EXHIBIT 2
LANDMARK COMMUNITY BANK
Canajoharie, New York
PLAN OF CONVERSION
From Mutual to Stock Form of Organization
I. GENERAL
The Board of Directors of Landmark Community Bank (the "Bank") has adopted
this Plan of Conversion whereby the Bank will convert from a federal mutual
savings institution to a federal stock savings institution pursuant to the Rules
and Regulations of the OTS (the "Stock Conversion"). The Plan includes, as part
of the conversion, the concurrent formation of a holding company. The new
holding company will be chartered as a Delaware corporation under the name
"Landmark Financial Corp." The Plan provides that non-transferable subscription
rights to purchase Holding Company Conversion Stock will be offered first to
Eligible Account Holders of record as of the Eligibility Record Date, then to
the Bank's Tax-Qualified Employee Plans, then to Supplemental Eligible Account
Holders of record as of the Supplemental Eligibility Record Date, then to Other
Members, and then to directors, officers and employees. Concurrently with, at
any time during, or promptly after the Subscription Offering, and on a lowest
priority basis, an opportunity to subscribe may also be offered to the general
public in a Direct Community Offering. The price of the Holding Company
Conversion Stock will be based upon an independent appraisal of the Bank and
will reflect its estimated pro forma market value, as converted. It is the
desire of the Board of Directors of the Bank to attract new capital to the Bank
in order to increase its capital, support future savings growth and increase the
amount of funds available for residential and other mortgage lending. The
Converted Bank is also expected to benefit from its management and other
personnel having a stock ownership in its business, since stock ownership is
viewed as an effective performance incentive and a means of attracting,
retaining and compensating management and other personnel. No change will be
made in the Board of Directors or management as a result of the Conversion.
Following the completion of the Stock Conversion, it is expected that the
Converted Bank will convert to a national or New York chartered commercial bank
(the "Bank Conversion"), although there can be no assurance that the Board of
Directors will determine to proceed with the Bank Conversion. The decision to
proceed with the Bank Conversion will depend in part on the status of any
regulations and legislation affecting banks and savings institutions at the time
of the completion of the Stock Conversion.
II. DEFINITIONS
Acting in Concert: The term "acting in concert" shall have the same
meaning given it in Section 574.2(c) of the Rules and Regulations of the OTS.
A-1
Actual Subscription Price: The price per share, determined as provided in
Section VI of the Plan, at which Holding Company Conversion Stock will be sold
in the Subscription Offering.
Affiliate: An "affiliate" of, or a Person "affiliated" with, a Specified
Person, is a Person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by or is under common control with,
the Person specified.
Associate: The term "associate," when used to indicate a relationship with
any Person, means (i) any corporation or organization (other than the Holding
Company, the Bank or a majority-owned subsidiary of the Holding Company) of
which such Person is an officer or partner or is, directly or indirectly, the
beneficial owner of ten percent or more of any class of equity securities, (ii)
any trust or other estate in which such Person has a substantial beneficial
interest or as to which such Person serves as trustee or in a similar fiduciary
capacity, and (iii) any relative or spouse of such Person, or any relative of
such spouse, who has the same home as such Person or who is a director or
officer of the Holding Company or the Bank or any subsidiary of the Holding
Company; provided, however, that any Tax-Qualified or Non-Tax-Qualified Employee
Plan shall not be deemed to be an associate of any director or officer of the
Holding Company or the Bank, to the extent provided in Section VI hereof.
Bank: Landmark Community Bank, or such other name as the institution may
adopt.
Bank Conversion: The conversion of the Converted Bank from a federally
chartered stock savings institution to a commercial bank.
BIF: Bank Insurance Fund.
Capital Stock: Any and all authorized shares of stock of the Converted
Bank after the Stock Conversion.
Commercial Bank: The commercial bank resulting from the Bank Conversion.
Commercial Bank Regulator: The state or federal agency that charters the
Commercial Bank.
Conversion: The Conversion of the Bank from the mutual to stock form of
organization pursuant to this Plan.
Converted Bank: The federally chartered stock savings institution
resulting from the Conversion of the Bank in accordance with the Plan.
Deposit Account: Any withdrawable account or deposit in excess of $50 in
the Bank.
Direct Community Offering: The offering to the general public of any
unsubscribed shares which may be effected as provided in Section VI hereof.
A-2
Eligibility Record Date: The close of business on December 31, 1995.
Eligible Account Holder: Any Person holding a Qualifying Deposit in the
Bank on the Eligibility Record Date.
Exchange Act: The Securities Exchange Act of 1934, as amended.
FDIC: Federal Deposit Insurance Corporation.
FRB: The Board of Governors of the Federal Reserve System.
Holding Company: Landmark Financial Corp., a Delaware corporation, which
upon completion of the Stock Conversion will own all of the outstanding common
stock of the Converted Bank, and which upon completion of the Bank Conversion
will own all of the outstanding common stock of the Commercial Bank.
Holding Company Conversion Stock: Shares of common stock, par value $.01
per share, to be issued and sold by the Holding Company as a part of the
Conversion; provided, however, that for purposes of calculating Subscription
Rights and maximum purchase limitations under the Plan, references to the number
of shares of Holding Company Conversion Stock shall refer to the number of
shares offered in the Subscription Offering.
Market Maker: A dealer (i.e., any Person who engages directly or
indirectly as agent, broker or principal in the business of offering, buying,
selling, or otherwise dealing or trading in securities issued by another Person)
who, with respect to a particular security, (i) regularly publishes bona fide,
competitive bid and offer quotations in a recognized inter-dealer quotation
system; or (ii) furnishes bona fide competitive bid and offer quotations on
request; and (iii) is ready, willing, and able to effect transactions in
reasonable quantities at his quoted prices with other brokers or dealers.
Maximum Subscription Price: The price per share of Holding Company
Conversion Stock to be paid initially by subscribers in the Subscription
Offering.
Member: Any Person or entity that qualifies as a member of the Bank
pursuant to its charter and bylaws.
Non-Tax-Qualified Employee Plan: Any defined benefit plan or defined
contribution plan of the Bank or the Holding Company, such as an employee stock
ownership plan, stock bonus plan, profit-sharing plan or other plan, which with
its related trust does not meet the requirements to be "qualified" under Section
401 of the Internal Revenue Code.
OTS: Office of Thrift Supervision, Department of the Treasury.
OTS Conversion Application: The application submitted to the OTS on Form
AC.
A-3
Officer: An executive officer of the Holding Company or the Bank,
including the Chairman of the Board, President, Executive Vice Presidents,
Senior Vice Presidents in charge of principal business functions, Secretary and
Treasurer.
Order Forms: Forms to be used in the Subscription Offering and in the
Direct Community Offering to exercise Subscription Rights.
