<PAGE>
As filed with the Securities and Exchange Commission on September 17, 1998
Registration No. 333-
-------
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------
PEOPLES BANKCORP, INC.
(Name of Small Business Issuer in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
NEW YORK 6035 [TO BE APPLIED FOR]
- --------------------------------- ---- ---------------------
(State or other jurisdiction (Primary standard industrial (I.R.S. employer
of incorporation or organization) classification code number) identification number)
825 STATE STREET
OGDENSBURG, NEW YORK 13669
(315) 393-4340
- ------------------------------------------------------------------------------------------------
(Address and telephone number of principal executive offices and principal place of business)
</TABLE>
ROBERT E. WILSON, PRESIDENT
AND CHIEF EXECUTIVE OFFICER
PEOPLES BANKCORP, INC.
825 STATE STREET
OGDENSBURG, NEW YORK 13669
(315) 393-4340
-------------------------------------------------------------------------------
(Name, address and telephone number of agent for service)
COPIES TO:
Gary R. Bronstein, Esquire
Joan S. Guilfoyle, Esquire
Housley Kantarian & Bronstein, P.C.
1220 19th Street, N.W., Suite 700
Washington, D.C. 20036
APPROXIMATE DATE 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. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==========================================================================================
Title of Each Class Dollar Proposed Maximum Proposed Maximum
of Securities To Be Amount To Offering Price Aggregate Amount Of
Registered Be Registered Per Share Offering Price (1) Registration Fee
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------
Common Stock, $0.01
par value $1,983,750 $10.00 $1,983,750 $585.21
==========================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(d).
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 SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
<PAGE>
PROSPECTUS
UP TO 198,375 SHARES OF COMMON STOCK
PEOPLES BANKCORP, INC.
825 STATE STREET
OGDENSBURG, NEW YORK 13669
(315) 393-4340
================================================================================
Ogdensburg Federal Savings and Loan Association is converting from a
federally chartered mutual savings and loan association to a federally chartered
stock savings and loan association. As part of the conversion, Ogdensburg
Federal Savings and Loan Association will become a wholly owned subsidiary of
Peoples Bankcorp, Inc. The Company was formed in September 1998 and upon
completion of the conversion will own all of the shares of Ogdensburg Federal
Savings and Loan Association. The common stock of the Company is being offered
to the public in accordance with a plan of conversion. The plan of conversion
must be approved by the Office of Thrift Supervision and by a majority of the
votes eligible to be cast by members of Ogdensburg Federal Savings and Loan
Association. The offering will not go forward if Ogdensburg Federal Savings and
Loan Association does not receive these approvals and the Company does not sell
at least the minimum number of shares.
The shares of common stock are first being offered pursuant to
nontransferable subscription rights in a Subscription Offering. Depositor and
borrower members as of certain eligibility dates will receive subscription
rights. Shares of common stock not subscribed for in the Subscription Offering
may be offered for sale in a community offering with preference given to
residents of St. Lawrence County, New York.
================================================================================
TERMS OF OFFERING
An independent appraiser has estimated the market value of the converted
Ogdensburg Federal Savings and Loan Association to be between $1,275,000 and
$1,725,000, which establishes the number of shares to be offered at a price of
$10 per share. Subject to Office of Thrift Supervision approval, up to 198,375
shares, an additional 15% above the maximum number of shares, may be offered.
Based on these estimates, we are making the following offering of shares of
common stock:
<TABLE>
<CAPTION>
<S> <C> <C>
. Price Per Share: $10
. Number of Shares Minimum/
Maximum, as adjusted: 127,500 to 198,375
. Offering Expenses: $350,000
. Net Proceeds to the Company
Minimum/Maximum, as adjusted: $925,000 to $1,633,750
. Net Proceeds Per Share
Minimum/Maximum, as adjusted: $7.25 to $8.24
</TABLE>
PLEASE REFER TO RISK FACTORS BEGINNING ON PAGE 1 OF THIS DOCUMENT.
These securities are not deposits or accounts and are not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other government agency.
Neither the Securities and Exchange Commission, the Office of Thrift
Supervision, nor any state securities commission has approved or disapproved of
these securities or determined if this prospectus is accurate or complete. Any
representation to the contrary is a criminal offense.
FOR INFORMATION ON HOW TO SUBSCRIBE, CALL THE STOCK INFORMATION CENTER AT (315)
___-____.
TRIDENT SECURITIES, INC.
The date of this Prospectus is __________ __, 1998
<PAGE>
TABLE OF CONTENTS
Page
----
Questions and Answers About the Stock Offering......................... (i)
Summary................................................................ (iv)
Selected Financial and Other Data...................................... (vii)
Risk Factors...........................................................
Proposed Purchases by Directors and Officers...........................
The Company............................................................
Ogdensburg Federal Savings and Loan Association........................
Use of Proceeds........................................................
Dividends..............................................................
Market for the Common Stock............................................
Capitalization.........................................................
Historical and Pro Forma Capital Compliance............................
Pro Forma Data.........................................................
The Conversion.........................................................
Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................
Business of Peoples Bankcorp, Inc......................................
Business of Ogdensburg Federal Savings and Loan Association............
Regulation.............................................................
Taxation...............................................................
Management of the Company..............................................
Management of Ogdensburg Federal Savings and Loan Association..........
Restrictions on Acquisitions of the Company............................
Description of Capital Stock...........................................
Legal and Tax Matters..................................................
Experts................................................................
Additional Information.................................................
Ogdensburg Federal Savings and Loan Association Index to
Financial Statements..................................................
Glossary............................................................... A-1
This document contains forward-looking statements which involve risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in the forward-looking statements. Factors that might cause
such a difference include, but are not limited to, those discussed in "Risk
Factors" beginning on page 1 of this document.
Please see the Glossary beginning on page A-1 for the meaning of
capitalized terms that are not defined in this document.
<PAGE>
[MAP TO BE INSERTED HERE]
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE STOCK OFFERING
Q: WHAT IS A MUTUAL TO STOCK CONVERSION?
A: The conversion is a change in our form of organization. Currently, we
operate as a federally chartered mutual savings and loan association with
no stockholders. As a result of the conversion, we will become a federally
chartered stock savings and loan association. As part of our conversion,
the Company is offering for sale shares of its common stock.
Q: WHAT IS THE PURPOSE OF THE CONVERSION AND THE OFFERING?
A: As a stock savings association operating through a holding company
structure, we will have the ability to plan and develop long-term growth
and improve our future access to the capital markets. The stock offering
will increase our capital and the amount of funds available to us for
lending and investment activities. This will give us greater flexibility
to diversify operations and expand into other geographic markets if we
choose to do so. If the Company's earnings are sufficient in the future,
you might also receive dividends and benefit from the long-term
appreciation of our stock price.
Q: HOW MANY SHARES OF STOCK WILL BE SOLD?
A: Between 127,500 and 172,500 shares of common stock will be sold. The
number of shares to be sold may be increased to 198,375 shares without
further notice to you, subject to receipt of approval of the Office of
Thrift Supervision, if market or financial conditions change prior to
completion of the conversion or if additional shares are needed to fill the
order of our employee stock ownership plan (the "ESOP").
Q: AT WHAT PRICE WILL THE SHARES BE SOLD?
The shares will be sold at $10.00 per share. This price was determined by
our board of directors and is the price most commonly used in stock
offerings involving conversions of mutual savings institutions.
Q: HOW DO I PURCHASE THE STOCK?
A: You must complete and return the Stock Order Form to us together with your
payment or your authorization for withdrawal of the payment amount from an
account you have with us, on or before _________ __, 1998. See pages ___
to ___.
(i)
<PAGE>
Q: HOW MUCH STOCK MAY I PURCHASE?
A: The minimum purchase is 25 shares (or $250). The maximum purchase per
eligible depositor in the subscription offering is 5,000 shares (or
$50,000). We may decrease or increase the maximum purchase limitation
without notifying you.
If shares are sold in a Community Offering, the maximum number of shares
that may be purchased by any party in the Community Offering, when combined
with the number of shares purchased by other parties with whom your shares
may be aggregated is 5,000 shares ($50,000). See pages ___ to ___.
In certain instances, your purchase might be grouped together with
purchases by persons with other accounts with whom you are affiliated or
related and in that event the aggregate purchases may not exceed 8,000
shares ($80,000).
Q: WHAT HAPPENS IF THERE ARE NOT ENOUGH SHARES TO FILL ALL ORDERS?
A: You might not receive any or all of the shares you want to purchase. If we
receive offers for more shares than we have available to sell, the stock
will be offered on a priority basis to the following persons:
. ELIGIBLE ACCOUNT HOLDERS - Persons who had a deposit account with us on
June 30, 1997 with a balance of at least $50.00. Any remaining shares will
be offered to:
. OUR ESOP. Any remaining shares will be offered to:
. SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDERS - Persons who had a deposit account
with us on September 30, 1998 with a balance of at least $50.00. Any
remaining shares will be offered to:
. OTHER MEMBERS - Other depositors and certain borrowers of ours, as of
, 1998.
-------------- --
If the above persons do not subscribe for all of the shares, the remaining
shares will be offered to certain members of the general public with
preference given to people who live in St. Lawrence County, New York. See
pages ___ to ___.
Q: WHAT PARTICULAR FACTORS SHOULD I CONSIDER WHEN DECIDING WHETHER OR NOT TO
BUY THE STOCK?
A: Because of the small size of the offering, there may not be an active market
for the shares, which may make it difficult to resell any shares you may
own. Before you decide to purchase stock, you should also read the Risk
Factors section beginning on page 1 of this document.
(ii)
<PAGE>
Q: AS A DEPOSITOR OR BORROWER MEMBER OF OGDENSBURG FEDERAL SAVINGS AND LOAN
ASSOCIATION, WHAT WILL HAPPEN IF I DO NOT PURCHASE ANY STOCK?
A: You presently have voting rights while we are in the mutual form; however,
once we convert to the stock form you will lose your voting rights unless
you purchase stock. You are not required to purchase stock. Your deposit
account, certificate accounts and any loans you may have with us will be
not be affected. See pages ___ to ___.
Q: WHO CAN HELP ANSWER ANY OTHER QUESTIONS I MAY HAVE ABOUT THE STOCK OFFERING?
A: In order to make an informed investment decision, you should read this
entire document. In addition, you should contact:
STOCK INFORMATION CENTER
PEOPLES BANKCORP, INC.
825 STATE STREET
OGDENSBURG, NEW YORK
(315) ___-____
(iii)
<PAGE>
SUMMARY
This summary highlights selected information from this document and may not
contain all the information that is important to you. To understand the stock
offering fully, you should read carefully this entire document, including the
financial statements and the notes to the financial statements of Ogdensburg
Federal Savings and Loan Association. References in this document to "we,"
"us," and "our" refer to Ogdensburg Federal Savings and Loan Association. In
certain instances where appropriate, "us" or "our" refers collectively to
Peoples Bankcorp, Inc. and Ogdensburg Federal Savings and Loan Association.
References in this document to "the Company" refer to Peoples Bankcorp, Inc.
PEOPLES BANKCORP, INC.
Peoples Bankcorp, Inc. was formed in September 1998 as a New York
corporation to be the holding company for Ogdensburg Federal Savings and Loan
Association. The Company is not an operating company and has not engaged in
any significant business to date. The holding company structure will provide
greater flexibility in terms of operations, expansion and diversification. See
page ___.
OGDENSBURG FEDERAL SAVINGS AND LOAN ASSOCIATION
We are a community and customer-oriented federal mutual savings association
with one office located in Ogdensburg, New York. We were originally founded in
1888 as a New York-chartered savings association and converted to a federally
chartered savings and loan association in 1982. Our primary market area
consists of the City of Ogdensburg and the surrounding townships of Lisbon,
Oswegatchie, Madrid, Morristown, Heuvelton, Hammond, Depeyster, Macomb and
Waddington and the village of Rennsselaer Falls in St. Lawrence County, New
York. Historically, we have emphasized residential mortgage lending, primarily
originating one- to four-family mortgage loans. We also make consumer loans and
a limited number of commercial real estate loans and commercial business loans.
At June 30, 1998, we had total assets of $24.2 million, deposits of $22.4
million, and total equity of $1.6 million. See page __.
THE STOCK OFFERING
The Company is offering between 127,500 and 172,500 shares of common stock
at $10.00 per share. Subject to approval by the Office of Thrift Supervision,
the number of shares to be sold may be increased to 198,375 shares without
further notice to you if market or financial conditions change prior to
completion of the conversion or if additional shares are needed to fill the
order of our ESOP.
(iv)
<PAGE>
STOCK PURCHASES
The Company is first offering its shares of common stock in a Subscription
Offering to depositor and borrower members as of certain eligibility dates. The
shares of common stock will be offered on the basis of priorities. Any
remaining shares may be offered in a Community Offering or in a Syndicated
Community Offering. See pages ___to ___.
SUBSCRIPTION RIGHTS
You may not sell or assign your subscription rights. Any transfer of
subscription rights is
prohibited by law. All persons exercising their subscription rights will be
required to certify that they are purchasing shares solely for their own account
and that they have no agreement or understanding regarding the sale or transfer
of the shares they are purchasing. We intend to pursue any and all remedies in
the event that we become aware of the transfer of any subscription rights. We
will reject orders that we determine to involve the transfer of such rights.
THE OFFERING RANGE AND DETERMINATION OF THE PRICE PER SHARE
The offering range is based on an independent appraisal of the pro forma
market value of the common stock by Feldman Financial Advisors, Inc.
("Feldman"), an appraisal firm experienced in appraisals of savings
institutions. The pro forma market value of the shares is our market value
after giving effect to the sale of shares in this offering. Feldman has
estimated that in its opinion as of September 4, 1998 such value ranged between
$1.3 million and $1.7 million (with a midpoint of $1.5 million) (the "Estimated
Valuation Range"). The appraisal was based in part upon our financial condition
and operations and the effect of the additional capital raised by the sale of
common stock in this offering. The $10.00 price per share was determined by our
board of directors and is the price most commonly used in stock offerings
involving conversions of mutual savings institutions. The appraisal will be
updated prior to the consummation of the conversion. If the updated pro forma
market value of the common stock is either below $1.3 million or above $2.0
million, we will notify you and you will have the opportunity to modify or
cancel your order. See pages ___to ___.
TERMINATION OF THE OFFERING
The Subscription Offering will terminate at 12:00 p.m., Eastern Time, on
_________ __, 1998. The Community Offering, if any, may terminate at any time
without notice but no later than _________ __, 1998, without approval by the
OTS.
BENEFITS TO MANAGEMENT FROM THE OFFERING
Our full-time employees will participate in the offering through purchases
of stock by our ESOP, which is a form of retirement plan. Following the
conversion, we also intend to implement a management recognition plan ("MRP")
under which certain officers and directors will be entitled to receive awards of
restricted stock at no cost to them, and a stock option and incentive plan (the
(v)
<PAGE>
"Option Plan"), which will benefit our officers and directors. However, the MRP
and Option Plan may not be adopted until at least six months after the
conversion and are subject to stockholder approval and compliance with OTS
regulations if adopted within the first year following our conversion. See
pages ___ to ___.
USE OF THE PROCEEDS FROM THE SALE OF COMMON STOCK
The Company will use a portion of the net proceeds from the stock offering
to make a loan to our ESOP to fund its purchase of 8% of the common stock issued
in the conversion. The Company will use at least 50% of the net proceeds to
purchase all the capital stock to be issued by us in the conversion. The Company
will retain the balance of the funds as its initial capitalization. These funds
will serve as a possible source of funds for the payment of dividends to
stockholders or to repurchase shares of common stock in the future and for
general corporate purposes. See page ___.
DIVIDENDS
Management of the Company does not anticipate paying a cash dividend in the
first year following the conversion. Following that period, Management intends
to review periodically the possible adoption of a dividend policy. We cannot
assure you, however, when, or if, we will ultimately decide to establish a cash
dividend policy. See page ___.
MARKET FOR THE COMMON STOCK
The Company intends to list the common stock over-the-counter through the
OTC "Electronic Bulletin Board" under the symbol "_____." The Company has
requested that Trident Securities, Inc. agree to match offers to buy and sell
the common stock. Trident Securities has no obligation to match offers to buy
and sell and may cease doing so at any time. Since the size of the offering is
small, it is unlikely that an active and liquid trading market for the shares
will develop and be maintained. Investors should therefore have a long-term
investment intent. Persons purchasing shares may not be able to sell their
shares when they desire or to sell them at a price equal to or above $10.00.
See page ___.
IMPORTANT RISKS IN OWNING THE COMPANY'S COMMON STOCK
Before you decide to purchase stock in the offering, you should read the
"Risk Factors" section beginning on page one of this document.
(vi)
<PAGE>
SELECTED FINANCIAL AND OTHER DATA
The selected data presented below under the captions "Selected Financial
Condition Data" and "Selected Operations Data" for, and as of the end of
December 31, 1997 and 1996, are derived from the audited financial statements of
Ogdensburg Federal Savings and Loan Association. The financial statements as of
December 31, 1997 and 1996 and for the years then ended are included elsewhere
in this Prospectus. The selected data presented below as of and for the six
month periods ended June 30, 1998 and 1997 are derived from the unaudited
financial statements of Ogdensburg Federal Savings and Loan Association included
elsewhere in this Prospectus. Results for the six month period ended June 30,
1998 do not necessarily indicate the results that may be expected for the year
ended December 31, 1998.
SELECTED FINANCIAL CONDITION DATA
The following table sets forth certain information concerning our financial
position at the dates indicated.
<TABLE>
<CAPTION>
AT AT DECEMBER 31,
JUNE 30, ------------------
1998 1997 1996
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Total assets............................................ $24,247 $ 23,402 $21,998
Loans, net.............................................. 18,698 16,668 15,359
Cash and cash equivalents............................... 1,239 1,227 1,571
Securities:
Available-for-sale..................................... -- 737 804
Held-to-maturity....................................... 3,546 4,031 3,561
Total deposits.......................................... 22,356 21,765 20,489
Total equity............................................ 1,648 1,577 1,477
</TABLE>
SELECTED OPERATIONS DATA
The following table sets forth certain information concerning our results of
operations for the periods shown.
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
June 30, DECEMBER 31,
----------------- ---------------
1998 1997 1997 1996 (1)
------- ------ ------- ------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Interest income..................................................... $ 882 $ 812 $1,662 $ 1,592
Interest expense.................................................... 522 477 998 955
Net interest income................................................. 360 335 664 637
Provision for loan losses........................................... 3 -- 57 --
Net interest income after provision for loan losses................. 357 335 607 637
Non-interest income................................................. 22 20 44 30
Non-interest expenses............................................... 281 250 525 656
Income before income tax expense.................................... 98 105 126 11
Income tax expense.................................................. 26 28 38 3
------- ----- ------ -------
Net income........................................................ $ 72 $ 77 $ 88 $ 8
======= ===== ====== =======
</TABLE>
- -------------------------
(1) Our results of operations for the year ended December 31, 1996 include a
special assessment of $128,000 which we were required to pay to
recapitalize the SAIF.
(vii)
<PAGE>
SELECTED FINANCIAL RATIOS AND OTHER DATA
The table below sets forth certain performance ratios for us for the periods
indicated.
<TABLE>
<CAPTION>
AT OR FOR THE AT OR FOR THE
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
---------------------- -----------------------
1998 1997 1997 1996
--------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
PERFORMANCE RATIOS:
Return on average assets (net income divided
by average total assets)....................................... 0.61% 0.69% 0.39% 0.04%
Return on average equity (net income divided
by average equity)............................................. 9.04 10.42 5.82 0.53
Net interest rate spread (combined weighted
average interest rate earned less combined
weighted average interest rate cost)........................... 2.97 2.96 2.86 2.90
Average interest-earning assets to
average interest-bearing liabilities........................... 105.36 104.73 104.62 104.15
Noninterest expense to average total assets..................... 1.18 1.12 2.30 3.00
ASSET QUALITY RATIOS:
Nonperforming assets to total assets............................ 1.41 0.11 1.42 0.04
Nonperforming loans to total loans.............................. 1.61 0.16 1.74 0.06
Allowance for loan losses to total loans........................ 0.87 0.72 0.97 0.75
Allowance for loan losses to nonperforming loans................ 54.46 438.46 55.97 1288.89
Provision for loan losses to loans, net......................... 0.02 -- 0.34 --
Net charge-offs to average loans outstanding.................... 0.01 0.01 0.06 --
CAPITAL RATIOS:
Equity to total assets.......................................... 6.80 6.80 6.74 6.71
Average equity to average total assets.......................... 6.72 6.64 6.64 6.96
</TABLE>
<TABLE>
<CAPTION>
AT AT DECEMBER 31,
JUNE 30, ---------------------------
1998 1997 1996
-------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
OTHER DATA:
Real estate loans outstanding............................................. 548 565 554
Deposit accounts.......................................................... 2,576 2,637 2,757
Offices open.............................................................. 1 1 1
</TABLE>
(viii)
<PAGE>
RISK FACTORS
In addition to the other information in this document, you should consider
carefully the following risk factors in deciding whether to invest in the common
stock.
LACK OF ACTIVE MARKET FOR COMMON STOCK
Due to the small size of the offering, it is highly unlikely that an active
trading market will develop and be maintained. If an active market does not
develop, you may not be able to sell your shares promptly or perhaps at all, or
sell your shares at a price equal to or above the price you paid for the shares.
The common stock may not be appropriate as a short-term investment. See "Market
for the Common Stock."
BELOW AVERAGE RETURN ON AVERAGE EQUITY AND INCREASED EXPENSES IMMEDIATELY AFTER
CONVERSION
Return on average equity (net income divided by average equity) is a ratio
used by many investors to compare the performance of a savings institution to
its peers. As a result of the conversion, our equity will increase
substantially. Our expenses also will increase because of the compensation
expense associated with our ESOP, MRP, and the costs of being a public company.
Because of the increases in our equity and expenses, our return on equity may
decrease as compared to our performance in previous years. Initially, we intend
to invest the net proceeds in short term investments which generally have lower
yields than residential mortgage loans. At June 30, 1998 and December 31, 1997,
our return on average equity was 9.04% and 10.42%, respectively. A lower return
on equity could reduce the trading price of our shares.
IMPACT OF TECHNOLOGICAL ADVANCES; YEAR 2000 COMPLIANCE
Our industry is experiencing rapid changes in technology. Technology-driven
products and services are frequently introduced. In addition to improving
customer services, effective use of technology increases efficiency and enables
financial institutions to reduce costs. Our future success will thus depend
partly on our ability to address our customers' needs by using technology. Many
of our competitors have far greater resources than we have to invest in
technology. There can be no assurance that we will be able to effectively
develop new technology-driven products and services or be successful in
marketing these products to our customers.
Our operations are also dependent on computers and computer systems,
whether we maintain them internally or they are maintained by a third party. We
have taken steps to ensure that our computer systems will properly recognize
information when the year changes to 2000. Systems that do not properly
recognize the correct year could produce faulty data or cause a system to fail.
We have also taken steps to ensure that we are in compliance with regulatory
directives in this area. There can be no assurance, however, that we and our
third party providers will be successful in
1
<PAGE>
making all necessary changes to avoid computer system failure related to the
year 2000. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Year 2000 Compliance."
RISKS ASSOCIATED WITH NONRESIDENTIAL LENDING
Although our primary lending activity is the origination of one- to four-
family mortgage loans, approximately $6.5 million, or 34.46%, of our gross loan
portfolio at June 30, 1998 consisted of loans other than one- to four-family
mortgage loans. Such loans included $5.4 million in consumer loans, $726,000 in
commercial real estate loans and $200,000 in commercial business loans.
Following the conversion, we intend to continue to originate nonresidential
loans particularly consumer loans. Although these loans generally provide for
higher interest rates and shorter terms than one- to four-family residential
real estate loans, these loans generally have a higher degree of credit and
other risks. Consumer loans also entail greater risk than one- to four-family
residential loans, particularly in the case of consumer loans which are
unsecured or secured by rapidly depreciable assets, such as automobiles. In such
cases, any repossessed collateral for a defaulted consumer loan may not provide
an adequate source of repayment of the outstanding loan balance as a result of
the greater likelihood of damage, loss or depreciation. Commercial business
loans involve a greater degree of risk than other types of lending as payments
on such loans are often dependent on the successful operation of the business
involved which may be subject, to a greater extent, to adverse conditions in the
economy.
POTENTIAL IMPACT OF CHANGES IN INTEREST RATES AND THE CURRENT INTEREST RATE
ENVIRONMENT
Our ability to make a profit, like that of most financial institutions, is
substantially dependent on our net interest income. Net interest income is the
difference between the interest income we earn on our interest-earning assets
(such as mortgage loans and investments) and the interest expense we pay on our
interest-bearing liabilities (such as deposits). Because a portion of the loans
we originate have fixed rates of interest and have longer effective maturities
than our interest-bearing liabilities, the yield on our interest-earning assets
generally will adjust more slowly to changes in interest rates than the cost of
our interest-bearing liabilities. As a result, our net interest income will be
adversely affected by material and prolonged increases in interest rates since
our interest expense would increase at a faster rate than our interest income.
Our earnings may also be adversely affected by rising interest rates due to
decreased customer demand. Although we attempt to reduce this risk by primarily
originating adjustable-rate loans ("ARMs"), the rates on such loans are fixed
for set periods of time (e.g., one year). In addition, the terms of such loans
do not permit us to increase the rate more than 2.0% at each rate adjustment or
above a fixed "ceiling rate." We may also experience an increase in
delinquencies on our ARMs when interest rates rise since the payments that
borrowers are then required to pay will increase.
The average life of loans and mortgage-backed securities can also be
affected by changes in interest rates. As interest rates decline, borrowers tend
to refinance higher-rate, fixed rate loans at lower rates. We also experience an
increase in prepayments on mortgage-backed securities as the
2
<PAGE>
loans underlying such securities are prepaid. Since rates will have declined, we
will not be able to reinvest such prepayments in assets earning interest rates
as high as the rates on the prepaid loans or mortgage-backed securities. As a
result our interest income could decline.
MARKET AREA AND RESOURCE LIMITATIONS
Our primary market area consists of St. Lawrence County, New York.
Population growth in St. Lawrence County is below that of the state of New York
and the United States as a whole. This trend is expected to continue in the
future. Our ability to make new loans in our market area may be limited to the
extent that the rate of population growth is flat or even declines. Further, on
average, the household income within our market area is substantially below the
average for New York as a whole and the United States. Within our market area,
we compete for loans and deposits with several other financial institutions.
Many competing institutions may have resources substantially greater than ours
and may therefore be able to offer a greater variety of loan and deposit
accounts which could give them a competitive advantage over us. Such competition
could adversely affect us in the future. See "Business of Ogdensburg Federal
Savings and Loan Association -- Competition."
DEPENDENCE ON PRESIDENT
Our successful operations depend to a considerable degree on our President,
Robert Wilson. The loss of his services could adversely affect us. We have
attempted to provide for his continued employment with us by entering into a
three-year employment agreement with Mr. Wilson. Mr. Wilson could terminate his
employment at any time, however. See "Management of Ogdensburg Federal Savings
and Loan Association" and " -- Executive Compensation -- Employment Agreement."
ANTI-TAKEOVER PROVISIONS AND STATUTORY PROVISIONS THAT COULD DISCOURAGE HOSTILE
ACQUISITIONS OF CONTROL
Provisions in the Company's certificate of incorporation and bylaws, the
Business Corporation Law of the State of New York, and certain federal
regulations may make it difficult, and expensive, to pursue a tender offer,
change in control or takeover attempt which we oppose. As a result,
stockholders who might desire to participate in such a transaction may not have
an opportunity to do so. Such provisions will also render the removal of the
current board of directors or management of the Company more difficult. In
addition, these provisions may reduce the trading price of our stock. These
provisions include: restrictions on the acquisition of the Company's equity
securities and limitations on voting rights; the classification of the terms of
the members of the board of directors; certain provisions relating to meetings
of stockholders; denial of cumulative voting by stockholders in the election of
directors; the issuance of preferred stock and additional shares of common stock
without shareholder approval; and super-majority provisions for the approval of
certain business combinations. See "Restrictions on Acquisitions of the
Company."
3
<PAGE>
POSSIBLE LIABILITY OF LARGE STOCKHOLDERS
Under New York law, the ten largest stockholders of a New York corporation,
as determined by the fair value of their stock, are jointly and severally liable
for any unpaid wages due to the corporation's laborers, servants or other
employees. Corporations whose stock is either listed on a national securities
exchange or regularly quoted in an over-the-counter market by one or more
members of a national or any affiliated securities association are exempt from
this provision. Upon completion of the Offering, the Company intends to list the
common stock over-the-counter. Trident Securities, Inc., a member of the
National Association of Securities Dealers has indicated that it will make a
market in the common stock. Trident Securities, Inc. is not obligated to do so,
however, and may stop doing so at any time. If the common stock of the Company
is not either listed on a national securities exchange or regularly quoted in an
over-the-counter market, the ten largest stockholders of the Company would be
personally liable in the event the Company failed to pay wages due to laborers,
servants or employees.
INTENTION TO REMAIN INDEPENDENT
We have operated as an independent, community oriented savings association
since 1888. It is our intention to continue to operate as an independent
community oriented financial institution following the Conversion. Accordingly,
you are urged not to subscribe for shares of our Common Stock if you are
anticipating a rapid sale by us to a third party. See "Business of the Company."
Also due to our intention to remain independent, we have included certain
provisions in our certificate of incorporation and bylaws which will assist us
in maintaining our status as an independent, publicly owned corporation. These
provisions as well as the New York general corporation law and certain federal
regulations may have certain anti-takeover effects which include: restrictions
on the acquisition of the Company's equity securities and limitations on voting
rights; the classification of the terms of the members of the Board of
Directors; certain provisions relating to the meeting of stockholders; denial of
cumulative voting by stockholders in the election of directors; the issuance of
preferred stock and additional shares of Common Stock without shareholder
approval; and super majority provisions for the approval of certain business
combinations. See "Restrictions on Acquisitions of the Company." As a result,
stockholders who might wish to participate in a change of control transaction
may not have an opportunity to do so.
POSSIBLE VOTING CONTROL BY DIRECTORS AND OFFICERS
The proposed purchases of the common stock by our directors, officers and
ESOP (estimated to be approximately _______ shares, or ____% of the shares to be
outstanding assuming 150,000 shares are sold), as well as the potential
acquisition of common stock through the Option Plan and MRP, could make it
difficult to obtain majority support for stockholder proposals which are opposed
by us. In addition, the voting of those shares could enable us to block the
approval of transactions (i.e., business combinations and amendment to our
certificate of incorporation and bylaws) requiring the approval of 80% of the
stockholders under the Company's certificate of incorporation. See
4
<PAGE>
"Management of Ogdensburg Federal Savings and Loan Association -- Executive
Compensation -- Employee Stock Ownership Plan," " -- Proposed Future Stock
Benefit Plans -- Stock Option Plan," " -- Management Recognition Plan,"
"Description of Capital Stock," and "Restrictions on Acquisitions of the
Company."
POSSIBLE DILUTIVE EFFECT OF MRP AND STOCK OPTIONS
If the conversion is completed and stockholders subsequently approve the
MRP and Option Plan, we will issue stock to our officers and directors through
these plans. If the shares for the MRP and Option Plan are issued from our
authorized but unissued stock, your ownership percentage could be diluted by up
to approximately ___% and the trading price of our stock may be reduced. See
"Pro Forma Data," "Management of Ogdensburg Federal Savings and Loan
Association --Proposed Future Stock Benefit Plans -- Stock Option Plan," and
" -- Management Recognition Plan."
FINANCIAL INSTITUTION REGULATION OF THE THRIFT INDUSTRY
We are subject to extensive regulation, supervision, and examination by the
OTS and the Federal Deposit Insurance Corporation ("FDIC"). The House of
Representatives has passed legislation which calls for the modernization of the
banking system and which would significantly affect the operations and
regulatory structure of financial services industry, including savings
institutions like us. While this legislation preserves the thrift charter, it
would limit the powers and activities of new unitary thrift holding companies.
The Senate is now considering the legislation and may modify it further. At this
time, we do not know what form the final legislation might take, but if enacted
into law, the legislation could affect our competitive environment as well as
our business and operations. See "Regulation -- Proposed Legislative and
Regulatory Changes."
POSSIBLE ADVERSE TAX CONSEQUENCES OF THE SUBSCRIPTION RIGHTS
We have received the opinion of Feldman that the subscription rights
granted to eligible members in connection with the conversion have no value.
This opinion is not binding on the Internal Revenue Service ("IRS"), however.
Should the IRS determine that the subscription rights do have ascertainable
value, you could be taxed as a result of your exercise of such rights in an
amount equal to such value .
RESTRICTIONS ON REPURCHASE OF SHARES
Generally, during the first year following the conversion, the Company may
not repurchase its shares. During each of the second and third years following
the conversion, the Company may generally repurchase up to 5% of its outstanding
shares as long as we give notice to the OTS of our plans and the OTS does not
object. During those periods, if we decide that additional repurchases would be
a good use of funds, we would not be able to do so, without obtaining OTS
approval. There is no assurance that OTS approval would be given. See "The
Conversion -- Restrictions on Repurchase of Shares."
5
<PAGE>
PROPOSED PURCHASES BY DIRECTORS AND OFFICERS
The following table sets forth the approximate purchases of common stock by
each director and executive officer and their associates in the conversion. The
table assumes that 150,000 shares (the midpoint of the Estimated Valuation
Range) of the common stock will be sold at $10.00 per share and that sufficient
shares will be available to satisfy their subscriptions.
<TABLE>
<CAPTION>
AGGREGATE
TOTAL PRICE OF PERCENT
SHARES SHARES OF SHARES
Name POSITION PURCHASED PURCHASED PURCHASED
- ---- -------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Robert E. Hentschel Chairman $ %
Anthony P. LeBarge, Sr. Director $ %
George E. Silver Director $ %
Wesley L. Stitt Director $ %
Robert E. Wilson President and Chief $ %
Executive Officer; Director
All directors and executive
officers as a group (5 persons) $ %
</TABLE>
THE COMPANY
The Company was formed as a New York corporation in September 1998 at our
direction for the purpose of serving as our holding company after the
conversion. Prior to the conversion, it has not engaged and is not expected to
engage in any material operations. The Company has received the approval of the
OTS to acquire control of us upon completion of the conversion. Upon
consummation of the conversion, the only assets the Company is expected to own
are the capital stock we will issue in the conversion, a note receivable from
our ESOP and any proceeds from the offering it retains.
As a holding company, the Company will have greater flexibility than we
would have to diversify its business activities through the formation of
subsidiaries or through acquisition. The Company will be classified as a unitary
savings and loan holding company after the conversion and will be required to
comply with OTS regulations and be subject to examination.
The Company's executive offices are located at 825 State Street,
Ogdensburg, New York, and its main telephone number is (315) 393-4340.
6
<PAGE>
OGDENSBURG FEDERAL SAVING AND LOAN ASSOCIATION
We are a federal mutual savings and loan association operating through one
office in Ogdensburg, New York. We were founded in 1888. We are a member of
the FHLB System. Our deposits are insured up to applicable limits by the
Federal Deposit Insurance Corporation ("FDIC") under the SAIF. At June 30,
1998, we had total assets of $24.2 million, total deposits of $22.4 million and
total equity of $1.6 million.
Our principal business consists of attracting deposits from the general
public and originating residential mortgage loans. We also offer various types
of consumer loans and a limited number of commercial real estate and commercial
business loans.
Our executive offices are located at 825 State Street, Ogdensburg, New York
and our main telephone number is (315) 393-4340.
USE OF PROCEEDS
The Company will retain 50% of the net proceeds from the offering. In
accordance with applicable OTS regulations and policies, the Company will retain
$463,000, $575,000, $687,000 and $817,000, respectively, at the minimum,
midpoint, maximum and maximum, as adjusted, of the Estimated Valuation Range.
The balance will be used to purchase all of the capital stock we will issue in
connection with the conversion. A portion of the net proceeds to be retained by
the Company will be lent to our ESOP to fund its purchase of 8% of the shares
sold in the conversion. On a short-term basis, the balance of the net proceeds
retained by the Company initially will be invested in short-term investments.
The net proceeds subsequently may be used to fund acquisitions of other
financial services institutions or to diversify into non-banking activities,
although we have no current plans or agreements to do so. Subject to applicable
regulatory restrictions, the net proceeds may also serve as a source of funds
for the repurchase of shares or for the payment of dividends to stockholders,
although the Company has not yet adopted a dividend policy. A portion of the
net proceeds may also be used to fund the purchase of 4.0% of the shares for the
MRP, which is anticipated to be adopted following the conversion. See "Pro
Forma Data."
The funds we receive from the sale of our capital stock to the Company will
be added to our general funds and be used for general corporate purposes
including: (i) investment in mortgages and other loans, (ii) U.S. Government
and federal agency securities, (iii) mortgage-backed securities, or (iv) funding
loan commitments. However, initially, we intend to invest the proceeds in
short-term investments until we can deploy the proceeds into higher yielding
loans. The funds added to our capital will further strengthen our capital
position.
The net proceeds may vary because the total expenses of the conversion may
be more or less than those estimated. We expect our estimated expenses to be
$350,000. Our estimated net proceeds will range from $925,000 to $1.4 million
(or up to $1.6 million in the event the maximum of the
7
<PAGE>
Estimated Valuation Range is increased to $2.0 million). See "Pro Forma Data."
The net proceeds will also vary if the number of shares to be issued in the
conversion is adjusted to reflect a change in our estimated pro forma market
value. Payments for shares made through withdrawals from existing deposit
accounts with us will not result in the receipt of new funds for investment by
us but will result in a reduction of our liabilities and interest expense as
funds are transferred from interest-bearing certificates or accounts.
For a period of one year following the completion of the conversion, we
will not pay any dividends that would be construed as a return of capital nor
take any actions to pursue or propose such dividends.
DIVIDENDS
The Company does not anticipate paying cash dividends during the first year
following the conversion. After such period, the Company will periodically
review the possible adoption of a dividend policy. However, declarations of
dividends by the board of directors will depend upon a number of factors,
including: (i) the amount of the net proceeds retained by the Company in the
conversion, (ii) investment opportunities available, (iii) capital
requirements, (iv) regulatory limitations, (v) results of operations and
financial condition, (vi) tax considerations, and (vii) general economic
conditions. Upon review of such considerations, the board may authorize future
dividends if it deems such payment appropriate and in compliance with applicable
law and regulation. In addition, from time to time in an effort to manage
capital at a desirable level, the board may determine to pay special cash
dividends. Special cash dividends may be paid in addition to, or in lieu of,
regular cash dividends. In addition, there can be no assurance that regular or
special dividends will be paid, or, if paid, will continue to be paid. See
"Historical and Pro Forma Capital Compliance," "The Conversion -- Effects of
Conversion to Stock Form on Depositors and Borrowers of Ogdensburg Federal
Savings and Loan Association -- Liquidation Account" and "Regulation -- Dividend
and Other Capital Distribution Limitations."
The Company is not subject to OTS regulatory restrictions on the payment of
dividends to its stockholders although the source of such dividends will be
dependent in part upon the receipt of dividends from us. The Company is
subject, however, to the requirements of New York law. Under New York Law, the
Company may declare and pay dividends or make other distributions which may
include cash, its bonds, its property, or shares and bonds of other
corporations, on its outstanding shares, except when (i) the Company is
insolvent or would be made insolvent, and (ii) when declaration, payment or
distribution would be contrary to any restrictions contained in the Company=s
certificate of incorporation. Dividends may be declared and paid out of the
Company's surplus only, so that the net assets remaining after such declaration,
payment or distribution will at least equal the amount of its stated capital.
In addition to the foregoing, the portion of our earnings which have been
appropriated for bad debt reserves and deducted for federal income tax purposes
cannot be used by us to pay cash dividends to the Company without the payment of
federal income taxes by us at the then current
8
<PAGE>
income tax rate on the amount deemed distributed, which would include the amount
of any federal income taxes attributable to the distribution. See "Taxation --
Federal Taxation" and Note 9 to the Financial Statements. The Company does not
contemplate any distribution by us that would result in a recapture of our bad
debt reserve or otherwise create federal tax liabilities.
MARKET FOR THE COMMON STOCK
The Company has never issued common stock to the public. Consequently,
there is no established market for the common stock. Following completion of
the Offering, the Company intends to list the common stock over-the-counter
through the OTC "Electronic Bulletin Board" under the symbol "_____" and the
Company intends to request that Trident Securities Inc. undertake to match
offers to buy and offers to sell the common stock. Trident Securities has no
obligation to match offers to buy and offers to sell and may cease doing so at
any time. In addition, the existence of a public trading market will depend
upon the presence in the market of both willing buyers and willing sellers at
any given time. The presence of a sufficient number of buyers and sellers at
any given time is a factor over which neither the Company nor any broker or
dealer has control. Due to the relatively small number of shares of common
stock being offered in the conversion and the concentration of ownership, it is
unlikely that an active or liquid trading market will develop or be maintained.
The absence of an active and liquid trading market may make it difficult for you
to sell your common stock and may have an adverse effect on the price of the
common stock. Purchasers should consider the potentially illiquid and long-term
nature of their investment in the shares offered hereby.
The aggregate price of the common stock is based upon an independent
appraisal of the pro forma market value of the common stock. However, there can
be no assurance that you will be able to sell the common stock you purchase in
the conversion at or above the price you paid for your shares.
9
<PAGE>
CAPITALIZATION
The following table presents our historical capitalization as of June 30,
1998 and the pro forma consolidated capitalization of the Company after giving
effect to the conversion, based upon the sale of the number of shares shown
below and the other assumptions set forth under "Pro Forma Data."
<TABLE>
<CAPTION>
PRO FORMA CONSOLIDATED CAPITALIZATION OF
THE COMPANY BASED ON THE SALE OF
------------------------------------------------------------------
MAXIMUM,
MINIMUM OF MIDPOINT OF MAXIMUM OF AS ADJUSTED,
HISTORICAL AT 127,500 SHARES 150,000 SHARES 172,500 SHARES 198,375 SHARES
JUNE 30, AT $10.00 AT $10.00 AT $10.00 AT $10.00
1998 PER SHARE PER SHARE PER SHARE PER SHARE
------------- --------------- --------------- --------------- ---------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Deposits (1)..................................... $22,356 $22,356 $22,356 $22,356 $22,356
Borrowings....................................... -- -- -- -- --
------------- ------- ------- ------- -------
Total deposits and borrowed funds............. $22,356 $22,356 $22,356 $22,356 $22,356
============= ======= ======= ======= =======
Capital stock:
Preferred stock, $0.01 par value per share:
authorized - 500,000 shares;
assumed outstanding - none................... $ -- $ -- $ -- $ -- $ --
Common stock, $0.01 par value per share
authorized - 3,000,000 shares;
shares to be outstanding - as shown.......... -- 1 2 2 2
Additional paid-in capital (2)................. -- 924 1,148 1,373 1,632
Less: Common stock acquired by ESOP (3)........ -- (102) (120) (138) (159)
Common stock acquired by MRP (4)..... -- (51) (60) (69) (79)
Retained earnings.............................. 1,648 1,648 1,648 1,648 1,648
Plus: Accumulated other comprehensive income.. -- -- -- -- --
------------- ------- ------- ------- -------
Total stockholders' equity................... $ 1,648 $ 2,420 $ 2,618 $ 2,816 $ 3,044
============= ======= ======= ======= =======
- -------------------------
</TABLE>
(1) Withdrawals from savings accounts for the purchase of stock have not been
reflected in these adjustments. Any withdrawals will reduce pro forma
capitalization by the amount of such withdrawals.
(2) Based upon the estimated net proceeds from the sale of capital stock less
the par value of shares sold.
(3) Assumes 8% of the shares of common stock to be sold in the conversion are
purchased by the ESOP and that the funds used to purchase such shares are
borrowed from the Company. See "Pro Forma Data" for additional details.
(4) Assumes the Company issues 4.0% of the shares sold in the offering to the
MRP and the purchase price for the shares purchased by the MRP was equal to
the purchase price of $10 per share. Implementation of the MRP within one
year of conversion would require regulatory and stockholder approval at a
meeting of our stockholders to be held no earlier than six months after the
conversion.
10
<PAGE>
HISTORICAL AND PRO FORMA CAPITAL COMPLIANCE
The following table shows our historical capital position relative to our
regulatory capital requirements as of June 30, 1998 and on a pro forma basis
after giving effect to the conversion and based upon the sale of the number of
shares shown below and the other assumptions set forth under "Pro Forma Data."
The definitions of the terms used in the table are those provided in the capital
regulations issued by the OTS. For a discussion of the capital standards
applicable to us, see "Regulation -- Regulation of the Association -- Regulatory
Capital Requirements."
<TABLE>
<CAPTION>
PRO FORMA AT JUNE 30, 1998 BASED ON THE SALE OF (1):
--------------------------------------------------------------------------------
MINIMUM OF MIDPOINT OF MAXIMUM OF MAXIMUM, AS
ADJUSTED
127,500 SHARES 150,000 SHARES 172,500 SHARES 198,375 SHARES
HISTORICAL AT AT $10.00 AT $10.00 AT $10.00 AT $10.00
JUNE 30, 1998 PER SHARE PER SHARE PER SHARE PER SHARE
------------------- ------------------- ------------------- ------------------ -------------------
PERCENT OF PERCENT OF PERCENT OF PERCENT OF PERCENT OF
AMOUNT ASSETS (2) AMOUNT ASSETS (2) AMOUNT ASSETS (2) AMOUNT ASSETS (2) AMOUNT ASSETS (2)
------ ----------- ------ ----------- ------ ----------- ------ ---------- ------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital under generally
accepted
accounting principles... $1,648 6.80% $1,958 7.94% $2,043 8.25% $2,129 8.56% $2,227 8.91%
====== ===== ====== ===== ====== ===== ====== ===== ====== =====
Tangible capital........... $1,648 6.80% $1,958 7.94% $2,043 8.25% $2,129 8.56% $2,227 8.91%
Tangible capital
requirement............... 364 1.50 370 1.50 371 1.50 373 1.50 375 1.50
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Excess.................. $1,284 5.30% $1,588 6.44% $1,622 6.75% $1,756 7.06% $1,852 7.41%
====== ===== ====== ===== ====== ===== ====== ===== ====== =====
Core capital............... $1,648 6.80% $1,958 7.94% $2,043 8.25% $2,129 8.56% $2,227 8.91%
Core capital requirement... 727 3.00 740 3.00 743 3.00 746 3.00 750 3.00
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Excess.................. $ 921 5.80% $1,218 4.94% $1,300 5.25% $1,383 5.56% $1,477 5.91%
====== ===== ====== ===== ====== ===== ====== ===== ====== =====
Risk-based capital......... $1,813 13.19% $2,123 15.19% $2,208 15.73% $2,294 16.27% $2,392 16.89%
Risk-based capital
requirement............... 1,100 8.00 1,118 8.00 1,123 8.00 1,128 8.00 1,133 8.00
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Excess.................. $ 713 5.19% $1,005 7.19% $1,085 7.73% $1,166 8.27% $1,259 8.89%
====== ===== ====== ===== ====== ===== ====== ===== ====== =====
- -------------------------
</TABLE>
(1) Assumes that the Company will retain 50% of the net proceeds at the
minimum, midpoint, maximum and maximum, as adjusted, with the remainder to
be used by the Company to purchase all of our capital stock to be issued
upon conversion. Assumes net proceeds distributed to the Company or to us
initially are invested in short-term securities that carry a risk-weight
equal to the ratio of risk-weighted assets to total assets at June 30,
1998. Assumes the ESOP purchases 8% of the shares to be sold in the
conversion and borrows the funds needed to purchase such shares from the
Company. Although repayment of such debt will be secured solely by the
shares purchased by the ESOP, we expect to make discretionary contributions
to the ESOP in an amount at least equal to the principal and interest
payments on the ESOP debt. The approximate amount expected to be borrowed
by the ESOP is not reflected in this table as borrowed funds but is
reflected as a reduction of capital. Assumes a number of issued and
outstanding shares of common stock equal to 4% of the common stock to be
sold in the conversion will be purchased by the MRP after the conversion.
The dollar amount of the common stock possibly to be purchased by the MRP
is based on the price per share in the conversion and represents unearned
compensation and is reflected as a reduction of capital. Such amounts do
not reflect possible increases or decreases in the value of such stock
relative to the price per share in the conversion. As we accrue
compensation expense to reflect the vesting of such shares pursuant to the
MRP, the charge against capital will be reduced accordingly. Does not
reflect a possible increase in capital upon the exercise of options by
participants in the Option Plan, 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
(15,000 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. Under the MRP and the Option Plan, shares issued to participants
could be newly issued shares or, subject to regulatory restrictions, shares
repurchased in the market. The MRP and the Option Plan are required to be
approved by the Company's stockholders and will not be implemented until at
least six months after the conversion. See "Management of Ogdensburg
Federal Savings and Loan Association -- Proposed Future Stock Benefit
Plans."
(2) Based on our total assets determined under generally accepted accounting
principles for equity purposes, adjusted total assets for the purposes of
the tangible and core capital requirements ($24.2 million, $24.7 million,
$24.8 million, $24.9 million and $25.1 million, respectively, at June 30,
1998 and on a pro forma basis at the minimum, midpoint, maximum and
maximum, as adjusted, of the Estimated Valuation Range) and risk-weighted
assets for the purpose of the risk-based capital requirement ($13.8
million, $14.0 million, $14.0 million, $14.1 million and $14.2 million,
respectively, at June 30, 1998 and on a pro forma basis at the minimum,
midpoint, maximum and maximum, as adjusted, of the Estimated Valuation
Range).
11
<PAGE>
PRO FORMA DATA
The actual net proceeds from the sale of the common stock cannot be
determined until the conversion is completed. However, net proceeds are
currently estimated to be between $925,000 and $1.6 million at the minimum and
maximum, as adjusted, of the Estimated Valuation Range, based upon the following
assumptions: (i) all of the shares will be sold in the Subscription or Community
Offering; (ii) expenses, including the marketing fee to be paid to Trident
Securities, printing costs, legal and accounting fees, appraisal fees and other
miscellaneous expenses will amount to $350,000.
The following table sets forth our historical net earnings and
stockholders' equity prior to the conversion and the pro forma consolidated net
income and stockholders' equity of the Company following the conversion. Pro
forma consolidated net income and stockholders' equity have been calculated as
if the common stock to be issued in the conversion had been sold at January 1,
1997, and the estimated net proceeds had been invested at 5.37%, which was
approximately equal to the one-year U.S. Treasury bill rate at June 30, 1998.
The one-year U.S. Treasury bill rate, rather than an arithmetic average of the
average yield on interest-earning assets and average rate paid on deposits, has
been used to estimate income on net proceeds because it is believed that it is a
more accurate estimate of the rate that would be obtained on an investment of
net proceeds from the offering. In calculating pro forma income, an effective
state and federal income tax rate of 38% has been assumed, resulting in an after
tax yield of 3.33%. Withdrawals from deposit accounts for the purchase of
shares are not reflected in the pro forma adjustments. As discussed under "Use
of Proceeds," the Company expects to retain 50% of the net conversion proceeds,
part of which will be lent to the ESOP to fund its purchase of 8.0% of the
shares issued in the conversion. No effect has been given in the pro forma
stockholders' equity calculation for the assumed earnings on the net proceeds.
Historical and pro forma per share amounts have been calculated by dividing
historical and pro forma amounts by the indicated number of shares.
THE STOCKHOLDERS' EQUITY INFORMATION IS NOT INTENDED TO REPRESENT THE FAIR
MARKET VALUE OF THE COMMON STOCK, OR THE CURRENT VALUE OF OUR ASSETS OR
LIABILITIES, OR THE AMOUNTS, IF ANY, THAT WOULD BE AVAILABLE FOR DISTRIBUTION TO
STOCKHOLDERS IN THE EVENT OF LIQUIDATION. FOR ADDITIONAL INFORMATION REGARDING
THE LIQUIDATION ACCOUNT, SEE "THE CONVERSION -- EFFECTS OF CONVERSION TO STOCK
FORM ON DEPOSITORS AND BORROWERS OF OGDENSBURG FEDERAL SAVINGS AND LOAN
ASSOCIATION -- LIQUIDATION ACCOUNT." THE PRO FORMA INCOME DERIVED FROM THE
ASSUMPTIONS SET FORTH ABOVE SHOULD NOT BE CONSIDERED INDICATIVE OF THE ACTUAL
RESULTS OF OUR OPERATIONS FOR ANY PERIOD. SUCH PRO FORMA DATA MAY BE MATERIALLY
AFFECTED BY A CHANGE IN THE PRICE PER SHARE OR NUMBER OF SHARES TO BE ISSUED IN
THE CONVERSION AND BY OTHER FACTORS.
12
<PAGE>
<TABLE>
<CAPTION>
AT OR FOR THE SIX MONTHS ENDED JUNE 30, 1998
---------------------------------------------------
MAXIMUM, AS
MINIMUM OF MIDPOINT OF MAXIMUM OF ADJUSTED, OF
127,500 150,000 172,500 198,375
SHARES SHARES SHARES SHARES
AT $10.00 AT $10.00 AT $10.00 AT $10.00
PER SHARE PER SHARE PER SHARE PER SHARE
--------- --------- --------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Gross proceeds.................................... $ 1,275 $ 1,500 $ 1,725 $ 1,984
Less estimated offering expenses.................. (350) (350) (350) (350)
-------- -------- -------- --------
Estimated net conversion proceeds................ $ 925 $ 1,150 $ 1,375 $ 1,634
======== ======== ======== ========
Less: Common stock acquired by ESOP.............. $ (102) $ (120) $ (138) $ (159)
Common stock acquired by MRP................ (51) (60) (69) (79)
-------- -------- -------- --------
Estimated investable net proceeds................ $ 772 $ 970 $ 1,168 $ 1,396
======== ======== ======== ========
Net income:
Historical net income............................ $ 72 $ 72 $ 72 $ 72
Pro forma adjustments:
Net income on net proceeds...................... 13 16 19 23
ESOP (1)........................................ (3) (4) (4) (5)
MRP (2)......................................... (3) (4) (4) (5)
-------- -------- -------- --------
Pro forma net income........................ $ 79 $ 80 $ 83 $ 85
======== ======== ======== ========
Net income per share:(3)
Historical net income............................ $ 0.61 $ 0.52 $ 0.45 $ 0.39
Pro forma adjustments:
Net income on net proceeds...................... 0.11 0.12 0.12 0.13
ESOP (1)........................................ (0.03) (0.03) (0.03) (0.03)
MRP (2)......................................... (0.03) (0.03) (0.03) (0.03)
-------- -------- -------- --------
Pro forma net income per share (3).......... $ 0.66 $ 0.58 $ 0.51 $ 0.46
======== ======== ======== ========
Number of shares.................................. 117,810 138,600 159,390 183,299
======== ======== ======== ========
Stockholders' equity (book value): (4)
Historical (retained earnings)................... $ 1,648 $ 1,648 $ 1,648 $ 1,648
Estimated net conversion proceeds (2)............ 925 1,150 1,375 1,634
Less: Common stock acquired by ESOP (1)....... (102) (120) (138) (159)
Common stock acquired by MRP (2)........... (51) (60) (69) (79)
-------- -------- -------- --------
Total......................................... $ 2,420 $ 2,618 $ 2,816 $ 3,044
======== ======== ======== ========
Stockholders' equity per share:(3)(4)
Historical (retained earnings)................... $ 12.93 $ 10.99 $ 9.55 $ 8.31
Estimated net conversion proceeds................ 7.25 7.67 7.97 8.24
Less: Common stock acquired by ESOP (1)....... (0.80) (0.80) (0.80) (0.80)
Common stock acquired by MRP (2)........... (0.40) (0.40) (0.40) (0.40)
-------- -------- -------- --------
Pro forma..................................... $ 18.98 $ 17.45 $ 16.32 $ 15.34
======== ======== ======== ========
Price to pro forma earnings multiple.............. 7.58% 8.62% 9.80% 10.87%
======== ======== ======== ========
Price to pro forma book value per share(4)........ 52.69% 57.30% 61.26% 65.17%
======== ======== ======== ========
(Footnotes on succeeding page)
</TABLE>
13
<PAGE>
(footnotes continued from preceding page)
- -------------------------
(1) Assumes the ESOP purchases 8% of the shares sold in the conversion and the
Company lends the ESOP the funds to do so. The approximate amount expected
to be borrowed by the ESOP from the Company is reflected as a reduction of
stockholders' equity. We intend to make annual contributions to the ESOP
over a 10 year period in an amount at least equal to the principal and
interest requirement of the debt. The pro forma net income assumes: (i)
the ESOP loan is payable over 10 years, (ii) the average fair value of the
ESOP shares is $10.00 per share in accordance with Statement of Position
("SOP") 93-6 of the American Institute of Certified Public Accountants
("AICPA"), and (iii) the effective tax rate was 38% for such period. The
pro forma stockholders' equity per share calculation assumes all ESOP
shares were outstanding, regardless of whether such shares would have been
released. ESOP expense is based upon generally accepted accounting
principles as described in accounting SOP 93-6. Generally accepted
accounting principles require that as and when shares pledged as security
for an ESOP loan are committed to be released from the loan (i.e., as the
loan is repaid), ESOP expense is recorded based upon the fair value of the
shares at that time. The ESOP loan is assumed to have a term of ten years.
It is therefore assumed that one-tenth of the Common Stock acquired by the
ESOP is committed to be released from the lien of the ESOP loan each year,
and one-fortieth each calendar quarter. ESOP expense shown is equal to the
number of shares so committed to be released for the period, multiplied by
the per share fair value at that time, which is assumed to be $10.00 per
share. All shares released during the period are assumed to be outstanding
for the entire period for the purpose of calculating earnings per share and
book value per share. Shares not yet committed to be released are not
deemed to be outstanding for either purpose.
(2) Assumes the Company issues 4.0% of the shares sold in the offering to the
MRP and the purchase price for the shares purchased by the MRP was equal to
the purchase price of $10 per share and 10% of the amount contributed was
an amortized expense during such period. As we accrue compensation expense
to reflect the five-year vesting period of such shares pursuant to the MRP,
the charge against capital will be reduced accordingly. In calculating the
pro forma effect of the MRP, an effective state and federal income tax rate
of 38% has been assumed. Implementation of the MRP within one year of
conversion would require regulatory and stockholder approval at a meeting
of our stockholders to be held no earlier than six months after the
conversion. For purposes of this table, it is assumed that the MRP will be
adopted by the board of directors, reviewed by the OTS, and approved by the
stockholders, and that the MRP will purchase the shares in the open market
within the year following the conversion. If the shares to be purchased by
the MRP are assumed at January 1, 1998, to be newly issued shares purchased
from the Company at the minimum, midpoint, maximum and maximum, as
adjusted, of the Estimated Valuation Range, pro forma stockholders' equity
per share would have been $18.63, $17.17, $16.08, and $15.14 at June 30,
1998, respectively. As a result of the MRP, stockholders' interests will
be diluted by approximately 3.8%. See "Management of Ogdensburg Federal
Savings and Loan Association - Proposed Future Stock Benefit Plans -
Management Recognition Plan."
(3) Per share data has been computed based on the assumed numbers of shares
sold in the conversion less ESOP shares. This treatment is in accordance
with SOP 93-6. No effect has been given to shares to be reserved for
issuance pursuant to the Option Plan. Accordingly, 9,690, 11,400, 13,110
and 15,076 shares have been subtracted from the shares assumed to be sold
at the minimum, midpoint, maximum, and maximum, as adjusted, of the
Estimated Valuation Range, respectively, and 117,810, 138,600, 159,390 and
183,299 shares are assumed to be outstanding at the minimum, midpoint,
maximum, and maximum, as adjusted of the Estimated Valuation Range.
(4) Consolidated stockholders' equity represents the excess of the carrying
value of the assets of the over its liabilities. The amounts shown do not
reflect the federal income tax consequences of the potential restoration to
income of the tax bad debt reserves for income tax purposes, which would be
required in the event of liquidation. The amounts shown also do not
reflect the amounts required to be distributed in the event of liquidation
to eligible depositors from the liquidation account which will be
established upon the consummation of the conversion. Pro forma
stockholders' equity information is not intended to represent the fair
market value of the shares, the current value of our assets or liabilities
or the amounts, if any, that would be available for distribution to
stockholders in the event of liquidation. Such pro forma data may be
materially affected by a change in the number of shares to be sold in the
conversion and by other factors.
14
<PAGE>
<TABLE>
<CAPTION>
AT OR FOR THE YEAR ENDED DECEMBER 31, 1997
---------------------------------------------------
MAXIMUM, AS
MINIMUM OF MIDPOINT OF MAXIMUM OF ADJUSTED, OF
127,500 150,000 172,500 198,375
SHARES SHARES SHARES SHARES
AT $10.00 AT $10.00 AT $10.00 AT $10.00
PER SHARE PER SHARE PER SHARE PER SHARE
--------- --------- --------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Gross proceeds.............................. $ 1,275 $ 1,500 $ 1,725 $ 1,984
Less estimated offering expenses............ (350) (350) (350) (350)
-------- -------- -------- --------
Estimated net conversion proceeds.......... $ 925 $ 1,150 $ 1,375 $ 1,634
======== ======== ======== ========
Less: Common stock acquired by ESOP........ $ (102) $ (120) $ (138) $ (159)
Common stock acquired by MRP......... (51) (60) (69) (79)
-------- -------- -------- --------
Estimated investable net proceeds.......... $ 772 $ 970 $ 1,168 $ 1,396
======== ======== ======== ========
Net income:
Historical net income...................... $ 88 $ 88 $ 88 $ 88
Pro forma adjustments:
Net income on net proceeds................ 26 33 40 47
ESOP (1).................................. (6) (7) (9) (10)
MRP (2)................................... (6) (7) (9) (10)
-------- -------- -------- --------
Pro forma net income................. $ 102 $ 107 $ 110 $ 115
======== ======== ======== ========
Net income per share:(3)
Historical net income...................... $ 0.74 $ 0.63 $ 0.55 $ 0.48
Pro forma adjustments:
Net income on net proceeds................ 0.22 0.24 0.25 0.26
ESOP (1).................................. (0.05) (0.05) (0.06) (0.05)
MRP (2)................................... (0.05) (0.05) (0.06) (0.05)
-------- -------- -------- --------
Pro forma net income per share (3).... $ 0.86 $ 0.77 $ 0.68 $ 0.64
======== ======== ======== ========
Number of shares............................ 118,320 139,200 160,080 184,092
======== ======== ======== ========
Stockholders' equity (book value): (4)
Historical (retained earnings)............. $ 1,576 $ 1,576 $ 1,576 $ 1,576
Estimated net conversion proceeds (2)...... 925 1,150 1,375 1,634
Less: Common stock acquired by ESOP (1). (102) (120) (138) (159)
Common stock acquired by MRP (2).... (51) (60) (69) (79)
-------- -------- -------- --------
Total................................... $ 2,348 $ 2,546 $ 2,744 $ 2,972
======== ======== ======== ========
Stockholders' equity per share:(3)(4)
Historical (retained earnings)............. $ 12.36 $ 10.51 $ 9.14 $ 7.94
Estimated net conversion proceeds.......... 7.25 7.67 7.97 8.24
Less: Common stock acquired by ESOP (1). (0.80) (0.80) (0.80) (0.80)
Common stock acquired by MRP (2)... (0.40) (0.40) (0.40) (0.40)
-------- -------- -------- --------
Pro forma............................... $ 18.42 $ 16.97 $ 15.91 $ 14.98
======== ======== ======== ========
Price to pro forma earnings multiple........ 11.63% 12.99% 14.71% 15.63%
======== ======== ======== ========
Price to pro forma book value per share(4).. 54.30% 58.92% 62.86% 66.75%
======== ======== ======== ========
(Footnotes on succeeding page)
</TABLE>
15
<PAGE>
(footnotes continued from preceding page)
- -------------------------
(1) Assumes the ESOP purchases 8% of the shares sold in the conversion and the
Company lends the ESOP the funds to do so. The approximate amount expected
to be borrowed by the ESOP from the Company is reflected as a reduction of
stockholders' equity. We intend to make annual contributions to the ESOP
over a 10 year period in an amount at least equal to the principal and
interest requirement of the debt. The pro forma net income assumes: (i)
the ESOP loan is payable over 10 years, (ii) the average fair value of the
ESOP shares is $10.00 per share in accordance with SOP 93-6 of the AICPA,
and (iii) the effective tax rate was 38% for such period. The pro forma
stockholders' equity per share calculation assumes all ESOP shares were
outstanding, regardless of whether such shares would have been released.
ESOP expense is based upon generally accepted accounting principles as
described in accounting SOP 93-6. Generally accepted accounting principles
require that as and when shares pledged as security for an ESOP loan are
committed to be released from the loan (i.e., as the loan is repaid), ESOP
expense is recorded based upon the fair value of the shares at that time.
The ESOP loan is assumed to have a term of ten years. It is therefore
assumed that one-tenth of the Common Stock acquired by the ESOP is
committed to be released from the lien of the ESOP loan each year, and one-
fortieth each calendar quarter. ESOP expense shown is equal to the number
of shares so committed to be released for the period, multiplied by the per
share fair value at that time, which is assumed to be $10.00 per share.
All shares released during the period are assumed to be outstanding for the
entire period for the purpose of calculating earnings per share and book
value per share. Shares not yet committed to be released are not deemed to
be outstanding for either purpose.
(2) Assumes the Company issues 4.0% of the shares sold in the offering to the
MRP and the purchase price for the shares purchased by the MRP was equal to
the purchase price of $10 per share and 20% of the amount contributed was
an amortized expense during such period. As we accrue compensation expense
to reflect the five-year vesting period of such shares pursuant to the MRP,
the charge against capital will be reduced accordingly. In calculating the
pro forma effect of the MRP, an effective state and federal income tax rate
of 38% has been assumed. Implementation of the MRP within one year of
conversion would require regulatory and stockholder approval at a meeting
of our stockholders to be held no earlier than six months after the
conversion. For purposes of this table, it is assumed that the MRP will be
adopted by the board of directors, reviewed by the OTS, and approved by the
stockholders, and that the MRP will purchase the shares in the open market
within the year following the conversion. If the shares to be purchased by
the MRP are assumed at January 1, 1997, to be newly issued shares purchased
from the Company at the minimum, midpoint, maximum and maximum, as
adjusted, of the Estimated Valuation Range, pro forma stockholders' equity
per share would have been $18.09, $16.71, $15.68, and $14.79 at June 30,
1998, respectively. As a result of the MRP, stockholders' interests will
be diluted by approximately 3.8%. See "Management of Ogdensburg Federal
Savings and Loan Association - Proposed Future Stock Benefit Plans -
Management Recognition Plan."
(3) Per share data has been computed based on the assumed numbers of shares
sold in the conversion less ESOP shares that have not been committed for
release. This treatment is in accordance with SOP 93-6. No effect has
been given to shares to be reserved for issuance pursuant to the Option
Plan. Pro forma net loss per share calculations include the number of
shares assumed to be sold in the conversion and, in accordance with SOP 93-
6, exclude ESOP shares which would not have been released during the
period. Accordingly, 9,180, 10,800, 12,420 and 14,283 shares have been
subtracted from the shares assumed to be sold at the minimum, midpoint,
maximum, and maximum, as adjusted, of the Estimated Valuation Range,
respectively, and 118,320, 139,200, 160,080 and 184,092 shares are assumed
to be outstanding at the minimum, midpoint, maximum, and maximum, as
adjusted of the Estimated Valuation Range. See Note ___ above.
(4) Consolidated stockholders' equity represents the excess of the carrying
value of the assets of the over its liabilities. The calculations are
based upon the number of shares issued in the conversion, without giving
effect to SOP 93-6. The amounts shown do not reflect the federal income
tax consequences of the potential restoration to income of the tax bad debt
reserves for income tax purposes, which would be required in the event of
liquidation. The amounts shown also do not reflect the amounts required to
be distributed in the event of liquidation to eligible depositors from the
liquidation account which will be established upon the consummation of the
conversion. Pro forma stockholders' equity information is not intended to
represent the fair market value of the shares, the current value of our
assets or liabilities or the amounts, if any, that would be available for
distribution to stockholders in the event of liquidation. Such pro forma
data may be materially affected by a change in the number of shares to be
sold in the conversion and by other factors.
16
<PAGE>
THE CONVERSION
THE OTS HAS APPROVED THE PLAN SUBJECT TO THE PLAN'S APPROVAL BY OUR MEMBERS
AT A SPECIAL MEETING OF MEMBERS, AND SUBJECT TO THE SATISFACTION OF CERTAIN
OTHER CONDITIONS IMPOSED BY THE OTS IN ITS APPROVAL. OTS APPROVAL, HOWEVER,
DOES NOT CONSTITUTE A RECOMMENDATION OR ENDORSEMENT OF THE PLAN BY THE OTS.
GENERAL
On July 23, 1998, our board of directors adopted a plan of conversion,
pursuant to which we will convert from a federally chartered mutual savings and
loan association to a federally chartered stock savings and loan association and
become a wholly owned subsidiary of the Company. The conversion will include
adoption of the proposed Federal Stock Charter and Bylaws which will authorize
the issuance of capital stock by us. Under the Plan, our capital stock is being
sold to the Company and the common stock of the Company is being offered to our
customers and then to the public.
The OTS has approved the Company's application to become a savings and loan
holding company and to acquire all of our capital stock to be issued in the
conversion. Pursuant to such OTS approval, the Company plans to retain a
portion of the net proceeds from the sale of shares of common stock and to use
the remainder to purchase all of the capital stock we will issue in the
conversion.
The shares are first being offered in a Subscription Offering to holders of
subscription rights. To the extent shares of common stock remain available
after the Subscription Offering, we may offer shares of common stock in a
Community Offering. The Community Offering, if any, may begin anytime
subsequent to the beginning of the Subscription Offering. Shares not subscribed
for in the Subscription and Community Offerings may be offered for sale by the
Company in a Syndicated Community Offering. We have the right, in our sole
discretion, to accept or reject, in whole or in part, any orders to purchase
shares of common stock received in the Community and Syndicated Community
Offering. See " -- Community Offering" and " -- Syndicated Community
Offering."
We must sell common stock in an amount equal to our pro forma market value
as a stock savings institution in order for the conversion to become effective.
We must complete the Community Offering within 45 days after the last day of the
Subscription Offering, unless we extend such period and obtain the approval of
the OTS to do so. The Plan provides that the conversion must be completed
within 24 months after the date of the approval of the Plan by our members.
In the event that we are unable to complete the sale of common stock and
effect the conversion within 45 days after the end of the Subscription Offering,
we may request an extension of the period by the OTS. We cannot assure you that
the extension would be granted if requested, nor can we assure you that our
valuation would not substantially change during any such extension. If the
Estimated Valuation Range of the shares must be amended, we cannot assure that
the OTS
17
<PAGE>
would approve such amended Estimated Valuation Range. Therefore, it is
possible that if the conversion cannot be completed within the requisite period
of time, we may not be permitted to complete the conversion. A substantial
delay caused by an extension of the period may also significantly increase the
expense of the conversion. We cannot sell any shares of common stock unless the
Plan is approved by our members.
The completion of the offering is subject to market conditions and other
factors beyond our control. We cannot give you any assurances as to the length
of time following approval of the Plan at the meeting of our members that will
be required to complete the Community Offering or other sale of the shares being
offered in the conversion. If we experience delays, our estimated pro forma
market value upon conversion could change significantly, together with
corresponding changes in the offering price and the net proceeds to be realized
by us from the sale of the shares. In the event we terminate the conversion, we
would be required to charge all conversion expenses against current income and
promptly return any funds collected by us in the offering to each potential
investor, plus interest at the prescribed rate.
EFFECTS OF CONVERSION TO STOCK FORM ON DEPOSITORS AND BORROWERS OF OGDENSBURG
FEDERAL SAVINGS AND LOAN ASSOCIATION
VOTING RIGHTS. Currently in our mutual form, our depositor and borrower
members have voting rights and may vote for the election of directors.
Following the conversion, depositors and borrower members will cease to have
voting rights.
SAVINGS ACCOUNTS AND LOANS. The conversion will not affect the balances,
terms and FDIC insurance coverage of savings accounts, nor will the amounts and
terms of loans and obligations of the borrowers under their individual
contractual arrangements with us be affected.
TAX EFFECTS. We have received an opinion from our counsel, Housley
Kantarian & Bronstein, P.C. on the material federal tax consequences of the
conversion. We have filed the opinion as an exhibit to the registration
statement of which this prospectus is a part. The opinion provides, in part,
that,: (i) the conversion will qualify as a reorganization under Section
368(a)(1)(F) of the Code, and we will not recognize any taxable gain in either
our mutual form or our stock form as a result of the proposed conversion; (ii)
we will not recognize any taxable gain upon the receipt of money from the
Company for our stock, nor will the Company recognize any gain upon the receipt
of money for the common stock; (iii) our assets in either our mutual or our
stock form will have the same basis before and after the conversion; (iv) the
holding period of our assets will include the period during which the assets
were held by us in our mutual form prior to conversion; (v) no gain or loss will
be recognized by the Eligible Account Holders, Supplemental Eligible Account
Holders, and Other Members upon the issuance to them of withdrawable savings
accounts in us in the stock form in the same dollar amount as their savings
accounts in us in the mutual form plus an interest in the liquidation account of
us in the stock form in exchange for their savings accounts in us in the mutual
form; (vi) depositors will recognize gain or loss upon the receipt of
liquidation rights and the receipt of subscription rights in the conversion, to
the extent such liquidation rights
18
<PAGE>
and subscription rights are deemed to have value, as discussed below; (vii) the
basis of each account holder's savings accounts in us after the conversion will
be the same as the basis of his savings accounts in us prior to the conversion,
decreased by the fair market value of the nontransferable subscription rights
received and increased by the amount, if any, of gain recognized on the
exchange; (viii) the basis of each account holder's interest in the liquidation
account will be zero; and (ix) the holding period of the common stock acquired
through the exercise of subscription rights shall begin on the date on which the
subscription rights are exercised.
With respect to the subscription rights, we have received an opinion of
Feldman which, based on certain assumptions, concludes that the subscription
rights to be received by 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.
Such opinion is based on the fact that such rights are: (i) acquired by the
recipients without payment therefor, (ii) non-transferable, (iii) of short
duration, and (iv) afford the recipients the right only to purchase shares at a
price equal to their estimated fair market value, which will be the same price
at which shares for which no subscription right is received in the Subscription
Offering will be offered in the Community Offering. If the subscription rights
granted to Eligible Account Holders or other eligible subscribers are deemed to
have an ascertainable value, receipt of such rights would be taxable only to
those Eligible Account Holders or other eligible subscribers who exercise the
subscription rights in an amount equal to such value (either as a capital gain
or ordinary income), and we could recognize gain on such distribution.
We are also subject to New York income taxes and have received an opinion
from Silver and Silver that the conversion will be treated for New York state
tax purposes similar to the conversion's treatment for federal tax purposes.
Unlike a private letter ruling, the opinions of Housley Kantarian &
Bronstein, P.C., Feldman and Silver and Silver have no binding effect or
official status, and we cannot give you any assurance that a court would sustain
the conclusions reached in any of those opinions if contested by the IRS or the
New York tax authorities. WE ENCOURAGE ELIGIBLE ACCOUNT HOLDERS, SUPPLEMENTAL
ELIGIBLE ACCOUNT HOLDERS, AND OTHER MEMBERS TO CONSULT WITH THEIR OWN TAX
ADVISERS AS TO THE TAX CONSEQUENCES IN THE EVENT THE SUBSCRIPTION RIGHTS ARE
DEEMED TO HAVE AN ASCERTAINABLE VALUE.
LIQUIDATION ACCOUNT. In the unlikely event of our complete liquidation in
our present mutual form, each depositor is entitled to equal distribution of any
of our assets, pro rata to the value of his accounts, remaining after payment of
claims of all creditors (including the claims of all depositors to the
withdrawal value of their accounts). Each depositor's pro rata share of such
remaining assets would be in the same proportion as the value of his deposit
accounts was to the total value of all deposit accounts in us at the time of
liquidation.
Upon a complete liquidation after the conversion, each depositor would have
a claim, as a creditor, of the same general priority as the claims of all other
general creditors of ours. Therefore, except as described below, a depositor's
claim would be solely in the amount of the balance in his
19
<PAGE>
deposit account plus accrued interest. A depositor would not have an interest in
the residual value of our assets above that amount if any.
The Plan provides for the establishment, upon the completion of the
conversion, of a special "liquidation account" for the benefit of Eligible
Account Holders and Supplemental Eligible Account Holders in an amount equal to
our net worth as reflected in the latest statement of financial condition in the
Prospectus. Each Eligible Account Holder and Supplemental Eligible Account
Holder, if he continues to maintain his deposit account with us, would be
entitled on a complete liquidation of us after conversion, to an interest in the
liquidation account prior to any payment to stockholders. Each Eligible Account
Holder would have an initial interest in such liquidation account for each
deposit account held in us on the qualifying date, June 30, 1997. Each
Supplemental Eligible Account Holder would have a similar interest as of the
qualifying date, September 30, 1998. The interest as to each deposit account
would be in the same proportion of the total liquidation account as the balance
of the deposit account on the qualifying dates was to the aggregate balance in
all the deposit accounts of Eligible Account Holders and Supplemental Eligible
Account Holders on such qualifying dates. However, if the amount in the deposit
account on any annual closing date of ours is less than the amount in such
account on the respective qualifying dates, then the interest in this special
liquidation account would be reduced from time to time by an amount
proportionate to any such reduction, and the interest would cease to exist if
such deposit account were closed. The interest in the special liquidation
account will never be increased despite any increase in the related deposit
account after the respective qualifying dates.
No merger, consolidation, purchase of bulk assets with assumptions of
savings accounts and other liabilities, or similar transactions with another
insured institution in which transaction we, in our converted form, are not the
surviving institution shall be considered a complete liquidation. In such
transactions, the liquidation account shall be assumed by the surviving
institution.
SUBSCRIPTION RIGHTS AND THE SUBSCRIPTION OFFERING
In accordance with OTS regulations, non-transferable subscription rights to
purchase shares of the common stock have been granted to all persons and
entities entitled to purchase shares in the Subscription Offering under the
Plan. The number of shares which these parties may purchase will be determined,
in part, by the total number of shares to be issued and by the availability of
the shares for purchase under the categories set forth in the Plan. If the
Community Offering, as described below, extends beyond 45 days following the
completion of the Subscription Offering, we will resolicit subscribers and
permit them to increase, decrease or rescind their orders. Subscription
priorities have been established for the allocation of stock to the extent that
shares are available after satisfaction of all subscriptions of all persons
having prior rights and subject to the maximum and minimum purchase limitations
set forth in the Plan and as described below under " -- Limitations on Purchases
of Shares." The following priorities have been established:
CATEGORY 1: ELIGIBLE ACCOUNT HOLDERS AT JUNE 30, 1997. Each Eligible
Account Holder (which collectively encompasses all names on a joint account)
will receive non-transferable
20
<PAGE>
subscription rights on a priority basis to purchase that number of shares of
common stock which is equal to 5,000 shares ($50,000). If there are insufficient
shares to satisfy the orders of all Eligible Account Holders, shares shall be
allocated among subscribing Eligible Account Holders so as to permit each such
account holder, to the extent possible, to purchase the lesser of 100 shares or
the total amount of his subscription. Any shares remaining shall be allocated
among the subscribing Eligible Account Holders on an equitable basis, related to
the amounts of their respective qualifying deposits as compared to the total
qualifying deposits of all subscribing Eligible Account Holders. Subscription
rights received by officers and directors in this category based on their
increased deposits in us in the one-year period preceding June 30, 1997, are
subordinated to the subscription rights of other Eligible Account Holders. See
" -- Limitations on Purchases and Transfer of Shares."
CATEGORY 2: ESOP. The ESOP has been granted subscription rights to purchase
up to 10% of the total shares issued in the conversion.
Although the right of the ESOP to subscribe for shares is subordinate to
the right of the Eligible Account Holders, in the event the offering results in
the issuance of shares above the maximum of the Estimated Valuation Range (i.e.,
more than 172,500 shares), the ESOP has a priority right to fill its
subscription. The ESOP currently intends to purchase up to 8.0% of the common
stock issued in the conversion. The ESOP may, however, determine to purchase
some or all of the shares covered by its subscription after the conversion in
the open market or, if approved by the OTS, out of authorized but unissued
shares in the event of an over subscription.
CATEGORY 3: SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDERS AT SEPTEMBER 30, 1998.
