As filed with the Securities and Exchange Commission on September 22, 1997
Registration No. 333-_______
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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WYMAN PARK BANCORPORATION, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
Delaware 6035 Applied For
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification No.)
incorporation or organization) Classification Code Number)
</TABLE>
11 West Ridgely Road, Lutherville, Maryland 21094
(410) 252-6450
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
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Ernest A. Moretti, President
Wyman Park Bancorporation, Inc.
11 West Ridgely Road
Lutherville, Maryland 21094
(410) 252-6450
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
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Please send copies of all communications to:
Jeffrey M. Werthan, P.C.
Gary A. Lax, P.C.
SILVER, FREEDMAN & TAFF, L.L.P.
(a limited liability partnership including professional corporations)
1100 New York Avenue, NW
Washington, DC 20005-3934
(202) 414-6100
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Approximate date of commencement of proposed
sale to the public: As soon as practicable after
this Registration Statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [X]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
====================================================================================================================================
Proposed Maximum Proposed Maximum
Title of Each Class of Amount to be Offering Price Aggregate Amount of
Securities to be Registered Registered(1) Per Share (1) Offering Price(1) Registration Fee
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $.01 per share 925,750 shares $10.00 $9,257,500 $2,806(1)
====================================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
Prospectus
[LOGO]
WYMAN PARK BANCORPORATION, INC.
(Proposed Holding Company for Wyman Park Federal Savings & Loan Association)
$10.00 Per Share
805,000 Shares of Common Stock
(Anticipated Maximum)
Wyman Park Bancorporation, Inc. (the "Holding Company") is offering up to
805,000 shares of common stock, par value $0.01 per share (the "Common Stock"),
in connection with the conversion of Wyman Park Federal Savings & Loan
Association, Lutherville, Maryland ("Wyman Park" or the "Association") from a
federally chartered mutual savings and loan association to a federally chartered
stock savings and loan association and the issuance of all of Wyman Park's
outstanding stock to the Holding Company (the "Conversion"). Pursuant to the
Association's plan of conversion (the "Plan of Conversion" or the "Plan"),
non-transferable rights to subscribe for the Common Stock ("Subscription
Rights") have been given, in order or priority, to (i) Wyman Park's depositors
with qualifying minimum deposits as of March 31, 1996 ("Eligible Account
Holders"), (ii) tax-qualified employee plans of Wyman Park and the Holding
Company ("Tax-Qualified Employee Plans") including the Holding Company's
Employee Stock Ownership Plan (the "ESOP"), provided, however, that the
Tax-Qualified Employee Plans shall have first priority Subscription Rights to
the extent that the total number of shares of Common Stock sold in the
Conversion exceeds the maximum of the Estimated Valuation Range as defined
below, (iii) Wyman Park's depositors as of September 30, 1997 ("Supplemental
Eligible Account Holders"), (iv) depositors as of ________, 1997 and certain
borrowers ("Other Members"), and (v) its employees, officers and directors (the
"Subscription Offering").
(continued on next page)
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FOR INFORMATION ON HOW TO SUBSCRIBE, CALL THE STOCK
INFORMATION CENTER AT (410) ___-____.
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FOR A DISCUSSION OF CERTAIN FACTORS TO BE CONSIDERED, SEE "RISK FACTORS"
BEGINNING ON PAGE __.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, ANY STATE SECURITIES REGULATOR, THE OFFICE OF THRIFT
SUPERVISION OR THE FEDERAL DEPOSIT INSURANCE CORPORATION, NOR HAS SUCH
COMMISSION, REGULATOR, OFFICE OR CORPORATION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE. THE SHARES OF COMMON STOCK OFFERED HEREBY
ARE NOT SAVINGS ACCOUNTS OR SAVINGS DEPOSITS AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION
OR ANY OTHER GOVERNMENT AGENCY.
================================================================================
Estimated
Underwriting
Fees
Commissions
and Estimated Net
Purchase Other Conversion
Price(1) Expenses(2) Proceeds(3)
-------- ----------- -----------
Per Share(4) ................. $10.00 $.59 $9.41
Minimum Total ................ $5,950,000.00 $392,129.00 $5,557,871.00
Midpoint Total ............... $7,000,000.00 $410,000.00 $6,590,000.00
Maximum Total ................ $8,050,000.00 $427,871.00 $7,622,129.00
Maximum Total, As Adjusted(5) $9,257,500.00 $448,423.00 $8,809,077.00
================================================================================
- ----------
(1) Determined on the basis of an appraisal prepared by Ferguson & Company,
Inc. ("Ferguson") dated as of August 22, 1997, which states that the
estimated pro forma market value of the Common Stock ranged from $5,950,000
to $8,050,000 or between 595,000 shares and 815,000 shares, of Common Stock
at $10.00 per share. See "The Conversion - Stock Pricing and Number of
Shares to be Issued."
(2) Consists of estimated costs to the Association and the Holding Company in
the Conversion, including commissions payable to Trident Securities, Inc.
("Trident Securities") estimated to be $392,129 and $427,871, respectively,
based on the minimum and the maximum of the Estimated Valuation Range, in
connection with the Subscription and Community Offering. Trident Securities
has no obligation to purchase the Common Stock. Such fees and commissions
to selected dealers, if any, may be deemed to be underwriting fees. See
"Pro Forma Data" and "The Conversion - Stock Price and Number of Shares to
be Issued" for information regarding such fees and expenses. The Holding
Company has agreed to indemnify Trident Securities against certain
liabilities, including liabilities arising under the Securities Act of
1933, as amended (the "Act"). Actual expenses and thus net proceeds, may be
more or less than estimated amounts.
(3) Net Conversion proceeds may vary from the estimated amounts, depending on
the number of shares issued and the number of shares sold subject to
commissions. The actual number of shares of Common Stock to be issued in
the Conversion will not be determined until after the close of the
offering.
(4) Assumes the sale of the midpoint number of shares. If the minimum, maximum
or 15% above the maximum number of shares are sold, estimated expenses per
share would be $.66, $.53 or $.48, respectively, resulting in estimated net
Conversion proceeds per share of $9.34, $9.47 or $9.52, respectively.
(5) As adjusted to give effect to the sale of up to an additional 120,750
shares (15% above the maximum of the Estimated Valuation Range) which may
be offered in the Conversion without the resolicitation of subscribers or
any right of cancellation, to reflect changes in market and financial
conditions following the commencement of the Offering. See "Pro Forma
Data," and "The Conversion - Stock Pricing and Number of Shares to be
Issued."
TRIDENT SECURITIES, INC.
The date of this Prospectus is ________, 1997
<PAGE>
(continued from prior page)
Subject to the prior rights of holders of Subscription Rights, the Holding
Company may offer the Common Stock for sale in a direct community offering to
members of the general public, with a first preference to natural persons
residing in Baltimore and Anne Arundel Counties, Maryland (the "Community
Offering" and when combined with the Subscription Offering are referred
collectively as the "Subscription and Community Offering"). The Association and
the Holding Company reserve the right, in their absolute discretion, to accept
or reject, in whole or in part, any or all orders in the Community Offering.
Subscription Rights are non- transferrable. Persons found to be selling or
otherwise transferring their right to purchase stock in the Subscription
Offering or purchasing Common Stock on behalf of another person will be subject
to forfeiture of such rights and possible further sanctions and penalties
imposed by the Office of Thrift Supervision (the "OTS"), an agency of the United
States Government.
The total number of shares to be issued in the Conversion will be based upon
an appraised valuation of the estimated aggregate pro forma market value of the
Holding Company and the Association as converted. The purchase price per share
("Purchase Price") has been fixed at $10.00. Based on the current aggregate
valuation range of $5.95 million to $8.05 million (the "Estimated Valuation
Range"), the Holding Company is offering for sale up to 805,000 shares.
Depending upon the market and financial conditions at the time of the completion
of the offering, if any, the total number of shares to be issued in the
Conversion may be increased or decreased from the 805,000 shares offered hereby,
provided that the product of the total number of shares multiplied by the price
per share remains within, or does not exceed by more than 15% the maximum of the
Estimated Valuation Range. If the aggregate Purchase Price of the Common Stock
sold in the Conversion is below $5,950,000 or above $9,257,500, or if the
offering is extended beyond __________, 1997, subscribers will be permitted to
modify or cancel their subscriptions and to have their subscription funds
returned promptly with interest. Under such circumstances, if subscribers take
no action, their subscription funds will be promptly returned to them with
interest. In all other circumstances, subscriptions are irrevocable by
subscribers. See "The Conversion - Offering of Holding Company Common Stock."
With the exception of the Tax-Qualified Employee Plans and certain large
depositors, no Eligible Account Holder, Supplemental Eligible Account Holder or
Other Member may purchase in their capacity as such in the Subscription Offering
more than $100,000 of Common Stock. In the aggregate, no person, together with
associates of and persons acting in concert with such person or persons on a
single account, may purchase more than $100,000 of Common Stock offered in the
Conversion based on the Estimated Valuation Range. Under certain circumstances,
the maximum purchase limitations may be increased or decreased at the sole
discretion of the Association and the Holding Company up to 9.99% of the total
number of shares of Common Stock sold in the Conversion or to one percent of
shares of Common Stock offered in the Conversion. The minimum purchase is 25
shares. See "The Conversion - Additional Purchase Restrictions."
The Holding Company must receive an order form and certification form
(together referred to as the "Order Form"), together with full payment at $10.00
per share (or appropriate instructions authorizing a withdrawal from a deposit
account at the Association) for all shares for which subscription is made, at
any office of the Association, by 12:00 noon, Lutherville, Maryland time, on
________, 1997, unless the Subscription and Community Offering is extended, at
the discretion of the Board of Directors, up to an additional 45 days with the
approval of the OTS, if necessary, but without additional notice to subscribers
(the "Expiration Date"). See "The Conver sion - Offering of Holding Company
Common Stock." Subscriptions paid by check, bank draft or money order will be
placed in a segregated account at the Association and will earn interest at the
Association's passbook rate from the date of receipt until completion or
termination of the Conversion. Payments authorized by withdrawal from deposit
accounts at the Association will continue to earn interest at the contractual
rate until the Conversion is completed or terminated; these funds will be
otherwise unavailable to the depositor until such time. Authorized withdrawals
from certificate accounts for the purchase of Common Stock will be permitted
without the imposition of early withdrawal penalties or loss of interest.
Following the completion of the offering, it is anticipated that the common
stock will be traded on the over-the-counter market with quotations available
through the OTC Electronic Bulletin Board ("OTC Bulletin Board"). If the common
stock cannot be quoted and traded on the Bulletin Board it is expected that the
transactions in the common stock will be reported in the pink sheets published
by the National Quotation Bureau, Inc. Prior to this offering there has not been
a public market for the Common Stock, and there can be no assurance that an
active and liquid trading market for the Common Stock will develop or that
resales of the Common Stock can be made at or above the Purchase Price. See
"Market for Common Stock" and "The Conversion - Stock Pricing and Number of
Shares to be Issued."
2
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[MAP TO COME]
3
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PROSPECTUS SUMMARY
The following summary does not purport to be complete and is qualified
in its entirety by the detailed information and financial statements appearing
elsewhere herein.
Wyman Park Bancorporation, Inc.
The Holding Company, Wyman Park Bancorporation, Inc., was formed in
1997 by Wyman Park under the laws of Delaware for the purpose of becoming a
savings and loan holding company which will own all of the outstanding capital
stock that Wyman Park will issue in connection with the Conversion. Immediately
following the Conversion, the only significant assets of the Holding Company
will be the capital stock of Wyman Park and up to approximately 50% of the net
proceeds from the Conversion, a portion of which is expected to be used to fund
the Holding Company's loan to its Employee Stock Ownership Plan ("ESOP"). See
"Use of Proceeds." Upon completion of the Conversion, the Holding Company's
business initially will consist only of the business of Wyman Park.
The executive office of the Holding Company is located at 11 West
Ridgely Road, Lutherville, Maryland 21093 and its telephone number at that
address is (410) 252-6450. See "Wyman Park Bancorporation, Inc."
Wyman Park
Wyman Park was founded in 1914 as an Maryland-chartered mutual
association and converted to a federally chartered association in 1937. Wyman
Park serves the financial needs of families and local businesses in its primary
market area through its main office located in central Baltimore County and
through its branch office located in northern Anne Arundel County, Maryland. Its
deposits are insured up to applicable limits by the Federal Deposit Insurance
Corporation ("FDIC"). At June 30, 1997, Wyman Park had total assets of $62.2
million, deposits of $56.1 million and retained earnings of $4.8 million (or
7.7% of total assets).
Wyman Park's business involves attracting deposits from the general
public and using such deposits to originate one- to four-family permanent and
construction residential mortgage and, to a lesser extent, commercial real
estate, multi-family, consumer (secured and unsecured), land and second mortgage
loans in its market area. The Association also invests in investment securities
consisting primarily of U.S. government obligations and various types of
short-term liquid assets.
See "Business."
The Association's basic mission is to maintain its focus as an
independent, community- oriented financial institution serving customers in its
primary market area. The Board of Directors has sought to accomplish this
mission through the adoption of a strategy designed to improve its capital
position and maintain its high asset quality, manage the Association's
sensitivity to changes in interest rates and improve the Association's net
interest margin. The Association has attempted to effect its strategy by (i)
continuing to emphasize one- to four-family permanent and construction
4
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residential mortgage lending, (ii) supplementing residential lending with
investments in commercial real estate, consumer and other loans, (iii)
emphasizing the origination of adjustable rate and short-and medium-term (up to
15 years) loans and investments; and (iv) maintaining a low overhead.
Financial highlights of the Association include the following:
o Capital Position. - At June 30, 1997, the Association had
retained earnings of $4.8 million (7.6 of total assets). Wyman
Park's regulatory capital exceeds all regulatory capital
requirements. At June 30, 1997, Wyman Park's risk-based capital
totaled $5.0 million which was approximately $2.3 million above
the Association's capital requirement at such date. Assuming on a
pro forma basis that $8.05 million of shares, the maximum of the
Estimated Valuation Range, were sold in the Conversion and
approximately 50% of the net Conversion proceeds were contributed
to Wyman Park by the Holding Company, as of June 30, 1997, the
Association's risk-based capital would have been $7.9 million
(22.5% of risk adjusted total assets). See "Regulation -
Regulatory Capital Requirements."
o Asset Quality. - The Association's ratio of non-performing assets
to total assets was .28% at June 30, 1997. The Association's
non-performing assets primarily consist of one- to four-family
mortgage loans. See "Business - Delinquencies and Non- Performing
Assets."
The information set forth above should be considered in light of the
factors described under the caption "Risk Factors." For additional information
regarding the implementation of the Association's business strategy, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Asset/Liability Management."
Forward-Looking Statements
When used in this Form 10-KSB and in future filings by the Holding
Company with the Securities and Exchange Commission (the "SEC"), in the
Company's press releases or other public or shareholder communications, and in
oral statements made with the approval of an authorized executive officer, the
words or phrases "will likely result", "are expected to", "will continue", "is
anticipated", "estimate", "project" or similar expressions are intended to
identify "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such statements are subject to risks
and uncertainties, including but not limited to changes in economic conditions
in the Holding Company's market area, changes in policies by regulatory
agencies, fluctuations in interest rates, demand for loans in the Holding
Company's market area and competition, all or some of which could cause actual
results to differ materially from historical earnings and those presently
anticipated or projected. The Holding Company wishes to caution readers not to
place undue reliance on any such forward-looking statements, which speak only as
of the date made and are subject to the above-stated qualifications in any
event. The Holding Company wishes to advise readers that the factors listed
above could affect the Holding Company's financial performance and could cause
the Holding Company's actual results for future periods to differ
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materially from any opinions or statements expressed with respect to future
periods in any current statements.
The Holding Company does not undertake--and specifically declines any
obligation--to publicly release the result of any revisions which may be made to
any forward-looking statements to reflect events or circumstances after the date
of such statements or to reflect the occurrence of anticipated or unanticipated
events.
The Conversion
Plan of Conversion. Under the Plan of Conversion, the Conversion is
subject to certain conditions, including the prior approval of the Plan by the
Association's members at a Special Meeting to be held on __________, 1997. After
the Conversion, the Association's current voting members (who include certain
deposit account holders and certain borrowers) will have no voting rights in
Wyman Park and will have no voting rights in the Holding Company unless they
become Holding Company stockholders. Eligible Account Holders and Supplemental
Eligible Account Holders, however, will have certain liquidation rights in the
Association. See "The Conversion Effects of Conversion to Stock Form on
Depositors and Borrowers of the Association - Liquidation Rights."
The Subscription and Community Offering. The shares of Common Stock to
be issued in the Conversion are being offered at a Purchase Price of $10.00 per
share in the Subscription Offering pursuant to nontransferable Subscription
Rights in the following order of priority: (i) Eligible Account Holders (i.e.,
depositors in the Association on March 31, 1996); (ii) Tax-Qualified Employee
Plans (in this case, the Holding Company's ESOP); provided, however, that the
Tax- Qualified Employee Plans shall have first priority Subscription Rights to
the extent that the total number of shares of Common Stock sold in the
Conversion exceeds the maximum of the Estimated Valuation Range; (iii)
Supplemental Eligible Account Holders (i.e., depositors in the Association on
September 30, 1997); (iv) Other Members (e.g., depositors of the Association as
of _________, 1997); and (v) employees, officers and directors of the
Association. Subscription Rights received in any of the foregoing categories
will be subordinated to the Subscription Rights received by those in a prior
category. Subscription Rights will expire if not exercised by _:__ _.m.,
Lutherville, Maryland time, on __________, 1997, unless extended (the
"Expiration Date").
Concurrently, and subject to the prior rights of holders of
Subscription Rights, any shares of Common Stock not subscribed for in the
Subscription Offering are being offered at the same price in the Community
Offering to members of the general public, with a preference given to natural
persons residing in Baltimore and Anne Arundel Counties, Maryland. The
Association and the Holding Company have engaged Trident Securities as financial
advisor and to assist in the distribution of shares of Common stock. Depending
on market conditions and subject to the prior rights of holders of Subscription
Rights, the Common Stock may be offered for sale to the general public on a best
efforts basis in the Community Offering through a selected dealers arrangement
to be coordinated by Trident Securities.
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The Association has established a Stock Information Center, managed by
Trident Securities, to coordinate the Subscription and Community Offering,
including tabulating orders and answering questions about the Subscription and
Community Offering received by telephone. All subscribers will be instructed to
mail payment to the Stock Information Center or deliver payment directly to the
Association's office. Payment for shares of Common Stock may be made by cash (if
delivered in person), check or money order or by authorization of withdrawal
from deposit accounts maintained with the Association. Such funds will not be
available for withdrawal and will not be released until the Conversion is
completed or terminated. The Association will not accept wire transfers for the
payment of stock for any reason. See "The Conversion - Method of Payment for
Subscriptions."
Purchase Limitations. The Plan of Conversion places limitations on the
number of shares which may be purchased in the Conversion by various categories
of persons. With the exception of the Tax-Qualified Employee Plans and certain
large depositors, no Eligible Account Holder, Supplemental Eligible Account
Holder or Other Member may purchase in their capacity as such in the
Subscription Offering more than $100,000 of Common Stock offered in the
Conversion. In the aggregate, no person or group of persons acting in concert
(other than the Tax-Qualified Employee Plans) or persons on a single account may
purchase more than $100,000 of Common Stock offered in the Conversion. These
purchase limits may be increased or decreased consistent with OTS regulations at
the sole discretion of the Holding Company and the Association. See "The Con
version - Offering of Holding Company Common Stock."
Prospectus Delivery and Procedure for Purchasing Shares. To ensure that
each purchaser receives a prospectus at least 48 hours prior to the Expiration
Date in accordance with Rule 15c2-8 under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), no prospectus will be mailed any later than
five days prior to such date or hand delivered any later than two days prior to
such date. Execution of the order form will confirm receipt or delivery in
accordance with Rule 15c2-8. Order forms will be distributed only with a
prospectus. The Association will accept for processing orders submitted on
original order forms with an executed certification. Photocopies or facsimile
copies of order forms or the form of certification will not be accepted. Payment
by cash, check, money order, bank draft or debit authorization to an existing
account at the Association must accompany the order form. No wire transfers will
be accepted. See "The Conversion - Method of Payment for Subscriptions."
In order to ensure that Eligible Account Holders, Supplemental Eligible
Account Holders and Other Members receive their stock purchase priorities,
depositors must list all accounts on the Order Form, giving all names on each
account and the account number as of the applicable record date.
Restrictions on Transfer of Subscription Rights. Prior to the
completion of the Conversion, no person may transfer or enter into any agreement
or understanding to transfer the legal or beneficial ownership of the
Subscription Rights or the shares of Common Stock to be issued upon their
exercise. Each person exercising Subscription Rights will be required to certify
that a purchase of Common Stock is solely for the purchaser's own account and
that there is no agreement or
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understanding regarding the sale or transfer of such shares. Persons found to be
selling or otherwise transferring their right to purchase stock in the
Subscription Offering or purchasing Common Stock on behalf of another person
will be subject to forfeiture of such rights and possible federal penalties and
sanctions. See "The Conversion - Restrictions on Transfer of Subscription Rights
and Shares."
Stock Pricing. The price of the Common Stock is $10.00 per share and is
the same for all purchasers, including insiders. The aggregate pro forma market
value of the Holding Company and Wyman Park, as converted, was estimated by
Ferguson, a firm experienced in appraising converting thrift institutions, to
range from $5,950,000 to $8,050,000 at August 22, 1997 (the "Estimated Valuation
Range"). Depending on market and financial conditions at the completion of the
Subscription and Community Offering, the number of shares of Common Stock to be
issued in the Conversion may be increased or decreased significantly from the
805,000 shares offered hereby and the price per share may be decreased. However,
subscribers will be permitted to modify or rescind their subscriptions if the
product of the number of shares to be issued multiplied by the price per share
is less than $5,950,000 or more than $9,257,500. See "Pro Forma Data" and "The
Conversion - Stock Pricing and Number of Shares to be Issued" for a description
of the manner in which such valuation was made and the limitations on its use.
The Ferguson appraisal is not intended to be, and must not be
interpreted as, a recommendation of any kind as to the advisability of voting to
approve the Conversion or of purchasing shares of Common Stock. The appraisal
considers Wyman Park and the Holding Company only as going concerns and should
not be considered as any indication of the liquidation value of Wyman Park or
the Holding Company. Moreover, the appraisal is necessarily based on many
factors which change from time to time. There can be no assurance that persons
who purchase shares in the Conversion will be able to sell such shares at prices
at or above the Purchase Price.
Purchases by Directors and Officers
The directors and officers of Wyman Park intend to purchase, in the
Subscription Offering for investment purposes and at the same price as the
shares are sold to other investors in the Conversion, approximately $600,000 of
Common Stock or 8.6% of the shares to be issued in the Conversion at the
midpoint of the Estimated Valuation Range (exclusive of an aggregate of 8% of
the shares to be issued in the Conversion which are anticipated to be purchased
by the ESOP). See "The Conversion - Participation by the Board."
Potential Benefits of Conversion to Directors and Executive Officers
Employee Stock Ownership Plan. The Board of Directors of the
Association has adopted an ESOP, a tax-qualified employee benefit plan for
officers and employees of the Holding Company and the Association. All employees
of the Association are eligible to participate in the ESOP after they attain age
21 and complete one year of service. The Association contribution to the ESOP is
allocated among participants on the basis of their relative compensation. Each
participant's account will be credited with cash and shares of the Holding
Company's Common Stock based upon compensation earned during the year with
respect to which the contribution is made. The ESOP
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intends to buy up to 8% of the Common Stock issued in the Conversion
(approximately $476,000 to $644,000 of the Common Stock based on the issuance of
the minimum and the maximum of the Estimated Valuation Range and the $10.00 per
share Purchase Price). The ESOP will purchase the shares with funds borrowed
from the Holding Company, and it is anticipated that the ESOP will repay the
loans through periodic tax-deductible contributions from the Association over a
ten-year period. These contributions will increase the compensation expense of
the Association. See "Management - Benefit Plans - Employee Stock Ownership
Plan" for a description of this plan.
Employment Agreement. The Association has had, since 1989, an
employment contract with its President, Ernest A. Moretti. The agreement
provides for a salary, contains bonus provisions tied to the Association's
performance, and has a term of three years (subject to an annual extension for
an additional year following an annual performance review). The key terms of
this agreement are expected to be incorporated into a new agreement which also
provides that under certain circumstances, including a change in control, Mr.
Moretti would be entitled, subject to certain limitations, to a severance
payment. See "Management - Executive Compensation - Employment Agreement."
Other Stock Benefit Plans. In addition to the ESOP and the employment
agreements, in the future the Holding Company may consider the implementation of
a stock option plan ("Stock Option Plan") and recognition and retention plan
("RRP") for the benefit of selected directors, officers and employees of the
Holding Company and the Association. Any such stock option plan or RRP will not
be implemented within one year of the date of the consummation of the
Conversion, subject to continuing OTS jurisdiction. If a determination is made
to implement a stock option plan or RRP, it is anticipated that any such plans
will be submitted to stockholders for their consideration at which time
stockholders would be provided with detailed information regarding such plan. If
such plans are approved, they will affect the Holding Company's net income and
stockholders' equity, although the actual results cannot be determined until
such plans are implemented.
Use of Proceeds
The net proceeds from the sale of Common Stock in the Conversion
(estimated at $5.6 million, $6.6 million, $7.6 million and $8.8 million based on
the minimum, midpoint, maximum and 15% above the maximum respectively, number of
shares, respectively) will substantially increase the capital of Wyman Park. See
"Pro Forma Data." The Holding Company will utilize approximately 50% of the net
proceeds from the issuance of the Common Stock to purchase all of the common
stock of Wyman Park to be issued upon Conversion and will retain approximately
50% of the net proceeds. The proceeds retained by the Holding Company will be
invested initially in short-term securities of a type similar to those invested
in by the Association. In addition, the Holding Company, subject to regulatory
approval, is expected to fund the ESOP loan. Such proceeds will also be
available for general corporate purposes, including the possible repurchase of
shares of the Common Stock, as permitted by applicable regulation. The Holding
Company currently has no specific plan to make any such repurchases of any of
its Common Stock. The net proceeds received by Wyman Park will become part of
Wyman Park's general funds for use in its business, subject to applicable
regulatory restrictions, and will be available to use for the acquisition of
deposits or assets or both from other institutions, although no such
acquisitions are being
9
<PAGE>
contemplated at this time, or for other corporate purposes. See "Use of
Proceeds" for additional information on the utilization of the offering proceeds
as well as on the OTS restrictions on repurchases of the Holding Company's
stock.
Dividends
The Holding Company anticipates paying an initial annual cash dividend
on the Common Stock at a rate of approximately 3.0% of the Purchase Price ($.30
per share) of the Common Stock following the first full quarter following
completion of the Conversion. Dividends, when and if paid, will be subject to
determination and declaration by the Board of Directors in its discretion, which
will take into account the Holding Company's consolidated financial condition
and results of operations, tax considerations, industry standards, economic
conditions, regulatory restrictions, general business practices and other
factors. See "Dividends," "Regulation - Regulatory Capital Requirements" and "-
Limitations on Dividends and Other Capital Distributions."
The Holding Company currently has no intention to initiate, and will
not initiate for a period of at least one year following completion of the Stock
Conversion, any action which leads to a return of capital (as distinguished from
a dividend) to stockholders of the Holding Company.
Market For Common Stock
The Holding Company has never issued capital stock to the public and,
consequently, there is no existing market for the Common Stock. Following the
completion of the offering, it is anticipated that the common stock will be
traded on the over-the-counter market with quotations available through the OTC
Bulletin Board. Trident Securities has indicated its intention to make a market
in the Common Stock If the common stock cannot be quoted and traded on the OTC
Bulletin Board it is expected that the transactions in the common stock will be
reported in the pink sheets published by the National Quotation Bureau, Inc.
Making a market may include the solicitation of potential buyers and sellers in
order to match buy and sell orders. However, Trident will not be subject to any
obligation with respect to such efforts.
There can be no assurance that an active or liquid trading market will
develop for the Common Stock, or if a market develops, that it will continue. A
public market having the desirable characteristics of depth, liquidity and
orderliness depends upon the presence in the marketplace of both willing buyers
and sellers of the Common Stock at any given time, which is not within the
control of the Holding Company or any market maker. Accordingly, there can be no
assurance that purchasers will be able to sell their shares at or above the
Purchase Price. See "Market for Common Stock."
Risk Factors
Special attention should be given to the following factors discussed
under "Risk Factors": lending activities; vulnerability to changes in interest
rates; competition; geographical concentration of loans; certain anti-takeover
provisions; voting control of shares by the Board, management, and
10
<PAGE>
employee plans; low return on equity and low net interest margin; ESOP
compensation expense; absence of prior market for common stock; proposed federal
legislation; and risk of delay.
11
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION
June 30,
------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(In Thousands)
Selected Financial Condition Data:
- ----------------------------------
Total assets ...................... $62,241 $63,866 $64,258 $64,666 $65,405
Loans receivable, net ............. 55,189 53,244 54,403 52,093 48,724
Mortgage-backed securities ........ 356 424 520 605 4,912
Investment securities ............. 2,993 2,964 5,920 7,935 8,300
Deposits .......................... 56,095 57,871 58,474 59,389 59,765
Retained earnings-
substantially restricted ......... 4,755 4,621 4,327 3,894 3,396
Year Ended June 30,
------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(In Thousands)
Selected Operations Data:
- -------------------------
Total interest income ............ $ 4,658 $ 4,725 $ 4,788 $ 4,537 $ 4,988
Total interest expense ........... 2,756 3,073 2,891 2,777 3,202
------- ------- ------- ------- -------
Net interest income ........... 1,902 1,652 1,897 1,760 1,786
Provision for (recovery of)
loan losses ..................... 145 25 (88) 183 133
------- ------- ------- ------- -------
Net interest income after
provision for loan losses ....... 1,757 1,627 1,985 1,577 1,653
Fees and service charges ......... 48 47 36 28 23
Gain on sales of loans,
mortgage-backed securities
and investment securities ....... 6 20 23 442 354
Other non-interest income ........ 24 39 26 177 135
------- ------- ------- ------- -------
Total non-interest income ........ 78 106 85 647 512
Total non-interest expense ....... 1,614 1,278 1,361 1,411 1,222
------- ------- ------- ------- -------
Income before taxes and
cumulative effect of
accounting change ............... 221 455 709 813 943
Income tax provision ............. 87 161 276 315 370
Cumulative effect of
accounting change ............... -- -- -- -- 69
------- ------- ------- ------- -------
Net income ....................... $ 134 $ 294 $ 433 $ 498 $ 642
======= ======= ======= ======= =======
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<PAGE>
<TABLE>
<CAPTION>
Year Ended June 30,
-------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Selected Financial Ratios and Other Data:
- -----------------------------------------
Performance Ratios:
Return on assets (ratio of net income to average total
assets) ....................................................... .22% .46% .67% .80% .99%
Return on retained earnings (ratio of net income to
average equity) ............................................... 2.87 6.56 10.52 13.22 21.02
Interest rate spread information:
Average during period .......................................... 2.76 2.26 2.70 2.46 2.54
End of period .................................................. 2.77 2.19 2.25 2.93 2.86
Net interest margin(1) .......................................... 3.14 2.63 2.98 2.75 2.81
Ratio of operating expense to average total assets .............. 2.62 2.01 2.11 2.27 1.89
Ratio of average interest-earning assets to average
interest-bearing liabilities .................................. 108.40 107.66 106.24 106.66 105.31
Loans as a percentage of total assets ........................... 88.67 83.37 84.66 80.56 74.50
Quality Ratios:
Non-performing assets to total assets at end of period ........... .28 .04 .30 .25 .28
Allowance for loan losses to non-performing loans ................ 153.11 456.89 51.89 196.32 234.46
Allowance for loan losses to loans receivable, net ............... .49 .24 .18 .60 .87
Capital Ratios:
Retained earnings to total assets at end of period ............... 7.64 7.24 6.73 6.02 5.19
Average retained earnings to average assets ...................... 7.58 7.04 6.36 6.05 4.71
Other Data:
Number of full-service offices ................................... 2 2 2 2 2
</TABLE>
- -----------
(1) Net interest income divided by average interest earning assets.
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<PAGE>
RISK FACTORS
The following factors, in addition to those discussed elsewhere in this
Prospectus, should be considered by investors before deciding whether to
purchase the Common Stock offered in the Subscription and Community Offering.
Vulnerability to Changes in Interest Rates
The Association's profitability, like that of many financial
institutions, is dependent to a large extent upon its net interest income, which
is the difference between its interest income on interest-earning assets, such
as loans and investments, and its interest expense on interest-bearing
liabilities, such as deposits. When interest-bearing liabilities mature or
reprice more quickly than interest-earning assets in a given period, a
significant increase in market rates of interest could adversely affect net
interest income. Similarly, when interest-earning assets mature or reprice more
quickly than interest-bearing liabilities, falling interest rates could result
in a decrease in net interest income. At June 30, 1997, fixed-rate loans totaled
$35.4 million or 63.4% of the Association's loan portfolio while adjustable-rate
loans totaled $20.5 million or 36.6% of the Association's loan portfolio. It is
likely that, in the event of an increase in interest rates, the Association
would experience a decline in profitability. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Asset and Liability
Management."
Competition
The Association experiences strong competition in its local market area
in both originating loans and attracting deposits. This competition arises from
a highly competitive market area with numerous savings institutions and
commercial banks, as well as credit unions, mortgage bankers and, with respect
to deposits, banking institutions and other financial intermediaries. The
Association recognizes its need to monitor competition and modify its products
and services as necessary and possible, taking into consideration the cost
impact. As a result, such competition may limit Wyman Park's growth and
profitability in the future. See "Business - Competition" and "- Originations,
Purchases and Sales of Loans."
Geographical Concentration of Loans
At June 30, 1997, substantially all of the Association's real estate
mortgage loans were secured by properties located in the Association's market
area of Baltimore County and its contiguous counties in Maryland. While the
Association currently believes that its loans are adequately secured or reserved
for, in the event that real estate prices in the Association's market area
substantially weaken or economic conditions in its market area deteriorate, some
borrowers may default and the value of the real estate collateral may be
insufficient to fully secure the loan. In such events, the Association may
experience increased levels of delinquencies and related losses having an
adverse impact on net income.
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<PAGE>
Certain Anti-Takeover Provisions
Certain provisions of the Holding Company's certificate of
incorporation and bylaws, including a provision limiting voting rights of
beneficial owners of more than 10% of the Common Stock, and Wyman Park's stock
charter and bylaws as well as certain Delaware laws and regulations, will assist
the Holding Company in maintaining its status as an independent publicly owned
corporation and may have certain anti-takeover effects. See "Restrictions on
Acquisition of Stock and Related Takeover Defensive Provisions."
Certificate of Incorporation and Bylaws of the Holding Company. The
Holding Company's certificate of incorporation and bylaws provide for, among
other things, a limit on voting more than 10% of the Common Stock described
above, staggered terms for members of its Board of Directors, noncumulative
voting for directors, limits on the calling of special meetings of stockholders
and director nominations, a fair price or supermajority stockholder approval
requirement for certain business combinations and certain shareholder proposal
notice requirements.
Federal Stock Charter of the Association. Provisions in Wyman Park's
federal stock charter that have an anti-takeover effect could also be applicable
to changes in control of the Holding Company as the sole shareholder of the
Association. Wyman Park's federal stock charter will include a provision
applicable for five years which prohibits the acquisition or offer to acquire
directly or indirectly the beneficial ownership of more than 10% of Wyman Park's
securities by any person or entity other than the Holding Company. Any person
violating this restriction may not vote Wyman Park's securities in excess of
10%.
These provisions in the Holding Company's and Wyman Park's governing
instruments may discourage potential proxy contests and other takeover attempts
by making the Holding Company less attractive to a potential acquiror,
particularly those takeover attempts which have not been negotiated with the
Board of Directors of the Holding Company and/or Wyman Park, as the case may be.
These provisions may also have the effect of discouraging a future takeover
attempt which would not be approved by the Holding Company's Board, but pursuant
to which stockholders may receive a substantial premium for their shares over
then current market prices. As a result, stockholders who might desire to
participate in such a transaction may not have any opportunity to do so. In
addition, certain of these provisions that limit the ability of persons
(including management or others) owning more than 10% of the shares to vote
their shares will be enforced by the Board of Directors of the Holding Company
or Wyman Park, as the case may be, to limit the voting rights of 10% or greater
stockholders and thus could have the effect in a proxy contest or other
solicitation to defeat a proposal that is desired by the holders of a majority
of the shares of Common Stock.
Federal Law and Regulations. Federal law also requires OTS approval
prior to the acquisition of "control" (as defined in OTS regulations) of an
insured institution, including a holding company thereof. In the event any
person or group of persons acquires shares in violation of these limitations,
such person or group may be restricted from voting his shares in excess of 10%
of the outstanding Common Stock. Such laws and regulations may also limit a
person's ability without regulatory approval to solicit proxies enabling him to
elect one third or more of the Holding
15
<PAGE>
Company's Board of Directors or exert a controlling influence on the operations
of Wyman Park or the Holding Company.
In addition, certain of these provisions may limit the ability of
persons (including management or others) owning more than 10% of the shares to
vote their shares (by proxy or otherwise) for proposals that they believe to be
in the best interests of shareholders. See "Management of the Association -
Benefit Plans," "Description of Capital Stock" and "Restrictions on Acquisitions
of Stock and Related Takeover Defensive Provisions."
Voting Control of Shares by the Board, Management and Employee Plans
The proposed purchases by the Board of Directors, management and
employees in the Subscription and Community Offering could render it more
difficult to obtain majority support for stockholder proposals opposed by the
Board and management. Assuming the sale of shares at the minimum, midpoint and
maximum of the Estimated Valuation Range, the proposed purchases of $600,000 of
shares of the Common Stock by the Board and the executive officers would
represent 10.1%, 8.6% and 7.5%, respectively, of the shares to be outstanding
upon completion of the Stock Conversion. In addition, the ESOP intends to
purchase 8% of the shares of Common Stock sold in the Subscription and Community
Offering. (Prior to allocation, shares held by the ESOP will be voted by the
independent trustee in its sole discretion.) See "Management - Benefit Plans,"
"Description of Capital Stock" and "Takeover Defensive Provisions."
Low Return on Equity and Low Net Interest Margin
As a result of the Association's high capital levels and the additional
capital that will be raised in the Conversion, its ability to leverage quickly
the net proceeds from the Conversion is highly likely to be limited. In
addition, recent policy changes may limit the amount of repurchases of common
stock that can be effected by the Holding Company. Further, in comparison to its
peers, the Association has a low net interest margin due in part to a high
relative balance of certificate accounts compared to transaction accounts.
Certificate accounts are traditionally believed to be subject to more rate
competition than are transaction accounts, which can result in an otherwise
higher cost of funds. Accordingly, it is anticipated that, for several years,
net interest margin and return on equity are likely to be low in comparison to
the Association's peers.
ESOP Compensation Expense
In November, 1993, the American Institute of Certified Public
Accountants ("AICPA") issued Statement of Position 93-6 "Employers' Accounting
for Employee Stock Ownership Plans" ("SOP 93-6"). SOP 93-6 requires an employer
to record compensation expense in an amount equal to the fair value of shares
committed to be released to employees from an employee stock ownership plan.
Assuming shares of Common Stock appreciate in value over time, the adoption of
SOP 93-6 will increase compensation expense relating to the ESOP to be
established in connection with the Conversion. It is impossible to determine at
this time the extent of such impact on future net income.
16
<PAGE>
Absence of Prior Market for Common Stock
Wyman Park, as a mutual thrift institution, and the Holding Company, as
a newly organized company, have never issued capital stock. Consequently, there
is not at this time an existing market for the Common Stock. Following the
completion of the offering, it is anticipated that the common stock will be
traded on the over-the-counter market with quotations available through the OTC
Bulletin Board. If the common stock cannot be quoted and traded on the OTC
Bulletin Board it is expected that the transactions in the common stock will be
reported in the pink sheets published by the National Quotation Bureau, Inc.
Making a market may include the solicitation of potential buyers and sellers in
order to match buy and sell orders. However, Trident will not be subject to any
obligation with respect to such efforts.
There can be no assurance that an active and liquid market for the
Common Stock will develop or be maintained, or that resales of the Common Stock
can be made at or above the conversion offering price after the completion of
the Conversion. See "Market for Common Stock."
A public trading market having the desirable characteristics of depth,
liquidity and orderliness depends upon the presence in the marketplace of both
willing buyers and sellers of the Common Stock at any given time. Accordingly,
there can be no assurance that an active and liquid market for the Common Stock
will develop or be maintained or that resales of the Common Stock can be made at
or above the Purchase Price. See "Market for Common Stock" and "The Conversion -
Stock Pricing and Number of Shares to be Issued."
Proposed Federal Legislation
The United States Congress is considering legislation that would
require all federal thrift institutions, such as Wyman Park, to either convert
to a national bank or a state chartered financial institution by a specified
date to be determined. In addition, under the legislation the Holding Company
likely would not be regulated as a thrift holding company, but rather as a bank
holding company. The OTS would also be abolished and its functions transferred
among the other federal banking regulators. Certain aspects of the legislation
remain to be resolved and therefore no assurance can be given as to whether or
in what form the legislation will be enacted or its effect on the Holding
Company and the Association.
Risk of Delayed Offering
The Subscription and Community Offering will expire at 12:00 noon,
Lutherville, Maryland time on __________, 1997 unless extended by the
Association and the Holding Company. However, unless waived by the Holding
Company or the Association, all orders will be irrevocable unless the Conversion
is not completed by __________, 1997. In the event the Conversion is not
completed by __________, 1997, subscribers will have the right to modify or
rescind their subscriptions and to have their subscription funds returned with
interest.
17
<PAGE>
USE OF PROCEEDS
Although the actual net proceeds from the sale of the Common Stock
cannot be determined until the Conversion is completed, it is presently
anticipated that such net proceeds will be between $5.6 million and $7.6 million
(or up to $8.8 million in the event of an increase in the aggregate pro forma
market value of the Common Stock of up to 15% above the maximum of the Estimated
Valuation Range). See "Pro Forma Data" and "The Conversion - Stock Pricing and
Number of Shares to be Issued" as to the assumptions used to arrive at such
amounts.
The net proceeds from the sale of the Common Stock in the Conversion
will substantially increase the capital of Wyman Park and will be used for
general corporate purposes including its lending and investment activities. For
information on the amount of pro forma net proceeds assuming the sale of various
amounts of Common Stock, see "Pro Forma Data."
In exchange for all of the common stock of Wyman Park issued upon
conversion, the Holding Company will contribute to Wyman Park approximately 50%
of the net proceeds from the sale of the Holding Company's Common Stock and the
Holding Company will retain the remaining 50% of the net proceeds. On an interim
basis, the proceeds will be invested by the Holding Company and Wyman Park in
short-term investments or to repay borrowings. Such short-term investments are
generally anticipated to be similar to those currently contained in the
Association's portfolio. The specific types and amounts of short-term assets
will be determined based on market conditions at the time of the completion of
the Conversion. In addition, the Holding Company, subject to regulatory
approval, is expected to provide the funding for the ESOP loan. See "Business -
Lending Activities" and " - Investment Activities" and "Management of the
Association - Benefit Plans - Employee Stock Ownership Plan."
While the new capital resulting from the Conversion could increase the
Association's return on assets (as a result of the earnings on the new capital),
it will probably result in a decline in return on equity because it is unlikely
that the Association will quickly be able to (i) invest the new capital in
assets with rates equal to the average rates earned on the Association's
seasoned asset portfolio and (ii) leverage the new capital by increasing
liabilities to fund asset growth. See "Risk Factors Low Return on Equity and Low
Net Interest Margin."
In the future the Holding Company may consider the adoption of a
restricted stock plan (i.e., the RRP) at the earliest, one year following the
Conversion and subject to stockholder ratification. If such a plan is
implemented, the Holding Company may use a portion of the net proceeds to fund
the purchase by the plan of the Holding Company's Common Stock.
After the completion of the Conversion, it is anticipated that the
Association will reinvest the proceeds of the interim short-term investments in
loans and investment securities. Proceeds reinvested in loans are anticipated to
be allocated among the Association's loan programs in proportions similar to
recent lending volumes, provided suitable opportunities are available to the
Association. Investment securities are anticipated to be similar to those in the
Association's current portfolio. However, the reinvestment of the proceeds will
be based on market conditions and
18
<PAGE>
investment opportunities. The timing and amount of such investments cannot now
be determined nor can the Association identify the specific assets in which
investments will be made.
The proceeds may also be utilized by the Holding Company to repurchase
(at prices which may be above or below the initial offering price) shares of the
Common Stock through an open market repurchase program available to all
stockholders subject to regulatory limitations, although the Holding Company
currently has no specific plan to repurchase any of its stock. In the future,
the Board of Directors of the Holding Company will make decisions on the
repurchase of the Common Stock based on its view of the appropriateness of the
price of the Common Stock as well as the Holding Company's and the Association's
investment opportunities and capital needs. Under current OTS regulations, no
repurchases may be made within the first year following Conversion except with
OTS approval under "exceptional circumstances." During the second and third
years following Conversion, OTS regulations permit, subject to certain
limitations, the repurchase of up to 5% of the outstanding shares of stock
during each twelve-month period with a greater amount permitted with OTS
approval. In general, the OTS regulations do not restrict repurchases thereafter
other than indirectly by virtue of limits on the Association's ability to pay
dividends to the Holding Company which may be necessary to fund the repurchase.
For a description of the restrictions on the Association's ability to provide
the Holding Company with funds through dividends or other distributions, see
"Dividends" and "The Conversion -Restrictions on Repurchase of Stock."
The Holding Company or Wyman Park may consider expansion through the
acquisition of other financial services providers (or branches, deposits or
assets thereof) or through the expansion of banking services through Wyman
Park's internet web site (www.wymanpark.com), although there are no specific
plans, negotiations or written or oral agreements regarding any acquisitions at
this time. In general, the Board will evaluate acquisition and diversification
opportunities, if any, by whether they would enhance the Holding Company's and
the Association's ability to fulfill their financial goals. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations." The
Holding Company may use remaining net proceeds to engage in activities not
permissible for the Association. See "Regulation - Holding Company Regulation."
DIVIDENDS
The Holding Company anticipates paying an initial annual cash dividend
on the Common Stock at a rate of approximately 3.0% of the Purchase Price ($.30
per share) of the Common Stock following the first full quarter following
completion of the Conversion. Dividends, when and if paid, will be subject to
determination and declaration by the Board of Directors in its discretion, which
will take into account the Holding Company's consolidated financial condition
and results of operations, tax considerations, industry standards, economic
conditions, regulatory restrictions, general business practices and other
factors. See "Dividends," "Regulation - Regulatory Capital Requirements" and "-
Limitations on Dividends and Other Capital Distributions."
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<PAGE>
The Holding Company currently has no intention to initiate, and will
not initiate for a period of at least one year following completion of the Stock
Conversion, any action which leads to a return of capital (as distinguished from
a dividend) to stockholders of the Holding Company.
MARKET FOR COMMON STOCK
The Holding Company has never issued capital stock to the public and,
consequently, there is no existing market for the Common Stock. Following the
completion of the offering, it is anticipated that the common stock will be
traded on the over-the-counter market with quotations available through the OTC
Bulletin Board. Trident Securities has indicated its intention to make a market
in the Common Stock If the common stock cannot be quoted and traded on the OTC
Bulletin Board it is expected that the transactions in the common stock will be
reported in the pink sheets published by the National Quotation Bureau, Inc.
Making a market may include the solicitation of potential buyers and sellers in
order to match buy and sell orders. However, Trident will not be subject to any
obligation with respect to such efforts.
There can be no assurance that an active or liquid trading market will
develop for the Common Stock, or if a market develops, that it will continue. A
public market having the desirable characteristics of depth, liquidity and
orderliness depends upon the presence in the marketplace of both willing buyers
and sellers of the Common Stock at any given time, which is not within the
control of the Holding Company or any market maker. Accordingly, there can be no
assurance that purchasers will be able to sell their shares at or above the
Purchase Price. See "Market for Common Stock."
WYMAN PARK BANCORPORATION, INC.
The Holding Company was incorporated by Wyman Park under the laws of
the State of Delaware in September 1997 for the purpose of owning all of the
outstanding stock of Wyman Park issued in the Conversion. The Holding Company
has applied to the OTS to acquire all of the common stock of Wyman Park which
will be outstanding upon completion of the Conversion.
As a Delaware corporation, the Holding Company is authorized to engage
in any activity that is permitted by the Delaware General Corporation Law. The
Board of Directors of the Holding Company anticipates that, after completion of
the Conversion, the Holding Company will conduct its business as a savings and
loan holding company. The holding company structure will provide the Holding
Company with greater flexibility than the Association by itself would have to
diversify its business activities, through existing or newly formed
subsidiaries, or through acquisitions or mergers of both mutual and stock thrift
institutions as well as other companies. Although there are no current
arrangements, understandings or agreements regarding any such acquisition, the
Holding Company will be in a position after the Conversion to take advantage of
any favorable acquisition opportunities that may arise, subject to regulatory
restrictions.
20
<PAGE>
The assets of the Holding Company will initially consist of the stock
of Wyman Park and approximately 50% of the net proceeds from the Conversion. The
initial activities of the Holding Company are anticipated to be funded by such
retained proceeds and the income thereon. Thereafter, activities of the Holding
Company may also be funded through dividends from Wyman Park, if any, sales of
additional securities, borrowings and income generated by other activities of
the Holding Company. At this time, there are no plans regarding such activities.
See "Dividends" and "Regulation-Holding Company Regulation."
WYMAN PARK FEDERAL SAVINGS & LOAN ASSOCIATION
Wyman Park's business involves attracting deposits from the general
public and using such deposits to originate one- to four-family permanent and
construction residential mortgage and, to a lesser extent, commercial real
estate, multi-family, consumer (secured and unsecured), land and second mortgage
loans in its market area. The Association also invests in investment securities
consisting primarily of U.S. government obligations and various types of
short-term liquid assets.
See "Business."
The Association's basic mission is to maintain its focus as an
independent, community- oriented financial institution serving customers in its
primary market area. The Board of Directors has sought to accomplish this
mission through the adoption of a strategy designed to improve its capital
position and maintain its high asset quality, manage the Association's
sensitivity to changes in interest rates and improve the Association's net
interest margin. The Association has attempted to effect its strategy by (i)
continuing to emphasize one- to four-family permanent and construction
residential mortgage lending, (ii) supplementing residential lending with
investments in commercial real estate, consumer and other loans, (iii)
emphasizing the origination of adjustable rate and short-and medium-term (up to
15 years) loans and investments; and (iv) maintaining a low overhead.
PRO FORMA DATA
The following table sets forth the historical net income and retained
earnings of Wyman Park at and for the year ended June 30, 1997 and, after giving
effect to the Conversion, the pro forma consolidated net income, capital stock
and stockholders' equity of the Holding Company at and for the year ended June
30, 1997. The pro forma data is computed on the assumptions that (i) the
specified number of shares of Common Stock was sold at the beginning of the
specified periods and yielded net proceeds to the Holding Company as indicated,
(ii) 50% of such net proceeds were retained by the Holding Company and the
remainder were used to purchase all of the stock of Wyman Park, and (iii) such
net proceeds, less the amount of the ESOP funding, were invested by the
Association and Holding Company at the beginning of the periods to yield a net
after-tax return of 3.5% for the year ended June 30, 1997. The assumed return is
based on the one year treasury bills, as adjusted for applicable federal taxes
totaling 38.0% of such assumed returns. The use of this current rate is viewed
to be more relevant in the current low rate environment than the use of an
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<PAGE>
arithmetic average of the weighted average yield earned by the Association on
its interest-earning assets and the weighted average rate paid on its deposits
during such periods. In calculating the underwriting fees, the table assumes
that (i) no commission was paid on $600,000 of shares sold to directors and
officers and (ii) 8% of the total shares sold in the Conversion were sold to the
ESOP at no commission. Total expenses are estimated to be $410,000 at the
Midpoint of the Estimated Valuation Range. Actual Conversion expenses may be
more or less than those estimated because the fees paid to Trident Securities
and other brokers will depend upon the categories of purchasers, the Purchase
Price and market conditions and other factors. The pro forma net income amounts
derived from the assumptions set forth herein should not be considered
indicative of the actual results of operations of the Holding Company that would
have been attained for any period if the Conversion had been actually
consummated at the beginning of such period, and the assumptions regarding
investment yields should not be considered indicative of the actual yields
expected to be achieved during any future period.
The total number of shares to be issued in the Conversion may be
increased or decreased significantly, and/or the price per share decreased, to
reflect changes in market and financial conditions prior to the close of the
Subscription and Community Offering. However, if the aggregate Purchase Price of
the Common Stock sold in the Conversion is below $5.95 million (the minimum of
the Estimated Valuation Range) or more than $9.26 million (15% above the
Estimated Valuation Range), subscribers will be offered the opportunity to
modify or cancel their subscriptions. See "The Conversion - Stock Pricing and
Number of Shares to be Issued."
22
<PAGE>
<TABLE>
<CAPTION>
At or For the Year Ended June 30, 1997
-------------------------------------------------
595,000 700,000 805,000 925,750
Shares Shares Shares Shares
$10.00 $10.00 $10.00 $10.00
per Share per Share per Share per Share
(Minimum (Midpoint (Maximum (Supermax
of Range) of Range) of Range) of Range)
--------- --------- --------- ---------
(Dollars in Thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C>
Gross proceeds ....................... $ 5,950 $ 7,000 $ 8,050 $ 9,257
Less offering expenses and
commissions ......................... (392) (410) (428) (448)
--------- --------- --------- ---------
Estimated net conversion proceeds ... 5,558 6,590 7,622 8,809
Less common stock acquired by ESOP(2) (476) (560) (644) (741)
Less common stock acquired by RRP(3) (238) (280) (322) (370)
--------- --------- --------- ---------
Estimated proceeds available for
investment ......................... $ 4,844 $ 5,750 $ 6,656 $ 7,698
========= ========= ========= =========
Net Income:
Historical ......................... $ 134 $ 134 $ 134 $ 134
Pro Forma Adjustments:
Net income from proceeds(2) ....... 170 201 233 270
ESOP(2) ........................... (30) (35) (40) (46)
RRP(3) ............................ (30) (35) (40) (46)
--------- --------- --------- ---------
Pro forma ....................... $ 245 $ 266 $ 287 $ 312
========= ========= ========= =========
Per Share:
Historical(4) .................... $ .23 $ .20 $ .17 $ .15
Pro forma Adjustments:
Net income from proceeds ........ .31 .31 .31 .31
ESOP(2) ......................... (.05) (.05) (.05) (.05)
RRP(3) .......................... (.05) (.05) (.05) (.05)
--------- --------- --------- ---------
Pro forma(8) ................ $ .44 $ .41 $ .38 $ .36
========= ========= ========= =========
Pro forma price to earnings
(P/E ratio)(1)(7) ................... 22.7 x 24.4x 26.3x 27.8 x
Number of shares used in calculating
earnings per share .................. 552,160 649,600 747,040 859,096
Stockholders' Equity (Book Value)(5):
Historical ......................... $ 4,750 $ 4,750 $ 4,750 $ 4,750
Estimated net Conversion proceeds .. 5,558 6,590 7,622 8,809
Less common stock acquired by:
ESOP(2) ........................... (476) (560) (644) (741)
RRP(3) ............................ (238) (280) (322) (370)
--------- --------- --------- ---------
Pro forma(6) .................. $ 9,594 $ 10,500 $ 11,406 $ 12,448
========= ========= ========= =========
Per Share(4):
Historical(4) ...................... $ 7.98 $ 6.79 $ 5.90 $ 5.13
Estimated net conversion proceeds .. 9.34 9.41 9.47 9.52
Less common stock acquired by:
ESOP(2) ........................... (.80) (.80) (.80) (.80)
RRP(3) ............................ (.40) (.40) (.40) (.40)
--------- --------- --------- ---------
Pro forma(6)(8) ............... $ 16.12 $ 15.00 $ 14.17 $ 13.45
========= ========= ========= =========
Pro forma price to book value ........ 62.0% 66.7% 70.6% 74.4%
Number of shares used in calculating
equity per share .................... 595,000 700,000 805,000 925,750
</TABLE>
23
<PAGE>
- ---------------------
(1) Net income includes an after-tax charge of approximately $235,000 taken
during the year ended June 30, 1997, representing a special assessment of
65.7 basis points on the Association's deposits at March 31, 1995, pursuant
to legislation enacted to recapitalize SAIF. Excluding that charge, based
on the other assumptions as reflected in this table, management estimates
that pro forma earnings per share would have been $.87, $.77, $.70 and
$.64, and the price to earnings ratio would have been 11.5, 13.0, 14.3 and
15.7 at the minimum, midpoint, maximum and 15% above the maximum of the
Estimated Valuation Range, respectively.
(2) It is assumed that 8% of the shares of Common Stock offered in the
Conversion will be purchased by the ESOP. The funds used to acquire such
shares will be borrowed by the ESOP from the net proceeds from the
Conversion retained by the Holding Company. The Association intends to make
contributions to the ESOP in amounts at least equal to the principal and
interest requirement of the debt. The Association's payment of the ESOP
debt is based upon equal installments of principal over a ten-year period
plus interest. Interest income earned by the Holding Company on the ESOP
debt offsets the interest paid by the Association on the ESOP loan.
Accordingly, only the principal payments on the ESOP debt are recorded as
an expense (tax-effected) to the Holding Company on a consolidated basis.
The amount borrowed is reflected as a reduction of stockholders' equity. No
reinvestment is assumed on proceeds contributed to fund the ESOP. The ESOP
expense has been computed based on the requirements of SOP 93-6 which
requires recognition of expense based upon the average market price of
shares committed to be released during the year and the exclusion of
unallocated shares from earnings per share computations. The valuation of
shares committed to be released is based upon the average market value of
the shares during the year, which, for purposes of this calculation, is
assumed to be equal to the $10.00 per share offering price. In computing
earnings per share, 10% of the ESOP shares purchased in the conversion are
assumed to be committed to be released. See "Management - Benefit Plans -
Employee Stock Ownership Plan."
(3) Assumes a number of shares of Common Stock equal to 4% of the Common Stock
to be sold in the Conversion will be purchased by the RRP in the open
market following conversion. The dollar amount of the Common Stock to be
purchased by the RRP is based on the Purchase Price in the Conversion and
represents unearned compensation and is reflected as a reduction of
capital. Such amount does not reflect possible increases or decreases in
the value of such stock relative to the Purchase Price in the Conversion.
As the Association accrues compensation expense to reflect the vesting of
such shares pursuant to the RRP, the charge against capital will be reduced
accordingly. RRP expense is based on amortization of the RRP over five
years. Implementation of the RRP will require stockholder approval. For
purposes of these tables, it is assumed that the RRP will be adopted by the
Association's Board of Directors and approved by the Company's
stockholders, and that the RRP will purchase the shares in the open market.
If the shares to be purchased by the RRP are assumed to be newly issued
shares purchased from the Company by the RRP at the Purchase Price, at the
minimum, midpoint, maximum and 15% above of the maximum of the Estimated
Valuation Range, the offering price to pro forma stockholders' equity per
share would be 62.9%, 67.5%, 71.4% and 75.1%, for the year ended June 30,
1997. Assuming that all RRP shares are awarded through the use of
authorized but unissued common stock, stockholders would be diluted by
approximately 3.85%. See "Prospectus Summary - Benefits of Stock Conversion
to Directors and Executive Officers -- Other Stock Benefit Plans."
(4) Historical per share amounts have been computed as if the shares of Common
Stock expected to be issued in the Conversion had been outstanding during
the period or on the dates shown, but without any adjustment of historical
net income or historical equity capital to reflect the investment of the
estimated net proceeds of the sale of shares in the Conversion or the
additional ESOP expense as described above.
(5) "Book value" represents the difference between the stated amounts of the
Association's assets and liabilities. The amounts shown do not reflect the
effect of the Liquidation Account which will be established for the benefit
of Eligible and Supplemental Eligible Account Holders in the Conversion and
the tax bad debt reserves. See "The Conversion Effects of Conversion to
Stock Form on Depositors and Borrowers of the Association" and "Regulation
- Federal and State Taxation." The amounts shown for book value do not
represent fair market values or amounts distributable to shareholders in
the unlikely event of liquidation.
(6) Does not represent possible future price appreciation or depreciation.
(7) The pro forma price to earnings ratio for the year ended June 30, 1997 is
determined by dividing the $10.00 Purchase Price by the annualized pro
forma earnings per share. The annualized pro forma earnings per shares is
determined by multiplying the pro forma earnings per share by six.
(8) In the future the Holding Company may consider the implementation of a
stock option plan for the benefit of selected directors, officers and
employees of the Holding Company and the Association. Any such stock option
plan will be implemented no earlier than one year after the date of the
consummation of the Stock Conversion. If a determination is made to
implement a stock option plan, it is anticipated that any such plan will be
submitted to stockholders for their consideration at which time
stockholders would be provided with detailed information regarding such
plan. Assuming that such plan is approved and assuming that options are
granted to purchase an aggregate amount of Common Stock equal to 10% of the
shares issued in the Conversion at exercise prices equal to the market
price of the Common Stock on the date of grant, then in the event the
shares issued under the plan consist of newly issued shares of Common Stock
and all options available for award under the plan were awarded, the
interests of existing stockholders would be diluted. At the minimum,
midpoint, maximum and 15% above the maximum of the Estimated Valuation
Range, if all shares under the plan were equal to the Purchase Price in the
Conversion, the additional shares issued would be 59,500, 70,000, 80,500
and 82,575, respectively, stockholders' equity per share at June 30, 1997
would be $15.57, $14.55, $13.79 and $13.13 respectively, net income per
share for the year ended June 30, 1997 would be $.43, $.40, $.38 and $.36.
24
<PAGE>
PRO FORMA REGULATORY CAPITAL ANALYSIS
At June 30, 1997, the Association exceeded each of the three OTS
capital requirements. Set forth below is a summary of the Association's
compliance with the OTS capital standards as of June 30, 1997 on a historical
basis, in accordance with generally accepted accounting principles ("GAAP"), and
on a pro forma basis using the assumptions contained under the caption "Pro
Forma Data" and assuming that the indicated number of shares were sold as of
such date.
<TABLE>
<CAPTION>
Pro Forma at June 30, 1997
------------------------------------------------------------------------
925,750 Shares
595,000 Shares 700,000 Shares 805,000 Shares 15% above
Historical Minimum Midpoint Maximum Maximum
---------------- ----------------- ---------------- ---------------- -----------------
Amount Percent(1) Amount Percent(1) Amount Percent(1) Amount Percent(1) Amount Percent(1)
------ --------- ------ ---------- ------ ---------- ------ ---------- ------ ----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GAAP Capital(2) ..................... $4,750 7.6% $6,815 10.5% $7,205 11.0% $7,595 11.6% $8,044 12.1%
====== ==== ====== ==== ====== ==== ====== ==== ====== ====
Tangible Capital:
Capital level ..................... 4,755 7.6 6,820 10.5 7,210 11.0 7,600 11.6 8,049 12.1
Requirement ....................... 934 1.5 972 1.5 979 1.5 986 1.5 994 1.5
------ ---- ------ ---- ------ ---- ------ ---- ------ ----
Excess ............................ 3,821 6.1 5,848 9.0 6,231 9.5 6,614 10.1 7,055 10.6
====== ==== ====== ==== ====== ==== ====== ==== ====== ====
Core Capital:
Capital level ..................... 4,755 7.6 6,820 10.5 7,210 11.0 7,600 11.6 8,049 12.1
Requirement ....................... 1,867 3.0 1,944 3.0 1,958 3.0 1,972 3.0 1,989 3.0
------ ---- ------ ---- ------ ---- ------ ---- ------ ----
Excess ............................ 2,888 4.6 4,876 7.5 5,252 8.0 5,628 8.6 6,060 9.1
====== ==== ====== ==== ====== ==== ====== ==== ====== ====
Risk-Based Capital:
Capital level(3) .................. 5,025 14.6 7,090 20.3 7,480 21.4 7,870 22.5 8,319 23.7
Requirement(4) .................... 2,748 8.0 2,788 8.0 2,796 8.0 2,803 8.0 2,812 8.0
------ ---- ------ ---- ------ ---- ------ ---- ------ ----
Excess ............................ $2,277 6.6% $4,302 12.3% $4,684 13.4% $5,067 14.5% $5,507 15.7%
====== ==== ====== ==== ====== ==== ====== ==== ====== ====
</TABLE>
- --------------
(1) Tangible and core capital levels are shown as a percentage of adjusted
total assets; risk-based capital levels are shown as a percentage of
risk-weighted assets.
(2) Total retained earnings as calculated under GAAP. Assumes that the
Association receives 50% of the net proceeds, offset in part by the
aggregate purchase price of Common Stock acquired at $10.00 per share by
the ESOP in the Conversion. The amount expected to be borrowed by the ESOP
is deducted from pro forma capital to illustrate the possible impact on the
Association.
(3) Includes $270,000 of general valuation allowances, all of which qualify as
supplementary capital. See "Regulation - Regulatory Capital Requirements."
(4) Assumes reinvestment of net proceeds in 20% risk-weighted assets.
25
<PAGE>
CAPITALIZATION
Set forth below is the capitalization, including deposits, of Wyman
Park as of June 30, 1997, and the pro forma capitalization of the Holding
Company at the minimum, the midpoint, the maximum and 15% above the maximum of
the Estimated Valuation Range, after giving effect to the Conversion and based
on other assumptions set forth in the table and under the caption "Pro Forma
Data."
<TABLE>
<CAPTION>
Pro Forma Based
Upon Sale at $10.00 Per Share of
--------------------------------------------------------
595,000 700,000 805,000 925,750
Historical Shares Shares Shares Shares
---------- ------ ------ ------ ------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Deposits(1) ......................................... $ 56,095 $ 56,095 $ 56,095 $ 56,095 $ 56,095
Borrowed funds(3) ................................... -- -- -- -- --
-------- -------- -------- -------- --------
Total deposits and borrowed funds ................... $ 56,095 $ 56,095 $ 56,095 $ 56,095 $ 56,095
======== ======== ======== ======== ========
Stockholders' Equity:
Serial Preferred Stock ($.01 par value)
Authorized - 500,000 shares; none to
be outstanding ................................... -- -- -- -- --
Common Stock ($.01 par value)
Authorized - 2,000,000 shares; to be
outstanding - (as shown)(4)(5) ................... -- 6 7 8 9
Additional paid-in capital ......................... -- 5,552 6,583 7,614 8,800
Retained earnings, substantially
restricted(2) .................................... 4,755 4,755 4,755 4,755 4,755
Unrealized loss on securities available
for sale, net of income taxes .................... (5) (5) (5) (5) (5)
Less common stock acquired by:
ESOP(3) .......................................... -- (476) (560) (644) (741)
RRP(4) ........................................... -- (238) (280) (322) (370)
-------- -------- -------- -------- --------
Total stockholders' equity ..................... $ 4,750 $ 9,594 $ 10,500 $ 11,406 $ 12,448
======== ======== ======== ======== ========
Total stockholders equity as a percent of
total assets ....................................... 7.6% 14.3% 15.4% 16.6% 17.8%
======== ======== ======== ======== ========
</TABLE>
26
<PAGE>
- ----------------
(1) No effect has been given to withdrawals from savings accounts for the
purpose of purchasing Common Stock in the Stock Conversion. Any such
withdrawals will reduce pro forma deposits by the amount of such
withdrawals.
(2) See "Dividends" and "Regulation - Limitations on Dividends and Other
Capital Distributions" regarding restrictions on future dividend payments
and "The Conversion - Effects of Conversion to Stock Form on Depositors and
Borrowers of the Association" regarding the liquidation account to be
established upon the Stock Conversion.
(3) Assumes that 8.0% of the shares issued in the Stock Conversion will be
acquired by the ESOP and that the ESOP will be funded by the Holding
Company. The Association intends to make contributions to the ESOP
sufficient to service and ultimately retire its debt. Since the Holding
Company will finance the ESOP debt, the ESOP debt will be eliminated
through consolidation and no liability will be reflected on the Holding
Company's consolidated financial statements. Accordingly, the amount of
stock acquired by the ESOP is shown in this table as a reduction of total
stockholders' equity. See "Management - Benefit Plans - Employee Stock
Ownership Plan."
(4) Assumes a number of shares of Common Stock equal to 4% of the Common Stock
to be sold in the Conversion will be purchased by the RRP in open market
purchases. The dollar amount of Common Stock to be purchased is based on
the $10.00 per share Purchase Price in the Conversion and represents
unearned compensation and is reflected as a reduction of capital. Such
amount does not reflect possible increases or decreases in the value of
such stock relative to the Purchase Price in the Conversion. As the
Association accrues compensation expense to reflect the vesting of such
shares pursuant to the RRP, the charge against capital will be reduced
accordingly. Implementation of the RRP will require stockholder approval.
If the shares to fund the RRP are assumed to come from authorized but
unissued shares purchased by the RRP from the Company at the Purchase
price, at the minimum, midpoint, maximum and 15% above the maximum of the
Estimated Valuation Range, the number of outstanding shares would be
618,800, 728,000, 837,200 and 962,780, respectively, and total
stockholders' equity would be $9.8 million, $10.8 million, $11.7 million
and $12.8 million, respectively, at June 30, 1997. As a result of the RRP
acquiring authorized but unissued shares from the Company, stockholders'
ownership in the Company would be diluted by approximately 3.85%. See
"Prospectus Summary - Benefits of Stock Conversion to Directors and
Executive Officers -- Other Stock Benefit Plans."
(5) Does not include additional shares of Common Stock that possibly could be
purchased by participants in the Option Plan, if implemented, under which
directors, executive officers and other employees could be granted options
to purchase an aggregate amount of Common Stock equal to 10% of the shares
issued in the Conversion (70,000 shares at the midpoint of the Estimated
Valuation Range) at exercise prices equal to the market price of the Common
Stock on the date of grant. Implementation of the Option Plan may require
stockholder approval. See "Prospectus Summary - Benefits of Stock
Conversion to Directors and Executive Officers -- Other Stock Benefit
Plans."
CONSOLIDATED STATEMENTS OF OPERATIONS
The following Consolidated Statements of Operations of Wyman Park for
each of the years in the three year period ended June 30, 1997 have been audited
by Wooden & Benson, Chartered, independent certified public accountants, whose
report thereon appears elsewhere herein. The Statements of Income should be read
in conjunction with the Consolidated Financial Statements and related Notes
included elsewhere herein.
27
<PAGE>
WYMAN PARK FEDERAL SAVINGS AND LOAN ASSOCIATION
AND SUBSIDIARY
Lutherville, Maryland
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Interest and fees on loans receivable $4,250,470 $4,157,290
Interest on mortgage-backed securities 26,733 35,236
Interest on investment securities 140,065 306,709
Interest on other investments 240,959 226,328
---------- ----------
Total interest income 4,658,227 4,725,563
Interest on savings deposits 2,749,541 3,064,802
Interest on Federal Home Loan Bank advances -- --
Interest on escrow deposits 6,424 8,481
---------- ----------
Total interest expense 2,755,965 3,073,283
Net interest income before provision for loan losses 1,902,262 1,652,280
Provision for loan losses (Notes 1 and 4) 145,000 25,000
---------- ----------
Net interest income 1,757,262 1,627,280
Other Income
Loan fees and service charges 48,284 46,937
Gain on sales of loans receivable 5,816 19,888
Gain on sale of investment securities, net -- --
Other 24,411 39,303
---------- ----------
Total other income 78,511 106,128
General and Administrative Expenses
Salaries and employee benefits 620,513 602,958
Occupancy costs 91,219 96,340
Federal deposit insurance premiums ( Note 11) 461,177 134,371
Data processing 67,071 65,173
Advertising 63,145 68,914
Franchise and other taxes 44,730 46,681
Other 267,225 263,735
---------- ----------
Total general and administrative expenses 1,615,080 1,278,172
Income before tax provision 220,693 455,236
Provision for income taxes (Notes 1 and 8) 86,888 161,119
---------- ----------
Net income $ 133,805 $ 294,117
========== ==========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
28
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
Management's discussion and analysis of financial condition and results
of operations is intended to assist in understanding the financial condition and
results of operations of the Association. The information contained in this
section should be read in conjunction with the consolidated financial statements
and accompanying notes thereto and other sections contained in this Prospectus.
The principal business of the Association consists of accepting deposits from
the general public and investing these funds primarily in loans, investment
securities and short-term liquid investments. The Association's loans consist
primarily of loans secured by residential real estate located in its market
areas, commercial real estate loans and consumer loans.
The Association's net income is dependent primarily on its net interest
income, which is the difference between interest earned on interest-earning
assets and the interest paid on interest-bearing liabilities. Net interest
income is a function of the Association's "interest rate spread," which is the
difference between the average yield earned on interest-earning assets and the
average rate paid on interest-bearing liabilities. The interest rate spread is
affected by regulatory, economic and competitive factors that influence interest
rates, loan demand and deposit flows. To a lesser extent, the Association's net
income also is affected by the level of general and administrative expenses and
the level of other income, which primarily consists of service charges and other
fees.
The operations of the Association are significantly affected by
prevailing economic conditions, competition and the monetary, fiscal and
regulatory policies of government agencies. Lending activities are influenced by
the demand for and supply of housing, competition among lenders, the level of
interest rates and the availability of funds. Deposit flows and costs of funds
are influenced by prevailing market rates of interest, primarily on competing
investments, account maturities and the levels of personal income and savings in
the Association's market area.
Historically, the Association's mission has been to originate loans on
a profitable basis to the communities it serves. In seeking to accomplish this
mission, the Board of Directors and management have adopted a business strategy
designed (i) to maintain the Association's capital level in excess of regulatory
requirements; (ii) to maintain the Association's asset quality; (iii) to
maintain, and if possible, increase the Association's earnings; and (iv) to
manage the Association's exposure to changes in interest rates.
Financial Condition
June 30, 1997 compared to June 30, 1996
Total assets decreased approximately $1.7 million or 2.5%, to $62.2
million at June 30, 1997 from $63.9 million at June 30, 1996. This decrease in
total assets was primarily the result of a $3.4 million decrease in cash and
cash equivalents, including short-term interest bearing deposits in other banks
and federal funds sold, which more than offset a $1.9 million increase in loans
receivable. The
29
<PAGE>
decrease in cash and cash equivalents was primarily due to management's decision
during the year ended June 30, 1997 to improve the Association's net interest
spread by investing excess liquid assets in higher yielding loans, as well as
reducing interest expense by decreasing the level of certificate accounts.
Management's strategy resulted in an increase in total loans receivable, which
primarily consisted of a $769,000 increase in residential mortgage loans and a
$1.4 million increase in commercial loans secured by real estate, including
participating interests purchased from other lenders.
Total liabilities decreased approximately $1.8 million, or 3.0%, to
$57.5 million at June 30, 1997 from $59.3 million at June 30, 1996. This
decrease was primarily the result of a $1.8 million decrease in total deposits
to approximately $56.1 million at June 30, 1997 from $57.9 million at June 30,
1996. This decrease in deposits consisted of a decrease in time deposits of
approximately $2.1 million, resulting from management's decision to lower the
Association's interest expense, and an increase of approximately $300,000 in
other deposit accounts.
Total equity of the Association increased approximately $151,000 to
$4.75 million at June 30, 1997 from $4.60 million at June 30, 1990, due to net
income of approximately $134,000 and a decrease of approximately $17,000 in
unrealized losses on available-for-sale securities for the year ended June 30,
1997.
Results of Operations
Comparison of Operating Results for the Years Ended June 30, 1997 and 1996
Performance Summary. Net income for the year ended June 30, 1997 was
approximately $134,000, a decrease of $160,000, or 54.5%, from net income of
$294,000 for the year ended June 30, 1996. This decrease was primarily due to an
increase in non-interest expenses of $337,000, which included a one time
assessment of $383,000 for federal insurance premiums; an increase in provision
for loan losses of $120,000, and a decrease in non-interest income of $28,000.
These items more than offset the positive effects of a $250,000 increase in net
interest income, producing a decrease of $234,000 in income before provision for
income taxes of $221,000 for the year ended June 30, 1997 as compared to
$455,000 for the year ended June 30, 1996. For the years ended June 30, 1997 and
1996, the returns on average assets were .22% and .46%, respectively, while the
returns on average equity were 2.87% and 6.56%, respectively.
Net Interest Income. Net interest income increased by approximately
$250,000, or 15.1%, to $1,902,000 for the year ended June 30, 1997 from
$1,652,000 for the year ended June 30, 1996. This reflects a decrease of
$67,000, or 1.4%, in interest income to $4,658,000 in fiscal 1997 from
$4,725,000 in fiscal 1996 while interest expense was decreasing by $317,000, or
10.3%, to $2,756,000 in fiscal 1997 from $3,073,000 in fiscal 1996. The increase
in net interest margin was primarily from the decrease in both average balances
and rates of interest paid on certificate accounts.
For the year ended June 30, 1997, the average yield on interest-earning
assets was 7.69% compared to 7.52% for the year ended June 30, 1996. The average
cost of interest-bearing liabilities
30
<PAGE>
was 4.93% for the year ended June 30, 1997, a decrease from 5.26% for the year
ended June 30, 1996. The average balance of interest-earning assets decreased by
$2.3 million or 3.6% to $60.6 million for year ended June 30, 1997, compared to
$62.9 million for the year ended June 30, 1996. The average balance of
interest-bearing liabilities decreased by $2.5 million or 4.3% to $55.9 million
for the year ended June 30, 1997, compared to $58.4 million for the year ended
June 30, 1996.
