Document:

Exhibit 10.1

      

     

      
      	
              March 31, 2021

            
	 
	
              Patricia M. Eaves

            
	
              [Intentionally Ommited]

            
	 
	
              Dear Mrs. Eaves:

            

       

      

      The Board of Directors (the “Board”) of First BanCorp (the “Corporation”), the bank holding company of FirstBank Puerto Rico (the “Bank”), is pleased
        to offer you the position as a Director of the Board of the Corporation and the Bank. Your service as a Director of the Corporation and the Bank shall be effective as of March 31, 2021 (the “Effective Date”), the date of effectiveness of this offer
        letter (the “Offer Letter”).

       

      The following are the detailed terms of this Offer Letter:

       

        

      	1.	
              Position/Services.

            

       

        

      	

            	a.	
              You will be expected to devote a reasonable amount of your business time to your services to the Corporation pursuant to this Offer Letter commensurate with your role as a member of the Board and
                as a member or Chair of a Board committee and you agree that you will not, without the prior written consent of the Corporation, directly or indirectly, provide any material services to any other banking entity which competes in any
                material respect with the Corporation and its subsidiaries until the earlier of (i) the termination of your services to the Corporation pursuant to this Offer Letter, and (ii) your resignation as Director (such date, the “Termination
                Date”), provided however that any services provided by you to any other banking entity which you have disclosed to the Corporation prior to the presentation of this Offer Letter and which continues to be provided as of its execution is not
                prohibited pursuant to this section and shall not require the prior written consent of the Corporation. You may resign as a member of the Board at any time upon written notice to its Chairman.

            

       

        

      	

            	b.	
              You shall render services as a member of the Board, as well as a member of any other committee which you may be appointed to by the Board during your services as a member of the Board, which may
                include the appointment as a committee chair. You shall attend and participate to the maximum extent practicable in such number of meetings of the Board and of the committee(s) of which you are a member as regularly or specially called.

            

       

        

      	2.	
              Term. Your term as Director shall continue until your successor is duly elected and qualified or until any resignation by you shall be effective. The position shall be up for re-election each year
                at the annual shareholders’ meeting and upon re-election, the terms and provisions of this Offer Letter (as modified from time to time) shall remain in full force and effect.

            

       

        

      	3.	
              Fees and Compensation.

            

       

        

      	

            	a.	
              Annual Director’s Fees. Commencing on the Effective Date, you will be paid fees for your services as a Director in a total amount equal to $115,000 per year (such amount, the “Annual Fee”). The
                Annual Fee shall be payable $75,000 in cash (the “Annual Retainer”) and $40,000 in the form of an annual grant of restricted stock (the “Restricted Stock”), under the First BanCorp Omnibus Incentive Plan, as amended. The cash Annual
                Retainer shall be paid in equal installments on a monthly basis over a twelve-month period. The Restricted Stock shall be awarded at the beginning of each twelve-month period during which you are a Director and shall be subject to a
                twelve-month vesting period. In addition, you may receive additional compensation in the form of retainers depending upon the Board committees which you may be appointed to by the Board during your services as a member of the Board as
                follows, subject to the right of the Board to change such fee structure at its discretion based on changed circumstances:

            

      

      

      
        
          

      

      	
              Committee

            	 	
              Committee Chair

              Retainer

            	 	 	
              Committee

              Member Retainer

            	 
	 	 	 	 	 	 	 
	
              Audit Committee

            	 	
              $

            	
              25,000

            	 	 	
              $

            	
              5,000

            	 
	 	 	 	 	 	 	 	 	 
	
              Compensation and Benefits Committee

            	 	
              $

            	
              5,000

            	 	 	 	
              -0-

            	 
	 	 	 	 	 	 	 	 	 
	
              Corporate Governance and Nominating Committee

            	 	
              $

            	
              5,000

            	 	 	 	
              -0-

            	 
	 	 	 	 	 	 	 	 	 
	
              Asset/Liability Committee

            	 	
              $

            	
              5,000

            	 	 	 	
              -0-

            	 
	 	 	 	 	 	 	 	 	 
