EXHIBIT 99.2
LEXINGTON FIRST FEDERAL MUTUAL HOLDING COMPANY
19 Natchez Trace Drive
Lexington, Tennessee 38351
(901) 968-6624
NOTICE OF SPECIAL MEETING OF MEMBERS
Notice is hereby given that a Special Meeting of Members (the "Special
Meeting") of Lexington First Federal Mutual Holding Company (the "Mutual Holding
Company") will be held at Lexington First Federal Savings Bank, 19 Natchez Trace
Drive, Lexington, Tennessee 38351, on _______, _____ __, 1997 at __:__ _.m.,
local time. Business to be taken up at the Special Meeting shall be:
(1) To consider and vote upon a Plan of Conversion and Agreement and Plan
of Reorganization (the "Plan") among the Mutual Holding Company,
Lexington First Federal Savings Bank (the "Bank" or "Lexington
First") and Community National Corporation (the "Company") pursuant
to which: (i) the Mutual Holding Company, which currently owns
approximately 60.54% of the outstanding shares of the common stock,
$1.00 par value, of the Bank (the "Bank Common Stock"), will convert
from mutual form to a federal interim stock savings bank and
simultaneously merge into the Bank, with the Bank being the surviving
entity; (ii) the Bank will then merge with an interim institution to
be formed as a wholly owned subsidiary of the Company, with the Bank
as the surviving entity; (iii) the outstanding shares of Bank Common
Stock (other than those held by the Mutual Holding Company, which
will be cancelled) will be converted into shares of the common stock,
$1.00 par value, of the Company (the "Common Stock") pursuant to a
ratio that will result in the holders of such shares (the "Public
Stockholders") owning in the aggregate approximately the same
percentage of the Company as they currently own of the Bank, before
giving effect to such stockholders purchasing additional shares in a
concurrent stock offering by the Company thereafter, receiving cash
in lieu of fractional shares or the exercise of dissenters' rights;
(iv) the Company will offer and sell shares of the Common Stock; and
(v) the Bank will convert from a federal stock savings bank to a
national bank (the "Bank Conversion"); and
(2) To consider and vote upon any other matters that may lawfully come
before the Special Meeting.
Note: The Board of Directors is not aware of any other matters that may
come before the Special Meeting.
The members entitled to vote at the Special Meeting shall be those members
of the Mutual Holding Company at the close of business on __________, 1997, and
who continue as members until the Special Meeting, and should the Special
Meeting be, from time to time, adjourned to a later time, until the final
adjournment thereof.
BY ORDER OF THE BOARD OF DIRECTORS
---------------------------------------------
Arba M. Taylor
Secretary
______________, 1997
Lexington, Tennessee
YOUR BOARD OF DIRECTORS URGES YOU TO CONSIDER CAREFULLY THIS PROXY MATERIAL
AND, WHETHER OR NOT YOU PLAN TO BE PRESENT IN PERSON AT THE SPECIAL MEETING, TO
FILL IN, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD(S) AS SOON AS POSSIBLE TO
ASSURE THAT YOUR VOTES WILL BE COUNTED. THIS WILL NOT PREVENT YOU FROM VOTING
IN PERSON IF YOU ATTEND THE SPECIAL MEETING
THE BANK, AS TRUSTEE FOR RETIREMENT ACCOUNTS ON DEPOSIT AT THE BANK, WILL
VOTE FOR THE PLAN UNLESS THE BENEFICIAL OWNER EXECUTES A PROXY FOR THE SPECIAL
MEETING, ATTENDS AND VOTES IN PERSON, OR OTHERWISE DIRECTS THE BANK.
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LEXINGTON FIRST FEDERAL MUTUAL HOLDING COMPANY
19 Natchez Trace Drive
Lexington, Tennessee 38351
(901) 968-6624
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PROXY STATEMENT
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YOUR PROXY, IN THE FORM ENCLOSED, IS SOLICITED BY THE BOARD OF
DIRECTORS OF LEXINGTON FIRST FEDERAL MUTUAL HOLDING COMPANY FOR USE AT A SPECIAL
MEETING OF ITS MEMBERS TO BE HELD ON ____________ __, 1997 AND ANY ADJOURNMENT
OF THAT MEETING, FOR THE PURPOSES SET FORTH IN THE FOREGOING NOTICE OF SPECIAL
MEETING. YOUR BOARD OF DIRECTORS URGES YOU TO VOTE FOR THE PLAN OF CONVERSION
---
AND AGREEMENT AND PLAN OF REORGANIZATION.
PURPOSE OF MEETING -- SUMMARY
A Special Meeting of Members (the "Special Meeting") of Lexington
First Federal Mutual Holding Company (the "Mutual Holding Company") will be held
at Lexington First Federal Savings Bank (the "Bank"), 19 Natchez Trace Drive,
Lexington, Tennessee 38351 on __________, ________, 199_, at __:__ _.m., local
time, for the purpose of considering and voting upon a Plan of Conversion and
Agreement and Plan of Reorganization (the "Plan") among the Mutual Holding
Company, Lexington First and Community National Corporation (the "Company")
pursuant to which: (i) the Mutual Holding Company, which currently owns
approximately 60.54% of the outstanding shares of the common stock, $1.00 par
value of the Bank (the "Bank Common Stock"), will convert from mutual form to a
federal interim stock savings bank and simultaneously merge with an into the
Bank, with the Bank being the surviving entity; (ii) the Bank will then merge
with an interim institution ("Interim") to be formed as a wholly owned
subsidiary of the Company, with the Bank as the surviving entity; (iii) the
outstanding shares of Bank Common Stock (other than those held by the Mutual
Holding Company, which will be cancelled) (the "Public Bank Shares") will be
converted in to shares of the common stock, $1.00 par value, of the Company (the
"Common Stock") pursuant to a ratio (the "Exchange Ratio") that will result in
the holders of such shares (the "Public Stockholders") owning in the aggregate
approximately the same percentage of the Company as they currently own of the
Bank, before giving effect to such stockholders purchasing additional shares in
a concurrent stock offering by the Company thereafter, receiving cash in lieu of
fractional shares or the exercise of dissenters' rights; (iv) the Company will
offer and sell shares of the Company's common stock (the "Conversion Stock");
and (v) the Bank will convert from a federal stock savings bank to a national
bank (the "Bank Conversion") . The offer and sale of the Conversion Stock and
the reorganization are collectively referred to herein as the "Stock Conversion
and Reorganization." The Bank Conversion and the Stock Conversion and
Reorganization are collectively referred to herein as the "Conversion."
Pursuant to the Plan and in connection with the Stock Conversion and
Reorganization, the Company is offering up to ______ shares of Conversion Stock
in a Subscription Offering with nontransferable subscription rights being
granted, in the following order of priority, to: (i) depositors of the Bank with
account balances of $50.00 or more as of the close of business on December 31,
1995 ("Eligible Account Holders"); (ii) depositors of the Bank with account
balances of $50.00 or more as of the close of business on ____________
("Supplemental Eligible Account Holders"); (iii) depositors of the Bank as of
the close of business on __________ (other than Eligible Account Holders and
Supplemental Eligible Account Holder(s) and borrowers as of December 14, 1992
whose loan continues to be outstanding on ______________ ("Other Members"); (iv)
directors, officers and employees of the Bank; and (v) Public Stockholders.
Subscription rights will expire if not exercised by 12:00 p.m., Central Time, on
___________, 1997, unless extended.
Subject to the prior rights of holders of subscription rights,
Conversion Stock not subscribed for in the Subscription Offering may be offered
in a Community Offering to certain members of the general public to whom a copy
of the Prospectus is delivered, with preference given to natural persons
residing in Henderson County, Tennessee. It is anticipated that shares not
subscribed for in the Subscription Offering and the Community Offering will be
offered to certain members of the general public in a Syndicated Community
Offering. The Mutual Holding Company, the
Bank and the Company (the "Primary Parties") reserve the absolute right to
reject or accept any orders in the Community Offering or the Syndicated
Community Offering, in whole or in part, either at the time of receipt of an
order or as soon as practicable following the Expiration Date.
The Primary Parties have retained Trident Securities, Inc. as
financial advisor and marketing agent in connection with the Offerings and to
assist in soliciting subscriptions in the Offerings. See "The Stock Conversion
and Reorganization -- The Offerings -- Subscription Offering," " -- Community
Offering," " -- Syndicated Community Offering" and " -- Marketing Arrangements"
in the accompanying Prospectus.
THE BOARD OF DIRECTORS OF THE MUTUAL HOLDING COMPANY UNANIMOUSLY
RECOMMENDS THAT YOU VOTE TO APPROVE THE PLAN. VOTING IN FAVOR OF THE PLAN WILL
NOT OBLIGATE ANY PERSON TO PURCHASE CONVERSION STOCK. EXCHANGE SHARES AND
- ---
SHARES OF CONVERSION STOCK ARE BEING OFFERED ONLY BY THE PROSPECTUS, WHICH IS
AVAILABLE UPON REQUEST, IF NOT INCLUDED HEREIN. SEE "AVAILABLE INFORMATION."
VOTING RIGHTS AND VOTE REQUIRED FOR APPROVAL
Depositors of the Bank, and borrowers of the Bank as of December 14,
1992 whose loans continue to be outstanding, are members of the Mutual Holding
Company under its current charter (the "Members"). All of the Members as of the
close of business on ______________ (the "Voting Record Date") who continue to
be Members on the date of the Special Meeting or any adjournment thereof will be
entitled to vote on the Plan. If there are not sufficient votes for approval of
the Plan at the time of the Special Meeting, the Special Meeting may be
adjourned to permit further solicitation of proxies.
At the Special Meeting, each depositor Member will be entitled to cast
one vote for every $100 or fraction thereof, of the total withdrawal value of
all of his accounts in the Bank as of the Voting Record Date. Each borrower
Member will be entitled to one vote in the aggregate for all loans with the Bank
in addition to the votes such Member may be entitled to cast as a depositor. In
no event, however, may any Member cast more than 1,000 votes.
Pursuant to Office of Thrift Supervision ("OTS") regulations,
consummation of the Stock Conversion and Reorganization is conditioned upon the
approval of the Plan by the OTS as well as: (i) the approval of the holders of
at least a majority of the total number of votes eligible to be cast by the
Members of the Mutual Holding Company as of the Voting Record Date at the
Special Meeting; and (ii) the approval of the holders of at least two-thirds of
the shares of the outstanding Bank Common Stock as of the voting record date for
the special meeting of stockholders called for that purpose (the "Stockholders'
Meeting). In addition, the parties have conditioned the consummation of the
Stock Conversion and Reorganization on the approval of the Plan by the holders
of at least a majority of the votes cast, in person or by proxy, by the Public
Stockholders at the Stockholders' Meeting and the exercise of dissenters' rights
of appraisal by the holders of less than 10% of the outstanding shares of Bank
Common Stock. The Mutual Holding Company intends to vote its shares of Bank
Common Stock, which amount to 60.54% of the outstanding shares, in favor of the
Plan at the Stockholders' Meeting.
This Proxy Statement and related materials are first being mailed to
Members on or about ___________.
Approval of the Plan by the Members of the Mutual Holding Company will
require the affirmative vote of at least a majority of the total outstanding
votes of the Mutual Holding Company's Members eligible to be cast at the Special
Meeting. As of the Voting Record Date for the Special Meeting, there were
approximately ______ votes eligible to be cast, of which ______ votes constitute
a majority.
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PROXIES
The Board of Directors of the Mutual Holding Company is soliciting the
proxy which accompanies this Proxy Statement for use at the Special Meeting.
Each proxy solicited hereby, if properly executed, duly returned before the
Special Meeting and not revoked prior to or at the Special meeting, will be
voted at the Special Meeting in accordance with the Member's instructions
indicated thereon. If no contrary instructions are given on the proxy, the
proxy, if signed, will be voted in favor of the Plan. If you do not return a
proxy or vote at the Special Meeting, it will have the same effect as a vote
against the Plan. If any other matters are properly presented before the Special
meeting, the persons named in the proxy will vote upon such matters according to
their discretion. Except with respect to procedural matters incident to the
conduct of the Special Meeting, no additional matters are expected to come
before the Special Meeting.
Any Member giving a proxy may revoke it at any time before it is voted
by delivering to the Secretary of the Mutual Holding Company either a written
revocation of the proxy or a duly executed proxy bearing a later date, or by
voting in person at the Special Meeting. Proxies are being solicited only for
use at the Special Meeting and any and all adjournments thereof and will not be
used for any other meeting.
Proxies may be solicited by officers, directors and employees of the
Mutual Holding Company personally, by telephone or further correspondence
without additional compensation.
Deposits held in a trust or other fiduciary capacity may be voted by
the trustee or other fiduciary to whom voting rights are delegated under the
trust instrument or other governing document or applicable law. In the case of
individual retirement accounts ("IRAs") and Keogh trusts established at the
Bank, the beneficiary may direct the trustee's vote on the Plan by returning a
completed proxy card to the Mutual Holding Company. For IRAs and Keogh trusts,
if no proxy card is returned, the trustee will vote in favor of approval of the
Plan on behalf of such beneficiary.
The Board of Directors urges you to mark, sign, date and return the
enclosed proxy card in the enclosed postage-paid envelope as soon as possible,
even if you do not intend to purchase Common Stock. This will ensure that your
vote will be counted.
LEXINGTON FIRST FEDERAL MUTUAL HOLDING COMPANY
The Mutual Holding Company is a federally chartered mutual holding
company chartered in 1992 in connection with the mutual holding company
reorganization of the Bank (the "MHC Reorganization"). The Mutual Holding
Company's primary asset is 135,000 shares of Bank Common Stock, which represents
60.54% of the shares of Bank Common Stock outstanding as of the date of this
Prospectus. The Mutual Holding Company's only other asset at December 31, 1996
was approximately $93,000 in cash. As part of the Stock Conversion and
Reorganization, the Mutual Holding Company will convert to an interim federal
savings bank and simultaneously merge with and into the Bank, with the Bank
being the surviving entity. Upon consummation of the Stock Conversion and
Reorganization, the stock of Home and the deposit account will become assets of
the Bank.
LEXINGTON FIRST FEDERAL SAVINGS BANK
Lexington First commenced operations in 1961 as a federally-chartered
mutual savings association under the name "Lexington First Federal Savings and
Loan Association" (the "Association"). On December 14, 1992, the Association
reorganized into the mutual holding company form of organization and completed a
sale of stock to the public. To accomplish this transaction, the Association
organized a federal stock savings bank as a wholly owned subsidiary. The mutual
Bank then transferred substantially all of its assets and liabilities to the
stock Bank in exchange for 135,000 shares of Bank Common Stock, and reorganized
itself into a federally chartered mutual holding company known as Lexington
First Federal Mutual Holding Company and sold 80,000 shares of Bank Common Stock
to certain
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members of the Bank and members of the general public. As of the date hereof,
the Mutual Holding Company and the Public Stockholders own an aggregate of
135,000 shares and 87,993 shares, or 60.54% and 39.46%, respectively, of the
outstanding shares of Bank Common Stock, respectively.
Lexington First's primary business, as conducted through its office
located in Lexington, Tennessee, has been the origination of mortgage loans
secured by single-family residential real estate located primarily in Henderson
County, Tennessee, with funds obtained through the attraction of savings
deposits, primarily transaction accounts, and certificate accounts with terms of
18 months or less. The Bank also makes construction loans on single-family
residences, savings account loans, and second mortgage consumer loans. In past
years, the Bank has made a limited number of loans on multi-family and
commercial real estate. The Bank also purchases mortgage-backed securities, and
invests in other liquid investment securities when warranted by the level of
excess funds. Following the Conversion, the Bank will attempt to significantly
increase its origination of commercial real estate loans, commercial business
loans and consumer loans. For more information on the business of Lexington
First see "Management's Discussion and Analysis of Financial Conditions and
Results of Operations" and "Business of the Bank" in the Prospectus which
accompanies this Proxy Statement.
Lexington First is subject to regulation by the OTS, as its primary
federal regulator and by the Federal Deposit Insurance Corporation ("FDIC"),
which, through the Savings Association Insurance Fund ("SAIF") administered by
it, insures Lexington First's deposits up to applicable limits. Lexington First
is a member of the Federal Home Loan Bank ("FHLB") of Cincinnati, which is one
of the 12 banks which comprise the FHLB System.
Lexington First's principal executive offices are located 19 Natchez
Trace Drive, Lexington, Tennessee 38351, and its telephone number is (901) 968-
6624.
COMMUNITY NATIONAL CORPORATION
Community National Corporation is a Tennessee corporation organized in
July 1997 by the Bank for the purpose of holding all of the capital stock of the
Bank following the Stock Conversion and Reorganization and of the National Bank
following the Bank Conversion. The Company has received approval from the OTS
to acquire control of the Bank subject to satisfaction of certain conditions.
Prior to the Conversion, the Company has not engaged and will not engage in any
material operations. Upon consummation of the Stock Conversion and
Reorganization, the Company will have no significant assets other than the
outstanding capital stock of the Bank (or, following the Bank Conversion, the
resulting national bank), and a portion of the net proceeds of the Stock
Conversion. Upon consummation of the Conversion, the Company's principal
business will be overseeing and directing the business of the resulting national
bank and investing the net Stock Conversion proceeds retained by it, and the
Company will register with the Board of Governors of the Federal Reserve System
(the "Federal Reserve Board") as a bank holding company under the Bank Holding
Company Act of 1956, as amended (the "BHCA") and deregister with the OTS as a
savings and loan holding company. See "Business of the Company" and "Regulation
- -- Depository Institution Regulation and -- Regulation of the Company" in the
Prospectus which accompanies this Proxy Statement.
The Company's principal executive office is located at the home office
of the Bank at 19 Natchez Trace Drive, Lexington, Tennessee 38351, and its
telephone number is (901) 968-6624.
THE STOCK CONVERSION AND REORGANIZATION
The Boards of Directors of the Mutual Holding Company, the Bank and
the Company (the "Primary Parties") have approved the Plan, as has the OTS,
subject to approval by the Members of the Mutual Holding Company and the
Stockholders of the Bank entitled to vote on the matter and the satisfaction of
certain other conditions. Such OTS approval, however, does not constitute a
recommendation or endorsement of the Plan by such agency.
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General
The Boards of Directors of the Mutual Holding Company and the Bank
unanimously adopted the Plan as of April 12, 1997. The Plan was subsequently
amended on July 12, 1997. The Plan has been approved by the OTS, subject to,
among other things, approval of the Plan by the Members of the Mutual Holding
Company and the Stockholders of the Bank. The Members' Meeting and the
Stockholders' Meeting have been called for this purpose on _____________, 1997.
The following is a brief summary of pertinent aspects of the Plan and
the Conversion and Reorganization. The summary is qualified in its entirety by
reference to the provisions of the Plan, which is attached hereto as Exhibit I.
See also the description under "The Stock Conversion and Reorganization" in the
accompanying Prospectus.