The average interest rate spread increased to 2.76% for the year ended
June 30, 1997 from 2.26% for the year ended June 30, 1996. The average net
interest income margin increased to 3.14% for the year ended June 30, 1997 from
2.63% for the year ended June 30, 1996.
31
<PAGE>
Yields Earned and Rates Paid
The following table presents for the periods indicated the total dollar
amount of interest income from average interest earning assets and the resultant
yields, as well as the interest expense on average interest bearing liabilities,
expressed both in dollars and rates. No tax equivalent adjustments were made.
All average balances are monthly average balances. Non-accruing loans have been
included in the table as loans carrying a zero yield.
<TABLE>
<CAPTION>
Year Ended June 30,
--------------------------------------------------------------------------------------------
1997 1996 1995
---------------------------- ----------------------------- ----------------------------
Average Interest Average Interest Average Interest
Outstanding Earned/ Yield/ Outstanding Earned/ Yield/ Outstanding Earned/ Yield/
Balance Paid Rate Balance Paid Rate Balance Paid Rate
------- ---- ---- ------- ---- ---- ------- ---- ----
(Dollars in Thousands)
Interest-Earning Assets:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Loans receivable(1)................ $53,903 $4,250 7.88% $53,033 $4,157 7.84% $55,460 $4,325 7.80%
Mortgage-backed securities......... 383 27 7.05 468 35 7.49 552 33 5.98
Investment securities.............. 2,402 140 5.83 5,298 307 5.79 5,845 329 5.63
FHLB stock......................... 510 37 7.25 510 37 7.25 510 36 7.06
Other investments.................. 3,382 204 6.03 3,547 189 5.33 1,192 65 5.45
-------- ------- ---- ------- ------- ---- ------- ------ ----
Total interest-earning assets(1).. $60,580 4,658 7.69 $62,856 4,725 7.52 $63,559 4,788 7.53
======= ------ ======= ------ ======= ------
Interest-Earning Liabilities:
Savings deposits................... $ 5,856 174 2.97 $ 5,593 178 3.18 $ 5,777 204 3.53
Demand and NOW deposits............ 9,745 309 3.17 9,632 317 3.29 9,990 332 3.32
Certificate accounts............... 40,182 2,267 5.64 43,010 2,570 5.98 42,326 2,254 5.33
Escrow deposits.................... 115 6 5.22 147 8 5.44 193 11 5.69
Borrowings......................... --- --- --- --- --- --- 1,542 90 5.83
------- ------- ----- ------- ------- ----- ------- ------- ----
Total interest-bearing liabilities $55,898 2,756 4.93 $58,382 3,073 5.26 $59,828 2,891 4.83
======= ------- ======= ------- ======= -------
Net interest income................. $1,902 $1,652 $1,897
====== ====== ======
Net interest rate spread............ 2.76% 2.26% 2.70%
==== ==== ====
Net earning assets.................. $4,682 $4,474 $3,731
====== ====== ======
Net yield on average interest-
earning assets...................... 3.14% 2.63% 2.98%
==== ==== ====
Average interest-earning assets to
average interest-bearing liabilities 1.08x 1.08x 1.06x
===== ===== =====
</TABLE>
- -----------------
(1) Calculated net of deferred loan fees, loan discounts, loans in process and
loss reserves.
32
<PAGE>
The following table presents the weighted average yields earned on
loans, investments and other interest-earning assets, and the weighted average
rates paid on savings deposits and the resultant interest rate spreads at the
dates indicated. Weighted average balances are based on monthly balances.
At June 30,
------------
1997 1996
---- ----
Weighted average yield on:
Loans receivable .................... 7.89% 7.84%
Mortgage-backed securities .......... 7.52 7.46
Investment securities ............... 5.94 5.61
Other interest-earning assets ....... 5.95 5.53
Combined weighted average yield on
interest-earning assets ........ 7.71 7.50
Weighted average rate paid on:
Savings deposits .................... 3.11 3.06
Demand and NOW deposits ............. 2.93 3.24
Certificate accounts ................ 5.71 6.07
Other interest-bearing liabilities .. 5.50 5.50
Combined weighted average rate paid
on interest-bearing liabilities . 4.94 5.31
Spread ............................... 2.77 2.19
Provision for Loan Losses. During the year ended June 30, 1997, the
Association recorded a provision for loan losses of $145,000 compared to $25,000
for the year ended June 30, 1996. This provision was recorded due to significant
growth of $1.4 million or 30.6% in commercial real estate loans in the year
ended June 30, 1997. The increased provision for loan losses is based on the
continued growth in this type of lending as well as other commercial real estate
lending, including participations, which has perceived higher credit risk than
traditional thrift lending on residential real estate loans.
During the year ended June 30, 1997, the Association's nonperforming
loans increased from $27,000 to $176,000, represented by two residential loans.
This increase did not have a significant effect on the Association's provision
for loan losses as management expects minimal losses, if any, related to these
two loans.
Management will continue to monitor its allowance for loan losses and
make additions to the allowance through the provision for loan losses as
economic conditions and other factors dictate. Although the Association
maintains its allowance for loan losses at a level which it considers to be
adequate to provide for loan losses, there can be no assurance that future
losses will not exceed estimated amounts or that additional provisions for loan
losses will not be required in the future.
Non-Interest Income. For the year ended June 30, 1997, non-interest
income decreased by approximately $28,000 or 26.0%, to $78,000 from $106,000 for
the year ended June 30, 1996. This
33
<PAGE>
decrease is primarily from a decrease in gains on the sale of loans receivable
of $14,000 and a decrease in other non-interest income of $15,000.
Non-Interest Expense. Non-interest expense increased by approximately
$337,000 or 26.4%, to $1,615,000 for the year ended June 30, 1997 from
$1,278,000 for the year ended June 30, 1996. This increase was primarily due to
the increase in federal deposit insurance expense of $327,000 or 243.2% for the
year ended June 30, 1997. The Savings Association Insurance Fund (the "SAIF")
made a one time assessment to all associations during the year ended June 30,
1997 to recapitalize that fund. The Association's portion of that one time
assessment was approximately $383,000. The rate of deposit insurance declined
beginning January 1, 1997 as a result of the one time assessment. See
"Regulation - Insurance of Accounts and Regulation by the FDIC." In addition, in
the future, non-interest expense may increase due to expenses associated with
the ESOP, other benefit programs and the costs of being a public company.
Income Taxes. The provision for income taxes decreased by approximately
$74,000 or 46.1% to $87,000 for the year ended June 30, 1997 from $161,000 for
the year ended June 30, 1996. This decrease results from the decrease in income
before the tax provision. The Association's effective tax rates were 39.4% and
35.4% for the years ended June 30, 1997 and 1996, respectively.
The Association is generally taxed at a federal rate of 34% based on
the IRS tax rate schedule for corporations. The Association is also subject to a
Maryland franchise tax based on earnings at a flat rate of 7% of taxable income.
This produces a combined federal and Maryland tax rate of 38.6% when the
deductibility of the Maryland tax for federal purposes is considered. Variances
from this rate in any given year are the result of certain items of income or
expense not being included in or deducted from taxable income; and, from changes
in the tax estimates of prior periods. The decrease in the provision for income
taxes for the year ended June 30, 1997 is primarily the result of the
corresponding $234,000 decrease in income before taxes.
34
<PAGE>
Rate Volume Analysis
The following schedule presents the dollar amount of changes in
interest income and interest expense for major components of interest-earning
assets and interest-bearing liabilities. It distinguishes between the changes
related to outstanding balances and that due to the changes in interest rates.
For each category of interest-earning assets and interest-bearing liabilities,
information is provided on changes attributable to (i) changes in volume (i.e.,
changes in volume multiplied by old rate) and (ii) changes in rate (i.e.,
changes in rate multiplied by old volume). For purposes of this table, changes
attributable to both rate and volume, which cannot be segregated, have been
allocated proportionately to the change due to volume and the change due to
rate.
<TABLE>
<CAPTION>
Year Ended June 30,
------------------------------------------------------------------------
1996 vs. 1997 1995 vs. 1996
----------------------------------- --------------------------------
Increase Increase
(Decrease) (Decrease)
Due to Total Due to Total
------------------- Increase ------------------ Increase
Volume Rate (Decrease) Volume Rate (Decrease)
------ ---- ---------- ------ ---- ----------
(Dollars in Thousands)
Interest-earning assets:
<S> <C> <C> <C> <C> <C> <C>
Loans receivable .................................... $ 68 $ 25 $ 93 $(190) $ 22 $(168)
Mortgage-backed securities .......................... (6) (2) (8) (5) 7 2
Investment securities ............................... (169) 2 (167) (31) 9 (22)
Other ............................................... (10) 25 15 130 (5) 125
----- ----- ----- ----- ----- -----
Total interest-earning assets ..................... $(117) $ 50 (67) $ (96) $ 33 (63)
===== ===== ----- ===== ===== -----
Interest-bearing liabilities:
Savings deposits .................................... $ 8 $ (12) (4) $ (7) $ (19) (26)
Demand and NOW deposits ............................. 3 (11) (8) (12) (3) (15)
Borrowings .......................................... -- -- -- (90) -- (90)
Certificate accounts ................................ (169) (134) (303) 38 278 316
Escrow deposits ..................................... (2) -- (2) (3) -- (3)
Total interest-bearing liabilities ................ $(160) $(157) (317) $ (74) $ 256 182
===== ===== ----- ===== ===== -----
Net interest income .................................. $ 250 $(245)
===== =====
</TABLE>
35
<PAGE>
Asset/Liability Management
One of the Association's principal financial objectives is to achieve
long-term profitability while reducing its exposure to fluctuations in interest
rates. The Association has sought to reduce exposure of its earnings to changes
in market interest rates by managing the mismatch between asset and liability
maturities and interest rates. The principal element in achieving this objective
has been to increase the interest-rate sensitivity of the Association's assets
by originating loans with interest rates subject to periodic repricing to market
conditions. Accordingly, the Association has emphasized the origination of one-
to three-year adjustable rate mortgage loans, balloon loans, short-term and
adjustable-rate commercial loans, and consumer loans for retention in its
portfolio.
An asset or liability is interest rate sensitive within a specific time
period if it will mature or reprice within that time period. If the
Association's assets mature or reprice more quickly or to a greater extent than
its liabilities, the Association's net portfolio value and net interest income
would tend to increase during periods of rising interest rates but decrease
during periods of falling interest rates. If the Association's assets mature or
reprice more slowly or to a lesser extent than its liabilities, the
Association's net portfolio value and net interest income would tend to decrease
during periods of rising interest rates but increase during periods of falling
interest rates.
The Association's Board of Directors has formulated an Interest Rate
Risk Management policy designed to promote long-term profitability while
managing interest-rate risk. The Board of Directors has established an
Asset/Liability Committee which consists primarily of the management team of the
Association. This committee meets periodically and reports to the Board of
Directors quarterly concerning asset/liability policies, strategies and the
Association's current interest rate risk position. The committee's first
priority is to structure and price the Association's assets and liabilities to
maintain an acceptable interest rate spread while reducing the net effects of
changes in interest rates.
Management's principal strategy in managing the Association's interest
rate risk has been to maintain short and intermediate term assets in the
portfolio, including one and three year adjustable rate mortgage loans, as well
as increased levels of commercial and consumer loans, which typically are for
short or intermediate terms and carry higher interest rates than residential
mortgage loans. In addition, in managing the Association's portfolio of
investment securities and mortgage-backed and related securities, management
seeks to purchase securities that mature on a basis that approximates as closely
as possible the estimated maturities of the Association's liabilities or
purchase securities that have adjustable rate provisions. The Association does
not engage in hedging activities.
In addition to shortening the average repricing of its assets, the
Association has sought to lengthen the average maturity of its liabilities by
adopting a tiered pricing program for its certificates of deposit, which
provides higher rates of interest on its longer term certificates in order to
encourage depositors to invest in certificates with longer maturities. This
policy is blended with management's strategy for reducing the overall balance in
certificate accounts in order to reduce the Association's interest expense.
36
<PAGE>
Net Portfolio Value. In order to encourage associations to reduce their
interest rate risk, the OTS adopted a rule incorporating an interest rate risk
("IRR") component into the risk-based capital rules. The IRR component is a
dollar amount that will be deducted from total capital for the purpose of
calculating an institution's risk-based capital requirement and is measured in
terms of the sensitivity of its net portfolio value ("NPV") to changes in
interest rates. NPV is the difference between incoming and outgoing discounted
cash flows from assets, liabilities, and off-balance sheet contracts. An
institution's IRR is measured as the change to its NPV as a result of a
hypothetical 200 basis points ("bp") change in market interest rates. A
resulting change in NPV of more than 2% of the estimated market value of its
assets will require the institution to deduct from its capital 50% of that
excess change. The rules provide that the OTS will calculate the IRR component
quarterly for each institution. Management reviews the OTS measurements on a
quarterly basis. In addition to monitoring selected measures on NPV, management
also monitors effects on net interest income resulting from increases or
decreases in rates. This measure is used in conjunction with NPV measures to
identify excessive interest rate risk. The following table presents the
Association's NPV at June 30, 1997, as calculated by the OTS, based on
information provided to the OTS by the Association.
NPV as % of
Portfolio Value
Net Portfolio Value of Assets
Change --------------------------------------- ---------------------
in Rates $ Amount $ Change % Change NPV Ratio % Change
-------- -------- -------- -------- --------- --------
(Dollars in Thousands)
+400 $3,154 $(3,681) (54)% 5.39% (5.27)%
+300 4,150 (2,685) (39) 6.92 (3.74)
+200 5,143 (1,692) (25) 8.37 (2.29)
+100 6,072 (763) (11) 9.66 (1.00)
Static 6,835 --- --- 10.66 ---
(100) 7,273 438 6 11.18 .52
(200) 7,270 435 6 11.07 .41
(300) 7,075 340 4 10.71 .05
(400) 6,979 144 2 10.48 (.18)
In the above table, the first column on the left presents the basis
points increments of yield curve shifts. The second column presents the overall
dollar amount of NPV at each basis point increment. The third and fourth columns
present the Association's actual position in dollar change and percentage change
in NPV at each basis point increment. The remaining columns present the
Association's percentage and percentage change in its NPV as a percentage of
portfolio value of assets.
Had it been subject to the IRR component at June 30, 1997 the
Association would have been considered to have had a greater than normal level
of interest rate exposure and a deduction from capital of $89,000 would have
been required. Although the OTS has informed the Association that it is not
subject to the IRR component discussed above, the Association is still subject
to interest rate risk and, as can be seen above, rising interest rates will
reduce the Association's NPV. The OTS has the authority to require otherwise
exempt institutions to comply with the rule concerning interest rate risk. See
"Regulation - Regulatory Capital Requirements."
37
<PAGE>
Certain shortcomings are inherent in the method of analysis presented
in the computation of NPV. Although certain assets and liabilities may have
similar maturities or periods within which they will reprice, they may react
differently to changes in market interest rates. The interest rates on certain
types of assets and liabilities may fluctuate in advance of changes in market
interest rates, while interest rates on other types may lag behind changes in
market rates.
The Association's Board of Directors is responsible for reviewing the
Association's asset and liability policies. The Board reviews interest rate risk
and trends on a quarterly basis and liquidity, capital ratios and requirements,
on a monthly. Management is responsible for administering the policies and
determinations of the Board of Directors with respect to the Bank's assets and
liability goals and strategies.
Notwithstanding its efforts with respect to asset/liability management,
the Association remains subject to IRR, and expects that its profit margin will
decrease if interest rates rise.
Liquidity
The primary investment activity of the Association is originating one-
to four-family residential mortgages, commercial real estate loans, and consumer
loans to be held to maturity. For the fiscal years ended June 30, 1997 and 1996
the Association originated loans for its portfolio in the amount of $8.9 million
and $9.0 million, respectively. For the same two fiscal years, these activities
were funded from repayments of $7.2 million and $9.5 million, respectively, and
sales and participations of $1.3 million and $990,000, respectively.
The Association is required to maintain minimum levels of liquid assets
under government regulations. The Association's short-term liquidity is
determined by adding (1) cash on hand, (2) daily investable deposits, (3) U.S.
Government agency obligations with maturities of less than one year and (4)
accrued interest on unpledged liquid assets. Securities with maturities of
greater than one year and less than five years are added to short-term liquidity
to equal the Association's total liquidity. The Association's liquidity ratio is
determined by dividing the liquidity by the average total liabilities of the
preceding month.
The Association's most liquid assets are cash and cash equivalents,
which include short-term investments. At June 30, 1997 and 1996, cash and cash
equivalents were $2.4 million and $5.8 million, respectively. In addition, the
Association has used jumbo certificates of deposit as a source of funds.
Deposits of $100,000 or more represented $5.7 million at June 30, 1997 (of which
$4.2 million were jumbo certificates of deposit) and $5.2 million at June 30,
1996, or 10.1% and 8.9% of total deposits, respectively. The regulatory minimum
for the Association is 1.0% short-term liquidity and 5.0% total liquidity. The
Association has always met the liquidity requirements. The Association's
eligible short-term liquidity ratios were 4.4% and 12.1%, respectively, at June
30, 1997 and 1996. The Association's eligible total liquidity ratios were 9.8%
and 15.4%, respectively, at June 30, 1997 and 1996.
38
<PAGE>
Liquidity management for the Association is both an ongoing and
long-term function of the Association's asset/liability management strategy.
Excess funds, when applicable, generally are invested in overnight deposits at a
correspondent bank and at the FHLB of Atlanta. Currently when the Association
requires funds, beyond its ability to general deposits, additional sources of
funds are available through the FHLB of Atlanta. The Association has the ability
to pledge its FHLB of Atlanta stock or certain other assets as collateral for
such advances. The Association has not used FHLB advances during the past two
fiscal years, but may use FHLB advances in the future to fund loan demand in
excess of available funds. Management and the Board of Directors believe that
due to significant amounts of adjustable rate mortgage loans that could be sold
and the Association's ability to acquire funds from the FHLB of Atlanta, the
Association's liquidity is adequate.
Year Ended June 30,
----------------------------------
1997 1996 1995
------- ------- --------
(In Thousands)
Net income .............................. $ 134 $ 294 $ 433
Adjustment to reconcile
net income to net cash from
operating activities .................. 118 78 (302)
------- ------- -------
Net cash from operating activities ...... 252 372 131
Net cash from investing activities ...... (1,937) 4,333 (9)
Net cash from financing activities ...... (1,739) (750) (823)
------- ------- -------
Net change in cash and cash
equivalents ........................... (3,424) 3,955 (701)
Cash and cash equivalents at
beginning of period ................... 5,801 1,846 2,547
------- ------- -------
Cash and cash equivalents at
end of period ......................... $ 2,377 $ 5,801 $ 1,846
======= ======= =======
The Association's principal sources of funds are deposits, loan
repayments and prepayments, and other funds provided by operations. While
scheduled loan repayments are relatively predictable, deposit flows and early
loan prepayments are more influenced by interest rates, general economic
conditions, and competition. The Association maintains investments in liquid
assets based upon management's assessment of (1) need for funds, (2) expected
deposit flows, (3) yields available on short-term liquid assets and (4)
objectives of the asset/liability management program.
OTS regulations presently require the Association to maintain an
average daily balance of investments in United States Treasury, federal agency
obligations and other investments having maturities of five years or less in an
amount equal to 5% of the sum of the Association's average daily balance of net
withdrawable deposit accounts and borrowings payable in one year or less. The
liquidity requirement, which may be changed from time to time by the OTS to
reflect changing economic conditions, is intended to provide a source of
relatively liquid funds upon which the Association may rely, if necessary, to
fund deposit withdrawals or other short-term funding needs. At June 30, 1997,
the Association's regulatory liquidity was 9.8%. For the last five fiscal years,
the Association was in compliance with such requirement and management believes
that the Association's liquidity is adequate. It should be noted that the
Association has an immediately accessible line of credit with the FHLB Atlanta
for $8.0 million. On June 30, 1997, the Association had commitments to originate
fixed-rate commercial and residential loans totaling $1.8 million, and variable
rate commercial and residential real estate mortgage loans totaling $49,000.
Loan commitments are generally for 60 days. The Association considers its
liquidity and capital reserves sufficient to meet its outstanding short- and
long-term needs.
39
<PAGE>
The Association is required by OTS regulations to meet certain minimum
capital requirements, which must be generally as stringent as the requirements
established for banks. Current capital requirements call for tangible capital of
1.5% of adjusted total assets, core capital (which for the Association consists
solely of tangible capital) of 3.0% of adjusted total assets and risk-based
capital (which for the Association consists of core capital and general
valuation allowances) of 8% of risk-weighted assets (assets are weighted at
percentage levels ranging from 0% to 100% depending on their relative risk). The
OTS has proposed to amend the core capital requirement so that those
associations that do not have the highest examination rating and an acceptable
level of risk will be required to maintain core capital of from 4% to 5%,
depending on the association's examination rating and overall risk. The
Association does not anticipate that it will be adversely affected if the core
capital requirements regulations are amended as proposed.
The following table summarizes the Association's regulatory capital
requirements and actual capital at June 30, 1997. (See Note 11 of Notes to
Consolidated Financial Statements for a reconciliation of capital under
generally accepted accounting principles and regulatory capital amounts.)
<TABLE>
<CAPTION>
Excess of Actual
Capital Over Current
Actual Capital Current Requirement Requirement
------------------- ------------------- ---------------------
Amount Percent Amount Percent Amount Percent Asset Total
------- ------- -------- ------- ---------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Tangible Capital .......... $ 4,755 7.6% $ 934 1.5% $ 3,821 6.1% $62,249
Core Capital .............. 4,755 7.6 1,867 3.0 2,888 4.7 62,249
Risk-based Capital ........ 5,025 14.6 2,748 8.0 2,277 6.6 34,344
</TABLE>
At June 30, 1997, the Association had a commitment for $27,500 of
capital expenditures related to computer equipment and data processing.
Impact of Inflation and Changing Prices
The financial statements and related data presented herein have been
prepared in accordance with generally accepted accounting principles which
require the measurement of financial position and operating results in terms of
historical dollars without considering changes in the relative purchasing power
of money over time due to inflation. The primary impact of inflation on the
operations of the Association is reflected in increased operating costs. Unlike
most industrial companies, virtually all of the assets and liabilities of a
financial institution are monetary in nature. As a result, interest rates,
generally, have a more significant impact on a financial institution's
performance than does inflation. Interest rates do not necessarily move in the
same direction or to the same extent as the prices of goods and services.
40
<PAGE>
Current Accounting Issues
Statement of Financial Accounting Standards (SFAS) No. 125, "Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities" was issued by the Financial Accounting Standards Board (FASB) in
June 1996. This statement provides that transfers of financial assets be
recognized as sales only when certain specified criteria related to the
transferor surrendering control of the assets are met. These criteria are more
restrictive than under previous generally accepted accounting principles. The
provisions of this statement will affect the accounting for certain transactions
commonly entered into by community financial institutions such as repurchase
agreements, bankers acceptances and participation loans. The statement is
effective for transactions occurring after December 31, 1996 and is to be
applied prospectively.
SFAS No. 127, "Deferral of the Effective Date of Certain Provisions of
FASB Statement No. 125" was issued in December 1996. This statement defers, for
one year, the effective date of Statement No. 125 for repurchase agreements,
dollar-roll, securities lending and similar transactions.
The effect, on the Association's financial position and results of
operations, of implementing Statement No. 125 in 1997 was not material.
SFAS No. 130, "Reporting Comprehensive Income" was issued in June 1997.
This statement requires that comprehensive income - made up of all revenues,
expenses, gains and losses - be reported and displayed in an entity's financial
statements with the same prominence as its other financial statements.
Currently, the only item that would be presented as a component of its net
income is the change during the year in unrealized gain or loss on available for
sale securities. The statement, which is effective for years beginning after
December 15, 1997, will not affect the Association's financial position or its
results of operations.
41
<PAGE>
BUSINESS
General
Located in Lutherville, Maryland, the Association is a financial
institution primarily engaged in the business of attracting savings deposits
from the general public and investing such funds in permanent mortgage loans
secured by one- to four-family residential real estate located primarily in
central Baltimore County and northern Baltimore City, Maryland. Through its
branch office located in Glen Burnie, a suburb to the south of Baltimore, the
Association also services Anne Arundel County, Maryland. In addition to
permanent mortgage loans, the Association also originates, to a lesser extent,
loans for the construction of one- to four-family real estate, commercial loans
secured by multi-family real estate (over four units) and nonresidential real
estate, and consumer loans, including home equity lines of credit, home
improvement loans, and loans secured by savings deposits. The Association
invests in U.S. government obligations, interest-bearing deposits in other
financial institutions, mortgage-backed securities, and other investments
permitted by applicable law.
Lending Activities
General. The principal lending activity of the Association is
originating first mortgage loans secured by owner-occupied one- to four-family
residential properties located in its primary market areas. In addition, in
order to increase the yield and the interest rate sensitivity of its portfolio
and in order to provide more comprehensive financial services to families and
community businesses in the Association's primary market area, Wyman Park also
originates commercial real estate, multi-family, consumer (secured and
unsecured), land, and second mortgage loans. See "- Originations, Purchases and
Sales of Loans." The Association reserves the right in the future to adjust or
discontinue any product offerings to respond to competitive or economic factors.
42
<PAGE>
Loan Portfolio Composition. The following information concerning the
composition of the Association's loan portfolios in dollar amounts and in
percentages (before deductions for loans in process, deferred fees and discounts
and allowances for losses) as of the dates indicated.
June 30,
-------------------------------------------
1997 1996
------------------ -------------------
Amount Percent Amount Percent
------ ------- ------ -------
(Dollars in Thousand)
Real Estate Loans:
One- to four-family ....... $46,346 82.92% $45,669 84.82%
Multi-family .............. 211 .38 128 .24
Commercial ................ 5,806 10.39 4,448 8.26
Construction or development 150 .27 270 .50
------- ------ ------- ------
Total real estate loans . 52,513 93.96 50,515 93.82
------- ------ ------- ------
Other Loans:
Consumer Loans:
Deposit account loans .... 176 .31 138 .26
Home equity .............. 3,184 5.70 3,189 5.92
Home improvement ......... 16 .03 -- --
Total consumer loans .... 3,376 6.04 3,327 6.18
------- -------- ------- ------
Total loans, gross ...... 55,889 100.00% 53,842 100.00%
------- ======== ------- ======
Less:
Loans in process .......... (231) (270)
Deferred fees and discounts (199) (203)
Allowance for losses ...... (270) (125)
------- -------
Total loans receivable, net $55,189 $53,244
======= =======
43
<PAGE>
The following table shows the composition of the Association's loan
portfolios by fixed- and adjustable-rate at the dates indicated.
June 30,
----------------------------------------
1997 1996
---------------- ----------------
Amount Percent Amount Percent
------ ------- ------ -------
(Dollars in Thousand)
Fixed-Rate Loans:
Real estate:
One- to four-family .............. $30,505 54.58% $28,093 52.18%
Multi-family ..................... -- -- 78 .14
Commercial ....................... 4,596 8.22 3,424 6.36
Construction or development ...... 150 .27 270 .50
------- ------ ------- ------
Total real estate loans ....... 35,251 63.07 31,865 59.18
Consumer .......................... 192 .34 138 .26
------- ------ ------- ------
Total fixed-rate loans ........ 35,443 63.41 32,003 59.44
------- ------ ------- ------
Adjustable-Rate Loans:
Real estate:
One- to four-family .............. 15,841 28.34 17,576 32.64
Multi-family ..................... 211 .38 50 .09
Commercial ....................... 1,210 2.17 1,024 1.90
------- ------ ------- ------
Total real estate loans ....... 17,262 30.89 18,650 34.63
Consumer .......................... 3,184 5.70 3,189 5.93
------- ------ ------- ------
Total adjustable-rate loans ... 20,446 36.59 21,839 40.56
------- ------ ------- ------
Total loans ................... 55,889 100.00% 53,842 100.00%
------- ====== ------- ======
Less:
Loans in process .................. (231) (270)
Deferred fees and discounts ....... (199) (203)
Allowance for loan losses ......... (270) (125)
------- -------
Total loans receivable, net .... $55,189 $53,244
======= =======
44
<PAGE>
The following schedule illustrates the interest rate sensitivity of the
Association's loan portfolio at June 30, 1997. Mortgages which have adjustable
or renegotiable interest rates are shown as maturing in the period during which
the contract is due. The schedule does not reflect the effects of possible
prepayments or enforcement of due-on-sale clauses.
Real Estate
---------------------------------------------------------
Multi-family and Construction
One- to Four-Family Commercial or Development
------------------- ---------------- -----------------
Weighted Weighted Weighted
Average Average Average
Amount Rate Amount Rate Amount Rate
------ ---- ------ ---- ------ ----
(Dollars in Thousands)
Due During
Years Ending
June 30,
- ------------------
1998(1) .......... $17,811 7.53% $ 485 9.14% $ 150 8.25%
1999 and 2000 .... 5,396 7.03 1,622 9.86 -- --
2001 and 2002 .... 3,063 8.00 229 9.45 -- --
2003-2007 ........ 6,138 7.61 1,210 9.92 -- --
2008-2017 ........ 10,824 7.05 1,742 9.42 -- --
2018 and following 3,114 7.57 729 7.34 -- --
------- ------- -------
$46,346 7.40 $ 6,017 9.37 $ 150 8.25%
======= ======= =======
Consumer Total
---------------- -------------------
Weighted Weighted
Average Average
Amount Rate Amount Rate
------ ---- ------ ----
Due During
Years Ending
June 30,
- ------------------
1998(1) .................... $ 3,360 9.56% $21,806 7.88%
1999 and 2000 .............. 3 9.25 7,021 7.68
2001 and 2002 .............. 13 9.52 3,305 8.11
2003-2007 .................. -- -- 7,348 7.95
2008-2017 .................. -- -- 12,566 7.38
2018 and following ......... -- -- 3,843 7.53
------- -------
$ 3,376 9.56 $55,889 7.74
======= =======
- ----------
(1) Includes demand loans and loans having no stated maturity.
The total amount of loans due after June 30, 1997 which have
predetermined interest rates is $35,443,000 while the total amount of loans due
after such dates which have floating or adjustable interest rates is
$20,446,000.
45
<PAGE>
Under federal law, the aggregate amount of loans that the Association
is permitted to make to any one borrower is generally limited to 15% of
unimpaired capital and surplus (25% if the security for such loan has a "readily
ascertainable" value or 30% for certain residential development loans). At June
30, 1997, based on the above, the Association's regulatory loan-to-one borrower
limit was approximately $750,000. On the same date, the Association had no
borrowers with outstanding balances in excess of this amount. As of June 30,
1997, the largest dollar amount of indebtedness to one borrower or group of
related borrowers was a $630,000 loan secured by a strip shopping center. The
next two largest loans had outstanding balances of $627,000 and $583,000,
respectively, and were secured by warehouse and offices, and a fast food
restaurant and retail establishment. Such loans are performing in accordance
with their terms.
Loan applications are accepted by salaried employees at the
Association's offices. Loan applications are presented for approval to the Loan
or Executive Loan Committees of the Board of Directors or to the full Board of
Directors, depending on the loan amount. Generally, the Loan Committee acts with
respect to loan requests equal to or less than $250,000 (except for single
family loan requests conforming to certain criteria, as to which the Loan
Committee may approve amounts up to $500,000, while the Executive Loan Committee
acts with respect to loan requests for more than $250,000 up to $500,000).
Decisions on loan applications are made on the basis of detailed applications
and property valuations (consistent with the Association's written lending
policy) by qualified independent appraisers. The loan applications are designed
primarily to determine the borrower's ability to repay and include income,
length of employment, past credit history and the amount of current
indebtedness. Significant items on the application are verified through use of
credit reports, financial statements, tax returns and/or confirmations. The
Association is an equal opportunity lender.
One- to Four-Family Residential Real Estate Lending
The cornerstone of the Association's lending program has long been the
origination of long-term permanent loans secured by mortgages on owner-occupied
one- to four-family residences. At June 30, 1997, $46.3 million, or 82.9% of the
Association's gross loan portfolio consisted of permanent loans on one- to
four-family residences. At that date, the average outstanding residential loan
balance was approximately $73,000 and the largest outstanding residential loan
had a principal balance of $382,000. Virtually all of the residential loans
originated by Wyman Park are secured by properties located in the Association's
market area. See "- Originations, Purchases and Sales of Loans."
Although the Bank has generally sold its fixed-rate loan production
since 1989, historically, Wyman Park originated for retention in its own
portfolio 30-year fixed-rate loans secured by one- to four-family residential
real estate. Beginning in the mid-1980s, in order to reduce its exposure to
changes in interest rates, Wyman Park began to originate adjustable rate
mortgage loans ("ARMs"), subject to market conditions and consumer preference.
The Association has from time to time sold some of its ARM production, which
conforms to standards promulgated by the Federal Home Loan Mortgage Corporation
("FHLMC"), and as a result of continued consumer demand, particularly during
periods of relatively low interest rates, Wyman Park has also continued to
originate fixed-rate residential loans in amounts and at rates and terms which
are monitored for
46
<PAGE>
compliance with the Association's asset/liability management policy. Currently,
the Association originates both conforming and jumbo construction and jumbo
fixed-rate permanent loans with maturities of up to 30 years. At June 30, 1997,
the Association had $30.5 million of fixed-rate permanent residential loans,
constituting 54.6% of the Association's loan portfolio at such date. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Asset/Liability Management."
The Association's ARM and balloon loans are offered at rates, terms and
points determined in accordance with market and competitive factors. The
Association's current one- to four-family residential ARMs are fully amortizing
loans with contractual maturities of up to 30 years. Balloon loans also have
terms of up to 30 years. Though from time to time "teaser" rates are offered,
applicants are qualified pursuant to FHLMC guidelines, which permits
qualifications at less than the fully indexed rate, and no ARMs allow for
negative amortization. The interest rates on the ARMs originated by Wyman Park
are generally subject to adjustment at one-, three- and five-year intervals
based on a margin over the Treasury Securities Constant Maturity Index.
Decreases or increases in the interest rate of the Association's ARMs are
generally limited to 6% above the initial interest rate over the life of the
loan, and up to a 2% per adjustment period per year or per adjustment period.
The Association's ARMs may be convertible into fixed-rate loans, depending on
the program selected, and do not contain prepayment penalties. Loans are not
assumable. At June 30, 1997, the total balance of one- to four-family ARMs was
$15.8 million, or 28.3% of the Association's loan portfolio.
As a service to its older customers, the Association also has
originated, and thereafter sold, reverse mortgages, enabling the "homeowner" to
utilize equity values that have built up in the underlying property.
As discussed above, the Association evaluates both the borrower's
ability to make principal, interest and escrow payments and the value of the
property that will secure the loan. Wyman Park originates residential mortgage
loans with loan-to-value ratios up to 97%. On mortgage loans exceeding an 80%
loan-to-value ratio at the time of origination, Wyman Park will generally
require private mortgage insurance in an amount intended to reduce the
Association's exposure to less than 80% of the appraised value of the underlying
property.
The Association requires title insurance on its mortgage loans as well
as fire and extended coverage casualty insurance in amounts at least equal to
the principal amount of the loan or the value of improvements on the property,
depending on the type of loan. The Association also requires flood insurance to
protect the property securing its interest when the property is located in a
flood plain.
The Association's residential mortgage loans customarily include
due-on-sale clauses giving the Association the right to declare the loan
immediately due and payable in the event that, among other things, the borrower
sells or otherwise disposes of the property subject to the mortgage and the loan
is not repaid.
47
<PAGE>
Construction and Development Lending
The Association makes construction loans to individuals for the
construction of their primary or secondary residences. Loans to individuals for
the construction of their residences typically run for up to nine months. The
borrower pays interest only during the construction period. Residential
construction loans are generally underwritten pursuant to the same guidelines
used for originating permanent residential loans. At June 30, 1997, the
Association had one construction loan with an outstanding aggregate balance of
$150,000 secured by residential property.
The Association has participated in loans to builders and developers to
finance the construction of residential property. Such loans generally have
adjustable interest rates based upon prime or treasury indexes with terms of 18
months. The proceeds of the loan are advanced during construction based upon the
percentage of completion as determined by an inspection by the lead lender. The
loan amount normally does not exceed 75% of projected completed value. Whether
the Association is willing to provide permanent takeout financing to the
purchaser of the home is determined independently of the construction loan by
separate underwriting. In the event that upon completion the house is not sold,
the builder is required to make principal and interest payments until the house
is sold.
Building lot loans, which include loans to acquire vacant or raw land,
are made to individuals. All of such loans are secured by land zoned for
residential developments and located within the Association's market area.
Before extending credit, the Association will require percolation tests and
related permits to be secured.
Construction and development lending, through participation or direct
lending, generally affords the Association an opportunity to receive interest at
rates higher than those obtainable from residential lending and to receive
higher origination and other loan fees. In addition, such loans are generally
made for relatively short terms. Nevertheless, construction lending to persons
other than owner-occupants is generally considered to involve a higher level of
credit risk than one- to four-family permanent residential lending due to the
concentration of principal in a limited number of loans and borrowers and the
effects of general economic conditions on construction projects, real estate
developers and managers. In addition, the nature of these loans is such that
they are more difficult to evaluate and monitor. The Association's risk of loss
on a construction or development loan is dependent largely upon the accuracy of
the initial estimate of the property's value upon completion of the project and
the estimated cost (including interest) of the project. If the estimate of value
proves to be inaccurate, the Association may be confronted, at or prior to the
maturity of the loan, with a project with a value which is insufficient to
assure full repayment and/or the possibility of having to make substantial
investments to complete and sell the project. Because defaults in repayment may
not occur during the construction period, it may be difficult to identify
problem loans at an early stage. When loan payments become due, the cash flow
from the property may not be adequate to service the debt. In such cases, the
Association may be required to modify the terms of the loan.
48
<PAGE>
Commercial Real Estate Lending
The Association's commercial real estate loan portfolio consists of
loans on a variety of non-residential properties including retail facilities,
warehouses, small office buildings, small industrial parks and shopping centers.
At June 30, 1997, the Association's largest commercial real estate loan totaled
$630,000 At that date, the Association had 23 other commercial real estate
loans, all totaling $5.8 million or 10.4 % of gross loans receivable. As of June
30, 1997, none of these loans were non-performing.
The Association has originated both balloon, adjustable-rate and
fixed-rate commercial real estate loans, although most current originations have
balloon or adjustable rates. Commercial loans generally adjust based on a
constant maturity index plus a margin. Adjustable rate loans generally have a
balloon feature after one or two adjustment periods to allow the Association to
re-evaluate the terms of the loan. Balloon loans mature at the end of the
initial balloon term and may be modified, extended or refinanced by the
Association. Commercial loans are generally underwritten in amounts of up to 75%
of the appraised value of the underlying property.
Appraisals on properties securing commercial real estate loans
originated by the Association are performed by a qualified independent appraiser
at the time the loan is made. In addition, the Association's underwriting
procedures generally require verification of the borrower's credit history,
income and financial statements, banking relationships and income projections or
operating histories for the property. Personal guarantees are generally obtained
for the Association's commercial real estate loans.
Substantially all of the commercial real estate loans originated by the
Association are secured by properties located within the Association's market
area.
The table below sets forth by type of security property the estimated
number, loan amount and outstanding balance of Wyman Park's commercial real
estate loans at June 30, 1997.
Outstanding
Number of Original Principal
Loans Loan Amount Balance
--------- ----------- -----------
(Dollars in Thousands)
Office ............................ 10 $1,850 $1,653
Retail ............................ 4 1,725 1,641
Small industrial .................. 2 535 482
Warehouse ......................... 4 1,372 1,262
Apartment ......................... 1 83 59
Land .............................. 3 758 709
------ ------ ------
Total .......................... 24 $6,323 $5,806
====== ====== ======
Commercial real estate loans generally present a higher level of credit
risk than loans secured by one- to four-family residences. This greater risk is
due to several factors, including the concentration of principal in a limited
number of loans and borrowers, the effects of general economic conditions on
income producing properties and the increased difficulty of evaluating and
49
<PAGE>
monitoring these types of loans. Furthermore, the repayment of loans secured by
commercial real estate is typically dependent upon the successful operation of
the related real estate project. If the cash flow from the project is reduced
(for example, if leases are not obtained or renewed), the borrower's ability to
repay the loan may be impaired.
Multi-Family Lending
The Association has historically made a few permanent multi-family
loans in its primary market area. As with commercial real estate loans,
multi-family loans present a higher level of credit risk than do loans secured
by one-to four-family residences. At June 30, 1997, loans secured by
multi-family properties aggregated $211,000, or .38% of the Association's gross
loans receivable.
The Association's multi-family loan portfolio includes loans secured by
five or more unit residential buildings located primarily in the Association's
market area.
Consumer Lending
Management believes that offering consumer loan products helps to
expand the Association's customer base and to create stronger ties to its
existing customer base. In addition, because consumer loans generally have
shorter terms to maturity and carry higher rates of interest than do residential
mortgage loans, they can be valuable asset/liability management tools. The
Association currently originates substantially all of its consumer loans in its
market area. At June 30, 1997, the Association's consumer loans totaled $3.4
million or 6.0% of the Association's gross loan portfolio.
Wyman Park offers a variety of consumer loans, including loans secured
by savings deposits and home equity lines of credit as well as unsecured home
improvement loans.
The largest component of the Association's consumer lending program is
its home equity line. At June 30, 1997, home equity loans totaled $3.2 million
or 5.7% of gross loans receivable. The Association also employs its standard
underwriting criteria discussed above in deciding whether to extend credit. The
Association's home equity lines of credit are originated in amounts which,
together with the amount of the first mortgage, generally do not exceed 80% of
the appraised value of the property securing the loan. At June 30, 1997, the
Association had $5.5 million of funds committed, but undrawn, under such lines.
Home equity loans are adjustable in nature, floating at a stated margin above
prime.
The terms of other types of consumer loans vary according to the type
of collateral, length of contract and creditworthiness of the borrower. The
underwriting standards employed by the Association for consumer loans include a
determination of the applicant's payment history on other debts and an
assessment of the borrower's ability to meet payments on the proposed loan along
with his existing obligations. In addition to the creditworthiness of the
applicant, the underwriting process also includes a comparison of the value of
the security, if any, in relation to the proposed loan amount.
50
<PAGE>
Consumer loans may entail greater risk than residential mortgage loans,
particularly in the case of consumer loans which are unsecured or secured by
rapidly depreciable assets. In addition, consumer loan collections are dependent
on the borrower's continuing financial stability, and thus are more likely to be
affected by adverse personal circumstances. Furthermore, the application of
various federal and state laws, including federal and state bankruptcy and
insolvency laws, may limit the amount which can be recovered on such loans.
Originations, Purchases and Sales of Loans
The Association originates real estate and other loans through
employees located at the Association's offices. Walk-in customers and referrals
from its current customer base, advertisement, real estate brokers, mortgage
loan brokers and builders are also important sources of loan originations as
well as Wyman Park's internet web-site (www.wymanpark.com). The association
utilized the services of mortgage or loan brokers from time to time. While
generally a portfolio lender, the Association may in the future evaluate loan
sale opportunities as they arise and make sales depending on market conditions.
The following table shows the loan origination, purchase, sale and
repayment activities of the Association for the periods indicated.
Year Ended June 30,
-------------------
1997 1996
------ -------
(Dollars in Thousands)
Originations by type:
Adjustable rate:
Real estate - one- to four-family.................. $2,843 $ 1,314
- multi-family..................... 90 ---
- commercial....................... 1,100 190
------ -------
Total adjustable-rate....................... 4,033 1,504
------ -------
Fixed rate:
Real estate - one- to four-family.................. 3,907 6,991
- commercial....................... 936 550
Non-real estate - consumer......................... 18 ---
------ -------
Total fixed-rate............................ 4,861 7,541
------ -------
Total loans originated...................... 8,894 9,045
------ -------
Purchases:
Real estate - one- to four-family.................. 983 ---
- commercial....................... 805 300
------ -------
Total loans purchased....................... 1,788 300
------ -------
Sales and Repayments:
Real estate - one- to four-family.................. 395 990
- commercial....................... 900 ---
------ -------
Total loans sold............................ 1,295 990
Principal repayments............................... 7,177 9,539
------ -------
Total reductions............................ 8,472 10,529
Increase (decrease) in other items, net.............. (265) 24
------ -------
Net increase (decrease)..................... $1,945 $(1,160)
====== =======
51
<PAGE>
Delinquencies and Non-Performing Assets
Loan Portfolio Management. When a borrower fails to make a required
payment on a loan, the Association attempts to cause the delinquency to be cured
by contacting the borrower. A late notice is generated on all loans over 15 and
30 days delinquent. Another late notice is sent 60 days after the due date
followed by telephone contact.
If the delinquency is not cured by the 65th day, the customer is
provided written notice that the account will be referred to counsel for
collection and foreclosure, if necessary. A good faith effort by the borrower at
this time will defer foreclosure for a reasonable length of time depending on
individual circumstances. After 90 days, foreclosure proceedings are generally
instituted. The Association may agree to accept a deed in lieu of foreclosure.
If it becomes necessary to foreclose, the property is sold at public sale and
the Association may bid on the property to protect its interest.
Unsecured consumer loans are charged off if they remain delinquent for
120 days unless the borrower and lender agree on a payment plan. If terms of the
plan are not met, they are then subject to charge off.
Real estate acquired by Wyman Park as a result of foreclosure is
classified as real estate owned until it is sold. When property is acquired by
foreclosure, it is recorded at the lower of cost or estimated fair value, less
estimated selling costs, at the date of acquisition, and any write-down
resulting therefrom is charged to the allowance for loan losses. Subsequent
decreases in the value of the property are charged to operations through the
creation of a valuation allowance. After acquisition, all costs incurred in
maintaining the property are expensed. Costs relating to the development and
improvement of the property, however, are capitalized to the extent of estimated
fair value less estimated costs to sell.
The following table sets forth the Association's loan delinquencies by
type, by amount and by percentage of type at June 30, 1997.
<TABLE>
<CAPTION>
Loans Delinquent For:
-----------------------------------------------------
60-89 Days 90 Days and Over Total Delinquent Loans
------------------------- ------------------------- --------------------------
Percent Percent Percent
of Loan of Loan of Loan
Number Amount Category Number Amount Category Number Amount Category
------ ------ -------- ------ ------ -------- ------ ------ --------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Real Estate:
One- to four-family ..................... 5 $178 .38% 2 $176 .38% 7 $354 .76%
---- ---- --- ---- --- ---
Total .................................. 5 $178 .32% 2 $176 .31% 7 $354 .63%
==== ==== === ==== === ===
</TABLE>
52
<PAGE>
Non-Performing Assets. The table below sets forth the amounts and
categories of non-performing assets in the Association's loan portfolio. Loans
are placed on non-accrual status when the collection of principal and/or
interest become doubtful. Foreclosed assets include assets acquired in
settlement of loans.
June 30,
---------------
1997 1996
---- ----
(Dollars in Thousands)
Non-accruing loans:
One- to four family............................ $176 $ 27
---- ----
Total non-performing assets...................... $176 $ 27
==== ====
Total as a percentage of total assets............ .28% .04%
=== ===
For the year ended June 30, 1997 gross interest income which would have
been recorded had the non-accruing loans been current in accordance with their
original terms amounted to $18,964. The amount that was included in interest
income on such loans was $14,492 for the year ended June 30, 1997.
Classification of Assets. Federal regulations require that each savings
institution classify its own assets on a regular basis. In addition, in
connection with examinations of savings institutions, OTS and FDIC examiners
have authority to identify problem assets and, if appropriate, require them to
be classified. There are three classifications for problem assets: Substandard,
Doubtful and Loss. Substandard assets have one or more defined weaknesses and
are characterized by the distinct possibility that the Association will sustain
some loss if the deficiencies are not corrected. Doubtful assets have the
weaknesses of Substandard assets, with the additional characteristics that the
weaknesses make collection or liquidation in full on the basis of currently
existing facts, conditions and values questionable, and there is a high
possibility of loss. An asset classified Loss is considered uncollectible and of
such little value that continuance as an asset on the balance sheet of the
institution, without establishment of a specific valuation allowance or
charge-off, is not warranted. Assets classified as Substandard or Doubtful
require the institution to establish prudent general allowances for loan losses.
If an asset or portion thereof is classified as a Loss, the institution may
charge off such amount against the loan loss allowance. If an institution does
not agree with an examiner's classification of an asset, it may appeal this
determination to the District Director of the OTS.
On the basis of management's review of its assets, at June 30, 1997,
the Association had two loans classified substandard with total principal of
$176,000.
Other Assets of Concern. In addition to non-performing loans and
substandard loans discussed above, as of June 30, 1997, the Association had five
loans totalling $178,000, which, because of known information about the possible
credit problems of the borrowers or the cash flows of the security property,
would cause management to have some doubts as to the ability of the
53
<PAGE>
borrowers to comply with present loan repayment terms and may result in the
future inclusion of such assets in non-performing asset categories.
Allowance for Loan Losses. The allowance for loan losses is established
through a provision for loan losses charged to earnings based on management's
evaluation of the risk inherent in its entire loan portfolio and changes in the
nature and volume of its loan activity. Such evaluation, which includes a review
of all loans of which full collectibility may not be reasonably assured,
considers the estimated net realizable value of the underlying collateral,
economic conditions, historical loan loss experience and other factors that
warrant recognition in providing for an adequate allowance for loan losses. In
determining the general reserves under these policies, historical charge-offs
and recoveries, changes in the mix and levels of the various types of loans, net
realizable values, the current loan portfolio and current economic conditions
are considered. Management also considers the Association's non-performing
assets in establishing its allowance for loan losses.
As of June 30, 1997, the Association's allowance for loan losses as a
percent of gross loans receivable and as a percent of non-performing loans
amounted to .5% and 153%, respectively. In light of the level of non-performing
assets to total assets and the nature of these assets, management believes that
the allowance for loan losses is adequate. While management believes that it
uses the best information available to determine the allowance for loan losses,
unforeseen market conditions could result in adjustments to the allowance for
loan losses, and net earnings could be significantly affected, if circumstances
differ substantially from the assumptions used in making the final
determination.
The following table sets forth an analysis of the Association's
allowance for loan losses.
Year Ended June 30,
-------------------
1997 1996
---- ----
(Dollars in Thousands)
Balance at beginning of period.................... $125 $100
Charge-offs:
Commercial real estate.......................... -- --
---- ----
-- --
---- ----
Net charge-offs................................... -- --
Additions charged to operations................... 145 25
---- ----
Balance at end of period.......................... $270 $125
==== ====
Ratio of net charge-offs during the period to
average loans outstanding during the period...... --% --%
==== ====
Ratio of net charge-offs during the period to
average non-performing assets.................... --% --%
==== ====
54
<PAGE>
The distribution of the Association's allowance for losses on loans at
the dates indicated is summarized as follows:
<TABLE>
<CAPTION>
June 30,
--------------------------------------------------------------------------------
1997 1996
------------------------------------ ------------------------------------
Percent Percent
of Loans of Loans
Loan in Each Loan in Each
Amount of Amounts Category Amount of Amounts Category
Loan Loss by to Total Loan Loss by to Total
Allowance Category Loans Allowance Category Loans
--------- -------- -------- --------- -------- --------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
One- to four-family ................ $ 25 $46,346 82.92% $ 22 $45,669 84.82%
Multi-family ....................... -- 211 .38 -- 128 .24
Commercial real estate ............. 56 5,806 10.39 43 4,448 8.26
Construction or development ....... -- 150 .27 -- 270 .50
Consumer ........................... -- 3,376 6.04 -- 3,327 6.18
Unallocated ........................ 189 -- -- 59 -- --
------- ------- ------ ------- ------- ------
Total ......................... $ 270 $55,889 100.00% $ 125 $53,842 100.00%
======= ======= ====== ======= ======= ======
</TABLE>
Investment Activities
As part of its asset/liability management strategy and liquidity
requirements, the Association invests in U.S. government and agency obligations
to supplement its lending activities. The Association's investment policy also
allows for investments in overnight funds, mortgage-backed securities and
certificates of deposit. The Association may consider the expansion of
investments into other securities if deemed appropriate. At June 30, 1997, the
Association did not own any securities of a single issuer which exceeded 10% of
the Association's retained earnings, other than U.S. government or federal
agency obligations. See Note 3 of the Notes to the Consolidated Financial
Statements for additional information regarding the Association's investment
securities portfolio.
The Association is required by federal regulations to maintain a
minimum amount of liquid assets that may be invested in specified securities and
is also permitted to make certain other securities investments. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital." Cash flow projections are regularly
reviewed and updated to assure that adequate liquidity is provided. As of June
30, 1997, the Association's liquidity ratio (liquid assets as a percentage of
net withdrawable savings and current borrowings) was 9.8% as compared to the OTS
requirement of 5.0%.
All of the Association's investment securities are classified as
available for sale. There were no sales of investment securities in fiscal 1997
or 1996. The Association may elect to classify investment securities acquired in
the future as trading securities or as held to maturity, instead of
available-for-sale, but there are no current plans to do so.
55
<PAGE>
The following table sets forth the composition of the Association's
investment and mortgage-backed securities at the dates indicated.
<TABLE>
<CAPTION>
June 30,
------------------------------------------------
1997 1996
--------------------- --------------------
Book % of Book % of
Value Total Value Total
------ ------ ------ ------
(Dollars in Thousands)
Investment securities:
<S> <C> <C> <C> <C>
Federal agency obligations ........................... $2,992 85.44% $2,964 85.32%
------ ------ ------ ------
Subtotal .......................................... 2,992 85.44 2,964 85.32
FHLB stock ........................................... 510 14.56 510 14.68
------ ------ ------ ------
Total investment securities and FHLB stock ........ $3,502 100.00% $3,474 100.00%
====== ====== ====== ======
Average remaining life of investment securities ........ 1.3 years 2.3 years
Other interest-earning assets:
Interest-bearing deposits with banks ................. $1,093 57.05% $3,483 60.46%
Federal funds sold ................................... 823 42.95 2,278 39.54
------ ------ ------ ------
Total ............................................. $1,916 100.00% $5,761 100.00%
====== ====== ====== ======
Mortgage-backed securities:
FNMA ................................................. $ 2 .56% $ 3 .71%
FHLMC ................................................ 354 99.44 421 99.29
------ ------ ------ ------
Total mortgage-backed securities .................. $ 356 100.00% $ 424 100.00%
====== ====== ====== ======
</TABLE>
At June 30, 1997, the composition and maturities of the investment
securities portfolio, excluding FHLB stock, are indicated in the following
table.
1 to 5
Years Total Investment Securities
------ ---------------------------
Book Value Book Value Market Value
---------- ---------- ------------
(Dollars in Thousands)
Federal agency obligations.......... $2,992 $2,992 $2,992
------ ------ ------
Total investment securities......... $2,992 $2,992 $2,992
====== ====== ======
Weighted average yield.............. 5.94% 5.94% 5.94%
Mortgage-Backed Securities. Wyman Park has a $356,000 portfolio of
mortgage-backed securities, all of which are insured or guaranteed by FHLMC or
the Federal National Mortgage Association ("FNMA"). Accordingly, management
believes that the Association's mortgage-backed securities are generally
resistant to credit problems. Because these securities represent a passthrough
of principal and interest from underlying individual thirty year mortgages, such
securities do present prepayment risk. Any such individual security contains
mortgages that can be prepaid at any time over the life of the security. In a
rising interest rate environment the underlying mortgages are likely to extend
their lives versus a stable or declining rate environment. A declining rate
environment can result in rapid prepayment. There is no certainty as to the
security life or speed of prepayment. The geographic makeup and correlated
economic conditions of the underlying mortgages also pay an
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important role in determining prepayment. In addition to prepayment risk,
interest rate risk is inherent in holding any debt security. As interest rates
rise the value of the security declines and conversely as interest rates decline
values rise. Adjustable rate mortgage-backed securities have the advantage of
moving their interest rate within limits with the contractual index used,
subject to the risk of prepayment. All of the adjustable rate mortgage-backed
securities in the portfolio are tied to the One Year Constant Maturity Treasury
Index and all are considered held for investment. The market valuation does not
consequently present a direct impact on equity.
Mortgage-backed securities can serve as collateral for borrowings and,
through sales and repayments, as a source of liquidity. For information
regarding the carrying and market values of Wyman Park's mortgage-backed
securities portfolio, see Note 3 of the Notes to Consolidated Financial
Statements. Under the Association's risk-based capital requirement,
mortgage-backed securities have a risk weight of 20% in contrast to the 50% risk
weight carried by residential loans. See "Regulation."
The following table sets forth the contractual maturities of the
Association's mortgage-backed securities at June 30, 1997.
Due in June 30, 1997
10 to 20 Balance
Years Outstanding
----- -----------
(In Thousands)
Federal Home Loan Mortgage Corporation.......... $354 $354
Federal National Mortgage Association........... 2 2
----- ----
Total...................................... $356 $356
==== ====
Sources of Funds
General. The Association's primary sources of funds are deposits,
amortization and prepayment of loan principal, maturities of investment
securities, short-term investments and funds provided from operations as well as
FHLB advances.
Deposits. Wyman Park offers a variety of deposit accounts having a wide
range of interest rates and terms. The Association's deposits consist of
passbook and statement accounts, NOW accounts, Christmas Club and money market
and certificate accounts, including Individual Retirement Accounts. The
Association relies primarily on advertising, including newspaper and radio,
pricing policies and customer service to attract and retain these deposits.
Neither premiums nor brokered deposits are utilized.
The flow of deposits is influenced significantly by general economic
conditions, changes in money market and prevailing interest rates and
competition. The Association's mix of transaction accounts and certificate
accounts is less favorable than its peers, resulting in a higher cost of funds
for the Association in relation to its peer group. At June 30, 1997, 28.3% of
the Association's deposits were in transaction accounts, versus 71.7% in
certificates. See "Risk Factors - Low Return on Equity and Low Net Interest
Margin" and "-- Competition."
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The Association has become more susceptible to short-term fluctuations
in deposit flows, as customers have become more interest rate conscious. The
Association manages the pricing of its deposits in keeping with its
asset/liability management, profitability and growth objectives. Based on its
experience, the Association believes that its passbook, demand and NOW accounts
are relatively stable sources of deposits. However, the ability of the
Association to attract and maintain certificate deposits, and the rates paid on
these deposits, has been and will continue to be significantly affected by
market conditions.
The following table sets forth the savings flows at the Association
during the periods indicated.
Year Ended June 30,
----------------------
1997 1996
--------- --------
(Dollars in Thousands)
Opening balance............................. $ 57,871 $ 58,473
Deposits.................................... 53,394 43,873
Withdrawals................................. (57,930) (47,539)
Interest credited........................... 2,762 3,064
-------- --------
Ending balance.............................. $ 56,097 $ 57,871
======== ========
Net decrease................................ $ (1,774) $ (602)
======== ========
Percent decrease............................ (3.07)% (1.03)%
======== ========
The following table sets forth the dollar amount of savings deposits in
the various types of deposit programs offered by the Association for the periods
indicated.
Year Ended June 30,
--------------------------------------
1997 1996
----------------- -----------------
Percent Percent
Amount of Total Amount of Total
------ -------- ------ --------
(Dollars in Thousands)
Transactions and Savings Deposits:
Commercial Demand 0% ............ $ 587 1.05% $ 337 .58%
Passbook Accounts 2.96% ......... 6,027 10.74 5,857 10.12
NOW Accounts 1.75 % ............. 1,615 2.88 1,673 2.89
Money Market Accounts 3.10% ..... 7,627 13.59 7,637 13.19
------- ------ ------- ------
Total Non-Certificates .......... 15,856 28.26 15,504 26.78
------- ------ ------- ------
Certificates:
4.00 - 5.99% .................. $26,366 46.99% $23,101 39.90%
6.00 - 7.99% .................. 13,492 24.04 16,657 28.77
8.00 - 9.99% .................. 383 .68 2,609 4.51
------- ------ ------- ------
Total Certificates .............. 40,241 71.71 42,367 73.18
------- ------ ------- ------
Accrued Interest ................ 19 .03 21 .04
------- ------ ------- ------
Total Deposits .................. $56,116 100.00% $57,892 100.00%
======= ====== ======= ======
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The following table shows rate and maturity information for the
Association's certificates of deposit as of June 30, 1997.
4.00- 6.00- 8.00- Percent
5.99% 7.99% 9.99% Total of Total
----- ----- ----- ----- --------
(Dollars in Thousands)
Certificate accounts
maturing
in quarter ending:
- ------------------
September 30, 1997............. $ 5,540 $ 991 $ --- $ 6,531 16.23%
December 31, 1997.............. 5,470 967 186 6,623 16.46
March 31, 1998................. 3,605 179 15 3,799 9.44
June 30, 1998.................. 3,216 86 --- 3,302 8.21
September 30, 1998............. 2,910 61 163 3,134 7.79
December 31, 1998.............. 2,292 53 3 2,348 5.83
March 30, 1999................. 506 451 16 973 2.42
June 30, 1999.................. 492 1,079 --- 1,571 3.90
September 30, 1999............. 267 1,227 --- 1,494 3.71
December 31, 1999.............. 138 900 --- 1,038 2.58
March 31, 2000................. 19 2,129 --- 2,148 5.34
Thereafter..................... 1,911 5,369 --- 7,280 18.09
-------- -------- ----- -------- ------
Total....................... $26,366 $13,492 $383 $40,241 100.00%
======= ======= ==== ======= ======
Percent of total............ 65.52% 33.53% .95%
===== ===== ===
At June 30, 1997 the Association had approximately $4.2 million in
certificate accounts in amounts of $100,000 or more maturing as follows:
Weighted
Maturity Period Amount Average Rate
--------------- ------ ------------
(Dollars in
thousands)
Three months or less..................... $ 983 4.78%
Over three through six months............ 449 5.48
Over six through 12 months............... 213 5.08
Over 12 months........................... 2,552 6.23
-------
Total.................................... $4,197 5.75
=======
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The following table indicates the amount of the Association's
certificates of deposit and other deposits by time remaining until maturity as
of June 30, 1997.
<TABLE>
<CAPTION>
Maturity
-------------------------------------------
Over Over
3 Months 3 to 6 6 to 12 Over
or Less Months Months 12 months Total
-------- ------- ------- --------- -------
<S> <C> <C> <C> <C> <C>
Certificates of deposit less than $100,000 $ 5,548 $ 6,174 $ 6,888 $17,434 $36,044
Certificates of deposit of $100,000 or more 983 449 213 2,552 4,197
Total certificates of deposit ............. $ 6,531 $ 6,623 $ 7,101 $19,986 $40,241
======= ======= ======= ======= =======
</TABLE>
For additional information regarding the composition of the
Association's deposits, see Note 7 of Notes to Consolidated Financial
Statements.
Borrowings. Wyman Park's other available sources of funds, not
currently utilized, include advances from the FHLB of Atlanta and other
borrowings. As a member of the FHLB of Atlanta, the Association is required to
own capital stock in the FHLB of Atlanta and is authorized to apply for advances
from the FHLB of Atlanta. Each FHLB credit program has its own interest rate,
which may be fixed or variable, and range of maturities. The FHLB of Atlanta may
prescribe the acceptable uses for these advances, as well as limitations on the
size of the advances and repayment provisions. The Association's immediate
credit availability at the FHLB of Atlanta is approximately $8 million at June
30, 1997.
The Association did not have any outstanding borrowings during the last
two fiscal years, although the Association did borrow $1 million from the FHLB
of Atlanta during the first quarter of fiscal 1998.
Service Corporations
As a federally chartered savings association, Wyman Park is permitted
by OTS regulations to invest up to 2% of its assets, or approximately $1.3
million at June 30, 1997, in the stock of, or loans to, service corporation
subsidiaries. As of such date, Wyman Park had one investment in a service
corporation, WP Financial Corporation, which engages in the sale of annuities.
The income derived from WP Financial Corporation is not material to the
Association's results of operations.
Competition
Wyman Park experiences strong competition both in originating real
estate loans and in attracting deposits. This competition arises from a highly
competitive market area with numerous commercial banks and savings institutions,
as well as credit unions and mortgage bankers and, with respect to deposits,
banking institutions and other financial intermediaries. The Association
competes for loans principally on the basis of the interest rates and loan fees
it charges, the types of loans it originates and the quality of services it
provides to borrowers.
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<PAGE>
The Association attracts all of its deposits through the communities in
which its offices are located; therefore, competition for those deposits is
principally from other savings institutions, commercial banks, securities firms,
money market and mutual funds and credit unions located in the same community.
The ability of the Association to attract and retain deposits depends on its
ability to provide an investment opportunity that satisfies the requirements of
investors as to rate of return, liquidity, risk, convenient locations and other
factors. The Association competes for these deposits by offering a variety of
deposit accounts at competitive rates, convenient business hours and a
customer-oriented staff. At June 30, 1997, the Association had in excess 60
financial institutions competing with it in its market area. The Association
estimates its market share of savings deposits in its market area to be
approximately 11.4%.
Competition may limit Wyman Park's growth and profitability in the
future. See "Risk Factors - Competition."
Employees
At June 30, 1997, the Association had a total of 15 full-time employees
and one part-time employee. None of the Association's employees are represented
by any collective bargaining group.
Management considers its employee relations to be good.
Properties
The following table sets forth information concerning the main office
and a branch office of the Association at June 30, 1997. The Association
believes that its current facilities are adequate.
Net Book
Owned Value at
Year or June 30,
Location Opened Leased(1) 1997
-------- ------ --------- ----
Main Office:
11 Ridgely Road 1977 Land Leased;(2)
Lutherville, MD 21093 Building Owned $95,000
Branch Office:
7963 Baltimore/Annapolis Blvd. 1977 Leased(3) N/A
Glen Burnie, MD 21060
- ---------
(1) See Note 6 to Notes to Consolidated Financial Statements.
(2) There are five, five-year options which expire in May 2027.
(3) Lease expires in November, 2001.
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<PAGE>
The Association's depositor and borrower customer files are maintained
by an independent data processing company. The net book value of the data
processing and computer equipment utilized by the Association at June 30, 1997
was approximately $12,000.
Legal Proceedings
From time to time, Wyman Park is involved as plaintiff or defendant in
various legal proceedings arising in the normal course of its business. While
the ultimate outcome of these various legal proceedings cannot be predicted with
certainty, it is the opinion of management that the resolution of these legal
actions should not have a material effect on Wyman Park's financial position or
results of operations.
REGULATION
General
Wyman Park is a federally chartered savings association, the deposits
of which are federally insured and backed by the full faith and credit of the
United States Government. Accordingly, Wyman Park is subject to broad federal
regulation and oversight extending to all its operations. Wyman Park is a member
of the FHLB of Atlanta and is subject to certain limited regulation by the Board
of Governors of the Federal Reserve System ("Federal Reserve Board"). As the
savings and loan holding company of Wyman Park, the Holding Company also is
subject to federal regulation and oversight. The purpose of the regulation of
the Holding Company and other holding companies is to protect subsidiary savings
associations. Wyman Park is a member of the SAIF, which together with the BIF
are the two deposit insurance funds administered by the FDIC, and the deposits
of Wyman Park are insured by the FDIC. As a result, the FDIC has certain
regulatory and examination authority over Wyman Park.
Certain of these regulatory requirements and restrictions are discussed
below or elsewhere in this document.
Federal Regulation of Savings Associations
The OTS has extensive authority over the operations of savings
associations. As part of this authority, Wyman Park is required to file periodic
reports with the OTS and is subject to periodic examinations by the OTS and the
FDIC. The last regular OTS examination of Wyman Park was as of December, 1996.
Under agency scheduling guidelines, it is likely that another examination will
be initiated in the near future. When these examinations are conducted by the
OTS and the FDIC, the examiners may require the Association to provide for
higher general or specific loan loss reserves. All savings associations are
subject to a semi-annual assessment, based upon the savings association's total
assets, to fund the operations of the OTS. The Association's OTS assessment for
the fiscal year ended June 30, 1997 was $21,845.
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<PAGE>
The OTS also has extensive enforcement authority over all savings
institutions and their holding companies, including Wyman Park and the Holding
Company. This enforcement authority includes, among other things, the ability to
assess civil money penalties, to issue cease-and-desist or removal orders and to
initiate injunctive actions. In general, these enforcement actions may be
initiated for violations of laws and regulations and unsafe or unsound
practices. Other actions or inactions may provide the basis for enforcement
action, including misleading or untimely reports filed with the OTS. Except
under certain circumstances, public disclosure of final enforcement actions by
the OTS is required.
In addition, the investment, lending and branching authority of the
Association is prescribed by federal laws and it is prohibited from engaging in
any activities not permitted by such laws. For instance, no savings institution
may invest in non-investment grade corporate debt securities. In addition, the
permissible level of investment by federal associations in loans secured by
non-residential real property may not exceed 400% of total capital, except with
approval of the OTS. Federal savings associations are also generally authorized
to branch nationwide. Wyman Park is in compliance with the noted restrictions.
Wyman Park's general permissible lending limit for
loans-to-one-borrower is equal to the greater of $500,000 or 15% of unimpaired
capital and surplus (except for loans fully secured by certain readily
marketable collateral, in which case this limit is increased to 25% of
unimpaired capital and surplus). At June 30, 1997, the Association's lending
limit under this restriction was $750,000. Assuming the sale of the minimum
number of shares in the Conversion at June 30, 1997, that limit would be
increased to $1.1 million. Wyman Park is in compliance with the
loans-to-one-borrower limitation.
The OTS, as well as the other federal banking agencies, has adopted
guidelines establishing safety and soundness standards on such matters as loan
underwriting and documentation, asset quality, earnings standards, internal
controls and audit systems, interest rate risk exposure and compensation and
other employee benefits. Any institution which fails to comply with these
standards must submit a compliance plan.
Insurance of Accounts and Regulation by the FDIC
Wyman Park is a member of the SAIF, which is administered by the FDIC.
Deposits are insured up to applicable limits by the FDIC and such insurance is
backed by the full faith and credit of the United States Government. As insurer,
the FDIC imposes deposit insurance premiums and is authorized to conduct
examinations of and to require reporting by FDIC-insured institutions. It also
may prohibit any FDIC-insured institution from engaging in any activity the FDIC
determines by regulation or order to pose a serious risk to the SAIF or the BIF.
The FDIC also has the authority to initiate enforcement actions against savings
associations, after giving the OTS an opportunity to take such action, and may
terminate the deposit insurance if it determines that the institution has
engaged in unsafe or unsound practices or is in an unsafe or unsound condition.
The FDIC's deposit insurance premiums are assessed through a risk-based
system under which all insured depository institutions are placed into one of
nine categories and assessed insurance premiums based upon their level of
capital and supervisory evaluation. Under the system, institutions
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<PAGE>
classified as well capitalized (i.e., a core capital ratio of at least 5%, a
ratio of Tier 1 or core capital to risk-weighted assets ("Tier 1 risk-based
capital") of at least 6% and a risk-based capital ratio of at least 10%) and
considered healthy pay the lowest premium while institutions that are less than
adequately capitalized (i.e., core or Tier 1 risk-based capital ratios of less
than 4% or a risk-based capital ratio of less than 8%) and considered of
substantial supervisory concern pay the highest premium. Risk classification of
all insured institutions is made by the FDIC for each semi-annual assessment
period.
The FDIC is authorized to increase assessment rates, on a semiannual
basis, if it determines that the reserve ratio of the SAIF will be less than the
designated reserve ratio of 1.25% of SAIF insured deposits. In setting these
increased assessments, the FDIC must seek to restore the reserve ratio to that
designated reserve level, or such higher reserve ratio as established by the
FDIC. The FDIC may also impose special assessments on SAIF members to repay
amounts borrowed from the United States Treasury or for any other reason deemed
necessary by the FDIC.
In order to equalize the deposit insurance premium schedules for BIF
and SAIF insured institutions, the FDIC imposed a one-time special assessment on
all SAIF-assessable deposits pursuant to federal legislation passed on September
30, 1996. Wyman Park's special assessment, which was $383,000, was paid in
November 1996, and included in federal deposit insurance expense in the fiscal
year ended June 30, 1997. Effective January 1, 1997, the premium schedule for
BIF and SAIF insured institutions ranged from 0 to 27 basis points. However,
SAIF-insured institutions are required to pay a Financing Corporation (FICO)
assessment, in order to fund the interest on bonds issued to resolve thrift
failures in the 1980s, equal to 6.48 basis points for each $100 in domestic
deposits, while BIF- insured institutions pay an assessment equal to 1.52 basis
points for each $100 in domestic deposits. The assessment is expected to be
reduced to 2.43 no later than January 1, 2000, when BIF insured institutions
fully participate in the assessment. These assessments, which may be revised
based upon the level of BIF and SAIF deposits will continue until the bonds
mature in the year 2017.
The Association will continue to be insured by the SAIF following
completion of the Conversion.
Regulatory Capital Requirements
Federally insured savings associations, such as Wyman Park, are
required to maintain a minimum level of regulatory capital. The OTS has
established capital standards, including a tangible capital requirement, a
leverage ratio (or core capital) requirement and a risk-based capital
requirement applicable to such savings associations. These capital requirements
must be generally as stringent as the comparable capital requirements for
national banks. The OTS is also authorized to impose capital requirements in
excess of these standards on individual associations on a case-by-case basis.
The capital regulations require tangible capital of at least 1.5% of
adjusted total assets (as defined by regulation). Tangible capital generally
includes common stockholders' equity and retained income, and certain
noncumulative perpetual preferred stock and related income. In addition, all
intangible assets, other than a limited amount of purchased mortgage servicing
rights, must be deducted from tangible capital for calculating compliance with
the requirement. At June 30, 1997, the Association did not have any intangible
assets.
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<PAGE>
The OTS regulations establish special capitalization requirements for
savings associations that own subsidiaries. In determining compliance with the
capital requirements, all subsidiaries engaged solely in activities permissible
for national banks or engaged in certain other activities solely as agent for
its customers are "includable" subsidiaries that are consolidated for capital
purposes in proportion to the association's level of ownership. For excludable
subsidiaries the debt and equity investments in such subsidiaries are deducted
from assets and capital. Wyman Park does not have any non-includable
subsidiaries.
At June 30, 1997, Wyman Park had tangible capital of $4.8 million, or
7.6% of total assets, which is approximately $3.8 million above the minimum
requirement of 1.5% of adjusted total assets in effect on that date. On a pro
forma basis, after giving effect to the sale of the minimum, midpoint and
maximum number of shares of Common Stock offered in the Conversion and
investment of 50% of the net proceeds in assets not excluded for tangible
capital purposes, Wyman Park would have had tangible capital equal to 10.5%,
11.0% and 11.6%, respectively, of adjusted total assets at June 30, 1997, which
is $5.8 million, $6.2 million and $6.6 million, respectively, above the
requirement.
The capital standards also require core capital equal to at least 3% of
adjusted total assets. Core capital generally consists of tangible capital plus
certain intangible assets, including a limited amount of purchased credit card
relationships. As a result of the prompt corrective action provisions discussed
below, however, a savings association must maintain a core capital ratio of at
least 4% to be considered adequately capitalized unless its supervisory
condition is such to allow it to maintain a 3% ratio. At June 30, 1997, Wyman
Park had no intangibles which were subject to these tests.
At June 30, 1997, Wyman Park had core capital equal to $4.8 million, or
7.6% of adjusted total assets, which is $2.9 million above the minimum leverage
ratio requirement of 3% as in effect on that date. On a pro forma basis, after
giving effect to the sale of the minimum, midpoint and maximum number of shares
of Common Stock offered in the Conversion and investment of 50% of the net
proceeds in assets not excluded from core capital, Wyman Park would have had
core capital equal to 10.5%, 11.0% and 11.6%, respectively, of adjusted total
assets at June 30, 1997, which is $4.9 million, $5.3 million and $5.6 million,
respectively, above the requirement.
The OTS risk-based requirement requires savings associations to have
total capital of at least 8% of risk-weighted assets. Total capital consists of
core capital, as defined above, and supplementary capital. Supplementary capital
consists of certain permanent and maturing capital instruments that do not
qualify as core capital and general valuation loan and lease loss allowances up
to a maximum of 1.25% of risk-weighted assets. Supplementary capital may be used
to satisfy the risk-based requirement only to the extent of core capital. The
OTS is also authorized to require a savings association to maintain an
additional amount of total capital to account for concentration of credit risk
and the risk of non-traditional activities. At June 30, 1997, Wyman Park had
$270,000 of general loss reserves, which was less than 1.25% of risk-weighted
assets.
Certain exclusions from capital and assets are required to be made for
the purpose of calculating total capital. Such exclusions consist of equity
investments (as defined by regulation) and that portion of land loans and
nonresidential construction loans in excess of an 80% loan-to-value ratio and
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<PAGE>
reciprocal holdings of qualifying capital instruments. Wyman Park had no such
exclusions from capital and assets at June 30, 1997.
In determining the amount of risk-weighted assets, all assets,
including certain off-balance sheet items, will be multiplied by a risk weight,
ranging from 0% to 100%, based on the risk inherent in the type of asset. For
example, the OTS has assigned a risk weight of 50% for prudently underwritten
permanent one- to four-family first lien mortgage loans not more than 90 days
delinquent and having a loan to value ratio of not more than 80% at origination
unless insured to such ratio by an insurer approved by the FNMA or FHLMC.