Other Members: Members of the Bank, other than Eligible Account Holders,
Tax-Qualified Employee Plans or Supplemental Eligible Account Holders, as of the
Voting Record Date.
Person: An individual, a corporation, a partnership, an association, a
joint-stock company, a trust, any unincorporated organization, or a government
or political subdivision thereof.
Plan: This Plan of Conversion of the Bank, including any amendment
approved as provided in this Plan, which provides for the conversion of the Bank
from a federally chartered mutual savings institution to a federally chartered
stock savings institution, and the subsequent conversion of the Converted Bank
from a federally chartered stock savings institution to a Commercial Bank.
Qualifying Deposit: The aggregate balance of each Deposit Account of an
Eligible Account Holder as of the Eligibility Record Date or of a Supplemental
Eligible Account Holder as of the Supplemental Eligibility Record Date.
SAIF: Savings Association Insurance Fund.
SEC: Securities and Exchange Commission.
Special Meeting: The Special Meeting of Members called for the purpose of
considering and voting upon the Plan of Conversion.
Stock Conversion: The conversion of the Bank to the Converted Bank,
including the change of the Bank's charter and bylaws to federal stock charter
and bylaws; sale by the Holding Company of Holding Company Conversion Stock; and
issuance and sale by the Converted Bank of Converted Bank Common Stock to the
Holding Company, all as provided for in the Plan.
Subscription Offering: The offering of shares of Holding Company
Conversion Stock for subscription and purchase pursuant to Section VI of the
Plan.
Subscription Rights: Non-transferable, non-negotiable, personal rights of
the Bank's Eligible Account Holders, Tax-Qualified Employee Plans, Supplemental
Eligible Account Holders, Other Members, and directors, Officers and employees,
or trusts of any such persons including individual retirement accounts and Keogh
accounts, to subscribe for shares of Holding Company Conversion Stock in the
Subscription Offering.
A-4
Supplemental Eligibility Record Date: The last day of the calendar quarter
preceding approval of the Plan by the OTS.
Supplemental Eligible Account Holder: Any person holding a Qualifying
Deposit in the Bank (other than an officer or director and their associates) on
the Supplemental Eligibility Record Date.
Tax-Qualified Employee Plans: Any defined benefit plan or defined
contribution plan of the Bank or the Holding Company, such as an employee stock
ownership plan, stock bonus plan, profit-sharing plan or other plan, which with
its related trust meets the requirements to be "qualified" under Section 401 of
the Internal Revenue Code.
Voting Record Date: The date set by the Board of Directors in accordance
with federal regulations for determining Members eligible to vote at the Special
Meeting.
III. STEPS PRIOR TO SUBMISSION OF PLAN OF CONVERSION TO THE MEMBERS
FOR APPROVAL
Prior to submission of the Plan of Conversion to its Members for approval,
the Bank must receive from the OTS approval of the Application for Approval of
Conversion on Form AC to convert to the federal stock form of organization. The
following steps must be taken prior to such regulatory approval:
A. The Board of Directors shall adopt the Plan by not less than a
two-thirds vote.
B. The Bank shall notify its Members of the adoption of the Plan by
publishing a statement in a newspaper having a general circulation in each
community in which the Bank maintains an office.
C. Copies of the Plan adopted by the Board of Directors shall be made
available for inspection at each office of the Bank.
D. The Bank will promptly cause an Application for Approval of
Conversion on Form AC, and a holding application on Form H-(e)1-(s) (or
other applicable form) to be prepared and filed with the OTS, and a
Registration Statement on Form SB-2 (or other applicable form) to be
prepared and filed with the SEC. Contemporaneously with, or following the
completion of, the Conversion, if the Converted Bank determines to proceed
with the Bank Conversion, a Holding Company Application on Form FRY-3 will
be prepared and filed with the FRB, a bank conversion application will be
prepared and filed with the Commercial Bank Regulator, and a bank
conversion application will be filed with the OTS.
E. Upon filing of the Form AC, the Bank shall notify its Members that
it has filed the Form AC by posting notice in each of its offices and by
publishing notice in a
A-5
newspaper having general circulation in each community in which the Bank
maintains an office.
F. The Board of Directors of the Bank, may, at any time, and
notwithstanding any language in this Plan to the contrary, elect not to
proceed with the Bank Conversion, in which event any applications filed
pursuant to the Bank Conversion may be withdrawn or abandoned. In the
event the Bank Conversion is not pursued, any references to the Bank
Conversion in this Plan shall be disregarded.
IV. CONVERSION PROCEDURE
Upon receipt of all regulatory approvals required for consummation of the
Stock Conversion, the Bank shall convene the Special Meeting scheduled in
accordance with the Bank's Bylaws to vote on the Plan. Promptly after receipt
of OTS approval of the OTS Conversion Application and at least 20 days but not
more than 45 days prior to the Special Meeting, the Bank will distribute proxy
solicitation materials to all voting Members as of the Voting Record Date
established for voting at the Special Meeting. Proxy materials will also be
sent to each beneficial holder of an Individual Retirement Account where the
name of the beneficial holder is disclosed on the Bank's records. The proxy
solicitation materials will include a copy of the Proxy Statement and other
documents authorized for use by the regulatory authorities and may also include
a Prospectus as provided in Section VI below. The Bank will also advise each
Eligible Account Holder and Supplemental Eligible Account Holder not entitled to
vote at the Special Meeting of the proposed Conversion and the scheduled Special
Meeting and provide a postage paid card on which to indicate whether he or she
wishes to receive the Prospectus, if the Subscription Offering is not held
concurrently with the proxy solicitation of Members for the Special Meeting.
Pursuant to applicable regulations, an affirmative vote of at least a
majority of the total outstanding votes of the Members will be required for
approval of the Plan. Voting may be in person or by proxy. By voting in favor
of the adoption of the Plan and the Conversion, the Members will be voting in
favor of the Stock Conversion and the adoption by the Bank of the Federal Stock
Charter and Bylaws in the forms attached as Exhibits A and B to this Plan.
Failure to pursue or receive regulatory approval for the Bank Conversion shall
have no effect on the vote with respect to the Stock Conversion.
Following approval of the application by the OTS, the Plan will be
submitted to a vote of the Members at the Special Meeting. If the Plan is
approved by Members holding a majority of the total number of votes entitled to
be cast at the Special Meeting, the Bank will take all other necessary steps
pursuant to applicable laws and regulations to convert to a federal stock
savings institution as part of a concurrent holding company formation pursuant
to the terms of the Plan.