Effects of the Stock Conversion and Reorganization
General. Prior to the Stock Conversion and Reorganization, each
depositor in the Bank has both a deposit account in the institution and a pro
rata ownership interest in the net worth of the Mutual Holding Company based
upon the balance in his account, which interest may only be realized in the
event of a liquidation of the Mutual Holding Company. However, this ownership
interest is tied to the depositor's account and has no tangible market value
separate from such deposit account. A depositor who reduces or closes his
account receives a portion or all of the balance in the account but nothing for
his ownership interest in the net worth of the Mutual Holding Company, which is
lost to the extent that the balance in the account is reduced.
Consequently, the depositors of the Bank normally have no way to
realize the value of their ownership interest in the Mutual Holding Company,
which has realizable value only in the unlikely event that the Mutual Holding
Company is liquidated. In such event, the depositors of record at that time, as
owners, would share pro rata in any residual surplus and reserves of the Mutual
Holding Company after other claims are paid.
Upon consummation of the Stock Conversion and Reorganization,
permanent nonwithdrawable capital stock will be created to represent the
ownership of the net worth of the Company. The Common Stock of the Company is
separate and apart from deposit accounts and cannot be and is not insured by the
FDIC or any other governmental agency. Certificates are issued to evidence
ownership of the permanent stock. The stock certificates are transferable, and
therefore the stock may be sold or traded if a purchaser is available with no
effect on any account the seller may hold in the Bank.
Continuity. While the Stock Conversion and Reorganization is being
accomplished, the normal business of the Bank of accepting deposits and making
loans will continue without interruption. The Bank will continue to be subject
to regulation by the OTS and the FDIC. After the Stock Conversion and
Reorganization, the Bank will continue to provide services for depositors and
borrowers under current policies by its present management and staff.
The directors and officers of the Bank at the time of the Stock
Conversion and Reorganization will continue to serve a directors and officers of
the Bank after the Stock Conversion and Reorganization. The directors and
officers of the Company consist of individuals currently serving as directors
and officers of the Mutual Holding Company and the Bank, and they generally will
retain their positions in the Company after the Stock Conversion and
Reorganization.
Effect on Public Bank Shares. Under the Plan, upon consummation of
the Stock Conversion and Reorganization, the Public Bank Shares shall be
converted into Common Stock based upon the Exchange Ratio without any further
action on the part of the holder thereof. Upon surrender of the Public Bank
Shares, Common Stock will be issued in exchange for such shares.
Upon consummation of the Stock Conversion and Reorganization, the
Public Stockholders of the Bank, a federally chartered savings bank, will become
stockholders of the Company, a Tennessee corporation.
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Effect on Deposit Accounts. Under the Plan, each depositor in the
Bank at the time of the Stock Conversion and Reorganization will automatically
continue as a depositor after the Stock Conversion and Reorganization, and each
such deposit account will remain the same with respect to deposit balance,
interest rate and other terms, except to the extent that funds in the account
are withdrawn to purchase Conversion Stock to be issued in the Offerings. Each
such account will be insured by the FDIC to the same extent as before the Stock
Conversion and Reorganization. Depositors will continue to hold their existing
certificates, passbooks and other evidences of their accounts.
Effect on Loans. No loan outstanding from the Bank will be affected
by the Stock Conversion and Reorganization, and the amount, interest rate,
maturity and security for each loan will remain as they were contractually fixed
prior to the Stock Conversion and Reorganization.
Effect on Voting Rights of Members. At present, all depositors of the
Bank are members of, and have voting rights in, the Mutual Holding Company as to
all matters requiring membership action. Upon completion of the Stock
Conversion and Reorganization, depositors will cease to be members and will no
longer be entitled to vote at meetings of the Mutual Holding Company. Upon
completion of the Stock Conversion and Reorganization, all voting rights in the
Bank will be vested in the Company as the sole stockholder of the Bank and
exclusive voting rights with respect to the Company will be vested in the
holders of Common Stock. Depositors of the Bank will not have voting rights in
the Company after the Stock Conversion and Reorganization, except to the extent
that they become stockholders of the Company.
Tax Effects. Consummation of the Stock Conversion and Reorganization
is conditioned on prior receipt by the Primary Parties of rulings or opinions
with regard to federal and Tennessee income taxation which indicate that the
adoption and implementation of the Plan set forth herein will not be taxable for
federal or Tennessee income tax purposes to the Primary Parties or the Bank's
Eligible Account Holders, Supplemental Eligible Account Holders or Other
Members, Public Stockholders except as discussed below.
Housley Kantarian & Bronstein, P.C., Washington, D.C., has issued an
opinion to the Company and the Bank to the effect that, for federal income tax
purposes: (1) the conversion of the Mutual Holding Company from mutual to stock
form and the simultaneous merger of the Mutual Holding Company with and into the
Bank, with the Bank being the surviving institution, will qualify as a
reorganization within the meaning of Section 368(a)(1)(A) of the Code; (2) no
gain or loss will be recognized by the Bank upon the receipt of the assets of
the converted Mutual Holding Company in such merger; (3) the merger of Interim
with and into the Bank, with the Bank being the surviving institution, will
qualify as a reorganization within the meaning of Section 368(a)(1)(A) of the
Code; (4) no gain or loss will be recognized by Interim upon the transfer of its
assets to the Bank; (5) no gain or loss will be recognized by the Bank upon the
receipt of the assets of Interim; (6) no gain or loss will be recognized by the
Company upon the receipt of Bank Common Stock solely in exchange for Common
Stock; (7) no gain or loss will be recognized by the Public Stockholders upon
the receipt of Common Stock solely in exchange for their Public Bank Shares; (8)
the basis of the Common Stock to be received by the Public Stockholders will be
the same as the basis of the Public Bank Shares surrendered in exchange
therefor, before giving effect to any payment of cash in lieu of fractional
shares; (9) the holding period of the Common Stock to be received by the Public
Stockholders will include the holding period of the Public Bank Shares, provided
that the Public Bank Shares were held as a capital asset on the date of the
exchange; (10) no gain or loss will be recognized by the Company upon the sale
of shares of Conversion Stock in the Offerings; (11) the Eligible Account
Holders and Supplemental Eligible Account Holders will recognize gain, if any,
upon the issuance to them of withdrawable savings accounts in the Bank following
the Stock Conversion and Reorganization, interests in the liquidation account
and nontransferable subscription rights to purchase Conversion Stock, but only
to the extent of the value, if any, of the subscription rights; and (12) the tax
basis to the holders of Conversion Stock purchased in the Offerings will be the
amount paid therefor, and the holding period for the shares of Conversion Stock
will begin on the date of consummation of the Offerings if purchased through the
exercise of subscription rights and on the day after the date of purchase if
purchased in the Community Offering or Syndicated Community Offering.
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Arnold, Spain & Company, P.C., Jackson, Tennessee has issued an
opinion to the Company and the Bank to the effect that the income tax
consequences of the Stock Conversion and Reorganization are substantially the
same under Tennessee laws as they are under the Code.
In the opinion of Ferguson & Company, which opinion is not binding on
the IRS, the subscription rights do not have any value, based on the fact that
such rights are acquired by the recipients without cost, are nontransferable and
of short duration, and afford the recipients the right only to purchase the
Conversion Stock at a price equal to its estimated fair market value, which will
be the same price as the Purchase Price for the unsubscribed shares of
Conversion Stock. If the subscription rights granted to eligible subscribers
are deemed to have an ascertainable value, receipt of such rights likely would
be taxable only to those eligible subscribers who exercise the subscription
rights (either as a capital gain or ordinary income) in an amount equal to such
value, and the Primary Parties could recognize gain on such distribution.
Eligible subscribers are encouraged to consult with their own tax advisor as to
the tax consequences in the event that such subscription rights are deemed to
have an ascertainable value.
Unlike private rulings, an opinion is not binding on the IRS and the
IRS could disagree with conclusions reached therein. In the event of such
disagreement, there can be no assurance that the IRS would not prevail in a
judicial or administrative proceeding.
Effect on Liquidation Rights. Were the Mutual Holding Company to
liquidate, all claims of the Mutual Holding Company's creditors would be paid
first. Thereafter, if there were any assets remaining, members of the Mutual
Holding Company would receive such remaining assets, pro rata, based upon the
deposit balances in their deposit accounts at the Bank immediately prior to
liquidation. In the unlikely event that the Bank were to liquidate after the
Stock Conversion and Reorganization, all claims of creditors (including those of
depositors, to the extent of their deposit balances) also would be paid first,
followed by distribution of the "liquidation account" to certain depositors (see
" --Liquidation Rights" below), with any assets remaining thereafter distributed
to the Company as the holder of the Bank's capital stock. Pursuant to the rules
and regulations of the OTS, a merger, consolidation, sale of bulk assets or
similar combination or transaction with another insured savings institution
would not be considered a liquidation for this purpose and, in such a
transaction, the liquidation account would be required to be assumed by the
surviving institution.
Liquidation Rights
In the unlikely event of a complete liquidation of the Mutual Holding
Company in its present mutual form, each depositor of the Bank would receive his
pro rata share of any assets of the Mutual Holding Company remaining after
payment of claims of all creditors. Each depositor's pro rata share of such
remaining assets would be in the same proportion as the value of his deposit
account was to the total value of all deposit accounts in the Bank at the time
of liquidation. After the Stock Conversion and Reorganization, each depositor,
in the event of a complete liquidation of the Bank, would have a claim as a
creditor of the same general priority as the claims of all other general
creditors of the Bank. However, except as described below, his claim would be
solely in the amount of the balance in his deposit account plus accrued
interest. He would not have an interest in the value or assets of the Bank or
the Company above that amount.
The Plan provides for the establishment, upon the completion of the
Stock Conversion and Reorganization, of a special "liquidation account" for the
benefit of Eligible Account Holders and Supplemental Eligible Account Holders in
an amount equal to the amount of any dividends waived by the Mutual Holding
Company plus the greater of (i) the Bank's retained earnings of $2.6 million at
March 31, 1992, the date of the latest balance sheet contained in the final
offering circular utilized in the Bank's initial public offering, or (ii) 60.54%
of the Bank's total stockholders' equity as reflected in its latest balance
sheet contained in the final Prospectus utilized in the Offerings. As of the
date of this Prospectus, the initial balance of the liquidation account would be
$3.9 million. Each Eligible Account Holder and Supplemental Eligible Account
Holder, if he were to continue to maintain his deposit account at the Bank,
would be entitled, upon a complete liquidation of the Bank after the Stock
Conversion and Reorganization, to an interest in the liquidation account prior
to any payment to the Company as the sole stockholder of the Bank. Each
Eligible Account
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Holder and Supplemental Eligible Account Holder would have an initial interest
in such liquidation account for each deposit account, including passbook
accounts, transaction accounts such as checking accounts, money market deposit
accounts and certificates of deposit, held in the Bank at the close of business
on the Eligibility Record Date or the Supplemental Eligibility Record Date, as
the case may be. Each Eligible Account Holder and Supplemental Eligible Account
Holder will have a pro rata interest in the total liquidation account for each
of his deposit accounts based on the proportion that the balance of each such
deposit account on Supplemental Eligibility Record Date, as the case may be bore
to the balance of all deposit accounts in the Bank on such date.
If, however, on any December 31 annual closing date of the Bank,
commencing December 31, 1996 for Eligible Account Holders and December 31, 1997
for Supplemental Eligible Account Holders, the amount in any deposit account is
less than the amount in such deposit account on December 31, 1995 or June 30,
1997, as the case may be, or any other annual closing date, then the interest in
the liquidation account relating to such deposit account would be reduced by the
proportion of any such reduction, and such interest will cease to exist if such
deposit account is closed. In addition, no interest in the liquidation account
would ever be increased despite any subsequent increase in the related deposit
account. Any assets remaining after the above liquidation rights of Eligible
Account Holders and Supplemental Eligible Account Holders are satisfied would be
distributed to the Company as the sole stockholder of the Bank.
Required Approvals
Various approvals of OTS are required in order to consummate the Stock
Conversion and Reorganization. The OTS has approved the Plan, subject to
approval by the Mutual Holding Company's Members and the Bank's Stockholders.
In addition, consummation of the Stock Conversion and Reorganization is subject
to OTS approval of the application of the Company to acquire control of the Bank
and the applications with respect to the merger of the Mutual Holding Company
(following its conversion to an interim federal stock savings association) into
the Bank and the merger of Interim into the Bank, with the Bank being the
surviving entity in both mergers. Applications for these approvals have been
filed and approved by the OTS subject to certain conditions. The Bank has also
applied to the OTS and OCC for approval of the conversion of the Bank to a
national bank and the Company has applied to the Federal Reserve Board for the
Company's continued ownership of 100% of the capital stock of the resulting
national bank. The Bank Conversion is contingent upon the approval of the OCC
and Federal Reserve Board.
Pursuant to OTS regulations, the Plan of Conversion also must be
approved by (1) at least a majority of the total number of votes eligible to be
cast by Members of the Mutual Holding Company at the Members' Meeting, and (2)
holders of at least two-thirds of the outstanding Bank Common Stock at the
Stockholders' Meeting. In addition, the Primary Parties have conditioned the
consummation of the Stock Conversion and Reorganization on the approval of the
Plan by at least a majority of the votes cast, in person or by proxy, by the
Public Stockholders at the Stockholders' Meeting.
Review By Administrative and Judicial Authorities
Federal law provides (i) that persons aggrieved by a final action of
the OTS which approves, with or without conditions, a plan of conversion may
obtain review of such final action only by filing a written petition in the
United States Court of Appeals for the circuit in which the principal office or
residence of such person is located, or in the United States Court of Appeals,
for the District of Columbia Circuit, requesting that the final action of the
OTS be modified, terminated or set aside, and (ii) that such petition must be
filed within 30 days after publication of notice of such final action in the
Federal Register, or 30 days after the date of mailing of the notice and proxy
statement for the meeting of the converting institution's members at which the
conversion is to be voted on, whichever is later.
HOW TO ORDER STOCK
The accompanying Prospectus contains information about the business
and financial condition of Lexington First and additional information about the
Stock Conversion and the Subscription Offering and the concurrent
8
Community Offering. Enclosed is an order form and a certification form to be
used to subscribe for Common Stock. You are not obligated to subscribe for
Common Stock, and voting to approve the Conversion will not obligate you to
subscribe for Common Stock.
All subscription rights are nontransferable and will expire if not
exercised by returning the accompanying stock order form and a certification
form with full payment (or appropriate instructions authorizing withdrawal from
a savings or certificate account at the Bank) for all shares for which
subscription is made to the Company by 12:00 p.m., local time, on __________,
1997, unless extended. A postage-paid reply envelope is provided for this
purpose. Provided that not all of the shares are subscribed for in the
Subscription Offering by members of the Mutual Holding Company, the remaining
shares are concurrently being offered to the general public in the Community
Offering with preference given to natural persons and trusts of natural persons
permanently residing in Henderson County, Tennessee.
The information contained in this Proxy Statement is limited in its
scope to use in the solicitation of proxies for the Special Meeting to consider
and vote on the Plan. It is not intended for use in the offering of the Common
Stock. Such offering is made only by the Prospectus.
AVAILABLE INFORMATION
The information contained in the accompanying Prospectus, including a
more detailed description of the Plan, is intended to help you evaluate the
Conversion and is incorporated herein by reference. All persons eligible to
vote at the Special Meeting should carefully review both this Proxy Statement
and the accompanying Prospectus.
YOUR BOARD OF DIRECTORS URGES YOU TO CONSIDER CAREFULLY THIS PROXY
MATERIAL AND, WHETHER OR NOT YOU PLAN TO BE PRESENT IN PERSON AT THE SPECIAL
MEETING, TO FILL IN, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD(S) AS SOON AS
POSSIBLE TO ASSURE THAT YOUR VOTES WILL BE COUNTED. THIS WILL NOT PREVENT YOU
FROM VOTING IN PERSON IF YOU ATTEND THE SPECIAL MEETING. YOU MAY REVOKE YOUR
PROXY BY WRITTEN INSTRUMENT DELIVERED TO THE SECRETARY OF THE BANK AT ANY TIME
PRIOR TO OR AT THE SPECIAL MEETING OR BY ATTENDING THE SPECIAL MEETING AND
VOTING IN PERSON.
THIS PROXY STATEMENT IS NOT AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY THE COMMON STOCK. THE OFFER IS MADE ONLY BY THE PROSPECTUS.
BY ORDER OF THE BOARD OF DIRECTORS
----------------------------------
Arba M. Taylor
Secretary
____________, 1997
Lexington, Tennessee
9
EXHIBIT A
================================================================================
PLAN OF CONVERSION
of
LEXINGTON FIRST FEDERAL MUTUAL HOLDING COMPANY
and
AGREEMENT AND PLAN OF REORGANIZATION
between
COMMUNITY NATIONAL CORPORATION
and
LEXINGTON FIRST FEDERAL SAVINGS BANK
================================================================================
TABLE OF CONTENTS
Page
----
INTRODUCTION.............................................................................. 1
I. DEFINITIONS......................................................................... 3
II. GENERAL PROCEDURE FOR CONVERSION AND REORGANIZATION................................. 8
III. CONVERSION STOCK.................................................................... 10
A. Total Number of Shares and Purchase Price
of Conversion Stock........................................................... 10
B. Subscription Offering.......................................................... 11
C. Community Offering, Syndicated Community Offering and Other Offerings.......... 14
D. Limitations on Subscriptions and Purchases of Conversion Stock................. 15
E. Timing of Subscription Offering, Manner of Exercising Subscription
Rights and Order Forms........................................................ 17
F. Payment for Conversion Stock................................................... 18
G. Account Holders in Nonqualified States or
Foreign Countries............................................................. 19
IV. CERTAIN OTHER EFFECTS OF CONVERSION................................................. 19
A. Liquidation Account............................................................ 19
B. Voting Rights of Stockholders.................................................. 20
C. Transfer of Deposit Accounts................................................... 21
D. Directors and Officers of the Bank............................................. 21
E. Requirements Following Stock Conversion and Reorganization
for Registration, Market Making, and Stock Exchange Listing................... 21
F. Dissenting Stockholders........................................................ 21
G. Effect of Bank Conversion...................................................... 21
V. EFFECTIVE DATE...................................................................... 22
VI. CERTAIN RESTRICTIONS FOLLOWING STOCK CONVERSION AND REORGANIZATION.................. 22
A. Requirements for Stock Purchases by Directors and Officers Following
the Stock Conversion and Reorganization....................................... 22
B. Restrictions on Transfer of Stock.............................................. 22
C. Restrictions on Acquisition of Stock of the Holding Company.................... 23
D. Dividend and Repurchase Restrictions........................................... 24
VII. MISCELLANEOUS....................................................................... 24
A. Tax Rulings or Opinions........................................................ 24
B. Stock Compensation Plans....................................................... 24
C. Amendment or Termination of the Plan........................................... 25
D. Interpretation of the Plan..................................................... 25
ANNEX A - PLAN OF MERGER BETWEEN THE MUTUAL HOLDING COMPANY
AND THE BANK........................................................................... A-1
ANNEX B - PLAN OF MERGER BETWEEN THE BANK, THE HOLDING
COMPANY AND INTERIM B.................................................................. B-1
INTRODUCTION
For purposes of this section, all capitalized terms have the meanings
ascribed to them in Article I.
