<PAGE>
EXHIBIT 2.1
Plan of Conversion
For
Citizens First Savings Bank
as adopted on
September 19, 2000
<PAGE>
PLAN OF CONVERSION
FOR
CITIZENS FIRST SAVINGS BANK
1. INTRODUCTION
This Plan of Conversion (the "Plan") provides for the conversion of
Citizens First Savings Bank (the "BANK") from a Michigan-chartered mutual
savings bank to a Michigan-chartered capital stock savings bank. The Board of
Directors of the BANK currently contemplates that all of the stock of the BANK
shall be held by a corporation (the "Holding Company"). The Board of Directors
has carefully considered the alternatives available to the BANK with respect to
its corporate structure and has determined that a mutual to stock conversion as
described in this Plan is in the best interests of the BANK, its depositors and
the communities served by the BANK. The Board of Directors believes that the
decline in mutuality is placing mutual savings banks, such as the BANK, at a
disadvantage to the increasing base of stock thrift and commercial bank
institutions. The restructuring of the BANK into the capital stock form of
organization will enable the BANK to compete more effectively with commercial
banks and other financial institutions for new business opportunities and
qualified employees, and as a stock institution, to increase its equity capital
base, to access the capital markets when needed, to enhance the BANK's ability
to expand its franchise and the products it offers and to operate more
effectively as an independent, community-oriented financial institution. The
use of the Holding Company, if so utilized, would also provide greater
organizational and operating flexibility. Shares of capital stock of the BANK
will be sold to the Holding Company and the Holding Company will offer the
Conversion Stock upon the terms and
<PAGE>
conditions set forth herein to the Eligible Account Holders, the Employee Plans
established by the BANK or Holding Company, Supplemental Eligible Account
Holders and Other Members in the respective priorities set forth in this Plan.
Any shares of Conversion Stock not subscribed for by the foregoing classes of
persons will be offered for sale to certain members of the public either
directly by the BANK and the Holding Company through a Community Offering or a
Syndicated Community Offering or through an underwritten firm commitment public
offering or through a combination thereof. In the event that the BANK decides
not to utilize the Holding Company in the conversion, Conversion Stock of the
BANK, in lieu of the Holding Company, will be sold as set forth above and in the
respective priorities set forth in this Plan. In addition to the foregoing, the
BANK and the Holding Company, as part of this Plan, intend to implement stock
option plans and other stock benefit plans and will provide employment or
severance agreements to certain management employees and certain other
compensation to the directors, officers and employees of the BANK as described
in the prospectus for the Conversion Stock.
In furtherance of the BANK's long term commitment to its community, this
Plan provides for the establishment of a foundation (the "Foundation") as part
of the Conversion. The Foundation is intended to complement the BANK's existing
community reinvestment activities in a manner that will allow the communities in
which the BANK operates to share in the potential growth and profitability of
the Holding Company and the BANK over the long term. Consistent with the BANK's
goal, the Holding Company intends to donate to the Foundation from its
authorized but unissued common stock up to 10.0% of the number of shares sold in
the Conversion.
This Plan, has been approved by at least two-thirds (2/3) of the members of
the Board of Directors of the BANK and must also be approved by the BANK's
members at a special meeting
2
<PAGE>
of members to be called for that purpose by: 1) the affirmative vote of 2/3 of
the total membership of the BANK, or such lesser amount as may be permitted by
applicable law, which vote may be obtained by the use of previously executed
proxies which have not been revoked, and 2) the affirmative vote of a majority
of the votes eligible to be cast by members which vote may not be obtained by
the use of previously executed proxies. Prior to the submission of this Plan to
the Voting Members for consideration, the Plan must be preliminarily approved by
the Commissioner and reviewed without objection by the Federal Deposit Insurance
Corporation.
2. DEFINITIONS
For the purposes of this Plan, the following terms have the following
meanings:
Account Holder - The term Account Holder means any Person holding a Deposit
--------------
Account in the BANK.
Acting in Concert - The term "Acting in Concert" means: (i) knowing
-----------------
participation in a joint activity or interdependent conscious parallel action
towards a common goal whether or not pursuant to an express agreement; (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; or
(iii) a person or company which acts in concert with another person or company
("other party") shall also be deemed to be acting in concert with any person or
company who is also acting in concert with that other party, except that any
Tax-Qualified Employee Stock Benefit Plan will not be deemed to be acting in
concert with its trustee or a person who serves in a similar capacity solely for
the purpose of determining whether stock held by the trustee and stock held by
the plan will be aggregated.
3
<PAGE>
Actual Purchase Price - The term Actual Purchase Price means the per share
---------------------
price at which the Conversion Stock is ultimately sold in accordance with the
terms hereof.
Associate - The term Associate when used to indicate a relationship with
---------
any person, means: (i) any corporation or organization (other than the BANK or a
majority-owned subsidiary of the BANK) of which such person is an officer or
partner or is, directly or indirectly, the beneficial owner of ten percent or
more of any class of equity securities; (ii) any trust or other estate in which
such person has a substantial beneficial interest or as to which such person
serves as trustee or in a similar fiduciary capacity except that for the
purposes of Sections 9 and 14 hereof, the term "Associate" does not include any
Non-Tax-Qualified Employee Stock Benefit Plan or any Tax-Qualified Employee
Stock Benefit Plan in which a person has a substantial beneficial interest or
serves as a trustee or in a similar fiduciary capacity, and except that, for
purposes of aggregating total shares that may be held by Officers and Directors
the term "Associate" does not include any Tax-Qualified Employee Stock Benefit
Plan; and (iii) any relative or spouse of such person, or any relative of such
spouse, who has the same home as such person or who is a Director or Officer of
the BANK or the Holding Company, if utilized, or any of its parents or
subsidiaries.
Bank - The term BANK means Citizens First Savings Bank, Port Huron,
----
Michigan.
Commissioner - The term Commissioner means the Commissioner of the Michigan
------------
Office of Financial and Insurance Services and the Division of Financial
Institutions.
Community Offering - The term Community Offering means the offering for
------------------
sale to certain members of the general public directly by the BANK or the
Holding Company, if utilized, of any shares of Conversion Stock not subscribed
for in the Subscription Offering.
4
<PAGE>
Conversion - The term Conversion means the change in the form of the BANK
----------
from mutual to stock form, the issuance of Conversion Stock and the acquisition
of the BANK by the Holding Company, if utilized, all in accordance with the
terms of this Plan.
Conversion Stock - The term Conversion Stock means the common stock offered
----------------
and issued by the Holding Company or the $1.00 par value Common Stock offered
and issued by the BANK, if the Holding Company form of organization is not
utilized, upon conversion.
Deposit Account - The term Deposit Account includes savings accounts, NOW
---------------
account deposits, withdrawable accounts, including certificates of deposit,
demand accounts, money market deposits and deposits made pursuant to IRA/Keogh
Plans. The term Deposit Account does not include escrow accounts.
Director - The term Director means a member of the Board of Directors of
--------
the BANK and, where applicable, a member of the Board of Directors of the
Holding Company.
Eligible Account Holder - The term Eligible Account Holder means any person
-----------------------
holding a Qualifying Deposit on the Eligibility Record Date.
Eligibility Record Date - The term Eligibility Record Date means the date
-----------------------
for determining Eligible Account Holders in the BANK and is July 31, 1999.
Employees - The term Employees means all Persons who are employed by the
---------
BANK but does not include an Officer or Director.
Employee Plans - The term Employee Plans means the Tax-Qualified Employee
--------------
Stock Benefit Plans of the BANK.
Estimated Price Range - The term Estimated Price Range means the range of
---------------------
minimum and maximum aggregate values determined by the Board of Directors of the
BANK within which the
5
<PAGE>
aggregate amount of Common Stock sold in the Conversion will fall. The Estimated
Price Range will be within the estimated pro forma market value of the
Conversion Stock as determined by the Independent Appraiser prior to the
Subscription Offering and as it may be amended from time to time thereafter.
FDIC - The term FDIC means the Federal Deposit Insurance Corporation.
----
Foundation - The term Foundation means a charitable foundation that will
----------
qualify as an exempt organization under Section 501(c)(3) of the Internal
Revenue Code.
Holding Company - The term Holding Company means the corporation formed for
---------------
the purpose of acquiring all of the shares of capital stock of the BANK to be
issued upon its conversion to stock form unless the Holding Company form of
organization is not utilized. Shares of common stock of the Holding Company
will be issued in the conversion to Participants and others in a Subscription
Offering, Community Offering, Syndicated Community Offering, or underwritten
firm commitment public offering, or through a combination thereof.
Independent Appraiser - The term Independent Appraiser means an appraiser
---------------------
retained by the BANK to prepare an appraisal of the pro forma market value of
the Conversion Stock.
Local Community - The term Local Community means the counties in the state
---------------
of Michigan where the Bank has a banking office.
Member - The term Member means any Person or entity who qualifies as a
------
member of the BANK pursuant to its Articles of Incorporation and bylaws.
Officer - The term Officer means an executive officer of the BANK which
-------
includes the Chief Executive Officer, President, Executive Vice President,
Senior Vice Presidents, Vice Presidents in
6
<PAGE>
charge of principal business functions, Secretary, Treasurer and Controller and
any person performing functions similar to those performed by the foregoing
persons.
Order Form - The term Order Form means any form together with attached
----------
cover letter, sent by the BANK to any Participant or Person containing among
other things a description of the alternatives available to such Person under
the Plan and by which any such Person may make elections regarding subscriptions
for Conversion Stock in the Subscription and Community Offerings.
Participants - The term Participants means the Eligible Account Holders,
------------
Employee Plans and Supplemental Eligible Account Holders.
Person - The term Person means an individual, a corporation, a partnership,
------
a bank, a joint-stock company, a trust (including Individual Retirement Accounts
and KEOGH Accounts), any unincorporated organization, a government or political
subdivision thereof or any other entity.
Plan - The term Plan means this Plan of Conversion of the BANK as it exists
----
on the date hereof and as it may hereafter be amended in accordance with its
terms.
Preferred Subscribers - The term Preferred Subscribers means those members
---------------------
of the general public who are natural persons residing in the BANK's Local
Community.