Each Supplemental Eligible Account Holder (which collectively encompasses all
names on a joint account) who is not an Eligible Account Holder will receive
non-transferable subscription rights to purchase that number of shares which is
equal to 5,000 shares ($50,000). If the allocation made in this paragraph
results in an over subscription, shares shall be allocated among subscribing
Supplemental Eligible Account Holders so as to permit each such account holder,
to the extent possible, to purchase the lesser of 100 shares or the total amount
of his subscription. Any shares not so allocated shall be allocated among the
subscribing Supplemental Eligible Account Holders on an equitable basis, related
to the amounts of their respective qualifying deposits as compared to the total
qualifying deposits of all subscribing Supplemental Eligible Account Holders.
See " -- Limitations on Purchases and Transfer of Shares."
The right of Supplemental Eligible Account Holders to subscribe for shares
is subordinate to the rights of the Eligible Account Holders and the ESOP to
subscribe for shares.
CATEGORY 4: OTHER MEMBERS AT __________, 1998. Each Other Member (which
collectively encompasses all names on a joint account) who is not an Eligible
Account Holder or Supplemental Eligible Account Holder, will receive non-
transferable subscription rights to purchase up to 5,000 shares ($50,000) to the
extent such shares are available following subscriptions by Eligible Account
Holders, the ESOP, and Supplemental Eligible Account Holders. In the event
there are not enough shares to fill the orders of the Other Members, the
subscriptions of the Other Members will be
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allocated so that each subscribing Other Member will be entitled to purchase the
lesser of 100 shares or the number of shares ordered. Any remaining shares will
be allocated among Other Members whose subscriptions remain unsatisfied on a
reasonable basis. See " --Limitations on Purchases and Transfer of Shares."
MEMBERS IN NON-QUALIFIED STATES. We will make reasonable efforts to comply
with the securities laws of all states in the United States in which persons
entitled to subscribe for the shares pursuant to the Plan reside. However, no
person will be offered or allowed to purchase any shares under the Plan if he
resides in a foreign country or in a state with respect to which any of the
following apply: (i) a small number of persons otherwise eligible to subscribe
for shares under the Plan reside in that state or foreign country; (ii) the
granting of subscription rights or offer or sale of shares of common stock to
those persons would require either us, or our employees to register, under the
securities laws of that state or foreign country, as a broker or dealer or to
register or otherwise qualify our securities for sale in that state or foreign
country; or (iii) such registration or qualification would be impracticable for
reasons of cost or otherwise. We will not make any payment in lieu of the
granting of subscription rights to any person.
RESTRICTIONS ON TRANSFER OF SUBSCRIPTION RIGHTS AND SHARES. Persons are
prohibited from transferring or entering into any agreement or understanding to
transfer the legal or beneficial ownership of their subscription rights. Only
the person to whom they are granted may exercise subscription rights and only
for his account. Each person subscribing for shares will be required to certify
that he is purchasing shares solely for his own account and has not entered into
an agreement or understanding regarding the sale or transfer of those 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.
We will pursue any and all legal and equitable remedies in the event we
become aware of the transfer of subscription rights and will not honor orders
believed by us to involve the transfer of subscription rights.
EXPIRATION DATE. The Subscription Offering will expire at 12:00 p.m.,
Eastern Time, on _________ __, 1998. Subscription rights will become void if
not exercised prior to the Expiration Date.
COMMUNITY OFFERING
To the extent that shares remain available for purchase after filling all
orders received in the Subscription Offering, we may offer shares of common
stock to certain members of the general public residing in New York and certain
other states with a preference to natural persons and trusts of natural persons
residing in St. Lawrence County, New York under such terms and conditions as may
be established by the board of directors. In the Community Offering, the
minimum purchase is 25 shares, and no person, together with associates of and
persons acting in concert with such persons, may purchase more than 5,000 shares
($50,000).
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WE MAY BEGIN THE COMMUNITY OFFERING AT ANY TIME AFTER THE SUBSCRIPTION
OFFERING HAS BEGUN. THE COMMUNITY OFFERING ONCE COMMENCED, MAY EXPIRE AT ANY
TIME WITHOUT NOTICE BUT NO LATER THAN 12:00 P.M., EASTERN TIME, ON __________
__, 1998 UNLESS WE EXTEND IT WITH THE PERMISSION OF THE OTS. PURCHASES OF
SHARES IN THE COMMUNITY OFFERING ARE SUBJECT TO OUR RIGHT IN OUR SOLE
DISCRETION, TO ACCEPT OR REJECT SUCH PURCHASES IN WHOLE OR IN PART EITHER AT THE
TIME AND RECEIPT OF AN ORDER, OR AS SOON AS PRACTICABLE FOLLOWING THE COMPLETION
OF THE COMMUNITY OFFERING.
In the event Community Offering orders are not filled, we will promptly
refund funds received by us with interest at our passbook rate. In the event an
insufficient number of shares are available to fill all orders in the Community
Offering, the available shares will be allocated on an equitable basis
determined by the board of directors, provided however that a preference will be
given to natural persons residing in St. Lawrence County, New York. If
regulatory approval is received to extend the Community Offering beyond 45 days
following the completion of the Subscription Offering, subscribers will be
resolicited. Shares sold in the Community Offering will be sold at $10.00 per
share.
SYNDICATED COMMUNITY OFFERING
The Plan provides that, if necessary, we may offer shares of common stock
not purchased in the Subscription and Community Offerings for sale to the
general public in a Syndicated Community Offering through a syndicate of
selected dealers to be formed and managed by Trident Securities. No individual
purchaser together with any associate or group of persons acting in concert may
purchase more than 5,000 shares ($50,000). Neither Trident Securities nor any
registered broker-dealer will be obligated to take or purchase any shares in the
Syndicated Community Offering, although Trident Securities has agreed to use its
best efforts in the sales of shares in any Syndicated Community Offering.
Shares sold in the Syndicated Community Offering will be sold at the Purchase
Price. See " -- Stock Pricing."
The Syndicated Community Offering will terminate no more than 45 days
following the Expiration Date, unless the Company extends it with the approval
of the OTS.
LIMITATIONS ON PURCHASES AND TRANSFER OF SHARES
The Plan provides for certain additional limitations to be placed upon the
purchase of the shares in the conversion. The minimum purchase is 25 shares.
No persons, together with associates, or group of persons acting in concert, may
purchase more than 8,000 shares ($80,000), except for the ESOP which may
purchase up to 10% of the shares sold. The OTS regulations governing the
conversion provide that officers and directors and their associates may not
purchase, in the aggregate, more than 35% of the shares issued pursuant to the
conversion.
Depending on market conditions and the results of the offering, the board
of directors may increase or decrease any of the purchase limitations without
the approval of our members and
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without resoliciting subscribers. If the maximum purchase limitation is
increased, persons who ordered the maximum amount will be given the first
opportunity to increase their orders. In doing so the preference categories in
the offerings will be followed.
In the event of an increase in the total number of shares offered in the
conversion due to an increase in the Estimated Valuation Range of up to 15% (the
"Adjusted Maximum"), the additional shares will be allocated in the following
order of priority: (i) to fill the ESOP's subscription of up to 8% of the
Adjusted Maximum number of shares (the ESOP currently intends to subscribe for
8%); (ii) in the event that there is an over subscription by Eligible Account
Holders, to fill unfulfilled subscriptions of Eligible Account Holders exclusive
of the Adjusted Maximum; (iii) in the event that there is an over subscription
by Supplemental Eligible Account Holders, to fill unfulfilled subscriptions to
Supplemental Eligible Account Holders exclusive of the Adjusted Maximum; (iv) in
the event that there is an over subscription by Other Members, to fill
unfulfilled subscriptions of Other Members exclusive of the Adjusted Maximum;
and (v) to fill unfulfilled subscriptions in the Community Offering to the
extent possible, exclusive of the Adjusted Maximum.
The term "acting in concert" means (i) knowing participation in a joint
activity or interdependent conscious parallel action towards a common goal
whether or not pursuant to an express agreement; or (ii) a combination or
pooling of voting or other interests in the securities of an issuer for a common
purpose pursuant to any contract, understanding, relationship, agreement or
other arrangement, whether written or otherwise. We may presume that certain
persons are acting in concert based upon, among other things, joint account
relationships, common account and/or addresses and the fact that such persons
have filed joint Schedule 13Ds with the SEC with respect to other companies.
The term "associate" of a person means (i) any corporation or organization
(other than us or a majority-owned subsidiary of ours) of which such person is
an officer or partner or is, directly or indirectly, the beneficial owner of 10%
or more of any class of equity securities, (ii) any trust or other estate in
which such person has a substantial beneficial interest or as to which such
person serves as director or in a similar fiduciary capacity (excluding tax-
qualified employee stock benefit plans), 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 us, or any of our subsidiaries. For example,
a corporation of which a person serves as an officer would be an associate of
that person, and therefore all shares purchased by that corporation would be
included with the number of shares which that person individually could purchase
under the above limitations.
The term "officer" may include our chairman of the board, president, vice
presidents in charge of principal business functions, Secretary and Treasurer
and any other person performing similar functions. All references herein to an
officer have the same meaning as used for an officer in the Plan.
The term "residing," as used in relation to the preference afforded natural
persons in St. Lawrence County, New York, means any natural person who occupies
a dwelling within St. Lawrence County, has an intention to remain within
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St. Lawrence County (manifested by establishing a physical, on-going, non-
transitory presence within St. Lawrence County), and continues to reside in St.
Lawrence County at the time of the offering. We may utilize deposit or loan
records or such other evidence provided to us to make the determination whether
a person is residing in St. Lawrence County. Such determination will be in our
sole discretion.
TO ORDER SHARES IN THE CONVERSION, PERSONS MUST CERTIFY THAT THEIR PURCHASE
DOES NOT CONFLICT WITH THE PURCHASE LIMITATIONS. IN THE EVENT THAT THE PURCHASE
LIMITATIONS ARE VIOLATED BY ANY PERSON (INCLUDING ANY ASSOCIATE OR GROUP OF
PERSONS AFFILIATED OR OTHERWISE ACTING IN CONCERT WITH SUCH PERSONS), WE WILL
HAVE THE RIGHT TO PURCHASE FROM THAT PERSON AT $10.00 PER SHARE ALL SHARES
ACQUIRED BY THAT PERSON IN EXCESS OF THE PURCHASE LIMITATIONS. IF THE EXCESS
SHARES HAVE BEEN SOLD BY THAT PERSON, WE MAY RECOVER THE PROFIT FROM THE SALE OF
THE SHARES BY THAT PERSON. WE MAY ASSIGN OUR RIGHT EITHER TO PURCHASE THE
EXCESS SHARES OR TO RECOVER THE PROFITS FROM THEIR SALE.
Shares of common stock purchased pursuant to the conversion will be freely
transferable, except for shares purchased by our directors and officers. For
certain restrictions on the shares purchased by directors and officers, see " --
Restrictions on Sales and Purchases of Shares by Directors and Officers." In
addition, under guidelines of the NASD, members of the NASD and their associates
are subject to certain restrictions on the transfer of securities purchased in
accordance with subscription rights and to certain reporting requirements upon
purchase of such securities.
ORDERING AND RECEIVING SHARES
USE OF ORDER FORMS. Subscription rights to subscribe may only be exercised
by completion of an original order form. Facsimiles of order forms will not be
accepted. Persons ordering shares in the Subscription Offering must deliver by
mail or in person a properly completed and executed original order form to us
prior to the Expiration Date. Order forms must be accompanied by full payment
for all shares ordered. See " -- Payment for Shares." No wire transfers will
be accepted. Subscription rights under the Plan will expire on the Expiration
Date, whether or not we have been able to locate each person entitled to
subscription rights. ONCE SUBMITTED, SUBSCRIPTION ORDERS CANNOT BE REVOKED
WITHOUT OUR CONSENT UNLESS THE CONVERSION IS NOT COMPLETED WITHIN 45 DAYS OF THE
EXPIRATION DATE.
Persons and entities not purchasing shares in the Subscription Offering
may, subject to availability, purchase shares in the Community Offering by
returning to us a completed and properly executed order form along with full
payment for the shares ordered.
In the event an order form (i) is not delivered and is returned to us by
the United States Postal Service or we are unable to locate the addressee, (ii)
is not received or is received after the Expiration Date, (iii) is defectively
completed or executed, or (iv) is not accompanied by full payment for the shares
subscribed for (including instances where a savings account or certificate
balance from which withdrawal is authorized is insufficient to fund the amount
of such required payment), the
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subscription rights for the person to whom such rights have been granted will
lapse as though that person failed to return the completed order form within the
time period specified. We may, but will not be required to, waive any
irregularity on any order form or require the submission of corrected order
forms or the remittance of full payment for subscribed shares by such date as we
specify. The waiver of an irregularity on an order form in no way obligates us
to waive any other irregularity on that, or any irregularity on any other, order
form. Waivers will be considered on a case by case basis. Photocopies of order
forms, payments from private third parties, or electronic transfers of funds
will not be accepted. Our interpretation of the terms and conditions of the Plan
and of the acceptability of the order forms will be final. We have the right to
investigate any irregularity on any order form.
To ensure that each purchaser receives a prospectus at least 48 hours before
the Expiration Date in accordance with Rule 15c2-8 of 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.
PAYMENT FOR SHARES. Payment for shares of common stock may be made (i) in
cash, if delivered in person, (ii) by check or money order, or (iii) by
authorization of withdrawal from savings accounts (including time certificates)
maintained with us or (iv) by an IRA not held by us. Appropriate means by which
such withdrawals may be authorized are provided in the order form. Once such a
withdrawal has been authorized, none of the designated withdrawal amount may be
used by the subscriber for any purpose other than to purchase the shares. Where
payment has been authorized to be made through withdrawal from a savings
account, the sum authorized for withdrawal will continue to earn interest at the
contract rate until the conversion has been completed or terminated. Interest
penalties for early withdrawal applicable to certificate accounts will not apply
to withdrawals authorized for the purchase of shares; however, if a partial
withdrawal results in a certificate account with a balance less than the
applicable minimum balance requirement, the certificate evidencing the remaining
balance will earn interest at the passbook savings account rate subsequent to
the withdrawal. Payments made in cash or by check or money order, will be
placed in a segregated saving account and interest will be paid by us at our
passbook savings account rate from the date payment is received until the
conversion is completed or terminated. An executed order form, once received by
us, may not be modified, amended, or rescinded without our consent, unless the
conversion is not completed within 45 days after the conclusion of the
Subscription Offering, in which case subscribers may be given an opportunity to
increase, decrease, or rescind their order. In the event that the conversion is
not consummated, all funds submitted pursuant to the offering will be refunded
promptly with interest.
Owners of self-directed IRAs may use the assets of such IRAs to purchase
shares in the offering, provided that such IRAs are not maintained on deposit
with us. Persons with IRAs maintained with us must have their accounts
transferred to an unaffiliated institution or broker to purchase shares in the
offering. The Stock Information Center can assist you in transferring your self-
directed IRA. Because of the paperwork involved, persons owning IRAs with us who
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wish to use their IRA account to purchase stock in the Offering, must contact
the Stock Information Center no later than _______________, 1998.
DELIVERY OF STOCK CERTIFICATES. Certificates representing shares of common
stock issued in the conversion will be mailed to the person(s) at the address
noted on the order form, as soon as practicable following consummation of the
conversion. Any certificates returned as undeliverable will be held until
properly claimed or otherwise disposed. Persons ordering shares might not be
able to sell their shares until they receive their stock certificates.
FEDERAL REGULATIONS PROHIBIT US FROM LENDING FUNDS OR EXTENDING CREDIT TO
ANY PERSON TO PURCHASE SHARES IN THE CONVERSION.
MARKETING ARRANGEMENTS
We have engaged Trident Securities as our financial advisor in connection
with the offering. Trident Securities has agreed to exercise its best efforts
to assist us in the sale of the shares in the offering. As compensation,
Trident Securities will receive a management fee in the amount of $60,000. If
shares are offered for sale in a Syndicated Community Offering, Trident
Securities will organize and manage the syndicate of selected broker-dealers.
The commission to be paid to any such selected broker-dealers will be at a rate
to be agreed to jointly by Trident Securities and us. Fees paid to Trident
Securities and to any other broker-dealer may be deemed to be underwriting fees,
and Trident Securities and such broker-dealers may be deemed to be underwriters.
Trident Securities will also be reimbursed for allocable expenses incurred by
them, including legal fees. Trident Securities' reimbursable out-of-pocket
expenses other than legal fees will not exceed $10,500 and its reimbursable
legal fees will not exceed $20,000. We have agreed to indemnify Trident
Securities for reasonable costs and expenses in connection with certain claims
or liabilities which might be asserted against Trident Securities. This
indemnification covers the investigation, preparation of defense and defense of
any action, proceeding or claim relating to misrepresentation or breach of
warranty of the written agreement among Trident Securities and us or the
omission or alleged omission of a material fact required to be stated or
necessary in the prospectus or other documents.
The shares will be offered principally by the distribution of this document
and through activities conducted at a Stock Information Center located at our
office. The Stock Information Center is expected to operate during our normal
business hours throughout the offering. A registered representative employed by
Trident Securities will be working at, and supervising the operation of, the
Stock Information Center. Trident Securities will assist us in responding to
questions regarding the conversion and the offering and processing order forms.
Our personnel will be present in the Stock Information Center to assist Trident
Securities with clerical matters and to answer questions related solely to our
business.
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STOCK PRICING
We have retained Feldman, an independent economic consulting and appraisal
firm, which is experienced in the evaluation and appraisal of business entities,
including savings institutions involved in the conversion process to prepare an
appraisal of our estimated pro forma market value. We will pay Feldman a fee of
$17,000 for preparing the appraisal and other services and will reimburse
Feldman up to $2,000 for reasonable out-of-pocket expenses. We have agreed to
indemnify Feldman under certain circumstances against liabilities and expenses
arising out of or based on any misstatement or untrue statement of a material
fact contained in the information supplied by us to Feldman.
Feldman prepared the appraisal in reliance upon the information contained
herein, including the financial statements. The appraisal contains an analysis
of a number of factors including, but not limited to, our financial condition
and operating trends, the competitive environment within which we operate,
operating trends of certain savings institutions and savings and loan holding
companies, relevant economic conditions, both nationally and in the state of New
York which affect the operations of savings institutions, and stock market
values of certain savings institutions. In addition, Feldman has advised us
that it has considered the effect of the additional capital raised by the sale
of the shares on our estimated aggregate pro forma market value.
On the basis of the above, Feldman has determined, in its opinion, that as
of September 4, 1998 our estimated aggregate pro forma market value was
$1,500,000. OTS regulations require, however, that the appraiser establish a
range of value for the stock to allow for fluctuations in the aggregate value of
the stock due to changing market conditions and other factors. Accordingly,
Feldman has established the Estimated Valuation Range from $1,275,000 to
$1,725,000 for the offering. The Estimated Valuation Range will be updated
prior to consummation of the conversion and the Estimated Valuation Range may
increase to $1,983,750.
The board of directors has reviewed the independent appraisal, including
the stated methodology of the independent appraiser and the assumptions used in
the preparation of the independent appraisal. The board of directors is relying
upon the expertise, experience and independence of the appraiser and is not
qualified to determine the appropriateness of the assumptions.
In order for stock sales to take place, Feldman must confirm to the OTS
that, to the best of Feldman's knowledge and judgment, nothing of a material
nature has occurred which would cause Feldman to conclude that the Purchase
Price on an aggregate basis was incompatible with Feldman's estimate of our pro
forma market value of us in converted form at the time of the sale. If,
however, the facts do not justify such a statement, an amended Estimated
Valuation Range may be established.
THE APPRAISAL IS NOT A RECOMMENDATION OF ANY KIND AS TO THE ADVISABILITY OF
PURCHASING THESE SHARES. IN PREPARING THE APPRAISAL, FELDMAN HAS RELIED UPON
AND ASSUMED THE ACCURACY AND COMPLETENESS OF FINANCIAL AND STATISTICAL
INFORMATION PROVIDED BY US. FELDMAN DID NOT
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INDEPENDENTLY VERIFY THE FINANCIAL STATEMENTS AND OTHER INFORMATION PROVIDED BY
US, NOR DID FELDMAN VALUE INDEPENDENTLY OUR ASSETS AND LIABILITIES. THE
APPRAISAL CONSIDERS US ONLY AS A GOING CONCERN AND SHOULD NOT BE CONSIDERED AS
OUR LIQUIDATION VALUE. MOREOVER, BECAUSE THE APPRAISAL IS BASED UPON ESTIMATES
AND PROJECTIONS OF A NUMBER OF MATTERS WHICH ARE SUBJECT TO CHANGE, THE MARKET
PRICE OF THE COMMON STOCK COULD DECLINE BELOW $10.00.
CHANGE IN NUMBER OF SHARES TO BE ISSUED IN THE CONVERSION
Depending on market and financial conditions at the time of the completion
of the Subscription and Community Offerings, we may significantly increase or
decrease the number of shares to be issued in the conversion. In the event of
an increase in the valuation, we may increase the total number of shares to be
issued in the conversion. An increase in the total number of shares to be
issued in the conversion would decrease a subscriber's percentage ownership
interest and the pro forma net worth (book value) per share and increase the
pro forma net income and net worth (book value) on an aggregate basis. In the
event of a material reduction in the valuation, we may decrease the number of
shares to be issued to reflect the reduced valuation. A decrease in the number
of shares to be issued in the conversion would increase a subscriber's
percentage ownership interest and the pro forma net worth (book value) per share
and decrease pro forma net income and net worth on an aggregate basis.
Persons ordering shares will not be permitted to modify or cancel their
orders unless the change in the number of shares to be issued in the conversion
results in an offering which is either less than $1,275,000 or more than
$1,983,750.
RESTRICTIONS ON REPURCHASE OF SHARES
Generally, during the first year following the conversion, the Company may
not repurchase its shares and during each of the second and third years
following the conversion, the Company may repurchase five percent of the
outstanding shares provided they are purchased in open-market transactions.
Repurchases must not cause us to become undercapitalized and at least 10 days
prior notice of the repurchase must be provided to the OTS. The OTS may
disapprove a repurchase program upon a determination that (1) the repurchase
program would adversely affect our financial condition, (2) the information
submitted is insufficient upon which to base a conclusion as to whether the
financial condition would be adversely affected, or (3) a valid business purpose
was not demonstrated. In addition, SEC rules also govern the method, time,
price, and number of shares of common stock that may be repurchased by the
Company and affiliated purchasers. If, in the future, the rules and regulations
regarding the repurchase of stock are liberalized, the Company may utilize the
rules and regulations then in effect.
RESTRICTIONS ON SALES AND PURCHASES OF SHARES BY DIRECTORS AND OFFICERS
Shares purchased by directors and officers of the Company may not be sold
for one year following completion of the conversion. An exception to this rule
is a disposition of shares in the
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event of the death of the director or officer. Any shares issued to directors
and officers as a stock dividend, stock split, or otherwise with respect to
restricted stock shall be subject to the same restrictions.
For three years following the conversion, directors and officers may
purchase shares only through a registered broker or dealer. Exceptions are
available only if the OTS has approved the purchase or the purchase is an arm's
length transaction and involves more than one percent of the outstanding shares.
INTERPRETATION AND AMENDMENT OF THE PLAN
We are authorized to interpret and amend the Plan. Our interpretations are
final. Amendments to the Plan after the receipt of member approval will not
need further member approval unless required by the OTS.
CONDITIONS AND TERMINATION
Completion of the conversion requires (i) the approval of the Plan by the
affirmative vote of not less than a majority of the total number of votes
eligible to be cast by our members; and (ii) completion of the sale of shares
within 24 months following approval of the Plan by our members. If these
conditions are not satisfied, the Plan will be terminated and we will continue
our business in the mutual form of organization. We may terminate the Plan at
any time prior to the meeting of members to vote on the Plan or at any time
thereafter with the approval of the OTS.
OTHER
ALL STATEMENTS MADE IN THIS DOCUMENT ARE HEREBY QUALIFIED BY THE CONTENTS
OF THE PLAN OF CONVERSION, THE MATERIAL TERMS OF WHICH ARE SET FORTH HEREIN.
tHE PLAN OF CONVERSION IS ATTACHED TO THE PROXY STATEMENT. COPIES OF THE PLAN
ARE AVAILABLE FROM US AND WE SHOULD BE CONSULTED FOR FURTHER INFORMATION.
ADOPTION OF THE PLAN BY OUR MEMBERS AUTHORIZES US TO INTERPRET, AMEND OR
TERMINATE THE PLAN.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management's discussion and analysis of financial condition and results of
operations is intended to assist you in understanding our financial condition
and results of operations. The information in this section should also be read
with our Financial Statements and Notes to the Financial Statements which are
included elsewhere in this document.
The Company has recently been formed and accordingly, has no results of
operations. The following discussion relates only to our financial condition
and results of operations
Our results of operations depend primarily on net interest income, which is
determined by (i) the difference between rates of interest we earn on our
interest-earning assets and the rates we pay on interest-bearing liabilities
(interest rate spread), and (ii) the relative amounts of interest-earning assets
and interest-bearing liabilities. Our results of operations are also affected
by non-interest expense, including primarily compensation and employee benefits,
federal deposit insurance premiums and office occupancy costs. Our results of
operations also are affected significantly by general and economic and
competitive conditions, particularly changes in market interest rates,
government policies and actions of regulatory authorities, all of which are
beyond our control.
Following the conversion, we believe there will be sufficient demand in our
market area to continue our policy of emphasizing lending in the one- to four-
family real estate loan area. In addition, we hope to experience continued
growth in our consumer loan portfolio; however, there is no assurance that we
will be able to do so. See "Business of Ogdensburg Federal Savings and Loan
Association-- Lending Activities."
YEAR 2000 COMPLIANCE
A great deal of information has been disseminated about the global computer
problem that may occur in the year 2000 which would affect the speed and
accuracy of the data processing that is essential to our operations. We are
conducting a thorough review of our internal systems as well as the efforts of
our outside data processing service provider. The progress of the plan is
monitored by our board of directors. We do not expect to incur significant
costs to replace existing hardware or software. The greatest potential for
problems, however, concerns the data processing provided by our third party
service bureau. The service bureau with which we operate is providing us with
periodic updates of its compliance progress. We have participated in the first
phase of testing with the provider satisfactorily with the second phase to be
completed prior to December 31, 1998. The service bureau has indicated that it
will be compliant by such date. With respect to our teller/platform computer
system, we are converting to a new system that is year 2000 compliant which will
be completed by April 30, 1999. We are in the process of developing a
contingency plan to deal with the potential that our service bureau is unable to
bring its systems into compliance by September 30, 1998. We believe that we
would use manual systems as a contingency plan if our current provider is unable
to resolve this problem in time. There can be no assurance in this regard,
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however, and it is possible that as a result we could experience data processing
delays, errors or failures, all of which could have a material adverse impact on
our financial condition and results of operations. We estimate that our expenses
related to year 2000 compliance will be approximately $5,000.
Computer problems experienced by our commercial borrowers could have an
adverse effect on their business operations and their ability to repay their
loans when due. We have begun evaluating the Year 2000 readiness of our
commercial loan applicants as part of the loan underwriting process in order to
assess their readiness and identify potential problems.
We are in the process of installing a new teller/platform computer system.
The costs of the new system will be approximately $50,000. The installation of
the new system is not a result of Year 2000 compliance. As a result, such costs
will be capitalized.
Computer problems experienced by the Company's commercial borrowers could
have an adverse effect on their business operations and their ability to repay
their loans when due. The Company has recently begun evaluating Year 2000
readiness of its commercial loan applicants as part of the loan underwriting
process and is calling upon major existing borrowers to assess their readiness
and identify potential problems.
MARKET/INTEREST RATE RISK DISCLOSURE
ASSET/LIABILITY MANAGEMENT. Our assets and liabilities may be analyzed by
examining the extent to which our assets and liabilities are interest-rate
sensitive and by monitoring the expected effects of interest rate changes on our
net portfolio value.
An asset or liability is interest rate sensitive within a specific time
period if it will mature or reprice within that time period. If our assets
mature or reprice more quickly or to a greater extent than our liabilities, our
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. Conversely, if our assets mature or reprice more slowly or to a lesser
extent than our liabilities, our 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. Our policy has been to mitigate the
interest rate risk inherent in the historical savings institution business of
originating long-term loans funded by short-term deposits by pursuing certain
strategies designed to decrease the vulnerability of our earnings to material
and prolonged changes in interest rates.
To manage the interest rate risk of this type of loan portfolio, we
emphasize the origination of ARM loans. At June 30, 1998, the average weighted
term to maturity of our mortgage loan portfolio was approximately 13.6 years and
the average weighted term of our time certificates was slightly less than one
year.
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<PAGE>
NET PORTFOLIO VALUE. In recent years, we have measured our interest rate
sensitivity by computing the "gap" between the assets and liabilities which were
expected to mature or reprice within certain time periods, based on assumptions
regarding loan prepayment and deposit decay rates formerly provided by the OTS.
However, the OTS now measures an institution's interest rate risk by computing
the amount by which the net present value of cash flow from assets, liabilities
and off balance sheet items (the institution's net portfolio value or "NPV")
would change in the event of a range of assumed changes in market interest
rates. These computations estimate the effect on an institution's NPV from
instantaneous and permanent 1% to 4% (100 to 400 basis points) increases and
decreases in market interest rates. The following table presents the interest
rate sensitivity of our NPV at June 30, 1998, as calculated by the OTS, which is
based upon quarterly information that we voluntarily provided to the OTS.
<TABLE>
<CAPTION>
NPV AS % OF
NET PORTFOLIO VALUE PORTFOLIO VALUE OF ASSETS
CHANGE --------------------------------- ------------------------------
IN RATES $ AMOUNT $ CHANGE % CHANGE NPV RATIO BASIS POINT CHANGE
- --------- -------- --------- -------- --------- ------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
+ 400 bp 1,433 (530) (27)% 6.06% (192) bp
+ 300 bp 1,618 (345) (18) 6.76 (122) bp
+ 200 bp 1,774 (188) (10) 7.33 (65) bp
+ 100 bp 1,891 (71) (4) 7.74 (23) bp
0 bp 1,962 -- -- 7.98
- - 100 bp 2,076 114 6 8.36 (39) bp
- - 200 bp 2,232 269 14 8.89 (92) bp
- - 300 bp 2,409 447 23 9.49 (151) bp
- - 400 bp 2,642 680 35 10.27 (229) bp
</TABLE>
The board of directors has established a policy setting forth maximum NPV
variances as a result of such instantaneous and permanent changes in interest
rates. At June 30, 1998, our interest rate sensitivity was within the policy
established by the board.
While we cannot predict future interest rates or their effects on our NPV
or net interest income, we do not expect current interest rates to have a
material adverse effect on our NPV or net interest income in the near future.
Computations of prospective effects of hypothetical interest rate changes are
based on numerous assumptions, including relative levels of market interest
rates, prepayments and deposit runoff and should not be relied upon as
indicative of actual results. Certain shortcomings are inherent in such
computations. Although certain assets and liabilities may have similar maturity
or periods of repricing, they may react at different times and in different
degrees to changes in the market interest rates. The interest rates on certain
types of assets and liabilities may fluctuate in advance of changes in market
interest rates, while rates on other types of assets and liabilities may lag
behind changes in market interest rates. Certain assets, such as ARM loans,
generally have features which restrict changes in interest rates on a short-term
basis and over the life of the loan. In the event of a change in interest
rates, prepayments and early withdrawal levels could deviate significantly from
those assumed in making calculations set forth above. Additionally, an
increased credit risk may result as the ability of many borrowers to service
their debt may decrease in the event of an interest rate increase.
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<PAGE>
The board of directors reviews our asset and liability policies. The board
of directors meets regularly to review interest rate risk and trends, as well as
liquidity and capital ratios and requirements. Management administers the
policies and determinations of the board of directors with respect to our asset
and liability goals and strategies. We expect that our asset and liability
policies and strategies will continue as described so long as competitive and
regulatory conditions in the financial institution industry and market interest
rates continue as they have in recent years.
34
<PAGE>
AVERAGE BALANCES, INTEREST AND AVERAGE YIELDS
The following table sets forth certain information relating to our average
balance sheet and reflects the average yield on assets and average cost of
liabilities for the periods indicated and the average yields earned and rates
paid at the date and for the periods indicated. Such yields and costs are
derived by dividing income or expense by the average daily balance of assets or
liabilities, respectively, for the periods presented. Average balances are
derived from daily balances.
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
----------------------------------------------------
AT JUNE 30, 1998 1997
1998 ------------------------- -------------------------
-------------------- AVERAGE AVERAGE
YIELD/ AVERAGE YIELD/ AVERAGE YIELD/
BALANCE COST BALANCE INTEREST COST BALANCE INTEREST COST
----------- -------- ------- -------- ------- ------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Interest-earning assets:
Loans (1)............................... $18,698 8.11% $17,151 $727 8.55% $15,341 $645 8.48%
Securities (2).......................... 3,546 5.69 4,498 127 5.69 4,683 132 5.68
Other short-term investments............ 756 5.78 769 28 7.34 1,123 35 6.28
------- ------- ---- ------- ----
Total interest-earning assets.......... 23,000 7.66 22,418 882 7.93 21,147 812 7.74
Non-interest-earning assets............... 1,247 1,373 1,177
------- ------- -------
Total assets........................... $24,247 $23,791 $22,324
======= ======= =======
Interest-bearing liabilities:
Savings and club accounts............... $ 3,131 3.09 $ 2,997 $ 40 2.69 $ 2,739 $ 39 2.87
Time certificates....................... 16,519 5.80 16,218 465 5.78 15,450 420 5.48
NOW and money market accounts........... 1,971 1.74 2,062 17 1.66 2,002 18 1.81
Borrowings.............................. -- -- -- -- -- -- -- --
------- ------- ---- ------- ----
Total interest-bearing liabilities..... 21,621 5.04 21,277 522 4.92 20,191 477 4.76
Non-interest-bearing liabilities.......... 978 916 651
------- ------- -------
Total liabilities...................... 22,599 22,193 20,842
Total equity.............................. 1,648 1,598 1,482
------- ------- -------
Total liabilities and equity........... $24,247 $23,791 $22,324
======= ======= =======
Net interest income....................... $360 $335
==== ====
Net interest rate spread.................. 2.62% 3.01% 2.98%
==== ==== ====
Net yield on interest-earning assets...... 3.24% 3.19%
==== ====
Average interest-earning assets
to average interest-bearing liabilities.. 1.06x 1.05x 1.05x
==== ==== ====
- -------------------------
</TABLE>
(1) Non-accrual loans are included in average balances, less allowance for loan
losses and deferred fees.
(2) Securities are included at amortized cost, with net unrealized gains or
losses on securities available-for-sale included as a component of non-
earning assets.
35
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------
1997 1996
-------- --------
AVERAGE AVERAGE
AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST COST BALANCE INTEREST COST
------- -------- -------- ------- -------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans (1)................................ $15,824 $1,330 8.40% $15,001 $1,266 8.44%
Securities (2)........................... 4,887 277 5.67 4,593 260 5.66
Other short-term investments............. 835 55 6.59 1,024 66 6.45
------- ------ ------- ------
Total interest-earning assets......... 21,546 1,662 7.71 20,618 1,592 7.72
Non-interest-earning assets................. 1,234 1,256
------- -------
Total assets.......................... $22,780 $21,874
======= =======
Interest-bearing liabilities:
Savings and club accounts................ $ 2,747 $ 79 2.88 $ 2,908 $ 86 2.96
Time certificates........................ 15,824 883 5.58 14,867 832 5.60
NOW accounts and money market accounts... 2,024 36 1.78 2,016 36 1.79
Borrowings.................................. -- -- -- 5 1 5.96
------- ------ ------- ------
Total interest-bearing liabilities..... 20,595 998 4.85 19,796 955 4.82
Non-interest-bearing liabilities............ 672 555
------- -------
Total liabilities...................... 21,267 20,352
Total equity................................ $ 1,502 $ 1,523
------- -------
Total liabilities and equity........... $22,769 $21,874
======= =======
Net interest income......................... $ 664 $ 637
------ ------
Net interest rate spread.................... 2.86 2.90%
==== ====
Net yield on interest-earning assets........ 3.08% 3.09%
==== ====
Average interest-earning assets
to average interest-bearing liabilities.. 1.05x 1.04x
==== ====
</TABLE>
(Footnotes on preceding page)
36
<PAGE>
RATE/VOLUME ANALYSIS
The table below sets forth certain information regarding changes in
interest income and interest expense for the periods indicated. For each
category of interest-earning asset and interest-bearing liability, information
is provided on changes attributable to: (i) changes in volume (changes in volume
multiplied by old rate); and (ii) changes in rate (change in rate multiplied by
old volume), and the net change in net interest income. The net change
attributable to the combined impact of volume and rate has been allocated
proportionately to the absolute dollar amounts of change in each.
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, YEAR ENDED DECEMBER 31,
--------------------------- -----------------------------------------------------
1998 vs. 1997 1997 VS. 1996 1996 VS. 1995
--------------------------- --------------------------- ------------------------
INCREASE (DECREASE) INCREASE (DECREASE) INCREASE (DECREASE)
DUE TO DUE TO DUE TO
--------------------------- --------------------------- ------------------------
VOLUME RATE TOTAL VOLUME RATE TOTAL VOLUME RATE TOTAL
--------- ----- --------- --------- ----- --------- --------- ----- ------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income:
Loans.............................. $ 77 $ 5 $ 82 $ 70 $(6) $ 64 $ (15) $ 20 $ 5
Securities......................... (5) -- (5) 17 1 17 27 (9) 18
Other short-term investments....... (12) 5 (7) (12) 1 (11) 18 (12) 6
----- --- ----- ----- --- ----- ----- ---- -----
Total interest-earning assets.... 60 10 70 75 (5) 70 30 (1) 29
----- --- ----- ----- --- ----- ----- ---- -----
Interest expense:
Savings and club accounts.......... 4 (3) 1 (5) (2) (7) (12) (3) (15)
Time certificates.................. 21 24 45 54 (3) 51 55 11 66
NOW and money market accounts...... 1 (2) (1) -- -- -- (5) 2 (3)
Borrowings........................ -- -- -- (1) (1) (1) -- 1 1
----- --- ----- ----- --- ----- ----- ---- -----
Total interest-bearing
liabilities.................... 26 19 45 48 (6) 43 38 11 49
----- --- ----- ----- --- ----- ----- ---- -----
Change in net interest income....... $ 34 $(9) $ 25 $ 27 $-- $ 27 $ (8) $(12) $ (20)
===== === ===== ===== === ===== ===== ==== =====
</TABLE>
37
<PAGE>
COMPARISON OF FINANCIAL CONDITION AT JUNE 30, 1998 AND DECEMBER 31, 1997
Total assets increased by $845,000, or 3.61%, from $23.4 million at
December 31, 1997 to $24.2 million at June 30, 1998. The increase in assets for
the period was attributable to the growth in our loan portfolio (net of
allowance for loan losses) of $2.0 million, or 12.18%, which was the result of
our capitalizing on strong loan demand in our market area, partially offset by
declines in the level of our securities designated as available for sale and
securities designated as held to maturity. Loan growth was partially funded by
the proceeds of the sale of securities designated as available for sale during
the period which amounted to $712,000, and principal repayments on held to
maturity investments. Deposits also served as a funding source. Total
liabilities increased by $774,000, or 3.55%, from $21.8 million at December 31,
1997 to $22.6 million at June 30, 1998. At June 30, 1998, our total deposits
amounted to $22.4 million, an increase of $591,000, or 2.72%, from December 31,
1998's level of $21.8 million. The deposit growth consisted primarily of
savings and club accounts and time certificates.
Total equity increased by $71,000, or 4.50%, due to net income from the
period. At June 30, 1998, we were in compliance with all applicable regulatory
capital requirements with total core and tangible capital of $1.6 million (6.8%
of adjusted total assets) and total risk-based capital of $1.8 million (13.2% of
risk-weighted assets).
COMPARISON OF RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND
1997
NET INCOME. Our net income for the six months ended June 30, 1998 was
relatively flat as compared to the six months ended June 30, 1997, decreasing by
$5,000, from $77,000 for the six months ended June 30, 1997 to $72,000 for the
six months ended June 30, 1998. The decrease in net income was due primarily to
an increased level of non-interest expenses, partially offset by an increased
level of net interest income.
NET INTEREST INCOME. Our net interest income, which is the difference
between our interest income and our interest expense, increased $25,000, or
7.46%, from $335,000 for the six months ended June 30, 1997 to $360,000 for the
six months ended June 30, 1998. The increase is due mainly to the growth in our
loan portfolio. The average balance of loans outstanding during the six months
ended June 30, 1998 was $17.2 million as compared to $15.3 million during the
first six months of 1997. Interest expense also increased over these six-month
periods due primarily to an increase in both the average balance of deposits
during the period and the average cost of our deposits. For the first six
months of 1998, our total deposits averaged $21.3 million as compared to $20.2
million for the first six months of 1997. The average cost of such deposits
amounted to 4.92% for the 1998 period, a 16 basis point increase from 4.76% for
the first half of 1997.
PROVISION FOR LOAN LOSSES. Financial institutions are required to
establish an allowance for loan losses. The balance of such allowance depends
on the risk in the institution's loan portfolio, its level of problem loans and
general economic conditions, among other factors. Loans which cannot be
collected are charged against the allowance and thereby reduce its balance.
38
<PAGE>
An institution adds to the allowance by making a provision for loan losses which
is an expense item. During the six months ended June 30, 1998 we made a $3,000
provision for loan losses compared to no provision for the comparable period in
fiscal year 1997. We determined, based on our analysis of all pertinent
information available to us concerning the Bank's loan portfolio, that such
addition to the loan loss allowance was necessary for this period. Net charge-
offs for the six months ended June 30, 1998 amounted to $2,000. At June 30,
1998, our allowance for loan losses amounted to $165,000 and represented 54.46%
of total nonperforming loans and 0.87% of total gross loans.
NONINTEREST INCOME. Noninterest income (e.g., gains or losses on the sale
of securities, loan and deposit account fees) increased $2,000 over the
comparative six-month periods due to increases in the fees earned on loans and
net gain on sale of securities offset by a decrease in other noninterest income.
NONINTEREST EXPENSE. Our noninterest expenses consist mainly of salaries
and employee benefits, directors' fees, office and equipment expense, federal
deposit insurance premiums, data processing fees and other miscellaneous
expenses. Noninterest expenses increased by $31,000, or 12.40%, for the six
months ended June 30, 1998 compared to the same period in fiscal year 1997 due
to increases in compensation and related expenses, deposit insurance, postage
and supplies and other expenses, offset by decreases in building, occupancy and
equipment expense and insurance.
Our noninterest expense will increase following the conversion due to
several factors. First, we will see added expense associated with the ESOP and,
later on, the MRP. Further, we will experience the costs of being a public
company.
INCOME TAX EXPENSE. Our provision for income tax decreased $2,000 over the
comparable period due to the decrease in our pre-tax income. Our effective tax
rates for the six months ended June 30, 1998 and 1997 were 26.5% and 26.7%,
respectively.
COMPARISON OF RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1997 AND
1996
NET INCOME. Our net income increased $80,000 from $8,000 for the fiscal
year ended December 31, 1996 to $88,000 for the fiscal year ended December 31,
1997. The primary reason for the increase was due to the absence of any SAIF
special assessment during the 1997 fiscal year. During the year ended December
31, 1996, all thrift institutions were required to pay a special assessment in
order to recapitalize the SAIF, the FDIC fund that insures our deposits. The
special assessment amounted to $128,000 for us and was paid during the quarter
ended December 31, 1996.
NET INTEREST INCOME. Our net interest income increased from $637,000 for
fiscal year 1996 to $664,000 for fiscal year 1997. The $27,000 increase was
primarily due to an increase in the average balance of our loan and securities
portfolios. During the year ended December 31, 1997, the average balance of our
loan portfolio increased by $823,000, or 5.49%, and the average balance of our
securities portfolio increased by $294,000, or 6.40%, as compared to the year
ended December 31, 1996. Total interest expense also increased during the fiscal
39
<PAGE>
year by $43,000 due to an increase in the volume of our deposits, primarily our
time certificates, which are the most costly component.
PROVISION FOR LOAN LOSSES. During fiscal year 1997, we decided to pursue
increases in our automobile loan portfolio which are believed to have greater
risk than one- to four-family mortgage lending. For this reason, we recorded a
$57,000 provision for loan losses as compared to no provision during the
previous fiscal year. Future additions to the loan loss allowance will be based
on the analysis of the loan portfolio as described above, and, accordingly, are
not predictable. During fiscal year 1997, we charged off a total of $9,000 in
loans as compared to no charge-offs during fiscal year 1996.
NONINTEREST INCOME. Noninterest income increased from $30,000 for fiscal
year 1996 to $44,000 for fiscal year 1997 due primarily to a $16,000 increase in
fees earned on deposit accounts.
NONINTEREST EXPENSE. For fiscal year 1997, total noninterest expenses were
$525,000 as compared to $656,000 for fiscal year 1996. The decline in this
expense level was due mainly to the absence of any special SAIF assessment in
the 1997 period. During fiscal year 1996, we were required to pay a special
assessment of $128,000 to help recapitalize the SAIF, the fund that insures our
deposits. This decline was offset by increases of $14,000 in building, occupancy
and equipment expense and $7,000 in other miscellaneous expenses. As a result
of the recapitalization of the SAIF, our deposit insurance premiums declined
significantly, resulting in a reduction of $163,000 from 1996 to 1997. We
expect our annual deposit insurance premium to remain at the current level,
.064% of total assessable deposits, in future periods though there can be no
assurance in this regard.
INCOME TAX EXPENSE. Our income tax expense for fiscal year 1997 amounted
to $38,000 as compared to $3,000 for fiscal year 1996. The $35,000 increase was
directly attributable to the increased level of pre-tax income in 1997 as
compared to 1996. Our effective tax rates for fiscal years 1997 and 1996 were
30.1% and 27.3%, respectively.
LIQUIDITY AND CAPITAL RESOURCES
We are required to maintain minimum levels of liquid assets as defined by
OTS regulations. This requirement, which varies from time to time (currently
4%) depending upon economic conditions and deposit flows, is based upon a
percentage of our deposits and short-term borrowings. The required ratio at
June 30, 1998 was 4% and our actual liquidity ratio at June 30, 1998 was 23.35%.
It is our belief that upon completion of the conversion our liquidity ratio will
increase due to the additional funds we will receive.
Our primary sources of funds are deposits, repayment of loans and mortgage-
backed securities, maturities of investments and interest-bearing deposits and
funds provided from operations. We are also able to obtain advances from the
FHLB of New York, although historically we have done this rarely. While
scheduled repayments of loans and mortgage-backed securities and maturities of
investment securities are predictable sources of funds, deposit flows and loan
40
<PAGE>
prepayments are greatly influenced by the general level of interest rates,
economic conditions and competition. We use our liquidity resources principally
to fund existing and future loan commitments, to fund maturing time certificates
and demand deposit withdrawals, to invest in other interest-earning assets, to
maintain liquidity, and to meet operating expenses.
Liquidity may be adversely affected by unexpected deposit outflows, higher
interest rates paid by competitors, adverse publicity relating to the savings
and loan industry, and similar matters. Management monitors projected liquidity
needs and determines the level desirable, based in part on our commitments to
make loans and management's assessment of our ability to generate funds.
A major portion of our liquidity consists of cash and cash equivalents,
which include cash and interest-bearing deposits in other banks. The level of
these assets is dependent upon our operating, investing, lending and financing
activities during any given period. At June 30, 1998, cash and cash equivalents
totaled $1.2 million.
Our primary investing activities include origination of loans and purchases
of investment and mortgage-backed securities. During the six months ended June
30, 1998 and the years ended December 31, 1997 and 1996, purchases of investment
and mortgage-backed securities totaled $3.0 million, $ 8.8 million and $7.0
million, respectively, while loan originations totaled $4.1 million, $4.3
million and $3.9 million, respectively. These investments were funded in part
by loan and securities and mortgage-backed securities repayments and maturities
and an increase in time certificates received for the six months ended June 30,
1998 and the years ended December 31, 1997 and 1996.
At June 30, 1998, we had $82,000 in outstanding commitments to originate
fixed-rate loans with rates that ranged from 7% to 8.99%. We anticipate that we
will have sufficient funds available to meet our current loan origination
commitments. Time certificates which are scheduled to mature in one year or
less totaled $12.3 million at June 30, 1998. Based on historical experience
management believes that a significant portion of such deposits will remain with
us.
We are subject to federal regulations that impose certain minimum capital
requirements. For a discussion on such capital levels, see "Historical and Pro
Forma Capital Compliance" and "Regulation -- Regulation of the Bank --
Regulatory Capital Requirements."
IMPACT OF INFLATION AND CHANGING PRICES
Our financial statements and the accompanying notes presented elsewhere in
this document, 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 the change
in the relative purchasing power of money over time and due to inflation. The
impact of inflation is reflected in the increased cost of our operations. As a
result, interest rates have a greater impact on our performance than do the
41
<PAGE>
effects of general levels of inflation. Interest rates do not necessarily move
in the same direction or to the same extent as the prices of goods and services.
IMPACT OF NEW ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") 128 "Earnings Per Share."
SFAS 128 requires the disclosure of basic and diluted earnings per share. It
establishes rules for calculating diluted earnings per share based upon the
effect of agreements by publicly traded companies to issue additional stock.
SFAS 128 is now effective and will require the Company, after the conversion, to
report in addition to basic earnings per share, diluted earnings per share which
would show, for example, the effect on earnings per share of the exercise of
outstanding stock options, if any.
In June 1997, the FASB issued SFAS 130, "Reporting Comprehensive Income,"
which requires that comprehensive income and its effect on equity must be
disclosed prominently in the notes to the financial statements. Comprehensive
income includes net income as adjusted for items that are recorded as direct
entries to equity. Only the impact of unrealized gains or losses on securities
available-for-sale is disclosed as an additional component of our income under
the requirements of SFAS 130. SFAS 130 imposes disclosure requirements only and
does not affect the Company's financial condition or results of operations.
Comprehensive income (loss) for the six months ended June 30, 1998 was $71,000
and was $100,000 for 1997 and ($4,000) for 1996.
In June 1997, the FASB issued SFAS 131, "Disclosures about Segments of an
Enterprise and Related Information," which changes the way public companies
report information about segments of their business on their annual financial
statements and requires them to report selected segment information in their
quarterly reports issued to stockholders. The Company anticipates that, in the
near future, the Company's business will comprise only one segment and hence
SFAS 131 will not have a material effect on its financial disclosures. However,
if the Company engages in material non-banking business in the future, separate
segment disclosure may be required.
In February 1998, the FASB issued SFAS 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits," which amends existing disclosure
rules regarding pension and other post-retirement benefits to standardize the
disclosure formats effective for fiscal years beginning after December 15, 1997.
Disclosures regarding pensions and other non-pension post-retirement benefits
have been combined. SFAS 132 addresses disclosure issues only and does not
require any substantive change in accounting treatment for the benefits covered
by it. Hence, the implementation of SFAS 132 will have no effect on the
Company's financial condition or results of operations.
In June 1998, the FASB issued SFAS 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes comprehensive accounting
and reporting requirements for derivative instruments and hedging activities.
The statement requires companies to recognize all derivatives as either assets
or liabilities, with the instruments measured at fair value. The accounting
42
<PAGE>
for gains and losses resulting from changes in fair value depends on the
intended use of the derivative and the type of risk being hedged. SFAS 133 is
effective for the Company and the Bank for all fiscal quarters beginning January
1, 2000. Earlier adoption is permitted. We do not presently use derivatives and
the adoption of SFAS 133 is not expected to have a material impact on the
Company's financial statement but will be better assessed closer to adoption
date.
BUSINESS OF PEOPLES BANKCORP, INC.
The Company is not an operating company and has not engaged in any
significant business to date. It was formed in September 1998 as a New York-
chartered corporation to be the holding company for Ogdensburg Federal Savings
and Loan Association. The holding company structure and retention of proceeds
will facilitate: (i) diversification into non-banking activities, (ii)
acquisitions of other financial institutions, such as savings institutions,
(iii) expansion within existing and into new market areas and (iv) stock
repurchases without adverse tax consequences. There are no present plans
regarding diversification, acquisitions or expansion or stock repurchases.
Ogdensburg Federal has operated as an independent community oriented
savings institution since 1888. It is our intention to continue to operate as
an independent community oriented savings association following the conversion.
Since the Company will own only one savings association, it generally will
not be restricted in the types of business activities in which it may engage,
provided that we retain a specified percentage of our assets in housing-related
investments. The Company initially will not conduct any active business and
does not intend to employ any persons other than officers but will utilize our
support staff from time to time.
BUSINESS OF OGDENSBURG FEDERAL SAVING AND LOAN ASSOCIATION
The principal sources of funds for our activities are deposits and payments
on loans. We are also able to borrow from the FHLB of New York, although
historically we have done this rarely. Our deposits totaled $22.4 million at
June 30, 1998. Funds are used principally for the origination of loans secured
by first mortgages on one- to four-family residences which are located in our
market area. Such loans totaled $12.4 million, or 65.55%, of our total loans
receivable portfolio at June 30, 1998. We also originate other types of loans,
including loans secured by commercial real estate and consumer loans, and
purchase investment and mortgage-backed securities. Our principal source of
revenue is interest received on loans and investments and our principal expense
is interest paid on deposits.
43
<PAGE>
MARKET AREA
We consider our primary market area to be the City of Ogdensburg, and the
surrounding townships of Lisbon, Oswegatchie, Madrid, Morristown, Heuvelton,
Hammond, Depeyster, Macomb and Waddington and the village of Rennsselaer Falls,
all of which are located in St. Lawrence County, New York. St. Lawrence County
is the largest county east of the Mississippi in terms of total acreage.
Ogdensburg is the eastern most United States port on the Great Lakes and the
northern most port in New York and is adjacent to the Montreal-Ottawa-Toronto
corridor. Although Ogdensburg is fairly rural with only approximately 13,000
residents, it is within a two hour drive of over 15 million people.
The largest employers in Ogdensburg and the surrounding communities include
the Ogdensburg Bridge and Port Authority, local government offices, U.S. Customs
Office, Mater Dei College and Wadhams Hall Seminary College, Ogdensburg School
District, Mitel Corporation, CompAS, and several local hospitals. By industry,
the largest sectors of the Ogdensburg economy are retail, services and
manufacturing. The average household income of $28,806 in 1997 for Ogdensburg
was significantly below that of New York as a whole of $57,084 and the average
for the United States of $50,540. The overall population of Ogdensburg has
declined by approximately 5% from 1990 to 1997 as compared to marginal growth of
1% for New York State and a 7.5% growth rate for the United States.
BUSINESS STRATEGY
Historically, our principal business strategy has been that of operating a
community-oriented institution which emphasizes residential real estate loans.
Our loans have typically been secured by properties located within our market
area. In recent years we have increased our originations of consumer loans,
particularly automobile loans, and have engaged in a limited amount of
commercial real estate and commercial business lending. The proceeds from the
conversion will enable us to continue growing and continue to meet the needs of
the market in which we do business. We do not anticipate that the mix of loans
that we will originate will change after conversion although we will consider
adding to our products and services as the competition within our market
demands.
LENDING ACTIVITIES
Most of our loans are mortgage loans which are secured by one- to four-
family residences. We also make consumer, residential construction and
commercial real estate and commercial business loans. Following the
conversion, we believe there will be sufficient demand in our market area to
continue our policy of emphasizing lending in the one- to four- family real
estate loan area and continue originating various types of consumer loans.
44
<PAGE>
At June 30, 1998, our gross loans totaled $18.9 million of which $12.4
million were mortgage loans secured by one-to four-family residences. We
originate both fixed rate mortgage and ARM loans. Generally, all of the
consumer loans we originate have fixed rates, with the exception of home equity
lines of credit.
The following table sets forth information concerning the types of loans
held by us at the dates indicated.
<TABLE>
<CAPTION>
AT DECEMBER 31,
AT JUNE 30, ----------------------------------
1998 1997 1996
--------------------- ---------------- ----------------
Amount % AMOUNT % AMOUNT %
------------ ------- -------- ------- -------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Type of Loan:
- ----------------------------------
Real estate loans:
One- to four-family residential.. $12,377 65.55% $11,893 70.56% $11,838 76.37%
Commercial....................... 726 3.84 706 4.19 553 3.57
Construction..................... 199 1.05 67 0.40 115 0.74
Other loans:
Automobile....................... 3,299 17.47 2,121 12.58 1,400 9.03
Home equity...................... 1,061 5.62 1,226 7.27 903 5.83
Passbook......................... 219 1.16 217 1.29 270 1.74
Commercial....................... 200 1.06 100 0.59 -- --
Other............................ 803 4.25 526 3.12 422 2.72
------- ------ ------- ------ ------- ------
18,884 100.00% 16,856 100.00% 15,501 100.00%
====== ====== ======
Less:
Deferred fees.................... 21 24 26
Allowance for loan losses........ 165 164 116
------- ------- -------
Total........................... $18,698 $16,668 $15,359
======= ======= =======
</TABLE>
45
<PAGE>
The following table sets forth the estimated maturity of our loan portfolio
at December 31, 1997. The table does not include the effects of possible
prepayments or scheduled repayments. All mortgage loans are shown as maturing
based on the date of the last payment required by the loan agreement.
<TABLE>
<CAPTION>
DUE AFTER DUE AFTER
DUE DURING THE YEAR ENDING 3 THROUGH 5 THROUGH DUE OVER 10
DECEMBER 31, 5 YEARS AFTER 10 YEARS AFTER YEARS AFTER
--------------------- DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1999 2000 1997 1997 1997 TOTAL
------ ----- ----- ------ ------ ------ -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Real Estate:
One- to four-family residential.. $7,703 $ 51 $ 27 $ 398 $ 937 $2,777 $11,893
Commercial....................... 348 -- -- 271 -- 87 706
Construction..................... 31 -- -- -- -- 36 67
Automobile and other.............. 51 214 437 1,726 219 -- 2,647
Home equity....................... 1,226 -- -- -- -- -- 1,226
Passbook.......................... 89 33 55 22 18 -- 217
Commercial........................ 100 -- -- -- -- -- 100
------ ----- ----- ------ ------ ------ -------
Total........................... $9,548 $ 298 $ 519 $2,417 $1,174 $2,900 $16,856
====== ===== ===== ====== ====== ====== =======
</TABLE>
46
<PAGE>
The next table shows at December 31, 1997, the dollar amount of all our
loans due one year or more after December 31, 1997 which have fixed interest
rates and have floating or adjustable interest rates.
<TABLE>
<CAPTION>
PREDETERMINED FLOATING OR
RATES ADJUSTABLE RATES
------------- ----------------
<S> <C> <C>
(IN THOUSANDS)
Real Estate:
One- to four-family residential.. $3,553 $ 8,340
Commercial....................... 87 619
Construction..................... 36 31
Automobile and other.............. 2,647 --
Home equity....................... -- 1,226
Passbook.......................... 217 --
Commercial........................ -- 100
------ -------
Total........................... $6,540 $10,316
====== =======
</TABLE>
ONE- TO FOUR-FAMILY RESIDENTIAL LOANS. Our primary lending activity
consists of the origination of one- to four-family residential mortgage loans
secured by property located in our primary market area. We generally originate
one- to four-family residential mortgage loans in amounts up to 80% of the
lesser of the appraised value or purchase price with a maximum loan amount of
$200,000 and a maximum term of 30 years. We also offer a first-time homebuyer
program pursuant to which loans may be made in amounts up to 90% of the lesser
of the appraised value or purchase price with the same maximum loan amount and
terms as our other mortgage loans.
We also offer ARM loans. The interest rate on ARM loans is based on an
index plus a stated margin. ARM loans provide for periodic interest rate
adjustments upward or downward of up to 2% per year. The interest rate may not
increase above a "ceiling rate" established at the time the loan is originated
and may not decrease below the original interest rate. Generally, ARM loans
typically reprice every year and provide for terms of up to 30 years with most
loans having terms of between 10 and 20 years.
ARM loans decrease the risk associated with changes in interest rates by
periodically repricing, but involve other risks because as interest rates
increase, the underlying payments by the borrower increase, thus increasing the
potential for default by the borrower. At the same time, the marketability of
the underlying collateral may be adversely affected by higher interest rates.
Upward adjustment of the contractual interest rate is also limited by the
maximum periodic and lifetime interest rate adjustment permitted by the loan
documents, and, therefore is potentially limited in effectiveness during periods
of rapidly rising interest rates. At June 30, 1998, approximately 55% of the
one- to four-family residential loans we held had adjustable rates of interest.
47
<PAGE>
Mortgage loans originated and held by us generally include due-on-sale
clauses. This gives us the right to deem the loan immediately due and payable
in the event the borrower transfers ownership of the property securing the
mortgage loan without our consent.
RESIDENTIAL CONSTRUCTION LOANS. We make a limited number of residential
construction loans on one- to four-family residential properties to the
individuals who will be the owners and occupants upon completion of
construction. Borrowers are required to pay interest during the construction
period which may not last beyond 12 months. Upon completion of the
construction, the loan converts to a fully amortizing mortgage loan. Loan
proceeds are disbursed according to a draw schedule and we inspect the progress
of the construction before additional funds are disbursed. Construction loans
are offered on either a fixed or adjustable basis.
Construction lending is generally considered to involve a higher degree of
credit risk than long term financing of residential properties. Our risk of
loss on a construction loan is dependent largely upon the accuracy of the
initial estimate of the property's value at completion of construction and the
estimated cost of construction. If the estimate of construction cost and the
marketability of the property upon completion of the project prove to be
inaccurate, we may be compelled to advance additional funds to complete the
construction. Furthermore, if the final value of the completed property is less
than the estimated amount, the value of the property might not be sufficient to
assure the repayment of the loan.
COMMERCIAL REAL ESTATE LOANS. We offer limited commercial real estate loans
secured by small apartment buildings, office buildings, and other commercial
properties. Loan amounts do not exceed 75% of the appraised value of the
property. At June 30, 1998, we had a participation interest in a commercial
real estate loan originated by the Thrift Associations Service Corporation
("TASCO"), a service corporation owned by various thrift institutions operating
in New York State. Our interest in this loan amounted to $269,000 and was
secured by an office building. This loan was on nonaccrual status at June 30,
1998 due to a prior history of late payments. At June 30, 1998, the borrower
had resumed making payments but due to the prior history of delinquent payments,
such loan remained on nonaccrual status.
Commercial real estate lending entails significant additional risks compared
to residential property lending. These loans typically involve large loan
balances to single borrowers or groups of related borrowers. The repayment of
these loans typically is dependent on the successful operation of the real
estate project securing the loan. These risks can be significantly affected by
supply and demand conditions in the market for office and retail space and may
also be subject to adverse conditions in the economy. To minimize these risks,
we generally limit this type of lending to our market area and to borrowers who
are otherwise well known to us.
COMMERCIAL BUSINESS LOANS. We engage in a limited amount of commercial
business lending to benefit from the higher fees and interest rates and the
shorter term to maturity. Our commercial business loans consist of equipment,
lines of credit and other business purpose loans, which generally are secured by
either the underlying properties or by the personal guarantees of the borrower.
48
<PAGE>
Our largest commercial business loan at June 30, 1998 had a balance of $200,000
and was made to a local auto dealer.
Unlike residential mortgage loans, which generally are made on the basis of
the borrower's ability to make repayment from his or her employment and other
income and which are secured by real property whose value tends to be more
easily ascertainable, commercial business loans typically are made on the basis
of the borrower's ability to make repayment from the cash flow of the borrower's
business. As a result, the availability of funds for the repayment of
commercial business loans may be substantially dependent on the success of the
business itself and the general economic environment.
CONSUMER LOANS. We offer various types of consumer loans in order to
provide a wider range of financial services to our customers. Consumer loans
totaled $5.4 million, or 28.50%, of our total loans at June 30, 1998. Our
consumer loans consist of automobile, home equity lines of credit, passbook and
personal loans. Home equity lines of credit have a maximum draw period of ten
years with a maximum term of 20 years. Passbook and certificate of deposit
secured loans are offered up to the maximum of the deposit balance and are due
on demand.
We offer loans for both new and used automobiles with maximum terms of five
years and maximum loan amounts of $30,000.
Consumer loans may entail greater risk than residential mortgage loans,
particularly in the case of consumer loans that are unsecured or secured by
assets that depreciate rapidly. Repossessed collateral for a defaulted consumer
loan may not be sufficient for repayment of the outstanding loan, and the
remaining deficiency may not be collectible.
LOAN APPROVAL AUTHORITY AND UNDERWRITING. Our President may approve all
consumer loans up to $30,000. All other loans require the approval of our board
of directors.
Upon receipt of a completed loan application from a prospective borrower, a
credit report is ordered. Income and certain other information is verified. If
necessary, additional financial information may be requested. An appraisal or
other estimate of value of the real estate intended to be used as security for
the proposed loan is obtained. Appraisals are prepared by outside fee
appraisers who are approved by the board of directors.
Either title insurance or a title opinion is generally required on all real
estate loans. Borrowers also must obtain fire and casualty insurance. Flood
insurance is also required on loans secured by property which is located in a
flood zone.
49
<PAGE>
LOAN ORIGINATIONS. The following table sets forth certain information with
respect to our loan originations and purchases for the periods indicated. We
have not purchased or sold any loans in the secondary market in recent years.
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
------------------ -------------------
1998 1997 1997 1996
------ ------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Loans originated:
Real estate loans:
One- to four-family residential.. $1,708 $ 697 $1,501 $1,953
Commercial....................... 35 90 104 115
Automobile........................ 1,726 677 1,674 908
Home equity....................... 30 249 473 472
Passbook.......................... 36 28 64 199
Commercial........................ 100 -- 100 --
Other............................. 430 152 425 224
------ ------ ------ ------
Total loans originated.......... $4,065 $1,893 $4,341 $3,871
====== ====== ====== ======
</TABLE>
LOAN COMMITMENTS. Written commitments are given to prospective borrowers
on all approved real estate loans. Generally, the commitment requires
acceptance within 30 days of the date of issuance. At June 30, 1998,
commitments to cover originations of mortgage loans were $302,000. We believe
that virtually all of our commitments will be funded.
LOANS TO ONE BORROWER. The maximum amount of loans which we may make to
any one borrower may not exceed the greater of $500,000, or 15%, of our
unimpaired capital and unimpaired surplus. We may lend an additional 10% of our
unimpaired capital and unimpaired surplus if the loan is fully secured by
readily marketable collateral. Our maximum loan-to-one borrower limit was
$500,000 at June 30, 1998. At June 30, 1998, our largest loan concentration
outstanding had a balance of $385,000.
NONPERFORMING AND PROBLEM ASSETS
LOAN DELINQUENCIES. Generally when a mortgage loan becomes 15 days past
due, a notice of nonpayment is sent to the borrower. If after 30 days payment
is still delinquent, the borrower will receive a formal delinquency notice. The
borrower will be contacted by telephone or visited personally if the loan
remains delinquent after 45 days. If the loan continues in a delinquent status
for 120 days past due and no repayment plan is in effect, the loan will be
referred to an attorney for collection, with foreclosure commenced no later than
180 days. The customer will be notified when foreclosure is commenced. At June
30, 1998, our loans past due between 30 and 89 days totaled $370,000.
Loans are reviewed on a monthly basis and are generally placed on a non-
accrual status when the loan becomes more than 90 days delinquent or when, in
our opinion, the collection of additional
50
<PAGE>
interest is doubtful. Interest accrued and unpaid at the time a loan is placed
on nonaccrual status is charged against interest income. Subsequent interest
payments, if any, are either applied to the outstanding principal balance or
recorded as interest income, depending on the assessment of the ultimate
collectibility of the loan.
NONPERFORMING ASSETS. The following table sets forth information regarding
nonaccrual loans and real estate owned. As of the dates indicated, we had no
loans categorized as troubled debt restructurings within the meaning of SFAS 114
and no loans which were 90 days or more past due and still accruing interest.
<TABLE>
<CAPTION>
AT AT DECEMBER 31,
JUNE 30, -----------------
1998 1997 1996
--------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Loans accounted for on a nonaccrual basis: (1)
Real estate:
One- to four-family residence................. $ 31 $ 22 $ --
Commercial.................................... 269 271 --
Construction.................................. -- -- --
Automobile..................................... 3 -- --
Home equity.................................... -- -- --
Passbook....................................... -- -- --
Commercial..................................... -- -- --
Other.......................................... -- -- 9
----- ----- ------
Total......................................... $ 303 $ 293 $ 9
===== ===== ======
Accruing loans which are contractually
past due 90 days or more:
Real estate:
One- to four-family residence................. $ -- $ -- $ --
Commercial.................................... -- -- --
Construction.................................. -- -- --
Automobile..................................... -- -- --
Home equity.................................... -- -- --
Passbook....................................... -- -- --
Commercial..................................... -- -- --
Other.......................................... -- -- --
----- ----- ------
Total......................................... $ -- $ -- $ --
===== ===== ======
Total nonperforming loans..................... $ 303 $ 293 $ 9
===== ===== ======
Percentage of total loans....................... 1.61% 1.74% 0.06%
===== ===== ======
Other non-performing assets (2)................. $ 40 $ 40 $ --
===== ===== ======
Loans modified in troubled debt restructurings.. $ -- $ -- $ --
===== ===== ======
- -------------------------
</TABLE>
(1) Non-accrual status denotes loans on which, in the opinion of management,
the collection of additional interest is unlikely. Payments received on a
nonaccrual loan are either applied to the outstanding principal balance or
recorded as interest income, depending on management's assessment of the
collectibility of the loan.
(2) Other nonperforming assets represents property acquired by us through
foreclosure or repossession. This property is carried at its fair value
less costs to sell.
51
<PAGE>
At June 30, 1998, our largest nonaccrual loan consisted of our $269,000
participation interest in a $3.2 million loan originated by TASCO. The borrower
on such loan was making payments at such date but, due to a prior delinquency
history, the loan remained on nonaccrual status. See " -- Commercial Real Estate
Loans."
During the six months ended June 30, 1998 and the year ended December 31,
1997, we would have recorded additional interest income of approximately $1,000
and $8,000, respectively, on nonaccrual loans if such loans had been current
throughout the period. During the six months ended June 30, 1998, we recorded
income on the TASCO loan on the cash basis as payments were received. We did
not include any income on nonaccrual loans during such periods with the
exception that payments on the TASCO loan were recorded on a cash basis as they
were received during the six months ended June 30, 1998. At June 30, 1998, we
did not have any loans which were not classified as nonaccrual, 90 days past due
or restructured, but where known information causes us to have serious concerns
as to the ability of these borrowers to comply with their current loan terms.
CLASSIFIED ASSETS. OTS regulations provide for a classification system for
problem assets of savings associations which covers all problem assets. Under
this classification system, problem assets of savings associations such as ours
are classified as "substandard," "doubtful," or "loss." An asset is considered
substandard if it is inadequately protected by the current net worth and paying
capacity of the borrower or of the collateral pledged, if any. Substandard
assets include those characterized by the "distinct possibility" that the
savings association will sustain "some loss" if the deficiencies are not
corrected. Assets classified as doubtful have all of the weaknesses inherent in
those classified substandard, with the added characteristic that the weaknesses
present make "collection or liquidation in full, on the basis of currently
existing facts, conditions, and, values, "highly questionable and improbable."
Assets classified as loss are those considered "uncollectible" and of such
little value that their continuance as assets without the establishment of a
specific loss reserve is not warranted. Assets may be designated "special
mention" because of potential weakness that do not currently warrant
classification in one of the aforementioned categories.
When a savings association classifies problem assets as either substandard
or doubtful, it may establish general allowances for loan losses in an amount
deemed prudent by management. General allowances represent loss allowances
which have been established to recognize the inherent risk associated with
lending activities, but which, unlike specific allowances, have not been
allocated to particular problem assets. When a savings association classifies
problem assets as loss, it is required either to establish a specific allowance
for losses equal to 100% of that portion of the asset so classified or to charge
off such amount. A savings association's determination as to the classification
of its assets and the amount of its valuation allowances is subject to review by
the OTS, which may order the establishment of additional general or specific
loss allowances. A portion of general loss allowances established to cover
possible losses related to assets classified as substandard or doubtful may be
included in determining a savings association's regulatory capital. Specific
valuation allowances for loan losses generally do not qualify as regulatory
capital.
52
<PAGE>
At June 30, 1998, none of our assets were classified as special mention,
doubtful or loss but we had $74,000 in loans classified as substandard.
FORECLOSED REAL ESTATE. Real estate acquired in settlement of loans is
carried at the lower of the unpaid loan balance or fair value less estimated
costs to sell. Write-downs from the unpaid loan balance to fair value at the
time of foreclosure are charged to the allowance for loan losses. Subsequent
write-downs to fair value, net of disposal costs, are charged to other expenses.
At June 30, 1998, we had one property which we received in lieu of foreclosure.
The property was carried on our books at $40,000 and has an appraised value in
excess of its carrying value. Subsequent to June 30, 1998, the property was
sold for $30,000.
ALLOWANCE FOR LOAN LOSSES. Our policy is to provide for losses on
unidentified loans in our loan portfolio. A provision for loan losses is
charged to operations based on management's evaluation of the potential losses
that may be incurred in our loan portfolio. The evaluation, including a review
of all loans on which full collectibility of interest and principal may not be
reasonably assured, considers: (i) our past loan loss experience, (ii) known and
inherent risks in our portfolio, (iii) adverse situations that may affect the
borrower's ability to repay, (iv) the estimated value of any underlying
collateral, and (v) current economic conditions.
We monitor our allowance for loan losses and make additions to the
allowance as economic conditions dictate. Although we maintain our allowance
for loan losses at a level that we consider adequate for the inherent risk of
loss in our loan portfolio, actual losses could exceed the balance of the
allowance for loan losses and additional provisions for loan losses could be
required. In addition, our determination as to the amount of its allowance for
loan losses is subject to review by the OTS, as part of its examination process.
After a review of the information available, the OTS might require the
establishment of an additional allowance.
53
<PAGE>
The following table sets forth an analysis of our allowance for loan losses
for the periods indicated.
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
June 30, DECEMBER 31,
------------------- --------------
1998 1997 1997 1996
---------- ------- ------ ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Balance at beginning of period........ $ 164 $ 116 $ 116 $ 116
Loans charged off:
Real estate mortgage:
One- to four-family residential..... -- -- -- --
Commercial.......................... -- -- 3 --
Construction........................ -- -- -- --
Automobile........................... 3 -- 3 --
Home equity.......................... -- -- -- --
Passbook............................. -- -- -- --
Commercial........................... -- -- -- --
Other................................ -- 2 3 --
----- ------ ----- -----
Total charge-offs..................... 3 2 9 --
----- ------ ----- -----
Recoveries:
Real estate mortgage:
One- to four-family residential..... -- -- -- --
Commercial.......................... -- -- -- --
Construction....................... -- -- -- --
Automobile........................... -- -- -- --
Home equity.......................... -- -- -- --
Passbook............................. -- -- -- --
Commercial........................... -- -- -- --
Other................................ 1 -- -- --
----- ------ ----- -----
Total recoveries...................... 1 -- -- --
----- ------ ----- -----
Net loans charged off................. 2 2 9 --
----- ------ ----- -----
Provision for loan losses............. 3 -- 57 --
----- ------ ----- -----
Balance at end of period.............. $ 165 $ 114 $ 164 $ 116
===== ====== ===== =====
Ratio of net charge-offs to average
loans outstanding during the period.. 0.01% 0.01% 0.06% 0.00%
===== ====== ===== =====
</TABLE>
54
<PAGE>
The following table illustrates the allocation of the allowance for loan
losses for each category of loan. The allocation of the allowance to each
category is not necessarily indicative of future loss in any particular category
and does not restrict our use of the allowance to absorb losses in other loan
categories.
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------------------------------------
AT JUNE 30, 1998 1997 1996
------------------------------ ---------------------- ---------------------
PERCENT OF PERCENT OF PERCENT OF
LOANS IN EACH LOANS IN EACH LOANS IN EACH
CATEGORY TO CATEGORY TO CATEGORY TO
AMOUNT TOTAL LOANS AMOUNT TOTAL LOANS AMOUNT TOTAL LOANS
---------------- -------------- ------ -------------- ------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Real estate mortgage:
One- to four-family residential... $ 32 19.39% $ 32 19.51% $ 41 35.34%
Commercial........................ 12 7.27 47 28.66 11 9.48
Construction...................... 1 0.61 1 0.61 3 2.59
Automobile......................... 85 51.52 53 32.32 29 25.00
Home equity........................ 16 9.70 18 10.97 19 16.38
Passbook........................... -- -- -- -- -- --
Commercial......................... -- -- -- -- -- --
Other.............................. 19 11.51 13 7.93 13 11.21
---- ------ ---- ------ ---- ------
Total allowance for loan losses.. $165 100.00% $164 100.00% $116 100.00%
==== ====== ==== ====== ==== ======
</TABLE>
INVESTMENT ACTIVITIES
SECURITIES. We are required under federal regulations to maintain a minimum
amount of liquid assets which may be invested in specified short-term securities
and certain other investments. See "Regulation -- Regulation of the Association
- -- Federal Home Loan Bank System" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources." The level of liquid assets varies depending upon several factors,
including: (i) the yields on investment alternatives, (ii) our judgment as to
the attractiveness of the yields then available in relation to other
opportunities, (iii) expectation of future yield levels, and (iv) our
projections as to the short-term demand for funds to be used in loan origination
and other activities. At June 30, 1998, our investment portfolio policy allowed
investments in instruments such as: (i) U.S. Treasury obligations, (ii) U.S.
federal agency or federally sponsored agency obligations, (iii) local municipal
obligations, (iv) mortgage-backed securities, (v) bankers' acceptances, (vi)
time certificates, (vii) federal funds, including FHLB overnight and term
deposits (up to six months), and (viii) investment grade corporate bonds,
commercial paper and mortgage derivative products. See " -- Mortgage-Backed
Securities." The board of directors may authorize additional investments.
Our securities at June 30, 1998 did not contain securities of any issuer
with an aggregate book value in excess of 10% of our equity, excluding those
issued by the United States Government or its agencies.
55
<PAGE>
MORTGAGE-BACKED SECURITIES. To supplement lending activities, we have
invested in residential mortgage-backed securities. Mortgage-backed securities
can serve as collateral for borrowings and, through repayments, as a source of
liquidity. Mortgage-backed securities represent a participation interest in a
pool of one- to four-family or other type of mortgages. Principal and interest
payments are passed from the mortgage originators, through intermediaries
(generally quasi-governmental agencies) that pool and repackage the
participation interests in the form of securities, to investors such as us. Our
mortgage-backed securities portfolio consists of participations or pass-through
certificates issued by the Government National Mortgage Association ("GNMA").
GNMA certificates are guaranteed as to principal and interest by the full faith
and credit of the United States. Our mortgage-backed securities portfolio was
classified as "held to maturity" at June 30, 1998.
Expected maturities will differ from contractual maturities due to
scheduled repayments and because borrowers may have the right to call or prepay
obligations with or without prepayment penalties.
Mortgage-backed securities typically are issued with stated principal
amounts. The securities are backed by pools of mortgages that have loans with
interest rates that are within a set range and have varying maturities. The
underlying pool of mortgages can be composed of either fixed-rate or adjustable
mortgage loans. Mortgage-backed securities are generally referred to as
mortgage participation certificates or pass-through certificates. The interest
rate risk characteristics of the underlying pool of mortgages (i.e., fixed-rate
or adjustable-rate) and the prepayment risk, are passed on to the certificate
holder. The life of a mortgage-backed pass-through security is equal to the
life of the underlying mortgages.
The following table sets forth the carrying value (i.e., amortized cost) of
our investment securities and mortgage-backed securities, at the dates
indicated. At June 30, 1998, the market value of our investment and mortgage-
backed securities portfolio, designated held to maturity, was $3.6 million.
The following table sets forth the carrying value of our investment
securities and mortgage-backed portfolio at the dates indicated.
<TABLE>
<CAPTION>
AT AT DECEMBER 31,
JUNE 30, ---------------
1998 1997 1996
-------- ------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Securities available-for-sale:
Mortgage-backed securities - GNMA.. $ -- $ 737 $ 804
Securities held to maturity :
U.S. Government securities......... 3,482 3,962 3,470
Mortgage-backed securities - GNMA.. 64 69 91
------ ------ ------
Total investments................. $3,546 $4,768 $4,365
====== ====== ======
</TABLE>
56
<PAGE>
The following table sets forth the scheduled maturities, carrying values,
market values and average yields for our investment portfolio at June 30, 1998.
