly tendered pursuant to the guaranteed delivery procedure, the Depositary must receive the Notice of Guaranteed Delivery before the Expiration Date. THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING CERTIFICATES FOR SHARES, IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY. The Company will not accept any alternative, conditional or contingent tenders, nor will it purchase any fractional Shares. All tendering stockholders, by execution of this Letter of Transmittal (or a facsimile of it), waive any right to receive any notice of the acceptance of their tender. 3. Inadequate Space. If the space provided in the box captioned 'Description of Shares Tendered' is inadequate, the certificate numbers and/or the number of Shares should be listed on a separate signed schedule and attached to this Letter of Transmittal. 4. Partial Tenders and Unpurchased Shares. (Not applicable to stockholders who tender by book-entry transfer.) If fewer than all of the Shares evidenced by any certificate are to be tendered, fill in the number of Shares which are to be tendered in the column entitled 'Number of Shares Tendered.' In such case, if any tendered Shares are purchased, a new certificate for the remainder of the Shares evidenced by the old certificate(s) will be issued and sent to the registered holder(s), unless otherwise specified in the 'Special Payment Instructions' or 'Special Delivery Instructions' box on this Letter of Transmittal, as soon as practicable after the Expiration Date. All Shares represented by the certificate(s) listed and delivered to the Depositary are deemed to have been tendered unless otherwise indicated. 5. Indication of Price at Which Shares Are Being Tendered. For Shares to be validly tendered, the stockholder must check the box indicating the price per Share at which he or she is tendering Shares under 'Price (In Dollars) Per Share at Which Shares Are Being Tendered' on this Letter of Transmittal. Only one box may be checked. If more than one box is checked, or if no box is checked (except as otherwise provided herein), there is no valid tender of Shares. A stockholder wishing to tender portions of his Share holdings at different prices must complete a separate Letter of Transmittal for each price at which he or she wishes to tender each such portion of his or her Shares. The same Shares cannot be tendered (unless previously validly withdrawn as provided in 'The Offer--Withdrawal Rights' of the Offer to Purchase) at more than one price. 6. Signatures on Letter of Transmittal, Stock Powers, and Endorsements. (a) If this Letter of Transmittal is signed by the registered holder(s) of the Shares tendered hereby, the signature(s) must correspond exactly with the name(s) as written on the face of the certificate without any change whatsoever. (b) If the Shares are registered in the names of two or more joint holders, each such holder must sign this Letter of Transmittal. (c) If any tendered Shares are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate Letters of Transmittal (or facsimiles of it) as there are different registrations of certificates. (d) When this Letter of Transmittal is signed by the registered holder(s) of the Shares listed and transmitted hereby, no endorsements of certificate(s) representing such Shares or separate stock powers are required unless payment is to be made, or the certificate(s) for Shares not tendered or not purchased are to be issued, to a person other than the registered holder(s). If this Letter of Transmittal is signed by a person other than the registered holder(s) of the certificate(s) listed, or if payment is to be made or certificate(s) for shares not tendered or not purchased are to be issued to a person other than the registered holder(s), the certificate(s) must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name(s) of the registered holder(s) appear(s) on the certificate(s), and any signature(s) on such certificate(s) or stock power(s) must be guaranteed by an Eligible Institution. See Instruction 1. (e) If this Letter of Transmittal or any certificates or stock powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity for the registered holder(s) of the certificates listed, such persons should so indicate when signing and must submit proper evidence satisfactory to the Company of their authority so to act. 7. Stock Transfer Taxes. Except as provided in this Instruction, no stock transfer tax stamps or funds to cover such stamps need accompany this Letter of Transmittal. The Company will pay or cause to be paid any stock transfer taxes payable on the transfer to it of Shares purchased pursuant to the Offer. If, however: (a) payment of the Purchase Price is to be made to any person other than the registered holder(s); (b) Shares not tendered or not accepted for purchase are to be registered in the name of any person other than the registered holder(s); or (c) tendered certificates are registered in the name of any person other than the person(s) signing this Letter of Transmittal; then the Depositary will deduct from the Purchase Price the amount of any stock transfer taxes (whether imposed on the registered holder, such other person or otherwise) payable on account of the transfer to such person unless satisfactory evidence of the payment of such taxes, or an exemption from them, is submitted. 8. Special Payment and Delivery Instructions. If certificate(s) for Shares not tendered or not purchased and/or check(s) are to be issued in the name of a person other than the signer of the Letter of Transmittal or if such certificate(s) and/or check(s) are to be sent to someone other than the signer of the Letter of Transmittal or to the signer at a different address, the boxes captioned 'Special Payment Instructions' and/or 'Special Delivery Instructions' on this Letter of Transmittal should be completed and signatures must be guaranteed as described in Instructions 1 and 6. 9. Odd Lots. As described in 'The Offer--Number of Shares; Proration' of the Offer to Purchase, if the Company is to purchase less than all Shares validly tendered and not withdrawn before the Expiration Date, the Shares purchased first will consist of all Shares validly tendered and not withdrawn by any stockholder who owned beneficially as of the close of business on April 8, 1998 and who continues to own as of the Expiration Date, an aggregate of fewer than 100 Shares and who tenders all of his Shares at or below the Purchase Price (an 'Odd Lot Holder'). This preference will not be available unless the box captioned 'Odd Lots' is completed. 10. Irregularities. The Company will determine, in its sole discretion, all questions as to the validity, form, eligibility (including time of receipt) and acceptance for payment of any tender of Shares, and its determination shall be final and binding on all parties. The Company reserves the absolute right to reject any or all tenders determined by it not to be in proper form or the acceptance of which or payment for which may, in the opinion of the Company's counsel, be unlawful. The Company also reserves the absolute right to waive any of the conditions of the Offer or any defects or irregularities in the tender of any particular Shares, and the Company's interpretation of the terms of the Offer (including these instructions) will be final and binding on all parties. No tender of Shares will be deemed to be validly made until all defects and irregularities have been cured or waived. Unless waived, any defects or irregularities in connection with tenders must be cured within such time as the Company shall determine. None of the Company, the Depositary nor any other person is or will be obligated to give notice of any defects or irregularities in tenders, nor shall any of them incur any liability for failure to give any such notice. 11. Questions and Requests for Assistance and Additional Copies. Questions and requests for assistance may be directed to, or additional copies of the Offer to Purchase, the Notice of Guaranteed Delivery, and this Letter of Transmittal may be obtained from the Information Agent at its address and telephone number set forth at the end of this Letter of Transmittal. 12. Substitute Form W-9 and Form W-8. Stockholders other than corporations and certain foreign individuals may be subject to backup federal income tax withholding. Each such tendering stockholder or other payee who does not otherwise establish to the satisfaction of the Depositary an exemption from backup federal income tax withholding is required to provide the Depositary with a correct taxpayer identification number ('TIN') on Substitute Form W-9 which is provided as a part of this Letter of Transmittal, and to indicate that the stockholder or other payee is not subject to backup withholding by checking the box in Part 2 of the form. For an individual, his TIN will generally be his social security number. Failure to provide the information on the form or to check the box in Part 2 of the form may subject the tendering stockholder or other payee to 31% backup federal income tax withholding on the payments made to the stockholder or other payee with respect to Shares purchased pursuant to the Offer and to a $50 penalty imposed by the Internal Revenue Service. Backup withholding is not an additional tax. Rather, the tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained. The box in Part 3 of the form may be checked if the tendering stockholder or other payee has not been issued a TIN and has applied for a TIN or intends to apply for a TIN in the near future. If the box in Part 3 is checked and the Depositary is not provided with a TIN within sixty (60) days, the Depositary will withhold 31% on all such payments thereafter until a TIN is provided to the Depositary. Stockholders who are foreign individuals should submit Form W-8 to certify that they are exempt from backup withholding, unless Instruction 13 applies. Form W-8 may be obtained from the Depositary. For additional information concerning Substitute Form W-9, see the enclosed 'Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9.' 13. Withholding on Foreign Stockholders. The Depositary will withhold federal income taxes equal to 30% of the gross payments payable to a foreign stockholder or his agent unless the Depositary determines that a reduced rate of withholding or an exemption from withholding is applicable. (Exemption from backup withholding does not exempt a foreign stockholder from the 30% withholding.) For this purpose, a foreign stockholder is any stockholder that is not (i) a citizen or resident of the United States, (ii) a corporation, partnership or other entity created or organized in or under the laws of the United States or any political subdivision thereof or (iii) an estate or trust the income of which is subject to United States federal income taxation regardless of the source of such income. The Depositary will determine a stockholder's status as a foreign stockholder and eligibility for a reduced rate of, or an exemption from, withholding by reference to the stockholder's address and to any outstanding certificates or statements concerning eligibility for a reduced rate of, or exemption from, withholding on the grounds that the gross proceeds paid pursuant to the Offer are effectively connected with the conduct of a trade or business within the United States, a foreign stockholder must deliver to the Depositary a properly executed Form 4224. Such form can be obtained from the Depositary. A foreign stockholder who has not previously submitted the appropriate certificates or statements with respect to a reduced rate of, or exemption from, withholding for which such stockholder may be eligible should consider doing so in order to avoid excess withholding. A foreign stockholder may be eligible to obtain a refund of tax withheld if such stockholder meets one of the three tests for capital gain or loss treatment described in 'Special Factors--Certain Federal Income Tax Consequences' of the Offer to Purchase or is otherwise able to establish that no tax or reduced amount of tax was due. Foreign stockholders are advised to consult their tax advisors regarding the application of federal income tax withholding, including eligibility for a withholding tax reduction or exemption and the refund procedures. 14. ESOP, Profit Sharing Plan and MSBP. Participants in the Community Federal Savings and Loan Association of Little Falls Employee Stock Ownership Plan, the Community Federal Savings and Loan Association of Little Falls Profit Sharing Plan and the Community Federal Savings and Loan Association of Little Falls Management Stock Bonus Plan may not use this Letter of Transmittal to direct the tender of Shares attributed to a participant's account, but must use the separate instruction form sent to them. IMPORTANT: THIS LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE OF IT (TOGETHER WITH CERTIFICATE(S) FOR SHARES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED DOCUMENTS) OR, IF APPLICABLE, THE NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE DEPOSITARY BEFORE THE EXPIRATION DATE. IMPORTANT TAX INFORMATION Under the United States federal income tax law, a stockholder whose tendered Shares are accepted for payment generally is required by law to provide the Depositary with such stockholder's correct TIN on Substitute Form W-9 below. If the Depositary is not provided with the correct TIN, the Internal Revenue Service may subject the stockholder or other payee to a $50 penalty. In addition, payments that are made to such stockholder or other payee with respect to Shares purchased pursuant to the Offer may be subject to backup withholding. Certain stockholders (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. In order for a foreign individual to qualify as an exempt recipient, the stockholder must submit a Form W-8, signed under penalties of perjury, attesting to the individual's exempt status. A Form W-8 can be obtained from the Depositary. See the enclosed 'Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9' for more instructions. If backup withholding applies, the Depositary is required to withhold 31% of any such payments made to the stockholder or other payee. Backup withholding is not an additional tax. Rather, the tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained. PURPOSE OF SUBSTITUTE FORM W-9 To prevent backup withholding on payment made to a stockholder or other payee with respect to Shares purchased pursuant to the Offer, the stockholder is required to notify the Depositary of the stockholder's correct TIN by completing the form below, certifying that the TIN provided on Substitute Form W-9 is correct (or that such stockholder is awaiting a TIN) and that: (a) the stockholder has not been notified by the Internal Revenue Service that the stockholder is subject to backup withholding as a result of failure to report all interest or dividends; or (b) the Internal Revenue Service has notified the stockholder that the stockholder is no longer subject to backup withholding. WHAT NUMBER TO GIVE THE DEPOSITARY The stockholder is required to give the Depositary the TIN (e.g., social security number or employer identification number) of the registered holder of the Shares. If the Shares are in more than one name or are not in the name of the actual owner, consult the enclosed 'Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9' for additional guidance on which number to report. PAYER'S NAME: SUBSTITUTE Part 1--PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT Social Security Number FORM W-9 AND CERTIFY BY SIGNING AND DATING BELOW. OR Employer Identification Number DEPARTMENT OF THE TREASURY Part 2--Check the box if you are NOT subject to INTERNAL REVENUE SERVICE backup withholding under the provisions of Section 3406(a)(1)(C) of the Internal Revenue Code because (1) you are exempt from backup withholding, or (2) you have not been notified by the Internal Revenue Service that you are subject to backup withholding as a result of failure to report all interest or dividends, or (3) the Internal Revenue Service has notified you that you are no longer subject to backup withholding. / / PAYER'S REQUEST FOR TAXPAYER CERTIFICATION--UNDER THE PENALTIES OF PERJURY, I Part 3-- IDENTIFICATION NUMBER (TIN) CERTIFY THAT THE INFORMATION PROVIDED ON THIS FORM Awaiting TIN / / IS TRUE, CORRECT, AND COMPLETE. SIGNATURE DATE
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN A BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECK THE BOX IN PART 3 OF SUBSTITUTE FORM W-9 CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (a) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office, or (b) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number within sixty (60) days, 31% of all reportable payments made to me thereafter will be withheld until I provide a number. - ---------------------------- ----------------------------- Signature Date
FACSIMILE COPIES OF THE LETTER OF TRANSMITTAL WILL BE ACCEPTED FROM ELIGIBLE INSTITUTIONS. THE LETTER OF TRANSMITTAL AND CERTIFICATES FOR SHARES AND ANY OTHER REQUIRED DOCUMENTS SHOULD BE SENT OR DELIVERED BY EACH TENDERING STOCKHOLDER OR HIS BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR OTHER NOMINEE TO THE DEPOSITARY AT ONE OF ITS ADDRESSES SET FORTH BELOW. THE DEPOSITARY REGISTRAR AND TRANSFER COMPANY By Mail/Overnight Delivery: Facsimile Transmission: By Hand Only: 10 Commerce Drive (908) 497-2313 c/o The Depository Trust Co. Cranford, New Jersey 07016 (for Eligible Institutions Only) Transfer Agent Drop 55 Water Street, 1st Floor New York, New York 10041-0099