OTS regulations also require that savings associations with more than
normal interest rate risk exposure deduct from its total capital, for purposes
of determining compliance with such requirement, an amount equal to 50% of its
interest-rate risk exposure multiplied by the present value of its assets. This
exposure is a measure of the potential decline in the net portfolio value of a
savings association, greater than 2% of the present value of its assets, based
upon a hypothetical 200 basis point increase or decrease in interest rates
(whichever results in a greater decline). Net portfolio value is the present
value of expected cash flows from assets, liabilities and off-balance sheet
contracts. The rule will not become effective until the OTS evaluates the
process by which savings associations may appeal an interest rate risk deduction
determination. It is uncertain as to when this evaluation may be completed. Any
savings association with less than $300 million in assets and a total risk-based
capital ratio in excess of 12% is exempt from this requirement unless the OTS
determines otherwise. At the present time, the proposal is not expected to have
a material impact on the Association.
On June 30, 1997, Wyman Park had total risk-based capital of
approximately $5.0 million (including $4.8 million in core capital and $270,000
in qualifying supplementary capital) and risk- weighted assets of $34.3 million;
or total capital of 14.6% of risk-weighted assets. This amount was $2.3 million
above the 8% requirement in effect on that date. On a pro forma basis, after
giving effect to the sale of the minimum, midpoint and maximum number of shares
of Common Stock offered in the Conversion, the infusion to the Association of
50% of the net Conversion proceeds and the investment of those proceeds in 20%
risk-weighted government securities, Wyman Park would have had total risk- based
capital of 20.3%, 21.4% and 22.5%, respectively, of risk-weighted assets, which
is above the current 8% requirement by $4.3 million, $4.7 million and $5.1
million, respectively.
The OTS and the FDIC are authorized and, under certain circumstances
required, to take certain actions against savings associations that fail to meet
their capital requirements. The OTS is generally required to take action to
restrict the activities of an "undercapitalized association" (generally defined
to be one with less than either a 4% core capital ratio, a 4% Tier 1
risked-based capital ratio or an 8% risk-based capital ratio). Any such
association must submit a capital restoration plan and until such plan is
approved by the OTS may not increase its assets, acquire another institution,
establish a branch or engage in any new activities, and generally may not make
capital distributions. The OTS is authorized to impose the additional
restrictions that are applicable to significantly undercapitalized associations.
As a condition to the approval of the capital restoration plan, any
company controlling an undercapitalized association must agree that it will
enter into a limited capital maintenance guarantee with respect to the
institution's achievement of its capital requirements.
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<PAGE>
Any savings association that fails to comply with its capital plan or
is "significantly undercapitalized" (i.e., Tier 1 risk-based or core capital
ratios of less than 3% or a risk-based capital ratio of less than 6%) must be
made subject to one or more of additional specified actions and operating
restrictions which may cover all aspects of its operations and include a forced
merger or acquisition of the association. An association that becomes
"critically undercapitalized" (i.e., a tangible capital ratio of 2% or less) is
subject to further mandatory restrictions on its activities in addition to those
applicable to significantly undercapitalized associations. In addition, the OTS
must appoint a receiver (or conservator with the concurrence of the FDIC) for a
savings association, with certain limited exceptions, within 90 days after it
becomes critically undercapitalized. Any undercapitalized association is also
subject to the general enforcement authority of the OTS and the FDIC, including
the appointment of a conservator or a receiver.
The OTS is also generally authorized to reclassify an association into
a lower capital category and impose the restrictions applicable to such category
if the institution is engaged in unsafe or unsound practices or is in an unsafe
or unsound condition.
The imposition by the OTS or the FDIC of any of these measures on the
Association may have a substantial adverse effect on its operations and
profitability.
Limitations on Dividends and Other Capital Distributions
OTS regulations impose various restrictions on savings associations
with respect to their ability to make distributions of capital, which include
dividends, stock redemptions or repurchases, cash-out mergers and other
transactions charged to the capital account. OTS regulations also prohibit a
savings association from declaring or paying any dividends or from repurchasing
any of its stock if, as a result, the regulatory capital of the association
would be reduced below the amount required to be maintained for the liquidation
account established in connection with its mutual to stock conversion. See "The
Conversion--Effects of Conversion to Stock Form on Depositors and Borrowers of
the Association" and "--Restrictions on Repurchase of Stock".
Generally, savings associations, such as Wyman Park, that before and
after the proposed distribution meet their capital requirements, may make
capital distributions during any calendar year equal to the greater of 100% of
net income for the year-to-date plus 50% of the amount by which the lesser of
the association's tangible, core or risk-based capital exceeds its capital
requirement for such capital component, as measured at the beginning of the
calendar year, or 75% of their net income for the most recent four quarter
period. However, an association deemed to be in need of more than normal
supervision by the OTS may have its dividend authority restricted by the OTS.
Wyman Park may pay dividends in accordance with this general authority.
Savings associations proposing to make any capital distribution need
only submit written notice to the OTS 30 days prior to such distribution.
Savings associations that do not, or would not meet their current minimum
capital requirements following a proposed capital distribution, however, must
obtain OTS approval prior to making such distribution. The OTS may object to the
distribution during that 30- day period notice based on safety and soundness
concerns. See "- Regulatory Capital Requirements."
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The OTS has proposed regulations that would revise the current capital
distribution restrictions. Under the proposal a savings association may make a
capital distribution without notice to the OTS (unless it is a subsidiary of a
holding company) provided that it has a CAMEL 1 or 2 rating, is not of
supervisory concern, and would remain adequately capitalized (as defined in the
OTS prompt corrective action regulations) following the proposed distribution.
Savings associations that would remain adequately capitalized following the
proposed distribution but do not meet the other noted requirements must notify
the OTS 30 days prior to declaring a capital distribution. The OTS stated it
will generally regard as permissible that amount of capital distributions that
do not exceed 50% of the institution's excess regulatory capital plus net income
to date during the calendar year. A savings association may not make a capital
distribution without prior approval of the OTS and the FDIC if it is
undercapitalized before, or as a result of, such a distribution. As under the
current rule, the OTS may object to a capital distribution if it would
constitute an unsafe or unsound practice. No assurance may be given as to
whether or in what form the regulations may be adopted.
Liquidity
All savings associations, including Wyman Park, are required to
maintain an average daily balance of liquid assets equal to a certain percentage
of the sum of its average daily balance of net withdrawable deposit accounts and
borrowings payable in one year or less. For a discussion of what Wyman Park
includes in liquid assets, see "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital
Resources." This liquid asset ratio requirement may vary from time to time
(between 4% and 10%) depending upon economic conditions and savings flows of all
savings associations. At the present time, the minimum liquid asset ratio is 5%.
In addition, short-term liquid assets (e.g., cash, certain time
deposits, certain bankers acceptances and short-term United States Treasury
obligations) currently must constitute at least 1% of the association's average
daily balance of net withdrawable deposit accounts and current borrowings.
Penalties may be imposed upon associations for violations of either liquid asset
ratio requirement. At June 30, 1997, the Association was in compliance with both
requirements, with an overall liquid asset ratio of 9.8% and a short-term liquid
assets ratio of 4.4%.
Qualified Thrift Lender Test
All savings associations, including Wyman Park, are required to meet a
qualified thrift lender ("QTL") test to avoid certain restrictions on their
operations. This test requires a savings association to have at least 65% of its
portfolio assets (as defined by regulation) in qualified thrift investments on a
monthly average for nine out of every 12 months on a rolling basis. As an
alternative, the savings association may maintain 60% of its assets in those
assets specified in Section 7701(a)(19) of the Internal Revenue Code. Under
either test, such assets primarily consist of residential housing related loans
and investments. At June 30, 1997, the Association met the test and has always
met the test since its effectiveness.
Any savings association that fails to meet the QTL test must convert to
a national bank charter, unless it requalifies as a QTL and thereafter remains a
QTL. If an association does not requalify and converts to a national bank
charter, it must remain SAIF-insured until the FDIC permits it to transfer to
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the BIF. If such an association has not yet requalified or converted to a
national bank, its new investments and activities are limited to those
permissible for both a savings association and a national bank, and it is
limited to national bank branching rights in its home state. In addition, the
association is immediately ineligible to receive any new FHLB borrowings and is
subject to national bank limits for payment of dividends. If such association
has not requalified or converted to a national bank within three years after the
failure, it must divest of all investments and cease all activities not
permissible for a national bank. In addition, it must repay promptly any
outstanding FHLB borrowings, which may result in prepayment penalties. If any
association that fails the QTL test is controlled by a holding company, then
within one year after the failure, the holding company must register as a bank
holding company and become subject to all restrictions on bank holding
companies. See "- Holding Company Regulation."
Community Reinvestment Act
Under the Community Reinvestment Act ("CRA"), every FDIC insured
institution has a continuing and affirmative obligation consistent with safe and
sound banking practices to help meet the credit needs of its entire community,
including low and moderate income neighborhoods. The CRA does not establish
specific lending requirements or programs for financial institutions nor does it
limit an institution's discretion to develop the types of products and services
that it believes are best suited to its particular community, consistent with
the CRA. The CRA requires the OTS, in connection with the examination of Wyman
Park, to assess the institution's record of meeting the credit needs of its
community and to take such record into account in its evaluation of certain
applications, such as a merger or the establishment of a branch, by Wyman Park.
An unsatisfactory rating may be used as the basis for the denial of an
application by the OTS.
The federal banking agencies, including the OTS, have recently revised
the CRA regulations and the methodology for determining an institution's
compliance with the CRA. Due to the heightened attention being given to the CRA
in the past few years, the Association may be required to devote additional
funds for investment and lending in its local community. The Association was
examined for CRA compliance in September 1995 and received a rating of
satisfactory.
Transactions with Affiliates
Generally, transactions between a savings association or its
subsidiaries and its affiliates are required to be on terms as favorable to the
association as transactions with non-affiliates. In addition, certain of these
transactions, such as loans to an affiliate, are restricted to a percentage of
the association's capital. Affiliates of Wyman Park include the Holding Company
and any company which is under common control with the Association. In addition,
a savings association may not lend to any affiliate engaged in activities not
permissible for a bank holding company or acquire the securities of most
affiliates. The OTS has the discretion to treat subsidiaries of savings
associations as affiliates on a case by case basis.
Certain transactions with directors, officers or controlling persons
are also subject to conflict of interest regulations enforced by the OTS. These
conflict of interest regulations and other statutes also
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impose restrictions on loans to such persons and their related interests. Among
other things, such loans must generally be made on terms substantially the same
as for loans to unaffiliated individuals.
Holding Company Regulation
The Holding Company will be a unitary savings and loan holding company
subject to regulatory oversight by the OTS. As such, the Holding Company is
required to register and file reports with the OTS and is subject to regulation
and examination by the OTS. In addition, the OTS has enforcement authority over
the Holding Company and its non-savings association subsidiaries which also
permits the OTS to restrict or prohibit activities that are determined to be a
serious risk to the subsidiary savings association.
As a unitary savings and loan holding company, the Holding Company
generally is not subject to activity restrictions. If the Holding Company
acquires control of another savings association as a separate subsidiary, it
would become a multiple savings and loan holding company, and the activities of
the Holding Company and any of its subsidiaries (other than Wyman Park or any
other SAIF-insured savings association) would become subject to such
restrictions unless such other associations each qualify as a QTL and were
acquired in a supervisory acquisition.
If Wyman Park fails the QTL test, the Holding Company must obtain the
approval of the OTS prior to continuing after such failure, directly or through
its other subsidiaries, any business activity other than those approved for
multiple savings and loan holding companies or their subsidiaries. In addition,
within one year of such failure the Holding Company must register as, and will
become subject to, the restrictions applicable to bank holding companies. The
activities authorized for a bank holding company are more limited than are the
activities authorized for a unitary or multiple savings and loan holding
company. See "--Qualified Thrift Lender Test."
The Holding Company must obtain approval from the OTS before acquiring
control of any other SAIF-insured association. Such acquisitions are generally
prohibited if they result in a multiple savings and loan holding company
controlling savings associations in more than one state. However, such
interstate acquisitions are permitted based on specific state authorization or
in a supervisory acquisition of a failing savings association.
Federal Securities Law
The stock of the Holding Company will be registered with the SEC under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The
Holding Company will be subject to the information, proxy solicitation, insider
trading restrictions and other requirements of the SEC under the Exchange Act.
Holding Company stock held by persons who are affiliates (generally
officers, directors and principal stockholders) of the Holding Company may not
be resold without registration or unless sold in accordance with certain resale
restrictions. If the Holding Company meets specified current public information
requirements, each affiliate of the Holding Company is able to sell in the
public market, without registration, a limited number of shares in any
three-month period.
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Federal Reserve System
The Federal Reserve Board requires all depository institutions to
maintain noninterest bearing reserves at specified levels against their
transaction accounts (primarily checking, NOW and Super NOW checking accounts).
At June 30, 1997, Wyman Park was in compliance with these reserve requirements.
The balances maintained to meet the reserve requirements imposed by the Federal
Reserve Board may be used to satisfy liquidity requirements that may be imposed
by the OTS. See "-- Liquidity."
Savings associations are authorized to borrow from the Federal Reserve
Association "discount window," but Federal Reserve Board regulations require
associations to exhaust other reasonable alternative sources of funds, including
FHLB borrowings, before borrowing from the Federal Reserve Association.
Federal Home Loan Bank System
Wyman Park is a member of the FHLB of Atlanta, which is one of 12
regional FHLBs, that administers the home financing credit function of savings
associations. Each FHLB serves as a reserve or central bank for its members
within its assigned region. It is funded primarily from proceeds derived from
the sale of consolidated obligations of the FHLB System. It makes loans to
members (i.e., advances) in accordance with policies and procedures, established
by the board of directors of the FHLB, which are subject to the oversight of the
Federal Housing Finance Board. All advances from the FHLB are required to be
fully secured by sufficient collateral as determined by the FHLB. In addition,
all long-term advances are required to provide funds for residential home
financing.
As a member, Wyman Park is required to purchase and maintain stock in
the FHLB of Atlanta. At June 30, 1997, Wyman Park had $510,000 in FHLB stock,
which was in compliance with this requirement. In past years, Wyman Park has
received substantial dividends on its FHLB stock. Over the past five fiscal
years such dividends have averaged 6.5% and were 7.3% for fiscal year 1997.
Under federal law the FHLBs are required to provide funds for the
resolution of troubled savings associations and to contribute to low- and
moderately priced housing programs through direct loans or interest subsidies on
advances targeted for community investment and low- and moderate-income housing
projects. These contributions have affected adversely the level of FHLB
dividends paid and could continue to do so in the future. These contributions
could also have an adverse effect on the value of FHLB stock in the future. A
reduction in value of Wyman Park's FHLB stock may result in a corresponding
reduction in Wyman Park's capital.
For the year ended June 30, 1997, dividends paid by the FHLB of Atlanta
to Wyman Park totaled $37,000, which was no increase over the amount of
dividends received in fiscal year 1996.
Federal and State Taxation
Savings associations such as Wyman Park that meet certain conditions
prescribed by the Internal Revenue Code of 1986, as amended (the "Code"), are
permitted to establish reserves for bad debts and
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to make annual additions thereto which may, within specified formula limits, be
taken as a deduction in computing taxable income for federal income tax
purposes. The amount of the bad debt reserve deduction is computed under the
experience method. Under the experience method, the bad debt reserve deduction
is an amount determined under a formula based generally upon the bad debts
actually sustained by the savings association over a period of years.
In August 1996, legislation was enacted that repealed the percentage of
taxable income method used by many thrifts, including the Association, to
calculate their bad debt reserve for federal income tax purposes. As a result,
small thrifts such as the Association must recapture that portion of the reserve
that exceeds the amount that could have been taken under the experience method
for tax years beginning after December 31, 1987. The recapture will occur over a
six-year period, the commencement of which will be delayed until the first
taxable year beginning after December 31, 1997, provided the institution meets
certain residential lending requirements. At June 30, 1997, the Association had
approximately $39,000 in bad debt reserves subject to recapture for federal
income tax purposes. The deferred tax liability related to the recapture has
been previously established so there will be no effect on future net income.
In addition to the regular income tax, corporations, including savings
associations such as Wyman Park, generally are subject to a minimum tax. An
alternative minimum tax is imposed at a minimum tax rate of 20% on alternative
minimum taxable income, which is the sum of a corporation's regular taxable
income (with certain adjustments) and tax preference items, less any available
exemption. The alternative minimum tax is imposed to the extent it exceeds the
corporation's regular income tax and net operating losses can offset no more
than 90% of alternative minimum taxable income.
A portion of the Association's reserves for losses on loans may not,
without adverse tax consequences, be utilized for the payment of cash dividends
or other distributions to a shareholder (including distributions on redemption,
dissolution or liquidation) or for any other purpose (except to absorb bad debt
losses). As of June 30, 1997, the portion of Wyman Park's reserves subject to
this treatment for tax purposes totaled approximately $1.8 million.
Wyman Park files federal income tax returns on a fiscal year basis
using the accrual method of accounting. The Holding Company does not anticipate
filing consolidated federal income tax returns with Wyman Park. Savings
associations that file federal income tax returns as part of a consolidated
group are required by applicable Treasury regulations to reduce their taxable
income for purposes of computing the percentage bad debt deduction for losses
attributable to activities of the non-savings association members of the
consolidated group that are functionally related to the activities of the
savings association member.
Wyman Park has been audited by the IRS with respect to federal income
tax returns through June, 1996. With respect to years examined by the IRS,
either all deficiencies have been satisfied or sufficient reserves have been
established to satisfy asserted deficiencies. In the opinion of management, any
examination of still open returns (including returns of subsidiaries and
predecessors of, or entities merged into, Wyman Park) would not result in a
deficiency which could have a material adverse effect on the financial condition
of Wyman Park.
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Maryland Taxation. The State of Maryland generally imposes a franchise
tax on thrift institutions computed at a rate of 7% of net earnings. For the
purpose of the 7% franchise tax, net earnings are defined as the net income of
the thrift institution as determined for federal corporate income tax purposes,
plus (i) interest income from obligations of the United States, of any state,
including Maryland, and of any country, municipal or public corporation
authority, special district or political subdivision of any state, including
Maryland, (ii) any profit realized from the sale or exchange of bonds issued by
the State of Maryland or any of its political subdivisions, and (iii) any
deduction for state income taxes.
Delaware Taxation. As a Delaware holding company, the Holding Company
is exempted from Delaware corporate income tax but is required to file an annual
report with and pay an annual fee to the State of Delaware. The Holding Company
is also subject to an annual franchise tax imposed by the State of Delaware.
MANAGEMENT
Directors and Executive Officers of the Holding Company
The Board of Directors of the Holding Company currently consists of
nine members, each of whom is also a director of the Association. See
"Management - Directors of the Association." Each Director of the Holding
Company has served as such since the Holding Company's incorporation in
September 1997. Directors of the Holding Company will serve three-year staggered
terms so that approximately one-third of the directors will be elected at each
annual meeting of stockholders. The terms of the current directors of the
Holding Company are the same as their terms as directors of the Association. The
Holding Company may consider paying fees to directors. See "- Directors of the
Association."
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The executive officers of the Holding Company are elected annually and
hold office until their respective successor has been elected and qualified or
until death, resignation or removal by the Board of Directors. The executive
officers of the Holding Company, who have held their positions since September
1997, are set forth below.
Name Title
- ------------------- ------------------------------------------------
Ernest A. Moretti Director, President and Chief Executive Officer
Ronald W. Robinson Chief Financial Officer
Charmaine M. Snyder Corporate Secretary
It is not anticipated that the executive officers of the Holding
Company will receive any remuneration in their capacity as Holding Company
executive officers. For information regarding compensation of directors and
executive officers of the Association, see "- Compensation and Meetings of the
Board of Directors of the Association" and "- Executive Compensation."
Committees of the Holding Company
The Holding Company formed standing Audit and Nominating Committees in
connection with its organization in September 1997. The Holding Company
committees did not meet during fiscal 1997.
The Audit Committee will review audit reports and related matters to
ensure effective compliance with regulations and internal policies and
procedures. This committee also will act on the recommendation by management of
an accounting firm to perform the Holding Company's annual audit and acts as a
liaison between the auditors and the Board. The current members of this
committee are Directors Heaver, Marsiglia, Salkin and, ex officio, Mr. Moretti.
The Nominating Committee will meet annually in order to nominate
candidates for membership on the Board of Directors. This committee is comprised
of the Board members who are not up for election.
Indemnification
The Certificate of Incorporation of the Holding Company provides that a
director or officer of the Holding Company shall be indemnified by the Holding
Company to the fullest extent authorized by the Delaware General Corporation Law
against all expenses, liability and loss reasonably incurred or suffered by such
person in connection with his activities as a director or officer or as a
director or officer of another company, if the director or officer held such
position at the request of the Holding Company. Delaware law requires that such
director, officer, employee or agent, in order to be indemnified, must have
acted in good faith and in a manner reasonably believed to be not opposed to the
best interests of the Holding Company and, with respect to any criminal action
or proceeding, either had reasonable cause to believe such conduct was lawful or
did not have reasonable cause to believe his conduct was unlawful.
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The Certificate of Incorporation and Delaware law also provide that the
indemnification provisions of such Certificate and the statute are not exclusive
of any other right which a person seeking indemnification may have or later
acquire under any statute, provision of the Certificate of Incorporation, Bylaws
of the Holding Company, agreement, vote of stockholders or disinterested
directors or otherwise.
These provisions may have the effect of deterring shareholder
derivative actions, since the Holding Company may ultimately be responsible for
expenses for both parties to the action. A similar effect would not be expected
for third-party claims.
In addition, the Certificate of Incorporation and Delaware law also
provide that the Holding Company may maintain insurance, at its expense, to
protect itself and any director, officer, employee or agent of the Holding
Company or another corporation, partnership, joint venture, trust or other
enterprise against any expense, liability or loss, whether or not the Holding
Company has the power to indemnify such person against such expense, liability
or loss under the Delaware General Corporation Law. The Holding Company intends
to obtain such insurance.
Directors of the Association
Upon completion of the Conversion, each of the directors of the
Association will continue to serve as a director of the converted Association.
The Board of Directors of the Association currently consists of nine directors.
The directors are divided into three classes. Approximately one-third of the
directors are elected at each annual meeting of stockholders. Because the
Holding Company will own all of the issued and outstanding shares of capital
stock of the Association after the Conversion, directors of the Holding Company
will elect the directors of the Association.
Term of
Director Office
Name Age(1) Position(s) Held Since Expires
---- ------ ---------------- ----- -------
Allan B. Heaver 45 Chairman of the Board 1983 1998
Ernest A. Moretti 56 Director, President and Chief 1989 1999
Executive Officer
H. Douglas Huether 71 Director 1965 1998
John K. White 65 Director 1987 1999
John R. Beever 64 Director 1984 1997
Albert M. Copp 62 Director 1992 1997
Gilbert D. Marsiglia, Sr. 59 Director 1988 1997
Jay H. Salkin 58 Director 1995 1998
G. Scott Barhight 40 Director 1996 1999
- --------
(1) At June 30, 1997.
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The business experience of each director is set forth below. All
directors have held their present positions for at least the past five years,
except as otherwise indicated.
Allan B. Heaver. Since 1986, Mr. Heaver has served as the Managing
General Partner of Heaver Properties, a commercial real estate
management/development company.
Ernest A. Moretti. Mr. Moretti is President and Chief Executive Officer
of the Association, a position he has held since 1989.
M. Douglas Huether. Since 1970, Mr. Huether has served as President of
Independent Can Company, a metal can manufacturing company and is currently
Chairman of the Board.
John K. White. For over 25 years prior to his retirement, Mr. White
served as Executive Vice President and is a current member of the Board of
Directors of the Baltimore Life Insurance Company and Life of Maryland
Insurance.
John R. Beever. Since 1967, Mr. Beever has served as President and
Chairman of the Board of John Dittmar & Sons, Inc., a manufacturer of
architectural woodwork.
Albert M. Copp. Since 1991, Mr. Copp has served as the Director of
Strategic Business Development for Whitney, Bailey, Cox & Magnani, a
civil/structural engineering company.
Gilbert D. Marsiglia, Sr. Mr. Marsiglia is the President of the real
estate brokerage firm of Gilbert D. Marsiglia & Co., Inc., a position he has
held since 1973.
Jay H. Salkin. Since 1981, Mr. Salkin has served as Senior Vice
President - Branch Manager of Advest, Inc., an investment brokerage company.
G. Scott Barhight. Mr. Barhight has been a partner with the law firm of
Whiteford, Taylor & Preston, LLP since 1992.
Executive Officers Who are not Directors
Each of the executive officers of the Association will retain his or
her office following the Conversion. Officers are elected annually by the Board
of Directors of the Association. The business experience of the executive
officers who are not also directors is set forth below.
Ronald W. Robinson. Mr. Robinson, age 52, currently serves as Treasurer
of the Association. Mr. Robinson has been employed by the Association since
1990.
Charmaine M. Snyder. Ms. Snyder, age 40, serves as the Association's
Corporate Secretary and Loan Servicing Manager. Ms. Snyder has been employed by
the Association since 1976.
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Meetings and Committees of the Board of Directors
The Association's Board of Directors meets at least monthly. During the
fiscal year ended June 30, 1997, the Board of Directors held 13 meetings. No
director attended fewer than 75% of the total meetings of the Board of Directors
and committees on which such Board member served during this period.
The Association has standing Loan, Marketing, Pension, Audit and
Compensation Committees, as well as an Executive Loan Committee and Executive
Committee for Strategic Planning.
The Loan Committee meets on an as-needed basis for the purpose of
reviewing and acting upon all commercial loan applications up to $250,000 and
residential loan applications up to $250,000 (or up to $500,000 if the loan
meets certain conditions). This committee met 2 to 3 times a week during fiscal
1997 and is comprised Offrs. Moretti and Robinson.
The Marketing Committee meets quarterly for the purpose of reviewing
and implementing marketing strategies. This committee met six times during
fiscal 1997 and is comprised of Directors Beever, Copp, Heaver, Marsiglia, and
Moretti.
The Pension Committee meets on an as-needed basis for the of reviewing
and discussing retirement matters effecting the Association's personnel. This
committee did not meet during fiscal 1997. Its members are Directors Heaver,
Huether, Moretti and White.
The Audit Committee meets annually with the Association's accounting
firm in order to review the annual audit. This committee met once in fiscal 1997
and is comprised of Directors Heaver, Marsiglia, Moretti and Salkin.
The Compensation Committee meets on an as-needed basis, but at least
once during a fiscal year for the purpose of reviewing officers' salaries and
bonuses. This committee met 3 times during fiscal 1997. The members of this
committee are Directors Copp, Heaver, Huether, Moretti and White.
The Executive Loan Committee meets on an as-needed basis, but at least
once a month, for the purpose of reviewing the purchase and sale of investments
as well as acting upon those loan applications outside the authority of the Loan
Committee. This committee met 12 times during fiscal 1997. Its members are
Directors Heaver, Salkin, Moretti and White as well as two other directors on a
rotating basis.
The Executive Committee for Strategic Planning meets on an as-needed
basis. This committee sets the direction of the Association's business plan and
oversees the progress in meeting stated goals. This committee also decides the
implementation of new products for the Association and makes other major
recommendations to the Board of Directors. This committee met 3 times in fiscal
1997 and is composed of Directors Heaver, Barhight, Beever, Huether, Moretti and
Salkin.
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Director Compensation
Each director of the Association is currently paid a fee of $575 for
each regular meeting attended. Non-employee directors receive committee fees of
$175 for each meeting attended. Employee directors do not receive fees for
participation on any committees.
Executive Compensation
The following table sets forth information concerning the compensation
paid or granted to the Association's Chief Executive Officer and each executive
officer who made in excess of $100,000 during fiscal 1997. No executive officer
of the Holding Company received cash compensation in excess of $100,000 in
fiscal 1997.
<TABLE>
<CAPTION>
Summary Compensation Table
------------------------------------------------------
Long-Term Compensation
Annual Compensation Awards
------------------- -----------------------
Restricted
Name and Principal Other Annual Stock Options/ All Other
Position Year(1) Salary($) Bonus($) Compensation($) Award($) SARs(#) Compensation($)(2)
------------------ ------- --------- -------- --------------- -------- ------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Ernest A. Moretti 1997 $115,000 $23,000 $--- $ --- ---/--- $10,550
President, Chief Executive
Officer and Director
</TABLE>
- -----------
(1) In accordance with the revised rules on executive officer and director
compensation disclosure adopted by the Securities and Exchange Commission,
Summary Compensation information is excluded for the years ended June 30,
1996 and 1995, as the Association was not a public company during such
periods.
(2) Includes $5,000 of life, health and disability premiums paid by the
Association, $3,900 paid by the Association in discretionary contributions
pursuant to the Association's 401(k) Plan and the value of a car provided
to Mr. Moretti of $1,650.
Employment Agreement. The Association has had, since 1989, an
employment contract with its President, Ernest A. Moretti. The agreement
provides for a salary of $115,000, contains bonus provisions tied to the
Association's performance and has a term of three years (subject to an annual
extension for an additional year following an annual performance review). The
key terms of this agreement are expected to be incorporated into a new agreement
which also provides that under certain circumstances, including a change in
control, Mr. Moretti would be entitled, subject to certain limitations, to a
severance payment in lieu of salary equal to a percentage of his base amount of
compensation, as defined.
Benefit Plans
General. Wyman Park currently provides insurance benefits to its
employees, including health, life, dental, disability and major medical
insurance, subject to certain deductibles and copayments by employees.
Additionally the Association provides its employee with a defined benefit
retirement plan and 401(k) plan.
Pension Plan. The Association makes available to all full-time
employees who have attained the age of 21 and completed at least one year of
service with Wyman Park, a defined benefit noncontributory pension plan. The
pension plan provides for monthly payments to or on behalf of each covered
employee upon the employee's retirement at age 65. These payments are calculated
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in accordance with a formula based on the employee's "average monthly
compensation," which is defined as the highest average of total compensation for
the last five consecutive calendar years of employment.
The following table sets forth, as of June 30, 1997, estimated annual
retirement benefits for individuals at age 65 payable in the form of a combined
ten-year certain and life annuity payment under the most advantageous plan
provisions for various levels of compensation and years of service. Such
payments are not subject to offset for social security benefits. The figures in
this table are based upon the assumption that the Pension Plan continues in its
present form and does not reflect benefits payable under the ESOP. At June 30,
1997, the estimated credited years of services of Mr.
Moretti was 7 years.
Pension Plan Table
- -----------------------------------------------------------------------
Years of Credited Service
--------------------------------------------------
High-Five Average
Compensation 10 Years 15 Years 20 Years 25 Years 30 Years
------------ -------- -------- -------- -------- --------
=======================================================================
401(k) Plan. The Association provides its employees a qualified,
tax-exempt pension plan with a "cash-or-deferred arrangement" qualifying under
Section 401(k) of the Internal Revenue Code (the "401(k) Plan"). Employees who
have attained age 21 and who have completed one year of employment, during which
they worked at least 1,000 hours, are eligible to participate in the 401(k) Plan
as of the first-day of the month following their eligibility date. Eligible
employees are permitted to contribute up to 15% of their compensation to the
401(k) Plan on a pre-tax basis, up to a maximum of $9,500. The Association
matches 50% of the first 3% of each participant's salary reduction contribution
to the 401(k) Plan.
Participant contributions to the 401(k) Plan are fully and immediately
vested. Withdrawals are not permitted before age 59 1/2 except in the event of
death, disability, termination of employment or reasons of proven financial
hardship. With certain limitations, participants may make withdrawals from their
accounts while actively employed. Upon termination of employment, the
participant's accounts will be distributed, unless he or she elects to defer the
payment.
The 401(k) Plan may be amended by the Board of Directors, except that
no amendment may be made which would reduce the interest of any participant in
the 401(k) Plan trust fund or divert any of the assets of the 401(k) Plan trust
fund to purposes other than the benefit of participants or their beneficiaries.
During fiscal 1997, the Association made $13,060 in contributions to
the 401(k) Plan.
Employee Stock Ownership Plan. The Boards of Directors of Wyman Park
and the Holding Company have approved the adoption of an ESOP for the benefit of
employees of the Holding Company and its subsidiaries, including Wyman Park. The
ESOP is designed to meet the requirements of an employee stock ownership plan as
described at Section 4975(e)(7) of the Code and Section 407(d)(6) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"). The ESOP
may borrow in order to finance purchases of the Holding Company's Common Stock.
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It is anticipated that the ESOP will be funded with a loan from the
Holding Company (not to exceed an amount equal to 8% of the gross conversion
proceeds). The Holding Company intends to apply to the OTS to permit it to lend
funds to the ESOP. In the event the Holding Company is not permitted to lend
funds to the ESOP and the ESOP is unable to obtain financing from an unrelated
lender for its stock purchase, the Holding Company may contribute funds to the
ESOP to enable it purchase up to 3% of the shares of Common Stock in the
Conversion; provided, however that the total contributions of the Holding
Company to the ESOP and RRPs for stock purchases in the Conversion may not
exceed 4% of the Common Stock sold in the Conversion.
GAAP generally requires that any borrowing by the ESOP from an
unaffiliated lender be reflected as a liability in the Holding Company's
consolidated financial statements, whether or not such borrowing is guaranteed
by, or constitutes a legally binding contribution commitment of, the Holding
Company or the Association. The funds used to acquire the ESOP shares are
expected to be borrowed from the Holding Company. If the Holding Company
finances the ESOP debt, the ESOP debt will be eliminated through consolidation
and no liability will be reflected on the Holding Company's consolidated
financial statements. In addition, shares purchased with borrowed funds will, to
the extent of the borrowings, be excluded from stockholders' equity,
representing unearned compensation to employees for future services not yet
performed. Consequently, if the ESOP purchases already-issued shares in the open
market, the Holding Company's consolidated liabilities will increase to the
extent of the ESOP's borrowings, and total and per share stockholders' equity
will be reduced to reflect such borrowings. If the ESOP purchases newly issued
shares from the Holding Company, total stockholders' equity would neither
increase nor decrease, but per share stockholders' equity and per share net
income would decrease because of the increase in the number of outstanding
shares. In either case, as the borrowings used to fund ESOP purchases are
repaid, total stockholders' equity will correspondingly increase.
All employees of the Association are eligible to participate in the
ESOP after they attain age 21 and complete one year of service. Employees will
be credited for years of service to the Association prior to the adoption of the
ESOP for participation and vesting purposes. The Association's contribution to
the ESOP is allocated among participants on the basis of compensation. Each
participant's account will be credited with cash and shares of Holding Company
Common Stock based upon compensation earned during the year with respect to
which the contribution is made. Contributions credited to a participant's
account are vested on a graduated basis and become fully vested when such
participant completes ten years of service. ESOP participants are en titled to
receive distributions from their ESOP accounts only upon termination of service.
Distributions will be made in cash and in whole shares of the Holding Company's
Common Stock. Fractional shares will be paid in cash. Participants will not
incur a tax liability until a distribution is made.
Each participating employee is entitled to instruct the trustee of the
ESOP as to how to vote the shares allocated to his or her account. The trustee
will not be affiliated with the Holding Company or Wyman Park.
The ESOP may be amended by the Board of Directors, except that no
amendment may be made which would reduce the interest of any participant in the
ESOP trust fund or divert any of the assets of the ESOP trust fund to purposes
other than the benefit of participants or their beneficiaries.
Other Stock Benefit Plans. In addition to the ESOP and the employment
agreements, in the future the Holding Company may consider the implementation of
a stock option plan ("Stock Option Plan") and recognition and retention plan
("RRP") for the benefit of selected directors, officers and employees of the
Holding Company and the Association. Any such stock option plan or RRP will not
be implemented within one year of the date of the consummation of the
Conversion, subject to continuing OTS jurisdiction. If a determination is made
to implement a stock option plan or RRP, it is anticipated that any such plans
will be submitted to stockholders for their consideration at which time
stockholders would be provided with detailed
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information regarding such plan. If such plans are approved, and affected, they
will have a dilutive effect on the Holding Company's stockholders as well as
affect the Holding Company's net income and stockholders' equity, although the
actual results cannot be determined until such plans are implemented.
Indebtedness of Management
The Association has followed a policy of granting loans to officers and
directors. Loans to directors and executive officers are made in the ordinary
course of business and on the same terms and conditions as those of comparable
transactions with the general public prevailing at the time, in accordance with
the Association's underwriting guidelines, and do not involve more than the
normal risk of collectibility or present other unfavorable features.
All loans by the Association to its directors and executive officers
are subject to OTS regulations restricting loan and other transactions with
affiliated persons of the Association. Federal law currently requires that all
loans to directors and executive officers generally be made on terms and
conditions comparable to those for similar transactions with non-affiliates.
Loans to all directors and executive officers and their associates totaled
$477,500 at June 30, 1997, which was 10.1% of the Association's equity capital
at that date. All loans to directors and executive officers were performing in
accordance with their terms at June 30, 1997.
THE CONVERSION
The Board of Directors of the Association and the OTS have approved the
Plan of Conversion. OTS approval does not constitute a recommendation or
endorsement of the Plan of Conversion. Certain terms used in the following
summary of the material terms of the Conversion are defined in the Plan of
Conversion, a copy of which may be obtained by contacting Wyman Park.
General
The Board of Directors of the Association has adopted the Plan, subject
to approval by the OTS and the members of the Association. Pursuant to the Plan,
the Association is to be converted from a federally chartered mutual savings
association to a federally chartered stock savings association, with the
concurrent formation of a holding company. The OTS has approved the Plan,
subject to its approval by the affirmative vote of the members of the
Association holding not less than a majority of the total number of votes
eligible to be cast at a special meeting called for that purpose (the "Special
Meeting"), to be held on _______, 1997.
The Conversion will be accomplished through amendment of the
Association's federal charter to authorize capital stock, at which time the
Association will become a wholly owned subsidiary of the Holding Company. The
Conversion will be accounted for as a pooling of interests.
Subscription Rights have been granted to Eligible Account Holders as of
March 31, 1996, the Tax- Qualified Employee Plans of the Association and Holding
Company, Supplemental Eligible Account Holders as of September 30, 1997, other
members, and officers, directors and employees of the Association. Additionally,
members of the general public may be afforded the opportunity to subscribe for
Holding Company Common Stock in a direct Community Offering, with a preference
to natural persons who reside in Baltimore and Anne Arundel Counties, Maryland.
See "- Offering of Holding Company Common Stock." Depending upon market
conditions, any shares not initially subscribed for in the Subscription and
Community Offering may be offered for sale on a best efforts basis by a selling
group of broker-dealers. Subscriptions for shares will be subject to the maximum
and minimum purchase limitations set forth in the Plan of Conversion.
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Business Purposes
Wyman Park has several business purposes for the Conversion. The sale
of Holding Company Common Stock will have the immediate result of providing the
Association with additional equity capital in order to support the Association's
existing operating strategies, subject to applicable regulatory restrictions.
The sale of the Common Stock is the most effective means of increasing the
Association's permanent capital and does not involve the high interest cost and
repayment obligation of subordinated debt. In addition, investment of that part
of the net Conversion proceeds paid by the Holding Company to the Association is
expected to provide additional operating income to further increase the
Association's capital on a continuing basis.
The Board of Directors of the Association believes that a holding
company structure could facilitate the acquisition of other savings institutions
in the future as well as other companies. If a multiple holding company
structure is utilized in a future acquisition, the acquired savings institution
would be able to operate on a more autonomous basis as a wholly owned subsidiary
of the Holding Company rather than as a division of the Association. For
example, the acquired savings institution could retain its own directors,
officers and corporate name as well as having representation on the Board of
Directors of the Holding Company. As of the date hereof, there are no plans or
understandings regarding the acquisition of any other institutions.
The Board of Directors of the Association also believes that a holding
company structure can facilitate the diversification of the Association's
business activities. While the potential for diversification will be maximized
if a unitary holding company structure is utilized because the types of business
activities permitted to a unitary holding company are broader than those of a
multiple holding company, either type of holding company may engage in a broader
range of activities than may a thrift institution directly. Currently, there are
no plans that the Holding Company engage in any material activities apart from
holding the shares of the Association and investing the remaining net proceeds
from the sale of Common Stock in the Conversion.
The preferred stock and additional common stock of the Holding Company
being authorized in the Conversion will be available for future acquisitions and
for issuance and sale to raise additional equity capital, generally without
stockholder approval, but subject to market conditions. Although the Holding
Company currently has no plans with respect to future issuances of equity
securities, the more flexible operating structure provided by the Holding
Company and the stock form of ownership is expected to assist the Association in
competing more aggressively with other financial institutions in its principal
market area.
The Conversion will structure the Association in the stock form used in
the United States by all commercial banks, most major business corporations and
an increasing number of savings institutions. The Conversion will permit the
Association's members to become stockholders of the Holding Company, thereby
allowing members to own stock in the financial organization in which they
maintain deposit accounts or with which they have a borrowing relationship. Such
ownership should encourage members to promote the Association to others, thereby
further contributing to the Association's earnings potential.
The Association is also expected to benefit from its management and
employees owning stock, because stock ownership is viewed as an effective
performance incentive and a means of attracting, retaining and compensating
personnel.
Effects of Conversion to Stock Form on Depositors and Borrowers of the
Association
Voting Rights. Deposit account holders will have no voting rights in
the converted Association or the Holding Company and will therefore not be able
to elect directors of either entity or to control their affairs. These rights
are currently accorded to deposit account holders with regard to the
Association. Subsequent to Conversion, voting rights will be vested exclusively
in the Holding Company as the sole stockholder of the
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Association. Voting rights as to the Holding Company will be held exclusively by
its stockholders. Each purchaser of Holding Company Common Stock shall be
entitled to vote on any matters to be considered by the Holding Company
stockholders. A stockholder will be entitled to one vote for each share of
Common Stock owned, subject to certain limitations applicable to holders of 10%
or more of the shares of the Common Stock.
See "Description of Capital Stock."
Deposit Accounts and Loans. The general terms of the Association's
deposit accounts, the balances of the individual accounts and the existing FDIC
insurance coverage will not be affected by the Conversion. Furthermore, the
Conversion will not affect the loan accounts, the balances of these accounts, or
the obligations of the borrowers under their individual contractual arrangements
with the Association.
Tax Effects. The Association has received an opinion from Silver,
Freedman & Taff, L.L.P. with regard to federal income taxation, and an opinion
from Wooden & Benson, Chartered with regard to Maryland taxation, to the effect
that the adoption and implementation of the Plan of Conversion set forth herein
will not be taxable for federal or Maryland tax purposes to the Association or
the Holding Company. See "- Income Tax Consequences."
Liquidation Rights. The Association has no plans to liquidate, either
before or subsequent to the completion of the Conversion. However, if there
should ever be a complete liquidation, either before or after Conversion,
deposit account holders would receive the protection of insurance by the FDIC up
to applicable limits. Subject thereto, liquidation rights before and after
Conversion would be as follows:
Liquidation Rights in Present Mutual Institution. In addition to the
protection of FDIC insurance up to applicable limits, in the event of a complete
liquidation of the Association, each holder of a deposit account in the
Association in its present mutual form would receive his or her pro rata share
of any assets of the Association remaining after payment of claims of all
creditors (including the claims of all depositors in the amount of the
withdrawal value of their accounts). Such holder's pro rata share of such
remaining assets, if any, would be in the same proportion of such assets as the
balance in his or her deposit account was to the aggregate balance in all
deposit accounts in the Association at the time of liquidation.
Liquidation Rights in Proposed Converted Institution. After Conversion,
each deposit account holder, in the event of a complete liquidation of the
Association, would have a claim of the same general priority as the claims of
all other general creditors of the Association in addition to the protection of
FDIC insurance up to applicable limits. Therefore, except as described below,
the deposit account holder's claim would be solely in the amount of the balance
in his or her deposit account plus accrued interest. The holder would have no
interest in the assets of the Association above that amount.
The Plan of Conversion provides that there shall be established, upon
the completion of the Conversion, a special "liquidation account" for the
benefit of Eligible Account Holders and Supplemental Eligible Account Holders
(i.e., depositors at March 31, 1996 and September 30, 1997) in an amount equal
to the net worth of the Association as of the date of its latest statement of
financial condition contained in the final prospectus relating to the sales of
shares of Holding Company Common Stock in the Conversion. Each Eligible Account
Holder and Supplemental Eligible Account Holder would have an initial interest
in such liquidation account for each deposit account held in the Association on
the applicable record date. A deposit account holder's interest as to each
deposit account would be in the same proportion of the total liquidation account
as the balance in his or her account on the applicable record date, was to the
aggregate balance in all deposit accounts of Eligible Account Holders and/or
Supplemental Eligible Account Holders on such dates. For deposit accounts in
existence on both dates separate subaccounts shall be determined on the basis of
the qualifying deposits in such deposit accounts on such record dates. However,
if the amount in the deposit account on any annual closing date of the
Association is less than the lowest amount in such account on March 31, 1996 or
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September 30, 1997 and on any subsequent closing date (each March 31st and
September 30th), then the account holder's interest in this special liquidation
account would be reduced by an amount proportionate to any such reduction, and
the account holder's interest would cease to exist if such deposit account were
closed.
In addition, the interest in the special liquidation account would
never be increased despite any increase in the balance of the account holders'
related accounts after Conversion, and could only decrease.
Any assets remaining after the above liquidation rights of Eligible
Account Holders and Supplemental Eligible Account Holders were satisfied would
be distributed to the Holding Company as the sole stockholder of the
Association.
No merger, consolidation, purchase of bulk assets with assumption of
deposit accounts and other liabilities, or similar transaction, whether the
Association, as converted, or another SAIF-insured institution is the surviving
institution, is deemed to be a complete liquidation for purposes of distribution
of the liquidation account and, in any such transaction, the liquidation account
would be assumed to the full extent authorized by regulations of the OTS as then
in effect. The OTS has stated that the consummation of a transaction of the type
described in the preceding sentence in which the surviving entity is not a
SAIF-insured institution would be reviewed on a case-by-case basis to determine
whether the transaction should constitute a "complete liquidation" requiring
distribution of any then remaining balance in the liquidation account. While the
Association believes that such a transaction should not constitute a complete
liquidation, there can be no assurance that the OTS will not adopt a contrary
position.
Common Stock. For information as to the characteristics of the Common
Stock to be issued under the Plan of Conversion, see "Dividends" and
"Description of Capital Stock." Common Stock issued under the Plan of Conversion
cannot, and will not, be insured by the FDIC or any other governmental agency.
The Association will continue, immediately after completion of the
Conversion, to provide its services to depositors and borrowers pursuant to its
existing policies and will maintain the existing management and employees of the
Association. Other than for payment of expenses incident to the Conversion, no
assets of the Association will be distributed in the Conversion. Wyman Park will
continue to be a member of the FHLB System, and its deposit accounts will
continue to be insured by the FDIC. The affairs of Wyman Park will continue to
be directed by the existing Board of Directors and management.
Offering of Holding Company Common Stock
Under the Plan of Conversion, 805,000 shares of Holding Company Common
Stock will be offered for sale, subject to certain restrictions described below,
initially through a Subscription Offering. Federal conversion regulations
require, with certain exceptions, that at least the minimum number of shares
offered in a conversion be sold in order for the conversion to become effective.
The Subscription and Community Offering will expire at 12:00 noon,
Lutherville, Maryland time, on _______, 1997 (the "Subscription Expiration
Date") unless extended by the Association and the Holding Company. Regulations
of the OTS require that all shares to be offered in the Conversion be sold
within a period ending not more than 45 days after the Subscription Expiration
Date (or such longer period as may be approved by the OTS) or, despite approval
of the Plan of Conversion by members, the Conversion will not be effected and
Wyman Park will remain in mutual form. This period expires on _________, 1997,
unless extended with the approval of the OTS. If the Subscription and Community
Offering is extended beyond _________, 1997, all subscribers will have the right
to modify or rescind their subscriptions and to have their subscription funds
returned promptly with interest. In the event that the Conversion is not
effected, all
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funds submitted and not previously refunded pursuant to the Subscription and
Community Offering will be promptly refunded to subscribers with interest at the
Association's current passbook rate, and all withdrawal authorizations will be
terminated.
Stock Pricing and Number of Shares to be Issued
Federal regulations require that the aggregate purchase price of the
securities of a thrift institution sold in connection with its conversion must
be based on an appraised aggregate market value of the institution as converted
(i.e., taking into account the expected receipt of proceeds from the sale of the
securities in the conversion), as determined by an independent valuation.
Ferguson, which is experienced in the valuation and appraisal of business
entities, including thrift institutions involved in the conversion process, was
retained by the Association to prepare an appraisal of the estimated pro forma
market value of the Association and the Holding Company upon Conversion.
Ferguson will receive a fee of approximately $12,000 for its appraisal.
The Association has agreed to indemnify Ferguson under certain circumstances
against liabilities and expenses (including legal fees) arising out of, related
to, or based upon the Conversion.
Ferguson has prepared an appraisal of the estimated pro forma market
value of the Association as converted. The Ferguson appraisal concluded that, at
________, 1997, an appropriate range for the estimated pro forma market value of
the Association and the Holding Company was from a minimum of $5,950,000 to a
maximum of $8,050,000 with a midpoint of $7,000,000. Assuming that the shares
are sold at $10.00 per share in the Conversion, the estimated number of shares
to be issued in the Conversion is expected to be between 595,000 and 805,000.
The Purchase Price of $10.00 was determined by discussion among the Boards of
Directors of the Association, the Holding Company and Ferguson, taking into
account, among other factors, (i) the requirement under OTS regulation that the
Common Stock be offered in a manner that would achieve the widest distribution
of shares and (ii) liquidity in the Common Stock subsequent to the Conversion.
The appraisal involved a comparative evaluation of the operating and
financial statistics of the Association with those of other thrift institutions.
The appraisal also took into account such other factors as the market for thrift
institution stocks generally, prevailing economic conditions, both nationally
and in Maryland which affect the operations of thrift institutions, the
competitive environment within which the Association operates and the effect of
the Association becoming a subsidiary of the Holding Company. No detailed
individual analysis of the separate components of the Holding Company's and the
Association's assets and liabilities was performed in connection with the
evaluation. The Plan of Conversion requires that all of the shares subscribed
for in the Subscription and Community Offering be sold at the same price per
share. The Board of Directors reviewed and discussed with Ferguson the
appraisal, including the methodology and the appropriateness of the assumptions
utilized and determined that in its opinion the Appraisal was not unreasonable.
The Estimated Valuation Range may be amended with the approval of the OTS in
connection with changes in the financial condition or operating results of the
Association or market conditions generally. As described below, an amendment to
the Estimated Valuation Range would not be made without a resolicitation of
subscriptions and/or proxies except in limited circumstances.
If, upon completion of the Subscription and Community Offering, at
least the minimum number of shares are subscribed for, Ferguson, after taking
into account factors similar to those involved in its prior Appraisal, will
determine its estimate of the pro forma market value of the Association and the
Holding Company upon Conversion, as of the close of the Subscription and
Community Offering.
If, based on the estimate of Ferguson, the aggregate pro forma market
value is not within the Estimated Valuation Range, Ferguson, upon the consent of
the OTS, will determine a new Estimated Valuation
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Range ("Amended Valuation Range"). If the aggregate pro forma market value of
the Association as converted and the Holding Company has increased in the
Amended Valuation Range to an amount that does not exceed $9,257,500 (i.e., 15%
above the maximum of the Estimated Valuation Range), then the number of shares
to be issued may be increased to accommodate such increase in value without a
resolicitation of subscriptions and/or proxies. In such event the Association
and the Holding Company do not intend to resolicit subscriptions and/or proxies
unless the Association and the Holding Company then determine, after
consultation with the OTS, that circumstances otherwise require such a
resolicitation. If, however, the aggregate pro forma market value of the Holding
Company and the Association, as converted, at that time is less than $5,950,000
or more than $9,257,500, a resolicitation of subscribers and/or proxies may be
made, the Plan of Conversion may be terminated or such other actions as the OTS
may permit may be taken. In the event that upon completion of the Subscription
and Community Offering, the pro forma market value of the Holding Company and
Association, as converted, is below $5,950,000 or above $9,257,500 (15% above
the maximum of the Estimated Valuation Range), the Holding Company intends to
file the revised appraisal with the SEC by post-effective amendment to its
Registration Statement on Form SB-2. See "Additional Information." If the Plan
of Conversion is terminated, all funds would be returned promptly with interest
at the rate of the Association's current passbook rate, and holds on funds
authorized for withdrawal from deposit accounts would be released. If there is a
resolicitation of subscriptions, subscribers will be given the opportunity to
cancel or change their subscriptions and to the extent subscriptions are so
canceled or reduced, funds will be returned with interest at the Association's
current passbook savings rate, and holds on funds authorized for withdrawal from
deposit accounts will be released or reduced. Unless there is a resolicitation,
stock subscriptions received by the Holding Company and the Association may not
be withdrawn by the subscriber and, if accepted by the Holding Company and the
Association, are final. If the Conversion is not completed prior to _________,
1999 (two years after the date of the Special Meeting), the Plan of Conversion
will automatically terminate.
Any increase in the total number of shares of Common Stock to be
offered in the Conversion will dilute a subscriber's percentage ownership
interest and will reduce the pro forma net income and net worth on a per share
basis. A decrease in the number of shares to be issued in the Conversion will
increase a subscriber's proportionate ownership interest and will increase both
pro forma net income and net worth on a per share basis while decreasing that
amount on an aggregate basis.
No sale of the shares will take place unless, prior thereto, Ferguson
confirms to the OTS that, to the best of Ferguson's knowledge and judgment,
nothing of a material nature has occurred which would cause Ferguson to conclude
that the actual Purchase Price on an aggregate basis is incompatible with its
estimate of the aggregate pro forma market value of the Holding Company and the
Association as converted at the time of the sale. If, however, the facts do not
justify such a statement, the Subscription and Community Offering or other sale
may be canceled, or a new Estimated Valuation Range set and a new offering held.
In preparing its valuation of the pro forma market value of the
Association and the Holding Company upon Conversion, Ferguson relied upon and
assumed the accuracy and completeness of all financial and statistical
information provided by the Association and the Holding Company. Ferguson also
considered information based upon other publicly available sources which it
believes are reliable. However, Ferguson does not guarantee the accuracy and
completeness of such information and did not independently verify the financial
statements and other data provided by the Association and the Holding Company or
independently value the assets or liabilities of the Association and the Holding
Company. The appraisal is not intended to be, and must not be interpreted as, a
recommendation of any kind as to the advisability of voting to approve the
Conversion or of purchasing shares of Common Stock. The appraisal considers
Wyman Park and the Holding Company only as going concerns and should not be
considered as any indication of the liquidation value of Wyman Park or the
Holding Company. Moreover, the appraisal is necessarily based on many factors
which change from time to time. There can be no assurance that persons who
purchase shares in the Conversion will be able to sell such shares at prices at
or above the Purchase Price.
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Subscription Offering
In accordance with OTS regulations, nontransferable Subscription Rights
have been granted under the Plan of Conversion to the following persons in the
following order of priority: (1) Eligible Account Holders (deposit account
holders of the Association as of March 31, 1996; (2) Tax-Qualified Employee
Plans; (3) Supplemental Eligible Account Holders (deposit account holders of the
Association as of September 30, 1997; (4) Other Members (certain borrowers and
depositors of the Association, other than Eligible Account Holders or
Supplemental Eligible Account Holders at the close of business on _________,
1997, the voting record date for the Special Meeting); and (5) officers,
directors and employees of the Association. All subscriptions received will be
subject to the availability of Holding Company Common Stock after satisfaction
of all subscriptions of all persons having prior rights in the Subscription
Offering, and to the maximum and minimum purchase limitations set forth in the
Plan of Conversion. The preference categories are more fully described below.
Category No. 1 is reserved for the Association's Eligible Account
Holders. Subscription Rights to purchase shares under this category will be
allocated among Eligible Account Holders to permit each such depositor to
purchase shares in an amount equal to the greater of $100,000 of Common Stock or
one-tenth of one percent (.10%) of the total shares offered in the Subscription
and Community Offering, or 15 times the product (rounded down to the next whole
number) obtained by multiplying the total number of shares of Common Stock to be
issued by a fraction of which the numerator is the amount of the qualifying
deposits of the Eligible Account Holder and the denominator is the total amount
of the qualifying deposits of all Eligible Account Holders in the Association,
in each case on the Eligibility Record Date, subject to the overall purchase
limitation and exclusive of shares issued pursuant to an increase in the
Estimated Valuation Range of up to 15% after satisfying the subscriptions of
Tax-Qualified Employee Plans. To the extent shares are oversubscribed in this
category, shares shall be allocated among subscribing Eligible Account Holders
to permit each such depositor, to the extent possible, to purchase a number of
shares sufficient to make his total allocations equal 100 shares. Any shares not
so allocated shall be allocated among the subscribing Eligible Account Holders
pro rata in the same proportion that each such subscriber's Qualifying Deposit,
as defined in the Plan of Conversion, bears to the total Qualifying Deposits of
all subscribing Eligible Account Holders whose subscriptions remain unsatisfied.
Category No. 2 provides for the issuance of Subscription Rights to
Tax-Qualified Employee Plans to purchase up to 10% of the total amount of shares
of Common Stock issued in the Subscription and Community Offering on a second
priority basis. However, such plans shall not, in the aggregate, purchase more
than 10% of the Holding Company Common Stock issued. The ESOP intends to
purchase a total of 8% of the Common Stock issued in the Conversion under this
category. Subscription Rights received pursuant to this category shall be
subordinated to all rights received by Eligible Account Holders to purchase
shares pursuant to Category No. 1; provided, however, that notwithstanding any
provision of the Plan of Conversion to the contrary, the Tax-Qualified Employee
Plans shall have first priority Subscription Rights to the extent that the total
number of shares of Common Stock sold in the Conversion exceeds the maximum of
the Estimated Valuation Range.
Category No. 3 is reserved for the Association's Supplemental Eligible
Account Holders. Subscription Rights to purchase shares under this category will
be allocated among Supplemental Eligible Account Holders to permit each such
depositor to purchase shares in an amount equal to the greater of $100,000,
one-tenth of one percent (.10%) of the total shares of Common Stock offered in
the Conversion, or 15 times the product (rounded down to the next whole number)
obtained by multiplying the total number of shares of Common Stock to be issued
by a fraction of which the numerator is the amount of the qualifying deposit of
the Supplemental Eligible Account Holder and the denominator is the total amount
of the qualifying deposit of the Supplemental Eligible Account Holders in the
converting Association in each case on December 31, 1996 (the
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"Supplemental Eligibility Record Date"), subject to the overall purchase
limitation after satisfying the subscriptions of Eligible Account Holders and
Tax Qualified Employee Plans. In the event of an oversubscription for shares,
the shares available shall be allocated first to permit each subscribing
Supplemental Eligible Account Holder, to the extent possible, to purchase a
number of shares sufficient to make his total allocation (including the number
of shares, if any, allocated in accordance with Category No. 1) equal to 100
shares, and thereafter among each subscribing Supplemental Eligible Account
Holder pro rata in the same proportion that his Qualifying Deposit bears to the
total Qualifying Deposits of all subscribing Supplemental Eligible Account
Holders whose subscriptions remain unsatisfied.
Category No. 4 provides, to the extent that shares are then available
after satisfying the subscriptions of Eligible Account Holders, Tax-Qualified
Employee Plans and Supplemental Eligible Account Holders, for the issuance of
Subscription Rights to Other Members to purchase shares equal to the greater of
$100,000 of Common Stock or one-tenth of one percent (.10%) of the total amount
of shares of Common Stock offered in the Subscription and Community Offering. In
the event of an oversubscription, the available shares will be allocated on a
pro rata basis in the same proportion as a subscriber's total votes on the
Voting Record Date for the Special Meeting bears to the total votes of all
subscribing Other Members on such date.
Each depositor (including IRA and Keogh account beneficiaries) is
entitled at the Special Meeting to cast one vote for each $100, or fraction
thereof, of the aggregate withdrawal value of all of such depositor's savings
accounts in the Association as of the applicable voting record date, up to a
maximum of 1,000 votes. Each borrower member of the Association as of the Voting
Record Date will be entitled to cast one vote as a borrower member.
Category No. 5 provides for the issuance of Subscription Rights to
officers, directors and employees of the Association, to purchase up to $100,000
of Common Stock to the extent that shares are available after satisfying the
subscriptions of eligible subscribers in preference Categories 1, 2, 3 and 4.
The total number of shares which may be purchased under this Category may not
exceed 24% of the total number of shares sold in the Conversion. In the event of
an oversubscription, the available shares will be allocated on a pro rata basis
in the same proportion that orders of each person bear to the total orders of
all subscribers in this Category.
Community Offering
To the extent that shares remain available for purchase after
satisfaction of all subscriptions received and accepted in the Subscription
Offering, the Association may offer shares pursuant to the Plan to certain
members of the general public in the Community Offering with a preference given
to natural persons residing in Baltimore and Anne Arundel Counties, Maryland.
Any excess of shares available will be available for purchase by the general
public in such a manner as to promote a wide distribution of the Common Stock.
Finally, depending on market conditions, the Association may offer shares to the
general public in a Syndicated Community Offering on a best efforts basis
through a selected dealer arrangement.
The opportunity to subscribe for shares of Common Stock in the
Community Offering (including a Syndicated Community Offering, if any) is
subject to the right of the Association and the Holding Company, in their sole
discretion, to accept or reject any such orders in whole or in part either at
the time of receipt of an order or as soon as practicable following the
Subscription Expiration Date. Regulations of the OTS require that all shares to
be offered in the Conversion be sold within a period ending not more than 45
days after the Subscription Expiration Date (or such longer period as may be
approved by the OTS). This period expires on May 30, 1997 unless extended with
the approval of the OTS. In addition, if the Subscription and Community Offering
is extended beyond _________, 1997 all subscribers will be resolicited and
notified of their rights to confirm, modify or rescind their subscriptions and
to have their subscription funds returned promptly with interest. No person,
together with associates of and persons acting in concert with such
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person, may purchase more than $100,000 of Common Stock in the Community
Offering. Subject to the foregoing, in the event of an oversubscription in the
Community Offering, shares will be allocated first to cover orders of natural
persons residing in Shelby County, next to cover orders of other persons (whose
order is accepted by the Association) so that such person may receive up to
1,000 shares and thereafter, to the extent shares remain available, on a pro
rata basis in the same proportion that unfilled orders of each person bears to
the total unfilled orders of all persons.
Additional Purchase Restrictions
In addition to the purchase limitations for each priority category
described above under "Subscription Offering" and for purchases in the Public
Offering, the Plan also provides for certain additional limitations to be placed
upon the aggregate purchase of shares in the Conversion. Specifically, no person
(other than a Tax- Qualified Employee Plan or certain large depositors) by
himself or herself or with an associate, and no group of persons acting in
concert or persons on a single account, may subscribe for or purchase more than
$100,000 of Common Stock offered in the Conversion based on the Estimated
Valuation Range, without regard to an increase in the number of shares to be
issued. For purposes of this limitation, an associate of a person does not
include a Tax-Qualified Employee Plan or Non-Tax Qualified Employee Plan in
which the person has a substantial beneficial interest or serves as a trustee or
in a similar fiduciary capacity. Moreover, for purposes of this paragraph,
shares held by one or more Tax Qualified or Non-Tax Qualified Employee Plans
attributed to a person shall not be aggregated with shares purchased directly by
or otherwise attributable to that person except for that portion of a plan which
is self-directed by a person. See "-Stock Pricing and Number of Shares to be
Issued" regarding potential changes in Subscription Rights in the event of a
decrease in the number of shares to be issued in the Conversion. Officers and
directors and their associates may not purchase, in the aggregate, more than 34%
of the shares to be sold in the Conversion. For purposes of the Plan, the
members of the Board of Directors are not deemed to be acting in concert solely
by reason of their Board membership. For purposes of this limitation, an
associate of an officer or director does not include a Tax-Qualified Employee
Plan. Moreover, any shares attributable to the officers and directors and their
associates, but held by a Tax- Qualified Employee Plan (other than that portion
of a plan which is self-directed) shall not be included in calculating the
number of shares which may be purchased under the limitations in this paragraph.
Shares purchased by employees who are not officers or directors of the
Association, or their associates, are not subject to this limitation. The term
"associate" is used above to indicate any of the following relationships with a
person: (i) any corporation or organization (other than the Holding Company or
the Association or a majority-owned subsidiary of the Holding Company or the
Association) of which a person is an officer or partner or is, directly or
indirectly, the beneficial owner of 10% or more of any class of equity security;
(ii) any trust or other estate in which such person has a substantial beneficial
interest or as to which such person serves as trustee or in a similar fiduciary
capacity; and (iii) any relative or spouse of such person or any relative of
such spouse who has the same home as such person or who is a director or officer
of the Holding Company or the Association or any subsidiary of the Holding
Company or the Association.
The Boards of Directors of the Holding Company and the Association, in
their sole discretion, may increase the maximum purchase limitations referred to
above up to 9.99% of the total shares sold in the Subscription and Community
Offering, provided that the percentage by which each such order exceeds 5% of
the shares being offered in the Subscription and Community Offering shall not
exceed, in the aggregate, 10% of the shares being offered in the Subscription
and Community Offering. Requests to purchase additional shares of Holding
Company Common Stock under this provision will be allocated by the Boards of
Directors on a pro rata basis giving priority in accordance with the priority
rights set forth above. Depending on market and financial conditions, the Boards
of Directors of the Holding Company and the Association, with the approval of
the OTS and without further approval of the members, may increase any of the
above purchase limitations or decrease the maximum purchase limitation to as low
as 1% of the shares of Common Stock offered in the Conversion.
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To the extent that shares are available, each subscriber must subscribe
for a minimum of 25 shares. In computing the number of shares to be allocated,
all numbers will be rounded down to the next whole number.
Common Stock purchased in the Conversion will be freely transferable
except for shares purchased by executive officers and directors of the
Association or the Holding Company. See "- Restrictions on Transfer of
Subscription Rights and Shares."
Marketing Arrangements
Wyman Park and the Holding Company have retained Trident Securities,
which is a broker-dealer registered with the Securities and Exchange Commission
and a member of the NASD, to act as selling agent and to advise and consult with
respect to the distribution of shares in the Subscription and Community
Offering. Trident Securities has no obligation to purchase the Common Stock in
the Conversion. Trident Securities will assist Wyman Park and the Holding
Company in the Subscription and Community Offering with respect to, but not
limited to, the following: (1) training and educating Wyman Park's employees
regarding the mechanics and regulatory requirements of the Stock Conversion and
offering process; (2) conducting informational meetings for subscribers and
other potential purchasers; (3) keeping records of all stock subscriptions; (4)
organizing and staffing the Stock Information Center; and (5) otherwise
assisting in the sale of stock in the Subscription and Community Offering. For
their services, Trident Securities will receive (i) a fee of 1.85% of the
aggregate dollar amount of stock sold in the Subscription and Community
Offering, excluding purchases by directors, officers, employees and their
immediate family members, and employee stock ownership and benefit plans to
investors who reside in the State of Maryland; (ii) a fee of 1.40% of the
aggregate dollar amount of stock sold in the Subscription and Community
Offering, excluding purchases by directors, officers, employees and their
immediate family members, and employee stock ownership and benefit plans to
investors who reside outside the State of Maryland; (iii) reasonable
out-of-pocket expenses not to exceed $12,000; and (iv) fees and expenses for
Trident Securities' counsel (not to exceed $34,000). For purposes of calculating
Trident Securities fee, it is assumed that the amount of stock sold in the
Conversion will not exceed the midpoint of the appraisal value of the Holding
Company.
The Holding Company has agreed to indemnify Trident Securities against
certain claims or liabilities, including certain liabilities under the
Securities Act of 1933, as amended, including indemnification for damages
arising from material misstatements or material omissions based upon information
supplied by the Holding Company or the Association.
In addition, directors and executive officers of the Holding Company
and the Association, may to a limited extent, participate in the solicitation of
offers to purchase Common Stock. Other employees of the Association may
participate in the Subscription and Community Offering in administrative
capacities, providing clerical work in effecting a sales transaction or
answering questions of a potential purchaser provided that the content of the
employee's responses is limited to information contained in the Prospectus or
other offering document. Other questions of prospective purchasers will be
directed to registered representatives. Such other employees have been
instructed not to solicit offers to purchase Common Stock or provide advice
regarding the purchase of Common Stock. Sales of Common Stock by directors,
executive officers and registered representatives will be made from the Stock
Information Center. The Holding Company will rely on Rule 3a4-1 under the
Exchange Act, and sales of Common Stock will be conducted within the
requirements of Rule 3a4-1, so as to permit officers, directors and employees to
participate in the sale of Common Stock. No officer, director or employee of the
Holding Company or Association 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 Stock.
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Method of Payment for Subscriptions
To purchase shares in the Subscription and Community Offering, an
executed original Order Form, including the certification form (facsimile and
photocopies will not be accepted) with the required payment for each share
subscribed for, or with appropriate authorization for withdrawal from the
subscriber's deposit account at the Association (which may be given by
completing the appropriate blanks in the order form), must be received by the
Holding Company at an office of the Association by 12:00 noon, Lutherville,
Maryland time on __________, 1997, the Subscription Expiration Date. Order Forms
which are not received by such time or are executed defectively or altered or
are received without full payment (or appropriate withdrawal instructions) are
not required to be accepted.
Payment for subscriptions may be made (i) in cash if delivered in
person at the office of the Association, (ii) by check, bank draft or money
order or (iii) by authorization of withdrawal from deposit accounts maintained
with the Association. Interest will be paid on payments made by cash, check,
bank draft or money order, whether or not the Conversion is completed or
terminated, at the regular passbook rate of ___% per annum from the date payment
is received until the completion or termination of the Conversion. If payment is
made by authorization of withdrawal from deposit accounts, the funds authorized
to be withdrawn from a deposit account will continue to accrue interest at the
contractual rates until completion or termination of the Conversion, but a hold
will be placed on such funds, thereby making them unavailable to the depositor
until completion or termination of the Conversion. Under no circumstances will
the Association accept wire transfers for payment of subscription orders.
If a subscriber authorizes the Association to withdraw the amount of
the purchase price from his certificate account, the Association will do so as
of the effective date of Conversion. The Association will waive any applicable
penalties for early withdrawal from certificate accounts. If the remaining
balance in a certificate account is reduced below the applicable minimum balance
requirement at the time that the funds actually are transferred under the
authorization, the rate paid on the remaining balance of the certificate account
will earn interest at the then-current passbook rate.
If the ESOP subscribes for shares during the Subscription Offering, the
ESOP will not be required to pay for the shares subscribed for at the time it
subscribes, but rather, may pay for such shares of Common Stock subscribed for
at the Purchase Price upon consummation of the Conversion, provided that there
is in force from the time of its subscription until such time a loan commitment
to lend to the ESOP, at such time, the aggregate Purchase Price of the shares
for which it subscribed.
Certificates representing shares of Common Stock purchased will be
mailed to purchasers at the last address of such persons appearing on the
records of the Holding Company, or to such other address as may be specified in
properly completed order forms, as soon as practicable following consummation of
the sale of all shares of Common Stock. Any certificates returned as
undeliverable will be disposed of in accordance with applicable law.
To ensure that each purchaser receives a prospectus at least 48 hours
prior to the Expiration Date in accordance with Rule 15c2-8 under the Exchange
Act, no prospectus will be mailed any later than five days prior to such date or
hand delivered any later than two days prior to such date. Execution of the
order form will confirm receipt or delivery in accordance with Rule 15c2-8.
Order forms will only be distributed with a prospectus. The Holding Company will
accept for processing only orders submitted on original order forms with the
form of certification. Photocopies or facsimile copies of order forms or
certifications will not be accepted. Payment by cash, check, money order, bank
draft or debit authorization to an existing account at the Association must
accompany the order form. No wire transfers will be accepted.
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In order to ensure that Eligible Account Holders, Supplemental Eligible
Account Holders and Other Members receive their stock purchase priorities,
depositors as of the Eligibility Record Date (March 31, 1996), the Supplemental
Eligibility Record Date (September 30, 1997) and/or the Voting Record Date
(__________, 1997) must list all accounts on the stock order form giving all
names on each
account and the account number as of the applicable record date.
In addition to the foregoing, if shares are offered through selected
dealers in the Community Offering, a purchaser may pay for his shares with funds
held by or deposited with a selected dealer. If an order form is executed and
forwarded to the selected dealer or if the selected dealer is authorized to
execute the order form on behalf of a purchaser, the selected dealer is required
to forward the order form and funds to the Holding Company for deposit in a
segregated account at the Association on or before noon of the business day
following receipt of the order form or execution of the order form by the
selected dealer. Alternatively, selected dealers may solicit indications of
interest from their customers and thereafter seek their confirmation as to their
intent to purchase. Those indicating an intent to purchase shall forward
executed order forms and certifications to their selected dealer or authorize
the selected dealer to execute such forms. The selected dealer will acknowledge
receipt of the order to its customer in writing on the following business day
and will debit such customer's account on the third business day after the
customer has confirmed his intent to purchase (the "debit date") and on or
before noon of the next business day following the debit date will send order
forms and funds to the Holding Company for deposit in a segregated account at
the Association. If such alternative procedure is employed, purchasers' funds
are not required to be in their accounts with selected dealers until the debit
date.
Restrictions on Transfer of Subscription Rights and Shares
Prior to the completion of the Conversion, the OTS conversion
regulations prohibit any person with Subscription Rights, including the
Tax-Qualified Employee Plans, Eligible Account Holders, Supplemental Eligible
Account Holders and Other Members of the Association, from transferring or
entering into any agreement or understanding to transfer the legal or beneficial
ownership of the Subscription Rights issued under the Plan or the shares of
Common Stock to be issued upon their exercise. Such rights may be executed only
by the person to whom they are granted and only for his account. Each person
exercising Subscription Rights will be required to certify that he is purchasing
shares solely for his own account and that he has no agreement or understanding
regarding the sale or transfer of such shares. The regulations also prohibit any
person from offering or making an announcement of an offer or intent to make an
offer to purchase Subscription Rights or shares of Common Stock prior to the
completion of the Conversion.
The Association and the Holding Company may pursue any and all legal
and equitable remedies in the event they become aware of the transfer of
Subscription Rights and will not honor orders known by them to involve the
transfer of such rights.
Except as to directors and executive officers of the Association and
the Holding Company, the shares of Common Stock sold in the Conversion will be
freely transferable. Shares purchased by directors, executive officers or their
associates in the Conversion shall be subject to the restrictions that said
shares shall not be sold during the period of one year following the date of
purchase, except in the event of the death of the stockholder. Accordingly,
stock certificates issued by the Holding Company to directors, executive
officers and associates shall bear a legend giving appropriate notice of such
restriction and, in addition, the Holding Company will give appropriate
instructions to the transfer agent for the Holding Company's Common Stock with
respect to the applicable restriction upon transfer of any restricted shares.
Any shares issued at a later date as a stock dividend, stock split or otherwise,
to holders of restricted stock, shall be subject to the same restrictions that
may apply to such restricted stock. Holding Company Common Stock (like the stock
of most companies) is subject to the requirements of the Securities Act of 1933,
as amended (the "Securities Act"). Accordingly, the Holding
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Company's Common Stock may be offered and sold only in compliance with
registration requirements or pursuant to an applicable exemption from
registration.
Holding Company's Common Stock received in the Conversion by persons
who are not "affiliates" of the Holding Company may be resold without
registration. Shares received by affiliates of the Holding Company (primarily
the directors, officers and principal stockholders of the Holding Company) will
be subject to the resale restrictions of Rule 144 under the Securities Act. Rule
144 generally requires that there be publicly available certain information
concerning the Holding Company, and that sales thereunder 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 Holding Company stock, or (ii)
if the stock is admitted to trading on a national securities exchange or
reported through the automated quotation system of a registered securities bank,
the average weekly reported volume of trading during the four weeks preceding
the sale.
Participation by the Board and Executive Officers
The directors and executive officers of Wyman Park have indicated their
intention to purchase in the Conversion an aggregate of $600,000 of Common
Stock, equal to 10.1%, 8.6%, 7.5% or 6.5% of the number of shares to be issued
in the Subscription and Community Offering, at the minimum, midpoint, maximum
and 15% above the maximum of the Estimated Valuation Range, respectively. The
following table sets forth information regarding Subscription Rights to Common
Stock intended to be exercised by each of the directors of the Association,
including members of their immediate family and their IRAs, and by all directors
and executive officers as a group. The following table assumes that 805,000
shares is the maximum and 700,000 is the midpoint of the Estimated Valuation
Range, of Common Stock are issued at the Purchase Price of $10.00 per share and
that sufficient shares will be available to satisfy the subscriptions indicated.
The table does not include shares to be purchased through the ESOP (8% of shares
issued in the Conversion).
<TABLE>
<CAPTION>
Number of
Aggregate Shares at Percent of
Purchase $10.00 Shares at
Name Title Price per Share Midpoint
---- ----- ----- --------- --------
<S> <C> <C> <C> <C>
Ernest A. Moretti............... President, Chief
Executive Officer
and Director $100,000 10,000 1.4%
Allan B. Heaver................. Chairman of the Board 70,000 7,000 1.0
H. Douglas Huether.............. Director 75,000 7,500 1.1
John K. White................... Director 50,000 5,000 .7
John R. Beever.................. Director 70,000 7,000 1.0
Albert M. Copp.................. Director 50,000 5,000 .7
Gilbert D. Marsiglia, Sr. ...... Director 35,000 3,500 .5
Jay H. Salkin................... Director 100,000 10,000 1.4
G. Scott Barhight............... Director 50,000 5,000 .7
All directors and officers
as a group (13 persons)...... $650,000 65,000 9.3
</TABLE>
Risk of Delayed Offering
The completion of the sale of all unsubscribed shares in the
Subscription and Community Offering will depend, in part, upon the Association's
operating results and market conditions at the time of the
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Subscription and Community Offering. Under the Plan of Conversion, all shares
offered in the Conversion must be sold within a period ending 24 months from the
date of the Special Meeting. While the Association and the Holding Company
anticipate completing the sale of shares offered in the Conversion within this
period, if the Board of Directors of the Association and the Holding Company are
of the opinion that economic conditions generally or the market for publicly
traded thrift institution stocks make undesirable a sale of the Holding
Company's Common Stock, then the Subscription and Community Offering may be
delayed until such conditions improve.