<TABLE>
<CAPTION>
MORE THAN TEN
ONE YEAR OR LESS ONE TO FIVE YEARS FIVE TO TEN YEARS YEARS TOTAL INVESTMENT PORTFOLIO
------------------ ----------------- ----------------- ------------------ -------------------------
CARRYING AVERAGE CARRYING AVERAGE CARRYING AVERAGE CARRYING AVERAGE CARRYING MARKET AVERAGE
VALUE YIELD VALUE YIELD VALUE YIELD VALUE YIELD VALUE VALUE YIELD
-------- -------- -------- -------- -------- ------- -------- -------- -------- ------ --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Securities
held-to-maturity:
U.S. Government and
agency securities........ $1,482 5.26% 2,000 5.87% -- -- $-- --% $3,482 $3,481 5.59%
Mortgage-backed
securities - GNMA........ -- -- -- -- 64 11.00 64 71 11.00
-------- -------- -------- -------- -------- ------
Total.................... $1,482 $2,000 $-- $64 $3,546 $3,552
======== ======== ======== ======== ======== ======
</TABLE>
57
<PAGE>
SOURCES OF FUNDS
Deposits are our major external source of funds for lending and other
investment purposes. Funds are also derived from the receipt of payments on
loans and prepayment of loans and, to a much lesser extent, maturities of
investment securities and mortgage-backed securities, borrowings and operations.
Scheduled loan principal repayments are a relatively stable source of funds,
while deposit inflows and outflows and loan prepayments are significantly
influenced by general interest rates and market conditions.
DEPOSITS. Consumer and commercial deposits are attracted principally from
within our primary market area through the offering of a selection of deposit
instruments including regular savings accounts, money market accounts, and term
certificate accounts. Deposit account terms vary according to the minimum
balance required, the time period the funds must remain on deposit, and the
interest rate. The interest rates paid by us on deposits are set weekly at the
direction of our senior management. Interest rates are determined based on our
liquidity requirements, interest rates paid by our competitors, and our growth
goals and applicable regulatory restrictions and requirements.
At June 30, 1998, time certificates in amounts of $100,000 or more
constituted $1.7 million, or 7.51%, of the deposit portfolio. The majority of
these certificates represent deposits from long-standing customers.
At June 30, 1998, our deposits were represented by the various types of
savings programs described below.
<TABLE>
<CAPTION>
INTEREST MINIMUM BALANCES IN PERCENTAGE OF
RATE CATEGORY AMOUNT THOUSANDS TOTAL DEPOSITS
- ------------ ----------------------------- ------------ ----------- --------------
<S> <C> <C> <C> <C>
-- % Demand accounts $ 100 $ 735 3.29%
3.09% Savings and club accounts 100 3,131 14.00
1.01%-2.57% NOW and money market accounts 100 to 2,500 1,971 8.82
<CAPTION>
TIME CERTIFICATES
-----------------------------
<S> <C> <C> <C> <C>
4.00-4.99% Fixed-term, fixed-rate 1,000 114 0.51%
5.00-5.99% Fixed-term, fixed-rate 1,000 15,727 70.35
6.00-6.99% Fixed-term, fixed-rate 1,000 675 3.03
------- ------
$22,356 100.00%
======= ======
</TABLE>
- -------------------------
* Represents weighted average interest rate.
58
<PAGE>
The following table sets forth our time certificates classified by interest
rate at the dates indicated.
<TABLE>
<CAPTION>
AT AT DECEMBER 31,
JUNE 30, -------------------
1998 1997 1996
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
4.00 - 4.99%................ $ 114 $ 111 $ 2,205
5.00 - 5.99%................ 13,748 10,928 9,396
6.00 - 6.99%................ 2,657 5,267 3,757
------- ------- -------
$16,519 $16,306 $15,358
======= ======= =======
</TABLE>
The following table sets forth the amount and maturities of our time
certificates at June 30, 1998. Approximately 83.23% of such time certificates
has interest rates from 5.00% to 5.99%.
<TABLE>
<CAPTION>
AMOUNT DUE
---------------------------------------------------------------
WITHIN
ONE YEAR 1-2 YEARS 2-3 YEARS 3-4 YEARS 4-5 YEARS TOTAL
-------- --------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
$12,267 $3,658 $420 $160 $14 $16,519
======= ====== ==== ==== === =======
</TABLE>
The following table sets forth our deposit activity for the periods
indicated:
<TABLE>
<CAPTION>
INCREASE INCREASE
(DECREASE) (DECREASE)
BALANCE AT FROM BALANCE AT FROM BALANCE AT
JUNE 30, % OF DECEMBER 31, DECEMBER 31, % OF DECEMBER 31, DECEMBER 31, % OF
1998 DEPOSITS 1997 1997 DEPOSITS 1996 1996 DEPOSITS
---------- -------- ------------ ------------ -------- ------------ ------------ --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Demand accounts............ $ 735 3.29% $ 97 $ 638 2.93% $ 168 $ 470 2.29%
Savings and club accounts.. 3,131 14.00 398 2,733 12.56 46 2,687 13.12
Time certificates.......... 16,519 73.89 213 16,306 74.92 948 15,358 74.96
NOW and money market
accounts.................. 1,971 8.82 (117) 2,088 9.59 114 1,974 9.63
------- ------ --------- ------- ------ --------- ------- ------
Total.................... $22,356 100.00% $ 591 $21,765 100.00% $ 1,276 $20,489 100.00%
======= ====== ========= ======= ====== ========= ======= ======
</TABLE>
59
<PAGE>
The following table indicates the amount of our time certificates of
$100,000 or more by original maturity as of June 30, 1998.
<TABLE>
<CAPTION>
CERTIFICATES
ORIGINAL MATURITY OF DEPOSIT
----------------- ------------
(IN THOUSANDS)
<S> <C>
Three months or less.............. $ --
Over three through six months..... 264
Over six through 12 months........ 873
Over 12 months.................... 543
------
Total.......................... $1,680
======
</TABLE>
BORROWINGS. Advances (borrowings) may be obtained from the FHLB of New
York to supplement our supply of lendable funds. Advances from the FHLB of New
York are typically secured by a pledge of our stock in the FHLB of New York, a
portion of our first mortgage loans and other assets. Each FHLB credit program
has its own interest rate, which may be fixed or adjustable, and range of
maturities. At June 30, 1998, we did not have any borrowings outstanding.
COMPETITION
We compete for deposits with other insured financial institutions such as
commercial banks, thrift institutions, credit unions, finance companies, and
multi-state regional banks in our market area. We also compete for funds with
insurance products sold by local agents and investment products such as mutual
funds and other securities sold by local and regional brokers. Loan competition
varies depending upon market conditions. Our competition comes from commercial
banks, thrift institutions, credit unions and mortgage bankers, many of whom
have greater resources than we have.
PROPERTIES
The following table sets forth certain information regarding our main office
which is our only location.
<TABLE>
<CAPTION>
BOOK VALUE AT DEPOSITS AT
YEAR OWNED OR JUNE 30, APPROXIMATE JUNE 30,
OPENED LEASED 1998 (1) SQUARE FOOTAGE 1998
------ --------- ------------- -------------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
MAIN OFFICE: 1987 Owned $ 425 2,800 $ 22,356
825 State Street
Ogdensburg, NY 13669
</TABLE>
_____________
(1) Cost less accumulated depreciation and amortization.
60
<PAGE>
PERSONNEL
At June 30, 1998, we had six full-time and one part-time employees. None
of our employees are represented by a collective bargaining group. We believe
that our relationship with our employees is good.
LEGAL PROCEEDINGS
We are, from time to time, a party to legal proceedings arising in the
ordinary course of our business, including legal proceedings to enforce our
rights against borrowers. We are not currently a party to any legal proceedings
which are expected to have a material adverse effect on our financial
statements.
REGULATION
Set forth below is a brief description of certain laws which relate to us.
The description is not complete and is qualified in its entirety by references
to applicable laws and regulations.
GENERAL
As a federally chartered, SAIF-insured savings institution, we are subject
to extensive regulation by the OTS and the FDIC. Our lending activities and
other investments must comply with various federal and state statutory and
regulatory requirements, and the OTS periodically examines us for compliance
with various regulatory requirements. The FDIC also has authority to conduct
periodic examinations of us. We must file reports with the OTS describing our
activities and our financial condition and we must obtain approvals from
regulatory authorities before entering into certain transactions such as the
conversion or mergers with other financial institutions. We are also subject to
certain reserve requirements promulgated by the Board of Governors of the
Federal Reserve System ("Federal Reserve System"). Our relationship with our
depositors and borrowers is also regulated to a great extent by federal and
state law, especially in such matters as the ownership of savings accounts and
the form and content of our mortgage documents. This supervision and regulation
are primarily intended to protect depositors. The regulatory structure also
gives the regulatory authorities extensive discretion in connection with their
supervisory and enforcement activities and examination policies, including
policies with respect to the classification of assets and the establishment of
adequate loan loss reserves for regulatory purposes. Any change in regulations,
whether by the OTS, the FDIC or any other government agency, could have a
material adverse impact on our operations.
61
<PAGE>
PROPOSED LEGISLATIVE AND REGULATORY CHANGES
The U.S. Congress is in the process of drafting legislation which may have
a profound effect on the financial services industry. On May 13, 1998, the U.S.
House of Representatives passed H.R. 10, the "Financial Services Competition Act
of 1998," which calls for a sweeping modernization of the banking system that
would permit affiliations between commercial banks, securities firms, insurance
companies and, subject to certain limitations, other commercial enterprises.
The stated purposes of H.R. 10 are to enhance consumer choice in the financial
services marketplace, level the playing field among providers of financial
services and increase competition. H.R. 10 removes many of the statutory
restrictions contained in current laws regulating the financial services
industry and calls for a new regulatory framework of financial institutions and
their holding companies. H.R. 10. however, preserves the thrift charter and all
existing thrift powers, but would restrict the activities of new unitary thrift
holding companies. The Senate is now considering and may further modify H.R.
10. At this time, it is unknown whether H.R. 10 will be enacted into law, or if
enacted, what form the final version of such legislation might take and how such
legislation may affect our and our holding company's business and operations.
REGULATION OF THE ASSOCIATION
INSURANCE OF DEPOSIT ACCOUNTS. The FDIC maintains two separate funds for
the insurance of deposits up to prescribed statutory limits. The Bank Insurance
Fund ("BIF") insures the deposits of commercial banks and the SAIF insures the
deposits of savings associations. We are a member of the SAIF. The FDIC is
authorized to establish separate annual assessment rates for deposit insurance
for members of the BIF and the SAIF. The FDIC may increase assessment rates for
either fund if necessary to restore the fund's ratio of reserves to insured
deposits to its target level within a reasonable time and may decrease such
assessment rates if such target level has been met. The FDIC has established a
risk-based assessment system for both SAIF and BIF members. Under this system,
assessments are set within a range, based on the risk the institution poses to
its deposit insurance fund. This risk level is determined based on the
institution's capital level and the FDIC's level of supervisory concern about
the institution.
Because a significant portion of the assessments paid into the SAIF by
savings institutions were used to pay the cost of prior savings institution
failures, the reserves of the SAIF were below the level required by law. The
BIF, however, met its required reserve level during the third calendar quarter
of 1995. As a result, deposit insurance premiums for deposits insured by the
BIF were substantially less than premiums for deposits such as ours which are
insured by the SAIF. On September 30, 1996, President Clinton signed into law
legislation which included provisions designed to recapitalize the SAIF and to
eliminate the significant premium disparity between the BIF and the SAIF. Under
this law, institutions with deposits insured by the SAIF were required to pay a
special assessment equal to $0.657 per $100 of SAIF-assessable deposits held at
March 31, 1995. We recognized this special assessment of $128,000 during the
quarter ended September 30, 1996 and were required to pay the assessment on
November 27, 1996.
62
<PAGE>
Beginning January 1, 1997, our annual deposit insurance premium was reduced
from 0.23% to 0.0644% of total assessable deposits. BIF institutions still pay
lower assessments than comparable SAIF institutions because BIF institutions pay
only 20% of the rate being paid by SAIF institutions on their deposits with
respect to obligations issued by the Financing Corp., a federally chartered
corporation which provided some of the financing required to resolve the thrift
crisis in the 1980s.
The recapitalization plan also provides for the merger of the SAIF and BIF
effective January 1, 1999, assuming there are no savings institutions under
federal law.
REGULATORY CAPITAL REQUIREMENTS. OTS capital regulations require savings
institutions to meet three capital standards: (1) tangible capital equal to at
least 1.5 % of total adjusted assets, (2) core capital equal to at least 3.0% of
total adjusted assets, and (3) risk-based capital equal to at least 8.0% of
total risk-weighted assets. In addition, the OTS may require that a savings
institution that has a risk-based capital ratio less than 8.0%, a ratio of Tier
1 capital to risk-weighted assets of less than 4.0% or a ratio of Tier 1 capital
to adjusted total assets of less than 4.0% (3.0% if the institution has received
the highest rating on its most recent examination) take certain actions to
increase its capital ratios. If the institution's capital is significantly
below the minimum required levels or if it is unsuccessful in increasing its
capital ratios, the OTS may significantly restrict its activities.
Tangible capital is defined as core capital less all intangible assets
(including supervisory goodwill), less certain mortgage servicing rights and
less certain investments. Core capital is defined as common stockholders'
equity (including retained earnings), non-cumulative perpetual preferred stock
and minority interests in the equity accounts of consolidated subsidiaries,
certain non-withdrawable accounts and pledged deposits of mutual savings
associations and qualifying supervisory goodwill, less non-qualifying intangible
assets, certain mortgage servicing rights and certain investments. Tier 1 has
the same definition as core capital.
63
<PAGE>
Risk-based capital equals the sum of core capital plus supplementary
capital. The components of supplementary capital include, among other items,
cumulative perpetual preferred stock, perpetual subordinated debt, mandatory
convertible subordinated debt, intermediate-term preferred stock, and the
portion of the allowance for loan losses not designated for specific loan
losses. Overall, supplementary capital is limited to 100% of core capital. A
savings institution must calculate its risk-weighted assets by multiplying each
asset and off-balance sheet item by various risk factors as determined by the
OTS, which range from 0% for cash to 100% for delinquent loans, property
acquired through foreclosure, commercial loans, and other assets. At June 30,
1998, we were in compliance with all regulatory capital requirements as is shown
on the table below.
<TABLE>
<CAPTION>
PERCENT OF
AMOUNT ASSETS (1)
---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Tangible capital................ $1,648 6.8%
Tangible capital requirement.... 364 1.5
------ ----
Excess....................... $1,284 5.3%
====== ====
Core capital (2)................ $1,648 6.8%
Core capital requirement........ 727 3.0
------ ----
Excess....................... $ 921 3.8%
====== ====
Risk-based capital.............. $1,813 13.2%
Risk-based capital requirement.. 1,100 8.0
------ ----
Excess....................... $ 713 5.2%
====== ====
</TABLE>
- -------------------------
(1) Based on adjusted total assets for purposes of the tangible capital and
core capital requirements and risk-weighted assets for purpose of the risk-
based capital requirement.
(2) Reflects the capital requirement which the Bank must satisfy to avoid
regulatory restrictions that may be imposed pursuant to prompt corrective
action regulations. The core requirement applicable to the Bank may
increase if the OTS amends its capital regulations, as it has proposed, in
response to the more stringent leverage ratio adopted by the Office of the
Comptroller of the Currency for national banks.
The risk-based capital standards of the OTS generally require savings
institutions with more than a "normal" level of interest rate risk to maintain
additional total capital. An institution's interest rate risk will be measured
in terms of the sensitivity of its "net portfolio value" to changes in interest
rates. Net portfolio value is defined, generally, as the present value of
expected cash inflows from existing assets and off-balance sheet contracts less
the present value of expected cash outflows from existing liabilities. A
savings institution will be considered to have a "normal" level of interest rate
risk exposure if the decline in its net portfolio value after an immediate 200
basis point increase or decrease in market interest rates (whichever results in
the greater decline) is less than two percent of the current estimated economic
value of its assets. An institution with a greater than normal interest rate
risk will be required to deduct from total capital, for purposes of calculating
its risk-based capital requirement, an amount (the "interest rate risk
component") equal to one-half the difference between the institution's measured
interest rate risk and the normal level of interest rate risk, multiplied by the
economic value of its total assets.
64
<PAGE>
The OTS calculates the sensitivity of an institution's net portfolio value
based on data submitted by the institution in a schedule to its quarterly Thrift
Financial Report and using the interest rate risk measurement model adopted by
the OTS. The amount of the interest rate risk component, if any, to be deducted
from an institution's total capital will be based on the institution's Thrift
Financial Report filed two quarters earlier. Savings institutions with less
than $300 million in assets and a risk-based capital ratio above 12% are
generally exempt from filing the interest rate risk schedule with their Thrift
Financial Reports. However, the OTS may require any exempt institution that it
determines may have a high level of interest rate risk exposure to file such
schedule on a quarterly basis and may be subject to an additional capital
requirement based upon its level of interest rate risk as compared to its peers.
Due to our size and risk-based capital level, we are exempt from the interest
rate risk component.
DIVIDEND AND OTHER CAPITAL DISTRIBUTION LIMITATIONS. OTS regulations
require us to give the OTS 30 days advance notice of any proposed declaration of
dividends to the Company. The OTS may prohibit the payment of dividends by us to
the Company. In addition, we may not declare or pay a cash dividend on our
capital stock if the effect would be to reduce our regulatory capital below the
amount required for the liquidation account to be established at the time of the
conversion. See "The Conversion -- Effects of Conversion to Stock Form on
Depositors and Borrowers of Ogdensburg Federal Savings and Loan Association --
Liquidation Account."
OTS regulations limit upon all capital distributions by savings
institutions, such as cash dividends, payments to repurchase or otherwise
acquire its shares, payments to stockholders of another institution in a cash-
out merger, and other distributions charged against capital. The rule
establishes three tiers of institutions based primarily on an institution's
capital level. An institution that exceeds all of its fully phased-in capital
requirements before and after a proposed capital distribution ("Tier 1
institution") and has not been advised by the OTS that it is in need of more
than the normal supervision can, after prior notice but without the approval of
the OTS, make capital distributions during a calendar year equal to the greater
of (i) 100.0% of its net income to date during the calendar year plus the amount
that would reduce by one-half its "surplus capital ratio" (the excess capital
over its fully phased-in capital requirements) at the beginning of the calendar
year, or (ii) 75% of its net income over the most recent four quarter period.
Any additional capital distributions require prior regulatory notice. As of
June 30, 1998, we qualified as a Tier 1 institution.
In the event our capital falls below our fully phased-in requirement or the
OTS notifies us that we are in need of more than normal supervision, we would
become a Tier 2 or Tier 3 institution and as a result, our ability to make
capital distributions could be restricted. Tier 2 institutions, which are
institutions that before and after the proposed distribution meet their current
minimum capital requirements, may only make capital distributions of up to 75%
of net income over the most recent four quarter period. Tier 3 institutions,
which are institutions that do not meet current minimum capital requirements and
propose to make a capital distribution, and Tier 2 institutions that propose to
make a capital distribution in excess of the noted safe harbor level, must
obtain OTS approval prior to making such distribution. In addition, the OTS
could prohibit a proposed capital distribution by any institution, which would
otherwise be permitted by the regulation, if the OTS determines that
65
<PAGE>
such distribution would constitute an unsafe or unsound practice. The OTS has
proposed rules relaxing certain approval and notice requirements for well-
capitalized institutions.
A savings institution is prohibited from making a capital distribution if,
after making the distribution, the savings institution would be undercapitalized
(i.e., not meet any one of its minimum regulatory capital requirements).
Further, a savings institution cannot distribute regulatory capital that is
needed for its liquidation account.
QUALIFIED THRIFT LENDER TEST. Savings institutions must meet a Qualified
Thrift Lender test. We must maintain at least 65.0% of our portfolio assets
(total assets less intangible assets, property we use in conducting our business
and liquid assets in an amount not exceeding 20.0% of total assets) in Qualified
Thrift Investments to satisfy the test. Qualified Thrift Investments consist
primarily of residential mortgage loans and mortgage-backed and other securities
related to domestic, residential real estate or manufactured housing. The
shares of stock we own in the FHLB of New York also qualify as Qualified Thrift
Investments. Subject to an aggregate limit of 20.0% of portfolio assets, we may
also count the following as Qualified Thrift Investments: (i) 50.0% of the
dollar amount of residential mortgage loans originated for sale, (ii)
investments in the capital stock or obligations of any service corporation or
operating subsidiary as long as such subsidiary derives at least 80% of its
revenues from domestic housing related activities, (iii) 200% of the dollar
amount of loans and investments to purchase, construct or develop "starter
homes," subject to certain other restrictions, (iv) 200% of the dollar amount of
loans for the purchase, construction or development of domestic residential
housing or community centers in "credit needy" areas or loans for small
businesses located in such areas, (v) loans for the purchase, construction or
development of community centers, (vi) loans for personal, family, household or
educational purposes, subject to a maximum of 10% of portfolio assets, and (vii)
shares of the Federal Home Loan Mortgage Corporation or the Federal National
Mortgage Association stock.
If we satisfy the test, we will continue to enjoy full borrowing privileges
from the FHLB of New York. If we do not satisfy the test we may lose our
borrowing restrictions and be subject to activities and branching restrictions
applicable to national banks. Compliance with the Qualified Thrift Lender test
is determined on a monthly basis in nine out of every 12 months. As of June 30,
1998, we were in compliance with our Qualified Thrift Lender requirement with
approximately 92.63% of our assets invested in Qualified Thrift Investments.
TRANSACTIONS WITH AFFILIATES. Generally, transactions between a savings
institution and its affiliates are subject to certain limitations. Such
transactions must be on terms as favorable to the savings institution as
comparable transactions with non-affiliates. In addition, certain of these
transactions are restricted to an aggregate percentage of the savings
institution's capital. Collateral in specified amounts must usually be provided
by affiliates in order to receive loans from the savings institution. Our
affiliates include the Company and any company which would be under common
control with us. In addition, a savings institution may not extend credit to
any affiliate engaged in activities not permissible for a bank holding company
or acquire the securities of any affiliate that
66
<PAGE>
is not a subsidiary. The OTS has the discretion to treat subsidiaries of savings
institution as affiliates on a case-by-case basis.
LOANS TO DIRECTORS, EXECUTIVE OFFICERS AND PRINCIPAL STOCKHOLDERS. Loans
from us to our directors, executive officers and, subsequent to the conversion,
our principal stockholders may not be made on terms more favorable than those
afforded to other borrowers. In addition, we cannot make loans in excess of
certain levels to directors, executive officers or 10% or greater stockholders
(or any of their affiliates) unless the loan is approved in advance by a
majority of our board of directors with any "interested" director not voting.
We are also prohibited from paying any overdraft of any of our executive
officers or directors. We are also subject to certain other restrictions on the
amount and type of loans to executive officers and directors and must annually
report such loans to our regulators.
LIQUIDITY REQUIREMENTS. All savings institutions 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. The liquidity requirement may vary from
time to time (between 4% and 10%) depending upon economic conditions and savings
flows of all savings institutions. At June 30, 1998, our required liquid asset
ratio was 4% and our actual ratio was 23.35%. Monetary penalties may be imposed
upon institutions for violations of liquidity requirements.
FEDERAL HOME LOAN BANK SYSTEM. We are a member of the FHLB of New York,
which is one of 12 regional FHLBs. Each FHLB serves as a reserve or central
bank for its members within its assigned region. It is funded primarily from
funds deposited by savings institutions and 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.
As a member, we are required to purchase and maintain stock in the FHLB of
New York in an amount equal to at least 1% of our aggregate unpaid residential
mortgage loans, home purchase contracts or similar obligations at the beginning
of each year, or 1/20 of our advances from the FHLB of New York, whichever is
greater. At June 30, 1998, we had $139,000 in FHLB stock, at cost, which was in
compliance with this requirement.
FEDERAL RESERVE SYSTEM. The Federal Reserve System requires all depository
institutions to maintain non-interest bearing reserves at specified levels
against their transaction accounts (primarily checking, NOW and Super NOW
checking accounts) and non-personal time certificates. The balances maintained
to meet the reserve requirements imposed by the Federal Reserve System may be
used to satisfy the liquidity requirements that are imposed by the OTS. At June
30, 1998, our reserve met the minimum level required by the Federal Reserve
System.
67
<PAGE>
HOLDING COMPANY REGULATION
GENERAL. The Company will be required to register and file reports with the
OTS and will be subject to regulation and examination by the OTS. In addition,
the OTS will have enforcement authority over the Company and any non-savings
institution subsidiaries. This will permit the OTS to restrict or prohibit
activities that it determines to be a serious risk to us. This regulation is
intended primarily for the protection of our depositors and not for the benefit
of you, as stockholders of the Company.
The Company will also be required to file certain reports with, and comply
with the rules and regulations of the SEC under the federal securities laws.
ACTIVITIES RESTRICTIONS. Since the Company will only own one savings
institution, it will be able to diversify its operations into activities not
related to banking, but only so long as we satisfy the Qualified Thrift Lender
Test. If the Company controls more than one savings institution, it would lose
the ability to diversify its operations into non-banking related activities,
unless such other savings institutions each also qualify as a Qualified Thrift
Lender and were acquired in a supervised acquisition. See " -- Qualified Thrift
Lender Test."
RESTRICTIONS ON ACQUISITIONS. The Company must obtain approval from the
OTS before acquiring control of any other savings institution or savings and
loan holding company, substantially all the assets thereof or in excess of 5% of
the outstanding shares of another savings institution or savings and loan
holding company. The Company's directors and officers or persons owning or
controlling more than 25% of the Company's stock, must also obtain approval of
the OTS before acquiring control of any savings institution or savings and loan
holding company.
The OTS may only approve acquisitions that will result in the formation of
a multiple savings and loan holding company which controls savings institutions
in more than one state if: (i) the multiple savings and loan holding company
involved controls a savings institution which operated a home or branch office
in the state of the institution to be acquired as of March 5, 1987; (ii) the
acquiror is authorized to acquire control of the savings institution pursuant to
the emergency acquisition provisions of the Federal Deposit Insurance Act; or
(iii) the statutes of the state in which the institution to be acquired is
located specifically permit institutions to be acquired by state-chartered
institutions or savings and loan holding companies located in the state where
the acquiring entity is located (or by a holding company that controls such
state-chartered savings institutions).
FEDERAL SECURITIES LAW. The Company has filed with the SEC a Registration
Statement under the Securities Act of 1933, as amended (the "Securities Act"),
for the registration of the common stock. Upon completion of the conversion,
the common stock will be registered with the SEC under the Exchange Act and,
under OTS regulations, generally may not be deregistered for at least three
years thereafter. The Company will be subject to the information, proxy
solicitation, insider trading restrictions and other requirements of the
Exchange Act.
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The registration under the Securities Act of the common stock does not
cover the resale of such shares. Shares of the common stock purchased by
persons who are not affiliates of the Company may generally be resold without
registration. Shares purchased by an affiliate of the Company will be subject
to certain resale restrictions. As long as the Company meets the current public
information requirements, each affiliate of the Company who complies with the
other conditions would be able to sell a limited number of shares based upon the
number of shares outstanding and the average trading volume for the common
stock.
TAXATION
FEDERAL TAXATION
We are subject to the provisions of the Internal Revenue Code of 1986, as
amended (the "Code"), in the same general manner as other corporations.
However, prior to August 1996, savings institutions such as us, which met
certain definitional tests and certain other conditions prescribed by the Code
could benefit from certain favorable provisions regarding their deductions from
taxable income for annual additions to their bad debt reserve. The amount of
the bad debt deduction that a qualifying savings institution could claim for tax
purposes with respect to additions to its reserve for bad debts for "qualifying
real property loans" could be based upon our actual loss experience (the
"experience method") or as a percentage of our taxable income (the "percentage
of taxable income method"). Historically, we used the method that would allow
us to take the largest deduction.
In August 1996, the Code was revised to equalize the taxation of savings
institutions and banks. Savings institutions, such as us, no longer have a
choice between the percentage of taxable income method and the experience method
in determining additions to bad debt reserves. Thrifts with $500 million of
assets or less may still use the experience method, which is generally available
to small banks currently. Larger thrifts may only take a tax deduction when a
loan is actually charged off. Any reserve amounts added after 1987 will be
taxed over a six year period beginning in 1996; however, bad debt reserves set
aside through 1987 are generally not taxed. A savings institution may delay
recapturing into income its post-1987 bad debt reserves for an additional two
years if it meets a residential-lending test. This law is not expected to have
a material impact on us. At June 30, 1998, we had $426,000 of post-1987 bad-
debt reserves.
Earnings appropriated to our bad debt reserve and claimed as a tax
deduction including our supplemental reserves for losses will not be available
for the payment of cash dividends or for distribution (including distributions
made on dissolution or liquidation), unless we include the amount in income,
along with the amount deemed necessary to pay the resulting federal income tax.
If such amount is used for any purpose other than bad debt losses, including a
dividend distribution or a distribution in liquidation, it will be subject to
federal income tax at the then current rate.
The Code imposes a tax ("AMT") on alternative minimum taxable income
("AMTI") at a rate of 20%. AMTI is increased by certain preference items,
including the excess of the tax bad debt reserve deduction using the percentage
of taxable income method over the deduction that would have
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been allowable under the experience method. Only 90% of AMTI can be offset by
net operating loss carryovers of which we currently have none. AMTI is also
adjusted by determining the tax treatment of certain items in a manner that
negates the deferral of income resulting from the regular tax treatment of those
items. Thus, our AMTI is increased by an amount equal to 75% of the amount by
which our adjusted current earnings exceeds our AMTI (determined without regard
to this adjustment and prior to reduction for net operating losses). In tax
years beginning after December 31, 1997, a "small" corporation will not be
subject to the AMT because its tentative minimum tax will be treated as zero.
For a tax year beginning in 1988, a corporation that has had average annual
gross receipts of $5,000,000 or less for its 1995-1997 tax years will be a small
corporation. Once a corporation is recognized as a small corporation, it will
continue to be exempt from AMT as long as its average annual gross receipts for
the prior 3-year period is not in excess of $7,500,000. If a corporation ceases
to be a small corporation, the AMT will apply prospectively only.
The Company may exclude from its income 100% of dividends received from us
as a member of the same affiliated group of corporations. A 70% dividends
received deduction generally applies with respect to dividends received from
corporations that are not members of such affiliated group, except that an 80%
dividends received deduction applies if the Company owns more than 20% of the
stock of a corporation paying a dividend. The above exclusion amounts, with the
exception of the affiliated group figure, were reduced in years in which we
availed our self of the percentage of taxable income bad debt deduction method.
Our federal income tax returns have not been audited by the IRS.
STATE TAXATION
We will continue to be subject to New York corporation income tax which is
___% of all taxable earnings when income exceeds $______.
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MANAGEMENT OF THE COMPANY
Our board of directors consists of the same individuals who serve as
directors of Ogdensburg Federal Savings and Loan Association. Our certificate
of incorporation and bylaws require that directors be divided into three
classes, as nearly equal in number as possible. Each class of directors serves
for a three-year period, with approximately one-third of the directors elected
each year. Our officers will be elected annually by the board and serve at the
board's discretion.
The following individuals will serve as executive officers of the Company.
<TABLE>
<CAPTION>
NAME POSITION(S) WITH THE COMPANY
---- ----------------------------
<S> <C>
Robert E. Wilson President and Chief Executive Officer
Todd R. Mashaw Vice President, Secretary/Treasurer
</TABLE>
MANAGEMENT OF OGDENSBURG FEDERAL SAVING AND LOAN ASSOCIATION
DIRECTORS AND EXECUTIVE OFFICERS
Our board of directors is composed of five members, each of whom serves for
a term of three years. Our proposed stock charter and bylaws require that
directors be divided into three classes, as nearly equal in number as possible.
Each class of directors serves for a three-year period, with approximately one-
third of the directors elected each year. Our officers are elected annually by
our board and serve at the board's discretion.
The following table sets forth information with respect to our directors,
all of whom will continue to serve in the same capacities after the conversion.
We have no other executive officers.
<TABLE>
<CAPTION>
AGE AS OF POSITION(S)WITH DIRECTOR TERM
NAME JUNE 30, 1998 THE ASSOCIATION SINCE EXPIRES
- ----------------------- ------------- ----------------------------- -------- -------
<S> <C> <C> <C> <C>
Anthony P. LeBarge, Sr. 49 Director 1991 2001
Robert E. Hentschel 63 Chairman 1992 1999
Wesley L. Stitt 68 Director 1980 1999
Robert E. Wilson 60 President and Chief Executive
Officer; Director 1966 2000
George E. Silver 58 Director 1989 2001
Todd R. Mashaw 35 Vice President N/A N/A
</TABLE>
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The business experience for the past five years of each of the directors
and executive officers is as follows:
ANTHONY P. LEBARGE served as our Chairman of the Board until January 1998.
He is the general manger of Noco Energy Corp. He is a member of S.U.N.Y. Canton
College Council and the Masonic Lodge No. 128.
ROBERT E. HENTSCHEL serves as our Chairman of the Board of Directors. He
is a general surgeon in private practice and has been the Regional Medical
Director of the New York State Department of Corrections, Riverview Corrections
Facility, since 1984. He is a Board member and past president of the Remington
Art Museum and is a Board member of AAA Automobile Travel Club.
WESLEY L. STITT has been retired since 1990. Prior to his retirement, he
was the Superintendent of Schools of the Ogdensburg City Schools. He is Vice
President of Remington Endowment Board, a Trustee of the Remington Art Museum,
Chairman of S.U.N.Y. Canton College Council and Vice President of Augsbury
Institute. He is also a member of Heuvelton Development Committee, Rural
Rehabilitation Committee and the Institute of Ethical Behavior.
ROBERT E. WILSON has served as our President and Chief Executive Officer
since 1963. He is a former member of the Ogdensburg City School Board having
served 15 years with two terms as President and two terms as Vice President. He
was a member of Kiwanis International for 15 years and served on their Board of
Directors. For 25 years he participated in the Kiwanis youth activity programs.
GEORGE E. SILVER is an attorney for the law firm of Silver and Silver, and
a judge for the Office of Court Administration. He served as Chairman of the
Board from 1994 to 1995. He is a member of the Board of Directors of A. Barton
Hepburn Hospital and the Board of Directors of Ogdensburg Rescue Squad. He is
also President Emeritus of the Board of Trustees of the Remington Art Museum.
TODD R. MASHAW has served as our Vice President since 1989. He has been a
member of the Board of Assessment and Review for the City of Ogdensburg since
1995 and has been a member of S.U.N.Y. Canton College Business Administration
Advisory Committee since 1991. He has also coached Kiwanis Baseball and is
active in bringing a community-built playground to the City of Ogdenburg.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The board of directors conducts its business through meetings of the board
and through activities of its committees. During the year ended December 31,
1997, the board of directors held 12 regular meetings and two special meetings.
No director attended fewer than 75% of the total
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meetings of the board of directors and committees on which such director served
during the year ended December 31, 1997.
DIRECTOR COMPENSATION
Each of the directors is paid a fee of $550 ($575 for the Chairman) per
regular monthly meeting and annual meeting of members attended and are paid for
one missed regular or annual meeting. In addition, they receive a fee of $100
per executive committee meeting attended. Total aggregate fees paid to the
current directors for the year ended December 31, 1997 were $39,000.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE. The following table sets forth the cash and
non-cash compensation awarded to or earned by our chief executive officer at
December 31, 1997. No other employee earned in excess of $100,000 for the year
ended December 31, 1997.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
NAME AND FISCAL ------------------- ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1)
------------------ ------ ---------- ------- ---------------
<S> <C> <C> <C> <C>
Robert E. Wilson 1997 $74,685 $3,650 $12,107
</TABLE>
- ----------
(1) Consists of board fees ($7,800) and matching contributions to the 401(k)
plan.
EMPLOYMENT AGREEMENT. We have entered into an employment agreement with our
President, Robert Wilson and our Vice President, Todd R. Mashaw. Mr. Wilson's
base salary under the employment agreement is $78,000 and Mr. Mashaw's base
salary is $42,500. Each employment agreement has a term of three years. Each
agreement is terminable by us for "just cause" as defined in the agreement. If
we terminate Mr. Wilson or Mr. Mashaw without just cause or if Mr. Wilson or Mr.
Mashaw terminates his employment for "good reason", he will be entitled to a
continuation of his salary from the date of termination through the remaining
term of the agreement, plus an additional 12 months. The employment agreements
also contain a provision stating that in the event of the termination of
employment in connection with any change in control of the Company or us, Mr.
Wilson and Mr. Mashaw will be paid a lump sum amount equal to 2.99 times their
respective five year average annual taxable cash compensation. If such payments
had been made under the agreement as of June 30, 1998, such payments would have
equaled approximately $221,000 and $114,000, respectively. The aggregate
payments that would have been made to them would be an expense to us, thereby
reducing our net income and our capital by that amount. The agreements may be
renewed annually by our board of directors upon a determination of satisfactory
performance within the board's sole discretion. If Mr. Wilson or Mr. Mashaw
shall become disabled during the term of his respective agreement, he shall
continue to receive payment of 100% of the base salary for a period of up to 180
days. Such payments shall not be reduced by any other benefit payments made
under other disability program in effect for our employees. If Mr. Wilson's or
Mr. Mashaw's
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employment terminates for a reason other than just cause, he will be entitled to
purchase from us family medical insurance through any group health plan
maintained by us.
EMPLOYEE STOCK OWNERSHIP PLAN. We have established the ESOP for the
exclusive benefit of participating employees of ours, to be implemented upon the
completion of the conversion. Participating employees are employees who have
completed one year of service with us (including at least 1,000 hours of
service) and have attained the age of 21. An application for a letter of
determination as to the tax-qualified status of the ESOP will be submitted to
the IRS. Although no assurances can be given, we expect that the ESOP will
receive a favorable letter of determination from the IRS.
The ESOP is to be funded by contributions made by us in cash or common
stock. Benefits may be paid either in shares of the common stock or in cash.
In accordance with the Plan, the ESOP may borrow funds with which to acquire up
to 8.0% of the common stock to be issued in the conversion. The ESOP intends to
borrow funds from the Company. The loan is expected to be for a term of ten
years at an annual interest rate equal to the prime rate as published in The
---
Wall Street Journal. Presently it is anticipated that the ESOP will purchase up
- --------------------
to 8.0% of the common stock to be issued in the offering (12,000 shares based on
the midpoint of the Estimated Valuation Range). The loan will be secured by the
shares purchased and earnings of ESOP assets. Shares purchased with such loan
proceeds will be held in a suspense account for allocation among participants as
the loan is repaid. We anticipate contributing approximately $______ annually
(based on a 12,000 shares purchase) to the ESOP to meet principal obligations
under the ESOP loan, as proposed. It is anticipated that all such contributions
will be tax-deductible. This loan is expected to be fully repaid in
approximately 10 years. ESOP expense is based upon generally accepted
accounting principles as described in accounting SOP 93-6. Generally accepted
accounting principles require that as and when shares pledged as security for an
ESOP loan are committed to be released from the loan (i.e., as the loan is
repaid), ESOP expense is recorded based upon the fair value of the shares at
that time.
Shares sold above the maximum of the Estimated Valuation Range (i.e., more
than 172,500 shares) may be sold to the ESOP before satisfying remaining
unfilled orders of Eligible Account Holders to fill the ESOP's subscription or
the ESOP may purchase some or all of the shares covered by its subscription
after the conversion in the open market.
Contributions to the ESOP and shares released from the suspense account
will be allocated among participants on the basis of total compensation,
excluding bonuses. All participants must be employed at least 500 hours in a
plan year in order to receive an allocation. Participants will become 20%
vested in their ESOP account balances for each year of service beginning with
the second year of service, up to a maximum of 100% for six years of service.
Up to five years of service prior to the adoption of the ESOP shall be credited
for the purposes of vesting. Vesting will be accelerated upon retirement,
death, disability, change in control of the Company, or termination of the ESOP.
Forfeitures will be reallocated to participants on the same basis as other
contributions in the plan year. Benefits may be payable in the form of a lump
sum upon retirement, death, disability or
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separation from service. Our contributions to the ESOP are discretionary and may
cause a reduction in other forms of compensation. Therefore, benefits payable
under the ESOP cannot be estimated.
In the event of a change in control of us, the outstanding balance of any
loans used to finance the purchase of shares by the ESOP will be payed off
through a transfer or sale of shares held as collateral under such loan, with
any remaining shares allocated to participant accounts pro rata based on their
account balances. Participants terminating employment on or after the change in
control will be entitled to receive a cash payment from the Company equal to the
amount, if any, which would have been allocated to the participant's account
immediately following the change in control but was precluded from allocation
based on allocation limits applicable under federal tax laws.
The board of directors has appointed non-employee directors to the ESOP
Committee to administer the ESOP and to serve as the initial ESOP Trustees. The
board of directors or the ESOP Committee may instruct the ESOP Trustees
regarding investments of funds contributed to the ESOP. The ESOP Trustees must
vote all allocated shares held in the ESOP in accordance with the instructions
of the participating employees. Unallocated shares and allocated shares for
which no timely direction is received will be voted by the ESOP Trustees as
directed by the board of directors or the ESOP Committee, subject to the
Trustees' fiduciary duties.
PROPOSED FUTURE STOCK BENEFIT PLANS
STOCK OPTION PLAN. We intend to adopt a stock option plan (the Option
Plan) following the conversion, subject to approval by you and the Company's
stockholders, at a stockholders= meeting to be held no sooner than six months
after the conversion. If the Option Plan is adopted during the first year
following the conversion, the Option Plan would be in compliance with the OTS
conversion regulations in effect. See "-- Restrictions on Stock Benefit
Plans." If the Option Plan is implemented more than one year after the
conversion, the Option Plan will comply with OTS regulations and policies that
are applicable at such time. If the Option Plan is implemented within one year
after the conversion, in accordance with OTS regulations, a number of shares
equal to 10% of the aggregate shares of common stock to be issued in the
offering (i.e., 15,000 shares based upon the sale of 150,000 shares at the
midpoint of the Estimated Valuation Range) would be reserved for issuance by the
Company upon exercise of stock options or stock appreciation rights ("SARs") to
be granted to our officers, directors and employees from time to time under the
Option Plan. The purpose of the Option Plan would be to provide additional
performance and retention incentives to certain officers, directors and
employees by facilitating their purchase of a stock interest in the Company.
Under the OTS conversion regulations, the Option Plan, would provide for a term
of 10 years, after which no awards could be made, unless earlier terminated by
the board of directors pursuant to the Option Plan and the options would vest
over a five year period (i.e., 20% per year), beginning one year after the date
of grant of the option. Options would expire no later than 10 years from the
date granted and would expire earlier if the Option Committee so determines or
in the event of termination of employment. Options would be granted based upon
several factors, including seniority, job duties and responsibilities, job
performance, our financial performance and a comparison of awards given by other
savings institutions converting from mutual to stock form.
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The Company would receive no monetary consideration for the granting of
stock options or SARs under the Option Plan. It would receive the option price
for each share issued to optionees upon the exercise of such options. Shares
issued as a result of the exercise of options will be either authorized but
unissued shares or shares purchased in the open market by the Company. However,
no purchases in the open market will be made that would violate applicable
regulations restricting purchases by the Company. The exercise of options and
payment for the shares received would contribute to the equity of the Company.
MANAGEMENT RECOGNITION PLAN. We intend to adopt the MRP following the
conversion, the objective of which is to enable us to retain personnel and
directors of experience and ability in key positions of responsibility. The
Company expects to hold a stockholders' meeting no sooner than six months after
the conversion in order for stockholders to vote to approve the MRP. If the MRP
is implemented within one year after the conversion, in accordance with
applicable OTS regulations, the shares granted under the MRP will be in the form
of restricted stock vesting over a five year period (i.e., 20% per year)
beginning one year after the date of grant of the award. Additionally, the
number of shares to be granted could not exceed 3% of the shares sold in the
conversion (4% if we had tangible capital of 10% or more) if the MRP is adopted
during the first year following conversion. If the MRP is implemented more than
one year after the conversion, the MRP will comply with such OTS regulations and
policies that are applicable at such time. Compensation expense in the amount
of the fair market value of the common stock granted will be recognized pro rata
over the years during which the shares are payable. Until they have vested,
such shares may not be sold, pledged or otherwise disposed of and are required
to be held in escrow. Any shares not so allocated would be voted by the MRP
Trustees. Awards would be granted based upon a number of factors, including
seniority, job duties and responsibilities, job performance, our performance and
a comparison of awards given by other institutions converting from mutual to
stock form. The MRP would be managed by a committee of non-employee directors
(the "MRP Trustees"). The MRP Trustees would have the responsibility to invest
all funds contributed by us to the trust created for the MRP (the "MRP Trust").
We expect to contribute sufficient funds to the MRP so that the MRP Trust
can purchase, in the aggregate, up to 4% of the amount of common stock that is
sold in the conversion. The shares purchased by the MRP would be authorized but
unissued shares or would be purchased in the open market. In the event the
market price of the common stock is greater than $10.00 per share, our
contribution of funds will be increased. Likewise, in the event the market
price is lower than $10.00 per share, our contribution will be decreased. In
recognition of their prior and expected services to us and the Company, as the
case may be, the officers, other employees and directors responsible for
implementation of the policies adopted by the board of directors and our
profitable operation will, without cost to them, be awarded stock under the MRP.
Based upon the sale of 150,000 shares of common stock in the offering at the
midpoint of the Estimated Valuation Range, the MRP Trust is expected to purchase
up to 6,000 shares of common stock.
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RESTRICTIONS ON STOCK BENEFIT PLANS. OTS regulations provide that in the
event we implement stock option or management and/or employee stock benefit
plans within one year from the date of conversion, such plans must comply with
the following restrictions: (1) the plans must be fully disclosed in the
prospectus, (2) for stock option plans, the total number of shares for which
options may be granted may not exceed 10% of the shares issued in the
conversion, (3) for restricted stock plans such as the MRP, the shares may not
exceed 3% of the shares issued in the conversion (4% for institutions with 10%
or greater tangible capital), (4) the aggregate amount of stock purchased by the
ESOP in the conversion may not exceed 10% (12% for well-capitalized institutions
utilizing a 4% management recognition plan), (5) no individual employee may
receive more than 25% of the available awards under the Option Plan or the MRP,
(6) directors who are not employees may not receive more than 5% individually or
30% in the aggregate of the awards under any plan, (7) all plans must be
approved by a majority of the total votes eligible to be cast at any duly called
meeting of the Company's stockholders held no earlier than six months following
the conversion, (8) for stock option plans, the exercise price must be at least
equal to the market price of the stock at the time of grant, (9) for restricted
stock plans such as the MRP, no stock issued in a conversion may be used to fund
the plan, (10) neither stock option awards nor restricted stock awards may vest
earlier than 20% as of one year after the date of stockholder approval and 20%
per year thereafter, and vesting may be accelerated only in the case of
disability or death (or if not inconsistent with applicable OTS regulations in
effect at such time, in the event of a change in control), (11) the proxy
material must clearly state that the OTS in no way endorses or approves of the
plans, and (12) prior to implementing the plans, all plans must be submitted to
the Regional Director of the OTS within five days after stockholder approval
with a certification that the plans approved by the stockholders are the same
plans that were filed with and disclosed in the proxy materials relating to the
meeting at which stockholder approval was received.
We have not yet decided whether the Option Plan or the MRP will be
implemented during the first year after the conversion. If they are implemented
after the first anniversary of the conversion, the above-described limitations
and provisions will not apply.
CERTAIN RELATED TRANSACTIONS
During the year ended December 31, 1997, certain of our officers and
directors had loans from us in amounts exceeding $60,000. All of such loans
were made in the ordinary course of business, were made on substantially the
same terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with other persons and did not involve more
than the normal risk of collectibility or present other unfavorable features.
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RESTRICTIONS ON ACQUISITIONS OF THE COMPANY
The following discussion is a general summary of the material provisions of
the certificate of incorporation and bylaws of the Company and certain other New
York corporate law and regulatory provisions, which may be deemed to have such
an anti-takeover effect. The description of these provisions is necessarily
general and we refer you, in each case, to the certificate of incorporation and
bylaws of the Company which are incorporated herein by reference. See
"Available Information" as to how to obtain a copy of these documents.
While the board of directors is not aware of any effort that might be made
to obtain control of the Company after conversion, the board of directors
believes that it is appropriate to include certain provisions as part of the
Company's certificate of incorporation and bylaws to protect the interests of
the Company and its stockholders from hostile takeovers ("anti-takeover"
provisions) which the board of directors might conclude are not in the best
interests of us or our stockholders. These provisions may have the effect of
discouraging a future takeover attempt which is not approved by the board of
directors but which individual stockholders may deem to be in their best
interests or in which stockholders may receive a substantial premium for their
shares over the current market prices. As a result, stockholders who might
desire to participate in such a transaction may not have an opportunity to do
so. Such provisions will also render the removal of the current board of
directors or management of the Company more difficult.
PROVISIONS OF THE COMPANY'S CERTIFICATE OF INCORPORATION AND BYLAWS
RESTRICTION ON ACQUISITION OF COMMON STOCK; LIMITATIONS ON VOTING RIGHTS.
The certificate of incorporation of the Company provides that, for a period of
five years after completion of the conversion, no person may directly or
indirectly, acquire or offer to acquire beneficial ownership of more than 10% of
any class of equity security outstanding of the Company (the "Limit"), unless
the "continuing" board of directors has first approved by a two-thirds vote the
offer or acquisition. Any shares acquired in violation of this restriction will
not be counted as shares outstanding for voting purposes, nor will the holder be
entitled to vote such shares. After five years from the date of conversion,
should any party acquire the beneficial ownership of shares in excess of 10%,
the record holders of more than 10% of any outstanding class of equity security
of the Company who obtained such shares without the requisite approval would be
entitled to cast only one-hundredth (1/100) of a vote for each share owned in
excess of 10%, and the aggregate voting power of such holders shall be allocated
proportionately among such record holders. A person is a beneficial owner of a
security if he has the power to vote or direct the voting of all or part of the
voting rights of the security, or has the power to dispose of or direct the
disposition of the security. The certificate of incorporation of the Company
further provides that this provision limiting voting rights may only be amended
upon the vote of 80% of the outstanding shares of voting stock.
ELECTION OF DIRECTORS. The Company's certificate of incorporation provides
that the board of directors of the Company will be divided into three staggered
classes, with directors in each class elected for three-year terms. As a result
of this provision, it would take two annual elections to
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replace a majority of the Company's board. The Company's bylaws provide that the
size of the board of directors may be increased or decreased only if two-thirds
of the directors then in office concur in such action. The certificate of
incorporation also provides that any vacancy occurring in the board of
directors, including a vacancy created by an increase in the number of
directors, shall be filled by the board. 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 at least 80% of the shares of the
Company entitled to vote generally in an election of directors cast at a meeting
of stockholders called for that purpose.
RESTRICTIONS ON CALL OF SPECIAL MEETING. The certificate of incorporation
of the Company provides that a special meeting of stockholders may be called
only pursuant to a resolution adopted by a majority of the board of directors,
or a Committee of the board.
ABSENCE OF CUMULATIVE VOTING. The Company's certificate of incorporation
provides that stockholders may not cumulate their votes in the election of
directors.
AUTHORIZED SHARES. The certificate of incorporation authorizes the issuance
of 3,000,000 shares of common stock and 500,000 shares of preferred stock. The
shares of common stock and preferred stock were authorized in an amount greater
than that to be issued in the conversion to provide the Company's board of
directors with as much flexibility as possible to effect, among other
transactions, financings, acquisitions, stock dividends, stock splits and the
exercise of stock options. However, these additional authorized shares may also
be used by the board of directors consistent with its fiduciary duty to deter
future attempts to gain control of the Company. The board of directors also has
sole authority to determine the terms of any one or more series of Preferred
Stock, including voting rights, conversion rates, and liquidation preferences.
As a result of the ability to fix voting rights for a series of Preferred Stock,
the board has the power, to the extent consistent with its fiduciary duty, to
issue a series of Preferred Stock to persons friendly to management in order to
attempt to block a post-tender offer merger or other transaction by which a
third party seeks control, and thereby assist management to retain its position.
The Company's board currently has no plans for the issuance of additional
shares, other than the possible issuance of additional shares pursuant to stock
benefit plans .
PROCEDURES FOR CERTAIN BUSINESS COMBINATIONS. The certificate of
incorporation requires the affirmative vote of at least 80% of the outstanding
shares of the Company entitled to vote in the election of director in order for
the Company to engage in or enter into certain "Business Combinations," as
defined therein, with any "Interested Shareholder" (as defined below) or any
affiliates of the "Interested Shareholder", unless the proposed transaction has
been approved in advance by the Company's board of directors, excluding those
who were not directors prior to the time the "Interested Shareholder" became the
"Interested Shareholder." Absent this provision, only the approval of a
majority of the shares outstanding would be required.
79
<PAGE>
The term "Interested Shareholder" is defined to include any person and the
affiliates and associates of the person (other than the Company or its
subsidiary) who beneficially owns, directly or indirectly, 10% or more of the
outstanding shares of voting stock of the Company. Any amendment to this
provision requires the affirmative vote of at least 80% of the shares of the
Company entitled to vote generally in an election of directors.
AMENDMENT TO CERTIFICATE OF INCORPORATION AND BYLAWS. Amendments to the
Company's certificate of incorporation must be approved by the Company's board
of directors and also by a majority of the outstanding shares of the 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 relating to restrictions on the acquisition and voting of greater
than 10% of the common stock; number, classification, election and removal of
directors; amendment of Bylaws; call of special stockholder meetings; 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 the holders of at least 80% of the outstanding shares of
the Company entitled to vote in the election of directors cast at a meeting
called for that purpose.
NEW YORK BUSINESS CORPORATION ACT
The New York Business Corporation Law contains two provisions described
below which will be applicable to the Company upon completion of the
conversion.
BUSINESS COMBINATION STATUTE. The New York Business Corporation Law
restricts for a period of five years a domestic corporation from engaging in a
business combination with an "interested shareholder" of the corporation unless
such business combination or the stock acquisition that resulted in the
interested shareholder achieving such status was approved by the board of
directors of such corporation prior to the subject stockholder's stock
acquisition date. The statute also restricts a corporation from engaging in a
business combination with an interested shareholder at any time other than (i) a
business combination approved by the board of directors prior to the interested
shareholder's stock acquisition date, (ii) a business combination approved by
the majority of the outstanding shares not owned by such stockholder but no
earlier than five years after the date of such stockholder's stock acquisition
date, or (iii) a business combination that satisfies certain "fair price"
provisions and other requirements. Under New York law, this statute is
applicable to all New York corporations with a class of securities registered
pursuant to the Exchange Act unless the corporation adopts a specific bylaw
provision opting out of its coverage. The common stock will be registered
pursuant to the Exchange Act and the bylaws do not contain any provision opting
out of its coverage.
80
<PAGE>
ANTI-GREENMAIL PROVISION. Pursuant to New York law, the Company will be
prohibited from repurchasing ten percent or more of its shares from a
stockholder for more than the market value thereof unless such repurchase has
been approved by a majority vote of the outstanding shares or such stockholder
has held such shares for more than two years.
BENEFIT PLANS
In addition to the provisions of the Company's certificate of incorporation
and bylaws described above, certain benefit plans of ours adopted in connection
with the conversion contain provisions which also may discourage hostile
takeover attempts which the boards of directors might conclude are not in the
best interests for us or our stockholders. For a description of the benefit
plans and the provisions of such plans relating to changes in control, see
"Management of Ogdensburg Federal Savings and Loan Association -- Proposed
Future Stock Benefit Plans."
REGULATORY RESTRICTIONS
For three years following conversion, OTS regulations prohibit 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% 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 a vote of 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, 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. Control in this context means ownership of, control of, or
holding proxies representing more than 25% of the voting shares of a savings
association or the power to control in any manner the election of a majority of
the directors of such institution.
Federal law also provides that no "person," acting directly or indirectly
or through or in concert with one or more other persons, may acquire control of
a savings association unless at least 60 days prior written notice has been
given to the OTS and the OTS has not objected to the proposed acquisition.
Control is defined for this purpose as the power, directly or indirectly, to
direct the management or policies of a savings association or to vote more than
25% of any class of voting securities of a savings association. Under federal
law (as well as the regulations referred to below) the term "savings
association" includes state-chartered and federally chartered SAIF-insured
institutions, federally chartered savings and loans and savings banks whose
accounts are insured by the FDIC and holding companies thereof.
81
<PAGE>
Federal regulations require that, prior to obtaining control of an insured
institution, a person, other than a company, must give 60 days notice to the OTS
and have received no OTS objection to such acquisition of control, and a company
must apply for and receive OTS approval of the acquisition. Control, involves a
25% voting stock test, control in any manner of the election of a majority of
the institution'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 an institution's voting stock, if the acquiror also is subject
to any one of either "control factors," constitutes a rebuttable determination
of control under the regulations. 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 after the
effective date of the regulations 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.
DESCRIPTION OF CAPITAL STOCK
The Company is authorized to issue 3,000,000 shares of the common stock,
$0.01 par value per share, and 500,000 shares of preferred stock, $0.01 par
value per share. The Company currently expects to issue up to 198,375 shares of
common stock in the conversion. The Company does not intend to issue any shares
of preferred stock in the conversion, nor are there any present plans to issue
such preferred stock following the conversion. Each share of common stock will
have the same relative rights as, and will be identical in all respects with,
each other share of common stock. THE COMMON STOCK OF THE COMPANY WILL
REPRESENT NONWITHDRAWABLE CAPITAL AND WILL NOT BE INSURED BY US, THE FDIC, OR
ANY OTHER GOVERNMENT AGENCY.
COMMON STOCK
VOTING RIGHTS. Each share of the common stock will have the same relative
rights and will be identical in all respects with every other share of the
common stock. The holders of the common stock will possess exclusive voting
rights in the Company, except to the extent that shares of Preferred Stock
issued in the future may have voting rights, if any. Each holder of the common
stock will be entitled to only one vote for each share held of record on all
matters submitted to a vote of holders of the common stock and will not be
permitted to cumulate their votes in the election of the Company's directors.
LIQUIDATION. In the unlikely event of the complete liquidation or
dissolution of the Company, the holders of the common stock will be entitled to
receive all assets of the Company available for distribution in cash or in kind,
after payment or provision for payment of (i) all debts and liabilities
82
<PAGE>
of the Company (including all deposits with us and accrued interest thereon);
(ii) any accrued dividend claims; (iii) liquidation preferences of any preferred
stock which may be issued in the future; and (iv) any interests in the
liquidation account established upon the conversion for the benefit of Eligible
Account Holders and Supplemental Eligible Account Holders who continue to have
their deposits with us.
DIVIDENDS. From time to time, dividends may be declared and paid to the
holders of the common stock, who will share equally in any such dividends. For
information about cash dividends, see "Dividends" and "Taxation."
RESTRICTIONS ON ACQUISITION OF THE COMMON STOCK. See "Restrictions on
Acquisition of the Company" for a discussion of the limitations on acquisition
of shares of the common stock.
OTHER CHARACTERISTICS. Holders of the common stock will not have preemptive
rights with respect to any additional shares of the common stock which may be
issued. Therefore, the board of directors may sell shares of capital stock of
the Company without first offering such shares to existing stockholders of the
Company. The common stock is not subject to call for redemption, and the
outstanding shares of common stock when issued and upon receipt by the Company
of the full purchase price therefor will be fully paid and non-assessable,
except as set forth under "-- Possible Liability of Large Stockholders" below.
POSSIBLE LIABILITY OF LARGE STOCKHOLDERS. Under New York law, the ten
largest stockholders of a New York corporation, as determined by the fair value
of their stock, are jointly and severally liable for any unpaid wages due to the
corporation's laborers, servants or other employees. Corporations whose stock
is either listed on a national securities exchange or regularly quoted in an
over-the-counter market by one or more members of a national or any affiliated
securities association are exempt from this provision. Upon completion of the
Offering, the Company intends to list the common stock over-the-counter.
Trident Securities, Inc., a member of the National Association of Securities
Dealers has indicated that it will make a market in the common stock. Trident
Securities, Inc. is not obligated to do so, however, and may stop doing so at
any time. If the common stock of the Company is not either listed on a national
securities exchange or regularly quoted in an over-the-counter market, the ten
largest stockholders of the Company would be personally liable in the event the
Company failed to pay wages due to laborers, servants or employees.
SERIAL PREFERRED STOCK
None of the 500,000 authorized shares of preferred stock of the Company will
be issued in the conversion. After the conversion is completed, the board of
directors of the Company will be authorized to issue serial preferred stock and
to fix and state voting powers, designations, preferences or other special
rights of such shares and the qualifications, limitations and restrictions
thereof, subject to regulatory approval but without stockholder approval. If
and when issued, the serial preferred stock is likely to rank prior to the
common stock as to dividend rights, liquidation preferences, or both, and may
have full or limited voting rights. The board of directors, without
83
<PAGE>
stockholder approval, can issue serial preferred stock with voting and
conversion rights which could adversely affect the voting power of the holders
of the common stock. The board of directors has no present intention to issue
any of the serial preferred stock.
LEGAL AND TAX MATTERS
The legality of the common stock has been passed upon for us by Housley
Kantarian & Bronstein, P.C., Washington, D.C. Certain legal matters for
Trident Securities may be passed upon by Malizia, Spidi, Sloane & Fisch, P.C.,
Washington, D.C. The federal income tax consequences of the conversion have
been passed upon for us by Housley Kantarian & Bronstein, P.C., Washington, D.C.
The New York income tax consequences of the conversion have been passed upon for
us by Silver and Silver, Morristown, New York.
EXPERTS
The financial statements of Ogdensburg Federal Savings and Loan Association
as of December 31, 1997 and 1996, and for the years then ended, have been
included herein and the registration statement filed with the SEC in reliance
upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, appearing elsewhere herein, and upon the authority of said firm as
experts in accounting and auditing.
Feldman has consented to the publication herein of a summary of its letters
to us setting forth its opinion as to the estimated pro forma market value of us
in the converted form and its opinion setting forth the value of subscription
rights and to the use of its name and statements with respect to it appearing in
this document.
ADDITIONAL INFORMATION
The Company has filed with the SEC a registration statement on Form SB-2
under the Securities Act of 1933, as amended, with respect to the common stock
offered in this document. As permitted by the rules and regulations of the SEC,
this document 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,
D.C. 20549, and copies of such material can be obtained from the SEC at
prescribed rates. The SEC also maintains an internet address ("Web site") that
contains reports, proxy and information statements and other information
regarding registrants, including the Company, that file electronically with the
SEC. The address for this Web site is "http: //www. sec. gov." The statements
contained in this document as to the contents of any contract or other document
filed as an exhibit to the Form SB-2 describe the material features of such
contract or document but are, of necessity, brief descriptions
84
<PAGE>
and are not necessarily complete; each such statement is qualified by reference
to such contract or document.
Ogdensburg Federal Savings and Loan 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 document omits certain information contained in
that Application. The Application may be examined at the principal office of
the OTS, 1700 G Street, N.W., Washington, D.C. 20552 and at the Northeast
Regional Office of the OTS, 10 Exchange Place, 18th Floor, Jersey City, New
Jersey 07302 without charge.
A copy of the certificate of incorporation and the bylaws of the Company
are available without charge from Ogdensburg Federal Savings and Loan
Association.
85
<PAGE>
OGDENSBURG FEDERAL SAVING AND LOAN ASSOCIATION
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report F-2
Statements of Financial Condition as of June 30, 1998 (unaudited) and
December 31, 1997 and 1996 F-3
Statements of Income for the Six Months Ended June 30, 1998 and 1997
(unaudited) and the Years Ended December 31, 1997 and 1996 F-4
Statements of Equity for the Six Months Ended June 30, 1998 (unaudited)
and the Years Ended December 31, 1997 and 1996 F-5
Statements of Cash Flows for the Six Months Ended June 30, 1998 and 1997
(unaudited) and the Years Ended December 31, 1997 and 1996 F-6
Notes to Financial Statements F-8
</TABLE>
All financial statement schedules are omitted because the required information
is either not applicable or is included in the financial statements or related
notes.
Separate financial statements for the Company have not been included since it
will not engage in material transactions until after the conversion. The
Company, which has been inactive to date, has no significant assets,
liabilities, revenues, expenses or contingent liabilities.
F-1
<PAGE>
[LETTERHEAD OF PEAT MARWICK LLP APPEARS HERE]
Independent Auditors' Report
The Board of Directors
Ogdensburg Federal Savings and Loan Association:
We have audited the accompanying statements of financial condition of Ogdensburg
Federal Savings and Loan Association as of December 31, 1997 and 1996, and the
related statements of income, equity and cash flows for the years then ended.
These financial statements are the responsibility of the Bank'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 audit 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 financial statements referred to above present fairly, in
all material respects, the financial position of Ogdensburg Federal Savings and
Loan Association as of December 31, 1997 and 1996, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
July 24, 1998
F-2
<PAGE>
OGDENSBURG FEDERAL SAVINGS AND LOAN ASSOCIATION
Statements of Financial Condition
(In thousands)
<TABLE>
<CAPTION>
December 31,
June 30, --------------------
Assets 1998 1997 1996
---- ---- ----
(unaudited)
<S> <C> <C> <C>
Cash and due from banks $ 622 674 671
Interest-bearing deposits with other banks 617 553 900
Securities available-for-sale, at fair value -- 737 804
Securities held-to-maturity (fair value of $3,552 (unaudited)
in 1998, $4,038 in 1997 and $3,572 in 1996) 3,546 4,031 3,561
Loans, net of deferred fees 18,863 16,832 15,475
Less allowance for loan losses 165 164 116
------- ------- -------
Net loans 18,698 16,668 15,359
Premises and equipment, net 426 434 455
Federal Home Loan Bank stock, at cost 139 137 136
Accrued interest receivable 150 125 92
Real estate owned 40 40 --
Other assets 9 3 20
------- ------- -------
Total assets $ 24,247 23,402 21,998
======= ======= =======
Liabilities and Equity
Liabilities:
Deposits:
Demand accounts 735 638 470
Savings and club accounts 3,131 2,733 2,687
Time certificates 16,519 16,306 15,358
NOW and money market accounts 1,971 2,088 1,974
------- ------- -------
Total deposits 22,356 21,765 20,489
Advance payments by borrowers for property
taxes and insurance 3 3 5
Other liabilities 240 57 27
------- ------- -------
Total liabilities 22,599 21,825 20,521
------- ------- -------
Commitments and contingencies (note 11)
Equity:
Retained earnings 1,648 1,576 1,488
Accumulated other comprehensive income -- 1 (11)
------- ------- -------
Total equity 1,648 1,577 1,477
------- ------- -------
Total liabilities and equity $ 24,247 23,402 21,998
======= ======= =======
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
OGDENSBURG FEDERAL SAVINGS AND LOAN ASSOCIATION
Statements of Income
(In thousands)
<TABLE>
<CAPTION>
Six-months
ended Years ended
June 30, December 31,
------------ -------------
1998 1997 1997 1996
---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C>
Interest income:
Loans $ 727 645 1,330 1,266
Securities 127 132 277 260
Other short-term investments 28 35 55 66
----- --- ----- -----
Total interest income 882 812 1,662 1,592
----- --- ----- -----
Interest expense:
Deposits 522 477 998 954
Borrowings -- -- -- 1
----- --- ----- -----
Total interest expense 522 477 998 955
----- --- ----- -----
Net interest income 360 335 664 637
Provision for loan losses 3 -- 57 --
----- --- ----- -----
Net interest income after provision
for loan losses 357 335 607 637
----- --- ----- -----
Non-interest income:
Service charges 14 11 30 14
Net gain on sale of securities 1 -- -- --
Other 7 9 14 16
----- --- ----- -----
Total non-interest income 22 20 44 30
----- --- ----- -----
Non-interest expenses:
Salaries and employee benefits 140 128 258 258
Directors fees 22 20 39 36
Building, occupancy and equipment 27 32 73 59
Data processing 15 14 28 27
Postage and supplies 12 8 25 23
Deposit insurance premium 7 4 11 174
Insurance 5 7 17 14
Other 53 37 74 65
----- --- ----- -----
Total non-interest expenses 281 250 525 656
----- --- ----- -----
Income before income tax expense 98 105 126 11
Income tax expense 26 28 38 3
----- --- ----- -----
Net income $ 72 77 88 8
===== === ===== =====
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
OGDENSBURG FEDERAL SAVINGS AND LOAN ASSOCIATION
Statements of Equity
Six-months ended June 30, 1998 and
years ended December 31, 1997 and 1996
(In thousands)
<TABLE>
<CAPTION>
Accumulated
Other
Retained Comprehensive
Earnings Income Total
-------- ------ -----
<S> <C> <C> <C>
Balance at December 31, 1995 $1,480 1 1,481
Comprehensive income:
Change in net unrealized gain (loss) on
securities, net of tax and
reclassification adjustment -- (12) (12)
Net income 8 -- 8
------ ------ -----
Comprehensive income 8 (12) (4)
------ ------ -----
Balance at December 31, 1996 1,488 (11) 1,477
Comprehensive income:
Change in net unrealized gain (loss) on
securities, net of tax and
reclassification adjustment -- 12 12
Net income 88 -- 88
------ ------ -----
Comprehensive income 88 12 100
------ ------ -----
Balance at December 31, 1997 1,576 1 1,577
Comprehensive income:
Change in net unrealized gain (loss) on
securities, net of tax and
reclassification adjustment (unaudited) -- (1) (1)
Net income (unaudited) 72 -- 72
------ ------ -----
Comprehensive income 72 (1) 71
------ ------ -----
Balance at June 30, 1998 (unaudited) $1,648 -- 1,648
====== ====== =====
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
OGDENSBURG FEDERAL SAVINGS AND LOAN ASSOCIATION
Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
Six-months
ended Years ended
June 30, December 31,
-------------------- -------------------
1998 1997 1997 1996
---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 72 77 88 8
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 8 10 21 22
(Increase) decrease in accrued interest receivable (25) -- (33) 3
Provision for loan losses 3 -- 57 --
Net gains on sales of securities (1) -- -- --
Net amortization (accretion) of
premiums/discounts (56) (99) (196) (186)
Increase in other liabilities 177 32 39 25
Deferred income taxes 6 5 (14) (10)
(Increase) decrease in other assets (6) 13 17 (16)
------- ------ ------ ------
Net cash provided (used) by operating
activities 178 38 (21) (154)
------- ------ ------ ------
Cash flows from investing activities:
Net increase in loans (2,033) (447) (1,406) (498)
Proceeds from sales of securities available-for-sale 712 -- -- --
Proceeds from maturities and principal
reductions of securities available-for-sale 18 19 83 87
Purchases of securities held-to-maturity (2,957) (3,882) (8,796) (6,952)
Proceeds from maturities and principal
reductions of securities held-to-maturity 3,505 3,513 8,523 8,007
Purchase of FHLB stock (2) (1) (1) (5)
------- ------ ------ ------
Net cash provided (used) by
investing activities (757) (798) (1,597) 639
------- ------ ------ ------
Cash flows from financing activities:
Increase in deposits 591 738 1,276 922
Decrease in advance payments by
borrowers for property taxes and insurance -- (2) (2) (31)
Borrowing from FHLB -- -- -- 200
Repayment to FHLB -- -- -- (200)
------- ------ ------ ------
Net cash provided by financing activities 591 736 1,274 891
------- ------ ------ ------
Net increase (decrease) in cash and cash equivalents 12 (24) (344) 1,376
Cash and cash equivalents at beginning of period 1,227 1,571 1,571 195
------- ------ ------ ------
Cash and cash equivalents at end of period $ 1,239 1,547 1,227 1,571
======= ====== ====== ======
</TABLE>
F-6
<PAGE>
OGDENSBURG FEDERAL SAVINGS AND LOAN ASSOCIATION
Statements of Cash Flows, Continued
(In thousands)
<TABLE>
<CAPTION>
Six-months
ended Years ended
June 30, December 31,
-------------- -------------
1998 1997 1997 1996
---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C>
Supplemental disclosure of cash flow
information:
Non-cash investing activities:
Additions to real estate owned $ - - 40 -
Cash paid during the period for:
Interest 522 477 998 955
Income taxes 24 - - 28
==== === === ===
</TABLE>
See accompanying notes to financial statements.
F-7
<PAGE>
OGDENSBURG FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements
Six-Months Ended June 30, 1998 and 1997 (unaudited) and
years ended December 31, 1997 and 1996
(1) Business
Ogdensburg Federal Savings and Loan Association (the "Bank") is organized
under the laws of the United States. The Bank is subject to regulation by
the Office of Thrift Supervision (OTS) as a mutual savings and loan
association. The Bank's lending activity is concentrated in St. Lawrence
County and surrounding areas.
(2) Summary of Significant Accounting Policies
(a) Basis of Presentation
The statements of financial condition as of June 30, 1998 and the
related statements of income and cash flows for the six-month periods
ended June 30, 1998 and 1997 and changes in equity for the six-month
period ended June 30, 1998 are unaudited and, in the opinion of
management, all adjustments (consisting of normal recurring accruals)
necessary for a fair presentation as of June 30, 1998 and for the
results for the unaudited periods have been made.
The financial statements have been prepared in conformity with
generally accepted accounting principles. Certain prior year amounts
have been reclassified to conform to the current year's
classifications. A description of the significant accounting policies
is presented below. In preparing the financial statements, management
is required to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities as of the date of the balance sheet and revenues and
expenses for the period. Actual results could differ from those
estimates.
(b) Cash and Cash Equivalents
Cash and cash equivalents include vault cash, amounts due from banks
which represents short-term highly liquid investments.
(c) Securities
The Bank classifies its debt securities as either available-for-sale
or held-to-maturity as the Bank does not hold any securities
considered to be trading. Held-to-maturity securities are those debt
securities the Bank has the ability and intent to hold until maturity.
All other debt securities are classified as available-for-sale.
Available-for-sale securities are recorded at fair value.
Held-to-maturity securities are recorded at amortized cost. Unrealized
holding gains and losses, net of the related tax effect, on
available-for-sale securities are excluded from earnings and reported
as a separate component of equity until realized. Transfers of
securities between categories are recorded at fair value at the date
of transfer.
F-8
<PAGE>
OGDENSBURG FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements, Continued
(2) Summary of Significant Accounting Policies, Continued
(c) Securities, Continued
A decline in the fair value of an available-for-sale or
held-to-maturity security that is deemed to be other than temporary
results in a charge to earnings resulting in the establishment of a
new cost basis for the security.
Premiums and discounts are amortized or accreted over the life of the
related security as an adjustment to yield using the interest method.
Dividend and interest income are recognized when earned. Realized
gains and losses on securities are included in earnings and are
calculated using the specific identification method, for determining
the cost of the securities sold.
(d) Loans
Loans are reported at the principal amount outstanding, net of
deferred fees. Fees and certain direct origination costs related to
lending activities are recognized using the interest method over the
contractual lives of the loans. Management has the ability and intent
to hold its loans to maturity.
Interest on loans is accrued and included in income at contractual
rates applied to the principal outstanding. The accrual of interest on
loans (including impaired loans) is generally discontinued and
previously accrued interest is reversed or an allowance is established
when loan payments are 90 days or more past due or when, by the
judgment of management, collectibility becomes uncertain. The
allowance is established by a charge to interest income equal to all
interest previously accrued. Subsequent recognition of income occurs
only to the extent that payment is received. Loans are returned to an
accrual status when both principal and interest are current and the
loan is determined to be performing in accordance with the applicable
loan terms.
(e) Allowance for Loan Losses
The allowance for loan losses consists of the provision charged to
operations based upon past loan loss experience, management's
evaluation of the loan portfolio under current economic conditions and
such other factors that require current recognition in estimating loan
losses. Loan losses and recoveries of loans previously written-off are
charged or credited to the allowance as incurred or realized,
respectively.
Management believes that the allowance for loan losses is adequate.
Management uses presently available information to recognize losses on
loans; however, future additions to the allowance may be necessary
based on changes in economic conditions. In addition, various
regulatory agencies, as an integral part of their examination process,
periodically review the Bank's allowance for loan losses and may
require the Bank to recognize additions to the allowance based on
their judgment of information available to them at the time of their
examination.
F-9
<PAGE>
OGDENSBURG FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements, Continued
(2) Summary of Significant Accounting Policies, Continued
(e) Allowance for Loan Losses, Continued
The Bank estimates losses on impaired loans based on the present value
of expected future cash flows (discounted at the loan's effective
interest rate) or the fair value of the underlying collateral if the
loan is collateral dependent. An impairment loss exists if the
recorded investment in a loan exceeds the value of the loan as
measured by the aforementioned methods. A loan is considered impaired
when it is probable that the Bank will be unable to collect all
amounts due according to the contractual terms of the loan agreement.
Generally, all commercial mortgage loans and commercial loans in a
delinquent payment status (90 days or more delinquent) are considered
impaired. Residential mortgage loans, consumer loans and home equity
lines of credit are evaluated collectively since they are homogenous
and generally carry smaller individual balances. Impairment losses are
included as a component of the allowance for loan losses. The Bank
recognizes interest income on impaired loans using the cash basis of
income recognition. Cash receipts on impaired loans are generally
applied according to the terms of the loan agreement, or as a
reduction of principal, based upon management judgment and the related
factors discussed above.
(f) Real Estate Owned
Real estate acquired in settlement of loans is carried at the lower of
the unpaid loan balance or fair value less estimated costs to sell.
Write-downs from the unpaid loan balance to fair value at the time of
foreclosure are charged to the allowance for loan losses. Subsequent
write-downs to fair value, net of disposal costs, are charged to other
expenses.
(g) Premises and Equipment
Land is carried at cost and buildings and improvements and furniture
and equipment are carried at cost less accumulated depreciation and
amortization. Depreciation is computed on the straight-line method
over the estimated useful lives of the assets (10-36 years for
building and improvements; 5-7 years for furniture and equipment).
(h) Employee Benefit Plans
The Bank has a non-contributory multiemployer pension plan which
participates in the Financial Institutions Retirement Fund. All full
time employees are covered by the plan.
The Bank has a defined contribution 401(k) Plan (the Plan) for all
eligible salaried employees. Employees are permitted to contribute up
to 15% of base pay to the Plan, subject to certain limitations. The
Bank matches each employee's contribution up to 5%.
F-10
<PAGE>
OGDENSBURG FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements, Continued
(2) Summary of Significant Accounting Policies, Continued
(i) Income Taxes
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income
in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in the period that
includes the enactment date.
(j) Comprehensive Income
On January 1, 1998, the Bank adopted the provisions of Statement of
Financial Accounting Standards No. 130, Reporting Comprehensive
Income. This statement establishes standards for reporting and display
of comprehensive income and its components. Comprehensive income
includes the reported net income of a bank adjusted for items that are
currently accounted for as direct entries to equity, such as the mark
to market adjustment on securities available for sale, foreign
currency items and minimum pension liability adjustments. At the Bank,
comprehensive income represents net income plus other comprehensive
income, which consists of the net change in unrealized gains or losses
on securities available for sale for the period. Accumulated other
comprehensive income represents the net unrealized gains or losses on
securities available for sale as of the balance sheet dates.
Comprehensive income for the six-month periods ended June 30, 1998 and
1997 (unaudited) was $71,000 and $81,000, respectively.
The following summarizes the components of other comprehensive income
(in thousands):
<TABLE>
<CAPTION>
Six-months
ended Years ended
June 30, December 31,
------------ ------------
1998 1997 1997 1996
---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C>
Other comprehensive income, before tax:
Net unrealized holding gain (loss) on
securities $ -- -- 17 (17)
Reclassification adjustment for (gains)
losses included in net income (1) -- -- --
----- ----- ----- -----
Other comprehensive income, before tax (1) -- 17 (17)
Income tax expense related to items of
other comprehensive income -- -- 5 (5)
----- ----- ----- -----
Other comprehensive income,
net of tax $ (1) -- 12 (12)
===== ===== ===== =====
</TABLE>
F-11
<PAGE>
OGDENSBURG FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements, Continued
(2) Summary of Significant Accounting Policies, Continued
(k) Financial Instruments With Off-Balance Sheet Risk
The Bank does not engage in the use of derivative financial
instruments. The Bank's off-balance sheet financial instruments are
limited to commitments to extend credit.
(l) New Accounting Standards
Effective January 1, 1998, the Bank adopted the remaining provisions
of Statement of Financial Accounting Standards ("SFAS") No. 125,
Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities, which relate to the accounting for
securities lending, repurchase agreements, and other secured financing
activities. These provisions, which were delayed for implementation by
SFAS No. 127, are not expected to have a material impact on the Bank.
