Exhibit 2.1
CAMBRIDGEPORT MUTUAL HOLDING COMPANY
PLAN OF CONVERSION
FROM
MUTUAL HOLDING COMPANY
TO
STOCK HOLDING COMPANY
AND
STOCK ISSUANCE
Adopted by the Board of Trustees
on October 19, 1999
TABLE OF CONTENTS
1. Introduction - Business Purpose........................................ 1
2. Definitions............................................................ 2
3. General Procedure for Conversion....................................... 7
3.1 Procedures for Conversion......................................... 7
3.2 Preconditions to Conversion....................................... 9
4. Number of Shares and Purchase Price of Conversion Stock................ 9
4.1 Independent Appraisal............................................. 9
4.2 Price Per Share................................................... 9
4.3 Number of Shares.................................................. 10
4.4 Confirmation of Valuation......................................... 10
5. Subscription Rights of Eligible Account Holders, Supplemental Eligible
Account Holders, Tax-Qualified Employee Stock Benefit Plans and
Management............................................................. 10
5.1 Subscription Priorities........................................... 10
5.2 Minimum Purchase; No Fractional Shares............................ 13
5.3 Purchase Limitations.............................................. 13
5.4 Certain Determinations............................................ 13
6. Direct Community Offering and Syndicated Community Offering............ 13
6.1 Direct Community Offering......................................... 13
6.2 Syndicated Community Offering..................................... 14
6.3 Other Arrangements................................................ 14
7. Limitations on Purchases............................................... 14
7.1 Maximum Purchase Limit............................................ 14
7.2 Purchases by Management........................................... 15
7.3 Illegal Purchases................................................. 15
7.4 Rejection of Orders............................................... 15
8. Manner of Exercising Rights; Order Forms............................... 15
9. Payment for Conversion Stock........................................... 17
9.1 Deadline for Receipt of Payment................................... 17
9.2 Changes in Aggregate Purchase Price............................... 17
9.3 Method of Payment................................................. 17
10. Expiration of Purchase Rights; Undelivered, Defective or Late Order Forms;
Insufficient Payment................................................... 18
10.1 Expiration of Subscription Rights................................. 18
10.2 Undelivered, Defective or Late Order Forms; Insufficient Payment.. 18
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10.3 Waiver of Irregularities or Defects.............................. 19
11. Persons in Nonqualified States or in Foreign Countries................. 19
12. Voting Rights after Conversion......................................... 19
13. Establishment of a Liquidation Account................................. 19
13.1 Establishment of Liquidation Account............................. 19
13.2 Interest in Liquidation Account.................................. 19
13.3 Amount of Subaccount Balances.................................... 19
13.4 Distributions.................................................... 20
14. Restriction on Transfer of Conversion Stock of Management.............. 20
14.1 Restrictions on Resale........................................... 20
14.2 Certificates and Stop Orders..................................... 20
14.3 Stock Dividends and Stock Splits................................. 21
15. Restriction on Stock Purchases by Management........................... 21
16. Amendment and Termination of the Plan.................................. 21
17. Time Period for Completion of Conversion............................... 21
18. Expenses of Conversion................................................. 21
19. Registration Under Securities Exchange Act of 1934..................... 21
20. Market................................................................. 22
21. Conversion Stock Not Insured........................................... 22
22. No Loans to Purchase Capital Stock..................................... 22
23. Restrictions on Acquisition of Bank.................................... 22
24. Stock Charter and Bylaws............................................... 22
24.1 Stock Holding Company Articles of Organization And Bylaws........ 22
24.2 Bank Charter And Bylaws.......................................... 23
25. Post Offering Matters.................................................. 23
25.1 Stock Benefit Plans.............................................. 23
25.2 Payment of Dividends............................................. 23
25.3 Repurchase of Stock.............................................. 23
26. Miscellaneous.......................................................... 24
26.1 Interpretation of Plan........................................... 24
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26.2 Enforcement of Terms and Conditions.............................. 24
Exhibits
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Exhibit A - Proposed Articles of Organization of the Stock Holding Company
Exhibit B - Proposed Bylaws of the Stock Holding Company
Exhibit C - Amended and Restated Charter of Cambridgeport Bank
Exhibit D - Amended and Restated Bylaws of Cambridgeport Bank
Exhibit E - Initial Directors of the Stock Holding Company
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CAMBRIDGEPORT MUTUAL HOLDING COMPANY
PLAN OF CONVERSION FROM MUTUAL HOLDING COMPANY
TO STOCK HOLDING COMPANY AND STOCK ISSUANCE
1. Introduction - Business Purpose
The Board of Trustees of Cambridgeport Mutual Holding Company, a
Massachusetts-chartered mutual holding company (the "MHC"), has determined that
it is in the best interests of the MHC, of Cambridgeport Bank, a Massachusetts-
chartered stock savings bank and wholly owned subsidiary of the MHC (the
"Bank"), of the depositors and customers of the Bank, and of the communities
served by the Bank and the MHC for the MHC to convert from a mutual institution
to a stock-form institution (the "Conversion"). Capitalized terms used but not
defined in this Section 1 shall have the meaning set forth in Section 2 hereof.
In order to carry out the Conversion, the Board of Trustees of the MHC has
adopted this Plan of Conversion (the "Plan") to be carried out under the laws of
the Commonwealth of Massachusetts and the regulations of the Massachusetts
Division of Banks and the FRB, and other applicable laws and regulations.
Pursuant to the Plan, the MHC will convert to a stock form corporation (the
"Stock Holding Company") and offer Conversion Stock on a priority basis to (i)
qualifying depositors, (ii) Tax-Qualified Employee Plans of the Bank and the MHC
and (iii) Management, with any remaining shares to be offered to the Local
Community in a Direct Community Offering and possibly to the public in a
Syndicated Community Offering.
The Conversion is intended to provide an additional source of capital not
now available in order to allow the Bank and the MHC to better serve the needs
of the Local Community through: increased lending (especially to support the
introduction of small business banking); opportunistic branch expansion;
diversification of products; expanding delivery systems, including the
introduction of Internet banking and capitalization on opportunities to serve
customers disenfranchised by recent consolidations in the banking industry. The
Conversion is also intended to provide an additional source capital to the Stock
Holding Company in order to allow it to: finance acquisitions of other
financial institutions or other businesses related to banking; pay dividends to
stockholders; and repurchase shares of Conversion Stock. In addition, after the
Conversion, the Stock Holding Company would have the ability to issue additional
shares of Holding Company Common Stock to raise additional capital or in
connection with additional mergers or acquisitions, although no additional
capital issuance and no merger or acquisition are planned or contemplated at the
present time. In addition, stock ownership by Officers and other Employees of
the Stock Holding Company and the Bank has proven to be an effective performance
incentive and an effective means of attracting and retaining qualified
personnel. The Board of Directors, Board of Trustees and senior management
believe that the Conversion will be beneficial to the population within the
primary market area. The Conversion will provide local customers and other
residents with an opportunity to become equity owners of the Bank, and thereby
participate in the possible stock price appreciation and cash dividends, which
is consistent with the objective of being a locally-owned financial institution
servicing local financial needs. The Board and management believe that,
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through expanded local stock ownership, current customers and non-customers who
purchase Conversion Stock will seek to enhance the financial success of the Bank
through consolidation of their banking business and increased referrals to the
Bank.
The Plan is subject to the approval of various regulatory agencies, and
must also be approved by the affirmative vote of at least a majority of the
MHC's Corporators (and a majority of the MHC's Independent Corporators (who must
constitute not less than 60% of all Corporators)) at an annual meeting or a
special meeting called for such purpose. By approving the Plan, the Corporators
will also be approving the Articles of Organization and bylaws of the Stock
Holding Company and the Charter and bylaws of the Bank and all other steps
necessary or incidental to the Conversion.
The Bank became a stock-form subsidiary of the MHC when the Bank
reorganized into mutual holding company form in 1994. Accordingly, the
Conversion will not affect the corporate existence of the Bank. Although the
Plan does provide that certain amendments will be made to the Bank's corporate
charter and bylaws, the Bank's business and operations will not be affected or
interrupted by the Conversion, and the Bank will continue as the same legal
entity after the Conversion. The deposit accounts and loan accounts of the
Bank's customers will not be affected by the Conversion. Upon Conversion, each
deposit account holder of the Bank will continue to hold exactly the same
deposit account as the holder held immediately before the Conversion. All
deposit accounts in the Bank following the Conversion will continue to be
insured up to the legal maximum by the Federal Deposit Insurance Corporation and
the Depositors Insurance Fund in the same manner as such deposit accounts were
insured immediately before the Conversion. There will be no change in the
Bank's loans. The Conversion will not result in any reduction of the Bank's
reserves or net worth.
