Exhibit 2
PLAN OF CONVERSION AND REORGANIZATION
OF
FINGER LAKES FINANCIAL CORPORATION, MHC
TABLE OF CONTENTS
1. INTRODUCTION.......................................................... 1
2. DEFINITIONS........................................................... 1
3. PROCEDURES FOR CONVERSION............................................. 6
4. HOLDING COMPANY APPLICATIONS AND APPROVALS............................ 8
5. SALE OF SUBSCRIPTION SHARES........................................... 8
6. PURCHASE PRICE AND NUMBER OF SUBSCRIPTION SHARES...................... 8
7. RETENTION OF CONVERSION PROCEEDS BY THE HOLDING COMPANY............... 9
8. SUBSCRIPTION RIGHTS OF ELIGIBLE ACCOUNT HOLDERS (FIRST PRIORITY)...... 9
9. SUBSCRIPTION RIGHTS OF EMPLOYEE PLANS (SECOND PRIORITY)............... 10
10. SUBSCRIPTION RIGHTS OF SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDERS (THIRD
PRIORITY)........................................................ 10
11. SUBSCRIPTION RIGHTS OF OTHER MEMBERS (FOURTH PRIORITY)................ 10
12. COMMUNITY OFFERING (FIFTH PRIORITY)................................... 11
13. SYNDICATED COMMUNITY OFFERING......................................... 11
14. LIMITATION ON PURCHASES............................................... 12
15. PAYMENT FOR CONVERSION STOCK.......................................... 13
16. MANNER OF EXERCISING SUBSCRIPTION RIGHTS THROUGH ORDER FORMS.......... 14
17. UNDELIVERED, DEFECTIVE OR LATE ORDER FORM; INSUFFICIENT PAYMENT....... 15
18. RESIDENTS OF FOREIGN COUNTRIES AND CERTAIN STATES..................... 15
19. ESTABLISHMENT OF LIQUIDATION ACCOUNT.................................. 15
20. VOTING RIGHTS OF STOCKHOLDERS......................................... 16
21. RESTRICTIONS ON RESALE OR SUBSEQUENT DISPOSITION...................... 16
22. REQUIREMENTS FOR STOCK PURCHASES BY DIRECTORS AND OFFICERS FOLLOWING
THE CONVERSION................................................... 17
23. TRANSFER OF DEPOSIT ACCOUNTS.......................................... 17
24. REGISTRATION AND MARKETING............................................ 17
25. TAX RULINGS OR OPINIONS............................................... 17
(i)
26. STOCK BENEFIT PLANS AND EMPLOYMENT AGREEMENTS......................... 18
27. RESTRICTIONS ON ACQUISITION OF BANK AND HOLDING COMPANY............... 18
28. PAYMENT OF DIVIDENDS AND REPURCHASE OF STOCK.......................... 19
29. CHARTER AND BYLAWS.................................................... 19
30. CONSUMMATION OF CONVERSION AND EFFECTIVE DATE......................... 19
31. EXPENSES OF CONVERSION................................................ 20
32. AMENDMENT OR TERMINATION OF PLAN...................................... 20
33. CONDITIONS TO CONVERSION.............................................. 20
34. INTERPRETATION........................................................ 20
EXHIBIT A AGREEMENT OF MERGER BETWEEN FINGER LAKES FINANCIAL
CORPORATION, MHC AND FINGER LAKES FINANCIAL CORP.