Qualifying Deposit - The term Qualifying means the balance of each Deposit
------------------
Account of $50 or more in the BANK at the close of business on the Eligibility
Record Date or the Supplemental Eligibility Record Date, whichever may be the
case. Deposit Accounts with total deposit balances of less than $50 shall not
constitute a Qualifying Deposit.
SEC - The term SEC refers to the United States Securities and Exchange
---
Commission.
7
<PAGE>
Special Meeting of Members - The term Special Meeting of Members means the
--------------------------
special meeting and any adjournments thereof held to consider and vote upon this
Plan.
Subscription Offering - The term Subscription Offering means the offering
---------------------
of Conversion Stock for purchase through Order Forms to Participants.
Subscription Price - The term Subscription Price means the amount per share
------------------
of Conversion Stock to be paid initially by Participants in the Subscription
Offering and persons in the Community Offering.
Supplemental Eligibility Record Date - The term Supplemental Eligibility
------------------------------------
Record Date means the supplemental record date for determining Supplemental
Eligible Account Holders of the BANK. The Supplemental Eligibility Record Date
shall be the last day of the calendar quarter preceding the Commissioner's
preliminary approval of the application for conversion.
Supplemental Eligible Account Holder - The term Supplemental Eligible
------------------------------------
Account Holder means any person (other than an Eligible Account Holder) holding
a Qualifying Deposit, except Officers, Directors and their Associates, as of the
Supplemental Eligibility Record Date.
Syndicated Community Offering - The term Syndicated Community Offering
-----------------------------
means the offering of Conversion Stock following the Subscription and Community
Offerings through a syndicate of broker-dealers.
Tax-Qualified Employee Stock Benefit Plan - The term Tax-Qualified Employee
-----------------------------------------
Stock Benefit Plan means any defined benefit plan or defined contribution plan,
such as an employee stock ownership plan, stock bonus plan, profit-sharing plan
or other plan, which, with its related trust, meets the requirements to be
"qualified" under Section 401 of the Internal Revenue Code. A
8
<PAGE>
"Non-Tax-Qualified Employee Stock Benefit Plan" is any defined benefit plan or
defined contribution plan which is not so qualified.
Voting Members - The term Voting Members means those persons qualifying as
--------------
voting members of the BANK pursuant to its Articles of Incorporation and bylaws.
Voting Record Date - The term Voting Record Date means the date fixed by
------------------
the Directors for determining eligibility to vote at the Special Meeting of
Members.
3. PROCEDURE FOR CONVERSION
After approval of the Plan by the Board of Directors of the BANK, the Plan
shall be submitted together with all other requisite material to the
Commissioner for approval and to the FDIC for its non-objection. Within 10 days
after the date of acceptance of the application for conversion by the
Commissioner, the BANK will cause to be published a notice of the filing of such
application with the Commissioner in accordance with applicable law. Following
preliminary approval by the Commissioner and notification of the FDIC's intent
not to object to the Conversion, the Plan will be submitted to a vote of the
Voting Members at the Special Meeting of Members called for that purpose. Upon
approval of the Plan by the Voting Members as required under applicable law,
final approval of the Commissioner and non-objection by the FDIC, the BANK will
take all other necessary steps pursuant to applicable laws and regulations to
convert the BANK to stock form. The conversion must be completed within 24
months of the approval of the Plan by the Voting Members, unless a longer time
period is permitted by governing laws and regulations.
The Board of Directors of the BANK intends to take all necessary steps to
form the Holding Company, including the filing of any necessary applications to
the appropriate regulatory authorities. In the event that the Holding Company is
utilized, upon conversion, the BANK will issue capital
9
<PAGE>
stock to the Holding Company and the Holding Company will issue and sell the
Conversion Stock in accordance with this Plan.
The Board of Directors of the BANK may determine for any reason at any time
prior to the issuance of the Conversion Stock not to utilize a holding company
form of organization in the Conversion, in which case, the Holding Company's
registration statement will be withdrawn from the SEC, the BANK will take all
steps necessary to complete the conversion from the mutual to the stock form of
organization, including filing any necessary documents with the Commissioner and
the FDIC, and will issue and sell the Conversion Stock in accordance with this
Plan. In such event, any subscriptions or orders received for Conversion Stock
of the Holding Company shall be deemed to be subscriptions or orders for
Conversion Stock of the BANK without any further action by the BANK or the
subscribers for the Conversion Stock, unless any such further action is required
by the Commissioner, the FDIC or the SEC, in which case the BANK shall take such
necessary action to complete the Conversion. Any references to the Holding
Company in this Plan shall mean the BANK in the event the Holding Company is
eliminated in the Conversion.
The Board of Directors of the BANK also intend to take all necessary steps
to establish the Foundation, and to fund such Foundation in the manner set forth
in Section 7A hereof, subject to the approval of the Voting Members.
The Conversion Stock will not be insured by the FDIC. The BANK will not
knowingly lend funds or otherwise extend credit to any Person to purchase shares
of the Conversion Stock.
10
<PAGE>
4. HOLDING COMPANY APPLICATIONS AND APPROVALS
The Holding Company shall make timely applications for any requisite
regulatory approvals. The BANK shall be a wholly-owned subsidiary of the Holding
Company unless the Holding Company is eliminated in the Conversion.
5. SALE OF CONVERSION STOCK
The Conversion Stock will be offered simultaneously in the Subscription
Offering to the Eligible Account Holders, Employee Plans and Supplemental
Eligible Account Holders in the respective priorities set forth in Sections 8
through 10 of this Plan. The Subscription Offering may be commenced as early as
the mailing of the Proxy Statement for the Special Meeting of Members and must
be commenced in time to complete the Conversion within the time period specified
in Section 3.
Any shares of Conversion Stock not subscribed for in the Subscription
Offering will be offered for sale in the Community Offering as provided in
Section 11 of this Plan. The Subscription Offering may be commenced prior to
the Special Meeting of Members and, in that event, the Community Offering may
also be commenced prior to the Special Meeting of Members. The offer and sale
of Conversion Stock prior to the Special Meeting of Members shall, however, be
conditioned upon approval of the Plan by the Voting Members.
If feasible, any shares of Conversion Stock remaining after the
Subscription and Community Offerings may be sold in a Syndicated Community
Offering, as provided in Section 12 of this Plan in a manner that will achieve
the widest distribution of the Conversion Stock as determined by the BANK. The
sale of all Conversion Stock subscribed for in the Subscription and Community
Offerings will be consummated simultaneously on the date the sale of Conversion
Stock in the
11
<PAGE>
Syndicated Community Offering is consummated and only if all unsubscribed for
Conversion Stock is sold.
The BANK may elect to offer to pay fees on a per share basis to brokers who
assist Persons in determining to purchase shares in the Subscription and
Community Offerings.
6. NUMBER OF SHARES AND PURCHASE PRICE OF CONVERSION STOCK
The total number of shares (or a range thereof) of Conversion Stock to be
issued and offered for sale will be determined jointly by the Board of Directors
of the BANK and the Board of Directors of the Holding Company, if the holding
company form of organization is utilized, immediately prior to the commencement
of the Subscription and Community Offerings, subject to adjustment thereafter if
necessitated by market or financial conditions, with the approval of the
Commissioner and the FDIC, if necessary. In particular, the total number of
shares may be increased by up to 15% of the number of shares offered in the
Subscription and Community Offering if the Estimated Price Range is increased
subsequent to the commencement of the Subscription and Community Offering to
reflect changes in market and financial conditions.
All shares sold in the Conversion will be sold at a uniform price per share
referred to in this Plan as the Actual Purchase Price. The aggregate purchase
price for all shares of Conversion Stock will not be inconsistent with the
estimated consolidated pro forma market value of the BANK or the Holding
Company, if utilized. The estimated consolidated pro forma market value of the
BANK or the Holding Company, if utilized, will be determined for such purpose by
the Independent Appraiser. Prior to the commencement of the Subscription and
Community Offerings, an Estimated Price Range will be established, which range
will vary within 15% above to 15% below the midpoint of such range. The number
of shares of Conversion Stock to be issued and the purchase price per share may
12
<PAGE>
be increased or decreased by the BANK. In the event that the aggregate purchase
price of the Conversion Stock is below the minimum of the Estimated Price Range,
or materially above the maximum of the Estimated Price Range, resolicitation of
purchasers may be required provided that up to a 15% increase above the maximum
of the Estimated Price Range will not be deemed material so as to require a
resolicitation. Up to a 15% increase in the number of shares to be issued which
is supported by an appropriate change in the estimated pro forma market value of
the BANK or the Holding Company, if utilized, will not be deemed to be material
so as to require a resolicitation of subscriptions. In the event that the
aggregate purchase price of the Conversion Stock is below the minimum of the
Estimated Price Range or in excess of 15% above the maximum of the Estimated
Price Range, and a resolicitation is required, such resolicitation shall be
effected in such manner and within such time as the BANK shall establish, with
the approval of the Commissioner and the FDIC, if required.
Based upon the independent valuation, as updated prior to the commencement
of the Subscription and Community Offerings, the Board of Directors of the
Holding Company, (if a holding company form of organization is utilized) and the
Board of Directors of the BANK will fix the Subscription Price and the range of
the number of shares to be offered. If upon completion of the Subscription and
Community Offerings all of the Conversion Stock is subscribed for, or if because
of a limited number of unsubscribed shares or otherwise a Syndicated Community
Offering cannot be effected, the total number of shares of Conversion Stock to
be issued and sold will be jointly determined by the BANK and Holding Company
(if a holding company form of organization is utilized) as follows: (a) the
estimated aggregate pro forma market value of the BANK or the Holding Company,
as the case may be, immediately after conversion as determined by the
13
<PAGE>
Independent Appraiser, expressed in terms of a specific aggregate dollar amount
rather than as a range, upon completion of the Subscription and Community
Offerings or other sale of all of the Conversion Stock shall be divided by (b)
the Actual Purchase Price.
If there is a Syndicated Community Offering of shares of Conversion Stock
not subscribed for in the Subscription and Community Offerings, the price per
share at which the Conversion Stock is sold in such Syndicated Community
Offering shall be the Subscription Price.