	
              Credit Committee

            	 	
              $

            	
              25,000

            	 	 	
              $

            	
              5,000

            	 
	 	 	 	 	 	 	 	 	 
	
              Risk Management Committee

            	 	
              $

            	
              25,000

            	 	 	
              $

            	
              5,000

            	 

       

        

      	

            	b.	
              Taxes. You are responsible for paying all Federal, state, and local income or business taxes, including estimated taxes, self-employment and any other taxes, fees, additions to tax, interest, or
                penalties, which may be assessed, imposed, or incurred as a result of any amounts paid to you pursuant to this Offer Letter. The Corporation may withhold or cause to be withheld from any Annual Fee any Federal, Puerto Rico, state or local
                taxes required by law to be withheld with respect to such Annual Fee. By acceptance of this Agreement, Director agrees to such deductions.

            

       

        

      	4.	
              Reimbursement of Board Meeting/Committee Expenses: D&O Insurance and Indemnification.

            

       

        

      	

            	a.	
              You shall be entitled to receive reimbursement for all reasonable and substantiated (i) expenses incurred by you in connection with your attending each Board meeting and any director education
                meetings, including reasonable and substantiated business class or equivalent travel expenses and meals and lodging, and (ii) legal expenses incurred by you in connection with the negotiation of this Offer Letter. All expenses incurred
                under this Section 4 will be reimbursed in accordance with the applicable policies and procedures of the Corporation; provided, however, that any amounts reimbursed in one taxable year will not affect the amounts eligible for reimbursement
                by the Corporation in a different taxable year, and all reimbursement requests must be submitted by you no later than December 31 of the calendar year following the calendar year in which the expense was incurred.

            

       

        

      	

            	b.	
              The Corporation shall, at its expense, purchase and maintain director’s and officer’s (“D&O”) insurance in an amount comparable to the amount of D&O insurance provided by chartered banks
                with similar total assets and of a similar size and complexity to the Corporation (but in no event less than $10 million), to protect itself and you, as a Director serving at the request of the Corporation, against any expense, liability,
                or loss, whether or not the Corporation would have the power to indemnify you against such expense, liability, or loss under applicable law. Such insurance shall be written by an insurer or insurers admitted to issue such insurance in
                Puerto Rico and holding a financial strength rating (“FSR”) of not less than B+ as such FSR is assigned by Best’s and shall be on terms and conditions as shall be customary in the current market from time to time. Such coverage shall
                include a “Side A” coverage available to directors in an amount comparable to that obtained by other comparable institutions (but in no event less than $10 million). The Corporation shall purchase such coverage on a basis that will provide
                protection to you not only during the time of your service as a director of the Board but also for six years after such service shall terminate for any reason. The Corporation will provide copies of its D&O insurance policies to you
                upon request and will promptly advise you of any changes that may occur in its existing coverages.

            

       

      

      
        
          

      

      	

            	c.	
              As a Director serving at the request of the Corporation, you shall be indemnified by the Corporation to the fullest extent permitted by applicable law against judgments, penalties (including excise
                and similar taxes and punitive damages), fines, settlements, and reasonable expenses (including reasonable attorneys’ and expert witness fees) actually incurred by you in connection with any actual or threatened proceeding (a “Proceeding”)
                relating to or arising from your service as a member of the Board or any committee thereof with any such expenses being advanced to you within 30 days of your written request therefore; provided that in any matter covered by paragraph (2)
                of Article Ninth of the Articles of Incorporation of the Corporation your conduct is not finally adjudged in a non-appealable decision by a court of competent jurisdiction to have constituted fraud, bad faith, gross negligence or willful
                and knowing violation of any law applicable to the Corporation or your service as a director or member of a committee of the Board, in which case there shall be no indemnification and you shall return any advances to the Corporation (a
                “Non-Indemnifiable Claim”); provided, further, however, that you shall be entitled to indemnification in any circumstance in which you acted or failed to act in reliance upon advice of counsel to the Corporation or the Board or any
                committee thereof or the court in which such action was brought shall determines upon application, that despite the adjudication of liability but in view of all the circumstances of the case, you are fairly and reasonably entitled to
                indemnity for such expenses which the court shall deem proper. Your entitlement to indemnification under this Section 4.c. shall not be limited to your entitlement to protection under any applicable insurance coverage and to any other
                indemnification or payment you may be entitled to under the circumstances under the Corporation’s articles of incorporation or by-laws or under any other agreement. Notwithstanding the foregoing, the Corporation shall not be obligated to
                provide any indemnification or advancement of expenses when (i) a Proceeding is between the Corporation and you (provided that you shall be entitled to such indemnification in respect of any action brought by or in the right of the
                Corporation by any shareholder thereof, i.e., a derivative action, and in respect of any action brought by you to establish your right to indemnification hereunder or otherwise; providing any such actions do not constitute a
                Non-Indemnifiable Claim); or (ii) prohibited by applicable law or regulation, including 12 C.F.R. part 359.