A material delay in the completion of the sale of all unsubscribed
shares in the Subscription and Community Offering may result in a significant
increase in the costs of completing the Conversion. Significant changes in the
Association's operations and financial condition, the aggregate market value of
the shares to be issued in the Conversion and general market conditions may
occur during such material delay. In the event the Conversion is not consummated
within 24 months after the date of the Special Meeting of Members, the
Association would charge accrued Conversion costs to then current period
operations.
Approval, Interpretation, Amendment and Termination
All interpretations of the Plan of Conversion, as well as the
completeness and validity of order forms and stock order and account withdrawal
authorizations, will be made by the Association and the Holding Company and will
be final, subject to the authority of the OTS and the requirements of applicable
law. The Plan of Conversion provides that, if deemed necessary or desirable by
the Boards of Directors of the Association and the Holding Company, the Plan of
Conversion may be substantively amended (including an amendment to eliminate the
formation of the Holding Company as part of the Conversion) by the Boards of
Directors of the Association and the Holding Company, as a result of comments
from regulatory authorities or otherwise, at any time with the concurrence of
the OTS. In the event the Plan of Conversion is substantially amended, other
than a change in the maximum purchase limits set forth herein, the Holding
Company intends to notify subscribers of the change and to permit subscribers to
modify or cancel their subscriptions. The Plan of Conversion will terminate if
the sale of all shares is not completed within 24 months after the date of the
Special Meeting of Members. The Plan of Conversion may be terminated by the
Boards of Directors of the Holding Company and the Association with the
concurrence of the OTS, at any time. A specific resolution approved by a
two-thirds vote of the Boards of Directors of the Holding Company and the
Association would be required to terminate the Plan of Conversion prior to the
end of such 24-month period.
Restrictions on Repurchase of Stock
For a period of three years following Conversion, the Holding Company
may not repurchase any shares of its capital stock, except in the case of an
offer to repurchase on a pro rata basis made to all holders of capital stock of
the Holding Company. Any such offer shall be subject to the prior approval of
the OTS. Furthermore, the Holding Company may not repurchase any of its stock
(i) if the result thereof would be to reduce the regulatory capital of the
Association below the amount required for the liquidation account to be
established pursuant to OTS regulations and (ii) except in compliance with the
requirements of the OTS' capital distribution rule.
The above limitations are subject to the OTS conversion rules which
generally provide that the Holding Company may repurchase its capital stock
provided (i) no repurchases occur within one year following the Conversion
(subject to certain exceptions), (ii) repurchases during the second and third
year after conversion are part of an open market stock repurchase program that
does not allow for a repurchase of more than 5% of the Holding Company's
outstanding capital stock during a 12-month period, (iii) the repurchases do not
cause the Association to become undercapitalized, and (iv) the Holding Company
provides notice to the OTS at lease 10 days prior to the commencement of a
repurchase program and the OTS does not object to such regulations.
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In addition, the above limitations do not preclude repurchases of capital stock
by the Holding Company in the event applicable federal regulatory limitations
are subsequently liberalized.
Income Tax Consequences
Consummation of the Conversion is expressly conditioned upon prior
receipt by the Association of either a ruling from the IRS or an opinion of
Silver, Freedman & Taff, L.L.P. with respect to federal taxation, and an opinion
of Wooden & Benson, Chartered with respect to Maryland taxation, to the effect
that consummation of the Conversion will not be taxable to the converted
Association or the Holding Company. The full text of the Silver, Freedman &
Taff, L.L.P. opinion, the Ferguson Letter and the Wooden & Benson, Chartered
opinion, which opinions are summarized herein, were filed with the SEC as
exhibits to the Holding Company's Registration Statement on Form SB-2. See
"Additional Information."
An opinion which is summarized below has been received from Silver,
Freedman & Taff, L.L.P. with respect to the proposed Conversion of the
Association to the stock form. The Silver, Freedman & Taff, L.L.P. opinion
states that (i) the Conversion will qualify as a reorganization under Section
368(a)(1)(F) of the Internal Revenue Code of 1986, as amended, and no gain or
loss will be recognized to the Association in either its mutual form or its
stock form by reason of the proposed Conversion, (ii) no gain or loss will be
recognized to the Association in its stock form upon the receipt of money and
other property, if any, from the Holding Company for the stock of the
Association; and no gain or loss will be recognized to the Holding Company upon
the receipt of money for Common Stock of the Holding Company; (iii) the assets
of the Association in either its mutual or its stock form will have the same
basis before and after the Conversion; (iv) the holding period of the assets of
the Association in its stock form will include the period during which the
assets were held by the Association in its mutual form prior to Conversion; (v)
gain, if any, will be realized by the depositors of the Association upon the
constructive issuance to them of withdrawable deposit accounts of the
Association in its stock form, nontransferable subscription rights to purchase
Holding Company Common Stock and/or interests in the Liquidation Account (any
such gain will be recognized by such depositors, but only in an amount not in
excess of the fair market value of the subscription rights and Liquidation
Account interests received); (vi) the basis of the account holder's savings
accounts in the Association after the Conversion will be the same as the basis
of his or her savings accounts in the Association prior to the Conversion; (vii)
the basis of each account holder's interest in the Liquidation Account is
assumed to be zero; (viii) based on the Ferguson Letter, as hereinafter defined,
the basis of the subscription rights will be zero; (ix) the basis of the Holding
Company Common Stock to its stockholders will be the purchase price thereof; (x)
a stockholder's holding period for Holding Company Common Stock acquired through
the exercise of subscription rights shall begin on the date on which the
subscription rights are exercised and the holding period for the Conversion
Stock purchased in the Subscription and Community Offering will commence on the
date following the date on which such stock is purchased; (xi) the Association
in its stock form will succeed to and take into account the earnings and profits
or deficit in earnings and profits, of the Association, in its mutual form, as
of the date of Conversion; (xii) the Association, immediately after Conversion,
will succeed to and take into account the bad debt reserve accounts of the
Association, in mutual form, and the bad debt reserves will have the same
character in the hands of the Association after Conversion as if no Conversion
had occurred; and (xiii) the creation of the Liquidation Account will have no
effect on the Association's taxable income, deductions or addition to reserve
for bad debts either in its mutual or stock form.
The opinion from Silver, Freedman & Taff, L.L.P. is based, among other
things, on certain assumptions, including the assumptions that the exercise
price of the Subscription Rights to purchase Holding Company Common Stock will
be approximately equal to the fair market value of that stock at the time of the
completion of the proposed Conversion. With respect to the Subscription Rights,
the Association will receive a letter from Ferguson (the "Ferguson Letter")
which, based on certain assumptions, will conclude that the Subscription Rights
to be received by Eligible Account Holders, Supplemental Eligible Account
Holders and
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other eligible subscribers do not have any economic value at the time of
distribution or at the time the Subscription Rights are exercised, whether or
not a Public Offering takes place.
The Association has also received an opinion of Silver, Freedman &
Taff, L.L.P. to the effect that, based in part on the Ferguson Letter: (i) no
taxable income will be realized by depositors as a result of the exercise of
non-transferable Subscription Rights to purchase shares of Holding Company
Common Stock at fair market value; (ii) no taxable income will be recognized by
borrowers, directors, officers and employees of the Association on the receipt
or exercise of Subscription Rights to purchase shares of Holding Company Common
Stock at fair market value; and (iii) no taxable income will be realized by the
Association or Holding Company on the issuance of Subscription Rights to
eligible subscribers to purchase shares of Holding Company Common Stock at fair
market value.
Notwithstanding the Ferguson Letter, if the Subscription Rights are
subsequently found to have a fair market value and are deemed a distribution of
property, it is Silver, Freedman & Taff, L.L.P.'s opinion that gain or income
will be recognized by various recipients of the Subscription Rights (in certain
cases, whether or not the rights are exercised) and the Association and/or the
Holding Company may be taxable on the distribution of the Subscription Rights.
In any event, all recipients are encouraged to consult with their own tax
advisors as to the tax consequences which may result.
With respect to Maryland taxation, the Association has received an
opinion from Wooden & Benson, Chartered to the effect that the Maryland tax
consequences to the Association, in its mutual or stock form, the Holding
Company, eligible account holders, parties receiving subscription rights,
parties purchasing conversion stock, and other parties participating in the
Conversion will be the same as the federal income tax consequences described
above.
Unlike a private letter ruling, the opinions of Silver, Freedman &
Taff, L.L.P. and Wooden & Benson, Chartered, as well as the Ferguson Letter,
have no binding effect or official status, and no assurance can be given that
the conclusions reached in any of those opinions would be sustained by a court
if contested by the IRS or the Maryland State tax authorities.
RESTRICTIONS ON ACQUISITIONS OF STOCK AND
RELATED TAKEOVER DEFENSIVE PROVISIONS
Although the Boards of Directors of the Association and the Holding
Company are not aware of any effort that might be made to obtain control of the
Holding Company after Conversion, the Board of Directors, as discussed below,
believes that it is appropriate to include certain provisions as part of the
Holding Company's certificate of incorporation to protect the interests of the
Holding Company and its stockholders from takeovers which the Board of Directors
of the Holding Company might conclude are not in the best interests of the
Association, the Holding Company or the Holding Company's stockholders.
The following discussion is a general summary of material provisions of
the Holding Company's certificate of incorporation and bylaws and certain other
regulatory provisions which may be deemed to have an "anti-takeover" effect. The
following description of certain of these provisions is necessarily general and,
with respect to provisions contained in the Holding Company's certificate of
incorporation and bylaws and the Association's proposed federal stock charter
and bylaws, reference should be made in each case to the document in question,
each of which is part of the Association's Conversion Application filed with the
OTS and the Holding Company's Registration Statement filed with the SEC. See
"Additional Information."
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<PAGE>
Provisions of the Holding Company's Certificate of Incorporation and Bylaws
Directors. Certain provisions of the Holding Company's certificate of
incorporation and bylaws will impede changes in majority control of the Board of
Directors. The Holding Company's certificate of incorporation provides that the
Board of Directors of the Holding Company will be divided into three classes,
with directors in each class elected for three-year staggered terms except for
the initial directors. Thus, assuming a Board of nine directors, it would take
two annual elections to replace a majority of the Holding Company's Board. The
Holding Company's bylaws provide that the size of the Board of Directors may be
in creased or decreased only by a majority vote of the whole Board or by a vote
of 80% of the shares eligible to be voted at a duly constituted meeting of
stockholders called for such purpose. The bylaws also provide that any vacancy
occurring in the Board of Directors, including a vacancy created by an increase
in the number of directors, shall be filled for the remainder of the unexpired
term by a majority vote of the directors then in office. Finally, the bylaws
impose certain notice and information requirements in connection with the
nomination by stockholders of candidates for election to the Board of Directors
or the proposal by stockholders of business to be acted upon at an annual
meeting of stockholders.
The certificate of incorporation provides that a director may only be
removed for cause by the affirmative vote of 80% of the shares eligible to vote.
Restrictions on Call of Special Meetings. The certificate of
incorporation of the Holding Company provides that a special meeting of
stockholders may be called only pursuant to a resolution of the Board of
Directors and for only such business as directed by the Board. Stockholders are
not authorized to call a special meeting.
Absence of Cumulative Voting. The Holding Company's certificate of
incorporation does not provide for cumulative voting rights in the election of
directors.
Authorization of Preferred Stock. The certificate of incorporation of
the Holding Company authorizes 500,000 shares of serial preferred stock, $.01
par value. The Holding Company is authorized to issue preferred stock from time
to time in one or more series subject to applicable provisions of law, and the
Board of Directors is authorized to fix the designations, powers, preferences
and relative participating, optional and other special rights of such shares,
including voting rights (which could be multiple or as a separate class) and
conversion rights. In the event of a proposed merger, tender offer or other
attempt to gain control of the Holding Company that the Board of Directors does
not approve, it might be possible for the Board of Directors to authorize the
issuance of a series of preferred stock with rights and preferences that would
impede the completion of such a transaction. An effect of the possible issuance
of preferred stock, therefore, may be to deter a future takeover attempt. The
Board of Directors has no present plans or understandings for the issuance of
any preferred stock and does not intend to issue any preferred stock except on
terms which the Board deems to be in the best interests of the Holding Company
and its stockholders.
Limitation on Voting Rights. The certificate of incorporation of the
Holding Company provides that in no event shall any record owner of any
outstanding Common Stock which is beneficially owned, directly or indirectly, by
a person who beneficially owns in excess of 10% of the then outstanding shares
of Common Stock (the "Limit"), be entitled or permitted to have any vote in
respect of the shares held in excess of the Limit. This limitation would not
inhibit any person from soliciting (or voting) proxies from other beneficial
owners for more than 10% of the Common Stock or from voting such proxies.
Beneficial ownership is to be determined pursuant to Rule 13d-3 of the General
Rules and Regulations of the Exchange Act, and in any event includes shares
beneficially owned by any affiliate of such person, shares which such person or
his affiliates (as defined in the certificate of incorporation) have the right
to acquire upon the exercise of conversion rights or options and shares as to
which such person and his affiliates have or share investment or voting power.
Directors and
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officers of the Holding Company by reason of their acting in such capacity,
shall not be deemed to beneficially own any shares owned by any other director
or officer. This provision will be enforced by the Board of Directors to limit
the voting rights of persons beneficially owning more than 10% of the stock and
thus could be utilized in a proxy contest or other solicitation to defeat a
proposal that is desired by a majority of the stockholders.
Procedures for Certain Business Combinations. The Holding Company's
certificate of incorporation requires that certain business combinations
(including transactions initiated by management) between the Holding Company (or
any majority-owned subsidiary thereof) and a 10% or more stockholder either (i)
be approved by at least 80% of the total number of outstanding voting shares,
voting as a single class, of the Holding Company, (ii) be approved by two-thirds
of the continuing Board of Directors (i.e., persons serving prior to the 10%
stockholder becoming such) or (iii) involve consideration per share generally
equal to that paid by such 10% stockholder when it acquired its block of stock.
It should be noted that since the Board and executive officers intend
to purchase approximately $600,000 of the shares offered in the Conversion and
may control the voting of additional shares through the ESOP, the Board and
management may be able to block the approval of combinations requiring an 80%
vote even where a majority of the stockholders vote to approve such
combinations.
Amendment to Certificate of Incorporation and Bylaws. Amendments to the
Holding Company's certificate of incorporation must be approved by the Holding
Company's Board of Directors and also by a majority of the outstanding shares of
the Holding Company's voting stock, provided, however, that approval by at least
80% of the outstanding voting stock is generally required for certain provisions
(i.e., provisions re lating to number, classification, election and removal of
directors; amendment of bylaws; call of special stockholder meetings; offers to
acquire and acquisitions of control; director liability; certain business
combinations; power of indemnification; and amendments to provisions relating to
the foregoing in the certificate of incorporation).
The bylaws may be amended by a majority vote of the Board of Directors
or the affirmative vote of at least 80% of the total votes eligible to be voted
at a duly constituted meeting of stockholders.
Purpose and Takeover Defensive Effects of the Holding Company's
Certificate of Incorporation and Bylaws. The Board of Directors of the
Association believes that the provisions described above are prudent and will
reduce the Holding Company's vulnerability to takeover attempts and certain
other transactions which have not been negotiated with and approved by its Board
of Directors. These provisions will also assist the Association in the orderly
deployment of the Conversion proceeds into productive assets during the initial
period after the Conversion. The Board of Directors believes these provisions
are in the best interest of the Association and of the Holding Company and its
stockholders. In the judgment of the Board of Directors, the Holding Com pany's
Board will be in the best position to determine the true value of the Holding
Company and to negotiate more effectively for what may be in the best interests
of its stockholders. Accordingly, the Board of Directors believes that it is in
the best interests of the Holding Company and its stockholders to encourage
potential acquirors to negotiate directly with the Board of Directors of the
Holding Company and that these provisions will encourage such negotiations and
discourage hostile takeover attempts. It is also the view of the Board of
Directors that these provisions should not discourage persons from proposing a
merger or other transaction at prices reflective of the true value of the
Holding Company and which is in the best interests of all stockholders.
Attempts to take over financial institutions and their holding
companies have recently become increasingly common. Takeover attempts which have
not been negotiated with and approved by the Board of Directors present to
stockholders the risk of a takeover on terms which may be less favorable than
might otherwise be available. A transaction which is negotiated and approved by
the Board of Directors, on the other
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<PAGE>
hand, can be carefully planned and undertaken at an opportune time in order to
obtain maximum value for the Holding Company and its stockholders, with due
consideration given to matters such as the management and business of the
acquiring corporation and maximum strategic development of the Holding Company's
assets.
An unsolicited takeover proposal can seriously disrupt the business and
management of a corporation and cause it great expense. Although a tender offer
or other takeover attempt may be made at a price substantially above then
current market price, such offers are sometimes made for less than all of the
outstanding shares of a target company. As a result, stockholders may be
presented with the alternative of partially liqui dating their investment at a
time that may be disadvantageous, or retaining their investment in an enterprise
which is under different management and whose objectives may not be similar to
those of the remaining stockholders. The concentration of control, which could
result from a tender offer or other takeover attempt, could also deprive the
Holding Company's remaining stockholders of the benefits of certain protective
provisions of the Exchange Act, if the number of beneficial owners becomes less
than the 300 required for Exchange Act registration.
Despite the belief of the Association and the Holding Company as to the
benefits to stockholders of these provisions of the Holding Company's
certificate of incorporation and bylaws, these provisions may also have the
effect of discouraging a future takeover attempt which would not be approved by
the Holding Company's Board, but pursuant to which stockholders may receive a
substantial premium for their shares over then current market prices. As a
result, stockholders who might desire to participate in such a transaction may
not have any opportunity to do so. Such provisions will also render the removal
of the Holding Company's Board of Directors and of management more difficult.
The Board will enforce the voting limitation provisions of the charter in proxy
solicitations and accordingly could utilize these provisions to defeat proposals
that are favored by a majority of the stockholders. The Boards of Directors of
the Association and the Holding Company, however, have concluded that the
potential benefits outweigh the possible disadvantages.
Pursuant to applicable law, at any annual or special meeting of its
stockholders after the Conversion, the Holding Company may adopt additional
charter provisions regarding the acquisition of its equity securities that would
be permitted to a Delaware corporation. The Holding Company and the Association
do not presently intend to propose the adoption of further restrictions on the
acquisition of the Holding Company's equity securi ties.
Other Restrictions on Acquisitions of Stock
Delaware Anti-Takeover Statute. The State of Delaware has enacted
legislation which provides that subject to certain exceptions a publicly held
Delaware corporation may not engage in any business combination with an
"interested stockholder" for three years after such stockholder became an
interested stockholder, unless, among other things, the interested stockholder
acquired at least 85% of the corporation's voting stock in the transaction that
resulted in the stockholder becoming an interested stockholder. This legislation
generally defines "interested stockholder" as any person or entity that owns 15%
or more of the corporation's voting stock. The term "business combination" is
defined broadly to cover a wide range of corporate transactions, including
mergers, sales of assets, issuances of stock, transactions with subsidiaries and
the receipt of disproportionate financial benefits. Under certain circumstances,
either the board of directors or both the board and two-thirds of the
stockholders other than the acquiror may approve a given business combination
and thereby exempt the corporation from the operation of the statute.
However, these statutory provisions do not apply to Delaware
corporations with fewer than 2,000 stockholders or which do not have voting
stock listed on a national exchange or listed for quotation with a registered
national securities association. The Holding Company's common stock has not been
approved for listing on a national exchange or for quotation with a registered
national securities association.
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Federal Regulation. A federal regulation prohibits any person prior to
the completion of a conversion from transferring, or entering into any agreement
or understanding to transfer, the legal or beneficial ownership of the
subscription rights issued under a plan of conversion or the stock to be issued
upon their exercise. This regulation also prohibits any person prior to the
completion of a conversion from offering, or making an announcement of an offer
or intent to make an offer, to purchase such subscription rights or stock. For
three years following conversion, this regulation prohibits any person, without
the prior approval of the OTS, from acquiring or making an offer to acquire more
than 10% of the stock of any converted savings institution if such person is, or
after consummation of such acquisition would be, the beneficial owner of more
than 10% of such stock. In the event that any person, directly or indirectly,
violates this regulation, the securities beneficially owned by such person in
excess of 10% may not be counted as shares entitled to vote and may not be voted
by any person or counted as voting shares in connection with any matter
submitted to a vote of stockholders. Like the charter provisions outlined above,
these federal regulations can make a change in control more difficult, even if
desired by the holders of the majority of the shares of the stock. The Board of
Directors reserves the right to ask the OTS or other federal regulators to
enforce these restrictions against persons seeking to obtain control of the
Company, whether in a proxy solicitation or otherwise. The policy of the Board
is that these legal restrictions must be observed in every case, including
instances in which an acquisition of control of the Company is favored by a
majority of the stockholders.
Federal law provides that no company, "directly or indirectly or acting
in concert with one or more persons, or through one or more subsidiaries, or
through one or more transactions," may acquire "control" of a savings
association at any time without the prior approval of the OTS. In addition,
federal regulations require that, prior to obtaining control of a savings
association, a person, other than a company, must give 60 days' prior notice to
the OTS and have received no OTS objection to such acquisition of control. Any
company that acquires such control becomes a "savings and loan holding company"
subject to registration, examination and regulation as a savings and loan
holding company. Under federal law (as well as the regulations referred to
below) the term "savings association" includes state and federally chartered
SAIF-insured institutions and federally chartered savings banks whose accounts
are insured by the SAIF and holding companies thereof.
Control, as defined under federal law, in general means ownership,
control of or holding irrevocable proxies representing more than 25% of any
class of voting stock, control in any manner of the election of a majority of a
savings association's directors, or a determination by the OTS that the acquiror
has the power to direct, or directly or indirectly to exercise a controlling
influence over, the management or policies of the institution. Acquisition of
more than 10% of any class of a savings association's voting stock, if the
acquiror also is subject to any one of eight "control factors," constitutes a
rebuttable determination of control under the regulations. Such control factors
include the acquiror being one of the two largest stockholders. The
determination of control may be rebutted by submission to the OTS, prior to the
acquisition of stock or the occurrence of any other circumstances giving rise to
such determination, of a statement setting forth facts and circumstances which
would support a finding that no control relationship will exist and containing
certain undertakings. The regulations provide that persons or companies which
acquire beneficial ownership exceeding 10% or more of any class of a savings
association's stock must file with the OTS a certification that the holder is
not in control of such institution, is not subject to a rebuttable determination
of control and will take no action which would result in a determination or
rebuttable determination of control without prior notice to or approval of the
OTS, as applicable.
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DESCRIPTION OF CAPITAL STOCK
Holding Company Capital Stock
The 3.0 million shares of capital stock authorized by the Holding
Company certificate of incorporation are divided into two classes, consisting of
2.5 million shares of Common Stock (par value $.01 per share) and 500,000 shares
of serial preferred stock (par value $.01 per share). The Holding Company
currently expects to issue between 595,000 and 805,000 shares of Common Stock in
the Conversion and no shares of serial preferred stock. The aggregate par value
of the issued shares will constitute the capital account of the Holding Company
on a consolidated basis. Upon payment of the Purchase Price, all shares issued
in the Conversion will be duly authorized, fully paid and nonassessable. The
balance of the Purchase Price of Common Stock, less expenses of Conversion, will
be reflected as paid-in capital on a consolidated basis. See "Capitalization."
Each share of the Common Stock will have the same relative rights and
will be identical in all respects with each other share of the Common Stock. The
Common Stock of the Holding Company will represent non-withdrawable capital,
will not be of an insurable type and will not be insured by the FDIC.
Under Delaware law, the holders of the Common Stock will possess
exclusive voting power in the Holding Company. Each stockholder will be entitled
to one vote for each share held on all matters voted upon by stockholders,
subject to the limitation discussed under "Restrictions on Acquisitions of Stock
and Related Takeover Defensive Provisions - Provisions of the Holding Company's
Certificate of Incorporation and Bylaws Limitation on Voting Rights." If the
Holding Company issues preferred stock subsequent to the Conversion, holders of
the preferred stock may also possess voting powers.
Liquidation or Dissolution. In the event of any liquidation,
dissolution or winding up of the Association, the Holding Company, as the sole
holder of the Association's capital stock would be entitled to receive, after
payment or provision for payment of all debts and liabilities of the Association
(including all deposit accounts and accrued interest thereon) and after
distribution of the balance in the special liquidation account to Eligible and
Supplemental Eligible Account Holders, all assets of the Association available
for distribution. In the event of liquidation, dissolution or winding up of the
Holding Company, the holders of its Common Stock would be entitled to receive,
after payment or provision for payment of all its debts and liabilities, all of
the assets of the Holding Company available for distribution. See "The
Conversion - Effects of Conversion to Stock Form on Depositors and Borrowers of
the Association." If preferred stock is issued subsequent to the Conversion, the
holders thereof may have a priority over the holders of Common Stock in the
event of liquidation or dissolution.
No Preemptive Rights. Holders of the Common Stock will not be entitled
to preemptive rights with respect to any shares which may be issued. The Common
Stock will not be subject to call for redemption, and, upon receipt by the
Holding Company of the full Purchase Price therefor, each share of the Common
Stock will be fully paid and nonassessable.
Preferred Stock. After Conversion, the Board of Directors of the
Holding Company will be authorized to issue preferred stock in series and to fix
and state the voting powers, designations, preferences and relative,
participating, optional or other special rights of the shares of each such
series and the qualifications, limitations and restrictions thereof. Preferred
stock may rank prior to the Common Stock as to dividend rights, liquidation
preferences, or both, and may have full or limited voting rights. The holders of
preferred stock will be entitled to vote as a separate class or series under
certain circumstances, regardless of any other voting rights which such holders
may have.
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Except as discussed above, the Holding Company has no present plans for
the issuance of the additional authorized shares of Common Stock or for the
issuance of any shares of preferred stock. In the future, the authorized but
unissued and unreserved shares of Common Stock will be available for general
corporate purposes, including but not limited to possible issuance as stock
dividends or stock splits, in future mergers or acquisitions, under a cash
dividend reinvestment and stock purchase plan, in a future underwritten or other
public offering, or under a stock based employee plan. The authorized but
unissued shares of preferred stock will similarly be available for issuance in
future mergers or acquisitions, in a future underwritten public offering or
private placement or for other general corporate purposes. Except as described
above or as otherwise required to approve the transaction in which the
additional authorized shares of common stock or authorized shares of preferred
stock would be issued, no stockholder approval will be required for the issuance
of these shares. Accordingly, the Board of Directors of the Holding Company,
without stockholder approval, can issue preferred stock with voting and
conversion rights which could adversely affect the voting power of the holders
of Common Stock.
Restrictions on Acquisitions. See "Restrictions on Acquisitions of
Stock and Related Takeover Defensive Provisions" for a description of certain
provisions of the Holding Company's certificate of incorporation and bylaws
which may affect the ability of the Holding Company's stockholders to
participate in certain transactions relating to acquisitions of control of the
Holding Company.
Dividends. The Holding Company's Board of Directors may consider a
policy of paying cash dividends on the Common Stock in the future. No decision
has been made, however, as to the amount or timing of such dividends, if any.
The declaration and payment of dividends are subject to, among other things, the
Holding Company's then current and projected consolidated operating results,
financial condition, regulatory restrictions, future growth plans and other
factors the Board deems relevant. Therefore, no assurance can be given that any
dividends will be declared.
The ability of the Holding Company to pay cash dividends to its
stockholders will be dependent, in part, upon the ability of the Association to
pay dividends to the Holding Company. OTS regulations do not permit the
Association to declare or pay a cash dividend on its stock or repurchase shares
of its stock if the effect thereof would be to cause its regulatory capital to
be reduced below the amount required for the liquidation account or to meet
applicable regulatory capital requirements.
Delaware law generally limits dividends of the Holding Company to an
amount equal to the excess of its net assets over its paid-in capital or, if
there is no such excess, to its net earnings for the current and immediately
preceding fiscal year. In addition, as the Holding Company does not anticipate,
for the immediate future, engaging in activities other than (i) investing in
cash, short-term securities and investment and mortgage-backed securities
similar to those invested in by the Association and (ii) holding the stock of
Wyman Park, the Holding Company's ability to pay dividends will be limited, in
part, by the Association's ability to pay dividends, as set forth above.
Earnings appropriated to the Association's "Excess" bad debt reserves
and deducted for federal income tax purposes cannot be used by the Association
to pay cash dividends to the Holding Company without adverse tax consequences.
See "Regulation - Federal and State Taxation."
LEGAL MATTERS
The legality of the Common Stock and the federal income tax
consequences of the Conversion will be passed upon for Wyman Park by the firm of
Silver, Freedman & Taff, L.L.P. (a limited liability partnership
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including professional corporations), 1100 New York Avenue, N.W., Washington, DC
20005. Silver, Freedman & Taff, L.L.P. has consented to the references herein to
its opinions. The Maryland tax consequences of the Conversion will be passed
upon by Wooden & Benson, Chartered. Wooden & Benson, Chartered has consented to
references herein to its opinion. Trident Securities, Inc. has been represented
in the Conversion by Luse Lehman Gorman Pomerenk & Schick P.C., Washington, DC
20005.
EXPERTS
The financial statements of Wyman Park as of June 30, 1997 and 1996 and
for each of the two years in the period ended June 30, 1997, appearing in this
Prospectus and Registration Statement have been audited by Wooden & Benson,
Chartered, independent auditors, as set forth in their report appearing
elsewhere herein and in the Registration Statement, and are included in reliance
upon such report given upon the authority of said firm as experts in accounting
and auditing.
Ferguson has consented to the inclusion herein of the summary of its
appraisal report to the Association setting forth its opinion as to the
estimated pro forma market value of the Holding Company and the Association as
converted and to the reference to its opinion that Subscription Rights do not
have any economic value.
ADDITIONAL INFORMATION
The Holding Company has filed with the SEC a registration statement
under the Securities Act of 1933, as amended, with respect to the Common Stock
offered hereby. As permitted by the rules and regulations of the SEC, this
Prospectus does not contain all the information set forth in the registration
statement. Such information can be examined without charge at the public
reference facilities of the SEC located at 450 Fifth Street, N.W., Washington,
DC 20549, and copies of such material can be obtained from the SEC at prescribed
rates. The statements contained herein as to the contents of any contract or
other document filed as an exhibit to the registration statement are, of
necessity, brief descriptions thereof of the material aspects of such contract
or other document; each such statement is qualified by reference to such
contract or document.
The Association has filed an Application for Conversion with the OTS
with respect to the Conversion. Pursuant to the rules and regulations of the
OTS, this Prospectus omits certain information contained in that Application.
The Application may be examined at the principal offices of the OTS, 1700 G
Street, N.W., Washington, D.C. 20552 and at the Southeast Regional Office of the
OTS, 1475 Peachtree Street, N.E., Atlanta, GA 30309, without charge.
In connection with the Conversion, the Holding Company will register
the Common Stock with the SEC under Section 12(g) of the Exchange Act, and, upon
such registration, the Holding Company and the holders of its Common Stock will
become subject to the proxy solicitation rules, reporting requirements and
restrictions on stock purchases and sales by directors, officers and greater
than 10% stockholders, the annual and periodic reporting and certain other
requirements of the Exchange Act. Under the Plan, the Holding Company has
undertaken that it will not terminate such registration for a period of at least
three years following the Conversion.
A copy of the Certificate of Incorporation and Bylaws of the Holding
Company are available without charge from the Association.
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WYMAN PARK BANCORPORATION, INC.
Lutherville, Maryland
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Independent Auditors' Report............................................... F-2
Consolidated Financial Statements:
Consolidated Statements of Financial Condition at June 30,
1997 and 1996............................................................. F-3
Consolidated Statements of Operations for the Years Ended
June 30, 1997 and 1996.................................................... 28
Consolidated Statements of Equity for the
Years Ended June 30, 1997 and 1996......................................... F-4
Consolidated Statements of Cash Flows for the
Years Ended June 30, 1997 and 1996........................................ F-5
Notes to Consolidated Financial Statements................................. F-6
# # # # #
All schedules are omitted because the required information
is not applicable or is included in the
Consolidated Financial Statements and related notes.
Financial Statements of the Holding Company have not
been provided because Wyman Park Bancorporation, Inc.
has not conducted any operations to date and
has not been capitalized.
F-1
<PAGE>
<PAGE>
Independent Auditors' Report
The Board of Directors
Wyman Park Federal Savings and Loan
Association and Subsidiary
Lutherville, Maryland
We have audited the accompanying consolidated statements of financial
condition of Wyman Park Federal Savings and Loan Association and Subsidiary as
of June 30, 1997 and 1996 and the related consolidated statements of operations,
equity and cash flows for the years then ended. These financial statements are
the responsibility of the Association's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Wyman Park Federal Savings and Loan Association and Subsidiary as of June 30,
1997 and 1996, and the consolidated results of their operations and their cash
flows for the years then ended, in conformity with generally accepted accounting
principles.
/s/Wooden & Benson
July 18, 1997
Baltimore, Maryland
F-2
<PAGE>
WYMAN PARK FEDERAL SAVINGS AND LOAN ASSOCIATION
AND SUBSIDIARY
Lutherville, Maryland
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
JUNE 30, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
----------- -----------
Assets
<S> <C> <C>
Cash and noninterest bearing deposits $ 461,268 $ 40,139
Interest-bearing deposits in other banks 1,092,682 3,482,926
Federal funds sold 823,142 2,278,181
----------- -----------
Total cash and cash equivalents (Notes 1 and 12) 2,377,092 5,801,246
Loans receivable, net (Notes 1, 4 and 12) 55,188,566 53,243,580
Mortgage-backed securities held-to-maturity at amortized cost, fair
value of $360,666 (1997) and $428,502 (1996) (Notes 1, 3 and 12) 356,187 424,009
Investment securities available-for-sale at fair value, amortized
cost of $3,000,000 (1997 and 1996) (Notes 1, 3 and 12) 2,992,500 2,964,375
Federal Home Loan Bank of Atlanta stock, at cost (Notes 2 and 12) 509,900 509,900
Accrued interest receivable (Note 5) 337,394 349,477
Ground rents owned, at cost (Note 12) 129,108 130,129
Property and equipment, net (Notes 1 and 6) 203,319 259,045
Prepaid expenses and other assets 88,764 100,715
Federal and state income taxes receivable -- 83,632
Deferred tax asset (Notes 1 and 8) 58,506 --
----------- -----------
Total assets $62,241,336 $63,866,108
=========== ===========
Liabilities and Equity
Liabilities
Demand deposits $ 5,892,975 $ 5,710,113
Money market and NOW accounts 9,960,827 9,793,334
Time deposits 40,241,530 42,367,177
----------- -----------
Total deposits (Notes 7 and 12) 56,095,332 57,870,624
Advance payments by borrowers for taxes, insurance
and ground rents (Note 12) 1,240,877 1,206,553
Accrued interest payable on savings deposits 18,994 20,874
Accrued expenses and other liabilities 120,151 142,963
Federal and State income taxes payable 16,163 --
Deferred income taxes (Notes 1 and 8) -- 26,310
----------- -----------
Total liabilities 57,491,517 59,267,324
Commitments and contingencies (Notes 4, 8 and 12) -- --
Equity
Retained earnings, substantially restricted (Notes 8 and 11) 4,754,419 4,620,614
Unrealized losses on available for sale securities (Notes 1 and 3) (4,600) (21,830)
----------- -----------
Total equity 4,749,819 4,598,784
----------- -----------
Total liabilities and equity $62,241,336 $63,866,108
=========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-3
<PAGE>
WYMAN PARK FEDERAL SAVINGS AND LOAN ASSOCIATION
AND SUBSIDIARY
Lutherville, Maryland
CONSOLIDATED STATEMENTS OF EQUITY
FOR THE YEARS ENDED JUNE 30, 1997 AND 1996
Unrealized Losses
Retained on Available For
Income Sale Securities Total
-------- ----------------- ----------
Balance at June 30, 1995 $4,326,497 $(49,005) $4,277,492
Net income 294,117 -- 294,117
Adjustment to unrealized holding
gains (losses) - debt and equity
securities -- 27,175 27,175
---------- -------- ----------
Balance at June 30, 1996 4,620,614 (21,830) 4,598,784
Net income 133,805 -- 133,805
Adjustment to unrealized holding
gains (losses) - debt and equity
securities -- 17,230 17,230
---------- -------- ----------
Balance at June 30, 1997 $4,754,419 $ (4,600) $4,749,819
========== ======== ==========
The accompanying notes to financial statements are an integral part of these
statements.
F-4
<PAGE>
WYMAN PARK FEDERAL SAVINGS AND LOAN ASSOCIATION
AND SUBSIDIARY
Lutherville, Maryland
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Cash flows from operating activities
Net income $ 133,805 $ 294,117
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization 59,693 60,823
Deferred income tax provision (benefit) (95,712) 74,272
Provision for loan losses 145,000 25,000
Amortization of loan fees, premiums and discounts, net (88,311) (92,855)
Loss on disposal of property and equipment 5,730 --
Gain on sales of loans receivable (5,816) (19,888)
Decrease in accrued interest receivable 12,083 18,819
(Increase) decrease in prepaid expenses and other assets 10,140 (24,324)
Increase (decrease) in accrued expenses and other liabilities (22,812) 10,857
Decrease in federal and state income taxes receivable 83,632 24,426
Increase in federal and state income taxes payable 16,163 --
Decrease in accrued interest payable on savings deposits (1,880) (799)
Other -- 1,457
----------- -----------
Net cash provided by operating activities 251,715 371,905
----------- -----------
Cash flows from investing activities
Purchases of investment securities (1,000,000) (1,000,000)
Sales and maturities of investment securities 1,000,000 4,000,000
Net (increase) decrease in loans receivable (3,290,858) 256,299
Sales of loans receivable 1,295,000 989,500
Mortgage-backed securities principal repayments 67,822 96,004
Purchases of property and equipment (9,697) (9,032)
Sale of ground rents owned 1,021 822
----------- -----------
Net cash provided by (used in ) investing activities (1,936,712) 4,333,593
----------- -----------
Cash flows from financing activities
Net decrease in savings deposits (1,773,481) (603,855)
Increase (decrease) in advance payments by borrowers for
taxes, insurance and ground rents 34,324 (145,970)
----------- -----------
Net cash used in financing activities (1,739,157) (749,825)
----------- -----------
Net increase (decrease) in cash and cash equivalents (3,424,154) 3,955,673
Cash and cash equivalents at beginning of year 5,801,246 1,845,573
----------- -----------
Cash and cash equivalents at end of year $ 2,377,092 $ 5,801,246
=========== ===========
Supplemental information
Interest paid on savings deposits and borrowed funds $ 2,751,421 $ 3,074,082
=========== ===========
Income taxes paid $ 82,805 $ 62,421
=========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-5
<PAGE>
WYMAN PARK FEDERAL SAVINGS AND LOAN ASSOCIATION
AND SUBSIDIARY
Lutherville, Maryland
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
Note 1 -- Summary of Significant Accounting Policies
------------------------------------------
Principals of Consolidation
The accompanying consolidated financial statements for the year
ended June 30, 1997 include the Association and its wholly-owned
subsidiary, W.P. Financial Corp. All significant intercompany
transactions have been eliminated. Prior to the year ended June 30,
1997, W.P. Financial Corp. was inactive.
Nature of Operations
The Association operates as a thrift institution taking deposits
from the general public and using those funds to promote home
ownership by making real estate loans in its service area. The
Association also engages in other forms of lending and investments. As
such, the Association is subject to the inherent risk that borrowers
will default and properties or other collateral will not be sufficient
to recover the loan balance. The Association's sound lending policies
have mitigated this risk and losses from loans have been minimal. The
Association is also subject to the risk that severe changes in
prevailing interest rates could cause impairment of its earnings
capability and the fair value of its net assets. However, management's
operating strategies combined with a relatively stable interest rate
environment since the mid-1980's, has resulted in the Association
being profitable and increasing its capital position.
Basis of Presentation
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenue and expenses during the reporting period. Actual results could
differ from those estimates. Material estimates that are particularly
susceptible to significant change in the near term relate to the
determination of the allowance for loan losses and the valuation of
investments in real estate. In connection with these determinations,
management obtains independent appraisals for significant properties
and prepares net realizable value analyses as appropriate.
Management believes that the allowances for losses on loans and
investments in real estate are adequate. While management uses
available information to recognize losses on loans and investments in
real estate, future additions to the allowances may be necessary based
on changes in economic conditions, particularly in the State of
Maryland. In addition, various regulatory agencies, as an integral
part of their examination process, periodically review the
Association's allowances for losses on
F-6
<PAGE>
WYMAN PARK FEDERAL SAVINGS AND LOAN
ASSOCIATION AND SUBSIDIARY
Lutherville, Maryland
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
Note 1 -- Summary of Significant Accounting Policies -- Continued
------------------------------------------
Basis of Presentation - Continued
loans and investments in real estate. Such agencies may require the
Association to recognize additions to the allowances based on their
judgments about information available to them at the time of their
examination.
Investment Securities and Mortgage-Backed Securities
The Association's debt and equity securities are classified into
two categories. Debt securities that the Association has the positive
intent and ability to hold to maturity are classified as
held-to-maturity and recorded at amortized cost. Debt securities not
classified as held-to-maturity and equity securities with readily
determinable fair values are considered available-for-sale and are
reported at fair value, with unrealized gains and losses excluded from
earnings and reported as a separate component of retained earnings
(net of tax effects). The Association does not invest in securities
for trading purposes. Fair value is determined based on bid prices
published in financial newspapers or bid quotations received from
securities dealers.
Premiums and discounts on investment and mortgage-backed
securities are amortized over the term of the security using methods
which approximate the interest method. Gain or loss on sale of
investments available-for-sale is reflected in income at the time of
sale using the specific identification method.
Property and Equipment
Property and equipment are carried at cost less accumulated
depreciation and amortization. Depreciation and amortization are
accumulated using the straight-line method over the estimated useful
lives of the assets. Additions and improvements are capitalized, and
charges for repairs and maintenance are expensed when incurred. The
related cost and accumulated depreciation or amortization are
eliminated from the accounts when an asset is sold or retired and the
resultant gain or loss is credited or charged to income.
Income Taxes
Deferred income taxes result primarily because of temporary
differences resulting from recognizing loan origination fees and costs
in different periods for financial reporting purposes and income tax
purposes prior to January 1, 1994, depreciation methods, loan loss
recognition, Federal Home Loan Bank (FHLB) stock dividends, and a
deferred compensation agreement. The Association changed its method of
accounting for loan origination fees and costs for tax purposes for
all transactions occurring on or after July 1, 1994 to conform with
the method utilized for financial reporting purposes.
F-7
<PAGE>
WYMAN PARK FEDERAL SAVINGS AND LOAN
ASSOCIATION AND SUBSIDIARY
Lutherville, Maryland
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
Note 1 -- Summary of Significant Accounting Policies -- Continued
------------------------------------------
Loan Fees
Origination and commitment fees and direct origination costs are
deferred and amortized to income over the contractual lives of the
related loans using the interest method. Under certain circumstances,
commitment fees are recognized over the commitment period or upon
expiration of the commitment. Unamortized loan fees are recognized in
income when the related loans are sold or prepaid.
Origination and commitment fees and direct origination costs on
loans originated for sale are deferred and recognized as a component
of gain or loss at the time of sale.
Provision for Loan Losses
The provision for loan losses is determined based on management's
review of the loan portfolio and analyses of the borrowers' ability to
repay, past collection experience, risk characteristics of individual
loans or groups of similar loans and underlying collateral, current
and prospective economic conditions and status of nonperforming loans.
Loans or portions thereof are charged-off when considered, in the
opinion of management, uncollectible.
Interest on potential problem loans is not accrued when, in the
opinion of management, the full collection of principal or interest is
in doubt. Any interest ultimately collected on such loans is recorded
in income in the period of recovery.
In October, 1994, the Financial Accounting Standards Board (FASB)
Statement of Financial Accounting Standards (SFAS) No. 114 "Accounting
by Creditors for Impairment of a Loan" was amended by Statement No.
118 "Accounting by Creditors for Impairment of a Loan - Income
Recognition and Disclosures" (collectively referred to as SFAS No.
114). SFAS No. 114 is effective for fiscal years beginning after
December 15, 1994. The Statement addresses the accounting by creditors
for impairment of certain loans. It is generally applicable for all
loans except large groups of smaller balance homogenous loans that are
collectively evaluated for impairment, including residential mortgage
loans and consumer installment loans. It also applies to all loans
that are restructured in a troubled debt restructuring involving a
modification of terms. However, if a loan was restructured in a
troubled debt restructuring involving a modification of terms before
the effective date of this Statement and it is not impaired based on
the terms specified by the restructuring agreement, a creditor may
continue to account for the loan in accordance with the provisions of
Statement No. 15, "Accounting for Troubled Debt Restructurings" prior
to its amendment by this Statement.
F-8
<PAGE>
WYMAN PARK FEDERAL SAVINGS AND LOAN
ASSOCIATION AND SUBSIDIARY
Lutherville, Maryland
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
Note 1 -- Summary of Significant Accounting Policies -- Continued
------------------------------------------
Provision for Loan Losses -- Continued
SFAS No. 114 requires that impaired loans be measured based on
the present value of expected future cash flows discounted at the
loan's effective interest rates, or at the loan's observable market
price or the fair value of the collateral if the loan is collateral
dependent. A loan is considered impaired when, based on current
information and events, it is probable that a creditor will be unable
to collect all amounts due according to the contractual terms of the
loan agreement. The Association adopted the provisions of SFAS No. 114
on July 1, 1995. Adoption of the Statement had no impact on the
Association's financial condition or results of its operations as of
and for the year ended June 30, 1996.
Foreclosed Real Estate
Real estate acquired through foreclosure is initially recorded at
the lower of cost or estimated fair value, less estimated selling
costs. Management periodically evaluates the carrying value of real
estate owned and establishes a valuation allowance for declines in
fair value, less estimated selling costs, below the initially recorded
value. Costs relating to holding such real estate are charged against
income in the current period, while costs relating to improving such
real estate are capitalized until a saleable condition is reached.
Statements of Cash Flows
For purposes of the statements of cash flows, the Association
considers all highly liquid investments with maturities at date of
purchase of three months or less to be cash equivalents. Cash
equivalents consist of interest-bearing deposits and federal funds
sold.
Note 2 -- Insurance of Savings Accounts and Related Matters
-------------------------------------------------
The Federal Deposit Insurance Corporation, through the Savings
Association Insurance Fund, insures deposits of account holders up to
$100,000. The Association pays an annual premium to provide for this
insurance. The Association is a member of the Federal Home Loan Bank
System and is required to maintain an investment in the stock of the
Federal Home Loan Bank of Atlanta equal to at least 1% of the unpaid
principal balances of its residential mortgage loans, .3% of its total
assets or 5% of its outstanding advances from the bank, whichever is
greater. Purchases and sales of stock are made directly with the bank
at par value.
F-9
<PAGE>
WYMAN PARK FEDERAL SAVINGS AND LOAN
ASSOCIATION AND SUBSIDIARY
Lutherville, Maryland
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
Note 3 -- Investment Securities
---------------------
Investment securities are summarized as follows:
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------- ---------- ---------- ----------
Available-for-Sale Securities:
June 30, 1997
U.S. government and
agency securities $3,000,000 $ -- $ (7,500) $2,992,500
June 30, 1996
U.S. government and
agency securities 3,000,000 -- (35,625) 2,964,375
Held-to-Maturity Securities:
June 30, 1997
Mortgage-backed securities 356,187 4,479 -- 360,666
June 30, 1996
Mortgage-backed securities 424,009 4,493 -- 428,502
The scheduled maturities of securities held-to-maturity and
securities (other than equity securities) available-for-sale at June
30, 1997, were as follows:
Held-to-Maturity Available-for-Sale
---------------------- -------------------------
Amortized Estimated Amortized Estimated
Cost Fair Value Cost Fair Value
--------- ---------- ---------- ----------
Due in one year or less $ -- $ -- $ -- $ --
Due from one to five years -- -- 3,000,000 2,992,500
Mortgage-backed securities 356,187 360,666 -- --
-------- -------- ---------- ----------
$356,187 $360,666 $3,000,000 $2,992,500
======== ======== ========== ==========
There were no sales of investment securities during the years
ended June 30, 1997 and 1996.
F-10
<PAGE>
WYMAN PARK FEDERAL SAVINGS AND LOAN
ASSOCIATION AND SUBSIDIARY
Lutherville, Maryland
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
Note 4 -- Loans Receivable
----------------
Substantially all of the Association's loans receivable are
mortgage loans secured by residential and commercial real estate
properties located in the State of Maryland. Loans are extended only
after evaluation by management of customers' creditworthiness and
other relevant factors on a case-by-case basis. The Association
generally does not lend more than 90% of the appraised value of a
property and requires private mortgage insurance on residential
mortgages with loan-to-value ratios in excess of 80%. In addition, the
Association generally obtains personal guarantees of repayment from
borrowers and/or others for construction, commercial and multi-family
residential loans and disburses the proceeds of construction and
similar loans only as work progresses on the related projects.
Residential lending is generally considered to involve less risk
than other forms of lending, although payment experience on these
loans is dependent to some extent on economic and market conditions in
the Association's primary lending area. Commercial and construction
loan repayments are generally dependent on the operations of the
related properties or the financial condition of its borrower or
guarantor. Accordingly, repayment of such loans can be susceptible to
adverse conditions in the real estate market and the regional economy.
Loans receivable are summarized as follows at June 30:
1997 1996
----------- -----------
Loans secured by first mortgages on real estate:
Residential $46,532,633 $45,763,895
FHA insured and VA guaranteed 23,273 33,258
Commercial 5,806,328 4,447,535
Construction loans 150,000 270,000
----------- -----------
Total first mortgage loans 52,512,234 50,514,688
Home equity lines-of-credit 3,183,895 3,189,104
Home improvement loans 16,358 124
Loans secured by savings deposits 175,898 137,553
----------- -----------
55,888,385 53,841,469
Less: Undisbursed portion of loans in process (231,000) (270,000)
Unearned loan fees, net (198,819) (202,889)
Allowance for loan losses (270,000) (125,000)
----------- -----------
Loans receivable, net $55,188,566 $53,243,580
=========== ===========
Average annual yield on loans receivable for the
years ended June 30 7.88% 7.84%
==== ====
F-11
<PAGE>
WYMAN PARK FEDERAL SAVINGS AND LOAN
ASSOCIATION AND SUBSIDIARY
Lutherville, Maryland
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
Note 4 -- Loans Receivable -- Continued
----------------
The following is a summary of nonperforming loans and troubled
debt restructuring as of June 30:
1997 1996
-------- --------
Nonaccrual loans $176,349 $ 27,359
Troubled debt restructuring -- --
-------- --------
Total nonperforming loans and troubled debt
restructuring $176,349 $ 27,359
======== ========
The contractual amount of interest that would have been recorded
on the above nonaccrual and troubled debt restructuring loans at June
30, 1997 and 1996 was $4,472 and $3,480, respectively. Actual interest
income recorded on such loans was $14,492 in 1997, $2,566 in 1996 and
$17,498 in 1995.
The Association, through its normal asset review process,
classifies certain loans which management believes involve a degree of
risk warranting additional attention. These classifications are
special mention, substandard, doubtful and loss. Not included above in
nonperforming and restructured loans was $178,260 and $270,387 which
was classified as special mention at June 30, 1997 and 1996,
respectively.
Changes in the allowance for losses on loans are summarized as
follows for the years ended June 30:
1997 1996
-------- --------
Balance at beginning of year $125,000 $100,000
Provision for loan losses 145,000 25,000
Charge-offs -- --
--------- --------
Balance at end of year $270,000 $125,000
======== ========
Commitments to extend credit are agreements to lend to customers,
provided that terms and conditions established in the related
contracts are met. At June 30, 1997 the Association had commitments to
originate first mortgage loans on real estate and home equity loans,
exclusive of undisbursed loan funds, of $1,821,100, of which
$1,225,800 carry a fixed rate based on the market rate at the date of
commitment and $595,300 carry a variable rate of interest.
The Association also had commitments to loan funds under unused
home-equity lines of credit aggregating approximately $5,464,623. Such
commitments carry a floating rate of interest.
F-12
<PAGE>
WYMAN PARK FEDERAL SAVINGS AND LOAN
ASSOCIATION AND SUBSIDIARY
Lutherville, Maryland
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
Note 4 -- Loans Receivable -- Continued
----------------
Commitments for mortgage loans generally expire within six months
and such loans and other commitments are generally funded from loan
principal repayments, excess liquidity and savings deposits. Since
certain of the commitments may expire without being drawn upon or may
not be utilized, the total commitment amounts do not necessarily
represent future cash requirements.
Substantially all of the Association's outstanding commitments at
June 30, 1997 are for loans which would be secured by real estate with
appraised values in excess of the commitment amounts. The
Association's exposure to credit loss under these contracts in the
event of non-performance by the other parties, assuming that the
collateral proves to be of no value, is represented by the commitment
amounts.
Loans serviced for others, which are not included in the
Association's assets, were approximately $2,338,256 and $1,490,408 at
June 30, 1997 and 1996, respectively. A fee is charged for such
servicing based on the unpaid principal balances.
In the normal course of business, loans are made to officers and
directors of the Association and their related interests. These loans
are consistent with sound banking practices, are within regulatory
lending limitations and do not involve more than normal risk of
collectibility. Transactions in these loans (omitting loans which
aggregate less than $60,000 per officer or director) for the year
ended June 30, 1997 are summarized as follows:
Balance at June 30, 1996 $391,775
New loans 89,524
Repayments (57,583)
--------
Balance at June 30, 1997 $423,716
========
Note 5 -- Accrued Interest Receivable
---------------------------
Accrued interest receivable is summarized as follows at June 30:
1997 1996
-------- --------
Loans receivable $269,162 $272,329
Mortgage-backed securities 4,360 5,045
Investment securities 57,688 58,523
Other 6,184 13,580
-------- --------
$337,394 $349,477
======== ========
F-13
<PAGE>
WYMAN PARK FEDERAL SAVINGS AND LOAN
ASSOCIATION AND SUBSIDIARY
Lutherville, Maryland
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
Note 6 -- Property and Equipment
----------------------
Property and equipment are summarized as follows at June 30:
Estimated
1997 1996 Useful Lives
-------- -------- ------------
Buildings and improvements $357,668 $357,668 23 years
Furniture, fixtures and equipment 308,110 368,030 3-20 years
Leasehold improvements 75,220 73,441 5-10 years
-------- --------
Total at cost 740,998 799,139
Less accumulated depreciation and
amortization 537,679 540,094
-------- --------
Property and equipment, net $203,319 $259,045
======== ========
The provision for depreciation charged to operations for the
years ended June 30, 1997 and 1996 amounted to $59,693 and $60,823,
respectively. Depreciation is calculated on a straight line basis over
the estimated useful life.
The Association is obligated under long-term operating leases for
its branch offices. These leases expire at various dates to 2002,
subject to renewal options. The approximate future minimum rental
payments under these leases at June 30, 1997 are as follows:
Due in Year
Ended June 30,
--------------
1998 $ 37,896
1999 37,896
2000 37,896
2001 37,896
2002 28,390
Subsequent to 2002 21,600
--------
Total $201,574
========
Rent expense was $37,906 and $37,288 for the years ended June 30,
1997 and 1996, respectively.
F-14
<PAGE>
WYMAN PARK FEDERAL SAVINGS AND LOAN
ASSOCIATION AND SUBSIDIARY
Lutherville, Maryland
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
Note 7 -- Deposits
--------
Time deposits are summarized as follows at June 30:
1997 1996
------------------ ------------------
Amount % Amount %
----------- ----- ----------- -----
Contractual maturity of certificate
accounts from June 30:
Under 12 months $20,255,689 50.3 $25,374,796 59.9
12 to 24 months 8,026,606 20.0 6,940,432 16.4
24 to 36 months 6,013,397 15.0 3,533,550 8.3
36 to 48 months 1,107,957 2.8 5,376,465 12.7
48 to 60 months 4,802,948 11.9 1,071,780 2.5
Over 60 months 34,933 0.0 70,154 0.2
----------- ----- ----------- -----
$40,241,530 100.0 $42,367,177 100.0
=========== ===== =========== =====
Average annual rate on savings deposits
for the year ended June 30 4.94% 5.31%
==== ====
Interest expense on savings deposits consists of the following
for the years ended June 30:
1997 1996
---------- ----------
Certificates $2,267,188 $2,570,023
Passbook 173,461 178,314
NOW and money market 308,892 316,465
---------- ----------
$2,749,541 $3,064,802
As of June 30, 1997 and 1996, the Association had customer
deposits in savings accounts of $100,000 or more of approximately
$5,680,377 and $5,166,170, respectively.
Note 8 -- Income Taxes
------------
The provision for income taxes consists of the following for the
years ended June 30:
1997 1996
-------- --------
Current:
Federal $149,745 $ 70,025
State 32,855 16,822
-------- --------
182,600 86,847
-------- --------
Deferred:
Federal (78,364) 60,539
State (17,348) 13,733
-------- --------
(95,712) 74,272
-------- --------
Provision for income taxes $ 86,888 $161,119
======== ========
F-15
<PAGE>
WYMAN PARK FEDERAL SAVINGS AND LOAN
ASSOCIATION AND SUBSIDIARY
Lutherville, Maryland
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
Note 8 -- Income Taxes -- Continued
------------
The net deferred tax asset (liability) at June 30, 1997 and 1996
consists of total deferred tax assets of $175,506 and $143,808,
respectively, and deferred tax liabilities of $117,000 and $170,118,
respectively. The tax effects of temporary differences between the
financial reporting and income tax basis of assets and liabilities
relate to the following at June 30:
1997 1996
-------- --------
Interest and fees on loans $ 51,392 $ 63,437
Allowance for losses on loans 104,274 47,288
Federal Home Loan Bank stock dividends (80,684) (79,033)
Deferred compensation 16,940 19,288
Unrealized loss on investment securities 2,900 13,795
Tax bad debt reserve (11,897) (29,263)
Other (24,419) (61,822)
-------- --------
$ 58,506 $(26,310)
======== ========
No valuation allowance has been provided against the net deferred
tax asset at June 30, 1997 because the amount could be realized
through a carryback against taxable income of prior years.
A reconciliation between the provision for income taxes and the
amount computed by multiplying income before provision for income
taxes by the statutory Federal income tax rate of 34% is as follows
for the years ended June 30:
1997 1996
-------- --------
Tax provision at statutory rate $ 75,036 $154,780
State income taxes, net of Federal
income tax benefit 10,235 20,166
Other 1,617 (13,827)
-------- --------
$ 86,888 $161,119
======== ========
Before 1996, the Association was able to use the most beneficial
of either the percentage of income method or an experience method,
similar to that used by commercial banks, to determine its tax
deduction for bad debts under Section 593 of the Internal Revenue
Code. Under provisions of the Small Business Protection Act of 1996,
Section 593 was repealed. The new law also provided that cumulative
bad debt deductions taken after 1987 (the base year) were to be
recaptured as taxable income over a six-year period beginning in 1996.
It further provided that the first installment of the recapture could
be deferred for up to two years if a residential lending test is met.
The Association did not meet this test in the year ended June 30,
1997. There was no material adverse effect on the Association's
financial position or results of
F-16
<PAGE>
WYMAN PARK FEDERAL SAVINGS AND LOAN
ASSOCIATION AND SUBSIDIARY
Lutherville, Maryland
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
Note 8 -- Income Taxes -- Continued
------------
operations as a result of the new law. The Association qualifies as a
small bank eligible to use the bank experience method for bad debt
deductions. However, the deductions under this method are not expected
to be as beneficial for determining the current tax provision as the
method previously allowed.
Retained earnings at June 30, 1997 include approximately
$1,777,000 for which no deferred income tax liability has been
recognized. This amount represents an allocation of income to bad-debt
deductions for tax purposes only. Reduction of amounts so allocated
for purposes other than tax bad-debt losses or adjustments arising
from carryback of net operating losses would create income for tax
purposes only, which would be subject to the then current corporate
income tax rate. The unrecorded deferred income tax liability on the
above amount is approximately $686,000.
Note 9 -- Pension Plan
------------
Substantially all employees of the Association are participants
in the Financial Institutions Retirement Fund, a multi-employer
non-contributory defined benefit pension plan. Pension expense in
connection with the Financial Institutions Retirement Fund reflects
the Association's required annual contribution to the Fund. Pension
expense for the years ended June 30, 1997 and 1996 was $17,652 and
$28,410, respectively.
Note 10 -- Accounting Pronouncements With Future Effective Dates
-----------------------------------------------------
SFAS No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities" was issued in
June 1996. This statement provides that transfers of financial assets
be recognized as sales only when certain specified criteria related to
the transferor surrendering control of the assets are met. These
criteria are more restrictive than under previous generally accepted
accounting principles. The provisions of this statement will affect
the accounting for certain transactions commonly entered into by
community financial institutions such as repurchase agreements,
bankers acceptances and participation loans. The statement is
effective for transactions occurring after December 31, 1996 and is to
be applied prospectively.
F-17
<PAGE>
WYMAN PARK FEDERAL SAVINGS AND LOAN
ASSOCIATION AND SUBSIDIARY
Lutherville, Maryland
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
Note 10 -- Accounting Pronouncements With Future Effective Dates -- Continued
-----------------------------------------------------
SFAS No. 127, "Deferral of the Effective Date of Certain
Provisions of FASB Statement No. 125" was issued in December 1996.
This statement defers, for one year, the effective date of Statement
No. 125 for repurchase agreements, dollar-roll, securities lending and
similar transactions.
The effect on the Association's financial position and results of
operations of implementing Statement No. 125 in 1997 was not material.
SFAS No. 130, "Reporting Comprehensive Income" was issued in June
1997. This statement requires that comprehensive income - made up of
all revenues, expenses, gains and losses - be reported and displayed
in an entity's financial statements with the same prominence as its
other financial statements. Currently, the only item that would be
presented as a component of the Association's comprehensive income
which is not also a component of its net income is the change during
the year in unrealized gain or loss on available for sale securities.
The statement, which is effective for years beginning after December
15, 1997, will not affect the Association's financial position or its
results of operations.
F-18
<PAGE>
WYMAN PARK FEDERAL SAVINGS AND LOAN
ASSOCIATION AND SUBSIDIARY
Lutherville, Maryland
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
Note 11 -- Regulatory Matters
------------------
The Association is subject to various regulatory capital
requirements administered by the federal banking agencies. Failure to
meet minimum capital requirements can initiate certain mandatory, and
possibly additional discretionary, actions by the regulators that, if
undertaken, could have a direct material effect on the Association's
financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Association
must meet specific capital guidelines that involve quantitative
measures of the Association's assets, liabilities, and certain
off-balance-sheet items as calculated under regulatory accounting
practices. The Association's capital amounts and classifications are
also subject to qualitative judgments by the regulators about
components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital
adequacy require the Association to maintain minimum amounts and
ratios (set forth in the table below) of total and Tier I capital (as
defined in the regulations) and risk-weighted assets (as defined), and
of Tier I capital (as defined) to average assets (as defined).
Management believes, as of June 30, 1997, that the Association meets
all capital adequacy requirements to which it is subject.
As of June 30, 1997, the most recent notification from the Office
of Thrift Supervision categorized the Association as well capitalized
under the regulatory framework for prompt corrective action. To be
categorized as well capitalized the Association must maintain minimum
total risk-based, Tier I risk-based, and Tier I leverage ratios as set
forth in the table. There are no conditions or events since that
notification that management believes have changed the Associations'
category. The Association's actual capital amounts and ratios are also
presented in the table.
<TABLE>
<CAPTION>
To be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
-------------------- ------------------- -------------------
Amount Ratio Amount Ratio Amount Ratio
---------- ------ ---------- ----- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
As of June 30, 1997:
Total Capital (to Risk Weighted Assets) $5,024,419 14.63% $2,747,520 8% $3,434,400 10%
Tier I Capital (to Risk
Weighted Assets) 4,754,419 13.84% 1,373,760 4% 2,060,640 6%
Tier I Capital (to Average Assets) 4,754,419 7.73% 2,461,062 4% 3,076,328 5%
As of June 30, 1996
Total Capital (to Risk Weighted Assets) 4,745,614 14.33% 2,649,760 8% 3,312,200 10%
Tier I Capital (to Risk
Weighted Assets) 4,620,614 13.95% 1,324,880 4% 1,987,320 6%
Tier I Capital (to Average Assets) 4,620,614 7.25% 2,548,844 4% 3,186,055 5%
</TABLE>
F-19
<PAGE>
WYMAN PARK FEDERAL SAVINGS AND LOAN
ASSOCIATION AND SUBSIDIARY
Lutherville, Maryland
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
Note 11 -- Regulatory Matters -- Continued
------------------
The Association also exceeds the minimum capital standards
required by the Office of Thrift Supervision, its primary regulator,
as follows:
Actual Required Minimum Excess
---------- ---------------- ----------
As of June 30, 1997:
Tangible capital $4,754,419 $ 934,000 $3,820,419
Core capital 4,754,419 1,867,000 2,887,419
Risk-based capital 5,024,419 2,748,000 2,276,419
As of June 30, 1996:
Tangible capital 4,620,614 958,000 3,662,614
Core capital 4,620,614 1,916,000 2,704,614
Risk-based capital 4,745,614 2,650,000 2,095,614
The Economic Growth and Regulatory Paperwork Reduction Act of
1996 was signed into law on September 30, 1996. One major provision of
the act was that institutions such as the Bank, with deposits insured
by the Federal Deposit Insurance Corporation's Savings Association
Insurance Fund (SAIF), were assessed a one time charge to recapitalize
the SAIF. Subsequent regulations established the amount of this
assessment at .657% of the institution's insured deposits as of March
31, 1995. The law also provided that the assessment would be
deductible for tax purposes in the year it was paid. The Bank paid its
one-time assessment in the amount of $382,726 in November 1996. It is
anticipated that future deposit insurance premiums will be less than
those paid in the past because of the one-time assessment making the
SAIF solvent.
F-20
<PAGE>
WYMAN PARK FEDERAL SAVINGS AND LOAN
ASSOCIATION AND SUBSIDIARY
Lutherville, Maryland
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
Note 11 -- Regulatory Matters -- Continued
------------------
The act also allows for a merger of the SAIF with the Bank
Insurance Fund as of January 1, 1999 if no savings institutions exist
at that time. Consequently, the Bank may be required to change its
charter to a national bank or state chartered bank before that date.
Note 12 -- Disclosures About Fair Value of Financial Instruments
-----------------------------------------------------
The following methods and assumptions were used to estimate the
fair value of each class of financial instruments for which it is
practicable to estimate that value:
Cash and Cash Equivalents -- For cash, non-interest bearing
deposits, variable rate interest-bearing deposits in other banks
and federal funds sold, the carrying amount is a reasonable
estimate of fair value.
Securities -- For marketable securities available for sale and
mortgage-backed securities, fair values are based on quoted
market prices or dealer quotes.
Loans Receivable -- For fixed rate residential mortgages, fair
value is based on computed present value of cash flows using
weighted average term to maturity and weighted average rate of
the Association's portfolio. For variable rate loans, the
carrying amount is considered a reliable estimate of fair value.
Ground Rents -- The fair value of ground rents is estimated by
management based on anticipated realization in the current
market.
Federal Home Loan Bank Stock -- Because of the limited nature of
the market for this instrument, the carrying amount is a
reasonable estimate of fair value.
Deposit Liabilities -- The fair value of demand deposits, savings
accounts and advance payments by borrowers for taxes, insurance
and ground rents is the amount payable on demand at the reporting
date. The fair value for certificate accounts, is based on
computed present value of cash flows using the rates currently
offered for deposits of similar remaining maturities.
Commitments -- For commitments to originate loans and purchase
loans and mortgage-backed securities, fair value considers the
differences between current levels of interest rates and
committed rates if any.
F-21
<PAGE>
WYMAN PARK FEDERAL SAVINGS AND LOAN
ASSOCIATION AND SUBSIDIARY
Lutherville, Maryland
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
Note 12 -- Disclosures About Fair Value of Financial Instruments -- Continued
-----------------------------------------------------
The estimated fair values of the Association's financial
instruments as of June 30 are as follows:
<TABLE>
<CAPTION>
1997 1996
-------------------------- --------------------------
Carrying Carrying
Amount Fair Value Amount Fair Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Financial Assets
Cash and cash equivalents $ 2,377,092 $ 2,377,092 $ 5,801,246 $ 5,801,246
Investments securities available
for sale 2,992,500 2,992,500 2,964,375 2,964,375
Mortgage-backed securities 356,187 360,666 424,009 428,502
Loans receivable 55,458,566 53,368,580
Less: allowance for loan losses 270,000 125,000
----------- -----------
55,188,566 56,052,888 53,243,580 53,886,140
Ground rents 129,108 77,465 130,129 78,077
Federal Home Loan Bank stock 509,900 509,900 509,900 509,900
Financial Liabilities
Savings deposits 56,095,332 56,485,590 57,870,624 58,426,486
Advance payments by borrowers
for taxes, insurance and ground
rents 1,240,877 1,240,877 1,206,553 1,206,553
Loan commitments 7,285,723 7,285,723 6,792,764 6,792,764
</TABLE>
Note 13 -- Plan of Conversion
------------------
On June 18, 1997, the Board of Directors adopted a plan of
conversion which provides for (i) the conversion of the Association
from a federally chartered mutual savings and loan association to a
federally chartered stock savings and loan association, the "Converted
Association," and (ii) the concurrent formation of a holding company
for the Converted Association, the "Holding Company."
The Association's plan of conversion provides for an initial
issuance of shares of capital stock to be offered to eligible members,
employees and officers of the Association at a price based on an
appraisal by an independent appraisal firm. Any shares not purchased
by eligible members may be sold at the discretion of the Association
to the public.
Costs, including underwriting discounts, if any, to complete the
conversion are expected to be deferred and deducted from the proceeds
from the sale of capital stock. If the conversion does not take place
all costs incurred will be charged to expense. Deferred costs
aggregated $32,720 at June 30, 1997.
F-22
<PAGE>
WYMAN PARK FEDERAL SAVINGS AND LOAN
ASSOCIATION AND SUBSIDIARY
Lutherville, Maryland
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
Note 13 -- Plan of Conversion - Continued
------------------
For the purpose of granting eligible members of the Association a
priority in the event of future liquidation, the Association will, at
the time of conversion, establish a liquidation account equal to its
retained income as of the date of the latest consolidated statement of
financial condition used in the final conversion offering circular. In
the event of future liquidation of the Association (and only in such
an event), an eligible deposit account holder who continues to
maintain his deposit account shall be entitled to receive a prorata
distribution from the liquidation account, based on such holder's
proportionate amount of the total current adjusted balances for
deposit accounts then held by all eligible account holders, before any
liquidation distribution may be made with respect to capital stock.
After the conversion, no dividends may be paid to stockholders if such
dividends reduce retained income of the Association below the amount
required for the liquidation account.
F-23
<PAGE>
No person has been authorized to give any information or to make any
representations in connection with this offering other than those contained in
this Prospectus and, if given or made, such other information and
representations must not be relied upon as having been authorized by the Holding
Company. Neither the delivery of this Prospectus nor any sale made hereunder
shall, under any circumstances, create any implication that there has been no
change in the affairs of the Holding Company since the date hereof or that the
information contained herein is correct as of any time subsequent to its date.
This Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any securities other than the registered securities to which it
relates. This Prospectus does not constitute an offer to sell or a solicitation
of a offer to buy such securities in any circumstances or jurisdictions in which
such offer or solicitation is unlawful.
TABLE OF CONTENTS
Page
----
Prospectus Summary...................................
Selected Consolidated Financial Information..........
Risk Factors.........................................
Use of Proceeds......................................
Dividends............................................
Market for Common Stock..............................
Wyman Park Bancorporation, Inc.......................
Wyman Park Federal Savings & Loan Association........
Pro Forma Data.......................................
Pro Forma Regulatory Capital Analysis................
Capitalization.......................................
Consolidated Statements of Operations................
Management's Discussion and Analysis of
Financial Condition and Results of Operations.......
Business.............................................
Regulation...........................................
Management...........................................
The Conversion.......................................
Restrictions on Acquisitions of Stock and
Related Takeover Defensive Provisions...............
Description of Capital Stock.........................
Legal Matters........................................
Experts..............................................
Additional Information...............................
Index to Consolidated Financial Statements...........
Until the later of ________, 1997 or 25 days after commencement of the
Offering all dealers effecting transactions in the registered securities,
whether or not participating in this distribution, may be required to deliver a
prospectus. This is in addition to the obligation of dealers to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
[ ] Shares
[LOGO]
WYMAN PARK
BANCORPORATION, INC.
(Proposed Holding Company for
Wyman Park Federal Savings
& Loan Association)
Common Stock
Prospectus
Trident Securities, Inc.
__________, 1997
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers
- ---------------------------------------------------
Article Eleventh of the Holding Company's Certificate of Incorporation
provides for indemnification of directors and officers of the Holding Company
against any and all liabilities, judgments, fines and reasonable settlements,
costs, expenses and attorneys' fees incurred in any actual, threatened or
potential proceeding, except to the extent that such indemnification is limited
by Delaware law and such law cannot be varied by contract or bylaw. Article
Eleventh also provides for the authority to purchase insurance with respect
thereto.
Section 145 of the General Corporation Law of the State of Delaware
authorizes a corporation's Board of Directors to grant indemnity under certain
circumstances to directors and officers, when made, or threatened to be made,
parties to certain proceedings by reason of such status with the corporation,
against judgments, fines, settlements and expenses, including attorneys' fees.
In addition, under certain circumstances such persons may be indemnified against
expenses actually and reasonably incurred in defense of a proceeding by or on
behalf of the corporation. Similarly, the corporation, under certain
circumstances, is authorized to indemnify directors and officers of other
corporations or enterprises who are serving as such at the request of the
corporation, when such persons are made, or threatened to be made, parties to
certain proceedings by reason of such status, against judgments, fines,
settlements and expenses, including attorneys' fees; and under certain
circumstances, such persons may be indemnified against expenses actually and
reasonably incurred in connection with the defense or settlement of a proceeding
by or in the right of such other corporation or enterprise. Indemnification is
permitted
Item 25. Other Expenses of Issuance and Distribution
- -----------------------------------------------------
Set forth below is an estimate of the amount of fees and expenses
(other than underwriting discounts and commissions) to be incurred in connection
with the issuance of the shares.
Counsel fees and expenses ................................... $ 75,000
Accounting fees and expenses ................................ 30,000
Appraisal and business plan preparation
fees and expenses ......................................... 24,000
Conversion Agent fees and expenses .......................... 8,000
Underwriting fees(1) (including financial
advisory fee and expenses) ............................... 125,911
Underwriter's counsel fees and expenses ..................... 40,000
Printing, postage and mailing ............................... 50,000
Registration and Filing Fees ................................ 25,000
Blue Sky fees and expenses .................................. 6,000
Stock Transfer Agent and Certificates ....................... 7,500
Other expenses(1) ........................................... 36,460
--------
TOTAL .................................................. $427,871
========
- -------------
(1) Based on maximum of Estimated Valuation Range.
<PAGE>
where such person (i) was acting in good faith; (ii) was acting in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation or other corporation or enterprise, as appropriate; (iii) with
respect to a criminal proceeding, has no reasonable cause to believe his conduct
was unlawful; and (iv) was not adjudged to be liable to the corporation or other
corporation or enterprise (unless the court where the proceeding was brought
determines that such person is fairly and reasonably entitled to indemnity).
Unless ordered by a court, indemnification may be made only following a
determination that such indemnification is permissible because the person being
indemnified has met the requisite standard of conduct. Such determination may be
made (i) by the Board of Directors of the Holding Company by a majority vote of
a quorum consisting of directors not at the time parties to such proceeding; or
(ii) if such a quorum cannot be obtained or the quorum so directs, then by
independent legal counsel in a written opinion; or (iii) by the stockholders.
Section 145 also permits expenses incurred by directors and officers in
defending a proceeding to be paid by the corporation in advance of the final
disposition of such proceedings upon the receipt of an undertaking by the
director or officer to repay such amount if it is ultimately determined that he
is not entitled to be indemnified by the corporation against such expenses.
Item 26. Recent Sales of Unregistered Securities
- -------------------------------------------------
The Registrant is newly incorporated, solely for the purpose of acting
as the holding company of the Wyman Park Federal Savings & Loan Association,
pursuant to the Plan of Conversion (filed as Exhibit 2 herein), and no sales of
its securities have occurred to date.
<PAGE>
Item 27. Exhibits and Financial Statement Schedules
- ----------------------------------------------------
(a) Exhibits:
1.1 Letter Agreement regarding management, marketing and consulting services*
1.2 Form of Agency Agreement*
2 Plan of Conversion
3.1 Certificate of Incorporation of the Holding Company
3.2 Bylaws of the Holding Company
3.3 Charter of Association in stock form
3.4 Bylaws of Association in stock form 4 Form of Stock Certificate of the
Holding Company
5 Opinion of Silver, Freedman & Taff, L.L.P. with Respect to Legality of
Stock
8.1 Opinion of Silver, Freedman & Taff, L.L.P. with respect to Federal income
tax consequences of the Stock Conversion
8.2 Opinion of Wooden & Benson Chartered with respect to Maryland income tax
consequences of the Stock Conversion
10.1 Letter Agreement regarding Appraisal Services and Business Plan
Preparation*
10.2 Employee Stock Ownership Plan
10.3 Directors Retirement Plan*
22 Subsidiaries
24.1 Consent of Silver, Freedman & Taff, L.L.P.
24.2 Consent of Wooden & Benson Chartered
24.3 Consent of Ferguson & Company
25 Power of Attorney (set forth on signature page)
99.1 Appraisal
99.2 Proxy Statement and form of proxy to be furnished to the Association's
account holders
99.3 Stock Order Form and Order Form Instructions*
99.4 Certification
99.5 Question and Answer Brochure*
99.6 Advertising, Training and Community Informational Meeting Materials*
99.7 Letter of Appraiser with respect to Subscription Rights*
- -----------
* To be filed supplementally or by amendment.