The Holding Company Conversion Stock will be offered for sale in the
Subscription Offering at the Maximum Subscription Price to Eligible Account
Holders, Tax-Qualified Employee Plans, Supplemental Eligible Account Holders,
Other Members and directors, Officers and employees of the Bank, prior to or
within 45 days after the date of the Special Meeting. The Bank may, either
concurrently with, at any time during, or promptly after the Subscription
A-6
Offering, also offer the Holding Company Conversion Stock to and accept
subscriptions from other Persons in a Direct Community Offering; provided that
the Bank's Eligible Account Holders, Tax-Qualified Employee Plans, Supplemental
Eligible Account Holders, Other Members and directors, Officers and employees
shall have the priority rights to subscribe for Holding Company Conversion Stock
set forth in Section VI of this Plan. However, the Holding Company and the Bank
may delay commencing the Subscription Offering beyond such 45 day period in the
event there exist unforeseen material adverse market or financial conditions.
If the Subscription Offering commences prior to the Special Meeting,
subscriptions will be accepted subject to the approval of the Plan at the
Special Meeting.
The period for the Subscription Offering will be not less than 20 days nor
more than 45 days and the period for the Direct Community Offering will be not
more than 45 days, unless extended by the Bank. Completion of the sale of all
shares of Holding Company Conversion Stock not sold in the Subscription Offering
and Direct Community Offering is required within 45 days after termination of
the Subscription Offering, subject to extension of such 45 day period by the
Holding Company and the Bank with the approval of the OTS. The Holding Company
and the Bank may jointly seek one or more extensions of such 45 day period if
necessary to complete the sale of all shares of Holding Company Conversion
Stock. In connection with such extensions, subscribers and other purchasers
will be permitted to increase, decrease or rescind their subscriptions or
purchase orders to the extent required by the OTS in approving the extensions.
Completion of the sale of all shares of Holding Company Conversion Stock is
required within 24 months after the date of the Special Meeting.
V. CONSUMMATION OF CONVERSION
A. Consummation of the Stock Conversion.
The date of consummation of the Stock Conversion will be the effective date
of the amendment of the Bank's federal mutual charter to read in the form of a
federal stock charter, which shall be the date of the sale of the Holding
Company Conversion Stock. After receipt of all orders for Holding Company
Conversion Stock, and concurrently with the execution thereof, the amendment of
the Bank's federal mutual charter and bylaws to authorize the issuance of shares
of Capital Stock and to conform to the requirements of a federal capital stock
savings institution will be declared effective by the OTS, the amended bylaws
approved by the Members will become effective, and the Bank will thereby be and
become the Converted Bank. At such time, the Holding Company Conversion Stock
will be issued and sold by the Holding Company, the Capital Stock to be issued
in the Conversion will be issued and sold to the Holding Company, and the
Converted Bank will become a wholly owned subsidiary of the Holding Company.
The Converted Bank will issue to the Holding Company 100% of its common stock,
representing all of the shares of Capital Stock to be issued by the Converted
Bank in the Stock Conversion, and the Holding Company will make payment to the
Converted Bank of that portion of the aggregate net proceeds realized by the
Holding Company from the sale of the Holding Company Conversion Stock under the
Plan as is necessary to increase the Converted Bank's tangible capital to at
least 10% of its adjusted total assets, or such other portion of the aggregate
net proceeds as may be authorized or required by the OTS.
A-7
B. Consummation of the Bank Conversion.
The Bank Conversion shall be deemed to occur and shall be effective upon
completion of all actions necessary or appropriate under applicable federal
statutes and regulations and the policies of the FRB, the Commercial Bank
Regulator and the OTS to complete the conversion of the Converted Bank to a
commercial bank, including without limitation, the approval of the Bank
Conversion by the Holding Company, as the sole shareholder of the Converted
Bank, whereupon the Converted Bank will thereby be and become the Commercial
Bank. It is expected that the Bank Conversion will be consummated as soon as
reasonably practicable following the consummation of the Stock Conversion as
described in Section VI herein, however, there can be no assurance that the Bank
Conversion will occur.
VI. STOCK OFFERING
A. Total Number of Shares and Purchase Price of Conversion Stock
The total number of shares of Holding Company Conversion Stock to be issued
and sold in the Conversion will be determined jointly by the Boards of Directors
of the Holding Company and the Bank prior to the commencement of the
Subscription Offering, subject to adjustment if necessitated by market or
financial conditions prior to consummation of the Conversion. The total number
of shares of Holding Company Conversion Stock shall also be subject to increase
in connection with any oversubscriptions in the Subscription Offering or Direct
Community Offering.
The aggregate price for which all shares of Holding Company Conversion
Stock will be sold will be based on an independent appraisal of the estimated
total pro forma market value of the Holding Company and the Converted Bank.
Such appraisal shall be performed in accordance with OTS guidelines and will be
updated as appropriate under or required by applicable regulations.
The appraisal will be made by an independent investment banking or
financial consulting firm experienced in the area of thrift institution
appraisals. The appraisal will include, among other things, an analysis of the
historical and pro forma operating results and net worth of the Converted Bank
and a comparison of the Holding Company, the Converted Bank and the Conversion
Stock with comparable thrift institutions and holding companies and their
respective outstanding capital stocks.
Based upon the independent appraisal, the Boards of Directors of the
Holding Company and the Bank will jointly fix the Maximum Subscription Price.
If, upon completion of the Subscription Offering and Direct Community
Offering, all of the Holding Company Conversion Stock is subscribed for or only
a limited number of shares remain unsubscribed for the Actual Subscription Price
for each share of Holding Company Conversion Stock will be determined by
dividing the estimated appraised aggregate pro forma market value of the Holding
Company and the Converted Bank, based on the independent appraisal as updated
upon completion of the Subscription Offering or other sale of all of the
A-8
Holding Company Conversion Stock, by the total number of shares of Holding
Company Conversion Stock to be issued and sold by the Holding Company upon
Conversion. Such appraisal will then be expressed in terms of a specific
aggregate dollar amount rather than as a range.
B. Subscription Rights
Non-transferable Subscription Rights to purchase shares will be issued
without payment therefor to Eligible Account Holders, Tax-Qualified Employee
Plans, Supplemental Eligible Account Holders, Other Members and directors,
Officers and employees of the Bank as set forth below.
1. Preference Category No. 1: Eligible Account Holders
Each Eligible Account Holder shall receive non-transferable
Subscription Rights to subscribe for shares of Holding Company Conversion
Stock in an amount equal to the greater of (i) $50,000; (ii) one-tenth of
one percent (.10%) of the total offering of shares; or (iii) 15 times the
product (rounded down to the next whole number) obtained by multiplying the
total number of shares of common stock to be issued by a fraction of which
the numerator is the amount of the qualifying deposit of the Eligible
Account Holder and the denominator is the total amount of qualifying
deposits of all Eligible Account Holders in the converting Bank in each
case on the Eligibility Record Date. If sufficient shares are not
available, shares shall be allocated first to permit each subscribing
Eligible Account Holder to purchase to the extent possible 100 shares, and
thereafter among each subscribing Eligible Account Holder pro rata in the
same proportion that his Qualifying Deposit bears to the total Qualifying
Deposits of all subscribing Eligible Account Holders whose subscriptions
remain unsatisfied.
