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EXHIBIT 99.1
COLUMBIA FEDERAL SAVINGS BANK
2497 DIXIE HIGHWAY
FT. MITCHELL, KENTUCKY 41017-3085
(606) 331-2419
NOTICE OF SPECIAL MEETING OF MEMBERS
Notice is hereby given that a Special Meeting of Members of Columbia
Federal Savings Bank ("Columbia Federal") will be held at
_______________________________________________________________________, on
__________, 1998, at ____ _.m., Eastern Time (the "Special Meeting"), for the
following purposes, all of which are more completely set forth in the
accompanying Summary Proxy Statement:
1. To consider and act upon a resolution to approve the Amended Plan
of Conversion (the "Plan"), a copy of which is attached hereto as Exhibit
A, pursuant to which Columbia Federal would convert from a mutual savings
bank chartered under the laws of the United States to a permanent capital
stock savings bank chartered under the laws of the United States (the
"Conversion") and become a wholly-owned subsidiary of Columbia Financial
of Kentucky, Inc., an Ohio corporation organized for the purpose of
purchasing all of the capital stock to be issued by Columbia Federal in
the Conversion;
2. To consider and act upon a resolution to adopt the Federal Stock
Charter of Columbia Federal, a copy of which is attached to the Plan as
Exhibit I;
3. To consider and act upon a resolution to adopt the Federal Stock
Bylaws of Columbia Federal, a copy of which is attached to the Plan as
Exhibit II; and
4. To transact such other business as may properly come before the
Special Meeting and any adjournments thereof.
Only those members of Columbia Federal who have a deposit account with
Columbia Federal at the close of business on ________, 1998 (the "Voting Record
Date"), and borrowers of record on the Voting Record Date whose loans were in
existence on December 16, 1995, are members of Columbia Federal entitled to
notice of and to vote at the Special Meeting and any adjournments thereof.
WHETHER OR NOT YOU EXPECT TO ATTEND THE SPECIAL MEETING, WE URGE YOU TO
CONSIDER THE ACCOMPANYING SUMMARY PROXY STATEMENT CAREFULLY, TO COMPLETE THE
ENCLOSED PROXY CARD(S) AND TO RETURN THE COMPLETED PROXY CARD(S) TO COLUMBIA
FEDERAL IN THE ENCLOSED POSTAGE-PAID RETURN ENVELOPE AS SOON AS POSSIBLE TO
ASSURE THAT YOUR VOTE(S) WILL BE COUNTED.
By Order of the Board of Directors
Ft. Mitchell, Kentucky
___________, 1998 Robert V. Lynch, President
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COLUMBIA FEDERAL SAVINGS BANK
2497 DIXIE HIGHWAY
FT. MITCHELL, KENTUCKY 41017-3085
(606) 331-2419
SUMMARY PROXY STATEMENT
INTRODUCTION
The enclosed proxy (the "Proxy") is being solicited by the Board of
Directors of Columbia Federal Savings Bank ("Columbia Federal") for use at the
special meeting of members of Columbia Federal to be held at
_______________________________________________________, on _____________,
1998, at ____ _.m., Eastern Time, and at any adjournments thereof (the "Special
Meeting"). The Special Meeting is being held for the following purposes:
1. To consider and act upon a resolution to approve the Amended Plan
of Conversion (the "Plan"), a copy of which is attached hereto as Exhibit
A, pursuant to which Columbia Federal would convert from a mutual savings
bank chartered under the laws of the United States to a permanent capital
stock savings bank chartered under the laws of the United States (the
"Conversion") and become a wholly-owned subsidiary of Columbia Financial
of Kentucky, Inc. ("CFKY"), an Ohio corporation organized for the purpose
of purchasing all of the capital stock to be issued by Columbia Federal in
the Conversion;
2. To consider and act upon a resolution to adopt the Federal Stock
Charter of Columbia Federal, a copy of which is attached to the Plan as
Exhibit I;
3. To consider and act upon a resolution to adopt the Federal Stock
Bylaws of Columbia Federal, a copy of which is attached to the Plan as
Exhibit II; and
4. To transact such other business as may properly come before the
Special Meeting.
The Board of Directors of Columbia Federal has unanimously adopted the
Plan. The Plan has also been approved by the United States Department of the
Treasury, Office of Thrift Supervision (the "OTS"), subject to the approval of
the Plan by the members of Columbia Federal at the Special Meeting and the
satisfaction of certain other conditions.
Pursuant to the Plan, Columbia Federal will become a wholly-owned
subsidiary of CFKY, a corporation which was incorporated under Ohio law for the
purpose of acquiring all of the capital stock to be issued by Columbia Federal
in connection with the Conversion. See "THE BUSINESS OF CFKY." CFKY will
conduct a subscription offering (the "Subscription Offering") in which up to
2,323,000 common shares, no par value, of CFKY (the "Common Shares") will be
offered to subscribers in the following priority categories:
(i) Eligible depositors of Columbia Federal as of September 30, 1996
("Eligible Account Holders");
(ii) The Columbia Financial of Kentucky, Inc., Employee Stock
Ownership Plan (the "ESOP");
(iii) Eligible depositors of Columbia Federal as of December 31, 1997
("Supplemental Eligible Account Holders"); and
(iv) Certain other depositors and borrowers of Columbia Federal.
See "THE CONVERSION - Subscription Offering." Common shares not subscribed for
the Subscription Offering may be offered to the general public in a direct
community offering (the "Community Offering") in the manner established
pursuant to the Plan and described in this Summary Proxy Statement. See "THE
CONVERSION - Community Offering." The offering of the Common Shares is made
only through the Prospectus of CFKY dated ________, 1998, a copy of which is
included with this Summary Proxy Statement (the "Prospectus"). See "ADDITIONAL
INFORMATION."
The aggregate purchase price of the Common Shares to be offered by CFKY
under the Plan is currently estimated to be between $17,170,000 and $23,230,000
(the "Valuation Range"). The total number of Common Shares sold in connection
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with the Conversion will be determined in the sole discretion of the Board of
Directors of CFKY if the aggregate value of the Common Shares sold is within
the Valuation Range or does not exceed the maximum of the Valuation Range by
more than 15%. The Valuation Range was determined by reference to an
independent appraisal of Columbia Federal's estimated pro forma market value,
as converted, prepared by Keller & Company, Inc. ("Keller"). See "THE
CONVERSION - Pricing and Number of Common Shares to be Sold."
Upon the consummation of the Conversion, the Federal Stock Charter of
Columbia Federal, a copy of which is attached to the Plan as Exhibit I, and the
Federal Stock Bylaws, a copy of which is attached to the Plan as Exhibit II,
will be the Charter and Bylaws of Columbia Federal as a stock savings and loan
association.
The approval of the Plan will have the effect of (i) terminating the
voting rights of the present members of Columbia Federal and (ii) modifying,
and eventually eliminating, the rights of the present members of Columbia
Federal to receive any surplus in the event of a complete liquidation of
Columbia Federal. Except for certain rights in the special liquidation account
established by the Plan (the "Liquidation Account"), such voting and
liquidation rights after the Conversion will vest exclusively in the holders of
the common shares of CFKY. See "THE CONVERSION - Principal Effects of the
Conversion."
During and upon the completion of the Conversion, Columbia Federal will
continue to provide services to depositors and borrowers pursuant to its
current policies at its existing offices. In addition, Columbia Federal will
continue to be a member of the Federal Home Loan Bank (the "FHLB") system, and
savings accounts at Columbia Federal will continue to be insured up to
applicable limits by the Savings Association Insurance Fund (the "SAIF")
administered by the Federal Deposit Insurance Corporation (the "FDIC").
This Summary Proxy Statement is dated _____________, 1998, and is first
being mailed to members of Columbia Federal on or about _____________, 1998.
VOTING RIGHTS AND VOTE REQUIRED FOR APPROVAL
All depositors having a deposit account of record with Columbia Federal on
_________, 1998 (the "Voting Record Date"), and all borrowers having a loan of
record with Columbia Federal on the Voting Record Date whose loans were in
existence on December 16, 1995, are members of Columbia Federal eligible to
vote at the Special Meeting ("Voting Members"). Voting Members who are
depositors will be entitled to cast one vote for each $100, or fraction
thereof, of the withdrawable value of their deposit accounts on the Voting
Record Date; provided, however, that no member shall be entitled to less than
one vote nor more than 1,000 votes.
A deposit account in which one or more persons has an interest shall be
deemed to be held by only one Voting Member for the purpose of voting at the
Special Meeting. Any questions as to the eligibility of a member to vote, the
number of votes allocated to each Voting Member or any other matter relating to
voting will be resolved at the time of the Special Meeting by reference to the
records of Columbia Federal. Voting members who are borrowers will be entitled
to cast one vote for each loan in existence on December 16, 1995, and still
outstanding on the Voting Record Date.
Columbia Federal's records disclose that, as of the Voting Record Date,
there were ___________ votes entitled to be cast at the Special Meeting, a
majority of which are required to approve the Plan. A majority of the votes
cast at the Special Meeting is necessary to adopt the Federal Stock Charter and
the Federal Stock Bylaws of Columbia Federal.
Columbia Federal, as the trustee of the Individual Retirement Accounts
("IRAs") at Columbia Federal, is empowered to vote at the Special Meeting all
votes eligible to be cast with respect to each IRA. The Board of Directors has
indicated that it intends to cast all of the votes under IRAs in favor of the
approval of the Plan, unless contrary instructions are received from IRA
holders. IRA holders who wish to give such instructions may do so by returning
the enclosed Proxy.
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PROXIES
Voting Members may vote in person or by proxy at the Special Meeting. For
Voting Members wishing to vote in person, ballots will be distributed at the
Special Meeting. For Voting Members wishing to vote by proxy at the Special
Meeting, the enclosed Proxy may be completed and given in accordance with this
Summary Proxy Statement. Any other proxy held by Columbia Federal will not be
used by Columbia Federal for the Special Meeting.
A Proxy will be voted in the manner indicated thereon or, in the absence
of specific instructions, will be voted FOR the approval of the Plan, FOR the
adoption of the Federal Stock Charter and FOR the adoption of the Federal Stock
Bylaws. Without affecting any vote previously taken, a Voting Member may
revoke a Proxy at any time before such proxy is exercised by executing a later
dated proxy or by giving Columbia Federal notice of revocation in writing or in
open meeting at the Special Meeting. Attendance at the Special Meeting will
not, of itself, revoke a Proxy.
Proxies may be solicited by the directors, officers and employees of
Columbia Federal in person or by telephone, telegraph, telecopy or mail, for
use only at the Special Meeting and any adjournments thereof and will not be
used for any other meeting. The cost of soliciting Proxies will be borne by
Columbia Federal.
MANAGEMENT'S RECOMMENDATIONS AND REASONS FOR CONVERSION
THE BOARD OF DIRECTORS RECOMMENDS THAT MEMBERS VOTE FOR THE APPROVAL OF
THE PLAN, FOR THE ADOPTION OF THE FEDERAL STOCK CHARTER AND FOR THE ADOPTION OF
THE FEDERAL STOCK BYLAWS.
In unanimously adopting the Plan, the Board of Directors determined that
Columbia Federal will derive substantial benefits from the Conversion and that
the Conversion is in the best interests of Columbia Federal, its members and
the public. The principal factors considered by Columbia Federal's Board of
Directors in reaching the decision to pursue a mutual-to-stock conversion are
the numerous competitive disadvantages which Columbia Federal faces if it
continues in mutual form. These disadvantages relate to a variety of factors,
including growth opportunities, employee retention and regulatory uncertainty.
If Columbia Federal is to grow and continue to prosper, the mutual form of
organization is the least desirable form from a competitive standpoint.
Although Columbia Federal does not have any specific acquisitions planned at
this time, the Conversion will position Columbia Federal to take advantage of
any acquisition opportunities which may present themselves. Because a
conversion to stock form is a time-consuming and complex process, Columbia
Federal cannot wait until an acquisition is imminent to embark on the
conversion process.
As an increasing number of Columbia Federal's competitors convert to stock
form and can use stock based compensation programs, Columbia Federal, as a
mutual, is at a disadvantage when it comes to attracting and retaining
qualified management. Columbia Federal believes that the ESOP for all
employees and the Columbia Financial of Kentucky, Inc., 1998 Stock Option and
Incentive Plan (the "Stock Option Plan") and the Columbia Financial of
Kentucky, Inc., Recognition and Retention Plan (the "RRP") for directors and
management are important tools, even though Columbia Federal will be required
to wait until after the Conversion to implement the Stock Option Plan and the
RRP.
Another benefit of the Conversion will be an increase in capital.
Notwithstanding Columbia Federal's current capital position, the importance of
higher levels of capital cannot be ignored. As has been amply demonstrated in
the past, changing accounting principles, interest rate shifts and changing
regulations can threaten even well-capitalized institutions. As a mutual
institution, Columbia Federal can increase capital only through retained
earnings or the issuance of subordinated debentures, which do not count as Tier
I capital for regulatory capital purposes. Capital that may seem unnecessary
now may support future growth and help Columbia Federal withstand future
threats to its capital.
In view of the competitive disadvantages and the ongoing debate about the
future of mutual institutions in the wake of regulatory consolidation and other
forces, Columbia Federal is choosing to reject the uncertainty inherent in the
mutual structure in favor of the more widely used, recognized and understood
stock form of ownership.
The Conversion will also give members of Columbia Federal, at their
option, the opportunity to become shareholders of CFKY. No member of Columbia
Federal will be obligated to subscribe or not to subscribe to common shares of
CFKY (the "Common Shares") by voting on the Plan, nor will any member's deposit
account be converted into
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Common Shares by such vote. After completion of the Conversion, Columbia
Federal will continue to provide the services presently offered to depositors
and borrowers, will maintain its existing offices and will retain its existing
management and employees.
Upon the consummation of the Conversion, the Federal Stock Charter of
Columbia Federal, a copy of which is attached to the Plan as Exhibit I, and the
Federal Stock Bylaws of Columbia Federal, a copy of which is attached to the
Plan as Exhibit II, will be the Charter and Bylaws of Columbia Federal as a
stock savings bank.
THE BUSINESS OF CFKY
CFKY was incorporated under Ohio law in 1997 at the direction of Columbia
Federal for the purpose of serving as a holding company for Columbia Federal.
CFKY has not conducted and will not conduct any business before the completion
of the Conversion, other than business related to the Conversion. Upon the
consummation of the Conversion, CFKY will be a unitary savings and loan holding
company, the principal assets of which initially will be the capital stock of
Columbia Federal and the investments made with the proceeds retained by CFKY
from the sale of the Common Shares in connection with the Conversion. See "USE
OF PROCEEDS."
The main office of CFKY is located at 2497 Dixie Highway, Ft. Mitchell,
Kentucky 41017-3085, and its telephone number is (606) 331-2419 .
THE BUSINESS OF COLUMBIA FEDERAL
GENERAL
Columbia Federal is principally engaged in the business of making
permanent first and second mortgage loans secured by one- to four-family
residential real estate located in Columbia Federal's primary lending area and
investing in U.S. Government and agency obligations, interest-bearing deposits
in other financial institutions and mortgage-backed securities. Columbia
Federal also originates loans for the construction of residential real estate
and loans secured by multifamily real estate (over four units) and
nonresidential real estate. The origination of consumer loans, including loans
secured by deposits and home improvement loans, constitutes a small portion of
Columbia Federal's lending activities. Loan funds are obtained primarily from
deposits, which are insured up to applicable limits by the FDIC, and loan and
mortgage-backed securities repayments.
Interest on loans, mortgage-backed securities and investments is Columbia
Federal's primary source of income. Columbia Federal's principal expense is
interest paid on deposit accounts. Operating results are dependent to a
significant degree on the net interest income of Columbia Federal, which is the
difference between interest earned on loans, mortgage-backed securities and
other investments and interest paid on deposits. Like most thrift
institutions, Columbia Federal's interest income and interest expense are
significantly affected by general economic conditions and by the policies of
various regulatory authorities.
Columbia Federal conducts business from its main office located in Ft.
Mitchell, Kentucky, a branch office in each of the municipalities of Covington,
Crescent Springs and Erlanger, which are located in Kenton County, Kentucky,
and a branch office in Florence, which is located in Boone County, Kentucky.
Columbia Federal's primary market area consists of Boone County and Kenton
County, Kentucky.
For a more detailed discussion of Columbia Federal's business and its
operating strategy, see "THE BUSINESS OF COLUMBIA FEDERAL," "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" and
"RISK FACTORS" in the Prospectus.
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THE CONVERSION
THE OTS HAS APPROVED THE PLAN, SUBJECT TO THE APPROVAL OF THE PLAN BY THE
MEMBERS OF COLUMBIA FEDERAL ENTITLED TO VOTE ON THE PLAN AND SUBJECT TO THE
SATISFACTION OF CERTAIN OTHER CONDITIONS IMPOSED BY THE OTS. OTS APPROVAL DOES
NOT CONSTITUTE A RECOMMENDATION OR ENDORSEMENT OF THE PLAN.
GENERAL
On October 9, 1997, the Board of Directors of Columbia Federal unanimously
adopted a Plan of Conversion, which it amended on December 11, 1997. The Board
of Directors recommends that the voting members of Columbia Federal approve the
Plan at the Special Meeting to be held on _______________, 1998. During and
upon completion of the Conversion, Columbia Federal will continue to provide
the services presently offered to depositors and borrowers, will maintain its
existing offices and will retain its existing management and employees.
Based on the current Valuation Range, between 1,717,000 and 2,323,000
Common Shares are expected to be offered in the Subscription Offering and the
Community Offering. In the Community Offering, preference will be given to
natural persons residing in Boone County and Kenton County, Kentucky, at a
price of $10 per share. Federal regulations require, with certain exceptions,
that shares offered in connection with the Conversion must be sold up to at
least the minimum point of the Valuation Range in order for the Conversion to
become effective. The actual number of shares sold in connection with the
Conversion will be determined based upon the final determination of the pro
forma market value of Columbia Federal at the completion of the Subscription
Offering and the Community Offering. See "Pricing and Number of Common Shares
to be Sold."
The Common Shares will be offered in the Subscription Offering to (1)
Eligible Account Holders, (2) the ESOP, (3) Supplemental Eligible Account
Holders and (4) Voting Members. Any Common Shares not subscribed for in the
Subscription Offering may be sold to the general public in the Community
Offering in a manner which will seek to achieve the widest distribution of the
Common Shares, but which will give preference to natural persons residing in
either Boone County or Kenton County, Kentucky. Under OTS regulations, the
Community Offering must be completed within 45 days after completion of the
Subscription Offering, unless such period is extended by Columbia Federal with
the approval of the OTS. If the Community Offering is determined not to be
feasible, an occurrence that is not currently anticipated, the Board of
Directors of Columbia Federal will consult with the OTS to determine an
appropriate alternative method of selling unsubscribed Common Shares. No
alternative sales methods are currently planned.
OTS regulations require the completion of the Conversion within 24 months
after the date of the approval of the Plan by the Voting Members of Columbia
Federal. The completion of the Conversion will be subject to market conditions
and other factors beyond Columbia Federal's control. Due to changing economic
and market conditions, no assurance can be given as to the length of time that
will be required to complete the sale of the Common Shares. If delays are
experienced, significant changes may occur in the estimated pro forma market
value of Columbia Federal. In such circumstances, Columbia Federal may also
incur substantial additional printing, legal and accounting expenses in
completing the Conversion. In the event the Conversion is not successfully
completed, Columbia Federal will be required to charge all Conversion expenses
against current earnings.
PRINCIPAL EFFECTS OF THE CONVERSION
VOTING RIGHTS. Deposit holders who are members of Columbia Federal in its
mutual form will have no voting rights in Columbia Federal as converted and
will not participate, therefore, in the election of directors or otherwise
control Columbia Federal's affairs. After the Conversion, voting rights in
Columbia Federal will be vested exclusively in CFKY as the sole shareholder of
Columbia Federal. Voting rights in CFKY will be held exclusively by its
shareholders. Each holder of CFKY's Common Shares will be entitled to one vote
for each Common Share owned on any matter to be considered by CFKY's
shareholders. See "DESCRIPTION OF AUTHORIZED SHARES."
DEPOSIT ACCOUNTS AND LOANS. Savings accounts in Columbia Federal, as
converted, will be equivalent in amount, interest rate and other terms to the
present savings accounts in Columbia Federal, and the existing FDIC insurance
on such deposits will not be affected by the Conversion. The Conversion will
not affect the terms of loan accounts or the rights and obligations of
borrowers under their individual contractual arrangements with Columbia
Federal.
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TAX CONSEQUENCES. The consummation of the Conversion is expressly
conditioned on receipt by Columbia Federal of a private letter ruling from the
Internal Revenue Service (the "IRS") or an opinion of counsel to the effect
that the Conversion will constitute a tax-free reorganization as defined in
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code").