On December 14, 1992, Lexington First Federal Savings Bank, a federal
mutual savings bank reorganized into the mutual holding company form of
organization and completed a sale of stock to the public. To accomplish this
transaction, the Bank organized a federal stock savings bank as a wholly owned
subsidiary. The mutual Bank then transferred substantially all of its assets and
liabilities to the stock Bank in exchange for 200,000 shares of Bank Common
Stock, and reorganized itself into a federally chartered mutual holding company
known as Lexington First Federal Mutual Holding Company and sold 80,000 shares
of Bank Common Stock to certain members of the Bank and members of the general
public. As of the date hereof, the Mutual Holding Company and the Public
Stockholders own an aggregate of 135,000 shares and 87,993 shares, or 60.54% and
39.46% of the outstanding shares of Bank Common Stock, respectively.
The Boards of Directors of the Mutual Holding Company and the Bank
believe that a conversion of the Mutual Holding Company to stock form and
reorganization of the Bank and the subsequent conversion of the Bank from a
federally chartered stock savings bank to a national bank pursuant to this Plan
of Conversion is in the best interests of the Mutual Holding Company and the
Bank, as well as the best interests of their respective Members and
Stockholders. The conversion of the Mutual Holding Company to stock form and the
acquisition of control of the Bank by the Holding Company are referred to herein
as the "Stock Conversion and Reorganization", the conversion of the Bank to a
National Bank is referred to herein as the "Bank Conversion", and the Stock
Conversion and Reorganization and the Bank Conversion are referred to herein
collectively as the "Conversion." The Boards of Directors have determined that
this Plan of Conversion equitably provides for the interests of Members through
the granting of subscription rights and the establishment of a liquidation
account. The Stock Conversion and Reorganization will result in the Bank being
wholly owned by a stock holding company, which is a more common structure and
form of ownership than a mutual holding company. In addition, the Stock
Conversion and Reorganization will result in the raising of additional capital
for the Bank and the Holding Company and should result in a more active and
liquid market for the Holding Company Common Stock than currently exists for the
Bank Common Stock, although there can be no assurances that this will be the
case. Finally, the Stock Conversion and Reorganization has been structured to
re-unite the accumulated earnings and profits retained by the Mutual Holding
Company with the retained earnings of the Bank through a tax-free
reorganization. This will increase the Bank's ability to pay dividends in the
future.
If the Bank had undertaken a standard conversion involving the
formation of a stock holding company in 1992, applicable Office of Thrift
Supervision ("OTS") regulations would have required a greater amount of Bank
Common Stock to be sold than resulted in the amount of net proceeds raised in
the Bank's initial public offering. In addition, if a standard conversion had
been conducted in 1992, management of the Bank believed that it would have been
difficult to profitably invest the larger amount of capital that would have been
raised, when compared to the amount of net proceeds raised in the Bank's initial
public offering. A standard conversion in 1992 also would have immediately
eliminated all aspects of the mutual form of organization.
Subsequent to the formation of the Mutual Holding Company, there have
been certain changes in the policies of the OTS relating to mutual holding
companies. In addition, market conditions for the stocks of savings institutions
and their holding companies have improved. In light of the foregoing, the Boards
of Directors of the Mutual Holding Company and the Bank believe that it is in
the best interests of such companies and their respective Members and
Stockholders to raise additional capital at this time, and that the most
feasible way to do so is through the Stock Conversion and Reorganization.
In connection with the Stock Conversion and Reorganization, the Bank
will form a new first-tier, wholly owned subsidiary known as Community National
Corporation which will become the Holding Company upon consummation of the Stock
Conversion and Reorganization. The Holding Company will in turn form Interim B
as a wholly owned subsidiary. As described in more detail in Article II, the
Mutual Holding Company will convert to an interim stock
A-1
savings association and will simultaneously merge with and into the Bank
pursuant to the Plan of Merger included as Annex A hereto, pursuant to which the
Mutual Holding Company will cease to exist and a liquidation account will be
established by the Bank for the benefit of depositor Members as of specified
dates, and Interim B will then merge with and into the Bank pursuant to the Plan
of Merger included as Annex B hereto, pursuant to which the Bank will become a
wholly owned subsidiary of the Holding Company and, in connection therewith,
each share of Bank Common Stock outstanding immediately prior to the effective
time thereof (other than shares as to which the holders thereof have properly
exercised dissenters' rights of appraisal, if any) shall be automatically
converted, without further action by the holder thereof, into and become the
right to receive shares of Holding Company Common Stock based on the Exchange
Ratio, plus cash in lieu of any fractional share interest.
In connection with the Stock Conversion and Reorganization, the Holding
Company will offer shares of Conversion Stock in the Offerings as provided
herein. Shares of Conversion Stock will be offered in a Subscription Offering in
descending order of priority to Eligible Account Holders, Tax-Qualified Employee
Stock Benefit Plans, Supplemental Eligible Account Holders, Other Members,
Directors, Officers and Employees and Public Stockholders. Any shares of
Conversion Stock remaining unsold after the Subscription Offering will be
offered for sale to the public through a Community Offering and/or Syndicated
Community Offering, as determined by the Boards of Directors of the Holding
Company and the Bank in their sole discretion.
The Stock Conversion and Reorganization is intended to provide a larger
capital base to support the Bank's lending and investment activities and thereby
enhance the Bank's capabilities to serve the borrowing and other financial needs
of the communities it serves. The use of the Holding Company will provide
greater organizational flexibility and possible diversification. The purpose of
the Bank Conversion is to provide the Bank with additional operating flexibility
and enhance its ability to provide a full range of banking products and services
to its community. It is the further desire of the Board of Directors to
reorganize the Bank (or the National Bank upon the Bank Conversion) as the
wholly owned subsidiary of the Holding Company to enhance flexibility of
operations, diversification of business opportunities and financial capability
for business and regulatory purposes and to enable the National Bank to compete
more effectively with other financial service organizations.
This Plan was adopted by the Boards of Directors of the Mutual Holding
Company and the Bank by at least a two-thirds vote of each such Board on April
12, 1997, and was adopted as amended on July 12, 1997.
This Plan is subject to the approval of the OTS and must be adopted by
(1) at least a majority of the total number of votes eligible to be case by
Voting Members of the Mutual Holding Company at the Special Meeting and (2)
holders of at least two-thirds of the outstanding Bank Common Stock at the
Stockholders' Meeting. In addition, the Primary Parties have conditioned the
consummation of the Stock Conversion and Reorganization on the approval of the
Plan by at least a majority of the votes cast, in person or by proxy, by the
Public Stockholders at the Stockholders' Meeting. Either prior to or immediately
following the consummation of the Stock Conversion and Reorganization, the
Holding Company, as the sole stockholder of the Bank, shall approve the Bank
Conversion and the Bank shall take such actions as may be necessary to
consummate the Bank Conversion. Consummation of the Bank Conversion also
requires the approval of the Office of the Comptroller of the Currency and the
Board of Governors of the Federal Reserve System.
After the Stock Conversion and Reorganization, the Bank will continue
to be regulated by the OTS, as its primary federal regulator and its chartering
authority, and by the FDIC, which insures the Bank's deposits up to applicable
limits. After the Bank Conversion, the Bank will be subject to comprehensive
examination, supervision and regulation by the OCC and the FDIC. In addition,
the Bank will continue to be a member of the Federal Home Loan Bank System and
all insured savings deposits will continue to be insured by the FDIC up to the
maximum provided by law.
A-2
I. DEFINITIONS.
As used in this Plan, the terms set forth below have the following
meaning:
Acting in Concert: The term "Acting in Concert" means: (i) knowing
-----------------
participation in a joint activity or interdependent conscious parallel action
towards a common goal whether or not pursuant to an express agreement; or (ii) a
combination or pooling of voting or other interests in the securities of an
issuer for a common purpose pursuant to any contract, understanding,
relationship, agreement or other arrangement, whether written or otherwise. A
person (as defined by Section 563b.2(a)(26) of the Regulations Applicable to All
Savings Associations) or company which acts in concert with another person or
company ("other party") shall also be deemed to be acting in concert with any
person or company who is also acting in concert with that other party, except
that any Tax-Qualified Employee Stock Benefit Plan will not be deemed to be
acting in concert with its trustee or a person who serves in a similar capacity
solely for the purpose of determining whether stock held by the trustee and
stock held by the Tax-Qualified Employee Stock Benefit Plan will be aggregated.
Actual Purchase Price: The term "Actual Purchase Price" means the price
---------------------
per share at which the Conversion Stock is ultimately sold by the Holding
Company in the Offerings in accordance with the terms hereof.
Affiliate: The term "Affiliate" means a Person who, 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) a corporation or organization (other than the Mutual
Holding Company, the Bank, a majority-owned subsidiary of the Bank or the
Holding Company) of which such Person is a director, officer or partner or is,
directly or indirectly, the beneficial owner of 10% 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, provided, however, that such term shall not
include any Tax-Qualified Employee Stock Benefit Plan of the Holding Company or
the Bank in which such Person has a substantial beneficial interest or serves as
a 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
of the subsidiaries of the foregoing.
Bank: The term "Bank" means either Lexington First Federal Savings Bank
----
in its mutual or stock form or Lexington First Federal Savings Bank following
consummation of the Stock Conversion and Reorganization, as the context
requires.
Bank Common Stock: The term "Bank Common Stock" means the common stock
-----------------
of the Bank, $1.00 par value per share, which stock is not and will not be
insured by the FDIC or any other governmental authority.
Bank Conversion: The term "Bank Conversion" means the conversion of the
---------------
Bank from a federally chartered stock savings bank to a national bank.
Bank Merger: The term "Bank Merger" means the merger of Interim B with
-----------
and into the Bank pursuant to the Plan of Merger included as Annex B hereto.
Capital Stock: The term "Capital Stock" means any and all authorized
-------------
shares of stock of the Bank after the Stock Conversion and Reorganization and of
the National Bank after the Bank Conversion.
Code: The term "Code" means the Internal Revenue Code of 1986, as
----
amended.
A-3
Community Offering: The term "Community Offering" means the offering for
------------------
sale by the Holding Company of any shares of Conversion Stock not subscribed for
in the Subscription Offering, with preference given in the Community Offering to
natural persons residing in the Local Community.
Control: The term "Control" (including the terms "controlling,"
-------
"controlled by," and "under common control with") means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.
Conversion: The term "Conversion" means the Stock Conversion and
----------
Reorganization and the Bank Conversion.
Conversion Stock: The term "Conversion Stock" means the Holding Company
----------------
Common Stock to be issued and sold in the Offerings pursuant to the Plan of
Conversion.
Deposit Account: The term "Deposit Account" means savings and demand
---------------
accounts, including passbook accounts, money market deposit accounts and
negotiable order of withdrawal accounts, and certificates of deposit and other
authorized accounts of the Bank held by a Member.
Director, Officer and Employee: The term "Director, Officer and
------------------------------
Employee" means the terms as applied respectively to any person who is a
director, officer or employee of the Mutual Holding Company, the Bank or any
subsidiary thereof.
Effective Date: The term "Effective Date" means the effective date of
--------------
the Stock Conversion and Reorganization as defined in Article V hereof.
Eligibility Record Date: The term "Eligibility Record Date" means the
-----------------------
date for determining Qualifying Deposits of Eligible Account Holders and is the
close of business on December 31, 1995.
Eligible Account Holder: The term "Eligible Account Holder" means any
-----------------------
Person holding a Qualifying Deposit on the Eligibility Record Date for purposes
of determining Subscription Rights and establishing subaccount balances in the
Liquidation Account.
Estimated Price Range: The term "Estimated Price Range" means the range
---------------------
of the estimated aggregate pro forma market value of the total number of shares
of Conversion Stock to be issued in the Offerings, as determined by the
Independent Appraiser in accordance with Section IV.A hereof.
Exchange Ratio: The term "Exchange Ratio" means the rate at which shares
--------------
of Holding Company Common Stock will be exchanged for shares of Bank Common
Stock held by the Public Stockholders (other than shares as to which dissenting
Public Stockholders properly exercise appraisal rights, if any) in connection
with the Bank Merger. The exact rate shall be determined by the Primary Parties
in order to ensure that upon consummation of the Stock Conversion and
Reorganization the Public Stockholders will own in the aggregate approximately
the same percentage of the Holding Company Common Stock to be outstanding upon
completion of the Stock Conversion and Reorganization as the percentage of Bank
Common Stock owned by them in the aggregate immediately prior to consummation of
the Stock Conversion and Reorganization, before giving effect to (a) cash paid
in lieu of any fractional interests of Holding Company Common Stock and (b) any
shares of Conversion Stock purchased by the Public Stockholders in the Offerings
or by Tax-Qualified Employee Stock Benefit Plans thereafter.
Exchange Shares: The term "Exchange Shares" means the shares of Holding
---------------
Company Common Stock to be issued to the Public Stockholders in connection with
the Bank Merger.
FDIC: The term "FDIC" means the Federal Deposit Insurance Corporation
----
or any successor thereto.
A-4
Federal Reserve Board: The term "Federal Reserve Board" means the Board
---------------------
of Governors of the Federal Reserve System.
Holding Company: The term "Holding Company" means Community National
---------------
Corporation a corporation to be organized under the laws of the State of
Tennessee. Such corporation will be initially formed as a first-tier, wholly
owned subsidiary of the Bank. Upon completion of the Stock Conversion and
Reorganization, the Holding Company shall hold all of the outstanding Capital
Stock of the Bank and, following the Bank Conversion, the Holding Company shall
be a bank holding company and shall hold all of the outstanding Capital Stock of
the National Bank.
Holding Company Common Stock: The term "Holding Company Common Stock"
----------------------------
means the common stock of the Holding Company, par value $1.00 per share,
including the Conversion Stock and the Exchange Shares, which stock cannot and
will not be insured by the FDIC or any other governmental authority.
Independent Appraiser: The term "Independent Appraiser" means a person
---------------------
independent of the Holding Company and the Bank, experienced and expert in the
area of corporate appraisal, and acceptable to the OTS, retained by the Bank to
prepare an appraisal of the pro forma market value of the Conversion Stock.
Initial Purchase Price: The term "Initial Purchase Price" means the
----------------------
price per share to be paid initially by Participants for shares of Conversion
Stock subscribed for in the Subscription Offering and by Persons for shares of
Conversion Stock ordered in the Community Offering.
Interim A: The term "Interim A" means Lexington First Federal M.H.C.
---------
Interim Savings Bank, an interim federal stock savings association, which will
be formed as a result of the conversion of Lexington First Federal Mutual
Holding Company into the stock form of organization.
Interim B: The term "Interim B" means Lexington First Federal Interim
---------
Savings Bank, which will be formed as a first-tier, wholly owned subsidiary of
the Holding Company to facilitate the Bank Merger.
Liquidation Account: The term "Liquidation Account" means the account to
-------------------
be maintained pursuant to Section IV.A by the Bank or the National Bank for the
benefit of Eligible Account Holders and Supplement Eligible Accounts who
maintain Deposit Accounts in the Bank after the Stock Conversion and
Reorganization or in the National Bank after the Bank Conversion.
Local Community: The term "Local Community" means Henderson County in
---------------
the State of Tennessee.
Member: The term "Member" means any Person qualifying as a member of the
------
Mutual Holding Company in accordance with its mutual charter and bylaws and the
laws of the United States.
M.H.C. Merger: The term "M.H.C. Merger" means the merger of Interim A
-------------
with and into the Bank pursuant to the Plan of Merger included as Annex A
hereto.
Mutual Holding Company: The term "Mutual Holding Company" means
----------------------
Lexington First Federal Mutual Holding Company prior to its conversion into an
interim stock savings association.
National Bank: The term "National Bank" means Community National Bank of
-------------
Tennessee, the national bank resulting from the Bank Conversion.
OCC: The term "OCC" means the Office of the Comptroller of the Currency
---
of the United States Department of the Treasury or any successor agency having
jurisdiction over the Bank Conversion.
A-5
OCC Conversion Application: The term "OCC Conversion Application" means
--------------------------
the application submitted to the OCC for approval of the Bank Conversion.
Offerings: The term "Offerings" means the Subscription Offering, the
---------
Community Offering and the Syndicated Community Offering.
Officer: The term "Officer" means an executive officer of the Holding
-------
Company or the Bank (as applicable), including the Chairman of the Board,
President, Executive Vice President, Vice Presidents in charge of principal
business functions, Secretary and Treasurer.
Order Form: The term "Order Form" means the form or forms provided by
----------
the Holding Company, containing all such terms and provisions as set forth in
Section III.E hereof, to a Participant or other Person by which Conversion Stock
may be ordered in the Offerings.
Other Member: The term "Other Member" means a Voting Member who is not
------------
an Eligible Account Holder or a Supplemental Eligible Account Holder.
OTS: The term "OTS" means the Office of Thrift Supervision within the
---
U.S. Department of Treasury or any successor thereto.
OTS Bank Conversion Application: The term "OTS Bank Conversion
-------------------------------
Application" means the application submitted to the OTS for approval of the Bank
Conversion.
Participant: The term "Participant" means any Eligible Account Holder,
-----------
Tax-Qualified Employee Stock Benefit Plan, Supplemental Eligible Account Holder,
Other Member, Director, Officer and Employee or Public Stockholder as of the
Voting Record Date.
Person: The term "Person" means an individual, a corporation, a
------
partnership, an association, a joint stock company, a trust, an unincorporated
organization or a governmental or any political subdivision thereof.
Plan or Plan of Conversion: The term "Plan" or "Plan of Conversion"
---- ------------------
means this Plan of Conversion and Agreement and Plan of Reorganization as
adopted by the Boards of Directors of the Mutual Holding Company and the Bank or
any amendment hereto approved as provided herein. The Board of Directors of the
Holding Company shall adopt this Plan as soon as practicable following its
organization, and the Board of Directors of Interim B shall adopt the Plan of
Merger included as Annex B hereto as soon as practicable following its
organization.
Primary Parties: The term "Primary Parties" mean the Mutual Holding
---------------
Company, the Bank and Holding Company and their successors.
Prospectus: The term "Prospectus" means the one or more documents to be
----------
used in offering the Conversion Stock in the Offerings.
Public Stockholders: The term "Public Stockholders" mean those Persons
-------------------
who own shares of Bank Common Stock, excluding the Mutual Holding Company, as of
the Voting Record Date.
Qualifying Deposits: The term "Qualifying Deposits" means the aggregate
-------------------
balance of all Deposit Accounts in the Bank of (i) an Eligible Account Holder at
the close of business on the Eligibility Record Date, provided such aggregate
balance is not less than $50, and (ii) a Supplemental Eligible Account Holder at
the close of business on the Supplemental Eligibility Record Date, provided such
aggregate balance is not less than $50.
A-6
Resident: The term "Resident" means any natural person subscribing for
--------
stock in the Subscription Offering or submitting an order in the Community
Offering who maintains a bona fide residence within the Local Community. The
Bank may utilize deposit or loan records or such other evidence provided to it
to make a determination as to whether a person is a bona fide resident of the
Local Community. In all cases, however, such determination shall be in the sole
and absolute discretion of the Bank.
Sale: The terms "sale" and "sell" mean every contract to sell or
----
otherwise dispose of a security or an interest in a security for value, but such
terms do not include an exchange of securities in connection with a merger or
acquisition following consummation of the Stock Conversion and Reorganization
approved by the OTS or any other federal agency having jurisdiction.