Non-transferable Subscription Rights to purchase Holding Company
Conversion Stock received by directors and Officers of the Bank and their
Associates, based on their increased deposits in the Bank in the one year
period preceding the Eligibility Record Date, shall be subordinated to all
other subscriptions involving the exercise of non-transferable Subscription
Rights of Eligible Account Holders.
2. Preference Category No. 2: Tax-Qualified Employee Plans
Each Tax-Qualified Employee Plan shall be entitled to receive
non-transferable Subscription Rights to purchase up to 10% of the shares of
Holding Company Conversion Stock, provided that singly or in the aggregate
such plans (other than that portion of such plans which is self-directed)
shall not purchase more than 10% of the shares of the Holding Company
Conversion Stock. Subscription Rights received pursuant to this Category
shall be subordinated to all rights received by Eligible Account Holders to
purchase shares pursuant to Category No. 1; provided, however, that
notwithstanding any other provision of this Plan to the contrary, the
Tax-Qualified Employee Plans shall have a first priority Subscription Right
to the extent that the total number of shares of Holding Company
A-9
Conversion Stock sold in the Conversion exceeds the maximum of the appraisal
range as set forth in the subscription prospectus.
3. Preference Category No. 3: Supplemental Eligible Account Holders
Each Supplemental Eligible Account Holder shall receive
non-transferable Subscription Rights to subscribe for shares of Holding
Company Conversion Stock in an amount equal to the greater of (i) $50,000;
(ii) one-tenth of one percent (.10%) of the total offering of shares; or
(iii) 15 times the product (rounded down to the next whole number) obtained
by multiplying the total number of shares of common stock to be issued by a
fraction of which the numerator is the amount of the qualifying deposit of
the Supplemental Eligible Account Holder and the denominator is the total
amount of qualifying deposits of all Supplemental Eligible Account Holders
in the converting Bank in each case on the Supplemental Eligibility Record
Date.
Subscription Rights received pursuant to this category shall be
subordinated to all Subscription Rights received by Eligible Account
Holders and Tax-Qualified Employee Plans pursuant to Category Nos. 1 and 2
above.
Any non-transferable Subscription Rights to purchase shares received
by an Eligible Account Holder in accordance with Category No. 1 shall
reduce to the extent thereof the Subscription Rights to be distributed to
such person pursuant to this Category.
In the event of an oversubscription for shares under the provisions of
this subparagraph, the shares available shall be allocated first to permit
each subscribing Supplemental Eligible Account Holder, to the extent
possible, to purchase a number of shares sufficient to make his total
allocation (including the number of shares, if any, allocated in accordance
with Category No. 1) equal to 100 shares, and thereafter among each
subscribing Supplemental Eligible Account Holder pro rata in the same
proportion that his Qualifying Deposit bears to the total Qualifying
Deposits of all subscribing Supplemental Eligible Account Holders whose
subscriptions remain unsatisfied.
4. Preference Category No. 4: Other Members
Each Other Member shall receive non-transferable Subscription Rights
to subscribe for shares of Holding Company Conversion Stock remaining after
satisfying the subscriptions provided for under Category Nos. 1 through 3
above, subject to the following conditions:
a. Each Other Member shall be entitled to subscribe for an
amount of shares equal to the greater of (i) $50,000; or (ii)
one-tenth of one percent (.10%) of the total offering of shares of
common stock in the Conversion, to the extent that Holding Company
Conversion Stock is available.
A-10
b. In the event of an oversubscription for shares under the
provisions of this subparagraph, the shares available shall be
allocated among the subscribing Other Members pro rata in the same
proportion that his number of votes on the Voting Record Date bears to
the total number of votes on the Voting Record Date of all subscribing
Other Members on such date. Such number of votes shall be determined
based on the Bank's mutual charter and bylaws in effect on the date of
approval by members of this Plan of Conversion.
5. Preference Category No. 5: Directors, Officers and Employees
Each director, Officer and employee of the Bank as of the date of the
commencement of the Subscription Offering shall be entitled to receive
non-transferable Subscription Rights to purchase shares of the Holding
Company Conversion Stock to the extent that shares are available after
satisfying subscriptions under Category Nos. 1 through 4 above. The shares
which may be purchased under this Category are subject to the following
conditions:
a. The total number of shares which may be purchased under this
Category may not exceed 25% of the number of shares of Holding Company
Conversion Stock.
b. The maximum amount of shares which may be purchased under
this Category by any Person is $50,000 of Holding Company Conversion
Stock. In the event of an oversubscription for shares under the
provisions of this subparagraph, the shares available shall be
allocated pro rata among all subscribers in this Category.
C. Direct Community Offering
1. Any shares of Holding Company Conversion Stock not subscribed
for in the Subscription Offering may be offered for sale in a Direct
Community Offering. This will involve an offering of all unsubscribed
shares directly to the general public with a preference to those natural
persons residing in the county in which the Bank maintains its offices.
The Direct Community Offering, if any, shall be for a period of not more
than 45 days unless extended by the Holding Company and the Bank, and
shall commence concurrently with, during or promptly after the
Subscription Offering. The purchase price per share to the general
public in a Direct Community Offering shall be the same as the Actual
Subscription Price. The Holding Company and the Bank may use an
investment banking firm or firms on a best efforts basis to sell the
unsubscribed shares in the Subscription and Direct Community Offering.
The Holding Company and the Bank may pay a commission or other fee to
such investment banking firm or firms as to the shares sold by such firm
or firms in the Subscription and Direct Community Offering and may also
reimburse such firm or firms for expenses incurred in connection with the
sale. The Direct Community Offering may include a syndicated community
offering managed by such investment banking firm or firms. The Holding
Company Conversion Stock will be
A-11
offered and sold in the Direct Community Offering, in accordance with
OTS regulations, so as to achieve the widest distribution of the Holding
Company Conversion Stock. No person, by himself or herself, or with an
Associate or group of Persons acting in concert, may subscribe for or
purchase more than $50,000 of Holding Company Conversion Stock offered
in the Direct Community Offering. Further, the Bank may limit total
subscriptions under this Section VI.C.1 so as to assure that the number
of shares available for the Public Offering may be up to a specified
percentage of the number of shares of Holding Company Conversion Stock.
Finally, the Bank may reserve shares offered in the Community Offering
for sales to institutional investors.