Columbia Federal intends to proceed with the Conversion based upon an opinion
rendered by its special counsel, Vorys, Sater, Seymour and Pease, to the
following effect:
(1) The Conversion constitutes a reorganization within the meaning of
Section 368(a)(1)(F) of the Code, and no gain or loss will be recognized
by Columbia Federal in its mutual form or in its stock form as a result of
the Conversion. Columbia Federal in its mutual form and Columbia Federal
in its stock form will each be a "party to a reorganization" within the
meaning of Section 368(b) of the Code;
(2) No gain or loss will be recognized by Columbia Federal upon the
receipt of money from CFKY in exchange for the capital stock of Columbia
Federal, as converted;
(3) The assets of Columbia Federal will have the same basis in its hands
immediately after the Conversion as it had in its hands immediately prior
to the Conversion, and the holding period of the assets of Columbia
Federal after the Conversion will include the period during which the
assets were held by Columbia Federal before the Conversion;
(4) No gain or loss will be recognized to the deposit account holders of
Columbia Federal upon the issuance to them, in exchange for their
respective withdrawable deposit accounts in Columbia Federal immediately
prior to the Conversion, of withdrawable deposit accounts in Columbia
Federal immediately after the Conversion, in the same dollar amount as
their withdrawable deposit accounts in Columbia Federal immediately prior
to the Conversion, plus, in the case of Eligible Account Holders and
Supplemental Eligible Account Holders, the interests in the Liquidation
Account of Columbia Federal, as described below;
(5) The basis of the withdrawable deposit accounts in Columbia Federal
held by its deposit account holders immediately after the Conversion will
be the same as the basis of their deposit accounts in Columbia Federal
immediately prior to the Conversion. The basis of the interests in the
Liquidation Account received by the Eligible Account Holders and
Supplemental Eligible Account Holders will be zero. The basis of the
nontransferable subscription rights received by Eligible Account Holders,
Supplemental Eligible Account Holders and Other Eligible Members
(hereinafter defined) will be zero (assuming that at distribution such
rights have no ascertainable fair market value);
(6) No gain or loss will be recognized by Eligible Account Holders,
Supplemental Eligible Account Holders or Other Eligible Members upon the
distribution to them of nontransferable subscription rights to purchase
Common Shares (assuming that at distribution such rights have no
ascertainable fair market value), and no taxable income will be realized
by such Eligible Account Holders, Supplemental Eligible Account Holders or
Other Eligible Members as a result of their exercise of such
nontransferable subscription rights;
(7) The basis of the Common Shares purchased by members of Columbia
Federal pursuant to the exercise of subscription rights will be the
purchase price thereof (assuming that such rights have no ascertainable
fair market value and that the purchase price is not less than the fair
market value of the shares on the date of such exercise), and the holding
period of such shares will commence on the date of such exercise. The
basis of the Common Shares purchased other than by the exercise of
subscription rights will be the purchase price thereof (assuming in the
case of the other subscribers that the opportunity to buy in the
Subscription Offering has no ascertainable fair market value), and the
holding period of such shares will commence on the day after the date of
the purchase;
(8) For purposes of Section 381 of the Code, Columbia Federal will be
treated as if there had been no reorganization. The taxable year of
Columbia Federal will not end on the effective date of the Conversion and,
immediately after the Conversion, Columbia Federal in its stock form will
succeed to and take into account the tax attributes of Columbia Federal in
its mutual form immediately prior to the Conversion, including Columbia
Federal's earnings and profits or deficit in earnings and profits;
(9) The bad debt reserves of Columbia Federal in its mutual form
immediately prior to the Conversion will not be required to be restored to
the gross income of Columbia Federal in its stock form as a result of the
Conversion, and immediately after the Conversion such bad debt reserves
will have the same character in the hands of Columbia Federal in its stock
form as they would have had if there had been no Conversion. Columbia
Federal in its stock form will succeed to and take into account the dollar
amounts of those accounts of Columbia Federal in its mutual form which
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represent bad debt reserves in respect of which Columbia Federal in its
mutual form has taken a bad debt deduction for taxable years ending on
or before the Conversion; and
(10) Regardless of book entries made for the creation of the Liquidation
Account, the Conversion will not diminish the accumulated earnings and
profits of Columbia Federal available for the subsequent distribution of
dividends within the meaning of Section 316 of the Code. The creation of
the Liquidation Account on the records of Columbia Federal will have no
effect on its taxable income, deductions for additions to reserves for bad
debts under Section 593 of the Code or distributions to stockholders under
Section 593(e) of the Code.
Columbia Federal has received an opinion from Keller to the effect that
the subscription rights have no ascertainable fair market value because the
rights are received by specified persons at no cost, may not be transferred and
are of short duration. The IRS could challenge the assumption that the
subscription rights have no ascertainable fair market value.
Columbia Federal has also received an opinion from VonLehman & Company
Inc., Ft. Mitchell, Kentucky, to the effect that the tax effects of the
Conversion under Kentucky law are substantially the same as they are under
federal law.
Each Eligible Account Holder, Supplemental Eligible Account Holder and
Other Eligible Member is urged to consult his or her own tax advisor with
respect to the effect of such tax consequences on his or her own particular
facts and circumstances.
LIQUIDATION ACCOUNT. In the unlikely event of a complete liquidation of
Columbia Federal in its present mutual form, each depositor in Columbia Federal
would receive a pro rata share of any assets of Columbia Federal remaining
after payment of the claims of all creditors, including the claims of all
depositors to the withdrawable value of their savings accounts. A depositor's
pro rata share of such remaining assets would be the same proportion of such
assets as the value of such depositor's savings deposits bears to the total
aggregate value of all savings deposits in Columbia Federal at the time of
liquidation.
In the event of a complete liquidation of Columbia Federal in its stock
form after the Conversion, each savings depositor as of September 30, 1996 (the
"Eligibility Record Date"), and December 31, 1997 (the "Supplemental
Eligibility Record Date"), would have a claim of the same general priority as
the claims of all other general creditors of Columbia Federal. Except as
described below, each depositor's claim would be solely in the amount of the
balance in such depositor's savings account plus accrued interest. The
depositor would have no interest in the assets of Columbia Federal above that
amount. Such assets would be distributed to CFKY as the sole shareholder of
Columbia Federal.
For the purpose of granting a limited priority claim to the assets of
Columbia Federal in the event of a complete liquidation thereof to Eligible
Account Holders and Supplemental Eligible Account Holders who continue to
maintain savings accounts at Columbia Federal after the Conversion, Columbia
Federal will, at the time of Conversion, establish the Liquidation Account in
an amount equal to the regulatory capital of Columbia Federal as of the latest
practicable date prior to the Conversion at which such regulatory capital can
be determined. For this purpose, Columbia Federal shall use the regulatory
capital figure no later than that set forth in its latest statement of
financial condition contained in the Prospectus. The Liquidation Account will
not operate to restrict the use or application of any of the regulatory capital
of Columbia Federal.
Each Eligible Account Holder and Supplemental Eligible Account Holder will
have a separate inchoate interest (the "Subaccount") in a portion of the
Liquidation Account for Qualifying Deposits held on the Eligibility Record Date
or the Supplemental Eligibility Record Date, as the case may be.
The balance of each initial Subaccount shall be an amount determined by
multiplying the amount in the Liquidation Account by a fraction, the numerator
of which is the closing balance in the account holder's account as of the close
of business on the Eligibility Record Date or the Supplemental Eligibility
Record Date, as the case may be, and the denominator of which is the total
amount of all Qualifying Deposits of Eligible Account Holders and Supplemental
Eligible Account Holders on the corresponding record date. The balance of each
Subaccount may be decreased but will never be increased. If, at the close of
business on any annual closing date of Columbia Federal subsequent to the
respective record dates the balance in the savings account to which a
Subaccount relates is less than the lesser of (i) the deposit balance in such
savings account at the close of business on any other annual closing date
subsequent to the Eligibility Record Date or Supplemental Eligibility Record
Date or (ii) the amount of the Qualifying Deposit as of the Eligibility Record
Date or the Supplemental Eligibility Record Date, the balance of the Subaccount
for such savings account shall be adjusted proportionately to the reduction in
such savings account balance. In the event of any such downward adjustment,
such Subaccount balance shall not be subsequently increased
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notwithstanding any increase in the deposit balance of the related
savings account. If any savings account is closed, its related Subaccount
shall be reduced to zero upon such closing.
In the event of a complete liquidation of the converted Columbia Federal
(and only in such event), each Eligible Account Holder and Supplemental
Eligible Account Holder shall receive from the Liquidation Account a
distribution equal to the current balance in each of such account holder's
Subaccounts before any liquidation distribution may be made to CFKY as the sole
shareholder of Columbia Federal. Any assets remaining after satisfaction of
such liquidation rights and the claims of Columbia Federal's creditors would be
distributed to CFKY as the sole shareholder of Columbia Federal. No merger,
consolidation, purchase of bulk assets or similar combination or transaction
with another institution, the deposits of which are insured by the FDIC, will
be deemed to be a complete liquidation for this purpose and, in any such
transaction, the Liquidation Account shall be assumed by the surviving
institution.
COMMON SHARES. SHARES ISSUED UNDER THE PLAN CANNOT AND WILL NOT BE
INSURED BY THE FDIC. For a description of the characteristics of the Common
Shares, see "DESCRIPTION OF AUTHORIZED SHARES."
INTERPRETATION AND AMENDMENT OF THE PLAN
The Boards of Directors of Columbia Federal and CFKY will interpret the
Plan. To the extent permitted by law, all interpretations of the Plan by the
Boards of Directors of Columbia Federal and CFKY will be final. The Plan may
be amended by the Boards of Directors of Columbia Federal and CFKY at any time
before completion of the Conversion with the concurrence of the OTS. If
Columbia Federal and CFKY determine upon advice of counsel and after
consultation with the OTS that any such amendment is material, subscribers will
be notified of the amendment and will be provided the opportunity to affirm,
increase, decrease or cancel their subscriptions. Any person who does not
affirmatively elect to continue his subscription or elects to rescind his
subscription before the date specified in the notice will have all of his or
her funds promptly refunded with interest. Any person who elects to decrease
his subscription will have the appropriate portion of his or her funds promptly
refunded with interest.
CONDITIONS AND TERMINATION
The completion of the Conversion requires the approval of the Plan and the
adoption of the Federal Stock Charter and Federal Stock Bylaws by the Voting
Members of Columbia Federal at the Special Meeting and the sale of the
requisite amount of Common Shares within 24 months following the date of such
approval. If these conditions are not satisfied, the Plan will automatically
terminate and Columbia Federal will continue its business in the mutual form of
organization. The Plan may be voluntarily terminated by the Board of Directors
at any time before the Special Meeting and at any time thereafter with the
approval of the OTS.
SUBSCRIPTION OFFERING
THE SUBSCRIPTION OFFERING WILL EXPIRE AT ___ _.M., EASTERN TIME, ON THE
SUBSCRIPTION EXPIRATION DATE. SUBSCRIPTION RIGHTS NOT EXERCISED BEFORE THE
SUBSCRIPTION EXPIRATION DATE WILL BE VOID, WHETHER OR NOT CFKY HAS BEEN ABLE TO
LOCATE EACH PERSON ENTITLED TO SUCH SUBSCRIPTION RIGHTS.
Nontransferable subscription rights to purchase Common Shares are being
issued at no cost to all eligible persons and entities in accordance with the
preference categories established by the Plan, as described below. Each
subscription right may be exercised only by the person to whom it is issued and
only for his or her own account. Each person subscribing for shares must
represent to CFKY that the subscriber is purchasing such shares for the
subscriber's own account and that the subscriber has no agreement or
understanding with any other person for the sale or transfer of such shares.
The number of Common Shares which a person who has subscription rights may
purchase will be determined, in part, by the total number of Common Shares to
be issued and the availability of such shares for purchase under the
preference categories set forth in the Plan and certain other limitations. See
"Limitations on Purchases of Common Shares." The sale of any Common Shares
pursuant to subscriptions received is contingent upon approval of the Plan by
the Voting Members of Columbia Federal at the Special Meeting.
The preference categories for the allocation of Common Shares, which have
been established by the Plan in accordance with applicable regulations, are as
follows:
10
Category 1. Eligible Account Holders will receive, without payment,
nontransferable subscription rights to purchase up to the greater of (i)
the number of Common Shares permitted to be purchased in the Community
Offering, (ii) .10% of the total number of Common Shares sold in
connection with the Conversion, or (iii) 15 times the product (rounded
down to the next whole number) obtained by multiplying the total number of
Common Shares sold in connection with the Conversion by a fraction of
which the numerator is the amount of the Eligible Account Holder's
Qualifying Deposit and the denominator of which is the total amount of
Qualifying Deposits of all Eligible Account Holders, in each case on the
Eligibility Record Date, subject to the overall purchase limitations set
forth in Section 10 of the Plan. See "Limitations on Purchases of Common
Shares."
If the exercise of subscription rights in this Category 1 results in
an over-subscription, Common Shares will be allocated among subscribing
Eligible Account Holders in a manner which will, to the extent possible,
make the total allocation of each subscriber equal 100 shares or the
amount subscribed for, whichever is lesser. Any Common Shares remaining
after such allocation has been made will be allocated among the
subscribing Eligible Account Holders whose subscriptions remain unfilled
in the proportion which the amount of their respective Qualifying Deposits
on the Eligibility Record Date bears to the total Qualifying Deposits of
all Eligible Account Holders on such date. No fractional shares will be
issued. The subscription rights of the Eligible Account Holders are
subordinate to the limited priority right of the ESOP set forth in the
following paragraph.
Category 2. The ESOP will receive, without payment, nontransferable
subscription rights to purchase up to 10% of the Common Shares sold in
connection with the Conversion. The subscription rights of the ESOP will be
subordinate to the subscription rights in Category 1, except that if the
final pro forma market value of Columbia Federal exceeds the maximum of the
Valuation Range, the ESOP shall have first priority with respect to the
amount sold in excess of the maximum of the Valuation Range. If the ESOP
is unable to purchase all or part of the Common Shares for which it
subscribes due to an oversubscription in Category 1, the ESOP may purchase
Common Shares on the open market or may purchase authorized but unissued
shares of CFKY. If the ESOP purchases authorized but unissued shares from
CFKY, such purchases would have a dilutive effect on the interests of
CFKY's shareholders.
Category 3. Supplemental Eligible Account Holders will receive,
without payment, non-transferable subscription rights to purchase up to the
greater of (i) the number of Common Shares permitted to be purchased in the
Community Offering, (ii) .10% of the total number of Common Shares sold in
connection with the Conversion, or (iii) 15 times the product (rounded down
to the next whole number) obtained by multiplying the total number of
Common Shares sold in connection with the Conversion by a fraction of which
the numerator is the amount of the Supplemental Eligible Account Holder's
Qualifying Deposit and the denominator of which is the total amount of
Qualifying Deposits of all Supplemental Eligible Account Holders, in each
case on the Supplemental Eligibility Record Date, subject to the overall
purchase limitations set forth in Section 10 of the Plan. See "Limitations
on Purchases of Common Shares."
If the exercise of subscription rights in this Category 3 results in
an over-subscription, Common Shares will be allocated among subscribing
Supplemental Eligible Account Holders in a manner which will, to the
extent possible, make the total allocation of each subscriber equal 100
shares or the amount subscribed for, whichever is lesser. Any Common
Shares remaining after such allocation has been made will be allocated
among the subscribing Supplemental Eligible Account Holders whose
subscriptions remain unfilled in the proportion which the amount of their
respective Qualifying Deposits on the Supplemental Eligibility Record Date
bears to the total Qualifying Deposits of all Supplemental Eligible
Account Holders on such date. No fractional shares will be issued.
Subscription rights received in this Category 3 will be subordinate
to the subscription rights in Categories 1 and 2.
Category 4. All Voting Members who are not Eligible Account Holders
or Supplemental Eligible Account Holders ("Other Eligible Members") will
receive nontransferable subscription rights to purchase Common Shares in an
amount up to the greater of the number permitted to be purchased in the
Community Offering or .10% of the total number of Common Shares sold in
connection with the Conversion, subject to the overall purchase limitations
set forth in Section 10 of the Plan. See "Limitations on Purchases of
Common Shares." In the event of an oversubscription in this Category 4,
the available shares will be allocated among subscribing Other Eligible
Members on an equitable basis in the same proportion that their respective
subscriptions bear to the total amount of all subscriptions in this
Category 4.
11
Subscription rights received in this Category 4 will be subordinate to the
subscription rights in Categories 1 through 3.
The Board of Directors may reject any one or more subscriptions if, based
upon the Board of Directors' interpretation of applicable regulations, such
subscriber is not entitled to the shares for which he or she has subscribed or
if the sales of the shares subscribed for would be in violation of any
applicable statutes, regulations or rules.
CFKY will make reasonable efforts to comply with the securities laws of
all states in the United States in which persons having subscription rights
reside. However, no such person will be offered or receive any Common Shares
under the Plan who resides in a foreign country or in a state of the United
States with respect to which all of the following apply: (i) a small number of
persons otherwise eligible to subscribe for Common Shares under the Plan
resides in such country or state; (ii) under the securities laws of such
country or state, the granting of subscription rights or the offer or sale of
Common Shares to such persons would require CFKY or its officers or directors,
to register as a broker or dealer or to register or otherwise qualify its
securities for sale in such country or state; and (iii) such registration or
qualification would be impracticable for reasons of cost or otherwise.
The term "resident" as used herein with respect to the Subscription
Offering means any person who, on the date of submission of a stock order form,
maintained a bona fide residence within a jurisdiction in which the Common
Shares are being offered for sale. If a person is a business entity, the
person's residence shall be the location of the principal place of business.
If the person is a personal benefit plan, the residence of the beneficiary
shall be the residence of the plan. In the case of all other benefit plans,
the residence of the trustee shall be the residence of the plan. In all cases,
the determination of a subscriber's residency shall be in the sole discretion
of Columbia Federal and CFKY.
COMMUNITY OFFERING
Concurrently with the Subscription Offering, CFKY is hereby offering
Common Shares in the Community Offering, subject to the limitations set forth
below, to the extent such shares remain available based upon the final
appraisal of Columbia Federal on a pro forma basis and after the satisfaction
of all orders received in the Subscription Offering. If subscriptions are
received in the Subscription Offering for at least 2,323,000 Common Shares,
Common Shares may not be offered in the Community Offering. If subscriptions
for at least 2,323,000 Common Shares have not been received by the Subscription
Expiration Date, CFKY anticipates offering Common Shares in the Community
Offering to the extent such shares remain available after the satisfaction of
all orders received in the Subscription Offering. All sales of Common Shares
in the Community Offering will be at the same price per share as the sales of
Common Shares in the Subscription Offering. THE COMMUNITY OFFERING MAY EXPIRE
AT ANY TIME WHEN ORDERS FOR AT LEAST 2,323,000 COMMON SHARES HAVE BEEN
RECEIVED, BUT IN NO EVENT LATER THAN 45 DAYS AFTER THE SUBSCRIPTION EXPIRATION
DATE, OR ___, 1998, UNLESS EXTENDED BY COLUMBIA FEDERAL AND CFKY WITH THE
APPROVAL OF THE OTS, IF NECESSARY. IN ACCORDANCE WITH THE PLAN, THE OFFERING
MAY NOT BE EXTENDED BEYOND ______, 2000.
In the event shares are available in the Community Offering, members of
the general public may purchase up to 15,000 Common Shares. See "Limitations
on Purchases of Common Shares." If an insufficient number of shares is
available to fill all of the orders received in the Community Offering, the
available shares will be allocated in the Community Offering in a manner to be
determined by the Board of Directors of CFKY, subject to the following:
(i) In the Community Offering, preference will be given to natural persons
who reside in either Boone County or Kenton County, Kentucky, the counties
in which the offices of Columbia Federal are located;
(ii) Orders received in the Community Offering will first be filled up to
a maximum of two percent of the total number of Common Shares offered,
with any remaining shares allocated on an equal number of shares per order
basis until all orders have been filled;
(iii) No person, together with any Associate and groups Acting in Concert,
may purchase more than 15,000 Common Shares in the Community Offering; and
(iv) The right of any person to purchase Common Shares in the Community
Offering is subject to the right of CFKY and Columbia Federal to accept or
reject such purchases in whole or in part.
12
The term "resident" as used herein with respect to the Community Offering
means any natural person who, on the date of submission of a stock order form,
maintained a bona fide residence within, as appropriate, Boone County or Kenton
County, Kentucky, or a jurisdiction in which the Common Shares are being
offered for sale.
LIMITATIONS ON PURCHASES OF COMMON SHARES
The Plan provides for certain additional limitations to be placed upon the
purchase of Common Shares. To the extent such shares are available, the
minimum number of shares that may be purchased by any party is 25. No
fractional shares will be issued.
Currently, no person, together with Associates (hereinafter defined) and
groups Acting in Concert (hereinafter defined), may purchase more than 30,000
Common Shares. Subject to any required regulatory approval and the
requirements of applicable laws and regulations, but without further approval
of the members of Columbia Federal, purchase limitations may be increased or
decreased at the sole discretion of the Boards of Directors of CFKY and
Columbia Federal at any time. If such amount is increased, persons who
subscribed for the maximum amount will be given the opportunity to increase
their subscriptions up to the then applicable limit, subject to the rights and
preferences of any person who has priority subscription rights. The Boards of
Directors of CFKY and Columbia Federal may, in their sole discretion, increase
the maximum purchase limitation referred to above up to 10% of the Common
Shares sold in connection with the Conversion, provided that orders for shares
exceeding 5% of the shares to be issued in the Conversion shall not exceed, in
the aggregate, 10% of the shares to be issued in the Conversion. In the event
that the purchase limitation is decreased after commencement of the
Subscription Offering, the order of any person who subscribed for the maximum
number of Common Shares 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.
"Acting in Concert" is defined as "knowing participation in a joint
activity or independent conscious parallel action towards a common goal whether
or not pursuant to an express agreement" or "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." Persons shall be presumed to be Acting in
Concert with each other, subject to rebuttal through a filing with the OTS, if:
(i) both are purchasing Common Shares in the Conversion and (a) are certain
executive officers, including the president, chief executive officer, chief
operating officer or vice president, directors, trustees, partners, persons who
perform, or whose nominees or representatives perform, similar policy making
functions at a company (other than Columbia Federal or CFKY), a principal
business unit or subsidiary of a company, a partnership, a joint venture or a
similar organization; (b) are persons who directly or indirectly own or control
10% or more of the stock of a company (other than Columbia Federal or CFKY); or
(c) constituted a group under the beneficial ownership reporting rules under
Section 13 or the proxy rules under Section 14 of the Securities Exchange Act
of 1934 (the "Exchange Act"); or (ii) one person provides credit to the other
for the purchase of Common Shares or is instrumental in obtaining that credit.
Companies (other than Columbia Federal or CFKY), partnerships, joint ventures
and similar organizations shall be presumed to be acting in concert with their
executive officers, directors, trustees, trusts for which they serve as
trustee, partners, agents who perform, or whose nominees or representatives
perform, similar policy making functions and persons who directly or indirectly
own or control 10% or more of their stock if both are purchasing Common Shares
in the Conversion. In addition, if a person is presumed to be Acting in
Concert with another person, company or similar organization, then such person
is presumed to Act in Concert with anyone else who is, or is presumed to be,
Acting in Concert with such other person, company or similar organization.
For purposes of the Plan, (i) the directors of Columbia Federal are not
deemed to be Acting in Concert solely by reason of their membership on the
Board of Directors of Columbia Federal; (ii) an associate of a person (an
"Associate") is (a) any corporation or organization (other than Columbia
Federal) of which such person is an officer, partner or, directly or
indirectly, the beneficial owner of 10% or more of any class of equity
securities; (b) any trust or other estate in which such person has a
substantial beneficial interest or as to which such person serves as trustee or
in a similar fiduciary capacity; and (c) any relative or spouse of such person,
or relative of such spouse, who either has the same home as such person or who
is a director or officer of Columbia Federal. Executive officers and directors
of Columbia Federal and their Associates may not purchase, in the aggregate,
more than 33.7% of the total number of Common Shares sold in the Conversion.
Shares acquired by the ESOP will not, pursuant to regulations governing the
Conversion, be aggregated with the shares purchased by the directors, officers
and employees of Columbia Federal.
Purchases of Common Shares are also subject to the change in control
regulations of the OTS. Such regulations restrict direct and indirect
purchases of 10% or more of the stock of any savings association by any person
or group of persons Acting in
13
Concert. See "RESTRICTIONS ON ACQUISITION OF COLUMBIA FEDERAL AND CFKY AND
RELATED ANTI-TAKEOVER PROVISIONS - Federal Law and Regulation" in the
Prospectus.
After the Conversion, Common Shares, except for shares purchased by
officers and directors of CFKY, will be freely transferable, subject to OTS
regulations. See "Restrictions on Transferability of Common Shares by
Directors and Officers."