EXHIBIT B AGREEMENT OF MERGER BETWEEN FINGER LAKES FINANCIAL CORP. AND
THE SAVINGS BANK OF THE FINGER LAKES
EXHIBIT C AGREEMENT OF MERGER BETWEEN THE SAVINGS BANK OF THE FINGER
LAKES AND FINGER LAKES INTERIM SAVINGS BANK
EXHIBIT D CERTIFICATE OF INCORPORATION OF THE HOLDING COMPANY
EXHIBIT E BYLAWS OF HOLDING COMPANY
(ii)
PLAN OF CONVERSION AND REORGANIZATION OF
Finger Lakes Financial Corporation, MHC
1. INTRODUCTION
This Plan of Conversion and Reorganization (the "Plan") provides for the
conversion of Finger Lakes Financial Corporation, MHC, a federal mutual holding
company (the "Mutual Holding Company") into the capital stock form of
organization (as converted, the "Holding Company"). The Mutual Holding Company
currently owns a majority of the common stock of Finger Lakes Financial Corp., a
federally-chartered stock holding company (the "Mid-Tier Holding Company") that
owns 100% of the common stock of The Savings Bank of the Finger Lakes (the
"Bank"), a federal stock savings bank which is headquartered in Geneva, New
York. The purpose of the Conversion is to convert the Mutual Holding Company to
the capital stock form of organization, which will provide the Holding Company
and the Bank with greater flexibility and capital resources to respond to
changing regulatory and market conditions and to effect corporate transactions,
including mergers and acquisitions. The Holding Company will offer Holding
Company Common Stock upon the terms and conditions set forth herein to Eligible
Account Holders, the Employee Plans established by the Bank or the Holding
Company, Supplemental Eligible Account Holders, Other Members and other persons
according to the respective priorities set forth in this Plan. Any shares not
subscribed for by the foregoing classes of persons will be offered for sale to
certain members of the public directly by the Holding Company through a
Community Offering or a Syndicated Community Offering or through an underwritten
firm commitment public offering, or through a combination thereof. As part of
the Conversion, each Minority Stockholder will receive Holding Company Common
Stock in exchange for Minority Shares. The Conversion will result in the voting
interests of the Mutual Holding Company's members being transferred to persons
who purchase Conversion Stock in the Offering. The Conversion will have no
impact on depositors, borrowers or customers of the Bank. After the Conversion,
the Bank will continue to be regulated by the OTS as its chartering authority.
The Bank also will continue to be a member of the Federal Home Loan Bank System
and all its insured savings deposits will continue to be insured by the FDIC to
the extent provided by applicable law.
This Plan has been adopted by the Board of Directors of the Mutual Holding
Company, and must also be approved by (i) a majority of the total number of
votes entitled to be cast by Voting Members of the Mutual Holding Company at a
Special Meeting of Members to be called for that purpose, and (ii) at least
two-thirds of the outstanding common stock of the Mid-Tier Holding Company at
the Special Meeting of Stockholders, including at least a majority of the votes
cast, in person or by proxy, by Minority Stockholders. Prior to the submission
of this Plan to the Voting Members and stockholders of the Mid-Tier Holding
Company for consideration, the Plan must be approved by the OTS.
2. DEFINITIONS
For the purposes of this Plan, the following terms have the following
meanings:
Account Holder - Any Person holding a Deposit Account in the Bank.
Acting in Concert - The term Acting in Concert means (i) knowing
participation in a joint activity or interdependent conscious parallel action
towards a common goal whether or not pursuant to an express agreement; or (ii) a
combination or pooling of voting or other interests in the securities of an
issuer for a common purpose pursuant to any contract, understanding,
relationship, agreement or other arrangement, whether written or otherwise. A
person or company which acts in concert with another person or company ("other
party") shall also be deemed to be acting in concert with any person or company
who is also acting in concert with that other party, except that any
tax-qualified employee stock benefit plan will not be deemed to be acting in
concert with its trustee or a person who serves in a similar capacity solely for
the purpose of determining whether stock held by the trustee and stock held by
the plan will be aggregated.
Adjusted Majority Ownership Interest - The percentage of the common stock
of the Mid-Tier Holding Company held by the Mutual Holding Company, as adjusted
to reflect the Dividend Waiver Adjustment.
Adjusted Minority Ownership Interest - The Minority Ownership Interest as
adjusted by the Dividend Waiver Adjustment.
Affiliate - Any person that controls, is controlled by, or is under common
control with another person.
Appraised Value Range - The range of the estimated consolidated pro forma
market value of the Holding Company, which shall also be equal to the estimated
pro forma market value of the total number of shares of Conversion Stock to be
issued in the Conversion, as determined by the Independent Appraiser prior to
the Subscription Offering and as it may be amended from time to time thereafter.