<PAGE>
Item 28. Undertakings
- ----------------------
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any Prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the Prospectus any facts or events arising after
the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and it will be governed by the final adjudication
of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
<PAGE>
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this Registration
Statement to be signed on its behalf by the undersigned, in the City of
Lutherville, State of Maryland, on September 22, 1997.
WYMAN PARK BANCORPORATION, INC.
By: /s/ Ernest A. Moretti
---------------------------------
Ernest A. Moretti, President and
Chief Executive Officer
(Duly Authorized Representative)
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Ernest A. Moretti his true and lawful
attorneys-in-fact and agents, with full power of substitution and
re-substitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement, and to file the same, with all exhibits thereto,
and all other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all said attorneys-in-fact and
agents or their substitutes or substitute may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<PAGE>
/s/ Ernest A. Moretti /s/ Ronald W. Robinson
- ------------------------------------- ------------------------------
Ernest A. Moretti, Director, Ronald W. Robinson,
President and Chief Executive Officer Chief Financial Officer
(Chief Operating Officer) (Principal Financial Officer)
/s/ Allan B. Heaver /s/ H. Douglas Huether
- -------------------------------------- ------------------------------
Allan B. Heaver, Chairman of the Board H. Dougals Huether, Director
/s/ John K. White /s/ John R. Beever
- -------------------------------------- ------------------------------
John T. White, Director John R. Beever, Director
/s/ Albert M. Copp /s/ Gilbert D. Marsiglia, Sr.
- -------------------------------------- ------------------------------
Albert M. Copp, Director Gilbert D. Marsiglia, Director
/s/ Jay H. Salkin /s/ G. Scott Barhight
- -------------------------------------- ------------------------------
Jay H. Salkin, Director G. Scott Barhight, Director
<PAGE>
As filed with the Securities and Exchange Commission on September 22, 1997
Registration No. 333-________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
EXHIBITS
TO
FORM SB-2
UNDER
THE SECURITIES ACT OF 1933
----------
WYMAN PARK BANCORPORATION, INC.
11 West Ridgely Road
Lutherville, Maryland 21094
================================================================================
<PAGE>
EXHIBIT INDEX
Exhibits:
- ---------
1.1 Letter Agreement regarding management, marketing and consulting services*
1.2 Form of Agency Agreement*
2 Plan of Conversion
3.1 Certificate of Incorporation of the Holding Company
3.2 Bylaws of the Holding Company
3.3 Charter of Association in stock form
3.4 Bylaws of Association in stock form
4 Form of Stock Certificate of the Holding Company
5 Opinion of Silver, Freedman & Taff, L.L.P. with Respect to Legality of
Stock
8.1 Opinion of Silver, Freedman & Taff, L.L.P. with respect to Federal income
tax consequences of the Stock Conversion
8.2 Opinion of Wooden & Benson Chartered with respect to Maryland income tax
consequences of the Stock Conversion
10.1 Employment Agreement with Ernest A. Moretti
10.2 Letter Agreement regarding Appraisal Services and Business Plan
Preparation*
10.3 Employee Stock Ownership Plan
22 Subsidiaries
24.1 Consent of Silver, Freedman & Taff, L.L.P.
24.2 Consent of Wooden & Benson Chartered
24.3 Consent of Ferguson & Company
25 Power of Attorney (set forth on signature page)
99.1 Appraisal*
99.2 Proxy Statement and form of proxy to be furnished to the Association's
account holders
99.3 Stock Order Form and Order Form Instructions*
99.4 Certification
99.5 Question and Answer Brochure*
99.6 Advertising, Training and Community Informational Meeting Materials*
99.7 Letter of Appraiser with respect to Subscription Rights*
- ------------
* To be filed supplementally or by amendment.
EXHIBIT 2
PLAN OF CONVERSION
<PAGE>
WYMAN PARK FEDERAL SAVINGS & LOAN ASSOCIATION
Lutherville, Maryland
PLAN OF CONVERSION
From Mutual to Stock Form of Organization
I. GENERAL
On June 18, 1997, the Board of Directors of Wyman Park Federal Savings
& Loan Association (the "Association") adopted a Plan of Conversion whereby the
Association would convert from a federal mutual savings institution to a federal
stock savings institution pursuant to the Rules and Regulations of the OTS. The
Plan includes, as part of the conversion, the concurrent formation of a holding
company. The new holding company is proposed to be chartered as a Delaware
corporation under the name to be selected. The Plan provides that
non-transferable subscription rights to purchase Holding Company Conversion
Stock will be offered first to Eligible Account Holders of record as of the
Eligibility Record Date, then to the Association's Tax-Qualified Employee Plans,
then to Supplemental Eligible Account Holders of record as of the Supplemental
Eligibility Record Date, then to Other Members, and then to directors, officers
and employees. Concurrently with, at any time during, or promptly after the
Subscription Offering, and on a lowest priority basis, an opportunity to
subscribe may also be offered to the general public in a Direct Community
Offering. The price of the Holding Company Conversion Stock will be based upon
an independent appraisal of the Association and will reflect its estimated pro
forma market value, as converted. It is the desire of the Board of Directors of
the Association to attract new capital to the Association in order to increase
its capital, support future savings growth and increase the amount of funds
available for residential and other mortgage lending. The Converted Association
is also expected to benefit from its management and other personnel having a
stock ownership in its business, since stock ownership is viewed as an effective
performance incentive and a means of attracting, retaining and compensating
management and other personnel. No change will be made in the Board of Directors
or management as a result of the Conversion.
II. DEFINITIONS
Acting in Concert: The term "acting in concert" shall have the same
meaning given it in ss.574.2(c) of the Rules and Regulations of the OTS.
Actual Subscription Price: The price per share, determined as provided
in Section V of the Plan, at which Holding Company Conversion Stock will be sold
in the Subscription Offering.
Affiliate: An "affiliate" of, or a Person "affiliated" with, a
specified Person, is a Person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by or is under common control with,
the Person specified.
Associate: The term "associate," when used to indicate a relationship
with any Person, means (i) any corporation or organization (other than the
Holding Company, the Association or
1
<PAGE>
a majority-owned subsidiary of the Holding Company) of which such Person is an
officer or partner or is, directly or indirectly, the beneficial owner of ten
percent or more of any class of equity securities, (ii) any trust or other
estate in which such Person has a substantial beneficial interest or as to which
such Person serves as trustee or in a similar fiduciary capacity, and (iii) any
relative or spouse of such Person, or any relative of such spouse, who has the
same home as such Person or who is a director or officer of the Holding Company
or the Association or any subsidiary of the Holding Company; provided, however,
that any Tax-Qualified or Non-Tax- Qualified Employee Plan shall not be deemed
to be an associate of any director or officer of the Holding Company or the
Association, to the extent provided in Section V hereof.
Association: Wyman Park Federal Savings & Loan Association, or such
other name as the institution may adopt.
Conversion: Change of the Association's charter and bylaws to federal
stock charter and bylaws; sale by the Holding Company of Holding Company
Conversion Stock; and issuance and sale by the Converted Association of
Converted Association Common Stock to the Holding Company, all as provided for
in the Plan.
Converted Association: The federally chartered stock savings
institution resulting from the Conversion of the Association in accordance with
the Plan.
Deposit Account: Any withdrawable or repurchasable account or deposit
in the Association.
Direct Community Offering: The offering to the general public of any
unsubscribed shares which may be effected as provided in Section V hereof.
Eligibility Record Date: The close of business on March 31, 1996.
Eligible Account Holder: Any Person holding a Qualifying Deposit in
the Association on the Eligibility Record Date.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Holding Company: A Delaware corporation, the name of which will be
determined, which upon completion of the Conversion will own all of the
outstanding common stock of the Converted Association.
Holding Company Conversion Stock: Shares of common stock, par value
$.01 per share, to be issued and sold by the Holding Company as a part of the
Conversion; provided, however, that for purposes of calculating Subscription
Rights and maximum purchase limitations under the Plan, references to the number
of shares of Holding Company Conversion Stock shall refer to the number of
shares offered in the Subscription Offering.
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Market Maker: A dealer (i.e., any Person who engages directly or
indirectly as agent, broker or principal in the business of offering, buying,
selling, or otherwise dealing or trading in securities issued by another Person)
who, with respect to a particular security, (i) regularly publishes bona fide,
competitive bid and offer quotations in a recognized inter-dealer quotation
system; or (ii) furnishes bona fide competitive bid and offer quotations on
request; and (iii) is ready, willing, and able to effect transactions in
reasonable quantities at his quoted prices with other brokers or dealers.
Maximum Subscription Price: The price per share of Holding Company
Conversion Stock to be paid initially by subscribers in the Subscription
Offering.
Member: Any Person or entity that qualifies as a member of the
Association pursuant to its charter and bylaws.
Non-Tax-Qualified Employee Plan: Any defined benefit plan or defined
contribution plan of the Association or the Holding Company, such as an employee
stock ownership plan, stock bonus plan, profit-sharing plan or other plan, which
with its related trust does not meet the requirements to be "qualified" under
Section 401 of the Internal Revenue Code.
OTS: Office of Thrift Supervision, Department of the Treasury.
Officer: An executive officer of the Holding Company or the
Association, including the Chairman of the Board, President, Executive Vice
Presidents, Senior Vice Presidents in charge of principal business functions,
Secretary and Treasurer.
Order Forms: Forms to be used in the Subscription Offering to exercise
Subscription Rights.
Other Members: Members of the Association, other than Eligible Account
Holders, Tax-Qualified Employee Plans or Supplemental Eligible Account Holders,
as of the Voting Record Date.
Person: An individual, a corporation, a partnership, an association, a
joint-stock company, a trust, any unincorporated organization, or a government
or political subdivision thereof.
Plan: This Plan of Conversion of the Association, including any
amendment approved as provided in this Plan.
Qualifying Deposit: The aggregate balance of each Deposit Account of an
Eligible Account Holder as of the Eligibility Record Date or of a Supplemental
Eligible Account Holder as of the Supplemental Eligibility Record Date.
SAIF: Savings Association Insurance Fund.
SEC: Securities and Exchange Commission.
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Special Meeting: The Special Meeting of Members called for the purpose
of considering and voting upon the Plan of Conversion.
Subscription Offering: The offering of shares of Holding Company
Conversion Stock for subscription and purchase pursuant to Section V of the
Plan.
Subscription Rights: Non-transferable, non-negotiable, personal rights
of the Association's Eligible Account Holders, Tax-Qualified Employee Plans,
Supplemental Eligible Account Holders, Other Members, and directors, Officers
and employees to subscribe for shares of Holding Company Conversion Stock in the
Subscription Offering.
Supplemental Eligibility Record Date: The last day of the calendar
quarter preceding approval of the Plan by the OTS.
Supplemental Eligible Account Holder: Any person holding a Qualifying
Deposit in the Association (other than an officer or director and their
associates) on the Supplemental Eligibility Record Date.
Tax-Qualified Employee Plans: Any defined benefit plan or defined
contribution plan of the Association or the Holding Company, such as an employee
stock ownership plan, stock bonus plan, profit-sharing plan or other plan, which
with its related trust meets the requirements to be "qualified" under Section
401 of the Internal Revenue Code.
Voting Record Date: The date set by the Board of Directors in
accordance with federal regulations for determining Members eligible to vote at
the Special Meeting.
III. STEPS PRIOR TO SUBMISSION OF PLAN OF CONVERSION TO THE MEMBERS FOR
APPROVAL
Prior to submission of the Plan of Conversion to its Members for
approval, the Association must receive from the OTS approval of the Application
for Approval of Conversion to convert to the federal stock form of organization.
The following steps must be taken prior to such regulatory approval:
A. The Board of Directors shall adopt the Plan by not less
than a two-thirds vote.
B. The Association shall notify its Members of the adoption of
the Plan by publishing a statement in a newspaper having a general
circulation in each community in which the Association maintains an
office.
C. Copies of the Plan adopted by the Board of Directors shall
be made available for inspection at each office of the Association.
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D. The Association will promptly cause an Application for
Approval of Conversion on Form AC to be prepared and filed with the
OTS, an Application on Form H-(e)1 (or other applicable form) to be
prepared and filed with the OTS and a Registration Statement on Form
S-1 to be prepared and filed with the SEC.
E. Upon receipt of notice from the OTS to do so, the
Association shall notify its Members that it has filed the Application
for Approval of Conversion by posting notice in each of its offices and
by publishing notice in a newspaper having general circulation in each
community in which the Association maintains an office.
IV. CONVERSION PROCEDURE
Following approval of the application by the OTS, the Plan will be
submitted to a vote of the Members at the Special Meeting. If the Plan is
approved by Members holding a majority of the total number of votes entitled to
be cast at the Special Meeting, the Association will take all other necessary
steps pursuant to applicable laws and regulations to convert to a federal stock
savings institution as part of a concurrent holding company formation pursuant
to the terms of the Plan.
The Holding Company Conversion Stock will be offered for sale in the
Subscription Offering at the Maximum Subscription Price to Eligible Account
Holders, Tax-Qualified Employee Plans, Supplemental Eligible Account Holders,
Other Members and directors, Officers and employees of the Association, prior to
or within 45 days after the date of the Special Meeting. The Association may,
either concurrently with, at any time during, or promptly after the Subscription
Offering, also offer the Holding Company Conversion Stock to and accept
subscriptions from other Persons in a Direct Community Offering; provided that
the Association's Eligible Account Holders, Tax-Qualified Employee Plans,
Supplemental Eligible Account Holders, Other Members and directors, Officers and
employees shall have the priority rights to subscribe for Holding Company
Conversion Stock set forth in Section V of this Plan. However, the Holding
Company and the Association may delay commencing the Subscription Offering
beyond such 45 day period in the event there exist unforeseen material adverse
market or financial conditions. If the Subscription Offering commences prior to
the Special Meeting, subscriptions will be accepted subject to the approval of
the Plan at the Special Meeting.
The period for the Subscription Offering and Direct Community Offering
will be not less than 20 days nor more than 45 days unless extended by the
Association. In connection with such extensions, subscribers and other
purchasers will be permitted to increase, decrease or rescind their
subscriptions or purchase orders to the extent required by the OTS in approving
the extensions. Completion of the sale of all shares of Holding Company
Conversion Stock is required within 24 months after the date of the Special
Meeting.
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V. STOCK OFFERING
A. Total Number of Shares and Purchase Price of Holding Company
Conversion Stock
The total number of shares of Holding Company Conversion Stock to be
issued and sold in the Conversion will be determined jointly by the Boards of
Directors of the Holding Company and the Association prior to the commencement
of the Subscription Offering, subject to adjustment if necessitated by market or
financial conditions prior to consummation of the Conversion. The total number
of shares of Holding Company Conversion Stock shall also be subject to increase
in connection with any oversubscriptions in the Subscription Offering or Direct
Community Offering.
The aggregate price for which all shares of Holding Company Conversion
Stock will be sold will be based on an independent appraisal of the estimated
total pro forma market value of the Holding Company and the Converted
Association. Such appraisal shall be performed in accordance with OTS guidelines
and will be updated as appropriate under or required by applicable regulations.
The appraisal will be made by an independent investment banking or
financial consulting firm experienced in the area of thrift institution
appraisals. The appraisal will include, among other things, an analysis of the
historical and pro forma operating results and net worth of the Converted
Association and a comparison of the Holding Company, the Converted Association
and the Holding Company Conversion Stock with comparable thrift institutions and
holding companies and their respective outstanding capital stocks.
Based upon the independent appraisal, the Boards of Directors of the
Holding Company and the Association will jointly fix the Maximum Subscription
Price.
The Actual Subscription Price for each share of Holding Company
Conversion Stock will be determined by dividing the estimated appraised
aggregate pro forma market value of the Holding Company and the Converted
Association, based on the independent appraisal as updated upon completion of
the Subscription Offering or other sale of all of the Holding Company Conversion
Stock, by the total number of shares of Holding Company Conversion Stock to be
issued and sold by the Holding Company upon Conversion. Such appraisal will then
be expressed in terms of a specific aggregate dollar amount rather than as a
range.
B. Subscription Rights
Non-transferable Subscription Rights to purchase shares will be issued
without payment therefor to Eligible Account Holders, Tax-Qualified Employee
Plans, Supplemental Eligible Account Holders, Other Members and directors,
Officers and employees of the Association as set forth below.
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1. Preference Category No. 1: Eligible Account Holders
Each Eligible Account Holder shall receive non-transferable
Subscription Rights to subscribe for shares of Holding Company
Conversion Stock in an amount equal to the greater of $100,000,
one-tenth of one percent (.10%) of the total offering of shares, or 15
times the product (rounded down to the next whole number) obtained by
multiplying the total number of shares of common stock to be issued by
a fraction of which the numerator is the amount of the qualifying
deposit of the Eligible Account Holder and the denominator is the total
amount of qualifying deposits of all Eligible Account Holders in the
converting Association in each case on the Eligibility Record Date. If
sufficient shares are not available, shares shall be allocated first to
permit each subscribing Eligible Account Holder to purchase to the
extent possible 100 shares, and thereafter among each subscribing
Eligible Account Holder pro rata in the same proportion that his
Qualifying Deposit bears to the total Qualifying Deposits of all
subscribing Eligible Account Holders whose subscriptions remain
unsatisfied.
Non-transferable Subscription Rights to purchase Holding
Company Conversion Stock received by directors and Officers of the
Association and their Associates, based on their increased deposits in
the Association in the one year period preceding the Eligibility Record
Date, shall be subordinated to all other subscriptions involving the
exercise of non-transferable Subscription Rights of Eligible Account
Holders.
2. Preference Category No. 2: Tax-Qualified Employee Plans
Each Tax-Qualified Employee Plan shall be entitled to receive
non-transferable Subscription Rights to purchase up to 10% of the
shares of Holding Company Conversion Stock, provided that singly or in
the aggregate such plans (other than that portion of such plans which
is self-directed) shall not purchase more than 10% of the shares of the
Holding Company Conversion Stock. Subscription Rights received pursuant
to this Category shall be subordinated to all rights received by
Eligible Account Holders to purchase shares pursuant to Category No. 1;
provided, however, that notwithstanding any other provision of this
Plan to the contrary, the Tax-Qualified Employee Plans shall have a
first priority Subscription Right to the extent that the total number
of shares of Holding Company Conversion Stock sold in the Conversion
exceeds the maximum of the appraisal range as set forth in the
subscription prospectus.
3. Preference Category No. 3: Supplemental Eligible Account
Holders
Each Supplemental Eligible Account Holder shall receive
non-transferable Subscription Rights to subscribe for shares of Holding
Company Conversion Stock in an amount equal to the greater of $100,000,
one-tenth of one percent (.10%) of the total offering of shares, or 15
times the product (rounded down to the next whole number) obtained by
multiplying the total number of shares of common stock to be issued by
a fraction of which the numerator is the amount of the qualifying
deposit of the Supplemental Eligible Account Holder and the denominator
is the total amount of qualifying deposits of
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all Supplemental Eligible Account Holders in the converting Association
in each case on the Supplemental Eligibility Record Date.
Subscription Rights received pursuant to this category shall
be subordinated to all Subscription Rights received by Eligible Account
Holders and Tax-Qualified Employee Plans pursuant to Category Nos. 1
and 2 above.
Any non-transferable Subscription Rights to purchase shares
received by an Eligible Account Holder in accordance with Category No.
1 shall reduce to the extent thereof the Subscription Rights to be
distributed to such person pursuant to this Category.
In the event of an oversubscription for shares under the
provisions of this subparagraph, the shares available shall be
allocated first to permit each subscribing Supplemental Eligible
Account Holder to the extent possible, to purchase a number of shares
sufficient to make his total allocation (including the number of
shares, if any, allocated in accordance with Category No. 1) equal to
100 shares, and thereafter among each subscribing Supplemental Eligible
Account Holder pro rata in the same proportion that his Qualifying
Deposit bears to the total Qualifying Deposits of all subscribing
Supplemental Eligible Account Holders whose subscriptions remain
unsatisfied.
4. Preference Category No. 4: Other Members
Each Other Member shall receive non-transferable Subscription
Rights to subscribe for shares of Holding Company Conversion Stock
remaining after satisfying the subscriptions provided for under
Category Nos. 1 through 3 above, subject to the following conditions:
a. Each Other Member shall be entitled to subscribe
for an amount of shares equal to the greater of $100,000 or
one-tenth of one percent (.10%) of the total offering of
shares of common stock in the Conversion, to the extent that
Holding Company Conversion Stock is available.
b. In the event of an oversubscription for shares
under the provisions of this subparagraph, the shares
available shall be allocated among the subscribing Other
Members pro rata in the same proportion that his number of
votes on the Voting Record Date bears to the total number of
votes on the Voting Record Date of all subscribing Other
Members on such date. Such number of votes shall be determined
based on the Association's mutual charter and bylaws in effect
on the date of approval by members of this Plan of Conversion.
5. Preference Category No. 5: Directors, Officers and
Employees
Each director, Officer and employee of the Association as of
the date of the commencement of the Subscription Offering shall be
entitled to receive non-transferable Subscription Rights to purchase
shares of the Holding Company Conversion Stock to the
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extent that shares are available after satisfying subscriptions under
Category Nos. 1 through 4 above. The shares which may be purchased
under this Category are subject to the following conditions:
a. The total number of shares which may be purchased
under this Category may not exceed 24% of the number of shares
of Holding Company Conversion Stock.
b. The maximum amount of shares which may be
purchased under this Category by any Person is $100,000 of
Holding Company Conversion Stock. In the event of an
oversubscription for shares under the provisions of this
subparagraph, the shares available shall be allocated pro rata
among all subscribers in this Category.
C. Direct Community Offering
Any shares of Holding Company Conversion Stock not subscribed
for in the Subscription Offering may be offered for sale in a Direct
Community Offering. This will involve an offering of all unsubscribed
shares directly to the general public with a preference to those
natural persons residing in any county in which the Association has an
office. The Direct Community Offering, if any, shall be for a period of
not less than 20 days nor more than 45 days unless extended by the
Holding Company and the Association, and shall commence concurrently
with, during or promptly after the Subscription Offering. The purchase
price per share to the general public in a Direct Community Offering
shall be the same as the Actual Subscription Price. The Holding Company
Conversion Stock will be offered and sold in the Direct Community
Offering, in accordance with OTS regulations, so as to achieve the
widest distribution of the Holding Company Conversion Stock. In the
event that the number of shares subscribed for under this Section V.C.
exceeds the number of available shares, will be allocated (to the
extent shares remain available) first to cover orders of natural
persons residing in any county in which the Association has an office,
then to cover the orders of any other person subscribing for shares in
the Community Offering so that each such person may receive 1,000
shares, and thereafter, on a pro rata basis to such persons based on
the amount of their respective subscriptions.
Securities dealers may also be used to sell unsubscribed
shares. Commissions, fees and expenses of securities dealers in selling
unsubscribed shares shall be paid by the Association. The Association
may pay a reasonable consulting fee to investment banking firms that
provided assistance and advice in connection with the Direct Community
Offering.
The Association and the Holding Company, in their sole
discretion, may reject subscriptions, in whole or in part, received
from any Person under this Section V.C.
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If purchasers cannot be found for an insignificant residue of
unsubscribed shares from the general public, other purchase
arrangements will be made by the Board of Directors of the Association,
if possible. Such other purchase arrangements will be subject to the
approval of the OTS and may provide for purchases by directors,
officers, their Associates and other persons in excess of the
limitations provided in this Section V. If such other purchase
arrangements cannot be made, the Plan will terminate.
D. Additional Limitations Upon Purchases of Shares of Holding Company
Conversion Stock
The following additional limitations shall be imposed on all purchases
of Holding Company Conversion Stock in the Conversion:
1. No Person, by himself or herself, or with an Associate or
group of Persons acting in concert, may subscribe for or purchase in
the Conversion an amount of shares of Holding Company Conversion Stock
which exceeds $100,000 of Holding Company Conversion Stock offered in
the Conversion based on the appraisal range contained in the
Association's subscription prospectus (exclusive of any additional
shares that may be offered pursuant to an increase in such appraisal
range not requiring a resolicitation of subscribers). For purposes of
this paragraph, an Associate of a Person does not include a
Tax-Qualified or Non-Tax-Qualified Employee Plan in which the person
has a substantial beneficial interest or serves as a trustee or in a
similar fiduciary capacity. Moreover, for purposes of this paragraph,
shares held by one or more Tax-Qualified or Non-Tax- Qualified Employee
Plans attributed to a Person shall not be aggregated with shares
purchased directly by or otherwise attributable to that Person.
2. Directors and Officers and their Associates may not
purchase in all categories in the Conversion an aggregate of more than
34% of the Holding Company Conversion Stock. For purposes of this
paragraph, an Associate of a Person does not include any Tax- Qualified
Employee Plan. Moreover, any shares attributable to the Officers and
directors and their Associates, but held by one or more Tax-Qualified
Employee Plans shall not be included in calculating the number of
shares which may be purchased under the limitation in this paragraph.
3. The minimum number of shares of Holding Company Conversion
Stock that may be purchased by any Person in the Conversion is 25
shares, provided sufficient shares are available.
4. The Boards of Directors of the Holding Company and the
Association may, in their sole discretion, increase the maximum
purchase limitation referred to in subparagraph 1. herein up to 9.99%,
provided that orders for shares exceeding 5% of the shares being
offered in the Subscription Offering shall not exceed, in the
aggregate, 10% of the shares being offered in the Subscription
Offering. Requests to purchase additional shares of Holding Company
Conversion Stock under this provision will be allocated by the Boards
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of Directors on a pro rata basis giving priority in accordance with the
priority rights set forth in this Section V.
Depending upon market and financial conditions, the Boards of Directors
of the Holding Company and the Association, with the approval of the OTS and
without further approval of the Members, may increase or decrease any of the
above purchase limitations.
For purposes of this Section V, the directors of the Holding Company
and the Association shall not be deemed to be Associates or a group acting in
concert solely as a result of their serving in such capacities.
Each Person purchasing Holding Company Conversion Stock in the
Conversion shall be deemed to confirm that such purchase does not conflict with
the above purchase limitations.
E. Restrictions and Other Characteristics of Holding Company Conversion
Stock Being Sold
1. Transferability. Holding Company Conversion Stock purchased
by Persons other than directors and Officers of the Holding Company or
the Association will be transferable without restriction. Shares
purchased by directors or Officers shall not be sold or otherwise
disposed of for value for a period of one year from the date of
Conversion, except for any disposition of such shares (i) following the
death of the original purchaser, or (ii) resulting from an exchange of
securities in a merger or acquisition approved by the applicable
regulatory authorities. Any transfers that could result in a change of
control of the Association or the Holding Company or result in the
ownership by any Person or group acting in concert of more than 10% of
any class of the Association's or the Holding Company's equity
securities are subject to the prior approval of the OTS.
The certificates representing shares of Holding Company
Conversion Stock issued to directors and Officers shall bear a legend
giving appropriate notice of the one year holding period restriction.
Appropriate instructions shall be given to the transfer agent for such
stock with respect to the applicable restrictions relating to the
transfer of restricted stock. Any shares of common stock of the Holding
Company subsequently issued as a stock dividend, stock split, or
otherwise, with respect to any such restricted stock, shall be subject
to the same holding period restrictions for Holding Company or
Association directors and Officers as may be then applicable to such
restricted stock.
No director or Officer of the Holding Company or of the
Association, or Associate of such a director or Officer, shall purchase
any outstanding shares of capital stock of the Holding Company for a
period of three years following the Conversion without the prior
written approval of the OTS, except through a broker or dealer
registered with the SEC or in a "negotiated transaction" involving more
than one percent of the then-outstanding shares of common stock of the
Holding Company. As used herein, the term "negotiated transaction"
means a transaction in which the securities are offered and the terms
and arrangements relating to any sale are arrived at through direct
communications between
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the seller or any Person acting on its behalf and the purchaser or his
investment representative. The term "investment representative" shall
mean a professional investment advisor acting as agent for the
purchaser and independent of the seller and not acting on behalf of the
seller in connection with the transaction.
2. Repurchase and Dividend Rights. For a period of three years
following Conversion, the Converted Association shall not repurchase
any shares of its capital stock, except in the case of an offer to
repurchase on a pro rata basis made to all holders of capital stock of
the Converted Association. Any such offer shall be subject to the prior
approval of the OTS. A repurchase of qualifying shares of a director
shall not be deemed to be a repurchase for purposes of this Section
V.E.2.
Present regulations also provide that the Converted
Association may not declare or pay a cash dividend on or repurchase any
of its stock (i) if the result thereof would be to reduce the
regulatory capital of the Converted Association below the amount
required for the liquidation account to be established pursuant to
Section XIII hereof, and (ii) except in compliance with requirements of
Section 563.134 of the Rules and Regulations of the OTS.
The above limitations are subject to Section 563b.3(g)(3) of
the Rules and Regulations of the OTS, which generally provides that the
Converted Association may repurchase its capital stock provided (i) no
repurchases occur within one year following conversion, (ii)
repurchases during the second and third year after conversion are part
of an open market stock repurchase program that does not allow for a
repurchase of more than 5% of the Association's outstanding capital
stock during a twelve-month period without OTS approval, (iii) the
repurchases do not cause the Association to become undercapitalized,
and (iv) the Association provides notice to the OTS at least 10 days
prior to the commencement of a repurchase program and the OTS does not
object. In addition, the above limitations shall not preclude payments
of dividends or repurchases of capital stock by the Converted
Association in the event applicable federal regulatory limitations are
liberalized subsequent to OTS approval of the Plan.
3. Voting Rights. After Conversion, holders of deposit
accounts will not have voting rights in the Converted Association or
the Holding Company. Exclusive voting rights as to the Converted
Association will be vested in the Holding Company, as the sole
stockholder of the Converted Association. Voting rights as to the
Holding Company will be held exclusively by its stockholders.
F. Exercise of Subscription Rights; Order Forms
1. If the Subscription Offering occurs concurrently with the
solicitation of proxies for the Special Meeting, the subscription
prospectus and Order Form may be sent to each Eligible Account Holder,
Tax-Qualified Employee Plan, Supplemental Eligible Account Holder,
Other Member, and director, Officer and employee at their last known
address as shown on the records of the Association. However, the
Association may, and if the Subscription Offering commences after the
Special Meeting the Association shall, furnish
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a subscription prospectus and Order Form only to Eligible Account
Holders, Tax-Qualified Employee Plans, Supplemental Eligible Account
Holders, Other Members, and directors, Officers and employees who have
returned to the Association by a specified date prior to the
commencement of the Subscription Offering a post card or other written
communication requesting a subscription prospectus and Order Form. In
such event, the Association shall provide a postage-paid post card for
this purpose and make appropriate disclosure in its proxy statement for
the solicitation of proxies to be voted at the Special Meeting and/or
letter sent in lieu of the proxy statement to those Eligible Account
Holders, Tax-Qualified Employee Plans or Supplemental Eligible Account
Holders who are not Members on the Voting Record Date.
2. Each Order Form will be preceded or accompanied by a
subscription prospectus describing the Holding Company and the
Converted Association and the shares of Holding Company Conversion
Stock being offered for subscription and containing all other
information required by the OTS or the SEC or necessary to enable
Persons to make informed investment decisions regarding the purchase of
Holding Company Conversion Stock.
3. The Order Forms (or accompanying instructions) used for the
Subscription Offering will contain, among other things, the following:
(i) A clear and intelligible explanation of the
Subscription Rights granted under the Plan to Eligible Account
Holders, Tax-Qualified Employee Plans, Supplemental Eligible
Account Holders, Other Members, and directors, Officers and
employees;
(ii) A specified expiration date by which Order
Forms must be returned to and actually received by the
Association or its representative for purposes of exercising
Subscription Rights, which date will be not less than 20 days
after the Order Forms are mailed by the Association;
(iii) The Maximum Subscription Price to be paid for
each share subscribed for when the Order Form is returned;
(iv) A statement that 25 shares is the minimum
number of shares of Holding Company Conversion Stock that may
be subscribed for under the Plan;
(v) A specifically designated blank space for
indicating the number of shares being subscribed for;
(vi) A set of detailed instructions as to how to
complete the Order Form including a statement as to the
available alternative methods of payment for the shares being
subscribed for;
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(vii) Specifically designated blank spaces for dating
and signing the Order Form;
(viii) An acknowledgement that the subscriber has
received the subscription prospectus;
(ix) A statement of the consequences of failing to
properly complete and return the Order Form, including a
statement that the Subscription Rights will expire on the
expiration date specified on the Order Form unless such
expiration date is extended by the Holding Company and the
Association, and that the Subscription Rights may be exercised
only by delivering the Order Form, properly completed and
executed, to the Association or its representative by the
expiration date, together with required payment of the Maximum
Subscription Price for all shares of Holding Company
Conversion Stock subscribed for;
(x) A statement that the Subscription Rights are
non-transferable and that all shares of Holding Company
Conversion Stock subscribed for upon exercise of Subscription
Rights must be purchased on behalf of the Person exercising
the Subscription Rights for his own account; and
(xi) A statement that, after receipt by the
Association or its representative, a subscription may not be
modified, withdrawn or canceled without the consent of the
Association.
G. Method of Payment
Payment for all shares of Holding Company Conversion Stock subscribed
for, computed on the basis of the Maximum Subscription Price, must accompany all
completed Order Forms. Payment may be made in cash (if presented in Person), by
check or money order, or, if the subscriber has a Deposit Account in the
Association (including a certificate of deposit), the subscriber may authorize
the Association to charge the subscriber's account.
If a subscriber authorizes the Association to charge his or her
account, the funds will continue to earn interest, but may not be used by the
subscriber until all Holding Company Conversion Stock has been sold or the Plan
of Conversion is terminated, whichever is earlier. The Association will allow
subscribers to purchase shares by withdrawing funds from certificate accounts
without the assessment of early withdrawal penalties with the exception of
prepaid interest in the form of promotional gifts. In the case of early
withdrawal of only a portion of such account, the certificate evidencing such
account shall be canceled if the remaining balance of the account is less than
the applicable minimum balance requirement, in which event the remaining balance
will earn interest at the passbook rate. This waiver of the early withdrawal
penalty is applicable only to withdrawals made in connection with the purchase
of Holding Company Conversion Stock under the Plan of Conversion. Interest will
also be paid, at not less than the then-current passbook rate, on all orders
paid in cash, by check or money order, from the date payment is received until
consummation of the Conversion. Payments made in cash, by check or
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money order will be placed by the Association in an escrow or other account
established specifically for this purpose.
In the event of an unfilled amount of any subscription order, the
Converted Association will make an appropriate refund or cancel an appropriate
portion of the related withdrawal authorization, after consummation of the
Conversion, including any difference between the Maximum Subscription Price and
the Actual Subscription Price (unless subscribers are afforded the right to
apply such difference to the purchase of additional whole shares). If for any
reason the Conversion is not consummated, purchasers will have refunded to them
all payments made and all withdrawal authorizations will be canceled in the case
of subscription payments authorized from accounts at the Association.
If any Tax-Qualified Employee Plans or Non-Tax-Qualified Employee Plans
subscribe for shares during the Subscription Offering, such plans will not be
required to pay for the shares subscribed for at the time they subscribe, but
may pay for such shares of Holding Company Conversion Stock subscribed for upon
consummation of the Conversion. In the event that, after the completion of the
Subscription Offering, the amount of shares to be issued is increased above the
maximum of the appraisal range included in the subscription prospectus, the
Tax-Qualified and Non-Tax-Qualified Employee Plans shall be entitled to increase
their subscriptions by a percentage equal to the percentage increase in the
amount of shares to be issued above the maximum of the appraisal range provided
that such subscriptions shall continue to be subject to applicable purchase
limits and stock allocation procedures.
H. Undelivered, Defective or Late Order Forms; Insufficient Payment
The Boards of Directors of the Holding Company and the Association
shall have the absolute right, in their sole discretion, to reject any Order
Form, including but not limited to, any Order Forms which (i) are not delivered
or are returned by the United States Postal Service (or the addressee cannot be
located); (ii) are not received back by the Association or its representative,
or are received after the termination date specified thereon; (iii) are
defectively completed or executed; (iv) are not accompanied by the total
required payment for the shares of Holding Company Conversion Stock subscribed
for (including cases in which the subscribers' Deposit Accounts or certificate
accounts are insufficient to cover the authorized withdrawal for the required
payment); or (v) are submitted by or on behalf of a Person whose representations
the Boards of Directors of the Holding Company and the Association believe to be
false or who they otherwise believe, either alone or acting in concert with
others, is violating, evading or circumventing, or intends to violate, evade or
circumvent, the terms and conditions of this Plan. In such event, the
Subscription Rights of the Person to whom such rights have been granted will not
be honored and will be treated as though such Person failed to return the
completed Order Form within the time period specified therein. The Association
may, but will not be required to, waive any irregularity relating to any Order
Form or require submission of corrected Order Forms or the remittance of full
payment for subscribed shares by such date as the Association may specify. The
interpretation of the Holding Company and the Association of the terms and
conditions of this Plan and of the proper completion of the Order Form will be
final, subject to the authority of the OTS.
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I. Member in Non-Qualified States or in Foreign Countries
The Holding Company and the Association will make reasonable efforts to
comply with the securities laws of all states in the United States in which
Persons entitled to subscribe for Holding Company Conversion Stock pursuant to
the Plan reside. However, no shares will be offered or sold under the Plan of
Conversion to any such Person who (1) resides in a foreign country or (2)
resides in a state of the United States in which a small number of Persons
otherwise eligible to subscribe for shares under the Plan of Conversion reside
or as to which the Holding Company and the Association determine that compliance
with the securities laws of such state would be impracticable for reasons of
cost or otherwise, including, but not limited to, a requirement that the Holding
Company or the Association or any of their officers, directors or employees
register, under the securities laws of such state, as a broker, dealer, salesman
or agent. No payments will be made in lieu of the granting of Subscription
Rights to any such Person.
VI. FEDERAL STOCK CHARTER AND BYLAWS
A. As part of the Conversion, the Association will take all appropriate
steps to amend its charter to read in the form of federal stock savings
institution charter as prescribed by the OTS. A copy of the proposed stock
charter is available upon request. By their approval of the Plan, the Members of
the Association will thereby approve and adopt such charter.
B. The Association will also take appropriate steps to amend its bylaws
to read in the form prescribed by the OTS for a federal stock savings
institution. A copy of the proposed federal stock bylaws is available upon
request.
C. The effective date of the adoption of the Association's federal
stock charter and bylaws shall be the date of the issuance and sale of the
Holding Company Conversion Stock as specified by the OTS.
VII. HOLDING COMPANY CERTIFICATE OF INCORPORATION
A copy of the proposed certificate of incorporation of the Holding
Company will be made available from the Association upon request.
VIII. DIRECTORS OF THE CONVERTED ASSOCIATION
Each Person serving as a member of the Board of Directors of the
Association at the time of the Conversion will thereupon become a director of
the Converted Association.
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IX. STOCK OPTION AND INCENTIVE PLAN AND RECOGNITION AND RETENTION PLAN
In order to provide an incentive for directors, Officers and employees
of the Holding Company and its subsidiaries (including the Association), the
Board of Directors of the Holding Company intends to adopt, subject to
shareholder approval, a stock option and incentive plan and a recognition and
retention plan as permitted by applicable regulation.
X. CONTRIBUTIONS TO TAX-QUALIFIED EMPLOYEE PLANS
The Converted Association and the Holding Company may in their
discretion make scheduled contributions to any Tax-Qualified Employee Plans,
provided that any such contributions which are for the acquisition of Holding
Company Conversion Stock, or the repayment of debt incurred for such an
acquisition, do not cause the Converted Association to fail to meet its
regulatory capital requirements.
XI. SECURITIES REGISTRATION AND MARKET MAKING
Promptly following the Conversion, the Holding Company will register
its stock with the SEC pursuant to the Exchange Act. In connection with the
registration, the Holding Company will undertake not to deregister such stock,
without the approval of the OTS, for a period of three years thereafter.
The Holding Company shall use its best efforts to encourage and assist
two or more Market Makers to establish and maintain a market for its common
stock promptly following Conversion. The Holding Company will also use its best
efforts to cause its common stock to be quoted on the National Association of
Securities Dealers, Inc. Automated Quotations System or to be listed on a
national or regional securities exchange.
XII. STATUS OF SAVINGS ACCOUNTS AND LOANS SUBSEQUENT TO CONVERSION
Each Deposit Account holder shall retain, without payment, a
withdrawable Deposit Account or Accounts in the Converted Association, equal in
amount to the withdrawable value of such account holder's Deposit Account or
Accounts prior to Conversion. All Deposit Accounts will continue to be insured
by the Federal Deposit Insurance Corporation up to the applicable limits of
insurance coverage, and shall be subject to the same terms and conditions
(except as to voting and liquidation rights) as such Deposit Account in the
Association at the time of the Conversion. All loans shall retain the same
status after Conversion as these loans had prior to Conversion (except as to
voting rights, if any).
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XIII. LIQUIDATION ACCOUNT
For purposes of granting to Eligible Account Holders and Supplemental
Eligible Account Holders who continue to maintain Deposit Accounts at the
Converted Association a priority in the event of a complete liquidation of the
Converted Association, the Converted Association will, at the time of
Conversion, establish a liquidation account in an amount equal to the net worth
of the Association as shown on its latest statement of financial condition
contained in the final offering circular used in connection with the Conversion.
The creation and maintenance of the liquidation account will not operate to
restrict the use or application of any of the regulatory capital accounts of the
Converted Association; provided, however, that such regulatory capital accounts
will not be voluntarily reduced below the required dollar amount of the
liquidation account. Each Eligible Account Holder and Supplemental Eligible
Account Holder shall, with respect to the Deposit Account held, have a related
inchoate interest in a portion of the liquidation account balance ("subaccount
balance").
The initial subaccount balance of a Deposit Account held by an Eligible
Account Holder or Supplemental Eligible Account Holder shall be determined by
multiplying the opening balance in the liquidation account by a fraction of
which the numerator is the amount of the Qualifying Deposit in the Deposit
Account on the Eligibility Record Date or the Supplemental Eligibility Record
Date and the denominator is the total amount of the Qualifying Deposits of all
Eligible Account Holders and Supplemental Eligible Account Holders on such
record dates in the Association. Such initial subaccount balance shall not be
increased, and it shall be subject to downward adjustment as provided below.
If the deposit balance in any Deposit Account of an Eligible Account
Holder or Supplemental Eligible Account Holder at the close of business on any
annual closing date subsequent to the record date is less than the lesser of (i)
the deposit balance in such Deposit Account at the close of business on any
other annual closing date subsequent to the Eligibility Record Date or the
Supplemental Eligibility Record Date or (ii) the amount of the Qualifying
Deposit in such Deposit Account on the Eligibility Record Date or Supplemental
Eligibility Record Date, the subaccount balance shall be reduced in an amount
proportionate to the reduction in such deposit balance. In the event of a
downward adjustment, the subaccount balance shall not be subsequently increased,
notwithstanding any increase in the deposit balance of the related Deposit
Account. If all funds in such Deposit Account are withdrawn, the related
subaccount balance shall be reduced to zero.
In the event of a complete liquidation of the Association (and only in
such event), each Eligible Account Holder and Supplemental Eligible Account
Holder shall be entitled to receive a liquidation distribution from the
liquidation account in the amount of the then-current adjusted subaccount
balances for Deposit Accounts then held before any liquidation distribution may
be made to stockholders. No merger, consolidation, bulk purchase of assets with
assumptions of Deposit Accounts and other liabilities, or similar transactions
with another institution the accounts of which are insured by the Federal
Deposit Insurance Corporation, shall be considered to be a complete liquidation.
In such transactions, the liquidation account shall be assumed by the surviving
institution.
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XIV. RESTRICTIONS ON ACQUISITION OF CONVERTED ASSOCIATION
Regulations of the OTS limit acquisitions, and offers to acquire,
direct or indirect beneficial ownership of more than 10% of any class of an
equity security of the Converted Association or the Holding Company. In
addition, consistent with the regulations of the OTS, the charter of the
Converted Association shall provide that for a period of five years following
completion of the Conversion: (i) no Person (i.e., no individual, group acting
in concert, corporation, partnership, association, joint stock company, trust,
or unincorporated organization or similar company, syndicate, or any other group
formed for the purpose of acquiring, holding or disposing of securities of an
insured institution) shall directly or indirectly offer to acquire or acquire
beneficial ownership of more than 10% of any class of the Association's equity
securities. Shares beneficially owned in violation of this charter provision
shall not be counted as shares entitled to vote and shall not be voted by any
Person or counted as voting shares in connection with any matter submitted to
the shareholders for a vote. This limitation shall not apply to any offer to
acquire or acquisition of beneficial ownership of more than 10% of the common
stock of the Association by a corporation whose ownership is or will be
substantially the same as the ownership of the Association, provided that the
offer or acquisition is made more than one year following the date of completion
of the Conversion; (ii) shareholders shall not be permitted to cumulate their
votes for elections of directors; and (iii) special meetings of the shareholders
relating to changes in control or amendment of the charter may only be called by
the Board of Directors.
XV. AMENDMENT OR TERMINATION OF PLAN
If necessary or desirable, the Plan may be amended at any time prior to
submission of the Plan and proxy materials to the Members by a two-thirds vote
of the respective Boards of Directors of the Holding Company and the
Association. After submission of the Plan and proxy materials to the Members,
the Plan may be amended by a two-thirds vote of the respective Boards of
Directors of the Holding Company and the Association only with the concurrence
of the OTS. In the event that the Association determines that for tax purposes
or otherwise it is in the best interest of the Association to convert from a
federal mutual to a federal stock institution without the concurrent formation
of a holding company, the Plan may be substantively amended, with OTS approval,
in such respects as the Board of Directors of the Association deems appropriate
to reflect such change from a holding company conversion to a direct conversion.
In the event the Plan is so amended, common stock of the Association will be
substituted for Holding Company Conversion Stock in the Subscription and Direct
Community Offerings, and subscribers will be resolicited as described in Section
V hereof. Any amendments to the Plan (including amendments to reflect the
elimination of the concurrent holding company formation) made after approval by
the Members with the concurrence of the OTS shall not necessitate further
approval by the Members unless otherwise required.
The Plan may be terminated by a two-thirds vote of the Association's
Board of Directors at any time prior to the Special Meeting of Members, and at
any time following such Special Meeting with the concurrence of the OTS. In its
discretion, the Board of Directors of the Association may modify or terminate
the Plan upon the order or with the approval of the OTS and without further
approval by Members. The Plan shall terminate if the sale of all shares of
Holding
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Company Conversion Stock is not completed within 24 months of the date of the
Special Meeting. A specific resolution approved by a majority of the Board of
Directors of the Association is required in order for the Association to
terminate the Plan prior to the end of such 24 month period.
XVI. EXPENSES OF THE CONVERSION
The Holding Company and the Association shall use their best efforts to
assure that expenses incurred by them in connection with the Conversion shall be
reasonable.
XVII. TAX RULING
Consummation of the Conversion is expressly conditioned upon prior
receipt of either a ruling of the United States Internal Revenue Service or an
opinion of tax counsel with respect to federal taxation, and either a ruling of
the Maryland taxation authorities or an opinion of tax counsel or other tax
advisor with respect to Maryland taxation, to the effect that consummation of
the transactions contemplated herein will not be taxable to the Holding Company
or the Association.
XVIII. EXTENSION OF CREDIT FOR PURCHASE OF STOCK
The Association may not knowingly loan funds or otherwise extend credit
to any Person to purchase in the Conversion shares of Holding Company Conversion
Stock.
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EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF THE HOLDING COMPANY
<PAGE>
CERTIFICATE OF INCORPORATION
OF
WYMAN PARK BANCORPORATION, INC.
FIRST: The name of the Corporation is Wyman Park Bancorporation, Inc.
(hereinafter sometimes referred to as the "Corporation").
SECOND: The address of the registered office of the Corporation in the
State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City
of Wilmington, County of New Castle. The name of the registered agent at that
address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of Delaware.
FOURTH:
A. The total number of shares of all classes of stock which the
Corporation shall have the authority to issue is two million five hundred
thousand (2,500,000) consisting of:
1. Five hundred thousand (500,000) shares of preferred stock, par value one
cent ($.01) per share (the "Preferred Stock"); and
2. Two million (2,000,000) shares of common stock, par value one cent
($.01) per share (the "Common Stock").
B. The Board of Directors is hereby expressly authorized, subject to
any limitations prescribed by law, to provide for the issuance of the shares of
Preferred Stock in series, and by filing a certificate pursuant to the
applicable law of the State of Delaware (such certificate being hereinafter
referred to as a "Preferred Stock Designation"), to establish from time to time
the number of shares to be included in each such series, and to fix the
designation, powers, preferences and rights of the shares of each such series
and any qualifications, limitations or restrictions thereof. The number of
authorized shares of the Preferred Stock may be increased or decreased (but not
below the number of shares thereof then outstanding) by the affirmative vote of
the holders of a majority of the Common Stock, without a vote of the holders of
the Preferred Stock, or of any series thereof, unless a vote of any such holders
is required pursuant to the terms of any Preferred Stock Designation.
C.1. Notwithstanding any other provision of this Certificate of
Incorporation, in no event shall any record owner of any outstanding Common
Stock which is beneficially owned, directly or indirectly, by a person who, as
of any record date for the determination of stockholders entitled to vote on any
matter, beneficially owns in excess of 10% of the then-outstanding shares of
Common Stock (the "Limit"), be entitled, or permitted to any vote in respect of
the shares held in excess of the Limit. The number of votes which may be cast by
any record owner by virtue of the provisions hereof in respect of Common Stock
beneficially owned by such person owning shares in excess of the Limit shall be
a number equal to the total number of votes which a single record owner of all
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Common Stock owned by such person would be entitled to cast, multiplied by a
fraction, the numerator of which is the number of shares of such class or series
beneficially owned by such person and owned of record by such record owner and
the denominator of which is the total number of shares of Common Stock
beneficially owned by such person owning shares in excess of the Limit.
C.2. The following definitions shall apply to this Section C of this
Article FOURTH:
(a) An "affiliate" of a specified person shall mean 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.
(b) "Beneficial ownership" shall be determined pursuant to Rule 13d-3 of
the General Rules and Regulations under the Securities Exchange Act of
1934 (or any successor rule or statutory provision), or, if said Rule
13d-3 shall be rescinded and there shall be no successor rule or
statutory provision thereto, pursuant to said Rule 13d-3 as in effect
on October 31, 1994; provided, however, that a person shall, in any
event, also be deemed the "beneficial owner" of any Common Stock:
(1) which such person or any of its affiliates beneficially owns,
directly or indirectly; or
(2) which such person or any of its affiliates has (i) the right
to acquire (whether such right is exercisable immediately or
only after the passage of time), pursuant to any agreement,
arrangement or understanding (but shall not be deemed to be
the beneficial owner of any voting shares solely by reason of
an agreement, contract, or other arrangement with this
Corporation to effect any transaction which is described in
any one or more of the clauses of Section A of Article EIGHTH)
or upon the exercise of conversion rights, exchange rights,
warrants, or options or otherwise, or (ii) sole or shared
voting or investment power with respect thereto pursuant to
any agreement, arrangement, understanding, relationship or
otherwise (but shall not be deemed to be the beneficial owner
of any voting shares solely by reason of a revocable proxy
granted for a particular meeting of stockholders, pursuant to
a public solicitation of proxies for such meeting, with
respect to shares of which neither such person nor any such
affiliate is otherwise deemed the beneficial owner); or
(3) which are beneficially owned, directly or indirectly, by any
other person with which such first mentioned person or any of
its affiliates acts as a partnership, limited partnership,
syndicate or other group pursuant to any agreement,
arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any shares of capital stock of
this Corporation;
and provided further, however, that (1) no director or officer of this
Corporation (or any affiliate of any such director or officer) shall,
solely by reason of any or all of such directors or officers acting in
their capacities as such, be deemed, for any purposes hereof, to
beneficially own any Common Stock beneficially owned by any other such
director or officer (or any affiliate thereof), and (2) neither any
employee stock ownership or similar plan of
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this Corporation or any subsidiary of this Corporation nor any trustee
with respect thereto (or any affiliate of such trustee) shall, solely
by reason of such capacity of such trustee, be deemed, for any purposes
hereof, to beneficially own any Common Stock held under any such plan.
For purposes of computing the percentage beneficial ownership of Common
Stock of a person, the outstanding Common Stock shall include shares
deemed owned by such person through application of this subsection but
shall not include any other Common Stock which may be issuable by this
Corporation pursuant to any agreement, or upon exercise of conversion
rights, warrants or options, or otherwise. For all other purposes, the
outstanding Common Stock shall include only Common Stock then
outstanding and shall not include any Common Stock which may be
issuable by this Corporation pursuant to any agreement, or upon the
exercise of conversion rights, warrants or options, or otherwise.
(c) A "person" shall mean any individual, firm, corporation, or other
entity.
(d) The Board of Directors shall have the power to construe and apply the
provisions of this section and to make all determinations necessary or
desirable to implement such provisions, including but not limited to
matters with respect to (1) the number of shares of Common Stock
beneficially owned by any person, (2) whether a person is an affiliate
of another, (3) whether a person has an agreement, arrangement, or
understanding with another as to the matters referred to in the
definition of beneficial ownership, (4) the application of any other
definition or operative provision of this Section to the given facts,
or (5) any other matter relating to the applicability or effect of
this Section.
C.3. The Board of Directors shall have the right to demand that any
person who is reasonably believed to beneficially own Common Stock in excess of
the Limit (or holds of record Common Stock beneficially owned by any person in
excess of the Limit) (a "Holder in Excess") supply the Corporation with complete
information as to (1) the record owner(s) of all shares beneficially owned by
such Holder in Excess, and (2) any other factual matter relating to the
applicability or effect of this section as may reasonably be requested of such
Holder in Excess. The Board of Directors shall further have the right to receive
from any Holder in Excess reimbursement for all expenses incurred by the Board
in connection with its investigation of any matters relating to the
applicability or effect of this section on such Holder in Excess, to the extent
such investigation is deemed appropriate by the Board of Directors as a result
of the Holder in Excess refusing to supply the Corporation with the information
described in the previous sentence.
C.4. Except as otherwise provided by law or expressly provided in this
Section C, the presence, in person or by proxy, of the holders of record of
shares of capital stock of the Corporation entitling the holders thereof to cast
one-third of the votes (after giving effect, if required, to the provisions of
this Section) entitled to be cast by the holders of shares of capital stock of
the Corporation entitled to vote shall constitute a quorum at all meetings of
the stockholders, and every reference in this Certificate of Incorporation to a
majority or other proportion of capital stock (or the holders thereof) for
purposes of determining any quorum requirement or any requirement for
stockholder consent or approval shall be deemed to refer to such majority or
other proportion of the votes (or the holders thereof) then entitled to be cast
in respect of such capital stock.
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C.5. Any constructions, applications, or determinations made by the
Board of Directors, pursuant to this Section in good faith and on the basis of
such information and assistance as was then reasonably available for such
purpose, shall be conclusive and binding upon the Corporation and its
stockholders.
C.6. In the event any provision (or portion thereof) of this Section C
shall be found to be invalid, prohibited or unenforceable for any reason, the
remaining provisions (or portions thereof) of this Section shall remain in full
force and effect, and shall be construed as if such invalid, prohibited or
unenforceable provision had been stricken herefrom or otherwise rendered
inapplicable, it being the intent of this Corporation and its stockholders that
each such remaining provision (or portion thereof) of this Section C remain, to
the fullest extent permitted by law, applicable and enforceable as to all
stockholders, including stockholders owning an amount of stock over the Limit,
notwithstanding any such finding.
FIFTH: The following provisions are inserted for the management of the
business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:
A. The business and affairs of the Corporation shall be managed by or under
the direction of the Board of Directors. In addition to the powers and
authority expressly conferred upon them by Statute or by this
Certificate of Incorporation or the By-laws of the Corporation, the
directors are hereby empowered to exercise all such powers and do all
such acts and things as may be exercised or done by the Corporation.
B. The directors of the Corporation need not be elected by written ballot
unless the By-laws so provide.
C. Subject to the rights of holders of any class or series of Preferred
Stock, any action required or permitted to be taken by the stockholders
of the Corporation must be effected at a duly called annual or special
meeting of stockholders of the Corporation and may not be effected by
any consent in writing by such stockholders.
D. Subject to the rights of holders of any class or series of Preferred
Stock, special meetings of stockholders of the Corporation may be called
only by the Board of Directors pursuant to a resolution adopted by a
majority of the total number of directors which the Corporation would
have if there were no vacancies on the Board of Directors (the "Whole
Board").
E. Stockholders shall not be permitted to cumulate their votes for the
election of directors.
SIXTH:
A. The number of directors shall be fixed from time to time exclusively
by the Board of Directors pursuant to a resolution adopted by a majority of the
Whole Board. The directors, other than those who may be elected by the holders
of any class or series of Preferred Stock, shall be
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<PAGE>
divided into three classes, as nearly equal in number as reasonably possible,
with the term of office of the first class to expire at the conclusion of the
first annual meeting of stockholders, the term of office of the second class to
expire at the conclusion of the annual meeting of stockholders one year
thereafter and the term of office of the third class to expire at the conclusion
of the annual meeting of stockholders two years thereafter, with each director
to hold office until his or her successor shall have been duly elected and
qualified. At each annual meeting of stockholders following such initial
classification and election, directors elected to succeed those directors whose
terms expire shall be elected for a term of office to expire at the third
succeeding annual meeting of stockholders after their election, with each
director to hold office until his or her successor shall have been duly elected
and qualified.
B. Subject to the rights of the holders of any series of Preferred
Stock then outstanding, newly created directorships resulting from any increase
in the authorized number of directors or any vacancies in the Board of Directors
resulting from death, resignation, retirement, disqualification, removal from
office or other cause may be filled only by a majority vote of the directors
then in office, though less than a quorum, and directors so chosen shall hold
office for a term expiring at the annual meeting of stockholders at which the
term of office of the class to which they have been elected expires, and until
such director's successor shall have been duly elected and qualified. No
decrease in the number of directors constituting the Board of Directors shall
shorten the term of any incumbent director.
C. Advance notice of stockholder nominations for the election of
directors and of business to be brought by stockholders before any meeting of
the stockholders of the Corporation shall be given in the manner provided in the
By-laws of the Corporation.
D. Subject to the rights of the holders of any series of Preferred
Stock then outstanding, any directors, or the entire Board of Directors, may be
removed from office at any time, but only for cause and only by the affirmative
vote of the holders of at least 80% of the voting power of all of the
then-outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors (after giving effect to the provisions of
Article FOURTH of this Certificate of Incorporation), voting together as a
single class.
SEVENTH: The Board of Directors is expressly empowered to adopt, amend
or repeal the By-laws of the Corporation. Any adoption, amendment or repeal of
the By-laws of the Corporation by the Board of Directors shall require the
approval of a majority of the Whole Board. The stockholders shall also have
power to adopt, amend or repeal the By-laws of the Corporation. In addition to
any vote of the holders of any class or series of stock of this Corporation
required by law or by this Certificate of Incorporation, the affirmative vote of
the holders of at least 80% of the voting power of all of the then-outstanding
shares of the capital stock of the Corporation entitled to vote generally in the
election of directors (after giving effect to the provisions of Article FOURTH
hereof), voting together as a single class, shall be required to adopt, amend or
repeal any provisions of the By-laws of the Corporation.
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EIGHTH:
A. In addition to any affirmative vote required by law or this
Certificate of Incorporation, and except as otherwise expressly provided in this
Section:
1. any merger or consolidation of the Corporation or any Subsidiary (as
hereinafter defined) with (i) any Interested Stockholder (as hereinafter
defined) or (ii) any other corporation (whether or not itself an
Interested Stockholder) which is, or after such merger or consolidation
would be, an Affiliate (as hereinafter defined) of an Interested
Stockholder; or
2. any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions) to or with
any Interested Stockholder, or any Affiliate of any Interested
Stockholder, of any assets of the Corporation or any Subsidiary having
an aggregate Fair Market Value (as hereafter defined) equaling or
exceeding 25% or more of the combined assets of the Corporation and its
Subsidiaries; or
3. the issuance or transfer by the Corporation or any Subsidiary (in one
transaction or a series of transactions) of any securities of the
Corporation or any Subsidiary to any Interested Stockholder or any
Affiliate of any Interested Stockholder in exchange for cash, securities
or other property (or a combination thereof) having an aggregate Fair
Market Value equaling or exceeding 25% of the combined assets of the
Corporation and its Subsidiaries except pursuant to an employee benefit
plan of the Corporation or any Subsidiary thereof; or
4. the adoption of any plan or proposal for the liquidation or dissolution
of the Corporation proposed by or on behalf of any Interested
Stockholder or any Affiliate of any Interested Stockholder; or
5. any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any
other transaction (whether or not with or into or otherwise involving
an Interested Stockholder) which has the effect, directly or
indirectly, of increasing the proportionate share of the outstanding
shares of any class of equity or convertible securities of the
Corporation or any Subsidiary which is directly or indirectly owned by
any Interested Stockholder or any Affiliate of any Interested
Stockholder (a "Disproportionate Transaction"); provided, however,
that no such transaction shall be deemed a Disproportionate
Transaction if the increase in the proportionate ownership of the
Interested Stockholder or Affiliate as a result of such transaction is
no greater than the increase experienced by the other stockholders
generally;
shall require the affirmative vote of the holders of at least 80% of the voting
power of the then-outstanding shares of stock of the Corporation entitled to
vote in the election of directors (the "Voting Stock"), voting together as a
single class. Such affirmative vote shall be required notwithstanding the fact
that no vote may be required, or that a lesser percentage may be specified, by
law or by any other provisions of this Certificate of Incorporation or any
Preferred Stock Designation or in any agreement with any national securities
exchange or quotation system or otherwise.
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The term "Business Combination" as used in this Article EIGHTH shall
mean any transaction which is referred to in any one or more of paragraphs 1
through 5 of Section A of this Article EIGHTH.
B. The provisions of Section A of this Article EIGHTH shall not be
applicable to any particular Business Combination, and such Business Combination
shall require only the affirmative vote of the majority of the outstanding
shares of capital stock entitled to vote, or such vote as is required by law or
by this Certificate of Incorporation, if, in the case of any Business
Combination that does not involve any cash or other consideration being received
by the stockholders of the Corporation solely in their capacity as stockholders
of the Corporation, the condition specified in the following paragraph 1 is met
or, in the case of any other Business Combination, all of the conditions
specified in either of the following paragraphs 1 and 2 are met:
1. The Business Combination shall have been approved by a majority of the
Disinterested Directors (as hereinafter defined).
2. All of the following conditions shall have been met:
(a) The aggregate amount of the cash and the Fair Market Value as of
the date of the consummation of the Business Combination of
consideration other than cash to be received per share by the
holders of Common Stock in such Business Combination shall at
least be equal to the higher of the following:
I. (if applicable) the Highest Per Share Price,
including any brokerage commissions, transfer taxes
and soliciting dealers' fees, paid by the Interested
Stockholder or any of its Affiliates for any shares
of Common Stock acquired by it (X) within the
two-year period immediately prior to the first public
announcement of the proposal of the Business
Combination (the "Announcement Date"), or (Y) in the
transaction in which it became an Interested
Stockholder, whichever is higher.
II. the Fair Market Value per share of Common Stock on
the Announcement Date or on the date on which the
Interested Stockholder became an Interested
Stockholder (such latter date is referred to in this
Article EIGHTH as the "Determination Date"),
whichever is higher.
(b) The aggregate amount of the cash and the Fair Market Value as of
the date of the consummation of the Business Combination of
consideration other than cash to be received per share by
holders of shares of any class of outstanding Voting Stock other
than Common Stock shall be at least equal to the highest of the
following (it being intended that the requirements of this
subparagraph (b) shall be required to be met with respect to
every such class of outstanding Voting Stock, whether or not the
Interested Stockholder has previously acquired any shares of a
particular class of Voting Stock):
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I. (if applicable) the Highest Per Share Price (as
hereinafter defined), including any brokerage
commissions, transfer taxes and soliciting dealers'
fees, paid by the Interested Stockholder for any
shares of such class of Voting Stock acquired by it
(X) within the two-year period immediately prior to
the Announcement Date, or (Y) in the transaction in
which it became an Interested Stockholder, whichever
is higher;
II. (if applicable) the highest preferential amount per
share to which the holders of shares of such class of
Voting Stock are entitled in the event of any
voluntary or involuntary liquidation, dissolution or
winding up of the Corporation; and
III. the Fair Market Value per share of such class of
Voting Stock on the Announcement Date or on the
Determination Date, whichever is higher.
(c) The consideration to be received by holders of a particular class
of outstanding Voting Stock (including Common Stock) shall be in
cash or in the same form as the Interested Stockholder has
previously paid for shares of such class of Voting Stock. If the
Interested Stockholder has paid for shares of any class of Voting
Stock with varying forms of consideration, the form of
consideration to be received per share by holders of shares of
such class of Voting Stock shall be either cash or the form used
to acquire the largest number of shares of such class of Voting
Stock previously acquired by the Interested Stockholder. The
price determined in accordance with subparagraph B.2 of this
Article EIGHTH shall be subject to appropriate adjustment in the
event of any stock dividend, stock split, combination of shares
or similar event.
(d) After such Interested Stockholder has become an Interested
Stockholder and prior to the consummation of such Business
Combination; (i) except as approved by a majority of the
Disinterested Directors, there shall have been no failure to
declare and pay at the regular date therefor any full quarterly
dividends (whether or not cumulative) on any outstanding stock
having preference over the Common Stock as to dividends or
liquidation; (ii) there shall have been (X) no reduction in the
annual rate of dividends paid on the Common Stock (except as
necessary to reflect any subdivision of the Common Stock), except
as approved by a majority of the Disinterested Directors, and (Y)
an increase in such annual rate of dividends as necessary to
reflect any reclassification (including any reverse stock split),
recapitalization, reorganization or any similar transaction which
has the effect of reducing the number of outstanding shares of
Common Stock, unless the failure to so increase such annual rate
is approved by a majority of the Disinterested Directors; and
(iii) neither such Interested Stockholder nor any of its
Affiliates shall have become the beneficial owner of any
additional shares of Voting Stock except as part of the
transaction which results in such Interested Stockholder becoming
an Interested Stockholder.
(e) After such Interested Stockholder has become an Interested
Stockholder, such Interested Stockholder shall not have received
the benefit, directly or indirectly (except
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proportionately as a stockholder), of any loans, advances,
guarantees, pledges or other financial assistance or any tax
credits or other tax advantages provided by the Corporation,
whether in anticipation of or in connection with such Business
Combination or otherwise.
(f) A proxy or information statement describing the proposed
Business Combination and complying with the requirements of the
Securities Exchange Act of 1934 and the rules and regulations
thereunder (or any subsequent provisions replacing such Act,
rules or regulations) shall be mailed to stockholders of the
Corporation at least 30 days prior to the consummation of such
Business Combination (whether or not such proxy or information
statement is required to be mailed pursuant to such Act or
subsequent provisions).
C. For the purposes of this Article EIGHTH:
1. A "Person" shall include an individual, a group acting in concert, a
corporation, a partnership, an association, a joint venture, a pool, 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 securities.
2. "Interested Stockholder" shall mean any Person (other than the
Corporation or any holding company or Subsidiary thereof) who or which:
(a) is the beneficial owner, directly or indirectly, of more than
10% of the voting power of the outstanding Voting Stock; or
(b) is an Affiliate of the Corporation and at any time within the
two-year period immediately prior to the date in question was
the beneficial owner, directly or indirectly, of 10% or more
of the voting power of the then-outstanding Voting Stock; or
(c) is an assignee of or has otherwise succeeded to any shares of
Voting Stock which were at any time within the two-year period
immediately prior to the date in question beneficially owned
by any Interested Stockholder, if such assignment or
succession shall have occurred in the course of a transaction
or series of transactions not involving a public offering
within the meaning of the Securities Act of 1933.
3. A Person shall be a "beneficial owner" of any Voting Stock:
(a) which such Person or any of its Affiliates or Associates (as
hereinafter defined) beneficially owns, directly or indirectly
within the meaning of Rule 13d-3 under the Securities Exchange
Act of 1934, as in effect on October 31, 1994; or
(b) which such Person or any of its Affiliates or Associates has
(i) the right to acquire (whether such right is exercisable
immediately or only after the passage of time),
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pursuant to any agreement, arrangement or understanding or
upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise, or (ii) the right to vote
pursuant to any agreement, arrangement or understanding (but
neither such Person nor any such Affiliate or Associate shall
be deemed to be the beneficial owner of any shares of Voting
Stock solely by reason of a revocable proxy granted for a
particular meeting of stockholders, pursuant to a public
solicitation of proxies for such meeting, and with respect to
which shares neither such Person nor any such Affiliate or
Associate is otherwise deemed the beneficial owner); or
(c) which are beneficially owned, directly or indirectly within
the meaning of Rule 13d-3 under the Securities Exchange Act of
1934, as in effect on October 31, 1994, by any other Person
with which such Person or any of its Affiliates or Associates
has any agreement, arrangement or understanding for the
purposes of acquiring, holding, voting (other than solely by
reason of a revocable proxy as described in Subparagraph (b)
of this Paragraph 3) or in disposing of any shares of Voting
Stock;
provided, however, that, in the case of any employee stock ownership or
similar plan of the Corporation or of any Subsidiary in which the
beneficiaries thereof possess the right to vote any shares of Voting
Stock held by such plan, no such plan nor any trustee with respect
thereto (nor any Affiliate of such trustee), solely by reason of such
capacity of such trustee, shall be deemed, for any purposes hereof, to
beneficially own any shares of Voting Stock held under any such plan.
4. For the purpose of determining whether a Person is an Interested
Stockholder pursuant to Paragraph 2 of this Section C, the number of
shares of Voting Stock deemed to be outstanding shall include shares
deemed owned through application of Paragraph 3 of this Section C but
shall not include any other shares of Voting Stock which may be
issuable pursuant to any agreement, arrangement or understanding, or
upon exercise of conversion rights, warrants or options, or otherwise.
5. "Affiliate" and "Associate" shall have the respective meanings ascribed
to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as in effect on October 31, 1994.
6. "Subsidiary" means any corporation of which a majority of any class of
equity security is owned, directly or indirectly, by the Corporation;
provided, however, that for the purposes of the definition of
Interested Stockholder set forth in Paragraph 2 of this Section C, the
term "Subsidiary" shall mean only a corporation of which a majority of
each class of equity security is owned, directly or indirectly, by the
Corporation.
7. "Disinterested Director" means any member of the Board of Directors who
is unaffiliated with the Interested Stockholder and was a member of the
Board of Directors prior to the time that the Interested Stockholder
became an Interested Stockholder, and any director who is thereafter
chosen to fill any vacancy on the Board of Directors or who is elected
and who, in either event, is unaffiliated with the Interested
Stockholder, and in connection with his or
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her initial assumption of office is recommended for appointment or
election by a majority of Disinterested Directors then on the Board of
Directors.
8. "Fair Market Value" means: (a) in the case of stock, the highest
closing sales price of the stock during the 30-day period immediately
preceding the date in question of a share of such stock of the
National Association of Securities Dealers Automated Quotations
("NASDAQ") System or any system then in use, or, if such stock is
admitted to trading on a principal United States securities exchange
registered under the Securities Exchange Act of 1934, Fair Market
Value shall be the highest sale price reported during the 30-day
period preceding the date in question, or, if no such quotations are
available, the Fair Market Value on the date in question of a share of
such stock as determined by the Board of Directors in good faith, in
each case with respect to any class of stock, appropriately adjusted
for any dividend or distribution in shares of such stock or in
combination or reclassification of outstanding shares of such stock
into a smaller number of shares of such stock, and (b) in the case of
property other than cash or stock, the Fair Market Value of such
property on the date in question as determined by the Board of
Directors in good faith.
9. Reference to "Highest Per Share Price" shall in each case with respect
to any class of stock reflect an appropriate adjustment for any
dividend or distribution in shares of such stock or any stock split or
reclassification of outstanding shares of such stock into a greater
number of shares of such stock or any combination or reclassification
of outstanding shares of such stock into a smaller number of shares of
such stock.
10. In the event of any Business Combination in which the Corporation
survives, the phrase "consideration other than cash to be received" as
used in Subparagraphs (a) and (b) of Paragraph 2 of Section B of this
Article EIGHTH shall include the shares of Common Stock and/or the
shares of any other class of outstanding Voting Stock retained by the
holders of such shares.
D. A majority of the Disinterested Directors of the Corporation shall
have the power and duty to determine for the purposes of this Article EIGHTH, on
the basis of information known to them after reasonable inquiry, (a) whether a
person is an Interested Stockholder; (b) the number of shares of Voting Stock
beneficially owned by any person; (c) whether a person is an Affiliate or
Associate of another; and (d) whether the assets which are the subject of any
Business Combination have, or the consideration to be received for the issuance
or transfer of securities by the Corporation or any Subsidiary in any Business
Combination has an aggregate Fair Market Value equaling or exceeding 25% of the
combined assets of the Corporation and its Subsidiaries. A majority of the
Disinterested Directors shall have the further power to interpret all of the
terms and provisions of this Article EIGHTH.
E. Nothing contained in this Article EIGHTH shall be construed to
relieve any Interested Stockholder from any fiduciary obligation imposed by law.
F. Notwithstanding any other provisions of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser vote
or no vote, but in addition to any affirmative vote
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of the holders of any particular class or series of the Voting Stock required by
law, this Certificate of Incorporation or any Preferred Stock Designation, the
affirmative vote of the holders of at least 80% of the voting power of all of
the then-outstanding shares of the Voting Stock, voting together as a single
class, shall be required to alter, amend or repeal this Article EIGHTH.
NINTH: The Board of Directors of the Corporation, when evaluating any
offer of another Person (as defined in Article EIGHTH hereof) to (A) make a
tender or exchange offer for any equity security of the Corporation, (B) merge
or consolidate the Corporation with another corporation or entity or (C)
purchase or otherwise acquire all or substantially all of the properties and
assets of the Corporation, may, in connection with the exercise of its judgment
in determining what is in the best interest of the Corporation and its
stockholders, give due consideration to all relevant factors, including, without
limitation, the social and economic effect of acceptance of such offer on the
Corporation's present and future customers and employees and those of its
Subsidiaries (as defined in Article EIGHTH hereof); on the communities in which
the Corporation and its Subsidiaries operate or are located; on the ability of
the Corporation to fulfill its corporate objectives as a financial institution
holding company and on the ability of its subsidiary financial institution to
fulfill the objectives of a federally insured financial institution under
applicable statutes and regulations.
TENTH:
A. Except as set forth in Section B of this Article TENTH, in addition
to any affirmative vote of stockholders required by law or this Certificate of
Incorporation, any direct or indirect purchase or other acquisition by the
Corporation of any Equity Security (as hereinafter defined) of any class from
any Interested Person (as hereinafter defined) shall require the affirmative
vote of the holders of at least 80% of the Voting Stock of the Corporation that
is not beneficially owned (for purposes of this Article TENTH beneficial
ownership shall be determined in accordance with Section C.2(b) of Article
FOURTH hereof) by such Interested Person, voting together as a single class.
Such affirmative vote shall be required notwithstanding the fact that no vote
may be required, or that a lesser percentage may be specified, by law or by any
other provisions of this Certificate of Incorporation or any Preferred Stock
Designation or in any agreement with any national securities exchange or
quotation system, or otherwise. Certain defined terms used in this Article TENTH
are as set forth in Section C below.
B. The provisions of Section A of this Article TENTH shall not be
applicable with respect to:
1. any purchase or other acquisition of securities made as part of a tender
or exchange offer by the Corporation or a Subsidiary (which term, as
used in this Article TENTH, is as defined in the first clause of Section
C.6 of Article EIGHTH hereof) of the Corporation to purchase securities
of the same class made on the same terms to all holders of such
securities and complying with the applicable requirements of the
Securities Exchange Act of 1934 and the rules and regulations thereunder
(or any subsequent provision replacing such Act, rules or regulations);
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2. any purchase or acquisition made pursuant to an open market purchase
program approved by a majority of the Board of Directors, including a
majority of the Disinterested Directors (which term, as used in this
Article TENTH, is as defined in Article EIGHTH hereof); or
3. any purchase or acquisition which is approved by a majority of the Board
of Directors, including a majority of the Disinterested Directors, and
which is made at no more than the Market Price (as hereinafter defined),
on the date that the understanding between the Corporation and the
Interested Person is reached with respect to such purchase (whether or
not such purchase is made or a written agreement relating to such
purchase is executed on such date), of shares of the class of Equity
Security to be purchased.
C. For the purposes of this Article TENTH:
1. The term Interested Person shall mean any Person (other than the
Corporation, Subsidiaries of the Corporation, pension, profit sharing,
employee stock ownership or other employee benefit plans of the
Corporation and its Subsidiaries, entities organized or established by
the Corporation or any of its Subsidiaries pursuant to the terms of such
plans and trustees and fiduciaries with respect to any such plan acting
in such capacity) that is the direct or indirect beneficial owner of 5%
or more of the Voting Stock of the Corporation, and any Affiliate or
Associate of any such person.