PLAN OF DISTRIBUTION
The offering of the Common Shares is made only pursuant to this
Prospectus, which is available to all eligible subscribers by mail. See
"ADDITIONAL INFORMATION." Additional copies are available at the offices of
Columbia Federal. Sales of Common Shares will be made primarily by registered
representatives affiliated with Charles Webb & Company, a division of Keefe,
Bruyette & Woods, Inc. ("Webb"). CFKY will rely on Rule 3a4-1 under the
Exchange Act, and sales of Common Shares will be conducted within the
requirements of Rule 3a4-1, which will permit officers, directors and employees
of CFKY and Columbia Federal to participate in the sale of Common Shares,
except that officers, directors and employees will not participate in the sale
of Common Shares to residents of any state in which such persons have not met
such state's requirements for participation. No officer, director or employee
of CFKY or Columbia Federal will be compensated in connection with his
participation by the payment of commissions or other remuneration based either
directly or indirectly on the transactions in the Common Shares.
To assist CFKY in marketing the Common Shares, CFKY has retained Webb,
which is a broker-dealer registered with the Securities and Exchange Commission
(the "SEC") and a member of the National Association of Securities Dealers,
Inc. (the "NASD"). Webb will consult with and advise CFKY and assist with the
sale of the Common Shares on a best efforts basis in connection with the
Conversion. The services to be rendered by Webb include assisting CFKY in
conducting the Subscription Offering and the Community Offering and educating
Columbia Federal personnel about the Conversion process. Webb has no
obligation to purchase any of the Common Shares.
For its services, Webb will receive a commission equal to 1.50% of the
aggregate purchase price paid for shares sold to residents of Boone County and
Kenton County, Kentucky; 1.25% of the aggregate purchase price of Common Shares
sold to residents of counties contiguous to Boone County or Kenton County,
Kentucky; and 0.75% of the aggregate purchase price of Common Shares sold to
persons not residents of Boone County or Kenton County, Kentucky, or counties
contiguous thereto. No commission will be paid on shares purchased by Columbia
Federal's directors, executive officers or employees or their immediate family
members or the ESOP. In the event that Columbia Federal requests Webb to
obtain the assistance of other broker-dealers ("Selected Dealers") to sell
Common Shares in the Community Offering, Webb will be paid a commission of 5.5%
of the aggregate purchase price of Common Shares sold by Selected Dealers, from
which the Selected Dealers will be paid, instead of the commission based upon
the residence of the purchasers. A management fee of $25,000 has already been
paid to Webb, and such amount will be deducted from the commission. Columbia
Federal will reimburse Webb for all reasonable out-of-pocket expenses,
including legal fees, not to exceed $35,000.
Columbia Federal has agreed to indemnify Webb against certain claims or
liabilities, including certain liabilities under the Securities Act of 1933, as
amended (the "Securities Act").
EFFECT OF EXTENSION OF COMMUNITY OFFERING
If the Community Offering extends beyond 45 days after the Subscription
Expiration Date, persons who have subscribed for Common Shares in the
Subscription Offering or in the Community Offering will receive a written
notice that until a date specified in the notice, they have the right to
increase, decrease or rescind their subscriptions for Common Shares. Any
person who does not affirmatively elect to continue his subscription or elects
to rescind his subscription during any such extension will have all of his
funds promptly refunded with interest. Any person who elects to decrease his
subscription during any such extension shall have the appropriate portion of
his funds promptly refunded with interest.
USE OF ORDER FORMS
Subscriptions for Common Shares in the Subscription Offering and the
Community Offering may be made only by completing and submitting an Order Form.
Any person who desires to subscribe for Common Shares in the Subscription
Offering must do so by delivering to CFKY at 2497 Dixie Highway, Ft. Mitchell,
Kentucky 41017-3085, or at any of its branches by mail or in person, prior to
_____.m., Eastern Time, on ______, 1998, a properly executed and completed
original Order Form, together with full payment of the subscription price of
$10.00 for each share for which subscription is made.
14
Photocopies or telecopies of Order Forms will not be accepted. THE FAILURE TO
DELIVER A PROPERLY EXECUTED ORIGINAL ORDER FORM AND FULL PAYMENT IN A MANNER BY
WHICH THEY ARE ACTUALLY RECEIVED BY CFKY NO LATER THAN ___ _.M. ON THE
SUBSCRIPTION EXPIRATION DATE WILL PRECLUDE THE PURCHASE OF COMMON SHARES IN THE
OFFERING.
AN EXECUTED ORDER FORM, ONCE RECEIVED BY CFKY, MAY NOT BE MODIFIED,
AMENDED OR RESCINDED WITHOUT THE CONSENT OF CFKY, UNLESS (I) THE COMMUNITY
OFFERING IS NOT COMPLETED WITHIN 45 DAYS AFTER THE SUBSCRIPTION EXPIRATION
DATE, OR (II) THE FINAL VALUATION OF COLUMBIA FEDERAL, AS CONVERTED, IS LESS
THAN $17,170,000 OR MORE THAN $26,714,500. IF EITHER OF THOSE EVENTS OCCUR,
PERSONS WHO HAVE SUBSCRIBED FOR COMMON SHARES IN THE SUBSCRIPTION OFFERING OR
IN THE COMMUNITY OFFERING WILL RECEIVE WRITTEN NOTICE THAT UNTIL A DATE
SPECIFIED IN THE NOTICE, THEY HAVE A RIGHT TO AFFIRM, INCREASE, DECREASE OR
RESCIND THEIR SUBSCRIPTIONS. ANY PERSON WHO DOES NOT AFFIRMATIVELY ELECT TO
CONTINUE HIS OR HER SUBSCRIPTION OR ELECTS TO RESCIND HIS OR HER SUBSCRIPTION
DURING ANY SUCH EXTENSION WILL HAVE ALL OF HIS OR HER FUNDS PROMPTLY REFUNDED
WITH INTEREST. ANY PERSON WHO ELECTS TO DECREASE HIS OR HER SUBSCRIPTION
DURING ANY SUCH EXTENSION WILL HAVE THE APPROPRIATE PORTION OF HIS OR HER FUNDS
PROMPTLY REFUNDED WITH INTEREST.
PAYMENT FOR COMMON SHARES
Payment of the subscription price for all Common Shares for which
subscription is made must accompany all completed Order Forms and Forms of
Certification in order for subscriptions to be valid. Payment for Common
Shares may be made (i) in cash, if delivered in person, (ii) by check, bank
draft or money order payable to the order of Columbia Federal, or (iii) by
authorization of withdrawal from savings accounts in Columbia Federal (other
than non-self-directed IRAs). Wire transfers will not be accepted. Columbia
Federal cannot lend money or otherwise extend credit to any person to purchase
Common Shares, other than the ESOP.
Payments made in cash or by check, bank draft or money order will be
placed in a segregated savings account insured by the FDIC up to applicable
limits. Interest will be paid by Columbia Federal on such accounts at Columbia
Federal's passbook rate, currently ______% annual percentage yield, from the
date payment is received until the Conversion is completed or terminated.
Payments made by check will not be deemed to have been received until such
check has cleared for payment.
During the Community Offering, Selected Dealers may only solicit
indications of interest from their customers to place orders with Columbia
Federal as of a certain date (the "Order Date") for the purchase of Common
Shares. When and if Columbia Federal believes that enough indications of
interest and orders have been received to consummate the Conversion, Webb will
request, as of the Order Date, Selected Dealers submit orders to purchase
shares for which Selected Dealers have previously received indications of
interest from the Selected Dealers' customers. The Selected Dealers will send
confirmations of the orders to such customers on the next business day after
the Order Date. The Selected Dealers will debit the accounts of their
customers on the date which will be three business days from the Order Date
(the "Settlement Date"). On the Settlement Date, funds received by Selected
Dealers will be remitted to Columbia Federal. Funds will be returned promptly
in the event the Conversion is not consummated.
Instructions for authorizing withdrawals from savings accounts are
provided in the Order Form. Once a withdrawal has been authorized, none of the
designated withdrawal amount may be used by a subscriber for any purpose other
than to purchase Common Shares, unless the Conversion is terminated. All sums
authorized for withdrawal will continue to earn interest at the contract rate
for such account or certificate until the completion or termination of the
Conversion. Interest penalties for early withdrawal applicable to certificate
accounts will be waived in the case of withdrawals authorized for the purchase
of Common Shares. If a partial withdrawal from a certificate account results
in a balance less than the applicable minimum balance requirement, the
certificate will be cancelled and the remaining balance will earn interest at
Columbia Federal's passbook rate subsequent to the withdrawal.
Persons who are beneficial owners of IRAs maintained at Columbia Federal
do not personally have subscription rights related to such account. The
account itself, however, may have subscription rights. In order to utilize
funds in an IRA maintained at Columbia Federal, the funds must be transferred
to a self-directed IRA that permits the IRA funds to be invested in stock. The
beneficial owner of the IRA must direct the trustee of the IRA to use funds
from such account to purchase Common Shares in connection with the Conversion.
Persons who are interested in utilizing IRAs at Columbia Federal to subscribe
for Common Shares should contact the Columbia Federal Stock Information Center
at (___) ___-____ for instructions and assistance.
15
Subscriptions will not be filled by CFKY until subscriptions have been
received in the Subscription Offering and the Community Offering for up to
1,717,000 Common Shares, the minimum point of the Valuation Range. If the
Conversion is terminated, all funds delivered to CFKY for the purchase of
Common Shares will be returned with interest, and all charges to savings
accounts will be rescinded. Subscribers and other purchasers will be notified
by mail, promptly on completion of the sale of the Common Shares, of the number
of shares for which their subscriptions have been accepted. Certificates
representing Common Shares will be delivered promptly thereafter.
If the ESOP subscribes for Common Shares in the Subscription Offering, the
ESOP will not be required to pay for the shares subscribed for at the time it
subscribes but may pay for such Common Shares upon consummation of the
Conversion.
SHARES TO BE PURCHASED BY MANAGEMENT PURSUANT TO SUBSCRIPTION RIGHTS
The following table sets forth certain information regarding the
subscription rights intended to be exercised by the directors and executive
officers of Columbia Federal and their Associates. For purposes of this table,
it has been assumed that 2,020,000 Common Shares will be sold in connection
with the Conversion at $10 per share, that the purchase limitations are not
changed and that a sufficient number of Common Shares will be available to
satisfy the intended purchases by directors and executive officers. See
"Pricing and Number of Common Shares to be Sold."
Percent Aggregate
Total of total purchase
Name shares offering price
- ---- ------ -------- ---------
J. Robert Bluemlein - -% $ -
Kenneth R. Kelly 30,000 1.49 300,000
John C. Layne 10,000 .50 100,000
Daniel T. Mistler 10,000 .50 100,000
Fred A. Tobergte, Sr. 30,000 1.49 300,000
Geraldine Zembrodt 20,000 .99 200,000
Robert V. Lynch 30,000 1.49 300,000
Mary Jane Lucas 5,000 .25 50,000
George Raybourne 2,500 .12 25,000
Edward Schwartz 20,000 .99 200,000
Harold E. Taylor 30,000 1.49 300,000
Abijah Adams 10,000 .50 100,000
Carol S. Margrave 3,000 .15 30,000
------ ---- ----------
Total 200,500 9.93% $2,005,000
All purchases by executive officers and directors of Columbia Federal are
made for investment purposes only and with no intent to resell.
PRICING AND NUMBER OF COMMON SHARES TO BE SOLD
The aggregate offering price of the Common Shares will be based on the pro
forma market value of the shares as determined by an independent appraisal of
Columbia Federal. Keller, a firm which evaluates and appraises financial
institutions, was retained by Columbia Federal to prepare an appraisal of the
estimated pro forma market value of Columbia Federal as converted. Keller will
receive a fee of $17,000 for its appraisal, which amount includes out-of-pocket
expenses.
The appraisal was prepared by Keller in reliance upon the information
contained herein. Keller also considered the following factors, among others:
the present and projected operating results and financial condition of Columbia
Federal and the economic and demographic conditions in Columbia Federal's
existing market area; the quality and depth of Columbia Federal's management
and personnel; certain historical financial and other information relating to
Columbia Federal and a comparative evaluation of the operating and financial
statistics of Columbia Federal with those of other thrift institutions; the
aggregate size of the offering; the impact of the Conversion on Columbia
Federal's regulatory capital and earnings potential; the trading market for
stock of comparable thrift institutions; the effect of Columbia Federal
becoming a subsidiary of CFKY; and general conditions in the markets for such
stocks.
16
Keller's valuation of the estimated pro forma market value of Columbia
Federal, as converted, is $20,200,000 as of November 28, 1997 (the "Pro Forma
Value"). CFKY will issue the Common Shares at a fixed price of $10.00 per
share and, by dividing the price per share into the final Pro Forma Value,
determined at the completion of the Conversion, will determine the number of
shares to be issued. Applicable regulations also require, however, that the
appraiser establish the Valuation Range of 15% on either side of the Pro Forma
Value to allow for fluctuations in the aggregate value of the Common Shares due
to changes in the market for thrift shares and other factors from the time of
commencement of the Subscription Offering until the completion of the
Conversion.
As of September 30, 1997, the Valuation Range was from $17,170,000 to
$23,230,000, which, based upon a per share offering price of $10.00, will
result in the sale of between 1,717,000 and 2,323,000 Common Shares. In the
event that Keller determines at the close of the Conversion that the aggregate
pro forma value of Columbia Federal is higher or lower than the Pro Forma Value
as of November 28, 1997, but is nevertheless within the Valuation Range, or is
not more than 15% above the maximum point of the Valuation Range, CFKY will
make an appropriate adjustment by raising or lowering the total number of
Common Shares sold in the Conversion consistent with the final Pro Form Value.
If, due to changing market conditions, the final valuation is not between the
minimum of the Valuation Range and 15% above the maximum of the Valuation
Range, subscribers will be given a notice of such final valuation and the right
to affirm, increase, decrease or rescind their subscriptions. Any person who
does not affirmatively elect to continue his subscription or elects to rescind
his subscription before the date specified in the notice will have all of his
funds promptly refunded with interest. Any person who elects to decrease his
subscription will have the appropriate portion of his funds promptly refunded
with interest.
THE APPRAISAL BY KELLER IS NOT INTENDED, AND MUST NOT BE CONSTRUED, AS A
RECOMMENDATION OF ANY KIND AS TO THE ADVISABILITY OF PURCHASING COMMON SHARES
OR VOTING TO APPROVE THE CONVERSION. IN PREPARING THE VALUATION, KELLER HAS
RELIED UPON AND ASSUMED THE ACCURACY AND COMPLETENESS OF FINANCIAL AND
STATISTICAL INFORMATION PROVIDED BY COLUMBIA FEDERAL AND ITS INDEPENDENT
AUDITORS. KELLER DID NOT INDEPENDENTLY VERIFY THE FINANCIAL STATEMENTS AND
OTHER INFORMATION PROVIDED BY COLUMBIA FEDERAL AND ITS INDEPENDENT AUDITORS,
NOR DID KELLER VALUE INDEPENDENTLY THE ASSETS OR LIABILITIES OF COLUMBIA
FEDERAL OR CFKY. THE VALUATION CONSIDERS COLUMBIA FEDERAL ONLY AS A GOING
CONCERN AND SHOULD NOT BE CONSIDERED AS AN INDICATION OF THE LIQUIDATION VALUE
OF COLUMBIA FEDERAL. MOREOVER, BECAUSE SUCH VALUATION IS NECESSARILY BASED
UPON ESTIMATES AND PROJECTIONS OF A NUMBER OF MATTERS, ALL OF WHICH ARE SUBJECT
TO CHANGE FROM TIME TO TIME, NO ASSURANCE CAN BE GIVEN THAT PERSONS PURCHASING
COMMON SHARES WILL THEREAFTER BE ABLE TO SELL SUCH SHARES AT PRICES WITHIN THE
ESTIMATED PRICE RANGE.
A copy of the complete appraisal is on file and open for inspection at the
offices of the OTS, 1700 G Street, N.W., Washington, DC 20552, at 200 W.
Madison Street, Suite 1300, Chicago, Illinois 60606, and at each of the offices
of Columbia Federal. It has also been filed as an exhibit to the Registration
Statement.
RESTRICTION ON REPURCHASE OF COMMON SHARES
Federal regulations prohibit CFKY from repurchasing any of its capital
stock for three years following the date of completion of the Conversion,
except as part of an open-market stock repurchase program during the second and
third years following the Conversion involving no more than 5% of CFKY's
outstanding capital stock during a twelve-month period or except as such a
repurchase would be otherwise approved by the OTS. In addition, after such a
repurchase, Columbia Federal's regulatory capital must equal or exceed all
regulatory capital requirements. Before commencement of such a program, CFKY
must provide notice to the OTS, and the OTS may disapprove the program if the
OTS determines that it would adversely affect the financial condition of
Columbia Federal or if it determines that there is no valid business purpose
for such repurchase. Such repurchase restrictions would not prohibit the ESOP
or the RRP from purchasing Common Shares during the first year following
Conversion.
RESTRICTIONS ON TRANSFERABILITY OF COMMON SHARES BY DIRECTORS AND OFFICERS
Common Shares purchased by directors or executive officers of CFKY or
their Associates will be subject to the restriction that such shares may not be
sold for a period of one year following completion of the Conversion, except in
the event of the death of the shareholder. The certificates evidencing Common
Shares issued by CFKY to directors, executive officers and their Associates
will bear a legend giving appropriate notice of the restriction imposed upon
the transfer of such Common Shares. In addition, CFKY will give appropriate
instructions to the transfer agent (if any) for CFKY's Common Shares in respect
of the applicable restriction for transfer of any restricted shares. Any
shares issued as a stock dividend, stock split or otherwise in respect of
restricted shares will be subject to the same restrictions.
17
Subject to certain exceptions, for a period of three years following the
Conversion, no director or officer of CFKY or Columbia Federal, or any of their
Associates, may purchase any common shares of CFKY without the prior written
approval of the OTS, except through a broker-dealer registered with the SEC.
This restriction will not apply, however, to negotiated transactions involving
more than 1% of a class of outstanding common shares of CFKY or shares acquired
by any stock benefit plan of Columbia Federal or CFKY.
The Common Shares, like the stock of most public companies, are subject to
the registration requirements of the Securities Act. Accordingly, the Common
Shares may be offered and sold only in compliance with such registration
requirements or pursuant to an applicable exemption from registration. Common
Shares received in the Conversion by persons who are not "affiliates" of CFKY
may be resold without registration. Common Shares received by affiliates of
CFKY will be subject to resale restrictions. An "affiliate" of CFKY, for
purposes of Rule 144, is a person who directly, or indirectly through one or
more intermediaries, controls, or is controlled by or is under common control
with, CFKY. Rule 144 generally requires that there be publicly available
certain information concerning CFKY and that sales subject to Rule 144 be made
in routine brokerage transactions or through a market maker. If the conditions
of Rule 144 are satisfied, each affiliate (or group of persons acting in
concert with one or more affiliates) is entitled to sell in the public market,
without registration, in any three-month period, a number of shares which does
not exceed the greater of (i) 1% of the number of outstanding shares of CFKY or
(ii) if the shares are admitted to trading on a national securities exchange or
reported through the automated quotation system of a registered securities
association, the average weekly reported volume of trading during the four
weeks preceding the sale.
RIGHTS OF REVIEW
Any person aggrieved by a final action of the OTS which approves, with or
without conditions, or disapproves the Plan may obtain review of such action by
filing in the Court of Appeals of the United States 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, a written petition
praying that the final action of the OTS be modified, terminated or set aside.
Such petition must be filed within 30 days after the date of mailing of proxy
materials to the Voting Members of Columbia Federal or within 30 days after the
date of publication in the Federal Register of notice of approval of the Plan
by the OTS, whichever is later.
USE OF PROCEEDS
The following table presents the estimated gross and net proceeds from the
sale of the Common Shares in connection with the Conversion based on the
Valuation Range:
15% above
Minimum Mid-point Maximum Maximum
--------- ---------- ----------- ----------
Gross proceeds $17,170,000 $20,200,000 $23,230,000 $26,714,500
Less estimated expenses 620,000 658,000 695,000 737,000
----------- ----------- ----------- -----------
Total net proceeds $16,550,000 $19,542,000 $22,535,000 $25,977,500
The final Pro Forma Value may be outside the Valuation Range, depending upon
financial, market and regulatory conditions at the time of the completion of
the offering. See "THE CONVERSION - Pricing and Number of Common Shares to be
Sold." The expenses are estimated assuming that (a) all of the indicated
number of Common Shares are sold in the Subscription Offering; (b) the
directors, officers and their associates purchase 200,500 shares; (c) the ESOP
purchases 8% of the Common Shares sold; and (d) 60% of the Common Shares are
sold to residents of Boone County or Kenton County, Kentucky, 20% of the Common
Shares are sold to residents of counties contiguous to either Boone County or
Kenton County, Kentucky, and 20% of the Common Shares are sold to persons not
residents of Boone County or Kenton County, Kentucky, or any county contiguous
to either of such counties. Actual expenses may be more or less than
estimated. See "THE CONVERSION - Plan of Distribution."
CFKY will retain 50% of the net proceeds from the sale of the Common
Shares, or $9,771,000 at the mid-point of the Valuation Range, including the
value of a promissory note from the ESOP, which CFKY intends to accept in
exchange for the issuance of Common Shares to the ESOP. Such proceeds will be
used to fund the RRP and, initially, will be invested in short-term and
intermediate-term government securities. The remainder of the net proceeds
received from the sale of the Common
18
Shares, $9,771,000 at the mid-point of the Valuation Range, will be invested by
CFKY in the capital stock to be issued by Columbia Federal to CFKY as a result
of the Conversion. Such investment will increase the regulatory capital of
Columbia Federal and will permit Columbia Federal to expand its lending and
investment activities and to enhance customer services. Enhanced customer
services may include the origination of additional types of loans, including
commercial loans and additional types of consumer loans, such as home equity
loans.
Columbia Federal anticipates that such net proceeds initially will be
invested in mortgage-backed securities. Eventually, however, Columbia Federal
will attempt to use the net proceeds to originate loans. Such use will be
consistent with Columbia Federal's effort to increase its income. See "RISK
FACTORS - Low Return on Assets and Low Return on Equity" in the Prospectus.
Although CFKY and Columbia Federal could use the increase in capital to
acquire other financial institutions or for CFKY to repurchase its own
outstanding shares, CFKY and Columbia Federal have no current plans or
agreements, written or oral, and are not negotiating, to acquire any other
institution and have no current plans for CFKY to repurchase any of its shares.
MARKET FOR COMMON SHARES
There is presently no market for the Common Shares. The aggregate
offering price for the Common Shares is based upon an independent appraisal of
Columbia Federal. The appraisal is not a recommendation as to the advisability
of purchasing Common Shares. See "THE CONVERSION - Pricing and Number of
Common Shares to be Sold." No assurance can be given that persons purchasing
Common Shares will thereafter be able to sell such shares at a price at or
above the offering price.