ANY QUESTIONS OR REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE OFFER TO PURCHASE, THE LETTER OF TRANSMITTAL OR THE NOTICE OF GUARANTEED DELIVERY MAY BE DIRECTED TO THE INFORMATION AGENT AT ITS TELEPHONE NUMBERS AND ADDRESS SET FORTH BELOW. A TENDERING STOCKHOLDER MAY ALSO CONTACT HIS BROKER, DEALER, COMMERCIAL BANK OR TRUST COMPANY FOR ASSISTANCE CONCERNING THE OFFER. IN ORDER TO CONFIRM THE DELIVERY OF HIS SHARES, A TENDERING STOCKHOLER SHOULD CONTACT THE DEPOSITARY. THE INFORMATION AGENT: MACKENZIE PARTNERS, INC. LOGO 156 Fifth Avenue New York, New York 10010 (212) 929-5500 (Call Collect) Call Toll Free: (800) 322-2885 April 13, 1998 EX-99.(A)(3) 4 LETTER TO BROKERS MISSISSIPPI VIEW HOLDING COMPANY Offer to Purchase For Cash Up to 222,000 Shares of its Common Stock at a Purchase Price Not Greater Than $21.50 Nor Less than $19.50 Per Share THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 5:00 P.M., EASTERN TIME, ON MONDAY, MAY 11, 1998, UNLESS THE OFFER IS EXTENDED. April 13, 1998 To: Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees Mississippi View Holding Company, a Minnesota corporation (the "Company"), has appointed us to act as Information Agent in connection with its offer to purchase up to 222,000 shares of its Common Stock, par value $0.10 per share (the "Shares"), at prices, net to the seller in cash, not greater than $21.50 nor less than $19.50 per Share, specified by tendering stockholders, upon the terms and subject to the conditions set forth in its Offer to Purchase, dated April 13, 1998, and the related Letter of Transmittal (which together constitute the "Offer"). The Company will, upon the terms and subject to the conditions of the Offer, determine a single per Share price (not greater than $21.50 nor less than $19.50 per Share) that it will pay for Shares validly tendered and not withdrawn pursuant to the Offer (the "Purchase Price"), taking into account the number of Shares so tendered and the prices specified by tendering stockholders. The Company will select the lowest Purchase Price which will allow it to purchase 222,000 Shares (or such lesser number of Shares as are validly tendered and not withdrawn at prices not greater than $21.50 nor less than $19.50 per Share) pursuant to the Offer, or such greater number as the Company may elect to purchase. All Shares validly tendered and not withdrawn at prices at or below the Purchase Price will be purchased at the Purchase Price, net to the seller in cash, upon the terms and subject to the conditions of the Offer, including the proration terms thereof. See "The Offer -- Number of Shares; Proration" in the Offer to Purchase. If, prior to the Expiration Date (as defined in the Offer to Purchase), more than 222,000 Shares are validly tendered and not withdrawn at or below the Purchase Price, the Company will, upon the terms and subject to the conditions of the Offer, buy Shares first from all Odd Lot Holders (as defined in the Offer to Purchase) who validly tender and do not withdraw all their Shares at or below the Purchase Price and then on a pro rata basis from all other stockholders whose Shares are validly tendered and not withdrawn at or below the Purchase Price. The Offer is conditioned upon, among other things, the Company obtaining the funds necessary to consummate the Offer and pay all related fees and expenses. The Offer is not conditioned upon any minimum number of Shares being tendered. See "The Offer -- Certain Conditions of the Offer" in the Offer to Purchase. For your information and for forwarding to your clients for whom you hold Shares registered in your name or in the name of your nominee, we are enclosing the following documents: 1. Offer to Purchase, dated April 13, 1998; 2. Letter to Clients that may be sent to your clients for whose accounts you hold Shares registered in your name or in the name of your nominee, with space provided for obtaining such clients' instructions with regard to the Offer; 3. Letter dated April 13, 1998 from Thomas J. Leiferman, President and Chief Executive Officer of the Company, to stockholders of the Company; 4. Letter of Transmittal for your use and for the information of your clients (together with accompanying Substitute Form W-9 and guidelines); and 5. Notice of Guaranteed Delivery to be used to accept the Offer if the Share certificates and all other required documents cannot be delivered to the Depositary by the Expiration Date or if the procedure for book-entry transfer cannot be completed on a timely basis. WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., EASTERN TIME, ON MONDAY, MAY 11, 1998, UNLESS THE OFFER IS EXTENDED. No fees or commissions will be payable to brokers, dealers or any person for soliciting tenders of Shares pursuant to the Offer other than fees paid to the Information Agent or the Depositary as described in the Offer to Purchase. The Company will, however, upon request, reimburse you for customary mailing and handling expenses incurred by you in forwarding any of the enclosed materials to the beneficial owners of Shares held by you as a nominee or in a fiduciary capacity. The Company will pay or cause to be paid any stock transfer taxes applicable to its purchase of Shares, except as otherwise provided in Instruction 7 of the Letter of Transmittal. In order to take advantage of the Offer, a duly executed and properly completed Letter of Transmittal and any other required documents should be sent to the Depositary with either certificate(s) representing the tendered Shares or confirmation of their book-entry transfer all in accordance with the instructions set forth in the Letter of Transmittal and the Offer to Purchase. As described in "The Offer -- Procedures for Tendering Shares" in the Offer to Purchase, tenders may be made without the concurrent deposit of stock certificates or concurrent compliance with the procedure for book-entry transfer, if such tenders are made by or through a broker or dealer which is a member firm of a registered national securities exchange, or a member of the National Association of Securities Dealers, Inc. or a commercial bank or trust company having an office, branch or agency in the United States. Certificates for Shares so tendered (or a confirmation of a book-entry transfer of such Shares into the Depositary's account at one of the Book-Entry Transfer Facilities described in the Offer to Purchase), together with a properly completed and duly executed Letter of Transmittal and any other documents required by the Letter of Transmittal, must be received by the Depositary within three over-the-counter trading days after timely receipt by the Depositary of a properly completed and duly executed Notice of Guaranteed Delivery. 2 Any inquiries you may have with respect to the Offer should be addressed to the Information Agent at its address and telephone number set forth on the back cover page of the Offer to Purchase. Additional copies of the enclosed material may be obtained from the undersigned, telephone: (800) 322-2885. Very truly yours, MacKenzie Partners, Inc. Enclosures |==============================================================================| | NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR| | ANY OTHER PERSON AS AN AGENT OF THE COMPANY OR ANY OF ITS AFFILIATES, THE | | INFORMATION AGENT OR THE DEPOSITARY, OR AUTHORIZE YOU OR ANY OTHER PERSON TO | | USE ANY DOCUMENT OR MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION| | WITH THE OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE STATEMENTS | | CONTAINED THEREIN. | |==============================================================================| 3 EX-99.(A)(4) 5 LETTER TO CLIENTS MISSISSIPPI VIEW HOLDING COMPANY Offer to Purchase for Cash Up to 222,000 Shares of its Common Stock at a Purchase Price Not Greater than $21.50 Nor Less than $19.50 Per Share To Our Clients: Enclosed for your consideration are the Offer to Purchase, dated April 13, 1998 and the related Letter of Transmittal (which together constitute the "Offer") in connection with the Offer by Mississippi View Holding Company, a Minnesota corporation (the "Company"), to purchase up to 222,000 shares of its common stock, par value $0.10 per share (the "Shares"), at prices net to the seller in cash, not greater than $21.50 nor less than $19.50 per Share, specified by tendering stockholders, on the terms and subject to the conditions of the Offer. The Company will, upon the terms and subject to the conditions of the Offer, determine a single per Share price (not greater than $21.50 nor less than $19.50 per Share) that it will pay for Shares validly tendered and not withdrawn pursuant to the Offer (the "Purchase Price"), taking into account the number of Shares so tendered and the prices specified by tendering stockholders. The Company will select the lowest Purchase Price which will allow it to purchase 222,000 Shares (or such lesser number of Shares as are validly tendered and not withdrawn at prices not greater than $21.50 nor less than $19.50 per Share) pursuant to the Offer, or such greater number as the Company may elect to purchase. All Shares validly tendered and not withdrawn at prices at or below the Purchase Price will be purchased at the Purchase Price, net to the seller in cash, upon the terms and subject to the conditions of the Offer, including the proration terms thereof. The Company will return all other Shares, including Shares tendered at prices greater than the Purchase Price and Shares not purchased because of proration. See "The Offer -- Number of Shares; Proration" in the Offer to Purchase. If, prior to the Expiration Date (as defined in the Offer to Purchase), more than 222,000 Shares are validly tendered and not withdrawn at or below the Purchase Price, the Company will, upon the terms and subject to the conditions of the Offer, accept Shares for purchase first from Odd Lot Holders (as defined in the Offer to Purchase) who validly tender and do not withdraw their Shares at or below the Purchase Price and then on a pro rata basis from all other stockholders whose Shares are validly tendered and not withdrawn at or below the Purchase Price. See "The Offer -- Number of Shares; Proration" in the Offer to Purchase. We are the holder of record of Shares held for your account. As such, we are the only ones who can tender your Shares, and then only pursuant to your instructions. We are sending you the Letter of Transmittal for your information only; you cannot use it to tender Shares we hold for your account. Please instruct us as to whether you wish us to tender any or all of the Shares we hold for your account on the terms and subject to the conditions of the Offer. We call your attention to the following: 1. You may tender Shares at prices, net to you in cash, not greater than $21.50 nor less than $19.50 per Share, as indicated in the attached instruction form. 2. The Offer is conditioned upon, among other things, the Company obtaining the funds necessary to consummate the Offer and to pay all related fees and expenses. The Offer is not conditioned upon any minimum number of Shares being tendered. 3. The Offer, proration period and withdrawal rights will expire at 5:00 p.m., Eastern time, on Monday, May 11, 1998, unless the Company extends the Offer. 4. The Offer is for 222,000 Shares constituting approximately 30% of the Shares outstanding as of April 9, 1998. 5. Assuming 222,000 Shares are purchased pursuant to the Offer and the sale of Shares to the newly-formed Trust (as defined in the Offer to Purchase) immediately after the Expiration Date, executive officers, directors, the Stock Plans (as defined in the Offer to Purchase) and the Trust, in the aggregate, will own approximately 49.5% of the outstanding Shares. The Board of Directors of the Company, based on, among other things, the unanimous recommendation of a Special Committee of non-employee directors of the Board, has unanimously approved the Offer. However, neither the Company nor its Board of Directors makes any recommendation to any stockholder as to whether to tender or refrain from tendering their Shares. Each stockholder must make the decision whether to tender Shares, and if so, how many Shares and at which price or prices. 6. Tendering stockholders will not be obligated to pay any brokerage commissions, solicitation fees or, subject to Instruction 7 of the Letter of Transmittal, stock transfer taxes on the Company's purchase of Shares pursuant to the Offer. 7. If you owned beneficially as of the close of business on April 8, 1998 and will continue to own beneficially as of the Expiration Date an aggregate of fewer than 100 Shares and you instruct us to tender on your behalf all such Shares at or below the Purchase Price before the Expiration Date and check the box captioned "Odd Lots" in the attached instruction form, the Company, upon the terms and subject to the conditions of the Offer, will accept all such Shares for purchase before proration, if any, of the purchase of other Shares tendered and not withdrawn at or below the Purchase Price. 8. If you wish to tender portions of your Share holdings at different prices, you must complete separate instructions for each price at which you wish to tender each such portion of your Shares. We must submit separate Letters of Transmittal on your behalf for each price you will accept. The same Shares cannot be tendered at different prices unless such tendered Shares are validly withdrawn and retendered. If you wish to have us tender any or all of your Shares, please so instruct us by completing, executing and returning to us the attached instruction form. An envelope to return your instructions to us is enclosed. If you authorize us to tender your Shares, we will tender all such Shares unless you specify otherwise on the attached instruction form. Your Instruction Form should be forwarded to us in ample time to permit us to submit a tender on your behalf on or before the expiration of the Offer. The Offer, proration period and withdrawal rights expire at 5:00 p.m., Eastern time, on Monday, May 11, 1998, unless the Company extends the Offer. As described in "The Offer -- Number of Shares; Proration" in the Offer to Purchase, if before the Expiration Date a greater number of Shares are validly tendered and not withdrawn at or below the Purchase Price than the Company will accept for purchase, the Company will accept Shares for purchase at the Purchase Price in the following order of priority: (a) first, all Shares validly tendered and not withdrawn at or below the Purchase Price before the Expiration Date by any Odd Lot Holder who: (1) tenders all Shares beneficially owned by such Odd Lot Holder at or below the Purchase Price (partial tenders will not qualify for this preference); and (2) completes the box captioned "Odd Lots" on the Letter of Transmittal and, if applicable, on the Notice of Guaranteed Delivery; and (b) then, after purchase of all of the foregoing Shares, all other Shares validly tendered and not withdrawn at or below the Purchase Price before the Expiration Date on a pro rata basis (with adjustments to avoid purchases of fractional Shares), as provided in the Offer to Purchase. The Company is not making the Offer to, nor will it accept tenders from or on behalf of, owners of Shares in any jurisdiction in which the Offer or its acceptance would violate the securities, blue sky or other laws of such jurisdiction. 2 Instruction Form With Respect to the MISSISSIPPI VIEW HOLDING COMPANY Offer to Purchase for Cash Up to 222,000 Shares of Its Common Stock at a Purchase Price Per Share Not Greater than $21.50 Nor Less than $19.50 Per Share The undersigned acknowledge(s) receipt of your letter and the enclosed Offer to Purchase, dated April 13, 1998 and related Letter of Transmittal (which together constitute the "Offer"), in connection with the Offer by Mississippi View Holding Company, a Minnesota corporation (the "Company"), to purchase up to 222,000 shares of its common stock, par value $0.10 per share (the "Shares"), at prices, net to the Seller in cash, not greater than $21.50 nor less than $19.50 per Share, specified by tendering stockholders, upon the terms and subject to the conditions of the Offer. The undersigned acknowledges that the Company will, upon the terms and subject to the conditions of the Offer, determine a single per Share price (not greater than $21.50 nor less than $19.50 per Share) that it will pay for Shares validly tendered and not withdrawn pursuant to the Offer (the "Purchase Price"), taking into account the number of Shares so tendered and the prices specified by tendering stockholders. The Company will select the lowest Purchase Price which will allow it to purchase 222,000 Shares (or such lesser number of Shares as are validly tendered and not withdrawn at prices not greater than $21.50 nor less than $19.50 per Share) pursuant to the Offer, or such greater number as the Company may elect to purchase. All Shares validly tendered and not withdrawn at prices at or below the Purchase Price will be purchased at the Purchase Price, net to the seller in cash, upon the terms and subject to the conditions of the Offer, including the proration terms thereof. The Company will return all other Shares. See "The Offer -- Number of Shares; Proration" in the Offer to Purchase. The undersigned hereby instruct(s) you to tender to the Company the number of Shares indicated below or, if no number is indicated, all Shares you hold for the account of the undersigned, at the price per Share indicated below, pursuant to the terms and subject to the conditions of the Offer. The Company will return Shares tendered at prices greater than the Purchase Price and Shares not purchased because of proration. Aggregate number of Shares to be tendered by you for the account of the undersigned: * Shares -------------------- * Unless otherwise indicated, all of the Shares held for the account of the undersigned will be tendered. |------------------------------------------------------------------------------| | ODD LOTS | | | | |_| By checking this box, the undersigned represents that the undersigned | | owned beneficially as of the close of business on April 8, 1998 and | | will continue to own beneficially as of the Expiration Date an | | aggregate of fewer than 100 Shares and is instructing the holder to | | tender all such Shares. | | | - -------------------------------------------------------------------------------- 3 |------------------------------------------------------------------------| | PRICE (IN DOLLARS) PER SHARE AT | | WHICH SHARES ARE BEING TENDERED | | | | IF SHARES ARE BEING TENDERED AT MORE | | THAN ONE PRICE, USE A SEPARATE | | LETTER OF TRANSMITTAL FOR EACH PRICE SPECIFIED. | | | | | | CHECK ONLY ONE BOX. | | IF MORE THAN ONE BOX IS CHECKED, OR IF | | NO BOX IS CHECKED (EXCEPT AS OTHERWISE PROVIDED | | HEREIN), THERE IS NO VALID TENDER OF SHARES. | | ---------------------------------------------------------------------- | | |_| $ 19.500 |_| $ 20.500 |_| $21.500 | | |_| 19.625 |_| 20.625 | | |_| 19.750 |_| 20.750 | | |_| 19.875 |_| 20.875 | | |_| 20.000 |_| 21.000 | | |_| 20.125 |_| 21.125 | | |_| 20.250 |_| 21.250 | | |_| 20.375 |_| 21.375 | | ---------------------------------------------------------------------- | |============================================================================| | SIGNATURE BOX | | | | | | Signature(s)______________________________________________________________ | | | | Dated ______________________________________________________________, 1998 | | | | Name(s) and Address(es)____________________________________________________| | | ------------------------------------------------------------------------ | | | | ------------------------------------------------------------------------- | | | |------------------------------------------------------------------------- | | (Please Print) | |Area Code and Telephone Number____________________________________________ | | | |Taxpayer Identification or | |Social Security Number_____________________________________________________ | |============================================================================| 4 EX-99.(A)(5) 6 NOTICE OF GUARANTEED DELIVERY NOTICE OF GUARANTEED DELIVERY of Shares of Common Stock of MISSISSIPPI VIEW HOLDING COMPANY This form or a facsimile of it must be used to accept the Offer, as defined below, if: (a) certificates for common stock, par value $0.10 per share (the "Shares"), of Mississippi View Holding Company, a Minnesota corporation, are not immediately available or certificates for Shares and all other required documents cannot be delivered to the Depositary before the Expiration Date (as defined in "The Offer -- Number of Shares; Proration" in the Offer to Purchase, as defined below); or (b) Shares cannot be delivered on a timely basis pursuant to the procedure for book-entry transfer. This form or a facsimile of it, signed and properly completed, may be delivered by hand, mail, telegram or facsimile transmission to the Depositary. See "The Offer -- Procedures for Tendering Shares" in the Offer to Purchase. To: Registrar and Transfer Company By Mail/Overnight Delivery: Facsimile Transmission: By Hand Only: 10 Commerce Drive (908) 497-2313 c/o The Depository Trust Co. Cranford, New Jersey 07016 (for Eligible Institutions Only) Transfer Agent Drop 55 Water Street, 1st Floor New York, New York 10041-0099