The maximum and minimum of the Appraised Value Range will vary within 15% above
and 15% below, respectively, the midpoint of the Appraised Value Range.
Associate - The term Associate when used to indicate a relationship with
any person, means (i) any corporation or organization (other than the Mid-Tier
Holding Company, the Bank or a majority-owned subsidiary of the Bank) of which
such person is an officer or partner or is, directly or indirectly, the
beneficial owner of 10 percent or more of any class of equity securities, (ii)
any trust or other estate in which such person has a substantial beneficial
interest or as to which such person serves as trustee or in a similar fiduciary
capacity, except that for the purposes of this Plan relating to subscriptions in
the offering the term "Associate" does not include any Non-Tax-Qualified
Employee Stock Benefit Plan or any Tax-Qualified Employee Stock Benefit Plan in
which a person has a substantial beneficial interest or serves as a trustee or
in a similar fiduciary capacity, and except that for purposes of aggregating
total shares that may be held by Officers and Directors the term "Associate"
does not include any Tax-Qualified Employee Stock Benefit Plan, and (iii) any
relative or spouse of such person, or any relative of such spouse, who has the
same home as such person or who is a Director or Officer of the Mid-Tier Holding
Company, the Bank or the Holding Company, or any of their parents or
subsidiaries.
Bank - The Savings Bank of the Finger Lakes.
Bank Merger - The merger of Interim with the Bank as set forth in this
Plan.
Code - The Internal Revenue Code of 1986, as amended.
Community - The New York Counties of Ontario, Seneca, Tompkins, and Cayuga.
Community Offering - The offering for sale to certain members of the
general public directly by the Holding Company of any shares not subscribed for
in the Subscription Offering.
Control - (including the terms "controlled by", "controlling" and "under
common control with") means the possession, directly or indirectly, of the power
to direct or cause the direction of the management or policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
Conversion - The conversion and reorganization of the Mutual Holding
Company to stock form pursuant to this Plan, and all steps incident or necessary
thereto, including the Exchange Offer and the Offering.
Conversion Stock - The Subscription Shares and the Exchange Shares issued
in the Conversion.
Deposit Account - The term Deposit Account means any withdrawable account
as defined in Section 561.42 of the Rules and Regulations of the OTS, and shall
include all demand deposit accounts and certificates of deposit.
Director - A member of the Board of Directors of the Bank, the Mid-Tier
Holding Company, the Holding Company or the Mutual Holding Company, as
appropriate in the context.
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Dividend Waiver Adjustment - The adjustment to the number of shares of
Holding Company Common Stock issued in the Conversion to Minority Stockholders
to reflect (i) the cumulative effect of the aggregate amount of dividends waived
by the Mutual Holding Company, and (ii) the market value of assets of the Mutual
Holding Company other than common stock of the Mid-Tier Holding Company.
The adjustment referred to in (i) above requires that the Minority
Ownership Interest be adjusted by multiplying it by a fraction, the numerator of
which is the Mid-Tier Holding Company stockholders' equity at the time of the
Conversion less the aggregate amount of dividends waived by the Mutual Holding
Company and the denominator of which is the Mid-Tier Holding Company
stockholders' equity at the time of the Conversion.
The adjustment referred to in (ii) above would further adjust the Minority
Ownership Interest by multiplying the results obtained in (i) above by a
fraction, the numerator of which is the pro forma market value of the Holding
Company less the market value of assets of the Mutual Holding Company other than
Mid-Tier Holding Company common stock and the denominator of which is the pro
forma market value of the Holding Company.
Eligible Account Holder - Any Person holding a Qualifying Deposit on the
Eligibility Record Date for purposes of determining subscription rights and
establishing subaccount balances in the Liquidation Account.
Eligibility Record Date - The date for determining Eligible Account Holders
of the Bank which is December 31, 1998.
Employees - All Persons who are employed by the Bank, the Mid-Tier Holding
Company or the Mutual Holding Company.
Employee Plans - Any Tax-Qualified Employee Stock Benefit Plan of the Bank,
including any ESOP and 401(k) Plan.