CFKY has received approval to have the Common Shares quoted on the Nasdaq
National Market System under the symbol ["CFKY"] upon the closing of the
Conversion, subject to certain conditions which CFKY and Columbia Federal
believe will be satisfied, although no assurance can be provided that the
conditions will be met. In connection with such approval, Webb has informed
Columbia Federal that Keefe, Bruyette & Woods, Inc., intends to make a market
in the Common Shares, although it is under no obligation to do so. No
assurance can be given, however, that an active or liquid market for the Common
Shares will develop after the completion of the Conversion or, if such a market
does develop, that such market will continue. Investors should consider,
therefore, the potentially illiquid and long-term nature of an investment in
the Common Shares. See "RISK FACTORS - Limited Market for the Common Shares"
in the Prospectus.
DIVIDEND POLICY
The declaration and payment of dividends by CFKY will be subject to the
discretion of the Board of Directors of CFKY and will be based on the earnings
and financial condition of CFKY and general economic conditions. If the Board
of Directors of CFKY determines in the exercise of its discretion that the net
income, capital, and consolidated financial condition of CFKY and the general
economy justify the declaration and payment of dividends by CFKY, the Board of
Directors of CFKY may authorize the payment of dividends on the Common Shares,
subject to the limitation under Ohio law that a corporation may pay dividends
only out of surplus. There can be no assurance that dividends will be declared
and paid on the Common Shares or, if declared and paid, that such dividends
will continue to be paid in the future. In addition, pursuant to a requirement
of the OTS, CFKY will not take any action that would further the payment of a
tax-free return of capital to its shareholders during the first year following
the completion of the Conversion.
Other than earnings on the investment of the proceeds retained by CFKY,
the only source of income of CFKY will be dividends periodically declared and
paid by the Board of Directors of Columbia Federal on the common stock of
Columbia Federal held by CFKY. The declaration and payment of dividends by
Columbia Federal to CFKY will be subject to the discretion of the Board of
Directors of Columbia Federal, to the earnings and financial condition of
Columbia Federal, to general economic conditions and to federal restrictions on
the payment of dividends by thrift institutions. Under regulations of the OTS
applicable to converted associations, Columbia Federal will not be permitted to
pay a cash dividend on its capital stock after the Conversion if its regulatory
capital would, as a result of the payment of such dividend, be reduced below
the amount required for the Liquidation Account or the applicable regulatory
capital requirement prescribed by the OTS. See "THE CONVERSION - Principal
Effects of the Conversion -- Liquidation Account" and "MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Liquidity and
Capital Resources" in the Prospectus. Columbia Federal may not pay a dividend
unless such dividend also complies with a regulation of the OTS limiting capital
distributions by savings associations. Capital distributions, for purposes of
such regulation, include, without limitation, payments
19
of cash dividends, repurchases and certain other acquisitions by an association
of its shares and payments to stockholders of another association in an
acquisition of such other association. See "REGULATION - Office of Thrift
Supervision -- Limitations on Capital Distributions" in the Prospectus.
CAPITALIZATION
Set forth below is the capitalization of Columbia Federal as of September
30, 1997, and the consolidated pro forma capitalization of CFKY, as adjusted
to give effect to the sale of Common Shares based on the Valuation Range and
estimated expenses. A change in the number of Common Shares sold in the
Conversion would materially affect such pro forma capitalization. See "USE OF
PROCEEDS" and "THE CONVERSION - Pricing and Number of Common Shares to be
Sold."
Pro forma capitalization of CFKY
at September 30, 1997, assuming the sale of:
---------------------------------------------------------------
1,717,000 2,020,000 2,323,000 2,671,450
Historical Common Common Common Common
capitalization Shares Shares Shares Shares
of Columbia Federal (Offering (Offering (Offering (Offering
at September 30, price of price of price of price of
1997 $10 per share) $10 per share) $10 per share) $10 per share)
------------------- -------------- -------------- -------------- --------------
(In thousands)
Deposits(1) $90,195 $90,195 $90,195 $90,195 $90,195
Borrowings - - - - -
Capital and retained earnings:
Preferred Shares, no par value per
share: authorized - 1,000,000
shares, assumed outstanding - none - - - - -
Common Shares, no par value per
share: authorized - 6,000,000
shares; assumed outstanding - as
shown (2) - - - - -
Additional paid-in capital - 16,550 19,542 22,535 25,978
Less Common Shares acquired by the
ESOP (3) - (1,374) (1,616) (1,858) (2,137)
Less Common Shares acquired by the
RRP (4) - (687) (808) (929) (1,069)
Retained earnings, net, substantially
restricted (5) 13,090 13,090 13,090 13,090 13,090
Unrealized gain on securities
available for sale, net 1 1 1 1 1
------- ------- ------- ------- -------
Total capital and retained earnings $13,091 $27,580 $30,209 $32,839 $35,863
======= ======= ======= ======= =======
____________
(1) No effect has been given to withdrawals from savings accounts for the
purpose of purchasing Common Shares in the Conversion. Any such
withdrawals will reduce pro forma deposits by the amount of such
withdrawals.
(2) The number of Common Shares to be issued will be determined on the basis
of the final valuation of Columbia Federal. See "THE CONVERSION - Pricing
and Number of Common Shares to be Sold." Common Shares assumed
outstanding does not reflect the issuance of any Common Shares that may be
reserved for issuance under the Stock Option Plan. See "MANAGEMENT OF
COLUMBIA FEDERAL - Stock Benefit Plans -- Stock Option Plan" in the
Prospectus. Reflects receipt of the proceeds from the sale of the Common
Shares, net of estimated expenses. Estimated expenses include estimated
sales commissions payable to Webb. Such sales commissions have been
computed based on the following assumptions: (i) 200,500 Common Shares
sold in the Offering will be purchased by directors, officers and
employees of Columbia Federal and the members of their immediate families;
(ii) 8% of the Common Shares sold in the Offering will be purchased by the
ESOP; and (iii) the remaining 1,657,900 Common Shares sold in connection
with the Conversion will be purchased in the Subscription Offering with
sales commissions of 1.50%, 1.25% and 0.75% on 60%, 20% and 20%,
respectively, of the aggregate dollar amount paid for such Common Shares.
(3) Assumes that 8% of the Common Shares sold in connection with the
Conversion will be acquired by the ESOP with funds borrowed by the ESOP
from CFKY for a term of 11 years at a rate of 9.5%. The ESOP loan will be
secured solely by the Common Shares purchased by the ESOP. Columbia
Federal has agreed, however, to use its best efforts to fund the ESOP
based on future earnings, which best efforts funding will reduce Columbia
Federal's total capital and retained earnings, as reflected in the table.
If the ESOP is unable to purchase all or part of the Common Shares for
which it subscribes, the ESOP may purchase Common Shares on the open
market or may purchase authorized but unissued shares of CFKY. If the
ESOP purchases authorized but unissued shares from CFKY, such purchases
would have a dilutive effect of approximately 7.41% on the voting
interests of CFKY's shareholders. See "MANAGEMENT OF COLUMBIA FEDERAL -
Employee Stock Ownership Plan" and "RISK FACTORS - Dilutive Effect and
Negative Effect on Earnings of Purchases by the ESOP and the RRP" in the
Prospectus.
(4) Assumes that 4% of the Common Shares will be acquired in the open market
by the RRP after the Conversion at a price of $10.00 per share. There can
be no assurance that the RRP will be implemented, that a sufficient number
of shares will be available for purchase by the RRP or that shares could
be purchased at a price of $10.00. A higher price per share, assuming the
purchase of the entire 4% of the shares, would reduce pro forma
shareholders' equity. The RRP may purchase shares in the open market or
may purchase authorized but unissued shares from CFKY. If authorized
20
but unissued shares are purchased, the voting interests of existing
shareholders would be diluted approximately 3.85%. See "MANAGEMENT OF
COLUMBIA FEDERAL - Recognition and Retention Plan and Trust" in the
Prospectus.
(5) Retained earnings include restricted and unrestricted retained earnings
and unrealized gain on securities designated as available for sale. See
"THE CONVERSION - Principal Effects of the Conversion -- Liquidation
Account" for information concerning the liquidation account to be
established in connection with the Conversion and "TAXATION - Federal
Taxation" in the Prospectus for information concerning restricted retained
earnings for federal tax purposes.
PRO FORMA DATA
Set forth below are the pro forma consolidated net earnings of CFKY for
the year ended September 30, 1997, and the pro forma shareholders' equity of
CFKY at such dates, along with the related pro forma per share amounts, giving
effect to the sale of the Common Shares in connection with the Conversion. The
computations are based on the assumed issuance of 1,717,000 Common Shares
(minimum point of the Valuation Range), 2,020,000 Common Shares (mid-point of
the Valuation Range), 2,323,000 Common Shares (maximum point of the Valuation
Range) and 2,671,450 Common Shares (15% above the maximum point of the
Valuation Range). See "THE CONVERSION - Pricing and Number of Common Shares to
be Sold." The pro forma data is based on the following assumptions: (i) the
sale of the Common Shares occurred at the beginning of the periods and yielded
the net proceeds indicated; (ii) such net proceeds were invested by CFKY and
Columbia Federal at the beginning of the specified period at 5.35%; (iii) no
withdrawals from existing deposit accounts were made to purchase the Common
Shares; (iv) CFKY will accept a promissory note from the ESOP in exchange for
the issuance of Common Shares; and (v) a portion of the cash proceeds retained
by CFKY will be used to fund the RRP and, pending such investment, be invested
in short-term and intermediate-term government securities. The assumed return
is based upon the yield for one year United States Treasury bills at November
28, 1997, because management intends to invest the initial cash proceeds in
government securities and mortgage-backed securities. In calculating pro forma
net earnings, a statutory federal income tax rate of 34% has been assumed for
the period, resulting in an after tax yield of 3.53%. In the opinion of
management, the assumed after-tax yield does not differ materially from the
estimated after-tax yield which will be obtained on the initial investment of
the cash proceeds in government securities and mortgage-backed securities and
is viewed as being more relevant in the current low interest rate environment
than the use of an arithmetic average of the fiscal year 1997 weighted average
yield on interest-earning assets and weighted average rates paid on deposits
during such period. Management also believes that utilization of savings
withdrawals to fund stock purchases would not have a material impact on the pro
forma data presented.
NO ASSURANCE CAN BE PROVIDED THAT THE YIELDS OR RESULTS SET FORTH IN THE
PRO FORMA DATA WILL BE ACHIEVED ON INVESTMENT OF THE CONVERSION PROCEEDS.
MOREOVER, THE PRO FORMA NET EARNINGS AMOUNTS DERIVED FROM THE ASSUMPTIONS SET
FORTH HEREIN SHOULD NOT BE CONSIDERED INDICATIVE OF THE ACTUAL RESULTS OF
OPERATIONS OF CFKY THAT WOULD HAVE BEEN ATTAINED FOR ANY PERIOD IF THE
CONVERSION HAD BEEN ACTUALLY CONSUMMATED AT THE BEGINNING OF SUCH PERIOD.
FURTHER, THE RATIO OF SHARE OFFERING PRICE TO THE PRO FORMA BOOK VALUE IS NOT
REPRESENTATIVE OF ANY POTENTIAL PRICE APPRECIATION ON THE COMMON SHARES. NO
EFFECT HAS BEEN GIVEN IN THE PRO FORMA SHAREHOLDERS' EQUITY FOR ANY ASSUMED
EARNINGS ON THE NET PROCEEDS OF THE CONVERSION.
21
At and for the year ended September 30, 1997, assuming the sale of:
--------------------------------------------------------------------------------
1,717,000 2,020,000 2,323,000 2,671,450
Common Shares Common Shares Common Shares Common Shares
(Offering price of (Offering price of (Offering price of (Offering price of
$10.00 per share) $10.00 per share) $10.00 per share) $10.00 per share)
------------------ ------------------ ------------------ ------------------
(Dollars in thousands, except per share amounts)
Gross proceeds $17,170 $20,200 $23,230 $26,715
Estimated expenses 620 658 695 737
------- ------- ------- -------
Estimated net proceeds $16,550 $19,542 $22,535 $25,978
------- ------- ------- -------
Less Common Shares acquired by the RRP (1) (687) (808) (929) (1,069)
Less Common Shares acquired by the ESOP (2) (1,374) (1,616) (1,858) (2,137)
------- ------- ------- -------
Net cash proceeds $14,489 $17,118 $19,748 $22,772
======= ======= ======= =======
Net earnings:
Historical $ 553 $ 553 $ 553 $ 553
Pro forma income on net proceeds 512 604 697 804
Pro forma adjustment for the RRP (1) (91) (107) (123) (141)
Pro forma adjustment for the ESOP (2) (82) (97) (111) (128)
------- ------- ------- -------
Pro forma net earnings $ 892 $ 953 $ 1,016 $ 1,088
======= ======= ======= =======
Earnings per share:
Historical $ 0.35 $ 0.30 $ 0.26 $ 0.22
Pro forma income on net proceeds 0.32 0.32 0.32 0.33
Pro forma adjustment for the RRP (1) (0.05) (0.05) (0.05) (0.05)
Pro forma adjustment for the ESOP (2) (0.06) (0.06) (0.06) (0.06)
------- ------- ------- -------
Pro forma earnings per share (3)(4) $ 0.56 $ 0.51 $ 0.47 $ 0.44
======= ======= ======= =======
Offering price as a multiple of pro forma earnings
per share 17.76 19.53 21.31 22.65
Shareholders' equity: (5)
Historical $13,091 $13,091 $13,091 $13,091
Estimated net proceeds from the sale of
Common Shares 16,550 19,542 22,535 25,978
Less unearned RRP shares (1) (687) (808) (929) (1,069)
Less unearned ESOP shares (2) (1,374) (1,616) (1,858) (2,137)
------- ------- ------- -------
Pro forma shareholders' equity $27,580 $30,209 $32,839 $35,863
======= ======= ======= =======
Per share shareholders' equity:
Historical $ 7.62 $ 6.48 $ 5.64 $ 4.90
Estimated net proceeds 9.64 9.67 9.70 9.72
Less unearned RRP shares (1) (0.40) (0.40) (0.40) (0.40)
Less unearned ESOP shares (2) (0.80) (0.80) (0.80) (0.80)
------- ------- ------- -------
Pro forma shareholders' equity per share (3) $ 16.06 $ 14.95 $ 14.14 $ 13.42
======= ======= ======= =======
Ratio of offering price to pro forma shareholders'
equity per share 62.27% 66.89% 70.72% 74.52%
____________
(Footnotes on next page)
22
(1) Assumes that 4% of the Common Shares sold in connection with the
Conversion will be purchased by the RRP after the Conversion at a price of
$10.00 per share and that one-fifth of the purchase price of the RRP
shares will be expensed in each of the first five years after the
Conversion. If the RRP is implemented in the first year after the
completion of the Conversion, it will be subject to various OTS
requirements, including the requirement that the RRP be approved by the
shareholders of CFKY. There can be no assurance that the RRP will be
approved by the shareholders, that a sufficient number of shares will be
available for purchase by the RRP or that the shares could be purchased at
$10.00 per share. A higher per share price, assuming the purchase of the
entire 4% of the shares, would reduce pro forma net earnings and pro forma
shareholders' equity. If an insufficient number of shares is available in
the open market to fund the RRP at the desired level, CFKY may issue
additional authorized shares. The issuance of authorized but unissued
shares in an amount equal to 4% of the Common Shares issued in the
Conversion would result in a 3.85% dilution in existing shareholders'
voting interests. See "MANAGEMENT OF COLUMBIA FEDERAL- Recognition and
Retention Plan and Trust" in the Prospectus.
(2) Assumes that 8% of the Common Shares sold in connection with the
Conversion will be purchased by the ESOP and that the funds used to
acquire such shares will be borrowed by the ESOP from CFKY with repayment
thereof secured solely by the Common Shares purchased by the ESOP.
Columbia Federal has agreed, however, to use its best efforts to fund the
ESOP based on future earnings, which best efforts funding will reduce the
income on the equity raised in connection with the Conversion, as
reflected in the table. Assumes the level amortization of the ESOP loan
over an eleven-year period with assumed tax benefits of 34%. See
"MANAGEMENT OF COLUMBIA FEDERAL - Employee Stock Ownership Plan" in the
Prospectus. The Board of Directors may elect to issue the ESOP shares
from authorized but unissued shares. The issuance of authorized but
unissued shares to the ESOP would have the effect of diluting the voting
interest of existing shareholders by 7.41%.
(3) No effect has been given to shares reserved for issuance upon the
exercise of options pursuant to the Stock Option Plan. See "MANAGEMENT OF
COLUMBIA FEDERAL - Stock Option Plan" in the Prospectus.
(4) In accordance with SOP 93-6 of the American Institute of Certified Public
Accountants ("SOP 93-6"), which requires that only those ESOP shares that
are committed to be released to the accounts of recipients be counted as
outstanding shares, per share amounts are based upon a number of shares
outstanding of 1,583,761, 1,863,248, 2,142,735, 2,464,145 at the minimum,
mid-point, maximum and 15% above the maximum of the Valuation Range,
respectively. The table reflects the ESOP cost at the $10.00 per share
offering price of the Common Shares in the Conversion, which may be more
or less than the fair value at which the shares are ultimately allocated.
(5) The effect of the Liquidation Account is not included in these
computations. For additional information concerning the Liquidation
Account, see "THE CONVERSION - Principal Effects of the Conversion --
Liquidation Account." The amounts shown do not reflect the federal income
tax consequences of the potential restoration of the bad debt reserves to
income for tax purposes, which would be required in the event of
liquidation. See "TAXATION - Federal Taxation" in the Prospectus.
23
SELECTED CONSOLIDATED FINANCIAL INFORMATION AND OTHER DATA
The following tables set forth certain information concerning the
consolidated financial condition, earnings and other data regarding Columbia
Federal at the dates and for the periods indicated. The financial information
should be read in conjunction with the consolidated financial statements and
notes thereto included elsewhere herein.
SELECTED FINANCIAL CONDITION AND OTHER DATA:
At September 30,
----------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(Dollars in thousands)
Total amount of:
Assets $104,006 $108,098 $108,376 $106,099 $107,739
Cash and amounts due from banks 612 549 543 568 612
Interest-bearing deposits in banks 6,215 2,498 6,304 2,202 6,621
Investment securities held to maturity 13,069 13,995 2,493 13,495 12,428
Investment securities available for sale 1,003 1,002 988 - -
Mortgage-backed securities 17,862 18,751 16,800 16,744 18,264
Loans receivable, net 61,578 67,741 68,270 70,288 67,026
FHLB stock, at cost 1,260 1,174 1,095 1,026 974
Deposits 90,195 94,657 95,806 93,807 97,278
Retained earnings - substantially
restricted 13,090 12,537 12,149 11,333 10,068
Number of offices (1) 5 5 5 5 5
At September 30,
-------------------------------------------------------
SUMMARY OF EARNINGS: 1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(In thousands)
Interest income $7,996 $8,198 $7,943 $7,939 $8,355
Interest expense 4,451 4,578 4,446 3,853 4,370
------ ------ ------ ------ ------
Net interest income 3,545 3,620 3,497 4,086 3,985
Provision for losses on loans 113 8 13 34 47
------ ------ ------ ------ ------
Net interest income after provision for
losses on loans 3,432 3,612 3,484 4,052 3,938
Non-interest income 88 96 92 108 174
Non-interest expense 2,667 3,120(2) 2,371 2,272 2,190
------ ------ ------ ------ ------
Income before federal income tax expense 853 588 1,205 1,888 1,922
Federal income tax expense 300 200 389 623 593
------ ------ ------ ------ ------
Net income $ 553 $ 388 $ 816 $1,265 $1,329
====== ====== ====== ====== ======
___________
(Footnotes on next page)
24
At or for the year ended September 30,
----------------------------------------------
SELECTED FINANCIAL RATIOS: 1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Performance ratios:
Return on average assets (3) 0.53% 0.36% 0.77% 1.17% 1.23%
Return on average equity (4) 4.30 3.10 6.92 11.78 14.12
Interest rate spread (5) 2.97 2.94 2.93 3.53 3.45
Net interest margin (6) 3.46 3.41 3.38 3.87 3.76
Non-interest expense to average total assets 2.53 2.87 2.24 2.15 2.07
Capital ratios:
Average equity to average assets 12.22 11.50 11.15 9.96 8.70
Equity to assets at end of period 12.59 11.60 11.21 10.68 9.34
Asset quality ratios and other data:
Nonperforming loans to total net loans at end
of period 0.98 0.26 - 0.71 0.39
Nonperforming assets to total assets at end of
period 0.58 0.16 0.03 0.56 0.46
Allowance for losses on loans to total net loans
at end of period 0.49 0.28 0.28 0.27 0.28
Allowance for losses on loans to nonperforming
loans at end of period 49.92 106.78 - 38.03 72.97
Net charge-offs to average loans - 0.01 0.02 0.05 0.07
____________
(1) All offices are full-service except that loan applications are accepted
only at the main office.
(2) Includes a non-recurring pre-tax expense of $592,000 for a special
one-time assessment to recapitalize the SAIF. See "REGULATION - FDIC
Regulations -- Deposit Insurance" in the Prospectus.
(3) Net income divided by average total assets.
(4) Net income divided by average total equity.
(5) Average yield on interest-earning assets less average cost of
interest-bearing liabilities.
(6) Net interest income as a percentage of average interest-earning assets.
LEGAL PROCEEDINGS
Columbia Federal is not presently involved in any legal proceedings of a
material nature. From time to time, Columbia Federal is a party to legal
proceedings incidental to its business to enforce its security interest in
collateral pledged to secure loans made by Columbia Federal.
MANAGEMENT OF CFKY
The Board of Directors of CFKY consists of seven members divided into two
classes. Each of the directors of CFKY is also a director of Columbia Federal.
The terms of Messrs. Mistler and Tobergte and Ms. Zembrodt expire in 1999, and
the terms of Messrs. Bluemlein, Kelly, Layne and Lynch expire in 2000.
25
The following persons are officers of CFKY: Kenneth R. Kelly, Chairman of
the Board; Robert V. Lynch, President; Carol S. Margrave, Secretary; Edward
Schwartz, Vice President; and Abijah Adams, Treasurer. After the consummation
of the Conversion, CFKY intends to have quarterly meetings of the Board of
Directors. CFKY does not currently pay directors' fees.
MANAGEMENT OF COLUMBIA FEDERAL
DIRECTORS AND EXECUTIVE OFFICERS
The Charter of Columbia Federal provides for a Board of Directors
consisting of not less than five nor more than 15 directors, such number to be
fixed or changed in the Bylaws or by the members. The Board of Directors
currently consists of seven directors divided into three classes. One class of
directors is elected each year. Each director serves for a three-year term.