(3) Securities
Securities are summarized as follows (in thousands):
<TABLE>
<CAPTION>
June 30, 1998
-------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
(unaudited)
<S> <C> <C> <C> <C>
Held-to-maturity:
U.S. Government securities $ 3,482 3 4 3,481
Mortgage-backed securities - GNMA 64 7 -- 71
------- ------ ------- -------
$ 3,546 10 4 3,552
======= ====== ======= =======
</TABLE>
<TABLE>
<CAPTION>
December 31, 1997
------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
<S> <C> <C> <C> <C>
Available-for-sale:
Mortgage-backed securities - GNMA $ 736 1 -- 737
------- ----- ------ -----
$ 736 1 -- 737
======= ===== ====== =====
Held-to-maturity:
U.S. Government securities $ 3,962 3 3 3,962
Mortgage-backed securities - GNMA 69 7 -- 76
------- ----- ------ -----
$ 4,031 10 3 4,038
======= ===== ====== =====
</TABLE>
F-12
<PAGE>
OGDENSBURG FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements, Continued
(3) Securities, Continued
<TABLE>
<CAPTION>
December 31, 1996
----------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
<S> <C> <C> <C> <C>
Available-for-sale:
Mortgage-backed securities - GNMA $ 820 -- 16 804
-------- ----- ----- ------
$ 820 -- 16 804
======== ===== ===== ======
Held-to-maturity:
U.S. Government securities $ 3,470 -- 1 3,469
Mortgage-backed securities - GNMA 91 12 -- 103
-------- ----- ----- ------
$ 3,561 12 1 3,572
======== ===== ===== ======
</TABLE>
The following table presents the carrying value and fair value of securities
based on the earlier of call or maturity date at June 30, 1998 (unaudited):
<TABLE>
<CAPTION>
Amortized Fair
Cost Value
---- -----
(In thousands)
<S> <C> <C>
Held-to-maturity:
Due within one year $ 1,482 1,482
Due after one year through five years 2,000 1,999
Due after ten years 64 71
------ -------
$ 3,546 3,552
====== =======
</TABLE>
The following table presents the carrying value and fair value of securities
based on the earlier of call or maturity date at December 31, 1997:
<TABLE>
<CAPTION>
Amortized Fair
Cost Value
---- -----
(In thousands)
<S> <C> <C>
Available-for-sale:
Due after ten years $ 736 737
------ -------
$ 736 737
====== =======
Held-to-maturity:
Due within one year 2,962 2,959
Due after one year through five years 1,000 1,003
Due after ten years 69 76
------ -------
$ 4,031 4,038
====== =======
</TABLE>
F-13
<PAGE>
OGDENSBURG FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements, Continued
(3) Securities, Continued
The amortized cost and fair value of mortgage-backed securities are
presented by contractual maturity in the preceding table. Expected
maturities will differ from contractual maturities because borrowers may
have the right to call or prepay obligations without call or prepayment
penalties.
Gross gains of $1,000 were realized on sales of available-for-sale
securities during the six months ended June 30, 1998 (unaudited). There
were no sales of securities during the six months ended June 30, 1997
(unaudited) or the years ended December 31, 1997 and 1996.
(4) Loans Receivable
Loans are summarized as follows (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
-------- ------------
1998 1997 1996
---- ---- ----
(unaudited)
<S> <C> <C> <C>
Mortgages:
One to four family residential $ 12,377 11,893 11,838
Commercial 726 706 553
Construction 199 67 115
------- ------- -------
13,302 12,666 12,506
Other loans:
Automobile 3,299 2,121 1,400
Home equity 1,061 1,226 903
Passbook 219 217 270
Commercial 200 100 --
Other 803 526 422
------- ------- -------
5,582 4,190 2,995
------- ------- -------
Total loans 18,884 16,856 15,501
Less:
Net deferred fees 21 24 26
------- ------- -------
$ 18,863 16,832 15,475
======= ======= =======
</TABLE>
Changes in the allowance for loan losses are summarized as follows (in
thousands):
<TABLE>
<CAPTION>
Six-months ended Years ended
June 30, December 31,
-------- ------------
1998 1997 1997 1996
---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C>
Balance at beginning of period $164 116 116 116
Provision charged to operations 3 -- 57 --
Recoveries 1 -- -- --
Loans charged off 3 2 9 --
---- ---- ---- ----
Balance at end of period $165 114 164 116
==== ==== ==== ====
</TABLE>
F-14
<PAGE>
OGDENSBURG FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements, Continued
(4) Loans Receivable, Continued
At June 30, 1998 (unaudited) and December 31, 1997, impaired loans totaled
$269,000 and $271,000, respectively with no related allowance for loan
losses as a result of cash flow analysis. Management believes it has no
impaired loans at December 31, 1996. The average recorded investment in
impaired loans was $270,000 and $0 during the six months ended June 30,
1998 and 1997 (unaudited), respectively and $23,000 and $0 during the years
ended December 31, 1997 and 1996, respectively. Interest income recognized
on impaired loans was $20,000 and $0 during the six months ended June 30,
1998 and 1997 (unaudited), respectively and $0 during the years ended
December 31, 1997 and 1996.
The principal balances of loans not accruing interest amounted to
approximately $303,000 (unaudited), $293,000 and $9,000 at June 30, 1998,
December 31, 1997 and 1996, respectively. The interest income foregone for
non-accruing loans was approximately $1,000 during the six months ended
June 30, 1998 and 1997 (unaudited) and $8,000 and $1,000 during the years
ended December 31, 1997 and 1996, respectively.
In the ordinary course of business, the Bank has and expects to continue to
have transactions, including borrowings, with its officers and directors.
In the opinion of management, such transactions were on substantially the
same terms, including interest rates and collateral, as those prevailing at
the time of comparable transactions with other persons and did not involve
more than a normal risk of collectibility or present any other unfavorable
features to the Bank. Loans to such borrowers at June 30, 1998, December
31, 1997 and 1996 were $579,000 (unaudited), $210,000 and $313,000,
respectively.
(5) Premises and Equipment
Premises and equipment are summarized as follows (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
-------- ------------
1998 1997 1996
---- ---- ----
(unaudited)
<S> <C> <C> <C>
Land $ 125 125 125
Buildings and improvements 429 429 429
Furniture and equipment 63 63 125
----- ---- -----
617 617 679
Less accumulated depreciation and amortization 191 183 224
----- ---- -----
$ 426 434 455
===== ==== =====
</TABLE>
Depreciation and amortization expense amounted to $8,000 and $10,000 during
the six months ended June 30, 1998 and 1997 (unaudited), respectively and
$21,000 and $22,000 during the years ended December 31, 1997 and 1996,
respectively.
F-15
<PAGE>
OGDENSBURG FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements, Continued
(6) Accrued Interest Receivable
Accrued interest receivable is summarized as follows (in thousands):
<TABLE>
<CAPTION>
December 31,
June 30, ---------------
1998 1997 1996
---- ---- ----
(unaudited)
<S> <C> <C> <C>
Loans $ 101 91 86
Securities 49 34 6
------ ----- -----
$ 150 125 92
====== ===== =====
</TABLE>
(7) Deposits
At June 30, 1998, December 31, 1997 and 1996, the aggregate amounts of time
deposits in denominations of $100,000 or more were approximately $1,680,000
(unaudited), $1,677,000 and $1,405,000, respectively. Deposit balances in
excess of $100,000 are not insured by the FDIC.
Contractual maturities of time certificates are summarized as follows (in
thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
---- ----
(unaudited)
<S> <C> <C>
Within one year $ 12,267 14,427
One through two years 3,658 1,339
Two through three years 420 381
Three through four years 160 155
Four through five years 14 4
------- -------
Total time certificates $ 16,519 16,306
======= =======
</TABLE>
Interest expense on deposits is summarized as follows (in thousands):
<TABLE>
<CAPTION>
Six-months ended Years ended
June 30, December 31,
------------- ------------
1998 1997 1997 1996
---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C>
Savings, club, and escrow accounts $ 40 39 79 86
Time certificates 465 420 883 832
NOW accounts and money
market accounts 17 18 36 36
---- ---- ---- ----
$ 522 477 998 954
==== ==== ==== ====
</TABLE>
F-16
<PAGE>
OGDENSBURG FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements, Continued
(8) Borrowings
The Bank is a member of the Federal Home Loan Bank of New York (FHLB). As a
member, the Bank is required to own capital stock in the FHLB and is
authorized to apply for advances from the FHLB. At June 30, 1998
(unaudited) and December 31, 1997 the Bank may borrow up to 30 percent of
total assets.
During the six-month period ended June 30, 1998 (unaudited) and 1997 the
Bank did not hold borrowings with the FHLB. During 1996 the Bank borrowed
$200,000 which was repaid prior to December 31, 1996.
(9) Income Taxes
Income taxes were allocated as follows (in thousands):
<TABLE>
<CAPTION>
Six-months ended Years ended
June 30, December 31,
------------- ------------
1998 1997 1997 1996
---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C>
Income before income tax
expense $ 26 28 38 3
Changes in equity, for
changes in unrealized gains
on securities -- -- 5 (5)
---- --- --- ----
$ 26 28 43 (2)
==== === === ====
</TABLE>
The components of income tax expense attributable to income from operations
are (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
--------------- ----------------
1998 1997 1997 1996
---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C>
Current:
Federal $ 15 20 46 7
State 5 3 6 6
--- --- --- ---
20 23 52 13
--- --- --- ---
Deferred:
Federal 4 3 (12) (6)
State 2 2 (2) (4)
--- --- --- ---
6 5 (14) (10)
--- --- --- ---
$ 26 28 38 3
=== === === ===
</TABLE>
F-17
<PAGE>
OGDENSBURG FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements, Continued
(9) Income Taxes, Continued
Actual tax expense attributable to income before income taxes differed from
"expected" tax expense, computed by applying the U.S. Federal statutory tax
rate of 34% to income before income tax as follows (in thousands):
<TABLE>
<CAPTION>
Six-months ended Years ended
June 30, December 31,
--------------- ---------------
1998 1997 1997 1996
---- ----- ---- ----
(unaudited)
<S> <C> <C> <C> <C>
Computed "expected" tax expense $ 33 36 43 4
Increase (decrease) in income
taxes resulting from:
State taxes, net of
Federal tax benefits 5 5 3 1
Benefit of Federal tax rates
below statutory rates (14) (13) (7) (2)
Other items, net 2 -- (1) --
------ ------ ----- ----
$ 26 28 38 3
====== ====== ===== ======
Effective tax rate 26.5% 26.7% 30.1% 27.3%
====== ====== ===== ======
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are (in
thousands):
<TABLE>
<CAPTION>
December 31,
June 30, -----------
1998 1997 1996
---- ---- ----
(unaudited)
<S> <C> <C> <C>
Deferred tax assets:
Allowance for loan losses $ 60 60 42
Net deferred loan fees 8 8 10
Accrued expenses 8 2 4
Unrealized losses on available-for-sale securities -- -- 5
Other 4 4 4
------ ----- -----
Total gross deferred tax assets 80 74 65
------ ----- -----
Deferred tax liabilities:
Accumulated depreciation on premises
and equipment 6 7 10
Accrued interest receivable 68 55 49
Prepaid expenses 1 -- --
Bad debt reserves in excess of base year reserve 14 15 18
------ ----- -----
Total gross deferred tax liabilities 89 77 77
------ ----- -----
Net deferred tax assets (liabilities) $ (9) (3) (12)
====== ===== =====
</TABLE>
F-18
<PAGE>
OGDENSBURG FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements, Continued
(9) Income Taxes, Continued
Realization of deferred tax assets is dependent upon the generation of
future taxable income or the existence of sufficient taxable income within
the carryback period. A valuation allowance is provided when it is more
likely than not that some portion of the deferred tax assets will not be
realized. In assessing the need for a valuation allowance, management
considers the scheduled reversal of the deferred tax liabilities, the level
of historical taxable income and projected future taxable income over the
periods in which the temporary differences comprising the deferred tax
assets will be deductible. Management believes that no valuation allowance
is necessary.
Included in retained earnings at June 30, 1998 (unaudited) and December 31,
1997 is approximately $426,000 representing aggregate provisions for loan
losses taken under the Internal Revenue Code. Use of these reserves to pay
dividends in excess of earnings and profits or to redeem stock, or if the
institution fails to qualify as a bank for Federal income tax purposes,
would result in taxable income to the Bank.
(10) Pension Plan
The Bank has a non-contributory multiemployer pension plan.
The Bank participates in the Financial Institutions Retirement Fund. The
Fund is a tax-qualified pension trust covering 319 participating employers.
Separate actuarial valuations are not made with respect to each employer.
All full-time employees of the Bank are covered by the plan. Statement of
Financial Accounting Standards (SFAS) No. 87, Employers' Accounting for
Pensions requires that in multiemployer plans, pension expense is equal to
contributions required each accounting period. During the six-months ended
June 30, 1998 (unaudited) and the years ended December 31, 1997 and 1996
the Bank was not required to make contributions to the plan and the expense
was $0.
The plan uses the projected unit credit cost method as its funding method.
The maximum number of years in which the initial past service liability
would be required to be paid off by any participating employer is 15.
Actuarial gains and losses are spread as a part of the valuation method.
The Bank adopted a 401(k) Plan effective January 1, 1994 covering all
full-time employees. The Bank matches an employee's contribution up to a
maximum of 5%. The expense for this Plan was $5,000 (unaudited) for the
six-months ended June 30, 1998 and 1997 and $10,000 and $8,000 for the
years ended December 31, 1997 and 1996, respectively.
The Bank is a party to financial instruments with off-balance sheet risk in
the normal course of business to meet the financing needs of its customers.
These financial instruments consist of commitments to extend credit and
involve, to varying degrees, elements of credit, market and interest rate
risk in excess of the amounts recognized in the balance sheet. Credit risk
represents the accounting loss that would be recognized at the reporting
date if obligated counterparties failed completely to perform as
contracted. Market risk represents risk that future changes in market
prices make financial instruments less valuable.
F-19
<PAGE>
OGDENSBURG FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements, Continued
(11) Commitments and Contingencies
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Since some of the commitments are
expected to expire without being drawn upon, the total commitment amounts
do not necessarily represent future cash requirements. The Bank evaluates
each customer's creditworthiness on a case-by-case basis. The amount of
collateral obtained, if deemed necessary by the Bank upon extension of
credit, is based on management's evaluation of the customer's financial
position. Collateral held varies, but may include real estate, accounts
receivable, inventory, property, plant and equipment and income-producing
commercial properties. Substantially all commitments to extend credit, if
exercised, will represent loans secured by real estate.
Commitments to originate fixed and adjustable rate loans are as follows (in
thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
---- ----
(unaudited)
<S> <C> <C>
Fixed rate
7.00 - 7.99% $ 56 --
8.00 - 8.99% 26 --
------ ------
Total fixed rate 82 --
Adjustable rate 220 15
------ ------
Total commitments to originate loans $ 302 15
====== ======
</TABLE>
Unused lines of credit, which includes home equity, consumer and
commercial, amounted to $326,000 (unaudited) and $345,000 at June 30, 1998
and December 31, 1997, respectively.
The Bank's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for loan commitments is represented
by the contractual or notional amount of these instruments. The Bank uses
the same credit policies in making commitments as it does for on-balance
sheet instruments. The Bank controls its credit risk through credit
approvals, limits, and monitoring procedures.
In the normal course of business, there are various outstanding legal
proceedings. In the opinion of management, the aggregate amount involved in
such proceedings is not material to the financial condition or results of
operations of the Bank.
F-20
<PAGE>
OGDENSBURG FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements, Continued
(12) Concentrations of Credit
A substantial portion of the Bank's loans are mortgages in Northern New
York State. Accordingly, the ultimate collectibility of a substantial
portion of the Bank's loan portfolio is susceptible to changes in market
conditions in this area. A majority of the Bank's loan portfolio is secured
by real estate.
The Bank's concentrations of credit risk are disclosed in the schedule of
loan classifications. Other than general economic risks, management is not
aware of any material concentrations of credit risk to any industry or
individual borrower.
(13) Regulatory Matters
In 1996 the Government mandated a one-time assessment related to the
recapitalization of the Savings Association Insurance Fund (SAIF). Of the
total deposit insurance premium in 1996, the SAIF assessment amounted to
$128,000.
The Bank is subject to various regulatory capital requirements administered
by its primary Federal regulator, the Office of Thrift Supervision (OTS).
Failure to meet the minimum regulatory capital requirements can initiate
certain mandatory, and possible additional discretionary actions by
regulators, that if undertaken, could have a direct material affect on the
Bank and the financial statements. Under the regulatory capital adequacy
guidelines and the regulatory framework for prompt corrective action, the
Bank must meet specific capital guidelines involving quantitative measures
of the Bank's assets, liabilities, and certain off-balance sheet items as
calculated under regulatory accounting practices. The Bank's capital
amounts and classification under the prompt corrective action guidelines
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 Bank to maintain minimum amounts and ratios of: total
risk-based capital and Tier I capital to risk-weighted assets (as defined
in the regulations), Tier I capital to adjusted tangible assets (as
defined), and tangible capital to tangible assets (as defined). As
discussed in greater detail below, as of December 31, 1997, the Bank met
all of the capital adequacy requirements to which it is subject.
As of March 31, 1997, the most recent notification from the OTS, the Bank
was categorized as well capitalized under the regulatory framework for
prompt corrective action. To be categorized as well capitalized, the Bank
has to maintain minimum total risk-based, Tier I risk-based, and Tier I
leverage ratios as disclosed in the table below. There are no conditions or
events since the most recent notification that management believes have
changed the Bank's prompt corrective action category.
F-21
<PAGE>
OGDENSBURG FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements, Continued
(13) Regulatory Matters, Continued
The following is a reconciliation of the Bank's GAAP and Regulatory capital
at June 30, 1998 (unaudited), December 31, 1997 and December 31, 1996 (in
thousands):
<TABLE>
<CAPTION>
GAAP Tangible Core Risk-based
capital capital % capital % capital %
------- ------- - ------- - ------- -
<S> <C> <C> <C> <C> <C> <C> <C>
June 30, 1998 (unaudited) $ 1,648 1,648 1,648 1,648
- -------------------------
Regulatory capital adjustments:
Allowance for loan losses
(up to 1.25% of risk-
weighted assets) -- -- 165
------ -------- --------
Total regulatory capital 1,648 6.8% 1,648 6.8% 1,813 13.2%
Regulatory capital requirement 364 1.5% 727 3.0% 1,100 8.0%
------ -------- --------
Regulatory capital excess $ 1,284 921 713
====== ======== ========
<CAPTION>
GAAP Tangible Core Risk-based
capital capital % capital % capital %
------- ------- - ------- - ------- -
<S> <C> <C> <C> <C> <C> <C> <C>
December 31, 1997 $ 1,577 1,577 1,577 1,577
- -----------------
Regulatory capital adjustments:
Allowance for loan losses
(up to 1.25% of risk-
weighted assets) -- -- 150
Net unrealized gain on
securities available for sale (1) (1) (1)
------- ------- -------
Total regulatory capital 1,576 6.7% 1,576 6.7% 1,726 14.4%
Regulatory capital requirement 351 1.5% 702 3.0% 958 8.0%
------- ------- -------
Regulatory capital excess $ 1,225 874 768
======= ======= =======
<CAPTION>
GAAP Tangible Core Risk-based
capital capital % capital % capital %
------- ------- - ------- - ------- -
<S> <C> <C> <C> <C> <C> <C> <C>
December 31, 1996 $ 1,477 1,477 1,477 1,477
- -----------------
Regulatory capital adjustments:
Allowance for loan losses
(up to 1.25% of risk-
weighted assets) -- -- 116
Net unrealized gain on
securities available for sale 11 11 11
------- ------- -------
Total regulatory capital 1,488 6.8% 1,488 6.8% 1,604 15.4%
Regulatory capital requirement 330 1.5% 660 3.0% 836 8.0%
------- ------- -------
Regulatory capital excess $ 1,158 828 768
======= ======= =======
</TABLE>
F-22
<PAGE>
OGDENSBURG FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements, Continued
(13) Regulatory Matters, Continued
The following is a summary of the Bank's actual capital amounts and ratios
compared to the OTS minimum capital adequacy requirements and the OTS
requirements for classification as a well capitalized institution under
prompt corrective action provisions (in thousands):
<TABLE>
<CAPTION>
To be classified as
well-capitalized under
Minimum capital prompt corrective
Actual adequacy requirements action provisions
------------------- --------------------- -----------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
As of June 30, 1998
- -------------------
(unaudited)
Total capital (to risk greater than greater than
weighted assets) $ 1,813 13.2% 1,100 or equal to 8.0% 1,375 or equal to 10.0%
Tier 1 Capital (to risk greater than greater than
weighted assets) 1,648 12.0 550 or equal to 4.0 825 or equal to 6.0
Tier 1 Capital (to adjusted greater than greater than
tangible assets) 1,648 6.8 727 or equal to 3.0 1,212 or equal to 5.0
Tangible Capital (to greater than
tangible assets) 1,648 6.8 364 or equal to 1.5 -- N/A
As of December 31, 1997
- -----------------------
Total capital (to risk greater than greater than
weighted assets) $ 1,726 14.4% 958 or equal to 8.0% 1,198 or equal to 10.0%
Tier 1 Capital (to risk greater than greater than
weighted assets) 1,576 13.2 479 or equal to 4.0 719 or equal to 6.0
Tier 1 Capital (to adjusted greater than greater than
tangible assets) 1,576 6.7 702 or equal to 3.0 1,170 or equal to 5.0
Tangible Capital (to greater than
tangible assets) 1,576 6.7 351 or equal to 1.5 -- N/A
As of December 31, 1996
- -----------------------
Total capital (to risk greater than greater than
weighted assets) $ 1,604 15.4% 836 or equal to 8.0% 1,045 or equal to 10.0%
Tier 1 Capital (to risk greater than greater than
weighted assets) 1,488 14.2 418 or equal to 4.0 627 or equal to 6.0
Tier 1 Capital (to adjusted greater than greater than
tangible assets) 1,488 6.8 660 or equal to 3.0 1,101 or equal to 5.0
Tangible Capital (to greater than
tangible assets) 1,488 6.8 330 or equal to 1.5 -- N/A
</TABLE>
F-23
<PAGE>
OGDENSBURG FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements, Continued
(14) Fair Value of Financial Instruments
The following methods and assumptions were used by the Bank in estimating
fair values of financial instruments:
Cash and cash equivalents: The fair values are considered to
approximate the carrying values, as reported in the balance sheet.
Securities: Fair values of securities are based on exchange quoted
market prices, where available. If quoted market prices are not
available, fair values are based on quoted market prices of similar
instruments.
Loans: For variable rate loans that reprice frequently and loans due
on demand with no significant change in credit risk, fair values are
considered to approximate carrying values. The fair values for certain
mortgage loans (e.g., one-to-four family residential) and other
consumer loans are based on quoted market prices of similar loans sold
on the secondary market, adjusted for differences in loan
characteristics. The fair values for other loans (e.g., commercial
real estate and rental property mortgage loans) are estimated using
discounted cash flow analyses, using interest rates currently being
offered for loans with similar terms to borrowers of similar credit
rating. The carrying amount of accrued interest approximates its fair
value.
FHLB Stock: The carrying value of this instrument, which is redeemable
at par, approximates fair value.
Off-balance-sheet instruments: Fair values for the Bank's
off-balance-sheet instruments (lines of credit and commitments to fund
loans) are based on fees currently charged to enter into similar
agreements, taking into account the remaining terms of the agreements
and the counterparties' credit standing. The fair value of these
financial instruments is immaterial and has therefore been excluded
from the table below.
Deposits: The fair values of demand, savings, club, NOW and money
market accounts are, by definition, equal to the amount payable on
demand at the reporting date (i.e., their carrying amounts). Fair
values for fixed-rate time certificates are estimated using a
discounted cash flow calculation that applies interest rates currently
being offered on these products to a schedule of aggregated expected
monthly maturities on time deposits.
F-24
<PAGE>
OGDENSBURG FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Financial Statements, Continued
(14) Fair Value of Financial Instruments, Continued
The estimated carrying values and fair values of the Bank's financial
instruments are as follows (in thousands):
<TABLE>
<CAPTION>
December 31,
June 30, ----------------------------------------------
1998 1997 1996
-------------------- ------------------- --------------------
(unaudited)
Carrying Fair Carrying Fair Carrying Fair
Amount Value Amount Value Amount Value
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Financial assets:
Cash, cash equivalents $ 1,239 1,239 1,227 1,227 1,571 1,571
Securities 3,546 3,552 4,768 4,775 4,365 4,376
Loans, net 18,698 18,888 16,668 16,306 15,359 14,687
FHLB stock 139 139 137 137 136 136
Financial liabilities:
Deposits:
Demand accounts 735 735 638 638 470 470
Savings and club accounts 3,131 3,131 2,733 2,733 2,687 2,687
Time certificates 16,519 16,544 16,306 16,329 15,358 15,397
NOW and money
market accounts 1,971 1,971 2,088 2,088 1,974 1,974
</TABLE>
Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial instrument.
These estimates are subjective in nature and involve uncertainties and
matters of significant judgment and, therefore, cannot be determined with
precision. Changes in assumptions could significantly affect the estimates.
(15) Plan of Conversion
On July 23, 1998, the Board of Directors of Ogdensburg Federal Savings and
Loan Association (the "Bank"), subject to regulatory approval and approval
by the depositors of the Bank, unanimously adopted a plan to convert from a
Federally-chartered mutual savings and loan association to a
Federally-chartered stock savings and loan association with the concurrent
formation of a holding company. It is anticipated that upon consummation of
the conversion, the holding company will own 100% of the stock of the Bank.
It is contemplated that stock in the holding company will be offered to
certain depositors of the Bank, an employee stock ownership plan for the
Bank and, if shares remain unsold, to the general public with a preference
to persons residing in St. Lawrence County, New York.
Upon consummation of the conversion, each depositor of the Bank will have a
deposit account in the resulting Bank.
The costs of the conversion will be deferred and reduce the proceeds from
the sale of the common stock of the holding company. If the conversion is
not completed, all costs will be charged to expense. The Bank has not
incurred any conversion costs as of June 30, 1998 (unaudited).
F-25
<PAGE>
GLOSSARY
<TABLE>
<S> <C>
ARM Loan Adjustable-rate mortgage loan.
BIF Bank Insurance Fund of the FDIC
Common Stock The common stock, $.01 par value per share, of Peoples
Bankcorp, Inc.
Community Offering Offering for sale to certain members of the general public
of any shares of common stock not subscribed for in the
Subscription Offering, including the possible offering of
common stock in a Syndicated Community Offering
Company Peoples Bankcorp, Inc.
Conversion Simultaneous conversion of Ogdensburg Federal Savings and
Loan Association, to stock form, the issuance of the
Ogdensburg Federal Savings and Loan Association's
outstanding capital stock to the Company and the Company's
offer and sale of common stock
Eligible Account
Holders Savings account holders of Ogdensburg Federal Savings and
Loan Association with account balances of at least $50 as
of the close of business on June 30, 1997
ERISA Employee Retirement Income Security of 1974, as amended
ESOP Employee Stock Ownership Plan
Estimated
Valuation Range Estimated pro forma market value of the common stock
ranging from $1,275,000 to $1,725,000
Exchange Act Securities Exchange Act of 1934, as amended
Expiration Date 12:00 p.m., Eastern time, on ___________, 1998
FASB Financial Accounting Standards Board
FDIC Federal Deposit Insurance Corporation
Federal Reserve
System The Board of Governors of the Federal Reserve System
</TABLE>
A-1
<PAGE>
<TABLE>
<S> <C>
Feldman Feldman Financial Advisors
FHLB Federal Home Loan Bank
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
IRA Individual retirement account or arrangement
IRS Internal Revenue Service
MRP Management recognition plan to be adopted no earlier than
six months after the conversion
NASD National Association of Securities Dealers, Inc.
NOW account Negotiable order of withdrawal account
NPV Net portfolio value
Offering Subscription, Community and Syndicated Community
offerings, collectively
Option Plan Stock option plan to be adopted within one year of the
conversion
Order Form Form for ordering stock accompanied by a certification
concerning certain matters
Other Members Savings account holders (other than eligible account
holders and supplemental eligible account holders) and
certain borrowers (borrowers whose loans were outstanding
on ________, 1998 and continue to be outstanding) who are
entitled to vote at the Special Meeting due to the
existence of a savings account or a borrowing,
respectively, on the Voting Record Date for the Special
Meeting
OTS Office of Thrift Supervision
Plan of Conversion Plan of Ogdensburg Federal Savings and Loan Association to
convert from a federally chartered mutual savings bank to
a federally chartered stock savings bank and the issuance
of all of Ogdensburg Federal Savings and Loan
Association's outstanding capital stock to the Company and
the issuance of the Company's stock to the public
</TABLE>
A-2
<PAGE>
<TABLE>
<S> <C>
Purchase Price $10.00 per share price of the common stock
SAIF Savings Association Insurance Fund of the FDIC
SEC Securities and Exchange Commission
Securities Act Securities Act of 1933, as amended
SFAS Statement of Financial Accounting Standards adopted by
FASB
Special Meeting Special Meeting of members of Ogdensburg Federal Savings
and Loan Association called for the purpose of approving
the Plan
Subscription
Offering Offering of non-transferable rights to subscribe for the
common stock, in order of priority, to Eligible Account
Holders, tax-qualified employee plans, Supplemental
Eligible Account Holders and Other Members
Supplemental Eligible
Account Holders Depositors, who are not Eligible Account Holders of
Ogdensburg Federal Savings and Loan Association, with
account balances of at least $50 on September 30, 1998.
Syndicated Community
Offering Offering of shares of common stock remaining after the
Subscription Offering and undertaken prior to the end and
as part of the Community Offering, and which may, at our
discretion be made to the general public on a best efforts
basis by a selling group of broker-dealers.
Trident Securities Trident Securities, Inc.
Voting Record Date The close of business on _________, 1998, the date for
determining members entitled to vote at the Special
Meeting.
</TABLE>
A-3
<PAGE>
No dealer, salesman or other person has been authorized to give any information
or to make any representations not contained in this document in connection with
the offering made hereby, and, if given or made, such information or
representations must not be relied upon as having been authorized by Ogdensburg
Federal Savings and Loan Association, the Company, or Trident Securities. This
document does not constitute an offer to sell, or the solicitation of an offer
to buy, any of the securities offered hereby to any person in any jurisdiction
in which such offer or solicitation would be unlawful. Neither the delivery of
this document by Ogdensburg Federal Savings and Loan Association, the Company,
or Trident Securities nor any sale made hereunder shall in any circumstances
create an implication that there has been no change in the of Ogdensburg Federal
Savings and Loan Association or the Company, since any of the dates as of which
information is furnished herein or since the date hereof.
PEOPLES BANKCORP, INC.
UP TO 198,375 SHARES
COMMON STOCK
PROSPECTUS
TRIDENT SECURITIES, INC.
DATED __________, 1998
THESE SECURITIES ARE NOT DEPOSITS OR ACCOUNTS
AND ARE NOT FEDERALLY INSURED OR GUARANTEED.
UNTIL ________ __, 1999 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
THAT EFFECT TRANSACTIONS IN THESE SECURITIES, WHETHER OR NOT PARTICIPATING IN
THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO
THE DEALER OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND
WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
<PAGE>
PART II: INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
* Legal Fees and Expenses......................... $ 50,000
* Printing, Word Processing, Postage and Mailing.. 40,000
* Appraisal and Business Plan Fees and Expenses... 19,000
* Accounting Fees and Expenses.................... 75,000
* Blue Sky Filing Fees and Expenses
(including counsel fees)...................... 10,000
* Transfer Agent Fees............................. 3,000
* Conversion Agent Fees........................... 6,000
* Federal Filing Fees (OTS and SEC)............... 9,000
* Other Expenses.................................. 8,000
--------
Total........................................... $220,000
========
</TABLE>
- -------------
* Estimated
** Does not include $90,500 in estimated underwriting fees and expenses.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
INDEMNIFICATION OF DIRECTORS AND OFFICERS OF OGDENSBURG FEDERAL SAVINGS AND
LOAN ASSOCIATION
Federal Regulations clearly define areas for indemnity coverage by Ogdensburg
Federal Savings and Loan Association (the "Association"), as follows:
(a) Any person against whom any action is brought by reason of the fact
that such person is or was a director or officer of the Association shall be
indemnified by the Association for:
(i) Reasonable costs and expenses, including reasonable attorney's
fees, actually paid or incurred by such person in connection with
proceedings related to the defense or settlement of such action;
(ii) Any amount for which such person becomes liable by reason of any
judgment in such action;
(iii) Reasonable costs and expenses, including reasonable attorney's
fees, actually paid or incurred in any action to enforce his rights
under this section, if the person attains a final judgment in favor of
such person in such enforcement action.
(b) Indemnification provided for in subparagraph (a) shall be made to such
officer or director only if the requirements of this subparagraph are met:
(i) The Association shall make the indemnification provided by
subparagraph (a) in connection with any such action which results in a
final judgment on the merits in favor of such officer or director.
(ii) The Association shall make the indemnification provided by
subparagraph (a) in case of settlement of such action, final judgment
against such director or officer or final judgment in favor of such
director or officer other than on the merits except in relation to
matters as to which he shall be adjudged to be liable for negligence
or misconduct in the performance of his duty, only if a majority of
the directors of the Association determines that such a director or
officer was acting in good faith within what he was reasonably
entitled to believe under the circumstances was the scope
II-1
<PAGE>
of his employment or authority and for a purpose which he was
reasonably entitled to believe under the circumstances was in the best
interest of the Association or their members or stockholders.
(c) As used in this paragraph:
(i) "Action" means any action, suit or other judicial or
administrative proceeding, or threatened proceeding, whether civil,
criminal, or otherwise, including any appeal or other proceeding for
review;
(ii) "Court" includes, without limitation, any court to which or in
which any appeal or any proceeding for review is brought;
(iii) "Final Judgment" means a judgment, decree, or order which is
appealable and as to which the period for appeal has expired and no
appeal has been taken;
(iv) "Settlement" includes the entry of a judgment by consent or by
confession or upon a plea of guilty or of nolo contendere.
Ogdensburg Federal has a directors and officers liability policy providing
for insurance against certain liabilities incurred by directors and officers of
Ogdensburg Federal while serving in their capacities as such.
INDEMNIFICATION OF DIRECTORS AND OFFICERS OF PEOPLES BANKCORP, INC.
Under the New York Business Corporation Law ("NYBCL"), a corporation may
indemnify its directors and officers made, or threatened to be made, a party to
any action or proceeding, except for stockholder derivative suits, if such
director or officer acted in good faith, for a purpose which he or she
reasonably believed to be in or, in the case of service to another corporation
or enterprise, not opposed to, the best interests of the corporation, and, in
criminal proceedings, had no reasonable cause to believe his or her conduct was
unlawful. In the case of stockholder derivative suits, the corporation may
indemnify a director or officer if he or she acted in good faith for a purpose
which he or she reasonably believed to be in or, in the case of service to
another corporation or enterprise, not opposed to the best interests of the
corporation, except that no indemnification may be made in respect of (i) a
threatened action, or a pending action which is settled or otherwise disposed
of, or (ii) any claim, issue or matter as to which such person has been adjudged
to be liable to the corporation, unless and only to the extent that the court in
which the action was brought, or, if no action was brought, any court of
competent jurisdiction, determines upon application that, in view of all the
circumstances of the case, the person is fairly and reasonably entitled to
indemnity for such portion of the settlement amount and expenses as the court
deems proper.
Any person who has been successful on the merits or otherwise in the
defense of a civil or criminal action or proceeding will be entitled to
indemnification. Except as provided in the preceding sentence, unless ordered
by a court pursuant to the NYBCL, any indemnification under the NYBCL pursuant
to the above paragraph may be made only if authorized in the specific case and
after a finding that the director or officer met the requisite standard of
conduct by (i) the disinterested directors if a quorum is available, (ii) the
board upon the written opinion of independent legal counsel or (iii) the
stockholders.
The indemnification described above under the NYBCL is not exclusive of
other indemnification rights to which a director or officer may be entitled,
whether contained in the certificate of incorporation or bylaws or when
authorized by (i) such certificate of incorporation or bylaws, (ii) a resolution
of stockholders, (iii) a resolution of directors, or (iv) an agreement providing
for such indemnification, provided that no indemnification may be made to or on
behalf of any director or officer if a judgment or other final adjudication
adverse to the director or officer establishes that his or her acts were
committed in bad faith or were the result of active and deliberate dishonesty
and
II-2
<PAGE>
were material to the cause of action so adjudicated, or that he or she
personally gained in fact a financial profit or other advantage to which he or
she was not legally entitled.
The foregoing statement is qualified in its entirety by reference to
Section 715, 717, 721 through 725 of the NYBCL.
DIRECTORS AND OFFICERS LIABILITY INSURANCE
Pursuant to its Certificate of Incorporation and New York law, the Company
is permitted to purchase and maintain insurance on behalf of an individual who
is or was a director, officer, employee, or agent of the Company. The
Association currently maintains such a policy and it is intended that the
Company will become a party to such policy.
ELEVENTH:
A. RIGHT TO INDEMNIFICATION. 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:
(1) that he or she is or was a director or officer of the
Corporation, or
(2) that he or she, being at the time a director or officer of
the Corporation, is or was serving at the request of the Corporation
as a director, trustee, officer, employee or agent of another
corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to an employee benefit plan
(collectively, "another enterprise" or "other enterprise"), whether
either in case (i) or in case (ii) the basis of such proceeding is
alleged action or inaction (x) in an official capacity as a director
or officer of the Corporation, or as a director, trustee, officer,
employee or agent of such other enterprise, or (y) in any other
capacity related to the Corporation or such other enterprise while so
serving as a director, trustee, officer, employee or agent, shall be
indemnified and held harmless by the Corporation to the fullest extent
authorized by the Business Corporation Law, as the same exists or may
hereafter be amended (but, in the case of any such amendment, with
respect to actions taken prior to such amendment, only to the extent
that such amendment does not prohibit the Corporation from providing
broader indemnification rights than permitted prior thereto), against
all expense, liability and loss (including, without limitation,
attorneys' fees, judgments, fines, ERISA excise taxes or penalties and
amounts paid in settlement) reasonably incurred or suffered by such
person in connection therewith. The persons indemnified by this
Article Eleventh are hereinafter referred to as "indemnitees." Such
indemnification as to such alleged action or inaction shall continue
as to an indemnitee who has after such alleged action or inaction
ceased to be a director or officer of the Corporation, or director,
officer, employee or agent of another enterprise; and shall inure to
the benefit of the indemnitee's heirs, executors and administrators.
The right to indemnification conferred in this Article Eleventh:
(i) shall be a contract right; (ii) shall not be affected adversely as
to any indemnitee by any amendment of this Certificate of
Incorporation with respect to any action or inaction occurring prior
to such amendment; and (iii) shall, subject to any requirements
imposed by law and the Bylaws, include the right to be paid by the
Corporation the expenses incurred in defending any such proceeding in
advance of its final disposition.
B. RELATIONSHIP TO OTHER RIGHTS AND PROVISIONS CONCERNING
------------------------------------------------------
INDEMNIFICATION. The rights to indemnification and to the advancement of
---------------
expenses conferred in this Article Eleventh shall not be exclusive of any
other right which any person may have or hereafter acquire under any
statute, this Certificate of Incorporation, Bylaws, agreement (including
any agreement between such person and any of the Corporation's affiliates,
predecessor or subsidiary corporations or any constituent corporation
absorbed by the Corporation
II-3
<PAGE>
in a consolidation or merger), vote of shareholders or disinterested
directors or otherwise. The Bylaws may contain such other provisions
concerning indemnification, including provisions specifying reasonable
procedures relating to and conditions to the receipt by indemnitees of
indemnification, provided that such provisions are not inconsistent with
the provisions of this Article Eleventh.
C. AGENTS AND EMPLOYEES. The Corporation may, to the extent
---------------------
authorized from time to time by the Board of Directors and to the fullest
extent authorized by the Business Corporation Law, as the same exists or
may hereafter be amended, grant rights to indemnification, and to the
advancement of expenses, to any employee or agent of the Corporation (or
any person, other than a director or officer of the Corporation, serving at
the Corporation's request as a director, trustee, officer, employee or
agent of another enterprise) or to persons who are or were a director,
officer, employee or agent of any of the Corporation's affiliates,
predecessor or subsidiary corporations or of a constituent corporation
absorbed by the Corporation in a consolidation or merger or who is or was
serving at the request of such affiliate, predecessor or subsidiary
corporation or of such constituent corporation as a director, officer,
employee or agent of another enterprise, in each case as determined by the
Board of Directors to the fullest extent of the provisions of this Article
Eleventh in cases of the indemnification and advancement of expenses of
directors and officers of the Corporation, or to any lesser extent (or
greater extent, if permitted by law) determined by the Board of Directors.
Nothing in this Article Eleventh C. shall limit the indemnification
provided in Article Eleventh A. hereof to any officer or director of the
Corporation who was or is made a party or is threatened to be made a party
to or is otherwise involved in any proceeding by reason of the fact that he
or she is or was serving at the request of the Corporation as a director,
officer, trustee, employee or agent of any subsidiary of the Corporation or
any other enterprise.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Not applicable.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES:
The exhibits and financial statement schedules filed as a part of this
registration statement are as follows:
(a) LIST OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
1 Agency Agreement with Trident Securities, Inc.
2 Plan of Conversion (Exhibit A to Proxy Statement filed
as Exhibit 99.2)
3.1 Certificate of Incorporation of Peoples Bankcorp, Inc.
3.2 Bylaws of People's Bankcorp, Inc.
4 Form of Common Stock Certificate of Peoples Bankcorp,
Inc.
5 Opinion of Housley Kantarian & Bronstein, P.C. regarding
legality of securities being registered
* 8.1 Federal Tax Opinion of Housley Kantarian & Bronstein,
P.C.
* 8.2 State Tax Opinion of Silver & Silver
</TABLE>
II-4
<PAGE>
<TABLE>
<S> <C>
8.3 Opinion of Feldman Financial Advisors as to the value of
subscription rights for tax purposes
10.1 Proposed People's Bankcorp, Inc. 1999 Stock Option and
Incentive Plan
10.2 Proposed People's Bankcorp, Inc. Management Recognition
Plan and Trust Agreement
10.3 Employment Agreement between Ogdensburg Federal Savings
and Loan Association and Robert E. Wilson
10.4 Guaranty Agreement between People's Bankcorp, Inc. and
Robert E. Wilson
10.5 Employment Agreement between Ogdensburg Federal Savings
and Loan Association and Todd R. Mashaw
10.6 Grantor Trust Agreement
23.1 Consent of Housley Kantarian & Bronstein, P.C. (in
opinions filed as Exhibits 5 and 8.1)
23.2 Consent of KPMG Peat Marwick LLP
23.3 Consent of Feldman Financial Advisors
24 Power of Attorney (reference is made to the signature
page of the Form SB-2)
27 Financial Data Schedule
* 99.1 Proposed Stock Order Form and Form of Certification
99.2 Proxy Statement for Special Meeting of Members of
Ogdensburg Federal Savings and Loan Association; Form of
Proxy
* 99.3 Form of Miscellaneous Solicitation and Marketing
Materials
* 99.4 Appraisal Report
</TABLE>
- ------------------
* To be filed by amendment.
(b) FINANCIAL STATEMENT SCHEDULES.
No financial statement schedules are filed because the required information
is not applicable or is included in the consolidated financial statements or
related notes.
ITEM 17. 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:
II-5
<PAGE>
(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;
(iii) To include any additional or changed material information on
the plan of distribution.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment shall be deemed to be a
new registration statement of the securities offered, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To file a post-effective amendment or remove from registration any of
the securities that remain unsold at the end of the offering.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the AAct@) 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 questions whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-6
<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 for filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of
Ogdensburg, State of New York, on September 11, 1998.
PEOPLE'S BANKCORP, INC.
By: /s/ Robert E. Wilson
----------------------------------------
Robert E. Wilson
President and Chief Executive Officer
(Duly Authorized Representative)
POWER OF ATTORNEY
We, the undersigned Directors of People's Bankcorp, Inc., hereby severally
constitute and appoint Robert E. Wilson, who may act, with full power of
substitution, our true and lawful attorney and agent, to do any and all things
in our names in the capacities indicated below which said Robert E. Wilson who
may act, may deem necessary or advisable to enable People's Bankcorp, Inc. to
comply with the Securities Act of 1933, as amended, and any rules, regulations
and requirements of the Securities and Exchange Commission, in connection with
the registration of People's Bankcorp, Inc. common stock, including
specifically, but not limited to, power and authority to sign for us in our
names in the capacities indicated below, the registration statement and any and
all amendments (including post-effective amendments) thereto; and we hereby
ratify and confirm all that said Robert E. Wilson shall do or cause to be done
by virtue thereof.
In accordance with the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates stated.
<TABLE>
<CAPTION>
Signatures Title Date
---------- ----- ----
<S> <C> <C>
/s/ Robert E. Wilson President, Chief Executive September 11, 1998
- ----------------------------------- Officer and Director
Robert E. Wilson (Principal Executive, Accounting
and Financial Officer)
/s/ Robert E. Hentschel Chairman of the Board September 11, 1998
- -----------------------------------
Robert E. Hentschel
/s/ Anthony P. LeBarge, Sr. Director September 11, 1998
- -----------------------------------
Anthony P. LeBarge, Sr.
/s/ Wesley L. Stitt Director September 11, 1998
- -----------------------------------
Wesley L. Stitt
/s/ George E. Silver Director September 11, 1998
- -----------------------------------
George E. Silver
</TABLE>
<PAGE>
EXHIBIT 1
DRAFT - 9/8/98
PEOPLES BANKCORP, INC.
COMMON STOCK
127,500 TO 198,375 SHARES
$10.00 PER SHARE
SALES AGENCY AGREEMENT
----------------------
Trident Securities, Inc.
4601 Six Forks Road, Suite 400
Raleigh, North Carolina 27609
Dear Sirs:
Peoples Bankcorp, Inc., a New York-chartered corporation (the "Company"),
and Ogdensburg Federal Savings and Loan Association, a federally chartered and
insured mutual savings association (the "Bank"), hereby confirm, as of
______________, 1998, their respective agreements with Trident Securities, Inc.
("Trident"), a broker-dealer registered with the Securities and Exchange
Commission ("Commission") and a member of the National Association of Securities
Dealers, Inc. ("NASD"), as follows:
1. Introductory. The Bank intends to convert from a federally chartered
------------
mutual savings association to a federally chartered stock savings association as
a wholly owned subsidiary of the Company (together with the Offerings, as
defined below, the issuance of shares of common stock of the Bank to the Company
and the incorporation of the Company, the "Conversion") pursuant to a plan of
conversion adopted on ______________, 1998 (as amended, if amended, the "Plan").
In accordance with the Plan, the Company is offering shares of its common stock
(the "Shares" and the "Common Stock"), pursuant to nontransferable subscription
rights in a subscription offering (the "Subscription Offering") to certain
depositors and borrowers of the Bank and to the Bank's tax-qualified employee
benefit plans (i.e., the Bank's Employee Stock Ownership Plan (the "ESOP")).
Shares of the Common Stock not sold in the Subscription Offering may be offered
to the general public in a community offering, with preference given to natural
persons residing in St. Lawrence County, New York (the "Community Offering"),
subject to the right of the Company and the Bank, in their absolute discretion,
to reject orders in the Community Offering in whole or in part. Shares not sold
in the Subscription Offering or otherwise in the Community Offering may be
offered to certain members of the general public as part of the Community
Offering by a group of broker-dealers (the "Syndicated Community Offering") (the
Subscription Offering and, if any, the Community and Syndicated Community
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 2
Offerings are sometimes referred to collectively as the "Offerings"). In the
Offerings, the Company is offering between 127,500 and 172,500 Shares, with the
possibility of offering up to 198,375 Shares without a resolicitation of
subscribers, as contemplated by Part 563b of Title 12 of the Code of Federal
Regulations. With the exception of the ESOP, no person (or persons through a
single account) may purchase in the Offerings more than 5,000 Shares; no person,
together with associates of and persons acting in concert with such person, may
purchase in the Offerings more than 10,000 Shares.
The Company and the Bank have been advised by Trident that it will utilize
its best efforts in assisting the Company and the Bank with the sale of the
Shares in the Offerings, including any Syndicated Community Offering. Prior to
the execution of this Agreement, the Company has delivered to Trident a
prospectus dated as of the date hereof and all supplements thereto to be used in
the Offerings. Such prospectus contains information with respect to the
Company, the Bank and the Shares.
2. Representations and Warranties.
------------------------------
(a) The Company and the Bank jointly and severally represent and
warrant to Trident that:
(i) The Company has filed with the Commission a registration
statement, including exhibits and an amendment or amendments thereto,
on Form SB-2 (No. 333-43063), including a prospectus relating to the
Offerings, for the registration of the Shares under the Securities Act
of 1933, as amended (the "Act"); and such registration statement has
become effective under the Act and no stop order has been issued with
respect thereto and no proceedings therefor have been initiated or, to
the Company's best knowledge, threatened by the Commission. Except as
the context may otherwise require, such registration statement, as
amended or supplemented, on file with the Commission at the time the
registration statement became effective, including the prospectus,
financial statements, schedules, exhibits and all other documents
filed as part thereof, as amended and supplemented, is herein called
the "Registration Statement," and the prospectus, as amended or
supplemented, on file with the Commission at the time the
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 3
Registration Statement became effective is herein called the
"Prospectus," except that if the prospectus filed by the Company with
the Commission pursuant to Rule 424(b) of the general rules and
regulations of the Commission under the Act (together with the
enforceable published policies and actions of the Commission
thereunder, the "SEC Regulations") differs from the form of prospectus
on file at the time the Registration Statement became effective, the
term "Prospectus" shall refer to the Rule 424(b) prospectus from and
after the time it is filed with or mailed for filing to the Commission
and shall include any amendments or supplements thereto from and after
their dates of effectiveness or use, respectively. If any Shares
remain unsubscribed following completion of the Subscription Offering
and, if any, the Community Offering, the Company (i) will promptly
file with the Commission a post-effective amendment to such
Registration Statement relating to the results of the Subscription
Offering and, if any, the Community Offering, any additional
information with respect to the proposed plan of distribution and any
revised pricing information or (ii) if no such post-effective
amendment is required, will file with, or mail for filing to, the
Commission a prospectus or prospectus supplement containing
information relating to the results of the Subscription Offering and,
if any, the Community Offering and pricing information pursuant to
Rule 424(c) of the Regulations, in either case in a form reasonably
acceptable to the Company and Trident.
(ii) The Bank has filed an Application for Approval of Conversion
on Form AC, including exhibits (as amended or supplemented, the "Form
AC" and together with the Form H-(e)1-S referred to below, the
"Conversion Application") with the Office of Thrift Supervision (the
"Office") under the Home Owners' Loan Act, as amended (the "HOLA") and
the enforceable rules and regulations, including published policies
and actions, of the Office thereunder (the "OTS Regulations"), which
has been approved by the Office; and the Prospectus and the proxy
statement for the solicitation of proxies from members for the special
meeting to approve the Plan (the "Proxy Statement") included as part
of the Form AC have been approved for use by the Office. No order has
been issued by the Office preventing or suspending the use of the
Prospectus or the Proxy Statement; and no action by or before the
Office revoking such approvals is pending or, to the Bank's best
knowledge, threatened. The Company has filed with the Office the
Company's application on Form H-(e)1-S promulgated under the savings
and loan holding company provisions of the HOLA and the OTS
Regulations and has received approval of its acquisition of the Bank
from the Office.
(iii) At the date of the Prospectus and at all times subsequent
thereto through and including the Closing Date (i) the Registration
Statement and the Prospectus (as amended or supplemented, if amended
or supplemented) complied with the Act and the Regulations, (ii) the
Registration Statement (as amended or supplemented, if amended or
supplemented) did not contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 4
necessary to make the statements therein not misleading, and (iii) the
Prospectus (as amended or supplemented, if amended or supplemented)
did not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which
they were made, not misleading. Representations or warranties in this
subsection shall not apply to statements or omissions made in reliance
upon and in conformity with written information furnished to the
Company or the Bank relating to Trident by or on behalf of Trident
expressly for use in the Registration Statement or Prospectus.
(iv) The Company has been duly organized as a New York
corporation, and the Bank has been duly organized as a mutual savings
association under the laws of the United States, and each of them is
validly existing and in good standing under the laws of the
jurisdiction of its organization with full power and authority to own
its property and conduct its business as described in the Registration
Statement and Prospectus; the Bank is a member in good standing of the
Federal Home Loan Bank of New York; and the deposit accounts of the
Bank are insured by the Savings Association Insurance Fund ("SAIF")
administered by the Federal Deposit Insurance Corporation ("FDIC") up
to the applicable legal limits. Each of the Company and the Bank is
not required to be qualified to do business as a foreign corporation
in any jurisdiction where non-qualification would have a material
adverse effect on the Company and the Bank, taken as a whole. The
Bank does not own equity securities of or an equity interest in any
business enterprise except as described in the Prospectus. Upon
amendment of the Bank's charter and bylaws as provided in the rules
and regulations of the Office and completion of the sale by the
Company of the Shares as contemplated by the Prospectus, (i) the Bank
will be converted pursuant to the Plan to a federally chartered
capital stock savings association with full power and authority to own
its property and conduct its business as described in the Prospectus,
(ii) all of the authorized and outstanding capital stock of the Bank
will be owned of record and beneficially by the Company, and (iii) the
Company will have no direct subsidiaries other than the Bank.
(v) The Bank has good, marketable and insurable title to all
assets material to its business and to those assets described in the
Prospectus as owned by it, free and clear of all material liens,
charges, encumbrances or restrictions, except for liens for taxes not
yet due, except as described in the Prospectus and except as could not
in the aggregate have a material adverse effect upon the operations or
financial condition of the Bank; and all of the leases and subleases
material to the operations or financial condition of the Bank, under
which it holds properties,
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 5
including those described in the Prospectus, are in full force and
effect as described therein.
(vi) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly
and validly authorized by all necessary actions on the part of each of
the Company and the Bank, and this Agreement is a valid and binding
obligation with valid execution and delivery of each of the Company
and the Bank, enforceable in accordance with its terms (except as the
enforceability thereof may be limited by bankruptcy, insolvency,
moratorium, reorganization or similar laws relating to or affecting
the enforcement of creditors' rights generally or the rights of
creditors of savings and loan holding companies the accounts of whose
subsidiaries are insured by the FDIC or by general equity principles,
regardless of whether such enforceability is considered in a
proceeding in equity or at law, and except to the extent that the
provisions of Sections 8 and 9 hereof may be unenforceable as against
public policy or pursuant to Sections 23A and 23B of the Federal
Reserve Act, 12 U.S.C. Sections 371c and 371c-1 (collectively,
"Section 23A")).
(vii) There is no litigation or governmental proceeding pending
or, to the best knowledge of the Company or the Bank, threatened
against or involving the Company, the Bank or any of their respective
assets which individually or in the aggregate would reasonably be
expected to have a material adverse effect on the condition (financial
or otherwise), results of operations and business, including the
assets and properties, of the Company and the Bank, taken as a whole.
(viii) The Company and the Bank have received the opinions of
Housley, Kantarian & Bronstein, P.C. with respect to federal tax
consequences of the Conversion, and of Silver and Silver, with respect
to New York tax consequences of the Conversion, to the effect that the
Conversion will constitute a tax-free reorganization under the
Internal Revenue Code of 1986, as amended, and will not be a taxable
transaction for the Bank or the Company under the laws of New York,
and the facts relied upon in such opinions are accurate and complete.
(ix) Each of the Company and the Bank has all such corporate
power, authority, authorizations, approvals and orders as may be
required to enter into this Agreement and to carry out the provisions
and conditions hereof, subject to the limitations set forth herein and
subject to the satisfaction of certain conditions imposed by the
Office in connection with its approvals of the Form AC and the
Application H-(e)1-S, and except as may be required under the
securities laws of
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 6
various jurisdictions, and in the case of the Company, as of the
Closing Date, will have such approvals and orders to issue and sell
the Shares to be sold by the Company as provided herein, and in the
case of the Bank, as of the Closing Date, will have such approvals and
orders to issue and sell the Shares of its Common Stock to be sold to
the Company as provided in the Plan, subject to the issuance of
amended charter in the form required for federally chartered stock
savings associations (the "Stock Charter"), the form of which Stock
Charter has been approved by the Office.
(x) Neither the Company nor the Bank is in violation of any rule
or regulation of the Office or the FDIC that could reasonably be
expected to result in any enforcement action against the Company, the
Bank or their officers or directors that might have a material adverse
effect on the condition (financial or otherwise), operations,
businesses, assets or properties of the Company and the Bank, taken as
a whole.
(xi) The financial statements and any related notes or schedules
which are included in the Registration Statement and the Prospectus
fairly present the financial condition, income, retained earnings and
cash flows of the Bank at the respective dates thereof and for the
respective periods covered thereby and comply as to form with the
applicable accounting requirements of the SEC and OTS Regulations.
Such financial statements have been prepared in accordance with
generally accepted accounting principles consistently applied
throughout the periods involved, except as set forth therein, and such
financial statements are consistent with financial statements and
other reports filed by the Bank with supervisory and regulatory
authorities except as such generally accepted accounting principles
may otherwise require. The tables in the Prospectus accurately
present the information purported to be shown thereby at the
respective dates thereof and for the respective periods therein.
(xii) There has been no material change in the condition
(financial or otherwise), results of operations or business, including
assets and properties, of the Company and the Bank, taken as a whole,
since the latest date as of which such condition is set forth in the
Prospectus, except as set forth therein; and the capitalization,
assets, properties and business of each of the Company and the Bank
conform to the descriptions thereof contained in the Prospectus. None
of the Company or the Bank has any material liabilities of any kind,
contingent or otherwise, except as set forth in the Prospectus.
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 7
(xiii) There has been no breach or default (or the occurrence of
any event which, with notice or lapse of time or both, would
constitute a default) under, or creation or imposition of any lien,
charge or other encumbrance upon any of the properties or assets of
the Company or the Bank pursuant to any of the terms, provisions or
conditions of, any agreement, contract, indenture, bond, debenture,
note, instrument or obligation to which the Company or the Bank is a
party or by which any of them or any of their respective assets or
properties may be bound or is subject, or violation of any
governmental license or permit or any enforceable published law,
administrative regulation or order or court order, writ, injunction or
decree, which breach, default, encumbrance or violation would have a
material adverse effect on the condition (financial or otherwise),
operations, business, assets or properties of the Company and the
Bank, taken as a whole; all agreements which are material to the
condition (financial or otherwise), results of operations or business
of the Company and the Bank, taken as a whole are in full force and
effect, and no party to any such agreement has instituted or, to the
best knowledge of the Company and the Bank, threatened any action or
proceeding wherein the Company or the Bank would be alleged to be in
default thereunder.
(xiv) None of the Company or the Bank is in violation of its
respective charter or bylaws. The execution and delivery hereof and
the consummation of the transactions contemplated hereby by the
Company and the Bank do not conflict with or result in a breach of the
charter or bylaws of the Company or the Bank (in either mutual or
stock form) or constitute a material breach of or default (or an event
which, with notice or lapse of time or both, would constitute a
default) under, give rise to any right of termination, cancellation or
acceleration contained in, or result in the creation or imposition of
any lien, charge or other encumbrance upon any of the properties or
assets of the Company or the Bank pursuant to any of the terms,
provisions or conditions of, any material agreement, contract,
indenture, bond, debenture, note, instrument or obligation to which
the Company or the Bank is a party or violate any governmental license
or permit or any enforceable published law, administrative regulation
or order or court order, writ, injunction or decree (subject to the
satisfaction of certain conditions imposed by the Office in connection
with its approval of the Conversion Application), which breach,
default, encumbrance or violation would have a material adverse effect
on the condition (financial or otherwise), operations or business of
the Company and the Bank, taken as a whole.
(xv) Subsequent to the respective dates as of which information
is given in the Registration Statement and Prospectus and prior to the
Closing Date (as
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 8
hereinafter defined), except as otherwise may be indicated or
contemplated therein, none of the Company or the Bank has issued any
securities which will remain issued at the Closing Date or incurred
any liability or obligation, direct or contingent, or borrowed money,
except borrowings in the ordinary course of business, or entered into
any other transaction not in the ordinary course of business and
consistent with prior practices, which is material in light of the
business of the Company and the Bank, taken as a whole.
(xvi) Upon consummation of the Conversion, the authorized,
issued and outstanding equity capital of the Company shall be within
the range as set forth in the Prospectus under the caption
"Capitalization," and no Common Stock of the Company shall be
outstanding immediately prior to the Closing Date; the issuance and
the sale of the Shares of the Company have been duly authorized by all
necessary action of the Company and approved by the Office and, when
issued in accordance with the terms of the Plan and paid for, shall be
validly issued, fully paid and nonassessable and shall conform to the
description thereof contained in the Prospectus; the issuance of the
Shares is not subject to preemptive rights, except as set forth in the
Prospectus; and good title to the Shares will be transferred by the
Company upon issuance thereof against payment therefor, free and clear
of all claims, encumbrances, security interests and liens against the
Company whatsoever. The certificates representing the Shares will
conform in all material respects with the requirements of applicable
laws and regulations. The issuance and sale of the capital stock of
the Bank to the Company has been duly authorized by all necessary
action of the Bank and the Company and appropriate regulatory
authorities (subject to the satisfaction of various conditions imposed
by the Office in connection with its approval of the Conversion
Application), and such capital stock, when issued in accordance with
the terms of the Plan, will be fully paid and nonassessable and will
conform in all material respects to the description thereof contained
in the Prospectus.
(xvii) No approval of any regulatory or supervisory or other
public authority is required in connection with the execution and
delivery of this Agreement or the issuance of the Shares, except for
the declaration of effectiveness of any required post-effective
amendment by the Commission and approval thereof by the Office and
approval of the Company's application on Form H-(e)1-S by the Office,
the issuance of the Stock Charter by the Office and as may be required
under the securities laws of various jurisdictions.
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 9
(xviii) All contracts and other documents required to be filed
as exhibits to the Registration Statement or the Conversion
Application have been filed with the Commission and/or the Office, as
the case may be.
(xix) KPMG Peat Marwick, LLP, which has audited the financial
statements of the Bank at December 31, 1997 and 1996 and for the years
ended December 31, 1997 and 1996 included in the Prospectus, is an
independent public accountant within the meaning of the Code of
Professional Ethics of the American Institute of Certified Public
Accountants and Title 12 of the Code of Federal Regulations, Section
571.2(c)(3).
(xx) For the past five years, the Company and the Bank have
timely filed all required federal, state and local franchise tax
returns, and no deficiency has been asserted with respect to such
returns by any taxing authorities, and the Company and the Bank have
paid all taxes that have become due and, to the best of their
knowledge, have made adequate reserves for similar future tax
liabilities, except where any failure to make such filings, payments
and reserves, or the assertion of such a deficiency, would not have a
material adverse effect on the condition of the Company and the Bank,
taken as a whole.
(xxi) All of the loans represented as assets of the Bank on the
most recent financial statements of the Bank included in the
Prospectus meet or are exempt from all requirements of federal, state
or local law pertaining to lending and interest, including without
limitation truth in lending (including the requirements of Regulation
Z and 12 C.F.R. Part 226 and Section 563.99), real estate settlement
procedures, consumer credit protection, equal credit opportunity and
all disclosure laws applicable to such loans, except for violations
which, if asserted, would not have a material adverse effect on the
Company and the Bank, taken as a whole.
(xxii) The records of account holders, depositors, borrowers and
other members of the Bank delivered to Trident by the Bank or its
agent for use during the Conversion have been prepared or reviewed by
the Bank and, to the best knowledge of the Company and the Bank, are
reliable and accurate.
(xxiii) None of the Company, the Bank or, to the best knowledge
of the Company and the Bank, the employees of the Company or the Bank,
has made any payment of funds of the Company or the Bank prohibited by
law, and no funds of the Company or the Bank have been set aside to be
used for any payment prohibited by law.
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 10
(xxiv) To the best knowledge of the Company and the Bank, the
Company and the Bank are in compliance with all laws, rules and
regulations relating to the discharge, storage, handling and disposal
of hazardous or toxic substances, pollutants or contaminants and
neither the Company nor the Bank believes that the Company or the Bank
is subject to liability under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, or any
similar law, except for violations which, if asserted, would not have
a material adverse effect on the Company and the Bank, taken as a
whole. There are no actions, suits, regulatory investigations or other
proceedings pending or, to the best knowledge of the Company or the
Bank, threatened against the Company or the Bank relating to the
discharge, storage, handling and disposal of hazardous or toxic
substances, pollutants or contaminants. To the best knowledge of the
Company and the Bank, no disposal, release or discharge of hazardous
or toxic substances, pollutants or contaminants, including petroleum
and gas products, as any of such terms may be defined under federal,
state or local law, has been caused by the Company or the Bank or, to
the best knowledge of the Company or the Bank, has occurred on, in or
at any of the facilities or properties of the Company or the Bank,
except such disposal, release or discharge which would not have a
material adverse effect on the Company and the Bank, taken as a whole.
(xxv) At the Closing Date, the Company and the Bank will have
completed the conditions precedent to, and shall have conducted the
Conversion in all material respects in accordance with, the Plan, the
HOLA, the OTS Regulations and all other applicable laws, regulations,
published decisions and orders, including all terms, conditions,
requirements and provisions precedent to the Conversion imposed by the
Office.
(b) Trident represents and warrants to the Company and the Bank that:
(i) Trident is registered as a broker-dealer with the Commission,
and is in good standing with the Commission and the NASD.
(ii) Trident is validly existing as a corporation in good
standing under the laws of its jurisdiction of incorporation, with
full corporate power and authority to provide the services to be
furnished to the Company and the Bank hereunder.
(iii) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly
and validly authorized by all necessary action on the part of Trident,
and this Agreement is a legal, valid and
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 11
binding obligation of Trident, enforceable in accordance with its
terms (except as the enforceability thereof may be limited by
bankruptcy, insolvency, moratorium, reorganization or similar laws
relating to or affecting the enforcement of creditors' rights
generally or the rights of creditors of registered broker-dealers
accounts of whose may be protected by the Securities Investor
Protection Corporation or by general equity principles, regardless of
whether such enforceability is considered in a proceeding in equity or
at law, and except to the extent that the provisions of Sections 8 and
9 hereof may be unenforceable as against public policy or pursuant to
Section 23A).
(iv) Each of Trident and, to Trident's knowledge, its employees,
agents and representatives who shall perform any of the services
required hereunder to be performed by Trident shall be duly authorized
and shall have all licenses, approvals and permits necessary to
perform such services, and Trident is a registered selling agent in
the jurisdictions listed in Exhibit A hereto and will remain
registered in such jurisdictions in which the Company is relying on
such registration for the sale of the Shares, until the Conversion is
consummated or terminated.
(v) The execution and delivery of this Agreement by Trident, the
fulfillment of the terms set forth herein and the consummation of the
transactions contemplated hereby shall not violate or conflict with
the corporate charter or bylaws of Trident or violate, conflict with
or constitute a breach of, or default (or an event which, with notice
or lapse of time, or both, would constitute a default) under, any
material agreement, indenture or other instrument by which Trident is
bound or under any governmental license or permit or any law,
administrative regulation, authorization, approval or order or court
decree, injunction or order.
(vi) Any funds received by Trident to purchase Common Stock will
be handled in accordance with Rule 15c2-4 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act").
(vii) There is not now pending or, to Trident's knowledge,
threatened against Trident any action or proceeding before the
Commission, the NASD, any state securities commission or any state or
federal court concerning Trident's activities as a broker-dealer.
3. Employment of Trident; Sale and Delivery of the Shares. On the basis
------------------------------------------------------
of the representations and warranties herein contained, but subject to the terms
and conditions herein set forth, the Company and the Bank hereby employ Trident
as their agent to utilize its best efforts
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 12
in assisting the Company with the Company's sale of the Shares in the
Subscription Offering and, if any, the Community Offering. The employment of
Trident hereunder shall terminate (a) forty-five (45) days after the Offerings
close, unless the Company and the Bank, with the approval of the Office, are
permitted to extend such period of time, or (b) upon consummation of the
Conversion, whichever date shall first occur.
In the event the Company is unable to sell a minimum of 127,500 Shares (or
such lesser amount as the Office may permit) within the period herein provided,
this Agreement shall terminate, and the Company and the Bank shall refund
promptly to any persons who have subscribed for any of the Shares, the full
amount which it may have received from them, together with interest as provided
in the Prospectus, and no party to this Agreement shall have any obligation to
the other party hereunder, except as set forth in Sections 6, 8(a) and 9 hereof.
Appropriate arrangements for placing the funds received from subscriptions for
Shares in special interest-bearing accounts with the Bank until all Shares are
sold and paid for were made prior to the commencement of the Offerings, with
provision for prompt refund to the purchasers as set forth above, or for
delivery to the Company if all Shares are sold.
If all conditions precedent to the consummation of the Conversion are
satisfied, including the sale of all Shares required by the Plan to be sold, the
Company agrees to issue or have issued such Shares and to release for delivery
certificates to subscribers thereof for such Shares on the Closing Date against
payment to the Company by any means authorized pursuant to the Prospectus, at
the principal office of the Company at 825 State Street,Ogdensburg, New York
13669, or at such other place as shall be agreed upon between the parties
hereto. The date upon which Trident is paid the compensation due hereunder is
herein called the "Closing Date."
Trident agrees either (a) upon receipt of an executed order form of a
subscriber to forward the offering price of the Common Stock ordered on or
before twelve noon on the next business day following receipt or execution of an
order form by Trident to the Bank for deposit in a segregated account or (b) to
solicit indications of interest in which event (i) Trident will subsequently
contact any potential subscriber indicating interest to confirm the interest and
give instructions to execute and return an order form or to receive
authorization to execute the order form on the subscriber's behalf, (ii) Trident
will mail acknowledgements of receipt of orders to each subscriber confirming
interest on the business day following such confirmation, (iii) Trident will
debit accounts of such subscribers on the third business day ("debit date")
following receipt of the confirmation referred to in (i), and (iv) Trident will
forward completed order forms together with such funds to the Bank on or before
twelve noon on the next business day following the debit date for deposit in a
segregated account. Trident acknowledges that if the procedure in (b) is
adopted, subscribers' funds are not required to be in their accounts until the
debit date.
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 13
In addition to the expenses specified in Section 6 hereof, Trident shall
receive the following compensation for its services hereunder:
(a)(i) a management fee in the amount of $60,000 and (ii) a commission
to be agreed upon by Trident and the Company for Shares sold by other
member firms of the NASD through a selected dealers arrangement in any
Syndicated Community Offering. All commissions shall be based on the
amount of Common Stock sold. All such commissions are to be payable in
same-day funds to Trident on the Closing Date.
(b) Trident shall be reimbursed for allocable expenses, including but
not limited to travel, communications and postage and legal fees and
expenses, whether or not the Offerings are successfully completed;
provided, however, that neither the Company nor the Bank shall pay or
reimburse Trident for any of the foregoing expenses accrued after Trident
shall have notified the Company or the Bank of its election to terminate
this Agreement pursuant to Section 11 hereof or after such time as the
Company or the Bank shall have given notice in accordance with Section 12
hereof that Trident is in breach of this Agreement. Trident's out-of-
pocket expenses will not exceed $10,500, and its legal fees will not exceed
$20,000, without the consent of the Company and the Bank. Full payment to
defray Trident's reimbursable expenses shall be made in same-day funds on
the Closing Date or, if the Conversion is not completed and is terminated
for any reason, within ten (10) business days of receipt by the Company of
a written request from Trident for reimbursement of its expenses. Trident
acknowledges receipt of $10,000 advance payment from the Bank which shall
be credited against the total reimbursement due Trident hereunder.
(c) Notwithstanding the limitations on reimbursement of Trident for
allocable expenses provided in the immediately preceding paragraph (b), in
the event that a resolicitation or other event causes the Offerings to be
extended beyond their original expiration date, the Company and the Bank
shall reimburse Trident for its reasonable expenses incurred during such
extended period, even if the allowances for reimbursable expenses provided
for paragraph (b) above have been exhausted, provided that any
reimbursements in excess of the limitations in paragraph (b) would not be
expected to exceed an amount equal to the product obtained by dividing
$30,500 (the original reimbursable out-of-pocket expense limit),
respectively, by the total number of days of the unextended Subscription
Offering (calculated from the date of the Prospectus to the intended close
of the Subscription Offering as stated in the Prospectus) and multiplying
such product by the number of days of the extension (that number of days
from the date of the supplemental prospectus used in the extended offering
to the closing of the extension of the offering(s) described in such
supplemental prospectus).
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 14
The Company shall pay any stock issue and transfer taxes which may be
payable with respect to the sale of the Shares. The Company and the Bank shall
also pay all expenses of the Conversion incurred by them or on their prior
approval including but not limited to their attorneys' fees, NASD filing fees,
and attorneys' fees relating to any required state securities laws research and
filings, telephone charges, air freight, rental equipment, supplies, transfer
agent charges, fees relating to auditing and accounting and costs of printing
all documents necessary in connection with the Conversion.
4. Offering. Subject to the provisions of Section 7 hereof, Trident is
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assisting the Company on a best efforts basis in offering a minimum of 127,500
and a maximum of 172,500 Shares, with the possibility of offering up to 198,375
Shares (except as the Office may permit to be decreased or increased) in the
Offerings. The Shares are to be offered to the public at the price set forth on
the cover page of the Prospectus and the first page of this Agreement.
5. Further Agreements. The Company and the Bank jointly and severally
------------------
covenant and agree that:
(a) The Company shall deliver to Trident, from time to time, such
number of copies of the Prospectus as Trident reasonably may request. The
Company authorizes Trident to use the Prospectus in any lawful manner in
connection with the offer and sale of the Shares.
(b) The Company will notify Trident immediately upon discovery, and
confirm the notice in writing, (i) when any post-effective amendment to the
Registration Statement becomes effective or any supplement to the
Prospectus has been filed, (ii) of the issuance by the Commission of any
stop order relating to the Registration Statement or of the initiation or
the threat of any proceedings for that purpose, (iii) of the receipt of any
notice with respect to the suspension of the qualification of the Shares
for offering or sale in any jurisdiction, and (iv) of the receipt of any
comments from the staff of the Commission relating to the Registration
Statement. If the Commission enters a stop order relating to the
Registration Statement at any time, the Company will make every reasonable
effort to obtain the lifting of such order at the earliest possible moment.
(c) During the time when a prospectus is required to be delivered
under the Act, the Company will comply so far as it is able with all
requirements imposed upon it by the Act, as now in effect and hereafter
amended, and by the Regulations, as from time to time in force, so far as
necessary to permit the continuance of offers and sales of or dealings in
the Shares in accordance with the provisions hereof and the Prospectus. If
during the period when the Prospectus is required to be delivered in
connection with the offer and sale of the Shares any event relating to or
affecting the Company and the Bank, taken as a
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 15
whole, shall occur as a result of which it is necessary, in the opinion of
counsel for Trident, with the concurrence of counsel to the Company, to
amend or supplement the Prospectus in order to make the Prospectus not
false or misleading in light of the circumstances existing at the time it
is delivered to a purchaser of the Shares, the Company forthwith shall
prepare and furnish to Trident a reasonable number of copies of an
amendment or amendments or of a supplement or supplements to the Prospectus
(in form and substance satisfactory to counsel for Trident) which shall
amend or supplement the Prospectus so that, as amended or supplemented, the
Prospectus shall not contain an untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements therein,
in light of the circumstances existing at the time the Prospectus is
delivered to a purchaser of the Shares, not misleading. The Company will
not file or use any amendment or supplement to the Registration Statement
or the Prospectus of which Trident has not first been furnished a copy or
to which Trident shall reasonably object after having been furnished such
copy. For the purposes of this subsection the Company and the Bank shall
furnish such information with respect to themselves as Trident from time to
time may reasonably request.
(d) The Company and the Bank have taken or will take all reasonably
necessary action as may be required to qualify or register the Shares for
offer and sale by the Company under the securities laws of such
jurisdictions as Trident and either the Company or its counsel may agree
upon; provided, however, that the Company shall not be obligated to qualify
as a foreign corporation to do business under the laws of any such
jurisdiction. In each jurisdiction where such qualification or
registration shall be effected, the Company, unless Trident agrees that
such action is not necessary or advisable in connection with the
distribution of the Shares, shall file and make such statements or reports
as are, or reasonably may be, required by the laws of such jurisdiction.
(e) Appropriate entries will be made in the financial records of the
Bank sufficient to establish a liquidation account for the benefit of
eligible account holders and supplemental eligible account holders in
accordance with the requirements of the Office.
(f) The Company will file a registration statement for the Common
Stock under Section 12(g) of the Exchange Act, prior to completion of the
stock offering pursuant to the Plan and shall request that such
registration statement be effective upon completion of the Conversion. The
Company shall maintain the effectiveness of such registration for a minimum
period of three years or for such shorter period as may be required by
applicable law.
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 16
(g) The Company will make generally available to its security holders
as soon as practicable, but not later than 90 days after the close of the
period covered thereby, an earnings statement (in form complying with the
provisions of Rule 158 of the regulations promulgated under the Act)
covering a twelve-month period beginning not later than the first day of
the Company's fiscal quarter next following the effective date (as defined
in said Rule 158) of the Registration Statement.
(h) For a period of three (3) years from the date of this Agreement
(unless the Common Stock shall have been deregistered under the Exchange
Act), the Company will furnish to Trident, as soon as publicly available
after the end of each fiscal year, a copy of its annual report to
shareholders for such year; and the Company will furnish to Trident (i) as
soon as publicly available, a copy of each report or definitive proxy
statement of the Company filed with the Commission under the Exchange Act
or mailed to shareholders, and (ii) from time to time, such other public
information concerning the Company as Trident may reasonably request.
(i) The Company shall use the net proceeds from the sale of the Shares
consistently with the manner set forth in the Prospectus.
(j) The Company shall not deliver the Shares until each and every
condition set forth in Section 7 hereof has been satisfied, unless such
condition is waived in writing by Trident.
(k) The Company shall advise Trident, if necessary, as to the
allocation of deposits, in the case of eligible account holders, and votes,
in the case of other members, and of the Shares in the event of an
oversubscription and shall, after consultation with Trident, provide
Trident final instructions as to the allocation of the Shares ("Allocation
Instructions") in such event and such information shall be accurate and
reliable. Trident shall be entitled to rely on such instructions and shall
have no liability in respect of its reliance thereon, including without
limitation, no liability for or related to any denial or grant of a
subscription in whole or in part.
(l) The Company and the Bank will take such actions and furnish such
information as are reasonably requested by Trident in order for Trident to
ensure compliance with the NASD's "Interpretation Relating to Free-Riding
and Withholding."
6. Payment of Expenses. Whether or not the Conversion is consummated,
-------------------
the Company and the Bank shall pay or reimburse Trident for (a) all filing fees
paid or incurred by Trident in connection with all filings with the NASD with
respect to the Offerings and, (b) in
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 17
addition, if the Company is unable to sell a minimum of 127,500 Shares or such
lesser amount as the Office may permit or the Conversion is otherwise
terminated, the Company and the Bank shall reimburse Trident for allocable
expenses incurred by Trident relating to the offering of the Shares as provided
in Section 3 hereof; provided, however, that neither the Company nor the Bank
shall pay or reimburse Trident for any of the foregoing expenses accrued after
Trident shall have notified the Company or the Bank of its election to terminate
this Agreement pursuant to Section 11 hereof or after such time as the Company
or the Bank shall have given notice in accordance with Section 12 hereof that
Trident is in breach of this Agreement.
7. Conditions of Trident's Obligations. Except as may be waived in
-----------------------------------
writing by Trident, the obligations of Trident as provided herein shall be
subject to the accuracy of the representations and warranties contained in
Section 2 hereof as of the date hereof and as of the Closing Date, to the
performance by the Company and the Bank of their obligations hereunder and to
the following conditions:
(a) At the Closing Date, Trident shall receive the favorable opinion
of Housley, Kantarian & Bronstein, P.C., special counsel for the Company
and the Bank, dated the Closing Date, addressed to Trident, in form and
substance reasonably satisfactory to counsel for Trident, substantially as
set forth in Exhibit B hereto.
(b) At the Closing Date, Trident shall receive the letter of Housley,
Kantarian & Bronstein, P.C., special counsel for the Company and the Bank,
dated the Closing Date, addressed to Trident, in form and substance
reasonably satisfactory to counsel for Trident, substantially as set forth
in Exhibit C hereto.
(c) Counsel for Trident shall have been furnished such documents as
they reasonably may require for the purpose of enabling them to review or
pass upon the matters required by Trident, and for the purpose of
evidencing the accuracy, completeness or satisfaction of any of the
representations, warranties or conditions herein contained, including but
not limited to, resolutions of the Board of Directors of the Company and
the Bank regarding the authorization of this Agreement and the transactions
contemplated hereby.