            

       

        

      	

            	d.	
              Each and every provision of this Section 4 is separate and distinct so that if any provision hereof shall be held to be invalid or unenforceable for any reason, such invalidity or unenforceability
                shall not affect the validity or enforceability of any other provision hereof. To the extent required, any provision of this Section 4 may be modified by a court of competent jurisdiction to preserve its validity and to provide you with the
                broadest possible indemnification permitted under Puerto Rican law.

            

       

        

      	

            	e.	
              If any provision of this Section 4 is invalidated on any ground by any court of competent jurisdiction, the Corporation shall nevertheless indemnify you as to any expenses, judgments, fines,
                penalties or excise taxes incurred with respect to any Proceeding to the full extent permitted by any provision hereof that has not been invalidated or by any other applicable provision of Puerto Rico law.

            

       

        

      	5.	
              General Provisions.

            

       

        

      	

            	a.	
              This Offer Letter supersedes any other agreements or promises made to you by anyone at the Corporation, whether oral or written, and, subject to approval by the Board, comprises the final,
                complete, and exclusive agreement between you and the Corporation.

            

       

        

      	

            	b.	
              This Offer Letter shall be governed by the laws of the Commonwealth of Puerto Rico, without regard to its principles of conflicts or choices of laws.

            

       

        

      	

            	c.	
              This Offer Letter may be modified only by a written instrument duly executed by you and an authorized representative of the Corporation.

            

       

        

      	

            	d.	
              This Offer Letter may be executed by the parties in separate counterparts, each of which, when so executed and delivered, shall be an original, but all of which, when taken as a whole, shall
                constitute one and the same instrument.

            

       

        

      	

            	e.	
              Any notices that are required to be given pursuant to this Offer Letter must be in writing and may be given by personal delivery, registered or certified mail (postage prepaid, return receipt
                requested), facsimile, courier, or overnight mail delivery to the following addresses:

            

       

        

      	
              To the Company:

            	 	
              First BanCorp

              PO Box 9146

              San Juan, PR 00907-0146

            	 	 
	 	 	 
	
              To You:

            	 	
              Patricia Eaves

            	 	 
	 	 	
              [Intentionally Omitted]

            	 	 

      

      

      
        
          

      

      	

            	f.	
              The Corporation and you hereby consent to the jurisdiction of the Federal and State courts of the Commonwealth of Puerto for the purpose of hearing any Proceeding between you and the Corporation
                arising hereunder or in respect to your service as a member of the Board or any committee thereof.

            

       

        

      	

            	g.	
              This Offer Letter shall be binding upon, and shall inure to the benefit of you and your heirs, executors and administrators, whether or not you have ceased to be a director, and the Corporation and
                its successors and assigns.

            

       

      (SIGNATURE PAGE FOLLOWS)

       

        

      
        
          

      

      Please sign and date this Offer Letter below and return it to the Corporation as soon as possible but in no event later than March 31, 2021, to
        indicate your agreement to the terms and conditions described herein.

       

      We look forward to your favorable reply and to a productive and enjoyable work relationship.