2. The Market Price of shares of a class of Equity Security on any day
shall mean the highest sale price of shares of such class of Equity
Security on such day, or, if that day is not a trading day, on the
trading day immediately preceding such day, on the national securities
exchange or the NASDAQ System or any other system then in use on which
such class of Equity Security is traded.
3. The term Equity Security shall mean any security described in Section
3(a)(11) of the Securities Exchange Act of 1934, as in effect on October
31, 1994, which is traded on a national securities exchange or the
NASDAQ System or any other system then in use.
4. For purposes of this Article TENTH, all references to the term
Interested Stockholder in the definition of Disinterested Director shall
be deemed to refer to the term Interested Person.
ELEVENTH:
A. Each person who was or is made a party or is threatened to be made a
party to or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (hereinafter a "proceeding"),
by reason of the fact that he or she is or was a director or an officer of the
Corporation or is or was serving at the request of the Corporation as a director
or officer of another corporation, including, without limitation, any Subsidiary
(as defined in Article EIGHTH herein), partnership, joint venture, trust or
other enterprise, including service with respect to an employee benefit plan
(hereinafter an "indemnitee"), whether the basis of such proceeding is alleged
action in an official capacity as a director or officer or in any other capacity
while serving as a director or officer, shall be indemnified and held harmless
by the Corporation to
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the fullest extent authorized by the Delaware General Corporation Law, as the
same exists or may hereafter be amended (but, in the case of any such amendment,
only to the extent that such amendment permits the Corporation to provide
broader indemnification rights than such law permitted the Corporation to
provide prior to such amendment), against all expense, liability and loss
(including attorneys' fees, judgments, fines, ERISA excise taxes or penalties
and amounts paid in settlement) reasonably incurred or suffered by such
indemnitee in connection therewith; provided, however, that, except as provided
in Section C hereof with respect to proceedings to enforce rights to
indemnification, the Corporation shall indemnify any such indemnitee in
connection with a proceeding (or part thereof) initiated by such indemnitee only
if such proceeding (or part thereof) was authorized by the Board of Directors of
the Corporation.
B. The right to indemnification conferred in Section A of this Article
shall include the right to be paid by the Corporation the expenses incurred in
defending any such proceeding in advance of its final disposition (hereinafter
an "advancement of expenses"); provided, however, that, if the Delaware General
Corporation Law requires, an advancement of expenses incurred by an indemnitee
in his or her capacity as a director or officer (and not in any other capacity
in which service was or is rendered by such indemnitee, including, without
limitation, service to an employee benefit plan) shall be made only upon
delivery to the Corporation of an undertaking (hereinafter an "undertaking"), by
or on behalf of such indemnitee, to repay all amounts so advanced if it shall
ultimately be determined by final judicial decision from which there is no
further right to appeal (hereinafter a "final adjudication"), that such
indemnitee is not entitled to be indemnified for such expenses under this
Section or otherwise. The rights to indemnification and to the advancement of
expenses conferred in Sections A and B of this Article shall be contract rights
and such rights shall continue as to an indemnitee who has ceased to be a
director or officer and shall inure to the benefit of the indemnitee's heirs,
executors and administrators.
C. If a claim under Section A or B of this Article is not paid in full
by the Corporation within sixty days after a written claim has been received by
the Corporation, except in the case of a claim for an advancement of expenses,
in which case the applicable period shall be twenty days, the indemnitee may at
any time thereafter bring suit against the Corporation to recover the unpaid
amount of the claim. If successful in whole or in part in any such suit, or in a
suit brought by the Corporation to recover an advancement of expenses pursuant
to the terms of an undertaking, the indemnitee shall also be entitled to be paid
the expense of prosecuting or defending such suit. In (i) any suit brought by
the indemnitee to enforce a right to indemnification hereunder (but not in a
suit brought by the indemnitee to enforce a right to an advancement of expenses)
it shall be a defense that, and (ii) in any suit by the Corporation to recover
an advancement of expenses pursuant to the terms of an undertaking the
Corporation shall be entitled to recover such expenses upon a final adjudication
that, the indemnitee has not met any applicable standard for indemnification set
forth in the Delaware General Corporation Law. Neither the failure of the
Corporation (including its Board of Directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
suit that indemnification of the indemnitee is proper in the circumstances
because the indemnitee has met the applicable standard of conduct set forth in
the Delaware General Corporation Law, nor an actual determination by the
Corporation (including its Board of Directors, independent legal counsel, or its
stockholders) that the indemnitee has not met such applicable standard of
conduct, shall create a presumption that the indemnitee has not met the
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applicable standard of conduct or, in the case of such a suit brought by the
indemnitee, be a defense to such suit. In any suit brought by the indemnitee to
enforce a right to indemnification or to an advancement of expenses hereunder,
or by the Corporation to recover an advancement of expenses pursuant to the
terms of an undertaking, the burden of proving that the indemnitee is not
entitled to be indemnified, or to such advancement of expenses, under this
Article or otherwise shall be on the Corporation.
D. The rights to indemnification and to the advancement of expenses
conferred in this Article shall not be exclusive of any other right which any
person may have or hereafter acquire under any statute, the Corporation's
Certificate of Incorporation, By-laws, agreement, vote of stockholders or
Disinterested Directors or otherwise.
E. The Corporation may maintain insurance, at its expense, to protect
itself and any director, officer, employee or agent of the Corporation or
another corporation, partnership, joint venture, trust or other enterprise
against any expense, liability or loss, whether or not the Corporation would
have the power to indemnify such person against such expense, liability or loss
under the Delaware General Corporation Law.
F. The Corporation may, to the extent authorized from time to time by a
majority vote of the disinterested directors, grant rights to indemnification
and to the advancement of expenses to any employee or agent of the Corporation
to the fullest extent of the provisions of this Article with respect to the
indemnification and advancement of expenses of directors and officers of the
Corporation.
TWELFTH: A director of this Corporation shall not be personally liable
to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director derived an
improper personal benefit. If the Delaware General Corporation Law is hereafter
amended to further eliminate or limit the personal liability of directors, then
the liability of a director of the Corporation shall be eliminated or limited to
the fullest extent permitted by the Delaware General Corporation Law, as so
amended.
Any repeal or modification of the foregoing paragraph by the
stockholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification.
THIRTEENTH: The Corporation reserves the right to amend or repeal any
provision contained in this Certificate of Incorporation in the manner
prescribed by the laws of the State of Delaware and all rights conferred upon
stockholders are granted subject to this reservation; provided, however, that,
notwithstanding any other provision of this Certificate of Incorporation or any
provision of law which might otherwise permit a lesser vote or no vote, but in
addition to any vote of the holders of any class or series of the stock of this
Corporation required by law or by this
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Certificate of Incorporation, the affirmative vote of the holders of at least
80% of the voting power of all of the then-outstanding shares of the capital
stock of the Corporation entitled to vote generally in the election of directors
(after giving effect to the provisions of Article FOURTH), voting together as a
single class, shall be required to amend or repeal this Article THIRTEENTH,
clauses B or C of Article FOURTH, clauses C or D of Article FIFTH, Article
SIXTH, Article SEVENTH, Article EIGHTH, Article TENTH or Article ELEVENTH.
FOURTEENTH: The name and mailing address of the sole incorporator are
as follows:
NAME MAILING ADDRES
Ernest A. Moretti Wyman Park Bancorporation, Inc.
11 West Ridgely Road
Lutherville, Maryland 21904
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I, THE UNDERSIGNED, being the incorporator, for the purpose of forming
a corporation under the laws of the State of Delaware, do make, file and record
this Certificate of Incorporation, do certify that the facts herein stated are
true, and, accordingly, have hereto set my hand this 17th day of September,
1997.
/s/ Ernest A. Moretti
-------------------------------
Ernest A. Moretti, Incorporator
17
EXHIBIT 3.2
BYLAWS
OF THE HOLDING COMPANY
<PAGE>
WYMAN PARK BANCORPORATION, INC.
BY-LAWS
ARTICLE I
STOCKHOLDERS
Section 1. Annual Meeting.
An annual meeting of the stockholders, for the election of directors to
succeed those whose terms expire and for the transaction of such other business
as may properly come before the meeting, shall be held at such place, on such
date, and at such time as the Board of Directors shall each year fix.
Section 2. Special Meetings.
Subject to the rights of the holders of any class or series of
preferred stock of the Corporation, special meetings of stockholders of the
Corporation may be called only by the Board of Directors pursuant to a
resolution adopted by a majority of the total number of directors which the
Corporation would have if there were no vacancies on the Board of Directors
(hereinafter the "Whole Board").
Section 3. Notice of Meetings.
Written notice of the place, date, and time of all meetings of the
stockholders shall be given, not less than ten (10) nor more than sixty (60)
days before the date on which the meeting is to be held, to each stockholder
entitled to vote at such meeting, except as otherwise provided herein or
required by law (meaning, here and hereinafter, as required from time to time by
the Delaware General Corporation Law or the Certificate of Incorporation of the
Corporation).
When a meeting is adjourned to another place, date or time, written
notice need not be given of the adjourned meeting if the place, date and time
thereof are announced at the meeting at which the adjournment is taken;
provided, however, that if the date of any adjourned meeting is more than thirty
(30) days after the date for which the meeting was originally noticed, or if a
new record date is fixed for the adjourned meeting, written notice of the place,
date and time of the adjourned meeting shall be given in conformity herewith. At
any adjourned meeting, any business may be transacted which might have been
transacted at the original meeting.
Section 4. Quorum.
At any meeting of the stockholders, the holders of at least one-third
of all of the shares of the stock entitled to vote at the meeting, present in
person or by proxy, shall constitute a quorum for all purposes, unless or except
to the extent that the presence of a larger number may be
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required by law. Where a separate vote by a class or classes is required, a
majority of the shares of such class or classes, present in person or
represented by proxy, shall constitute a quorum entitled to take action with
respect to that vote on that matter.
If a quorum shall fail to attend any meeting, the chairman of the
meeting or the holders of a majority of the shares of stock entitled to vote who
are present, in person or by proxy, may adjourn the meeting to another place,
date or time.
If a notice of any adjourned special meeting of stockholders is sent to
all stockholders entitled to vote thereat, stating that it will be held with
those present constituting a quorum, then except as otherwise required by law,
those present at such adjourned meeting shall constitute a quorum, and all
matters shall be determined by a majority of the votes cast at such meeting.
Section 5. Organization.
Such person as the Board of Directors may have designated or, in the
absence of such a person, the President of the Corporation or, in his or her
absence, such person as may be chosen by the holders of a majority of the shares
entitled to vote who are present, in person or by proxy, shall call to order any
meeting of the stockholders and act as chairman of the meeting. In the absence
of the Secretary of the Corporation, the secretary of the meeting shall be such
person as the chairman appoints.
Section 6. Conduct of Business.
(a) The chairman of any meeting of stockholders shall
determine the order of business and the procedure at the meeting, including such
regulation of the manner of voting and the conduct of discussion as seem to him
or her in order.
(b) At any annual meeting of the stockholders, only such
business shall be conducted as shall have been brought before the meeting (i) by
or at the direction of the Board of Directors or (ii) by any stockholder of the
Corporation who is entitled to vote with respect thereto and who complies with
the notice procedures set forth in this Section 6(b). For business to be
properly brought before an annual meeting by a stockholder, the stockholder must
have given timely notice thereof in writing to the Secretary of the Corporation.
To be timely, a stockholder's notice must be delivered or mailed to and received
at the principal executive offices of the Corporation not less than thirty (30)
days prior to the date of the annual meeting; provided, however, that in the
event that less than forty (40) days' notice of the date of the meeting is given
or made to stockholders, notice by the stockholder to be timely must be received
not later than the close of business on the 10th day following the day on which
such notice of the date of the annual meeting was mailed. A stockholder's notice
to the Secretary shall set forth as to each matter such stockholder proposes to
bring before the annual meeting (i) a brief description of the business desired
to be brought before the annual meeting and the reasons for conducting such
business at the annual meeting, (ii) the name and address, as they appear on the
Corporation's books, of the
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stockholder who proposed such business, (iii) the class and number of shares of
the Corporation's capital stock that are beneficially owned by such stockholder
and (iv) any material interest of such stockholder in such business.
Notwithstanding anything in these By-laws to the contrary, no business shall be
brought before or conducted at an annual meeting except in accordance with the
provisions of this Section 6(b). The officer of the Corporation or other person
presiding over the annual meeting shall, if the facts so warrant, determine and
declare to the meeting that business was not properly brought before the meeting
in accordance with the provisions of this Section 6(b) and, if he should so
determine, he shall so declare to the meeting and any such business so
determined to be not properly brought before the meeting shall not be
transacted.
At any special meeting of the stockholders, only such business shall be
conducted as shall have been brought before the meeting by or at the direction
of the Board of Directors or by or at the direction of the holders of not less
than one-tenth of all the outstanding capital stock of the Corporation at whose
instance the special meeting is called.
(c) Only persons who are nominated in accordance with the
procedures set forth in these By-laws shall be eligible for election as
directors. Nominations of persons for election to the Board of Directors of the
Corporation may be made at a meeting of stockholders at which directors are to
be elected only (i) by or at the direction of the Board of Directors or (ii) by
any stockholder of the Corporation entitled to vote for the election of
directors at the meeting who complies with the notice procedures set forth in
this Section 6(c). Such nominations, other than those made by or at the
direction of the Board of Directors, shall be made by timely notice in writing
to the Secretary of the Corporation. To be timely, a stockholder's notice shall
be delivered or mailed to and received at the principal executive offices of the
Corporation not less than 30 days prior to the date of the meeting; provided,
however, that in the event that less than 40 days' notice of the date of the
meeting is given or made to stockholders, notice by the stockholder to be timely
must be so received not later than the close of business on the 10th day
following the day on which such notice of the date of the meeting was mailed.
Such stockholder's notice shall set forth (i) as to each person whom such
stockholder proposes to nominate for election or re-election as a director, all
information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise required, in
each case pursuant to Regulation 14A under the Securities Exchange Act of 1934,
as amended (including such person's written consent to being named in the proxy
statement as a nominee and to serving as a director if elected); and (ii) as to
the stockholder giving the notice: (x) the name and address, as they appear on
the Corporation's books, of such stockholder and (y) the class and number of
shares of the Corporation's capital stock that are beneficially owned by such
stockholder. At the request of the Board of Directors, any person nominated by
the Board of Directors for election as a director shall furnish to the Secretary
of the Corporation that information required to be set forth in a stockholder's
notice of nomination which pertains to the nominee. No person shall be eligible
for election as a director of the Corporation unless nominated in accordance
with the provisions of this Section 6(c). The officer of the Corporation or
other person presiding at the meeting shall, if the facts so warrant, determine
that a nomination was not made in accordance with such provisions
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and, if he or she should so determine, he or she shall so declare to the meeting
and the defective nomination shall be disregarded.
Section 7. Proxies and Voting.
At any meeting of the stockholders, every stockholder entitled to vote
may vote in person or by proxy authorized by an instrument in writing (or as
otherwise permitted under applicable law) by the stockholder or his duly
authorized attorney-in-fact filed in accordance with the procedure established
for the meeting. Proxies solicited on behalf of the management shall be voted as
directed by the stockholder or in the absence of such direction, as determined
by a majority of the Board of Directors. No proxy shall be valid after eleven
months from the date of its execution except for a proxy coupled with an
interest.
Each stockholder shall have one (1) vote for every share of stock
entitled to vote which is registered in his or her name on the record date for
the meeting, except as otherwise provided herein or in the Certificate of
Incorporation of the Corporation or as required by law.
All voting, including on the election of directors but excepting where
otherwise required by law, may be by a voice vote; provided, however, that upon
demand therefore by a stockholder entitled to vote or his or her proxy, a stock
vote shall be taken. Every stock vote shall be taken by ballot, each of which
shall state the name of the stockholder or proxy voting and such other
information as may be required under the procedure established for the meeting.
Every vote taken by ballot shall be counted by an inspector or inspectors
appointed by the chairman of the meeting.
All elections shall be determined by a plurality of the votes cast, and
except as otherwise required by law or as provided in the Certificate of
Incorporation, all other matters shall be determined by a majority of the votes
cast.
Section 8. Stock List.
The officer who has charge of the stock transfer books of the
Corporation shall prepare and make, in the time and manner required by
applicable law, a list of stockholders entitled to vote and shall make such list
available for such purposes, at such places, at such times and to such persons
as required by applicable law. The stock transfer books shall be the only
evidence as to the identity of the stockholders entitled to examine the stock
transfer books or to vote in person or by proxy at any meeting of stockholders.
Section 9. Consent of Stockholders in Lieu of Meeting.
Subject to the rights of the holders of any class or series of
preferred stock of the Corporation, any action required or permitted to be taken
by the stockholders of the Corporation must be effected at a duly called annual
or special meeting of stockholders of the Corporation and may not be effected by
any consent in writing by such stockholders.
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Section 10. Inspectors of Election
The Board of Directors shall, in advance of any meeting of
stockholders, appoint one or more persons as inspectors of election, to act at
the meeting or any adjournment thereof and make a written report thereof, in
accordance with applicable law.
ARTICLE II
BOARD OF DIRECTORS
Section 1. General Powers, Number and Term of Office.
The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors. The number of directors shall be
as provided for in the Certificate of Incorporation. 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.
The directors, other than those who may be elected by the holders of
any class or series of preferred stock, shall be divided into three classes, as
nearly equal in number as reasonably possible, with the term of office of the
first class to expire at the conclusion of the first annual meeting of
stockholders, the term of office of the second class to expire at the conclusion
of the annual meeting of stockholders one year thereafter and the term of office
of the third class to expire at the conclusion of the annual meeting of
stockholders two years thereafter, with each director to hold office until his
or her successor shall have been duly elected and qualified. At each annual
meeting of stockholders, commencing with the first annual meeting, directors
elected to succeed those directors whose terms expire shall be elected for a
term of office to expire at the third succeeding annual meeting of stockholders
after their election, with each director to hold office until his or her
successor shall have been duly elected and qualified.
Section 2. Vacancies and Newly Created Directorships.
Subject to the rights of the holders of any class or series of
preferred stock then outstanding, newly created directorships resulting from any
increase in the authorized number of directors or any vacancies in the Board of
Directors resulting from death, resignation, retirement, disqualification,
removal from office or other cause may be filled only by a majority vote of the
directors then in office, though less than a quorum, and directors so chosen
shall hold office for a term expiring at the annual meeting of stockholders at
which the term of office of the class to which they have been elected expires,
and until such director's successor shall have been duly elected and qualified.
No decrease in the number of authorized directors constituting the Board shall
shorten the term of any incumbent director.
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Section 3. Regular Meetings.
Regular meetings of the Board of Directors shall be held at such place
or places, on such date or dates, and at such time or times as shall have been
established by the Board of Directors and publicized among all directors. A
notice of each regular meeting shall not be required.
Section 4. Special Meetings.
Special meetings of the Board of Directors may be called by one-third
(1/3) of the directors then in office (rounded up to the nearest whole number)
or by the President and shall be held at such place, on such date, and at such
time as they or he or she shall fix. Notice of the place, date, and time of each
such special meeting shall be given to each director by whom it is not waived by
mailing written notice not less than five (5) days before the meeting or by
telegraphing or telexing or by facsimile transmission of the same not less than
twenty-four (24) hours before the meeting. Unless otherwise indicated in the
notice thereof, any and all business may be transacted at a special meeting.
Section 5. Quorum.
At any meeting of the Board of Directors, a majority of the authorized
number of directors then constituting the Board shall constitute a quorum for
all purposes. If a quorum shall fail to attend any meeting, a majority of those
present may adjourn the meeting to another place, date, or time, without further
notice or waiver thereof.
Section 6. Participation in Meetings By Conference Telephone.
Members of the Board of Directors, or of any committee thereof, may
participate in a meeting of such Board or committee by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other and such participation shall
constitute presence in person at such meeting.
Section 7. Conduct of Business.
At any meeting of the Board of Directors, business shall be transacted
in such order and manner as the Board may from time to time determine, and all
matters shall be determined by the vote of a majority of the directors present,
except as otherwise provided herein or required by law. Action may be taken by
the Board of Directors without a meeting if all members thereof consent thereto
in writing, and the writing or writings are filed with the minutes of
proceedings of the Board of Directors.
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Section 8. Powers.
The Board of Directors may, except as otherwise required by law,
exercise all such powers and do all such acts and things as may be exercised or
done by the Corporation, including, without limiting the generality of the
foregoing, the unqualified power:
(1) To declare dividends from time to time in accordance with
law;
(2) To purchase or otherwise acquire any property, rights or
privileges on such terms as it shall determine;
(3) To authorize the creation, making and issuance, in such
form as it may determine, of written obligations of every kind, negotiable or
non-negotiable, secured or unsecured, and to do all things necessary in
connection therewith;
(4) To remove any officer of the Corporation with or without
cause, and from time to time to devolve the powers and duties of any officer
upon any other person for the time being;
(5) To confer upon any officer of the Corporation the power to
appoint, remove and suspend subordinate officers, employees and agents;
(6) To adopt from time to time such stock, option, stock
purchase, bonus or other compensation plans for directors, officers, employees
and agents of the Corporation and its subsidiaries as it may determine;
(7) To adopt from time to time such insurance, retirement, and
other benefit plans for directors, officers, employees and agents of the
Corporation and its subsidiaries as it may determine; and,
(8) To adopt from time to time regulations, not inconsistent
with these By-laws, for the management of the Corporation's business and
affairs.
Section 9. Compensation of Directors.
Directors, as such, may receive, pursuant to resolution of the Board of
Directors, fixed fees and other compensation for their services as directors,
including, without limitation, their services as members of committees of the
Board of Directors.
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ARTICLE III
COMMITTEES
Section 1. Committees of the Board of Directors.
The Board of Directors, by a vote of a majority of the Board of
Directors, may from time to time designate committees of the Board, with such
lawfully delegable powers and duties as it thereby confers, to serve at the
pleasure of the Board and shall, for those committees and any others provided
for herein, elect a director or directors to serve as the member or members,
designating, if it desires, other directors as alternate members who may replace
any absent or disqualified member at any meeting of the committee. Any committee
so designated may exercise the power and authority of the Board of Directors to
declare a dividend, to authorize the issuance of stock or to adopt a certificate
of ownership and merger pursuant to Section 253 of the Delaware General
Corporation Law if the resolution which designated the committee or a
supplemental resolution of the Board of Directors shall so provide. In the
absence or disqualification of any member of any committee and any alternate
member in his or her place, the member or members of the committee present at
the meeting and not disqualified from voting, whether or not he or she or they
constitute a quorum, may by unanimous vote appoint another member of the Board
of Directors to act at the meeting in the place of the absent or disqualified
member.
Section 2. Conduct of Business.
Each committee may determine the procedural rules for meeting and
conducting its business and shall act in accordance therewith, except as
otherwise provided herein or required by law. Adequate provision shall be made
for notice to members of all meetings; one-third (1/3) of the members shall
constitute a quorum unless the committee shall consist of one (1) or two (2)
members, in which event one (1) member shall constitute a quorum; and all
matters shall be determined by a majority vote of the members present. Action
may be taken by any committee without a meeting if all members thereof consent
thereto in writing, and the writing or writings are filed with the minutes of
the proceedings of such committee.
Section 3. Nominating Committee.
The Board of Directors shall appoint a Nominating Committee of the
Board, consisting of three (3) members, one of which shall be the President if,
and only so long as, the President remains in office as a member of the Board of
Directors. The Nominating Committee shall have authority (a) to review any
nominations for election to the Board of Directors made by a stockholder of the
Corporation pursuant to Section 6(c)(ii) of Article I of these By-laws in order
to determine compliance with such By-law and (b) to recommend to the Whole Board
nominees
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for election to the Board of Directors to replace those directors whose terms
expire at the annual meeting of stockholders next ensuing.
ARTICLE IV
OFFICERS
Section 1. Generally.
(a) The Board of Directors as soon as may be practicable after
the annual meeting of stockholders shall choose a President, a Secretary and a
Treasurer and from time to time may choose such other officers as it may deem
proper. The President shall be chosen from among the directors. Any number of
offices may be held by the same person.
(b) The term of office of all officers shall be until the next
annual election of officers and until their respective successors are chosen,
but any officer may be removed from office at any time by the affirmative vote
of a majority of the authorized number of directors then constituting the Board
of Directors.
(c) All officers chosen by the Board of Directors shall each
have such powers and duties as generally pertain to their respective offices,
subject to the specific provisions of this Article IV. Such officers shall also
have such powers and duties as from time to time may be conferred by the Board
of Directors or by any committee thereof.
Section 2. President.
The President shall be the chief executive officer and, subject to the
control of the Board of Directors, shall have general power over the management
and oversight of the administration and operation of the Corporation's business
and general supervisory power and authority over its policies and affairs. He
shall see that all orders and resolutions of the Board of Directors and of any
committee thereof are carried into effect.
Each meeting of the stockholders and of the Board of Directors shall be
presided over by such officer as has been designated by the Board of Directors
or, in his absence, by such officer or other person as is chosen at the meeting.
The Secretary or, in his absence, the General Counsel of the Corporation or such
officer as has been designated by the Board of Directors or, in his absence,
such officer or other person as is chosen by the person presiding, shall act as
secretary of each such meeting.
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Section 3. Vice President.
The Vice President or Vice Presidents, if any, shall perform the duties
of the President in his absence or during his disability to act. In addition,
the Vice Presidents shall perform the duties and exercise the powers usually
incident to their respective offices and/or such other duties and powers as may
be properly assigned to them from time to time by the Board of Directors, the
Chairman of the Board or the President.
Section 4. Secretary.
The Secretary or an Assistant Secretary shall issue notices of
meetings, shall keep their minutes, shall have charge of the seal and the
corporate books, shall perform such other duties and exercise such other powers
as are usually incident to such offices and/or such other duties and powers as
are properly assigned thereto by the Board of Directors, the Chairman of the
Board or the President.
Section 5. Treasurer.
The Treasurer shall have charge of all monies and securities of the
Corporation, other than monies and securities of any division of the Corporation
which has a treasurer or financial officer appointed by the Board of Directors,
and shall keep regular books of account. The funds of the Corporation shall be
deposited in the name of the Corporation by the Treasurer with such associations
or trust companies as the Board of Directors from time to time shall designate.
He shall sign or countersign such instruments as require his signature, shall
perform all such duties and have all such powers as are usually incident to such
office and/or such other duties and powers as are properly assigned to him by
the Board of Directors, the Chairman of the Board or the President, and may be
required to give bond for the faithful performance of his duties in such sum and
with such surety as may be required by the Board of Directors.
Section 6. Assistant Secretaries and Other Officers.
The Board of Directors may appoint one or more assistant secretaries
and one or more assistants to the Treasurer, or one appointee to both such
positions, which officers shall have such powers and shall perform such duties
as are provided in these By-laws or as may be assigned to them by the Board of
Directors, the Chairman of the Board or the President.
Section 7. Action with Respect to Securities of Other Corporations
Unless otherwise directed by the Board of Directors, the President or
any officer of the Corporation authorized by the President shall have power to
vote and otherwise act on behalf of the Corporation, in person or by proxy, at
any meeting of stockholders of or with respect to any action of stockholders of
any other corporation in which this Corporation may hold securities and
otherwise to exercise any and all rights and powers which this Corporation may
possess by reason of its ownership of securities in such other Corporation.
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ARTICLE V
STOCK
Section 1. Certificates of Stock.
Each stockholder shall be entitled to a certificate signed by, or in
the name of the Corporation by, the President or a Vice President, and by the
Secretary or an Assistant Secretary, or the Treasurer or an Assistant Treasurer,
certifying the number of shares owned by him or her.
Any or all of the signatures on the certificate may be by facsimile.
Section 2. Transfers of Stock.
Transfers of stock shall be made only upon the transfer books of the
Corporation kept at an office of the Corporation or by transfer agents
designated to transfer shares of the stock of the Corporation. Except where a
certificate is issued in accordance with Section 4 of Article V of these
By-laws, an outstanding certificate for the number of shares involved shall be
surrendered for cancellation before a new certificate is issued therefore.
Section 3. Record Date.
In order that the Corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders, or to receive payment of
any dividend or other distribution or allotment of any rights or to exercise any
rights in respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board of Directors may fix a record
date, which record date shall not precede the date on which the resolution
fixing the record date is adopted and which record date shall not be more than
sixty (60) nor less than ten (10) days before the date of any meeting of
stockholders, nor more than sixty (60) days prior to the time for such other
action as hereinbefore described; provided, however, that if no record date is
fixed by the Board of Directors, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice is given or,
if notice is waived, at the close of business on the day next preceding the day
on which the meeting is held, and, for determining stockholders entitled to
receive payment of any dividend or other distribution or allotment of rights or
to exercise any rights of change, conversion or exchange of stock or for any
other purpose, the record date shall be at the close of business on the day on
which the Board of Directors adopts a resolution relating thereto.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
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Section 4. Lost, Stolen or Destroyed Certificates.
In the event of the loss, theft or destruction of any certificate of
stock, another may be issued in its place pursuant to such regulations as the
Board of Directors may establish concerning proof of such loss, theft or
destruction and concerning the giving of a satisfactory bond or bonds of
indemnity.
Section 5. Regulations.
The issue, transfer, conversion and registration of certificates of
stock shall be governed by such other regulations as the Board of Directors may
establish.
ARTICLE VI
NOTICES
Section 1. Notices.
Except as otherwise specifically provided herein or required by law,
all notices required to be given to any stockholder, director, officer, employee
or agent shall be in writing and may in every instance be effectively given by
hand delivery to the recipient thereof, by depositing such notice in the mail,
postage paid, by sending such notice by prepaid telegram or mailgram or by
sending such notice by facsimile machine or other electronic transmission. Any
such notice shall be addressed to such stockholder, director, officer, employee
or agent at his or her last known address as the same appears on the books of
the Corporation. The time when such notice is received, if hand delivered, or
dispatched, if delivered through the mail, by telegram or mailgram or by
facsimile machine or other electronic transmission, shall be the time of the
giving of the notice.
Section 2. Waivers.
A written waiver of any notice, signed by a stockholder, director,
officer, employee or agent, whether before or after the time of the event for
which notice is to be given, shall be deemed equivalent to the notice required
to be given to such stockholder, director, officer, employee or agent. Neither
the business nor the purpose of any meeting need be specified in such a waiver.
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ARTICLE VII
MISCELLANEOUS
Section 1. Facsimile Signatures.
In addition to the provisions for use of facsimile signatures elsewhere
specifically authorized in these By-laws, facsimile signatures of any officer or
officers of the Corporation may be used whenever and as authorized by the Board
of Directors or a committee thereof.
Section 2. Corporate Seal.
The Board of Directors may provide a suitable seal, containing the name
of the Corporation, which seal shall be in the charge of the Secretary. If and
when so directed by the Board of Directors or a committee thereof, duplicates of
the seal may be kept and used by the Treasurer or by an Assistant Secretary or
Assistant Treasurer.
Section 3. Reliance upon Books, Reports and Records.
Each director, each member of any committee designated by the Board of
Directors, and each officer of the Corporation shall, in the performance of his
or her duties, be fully protected in relying in good faith upon the books of
account or other records of the Corporation and upon such information, opinions,
reports or statements presented to the Corporation by any of its officers or
employees, or committees of the Board of Directors so designated, or by any
other person as to matters which such director or committee member reasonably
believes are within such other person's professional or expert competence and
who has been selected with reasonable care by or on behalf of the Corporation.
Section 4. Fiscal Year.
The fiscal year of the Corporation shall be as fixed by the Board of
Directors.
Section 5. Time Periods.
In applying any provision of these By-laws which requires that an act
be done or not be done a specified number of days prior to an event or that an
act be done during a period of a specified number of days prior to an event,
calendar days shall be used, the day of the doing of the act shall be excluded
and the day of the event shall be included.
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ARTICLE VIII
AMENDMENTS
The By-laws of the Corporation may be adopted, amended or repealed as
provided in Article SEVENTH of the Certificate of Incorporation of the
Corporation.
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EXHIBIT 3.3
CHARTER OF ASSOCIATION IN STOCK FORM
OF THE HOLDING COMPANY
<PAGE>
FEDERAL STOCK CHARTER
WYMAN PARK FEDERAL SAVINGS & LOAN ASSOCIATION
SECTION 1. Corporate title. The full corporate title of the association
is "Wyman Park Federal Savings & Loan Association."
SECTION 2. Office. The home office shall be located in the City of
Lutherville, County of Baltimore, in the State of Maryland.
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 that the association has the authority to issue is two million
five hundred thousand (2,500,000), of which two million (2,000,000) shall be
common stock of par value of $.01 per share, and of which five hundred thousand
(500,000) shall be serial preferred stock of par value $.01 per share. The
shares may be issued from time to time as authorized by the board of directors
without further approval of stockholders, 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 and shall not be less than the par value. 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 the initial organization of the association
or 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 their 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.
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Nothing contained in this SECTION 5 (or in any supplementary sections
hereto) shall entitle the holders of any class of a series of capital stock to
vote as a separate class or series, or to more than one vote per share:
Provided, That this restriction on voting separately by class or series shall
not apply:
(i) To any provision that would authorize the holders of
preferred stock, voting as a class or series, to elect
some members of the board of directors, less than a
majority thereof, in the event of default in the
payment of dividends on any class or series of
preferred stock;
(ii) To any provision which would require the holders of
preferred stock, voting as a class or series, to
approve the merger or consolidation of the association
with another corporation or the sale, lease, or
conveyance (other than by mortgage or pledge) of
properties or business in exchange for securities of a
corporation other than the association if the preferred
stock is exchanged for securities of such other
corporation: Provided, That no provision may require
such approval for transactions undertaken with the
assistance or pursuant to the direction of the Office
or the Federal Deposit Insurance Corporation;
(iii) To any amendment which would adversely change the
specific terms of any class or series of capital stock
as set forth in this SECTION 5 (or in any supplementary
sections hereto), including any amendment which would
create or enlarge any class or series ranking prior
thereto in rights and preferences. An amendment which
increases the number of authorized shares of any class
or series of capital stock, or substitutes the
surviving association in a merger or consolidation for
the association, shall not be considered to be such an
adverse change.
A description of the different classes and series (if any) of the
association's capital stock and a statement of the designations, and the
relative rights, preferences, and limitations of the shares of each class and
series (if any) of capital stock are as follows:
A. Common stock. Except as provided in this SECTION 5 (or in any
supplementary sections thereto) 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.
Whenever there shall have been paid, or declared and set aside for
payment, to the holders of the outstanding shares of any class of stock having
preference over the common stock as to the payment of dividends, the full amount
of dividends and of sinking fund, retirement fund, or other retirement payments,
if any, to which such holders are respectively entitled in preference to the
common stock, then dividends may be paid on the common stock and on any class or
series of stock entitled to participate therewith as to dividends out of any
assets legally available for the payment of dividends.
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In the event of any liquidation, dissolution, or winding up of the
association, the holders of the common stock (and the holders of any class or
series of stock entitled to participate with the common stock in the
distribution of assets) shall be entitled to receive, in cash or in kind, the
assets of the association available for distribution remaining after: (i)
Payment or provision for payment of the association's debts and liabilities;
(ii) distributions or provision for distributions in settlement of its
liquidation account; and (iii) distributions or provisions for distributions to
holders of any class or series of stock having preference over the common stock
in the liquidation, dissolution, or winding up of the association. 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.
B. Preferred Stock. The association may provide in supplementary
sections to its charter for one or more classes of preferred stock, which shall
be separately identified. The shares of any class may be divided into and issued
in series, with each series separately designated so as to distinguish the
shares thereof from the shares of all other series and classes. The terms of
each series shall be set forth in a supplementary section to the charter. All
shares of the same class shall be identical except as to the following relative
rights and preferences, as to which there may be variations between different
series:
(a) The distinctive serial designation and the number of shares
constituting such series;
(b) The dividend rate or the amount of dividends to be paid on the
shares of such series, whether dividends shall be cumulative
and, if so, from which date(s), the payment date(s) for
dividends, and the participating or other special rights, if
any, with respect to dividends;
(c) The voting powers, full or limited, if any, of shares of such
series;
(d) Whether the shares of such series shall be redeemable and, if
so, the price(s) at which, and the terms and conditions on
which such shares may be redeemed;
(e) The amount(s) payable upon the shares of such series in the
event of voluntary or involuntary liquidation, dissolution, or
winding up of the association;
(f) Whether the shares of such series shall be entitled to the
benefit of a sinking or retirement fund to be applied to the
purchase or redemption of such shares, and if so entitled, the
amount of such fund and the manner of its application,
including the price(s) at which such shares may be redeemed or
purchased through the application of such fund;
(g) Whether the shares of such series shall be convertible into,
or exchangeable for, shares of any other class or classes of
stock of the association and, if so, the conversion price(s),
or the rate(s) of exchange, and the adjustments thereof, if
any, at which such conversion or exchange may be made, and any
other terms and conditions of such conversion or exchange;
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(h) The price or other consideration for which the shares of such
series shall be issued; and
(i) Whether the shares of such series which are redeemed or
converted shall have the status of authorized but unissued
shares of serial preferred stock and whether such shares may
be reissued as shares of the same or any other series of
serial preferred stock.
Each share of each series of serial preferred stock shall have the same
relative rights as and be identical in all respects with all the other shares of
the same series.
The board of directors shall have authority to divide, by the adoption
of supplementary charter sections, any authorized class of preferred stock into
series, and, within the limitations set forth in this section and the remainder
of this charter, fix and determine the relative rights and preferences of the
shares of any series so established.
Prior to the issuance of any preferred shares of a series established
by a supplementary charter section adopted by the board of directors, the
association shall file with the Secretary to the Office a dated copy of that
supplementary section of this charter established and designating the series and
fixing and determining the relative rights and preferences thereof.
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.
SECTION 7. 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.
SECTION 8. Beneficial ownership limitation. Notwithstanding anything
contained in the association's charter or bylaws to the contrary, for a period
of five years from the effective date of this charter, no person other than
First Robinson Financial Corporation, the parent holding company of the
association 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
Section 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.
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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.
SECTION 9. Cumulative voting limitation. Stockholders shall be
permitted to cumulate their votes for election of directors.
SECTION 10. 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 11. Priority of accounts. In any situation which the priority
of the accounts of the association is in controversy, all such accounts shall,
to the extent of their withdrawable value, be debts of the association having at
least as high a priority as the claims of general creditors of the association
not having priority (other than any priority arising or resulting from
consensual subordination) over other general creditors of the association.
SECTION 12. 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 first 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 or
preapproved by the Office.
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WYMAN PARK FEDERAL SAVINGS & LOAN ASSOCIATION
ATTEST:___________________________ By:________________________________
________________, Secretary Ernest A. Moretti, President and
Chief Executive Officer
DIRECTOR OF THE OFFICE OF THRIFT SUPERVISION
ATTEST:___________________________ By:________________________________
Secretary of the Office of Director of the Office of Thrift
Thrift Supervision Supervision
Declared effective this ____ day of ___________, 1997.
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EXHIBIT 3.4
BYLAWS OF THE ASSOCIATION IN STOCK FORM
<PAGE>
STOCK BYLAWS
OF
WYMAN PARK FEDERAL SAVINGS & LOAN ASSOCIATION
Article I - Home Office
The home office of the association shall be at 11 West Ridgely Road,
City of Lutherville, County of Baltimore, in the State of Maryland.
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 convenient place 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 Wednesday of each October if not a
legal holiday, and if a legal holiday, then on the next day following which is
not a legal holiday, at __________ a.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 the most current edition of Robert's Rules of Order
unless otherwise prescribed by regulations of the Office or these bylaws or the
board of directors adopts another written procedure for the conduct of meetings.
The board of directors shall designate, when present, either the chairman of the
board or 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
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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 action, requiring such determination of
shareholders, is to be taken. When a determination of shareholders entitled to
vote at any meeting of 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 of
record entitled to vote at such meeting, or any adjournment thereof, 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 ss. 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 the vote of a greater number of
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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.
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.
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Section 12. Cumulative Voting. 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 person 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 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
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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 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
nine 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
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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 participation
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 24 hours 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, 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.
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 only until the next
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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
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 only 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. If cumulative voting has
been deleted, the preceding sentence should be deleted. 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 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,
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or recommending to the shareholders 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
proceeding and report the same to the board of directors for its information at
the meeting held next after the proceedings shall have occurred.
8
<PAGE>
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
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 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.
9
<PAGE>
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 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.
10
<PAGE>
Article VIII - Fiscal Year
The fiscal year of the association shall end on the 30th day of June of
each year. The appointment of 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 an 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 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, 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 bylaws.
11
EXHIBIT 4
FORM OF STOCK CERTIFICATE OF THE HOLDING COMPANY
<PAGE>
NUMBER____________
COMMON STOCK
CUSIP No._____
WYMAN PARK BANCORPORATION, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
This Certifies that
is the owner of
FULLY PAID AND NONASSESSABLE SHARES OF COMMON STOCK, PAR VALUE
$.01 PER SHARE OF WYMAN PARK BANCORPORATION, INC.(the "Corporation"), a Delaware
corporation. The shares represented by this certificate are transferable only on
the stock transfer books of the Corporation by the holder of record hereof, or
by his duly authorized attorney or legal representative, upon the surrender of
this certificate properly endorsed. This certificate is not valid until
countersigned and registered by the Corporation's transfer agent and registrar.
THIS SECURITY IS NOT A DEPOSIT OR ACCOUNT AND IS NOT FEDERALLY INSURED OR
GUARANTEED.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
executed by the facsimile signatures of its duly authorized officers and has
caused a facsimile of its corporate seal to be hereunto affixed.
DATED___________________________________
________________________________________ __________________________
Charmaine M. Snyder, Corporate Secretary Ernest A. Moretti
President
[Seal]
Countersigned and Registered:
[ Name ]
_____________________________
Transfer Agent and Registrar
<PAGE>
WYMAN PARK BANCORPORATION, INC.
The shares represented by this certificate are issued subject to all
the provisions of the Certificate of Incorporation and Bylaws of Wyman Park
Bancorporation, Inc. (the "Corporation") as from time to time amended (copies of
which are on file at the principal executive offices of the Corporation).
The Corporation's Certificate of Incorporation provides that no
"person" (as defined in the Certificate of Incorporation) who "beneficially
owns" (as defined in the Certificate of Incorporation) in excess of 10% of the
outstanding shares of the Corporation shall be entitled to vote any shares held
in excess of such limit. This provision of the Certificate of Incorporation
shall not apply to an acquisition of securities of the Corporation by an
employee stock purchase plan or other employee benefit plan of the Corporation
or any of its subsidiaries.
The Corporation's Certificate of Incorporation also includes a
provision the general effect of which is to require the affirmative vote of the
holders of 80% of the outstanding voting shares of the Corporation to approve
certain "business combinations" (as defined in the Certificate of Incorporation)
between the Corporation and a stockholder owning in excess of 10% of the
outstanding shares of the Corporation. However, only the affirmative vote of a
majority of the outstanding shares or such vote as is otherwise required by law
(rather than the 80% voting requirement) is applicable to the particular
transaction if it is approved by a majority of the "disinterested directors" (as
defined in the Certificate of Incorporation) or, alternatively, the transaction
satisfies certain minimum price and procedural requirements. The Corporation's
Certificate of Incorporation also contains a provision which requires the
affirmative vote of holders of at least 80% of the outstanding voting shares of
the Corporation which are not beneficially owned by the "interested person" (as
defined in the Certificate of Incorporation) to approve the direct or indirect
purchase or other acquisition by the Corporation of any "equity security" (as
defined in the Certificate of Incorporation) from such interested person.
The Corporation will furnish to any stockholder upon request and
without charge a full statement of the powers, designations, preferences and
relative participating, optional or other special rights of each authorized
class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights, to the extent that the same have
been fixed, and of the authority of the board of directors to designate the same
with respect to other series. Such request may be made to the Corporation or to
its Transfer Agent and Registrar.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT__________Custodian_________
(Cust) (Minor)
TEN ENT - as tenants by the
entirety Under Uniform Gift to Minors Act-____________
JT TEN - as joint tenants with UNIF TRANS MIN ACT_________Custodian_________
right of survivorship (Cust) (Minor)
and not as tenants
in common. Under Uniform Transfers to Minors Act-_______
(State)
Additional abbreviations may also be used though not in the above list.
For Value Received, ___________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- ------------------------------
- ------------------------------
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
_______________Shares of Common Stock represented by the within certificate, and
do hereby irrevocably constitute and appoint____________________________________
___________Attorney to transfer the said shares on the books of the within named
Corporation with full power of substitution in the premises.
Dated__________________
_________________________________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND
WITH THE NAME AS WRITTEN UPON THE FACE OF THE
CERTIFICATE I N EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
EXHIBIT 5
OPINION OF SILVER, FREEDMAN & TAFF, L.L.P.
WITH RESPECT TO LEGALITY OF STOCK
<PAGE>
September 22, 1997
The Board of Directors
Wyman Park Bancorporation, Inc.
11 West Ridgely Road
Lutherville, Maryland 21094
Re: Registration Statement
Under the Securities Act of 1933
Gentlemen:
This opinion is rendered in connection with the Registration Statement
to be filed on Form S-1 with the Securities and Exchange Commission under the
Securities Act of 1933 relating to the 925,750 shares of Common Stock of Wyman
Park Bancorporation, Inc. (the "Company"), par value $.01 per share, to be
issued. As counsel, we have reviewed the Certificate of Incorporation of the
Company and such other documents as we have deemed appropriate for the purpose
of this opinion. We are rendering this opinion as of the time the Registration
Statement referred to above becomes effective.
Based on the foregoing, we are of the opinion that the shares of Common
Stock of the Company covered by the aforesaid Registration Statement will, when
sold, be validly issued, fully paid and non-assessable shares of Common Stock of
the Company.
Very truly yours,
/s/ SILVER, FREEDMAN & TAFF,L.L.P.
----------------------------------
SILVER, FREEDMAN & TAFF, L.L.P.
EXHIBIT 8.1
OPINION OF SILVER, FREEDMAN & TAFF, L.L.P. WITH
RESPECT TO FEDERAL INCOME TAX CONSEQUENCES
OF THE CONVERSION
<PAGE>
Board of Directors
September 19, 1997
Page 1
September 19, 1997
Board of Directors
Wyman Park Federal Savings &
Loan Association
11 West Ridgely Road
Lutherville, Maryland 21093
RE: Federal Income Tax Opinion Relating To The Conversion
of Wyman Park Federal Savings & Loan Association From
A Federally-Chartered Mutual Savings and Loan Association
To A Federally-Chartered Stock Savings and Loan Association
Under Section 368(a)(1)(F) of the Internal Revenue Code of 1986,
As Amended
Gentlemen:
In accordance with your request set forth hereinbelow is the
opinion of this firm relating to the federal income tax consequences of the
conversion of Wyman Park Federal Savings & Loan Association ("Mutual") from a
federally-chartered mutual institution to a federally-chartered stock
institution ("Stock Association") pursuant to the provisions of Section
368(a)(1)(F) of the Internal Revenue Code of 1986, as amended (the "Code").
Capitalized terms used herein which are not expressly defined
herein shall have the meaning ascribed to them in the Plan of Conversion dated
June 18, 1997 (the "Plan").
The following assumptions have been made in connection with
our opinions hereinbelow:
1. The Conversion is implemented in accordance with the terms of the
Plan and all conditions precedent contained in the Plan shall be performed or
waived prior to the consummation of the Conversion.
<PAGE>
Board of Directors
September 19, 1997
Page 2
2. No amount of the savings accounts and deposits of Mutual, as of the
Eligibility Record Date or the Supplemental Eligibility Record Date, will be
excluded from participating in the liquidation account of Stock Association. To
the best of the knowledge of the management of Mutual there is not now, nor will
there be at the time of the Conversion, any plan or intention, on the part of
the depositors in Mutual to withdraw their deposits following the Conversion.
Deposits withdrawn immediately prior to or immediately subsequent to the
Conversion (other than maturing deposits) are considered in making these
assumptions.
3. Holding Company and Stock Association each have no plan or intention
to redeem or otherwise acquire any of the Holding Company Conversion Stock to be
issued in the proposed transaction.
4. Immediately following the consummation of the proposed transaction,
Stock Association will possess the same assets and liabilities as Mutual held
immediately prior to the proposed transaction, plus substantially all of the net
proceeds from the sale of its stock to Holding Company except for assets used to
pay expenses of the Conversion. The liabilities transferred to Stock Association
were incurred by Mutual in the ordinary course of business.
5. No cash or property will be given to deposit account holders in lieu
of Subscription Rights or an interest in the liquidation account of Stock
Association.
6. Following the Conversion, Stock Association will continue to engage
in its business in substantially the same manner as Mutual engaged in business
prior to the Conversion, and it has no plan or intention to sell or otherwise
dispose of any of its assets, except in the ordinary course of business.
7. There is no plan or intention for Stock Association to be liquidated
or merged with another corporation following the consummation of the Conversion.
8. The fair market value of each savings account plus an interest in
the liquidation account of Stock Association will, in each instance, be
approximately equal to the fair market value of each savings account of Mutual
plus the interest in the residual equity of Mutual surrendered in exchange
therefor.
9. Mutual, Stock Association and Holding Company are each corporations
within the meaning of Section 7701(a)(3) of the Code.
10. Holding Company has no plan or intention to sell or otherwise
dispose of the stock of Stock Association received by it in the proposed
transaction.
<PAGE>
Board of Directors
September 19, 1997
Page 3
11. Both Stock Association and Holding Company have no plan or
intention, either currently or at the time of Conversion, to issue additional
shares of common stock following the proposed transaction, other than shares
that may be issued to employees and/or directors pursuant to certain stock
option and stock incentive plans or that may be issued to employee benefit
plans.
12. If all of the net proceeds from the sale of Holding Company
Conversion Stock had been contributed by Holding Company to Stock Association in
exchange for common stock of Stock Association in the transaction, as opposed to
Holding Company retaining a portion of such net proceeds (the "retained
proceeds"), and Stock Association immediately thereafter made a distribution of
the retained proceeds to Holding Company, Stock Association would have
sufficient current and accumulated earnings and profits for tax purposes such
that the distribution would not result in the recapture of any portion of the
bad debt reserves of Stock Association for federal income tax reporting.
13. Assets used to pay expenses of the Conversion and all distributions
(except for regular, normal interest payments and other payments in the normal
course of business made by Mutual immediately preceding the transaction) will in
the aggregate constitute less than 1% of the net assets of Mutual and any such
expenses and distributions will be paid by Stock Association from the proceeds
of the sale of Holding Company Conversion Stock.
14. All distributions to deposit account holders in their capacity as
deposit account holders (except for regular, normal interest payments made by
Mutual), will, in the aggregate, constitute less than 1% of the fair market
value of the net assets of Mutual.
15. At the time of the proposed transaction, the fair market value of
the assets of Mutual on a going concern basis (including intangibles) will equal
or exceed the amount of its liabilities plus the amount of liabilities to which
such assets are subject. Mutual will have a positive regulatory net worth at the
time of the Conversion.
16. Mutual is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the Code. The
proposed transaction does not involve a receivership, foreclosure, or similar
proceeding before a federal or state agency involving a financial institution to
which Section 585 of the Code applies.
17. Mutual's Eligible Account Holders and Supplemental Eligible Account
Holders will pay expenses of the Conversion solely attributable to them, if any.
<PAGE>
Board of Directors
September 19, 1997
Page 4
18. The liabilities of Mutual assumed by Stock Association plus the
liabilities, if any, to which the transferred assets are subject were incurred
by Mutual in the ordinary course of its business and are associated with the
assets being transferred.
19. There will be no purchase price advantage for Mutual's deposit
account holders who purchase Holding Company Conversion Stock.
20. Neither Mutual nor Stock Association is an investment company as
defined in Sections 368(a)(2)(F)(iii) and (iv) of the Code.
21. None of the compensation to be received by any deposit account
holder-employees of Mutual or Holding Company will be separate consideration
for, or allocable to, any of their deposits in Mutual. No interest in the
liquidation account of Stock Association will be received by any deposit account
holder-employees as separate consideration for, or will otherwise be allocable
to, any employment agreement, and the compensation paid to each deposit account
holder-employee, during the twelve-month period preceding or subsequent to the
Conversion, will be for services actually rendered and will be commensurate with
amounts paid to the third parties bargaining at arm's-length for similar
services. No shares of Holding Company Conversion Stock will be issued to or
purchased by any deposit account holder-employee of Mutual or Holding Company at
a discount or as compensation in the proposed transaction.
22. No creditors of Mutual or the depositors in their role as
creditors, have taken any steps to enforce their claims against Mutual by
instituting bankruptcy or other legal proceedings, in either a court or
appropriate regulatory agency, that would eliminate the proprietary interests of
the Members prior to the Conversion of Mutual including depositors as the equity
holders of Mutual.
23. The proposed transaction does not involve the payment to Stock
Association or Mutual of financial assistance from federal agencies within the
meaning of Notice 89-102, 1989-40 C.B. 1.
24. On a per share basis, the purchase price of Holding Company
Conversion Stock will be equal to the fair market value of such stock at the
time of the completion of the proposed transaction.
25. Mutual has received or will receive an opinion from Ferguson and
Co. ("Appraiser's Opinion"), which concludes that the Subscription Rights to be
received by Eligible Account Holders, Supplemental Eligible Account Holders and
other eligible subscribers do not have any ascertainable fair market value,
since they are acquired by the recipients without cost, are non-transferable and
of short duration, and afford the recipients a right only to purchase Holding
Company Conversion
<PAGE>
Board of Directors
September 19, 1997
Page 5
Stock at a price equal to its estimated fair market value, which will be the
same price as the Public Offering Price for unsubscribed shares of Holding
Company Conversion Stock.
26. Mutual will not have any net operating losses, capital loss
carryovers or built-in losses at the time of the Conversion.
OPINION
Based solely on the assumptions set forth hereinabove and our analysis
and examination of applicable federal income tax laws, rulings, regulations,
judicial precedents and the Appraiser's Opinion, we are of the opinion that if
the transaction is undertaken in accordance with the above assumptions:
(1) The Conversion will constitute a reorganization within the meaning
of Section 368(a)(1)(F) of the Code. Neither Mutual nor Stock Association will
recognize any gain or loss as a result of the transaction (Rev. Rul. 80-105,
1980-1 C.B. 78). Mutual and Stock Association will each be a party to a
reorganization within the meaning of Section 368(b) of the Code.
(2) Stock Association will recognize no gain or loss upon the receipt
of money and other property, if any, in the Conversion, in exchange for its
shares. (Section 1032(a) of the Code.)
(3) No gain or loss will be recognized by Holding Company upon the
receipt of money for Holding Company Conversion Stock. (Section 1032(a) of the
Code.)
(4) The basis of Mutual's assets in the hands of Stock Association will
be the same as the basis of those assets in the hands of Mutual immediately
prior to the transaction. (Section 362(b) of the Code.)
(5) Stock Association's holding period of the assets of Mutual will
include the period during which such assets were held by Mutual prior to the
Conversion. (Section 1223(2) of the Code.)
(6) Stock Association, for purposes of Section 381 of the Code, will be
treated as if there had been no reorganization. The tax attributes of Mutual
enumerated in Section 381(a) of the Code will be taken into account by Stock
Association as if there had been no reorganization. Accordingly, the tax year of
Mutual will not end on the effective date of the Conversion. The part of the tax
year of Mutual before the Conversion will be includible in the tax year of Stock
Association after the Conversion. Therefore, Mutual will not have to file a
federal income tax return for the portion of the tax year prior to the
Conversion. (Rev. Rul. 57-276, 1957-1 C.B. 126.)
<PAGE>
Board of Directors
September 19, 1997
Page 6
(7) Depositors will realize gain, if any, upon the constructive
issuance to them of withdrawable deposit accounts of Stock Association,
Subscription Rights and/or interests in the liquidation account of Stock
Association. Any gain resulting therefrom will be recognized, but only in an
amount not in excess of the fair market value of the liquidation accounts and/or
Subscription Rights received. The liquidation accounts will have nominal, if
any, fair market value. Based solely on the accuracy of the conclusion reached
in the Appraiser's Opinion, and our reliance on such opinion, that the
Subscription Rights have no value at the time of distribution or exercise, no
gain or loss will be required to be recognized by depositors upon receipt or
distribution of Subscription Rights. (Section 1001 of the Code.) See Paulsen v.
Commissioner, 469 U.S. 131,139 (1985). Likewise, based solely on the accuracy of
the aforesaid conclusion reached in the Appraiser's Opinion, and our reliance
thereon, we give the following opinions: (a) no taxable income will be
recognized by the borrowers, directors, officers and employees of Mutual upon
the distribution to them of Subscription Rights or upon the exercise or lapse of
the Subscription Rights to acquire Holding Company Conversion Stock at fair
market value; (b) no taxable income will be realized by the depositors of Mutual
as a result of the exercise or lapse of the Subscription Rights to purchase
Holding Company Conversion Stock at fair market value. Rev. Rul. 56-572, 1956-2
C.B. 182; and (c) no taxable income will be realized by Mutual, Stock
Association or Holding Company on the issuance or distribution of Subscription
Rights to depositors of Mutual to purchase shares of Holding Company Conversion
Stock at fair market value. (Section 311 of the Code.)
Notwithstanding the Appraiser's Opinion, if the Subscription Rights are
subsequently found to have a fair market value, income may be recognized by
various recipients of the Subscription Rights (in certain cases, whether or not
the rights are exercised) and Holding Company and/or Stock Association may be
taxable on the distribution of the Subscription Rights. (Section 311 of the
Code.) In this regard, the Subscription Rights may be taxed partially or
entirely at ordinary income tax rates.
(8) The creation of the liquidation account on the records of Stock
Association will have no effect on Mutual's or Stock Association's taxable
income, deductions or tax bad debt reserve.
(9) A depositor's basis in the savings deposits of Stock Association
will be the same as the basis of his savings deposits in Mutual. (Section 1012
of the Code.) Based upon the Appraiser's Opinion, the basis of the Subscription
Rights will be zero. The basis of the interest in the liquidation account of
Stock Association received by Eligible Account Holders and Supplemental Eligible
Account Holders will be equal to the cost of such property, i.e., the fair
market value of the proprietary interest in Mutual, which in this transaction we
assume to be zero.
(10) The basis of Holding Company Conversion Stock to its shareholders
will be the purchase price thereof. (Section 1012 of the Code.)
<PAGE>
Board of Directors
September 19, 1997
Page 7
(11) A shareholder's holding period for Holding Company Conversion
Stock acquired through the exercise of the Subscription Rights shall begin on
the date on which the Subscription Rights are exercised. (Section 1223(6) of the
Code.) The holding period for the Holding Company Conversion Stock purchase
pursuant to the direct community offering, public offering or under other
purchase arrangements will commence on the date following the date on which such
stock is purchased. (Rev. Rul. 70-598, 1970-2 C.B. 168).
(12) Regardless of any book entries that are made for the establishment
of a liquidation account, the reorganization will not diminish the accumulated
earnings and profits of Mutual available for the subsequent distribution of
dividends, within the meaning of Section 316 of the Code. Section 1.312-11(b)
and (c) of the Regulations. Stock Association will succeed to and take into
account the earnings and profits or deficit in earnings and profits, of Mutual
as of the date of Conversion.
The above opinions are effective to the extent that Mutual is solvent.
No opinion is expressed about the tax treatment of the transaction if Mutual is
insolvent. Whether or not Mutual is solvent will be determined at the end of the
taxable year in which the transaction is consummated.
No opinion is expressed as to the tax treatment of the transaction
under the provisions of any of the other sections of the Code and Income Tax
Regulations which may also be applicable thereto, or to the tax treatment of any
conditions existing at the time of, or effects resulting from, the transaction
which are not specifically covered by the opinions set forth above.
Respectfully submitted,
/s/ SILVER, FREEDMAN & TAFF, L.L.P
----------------------------------
SILVER, FREEDMAN & TAFF, L.L.P.
Exhibit 8.2
[WOODEN & BENSON LETTERHEAD]
September 18, 1997
Board of Directors
Wyman Park Federal Savings & Loan Association
11 West Ridgely Road
Lutherville, Maryland 21093
Gentlemen:
The firm of Silver, Freedman & Taff, LLP has provided an opinion
concerning the various tax consequences resulting from the conversion of Wyman
Park Federal Savings & Loan Association (the "Association") from a
federally-chartered mutual institution to a federally-chartered stock
institution pursuant to the provisions of Section 368(a)(1)(F) of the Internal
Revenue Code of 1986, as amended, with the simultaneous formation of Wyman Park
Bancorporation, Inc. (the "Holding Company") as the Association's parent
corporation.
Since Maryland tax law follows federal tax law for a transaction
undertaken in accordance with the assumptions stated in the opinion of Silver,
Freedman & Taff, LLP, it is our opinion that the Maryland tax consequences to
the Association, in its mutual or stock form, the Holding Company, eligible
account holders, parties receiving subscription rights, parties purchasing
conversion stock, and other parties participating in the Conversion will be the
same as the federal income tax consequences.
Respectfully submitted,
/s/ Wooden & Benson
EXHIBIT 10.1
FORM OF EMPLOYMENT AGREEMENT
<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of
this ___ day of __________, 199_, by and between Wyman Park Federal Savings &
Loan Association (hereinafter referred to as the "Bank" whether in mutual or
stock form), and Ernest A. Moretti (the "Employee").
WHEREAS, the Employee is currently serving as President and Chief
Executive Officer of the Bank; and
WHEREAS, the Bank has adopted a plan of conversion whereby the Bank
will convert to capital stock form as the subsidiary of _____________________
(the "Holding Company"), subject to the approval of the Bank's members and the
Office of Thrift Supervision (the "Conversion"); and
WHEREAS, the board of directors of the Bank ("Board of Directors")
recognizes that, as is the case with publicly held corporations generally, the
possibility of a change in control of the Holding Company and/or the Bank may
exist and that such possibility, and the uncertainty and questions which it may
raise among management, may result in the departure or distraction of key
management personnel to the detriment of the Bank, the Holding Company and their
respective stockholders; and
WHEREAS, the Board of Directors believes it is in the best interests of
the Bank to enter into this Agreement with the Employee in order to assure
continuity of management of the Bank and to reinforce and encourage the
continued attention and dedication of the Employee to the Employee's assigned
duties without distraction in the face of potentially disruptive circumstances
arising from the possibility of a change in control of the Holding Company or
the Bank, although no such change is now contemplated; and
WHEREAS, the Board of Directors has approved and authorized the
execution of this Agreement with the Employee to take effect as stated in
Section 2 hereof;
NOW, THEREFORE, in consideration of the foregoing and of the respective
covenants and agreements of the parties herein, it is AGREED as follows:
1. Definitions.
(a) The term "Change in Control" means an event of a nature
that (i) results in a change in control of the Bank or the Holding Company
within the meaning of the Home Owners' Loan Act of 1933 and 12 C.F.R. Part 574
as in effect on the date hereof; or (ii) would be required to be reported in
response to Item 1 of the current report on Form 8-K, as in effect on the date
hereof, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
(the "Exchange Act"); (2) any person (as the term is used in Sections 13(d) and
14(d) of the Exchange Act) is or becomes the beneficial owner (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly of securities of the
Bank or the Holding Company representing 20% or more of the Bank's or the
1
<PAGE>
Holding Company's outstanding securities; (3) individuals who are members of the
board of directors of the Bank or the Holding Company on the date hereof (the
"Incumbent Board") cease for any reason to constitute at least a majority
thereof, provided that any person becoming a director subsequent to the date
hereof whose election was approved by a vote of at least three-quarters of the
directors comprising the Incumbent Board, or whose nomination for election by
the Holding Company's stockholders was approved by the nominating committee
serving under an Incumbent Board, shall be considered a member of the Incumbent
Board; (4) a reorganization, merger, consolidation, sale of all or substantially
all of the assets of the Bank or the Holding Company or a similar transaction in
which the Bank or the Holding Company is not the resulting entity or the Bank or
the Holding Company survives only as a subsidiary of another entity; or (5) a
merger of another corporation into the Bank or Holding Company which survives
if, as a result of such merger, less than 60% of the outstanding voting
securities of the Bank or Holding Company shall be owned in the aggregate
immediately after such merger by the owners of the voting shares of the Bank or
Holding Company outstanding immediately prior. The term "Change in Control"
shall not include an acquisition of securities by an employee benefit plan of
the Bank or the Holding Company or the acquisition of securities of the Bank by
the Holding Company in connection with the Conversion. In the application of 12
C.F.R. Part 574 to a determination of a Change in Control, determinations to be
made by the OTS or its Director under such regulations shall be made by the
Board of Directors.
(b) The term "Commencement Date" means the date of completion
of the initial public offering of the Holding Company's stock in connection with
the Conversion.
(c) The term "Date of Termination" means the later of (1) the
date upon which the Bank gives notice to the Employee of the termination of the
Employee's employment with the Bank or (2) the date upon which the Employee
ceases to serve as an employee of the Bank.
(d) The term "Involuntary Termination" means termination of
the employment of Employee without the Employee's express written consent, and
shall include a material diminution of or interference with the Employee's
duties, responsibilities and benefits as President and Chief Executive Officer
of the Bank, including (without limitation) any of the following actions unless
consented to in writing by the Employee: (1) a change in the principal workplace
of the Employee to a location outside of a 30 mile radius from the Bank's
headquarters office as of the date hereof; (2) a material demotion of the
Employee; (3) a material reduction in the number or seniority of other Bank
personnel reporting to the Employee or a material reduction in the frequency
with which, or in the nature of the matters with respect to which, such
personnel are to report to the Employee, other than as part of a Bank- or
Holding Company-wide reduction in staff; (4) a material adverse change in the
Employee's salary, perquisites, benefits, contingent benefits or vacation, other
than as part of an overall program applied uniformly and with equitable effect
to all employees of the Bank or the Holding Company; and (5) a material
permanent increase in the required hours of work or the workload of the
Employee. The term "Involuntary Termination" does not include Termination for
Cause or termination of employment due to retirement, death, disability or
suspension or temporary
2
<PAGE>
or permanent prohibition from participation in the conduct of the Bank's affairs
under Section 8 of the Federal Deposit Insurance Act ("FDIA").
(e) The terms "Termination for Cause" and "Terminated for
Cause" mean termination of the employment of the Employee because of the
Employee's personal dishonesty, incompetence, willful misconduct, breach of a
fiduciary duty involving personal profit, intentional failure to perform stated
duties, willful violation of any law, rule, or regulation (other than traffic
violations or similar offenses) or final cease-and-desist order, material breach
of any provision of this Agreement. No act or failure to act by the Employee
shall be considered willful unless the Employee acted (or failed to act) with an
absence of good faith and without a reasonable belief that his action or failure
to act was reasonable and in the best interest of the Bank. Notwithstanding the
prior sentence, it shall constitute a material breach of this Agreement should
Employee, individually or acting in concert with a group, take any action
leading to a change in control of the Bank or the Holding Company within the
meaning of the Home Owners' Loan Act of 1933 and 12 C.F.R. Part 574 as in effect
on the date hereof, that is opposed by a majority of the Board of Directors;
provided, however, if Employee is acting in concert with one or more members of
the Board of Directors in actions leading to a change in control of the Bank and
the Employee reasonably believes such actions are in the best interest of the
Bank, such directors shall not be a material breach of this Agreement even if a
majority of the Board of Directors opposes any such change in control. The
Employee shall not be deemed to have been Terminated for Cause unless and until
there shall have been delivered to the Employee a copy of a resolution, duly
adopted by the affirmative vote of not less than a majority of the entire
membership of the Board of Directors at a meeting of the Board called and held
for such purpose (after reasonable notice to the Employee and an opportunity for
the Employee, together with the Employee's counsel, to be heard before the
Board), stating that in the good faith opinion of the Board the Employee has
engaged in conduct described in the preceding sentence and specifying the
particulars thereof in detail.
2. Term. The term of this Agreement shall be a period of three years
commencing on the Commencement Date, subject to earlier termination as provided
herein. Beginning on the first anniversary of the Commencement Date, and on each
anniversary thereafter, the term of this Agreement shall be extended for a
period of one year in addition to the then-remaining term, provided that (1) the
Bank has not given notice to the Employee in writing at least 120 days prior to
such anniversary that the term of this Agreement shall not be extended further;
and (2) prior to such anniversary, the Board of Directors of the Bank explicitly
reviews and approves the extension. Reference herein to the term of this
Agreement shall refer to both such initial term and such extended terms.
3. Employment. The Employee is employed as President and Chief
Executive Officer of the Bank. As such, the Employee shall render administrative
and management services as are customarily performed by persons situated in
similar executive capacities, and shall have such other powers and duties of an
officer of the Bank as the Board of Directors may prescribe from time to time.
3
<PAGE>
4. Compensation.
(a) Salary. The Bank agrees to pay the Employee during the
term of this Agreement an annual salary not less than $115,000. The amount of
the Employee's salary shall be reviewed by the Board of Directors, beginning not
later than the first anniversary of the Commencement Date.
Adjustments in salary or other compensation shall not limit or reduce any other
obligation of the Bank under this Agreement. The Employee's salary in effect
from time to time during the term of this Agreement shall not thereafter be
reduced.
(b) Bonuses. The Employee shall be entitled to participate in
an equitable manner with all other executive officers of the Bank in
discretionary bonuses as authorized and declared by the Board of Directors to
its executive employees. No other compensation provided for in this Agreement
shall be deemed a substitute for the Employee's right to participate in such
bonuses when and as declared by the Board of Directors. In addition to salary
provided in this section above, Employee shall be entitled to receive, as he has
from November 1, 1989, a "first tier" and "second tier" bonus. A "first tier"
bonus of $15,000 per year shall be paid to Employee based on satisfaction of two
criteria: (1) the Bank must achieve an after tax return on assets equal to or
better than .5%, and (2) the achievement of the objectives contained in the
Bank's strategic plan respecting such factors as gap position, asset mix,
liquidity, and IDC rating, it being also agreed that the strategic plan shall be
regularly updated by the officers and approved by the Strategic Planning
Committee. A "second tier" bonus shall be paid to Employee based on 5% of any
additional after tax earnings which the Bank enjoys beyond the requirements of
the first tier bonus. In the case of both the "first tier" and "second tier"
bonuses, payment of such bonuses shall also be contingent on the Bank
maintaining at all times a supervisory rating of not less than "3" and required
levels of tangible, core and risk-weighted capital as set forth in the
regulations of the OTS in effect as of the date of this Agreement.
(c) Expenses. The Employee shall be entitled to receive prompt
reimbursement for all reasonable expenses incurred by the Employee in performing
services under this Agreement in accordance with the policies and procedures
applicable to the executive officers of the Bank, provided that the Employee
accounts for such expenses as required under such policies and procedures.
5. Benefits.
(a) Participation in Retirement and Employee Benefit Plans.
The Employee shall be entitled to participate in all plans relating to pension,
thrift, profit-sharing, group life insurance, medical and dental coverage,
education, cash bonuses, and other retirement or employee benefits or
combinations thereof, in which the Bank's executive officers participate.
(b) Fringe Benefits. The Employee shall be eligible to
participate in, and receive benefits under, any fringe benefit plans which are
or may become applicable to the Bank's executive officers.
4
<PAGE>
6. Vacations; Leave. The Employee shall be entitled to annual paid
vacation of not less than four weeks per year and to voluntary leave of absence,
with or without pay, from time to time at such times and upon such conditions as
the Board of Directors may determine in its discretion.
7. Termination of Employment.
(a) Involuntary Termination. The Board of Directors may
terminate the Employee's employment at any time, but, except in the case of
Termination for Cause, termination of employment shall not prejudice the
Employee's right to compensation or other benefits under this Agreement. In the
event of Involuntary Termination other than in connection with or within 12
months after a Change in Control, (1) the Bank shall pay to the Employee during
the remaining term of this Agreement the Employee's salary at the rate in effect
immediately prior to the Date of Termination, payable in such manner and at such
times as such salary would have been payable to the Employee under Section 4(a)
if the Employee had continued to be employed by the Bank, and (2) the Bank shall
provide to the Employee during the remaining term of this Agreement health
benefits as maintained by the Bank for the benefit of its executive officers
from time to time during the remaining term of the Agreement or substantially
the same health benefits as the Bank maintained for its executive officers
immediately prior to the Date of Termination.
(b) Termination for Cause. In the event of Termination for
Cause, the Bank shall pay the Employee the Employee's salary through the Date of
Termination, and the Bank shall have no further obligation to the Employee under
this Agreement.
(c) Voluntary Termination. The Employee's employment may be
voluntarily terminated by the Employee at any time upon 90 days' written notice
to the Bank or such shorter period as may be agreed upon between the Employee
and the Board of Directors of the Bank. In the event of such voluntary
termination, the Bank shall be obligated to continue to pay to the Employee the
Employee's salary and benefits only through the Date of Termination, at the time
such payments are due, and the Bank shall have no further obligation to the
Employee under this Agreement.
(d) Change in Control. In the event of Involuntary Termination
in connection with or within 12 months after a Change in Control which occurs at
any time while the Employee is employed under this Agreement, the Bank shall,
subject to Section 8 of this Agreement, (1) pay to the Employee in a lump sum in
cash within 25 business days after the Date of Termination an amount equal to
299% of the Employee's "base amount"1 as defined in Section 280G of the Internal
Revenue Code of 1986, as amended (the "Code"); and (2) provide to the Employee
during the remaining term of this Agreement such health benefits as are
maintained for executive officers of the Bank from time to time during the
remaining term of this Agreement or substantially the same
- ------------
1 Note that "base amount" is not the same as base salary. "Base amount"
is the employee's average annual compensation includable in his gross income for
tax purposes during the most recent five full taxable years.
5
<PAGE>
health benefits as the Bank maintained for its executive officers immediately
prior to the Date of Termination.
(e) Death; Disability. In the event of the death of the
Employee while employed under this Agreement and prior to any termination of
employment, the Employee's estate, or such person as the Employee may have
previously designated in writing (the "Recipient"), shall be entitled to receive
from the Bank in a lump sum the salary of the Employee for a period of six
months following the date of death at the rate at which salary was payable to
the Employee as of the date of death. If the Employee becomes disabled as
defined in the Bank's then current disability plan, if any, or if the Employee
is otherwise unable to serve as President and Chief Executive Officer, the
Employee shall be entitled to receive group and other disability income benefits
of the type, if any, then provided by the Bank for executive officers.
(f) Temporary Suspension or Prohibition. If the Employee is
suspended and/or temporarily prohibited from participating in the conduct of the
Bank's affairs by a notice served under Section 8(e)(3) or (g)(1) of the FDIA,
12 U.S.C. ss. 1818(e)(3) and (g)(1), the Bank's obligations under this Agreement
shall be suspended as of the date of service, unless stayed by appropriate
proceedings. If the charges in the notice are dismissed, the Bank may in its
discretion (i) pay the Employee all or part of the compensation withheld while
its obligations under this Agreement were suspended and (ii) reinstate in whole
or in part any of its obligations which were suspended.
(g) Permanent Suspension or Prohibition. If the Employee is
removed and/or permanently prohibited from participating in the conduct of the
Bank's affairs by an order issued under Section 8(e)(4) or (g)(1) of the FDIA,
12 U.S.C. ss. 1818(e)(4) and (g)(1), all obligations of the Bank under this
Agreement shall terminate as of the effective date of the order, but vested
rights of the contracting parties shall not be affected.
(h) Default of the Bank. If the Bank is in default (as defined
in Section 3(x)(1) of the FDIA), all obligations under this Agreement shall
terminate as of the date of default, but this provision shall not affect any
vested rights of the contracting parties.
(i) Termination by Regulators. All obligations under this
Agreement shall be terminated, except to the extent determined that continuation
of this Agreement is necessary for the continued operation of the Bank: (1) by
the Director of the Office of Thrift Supervision (the "Director") or his or her
designee, at the time the Federal Deposit Insurance Corporation enters into an
agreement to provide assistance to or on behalf of the Bank under the authority
contained in Section 13(c) of the FDIA; or (2) by the Director or his or her
designee, at the time the Director or his or her designee approves a supervisory
merger to resolve problems related to operation of the Bank or when the Bank is
determined by the Director to be in an unsafe or unsound condition. Any rights
of the parties that have already vested, however, shall not be affected by any
such action.
6
<PAGE>
8. Certain Reduction of Payments by the Bank.
(a) Notwithstanding any other provision of this Agreement, if
the value and amounts of benefits under this Agreement, together with any other
amounts and the value of benefits received or to be received by the Employee in
connection with a Change in Control would cause any amount to be nondeductible
by the Bank or the Holding Company for federal income tax purposes pursuant to
Section 280G of the Code in effect as of the Commencement Date, then amounts and
benefits under this Agreement shall be reduced (not less than zero) to the
extent necessary so as to maximize amounts and the value of benefits to the
Employee without causing any amount to become nondeductible by the Bank or the
Holding Company pursuant to or by reason of such Section 280G in effect as of
the Commencement Date and the Employee shall determine the allocation of such
reduction among payments and benefits to the Employee.
(b) Any payments made to the Employee pursuant to this
Agreement, or otherwise, are subject to and conditioned upon their compliance
with 12 U.S.C. 1828(k) and any regulations promulgated thereunder.
9. No Mitigation. The Employee shall not be required to mitigate the
amount of any salary or other payment or benefit provided for in this Agreement
by seeking other employment or otherwise, nor shall the amount of any payment or
benefit provided for in this Agreement be reduced by any compensation earned by
the Employee as the result of employment by another employer, by retirement
benefits after the Date of Termination or otherwise.