ESOP - An Employee Stock Ownership Plan and related trust established by
the Bank or the Holding Company.
Exchange Offer - The offer of Holding Company Common Stock to Minority
Stockholders in exchange for Minority Shares.
Exchange Ratio - The rate at which shares of Holding Company Common Stock
are exchanged for Minority Shares upon consummation of the Conversion. The
Exchange Ratio shall be determined as of the closing of the Conversion and shall
be the rate that will result in the Minority Stockholders owning in the
aggregate the same percentage of the outstanding shares of Holding Company
Common Stock immediately upon completion of the Conversion as the percentage of
Mid-Tier Holding Company common stock owned by them in the aggregate immediately
prior to the consummation of the Conversion, before giving effect to (i) the
Dividend Waiver Adjustment, (ii) the payment of cash in lieu of issuing
fractional shares of Holding Company Common Stock, and (iii) any shares of
Holding Company Common Stock purchased by the Minority Stockholders in the
Conversion.
Exchange Shares - Shares of Holding Company Common Stock issued to Minority
Stockholders in exchange for Minority Shares.
FDIC - The Federal Deposit Insurance Corporation.
Holding Company - The Delaware (or other state) corporation formed for the
purpose of acquiring all of the shares of capital stock of the Bank in
connection with the Conversion. Shares of Holding Company Common Stock will be
issued in the Conversion to Participants and others in the Conversion.
Holding Company Common Stock - The common stock, par value $.01 per share,
of the Holding Company.
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Independent Appraiser - The appraiser retained by the Mutual Holding
Company and the Bank to prepare an appraisal of the pro forma market value of
the Conversion Stock.
Interim - The interim federal savings bank subsidiary of the Holding
Company established to effect the Conversion.
Liquidation Account - One or more accounts established in accordance with
12 C.F.R. 563b.3(f) and OTS policy.
Member - Any Person or entity who qualifies as a member of the Mutual
Holding Company pursuant to its charter and bylaws.
MHC Merger - The merger of the Mutual Holding Company with the Mid-Tier
Holding Company as set forth in this Plan.
Mid-Tier Holding Company - Finger Lakes Financial Corp., the federal
holding company that owns 100% of the Bank's Common Stock.
Mid-Tier Merger - The conversion of the Mid-Tier Holding Company into an
interim federal stock savings bank and subsequent merger with and into the Bank
as set forth in this Plan.
Minority Shares - Any outstanding common stock of the Mid-Tier Holding
Company, or shares of common stock of the Mid-Tier Holding Company issuable upon
the exercise of options or grant of stock awards, held by persons other than the
Mutual Holding Company.
Minority Ownership Interest - The percentage of the Mid-Tier Holding
Company's common stock held by stockholders other than the Mutual Holding
Company immediately prior to the completion of the Conversion.
Minority Stockholder - Any owner of Minority Shares immediately prior to
the closing of the Conversion.
Mutual Holding Company - Finger Lakes Financial Corporation, MHC, the
mutual holding company of the Bank.
OTS - The Office of Thrift Supervision of the Department of the Treasury or
any successor thereto.
Offering - The offering for sale, pursuant to this Plan, of Holding Company
Common Stock in a Subscription Offering, Community Offering, and Syndicated
Community Offering (or underwritten public offering), as the case may be. The
term "Offering" does not include the Holding Company Common Stock issued in
exchange for Minority Shares pursuant to this Plan.
Offering Range - The number of shares of Holding Company Stock offered for
sale in the Offering multiplied by the subscription price. The Offering Range
shall be equal to the Appraised Value Range multiplied by the Adjusted Majority
Ownership Percentage.
Officer - An executive officer of the Bank, the Mid-Tier Holding Company,
the Holding Company or the Mutual Holding Company as appropriate in the context,
which includes the Chief Executive Officer, President, Senior Vice Presidents,
Executive Vice President in charge of principal business functions, Secretary
and Controller and any Person performing functions similar to those performed by
the foregoing persons.
Order Form - Any form (together with any attached cover letter and/or
certifications or acknowledgments), sent by the Bank to any Participant or
Person containing among other things a description of the alternatives available
to such Person under the Plan and by which any such Person may make elections
regarding subscriptions for Conversion Stock in the Subscription Offering.
