LONDON -- Lloyds Bank PLC said it is studying the implications of a British High Court ruling that part of its $2.68 billion takeover bid of Cheltenham & Gloucester Building Society is unlawful.

But a spokeswoman said the bank plans to proceed with a modified bid.

LLoyds had proposed to pay each shareholding member of Cheltenham & Gloucester, each mortgage borrower of the building society (which is similar to a savings and loan), each employee and pensioner, and each deposit holder.

Sir Donald Nicholas, the judge, said a cash payment to members of Cheltenham & Gloucester who haven't held shares for two years would be outside the law.

But he said proposed payments to holders of deposit accounts and other nonmembers isn't prohibited and can therefore be approved by the shareholders and borrowing members of Cheltenham.

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