10. Attorneys Fees. In the event the Bank exercises its right of
Termination for Cause, but it is determined by a court of competent jurisdiction
or by an arbitrator pursuant to Section 17 that cause did not exist for such
termination, or if in any event it is determined by any such court or arbitrator
that the Bank has failed to make timely payment of any amounts owed to the
Employee under this Agreement, the Employee shall be entitled to reimbursement
for all reasonable costs, including attorneys' fees, incurred in challenging
such termination or collecting such amounts. Such reimbursement shall be in
addition to all rights to which the Employee is otherwise entitled under this
Agreement.
11. No Assignments.
(a) This Agreement is personal to each of the parties hereto,
and neither party may assign or delegate any of its rights or obligations
hereunder without first obtaining the written consent of the other party;
provided, however, that the Bank shall require any successor or assign (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Bank, by an assumption
agreement in form and substance satisfactory to the Employee, to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Bank would be required to perform it if no such succession or
assignment had taken place. Failure of the Bank to obtain such an assumption
agreement prior to the effectiveness of any such succession or assignment shall
be a breach of this Agreement and
7
<PAGE>
shall entitle the Employee to compensation from the Bank in the same amount and
on the same terms as the compensation pursuant to Section 7(d) hereof. For
purposes of implementing the provisions of this Section 11(a), the date on which
any such succession becomes effective shall be deemed the Date of Termination.
(b) This Agreement and all rights of the Employee hereunder
shall inure to the benefit of and be enforceable by the Employee's personal and
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Employee should die while any
amounts would still be payable to the Employee hereunder if the Employee had
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to the Employee's devisee,
legatee or other designee or if there is no such designee, to the Employee's
estate.
12. Notice. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when personally delivered or sent by certified
mail, return receipt requested, postage prepaid, to the Bank at its home office,
to the attention of the Board of Directors with a copy to the Secretary of the
Bank, or, if to the Employee, to such home or other address as the Employee has
most recently provided in writing to the Bank.
13. Amendments. No amendments or additions to this Agreement shall be
binding unless in writing and signed by both parties, except as herein otherwise
provided.
14. Headings. The headings used in this Agreement are included solely
for convenience and shall not affect, or be used in connection with, the
interpretation of this Agreement.
15. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
16. Governing Law. This Agreement shall be governed by the laws of the
United States to the extent applicable and otherwise by the laws of the State of
Maryland.
17. Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator's award in any court having
jurisdiction.
8
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE
ENFORCED BY THE PARTIES.
Attest: Wyman Park Federal Savings & Loan
Association
- --------------------- ---------------------------
Secretary By:
Its:
Employee
----------------------------
Ernest A. Moretti
9
Exhibit 10.3
WYMAN PARK BANCORPORATION, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
Effective as of July 1, 1997
<PAGE>
WYMAN PARK BANCORPORATION, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
TABLE OF CONTENTS
PREAMBLE 1
ARTICLE I DEFINITION OF TERMS AND CONSTRUCTION
1.1 Definitions
(a) "Act" 2
(b) "Administrator" 2
(c) "Annual Additions" 2
(d) "Authorized Leave of Absence" 2
(e) "Beneficiary" 2
(f) "Board of Directors" 2
(g) "Break" 3
(h) "Code" 3
(i) "Compensation" 3
(j) "Date of Hire" 3
(k) "Disability" 3
(l) "Disability Retirement Date" 3
(m) "Early Retirement Date" 4
(n) "Effective Date" 4
(o) "Eligibility Period" 4
(p) "Employee" 4
(q) "Employer" 4
(r) "Employer Securities" 4
(s) "Entry Date" 4
(t) "Exempt Loan" 4
(u) "Former Participant" 4
(v) "Fund" 4
(w) "Hour of Service" 5
(x) "Investment Adjustments" 5
(y) "Limitation Year" 5
(z) "Normal Retirement Date" 5
(aa) "Participant" 5
(bb) "Plan" 6
(cc) "Plan Year" 6
(dd) "Qualified Domestic Relations Order" 6
(ee) "Retirement" 6
(ff) "Service" 6
<PAGE>
(gg) "Sponsor" 6
(hh) "Trust Agreement" 6
(ii) "Trustee" 7
(jj) "Valuation Date" 7
(kk) "Year of Service" 7
1.2 Plurals and Gender 7
1.3 Incorporation of Trust Agreement 7
1.4 Headings 8
1.5 Severability 8
1.6 References to Governmental Regulations 8
ARTICLE II PARTICIPATION
2.1 Commencement of Participation 9
2.2 Termination of Participation 9
2.3 Resumption of Participation 9
2.4 Determination of Eligibility 10
ARTICLE III CREDITED SERVICE
3.1 Service Counted for Eligibility Purposes 11
3.2 Service Counted for Vesting Purposes 11
3.3 Credit for Pre-Break Service 11
3.4 Service Credit During Authorized Leaves 11
3.5 Service Credit During Maternity or
Paternity Leave 12
3.6 Ineligible Employees 12
ARTICLE IV CONTRIBUTIONS
4.1 Employee Stock Ownership Contributions 13
4.2 Time and Manner of Employee Stock Ownership
Contributions 13
4.3 Records of Contributions 14
4.4 Erroneous Contributions 14
4.5 Re-employed Veterans 15
ARTICLE V ACCOUNTS, ALLOCATIONS AND INVESTMENTS
5.1 Establishment of Separate Participant
Accounts 16
5.2 Establishment of Suspense Account 16
5.3 Allocation of Earnings, Losses and Expenses 17
5.4 Allocation of Forfeitures 17
5.5 Allocation of Annual Employee Stock
Ownership Contributions 17
5.6 Limitation on Annual Additions 18
<PAGE>
5.7 Erroneous Allocations 21
5.8 Value of Participant's Interest in Fund 21
5.9 Investment of Account Balances 21
ARTICLE VI RETIREMENT, DEATH AND DESIGNATION
OF BENEFICIARY
6.1 Normal Retirement 22
6.2 Early Retirement 22
6.3 Disability Retirement 22
6.4 Death Benefits 22
6.5 Designation of Death Beneficiary and
Manner of Payment 23
ARTICLE VII VESTING AND FORFEITURES
7.1 Vesting on Death, Disability, Normal Retirement 24
7.2 Vesting on Termination of Participation 24
7.3 Disposition of Forfeitures 24
ARTICLE VIII EMPLOYEE STOCK OWNERSHIP RULES
8.1 Right to Demand Employer Securities 26
8.2 Voting Rights 26
8.3 Nondiscrimination in Employee Stock Owner-
ship Contributions 26
8.4 Dividends 27
8.5 Exempt Loans 27
8.6 Exempt Loan Payments 29
8.7 Put Option 30
8.8 Diversification Requirements 30
8.9 Independent Appraiser 31
ARTICLE IX PAYMENTS AND DISTRIBUTIONS
9.1 Payments on Termination of Service
- In General 32
9.2 Commencement of Payments 32
9.3 Mandatory Commencement of Benefits 33
9.4 Required Beginning Dates 35
9.5 Form of Payment 35
9.6 Payments Upon Termination of Plan 36
9.7 Distribution Pursuant to Qualified
Domestic Relations Orders 36
9.8 Cash-Out Distributions 36
9.9 ESOP Distribution Rules 37
9.10 Withholding 37
9.11 Waiver of 30-day Notice 38
<PAGE>
9.12 Re-employed Veterans 38
ARTICLE X PROVISIONS RELATING TO TOP-HEAVY PLANS
10.1 Top-Heavy Rules to Control 39
10.2 Top-Heavy Plan Definitions 39
10.3 Calculation of Accrued Benefits 41
10.4 Determination of Top-Heavy Status 42
10.5 Determination of Super Top-Heavy Status 42
10.6 Minimum Contribution 43
10.7 Vesting 44
10.8 Maximum Benefit Limitation 44
ARTICLE XI ADMINISTRATION
11.1 Appointment of Administrator 45
11.2 Resignation or Removal of Administrator 45
11.3 Appointment of Successors: Terms of
Office, Etc. 45
11.4 Powers and Duties of Administrator 45
11.5 Action by Administrator 47
11.6 Participation by Administrators 47
11.7 Agents 47
11.8 Allocation of Duties 47
11.9 Delegation of Duties 47
11.10 Administrator's Action Conclusive 48
11.11 Compensation and Expenses of
Administrator 48
11.12 Records and Reports 48
11.13 Reports of Fund Open to Participants 48
11.14 Named Fiduciary 48
11.15 Information from Employer 49
11.16 Reservation of Rights by Employer 49
11.17 Liability and Indemnification 49
11.18 Service as Trustee and Administrator 49
<PAGE>
ARTICLE XII CLAIMS PROCEDURE
12.1 Notice of Denial 50
12.2 Right to Reconsideration 50
12.3 Review of Documents 50
12.4 Decision by Administrator 50
12.5 Notice by Administrator 50
ARTICLE XIII AMENDMENTS, TERMINATION AND MERGER
13.1 Amendments 51
13.2 Consolidation, Merger or Other
Transactions of Employer 51
13.3 Consolidation or Merger of Trust 52
13.4 Bankruptcy or Insolvency of Employer 52
13.5 Voluntary Termination 53
13.6 Partial Termination of Plan or Permanent
Discontinuance of Contributions 53
ARTICLE XIV MISCELLANEOUS
14.1 No Diversion of Funds 54
14.2 Liability Limited 54
14.3 Incapacity 54
14.4 Spendthrift Clause 54
14.5 Benefits Limited to Fund 55
14.6 Cooperation of Parties 55
14.7 Payments Due Missing Persons 55
14.8 Governing Law 55
14.9 Nonguarantee of Employment 56
14.10 Counsel 56
<PAGE>
WYMAN PARK BANCORPORATION, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
PREAMBLE
Effective as of July 1, 1997, Wyman Park Bancorporation, Inc., a
Delaware corporation (the "Sponsor"), has adopted the Wyman Park Bancorporation,
Inc. Employee Stock Ownership Plan in order to enable Participants to share in
the growth and prosperity of the Sponsor and its wholly owned subsidiary, Wyman
Park Federal Savings & Loan Association, and to provide Participants with an
opportunity to accumulate capital for their future economic security by
accumulating funds to provide retirement, death and disability benefits. The
Plan is a stock bonus plan designed to meet the re quirements of an employee
stock ownership plan as described at Section 4975(e)(7) of the Code and Section
407(d)(6) of ERISA. The primary purpose of the employee stock ownership plan is
to invest in employer securities. The Sponsor intends that the Plan will qualify
under Sections 401(a) and 501(a) of the Code and will comply with the provisions
of ERISA. The Plan has been drafted to comply with the Tax Reform Act of 1986,
the Omnibus Budget Reconciliation Act of 1986, the Omnibus Budget Reconciliation
Act of 1987, the Technical and Miscellaneous Revenue Act of 1988, the Revenue
Reconciliation Act of 1989, the Omnibus Budget Reconciliation Act of 1993, and
the Small Business Job Protection Act of 1986.
The terms of this Plan shall apply only with respect to Employees of
the Employer on and after July 1, 1997.
<PAGE>
ARTICLE I
DEFINITION OF TERMS AND CONSTRUCTION
1.1 Definitions.
Unless a different meaning is plainly implied by the context, the
following terms as used in this Plan shall have the following meanings:
(a) "Act" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, or any successor statute.
(b) "Administrator" shall mean the administrative committee provided
for in Article XI.
(c) "Annual Additions" shall mean, with respect to each Participant,
the sum of those amounts allocated to the Participant's accounts under this Plan
and under any other qualified defined contribution plan to which the Employer
contributes for any Limitation Year, consisting of the follow ing:
(1) Employer contributions;
(2) Forfeitures; and
(3) Voluntary contributions (if any).
(d) "Authorized Leave of Absence" shall mean an absence from Service
with respect to which the Employee may or may not be entitled to Compensation
and which meets any one of the following requirements:
(1) Service in any of the armed forces of the United States for
up to 36 months, provided that the Employee resumes Service within 90
days after discharge, or such longer period of time during which such
Employee's employment rights are protected by law; or
(2) Any other absence or leave expressly approved and granted by
the Employer which does not exceed 24 months, provided that the
Employee resumes Service at or before the end of such approved leave
period. In approving such leaves of absence, the Employer shall treat
all Employees on a uniform and nondiscriminatory basis.
(e) "Beneficiary" shall mean such persons as may be designated by the
Participant to receive benefits after the death of the Participant, or such
persons designated by the Administrator to receive benefits after the death of
the Participant, all as provided in Section 6.5.
(f) "Board of Directors" shall mean the Board of Directors of the
Sponsor.
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(g) "Break" shall mean a Plan Year during which an Employee fails to
complete more than 500 Hours of Service.
(h) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time, or any successor statute.
(i) "Compensation" shall mean the amount of remuneration paid to an
Employee by the Employer, after the date on which the Employee becomes a
Participant, for services rendered to the Employer during a Plan Year, including
base salary, bonuses, overtime and commissions, and any amount of compensation
contributed pursuant to a salary reduction election under Code Section 401(k)
and any amount of compensation contributed to a cafeteria plan described at
Section 125 of the Code, but excluding amounts paid by the Employer or accrued
with respect to this Plan or any other qualified or non-qualified unfunded plan
of deferred compensation or other employee welfare plan to which the Employer
contributes, payments for group insurance, medical benefits, reimburse ment for
expenses, and other forms of extraordinary pay, and excluding amounts accrued
for a prior year. Notwithstanding anything herein to the contrary, the annual
Compensation of each Participant taken into account under the Plan for any Plan
Year shall not exceed $160,000, as adjusted from time to time in accordance with
Section 415(d) of the Code.
(j) "Date of Hire" shall mean the date on which a person shall perform
his first Hour of Service. Notwithstanding the foregoing, in the event a person
incurs one or more consecutive Breaks after his initial Date of Hire which
results in the forfeiture of his pre-Break Service pursuant to Section 3.3, his
"Date of Hire" shall thereafter be the date on which he completes his first Hour
of Service after such Break or Breaks.
(k) "Disability" shall mean a physical or mental impairment which
prohibits a Participant from engaging in any occupation for wages or profit and
which has caused the Social Security Administration to classify the individual
as "disabled" for purposes of Social Security.
(l) "Disability Retirement Date" shall mean the first day of the month
after which a Participant incurs a Disability.
(m) "Early Retirement Date" shall mean the first day of the month
coincident with or next following the date on which a Participant attains age 55
and completes 5 Years of Service.
(n) "Effective Date" shall mean July 1, 1997.
(o) "Eligibility Period" shall mean the period of 12 consecutive months
commencing on an Employee's Date of Hire. Succeeding eligibility computation
periods after the initial eligibility computation period shall be based on Plan
Years which include the first anniversary of an Employee's Date of Hire.
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<PAGE>
(p) "Employee" shall mean any person employed by the Employer,
including officers but excluding directors in their capacity as such; provided,
however, that the term "Employee" shall not include leased employees, employees
regularly employed outside the employer's own offices in connection with the
operation and maintenance of buildings or other properties acquired through
foreclosure or deed, and any employee included in a unit of employees covered by
a collective-bargaining agreement with the Employer that does not expressly
provide for participation of such employees in this Plan, where there has been
good-faith bargaining between the Employer and employees' representatives on the
subject of retirement benefits.
(q) "Employer" shall mean Wyman Park Bancorporation, Inc., a Delaware
corporation, and its wholly owned subsidiary, Wyman Park Federal Savings & Loan
Association, or any successors to the aforesaid corporations by merger,
consolidation or otherwise, which may agree to continue this Plan, or any
affiliated or subsidiary corporation or business organization of any Employer
which, with the consent of the Sponsor, shall agree to become a party to this
Plan.
(r) "Employer Securities" shall mean the common stock issued by Wyman
Park Bancorporation, Inc., a Delaware corporation.
(s) "Entry Date" shall mean each July 1 and January 1, so long as this
Plan shall remain in effect.
(t) "Exempt Loan" shall mean a loan described at Section 4975(d)(1) of
the Code to the Trustee to purchase Employer Securities for the Plan, made or
guaranteed by a disqualified person, as defined at Section 4975(e)(2) of the
Code, including, but not limited to, a direct loan of cash, a purchase money
transaction, an assumption of an obligation of the Trustee, an unsecured
guarantee or the use of assets of such disqualified person as collateral for
such a loan.
(u) "Former Participant" shall mean any previous Participant whose
participation has terminated but who has a vested interest in the Plan which has
not been distributed in full.
(v) "Fund" shall mean the Fund maintained by the Trustee pursuant to
the Trust Agreement in order to provide for the payment of the benefits
specified in the Plan.
(w) "Hour of Service" shall mean each hour for which an Employee is
directly or indirectly paid or entitled to payment by an Employer for the
performance of duties or for reasons other than the performance of duties (such
as vacation time, holidays, sickness, disability, paid lay-offs, jury duty and
similar periods of paid nonworking time). To the extent not otherwise included,
Hours of Service shall also include each hour for which back pay, irrespective
of mitigation of damages, is either award ed or agreed to by the Employer. Hours
of working time shall be credited on the basis of actual hours worked, even
though compensated at a premium rate for overtime or other reasons. In computing
and crediting Hours of Service for an Employee under this Plan, the rules set
forth in Sections 2530.200b- 2(b) and (c) of the Department of Labor Regulations
shall apply, said Sections being herein incorporated
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by reference. Hours of Service shall be credited to the Plan Year or other
relevant period during which the services were performed or the nonworking time
occurred, regardless of the time when Compensation therefor may be paid. Any
Employee for whom no hourly employment records are kept by the Employer shall be
credited with 45 Hours of Service for each calendar week in which he would have
been credited with a least one Hour or Service under the foregoing provisions,
if hourly records were available. Effective January 1, 1985, for absences
commencing on or after that date, solely for purposes of determining whether a
Break for participation and vesting purposes has occurred in an Eligibility
Period or Plan Year, an individual who is absent from work for maternity or
paternity reasons shall receive credit for the Hours of Service which would
otherwise have been credited to such individual but for such absence, or in any
case in which such hours cannot be determined, 8 Hours of Service per day of
such absence. For purposes of this Section 1.1(w), an absence from work for
maternity or paternity reasons means an absence (1) by reason of the pregnancy
of the individual, (2) by reason of a birth of a child of the individual, (3) by
reason of the placement of a child with the individual in connection with the
adoption of such child by such individual, or (4) for purposes of caring for
such child for a period beginning immediately following such birth or placement.
The Hours of Service credited under this provision shall be credited (1) in the
computation period in which the absence begins if the crediting is necessary to
prevent a Break in that period, or (2) in all other cases, in the following
computation period.
(x) "Investment Adjustments" shall mean the increases and/or decreases
in the value of a Participant's accounts attributable to earnings, gains, losses
and expenses of the Fund, as set forth in Section 5.3.
(y) "Limitation Year" shall mean the Plan Year.
(z) "Normal Retirement Date" shall mean the first day of the month
coincident with or during which a Participant attains age 65 and completes the
fifth anniversary of his participation in the Plan.
(aa) "Participant" shall mean an Employee who has met all of the
eligibility requirements of the Plan and who is currently included in the Plan
as provided in Article II hereof.
(bb) "Plan" shall mean the Wyman Park Bancorporation, Inc. Employee
Stock Ownership Plan, as described herein or as hereafter amended from time to
time.
(cc) "Plan Year" shall mean any 12 consecutive month period commencing
on July 1 and ending on June 30.
(dd) "Qualified Domestic Relations Order" shall mean any judgment,
decree or order (including approval of a property settlement agreement) that
relates to the provision of child support, alimony, marital property rights to a
spouse, former spouse, child or other dependent of the Participant (all such
persons hereinafter termed "alternate payee") and is made pursuant to a State
domestic
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<PAGE>
relations law (including community property law) and, further, that creates or
recognizes the existence of an alternate payee's right to, or assigns to an
alternate payee the right to receive all or a portion of the benefits payable
with respect to a Participant and that clearly specifies the following:
(1) the name and last known mailing address (if available) of the
Participant and the name and mailing address of each alternate payee
to which the order relates;
(2) the amount or percentage of the Participant's benefits to be
paid to an alternate payee or the manner in which the amount is to be
determined; and
(3) the number of payments or period for which payments are
required.
A domestic relations order is not a Qualified Domestic Relations Order
if it:
(1) requires the Plan to provide any type or form of benefit or
any option not otherwise provided under the Plan; or,
(2) requires the Plan to provide increased benefits, or
(3) requires payment of benefits to an alternate payee that is
required to be paid to another alternate payee under a previously
existing Qualified Domestic Relations Order.
(ee) "Retirement" shall mean termination of employment which qualifies
as early, normal or Disability retirement as described in Article VI.
(ff) "Service" shall mean employment with the Employer.
(gg) "Sponsor" shall mean Wyman Park Bancorporation, Inc., a Delaware
corporation.
(hh) "Trust Agreement" shall mean the agreement, dated __________, 1997
by and between Wyman Park Bancorporation, Inc., a Delaware corporation, and
_________________, of _________________, _________________.
(ii) "Trustee" shall mean the Trustee or Trustees by whom the assets of
the Plan are held, as provided in the Trust Agreement, or his or their
successors.
(jj) "Valuation Date" shall mean the last day of each Plan Year. The
Trustee may make additional valuations, at the instruction of the Administrator,
but in no event may the Administrator request additional valuations by the
Trustee more frequently than quarterly. Whenever such date falls on a Saturday,
Sunday or holiday, the preceding business day shall be the Valuation Date.
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<PAGE>
(kk) "Year of Service" shall mean any Plan Year during which an
Employee has completed at least 1,000 Hours of Service, except as otherwise
specified in Article III, in the determination of Years of Service for
eligibility and vesting purposes under this Plan, the term "Year of Service"
shall also mean any Plan Year during which an Employee has completed at least
1,000 Hours of Service with an entity that is:
(1) a member of a controlled group including the Employer, while
it is a member of such controlled group (within the meaning of Section
414(b) of the Code);
(2) in a group of trades or businesses under common control with
the Employer, while it is under common control (within the meaning of
Section 414(c) of the Code);
(3) a member of an affiliated service group including the
Employer, while it is a member of such affiliated service group
(within the meaning of Section 414(m) of the Code); or
(4) a leasing organization, under the circumstances described in
Section 414(n) of the Code.
1.2 Plurals and Gender.
Where appearing in the Plan and the Trust Agreement, the masculine
gender shall include the feminine and neuter genders, and the singular shall
include the plural, and vice versa, unless the context clearly indicates a
different meaning.
1.3 Incorporation of Trust Agreement.
The Trust Agreement, as the same may be amended from time to time, is
intended to be and hereby is incorporated by reference into this Plan and for
all purposes shall be deemed a part of the Plan.
1.4 Headings.
The headings and sub-headings in this Plan are inserted for the
convenience of reference only and are to be ignored in any construction of the
provisions hereof.
1.5 Severability.
In case any provision of this Plan shall be held illegal or void, such
illegality or invalidity shall not affect the remaining provisions of this Plan,
but shall be fully severable, and the Plan shall be construed and enforced as if
said illegal or invalid provisions had never been inserted herein.
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<PAGE>
1.6 References to Governmental Regulations.
References in this Plan to regulations issued by the Internal Revenue
Service, the Department of Labor, or other governmental agencies shall include
all regulations, rulings, procedures, releases and other position statements
issued by any such agency.
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<PAGE>
ARTICLE II
PARTICIPATION
2.1 Commencement of Participation.
(a) Any Employee who completes at least 1,000 Hours of Service during
his Eligibility Period or during any Plan Year beginning after his Date of Hire
shall initially become a Participant on the Entry Date coincident with or next
following the later of the following dates, provided he is employed by the
Employer on that Entry Date:
(1) The date which is 12 months after his Date of Hire; and
(2) The date on which he attains age 21.
(b) Any Employee who had satisfied the requirements set forth in
Section 2.1(a) during the 12-month period prior to the Effective Date shall
become a Participant on the Effective Date, provided he is still employed by the
Employer on the Effective Date.
2.2 Termination of Participation.
After commencement or resumption of his participation, an Employee
shall remain a Participant during each consecutive Plan Year thereafter until
the earliest of the following dates:
(a) His actual Retirement date;
(b) His date of death; or
(c) The last day of a Plan Year during which he incurs a Break.
2.3 Resumption of Participation.
(a) Any Participant whose employment terminates and who resumes Service
before he incurs a Break shall resume participation immediately on the date he
is reemployed.
(b) Except as otherwise provided in Section 2.3(c), any Participant who
incurs one or more Breaks and resumes Service shall resume participation
retroactively as of the first day of the first Plan Year in which he completes a
Year of Service after such Break(s).
(c) Any Participant who incurs one or more Breaks and resumes Service,
but whose pre-Break Service is not reinstated to his credit pursuant to Section
3.3, shall be treated as a new
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<PAGE>
Employee and shall again be required to satisfy the eligibility requirements
contained in Section 2.1 before resuming participation on the appropriate Entry
Date, as specified in Section 2.1.
2.4 Determination of Eligibility.
The Administrator shall determine the eligibility of Employees in
accordance with the provisions of this Article. For each Plan Year, the Employer
shall furnish the Administrator a list of all Employees, indicating the original
date of their reemployment with the Employer and any Breaks they may have
incurred.
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<PAGE>
ARTICLE III
CREDITED SERVICE
3.1 Service Counted for Eligibility Purposes.
Except as provided in Section 3.3, all Years of Service completed by an
Employee shall be counted in determining his eligibility to become a Participant
on and after the Effective Date, whether such Service was completed before or
after the Effective Date.
3.2 Service Counted for Vesting Purposes.
All Years of Service completed by an Employee (including Years of
Service completed prior to the Effective Date) shall be counted in determining
his vested interest in this Plan, except the following:
(a) Service which is disregarded under the provisions of Section 3.3;
(b) Service prior to the Effective Date of this Plan if such Service
would have been disregarded under the "break in service" rules (within the
meaning of Section 1.411(a)-5(b)(6) of the Treasury Regulations).
3.3 Credit for Pre-Break Service.
Upon his resumption of participation following one or a series of
consecutive Breaks, an Employee's pre-Break Service shall be reinstated to his
credit for all purposes of this Plan only if either:
(a) He was vested in any portion of his accrued benefit at the time the
Break(s) began; or
(b) The number of his consecutive Breaks does not equal or exceed the
greater of 5 or the number of his Years of Service credited to him before the
Breaks began.
Except as provided in the foregoing, none of an Employee's Service
prior to one or a series of consecutive Breaks shall be counted for any purpose
in connection with his participation in this Plan thereafter.
3.4 Service Credit During Authorized Leaves.
An Employee shall receive no Service credit under Section 3.1 or 3.2
during any Authorized Leave of Absence. However, solely for the purpose of
determining whether he has incurred a Break during any Plan Year in which he is
absent from Service for one or more Authorized Leaves of
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<PAGE>
Absence, he shall be credited with 45 Hours of Service for each week during any
such leave period. Notwithstanding the foregoing, if an Employee fails to return
to Service on or before the end of a leave period, he shall be deemed to have
terminated Service as of the first day of such leave period and his credit for
Hours of Service, determined under this Section 3.4, shall be revoked.
Notwithstanding anything contained herein to the contrary, an Employee who is
absent by reason of military service as set forth in Section 1.1(d)(1) shall be
given Service credit under this Plan for such military leave period to the
extent, and for all purposes, required by law.
3.5 Service Credit During Maternity or Paternity Leave.
Effective for absences beginning on or after January 1, 1985, for
purposes of determining whether a Break has occurred for participation and
vesting purposes, an individual who is on maternity or paternity leave as
described in Section 1.1(w), shall be deemed to have completed Hours of Service
during such period of absence, all in accordance with Section 1.1(w).
Notwithstanding the foregoing, no credit shall be given for such Hours of
Service unless the individual furnishes to the Administrator such timely
information as the Administrator may reasonably require to determine:
(a) that the absence from Service was attributable to one of the
maternity or paternity reasons enumerated in Section 1.1(w); and
(b) the number of days for which such absence lasted.
In no event, however, shall any credit be given for such leave other than for
determining whether a Break has occurred.
3.6 Ineligible Employees.
Notwithstanding any provisions of this Plan to the contrary, any person
who is employed by the Employer, but who is ineligible to participate in this
Plan, either because of his failure
(a) To meet the eligibility requirements contained in Article II; or
(b) To be an Employee, as defined in Section 1.1(p), shall,
nevertheless, earn Years of Service for eligibility and vesting purposes
pursuant to the rules contained in this Article III. However, such a person
shall not be entitled to receive any contributions hereunder unless and until he
becomes a Participant in this Plan, and then, only during his period of
participation.
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<PAGE>
ARTICLE IV
CONTRIBUTIONS
4.1 Employee Stock Ownership Contributions.
(a) Subject to all of the provisions of this Article IV, for each Plan
Year commencing on or after the Effective Date, the Employer shall make an
Employee Stock Ownership contribution to the Fund, in such amount as may be
determined by the Board of Directors in its discretion. Such contribution shall
be in the form of cash or Employer Securities. In determining the value of
Employer Securities transferred to the Fund as an Employee Stock Ownership
contribution, the Administrator may determine the average of closing prices of
such securities for a period of up to 90 consecutive days immediately preceding
the date on which the securities are contributed to the Fund. In the event that
the Employer Securities are not readily tradable on an established securities
market, the value of the Employer Securities transferred to the Fund shall be
determined by an independent appraiser in accordance with Section 8.9.
(b) In no event shall such contribution by the Employer exceed for any
Plan Year the maximum amount that may be deducted by the Employer under Section
404 of the Code, nor shall such contribution cause the Employer to violate its
regulatory capital requirements. Each Employee Stock Ownership contribution by
the Employer shall be deemed to be made on the express condition that the Plan,
as then in effect, shall be qualified under Sections 401 and 501 of the Code and
that the amount of such contribution shall be deductible from the Employer's
income under Section 404 of the Code.
4.2 Time and Manner of Employee Stock Ownership Contributions.
(a) The Employee Stock Ownership contribution (if any) for each Plan
Year shall be paid to the Trustee in one lump sum or installments at any time on
or before the expiration of the time prescribed by law (including any
extensions) for filing of the Employer's federal income tax return for its
fiscal year ending concurrent with or during such Plan Year. Any portion of the
Employee Stock Ownership contribution for each Plan Year that may be made prior
to the last day of the Plan Year shall be maintained by the Trustee in the
Employee Stock Ownership suspense account described in Section 5.2 until the
last day of such Plan Year.
(b) If an Employee Stock Ownership contribution for a Plan Year is paid
after the close of the Employer's fiscal year which ends concurrent with or
during such Plan Year but on or prior to the due date (including any extensions)
for filing of the Employer's federal income tax return for such fiscal year, it
shall be considered, for allocation purposes, as an Employee Stock Ownership
contribution to the Fund for the Plan Year for which it was computed and
accrued, unless such
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<PAGE>
contribution is accompanied by a statement to the Trustee, signed by a
representative of the Employer, which specifies that the Employee Stock
Ownership contribution is made with respect to the Plan Year in which it is
received by the Trustee. Any Employee Stock Ownership contribution paid by the
Employer during any Plan Year but after the due date (including any extensions)
for filing of its federal income tax return for the fiscal year of the Employer
ending on or before the last day of the preceding Plan Year shall be treated,
for allocation purposes, as an Employee Stock Ownership contribution to the Fund
for the Plan Year in which the contribution is paid to the Trustee.
(c) Notwithstanding anything contained herein to the contrary, no
Employee Stock Ownership contribution shall be made for any year during which a
"limitations account" created pursuant to Section 5.6(c)(2) is in existence
until the balance of such limitations account has been reallocated in accordance
with Section 5.6(c)(2).
4.3 Records of Contributions.
The Employer shall deliver at least annually to the Trustee, with
respect to the contributions contemplated in Section 4.1, a certificate of the
Administrator, in such form as the Trustee shall approve, setting forth:
(a) The aggregate amount of contributions, if any, to the Fund for such
Plan Year;
(b) The names, Internal Revenue Service identifying numbers and current
residential addresses of all Participants in the Plan;
(c) The amount and category of contributions to be allocated to each
such Participant; and
(d) Any other information reasonably required for the proper operation
of the Plan.
4.4 Erroneous Contributions.
(a) Notwithstanding anything herein to the contrary, upon the
Employer's request, a contribution which was made by a mistake of fact, or
conditioned upon the initial qualification of the Plan, under Code Section 401,
or upon the deductibility of the contribution under Section 404 of the Code,
shall be returned to the Employer by the Trustee within one year after the
payment of the contribution, the denial of the qualification or the disallowance
of the deduction (to the extent disallowed), whichever is applicable; provided,
however, that in the case of denial of the initial qualification of the Plan, a
contribution shall not be returned unless an Application for Determination has
been timely filed with the Internal Revenue Service. Any portion of a
contribution returned pursuant to this Section 4.4 shall be adjusted to reflect
its proportionate share of the losses of the fund, but shall not be adjusted to
reflect any earnings or gains. Notwithstanding any provisions of this Plan to
the contrary, the right or claim of any Participant or Beneficiary to any asset
of the Fund or any benefit under this Plan shall be subject to and limited by
this Section 4.4.
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(b) In no event shall voluntary Employee contributions be accepted. Any
such voluntary Employee contributions (and any earnings attributable thereto)
mistakenly received by the Trustee shall promptly be returned to the
Participant.
4.5 Re-employed Veterans.
Notwithstanding anything to the contrary set forth in the Plan, if an
Employee has been rehired by the Employer and is eligible for the benefits
provided by the Uniformed Services Employment and Reemployment Rights Act by
virtue of his prior military service and by virtue of his having met all the
requirements of that Act for being accorded the benefits provided thereunder, he
shall not be deemed to have incurred a Break because of his period of military
service. The Employee's military service shall be treated as Service hereunder
for eligibility, vesting and benefit accrual purposes. Such Employee shall be
entitled to all Employer contributions to which he otherwise would have been
entitled had he been employed by the Employer during the period of his military
service. In computing contribution amounts dependent upon or limited by the
amount of Compensation the Employee earned or would have earned, the Employee
shall be treated as receiving Compensation from the Employer during the period
of military service equal to the Compensation that Employee otherwise would have
received from the Employer during that period, or, if the Compensation the
Employee otherwise would have received is not reasonably certain, the Employee's
average Compensation from the Employer during the period immediately preceding
the period of military service. Such Employee shall not, however, be credited
with any earnings on any such additional Employer or Employee contributions
described in this Section before the contribution is actually made. Furthermore,
no forfeitures shall be allocated to such Employee's Accounts hereunder for the
period of military service. The rules governing the limitations on all such
contributions that may be required hereunder the Employer shall be governed by
Section 414(u) of the Code and any regulations promulgated thereunder.
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ARTICLE V
ACCOUNTS, ALLOCATIONS AND INVESTMENTS
5.1 Establishment of Separate Participant Accounts.
The Administrator shall establish and maintain separate individual
accounts for Participants in the Plan and for each Former Participant in
accordance with the provisions of this Article V. Such separate accounts shall
be for accounting purposes only and shall not require a segregation of the Fund,
and no Participant, Former Participant or Beneficiary shall acquire any right to
or interest in any specific assets of the Fund as a result of the allocations
provided for under this Plan, except where segregation is expressly provided for
in this Plan.
(a) Employee Stock Ownership Accounts.
The Administrator shall establish a separate Employee Stock Ownership
Account in the Fund for each Participant. The account shall be credited as of
the last day of each Plan Year with the amounts allocated to the Participant
under Sections 5.4 and 5.5. The Administrator may establish subaccounts
hereunder, an Employer Stock Account reflecting a Participant's interest in
Employer Securities held by the Trust and an Other Investments Account
reflecting the Participant's interest in his Employee Stock Ownership Account
other than Employer Securities.
(b) Distribution Accounts.
In any case where distribution of a terminated Participant's vested
interest in the Plan is to be deferred, the Administrator shall establish a
separate, nonforfeitable account in the Fund to which the balance in his
Employee Stock Ownership Account in the Plan shall be transferred after such
Participant incurs a Break. Unless the Former Participant's distribution
accounts are segregated for investment purposes pursuant to section 9.4, they
shall share in Investment Adjustments.
(c) Other Accounts.
The Administrator shall establish such other separate accounts for each
Participant as may be necessary or desirable for the convenient administration
of the Fund.
5.2 Establishment of Suspense Accounts.
The Administrator shall establish separate accounts to be known as
"suspense accounts." There shall be credited to such appropriate suspense
accounts any Employee Stock Ownership contributions that may be made prior to
the last day of the Plan Year, as provided in Section 4.2. The suspense accounts
shall share proportionately as to time and amount in any Investment Adjustments.
As of the last day of each Plan Year, the balance of the Employee Stock
Ownership suspense account
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shall be added to the Employee Stock Ownership contribution and allocated to the
Employee Stock Ownership Accounts of Participants as provided in Section 5.5,
except as provided herein. In the event that the Plan takes an Exempt Loan, the
Employer Securities purchased thereby shall be allocat ed to a separate Exempt
Loan Suspense Account, from which allocations shall be made in accordance with
Section 8.5.
5.3 Allocation of Earnings, Losses and Expenses.
As of each Valuation Date, any increase or decrease in the net worth of
the aggregate Employee Stock Ownership Accounts held in the Fund attributable to
earnings, losses, expenses and unrealized appreciation or depreciation in each
such aggregate Account, as determined by the Trustee pursuant to the Trust
Agreement, shall be credited to or deducted from the appropriate suspense
accounts and all Participants' Employee Stock Ownership Accounts (except
segregated distribution accounts described in Section 5.1(b) and the
"limitations account" described in Section 5.6(c)(4)) in the proportion that the
value of each such Account (determined immediately prior to such allocation and
before crediting any Employee Stock Ownership contributions and forfeitures for
the current Plan Year but after adjustment for any transfer to or from such
Accounts and for the time such funds were in such Accounts) bears to the value
of all Employee Stock Ownership Accounts.
5.4 Allocation of Forfeitures.
As of the last day of each Plan Year, all forfeitures attributable to
the Employee Stock Ownership Accounts which are then available for reallocation
shall be, as appropriate, added to the Employee Stock Ownership contribution (if
any) for such year and allocated among the Participants' Employee Stock
Ownership Accounts, as appropriate, in the manner provided in Sections 5.5 and
5.6.
5.5 Allocation of Annual Employee Stock Ownership Contributions.
As of the last day of each Plan Year for which the Employer shall make
an Employee Stock Ownership contribution, the Administrator shall allocate the
Employee Stock Ownership contribution (including reallocable forfeitures) for
such Plan Year to the Employee Stock Ownership account of each Participant who
completed at least 1,000 Hours of Service during that Plan Year, provided that
he is still employed by the Employer on the last day of the Plan Year. Such
allocation shall be made in the same proportion that each such Participant's
Compensation for such Plan Year bears to the total Compensation of all such
Participants for such Plan Year, subject to Section 5.6. Notwithstanding the
foregoing, if a Participant attains his Normal Retirement Date and terminates
Service prior to the last day of the Plan Year but after completing 1,000 Hours
of Service, he shall be entitled to an allocation based on his Compensation
earned prior to his termination and during the Plan Year. Furthermore, if a
Participant completes 1,000 Hours of Service and is on a Leave of Absence on the
last day of the Plan Year because of pregnancy or other medical reason, such a
Participant shall be entitled to an allocation based on his Compensation earned
during such Plan Year.
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5.6 Limitation on Annual Additions.
(a) Notwithstanding any provisions of this Plan to the contrary, the
total Annual Additions credited to a Participant's accounts under this Plan (and
under any other defined contribution plan to which the Employer contributes) for
any Limitation Year shall not exceed the lesser of:
(1) 25% of the Participant's compensation for such Limitation
Year; or
(2) $30,000 (or, if greater, one-fourth of the defined benefit
dollar limitation set forth in Section 415(b)(1)(A) of the Code).
Whenever otherwise allowed by law, the maximum amount of $30,000 shall
be automatically adjusted annually for cost-of-living increases in
accordance with Section 415(d) of the Code and the highest such
increase effective at any time during the Limitation Year shall be
effective for the entire Limitation Year, without any amendment to
this Plan.
(b) Solely for the purpose of this Section 5.6, the term "compensation"
is defined as wages, salaries, and fees for professional services and other
amounts received (without regard to whether or not an amount is paid in cash)
for personal services actually rendered in the course of employment with the
Employer maintaining the Plan to the extent that the amounts are includable in
gross income (including, but not limited to, commissions paid to salesmen,
compensation for services on the basis of a percentage of profits, commissions
on insurance premiums, tips, bonuses, fringe benefits, and reimbursements or
other expense allowances under a nonaccountable plan (as described in Treas.
Regs. Section 1.62-2(c)), and excluding the following:
(1) Employer contributions to a plan of deferred compensation
which are not includible in the Employee's gross income for the
taxable year in which contributed, or Employer contributions under a
simplified employee pension plan to the extent such contributions are
deductible by the Employee, or any distributions from a plan of
deferred compensation;
(2) Amounts realized from the exercise of a non-qualified stock
option, or when restricted stock (or property) held by the employee
either becomes freely transferable or is no longer subject to a
substantial risk of forfeiture;
(3) Amounts realized from the sale, exchange or other disposition
of stock acquired under a qualified stock option; and
(4) Other amounts which received special tax benefits, or
contributions made by the employer (whether or not under a salary
reduction agreement) towards the purchase of an annuity contract
described in section 403(b) of the Code (whether or not the
contributions are actually excludable from the gross income of the
Employee).
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(c) In the event that the limitations on Annual Additions described in
this Section 5.6(a) above are exceeded with respect to any Participant in any
Limitation Year, then the contributions allocable to the Participant for such
year shall be reduced to the minimum extent required by such limitations in the
following order of priority:
(1) If any further reductions in Annual Additions are necessary,
then the Employee Stock Ownership contributions and forfeitures
allocated during such Limitation Year to the Participant's Employee
Stock Ownership Account shall be reduced. The amount of any such
reductions in the Employee Stock Ownership contributions and
forfeitures shall be reallocated to all other Participants in the same
manner as set forth under Sections 5.4 and 5.5.
(2) Any amounts which cannot be reallocated to other Participants
in a current Limitation Year in accordance with Section 5.6(c)(1)
above because of the limitations contained in Sections 5.6(a) and (d)
shall be credited to an account designated as the "limitations
account" and carried forward to the next and subsequent Limitation
Years until it can be reallocated to all Participants as set forth in
Sections 5.4, and 5.5, as appropriate. No Investment Adjustments shall
be allocated to this limitations account. In the next and subsequent
Limitation Years, all amounts in the limitations account must be
allocated in the manner described in Sections 5.4 and 5.5, as
appropriate, before any Employee Stock Ownership contributions may be
made to this Plan for that Limitation Year.
(3) The Administrator shall determine to what extent the Annual
Additions to any Participant's Employee Stock Ownership Account must
be reduced in each Limitation Year. The Administrator shall reduce the
Annual Additions to all other qualified, tax-exempt retirement plans
maintained by the Employer in accordance with the terms contained
therein for required reductions or reallocations mandated by Section
415 of the Code before reducing any Annual Additions in this Plan.
(4) In the event this Plan is voluntarily terminated by the
Employer under Section 13.5, any amounts credited to the limitations
account described in Section 5.6(c)(2) above which have not be
reallocated as set forth herein shall be distributed to the
Participants who are still employed by the Employer on the date of
termination, in the proportion that each Participant's Compensation
bears to the Compensation of all Participants.
(d) The Annual Additions credited to a Participant's accounts for each
Limitation Year are further limited so that in the case of an Employee who is a
Participant in both this Plan and any qualified defined benefit plan
(hereinafter referred to as a "pension plan") of the Employer, the sum of (1)
and (2) below will not exceed 1.0:
(1) (A) The projected annual normal retirement benefit of a
Participant under the pension plan, divided by
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(B) The lesser of:
(i) The product of 1.25 multiplied by the dollar
limitation in effect under Section 415(b)(1)(A) of the Code
for such Limitation Year, or
(ii) The product of 1.4 multiplied by the amount of
compensation which may be taken into account under Section
415(b)(1)(B) of the Code for the Participant for such
Limitation Year; plus
(2) (A) The sum of Annual Additions credited to the Participant under
this Plan for all Limitation Years, divided by:
(B) The sum of the lesser of the following amounts
determined for such Limitation Year and for each prior year of
service with the Employer:
(i) The product of 1.25 multiplied by the dollar
limitation in effect under Section 415(b)(1)(A) of the Code
for such Limitation Year, or
(ii) The product of 1.4 multiplied by the amount of
compensation which may be taken into account under Section
415(b)(1)(B) of the Code for the Participant for such
Limitation Year.
The Administrator may, in calculating the defined contribution plan
fraction described in Section 5.6(d)(2), elect to use the transitional rule
pursuant to Section 415(e)(6) of the Code, if applicable. If the sum of the
fractions produced above will exceed 1.0, even after the use of the "fresh
start" rule contained in Section 235 of the Tax Equity and Fiscal Responsibility
Act of 1982 ("TEFRA"), if applicable, then the same provisions as stated in
Section 5.6(c) above shall apply. If, even after the reductions provided for in
Section 5.6(c), the sum of the fractions still exceed 1.0, then the benefits of
the Participant provided under the pension plan shall be reduced to the extent
neces sary, in accordance with Treasury Regulations issued under the Code.
Solely for the purposes of this Section 5.6(d), the term "years of service"
shall mean all years of service defined by Treasury Regulations issued under
Section 415 of the Code.
(e) In the event that the Employer is a member of (1) a controlled
group of corporations or a group of trades or businesses under common control
(as described in Section 414(b) or (c) of the Code, as modified by Section
415(h) thereof), or (2) an affiliated service group (as described in Section
414(m) of the Code), the Annual Additions credited to any Participant's accounts
in any such Limitation Year shall be further limited by reason of the existence
of all other qualified retirement plans maintained by such affiliated
corporations, other entities under common control or other members of the
affiliated service group, to the extent such reduction is required by Section
415 of the Code and the regulations promulgated thereunder. The Administrator
shall determine if any such
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reduction in the Annual Additions to a Participant's accounts is required for
this reason, and if so, the same provisions as stated in 5.6(c) and (d) above
shall apply.
(f) Annual Additions shall not include any Employer contributions which
are used by the Trust to pay interest on an Exempt Loan nor any forfeitures of
Employer Securities purchased with the proceeds of an Exempt Loan, provided that
not more than one-third of the Employer contributions are allocated to
Participants who are among the group of employees deemed "highly compensated
employees" within the meaning of Code Section 414(q).
5.7 Erroneous Allocations.
No Participant shall be entitled to any Annual Additions or other
allocations to his accounts in excess of those permitted under Sections 5.3,
5.4, 5.5, and 5.6. If it is determined at anytime that the Administrator and/or
Trustees have erred in accepting and allocating any contributions or forfeitures
under this Plan, or in allocating Investment Adjustments, or in excluding or
including any person as a Participant, then the Administrator, in a uniform and
nondiscriminatory manner, shall determine the manner in which such error shall
be corrected and shall promptly advise the Trustee in writing of such error and
of the method for correcting such error. The accounts of any or all Participants
may be revised, if necessary, in order to correct such error.
5.8 Value of Participant's Interest in Fund.
At any time, the value of a Participant's interest in the Fund shall
consist of the aggregate value of his Employee Stock Ownership Account and his
distribution account, if any, determined as of the next-preceding Valuation
Date. The Administrator shall maintain adequate records of the cost basis of
Employer Securities allocated to each Participant's Employer Stock Ownership
Account.
5.9 Investment of Account Balances.
The Employee Stock Ownership Accounts shall be invested primarily in
Employer Securities. Employer Securities shall constitute at least 51% of the
assets of all Employee Stock Ownership Accounts. All sales of Employer
Securities by the Trustee attributable to the Employee Stock Ownership Accounts
of all Participants shall be charged pro rata to the Employee Stock Ownership
Accounts of all Participants.
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ARTICLE VI
RETIREMENT, DEATH AND DESIGNATION OF BENEFICIARY
6.1 Normal Retirement.
A Participant who reaches his Normal Retirement Date and who shall
retire at that time shall thereupon be entitled to retirement benefits based on
the value of his interest in the Fund, payable pursuant to the provisions of
Section 9.1. A Participant who remains in Service after his Normal Retirement
Date shall not be entitled to any retirement benefits until his actual
termination of Service thereafter (except as provided in Section 9.3(g)) and he
shall meanwhile continue to participate in this Plan.
6.2 Early Retirement.
A Participant who reaches his Early Retirement Date may retire at such
time (or, at his election, as of the first day of any month thereafter prior to
his Normal Retirement Date) and shall thereupon be entitled to retirement
benefits based on the value of his interest in the Fund, payable pursuant to the
provisions of Section 9.1.
6.3 Disability Retirement.
In the event a Participant incurs a Disability, he may retire on his
Disability Retirement Date and shall thereupon be entitled to retirement
benefits based on the value of his interest in the Fund, payable pursuant to the
provisions of Section 9.1.
6.4 Death Benefits.
(a) Upon the death of a Participant before his Retirement or other
termination of Service, the value of his interest in the Fund shall be payable
pursuant to the provisions of Section 9.1. The Administrator shall direct the
Trustee to distribute his interest in the Fund to any surviving Beneficiary
designated by the Participant or, if none, to such persons designated by the
Administrator pursuant to Section 6.5.
(b) Upon the death of a Former Participant, the Administrator shall
direct the Trustee to distribute any undistributed balance of his interest in
the Fund to any surviving Beneficiary designated by him or, if none, to such
persons designated by the Administrator pursuant to Section 6.5.
(c) The Administrator may require such proper proof of death and such
evidence of the right of any person to receive the interest in the Fund of a
deceased Participant or Former Partici pant as the Administrator may deem
desirable. The Administrator's determination of death and of
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the right of any person to receive payment shall be conclusive.
6.5 Designation of Death Beneficiary and Manner of Payment.
(a) Each Participant shall have the right to designate a Beneficiary or
Beneficiaries to receive the sum or sums to which he may be entitled upon his
death. The Participant may also designate the manner in which any death benefits
under this Plan shall be payable to his Beneficiary, provided that such
designation is in accordance with Section 9.4. Such designation of Beneficiary
and manner of payment shall be in writing and delivered to the Administrator,
and shall be effective when received by the Administrator. The Participant shall
have the right to change such designation by notice in writing to the
Administrator. Such change of Beneficiary or the manner of payment shall become
effective upon its receipt by the Administrator. Any such change shall be deemed
to revoke all prior designations.
(b) If a Participant shall fail to designate validly a Beneficiary or
if no designated Beneficiary survives the Participant, his interest in the Fund
shall be paid to the person or persons in the first of the following classes of
successive preference Beneficiaries surviving at the death of the Participant:
the Participant's (1) widow or widower, (2) children, (3) parents, and (4)
estate. The Administrator shall decide what Beneficiaries, if any, shall have
been validly designated, and its decision shall be binding and conclusive on all
persons.
(c) Notwithstanding the foregoing, if a Participant has been married
throughout the 12 month period preceding the date of his death, the sum or sums
to which he may be entitled under this Plan upon his death shall be paid to his
spouse, unless the Participant's spouse shall have consented to the election of
another Beneficiary. Such a spousal consent shall be in writing and shall be
witnessed either by a representative of the Plan or a notary public. If it is
established to the satisfaction of the Administrator that such spousal consent
cannot be obtained because there is no spouse, because the spouse cannot be
located, or other reasons prescribed by governmental regulations, the consent of
the spouse may be waived, and the Participant may designate a Beneficiary or
Beneficiaries other than his spouse.
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ARTICLE VII
VESTING AND FORFEITURES
7.1 Vesting on Death, Disability and Normal Retirement.
Unless his participation in this Plan shall have terminated prior
thereto, upon a Participant's death, Disability or upon his attainment of Normal
Retirement Date (whether or not he actually retires at that time) while he is
still employed by the Employer, the Participant's entire interest in the Fund
shall be fully vested and nonforfeitable.
7.2 Vesting on Termination of Participation.
Upon termination of his participation in this Plan for any reason other
than death, Disability, or Normal Retirement, a Participant shall be vested in a
percentage of his Employee Stock Ownership Account, such vested percentages to
be determined under the following table, based on the Years of Service
(including Years of Service prior to the Effective Date) credited to him for
vesting purposes at the time of his termination of participation:
Years of Service Completed Percentage Vested
-------------------------- -----------------
Less than 2 0%
2 but less than 3 20%
3 but less than 4 40%
4 but less than 5 60%
5 but less than 6 80%
6 or more 100%
Any portion of the Participant's Employee Stock Ownership Account which
is not vested at the time he incurs a Break shall thereupon be forfeited and
disposed of pursuant to Section 7.3. Distribution of the vested portion of a
terminated Participant's interest in the Plan may be authorized by the
Administrator in any manner permitted under Section 9.1.
7.3 Disposition of Forfeitures.
(a) In the event a Participant incurs a Break and subsequently resumes
both his Service and his participation in the Plan prior to incurring at least 5
Breaks, the forfeitable portion of his Employee Stock Ownership Account shall be
reinstated to the credit of the Participant as of the date he resumes
participation.
(b) In the event a Participant terminates Service and subsequently
incurs a Break and receives a distribution, or in the event a Participant does
not terminate Service, but incurs at least 5
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Breaks, or in the event that a Participant terminates Service and incurs at
least 5 Breaks but has not received a distribution, then the forfeitable portion
of his Employer Account, including Investment Adjustments, shall be reallocated
to other Participants, pursuant to Section 5.4 as of the date the Participant
incurs such Break or Breaks, as the case may be.
(c) In the event a former Participant who had received a distribution
from the Plan is rehired, he shall repay the amount of his distribution before
the earlier of 5 years after the date of his rehire by the Employer, or the
close of the first period of 5 consecutive Breaks commencing after the
withdrawal in order for any forfeited amounts to be restored to him.
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ARTICLE VIII
EMPLOYEE STOCK OWNERSHIP PROVISIONS
8.1 Right to Demand Employer Securities.
A Participant entitled to a distribution from his Employee Stock
Ownership Account shall be entitled to demand that his interest in the Account
be distributed to him in the form of Em ployer Securities, all subject to
Section 9.9. In the event that the Employer Securities are not readily tradable
on an established market, the Participant shall be entitled to require that the
Employer repurchase the Employer Securities under a fair valuation formula, as
provided by governmental regulations. The Participant or Beneficiary shall be
entitled to exercise the put option described in the preceding sentence for a
period of not more than 60 days following the date of distribution of Employer
Securities to him. If the put option is not exercised within such 60-day period,
the Participant or Beneficiary may exercise the put option during an additional
period of not more than 60 days after the beginning of the first day of the
first Plan Year following the Plan Year in which the first put option period
occurred, all as provided in regulations promulgated by the Secretary of the
Treasury.
8.2 Voting Rights.
Each Participant with an Employee Stock Ownership Account shall be
entitled to direct the Trustee as to the manner in which the Employer Securities
in such Account are to be voted. Employer Securities held in the Employee Stock
Ownership Suspense Account or the Exempt Loan Suspense Account shall be voted by
the Trustee on each issue with respect to which shareholders are entitled to
vote in the manner directed by the majority of the Participants who directed the
Trustee as to the manner of voting their shares in the Employee Stock Ownership
Accounts with respect to such issue. Prior to the initial allocation of shares,
the Trustee shall be entitled to vote the shares in the Suspense Account without
prior direction from the Participants or the Administrator. In the event that a
Participant fails to give timely voting instructions to the Trustee with respect
to the voting of his allocated Employer Securities, the Trustee shall be
entitled to vote such shares in its discretion.
8.3 Nondiscrimination in Employee Stock Ownership Contributions.
In the event that the amount of the Employee Stock Ownership
contributions that would be required in any Plan Year to make the scheduled
payments on an Exempt Loan would exceed the amount that would otherwise be
deductible by the Employer for such Plan Year under Code Section 404, then no
more than one-third of the Employee Stock Ownership contributions for the Plan
Year, which is also the Employer's taxable year, shall be allocated to the group
of Employees who, during the Plan Year or the preceding Plan Year:
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(a) Was at any time a 5 percent owner of the Employer;
(b) Received compensation from the Employer in excess of $75,000, as
adjusted under Code Section 414(q);
(c) Received compensation from the Employer in excess of $50,000, as
adjusted under Code Section 414(q), and was in the "top-paid group" of employees
(as defined below) for such year; or
(d) Was at any time an officer and received compensation greater than
50 percent of the amount in effect under Code Section 415(b)(1)(A), as adjusted
for cost-of-living increases permitted under Code Section 415(d)(1), but without
regard to any adjustment under Code Section 415(c)(6)(A).
An Employee shall be deemed a member of the "top-paid group" of employees for a
given Plan Year if such Employee is in the group of the top 20% of the employees
of the Employer when ranked on the basis of compensation.
8.4 Dividends.
Dividends paid with respect to Employer Securities credited to a
Participant's Employee Stock Ownership account as of the record date for the
dividend payment may be paid in cash to the Participants, pursuant to the
directions of the Board of Directors of the Sponsor. If the Board of Directors
shall direct that the aforesaid dividends shall be paid directly to
Participants, the quarterly dividends paid with respect to such Employer
Securities shall be paid to the Plan, from which dividend distributions in cash
shall be made to the Participants with respect to the Employer Securities in
their Employee Stock Ownership Accounts within 90 days of the close of the Plan
Year in which the dividends were paid. Dividends on Employer Securities obtained
pursuant to an Exempt Loan and still held in the Suspense Account may be used to
make payments on an Exempt Loan, as described in Section 8.5.
8.5 Exempt Loans.
(a) The Sponsor may direct the Trustee to obtain Exempt Loans. The
Exempt Loan may take the form of (i) a loan from a bank or other commercial
lender to purchase Employer Securities (ii) a loan from the Employer to the
Plan; or (iii) an installment sale of Employer Securities to the Plan. The
proceeds of any such Exempt Loan shall be used, within a reasonable time after
the Ex empt Loan is obtained, only to purchase Employer Securities, repay the
Exempt Loan, or repay any prior Exempt Loan. Any such Exempt Loan shall provide
for no more than a reasonable rate of interest and shall be without recourse
against the Plan. The number of years to maturity under the Exempt Loan must be
definitely ascertainable at all times. The only assets of the Plan that may be
given as collateral for an Exempt Loan are Employer Securities acquired with the
proceeds
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of the Exempt Loan and Employer Securities that were used as collateral for a
prior Exempt Loan repaid with the proceeds of the current Exempt Loan. Such
Employer Securities so pledged shall be placed in an Exempt Loan Suspense
Account. No person or institution entitled to payment under an Exempt Loan shall
have recourse against Trust assets other than the aforesaid collateral, Employer
Stock Ownership contributions (other than contributions of Employer Securities)
that are available under the Plan to meet obligations under the Exempt Loan and
earnings attributable to such collateral and the investment of such
contributions. All Employee Stock Ownership contributions paid during the Plan
Year in which an Exempt Loan is made (whether before or after the date the
proceeds of the Exempt Loan are received), all Employee Stock Ownership contribu
tions paid thereafter until the Exempt Loan has been repaid in full, and all
earnings from investment of such Employee Stock Ownership contributions, without
regard to whether any such Employee Stock Ownership contributions and earnings
have been allocated to Participants' Employee Stock Ownership Accounts, shall be
available to meet obligations under the Exempt Loan as such obligations accrue,
or prior to the time such obligations accrue, unless otherwise provided by the
Employer at the time any such contribution is made. Any pledge of Employer
Securities shall provide for the release of shares so pledged upon the payment
of any portion of the Exempt Loan.
(b) For each Plan Year during the duration of the Exempt Loan, the
number of shares of Employer Securities released from such pledge shall equal
the number of encumbered shares held immediately before release for the current
Plan Year multiplied by a fraction. The numerator of the fraction is the sum of
principal and interest paid in such Plan Year. The denominator of the fraction
is the sum of the numerator plus the principal and interest to be paid for all
future years. Such years will be determined without taking into account any
possible extension or renewal periods. If interest on any Exempt Loan is
variable, the interest to be paid in future years under the Exempt Loan shall be
computed by using the interest rate applicable as of the end of the Plan Year.
(c) Notwithstanding the foregoing, the Trustee may obtain an Exempt
Loan pursuant to the terms of which the number of Employer Securities to be
released from encumbrance shall be determined solely with reference to principal
payments. In the event that such an Exempt Loan is obtained, annual payments of
principal and interest shall be at a cumulative rate that is not less rapid at
any time than level payments of such amounts for not more than 10 years. The
amount of interest in any such annual loan repayment shall be disregarded only
to the extent that it would be determined to be interest under standard loan
amortization tables. The requirement set forth in the preceding sentence shall
not be applicable from the time that, by reason of a renewal, extension, or
refinancing, the sum of the expired duration of the Exempt Loan, the renewal
period, the extension period, and the duration of a new Exempt Loan exceeds 10
years.
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8.6 Exempt Loan Payments.
(a) Payments of principal and interest on any Exempt Loan during a Plan
Year shall be made by the Trustee (as directed by the Administrator) only from
(1) Employee Stock Ownership contributions to the Trust made to meet the Plan's
obligation under an Exempt Loan (other than contributions of Employer
Securities) and from any earnings attributable to Employer Securities held as
collateral for an Exempt Loan and investments of such contributions (both
received during or prior to the Plan Year); (2) the proceeds of a subsequent
Exempt Loan made to repay a prior Exempt Loan; and (3) the proceeds of the sale
of any Employer Securities held as collateral for an Exempt Loan. Such
contribution and earnings shall be accounted for separately by the Plan until
the Exempt Loan is repaid.
(b) Employer Securities released by reason of the payment of principal
or interest on an Exempt Loan from amounts allocated to Participants' Employee
Stock Ownership Accounts shall immediately upon payment be allocated as set
forth in Section 5.5.
(c) The Employer shall contribute to the Trust sufficient amounts to
enable the Trust to pay principal and interest on any such Exempt Loans as they
are due, provided however that no such contribution shall exceed the limitations
in Section 5.6. In the event that such contributions by reason of the
limitations in Section 5.6 are insufficient to enable the Trust to pay principal
and interest on such Exempt Loan as it is due, then upon the Trustee's request
the Employer shall:
(1) Make an Exempt Loan to the Trust in sufficient amounts to meet such
principal and interest payments. Such new Exempt Loan shall be subordinated to
the prior Exempt Loan. Securities released from the pledge of the prior Exempt
Loan shall be pledged as collateral to secure the new Exempt Loan. Such Employer
Securities will be released from this new pledge and allocated to the Employee
Stock Ownership Accounts of the Partici pants in accordance with applicable
provisions of the Plan;
(2) Purchase any Employer Securities pledged as collateral in an amount
necessary to provide the Trustee with sufficient funds to meet the principal and
interest repayments. Any such sale by the Plan shall meet the requirements of
Section 408(e) of ERISA; or
(3) Any combination of the foregoing. However, the Employer shall not,
pursuant to the provisions of this subsection, do, fail to do or cause to be
done any act or thing which would result in a disqualification of the Plan as an
Employee Stock Ownership Plan under the Code.
(d) Except as provided in Section 8.1 above and notwithstanding any
amendment to or termination of the Plan which causes it to cease to qualify as
an Employee Stock Ownership plan within the meaning of Section 4975(e)(7) of the
Code, or any repayment of an Exempt Loan, no
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shares of Employer Securities acquired with the proceeds of an Exempt Loan
obtained by the Trust to purchase Employer Securities may be subject to a put,
call or other option, or buy-sell or similar arrangement while such shares are
held by the Plan or when such Shares are distributed from the Plan.
8.7 Put Option.
If a Participant exercises a put option (as set forth in Section 8.1)
with respect to Employer Securities that were distributed as part of a total
distribution pursuant to which a Participant's Employee Stock Ownership Account
is distributed to him in a single taxable year, the Employer or the Plan may
elect to pay the purchase price of the Employer Securities over a period not to
exceed 5 years. Such payments shall be made in substantially equal installments
not less frequently than annually over a period beginning not later than 30 days
after the exercise of the put option. Reasonable interest shall be paid to the
Participant with respect to the unpaid balance of the purchase price and
adequate security shall be provided with respect thereto. In the event that a
Participant exercises a put option with respect to Employer Securities that are
distributed as part of an installment distribution, the amount to be paid for
such securities shall be paid not later than 30 days after the exercise of the
put option.
8.8 Diversification Requirements
Each Participant who has completed at least 10 years of participation
in the Plan and has attained age 55 may elect within 90 days after the close of
each Plan Year during his "qualified election period" to direct the Plan as to
the investment of at least 25 percent of his Employee Stock Ownership Account
(to the extent such percentage exceeds the amount to which a prior election
under this Section 8.8 had been made). For purposes of this Section 8.8, the
term "qualified election period" shall mean the 5-Plan-Year period beginning
with the Plan Year after the Plan Year in which the Participant attains age 55
(or, if later, beginning with the Plan Year after the first Plan Year in which
the Employee first completes at least 10 years of participation in the Plan). In
the case of the Employee who has attained age 60 and completed 10 years of
participation in the prior Plan Year and in the case of the election year in
which any other Participant who has met the minimum age and service requirements
for diversification can make his last election hereunder, he shall be entitled
to direct the Plan as to the investment of at least 50 percent of his Employee
Stock Ownership Account (to the extent such percentage exceeds the amount to
which a prior election under this Section 8.8 had been made). The Plan shall
make available at least 3 investment options (not inconsistent with regulations
prescribed by the Department of Treasury) to each Participant making an election
hereunder. The Plan shall be deemed to have met the requirements of this Section
if the portion of the Participant's Employee Stock Ownership Account covered by
the election hereunder is distributed to the Participant or his designated
Beneficiary within 90 days after the period during which the election may be
made. In the absence of such a distribution, the Trustee shall implement the
Participant's election within 90 days following the expiration of the qualified
election period.
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8.9 Independent Appraiser.
An independent appraiser meeting the requirements of Code Section
170(a)(1) shall value the Employer Securities in those Plan Years when such
securities are not readily tradable on an established securities market.
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ARTICLE IX
PAYMENTS AND DISTRIBUTIONS
9.1 Payments on Termination of Service - In General.
All benefits provided under this Plan shall be funded by the value of a
Participant's vested interest in the Fund. As soon as practicable after a
Participant's Retirement, death or termination of Service, the Administrator
shall ascertain the value of his vested interest in the Fund, as provided in
Article V, and the Administrator shall hold or dispose of the same in accordance
with the following provisions of this Article IX.
9.2 Commencement of Payments.
(a) Distributions upon Retirement or Death. Upon a Participant's
Retirement or Death, payment of benefits under this Plan shall, unless the
Participant otherwise elects (in accordance with Section 9.3), commence no later
than 6 months after the close of the Plan Year in which occurs the date of the
Participant's Retirement or death.
(b) Distribution following Termination of Service. Unless a Participant
elects otherwise, if a Participant terminates Service prior to Retirement or
death, he shall be accorded an opportunity to commence receipt of distributions
from his Accounts within six (6) months after the Valuation Date next following
the date of his termination of service. A Participant who terminates Service
with a deferred vested benefit shall be entitled to receive from the
Administrator a statement of his benefits. In the event that a Participant
elects not to commence receipt of distributions from his Accounts in accordance
with this Section 9.2(b), after the Participant incurs a Break, the
Administrator shall transfer his deferred vested interest to a distribution
account. If a Participant's vested Employer Account does not exceed (or at the
time of any prior distribution did not exceed) $3,500, the Plan Administrator
may distribute the vested portion of his Employer Account as soon as
administratively feasible without the consent of the Participant or his spouse.
(c) Distribution of Accounts Greater Than $3,500. If the value of a
Participant's vested Account balance exceeds (or at the time of any prior
distribution exceeded) $3,500, and the Account balance is immediately
distributable, the Participant must consent to any distribution of such Account
balance. The Plan Administrator shall notify the Participant of the right to
defer any distribution until the Participant's Account balance is no longer
immediately distributable. The consent of the Participant shall not be required
to the extent that a distribution is required to satisfy Code ss.401(a)(9) or
Code ss.415.
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9.3 Mandatory Commencement of Benefits.
(a) Unless a Participant elects otherwise, in writing, distribution of
benefits will begin no later than the 60th day after the latest of the close of
the Plan Year in which (i) the Participant attains age 65, (ii) occurs the tenth
anniversary of the year in which the Participant commenced participation in the
Plan Year, or (iii) the Participant terminates Service with the Employer.
(b) In the event that the Plan shall be subsequently amended to provide
for a form of distribution other than a lump sum, as of the first distribution
calendar year, distributions, if not made in a lump sum, may be made only over
one of the following periods (or a combination thereof):
(i) the life of the Participant,
(ii) the life of the Participant and the designated beneficiary,
(iii) a period certain not extending beyond the life expectancy
of the Participant, or
(iv) a period certain not extending beyond the joint and last
survivor expectancy of the Participant and a designated beneficiary.
(c) In the event that the Plan shall be subsequently amended to provide
for a form of distribution other than a lump sum, if the participant's interest
is to be distributed in other than a lump sum, the following minimum
distribution rules shall apply on or after the required beginning date:
(i) If a Participant's benefit is to be distributed over (1) a
period not extending beyond the life expectancy of the Participant or
the joint life and last survivor expectancy of the Participant and the
Participant's designated beneficiary or (2) a period not extending
beyond the life expectancy of the designated beneficiary, the amount
required to be distributed for each calendar year, beginning with
distributions for the first distribution calendar year, must at least
equal the quotient obtained by dividing the Participant's benefit by
the applicable life expectancy.
(ii) For calendar years beginning after December 31, 1988, the
amount to be distributed each year, beginning with distributions for
the first distribution calendar year shall not be less than the
quotient obtained by dividing the Participant's benefit by the lesser
of (1) the applicable life expectancy or (2) if the Participant's
spouse is not the designated beneficiary, the applicable divisor
determined from the table set forth in Q&A-4 of section 1.401(a)(9)-2
of the Proposed Regulations. Distributions after the death of the
participant shall be distributed using the applicable life expectancy
in sub-section (iii) above as the relevant divisor without regard to
Proposed Regulations 1.401(a)(9)-2.
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(iii) The minimum distribution required for the Participant's
first distribution calendar year must be made on or before the
Participant's required beginning date. The minimum distribution for
other calendar years, including the minimum distribution for the
distribution calendar year in which the employee's required beginning
date occurs, must be made on or before December 31 of the distribution
calendar year.
(d) If a Participant dies after a distribution has commenced in
accordance with Section 8.3(b) but before his entire interest has been
distributed to him, the remaining portion of such interest shall be distributed
to his Beneficiary at least as rapidly as under the method of distribution in
effect as of the date of his death.
(e) If a Participant shall die before the distribution of his interest
in the Plan has begun, the entire interest of the Participant shall be
distributed by December 31 of the calendar year containing the fifth anniversary
of the death of the Participant, except in the following events:
(i) If any portion of the Participant's interest is payable to
(or for the benefit of) a designated beneficiary over a period not
extending beyond the life expectancy of such beneficiary and such
distributions begin not later than December 31 of the calendar year
immediately following the calendar year in which the Participant died.
(ii) If any portion of the Participant's interest is payable to
(or for the benefit of) the Participant's spouse over a period not
extending beyond the life expectancy of such spouse and such
distributions begin no later than December 31 of the calendar year in
which the Participant would have attained age 70-1/2.
If the Participant has not made a distribution election by the time of
his death, the Participant's designated beneficiary shall elect the method of
distribution no later than the earlier of (1) December 31 of the calendar year
in which distributions would be required to begin under this Article or (2)
December 31 of the calendar year which contains the fifth anniversary of the
date of death of the Participant. If the Participant has no designated
beneficiary, or if the designated beneficiary does not elect a method of
distribution, distribution of the Participant's entire interest shall be
completed by December 31 of the calendar year containing the fifth anniversary
of the Participant's death.
(f) For purposes of this Article, the life expectancy of a Participant
and his spouse may be redetermined but not more frequently than annually. The
life expectancy (or joint and last survivor expectancy) shall be calculated
using the attained age of the Participant (or designated beneficiary) as of the
Participant's (or designated beneficiary's) birthday in the applicable calendar
year reduced by one for each calendar year which has elapsed since the date life
expectancy was first calculated. If life expectancy is being recalculated, the
applicable life expectancy shall be the life expectancy as so recalculated. The
applicable calendar year shall be the first distribution calendar year, and if
life expectancy is being recalculated, such succeeding calendar year. Unless
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otherwise elected by the Participant (or his spouse, if applicable) by the time
distributions are required to begin, life expectancies shall be recalculated
annually. Any such election not to recalculate shall be irrevocable and shall
apply to all subsequent years. The life expectancy of a nonspouse beneficiary
may not be recalculated.
(g) For purposes of Section 9.3(b) and 9.3(e), any amount paid to a
child shall be treated as if it had been paid to a surviving spouse if such
amount will become payable to the surviving spouse upon such child reaching
majority (or other designated event permitted under regulations).
(h) For distributions beginning before the Participant's death, the
first distribution calendar year is the calendar year immediately preceding the
calendar year which contains the Participant's required beginning date. For
distributions beginning after the Participant's death, the first distribution
calendar year is the calendar year in which distributions are required to begin
pursuant to this Article.
9.4 Required Beginning Dates.
(a) General Rule. The required beginning date of a Participant is the
first day of April of the calendar year following the calendar year in which the
participant attains age 70-1/2, provided that such Participant is a 5-percent
owner.
(b) 5-percent owner. A Participant is treated as a 5-percent owner for
purposes of this section if such Participant is a 5-percent owner as defined in
section 416(i) of the Code (determined in accordance with section 416 but
without regard to whether the plan is top-heavy) at any time during the Plan
Year ending with or within the calendar year in which such owner attains age
66-1/2 or any subsequent Plan Year. Once distributions have begun to a 5-percent
owner under this section, they must continue to be distributed, even if the
Participant ceases to be a 5- percent owner in a subsequent year.
9.5 Form of Payment.
Each Participant's vested interest shall be distributed in a lump sum
payment. Notwithstanding the preceding sentence, but subject to Section 9.3, the
Administrator may not distribute a lump sum when the present value of a
Participant's total Account balances is in excess of $3,500 without the
Participant's consent. This form of payment shall be the normal form of
distribution. Furthermore, however, in the event that the Administrator must
commence distributions, pursuant to Section 9.4, with respect to an Employee who
has attained age 70-1/2 and is still employed by the Employer, if the Employee
does not elect a lump sum distribution, payments shall be made in installments
in such amounts as shall satisfy the minimum distribution rules of Section 9.3.
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9.6 Payments Upon Termination of Plan.
Upon termination of this Plan pursuant to Sections 13.2, 13.4, 13.5 or
13.6, the Administrator shall continue to perform its duties and the Trustee
shall make all payments upon the following terms, conditions and provisions: All
interests of Participants shall immediately become fully vested; the value of
the interests of all Participants shall be determined within 60 days after such
termination, and the Administrator shall have the same powers to direct the
Trustee in making payments as contained in Sections 9.1 and 13.5.
9.7 Distributions Pursuant to Qualified Domestic Relations Orders.
Upon receipt of a domestic relations order, the Administrator shall
notify promptly the Participant and any alternate payee of receipt of the order
and the Plan's procedure for determining whether the order is a Qualified
Domestic Relations Order. While the issue of whether a domestic relations order
is a Qualified Domestic Relations Order is being determined, if the benefits
would otherwise be paid, the Administrator shall segregate in a separate account
in the Plan the amounts that would be payable to the alternate payee during such
period if the order were a Qualified Do mestic Relations Order. If within 18
months the order is determined to be a Qualified Domestic Relations Order, the
amounts so segregated, along with the interest or investment earnings
attributable thereto shall be paid to the alternate payee. Alternatively, if
within 18 months, it is determined that the order is not a Qualified Domestic
Relations Order or if the issue is still unresolved, the amounts segregated
under this Section 9.6, with the earnings attributable thereto, shall be paid to
the Participant or Beneficiary who would have been entitled to such amounts if
there had been no order. The determination as to whether the order is qualified
shall be applied prospectively. Thus, if the Administrator determines that the
order is a Qualified Domestic Relations Order after the 18-month period, the
Plan shall not be liable for payments to the alternative payee for the period
before the order is determined to be a Qualified Domestic Relations Order.
9.8 Cash-Out Distributions
If a Participant receives a distribution of the entire present value of
his vested Account balances under this Plan because of the termination of his
participation in the Plan, the Plan shall disregard a Participant's Service with
respect to which such cash-out distribution shall have been made, in computing
his accrued benefit under the Plan in the event that a Former Participant shall
again become an Employee and become eligible to participate in the Plan. Such a
distribution shall be deemed to be made on termination of participation in the
Plan if it is made not later than the close of the second Plan Year following
the Plan Year in which such termination occurs. The forfeitable portion of a
Participant's accrued benefit shall be restored upon repayment to the Plan by
such former Participant of the full amount of the cash-out distribution,
provided that the former Participant again becomes an Employee. Such repayment
must be made by the Employee not later than the end of the 5-year period
beginning with the date of the distribution. Forfeitures required
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to be restored by virtue of such repayment shall be restored from the following
sources in the following order of preference: (i) current forfeitures; (ii)
additional employee stock ownership contributions, as appropriate and as subject
to Section 5.6; and (iii) investment earnings of the Fund. In the event that a
Participant's interest in the Plan is totally forfeitable, a Participant shall
be deemed to have received a distribution of zero upon his termination of
Service. In the event of a return to Service within 5 years of the date of his
deemed distribution, the Participant shall be deemed to have repaid his
distribution in accordance with the rules of this Section 9.8.
9.9 ESOP Distribution Rules.
Notwithstanding any provision of this Article IX to the contrary, the
distribution of a Participant's Employee Stock Ownership Account (unless the
Participant elects otherwise in writing), shall commence as soon as
administratively feasible as of the first Valuation Date coincident with or next
following his death, disability or termination of Service, but not later than 1
year after the close of the Plan Year in which the Participant separates from
Service by reason of the attainment of his Normal Retirement Date, disability,
death or separation from Service. In addition, all distributions hereunder
shall, to the extent that the Participant's Account is invested in Employer
Securities, be made in the form of Employer Securities. Fractional shares,
however, may be distributed in the form of cash.