Notwithstanding the foregoing, no sale of Conversion Stock may be
consummated unless, prior to such consummation, the Independent Appraiser
confirms to the BANK and Holding Company, if utilized, and to the Commissioner
and the FDIC 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 Actual Purchase Price is incompatible with
its estimate of the aggregate consolidated pro forma market value of the Holding
Company or the BANK if no Holding Company is utilized. If such confirmation is
not received, the BANK may cancel the Subscription and Community Offerings
and/or the Syndicated Community Offering, extend the Conversion, establish a new
Subscription Price Range and/or Estimated Price Range, extend, reopen or hold
new Subscription and Community Offerings and/or Syndicated Community Offering or
take such other action as the Commissioner and the FDIC may permit.
The Conversion Stock to be issued in the Conversion shall be fully paid and
nonassessable.
7. PURCHASE BY THE HOLDING COMPANY OF THE STOCK OF THE BANK
Upon the consummation of the sale of all of the Conversion Stock, and in
the event that a holding company form of organization is utilized, the Holding
Company will purchase from the
14
<PAGE>
BANK all of the capital stock of the BANK to be issued by the BANK in the
Conversion in exchange for the Conversion proceeds that are not permitted to be
retained by the Holding Company.
The Holding Company will apply to retain up to 50% of the proceeds of the
Conversion. Assuming the Holding Company is not eliminated, a lesser percentage
may be acceptable. The BANK believes that the Conversion proceeds will provide
economic strength to the Holding Company and the BANK for the future in a highly
competitive and regulated environment and would facilitate expansion through
acquisitions, diversification into other related businesses and for other
business and investment purposes, including the payment of dividends and future
repurchases of Conversion Stock as permitted. If during the Conversion process
the Board of Directors of the BANK determines not to complete the Conversion
utilizing a holding company form of organization, capital stock of the BANK will
be issued and sold in accordance with the Plan. The above activities may also be
engaged in by the BANK if the Holding Company is eliminated.
7A. ESTABLISHMENT AND FUNDING OF FOUNDATION
As part of the Conversion, the Holding Company and the BANK intend to
establish a Foundation that will qualify as an exempt organization under Section
501(c)(3) of the Internal Revenue Code and to donate to the Foundation up to
10.0% of the number of shares of Common Stock sold in the Conversion. The
Foundation is being formed in connection with the Conversion in order to
complement the BANK's existing community reinvestment activities and to share
with the communities in which the BANK operates a part of the BANK's financial
success as a community-minded, financial services institution. The funding of
the Foundation with Common Stock of the Holding Company accomplishes this goal
as it enables such communities to share in the potential growth and
profitability of the Holding Company and the BANK over the long-term.
15
<PAGE>
The Foundation will be dedicated to the promotion of charitable purposes
within the communities in which the BANK operates, including, but not limited
to, grants or donations to support housing assistance, scholarships, local
education, not-for-profit medical facilities, not-for-profit community groups
and other types of organizations or civic minded projects. The board of
directors of the Foundation will be responsible for establishing the polices of
the Foundation with respect to grants or donations, consistent with the stated
purposes of the Foundation. The Foundation will annually distribute total grants
to assist charitable organizations or to fund projects within its local
community of not less than 5% of the average fair value of Foundation assets
each year. In order to serve the purposes for which it was formed and maintain
its 501(c)(3) qualification, the Foundation may sell, on an annual basis, a
limited portion of the Common Stock contributed to it by the Holding Company.
The establishment and funding of the Foundation as part of the Conversion
is subject to the approval of the Voting Members by an affirmative vote of a
majority of the votes eligible to be cast by Voting Members in person or by
proxy at the Special Meeting. In the event that the BANK's Members approve this
Plan, but not the Foundation, the BANK may determine to complete the Conversion
without the establishment of the Foundation and may do so without amending this
Plan or obtaining any further vote of the BANK's Members. Failure of the Voting
Members to approve the Foundation may materially affect the pro forma market
value of the BANK. In such an event, the BANK may establish a new Estimated
Price Range and commence a resolicitation of subscribers. For comparison
purposes, Voting Members will be provided with a projection of the pro forma
market value of the Conversion Stock, an Estimated Price Range and certain
selected pro forma
16
<PAGE>
financial data that would result if the Conversion were consummated without
establishment of the Foundation.
8. SUBSCRIPTION RIGHTS OF ELIGIBLE ACCOUNT HOLDERS (FIRST PRIORITY)
A. Each Eligible Account Holder shall receive, as first priority and
without payment, nontransferable subscription rights to subscribe for shares of
Conversion Stock equal to an amount up to the greater of: the amount permitted
to be subscribed for in the Community Offering which amount, pursuant to Section
11, currently is $250,000 of the Conversion Stock offered, but which may be
increased to 5% or decreased to less than $250,000 without the further approval
of Members or resolicitation of subscribers; one-tenth of one percent (.10%) of
the total offering of shares of Conversion Stock; or fifteen 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 each case on the Eligibility Record Date, subject to the maximum
purchase limitation specified in Section 13A and the minimum purchase limitation
specified in Section 13C and exclusive of an increase in the total number of
shares issued due to an increase in the Estimated Price Range of up to 15%.
B. In the event that Eligible Account Holders exercise subscription
rights for a number of shares of Conversion Stock in excess of the total number
of shares eligible for subscription, the shares of Conversion Stock shall be
allocated among the subscribing Eligible Account Holders so as to permit each
subscribing Eligible Account Holder, 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
17
<PAGE>
shares or the number of shares subscribed for by the Eligible Account Holders.
Any shares remaining after that allocation will be allocated among the
subscribing Eligible Account Holders whose subscriptions remain unsatisfied in
the proportion that the amount of the Qualifying Deposit of each Eligible
Account Holder whose subscription remains unsatisfied bears to the total amount
of the Qualifying Deposits of all Eligible Account Holders whose subscriptions
remain unsatisfied. If the amount so allocated exceeds the amount subscribed for
by any one or more Eligible Account Holders, the excess shall be reallocated
(one or more times as necessary) among those Eligible Account Holders whose
subscriptions are still not fully satisfied on the same principle until all
available shares have been allocated or all subscriptions satisfied.
C. Subscription rights as Eligible Account Holders received by Directors
and Officers and their Associates which are based on deposits made by such
persons during the twelve (12) months preceding the Eligibility Record Date
shall be subordinated to the Subscription Rights of all other Eligible Account
Holders.
9. SUBSCRIPTION RIGHTS OF THE EMPLOYEE PLANS (SECOND PRIORITY)
The Employee Plans shall receive, without payment, as a second priority
after the filling of subscriptions of Eligible Account Holders, nontransferable
subscription rights to purchase in the Subscription Offering up to 10% of the
shares of Conversion Stock to be issued in the Conversion. If, after the filling
of subscriptions of Eligible Account Holders, a sufficient number of shares are
not available to fill the subscriptions by such Employee Plans, the subscription
by such Employee Plans shall be filled to the maximum extent possible.
18
<PAGE>
The Employee Plans shall not be deemed to be an Associate or affiliate of
or Person Acting in Concert with any Director or Officer of the Holding Company
or the BANK.
10. SUBSCRIPTION RIGHTS OF SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDERS (THIRD
PRIORITY)
A. Each Supplemental Eligible Account Holder shall receive, without
payment, as third priority after the filing of subscriptions of Eligible Account
Holders and the Employee Plans, nontransferable subscription rights to subscribe
for shares of Conversion Stock equal to an amount up to the greater of: the
amount permitted to be subscribed for in the Community Offering which amount,
pursuant to Section 11, currently is $250,000 of the Conversion Stock offered,
but which may be increased to 5% or decreased to less than $250,000 without the
further approval of Members or resolicitation of subscribers; one-tenth of one
percent (.10%) of the total offering of Conversion Stock; or fifteen 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 Supplemental
Eligible Account Holder and the denominator is the total amount of the
Qualifying Deposits of all Supplemental Eligible Account Holders in each case on
the Supplemental Eligibility Record Date, subject to the maximum purchase
limitation specified in Section 13A and the minimum purchase limitation
specified in Section 13C and exclusive of an increase in the total number of
shares issued due to an increase in the Estimated Price Range of up to 15%.
19
<PAGE>
B. In the event that Supplemental Eligible Account Holders exercise
subscription rights for a number of shares of Conversion Stock in excess of the
total number of shares eligible for subscription, the remaining shares of
Conversion Stock shall be allocated among the subscribing Supplemental Eligible
Account Holders so as to permit each subscribing Supplemental Eligible Account
Holder, 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 Supplemental Eligible
Account Holder. Any shares remaining after that allocation will be allocated
among the subscribing Supplemental Eligible Account Holders whose subscriptions
remain unsatisfied in the proportion that the amount of the Qualifying Deposit
of each Supplemental Eligible Account Holder whose subscription remains
unsatisfied bears to the total amount of the Qualifying Deposits of all
Supplemental Eligible Account Holders whose subscriptions remain unsatisfied. If
the amount so allocated exceeds the amount subscribed for by any one or more
Supplemental Eligible Account Holders, the excess shall be reallocated (one or
more times as necessary) among those Supplemental Eligible Account Holders whose
subscriptions are still not fully satisfied on the same principle until all
available shares have been allocated or all subscriptions satisfied.
C. Subscription rights received by an Eligible Account Holder pursuant to
Section 8 shall be applied in partial satisfaction of the subscription rights to
be received as a Supplemental Eligible Account Holder pursuant to this Section
10.
20
<PAGE>
11. COMMUNITY OFFERING (FOURTH PRIORITY)
If less than the total number of shares of Conversion Stock to be
subscribed for in the Conversion are sold in the Subscription Offering, it is
expected that shares remaining unsubscribed for will be made available for
purchase in the Community Offering to certain members of the general public,
which may subscribe together with any Associate or group of persons Acting in
Concert for up to $250,000 of the shares of Conversion Stock offered subject to
the Maximum Overall Purchase Limitation as specified in Section 13A and the
minimum purchase limitation specified in Section 13C and exclusive of an
increase in the total number of shares issued due to an increase in the
Estimated Price Range of up to 15%; provided, however, that the amount permitted
to be purchased in the Community Offering may be increased to 5% of the
Conversion Stock; or decreased to less than $250,000 without the further
approval of Members or resolicitation of subscribers. The shares may be made
available in the Community Offering through a direct community marketing program
which may provide for utilization of a broker, dealer, consultant or investment
banking firm, experienced and expert in the sale of savings institution
securities. Such entities may be compensated on a fixed fee basis or on a
commission basis, or a combination thereof. Any excess of shares will be
available for purchase by the general public with preference given to Preferred
Subscribers. The BANK shall make distribution of the Conversion Stock to be sold
in the Community Offering in such a manner as to promote the widest distribution
of Conversion Stock. The BANK reserves the right to reject any or all orders, in
whole or in part, which are received in the Community Offering.