In the event of an oversubscription for shares in the Community
Offering, shares may be allocated (to the extent shares remain available)
first to cover any reservation of shares for a public offering or
institutional orders, next to cover orders of natural persons residing in
the counties in which the Bank maintains its offices, then to cover the
orders of any other person subscribing for shares in the Community Offering
so that each such person may receive 500 shares, and thereafter, on a pro
rata basis to such persons based on the amount of their respective
subscriptions.
The Bank and the Holding Company, in their sole discretion, may reject
subscriptions, in whole or in part, received from any Person under this
Section VI.C.
2. If for any reason shares remain unsold after the Subscription
Offering and the Direct Community Offering, the Boards of Directors of the
Holding Company and the Bank will seek to make other arrangements for the
sale of the remaining shares. Such other arrangements will be subject to
the approval of the OTS and to compliance with applicable securities laws.
D. Additional Limitations Upon Purchases of Shares of Holding Company
Conversion Stock
The following additional limitations shall be imposed on all purchases of
Holding Company Conversion Stock in the Conversion:
1. No Person, by himself or herself, or with an Associate or group of
Persons acting in concert, may subscribe for or purchase in the Conversion
a number of shares of Holding Company Conversion Stock which exceeds the
lesser of $50,000 or five percent (5.0%) of the Holding Company Conversion
Stock offered in the Conversion. For purposes of this paragraph, an
Associate of a Person does not include a Tax-Qualified or Non-Tax Qualified
Employee Plan in which the person has a substantial beneficial interest or
serves as a trustee or in a similar fiduciary capacity. Moreover, for
purposes of this paragraph, shares held by one or more Tax-Qualified or
Non-Tax Qualified Employee Plans attributed to a Person shall not be
aggregated with shares purchased directly by or otherwise attributable to
that Person.
A-12
2. Directors and Officers and their Associates may not purchase in
all categories in the Conversion an aggregate of more than 35% of the
Holding Company Conversion Stock. For purposes of this paragraph, an
Associate of a Person does not include any Tax-Qualified Employee Plan.
Moreover, any shares attributable to the Officers and directors and their
Associates, but held by one or more Tax-Qualified Employee Plans shall not
be included in calculating the number of shares which may be purchased
under the limitation in this paragraph.
3. The minimum number of shares of Holding Company Conversion Stock
that may be purchased by any Person in the Conversion is 25 shares,
provided sufficient shares are available.
4. The Boards of Directors of the Holding Company and the Bank may,
in their sole discretion, increase the maximum purchase limitation referred
to in subparagraph 1. herein up to 9.99%, provided that orders for shares
exceeding 5% of the shares being offered in the Subscription Offering shall
not exceed, in the aggregate, 10% of the shares being offered in the
Subscription Offering. Requests to purchase additional shares of Holding
Company Conversion Stock under this provision will be allocated by the
Boards of Directors on a pro rata basis giving priority in accordance with
the priority rights set forth in this Section VI.
5. The Boards of Directors of the Holding Company and the Bank may,
in their sole discretion, decrease the maximum purchase limitation referred to
in subparagraph 1. herein down to 1.0%.
Depending upon market and financial conditions, the Boards of Directors of
the Holding Company and the Bank, with the approval of the OTS and without
further approval of the Members, may increase or decrease any of the above
purchase limitations.
For purposes of this Section VI, the directors of the Holding Company and
the Bank shall not be deemed to be Associates or a group acting in concert
solely as a result of their serving in such capacities.
Each Person purchasing Holding Company Conversion Stock in the Conversion
shall be deemed to confirm that such purchase does not conflict with the above
purchase limitations.
E. Restrictions and Other Characteristics of Holding Company Conversion
Stock Being Sold
1. Transferability. Holding Company Conversion Stock purchased by
Persons other than directors and Officers of the Holding Company or the
Bank will be transferable without restriction. Shares purchased by
directors or Officers shall not be sold or otherwise disposed of for
value for a period of one year from the date of Conversion, except for
any disposition of such shares (i) following the death of the original
purchaser, or (ii) resulting from an exchange of securities in a merger
or acquisition approved by the
A-13
applicable regulatory authorities. Any transfers that could result in a
change of control of the Bank or the Holding Company or result in the
ownership by any Person or group acting in concert of more than 10% of
any class of the Bank's or the Holding Company's equity securities are
subject to the prior approval of the OTS.
The certificates representing shares of Holding Company Conversion
Stock issued to directors and Officers shall bear a legend giving
appropriate notice of the one year holding period restriction. Appropriate
instructions shall be given to the transfer agent for such stock with
respect to the applicable restrictions relating to the transfer of
restricted stock. Any shares of common stock of the Holding Company
subsequently issued as a stock dividend, stock split, or otherwise, with
respect to any such restricted stock, shall be subject to the same holding
period restrictions for Holding Company or Bank directors and Officers as
may be then applicable to such restricted stock.
No director or Officer of the Holding Company or of the Bank, or
Associate of such a director or Officer, shall purchase any outstanding
shares of capital stock of the Holding Company for a period of three years
following the Conversion without the prior written approval of the OTS,
except through a broker or dealer registered with the SEC or in a
"negotiated transaction" involving more than one percent of the
then-outstanding shares of common stock of the Holding Company. As used
herein, the term "negotiated transaction" means a transaction in which the
securities are offered and the terms and arrangements relating to any sale
are arrived at through direct communications between the seller or any
Person acting on its behalf and the purchaser or his investment
representative. The term "investment representative" shall mean a
professional investment advisor acting as agent for the purchaser and
independent of the seller and not acting on behalf of the seller in
connection with the transaction.
2. Repurchase and Dividend Rights. For a period of three years
following Conversion, the Converted Bank shall not repurchase any shares of
its capital stock, except in the case of an offer to repurchase on a pro
rata basis made to all holders of capital stock of the Converted Bank. Any
such offer shall be subject to the prior non-objection of the OTS. A
repurchase of qualifying shares of a director shall not be deemed to be a
repurchase for purposes of this Section VI.E.2.
Present regulations also provide that the Converted Bank may not
declare or pay a cash dividend on or repurchase any of its stock (i) if the
result thereof would be to reduce the regulatory capital of the Converted
Bank below the amount required for the liquidation account to be established
pursuant to Section XIII hereof, and (ii) except in compliance with
requirements of Section 563.134 of the Rules and Regulations of the OTS.
The above limitations are subject to Section 563b.3(g)(3) of the Rules
and Regulations of the OTS, which generally provides that the Converted
Bank may repurchase its capital stock provided (i) no repurchases occur
within one year following conversion, (ii) repurchases during the second
and third year after conversion are part of an open market stock repurchase
program that does not allow for a repurchase of more than 5% of
A-14
the Bank's outstanding capital stock during a twelve-month period without
OTS approval, (iii) the repurchases do not cause the Bank to become
undercapitalized, and (iv) the Bank provides notice to the OTS at least
10 days prior to the commencement of a repurchase program and the OTS does
not object. In addition, the above limitations shall not preclude payments
of dividends or repurchases of capital stock by the Converted Bank in the
event applicable federal regulatory limitations are liberalized subsequent
to OTS approval of the Plan or as otherwise permitted by the OTS or other
appropriate regulatory authority. Such restrictions and limitations shall
not apply following consummation of the Bank Conversion, unless the OTS
approval of the Bank Conversion otherwise requires.