The Board of Directors met 13 times during the fiscal year ended September 30,
1997, for regular and special meetings. No director attended fewer than 75% of
the aggregate of such meetings and all meetings of the committees of which such
director was a member.
The following table presents certain information with respect to the
present directors and executive officers of Columbia Federal:
Date of Term
Name Age(1) Position with Columbia Federal service expires
- ---- ------ ------------------------------- ------- --------
J. Robert Bluemlein 79 Director 1970 1999
Kenneth R. Kelly 76 Director, Chairman of the Board 1965 2000
John C. Layne 48 Director 1995 1998
Robert V. Lynch 52 Director, President, CEO 1971 1999
Daniel T. Mistler 55 Director 1997 2000
Fred A. Tobergte, Sr. 79 Director 1981 1999
Geraldine Zembrodt 53 Director 1993 1998
Mary Jane Lucas 61 Senior Vice President 1971 -
George Raybourne 44 Vice President 1972 -
Edward Schwartz 48 Vice President 1972 -
Harold E. Taylor 56 Vice President 1996
Abijah Adams 52 Controller 1978 -
Carol S. Margrave 42 Secretary, Treasurer 1979 -
____________
(1) At September 30, 1997.
Mr. Bluemlein retired in 1983 after serving as Vice President of Columbia
Federal from 1970 to 1983. Prior to becoming Vice President and Director of
Columbia Federal, Mr. Bluemlein was Executive Vice President of Star Federal
Savings and Loan Association.
Mr. Kelly has been Chairman of the Board of Columbia Federal since 1983.
He has served as President and co-owner of Kelly Brothers Lumber Co., a lumber
and building supply store in Covington, Kentucky, since its founding in 1947.
Mr. Layne has been a partner in Rafalske & Layne, LLP, Certified Public
Accountants, which has its offices in Cincinnati, Ohio, since 1982.
26
Mr. Lynch has been employed by Columbia Federal since 1971, served as
Treasurer from 1974 to 1977, has served as President and Chief Executive
Officer since 1977 and has been a director since 1978.
Mr. Mistler is an attorney who joined Deters, Benzinger & LaVelle, PSC, a
law firm located in Covington, Kentucky, in 1984 and now serves on its Board of
Directors and manages its residential real estate department.
27
Mr. Tobergte served the Kentucky Department of Transportation for twenty
years, where he held various positions, including that of Enforcement Officer,
prior to his retirement in 1981.
Ms. Zembrodt has co-owned and operated The Village Gallerie, an art and
framing gallery located in Ft. Wright, Kentucky, since May 1995. Ms. Zembrodt
previously co-owned and operated The Sample Shop, a gift shop then located in
Ft. Wright, Kentucky, from 1982 to May 1994.
Ms. Lucas has served Columbia Federal since 1971, having served as
Secretary and Treasurer from 1979 until 1993, when she became Vice President.
Ms. Lucas became Columbia Federal's Senior Vice President in 1994 and heads
Columbia Federal's Loan Department.
Mr. Raybourne has been employed by Columbia Federal since 1972, serving as
Assistant Vice President from 1979 to 1993, when he became Vice President. Mr.
Raybourne is responsible for property appraisals, which he performs, and
property management.
Mr. Schwartz has been employed by Columbia Federal since 1972, serving as
Assistant Vice President until 1994, when he became Vice President. Mr.
Schwartz is responsible for IRA's and mortgage servicing.
Mr. Taylor joined Columbia Federal in July 1996 as Vice President in
charge of lending. Prior to joining Columbia Federal, Mr. Taylor was employed
by Lexington Federal Savings Bank in Lexington, Kentucky, serving as its Vice
President and Loan Department Manager since 1991.
Mr. Adams joined Columbia Federal as Accountant in 1978 and became
Controller in 1987.
Ms. Margrave has been employed by Columbia Federal since 1979, serving as
Branch Manager from 1983 to 1992 and Assistant Secretary from 1992 to 1993,
when she became Secretary and Treasurer.
DESCRIPTION OF AUTHORIZED SHARES
GENERAL
The Articles of Incorporation of CFKY authorize the issuance of six
million common shares and one million preferred shares. The common shares and
the preferred shares authorized by CFKY's Articles of Incorporation have no par
value. Upon receipt by CFKY of the purchase price therefor and subsequent
issuance thereof, each Common Share will be fully paid and nonassessable. The
Common Shares of CFKY will represent nonwithdrawable capital and will not and
cannot be insured by the FDIC. Each Common Share will have the same relative
rights and will be identical in all respects to every other Common Share.
None of the preferred shares of CFKY will be issued in connection with the
Conversion. The Board of Directors of CFKY is authorized, without shareholder
approval, to issue preferred shares and to fix and state the designations,
preferences or other special rights of such shares and the qualifications,
limitations and restrictions thereof. The preferred shares may rank prior to
the common shares as to dividend rights, liquidation preferences or both. Each
holder of preferred shares will be entitled to one vote for each preferred
share held of record on all matters submitted to a vote of shareholders. The
issuance of preferred shares and any conversion rights which may be specified
by the Board of Directors for the preferred shares could adversely affect the
voting power of holders of the common shares. The Board of Directors has no
present intention to issue any of the preferred shares.
The following is a summary description of the rights of the common shares
of CFKY, including the material express terms of such shares as set forth in
CFKY's Articles of Incorporation.
LIQUIDATION RIGHTS
In the event of the complete liquidation or dissolution of CFKY, the
holders of the Common Shares will be entitled to receive all assets of CFKY
available for distribution, in cash or in kind, after payment or provision for
payment of (i) all debts and liabilities of CFKY, (ii) any accrued dividend
claims, and (iii) any interests in the Liquidation Account.
28
VOTING RIGHTS
The holders of the Common Shares will possess exclusive voting rights in
CFKY, unless preferred shares are issued. Each holder of Common Shares will be
entitled to one vote for each share held of record on all matters submitted to
a vote of holders of common shares.
Section 1701.55 of the Ohio Revised Code provides in substance and effect
that shareholders of a for profit corporation which is not a savings bank and
which is incorporated under Ohio law must initially be granted the right to
cumulate votes in the election of directors. Section 1701.69 of the Ohio
Revised Code provides that an Ohio corporation may eliminate cumulative voting
in the election of directors after the expiration of 90 days after the date of
initial incorporation by filing with the Ohio Secretary of State an amendment
to the articles of incorporation eliminating cumulative voting. The Articles
of Incorporation of CFKY have been amended to eliminate cumulative voting. See
"RESTRICTIONS ON ACQUISITION OF COLUMBIA FEDERAL AND CFKY AND RELATED
ANTI-TAKEOVER PROVISIONS - Articles of Incorporation of CFKY -- Elimination of
Cumulative Voting" in the Prospectus.
DIVIDENDS
The holders of the Common Shares will be entitled to the payment of
dividends when, as and if declared by the Board of Directors and paid out of
funds, if any, available under applicable laws and regulations for the payment
of dividends. The payment of dividends is subject to federal and state
statutory and regulatory restrictions. See "DIVIDEND POLICY" and "TAXATION -
Federal Taxation" in the Prospectus for a description of restrictions on the
payment of cash dividends.
PREEMPTIVE RIGHTS
After the consummation of the Conversion, no shareholder of CFKY will
have, as a matter of right, the preemptive right to purchase or subscribe for
shares of any class, now or hereafter authorized, or to purchase or subscribe
for securities or other obligations convertible into or exchangeable for such
shares or which by warrants or otherwise entitle the holders thereof to
subscribe for or purchase any such share.
RESTRICTIONS ON ALIENABILITY
See "THE CONVERSION - Restrictions on Repurchase of Common Shares" for a
description of the limitations on the repurchase of stock by CFKY; "THE
CONVERSION - Restrictions on Transferability of Common Shares by Directors and
Officers" for a description of certain restrictions on the transferability of
Common Shares purchased by officers and directors; and "RESTRICTIONS ON
ACQUISITION OF COLUMBIA FEDERAL AND CFKY AND RELATED ANTI-TAKEOVER PROVISIONS"
in the Prospectus for information regarding regulatory restrictions on
acquiring Common Shares.
REGISTRATION REQUIREMENTS
CFKY will register its common shares with the SEC pursuant to Section
12(g) of the Exchange Act prior to or promptly upon completion of the
Conversion and will not deregister such shares for a period of three years
following the completion of the Conversion. Upon such registration, the proxy
and tender offer rules, insider trading restrictions, annual and periodic
reporting and other requirements of the Exchange Act will apply.
LEGAL MATTERS
Certain legal matters pertaining to the Common Shares and the federal tax
consequences of the Conversion will be passed upon for Columbia Federal by
Vorys, Sater, Seymour and Pease, 221 E. Fourth Street, Cincinnati, Ohio 45202.
Kentucky tax consequences of the Conversion will be passed upon for Columbia
Federal by VonLehman & Company Inc., certified public accountants. Certain
legal matters will be passed upon for Webb by its counsel, Breyer & Aguggia,
Suite 470 East, 1300 I Street, N.W., Washington, DC 20005.
29
EXPERTS
The financial statements of Columbia Federal for the years ended September
30, 1997, 1996 and 1995, included in this Prospectus have been audited by
VonLehman & Company Inc., certified public accountants, as stated in their
report appearing herein and have been so included in reliance upon such report
given upon the authority of that firm as experts in accounting and auditing.
Keller has consented to the publication herein of the summary of its
letter to Columbia Federal setting forth its opinion as to the estimated pro
forma market value of Columbia Federal as converted and to the use of its name
and statements with respect to it appearing herein.
ADDITIONAL INFORMATION
CFKY has filed with the SEC a Registration Statement on Form S-1 (File No.
________) under the Securities Act with respect to the Common Shares offered
hereby. This Prospectus does not contain all of the information set forth in
the Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the SEC. Such information may be inspected
at the public reference facilities maintained by the SEC at 450 Fifth Street,
N.W., Washington, DC 20549, and copies may be obtained from the SEC at
prescribed rates. The SEC maintains a World Wide Web site (http://www.sec.gov)
that contains reports, proxy and information statements and other information
regarding registrants that file with the SEC, including CFKY.
Columbia Federal has filed an Application for Approval of Conversion (the
"Application") with the OTS. This document omits certain information contained
in the Application. The Application, the exhibits and the financial statements
that are part thereof may be inspected at the offices of the OTS, 1700 G
Street, N.W., Washington, DC 20552, and the Central Regional Office, 200 W.
Madison Street, Suite 1300, Chicago, Illinois 60606.
30
EXHIBIT A
COLUMBIA FEDERAL SAVINGS BANK
AMENDED PLAN OF CONVERSION
Table of Contents
Introduction........................................................ 6
Definitions......................................................... 6
Procedures for the Conversion....................................... 9
Purchase Price of Common Shares and Number of Common Shares
to be Offered in Connection with the Conversion.................... 10
Subscription Rights of Eligible Account Holders..................... 11
Subscription Rights of Tax-Qualified Employee Stock
Benefit Plans...................................................... 12
Subscription Rights of Supplemental Eligible Account Holders........ 12
Subscription Rights of Other Eligible Members....................... 12
Community Offering.................................................. 13
Additional Limitations on Purchases................................. 13
Procedures for the Subscription Offering and the
Community Offering................................................. 14
Payment for Common Shares........................................... 15
Expiration of Subscription Rights; Undelivered, Defective or
Late Order Forms; Insufficient Payment............................. 16
Compliance with Securities Laws..................................... 17
Rights of Shareholders After Completion of Conversion............... 17
Establishment of Liquidation Account................................ 17
Accounts in Converted Association................................... 18
Restrictions on Purchases and Sales of Common Shares by
Officers and Directors Following Conversion........................ 18
Restrictions on Acquisition of Columbia Federal or
the Holding Company................................................ 19
Amendment or Termination of this Plan............................... 19
Consummation of Conversion.......................................... 19
Tax Rulings/Opinions................................................ 20
Directors and Officers of Columbia Federal.......................... 20
Stock Benefit Plans................................................. 20
Registration of Common Shares; Market for Common Shares............. 20
Expenses of Conversion.............................................. 20
Mailing of Proxy Materials.......................................... 20
Interpretation of the Plan.......................................... 21
31
COLUMBIA FEDERAL SAVINGS BANK
AMENDED PLAN OF CONVERSION
1. INTRODUCTION.
The Board of Directors of Columbia Federal Savings Bank (hereinafter
referred to as "Columbia Federal") adopted a Plan of Conversion on October 9,
1997. On December 11, 1997, the Board of Directors approved certain amendments
to the Plan of Conversion, all of which are incorporated into this Amended Plan
of Conversion. This Amended Plan of Conversion is hereinafter referred to as
this "Plan."
This Plan provides for the conversion of Columbia Federal from a mutual
savings and loan association to a permanent capital stock savings association
chartered under the laws of the United States (hereinafter referred to as the
"Conversion") and the acquisition by a holding company to be formed at the
direction of Columbia Federal of all of the capital stock to be issued by
Columbia Federal in the Conversion. The purpose of the Conversion is to
provide Columbia Federal with additional capital to increase its regulatory
capital, expand lending and investment activities, enhance customer services
and pursue other lawful activities which the Board of Directors may deem to be
in the best interests of Columbia Federal.
After the completion of the Conversion, savings accounts in Columbia
Federal will be equivalent in amount, interest rate and other terms to the
present savings accounts in Columbia Federal and will continue to be insured by
the Federal Deposit Insurance Corporation to the maximum amount permitted by
law. Rights of account holders with respect to liquidation and voting will
change, however, as a result of the Conversion. As a permanent capital stock
savings association, Columbia Federal will succeed to all of the presently
existing rights, interests, duties and obligations of the mutual savings and
loan association to the extent provided by law, including, but not limited to,
all rights to and interests in its assets and properties, both real and
personal.
This Plan must be approved at the Special Meeting (hereinafter defined) of
Members (hereinafter defined) by the affirmative vote of a majority of the
total outstanding votes entitled to be cast at the Special Meeting. Before
this Plan may be submitted at the Special Meeting to the members of Columbia
Federal for approval, however, this Plan must be approved by the Office of
Thrift Supervision (hereinafter referred to as the "OTS"). The Amended Charter
and the Amended Bylaws of Columbia Federal must also be approved at the Special
Meeting by the affirmative vote of at least a majority of the total outstanding
votes entitled to be cast in person or by proxy at the Special Meeting.
2. DEFINITIONS.
As used in this Plan, the following terms have the corresponding
meanings:
ACTING IN CONCERT means (a) knowing participation in a joint activity or
interdependent conscious parallel action toward a common goal whether or
not pursuant to an express agreement, or (b) 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.
AFFILIATE, when used to indicate a relationship with a specified Person,
means a Person that directly, or indirectly through one or more
intermediaries, controls or is controlled by, or is under common control
with, the Person specified.
AMENDED BYLAWS means the Federal Bylaws of Columbia Federal in the form
which is attached hereto as Exhibit II and which will be filed with the
OTS on the date on which the Conversion becomes effective.
AMENDED CHARTER means the Federal Stock Charter of Columbia Federal in
the form which is attached hereto as Exhibit I and which will be filed
with the OTS on the date on which the Conversion becomes effective.
APPLICATION means the Application for Conversion on Form AC to be filed
by Columbia Federal with the OTS pursuant to Title 12, Code of Federal
Regulations, Part 563b.
32
ASSOCIATE, when used to indicate a relationship with any Person, means
(i) any corporation or organization (other than Columbia Federal, the
Holding Company or a majority-owned subsidiary of Columbia Federal or the
Holding Company) of which such Person is an 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, except that such term will
not include a Tax-Qualified Employee Stock Benefit Plan, 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
Columbia Federal, the Holding Company or any of their subsidiaries.
BROKER means any Person engaged in the business of effecting transactions
in securities for the account of others.
COMMON SHARES means the common shares of the Holding Company to be
offered and sold by the Holding Company in connection with the
Conversion.
COMMUNITY MEMBER means any natural person who, on the date of submission
of an Order Form, is a Resident of either Boone County or Kenton County,
the counties in which Columbia Federal's offices are located.
COMMUNITY OFFERING means the offering of Common Shares to the public
concurrently with or after the completion of the Subscription Offering in
a manner by which Community Members are given preference.
CONVERSION means the change in the form of Columbia Federal from the
mutual to the permanent capital stock form upon (i) the filing of the
Amended Charter; (ii) the sale and issuance of Common Shares by the
Holding Company in the Subscription Offering and the Community Offering;
and (iii) the purchase by the Holding Company of the capital stock of
Columbia Federal.
DEALER means any Person who engages either for all or part of such
person's time, directly or indirectly, as agent, broker or principal, in
the business of offering, buying, selling or otherwise dealing or trading
in securities issued by another Person.
ELIGIBILITY RECORD DATE means the close of business on September 30,
1996, the record date set by Columbia Federal for determining Eligible
Account Holders.
ELIGIBLE ACCOUNT HOLDER means any person holding a Qualifying Deposit in
Columbia Federal on the Eligibility Record Date.
FDIC means the Federal Deposit Insurance Corporation, an agency of the
United States government.
HOLDING COMPANY means a corporation to be formed at the direction of
Columbia Federal under Ohio law for the purpose of becoming a savings and
loan holding company through the acquisition of all of the capital stock
to be issued by Columbia Federal in connection with the Conversion.
COLUMBIA FEDERAL means Columbia Federal Savings Bank, in its mutual or
stock form, as appropriate.
INDEPENDENT APPRAISER means the firm employed by Columbia Federal to make
the estimated pro forma market valuation of Columbia Federal which will
be used as the basis for determining the price of the Common Shares.
LIQUIDATION ACCOUNT means the account established in accordance with
Section 16 of this Plan for Eligible Account Holders and Supplemental
Eligible Account Holders who continue to maintain a Savings Account at
Columbia Federal after the Conversion.
33
MEMBER means any Person qualifying as a member of Columbia Federal under
its present Charter and Bylaws and any borrower as of December 16, 1995,
who retains membership rights pursuant to Title 12, Code of Federal
Regulations, Section 544.1.
OFFICER means an executive officer of the Holding Company or Columbia
Federal, including the Chairman of the Board of Directors, the President,
a Vice President, the Secretary, the Treasurer or principal financial
officer, the comptroller or principal accounting officer and any other
person performing similar functions for the Holding Company or Columbia
Federal.
ORDER FORMS means the original forms which will be sent to the Eligible
Account Holders, Tax-Qualified Employee Stock Benefit Plans, Supplemental
Eligible Account Holders and Other Eligible Members to enable such
Persons to exercise their respective Subscription Rights in accordance
with this Plan and which may be sent to others in the Community Offering.
OTHER ELIGIBLE MEMBERS means those Persons, other than Eligible Account
Holders and Supplemental Eligible Account Holders, who are eligible to
purchase Common Shares pursuant to this Plan by reason of being a Voting
Member.
OTS means the Office of Thrift Supervision, an agency of the United
States government.
PERSON means an individual, a corporation, a partnership, an association,
a joint-stock company, a trust, any unincorporated organization, or a
government or political subdivision thereof.
PROSPECTUS means the document describing the terms and conditions of the
Subscription Offering and the Community Offering, including a complete
description of the business and affairs of Columbia Federal and the
Holding Company.
PROXY means the form of authorization by which a Person is, or may be
deemed to be, designated to act for a Voting Member in the exercise of
his or her voting rights in the affairs of Columbia Federal.
PROXY MATERIALS means the Notice of Special Meeting, the Proxy Statement
and the form of Proxy used in connection with soliciting Proxies from
Members for use at the Special Meeting.
PURCHASE PRICE means the actual, uniform price per share at which Common
Shares will be sold in the Subscription Offering and may be offered in
the Community Offering. Such price shall be based upon the appraised
estimated pro forma market value of such shares, determined as provided
in Section 4 of this Plan.
QUALIFYING DEPOSIT means the aggregate balance of all Savings Accounts
owned by an Eligible Account Holder or a Supplemental Eligible Account
Holder at the close of business on the Eligibility Record Date or the
Supplemental Eligibility Record Date, respectively; provided, however,
that Savings Accounts with aggregate deposit balances of less than $50
will not constitute a Qualifying Deposit.
RESIDENT means any person who, on the Voting Record Date, maintains a
bona fide residence within Kenton County or Boone County, Kentucky, as
determined in the sole discretion of Columbia Federal and the Holding
Company.
SEC means the Securities and Exchange Commission, an agency of the United
States government.
SAVINGS ACCOUNT has the same meaning as that specified in Title 12, Code
of Federal Regulations, Part 561, as in effect on the date this Plan is
adopted by the Board of Directors of Columbia Federal, and includes
certificates of deposit.
SPECIAL MEETING means the meeting of the Voting Members of Columbia
Federal called for the specific purpose of submitting this Plan to the
Voting Members for approval.
34
SUBSCRIPTION OFFERING means the offering of Common Shares to the holders
of Subscription Rights.
SUBSCRIPTION RIGHTS means the nontransferable rights issued by Columbia
Federal to the Eligible Account Holders, the Tax-Qualified Employee Stock
Benefit Plans, Supplemental Eligible Account Holders and Other Eligible
Members to purchase Common Shares in the Subscription Offering pursuant
to this Plan.
SUPPLEMENTAL ELIGIBILITY RECORD DATE means the record date used for
determining Supplemental Eligible Account Holders. Such date will be the
last day of the calendar quarter preceding the approval by the OTS of the
Application.
SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDER means any person holding a
Qualifying Deposit at the close of business on the Supplemental
Eligibility Record Date, except Officers and directors of Columbia
Federal and the Holding Company and their Associates.
TAX-QUALIFIED EMPLOYEE STOCK BENEFIT PLAN means any defined benefit plan
or defined contribution plan of the Holding Company or Columbia Federal,
such as an employee stock ownership plan, stock bonus plan, profit
sharing plan or other plan which, with its related trust, meets the
requirements to be "qualified" under Section 401 of the Internal Revenue
Code of 1986, as amended.
VOTING MEMBER means any Member of Columbia Federal eligible to vote at
the Special Meeting.
VOTING RECORD DATE means the record date fixed by the Board of Directors
in accordance with applicable OTS regulations and the Charter and Bylaws
of Columbia Federal for determining the eligibility of Members to vote on
this Plan at the Special Meeting.
3. PROCEDURES FOR THE CONVERSION.
The following procedures will be followed to effect the Conversion:
Promptly after the adoption of this Plan by a vote of at least
two-thirds of the members of the Board of Directors of Columbia Federal,
Columbia Federal will publish a notice of the adoption of this Plan in an
English language newspaper having general circulation in each community
in which an office of Columbia Federal is located. Copies of such notice
will also be made available for inspection by Members at each office of
Columbia Federal.
The Holding Company will be incorporated under Ohio law, after which
the Board of Directors of the Holding Company will consent to the Plan by
at least a two-thirds vote.
Columbia Federal will submit this Plan for approval, together with
all other requisite materials, to the OTS in the form of the Application.
After the filing of the Application with the OTS, Columbia Federal
will prominently post in each office of Columbia Federal and publish in
an English language newspaper having general circulation in each
community in which an office of Columbia Federal is located a notice to
the effect that Columbia Federal has filed the Application with the OTS.
After the OTS approves the Application, Columbia Federal will mail
Proxy Materials to each of the Voting Members as of the Voting Record
Date at their last known addresses appearing on the records of Columbia
Federal for the purpose of soliciting the Proxies of Voting Members for
use at the Special Meeting. The approval of this Plan will require the
affirmative vote, cast in person or by Proxy, of a majority of the total
outstanding votes entitled to be cast at the Special Meeting.
35
Subject to the approval of this Plan by the Voting Members at the
Special Meeting, the following will occur:
Common Shares will be offered simultaneously to the Eligible
Account Holders, the Tax-Qualified Employee Stock Benefit Plans, the
Supplemental Eligible Account Holders and the Other Eligible Members
in the respective priorities set forth in Sections 5, 6, 7 and 8 of
this Plan. All sales of Common Shares to Eligible Account Holders,
the Tax-Qualified Employee Stock Benefit Plans, Supplemental Eligible
Account Holders and Other Eligible Members will be completed at the
earliest practicable date following expiration of the Subscription
Rights provided for in this Plan. Notwithstanding anything in this
Plan to the contrary, Columbia Federal, in its sole discretion, may
commence the Subscription Offering concurrently with or at any time
after the mailing to the Voting Members of the Proxy Materials and may
complete the Subscription Offering before the Special Meeting if the
completion of the offer and sale of the Common Shares is conditioned
upon the approval of this Plan by the Voting Members. In the event
that Columbia Federal elects in its discretion to commence the
Subscription Offering after the Special Meeting, the Subscription
Offering will be commenced not later than 45 days after the date on
which the Special Meeting is adjourned, except as may otherwise be
approved by the OTS.
Concurrently with, following the commencement of or following the
completion of the Subscription Offering, Columbia Federal may also
offer Common Shares in the Community Offering, subject to the prior
satisfaction of the Subscription Rights of the Eligible Account
Holders, Tax-Qualified Employee Stock Benefit Plans, Supplemental
Eligible Account Holders and Other Eligible Members.
All other steps considered necessary or desirable by the Board of
Directors of Columbia Federal and the Board of Directors of the Holding
Company will be taken pursuant to applicable laws and regulations to
effect the Conversion.
4. PURCHASE PRICE OF COMMON SHARES AND NUMBER OF COMMON SHARES TO BE OFFERED
IN CONNECTION WITH THE CONVERSION.
The Purchase Price will be determined by the Board of Directors of
Columbia Federal and the Board of Directors of the Holding Company before the
commencement of the Subscription Offering, subject to adjustment as described
below. The number of Common Shares to be issued in connection with the
Conversion will be determined by the Board of Directors of the Holding Company
and the Board of Directors of Columbia Federal before the completion of all
sales of Common Shares contemplated by this Plan on the basis of the estimated
pro forma market value of Columbia Federal, as converted, and the Purchase
Price. No fractional shares will be issued in connection with the Conversion.
The estimated pro forma market value of Columbia Federal, as converted,
will be determined for such purpose by the Independent Appraiser, based upon
such factors as the Independent Appraiser deems appropriate and as are
consistent with the regulations of the OTS. Immediately before the
commencement of the Subscription Offering, a range will be established for the
aggregate Purchase Price of Common Shares to be offered in the Subscription
Offering and the Community Offering. The maximum of such range shall be 15%
above the pro forma market value of Columbia Federal, and the minimum of such
range shall be 15% below the pro forma market value of Columbia Federal. The
Independent Appraiser will review, from time to time as appropriate, or as
required by law or regulation, developments subsequent to its valuation to
determine whether the estimated pro forma market value of Columbia Federal, as
converted, should be revised. If, after the commencement of the Subscription
Offering, the Independent Appraiser determines that the estimated pro forma
market value of Columbia Federal, as converted, has increased or decreased due
to subsequent developments, the Conversion may be completed without notifying
Persons who have subscribed for Common Shares and without a resolicitation of
subscriptions if such pro forma market value is not less than the minimum of
the valuation range approved by the OTS or does not exceed the maximum point of
the valuation
36
range by more than 15%. If, however, as a result of any such change, the
estimated pro forma market value of Columbia Federal is less than the minimum
of the valuation range or exceeds the maximum point of such valuation range by
more than 15%, a new estimated pro forma market valuation range may be
established, and the Board of Directors may, with the approval of the OTS,
elect to increase or decrease the number of Common Shares to be issued in
connection with the Conversion or increase or decrease the Purchase Price, in
which case Persons who have subscribed for Common Shares will be notified and
will be given the opportunity to increase, decrease or rescind their
subscriptions.
5. SUBSCRIPTION RIGHTS OF ELIGIBLE ACCOUNT HOLDERS.
Eligible Account Holders will have the following rights to subscribe to
and to purchase Common Shares:
A. Each Eligible Account Holder will receive, without payment, a
nontransferable Subscription Right to purchase a number of Common Shares
up to the greater of (i) the amount permitted to be purchased in the
Community Offering, (ii) .10% of the total number of Common Shares sold
in connection with the Conversion, and (iii) 15 times the product
(rounded down to the next whole number) obtained by multiplying the total
number of Common Shares sold in connection with the Conversion by a
fraction of which the numerator is the amount of the Eligible Account
Holder's Qualifying Deposit and the denominator of which is the total
amount of Qualifying Deposits of all Eligible Account Holders, in each
case on the Eligibility Record Date, subject to the overall purchase
limitations set forth in Section 10 of this Plan and subject to
adjustment by the Boards of Directors of the Holding Company and Columbia
Federal as set forth in Section 10 of this Plan.
B. In the event that subscriptions for Common Shares are received
from Eligible Account Holders upon the exercise of Subscription Rights
pursuant to paragraph (a) of this Section 5 in excess of the number of
Common Shares available for such subscriptions, the Common Shares
available for purchase will be allocated among the subscribing Eligible
Account Holders in a manner by which each subscribing Eligible Account
Holder, to the extent possible, will be permitted to subscribe to a
number of shares sufficient to make such Eligible Account Holder's total
allocation of Common Shares equal to the lesser of (i) 100 shares or (ii)
the number of shares subscribed for by such Eligible Account Holder. Any
shares remaining after such allocation will be allocated among the
subscribing Eligible Account Holders whose subscriptions remain
unsatisfied in the proportion which the amount of each Eligible Account
Holder's Qualifying Deposit bears to the total of the Qualifying Deposits
of all subscribing Eligible Account Holders. No fractional shares will,
however, be issued in connection with the Conversion.
C. Subscription Rights held by Eligible Account Holders who are also
Officers and directors of the Holding Company or Columbia Federal, and
their Associates, to the extent that they are attributable to increased
deposits during the one-year period preceding the Eligibility Record
Date, will be subordinated to the Subscription Rights of all other
Eligible Account Holders.
D. The subscription rights of the Eligible Account Holders are
subordinate to the limited priority right of Columbia Federal' s
Tax-Qualified Employee Stock Benefit Plans set forth in Section 6 of this
Plan.
6. SUBSCRIPTION RIGHTS OF TAX-QUALIFIED EMPLOYEE STOCK BENEFIT PLANS.
The Tax-Qualified Employee Stock Benefit Plans of Columbia Federal will
receive non-transferable subscription rights to purchase up to 10% of the
Common Shares offered in connection with the Conversion, subject to adjustment
by the Boards of Directors of the Holding Company and Columbia Federal as set
forth in Section 10 of this Plan. The Subscription Rights of the Tax-Qualified
Employee Stock Benefit Plans are subordinate to the Subscription Rights of the
Eligible Account Holders pursuant to Section 5 of this Plan, except that if the
final pro forma market value of Columbia Federal exceeds the maximum of the
valuation range, the ESOP shall have first priority with respect to the amount
sold in excess of the maximum of the valuation range.
37
7. SUBSCRIPTION RIGHTS OF SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDERS.
Supplemental Eligible Account Holders will have the following rights to
subscribe to and to purchase Common Shares:
A. Each Supplemental Eligible Account Holder will receive, without
payment, a nontransferable Subscription Right to purchase a number of
Common Shares up to the greater of (i) the amount permitted to be
purchased in the Community Offering, (ii) .10% of the total number of
Common Shares sold in connection with the Conversion, and (iii) 15 times
the product (rounded down to the next whole number) obtained by
multiplying the total number of Common Shares sold in connection with the
Conversion by a fraction of which the numerator is the amount of the
Supplemental Eligible Account Holder's Qualifying Deposit and the
denominator of which is the total amount of Qualifying Deposits of all
Supplemental Eligible Account Holders, in each case on the Supplemental
Eligibility Record Date, subject to the overall purchase limitations set
forth in Section 10 of this Plan and subject to adjustment by the Boards
of Directors of the Holding Company and Columbia Federal as set forth in
Section 10 of this Plan.
B. In the event that subscriptions for Common Shares are received
from Supplemental Eligible Account Holders upon the exercise of
Subscription Rights pursuant to paragraph (a) of this Section 7 in excess
of the number of Common Shares available for such subscriptions, the
Common Shares available for purchase will be allocated among the
subscribing Supplemental Eligible Account Holders in a manner by which
each subscribing Supplemental Eligible Account Holder, to the extent
possible, will be permitted to subscribe to a number of Common Shares
sufficient to make such Supplemental Eligible Account Holder's total
allocation of Common Shares equal to the lesser of (i) 100 shares or (ii)
the number of Common Shares subscribed for by such Supplemental Eligible
Account Holder. Any Common Shares remaining after such allocation will
be allocated among the subscribing Supplemental Eligible Account Holders
whose subscriptions remain unsatisfied in the proportion which the amount
of each such Supplemental Eligible Account Holder's Qualifying Deposit
bears to the total amount of the Qualifying Deposits of all such
subscribing Supplemental Eligible Account Holders. No fractional shares
will be issued, however, in connection with the Conversion.
C. Subscription Rights received pursuant to this Section 7 will be
subordinate to all the Subscription Rights of Eligible Account Holders
and the Tax-Qualified Employee Stock Benefit Plans pursuant to Sections 5
and 6 of this Plan. Any nontransferable Subscription Rights to purchase
Common Shares received by an Eligible Account Holder pursuant to Section
5 of this Plan will be applied in partial satisfaction of Subscription
Rights received pursuant to this Section 7.
8. SUBSCRIPTION RIGHTS OF OTHER ELIGIBLE MEMBERS.
Other Eligible Members will have the following rights to subscribe to and
to purchase Common Shares:
A. Each Other Eligible Member will receive, without payment,
nontransferable Subscription Rights to purchase a number of Common Shares
up to the greater of (i) the amount permitted to be purchased in the
Community Offering, and (ii) .10% of the total number of Common Shares
sold in connection with the Conversion, subject to adjustment by the
Boards of Directors of the Holding Company and Columbia Federal as set
forth in Section 10 of this Plan.
B. In the event that subscriptions for Common Shares are received
from Other Eligible Members upon the exercise of Subscription Rights
pursuant to this Section 8 in excess of the number of Common Shares
available for such subscriptions, the Common Shares available for
purchase will be allocated among the Other Eligible Members from whom
subscriptions are received in the same proportion that their respective
subscriptions bear to the total subscriptions of all Other Eligible
Members; provided, however, that, to the extent sufficient Common Shares
are available, each subscribing Other Eligible Member shall receive 25
Common Shares before the remaining available Common Shares are allocated.
38
C. Subscription Rights received by Other Eligible Members pursuant
to this Section 8 are subordinate to all rights received by Eligible
Account Holders, the Tax-Qualified Employee Stock Benefit Plans and
Supplemental Eligible Account Holders pursuant to Sections 5, 6 and 7 of
this Plan.
9. COMMUNITY OFFERING.
Concurrently with or at any time after the commencement or completion of
the Subscription Offering, the Holding Company may offer Common Shares in the
Community Offering in accordance with the following procedures and conditions:
A. Any Common Shares not subscribed for in the Subscription Offering
may be offered and sold in the Community Offering. If conducted, the
Community Offering will be conducted in a manner which will give
Community Members a preference in the purchase of Common Shares and will
seek to achieve the widest distribution of Common Shares.
B. The maximum number of Common Shares which may be subscribed for
or purchased in the Community Offering by any Person, together with any
Associates or group of Persons Acting in Concert, will be equal to the
quantity obtained by dividing $150,000 by the Purchase Price, subject to
the overall purchase limitations set forth in Section 10 of this Plan and
subject to adjustment by the Board of Directors of the Holding Company
and Columbia Federal as set forth in Section 10 of this Plan.
C. Orders for Common Shares in the Community Offering will first be
filled up to a maximum of 2% of the Common Shares sold in the Conversion,
and thereafter any remaining shares will be allocated on an equal number
of shares per order basis until all orders for Common Shares have been
filled, subject to the limitations provided in Section 10 of this Plan.
D. Columbia Federal or the Holding Company may retain a Broker to
assist in selling the Common Shares in the Community Offering.
E. Columbia Federal and the Holding Company reserve the right to
reject, in whole or in part, any order to purchase Common Shares from any
Person in the Community Offering.
10. ADDITIONAL LIMITATIONS ON PURCHASES.
The minimum number and maximum number of Common Shares which may be
subscribed for or purchased in connection with the Conversion are as follows:
A. A minimum of 25 Common Shares must be purchased by each Person
purchasing Common Shares in connection with the Conversion to the extent
Common Shares are available; provided, however, that if the Purchase
Price is greater than $20 per share, the minimum number of Common Shares
to which a Person may subscribe will be adjusted in a manner by which the
aggregate Purchase Price required to be paid for such minimum number of
Common Shares does not exceed $500. No fractional shares will be issued,
however, in connection with the Conversion.
B. Eligible Account Holders, Supplemental Eligible Account Holders
and Other Eligible Members may purchase Common Shares in the Community
Offering subject to the purchase limitations set forth in Section 9 of
this Plan, provided that the maximum number of Common Shares which may be
subscribed for or purchased in connection with the Conversion by any
Person, together with any Associate or group of Persons Acting in
Concert, shall not exceed the quantity obtained by dividing $300,000 by
the purchase price, except that any one or more of the Tax-Qualified
Employee Stock Benefit Plans may purchase in the aggregate not more than
10% of the Common Shares sold in connection with the Conversion and will
be entitled to purchase such amount regardless of the number of Common
Shares purchased by other Persons. Common Shares held by one or more
Tax-Qualified Employee Stock Benefit
39
Plans or non-tax-qualified employee stock benefit plans and attributed to
a Person will not be aggregated with Common Shares purchased directly by
or otherwise attributable to such Person. For the purpose of this
Section 10, the members of the Board of Directors of the Holding Company
and the Board of Directors of Columbia Federal will not be deemed to be
Associates or a group of Persons Acting in Concert solely as a result of
their membership on such Boards of Directors.
C. The maximum number of Common Shares which may be subscribed for
or purchased in connection with the Conversion by Officers and directors
of Columbia Federal and their Associates in the aggregate shall not
exceed 33.7% of the total number of Common Shares. Common Shares held by
one or more Tax-Qualified Employee Stock Benefit Plans or
non-tax-qualified employee stock benefit plans and attributed to a Person
will not be aggregated with Common Shares purchased directly by or
otherwise attributable to such Person.
D. Subject to any required regulatory approval and the requirements
of applicable laws and regulations, but without further approval of the
members of Columbia Federal, purchase limitations may be increased or
decreased at the sole discretion of the Boards of Directors of the
Holding Company and Columbia Federal at any time. If such amount is
increased, persons who subscribed for the maximum amount will be given
the opportunity to increase their subscriptions up to the then applicable
limit, subject to the rights and preferences of any person who has
priority subscription rights. The Boards of Directors of the Holding
Company and Columbia Federal may, in their sole discretion, increase such
maximum purchase limitation up to 9.99%; provided, however, that orders
for Common Shares exceeding 5% of the Common Shares to be issued in the
Conversion shall not exceed, in the aggregate, 10% of the Common Shares
to be issued in the Conversion. In the event that the purchase
limitation is decreased after commencement of the Subscription Offering,
the order of any person who subscribed for the maximum number of Common
Shares shall be decreased by the minimum amount necessary so that such
person shall be in compliance with the then maximum number of Common
Shares permitted to be subscribed for by such person. The maximum
purchase limitation for Eligible Account Holders, Supplemental Eligible
Account Holders and Other Eligible Members shall not be decreased below
1% of the total number of shares to be sold in the Conversion.
E. The Subscription Rights granted under this Plan are
nontransferable. Each Subscription Right may be exercised only by the
Person to whom it is issued and only for such Person's own account. Each
Person exercising Subscription Rights will be required to certify that he
or she is purchasing for his or her own account and that he or she has no
agreement or understanding for the sale or transfer of the stock to which
he or she subscribes. The Board of Directors of Columbia Federal may
reject any subscription which such Board reasonably believes involves an
impermissible transfer of a Subscription Right. The Board of Directors
of Columbia Federal may require any Person who the Board reasonably
believes to be involved in an impermissible transfer of a Subscription
Right to provide such information or assurances as the Board may request
to verify the validity of a Subscription Right.
11. PROCEDURES FOR THE SUBSCRIPTION OFFERING AND THE COMMUNITY OFFERING.
The Subscription Offering and the Community Offering shall be conducted in
the following manner:
A. At the time the Proxy Materials are, pursuant to the
authorization of the OTS, mailed to Voting Members at their last known
addresses appearing on the records of Columbia Federal, Columbia Federal
and the Holding Company may commence the Subscription Offering and the
Community Offering.
B. Prior to the commencement of the Subscription Offering, the
Holding Company will file a registration statement with the SEC. No
Prospectus may be distributed to Persons who have Subscription Rights or
to Community Members or others until and unless the SEC has declared the
Prospectus effective.
40
C. The offer of Common Shares to Persons who have Subscription
Rights, to Community Members and to others will be conditioned upon the
approval of this Plan by the Voting Members at the Special Meeting.
D. The Subscription Offering and the Community Offering may be
closed before the Special Meeting.
E. Orders for Common Shares received in the Subscription Offering
and the Community Offering will first be filled, in the order of priority
set forth in this Plan, by the orders of Persons holding Subscription
Rights.
F. The Prospectus will contain all the information required by the
OTS, the SEC and all applicable laws and regulations necessary to enable
the recipients of the Order Forms to make informed investment decisions
regarding the purchase of Common Shares.
G. The Order Forms will contain all the information required by the
OTS and all applicable laws and regulations.
12. PAYMENT FOR COMMON SHARES.
Common Shares will be paid for in accordance with the following procedure:
A. Full payment for all Common Shares subscribed for must be
received by Columbia Federal, together with properly completed and
executed original Order Forms therefor, before the expiration time, which
will be specified on the Order Forms, unless such time is extended by
Columbia Federal. Photocopied or telecopied Order Forms will not be
accepted. The amount of such required payment will be the amount which
equals the Purchase Price (which will be specified in the Order Forms or
accompanying materials), multiplied by the number of Common Shares
subscribed for in accordance with the terms of this Plan.
B. Payment for Common Shares ordered in the Subscription Offering
will be permitted to be made:
(i) In cash, if delivered in person;
(ii) By check, bank draft, money order or negotiable order of
withdrawal; provided, however, that any payment by check, bank draft,
money order or negotiable order of withdrawal will be accepted subject to
payment by the drawee of such check, bank draft, money order or
negotiable order of withdrawal; or
(iii) By appropriate authorization of withdrawal from any Savings
Account in Columbia Federal.
For the purpose of determining the withdrawal balance of any Savings
Accounts, such withdrawals will be deemed to have been made upon receipt
of appropriate authorization therefor, but interest at the rates
applicable to such accounts will be paid by Columbia Federal on the
amounts deemed to have been withdrawn until the date on which the
Conversion is completed or terminated, at which time the authorized
withdrawal actually will be made. Interest will be paid by Columbia
Federal on payments for Common Shares paid in cash or by check,
negotiable order of withdrawal or money order at an annual rate equal to
Columbia Federal's passbook account rate or such higher rate as may be
determined by Columbia Federal. Such interest will be paid from the date
payments are received by Columbia Federal until consummation or
termination of the Conversion.
41
(c) The Order Forms will contain appropriate means by which
authorization of withdrawals from Savings Accounts may be made to pay for
subscribed shares. Once a withdrawal has been authorized, none of the
designated withdrawal amount may be withdrawn from the designated Savings
Account (except by Columbia Federal as payment for Common Shares) while
this Plan remains in effect. Savings Accounts will be permitted to be
established for the purpose of making payment for subscribed Common
Shares. Notwithstanding any regulatory provisions regarding penalties
for early withdrawal from certificate accounts and minimum qualifying
balances for such accounts, payment for Common Shares will be permitted
through authorization of withdrawals from such accounts without the
assessment of such penalties. If, after such withdrawal, the applicable
minimum balance requirement ceases to be met, such certificate account
will be canceled and the remaining balance thereof will earn interest
only at Columbia Federal's passbook account rate.
(d) Columbia Federal will not lend funds or otherwise extend credit
to any Person to purchase Common Shares.
13. EXPIRATION OF SUBSCRIPTION RIGHTS; UNDELIVERED, DEFECTIVE OR LATE ORDER
FORMS; INSUFFICIENT PAYMENT.
Subscription Rights will expire or terminate in accordance with the
following:
A. All Subscription Rights provided for in this Plan, including
without limitation the Subscription Rights of all Persons whose Order
Forms are returned by the United States Post Office as undeliverable,
will expire at a specified time on a specified date which will be not
less than 20 days nor more than 45 days following the date on which Order
Forms are first sent to Eligible Account Holders, Supplemental Eligible
Account Holders and Other Eligible Members; provided, however, that
Columbia Federal will have the power to extend such expiration time in
its discretion only for a reasonable time beyond such 45-day period.
B. If Columbia Federal is unable to locate particular persons
granted Subscription Rights under this Plan, or if Order Forms (i) are
returned as undeliverable by the United States Post Office, (ii) are not
received by Columbia Federal prior to the expiration date specified
thereon, (iii) are defectively filled out or executed, or (iv) are not
accompanied by the full required payment for the Common Shares subscribed
for (including cases in which Savings Accounts from which withdrawals are
authorized are insufficient to cover the amount of the required payment
or the check, bank draft, negotiable order of withdrawal or money order
does not clear by the expiration time), the Subscription Rights will
lapse as though the Person to whom such rights have been granted failed
to return the completed Order Form within the time period specified
thereon. In any such case as discussed in this paragraph (b), all
payments accompanying the Order Forms will be refunded and, in the case
of payments authorized through withdrawal from deposits as permitted by
Section 12 above, such withdrawals will not be made.