If the subscribers in the Community Offering, whose orders would otherwise
be accepted, subscribe for more shares than are available for purchase, the
shares available to them will be
21
<PAGE>
allocated among the subscribers in the manner which permits each such person to
the extent possible, to purchase the number of shares necessary to make his
total allocation of Conversion Stock equal to the lesser of 100 shares or the
number of shares subscribed for by such persons. Thereafter, unallocated shares
will be allocated among the subscribers whose subscriptions remain unsatisfied
on a 100 shares per order basis until all such orders have been filled or the
remaining shares have been allocated. The BANK may establish all other terms and
conditions of such offer. The Community Offering may commence concurrently with
the Subscription Offering or anytime during or after the Subscription Offering.
The Community Offering must be completed within 45 days after the completion of
the Subscription Offering unless otherwise extended by the Commissioner and the
FDIC, if required.
12. SYNDICATED COMMUNITY OFFERING
If feasible, all shares of Conversion Stock not subscribed for in the
Subscription and Community Offerings may be sold in a Syndicated Community
Offering, subject to such terms, conditions and procedures as may be determined
by the BANK, in a manner that will achieve the widest distribution of the
Conversion Stock subject to the right of the BANK to accept or reject in whole
or in part all subscriptions in the Syndicated Community Offering. In the
Syndicated Community Offering, any person together with any Associate or group
of persons Acting in Concert may purchase up to $250,000 of the total number of
shares of Conversion Stock offered subject to the maximum purchase limitation
specified in Section 13A and the minimum purchase limitation specified in
Section 13C and exclusive of an increase in the total number of shares issued
due to an increase in the Estimated Price Range of up to 15%; provided, however,
that this amount may be increased to 5% or decreased to less than $250,000
without the further approval of Members or
22
<PAGE>
resolicitation of subscribers. The shares purchased by any Person together with
any Associate or group of persons Acting in Concert pursuant to Section 11 shall
be counted toward meeting the maximum percentage of shares permitted to be
purchased pursuant to this Section. Provided that the Subscription Offering has
commenced, the BANK may commence the Syndicated Community Offering at any time
after the mailing to the Members of the Proxy Statement to be used in connection
with the Special Meeting of Members, provided that the completion of the offer
and sale of the Conversion Stock shall be conditioned upon the approval of this
Plan by the Voting Members. If the Syndicated Community Offering is not sooner
commenced pursuant to the provisions of the preceding sentence, the Syndicated
Community Offering will be commenced as soon as practicable following the date
upon which the Subscription and Community Offerings terminate.
Alternatively, if a Syndicated Community Offering is not held, the BANK
shall have the right to sell any shares of Conversion Stock remaining following
the Subscription and Community Offerings in an underwritten firm commitment
public offering. The provisions of Section 13 hereof shall not be applicable to
sales to underwriters for purposes of such an offering but shall be applicable
to the sales by the underwriters to the public. The price to be paid by the
underwriters in such an offering shall be equal to the Actual Purchase Price
less an underwriting discount to be negotiated among such underwriters and the
BANK, which will in no event exceed an amount deemed to be acceptable by the
Commissioner and the FDIC.
If for any reason a Syndicated Community Offering or an underwritten firm
commitment public offering of shares of Conversion Stock not sold in the
Subscription and Community Offerings cannot be effected, or in the event that
any insignificant residue of shares of Conversion Stock is not sold in the
Subscription and Community Offerings or in the Syndicated Community Offering or
an
23
<PAGE>
underwritten firm commitment public offering, other purchase arrangements will
be made for the sale of unsubscribed shares by the BANK, if possible. Such other
purchase arrangements will be subject to the approval of the Commissioner and
the FDIC.
13. LIMITATION ON PURCHASES
In addition to the maximum amount of Conversion Stock that may be
subscribed for as set forth in Sections 8, 10, 11 and 12, the following
limitations shall apply to all purchases of shares of Conversion Stock:
A. The maximum number of shares of Conversion Stock which may be
subscribed for or purchased in all categories in the conversion by any Person or
Participant together with any Associate or group or persons Acting in Concert
shall not exceed 1.5% of the shares of Conversion Stock offered (the "Maximum
Overall Purchase Limitation"), except for the Employee Plans which may subscribe
for up to 10% of the Conversion Stock issued and except for certain Eligible
Account Holders and Supplemental Eligible Account Holders which may subscribe
for or purchase shares in accordance with Sections 8 and 10 herein,
respectively; provided, however, in the event that the Maximum Overall Purchase
Limitation is increased to more than 2.0% of the shares of Conversion Stock
offered, orders for Conversion Stock in the Community Offering and in the
Syndicated Community Offering (or, alternatively an underwritten firm commitment
public offering), if any, shall, as determined by the BANK, first be filled to a
maximum of 2.0% of the total number of shares of Conversion Stock offered and
thereafter remaining shares shall be allocated on an equal number of shares
basis per order until all orders have been filled.
24
<PAGE>
B. The maximum number of shares of Conversion Stock which may be
purchased in all categories in the Conversion by Officers and Directors of the
BANK and their Associates in the aggregate shall not exceed 25% of the total
number of shares of Conversion Stock issued.
C. A minimum of 25 shares of Conversion Stock must be purchased by each
Person purchasing shares in the Conversion to the extent those shares are
available; provided, however, that in the event the minimum number of shares of
Conversion Stock purchased times the price per share exceeds $500, then such
minimum purchase requirement shall be reduced to such number of shares of
Conversion Stock which when multiplied by the price per share shall not exceed
$500, as determined by the Board.
If the number of shares of Conversion Stock otherwise allocable pursuant to
Sections 8, 10, 11 and 12, to any Person or that Person's Associates would be in
excess of the maximum number of shares permitted as set forth above, the number
of shares of Conversion Stock allocated to each such person shall be reduced to
the lowest limitation applicable to that Person, and then the number of shares
allocated to each group consisting of a Person and that Person's Associates
shall be reduced so that the aggregate allocation to that Person and his or her
Associates complies with the above maximums, and such maximum number of shares
shall be reallocated among that Person and his or her Associates as they may
agree, or in the absence of an agreement, in proportion to the shares subscribed
by each (after first applying the maximums applicable to each Person,
separately).
Depending upon market or financial conditions, the Board of Directors of
the BANK and the Holding Company, without further approval of the Members, may
decrease or increase the purchase limitations in this Plan, provided that the
maximum purchase limitations may not be increased to a percentage in excess of
5%. Notwithstanding the foregoing, the Maximum Overall Purchase
25
<PAGE>
Limitation may be increased up to 9.99% provided that orders for Conversion
Stock exceeding 5% of the shares being offered shall not exceed, in the
aggregate, 10% of the total offering. If the BANK or the Holding Company, as the
case may be, increases the maximum purchase limitations, the BANK or the Holding
Company, as the case may be, is only required to resolicit Persons who
subscribed for the maximum purchase amount and may, in the sole discretion of
the BANK or the Holding Company, as the case may be, resolicit certain other
large subscribers.
For purposes of this Section 13, the Directors and Officers of the BANK and
the Holding Company shall not be deemed to be Associates or a group affiliated
with each other or otherwise Acting in Concert solely as a result of their being
Directors or Officers of the BANK or the Holding Company.
Each Person purchasing Conversion Stock in the Conversion shall be deemed
to confirm that such purchase does not conflict with the above purchase
limitations contained in this Plan.
26
<PAGE>
For a period of three years following the Conversion, no Officer, Director
or their Associates shall purchase, without the prior written approval of the
Commissioner, any outstanding shares of common stock of the BANK or the Holding
Company, as the case may be, except from a broker-dealer registered with the
SEC. This provision shall not apply to negotiated transactions involving more
than one percent of the outstanding shares of common stock of the BANK or the
Holding Company, as the case may be, the exercise of any options pursuant to a
stock option plan or purchases of common stock of the BANK or the Holding
Company, as the case may be, made by or held by any Tax-Qualified Employee Stock
Benefit Plan or Non-Tax-Qualified Employee Stock Benefit Plan of the BANK or the
Holding Company (including the Employee Plans) which may be attributable to any
Officer or Director. As used herein, the term "negotiated transaction" means a
transaction in which the securities are offered and the terms and arrangements
relating to any sale are arrived at through direct communications between the
seller or any person acting on its behalf and the purchaser or his investment
representative. The term "investment representative" shall mean a professional
investment advisor acting as agent for the purchaser and independent of the
seller and not acting on behalf of the seller in connection with the
transaction.
14. PAYMENT FOR CONVERSION STOCK
All payments for Conversion Stock subscribed for in the Subscription,
Community and Syndicated Community Offerings must be delivered in full to the
BANK, together with a properly completed and executed Order Form, or purchase
order in the case of the Syndicated Community Offering, on or prior to the
expiration date specified on the Order Form or purchase order, as the case may
be, unless such date is extended by the BANK; provided, however, that if the
Employee Plans subscribe for shares during the Subscription Offering, such plans
will not be required to pay for the
27
<PAGE>
shares at the time they subscribe but rather may pay for such shares of
Conversion Stock subscribed for by such plans at the Actual Purchase Price upon
consummation of the Conversion, provided that, in the case of the employee stock
ownership plan (the "ESOP") there is in force from the time of its subscription
until the consummation of the Conversion, a loan commitment from the Holding
Company or an unrelated financial institution to lend to the ESOP, at such time,
the aggregate Subscription Price of the shares for which it subscribed. The BANK
may make scheduled discretionary contributions to an Employee Plan provided such
contributions do not cause the BANK to fail to meet its regulatory capital
requirement.
Notwithstanding the foregoing, the BANK and the Holding Company, if
utilized, shall have the right, in their sole discretion, to permit
institutional investors to submit contractually irrevocable orders in the
Community Offering and to thereafter submit payment for the Conversion Stock for
which they are subscribing in the Community Offering at any time prior to 48
hours before the completion of the Conversion, unless such 48 hour period is
waived by the BANK and the Holding Company, in their sole discretion.