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN THOSE SHOWN ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THAT LISTED ABOVE DOES NOT CONSTITUTE A VALID DELIVERY Ladies and Gentlemen: The undersigned hereby tenders to Mississippi View Holding Company, at the price per Share indicated below, net to the seller in cash, upon the terms and conditions set forth in the Offer to Purchase, dated April 13, 1998 (the "Offer to Purchase") and the related Letter of Transmittal (which together constitute the "Offer"), receipt of which is hereby acknowledged, Shares pursuant to the guaranteed delivery procedure set forth in "The Offer - - Procedures for Tendering Shares" in the Offer to Purchase. |============================================================================ | | ODD LOTS | | | | To be completed ONLY if Shares are being tendered by or on behalf of a | | person owning beneficially as of the close of business on April 8, 1998 and| | who will continue to own beneficially as of the Expiration Date, an | | aggregate of fewer than 100 Shares. | | | | The undersigned either (check one): | | | | |_| was the beneficial owner as of the close of business on April 8, 1998 | | and will continue to be the beneficial owner as of the Expiration Date,| | of an aggregate of fewer than 100 Shares, all of which are being | | tendered; or | | | | |_| is a broker, dealer, commercial bank, trust company or other nominee | | which: | | | | (a) is tendering, for beneficial owners, Shares with respect to | | which it is the registered holder; and | | | | (b) believes, based upon representations made to it by such | | beneficial owners, that each such person was the beneficial | | owner as of the close of business on April 8, 1998 and each | | such person would continue to be the beneficial owner as of | | the Expiration Date, of an aggregate of fewer than 100 | | Shares and is tendering all of such Shares. | |============================================================================= | |---------------------------------------------------------------------------- | | PRICE (IN DOLLARS) PER SHARE AT | | WHICH SHARES ARE BEING TENDERED | | | | IF SHARES ARE BEING TENDERED AT MORE | | THAN ONE PRICE, USE A SEPARATE | | LETTER OF TRANSMITTAL FOR EACH PRICE SPECIFIED. | | | | | | CHECK ONLY ONE BOX. | | IF MORE THAN ONE BOX IS CHECKED, OR IF | | NOBOX IS CHECKED (EXCEPT AS OTHERWISE PROVIDED HEREIN), THERE | | IS NO VALID TENDER OF SHARES. | |-----------------------------------------------------------------------------| | |_| $ 19.500 |_| $ 20.250 |_| $21.000 | | |_| 19.625 |_| 20.375 |_| 21.125 | | |_| 19.750 |_| 20.500 |_| 21.250 | | |_| 19.875 |_| 20.625 |_| 21.375 | | |_| 20.000 |_| 20.750 |_| 21.500 | | |_| 20.125 |_| 20.875 | | | | | |---------------------------------------------------------------------------- | |------------------------------------------------------------------------------| |Certificate Nos. (if available): | | | | --------------------------------------------------------------------------- | | | | --------------------------------------------------------------------------- | | | |Name(s): | | | | --------------------------------------------------------------------------- | | | | --------------------------------------------------------------------------- | | Please type or print | | | |Address(es): | | ----------------------------------------------------------------- | | | | ---------------------------------------------------------------------------- | | | | ---------------------------------------------------------------------------- | | Zip Code | | | |Area Code and | |Telephone Number: | | -------------------------------------------------------------| |------------------------------------------------------------------------------| |----------------------------------------------------------------------------| | SIGN HERE | | | | | | | | | | | |Dated: , 1998 | | | |If Shares will be tendered by book-entry transfer, check box of applicable | |Book-Entry Facility: | | | ||_| The Depository Trust Company | | | ||_| Philadelphia Depository Trust Company | | | |Account Number: | | | | | | | | | |----------------------------------------------------------------------------| 3 GUARANTEE The undersigned is (1) a member firm of a registered securities exchange; (2) a member of the National Association of Securities Dealers, Inc.; or (3) a commercial bank or trust company having an office, branch or agency in the United States, and represents that: (a) the above-named person(s) has a "net long position" in Shares or "equivalent securities" at least equal to the Shares tendered within the meaning of Rule 14e-4 promulgated under the Securities Exchange Act of 1934, as amended; and (b) such tender of Shares complies with such Rule 14e-4; and guarantees that the Depositary will receive certificates for the Shares tendered hereby in proper form for transfer, or Shares will be tendered pursuant to the procedure for book-entry transfer at The Depository Trust Company or Philadelphia Depository Trust Company, in any case, together with a properly completed and duly executed Letter of Transmittal and any other documents required by the Letter of Transmittal (or a manually signed facsimile of them), all within three over-the-counter trading days after the day the Depositary receives this Notice. |==============================================================================| |Name of Firm: Address: | | ------------------------------- -----------------------| | | |-------------------------------------------- -------------------------------| | Authorized Signature | | -------------------------------| | | | -------------------------------| |Name: Zip Code | | --------------------------------------- | | Please Print | | Area Code and | | Telephone Number: | | --------------| |Title: Dated: , 1998 | | -------------------------------------- ------------------ | | | | | |==============================================================================| 4 EX-99.(A)(6) 7 LETTER TO STOCKHOLDERS [LETTERHEAD OF MISSISSIPPI VIEW HOLDING COMPANY] April 13, 1998 To Our Stockholders: Mississippi View Holding Company (the "Company") is offering to purchase 222,000 shares (approximately 30% of its currently outstanding shares) of its common stock from its stockholders at a cash price not greater than $21.50 nor less than $19.50 per share. The Company is conducting the Offer through a procedure commonly referred to as a "Modified Dutch Auction." This procedure allows you to select the price within that price range at which you are willing to sell your shares to the Company. Based upon the number of shares tendered and the prices specified by the tendering stockholders, the Company will determine a single per share purchase price within that price range which will allow it to buy 222,000 shares (or such lesser number of shares as are validly tendered and not withdrawn at prices not greater than $21.50 nor less than $19.50 per share) (the "Purchase Price"). Subject to possible proration in the event more than 222,000 shares are tendered at or below the Purchase Price, all of the shares that are validly tendered at prices at or below that Purchase Price (and are not withdrawn) will be purchased at that same Purchase Price, net to the selling stockholder in cash. Since the Company is purchasing stock directly from its stockholders, there are no brokerage commissions. All other shares which have been tendered and not purchased will be returned to the stockholder. For those stockholders who own an aggregate of fewer than 100 shares, the Offer may represent an opportunity to sell all of their shares without having to pay brokerage commissions. The Offer, proration period and withdrawal rights expire at 5:00 p.m., Eastern time, on Monday, May 11, 1998, unless the Offer is extended. Neither the Company nor its Board of Directors makes any recommendation to any stockholder as to whether to tender or refrain from tendering shares. You must make your own decision whether to tender shares and, if so, how many shares to tender and at which price or prices. This Offer is explained in detail in the enclosed Offer to Purchase and Letter of Transmittal. If you want to tender your shares, the instructions on how to tender shares are also explained in detail in the enclosed materials. I encourage you to read these materials carefully before making any decision with respect to the Offer. Very truly yours, /s/ Thomas J. Leiferman Thomas J. Leiferman President EX-99.(A)(7) 8 PRESS RELEASE contact: Thomas J. Leiferman, President and CEO Phone: (320) 632-5461 For immediate release April 13, 1998 Mississippi View Holding Company Announces Share Repurchase Of Up To 222,000 Shares Little Falls, Minnesota, April 13, 1998 -- Mississippi View Holding Company (formally traded on Nasdaq SmallCap Market under the symbol "MIVI"), the holding company of Community Federal Savings and Loan Association of Little Falls (the "Association") commenced a "Modified Dutch Auction" self-tender offer on April 13, 1998 for up to 222,000 common shares, or approximately 30 percent, of its 736,864 common shares currently outstanding. The offer will allow common shareholders to specify prices at which they are willing to tender their shares at a price not greater than $21.50 and not less than $19.50 per share. After receiving tenders, the Company will select a single per share price which will allow it to buy up to 222,000 shares. All shares purchased will be purchased at the company-selected price for cash, even if tendered at a lower price. If more than the maximum number of shares sought is tendered at or below the company-selected price, tendering shareholders owning fewer than 100 shares will have their shares purchased without pro- ration. Other shares will be purchased pro rata. The offer is conditioned upon, among other things, the Company obtaining the funds necessary to consummate the offer and to pay all related fees and expenses. The offer is not conditioned on a minimum number of shares being tendered. In connection with the offer, the Company has established the Mississippi View Holding Company Stock Employee Compensation Trust (the "Trust") and has agreed to sell approximately $1.2 million of common shares (based on the company-selected price in the offer) to the Trust. The Trust will use such shares to fund contributions to Company employee benefit plans the benefits of which are paid in stock of the Company. Assuming the purchase of 222,000 shares pursuant to the offer and the sale of shares to the Trust, executive officers, directors, Company compensation plans and the Trust will own approximately 49.5% of the Company's outstanding shares after completion of the offer. The tender offer, proration period and withdrawal rights will expire at 5:00 p.m. on Monday, May 11, 1998, unless extended. On March 31, 1998, the last full trading day in the over-the-counter market on which a sale was reported prior to the commencement of the offer, the closing per share sales price of the Company's common stock was $18.50. MacKenzie Partners, Inc., New York, New York will act as the information agent for the offer. Shareholders will, in general, be able to tender their shares free of all brokerage commissions and stock transfer taxes, if any, which will be paid by the Company. Each shareholder is urged to consult his tax advisor as to the particular tax consequences of the tender offer to such shareholder. The full details of the offer, including complete instructions on the tender process procedure along with the transmittal forms and other data is being mailed to shareholders commencing April 13, 1998. NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO ANY SHAREHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING ANY OR ALL OF SUCH SHAREHOLDER'S SHARES IN THE OFFER AND HAS NOT AUTHORIZED ANY PERSON TO MAKE ANY SUCH RECOMMENDATION. This announcement is neither an offer to purchase nor a solicitation of an offer to sell shares of Mississippi View Holding Company common stock. The offer is made solely by the Offer to Purchase, dated April 13, 1998, and the related Letter of Transmittal. # # # # # # # # # # # # # # # # # 2 EX-99.(A)(8) 9 ESOP LETTER [Community Federal Savings and Loan Association of Little Falls Letterhead] IMMEDIATE ATTENTION REQUIRED April 13, 1998 RE: DIRECTION CONCERNING TENDER OF SHARES DEAR ESOP PARTICIPANT: Enclosed are materials that require your immediate attention. They describe matters directly affecting your participant account in the Community Federal Savings and Loan Association of Little Falls Employee Stock Ownership Plan (the "ESOP"). Read all the materials carefully. You will need to complete the enclosed Direction Form and return it in the postage paid envelope provided. THE DEADLINE FOR RECEIPT OF YOUR COMPLETED DIRECTION FORM IS 5:00 P.M., EASTERN TIME, FRIDAY, MAY 8, 1998 (UNLESS EXTENDED). YOU SHOULD COMPLETE THE FORM AND RETURN IT EVEN IF YOU DECIDE NOT TO PARTICIPATE IN THE TRANSACTION DESCRIBED IN THE MATERIALS. The remainder of this letter summarizes the transaction and your rights and alternatives under the ESOP, but you also should review the more detailed explanation provided in the other materials. BACKGROUND Mississippi View Holding Company (the "Company"), the parent corporation of Community Federal Savings and Loan Association of Little Falls, has made a tender offer (the "Offer') to purchase up to 222,000 shares of its common stock. The objectives of the purchase, and financial and other information relating to the Offer, are described in detail in the enclosed Offer to Purchase, which is being provided to all shareholders of the Company. As a participant in the ESOP, you are directly affected, because the Company's Offer to Purchase extends to the approximately 80,639 shares of the Company's stock currently held by the ESOP. Only the Trustee of the ESOP can tender the shares of common stock held by the ESOP. However, as an ESOP participant, you may direct the Trustee whether or not to tender the shares that are allocated to your ESOP Account. If you elect to have the Trustee tender these shares, you also are entitled to specify the price or prices at which they should be tendered. To assure the confidentiality of your decision, the Company has retained MacKenzie Partners, Inc. to tabulate the directions of ESOP participants. You will note from the enclosed envelope that your Direction Form is to be returned to MacKenzie Partners, Inc. The Trustee will decide whether to tender or hold shares of the ESOP that currently have not been allocated to participants' ESOP Accounts. The Trustee will also decide the disposition of shares that are allocated to Accounts of participants who fail to return a timely or properly completed Direction Form. The Trustee will determine whether the implementation of any participant directions or adherence to any ESOP provisions would be contrary to its fiduciary duties in accordance with the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). As the fiduciary to the ESOP, the Trustee will make the final determination as to whether participants' directions will be followed taking into account the ESOP's purpose and the interest of all participants. Although it is not anticipated that any participant direction will violate ERISA, such that the direction would have to be reversed or disregarded, the United States Department of Labor requires that the Trustee, as the fiduciary for ESOP participants, retain this discretion. HOW THE OFFER WORKS The details of the Offer are described in the enclosed materials, which you should review carefully. However, in broad outline, the Offer will work as follows with respect to ESOP participants. - The Company has offered to purchase up to 222,000 shares of its common stock at a price between $19.50 and $21.50 per share. - If you want any of the shares that are allocated to your ESOP Account sold, you need to direct that they be offered (or "tendered") for sale. - You also need to specify the price at which you want the shares tendered. That price must be between the two limits above. - After the deadline for the tender of shares by all shareholders, including the ESOP, Registrar and Transfer Company will tabulate all tenders, and the Company will determine the price, between the two limits, that it will pay for shares validly tendered pursuant to the Offer (the "Purchase Price"). - All shares validly tendered at prices at or below the Purchase Price and not withdrawn will be purchased at the Purchase Price, upon the terms and subject to the conditions of the Offer, including the proration provisions. 2 - If you tender any shares at a price in excess of the Purchase Price as finally determined, those shares will not be purchased by the Company, and they will remain allocated to your ESOP Account. This form of transaction is commonly called a "Dutch Auction" and requires some strategy on your part. For example, if you determine that it is advisable that your ESOP plan assets be sold at this time, you may want to tender your shares at a price at or near the lower limit. If you are not sure whether or not you want to participate, but would be willing to sell at a price above the lower limit, then you may want to specify a higher price, not to exceed the upper limit. If you do not want to sell shares allocated to your ESOP Account at this time under any circumstances, an option is provided for you to direct that shares allocated to your ESOP Account be held. The Trustee may override any direction that it determines is contrary to its fiduciary duties under ERISA, as previously described. In particular, the Company will be prohibited from purchasing shares from the ESOP if the Purchase Price, as finally determined, is less than the fair market price of the shares on the date the shares are accepted for purchase. Finally, the Company will prorate the number of shares purchased from shareholders if there is an excess of shares tendered over the exact number desired at the Purchase Price as ultimately determined. PROCEDURE FOR DIRECTING TRUSTEE A Direction Form for making your direction is enclosed. You must complete this form and return it in the included envelope in time to be received no later than 5:00 p.m., Eastern time, on Friday, May 8, 1998 (unless the Offer is extended or amended). If your form is not received by this deadline, or if it is not fully and properly completed, the shares in your ESOP Account will be tendered or held as decided by the Trustee. To properly complete your Direction Form, you must do the following: (1) On the face of the form, check Box 1 or 2. CHECK ONLY ONE BOX. Make your decision which box to check as follows: - CHECK BOX 1 if you do not want the shares presently allocated to your ESOP Account tendered for sale at any price and simply want the Trustee to continue holding such shares allocated to your Account. - CHECK BOX 2 in all other cases and complete lines A to E of the table immediately below Box 2. (You should not complete the table if you checked Box 1). Use lines A, B and C to specify the number of shares that you want to tender at each price indicated. Typically, you would elect to have all of your shares tendered at a single 3 price; however, the form gives you the option of splitting your shares among several prices. You must state the number of shares to be sold at each indicated price by filling in the number of shares in the box immediately below the price. After you have specified your tender price or prices, you should total the number of shares in each row A, B and C and insert the total of each line in the box provided at the end of that line. Specify the number of shares, if any, that you do not want tendered, but wish the Trustee to hold, in the single box on line D. Finally, total the shares in the end boxes of rows A to D and insert the total in the box on line E. The total in this box must equal the number of shares allocated to your ESOP Account as shown on the address label on the reverse side of the Direction Form. (2) Turn the Direction Form over, and date and sign it in the spaces provided. (3) Return the Direction Form in the included postage prepaid envelope no later than 5:00 p.m., Eastern time, on Friday, May 8, 1998 (unless this deadline is extended). Be sure to return the form even if you decide not to have the Trustee tender any shares. Your direction will be deemed irrevocable unless withdrawn by 5:00 p.m., Eastern time, on Friday, May 8, 1998 (unless the Offer is extended or amended). To be effective, a notice of withdrawal of your direction must be in writing and must be received by MacKenzie Partners, Inc. at the following address: MacKenzie Partners, Inc. 156 Fifth Avenue New York, New York 10010 Facsimile Transmission (212) 929-0308 4 Your notice of withdrawal must include your name, address, Social Security number, and the number of shares allocated to your ESOP Account. Upon receipt of your notice of withdrawal by MacKenzie Partners, Inc., your previous direction will be deemed canceled. You may direct the re-tendering of any shares in your Account by repeating the previous instructions for directing the tendering set forth in this letter. INVESTMENT OF TENDER PROCEEDS For any ESOP shares that are tendered and purchased by the Company, the Company will pay cash to the ESOP. The Trustee then will determine whether to reinvest in shares of the Company's stock or in alternative investments, being guided by the ESOP's terms and the trust agreement, and subject to the limitations of ERISA. At present, it is anticipated that the cash proceeds for any stock purchased in the Offer will be allocated to your ESOP Account and invested in certificates of deposit at Community Federal Savings and Loan Association of Little Falls. Please be advised that to the extent that common stock is tendered and converted to cash, you will no longer be eligible to receive cash dividends paid on such ESOP shares sold and you will not participate in any appreciation or depreciation in the future market value of the common stock sold. Future allocations of common stock may be made to your participant Account in accordance with the terms of the ESOP. Individual participants in the ESOP will not receive any portion of the tender proceeds at this time. All such proceeds and the assets will remain in the ESOP and may be withdrawn only in accordance with the ESOP's terms. No gain or loss will be recognized by the ESOP or participants in the ESOP for federal income tax purposes in connection with the tender or sale of shares held in the ESOP. NO RECOMMENDATION THE COMPANY'S BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MAKING OF THE OFFER. HOWEVER, NEITHER THE COMPANY, ITS BOARD OF DIRECTORS, THE TRUSTEE, THE ESOP COMMITTEE, OR ANY OTHER PARTY MAKES ANY RECOMMENDATION TO PARTICIPANTS AS TO WHETHER TO TENDER SHARES, THE PRICE AT WHICH TO TENDER, OR WHETHER TO REFRAIN FROM TENDERING SHARES. EACH PARTICIPANT MUST MAKE HIS OR HER OWN DECISION WHETHER TO TENDER ALL, A PORTION OR NO SHARES AND AT WHAT PRICE, IF ANY. 5 CONFIDENTIALITY AS MENTIONED ABOVE, MACKENZIE PARTNERS, INC. HAS BEEN RETAINED TO HELP ASSURE THE CONFIDENTIALITY OF YOUR DECISION AS AN ESOP PARTICIPANT. YOUR DECISION WILL NOT BE DISCLOSED TO ANY DIRECTORS, OFFICERS, OR EMPLOYEES OF MISSISSIPPI VIEW HOLDING COMPANY OR COMMUNITY FEDERAL SAVINGS AND LOAN ASSOCIATION OF LITTLE FALLS, EXCEPT FOR THE PURPOSE OF ALLOCATING PROCEEDS TO YOUR ESOP ACCOUNT IN THE EVENT THAT ALL OR A PORTION OF YOUR SHARES ARE SOLD. FURTHER INFORMATION Although MacKenzie Partners, Inc. also has no recommendation and cannot advise you what to do, its representatives are prepared to answer any question that you may have on the procedures involved in the Dutch Auction and your direction. MacKenzie Partners, Inc. can also help you complete your Direction Form. For this purpose, you may contact MacKenzie Partners, Inc. at the following toll-free number: MacKenzie Partners, Inc. (800) 322-2885 Please consider this letter and the enclosed materials carefully and then return your Direction Form promptly. Sincerely, Trustees for the Community Federal Savings and Loan Association of Little Falls Employee Stock Ownership Plan 6 COMMUNITY FEDERAL SAVINGS AND LOAN ASSOCIATION OF LITTLE FALLS EMPLOYEE STOCK OWNERSHIP PLAN DIRECTION FORM BEFORE COMPLETING THIS FORM, PLEASE READ CAREFULLY THE ACCOMPANYING OFFER TO PURCHASE See the Address Label on Reverse Side of This Form for the Number of Shares Allocated to Your Plan Account In accordance with the Mississippi View Holding Company (the "Company") Offer to Purchase dated April 13, 1998, a copy of which I have received and read, I hereby direct the Plan's Trustee as follows (check only one box): |_| 1. To refrain from tendering and to hold all shares allocated to my Account. |_| 2. To tender shares allocated to my Account at the price or prices indicated below, except for any shares to be held as indicated on line D below:
- ----------------------------------------------------------------------------------------------------------------------------------- Price $19.500 $19.625 $19.750 $19.875 $20.000 $20.125 $20.250 $20.375 Total - ----------------------------------------------------------------------------------------------------------------------------------- A Number Of Shares - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- Price $20.500 $20.625 $20.750 $20.875 $21.000 $21.125 $21.250 $21.375 Total - ----------------------------------------------------------------------------------------------------------------------------------- B Number Of Shares - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- Price $21.500 Total - ----------------------------------------------------------------------------------------------------------------------------------- C Number Of Shares - ----------------------------------------------------------------------------------------------------------------------------------- Total - ----------------------------------------------------------------------------------------------------------------------------------- D Shares To Be Held - ----------------------------------------------------------------------------------------------------------------------------------- Total - ----------------------------------------------------------------------------------------------------------------------------------- E Total Shares - -----------------------------------------------------------------------------------------------------------------------------------
Total the number of shares in each of rows A, B and C and insert that total in the box at the end of each row. Show shares to be held in the box at the end of row D. Total the numbers in the end boxes of rows A to D and insert that total number in the end box of row E. The total in the box of row E must equal the number of shares allocated to your Account as shown on the address label on the reverse side of this form. INSTRUCTIONS Carefully complete the face portion of this Direction Form. Then insert today's date and sign your name in the spaces provided below. Enclose the form in the included postage prepaid envelope and mail it promptly. Your Direction Form must be received no later than 5:00 p.m., Eastern time, on Friday, May 8, 1998. Direction Forms that are not fully or properly completed, dated and signed, or that are received after the deadline, will not be processed, and the shares allocated to your Account will be held or tendered, and if tendered, at a price, as determined by the Trustee. Note that the Trustee also has the right to disregard any direction that it determines cannot be implemented without violation of applicable law. Neither the Company, its Board of Directors, the Trustee, the Committee, nor any other party makes any recommendation to participants as to whether to tender shares, the price at which to tender, or to refrain from tendering shares. Each participant must make his or her own decision on these matters. Date: __________, 1998 _________________________________ Your Signature EX-99.(A)(9) 10 PROFIT SHARING PLAN LETTER [Community Federal Savings and Loan Association of Little Falls Letterhead] IMMEDIATE ATTENTION REQUIRED April 13, 1998 RE: DIRECTION CONCERNING TENDER OF SHARES DEAR PROFIT SHARING PLAN PARTICIPANT: Enclosed are materials that require your immediate attention. They describe matters directly affecting your participant account in the Community Federal Savings and Loan Association of Little Falls Profit Sharing Plan (the "Plan"). Read all the materials carefully. You will need to complete the enclosed Direction Form and return it in the postage paid envelope provided. THE DEADLINE FOR RECEIPT OF YOUR COMPLETED DIRECTION FORM IS 5:00 P.M., EASTERN TIME, FRIDAY, MAY 8, 1998 (UNLESS EXTENDED). YOU SHOULD COMPLETE THE FORM AND RETURN IT EVEN IF YOU DECIDE NOT TO PARTICIPATE IN THE TRANSACTION DESCRIBED IN THE MATERIALS. The remainder of this letter summarizes the transaction and your rights and alternatives under the Plan, but you also should review the more detailed explanation provided in the other materials. BACKGROUND Mississippi View Holding Company (the "Company"), the parent corporation of Community Federal Savings and Loan Association of Little Falls, has made a tender offer (the "Offer") to purchase up to 222,000 shares of its common stock. The objectives of the purchase, and financial and other information relating to the offer, are described in detail in the enclosed Offer to Purchase, which is being provided to all shareholders of the Company. As a participant in the Plan, you are directly affected, because the Company's Offer to Purchase extends to the shares of the Company's stock held by the Plan. Only the Trustee of the Plan can tender the shares of common stock held by the Plan. However, as a Plan participant, you may direct the Trustee whether or not to tender the shares that are allocated to your Plan Account. If you elect to have the Trustee tender these shares, you also are entitled to specify the price or prices at which they should be tendered. To assure the confidentiality of your decision, the Company has retained MacKenzie Partners, Inc. to tabulate the directions of Plan participants. You will note from the enclosed envelope that your Direction Form is to be returned to MacKenzie Partners, Inc. The Trustee will decide the disposition of shares that are allocated to Accounts of participants who fail to return a timely or properly completed Direction Form. The Trustee will determine whether the implementation of any participant directions or adherence to any Plan provisions would be contrary to its fiduciary duties in accordance with the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). As the fiduciary to the Plan, the Trustee will make the final determination as to whether participants' directions will be followed taking into account the Plan's purpose and the interest of all participants. Although it is not anticipated that any participant direction will violate ERISA, such that the direction would have to be reversed or disregarded, the United States Department of Labor requires that the Trustee, as the fiduciary for Plan participants, retain this discretion. HOW THE OFFER WORKS The details of the Offer are described in the enclosed materials, which you should review carefully. However, in broad outline, the Offer will work as follows with respect to Plan participants. - The Company has offered to purchase up to 222,000 shares of its common stock at a price between $19.50 and $21.50 per share. - If you want any of the shares that are allocated to your Plan Account sold, you need to direct that they be offered (or "tendered") for sale. - You also need to specify the price at which you want the shares tendered. That price must be between the two limits above. - After the deadline for the tender of shares by all shareholders, including the Plan, Registrar and Transfer Company will tabulate all tenders, and the Company will determine the price, between the two limits, that it will pay for shares validly tendered pursuant to the Offer (the "Purchase Price"). - All shares validly tendered at prices at or below the Purchase Price and not withdrawn will be purchased at the Purchase Price, upon the terms and subject to the conditions of the Offer, including the proration provisions. - If you tender any shares at a price in excess of the Purchase Price as finally determined, those shares will not be purchased by the Company, and they will remain allocated to your Plan Account. 2 This form of transaction is commonly called a "Dutch Auction" and requires some strategy on your part. For example, if you determine that it is advisable that your Plan assets be sold at this time, you may want to tender your shares at a price at or near the lower limit. If you are not sure whether or not you want to participate, but would be willing to sell at a price above the lower limit, then you may want to specify a higher price, not to exceed the upper limit. If you do not want to sell shares allocated to your Plan Account at this time under any circumstances, an option is provided for you to direct that shares allocated to your Plan Account be held. The Trustee may override any direction that it determines is contrary to its fiduciary duties under ERISA, as previously described. In particular, the Company will be prohibited from purchasing shares from the Plan if the Purchase Price, as finally determined, is less than the fair market price of the shares on the date the shares are accepted for purchase. Finally, the Company will prorate the number of shares purchased from shareholders if there is an excess of shares tendered over the exact number desired at the Purchase Price as ultimately determined. PROCEDURE FOR DIRECTING TRUSTEE A Direction Form for making your direction is enclosed. You must complete this form and return it in the included envelope in time to be received no later than 5:00 p.m., Eastern time, on Friday, May 8, 1998 (unless the Offer is extended or amended). If your form is not received by this deadline, or if it is not fully and properly completed, the shares in your Plan Account will be tendered or held as decided by the Trustee. To properly complete your Direction Form, you must do the following: (1) On the face of the form, check Box 1 or 2. CHECK ONLY ONE BOX. Make your decision which box to check as follows: - CHECK BOX 1 if you do not want the shares presently allocated to your Plan Account tendered for sale at any price and simply want the Trustee to continue holding such shares allocated to your Account. - CHECK BOX 2 in all other cases and complete lines A to E of the table immediately below Box 2. (You should not complete the table if you checked Box 1). Use lines A, B and C to specify the number of shares that you want to tender at each price indicated. Typically, you would elect to have all of your shares tendered at a single price; however, the form gives you the option of splitting your shares among several prices. You must state the number of shares to be sold at each indicated price by filling in the number of shares in the box immediately below the price. 3 After you have specified your tender price or prices, you should total the number of shares in each row A, B and C and insert the total of each line in the box provided at the end of that line. Specify the number of shares, if any, that you do not want tendered, but wish the Trustee to hold, in the single box on line D. Finally, total the shares in the end boxes of rows A to D and insert the total in the box on line E. The total in this box must equal the number of shares allocated to your Plan Account as shown on the address label on the reverse side of the Direction Form. (2) Turn the Direction Form over, and date and sign it in the spaces provided. (3) Return the Direction Form in the included postage prepaid envelope no later than 5:00 p.m., Eastern time, on Friday, May 8, 1998 (unless this deadline is extended). Be sure to return the form even if you decide not to have the Trustee tender any shares. Your direction will be deemed irrevocable unless withdrawn by 5:00 p.m., Eastern time, on Friday, May 8, 1998 (unless the Offer is extended or amended). To be effective, a notice of withdrawal of your direction must be in writing and must be received by MacKenzie Partners, Inc. at the following address: MacKenzie Partners, Inc. 156 Fifth Avenue New York, New York 10010 Facsimile Transmission (212) 929-0308 Your notice of withdrawal must include your name, address, Social Security number, and the number of shares allocated to your Plan Account. Upon receipt of your notice of withdrawal by MacKenzie Partners, Inc., your previous direction will be deemed canceled. You may direct the re-tendering of any shares in your Account by repeating the previous instructions for directing the tendering set forth in this letter. 4 INVESTMENT OF TENDER PROCEEDS For any Plan shares that are tendered and purchased by the Company, the Company will pay cash to the Plan. The Trustee then will determine whether to reinvest in shares of the Company's stock or in alternative investments, being guided by the Plan's terms and the trust agreement, and subject to the limitations of ERISA. At present, it is anticipated that the cash proceeds for any stock purchased in the Offer will be allocated to your Plan Account and invested in certificates of deposit at Community Federal Savings and Loan Association of Little Falls. Please be advised that to the extent that common stock is tendered and converted to cash, you will no longer be eligible to receive cash dividends paid on such Plan shares sold and you will not participate in any appreciation or depreciation in the future market value of the common stock sold. Future allocations of common stock may be made to your participant Account in accordance with the terms of the Plan. Individual participants in the Plan will not receive any portion of the tender proceeds at this time. All such proceeds and the assets will remain in the Plan and may be withdrawn only in accordance with the Plan's terms. No gain or loss will be recognized by the Plan or participants in the Plan for federal income tax purposes in connection with the tender or sale of shares held in the Plan. NO RECOMMENDATION THE COMPANY'S BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MAKING OF THE OFFER. HOWEVER, NEITHER THE COMPANY, ITS BOARD OF DIRECTORS, THE TRUSTEE, OR ANY OTHER PARTY MAKES ANY RECOMMENDATION TO PARTICIPANTS AS TO WHETHER TO TENDER SHARES, THE PRICE AT WHICH TO TENDER, OR WHETHER TO REFRAIN FROM TENDERING SHARES. EACH PARTICIPANT MUST MAKE HIS OR HER OWN DECISION WHETHER TO TENDER ALL, A PORTION OR NO SHARES AND AT WHAT PRICE, IF ANY. CONFIDENTIALITY AS MENTIONED ABOVE, MACKENZIE PARTNERS, INC. HAS BEEN RETAINED TO HELP ASSURE THE CONFIDENTIALITY OF YOUR DECISION AS A PLAN PARTICIPANT. YOUR DECISION WILL NOT BE DISCLOSED TO ANY DIRECTORS, OFFICERS, OR EMPLOYEES OF MISSISSIPPI VIEW HOLDING COMPANY OR COMMUNITY FEDERAL SAVINGS AND LOAN ASSOCIATION OF LITTLE FALLS, EXCEPT FOR THE PURPOSE OF ALLOCATING PROCEEDS TO YOUR PLAN ACCOUNT IN THE EVENT THAT ALL OR A PORTION OF YOUR SHARES ARE SOLD. 5 FURTHER INFORMATION Although MacKenzie Partners, Inc. also has no recommendation and cannot advise you what to do, its representatives are prepared to answer any question that you may have on the procedures involved in the Dutch Auction and your direction. MacKenzie Partners, Inc. can also help you complete your Direction Form. For this purpose, you may contact MacKenzie Partners, Inc. at the following toll-free number: MacKenzie Partners, Inc. (800) 322-2885 Please consider this letter and the enclosed materials carefully and then return your Direction Form promptly. Sincerely, Trustees for the Community Federal Savings and Loan Association of Little Falls Profit Sharing Plan 6 COMMUNITY FEDERAL SAVINGS AND LOAN ASSOCIATION OF LITTLE FALLS PROFIT SHARING PLAN DIRECTION FORM BEFORE COMPLETING THIS FORM, PLEASE READ CAREFULLY THE ACCOMPANYING OFFER TO PURCHASE See the Address Label on Reverse Side of This Form for the Number of Shares Allocated to Your Plan Account In accordance with the Mississippi View Holding Company (the "Company") Offer to Purchase dated April 13, 1998, a copy of which I have received and read, I hereby direct the Plan's Trustee as follows (check only one box): |_| 1. To refrain from tendering and to hold all shares allocated to my Account. |_| 2. To tender shares allocated to my Account at the price or prices indicated below, except for any shares to be held as indicated on line D below:
- ----------------------------------------------------------------------------------------------------------------------------------- Price $19.500 $19.625 $19.750 $19.875 $20.000 $20.125 $20.250 $20.375 Total - ----------------------------------------------------------------------------------------------------------------------------------- A Number Of Shares - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- Price $20.500 $20.625 $20.750 $20.875 $21.000 $21.125 $21.250 $21.375 Total - ----------------------------------------------------------------------------------------------------------------------------------- B Number Of Shares - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- Price $21.500 Total - ----------------------------------------------------------------------------------------------------------------------------------- Number Of Shares - ----------------------------------------------------------------------------------------------------------------------------------- Total - ----------------------------------------------------------------------------------------------------------------------------------- D Shares To Be Held - ----------------------------------------------------------------------------------------------------------------------------------- Total - ----------------------------------------------------------------------------------------------------------------------------------- E Total Shares - -----------------------------------------------------------------------------------------------------------------------------------