(d) Prior to and at the Closing Date, in the reasonable opinion of
Trident, (i) there shall have been no material change in the condition,
financial or otherwise, business or results of operations of the Company
and the Bank, taken as a whole, since the latest date as of which such
condition is set forth in the Prospectus, except as referred to therein;
(ii) there shall have been no transaction entered into by the Company or
the Bank after the latest date as of which the financial condition of the
Company or the Bank is set forth in
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 18
the Prospectus other than transactions referred to or contemplated therein,
transactions in the ordinary course of business, and transactions which are
not material to the Company and the Bank, taken as a whole; (iii) none of
the Company or the Bank shall have received from the Office or Commission
any direction (oral or written) to make any change in the method of
conducting their respective businesses which is material to the business of
the Company and the Bank, taken as a whole, with which they have not
complied; (iv) no action, suit or proceeding, at law or in equity or before
or by any federal or state commission, board or other administrative
agency, shall be pending or threatened against the Company or the Bank or
affecting any of their respective assets, wherein an unfavorable decision,
ruling or finding would have a material adverse effect on the business,
operations, financial condition or income of the Company and the Bank,
taken as a whole; and (v) the Shares shall have been qualified or
registered for offering and sale by the Company under the securities laws
of such jurisdictions as Trident and the Company shall have agreed upon.
(e) At the Closing Date, Trident shall receive a certificate of the
principal executive, financial and accounting officer(s) of each of the
Company and the Bank, dated the Closing Date, to the effect that: (i) they
have examined the Prospectus and, at the time the Prospectus became
authorized by the Company for use, the Prospectus did not contain an untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements therein, in light of the circumstances under
which they were made, not misleading with respect to the Company or the
Bank; (ii) since the date the Prospectus became authorized by the Company
for use, no event has occurred which should have been set forth in an
amendment or supplement to the Prospectus which has not been so set forth,
including specifically, but without limitation, any material change in the
business, condition (financial or otherwise) or results of operations of
the Company or the Bank and, the conditions set forth in clauses (ii)
through (iv) inclusive of subsection (d) of this Section 7 have been
satisfied; (iii) to the best knowledge of such officers, no order has been
issued by the Commission or the Office to suspend the Offerings or the
effectiveness of the Prospectus, and no action for such purposes has been
instituted or threatened by the Commission or the Office; (iv) to the best
knowledge of such officers, no person has sought to obtain review of the
final actions of the Office and division approving the Plan; and (v) all of
the representations and warranties contained in Section 2 of this Agreement
are true and correct, with the same force and effect as though expressly
made on the Closing Date.
(f) At the Closing Date, Trident shall receive, among other documents,
(i) copies of the letters from the Office authorizing the use of the
Prospectus and the Proxy Statement, (ii) a copy of the order of the
Commission declaring the Registration Statement
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 19
effective; (iii) copies of the letters from the Office evidencing the
corporate existence of the Bank; (iv) a copy of the letter from the
appropriate New York authority evidencing the incorporation (and, if
generally available from such authority, good standing) of the Company; (v)
a copy of the Company's charter certified by the appropriate New York
governmental authority; and, (vi) if available, a copy of the letter from
the Office approving the Bank's Stock Charter.
(g) As soon as available after the Closing Date, Trident shall receive
a copy of the Bank's Certified Stock Charter executed by the appropriate
federal governmental authority.
(h) Concurrently with the execution of this Agreement, Trident
acknowledges receipt of a letter from KPMG Peat Marwick LLP, independent
certified public accountants, addressed to Trident and the Company, in
substance and form satisfactory to counsel for Trident, with respect to the
financial statements and certain financial information contained in the
Prospectus.
(i) At the Closing Date, Trident shall receive a letter in form and
substance satisfactory to counsel for Trident from KPMG Peat Marwick LLP,
independent certified public accountants, dated the Closing Date and
addressed to Trident and the Company, confirming the statements made by
them in the letter delivered by them pursuant to the preceding subsection
as of a specified date not more than five (5) days prior to the Closing
Date.
All such opinions, certificates, letters and documents shall be in
compliance with the provisions hereof only if they are, in the reasonable
opinion of Trident and its counsel, satisfactory to Trident and its counsel.
Any certificates signed by an officer or director of the Company or the Bank
prepared for Trident's reliance and delivered to Trident or to counsel for
Trident shall be deemed a representation and warranty by the Company and the
Bank to Trident as to the statements made therein. If any condition to
Trident's obligations hereunder to be fulfilled prior to or at the Closing Date
is not so fulfilled, Trident may terminate this Agreement or, if Trident so
elects, may waive in writing any such conditions which have not been fulfilled,
or may extend the time of their fulfillment. If Trident terminates this
Agreement as aforesaid, the Company and the Bank shall reimburse Trident for its
expenses as provided in Section 3(b) hereof.
8. Indemnification.
---------------
(a) The Company and the Bank jointly and severally agree to indemnify
and hold harmless Trident, its officers, directors and employees and each
person, if any, who
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 20
controls Trident within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act, against any and all loss, liability, claim,
damage and expense whatsoever and shall further promptly reimburse such
persons for any legal or other expenses reasonably incurred by each or any
of them in investigating, preparing to defend or defending against any such
action, proceeding or claim (whether commenced or threatened) arising out
of or based upon (A) any misrepresentation by the Company or the Bank in
this Agreement or any breach of warranty by the Company or the Bank with
respect to this Agreement or arising out of or based upon any untrue or
alleged untrue statement of a material fact or the omission or alleged
omission of a material fact required to be stated or necessary to make not
misleading any statements contained in (i) the Registration Statement or
the Prospectus or (ii) any application (including the Form AC and the Form
H-(e)1-S) or other document or communication (in this Section 8
collectively called "Application") prepared or executed by or on behalf of
the Company or the Bank or based upon written information furnished by or
on behalf of the Company or the Bank, whether or not filed in any
jurisdiction, to effect the Conversion or qualify the Shares under the
securities laws thereof or filed with the Office or Commission, unless such
statement or omission was made in reliance upon and in conformity with
written information furnished to the Company or the Bank with respect to
Trident by or on behalf of Trident expressly for use in the Prospectus or
any amendment or supplement thereof or in any Application, as the case may
be, or (B) the participation by Trident in the Conversion. This indemnity
shall be in addition to any liability the Company and the Bank may have to
Trident otherwise.
(b) The Company shall indemnify and hold Trident harmless for any
liability whatsoever arising out of (i) the Allocation Instructions or (ii)
any records of account holders, depositors, borrowers and other members of
the Bank delivered to Trident by the Bank or its agents for use during the
Conversion.
(c) Trident agrees to indemnify and hold harmless the Company and the
Bank, their officers, directors and employees and each person, if any, who
controls the Company or the Bank within the meaning of Section 15 of the
Act or Section 20(a) of the Exchange Act, to the same extent as the
foregoing indemnity from the Company and the Bank to Trident, but only with
respect to (A) statements or omissions, if any, made in the Prospectus or
any amendment or supplement thereof, in any Application or to a purchaser
of the Shares in reliance upon, and in conformity with, written information
furnished to the Company or the Bank with respect to Trident by or on
behalf of Trident expressly for use in the Prospectus or in any
Application; (B) any misrepresentation by Trident in Section 2(b) of this
Agreement; or (C) any liability of the Company or the Bank which is found
in a final judgment by a court of competent jurisdiction (not subject to
further
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 21
appeal) to have principally and directly resulted from gross negligence or
willful misconduct of Trident.
(d) Promptly after receipt by an indemnified party under this Section
8 of notice of the commencement of any action, such indemnified party will,
if a claim in respect thereof is to be made against the indemnifying party
under this Section 8, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will not
relieve it from any liability which it may have to any indemnified party
otherwise than under this Section 8. In case any such action is brought
against any indemnified party, and it notifies the indemnifying party of
the commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may wish, jointly with the
other indemnifying party similarly notified, to assume the defense thereof,
with counsel satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party will not be liable to
such indemnified party under this Section 8 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the
defense thereof other than the reasonable cost of investigation except as
otherwise provided herein. In the event the indemnifying party elects to
assume the defense of any such action and retain counsel acceptable to the
indemnified party, the indemnified party may retain additional counsel, but
shall bear the fees and expenses of such counsel unless (i) the
indemnifying party shall have specifically authorized the indemnified party
to retain such counsel or (ii) the parties to such suit include such
indemnifying party and the indemnified party, and such indemnified party
shall have been advised by counsel that one or more material legal defenses
may be available to the indemnified party which may not be available to the
indemnifying party, in which case the indemnifying party shall not be
entitled to assume the defense of such suit notwithstanding the
indemnifying party's obligation to bear the fees and expenses of such
counsel. An indemnifying party against whom indemnity may be sought shall
not be liable to indemnify an indemnified party under this Section 8 if any
settlement of any such action is effected without such indemnifying party's
consent. To the extent required by law, this Section 8 is subject to and
limited by the provisions of Section 23A.
9. Contribution. In order to provide for just and equitable contribution
------------
in circumstances in which the indemnity agreement provided for in Section 8
above is for any reason held to be unavailable to Trident, the Company and/or
the Bank other than in accordance with its terms, the Company or the Bank and
Trident shall contribute to the aggregate losses, liabilities, claims, damages,
and expenses of the nature contemplated by said indemnity agreement incurred by
the Company or the Bank and Trident (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company and the Bank on the one
hand and Trident on the other
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 22
from the offering of the Shares or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (i) above, but
also the relative fault of the Company or the Bank on the one hand and Trident
on the other hand in connection with the statements or omissions which resulted
in such losses, claims, damages, liabilities or judgments, as well as any other
relevant equitable considerations. The relative benefits received by the Company
and the Bank on the one hand and Trident on the other shall be deemed to be in
the same proportions as the total net proceeds from the Conversion received by
the Company and the Bank bear to the total commissions received by Trident under
this Agreement. The relative fault of the Company or the Bank on the one hand
and Trident on the other shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or the Bank or by Trident and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The Company and the Bank and Trident agree that it would not be just and
equitable if contribution pursuant to this Section 9 were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by the indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 9, Trident shall not be required
to contribute any amount in excess of the amount by which commissions owed
Trident pursuant to this Agreement exceeds the amount of any damages which
Trident has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who is not guilty of such
fraudulent misrepresentation. To the extent required by law, this Section 8 is
subject to and limited by the provisions of Section 23A.
10. Survival of Agreements, Representations and Indemnities. The
-------------------------------------------------------
respective indemnities of the Company and the Bank and Trident and the
representation and warranties of the Company and the Bank and of Trident set
forth in or made pursuant to this Agreement shall remain in full force and
effect, regardless of any termination or cancellation of this Agreement or any
investigation made by or on behalf of Trident or the Company or the Bank or any
controlling person or indemnified party referred to in Section 8 hereof, and
shall survive any termination or consummation of this Agreement and/or the
issuance of the Shares, and any legal representative
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 23
of Trident, the Company, the Bank and any such controlling persons shall be
entitled to the benefit of the respective agreements, indemnities, warranties
and representations.
11. Termination. Trident may terminate this Agreement by giving the
-----------
notice indicated below in this Section at any time after this Agreement becomes
effective as follows:
(a) If any domestic or international event or act or occurrence has
materially disrupted the United States securities markets such as to make
it, in Trident's reasonable opinion, impracticable to proceed with the
offering of the Shares; or if trading on the New York Stock Exchange shall
have suspended; or if the United States shall have become involved in a war
or major hostilities; or if a general banking moratorium has been declared
by a state or federal authority which has material effect on the Bank or
the Conversion; or if a moratorium in foreign exchange trading by major
international banks or persons has been declared; or if there shall have
been a material change in the capitalization, condition or business of the
Company, or if the Bank shall have sustained a material or substantial loss
by fire, flood, accident, hurricane, earthquake, theft, sabotage or other
calamity or malicious act, whether or not said loss shall have been
insured; or if there shall have been a material adverse change in the
condition or prospects of the Company, the Bank or the Subsidiary.
(b) If Trident elects to terminate this Agreement as provided in this
Section, the Company and the Bank shall be notified promptly by Trident by
telephone or telegram, confirmed by letter.
(c) If this Agreement is terminated by Trident for any of the reasons
set forth in subsection (a) above, and to fulfill its obligations, if any,
pursuant to Sections 3, 6, 8(a) and 9 of this Agreement and upon demand,
the Company and the Bank shall pay Trident the full amount so owing
thereunder.
(d) The Bank may terminate the Conversion in accordance with the
terms of the Plan. Such termination shall be without liability to any
party, except that the Company and the Bank shall be required to fulfill
their obligations, if any, pursuant to Sections 3(b), 6, 8(a) and 9 of this
Agreement.
12. Notices. All communications hereunder, except as herein otherwise
-------
specifically provided, shall be in writing and if sent to Trident shall be
mailed, delivered or telegraphed and confirmed to Trident Securities, Inc., 4601
Six Forks Road, Suite 400, Raleigh, North Carolina 27609, Attention: Mr. R. Lee
Burrows, Jr. (with a copy to Malizia, Spidi, Sloane & Fisch, P.C., 1301 K
Street, N.W., Suite 700 East, Washington, D.C. 20005, Attention: Charles E.
Sloane,
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 24
Esquire) and if sent to the Company or the Bank, shall be mailed, delivered or
telegraphed and confirmed to Peoples Bankcorp, Inc., Ogdensburg Federal Savings
and Loan Association, 825 State Street, Ogdensburg, New York 13669, Attention:
Mr. Robert E. Wilson, President (with a copy to Housley, Kantarian & Bronstein,
P.C., 1220 19th Street, N.W., Suite 700, Washington, D.C. 20036, Attention: Joan
S. Guilfoyle, Esquire).
13. Parties. This Agreement shall inure solely to the benefit of, and
-------
shall be binding upon, Trident, the Company, the Bank and the controlling and
other persons referred to in Section 8 hereof, and their respective successors,
legal representatives and assigns, and no other person shall have or be
construed to have any legal or equitable right, remedy or claim under or in
respect of or by virtue of this Agreement or any provision herein contained.
14. Construction. Unless governed by preemptive federal law, this
------------
Agreement shall be governed by and construed in accordance with the substantive
laws of New York.
15. Counterparts. This Agreement may be executed in separate
------------
counterparts, each of which when so executed and delivered shall be an original,
but all of which together shall constitute but one and the same instrument.
* * *
<PAGE>
Please acknowledge your agreement to the foregoing by signing below and
returning to the Company one copy of this letter.
PEOPLES BANKCORP, INC. OGDENSBURG FEDERAL SAVINGS AND
LOAN ASSOCIATION
By: By:
----------------------------- -----------------------------
Robert E. Wilson Robert E. Wilson
President and Chief Executive President and Chief Executive
Officer Officer
Date: November __, 1998 Date: November __, 1998
Agreed to and accepted:
TRIDENT SECURITIES, INC.
By:
-----------------------------
Date: November __, 1998
<PAGE>
EXHIBIT A
<PAGE>
Trident Securities, Inc. is a registered selling agent in the jurisdictions
--
listed below:
<TABLE>
<CAPTION>
<S> <C>
Alabama Missouri
Alaska Montana
Arizona Nebraska
Arkansas Nevada
California New Hampshire
Colorado New Jersey
Connecticut New Mexico
Delaware New York
District of Columbia North Carolina
Florida North Dakota (Trident Securities, Inc. only, no agents)
Georgia Ohio
Idaho Oklahoma
Illinois Oregon
Indiana Pennsylvania
Iowa Rhode Island
Kansas South Carolina
Kentucky Tennessee
Louisiana Texas
Maine Vermont
Maryland Virginia
Massachusetts Washington
Michigan Tennessee
Minnesota Utah
Mississippi Wisconsin
Wyoming
</TABLE>
Trident Securities, Inc. is not a registered selling agent in the jurisdictions
------
listed below:
Hawaii
South Dakota
<PAGE>
EXHIBIT B
<PAGE>
EXHIBIT C
<PAGE>
CERTIFICATE OF INCORPORATION
OF
PEOPLES BANKCORP, INC.
(UNDER SECTION 402 OF THE BUSINESS CORPORATION LAW)
FIRST: The name of the Corporation is PEOPLES BANKCORP, INC. (hereinafter
called the "Corporation").
SECOND: This Corporation is formed to act as a savings and loan holding
company and to engage in any lawful act or activity for which a corporation may
be organized under the Business Corporation Law of the State of New York (the
"Business Corporation Law") or any other statute of the State of New York,
provided that the Corporation shall not engage in any act or activity requiring
the consent or approval of any state official, department, board, agency or
other body without such consent or approval first being obtained.
THIRD: The county within this state in which the office of the corporation
is to be located is St. Lawrence County.
FOURTH: The total number of shares of all classes of capital stock which
the Corporation has authority to issue is 3,500,000 shares, of which 3,000,000
are to be shares of common stock, $.01 par value per share (the "Common Stock"),
and 500,000 are to be shares of serial preferred stock, $.01 par value per share
(the "Preferred Stock"). The shares of capital stock may be issued by the
Corporation from time to time as approved by the Board of Directors of the
Corporation without the approval of the shareholders, except as otherwise
provided in this Article Fourth, the Business Corporation Law or, if applicable,
the rules of a national securities exchange on which the Corporation's capital
stock is listed. The consideration for the issuance of the shares of capital
stock shall be paid to or received by the Corporation in the form and manner
permitted by the Business Corporation Law and shall not be less than the par
value per share of such shares.
Notwithstanding any other provision of this Certificate of Incorporation,
no holder of any shares of the Corporation's capital stock shall have or be
entitled to any preemptive, preferential or other right, under Section 622 of
the Business Corporation Law or otherwise, to subscribe for, purchase or
otherwise acquire any shares of any class of the Corporation's capital stock or
any series thereof, whether now or hereafter authorized, or other obligations or
securities of the Corporation convertible into or exchangeable for such shares,
or carrying rights or options to purchase shares of any class of the
Corporation's capital stock or any series thereof, including without limitation
warrants, subscription rights or options to subscribe for, purchase or otherwise
acquire such shares or securities, or any other instruments evidencing such
rights or options.
Subject to the provisions of the Business Corporation Law, the Corporation
is authorized to make pro rata distributions of its authorized but unissued
shares of capital stock to holders of shares of the same or any other class of
the Corporation's capital stock or series thereof.
<PAGE>
A description of the different classes and series (if any) of the
Corporation's capital stock, and a statement of the relative powers,
designations, preferences and rights of the shares of each class and series (if
any) of capital stock, and the qualifications, limitations or restrictions
thereof, are as follows:
A. COMMON STOCK. Subject to all of the powers, rights and
------------
preferences of the holders of Preferred Stock provided by resolution or
resolutions of the Board of Directors pursuant to this Article Fourth or by
the Business Corporation Law, holders of shares of Common Stock shall
exclusively possess all voting power and shall be entitled to one vote for
each share held by such holders with respect to all matters voted on by the
shareholders of the Corporation.
Whenever there shall have been paid, or declared and set aside
for payment, to the holders of the outstanding shares of any class of
capital stock having preference over the Common Stock as to the payment of
dividends or other distributions the full amount of dividends or such other
distributions, and sinking fund or retirement fund or other retirement
payments, if any, to which such holders are respectively entitled in
preference to holders of the Common Stock, then dividends or such other
distributions, as the case may be, may be paid on the Common Stock, and on
any class or series of capital stock entitled to participate therewith as
to dividends or such other dividends, as the case may be, to the holders
thereof out of any assets legally available for the payment of dividends or
such other distributions, but only when and as declared by the Board of
Directors of the Corporation.
In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation (none of which for purposes of
any provision of this Certificate of Incorporation shall be deemed to
include a consolidation or merger of the Corporation, or the sale of all or
substantially all of the Corporation's assets), after there shall have been
paid, or declared and set aside for payment, to the holders of the
outstanding shares of any class of capital stock having preference over the
Common Stock as to distribution of assets of the Corporation in any such
event the full preferential amounts to which the holders of such shares are
respectively entitled, the holders of the Common Stock and of any class or
series of capital stock entitled to participate therewith, in whole or in
part, as to distribution of the Corporation's assets, shall be entitled,
after payment or provision for payment of all debts and liabilities of the
Corporation, to receive the remaining assets of the Corporation available
for distribution, in cash or in kind, ratably in proportion to the number
of shares of Common Stock held by them.
Each share of Common Stock shall have the same relative powers,
preferences and rights as, and shall be identical in all respects with, all
the other shares of Common Stock.
2
<PAGE>
B. PREFERRED STOCK. Subject to limitations prescribed by the
---------------
Business Corporation Law and the provisions of this Certificate of
Incorporation, the Board of Directors of the Corporation is authorized to
provide from time to time by resolution or resolutions for the issuance of
one or more series of Preferred Stock, and, by filing a certificate
pursuant to the Business Corporation Law, to establish from time to time
the number of shares of Preferred Stock to be included in each such series,
and to fix and state the powers, designations, preferences and relative,
participating, optional or other special rights of the shares of each such
series, and the qualifications, limitations or restrictions thereof,
including, but not limited to determination of any of the following:
(1) the distinctive serial designation and the number of
shares constituting such series, which number the Board of
Directors may thereafter (except where otherwise provided in a
resolution designating a particular series) increase (but not
above the total number of authorized shares of the series) or
decrease (but not below the number of shares of such series then
outstanding);
(2) the dividend rates or the amount of dividends to be paid
on the shares of such series, the record and payment date or dates
for dividends, whether dividends shall be cumulative and, if so,
from which date or dates, and the participating or other special
rights, if any, including any relative rights of priority of
payment, with respect to dividends to be paid on shares of such
series;
(3) whether the shares of such series shall have voting
rights in addition to the voting rights provided by law, and, if
so, the terms and conditions of such voting rights, including, but
not limited to, the right of the holders of such shares to vote as
a separate class either alone or with the holders of shares of one
or more other series of Preferred Stock and the right to have more
than one vote per share;
(4) whether the shares of such series shall be redeemable
and, if so, the times, prices and other terms and conditions upon
which such shares may be redeemed, including, but not limited to,
the amount per share which shall be payable upon such redemption,
which amount may vary under different conditions and at different
redemption dates;
(5) the amount or amounts payable upon the shares of such
series in the event of voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, and the relative
rights of priority, if any, of payment upon shares of such series;
(6) whether the shares of such series shall be entitled to
the benefits of a sinking or retirement fund to be applied to the
purchase or redemption of such shares, and, if so entitled, the
terms and conditions of such fund, including,
3
<PAGE>
but not limited to, the amount of such fund and the manner of its
application, including the price or prices at which such shares
may be redeemed or purchased through the application of such
funds;
(7) whether the shares of such series shall be convertible
into, or exchangeable for, shares of any other class or classes of
the Corporation's capital stock or any series thereof and, if so
convertible or exchangeable, the conversion price or prices or the
rate or rates 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;
(8) the subscription or purchase price and form of
consideration for which the shares of such series shall be issued;
(9) whether the shares of such series which are redeemed,
converted or exchanged shall have the status of authorized but
unissued shares of Preferred Stock and whether such shares may be
reissued as shares of the same or any other series of Preferred
Stock; and
(10) any other relative rights, preferences and limitations
of the shares of such series.
Each share of each series of Preferred Stock shall have the
same relative powers, preferences and rights as, and shall be identical in
all respects with, all the other shares of the same series of Preferred
Stock. Except as required by the Business Corporation Law, the Board of
Directors of the Corporation is authorized to amend this Certificate of
Incorporation to provide for one or more series of Preferred Stock without
obtaining the approval of the holders of any class of capital stock of the
Corporation.
FIFTH: The Secretary of State of the State of New York is designated as
the agent of the Corporation upon whom process in any action or proceeding
against the Corporation may be served, and the address to which the Secretary of
State shall mail a copy of process in any action or proceeding against the
Corporation which may be served upon him is:
Peoples Bankcorp, Inc.
825 State Street
Ogdensburg, New York 13669
Attention: Secretary.
SIXTH: The duration of the Corporation is to be perpetual.
SEVENTH: Cumulative voting rights shall not exist with respect to the
election of directors.
4
<PAGE>
EIGHTH: In connection with taking any action, including, without
limitation, action which may involve or relate to any business combination or
transaction, including, without limitation, any merger, consolidation or sale of
the Corporation's assets, or a proposal by another Person or Persons to make a
business combination or transaction or a tender or other exchange offer (whether
in cash or securities, or both) or any other proposal relating to a change or
potential change in the control of the Corporation, and the exercise of its or
their judgment in determining what is in the best interest of the Corporation
and its shareholders, the Board of Directors, any Committee of the Board of
Directors or any individual director may, but shall not be required to, in
addition to considering the long-term and short-term interests of the
Corporation and its shareholders, consider all of the following factors and any
other factors which it deems relevant: (i) the social, legal, economic and other
effects of the action or matter being or to be considered on the Corporation and
its subsidiaries, its and their employees, depositors, customers and creditors
and the communities in which the Corporation and its subsidiaries operate or are
located; and (ii) when evaluating a business combination or transaction or a
proposal by another Person or Persons to make a business combination or
transaction or a tender or other exchange offer or any other proposal relating
to a change or potential change in control of the Corporation, (v) the business,
reputation and financial condition and earnings prospects of the acquiring
Person or Persons and the possible effects of such factors on the Corporation
and its subsidiaries, its and their employees, depositors, customers and
creditors, the future value of the Corporation's capital stock, and the
communities in which the Corporation and its subsidiaries operate or are
located; (w) the reputation, business practices, competence, experience and
integrity of the acquiring Person or Persons and its or their management and
affiliates; (x) the prospects for successful conclusion of the business
combination, transaction, offer or proposal; (y) whether the price or value of
the securities being offered in the business combination, transaction or offer
is acceptable based on the historical and present operating results and
financial condition of the Corporation and whether a more favorable price could
be obtained for the Corporation's securities or assets, whichever the case may
be, in the future; and (z) any antitrust or other legal or regulatory issues
that are raised by the business combination, transaction, offer or proposal. As
used in this Article Eighth, the term "Person" means any individual,
partnership, firm, corporation, association, trust, unincorporated organization
or other entity; when two or more Persons act as a partnership, limited
partnership, syndicate, or other group acting in concert for the purpose of
acquiring, holding, voting or disposing of securities of the Corporation, such
partnership, limited partnership, syndicate or group shall also be deemed a
"Person" for purposes of this Article Eighth.
If the Board of Directors determines that a business combination,
transaction, offer or proposal should not be recommended to the shareholders, it
may take any lawful action to accomplish its purpose of opposing or not
recommending such business combination, transaction, offer or proposal,
including, without limitation, any or all of the following: advising
shareholders not to accept the business combination, transaction, offer or
proposal; soliciting proxies against the business combination, transaction,
offer or proposal; initiating or filing, in good faith, litigation or complaints
with governmental or regulatory authorities against the business combination,
transaction, offer or proposal; issuing the authorized but unissued securities
or treasury stock of the Corporation or granting options (either statutory or
nonstatutory, or both) with respect thereto in
5
<PAGE>
accordance with applicable law; acquiring another entity or entities to create
an antitrust or other regulatory problem for the business combination,
transaction, offer or proposal; and obtaining a more favorable offer or
proposal.
The provisions of this Article Eighth shall be deemed solely to grant
discretionary authority to the directors and shall not be deemed to provide to
any constituency the right to be considered. In addition, the provisions of this
Articles Eighth shall be supplemental to and in no way limiting of the powers
and authority granted to the directors by applicable law.
NINTH: The Board of Directors of the Corporation shall be divided into
three classes. The respective terms of office of the members of each such class
shall end in successive years. The number of directors in each class shall be
as specified in, or as determined pursuant to, the Bylaws and shall be nearly as
equal as possible. Except as provided in Article Ninth of this Certificate of
Incorporation, the directors in each class shall be elected to hold office until
the third successive annual meeting of shareholders after their election and
until their successors shall have been elected and qualified. At each annual
meeting of shareholders the directors of only one class shall be elected, except
directors who may be elected to fill vacancies. If the number of directors
comprising the Board of Directors is changed, any increase or decrease shall be
apportioned among the classes so as to maintain or attain the number of
directors in each class as nearly equal as reasonably possible, but in no case
shall a decrease in the number of directors shorten the term of any incumbent
director.
TENTH: Any vacancies in the Board of Directors for any reason, including,
but not limited to, any vacancy resulting by reason of the removal of a director
with cause or, if permitted by this Certificate of Incorporation, without cause,
and any newly created directorships resulting by reason of any increase in the
number of directors may be filled only by the Board of Directors, acting by a
majority of the remaining directors then in office, although less than a quorum,
or by a sole remaining director. Any director so elected by the Board of
Directors to fill a vacancy shall hold office only until the next annual meeting
of shareholders and until his or her successor shall have been elected and
qualified, notwithstanding that the term of office of other directors in the
class of which he or she is a member does not expire at the time of such
meeting. The successor to any director elected by the Board to fill a vacancy
shall be elected by the shareholders to a term of office which shall expire at
the same time as the term of office of the other directors in the class to which
he or she is elected and until his or her successor is elected and qualified.
Notwithstanding any other provision of this Certificate of Incorporation, if the
holders of any class or classes of shares of the Corporation's capital stock,
other than the Common Stock, or any series thereof shall be entitled to elect
one or more directors pursuant to this Certificate of Incorporation, any vacancy
in the directors elected by such class or classes or series may be filled by a
majority of the directors elected by such class or classes or series then in
office, or, if no such director is then in office, by the Board of Directors as
otherwise provided in this Article Tenth.
6
<PAGE>
ELEVENTH:
A. RIGHT TO INDEMNIFICATION. 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:
(1) that he or she is or was a director or officer of the
Corporation, or
(2) that he or she, being at the time a director or officer of
the Corporation, is or was serving at the request of the Corporation
as a director, trustee, officer, employee or agent of another
corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to an employee benefit plan
(collectively, "another enterprise" or "other enterprise"), whether
either in case (i) or in case (ii) the basis of such proceeding is
alleged action or inaction (x) in an official capacity as a director
or officer of the Corporation, or as a director, trustee, officer,
employee or agent of such other enterprise, or (y) in any other
capacity related to the Corporation or such other enterprise while so
serving as a director, trustee, officer, employee or agent, shall be
indemnified and held harmless by the Corporation to the fullest extent
authorized by the Business Corporation Law, as the same exists or may
hereafter be amended (but, in the case of any such amendment, with
respect to actions taken prior to such amendment, only to the extent
that such amendment does not prohibit the Corporation from providing
broader indemnification rights than permitted prior thereto), against
all expense, liability and loss (including, without limitation,
attorneys' fees, judgments, fines, ERISA excise taxes or penalties and
amounts paid in settlement) reasonably incurred or suffered by such
person in connection therewith. The persons indemnified by this
Article Eleventh are hereinafter referred to as "indemnitees." Such
indemnification as to such alleged action or inaction shall continue
as to an indemnitee who has after such alleged action or inaction
ceased to be a director or officer of the Corporation, or director,
officer, employee or agent of another enterprise; and shall inure to
the benefit of the indemnitee's heirs, executors and administrators.
The right to indemnification conferred in this Article Eleventh: (i)
shall be a contract right; (ii) shall not be affected adversely as to
any indemnitee by any amendment of this Certificate of Incorporation
with respect to any action or inaction occurring prior to such
amendment; and (iii) shall, subject to any requirements imposed by law
and the Bylaws, include the right to be paid by the Corporation the
expenses incurred in defending any such proceeding in advance of its
final disposition.
B. RELATIONSHIP TO OTHER RIGHTS AND PROVISIONS CONCERNING
------------------------------------------------------
INDEMNIFICATION. The rights to indemnification and to the advancement of
---------------
expenses conferred in this Article Eleventh shall not be exclusive of any
other right which any person may have or hereafter acquire under any
statute, this Certificate of Incorporation, Bylaws,
7
<PAGE>
agreement (including any agreement between such person and any of the
Corporation's affiliates, predecessor or subsidiary corporations or any
constituent corporation absorbed by the Corporation in a consolidation or
merger), vote of shareholders or disinterested directors or otherwise. The
Bylaws may contain such other provisions concerning indemnification,
including provisions specifying reasonable procedures relating to and
conditions to the receipt by indemnitees of indemnification, provided that
such provisions are not inconsistent with the provisions of this Article
Eleventh.
C. AGENTS AND EMPLOYEES. The Corporation may, to the extent
--------------------
authorized from time to time by the Board of Directors and to the fullest
extent authorized by the Business Corporation Law, as the same exists or
may hereafter be amended, grant rights to indemnification, and to the
advancement of expenses, to any employee or agent of the Corporation (or
any person, other than a director or officer of the Corporation, serving at
the Corporation's request as a director, trustee, officer, employee or
agent of another enterprise) or to persons who are or were a director,
officer, employee or agent of any of the Corporation's affiliates,
predecessor or subsidiary corporations or of a constituent corporation
absorbed by the Corporation in a consolidation or merger or who is or was
serving at the request of such affiliate, predecessor or subsidiary
corporation or of such constituent corporation as a director, officer,
employee or agent of another enterprise, in each case as determined by the
Board of Directors to the fullest extent of the provisions of this Article
Eleventh in cases of the indemnification and advancement of expenses of
directors and officers of the Corporation, or to any lesser extent (or
greater extent, if permitted by law) determined by the Board of Directors.
Nothing in this Article Eleventh C. shall limit the indemnification
provided in Article Eleventh A. hereof to any officer or director of the
Corporation who was or is made a party or is threatened to be made a party
to or is otherwise involved in any proceeding by reason of the fact that he
or she is or was serving at the request of the Corporation as a director,
officer, trustee, employee or agent of any subsidiary of the Corporation or
any other enterprise.
TWELFTH: No director of the Corporation shall be personally liable to the
Corporation or its shareholders for monetary damages for any breach of fiduciary
duty by such director as a director, except to the extent such exculpation is
prohibited by the Business Corporation Law. No amendment to or repeal of this
Article Twelfth shall apply to or have any effect on the liability or alleged
liability of any director of the Corporation for or with respect to any acts or
omissions of such director occurring prior to such amendment or repeal.
THIRTEENTH: Any director may be removed from office at any time for cause
by (i) the affirmative vote of the holders of at least eighty percent (80%) of
the combined voting power of all of the shares of capital stock of the
Corporation then entitled to vote generally in the election of directors or
(ii) the affirmative vote of sixty-six and two-thirds percent (66 2/3%) of the
entire Board of Directors, other than the director to be removed.
Notwithstanding the immediately preceding sentence, when the holders of any
series of Preferred Stock are entitled to elect one or more directors pursuant
to a resolution or resolutions providing for any series of Preferred Stock under
Article
8
<PAGE>
Fourth hereof, any director so elected by the holders of such series may be
removed only by the applicable vote of the holders of the shares of such series
as set forth in such resolution or resolutions. Directors shall not be removed
without cause. Cause is defined as any one or more of the following: the
commission of any violation of law, rule or regulation or of a cease and desist
order which has become final; engaging or participating in any unsafe or unsound
practice in connection with the Corporation or any of its subsidiaries
regardless of whether actual harm or damages result to the Corporation; the
commission or omission of or engaging in any act, or practice which constitutes
a material breach of a director's fiduciary duty as director, involves personal
dishonesty on the part of the director or demonstrates a willful or continuing
disregard for the best interests of the Corporation; the adjudication that a
director is of an unsound mind; the adjudication that a director is bankrupt;
the intentional destruction of the Corporation's property; the breach or
violation of any agreements with the Corporation or any of its subsidiaries
signed by the director, including, but not limited to, confidentiality and
nondisclosure agreements; or engaging in dishonorable or disruptive behavior,
practices or acts which would be reasonably expected to harm or bring into
disrepute the Corporation, its business or its employees. The phrase "the entire
Board of Directors" or "the entire Board," as used in this Certificate of
Incorporation shall refer to the total number of directors which the Corporation
would have if there were no vacancies.
FOURTEENTH: The Corporation may lend money to or guarantee the obligation
of any director of the Corporation if the particular loan or guarantee is
approved by the shareholders of the Corporation pursuant to the provisions of
the Business Corporation Law or if the Board of Directors determines that the
particular loan or guarantee benefits the Corporation and either approves the
particular loan or guarantee or a general plan authorizing such loans and
guarantees.
FIFTEENTH: Subject to applicable law and except as otherwise expressly
required by this Certificate of Incorporation, any action required or permitted
to be taken by the shareholders of the Corporation must be effected or taken at
a duly called annual or special meeting of such shareholders and may not be
effected or taken by any consent in writing by any such shareholders.
SIXTEENTH: The shareholder vote required to approve a Business Combination
(as hereinafter defined) shall be as set forth in this Article Sixteenth, in
addition to any other requirements under applicable law.
A. (1) Except as otherwise expressly provided in this Article
Sixteenth, the affirmative vote of the holders of (i) at least 80% of the
outstanding shares entitled to vote thereon (and, if any class or series of
shares is entitled to vote thereon separately, the affirmative vote of the
holders of at least two-thirds of the outstanding shares of each such class
or series) and (ii) a majority of the outstanding shares entitled to vote
thereon not including shares deemed beneficially owned by an Interested
Shareholder (as hereinafter defined) shall be required in order to
authorize any of the following:
(a) any merger, share exchange or consolidation of the
Corporation or any subsidiary thereof with or into an Interested
Shareholder;
9
<PAGE>
(b) any sale, lease, exchange, transfer or other disposition of
(including, without limitation, the granting of any mortgage, pledge
or other security interest in) all or any Substantial Part (as
hereinafter defined) of the assets (in one transaction or in a series
of transactions) of the Corporation (including, without limitation,
any voting securities of a subsidiary) or of a subsidiary thereof to
an Interested Shareholder or proposed by or on behalf of an Interested
Shareholder;
(c) any sale, lease, exchange, transfer or other disposition of
including, without limitation, any granting of a mortgage, pledge or
any other security interest in, all or any Substantial Part of the
assets (in one transaction or in a series of transactions) of an
Interested Shareholder to the Corporation or a subsidiary thereof;
(d) the issuance or transfer (in one transaction or in a series
of transactions) by the Corporation or any subsidiary thereof of any
securities of the Corporation or of a subsidiary thereof to an
Interested Shareholder other than pursuant to a dividend or
distribution made pro rata to all shareholders of the Corporation;
(e) the acquisition by the Corporation or a subsidiary thereof
of any securities of an Interested Shareholder or of any securities
convertible into securities of an Interested Shareholder;
(f) any transaction proposed by or on behalf of an Interested
Shareholder or pursuant to any agreement, arrangement or understanding
with an Interested Shareholder which has the effect, directly or
indirectly, of increasing the Interested Shareholder's proportionate
ownership of voting securities of the Corporation or of a subsidiary
thereof (or of securities that are convertible to, exchangeable for or
carry the right to acquire such voting securities);
(g) the adoption of any plan or proposal of liquidation or
dissolution of the Corporation, any reincorporation of the Corporation
in another state or jurisdiction, any reclassification of the common
stock of the Corporation, or any recapitalization involving the common
stock of the Corporation proposed by or on behalf of an Interested
Shareholder.
(h) any loans, advances, guarantees, pledges, financial
assistance, security arrangements, restrictive covenants or any tax
credits or other tax advantages provided by, through or to the
Corporation or any subsidiary thereof as a result of which an
Interested Shareholder receives a benefit, directly or indirectly,
other than proportionately as a shareholder; and
(i) any agreement, contract or other arrangement providing for
any of the transactions described in this Section (A).
10
<PAGE>
(2) Such affirmative vote shall be required notwithstanding any other
provision of this Certificate of Incorporation, any provision of law, or
any agreement with any national securities exchange or automated quotation
system which might otherwise permit a lesser vote or no vote.
(3) The term "Business Combination" as used in this Article Sixteenth
shall mean any transaction which is referred to in any one or more of
Subsections (1)(a) through (1)(i) of this Section A.
B. The provisions of Section A of this Article Sixteenth shall not
be applicable to any particular Business Combination, and such Business
Combination shall require only such affirmative vote as is required by any
other provision of this Certificate of Incorporation, any provisions of law
or any agreement with any federal regulatory agency, national securities
exchange or automated quotation system, if either the Business Combination
or the transaction in which the Interested Shareholder became an Interested
Shareholder shall have been approved in advance by at least two-thirds of
the Continuing Directors (as hereinafter defined); provided, however, that
such approval shall be effective only if obtained at a meeting at which a
Continuing Director Quorum (as hereinafter defined) is present.
C. For the purpose of this Article Sixteenth the following
definitions apply:
(1) The term "Interested Shareholder" shall mean: (a) any
individual, corporation, partnership or other person or entity which
together with its "affiliates" (as that term is defined in Rule 12b-2
of the General Rules and Regulations under the Securities Exchange Act
of 1934) "beneficially owns" (as that term is defined in Rule 13d-3 of
the General Rules and Regulations under the Securities Exchange Act of
1934) in the aggregate 10% or more of the outstanding shares of the
Common Stock of the Corporation; (b) any "affiliate" (as that term is
defined in Rule 12b-2 under the Securities Exchange Act of 1934) of
any such individual, corporation, partnership or other person or
entity; or (c) any corporation which would be an "affiliate" (as that
term is defined in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934) of any such individual,
corporation, partnership or other person or entity following a
Business Combination. Without limitation, any shares of the common
stock of the Corporation which any Interested Shareholder has the
right to acquire pursuant to any agreement, upon exercise of
conversion rights, warrants or options or otherwise shall be deemed
"beneficially owned" by such Interested Shareholder.
(2) The term "Substantial Part" shall mean more than 10 percent
of the total assets of the Corporation or the Related Person, as the
case may be, as of the end of its most recent fiscal year ending prior
to the time the determination is made.
11
<PAGE>
(3) The term "Continuing Director" shall mean any member of the
Board of Directors of the Corporation who is unaffiliated with an
Interested Shareholder and was a member of the Board of Directors
prior to the time that the Interested Shareholder became an Interested
Shareholder, and any successor of a Continuing Director who is
recommended to succeed a Continuing Director by a majority of
Continuing Directors then on the board of directors.
(4) The term "Continuing Director Quorum" shall mean at least
two-thirds of the Continuing Directors capable of exercising the
powers conferred on them.
SEVENTEENTH:
A. For a period of five years from the effective date of the
completion of the conversion of Ogdensburg Federal Savings and Loan
Association from mutual to stock form (which entity shall become a wholly
owned subsidiary of the Corporation upon such conversion), no person shall
directly or indirectly offer to acquire or acquire the beneficial ownership
of more than 10% of any class of equity security of the Corporation, unless
such offer or acquisition shall have been approved in advance by a two-
thirds vote of the Continuing Directors, as such term is defined in Article
Sixteenth hereof. In addition, for a period of five years from the
completion of the conversion of Ogdensburg Federal Savings and Loan
Association from mutual to stock form, and notwithstanding any provision to
the contrary in this Certificate of Incorporation or the bylaws of the
Corporation, where any person directly or indirectly acquires beneficial
ownership of more than 10% of any class of equity security of the
Corporation in violation of this Article Sixteenth, the securities
beneficially owned in excess of 10% shall not be counted as shares entitled
to vote, shall not be voted by any person or counted as voting shares in
connection with any matter submitted to the shareholders for a vote, and
shall not be counted as outstanding for purposes of determining a quorum or
the affirmative vote necessary to approve any matter submitted to the
shareholders for a vote.
B. If, at any time after five years from the effective date of the
completion of the conversion of Ogdensburg Federal Savings and Loan
Association from mutual to stock form, any person shall acquire the
beneficial ownership of more than 10% of any class of equity security of
the Corporation without the prior approval by a two-thirds vote of the
Continuing Directors, as defined in Article Sixteenth of this Certificate
of Incorporation, then the record holders of voting stock of the
Corporation beneficially owned by such acquiring person shall have only the
voting rights set forth in this Section (A) on any matter requiring their
vote or consent. With respect to each vote in excess of 10% of the voting
power of the outstanding shares of voting stock of the Corporation which
such record holders would otherwise be entitled to cast without giving
effect to this Section (A), such record holders in the aggregate shall be
entitled to cast only one-hundredth (1/100th) of a vote, and the aggregate
voting power of such record holders, so limited for all shares
12
<PAGE>
of voting stock of the Corporation beneficially owned by such acquiring
person, shall be allocated proportionately among such record holders. For
each such record holder, this allocation shall be accomplished by
multiplying the aggregate voting power, as so limited, of the outstanding
shares of voting stock of the Corporation beneficially owned by such
acquiring person by a fraction whose numerator is the number of votes
represented by the shares of voting stock of the Corporation owned of
record by such record holder (and which are beneficially owned by such
acquiring person) and whose denominator is the total number of votes
represented by the shares of voting stock of the Corporation that are
beneficially owned by such acquiring person. A person who is a record owner
of shares of voting stock of the Corporation that are beneficially owned
simultaneously by more than one person shall have, with respect to such
shares, the right to cast the least number of votes that such person would
be entitled to cast under this Section (B) by virtue of such shares being
so beneficially owned by any of such acquiring persons.
C. DEFINITIONS. The term "person" means 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 acting in concert formed for the purpose of
acquiring, holding or disposing of securities of the Corporation. The term
"acquire" includes every type of acquisition, whether effected by purchase,
exchange, operation of law or otherwise. The term "offer" includes every
offer to buy or otherwise acquire, solicitation of an offer to sell, tender
offer for or request for invitation for tenders of, a security or interest
in a security for value. The term "acting in concert" includes: (1)
knowing participation in a joint activity or conscious parallel action
towards a common goal whether or not pursuant to an express agreement; and
(2) a combination or pooling of voting or other interests in the
Corporation's outstanding shares for a common purpose pursuant to any
contract, understanding, relationship, agreement or other arrangement,
whether written or otherwise. The term "beneficial ownership" shall have
the meaning defined in Rule 13d-3 of the General Rules and Regulations
under the Securities Exchange Act of 1934.
D. EXCLUSION FOR UNDERWRITERS, EMPLOYEE BENEFIT PLANS AND CERTAIN
--------------------------------------------------------------
PROXIES. The restrictions contained in this Article Seventeenth shall not
-------
apply to: (1) any underwriter or member of an underwriting or selling
group involving a public sale or resale of securities of the Corporation or
a subsidiary thereof; provided, however, that upon completion of the sale
or resale of such securities, no such underwriter or member of such selling
group is a beneficial owner of more than 10% of any class of equity
security of the Corporation; (2) any proxy granted to one or more
Continuing Directors, as defined in Article Sixteenth of this Certificate
of Incorporation, by a shareholder of the Corporation; or (3) any employee
benefit plans of the Corporation or a subsidiary thereof. In addition, the
Continuing Directors, as defined in Article Sixteenth of this Certificate
of Incorporation, the officers and employees of the Corporation and its
subsidiaries, the directors of subsidiaries of the Corporation, the
employee benefit plans of the Corporation and its subsidiaries, entities
organized or established by the Corporation or any subsidiary
13
<PAGE>
thereof pursuant to the terms of such plans and trustees and fiduciaries
with respect to such plans acting in such capacity shall not be deemed to
be a group with respect to their beneficial ownership of voting stock of
the Corporation solely by virtue of their being directors, officers or
employees of the Corporation or a subsidiary thereof or by virtue of the
Continuing Directors, as defined in Article Sixteenth of this Certificate
of Incorporation, the officers and employees of the Corporation and its
subsidiaries and the directors of subsidiaries of the Corporation being
fiduciaries or beneficiaries of an employee benefit plan of the Corporation
or a subsidiary of the Corporation. Notwithstanding the foregoing, no
director, officer or employee of the Corporation or any of its
subsidiaries, or group of any of them, shall be exempt from the provisions
of this Article Sixteenth should any such person or group become a
beneficial owner of more than 10% of any class of equity security of the
Corporation.
D. DETERMINATIONS. A majority of the Continuing Directors, as
--------------
defined in Article Sixteenth of this Certificate of Incorporation, shall
have the power to construe and apply the provisions of this Article
Seventeenth 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 beneficially owned by any person;
(2) whether a person has an agreement, arrangement or understanding with
another as to the matters referred to in the definition of beneficial
ownership; (3) the application of any other definition or operative
provision of this Article Seventeenth to the given facts; or (4) any other
matter relating to the applicability or effect of this Article Seventeenth.
Any constructions, applications or determinations made by the Continuing
Directors, as defined in Article Sixteenth of this Certificate of
Incorporation, pursuant to this Article Seventeenth 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 shareholders.
EIGHTEENTH:
A. The Corporation hereby reserves the right to amend, alter, change
or repeal any provision contained in this Certificate of Incorporation, and
all rights conferred upon shareholders are granted subject to this
reservation. Except as may be required by applicable law or any other
provision of this Certificate of Incorporation, any such amendment,
alteration, change or repeal of any provision of this Certificate of
Incorporation shall require the affirmative vote of both (a) a majority of
the Board of Directors and (b) a majority of the combined voting power of
all of the shares of capital stock of the Corporation then entitled to vote
generally in the election of directors.
B. Notwithstanding anything contained in this Certificate of
Incorporation to the contrary, the affirmative vote of a majority of the
Board of Directors and the holders of at least 80 percent (80%) of the
combined voting power of all of the shares of capital stock of the
Corporation then entitled to vote generally in the election of directors
shall be required
14
<PAGE>
to amend, repeal, alter, change or adopt any provision inconsistent with
Articles Seventh, Eighth, Ninth, Tenth, Eleventh, Twelfth, Thirteenth,
Sixteenth and Seventeenth hereof and this Section B.
NINETEENTH: In furtherance and not in limitation of the powers conferred
by statute, the Board of Directors is expressly authorized to adopt, make,
amend, change, alter or repeal the Bylaws of the Corporation.
15
<PAGE>
IN WITNESS WHEREOF, this certificate has been subscribed this _____ day
of September, 1998, by the undersigned, who affirms that the statements made
herein are true under the penalties of perjury.
_______________________________
Robert E. Wilson
825 State Street
Ogdensburg, New York 13669
16
<PAGE>
EXHIBIT 3.2
PEOPLES BANKCORP, INC.
BYLAWS
------
ARTICLE I
OFFICES
-------
SECTION 1. Principal Office. The principal office of the corporation
----------------
shall be located in the City of Ogdensburg, County of St. Lawrence and State of
New York.
SECTION 2. Other Offices. The corporation may also have such other
-------------
offices, either within or without the State of New York, as the Board of
Directors may from time to time determine or the business of the corporation may
require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
------------------------
SECTION 1. Place of Meetings. Meetings of Shareholders shall be held
-----------------
at the principal office of the Corporation or at such place within or without
the State of New York as may be fixed by the Board of Directors.
SECTION 2. Annual Meeting. The Annual Meeting of Shareholders shall be
--------------
held each year on a date to be fixed by the Board of Directors. At each Annual
Meeting of Shareholders, the Shareholders shall elect the appropriate class of
Directors for the ensuing year and shall transact such other business as may
properly come before the Meeting.
SECTION 3. Special Meetings. Special Meetings of the Shareholders
----------------
may be called at any time by the Chairman of the Board of Directors, the
President or by the majority vote of the entire Board of Directors. The only
business which may be conducted at such a meeting, other than procedural matters
and matters relating to the conduct of the meeting, shall be the matter or
matters described in the notice of the meeting.
SECTION 4. Fixing Record Date. The Board of Directors may fix, in
------------------
advance, a date as the record date for purpose of determining the shareholders
entitled to notice of or to vote at any meeting of shareholders or any
adjournment thereof, or to express consent to or dissent from any proposal
without a meeting, or for the purpose of determining shareholders entitled to
receive payment of any dividend or the allotment of any rights, or for the
purpose of any other action. Such date shall be not more than sixty (60) nor
less than ten (10) days before the date of such meeting nor more than 60 days
before any other action. If no record date is fixed, the record date for the
purpose of determining shareholders entitled to notice of or to vote at a
meeting of shareholders shall be at the close of business on the day next
preceding the day on which notice is given and for all other
<PAGE>
purposes shall be at the close of business on the day on which the resolution of
the Board of Directors relating thereto is adopted.
SECTION 5. Notice of Meetings of Shareholders. Written notice of every
----------------------------------
meeting of shareholders shall state the place, date and hour of the meeting and
unless it is the annual meeting, indicate that it is being issued by or at the
direction of the person or persons calling the meeting. Notice of a special
meeting shall also state the purpose or purposes for which the meeting is
called. If, at any meeting, action is proposed to be taken which would, if
taken, entitle shareholders fulfilling the statutory requirements to receive
payment for their shares, the notice of such meeting shall include a statement
of that purpose and to that effect. A copy of the notice of any meeting shall
be given, personally or by mail, not less than ten (10) nor more than sixty (60)
days before the date of the meeting, to each shareholder entitled to vote at
such meeting. If mailed, such notice shall be deemed given when deposited in
the United States mail, with postage thereon prepaid, directed to the
shareholder at his address as it appears on the record of shareholders or, if he
shall have filed with the secretary of the corporation a written request that
notices to him be mailed to some other address, then directed to him at such
other address.
SECTION 6. Adjourned Meetings. When a determination of shareholders
------------------
entitled to notice of or to vote at any meeting of shareholders has been made,
such determination shall apply to any adjournment thereof, unless the Board of
Directors fixes a new record date for the adjourned meeting. When a meeting is
adjourned to another time or place, it shall not be necessary to give any
notice of the adjourned meeting if the time and place to which the meeting is
adjourned are announced at the meeting at which the adjournment is taken, and at
the adjourned meeting the corporation may transact any business that might have
been transacted on the original date of the meeting. However, if after the
adjournment the Board of Directors fixes a new record date for the adjourned
meeting, a notice of the adjourned meeting shall be given to each shareholder of
record on the new record date entitled to notice.
SECTION 7. List of Shareholders at Meeting. A list of shareholders
-------------------------------
as of the record date, certified by the secretary or by the transfer agent,
shall be produced at any meeting of shareholders upon the request thereat or
prior thereto of any shareholder. If the right to vote at any meeting is
challenged, the inspectors of election, or person presiding thereat, shall
require such list of shareholders to be produced as evidence of the right of
the persons challenged to vote at such meeting, and all persons who appear from
such list to be shareholders entitled to vote thereat may vote at such meeting.
SECTION 8. Quorum of Shareholders. The holders of one-third of the
----------------------
shares entitled to vote thereat shall constitute a quorum at a meeting of
shareholders for the transaction of any business. When a quorum is once present
to organize a meeting, it is not broken by the subsequent withdrawal of any
shareholders. Despite the absence of a quorum, the shareholders present may
adjourn the meeting.
2
<PAGE>
SECTION 9. Proxies. Every shareholder entitled to vote at a meeting of
-------
shareholders may authorize another person or persons to act for him by proxy.
Such authorization shall be in writing or by such other means as proscribed
under New York law. No proxy shall be valid after the expiration of eleven (11)
months from the date thereof unless otherwise provided in the proxy. Every proxy
shall be revocable at the pleasure of the shareholder executing it, except in
those cases where an irrevocable proxy is provided by law.
SECTION 10. Inspectors at Shareholders Meetings. The Board of Directors,
-----------------------------------
in advance of any shareholders meeting, shall appoint one or more inspectors to
act at the meeting or any adjournment thereof and make a written report thereof.
The Board of Directors may designate one or more persons as alternate inspectors
to replace any inspector who fails to act. If inspectors are not so appointed,
or if such persons are unable to act, the person presiding at a shareholders
meeting shall appoint one or more inspectors. Each inspector, before entering
upon the discharge of his duties, shall take and sign an oath faithfully to
execute the duties of inspector at such meeting with strict impartiality and
according to the best of his ability. The inspector or inspectors shall
determine the number of shares outstanding and the voting power of each, the
shares represented at the meeting, the existence of a quorum, the validity and
effect of proxies, and shall receive votes, ballots or consents, hear and
determine all challenges and questions arising in connection with the right to
vote, count and tabulate all votes, ballots or consents, determine the result,
and do such acts as are proper to conduct the election or vote with fairness to
all shareholders. On request of the person presiding at the meeting or any
shareholder entitled to vote thereat, the inspectors shall make a report in
writing of any challenge, question or matter determined by them and execute a
certificate of any fact found by them. A report or certificate made by them
shall be prima facie evidence of the facts stated and of the vote as certified
by them.
SECTION 11. Qualifications of Voters. Every shareholder of record shall
------------------------
be entitled at every meeting of shareholders to one vote for every share
standing in his name on the record of shareholders. Neither treasury shares nor
shares held by another domestic or foreign corporation of any type or kind, if a
majority of the shares entitled to vote in the election of directors of such
other corporation is held by the corporation, shall be voted at any meeting or
counted in determining the total number of outstanding shares. Shares held by
an administrator, executor, guardian, conservator, committee, or other
fiduciary, except a trustee, may be voted by him, either in person or by proxy,
without transfer of such shares into his name. Shares held by a trustee may be
voted by him, either in person or by proxy, only after the shares have been
transferred into his name as trustee or into the name of his nominee. Shares
held by or under the control of a receiver may be voted by him without the
transfer thereof into his name if authority so to do is contained in an order of
the court by which such received 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, or a nominee of the pledgee. Shares
standing in the name of another domestic or foreign corporation of any type or
kind may be voted by such officer, agent or proxy as the Bylaws of such
corporation may provide or, in the absence of such provision, as the Board of
Directors of such corporation may determine.
3
<PAGE>
SECTION 12. Vote of Shareholders. Directors shall, except as otherwise
--------------------
required by law, be elected by a plurality of the votes cast at a meeting of
shareholders by the holders of shares entitled to vote in the election. Any
other corporate action by vote of the shareholders shall, except as otherwise
required by law, these Bylaws or the certificate of incorporation, be authorized
by a majority of the votes cast at a meeting of shareholders by the holders of
shares entitled to vote thereon.
SECTION 13. Conduct of Shareholders' Meetings. The Officer presiding
---------------------------------
over the shareholders' meeting may establish such rules and regulations for the
conduct of the meeting as the presiding Officer may deem to be reasonably
necessary or desirable for the orderly and expeditious conduct of the meeting.
SECTION 14. Shareholder Proposals. No shareholder shall be entitled to
---------------------
submit a proposal to a meeting of shareholders unless at the time of submitting
the proposal, the shareholder shall be a record or beneficial owner of at least
1% or $1,000 in market value of shares entitled to be voted at the meeting, and
shall have held such shares for at least one year and shall continue to own
such shares through the date on which the meeting is held. A shareholder
meeting the above requirements shall deliver to the secretary of the
corporation not later than 120 days prior to the date on which the corporation's
proxy statement was mailed to stockholders in connection with the previous
year's annual meeting, the text of any proposal which he intends to propose at
an annual meeting of shareholders and a notice of the intention of the
shareholder to present such proposal at the meeting. A proposal to be presented
at any meeting of shareholders other than an annual meeting shall be delivered
to the secretary a reasonable time before the mailing of the corporation's proxy
material.
ARTICLE III
DIRECTORS
---------
SECTION 1. Management of Corporation. The property, business, and
-------------------------
affairs of the Corporation shall be managed and controlled by its Board of
Directors each of whom shall be at least 18 years of age.
SECTION 2. Number, Election and Term of Office. The Board of Directors
-----------------------------------
shall consist of five (5) Directors. The number of Directors may be increased
or decreased at any time by amendment of these Bylaws. No decrease in the
number shall shorten the term of any incumbent Director. Directors shall hold
office for the time for which they are elected and until their successors are
duly elected and qualified.
SECTION 3. Classification of Board. The Board of Directors shall be
-----------------------
divided into three classes in respect of term of office, each class to contain,
as near as may be, one-third of the whole number of the Board. Of the first
Board of Directors, the members of one class shall serve until the Annual
Meeting of Shareholders held in the year following their election, the members
of the second
4
<PAGE>
class shall serve until the Annual Meeting of Shareholders held two years
following their election, and the members of the third class shall serve until
the Annual Meeting of Shareholders held three years following their election;
provided, however, that in each case Directors shall continue to serve until
their successors shall be elected and shall qualify. At each Annual Meeting of
Shareholders following election of the first Board of Directors, one class of
Directors shall be elected to serve until the Annual Meeting of Shareholders
held three years next following and until their successors shall be elected and
shall qualify.
SECTION 4. Newly Created Directorships and Vacancies. Newly created
-----------------------------------------
directorships resulting from an increase in the number of directors and
vacancies occurring in the Board of Directors for any reason may be filled by
vote of a majority of the directors then in office, although less than a quorum
exists. A director elected to fill a newly created directorship or a vacancy,
shall be elected to hold office until the next meeting of shareholders at which
the election of directors is in the regular order of business, and until his
successor has been elected and qualified.
SECTION 5. Removal of Directors. Any director, an entire class of
--------------------
directors or the entire Board of Directors may be removed from office, for
cause, only by the affirmative vote of the holders of at least 75% of the
outstanding shares of stock of the corporation entitled to vote generally in the
election of directors, voting together as a single class.
SECTION 6. Quorum and Voting Requirements. A majority of the Directors
------------------------------
shall constitute a quorum. The affirmative vote of a majority of the Directors
present at a Meeting at which a quorum is present shall be required for action
by the Board of Directors on any matter.
SECTION 7. Regular Meetings. Regular Meetings of the Board of
----------------
Directors shall be held at such time and place as may be specified from time to
time by resolution of the Board of Directors and notice thereof need not be
given. If no such resolution shall be in effect, Regular Meetings of the Board
of Directors shall be called in the manner hereinafter provided with respect to
Special Meetings of the Board of Directors.
SECTION 8. Special Meetings. Special Meetings of the Board of
----------------
Directors may be called by the Chairman of the Board or the President and shall
be called by the President upon written request of any two Directors. If the
President shall not call such Meetings with fifteen days after receipt of such
written request, the Directors making such request may call the Meeting. At
least two days oral or written notice of each Special Meeting stating the time
and place of the Meeting shall be given to each Director. No notice of
Directors' Meeting need be given to any Director who attends such Meeting in
person without protesting prior to or at the commencement of such Meeting, or
who waives such notice in writing executed and filed with the Secretary of the
Corporation, either before or after the Meeting. The Secretary shall cause any
such waiver to be filed with, or entered upon, the records of the Meeting. The
notice need not specify the purpose of any Regular or Special Meeting.
5
<PAGE>
SECTION 9. Written Consent of Directors Without A Meeting. Any action
----------------------------------------------
required or permitted to be taken by the Board of Directors or a committee
thereof may be taken without a meeting if all members of the Board or the
committee consent in writing to the adoption of a resolution authorizing the
action. The resolution and the written consents thereto by the members of the
board or committee shall be filed with the minutes of the proceedings of the
Board or committee.
SECTION 10. Place and Time of Meetings of Board of Directors. Meetings
------------------------------------------------
of the Board of Directors, regular or special, may be held at any place, within
or without the State of New York and at any time, fixed by the Board of
Directors or by the person or persons calling the meeting. Such meetings may be
held by means of a conference telephone or similar communications equipment
allowing all persons participating in the meeting to hear each other at the same
time.
SECTION 11. Reimbursement and Compensation of Directors. The directors
-------------------------------------------
may be paid their expenses of attendance at each meeting of the Board of
Directors and may be paid a fixed sum for attendance at each meeting of the
Board of Directors or a stated salary as director. No such payment shall
preclude any director from serving the corporation in any other capacity and
receiving compensation therefor. Members of the executive committee or other
committees may be allowed similar reimbursement and compensation for their
services as such.
SECTION 12. Committees. The Board of Directors may designate one or more
----------
Directors to constitute committees of the Board. Each such Committee shall have
and may exercise all of the authority of the Board of Directors, except as shall
be provided in the resolution establishing such Committee. Each such Committee
shall serve at the pleasure of the Board of Directors and shall keep minutes of
its proceedings which shall be reported to the Board of Directors.
No such Committee shall have authority as to the following matters:
(i) The submission to Shareholders of any action that needs
Shareholders' approval.
(ii) The filling of vacancies in the Board of Directors or in any
Committee.
(iii) The fixing of compensation of the Directors for serving on the Board
or any Committee.
(iv) The amendment or repeal of the Bylaws or the adoption of new Bylaws.
(v) The amendment or repeal or any resolution of the Board which by its
terms shall not be so amendable or repealable.
6
<PAGE>
SECTION 13. Indemnification and Reimbursement. The Corporation shall
---------------------------------
indemnify a current or former Director, officer, employee or agent of the
Corporation or other person required or permitted to be indemnified under the
Corporation Law of New York, as now or hereafter amended, to the fullest extent
permitted by the provisions of such law.
SECTION 14. Nominating Committee. The Board of Directors or a committee
--------------------
appointed by the Board of Directors shall act as a nominating committee for
selecting the management nominees for election as Directors. Except in the case
of a nominee substituted as a result of the death or other incapacity of a
management nominee, the nominating committee shall deliver written nominations
to the Secretary at least twenty days prior to the date of the Annual Meeting.
Provided such committee makes such nominations, no nominations for Directors
except those made by the nominating committee shall be voted upon at the Annual
Meeting unless other nominations by stockholders are made in writing and
delivered to the Secretary of the Corporation in accordance with the provisions
of the Corporation's Certificate of Incorporation.
ARTICLE IV
OFFICERS
--------
SECTION 1. Titles, Election and Duties. At the first Meeting of the
---------------------------
Board of Directors held after the Annual Meeting of Shareholders the Directors
shall appoint from among their number a Chairman, a President, and shall appoint
a Treasurer and a Secretary. The Board may also appoint, from time to time, a
Vice Chairman of the Board and one or more Vice-Presidents, Assistant Vice
Presidents, Assistant Treasurers, Assistant Secretaries, and such other officers
as the Directors deem expedient. Any two or more offices may be held by the
same person except the office of President and Secretary. The duties of the
officers of the Corporation shall be such as are imposed by these Bylaws and,
from time to time, prescribed by the Directors.
SECTION 2. Chairman of the Board. The Chairman of the Board shall
---------------------
preside at all Meetings of the Directors and Shareholders. He shall have the
power to call Special Meetings of the Board of Directors at any time he may deem
it in the interest of the Corporation, and shall perform all other duties
usually pertaining to the Office of the Chairman of the Board.
SECTION 3. Vice Chairman of the Board. The Vice Chairman of the Board,
--------------------------
if any, shall preside in the absence of the Chairman of the Board at all
Meetings of the Directors and Shareholders, and shall have such other duties as
may be prescribed from time to time by the Board of Directors or by the Bylaws.
SECTION 4. President. The President shall be the Chief Executive and
---------
Administrative Officer of the Corporation. In the absence of the Chairman of
the Board and the Vice Chairman of the Board, the President shall preside at all
Meetings of the Directors and Shareholders.
7
<PAGE>
SECTION 5. Vice Presidents. The Vice President, if any, or if there
---------------
shall be more than one, the Vice Presidents in the order of seniority or in any
other order determined by the Board of Directors shall, in the event of the
absence or disability of the President, perform the duties and exercise the
powers of the President. The Vice President or Vice Presidents shall assist the
President in the performance of his duties.
SECTION 6. Treasurer. The Treasurer shall keep the fiscal accounts of
---------
the Corporation, including an account of all moneys received or disbursed. At
intervals of not more than twelve months, he shall prepare or have prepared for
the Corporation a balance sheet showing the financial condition of the
Corporation as of a date not more than fours months prior thereto, and a profit
and loss statement for the immediately preceding fiscal year, each of which
shall be deposited at the principal office of the Corporation and shall be kept
by the Corporation for at least ten years from such date. In addition, within
sixty days after the preparation of each such balance sheet and profit and loss
statement, the Corporation shall mail a copy thereof to each Shareholder of
record. The Treasurer may endorse, for and on behalf of the Corporation,
checks, notes and other obligations and shall deposit the same and all moneys
and valuables in the name of, and to the credit of, the Corporation in such
banks and depositories as the Board of Directors shall designate. The Treasurer
shall have custody of and shall have the power to endorse for transfer on behalf
of the Corporation, securities and other investment instruments owned by the
Corporation.
SECTION 7. Assistant Treasurers. The Assistant Treasurers, if any,
--------------------
shall assist the Treasurer in the performance of his duties and shall carry out
the duties of the Treasurer whenever the Treasurer is unable to perform such
duties.
SECTION 8. Secretary. The Secretary shall keep the minutes of the
---------
Meetings of Shareholders and Directors and shall give notice of all such
Meetings as required in these Bylaws. The Secretary shall have custody of the
seal of the Corporation and all books, records and papers of the Corporation,
except those in the custody of the Treasurer or some other person authorized to
have custody and possession thereof by a resolution of the Board of Directors.
SECTION 9. Assistant Secretaries. The Assistant Secretaries, if any,
---------------------
shall assist the Secretary in the performance of his duties and shall carry out
the duties of the Secretary whenever the Secretary is unable to perform such
duties.
SECTION 10. Compensation. The salaries of all officers shall be fixed by
------------
the Board of Directors or a committee of the Board of Directors.
SECTION 11. Terms of Office. Each officer shall serve for the term for
---------------
which he is appointed and until his successor is duly appointed and qualified.
Any officer may be removed by the Board of Directors at any time, but any such
removal shall be without prejudice to any contractual rights the person so
removed may have. Vacancies among the officers by reason of death, resignation
or other causes shall be filled by the Board of Directors.
8
<PAGE>
ARTICLE V
CONTRACTS, CHECKS AND DEPOSITS
------------------------------
SECTION 1. Contracts. The Board of Directors may authorize any officer
---------
or officers, agent or agents, to enter into any contract or execute and deliver
any instrument in the name of and on behalf of the corporation and such
authority may be general or confined to specific instances.
SECTION 2. 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 corporation, shall be signed by such officer or officers, agent or
agents of the corporation and in such manner as shall from time to time be
determined by resolution of the Board of Directors.
SECTION 3. Deposits. All funds of the corporation not otherwise
--------
employed shall be deposited from time to time to the credit of the corporation
in such banks, trust companies or other depositaries as the Board of Directors
may select.
ARTICLE VI
SHARES
------
SECTION 1. Certificates of Shares. Every share certificate of the
----------------------
Corporation shall be in such form (consistent with applicable law and, if
applicable, the rules of a national securities exchange on which the
Corporation's capital stock is listed) as shall be determined by the Board,
signed by the Chairman of the Board or the Vice Chairman or the President or a
Vice President and the Secretary or Assistant Secretary or the Treasurer or
Assistant Treasurer. Certificates may be signed by a facsimile signature if the
certificate is countersigned by a transfer agent or registered by a registrar
other than the Corporation or its employees or the shares are listed on a
national registered securities exchange. All certificates for shares shall be
consecutively numbered or otherwise identified. The name and address of the
person to whom the shares represented thereby are issued, with the number of
shares and date of issue, shall be entered on the stock transfer books of the
Corporation. All certificates surrendered to the Corporation for transfer shall
be canceled and no new certificate shall be issued until the former certificate
for a like number of shares shall have been surrendered and canceled.
Notwithstanding any other provision of these Bylaws and subject to the
requirements of the BCL, the shares of the Corporation's capital stock may be
uncertificated shares.
9
<PAGE>
SECTION 2. Transfer Agent. The Board of Directors shall have power to
--------------
appoint one or more Transfer Agents and Registrars for the transfer and
registration of certificates of shares of any class, and may require that share
certificates shall be countersigned and registered by one or more of such
Transfer Agents and Registrars.
SECTION 3. Transfer of Shares. Shares of capital stock of the
------------------
Corporation shall be transferable on the books of the Corporation only by the
holder of record thereof in person or by a duly authorized attorney, upon
surrender and cancellation of certificates for a like number of shares.
SECTION 4. Lost Certificates. The Board of Directors may direct a new
-----------------
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation, alleged to have been lost,
apparently destroyed or wrongfully taken upon the making of an affidavit of that
fact by the person claiming the certificate to be lost, apparently destroyed or
wrongfully taken. When authorizing such issue of a new certificate or
certificates, the Board of Directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, apparently
destroyed or wrongfully taken certificate or certificates, or his legal
representative to advertise the same in such manner as it shall require and/or
give the corporation a bond in such sum and with such surety or sureties as it
may direct as indemnity against any claim that may be made against the
corporation with respect to the certificates alleged to have been lost,
apparently destroyed or wrongfully taken.
SECTION 5. Holder of Record. The Corporation shall be entitled to treat
----------------
the holder of record of any shares as the holder thereof in fact and shall not
be bound to recognize any equitable or other claim to or interest in such shares
on the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise expressly provided by law.
SECTION 6. Closing of Books. The Board of Directors shall have the power
----------------
to close the share transfer books of the Corporation for a period not exceeding
fifty days preceding the date of any Meeting of Shareholders or the date for
payment of any dividend or the date for the allotment of rights or the date when
any change or conversion or exchange of shares shall go into effect; provided
that in lieu of closing the share transfer books, the Board of Directors may fix
in advance a date, not exceeding fifty days preceding the date of any Meeting of
Shareholders, or the date for the payment of any dividend or the date for
allotment or rights, or the date when any change or conversion or exchange of
shares shall go into effect, as a record date for the determination of the
Shareholders entitled to notice of and to vote at any such Meeting, or entitled
to receive payment of any such dividends, or any such allotment of rights, or to
exercise the rights in respect to any such change, conversion or exchange of
shares, and in such case only Shareholders of record on the date so fixed shall
be entitled to such notice of and to vote at such Meeting, or to receive payment
of such dividend, or allotment of rights, or exercise of such rights, as the
case may be, and notwithstanding any transfer of any shares on the books of the
Corporation after any such record date fixed as herein provided.
10
<PAGE>
ARTICLE VII
SEAL
----
The Corporate Seal of the Corporation shall be circular in form and contain
the name of the Corporation, the year when it was formed, and the words "New
York." The corporation may use the seal causing it or a facsimile to be affixed
or impressed or reproduced in any other manner.
ARTICLE VIII
AMENDMENTS
----------
SECTION 1. Adoption, Amendment and Repeal. Bylaws may be amended,
------------------------------
repealed or adopted by the affirmative vote of eighty percent (80%) of all of
the votes eligible to be cast at a Meeting of Shareholders held to consider such
matter and new Bylaws may also be adopted provided that the notice of any such
Meeting at which Bylaws are to be adopted, amended or repealed shall include
notice of such proposed action. Any By-law may be amended, repealed or adopted
by the Directors by the affirmative vote of a majority of the Directors then
elected and qualified; but any By-law adopted by the Board of Directors may be
amended or repealed by Shareholder vote.
SECTION 2. Record of Changes. Whenever a By-law is amended or repealed
-----------------
or a new By-law is adopted, such action and the date on which it was taken shall
be noted on the original Bylaws in the appropriate place or a new set of Bylaws
shall be prepared incorporating such changes.
ARTICLE IX
MISCELLANEOUS
-------------
SECTION 1. Inconsistencies with Certificate of Incorporation. In any
-------------------------------------------------
provision of these Bylaws shall be found to be inconsistent with any provision
of the Certificate of Incorporation, as presently existing, or as from time to
time amended, the latter shall constitute the controlling authority.
SECTION 2. Applicable Gender. Where the use of the female gender would
-----------------
be appropriate in framing these Bylaws, it shall be deemed to be intended
alternatively to or in conjunction with the male gender.
11
<PAGE>
<TABLE>
<S> <C> <C>
EXHIBIT 4
COMMON STOCK
NUMBER _____ _____ SHARES
PEOPLES BANKCORP, INC.
OGDENSBURG, NEW YORK
This certifies that
is the owner of
fully paid and non-assessable shares of common stock, par value $0.01 per share, of
Peoples Bankcorp, Inc. (the "Corporation"), a New York 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.
IN WITNESS WHEREOF, the Corporation has caused this this certificate to be executed by the facsimile
signature of its duly authorized officers and has caused a facsimile of its corporate seal to
be hereunto affixed.
- ----------------------------------- ---------------------------------------------
Sheila M. Shaver Robert E. Wilson
Secretary President
Countersigned and Registered:
(SEAL)
____________________________
Transfer Agent and Registrar
BY: ____________________________
Authorized Signature
SEE REVERSE FOR CERTAIN RESTRICTIONS ON TRANSFER
</TABLE>
<PAGE>
FORM OF STOCK CERTIFICATE - BACK SIDE
The shares represented by this certificate are issued subject to all the
provisions of the Certificate of Incorporation and Bylaws of the Corporation as
from time to time amended (copies of which are on file at the principal
executive office of the Corporation), to all of which the holder by acceptance
hereof assents.
The Corporation will furnish to any shareholder upon request and without
charge, a full statement of the designation, relative rights, preferences and
limitations of the shares of each class of capital stock the Corporation is
authorized to issue and, with respect to preferred stock, the designation,
relative rights, preferences and limitations of each series of preferred stock
so far as the same have been fixed and the authority of the Board of Directors
to designate and fix the relative rights, preferences and limitations of other
series. Such request may be made in writing to the Secretary of the
Corporation.
The Corporation's Certificate of Incorporation includes a provision which
prohibits any person from directly or indirectly acquiring the beneficial
ownership of more than 10% of any class of equity security of the Corporation,
unless such offer or acquisition shall have been approved in advance by a two-
thirds vote of the Continuing Directors of the Corporation, as defined in
Section ____ of the Certificate of Incorporation. This provision does not apply
to the purchase of shares by underwriters in connection with a public offering,
the granting of proxies to certain directors of the Corporation by stockholders
of the Corporation or the acquisition of shares by an employee benefit plan of
the Corporation or a subsidiary. Such provision eliminates the voting rights
of securities acquired in violation of the provision. Such provision will
expire five years from the date of completion of the conversion of Ogdensburg
Federal Savings and Loan Association, Ogdensburg, New York (the "Association")
from mutual to stock form. The Certificate of Incorporation also imposes
certain restrictions on the voting rights of beneficial owners of more than 10%
of any class of equity security of the Corporation after five years from the
date of completion of the conversion of the Association from mutual to stock
form.
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
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not as tenants in
common
UNIF TRANSFER MIN ACT - ..............Custodian.............. under Uniform
(Cust) (Minor)
Transfers to Minors Act.......................
(State)
Additional abbreviations may also be used though not in the above list.
NOTE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME OF THE
STOCKHOLDER(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
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 THE COMMON STOCK EVIDENCED BY THIS CERTIFICATE, AND DO HEREBY IRREVOCABLY
CONSTITUTE AND APPOINT __________________________________, ATTORNEY, TO TRANSFER
THE SAID SHARES ON THE BOOKS OF THE CORPORATION, WITH FULL POWER OF
SUBSTITUTION.
DATED _____________________
______________________________________
SIGNATURE
______________________________________
SIGNATURE
IN PRESENCE OF: _______________________
<PAGE>
[Letterhead of Housley Kantarian & Bronstein, P.C.]
September 17, 1998
Board of Directors
Peoples Bankcorp, Inc.
825 State Street
Ogdensburg, New York 13669
RE: Registration Statement on Form SB-2
Gentlemen:
You have requested our opinion as special counsel to Peoples Bankcorp, Inc.
(the "Company"), in connection with the Registration Statement on Form SB-2 to
be filed with the Securities and Exchange Commission under the Securities Act of
1933, as amended (the "Registration Statement"). The Registration Statement
relates to shares of common stock of the Company (the "Common Stock") to be
issued in connection with the simultaneous conversion of Ogdensburg Federal
Savings and Loan Association (the "Association") from a federal mutual savings
and loan association to a federal capital stock savings and loan association and
reorganization into the holding company form of ownership as a wholly owned
subsidiary of the Company.
In rendering this opinion, we understand that the Common Stock will be
offered and sold in the manner described in the Prospectus which is a part of
the Registration Statement. We have examined such records and documents and
made such examination as we have deemed relevant in connection with this
opinion.
Based upon the foregoing, it is our opinion that the shares of Common Stock
will, when issued and sold as contemplated by the Registration Statement, be
legally issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us in the Prospectus under the
heading "Legal and Tax Matters."
HOUSLEY KANTARIAN & BRONSTEIN, P.C.
By: /s/ Gary R. Bronstein
------------------------------------
Gary R. Bronstein
<PAGE>
EXHIBIT 8.3
[LETTERHEAD OF FELDMAN FINANCIAL ADVISORS, INC.]
September 15, 1998
Board of Directors
Ogdensburg Federal Savings and Loan Association
825 State Street
Ogdensburg, New York 13669
Gentlemen:
It is the opinion of Feldman Financial Advisors, Inc., that the subscription
rights to be received by the eligible account holders and other eligible
subscribers of Ogdensburg Federal Savings and Loan Association (the
"Association"), pursuant to the Plan of Conversion adopted by the Board of
Directors of the Association, do not have any economic value at the time of
distribution or at the time the rights are exercised in the subscription
offering.
Such opinion is based on the fact that the subscription rights are acquired by
the recipients without payment therefor, are nontransferable and of short
duration, and afford the recipients the right only to purchase shares of common
stock of Peoples Bankcorp, Inc., the holding company formed to acquire all of
the capital stock of the Association, at a price equal to the estimated
aggregate pro forma market value, which will be the same price at which any
unsubscribed shares will be sold in the community offering.
Sincerely,
/s/ Feldman Financial Advisors, Inc.