2. Definitions
As used in the Plan, the terms set forth below have the following meanings:
Acting in Concert: The term "Acting in Concert" means (a) knowing
participation in a joint activity or conscious parallel action towards a common
goal, whether or not pursuant to an express agreement; or (b) Persons seeking to
combine or pool their voting or other interests (such as subscription rights) in
the securities of an issuer for a common purpose, pursuant to any contract,
understanding, relationship, agreement or other arrangement, whether written or
otherwise. When Persons act together for such purpose, their group is deemed to
have acquired their stock. The determination of whether a group is Acting in
Concert shall be made solely by the Board of Trustees of the MHC or Officers
delegated by such Board and may be based on any evidence upon which the Board or
such delegatee chooses to rely, including, without limitation, joint account
relationships or the fact that such Persons have filed joint Schedules 13D with
the SEC with respect to other companies. Trustees of the MHC and directors of
the Stock Holding Company and the Bank shall not be deemed to be Acting in
Concert solely as a result of their membership on any such board or boards.
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Affiliate: An "Affiliate" of, or a Person "Affiliated" with, a specified
Person, is a Person that directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with the
Person specified.
Aggregate Purchase Price: The term "Aggregate Purchase Price" means the
total sum paid for all shares of Conversion Stock.
Application: The application, including a copy of the Plan, submitted by
the MHC to the Commissioner for approval of the Conversion.
Associate: The term "Associate," when used to indicate a relationship with
any Person, means: (i) any corporation or organization (other than the Bank,
the Stock Holding Company, the MHC or a majority-owned subsidiary of any
thereof) of which such Person is a director, Officer or partner or is, directly
or indirectly, the beneficial owner of 10% or more of any class of equity
securities; (ii) any trust or other estate in which such Person has a
substantial beneficial interest or as to which such Person serves as trustee or
in a similar fiduciary capacity; (iii) any relative or spouse of such Person, or
any relative of such spouse, who has the same home as such Person; and (iv) any
Person Acting in Concert with any of the Persons or entities specified in
clauses (i) through (iii) above; provided, however, that any Tax-Qualified or
Non-Tax-Qualified Employee Plan shall not be deemed to be an Associate of any
director, trustee or Officer of the MHC, the Stock Holding Company or the Bank,
to the extent provided in the Plan. When used to refer to a Person other than
an Officer or director of the Bank, the MHC or the Stock Holding Company, the
MHC in its sole discretion may determine the Persons that are Associates of
other Persons. Trustees of the MHC and directors of the Stock Holding Company
and the Bank shall not be deemed to be Associates solely as a result of their
membership on such Board.
Bank: Cambridgeport Bank.
BHCA: The Bank Holding Company Act of 1956, as amended.
Broker-Dealer: The term "Broker-Dealer" means any person who engages
either for all or part of such person's time, directly or indirectly, as agent,
broker or principal, in the business of offering, buying, selling or otherwise
dealing or trading in securities issued by another person.
Commissioner: The Office of the Commissioner of Banks of The Commonwealth
of Massachusetts.
Community Offering: A Direct Community Offering and/or a Syndicated
Community Offering.
Conversion: (1) the conversion of the MHC into the Stock Holding Company
by amendment of the MHC's charter and bylaws to authorize the issuance of
capital stock or by such other means as the Commissioner shall approve under
applicable Massachusetts law and regulations, (2) the offering of Conversion
Stock in a Subscription Offering and, to the extent shares remain available, in
a Direct Community Offering and possibly in a Syndicated Community Offering; (3)
the issuance
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of the Conversion Stock, (4) the amendment of the Bank's charter and bylaws as
contemplated in the Plan; and (5) the consummation of the related transactions
provided for in the Plan.
Conversion Stock: The Holding Company Common Stock to be issued in the
Conversion.
Corporator: A member of the MHC's Board of Corporators.
Deposit Account: Any withdrawable deposit account offered by the Bank,
including, without limitation, savings accounts, NOW account deposits,
certificates of deposit, demand deposits, Keogh Plan, SEPs and IRA accounts for
which the Bank acts as custodian or trustee, and such other types of deposit
accounts as may then have been authorized by Massachusetts or federal law and
regulations, but not including repurchase agreements, savings bank life
insurance policies or certain escrow accounts.
Direct Community Offering: The offering to the Local Community with
preference given to natural persons residing in the Local Community, and then to
the general public of any unsubscribed shares in the Subscription Offering which
may be effected pursuant to the Plan. The Direct Community Offering may be
conducted simultaneously with the Subscription Offering.
Division: The Division of Banks of The Commonwealth of Massachusetts.
Eligible Account Holder: Any Person holding a Qualifying Deposit on the
Eligibility Record Date.
Eligibility Record Date: July 31, 1998, the date for determining who
qualifies as an Eligible Account Holder.
Employee: The term "Employee" does not include a trustee, director or
Officer.
Employee Plan: Any Tax-Qualified Employee Plan or Non-Tax-Qualified
Employee Benefit Plan.
ESOP: The employee stock ownership plan to be established by the Bank.
Estimated Valuation Range: The dollar range of the proposed Offering, as
determined by the Independent Appraiser before the Offering and as it may be
amended from time to time thereafter. The Estimated Valuation Range may vary
within 15% above or 15% below the midpoint of such range, with a possible
adjustment by up to 15% above the maximum ("Range Maximum") of such range.
Exchange Act: The Securities Exchange Act of 1934, as amended.
FDIC: The Federal Deposit Insurance Corporation.
FRB: The Board of Governors of the Federal Reserve System.
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Holding Company Common Stock: The common stock authorized to be issued
from time to time by the Stock Holding Company.
Independent Appraiser: The appraiser retained by the MHC to prepare an
appraisal of the pro forma market value of the Conversion Stock.
Independent Corporator: A Corporator who is not an Employee, Officer, or
trustee of the MHC or an Employee, Officer, director, or "significant borrower"
of the Bank.
Independent Valuation: The estimated pro forma market value of the
Conversion Stock as determined by the Independent Appraiser.
Information Statement. The information statement required to be sent to
the Corporators in connection with the Special Meeting.
Liquidation Account: The liquidation account established pursuant to
Section 13.1 of the Plan.
Local Community: Those cities and towns designated by the MHC with the
approval of the Commissioner before the commencement of the Offering.
Management: Employees, Officers, directors, trustees and Corporators of
the Bank or the MHC at the time of the Offering.
Marketing Agent: The broker-dealer responsible for organizing and managing
the Conversion and sale of the Conversion Stock.
Market Maker: A dealer (i.e., any Person who engages directly or
indirectly as agent, broker, or principal in the business of offering, buying,
selling or otherwise dealing or trading in securities issued by another Person)
who, with respect to a particular security, (i) regularly publishes bona fide
competitive bid and offer quotations on request, and (ii) is ready, willing and
able to effect transactions in reasonable quantities at the dealer's quoted
prices with other brokers or dealers.
Maximum Purchase Limit: The limitation on the purchase of shares of
Conversion Stock established by Section 7.1, as such limit may be increased
pursuant to said Section 7.1.
MHC: Cambridgeport Mutual Holding Company, the Massachusetts-chartered
holding company for the Bank as it exists in mutual form prior to the
Conversion.
Non-Tax-Qualified Employee Benefit Plan: Any defined benefit plan or
defined contribution plan which is not qualified under Section 401 of the
Internal Revenue Code.
Offering: The Subscription Offering, the Direct Community Offering and the
Syndicated Community Offering.
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Officer: The Chairman of the Board, the President, any officer of the
level of vice president or above, the Clerk and the Treasurer of the Bank, the
MHC or the Stock Holding Company, as the case may be.
Person: An individual, corporation, partnership, association, joint-stock
company, trust (including Individual Retirement Accounts, SEP's and Keogh
Accounts), unincorporated organization, government entity or political
subdivision thereof or any other entity.
Plan: This Plan of Conversion as adopted by the Board of Directors of the
Bank and the Board of Trustees of the MHC and approved by the Commissioner.
Prospectus: The term "Prospectus" means the prospectus by which the
Conversion Stock is being offered.