Total the number of shares in each of rows A, B and C and insert that total in the box at the end of each row. Show shares to be held in the box at the end of row D. Total the numbers in the end boxes of rows A to D and insert that total number in the end box of row E. The total in the box of row E must equal the number of shares allocated to your Account as shown on the address label on the reverse side of this form. INSTRUCTIONS Carefully complete the face portion of this Direction Form. Then insert today's date and sign your name in the spaces provided below. Enclose the form in the included postage prepaid envelope and mail it promptly. Your Direction Form must be received no later than 5:00 p.m., Eastern time, on Friday, May 8, 1998. Direction Forms that are not fully or properly completed, dated and signed, or that are received after the deadline, will not be processed, and the shares allocated to your Account will be held or tendered, and if tendered, at a price, as determined by the Trustee. Note that the Trustee also has the right to disregard any direction that it determines cannot be implemented without violation of applicable law. Neither the Company, its Board of Directors, the Trustee, nor any other party makes any recommendation to participants as to whether to tender shares, the price at which to tender, or to refrain from tendering shares. Each participant must make his or her own decision on these matters. Date: __________, 1998 ____________________ Your Signature EX-99.(A)(10) 11 MANAGEMENT STOCK BONUS PLAN LETTER [Community Federal Savings and Loan Association of Little Falls Letterhead] IMMEDIATE ATTENTION REQUIRED April 13, 1998 RE: DIRECTION CONCERNING TENDER OF SHARES DEAR MANAGEMENT STOCK BONUS PLAN PARTICIPANT: Enclosed are materials that require your immediate attention. They describe matters directly affecting your participant account in the Community Federal Savings and Loan Association of Little Falls Management Stock Bonus Plan (the "Plan"). Read all the materials carefully. You will need to complete the enclosed Direction Form and return it in the postage paid envelope provided. THE DEADLINE FOR RECEIPT OF YOUR COMPLETED DIRECTION FORM IS 5:00 P.M., EASTERN TIME, FRIDAY, MAY 8, 1998 (UNLESS EXTENDED). YOU SHOULD COMPLETE THE FORM AND RETURN IT EVEN IF YOU DECIDE NOT TO PARTICIPATE IN THE TRANSACTION DESCRIBED IN THE MATERIALS. The remainder of this letter summarizes the transaction and your rights and alternatives under the Plan, but you also should review the more detailed explanation provided in the other materials. BACKGROUND Mississippi View Holding Company (the "Company"), the parent corporation of Community Federal Savings and Loan Association of Little Falls has made a tender offer (the "Offer") to purchase up to 222,000 shares of its common stock. The objectives of the purchase, and financial and other information relating to the offer, are described in detail in the enclosed Offer to Purchase, which is being provided to all shareholders of the Company. As a participant in the Plan, you are directly affected, because the Company's Offer to Purchase extends to the approximately 28,629 shares of the Company's stock currently held by the Plan. Only the Trustee of the Plan can tender the shares of common stock held by the Plan. However, as a Plan participant, you may direct the Trustee whether or not to tender the shares that are allocated to your Plan Account. If you elect to have the Trustee tender these shares, you also are entitled to specify the price or prices at which they should be tendered. Please note however, whether or not you elect to tender Shares, upon vesting of awards under the Plan, you will receive common stock, not cash. To assure the confidentiality of your decision, the Company has retained MacKenzie Partners, Inc. to tabulate the directions of Plan participants. You will note from the enclosed envelope that your Direction Form is to be returned to MacKenzie Partners, Inc. The Trustee will decide whether to tender or hold shares of the Plan that currently have not been allocated to participants' Plan Accounts. The Trustee will also decide the disposition of shares that are allocated to Accounts of participants who fail to return a timely or properly completed Direction Form. The Trustee will determine whether the implementation of any participant directions or adherence to any Plan provisions would be contrary to its fiduciary duties in accordance with the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). As the fiduciary to the Plan, the Trustee will make the final determination as to whether participants' directions will be followed taking into account the Plan's purpose and the interest of all participants. Although it is not anticipated that any participant direction will violate ERISA, such that the direction would have to be reversed or disregarded, the United States Department of Labor requires that the Trustee, as the fiduciary for Plan participants, retain this discretion. HOW THE OFFER WORKS The details of the Offer are described in the enclosed materials, which you should review carefully. However, in broad outline, the Offer will work as follows with respect to Plan participants. - The Company has offered to purchase up to 222,000 shares of its common stock at a price between $19.50 and $21.50 per share. - If you want any of the shares that are allocated to your Plan Account sold, you need to direct that they be offered (or "tendered") for sale. - You also need to specify the price at which you want the shares tendered. That price must be between the two limits above. - After the deadline for the tender of shares by all shareholders, including the Plan, Registrar and Transfer Company will tabulate all tenders, and the Company will determine the price, between the two limits, that it will pay for shares validly tendered pursuant to the Offer (the "Purchase Price"). 2 - If you tender any shares at a price in excess of the Purchase Price as finally determined, those shares will not be purchased by the Company, and they will remain allocated to your Plan Account. The Trustee may override any direction that it determines is contrary to its fiduciary duties under ERISA, as previously described. In particular, the Company will be prohibited from purchasing shares from the Plan if the Purchase Price, as finally determined, is less than the fair market price of the shares on the date the shares are accepted for purchase. Finally, the Company will prorate the number of shares purchased from shareholders if there is an excess of shares tendered over the exact number desired at the Purchase Price as ultimately determined. PROCEDURE FOR DIRECTING TRUSTEE A Direction Form for making your direction is enclosed. You must complete this form and return it in the included envelope in time to be received no later than 5:00 p.m., Eastern time, on Friday, May 8, 1998 (unless the Offer is extended or amended). If your form is not received by this deadline, or if it is not fully and properly completed, the shares in your Plan Account will be tendered or held as decided by the Trustee. To properly complete your Direction Form, you must do the following: (1) On the face of the form, check Box 1 or 2. CHECK ONLY ONE BOX. Make your decision which box to check as follows: - CHECK BOX 1 if you do not want the shares presently allocated to your Plan Account tendered for sale at any price and simply want the Trustee to continue holding such shares allocated to your Account. - CHECK BOX 2 in all other cases and complete lines A to E of the table immediately below Box 2. (You should not complete the table if you checked Box 1). Use lines A, B and C to specify the number of shares that you want to tender at each price indicated. Typically, you would elect to have all of your shares tendered at a single price; however, the form gives you the option of splitting your shares among several prices. You must state the number of shares to be sold at each indicated price by filling in the number of shares in the box immediately below the price. 3 After you have specified your tender price or prices, you should total the number of shares in each row A, B and C and insert the total of each line in the box provided at the end of that line. Specify the number of shares, if any, that you do not want tendered, but wish the Trustee to hold, in the single box on line D. Finally, total the shares in the end boxes of rows A to D and insert the total in the box on line E. The total in this box must equal the number of shares allocated to your Plan Account as shown on the address label on the reverse side of the Direction Form. (2) Turn the Direction Form over, and date and sign it in the spaces provided. (3) Return the Direction Form in the included postage prepaid envelope no later than 5:00 p.m., Eastern time, on Friday, May 8, 1998 (unless this deadline is extended). Be sure to return the form even if you decide not to have the Trustee tender any shares. Your direction will be deemed irrevocable unless withdrawn by 5:00 p.m., Eastern time, on Friday, May 8, 1998 (unless the Offer is extended or amended). To be effective, a notice of withdrawal of your direction must be in writing and must be received by MacKenzie Partners, Inc. at the following address: MacKenzie Partners, Inc. 156 Fifth Avenue New York, New York 10010 Facsimile Transmission (212) 929-0308 Your notice of withdrawal must include your name, address, Social Security number, and the number of shares allocated to your Plan Account. Upon receipt of your notice of withdrawal by MacKenzie Partners, Inc., your previous direction will be deemed canceled. You may direct the re-tendering of any shares in your Account by repeating the previous instructions for directing the tendering set forth in this letter. INVESTMENT OF TENDER PROCEEDS For any Plan shares that are tendered and purchased by the Company, the Company will pay cash to the Plan. The Trustee then will determine whether to reinvest in shares of the Company's stock or in alternative investments, being guided by the Plan's terms and the trust agreement, and subject to the limitations of ERISA. It is currently anticipated that the Trustee 4 will use any cash proceeds to repurchase shares of Company common stock. Please be advised that directing the Trustee to tender shares will not affect the number of shares previously allocated to you or the vesting schedule of such shares. Any cash proceeds received from the tender of shares by the Plan will be retained by the trust, and not allocated to the accounts of participants. NO RECOMMENDATION THE COMPANY'S BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MAKING OF THE OFFER. HOWEVER, NEITHER THE COMPANY, ITS BOARD OF DIRECTORS, THE TRUSTEE, OR ANY OTHER PARTY MAKES ANY RECOMMENDATION TO PARTICIPANTS AS TO WHETHER TO TENDER SHARES, THE PRICE AT WHICH TO TENDER, OR WHETHER TO REFRAIN FROM TENDERING SHARES. EACH PARTICIPANT MUST MAKE HIS OR HER OWN DECISION WHETHER TO TENDER ALL, A PORTION OR NO SHARES AND AT WHAT PRICE, IF ANY. CONFIDENTIALITY AS MENTIONED ABOVE, MACKENZIE PARTNERS, INC. HAS BEEN RETAINED TO HELP ASSURE THE CONFIDENTIALITY OF YOUR DECISION AS A PLAN PARTICIPANT. YOUR DECISION WILL NOT BE DISCLOSED TO ANY DIRECTORS, OFFICERS, OR EMPLOYEES OF MISSISSIPPI VIEW HOLDING COMPANY OR COMMUNITY FEDERAL SAVINGS AND LOAN ASSOCIATION OF LITTLE FALLS. 5 FURTHER INFORMATION Although MacKenzie Partners, Inc. also has no recommendation and cannot advise you what to do, its representatives are prepared to answer any question that you may have on the procedures involved in the Dutch Auction and your direction. MacKenzie Partners, Inc. can also help you complete your Direction Form. For this purpose, you may contact MacKenzie Partners, Inc. at the following toll-free number: MacKenzie Partners, Inc. (800) 322-2885 Please consider this letter and the enclosed materials carefully and then return your Direction Form promptly. Sincerely, Trustees for the Community Federal Savings and Loan Association of Little Falls Management Stock Bonus Plan 6 COMMUNITY FEDERAL SAVINGS AND LOAN ASSOCIATION OF LITTLE FALLS MANAGEMENT STOCK BONUS PLAN DIRECTION FORM BEFORE COMPLETING THIS FORM, PLEASE READ CAREFULLY THE ACCOMPANYING OFFER TO PURCHASE See the Address Label on Reverse Side of This Form for the Number of Shares Allocated to Your Plan Account In accordance with the Mississippi View Holding Company (the "Company") Offer to Purchase dated April 13, 1998, a copy of which I have received and read, I hereby direct the Plan's Trustee as follows (check only one box): |_| 1. To refrain from tendering and to hold all shares allocated to my Account. |_| 2. To tender shares allocated to my Account at the price or prices indicated below, except for any shares to be held as indicated on line D below:
- ----------------------------------------------------------------------------------------------------------------------------------- Price $19.500 $19.625 $19.750 $19.875 $20.000 $20.125 $20.250 $20.375 Total - ----------------------------------------------------------------------------------------------------------------------------------- A Number Of Shares - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- Price $20.500 $20.625 $20.750 $20.875 $21.000 $21.125 $21.250 $21.375 Total - ----------------------------------------------------------------------------------------------------------------------------------- B Number Of Shares - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- Price $21.500 Total - ----------------------------------------------------------------------------------------------------------------------------------- C Number Of Shares - ----------------------------------------------------------------------------------------------------------------------------------- Total - ----------------------------------------------------------------------------------------------------------------------------------- D Shares To Be Held - ----------------------------------------------------------------------------------------------------------------------------------- Total - ----------------------------------------------------------------------------------------------------------------------------------- E Total Shares - -----------------------------------------------------------------------------------------------------------------------------------
Total the number of shares in each of rows A, B and C and insert that total in the box at the end of each row. Show shares to be held in the box at the end of row D. Total the numbers in the end boxes of rows A to D and insert that total number in the end box of row E. The total in the box of row E must equal the number of shares allocated to your Account as shown on the address label on the reverse side of this form. INSTRUCTIONS Carefully complete the face portion of this Direction Form. Then insert today's date and sign your name in the spaces provided below. Enclose the form in the included postage prepaid envelope and mail it promptly. Your Direction Form must be received no later than 5:00 p.m., Eastern time, on Friday, May 8, 1998. Direction Forms that are not fully or properly completed, dated and signed, or that are received after the deadline, will not be processed, and the shares allocated to your Account will be held or tendered, and if tendered, at a price, as determined by the Trustee. Note that the Trustee also has the right to disregard any direction that it determines cannot be implemented without violation of applicable law. Neither the Company, its Board of Directors, the Trustee, nor any other party makes any recommendation to participants as to whether to tender shares, the price at which to tender, or to refrain from tendering shares. Each participant must make his or her own decision on these matters. Date: __________, 1998 ____________________________ Your Signature EX-99.(C)(1) 12 STOCK EMPLOYEE COMPENSATION TRUST AGREEMENT MISSISSIPPI VIEW HOLDING COMPANY STOCK EMPLOYEE COMPENSATION TRUST Effective as of April 10, 1998 TABLE OF CONTENTS PAGE ---- ARTICLE 1. Trust, Trustee and Trust Fund................................................ 2 1.1. Trust......................................................2 1.2. Trustee....................................................2 1.3. Trust Fund.................................................2 1.4. Trust Fund Subject to Claims...............................2 1.5. Definitions................................................3 ARTICLE 2. Contribution and Dividends....................................................5 2.1. Contributions .............................................5 2.2. Dividends..................................................5 ARTICLE 3. Release and Allocation of Company Stock.......................................6 3.1. Release of Shares..........................................6 3.2. Allocations................................................6 3.3 Prohibition Against Funding Future Benefits of Company Directors.....................................6 ARTICLE 4. Trust Expenses and Tax Withholding............................................6 4.1. Trust Expenses.............................................6 4.2. Withholding of Taxes.......................................6 ARTICLE 5. Administration of Trust Fund..................................................7 5.1. Management and Control of Trust Fund.......................7 5.2. Investment of Funds........................................7 5.3. Trustee's Administrative Powers............................7 5.4. Voting and Tendering of Company Stock......................9 5.5. Indemnification...........................................10 5.6. General Duty to Communicate to Committee..................10 ARTICLE 6. Accounts and Reports of Trustee..............................................11 6.1. Records and Accounts of Trustee...........................11 6.2. Fiscal Year...............................................11 6.3. Reports of Trustee........................................11 6.4. Final Report..............................................11 ARTICLE 7. Succession of Trustee........................................................11 7.1. Resignation of Trustee....................................11 7.2. Removal of Trustee........................................11 7.3. Appointment of Successor Trustee..........................12 7.4. Succession of Trust Fund Assets...........................12 7.5. Continuation of Trust.....................................12 7.6. Changes in Organization of Trustee........................12 7.7. Continuance of Trustee's Powers in Event of Termination of the Trust..................................12 ARTICLE 8. Amendment or Termination.....................................................12 8.1. Amendments................................................12 8.2. Termination...............................................13 8.3. Form of Amendment or Termination..........................13 ARTICLE 9. Miscellaneous................................................................13 9.1. Controlling Law...........................................13 9.2. Committee Action..........................................13 9.3. Notices...................................................13 9.4. Severability..............................................14 9.5. Protection of Persons Dealing with the Trust..............14 9.6. Tax Status of Trust.......................................14 9.7. Participants to Have No Interest in the Company by Reason of the Trust ...................................14 9.8. Nonassignability..........................................14 9.9. Gender and Plurals........................................14 9.10. Counterparts..............................................15 9.11. Term of Trust.............................................15 MISSISSIPPI VIEW HOLDING COMPANY STOCK EMPLOYEE COMPENSATION TRUST THIS TRUST AGREEMENT (the "Agreement") made effective as of April 10, 1998, between Mississippi View Holding Company (the "Company"), a Minnesota corporation, and Neil Adamek and Gerald Peterson (collectively referred to herein as the "Trustee"). W I T N E S S E T H : WHEREAS, the Company desires to establish a trust (the "Trust") in accordance with the laws of the State of Minnesota and for the purposes stated in this Agreement; and WHEREAS, the Trustee desires to act as trustee of the Trust, and to hold legal title to the assets of the Trust, in trust, for the purposes hereinafter stated and in accordance with the terms hereof; and WHEREAS, the Company or its subsidiaries have previously adopted the Plans (as defined below); and WHEREAS, the Company desires to provide assurance of the availability of the shares of its common stock necessary to satisfy certain of its obligations or those of its subsidiaries under the Plans (as defined below); WHEREAS, the Company desires that the assets to be held in the Trust Fund (as defined below) should be principally or exclusively securities of the Company and, therefore, expressly waives any diversification of investments that might otherwise be necessary, appropriate, or required pursuant to applicable provisions of law, if any; and WHEREAS, the Trustee has been appointed as trustee and has accepted such appointment as of the date set forth first above. NOW THEREFORE, the parties hereto hereby establish the Trust and agree that the Trust will be comprised, held and disposed of as follows: ARTICLE 1. Trust, Trustee and Trust Fund 1.1. Trust. This Agreement and the Trust shall be known as the Mississippi View Holding Company Stock Employee Compensation Trust ("Trust"). The parties intend that the Trust will be an independent legal entity with title to and power to convey all of its assets. The parties hereto further intend that the Trust not be subject to the Employee Retirement Income Security Act of 1974, as amended. The Trust is not a part of any of the Plans (as herein defined) and does not provide retirement or other benefits to any Plan Participant (as herein defined). The assets of the Trust will be held, managed, invested, and disposed of by the Trustee, in accordance with the terms of the Trust. 