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Other Member - Any Member on the Voting Record Date who is not an Eligible
Account Holder or Supplemental Eligible Account Holder.
Participant - Any Eligible Account Holder, Employee Plan, Supplemental
Eligible Account Holder, or Other Member.
Person - An individual, a corporation, a partnership, an association, a
joint-stock company, a trust (including Individual Retirement Accounts and KEOGH
Accounts), any unincorporated organization, a government or political
subdivision thereof or any other entity.
Plan - This Plan of Conversion and Reorganization of the Mutual Holding
Company as it exists on the date hereof and as it may hereafter be amended in
accordance with its terms.
Prospectus - The one or more documents used in offering the Conversion
Stock in the Offering and the Exchange Shares.
Qualifying Deposit - The aggregate balance of all Deposit Accounts in the
Bank of (i) an Eligible Account Holder at the close of business on the
Eligibility Record Date, provided such aggregate balance is not less than $50,
and (ii) a Supplemental Eligible Account Holder at the close of business on the
Supplemental Eligibility Record Date, provided such aggregate balance is not
less than $50.
Resident - Any person who occupies a dwelling within the Community, has a
present intent to remain within the Community for a period of time, and
manifests the genuineness of that intent by establishing an ongoing physical
presence within the Community together with an indication that such presence
within the Community is something other than merely transitory in nature. To the
extent the person is a corporation or other business entity, the principal place
of business or headquarters shall be in the Community. To the extent a person is
a personal benefit plan, the circumstances of the beneficiary shall apply with
respect to this definition. In the case of all other benefit plans,
circumstances of the trustee shall be examined for purposes of this definition.
The Mutual Holding Company and the Bank may utilize deposit or loan records or
such other evidence provided to it to make a determination as to whether a
person is a resident. In all cases, however, such a determination shall be in
the sole discretion of the Mutual Holding Company and the Bank. A Participant
must be a "Resident" for purposes of determining whether such person "resides"
in the Community as such term is used in this Plan.
SEC - The Securities and Exchange Commission.
Share Exchange - The Exchange of Minority Shares for Holding Company Common
Stock in the Conversion.
Special Meeting of Members - The special meeting of members of the Mutual
Holding Company and any adjournments thereof held to consider and vote upon this
Plan.
Special Meeting of Stockholders - The special meeting of stockholders of
the Mid-Tier Holding Company and any adjournments thereof held to consider and
vote upon the Plan.
Subscription Offering - The offering of Subscription Shares to
Participants.
Subscription Price - The price per Subscription Share to be paid by
Participants in the Subscription Offering and Persons in the Community Offering.
The Subscription Price will be determined by the Board of Directors of the
Mutual Holding Company and fixed prior to the commencement of the Subscription
Offering.
Subscription Shares - Shares of Holding Company Common Stock issued in the
Offering. Subscription Shares do not include Exchange Shares.
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Supplemental Eligible Account Holder - Any Person, other than Directors and
Officers of the Bank and their Associates, holding a Qualifying Deposit on the
Supplemental Eligibility Record Date, who is not an Eligible Account Holder.
Supplemental Eligibility Record Date - The date for determining
Supplemental Eligible Account Holders, which shall be the last day of the
calendar quarter preceding OTS approval of the application for conversion.
Syndicated Community Offering - The offering of Conversion Stock following
the Subscription and Community Offerings through a syndicate of broker-dealers.
Tax-Qualified Employee Stock Benefit Plan - Any defined benefit plan or
defined contribution plan, such as an employee stock ownership plan, stock bonus
plan, profit-sharing plan or other plan, which, with its related trust, meets
the requirements to be "qualified" under Section 401 of the Internal Revenue
Code. The Bank may make scheduled discretionary contributions to a tax-qualified
employee stock benefit plan, provided such contributions do not cause the Bank
to fail to meet its regulatory capital requirement. A "Non-Tax-Qualified
Employee Stock Benefit Plan" is any defined benefit plan or defined contribution
plan which is not so qualified.