       

      Sincerely,

       

      	First BanCorp	 
	 	 	 
	
              By:

            	
               /s/ Roberto Herencia

            	 
	 	
              Roberto Herencia

            	 
	 	
              Chairman of the Board

            	 

       

      Agreed and Accepted:

      	 	 	 
	
              By:

            	
               /s/ Patricia Eaves

            	 
	 	
              Patricia M. Eavesafbi-ex42_10.htm

Exhibit 4.2

Description of Registrant’s Securities

 

Unless otherwise indicated or the context otherwise requires, references in this Exhibit 4.2 to “we, “us” and “our” refer collectively to Affinity Bancshares, Inc. and Affinity Bank or to either of those entities, depending on the context.

General

Affinity Bancshares is authorized to issue 40,000,000 shares of common stock, par value of $0.01 per share, and 10,000,000 shares of preferred stock, par value $0.01 per share.  Each share of Affinity Bancshares, Inc.’s common stock has the same relative rights as, and is identical in all respects with, each other share of common stock. All outstanding shares of our common stock are duly authorized, fully paid and nonassessable.  

Our board of directors can, without stockholder approval, issue additional shares of common stock.  Any such issuance of additional shares of common stock could dilute the voting strength of the holders of the common stock and may assist management in impeding an unfriendly takeover or attempted change in control.

Common Stock

Dividends.  Affinity Bancshares may pay dividends on its common stock if, after giving effect to such dividends, it would be able to pay its debts in the usual course of business and its total assets would exceed the sum of its total liabilities plus the amount needed to satisfy the preferential rights upon dissolution of stockholders whose preferential rights on dissolution are superior to those receiving the dividends.  However, even if Affinity Bancshares’ assets are less than the amount necessary to satisfy the requirement set forth above, Affinity Bancshares may pay dividends from: its net earnings for the fiscal year in which the distribution is made; its net earnings for the preceding fiscal year; or the sum of its net earnings for the preceding eight fiscal quarters.  The payment of dividends by Affinity Bancshares is also subject to limitations that are imposed by applicable regulation, including restrictions on payments of dividends that would reduce Affinity Bancshares’ assets below the then-adjusted balance of its liquidation account.  The holders of common stock of Affinity Bancshares will be entitled to receive and share equally in dividends as may be declared by our board of directors out of funds legally available therefor.  If Affinity Bancshares issues shares of preferred stock, the holders thereof may have a priority over the holders of the common stock with respect to dividends.

Voting Rights.  The holders of common stock of Affinity Bancshares have exclusive voting rights in Affinity Bancshares.  They elect Affinity Bancshares’ board of directors and act on other matters as are required to be presented to them under Maryland law or as are otherwise presented to them by the board of directors.  Generally, each holder of common stock is entitled to one vote per share and does not have any right to cumulate votes in the election of directors.  Any person who beneficially owns more than 10% of the then-outstanding shares of Affinity Bancshares’ common stock, however, will not be entitled or permitted to vote any shares of common stock held in excess of the 10% limit.  If Affinity Bancshares issues shares of preferred stock, holders of the preferred stock may also possess voting rights. Certain matters require the approval of 80% of our outstanding common stock.

Liquidation.  In the unlikely event of any liquidation, dissolution or winding up of Affinity Bank, Affinity Bancshares, as the holder of 100% of Affinity Bank’s capital stock, would be entitled to receive all assets of Affinity Bank available for distribution, after payment or provision for payment of all debts and liabilities of Affinity Bank, including all deposit accounts and accrued interest thereon, and after distribution of the balance in the liquidation account established in connection with the mutual-to-stock conversion of Community First Bancshares, MHC.  In the unlikely event of liquidation, dissolution or winding up of Affinity Bancshares, the holders of its common stock would be entitled to receive, after payment or provision for payment of all its debts and liabilities (including payments with respect to its liquidation account), all of the assets of Affinity Bancshares available for distribution.  

If preferred stock is issued, the holders thereof may have a priority over the holders of the common stock in the event of liquidation or dissolution.

 

Preemptive Rights.  Holders of the common stock of Affinity Bancshares are not be entitled to preemptive rights with respect to any shares that may be issued.  The common stock is not subject to redemption.

Preferred Stock

None of Affinity Bancshares’ authorized shares of preferred stock are outstanding.  Preferred stock may be issued with preferences and designations as our board of directors may from time to time determine.  Our board of directors may, without stockholder approval, issue shares of preferred stock with voting, dividend, liquidation and conversion rights that could dilute the voting strength of the holders of the common stock and may assist management in impeding an unfriendly takeover or attempted change in control.

Forum Selection for Certain Stockholder Lawsuits

The articles of incorporation of Affinity Bancshares provide that, unless Affinity Bancshares consents in writing to the selection of an alternative forum, the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of Affinity Bancshares, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of Affinity Bancshares to Affinity Bancshares or Affinity Bancshares’ stockholders, (iii) any action asserting a claim arising pursuant to any provision of the Maryland General Corporation Law, or (iv) any action asserting a claim governed by the internal affairs doctrine will be conducted in a state or federal court located within the State of Maryland, in all cases subject to the court’s having personal jurisdiction over the indispensible parties named as defendants.  This exclusive forum provision does not apply to claims arising under the federal securities laws.  Under the articles of incorporation, any person or entity purchasing or otherwise acquiring any interest in shares of capital stock of Affinity Bancshares shall be deemed to have notice of and consented to the exclusive forum provision of the articles of incorporation.  This exclusive forum provision may limit a stockholder’s ability to bring a claim in a judicial forum it finds favorable for disputes with Affinity Bancshares and its directors, officers, and other employees or may cause a stockholder to incur additional expense by having to bring a claim in a judicial forum that is distant from where the stockholder resides, or both.

Federal Conversion Regulations

Federal Reserve Board regulations prohibit any person from making an offer, announcing an intent to make an offer or participating in any other arrangement to purchase stock or acquire stock or subscription rights in a converting institution or its holding company from another person before completion of its conversion.  Further, without the prior written approval of the Federal Reserve Board, no person may make an offer or announcement of an offer to purchase shares or actually acquire shares of a converted institution or its holding company for a period of three years from the date of the completion of the conversion if, upon the completion of such offer, announcement or acquisition, the person would become the beneficial owner of more than 10% of the outstanding stock of the institution or its holding company.  Such restriction applies to Affinity Bancshares until January 2024.

The Federal Reserve Board has defined “person” to include any individual, group acting in concert, corporation, partnership, association, joint stock company, trust, unincorporated organization or similar company, a syndicate or any other group formed for the purpose of acquiring, holding or disposing of securities of an insured institution.  However, offers made exclusively to a bank or its holding company, or to an underwriter or member of a selling group acting on the converting institution’s or its holding company’s behalf for resale to the general public, are excepted.  The regulation also provides civil penalties for willful violation or assistance in any such violation of the regulation by any person connected with the management of the converting institution or its holding company or who controls more than 10% of the outstanding shares or voting rights of a converted institution or its holding company.

Change in Control Law and Regulations

Under the Change in Bank Control Act, a federal law, no person may acquire control of an insured savings association or its parent holding company unless the Federal Reserve Board has been given 60 days’ prior written notice and has not issued a notice disapproving the proposed acquisition.  The Federal Reserve Board takes into consideration certain factors, including the financial and managerial resources of the acquirer and the competitive effects of the acquisition.  In addition, federal regulations provide that no company may acquire control of a savings association without the prior approval of the Federal Reserve Board.  Any company that acquires such control becomes a “savings and loan holding company” subject to registration, examination and regulation by the Federal Reserve Board.  

Control, as defined under federal law, means ownership, control of or holding irrevocable proxies representing more than 25% of any class of voting stock, control in any manner of the election of a majority of the company’s directors, or a determination by the Federal Reserve Board that the acquirer has the power to direct, or directly or indirectly exercise a controlling influence over, the management or policies of the institution.  Acquisition of more than 10% of any class of a savings and loan holding company’s voting stock constitutes a rebuttable determination of control under the regulations under certain circumstances including where, as will be the case with Affinity Bancshares, the issuer has registered securities under Section 12 of the Securities Exchange Act of 1934.  Federal Reserve Board regulations provide that parties seeking to rebut control will be provided an opportunity to do so in writing.  

The Federal Reserve Board has adopted a final rule, effective September 30, 2020, that revises its framework for determining whether a company, under the Bank Holding Company Act, has a “controlling influence” over a bank or savings and loan holding company.

Maryland Law and Articles of Incorporation and Bylaws of Affinity Bancshares

Maryland law, as well as Affinity Bancshares’ articles of incorporation and bylaws, contain a number of provisions relating to corporate governance and rights of stockholders that may discourage future takeover attempts.  As a result, stockholders who might desire to participate in such transactions may not have an opportunity to do so. In addition, these provisions will also render the removal of the board of directors or management of Affinity Bancshares more difficult. 

Directors. The board of directors is divided into three classes.  The members of each class are elected for a term of three years and only one class of directors is elected annually.  Thus, it would take at least two annual elections to replace a majority of the board of directors.  The bylaws establish qualifications for board members, including restrictions on affiliations with competitors of Affinity Bank, restrictions based upon prior legal or regulatory violations and a residency requirement.  Further, the bylaws impose notice and information requirements in connection with the nomination by stockholders of candidates for election to the board of directors or the proposal by stockholders of business to be acted upon at an annual meeting of stockholders.  Such notice and information requirements are applicable to all stockholder business proposals and nominations, and are in addition to any requirements under the federal securities laws.

Restrictions on Calling Special Meetings.  The articles of incorporation and bylaws provide that special meetings of stockholders can be called by the president, the chairperson, by a majority of the whole board of directors or upon the written request of stockholders entitled to cast at least a majority of all votes entitled to vote at the meeting.

Prohibition of Cumulative Voting.  The articles of incorporation prohibit cumulative voting for the election of directors. 

Limitation of Voting Rights.  The articles of incorporation provide that no record owner of any of Affinity Bancshares’ outstanding common stock that is beneficially owned, directly or indirectly, by a person who beneficially owns more than 10% of the outstanding shares of common stock will be permitted to vote any shares in excess of such 10% limit.

Restrictions on Removing Directors from Office.  The articles of incorporation provide that directors may be removed only for cause, and only by the affirmative vote of the holders of at least two-thirds of the voting power of all of Affinity Bancshares’ then-outstanding common stock entitled to vote (after giving effect to the limitation on voting rights discussed above in “—Limitation of Voting Rights”).

Authorized but Unissued Shares.  Affinity Bancshares has authorized but unissued shares of common and preferred stock.  The articles of incorporation authorize 10,000,000 shares of serial preferred stock.  Affinity Bancshares is authorized to issue preferred stock from time to time in one or more series subject to applicable provisions of law, and the board of directors is authorized to fix the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications and terms and conditions of redemption of the shares of each such series.  In the event of a proposed merger, tender offer or other attempt to gain control of Affinity Bancshares that the board of directors does not approve, it may be possible for the board of directors to authorize the issuance of a series of preferred stock with rights and preferences that would impede the completion of the transaction.  An effect of the possible issuance of preferred stock therefore may be to deter a future attempt to gain control of Affinity Bancshares.  The board of directors has no present plan or understanding to issue any preferred stock. 

Amendments to Articles of Incorporation and Bylaws.  Amendments to the articles of incorporation must be approved by the board of directors and by the affirmative vote of at least two-thirds of the outstanding shares of common stock, or by the affirmative vote of a majority of the outstanding shares of common stock if at least two-thirds of the members of the whole board of directors approves such amendment; provided, however, that approval by at least 80% of the outstanding voting stock is generally required to amend certain provisions

The articles of incorporation also provide that the bylaws may be amended by the affirmative vote of a majority of Affinity Bancshares’ directors or by the affirmative vote of at least 80% of the total votes eligible to be cast by stockholders at a duly constituted meeting of stockholders.  Any amendment of this super-majority requirement for amendment of the bylaws would also require the approval of 80% of the total votes eligible to be cast.

Business Combinations with Interested Stockholders.  Maryland law restricts mergers, consolidations, sales of assets and other business combinations between Affinity Bancshares and an “interested stockholder.”

Evaluation of Offers.  The articles of incorporation of Affinity Bancshares provide that its board of directors, when evaluating a transaction that would or may involve a change in control of Affinity Bancshares (whether by purchases of its securities, merger, consolidation, share exchange, dissolution, liquidation, sale of all or substantially all of its assets, proxy solicitation or otherwise), may, in connection with the exercise of its business judgment in determining what is in the best interests of Affinity Bancshares and its stockholders and in making any recommendation to the stockholders, give due consideration to all relevant factors, including, but not limited to, certain enumerated factors.

Purpose and Anti-Takeover Effects of Affinity Bancshares’ Articles of Incorporation and Bylaws.  Our board of directors believes that the provisions described above are prudent and will reduce our vulnerability to takeover attempts and certain other transactions that have not been negotiated with and approved by our board of directors.  These provisions also will assist us in the orderly deployment of the offering proceeds into productive assets during the initial period after the conversion.  We believe these provisions are in the best interests of Affinity Bancshares and its stockholders.  Our board of directors believes that it will be in the best position to determine the true value of Affinity Bancshares and to negotiate more effectively for what may be in the best interests of all our stockholders.  Accordingly, our board of directors believes that it is in the best interests of Affinity Bancshares and all of our stockholders to encourage potential acquirers to negotiate directly with the board of directors and that these provisions will encourage such negotiations and discourage hostile takeover attempts.  It is also the view of our board of directors that these provisions should not discourage persons from proposing a merger or other transaction at a price reflective of the true value of Affinity Bancshares and that is in the best interests of all our stockholders.

 

Takeover attempts that have not been negotiated with and approved by our board of directors present the risk of a takeover on terms that may be less favorable than might otherwise be available.  A transaction that is negotiated and approved by our board of directors, on the other hand, can be carefully planned and undertaken at an opportune time in order to obtain maximum value for our stockholders, with due consideration given to matters such as the management and business of the acquiring corporation.

Although a tender offer or other takeover attempt may be made at a price substantially above the current market price, such offers are sometimes made for less than all of the outstanding shares of a target company.  As a result, stockholders may be presented with the alternative of partially liquidating their investment at a time that may be disadvantageous, or retaining their investment in an enterprise that is under different management and whose objectives may not be similar to those of the remaining stockholders.

Despite our belief as to the benefits to stockholders of these provisions of Affinity Bancshares’ articles of incorporation and bylaws, these provisions also may have the effect of discouraging a future takeover attempt that would not be approved by our board of directors, but pursuant to which stockholders may receive a substantial premium for their shares over then current market prices.  As a result, stockholders who might desire to participate in such a transaction may not have any opportunity to do so.  Such provisions will also make it more difficult to remove our board of directors and management.  Our board of directors, however, has concluded that the potential benefits outweigh the possible disadvantages.

Charter of Affinity Bank

Affinity Bank’s charter provides that for a period of five years from the closing of Affinity Bank’s initial mutual holding company reorganization, no person other than Affinity Bancshares may offer directly or indirectly to acquire the beneficial ownership of more than 10% of any class of equity security of Affinity Bank.  This provision will not apply to any tax-qualified employee benefit plan of Affinity Bank or Affinity Bancshares or to underwriters in connection with a public offering.  In addition, during this five-year period, all shares owned over the 10% limit may not be voted on any matter submitted to stockholders for a vote.

Benefit Plans

In addition to the provisions of Affinity Bancshares, Inc.’s articles of incorporation and bylaws described above, benefit plans of Affinity Bancshares, Inc. and Affinity Bank that may authorize the issuance of equity to its board of directors, officers and employees contain or may contain provisions which also may discourage hostile takeover attempts which the board of directors of Affinity Bank might conclude are not in the best interests of Affinity Bancshares, Inc. and Affinity Bank or Affinity Bancshares, Inc.’s stockholders.

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