Payment for Conversion Stock subscribed for shall be made either in cash
(if delivered in person), check or money order. Alternatively, subscribers in
the Subscription and Community Offerings may pay for the shares subscribed for
by authorizing the BANK on the Order Form to make a withdrawal from the
subscriber's Deposit Account at the BANK in an amount equal to the purchase
price of such shares. Such authorized withdrawal, whether from a savings,
passbook or certificate account, shall be without penalty as to premature
withdrawal. If the authorized withdrawal is from a certificate account, and the
remaining balance does not meet the applicable minimum balance requirement, the
certificate shall be cancelled at the time of withdrawal, without
28
<PAGE>
penalty, and the remaining balance will earn interest at the passbook rate.
Funds for which a withdrawal is authorized will remain in the subscriber's
Deposit Account, but may not be used by the subscriber until the Conversion
Stock has been sold or the 45-day period (or such longer period as may be
approved by the Commissioner) following the Subscription and Community Offering
has expired, whichever occurs first. Thereafter, the withdrawal will be given
effect only to the extent necessary to satisfy the subscription (to the extent
it can be filled) at the purchase price per share. Interest will continue to be
earned on any amounts authorized for withdrawal until such withdrawal is given
effect. Interest will be paid by the BANK at not less than the passbook annual
rate on payments for Conversion Stock received in cash or by check or money
order. Such interest will be paid from the date payment is received by the BANK
until consummation or termination of the Conversion. If for any reason the
Conversion is not consummated, all payments made by subscribers in the
Subscription, Community and Syndicated Community Offerings will be refunded to
them with interest. In case of amounts authorized for withdrawal from Deposit
Accounts, refunds will be made by cancelling the authorization for withdrawal.
The BANK will not knowingly make any loans or granting any lines of credit for
the purchase of stock in the Conversion.
15. MANNER OF EXERCISING SUBSCRIPTION RIGHTS THROUGH ORDER FORMS
As soon as practicable after the Prospectus prepared by the Holding Company
and the BANK has been declared effective or approved for use by the
Commissioner, the FDIC and the SEC, if the holding company form of organization
is utilized, Order Forms will be distributed to all Eligible Account Holders,
the Employee Plans and Supplemental Eligible Account Holders at their last known
addresses appearing in the deposit records of the BANK for the purpose of
subscribing for
29
<PAGE>
shares of Conversion Stock in the Subscription Offering and will be made
available for use by those Persons entitled to purchase in the Community
Offering. Notwithstanding the foregoing, the BANK may elect to send Order Forms
only to those Persons who request them after a notice as is approved by the
Commissioner and is adequate to apprise all Eligible Account Holders, the
Employee Plans and Supplemental Eligible Account Holders of the pendency of the
Subscription Offering has been given. Such notice may be included with the proxy
statement for the Special Meeting of Members and may also be included in a
notice of the pendency of the Conversion and the Special Meeting of Members sent
to all Eligible Account Holders and Supplemental Eligible Account Holders.
Each Order Form will be preceded or accompanied by the Prospectus (if a
holding company form of organization is utilized) or the Offering Circular (if
the holding company form of organization is not utilized) describing the Holding
Company, if utilized, the BANK, the Conversion Stock and the Subscription and
Community Offerings. Each Order Form will contain, among other things, the
following:
A. A specified date by which all Order Forms must be received by the
BANK, which date shall be not less than twenty (20), nor more than forty-five
(45) days, following the date on which the Order Forms are mailed by the BANK,
and which date will constitute the termination of the Subscription Offering;
B. The Subscription Price per share for shares of Conversion Stock to be
sold in the Subscription and Community Offerings;
C. A description of the minimum and maximum number of shares of
Conversion Stock which may be subscribed for pursuant to the exercise of
subscription rights or otherwise purchased in the Community Offering;
30
<PAGE>
D. Instructions as to how the recipient of the Order Form is to indicate
thereon the number of shares of Conversion Stock for which such person elects to
subscribe and the available alternative methods of payment therefor;
E. An acknowledgment that the recipient of the Order Form has received a
final copy of the Prospectus or Offering Circular, as the case may be, prior to
execution of the Order Form;
F. A statement to the effect that all subscription rights are
nontransferable, will be void at the end of the Subscription Offering, and can
only be exercised by delivering within the subscription period such properly
completed and executed Order Form, together with cash (if delivered in person),
check or money order in the full amount of the purchase price as specified in
the Order Form for the shares of Conversion Stock for which the recipient elects
to subscribe in the Subscription Offering (or by authorizing on the Order Form
that the BANK withdraw said amount from the subscriber's Deposit Account at the
BANK) to the BANK; and
G. A statement to the effect that the executed Order Form, once received
by the BANK, may not be modified or amended by the subscriber without the
consent of the BANK.
Notwithstanding the above, the BANK and the Holding Company will not accept
orders received on photocopied or facsimilied order forms.
16. UNDELIVERED, DEFECTIVE OR LATE ORDER FORMS: INSUFFICIENT PAYMENT
In the event Order Forms (a) are not delivered and are returned to the BANK
by the United States Postal Service or the BANK is unable to locate the
addressee, (b) are not received back by the BANK or are received by the BANK
after the expiration date specified thereon, (c) are defectively filled out or
executed, (d) are not accompanied by the full required payment, except in the
case of
31
<PAGE>
institutional investors in the Community Offering, by delivering irrevocable
orders together with a legally binding commitment to pay in cash, check or money
order the full amount of the purchase price prior to 48 hours before the
completion of the Conversion for the shares of Conversion Stock subscribed for
(including cases in which savings accounts from which withdrawals are authorized
are insufficient to cover the amount of the required payment), or (e) are not
mailed pursuant to a "no mail" order placed in effect by the account holder, the
subscription rights of the person to whom such rights have been granted will
lapse as though such person failed to return the contemplated Order Form within
the time period specified thereon; provided, however, that the BANK may, but
will not be required to, waive any immaterial 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 the BANK may specify. The
interpretation of the BANK of terms and conditions of the Plan and of the Order
Forms will be final, subject to the authority of the Commissioner and the FDIC,
if required.
17. RESTRICTIONS ON RESALE OR SUBSEQUENT DISPOSITION
A. All shares of Conversion Stock purchased by Directors or Officers of
the BANK or the Holding Company in the Conversion shall be subject to the
restriction that, except as provided in Section 17B, below, or as may be
approved by the Commissioner, no interest in such shares may be sold or
otherwise disposed of for value for a period of one (1) year following the date
of purchase.
B. The restriction on disposition of shares of Conversion Stock set forth
in Section 17A above shall not apply to the following:
(i) Any exchange of such shares in connection with a merger or
acquisition involving the BANK or the Holding Company, as the case may be, which
has been approved by the Commissioner; and
32
<PAGE>
(ii) Any disposition of such shares following the death of the person
to whom such shares were initially sold under the terms of the Plan.
C. With respect to all shares of Conversion Stock subject to restrictions
on resale or subsequent disposition, each of the following provisions shall
apply:
(i) Each certificate representing shares restricted within the
meaning of Section 17A, above, shall bear a legend prominently stamped on its
face giving notice of the restriction;
(ii) Instructions shall be issued to the stock transfer agent for the
BANK or the Holding Company, as the case may be, not to recognize or effect any
transfer of any certificate or record of ownership of any such shares in
violation of the restriction on transfer; and
(iii) Any shares of capital stock of the BANK or the Holding Company,
as the case may be, issued with respect to a stock dividend, stock split, or
otherwise with respect to ownership of outstanding shares of Conversion Stock
subject to the restriction on transfer hereunder shall be subject to the same
restriction as is applicable to such Conversion Stock.
18. VOTING RIGHTS OF STOCKHOLDERS
Upon conversion, the holders of the capital stock of the BANK shall have
the exclusive voting rights with respect to the BANK as specified in its
Articles of Incorporation. The holders of the common stock of the Holding
Company (if a holding company form of organization is utilized) shall have the
exclusive voting rights with respect to the Holding Company.
19. ESTABLISHMENT OF LIQUIDATION ACCOUNT
The BANK shall establish at the time of conversion a liquidation account in
an amount equal to its net worth as of the latest practicable date prior to
conversion (the "Liquidation Account"). The Liquidation Account will be
maintained by the BANK for the benefit of the Eligible Account
33
<PAGE>
Holders and Supplemental Eligible Account Holders who continue to maintain their
Deposit Accounts at the BANK. Each Eligible Account Holder and Supplemental
Eligible Account Holder shall, with respect to his Deposit Account, hold a
related inchoate interest in a portion of the Liquidation Account balance, in
relation to his Deposit Account balance at the Eligibility Record Date and/or
Supplemental Eligibility Record Date or to such balance as it may be
subsequently reduced, as hereinafter provided.
In the unlikely event of a complete liquidation of the BANK (and only in
such event), following all liquidation payments to creditors (including those to
Account Holders to the extent of their Deposit Accounts) each Eligible Account
Holder and Supplemental Eligible Account Holder shall be entitled to receive a
liquidating distribution from the Liquidation Account, in the amount of the then
adjusted subaccount balance for his or her Deposit Account then held, before any
liquidation distribution may be made to any holders of the BANK's capital stock.
No merger, consolidation, bulk purchase of assets with assumption of Deposit
Accounts and other liabilities, or similar transactions with an FDIC-insured
institution, in which the BANK is not the surviving institution, shall be deemed
to be a complete liquidation for this purpose. In such transactions, the
Liquidation Account shall be assumed by the surviving institution.
The initial subaccount balance for a Deposit Account held by an Eligible
Account Holder and Supplemental Eligible Account Holder shall be determined by
multiplying the opening balance in the Liquidation Account by a fraction, the
numerator of which is the amount of such Eligible Account Holder's and/or
Supplemental Eligible Account Holder's Qualifying Deposit and the denominator of
which is the total amount of all Qualifying Deposits of all Eligible Account
Holders and Supplemental Eligible Account Holders in the BANK. Such initial
subaccount balance shall not
34
<PAGE>
be increased, but shall be subject to downward adjustment as described below.
For Deposit Accounts in existence at both dates, separate subaccounts shall be
determined on the basis of the Qualifying Deposits in such Deposit Account on
such record dates. Such initial subaccount balances shall not be increased but
shall be subject to downward adjustment as described below.