9.10 Withholding.
(a) Notwithstanding any provision of the Plan to the contrary that
would otherwise limit a distributee's election under this Article IX, a
distributee may elect, at the time and in the manner prescribed by the Plan
Administrator, to have any portion of an "eligible rollover distribution" paid
directly to an "eligible retirement plan" specified by the distributee in a
"direct rollover."
(b) For purposes of this Section 9.10, an "eligible rollover
distribution" is any distribution of all or any portion of the balance to the
credit of the distributee, except that an "eligible rollover distribution" does
not include: any distribution that is one of a series of substantially equal
periodic payments (not less frequently than annually) made for the life (or life
expectancy) of the distributee or the joint lives (or joint life expectancies)
of the distributee and the distributee's designated beneficiary, or for a
specified period of ten years or more; any distribution to the extent such
distribution is required under section 401(a)(9) of the Code; and the portion of
any distribution that is not includible in gross income (determined without
regard to the exclusion for net unrealized appreciation with respect to Employer
Securities).
(c) For purposes of this Section 9.10, an "eligible retirement plan" is
an individual retirement account described in section 408(a) of the Code, an
individual retirement annuity described in section 408(b) of the Code, an
annuity plan described in section 403(a) of the Code, or a qualified trust
described in section 401(a) of the Code, that accepts the distributee's eligible
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rollover distribution. However, in the case of an "eligible rollover
distribution" to the surviving spouse, an "eligible retirement plan" is an
individual retirement account or individual retirement annuity.
(d) For purposes of this Section 9.10, a distributee includes a
Participant or former Participant. In addition, the Participant's or former
Participant's surviving spouse and the Participant's or former Participant's
spouse or former spouse who is the alternate payee under a qualified domestic
relations order, as defined in section 414(p) of the Code, are "distributees"
with regard to the interest of the spouse or former spouse.
(e) For purposes of this Section 9.10, a "direct rollover" is a payment
by the Plan to the "eligible retirement plan" specified by the distributee.
9.11 Waiver of 30-day Notice.
If a distribution is one to which sections 401(a)(11) and 417 of the
Code do not apply, such distribution may commence less than 30 days after the
notice required under section 1.411(a)- 11(c) of the Income Tax Regulations is
given, provided that: (1) the Plan Administrator clearly informs the Participant
that the Participant has a right to a period of at least 30 days after receiving
the notice to consider the decision of whether or not to elect a distribution
(and, if applicable, a particular distribution option), and (2) the Participant,
after receiving the notice, affirmatively elects a distribution.
9.12 Re-employed Veterans.
Notwithstanding anything to the contrary set forth in the Plan, if an
Employee has been rehired by the Employer and is eligible for the benefits
provided by the Uniformed Services Employment and Reemployment Rights Act by
virtue of his prior military service and by virtue of his having met all the
requirements of that Act for being accorded the benefits provided thereunder, he
shall not be deemed to have incurred a Break because of his period of military
service. The Employee's military service shall be treated as Service hereunder
for eligibility, vesting and benefit accrual purposes. Such Employee shall be
entitled to all Employer contributions to which he otherwise would have been
entitled had he been employed by the Employer during the period of his military
service. In computing contribution amounts dependent upon or limited by the
amount of Compensation the Employee earned or would have earned, the Employee
shall be treated as receiving Compensation from the Employer during the period
of military service equal to the Compensation that Employee otherwise would have
received from the Employer during that period, or, if the Compensation the
Employee otherwise would have received is not reasonably certain, the Employee's
average Compensation from the Employer during the period immediately preceding
the period of military service. Such Employee shall not, however, be credited
with any earnings on any such additional Employer or Employee contributions
described in this Section before the contribution is actually made.
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Furthermore, no forfeitures shall be allocated to such Employee's Accounts
hereunder for the period of military service. The rules governing the
limitations on all such contributions that may be required hereunder the
Employer shall be governed by Section 414(u) of the Code and any regulations
promulgated thereunder.
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ARTICLE X
PROVISIONS RELATING TO TOP-HEAVY PLANS
10.1 Top-Heavy Rules to Control.
Anything contained in this Plan to the contrary notwithstanding, if for
any Plan Year the Plan is a top-heavy plan, as determined pursuant to Section
416 of the Code, then the Plan must meet the requirements of this Article X for
such Plan Year.
10.2 Top-Heavy Plan Definitions.
Unless a different meaning is plainly implied by the context, the
following terms as used in this Article X shall have the following meanings:
(a) "Accrued Benefit" shall mean the account balances or accrued
benefits of an Employee, calculated pursuant to Section 10.3.
(b) "Determination Date" shall mean, with respect to any particular
Plan Year of this Plan, the last day of the preceding Plan Year (or, in the case
of the first Plan Year of the Plan, the last day of the first Plan Year). In
addition, the term "Determination Date" shall mean, with respect to any
particular plan year of any plan (other than this Plan) in a Required
Aggregation Group or a Permissive Aggregation Group, the last day of the plan
year of such plan which falls within the same calendar year as the Determination
Date for this Plan.
(c) "Employer" shall mean the Employer (as defined in Section 1.1(q))
and any entity which is (1) a member of a controlled group including such
Employer, while it is a member of such controlled group (within the meaning of
Section 414(b) of the Code), (2) in a group of trades or businesses under common
control with such Employer, while it is under common control (within the meaning
of Section 414(c) of the Code), and (3) a member of an affiliated service group
including such Employer, while it is a member of such affiliated service group
(within the meaning of Section 414(m) of the Code).
(d) "Key Employee" shall mean any Employee or former Employee (or any
Beneficiary of such Employee or former Employee, as the case may be) who, at any
time during the Plan Year or during the 4 immediately preceding Plan Years is
one of the following:
(1) An officer of the Employer who has compensation greater than
50% of the amount in effect under Code 415(b)(1)(A) for the Plan Year;
provided, however, that no more than 50 Employees (or, if lesser, the
greater of 3 or 10% of the Employees) shall be deemed officers;
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(2) One of the 10 Employees having annual compensation (as
defined in Section 415 of the Code) in excess of the limitation in
effect under Section 415(c)(1)(A) of the Code, and owning (or
considered as owning, within the meaning of Section 318 of the Code)
the largest interests in the Employer;
(3) Any Employee owning (or considered as owning, within the
meaning of Section 318 of the Code) more than 5% of the outstanding
stock of the Employer or stock possessing more than 5% of the total
combined voting power of all stock of the Employer; or
(4) Any Employee having annual compensation (as defined in
Section 415 of the Code) of more than $150,000 and who would be
described in Section 10.2(d)(3) if "1%" were substituted for "5%"
wherever the latter percentage appears.
For purposes of applying Section 318 of the Code to the provisions of
this Section 10.2(d), Section 318(a)(2)(C) of the Code shall be applied by
substituting "5%" for "50%" wherever the latter percentage appears. In addition,
for purposes of this Section 10.2(d), the provisions of Section 414(b), (c) and
(m) shall not apply in determining ownership interests in the Employer. However,
for purposes of determining whether an individual has compensation in excess of
$150,000, or whether an individual is a Key Employee under Section 10.2(d)(1)
and (2), compensation from each entity required to be aggregated under Sections
414(b), (c) and (m) of the Code shall be taken into account. Notwithstanding
anything contained herein to the contrary, all determinations as to whether a
person is or is not a Key Employee shall be resolved by reference to Section 416
of the Code and any rules and regulations promulgated thereunder.
(e) "Non-Key Employee" shall mean any Employee or former Employee (or
any Beneficiary of such Employee or former Employee, as the case may be) who is
not considered to be a Key Employee with respect to this Plan.
(f) "Permissive Aggregation Group" shall mean all plans in the Required
Aggregation Group and any other plans maintained by the Employer which satisfy
Sections 401(a)(4) and 410 of the Code when considered together with the
Required Aggregation Group.
(g) "Required Aggregation Group" shall mean each plan (including any
terminated plan) of the Employer in which a Key Employee is (or in the case of a
terminated plan, had been) a Participant in the Plan Year containing the
Determination Date or any of the 4 preceding Plan Years, and each other plan of
the Employer which enables any plan of the Employer in which a Key Employee is a
Participant to meet the requirement of Sections 401(a)(4) and 410 of the Code.
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10.3 Calculation of Accrued Benefits.
(a) An Employee's Accrued Benefit shall be equal to:
(1) With respect to this Plan or any other defined contribution
plan (other than a defined contribution pension plan) in a Required
Aggregation Group or a Permissive Aggregation Group, the Employee's
account balances under the respective plan, determined as of the most
recent plan valuation date within a 12-month period ending on the
Determination Date, including contributions actually made after the
valuation date but before the Determination Date (and, in the first
plan year of a plan, also including any contributions made after the
Determination Date which are allocated as of a date in the first plan
year).
(2) With respect to any defined contribution pension plan in a
Required Aggregation Group or a Permissive Aggregation Group, the
Employee's account balances under the plan, determined as of the most
recent plan valuation date within a 12-month period ending on the
Determination Date, including contributions which have not actually
been made, but which are due to be made as of the Determination Date.
(3) With respect to any defined benefit plan in a Required
Aggregation Group or a Permissive Aggregation Group, the present value
of the Employee's accrued benefits under the plan, determined as of
the most recent plan valuation date within a 12-month period ending on
the Determination Date, pursuant to the actuarial assumptions used by
such plan, and calculated as if the Employee terminated Service under
such plan as of the valuation date (except that, in the first plan
year of a plan, a current Participant's estimated Accrued Benefit Plan
as of the Determination Date shall be taken into account).
(4) If any individual has not performed services for the Employer
maintaining the Plan at any time during the 5-year period ending on
the Determination Date, any Accrued Benefit for such individual shall
not be taken into account.
(b) The Accrued Benefit of any Employee shall be further adjusted as
follows:
(1) The Accrued Benefit shall be calculated to include all
amounts attributable to both Employer and Employee contributions, but
shall exclude amounts attributable to voluntary deductible Employee
contributions, if any.
(2) The Accrued Benefit shall be increased by the aggregate
distributions made with respect to an Employee under the plan or
plans, as the case may be, during the 5-year period ending on the
Determination Date.
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(3) Rollover and direct plan-to-plan transfers shall be taken
into account as follows:
(A) If the transfer is initiated by the Employee and made
from a plan maintained by one employer to a plan maintained by
another unrelated employer, the transferring plan shall continue
to count the amount transferred; the receiving plan shall not
count the amount transferred.
(B) If the transfer is not initiated by the Employee or is
made between plans maintained by related employers, the
transferring plan shall no longer count the amount transferred;
the receiving plan shall count the amount transferred.
(c) If any individual has not performed services for the Employer at
any time during the 5- year period ending on the Determination Date, any accrued
benefit for such individual (and the account of such individual) shall not be
taken into account.
10.4 Determination of Top-Heavy Status.
This Plan shall be considered to be a top-heavy plan for any Plan Year
if, as of the Determination Date, the value of the Accrued Benefits of Key
Employees exceeds 60% of the value of the Accrued Benefits of all eligible
Employees under the Plan. Notwithstanding the foregoing, if the Employer
maintains any other qualified plan, the determination of whether this Plan is
top-heavy shall be made after aggregating all other plans of the Employer in the
Required Aggregation Group and, if desired by the Employer as a means of
avoiding top-heavy status, after aggregating any other plan of the Employer in
the Permissive Aggregation Group. If the required Aggregation Group is
top-heavy, then each plan contained in such group shall be deemed to be
top-heavy, notwithstanding that any particular plan in such group would not
otherwise be deemed to be top-heavy. Conversely, if the Permissive Aggregation
Group is not top-heavy, then no plan contained in such group shall be deemed to
be top-heavy, notwithstanding that any particular plan in such group would
otherwise be deemed to be top-heavy. In no event shall a plan included in a
top-heavy Permissive Aggregation Group be deemed a top-heavy plan unless such
plan is also included in a top-heavy Required Aggregation Group.
10.5 Determination of Super Top-Heavy Status.
The Plan shall be considered to be a super top-heavy plan if, as of the
Determination Date, the Plan would meet the test specified in Section 10.4 above
for classification as a top-heavy plan, except that "90%" shall be substituted
for "60%" whenever the latter percentage appears.
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10.6 Minimum Contribution.
(a) For any year in which the Plan is top-heavy, each Non-Key Employee
who has met the age and service requirements, if any, contained in the Plan,
shall be entitled to a minimum con tribution (which may include forfeitures
otherwise allocable) equal to a percentage of such Non-Key Employee's
compensation (as defined in Section 415 of the Code) as follows:
(1) If the Non-Key Employee is not covered by a defined benefit
plan maintained by the Employer, then the minimum contribution under
this Plan shall be 3% of such Non-Key Employee's compensation.
(2) If the Non-Key Employee is covered by a defined benefit plan
maintained by the Employer, then the minimum contribution under this
Plan shall be 5% of such Non-Key Employee's compensation.
(b) Notwithstanding the foregoing, the minimum contribution otherwise
allocable to a Non-Key Employee under this Plan shall be reduced in the
following circumstances:
(1) The percentage minimum contribution required under this Plan
shall in no event exceed the percentage contribution made for the Key
Employee for whom such percentage is the highest for the Plan Year
after taking into account contributions under other defined
contribution plans in this Plan's Required Aggregation Group;
provided, however, that this Section 10.7(b)(1) shall not apply if
this Plan is included in a Required Aggregation Group and this Plan
enables a defined benefit plan in such Required Ag gregation Group to
meet the requirements of Section 401(a)(4) or 410 of the Code.
(2) No minimum contribution shall be required (or the minimum
contribution shall be reduced, as the case may be) for a Non-Key
Employee under this Plan for any Plan Year if the Employer maintains
another qualified plan under which a minimum benefit or contribution
is being accrued or made on account of such Plan Year, in whole or in
part, on behalf of the Non-Key Employee, in accordance with Section
416(c) of the Code.
(c) For purposes of this Section 10.6, there shall be disregarded (1)
any Employer contributions attributable to a salary reduction or similar
arrangement, or (2) any Employer contri butions to or any benefits under Chapter
21 of the Code (relating to the Federal Insurance Contributions Act), Title II
of the Social Security Act, or any other federal or state law.
(d) For purposes of this Section 10.6, minimum contributions shall be
required to be made on behalf of only those Non-Key Employees, as described in
Section 10.7(a), who have not terminated Service as of the last day of the Plan
Year. If a Non-Key Employee is otherwise entitled to receive a minimum
contribution pursuant to this Section 10.6(d), the fact that such Non-Key
Employee failed to complete 1,000 Hours of Service or failed to make any
mandatory or
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elective contributions under this Plan, if any are so required, shall not
preclude him from receiving such minimum contribution.
10.7 Vesting.
(a) For any Plan Year in which the Plan is a top-heavy plan, a
Participant's Employer account shall continue to vest according to the following
schedule:
Years of Service Completed Percentage Vested
-------------------------- -----------------
Less than 2 0%
2 but less than 3 20%
3 but less than 4 40%
4 but less than 5 60%
5 but less than 6 80%
6 or more 100%
(b) For purposes of Section 10.7(a), the term "year of service" shall
have the same meaning as set forth in Section 1.1(kk), as modified by Section
3.2
(c) If for any Plan Year the Plan becomes top-heavy and the vesting
schedule set forth in Section 10.7(a) becomes effective, then, even if the Plan
ceases to be top-heavy in any subse quent Plan Year, the vesting schedule set
forth in Section 10.7(a) shall remain applicable with respect to any Participant
who has completed 3 Years of Service.
10.8 Maximum Benefit Limitation.
For any Plan Year in which the Plan is a top-heavy plan, Section
5.6(d)(1)(B)(i) and Section 5.6(d)(2)(B)(i)shall be read by substituting "1.0"
for "1.25" wherever the latter figure appears; provided, however, that such
substitution shall not have the effect of reducing any benefit accrued under a
defined benefit plan prior to the first day of the plan year in which this
Section 10.8 becomes applicable.
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ARTICLE XI
ADMINISTRATION
11.1 Appointment of Administrator.
This Plan shall be administered by a committee consisting of up to 5
persons, whether or not Employees or Participants, who shall be appointed from
time to time by the Board of Directors to serve at its pleasure. The Sponsor may
require that each person appointed as an Administrator shall signify his
acceptance by filing an acceptance with the Sponsor. The term "Administrator" as
used in this Plan shall refer to the members of the committee, either
individually or collectively, as appropriate. In the event that the Sponsor
shall elect not to appoint any individuals to constitute a committee to
administer the Plan, the Sponsor shall serve as the Administrator hereunder.
11.2 Resignation or Removal of Administrator.
An Administrator shall have the right to resign at any time by giving
notice in writing, mailed or delivered to the Employer and to the Trustee. Any
Administrator who was an employee of the Employer at the time of his appointment
shall be deemed to have resigned as an Administrator upon his termination of
Service. The Board of Directors may, in its discretion, remove any Administrator
with or without cause, by giving notice in writing, mailed or delivered to the
Administrator and to the Trustee.
11.3 Appointment of Successors: Terms of Office, Etc.
Upon the death, resignation or removal of an Administrator, the
Employer may appoint, by Board of Directors' resolution, a successor or
successors. Notice of termination of an Adminis trator and notice of appointment
of a successor shall be made by the Employer in writing, with copies mailed or
delivered to the Trustee, and the successor shall have all the rights and
privileges and all of the duties and obligations of the predecessor.
11.4 Powers and Duties of Administrator.
The Administrator shall have the following duties and responsibilities
in connection with the administration of this Plan:
(a) To promulgate and enforce such rules, regulations and procedures as
shall be proper for the efficient administration of the Plan, such rules,
regulations and procedures to apply uniformly to all Employees, Participants and
Beneficiaries;
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(b) To determine, in its sole and absolute discretion, all questions
arising in the administration, interpretation and application of the Plan,
including questions of eligibility and of the status and rights of Participants,
Beneficiaries and any other persons hereunder;
(c) To decide any dispute arising hereunder strictly in accordance with
the terms of the Plan; provided, however, that no Administrator shall
participate in any matter involving any questions relating solely to his own
participation or benefits under this Plan;
(d) To advise the Employer and the Trustee regarding the known future
needs for funds to be available for distribution in order that the Trustee may
establish investments accordingly;
(e) To correct defects, supply omissions and reconcile inconsistencies
to the extent necessary to effectuate the Plan;
(f) To advise the Employer of the maximum deductible contribution to
the Plan for each fiscal year;
(g) To direct the Trustee concerning all payments which shall be made
out of the Fund pursuant to the provisions of this Plan;
(h) To advise the Trustee on all terminations of Service by
Participants, unless the Employer has so notified the Trustee;
(i) To confer with the Trustee on the settling of any claims against
the Fund;
(j) To make recommendations to the Board of Directors with respect to
proposed amendments to the Plan and the Trust Agreement;
(k) To file all reports with government agencies, Employees and other
parties as may be required by law, whether such reports are initially the
obligation of the Employer, the Plan or the Trustee; and
(l) To have all such other powers as may be necessary to discharge its
duties hereunder.
Discretion is granted to the Administrator to affect the benefits,
rights and privileges of Participants, Beneficiaries or other persons affected
by this Plan. The Administrator shall exercise its discretion under the terms of
this Plan and shall administer the Plan in accordance with its terms, such
administration to be exercised uniformly so that all persons similarly situated
shall be similarly treated.
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11.5 Action by Administrator.
The Administrator may elect a Chairman and Secretary from among its
members and may adopt rules for the conduct of its business. A majority of the
members then serving shall consti tute a quorum for the transaction of business.
All resolutions or other action taken by the Administrator shall be by vote of a
majority of those present at such meeting and entitled to vote. Resolutions may
be adopted or other action taken without a meeting upon written consent signed
by at least a majority of the members. All documents, instruments, orders,
requests, directions, instructions and other papers shall be executed on behalf
of the Administrator by either the Chairman or the Secretary of the
Administrator, if any, or by any member or agent of the Ad ministrator duly
authorized to act on the Administrator's behalf.
11.6 Participation by Administrators.
No Administrator shall be precluded from becoming a Participant in the
Plan if he would be otherwise eligible, but he shall not be entitled to vote or
act upon matters or to sign any documents relating specifically to his own
participation under the Plan, except when such matters or documents relate to
benefits generally. If this disqualification results in the lack of a quorum,
then the Board of Directors shall appoint a sufficient number of temporary
Administrators who shall serve for the sole purpose of determining such a
question.
11.7 Agents.
The Administrator may employ agents and provide for such clerical,
legal, actuarial, accounting, medical, advisory or other services as it deems
necessary to perform its duties under this Plan. The cost of such services and
all other expenses incurred by the Administrator in connection with the
administration of the Plan shall be paid from the Fund, unless paid by the Em
ployer.
11.8 Allocation of Duties.
The duties, powers and responsibilities reserved to the Administrator
may be allocated among its members so long as such allocation is pursuant to
written procedures adopted by the Administrator, in which case, except as may be
required by the Act, no Administrator shall have any liability, with respect to
any duties, powers or responsibilities not allocated to him, for the acts of
omissions of any other Administrator.
11.9 Delegation of Duties.
The Administrator may delegate any of its duties to other employees of
the Employer, to the Trustee with its consent, or to any other person or firm,
provided that the Administrator shall prudently choose such agents and rely in
good faith on their actions.
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11.10 Administrator's Action Conclusive.
Any action on matters within the authority of the Administrator shall
be final and conclusive except as provided in Article XII.
11.11 Compensation and Expenses of Administrator.
No Administrator who is receiving compensation from the Employer as a
full-time employee, as a director or agent, shall be entitled to receive any
compensation or fee for his services hereunder. Any other Administrator shall be
entitled to receive such reasonable compensation for his services as an
Administrator hereunder as may be mutually agreed upon between the Employer and
such Administrator. Any such compensation shall be paid from the Fund, unless
paid by the Employer. Each Administrator shall be entitled to reimbursement by
the Employer for any reasonable and necessary expenditures incurred in the
discharge of his duties.
11.12 Records and Reports.
The Administrator shall maintain adequate records of its actions and
proceedings in administering this Plan and shall file all reports and take all
other actions as it deems appropriate in order to comply with the Act, the Code
and governmental regulations issued thereunder.
11.13 Reports of Fund Open to Participants.
The Administrator shall keep on file, in such form as it shall deem
convenient and proper, all annual reports of the Fund received by the
Administrator from the Trustee, and a statement of each Participant's interest
in the Fund as from time to time determined. The annual reports of the Fund and
the statement of his own interest in the Fund, as well as a complete copy of the
Plan and the Trust Agreement and copies of annual reports to the Internal
Revenue Service, shall be made available by the Administrator to the Employer
for examination by each Participant during reasonable hours at the office of the
Employer, provided, however, that the statement of a Participant's interest
shall not be made available for examination by any other Participant.
11.14 Named Fiduciary.
The Administrator is the named fiduciary for purposes of the Act and
shall be the designated agent for receipt of service of process on behalf of the
Plan. It shall use ordinary care and diligence in the performance of its duties
under this Plan. Nothing in this Plan shall preclude the Employer from
indemnifying the Administrator for all actions under this Plan, or from
purchasing liability insurance to protect it with respect to its duties under
this Plan.
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11.15 Information from Employer.
The Employer shall promptly furnish all necessary information to the
Administrator to permit it to perform its duties under this Plan. The
Administrator shall be entitled to rely upon the accuracy and completeness of
all information furnished to it by the Employer, unless it knows or should have
known that such information is erroneous.
11.16 Reservation of Rights by Employer.
Where rights are reserved in this Plan to the Employer, such rights
shall be exercised only by action of the Board of Directors, except where the
Board of Directors, by written resolution, delegates any such rights to one or
more officers of the Employer or to the Administrator. Subject to the rights
reserved to the Board of Directors acting on behalf of the Employer as set forth
in this Plan, no member of the Board of Directors shall have any duties or
responsibilities under this Plan, except to the extent he shall be acting in the
capacity of an Administrator or Trustee.
11.17 Liability and Indemnification.
(a) The Administrator shall perform all duties required of it under
this Plan in a prudent manner. To the extent not prohibited by the Act, the
Administrator shall not be respon sible in any way for any action or omission of
the Employer, the Trustee or any other fiduciaries in the performance of their
duties and obligations set forth in this Plan and in the Trust Agreement. To the
extent not prohibited by the Act, the Administrator shall also not be
responsible for any act or omission of any of its agents, or with respect to
reliance upon advice of its counsel (whether or not such counsel is also counsel
to the Employer or the Trustee), provided that such agents or counsel were
prudently chosen by the Administrator and that the Administrator relied in good
faith upon the action of such agent or the advice of such counsel.
(b) The Administrator shall not be relieved from responsibility or
liability for any responsibility, obligation or duty imposed upon it under this
Plan or under the Act. Except for its own gross negligence, willful misconduct
or willful breach of the terms of this Plan, the Administrator shall be
indemnified and held harmless by the Employer against liability or losses
occurring by reason of any act or omission of the Administrator to the extent
that such indemnification does not violate the Act or any other federal or state
laws.
11.18 Service as Trustee and Administrator.
Nothing in this Plan shall prevent one or more Trustees from serving as
Administrator under this Plan.
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ARTICLE XII
CLAIMS PROCEDURE
12.1 Notice of Denial.
If a Participant or his Beneficiary is denied any benefits under this
Plan, either in whole or in part, the Administrator shall advise the claimant in
writing of the amount of his benefit, if any, and the specific reasons for the
denial. The Administrator shall also furnish the claimant at that time with a
written notice containing:
(a) A specific reference to pertinent Plan provisions;
(b) A description of any additional material or information necessary
for the claimant to perfect his claim, if possible, and an explanation of why
such material or information is needed; and
(c) An explanation of the Plan's claim review procedure.
12.2 Right to Reconsideration.
Within 60 days of receipt of the information described in 12.1 above,
the claimant shall, if he desires further review, file a written request for
reconsideration with the Administrator.
12.3 Review of Documents.
So long as the claimant's request for review is pending (including the
60-day period described in Section 12.2 above), the claimant or his duly
authorized representative may review pertinent Plan documents and the Trust
Agreement (and any pertinent related documents) and may submit issues and
comments in writing to the Administrator.
12.4 Decision by Administrator.
A final and binding decision shall be made by the Administrator within
60 days of the filing by the claimant of his request for reconsideration;
provided, however, that if the Admin istrator feels that a hearing with the
claimant or his representative present is necessary or desirable, this period
shall be extended an additional 60 days.
12.5 Notice by Administrator.
The Administrator's decision shall be conveyed to the claimant in
writing and shall include specific reasons for the decision, written in a manner
calculated to be understood by the claimant, with specific references to the
pertinent Plan provisions on which the decision is based.
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ARTICLE XIII
AMENDMENTS, TERMINATION AND MERGER
13.1 Amendments.
The Employer reserves the right at any time and from time to time, and
retroactively if deemed necessary or appropriate by it, to the extent
permissible under law, to conform with governmental regulations or other
policies, to amend in whole or in part any or all of the provisions of this
Plan, provided that:
(a) No amendment shall make it possible for any part of the Fund to be
used for, or diverted to, purposes other than for the exclusive benefit of
Participants or their Beneficiaries un der the Trust Agreement, except to the
extent provided in Section 4.4;
(b) No amendment may, directly or indirectly, reduce the vested portion
of any Participant's interest as of the effective date of the amendment or
change the vesting schedule with respect to the future accrual of Employer
contributions for any Participants unless each Participant with 3 or more Years
of Service with the Employer is permitted to elect to have the vesting schedule
in effect before the amendment used to determine his vested benefit; and
(c) No amendment may eliminate an optional form of benefit.
(d) No amendment may increase the duties of the Trustee without its
consent.
Amendments may be made in the form of Board of Directors' resolutions
or separate written document. Copies of all amendments shall be delivered to the
Trustee.
13.2 Consolidation, Merger or Other Transactions of Employer.
Nothing in this Plan shall prevent the consolidation, merger,
reorganization or liquidation of the Employer, or prevent the sale by Employer
of any or all of its property. Any successor corporation or other entity formed
and resulting from any such transaction shall have the right to become a party
to this Plan by adopting the same by resolution and by appointing a new Trustee
as though the Trustee had resigned in accordance with the Trust Agreement, and
by executing a proper supplemental agreement with the Trustee. If, within 180
days from the effective date of such transaction, such new entity does not
become a party to this Plan as above provided, this Plan shall automatically be
terminated and the Trustee shall make payments to the persons entitled thereto
in accordance with Section 9.5.
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13.3 Consolidation or Merger of Trust.
In the event of any merger or consolidation of the Fund with, or
transfer in whole or in part of the assets and liabilities of the Fund to,
another trust fund held under any other plan of deferred compensation maintained
or to be established for the benefit of all or some of the Participants of this
Plan, the assets of the Fund applicable to such Participants shall be
transferred to the other trust fund only if:
(a) Each Participant would receive a benefit under such successor trust
fund immediately after the merger, consolidation or transfer which is equal to
or greater than the benefit he would have been entitled to receive immediately
before the merger, consolidation or transfer (determined as if this Plan and
such transferee trust fund had then terminated);
(b) Resolutions of the Board of Directors under this Plan, or of any
new or successor employer of the affected Participants, shall authorize such
transfer of assets, and, in the case of the new or successor employer of the
affected Participants, its resolutions shall include an assumption of
liabilities with respect to such Participants' inclusion in the new employer's
plan; and
(c) Such other plan and trust are qualified under Sections 401(a) and
501(a) of the Code.
13.4 Bankruptcy or Insolvency of Employer.
In the event of (a) the Employer's legal dissolution or liquidation by
any procedure other than a consolidation or merger, (b) the Employer's
receivership, insolvency, or cessation of its business as a going concern, or
(c) the commencement of any proceeding by or against the Employer under the
federal bankruptcy laws, and similar federal or state statute, or any federal or
state statute or rule providing for the relief of debtors, compensation of
creditors, arrangement, receivership, liquidation or any similar event which is
not dismissed within 30 days, this Plan shall terminate automatically on such
date (provided, however, that if a proceeding is brought against the Employer
for reorganization under Chapter 11 of the United States Bankruptcy Code or any
similar federal or state statute, then this Plan shall terminate automatically
if and when said proceeding results in a liquidation of the Employer, or the
approval of any Plan providing therefor, or the proceeding is converted to a
case under Chapter 7 of the Bankruptcy Code or any similar conversion to a
liquidation proceeding under federal or state law including, but not limited to,
a receivership proceeding). In the event of any such termination as provided in
the foregoing sentence, the Trustee shall make payments to the persons entitled
thereto in accordance with Section 9.5 hereof.
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13.5 Voluntary Termination.
The Board of Directors reserves the right to terminate this Plan at any
time by giving to the Trustee and the Administrator notice in writing of such
desire to terminate. The Plan shall terminate upon the date of receipt of such
notice, the interests of all Participants shall become fully vested, and the
Trustee shall make payments to each Participant or Beneficiary in accordance
with Section 9.5. Alternatively, the Employer, in its discretion, may determine
to continue the Trust Agreement and to continue the maintenance of the Fund, in
which event distributions shall be made upon the contingencies and in all the
circumstances which would have been entitled such distributions on a fully
vested basis, had there been no termination of the Plan.
13.6 Partial Termination of Plan or Permanent Discontinuance of Contributions.
In the event that a partial termination of the Plan shall be deemed to
have occurred, or if the Employer shall discontinue completely its contributions
hereunder, the right of each affected Participant to his interest in the Fund
shall be fully vested. The Employer, in its discretion, shall decide whether to
direct the Trustee to make immediate distribution of such portion of the Fund
assets to the persons entitled thereto or to make distribution in the
circumstances and contingencies which would have controlled such distributions
if there had been no partial termina tion or discontinuance of contributions.
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ARTICLE XIV
MISCELLANEOUS
14.1 No Diversion of Funds.
It is the intention of the Employer that it shall be impossible for any
part of the corpus or income of the Fund to be used for, or diverted to,
purposes other than for the exclusive benefit of the Participants or their
Beneficiaries, except to extent that a return of the Employer's contribution is
permitted under Section 4.4.
14.2 Liability Limited.
Neither the Employer nor the Administrator, nor any agents, employees,
officers, directors or shareholders of any of them, nor the Trustee, nor any
other person shall have any liability or responsibility with respect to this
Plan, except as expressly provided herein.
14.3 Incapacity.
If the Administrator shall receive evidence satisfactory to it that a
Participant or Beneficiary entitled to receive any benefit under the Plan is, at
the time when such benefit becomes payable, a minor, or is physically or
mentally incompetent to receive such benefit and to give a valid release
therefor, and that another person or an institution is then maintaining or has
custody of such Participant or Beneficiary, and that no guardian, committee or
other representative of the estate of such Participant or Beneficiary shall have
been duly appointed, the Administrator may direct the Trustee to make payment of
such benefit otherwise payable to such Participant or Beneficiary, to such other
person or institution, including a custodian under a Uniform Gifts to Minor Act,
or corresponding legislation (who shall be an adult, a guardian of the minor or
a trust company), and the release of such other person or institution shall be a
valid and complete discharge for the payment of such benefit.
14.4 Spendthrift Clause.
Except as permitted by the Act or the Code, no benefits or other
amounts payable under the Plan shall be subject in any manner to anticipation,
sale, transfer, assignment, pledge, encum brance, charge or alienation. If the
Administrator determines that any person entitled to any payments under the Plan
has become insolvent or bankrupt or has attempted to anticipate, sell, transfer,
assign, pledge, encumber, charge or otherwise in any manner alienate any benefit
or other amount payable to him under the Plan or that there is any danger of any
levy or attachment or other court process or encumbrance on the part of any
creditor of such person entitled to payments under the Plan against any benefit
or other accounts payable to such person, the Administrator may, at any time, in
its discretion, direct the Trustee to withhold any or all payments to such
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person under the Plan and apply the same for the benefit of such person, in such
manner and in such proportion as the Administrator may deem proper.
14.5 Benefits Limited to Fund.
All contributions by the Employer to the Fund shall be voluntary, and
the Employer shall be under no legal liability to make any such contributions.
The benefits of this Plan shall be only as can be provided by the assets of the
Fund, and no liability for the payment of benefits under the Plan or for any
loss of assets due to any action or inaction of the Trustee shall be imposed
upon the Employer.
14.6 Cooperation of Parties.
All parties to this Plan and any party claiming interest hereunder
agree to perform any and all acts and execute any and all documents and papers
which are necessary and desirable for carrying out this Plan or any of its
provisions.
14.7 Payments Due Missing Persons.
The Administrator shall direct the Trustee to make a reasonable effort
to locate all persons entitled to benefits under the Plan; however,
notwithstanding any provision in the Plan to the contrary, if, after a period of
5 years from the date such benefit shall be due, any such persons entitled to
benefits have not been located, their rights under the Plan shall stand
suspended. Before this provision becomes operative, the Trustee shall send a
certified letter to all such persons at their last known address advising them
that their interest in benefits under the Plan shall be suspended. Any such
suspended amounts shall be held by the Trustee for a period of 3 additional
years (or a total of 8 years from the time the benefits first became payable),
and thereafter such amounts shall be reallocated among current Participants in
the same manner that a current contribution would be allocated. However, if a
person subsequently makes a valid claim with respect to such reallocated amounts
and any earnings thereon, the Plan earnings or the Employer's contribution to be
allocated for the year in which the claim shall be paid shall be reduced by the
amount of such payment. Any such suspended amounts shall be handled in a manner
not inconsistent with regulations issued by the Internal Revenue Service and
Department of Labor.
14.8 Governing Law.
This Plan has been executed in the State of Maryland and all questions
pertaining to its validity, construction and administration shall be determined
in accordance with the laws of that State, except to the extent superseded by
the Act.
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14.9 Nonguarantee of Employment.
Nothing contained in this Plan shall be construed as a contract of
employment between the Employer and any Employee, or as a right of any Employee
to be continued in the employment of the Employer, or as a limitation of the
right of the Employer to discharge any of its Employees, with or without cause.
14.10 Counsel.
The Trustee and the Administrator may consult with legal counsel, who
may be counsel for the Employer and for the Administrator or the Trustee (as the
case may be), with respect to the meaning or construction of this Plan and the
Trust Agreement, their respective obligations or duties hereunder or with
respect to any action or proceeding or any question of law, and they shall be
fully protected with respect to any action taken or omitted by them in good
faith pursuant to the advice of legal counsel.
IN WITNESS WHEREOF, the Sponsor has caused these presents to be
executed by its duly authorized officers and its corporate seal to be affixed on
this ____ day of September, 1997.
WYMAN PARK
BANCORPORATION, INC.
ATTEST:
____________________________ By________________________
Charmaine M. Snyder, Ernest A. Moretti,
Secretary President
[Corporate Seal]
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EXHIBIT 22
SUBSIDIARIES
<PAGE>
SUBSIDIARIES OF THE REGISTRANT
(Upon the completion of Transaction)
State of
Percentage Incorporation
of or
Parent Subsidiary Ownership Organization
- ------ ---------- ---------- -------------
Wyman Park Bancorporation Wyman Park Federal 100% Federal
Savings & Loan Association
Wyman Park Federal WP Financial Corporation 100% Maryland
Savings & Loan Association
It is contemplated that the financial statements of the Registrant will
be consolidated with Wyman Park Federal Savings & Loan Association.
EXHIBIT 24.1
CONSENT OF SILVER, FREEDMAN & TAFF, L.L.P.
<PAGE>
CONSENT OF COUNSEL
We consent to the use of our opinion, to the incorporation by reference
of such opinion as an exhibit to the Form SB-2 and to the reference to our firm
under the headings "The Conversion - Income Tax Consequences" and "Legal and Tax
Matters" in the Prospectus and proxy statement included in this Form S-1. In
giving this consent, we do not admit that we are within the category of persons
whose consent is required under Section 7 of the Securities Act of 1933, as
amended, or the rules and regulations of the Securities and Exchange Commission
thereunder.
/s/ SILVER, FREEDMAN & TAFF, L.L.P.
SILVER, FREEDMAN & TAFF, L.L.P.
Washington, D.C.
September 22, 1997
Exhibit 24.2
Consent of Independent Auditors
We hereby consent to the use in the OTS Application to Convert on Form
AC and in the SEC Registration Statement on Form SB-2 of our report dated July
18, 1997, relating to the consolidated financial statements of Wyman Park
Federal Savings and Loan Association for the two years ended June 30, 1997, and
the use of our name under the caption "Experts" in the Prospectus, which is part
of the OTS Application and the SEC Registration Statement.
/s/ Wooden & Benson
September 18, 1997
Baltimore, Maryland
[FERGUSON & COMPANY LETTERHEAD]
September 19, 1997
Board of Directors
Wyman Park Federal Savings and Loan Association
11 West Ridgely Road
Lutherville, Maryland
Directors:
We hereby consent to the use of our firm's name in the Form AC
Application for Conversion of Wyman Park Federal Savings and Loan Association,
Lutherville, Maryland, and any amendments thereto, in the Form SB-2 Registration
Statement of Wyman Park Bancorporation, Inc. and any amendments thereto, and in
the Application H-(e)1-s for Wyman Park Bancorporation, Inc. We also hereby
consent to the inclusion of, summary of, and references to our Appraisal Report
and our opinion concerning subscription rights in such filings including the
Prospectus of Wyman Park Bancorporation, Inc.
Sincerely,
/s/ Charles M. Herbert
Charles M. Hebert
Principal
EXHIBIT 99.2
PROXY STATEMENT AND FORM OF PROXY TO BE
FURNISHED TO THE ASSOCIATION'S
ACCOUNT HOLDERS
<PAGE>
FORM OF PROXY
REVOCABLE PROXY
WYMAN PARK FEDERAL SAVINGS & LOAN ASSOCIATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF WYMAN PARK FEDERAL SAVINGS & LOAN ASSOCIATION
The undersigned member of Wyman Park Federal Savings & Loan Association
(the "Association") hereby appoints the Board of Directors of the Association as
proxies to cast all votes which the undersigned member is entitled to cast at a
Special Meeting of Members to be held at the main office of the Association,
located at 11 West Ridgely Road, Lutherville, Maryland, at the hour and date
stated in the Proxy Statement, and at any and all adjournments and postponements
thereof, and to act with respect to all votes that the undersigned would be
entitled to cast, if then personally present, in accordance with the
instructions on the reverse side hereof:
to vote FOR or AGAINST the adoption of the Plan of Conversion providing
for the conversion of the Association from a federally chartered mutual savings
association to a federally chartered stock savings association as a wholly owned
subsidiary of Wyman Park Bancorporation, Inc., a newly organized Delaware
corporation formed by the Association for the purpose of becoming the holding
company for the Association, and the related transactions provided for in such
Plan of Conversion, including the adoption of an amended Federal Stock Charter
and Bylaws for the Association, pursuant to the laws of the United States and
the Rules and Regulations administered by the Office of Thrift Supervision.
This proxy will be voted as directed by the undersigned member. UNLESS
CONTRARY DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR ADOPTION OF THE PLAN
OF CONVERSION. In addition, this proxy will be voted at the discretion of the
Board of Directors upon any other matter as may properly come before the Special
Meeting.
The undersigned member may revoke this proxy at any time before it is
voted by delivering to the Secretary of the Association either by a written
revocation of the proxy or a duly executed proxy bearing a later date, or by
appearing at the Special Meeting and voting in person. The undersigned member
hereby acknowledges receipt of the Notice of Special Meeting and Proxy
Statement.
(IMPORTANT: PLEASE VOTE, DATE AND SIGN ON REVERSE SIDE)
<PAGE>
WYMAN PARK FEDERAL SAVINGS & LOAN ASSOCIATION
Please Mark Votes Below
Approval of the Plan of Conversion
___ ___
FOR |___| AGAINST |___|
DATE _______________________, 1997
X ________________________________
X ________________________________
IMPORTANT: Please sign your name
name exactly as it appears on this
proxy. Joint accounts need only
one signature. When signing as an
attorney, administrator, agent,
corporation, officer, executor,
trustee or guardian, etc., please
add your full title to your
signature.
NOTE: IF YOU RECEIVE MORE THAN ONE PROXY CARD, PLEASE SIGN AND RETURN ALL
CARDS IN THE ACCOMPANYING ENVELOPE.
<PAGE>
WYMAN PARK FEDERAL SAVINGS & LOAN ASSOCIATION
11 West Ridgely Road
Lutherville, Maryland 21903-5172
(410) 252-6450
NOTICE OF SPECIAL MEETING OF MEMBERS
Notice is hereby given that a Special Meeting of Members (the
"Special Meeting") of Wyman Park Federal Savings & Loan Association, ("Wyman
Park" or the "Association"), will be held at the main office of the Association
located at 11 West Ridgely Road, Lutherville, Maryland 21903-5172 on December
__, 1997 at __:__ _a.m., Lutherville, Maryland time. The purpose of this Special
Meeting is to consider and vote upon:
A plan to convert the Association from a federally chartered mutual
savings association to a federally chartered stock savings
association, including the adoption of a federal stock charter and
bylaws, with the concurrent sale of all the Association's common
stock to Wyman Park Bancorporation, Inc., a Delaware corporation
(the "Holding Company"), and sale by the Holding Company of shares
of its common stock; and
such other business as may properly come before the Special Meeting or any
adjournment thereof. Management is not aware of any such other business.
The members who shall be entitled to notice of and to vote at the
Special Meeting and any adjournment thereof are depositors of the Association at
the close of business on _____ __, 1997 who continue to be depositors as of the
date of the Special Meeting. In the event there are not sufficient votes for
approval of the Plan of Conversion at the time of the Special Meeting, the
Special Meeting may be adjourned from time to time in order to permit further
solicitation of proxies.
BY ORDER OF THE BOARD OF DIRECTORS
Allan B. Heaver
Chairman of the Board
Lutherville, Maryland
November __, 1997
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE
FOR APPROVAL OF THE PLAN OF CONVERSION BY COMPLETING THE
ENCLOSED PROXY CARD AND RETURNING IT IN THE ENCLOSED
POSTAGE-PAID ENVELOPE AS SOON AS POSSIBLE.
YOUR VOTE IS VERY IMPORTANT.
----------------------------
<PAGE>
SUMMARY OF PROPOSED CONVERSION
This summary does not purport to be complete and is qualified in
its entirety by the more detailed information contained in the remainder of this
Proxy Statement and the accompanying Prospectus.
Under its present "mutual" form of organization, Wyman Park has no
stockholders. Its deposit account holders and certain borrowers are members of
the Association and have voting rights in that capacity. In the unlikely event
of liquidation, the Association's deposit account holders would have the sole
right to receive any assets of the Association remaining after payment of its
liabilities (including the claims of all deposit account holders to the
withdrawal value of their deposits). Under the Plan of Conversion (the "Plan of
Conversion") to be voted on at the Special Meeting, the Association would be
converted into a federally chartered savings association organized in stock
form, and all of the Association's common stock would be sold concurrently to
the Holding Company (the "Conversion"). The Holding Company will offer and sell
its common stock (the "Common Stock") in an offering to, in order of priority,
(i) Wyman Park's depositors as of March 31, 1996 ("Eligible Account Holders"),
(ii) tax-qualified employee plans of Wyman Park and the Holding Company
("Tax-Qualified Employee Plans") including the Holding Company's Employee Stock
Ownership Plan (the "ESOP"), provided, however, that the Tax-Qualified Employee
Plans shall have first priority Subscription Rights to the extent that the total
number of shares of Common Stock sold in the Conversion exceeds the maximum of
the Estimated Valuation Range as defined below, (iii) Wyman Park's depositors as
of September 30, 1997 ("Supplemental Eligible Account Holders"), (iv) depositors
and certain borrowers as of both October 17, 1990 and as of ________, 1997
("Other Members"), and (v) its employees, officers and directors (the
"Subscription Offering").
Concurrent with the Subscription Offering, to the extent the Common
Stock is not all sold to the persons in the foregoing categories, the Holding
Company will offer Common Stock to members of the general public to whom a
prospectus (the "Prospectus") has been delivered, with first preference to
natural persons residing in Baltimore and Anne Arundel Counties, Maryland ("the
Community Offering"). The Subscription Offering and the Community Offering are
referred to collectively as the "Subscription and Community Offerings." Voting
and liquidation rights with respect to the Association would thereafter be held
by the Holding Company, except to the limited extent of the liquidation account
(the "Liquidation Account") that will be established for the benefit of Eligible
and Supplemental Eligible Account Holders of the Association and voting and
liquidation rights in the Holding Company would be held only by those persons
who become stockholders of the Holding Company through purchase of shares of its
Common Stock. See "Description of the Plan of Conversion - Principal Effects of
Conversion - Liquidation Rights of Depositor Members."
THE CONVERSION WILL NOT AFFECT THE BALANCE, INTEREST RATE OR FEDERAL
INSURANCE PROTECTION OF ANY SAVINGS DEPOSIT, AND NO PERSON WILL BE OBLIGATED
TO PURCHASE ANY STOCK IN THE CONVERSION.
Business Purposes
for Conversion Net Conversion proceeds are expected to increase the capital
of Wyman Park, which will support the expansion of its
financial services to the public. The conversion to stock
form and the use of a holding company structure are also
expected to enhance its ability to expand through possible
mergers and acquisitions (although no such transactions are
contemplated at this time) and will facilitate its future
access to the capital markets. The Association will continue
to be subject to comprehensive regulation and examination by
the Office of Thrift Supervision, Department of Treasury
("OTS") and the Federal Deposit Insurance Corporation
("FDIC").
Subscription
Offering As part of the Conversion, Common Stock is being offered for
sale in the Subscription Offering, in the priorities
summarized below, to the Association's (i) Eligible Account
Holders, (ii) Tax-Qualified Employee Plans, (iii)
Supplemental Eligible Account Holders, (iv) Other Members,
and (v) its employees, officers and directors.
i
<PAGE>
Subscription Rights
of Eligible
Account Holders Each Eligible Account Holder has been given non-transferable
rights to subscribe for an amount equal to the greater of
$100,000 of Common Stock, one-tenth of one percent of the
total number of shares offered in the Subscription Offering
or 15 times the product (rounded down to the next whole
number) obtained by multiplying the total number of shares
to be issued by a fraction of which the numerator is the
amount of qualifying deposits of such subscriber and the
denominator is the total qualifying deposits of all account
holders in this category on the qualifying date.
Subscription Rights
of Tax-Qualified
Employee Plans The Association's Tax-Qualified Employee Plans have been
given non-transferable rights to subscribe, individually and
in the aggregate, for up to 10% of the total number of
shares sold in the Conversion after satisfaction of
subscriptions of Eligible Account Holders. Notwithstanding
the foregoing, to the extent orders for shares exceed the
maximum of the appraisal range, Tax-Qualified Employee Plans
shall be afforded a first priority to purchase shares sold
above the maximum of the appraisal range. It is anticipated
that Tax-Qualified Employee Plans will purchase 8% of the
Common Stock sold in the Conversion.
Subscription Rights
of Supplemental
Eligible Account
Holders After satisfaction of subscriptions of Eligible Account
Holders and Tax- Qualified Employee Plans, each Supplemental
Eligible Account Holder (other than directors and officers
of the Association) has been given non-transferable rights
to subscribe for an amount equal to the greater of $100,000
of Common Stock, one-tenth of one percent of the total
number of shares offered in the Conversion or 15 times the
product (rounded down to the whole next number) obtained by
multiplying the total number of shares to be issued by a
fraction of which the numerator is the amount of qualifying
deposits of such subscriber and the denominator is the total
qualifying deposits of all account holders in this category
on the qualifying date. The subscription rights of each
Supplemental Eligible Account Holder shall be reduced to the
extent of such person's subscription rights as an Eligible
Account Holder.
Subscription Rights
of Other Members Each Other Member has been given non-transferable rights to
subscribe for an amount equal to the greater of $100,000 of
Common Stock or one-tenth of one percent of the total number
of shares offered in the Conversion after satisfaction of
the subscriptions of the Association's Eligible Account
Holders, Tax-Qualified Employee Plans and Supplemental
Eligible Account Holders.
Subscription Rights
of Association
Personnel Each individual employee, officer and director of the
Association has been given the right to purchase up to
$100,000 of Common Stock after satisfaction of the
subscriptions of Eligible Account Holders, Tax-Qualified
Employee Plans, Supplemental Eligible Account Holders and
Other Members. Total shares subscribed for by the employees,
officers and directors in this category may not exceed 24%
of the total shares offered in the Conversion.
Purchase
Limitations No person (other than a Tax-Qualified Employee Plan) by
himself or herself or with an associate, and no group of
persons acting in concert, may subscribe for or purchase
more than $100,000 of Common Stock offered in the
Conversion. Officers and directors and their associates may
not purchase, in the aggregate, more than 34% of the shares
to be sold in the Conversion. For purposes of the Plan, the
members of the Board of
ii
<PAGE>
Directors are not deemed to be acting in concert solely by
reason of their Board membership.
Expiration Date of
the Subscription
Offering All subscriptions for Common Stock must be received by
_:00 _.m., Lutherville, Maryland time on ________ __, 1997.
How to Subscribe
for Shares For information on how to subscribe for Common Stock being
offered in the Conversion, please read the Prospectus and
the order form and instructions accompanying this Proxy
Statement. Subscriptions will not become effective until the
Plan of Conversion has been approved by the Association's
members and all of the Common Stock offered in the
Conversion has been subscribed for or sold in the
Subscription and Community Offerings or through such other
means as may be approved by the OTS.
Price of
Common Stock All sales of Common Stock in the Offering will be made at
the same price per share which is currently expected to be
$10.00 per share on the basis of an independent appraisal of
the pro forma market value of the Association and the
Holding Company upon Conversion. On the basis of a
preliminary appraisal by Ferguson & Company, Inc.
("Ferguson"), which has been reviewed by the OTS, a minimum
of _________ and a maximum of _________ shares will be
offered in the Conversion. See "The Conversion - Stock
Pricing and Number of Shares to be Issued" in the
Prospectus.
Tax Consequences The Association has received an opinion from its special
counsel, Silver, Freedman & Taff, L.L.P., stating that the
Conversion is a nontaxable reorganization under Section
368(a)(1)(F) of the Internal Revenue Code. The Association
has also received an opinion from Wooden & Benson, Chartered
stating that the Conversion will not be a taxable
transaction for Maryland income tax purposes.
Required Vote Approval of the Plan of Conversion will require the
affirmative vote of a majority of all votes eligible to be
cast at the Special Meeting.
YOUR BOARD OF DIRECTORS URGES YOU TO VOTE FOR
THE PLAN OF CONVERSION
iii
<PAGE>
WYMAN PARK FEDERAL SAVINGS & LOAN ASSOCIATION
PROXY STATEMENT
SPECIAL MEETING OF MEMBERS TO BE HELD ON ________ __, 1997
PURPOSE OF MEETING
This Proxy Statement is being furnished to you in connection with
the solicitation on behalf of the Board of Directors of Wyman Park Federal
Savings & Loan Association ("Wyman Park Federal" or the "Association") of the
proxies to be voted at the Special Meeting of Members (the "Special Meeting") of
the Association to be held at the Association's main office located at 11 West
Ridgely Road, Lutherville, Maryland, on ________ __, 1997 at __:__ _.m.,
Lutherville, Maryland time, and at any adjournments thereof. The Special Meeting
is being held for the purpose of considering and voting upon a Plan of
Conversion under which the Association would be converted (the "Conversion")
from a federally chartered mutual savings association into a federally chartered
stock savings association, the concurrent sale of all the common stock of the
stock savings association to Wyman Park Bancorporation, Inc. (the "Holding
Company"), a Delaware corporation, and the sale by the Holding Company of shares
of its common stock (the "Common Stock") and such other business as may properly
come before the meeting and any adjournment thereof.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF THE ASSOCIATION RECOMMENDS THAT
YOU VOTE TO APPROVE THE PLAN OF CONVERSION.
The Association is currently organized in "mutual" rather than
"stock" form, meaning that it has no stockholders and no authority under its
federal mutual charter to issue capital stock. The Association's Board of
Directors has adopted the Plan of Conversion providing for the Conversion. The
sale of Common Stock of the Holding Company, which was recently formed to become
the holding company of the Association, will substantially increase the
Association's net worth. The Holding Company will exchange approximately 50% of
the net proceeds from the sale of the Common Stock for the common stock of the
Association to be issued upon Conversion. The Holding Company expects to retain
the balance of the net proceeds as its initial capitalization, a portion of
which the Holding Company intends to lend to its Employee Stock Ownership Plan
to fund its purchase of Common Stock. This increased capital will support the
expansion of the Association's financial services to the public. The Board of
Directors of the Association also believes that the conversion to stock form and
the use of a holding company structure will enhance the Association's ability to
expand through possible mergers and acquisitions (although no such transactions
are contemplated at this time) and will facilitate its future access to the
capital markets.
The Board of Directors of the Association believes that the
Conversion will further benefit the Association by enabling it to attract and
retain key personnel through prudent use of stock-related incentive compensation
and benefit plans.
Voting in favor of the Plan of Conversion will not obligate any
person to purchase any Common Stock.
THE OFFICE OF THRIFT SUPERVISION ("OTS") HAS APPROVED THE PLAN OF
CONVERSION SUBJECT TO THE APPROVAL OF THE ASSOCIATION'S MEMBERS AND THE
SATISFACTION OF CERTAIN OTHER CONDITIONS. HOWEVER, SUCH APPROVAL DOES NOT
CONSTITUTE A RECOMMENDATION OR ENDORSEMENT OF THE PLAN OF CONVERSION BY THE OTS.
INFORMATION RELATING TO VOTING AT THE SPECIAL MEETING
The Board of Directors of the Association has fixed__________ __,
1997 as the voting record date ("Voting Record Date") for the determination of
members entitled to notice of the Special Meeting. All Association depositors
and certain borrowers are members of the Association under its current charter.
All Association members of record as
1
<PAGE>
of the close of business on the Voting Record Date who continue to be members as
of the date of the Special Meeting will be entitled to vote at the Special
Meeting or any adjournment thereof.
Each depositor member (including IRA and Keogh account
beneficiaries) will be entitled at the Special Meeting to cast one vote for each
$100, or fraction thereof, of the aggregate withdrawal value of all of such
depositor's accounts in the Association as of the Voting Record Date, up to a
maximum of 1,000 votes. In general, accounts held in different ownership
capacities will be treated as separate memberships for purposes of applying the
1,000 vote limitation. For example, if two persons hold a $100,000 account in
their joint names and each of the persons also holds a separate account for
$100,000 in his own name, each person would be entitled to 1,000 votes for each
separate account and they would together be entitled to cast 1,000 votes on the
basis of the joint account. Where no proxies are received from IRA and Keogh
account beneficiaries, after due notification, the Association, as trustee of
these accounts, is entitled to vote these accounts in favor of the Plan of
Conversion.
Each borrower member of the Association as of both October 17, 1990
and the Voting Record Date, who continues to be a borrowers as of the date of
the Special Meeting will be entitled to cast one vote as a borrower members, in
addition to any vote be or she may be entitled to cast as a depositor.
Approval of the Plan of Conversion requires the affirmative vote of
a majority of the total outstanding votes of the Association's members eligible
to be cast at the Special Meeting. As of________ __, 1997, the Association had
approximately _______ members who were entitled to cast a total of approximately
_______ votes at the Special Meeting.
Association members may vote at the Special Meeting or any
adjournment thereof in person or by proxy. Any member giving a proxy will have
the right to revoke the proxy at any time before it is voted by giving written
notice to the Secretary of the Association, provided that such written notice is
received by the Secretary prior to the Special Meeting or any adjournment
thereof, or upon request if the member is present and chooses to vote in person.
All properly executed proxies received by the Board of Directors of
the Association will be voted in accordance with the instructions indicated
thereon by the members giving such proxies. If no instructions are given, such
proxies will be voted in favor of the Plan of Conversion. If any other matters
are properly presented at the Special Meeting and may properly be voted on, the
proxies solicited hereby will be voted on such matters in accordance with the
best judgment of the proxy holders named thereon. Management is not aware of any
other business to be presented at the Special Meeting.
If a proxy is not executed and is returned or the member does not
vote in person, the Association is prohibited by OTS regulations from using a
previously executed proxy to vote for the Conversion. As a result, failure to
vote may have the same effect as a vote against the Plan of Conversion.
To the extent necessary to permit approval of the Plan of
Conversion, proxies may be solicited by officers, directors or regular employees
of the Association, in person, by telephone or through other forms of
communication and, if necessary, the Special Meeting may be adjourned to a later
date. In addition, Trident Securities, Inc. will assist the Association in the
solicitation of proxies. Such persons will be reimbursed by the Association for
their expenses incurred in connection with such solicitation. The Association
will bear all costs of this solicitation. The proxies solicited hereby will be
used only at the Special Meeting and at any adjournment thereof.
DESCRIPTION OF THE PLAN OF CONVERSION
The Plan of Conversion to be presented for approval at the Special
Meeting provides for the Conversion to be accomplished through adoption of
amended charter and bylaws for the Association to authorize the issuance of
capital stock along with the concurrent formation of a holding company. As part
of the Conversion, the Plan of Conversion provides for the subscription offering
(the "Subscription Offering") of the Common Stock to the Association's (i)
Eligible Account Holders (deposit account holders as of March 31, 1996); (ii)
Tax-Qualified Employee Plans, (iii) Supplemental Eligible Account Holders
(deposit account holders as of September 30, 1997); (iv) Other Members (deposit
account holders and certain borrowers eligible to vote at the Special Meeting
who are not as Eligible Account Holders or Supplemental Eligible Account
Holders); and (v) the Association's employees, officers and directors.
Notwithstanding the foregoing, to the extent orders for shares exceed the
maximum of the appraisal range,
2
<PAGE>
Tax-Qualified Employee Plans shall be afforded a first priority to purchase
shares sold above the maximum of the appraisal range. It is anticipated that
Tax-Qualified Employee Plans will purchase 8% of the Common Stock sold in the
Conversion. In addition, in the Community Offering, concurrent with the
Subscription Offering, members of the general public, with a first preference to
natural persons residing in Baltimore and Anne Arundel Counties, Maryland, will
be afforded the opportunity to purchase the Common Stock not subscribed for in
the Subscription Offering.
THE SUBSCRIPTION OFFERING HAS COMMENCED AS OF THE DATE OF MAILING
OF THIS PROXY STATEMENT. A PROSPECTUS EXPLAINING THE TERMS OF THE SUBSCRIPTION
OFFERING, INCLUDING HOW TO ORDER AND PAY FOR SHARES AND DESCRIBING THE BUSINESS
OF THE ASSOCIATION AND THE HOLDING COMPANY; ACCOMPANIES THIS PROXY STATEMENT AND
SHOULD BE READ BY ALL PERSONS WHO WISH TO CONSIDER SUBSCRIBING FOR COMMON STOCK.
THE SUBSCRIPTION OFFERING EXPIRES AT _:00 _.M., LUTHERVILLE, MARYLAND TIME ON
________ __, 1997 UNLESS EXTENDED BY THE ASSOCIATION AND THE HOLDING COMPANY.
The federal conversion regulations require that all stock offered
in a conversion must be sold in order for the conversion to become effective.
The conversion regulations require that the offering be completed within 45 days
after completion of the Subscription Offering period unless extended by the
Association and the Holding Company with the approval of the OTS. This 45-day
period expires ________ __, 1997 unless the Subscription Offering is extended.
If this is not possible, an occurrence that is currently not anticipated, the
Board of Directors of the Association and the Holding Company will consult with
the OTS to determine an appropriate alternative method of selling all
unsubscribed shares offered in the Conversion. The Plan of Conversion provides
that the Conversion must be completed within 24 months after the date of the
Special Meeting.
The Subscription and Community Offerings or any other sale of the
unsubscribed shares will be made as soon as practicable after the date of the
Special Meeting. No sales of shares may be completed, either in the Subscription
and Community Offerings or otherwise, unless the Plan of Conversion is approved
by the members of the Bank.
The commencement and completion of the Subscription and Community
Offerings, however, is subject to market conditions and other factors beyond the
Association's control. Due to adverse conditions in the stock market in the
past, a number of converting thrift institutions encountered significant delays
in completing their stock offerings or were not able to complete them at all. No
assurance can be given as to the length of time after approval of the Plan of
Conversion at the Special Meeting that will be required to complete the
Subscription and Community Offerings or other sale of the Common Stock to be
offered in the Conversion. If delays are experienced, significant changes may
occur in the estimated pro forma market value of the Holding Company's Common
Stock, together with corresponding changes in the offering price and the net
proceeds realized by the Association and the Holding Company from the sale of
the Common Stock. The Association and the Holding Company may also incur
substantial additional printing, legal, accounting and other expenses in
completing the Conversion.
The following is a brief summary of the Conversion and is qualified
in its entirety by reference to the Plan of Conversion, a complete copy of which
is attached hereto. The Association's federal stock charter and bylaws that will
become effective upon completion of the Conversion are available from the
Association upon request. A copy of the Holding Company's articles of
incorporation and bylaws are also available from the Association upon request.
Principal Effects of Conversion
Depositors. The Conversion will not change the amount, interest
rate, withdrawal rights or federal insurance protection of deposit accounts, or
affect deposit accounts in any way other than with respect to voting and
liquidation rights as discussed below.
Borrowers. The rights and obligations of borrowers under their loan
agreements with the Association will remain unchanged by the Conversion. The
principal amount, interest rate and maturity date of loans will remain as they
were contractually fixed prior to the Conversion.
Voting Rights of Members. Under the Association's current federal
mutual charter, depositors and certain borrowers have voting rights as members
of the Association with respect to the election of directors and certain other
affairs of the Association. After the Conversion, exclusive voting rights with
respect to all such matters will be vested
3
<PAGE>
in the Holding Company as the sole stockholder of the Association. Depositors
and certain borrowers will no longer have any voting rights, except to the
extent that they become stockholders of the Holding Company through the purchase
of its Common Stock. Voting rights in the Holding Company will be held
exclusively by its stockholders.
Liquidation Rights of Depositor Members. Currently, in the unlikely
event of liquidation of the Association, any assets remaining after satisfaction
of all creditors' claims in full (including the claims of all depositors to the
withdrawal value of their accounts) would be distributed pro rata among the
depositors of the Association, with the pro rata share of each being the same
proportion of all such remaining assets as the withdrawal value of each
depositor's account is of the total withdrawal value of all accounts in the
Association at the time of liquidation. After the Conversion, the assets of the
Association would first be applied, in the event of liquidation, against the
claims of all creditors (including the claims of all depositors to the
withdrawal value of their accounts). Any remaining assets would then be
distributed to the persons who qualified as Eligible Account Holders or
Supplemental Eligible Account Holders under the Plan of Conversion to the extent
of their interests in a "Liquidation Account" that will be established at the
time of the completion of the Conversion and then to the Holding Company as the
sole stockholder of the Association's outstanding common stock. The
Association's depositors who did not qualify as Eligible Account Holders or
Supplemental Eligible Account Holders would have no right to share in any
residual net worth of the Association in the event of liquidation after the
Conversion, but would continue to have the right as creditors of the Association
to receive the full withdrawal value of their deposits prior to any distribution
to the Holding Company as the Association's sole stockholder. In addition, the
Association's deposit accounts will continue to be insured by the FDIC to the
maximum extent permitted by law, currently up to $100,000 per insured account.
The Liquidation Account will initially be established in an amount equal to the
net worth of the Association as of the date of the Association's latest
statement of financial condition contained in the final prospectus used in
connection with the Conversion. Each Eligible Account Holder and/or Supplemental
Eligible Account Holder will receive an initial interest in the Liquidation
Account in the same proportion as the balance in all of his qualifying deposit
accounts was of the aggregate balance in all qualifying deposit accounts of all
Eligible Account Holders and Supplemental Eligible Account Holders on March 31,
1996 or September 30, 1997, respectively. For accounts in existence on both
dates, separate subaccounts shall be determined on the basis of the qualifying
deposits in such accounts on the record dates. However, if the amount in the
qualifying deposit account on any annual closing date of the Association is less
than the lowest amount in such deposit account on the Eligibility Record Date
and/or Supplemental Eligibility Record Date, and any subsequent annual closing
date, this interest in the Liquidation Account will be reduced by an amount
proportionate to such reduction in the related deposit account and will not
thereafter be increased despite any subsequent increase in the related deposit
account.
The Association. Under federal law, the stock savings association
resulting from the Conversion will be deemed to be a continuation of the mutual
savings association rather than a new entity and will continue to have all of
the rights, privileges, properties, assets and liabilities of the Association
prior to the Conversion. The Conversion will enable the Association to issue
capital stock, but will not change the general objectives, purposes or types of
business currently conducted by the Association, and no assets of the
Association will be distributed in order to effect the Conversion, other than to
pay the expenses incident thereto. After the Conversion, the Association will
remain subject to examination and regulation by the OTS and will continue to be
a member of the Federal Home Loan Bank System. The Conversion will not cause any
change in the executive officers or directors of the Association.
Tax Consequences. Consummation of the Conversion is expressly
conditioned upon prior receipt of either a ruling of the United States Internal
Revenue Service ("IRS") or an opinion letter of the Association's counsel with
respect to federal taxation, and either a ruling of the Maryland taxation
authorities or an opinion letter from the Association's accountants with respect
to Maryland taxation, to the effect that the Conversion will not be a taxable
transaction to the Holding Company, the Association or the Association's deposit
account holders receiving subscription rights.
The Association has received an opinion of its special counsel,
Silver, Freedman & Taff, L.L.P., to the effect that (i) the Conversion will
qualify as a reorganization under Section 368(a)(1)(F) of the Internal Revenue
Code of 1986, as amended, and no gain or loss will be recognized to the
Association in either its mutual form or its stock form by reason of the
proposed Conversion, (ii) no gain or loss will be recognized to the Association
in its stock form upon the receipt of money and other property, if any, from the
Holding Company for the stock of the Association; and no gain or loss will be
recognized to the Holding Company upon the receipt of money for Common Stock of
the Holding Company; (iii) the assets of the Association in either its mutual or
its stock form will have the same basis before and after the Conversion; (iv)
the holding period of the assets of the Association in its stock form will
include the period
4
<PAGE>
during which the assets were held by the Association in its mutual form prior to
Conversion; (v) gain, if any, will be realized by the depositors of the
Association upon the constructive issuance to them of withdrawable deposit
accounts of the Association in its stock form, nontransferable subscription
rights to purchase Holding Company Common Stock and/or interests in the
Liquidation Account (any such gain will be recognized by such depositors, but
only in an amount not in excess of the fair market value of the subscription
rights and Liquidation Account interests received); (vi) the basis of the
account holder's savings accounts in the Association after the Conversion will
be the same as the basis of his or her savings accounts in the Association prior
to the Conversion; (vii) the basis of each account holder's interest in the
Liquidation Account is assumed to be zero; (viii) based on the Ferguson Letter,
as hereinafter defined, the basis of the subscription rights will be zero; (ix)
the basis of the Holding Company Common Stock to its stockholders will be the
purchase price thereof; (x) a stockholder's holding period for Holding Company
Common Stock acquired through the exercise of subscription rights shall begin on
the date on which the subscription rights are exercised and the holding period
for the Conversion Stock purchased in the Subscription and Community Offering
will commence on the date following the date on which such stock is purchased;
(xi) the Association in its stock form will succeed to and take into account the
earnings and profits or deficit in earnings and profits, of the Association, in
its mutual form, as of the date of Conversion; (xii) the Association,
immediately after Conversion, will succeed to and take into account the bad debt
reserve accounts of the Association, in mutual form, and the bad debt reserves
will have the same character in the hands of the Association after Conversion as
if no Conversion had occurred; and (xiii) the creation of the Liquidation
Account will have no effect on the Association's taxable income, deductions or
addition to reserve for bad debts either in its mutual or stock form.
The opinion from Silver, Freedman & Taff, L.L.P. is based, among
other things, on certain assumptions, including the assumptions that the
exercise price of the Subscription Rights to purchase Holding Company Common
Stock will be approximately equal to the fair market value of that stock at the
time of the completion of the proposed Conversion. With respect to the
Subscription Rights, the Association will receive a letter from Ferguson &
Company, Inc. (the "Ferguson Letter") which, based on certain assumptions, will
conclude that the Subscription Rights to be received by Eligible Account
Holders, Supplemental Eligible Account Holders and other eligible subscribers do
not have any economic value at the time of distribution or at the time the
Subscription Rights are exercised, whether or not a Public Offering takes place.
The Association has also received an opinion of Silver, Freedman &
Taff, L.L.P. to the effect that, based in part on the Ferguson Letter: (i) no
taxable income will be realized by depositors as a result of the exercise of
non-transferable Subscription Rights to purchase shares of Holding Company
Common Stock at fair market value; (ii) no taxable income will be recognized by
borrowers, directors, officers and employees of the Association on the receipt
or exercise of Subscription Rights to purchase shares of Holding Company Common
Stock at fair market value; and (iii) no taxable income will be realized by the
Association or Holding Company on the issuance of Subscription Rights to
eligible subscribers to purchase shares of Holding Company Common Stock at fair
market value.
Notwithstanding the Ferguson Letter, if the Subscription Rights are
subsequently found to have a fair market value and are deemed a distribution of
property, it is Silver, Freedman & Taff, L.L.P.'s opinion that gain or income
will be recognized by various recipients of the Subscription Rights (in certain
cases, whether or not the rights are exercised) and the Association and/or the
Holding Company may be taxable on the distribution of the Subscription Rights.
In any event, all recipients are encouraged to consult with their own tax
advisors as to the tax consequences which may result.
With respect to Maryland taxation, the Association has received an
opinion from Wooden & Benson, Chartered to the effect that the Maryland tax
consequences to the Association, in its mutual or stock form, the Holding
Company, eligible account holders, parties receiving subscription rights,
parties purchasing conversion stock, and other parties participating in the
Conversion will be the same as the federal income tax consequences described
above.
Unlike a private letter ruling, the opinions of Silver, Freedman &
Taff, L.L.P. and Wooden & Benson, Chartered, as well as the Ferguson Letter,
have no binding effect or official status, and no assurance can be given that
the conclusions reached in any of those opinions would be sustained by a court
if contested by the IRS or the Maryland State tax authorities.
5
<PAGE>
Approval, Interpretation, Amendment and Termination
Under the Plan of Conversion, the letter from the OTS giving
approval thereto, and applicable regulations, consummation of the Conversion is
subject to the satisfaction of the following conditions: (a) approval of the
Plan of Conversion by members of the Association casting at least a majority of
the votes eligible to be cast at the Special Meeting; (b) sale of all of the
Common Stock to be offered in the Conversion; and (c) receipt of favorable
rulings or opinions as to the federal and Maryland tax consequences of the
Conversion.
The Plan of Conversion may be substantively amended by the Boards
of Directors of the Association and the Holding Company with the concurrence of
the OTS. If the Plan of Conversion is amended, proxies which have been received
prior to such amendment will not be resolicited unless otherwise required by the
OTS. Also, as required by the federal regulations, the Plan of Conversion
provides that the transactions contemplated thereby may be terminated by the
Board of Directors of the Association alone at any time prior to the Special
Meeting and may be terminated by the Board of Directors of the Association at
any time thereafter with the concurrence of the OTS, notwithstanding approval of
the Plan of Conversion by the members of the Association at the Special Meeting.
All interpretations by the Association and the Holding Company of the Plan of
Conversion and of the order forms and related materials for the Subscription
Offering will be final, except as regards or affects the OTS.
Judicial Review
Section 5(i)(2)(B) of the Home Owners' Loan Act, as amended, 12
U.S.C. ss.1464(i)(2)(B) and Section 563b.8(u) of the Rules and Regulations
promulgated thereunder (12 C.F.R. Section 563b.8(u)) provide: (i) that persons
aggrieved by a final action of the OTS which approves, with or without
conditions, or disapproves a plan of conversion, may obtain review of such final
action only by filing a written petition in the United States Court of Appeals
for the circuit in which the principal office or residence of such person is
located, or in the United States Court of Appeals for the District of Columbia,
requesting that the final action of the OTS be modified, terminated or set
aside, and (ii) that such petition must be filed within 30 days after
publication of notice of such final action in the Federal Register, or 30 days
after the date of mailing of the notice and proxy statement for the meeting of
the converting institution's members at which the conversion is to be voted on,
whichever is later. The notice of the Special Meeting of the Association's
members to vote on the Plan of Conversion described herein is included at the
beginning of this Proxy Statement. The statute and regulation referred to above
should be consulted for further information.
ADDITIONAL INFORMATION
The information contained in the accompanying Prospectus, including
a more detailed description of the Plan of Conversion, consolidated financial
statements of the Association and a description of the capitalization and
business of the Association and the Holding Company, including the Association's
directors and executive officers and their compensation, the anticipated use of
the net proceeds from the sale of the Common Stock and a description of the
Common Stock, is intended to help you evaluate the Conversion and is
incorporated by this reference.
YOUR VOTE IS VERY IMPORTANT TO US. PLEASE TAKE A MOMENT NOW TO
COMPLETE AND RETURN YOUR PROXY CARD IN THE POSTAGE-PAID ENVELOPE PROVIDED. YOU
MAY STILL ATTEND THE SPECIAL MEETING AND VOTE IN PERSON EVEN THOUGH YOU HAVE
VOTED YOUR PROXY. FAILURE TO SUBMIT A PROXY WILL HAVE THE SAME EFFECT AS VOTING
AGAINST THE CONVERSION.
If you have any questions, please call our Stock Information Center
at (___) ___-____.
IMPORTANT: YOU MAY BE ENTITLED TO VOTE IN MORE THAN ONE CAPACITY.
PLEASE SIGN, DATE AND PROMPTLY RETURN EACH PROXY CARD YOU RECEIVE.
----------------------
THIS PROXY STATEMENT IS NOT AN OFFER TO SELL OR THE SOLICITATION OF
AN OFFER TO BUY STOCK. THE OFFER WILL BE MADE ONLY BY THE PROSPECTUS.
THE COMMON STOCK IS NOT A DEPOSIT OR ACCOUNT AND IS NOT FEDERALLY
INSURED OR GUARANTEED.
6
CERTIFICATION
I ACKNOWLEDGE THAT THIS SECURITY IS NOT A DEPOSIT OR ACCOUNT AND IS NOT
FEDERALLY INSURED, AND IS NOT GUARANTEED BY WYMAN PARK FEDERAL SAVINGS & LOAN
ASSOCIATION, OR BY THE FEDERAL GOVERNMENT.
If anyone asserts that this security is federally insured or
guaranteed, or is as safe as an insured deposit, I should call the Office of
Thrift Supervision, Central Regional Director, John Ryan (404) 888-0771.
I further certify that, before purchasing the common stock par value
$0.01 of Wyman Park Bancorporation, Inc., the proposed holding company for Wyman
Park Federal Savings & Loan Association (the "Association"), I received a
prospectus dated ___________, 1997 (the "Prospectus").
The Prospectus that I received contains disclosure concerning the
nature of the security being offered and describes the risks involved in the
investment, including, but not limited to: vulnerability to changes in interest
rates; competition; geographical concentration of loans; certain anti-takeover
provisions; voting control of shares by the board, management and employee
plans; low return of equity and low net interest margin; ESOP compensation
expense; absence of active market for common stock; proposed federal
legislation; risk of delayed offering.
For a more detailed description of the risks involved in the offering,
see "Risk Factors" at pages __ through __ of the Prospectus.
In addition, the certificate of incorporation of the Company requires a
vote of 80% of stockholders to remove directors, to approve certain business
combinations or to amend the certificate of incorporation, which may have the
effect of discouraging a future takeover attempt of the Company. For additional
information, see pages ___ through ___ of the Prospectus.
NOTE: If the stock is to be held jointly,
both parties must sign.
Signature:
Signature:
Date:
