ASHE FEDERAL BANK
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION, dated September 15, 1997, is
by and among ASHE FEDERAL BANK, a federal stock savings bank (the "Bank"); AF
BANKSHARES, INC., a federally-chartered corporation (the "Stock Holding
Company"), and ASHE INTERIM SAVINGS BANK, a to-be-formed interim federal stock
savings bank ("Interim").
The parties hereto desire to enter into an Agreement and Plan of
Reorganization whereby the corporate structure of the Bank will be reorganized
into the stock holding company form of ownership. The result of such
reorganization will be that immediately after the Effective Date (as defined in
Article V below), all of the issued and outstanding shares of common stock, par
value $0.01 per share, of the Bank will be held by the Stock Holding Company,
and the holders of the issued and outstanding shares of common stock of the Bank
will become the holders of the issued and outstanding shares of common stock of
the Stock Holding Company.
The reorganization of the Bank will be accomplished by the following
steps: (1) the formation by the Bank of the Stock Holding Company as a wholly
owned subsidiary; (2) the formation of Ashe Interim Savings Bank ("Interim"), an
interim federal stock savings bank which will be wholly owned by the Stock
Holding Company; and (3) the merger of Interim into the Bank, with the Bank as
the surviving corporation. Pursuant to such merger: (i) each of the issued and
outstanding shares of common stock of the Bank will be converted by operation of
law into an equal number of issued and outstanding shares of common stock of the
Stock Holding Company; and (ii) each of the issued and outstanding shares of
common stock of Interim will automatically be converted by operation of law into
an equal number of issued and outstanding shares of common stock of the Bank.
Notwithstanding any other provision herein, at any time prior to the Effective
Date, the Bank shall be entitled to revise the structure of the merger or other
transactions contemplated hereby or the manner of effecting such transactions;
provided, that each of the transactions comprising such revised structure or
manner shall not, as a result of such revision, subject any of the stockholders
of the Bank to adverse tax consequences. This agreement and any related
documents shall be appropriately amended in order to reflect any such revised
structure.
NOW, THEREFORE, in order to consummate this Agreement and Plan of
Reorganization, and in consideration of the mutual covenants herein set forth.
the parties agree as follows:
ARTICLE I
MERGER OF INTERIM INTO
THE BANK AND RELATED MATTERS
1.1 On the Effective Date, Interim will be merged with and into the
Bank (the "Merger") and the separate existence of Interim shall cease, and all
assets and property (real, personal and mixed, tangible and intangible, choses
in action, rights and credits) then owned by Interim, or which would inure to
it, shall immediately and automatically, by operation of law and without any
conveyance, transfer, or further action,
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become the property of the Bank. The Bank shall be deemed to be a continuation
of Interim, and the Bank shall succeed to the rights and obligations of Interim.
1.2 Following the Merger, the existence of the Bank shall continue
unaffected and unimpaired by the Merger, with all the rights, privileges,
immunities and powers, and subject to all the duties and liabilities, of a
corporation organized under federal law. The Charter and Bylaws of the Bank, as
presently in effect, shall continue in full force and effect and shall not be
changed in any manner whatsoever by the Merger.
1.3 From and after the Effective Date, and subject to the actions of
the Board of Directors of the Bank, the business presently conducted by the Bank
(whether directly or through its subsidiaries) will continue to be conducted by
it, as a wholly owned subsidiary of Stock Holding Company, and the present
directors and officers of the Bank will continue in their present positions. The
home office and branch offices of the Bank in existence immediately prior to the
Effective Date shall continue to be the home office and branch offices,
respectively, of the Bank from and after the Effective Date.
ARTICLE II
CONVERSION OF STOCK
2.1 The terms and conditions of the Merger, the mode of carrying the
same into effect, and the manner and basis of converting the common stock of the
Bank into common stock of the Stock Holding Company pursuant to this Agreement
shall be as follows:
A. On the Effective Date, each share of common stock, par
value $0.01 per share, of the Bank issued and outstanding immediately prior to
the Effective Date shall automatically by operation of law be converted into and
shall become one share of common stock, par value $0.01 per share, of the Stock
Holding Company (the "Stock Holding Company Common Stock"). Each share of common
stock of Interim issued and outstanding immediately prior to the Effective Date
shall, on the Effective Date, automatically by operation of law be converted
into and become one share of common stock, $0.01 par value per share, of the
Bank and shall not be further converted into shares of the Stock Holding
Company, so that from and after the Effective Date, all of the issued and
outstanding shares of common stock of the Bank shall be held by the Stock
Holding Company.
B. On the Effective Date, the current stock option plans and
recognition plans of the Bank (collectively, the "Benefit Plans") shall
automatically, by operation of law, be continued as Benefit Plans of the Bank
and/or the Stock Holding Company. Each option to purchase shares of the Bank
common stock under the Bank's stock option plan outstanding at that time will be
automatically converted into an identical option, with identical price, terms
and conditions, to purchase an identical number of shares of Stock Holding
Company Common Stock in lieu of shares of the Bank common stock. The Stock
Holding Company and the Bank may make appropriate amendments to the Benefit
Plans to reflect the adoption of the Benefit Plans as the plans of the Stock
Holding Company, without adverse effect on the Benefit Plans and their
participants.
C. From and after the Effective Date, each holder of an
outstanding certificate or certificates that, prior thereto, represented shares
of the Bank common stock, shall, upon surrender of the same to the designated
agent of the Bank, be entitled to receive in exchange therefor a certificate or
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certificates representing the number of whole shares of Stock Holding Company
Common Stock into which the shares theretofore represented by the certificate or
certificates so surrendered shall have been converted, as provided in the
foregoing provisions of this Section 2.1. Until so surrendered, each such
outstanding certificate which, prior to the Effective Date, represented shares
of Bank common stock shall be automatically deemed for all purposes to evidence
the ownership of the equal number of whole shares of Stock Holding Company
Common Stock. Former holders of shares of Bank common stock will not be required
to exchange their Bank common stock certificates for new certificates evidencing
the same number of shares of Stock Holding Company Common Stock. If in the
future the Stock Holding Company determines to effect an exchange of stock
certificates, instructions will be sent to all holders of record of Stock
Holding Company Common Stock.
D. All shares of Stock Holding Company Common Stock into which
shares of the Bank common stock shall have been converted pursuant to this
Article II shall be deemed to have been issued in full satisfaction of all
rights pertaining to such converted shares.
E. On the Effective Date, the holders of certificates formerly
representing the Bank common stock outstanding on the Effective Date shall cease
to have any rights with respect to the stock of the Bank common stock, and their
sole rights shall be with respect to the Stock, Holding Company Common Stock
into which their shares of the Bank common stock shall have been converted by
the Merger.
ARTICLE III
CONDITIONS
3.1 The obligations of the Bank, Stock Holding Company and Interim to
effect the Merger and otherwise consummate the transactions which are the
subject matter hereof shall be subject to satisfaction of the following
conditions:
A. To the extent required by applicable law, rules and
regulations, the holders of the outstanding shares of the Bank common stock
shall, at a meeting of the stockholders of the Bank duly called, have approved
this Agreement by the affirmative vote of a majority of the shares of the Bank
common stock.
B. Any and all approvals from the OTS, the Securities and
Exchange Commission and any other federal governmental agency having
jurisdiction necessary for the lawful consummation of the Merger and the
issuance and delivery of Stock Holding Company Common Stock as contemplated by
this Agreement shall have been obtained.
C. The Bank shall have received either (i) a ruling from the
Internal Revenue Service or (ii) an opinion from its legal counsel, to the
effect that the Merger will be treated as a non-taxable transaction under
applicable provisions of the Internal Revenue Code of 1986, as amended, and that
no gain or loss will be recognized by the stockholders of the Bank upon the
exchange of the Bank common stock held by them solely for Stock Holding Company
Common Stock.
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ARTICLE IV
TERMINATION
4.1 This Agreement may be terminated at the election of any of the
parties hereto if any one or more of the conditions to the obligations of any of
them hereunder shall not have been satisfied and shall have become incapable of
fulfillment and shall not be waived. This Agreement may also be terminated at
any time prior to the Effective Date by the mutual consent of the respective
Boards of Directors of the parties.
4.2 In the event of the termination of this Agreement pursuant to any
of the foregoing provisions, no party shall have any further liability or
obligation of any nature to any other party under this Agreement.
ARTICLE V
EFFECTIVE DATE OF MERGER
5.1 Upon satisfaction or waiver (in accordance with the provisions of
this Agreement) of each of the conditions set forth in Article III, the parties
hereto shall cause to be filed with the OTS Articles of Combination and such
certificates or further documents as shall be required by the OTS, and with such
other federal regulatory agencies as may be required. Upon approval by the OTS
and endorsement of such Articles of Combination by the OTS, the Merger and other
transactions contemplated by this Agreement shall become effective. The
Effective Date for all purposes hereunder shall be the date of such endorsement
by the OTS.
ARTICLE VI
MISCELLANEOUS
6.1 Any of the terms or conditions of this Agreement, which may legally
be waived, may be waived at any time by any party hereto that is entitled to the
benefit thereof, or any of such terms or conditions may be amended or modified
in whole or in part at any time, to the extent authorized by applicable law, by
an agreement in writing, executed in the same manner as this Agreement.
6.2 Any of the terms or conditions of this Agreement may be amended or
modified in whole or in part at any time, to the extent permitted by applicable
law, rules, and regulations, by an amendment in writing, provided that any such
amendment or modification is not materially adverse to the Bank, the Stock
Holding Company or their stockholders. In the event that any governmental agency
requests or requires that the transactions contemplated herein be modified in
any respect as a condition of providing a necessary regulatory approval or
favorable ruling, or that in the opinion of counsel such modification is
necessary to obtain such approval or ruling, this Agreement may be modified, at
any time before or after adoption thereof by the stockholders of the Bank, by an
instrument in writing, provided that the effect of such amendment would not be
materially adverse to the Bank, Stock Holding Company or their stockholders.
6.3 This Agreement shall be governed by and construed under the laws of
the United States.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement and Plan of Reorganization as of the date first above written.
ASHE FEDERAL BANK
By: /s/ James A. Todd
-------------------------------------
James A. Todd
President and Chief Executive Officer
AF BANKSHARES, INC.
(IN FORMATION)
By: /s/ James A. Todd
-------------------------------------
James A. Todd
President and Chief Executive Officer
ASHE INTERIM SAVINGS BANK
(IN FORMATION)
By: /s/ James A. Todd
-------------------------------------
James A. Todd
President and Chief Executive Officer
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