If, at the close of business on any annual closing date, commencing on or
after the effective date of Conversion, the deposit balance in the Deposit
Account of an Eligible Account Holder or Supplemental Eligible Account Holder is
less than the lesser of (i) the balance in the Deposit Account at the close of
business on any other annual closing date subsequent to the Eligibility Record
Date or Supplemental Eligibility Record Date, or (ii) the amount of the
Qualifying Deposit in such Deposit Account, the subaccount balance for such
Deposit Account shall be adjusted by reducing such subaccount balance in an
amount proportionate to the reduction in such deposit balance. In the event of
such downward adjustment, the subaccount balance shall not be subsequently
increased, notwithstanding any subsequent increase in the deposit balance of the
related Deposit Account. If any such Deposit Account is closed, the related
subaccount shall be reduced to zero.
The creation and maintenance of the Liquidation Account shall not operate
to restrict the use or application of any of the net worth accounts of the BANK.
20. TRANSFER OF DEPOSIT ACCOUNTS AND CONTINUITY OF THE BANK
Upon Conversion, each Deposit Account Holder having a Deposit Account at
the BANK prior to the Conversion will continue to have a Deposit Account,
without payment therefor, in the same amount and subject to the same terms and
conditions (except for voting and liquidation rights) as in effect prior to the
Conversion.
35
<PAGE>
After the Conversion, the BANK will succeed to all the rights, interests,
duties and obligations of the BANK before the Conversion, including but not
limited to all rights and interests of the BANK in and to its assets and
properties, whether real, personal or mixed. The BANK will continue to be a
member of the Federal Home Loan Bank System and all its insured deposits will
continue to be insured by the FDIC to the extent provided by applicable law.
21. RESTRICTIONS ON ACQUISITION OF THE BANK AND HOLDING COMPANY
36
<PAGE>
The Certificate of Incorporation of the Holding Company, if a
holding company form of organization is utilized, will contain a provision
stipulating that in no event shall any record owner of any outstanding shares of
the Holding Company's common stock who beneficially owns in excess of 10% of
such outstanding shares be entitled or permitted to any vote in respect to any
shares held in excess of 10%. In addition, the Certificate of Incorporation and
Bylaws of the Holding Company provide for staggered terms of the directors,
noncumulative voting for directors, limitations on the calling of special
meetings, a fair price provision for certain business combinations, director
qualifications and certain notice requirements.
37
<PAGE>
22. PAYMENT OF DIVIDENDS AND REPURCHASE OF STOCK
The BANK shall not declare or pay a cash dividend on, or repurchase any of,
its capital stock if the effect thereof would cause its regulatory capital to be
reduced below the amount required for the Liquidation Account or any applicable
minimum capital requirement imposed by the FDIC. Otherwise, the BANK may declare
dividends, make capital distributions or repurchase its capital stock in
accordance with applicable law and regulations.
23. AMENDMENT OF PLAN
If deemed necessary or desirable, the Plan may be substantively amended at
any time prior to solicitation of proxies from Members to vote on the Plan by a
two-thirds vote of the BANK's Board of Directors, and at any time thereafter by
such vote of such Board of Directors with the concurrence of the Commissioner
and, if necessary, the FDIC. Any amendment to the Plan made after approval by
the Members with the approval of the Commissioner and, if necessary, the FDIC
shall not necessitate further approval by the Members unless otherwise required
by the Commissioner and, if necessary, the FDIC. The Plan may be terminated by
majority vote of the BANK's Board of Directors at any time prior to the Special
Meeting of Members to vote on the Plan, and at any time thereafter with the
concurrence of the Commissioner and, if necessary, the FDIC.
By adoption of the Plan, the Members of the BANK authorize the Board of
Directors to amend or terminate the Plan under the circumstances set forth in
this Section 23.
24. ARTICLES OF INCORPORATION AND BYLAWS
By voting to adopt the Plan, members of the BANK will be voting to adopt
the Stock Savings Bank Articles of Incorporation and Bylaws attached as Exhibits
I and II to this Plan. The effective
38
<PAGE>
date of the BANK's stock Articles of Incorporation and bylaws shall be the date
of issuance and sale of the Conversion Stock as specified by the Commissioner.
25. CONSUMMATION OF CONVERSION
The Conversion of the BANK shall be deemed to take place and be effective
upon the completion of all requisite organizational procedures for obtaining a
Stock Savings Bank Articles of Incorporation for the BANK and sale of all
Conversion Stock.
26. REGISTRATION AND MARKETING
Within the time period required by applicable laws and regulations, the
BANK or the Holding Company, as the case may be, will register the securities
issued in connection with the Conversion pursuant to the Securities Exchange Act
of 1934 and will not deregister such securities for a period of at least three
years thereafter, except that the maintenance of registration for three years
requirement may be fulfilled by any successor to the BANK or any holding company
of the BANK. In addition, the BANK or Holding Company, as the case may be, will
use its best efforts to encourage and assist a market-maker to establish and
maintain a market for the Conversion Stock and to list those securities on a
national or regional securities exchange or the Nasdaq system.
27. RESIDENTS OF FOREIGN COUNTRIES AND CERTAIN STATES
The BANK will make reasonable efforts to comply with the securities laws of
all States in the United States in which Persons entitled to subscribe for
shares of Conversion Stock pursuant to the Plan reside. However, no such Person
will be issued subscription rights or be permitted to purchase shares of
Conversion Stock in the Subscription Offering if such Person resides in a
foreign country or in a state of the United States with respect to which both of
the following apply: (A) a small number of Persons otherwise eligible to
subscribe for shares under the Plan reside in such state
39
<PAGE>
and; (B) the issuance of subscription rights or the offer or sale of shares of
Conversion Stock to such Persons would require the BANK or the Holding Company,
as the case may be, under the securities laws of such state or foreign country,
to register as a broker, dealer, salesman or agent or to register or otherwise
qualify its securities for sale in such state or foreign country and such
registration or qualification would be impracticable for reasons of cost or
otherwise.
28. EXPENSES OF CONVERSION
The BANK shall use its best efforts to assure that expenses incurred by it
in connection with the Conversion shall be reasonable.
29. CONDITIONS TO CONVERSION
The Conversion of the BANK pursuant to this Plan is expressly conditioned
upon the following:
(a) Prior receipt by the BANK of rulings of the United States Internal
Revenue Service and any applicable state taxing authority, or opinions of
counsel, substantially to the effect that the Conversion will not result in any
adverse federal or state tax consequences to Eligible Account Holders or to the
BANK and the Holding Company before or after the Conversion;
(b) The sale of all of the Conversion Stock offered in the Conversion; and
(c) The completion of the Conversion within the time period specified in
Section 3 of this Plan.
40
<PAGE>
30. INTERPRETATION
All interpretations of this Plan and application of its provisions to
particular circumstances by a majority of the Board of Directors of the BANK
shall be final, subject to the authority of the Commissioner and the FDIC.
41
<PAGE>
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
CITIZENS FIRST SAVINGS BANK
---------------------------
(Name of Savings Bank)
For the purpose of organizing a savings bank to carry on the business of banking
pursuant to the Savings Bank Act of 1996, the incorporators of the savings bank
hereinafter named enter into the following amended and restated articles of
incorporation:
FIRST. The name of the savings bank shall be:
CITIZENS FIRST SAVINGS BANK
---------------------------
SECOND. The place where the principal office of this savings bank shall be
located and shall conduct its business is in the City of Port Huron, County of
St. Clair, State of Michigan.
THIRD. The purpose of this corporation is to carry on the business of
banking pursuant to the Savings Bank Act of 1996.
FOURTH. The total number of shares of all classes of the stock which the
Savings Bank has authority to issue is one thousand (1,000) shares all of which
shares shall be common stock. The consideration for the issuance of the shares
shall be paid in full before their issuance and shall not be less than the
stated value per share and otherwise shall comply with all requirements of
Michigan Law. Neither promissory notes nor future services shall constitute
payment or part payment for the issuance of shares of the Savings Bank. Upon
payment of such consideration such shares shall be deemed to be fully paid. In
the case of a stock dividend, that part of the surplus of the Savings Bank which
is transferred to stated capital upon the issuance of the shares as a stock
dividend shall be deemed to be the consideration for their issuance.
A description of the Savings Bank's stock and a statement of the
designations, and the relative rights, preferences and limitations of the shares
of stock are as follows:
Common Stock. Except as provided in this Article Fourth (or in any
------------
supplementary sections hereto) the holders of the common stock shall
exclusively possess all voting power. Each holder of shares of common
stock shall be entitled to one vote for each share held by such holder.
Whenever there shall have been paid, or declared and set aside for
payment, to the holders of the outstanding shares of any class of stock
having preference over the common stock as to the payment of dividends,
the full amount of dividends and of sinking fund or retirement fund or
other retirement payments, if any, to which such holders are
respectively entitled in preference to the common stock,
<PAGE>
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; but only
when and as declared by the board of directors.
In the event of any liquidation, dissolution, or winding up of the
Savings Bank, 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 Savings Bank's available for
distribution remaining after: (i) payment or provision for payment of
the Savings Bank's debts and liabilities; (ii) distributions or
provision for distributions in settlement of its liquidation account;
and (iii) distributions or provision 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 Savings Bank.
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.
2
<PAGE>
FIFTH. The period for which this savings bank is organized is perpetual.
SIXTH Liquidation Account. The Savings Bank shall establish and
-------------------
maintain a liquidation account for the benefit of its deposit account holders as
of July 31, 1999 ("Eligible Account Holders") and its deposit account holders as
of December 31, 2000 ("Supplemental Eligible Account Holders"). In the event of
a complete liquidation of the Savings Bank it shall comply with applicable rules
and regulations with respect to the amount and the priorities on liquidation of
each of the Bank's Eligible Account Holder's and Supplemental Eligible Account
Holder's inchoate interests in the liquidation account to the extent it is still
in existence; provided, however, that an Eligible Account Holder's and
Supplemental Eligible Account Holder's inchoate interest in the liquidation
account shall not entitle such Eligible Account Holder or Supplemental Eligible
Account Holder to any voting rights at meetings of the Savings Bank's
stockholders.
3
<PAGE>
SEVENTH. Indemnification.