Purchase Price: The term "Purchase Price" means the price of the
Conversion Stock, as offered in the Conversion.
Qualifying Deposit: The term "Qualifying Deposit" means deposit accounts
of all types offered by the Bank including, but not limited to, NOW account
deposits, certificates of deposit, demand deposits, money market deposits and
deposits made pursuant to IRA/Keogh Plans. It does not include repurchase
agreements, savings bank life insurance policies or certain escrow accounts.
Aggregate deposits of less than $50 will not constitute Qualifying Deposits.
Range Maximum: The valuation which is 15% above the midpoint of the
Estimated Valuation Range, as defined in Section 4.1.
Regulations: The regulations of the Division and the FRB regarding mutual
to stock conversions.
SEC: The Securities and Exchange Commission.
Special Meeting: The Special Meeting of Corporators called for the purpose
of voting on the Plan.
Stock Holding Company: The stock-form holding company that will result
from the conversion of the MHC as provided in the Plan, issue Conversion Stock
in the Conversion, and continue to own 100% of the common stock of the Bank.
Stock Holding Company Application: The holding company application to be
submitted by the MHC to the FRB to have the MHC convert to stock form and issue
Conversion Stock.
Subscription Offering: The term "Subscription Offering" means the offering
of Conversion Stock, through nontransferable Subscription Rights issued to
Eligible Account Holders, Supplemental Eligible Account Holders, the Tax
Qualified Employee Stock Benefit Plans of the Bank and Management.
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Supplemental Eligibility Record Date: The term "Supplemental Eligibility
Record Date" means September 30, 1999, the record date set by the Bank for
determining Supplemental Eligible Account Holders.
Supplemental Eligible Account Holder: The term "Supplemental Eligible
Account Holder" means any person (other than an Eligible Account Holder) holding
a Qualifying Deposit in the Bank as of the Supplemental Eligibility Record Date,
except Officers, directors, trustees, corporators and their associates.
Syndicated Offering: The term "Syndicated Offering" means the offering of
Conversion Stock not subscribed for in the Subscription Offering or the Direct
Community Offering, if any, to certain members of the general public and/or
through a syndicate of registered 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 of the Bank, such as an employee stock ownership plan, or
other plan, which, with its related trust, meets the requirements to be
"qualified" under section 401 of the Internal Revenue Code of 1986, as amended:
3. General Procedure for Conversion
3.1 Procedures for Conversion. After adoption of the Plan by the Board of
Directors of the Bank and at least two-thirds of the Board of Trustees of the
MHC, the Plan will be submitted, together with all other requisite material in
the Application, to the Commissioner for his approval and to the FRB to
determine whether it has objections, based on safety and soundness
considerations, to the Conversion. References herein to approval of the
Commissioner shall also refer to the approval from the FRB. The Bank must also
receive either private letter rulings from the Internal Revenue Service and the
Massachusetts Department of Revenue or opinions of its counsel as to the federal
income tax consequences of the Conversion and of its tax accountants as to the
Massachusetts income tax consequences of the Conversion, in either case
substantially to the effect that the Conversion will not result in any adverse
federal or Massachusetts income tax consequence to the Bank, the MHC, the Stock
Holding Company, Eligible Account Holders or Supplemental Eligible Account
Holders.
Upon a determination by the Commissioner that the Application is complete,
the MHC will publish and post public announcements and notices of the
Application as required by the Commissioner and the Regulations. Following
approval of the Plan by the Commissioner, the Special Meeting shall be scheduled
in accordance with the MHC's Bylaws, and the Plan (as revised in response to
comments received from the Commissioner), proposed revisions and amendments to
the charters and bylaws of the Bank and the Articles of Organization and bylaws
of the Stock Holding Company, and any information required pursuant to the
Regulations, will be submitted to the Corporators for their consideration and
approval at the Special Meeting. The MHC will mail to each Corporator a copy of
the Information Statement not less than seven (7) days before the Special
Meeting. Following approval of the Plan by the Corporators, the MHC intends to
take such steps
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as may be appropriate pursuant to applicable laws and regulations to convert the
MHC to a Massachusetts-chartered stock form holding company.
If the Corporators approve the Plan, and upon receipt of all required
regulatory approvals, the Bank will sell the Conversion Stock in a Subscription
Offering as provided herein. Upon such approval, the Conversion Stock to be
issued pursuant to this Plan will be offered to Eligible Account Holders,
Supplemental Eligible Account Holders, the Tax-Qualified Employee Stock Benefit
Plans and Management and as set forth in Section 5 of this Plan. The
Subscription Offering period will run for no less than twenty (20) but no more
than forty-five (45) days from the date of distribution of the Subscription
Offering materials, unless extended by the MHC with the approval of the
Commissioner.
If feasible, any Conversion Stock remaining will then be sold to the
general public through a Direct Community Offering as provided in Section 6 of
this Plan. The sale of all Conversion Stock ordered in the Subscription
Offering may be consummated simultaneously, during or subsequent to the date the
Direct Community Offering is completed, or, if there is no Direct Community
Offering, as soon as practicable following expiration of the Subscription Rights
provided for in this Plan.
If feasible, any shares of Conversion Stock remaining unsold after
completion of the Subscription Offering and a Direct Community Offering will be
sold in a Syndicated Community Offering (which may commence following or
contemporaneously with the Direct Community Offering). If for any reason a
Syndicated Community Offering of all unsubscribed Conversion Stock cannot be
effected, the MHC will use its best efforts to obtain other purchasers, subject
to the approval of the Commissioner. Completion of the sale of all Conversion
Stock not sold in the Subscription Offering is required within forty-five (45)
days after termination of the Subscription Offering, subject to the extension of
such forty-five (45) day period by the MHC with the approval of the
Commissioner. The MHC may seek one or more extensions of such forty-five (45)
day period if necessary to complete the sale of all shares of Conversion Stock.
If all available shares of Conversion Stock are sold in the Subscription
Offering and any Direct Community Offering, there will be no Syndicated
Community Offering and the Conversion will be consummated upon completion of the
Subscription Offering or the Direct Community Offering, as the case may be.
Upon the consummation of the Conversion, the MHC will be converted into the
Stock Holding Company. The Stock Holding Company will be chartered as a
Massachusetts corporation and will be authorized to exercise any and all powers,
rights and privileges, and will be subject to all limitations applicable to bank
holding companies under applicable laws and regulations. The initial members of
the Board of Directors of the Stock Holding Company will be those Persons whose
names are set forth on Exhibit E to the Plan, each to hold office until the
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Annual Meeting (or Special Meeting in lieu thereof) in the year set forth
opposite their respective names on such Exhibit E, and until their successors
are elected and have been qualified, and otherwise in accordance with the
Articles of Organization and By-Laws of the Stock Holding Company. The Officers
of the Bank immediately prior to the Conversion shall be the initial Officers of
the Stock Holding Company, in each case until their respective successors are
duly elected or appointed and qualified. The Stock Holding Company, as
successor in interest to the MHC, will continue to own 100% of the common
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stock of the Bank. The Stock Holding Company expects to contribute at least 50%
of the net proceeds of the Conversion to the Bank as additional capital.
The Bank believes that the Conversion proceeds will greatly enhance the
Bank's ability, among other things, (i) to expand its franchise through
increased lending, (ii) to diversify products offered to customers and (iii) to
establish new branch locations.
3.2 Preconditions to Conversion. The Conversion is expressly conditioned
upon prior occurrence of the following:
(1) Approval of the Plan by the affirmative vote of a majority of the
Corporators at a regular or special meeting of such Corporators (and,
if required by regulatory authorities, by the affirmative vote of a
majority of Independent Corporators (who shall constitute not less
than 60% of all Corporators)).
(2) Approval by the Commissioner of the Application, including the Plan
and the Articles of Organization and Bylaws of the Stock Holding
Company and of the Bank.
(3) Approval by the FRB for the MHC to convert to stock form and issue
Conversion Stock.
4. Number of Shares and Purchase Price of Conversion Stock.
4.1 Independent Appraisal. An Independent Appraiser shall be employed by
the MHC to provide it with an Independent Valuation as required by regulations
of the Commissioner. The Trustees of the MHC shall thoroughly review and
analyze the methodology and fairness of the Independent Valuation. The
Independent Valuation will be made by a written report to the MHC, contain the
factors upon which the Independent Valuation was made and conform to procedures
adopted by the Commissioner. The Independent Valuation shall contain an
Estimated Valuation Range of aggregate prices for the Conversion Stock, which
range shall reflect the anticipated pro forma market value of the Conversion
Stock. The Aggregate Purchase Price shall be no more than 15 percent above the
Estimated Valuation Range, and the minimum price shall be no more than 15
percent below the Estimated Valuation Range. All shares to be sold in the
Conversion shall be sold at a uniform price per share.
The Independent Appraiser shall evaluate the pro forma market value of the
Conversion Stock, which value shall be included in the Prospectus (as described
in Section 8 of this Plan) filed with the Commissioner. The Independent
Appraiser shall also present to the MHC at the close of the Subscription
Offering a valuation of the pro forma market value of the Conversion Stock. The
Aggregate Purchase Price of the Conversion Stock shall be adjusted to reflect
any required changes in the Independent Valuation. If, as a result of such
adjustment, the Aggregate Purchase Price is not within the Estimated Valuation
Range, the MHC shall obtain an amendment to the Commissioner's approval. If
appropriate, the Commissioner will condition his approval by requiring a
resolicitation of depositors and/or order forms.
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4.2 Price Per Share. The price per share for each share of Conversion
Stock when multiplied by the number of shares of Conversion Stock, shall be
equivalent to the pro forma market value of the Conversion Stock in accordance
with the Independent Valuation furnished to the MHC by the Independent
Appraiser.
4.3 Number of Shares. The total number of shares of Conversion Stock
which will be issued in connection with the Conversion will be determined by the
Board of Trustees of the MHC and the Board of Directors of the Bank immediately
prior to the commencement of the Subscription Offering; provided, that the Board
of Trustees of the MHC may elect to increase or decrease the number of shares of
Conversion Stock to be offered in the Offering depending upon market and
financial conditions or in the event the initial Independent Valuation is
materially increased or is decreased by the Independent Appraiser.
4.4 Confirmation of Valuation. Notwithstanding the foregoing, no sale of
Conversion Stock may be consummated unless, before such consummation, the
Independent Appraiser confirms to the Trustees of the MHC and to the FRB and the
Commissioner 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 Aggregate Purchase Price for all shares of
Conversion Stock is incompatible with its estimate of the aggregate consolidated
pro forma market value of the Conversion Stock. An increase in the aggregate
value of the Conversion Stock by up to 15% above the estimated pro forma market
value of the MHC would not be deemed to be material. If such confirmation is
not received, the MHC may cancel the Conversion, resolicit and extend the
Conversion and establish a new Purchase Price and/or Estimated Valuation Range,
or hold a new Conversion or take such other action as the FRB and the
Commissioner may permit. The estimated pro forma market value of the
Conversion Stock shall be determined for such purpose by an Independent
Appraiser on the basis of such appropriate factors as are not inconsistent with
the Regulations and will be confirmed upon completion of the Conversion. In any
case, the total number of shares of Conversion Stock to be issued and sold will
be determined by the MHC as follows: (a) the estimated aggregate pro forma
market value of the Conversion Stock, immediately after Conversion as
determined by the Independent Appraiser, expressed in terms of a specific
aggregate dollar amount rather than as a range, shall be divided by (b) the
Purchase Price.
5. Subscription Rights of Eligible Account Holders, Supplemental Eligible
Account Holders, Tax-Qualified Employee Stock Benefit Plans and Management
5.1 Subscription Priorities. In descending order of priority, the
opportunity to purchase Conversion Stock shall be given in the Subscription
Offering to: (A) Eligible Account Holders; (B) Supplemental Eligible Account
Holders; (C) Tax-Qualified Employee Plans; and (D) Management. Any shares of
Conversion Stock that are not subscribed for in the Subscription Offering at the
discretion of the MHC may be offered for sale in a Direct Community Offering
and/or, if necessary, a Syndicated Community Offering on terms and conditions
and procedures satisfactory to the MHC.
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(A) Category No. 1: Eligible Account Holders
(1) Each Eligible Account Holder shall receive, as first priority and
without payment, non-transferable Subscription Rights to purchase
shares of Conversion Stock in the amount up to $1,000,000. The MHC
may, in its sole discretion and without further notice to or
solicitation of subscribers or other prospective purchasers, (x)
increase such $1,000,000 purchase limit to up to 5% of the number of
shares of Conversion Stock offered in the Offering, exclusive of an
increase in the total number of shares issued due to an increase in
the offering range of up to 15%, or (y) decrease such $1,000,000
purchase limit to no less than one-tenth of one percent (.10%) of the
number of shares of Conversion Stock offered in the Offering. If the
MHC increases the $1,000,000 purchase limit, subscribers for the
previously-effective maximum amount in the subscription offering will
be, and certain other large subscribers in the sole discretion of the
MHC may be, given the opportunity to increase their subscriptions up
to the then applicable limit. Requests to purchase additional shares
of Conversion Stock under this provision will be determined by the
MHC, in its sole discretion. Such subscription is subject to the
Maximum Purchase Limit specified in Section 7.1 and the minimum
purchase limit in Section 7.1 and exclusive of an increase in the
total number of shares issued due to an increase in the Estimated
Valuation Range of up to 15%.
(2) In the event that subscriptions for Conversion Stock are received from
Eligible Account Holders upon exercise of Subscription Rights pursuant
to paragraph (a) in excess of the number of Shares available for
subscription, the Conversion Stock available for purchase will 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 total
allocation of Conversion Stock equal to the lesser of 100 Shares or
the number of Shares subscribed for by such Eligible Account Holder.
Any Shares remaining after such allocation will be allocated among the
subscribing Eligible Account Holders whose subscriptions remain
unsatisfied in the proportion which the amount of each Eligible
Account Holder's Qualifying Deposit 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 on the same principle (one or more
times as necessary) among those Eligible Account Holders whose
subscriptions are still not fully satisfied until all available Shares
have been allocated.
(3) Subscription Rights held by Eligible Account Holders who are also
Officers, directors, trustees or Corporators of the Bank or the MHC or
their Associates, will be subordinated to those of other Eligible
Account Holders to the extent they are attributable to increased
deposits during the one-year period preceding the Eligibility Record
Date.
11
(B) Category No. 2: Supplemental Eligible Account Holders
(1) Each Supplemental Eligible Account Holder shall receive, as second
priority and without payment, nontransferable subscription rights to
subscribe for shares of Conversion Stock equal to an amount up to
$1,000,000. The MHC may, in its sole discretion and without further
notice to or solicitation of subscribers or other prospective
purchasers, (x) increase such $1,000,000 purchase limit to up to 5% of
the number of shares of Conversion Stock offered in the Offering,
exclusive of an increase in the total number of shares issued due to
an increase in the offering range of up to 15%, or (y) decrease such
$1,000,000 purchase limit to no less than one-tenth of one percent
(.10%) of the number of shares of Conversion Stock offered in the
Offering. If the MHC increases the $1,000,000 purchase limit,
subscribers for the previously-effective maximum amount in the
subscription offering will be, and certain other large subscribers in
the sole discretion of the MHC may be, given the opportunity to
increase their subscriptions up to the then applicable limit. Requests
to purchase additional shares of Conversion Stock under this provision
will be determined by the MHC, in its sole discretion. Such
subscription is subject to the Maximum Purchase Limit specified in
Section 7.1 and the minimum purchase limit in Section 7.1 and
exclusive of an increase in the total number of shares issued due to
an increase in the Estimated Valuation Range of up to 15%.
(2) In the event that subscriptions for Conversion Stock are received from
Supplemental Eligible Account Holders upon exercise of Subscription
Rights pursuant to paragraph (a) in excess of the number of Shares
available for subscription, the Conversion Stock available for
purchase will 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 total allocation of Conversion Stock equal to
the lesser of 100 Shares or the number of Shares subscribed for by
such Supplemental Eligible Account Holder. Any Shares remaining after
such allocation will be allocated among the subscribing Supplemental
Eligible Account Holders whose subscriptions remain unsatisfied in the
proposition which the amount of each Supplemental Eligible Account
Holder's Qualified Deposit bears to the total 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.
(C) Category No. 3: Tax-Qualified Employee Stock Benefit Plans
The Tax-Qualified Employee Stock Benefit Plans of the Bank shall
receive, without payment, as a third priority after the filling of the
subscriptions of Eligible Account
12
Holders, non-transferable Subscription Rights to purchase up to 8% of
the shares of Conversion Stock issued in the Conversion. In the event
that the total number of shares of Conversion Stock offered in the
Conversion is increased to an amount greater than the Range Maximum,
the Tax-Qualified Employee Stock Benefit Plans shall have a priority
right to purchase any such shares exceeding the Range Maximum (up to
the aggregate of 8% of Conversion Stock sold. If all the shares of
Common Stock offered in the Subscription Offering are purchased by
Eligible Account Holders and Supplemental Eligible Account Holders or
if the Tax-Qualified Employee Stock Benefit Plans choose not to fill
their orders in the Offering, then the Tax-Qualified Employee Stock
Benefit Plans will purchase shares in the open market following
consummation of the Conversion. A Tax-Qualified Employee Stock Benefit
Plan shall not be deemed to be an Associate or Affiliate of, or a
Person Acting in Concert with, any Director or Officer of the Holding
Company or the Bank. Notwithstanding any provision contained herein to
the contrary, the Bank may make scheduled discretionary contributions
to a Tax-Qualified Employee Stock Benefit Plan; provided, that such
contributions do not cause the Bank to fail to meet its regulatory
capital requirements.
(D) Category No. 4: Management.
To the extent there are shares remaining after satisfaction of
subscriptions by Eligible Account Holders, Supplemental Eligible
Account Holders, and any Tax-Qualified Employee Plan, each Management
member who does not already qualify in a preceding category shall
receive non-transferable subscription rights to subscribe for shares
of Conversion Stock offered in the Conversion in an amount up to
$1,000,000. The MHC may, in its sole discretion and without further
notice to or solicitation of subscribers or other prospective
purchasers, (x) increase such $1,000,000 purchase limit to up to 5% of
the number of shares of Conversion Stock offered in the Offering,
exclusive of an increase in the total number of shares issued due to
an increase in the offering range of up to 15%, or (y) decrease such
$1,000,000 purchase limit to no less than one-tenth of one percent
(.10%) of the number of shares of Conversion Stock offered in the
Offering. If the MHC increases the $1,000,000 purchase limit,
subscribers for the previously-effective maximum amount in the
subscription offering will be, and certain other large subscribers in
the sole discretion of the MHC may be, given the opportunity to
increase their subscriptions up to the then applicable limit.
Requests to purchase additional shares of Conversion Stock under this
provision will be determined by the MHC, in its sole discretion. Such
subscription is subject to (i) the Maximum Purchase Limit specified in
Section 7.1 and the minimum purchase limitation in Section 7.1 and
exclusive of an increase in the total number of shares issued due to
an increase in the Estimated Valuation Range of up to 15% and (ii) the
limitation on purchases by Management specified in Section 7.2. In
the event that Management subscribes under this Section 5.1(D) for
more shares of Conversion Stock than are available for purchase by
them, the shares of Conversion Stock available for purchase will be
allocated by the MHC among such
13
subscribing persons on an equitable basis, such as by giving weight to
the period of service, compensation and position of the individual
subscriber.
5.2 Minimum Purchase; No Fractional Shares. The minimum purchase by any
Person shall be 25 shares (to the extent that shares of Conversion Stock are
available for purchase), provided, however, that the aggregate purchase price
for any minimum share purchase shall not exceed $250. No fractional shares will
be allocated or issued.
5.3 Purchase Limitations and Adjustments. All purchase priorities
established by this Section 5 shall be subject to the purchase limitations set
forth in, and shall be subject to adjustment as provided in, Section 7.1 and
Section 7.2 of this Plan. In addition to the priorities set forth in this
Section 5, the MHC may establish other priorities for the purchase of Conversion
Stock, subject to the approval of the Commissioner and the FRB.
5.4 Certain Determinations. All interpretations or determinations of
whether prospective purchasers are "residents," "Associates," or "Acting in
Concert", and any other interpretations of any and all other provisions of the
Plan shall be made by and at the sole discretion of the MHC, and may be based on
whatever evidence the MHC may choose to use in making any such determination.
6. Direct Community Offering and Syndicated Community Offering.
6.1 Direct Community Offering. If feasible, Conversion Stock which
remains unsubscribed after the exercise of Subscription Rights pursuant to the
Subscription Offering (Section 5) shall be offered for sale first to the Local
Community and then to the general public through a Direct Community Offering.
The Direct Community Offering, if any, may commence simultaneously with the
Subscription Offering or may commence during or after the commencement of the
Subscription Offering, as the Board so determines. The right to subscribe for
Conversion Stock in the Direct Community Offering is subject to the right of the
Bank to accept or reject such subscriptions in whole or in part. Conversion
Stock being sold in the Direct Community Offering will be offered and sold in a
manner that will achieve the widest distribution of the Conversion Stock. In
making the Direct Community Offering, the MHC will give preference to natural
persons residing in the Local Community. Orders accepted in the Direct
Community Offering shall each be filled up to a maximum amount to be determined
by the MHC but not in excess of 2% of the Aggregate Purchase Price per order and
thereafter remaining shares shall be allocated on an equal number of shares
basis per order until all available shares have been allocated. No Person may
purchase more than $1,000,000 of Conversion Stock in the Direct Community
Offering.
The Direct Community Offering, if any, shall be for a period of not more
than 45 days unless extended by the MHC, and shall commence concurrently with,
during or promptly after the Subscription Offering. The MHC may use the
Marketing Agent on a best efforts basis to sell the unsubscribed shares in the
Subscription Offering and Direct Community Offering. The MHC may pay a
commission or other fee to the Marketing Agent as to the shares sold by the
Marketing Agent in the Subscription Offering and Direct Community Offering and
may also reimburse the Marketing Agent for expenses incurred in connection with
the sale.
14
6.2 Syndicated Community Offering. If any Conversion Stock remains unsold
in the Subscription Offering and Direct Community Offering, the MHC may use the
services of Broker-Dealers to sell such unsold shares in a Syndicated Community
Offering, subject to terms, conditions and procedures as may be determined by
the MHC in a manner that is intended to achieve the widest distribution of the
Conversion Stock subject to the rights of the MHC to accept or reject in whole
or in part all orders in the Syndicated Community Offering. No Person may
purchase in the Syndicated Community Offering more than $1,000,000 of
Conversion Stock. The Syndicated Community Offering will commence during or as
soon as practicable after termination of the Direct Community Offering, if any.
The Syndicated Community Offering shall be completed within 45 days after the
termination of the Subscription Offering, unless such period is extended as
provided herein. The commission in the Syndicated Community Offering shall be
determined by a marketing agreement between the MHC and the Marketing Agent.
Such agreement shall be filed with the FRB, the Division and the SEC.
6.3 Other Arrangements. If for any reason a Syndicated Community Offering
of unsubscribed shares of Conversion Stock cannot be effected or is not deemed
to be advisable, and any shares remain unsold after the Subscription Offering
and the Direct Community Offering, if any, the MHC will seek to make other
arrangements for the sale of the remaining shares, including an underwritten
public offering. Such other arrangements will be subject to the approval of the
Commissioner and the FRB and to compliance with applicable state and federal
securities laws. The MHC may terminate the Direct Community Offering or the
Syndicated Community Offering as soon as it has received orders for at least the
minimum number of shares available for purchase in the Offering.
7. Limitations on Purchases.
7.1 Maximum Purchase Limit. With the exception of the Tax-Qualified
Employee Stock Benefit Plans, which are expected to subscribe for 8% of the
shares of Conversion Stock, the Plan of Conversion provides for the following
purchase limitations: no Person, either alone or together with Associates of or
Persons Acting In Concert with such Person, may purchase more than $2,000,000 of
Conversion Stock except that: (i) the MHC may, in its sole discretion and
without further notice to or solicitation of subscribers or other prospective
purchasers, (x) increase such Maximum Purchase Limit to up to 5% of the number
of shares of Conversion Stock offered in the Offering or (y) decrease such
Maximum Purchase Limit to no less than one-tenth of one percent (.10%) of the
number of shares of Conversion Stock offered in the Offering. If the MHC
increases the Maximum Purchase Limit, subscribers for the previously-effective
maximum amount will be, and certain other large subscribers in the sole
discretion of the MHC may be, given the opportunity to increase their
subscriptions up to the then applicable limit. Requests to purchase additional
shares of Conversion Stock under this provision will be determined by the MHC,
in its sole discretion. A minimum of 25 shares of Conversion Stock must be
purchased by each person purchasing Conversion Stock to the extent shares are
available, provided, however, that such minimum number of shares will be reduced
if the price per share times such minimum number of shares exceeds $500.