FELDMAN FINANCIAL ADVISORS, INC.
<PAGE>
Exhibit 10.1
PEOPLES BANKCORP, INC.
1999 STOCK OPTION PLAN
1. PURPOSE OF THE PLAN.
The purpose of this Plan is to advance the interests of the Company through
providing select key Employees and Directors of the Association, the Company,
and their Affiliates with the opportunity to acquire Shares. By encouraging
such stock ownership, the Company seeks to attract, retain and motivate the best
available personnel for positions of substantial responsibility and to provide
additional incentives to Directors and key Employees of the Company or any
Affiliate to promote the success of the business.
2. DEFINITIONS.
As used herein, the following definitions shall apply.
(a) "Affiliate" shall mean any "parent corporation" or "subsidiary
corporation" of the Company, as such terms are defined in Section 424(e) and
(f), respectively, of the Code.
(b) "Agreement" shall mean a written agreement entered into in accordance
with Paragraph 5(c).
(c) "Association" shall mean Ogdensburg Federal Savings & Loan Association.
(d) "Awards" shall mean, collectively, Options and SARs, unless the context
clearly indicates a different meaning.
(e) "Board" shall mean the Board of Directors of the Company.
(f) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(g) "Committee" shall mean not only the Stock Option Committee consisting
of at least two Non-Employee Directors appointed by the Board in accordance with
Paragraph 5(a) hereof, but also the Board.
(h) "Common Stock" shall mean the common stock of the Company.
(i) "Company" shall mean Peoples Bankcorp, Inc.
(j) "Continuous Service" shall mean the absence of any interruption or
termination of service as an Employee or Director of the Company or an
Affiliate. Continuous Service shall not be considered interrupted in the case
of sick leave, military leave or any other leave of absence approved by the
Company, in the case of transfers between payroll locations of the Company or
between the Company, an Affiliate or a successor, or in the case of a Director's
performance of services in an emeritus or advisory capacity.
(k) "Date of Conversion" shall mean the date of conversion of the
Association from mutual to stock form.
(l) "Director" shall mean any member of the Board, and any member of the
board of directors of any Affiliate that the Board has by resolution designated
as being eligible for participation in this Plan.
(m) "Disability" shall mean a physical or mental condition, which in the
sole and absolute discretion of the Committee, is reasonably expected to be of
indefinite duration and to substantially prevent a Participant from fulfilling
his or her duties or responsibilities to the Company or an Affiliate.
<PAGE>
(n) "Effective Date" shall mean the date specified in Paragraph 14 hereof.
(o) "Employee" shall mean any person employed by the Company, the
Association, or an Affiliate.
(p) "Exercise Price" shall mean the price per Optioned Share at which an
Option or SAR may be exercised.
(q) "ISO" shall mean an option to purchase Common Stock which meets the
requirements set forth in the Plan, and which is intended to be and is
identified as an "incentive stock option" within the meaning of Section 422 of
the Code.
(r) "Market Value" shall mean the fair market value of the Common Stock, as
determined under Paragraph 8(b) hereof.
(s) "Non-Employee Director" shall have the meaning provided in Rule 16b-3.
(t) "Non-ISO" means an option to purchase Common Stock which meets the
requirements set forth in the Plan but which is not intended to be and is not
identified as an ISO.
(u) "Option" means an ISO and/or a Non-ISO.
(v) "Optioned Shares" shall mean Shares subject to an Award granted
pursuant to this Plan.
(w) "OTS Award Limitations" shall mean the following percentage
limitations, determined with respect to the total Shares reserved for Awards
under this Plan: 25% for total Awards to any particular Employee, 5% for total
Awards to any particular non-Employee Director, and 30% for total Awards to the
non-Employee Directors as a group.
(x) "Participant" shall mean any person who receives an Award pursuant to
the Plan.
(y) "Plan" shall mean this Peoples Bankcorp, Inc. 1999 Stock Option and
Incentive Plan.
(z) "Rule 16b-3" shall mean Rule 16b-3 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as amended.
(aa) "Share" shall mean one share of Common Stock.
(bb) "SAR" (or "Stock Appreciation Right") means a right to receive the
appreciation in value, or a portion of the appreciation in value, of a specified
number of shares of Common Stock.
(cc) "Year of Service" shall mean a full twelve-month period, measured from
the date of an Award and each annual anniversary of that date, during which a
Participant has not terminated Continuous Service for any reason.
3. TERM OF THE PLAN AND AWARDS.
(a) Term of the Plan. The Plan shall continue in effect for a term of ten
years from the Effective Date, unless sooner terminated pursuant to Paragraph 16
hereof. No Award shall be granted under the Plan after ten years from the
Effective Date.
(b) Term of Awards. The term of each Award granted under the Plan shall be
established by the Committee, but shall not exceed 10 years; provided, however,
that in the case of an Employee who owns Shares
-2-
<PAGE>
representing more than 10% of the outstanding Common Stock at the time an ISO is
granted, the term of such ISO shall not exceed five years.
4. SHARES SUBJECT TO THE PLAN.
(a) General Rule. Except as otherwise required under Paragraph 11, the
aggregate number of Shares deliverable pursuant to Awards shall not exceed
________ Shares, which equals 10% of the Shares issued by the Company in
connection with the Association's conversion from mutual to stock form. Such
Shares may be authorized but unissued Shares, Shares held in treasury, or Shares
held in a grantor trust created by the Company. If any Awards should expire,
become unexercisable, or be forfeited for any reason without having been
exercised, the Optioned Shares shall, unless the Plan shall have been
terminated, be available for the grant of additional Awards under the Plan.
(b) Special Rule for SARs. The number of Shares with respect to which an
SAR is granted, but not the number of Shares which the Company delivers or could
deliver to an Employee or individual upon exercise of an SAR, shall be charged
against the aggregate number of Shares remaining available under the Plan;
provided, however, that in the case of an SAR granted in conjunction with an
Option, under circumstances in which the exercise of the SAR results in
termination of the Option and vice versa, only the number of Shares subject to
the Option shall be charged against the aggregate number of Shares remaining
available under the Plan. The Shares involved in an Option as to which option
rights have terminated by reason of the exercise of a related SAR, as provided
in Paragraph 10 hereof, shall not be available for the grant of further Options
under the Plan.
5. ADMINISTRATION OF THE PLAN.
(a) Appointment of the Committee. The Plan shall be administered by the
Committee. Members of the Committee shall serve at the pleasure of the Board.
In the absence at any time of a duly appointed Committee, the Plan shall be
administered by the Board.
(b) Powers of the Committee. Except as limited by the express provisions
of the Plan or by resolutions adopted by the Board, the Committee shall have
sole and complete authority and discretion (i) to select Participants and grant
Awards, (ii) to determine the form and content of Awards to be issued in the
form of Agreements under the Plan, (iii) to interpret the Plan, (iv) to
prescribe, amend and rescind rules and regulations relating to the Plan, and (v)
to make other determinations necessary or advisable for the administration of
the Plan. The Committee shall have and may exercise such other power and
authority as may be delegated to it by the Board from time to time. A majority
of the entire Committee shall constitute a quorum and the action of a majority
of the members present at any meeting at which a quorum is present, or acts
approved in writing by a majority of the Committee without a meeting, shall be
deemed the action of the Committee.
(c) Agreement. Each Award shall be evidenced by a written agreement
containing such provisions as may be approved by the Committee. Each such
Agreement shall constitute a binding contract between the Company and the
Participant, and every Participant, upon acceptance of such Agreement, shall be
bound by the terms and restrictions of the Plan and of such Agreement. The
terms of each such Agreement shall be in accordance with the Plan, but each
Agreement may include such additional provisions and restrictions determined by
the Committee, in its discretion, provided that such additional provisions and
restrictions are not inconsistent with the terms of the Plan. In particular,
the Committee shall set forth in each Agreement (i) the Exercise Price of an
Option or SAR, (ii) the number of Shares subject to the Award, and its
expiration date, (iii) the manner, time, and rate (cumulative or otherwise) of
exercise or vesting of such Award, and (iv) the restrictions, if any, to be
placed upon such Award, or upon Shares which may be issued upon exercise of such
Award. The Chairman of the Committee and such other Directors and officers as
shall be designated by the Committee are hereby authorized to execute Agreements
on behalf of the Company and to cause them to be delivered to the recipients of
Awards.
-3-
<PAGE>
(d) Effect of the Committee's Decisions. All decisions, determinations and
interpretations of the Committee shall be final and conclusive on all persons
affected thereby.
(e) Indemnification. In addition to such other rights of indemnification
as they may have, the members of the Committee shall be indemnified by the
Company in connection with any claim, action, suit or proceeding relating to any
action taken or failure to act under or in connection with the Plan or any
Award, granted hereunder to the full extent provided for under the Company's
governing instruments with respect to the indemnification of Directors.
6. GRANT OF OPTIONS TO EMPLOYEES.
(a) General Rule. Only Employees shall be eligible to receive Awards. In
selecting those Employees to whom Awards will be granted and the number of
shares covered by such Awards, the Committee shall consider the position, duties
and responsibilities of the eligible Employees, the value of their services to
the Company and its Affiliates, and any other factors the Committee may deem
relevant. Notwithstanding the foregoing, the Committee shall automatically make
the Awards specified in Paragraphs 6(b) and 7 hereof, and (ii) no Employee or
non-Employee Director shall receive Options in excess of the OTS Award
Limitations. [NOT APPLICABLE IF PLAN IS IMPLEMENTED MORE THAN ONE YEAR AFTER
THE DATE OF CONVERSION.]
(b) Automatic Grants to Employees. On the Effective Date, the following
Employee shall receive an Option (in the form of an ISO, to the extent
permissible under the Code) to purchase the number of Shares indicated below
(but not to exceed the OTS Award Limitations), at an Exercise Price per Share
equal to the Market Value of a Share on the Effective Date; provided that such
grant shall not be made to an Employee whose Continuous Service terminates on or
before the Effective Date:
Percentage of Shares
Participant Reserved under Paragraph 4(a)
----------- -----------------------------
Robert E. Wilson 25%
With respect to the above-named Participant, the Option granted to the
Participant hereunder (i) shall vest in accordance with the general rule set
forth in Paragraph 9(a) of the Plan, (ii) shall have a term of ten years from
the Effective Date, and (iii) shall be subject to the general rule set forth in
Paragraph 9(c) with respect to the effect of a Participant's termination of
Continuous Service on the Participant's right to exercise his Options.
(c) Special Rules for ISOs. The aggregate Market Value, as of the date the
Option is granted, of the Shares with respect to which ISOs are exercisable for
the first time by an Employee during any calendar year (under all incentive
stock option plans, as defined in Section 422 of the Code, of the Company or any
present or future Affiliate of the Company) shall not exceed $100,000.
Notwithstanding the foregoing, the Committee may grant Options in excess of the
foregoing limitations, in which case Options granted in excess of such
limitation shall be Non-ISOs.
7. Grants of Options to Non-employee Directors
(a) Automatic Grants. Notwithstanding any other provisions of this Plan,
each Director who is not an Employee but is a Director on the Effective Date
shall receive, on said date, Non-ISOs to purchase a number of Shares equal to 5%
of the Shares reserved under the Plan. Such Non-ISOs shall have an Exercise
Price per Share equal to the Market Value of a Share on the date of grant.
-4-
<PAGE>
(b) Terms of Exercise. Options received under the provisions of this
Paragraph (i) shall become exercisable in accordance with paragraph 9(a) of the
Plan, and (ii) may be exercised from time to time by written notice of intent to
exercise the Option with respect to all or a specified number of the Optioned
Shares, and payment to the Company (contemporaneously with the delivery of such
notice), in cash, in Common Stock, or a combination of cash and Common Stock, of
the amount of the Exercise Price for the number of the Optioned Shares with
respect to which the Option is then being exercised. Each such notice and
payment shall be delivered, or mailed by prepaid registered or certified mail,
addressed to the Treasurer of the Company at the Company's executive offices. A
Director who exercises Options pursuant to this Paragraph may satisfy all
applicable federal, state and local income and employment tax withholding
obligations, in whole or in part, by irrevocably electing to have the Company
withhold shares of Common Stock, or to deliver to the Company shares of Common
Stock that he already owns, having a value equal to the amount required to be
withheld; provided that to the extent not inconsistent herewith, such election
otherwise complies with those requirements of Paragraphs 8 and 19 hereof.
Options granted under this Paragraph shall have a term of ten years;
provided that Options granted under this Paragraph shall expire one year after
the date on which a Director terminates Continuous Service on the Board for a
reason other than death, but in no event later than the date on which such
Options would otherwise expire. In the event of such Director's death during
the term of his directorship, Options granted under this Paragraph shall become
immediately exercisable, and may be exercised within two years from the date of
his death by the personal representatives of his estate or person or persons to
whom his rights under such Option shall have passed by will or by laws of
descent and distribution, but in no event later than the date on which such
Options would otherwise expire. In the event of such Director's Disability
during his or her directorship, the Director's Option shall become immediately
exercisable, and such Option may be exercised within one year of the termination
of directorship due to Disability, but not later than the date that the Option
would otherwise expire. Unless otherwise inapplicable or inconsistent with the
provisions of this Paragraph, the Options to be granted to Directors hereunder
shall be subject to all other provisions of this Plan.
(c) Effect of the Committee's Decisions. The Committee's determination
whether a Participant's Continuous Service has ceased, and the effective date
thereof, shall be final and conclusive on all persons affected thereby.
8. EXERCISE PRICE FOR OPTIONS.
(a) Limits on Committee Discretion. The Exercise Price as to any
particular Option shall not be less than 100% of the Market Value of the
Optioned Shares on the date of grant. In the case of an Employee who owns
Shares representing more than 10% of the Company's outstanding Shares of Common
Stock at the time an ISO is granted, the Exercise Price shall not be less than
110% of the Market Value of the Optioned Shares at the time the ISO is granted.
(b) Standards for Determining Exercise Price. If the Common Stock is
listed on a national securities exchange (including the NASDAQ National Market
System) on the date in question, then the Market Value per Share shall be the
average of the highest and lowest selling price on such exchange on such date,
or if there were no sales on such date, then the Exercise Price shall be the
mean between the bid and asked price on such date. If the Common Stock is
traded otherwise than on a national securities exchange on the date in question,
then the Market Value per Share shall be the mean between the bid and asked
price on such date, or, if there is no bid and asked price on such date, then on
the next prior business day on which there was a bid and asked price. If no
such bid and asked price is available, then the Market Value per Share shall be
its fair market value as determined by the Committee, in its sole and absolute
discretion.
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<PAGE>
9. EXERCISE OF OPTIONS.
(a) Generally. Each Option shall become exercisable with respect to twenty
percent (20%) of the Optioned Shares upon the Participant's completion of each
of five Years of Service, provided that an Option shall become fully (100%)
exercisable immediately upon termination of the Participant's Continuous Service
due to the Participant's Disability or death. [MAY BE DIFFERENT IF THE PLAN IS
IMPLEMENTED MORE THAN ONE YEAR AFTER THE DATE OF CONVERSION.] An Option may not
be exercised for a fractional Share. [IF THE PLAN IS IMPLEMENTED MORE THAN ONE
YEAR AFTER THE DATE OF CONVERSION, VESTING WOULD ACCELERATE TO 100% UPON A
PARTICIPANT'S RETIREMENT OR TERMINATION OF SERVICE IN CONNECTION WITH A CHANGE
IN CONTROL.]
(b) Procedure for Exercise. A Participant may exercise Options, subject to
provisions relative to its termination and limitations on its exercise, only by
(1) written notice of intent to exercise the Option with respect to a specified
number of Shares, and (2) payment to the Company (contemporaneously with
delivery of such notice) in cash, in Common Stock, or a combination of cash and
Common Stock, of the amount of the Exercise Price for the number of Shares with
respect to which the Option is then being exercised. Each such notice (and
payment where required) shall be delivered, or mailed by prepaid registered or
certified mail, addressed to the Treasurer of the Company at its executive
offices. Common Stock utilized in full or partial payment of the Exercise Price
for Options shall be valued at its Market Value at the date of exercise, and may
consist of Shares subject to the Option being exercised.
(c) Period of Exercisability. Except to the extent otherwise provided in
the terms of an Agreement, an Option may be exercised by a Participant only
while he is an Employee and has maintained Continuous Service from the date of
the grant of the Option, or within one year after termination of such Continuous
Service (but not later than the date on which the Option would otherwise
expire), except if the Employee's Continuous Service terminates by reason of --
(1) "Just Cause" which for purposes hereof shall have the meaning set
forth in any unexpired employment or severance agreement between the
Participant and the Association and/or the Company (and, in the absence of
any such agreement, shall mean termination because of the Employee's
personal dishonesty, incompetence, willful misconduct, breach of 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),
then the Participant's rights to exercise such Option shall expire on the
date of such termination; or
(2) death, then to the extent that the Participant would have been
entitled to exercise the Option immediately prior to his death, such Option
of the deceased Participant may be exercised within two years from the date
of his death (but not later than the date on which the Option would
otherwise expire) by the personal representatives of his estate or person
or persons to whom his rights under such Option shall have passed by will
or by laws of descent and distribution.
(d) Effect of the Committee's Decisions. The Committee's determination
whether a Participant's Continuous Service has ceased, and the effective date
thereof, shall be final and conclusive on all persons affected thereby.
(e) Mandatory Six-Month Holding Period. Notwithstanding any other
provision of this Plan to the contrary, common stock of the Company that is
purchased upon exercise of an Option or SAR may not be sold within the six-month
period following the grant of that Option or SAR.
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<PAGE>
10. SARS (STOCK APPRECIATION RIGHTS)
(a) Granting of SARs. In its sole discretion, the Committee may from time
to time grant SARs to Employees either in conjunction with, or independently of,
any Options granted under the Plan. An SAR granted in conjunction with an
Option may be an alternative right wherein the exercise of the Option terminates
the SAR to the extent of the number of shares purchased upon exercise of the
Option and, correspondingly, the exercise of the SAR terminates the Option to
the extent of the number of Shares with respect to which the SAR is exercised.
Alternatively, an SAR granted in conjunction with an Option may be an additional
right wherein both the SAR and the Option may be exercised. An SAR may not be
granted in conjunction with an ISO under circumstances in which the exercise of
the SAR affects the right to exercise the ISO or vice versa, unless the SAR, by
its terms, meets all of the following requirements:
(1) The SAR will expire no later than the ISO;
(2) The SAR may be for no more than the difference between the
Exercise Price of the ISO and the Market Value of the Shares
subject to the ISO at the time the SAR is exercised;
(3) The SAR is transferable only when the ISO is transferable, and
under the same conditions;
(4) The SAR may be exercised only when the ISO may be exercised; and
(5) The SAR may be exercised only when the Market Value of the Shares
subject to the ISO exceeds the Exercise Price of the ISO.
(b) Terms of SAR Awards. The provisions of Paragraphs 8 and 9 are
incorporated by reference herein, and shall determine the terms of SARs (to the
extent not inconsistent herewith).
(c) Exercise of SARs. An SAR granted hereunder shall be exercisable at
such times and under such conditions as shall be permissible under the terms of
the Plan and of the Agreement granted to a Participant, provided that an SAR may
not be exercised for a fractional Share. Upon exercise of an SAR, the
Participant shall be entitled to receive, without payment to the Company except
for applicable withholding taxes, an amount equal to the excess of (or, in the
discretion of the Committee if provided in the Agreement, a portion of) the
excess of the then aggregate Market Value of the number of Optioned Shares with
respect to which the Participant exercises the SAR, over the aggregate Exercise
Price of such number of Optioned Shares. This amount shall be payable by the
Company, in the discretion of the Committee, in cash or in Shares valued at the
then Market Value thereof, or any combination thereof.
11. EFFECT OF CHANGES IN COMMON STOCK SUBJECT TO THE PLAN.
(a) Recapitalizations; Stock Splits, Etc. The number and kind of shares
reserved for issuance under the Plan, and the number and kind of shares subject
to outstanding Awards, and the Exercise Price thereof, shall be proportionately
adjusted for any increase, decrease, change or exchange of Shares for a
different number or kind of shares or other securities of the Company which
results from a merger, consolidation, recapitalization, reorganization,
reclassification, stock dividend, split-up, combination of shares, or similar
event in which the number or kind of shares is changed without the receipt or
payment of consideration by the Company.
(b) Transactions in which the Company is Not the Surviving Entity. In the
event of (i) the liquidation or dissolution of the Company, (ii) a merger or
consolidation in which the Company is not the surviving entity, or (iii) the
sale or disposition of all or substantially all of the Company's assets (any of
the foregoing to be referred to herein as a "Transaction"), all outstanding
Awards, together with the Exercise Prices thereof, shall be equitably adjusted
for any change or exchange of Shares for a different number or kind of shares or
other securities which results from the Transaction.
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<PAGE>
(c) Special Rule for ISOs. Any adjustment made pursuant to subparagraphs
(a) or (b) hereof shall be made in such a manner as not to constitute a
modification, within the meaning of Section 424(h) of the Code, of outstanding
ISOs.
(d) Conditions and Restrictions on New, Additional, or Different Shares or
Securities. If, by reason of any adjustment made pursuant to this Paragraph, a
Participant becomes entitled to new, additional, or different shares of stock or
securities, such new, additional, or different shares of stock or securities
shall thereupon be subject to all of the conditions and restrictions which were
applicable to the Shares pursuant to the Award before the adjustment was made.
(e) Other Issuances. Except as expressly provided in this Paragraph, the
issuance by the Company or an Affiliate of shares of stock of any class, or of
securities convertible into Shares or stock of another class, for cash or
property or for labor or services either upon direct sale or upon the exercise
of rights or warrants to subscribe therefor, shall not affect, and no adjustment
shall be made with respect to, the number, class, or Exercise Price of Shares
then subject to Awards or reserved for issuance under the Plan.
(f) Certain Special Dividends. The Exercise Price of shares subject to
outstanding Awards shall be proportionately adjusted upon the payment of a
special large and nonrecurring dividend that has the effect of a return of
capital to the stockholders.
12. NON-TRANSFERABILITY OF AWARDS.
Awards may not be sold, pledged, assigned, hypothecated, transferred or
disposed of in any manner other than by will or by the laws of descent and
distribution. Notwithstanding the foregoing, or any other provision of this
Plan, a Participant who holds Awards may transfer such Awards (but not Incentive
Stock Options) to his or her spouse, lineal ascendants, lineal descendants, or
to a duly established trust for the benefit of one or more of these individuals.
Awards so transferred may thereafter be transferred only to the Participant who
originally received the grant or to an individual or trust to whom the
Participant could have initially transferred the Awards pursuant to this
Paragraph 12. Awards which are transferred pursuant to this Paragraph 12 shall
be exercisable by the transferee according to the same terms and conditions as
applied to the Participant.
13. TIME OF GRANTING AWARDS.
The date of grant of an Award shall, for all purposes, be the later of the
date on which the Committee makes the determination of granting such Award, and
the Effective Date. Notice of the determination shall be given to each
Participant to whom an Award is so granted within a reasonable time after the
date of such grant.
14. EFFECTIVE DATE.
The Plan shall become effective immediately upon its approval by a
favorable vote of stockholders owning at least a majority of the total votes
eligible to be cast at a duly called meeting of the Company's stockholders held
in accordance with applicable laws, provided that the Plan shall not be
submitted for such approval within the six-month period after the Association
completes its mutual-to-stock conversion.[STOCKHOLDER APPROVAL MAY BE
UNNECESSARY, OR INVOLVE A DIFFERENT VOTE REQUIREMENT, IF THE PLAN IS IMPLEMENTED
MORE THAN ONE YEAR AFTER THE DATE OF CONVERSION.] No Awards may be made prior
to approval of the Plan by the stockholders of the Company.
15. MODIFICATION OF AWARDS.
At any time, and from time to time, the Board may authorize the Committee
to direct execution of an instrument providing for the modification of any
outstanding Award, provided no such modification shall confer on
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<PAGE>
the holder of said Award any right or benefit which could not be conferred on
him by the grant of a new Award at such time, or impair the Award without the
consent of the holder of the Award.
16. AMENDMENT AND TERMINATION OF THE PLAN.
The Board may from time to time amend the terms of the Plan and, with
respect to any Shares at the time not subject to Awards, suspend or terminate
the Plan. No amendment, suspension or termination of the Plan shall, without
the consent of any affected holders of an Award, alter or impair any rights or
obligations under any Award theretofore granted.
17. CONDITIONS UPON ISSUANCE OF SHARES.
(a) Compliance with Securities Laws. Shares of Common Stock shall not be
issued with respect to any Award unless the issuance and delivery of such Shares
shall comply with all relevant provisions of law, including, without limitation,
the Securities Act of 1933, as amended, the rules and regulations promulgated
thereunder, any applicable state securities law, and the requirements of any
stock exchange upon which the Shares may then be listed.
(b) Special Circumstances. The inability of the Company to obtain approval
from any regulatory body or authority deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder shall relieve
the Company of any liability in respect of the non-issuance or sale of such
Shares. As a condition to the exercise of an Option or SAR, the Company may
require the person exercising the Option or SAR to make such representations and
warranties as may be necessary to assure the availability of an exemption from
the registration requirements of federal or state securities law.
(c) Committee Discretion. The Committee shall have the discretionary
authority to impose in Agreements such restrictions on Shares as it may deem
appropriate or desirable, including but not limited to the authority to impose a
right of first refusal or to establish repurchase rights or both of these
restrictions.
18. RESERVATION OF SHARES.
The Company, during the term of the Plan, will reserve and keep available a
number of Shares sufficient to satisfy the requirements of the Plan.
19. WITHHOLDING TAX.
The Company's obligation to deliver Shares upon exercise of Options and/or
SARs shall be subject to the Participant's satisfaction of all applicable
federal, state and local income and employment tax withholding obligations. The
Committee, in its discretion, may permit the Participant to satisfy the
obligation, in whole or in part, by irrevocably electing to have the Company
withhold Shares, or to deliver to the Company Shares that he already owns,
having a value equal to the amount required to be withheld. The value of the
Shares to be withheld, or delivered to the Company, shall be based on the Market
Value of the Shares on the date the amount of tax to be withheld is to be
determined. As an alternative, the Company may retain, or sell without notice,
a number of such Shares sufficient to cover the amount required to be withheld.
20. NO EMPLOYMENT OR OTHER RIGHTS.
In no event shall an Employee's or Director's eligibility to participate or
participation in the Plan create or be deemed to create any legal or equitable
right of the Employee, Director, or any other party to continue service with the
Company, the Association, or any Affiliate of such corporations. Except to the
extent provided in Paragraphs 6(b) and 7(a), no Employee or Director shall have
a right to be granted an Award or, having received an Award, the right to again
be granted an Award. However, an Employee or Director who has been granted an
Award may, if otherwise eligible, be granted an additional Award or Awards.
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<PAGE>
21. GOVERNING LAW.
The Plan shall be governed by and construed in accordance with the laws of
the State of New York, except to the extent that federal law shall be deemed to
apply.
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<PAGE>
PEOPLES BANKCORP, INC.
MANAGEMENT RECOGNITION PLAN
ARTICLE I
ESTABLISHMENT OF THE PLAN
1.01 The Company hereby establishes this Plan upon the terms and
conditions hereinafter stated.
1.02 Through acceptance of their appointment to the Committee, each member
of the Committee hereby accepts his or her appointment hereunder upon the terms
and conditions hereinafter stated.
ARTICLE II
PURPOSE OF THE PLAN
2.01 The purpose of the Plan is to reward and retain personnel of
experience and ability in key positions of responsibility by providing Employees
and Directors of the Company, the Association, and their Affiliates with a
proprietary interest in the Company, and as compensation for their past
contributions to the Association, and as an incentive to make such contributions
in the future.
ARTICLE III
DEFINITIONS
The following words and phrases when used in this Plan with an initial
capital letter, shall have the meanings set forth below unless the context
clearly indicates otherwise. Wherever appropriate, the masculine pronoun shall
include the feminine pronoun and the singular shall include the plural.
3.01 "Affiliate" shall mean any "parent corporation" or "subsidiary
corporation" of the Company, as such terms are defined in Section 424(e) and
(f), respectively, of the Internal Revenue Code of 1986, as amended.
3.02 "Association" means Ogdensburg Federal Savings & Loan Association.
3.03 "Beneficiary" means the person or persons designated by a Participant
to receive any benefits payable under the Plan in the event of such
Participant's death. Such person or persons shall be designated in writing on
forms provided for this purpose by the Committee and may be changed from time to
time by similar written notice to the Committee. In the absence of a written
designation, the Beneficiary shall be the Participant's surviving spouse, if any
or if none, his estate.
3.04 "Board" means the Board of Directors of the Company.
3.05 "Committee" means the Management Recognition Plan Committee appointed
by the Board pursuant to Article IV hereof.
3.06 "Common Stock" means shares of the common stock of the Company.
3.07 "Company" means Peoples Bankcorp, Inc..
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3.08 "Continuous Service" shall mean the absence of any interruption or
termination of service as an Employee or Director of the Company or an
Affiliate. Continuous Service shall not be considered interrupted in the case
of sick leave, military leave or any other leave of absence approved by the
Company in the case of transfers between payroll locations of the Company or
between the Company, an Affiliate or a successor, or in the case of a Director's
performance of services in an emeritus or advisory capacity.
3.09 "Date of Conversion" means the date of the conversion of the
Association from mutual to stock form.
3.10 "Director" means a member of the Board.
3.11 "Disability" shall mean a physical or mental condition, which in the
sole and absolute discretion of the Committee, is reasonably expected to be of
indefinite duration and to substantially prevent a Participant from fulfilling
his or her duties or responsibilities to the Company or an Affiliate.
3.12 "Effective Date" means the date on which the Plan first becomes
effective, as determined under Section 8.07 hereof.
3.13 "Employee" means any person who is employed by the Company or an
Affiliate.
3.14 "Non-Employee Director" shall have the meaning provided in Rule 16b-3
of the General Rules and Regulations under the Securities Exchange Act of 1934,
as amended.
3.15 "OTS Award Limitations" shall mean the following percentage
limitations, determined with respect to the total shares reserved for awards
under this Plan: 25% for total Plan Share Awards to any particular Employee, 5%
for total Plan Share Awards to any particular non-Employee Director, and 30% for
total Plan Share Awards to the non-Employee Directors as a group.
3.16 "Participant" means an Employee or Director who holds a Plan Share
Award.
3.17 "Plan" means this Peoples Bankcorp, Inc. Management Recognition Plan.
3.18 "Plan Shares" means shares of Common Stock held in the Trust which
are awarded or issuable to a Participant pursuant to the Plan.
3.19 "Plan Share Award" means a right granted under this Plan to receive
Plan Shares.
3.20 "Plan Share Reserve" means the shares of Common Stock held by the
Trustee pursuant to Sections 5.02 and 5.03.
3.21 "Trust" and "Trust Agreement" mean that agreement entered into
pursuant to the terms hereof between the Company and the Trustee, and "Trust"
means the trust created thereunder.
3.22 "Trustee" means that person(s) or entity appointed by the Board
pursuant to the Trust Agreement to hold legal title to the Plan assets for the
purposes set forth herein.
3.23 "Year of Service" shall mean a full twelve-month period, measured
from the date of a Plan Share Award and each annual anniversary of that date,
during which a Participant's Continuous Service has not terminated for any
reason.
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ARTICLE IV
ADMINISTRATION OF THE PLAN
4.01 ROLE AND POWERS OF THE COMMITTEE. The Plan shall be administered and
interpreted by the Committee, which shall consist of not less than two members
of the Board who are Non-Employee Directors. In the absence at any time of a
duly appointed Committee, the Plan shall be administered by those members of the
Board who are Non-Employee Directors, and by the Board if there are less than
two Non-Employee Directors.
The Committee shall have all of the powers allocated to it in this and
other Sections of the Plan. Except as limited by the express provisions of the
Plan or by resolutions adopted by the Board, the Committee shall have sole and
complete authority and discretion (i) to make Plan Share Awards to such
Employees as the Committee may select, (ii) to determine the form and content of
Plan Share Awards to be issued under the Plan, (iii) to interpret the Plan, (iv)
to prescribe, amend and rescind rules and regulations relating to the Plan, and
(v) to make other determinations necessary or advisable for the administration
of the Plan. The Committee shall have and may exercise such other power and
authority as may be delegated to it by the Board from time to time. Subject to
Section 4.02, the interpretation and construction by the Committee of any
provisions of the Plan or of any Plan Share Award granted hereunder shall be
final and binding. The Committee shall act by vote or written consent of a
majority of its members, and shall report its actions and decisions with respect
to the Plan to the Board at appropriate times, but in no event less than one
time per calendar year. The Committee may recommend to the Board one or more
persons or entity to act as Trustee(s) in accordance with the provisions of this
Plan and the Trust.
4.02 ROLE OF THE BOARD. The members of the Committee shall be appointed
or approved by, and will serve at the pleasure of, the Board. The Board may in
its discretion from time to time remove members from, or add members to, the
Committee. The Board shall have all of the powers allocated to it in this and
other Sections of the Plan, may take any action under or with respect to the
Plan which the Committee is authorized to take, and may reverse or override any
action taken or decision made by the Committee under or with respect to the
Plan, provided, however, that the Board may not revoke any Plan Share Award
already made or impair a participant's vested rights under a Plan Share Award.
Members of the Board who are eligible for or who have been granted Plan Share
Awards (other than pursuant to Section 6.04) may not vote on any matters
affecting the administration of the Plan or the grant of Plan Shares or Plan
Share Awards (although such members may be counted in determining the existence
of a quorum at any meeting of the Board during which actions with regard thereto
are taken). Further, with respect to all actions taken by the Board in regard
to the Plan, such action shall be taken by a majority of the Board where such a
majority of the directors acting in the matter are Non-Employee Directors.
4.03 LIMITATION ON LIABILITY. No member of the Board or the Committee or
the Trustee(s) shall be liable for any determination made in good faith with
respect to the Plan or any Plan Shares or Plan Share Awards granted under it.
If a member of the Board or the Committee or any Trustee is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative, by
reason of anything done or not done by him in such capacity under or with
respect to the Plan, the Company shall indemnify such member, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him or her in connection with such action,
suit or proceeding if he or she acted in good faith and in a manner he or she
reasonably believed to be in the best interests of the Company and its
Affiliates and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
ARTICLE V
CONTRIBUTIONS; PLAN SHARE RESERVE
5.01 AMOUNT AND TIMING OF CONTRIBUTIONS. The Board shall determine the
amounts (or the method of computing the amounts) to be contributed by the
Company to the Trust, provided that the Association may also
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<PAGE>
make contributions to the Trust. Such amounts shall be paid to the Trustee at
the time of contribution. No contributions to the Trust by Employees shall be
permitted.
5.02 INVESTMENT OF TRUST ASSETS; MAXIMUM PLAN SHARE AWARDS. The Trustee
shall invest Trust assets only in accordance with the Trust Agreement; provided
that the Trust shall not purchase, and Plan Share Awards shall not be made with
respect to, more than four percent (4%) of the number of Shares issued on the
Date of Conversion. Common Stock purchased by the Trust may be newly issued
shares, treasury shares, or shares held in a grantor trust.
5.03 EFFECT OF ALLOCATIONS, RETURNS AND FORFEITURES UPON PLAN SHARE
RESERVES. Upon the allocation of Plan Share Awards under Section 6.02, the Plan
Share Reserve shall be reduced by the number of Shares subject to the Awards so
allocated. Any Shares subject or attributable to an Award which may not be
earned because of a forfeiture by the Participant pursuant to Section 7.01 shall
be added to the Plan Share Reserve.
ARTICLE VI
ELIGIBILITY; ALLOCATIONS
6.01 ELIGIBILITY. Except as otherwise provided in Section 6.04 hereof,
the Committee shall make Plan Share Awards only to Employees. In selecting
those Employees to whom Plan Share Awards will be granted and the number of
shares covered by such Awards, the Committee shall consider the position, duties
and responsibilities of the eligible Employees, the value of their services to
the Company and its Affiliates, and any other factors the Committee may deem
relevant. Notwithstanding the foregoing, (i) the Committee shall automatically
make the Plan Share Awards specified in Sections 6.04 and 6.05 hereof; and (ii)
no Employee or non-Employee Director shall receive Plan Share Awards in excess
of the OTS Award Limitations. [NOT APPLICABLE IF PLAN IS IMPLEMENTED MORE THAN
ONE YEAR AFTER THE DATE OF CONVERSION.]
6.02 ALLOCATIONS. The Committee will determine which Employees and
Directors will be granted discretionary Plan Share Awards, and the number of
Shares covered by each Plan Share Award, provided that in no event shall any
Awards be made which will violate the governing instruments of the Association
or its Affiliates or any applicable federal or state law or regulation. In the
event Plan Shares are forfeited for any reason or additional shares of Common
Stock are purchased by the Trustee, the Committee may, from time to time,
determine which of the Employees referenced in Section 6.01 above will be
granted additional Plan Share Awards to be awarded from the forfeited or
acquired Plan Shares.
6.03 FORM OF ALLOCATION. As promptly as practicable after a determination
is made pursuant to Section 6.02 that a Plan Share Award is to be made, the
Committee shall notify the Participant in writing of the grant of the Award, the
number of Plan Shares covered by the Award, and the terms upon which the Plan
Shares subject to the Award may be earned. The date on which the Committee so
notifies the Participant shall be considered the date of grant of the Plan Share
Awards. The Committee shall maintain records as to all grants of Plan Share
Awards under the Plan.
6.04 AUTOMATIC GRANTS TO NON-EMPLOYEE DIRECTORS. Notwithstanding any
other provisions of this Plan, each Director who is not an Employee but is a
Director on the Effective Date shall receive, on said date, a Plan Share Award
for a number of Shares equal to the five (5%) of the number of Plan Shares which
the Trust is authorized to purchase pursuant to Section 5.02 of the Plan.
Plan Share Awards received under the provisions of this Section shall
become vested and nonforfeitable according to the general rules set forth in
subsections (a), and (b) of Section 7.01, and the Committee shall have no
discretion to alter or accelerate said vesting requirements. Unless otherwise
inapplicable or inconsistent with the provisions of this Section, the Plan Share
Awards to be granted hereunder shall be subject to all other provisions of this
Plan.
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6.05 AUTOMATIC GRANTS TO EMPLOYEES. On the Effective Date, the following
individual shall receive a Plan Share Award as to the number of Plan Shares
indicated below, provided that such award shall not be made to an individual who
is not an Employee on the Effective Date:
<TABLE>
<CAPTION>
Employee Shares Subject to Plan Share Award
-------- ----------------------------------
<S> <C>
Robert E. Wilson 25%
</TABLE>
Plan Share Awards received under the provisions of this Section shall
become vested and nonforfeitable according to the general rules set forth in
subsections (a) and (b) of Section 7.01, and the Committee shall have no
discretion to alter said vesting requirements. Unless otherwise inapplicable or
inconsistent with the provisions of this Section, the Plan Share Awards to be
granted hereunder shall be subject to all other provisions of this Plan.
6.06 ALLOCATIONS NOT REQUIRED. Notwithstanding anything to the contrary
in Sections 6.01 and 6.02, but subject to Sections 6.04 and 6.05, no Employee or
Director shall have any right or entitlement to receive a Plan Share Award
hereunder, such Awards being at the total discretion of the Committee, nor shall
any Employees or Directors as a group have such a right. The Committee may,
with the approval of the Board (or, if so directed by the Board) return all
Common Stock in the Plan Share Reserve to the Company at any time, and cease
issuing Plan Share Awards.
ARTICLE VII
EARNINGS AND DISTRIBUTION OF PLAN SHARES; VOTING RIGHTS
7.01 EARNING PLAN SHARES; FORFEITURES.
(a) GENERAL RULES. Twenty percent (20%) of the Plan Shares subject
to a Plan Share Award shall be earned and become non-forfeitable by a
Participant upon his or her completion of each of five Years of Service. [MAY BE
DIFFERENT IF THE PLAN IS IMPLEMENTED MORE THAN ONE YEAR AFTER THE DATE OF
CONVERSION.]
(b) EXCEPTION FOR TERMINATIONS DUE TO DEATH OR DISABILITY.
Notwithstanding the general rule contained in Section 7.01(a) above, all Plan
Shares subject to a Plan Share Award held by a Participant whose service with
the Company or an Affiliate terminates due to the Participant's death or
Disability shall be deemed earned as of the Participant's last day of service
with the Company or an Affiliate and shall be distributed as soon as practicable
thereafter. [IF THE PLAN IS IMPLEMENTED MORE THAN ONE YEAR AFTER THE DATE OF
CONVERSION, VESTING WOULD ACCELERATE TO 100% UPON A PARTICIPANT'S RETIREMENT OR
TERMINATION OF SERVICE IN CONNECTION WITH A CHANGE IN CONTROL.]
7.02 ACCRUAL OF DIVIDENDS. Whenever Plan Shares are paid to a Participant
or Beneficiary under Section 7.03, such Participant or Beneficiary shall also be
entitled to receive, with respect to each Plan Share paid, an amount equal to
any cash dividends (including special large and nonrecurring dividends,
including one that has the effect of a return of capital to the Company's
stockholders) and a number of shares of Common Stock equal to any stock
dividends, declared and paid with respect to a share of Common Stock between the
date the relevant Plan Share Award was initially granted to such Participant and
the date the Plan Shares are being distributed. There shall also be distributed
an appropriate amount of net earnings, if any, of the Trust with respect to any
cash dividends so paid out.
5
<PAGE>
7.03 DISTRIBUTION OF PLAN SHARES.
(a) TIMING OF DISTRIBUTIONS: GENERAL RULE. Except as provided in
subsections (c), and (d) below, the Trustee shall distribute Plan Shares and
accumulated cash from dividends and interest to the Participant or his
Beneficiary, as the case may be, as soon as practicable after they have been
earned. No fractional shares shall be distributed.
(b) FORM OF DISTRIBUTION. The Trustee shall distribute all Plan
Shares, together with any shares representing stock dividends, in the form of
Common Stock. One share of Common Stock shall be given for each Plan Share
earned. Payments representing cash dividends (and earnings thereon) shall be
made in cash.
(c) WITHHOLDING. The Trustee shall withhold from any cash payment
made under this Plan sufficient amounts to cover any applicable withholding and
employment taxes, and if the amount of such cash payment is not sufficient, the
Trustee shall require the Participant or Beneficiary to pay to the Trustee the
amount required to be withheld as a condition of delivering the Plan Shares.
The Trustee shall pay over to the Company or Affiliate which employs or employed
such Participant any such amount withheld from or paid by the Participant or
Beneficiary.
(d) TIMING: EXCEPTION FOR 10% SHAREHOLDERS. Notwithstanding
Subsections (a) and (b) above, no Plan Shares may be distributed prior to the
date which is five (5) years from the Date of Conversion to the extent the
Participant or Beneficiary, as the case may be, would after receipt of such
Shares own in excess of ten percent (10%) of the issued and outstanding shares
of Common Stock unless such action is approved in advance by a majority vote of
non-employee directors of the Board. To the extent this limitation would delay
the date on which a Participant receives Plan Shares, the Participant may elect
to receive from the Trust, in lieu of such Plan Shares, the cash equivalent
thereof. Any Plan Shares remaining undistributed solely by reason of the
operation of this Subsection (d) shall be distributed to the Participant or his
Beneficiary on the date which is five years from the Date of Conversion.
(e) REGULATORY EXCEPTIONS. No Plan Shares shall be distributed
unless and until all of the requirements of all applicable law and regulation
shall have been fully complied with, including the receipt of approval of the
Plan by the stockholders of the Company by such vote, if any, as may be required
by applicable law and regulations.
7.04 VOTING OF PLAN SHARES. All shares of Common Stock held by the Trust
(whether or not subject to a Plan Share Award) shall be voted by the Trustee in
the same proportion as the trustee of the Company's Employee Stock Ownership
Plan votes Common Stock held in the trust associated therewith, and in the
absence of any such voting, shall be voted in the manner directed by the Board.
7.05 DEFERRAL ELECTIONS BY PARTICIPANTS.
(a) ELECTIONS TO DEFER. At any time prior to December 31st of any
year prior to the date on which a Participant becomes vested in any shares
subject to his or her Plan Share Award, a Participant who is a member of a
select group of management or highly compensated employees (within the meaning
of the Employees= Retirement Income Security Act of 1973) may irrevocably elect,
on the form attached hereto as Exhibit "A" (the "Election Form"), to defer the
receipt of all or a percentage of the Plan Shares that would otherwise be
transferred to the Participant upon the vesting of such award (the "Deferred
Shares").
(b) RECORDKEEPING; HOLDING OF DEFERRED SHARES. The MRP Committee
shall establish and maintain an individual account in the name of each
Participant who files an Election Form for the purpose of tracking deferred
earnings attributable to cash dividends paid on Deferred Shares (the "Cash
Account"). On the last day of each fiscal year of the Company, the Committee
shall credit to the Participant's Cash Account earnings on the balance of the
Cash Account at a rate equal to the dividend-adjusted total return on Common
Stock, as determined from time to time by the MRP Committee in its sole
discretion. The Trustees shall hold each Participant's Deferred Shares and
6
<PAGE>
Deferred Earnings in the Trust until distribution is required pursuant to the
election set forth in the Participant's Election Form.
(c) DISTRIBUTIONS OF DEFERRED SHARES. The Trustee shall distribute
a Participant's Deferred Shares and Deferred Earnings in accordance with the
Participant's Election Form. All distributions made by the Company and/or the
Trustees pursuant to elections made hereunder shall be subject to applicable
federal, state, and local tax withholding and to such other deductions as shall
at the time of such payment be required under any income tax or other law,
whether of the United States or any other jurisdiction, and, in the case of
payments to a beneficiary, the delivery to the Committee and/or Trustees of all
necessary waivers, qualifications and other documentation. Within 90 days after
receiving notice of a Participant's death, the Trustee shall distribute any
balance of the Participant's Deferred Shares and Deferred Earnings to the
Participant's designated beneficiary, if living, or if such designated
beneficiary is deceased or the Participant failed to designate a beneficiary, to
the Participant's estate. If, on the other hand, a Participant's Continuous
Service terminates for a reason other than the Participant's death, Disability,
early retirement, or normal retirement, the Participant's Deferred Shares and
Deferred Earnings shall be distributed to the Participant in a lump sum
occurring as soon as reasonably practicable. The distribution provisions of a
Participant=s Election Form shall become irrevocable on the first to occur of
(i) the date one year before the Participant=s termination of Continuous Service
for a reason other than death, and (ii) on the Participant=s death if that
terminates the Participant=s Continuous Service.
(d) HARDSHIP WITHDRAWALS. Notwithstanding any other provision of
the Plan or a Participant's Election Form, in the event the Participant suffers
an unforeseeable emergency hardship within the contemplation of this paragraph,
the Participant may apply to the Committee for an immediate distribution of all
or a portion of his Deferred Shares and Deferred Earnings. The hardship must
result from a sudden and unexpected illness or accident of the Participant or a
dependent of the Participant, casualty loss of property, or other similar
conditions beyond the control of the Participant. Examples of purposes which are
not considered hardships include post-secondary school expenses or the desire to
purchase a residence. In no event will a distribution be made to the extent the
hardship could be relieved through reimbursement or compensation by insurance or
otherwise, or by liquidation of the Participant's nonessential assets to the
extent such liquidation would not itself cause a severe financial hardship. The
amount of any distribution hereunder shall be limited to the amount necessary to
relieve the Participant's financial hardship. The determination of whether a
Participant has a qualifying hardship and the amount which qualifies for
distribution, if any, shall be made by the Committee in its sole discretion. The
Committee may require evidence of the purpose and amount of the need, and may
establish such application or other procedures as it deems appropriate.
(e) RIGHTS TO DEFERRED SHARES AND EARNINGS. A Participant may not
assign his or her claim to Deferred Shares and Deferred Earnings during his or
her lifetime, except in accordance with Section 8.03 of this Plan. A
Participant's right to Deferred Shares and Deferred Earnings shall at all times
constitute an unsecured promise of the Company to pay benefits as they come due.
The right of the Participant or his or her beneficiary to receive benefits
hereunder shall be solely an unsecured claim against the general assets of the
Company. Neither the Participant nor his or her beneficiary shall have any
claim against or rights in any specific assets or other fund of the Company, and
any assets in the Trust shall be deemed general assets of the Company.
ARTICLE VIII
MISCELLANEOUS
8.01 ADJUSTMENTS FOR CAPITAL CHANGES.
(a) RECAPITALIZATIONS; STOCK SPLITS, ETC. The number and kind of
shares which may be purchased under the Plan, and the number and kind of shares
subject to outstanding Plan Share Awards, shall be proportionately adjusted for
any increase, decrease, change or exchange of shares of Common Stock for a
different number or kind of shares or other securities of the Company which
results from a merger, consolidation, recapitaliza-
7
<PAGE>
tion, reorganization, reclassification, stock dividend, split-up, combination of
shares, or similar event in which the number or kind of shares is changed
without the receipt or payment of consideration by the Company.
(b) TRANSACTIONS IN WHICH THE COMPANY IS NOT THE SURVIVING ENTITY.
In the event of (i) the liquidation or dissolution of the Company, (ii) a merger
or consolidation in which the Company is not the surviving entity, or (iii) the
sale or disposition of all or substantially all of the Company's assets (any of
the foregoing to be referred to herein as a "Transaction"), all outstanding Plan
Share Awards shall be adjusted for any change or exchange of shares of Common
Stock for a different number or kind of shares or other securities which results
from the Transaction.
(c) CONDITIONS AND RESTRICTIONS ON NEW, ADDITIONAL, OR DIFFERENT
SHARES OR SECURITIES. If, by reason of any adjustment made pursuant to this
Section, a Participant becomes entitled to new, additional, or different shares
of stock or securities, such new, additional, or different shares of stock or
securities shall thereupon be subject to all of the conditions and restrictions
which were applicable to the shares pursuant to the Plan Share Award before the
adjustment was made. In addition, the Committee shall have the discretionary
authority to impose on the Shares subject to Plan Share Awards to Employees such
restrictions as the Committee may deem appropriate or desirable, including but
not limited to a right of first refusal, or repurchase option, or both of these
restrictions.
(d) OTHER ISSUANCES. Except as expressly provided in this Section,
the issuance by the Company or an Affiliate of shares of stock of any class, or
of securities convertible into shares of Common Stock or stock of another class,
for cash or property or for labor or services either upon direct sale or upon
the exercise of rights or warrants to subscribe therefor, shall not affect, and
no adjustment shall be made with respect to, the number or class of shares of
Common Stock then subject to Plan Share Awards or reserved for issuance under
the Plan.
8.02 AMENDMENT AND TERMINATION OF PLAN. The Board may, by resolution, at
any time amend or terminate the Plan; provided that no amendment or termination
of the Plan shall, without the written consent of a Participant, impair any
rights or obligations under a Plan Share Award theretofore granted to the
Participant.
The power to amend or terminate the Plan in accordance with this Section
8.02 shall include the power to direct the Trustee to return to the Company all
or any part of the assets of the Trust, including shares of Common Stock held in
the Plan Share Reserve. However, the termination of the Trust shall not affect
a Participant's right to earn Plan Share Awards and to receive a distribution of
Common Stock relating thereto, including earnings thereon, in accordance with
the terms of this Plan and the grant by the Committee or the Board.
8.03 NONTRANSFERABILITY. Plan Share Awards may not be sold, pledged,
assigned, hypothecated, transferred or disposed of in any manner other than by
will or by the laws of descent and distribution. Notwithstanding the foregoing,
or any other provision of this Plan, a Participant who holds Plan Share Awards
may transfer such Awards to his or her spouse, lineal ascendants, lineal
descendants, or to a duly established trust for the benefit of one or more of
these individuals. Plan Share Awards so transferred may thereafter be
transferred only to the Participant who originally received the grant or to an
individual or trust to whom the Participant could have initially transferred the
Awards pursuant to this Section 8.03. Plan Share Awards which are transferred
pursuant to this Section 8.03 shall be exercisable by the transferee according
to the same terms and conditions as applied to the Participant.
8.04 NO EMPLOYMENT OR OTHER RIGHTS. Neither the Plan nor any grant of a
Plan Share Award or Plan Shares hereunder nor any action taken by the Trustee,
the Committee or the Board in connection with the Plan shall create any right,
either express or implied, on the part of any Employee or Director to continue
in the service of the Company, the Association, or an Affiliate thereof.
8
<PAGE>
8.05 VOTING AND DIVIDEND RIGHTS. No Participant shall have any voting or
dividend rights or other rights of a stockholder in respect of any Plan Shares
covered by a Plan Share Award prior to the time said Plan Shares are actually
distributed to him.
8.06 GOVERNING LAW. The Plan and Trust shall be governed and construed
under the laws of the State of New York to the extent not preempted by Federal
law.
8.07 EFFECTIVE DATE. The Plan shall become effective immediately upon its
approval by a favorable vote of stockholders of the Company who own at least a
majority of the total votes eligible to be cast at a duly called meeting of the
Company's stockholders held in accordance with applicable laws, provided that
the Plan shall not be submitted for such approval within the six-month period
after the Date of Conversion. [STOCKHOLDER APPROVAL MAY BE UNNECESSARY, OR
INVOLVE A DIFFERENT VOTE REQUIREMENT, IF THE PLAN IS IMPLEMENTED MORE THAN ONE
YEAR AFTER THE DATE OF CONVERSION.] In no event shall Plan Share Awards be made
prior to the Effective Date.
8.08 TERM OF PLAN. This Plan shall remain in effect until the earlier of
(i) termination by the Board, or (ii) the distribution of all assets of the
Trust. Termination of the Plan shall not affect any Plan Share Awards
previously granted, and such Awards shall remain valid and in effect until they
have been earned and paid, or by their terms expire or are forfeited.
8.09 TAX STATUS OF TRUST. It is intended that (i) the Trust associated
with the Plan be treated as a grantor trust of the Company under the provisions
of Section 671 et seq. of the Code, as the same may be amended from time to
-- ---
time, and (ii) that in accordance with Revenue Procedure 92-65 (as the same may
be amended from time to time), Participants have the status of general unsecured
creditors of the Company, the Plan constitutes a mere unfunded promise to make
benefit payments in the future, the Plan is unfunded for tax purposes and for
purposes of Title I of the Employee Retirement Income Security Act of 1974, as
amended, and the Trust has been and will continue to be maintained in conformity
with Revenue Procedure 92-64 (as the same may be amended from time to time).
9
<PAGE>
TRUST AGREEMENT
UNDER THE PEOPLES BANKCORP, INC.
MANAGEMENT RECOGNITION PLAN
---------------
Trust Agreement
---------------
This Agreement made this _____ day of _________, 199__ by and between
Peoples Bankcorp, Inc. (the "Company") and ______________, ____________________,
and ______________________ (acting by majority, the "Trustee").
WHEREAS, the Company maintains the Peoples Bankcorp, Inc. Management
Recognition Plan (the "Plan"), and has incurred or expects to incur liability
under the terms of the Plan with respect to the individuals participating in the
Plan ("Participants"); and
WHEREAS, the Company wishes to establish a trust (the "Trust") and to
contribute to the Trust assets that shall be held therein, subject to the claims
of the Company's general creditors in the event of Insolvency, as defined in
Section 3(a) hereof, until paid to Participants and their beneficiaries in such
manner and at such times as specified in the Plan; and
WHEREAS, it is the intention of the parties that this Trust shall
constitute an unfunded arrangement and shall not affect the status of the Plan
as an unfunded plan maintained for the purpose of providing deferred
compensation for a select group of management or highly compensated employees
for purposes of Title I of the Employee Retirement Income Security Act of 1974;
and
WHEREAS, it is the intention of the Company to make contributions to the
Trust to provide itself with a source of funds to assist it in the meeting of
its liabilities under the Plan.
NOW, THEREFORE, the parties do hereby establish this Trust and agree that
the Trust shall be comprised, held and disposed of as follows:
Section 1. Establishment of Trust
---------- ----------------------
(a) The Company hereby deposits, or will shortly hereafter deposit, with
the Trustee in trust (i) shares of the Company's common stock ("Common Stock")
in an amount up to four percent (4%) of the number of shares of Common Stock
issued by the Company in connection with the conversion of Ogdensburg Federal
Savings & Loan Association (the "Association") from mutual to stock form, or
(ii) an amount expected to be sufficient to permit the Trust to purchase said
shares. Said shares or amount shall become the initial principal of the Trust
to be held, administered and disposed of by the Trustee as provided in this
Trust Agreement.
(b) The Trust shall become irrevocable upon the effective date of the
Plan.
(c) The Trust is intended to be a grantor trust, of which the Company is
the grantor, within the meaning of subpart E, part I, subchapter J, chapter 1,
subtitle A of the Internal Revenue Code of 1986, as amended (the "Code"), and
shall be construed accordingly.
(d) The principal of the Trust, and any earnings thereon, shall be held
separate and apart from other funds of the Company and shall be used exclusively
for the uses and purposes of Participants and general creditors as herein set
forth. Participants and their beneficiaries shall have no preferred claim on,
or any beneficial ownership interest in, any assets of the Trust. Any rights
created under the Plan and this Trust Agreement shall be mere
<PAGE>
unsecured contractual rights of Participants and their beneficiaries against the
Company. Any assets held by the Trust will be subject to the claims of the
Company's general creditors under federal and state law in the event of
Insolvency, as defined in Section 3(a) herein.
(e) The Company, in its sole discretion, may at any time, or from time to
time, make additional deposits of cash or other property in trust with the
Trustee to augment the principal to be held, administered and disposed of by
Trustee as provided in this Trust Agreement. Neither the Trustee nor any
Participant or beneficiary shall have any right to compel such additional
deposits.
Section 2. Payments to Plan Participants and Their Beneficiaries.
---------- -----------------------------------------------------
(a) The Company shall deliver to the Trustee a schedule (the "Payment
Schedule") that indicates the amounts payable in respect of each Participant
(and his or her beneficiaries), that provides a formula or other instructions
acceptable to the Trustee for determining the amounts so payable, the form in
which such amount is to be paid (as provided for or available under the Plan),
and the time of commencement for payment of such amounts. Except as otherwise
provided herein, the Trustee shall make payments to Participants and their
beneficiaries in accordance with such Payment Schedule. The Trustee shall make
provision for the reporting and withholding of any federal, state or local taxes
that may be required to be withheld with respect to the payment of benefits
pursuant to the terms of the Plan and shall pay amounts withheld to the
appropriate taxing authorities or determine that such amounts have been
reported, withheld and paid by the Company.
(b) The entitlement of a Participant or his or her beneficiaries to
benefits under the Plan shall be determined by the Company or such party as it
shall designate under the Plan, and any claim for such benefits shall be
considered and reviewed under the procedures set out in the Plan.
(c) The Company may make payment of benefits directly to Participants or
their beneficiaries as they become due under the terms of the Plan. The Company
shall notify the Trustee of its decision to make payment of benefits directly
prior to the time amounts are payable to Participants or their beneficiaries.
In addition, if the principal of the Trust, and any earnings thereon, are not
sufficient to make payments of benefits in accordance with the terms of the
Plan, the Company shall make the balance of each such payment as it falls due.
The Trustee shall notify the Company where principal and earnings are not
sufficient.
Section 3. Trustee Responsibility Regarding Payments to Trust Beneficiary
---------- --------------------------------------------------------------
When Company Is Insolvent.
-------------------------
(a) The Trustee shall cease payment of benefits to Participants and their
beneficiaries if the Company is Insolvent. The Company shall be considered
"Insolvent" for purposes of this Trust Agreement if (i) the Company is unable to
pay its debts as they become due, or (ii) the Company becomes subject to a
pending proceeding as a debtor under the United States Bankruptcy Code.
(b) At all times during the continuance of this Trust, as provided in
Section 1(d) hereof, the principal and income of the Trust shall be subject to
claims of general creditors of the Company under federal and state law as set
forth below.
(c) The Board of Directors and the Chief Executive Officer of the Company
shall have the duty to inform the Trustee in writing of the Company's
Insolvency. If a person claiming to be a creditor of the Company alleges in
writing to the Trustee that the Company has become Insolvent, the Trustee shall
determine whether the Company is Insolvent and, pending such determination, the
Trustee shall discontinue payment of benefits to Participants or their
beneficiaries.
2
<PAGE>
(1) Unless the Trustee has actual knowledge of the Company's
Insolvency, or has received notice from the Company or a person claiming to be a
creditor alleging that the Company is Insolvent, the Trustee shall have no duty
to inquire whether the Company is Insolvent. The Trustee may in all events rely
on such evidence concerning the Company's solvency as may be furnished to the
Trustee and that provides the Trustee with a reasonable basis for making a
determination concerning the Company's solvency.
(2) If at any time the Trustee has determined that the Company is
Insolvent, the Trustee shall discontinue payments to Plan participants or their
beneficiaries, shall liquidate the Trust's investment in Common Stock, and shall
hold the assets of the Trust for the benefit of the Company's general creditors.
Nothing in this Trust Agreement shall in any way diminish any rights of
Participants or their beneficiaries as general creditors of the Company with
respect to benefits due under the Plan or otherwise.
(3) The Trustee shall resume the payment of benefits to Participants
or their beneficiaries in accordance with Section 2 of this Trust Agreement only
after the Trustee has determined that the Company is not Insolvent (or is no
longer Insolvent).
(d) Provided that there are sufficient assets, if the Trustee discontinues
the payment of benefits from the Trust pursuant to Section 3(b) hereof and
subsequently resumes such payments, the first payment following such
discontinuance shall include the aggregate amount of all payments due to
Participants or their beneficiaries under the terms of the Plan for the period
of such discontinuance, less the aggregate amount of any payments made to
Participants or their beneficiaries by the Company in lieu of the payments
provided for hereunder during any such period of discontinuance.
Section 4. Payments to the Company.
---------- -----------------------
Except as provided in Section 3 hereof, after the Trust has become
irrevocable, the Company shall have no right or power to direct the Trustee to
return to the Company or to divert to others any of the Trust assets before all
payment of benefits have been made to Plan Participants and their beneficiaries
pursuant to the terms of the Plan.
Section 5. Investment Authority.
---------- --------------------
(a) The Trustee shall have sole discretion as to the investment of Trust
assets, except that to the extent reasonably practicable, the Trustee shall
invest all assets of the Trust in Common Stock provided that the Trust shall not
purchase from time to time a number of shares of Common Stock exceeding __% of
the shares of Common Stock issued in the Association's mutual to stock
conversion.
(b) All rights associated with assets of the Trust shall be exercised by
the Trustee or the person designated by the Trustee, and shall in no event be
exercisable by or rest with Participants, except that voting rights with respect
to Common Stock will be exercised in accordance with the terms of the Plan.
(c) Subject to applicable federal and state securities laws, if for any
reason the Trustee will be selling shares of Common Stock, the Trustee shall
sell such shares by (i) giving each Beneficiary 20 business days within which to
purchase, at fair market value, all or part of the shares of Common Stock that
the Trustee holds for the benefit of the Beneficiary, and (ii) to the extent
purchases by Beneficiaries are insufficient to eliminate the Trusts' excess
holdings of Common Stock, to offer to sell, and to sell, all or any part of the
excess shares held by the Trust to the following purchasers, listed here by
order of priority: first, the Company; second, any benefit plan maintained by
the Company or the Association; third, directors of the Association; fourth,
officers of the Association; fifth, members of the general public.
3
<PAGE>
Section 6. Disposition of Income.
---------- ---------------------
During the term of this Trust, all income received by the Trust, net of
expenses and taxes, shall be accumulated and reinvested.
Section 7. Accounting by Trustee.
---------- ---------------------
The Trustee shall keep accurate and detailed records of all investments,
receipts, disbursements, and all other transactions required to be made,
including such specific records as shall be agreed upon in writing between the
Company and the Trustee. Within 60 days following the close of each calendar
year and within 20 days after the removal or resignation of the Trustee, the
Trustee shall deliver to the Company a written account of its administration of
the Trust during such year or during the period from the close of the last
preceding year to the date of such removal or resignation, setting forth all
investments, receipts, disbursements and other transactions effected by it,
including a description of all securities and investments purchased and sold
with the cost or net proceeds of such purchased and sold with the cost or net
proceeds of such purchases or sales (accrued interest paid or receivable being
shown separately), and showing all cash, securities and other property held in
the Trust at the end of such year or as of the date of such removal or
resignation, as the case may be.
Section 8. Responsibility of Trustee.
---------- -------------------------
(a) The Trustee shall act with the care, skill, prudence and diligence
under the circumstances then prevailing that a prudent person acting in like
capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims, provided, however, that the
Trustee shall incur no liability to any person for any action taken pursuant to
a direction, request or approval given by the Company which is contemplated by,
and in conformity, the terms of the Plan or this Trust and is given in writing
by the Company. In the event of a dispute between the Company and a party, the
Trustee may apply to a court of competent jurisdiction to resolve the dispute.
(b) If the Trustee undertakes or defends any litigation arising in
connection with this Trust, the Company agrees to indemnify the Trustee against
Trustee's costs, expenses and liabilities (including, without limitation,
attorneys' fees and expenses) relating thereto and to be primarily liable for
such payments, except in those cases where the Trustee shall have been found by
a court of competent jurisdiction to have acted with gross negligence or willful
misconduct. If the Company does not pay such costs, expenses and liabilities in
a reasonably timely manner, the Trustee may obtain payment from the Trust.
(c) The Trustee may consult with legal counsel with respect to any of its
duties or obligations hereunder.
(d) The Trustee may hire agents, accountants, actuaries, investment
advisors, financial consultants or other professionals to assist it in
performing any of its duties or obligations hereunder.
(e) The Trustee shall have, without exclusion, all powers conferred on
trustees by applicable law, unless expressly provided otherwise herein,
provided, however, that if an insurance policy is held as an asset of the Trust,
the Trustee shall have no power to name a beneficiary of the policy other than
the Trust, to assign the policy (as distinct from conversion of the policy to a
different form) other than to a successor Trustee, or to loan to any person the
proceeds of any borrowing against such policy.
(f) Notwithstanding any powers granted to the Trustee pursuant to this
Trust Agreement or to applicable law, the Trustee shall not have any power that
could give this Trust the objective of carrying on a business and dividing the
gains therefrom, within the meaning of Section 301.7701-2 of the Procedure and
Administrative Regulations promulgated pursuant to the Code.
4
<PAGE>
Section 9. Compensation and Expenses of Trustee.
---------- ------------------------------------
The Company shall pay all administrative expenses and the Trustee's fees
and expenses relating to the Plan and this Trust. If not so paid, the fees and
expenses shall be paid from the Trust.
Section 10. Resignation and Removal of Trustee.
----------- ----------------------------------
The Trustee (or any individual serving as one of the trustees who act by
majority as the Trustee) may resign at any time by written notice to the
Company, which resignation shall be effective 30 days after the Company receives
such notice (unless the Company and the Trustee agree otherwise). The Trustee
(or any individual serving as one of the trustees who act by majority as the
Trustee) may be removed by the Company on 30 days notice or upon shorter notice
accepted by the Trustee.
If the Trustee (or any individual serving as one of the trustees who act by
majority as the Trustee) resigns or is removed, a successor shall be appointed,
in accordance with Section 11 hereof, by the effective date or resignation or
removal under this section. If no such appointment has been made, the Trustee
may apply to a court of competent jurisdiction for appointment of a successor or
for instructions. All expenses of the Trustee in connection with the proceeding
shall be allowed as administrative expenses of the Trust. Upon resignation or
removal of the Trustee and appointment of a successor trustee, all assets shall
subsequently be transferred to the successor trustee. The transfer shall be
completed within 60 days after receipt of notice of resignation, removal or
transfer, unless the Company extends the time limit.
Section 11. Appointment of Successor.
----------- ------------------------
If the Trustee resigns or is removed in accordance with Section 10 hereof,
the Company may appoint any other party as a successor to replace the Trustee
upon resignation or removal. The appointment shall be effective when accepted
in writing by the new trustee, who shall have all of the rights and powers of
the former trustee, including ownership rights in the Trust assets. The former
trustee shall execute any instrument necessary or reasonably requested by the
Company or the successor trustee to evidence the transfer.
A successor trustee need not examine the records and acts of any prior
trustee and may retain or dispose of existing Trust assets, subject to Sections
7 and 8 hereof. The successor trustee shall not be responsible for, and the
Company shall indemnify and defend the successor trustee from, any claim or
liability resulting from any action or inaction of any prior trustee or from any
other past event, or any condition existing at the time it becomes successor
trustee.
Section 12. Amendment or Termination.
----------- ------------------------
(a) This Trust Agreement may be amended by a written instrument executed
by the Trustee and the Company, provided that no such amendment shall make the
Trust revocable.
(b) The Trust shall not terminate until the date on which Participants and
their beneficiaries are no longer entitled to benefits pursuant to the terms
hereof. Upon termination of the Trust, the Trustee shall return any assets
remaining in the Trust to the Company.
(c) Upon written approval of all Participants (or their beneficiaries if
they are then entitled to payment of benefits), the Company may terminate this
Trust prior to the time all benefit payments under the Plan have been made. All
assets in the Trust at termination shall be returned to the Company.
5
<PAGE>
Section 13. Miscellaneous.
----------- -------------
(a) Any provision of this Trust Agreement prohibited by law shall be
ineffective to the extent of any such prohibition, without invalidating the
remaining provisions hereof.
(b) Benefits payable to Participants and their beneficiaries under this
Trust Agreement may not be anticipated, assigned (either at law or in equity),
alienated, pledged, encumbered or subjected to attachment, garnishment, levy,
execution or other legal or equitable process, except pursuant to the terms of
the Plan.
(c) This Trust Agreement shall be governed by and construed in accordance
with the laws of the State of New York, to the extent not preempted by federal
law.
(d) The Trustee agrees to be bound by the terms of the Plan, as in effect
from time to time.
(e) The Trustee shall act by vote or written consent of a majority of its
duly-appointed members.
IN WITNESS WHEREOF, the Company, by its duly authorized officer, has caused
this Agreement to be executed, and its corporate seal affixed, and the Trustees
have executed this Agreement, this _____ day of _______________, 199__.
ATTEST: PEOPLES BANKCORP, INC.
By:
- ---------------------------------- ----------------------------------
Its President
ATTEST:
- ---------------------------------- --------------------------------------
, Trustee
-----------------------------
- ---------------------------------- --------------------------------------
, Trustee
-----------------------------
- ---------------------------------- --------------------------------------
, Trustee
-----------------------------
6
<PAGE>
Exhibit 10.3
OGDENSBURG FEDERAL SAVINGS & LOAN ASSOCIATION
--------------------------
Employment Agreement with
Robert E. Wilson
--------------------------
AGREEMENT entered into and effective this ________ day of _______________,
199_, by and between Ogdensburg Federal Savings & Loan Association (the
"Association") and Robert E. Wilson (the "Employee").
WHEREAS, the Employee has heretofore been employed by the Association as
its President and is experienced in all phases of the business of the
Association; and
WHEREAS, the Board of Directors (the "Board") of the Association believes
it is in the best interests of the Association to enter into this Agreement with
the Employee in order to assure continuity of management of the Association and
to reinforce and encourage the continued attention and dedication of the
Employee to his assigned duties; and
WHEREAS, the parties desire by this writing to set forth the continuing
employment relationship of the Association and the Employee.
NOW, THEREFORE, it is AGREED as follows:
1. Defined Terms
-------------
When used anywhere in this Agreement, the following terms shall have the
meaning set forth herein.
(a) "Change in Control" shall mean any one of the following events:
(i) the acquisition of ownership, holding or power to vote more than 25% of the
voting stock of the Association or the Company, (ii) the acquisition of the
ability to control the election of a majority of the Association's or the
Company's directors, (iii) the acquisition of a controlling influence over the
management or policies of the Association or of the Company by any person or by
persons acting as a "group" (within the meaning of Section 13(d) of the
Securities Exchange Act of 1934), or (iv) during any period of two consecutive
years, individuals (the "Continuing Directors") who at the beginning of such
period constitute the Board of Directors of the Association or of the Company
(the "Existing Board") cease for any reason to constitute at least two-thirds
thereof, provided that any individual whose election or nomination for election
as a member of the Existing Board was approved by a vote of at least two-thirds
of the Continuing Directors then in office shall be considered a Continuing
Director. Notwithstanding the foregoing, the Company's ownership of the
Association shall not of itself constitute a Change in Control for purposes of
the Agreement.
<PAGE>
For purposes of this paragraph only, the term "person" refers to an individual
or a corporation, partnership, trust, association, joint venture, pool,
syndicate, sole proprietorship, unincorporated organization or any other form of
entity not specifically listed herein.
(b) "Company" shall mean [Holding Company]
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time, and as interpreted through applicable rulings and regulations
in effect from time to time.
(d) "Code Section 280G Maximum" shall mean the product of 2.99 and
the Employee's "base amount" as defined in Code Section 280G(b)(3).
(e) "Disability" shall mean a physical or mental infirmity which
impairs the Employee's ability to substantially perform his duties under this
Agreement and which results in the Employee becoming eligible for long-term
disability benefits under the Association's long-term disability plan (or, if
the Association has no such plan in effect, which impairs the Employee's ability
to substantially perform his duties under this Agreement for a period of 180
consecutive days).
(f) "Effective Date" shall mean the date referenced in the opening
paragraph of this Agreement.
(g) "Good Reason" shall mean any of the following events, which has
not been consented to in advance by the Employee in writing: (i) the requirement
that the Employee move his personal residence, or perform his principal
executive functions, more than 30 miles from his primary office as of the later
of the Effective Date and the most recent voluntary relocation by the Employee;
(ii) a material reduction in the Employee's base compensation under this
Agreement as the same may be increased from time to time; (iii) the failure by
the Association or the Company to continue to provide the Employee with
compensation and benefits provided under this Agreement as the same may be
increased from time to time, or with benefits substantially similar to those
provided to him under any of the employee benefit plans in which the Employee
now or hereafter becomes a participant, or the taking of any action by the
Association or the Company which would directly or indirectly reduce any of such
benefits or deprive the Employee of any material fringe benefit enjoyed by him
under this Agreement; (iv) the assignment to the Employee of duties and
responsibilities materially different from those normally associated with his
position; (v) a failure to reelect the Employee to the Board of Directors of the
Association or the Company, if the Employee has served on such Board at any time
during the term of the Agreement; or (vi) a material diminution or reduction in
the Employee's responsibilities or authority (including reporting
responsibilities) in connection with his employment with the Association.
(h) "Just Cause" shall mean, in the good faith determination of the
Association's Board of Directors, the Employee's personal dishonesty,
incompetence, willful misconduct, breach
-2-
<PAGE>
of 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, or
material breach of any provision of this Agreement. The Employee shall have no
right to receive compensation or other benefits for any period after termination
for Just Cause. No act, or failure to act, on the Employee's part shall be
considered "willful" unless he has acted, or failed to act, with an absence of
good faith and without a reasonable belief that his action or failure to act was
in the best interest of the Association and the Company.
(i) "Protected Period" shall mean the period that begins on the date
six months before a Change in Control and ends on the later of the first annual
anniversary of the Change in Control or the expiration date of this Agreement.
(j) "Trust" shall mean a grantor trust that is designed in accordance
with Revenue Procedure 92-64 and has a trustee independent of the Association
and the Company.
2. Employment. The Employee is employed as the President of the
----------
Association. The Employee shall render such administrative and management
services for the Association as are currently rendered and as are customarily
performed by persons situated in a similar executive capacity. The Employee
shall also promote, by entertainment or otherwise, as and to the extent
permitted by law, the business of the Association. The Employee's other duties
shall be such as the Board may from time to time reasonably direct, including
normal duties as an officer of the Association.
3. Base Compensation. The Association agrees to pay the Employee during
-----------------
the term of this Agreement a salary at the rate of $__________________ per
annum, payable in cash not less frequently than monthly. The Board shall
review, not less often than annually, the rate of the Employee's salary, and in
its sole discretion may decide to increase his salary.
4. Discretionary Bonuses. The Employee shall participate in an equitable
---------------------
manner with all other senior management employees of the Association in
discretionary bonuses that the Board may award from time to time to the
Association's senior management employees. No other compensation provided for
in this Agreement shall be deemed a substitute for the Employee's right to
participate in such discretionary bonuses.
5. Participation in Retirement, Medical and Other Plans.
----------------------------------------------------
(a) The Employee shall be eligible to participate in any of the
following plans or programs that the Association may now or in the future
maintain: group hospitalization, disability, health, dental, sick leave, life
insurance, travel and/or accident insurance, auto allowance/auto lease,
retirement, pension, and/or other present or future qualified or nonqualified
plans provided by the Association, generally which benefits, taken as a whole,
must be at least as favorable as those in effect on the Effective Date.
-3-
<PAGE>
(b) The Employee shall also be eligible to participate in any fringe
benefits which are or may become available to the Association's senior
management employees, including for example: any stock option or incentive
compensation plans, and any other benefits which are commensurate with the
responsibilities and functions to be performed by the Employee under this
Agreement. The Employee shall be reimbursed for all reasonable out-of-pocket
business expenses which he shall incur in connection with his services under
this Agreement upon substantiation of such expenses in accordance with the
policies of the Association.
6. Term. The Association hereby employs the Employee, and the Employee
----
hereby accepts such employment under this Agreement, for the period commencing
on the Effective Date and ending 36 months thereafter (or such earlier date as
is determined in accordance with Section 10 or 12 hereof). Additionally, on
each annual anniversary date from the Effective Date, the Employee's term of
employment shall be extended for an additional one-year period beyond the then
effective expiration date, provided the Board determines in a duly adopted
resolution that the performance of the Employee has met the Board's requirements
and standards, and that this Agreement shall be extended. Only those members of
the Board of Directors who have no personal interest in this Employment
Agreement shall discuss and vote on the approval and subsequent review of this
Agreement.
7. Loyalty; Noncompetition.
-----------------------
(a) During the period of his employment hereunder and except for
illnesses, reasonable vacation periods, and reasonable leaves of absence, the
Employee shall devote all his full business time, attention, skill, and efforts
to the faithful performance of his duties hereunder; provided, however, from
time to time, the Employee may serve on the boards of directors of, and hold any
other offices or positions in, companies or organizations, which will not
present any conflict of interest with the Association or any of its subsidiaries
or affiliates, or unfavorably affect the performance of the Employee's duties
pursuant to this Agreement, or will not violate any applicable statute or
regulation. "Full business time" is hereby defined as that amount of time
usually devoted to like companies by similarly situated executive officers.
During the term of his employment under this Agreement, the Employee shall not
engage in any business or activity contrary to the business affairs or interests
of the Association.
(b) Nothing contained in this Section shall be deemed to prevent or
limit the Employee's right to invest in the capital stock or other securities of
any business dissimilar from that of the Association, or, solely as a passive or
minority investor, in any business.
8. Standards. The Employee shall perform his duties under this Agreement
---------
in accordance with such reasonable standards as the Board may establish from
time to time. The Association will provide the Employee with the working
facilities and staff customary for similar executives and necessary for him to
perform his duties.
-4-
<PAGE>
9. Vacation and Sick Leave. At such reasonable times as the Board shall
-----------------------
in its discretion permit, the Employee shall be entitled, without loss of pay,
to absent himself voluntarily from the performance of his employment under this
Agreement, all such voluntary absences to count as vacation time, provided that:
(a) The Employee shall be entitled to an annual vacation in accordance
with the policies that the Board periodically establishes for senior management
employees of the Association.
(b) The Employee shall not receive any additional compensation from
the Association on account of his failure to take a vacation or sick leave, and
the Employee shall not accumulate unused vacation or sick leave from one fiscal
year to the next, except in either case to the extent authorized by the Board.
(c) In addition to the aforesaid paid vacations, the Employee shall be
entitled without loss of pay, to absent himself voluntarily from the performance
of his employment with the Association for such additional periods of time and
for such valid and legitimate reasons as the Board may in its discretion
determine. Further, the Board may grant to the Employee a leave or leaves of
absence, with or without pay, at such time or times and upon such terms and
conditions as such Board in its discretion may determine.
(d) In addition, the Employee shall be entitled to an annual sick
leave benefit as established by the Board.
10. Termination and Termination Pay. Subject to Section 12 hereof, the
-------------------------------
Employee's employment hereunder may be terminated under the following
circumstances:
(a) Death. The Employee's employment under this Agreement shall
terminate upon his death during the term of this Agreement, in which event the
Employee's estate shall be entitled to receive the compensation due the Employee
through the last day of the calendar month in which his death occurred.
(b) Disability. (1) The Association may terminate the Employee's
employment after having established the Employee's Disability, in which event
the Employee shall be entitled to the compensation and benefits provided for
under this Agreement for (i) any period during the term of this Agreement and
prior to the establishment of the Employee's Disability during which the
Employee is unable to work due to the physical or mental infirmity, and (ii) any
period of Disability which is prior to the Employee's termination of employment
pursuant to this Section 10(b); provided that any benefits paid pursuant to the
Association's long term disability plan will continue as provided in such plan
without reduction for payments made pursuant to this Agreement.