1.2. Trustee. The trustee named above, and its successor or successors, is hereby designated as the trustee hereunder, to receive, hold, invest, manage, administer and distribute the Trust Fund (as defined hereinafter) in accordance with this Agreement, the provisions of which shall govern the power, duties and responsibilities of the Trustee. 1.3. Trust Fund. The assets held at any time and from time to time under the Trust collectively are herein referred to as the "Trust Fund" and shall consist of contributions received by the Trustee, proceeds of any loans, investments and reinvestment thereof, the earnings and income thereon, less disbursements therefrom. Except as herein otherwise provided, title to the assets of the Trust Fund shall at all times be vested in the Trustee and securities that are part of the Trust Fund shall be held in such manner that the Trustee's name and the fiduciary capacity in which the securities are held are fully disclosed, subject to the right of the Trustee to hold title in bearer form or in the name of a nominee, and the interests of others in the Trust Fund shall be only the right to have such assets received, held, invested, administered and distributed in accordance with the provisions of the Trust. 1.4. Trust Fund Subject to Claims. Notwithstanding any provision of this Agreement to the contrary, the Trust Fund shall at all times remain subject to the claims of the Company's general creditors under federal and state law. In addition, the Board of Directors and Chief Executive Officer of the Company shall have the duty to inform the Trustee in writing of the Company's Insolvency. If a person claiming to be a creditor of the Company alleges in writing to the Trustee that the Company has become Insolvent, the Trustee shall determine whether the Company is Insolvent and, pending such determination, the Trustee shall discontinue allocations pursuant to Article 3. Unless the Trustee has actual knowledge of the Company's Insolvency, or has received notice from the Company or a person claiming to be a creditor alleging that the Company is Insolvent, the Trustee shall have no duty to inquire whether the Company is Insolvent. The Trustee may in all events rely on such evidence concerning the Company's solvency as may be -2- furnished to the Trustee and that provides the Trustee with a reasonable basis for making a determination concerning the Company's Insolvency. If at any time the Trustee has determined that the Company is Insolvent, the Trustee shall discontinue allocations pursuant to Article 3 and shall hold the Trust Fund for the benefit of the Company's general creditors. Nothing in this Trust Agreement shall in any way diminish any rights of employees as general creditors of the Company with respect to benefits due under the Plan(s) or otherwise. The Trust shall resume allocations pursuant to Article 3 only after the Trustee has determined that the Company is not Insolvent (or is no longer Insolvent). 1.5. Definitions. In addition to the terms defined in the preceding portions of the Trust, certain capitalized terms have the meanings set forth below; Association. "Association" means Community Federal Savings and Loan Association of Little Falls. Board of Directors. "Board of Directors" means the board of directors of the Company. Change of Control. "Change of Control" means: (i) the sale of all, or a material portion, of the assets of the Company or the Association; (ii) the merger or recapitalization of the Company or the Association whereby the Company or the Association is not the surviving entity; (iii) a change of control of the Company or the Association, as otherwise defined or determined by the Office of Thrift Supervision or regulations promulgated by it; or (iv) the acquisition, directly or indirectly, of the beneficial ownership (within the meaning of that term as it is used in Section 13(d) of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder) of twenty-five percent (25%) or more of the outstanding voting securities of the Company or the Association by any person, trust, entity or group. This limitation shall not apply to the purchase of shares of up to 25% of any class of securities of the Company or the Association by a tax-qualified employee stock benefit plan which is exempt from the approval requirements, set forth under 12 C.F.R. ss.574.3(c)(1)(vi) as now in effect or as may hereafter be amended. The term "person" refers to an individual or a corporation, partnership, trust, association, joint venture, pool, syndicate, sole proprietorship, unincorporated organization or any other form of entity not specifically listed herein. The decision of the Committee as to whether a change in control has occurred shall be conclusive and binding. Code. "Code" means the Internal Revenue Code of 1986, as amended. Committee. "Committee" means a committee of directors and/or officers selected by the Board of Directors or by an individual or individuals authorized by the Board of Directors to make such selection which is charged with administration of the Trust. -3- Company. "Company" means Mississippi View Holding Company, a Minnesota corporation, or any successor thereto. References to the Company shall include its subsidiaries where appropriate. Company Stock. "Company Stock" means shares of common stock, par value $0.10 per share, issued by the Company and any successor securities. Extraordinary Dividend. "Extraordinary Dividend" means any dividend or other distribution of cash or other property (other than Company Stock) made with respect to Company Stock, which the Board of Directors declares generally to be other than an ordinary dividend. Insolvency. "Insolvency" means (i) the inability of the Company to pay its debts as they become due, or (2) the Company being subject to a pending proceeding as a debtor under the provisions of Title 11 of the United States Code (Bankruptcy Code). Leveraged Shares Account. "Leveraged Shares Account" means an account containing shares of Company Stock that were acquired with the Loan, continue to be held as collateral for the Loan, and which have not been released from such account. Loan. "Loan" means the loan and extension of credit to the Trust evidenced by the promissory note dated as of the date of the Closing (as defined in the Stock Purchase Agreement to be dated May 11, 1998 between the Trust and the Company), with which the Trustee will purchase Company Stock. Participant Shares. "Participant Shares" means shares of Company Stock that are Available Shares and that have been allocated to a Plan Participant. Plan Committee Certification. "Plan Committee Certification" means a certification to be provided to the Trustee by the Committee promptly after the end of each Trust Year which (i) sets forth the number of shares of Company Stock transferred to each Plan Participant, whether or not pursuant to the Trust, during the Relevant Period (as defined in Section 5.4) under each Plan, and (ii) certifies that the determination of such number is in accordance with the terms of each Plan. Plans. "Plans" means the Mississippi View Holding Company 1995 Stock Option Plan, the Mississippi View Holding Company 1997 Stock Option Plan, and any other employee benefit plan of the Company or its subsidiaries designated as such by the Board of Directors. Plan Participant. "Plan Participant" means a participant in any of the Plans. Trustee. "Trustee" means collectively the following individuals: Neil Adamek and Gerald Peterson, or any successor trustee. -4- Trust Year. "Trust Year" means the period beginning on April 10, 1998 and ending on April 9, 1999, and each 12-month period thereafter beginning on the 10th day of April and ending on the 9th day of April in the following calendar year. Unallocated Shares Account. "Unallocated Shares Account" means a separate account to be maintained by the Trustee to hold Available Shares that have not been allocated or distributed to the Plans to meet the Plans' employee benefit liability. ARTICLE 2. Contributions and Dividends 2.1 Contributions. For each Trust Year, the Company shall contribute to the Trust in cash such amount, which together with dividends, as provided in Section 2.2, and any other earnings of the Trust, shall enable the Trustee to make all payments of principal and interest due under the Loan on a timely basis. Unless otherwise expressly provided herein, the Trustee shall apply all such contributions, dividends and earnings to the payment of principal and interest due under the Loan. If, at the end of any Trust Year, no such contribution has been made in cash, such contribution shall be deemed to have been in the form of forgiveness of principal and interest on the Loan to the extent of the Company's failure to make contributions as required by this Section 2.1. All contributions made under the Trust shall be delivered to the Trustee. The Trustee shall be accountable for all contributions received by it, but shall have no duty to require any contributions to be made to it. 2.2 Dividends. Except as otherwise provided herein, dividends paid in cash on Company Stock held by the Trust, including Company Stock held in the Suspense Account, shall be applied to pay interest and repay scheduled principal due under the Loan. In the event that dividends paid on Company Stock held in the Trust exceed the amount of scheduled principal and interest due in any Trust Year, such excess shall be applied by the Trustee, to the extent directed by the Committee, to prepay principal of the Loan and/or invested in additional Company Stock. Dividends which are not in cash or in Company Stock (including Extraordinary Dividends, or portions thereof) shall be reduced to cash by the Trustee and reinvested in Company Stock as soon as practicable. For purposes of this Agreement, Company Stock purchased with the proceeds of an Extraordinary Dividend or with the proceeds of a non-cash dividend shall, for purposes of this Agreement (including without limitation Section 3.1 hereof), be deemed to have been acquired with the proceeds of the Loan. In the Trustee's discretion, investments in Company Stock may be made through open-market purchases, private transactions or (with the Company's consent) purchases from the Company. -5- ARTICLE 3. Release and Allocation of Company Stock 3.1 Release of Shares. Subject to the other provisions of this Article 3, upon the payment or forgiveness in any Trust Year of any principal on the Loan (a "Principal Payment"), the following number of shares of Company Stock acquired with the proceeds of the Loan shall be available for allocation ("Available Shares") as provided in this Article 3: the number of shares so acquired and held in the Trust immediately before such payment or forgiveness, multiplied by a fraction the numerator of which is the amount of the Principal Payment and the denominator of which is the sum of such Principal Payment and the remaining principal of the Loan outstanding after such Principal Payment. 3.2 Allocations. Available Shares shall be allocated as directed by the Committee to the Plans at such times as the Company may be required to provide shares of Company Stock in accordance with the terms of such Plans. The Committee's discretion shall be limited to the number of Available Shares. In the event that as of the last day of any Trust Year, any unallocated Available Shares remain after satisfaction of all current and future benefit obligations under each of the Plans, all remaining Available Shares shall be contributed by the Trustee to the Company or its subsidiaries. 3.3 Prohibition Against Funding Future Benefits of Company Directors Notwithstanding anything herein to the contrary, under no circumstances may any assets of the Trust be released, allocated, or otherwise directed by the Committee or the Trustee to fund any future liabilities of the Company or its subsidiaries related to any future benefit plans which are adopted after the effective date of the Trust to benefit Directors of the Company. ARTICLE 4. Trust Expenses and Tax Withholding 4.1 Trust Expenses. The Trustee shall be entitled to be reimbursed for its reasonable legal, accounting and appraisal fees, out-of-pocket expenses and other charges reasonably incurred in connection with the administration, management, investment and distribution of the Trust Fund. Such reimbursement shall be made out of the Trust Fund. The Company agrees to make sufficient contributions to the Trust to pay such amounts owing the Trustee in addition to those contributions required by Section 2.1 and, in the event the Company fails to make the contributions necessary to pay amounts owing to the Trustee, the Trustee shall be entitled to seek payment directly from the Company. Absent receipt of payment for expenses from the Company, the Trustee may utilize contributions from the Company otherwise intended to be principal payments for the purpose of meeting expense obligations of the Trust. 4.2 Withholding of Taxes. The Trustee may withhold, require withholding, or otherwise satisfy its withholding obligation, on any distribution which it is directed to make, such amount as it may reasonably estimate to be necessary to comply with applicable federal, state and local -6- withholding requirements. Upon settlement of such tax liability, the Trustee shall distribute the balance of such amount. Prior to making any distribution hereunder, the Trustee may require such release or documents from any taxing authority, or may require such indemnity, as the Trustee shall reasonably deem necessary for its protection. ARTICLE 5. Administration of Trust Fund 5.1 Management and Control of Trust Fund. Subject to the terms of this Agreement, the Trustee shall have exclusive authority and responsibility to manage and control the assets of the Trust Fund. 5.2 Investment of Funds. Except as otherwise provided in Section 2.2 and in this Section 5.2, the Trustee shall invest and reinvest the Trust Fund exclusively in Company Stock, including any accretions thereto resulting from the proceeds of a tender offer, recapitalization or similar transactions which, if not in Company Stock, shall be reduced to cash as soon as practicable. The Trustee may invest any portion of the Trust Fund temporarily pending investment in Company Stock, distribution or payment of expenses in (i) investments in United States Government obligations with maturities of less than one year, (ii) interest-bearing accounts including but not limited to certificates of deposit, time deposits, savings accounts and money market accounts with maturities of less than one year in any bank, which accounts are insured by the Federal Deposit Insurance Corporation or other similar federal agency, including the Association, (iii) obligations issued or guaranteed by any agency or instrumentality of the United States of America with maturities of less than one year or (iv) short-term discount obligations of the Federal National Mortgage Association. 5.3 Trustee's Administrative Powers. Except as otherwise provided herein, and subject to the Trustee's duties hereunder, the Trustee shall have the following powers and rights, in addition to those provided elsewhere in this Agreement or by law: (a) to retain any asset of the Trust Fund; (b) subject to Section 5.4 and Article 3, to sell, transfer, mortgage, pledge, lease or otherwise dispose of, or grant options with respect to, any Trust Fund assets at public or private sale; (c) upon direction from the Company, to borrow from any lender (including the Company pursuant to the Loan), to acquire Company Stock as authorized by this Agreement, to enter into lending agreements upon such terms (including reasonable interest and security for the loan and rights to renegotiate and prepay such loan) as may -7- be determined by the Committee; provided, however, that any collateral given by the Trustee for the Loan shall be limited to cash and property contributed by the Company to the Trust and dividends paid on Company Stock held in the Trust Fund and shall include Company Stock acquired with the proceeds of the Loan; (d) with the consent of the Committee, to settle, submit to arbitration, compromise, contest, prosecute or abandon claims and demands in favor of or against the Trust Fund; (e) to vote or to give any consent with respect to any securities, including any Company Stock, held by the Trust either in person or by proxy for any purpose, provided that the Trustee shall vote, tender or exchange all shares of Company Stock as provided in Section 5.4; (f) to exercise any of the powers and rights of an individual owner with respect to any asset of the Trust Fund and to perform any and all other acts that in its judgment are necessary or appropriate for the proper administration of the Trust Fund, even though such powers, rights and acts are not specifically enumerated in this Agreement; (g) to employ such accountants, actuaries, investment bankers, appraisers, other advisors and agents as may be reasonably necessary in collecting, managing, administering, investing, valuing, distributing and protecting the Trust Fund or the assets thereof or any borrowings of the Trustee made in accordance with Section 5.3(c); and to pay their reasonable fees and out-of-pocket expenses, which shall be deemed to be expenses of the Trust and for which the Trustee shall be reimbursed in accordance with Section 4.1; (h) to cause any asset of the Trust Fund to be issued, held or registered in the Trustee's name or in the name of its nominee, or in such form that title will pass by delivery, provided that the records of the Trustee shall indicate the true ownership of such asset; (i) to utilize another entity as custodian to hold, but not invest or otherwise manage or control, some or all of the assets of the Trust Fund; and (j) to consult with legal counsel (who may also be counsel for the Company generally) with respect to any of its duties or obligations hereunder; and to pay the reasonable fees and out-of-pocket expenses of such counsel, which shall be deemed to be expenses of the Trust and for which the Trustee shall be reimbursed in accordance with Section 4.1. (k) to deliver to the Company from time to time, as directed by the Committee, any assets held by the Trust (including Company Stock). -8- (l) to execute and file any such application, statement or report on behalf of the Trust with any governmental regulatory agency necessary to consumate the acquisition by the Trust of Company Stock. Notwithstanding the foregoing, neither the Trust nor the Trustee shall have any power to, and shall not, engage in any trade or business. 