15
7.2 Purchases by Management. The maximum number of Shares which may be
purchased in the Offering by Officers, directors, trustees and corporators and
their Associates, in the aggregate shall not exceed 30 percent (30%) of the
Conversion Stock sold in the Offering. Each Management person will be subject
to the same purchase limitations as other Eligible Account Holders and
Supplemental Eligible Account Holders.
7.3 Illegal Purchases. Notwithstanding any other provision of the Plan,
no Person shall be entitled to purchase any Conversion Stock to the extent such
purchase would be illegal under any federal law or state law or regulation or
would violate regulations or policies of the National Association of Securities
Dealers, Inc., particularly those regarding free riding and withholding. The
MHC and/or its agents may ask for an acceptable legal opinion from any purchaser
as to the legality of such purchase and may refuse to honor any purchase order
if such opinion is not timely furnished.
7.4 Rejection of Orders. The Bank and the MHC have the right in their
sole discretion to reject any order submitted by a Person whose representations
the Bank and the MHC believe to be false or who they otherwise believe, either
alone or Acting in Concert with others, is violating, circumventing, or intends
to violate, evade or circumvent the terms and conditions of the Plan.
8. Manner of Exercising Rights; Order Forms.
Upon authorization of the sale of Conversion Stock by the Commissioner:
(1) Promptly after the Commissioner has approved the Prospectus referred
to in paragraph (2) of this Section 8, order forms approved by the
Commissioner for the exercise of the Subscription Rights provided for
in this Plan will be sent to all persons with Subscription Rights at
their last known address appearing in the records of the Bank.
(2) Each order form will be preceded or accompanied by a Prospectus which
must be approved by the Commissioner. Such Prospectus shall describe
the Bank and the Conversion Stock being offered and will contain all
the information required by the Commissioner and all applicable laws
and regulations as necessary to enable the recipients of the order
forms to make informed investment decisions regarding the purchase of
Conversion Stock. The Bank may, in lieu of mailing a Prospectus to
each Eligible Account Holder and Supplemental Eligible Account Holder,
mail a Notice and Information Statement to each such person with a
request form to be returned to the Bank by a reasonable date certain
to request subscription materials.
(3) The order forms will contain or will be accompanied by, among other
things, the following:
(a) An explanation of the rights and privileges granted under this
Plan to each class of persons granted Subscription Rights
pursuant to Section 5 of this Plan with respect to the purchase
of Conversion Stock ;
16
(b) A specified time by which order forms must be received by the
Bank for purposes of exercising the Subscription Rights under
this Plan, as provided in Section 10 of this Plan;
(c) A statement that the Aggregate Purchase Price at which the
Conversion Stock will ultimately be purchased in the Conversion
has not been determined as of the date of mailing of the order
form, but that such price will be within the range of prices
which will be stated in the Prospectus;
(d) The amount which must be returned with the order form to
subscribe for Conversion Stock. Such amount will be equal to the
Purchase Price multiplied by the number of Shares subscribed for
in accordance with the terms of this Plan;
(e) Instructions concerning how to indicate on such order form the
extent to which the recipient elects to exercise Subscription
Rights under this Plan, the name or names in which the Shares
subscribed for are to be registered, the address to which
certificates representing such Shares are to be sent and the
alternative methods of payment for Conversion Stock which will be
permitted;
(f) Specifically designated blank spaces for dating and signing the
order form;
(g) An acknowledgment that the recipient of the order form has
received, prior to signing the order form, the Prospectus
referred to in paragraph (b) of this Section 8;
(h) A statement that the Subscription Rights provided for in this
Plan are nontransferable, will be void after the specified time
referred to in paragraph (3)(6) above and can be exercised only
by delivery of the order form, properly completed and executed,
to the Bank, together with the full required payment (in the
manner specified in Section 9 of this Plan) for the number of
shares of Conversion Stock subscribed for prior to such specified
time; and
(i) Provision for certification to be executed by the recipient of
the order form to the effect that, as to any shares of Conversion
Stock which the recipient elects to purchase, such recipient is
purchasing such shares of Conversion Stock for his own account
only and has no present agreement or understanding regarding any
subsequent sale or transfer of such shares of Conversion Stock.
9. Payment for Conversion Stock.
9.1 Deadline for Receipt of Payment. Full payment for Conversion Stock
subscribed for must be received by the Bank, together with properly completed
and executed order forms therefor,
17
prior to the expiration time, which will be specified on the order forms, unless
such date is extended by the Bank; provided, however, that if any Employee Plan
subscribes for shares during the Subscription Offering, such plans will not be
required to pay for the shares at the time they subscribe but rather may pay for
such shares of Conversion Stock subscribed for by such plans at the Purchase
Price upon consummation of the Conversion; provided, however, that, in the case
of the ESOP there is in force from the time of its subscription until the
consummation of the Conversion, a loan commitment to lend to the ESOP, at such
time, the aggregated Purchase Price of the shares for which it subscribed. The
Stock Holding Company or the Bank may make scheduled discretionary contributions
to an Employee Plan provided such contributions from the Bank, if any, do not
cause the Bank to fail to meet its regulatory capital requirement. Payment for
Conversion Stock may also be made by a participant in an Employee Plan
(including the Bank's tax-qualified deferred compensation plan for Bank
Employees) causing funds held for such participant's benefit by an Employee Plan
to be paid over for such purchase to the extent that such plan allows
participants or any related trust established for the benefit of such
participants to direct that some or all of their individual accounts or sub-
accounts be invested in Holding Company Conversion Stock.
9.2 Changes in Aggregate Purchase Price. If it is determined that the
Aggregate Purchase Price should be greater than 15% above the Range Maximum,
upon compliance with such requirements as may be imposed by the Commissioner
(which may include resolicitation of votes for approval of this Plan by
Corporators of the MHC) each person who subscribed for Conversion Stock will be
permitted to withdraw his subscription and have his payment for Conversion Stock
returned to him in whole or in part, with interest, or to make payment to the
Bank of the additional amount necessary to pay for the Conversion Stock
subscribed for by him at the Purchase Price in the manner and within the time
prescribed by the Bank. If the Aggregate Purchase Price is outside the range of
prices established by the Independent Appraiser referred to in Section 4 of this
Plan and set forth in the Prospectus referred to in Section 8 of this Plan, the
MHC will apply for an amendment to the Commissioner's approval of this Plan and
comply with such requirements as the Commissioner may then establish.
9.3 Method of Payment. Payment for Conversion Stock will be permitted to
be made in any of the following manners:
(1) By check, bank draft or money order, provided that checks will only be
accepted subject to collection. Interest will be paid by the Bank at
not less than the rate per annum being paid by the Bank on its
passbook accounts at the time the Subscription Offering commences, on
payments for Conversion Stock received in the Subscription Offering by
check, bank draft or money order from the date payment is received
until consummation or termination of the Conversion. The Bank shall be
entitled to invest all amounts paid for subscriptions in the
Subscription Offering for its own account until completion or
termination of the Conversion.
(2) By appropriate authorization of withdrawal from designated types of
deposit accounts in the Bank. The order forms will contain appropriate
means by which authorization of such withdrawals may be made. For
purposes of determining the withdrawable
18
balance of such accounts, such withdrawals will be deemed to have been
made upon receipt of appropriate authorization therefor, but interest
at the rates applicable to the accounts from which the withdrawals
have been deemed to have been made will be paid by the Bank on the
amounts deemed to have been withdrawn until the date on which the
Conversion is consummated, at which date the authorized withdrawal
will actually be made. Such withdrawals may be made upon receipt of
order forms authorizing such withdrawals, but interest will be paid by
the Bank on the amounts withdrawn as if such amounts had remained in
the accounts from which they were withdrawn until the date upon which
the sales of Conversion Stock pursuant to exercise of Subscription
Rights are actually consummated.
(3) Wire transfers as payment for shares ordered for purchase may be
permitted or accepted as proper payment.
(4) Payments for the purchase of Conversion Stock in the Subscription
Offering will be permitted through authorization of withdrawals from
certificate accounts at the Bank without early withdrawal penalties.
If the remaining balances of the certificate accounts after such
withdrawals are less than the minimum qualifying balances under
applicable regulations, the certificates evidencing the accounts will
be canceled upon consummation of the Conversion, and the remaining
balances will thereafter earn interest at the passbook rate.
10. Expiration of Purchase Rights; Undelivered, Defective or Late Order
Forms; Insufficient Payment.
10.1 Expiration of Subscription Rights. All Subscription Rights provided
for in this Plan, including, without limitation the Subscription Rights of all
persons whose order forms are returned by the United States Post Office as
undeliverable, will expire at [ ] p.m. Massachusetts Time, on a specified
date which shall be not less than the twentieth day following the date on which
order forms are first sent to Eligible Account Holders, provided that the Bank
shall have the power to extend such expiration time in its discretion.
10.2 Undelivered, Defective or Late Order Forms; Insufficient Payment. In
those cases in which the Bank is unable to locate particular persons granted
Subscription Rights under this Plan, and cases in which order forms (1) are
returned as undeliverable by the United States Post Office, (2) are not received
back by the Bank or are received by the Bank after the expiration date specified
thereon, (3) are defectively filled out or executed or (4) are not accompanied
by the full required payment for the Conversion Stock subscribed for (including
cases in which deposit accounts from which withdrawals are authorized are
insufficient to cover the amount of the required payment), the Subscription
Rights of the person to whom such rights have been granted will lapse as though
such person failed to return the completed order form within the time period
specified thereon.
10.3 Waiver of Irregularities or Defects. The Bank may, but will not be
obligated to, waive any irregularity on any order forms or require the
submission of corrected order forms or the
19
remittance of full payment for Shares subscribed for by such date as it may
specify, and all interpretations by the Bank of terms and conditions of this
Plan and of the order forms will be final.
11. Persons in Nonqualified States or in Foreign Countries.
Subject to the following sentence, the Stock Holding Company will make
reasonable efforts to comply with the securities laws of all states of the
United States in which Eligible Account Holders and Supplemental Eligible
Account Holders entitled to subscribe for Conversion Stock pursuant to this Plan
reside. However, no such person will be offered any Subscription Rights or sold
any Conversion Stock under this Plan who resides in a foreign country or who
resides in a state of the United States with respect to which the Bank
determines that compliance with the securities laws of such state would be
impracticable for reasons of cost or otherwise. No payments will be made in
lieu of the granting of Subscription Rights to such persons.
12. Voting Rights after Conversion.
Following Conversion, voting rights with respect to the Stock Holding
Company will be held and exercised exclusively by the holders of the capital
stock of the Stock Holding Company; the Stock Holding Company shall own all of
the issued and outstanding stock of the Bank.
13. Establishment of a Liquidation Account.
13.1 Establishment of Liquidation Account. For purposes of granting a
priority claim to the assets of the Bank in the event of a complete liquidation
thereof to Eligible Account Holders and Supplemental Eligible Account Holders
who continue to maintain deposit accounts at the Bank, the Stock Holding Company
will, at the time of Conversion, establish a "Liquidation Account" in an amount
equal to the net worth of the MHC set forth in its latest statement of financial
condition contained in its final Prospectus. The function of the Liquidation
Account is to establish a priority on liquidation and, except as provided for in
this Section 13, shall not operate to restrict the use or application of any of
the net worth accounts of the Stock Holding Company.
13.2 Interest in Liquidation Account. Each Eligible Account Holder and
Supplemental Eligible Account Holder will have a separate inchoate interest in
the Liquidation Account for each deposit account making up a Qualifying Deposit.
Such inchoate interests are referred to herein as "Subaccount Balances." For
deposit accounts in existence on the Eligibility Record Date and the
Supplemental Eligibility Record Date, separate Subaccount Balances shall be
determined on the basis of the Qualifying Deposits in such deposit accounts on
each such date.
13.3 Amount of Subaccount Balances. Each initial Subaccount Balance in the
Liquidation Account shall be an amount determined by multiplying the opening
balance in the Liquidation Account by a fraction the numerator of which is the
closing balance in the Eligible Account Holder's and Supplemental Eligible
Account Holder's account and the denominator of which is the total amount of all
Qualifying Deposits of Eligible Account Holders and Supplemental Account Holders
on the corresponding record date. Each initial Subaccount Balance in the
Liquidation Account shall never be increased, but will be subject to downward
adjustment as follows. If the balance in the
20
deposit account to which a Subaccount Balance relates, at the close of business
on any annual closing date of the Bank subsequent to the corresponding record
date, is less than the lesser of the deposit balance in such account at the
close of business on any other annual closing date subsequent to the Eligibility
Record Date or Supplemental Eligibility Record Date, or the amount of the
Qualifying Deposit as of the Eligibility Record Date or Supplemental Eligible
Record Date, the Subaccount Balance for such deposit account shall be adjusted
by reducing such Subaccount Balance in an amount proportionate to the reduction
in such account balance. If any account is closed, its related Subaccount
Balance shall be reduced to zero upon such closing.
13.4 Distributions. In event of a complete liquidation of the Stock
Holding Company (and only in such event), each Eligible Account Holder and
Supplemental Eligible Account Holder shall receive from the Liquidation Account
a liquidation distribution equal to the current amount in each of his Subaccount
Balances, before any liquidation distribution may be made to any holders of the
conversion stock of the converted Bank. No merger, consolidation, purchase of
bulk assets with assumption of accounts and other liabilities, or similar
transaction, in which the Stock Holding Company is not the surviving
institution, will be deemed to be a complete liquidation for this purpose, and,
in any such transaction, the Liquidation Account shall be assumed by the
surviving institution.
14. Restriction on Transfer of Conversion Stock of Management.
14.1 Restrictions on Resale. All capital stock purchased by Officers,
directors, trustees and Corporators of the Bank or the MHC on original issue
pursuant to this Plan (by subscription or otherwise) will be subject to the
restriction that no such shares shall be sold for a period of one year following
the date of purchase of such shares, except in the event of the death or
substantial disability (as determined by the Commissioner) of the Management
person to whom such Conversion Stock was initially sold under the terms of this
Plan or upon the written approval of the Commissioner.
14.2 Certificates and Stop Orders. With respect to all Conversion Stock
subject to restriction on subsequent disposition pursuant to the above
paragraph, each of the following provisions shall apply:
(1) Each certificate representing such Conversion Stock shall bear the
following legend prominently stamped on its face giving notice of such
restriction on transfer:
The shares represented by this certificate may not be sold by the
registered holder hereof for a period of not less than one year from
the date of issuance hereof, except in the event of the death of the
registered holder or substantial disability (as determined by the
Commissioner) of the officer, director, trustee or corporator to whom
such shares were initially sold under the terms of this Plan or upon
the written approval of the Commissioner.
21
(2) Instructions will be given to the transfer agent for the Stock Holding
Company not to recognize or effect any transfer of any certificates
representing such Shares, or any change of record ownership thereof in
violation of such restriction on transfer.
14.3 Stock Dividends and Stock Splits. Any capital stock of the Stock
Holding Company issued in respect of a stock dividend, stock split or otherwise
in respect of ownership of outstanding Shares subject to restrictions on
transfer hereunder will be subject to the same restrictions as are applicable to
the Conversion Stock in respect of which such Conversion Stock is issued.
15. Restriction on Stock Purchases by Management.
For a period of three years following the Conversion, no Officer, director,
trustee or Corporator of the Bank the MHC or the Stock Holding Company or any of
their Associates shall, without the prior written approval of the Commissioner,
purchase capital stock of the Stock Holding Company from the Bank, the MHC or
the Stock Holding Company.
16. Amendment and Termination of the Plan.
This Plan may be substantively amended by the Board of Trustees of the MHC
in its sole discretion as a result of comments from regulatory authorities or
otherwise, at any time prior to the date material is sent to the Corporators in
connection with the Special Meeting to consider this Plan, and at any time
thereafter with the concurrence of the Commissioner. This Conversion may be
terminated by the Trustees of the MHC at any time prior to the Special Meeting
of the Corporators called to consider this Plan and at any time thereafter with
the concurrence of the Commissioner.
17. Time Period for Completion of Conversion.
The Conversion of the MHC shall be completed within 24 months from the date
this Plan is approved by the Board of Trustees of the MHC.
18. Expenses of Conversion.
The Bank and the MHC shall use their best efforts to assure that the
expenses incurred in connection with the Conversion shall be reasonable.