3. Voting Rights. After Conversion, holders of deposit accounts will
not have voting rights in the Bank or the Holding Company. Exclusive
voting rights as to the Bank will be vested in the Holding Company, as the
sole stockholder of the Bank. Voting rights as to the Holding Company will
be held exclusively by its stockholders.
F. Exercise of Subscription Rights; Order Forms
1. If the Subscription Offering occurs concurrently with the
solicitation of proxies for the Special Meeting, the subscription
prospectus and Order Form may be sent to each Eligible Account Holder,
Tax-Qualified Employee Plan, Supplemental Eligible Account Holder, Other
Member, and director, Officer and employee at their last known address as
shown on the records of the Bank. However, the Bank may, and if the
Subscription Offering commences after the Special Meeting the Bank shall,
furnish a subscription prospectus and Order Form only to Eligible Account
Holders, Tax-Qualified Employee Plans, Supplemental Eligible Account
Holders, Other Members, and directors, Officers and employees who have
returned to the Bank by a specified date prior to the commencement of the
Subscription Offering a post card or other written communication requesting
a subscription prospectus and Order Form. In such event, the Bank shall
provide a postage-paid post card for this purpose and make appropriate
disclosure in its proxy statement for the solicitation of proxies to be
voted at the Special Meeting and/or letter sent in lieu of the proxy
statement to those Eligible Account Holders, Tax-Qualified Employee Plans
or Supplemental Eligible Account Holders who are not Members on the Voting
Record Date.
2. Each Order Form will be preceded or accompanied by a subscription
prospectus describing the Holding Company and the Converted Bank and the
shares of Holding Company Conversion Stock being offered for subscription
and containing all other information required by the OTS or the SEC or
necessary to enable Persons to make informed investment decisions regarding
the purchase of Holding Company Conversion Stock.
3. The Order Forms (or accompanying instructions) used for the
Subscription Offering will contain, among other things, the following:
A-15
(i) A clear and intelligible explanation of the Subscription
Rights granted under the Plan to Eligible Account Holders,
Tax-Qualified Employee Plans, Supplemental Eligible Account Holders,
Other Members, and directors, Officers and employees;
(ii) A specified expiration date by which Order Forms must be
returned to and actually received by the Bank or its representative
for purposes of exercising Subscription Rights, which date will be not
less than 20 days after the Order Forms are mailed by the Bank;
(iii) The Maximum Subscription Price to be paid for each share
subscribed for when the Order Form is returned;
(iv) A statement that 25 shares is the minimum number of
shares of Holding Company Conversion Stock that may be subscribed for
under the Plan;
(v) A specifically designated blank space for indicating the
number of shares being subscribed for;
(vi) A set of detailed instructions as to how to complete the
Order Form including a statement as to the available alternative
methods of payment for the shares being subscribed for;
(vii) Specifically designated blank spaces for dating and
signing the Order Form;
(viii) An acknowledgment that the subscriber has received the
subscription prospectus;
(ix) A statement of the consequences of failing to properly
complete and return the Order Form, including a statement that the
Subscription Rights will expire on the expiration date specified on
the Order Form unless such expiration date is extended by the Holding
Company and the Bank, and that the Subscription Rights may be
exercised only by delivering the Order Form, properly completed and
executed, to the Bank or its representative by the expiration date,
together with required payment of the Maximum Subscription Price for
all shares of Holding Company Conversion Stock subscribed for;
(x) A statement that the Subscription Rights are
non-transferable and that all shares of Holding Company Conversion
Stock subscribed for upon exercise of Subscription Rights must be
purchased on behalf of the Person exercising the Subscription Rights
for his own account; and
A-16
(xi) A statement that, after receipt by the Bank or its
representative, a Subscription may not be modified, withdrawn or
canceled without the consent of the Bank.
G. Method of Payment
Payment for all shares of Holding Company Conversion Stock subscribed for,
computed on the basis of the Maximum Subscription Price, must accompany all
completed Order Forms. Payment may be made in cash (if presented in Person), by
check, or, if the subscriber has a Deposit Account in the Bank (including a
certificate of deposit), the subscriber may authorize the Bank to charge the
subscriber's account.
If a subscriber authorizes the Bank to charge his or her account, the funds
will continue to earn interest, but may not be used by the subscriber until all
Holding Company Conversion Stock has been sold or the Plan of Conversion is
terminated, whichever is earlier. The Bank will allow subscribers to purchase
shares by withdrawing funds from certificate accounts without the assessment of
early withdrawal penalties with the exception of prepaid interest in the form of
promotional gifts. In the case of early withdrawal of only a portion of such
account, the certificate evidencing such account shall be canceled if the
remaining balance of the account is less than the applicable minimum balance
requirement, in which event the remaining balance will earn interest at the
passbook rate. This waiver of the early withdrawal penalty is applicable only
to withdrawals made in connection with the purchase of Holding Company
Conversion Stock under the Plan of Conversion. Interest will also be paid, at
not less than the then-current passbook rate, on all orders paid in cash, by
check or money order, from the date payment is received until consummation of
the Conversion. Payments made in cash, by check or money order will be placed
by the Bank in an escrow or other account established specifically for this
purpose.
In the event of an unfilled amount of any subscription order, the Converted
Bank will make an appropriate refund or cancel an appropriate portion of the
related withdrawal authorization, after consummation of the Conversion,
including any difference between the Maximum Subscription Price and the Actual
Subscription Price (unless subscribers are afforded the right to apply such
difference to the purchase of additional whole shares). If for any reason the
Conversion is not consummated, purchasers will have refunded to them all
payments made and all withdrawal authorizations will be canceled in the case of
subscription payments authorized from accounts at the Bank.
If any Tax-Qualified Employee Plans or Non-Tax-Qualified Employee Plans
subscribe for shares during the Subscription Offering, such plans will not be
required to pay for the shares subscribed for at the time they subscribe, but
may pay for such shares of Holding Company Conversion Stock subscribed for
upon consummation of the Conversion. In the event that, after the completion
of the Subscription Offering, the amount of shares to be issued is increased
above the maximum of the appraisal range included in the Prospectus, the Tax
Qualified and Non-Tax Qualified Employee Plans shall be entitled to increase
their subscriptions by a percentage equal to the percentage increase in the
amount of shares to be issued above the maximum of the appraisal
A-17
range provided that such subscriptions shall continue to be subject to
applicable purchase limits and stock allocation procedures.