5.4. Voting and Tendering of Company Stock. (a) Voting of Company Stock. Shares of Company Stock held in the Leveraged Shares Account or in the Unallocated Shares Account shall be voted by the Trustee as directed by the Committee. The Trustee shall follow the directions of each Plan Participant that has been allocated Available Shares, as to the manner in which shares of Company Stock held by the Trust are to be voted on each matter brought before an annual or special stockholders' meeting of the Company or the manner in which any consent is to be executed, in each case as provided below. Before each such meeting of stockholders, the Trustee shall cause to be furnished to each Plan Participant that has been allocated Available Shares a copy of the proxy solicitation material received by the Trustee, together with a form requesting confidential instructions as to how to vote the shares of Company Stock held by the Trustee. Upon timely receipt of directions from the Plan Participants, the Trustee shall on each such matter vote the number of shares of the Company Stock held by the Trust in the manner directed by the Plan Participants who have been allocated Available Shares. With respect to any Participant Shares for which the Trustee does not receive a signed voting-direction instrument, such shares will be voted by the Trustee in the same manner as if they were shares of Company Stock held in the Leveraged Shares Account or in the Unallocated Shares Account. Notwithstanding the foregoing, if the Trustee determines upon the advice of its legal counsel, that voting the Company Stock in the manner described above would violate any relevant federal or state laws or regulations, the Trustee, in its sole discretion, may vote such shares of Company Stock in an alternative manner so as to comply with such laws or regulations. (b) Tender or Exchange of Company Stock. Shares of Company Stock held in the Leveraged Shares Account or in the Unallocated Shares Account shall be tendered by the Trustee as directed by the Committee. The Trustee shall use its best efforts timely to distribute or cause to be distributed to each Plan Participant any written materials distributed to stockholders of the Company generally in connection with any tender offer or exchange offer, together with a form requesting confidential instructions on whether or not to tender or exchange shares of Company Stock held in the Trust. Upon timely receipt of instructions from a Plan Participant, the Trustee shall tender such Participant Shares if such Plan Participant has directed the Trustee to tender. If the Trustee shall not receive timely instruction from a Plan Participant as to the manner in which to respond to such a tender or exchange offer, such shares shall be tendered by the Trustee as directed by the Committee. Notwithstanding the foregoing, if the Trustee determines upon the advice of its legal counsel, that tendering the Company Stock in the manner described above would violate any relevant federal or state laws or regulations, the Trustee, in its sole discretion, may tender such shares of Company Stock in an alternative manner so as to comply with such laws or regulations. -9- (c) The Company shall maintain appropriate procedures to ensure that all instruction by Plan Participants are collected, tabulated, and transmitted without being divulged or released to any person affiliated with the Company or its affiliates. All actions taken by Plan Participants shall be held confidential by the Trustee and shall not be divulged or released to any person. 5.5 Indemnification. (a) The Company shall and hereby does indemnify and hold harmless the Trustee from and against any claims, demands, actions, administrative or other proceedings, causes demands, actions, administrative or other proceedings, causes of action, liability, loss, cost, damage or expense (including reasonable attorneys' fees), which may be asserted against it, in any way arising out of or incurred as a result of its action or failure to act in connection with the operation and administration of the Trust; provided that such indemnification shall not apply to the extent that the Trustee has acted (i) in willful or grossly negligent violation of applicable law or its duties under this Trust or (ii) in bad faith. The Trustee shall be under no liability to any person for any loss of any kind which may result (i) by reason of any action taken by it in accordance with any direction of the Committee, (ii) by reason of its failure to exercise any power or authority or to take any action hereunder because of the failure of any such directing participant to give directions to the Trustee, as provided for in this Agreement, or (iii) by reason of any act or omission of any of the directing participants with respect to its duties under this Trust. The Trustee shall be fully protected in acting upon any instrument, certificate, or paper delivered by the Committee and believed in good faith by the Trustee to be genuine and to be signed or presented by the proper person or persons, and the Trustee shall be under no duty to make any investigation or inquiry as to any statement contained in any such writing, but may accept the same as conclusive evidence of the truth and accuracy of the statements therein contained. (b) The Company may, but shall not be required to, maintain liability insurance to insure its obligations hereunder. If any payments made by the Company or the Trust pursuant to this indemnity are covered by insurance, the Company or the Trust (as applicable) shall be subrogated to the rights of the indemnified party against the insurance company. (c) Without limiting the generality of the foregoing, the Company will, at the request of the Trustee, advance to the Trustee reasonable amounts of expenses, including reasonable attorneys' fees and expenses, which the Trustee advised have been incurred in connection with its investigation or defense of any claim, demand, action, cause of action, administrative or other proceeding arising out of or in connection with the Trustee's performance of its duties under this Agreement. 5.6. General Duty to Communicate to Committee. The Trustee shall promptly notify the Committee of all communications with or from any government agency or with respect to any legal proceeding with regard to the Trust and with or from any Plan Participants concerning their entitlement under the Plans or the Trust. -10- ARTICLE 6. Accounts and Reports of Trustee 6.1 Records and Accounts of Trustee. The Trustee shall maintain accurate and detailed records and accounts of all transactions of the Trust, which shall be available at all reasonable times for inspection or audit by any person designated by the Company and which shall be retained as required by applicable law. 6.2 Fiscal Year. The fiscal year of the Trust shall be the twelve month period beginning on April 10 and ending April 9. The first fiscal year of the Trust shall begin on April 10, 1998 and end on April 9, 1999. 6.3 Reports of Trustee. The Trustee shall prepare and present to the Committee a report for the period ending on the last day of each fiscal year, and for such shorter periods as the Committee may reasonably request, listing all securities and other property acquired and disposed of and all receipts, disbursements and other transactions effected by the Trust after the date of the Trustee's last account, and further listing all cash, securities, and other property held by the Trust, together with the fair market value thereof, as of the end of such period. In addition to the foregoing, the report shall contain such information regarding the Trust Fund's assets and transactions as the Committee in its discretion may reasonably request. 6.4 Final Report. In the event of the resignation or removal of a Trustee hereunder, the Committee may request and the Trustee shall then with reasonable promptness submit, for the period ending on the effective date of such resignation or removal, a report similar in form and purpose to that described in Section 6.3. ARTICLE 7. Succession of Trustee 7.1 Resignation of Trustee. The Trustee or any successor thereto may resign as Trustee hereunder at any time upon delivering a written notice of such resignation, to take effect sixty (60) days after the delivery thereof to the Committee, unless the Committee accepts shorter notice; provided, however, that no such resignation shall be effective until a successor Trustee has assumed the office of Trustee hereunder. 7.2 Removal of Trustee. The Trustee or any successor thereto may be removed by the Company by delivering to the Trustee so removed an instrument executed by the Committee informing the Trustee of the Committee's decision. Such removal shall take effect at the date specified in such instrument, which shall not be less than sixty (60) days after delivery of the instrument, unless the Trustee accepts shorter notice; provided, however, that no such removal shall be effective until a successor Trustee has assumed the office of Trustee hereunder. -11- 7.3 Appointment of Successor Trustee. Whenever the Trustee or any successor thereto shall resign or be removed or a vacancy in the position shall otherwise occur, the Company shall use its best efforts to appoint a successor Trustee as soon as practicable after receipt by the Committee of a notice described in Section 7.1, or the delivery to the Trustee of a notice described in Section 7.2, as the case may be, but in no event more than seventy-five (75) days after receipt or delivery, as the case may be, of such notice. A successor Trustee's appointment shall not become effective until such successor shall accept such appointment by delivering its acceptance in writing to the Company. If a successor is not appointed within such 75 day period, the Trustee, at the Company's expense, may petition a court of competent jurisdiction for appointment of a successor. 7.4 Succession to Trust Fund Assets. The title to all property held hereunder shall vest in any successor Trustee acting pursuant to the provisions hereof without the execution or filing of any further instrument, but a resigning or removed Trustee shall execute all instruments and do all acts necessary to vest title in the successor Trustee. Each successor Trustee shall have, exercise and enjoy all of the powers, both discretionary and ministerial, herein conferred upon its predecessors. A successor Trustee shall not be obliged to examine or review the accounts, records, or acts of, or property delivered by, any previous Trustee and shall not be responsible for any action or any failure to act on the part of any previous Trustee. 7.5 Continuation of Trust. In no event shall the legal disability, resignation or removal of a Trustee terminate the Trust, but the Company shall forthwith appoint a successor Trustee in accordance with section 7.3 to carry out the terms of the Trust. 7.6. Changes in Organization of Trustee. In the event that any corporate Trustee hereunder shall be converted into, shall merge or consolidate with, or shall sell or transfer substantially all of its assets and business to, another corporation, state or federal, the corporation resulting from such conversion, merger or consolidation, or the corporation to which such sale or transfer shall be made, shall thereunder become and be the Trustee under the Trust with the same effect as though originally so named. 7.7. Continuance of Trustee's Powers in Event of Termination of the Trust. In the event of the termination of the Trust, as provided herein, the Trustee shall dispose of the Trust Fund in accordance with the provisions hereof. Until the final distribution of the Trust fund, the Trustee shall continue to have all powers provided hereunder as necessary or expedient for the orderly liquidation and distribution of the Trust Fund. Article 8. Amendment or Termination 8.1. Amendments. Except as otherwise provided herein, the Company may amend the Trust at any time and from time to time in any manner which it deems desirable. Notwithstanding the foregoing, the Company shall retain the power under all circumstances to amend the Trust to correct any errors or clarify any ambiguities or similar issues of interpretation of this Agreement. -12- 8.2. Termination. Subject to the terms of this Section 8.2, the Trust shall terminate on the date on which the Loan is paid in full (the "Termination Date"). The Company may terminate the Trust at any time prior to the Termination Date. The Trust shall also terminate automatically upon the Company giving the Trustee written notice of a Change of Control. Immediately upon a termination of the Trust, the Company shall be deemed to have forgiven all amounts then outstanding under the Loan. As directed by the Committee, the Trustee shall allocate the Available Shares to the Plans. As soon as practicable after receiving notice from the Company of a Change of Control or upon any other termination of the Trust, the Trustee shall sell any unallocated Available Shares and other non-cash assets (if any) then held in the Trust Fund as directed by the Committee. The proceeds of such sale shall first be returned to the Company up to an amount equal to the principal amount, plus any accrued interest, of the Loan that was forgiven upon such termination. Any funds remaining in the Trust after such payment to the Company shall be distributed with reasonable promptness to the Company; provided, however, that all distributions from the Trust comply with all relevant federal and state laws and regulations. 8.3 Form of Amendment or Termination. Any amendment or termination of the Trust shall be evidenced by an instrument in writing signed by an authorized officer of the Company, certifying that said amendment or termination has been authorized and directed by the Company or the Board of Directors, as applicable, and, in the case of any amendment, shall be consented to by signature of the Trustee, or an authorized officer of the Trustee, if required by Section 8.1 Article 9. Miscellaneous 9.1. Controlling Law. The laws of the State of Minnesota shall be the controlling law in all matters relating to the trust, without regard to conflicts of law, except to the extent that the laws of the United States of America shall be deemed applicable. 9.2. Committee Action. Any action required or permitted to be taken by the Committee may be taken on behalf of the Committee by any individual so authorized. The Company shall furnish to the Trustee the name and specimen signature of each member of the Committee upon whose statement of a decision or direction the Trustee is authorized to rely. Until notified of a change in the identity of such person or persons, the Trustee shall act upon the assumption that there has been no change. 9.3. Notices. All notices, requests, or other communications required or permitted to be delivered hereunder shall be in writing, delivered by registered or certified mail, return receipt requested as follows: To the Company: Mississippi View Holding Company 35 East Broadway Little Falls, Minnesota 56345-3093 Attention: Thomas J. Leiferman, President -13- To the Trustee: Mississippi View Holding Company Stock Employee Compensation Trust 35 East Broadway Little Falls, Minnesota 56345-3093 Attention: Trustee Chairman Any party hereto may from time to time, by written notice given as aforesaid, designate any other address to which notices, requests or other communications addressed to it shall be sent. 9.4. Severability. If any provision of the Trust shall be held illegal, invalid or unenforceable for any reason, such provision shall not affect the remaining parts hereof, but the Trust shall be construed and enforced as if said provision had never been inserted herein. 9.5. Protection of Persons Dealing with the Trust. No person dealing with the Trustee shall be required or entitled to monitor the application of any money paid or property delivered to the Trustee, or determine whether or not the Trustee is acting pursuant to authorities granted to it hereunder or to authorizations or directions herein required. 9.6. Tax Status of Trust. It is intended that the Company, as grantor hereunder, be treated as the owner of the entire Trust and the trust assets under Section 671, et seq. of the Code. Until advised otherwise, the Trustee may presume that the Trust is so characterized for federal income tax purposes and shall make all filings of tax returns on that presumption. 9.7. Participants to Have No Interest in the Company by Reason of the Trust. Neither the creation of the Trust nor anything contained in the Trust shall be construed as giving any person, including any individual employed by the Company or any subsidiary of the Company, any equity or interest in the assets, business, or affairs of the Company except to the extent that any such individuals are entitled to exercise stockholder rights with respect to Company Stock pursuant to Section 5.4 9.8. Nonassignability. No right or interest of any person to receive distributions from the Trust shall be assignable or transferable, in whole or in part, either directly or by operation of law or otherwise, including, but not by way of limitation, execution, levy, garnishment, attachment, pledge, or bankruptcy, but excluding death or mental incompetency, and no right or interest of any person to receive distributions from the Trust shall be subject to any obligation or liability of any such person, including claims for alimony or the support of any spouse or child. 9.9. Gender and Plurals. Whenever the context requires or permits, the masculine gender shall include the feminine gender and the singular form shall include the plural form and shall be interchangeable. -14- 9.10. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be considered an original. 9.11. Term of Trust. This Trust shall remain in effect until the earlier of (i) termination by the Company's Board of Directors, (ii) the distribution of all assets of the Trust, or (iii) 21 years from the Closing Date. Termination of the Trust shall not effect any Available Shares previously allocated to the Plans. -15- IN WITNESS WHEREOF, the Company and the Trustee have caused this Agreement to be signed, and their seals affixed hereto, by their authorized officers all as of the day, month and year first above written. The following individuals sign as Trustee of the Mississippi View Holding Company Stock Employee Compensation Trust /s/ Neil Adamek ------------------------------- Neil Adamek, as Trustee /s/ Gerald Peterson ------------------------------- Gerald Peterson, as Trustee Attest: /s/ Mary Ann Karnowski ---------------------- MISSISSIPPI VIEW HOLDING COMPANY By: /s/ Thomas J. Leiferman ------------------------------ Thomas J. Leiferman Its: President and Chief Executive Officer Attest: /s/ Mary Ann Karnowski ---------------------- -16- EX-99.