C. Columbia Federal may, but will not be obligated to, waive any
irregularity on any Order Form or require the submission of a corrected
Order Form or waive the remittance of full payment for shares subscribed
for by such date as it may specify. An executed Order Form, once
received by Columbia Federal, may not be modified, amended or rescinded
without the consent of Columbia Federal, unless (i) the Community
Offering is not completed within 45 days after the expiration of the
Subscription Offering, or (ii) the final valuation of Columbia Federal,
as converted, is less than the minimum of the valuation range established
by the Independent Appraiser before the commencement of the Subscription
Offering or exceeds the maximum of such valuation range by more than 15%.
If either of those events occurs, persons who have subscribed for Common
Shares in the Subscription Offering will receive written notice that they
have a right to affirm, increase, decrease or rescind their
subscriptions. Subject to the authority of the OTS and the Division, all
interpretations by Columbia Federal and the Holding Company of the terms
and conditions of this Plan and of the Order Forms will be final.
D. The sale of all Common Shares must be completed within 45 days
after the termination of the Subscription Offering, unless extended by
Columbia Federal with the consent of the OTS, and
42
within 24 months of approval of this Plan by the Voting Members at the
Special Meeting. The 24-month period may not be extended by Columbia
Federal or the OTS.
14. COMPLIANCE WITH SECURITIES LAWS.
Columbia Federal and the Holding Company will make reasonable efforts to
comply with the securities laws of the United States and all other
jurisdictions in which Eligible Account Holders, Supplemental Eligible Account
Holders and Other Eligible Members reside. No person, however, will be offered
any Subscription Rights or sold any Common Shares under this Plan in the event
such Person resides in a foreign country or in any jurisdiction of the United
States in respect of which (a) the granting of Subscription Rights or the offer
or sale of Common Shares under this Plan to such persons would require Columbia
Federal, the Holding Company or their directors, officers or employees to
register under the securities laws of such jurisdiction as a Broker, Dealer or
agent or to register or otherwise qualify the Common Shares for sale in such
state or (b) Columbia Federal determines that compliance with the securities
laws of such jurisdiction would be impracticable for reasons of cost or
otherwise. No payments will be made in lieu of the granting of Subscription
Rights to such persons.
15. RIGHTS OF SHAREHOLDERS AFTER COMPLETION OF CONVERSION.
After the Conversion, the Holding Company will be the sole shareholder of
Columbia Federal and will exercise all rights attendant to owning the stock of
Columbia Federal. Persons owning common shares of the Holding Company will
have the following rights after the Conversion:
A. Voting rights in respect of the Holding Company will be held and
exercised exclusively by the holders of the issued and outstanding
capital stock of the Holding Company. Neither borrowers from Columbia
Federal nor holders of Savings Accounts in Columbia Federal will have any
voting rights in Columbia Federal or the Holding Company on the basis of
such borrowings or Savings Accounts.
B. The Holding Company will have the exclusive rights, subject to
the rights of Eligible Account Holders and Supplemental Eligible Account
Holders in the Liquidation Account provided for in Section 16 of this
Plan, to receive the distribution of any assets remaining after payment
of creditors' claims, including the claims of Savings Account holders to
the withdrawal value of their accounts, in the event of any voluntary or
involuntary liquidation of Columbia Federal after the Conversion. The
shareholders of the Holding Company will have the exclusive right to
receive the distribution of any assets remaining after the payment of
creditors' claims.
16. ESTABLISHMENT OF LIQUIDATION ACCOUNT.
A Liquidation Account will be established on the effective date of the
Conversion in accordance with the following:
A. For purposes of granting a limited priority claim to the assets
of Columbia Federal in the event of a complete liquidation thereof to
Eligible Account Holders and Supplemental Eligible Account Holders who
continue to maintain a Savings Account at Columbia Federal after the
Conversion, Columbia Federal will, at the time of Conversion, establish
the Liquidation Account in an amount equal to the regulatory capital of
Columbia Federal as set forth in its latest statement of financial
condition contained in its Prospectus for the sale of Common Shares. The
Liquidation Account will not operate to restrict the use or application
of any of the regulatory capital of Columbia Federal.
B. Each Eligible Account Holder and Supplemental Eligible Account
Holder will have a separate inchoate interest in a portion of the
Liquidation Account for each Savings Account making up such account
holder's Qualifying Deposit (herein referred to as the "Subaccount").
C. The initial balance of each Subaccount will be an amount
determined by multiplying the amount in the Liquidation Account by a
fraction, the numerator of which is the amount of the account
43
holder's Qualifying Deposits as of the close of business on the
Eligibility Record Date or the Supplemental Eligibility Record Date, as
the case may be, and the denominator of which is the total amount of all
Qualifying Deposits of Eligible Account Holders and Supplemental Eligible
Account Holders on the corresponding record date. For Savings Accounts
in existence on both the Eligibility Record Date and the Supplemental
Eligibility Record Date, separate Subaccounts will be determined on the
basis of the Qualifying Deposits in such Savings Accounts on each such
date. The balance of each Subaccount will never be increased above the
initial balance. If the balance in the Savings Account to which a
Subaccount relates, at the close of business on the last day of each
fiscal year of the Holding Company subsequent to the respective record
dates, is less than the lesser of (i) the deposit balance in such Savings
Account at the close of business on the last day of each fiscal year of
the Holding Company subsequent to the Eligibility Record Date or
Supplemental Eligibility Record Date or (ii) the amount of the Qualifying
Deposit as of the Eligibility Record Date or the Supplemental Eligibility
Record Date, the balance of the Subaccount for such Savings Account will
be adjusted proportionate to the reduction in such Savings Account
balance. In the event of any such downward adjustment, such Subaccount
balance will not be subsequently increased notwithstanding any increase
in the deposit balance of the related Savings Account. If any Savings
Account is closed, its related Subaccount will be reduced to zero upon
such closing. The Subaccount of an account holder will be maintained for
as long as the account holder maintains an account with the same Social
Security or tax identification number.
D. In the event of a complete liquidation of the converted Columbia
Federal (and only in such event), each Eligible Account Holder and
Supplemental Eligible Account Holder will be entitled to receive from the
Liquidation Account a distribution equal to the current adjusted balance
in each of such account holder's Subaccounts before any liquidation
distribution may be made to any holders of the capital stock of Columbia
Federal. No merger, consolidation, sale of bulk assets or similar
combination or transaction with another savings association, the accounts
of which are insured by the FDIC, will be deemed to be a complete
liquidation for this purpose and, in any such transaction, the
Liquidation Account will be assumed by the surviving insured institution.
17. ACCOUNTS IN CONVERTED ASSOCIATION.
Each Savings Account in Columbia Federal at the time of the Conversion
will constitute, without payment or further action by the account holder, a
Savings Account in Columbia Federal as converted, equal in withdrawable amount
to the withdrawal value, and subject to the same terms and conditions, except
as to voting and liquidation rights, as such Savings Account in Columbia
Federal immediately before the Conversion.
18. RESTRICTIONS ON PURCHASES AND SALES OF COMMON SHARES BY OFFICERS AND
DIRECTORS FOLLOWING CONVERSION.
Purchases and sales of shares of the Holding Company after the Conversion
will be restricted in accordance with the following:
A. All Common Shares purchased by Officers or directors of the
Holding Company or Columbia Federal or their Associates pursuant to this
Plan will be subject to the restriction that no such shares will be sold
for a period of one year following the date of purchase of such shares,
except in the event of the death of the Officer, director or Associate.
B. With respect to all Common Shares subject to restriction on
subsequent disposition pursuant to paragraph (a) of this Section 18, each
of the following provisions will apply:
Each certificate representing such shares will bear the
following legend prominently stamped thereon giving notice of such
restriction on transfer:
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THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD BY THE
REGISTERED HOLDER HEREOF FOR A PERIOD OF NOT LESS THAN ONE YEAR FROM
THE DATE OF ISSUANCE HEREOF, EXCEPT IN THE EVENT OF THE DEATH OF THE
REGISTERED HOLDER OF SUCH SHARES.
Instructions will be given to the transfer agent for the Holding
Company, if any, not to recognize or effect any transfer of any
certificates representing such shares, or any change of record
ownership thereof, in violation of such restriction on transfer; and
Any shares of capital stock of the Holding Company issued as a
stock dividend, stock split or otherwise with respect to outstanding
Common Shares subject to restrictions on transfer hereunder will be
subject to the same restrictions as are applicable to the Common
Shares with respect to which such shares of stock are issued.
(c) For a period of three years following the Conversion, no Officer
or director of Columbia Federal or the Holding Company, or any Associates
of such Officer or director, shall, without the prior written approval of
the OTS, purchase the capital stock of the Holding Company other than
from a Broker or Dealer registered with the SEC. This provision will not
apply to (i) negotiated transactions involving more than 1% of a class of
outstanding capital stock of the Holding Company or (ii) purchases of
shares of capital stock made by and held by any one or more tax-qualified
or non-tax-qualified employee stock benefit plans which may be
attributable to individual Officers or directors of the Holding Company
or Columbia Federal.
19. RESTRICTIONS ON ACQUISITION OF COLUMBIA FEDERAL OR HOLDING COMPANY.
Acquisition of capital stock of Columbia Federal or the Holding Company
after the Conversion will be subject to various restrictions contained in the
Amended Charter and Amended Bylaws of Columbia Federal, the articles of
incorporation and the code of regulations of the Holding Company and various
state and federal laws and regulations. In addition, the articles of
incorporation of the Holding Company or the Amended Charter of Columbia Federal
may include the limitation that, for a period of up to five years from the date
of completion of the Conversion of Columbia Federal from mutual to stock form,
no Person may directly or indirectly offer to acquire or acquire the beneficial
ownership of more than 10% of any class of an equity security of Columbia
Federal or the Holding Company.
20. AMENDMENT OR TERMINATION OF THIS PLAN.
If deemed necessary or desirable by the Board of Directors of Columbia
Federal and the Holding Company, this Plan may be amended by the Board of
Directors of Columbia Federal and the Holding Company in their sole discretion
at any time prior to the solicitation of Proxies from Voting Members entitled
to vote on this Plan and at any time thereafter with the concurrence of the
OTS. The Conversion pursuant to this Plan may be terminated by the Board of
Directors of Columbia Federal and the Board of Directors of the Holding Company
in their sole discretion at any time prior to the Special Meeting and at any
time thereafter with the concurrence of the OTS.
21. CONSUMMATION OF CONVERSION.
The Conversion of the mutual Columbia Federal into the stock Columbia
Federal will be deemed to have taken place and to be effective at the time and
date provided in the regulations of the OTS. The Conversion must be completed
within 24 months of the approval of this Plan by the Members.
22. TAX RULINGS/OPINIONS.
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The Conversion is expressly conditioned upon the prior receipt by Columbia
Federal and the Holding Company of either rulings from the Internal Revenue
Service and the appropriate Kentucky taxing authorities or opinions of legal
counsel or other tax advisors to Columbia Federal in form and substance
satisfactory to Columbia Federal and to the effect, among other things, that
the Conversion will constitute a tax-free "reorganization" as defined in
Section 368(a) of the Internal Revenue Code of 1986, as amended, and comparable
provisions of applicable state law, or that consummation of the transactions
provided for in this Plan will not otherwise result in any federal, state or
other tax consequences to Columbia Federal or the converted Columbia Federal
deemed materially adverse by the Board of Directors of Columbia Federal or the
Board of Directors of the Holding Company.
23. DIRECTORS AND OFFICERS OF COLUMBIA FEDERAL.
It is not intended that the Conversion will result in any change in the
directors or Officers of Columbia Federal. The persons serving as Officers on
the date the Application is filed with the OTS will continue to serve at the
discretion of the Board of Directors of Columbia Federal in their respective
capacities as Officers of the converted Columbia Federal. The persons serving
as directors of Columbia Federal on the date the Application is filed with the
OTS will continue to serve as directors following the Conversion until the
expiration of their terms or their earlier death, resignation or removal from
office.
24. STOCK BENEFIT PLANS.
Following the completion of the Conversion, Columbia Federal or the
Holding Company may establish one or more stock option plans and management
recognition plans to the extent permitted by OTS regulations. Columbia Federal
and the Holding Company may make scheduled or discretionary contributions to
one or more stock benefit plans maintained by Columbia Federal or the Holding
Company for the benefit of the directors, officers or employees of Columbia
Federal or the Holding Company, provided such contributions do not cause
Columbia Federal to fail to meet its regulatory capital requirements.
25. REGISTRATION OF COMMON SHARES; MARKET FOR COMMON SHARES.
A. Before or promptly following the Conversion, the Holding Company
will register with the SEC the Common Shares issued in connection with
the Conversion pursuant to the Securities Exchange Act of 1934 and will
not deregister such shares for a period of three years thereafter.
B. While there is no assurance that an active market for the Common
Shares will develop following the Conversion, the Holding Company will
use its best efforts to encourage and assist a market maker to establish
and maintain a market for the Common Shares and will use its best efforts
to cause such shares to be quoted on The Nasdaq Stock Market (or any
comparable quotation system which may hereafter be developed) or listed
on a national or regional securities exchange.
26. EXPENSES OF CONVERSION.
Columbia Federal and the Holding Company will use their best efforts to
assure that the expenses incurred in connection with the Conversion will be
reasonable.
27. MAILING OF PROXY MATERIALS.
The Proxy Materials will only be sent to Voting Members as of the Voting
Record Date.
28. INTERPRETATION OF THE PLAN.
The Boards of Directors of Columbia Federal and the Holding Company will
interpret this Plan. To the extent permitted by law, all interpretations of
this Plan by the Boards of Directors of Columbia Federal and the Holding
Company will be final.
46
EXHIBIT I
COLUMBIA FEDERAL SAVINGS BANK
FEDERAL STOCK CHARTER
SECTION 1. CORPORATE TITLE. The full corporate title of the association is
Columbia Federal Savings Bank.
SECTION 2. OFFICE. The home office shall be located in Ft. Mitchell,
Kentucky.
SECTION 3. DURATION. The duration of the association is perpetual.
SECTION 4. PURPOSE AND POWERS. The purpose of the association is to pursue any
or all of the lawful objectives of a federal savings association chartered
under section 5 of the Home Owners' Loan Act and to exercise all of the
express, implied, and incidental powers conferred thereby and by all acts
amendatory thereof and supplemental thereto, subject to the Constitution and
laws of the United States as they are now in effect, or as they may hereafter
be amended, and subject to all lawful and applicable rules, regulations, and
orders of the Office of Thrift Supervision ("Office").
SECTION 5. CAPITAL STOCK. The total number of shares of all classes of the
capital stock which the association has the authority to issue is ten million
(10,000,000), all of which shall be common stock with no par value. The shares
may be issued from time to time as authorized by the board of directors without
the approval of its shareholders, except as otherwise provided in this Section
5 or to the extent that such approval is required by governing law, rule, or
regulation. The consideration for the issuance of the shares shall be paid in
full before their issuance. Neither promissory notes nor future services shall
constitute payment or part payment for the issuance of shares of the
association. The consideration for the shares shall be cash, tangible or
intangible property (to the extent direct investment in such property would be
permitted to the association), labor, or services actually performed for the
association, or any combination of the foregoing. In the absence of actual
fraud in the transaction, the value of such property, labor, or services, as
determined by the board of directors of the association, shall be conclusive.
Upon payment of such consideration, such shares shall be deemed to be fully
paid and nonassessable. In the case of a stock dividend, that part of the
retained earnings of the association that is transferred to common stock or
paid-in capital accounts upon the issuance of shares as a stock dividend shall
be deemed to be the consideration for their issuance.
Except for shares issued in connection with the conversion of the
association from the mutual to the stock form of capitalization, no shares of
capital stock (including shares issuable upon conversion, exchange, or exercise
of other securities) shall be issued, directly or indirectly, to officers,
directors, or controlling persons of the association other than as part of a
general public offering or as qualifying shares to a director, unless the
issuance or the plan under which they would be issued has been approved by a
majority of the total votes eligible to be cast at a legal meeting.
The holders of the common stock shall exclusively possess all voting
power. Each holder of shares of common stock shall be entitled to one vote for
each share held by such holder, except as to the cumulation of votes for the
election of directors, unless the charter provides that there shall be no such
cumulative voting. Subject to any provision for a liquidation account, in the
event of any liquidation, dissolution, or winding up of the association, the
holders of the common stock shall be entitled, after payment or provision for
payment of all debts and liabilities of the association, to receive the
remaining assets of the association available for distribution, in cash or in
kind. Each share of common stock shall have the same relative rights as and be
identical in all respects with all the other shares of common stock.
SECTION 6. PREEMPTIVE RIGHTS. Holders of the capital stock of the association
shall not be entitled to preemptive rights with respect to any shares of the
association which may be issued.
47
SECTION 7. LIQUIDATION ACCOUNT. Pursuant to the requirements of the Office's
regulations (12 C.F.R. Part 563b), the association shall establish and maintain
a liquidation account for the benefit of its savings accountholders as of
September 30, 1996 and ____________________ ("eligible savers"). In the event
of a complete liquidation of the association, it shall comply with such
regulations with respect to the amount and the priorities on liquidation of
each of the association's eligible savers' inchoate interest in the liquidation
account, to the extent it is still in existence; provided, that an eligible
saver's inchoate interest in the liquidation account shall not entitle such
eligible saver to any voting rights at any meetings of the association's
stockholders.
SECTION 8. CERTAIN PROVISIONS APPLICABLE FOR FIVE YEARS. Notwithstanding
anything contained in the association's charter or bylaws to the contrary, for
a period of five years from the date of completion of the conversion of the
association from mutual to stock form, the following provisions shall apply:
A. BENEFICIAL OWNERSHIP LIMITATION. No person shall directly or
indirectly offer to acquire or acquire the beneficial ownership of more
than 10% of any class of an equity security of the association. This
limitation shall not apply to a transaction in which the association
forms a holding company without change in the respective beneficial
ownership interests of its stockholders other than pursuant to the
exercise of any dissenter and appraisal rights, the purchase of shares by
underwriters in connection with a public offering, or the purchase of
shares by a tax-qualified employee stock benefit plan which is exempt
from the approval requirements under Sec.574.3(c)(1)(vi) of the Office's
regulations.
In the event shares are acquired in violation of this Section 8, all
shares beneficially owned by any person in excess of 10% shall be
considered "excess shares" and 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.
For purposes of this Section 8, the following definitions apply:
1. The term "person" includes an individual, a group acting in
concert, a corporation, a partnership, an association, a joint stock
company, a trust, an unincorporated organization or similar company, a
syndicate or any other group formed for the purpose of acquiring,
holding, or disposing of the equity securities of the association.
2. The term "offer" includes every offer to buy or otherwise
acquire, solicitation of an offer to sell, tender offer for, or request
or invitation for tenders of, a security or interest in a security for
value.
3. The term "acquire" includes every type of acquisition, whether
effected by purchase, exchange, operation of law or otherwise.
4. The term "acting in concert" means (a) knowing participation in a
joint activity or conscious parallel action towards a common goal whether
or not pursuant to an express agreement, or (b) 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 arrangements, whether written or otherwise.
B. CUMULATIVE VOTING LIMITATION. Stockholders shall not be permitted to
cumulate their votes for election of directors.
C. CALL FOR SPECIAL MEETINGS. Special meetings of stockholders relating
to changes in control of the association or amendments to its charter
shall be called only upon direction of the board of directors.
SECTION 9. DIRECTORS. The association shall be under the direction of a board
of directors. The authorized number of directors, as stated in the
association's bylaws, shall not be fewer than five nor more than fifteen except
when a greater or lesser number is approved by the Director of the Office, or
his or her delegate.
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SECTION 10. AMENDMENT OF CHARTER. Except as provided in Section 5, no
amendment, addition, alteration, change, or repeal of this charter shall be
made, unless such is proposed by the board of directors of the association,
approved by the shareholders by a majority of the votes eligible to be cast at
a legal meeting, unless a higher vote is otherwise required, and approved as
preapproved by the Office. Any amendment, addition, alteration, change, or
repeal so acted upon shall be effective upon filing with the Office in
accordance with regulatory procedures or on such other date as the Office may
specify in its preliminary approval.
Attest: _______________________________ By: ________________________________
Secretary President
Columbia Federal Savings Columbia Federal Savings
Bank Bank
Attest: _______________________________ By: ________________________________
Secretary of the Office Director of the Office
of Thrift Supervision of Thrift Supervision
Effective Date: ___________________
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EXHIBIT II
COLUMBIA FEDERAL SAVINGS BANK
FEDERAL STOCK BYLAWS
ARTICLE I - HOME OFFICE
The home office of Columbia Federal Savings Bank shall be at 2497 Dixie
Highway, Ft. Mitchell, Kentucky, 41017 in the County of Kenton, in the
Commonwealth of Kentucky.
ARTICLE II - SHAREHOLDERS
SECTION 1. PLACE OF MEETINGS. All annual and special meetings of
shareholders shall be held at the home office of the association or at such
other place in the state in which the principal place of business of the
association is located as the board of directors may determine.
SECTION 2. ANNUAL MEETING. A meeting of the shareholders of the
association for the election of directors and for the transaction of any other
business of the association shall be held annually within 150 days after the
end of the association's fiscal year on the third Thursday in January, if not a
legal holiday, and if a legal holiday, then on the next day following which is
not a legal holiday, at 2:00 p.m., or at such other date and time within such
150-day period as the board of directors may determine.
SECTION 3. SPECIAL MEETINGS. Special meetings of the shareholders for
any purpose or purposes, unless otherwise prescribed by the regulations of the
Office of Thrift Supervision ("Office"), may be called at any time by the
chairman of the board, the president, or a majority of the board of directors,
and shall be called by the chairman of the board, the president, or the
secretary upon the written request of the holders of not less than one-tenth of
all of the outstanding capital stock of the association entitled to vote at the
meeting. Such written request shall state the purpose or purposes of the
meeting and shall be delivered to the home office of the association addressed
to the chairman of the board, the president, or the secretary.
SECTION 4. CONDUCT OF MEETINGS. Annual and special meetings shall be
conducted in accordance with rules and procedures adopted by the board of
directors. The board of directors shall designate, when present, either the
chairman of the board or the president to preside at such meetings.
SECTION 5. NOTICE OF MEETINGS. Written notice stating the place, day,
and hour of the meeting and the purpose(s) for which the meeting is called
shall be delivered not fewer than 20 nor more than 50 days before the date of
the meeting, either personally or by mail, by or at the direction of the
chairman of the board, the president, or the secretary, or the directors
calling the meeting, to each shareholder of record entitled to vote at such
meeting. If mailed, such notice shall be deemed to be delivered when deposited
in the mail, addressed to the shareholder at the address as it appears on the
stock transfer books or records of the association as of the record date
prescribed in Section 6 of this Article II with postage prepaid. When any
shareholders' meeting, either annual or special, is adjourned for 30 days or
more, notice of the adjourned meeting shall be given as in the case of an
original meeting. It shall not be necessary to give any notice of the time and
place of any meeting adjourned for less than 30 days or of the business to be
transacted at the meeting, other than an announcement at the meeting at which
such adjournment is taken.