H. Undelivered, Defective or Late Order Forms; Insufficient Payment
The Boards of Directors of the Holding Company and the Bank shall have the
absolute right, in their sole discretion, to reject any Order Form, including
but not limited to, any Order Forms which (i) are not delivered or are returned
by the United States Postal Service (or the addressee cannot be located); (ii)
are not received back by the Bank or its representative, or are received after
the termination date specified thereon; (iii) are defectively completed or
executed; (iv) are not accompanied by the total required payment for the shares
of Holding Company Conversion Stock subscribed for (including cases in which the
subscribers' Deposit Accounts or certificate accounts are insufficient to cover
the authorized withdrawal for the required payment); or (v) are submitted by or
on behalf of a Person whose representations the Boards of Directors of the
Holding Company and the Bank believe to be false or who they otherwise believe,
either alone or acting in concert with others, is violating, evading or
circumventing, or intends to violate, evade or circumvent, the terms and
conditions of this Plan. In such event, the Subscription Rights of the Person
to whom such rights have been granted will not be honored and will be treated as
though such Person failed to return the completed Order Form within the time
period specified therein. The Bank may, but will not be required to, waive any
irregularity relating to any Order Form or require submission of corrected Order
Forms or the remittance of full payment for subscribed shares by such date as
the Bank may specify. The interpretation of the Holding Company and the Bank of
the terms and conditions of this Plan and of the proper completion of the Order
Form will be final, subject to the authority of the OTS.
I. Member in Non-Qualified States or in Foreign Countries
The Holding Company and the Bank will make reasonable efforts to comply
with the securities laws of all states in the United States in which Persons
entitled to subscribe for Holding Company Conversion Stock pursuant to the Plan
reside. However, no shares will be offered or sold under the Plan of Conversion
to any such Person who (1) resides in a foreign country or (2) resides in a
state of the United States in which a small number of Persons otherwise eligible
to subscribe for shares under the Plan of Conversion reside or as to which the
Holding Company and the Bank determine that compliance with the securities laws
of such state would be impracticable for reasons of cost or otherwise,
including, but not limited to, a requirement that the Holding Company or the
Bank or any of their officers, directors or employees register, under the
securities laws of such state, as a broker, dealer, salesman or agent. No
payments will be made in lieu of the granting of Subscription Rights to any such
Person.
VII. FEDERAL STOCK CHARTER AND BYLAWS
A. As part of the Conversion, the Bank will take all appropriate steps to
amend its charter to read in the form of federal stock savings institution
charter as prescribed by the OTS. A copy of the proposed stock charter is
available upon request. By their approval of the Plan, the Members of the Bank
will thereby approve and adopt such charter.
A-18
B. The Bank will also take appropriate steps to amend its bylaws to read
in the form prescribed by the OTS for a federal stock savings institution. A
copy of the proposed federal stock bylaws is available upon request.
C. The effective date of the adoption of the Bank's federal stock charter
and bylaws shall be the date of the issuance and sale of the Holding Company
Conversion Stock as specified by the OTS.
VIII. HOLDING COMPANY CERTIFICATE OF INCORPORATION
A copy of the proposed certificate of incorporation of the Holding Company
will be made available from the Bank upon request.
IX. DIRECTORS OF THE CONVERTED BANK
Each Person serving as a member of the Board of Directors of the Bank at
the time of the Stock Conversion will thereupon become a director of the
Converted Bank. If the Bank Conversion is consummated, each person serving as a
member of the Board of Directors of the Converted Bank at the time of the Bank
Conversion will become a director of the Converted Bank following the Bank
Conversion.
X. STOCK OPTION AND INCENTIVE PLAN AND RECOGNITION AND
RETENTION PLAN
In order to provide an incentive for directors, Officers and employees of
the Holding Company and its subsidiaries (including the Bank), the Board of
Directors of the Holding Company intends to adopt, subject to shareholder
approval, a stock option and incentive plan and a recognition and retention plan
as permitted by applicable regulation following the Conversion.
XI. CONTRIBUTIONS TO TAX-QUALIFIED EMPLOYEE PLANS
The Converted Bank and the Holding Company may in their discretion make
scheduled contributions to any Tax-Qualified Employee Plans, provided that any
such contributions which are for the acquisition of Holding Company Conversion
Stock, or the repayment of debt incurred for such an acquisition, do not cause
the Converted Bank to fail to meet its regulatory capital requirements.
XII. SECURITIES REGISTRATION AND MARKET MAKING
Promptly following the Stock Conversion, the Holding Company will register
its common stock with the SEC pursuant to the Exchange Act. In connection with
the registration, the Holding Company will undertake not to deregister such
common stock, without the approval of the OTS, for a period of three years
thereafter.
A-19
The Holding Company shall use its best efforts to encourage and assist two
or more market makers to establish and maintain a market for its common stock
promptly following Conversion.
XIII. STATUS OF SAVINGS ACCOUNTS AND LOANS SUBSEQUENT TO
CONVERSION
Each Deposit Account holder shall retain, without payment, a withdrawable
Deposit Account or Accounts in the Converted Bank, equal in amount to the
withdrawable value of such account holder's Deposit Account or Accounts prior to
the Stock Conversion. All Deposit Accounts will continue to be insured by the
FDIC up to the applicable limits of insurance coverage, and shall be subject to
the same terms and conditions (except as to voting and liquidation rights) as
such Deposit Account in the Bank at the time of the Conversion. All loans shall
retain the same status after Conversion as these loans had prior to Conversion.
XIV. LIQUIDATION ACCOUNT
For purposes of granting to Eligible Account Holders and Supplemental
Eligible Account Holders who continue to maintain Deposit Accounts at the
Converted Bank a priority in the event of a complete liquidation of the
Converted Bank, the Converted Bank will, at the time of Conversion, establish a
liquidation account in an amount equal to the net worth of the Bank as shown on
its latest statement of financial condition contained in the final offering
circular used in connection with the Conversion. The creation and maintenance
of the liquidation account will not operate to restrict the use or application
of any of the regulatory capital accounts of the Converted Bank; provided,
however, that such regulatory capital accounts will not be voluntarily reduced
below the required dollar amount of the liquidation account. Each Eligible
Account Holder and Supplemental Eligible Account Holder shall, with respect to
the Deposit Account held, have a related inchoate interest in a portion of the
liquidation account balance ("subaccount balance").
The initial subaccount balance of a Deposit Account held by an Eligible
Account Holder or Supplemental Eligible Account Holder shall be determined by
multiplying the opening balance in the liquidation account by a fraction of
which the numerator is the amount of the Qualifying Deposit in the Deposit
Account on the Eligibility Record Date or the Supplemental Eligibility Record
Date and the denominator is the total amount of the Qualifying Deposits of all
Eligible Account Holders and Supplemental Eligible Account Holders on such
record dates in the Bank. Such initial subaccount balance shall not be
increased, and it shall be subject to downward adjustment as provided below.