- -------
-5-
<PAGE>
(2) During any period that the Employee shall receive disability
benefits and to the extent that the Employee shall be physically and mentally
able to do so, he shall furnish such information, assistance and documents so as
to assist in the continued ongoing business of the Association and, if able,
shall make himself available to the Association to undertake reasonable
assignments consistent with his prior position and his physical and mental
health. The Association shall pay all reasonable expenses incident to the
performance of any assignment given to the Employee during the disability
period.
(c) Just Cause. The Board may, by written notice to the Employee,
immediately terminate his employment at any time, for Just Cause. The Employee
shall have no right to receive compensation or other benefits for any period
after termination for Just Cause.
(d) Without Just Cause; Constructive Discharge. The Board may, by
written notice to the Employee, immediately terminate his employment at any time
for a reason other than his Disability or Just Cause, in which event the
Employee shall be entitled to receive the salary provided pursuant to Section 3
hereof, up to the expiration date of this Agreement, including any renewal term
(the "Expiration Date"), plus said salary for an additional 12-month period
(unless such termination occurs during the Protected Period, in which event the
benefits and compensation provided for in Section 12 shall apply). All amounts
payable to the Employee shall be paid, at the option of the Employee, either (I)
in periodic payments, through the Expiration Date, or (II) in one lump sum
within ten days of such termination.
(e) Good Reason. The Employee shall be entitled to receive the
compensation and benefits payable under subsection 10(d) hereof in the event
that the Employee voluntarily terminates employment within 90 days of an event
that constitutes Good Reason, (unless such voluntary termination occurs during
the Protected Period, in which event the benefits and compensation provided for
in Section 12 shall apply).
(f) Termination or Suspension Under Federal Law. (1) If the Employee
is removed and/or permanently prohibited from participating in the conduct of
the Association's affairs by an order issued under Sections 8(e)(4) or 8(g)(1)
of the Federal Deposit Insurance Act ("FDIA") (12 U.S.C. 1818(e)(4) and (g)(1)),
all obligations of the Association under this Agreement shall terminate, as of
the effective date of the order, but vested rights of the parties shall not be
affected.
(2) If the Association is in default (as defined in Section
3(x)(1) of FDIA), all obligations under this Agreement shall terminate as of the
date of default; however, this Paragraph shall not affect the vested rights of
the parties.
(3) If a notice served under Section 8(e)(3) or (g)(1) of the
FDIA (12 U.S.C. 1818(e)(3) or (g)(1)) suspends and/or temporarily prohibits the
Employee from participating in the conduct of the Association's affairs, the
Association's obligations under this Agreement shall be suspended as of the date
of such service, unless stayed by appropriate
-6-
<PAGE>
proceedings. If the charges in the notice are dismissed, the Association may in
its discretion (i) pay the Employee all or part of the compensation withheld
while its contract obligations were suspended, and (ii) reinstate (in whole or
in part) any of its obligations which were suspended.
(4) Any payments made to the Employee pursuant to this Agreement,
or otherwise, are subject to and conditioned upon their compliance with both 12
----
U.S.C. Section 1828(k) and any regulations promulgated thereunder, and
---
Regulatory Bulletin 27A, but only to the extent required thereunder on the date
any payment is required pursuant to this Agreement.
(g) Voluntary Termination by Employee. Subject to Section 12 hereof,
the Employee may voluntarily terminate employment with the Association during
the term of this Agreement, upon at least 90 days' prior written notice to the
Board of Directors, in which case the Employee shall receive only his
compensation, vested rights and employee benefits up to the date of his
termination (unless such termination occurs pursuant to Section 10(d) hereof or
within the Protected Period, in Section 12(a) hereof, in which event the
benefits and compensation provided for in Sections 10(d) or 12, as applicable,
shall apply).
11. No Mitigation. The Employee shall not be required to mitigate the
-------------
amount of any payment provided for in this Agreement by seeking other employment
or otherwise and no such payment shall be offset or reduced by the amount of any
compensation or benefits provided to the Employee in any subsequent employment.
12. Change in Control.
-----------------
(a) Trigger Events. The Employee shall be entitled to collect the
severance benefits set forth in Subsection (b) hereof in the event that either
(i) the Employee voluntarily terminates employment for any reason within the 30-
day period beginning on the date of a Change in Control, (ii) the Employee
voluntarily terminates employment within 90 days of an event that both occurs
during the Protected Period and constitutes Good Reason, or (iii) the
Association or the Company or their successor(s) in interest terminate the
Employee's employment without his written consent and for any reason other than
Just Cause during the Protected Period.
(b) Amount of Severance Benefit. If the Employee becomes entitled to
collect severance benefits pursuant to Section 12(a) hereof, the Association
shall:
(i) pay the Employee a severance benefit equal to the difference
between the Code Section 280G Maximum and the sum of any other
"parachute payments" as defined under Code Section 280G(b)(2) that the
Employee receives on account of the Change in Control, and
(ii) pay for long-term disability and provide such medical
benefits as are available to the Employee under the provisions of
COBRA, for eighteen (18) months (or such longer period, up to 24
months, if COBRA is amended).
-7-
<PAGE>
The amount payable under this Section 12(b) shall be paid either (i) in one
lump sum within ten days of the later of the date of the Change in Control and
the Employee's last day of employment with the Association or the Company, or
(ii) if prior to the date which is 90 days before the date on which a Change in
Control occurs, the Employee filed a duly executed irrevocable written election
in the form attached hereto as Exhibit "A", payment of such amount shall be made
according to the elected schedule. Deferred amounts shall bear interest from
the date on which they would otherwise be payable until the date paid at a rate
equal to 120% of the applicable federal rate, compounded semiannually, as
determined under Code Section 1274(d) and the regulations thereunder.
In the event that the Employee, the Association, and the Company jointly
agree that the Employee has collected an amount exceeding the Code '280G
Maximum, the parties may agree in writing that such excess shall be treated as a
loan ab initio, which the Employee shall repay to the Association, on terms and
---------
conditions mutually agreeable to the parties, together with interest at the
applicable federal rate provided for in Section 7872(f)(2)(B) of the Code.
(c) Funding of Grantor Trust upon Change in Control. Not later than
ten business days after a Change in Control, the Association shall (i) deposit
in a Trust an amount equal to the Code Section 280G Maximum, unless the
Employee has previously provided a written release of any claims under this
Agreement, and (ii) provide the trustee of the Trust with a written direction to
hold said amount and any investment return thereon in a segregated account for
the benefit of the Employee, and to follow the procedures set forth in the next
paragraph as to the payment of such amounts from the Trust.
During the 15-consecutive month period after a Change in Control, the
Employee may provide the trustee of the Trust with a written notice directing
the trustee to pay to Employee an amount designated in the notice as being
payable pursuant to this Agreement. Within three business days after receiving
said notice, the trustee of the Trust shall pay such amount to the Employee, and
coincidentally shall provide the Association or its successor with notice of
such payment. Upon the earlier of the Trust's final payment of all amounts due
under the preceding paragraph or the date 15 months after the Change in Control
of the Association, the trustee of the Trust shall pay to the Association the
entire balance remaining in the segregated account maintained for the benefit of
the Employee. The Employee shall thereafter have no further interest in the
Trust.
13. Indemnification. The Association and the Company agree that their
---------------
respective Bylaws shall continue to provide for indemnification of directors,
officers, employees and agents of the Association and the Company, including the
Employee during the full term of this Agreement, and to at all times provide
adequate insurance for such purposes.
14. Reimbursement of Employee for Enforcement Proceedings. In the event
-----------------------------------------------------
that any dispute arises between the Employee and the Association as to the terms
or interpretation of this Agreement, whether instituted by formal legal
proceedings or otherwise, including any action that
-8-
<PAGE>
the Employee takes to defend against any action taken by the Association or the
Company, the Employee shall be reimbursed for all costs and expenses, including
reasonable attorneys' fees, arising from such dispute, proceedings or actions,
provided that the Employee obtains either a written settlement or a final
judgement by a court of competent jurisdiction substantially in his favor. Such
reimbursement shall be paid within ten days of the Employee's furnishing to the
Association written evidence, which may be in the form, among other things, of a
canceled check or receipt, of any costs or expenses incurred by the Employee.
15. Federal Income Tax Withholding. The Association may withhold all
------------------------------
federal and state income or other taxes from any benefit payable under this
Agreement as shall be required pursuant to any law or government regulation or
ruling.
16. Successors and Assigns.
----------------------
(a) Association. This Agreement shall not be assignable by the
Association, provided that this Agreement shall inure to the benefit of and be
binding upon any corporate or other successor of the Association which shall
acquire, directly or indirectly, by merger, consolidation, purchase or
otherwise, all or substantially all of the assets or stock of the Association.
(b) Employee. Since the Association is contracting for the unique and
personal skills of the Employee, the Employee shall be precluded from assigning
or delegating his rights or duties hereunder without first obtaining the written
consent of the Association; provided, however, that nothing in this paragraph
shall preclude (i) the Employee from designating a beneficiary to receive any
benefit payable hereunder upon his death, or (ii) the executors, administrators,
or other legal representatives of the Employee or his estate from assigning any
rights hereunder to the person or persons entitled thereunto.
(c) Attachment. Except as required by law, no right to receive
payments under this Agreement shall be subject to anticipation, commutation,
alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation or
to exclusion, attachment, levy or similar process or assignment by operation of
law, and any attempt, voluntary or involuntary, to effect any such action shall
be null, void and of no effect.
17. Amendments. No amendments or additions to this Agreement shall be
----------
binding unless made in writing and signed by all of the parties, except as
herein otherwise specifically provided.
18. Applicable Law. Except to the extent preempted by federal law, the
--------------
laws of the State of New York shall govern this Agreement in all respects,
whether as to its validity, construction, capacity, performance or otherwise.
-9-
<PAGE>
19. 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.
20. Entire Agreement. This Agreement, together with any understanding or
----------------
modifications thereof as agreed to in writing by the parties, shall constitute
the entire agreement between the parties hereto and shall supersede any prior
agreement between the parties.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first hereinabove written.
OGDENSBURG FEDERAL SAVINGS
& LOAN ASSOCIATION
Witnessed by:
By:
- --------------------- -------------------------
Secretary Its Chairman of the Board
Witnessed by:
- --------------------- -------------------------
Robert E. Wilson
-10-
<PAGE>
EXHIBIT "A"
OGDENSBURG FEDERAL SAVINGS & LOAN ASSOCIATION
EMPLOYMENT AGREEMENT
-------------------------------
DEFERRED PAYMENT ELECTION FORM
-------------------------------
AGREEMENT, made this ____ day of ________, 19__, by and between _________
(the "Employee") and Ogdensburg Federal Savings & Loan Association (the
"Association") with respect to payment of severance compensation to the Employee
pursuant to Section 12(b) of his employment agreement ("Agreement") with the
Association dated _______, 199__.
NOW THEREFORE, it is mutually agreed as follows:
1. Form of Payment. The Employee, by the execution hereof, in accordance
---------------
with Section 12(b) of the Agreement, elects to have his change in control
severance benefits (plus earnings thereon) distributed in cash as follows:
[_] in one lump sum payment.
[_] in substantially equal annual payments over a period of _____ years
(no more than 10).
2. In the event of the Employee=s death, his benefits shall be
distributed --
[_] in one lump sum payment.
[_] in accordance with the payment schedule selected in paragraph 1
hereof (with payments made as though the Employee survived to
collect all benefits, and as though the Employee terminated service
on the date of his death, if payments had not already begun).
3. Designation of Beneficiary. In the event of the Employee's death
--------------------------
before he has collected all of the benefits payable pursuant to the Agreement
and this election, any such benefits payable shall be distributed to the
beneficiary or beneficiaries designated under subparagraphs a and b of this
paragraph 3 in the manner elected pursuant to paragraph 2 above:
<PAGE>
Employment Agreement
Deferred Payment Election Form
Page 2
a. Primary Beneficiary. The Employee hereby designates the person(s)
-------------------
named below to be his primary beneficiary and to receive the balance of any
unpaid benefits under the Agreement:
<TABLE>
<CAPTION>
==================================================================================
Name of Percentage of
Primary Beneficiary Mailing Address Death Benefit
- ----------------------------------------------------------------------------------
<S> <C> <C>
%
- ----------------------------------------------------------------------------------
%
==================================================================================
</TABLE>
b. Contingent Beneficiary. In the event that the primary beneficiary or
----------------------
beneficiaries named above are not living at the time of the Employee's death,
the Employee hereby designates the following person(s) to be his contingent
beneficiary for purposes of the Agreement:
<TABLE>
<CAPTION>
==================================================================================
Name of Percentage of
Contingent Beneficiary Mailing Address Death Benefit
- ----------------------------------------------------------------------------------
<S> <C> <C>
%
- ----------------------------------------------------------------------------------
%
==================================================================================
</TABLE>
4. Effect of Election. The elections made in paragraph 1 hereof shall
------------------
become irrevocable 90 days prior to the change in control. The Employee may, by
submitting an effective superseding Deferred Payment Election Form at any time
and from time to time, prospectively change the beneficiary designation and the
manner of payment to a beneficiary. Such elections shall, however, become
irrevocable upon the Employee's death.
5. Commitments. The Association agrees to make payment of all amounts due
-----------
the Employee in accordance with the terms of the Agreement and the elections
made by the Employee herein.
<PAGE>
Employment Agreement
Deferred Payment Election Form
Page 3
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands the
day and year first above-written.
EMPLOYEE
Witnessed by:
- ------------------------ --------------------------------------
Robert E. Wilson
OGDENSBURG FEDERAL SAVINGS
& LOAN ASSOCIATION
Witnessed by:
By
- ------------------------ ------------------------------------
Secretary Its Chairman of the Board
<PAGE>
Exhibit 10.4
PEOPLES BANKCORP, INC.
--------------------------
Guaranty Agreement
--------------------------
THIS AGREEMENT is entered into this ______ day of __________, 199__ (the
"Effective Date"), by and between Peoples Bankcorp, Inc. (the "Company") and
_________________ (the "Employee").
WHEREAS, the Employee has heretofore been employed by Ogdensburg Federal
Savings & Loan Association (the "Association") as its President, and has entered
into an employment agreement (the "Association Agreement") of even date herewith
with the Association; and
WHEREAS, the Board of Directors (the "Board") of the Company believes it is
in the best interests of the Company to enter into this Agreement with the
Employee in order to assure continuity of management of the Association and the
Company, and to reinforce and encourage the long-term retention of the Employee;
and
WHEREAS, the parties desire by this writing to set forth the Company's
commitment to guarantee the Association's obligations under the Association
Agreement with the Employee.
NOW, THEREFORE, it is AGREED as follows:
1. Consideration from Company: Joint and Several Liability. The Company
-------------------------------------------------------
hereby agrees that to the extent permitted by law, it shall be jointly and
severally liable with the Association for the payment of all amounts due under
the Association Agreement, provided that Section 10(f) of the Association
Agreement shall be inapplicable to this Agreement. The Board may in its
discretion at any time during the term of this Agreement agree to pay the
Employee a base salary for the remaining term of this Agreement. If the Board
agrees to pay such salary, the Board shall thereafter review, not less often
than annually, the rate of the Employee's salary, and in its sole discretion may
decide to increase his salary.
2. Discretionary Bonuses; Participation in Retirement, Medical and Other
---------------------------------------------------------------------
Plans. The Employee shall participate in an equitable manner with all other
- -----
senior management employees of the Company in discretionary bonuses that the
Board may award from time to time to the Company's senior management employees,
as well as in (i) any of the following plans or programs that the Company may
now or in the future maintain: group hospitalization, disability, health,
dental, sick leave, life insurance, travel and/or accident insurance, auto
allowance/auto lease, retirement, pension, and/or other present or future
qualified plans provided by the Company, generally which benefits, taken as a
whole, must be at least as favorable as those in effect on the Effective Date;
and (ii) any fringe benefits which are or may become available to the Company's
senior management employees, including for example: any stock option or
incentive compensation plans, and any other benefits which are commensurate with
the responsibilities and functions to be performed by the Employee under this
Agreement.
3. Indemnification. The Company agrees that its Bylaws shall continue to
---------------
provide for indemnification of directors, officers, employees and agents of the
Company, including the Employee, during the full term of this Agreement, and to
at all times provide adequate insurance for such purposes.
4. Successors and Assigns.
----------------------
(a) Company. This Agreement shall inure to the benefit of and be
binding upon any corporate or other successor of the Company which shall
acquire, directly or indirectly, by merger, consolidation, purchase or
otherwise, all or substantially all of the assets or stock of the Company.
<PAGE>
(b) Attachment. Except as required by law, no right to receive
payments under this Agreement shall be subject to anticipation, commutation,
alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation or
to exclusion, attachment, levy or similar process or assignment by operation of
law, and any attempt, voluntary or involuntary, to effect any such action shall
be null, void and of no effect.
5. Amendments. No amendments or additions to this Agreement shall be
----------
binding unless made in writing and signed by all of the parties, except as
herein otherwise specifically provided.
6. Applicable Law. Except to the extent preempted by federal law, the
--------------
laws of the State of New York shall govern this Agreement in all respects,
whether as to its validity, construction, capacity, performance or otherwise.
7. 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.
8. Entire Agreement. This Agreement, together with any understanding or
----------------
modifications thereof as agreed to in writing by the parties, shall constitute
the entire agreement between the parties hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first hereinabove written.
PEOPLES BANKCORP, INC.
Witnessed by:
By
- ------------------- ----------------------------------------
Secretary Its Chairman of the Board
Witnessed by:
- ------------------- ----------------------------------------
Employee
-2-
<PAGE>
Exhibit 10.5
OGDENSBURG FEDERAL SAVINGS & LOAN ASSOCIATION
--------------------------
Employment Agreement with
Todd R. Mashaw
--------------------------
AGREEMENT entered into and effective this ________ day of _______________,
199_, by and between Ogdensburg Federal Savings & Loan Association (the
"Association") and Todd R. Mashaw (the "Employee").
WHEREAS, the Employee has heretofore been employed by the Association as
its President and is experienced in all phases of the business of the
Association; and
WHEREAS, the Board of Directors (the "Board") of the Association believes
it is in the best interests of the Association to enter into this Agreement with
the Employee in order to assure continuity of management of the Association and
to reinforce and encourage the continued attention and dedication of the
Employee to his assigned duties; and
WHEREAS, the parties desire by this writing to set forth the continuing
employment relationship of the Association and the Employee.
NOW, THEREFORE, it is AGREED as follows:
1. Defined Terms
-------------
When used anywhere in this Agreement, the following terms shall have the
meaning set forth herein.
(a) "Change in Control" shall mean any one of the following events:
(i) the acquisition of ownership, holding or power to vote more than 25% of the
voting stock of the Association or the Company, (ii) the acquisition of the
ability to control the election of a majority of the Association's or the
Company's directors, (iii) the acquisition of a controlling influence over the
management or policies of the Association or of the Company by any person or by
persons acting as a "group" (within the meaning of Section 13(d) of the
Securities Exchange Act of 1934), or (iv) during any period of two consecutive
years, individuals (the "Continuing Directors") who at the beginning of such
period constitute the Board of Directors of the Association or of the Company
(the "Existing Board") cease for any reason to constitute at least two-thirds
thereof, provided that any individual whose election or nomination for election
as a member of the Existing Board was approved by a vote of at least two-thirds
of the Continuing Directors then in office shall be considered a Continuing
Director. Notwithstanding the foregoing, the Company's ownership of the
Association shall not of itself constitute a Change in Control for purposes of
the Agreement.
<PAGE>
For purposes of this paragraph only, the term "person" refers to an individual
or a corporation, partnership, trust, association, joint venture, pool,
syndicate, sole proprietorship, unincorporated organization or any other form of
entity not specifically listed herein.
(b) "Company" shall mean [Holding Company]
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time, and as interpreted through applicable rulings and regulations
in effect from time to time.
(d) "Code '280G Maximum" shall mean the product of 2.99 and the
Employee's "base amount" as defined in Code '280G(b)(3).
(e) "Disability" shall mean a physical or mental infirmity which
impairs the Employee's ability to substantially perform his duties under this
Agreement and which results in the Employee becoming eligible for long-term
disability benefits under the Association's long-term disability plan (or, if
the Association has no such plan in effect, which impairs the Employee's ability
to substantially perform his duties under this Agreement for a period of 180
consecutive days).
(f) "Effective Date" shall mean the date referenced in the opening
paragraph of this Agreement.
(g) "Good Reason" shall mean any of the following events, which has
not been consented to in advance by the Employee in writing: (i) the requirement
that the Employee move his personal residence, or perform his principal
executive functions, more than 30 miles from his primary office as of the later
of the Effective Date and the most recent voluntary relocation by the Employee;
(ii) a material reduction in the Employee's base compensation under this
Agreement as the same may be increased from time to time; (iii) the failure by
the Association or the Company to continue to provide the Employee with
compensation and benefits provided under this Agreement as the same may be
increased from time to time, or with benefits substantially similar to those
provided to him under any of the employee benefit plans in which the Employee
now or hereafter becomes a participant, or the taking of any action by the
Association or the Company which would directly or indirectly reduce any of such
benefits or deprive the Employee of any material fringe benefit enjoyed by him
under this Agreement; (iv) the assignment to the Employee of duties and
responsibilities materially different from those normally associated with his
position; (v) a failure to reelect the Employee to the Board of Directors of the
Association or the Company, if the Employee has served on such Board at any time
during the term of the Agreement; or (vi) a material diminution or reduction in
the Employee's responsibilities or authority (including reporting
responsibilities) in connection with his employment with the Association.
(h) "Just Cause" shall mean, in the good faith determination of the
Association's Board of Directors, the Employee's personal dishonesty,
incompetence, willful misconduct, breach
-2-
<PAGE>
of 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, or
material breach of any provision of this Agreement. The Employee shall have no
right to receive compensation or other benefits for any period after termination
for Just Cause. No act, or failure to act, on the Employee's part shall be
considered "willful" unless he has acted, or failed to act, with an absence of
good faith and without a reasonable belief that his action or failure to act was
in the best interest of the Association and the Company.
(i) "Protected Period" shall mean the period that begins on the date
six months before a Change in Control and ends on the later of the first annual
anniversary of the Change in Control or the expiration date of this Agreement.
(j) "Trust" shall mean a grantor trust that is designed in accordance
with Revenue Procedure 92-64 and has a trustee independent of the Association
and the Company.
2. Employment. The Employee is employed as the President of the
----------
Association. The Employee shall render such administrative and management
services for the Association as are currently rendered and as are customarily
performed by persons situated in a similar executive capacity. The Employee
shall also promote, by entertainment or otherwise, as and to the extent
permitted by law, the business of the Association. The Employee's other duties
shall be such as the Board may from time to time reasonably direct, including
normal duties as an officer of the Association.
3. Base Compensation. The Association agrees to pay the Employee during
-----------------
the term of this Agreement a salary at the rate of $__________________ per
annum, payable in cash not less frequently than monthly. The Board shall
review, not less often than annually, the rate of the Employee's salary, and in
its sole discretion may decide to increase his salary.
4. Discretionary Bonuses. The Employee shall participate in an equitable
---------------------
manner with all other senior management employees of the Association in
discretionary bonuses that the Board may award from time to time to the
Association's senior management employees. No other compensation provided for
in this Agreement shall be deemed a substitute for the Employee's right to
participate in such discretionary bonuses.
5. Participation in Retirement, Medical and Other Plans.
----------------------------------------------------
(a) The Employee shall be eligible to participate in any of the
following plans or programs that the Association may now or in the future
maintain: group hospitalization, disability, health, dental, sick leave, life
insurance, travel and/or accident insurance, auto allowance/auto lease,
retirement, pension, and/or other present or future qualified or nonqualified
plans provided by the Association, generally which benefits, taken as a whole,
must be at least as favorable as those in effect on the Effective Date.
-3-
<PAGE>
(b) The Employee shall also be eligible to participate in any fringe
benefits which are or may become available to the Association's senior
management employees, including for example: any stock option or incentive
compensation plans, and any other benefits which are commensurate with the
responsibilities and functions to be performed by the Employee under this
Agreement. The Employee shall be reimbursed for all reasonable out-of-pocket
business expenses which he shall incur in connection with his services under
this Agreement upon substantiation of such expenses in accordance with the
policies of the Association.
6. Term. The Association hereby employs the Employee, and the Employee
----
hereby accepts such employment under this Agreement, for the period commencing
on the Effective Date and ending 36 months thereafter (or such earlier date as
is determined in accordance with Section 10 or 12 hereof). Additionally, on
each annual anniversary date from the Effective Date, the Employee's term of
employment shall be extended for an additional one-year period beyond the then
effective expiration date, provided the Board determines in a duly adopted
resolution that the performance of the Employee has met the Board's requirements
and standards, and that this Agreement shall be extended. Only those members of
the Board of Directors who have no personal interest in this Employment
Agreement shall discuss and vote on the approval and subsequent review of this
Agreement.
7. Loyalty; Noncompetition.
-----------------------
(a) During the period of his employment hereunder and except for
illnesses, reasonable vacation periods, and reasonable leaves of absence, the
Employee shall devote all his full business time, attention, skill, and efforts
to the faithful performance of his duties hereunder; provided, however, from
time to time, the Employee may serve on the boards of directors of, and hold any
other offices or positions in, companies or organizations, which will not
present any conflict of interest with the Association or any of its subsidiaries
or affiliates, or unfavorably affect the performance of the Employee's duties
pursuant to this Agreement, or will not violate any applicable statute or
regulation. "Full business time" is hereby defined as that amount of time
usually devoted to like companies by similarly situated executive officers.
During the term of his employment under this Agreement, the Employee shall not
engage in any business or activity contrary to the business affairs or interests
of the Association.
(b) Nothing contained in this Section shall be deemed to prevent or
limit the Employee's right to invest in the capital stock or other securities of
any business dissimilar from that of the Association, or, solely as a passive or
minority investor, in any business.
8. Standards. The Employee shall perform his duties under this Agreement
---------
in accordance with such reasonable standards as the Board may establish from
time to time. The Association will provide the Employee with the working
facilities and staff customary for similar executives and necessary for him to
perform his duties.
-4-
<PAGE>
9. Vacation and Sick Leave. At such reasonable times as the Board shall
-----------------------
in its discretion permit, the Employee shall be entitled, without loss of pay,
to absent himself voluntarily from the performance of his employment under this
Agreement, all such voluntary absences to count as vacation time, provided that:
(a) The Employee shall be entitled to an annual vacation in accordance
with the policies that the Board periodically establishes for senior management
employees of the Association.
(b) The Employee shall not receive any additional compensation from
the Association on account of his failure to take a vacation or sick leave, and
the Employee shall not accumulate unused vacation or sick leave from one fiscal
year to the next, except in either case to the extent authorized by the Board.
(c) In addition to the aforesaid paid vacations, the Employee shall be
entitled without loss of pay, to absent himself voluntarily from the performance
of his employment with the Association for such additional periods of time and
for such valid and legitimate reasons as the Board may in its discretion
determine. Further, the Board may grant to the Employee a leave or leaves of
absence, with or without pay, at such time or times and upon such terms and
conditions as such Board in its discretion may determine.
(d) In addition, the Employee shall be entitled to an annual sick
leave benefit as established by the Board.
10. Termination and Termination Pay. Subject to Section 12 hereof, the
-------------------------------
Employee's employment hereunder may be terminated under the following
circumstances:
(a) Death. The Employee's employment under this Agreement shall
terminate upon his death during the term of this Agreement, in which event the
Employee's estate shall be entitled to receive the compensation due the Employee
through the last day of the calendar month in which his death occurred.
(b) Disability. (1) The Association may terminate the Employee's
employment after having established the Employee's Disability, in which event
the Employee shall be entitled to the compensation and benefits provided for
under this Agreement for (i) any period during the term of this Agreement and
prior to the establishment of the Employee's Disability during which the
Employee is unable to work due to the physical or mental infirmity, and (ii) any
period of Disability which is prior to the Employee's termination of employment
pursuant to this Section 10(b); provided that any benefits paid pursuant to the
Association's long term disability plan will continue as provided in such plan
without reduction for payments made pursuant to this Agreement.
- -------
-5-
<PAGE>
(2) During any period that the Employee shall receive disability
benefits and to the extent that the Employee shall be physically and mentally
able to do so, he shall furnish such information, assistance and documents so as
to assist in the continued ongoing business of the Association and, if able,
shall make himself available to the Association to undertake reasonable
assignments consistent with his prior position and his physical and mental
health. The Association shall pay all reasonable expenses incident to the
performance of any assignment given to the Employee during the disability
period.
(c) Just Cause. The Board may, by written notice to the Employee,
immediately terminate his employment at any time, for Just Cause. The Employee
shall have no right to receive compensation or other benefits for any period
after termination for Just Cause.
(d) Without Just Cause; Constructive Discharge. The Board may, by
written notice to the Employee, immediately terminate his employment at any time
for a reason other than his Disability or Just Cause, in which event the
Employee shall be entitled to receive the salary provided pursuant to Section 3
hereof, up to the expiration date of this Agreement, including any renewal term
(the "Expiration Date"), plus said salary for an additional 12-month period
(unless such termination occurs during the Protected Period, in which event the
benefits and compensation provided for in Section 12 shall apply).
All amounts payable to the Employee shall be paid, at the option of the
Employee, either (I) in periodic payments, through the Expiration Date, or (II)
in one lump sum within ten days of such termination.
(e) Good Reason. The Employee shall be entitled to receive the
compensation and benefits payable under subsection 10(d) hereof in the event
that the Employee voluntarily terminates employment within 90 days of an event
that constitutes Good Reason, (unless such voluntary termination occurs during
the Protected Period, in which event the benefits and compensation provided for
in Section 12 shall apply).
(f) Termination or Suspension Under Federal Law. (1) If the Employee
is removed and/or permanently prohibited from participating in the conduct of
the Association's affairs by an order issued under Sections 8(e)(4) or 8(g)(1)
of the Federal Deposit Insurance Act ("FDIA") (12 U.S.C. 1818(e)(4) and (g)(1)),
all obligations of the Association under this Agreement shall terminate, as of
the effective date of the order, but vested rights of the parties shall not be
affected.
(2) If the Association is in default (as defined in Section
3(x)(1) of FDIA), all obligations under this Agreement shall terminate as of the
date of default; however, this Paragraph shall not affect the vested rights of
the parties.
(3) If a notice served under Section 8(e)(3) or (g)(1) of the
FDIA (12 U.S.C. 1818(e)(3) or (g)(1)) suspends and/or temporarily prohibits the
Employee from
-6-
<PAGE>
participating in the conduct of the Association's affairs, the Association's
obligations under this Agreement shall be suspended as of the date of such
service, unless stayed by appropriate proceedings. If the charges in the notice
are dismissed, the Association may in its discretion (i) pay the Employee all or
part of the compensation withheld while its contract obligations were suspended,
and (ii) reinstate (in whole or in part) any of its obligations which were
suspended.
(4) Any payments made to the Employee pursuant to this
Agreement, or otherwise, are subject to and conditioned upon their compliance
with both 12 U.S.C. Section 1828(k) and any regulations promulgated thereunder,
----
and Regulatory Bulletin 27A, but only to the extent required thereunder on the
- ---
date any payment is required pursuant to this Agreement.
(g) Voluntary Termination by Employee. Subject to Section 12 hereof,
the Employee may voluntarily terminate employment with the Association during
the term of this Agreement, upon at least 90 days' prior written notice to the
Board of Directors, in which case the Employee shall receive only his
compensation, vested rights and employee benefits up to the date of his
termination (unless such termination occurs pursuant to Section 10(d) hereof or
within the Protected Period, in Section 12(a) hereof, in which event the
benefits and compensation provided for in Sections 10(d) or 12, as applicable,
shall apply).
11. No Mitigation. The Employee shall not be required to mitigate the
-------------
amount of any payment provided for in this Agreement by seeking other employment
or otherwise and no such payment shall be offset or reduced by the amount of any
compensation or benefits provided to the Employee in any subsequent employment.
12. Change in Control.
-----------------
(a) Trigger Events. The Employee shall be entitled to collect the
severance benefits set forth in Subsection (b) hereof in the event that either
(i) the Employee voluntarily terminates employment for any reason within the 30-
day period beginning on the date of a Change in Control, (ii) the Employee
voluntarily terminates employment within 90 days of an event that both occurs
during the Protected Period and constitutes Good Reason, or (iii) the
Association or the Company or their successor(s) in interest terminate the
Employee's employment without his written consent and for any reason other than
Just Cause during the Protected Period.
(b) Amount of Severance Benefit. If the Employee becomes entitled to
collect severance benefits pursuant to Section 12(a) hereof, the Association
shall:
(i) pay the Employee a severance benefit equal to the difference
between the Code '280G Maximum and the sum of any other "parachute
payments" as defined under Code '280G(b)(2) that the Employee receives
on account of the Change in Control, and
-7-
<PAGE>
(ii) pay for long-term disability and provide such medical
benefits as are available to the Employee under the provisions of
COBRA, for eighteen (18) months (or such longer period, up to 24
months, if COBRA is amended).
The amount payable under this Section 12(b) shall be paid either (i) in one
lump sum within ten days of the later of the date of the Change in Control and
the Employee's last day of employment with the Association or the Company, or
(ii) if prior to the date which is 90 days before the date on which a Change in
Control occurs, the Employee filed a duly executed irrevocable written election
in the form attached hereto as Exhibit "A", payment of such amount shall be made
according to the elected schedule. Deferred amounts shall bear interest from
the date on which they would otherwise be payable until the date paid at a rate
equal to 120% of the applicable federal rate, compounded semiannually, as
determined under Code Section 1274(d) and the regulations thereunder.
In the event that the Employee, the Association, and the Company jointly
agree that the Employee has collected an amount exceeding the Code '280G
Maximum, the parties may agree in writing that such excess shall be treated as a
loan ab initio, which the Employee shall repay to the Association, on terms and
---------
conditions mutually agreeable to the parties, together with interest at the
applicable federal rate provided for in Section 7872(f)(2)(B) of the Code.
(c) Funding of Grantor Trust upon Change in Control. Not later than
ten business days after a Change in Control, the Association shall (i) deposit
in a Trust an amount equal to the Code '280G Maximum, unless the Employee has
previously provided a written release of any claims under this Agreement, and
(ii) provide the trustee of the Trust with a written direction to hold said
amount and any investment return thereon in a segregated account for the benefit
of the Employee, and to follow the procedures set forth in the next paragraph as
to the payment of such amounts from the Trust.
During the 15-consecutive month period after a Change in Control, the
Employee may provide the trustee of the Trust with a written notice directing
the trustee to pay to Employee an amount designated in the notice as being
payable pursuant to this Agreement. Within three business days after receiving
said notice, the trustee of the Trust shall pay such amount to the Employee, and
coincidentally shall provide the Association or its successor with notice of
such payment. Upon the earlier of the Trust's final payment of all amounts due
under the preceding paragraph or the date 15 months after the Change in Control
of the Association, the trustee of the Trust shall pay to the Association the
entire balance remaining in the segregated account maintained for the benefit of
the Employee. The Employee shall thereafter have no further interest in the
Trust.
13. Indemnification. The Association and the Company agree that their
---------------
respective Bylaws shall continue to provide for indemnification of directors,
officers, employees and agents of the Association and the Company, including the
Employee during the full term of this Agreement, and to at all times provide
adequate insurance for such purposes.
-8-
<PAGE>
14. Reimbursement of Employee for Enforcement Proceedings. In the event
-----------------------------------------------------
that any dispute arises between the Employee and the Association as to the terms
or interpretation of this Agreement, whether instituted by formal legal
proceedings or otherwise, including any action that the Employee takes to defend
against any action taken by the Association or the Company, the Employee shall
be reimbursed for all costs and expenses, including reasonable attorneys' fees,
arising from such dispute, proceedings or actions, provided that the Employee
obtains either a written settlement or a final judgement by a court of competent
jurisdiction substantially in his favor. Such reimbursement shall be paid
within ten days of the Employee's furnishing to the Association written
evidence, which may be in the form, among other things, of a canceled check or
receipt, of any costs or expenses incurred by the Employee.
15. Federal Income Tax Withholding. The Association may withhold all
------------------------------
federal and state income or other taxes from any benefit payable under this
Agreement as shall be required pursuant to any law or government regulation or
ruling.
16. Successors and Assigns.
----------------------
(a) Association. This Agreement shall not be assignable by the
Association, provided that this Agreement shall inure to the benefit of and be
binding upon any corporate or other successor of the Association which shall
acquire, directly or indirectly, by merger, consolidation, purchase or
otherwise, all or substantially all of the assets or stock of the Association.
(b) Employee. Since the Association is contracting for the unique and
personal skills of the Employee, the Employee shall be precluded from assigning
or delegating his rights or duties hereunder without first obtaining the written
consent of the Association; provided, however, that nothing in this paragraph
shall preclude (i) the Employee from designating a beneficiary to receive any
benefit payable hereunder upon his death, or (ii) the executors, administrators,
or other legal representatives of the Employee or his estate from assigning any
rights hereunder to the person or persons entitled thereunto.
(c) Attachment. Except as required by law, no right to receive
payments under this Agreement shall be subject to anticipation, commutation,
alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation or
to exclusion, attachment, levy or similar process or assignment by operation of
law, and any attempt, voluntary or involuntary, to effect any such action shall
be null, void and of no effect.
17. Amendments. No amendments or additions to this Agreement shall be
----------
binding unless made in writing and signed by all of the parties, except as
herein otherwise specifically provided.
18. Applicable Law. Except to the extent preempted by federal law, the
--------------
laws of the State of New York shall govern this Agreement in all respects,
whether as to its validity, construction, capacity, performance or otherwise.
-9-
<PAGE>
19. 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.
20. Entire Agreement. This Agreement, together with any understanding or
----------------
modifications thereof as agreed to in writing by the parties, shall constitute
the entire agreement between the parties hereto and shall supersede any prior
agreement between the parties.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first hereinabove written.
OGDENSBURG FEDERAL SAVINGS
& LOAN ASSOCIATION
Witnessed by:
By:
- --------------------- -------------------------
Secretary Its Chairman of the Board
Witnessed by:
- --------------------- -------------------------
Todd R. Mashaw
-10-
<PAGE>
EXHIBIT "A"
OGDENSBURG FEDERAL SAVINGS & LOAN ASSOCIATION
EMPLOYMENT AGREEMENT
-------------------------------
DEFERRED PAYMENT ELECTION FORM
-------------------------------
AGREEMENT, made this ____ day of ________, 19__, by and between _________
(the "Employee") and Ogdensburg Federal Savings & Loan Association (the
"Association") with respect to payment of severance compensation to the Employee
pursuant to Section 12(b) of his employment agreement ("Agreement") with the
Association dated _______, 199__.
NOW THEREFORE, it is mutually agreed as follows:
1. Form of Payment. The Employee, by the execution hereof, in accordance
---------------
with Section 12(b) of the Agreement, elects to have his change in control
severance benefits (plus earnings thereon) distributed in cash as follows:
[_] in one lump sum payment.
[_] in substantially equal annual payments over a period of _____ years
(no more than 10).
2. In the event of the Employee's death, his benefits shall be
distributed --
[_] in one lump sum payment.
[_] in accordance with the payment schedule selected in paragraph 1
hereof (with payments made as though the Employee survived to
collect all benefits, and as though the Employee terminated service
on the date of his death, if payments had not already begun).
3. Designation of Beneficiary. In the event of the Employee's death
--------------------------
before he has collected all of the benefits payable pursuant to the Agreement
and this election, any such benefits payable shall be distributed to the
beneficiary or beneficiaries designated under subparagraphs a and b of this
paragraph 3 in the manner elected pursuant to paragraph 2 above:
<PAGE>
Employment Agreement
Deferred Payment Election Form
Page 2
a. Primary Beneficiary. The Employee hereby designates the person(s)
-------------------
named below to be his primary beneficiary and to receive the balance of any
unpaid benefits under the Agreement:
<TABLE>
<CAPTION>
==================================================================================
Name of Mailing Address Percentage of
Primary Beneficiary Death Benefit
- ----------------------------------------------------------------------------------
<S> <C> <C>
%
- ----------------------------------------------------------------------------------
%
==================================================================================
</TABLE>
b. Contingent Beneficiary. In the event that the primary beneficiary or
----------------------
beneficiaries named above are not living at the time of the Employee's death,
the Employee hereby designates the following person(s) to be his contingent
beneficiary for purposes of the Agreement:
<TABLE>
<CAPTION>
==================================================================================
Name of Percentage of
Contingent Beneficiary Mailing Address Death Benefit
- ----------------------------------------------------------------------------------
<S> <C> <C>
%
- ----------------------------------------------------------------------------------
%
==================================================================================
</TABLE>
4. Effect of Election. The elections made in paragraph 1 hereof shall
-------------------
become irrevocable 90 days prior to the change in control. The Employee may, by
submitting an effective superseding Deferred Payment Election Form at any time
and from time to time, prospectively change the beneficiary designation and the
manner of payment to a beneficiary. Such elections shall, however, become
irrevocable upon the Employee's death.
5. Commitments. The Association agrees to make payment of all amounts due
-----------
the Employee in accordance with the terms of the Agreement and the elections
made by the Employee herein.
<PAGE>
Employment Agreement
Deferred Payment Election Form
Page 3
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands the
day and year first above-written.
EMPLOYEE
Witnessed by:
- ----------------------- -------------------------------------
Todd R. Mastaw
OGDENSBURG FEDERAL SAVINGS
& LOAN ASSOCIATION
Witnessed by:
By
- ----------------------- -------------------------------------
Secretary Its Chairman of the Board
<PAGE>
PEOPLES BANKCORP, INC.
GRANTOR TRUST AGREEMENT
PREAMBLE. This Grantor Trust Agreement (the "Trust Agreement") is entered
into effective this 18th day of August, 1998, by and between Peoples Bankcorp,
Inc. (the "Company") and the undersigned non-employee directors (acting by
majority, the "Trustee").
WHEREAS, the Company has entered into, or has expressed an indication to
enter into, the following plans and arrangements (collectively, the
"Arrangements"): the 1999 Stock Option and Incentive Plan, the Management
Recognition Plan, and separate employment or guarantee agreements with its
executive officers; and
WHEREAS, the Company has incurred or expects to incur liability under the
terms of the Arrangements with respect to the benefits payable to the parties
thereto (the "Beneficiaries", which term shall also include any beneficiary of a
deceased party covered by an Arrangement); and
WHEREAS, it is the intention of the Company to establish this trust (the
"Trust") and to contribute assets to the Trust that shall be held therein,
subject to the claims of the Company's general creditors in the event of
Insolvency, as defined in Section 3(a) hereof, until paid to Beneficiaries in
such manner and at such times as specified in the Arrangements; and
WHEREAS, it is the intention of the parties hereto that this Trust shall
constitute an unfunded arrangement and shall not affect the status of the
Arrangements as unfunded arrangements maintained for the purpose of providing
deferred compensation to a select group of management or highly compensated
individuals for purposes of Title I of the Employee Retirement Income Security
Act of 1974, as amended; and
WHEREAS, it is the intention of the Company to make contributions to the
Trust to provide itself with a source of funds to assist it in the meeting of
its liabilities under the Arrangements.
NOW, THEREFORE, the parties do hereby establish this Trust and agree that
the Trust shall be established and administered as set forth herein:
Section 1. Establishment of Trust
----------------------------------
(a) The Company hereby deposits, or will shortly hereafter deposit in
trust, the sum of $2,500 with the Trustee on or shortly after execution of this
Trust Agreement, which shall constitute the initial principal of the Trust to be
held, administered and dispersed by the Trustee as provided for in this Trust
Agreement.
(b) The Trust shall be irrevocable.
(c) The Trust is intended to be a grantor trust, of which the Company is
the grantor, within the meaning of subpart E, part I, subchapter J, chapter 1,
subtitle A of the Internal Revenue Code of 1986, as amended (the "Code"), and
shall be construed accordingly.
(d) The principal of the Trust, and any earnings thereon, shall be held
separate and apart from other funds of the Company and shall be used exclusively
as herein set forth. Beneficiaries shall have no preferred claim on, or any
beneficial ownership interest in, any assets of the Trust. Any rights created
under the Arrangements and this Trust Agreement shall be unsecured contractual
rights of the Beneficiaries, as provided for in this Agreement. Any assets held
by the Trust will be subject to the claims of the Company's general creditors
under federal and state law in the event of Insolvency, as defined in
Section 3(a) herein.
1
<PAGE>
(e) The Company, in its sole discretion, may at any time, or from time to
time, make additional contributions of cash or other assets to the Trustee to
augment the principal of the Trust to be held, administered, and dispersed by
the Trustee as provided for in this Trust Agreement. Neither the Trustee nor
any Beneficiary shall have any right to compel such additional contributions.
(f) Upon a Change in Control within the meaning of Section 13(e) hereof,
the Company shall, as soon as possible but in no event longer than ten business
days after the Change in Control, make an irrevocable contribution to this Trust
in an amount that is projected to provide the Trust with sufficient funds to pay
each Beneficiary the benefits to which he or she is entitled pursuant to the
Arrangements as in effect on the date of the Change in Control.
Section 2. Payments to Beneficiaries
-------------------------------------
(a) Within 60 days after the end of each calendar year beginning with
1998, the Company shall deliver to the Trustee a schedule (the "Payment
Schedule") which reflects the benefits payable with respect to each Beneficiary,
a formula or other instructions acceptable to the Trustee for determining the
benefits so payable, the form in which such benefits are to be paid (as provided
for or available under the Arrangements), and the date of commencement for
payment of such benefits. Except as otherwise provided herein, the Trustee shall
make payments to Beneficiaries in accordance with such Payment Schedule. The
Trustee shall make provisions for the reporting and withholding of any federal,
state or local taxes that may be required to be withheld with respect to the
payment of benefits pursuant to the terms of the Arrangements and shall pay
amounts withheld to the appropriate taxing authorities or determine that such
amounts have been reported, withheld, and paid by the Company.
(b) Notwithstanding the foregoing, after a Change in Control, the Trustee
shall promptly make payments from the Trust to each and every Beneficiary who
provides the Trustee with a notarized statement specifying the amount payable
and affirming that such amount has both become unconditionally payable pursuant
to one or more of the Arrangements and has not been, and is not being, paid
directly by the Company or its successors; provided that the Trustee shall
provide the Company with notice of such payments promptly, but only after, the
Trustee makes them.
(c) The entitlement of a Beneficiary to benefits under the Arrangements
shall be determined by the Company or such party as may be designated under the
Arrangements, and any claim for such benefits shall be considered and reviewed
under the procedures set forth in the Arrangements.
(d) The Company may make payment of benefits directly to Beneficiaries as
such benefits become due under the terms of the Arrangements. The Company shall
notify the Trustee of its decision to make such payment of benefits prior to the
time benefits are payable to Beneficiaries. In addition, if the principal of
the Trust, and any earnings thereon, are not sufficient to make payments of
benefits in accordance with the terms of the Arrangements, the Company shall
make the balance of each such payment as due. The Trustee shall notify the
Company when existing principal and earnings are insufficient under the Payment
Schedule.
Section 3. Trustee Responsibility Regarding Payments to Trust Beneficiary
--------------------------------------------------------------------------
When Company Is Insolvent
-------------------------
(a) The Trustee shall cease payment of benefits to Beneficiaries if the
Company is Insolvent. The Company shall be considered "Insolvent" for purposes
of this Trust Agreement if (i) the Company is unable to pay its debts when the
same become due, or (ii) the Company is determined to be Insolvent by its
primary banking regulator, or (iii) the Company is placed in receivership by its
primary banking regulator due to its Insolvency.
(b) At all times during the existence of this Trust, as provided in
Section l (d) hereof, the principal and income of the Trust shall be subject to
claims of general creditors of the Company under federal and state law as set
forth below.
(c) The Board of Directors and the Chief Executive Officer of the Company
shall have the duty to inform the Trustee in writing of the Company's
Insolvency. If a person claiming to be a creditor of the Company alleges in
writing to the Trustee that the Company has become Insolvent, the Trustee shall
determine whether the
2
<PAGE>
Company is Insolvent and, pending such determination, the Trustee shall
discontinue payment of benefits to Beneficiaries.
(1) Unless the Trustee has actual knowledge of the Company's
Insolvency, or has received notice from the Company or a person claiming to be a
creditor alleging that the Company is Insolvent, the Trustee shall have no duty
to inquire whether the Company is Insolvent. The Trustee may in all events rely
on such evidence concerning the Company's solvency as may be furnished to the
Trustee and that provides the Trustee with a reasonable basis for making a
determination concerning the Company's solvency.
(2) If at any time the Trustee has determined that the Company is
Insolvent, the Trustee shall discontinue payments to Beneficiaries, shall
liquidate the Trust's investment, if any, in common stock ("Common Stock") of
the Company, and shall hold the assets of the Trust for the benefit of the
Company's general creditors. Nothing in this Trust Agreement shall in any way
diminish any rights of Beneficiaries as general creditors of the Company with
respect to benefits due under the Arrangements or otherwise.
(3) The Trustee shall resume the payment of benefits to Beneficiaries
in accordance with Section 2 of this Trust Agreement only after the Trustee has
determined that the Company is not Insolvent or is no longer Insolvent.
(d) If the Trustee discontinues the payment of benefits from the Trust
pursuant to Section 3(a) hereof and subsequently resumes such payments, the
first payment following such discontinuance shall include the aggregate amount
of all payments due to Beneficiaries under the terms of the Arrangements for the
period of such discontinuance, provided that there are sufficient assets to make
such payments. The aggregate amount of any payments to Beneficiaries by the
Company, in lieu of the payments provided for hereunder during any such period
of discontinuance, shall be deducted from any payments made by the Trustee
hereunder.
Section 4. Payments to the Company
-----------------------------------
After the Trust has become irrevocable, the Company shall have no right or
power to direct the Trustee to return to the Company or to divert to others any
of the Trust assets before all payment of benefits have been made to
Beneficiaries pursuant to the terms of the Arrangements, except as provided for
in Section 3 hereof.
Section 5. Investment Authority
--------------------------------
(a) The Trustee shall have the sole discretion as to the investment of
Trust assets, provided that the Trustee (i) shall invest Trust assets in a
manner reasonably anticipated to provide the Trust with assets sufficient to
fund the Company's obligations under the Arrangements, and (ii) shall follow any
investment directions provided by the Company prior to a Change in Control.
(b) All rights associated with assets of the Trust shall be exercised by
the Trustee or the person designated by the Trustee, and shall in no event be
exercisable by or through Beneficiaries, except that voting rights with respect
to any Common Stock held by the Trust will be exercised by the Trustee only
"FOR" proposals endorsed by the Company's Board of Directors. The Company shall
have the right in its sole discretion, to substitute assets of equal fair market
value for any assets held by the Trust. This right is exercisable by the
Company in a non-fiduciary capacity without consent of any person in a fiduciary
capacity.
(c) Subject to applicable federal and state securities laws, if for any
reason the Trustee determines that it is appropriate to sell shares of Common
Stock, the Trustee shall first offer to sell such shares to the following
purchasers, in order of priority: first, the Company; second, any benefit plan
maintained by the Company or Ogdensburg Federal Savings & Loan Association (the
"Association"); third, current Directors of the Company or the Association;
fourth, current officers of the Association or the Company; and fifth, members
of the general public (through sales on the open market).
3
<PAGE>
Section 6. Disposition of Income
---------------------------------
During the term of this Trust, all income received by the Trust, net of
expenses and taxes, shall be reinvested.
Section 7. Accounting by Trustee
---------------------------------
The Trustee shall keep accurate and detailed records of all investments,
receipts, disbursements of all transactions, including such specific records as
shall be agreed upon in writing between the Company and the Trustee. Within 60
days following the close of each calendar year, and within 20 days after the
removal or resignation of the Trustee, the Trustee shall deliver to the Company
a written account of its administration of the Trust during such year or during
the period from the close of the last preceding year to the date of such removal
or resignation, reflecting all investments, receipts, disbursements and other
transactions effected by it, including a description of all securities and
investments purchased and sold with the cost or net proceeds of such purchases
or sales (accrued interest paid or receivable recorded separately), and
reflecting all cash, securities and other property held in the Trust at the end
of such year or as of the date of such removal or resignation, as applicable.
Section 8. Responsibility of Trustee
-------------------------------------
(a) The Trustee shall act with the care, skill, prudence and diligence
under the circumstances then prevailing that a prudent person acting in like
capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and with like objectives, provided, however, that
the Trustee shall incur no liability to any person for any action taken pursuant
to a direction, request or approval given by the Company which is contemplated
by, and in conformity with, the terms of the Arrangements or this Trust
Agreement and is given in writing by the Company. In the event of a dispute
between the Company and a party, the Trustee may apply to a court of competent
jurisdiction to resolve the dispute.
(b) If the Trustee undertakes or defends any litigation arising in
connection with this Trust, the Company agrees to indemnify the Trustee against
Trustee's costs, expenses and liabilities (including, without limitation,
attorneys' fees and expenses) relating thereto and to be primarily liable for
such payments, except in those cases where the Trustee shall have been found by
a court of competent jurisdiction to have acted with gross negligence or willful
misconduct. If the Company does not pay such costs, expenses and liabilities in
a reasonably timely manner, the Trustee may obtain payment from the Trust.
(c) The Trustee may consult with legal counsel with respect to any of its
duties or obligations hereunder.
(d) The Trustee may hire agents, accountants, actuaries, investment
advisors, financial consultants or other professionals to assist it in
performing any of its duties or obligations hereunder.
(e) The Trustee shall have, without exclusion, all powers conferred on
trustees by applicable law, unless expressly provided otherwise herein,
provided, however, that if an insurance policy is held as an asset of the Trust,
the Trustee shall have no power to name a beneficiary of the policy other than
the Trust, to assign the policy (as distinct from conversion of the policy to a
different form) other than to a successor the Trustee, or to loan to any person
the proceeds of any borrowing against such policy.
(f) Notwithstanding any powers granted to the Trustee pursuant to this
Trust Agreement or to applicable law, the Trustee shall not have any power that
may accord the Trust the authority to engage in a business and to receive the
gains therefrom, within the meaning of Section 301.7701-2 of the Procedure and
Administrative Regulations promulgated pursuant to the Code.
4
<PAGE>
Section 9. Compensation and Expenses of Trustee
------------------------------------------------
The Company shall pay all administrative expenses and the Trustee's fees
and expenses relating to the Arrangements and this Trust. If not so paid, the
fees and expenses shall be paid from the Trust.
Section 10. Resignation and Removal of Trustee
-----------------------------------------------
The Trustee may resign at any time by written notice to the Company, which
resignation shall be effective 30 days after the Company receives such notice
(unless the Company and the Trustee agree otherwise). The Trustee may be
removed by the Company on 30 days notice or upon shorter notice accepted by the
Trustee, but only if at least 80% of the Beneficiaries (including Beneficiaries
in pay status) consent in writing to such removal.
If the Trustee resigns or is removed, a successor shall be appointed, in
accordance with Section 11 hereof, by the effective date of resignation or
removal under this section. If no such appointment has been made, the Trustee
may apply to a court of competent jurisdiction for appointment of a successor or
for instructions. All expenses of the Trustee in connection with the proceeding
shall be allowed as administrative expenses of the Trust. Upon resignation or
removal of the Trustee and appointment of a Successor Trustee, all assets shall
subsequently be transferred to the Successor Trustee. The transfer shall be
completed within 60 days after receipt of notice of resignation, removal or
transfer, unless the Company extends the time for such transfer.
Section 11. Appointment of Successor
-------------------------------------
If the Trustee resigns or is removed in accordance with Section 10 hereof,
the Company may appoint any other party as a successor to replace the Trustee
upon such resignation or removal. The appointment shall be effective when
accepted in writing by the new trustee, who shall have all of the rights and
powers of the former trustee, including ownership rights in the Trust assets.
The former trustee shall execute any instrument necessary or reasonably
requested by the Company or the Successor Trustee to evidence the transfer.
Notwithstanding the foregoing, if the Trustee resigns or is removed following a
Change in Control, the Trustee that has resigned or is being removed shall
appoint as its successor a third party financial institution that has trust
powers, is independent of and unrelated to the entity that has acquired or
otherwise obtained control of the Company, and is agreed to in writing by at
least 80% of the Beneficiaries.
A Successor Trustee need not examine the records and acts of any prior
trustee and may retain or dispose of existing Trust assets, subject to Sections
7 and 8 hereof. The Successor Trustee shall not be responsible for, and the
Company shall indemnify and defend the Successor Trustee from, any claim or
liability resulting from any action or inaction of any prior trustee or from any
other past event, or any condition existing at the time it becomes Successor
Trustee.
Section 12. Amendment or Termination
-------------------------------------
(a) This Trust Agreement may be amended by a written instrument executed
by the Trustee and the Company, provided that no such amendment shall either
------
conflict with the terms of the Arrangements, or make the Trust revocable.
--
(b) Notwithstanding subsection (a) hereof, the provisions of this Trust
Agreement and the trust created thereby may not be amended or terminated after
the date a Change in Control occurs, without the written consent of at least 80%
of the number of Beneficiaries.
(c) The Trust shall not terminate until the date on which no Beneficiary
is entitled to benefits pursuant to the terms hereof or of the Arrangements.
Upon termination of the Trust, the Trustee shall return any assets remaining in
the Trust to the Company.
5
<PAGE>
(d) The Company may terminate this Trust prior to the payment of all
benefits under the Arrangements upon written approval of the Beneficiaries
entitled to payment of such benefits.
Section 13. Miscellaneous
--------------------------
(a) Any provision of this Trust Agreement prohibited by law shall be
ineffective to the extent of any such prohibition, without invalidating the
remaining provisions hereof.
(b) Benefits payable to Beneficiaries under this Trust Agreement may not
be anticipated, assigned (either at law or in equity), alienated, pledged,
encumbered or subjected to attachment, garnishment, levy, execution or other
legal or equitable process, except pursuant to the terms of the Arrangements and
this Trust Agreement.
(c) This Trust Agreement shall be governed by and construed in accordance
with the laws of the State of West Virginia, except to the extent preempted by
federal law.
(d) The Trustee agrees to be bound by the terms of the Arrangements, as in
effect from time to time.
(e) "Change in Control" is defined in the Company's 1999 Stock Option and
Incentive Plan (the "Plan"), and shall be defined in the same manner for
purposes of this Trust. Any amendment to the Plan that modifies its definition
of a "Change in Control" shall be deemed to apply with equal force, effect, and
timing to the definition of Change in Control for purposes of this Trust, except
that a modification that may adversely affect a Beneficiary shall be ineffectual
as to the Beneficiary unless he or she consents in writing to be bound by the
modification.
Section 14. Effective Date.
---------------------------
The effective date of this Trust Agreement shall be the date referenced in
the Preamble.
6
<PAGE>
IN WITNESS WHEREOF, the Company, by its duly authorized officer, has caused
this Trust Agreement to be executed, and its corporate seal affixed, and the
Trustees have executed this Trust Agreement, on the date referenced in the
Preamble.
PEOPLES BANKCORP, INC.
Witnessed by:
__________________________________ By ___________________________________
Its Chairman of the Board
TRUSTEES
Witnessed by:
__________________________________ ______________________________________
Witnessed by:
__________________________________ ______________________________________
Witnessed by:
__________________________________ ______________________________________
Witnessed by:
__________________________________ ______________________________________
7
<PAGE>
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Ogdensburg Federal Savings and Loan Association
We consent to the inclusion in the Registration Statement on Form SB-2 of
Peoples Bankcorp, Inc. of our audit report dated July 24, 1998 on the statements
of financial condition of Ogdensburg Federal Savings and Loan Association as of
December 31, 1997 and 1996, and the related statements of income, equity and
cash flows for each of the years in the two year period ended December 31, 1997.
We also consent to the reference to our firm under the heading "Experts" in the
prospectus.
/s/ KPMG Peat Marwick LLP
September 10, 1998
Syracuse, New York
<PAGE>
EXHIBIT 23.3
[LETTERHEAD OF FELDMAN FINANCIAL ADVISORS, INC.]
September 15, 1998
Board of Directors
Ogdensburg Federal Savings and Loan Association
825 State Street
Ogdensburg, New York 13669
Gentlemen:
We hereby consent to the use of our name and summary of our valuation opinion,
as referenced in the Application for Approval of Conversion ("Form AC") filed by
Ogdensburg Federal Savings and Loan Association (the "Association") with Office
of Thrift Supervision, regarding the estimated aggregate pro forma market value
of the Association in connection with its reorganization from mutual to stock
form and simultaneous offering for sale of shares of common stock by Peoples
Bankcorp, Inc. (the "Holding Company").
We hereby consent to reference in the Form AC the summary of our opinion as to
the value of subscription rights granted by the Association. We further consent
to the use of our name and summary opinions as noted above in the Registration
Statement and Prospectus filed by the Holding Company with the Securities and
Exchange Commission.
Sincerely,
/s/ Feldman Financial Advisors, Inc.
FELDMAN FINANCIAL ADVISORS, INC.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 622
<INT-BEARING-DEPOSITS> 617
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 3,546
<INVESTMENTS-MARKET> 3,552
<LOANS> 18,563
<ALLOWANCE> 165
<TOTAL-ASSETS> 24,247
<DEPOSITS> 22,356
<SHORT-TERM> 0
<LIABILITIES-OTHER> 243
<LONG-TERM> 0
0
0
<COMMON> 0
<OTHER-SE> 1,648
<TOTAL-LIABILITIES-AND-EQUITY> 24,247
<INTEREST-LOAN> 727
<INTEREST-INVEST> 127
<INTEREST-OTHER> 28
<INTEREST-TOTAL> 882
<INTEREST-DEPOSIT> 522
<INTEREST-EXPENSE> 522
<INTEREST-INCOME-NET> 360
<LOAN-LOSSES> 3
<SECURITIES-GAINS> 1
<EXPENSE-OTHER> 281
<INCOME-PRETAX> 98
<INCOME-PRE-EXTRAORDINARY> 72
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 72
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 3.24
<LOANS-NON> 303
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 164
<CHARGE-OFFS> 3
<RECOVERIES> 1
<ALLOWANCE-CLOSE> 165
<ALLOWANCE-DOMESTIC> 165
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 674
<INT-BEARING-DEPOSITS> 553
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 737
<INVESTMENTS-CARRYING> 4,031
<INVESTMENTS-MARKET> 4,038
<LOANS> 16,832
<ALLOWANCE> 164
<TOTAL-ASSETS> 23,402
<DEPOSITS> 21,756
<SHORT-TERM> 0
<LIABILITIES-OTHER> 60
<LONG-TERM> 0
0
0
<COMMON> 0
<OTHER-SE> 1,577
<TOTAL-LIABILITIES-AND-EQUITY> 23,402
<INTEREST-LOAN> 1,330
<INTEREST-INVEST> 277
<INTEREST-OTHER> 55
<INTEREST-TOTAL> 1,662
<INTEREST-DEPOSIT> 998
<INTEREST-EXPENSE> 998
<INTEREST-INCOME-NET> 664
<LOAN-LOSSES> 57
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 525
<INCOME-PRETAX> 126
<INCOME-PRE-EXTRAORDINARY> 88
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 88
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 3.08
<LOANS-NON> 293
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 116
<CHARGE-OFFS> 9
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 164
<ALLOWANCE-DOMESTIC> 164
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<PAGE>
Exhibit 99.2
OGDENSBURG FEDERAL SAVINGS AND LOAN ASSOCIATION
825 State Street
Ogdensburg, New York 13669
(315) 393-4340
NOTICE OF SPECIAL MEETING OF MEMBERS
Notice is hereby given that a Special Meeting of Members (the "Special
Meeting") of Ogdensburg Federal Savings and Loan Association (the "Association")
will be held at the offices of the Association, 825 State Street, Ogdensburg,
New York, on _________, 1998 at __:__ _.m. Business to be taken up at the
Special Meeting shall be:
(1) To consider and vote upon the adoption of a Plan of Conversion
providing for 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") as a wholly owned subsidiary of Peoples Bankcorp,
Inc., a newly organized New York 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,
including the adoption of an amended Federal Stock Charter and
Bylaws for the Converted Association pursuant to the laws of the
United States and the Rules and Regulations administered by the
Office of Thrift Supervision.
(2) To consider and vote upon any other matters that may lawfully come
before the Special Meeting.
Note: As of the date of mailing of this Notice of Special Meeting of
Members, the Board of Directors is not aware of any other matters
that may come before the Special Meeting.
The members entitled to vote at the Special Meeting shall be those members
of the Association at the close of business on _________, 1998, who continue as
members until the Special Meeting and, should the Special Meeting be, from time
to time, adjourned to a later time, until the final adjournment thereof.
BY ORDER OF THE BOARD OF DIRECTORS
Sheila M. Shaver
Secretary
______________, 1998
Ogdensburg, New York
---------------------------------
YOUR BOARD OF DIRECTORS URGES YOU TO CONSIDER CAREFULLY THIS PROXY
MATERIAL AND, WHETHER OR NOT YOU PLAN TO BE PRESENT IN PERSON AT THE SPECIAL
MEETING, TO FILL IN, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD(S) AS SOON AS
POSSIBLE TO ASSURE THAT YOUR VOTES WILL BE COUNTED. THIS WILL NOT PREVENT YOU
FROM VOTING IN PERSON IF YOU ATTEND THE SPECIAL MEETING.
<PAGE>
GLOSSARY
<TABLE>
<CAPTION>
<S> <C>
Association Ogdensburg Federal Savings and Loan
Association converting from mutual to
stock form, in its mutual form and
the federally chartered stock savings
and loan association resulting from
the Association's conversion from
mutual to stock form
Company The corporation named Peoples
Bankcorp, Inc. formed by the
Association to serve as its holding
company after the Conversion
Community Offering The offering of shares of the common
stock to the general public
concurrently with or after
commencement of the Subscription
Offering, giving preference to
natural persons and trusts of natural
persons (including individual
retirement and Keogh retirement
accounts and personal trusts in which
such natural persons have substantial
interests) who are permanent
residents of the Association's Local
Community
Conversion Conversion of the Association from
mutual to stock form, the issuance of
the Association's outstanding common
stock to the Company and the issuance
of the Company's outstanding common
stock to purchasers in the
Subscription Offering and, if any,
the Community Offering and/or
Syndicated Offering
Eligible Account Holders Holders of savings accounts at the
Association with balances of at least
$50.00 as of June 30, 1997
ESOP Employee Stock Ownership Plan to be
implemented by the Company in the
Conversion
Estimated Valuation Range Range of valuation from 15% below to
15% above the independent appraisal
of our estimated pro forma market
value, which was $1,500,000 as of
September 4, 1998
FDIC Federal Deposit Insurance Corporation
Feldman Feldman Financial Advisors, Inc., the
firm we engaged to prepare the
appraisal of our estimated pro forma
market value in the Conversion
Local Community The county where our offices are
located -- St. Lawrence County, New
York
Other Members Depositor and borrower members of the
Association as of ______ __, 1998.
OTS Office of Thrift Supervision of the
United States Department of the
Treasury
SEC Securities and Exchange Commission
Subscription Offering The offering of shares of the common
stock to Eligible Account Holders,
the ESOP, Supplemental Eligible
Account Holders and Other Members
Supplemental Eligible Account Holders of savings accounts at the
Holders Association with balances of at least
$50.00 as of September 30, 1998
Syndicated Offering If any, the offering of shares of the
common stock to the general public
after the Subscription and Community
Offerings in a syndicated offering by
selected dealers
Trident Securities Trident Securities, Inc., the firm we
engaged to advise and assist us in
the marketing of the common stock and
the conduct of the Subscription
Offering and, if any, the Community
Offering and/or Syndicated Offering
</TABLE>
<PAGE>
QUESTIONS AND ANSWERS
Set forth below are answers to frequently asked questions about the
procedures for voting on the Plan of Conversion and related matters. For
additional information about the Conversion, please refer to the more detailed
information contained in this proxy statement and the accompanying prospectus.
For assistance, please contact the Stock Information Center at (315) ___-____.
About Voting "For" the Plan of Conversion
1. Am I eligible to vote at the Special Meeting of Members to be held to
consider the Plan of Conversion?
You are eligible to vote at the Special Meeting of Members to be held
on _________, 1998 if you were a depositor or borrower of Ogdensburg
Federal Savings at the close of business on the Voting Record Date
(_______, 1998) and continue as such until the Special Meeting. If
you were a member on the Voting Record Date, you should have received
a proxy statement and a proxy card with which to vote.
2. How many votes do I have?
As an account holder of ours, you have one vote for each $100, or
fraction thereof, on deposit in your account(s) with us. Each
borrower member may cast one vote in addition to the number of votes,
if any, he or she is entitled to cast as an account holder. No member
may cast more than 1,000 votes.
3. If I vote "against" the Plan of Conversion and it is approved, will I
be prohibited from buying stock during the Subscription Offering?
No. Voting against the Plan of Conversion in no way restricts you
from purchasing the common stock of our holding company in the
Subscription Offering.
4. Did the Board of Directors of Ogdensburg Federal Savings and Loan
Association unanimously adopt the Plan of Conversion?
Yes. Our Board of Directors unanimously adopted the Plan of
Conversion and urges that all members vote "FOR" approval of the Plan
of Conversion.
5. What happens if Ogdensburg Federal Savings and Loan Association does
not get enough votes to approve the Plan of Conversion?
The Conversion would not take place, and we would remain a mutual
savings association.
6. As a qualifying depositor or borrower of Ogdensburg Federal Savings
and Loan Association, am I required to vote?
No. However, failure to return your proxy card or otherwise vote will
have the same effect as a vote AGAINST the Plan of Conversion.
7. What is a Proxy Card?
A proxy card gives you the ability to vote without attending the
Special Meeting in person. If you received more than one
informational packet, then you should vote the proxy cards in all
packets. Your proxy card(s) is (are) located in the window sleeve of
your informational packet(s).
You may attend the meeting and vote, even if you have returned your
proxy card, if you choose to do so. However, if you are unable to
attend, you still are represented by proxy. Previously executed
proxies, other
<PAGE>
than those proxies related to the Conversion which were sent to you,
will not be used to vote for approval of the Plan of Conversion, even
if you do not execute another proxy or attend the Special Meeting and
vote in person.
8. How can I get further information concerning the stock offering?
You may call the Stock Information Center at (315) ___-____ for
further information or to request a copy of the prospectus, a Stock
Order Form, a proxy statement or a proxy card.
THIS INFORMATION DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY PEOPLES BANKCORP, INC. COMMON STOCK. SUCH OFFERS AND
SOLICITATIONS MAY BE MADE ONLY BY MEANS OF THE PROSPECTUS. COPIES OF THE
PROSPECTUS MAY BE OBTAINED BY CALLING THE STOCK INFORMATION CENTER AT (315) ___-
____.
THE SHARES OF PEOPLES BANKCORP BANCORP, INC. COMMON STOCK BEING OFFERED ARE
NOT SAVINGS OR DEPOSIT ACCOUNTS AND ARE NOT INSURED BY THE SAVINGS ASSOCIATION
INSURANCE FUND OF THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENT AGENCY.
<PAGE>
OGDENSBURG FEDERAL SAVINGS AND LOAN ASSOCIATION
825 STATE STREET
OGDENSBURG, NEW YORK 81201
(315) 393-4340
PROXY STATEMENT
YOUR PROXY, IN THE FORM ENCLOSED, IS SOLICITED BY OUR BOARD OF DIRECTORS
FOR USE AT A SPECIAL MEETING OF OUR MEMBERS TO BE HELD ON __________, 1998 AND
ANY ADJOURNMENT OF THAT MEETING, FOR THE PURPOSES SET FORTH IN THE FOREGOING
NOTICE OF SPECIAL MEETING. OUR BOARD OF DIRECTORS URGES YOU TO VOTE FOR THE
PLAN OF CONVERSION.
PURPOSE OF MEETING -- SUMMARY
A Special Meeting of Members (the "Special Meeting") of Ogdensburg Federal
Savings and Loan Association (the "Association") will be held at the offices of
the Association, 825 State Street, New York on _________, ___________, 1998, at
__:__ _.m., local time, for the purpose of considering and voting upon a Plan of
Conversion (the "Plan"), which was unanimously adopted by our Board of Directors
and which, if approved by a majority of the total votes eligible to be cast by
the members, will permit us to convert from a federal mutual savings and loan
association to a federal stock savings and loan association as a wholly owned
subsidiary of Peoples Bankcorp, Inc. (the "Company"), a New York corporation
which we formed for the purpose of becoming our holding company. Our Conversion
and the acquisition of us by the Company is referred to in this Proxy Statement
as the "Conversion". The Conversion is contingent upon our members' approval of
the Plan of Conversion at the Special Meeting or any adjournment of the Special
Meeting.
The Plan provides in part that after receiving final authorization from the
Office of Thrift Supervision ("OTS"), the Company will offer for sale shares of
its Common Stock through the issuance of nontransferable subscription rights,
first to our depositors as of June 30, 1997, with $50.00 or more on deposit with
us on that date ("Eligible Account Holders"), second to the Company's Employee
Stock Ownership Plan (the "ESOP") (a tax-qualified employee stock benefit plan
of the Company, as defined in the Plan), third to our depositors with $50.00 or
more on deposit with us on September 30, 1998, the last day of the calendar
quarter preceding approval of the Plan by the OTS ("Supplemental Eligible
Account Holders"), and fourth to other members, i.e., our depositors and
borrower members, other than Eligible Account Holders and Supplemental Eligible
Account Holders on ___________, 1998 ("Other Members") (the "Subscription
Offering"). Subscription rights received in any of the foregoing categories
will be subordinated to the subscription rights of those in a prior category,
with the exception that any shares of Common Stock sold in excess of the high
end of the estimated value range as established in an independent appraisal, as
discussed below, may be first sold to the ESOP. The Company may offer any
shares remaining after the Subscription Offering to certain members of the
general public in a community offering (the "Community Offering"). In the
Community Offering, preference will be given to natural persons and trusts of
natural persons who are permanent residents of our local community, St. Lawrence
County, New York (the "Local Community"). Any shares of Common Stock not
purchased in the Subscription and Community Offerings may be sold as part of a
community offering on a best efforts basis by a selling group of selected
broker-dealers to be managed by Trident Securities, Inc. (the "Syndicated
Community Offering"). The aggregate price of the Common Stock to be issued by
the Company under the Plan is currently estimated to be between $1,275,000 and
$1,983,750, subject to adjustment, as determined by an independent appraisal of
our estimated pro forma market value as converted and as a wholly owned
subsidiary of the Company. See "The Conversion -- Stock Pricing and Number of
Shares to be Issued" in the accompanying Prospectus.
<PAGE>
Adoption of our proposed Federal Stock Charter and Bylaws is an integral
part of the Plan. Copies of the Plan and the proposed Federal Stock Charter and
Bylaws are attached to this Proxy Statement as exhibits. These documents
provide, among other things, for the termination of voting rights of members and
creation of their rights to receive any surplus remaining in the event of our
liquidation. These rights, except for the rights of Eligible Account Holders
and Supplemental Eligible Account Holders in the liquidation account established
for their benefit upon completion of the Conversion, will vest exclusively in
the Company as the sole holder of our outstanding capital stock. For further
information, see "The Conversion -- Effect of Conversion to Stock Form on
Depositors and Borrowers of the Association" in the accompanying Prospectus.
RECOMMENDATION OF THE BOARD OF DIRECTORS
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" APPROVAL
OF THE PLAN OF CONVERSION. VOTING IN FAVOR OF THE PLAN OF CONVERSION WILL NOT
---
OBLIGATE ANY PERSON TO PURCHASE STOCK.
The Conversion will be accomplished through adoption of a new Federal Stock
Charter and Bylaws to authorize our issuance of capital stock to the Company.
Under the Plan, up to 212,750 shares of the Common Stock, subject to adjustment,
are being offered for sale by the Company. Upon completion of the Conversion,
we will issue all of our newly issued shares of capital stock (100,000 shares)
to the Company in exchange for at least 50% of the net proceeds of the
Conversion. None of our assets will be distributed in order to effect the
Conversion other than to pay expenses incident thereto.
The net proceeds from the sale of Common Stock in the Conversion will
substantially increase our capital, which will increase the amount of funds
available for lending and investment, and support current operations and the
continued growth of our business. The holding company structure will provide
greater flexibility than we alone would have for diversification of business
activities and geographic operations. We believe that this increased capital
and operating flexibility will enable us to compete more effectively with other
savings institutions and other types of financial service organizations. We
also believe that the Conversion will enhance the future access of both
ourselves and the Company to the capital markets.
PEOPLES BANKCORP, INC.
The Company was formed as a New York corporation in September 1998 at our
direction for the purpose of serving as our holding company after the
Conversion. Prior to the Conversion, the Company has not engaged and is not
expected to engage in any material operations. The Company has received the
approval of the OTS to acquire control of us upon completion of the Conversion.
Upon consummation of the Conversion, the only assets the Company is expected to
own are the capital stock we will issue in connection with the Conversion, a
note receivable from our ESOP and any proceeds from the offering the Company
retains.
As a holding company, the Company will have greater flexibility than we
would have to diversify its business activities through the formation of
subsidiaries or through acquisition. The Company will be classified as a unitary
savings and loan holding company after the Conversion and will be required to
comply with OTS regulations and be subject to examination.
The Company's executive offices are located at 825 State Street,
Ogdensburg, New York 13669 and its main telephone number is (315) 393-4340.
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OGDENSBURG FEDERAL SAVINGS AND LOAN ASSOCIATION
We are a federal mutual savings and loan association operating through one
office in Ogdensburg, New York. We were founded in 1888. We are a member of
the FHLB System. Our deposits are insured up to applicable limits by the
Federal Deposit Insurance Corporation ("FDIC") under the SAIF. At June 30,
1998, we had total assets of $24.2 million, total deposits of $22.4 million and
total equity of $1.6 million.
Our principal business consists of attracting deposits from the general
public and originating residential mortgage loans. We also offer various types
of consumer loans and a limited number of commercial real estate and commercial
business loans.
Our executive offices are located at 825 State Street, Ogdensburg, New York
81201, and its main telephone number is (315) 393-4340.
INFORMATION RELATING TO VOTING AT THE SPECIAL MEETING
Our Board of Directors has fixed the close of business on ________ ___,
1998 as the record date (the "Voting Record Date") for the determination of
members entitled to notice of and to vote at the Special Meeting. Under our
current mutual charter, our members include all holders of deposit or other
authorized accounts and certain of our borrowers. All members of record as of
the close of business on the Voting Record Date who remain members until the
date of the Special Meeting will be entitled to vote at the Special Meeting or
any adjournment thereof.
At the Special Meeting each depositor member may cast one vote for each
$100, or fraction thereof, of the aggregate withdrawal value of all of his or
her savings accounts with us as of the Voting Record Date. Each borrower member
will be entitled to one vote in addition to the number of votes to which he or
she is entitled as a depositor. No member may cast more than 1,000 votes.
Approval of the Plan of Conversion to be presented at the Special Meeting
will require the affirmative vote of at least a majority of the total
outstanding votes of our members eligible to be cast at the Special Meeting. As
of the Voting Record Date for the Special Meeting, there were approximately
_____ votes eligible to be cast, of which _____ votes constitute a majority.
Members may vote at the Special Meeting or any adjournment thereof in
person or by proxy. All properly executed proxies received by us will be voted
in accordance with the instructions indicated on the proxies by the members
giving such proxies. If no contrary instructions are given, proxies will be
voted in favor of the Plan of Conversion. If any other matters are properly
presented before the Special Meeting and may properly be voted upon, the proxies
solicited hereby will be voted on such matters by the proxy holders named
therein as directed by our Board of Directors. Valid, previously executed
general proxies, which typically are obtained from members when they open their
accounts with us, will not be used to vote for approval of the Plan of
Conversion, even if the respective members do not execute another proxy or
attend the Special Meeting and vote in person. You have the right to revoke
your proxy at any time before the voting at the Special Meeting by delivering
either written notice or a duly executed proxy bearing a later date to the
Secretary of Ogdensburg Federal Savings and Loan Association. The Secretary
must receive this written notice or the later-dated proxy prior to the Special
Meeting or any adjournment thereof. You may also revoke your proxy by attending
the Special Meeting and voting in person.
FAILURE TO RETURN AN EXECUTED PROXY FOR THE SPECIAL MEETING OR TO ATTEND
THE SPECIAL MEETING IN ORDER TO VOTE IN PERSON WOULD HAVE THE SAME EFFECT AS
VOTING AGAINST THE CONVERSION.