Voting Member - Any Person who at the close of business on the Voting
Record Date is entitled to vote as a member of the Mutual Holding Company
pursuant to its charter and bylaws.
Voting Record Date - The date fixed by the Directors in accordance with OTS
regulations for determining eligibility to vote at the Special Meeting of
Members and/or the Special Meeting of Stockholders.
3. PROCEDURES FOR CONVERSION
A. After approval of the Plan by the Board of Directors of the Bank and the
Mutual Holding Company, the Plan shall be submitted together with all other
requisite material to the OTS for its approval. Notice of the adoption of the
Plan by the Board of Directors of the Bank and the Mutual Holding Company and
the submission of the Plan to the OTS for its approval will be published in a
newspaper having general circulation in each community in which an office of the
Bank is located and copies of the Plan will be made available at each office of
the Bank for inspection by the Members. Upon receipt of notice from the OTS to
do so, the Mutual Holding Company also will cause to be published a notice of
the filing with the OTS of an application to convert in accordance with the
provisions of the Plan.
B. Promptly following approval by the OTS, the Plan will be submitted to a
vote of (i) the Voting Members at the Special Meeting of Members, and (ii) the
Stockholders of the Mid-Tier Holding Company at the Special Meeting of
Stockholders. The Mutual Holding Company will mail to all Members as of the
Voting Record Date, at their last known address appearing on the records of the
Bank, a proxy statement in either long or summary form describing the Plan which
will be submitted to a vote of the Members at the Special Meeting of Members.
The Mid-Tier Holding Company also will mail to all stockholders as of the Voting
Record Date, a proxy statement describing the Plan and the Conversion, which
will be submitted to a vote of stockholders at the special meeting of
stockholders. The Holding Company will also mail to all Participants either a
Prospectus and Order Form for the purchase of Subscription Shares or a letter
informing them of their right to receive a Prospectus and Order Form and a
postage prepaid card to request such materials, subject to other provisions of
this Plan. In addition, all Participants will receive, or be given the
opportunity to request by either returning a postage prepaid card which will be
distributed with the proxy statement or by letter addressed to the Bank's
Secretary, a copy of the Plan as well as the certificate of incorporation or
bylaws of the Holding Company. Upon approval of the Plan by (i) a majority of
the total number of votes entitled to be cast by the Voting Members, (ii) at
least two-thirds of the outstanding common stock of the Mid-Tier Holding
Company, and (iii) a majority vote of Minority Stockholders present in person or
by proxy, the Mutual Holding Company, the Holding Company and the Bank will take
all other necessary steps pursuant to applicable laws and regulations to
consummate the Conversion and Offering. The Conversion must be completed within
24 months of the approval of the Plan by the Voting Members, unless a longer
time period is permitted by governing laws and regulations.
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C. The Conversion will be effected as follows, or in any other manner which
is consistent with the purposes of this Plan and applicable laws and
regulations. The choice of which method to use to effect the Conversion will be
made by the Board of Directors of the Mutual Holding Company immediately prior
to the closing of the Conversion. Each of the steps set forth below shall be
deemed to occur in such order as is necessary to consummate the Conversion
pursuant to the Plan, the intent of the Board of Directors of the Mutual Holding
Company and the Bank, and OTS regulations. Approval of the Plan by the Members
and stockholders of the Mid-Tier Holding Company shall also constitute approval
of each of the transactions necessary to implement the Plan.
(1) The Bank will establish the Holding Company as a first-tier
Delaware chartered stock holding company subsidiary.
(2) Holding Company will charter Interim.
(3) The Mutual Holding Company will merge with and into the Mid-Tier
Holding Company (the "MHC Merger") pursuant to the Agreement of Merger
attached hereto as Exhibit A between the Mutual Holding Company and the
Mid-Tier Holding Company, whereby the shares of Mid-Tier Holding Company
common stock held by the Mutual Holding Company will be canceled and each
Eligible Account Holder and Supplemental Eligible Account Holder will
receive an interest in a Liquidation Account of the Mid-Tier Holding
Company in exchange for such person's interest in the Mutual Holding
Company.