(C)(2) 13 COMMON STOCK PURCHASE AGREEMENT COMMON STOCK PURCHASE AGREEMENT THIS COMMON STOCK PURCHASE AGREEMENT (this "Agreement"), made this 10th day of April, 1998, between Mississippi View Holding Company, a Minnesota corporation (the "Seller") and Messrs. Gerald Peterson and Neil Adamek, solely in their capacity as trustees (the "Trustees") of the Mississippi View Holding Company Stock Employee Compensation Trust (the "Trust") (the Trust is hereinafter sometimes referred to as the "Purchaser") under a trust agreement between the Seller and the Trustees dated April 10, 1998 (the "Trust Agreement"). W I T N E S S E T H : WHEREAS, as contemplated by the Trust Agreement, the Purchaser is to purchase from the Seller, and the Seller is to sell to the Purchaser, shares of the Seller's common stock, $0.10 par value (the "Common Stock"), all as more specifically provided herein; WHEREAS, Seller intends to initiate a tender offer, in accordance with Rule 13e- 3 and Rule 13e-4 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), under which Seller will offer to purchase up to 222,000 shares of Common Stock (the "Tender Offer"), which is intended to offset the dilution in earnings per share which would otherwise result from the sale of Common Stock to the Trustees hereunder. Seller has provided to the Trustees copies of the proposed forms of the Offer to Purchase and related documents to be distributed in connection with the Tender Offer (the "Offer Materials"). Seller will, upon the terms and subject to the conditions of the Offer, determine a single per Share price (not greater than $21.50 nor less than $19.50 per Share) that it will pay for Shares properly tendered and not withdrawn pursuant to the Offer (the "Purchase Price"), taking into account the number of Shares so tendered and the prices specified by tendering stockholders. The Offer is subject to various conditions, as set forth in "The Offer -- Certain Conditions of the Offer" in the Offer to Purchase. WHEREAS, the parties intend to base the purchase price to be paid by the Trustee hereunder on the purchase price in the Tender Offer. The parties intend that the transaction hereunder shall be closed immediately after the expiration of the Tender Offer, and have requested and expect to obtain an exemption (the "Exemptive Order") from the restrictions of Rule 13e-4(f)(6) under the Exchange Act to permit such schedule to be followed. NOW, THEREFORE, in consideration of the mutual covenants and undertakings contained herein, and subject to and on the terms and conditions set forth herein, the parties hereto agree as follows: ARTICLE I PURCHASE AND SALE OF SHARES 1.1 Purchase and Sale. Subject to the terms and conditions set forth herein, the Seller will sell to the Purchaser, and the Purchaser will purchase from the Seller, at the Closing (as hereinafter defined), that number of shares of Common Stock which is equal to the lesser of (i) the quotient of $1,214,750 divided by the Purchase Price (as defined in the recitals to this Agreement) or (ii) 9.9% of the outstanding shares of Common Stock at the time of the Closing, with any fractional shares of Common Stock being rounded to the nearest whole number of shares. The shares of Common Stock to be purchased by the Purchaser and sold by the Seller at the Closing are referred to in this Agreement as the "Common Shares." In consideration for the Common Shares, the Purchaser will deliver to the Seller the note in the form of Schedule 1.1 to this Agreement in the principal amount of $1,214,750 (the "Note"). 1.2 Closing. The closing of the sale and purchase of the Common shares hereunder (the "Closing"), will be held at the offices of the Seller's counsel (a) as soon as practicable following the closing of the Seller's Tender Offer, or (b) at such earlier time, date and place as may be designated by the Seller, or (c) at such later time, date and place as may be mutually agreed upon by the Seller and the Purchaser. 1.3 Delivery and Payment. At the Closing, the Seller will deliver to the Purchaser a certificate representing the Common Shares, which certificate shall be registered in the name of the Trustees, or the name of its nominee, against payment by the Purchaser to the Seller of the aggregate purchase price therefor. The Seller will pay all stamp and other transfer taxes, if any, which may be payable in respect of the sale and delivery of the Common Shares. ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE SELLER The Seller represents and warrants to the Purchaser as follows: 2.1 Corporate Existence and Authority. The Seller (i) is a corporation duly organized, validly existing and in good standing under the laws of the State of Minnesota; (ii) has all requisite corporate power to execute, deliver and perform this Agreement; and (iii) has taken all necessary corporate action to authorize the execution, delivery and performance of this Agreement. 2.2 No Conflict. The execution and delivery of this Agreement does not, and the consummation of the transactions contemplated hereby will not, violate, conflict with or constitute a default under (i) the Seller's certificate of incorporation or by-laws, (ii) any agreement, indenture or other instrument to which the Seller is a party or by which the Seller or its assets may be bound or (iii) upon receipt of the Exemptive Order, any law, regulation, order, arbitration, award, judgment or decree applicable to the Seller. 2.3 Validity. This Agreement has been duly executed and delivered by the Seller and is a valid and binding agreement of the Seller enforceable against the Seller in accordance with its terms, except as the enforceability thereof may be limited by any applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other laws affecting the -2- enforcement of creditors' rights generally, and by general principles of equity. 2.4 The Common Shares. The Common Shares have been duly authorized and are (or when issued as contemplated hereby will be) validly issued and constitute fully-paid and non-assessable shares of Common Stock, $0.10 par value per share, of the Seller. No stockholder of the Seller has any preemptive or other subscription right to acquire any shares of Common Stock. The Seller will convey to the Purchaser, on the date of Closing, good and valid title to the Common Shares free and clear of any liens, claims, security interests and encumbrances. 2.5 Litigation. There are no actions, suits, proceedings or arbitrations or investigations pending, or to the Seller's best knowledge, threatened in any court or before any governmental agency or instrumentality or arbitration panel or otherwise against or by the Seller which seek to or could restrain, prohibit, rescind or declare unlawful, or result in substantial damages in respect of, this Agreement or the performance hereof by the Seller (including, without limitation, the delivery of the Common Shares). 2.6 Business and Financial Information. Seller has heretofore delivered to the Purchaser copies of the audited consolidated statements of financial condition, and statements of earnings and statements of shareholders' equity of Seller and its subsidiaries as of and for the fiscal years ended September 30, 1997 and 1996 and the unaudited consolidated statements of financial condition, and statement of earnings of Seller and its subsidiaries as of and for the three months ended December 31, 1997 and 1996 (including the related notes and schedules, the "Seller Financial Statements"). The Seller Financial Statements fairly present the consolidated results of operations and changes in financial position for the periods set forth therein and the consolidated financial position as at the dates thereof of Seller and its subsidiaries, in accordance with generally accepted accounting principles consistently applied throughout the periods involved, except as set forth in the notes thereto and subject, in the case of unaudited financial statements, to the omission of certain notes not ordinarily accompanying such unaudited financial statements and to normal year-end audit adjustments which in each case will not be material to Seller and its subsidiaries taken as a whole. Since March 23, 1995, Seller has filed with the Securities and Exchange Commission all forms, reports and documents required to be filed by it pursuant to the Exchange Act (the "Disclosure Documents"), all of which have complied as to form in all material respects with all applicable requirements of such Acts. None of the Disclosure Documents, at the time filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The Seller's Rule 13e-3 Transaction Statement and Issuer Tender Offer Statement on Schedule 13E-4 relating to the Offer, and the Offer to Purchase and the other documents sent to holders of shares of Common Stock in connection with the Offer, do not contain and will not contain, at the time filed, any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were or shall be made, not misleading. -3- ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE PURCHASER The Purchaser hereby represents and warrants to the Seller as follows: 3.1 Authority; Validity. The Purchaser has full power and authority to execute and deliver this Agreement and the Note as Trustee and to consummate the transactions contemplated hereby. The Note has been duly executed by the Trustee on behalf of the Trust and, upon the execution and delivery by the Trustee on behalf of the Trust, the Note will be a valid and binding agreement of the Purchaser enforceable in accordance with its terms, except as the enforceability thereof may be limited by any applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other laws affecting the enforcement of creditors' rights generally, and by general principles of equity. ARTICLE IV RESTRICTIONS ON DISPOSITION OF THE COMMON SHARES 4.1 Restricted Securities. The Purchaser acknowledges that the Purchaser is acquiring the Common Shares pursuant to a transaction exempt from registration under the Securities Act of 1933, as amended (the "Securities Act"). The Purchaser represents, warrants and agrees that all Common Shares acquired by the Purchaser pursuant to this Agreement are being acquired for investment without any intention of making a distribution thereof, or of making any sale or other disposition thereof which would be in violation of the Securities Act or any applicable state securities law, and that the Purchaser will not dispose of any of the Common Shares except that the Trustees will, from time to time, convey a portion of the Common Shares to the participants in the Plans to satisfy the obligations of the Company thereunder and convey a portion of the Common Shares to the trustee of the Plans, and except upon termination of the Trust to the extent that the Trust then holds any Common Shares, all in compliance with all provisions of applicable federal and state law regulating the issuance, sale and distribution of securities. 4.2 Legend. Until such time as the Common Shares are registered pursuant to the provisions of the Securities Act, any certificate or certificates representing the Common Shares delivered pursuant to Section 1.3, will bear a legend in substantially the following form: "The shares represented by this certificate have not been registered under the Securities Act of 1933, as amended, and may not be sold, transferred or otherwise disposed of unless they have first been registered under such Act or unless an exemption from registration is available." -4- The Seller may place stop transfer orders against the registration or transfer of any share evidenced by such a certificate or certificates until such time as the requirements of the foregoing are satisfied. ARTICLE V COVENANTS OF SELLER The Seller agrees that: 5.1 Financial Statements, Reports and Documents. Subsequent to the Closing, and for as long as the Common Shares are held by the Trust (unless the Trustees shall otherwise consent in writing), the Seller shall deliver to the Trustees each of the following: (a) Annual Statements. As soon as available and in any event within one hundred twenty (120) days after the close of each fiscal year of the Seller, copies of the consolidated statement of financial position of the Seller and its subsidiaries as of the close of such fiscal year and consolidated statements of income, cash flow and shareholders' equity of the Seller and its subsidiaries for such fiscal year, in each case setting forth in comparative form the figures for the preceding fiscal year, all in reasonable detail and accompanied by an opinion thereon of Bertram Cooper & Co., LLP, or of other independent public accountants of recognized national standing, to the effect that such financial statements have been prepared in accordance with generally accepted accounting principles consistently applied (except for changes in which such accountants concur) and that the examination of such accountants in connection with such financial statements has been made in accordance with generally accepted auditing standards and, accordingly, includes such tests of the accounting records and such other auditing procedures as were considered necessary in the circumstances; (b) SEC and Other Reports. Promptly upon their becoming available, one copy of each financial statement, report, notice or proxy statement sent by the Seller to stockholders generally and of each regular or periodic report, registration statement or prospectus (other than any registration statement on Form S-8 and its related prospectus) filed by the Seller with the Securities and Exchange Commission or any successor agency; and (c) Other Information. Such other information concerning the business, properties or financial condition of the Seller as the Trustee shall reasonably request. The Seller will comply with all federal, state, local and foreign laws, regulations or orders, and all the rules of any foreign laws, regulations or orders, and all the rules of any stock exchange or similar entity which are applicable to it or to the conduct of this business, and, without -5- limiting the generality of the foregoing, shall make such filings, distributions and disclosures as are required by the Securities Act, the Exchange Act, or any of the regulations, rules or orders promulgated thereunder, insofar as the failure to comply would materially and adversely affect the Company and its subsidiaries taken as a whole. To the extent required under the Exchange Act, the Seller will maintain complete and accurate books, records and accounts in accordance with the requirements of Section 13(b)(2) under the Exchange Act. ARTICLE VI CONDITIONS TO CLOSING 6.1 Conditions to Obligations of the Purchaser. The obligation of the Purchaser to purchase the Common Shares is subject to the satisfaction of the following conditions on the date of Closing: (a) The representations and warranties of the Seller set forth in Article II hereof shall be true and correct; and if the Closing shall occur on a date other than the date of this Agreement, the Purchaser shall have been furnished with a certificate, dated the date of Closing, to such effect, signed by an authorized officer of the Seller; (b) All permits, approvals, authorizations and consents of third parties necessary for the consummation of the transactions herein shall have been obtained, and no order of any court or administrative agency shall be in effect which restrains or prohibits the transactions contemplated by this Agreement, and no suit, action or other proceeding by any governmental body or other person shall have been instituted which questions the validity or legality of the transactions contemplated by this Agreement; and (c) The Exemptive Order shall be in full force and effect and shall be sufficient to permit the sale of the Common Shares to the Trustees on the date of Closing as contemplated hereby. 6.2 Conditions to Obligations of the Seller. The obligation of the Seller to issue, sell and deliver the Common Shares to the Purchaser is subject to the satisfaction of the following conditions on the date of Closing: (a) The representations and warranties of the Purchaser set forth in Article III hereof shall be true and correct; and if the Closing shall occur on a date other than the date of this Agreement, the Seller shall have been furnished with a certificate dated the date of Closing, to such effect, signed by the Trustees; (b) No order of any court or administrative agency shall be in effect which restrains or prohibits the transactions contemplated by this Agreement, and -6- no suit, action or other proceeding by any governmental body or other person shall have been instituted which questions the validity or legality of the transactions contemplated by this Agreement; and (c) The Exemptive Order shall be in full force and effect and shall be sufficient to permit the sale of the Common Shares to the Trustees on the date of Closing as contemplated hereby. ARTICLE VII MISCELLANEOUS 7.1 Expenses. The Seller shall pay all of its expenses, and it shall pay the Purchaser's expenses, in connection with the authorization, preparation, execution and performance of this Agreement, including without limitation the reasonable fees and expenses of the Trustee, its agents, representatives, counsel, financial advisors and consultants. 7.2 Survival of Seller's Representations and Warranties. All representations and warranties made by the Seller to the Purchaser in this Agreement shall survive the Closing. 7.3 Notices. All notices, requests, or other communications required or permitted to be delivered hereunder shall be in writing, delivered by registered or certified mail, return receipt requested, as follows: (a) To the Seller: Mississippi View Holding Company 35 East Broadway Little Falls, Minnesota 56345 Attention: Thomas J. Leiferman (b) To the Purchaser: Mississippi View Holding Company 35 East Broadway Little Falls, Minnesota 56345 Attention: Trustees of Mississippi View Holding Company Stock Employee Compensation Trust Any party hereto may from time to time, by written notice given as aforesaid, designate any other address to which notices, requests or other communications addressed to it shall be sent. -7- 7.4 Specific Performance. The parties hereto acknowledge that damages would be an inadequate remedy for any breach of the provisions of this Agreement and agree that the obligations of the parties hereunder shall be specifically enforceable, and neither party will take any action to impede the other from seeking to enforce such rights of specific performance. 7.5 Successors and Assigns; Integration; Assignability. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto, and their respective legal representatives, successors and assigns. This Agreement (a) constitutes, together with the Note, the Trust Agreement, and any other written agreements between the Purchaser and the Seller executed and delivered on the date hereof, the entire agreement between the parties hereto and supersedes all other prior agreements and understandings, both written and oral, among the parties, with respect to the subject matter hereof; (b) shall not confer upon any persons other than the parties hereto any rights or remedies hereunder; and (c) shall not be assignable by operation of law or otherwise, except that the Trustees may assign all their rights hereunder to any corporation or other institution exercising trust powers in connection with any such institution assuming the duties of a trustee under the Trust. 7.6 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the state of Minnesota. 7.7 Further Assurances. Subject to the terms and conditions herein provided, each of the parties hereto agrees to use all reasonable efforts to take, or cause to be taken, all action and to do, or cause to be done, all things necessary, proper or advisable to consummate and make effective the transactions contemplated by this Agreement. 7.8 Amendment and Waiver. No amendment or waiver of any provision of this Agreement or consent to departure therefrom shall be effective unless in writing and signed by the Purchaser and the Seller. 7.9 Counterparts. This Agreement may be executed in any number of counterparts with the same effect as if the signatures thereto were upon one instrument. 7.10 Certain Limitations. The execution and delivery of this Agreement and the performance by the Trustees of this Agreement and under the terms of the Trust have been, or will be, effected by the Trustees in their capacity as Trustees. Nothing in this Agreement shall be interpreted to increase, decrease or modify in any manner any liability of the Trustees to the Seller or to any Trustee, representative or other claimant by right of the Seller resulting from the Trustees' performance of their duties under the constituent instruments of the Trust, and no personal liability shall be asserted or enforceable against said person by reason of any of the covenants, statements or representations contained in this Agreement. 7.11 Incorporation. The terms and conditions of the Trust Agreement relating to the nature of the responsibilities of the Trustees and the indemnification of the Trustees by the Seller are incorporated herein by reference and made applicable to this Agreement. -8- IN WITNESS WHEREOF, the undersigned have duly executed this Agreement on the date and year first above written. By: /s/ Gerald Peterson ----------------------------- Name: Title: as Trustee of the Mississippi View Holding Company Stock Employee Compensation Trust Attest: /s/ Neil Adamek ------------------------ Title: By: /s/ Neil Adamek ------------------------ Name: Title: as Trustee of the Mississippi View Holding Company Stock Employee Compensation Trust Attest: Mary Ann Karnowski ------------------------ Title: MISSISSIPPI VIEW HOLDING COMPANY By: /s/ Thomas J. Leiferman --------------------------- Name: Title: Attest: Mary Ann Karnowski ------------------------- Title: -9- -----END PRIVACY-ENHANCED MESSAGE-----