19. Registration Under Securities Exchange Act of 1934.
The Stock Holding Company shall register its Conversion Stock under the
Massachusetts General Laws and Section 12(g) of the Securities Exchange Act of
1934, as amended, concurrently with or promptly following the Conversion,
provided that either or both such registrations are required under applicable
law.
20. Market.
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The Stock Holding Company shall use its best efforts to encourage and
assist two or more market makers to establish and maintain a market for its
Conversion Stock promptly following Conversion. The Stock Holding Company shall
also use its best efforts to cause its Conversion Stock to be quoted on the
Nasdaq Stock Market or such other national exchange.
21. Conversion Stock Not Insured.
The Conversion Stock will not be covered by deposit insurance.
22. No Loans to Purchase Capital Stock.
The Bank shall not loan funds or otherwise extend credit to any person to
purchase the capital stock of the Holding Company in connection with the
Conversion. The Stock Holding Company will not offer or sell any of the Holding
Company Common Stock proposed to be issued to any Person whose purchase would be
financed by funds loaned to the Person by the Stock Holding Company, Bank or any
of their Affiliates.
23. Restrictions on Acquisition of Bank.
Present Massachusetts regulations provide that for a period of three years
following completion of the Conversion, no Person, or group of Persons Acting In
Concert shall directly, or indirectly, offer to purchase or actually acquire the
beneficial ownership of more than 10% of any class of equity security of the
Bank without the prior approval of the Commissioner. However, approval is not
required for purchases directly from the Bank or the underwriters or selling
group acting on its behalf with a view towards public resale, or for purchases
not exceeding one percent per annum of the shares outstanding, or for the
acquisition of securities by one or more Tax-Qualified Employee Stock Benefit
Plans of the Bank, provided that the plan or plans do not have beneficial
ownership in the aggregate of more than 25% of any class of equity security of
the Bank. Civil penalties may be imposed by the Commissioner for willful
violation or assistance of any violation. Where any person directly or
indirectly, acquires beneficial ownership of more than ten percent of any class
of equity security of the Bank within such three-year period without the prior
approval of the Commissioner, stock of the Bank beneficially owned by such
person in excess of 10% shall not be counted as shares entitled to vote and
shall not be voted by any person or counted as voting shares in connection with
any matter submitted to the stockholders for a vote.
24. Stock Charter and Bylaws.
24.1 Stock Holding Company Articles of Organization And Bylaws. Copies of
the proposed Articles of Organization and Bylaws of the Stock Holding Company
are attached hereto as Exhibit A and Exhibit B, respectively, and are made a
--------- ---------
part of the Plan. By their approval of the Plan, the Corporators shall have
approved and adopted the Articles of Organization and Bylaws of the Stock
Holding Company.
24.2 Bank Charter And Bylaws. Copies of the proposed amended and restated
Charter and Bylaws of the Bank are attached hereto as Exhibit C and Exhibit D,
--------- ---------
respectively, and are made a part
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of the Plan. By their approval of the Plan, the Trustees, as the governing body
of the sole stockholder of the Bank, have approved and adopted the amended and
restated Charter and Bylaws of the Bank.
25. Post Offering Matters.
25.1 Stock Benefit Plans. The Board of Directors of the Bank and/or the
Stock Holding Company are permitted under the Regulations, and may decide, to
adopt one or more stock benefit plans for the benefit of the Employees, Officers
and directors of the Bank and Stock Holding Company, including an ESOP, stock
award plans and stock option plans, which will be authorized to purchase Common
Stock and grant options for Common Stock. However, only the Tax-Qualified
Employee Plans will be permitted to purchase Conversion Stock in the Conversion
subject to the purchase priorities set forth in the Plan. Pursuant to the
Regulations, the Stock Holding Company may authorize the ESOP and any other Tax-
Qualified Employee Plans to purchase in the aggregate up to 8% of the Conversion
Stock to be issued. The Bank or the Stock Holding Company may make scheduled
discretionary contributions to one or more Tax-Qualified Employee Plans to
purchase Common Stock or to purchase issued and outstanding shares of Common
Stock or authorized but unissued shares of Common Stock subsequent to the
completion of the Conversion, provided, however, that such contributions do not
cause the Bank to fail to meet any of its regulatory capital requirements. The
Plan specifically authorizes the grant and issuance by the Stock Holding Company
of (i) awards of Common Stock after the Conversion pursuant to one or more stock
recognition and award plans (the "Recognition Plans") in an amount equal to up
to 4% of the number of shares of Conversion Stock issued in the Conversion, (ii)
options to purchase a number of shares of the Stock Holding Company's Conversion
Stock in an amount equal to up to 10% of the number of shares of Conversion
Stock issued in the Conversion and shares of Conversion Stock issuable upon
exercise of such options, and (iii) Common Stock to one or more Tax Qualified
Employee Plans, including the ESOP, at the closing of the Conversion or at any
time thereafter, in an amount equal to up to 8% of the number of shares of
Conversion Stock issued in the Conversion (including shares of Conversion Stock
to be issued to the ESOP). Shares awarded to the Tax Qualified Employee Plans
or pursuant to the Recognition Plans, and shares issued upon exercise of options
may be authorized but unissued shares of the Stock Holding Company's Common
Stock, or shares of Common Stock purchased by the Stock Holding Company or such
plans in the open market. The Recognition Plans and the stock option plans will
be subject to shareholder approval.
25.2 Payment of Dividends. The Stock Holding Company may not declare or
pay a cash dividend on the Holding Company Common Stock if the effect thereof
would cause its regulatory capital to be reduced below the amount required to
maintain the Liquidation Account and under FRB rules and regulations.
Otherwise, the Stock Holding Company may declare dividends in accordance with
applicable laws and regulations.
25.3 Repurchase of Stock. Based upon facts and circumstances following the
Conversion and subject to applicable regulatory and accounting requirements, the
Board of Directors of the Stock Holding Company may determine to repurchase
stock in the future. Such facts and circumstances may include but not be limited
to: (i) market and economic factors such as the price at which the Holding
Company Common Stock is trading in the market, the volume of trading, the
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attractiveness of other investment alternatives in terms of the rate of return
and risk involved in the investment, the ability to increase the book value
and/or earnings per share of the remaining outstanding shares, and the
opportunity to improve the Stock Holding Company's return on equity; (ii) the
avoidance of dilution to stockholders by not having to issue additional shares
to cover the exercise of stock options or the purchase of shares by the ESOP in
the event the ESOP is unable to acquire shares in the Subscription Offering, or
to fund the Stock Plans; and (iii) any other circumstances in which repurchases
would be in the best interests of the Stock Holding Company and its
shareholders.
26. Miscellaneous.
26.1 Interpretation of Plan. All interpretations of the Plan and
application of its provisions to particular circumstances by the MHC shall be
final, subject to the authority of the Commissioner. When a reference is made in
this Agreement to Sections or Exhibits, such reference shall be to a Section of
or Exhibit to the Plan unless otherwise indicated. The recitals hereto
constitute an integral part of the Plan. References to Sections include
subsections, which are part of the related Section (e.g., a section numbered
"Section 5.5.1" would be part of "Section 5.5" and references to "Section 5.5"
would also refer to material contained in the subsection described as "Section
5.5.1"). The table of contents and headings contained in the Plan are for
reference purposes only and shall not affect in any way the meaning or
interpretation of the Plan. Whenever the words "include", "includes" or
"including" are used in the Plan, they shall be deemed to be followed by the
words "without limitation".
26.2 Enforcement of Terms and Conditions. The MHC shall have the right to
take all such action as it, in its sole discretion, may deem necessary,
appropriate or advisable in order to monitor and enforce the terms, conditions,
limitations and restrictions contained in the Plan and the terms, conditions and
representations contained in the Order Forms, including, but not limited to, the
right to require any subscriber or purchaser to provide evidence, in a form
satisfactory to the MHC, of such Person's eligibility to subscribe for or
purchase shares of the Conversion Stock under the terms of the Plan and the
absolute right (subject only to any necessary regulatory approvals or
concurrence) to reject, limit or revoke acceptance of any subscription or order
and to delay, terminate or refuse to consummate any sale of Conversion Stock
that it believes might violate, or is designed to, or is any part of a plan to,
evade or circumvent such terms, conditions, limitations, restrictions and
representations. Any such action shall be final, conclusive and binding on all
Persons, and the MHC, the Bank and their Board of Trustees, Board of Directors,
Officers, Employees and agents shall be free from any liability to any Person on
account of any such action.
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