(4) The Mid-Tier Holding Company will convert into or exchange its
charter for an interim federal stock savings bank (which shall continue to
be referred to as the "Mid-Tier Holding Company") and will merge with and
into the Bank (the "Mid-Tier Merger") with the Bank as the resulting entity
pursuant to the Agreement of Merger attached hereto as Exhibit B between
the Mid-Tier Holding Company and the Bank, whereby (i) the Mid-Tier Holding
Company stockholders other than the Mutual Holding Company ("Minority
Stockholders") will constructively receive shares of Bank common stock in
exchange for their Mid-Tier Holding Company common stock and (ii) each
Eligible Account Holder and Supplemental Eligible Account Holder will
receive an interest in a Liquidation Account of the Bank in exchange for
such person's interest in the Mid-Tier Holding Company.
(5) Contemporaneously with the Mid-Tier Merger, Interim will merge
with and into the Bank with the Bank as the surviving entity (the "Bank
Merger") pursuant to the Agreement of Merger attached hereto as Exhibit C
between the Bank and Interim. Constructive shareholders of the Bank (i.e.,
Minority Stockholders immediately prior to the Conversion) will exchange
the shares of Bank common stock that they constructively received in the
Mid-Tier Merger for Holding Company Common Stock.
(6) Contemporaneously with the Bank Merger, the Holding Company will
sell the Subscription Shares in the Offering.
D. As part of the Conversion, each of the Minority Shares shall
automatically, without further action of the holder thereof, be converted into
and become the right to receive Holding Company Common Stock based upon the
Exchange Ratio. The basis for exchange of Minority Shares for Holding Company
Common Stock shall be fair and reasonable. Options to purchase shares of
Mid-Tier Holding Company common stock which are outstanding immediately prior to
the consummation of the Conversion shall be converted into options to purchase
shares of Holding Company Common Stock, with the number of shares subject to the
option and the exercise price per share to be adjusted based upon the Exchange
Ratio so that the aggregate exercise price remains unchanged, and with the
duration of the option remaining unchanged.
E. Concurrently with the filing of the Conversion Application with the OTS,
the Holding Company shall also seek to register the Conversion Stock with the
SEC and any appropriate state securities authorities. In addition, if required
by applicable law and regulations, the Board of Directors of the Bank and the
Mid-Tier Holding Company shall prepare preliminary proxy materials as well as
other applications and information for review by the SEC and the OTS in
connection with the solicitation of stockholder approval of the Plan.
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F. The Certificate of Incorporation of the Holding Company (the
"Certificate") shall read substantially in the form of Exhibit D.
G. The home office and branch offices of the Bank shall be unaffected by
the Conversion. The executive offices of the Holding Company shall be located at
the current offices of the Mutual Holding Company.
4. HOLDING COMPANY APPLICATIONS AND APPROVALS
The Board of Directors of the Holding Company and the Mutual Holding
Company will take all necessary steps to convert the Mutual Holding Company to
stock form, form the Holding Company and complete the Offering. The Holding
Company shall make timely applications for any requisite regulatory approvals,
including an Application on Form AC and a Holding Company Application on Form
H-(e)1 or H-(e)1-S, to be filed with the OTS and a Registration Statement to be
filed with the SEC.
5. SALE OF SUBSCRIPTION SHARES
The Subscription Shares will be offered simultaneously in the Subscription
Offering to the Participants in the respective priorities set forth in this
Plan. The Subscription Offering may begin as early as the mailing of the Proxy
Statement for the Special Meeting of Members. The Holding Company Common Stock
will not be insured by the FDIC. The Bank will not knowingly lend funds or
otherwise extend credit to any Person to purchase shares of Holding Company
Common Stock.
Any shares of Holding Company Common Stock not subscribed for in the
Subscription Offering will be offered for sale in the Community Offering. The
Subscription Offering may be commenced prior to the Special Meeting of Members
and, in that event, the Community Offering may also be commenced prior to the
Special Meeting of Members. The offer and sale of Holding Company Common Stock
prior to the Special Meeting of Members shall, however, be conditioned upon
approval of the Plan by the Voting Members and stockholders of the Mid-Tier
Holding Company.