SECTION 6. FIXING OF RECORD DATE. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment, or shareholders entitled to receive payment of any dividend,
or in order to make a determination of shareholders for any other proper
purpose, the board of directors shall fix in advance a date as the record date
for any such determination of shareholders. Such date in any case shall be not
more than 60 days and, in case of a meeting of shareholders, not fewer than 10
days prior to the date on which the particular
50
action, requiring such determination of shareholders, is to be taken. When a
determination of shareholders entitled to vote at any meeting of the
shareholders has been made as provided in this section, such determination
shall apply to any adjournment.
SECTION 7. VOTING LISTS. At least 20 days before each meeting of the
shareholders, the officer or agent having charge of the stock transfer books
for shares of the association shall make a complete list of the shareholders
entitled to vote at such meeting, or any adjournment, arranged in alphabetical
order, with the address and the number of shares held by each. This list of
shareholders shall be kept on file at the home office of the association and
shall be subject to inspection by any shareholder of record or the
shareholder's agent at any time during usual business hours for a period of 20
days prior to such meeting. Such list shall also be produced and kept open at
the time and place of the meeting and shall be subject to inspection by any
shareholder of record or any shareholder's agent during the entire time of the
meeting. The original stock transfer book shall constitute prima facie
evidence of the shareholders entitled to examine such list or transfer books or
to vote at any meeting of shareholders.
In lieu of making the shareholder list available for inspection by
shareholders as provided in the preceding paragraph, the board of directors may
elect to follow the procedures prescribed in Sec.552.6(d) of the Office's
regulations as now or hereafter in effect.
SECTION 8. QUORUM. A majority of the outstanding shares of the
association entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of shareholders. If less than a majority of
the outstanding shares is represented at a meeting, a majority of the shares so
represented may adjourn the meeting from time to time without further notice.
At such adjourned meeting at which a quorum shall be present or represented,
any business may be transacted which might have been transacted at the meeting
as originally notified. The shareholders present at a duly organized meeting
may continue to transact business until adjournment, notwithstanding the
withdrawal of enough shareholders to constitute less than a quorum. If a
quorum is present, the affirmative vote of the majority of the shares
represented at the meeting and entitled to vote on the subject matter shall be
the act of the shareholders, unless a vote of a greater number of shareholders
voting together or voting by classes is required by law or the charter.
Directors, however, are elected by a plurality of the votes cast at an election
of directors.
SECTION 9. PROXIES. At all meetings of shareholders, a shareholder may
vote by proxy executed in writing by the shareholder or by his or her duly
authorized attorney in fact. Proxies may be given telephonically or
electronically as long as the holder uses a procedure for verifying the
identity of the shareholder. Proxies solicited on behalf of the management
shall be voted as directed by the shareholder or, in the absence of such
direction, as determined by a majority of the board of directors. No proxy
shall be valid more than eleven months from the date of its execution except
for a proxy coupled with an interest.
SECTION 10. VOTING OF SHARES IN THE NAME OF TWO OR MORE PERSONS. When
ownership stands in the name of two or more persons, in the absence of written
directions to the association to the contrary, at any meeting of the
shareholders of the association, any one or more of such shareholders may cast,
in person or by proxy, all votes to which such ownership is entitled. In the
event an attempt is made to cast conflicting votes, in person or by proxy, by
the several persons in whose names shares of stock stand, the vote or votes to
which those persons are entitled shall be cast as directed by a majority of
those holding such and present in person or by proxy at such meeting, but no
votes shall be cast for such stock if a majority cannot agree.
SECTION 11. VOTING OF SHARES BY CERTAIN HOLDERS. Shares standing in the
name of another corporation may be voted by any officer, agent, or proxy as the
bylaws of such corporation may prescribe, or, in the absence of such provision,
as the board of directors of such corporation may determine. Shares held by an
administrator, executor, guardian or conservator may be voted by him or her,
either in person or by proxy, without a transfer of such shares into his or her
name. Shares standing in the name of a trustee may be voted by him or her,
either in person or by proxy, but no trustee shall be entitled to vote shares
held by him or her without a transfer of such shares into his or her name.
Shares held in trust in an IRA or Keogh Account, however, may be voted by the
association if no other instructions are received. Shares standing in the name
of a receiver may be voted by such receiver, and shares held by or under the
control of a receiver may be voted by such receiver without the transfer into
his or her name if authority to do so is contained in an appropriate order of
the court or other public authority by which such receiver was appointed.
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A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Neither treasury shares of its own stock held by the association nor
shares held by another corporation, if a majority of the shares entitled to
vote for the election of directors of such other corporation are held by the
association, shall be voted at any meeting or counted in determining the total
number of outstanding shares at any given time for purposes of any meeting.
SECTION 12. CUMULATIVE VOTING. Subject to the provisions of Section 8.B.
of the Charter of the association prohibiting cumulative voting in the election
of directors for a period of five years from the date of completion of the
conversion of the association from mutual to stock form, every shareholder
entitled to vote at an election for directors shall have the right to vote, in
person or by proxy, the number of shares owned by the shareholder for as many
persons as there are directors to be elected and for whose election the
shareholder has a right to vote, or to cumulate the votes by giving one
candidate as many votes as the number of such directors to be elected
multiplied by the number of shares shall equal or by distributing such votes on
the same principle among any number of candidates.
SECTION 13. INSPECTORS OF ELECTION. In advance of any meeting of
shareholders, the board of directors may appoint any persons other than
nominees for office as inspectors of election to act at such meeting or any
adjournment. The number of inspectors shall be either one or three. Any such
appointment shall not be altered at the meeting. If inspectors of election are
not so appointed, the chairman of the board or the president may, or on the
request of not fewer than 10 percent of the votes represented at the meeting
shall, make such appointment at the meeting. If appointed at the meeting, the
majority of the votes present shall determine whether one or three inspectors
are to be appointed. In case any person appointed as inspector fails to appear
or fails or refuses to act, the vacancy may be filled by appointment by the
board of directors in advance of the meeting or at the meeting by the chairman
of the board or the president.
Unless otherwise prescribed by regulations of the Office, the duties of
such inspectors shall include: determining the number of shares and the voting
power of each share, the shares represented at the meeting, the existence of a
quorum, and the authenticity, validity and effect of proxies; receiving votes,
ballots or consents; hearing and determining all challenges and questions in
any way arising in connection with the rights to vote; counting and tabulating
all votes or consents; determining the result; and such acts as may be proper
to conduct the election or vote with fairness to all shareholders.
SECTION 14. NOMINATING COMMITTEE. The board of directors shall act as a
nominating committee for selecting the management nominees for election as
directors. Except in the case of a nominee substituted as a result of the
death or other incapacity of a management nominee, the nominating committee
shall deliver written nominations to the secretary at least 20 days prior to
the date of the annual meeting. Upon delivery, such nominations shall be
posted in a conspicuous place in each office of the association. No
nominations for directors except those made by the nominating committee shall
be voted upon at the annual meeting unless other nominations by shareholders
are made in writing and delivered to the secretary of the association at least
five days prior to the date of the annual meeting. Upon delivery, such
nominations shall be posted in a conspicuous place in each office of the
association. Ballots bearing the names of all persons nominated by the
nominating committee and by shareholders shall be provided for use at the
annual meeting. However, if the nominating committee shall fail or refuse to
act at least 20 days prior to the annual meeting, nominations for directors may
be made at the annual meeting by any shareholder entitled to vote and shall be
voted upon.
SECTION 15. NEW BUSINESS. Any new business to be taken up at the annual
meeting shall be stated in writing and filed with the secretary of the
association at least five days before the date of the annual meeting, and all
business so stated, proposed, and filed shall be considered at the annual
meeting; but no other proposal shall be acted upon at the annual meeting. Any
shareholder may make any other proposal at the annual meeting and the same may
be discussed and considered, but unless stated in writing and filed with the
secretary at least five days before the meeting, such proposal shall be laid
over for action at an adjourned, special, or annual meeting of the shareholders
taking place 30 days or more thereafter. This provision shall not prevent the
consideration and approval or disapproval at the annual
52
meeting of reports of officers, directors and committees; but in connection
with such reports, no new business shall be acted upon at such annual meeting
unless stated and filed as herein provided.
SECTION 16. INFORMAL ACTION BY SHAREHOLDERS. Any action required to be
taken at a meeting of the shareholders, or any other action which may be taken
at a meeting of shareholders, may be taken without a meeting if consent in
writing, setting forth the action so taken, shall be given by all of the
shareholders entitled to vote with respect to the subject matter.
ARTICLE III - BOARD OF DIRECTORS
SECTION 1. GENERAL POWERS. The business and affairs of the association
shall be under the direction of its board of directors. The board of directors
shall annually elect a chairman of the board and a president from among its
members and shall designate, when present, either the chairman of the board or
the president to preside at its meetings.
SECTION 2. NUMBER AND TERM. The board of directors shall consist of
seven members and shall be divided into three classes as nearly equal in number
as possible. The members of each class shall be elected for a term of three
years and until their successors are elected and qualified. One class shall be
elected by ballot annually.
SECTION 3. REGULAR MEETINGS. A regular meeting of the board of directors
shall be held without other notice than this bylaw following the annual meeting
of shareholders. The board of directors may provide, by resolution, the time
and place, for the holding of additional regular meetings without other notice
than such resolution. Directors may participate in a meeting by means of a
conference telephone or similar communications device through which all persons
participating can hear each other at the same time. Participation by such
means shall constitute presence in person for all purposes.
SECTION 4. QUALIFICATION. Each director shall at all times be the
beneficial owner of not less than 100 shares of capital stock of the
association unless the association is a wholly owned subsidiary of a holding
company.
SECTION 5. SPECIAL MEETINGS. Special meetings of the board of directors
may be called by or at the request of the chairman of the board, the president,
or one-third of the directors. The persons authorized to call special meetings
of the board of directors may fix any place, within the association's normal
lending territory, as the place for holding any special meeting of the board of
directors called by such persons.
Members of the board of directors may participate in special meetings by
means of conference telephone or similar communications equipment by which all
persons participating in the meeting can hear each other. Such participations
shall constitute presence in person for all purposes.
SECTION 6. NOTICE. Written notice of any special meeting shall be given
to each director at least two days prior thereto when delivered personally or
by telegram or at least five days prior thereto when delivered by mail at the
address at which the director is most likely to be reached. Such notice shall
be deemed to be delivered when deposited in the mail so addressed, with postage
prepaid if mailed or when delivered to the telegraph company if sent by
telegram or when the association receives notice of delivery if electronically
transmitted. Any director may waive notice of any meeting by a writing filed
with the secretary. The attendance of a director at a meeting shall constitute
a waiver of notice of such meeting, except where a director attends a meeting
for the express purpose of objecting to the transaction of any business because
the meeting is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any meeting of the board of directors need
be specified in the notice or waiver of notice of such meeting.
SECTION 7. QUORUM. A majority of the number of directors fixed by
section 2 of this article III shall constitute a quorum for the transaction of
business at any meeting of the board of directors; but if less than such
majority is present at a meeting, a majority of the directors present may
adjourn the meeting from time to time. Notice of any adjourned meeting shall
be given in the same manner as prescribed by section 5 of this article III.
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SECTION 8. MANNER OF ACTING. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the board
of directors, unless a greater number is prescribed by regulation of the Office
or by these bylaws.
SECTION 9. ACTION WITHOUT A MEETING. Any action required or permitted to
be taken by the board of directors at a meeting may be taken without a meeting
if a consent in writing, setting forth the action so taken, shall be signed by
all of the directors.
SECTION 10. RESIGNATION. Any director may resign at any time by sending
a written notice of such resignation to the home office of the association
addressed to the chairman of the board or the president. Unless otherwise
specified, such resignation shall take effect upon receipt by the chairman of
the board or the president. More than three consecutive absences from regular
meetings of the board of directors, unless excused by resolution of the board
of directors, shall automatically constitute a resignation, effective when such
resignation is accepted by the board of directors.
SECTION 11. VACANCIES. Any vacancy occurring on the board of directors
may be filled by the affirmative vote of a majority of the remaining directors
although less than a quorum of the board of directors. A director elected to
fill a vacancy shall be elected to serve until the next election of directors
by the shareholders. Any directorship to be filled by reason of an increase in
the number of directors may be filled by election by the board of directors for
a term of office continuing only until the next election of directors by the
shareholders.
SECTION 12. COMPENSATION. Directors, as such, may receive a stated
salary for their services. By resolution of the board of directors, a
reasonable fixed sum, and reasonable expenses of attendance, if any, may be
allowed for actual attendance at each regular or special meeting of the board
of directors. Members of either standing or special committees may be allowed
such compensation for attendance at committee meetings as the board of
directors may determine.
SECTION 13. PRESUMPTION OF ASSENT. A director of the association who is
present at a meeting of the board of directors at which action on any
association matter is taken shall be presumed to have assented to the action
taken unless his or her dissent or abstention shall be entered in the minutes
of the meeting or unless he or she shall file a written dissent to such action
with the person acting as the secretary of the meeting before the adjournment
thereof or shall forward such dissent by registered mail to the secretary of
the association within five days after the date a copy of the minutes of the
meeting is received. Such right to dissent shall not apply to a director who
voted in favor of such action.
SECTION 14. REMOVAL OF DIRECTORS. At a meeting of shareholders called
expressly for that purpose, any director may be removed for cause by a vote of
the holders of a majority of the shares then entitled to vote at an election of
directors. If less than the entire board is to be removed, no one of the
directors may be removed if the votes cast against the removal would be
sufficient to elect a director if then cumulatively voted at an election of the
class of directors of which such director is a part. Whenever the holders of
the shares of any class are entitled to elect one or more directors by the
provisions of the charter or supplemental sections thereto, the provisions of
this section shall apply, in respect to the removal of a director or directors
so elected, to the vote of the holders of the outstanding shares of that class
and not to the vote of the outstanding shares as a whole.
ARTICLE IV - EXECUTIVE AND OTHER COMMITTEES
SECTION 1. APPOINTMENT. The board of directors, by resolution adopted by
a majority of the full board, may designate the chief executive officer and two
or more of the other directors to constitute an executive committee. The
designation of any committee pursuant to this Article IV and the delegation of
authority shall not operate to relieve the board of directors, or any director,
of any responsibility imposed by law or regulation.
SECTION 2. AUTHORITY. The executive committee, when the board of
directors is not in session, shall have and may exercise all of the authority
of the board of directors except to the extent, if any, that such authority
shall be limited
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by the resolution appointing the executive committee; and except also that the
executive committee shall not have the authority of the board of directors with
reference to: the declaration of dividends; the amendment of the charter or
bylaws of the association, or recommending to the stockholders a plan of
merger, consolidation, or conversion; the sale, lease, or other disposition of
all or substantially all of the property and assets of the association
otherwise than in the usual and regular course of its business; a voluntary
dissolution of the association; a revocation of any of the foregoing; or the
approval of a transaction in which any member of the executive committee,
directly or indirectly, has any material beneficial interest.
SECTION 3. TENURE. Subject to the provisions of section 8 of this
article IV, each member of the executive committee shall hold office until the
next regular annual meeting of the board of directors following his or her
designation and until a successor is designated as a member of the executive
committee.
SECTION 4. MEETINGS. Regular meetings of the executive committee may be
held without notice at such times and places as the executive committee may fix
from time to time by resolution. Special meetings of the executive committee
may be called by any member thereof upon not less than one day's notice stating
the place, date, and hour of the meeting, which notice may be written or oral.
Any member of the executive committee may waive notice of any meeting and no
notice of any meeting need be given to any member thereof who attends in
person. The notice of a meeting of the executive committee need not state the
business proposed to be transacted at the meeting.
SECTION 5. QUORUM. A majority of the members of the executive committee
shall constitute a quorum for the transaction of business at any meeting
thereof, and action of the executive committee must be authorized by the
affirmative vote of a majority of the members present at a meeting at which a
quorum is present.
SECTION 6. ACTION WITHOUT A MEETING. Any action required or permitted to
be taken by the executive committee at a meeting may be taken without a meeting
if a consent in writing, setting forth the action so taken, shall be signed by
all of the members of the executive committee.
SECTION 7. VACANCIES. Any vacancy in the executive committee may be
filled by a resolution adopted by a majority of the full board of directors.
SECTION 8. RESIGNATIONS AND REMOVAL. Any member of the executive
committee may be removed at any time with or without cause by resolution
adopted by a majority of the full board of directors. Any member of the
executive committee may resign from the executive committee at any time by
giving written notice to the president or secretary of the association. Unless
otherwise specified, such resignation shall take effect upon its receipt; the
acceptance of such resignation shall not be necessary to make it effective.
SECTION 9. PROCEDURE. The executive committee shall elect a presiding
officer from its members and may fix its own rules of procedure which shall not
be inconsistent with these bylaws. It shall keep regular minutes of its
proceedings and report the same to the board of directors for its information
at the meeting held next after the proceedings shall have occurred.
SECTION 10. OTHER COMMITTEES. The board of directors may by resolution
establish an audit, loan, or other committee composed of directors as they may
determine to be necessary or appropriate for the conduct of the business of the
association and may prescribe the duties, constitution, and procedures thereof.
ARTICLE V - OFFICERS
SECTION 1. POSITIONS. The officers of the association shall be a
president, one or more vice presidents, a secretary and a treasurer or
comptroller, each of whom shall be elected by the board of directors. The
board of directors may also designate the chairman of the board as an officer.
The president shall be the chief executive officer, unless the board of
directors designates the chairman of the board as chief executive officer. The
president shall be a director of the association. The offices of the secretary
and treasurer or comptroller may be held by the same person and a vice
president may also be either the secretary or the treasurer or comptroller.
The board of directors may designate one or
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more vice presidents as executive vice president or senior vice president. The
board of directors may also elect or authorize the appointment of such other
officers as the business of the association may require. The officers shall
have such authority and perform such duties as the board of directors may from
time to time authorize or determine. In the absence of action by the board of
directors, the officers shall have such powers and duties as generally pertain
to their respective offices.
SECTION 2. ELECTION AND TERM OF OFFICE. The officers of the association
shall be elected annually at the first meeting of the board of directors held
after each annual meeting of the shareholders. If the election of officers is
not held at such meeting, such election shall be held as soon thereafter as
possible. Each officer shall hold office until a successor has been duly
elected and qualified or until the officer's death, resignation, or removal in
the manner hereinafter provided. Election or appointment of an officer,
employee, or agent shall not of itself create contractual rights. The board of
directors may authorize the association to enter into an employment contract
with any officer in accordance with regulations of the Office; but no such
contract shall impair the right of the board of directors to remove any officer
at any time in accordance with section 3 of this article V.
SECTION 3. REMOVAL. Any officer may be removed by the board of directors
whenever in its judgment the best interests of the association will be served
thereby, but such removal, other than for cause, shall be without prejudice to
the contractual rights, if any, of the person so removed.
SECTION 4. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification, or otherwise may be filled by the board
of directors for the unexpired portion of the term.
SECTION 5. REMUNERATION. The remuneration of the officers shall be fixed
from time to time by the board of directors.
ARTICLE VI - CONTRACTS, LOANS, CHECKS AND DEPOSITS
SECTION 1. CONTRACTS. To the extent permitted by regulations of the
Office, and except as otherwise prescribed by these bylaws with respect to
certificates for shares, the board of directors may authorize any officer,
employee, or agent of the association to enter into any contract or execute and
deliver any instrument in the name of and on behalf of the association. Such
authority may be general or confined to specific instances.
SECTION 2. LOANS. No loans shall be contracted on behalf of the
association and no evidence of indebtedness shall be issued in its name unless
authorized by the board of directors. Such authority may be general or
confined to specific instances.
SECTION 3. CHECKS, DRAFTS, ETC. All checks, drafts or other orders for
the payment of money, notes, or other evidences of indebtedness issued in the
name of the association shall be signed by one or more officers, employees or
agents of the association in such manner as shall from time to time be
determined by the board of directors.
SECTION 4. DEPOSITS. All funds of the association not otherwise employed
shall be deposited from time to time to the credit of the association in any
duly authorized depositories as the board of directors may select.
ARTICLE VII - CERTIFICATES FOR SHARES AND THEIR TRANSFER
SECTION 1. CERTIFICATES FOR SHARES. Certificates representing shares of
capital stock of the association shall be in such form as shall be determined by
the board of directors and approved by the Office. Such certificates shall be
signed by the chief executive officer or by any other officer of the association
authorized by the board of directors, attested by the secretary or an assistant
secretary, and sealed with the corporate seal or a facsimile thereof. The
signatures of such officers upon a certificate may be facsimiles if the
certificate is manually signed on behalf of a transfer agent or a registrar
other than the association itself or one of its employees. Each certificate for
shares of
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capital stock shall be consecutively numbered or otherwise identified. The
name and address of the person to whom the shares are issued, with the number
of shares and date of issue, shall be entered on the stock transfer books of
the association. All certificates surrendered to the association for transfer
shall be cancelled and no new certificate shall be issued until the former
certificate for a like number of shares has been surrendered and cancelled,
except that in the case of a lost or destroyed certificate, a new certificate
may be issued upon such terms and indemnity to the association as the board of
directors may prescribe.
SECTION 2. TRANSFER OF SHARES. Transfer of shares of capital stock of
the association shall be made only on its stock transfer books. Authority for
such transfer shall be given only by the holder of record or by his or her
legal representative, who shall furnish proper evidence of such authority, or
by his or her attorney authorized by a duly executed power of attorney and
filed with the association. Such transfer shall be made only on surrender for
cancellation of the certificate for such shares. The person in whose name
shares of capital stock stand on the books of the association shall be deemed
by the association to be the owner for all purposes.
ARTICLE VIII - FISCAL YEAR
The fiscal year of the association shall end on the 30th day of September
of each year. The appointment of such accountants shall be subject to annual
ratification by the shareholders.
ARTICLE IX - DIVIDENDS
Subject to the terms of the association's charter and the regulations and
orders of the Office, the board of directors may, from time to time, declare,
and the association may pay, dividends on its outstanding shares of capital
stock.
ARTICLE X - CORPORATE SEAL
The board of directors shall provide a association seal which shall be two
concentric circles between which shall be the name of the association. The
year of incorporation or an emblem may appear in the center.
ARTICLE XI - AMENDMENTS
These bylaws may be amended in a manner consistent with regulations of the
Office and shall be effective after: (i) approval of the amendment and (ii)
receipt of any applicable regulatory approval. When an association fails to
meet its quorum requirements, solely due to vacancies on the board, then the
affirmative vote of a majority of the sitting board will be required to amend
the by laws by a majority vote of the authorized board of directors, or by a
majority vote of the votes cast by the shareholders of the association at any
legal meeting.
EFFECTIVE DATE: _________________________ , 1998