3
<PAGE>
Proxies may be solicited by our officers, directors or other employees, in
person, by telephone or through other forms of communication. Such persons will
be reimbursed by us only for their expenses incurred in connection with such
solicitation.
The proxies solicited hereby will be used only at the Special Meeting and
at any adjournment thereof; they will not be used at any other meeting.
DESCRIPTION OF THE PLAN CONVERSION
THE OTS HAS APPROVED THE PLAN SUBJECT TO THE PLAN'S APPROVAL BY OUR MEMBERS
AT A SPECIAL MEETING OF MEMBERS, AND SUBJECT TO THE SATISFACTION OF CERTAIN
OTHER CONDITIONS IMPOSED BY THE OTS IN ITS APPROVAL. OTS APPROVAL, HOWEVER,
DOES NOT CONSTITUTE A RECOMMENDATION OR ENDORSEMENT OF THE PLAN BY THE OTS.
GENERAL
On July 23, 1998, our board of directors adopted a plan of conversion,
pursuant to which we will convert from a federally chartered mutual savings and
loan association to a federally chartered stock savings and loan association and
become a wholly owned subsidiary of the Company. The conversion will include
adoption of the proposed Federal Stock Charter and Bylaws which will authorize
the issuance of capital stock by us. Under the Plan, our capital stock is being
sold to the Company and the common stock of the Company is being offered to our
customers and then to the public.
The OTS has approved the Company's application to become a savings and loan
holding company and to acquire all of our capital stock to be issued in the
conversion. Pursuant to such OTS approval, the Company plans to retain a
portion of the net proceeds from the sale of shares of common stock and to use
the remainder to purchase all of the capital stock we will issue in the
conversion.
The shares are first being offered in a Subscription Offering to holders of
subscription rights. To the extent shares of common stock remain available
after the Subscription Offering, we may offer shares of common stock in a
Community Offering. The Community Offering, if any, may begin anytime
subsequent to the beginning of the Subscription Offering. Shares not subscribed
for in the Subscription and Community Offerings may be offered for sale by the
Company in a Syndicated Community Offering. We have the right, in our sole
discretion, to accept or reject, in whole or in part, any orders to purchase
shares of common stock received in the Community and Syndicated Community
Offering.
We must sell common stock in an amount equal to our pro forma market value
as a stock savings institution in order for the conversion to become effective.
We must complete the Community Offering within 45 days after the last day of the
Subscription Offering, unless we extend such period and obtain the approval of
the OTS to do so. The Plan provides that the conversion must be completed
within 24 months after the date of the approval of the Plan by our members.
In the event that we are unable to complete the sale of common stock and
effect the conversion within 45 days after the end of the Subscription Offering,
we may request an extension of the period by the OTS. We cannot assure you that
the extension would be granted if requested, nor can we assure you that our
valuation would not substantially change during any such extension. If the
Estimated Valuation Range of the shares must be amended, we cannot assure that
the OTS would approve such amended Estimated Valuation Range. Therefore, it is
possible that if the conversion cannot be completed within the requisite period
of time, we may not be permitted to complete the conversion. A substantial
delay caused by an extension of the period may also significantly increase the
expense of the conversion. We cannot sell any shares of common stock unless the
Plan is approved by our members.
4
<PAGE>
The completion of the offering is subject to market conditions and other
factors beyond our control. We cannot give you any assurances as to the length
of time following approval of the Plan at the meeting of our members that will
be required to complete the Community Offering or other sale of the shares being
offered in the conversion. If we experience delays, our estimated pro forma
market value upon conversion could change significantly, together with
corresponding changes in the offering price and the net proceeds to be realized
by us from the sale of the shares. In the event we terminate the conversion, we
would be required to charge all conversion expenses against current income and
promptly return any funds collected by us in the offering to each potential
investor, plus interest at the prescribed rate.
EFFECTS OF CONVERSION TO STOCK FORM ON DEPOSITORS AND BORROWERS OF OGDENSBURG
FEDERAL SAVINGS AND LOAN ASSOCIATION
VOTING RIGHTS. Currently in our mutual form, our depositor and borrower
members have voting rights and may vote for the election of directors.
Following the conversion, depositors and borrower members will cease to have
voting rights.
SAVINGS ACCOUNTS AND LOANS. The conversion will not affect the balances,
terms and FDIC insurance coverage of savings accounts, nor will the amounts and
terms of loans and obligations of the borrowers under their individual
contractual arrangements with us be affected.
TAX EFFECTS. We have received an opinion from our counsel, Housley
Kantarian & Bronstein, P.C. on the material federal tax consequences of the
conversion. We have filed the opinion as an exhibit to the registration
statement of which this prospectus is a part. The opinion provides, in part,
that,: (i) the conversion will qualify as a reorganization under Section
368(a)(1)(F) of the Code, and we will not recognize any taxable gain in either
our mutual form or our stock form as a result of the proposed conversion; (ii)
we will not recognize any taxable gain upon the receipt of money from the
Company for our stock, nor will the Company recognize any gain upon the receipt
of money for the common stock; (iii) our assets in either our mutual or our
stock form will have the same basis before and after the conversion; (iv) the
holding period of our assets will include the period during which the assets
were held by us in our mutual form prior to conversion; (v) no gain or loss will
be recognized by the Eligible Account Holders, Supplemental Eligible Account
Holders, and Other Members upon the issuance to them of withdrawable savings
accounts in us in the stock form in the same dollar amount as their savings
accounts in us in the mutual form plus an interest in the liquidation account of
us in the stock form in exchange for their savings accounts in us in the mutual
form; (vi) depositors will recognize gain or loss upon the receipt of
liquidation rights and the receipt of subscription rights in the conversion, to
the extent such liquidation rights and subscription rights are deemed to have
value, as discussed below; (vii) the basis of each account holder's savings
accounts in us after the conversion will be the same as the basis of his savings
accounts in us prior to the conversion, decreased by the fair market value of
the nontransferable subscription rights received and increased by the amount, if
any, of gain recognized on the exchange; (viii) the basis of each account
holder's interest in the liquidation account will be zero; and (ix) the holding
period of the common stock acquired through the exercise of subscription rights
shall begin on the date on which the subscription rights are exercised.
With respect to the subscription rights, we have received an opinion of
Feldman which, based on certain assumptions, concludes that the subscription
rights to be received by 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.
Such opinion is based on the fact that such rights are: (i) acquired by the
recipients without payment therefor, (ii) non-transferable, (iii) of short
duration, and (iv) afford the recipients the right only to purchase shares at a
price equal to their estimated fair market value, which will be the same price
at which shares for which no subscription right is received in the Subscription
Offering will be offered in the Community Offering. If the subscription rights
granted to Eligible Account Holders or other eligible subscribers are deemed to
have an ascertainable value, receipt of such rights would be taxable only to
those Eligible Account Holders or other eligible subscribers who exercise the
subscription rights in an amount equal to such value (either as a capital gain
or ordinary income), and we could recognize gain on such distribution.
5
<PAGE>
We are also subject to New York income taxes and have received an opinion
from Silver & Silver that the conversion will be treated for New York state tax
purposes similar to the conversion's treatment for federal tax purposes.
Unlike a private letter ruling, the opinions of Housley Kantarian &
Bronstein, P.C., Feldman and Silver & Silver have no binding effect or official
status, and we cannot give you any assurance that a court would sustain the
conclusions reached in any of those opinions if contested by the IRS or the New
York tax authorities. WE ENCOURAGE ELIGIBLE ACCOUNT HOLDERS, SUPPLEMENTAL
ELIGIBLE ACCOUNT HOLDERS, AND OTHER MEMBERS TO CONSULT WITH THEIR OWN TAX
ADVISERS AS TO THE TAX CONSEQUENCES IN THE EVENT THE SUBSCRIPTION RIGHTS ARE
DEEMED TO HAVE AN ASCERTAINABLE VALUE.
LIQUIDATION ACCOUNT. In the unlikely event of our complete liquidation in
our present mutual form, each depositor is entitled to equal distribution of any
of our assets, pro rata to the value of his accounts, remaining after payment of
claims of all creditors (including the claims of all depositors to the
withdrawal value of their accounts). Each depositor's pro rata share of such
remaining assets would be in the same proportion as the value of his deposit
accounts was to the total value of all deposit accounts in us at the time of
liquidation.
Upon a complete liquidation after the conversion, each depositor would have
a claim, as a creditor, of the same general priority as the claims of all other
general creditors of ours. Therefore, except as described below, a depositor's
claim would be solely in the amount of the balance in his deposit account plus
accrued interest. A depositor would not have an interest in the residual value
of our assets above that amount if any.
The Plan provides for the establishment, upon the completion of the
conversion, of a special "liquidation account" for the benefit of Eligible
Account Holders and Supplemental Eligible Account Holders in an amount equal to
our net worth as reflected in the latest statement of financial condition in the
Prospectus. Each Eligible Account Holder and Supplemental Eligible Account
Holder, if he continues to maintain his deposit account with us, would be
entitled on a complete liquidation of us after conversion, to an interest in the
liquidation account prior to any payment to stockholders. Each Eligible Account
Holder would have an initial interest in such liquidation account for each
deposit account held in us on the qualifying date, June 30, 1997. Each
Supplemental Eligible Account Holder would have a similar interest as of the
qualifying date, September 30, 1998. The interest as to each deposit account
would be in the same proportion of the total liquidation account as the balance
of the deposit account on the qualifying dates was to the aggregate balance in
all the deposit accounts of Eligible Account Holders and Supplemental Eligible
Account Holders on such qualifying dates. However, if the amount in the deposit
account on any annual closing date of ours is less than the amount in such
account on the respective qualifying dates, then the interest in this special
liquidation account would be reduced from time to time by an amount
proportionate to any such reduction, and the interest would cease to exist if
such deposit account were closed. The interest in the special liquidation
account will never be increased despite any increase in the related deposit
account after the respective qualifying dates.
No merger, consolidation, purchase of bulk assets with assumptions of
savings accounts and other liabilities, or similar transactions with another
insured institution in which transaction we, in our converted form, are not the
surviving institution shall be considered a complete liquidation. In such
transactions, the liquidation account shall be assumed by the surviving
institution.
RESTRICTIONS ON SALES AND PURCHASES OF SHARES BY DIRECTORS AND OFFICERS
Shares purchased by directors and officers of the Company may not be sold
for one year following completion of the conversion. An exception to this rule
is a disposition of shares in the event of the death of the director or officer.
Any shares issued to directors and officers as a stock dividend, stock split, or
otherwise with respect to restricted stock shall be subject to the same
restrictions.
For three years following the conversion, directors and officers may
purchase shares only through a registered broker or dealer. Exceptions are
available only if the OTS has approved the purchase or the purchase is an arm's
length transaction and involves more than one percent of the outstanding shares.
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<PAGE>
INTERPRETATION AND AMENDMENT OF THE PLAN
We are authorized to interpret and amend the Plan. Our interpretations are
final. Amendments to the Plan after the receipt of member approval will not
need further member approval unless required by the OTS.
CONDITIONS AND TERMINATION
Completion of the conversion requires (i) the approval of the Plan by the
affirmative vote of not less than a majority of the total number of votes
eligible to be cast by our members; and (ii) completion of the sale of shares
within 24 months following approval of the Plan by our members. If these
conditions are not satisfied, the Plan will be terminated and we will continue
our business in the mutual form of organization. We may terminate the Plan at
any time prior to the meeting of members to vote on the Plan or at any time
thereafter with the approval of the OTS.
OTHER
All statements made in this document are hereby qualified by the contents of
the plan of conversion, the material terms of which are set forth herein. The
plan of conversion is attached to the Proxy Statement. Copies of the Plan are
available from us and we should be consulted for further information. Adoption
of the Plan by our members authorizes us to interpret, amend or terminate the
Plan.
CHARTER AND BYLAWS
The following is a summary of certain provisions of the Charter and Bylaws
which will become effective upon our conversion into a federally chartered stock
savings bank. Complete copies of the Stock Charter and Bylaws are attached as
Exhibits B and C to this Proxy Statement.
In stock form, we will be authorized to issue 3,000,000 shares of common
stock, $1.00 par value per share. Our common stock will not be insured by the
FDIC. All of our outstanding common stock will be owned by the Company.
Accordingly, exclusive voting rights with respect to our affairs after the
Conversion will be vested in the Company's Board of Directors.
Our Charter provides that the number of directors shall be not fewer than
five or more than 15, with the exact number to be fixed in the Bylaws. The
proposed Stock Bylaws provide that the number directors shall be five.
Directors will serve for terms of three years and the terms of directors will be
staggered so that approximately one-third of the Board is elected each year.
In addition to the common stock, we will be authorized to issue 500,000
shares of serial preferred stock, $1.00 par value per share. The Board of
Directors will be permitted, without further stockholder approval, to authorize
the issuance of preferred stock in series and to fix the voting powers,
designations, preferences and relative, participating, optional, conversion and
other special rights of the shares of each series of the preferred stock and the
qualifications, limitations and restrictions thereof. Preferred stock may rank
prior to common stock in dividend rights, liquidation preferences, or both, and
may have voting rights.
Neither the Stock Charter nor the Bylaws provide for indemnification of
officers and directors. However, we will be required by OTS regulations (as we
currently are) to indemnify its directors, officers and employees against legal
and other expenses incurred in defending lawsuits brought against them by
reasons of the performance of their official duties. Indemnification may be
made to any such person only if final judgment on the merits is in his favor or,
in case of (i) settlement, (ii) final judgment against him or (iii) final
judgment in his favor, other than on the merits, if a majority of our directors
determines that he was acting in good faith within the scope of his employment
or authority as he could reasonably have perceived it under the circumstances
and for a purpose he could have reasonably believed under the circumstances was
in our best interest or the best interest of our stockholders. If a majority of
our directors concludes
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that in connection with an action any person ultimately may become entitled to
indemnification, the directors may authorize payment of reasonable costs and
expenses arising from defense or settlement of such action.
HOW TO ORDER STOCK
The accompanying prospectus contains information about our business and
financial condition of the and additional information about the Conversion and
the Subscription Offering and the Community Offering. Enclosed is a Stock Order
Form you must use to purchase for stock. You are not obligated to purchase
stock and voting to approve the Conversion will not obligate you to purchase for
stock.
All Subscription Rights are nontransferable and will expire if you do not
exercise them by returning the accompanying Stock Order Form with full payment
(or appropriate instructions authorizing withdrawal from a savings or
certificate account with us) for all shares for which subscription is made to
the Company by __:__ _.m., Eastern Time, on ________ ___, 1998, unless extended
by us. A postage-paid reply envelope is provided for this purpose. If not all
of the shares are subscribed for in the Subscription Offering by our members,
the remaining shares may be offered to the general public in the Community
Offering with preference given to natural persons and trusts of natural persons
who reside in St. Lawrence County, New York.
THE INFORMATION CONTAINED IN THIS PROXY STATEMENT IS LIMITED IN ITS SCOPE TO
USE IN THE SOLICITATION OF PROXIES FOR THE SPECIAL MEETING TO VOTE ON THE PLAN
OF CONVERSION. IT IS NOT INTENDED FOR USE IN THE OFFERING OF THE COMMON STOCK.
SUCH OFFERING IS MADE ONLY BY THE ACCOMPANYING PROSPECTUS.
ADDITIONAL INFORMATION
The information contained in the accompanying prospectus includes a more
detailed description of the Plan of Conversion and is intended to help you
evaluate the Conversion.
All persons eligible to vote at the Special Meeting should review both this
Proxy Statement and the accompanying prospectus carefully.
YOUR BOARD OF DIRECTORS URGES YOU TO CONSIDER CAREFULLY THIS PROXY MATERIAL
AND, WHETHER OR NOT YOU PLAN TO BE PRESENT IN PERSON AT THE SPECIAL MEETING, TO
FILL IN, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD(S) AS SOON AS POSSIBLE TO
ASSURE THAT YOUR VOTES WILL BE COUNTED. THIS WILL NOT PREVENT YOU FROM VOTING
IN PERSON IF YOU ATTEND THE SPECIAL MEETING. YOU MAY REVOKE YOUR PROXY BY
WRITTEN INSTRUMENT DELIVERED TO THE SECRETARY OF OGDENSBURG FEDERAL SAVINGS AND
LOAN ASSOCIATION AT ANY TIME PRIOR TO OR AT THE SPECIAL MEETING OR BY ATTENDING
THE SPECIAL MEETING AND VOTING IN PERSON.
THIS PROXY STATEMENT IS NOT AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER
TO BUY THE COMMON STOCK. THE OFFER IS MADE ONLY BY THE ACCOMPANYING PROSPECTUS.
BY ORDER OF THE BOARD OF DIRECTORS
Sheila M. Shaver
Secretary
______________, 1998
Ogdensburg, New York
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EXHIBIT A
OGDENSBURG FEDERAL SAVINGS & LOAN ASSOCIATION
OGDENSBURG, NEW YORK
PLAN OF CONVERSION
FROM MUTUAL TO STOCK ORGANIZATION
I. GENERAL.
On July 23, 1998, the Board of Directors of Ogdensburg Federal Savings &
Loan Association, Ogdensburg, New York (the "Association"), after careful study
and consideration, adopted this Plan of Conversion from Mutual to Stock
Organization (the "Plan"), whereby the Association will convert from a federal
mutual savings association to a federal capital stock savings association (the
"Converted Association") as a wholly owned subsidiary of a Holding Company to be
formed at the direction of the Association (the "Conversion").
The Conversion is subject to regulations of the Director of the Office of
Thrift Supervision of the United States Department of the Treasury ("OTS")
pursuant to Section 5(i) of the Home Owners' Loan Act and Part 563b of the Rules
and Regulations Applicable to All Savings Associations.
The Plan is subject to the prior written approval of the OTS and must be
adopted by the affirmative vote of at least a majority of the total outstanding
votes of the Members of the Association. Pursuant to the Plan, shares of
Conversion Stock in the Holding Company will be offered in a Subscription
Offering pursuant to non-transferable Subscription Rights at a predetermined and
uniform price first to the Association's Eligible Account Holders of record as
of June 30, 1997, second to the Association's Tax-Qualified Employee Stock
Benefit Plans, third to Supplemental Eligible Account Holders of record as of
the last day of the calendar quarter preceding OTS approval of the Association's
application to convert to stock form and fourth to Other Members of the
Association. Concurrently with the Subscription Offering, shares not subscribed
for in the Subscription Offering may be offered by the Association to the
general public in a Community Offering. Shares remaining, if any, may then be
offered to the general public in an underwritten public offering or otherwise.
The aggregate Purchase Price of the Conversion Stock will be based upon an
independent appraisal of the Association and will reflect the estimated pro
forma market value of the Converted Association, as a subsidiary of the Holding
Company.
It is the desire of the Board of Directors to attract new capital to the
Converted Association to increase its net worth, to support future savings
growth, to increase the amount of funds available for other lending and
investment, to provide greater resources for the expansion of customer services
and to facilitate future expansion. In addition, the Board of Directors
currently intends to implement stock option plans and other stock benefit plans
subsequent to the Conversion to better attract and retain qualified directors
and officers. It is the further desire of the Board of Directors to reorganize
the Converted Association as the wholly owned subsidiary of the Holding Company
to enhance flexibility of operations, diversification of business opportunities
and financial capability for business and regulatory purposes and to enable the
Converted Association to compete more effectively with other financial service
organizations.
No change will be made in the Board of Directors or management of the
Association as a result of the Conversion.
II. DEFINITIONS.
Acting in Concert: The term "Acting in Concert" means (i) knowing
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participation in a joint activity or interdependent conscious parallel action
towards a common goal whether or not pursuant to an express agreement; or (ii) a
combination or pooling of voting or other interests in the securities of an
issuer for a common purpose pursuant to any contract, understanding,
relationship, agreement or other arrangement, whether written or otherwise. A
person (as defined by 12 C.F.R. (S)563b.2(a)(26)) who acts in concert with
another person ("other party") shall also be deemed to be acting in concert with
any person who is also acting in concert with that other party, except that any
Tax-Qualified
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Employee Stock Benefit Plan will not be deemed to be acting in concert with its
trustee or a person who serves in a similar capacity solely for the purpose of
determining whether stock held by the trustee and stock held by the Tax-
Qualified Employee Benefit Plan will be aggregated.
Associate: The term "Associate," when used to indicate a relationship with
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any person, means (i) any corporation or organization (other than the
Association, the Holding Company or a majority-owned subsidiary of the
Association or the Holding Company) of which such person is an officer or
partner or is, directly or indirectly, the beneficial owner of 10% or more of
any class of equity securities; (ii) any trust or other estate in which such
person has a substantial beneficial interest or as to which such person serves
as trustee or in a similar fiduciary capacity, except that such term shall not
include a "Tax-Qualified Employee Stock Benefit Plan," as defined herein; 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 of the Association or the
Holding Company, or any of their subsidiaries.
Association: The term "Association" means Ogdensburg Federal Savings &
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Loan Association, either in its present form as a federal mutual savings
association or in its future form as a federal mutual savings association in the
event of the amendment of its federal mutual charter and bylaws to substantially
conform with the current regulatory model federal mutual savings association
charter and bylaws.
Capital Stock: The term "Capital Stock" means any and all authorized
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shares of stock of the Converted Association.
Community Offering: The term "Community Offering" means the offering of
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shares of Conversion Stock to the general public by the Holding Company
concurrently with or after commencement of the Subscription Offering, giving
preference to natural persons and trusts of natural persons (including
individual retirement and Keogh retirement accounts and personal trusts in which
such natural persons have substantial interests) who are permanent Residents of
the Association's Local Community.
Conversion: The term "Conversion" means (i) the amendment of the
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Association's federal mutual charter and bylaws to authorize issuance of shares
of Capital Stock by the Converted Association and to conform to the requirements
of a federal capital stock savings association under the laws of the United
States and applicable regula tions; (ii) the issuance and sale of Conversion
Stock by the Holding Company in the Subscription and Community Offerings and/or
in an underwritten public offering or otherwise; and (iii) the purchase by the
Holding Company of all the Capital Stock of the Converted Association to be
issued in the Conversion immediately following or concurrently with the close of
the sale of the Conversion Stock.
Conversion Stock: The term "Conversion Stock" means the shares of common
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stock to be issued and sold by the Holding Company pursuant to the Plan.
Converted Association: The term "Converted Association" means Ogdensburg
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Federal Savings & Loan Association in its form as a federal capital stock
savings association resulting from the conversion of the Association to the
stock form of organization in accordance with the terms of the Plan.
Eligibility Record Date: The term "Eligibility Record Date" means the
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close of business on June 30, 1997.
Eligible Account Holder: The term "Eligible Account Holder" means each
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holder of one or more Qualifying Deposits in the Association on the Eligibility
Record Date.
Holding Company: The term "Holding Company" means a corporation to be
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incorporated by the Association under state law for the purpose of becoming a
holding company for the Converted Association through the issuance and sale of
Conversion Stock under the Plan and the concurrent acquisition of 100% of the
Capital Stock to be issued and sold pursuant to the Plan.
Holding Company Stock: The term "Holding Company Stock" means any and all
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authorized shares of stock of the Holding Company.
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Independent Appraiser: The term "Independent Appraiser" means a person
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independent of the Association, experienced and expert in the area of corporate
appraisal, and acceptable to the OTS, retained by the Association to prepare an
appraisal of the pro forma market value of the Converted Association, as a
subsidiary of the Holding Company.
Local Community: The term "Local Community" means the county or counties
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in which the Association's office or offices are located.
Market Maker: The term "Market Maker" means a dealer (i.e., any person who
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engages, either for all or part of such person's time, directly or indirectly,
as agent, broker or principal in the business of offering, buying, selling or
otherwise dealing or trading in securities issued by another person) who, with
respect to a particular security, (i)(a) regularly publishes bona fide,
competitive bid and offer quotations in a recognized interdealer quotation
system or (b) furnishes bona fide competitive bid and offer quotations on
request and (ii) is ready, willing and able to effect transactions in reasonable
quantities at its quoted prices with other brokers or dealers.
Member: The term "Member" means any person or entity who qualifies as a
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member of the Association under its federal mutual charter and bylaws prior to
the Conversion.
Officer: The term "Officer" means an executive officer of the Holding
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Company or the Association (as applicable), including the Chairman of the Board,
President, Executive Vice Presidents, Senior Vice Presidents in charge of
principal business functions, Secretary and Treasurer.
Order Form: The term "Order Form" means the order form or forms to be used
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by Eligible Account Holders, Supplemental Eligible Account Holders and other
persons eligible to purchase Conversion Stock pursuant to the Plan.
Other Member: The term "Other Member" means any person, other than an
------------
Eligible Account Holder or a Supplemental Eligible Account Holder, who is a
Member as of the Voting Record Date.
OTS: The term "OTS" means the Office of Thrift Supervision of the United
---
States Department of the Treasury or any successor agency having jurisdiction
over the Conversion.
Plan: The term "Plan" means this Plan of Conversion under which the
----
Association will convert from a federal mutual savings association to a federal
capital stock savings association as a wholly owned subsidiary of the Holding
Company, as originally adopted by the Board of Directors or amended in
accordance with the terms hereof.
Qualifying Deposit: The term "Qualifying Deposit" means each savings
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balance in any Savings Account in the Association as of the close of business on
the Eligibility Record Date or the Supplemental Eligibility Record Date, as
applicable, which is equal to or greater than $50.00.
Registration Statement: The term "Registration Statement" means the
----------------------
Registration Statement on Form S-1, or such other form as may be appropriate,
and any amendments thereto, filed by the Holding Company with the SEC pursuant
to the Securities Act of 1933, as amended, to register shares of Conversion
Stock.
Resident: The term "Resident," as used in this Plan in relation to the
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preference afforded natural persons and trusts of natural persons in the Local
Community, includes any natural person who occupies a dwelling within the Local
Community, has an intention to remain within the Local Community for a period of
time (manifested by establishing a physical, ongoing, non-transitory presence
within the Local Community) and continues to reside therein at the time of the
Community Offering. The Association may utilize deposit or loan records or such
other evidence provided to it to make the determination as to whether a person
is residing in the Local Community. To the extent the "person" is a corporation
or other business entity, the principal place of business or headquarters should
be within the Local Community. To the extent the "person" is a personal benefit
plan, the circumstances of the beneficiary shall apply with respect to this
definition. In the case of all other benefit plans, circumstances of the
trustee shall be examined for purposes of this definition. In all cases, such
determination shall be in the sole discretion of the Association.
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Sale: The terms "sale" and "sell" mean every contract to sell or otherwise
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dispose of a security or an interest in a security for value, but such terms do
not include an exchange of securities in connection with a merger or acquisition
approved by the OTS or any other federal agency having jurisdiction.
Savings Account: The term "Savings Account" means a withdrawable deposit
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in the Association.
SEC: The term "SEC" means the Securities and Exchange Commission or any
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successor agency.
Special Meeting: The term "Special Meeting" means the Special Meeting of
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Members to be called for the purpose of submitting the Plan to the Members for
their approval.
Subscription Offering: The term "Subscription Offering" means the offering
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of shares of Conversion Stock to Eligible Account Holders, Tax-Qualified
Employee Stock Benefit Plans, Supplemental Eligible Account Holders and Other
Members under the Plan.
Subscription and Community Prospectus: The term "Subscription and
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Community Prospectus" means the final prospectus to be used in connection with
the Subscription and Community Offerings.
Subscription Rights: The term "Subscription Rights" means non-
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transferable, non-negotiable, personal rights of Eligible Account Holders, Tax-
Qualified Employee Stock Benefit Plans, Supplemental Eligible Account Holders
and Other Members to purchase Conversion Stock offered under the Plan.
Supplemental Eligibility Record Date: The term "Supplemental Eligibility
------------------------------------
Record Date" means the last day of the calendar quarter preceding the approval
of the Plan by the OTS.
Supplemental Eligible Account Holder: The term "Supplemental Eligible
------------------------------------
Account Holder" means each holder of one or more Qualifying Deposits in the
Association (other than Officers and directors of the Association and their
Associates) on the Supplemental Eligibility Record Date.
Tax-Qualified Employee Stock Benefit Plan: The term "Tax-Qualified
-----------------------------------------
Employee Stock Benefit Plan" means 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 require ments to be "qualified" under
section 401 of the Internal Revenue Code of 1986, as amended. "Non-Tax-
Qualified Employee Stock Benefit Plan" means any defined benefit plan or defined
contribution plan which is not so qualified.
Voting Record Date: The term "Voting Record Date" means the date fixed by
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the Board of Directors of the Association to determine Members of the
Association entitled to vote at the Special Meeting.
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III. STEPS PRIOR TO SUBMISSION OF THE PLAN TO THE MEMBERS FOR APPROVAL.
Prior to submission of the Plan to its Members for approval, the
Association must receive approval from the OTS of an Application for Approval of
Conversion on Form AC, which includes the Plan to convert to the stock form of
organization (the "Application"). 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. Promptly after adoption of the Plan by the Board of Directors, 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 and/or by mailing a
letter to each of its Members.
C. A press release relating to the proposed Conversion may be
submitted to the local media.
D. Copies of the Plan adopted by the Board of Directors shall be made
available for inspection by Members at each office of the Association.
E. The Association shall cause the Holding Company to be incorporated
under state law, and the Board of Directors of the Holding Company shall
concur in the Plan by at least a two-thirds vote.
F. The Association shall submit or cause to be submitted the
Application to the OTS. The Holding Company shall submit or cause to be
submitted an Application H-(e)1 or Application H-(e)1-S to the OTS and the
Registration Statement to the SEC. Upon receipt of advice from the
regulatory authorities that the Application has been received and is in the
prescribed form, the Association shall publish a "Notice of Filing of an
Application for Conversion to a Stock Savings Association" in a newspaper
of general circulation, as referred to in Paragraph III.B. herein. The
Association also shall prominently display a copy of such notice in each of
its offices. The Holding Company shall publish notice of the filing of the
Application H-(e)1 or H-(e)1-S in accordance with applicable regulations.
G. The Association shall obtain an opinion of its tax advisors or a
favorable ruling from the United States Internal Revenue Service which
shall state that the Conversion will not result in a taxable reorganization
for federal income tax purposes to the Association. Receipt of a favorable
opinion or ruling is a condition precedent to completion of the Conversion.
H. The Plan shall be submitted to a vote of the Members at the
Special Meeting after approval by the OTS.
IV. MEETING OF MEMBERS.
Following receipt of approval of the Plan by the OTS, the Special Meeting
to vote on the Plan shall be scheduled in accordance with the Association's
bylaws and applicable regulations. Notice of the Special Meeting will be given
by means of a proxy statement authorized for use by the OTS. Promptly after
receipt of approval and at least 20 days but not more than 45 days prior to the
Special Meeting, the Association will distribute proxy solicitation materials to
all voting Members as of the Voting Record Date established for voting at the
Special Meeting. Proxy materials will also be sent to each beneficial holder of
an Individual Retirement Account where the name of the beneficial holder is
disclosed on the Association's records. The proxy solicitation materials will
include a copy of the Proxy Statement and other documents authorized for use by
the regulatory authorities and may also include a Subscription and Community
Prospectus as provided in Paragraph VI. below. The Association will also advise
each Eligible Account Holder and Supplemental Eligible Account Holder not
entitled to vote at the Special Meeting of the proposed Conversion and the
scheduled Special Meeting and provide a postage paid card on which to indicate
whether he or she wishes to receive the Subscription and Community Prospectus,
if the Subscription and Community Offerings are not held concurrently with the
proxy solicitation.
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Pursuant to applicable regulations, an affirmative vote of at least a
majority of the total outstanding votes of the Members will be required for
approval of the Plan. Voting may be in person or by proxy. The OTS shall be
promptly notified of the actions of the Members at the Special Meeting.
V. SUMMARY PROXY STATEMENT.
The Proxy Statement to be furnished to Members may be in summary form,
provided that a statement is made in boldface type that a more detailed
description of the proposed transaction may be obtained by returning an enclosed
postage paid card or other written communication requesting a supplemental
information statement. Without prior approval from the OTS, the Special Meeting
shall not be held fewer than 20 days after the last day on which the
supplemental information statement is mailed to Members requesting the same.
The supplemental information statement may be combined with the Subscription and
Community Prospectus if the Subscription and Community Offerings are commenced
concurrently with the proxy solicitation of Members for the Special Meeting.
VI. OFFERING DOCUMENTS.
The Holding Company may commence the Subscription Offering and, provided
that the Subscription Offering has commenced, may commence the Community
Offering concurrently with or during the proxy solicitation of Members and may
close the Subscription and Community Offerings before the Special Meeting,
provided that the offer and sale of the Conversion Stock shall be conditioned
upon approval of the Plan by the Members at the Special Meeting.
The Association's proxy solicitation materials may require Eligible Account
Holders, Supplemental Eligible Account Holders and Other Members to return to
the Association by a reasonable date certain a postage-paid written
communication requesting receipt of a Subscription and Community Prospectus in
order to be entitled to receive a Subscription and Community Prospectus,
provided that the Subscription Offering shall not be closed until the expiration
of 30 days after mailing proxy solicitation materials to voting Members and a
postage-paid written communication to non-voting Eligible Account Holders and
Supplemental Eligible Account Holders. If the Subscription Offering is
commenced within 45 days after the Special Meeting, the Association shall
transmit, no more than 30 days prior to the commencement of the Subscription
Offering, to each voting Member who had been furnished with proxy solicitation
materials and to each non-voting Eligible Account Holder and Supplemental
Eligible Account Holder, written notice of the commencement of the Subscription
Offering which shall state that the Association is not required to furnish a
Subscription and Community Prospectus to them unless they return by a reasonable
date certain a postage-paid written communication requesting the receipt of the
Subscription and Community Prospectus.
Prior to commencement of the Subscription and Community Offerings, the
Holding Company shall file the Registration Statement with the SEC pursuant to
the Securities Act of 1933, as amended. The Holding Company shall not
distribute the Subscription and Community Prospectus until the Registration
Statement containing the same has been declared effective by the SEC and the
aforementioned documents have been approved by the OTS. The Subscription and
Community Prospectus may be combined with the Proxy Statement for the Special
Meeting.
VII. CONSUMMATION OF CONVERSION.
The date of consummation of the Conversion will be the effective date of
the amendment of the Association's federal mutual charter to read in the form of
a federal stock charter, which shall be the date of the issuance and sale of the
Conversion Stock. After receipt of all orders for Conversion Stock, and
concurrently with the execution thereof, the amendment of the Association's
federal mutual charter to authorize the issuance of shares of Capital Stock and
to conform to the requirements of a federal capital stock savings Association
will be declared effective by the OTS, and the amended bylaws approved by the
Members will become effective. At such time, the Conversion Stock will be
issued and sold by the Holding Company, the Capital Stock to be issued in the
Conversion will be issued and sold to the Holding Company, and the Converted
Association will become a wholly owned subsidiary of the Holding Company. The
Converted Association will issue to the Holding Company 100,000 shares of its
common stock, representing all of the shares of Capital Stock to be issued by
the Converted Association in the Conversion, and the Holding Company will make
payment to the Converted Association of at least 50 percent of the aggregate net
proceeds realized by the
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Holding Company from the sale of the Conversion Stock under the Plan, or such
other portion of the aggregate net proceeds as may be authorized or required by
the OTS.
VIII. STOCK OFFERING.
A. General.
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The aggregate purchase price of all shares of Conversion Stock which
will be offered and sold will be equal to the estimated pro forma market
value of the Converted Association, as a subsidiary of the Holding Company,
as determined by an independent appraisal. The exact number of shares of
Conversion Stock to be offered will be determined by the Board of Directors
of the Association and the Board of Directors of the Holding Company, or
their respective designees, in conjunction with the determination of the
Purchase Price (as that term is defined in Paragraph VIII.B. below). The
number of shares to be offered may be subsequently adjusted prior to
completion of the Conversion as provided below.
B. Independent Evaluation and Purchase Price of Shares.
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All shares of Conversion Stock sold in the Conversion will be sold at
a uniform price per share referred to in this Plan as the "Purchase Price."
The Purchase Price and the total number of shares of Conversion Stock to be
offered in the Conversion will be determined by the Board of Directors of
the Association and the Board of Directors of the Holding Company, or their
respective designees, immediately prior to the simultaneous completion of
all such sales contemplated by this Plan on the basis of the estimated pro
forma market value of the Converted Association, as a subsidiary of the
Holding Company, at such time. The estimated pro forma market value of the
Converted Association, as a subsidiary of the Holding Company, will be
determined for such purpose by an Independent Appraiser on the basis of
such appropriate factors as are not inconsistent with applicable
regulations. Immediately prior to the Subscription and Community
Offerings, a subscription price range of shares for the offerings will be
established (the "Valuation Range"), which will vary from 15% above to 15%
below the midpoint of such range. The number of shares of Conversion Stock
ultimately issued and sold will be determined at the close of the
Subscription and Community Offerings and any other offering. The
subscription price range and the number of shares to be offered may be
changed subsequent to the Subscription and Community Offerings as the
result of any appraisal updates prior to the completion of the Conversion,
without notifying eligible purchasers in the Subscription and Community
Offerings and without a resolicitation of subscriptions, provided the
aggregate Purchase Price is not below the low end or more than 15 percent
above the high end of the Valuation Range previously approved by the OTS or
if, in the opinion of the Boards of Directors of the Association and the
Holding Company, the new Valuation Range established by the appraisal
update does not result in a materially different capital position of the
Converted Association.
Notwithstanding the foregoing, no sale of Conversion Stock may be
consummated unless, prior to such consummation, the Independent Appraiser
confirms to the Association and the Holding Company and to the OTS that, to
the best knowledge of the Independent Appraiser, nothing of a material
nature has occurred which, taking into account all relevant factors, would
cause the Independent Appraiser to conclude that the aggregate value of the
Conversion Stock at the Purchase Price is incompatible with its estimate of
the aggregate consolidated pro forma market value of the Converted
Association, as a subsidiary of the Holding Company. If such confirmation
is not received, the Association may cancel the Subscription and Community
Offerings and/or any other offering, extend the Conversion, establish a new
Valuation Range, extend, reopen or hold new Subscription and Community
Offerings and/or other offerings or take such other action as the OTS may
permit.
C. Subscription Offering.
---------------------
Non-transferable Subscription Rights to purchase shares of Conversion
Stock will be issued at no cost to Eligible Account Holders, Tax-Qualified
Employee Stock Benefits Plans, Supplemental Eligible Account Holders and
Other Members pursuant to priorities established by applicable regulations.
All shares must be sold, and, to the extent that Conversion Stock is
available, no subscriber will be allowed to purchase fewer than
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25 shares of Conversion Stock, provided that this number shall be decreased
if the aggregate purchase price exceeds $500. The priorities established by
applicable regulations for the purchase of shares are as follows:
1. Category No. 1: Eligible Account Holders.
a. Each Eligible Account Holder shall receive, without payment,
non-transferable Subscription Rights to purchase Conversion Stock in
an amount equal to the greater of $50,000, one-tenth of one percent of
the total offering of shares of Conversion Stock or 15 times the
product (rounded down to the next whole number) obtained by
multiplying the total number of shares of Conversion 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 Converted Association in each case on the Eligibility
Record Date.
b. Non-transferable Subscription Rights to purchase Conversion
Stock received by Officers and directors 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 to purchase shares pursuant to this
Subscription Category.
c. In the event of an oversubscription for shares of Conversion
Stock pursuant to this Category, shares of Conversion Stock shall be
allocated among subscribing Eligible Account Holders as follows:
(I) Shares of Conversion Stock shall be allocated among
subscribing Eligible Account Holders so as to permit each such
Account Holder, to the extent possible, to purchase a number of
shares of Conversion Stock sufficient to make its total
allocation equal to 100 shares or the total amount of its
subscription, whichever is less.
(II) Any shares not so allocated shall be allocated among
the subscribing Eligible Account Holders on an equitable basis,
related to the amounts of their respective aggregate Qualifying
Deposits, as compared to the total aggregate Qualifying Deposits
of all subscribing Eligible Account Holders.
2. Category No. 2: Tax-Qualified Employee Stock Benefit Plans.
a. Tax-Qualified Employee Stock Benefit Plans of the Converted
Association shall receive, without payment, non-transferable
Subscription Rights to purchase up to 10% of the shares of Conversion
Stock issued in the Conversion.
b. Subscription rights received in this Category shall be
subordinated to the Subscription Rights received by Eligible Account
Holders pursuant to Category No. 1, provided that any shares of
Conversion Stock sold in excess of the high end of the Valuation Range
may be first sold to Tax-Qualified Employee Stock Benefit Plans.
3. Category No. 3: Supplemental Eligible Account Holders.
a. In the event that the Eligibility Record Date is more than 15
months prior to the date of the latest amendment of the Application
filed prior to OTS approval, then each Supplemental Eligible Account
Holder shall receive, without payment, non-transferable Subscription
Rights to purchase Conversion Stock in an amount equal to the greater
of $50,000, one-tenth of one percent of the total offering of shares
of Conversion Stock or 15 times the product (rounded down to the next
whole number) obtained by multiplying the total number of the shares
of Conversion Stock to be issued by a fraction of which the numerator
is the amount of the Qualifying Deposit of the Supplemental
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Eligible Account Holder and the denominator is the total amount of the
Qualifying Deposits of all Supplemental Eligible Account Holders on
the Supplemental Eligibility Record Date.
b. Subscription Rights received pursuant to this Category shall
be subordinated to the Subscription Rights received by the Eligible
Account Holders and by Tax-Qualified Employee Stock Benefit Plans
pursuant to Category Nos. 1 and 2.
c. 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 Eligible Account Holder pursuant to this Category.
d. In the event of an oversubscription for shares of Conversion
Stock pursuant to this Category, shares of Conversion Stock shall be
allocated among the subscribing Supplemental Eligible Account Holders
as follows:
(I) Shares of Conversion Stock shall be allocated among
subscribing Supplemental Eligible Account Holders so as to permit
each such Supplemental Eligible Account Holder, to the extent
possible, to purchase a number of shares of Conversion Stock
sufficient to make its total allocation (including the number of
shares of Conversion Stock, if any, allocated in accordance with
Category No. 1) equal to 100 shares of Conversion Stock or the
total amount of its subscription, whichever is less.
(II) Any shares of Conversion Stock not allocated in
accordance with subparagraph (I) above shall be allocated among
the subscribing Supplemental Eligible Account Holders on an
equitable basis, related to the amounts of their respective
aggregate Qualifying Deposits on the Supplemental Eligibility
Record Date as compared to the total aggregate Qualifying
Deposits of all subscribing Supplemental Eligible Account Holders
in each case on the Supplemental Eligibility Record Date.
4. Category No. 4: Other Members.
a. Each Other Member, other than those Members who are Eligible
Account Holders or Supplemental Eligible Account Holders, shall
receive, without payment, non-transferable Subscription Rights to
purchase Conversion Stock in an amount equal to the greater of $50,000
or one-tenth of one percent of the total offering of shares of
Conversion Stock.
b. Subscription Rights received pursuant to this Category shall
be subordinated to the Subscription Rights received by Eligible
Account Holders, Tax-Qualified Employee Stock Benefit Plans and
Supplemental Eligible Account Holders pursuant to Category Nos. 1, 2
and 3.
c. In the event of an oversubscription for shares of Conversion
Stock pursuant to this Category, the shares of Conversion Stock
available shall be allocated among subscribing Other Members so as to
permit each subscribing Other Member, to the extent possible, to
purchase a number of shares sufficient to make his or her total
allocation of Conversion Stock equal to the lesser of 100 shares or
the number of shares subscribed for by the Other Member. The shares
remaining thereafter will be allocated among subscribing Other Members
whose subscriptions remain unsatisfied on a reasonable basis as
determined by the Board of Directors.
Order Forms may provide that the maximum purchase limitation
shall be based on the midpoint of the Valuation Range. In the event
the aggregate Purchase Price of the Conversion Stock issued and sold
is below the midpoint of the Valuation Range, that portion of
subscriptions in excess of the maximum purchase limitation will be
refunded. In the event the aggregate Purchase Price of Conversion
Stock issued and sold is above the midpoint of the Valuation Range,
persons who have subscribed for the maximum purchase limitation may be
given the opportunity to increase their
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subscriptions so as to purchase the maximum number of shares subject
to the availability of shares. The Association will not otherwise
notify subscribers of any change in the number of shares of Conversion
Stock offered.
D. Community Offering.
------------------
1. Any shares of Conversion Stock not purchased through the
exercise of Subscription Rights in the Subscription Offering may be
sold in a Community Offering, which may commence concurrently with the
Subscription Offering. Shares of Conversion Stock will be offered in
the Community Offering to the general public, giving preference to
natural persons and the trusts of natural persons (including
individual retirement and Keogh retirement accounts and personal
trusts in which such natural persons have substantial interests) who
are permanent Residents of the Local Community. The Community
Offering may commence concurrently with or as soon as practicable
after the completion of the Subscription Offering and must be
completed within 45 days after the last day of the Subscription
Offering, unless extended by the Holding Company with the approval of
the OTS. The offering price of the Conversion Stock to the general
public in the Community Offering will be the same price paid for such
stock by Eligible Account Holders and other persons in the
Subscription Offering. If sufficient shares are not available to
satisfy all orders in the Community Offering, the shares available
will be allocated by the Holding Company in its discretion. The
Holding Company shall have the right to accept or reject orders in the
Community Offering in whole or in part.
2. Orders accepted in the Community Offering shall be filled up
to a maximum of 2% of the Conversion Stock, and thereafter remaining
shares shall be allocated on an equal number of shares basis per order
until all orders have been filled.
3. The Conversion Stock to be offered in the Community Offering
will be offered and sold in a manner that will achieve the widest
distribution of the Conversion Stock.
E. Other Offering.
--------------
In the event a Community Offering does not appear feasible, the
Association will immediately consult with the OTS to determine the
most viable alternative available to effect the completion of the
Conversion. Should no viable alternative exist, the Association may
terminate the Conversion with the concurrence of the OTS.
F. Limitations Upon Purchases of Shares of Conversion Stock.
--------------------------------------------------------
The following additional limitations and exceptions shall apply to all
purchases of Conversion Stock:
1. No Person may purchase fewer than 25 shares of Conversion
Stock in the Conversion, to the extent such shares are available.
2. Purchases of Conversion Stock in the Community Offering by
any person, when aggregated with purchases by an Associate of that
person, or a group of persons Acting in Concert, shall not exceed
$50,000 of Conversion Stock, except that Tax-Qualified Employee Stock
Benefit Plans may purchase up to 10% of the total shares of Conversion
Stock to be issued in the Conversion, and shares to be held by the
Tax-Qualified Employee Stock Benefit Plans and attributable to a
participant thereunder shall not be aggregated with shares of
Conversion Stock purchased by such participant or any other purchaser
of Conversion Stock in the Conversion.
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<PAGE>
3. Officers and directors of the Association and the Holding
Company, and Associates thereof, may not purchase in the aggregate
more than 35% of the shares of Conversion Stock issued in the
Conversion, or such greater amount as may be permitted under
applicable legal limits.
4. Directors of the Holding Company and the Association shall
not be deemed to be Associates or a group Acting in Concert with other
directors solely as a result of membership on the Board of Directors
of the Holding Company or the Association or any of their
subsidiaries.
5. Purchases of shares of Conversion Stock in the Conversion by
any person, when aggregated with purchases by an Associate of that
person, or a group of persons Acting in Concert, shall not exceed
$100,000 of Conversion Stock, except that Tax-Qualified Employee
Stock Benefit Plans may purchase up to 10% of the total shares of
Conversion Stock to be issued in the Conversion, and shares purchased
by the Tax-Qualified Employee Stock Benefit Plans and attributable to
a participant thereunder shall not be aggregated with shares purchased
by such participant or any other purchaser of Conversion Stock in the
Conversion.
Subject to any required regulatory approval and the requirements of
applicable laws and regulations, the Holding Company and the Association
may increase or decrease any of the purchase limitations set forth herein
at any time. Under current regulatory authority, the Boards of Directors
of the Holding Company and the Association may, in their discretion,
increase the maximum purchase limitations in the Subscription Offering
and/or, if applicable, the Community Offering or other offering up to
9.99%, provided that orders for shares exceeding 5% of the shares to be
issued in the Conversion shall not exceed, in the aggregate, 10% of the
shares to be issued in the Conversion. In the event that the individual
purchase limitation is increased after commencement of the Subscription and
Community Offerings, the Holding Company and the Association shall permit
any person who subscribed for the maximum number of shares of Conversion
Stock to purchase an additional number of shares, such that such person
shall be permitted to subscribe for the then maximum number of shares
permitted to be subscribed for by such person, subject to the rights and
preferences of any person who has priority Subscription Rights. In the
event that either the individual purchase limitation or the number of
shares of Conversion Stock to be sold in the Conversion is decreased after
commencement of the Subscription and Community Offerings, the orders of any
person who subscribed for the maximum number of shares of Conversion Stock
shall be decreased by the minimum amount necessary so that such person
shall be in compliance with the then maximum number of shares permitted to
be subscribed for by such person.
Each person purchasing Conversion Stock in the Conversion shall be
deemed to confirm that such purchase does not conflict with the purchase
limitations under the Plan or otherwise imposed by law, rule or regulation.
In the event that such purchase limitations are violated by any person
(including any Associate or group of persons affiliated or otherwise Acting
in Concert with such person), the Holding Company shall have the right to
purchase from such person at the actual Purchase Price per share all shares
acquired by such person in excess of such purchase limitations or, if such
excess shares have been sold by such person, to receive the difference
between the actual Purchase Price per share paid for such excess shares and
the price at which such excess shares were sold by such person. This right
of the Holding Company to purchase such excess shares shall be assignable
by the Holding Company.
G. Restrictions on and Other Characteristics of Stock Being Sold.
-------------------------------------------------------------
1. Transferability.
---------------
Except as provided in Paragraph XIII. below, Conversion Stock
purchased by persons other than directors and Officers of the
Association and directors and Officers of the Holding Company will be
transferable without restriction. Conversion Stock purchased by such
directors or Officers shall not be sold for a period of one year from
the date of Conversion except for any sale 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.
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The Conversion Stock issued by the Holding Company to such
directors and Officers shall bear the following legend giving
appropriate notice of the one-year holding period restriction:
"The shares of stock evidenced by this Certificate are restricted
as to transfer for a period of one year from the date of this
Certificate pursuant to applicable regulations of the Office of
Thrift Supervision of the United States Department of the
Treasury. Except in the event of the death of the registered
holder, the shares represented by this Certificate may not be
sold prior thereto without a legal opinion of counsel for the
Holding Company that said sale is permissible under the
provisions of applicable laws and regulations."
In addition, the Holding Company shall give appropriate
instructions to the transfer agent for the Holding Company Stock with
respect to the applicable restrictions relating to the transfer of
restricted stock. Any shares of Holding Company Stock 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 such directors and Officers as may be then applicable
to such restricted stock.
2. Repurchase and Dividend Rights.
------------------------------
Pursuant to present regulations, except as otherwise permitted by
the OTS, the Holding Company may not, for a period of three years from
the date of Conversion, repurchase Holding Company Stock from any
person, with the exception of (i) repurchases on a pro rata basis
pursuant to offers approved by the OTS and made to all stockholders,
(ii) repurchases of qualifying shares of directors or, (iii) unless
prohibited by the OTS, repurchases of shares to fund employee stock
benefit plans of the Holding Company or the Association. Upon 10
days' written notification to the OTS Regional Director for the
Converted Association and the Chief Counsel of the Corporate and
Securities Division of the OTS, however, the Holding Company may make
open market repurchases of outstanding Holding Company Stock, provided
that (i) such Regional Director and Chief Counsel do not object based
on a determination that (a) the repurchases would materially adversely
affect the financial condition of the Converted Association, (b) the
information submitted by the Converted Association is insufficient
upon which to base a conclusion as to whether the Converted
Association's financial condition would be materially adversely
affected, or (c) the Converted Association does not demonstrate a
valid purpose for the repurchases. Except as otherwise permitted by
the OTS, (i) no repurchases may occur in the first year following the
Conversion; (ii) any repurchases in the second and third years
following the Conversion must be part of an open-market stock
repurchase program that allows no more than five percent (5%) of the
outstanding Holding Company Stock to be purchased during any 12 month
period; and (iii) any repurchases within the first three years
following the Conversion must not cause the Converted Association to
become "undercapitalized," as defined pursuant to 12 C.F.R. (S)565.4
or a successor regulation.
Present regulations also provide that the Converted Association
may not declare or pay a cash dividend on or repurchase any of its
Capital Stock if the result thereof would be to reduce the regulatory
capital of the Converted Association below the amount required for the
Liquidation Account. Further, any dividend declared or paid on, or
repurchase of, the Capital Stock shall be in compliance with the Rules
and Regulations of the OTS, or other applicable regulations.
The above limitations shall not preclude payment of dividends on,
or repurchases of, Holding Company Stock in the event applicable
federal regulatory limitations are liberalized subsequent to the
Conversion.
3. Voting Rights.
-------------
After Conversion, holders of Savings Accounts and obligors on
loans will not have voting rights in the Converted Association.
Exclusive voting rights with respect to the Holding Company shall be
vested in the holders of Holding Company Stock, and the Holding
Company will have
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<PAGE>
exclusive voting rights with respect to the Capital Stock. Each
stockholder of the Holding Company will be entitled to vote on any
matters coming before the stockholders of the Holding Company for
consideration and will be entitled to one vote for each share of stock
owned by said stockholder.
4. Purchases by Officers, Directors and Associates Following
---------------------------------------------------------
Conversion.
----------
Without the prior approval of the OTS, Officers and directors of
the Converted Association and Officers and directors of the Holding
Company, and their Associates, shall be prohibited for a period of
three years following completion of the Conversion from purchasing
outstanding shares of Holding Company Stock, except from a broker or
dealer registered with the SEC. Notwithstanding this restriction,
negotiated transactions involving more than 1% of the total
outstanding shares of Holding Company Stock and purchases made and
shares held by a Tax-Qualified Employee Stock Benefit Plan or Non-Tax-
Qualified Employee Stock Benefit Plan which may be attributable to
Officers or directors may be made without OTS permission or the use of
a broker or dealer.
H. Mailing of Offering Materials and Collation of Subscriptions.
------------------------------------------------------------
The sale of all shares of Conversion Stock offered pursuant to the
Plan must be completed within 24 months after approval of the Plan at the
Special Meeting. After approval of the Plan by the OTS and the declaration
of the effectiveness of the Subscription and Community Prospectus by the
SEC, the Holding Company shall distribute such Subscription and Community
Prospectus and Order Forms for the purchase of shares in accordance with
the terms of the Plan.
The recipient of an Order Form will be provided neither fewer than 20
days nor more than 45 days from the date of mailing, unless extended, to
complete, execute and return properly the Order Form to the Holding Company
or the Association. Self-addressed, postage paid return envelopes will
accompany these forms when mailed. The Association or Holding Company will
collate the returned executed Order Forms upon completion of the
Subscription Offering. Failure of any eligible subscriber to return a
properly completed and executed Order Form within the prescribed time
limits shall be deemed a waiver and a release by such person of any rights
to purchase shares of Conversion Stock hereunder.
The sale of all shares of Conversion Stock shall be completed within
45 days after the last day of the Subscription Offering unless extended by
the Holding Company and the Association with the approval of the OTS.
I. Method of Payment.
-----------------
Payment for all shares of Conversion Stock subscribed for in the
Subscription and Community Offerings must be received in full by the
Association or the Holding Company, together with properly completed and
executed Order Forms, indicating thereon the number of shares being
subscribed for and such other information as may be required thereon, on or
prior to the expiration date specified on the Order Form, unless such date
is extended by the Holding Company and the Association; provided, however,
that payments by Tax-Qualified Employee Stock Benefit Plans for Conversion
Stock may be made to the Association concurrently with the completion of
the Conversion.
Payment for all shares of Conversion Stock may be made in cash (if
delivered in person) or by check or money order, or, if the subscriber has
a Savings Account in the Association (including a certificate of deposit),
the subscriber may authorize the Association to charge the subscriber's
Savings Account for the purchase amount. The Association shall pay
interest at not less than the passbook rate on all amounts paid in cash or
by check or money order to purchase shares of Conversion Stock in the
Subscription and Community Offerings from the date payment is received
until the Conversion is completed or terminated. The Association shall not
knowingly loan funds or otherwise extend credit to any person for the
purpose of purchasing Conversion Stock.
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<PAGE>
If a subscriber authorizes the Association to charge its Savings
Account, the funds will remain in the subscriber's Savings Account and will
continue to earn interest, but may not be used by the subscriber until all
Conversion Stock has been sold or the Conversion is terminated, whichever
is earlier. The withdrawal will be given effect only concurrently with the
sale of all shares of Conversion Stock in the Conversion and only to the
extent necessary to satisfy the subscription at a price equal to the
Purchase Price. The Association will allow subscribers to purchase shares
of Conversion Stock by withdrawing funds from certificate accounts without
the assessment of early withdrawal penalties. In the case of early
withdrawal of only a portion of such account, the certificate evidencing
such account shall be cancelled if the remaining balance of the account is
less than the applicable minimum balance requirement. In that 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 Conversion Stock under the Plan.
Tax-Qualified Employee Stock Benefit Plans may subscribe for shares by
submitting an Order From, and in the case of an employee stock ownership
plan, together with evidence of a loan commitment from the Holding Company
or an unrelated financial institution for the purchase of the shares of
Conversion Stock, during the Subscription Offering and by making payment
for the shares of Conversion Stock on the date of the closing of the
Conversion.
J. Undelivered, Defective or Late Order Forms; Insufficient Payment.
----------------------------------------------------------------
In the event an Order Form (i) is not delivered and is returned to the
Holding Company or the Association by the United States Postal Service (or
the Holding Company or the Association is unable to locate the addressee);
(ii) is not received by the Holding Company or the Association, or is
received by the Holding Company or the Association after termination of the
date specified thereon; (iii) is defectively completed or executed; or (iv)
is not accompanied by the total required payment for the shares of
Conversion Stock subscribed for (including cases in which the subscribers'
Savings Accounts are insufficient to cover the authorized withdrawal for
the required payment), 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. Alternatively, the Holding Company or the
Association may, but will not be required to, waive any irregularity
relating to any Order Form or require the submission of a corrected Order
Form or the remittance of full payment for subscribed shares of Conversion
Stock by such date as the Holding Company or the Association may specify.
Subscription orders, once tendered, cannot be revoked. The Holding
Company's and the Association's interpretation of the terms and conditions
of this Plan and acceptability of the Order Forms will be final and
conclusive.
K. Members in Non-Qualified States or in Foreign Countries.
-------------------------------------------------------
The Holding Company will make reasonable efforts to comply with the
securities laws of all states in the United States in which persons
entitled to subscribe for Conversion Stock pursuant to the Plan reside.
However, no such person will be offered or receive any Conversion Stock
under this Plan who resides in a foreign country or who resides in a state
of the United States with respect to which any or all of the following
apply: (i) a small number of persons otherwise eligible to subscribe for
shares of Conversion Stock under this Plan reside in such state or foreign
country; (ii) the granting of Subscription Rights or the offer or sale of
shares of Conversion Stock to such person would require the Holding Company
or the Association or their employees to register, under the securities
laws of such state, as a broker, dealer, salesman or agent or to register
or otherwise qualify its securities for sale in such state or foreign
country; and (iii) such registration qualification would be impracticable
for reasons of cost or otherwise. No payments will be made in lieu of the
granting of Subscription Rights to any such person.
L. Sales Commissions.
-----------------
Sales commissions may be paid as determined by the Boards of Directors
of the Association and the Holding Company or their designees to securities
dealers assisting subscribers in making purchases of Conversion Stock in
the Subscription Offering or in the Community Offering, if the securities
dealer is named
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<PAGE>
by the subscriber on the Order Form. In addition, a sales commission may
be paid to a securities dealer for advising and consulting with respect to,
or for managing the sale of Conversion Stock in, the Subscription Offering,
the Community Offering or any other offering.
IX. CHARTER AND BYLAWS.
As part of the Conversion, a federal stock charter and bylaws will be
adopted to authorize the Converted Association to operate as a federal capital
stock savings association. By approving the Plan, the Members of the
Association will thereby approve amending the Association's existing federal
mutual charter and bylaws to read in the form of a federal stock charter and
bylaws. Prior to completion of the Conversion, the proposed federal stock
charter and bylaws may be amended in accordance with the provisions and
limitations for amending the Plan under Paragraph XIV. below. The effective
date of the amendment of the Association's federal mutual charter and bylaws to
read in the form of a federal stock charter and bylaws shall be the date of the
issuance of the Conversion Stock, which shall be the date of consummation of the
Conversion.
X. REGISTRATION AND MARKET MAKING.
In connection and concurrently with the Conversion, the Holding Company
shall register the Holding Company Stock with the SEC pursuant to the Securities
Exchange Act of 1934, as amended, and shall undertake not to deregister the
Holding Company Stock for a period of three years thereafter.
The Holding Company shall use its best efforts to encourage and assist
various Market Makers to establish and maintain a market for the Holding Company
Stock. The Holding Company shall also use its best efforts to have the Holding
Company Stock quoted on the National Association of Securities Dealers, Inc.
Automated Quotation System or listed on a national or regional securities
exchange.
XI. STATUS OF SAVINGS ACCOUNTS AND LOANS SUBSEQUENT TO CONVERSION.
All Savings Accounts in the Association will retain the same status after
Conversion as these accounts had prior to Conversion. Subject to Paragraph
VIII.I. hereof, each holder of a Savings Account in the Association shall
retain, without payment, a withdrawable Savings Account or Savings Accounts in
the Converted Association, equal in dollar amount and on the same terms and
conditions as in effect prior to Conversion. All Savings Accounts will continue
to be insured by the Savings Association Insurance Fund of the Federal Deposit
Insurance Corporation up to the applicable limits of insurance coverage. All
loans shall retain the same status after Conversion as these loans had prior to
Conversion. After Conversion, holders of Savings Accounts and obligors on loans
of the Association will not have voting rights in the Converted Association.
Exclusive voting rights with respect to the Holding Company shall be vested in
the holders of the Conversion Stock issued by the Holding Company, and the
Holding Company will have exclusive voting rights with respect to the Converted
Association's Capital Stock.
XII. LIQUIDATION ACCOUNT.
After the Conversion, holders of Savings Accounts will not be entitled to
share in the residual assets after liquidation of the Converted Association.
However, pursuant to applicable regulations, the Association shall, at the time
of the Conversion, establish a Liquidation Account in an amount equal to its
regulatory capital as of the date of the latest statement of financial condition
contained in the final prospectus to be used in connection with the Conversion.
The function of the Liquidation Account is to establish a priority on
liquidation, and, except as provided in Paragraph VIII.G.2. above, the existence
of the Liquidation Account shall not operate to restrict the use or application
of any of the net worth accounts of the Converted Association.
The Liquidation Account shall be maintained by the Converted Association
subsequent to Conversion for the benefit of Eligible Account Holders and
Supplemental Eligible Account Holders who retain their Savings Accounts in the
Converted Association. Each Eligible Account Holder and Supplemental Eligible
Account Holder shall, with respect to each Savings Account held, have a related
inchoate interest in a portion of the Liquidation Account ("subaccount
balance").
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<PAGE>
The initial subaccount balance for a Savings Account held by an Eligible
Account Holder and/or a 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 related
Savings Account and the denominator is the total amount of the qualifying
deposits of all Eligible Account Holders and Supplemental Eligible Account
Holders in the Association. Such initial subaccount balance shall not be
increased but shall be subject to downward adjustment as provided below.
If the deposit balance in any Savings Account of an Eligible Account Holder
or Supplemental Eligible Account Holder to which the subaccount relates at the
close of business on any annual closing date subsequent to the Eligibility
Record Date or Supplemental Eligibility Record Date is less than the lesser of
(i) the deposit balance in such Savings Account at the close of business on any
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 Savings Account on the Eligibility Record Date or the
Supplemental Eligibility Record Date, then the subaccount balance for such
Savings Account shall be adjusted by reducing such subaccount balance 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
Savings Account. If any such Savings Account is closed, the related subaccount
balance shall be reduced to zero.
In the event of a complete liquidation of the Converted 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 Savings Accounts then held before any liquidation distribution may
be made to stockholders. No merger, consolidation, sale of bulk assets or
similar combination or transaction with another institution insured by the
Federal Deposit Insurance Corporation shall be considered to be a complete
liquidation for these purposes. In such transactions, the Liquidation Account
shall be assumed by the surviving institution.
XIII. RESTRICTIONS ON ACQUISITION OF HOLDING COMPANY.
A. Present regulations provide that for a period of three years
following completion of the Conversion, no person (i.e., an individual, a
group acting in concert, a corporation, a partnership, an association, a
joint stock company, a trust or any unincorporated organization or similar
company, a syndicate or any other group formed for the purpose of
acquiring, holding or disposing of securities of an insured institution or
its holding company) shall directly, or indirectly, offer to purchase or
actually acquire the beneficial ownership of more than 10% of any class of
Holding Company Stock without the prior approval of the OTS. However,
approval is not required for purchases directly from the Holding Company or
underwriters or a selling group acting on its behalf with a view towards
public resale, or for purchases not exceeding 1% per annum of the shares
outstanding, or for the acquisition of securities by one or more Tax-
Qualified Employee Stock Benefit Plans of the Holding Company or the
Converted Association, provided that the plan or plans do not have
beneficial ownership in the aggregate of more than 25% of any class of
Holding Company Stock. Civil penalties may be imposed by the OTS for
willful violation or assistance of any violation. Where any person,
directly or indirectly, acquires beneficial ownership of more than 10% of
any class of Holding Company Stock within such three-year period, without
the prior approval of the OTS, Holding Company Stock beneficially owned by
such person in excess of 10% 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 stockholders for a vote.
B. The Holding Company may provide in its Articles of Incorporation a
provision that, for a period of five years following the date of the
completion of the Conversion, no person shall directly or indirectly offer
to acquire or actually acquire the beneficial ownership of more than 10% of
any class of Holding Company Stock except with respect to purchases by one
or more Tax-Qualified Employee Stock Benefit Plans of the Holding Company
or Converted Association. The Holding Company may provide in its Articles
of Incorporation for such other provisions affecting the acquisition of
Holding Company Stock as shall be determined by its Board of Directors.
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<PAGE>
XIV. INTERPRETATION AND AMENDMENT OR TERMINATION OF THE PLAN.
The Association's Board of Directors shall have the sole discretion to
interpret and apply the provisions of the Plan to particular facts and
circumstances and to make all determinations necessary or desirable to implement
such provisions, including but not limited to matters with respect to giving
preference to natural persons and trusts of natural persons who are permanent
Residents of the Association's Local Community, and any and all interpretations,
applications and determinations made by the Board of Directors 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 Association and its
members and subscribers in the Subscription and Community Offerings, subject to
the authority of the OTS.
If deemed necessary or desirable, the Plan may be substantively amended at
any time prior to submission of the Plan and proxy materials to the Members by a
two-thirds vote of the Association's Board of Directors. After submission of
the Plan and proxy materials to the Members, the Plan may be amended by a two-
thirds vote of the Association's Board of Directors at any time prior to the
Special Meeting and at any time following such Special Meeting with the
concurrence of the OTS. In its discretion, the Board of Directors may modify or
terminate the Plan upon the order of the regulatory authorities without a
resolicitation of proxies or another Special Meeting.
In the event that mandatory new regulations pertaining to conversions are
adopted by the OTS or any successor agency prior to the completion of the
Conversion, the Plan will be amended to conform to the new mandatory regulations
without a resolicitation of proxies or another Special Meeting. In the event
that new conversion regulations adopted by the OTS or any successor agency prior
to completion of the Conversion contain optional provisions, the Plan may be
amended to utilize such optional provisions at the discretion of the Board of
Directors without a resolicitation of proxies or another Special Meeting.
By adoption of the Plan, the Association's Members authorize the Board of
Directors to amend and/or terminate the Plan under the circumstances set forth
above.
XV. EXPENSES OF THE CONVERSION.
The Holding Company and the Association will use their best efforts to
assure that expenses incurred in connection with the Conversion shall be
reasonable.
XVI. CONTRIBUTIONS TO TAX-QUALIFIED EMPLOYEE STOCK BENEFIT PLANS.
The Holding Company and the Converted Association may make scheduled
discretionary contributions to their Tax-Qualified Employee Stock Benefit Plans,
provided such contributions do not cause the Converted Association to fail to
meet its then-applicable regulatory capital requirements.
A-17
<PAGE>
EXHIBIT B
OGDENSBURG FEDERAL SAVINGS AND LOAN ASSOCIATION
FEDERAL STOCK CHARTER
SECTION 1. CORPORATE TITLE. The full corporate title of the association
is Ogdensburg Federal Savings and Loan Association (the "association").
SECTION 2. OFFICE. The home office shall be located at 825 State Street,
in the City of Ogdensburg, in the State of New York.
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 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
capital stock that the association has the authority to issue is 3,500,000, of
which 3,000,000 shall be common stock of par value of $1.00 per share and of
which 500,000 shares shall be serial preferred stock of par value of $3,000,000
per share. The shares may be issued from time to time as authorized by the
board of directors without further approval of shareholders, except as otherwise
provided in this Section 5 or to the extent that such approval is required by
governing law, rule, or regulation. The consideration for the issuance of the
shares shall be paid in full before their issuance 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), 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. 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
issued 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.
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 which 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
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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 of 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 common stock shall exclusively
possess all voting power. Each holder of shares of the 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.
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 provisions 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;
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(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;
(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. AMENDMENT OF CHARTER. Except as provided in Section 5, no
amendment, addition, alteration, change or repeal of this charter shall be made,
unless such is proposed by the board of directors of the association, approved
by the shareholders by a majority of the votes eligible to be cast at a legal
meeting, unless a higher vote is otherwise required, and approved or preapproved
by the Office.
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SECTION 9. LIQUIDATION ACCOUNT. Pursuant to the requirements of the
Office's regulations (12 C.F.R. Subchapter D), the association shall establish
and maintain a liquidation account for the benefit of its savings account
holders as of December 31, 1995 and September 30, 1997 ("eligible savers"). In
the event of a complete liquidation of the association, it shall comply with
such regulations with respect to the amount and the priorities on liquidation of
each of the association's eligible savers' inchoate interest in the liquidation
account, to the extent it is still in existence; provided, that an eligible
--------
savers' inchoate interest in the liquidation account shall not entitle such
eligible saver to any voting rights at meetings of the association's
shareholders.
Attest:______________________________ By:_____________________________________
Secretary Robert E. Wilson
Ogdensburg Federal Savings and President and Chief Executive Officer
Loan Association Ogdensburg Federal Savings and Loan
Association
Attest:______________________________ By:_____________________________________
Secretary Director of the Office of Thrift
Office of Thrift Supervision Supervision
Effective Date: _________________________.
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EXHIBIT C
BYLAWS
OGDENSBURG FEDERAL SAVINGS AND LOAN ASSOCIATION
ARTICLE I - HOME OFFICES
The home office of the association shall be 826 State Street, in the County
of St. Lawrence, in the State of New York.
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 31st of December if not a legal holiday,
and if a legal holiday, then on the next day following which is not a legal
holiday, at __:__ p.m. or at such other date and time within such 150-day period
as the board of directors may determine.
SECTION 3. SPECIAL MEETINGS. Special meetings of the shareholders for any
purpose or purposes, unless otherwise prescribed by the regulations of the
Office of Thrift Supervision ("Office"), may be called at any time by the
chairman of the board, the president, or a majority of the board of directors,
and shall be called by the chairman of the board, the president, or the
secretary upon the written request of the holders of not less than one-tenth of
all of the outstanding capital stock of the association entitled to vote at the
meeting. Such written request shall state the purpose or purposes of the
meeting and shall be delivered to the home office of the association addressed
to the chairman of the board, the president, or the secretary.
SECTION 4. CONDUCT OF MEETINGS. Annual and special meetings shall be
conducted in accordance with 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 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
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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
any 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 (S)
552.6(d) of the Office's regulations as now or hereafter in effect.
In lieu of making the shareholder list available for inspection by
shareholders as provided in the preceding paragraph, the board of directors may
perform such acts as required by paragraphs (a) and (b) of Rule 14a-7 of the
General Rules and Regulations under the Securities Exchange Act of 1934, as may
be duly requested in writing, with respect to any matter which may be properly
considered at a meeting of shareholders, by any shareholder who is entitled to
vote on such matter and who shall defray the reasonable expenses to be incurred
by the association in performance of the act or acts required.
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 a majority of the shares represented at the
meeting and entitled to vote on the subject matter shall be the act of
shareholders, unless the vote of a greater number of shareholders voting
together or voting by classes is required by law or the charter. Directors,
however, are elected by a plurality of the votes cast at an election of
directors.
SECTION 9. PROXIES. At all meetings of shareholders, a shareholder may
vote by proxy executed in writing by the shareholder or by his or her duly
authorized attorney in fact. Proxies may be given telephonically or
electronically as long as the holder uses a procedure for verifying the identity
of the shareholder. Proxies solicited on behalf of the management shall be
voted as directed by the shareholder or, in the absence of such direction, as
determined by a majority of the board of directors. No proxy shall be valid
more than eleven months from the date of its execution except for a proxy
coupled with an interest.
SECTION 10. VOTING OF SHARES IN THE NAME OF TWO OR MORE PERSONS. When
ownership stands in the name of two or more persons, in the absence of written
directions to the association to the contrary, at any meeting of the
shareholders of the association any one or more of such shareholders may cast,
in person or by proxy, all votes to which such ownership is entitled. In the
event an attempt is made to cast conflicting votes, in person or by proxy, by
the several persons in whose names shares of stock stand, the vote or votes to
which those persons are entitled shall be cast as directed by a majority of
those holding such stock and present in person or by proxy at such meeting, but
no votes shall be cast for such stock if a majority cannot agree.
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SECTION 11. VOTING OF SHARES OF 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 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 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 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 con tained 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.
SECTION 12. 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 13. NOMINATING COMMITTEE. The board of directors shall act as a
nominating committee for selecting the management nominees for election as
directors. Except in the case of a nominee substituted as a result of the death
or other incapacity of a management nominee, the nominating committee shall
deliver written nominations to the secretary at least 20 days prior to the date
of the annual meeting. Upon delivery, such nominations shall be posted in a
conspicuous place in each office of the association. No nominations for
directors except those made by the nominating committee shall be voted upon at
the annual meeting unless other nominations by shareholders are made in writing
and delivered to the secretary of the association at least five days prior to
the date of the annual meeting. Upon delivery, such nominations shall be posted
in a conspicuous place in each office of the association. Ballots bearing the
names of all persons nominated by the nominating committee and by shareholders
shall be provided for use at the annual meeting. However, if the nominating
committee shall fail or refuse to act at least 20 days prior to the annual
meeting, nominations for directors may be made at the annual meeting by any
shareholder entitled to vote and shall be voted upon.
SECTION 14. NEW BUSINESS. Any new business to be taken up at the annual
meeting shall be stated in writing and filed with the secretary of the
association at least five days before the date of the annual meeting, and all
business so stated, proposed, and filed shall be considered at the annual
meeting; but no other proposal shall be acted upon at the
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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 15. 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 five
(5) 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
telephone conference or similar communication device through which all persons
participating can hear each other at the same time. Participation by such shall
constitute presence in person for all purposes.
SECTION 4. QUALIFICATION. Each director shall at all times be the
beneficial owner of not less than 100 shares of capital stock of the association
unless the association is a wholly owned subsidiary of a holding company.
SECTION 5. SPECIAL MEETINGS. Special meetings of the board of directors
may be called by or at the request of the chairman of the board, the president,
or one-third of the directors. The persons authorized to call special meetings
of the board of directors may fix any place, within the association's normal
lending territory, as the place for holding any special meeting of the board of
directors called by such persons.
Members of the board of directors may participate in special meetings by
means of conference telephone or similar communications equipment by which all
persons participating in the meeting can hear each other. Such 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
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transacted at, nor the purpose of, any meeting of the board of directors need be
specified in the notice of 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 6 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 until the next election of directors by
the shareholders. Any directorship to be filled by reason of an increase in the
number of directors may be filled by election by the board of directors for a
term of office continuing only until the next election of directors by the
shareholders.
SECTION 12. COMPENSATION. Directors, as such, may receive a stated salary
for their services. By resolution of the board of directors, a reasonable fixed
sum, and reasonable expenses of attendance, if any, may be allowed for
attendance at each regular or special meeting of the board of directors.
Members of either standing or special committees may be allowed such
compensation for attendance at committee meetings as the board of directors may
determine.
SECTION 13. PRESUMPTION OF ASSENT. A director of the association who is
present at a meeting of the board of directors at which action on any
association matter is taken shall be presumed to have assented to the action
taken unless his or her dissent or abstention shall be entered in the minutes of
the meeting or unless he or she shall file a written dissent to such action with
the person acting as the secretary of the meeting before the adjournment thereof
or shall forward such dissent by registered mail to the secretary of the
association within five days after the date a copy of the minutes of the meeting
is received. Such right to dissent shall not apply to a director who voted in
favor of such action.
SECTION 14. REMOVAL OF DIRECTORS. At a meeting of shareholders called
expressly for that purpose, any director may be removed for cause by a vote of
the holders of a majority of the shares then entitled to vote at an election of
directors. 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.
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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, 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
proceedings and report the same to the board of directors for its information at
the meeting held next after the proceedings shall have occurred.
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SECTION 10. OTHER COMMITTEES. The board of directors may by resolution
establish an audit, loan, or other committee composed of directors as it 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.
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.
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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 canceled and no new certificate shall be issued until the
former certificate for a like number of shares has been surrendered and
canceled, except that in the case of a lost or destroyed certificate, a new
certificate may be issued upon such terms and indemnity to the association as
the board of directors may prescribe.
SECTION 2. TRANSFER OF SHARES. Transfer of shares of capital stock of the
association shall be made only on its stock transfer books. Authority for such
transfer shall be given only by the holder of record or by his or her legal
representative, who shall furnish proper evidence of such authority, or by his
or her attorney authorized by a duly executed power of attorney and filed with
the association. Such transfer shall be made only on surrender for cancellation
of the certificate for such shares. The person in whose name shares of capital
stock stand on the books of the association shall be deemed by the association
to be the owner for all purposes.
ARTICLE VIII - FISCAL YEAR
The fiscal year of the association shall end on the 31st day of December of
each year. The appointment of accountants shall be subject to annual
ratification by the shareholders.
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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
of the authorized board of directors, or by a majority of the votes cast by the
shareholders of the association at any legal meeting, and (ii) receipt of any
applicable regulatory approval. When the association fails to meet its quorum
requirement solely due to vacancies on the board, then the affirmative vote of
the majority of the sitting board will be required to amend the bylaws.
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REVOCABLE PROXY
(SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
OGDENSBURG FEDERAL SAVINGS AND LOAN ASSOCIATION
FOR A SPECIAL MEETING OF MEMBERS
TO BE HELD ON ____________, 1998)
The undersigned member of Ogdensburg Federal Savings and Loan Association
(the "Association") hereby appoints _______________, _______________ and
_______________ or any one of them, with full powers of substitution, as
attorneys-in-fact and agents for and in the name of the undersigned, to vote
such votes as the under signed may be entitled to cast at the Special Meeting
of Members (the "Meeting") of Ogdensburg Federal Savings and Loan Association to
be held at the offices of the Association, 825 State Street, Ogdensburg, New
York, on _________, ___________, 1998, at __:__ _.m., local time, and at any
adjournments thereof. They are authorized to cast all votes to which the
undersigned is entitled, as follows:
<TABLE>
<CAPTION>
FOR AGAINST
--- -------
<S> <C> <C>
Adoption of the Plan of Conversion, providing for 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"), as a wholly owned subsidiary of Peoples
Bankcorp, Inc., and the related transactions provided for in
such plan, including the adoption of an amended Charter and
Bylaws for the Converted Association.
[_] [_]
In their discretion, on any other matters that may lawfully come before the
meeting.
</TABLE>
NOTE: The Board of Directors is not aware of any other matter that may come
before the Meeting.
<PAGE>
THIS PROXY WILL BE VOTED FOR THE PLAN IF
NO CHOICE IS MADE HEREON
Should the undersigned be present and elect to vote at said Meeting or at
any adjournment thereof and, after notification to the Secretary of Ogdensburg
Federal Savings and Loan Association at said Meeting of the member's decision to
terminate this Proxy, then the power of said attorneys-in-fact or agents shall
be deemed terminated and of no further force and effect. The undersigned hereby
revokes any and all proxies heretofore given.
The undersigned acknowledges receipt of a Notice of Special Meeting of the
Members of Ogdensburg Federal Savings and Loan Association to be held on
__________, 1998, a Proxy Statement dated __________, 1998 and a Prospectus
dated __________, 1998 prior to the execution of this Proxy.
-------------------------------------------
Date
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Signature
Note: Only one signature is required in the
case of a joint account.