Savings Account: The term "Savings Account" means a withdrawable deposit
---------------
in the Bank after the Stock Conversion and Reorganization and a withdrawable
deposit in the National Bank after the Bank Conversion.
SEC: The term "SEC" means the Securities and Exchange Commission.
---
Special Meeting: The term "Special Meeting" means the Special Meeting
---------------
of Members of the Mutual Holding Company called for the purpose of submitting
this Plan to the Members for their approval, including any adjournments of such
meeting.
Stock Conversion and Reorganization: The term "Stock Conversion and
-----------------------------------
Reorganization" means (i) the conversion of the Mutual Holding Company to an
interim stock savings association and the subsequent merger with the Bank,
pursuant to which the Mutual Holding company will cease to exist, (ii) the Bank
Merger, pursuant to which the Bank will become a wholly owned subsidiary of the
Company and, in connection therewith, each share of Bank Common Stock
outstanding immediately prior to the effective time thereof shall automatically
be converted, without further action by the holder thereof, into and become the
right to receive shares of Holding Company Common Stock based on the Exchange
Ratio, plus cash in lieu of any fractional share interest, and (iii) the
issuance of Conversion Stock by the Holding Company in the Offerings as provided
herein, which will increase the number of shares of Holding Company Common Stock
outstanding and the capitalization of the Holding Company and the Bank.
Stockholders: The term "Stockholders" means those Persons who own shares
------------
of Bank Common Stock.
Stockholders' Meeting: The term "Stockholders' Meeting" means the annual
---------------------
or special meeting of Stockholders of the Bank called for the purpose of
submitting this Plan to the Stockholders for their approval, including any
adjournments of such meeting.
Subscription Offering: The term "Subscription Offering" means the
---------------------
offering of the Conversion Stock to Participants.
Subscription Rights: The term "Subscription Rights" means
-------------------
nontransferable rights to subscribe for Conversion Stock granted to Participants
pursuant to the terms of this Plan.
Supplemental Eligible Account Holder: The term "Supplemental Eligible
------------------------------------
Account Holder" means any Person, (other than Directors, Officers and their
respective Associates) holding a Qualifying Deposit at the close of business on
the Supplemental Eligibility Record Date.
Supplemental Eligibility Record Date: The term "Supplemental Eligibility
------------------------------------
Record Date, if applicable, means the date for determining Qualifying Deposits
of Supplemental Eligible Account Holders and shall be required if the
Eligibility Record Date is more than 15 months prior to the date of the latest
amendment to the Application for Conversion filed by the Mutual Holding Company
prior to approval of such application by the OTS. If applicable, the
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Supplemental Eligibility Record Date shall be the last day of the calendar
quarter preceding OTS approval of the Application for Conversion submitted by
the Mutual Holding Company pursuant to this Plan of Conversion.
Syndicated Community Offering: The term "Syndicated Community Offering"
-----------------------------
means the offering for sale by a syndicate of broker-dealers to the general
public of shares of Conversion Stock not purchased in the Subscription Offering
and the Community Offering.
Tax-Qualified Employee Stock Benefit Plan: The term "Tax-Qualified
-----------------------------------------
Employee Stock Benefit Plan" means any defined benefit plan or defined
contribution plan, such as an employee stock ownership plan, stock bonus plan,
profit-sharing plan or other plan, which is established for the benefit of the
employees of the Holding Company and the Bank and which, with its related trust,
meets the requirements to be "qualified" under Section 401 of the Code as from
time to time in effect. A "Non-Tax-Qualified Employee Stock Benefit Plan" is any
defined benefit plan or defined contribution stock benefit plan which is not so
qualified.
Voting Member: The term "Voting Member" means a Person who at the close
-------------
of business on the Voting Record Date is entitled to vote as a Member of the
Mutual Holding Company in accordance with its mutual charter and bylaws.
Voting Record Date: The term "Voting Record Date" means the date or
------------------
dates fixed by the Board of Directors for determining the eligibility of Members
to vote at the Special Meeting and of Stockholders to vote at the Stockholders'
Meeting, as applicable.
Y-3 Application: The term "Y-3 Application" means the application
---------------
submitted to the Federal Reserve Board on the Federal Reserve Board Form FR Y-3
for approval for the Holding Company to maintain control of the National Bank.
II. GENERAL PROCEDURE FOR CONVERSION AND REORGANIZATION
A. An application for the Stock Conversion and Reorganization,
including the Plan and all other requisite material (the "Application for
Conversion"), shall be submitted to the OTS for approval. The Mutual Holding
Company and the Bank also will cause notice of the adoption of the Plan by the
Boards of Directors of the Mutual Holding Company and the Bank to be given by
publication in a newspaper having general circulation in each community in which
an office of the Bank is located; and will cause copies of the Plan to be made
available at each office of the Mutual Holding Company and the Bank for
inspection by Members and Stockholders. After receipt of notice from the OTS to
do so, the Mutual Holding Company and the Bank will post the notice of the
filing of the Application for Conversion in each of their offices and will again
cause to be published, in accordance with the requirements of applicable
regulations of the OTS, a notice of the filing with the OTS of an application to
convert the Mutual Holding Company from mutual to stock form.
B. Also promptly following the adoption of this Plan, the Bank shall
file the OCC Conversion Application and the OTS Bank Conversion Application and
the Holding Company shall file a draft Y-3 Application.
C. The Holding Company shall submit or cause to be submitted an
Application H-(e)1 or H-(e)1-S to the OTS for approval of the acquisition of the
Bank and shall file the final Y-3 Application. Such application also shall
include applications to form Interim A and Interim B. In addition, an
application to merge Interim A and the Bank and an application to merge Interim
B and the Bank shall be filed with the OTS, either as an exhibit to the
Application H- (e)1 or H-(e)1-S or as the case may be, or separately. All
notices required to be published in connection with such applications shall be
published at the times required. After the receipt of all requisite regulatory
approvals, the Holding Company will form Interim B as a first-tier, wholly owned
subsidiary the Company, and the Board of Directors of Interim B shall adopt the
Plan of Merger included as Annex B hereto by at least a two-thirds vote. In
addition, the Holding Company shall approve such Plan of Merger in its capacity
as the sole stockholder of Interim B.
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D. The Holding Company shall file a Registration Statement with the
SEC to register the Holding Company Common Stock to be issued in the Stock
Conversion and Reorganization under the Securities Act of 1933, as amended, and,
if required, shall register such Holding Company Common Stock under any
applicable state securities laws. Upon registration and after the receipt of all
required regulatory approvals, the Conversion Stock shall be first offered for
sale in a Subscription Offering to Eligible Account Holders, Tax-Qualified
Employee Stock Benefit Plans, Supplemental Eligible Account Holders, if any,
Other Members, Directors, Officers and Employees and Public Stockholders as of
the Voting Record Date. It is anticipated that any shares of Conversion Stock
remaining unsold after the Subscription Offering will be sold through a
Community Offering and/or a Syndicated Community Offering. The purchase price
per share for the Conversion Stock shall be a uniform price determined in
accordance with Section III.A hereof. The Holding Company shall contribute to
the Bank an amount of the net proceeds received by the Holding Company from the
sale of Conversion Stock as shall be determined by the Boards of Directors of
the Holding Company and the Bank and as shall be approved by the OTS.
E. Promptly following receipt of requisite approval of the OTS, this
Plan will be submitted to the Members for their consideration and approval at
the Special Meeting. The Mutual Holding Company may, at its option, mail to all
Members as of the Voting Record Date, at their last known address appearing on
the records of the Mutual Holding Company and the Bank, a proxy statement in
either long or summary form describing the Plan which will be submitted to a
vote of the Members at the Special Meeting. The Holding Company also shall mail
to all such Members (as well as other Participants) either a Prospectus and
Order Form for the purchase of Conversion Stock or a letter informing them of
their right to receive a Prospectus and Order Form and a postage prepaid card to
request such materials, subject to the provisions of Section III.G hereof. In
addition, all such Members will receive, or be given the opportunity to request
by returning a postage-prepaid card which will be distributed with the proxy
statement, letter or other written communication, a copy of the certificate of
incorporation and bylaws of the Holding Company. The Plan must be approved by
the affirmative vote of at least a majority of the total number of votes
eligible to be cast by Voting Members at the Special Meeting.
F. Subscription Rights to purchase shares of Conversion Stock will be
issued without payment therefor to Eligible Account Holders, Tax-Qualified
Employee Plans, Supplemental Eligible Account Holders, if any, Other Members,
Directors, Officers and Employees and Public Stockholders as of the Voting
Record Date, as set forth in Section III.B.
G. The Bank shall file preliminary proxy materials with the OTS in
order to seek the approval of the Plan by its Stockholders. Promptly following
clearance of such proxy materials and the receipt of any other requisite
approval of the OTS, the Bank will mail definitive proxy materials to all
Stockholders as of the Voting Record Date, at their last known address appearing
on the records of the Bank, for their consideration and approval of this Plan at
the Stockholders' Meeting. The Plan must be approved by the holders of at least
two-thirds of the outstanding Bank Common Stock as of the Voting Record Date. In
addition, the Primary Parties have conditioned the consummation of the Stock
Conversion and Reorganization on the approval of the Plan by at least a majority
of the votes cast, in person or by proxy, by the Public Stockholders at the
Stockholders' Meeting.
H. The Effective Date of the Stock Conversion and Reorganization shall
be the date set forth in Article V hereof. Upon the Effective Date, the
following transactions shall be deemed to have occurred simultaneously:
1. The Mutual Holding Company shall convert into an interim
stock savings association, Interim A, and Interim A shall simultaneously merge
with and into the Bank in the M.H.C. Merger, with the Bank being the surviving
institution. As a result of the M.H.C. Merger, (x) the shares of Bank Common
Stock currently held by the Mutual Holding Company shall be canceled and (y)
Members of the Mutual Holding Company will be granted interests in the
Liquidation Account.
2. Interim B shall merge with and into the Bank pursuant to the
Bank Merger, with the Bank being the surviving institution. As a result of the
Bank Merger: (x) the shares of Holding Company Common Stock
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held by the Bank shall be canceled; (y) the shares of Bank Common Stock held by
the Public Stockholders (other than shares as to which the holders thereof have
properly exercised dissenters' rights of appraisal, if any) shall be converted
into the right to receive shares of Holding Company Common Stock based upon the
Exchange Ratio, plus cash in lieu of any fractional share interest based upon
the Actual Purchase Price; and (z) the shares of common stock of Interim B held
by the Holding Company shall be converted into shares of Bank Common Stock on a
one-for-one basis, with the result that the Bank shall become a wholly owned
subsidiary of the Company.
3. The Holding Company shall consummate the sale of the
Conversion Stock.
I. In the event the Holding Company Common Stock does not constitute
qualified consideration within the meaning of Section 552.14 of the Regulations
for Federal Savings Associations (the "Appraisal Regulation"), the notice for
the Stockholders' Meeting shall notify Public Stockholders of their right to
demand the payment of the appraised value of their shares upon consummation of
the Stock Conversion and Reorganization. Such notice shall also include a copy
of the Appraisal Regulation. Within ten days after the Effective Date, written
notice shall be given to all Public Stockholders who have properly exercised
appraisal rights in accordance with the Appraisal Regulation. Consummation of
the Stock Conversion and Reorganization is specifically conditioned on the
exercise of appraisal rights by less than 10% of the outstanding shares of Bank
Common Stock.
J. The Primary Parties may retain and pay for the services of
financial and other advisors and investment bankers to assist in connection with
any or all aspects of the Stock Conversion and Reorganization, including in
connection with the Offerings, the payment of fees to brokers and investment
bankers for assisting Persons in completing and/or submitting Order Forms. All
fees, expenses, retainers and similar items shall be reasonable.
K. 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 OCC and the OTS to complete the
conversion of the Bank to a national bank, including without limitation the
approval of the Bank Conversion by the Holding Company, as the sole stockholder
of the Bank, and the Bank will thereby be and become the National Bank. The Bank
Conversion shall be consummated as soon as practicable following the
consummation of the Stock Conversion as described in this Paragraph II.
L. The Board of Directors of the Bank may, at any time, elect not to
proceed with the Bank Conversion, in which event the OCC Conversion Application,
the OTS Bank Conversion Application and the Y-3 Application shall be withdrawn.
In the event the Bank Conversion is not pursued, any references to the Bank
Conversion in this Plan shall be deemed to constitute references to the Stock
Conversion and Reorganization and references to the National Bank shall be
deemed to constitute references to the Bank.
III. CONVERSION STOCK OFFERING
A. Total Number of Shares and Purchase Price of Conversion Stock.
--------------------------------------------------------------
1. The aggregate price at which shares of Conversion Stock shall
be sold in the Offerings shall be based on a pro forma valuation of the
aggregate market value of the Conversion Stock prepared by the Independent
Appraiser. The valuation shall be based on financial information relating to the
Primary Parties, market, financial and economic conditions, a comparison of the
Primary Parties with selected publicly held financial institutions and holding
companies and with comparable financial institutions and holding companies and
such other factors as the Independent Appraiser may deem to be important. The
valuation shall be stated in terms of an Estimated Price Range, the maximum of
which shall generally be no more than 15% above the average of the minimum and
maximum of such price range and the minimum of which shall generally be no more
than 15% below such average. The valuation shall be updated during the Stock
Conversion and Reorganization as market and financial conditions warrant and as
may be required by the OTS.
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2. Based upon the independent valuation, the Boards of Directors
of the Primary Parties shall fix the Initial Purchase Price and the number (or
range) of shares of Conversion Stock to be offered in the Subscription Offering,
Community Offering and/or Syndicated Community Offering. The Actual Purchase
Price and the total number of shares of Conversion Stock to be issued in the
Offerings shall be determined by the Boards of Directors of the Primary Parties
upon conclusion of the Offerings in consultation with the Independent Appraiser
and any financial advisor or investment banker retained by the Primary Parties
in connection therewith.
3. Subject to the approval of the OTS, the Estimated Price Range
may be increased or decreased to reflect market, financial and economic
conditions prior to completion of the Stock Conversion and Reorganization, and
under such circumstances the Primary Parties may increase or decrease the total
number of shares of Conversion Stock to be issued in the Stock Conversion and
Reorganization to reflect any such change. Notwithstanding anything to the
contrary contained in this Plan, no resolicitation of subscribers shall be
required and subscribers shall not be permitted to modify or cancel their
subscriptions unless the gross proceeds from the sale of the Conversion Stock
issued in the Stock Conversion and Reorganization are less than the minimum or
(excluding purchases, if any, by the Holding Company's and the Bank's Tax-
Qualified Employee Stock Benefit Plans under Section III.B.2 hereof) more than
15% above the maximum of the Estimated Price Range set forth in the Prospectus.
In the event of an increase in the total number of shares offered in the Stock
Conversion and Reorganization due to an increase in the Estimated Price Range,
the priority of share allocation shall be as set forth in this Plan, provided,
however, that such priorities will have no effect whatsoever on the ability of
the Tax-Qualified Employee Stock Benefit Plans to purchase additional shares
pursuant to Section III.B.2.
4. (a) In the event that Tax-Qualified Employee Stock Benefit
Plans are unable to purchase the number of shares subscribed for by such
Tax-Qualified Employee Stock Benefit Plans due to an oversubscription for shares
of Conversion Stock pursuant to Section III.B.1 hereof, Tax-Qualified Employee
Stock Benefit Plans may purchase from the Holding Company, and the Holding
Company may sell to the Tax-Qualified Employee Stock Benefit Plans, such
additional shares ("Additional Shares") of Holding Company Common Stock
necessary to fill the subscriptions of the Tax-Qualified Employee Stock Benefit
Plans, provided that such Additional Shares may not exceed 10% of the total
number of shares of Conversion Stock sold in the Stock Conversion and
Reorganization. The sale of Additional Shares, if necessary, will occur
contemporaneously with the sale of the Conversion Stock. The sale of Additional
Shares to Tax-Qualified Employee Stock Benefit Plans by the Holding Company is
conditioned upon receipt by the Holding Company of a letter from the Independent
Appraiser to the effect that such sale would not have a material effect on the
Stock Conversion and Reorganization or the Actual Purchase Price and the
approval of the OTS. The ability of the Tax-Qualified Employee Stock Benefit
Plans to purchase up to an additional 10% of the total number of shares of
Conversion Stock sold in the Stock Conversion and Reorganization shall not be
affected or limited in any manner by the priorities or purchase limitations
otherwise set forth in this Plan of Conversion.
(b) Notwithstanding anything to the contrary contained in this
Plan, if the final valuation range of the Conversion Stock exceeds the maximum
Conversion Stock offering range, up to 10% of the total number of shares of
Conversion Stock sold in the Stock Conversion and Reorganization may be sold to
Tax-Qualified Stock Benefit Plans prior to filling any other orders for
Conversion Stock from such shares in excess of the maximum Conversion Stock
offering range.
B. Subscription Offering.
---------------------
Non-transferable Subscription Rights to purchase shares of Conversion
Stock will be issued at no cost to Eligible Account Holders, Tax-Qualified
Employee Stock Benefit Plans, Supplemental Eligible Account Holders and Other
Members pursuant to priorities established by applicable regulations. All shares
must be sold, and, to the extent that Conversion Stock is available, no
subscriber will be allowed to purchase fewer than 25 shares of Conversion Stock,
provided that this number shall be decreased if the aggregate purchase price
exceeds $500. The priorities established by applicable regulations for the
purchase of shares are as follows:
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1. Category No. 1: Eligible Account Holders.
(a) Each Eligible Account Holder shall receive, without
payment, Subscription Rights to purchase up to the greater of (i) 5,000 shares
of Conversion Stock per qualifying deposit or loan account, provided that the
aggregate maximum number of shares of Conversion Stock that may be purchased by
any person, together with associates, or groups of persons acting in concert in
the Offerings is 5% of the shares sold in the Offerings, and provided that when
such shares are combined with Exchange Shares, such person, together with
Associates and persons acting in concert, does not own in excess of 5% of the
Shares of Holding Company Common Stock Outstanding upon consummation of the
Conversion, (ii) one-tenth of 1% of the total offering of shares of Conversion
Stock in the Subscription Offering, and (iii) 15 times the product (rounded down
to the next whole number) obtained by multiplying the total number of shares of
Conversion Stock offered in the Subscription Offering by a fraction, of which
the numerator is the amount of the Qualifying Deposits of the Eligible Account
Holder and the denominator is the total amount of all Qualifying Deposits of all
Eligible Account Holders, subject to Section III.G hereof .
(b) In the event of an oversubscription for shares of
Conversion Stock pursuant to Section III.B.1, available shares shall be
allocated among subscribing Eligible Account Holders so as to permit each such
Eligible Account Holder, to the extent possible, to purchase a number of shares
which will make his or her total allocation equal to the lesser of the number of
shares subscribed for or 100 shares. Any available shares remaining after each
subscribing Eligible Account Holder has been allocated the lesser of the number
subscribed for or 100 shares shall be allocated among the subscribing Eligible
Account Holders in the proportion which the Qualifying Deposit of each such
subscribing Eligible Account Holder bears to the total Qualifying Deposits of
all such subscribing Eligible Account Holders, provided that no fractional
shares shall be issued. Subscription Rights of Eligible Account Holders who are
also Directors or Officers and their Associates shall be subordinated to those
of other Eligible Account Holders to the extent that they are attributable to
increased deposits during the one-year period preceding the Eligibility Record
Date.
2. Category No. 2: Tax-Qualified Employee Stock Benefit Plans.
Notwithstanding the purchase limitations discussed below,
Tax-Qualified Employee Stock Benefit Plans of the Holding Company and the Bank
shall receive, without payment, Subscription Rights to purchase in the aggregate
up to 10% of the Conversion Stock and the Exchange Stock, including any shares
of Conversion Stock to be issued in the Stock Conversion and Reorganization as a
result of an increase in the Estimated Price Range after commencement of the
Subscription Offering and prior to completion of the Stock Conversion and
Reorganization. Consistent with applicable laws and regulations and policies and
practices of the OTS, Tax-Qualified Employee Stock Benefit Plans may use funds
contributed by the Holding Company or the Bank and/or borrowed from an
independent financial institution to exercise such Subscription Rights, and the
Holding Company and the Bank may make scheduled discretionary contributions
thereto, provided that such contributions do not cause the Holding Company or
the Bank to fail to meet any applicable regulatory capital requirement. The
purchase of shares of Conversion Stock by Tax-Qualified Employee Stock Benefit
Plans shall be in the sole discretion of the Boards of Directors of the Holding
Company and the Bank.
3. Category No. 3: Supplemental Eligible Account Holders.
(a) In the event that the Eligibility Record Date is more
than 15 months prior to the date of the latest amendment to the Application for
Conversion filed prior to OTS approval, then, and only in such event, a
Supplemental Eligibility Record Date shall be set and each Supplemental Eligible
Account Holder shall receive, without payment, Subscription Rights to purchase
up to the greater of (i) 5,000 shares of Conversion Stock per qualifying deposit
or loan account, provided that the aggregate maximum number of shares of
Conversion Stock that may be purchased by any person, together with associates,
or groups of persons acting in concert in the Offerings is 5% of the shares sold
in the Offerings, and provided that when such shares are combined with Exchange
Shares, such person, together with Associates and persons acting in concert,
does not own in excess of 5% of the Shares of Holding Company Common Stock
Outstanding upon consummation of the Conversion, (ii) one-tenth of 1% of the
total offering
A-12
of shares of Conversion Stock in the Subscription Offering, and (iii) 15 times
the product (rounded down to the next whole number) obtained by multiplying the
total number of shares of Conversion Stock offered in the Subscription Offering
by a fraction, of which the numerator is the amount of the Qualifying Deposits
of the Supplemental Eligible Account Holder and the denominator is the total
amount of all Qualifying Deposits of all Supplemental Eligible Account Holders,
subject to Section III.G hereof and the availability of shares of Conversion
Stock for purchase after taking into account the shares of Conversion Stock
purchased by Eligible Account Holders and Tax-Qualified Employee Stock Benefit
Plans through the exercise of Subscription Rights under Sections III.B.1 and
III.B.2 hereof.
(b) In the event of an oversubscription for
shares of Conversion Stock pursuant to Section III.B.3, available shares shall
be allocated among subscribing Supplemental Eligible Account Holders so as to
permit each such Supplemental Eligible Account Holder, to the extent possible,
to purchase a number of shares which will make his or her total allocation
(including the number of shares, if any, allocated in accordance with Section
III.B.1 hereof) equal to the lesser of the number of shares subscribed for or
100 shares. Any available shares remaining after each subscribing Supplemental
Eligible Account Holder has been allocated the lesser of the number subscribed
for or 100 shares shall be allocated among the subscribing Supplemental Eligible
Account Holders in the proportion which the Qualifying Deposit of each such
subscribing Supplemental Eligible Account Holder bears to the total Qualifying
Deposits of all such subscribing Supplemental Eligible Account Holders, provided
that no fractional shares shall be issued.
4. Category No. 4: Other Members.
(a) Each Other Member shall receive, without
payment, Subscription Rights to purchase up to the greater of (i) 5,000 shares
of Conversion Stock per qualifying deposit or loan account, provided that the
aggregate maximum number of shares of Conversion Stock that may be purchased by
any person, together with associates, or groups of persons acting in concert in
the Offerings is 5% of the shares sold in the Offerings, and provided that when
such shares are combined with Exchange Shares, such person, together with
Associates and persons acting in concert, does not own in excess of 5% of the
Shares of Holding Company Common Stock Outstanding upon consummation of the
Conversion, and (ii) one-tenth of 1% of the total offering of shares of
Conversion Stock in the Subscription Offering, in each case subject to Section
III.G hereof and the availability of shares of Conversion Stock for purchase
after taking into account the shares of Conversion Stock purchased by Eligible
Account Holders, Tax-Qualified Employee Stock Benefit Plans, and Supplemental
Eligible Account Holders, if any, through the exercise of Subscription Rights
under Sections III.B.1, 2 and 3 hereof.
(b) If, pursuant to this Section III.B.4, Other
Members subscribe for a number of shares of Conversion Stock in excess of the
total number of shares of Conversion Stock remaining, available shares shall be
allocated among subscribing Other Members so as to permit each Other Member, to
the extent possible, to purchase a number of shares which will make his or her
total allocation equal to the lesser of the number of shares subscribed for or
100 shares. Any remaining shares shall be allocated among subscribing Other
Members on a pro rata basis in the same proportion as each such Other Member's
subscription bears to the total subscriptions of all subscribing Other Members,
provided that no fractional shares shall be issued.
5. Category No. 5: Directors, Officers and Employees.
(a) To the extent that there are sufficient
shares remaining after satisfaction of all subscriptions under the above
categories, Directors, Officers and Employees of the Bank shall receive, without
payment, Subscription rights to purchase in this category 5,000 shares of
Conversion Stock per qualifying deposit or loan account or, if no account per
person, provided that the aggregate maximum number of shares of Conversion Stock
that may be purchased by any person, together with associates, or groups of
persons acting in concert in the Offerings is 5% of the shares sold in the
Offerings, and provided that when such shares are combined with Exchange Shares,
such person, together with Associates and persons acting in concert, does not
own in excess of 5% of the Shares of Holding Company
A-13
Common Stock Outstanding upon consummation of the Conversion, and provided that
all Directors shall be allowed to purchase up to an aggregate of 35% of the
shares of Conversion Stock offered in the Subscription Offering.
(b) In the event of an oversubscription for
shares of Conversion Stock pursuant to this Section III.B.5, Subscription Rights
for the purchase of such shares shall be allocated among the individual
Directors, Officers and Employees on a point system basis, whereby a point will
be assigned for each year of employment and for each salary increment of $5,000
per annum and five points for each office held in the Mutual Holding Company and
the Bank, including a directorship. If any such Director, Officer or Employee
does not subscribe for his or her full allocation of shares, any shares not
subscribed for may be purchased by other Directors, Officers and Employees in
proportion to their respective subscriptions, provided that no fractional shares
shall be issued.
6. Category No. 6: Public Stockholders.
(a) Each Public Stockholder as of the Voting
Record Date shall receive, without payment, Subscription Rights to purchase up
to the greater of (i) 5,000 shares of Conversion Stock, provided that the
aggregate maximum number of shares of Conversion Stock that may be purchased by
any person, together with associates, or groups of persons acting in concert in
the Offerings is 5% of the shares sold in the Offerings, and provided that when
such shares are combined with Exchange Shares, such person, together with
Associates and persons acting in concert, does not own in excess of 5% of the
Shares of Holding Company Common Stock Outstanding upon consummation of the
Conversion; and (ii) one tenth of 1% of the total offering of shares of
Conversion Stock in the Subscription Offering, in each case subject to Section
III.G hereof and the availability of shares of Conversion Stock for purchase
after taking into account the shares of Conversion Stock purchased by Eligible
Account Holders, Tax-Qualified Employee Stock Benefit Plans, Supplemental
Eligible Account Holders, if any, Other Members and Directors, Officers and
Employees.
(b) If, pursuant to this Section III.B.6, Public
Stockholders as of the Voting Record Date subscribe for a number of shares of
Conversion Stock in excess of the total number of shares of Conversion Stock
remaining, available shares shall be allocated among subscribing Public
Stockholders as of the Voting Record Date on a pro rata basis in the same
proportion as each such Public Stockholder's subscription bears to the total
subscriptions of all such subscribing Public Stockholders, provided that no
fractional shares shall be issued.
C. Community Offering, Syndicated Community Offering and Other
-----------------------------------------------------------
Offerings.
---------
1. If less than the total number of shares of Conversion
Stock are sold in the Subscription Offering, it is anticipated that all
remaining shares of Conversion Stock shall, if practicable, be sold in a
Community Offering and/or Syndicated Community Offering. Subject to the
requirements set forth herein, the manner in which the Conversion Stock is sold
in the Community Offering and/or Syndicated Community Offering shall have as the
objective the achievement of the widest possible distribution of such stock.
2. In the event of a Community Offering, all shares of
Conversion Stock which are not subscribed for in the Subscription Offering shall
be offered for sale by means of a direct community marketing program, which may
provide for the use of brokers, dealers or investment banking firms experienced
in the sale of financial institution securities. Any available shares in excess
of those not subscribed for in the Subscription Offering will be available for
purchase by members of the general public to whom a Prospectus is delivered by
the Holding Company or on its behalf, with preference given to natural persons
residing in the Local Community ("Preferred Subscribers").
3. A Prospectus and Order Form shall be furnished to such
Persons as the Primary Parties may select in connection with the Community
Offering, and each order for Conversion Stock in the Community Offering shall be
subject to the absolute right of the Primary Parties to accept or reject any
such order in whole or in part either at the time of receipt of an order or as
soon as practicable following completion of the Community Offering. Available
shares will be allocated first to each Preferred Subscriber whose order is
accepted in an amount equal to the lesser of
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100 shares or the number of shares subscribed for by each such Preferred
Subscriber, if possible. Thereafter, unallocated shares shall be allocated among
the Preferred Subscribers whose accepted orders remain unsatisfied in the same
proportion that the unfilled order of each bears to the total unfilled orders of
all Preferred Subscribers whose accepted orders remain unsatisfied, provided
that no fractional shares shall be issued. If there are any shares remaining
after all accepted orders by Preferred Subscribers have been satisfied, any
remaining shares shall be allocated to other members of the general public who
purchase in the Community Offering, applying the same allocation described above
for Preferred Subscribers.
4. The amount of Conversion Stock that any Person may
purchase in the Community Offering shall not exceed the purchase limitation set
forth in Section III.D.2 hereof provided that, subject to the preferences set
forth in Paragraphs 2 and 3 of this Section III.C of this Plan and to the extent
applicable, orders for Conversion Stock in the Community Offering shall first be
filled to a maximum of 2% of the total number of shares of Conversion Stock sold
in the Offerings and thereafter any remaining shares shall be allocated on an
equal number of shares basis per order until all orders have been filled. The
Primary Parties may commence the Community Offering concurrently with, at any
time during, or as soon as practicable after the end of, the Subscription
Offering, and the Community Offering must be completed within 45 days after the
completion of the Subscription Offering, unless extended by the Primary Parties
with any required regulatory approval.
5. Subject to such terms, conditions and procedures as
may be determined by the Primary Parties, all shares of Conversion Stock not
subscribed for in the Subscription Offering or ordered in the Community Offering
may be sold by a syndicate of broker-dealers to the general public in a
Syndicated Community Offering. Each order for Conversion Stock in the Syndicated
Community Offering shall be subject to the absolute right of the Primary Parties
to accept or reject any such order in whole or in part either at the time of
receipt of an order or as soon as practicable after completion of the Syndicated
Community Offering. The amount of Conversion Stock that any Person may purchase
in the Syndicated Community Offering shall not exceed the purchase limitation
set forth in Section III.D.2 hereof provided that, to the extent applicable,
orders for Conversion Stock in the Syndicated Community Offering shall first be
filled to a maximum of 2% of the total number of shares of Conversion Stock sold
in the Offering and thereafter any remaining shares shall be allocated on an
equal number of shares basis per order until all orders have been filled. The
Primary Parties may commence the Syndicated Community Offering concurrently
with, at any time during, or as soon as practicable after the end of, the
Subscription Offering and/or Community Offering, and the Syndicated Community
Offering must be completed within 45 days after the completion of the
Subscription Offering, unless extended by the Primary Parties with any required
regulatory approval.
6. If for any reason a Syndicated Community Offering of
shares of Conversion Stock not sold in the Subscription Offering and the
Community Offering cannot be effected, or in the event that any insignificant
residue of shares of Conversion Stock is not sold in the Subscription Offering,
Community Offering or the Syndicated Community Offering, the Primary Parties
shall use their best efforts to obtain other purchasers for such shares in such
manner and upon such conditions as may be satisfactory to the OTS.
D. Limitations on Subscriptions and Purchases of Conversion
--------------------------------------------------------
Stock.
-----
1. The maximum number of shares of Conversion Stock which
may be purchased in the Conversion by Tax-Qualified Employee Stock Benefit Plans
shall not exceed 10% of the total number of shares of Exchange Stock and
Conversion Stock sold in the Offerings, including any shares which may be issued
in the event of an increase in the minimum of the Estimated Price Range to
reflect changes in market, financial and economic conditions after commencement
of the Subscription Offering and prior to completion of the Offerings.
2. Except in the case of Tax-Qualified Employee Stock
Benefit Plans in the aggregate, as set forth in Section III.D.1, and subject to
Section III.D.6 and in addition to the other restrictions and limitations set
forth herein, the maximum number of shares of Holding Company Common Stock which
any Person may, directly or indirectly, subscribe for or purchase in the Stock
Conversion and Reorganization shall not exceed 5,000 shares of
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Conversion Stock per qualifying deposit or loan account (or if no such account,
per person), provided that the aggregate maximum number of shares of Conversion
Stock that may be purchased by any person, together with associates, or groups
of persons acting in concert in the Offerings is 5% of the shares sold in the
Offerings, and that when such shares are combined with Exchange Shares, such
person, together with Associates and persons acting in concert shall not own in
excess of 5% of the shares of Holding Company Common Stock outstanding upon the
consummation of the Conversion.
3. The number of shares of Conversion Stock which
Directors and Officers and their Associates may purchase in the aggregate in the
Offerings shall not exceed 35% of the total number of shares of Conversion Stock
sold in the Offerings, including any shares which may be issued in the event of
an increase in the maximum of the Estimated Price Range to reflect changes in
market, financial and economic conditions after commencement of the Subscription
Offering and prior to completion of the Offerings.
4. No Person may purchase fewer than 25 shares of
Conversion Stock in the Offerings, to the extent such shares are available;
provided, however, that if the Actual Purchase Price is greater than $20.00 per
share, such minimum number of shares shall be adjusted so that the aggregate
Actual Purchase Price for such minimum shares will not exceed $500.00
5. For purposes of the foregoing limitations and the
determination of Subscription Rights, (i) Directors, Officers and Employees
shall not be deemed to be Associates or a group Acting in Concert solely as a
result of their capacities as such, (ii) shares purchased by Tax-Qualified
Employee Stock Benefit Plans shall not be attributable to the individual
trustees or beneficiaries of any such plan for purposes of determining
compliance with the limitations set forth in Section III.D.2 hereof, (iii)
shares purchased by Tax-Qualified Employee Stock Benefit Plans shall not be
attributable to the individual trustees or beneficiaries of any such plan for
purposes of determining compliance with the limitation set forth in Section
III.D.3 hereof, and (iv) Exchange Shares shall be valued at the Actual Purchase
Price.
6. Subject to any required regulatory approval and the
requirements of applicable laws and regulations, but without further approval of
the Members of the Mutual Holding Company or the Stockholders of the Bank, the
Primary Parties may increase or decrease any of the individual or aggregate
purchase limitations set forth herein whether prior to, during or after the
Subscription Offering, Community Offering and/or Syndicated Community Offering
provided, however, that in the event the individual purchase limit is increased
above 5% of the total number of shares of Conversion Stock sold in the offering,
the aggregate number of shares sold to subscribers in excess of 5% shall not
exceed 10% of the total number of shares sold in the Offering. In the event that
an individual purchase limitation is increased after commencement of the
Subscription Offering or any other Offering, the Primary Parties shall permit
any Person who subscribed for the maximum number of shares of Conversion Stock
to subscribe for an additional number of shares, so that such Person shall be
permitted to subscribe for the then maximum number of shares permitted to be
subscribed for by such Person, subject to the rights and preferences of any
Person who has priority Subscription Rights and the allocation formula described
in the foregoing sentence. In the event that an individual purchase limitation
is decreased after commencement of the Subscription Offering or any other
offering, the orders of any Person who subscribed for more than the new purchase
limitation shall be decreased by the minimum amount necessary so that such
Person shall be in compliance with the then maximum number of shares permitted
to be subscribed for by such Person.
7. Each Person purchasing Conversion Stock in the Stock
Conversion and Reorganization shall be deemed to confirm that such purchase does
not conflict with the purchase limitations under the Plan or otherwise imposed
by law, rule or regulation. In the event that such purchase limitations are
violated by any Person (including any Associate or group of Persons affiliated
or otherwise Acting in Concert with such person), the Holding Company shall have
the right to purchase from such Person at the Actual Purchase Price per share
all shares acquired by such Person in excess of such purchase limitations or, if
such excess shares have been sold by such person, to receive the difference
between the Actual Purchase Price per share paid for such excess shares and the
price at which such excess
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shares were sold by such Person. This right of the Holding Company to purchase
such excess shares shall be assignable by the Holding Company.
8. The Primary Parties shall have the right to take all
such action as they may, in their sole discretion, deem necessary, appropriate
or advisable in order to monitor and enforce the terms, conditions, limitations
and restrictions contained in this Section III.D and elsewhere in this Plan and
the terms, conditions and representations contained in the Order Form,
including, but not limited to, the absolute right (subject only to any necessary
regulatory approvals or concurrences) to reject, limit or revoke acceptance of
any subscription or order and to delay, terminate or refuse to consummate any
sale of Conversion Stock which they believe might violate, or is designed to, or
is any part of a plan to, evade or circumvent such terms, conditions,
limitations, restrictions and representations. Any such action shall be final,
conclusive and binding on all persons, and the Primary Parties and their
respective Boards shall be free from any liability to any Person on account of
any such action.
9. Notwithstanding anything to the contrary contained in
this Plan, no Public Stockholder will be required to sell any Bank Common Stock
or be limited in receiving Exchange Shares provided that their aggregate
ownership of Holding Company Common Stock including Conversion Stock purchased
in the Offerings and Exchange Shares received pursuant to the Bank Merger would
not exceed 5.0% of the total number of shares of Holding Company Common Stock
outstanding immediately following the Stock Conversion and Reorganization. Such
percentage may be increased but to no greater than 9.9% of the total number of
shares outstanding provided: (a) each Person who has subscribed for the maximum
number of shares of Conversion Stock shall have been offered the opportunity to
increase their subscriptions to such percentage of the Conversion Stock subject
to the provisions of Section III.D.6 hereof; and (b) the aggregate number of
shares held by all stockholders in excess of 5% shall not exceed 10% of the
total number of shares of Holding Company Common Stock outstanding immediately
following the Stock Conversion and Reorganization. In calculating the percentage
ownership of any stockholder for purposes of this Section, the number of shares
outstanding shall be deemed to include any shares which the stockholder has the
right to acquire pursuant to presently exercisable options. In the event a
Public Stockholder's ownership would exceed the foregoing limitation, the
Holding Company shall have the right to reject, limit or revoke acceptance of
any subscription or order from such Person and/or the right to purchase any
excess shares from such Person at the Actual Purchase Price.
E. Timing of Subscription Offering, Manner of Exercising
-----------------------------------------------------
Subscription Rights and Order Forms.
-----------------------------------
1. The Subscription Offering may be commenced
concurrently with or at any time after the mailing to Voting Members of the
Mutual Holding Company and Stockholders of the Bank of the proxy statement(s) to
be used in connection with the Special Meeting and the Stockholders' Meeting.
The Subscription Offering may be closed before the Special Meeting and the
Stockholders' Meeting, provided that the offer and sale of the Conversion Stock
shall be conditioned upon the approval of the Plan by the Voting Members of the
Mutual Holding Company and the Stockholders of the Bank at the Special Meeting
and the Stockholders' Meeting, respectively.
2. The exact timing of the commencement of the
Subscription Offering shall be determined by the Primary Parties in consultation
with the Independent Appraiser and any financial or advisory or investment
banking firm retained by them in connection with the Conversion. The Primary
Parties may consider a number of factors, including, but not limited to, their
current and projected future earnings, local and national economic conditions,
and the prevailing market for stocks in general and stocks of financial
institutions in particular. The Primary Parties shall have the right to
withdraw, terminate, suspend, delay, revoke or modify any such Subscription
Offering, at any time and from time to time, as they in their sole discretion
may determine, without liability to any Person, subject to compliance with
applicable securities laws and any necessary regulatory approval or concurrence.
3. The Primary Parties shall, promptly after the SEC has
declared the Registration Statement which includes the Prospectus effective and
all required regulatory approvals have been obtained, distribute or make
available the Prospectus, together with Order Forms for the purchase of
Conversion Stock, to all Participants for the purpose of enabling them to
exercise their respective Subscription Rights, subject to Section III.G hereof.
The Primary
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Parties may elect to mail a Prospectus and Order Form only to those Participants
who request such materials by returning a postage-paid card to the Primary
Parties by a date specified in the letter informing them of their Subscription
Rights. Under such circumstances, the Subscription Offering shall not be closed
until the expiration of 30 days after the mailing by the Primary Parties of the
postage-paid card to Participants.
4. A single Order Form for all Deposit Accounts
maintained with the Bank by an Eligible Account Holder and any Supplemental
Eligible Account Holder may be furnished, irrespective of the number of Deposit
Accounts maintained with the Bank on the Eligibility Record Date and
Supplemental Eligibility Record Date, respectively.
5. The recipient of an Order Form shall have no less than
20 days and no more than 45 days from the date of mailing of the Order Form
(with the exact termination date to be set forth on the Order Form) to properly
complete and execute the Order Form and deliver it to the Primary Parties. The
Primary Parties may extend such period by such amount of time as they determine
is appropriate. Failure of any Participant to deliver a properly executed Order
Form to the Primary Parties, along with payment (or authorization for payment by
withdrawal) for the shares of Conversion Stock subscribed for, within the time
limits prescribed, shall be deemed a waiver and release by such person of any
rights to subscribe for shares of Conversion Stock. Each Participant shall be
required to confirm to the Primary Parties by executing an Order Form that such
person has fully complied with all of the terms, conditions, limitations and
restrictions in the Plan.
6. The Primary Parties shall have the absolute right, in
their sole discretion and without liability to any Participant or other Person,
to reject any Order Form, including, but not limited to, any Order From that is
(i) improperly completed or executed; (ii) not timely received; (iii) not
accompanied by the proper payment (or authorization of withdrawal for payment
or, in the case of institutional investors in the Community Offering, not
accompanied by an irrevocable order together with a legally binding commitment
to pay the full amount of the purchase price prior to 48 hours before the
completion of the Offerings; or (iv) submitted by a person whose representations
the Primary Parties 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 the
Plan. The Primary Parties may, but will not be required to, waive any
irregularity on any Order Form or may require the submission of corrected Order
Forms or the remittance of full payment for shares of Conversion Stock by such
date as they may specify. The interpretation of the Primary Parties of the terms
and conditions of the Order Forms shall be final and conclusive.
7. The Primary Parties may elect to offer to pay fees on
a per share basis to securities brokers who assist purchasers of Conversion
Stock in the Offerings.
F. Payment for Conversion Stock.
----------------------------
1. Payment for shares of Conversion Stock subscribed for
by Participants in the Subscription Offering and payment for shares of
Conversion Stock ordered by Persons in the Community Offering shall be equal to
the Initial Purchase Price multiplied by the number of shares which are being
subscribed for or ordered, respectively. Such payment may be made in cash, if
delivered in person, or by check or money order at the time the Order Form is
delivered to the Primary Parties. The Primary Parties may also elect to receive
payment for shares of Conversion Stock by wire transfer. In addition, the
Primary Parties may elect to provide Participants and/or other Persons who have
a Deposit Account with the Bank the opportunity to pay for shares of Conversion
Stock by authorizing the Bank to withdraw from such Deposit Account an amount
equal to the aggregate Initial Purchase Price of such shares. If the Actual
Purchase Price is less than the Initial Purchase Price, the Primary Parties
shall refund the difference to all Participants and other Persons, unless the
Primary Parties choose to provide Participants and other Persons the opportunity
on the Order Form to elect to have such difference applied to the purchase of
additional whole shares of Conversion Stock. If the Actual Purchase Price is
more than the Initial Purchase Price, the Primary Parties shall reduce the
number of shares of Conversion Stock ordered by Participants and other Persons
and refund any remaining amount
A-18
which is attributable to a fractional share interest, unless the Primary Parties
choose to provide Participants and other Persons the opportunity to increase the
Actual Purchase Price submitted to them.
2. Consistent with applicable laws and regulations and
policies and practices of the OTS, payment for shares of Conversion Stock
subscribed for by Tax-Qualified Employee Stock Benefit Plans may be made with
funds contributed by the Holding Company and/or the Bank and/or funds obtained
pursuant to a loan from an unrelated financial institution pursuant to a loan
commitment which is in force from the time that any such plan submits an Order
Form until the closing of the transactions contemplated hereby.
3. If a Participant or other Person authorizes the Bank
to withdraw the amount of the Initial Purchase Price from his or her Deposit
Account, the Bank shall have the right to make such withdrawal or to place a
hold on funds in the Deposit Account equal to the aggregate Initial Purchase
Price upon receipt of the Order Form. Notwithstanding any regulatory provisions
regarding penalties for early withdrawals from certificate accounts, the Bank
may allow payment by means of withdrawal from certificate accounts without the
assessment of such penalties. In the case of an early withdrawal of only a
portion of such account, the certificate evidencing such account shall be
canceled if any applicable minimum balance requirement ceases to be met. In such
case, the remaining balance will earn interest at the regular passbook rate.
However, where any applicable minimum balance is maintained in such certificate
account, the rate of return on the balance of the certificate account shall
remain the same as prior to such early withdrawal. This waiver of the early
withdrawal penalty applies only to withdrawals made in connection with the
purchase of Conversion Stock and is entirely within the discretion of the
Primary Parties.
4. The Bank shall pay interest, at not less than the
passbook rate, for all amounts paid in cash, by check or money order to purchase
shares of Conversion Stock in the Subscription Offering and the Community
Offering from the date payment is received until the date the Stock Conversion
and Reorganization is completed or terminated.
5. The Bank shall not knowingly loan funds or otherwise
extend credit to any Participant or other Person to purchase Conversion Stock.
6. Each share of Conversion Stock shall be non-assessable
upon payment in full of the Actual Purchase Price.
G. Account Holders in Nonqualified States or Foreign Countries.
-----------------------------------------------------------
The Primary Parties shall make reasonable efforts to comply with the
securities laws of all jurisdictions in the United States in which Participants
reside. However, no Participant will be offered or receive any Conversion Stock
under the Plan if such Participant resides in a foreign country or resides in a
jurisdiction of the United States with respect to which all of the following
apply: (a) there are few Participants otherwise eligible to subscribe for shares
under this Plan who reside in such jurisdiction; (b) the granting of
Subscription Rights or the offer or sale of shares of Conversion Stock to such
Participants would require any of the Primary Parties or their respective
Directors and Officers, under the laws of such jurisdiction, to register as a
broker-dealer, salesman or selling agent or to register or otherwise qualify the
Conversion Stock for sale in such jurisdiction, or any of the Primary Parties
would be required to qualify as a foreign corporation or file a consent to
service of process in such jurisdiction; and (c) such registration,
qualification or filing in the judgment of the Primary Parties would be
impracticable or unduly burdensome for reasons of cost or otherwise. No payments
will be made in lieu of the granting of Subscription Rights to any Person.
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IV. CERTAIN OTHER EFFECTS OF CONVERSION
A. Liquidation Account.
-------------------
1. At the time of the M.H.C. Merger, the Bank shall
establish a Liquidation Account in an amount equal to the amount of the
dividends from Bank Common Stock waived by the Mutual Holding Company plus the
greater of (i) $2.6 million, which is equal to 100% of the retained earnings of
the Bank as of March 31, 1992, the date of the latest statement of financial
condition contained in the final offering circular utilized in the Bank's
initial public offering, or (ii) 60.54% of the Bank's total stockholders' equity
as reflected in its latest statement of financial condition contained in the
final Prospectus utilized in the Stock Conversion and Reorganization. The
function of the Liquidation Account will be to preserve the rights of certain
holders of Deposit Accounts in the Bank who maintain such accounts in the Bank
following the Stock Conversion and Reorganization to a priority to distributions
in the unlikely event of a liquidation of the Bank subsequent to the Stock
Conversion and Reorganization.
2. The Liquidation Account shall be maintained for the
benefit of Eligible Account Holders and Supplemental Eligible Account Holders,
if any, who maintain their Deposit Accounts in the Bank after the Stock
Conversion and Reorganization and in the National Bank after the Bank
Conversion. Each such account holder will, with respect to each Deposit Account
held, have a related inchoate interest in a portion of the Liquidation Account
balance, which interest will be referred to in this Section IV.A as the
"subaccount balance." All Deposit Accounts having the same social security
number will be aggregated for purposes of determining the initial subaccount
balance with respect to such Deposit Accounts, except as provided in Paragraph 4
of this Section IV.A.
3. In the event of a complete liquidation of the Bank
subsequent to the Stock Conversion and Reorganization or in the event of a
complete liquidation of the National Bank after the Bank Conversion (and only in
such event), each Eligible Account Holder and Supplemental Eligible Account
Holder, if any, shall be entitled to receive a liquidation distribution from the
Liquidation Account in the amount of the then current subaccount balances for
Deposit Accounts then held (adjusted as described below) before any liquidation
distribution may be made with respect to the Capital Stock of the Bank or the
National Bank. No merger, consolidation, sale of bulk assets or similar
combination transaction with another FDIC-insured institution in which the Bank
is not the surviving entity shall be considered a complete liquidation for this
purpose. In any merger or consolidation transaction, the Liquidation Account
shall be assumed by the surviving entity.
4. The initial subaccount balance for a Deposit Account
held by an Eligible Account Holder and Supplemental Eligible Account Holder, if
any, 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
Deposits of such account holder and the denominator is the total amount of
Qualifying Deposits of all Eligible Account Holders and Supplemental Eligible
Account Holders, if any. For Deposit Accounts in existence at both the
Eligibility Record Date and the Supplemental Eligibility Record Date, if any,
separate initial subaccount balances shall be determined on the basis of the
Qualifying Deposits in such Deposit Accounts on each such record date. Initial
subaccount balances shall not be increased, and shall be subject to downward
adjustment as provided below.
5. If the aggregate deposit balance in the Deposit
Account(s) of any Eligible Account Holder or Supplemental Eligible Account
Holder, if any, at the close of business on any December 31 annual closing date,
commencing December 31, 1995 for Eligible Account Holders and June 30, 1997 for
Supplemental Eligible Account Holders, is less than the lesser of (a) the
aggregate deposit balance in such Deposit Account(s) at the close of business on
any other annual closing date subsequent to such record dates or (b) the
aggregate deposit balance in such Deposit Account(s) as of the Eligibility
Record Date or the Supplemental Eligibility Record Date, the subaccount balance
for such Deposit Account(s) shall be adjusted by reducing such subaccount
balance in an amount proportionate to the reduction in such deposit balance. In
the event of such a downward adjustment, the subaccount balance shall not be
subsequently increased, notwithstanding any subsequent increase in the deposit
balance of the related Deposit Account(s). The subaccount balance of an Eligible
Account Holder or Supplemental Eligible Account Holder, if any,
A-20
will be reduced to zero if such Account Holder ceases to maintain a Deposit
Account at the Bank that has the same social security number as appeared on his
Deposit Account(s) at the Eligibility Record Date or, if applicable, the
Supplemental Eligibility Record Date.
6. Subsequent to the Stock Conversion and Reorganization,
the Bank may not pay cash dividends generally on deposit accounts and/or Capital
Stock of the Bank, or repurchase any of the Capital Stock of the Bank, if such
dividend or repurchase would reduce the Bank's regulatory capital below the
aggregate amount of the then current subaccount balances for Deposit Accounts
then held; otherwise, the existence of the liquidation account shall not operate
to restrict the use or application of any of the net worth accounts of the Bank.
7. For purposes of this Section IV.A, a Deposit Account
includes a predecessor or successor account which is held by an Account Holder
with the same social security number.
8. The Bank Conversion shall not be deemed to be a
complete liquidation of the 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 Bank in connection therewith,
shall be assumed by the National Bank.
The Liquidation Account shall be maintained by the National Bank, under
the same rules and conditions applicable to the Bank, subsequent to the Bank
Conversion for the benefit of Eligible Account Holders and Supplemental Eligible
Account Holders who retain their Savings Accounts in the National Bank.
B. Voting Rights of Stockholders.
-----------------------------
Following consummation of the Stock Conversion and Reorganization,
voting rights with respect to the Bank shall be held and exercised exclusively
by the Holding Company as holder of all of the Bank's outstanding voting Capital
Stock, and voting rights with respect to the Holding Company shall be held and
exercised exclusively by the holders of the Holding Company's voting capital
stock. Following the consummation of the Bank Conversion, voting rights with
respect to the National Bank shall be held and exercised exclusively by the
Holding Company as holder of all of the National Bank's outstanding voting
Capital Stock and voting rights with respect to the Holding Company shall be
held and exercised exclusively by the holders of the Holding Company's voting
capital stock.
C. Transfer of Deposit Accounts.
----------------------------
Each Deposit Account in the Bank at the time of the consummation of the
Stock Conversion and Reorganization shall become, without further action by the
holder, a Deposit Account in the Bank equivalent in withdrawable amount to the
withdrawal value (as adjusted to give effect to any withdrawal made for the
purchase of Conversion Stock), and subject to the same terms and conditions
(except as to voting and liquidation rights) as such Deposit Account in the Bank
immediately preceding consummation of the Stock Conversion and Reorganization.
Holders of Deposit Accounts in the Bank shall not, as such holders, have any
voting rights.
D. Directors and Officers of the Bank.
----------------------------------
Each person serving as a Director or Officer of the Bank at the time of
the Stock Conversion and Reorganization or of the National Bank at the time of
the Bank Conversion shall continue to serve as a Director or Officer of the Bank
or the National Bank for the balance of the term for which the person was
elected prior to the Stock Conversion and Reorganization and the Bank
Conversion, and until a successor is elected and qualified. The number, names,
business addresses and terms of the Directors of the Bank are set forth in the
Plans of Merger included as Annexes A and B hereto.
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E. Requirements Following Stock Conversion and Reorganization for
--------------------------------------------------------------
Registration, Market Making, and Stock Exchange Listing.
-------------------------------------------------------
In connection with the Stock Conversion and Reorganization, the Holding
Company shall register the Holding Company Common Stock pursuant to Section
12(g) of the Securities Exchange Act of 1934, as amended, and shall undertake
not to deregister such stock for a period of three years thereafter. The Holding
Company also shall use its best efforts to (i) encourage and assist a market
maker to establish and maintain a market for the Holding Company Common Stock
and (ii) list the Holding Company Common Stock on a national or regional
securities exchange or to have quotations for such stock disseminated on the
National Association of Securities Dealers Automated Quotation System.
F. Dissenting Stockholders.
-----------------------
If any Stockholders of the Bank dissent from the Stock
Conversion and Reorganization and exercise and perfect the right to obtain
valuation of and payment for their shares of Bank Common Stock ("Dissenting
Shares") pursuant to the Appraisal Regulation, then (a) the Dissenting Shares,
if any, will be deemed to have been retired and canceled immediately prior to
consummation of the Stock Conversion and Reorganization, with the effect that
such shares will not be exchanged for Holding Company Common Stock pursuant to
Section II.G.2 hereof, and (b) all payments to be made to the holders of such
Dissenting Shares will be made directly by the Bank. Consummation of the Stock
Conversion and Reorganization is conditioned upon the number of Dissenting
Shares being less than 10.0% of the shares of Bank Common Stock issued and
outstanding immediately prior to consummation of the Stock Conversion and
Reorganization.
G. Effect of Bank Conversion
-------------------------
Upon completion of the Bank Conversion, the corporate existence of the
Bank shall not cease, but the National Bank shall be deemed to be a continuation
of the Bank, and shall succeed to all the rights, interests, duties and
obligations of the Bank as in existence as of immediately prior to the
consummation of the Bank Conversion as described in Paragraph II.K. herein,
including but not limited to all rights and interests of the Bank in and to its
assets and properties, whether real, personal or mixed.
As part of the Bank Conversion, a national bank articles of association
and bylaws will be adopted to allow the National Bank to operate as a national
bank. By approving the Plan, the Members of the Mutual Holding Company and the
Public Stockholders will thereby approve such articles of association and
bylaws. Prior to completion of the Bank Conversion, the articles of association
and bylaws may be amended in accordance with the provisions and limitations for
amending the Plan under Paragraph VII.C. below. The effective date of the
articles of association and bylaws of the National Bank shall be the date of the
consummation of the Bank Conversion.
Each Person holding a Savings Account at the Bank as of immediately
prior to consummation of the Bank Conversion as set forth in Paragraph II.K.
herein shall receive, without payment, a withdrawable Savings Account or Savings
Accounts in the National Bank equal in dollar amount and on the same terms and
conditions as in effect as of immediately prior to the consummation of the Bank
Conversion. All Savings Accounts will continue to be insured by the FDIC up to
the applicable limits of insurance coverage. All loans shall retain the same
status after the Bank Conversion as these loans had prior to Bank Conversion.
V. EFFECTIVE DATE
The effective date of the Stock Conversion and Reorganization shall be
the date upon which the last of the following actions occurs: (i) the filing of
Articles of Combination with the OTS with respect to the Mutual Holding Company
Merger, (ii) the filing of Articles of Combination with the OTS with respect to
the Bank Merger, (iii) the closing of the issuance of the shares of Conversion
Stock in the Offerings, and (iv) compliance with any conditions imposed by the
OTS that is required to be complied with prior to the Effective Date. The filing
of Articles of
A-22
Combination relating to the Mutual Holding Company Merger and the Bank Merger
and the closing of the issuance of shares of Conversion Stock in the Offerings
shall not occur until all requisite regulatory, Member and Stockholder approvals
have been obtained, all applicable waiting periods have expired and sufficient
subscriptions and orders for the Conversion Stock have been received. It is
intended that the closing of the Mutual Holding Company Merger, the Bank Merger
and the sale of shares of Conversion Stock in the Offerings shall occur
consecutively and substantially simultaneously.
VI. CERTAIN RESTRICTIONS FOLLOWING STOCK CONVERSION AND REORGANIZATION
A. Requirements for Stock Purchases by Directors and Officers
----------------------------------------------------------
Following the Stock Conversion and Reorganization.
-------------------------------------------------
For a period of three years following the Stock Conversion and
Reorganization, the Directors and Officers of the Holding Company and the Bank
and their Associates may not purchase, without the prior written approval of the
OTS, Holding Company Common Stock except from a broker-dealer registered with
the SEC. This prohibition shall not apply, however, to (i) a negotiated
transaction arrived at by direct negotiation between buyer and seller and
involving more than 1% of the outstanding Holding Company Common Stock and (ii)
purchases of stock made by and held by any Tax-Qualified Employee Stock Benefit
Plan (and purchases of stock made by and held by any Non-Tax-Qualified Employee
Stock Benefit Plan following the receipt of stockholder approval of such plan)
which may be attributable to individual officers or directors; and (iii) any
transaction occurring after the consummation of the Bank Conversion as set forth
in Paragraph II.K. herein unless OTS approval of the Bank Conversion otherwise
requires.
The foregoing restriction on purchases of Holding Company Common Stock
shall be in addition to any restrictions that may be imposed by federal and
state securities laws.
B. Restrictions on Transfer of Stock by Directors and Officers.
-----------------------------------------------------------
All shares of the Conversion Stock which are purchased by Persons other
than Directors and Officers shall be transferable without restriction, except in
connection with a transaction proscribed by Section V.C of this Plan. Shares of
Conversion Stock purchased by Directors and Officers of the Holding Company and
the Bank on original issue from the Holding Company (by subscription or
otherwise) shall be subject to the restriction that such shares shall not be
sold or otherwise disposed of for value for a period of one year following the
date of purchase, except for any disposition of such shares following the death
of the original purchaser or pursuant to any merger or similar transaction
approved by the OTS, or following consummation of the Bank Conversion unless the
OTS approval of the Bank Conversion otherwise requires. The shares of Conversion
Stock issued by the Holding Company to Directors and Officers shall bear the
following legend giving appropriate notice of such one-year restriction:
The shares of stock evidenced by this Certificate are
restricted as to transfer for a period of one year from the date of
this Certificate pursuant to Part 563b of the Rules and Regulations of
the Office of Thrift Supervision of the United States Department of the
Treasury. Except in the event of the death of the registered holder of
this Certificate, such shares may not be transferred during such
one-year period without a legal opinion of counsel for the Company that
said transfer is permissible under the provisions of applicable law and
regulation. This restrictive legend shall be deemed null and void after
one year from the date of this Certificate.
In addition, the Holding Company shall give appropriate instructions to
the transfer agent for the Holding Company Common Stock with respect to the
applicable restrictions relating to the transfer of retired stock. Any shares
issued at a later date as a stock dividend, stock split or otherwise with
respect to any such restricted stock shall be subject to the same holding period
restrictions as may then be applicable to such restricted stock.
The foregoing restriction on transfer shall be in addition to any
restrictions on transfer that may be imposed by federal and state securities
laws.
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C. Restrictions on Acquisition of Stock of the Holding Company.
-----------------------------------------------------------
The articles of incorporation of the Holding Company may prohibit any
Person together with Associates or group of Persons Acting in Concert from
offering to acquire or acquiring, directly or indirectly, beneficial ownership
of more than 10% of any class of equity securities of the Holding Company, or of
securities convertible into more than 10% of any such class, for up to five
years following completion of the Stock Conversion and Reorganization. The
articles of incorporation of the Holding Company also may provide that all
equity securities beneficially owned by any Person in excess of 10% of any class
of equity securities during such period shall be considered "excess shares," and
that excess shares 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
matters submitted to the stockholders for a vote. If included in the articles of
incorporation, the foregoing restrictions shall not apply to (i) any offer with
a view toward public resale made exclusively to the Holding Company by
underwriters or a selling group acting on its behalf, (ii) the purchase of
shares by a Tax-Qualified Employee Stock Benefit Plan established for the
benefit of the employees of the Holding Company and its subsidiaries which is
exempt from approval requirements under Section 574.3(c)(1)(vi) of the
Regulations Applicable to All Savings Associations or any successor thereto, and
(iii) any offer or acquisition approved in advance by the affirmative vote of
two-thirds of the entire Board of Directors of the Holding Company. Directors,
Officers or Employees of the Holding Company or the Bank or any subsidiary
thereof shall not be deemed to be Associates or a group Acting in Concert with
respect to their individual acquisitions of any class of equity securities of
the Holding Company solely as a result of their capacities as such.
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 directly, or indirectly, offer to purchase or actually
acquire the beneficial ownership of more than 10% of any class of Holding
Company Stock without the prior approval of the Federal Reserve Board.
D. Dividend and Repurchase Restrictions.
------------------------------------
1. Except as may otherwise may be permitted by the OTS,
the Holding Company may not repurchase any shares of its Capital Stock during
the first year following consummation of the Stock Conversion and
Reorganization. During the second and third years following consummation of the
Stock Conversion and Reorganization, the Holding Company may not repurchase any
of its Capital Stock from any person, other than pursuant to (i) an offer to
repurchase made by the Holding Company on a pro rata basis to all of its
stockholders and which is approved by the OTS, (ii) the repurchase of qualifying
shares of a director, if any, (iii) purchases in the open market by a Tax-
Qualified or Non-Tax-Qualified Employee Stock Benefit Plan in an amount
reasonable and appropriate to fund the plan, or (iv) a repurchase program
approved by the OTS. These restrictions and limitations upon repurchases shall
not apply following consummation of the Bank Conversion as set forth in
Paragraph II.K. herein unless the OTS approval of the Bank Conversion otherwise
requires.
2. The Bank may not declare or pay a cash dividend on, or
repurchase any of, its Capital Stock if the effect thereof would cause the
regulatory capital of the Bank to be reduced below the amount required for the
Liquidation Account. Any dividend declared or paid on, or repurchase of, the
Bank's Capital Stock also shall be in compliance with Section 563.134 of the
Regulations Applicable to All Savings Associations, or any successor thereto.
Further, such restrictions and limitations upon repurchases of Capital Stock and
upon the declaration and payment of cash dividends thereon shall not apply
following consummation of the Bank Conversion as set forth in Paragraph II.K.
herein unless the OTS approval of the Bank Conversion otherwise requires.
3. Notwithstanding anything to the contrary set forth
herein, the Holding Company may repurchase its Capital Stock to the extent and
subject to the requirements set forth in Section 563b.3(g)(3) of the
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Regulations Applicable to All Savings Associations, or any successor thereto, or
as otherwise may be approved by the OTS.
VII. MISCELLANEOUS
A. Tax Rulings or Opinions.
-----------------------
Consummation of the Stock Conversion and Reorganization is conditioned
upon prior receipt by the Primary Parties of either a ruling or an opinion of
counsel with respect to federal tax law, and either a ruling or an opinion of
counsel with respect to Tennessee tax law, to the effect that consummation of
the transactions contemplated hereby will not result in a taxable reorganization
under the provisions of the applicable codes or otherwise result in any adverse
tax consequences to the Primary Parties or to account holders receiving
Subscription Rights before or after the Stock Conversion and Reorganization,
except in each case to the extent, if any, that Subscription Rights are deemed
to have fair market value on the date such rights are issued.
B. Stock Compensation Plans.
------------------------
1. The Holding Company, the Bank and the National Bank,
at the discretion of their respective Board of Directors, are authorized to
adopt Tax-Qualified Employee Stock Benefit Plans in connection with the Stock
Conversion and Reorganization, including without limitation an employee stock
ownership plan.
2. The Holding Company, the Bank and the National Bank
also are authorized to adopt stock option plans, restricted stock grant plans
and other Non-Tax-Qualified Employee Stock Benefit Plans, provided that no stock
options shall be granted, and no shares of Conversion Stock shall be purchased,
pursuant to any of such plans prior to the earlier of (i) the one-year
anniversary of the consummation of the Stock Conversion and Reorganization or
(ii) the receipt of stockholder approval of such plans at either the annual or
special meeting of stockholders of the Holding Company to be held not earlier
than six months after the completion of the Stock Conversion and Reorganization.
3. Existing as well as any newly created Tax-Qualified
Employee Stock Benefit Plans may purchase shares of Conversion Stock in the
Offerings, to the extent permitted by the terms of such benefit plans and this
Plan.
C. Amendment or Termination of the Plan.
------------------------------------
If deemed necessary or desirable by the Boards of Directors of the
Primary Parties, this Plan may be substantively amended, as a result of comments
from regulatory authorities or otherwise, at any time prior to the solicitation
of proxies from Members and Stockholders to vote on the Plan and at any time
thereafter with the concurrence of the OTS. Any amendment to this Plan made
after approval by the Members and Stockholders with the concurrence of the OTS
shall not necessitate further approval by the members or Stockholders unless
otherwise required by the OTS. Any amendment to this Plan which may be required
in connection with changes associated with the preference afforded to Persons in
the Local Community shall not be deemed to be a material change to the Plan, the
Primary Parties shall not resolicit subscribers and orders shall be filled in
accordance with any such revisions to the Local Community preference. This Plan
shall terminate if the sale of all shares of Conversion Stock is not completed
within 24 months from the date of the Special Meeting. Prior to the earlier of
the Special Meeting and the Stockholders' Meeting, this Plan may be terminated
by the Boards of Directors of the Primary Parties without approval of the OTS;
after the Special Meeting or the Stockholders' Meeting, the Boards of Directors
may terminate this Plan only with the approval of the OTS.
D. Interpretation of the Plan.
--------------------------
All interpretations of this Plan and application of its provisions to
particular circumstances by a majority of each of the Boards of Directors of the
Primary Parties shall be final, subject to the authority of the OTS, the Federal
A-25
Reserve Board, the OCC, or any successor agency. Nothing expressed or referred
to herein is intended to create any contractual rights in any parties other than
the parties hereto, their successors and permitted assigns.
IN WITNESS WHEREOF, the parties have caused this Plan to be executed by
their duly authorized officers as of this 12th day of April, 1997.
LEXINGTON FIRST FEDERAL MUTUAL HOLDING
COMPANY
Attest: By:
------------------ -----------------------
Secretary Howard Tignor
President
LEXINGTON FIRST FEDERAL SAVINGS BANK
Attest: By:
------------------ -----------------------
Secretary Howard Tignor
President
COMMUNITY NATIONAL CORPORATION
Attest: By:
------------------ -----------------------
Secretary Howard Tignor
President
A-26
ANNEX A
PLAN OF MERGER
Plan of Merger, dated as of ____________, 1997, between Lexington First
Federal Mutual Holding Company (the "Mutual Holding Company"), a federally-
chartered mutual holding company, and Lexington First Federal Savings Bank (the
"Bank" or the "Surviving Corporation"), a federally-chartered savings bank.
WITNESSETH:
WHEREAS, the Mutual Holding Company and the Bank have adopted a Plan of
Conversion of the Mutual Holding Company and Agreement and Plan of
Reorganization between Community National Corporation (the "Holding Company")
and the Bank (the "Plan of Conversion"), pursuant to which (i) the Mutual
Holding Company will convert to a federally-chartered interim stock savings bank
and simultaneously merge with and into the Bank, (ii) the Bank and a
newly-formed interim savings bank will merge, pursuant to which the Bank will
become a wholly-owned subsidiary of the Holding Company (the "Bank Merger"), and
(iii) the Holding Company will offer shares of its common stock in the manner
set forth in the Plan of Conversion; and
WHEREAS, the Mutual Holding Company, which owns 60.54% of the
outstanding common stock of the Bank, $1.00 par value per share ("Bank Common
Stock"), will convert to a federally-chartered interim stock savings bank
pursuant to the Plan of Conversion and merge with and into the Bank pursuant to
this Plan of Merger (the "Mutual Holding Company Merger"), pursuant to which,
among other things, all interests of members in the Mutual Holding Company and
all shares of Bank Common Stock held by the Mutual Holding Company will be
canceled; and
WHEREAS, the Mutual Holding Company and the Bank (the "Constituent
Corporations") desire to provide for the terms and conditions of the Mutual
Holding Company Merger;
NOW, THEREFORE, the Mutual Holding Company and the Bank hereby agree as
follows:
1. Effective Date. The Mutual Holding Company Merger shall become
effective on the date specified in the endorsement of the Articles of
Combination relating to the Mutual Holding Company Merger by the Secretary of
the Office of Thrift Supervision ("OTS") pursuant to 12 C.F.R. (S) 552.13(k), or
any successor thereto (the "Effective Date").
2. The Mutual Holding Company Merger and Effect Thereof. Subject
to the terms and conditions set forth herein and the prior approval of the OTS
of the Stock Conversion and Reorganization, as defined in the Plan of
Conversion, and the expiration of all applicable waiting periods, the Mutual
Holding Company shall convert from the mutual form to a federal interim stock
savings bank and simultaneously merge with and into the Bank, which shall be the
Surviving Corporation. Upon consummation of the Mutual Holding Company Merger,
the Surviving Corporation shall be considered the same business and corporate
entity as each of the Constituent Corporations and thereupon and thereafter all
the property, rights, powers and franchises of each of the Constituent
Corporations shall vest in the Surviving Corporation and the Surviving
Corporation shall be subject to and be deemed to have assumed all of the debts,
liabilities, obligations and duties of each of the Constituent Corporations and
shall have succeeded to all of each of their relationships, fiduciary or
otherwise, as fully and to the same extent as if such property, rights,
privileges, powers, franchises, debts, obligations, duties and relationships had
been originally acquired, incurred or entered into by the Surviving Corporation.
In addition, any reference to either of the Constituent Corporations in any
contract, will or document, whether executed or taking effect before or after
the Effective Date, shall be considered a reference to the Surviving Corporation
if not inconsistent with the other provisions of the contract, will or document;
and any pending action or other judicial proceeding to which either of the
Constituent Corporations is a party shall not be deemed to have
A-1
abated or to have been discontinued by reason of the Mutual Holding Company
Merger, but may be prosecuted to final judgment, order or decree in the same
manner as if the Mutual Holding Company Merger had not occurred or the Surviving
Corporation may be substituted as a party to such action or proceeding, and any
judgment, order or decree may be rendered for or against it that might have been
rendered for or against either of the Constituent Corporations if the Mutual
Holding Company Merger had not occurred.
3. Cancellation of Bank Common Stock held by the Mutual Holding
Company and Member Interests; Liquidation Account
(a) On the Effective Date, (i) each share of Bank Common Stock
issued and outstanding immediately prior to the Effective Date and held by the
Mutual Holding Company shall, by virtue of the Mutual Holding Company Merger and
without any action on the part of the holder thereof, be canceled, (ii) the
interests in the Mutual Holding Company of any person, firm or entity who or
which qualified as a member of the Mutual Holding Company in accordance with its
mutual charter and bylaws and the laws of the United States prior to the Mutual
Holding Company's conversion from mutual to stock form (the "Members") shall, by
virtue of the Mutual Holding Company Merger and without any action on the part
of the holder thereof, be canceled, and (iii) the Bank shall establish a
liquidation account on behalf of each depositor member of the Mutual Holding
Company, as defined in the Plan of Conversion, in accordance with Section IV.B
of the Plan of Conversion.
(b) At or after the Effective Date and prior to the Bank Merger,
each certificate or certificates theretofore evidencing issued and outstanding
shares of Bank Common Stock, other than any such certificate or certificates
held by the Mutual Holding Company, which shall be canceled, shall continue to
represent issued and outstanding shares of Bank Common Stock.
4. Dissenting Shares. No Member of the Mutual Holding Company
shall have any dissenter or appraisal rights in connection with the Mutual
Holding Company Merger. However, stockholders of the Bank shall have dissenter
or appraisal rights in accordance with the Plan of Conversion and 12 C.F.R. (S)
552.14.
5. Name of Surviving Corporation. The name of the Surviving
Corporation shall be "Lexington First Federal Savings Bank."
6. Directors of the Surviving Corporation. Upon and after the
Effective Date, until changed in accordance with the Charter and Bylaws of the
Surviving Corporation and applicable law, the number of directors of the
Surviving Corporation shall be nine. The names of those persons who, upon and
after the Effective Date, shall be directors of the Surviving Corporation are
set forth below. Each such director shall serve for the term which expires at
the annual meeting of stockholders of the Surviving Corporation in the year set
forth after his respective name, and until a successor is elected and qualified.
Name Term Expires
---- ------------
Pat Carnal
Stephen Lowry
Stephen Milan
Pope Thomas
Rob Thomas
Arba Milam Taylor
Howard W. Tignor
Charlie H. Walker
Richard Walker
A-2
The address of each such director is c/o Lexington First Federal
Savings Bank, 19 Natchez Trace Drive, Lexington, Tennessee 38351.
7. Officers of the Surviving Corporation. Upon and after the
Effective Date, until changed in accordance with the Charter and Bylaws of the
Surviving Corporation and applicable law, the officers of the Bank immediately
prior to the Effective Date shall be the officers of the Surviving Corporation.
8. Offices. Upon the Effective Date, all offices of the Bank
shall be offices of the Surviving Corporation. As of the Effective Date, the
home office of the Surviving Corporation shall remain at 19 Natchez Trace Drive,
Lexington, Tennessee 38351, except for the addition of deposit-taking offices
authorized or the deletion of the deposit-taking offices closed subsequent to
the date hereof and the Effective Date:
9. Charter and Bylaws. On and after the Effective Date, the
Charter of the Bank as in effect immediately prior to the Effective Date shall
be the Charter of the Surviving Corporation until amended in accordance with the
terms thereof and applicable law, except that the Charter shall be amended to
provide for the establishment of a liquidation account in accordance with
applicable law and regulation.
On or after the Effective Date, the Bylaws of the Bank as in
effect immediately prior to the Effective Date shall be the Bylaws of the
Surviving Corporation until amended in accordance with the terms thereof and
applicable law.
10. Stockholders and Member Approvals. The affirmative votes of
the holders of the Bank Common Stock set forth in Section II.F of the Plan of
Conversion and the Members set forth in Section II.D of the Plan of Conversion
shall be required to approve the Plan of Conversion, of which this Plan of
Merger is a part, on behalf of the Bank and the Mutual Holding Company,
respectively.
11. Abandonment of Agreement. This Plan of Merger may be abandoned
by either the Mutual Holding Company or the Bank at any time before the
Effective Date in the manner set forth in Section VI.D of the Plan of
Conversion.
12. Amendments. This Plan of Merger may be amended in the manner
set forth in Section VI.D of the Plan of Conversion by a subsequent writing
signed by the parties hereto upon the approval of the Board of Directors of each
of the parties hereto.
13. Successors. This Agreement shall be binding on the successors
of the Mutual Holding Company and the Bank.
14. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the United States of America.
A-3
IN WITNESS WHEREOF, the Mutual Holding Company and the Bank have caused
this Plan of Merger to be executed by their duly authorized officers as of the
day and year first above written.
LEXINGTON FIRST FEDERAL MUTUAL
HOLDING COMPANY
Attest:
By:
- ------------------------- --------------------------
Howard Tignor
Secretary President
LEXINGTON FIRST FEDERAL SAVINGS BANK
Attest:
By:
- ------------------------- --------------------------
Howard Tignor
Secretary President
A-4
ANNEX B
PLAN OF MERGER
Plan of Merger, dated as of ______ __, 1997, among Lexington First
Federal Savings Bank (the "Bank" or the "Surviving Bank"), a federally-chartered
savings bank, Community National Corporation (the "Holding Company"), a
Tennessee corporation, and Lexington Federal Interim Savings Bank ("Interim"), a
federally-chartered interim savings bank.
WITNESSETH:
WHEREAS, the Bank has organized the Holding Company as a first-tier,
wholly-owned subsidiary for the purpose of becoming the stock holding company of
the Bank upon completion of the Stock Conversion and Reorganization, as defined
in the Plan of Conversion of Lexington First Federal Mutual Holding Company (the
"Mutual Holding Company") and Agreement and Plan of Reorganization between the
Holding Company and the Bank (the "Plan of Conversion"); and
WHEREAS, the Mutual Holding Company, a federally-chartered mutual
holding company which owns 60.54% of the common stock of the Bank, $1.00 par
value per share ("Bank Common Stock"), will convert to a federally-chartered
interim stock savings bank and simultaneously merge with and into the Bank
pursuant to the Plan of Conversion and the Plan of Merger included as Annex A
thereto (the "Mutual Holding Company Merger"), pursuant to which all shares of
Bank Common Stock held by the Mutual Holding Company will be canceled; and
WHEREAS, the formation of a stock holding company by the Bank will be
facilitated by causing the Holding Company to become the sole stockholder of a
newly-formed interim federally-chartered stock savings bank and then merging the
interim savings bank with an into the Bank (the "Bank Merger"), pursuant to
which the Bank will become a wholly-owned subsidiary of the Holding Company and,
in connection therewith, all outstanding shares of Bank Common Stock will be
converted automatically into and become shares of common stock of the Holding
Company, $.01 par value per share ("Holding Company Common Stock"); and
WHEREAS, Interim is being organization by the officers of the Bank as
an interim federally-chartered stock savings bank with the Holding Company as
its sole stockholder in order to effect the Bank Merger; and
WHEREAS, the Bank and Interim (the "Constituent Banks") desire to
provide for the terms and conditions of the Bank Merger.
NOW, THEREFORE, the Bank and Interim hereby agree as follows:
1. Effective Date. The Bank Merger shall become effective on the
date specified in the endorsement of the Articles of Combination relating to the
Bank Merger by the Secretary of the Office of Thrift Supervision ("OTS")
pursuant to 12 C.F.R. (S) 552.13(k), or any successor thereto (the "Effective
Date").
2. The Bank Merger and Effect Thereof. Subject to the terms and
conditions set forth herein and the prior approval of the OTS of the Stock
Conversion and Reorganization, as defined in the Plan of Conversion, and the
expiration of all applicable waiting periods. Interim shall merge with and into
the Bank, which shall be the Surviving Bank. Upon consummation of the Bank
Merger, the Surviving Bank shall be considered the same business and corporate
entity as each of the Constituent Banks and thereupon and thereafter all the
property, rights, powers and franchises of each of the Constituent Banks shall
vest in the Surviving Bank and the Surviving Bank shall be subject to and be
deemed to have assumed all of the debts, liabilities, obligations and duties of
each of the Constituent Banks and shall have succeeded to all of each of their
relationships, fiduciary or otherwise, as fully and to the same extent as if
such property, rights, privileges, powers, franchises, debts, obligations,
duties and relationships had been originally
B-1
acquired, incurred or entered into by the Surviving Bank. In addition, any
reference to either of the Constituent Banks in any contract, will or document,
whether executed or taking effect before or after the Effective Date, shall be
considered a reference to the Surviving Bank if not inconsistent with the other
provision of the contract, will or document; and any pending action or other
judicial proceeding to which either of the Constituent Banks is a party shall
not be deemed to have abated or to have been discontinued by reason of the Bank
Merger, but may be prosecuted to final judgment, order or decree in the same
manner as if the Bank Merger had not occurred or the Surviving Bank may be
substituted as a party to such action or proceeding, and any judgement, order or
decree may be rendered for or against it that might have been rendered for or
against either of the Constituent Banks if the Bank Merger had not occurred.
3. Conversion of Stock.
(a) On the Effective Date, (i) each share of Bank Common Stock
issued and outstanding immediately prior to the Effective Date (other than
shares as to which the holders thereof have properly exercised dissenter's
rights of appraisal, if any) shall, by virtue of the Bank Merger and without any
action on the part of the holder thereof, be converted into the right to receive
Holding Company Common Stock based on the Exchange Ratio, as defined in the Plan
of Conversion, plus the right to receive cash in lieu of any fractional share
interest, as determined in accordance with Section 3(c) hereof, (ii) each share
of common stock, $1.00 par value per share, of Interim ("Interim Common Stock")
issued and outstanding immediately prior to the Effective Date shall, by virtue
of the Bank Merger and without any action on the part of the holder thereof, be
converted into one share of Bank Common Stock, and (iii) each share of Holding
Company Common Stock issued and outstanding immediately prior to the Effective
Date shall, by virtue of the Bank Merger and without any action on the part of
the holder thereof, be canceled. By voting in favor of this Plan of Merger, the
Holding Company, as the sole stockholder of Interim, shall have agreed to (i)
issue shares of Holding Company Common Stock in accordance with the terms
hereof, and (ii) cancel all previously issued and outstanding shares of Holding
Company Common Stock upon the effectiveness of the Bank Merger.
(b) On and after the Effective Date, there shall be no
registrations of transfers on the stock transfer books of Interim or the Bank of
shares of Interim Common Stock or Bank Common Stock which were outstanding
immediately prior to the Effective Date.
(c) Notwithstanding any other provision hereof, no fractional
shares of Holding Company Common Stock shall be issued to holders of Bank Common
Stock. In lieu thereof, each holder of shares of Bank Common Stock entitled to a
fraction of a share of Holding Company Common Stock shall, at the time of
surrender of the certificate or certificates representing such holder's shares,
receive an a mount of cash equal to the product arrived at by multiplying such
fraction of a share of Holding Company Common Stock by the Actual Purchase
Price, as defined in the Plan of Conversion. No such holder shall be entitled to
dividends, voting rights or any other rights in respect of any fractional share.
4. Exchange of Shares.
(a) At or after the Effective Date, each holder of a certificate
or certificates therefore evidencing issued and outstanding shares of Bank
Common Stock (other than shares as to which the holders thereof have properly
exercised dissenter's rights of appraisal, if any), upon surrender of the same
to an agent, duly appointed by the Holding Company ("Exchange Agent"), shall be
entitled to receive in exchange thereof a certificate or certificates
representing the number of full shares of Holding Company Common Stock for which
the shares of Bank Common Stock therefore represented by the certificate or
certificates so surrendered shall have been converted as provided in Section
3(a) hereof. The Exchange Agent shall mail to each holder of record of an
outstanding certificate which immediately prior to the Effective Date evidenced
shares of Bank Common Stock, and which is to be exchanged for Holding Company
Common Stock as provided in Section 3(a) hereof, a form of letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and title
to such certificate shall pass, only upon delivery of such certificate to the
Exchange Agent) advising such holder of the terms of the exchange effected by
the Bank Merger and of the procedure for
B-2
surrendering to the Exchange agent such certificate in exchange for a
certificate or certificates evidencing Holding Company Common Stock.
(b) No holder of a certificate therefore representing shares of
Bank Common Stock shall be entitled to receive any dividends in respect of the
Holding Company Common Stock into which such shares shall have been converted by
virtue of the Bank Merger until the certificate representing such shares of Bank
Common Stock is surrendered in exchange for certificates representing shares of
Holding Company Common Stock. In the event that dividends are declared and paid
by the Holding Company in respect of Holding Company Common Stock after the
Effective Date but prior to surrender of certificates representing shares of
Bank Common Stock, dividends payable in respect of shares of Holding Company
Common Stock not then issued shall accrue (without interest). Any such dividends
shall be paid (without interest) upon surrender of the certificates representing
such shares of Bank Common Stock. The Holding Company shall be entitled, after
the Effective Date, to treat certificates representing shares of Bank Common
Stock as evidencing ownership of the number of full shares of Holding Company
Common Stock into which the shares of Bank Common Stock represented by such
certificates shall have been converted, notwithstanding the failure on the part
of the holder thereof to surrender such certificates.
(c) The Holding Company shall not be obligated to deliver a
certificate or certificates representing shares of Holding Company Common Stock
to which a holder of Bank Common Stock would otherwise be entitled as a result
of the Bank Merger until such holder surrenders the certificate or certificates
representing the shares of Bank Common Stock for exchange as provided in this
Section 4, or, in default thereof, an appropriate Affidavit of Loss and
Indemnity Agreement and/or a bond as may be required in each case by the Holding
Company. If any certificate evidencing shares of Holding Company Common Stock is
to be issued in a name other than that in which the certificate evidencing Bank
Common Stock surrendered in exchange therefor is registered, it shall be a
condition of the issuance thereof that the certificate so surrendered shall be
properly endorsed and otherwise in proper form for transfer and that the person
requesting such exchange pay to the Exchange agent any transfer or other tax
required by reason of the issuance of a certificate for shares of Holding
Company Common Stock in any name other than that of the registered holder of the
certificate surrendered or otherwise establish to the satisfaction of the
Exchange Agent that such tax has been paid or is not payable.
(d) If, between the date hereof and the Effective Date, the shares
of Bank Common Stock shall be changed into a different number or class of shares
by reason of any reclassification, recapitalization, split-up, combination,
exchange of shares or readjustment, or a stock dividend thereon shall be
declared with a record date within said period, the Exchange Ratio specified in
Section 3(a) hereof shall be adjusted accordingly.
5. Dissenting Shares. Holders of shares of Bank Common Stock
shall have dissenter or appraisal rights in connection with the Bank Merger in
accordance with Section VI.D of the Plan of Conversion and 12 C.F.R. ss.
552.14(b).
6. Name of Surviving Bank. The name of the Surviving Bank shall
be "Lexington First Federal Savings Bank"
B-3
7. Directors of the Surviving Bank. Upon and after the Effective
Date, until changed in accordance with the Charter and Bylaws of the Surviving
Bank and applicable law, the number of directors of the Surviving Bank shall be
seven. The names of those persons who, upon and after the Effective Date, shall
be directors of the Surviving Bank are set forth below. Each such director shall
service for the term which expires at the annual meeting of stockholders of the
Surviving Bank in the year set forth after his respective name, and until a
successor is elected and qualified.
Name Term Expires
------------- ------------
Pat Carnal
Stephen Lowry
Pope Thomas
Rob Thomas
Arba Milam Taylor
Howard W. Tignor
Charlie H. Walker
The address of each such director is c/o Lexington First Federal
Savings Bank, 19 Natchez Trace Drive, Lexington, Tennessee 38351.
8. Officers of the Surviving Bank. Upon and after the Effective
Date, until changed in accordance with the Charter and Bylaws of the Surviving
Bank and applicable law, the officers of the Bank immediately prior to the
Effective Date shall be the officers of the Surviving Bank.
9. Offices. Upon the Effective Date, all offices of the Bank
shall be offices of the Surviving Bank. As of the Effective Date, the home
office of the Surviving Bank shall remain at 19 Natchez Trace Drive, Lexington,
Tennessee 38351, except for the addition of deposit-taking offices authorized or
the deletion of deposit-taking offices closed subsequent to the date hereof and
the Effective Date:
10. Charter and Bylaws. On and after the Effective Date, the
Charter and Bylaws of the Bank as in effect immediately prior to the Effective
Date shall be the Charter and Bylaws of the Surviving Bank until amended in
accordance with the terms thereof and applicable laws.
11. Savings Accounts. Upon the Effective Date, any savings
accounts of Interim, without reissue, shall be and become savings accounts of
the Surviving Bank without change in their respective terms, including, without
limitation, maturity, minimum required balances or withdrawal value.
12. Stock Compensation Plans. By voting in favor of this Plan of
Merger, the Holding Company shall have approved adoption of the Bank's existing
1992 Stock Option Plan and Management Recognition Plan (collectively, the
"Plans") as plans of the Holding Company and shall have agreed to issue Holding
Company Common Stock in lieu of Bank Common Stock pursuant to the terms of such
Plans. As of the Effective Date, rights outstanding under the Plans shall be
assumed by the Holding Company and thereafter shall be rights only for shares of
Holding Company Common Stock, with each such right being for a number of shares
of Holding Company Common Stock equal to the number of shares of Bank Common
Stock that were available thereunder immediately prior to the Effective Date
times the Exchange Ratio, as defined in the Plan of Conversion, and the price of
each such right shall be adjusted to reflect the Exchange Ratio and so that the
aggregate purchase price of the right is unaffected, but with no change in any
other term or condition of such right. The Holding Company shall make
appropriate amendments to the Plans to reflect the adoption of the Plans by the
Holding Company without adverse effect upon the rights outstanding thereunder.
B-4
13. Stockholder Approval. The affirmative votes of the holders of
Bank Common Stock set forth in Section II.F of the Plan of Conversion shall be
required to approve the Plan of Conversion, of which this Plan of Merger is a
part, on behalf of the Bank. The approval of the Holding Company, as the sole
holder of the Interim Common Stock, shall be required to approve the Plan of
Conversion, of which this Plan of Merger is a part, on behalf of Interim.
14. Registration; Other Approvals. In addition to the approvals
set forth in Section 1 and 13 hereof and the Plan of Conversion, the parties'
obligations to consummate the Bank Merger shall be subject to the Holding
Company Common Stock to be issued hereunder in exchange for Bank Common Stock
being registered under the Securities Act of 1933, as amended, and registered or
qualified under applicable state securities laws, as well as the receipt of all
other approvals, consents or waivers as the parties may deem necessary or
advisable.
15. Abandonment of Agreement. This Plan of Merger may be abandoned
by either the Bank or Interim at any time before the Effective Date in the
manner set forth in Section VI.D of the Plan of Conversion.
16. Amendments. This Plan of Merger may be amended in the manner
set forth in Section VI.D of the Plan of Conversion by a subsequent writing
signed by the parties hereto upon the approval of the board of Directors of each
of the parties hereto.
17. Successors. This Agreement shall be binding on the successors
of the Bank and Interim.
18. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the United States of America.
IN WITNESS WHEREOF, the Bank and Interim have caused this Plan of
Merger to be executed by their duly authorized officers as of the day and year
first above written.
COMMUNITY NATIONAL CORPORATION
By:
------------------------
Howard Tignor
President
LEXINGTON FIRST FEDERAL SAVINGS BANK
Attest:
By:
- ------------------------- ------------------------
Howard Tignor
Secretary President
LEXINGTON FEDERAL INTERIM SAVINGS BANK
(In Organization)
Attest:
By:
- ------------------------- ------------------------
Howard Tignor
Secretary
B-5
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REVOCABLE PROXY
(SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
LEXINGTON FIRST FEDERAL MUTUAL HOLDING COMPANY
FOR A SPECIAL MEETING OF MEMBERS TO BE HELD ON , 1997)
The undersigned member of Lexington First Federal Mutual Holding
Company hereby appoints , and as attorneys-in-
fact and agents for and in the name of the undersigned, to vote such
votes as the undersigned may be entitled to cast at the Special Meeting
of Members of Lexington First Federal Mutual Holding Company to be held
at Lexington First Federal Savings Bank, 19 Natchez Trace Drive,
Lexington, Tennessee 38351, on , , 1997, at .m., Central
Time, and at any adjournments thereof. They are authorized to cast all
votes to which the undersigned is entitled, as follows:
1. Adoption of the Plan of Conversion and Agreement and Plan of
Reorganization among Lexington First Federal Mutual Holding Company
(the "Mutual Holding Company"), Lexington First Federal Savings Bank
(the "Bank") and Community National Corporation (the "Company"),
pursuant to which (i) the Mutual Holding Company, which currently owns
approximately 60.54% of the outstanding shares of the common stock,
$1.00 par value, of the Bank (the "Bank Common Stock"), will convert
from mutual form to a federal interim stock savings bank and
simultaneously merge with and into the Bank, with the Bank as the
surviving entity; (ii) the Bank will subsequently merge with an
interim savings institution to be formed as a wholly owned subsidiary
of the Company, with the Bank as the surviving entity; (iii) the
outstanding shares of Bank Common Stock (other than those held by the
Mutual Holding Company, which will be cancelled) will be converted
into shares of the common stock, $1.00 par value, of the Company (the
"Common Stock") pursuant to a ratio that will result in the holders of
such shares owning in the aggregate approximately the same percentage
of the Company as they currently own of the Bank, before giving effect
to such stockholders purchasing additional shares in a concurrent
stock offering by the Company, the receipt of cash in lieu of
fractional shares or the exercise of dissenters' rights; (iv) the
offer and sale of shares of Common Stock by the Company; and (v) the
Bank will convert from a stock savings bank to a national bank.
2. In their discretion, on any other matters that may lawfully come
before the Meeting.
NOTE: The Board of Directors is not aware of any other matter that may
come before the Meeting.
PLEASE VOTE, DATE, AND SIGN ON THE REVERSE SIDE
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- --------------------------------------------------------------------------------
THIS PROXY WILL BE VOTED FOR THE PLAN IF NO CHOICE IS MADE HEREON
Should the undersigned be present and elect to vote at said Meeting or
at any adjournment thereof and, after notification to the Secretary of
the Mutual Holding Company at the Special Meeting of the member's
decision to terminate this Proxy, then the power of said attorneys-in-
fact or agents shall be deemed terminated and of no further force and
effect. The undersigned hereby revokes any and all proxies heretofore
given.
PLEASE MARK VOTES [X] FOR AGAINST ABSTAIN
1. Adoption of the Plan of Conversion and Agreement [_] [_] [_]
and Plan of Reorganization.
- --------------------------------------------------------------------------------
The undersigned acknowledges
receipt of a Notice of Special
Meeting of the Members of Lex-
ington First Federal Mutual
Holding Company to be held on
, 1997 and a Proxy State-
ment and a Prospectus from Com-
munity National Corporation
dated , 1997 prior to the
execution of this Proxy.
DATE:
--------------------------------
SIGNATURE:
--------------------------------
NOTE: ONLY ONE SIGNATURE IS RE-
QUIRED IN THE CASE OF A JOINT
ACCOUNT.
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