---------------
(A). A director of the Savings Bank shall not be personally liable to the
Savings Bank or its stockholders for monetary damages for a breach of fiduciary
duty as a director, except for liability: (a) for any breach of the director's
duty of loyalty to the Savings Bank or its stockholders; (b) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law; (c) resulting from a violation of Section 223 of the Michigan
Savings Bank Act; or (d) for any transaction from which the director derived an
improper personal benefit. In the event the Michigan Savings Bank Act is amended
to authorize corporate action further eliminating or limiting the personal
liability of directors, then the liability of a director of the corporation
shall be eliminated or limited to the fullest extent permitted by the Michigan
Savings Bank Act, as so amended. Any repeal, modification or adoption of any
provision in these Articles of Incorporation inconsistent with this Article
Ninth (A) shall not adversely affect any right or protection of a director of
the Savings Bank existing at the time of such repeal, modification or adoption.
(B). The Savings Bank may indemnify persons identified in Section 326 of
the Michigan Savings Bank Act, against expenses, judgments, penalties, fines and
amounts paid in settlement, to the full extent permitted by Sections 326 through
329 of said Act.
4
<PAGE>
STOCK BYLAWS FOR
CITIZENS FIRST SAVINGS BANK
ARTICLE I - HOME OFFICE
-----------------------
The principal office of Citizens First Savings Bank (the "Savings Bank")
shall be 525 Water Street, Port Huron, in the County of St Clair, in the state
of Michigan.
ARTICLE II - STOCKHOLDERS
-------------------------
Section 1. Annual Meeting.
--------- --------------
a. The annual meeting of the shareholders of the Savings Bank shall be
held at 7:30 P.M. in the principal office of the Savings Bank each year on the
first Wednesday of May, if not a legal holiday, and if a legal holiday, then on
the day following, or at such other time and place as shall be otherwise
determined by the Board of Directors, for the purpose of electing Directors and
of transacting such other business as may properly be brought before the
meeting.
b. Notice of the annual meeting of shareholders shall be given as
provided in section 4 of this Article.
c. No proposals submitted by shareholders shall be voted upon at the
annual meeting unless they have first been submitted in writing and delivered to
the Secretary of the Savings Bank at least sixty (60) days prior to the date of
the annual meeting, which proposals (or summary thereof) shall then be posted in
a prominent place in the principal place of business for a ten-day period prior
to the date of the annual meeting.
Section 2. Special Meetings of Shareholders. Special meetings of the
--------- --------------------------------
shareholders of the Savings Bank may be called at any time by the President or
the Board of Directors; and shall be called by the President or a Vice-
President. Such written request shall state the purpose of the meeting and
shall be delivered at the principal place of business of the Savings Bank
addressed to the President. Notice of a special meeting of shareholders shall
be given as provided in section 4 of this Article.
Section 3. Procedure. The President shall preside over annual meetings
---------- ---------
and special meetings of shareholders, and shall, determine the order of business
and the procedure at the meeting, including such regulation of the manner of
voting and the conduct of discussion as seem to him or her in order except as
otherwise provided herein, conduct all such meetings in accordance with the then
current Robert's Rule of Order. The President shall prepare the agenda for
meetings of the shareholders. The agenda for annual meetings of the shareholders
shall include the election of the Board of Directors, a full report by the
President of the financial condition of the Savings Bank, and a full report by
the President of the Savings Bank's progress during the preceding year and an
outline of its program for the succeeding year.
<PAGE>
Section 4. Notice of Meeting. Notice of each meeting of shall be
--------- -----------------
either published once a week for the two (2) consecutive calendar weeks (in each
instance on any day of the week) immediately prior to the week in which such
meeting shall convene, in a newspaper printed in the English language and of
general circulation in the city or county in which the principal place of
business of the Savings Bank is located, or mailed postage prepaid at least ten
(10) days and not more than sixty (60) days prior to the date on which such
meeting shall convene to each of its shareholders of record at the last address
appearing on the books of the Savings Bank. Such notice shall state the name of
the Savings Bank, the purpose(s) for which the meeting is called, the place of
the meeting and the date and time when it shall convene. If any shareholders, in
person or by authorized attorney, shall waive in writing notice of any special
meeting of members, notice thereof need not be given to such shareholders.
Section 5. Approval of Shareholders. Any matter requiring approval by
--------- ------------------------
the shareholders shall be approved upon the affirmative vote by a majority (or a
plurality in the case of election of directors) of all voting shares at a duly
held regular meeting or special meeting.
Section 6. Election of Board of Directors. The Board of Directors
--------- ------------------------------
shall be elected by the shareholders at their annual meeting. 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 Savings Bank at least sixty (60)
days prior to the date of the annual meeting. Ballots bearing the names of all
persons nominated by the Nominating Committee, and timely nominated by other
shareholders prior to the annual meeting, shall be provided for use by the
shareholders at the annual meeting.
Section 7. Record Date. For the purpose of determining shareholders
--------- -----------
entitled to notice of or to vote at any meeting of shareholders or any
adjournment thereof, or in order to make a determination of shareholders for any
other proper purpose, the Board of Directors may fix in advance a record date
for any such determination of shareholders. The shareholder entitled to
participate in any such action shall be the shareholder of record on the books
of the Savings Bank on such record date. The number of votes which each
shareholder shall be entitled to cast shall be determined from the books of the
Savings Bank as of such record date. Any shareholder of such record date who
ceases to be a shareholder prior to such meeting shall not be entitled to vote
at the meeting.
Section 8. Voting Rights. In consideration of all questions requiring
--------- -------------
action by the shareholders of the Savings Bank, each shareholder entitled to
vote shall be entitled to one vote for each share held by him or her. A
shareholder may only vote at any meeting of the Savings Bank by written proxy or
in person.
Section 9. Inspectors of Election. Whenever any person who is present
--------- ----------------------
or represented by proxy and is entitled to vote at a meeting of the shareholders
shall request the appointment of inspectors, the President shall appoint not
more than three inspectors who need not be shareholders. If the right of any
person to vote at such meeting shall be challenged, the inspectors shall
determine such right. The inspectors shall receive and count the votes either
upon an election or for the
2
<PAGE>
decision of any question, and shall determine the result. Their certificate of
any vote shall be prima facie evidence thereof.
Section 10. Proxies. Voting by the shareholders may be by proxy
---------- -------
provided that no proxies shall be voted at any meeting unless such proxies shall
have been placed on file with the Secretary of the Savings Bank, for
verification, prior to the convening of such meeting. All proxies with a term
greater than eleven (11) months or solicited at the expense of the Savings Bank
must run to the Board of Directors as a whole, or to the Proxy Committee
appointed by the Board of Directors.
ARTICLE III - BOARD OF DIRECTORS
--------------------------------
Section 1. Number. The business, property and affairs of the Savings
--------- ------
Bank shall be managed and controlled by a Board of Directors composed of not
less than six nor more than twelve Directors who need not be shareholders of the
Savings Bank. If less than six Directors are elected by the shareholders, the
vacancies may be filled at any subsequent meeting of the shareholders called for
that purpose of which notice is given as provided in these bylaws or by the
Board of Directors.
Section 2. Terms of Office. The Directors shall be classified with
--------- ---------------
respect to the time for which they shall severally hold office by dividing them
into three classes as nearly equal in number as possible. At each annual meeting
of shareholders, successors to the class of Directors whose terms shall expire
that year shall be elected to hold office for a term of three years, so that the
term of office of one class of Directors shall expire in each year. Each
Director shall hold office until the next annual meeting of the shareholders,
and until a successor is elected and qualifies.
Section 3. Oath. Each Director prior to taking office shall take and
--------- ----
subscribe an oath that he or she will diligently and honestly perform his or her
duties and will not knowingly violate, or permit to be violated, any provisions
of Michigan's Savings Bank Act. The Secretary of the Savings Bank shall transmit
the signed oath to the Commissioner of the Office of Financial and Insurance
Services.
Section 4. Removal. Any Director may be removed for cause by a
--------- -------
majority vote of the Board of Directors, or for cause by the shareholders at a
meeting of the shareholders called expressly for that purpose.
Section 5. Resignation. A Director may resign at any time by sending
--------- -----------
written notice to that effect delivered to the Secretary of the Savings Bank.
Section 6. Vacancies. Vacancies in the Board of Directors may be
--------- ---------
filled by a majority vote of the remaining qualified Directors.
Section 7. Organizational Meeting. Immediately following the annual
--------- ----------------------
meeting of shareholders, or at such other time and place as approved by a
majority of the Board of Directors, the Board of Directors shall convene for the
purpose of electing officers and transacting any other business properly brought
before it.
3
<PAGE>
Section 8. Regular Meetings; Notice. Regular meetings of the Board of
--------- ------------------------
Directors shall be held monthly, but in no event less than six times per year,
and at such time and place as the Board of Directors shall from time to time
determine by resolution of the Board or by Waiver of Notice and Consent.
Section 9. Special Meetings. Special meetings of the Board of
--------- ----------------
Directors may be called by the Chair of the Board, the President, or any three
of the Directors qualified at the time of the call, by giving reasonable notice,
personally, by mail, by facsimile, or by telegram, of the time, place and
purpose of such meeting.
Section 10. Waiver of Notice. Notice of the time, place and purpose of
---------- ----------------
any meeting of the Board of Directors may be waived in writing, by facsimile, or
by telegram, either before or after such meeting has been held.
Section 11. Quorum. A majority of the qualified Directors shall
---------- ------
constitute a quorum for the transaction of business. If there shall be less than
a quorum present at any meeting, a majority of the Directors present may adjourn
the meeting from time to time without notice, other than announcement at the
meeting, until a quorum shall be present, at which time any business may be
transacted which might have been transacted at the meeting as first convened had
there been a quorum present.
Section 12. Majority Action. Unless otherwise specified by law, the
---------- ---------------
Articles of Incorporation or these Bylaws, action taken at meetings of the Board
of Directors shall be by a majority of the votes cast.
Section 13. Election of Officers. The Board of Directors shall elect a
---------- --------------------
Chair of the Board, a President, and may elect a Vice-Chair of the Board, and
one or more Vice-Presidents, Secretaries and Treasurers. None of said officers,
except the Chair of the Board and President, need be a Director.
Section 14. Removal of Officers and Agents. Any officer or agent may be
---------- ------------------------------
removed by the Board of Directors whenever in its judgment the best interests of
the Savings Bank will be served thereby.