If the deposit balance in any Deposit Account of an Eligible Account
Holder or Supplemental Eligible Account Holder at the close of business on
any annual closing date subsequent to the record date is less than the lesser
of (i) the deposit balance in such Deposit Account at the close of business
on any other annual closing date subsequent to the Eligibility Record Date or
the Supplemental Eligibility Record Date or (ii) the amount of the Qualifying
Deposit in such Deposit Account on the Eligibility Record Date or
Supplemental Eligibility Record Date, the subaccount balance shall be reduced
in an amount proportionate to the reduction in such deposit balance. In the
event of a downward adjustment, the subaccount balance shall not be
A-20
subsequently increased, notwithstanding any increase in the deposit balance
of the related Deposit Account. If all funds in such Deposit Account are
withdrawn, the related subaccount balance shall be reduced to zero.
In the event of a complete liquidation of the Converted Bank (and only in
such event), each Eligible Account Holder and Supplemental Eligible Account
Holder shall be entitled to receive a liquidation distribution from the
liquidation account in the amount of the then-current adjusted subaccount
balances for Deposit Accounts then held before any liquidation distribution may
be made to stockholders. No merger, consolidation, bulk purchase of assets with
assumptions of Deposit Accounts and other liabilities, or similar transactions
with another institution the accounts of which are insured by the FDIC, shall be
considered to be a complete liquidation. In such transactions, the liquidation
account shall be assumed by the surviving institution.
The Bank Conversion shall not be deemed to be a complete liquidation of the
Converted Bank for purposes of the distribution of the liquidation account.
Upon consummation of the Bank Conversion, the liquidation account, and all
rights and obligations of the Converted Bank in connection therewith, shall be
assumed by the Commercial Bank.
The liquidation account shall be maintained by the Commercial Bank, under
the same rules and conditions applicable to the Converted Bank, subsequent to
the Bank Conversion for the benefit of Eligible Account Holders and Supplemental
Eligible Account Holders who retain their Deposit Account in the Commercial
Bank.
XV. RESTRICTIONS ON ACQUISITION OF CONVERTED BANK, THE COMMERCIAL BANK, OR THE
HOLDING COMPANY
Regulations of the OTS limit acquisitions, and offers to acquire, direct or
indirect beneficial ownership of more than 10% of any class of an equity
security of the Converted Bank or the Holding Company. In addition, consistent
with the regulations of the OTS, the charter of the Converted Bank shall provide
that for a period of five years following completion of the Conversion: (i) no
Person (i.e., no individual, group acting in concert, corporation, partnership,
association, joint stock company, trust, or unincorporated organization or
similar company, syndicate, or any other group formed for the purpose of
acquiring, holding or disposing of securities of an insured institution) shall
directly or indirectly offer to acquire or acquire beneficial ownership of more
than 10% of any class of the Bank's equity securities. Shares beneficially
owned in violation of this charter provision shall not be counted as shares
entitled to vote and shall not be voted by any Person or counted as voting
shares in connection with any matter submitted to the shareholders for a vote.
This limitation shall not apply to any offer to acquire or acquisition of
beneficial ownership of more than 10% of the common stock of the Bank by a
corporation whose ownership is or will be substantially the same as the
ownership of the Bank, provided that the offer or acquisition is made more than
one year following the date of completion of the Conversion; (ii) shareholders
shall not be permitted to cumulate their votes for elections of directors; and
(iii) special meetings of the shareholders relating to changes in control or
amendment of the charter may only be called by the Board of Directors.
A-21
Upon consummation of the Bank Conversion, no person (i.e., an individual, a
group acting in concert, a corporation, a partnership, an association, a joint
stock company, a trust or any unincorporated organization or similar company, a
syndicate or any other group formed for the purpose of acquiring, holding or
disposing of securities of an insured institution or its holding company) shall
be permitted to directly, or indirectly, offer to purchase or actually acquire
the beneficial ownership of more than 10% of any class of the Holding Company's
stock without the prior approval of the FRB.
The Holding Company may provide in its certificate of incorporation a
provision that, for a specified period of up to five years following the date
of the completion of the Stock Conversion, no person shall directly or
indirectly offer to acquire or actually acquire the beneficial ownership of
more than 10% of any class of Holding Company stock except with respect to
purchases by one or more Tax-Qualified Employee Stock Benefit Plans of the
Holding Company or Converted Bank. The Holding Company may provide in its
certificate of incorporation for such other provisions affecting the
acquisition of Holding Company stock as shall be determined by its Boards of
Directors.
XVI. AMENDMENT OR TERMINATION OF PLAN
If necessary or desirable, the Plan may be amended at any time prior to
submission of the Plan and proxy materials to the Members by a two-thirds vote
of the respective Boards of Directors of the Holding Company and the Bank.
After submission of the Plan and proxy materials to the Members, the Plan may be
amended by a two-thirds vote of the respective Boards of Directors of the
Holding Company and the Bank only with the concurrence of the OTS. Any
amendments to the Plan made after approval by the Members with the concurrence
of the OTS shall not necessitate further approval by the Members unless
otherwise required.
The Plan may be terminated by a two-thirds vote of the Bank's Board of
Directors at any time prior to the Special Meeting of Members, and at any time
following such Special Meeting with the concurrence of the OTS. In its
discretion, the Board of Directors of the Bank may modify or terminate the Plan
upon the order or with the approval of the OTS and without further approval by
Members. The Plan shall terminate if the sale of all shares of Conversion Stock
is not completed within 24 months of the date of the Special Meeting. A
specific resolution approved by a majority of the Board of Directors of the Bank
is required in order for the Bank to terminate the Plan prior to the end of such
24 month period.
XVII. EXPENSES OF THE CONVERSION
The Holding Company and the Bank shall use their best efforts to assure
that expenses incurred by them in connection with the Conversion shall be
reasonable.
XVIII. TAX RULING
Consummation of the Conversion is expressly conditioned upon prior
receipt of either a ruling of the United States Internal Revenue Service or
an opinion of tax counsel with respect to
A-22
federal taxation, and either a ruling of the New York taxation authorities or
an opinion of tax counsel or other tax advisor with respect to New York
taxation, to the effect that consummation of the transactions contemplated
herein will not be taxable to the Holding Company or the Bank.
XIX. EXTENSION OF CREDIT FOR PURCHASE OF COMMON STOCK
The Bank may not knowingly loan funds or otherwise extend credit to any
Person to purchase in the Conversion shares of Holding Company Conversion Stock.
Dated: April 1, 1997
F:\CLIENTS\1019\CANAJOHA.P02
A-23