Section 15. Delegation of Powers. For any reason deemed sufficient by
---------- --------------------
the Board of Directors, whether occasioned by absence or otherwise, the Board
may delegate all or any of the powers and duties of any officer to any other
officer or Director, but no officer or Director shall execute, acknowledge or
verify any instrument in more than one capacity.
Section 16. Bonds. The Board of Directors shall require every employee
---------- -----
concerned in the handling of moneys, accounts or securities of the Savings Bank,
who can be bonded, to be bonded at the Savings Bank's expense by a surety
company authorized to do business in Michigan in such an amount as shall be
determined by them.
4
<PAGE>
Section 17. Age Limitations of Directors. A Director shall retire from
---------- ----------------------------
the Board of Directors immediately following the Board meeting held immediately
prior to the Director's 70/th/ birthday.
ARTICLE IV - COMMITTEES
-----------------------
Section 1. Nominating Committee.
--------- --------------------
a. The Board of Directors shall constitute the Nominating Committee, as a
committee of the whole.
b. A majority of the members of the Nominating Committee shall constitute
a quorum. Action may be taken by a majority of members present at any meeting of
the Nominating Committee.
Section 2. Audit Committee.
---------- ---------------
a. The Board of Directors shall appoint an Audit Committee consisting of
two or more members.
b. The Audit Committee shall carry out the statutory compliance review
functions as assigned by the Board of Directors, including but not limited to
those required by section 339 of Michigan's Savings Bank Act, and other
applicable laws and regulations.
Section 3. Compensation Committee.
--------- ----------------------
a. The Board of Directors shall appoint a Compensation Committee
consisting of two or more members, but shall include in such appointment the
Chair of the Board and the Chair of the Audit Committee.
b. The Compensation Committee shall present to the Board of Directors
compensation formulae for the President's compensation, and for compensation of
the Board of Directors. Upon approval of compensation formulae by the Board of
Directors, the Compensation Committee shall administer and implement the
compensation formulae, without further action by the Board of Directors.
c. The compensation for all other officers, agents and employees of the
Savings Bank shall be governed by the annual operating budget of the Savings
Bank.
Section 4. Proxy Committee.
--------- ---------------
a. The Board of Directors shall appoint a Proxy Committee, consisting of
two or more members.
5
<PAGE>
b. The Proxy Committee shall vote, at meetings of shareholders, any
proxies which have been placed on file with the Secretary of the Savings Bank,
and which run to the Board of Directors or to the Proxy Committee itself.
Section 5. Loan Committee.
--------- --------------
a. The Board of Directors shall appoint a Loan Committee, consisting of
two or more members.
b. The Loan Committee shall develop, and present to the Board of
Directors for consideration, written standards by which the various loan
departments of the Savings Bank may make loan decisions. The Loan Committee
shall meet as necessary based on the Savings Bank's loan activity.
Section 6. Other Committees. The Board of Directors shall appoint such
--------- ----------------
other standing and temporary committees as it may deem desirable. Each such
committee shall have such powers and perform such duties as may be delegated to
it by the Board of Directors.
Section 7. Membership. The President and the Chair of the Board shall
--------- ----------
present to the Board of Directors nominations for committee membership, for
consideration by the Board of Directors. In addition to appointments made by the
Board of Directors, the President shall be a voting member of each standing and
temporary committee created by the Board of Directors; and the Chair of the
Board shall be a non-voting member of each such committee, unless appointed to
such committee specifically by the Board in which case the Chair of the Board
shall be a voting member.
ARTICLE V - OFFICERS
--------------------
Section 1. Chair of the Board. The Chair of the Board shall preside at
--------- ------------------
all meetings of the Board of Directors. The Chair of the Board shall be a non-
voting member of each standing and temporary committee created by the Board of
Directors, unless appointed to such committee specifically by the Board in which
case the Chair of the Board shall be a voting member.
Section 2. Vice-Chair of the Board. If one has been appointed by the
--------- -----------------------
Board of Directors, the Vice-Chair of the Board shall preside at meetings of the
Board of Directors, in the absence of the Chair of the Board.
Section 3. President.
--------- ---------
a. The President shall be the chief executive officer of the Savings
Bank, charged with the supervision and management of bank personnel,
implementation of policies and programs, maintenance of effective operating cost
controls, preparation of proposed operating budgets and profit forecasts, the
submission of periodic reports of bank performance against cost and profit
objectives, execution of approved advertising and sales programs, development
and maintenance of
6
<PAGE>
favorable community and customer relationships, profitable acquisition of
available business, management and control of daily operations, achievement of
deposit goals, attainment of capital requirements and maintenance of adequate
relationships with supervisory or public bodies.
b. The President shall make policy recommendations to the Board of
Directors.
c. The President shall have full power to sign, execute and deliver on
behalf of the Savings Bank all papers necessary to be signed, executed and
delivered in carrying on its business and such other papers as he may be
directed to sign by the Board of Directors.
d. The President shall be a voting member of each standing and temporary
committee created by the Board of Directors.
Section 4. Vice-Presidents and Assistant Vice-Presidents.
--------- ---------------------------------------------
a. There shall be as many Vice-Presidents and Assistant Vice-Presidents
as the Board of Directors may from time to time determine. Each Vice-President
shall perform such duties as may be assigned by the Board of Directors or by the
President. The performance of any corporate act by a Vice-President, in
accordance with any provision of the Bylaws, shall have the same force and
effect as if it were the act of the President. At the direction of the President
or the Board of Directors, a Vice-President shall perform the duties of the
President in case of the President's absence, disqualification, or inability,
and such other duties as are required by law.
b. An Assistant Vice-President, in the absence or disability of the Vice-
President whom he assists, shall perform the duties and exercise the powers of
that Vice-President.
Section 5. Treasurer and Assistant Treasurer.
--------- ---------------------------------
a. The Board of Directors shall elect a Treasurer and may elect one or
more Assistant Treasurers. The Treasurer shall supervise and conduct all routine
banking business and shall have care and custody of the Savings Bank's funds,
securities and property subject to the supervision of the President. The
Treasurer shall keep permanent records of the funds and property of the Savings
Bank and of all banking transactions. The Treasurer shall have authority to
receive all moneys. The Treasurer shall pay out and disburse all moneys under
the direction and control of the President and the Board of Directors. The
Treasurer shall deposit each day to the credit of the Savings Bank all moneys
not required for the convenience of the Savings Bank's business in such bank or
banks or other depositories as the Board of Directors may from time to time
direct. The Treasurer shall safely keep in his custody the seal of the Savings
Bank, and shall have such additional powers and duties as may be assigned by the
Board of Directors.
b. Subject to the control of the President and the Treasurer, each
Assistant Treasurer shall have such powers and perform such duties as may be
assigned by the Board of Directors, and shall perform, in the absence or
disability of the Treasurer, the duties and powers of the Treasurer.
7
<PAGE>
Section 6. Secretary of the Board; Assistant Secretary.
---------- -------------------------------------------
a. The Secretary shall keep the minutes of the meetings of the Board of
Directors, and of the shareholders, and shall give notices of all meetings of
which notice is required. The Secretary shall affix the Seal to written
instruments properly executed on behalf of the Savings Bank and attest to the
same; and generally, shall perform such other duties as may be prescribed from
time to time by the Board or the President.
b. The Secretary shall attend all meetings of the shareholders and of the
Board of Directors, and shall preserve in books of the Savings Bank true minutes
of the proceedings at all such meetings. The Secretary shall give all notices
required by statute, by law or resolution.
c. The Secretary of the Savings Bank shall keep a record of all
Committees' proceedings, which, signed by the Chair of the Committee, shall be
presented at the meetings of the Committee, and at the meetings of the Board of
Directors.
d. Each Assistant Secretary shall perform such duties as shall be
prescribed by the Board, the President or the Secretary.
ARTICLE VI - INDEMNIFICATION
----------------------------
Section 1. Indemnification of Directors, Officers and Employees. The
---------- ----------------------------------------------------
Board of Directors may cause the Savings Bank to indemnify a person in the
manner described in Michigan's Savings Bank Act, in accordance with that Act, if
the Board of Directors determines that the standards set forth in that Act have
been met.
The Savings Bank may, upon the affirmative vote of a majority of its Board
of Directors, purchase insurance for the purpose of indemnifying its Directors,
officers and other employees, in accordance with Michigan's Savings Bank Act.
Such insurance may, but need not, be for the benefit of all Directors, officers,
or employees.
ARTICLE VII - SUBSIDIARIES
--------------------------
Section 1. Subsidiary Boards of Directors. The boards of directors of
---------- ------------------------------
subsidiaries of the Savings Bank shall be appointed annually by the Board of
Directors of the Savings Bank. The President and the Chair of the Board of the
Savings Bank shall submit nominations, to that effect, to the Board of Directors
of the Savings Bank for that Board's consideration.
Section 2. Reporting by Subsidiary Boards. Each board of directors of
--------- ------------------------------
a subsidiary of the Savings Bank shall submit at least annually to the President
of the Savings Bank, or upon the request of the President of the Savings Bank,
full reports of the financial condition of the subsidiary, and a full report of
the subsidiary's progress during the preceding year and an outline of the
subsidiary's program for the succeeding year.
8
<PAGE>
ARTICLE VIII - EXECUTION OF INSTRUMENTS
---------------------------------------
All instruments, reports and documents shall be executed as provided from
time to time, by resolution of the Board of Directors and as provided by law.
ARTICLE IX - CORPORATE SEAL
---------------------------
The corporate seal shall be of the design impressed hereon which is hereby
adopted as the corporate seal of the Savings Bank.
ARTICLE X - FISCAL YEAR
-----------------------
The fiscal year shall end each March 31/st/, or on such other date as shall
be determined by the Board of Directors.
ARTICLE XI - AMENDMENT OF BYLAWS
--------------------------------
Adoption of any bylaw amendment, as long as consistent with applicable law,
rules, and regulations, and which adequately addresses the subject and purpose
of the stated bylaw section, shall be effective after such amendment has been
approved by a two-thirds affirmative vote of the entire Board of Directors, or
by a vote of the shareholders of the Savings Bank at a meeting called for that
purpose.
ADOPTED by the Board of Directors on September 19, 2000.
_________________________________
Larry J. Moeller, Sr.
Chair of the Board of Directors
_________________________________
Timothy D. Regan
Secretary of the Savings Bank
9