If feasible, any shares of Holding Company Common Stock remaining after the
Subscription and Community Offerings, will be sold in a Syndicated Community
Offering in a manner that will achieve the widest distribution of the Holding
Company Common Stock. The sale of all Holding Company Common Stock subscribed
for in the Subscription and Community Offerings will be consummated
simultaneously on the date the sale of Holding Company Common Stock in the
Syndicated Community Offering is consummated and only if all unsubscribed for
Holding Company Common Stock is sold.
6. PURCHASE PRICE AND NUMBER OF SUBSCRIPTION SHARES
The total number of shares (or a range thereof) of Holding Company Common
Stock to be offered in the Conversion will be determined jointly by the Boards
of Directors of the Bank, the Mid-Tier Holding Company and the Holding Company
immediately prior to the commencement of the Subscription and Community
Offerings, and will be based on the Appraised Value Range divided by the
Subscription Price. The Offering Range will be equal to the Appraised Value
Range multiplied by the Adjusted Majority Ownership Interest. The estimated pro
forma consolidated market value of the Holding Company will be subject to
adjustment within the Appraised Value Range if necessitated by market or
financial conditions, with the approval of the OTS, if necessary, and the
maximum of the Appraised Value Range may be increased by up to 15% subsequent to
the commencement of the Subscription and Community Offerings to reflect changes
in market and financial conditions. The number of shares of Conversion Stock
issued in the Conversion will be equal to the estimated pro forma consolidated
market value of the Holding Company, as may be amended, divided by the
Subscription Price, and the number of Subscription Shares sold in the Offering
will be equal to the product of (i) the estimated pro forma consolidated market
value of the Holding Company, as may be amended, divided by the Subscription
Price, and (ii) the Adjusted Majority Ownership Interest.
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In the event that the Subscription Price multiplied by the number of shares
of Conversion Stock to be issued in the Conversion is below the minimum of the
Appraised Value Range, or materially above the maximum of the Appraised Value
Range, resolicitation of purchasers may be required, provided that up to a 15%
increase above the maximum of the Appraised Value Range will not be deemed
material so as to require a resolicitation. Any such resolicitation shall be
effected in such manner and within such time as the Bank and the Mutual Holding
Company shall establish, with the approval of the OTS if required.
Notwithstanding the foregoing, shares of Conversion Stock will not be
issued unless, prior to the consummation of the Conversion, the Independent
Appraiser confirms to the Bank, the Mutual Holding Company, the Holding Company
and to the OTS that, to the best knowledge of the Independent Appraiser, nothing
of a material nature has occurred which, taking into account all relevant
factors, would cause the Independent Appraiser to conclude that the number of
shares of Conversion Stock issued in the Conversion multiplied by the
Subscription Price is incompatible with its estimate of the aggregate
consolidated pro forma market value of the Holding Company. An increase in the
aggregate value of the Conversion Stock by up to 15% above the maximum of the
Appraised Value Range, would not be deemed to be material. If such confirmation
is not received, the Holding Company may cancel the Subscription and Community
Offerings and/or the Syndicated Community Offering, extend the Conversion,
establish a new Subscription Price and/or Appraised Value Range, extend, reopen
or hold new Subscription and Community Offerings and/or Syndicated Community
Offering or take such other action as the OTS may permit.
The Holding Company Common Stock to be issued in the Conversion shall be
fully paid and nonassessable.
7. RETENTION OF CONVERSION PROCEEDS BY THE HOLDING COMPANY
The Holding Company will apply to the OTS to retain up to 50% of the
proceeds of the Offering. The Holding Company believes that the Offering
proceeds will provide economic strength to the Holding Company and the Bank in a
highly competitive financial services industry and would facilitate the possible
expansion through acquisitions of other financial institutions, possible
diversification into other related businesses and for other business and
investment purposes, including the possible payment of dividends and future
repurchases of the Holding Company Common Stock as permitted by the OTS.
8. SUBSCRIPTION RIGHTS OF ELIGIBLE ACCOUNT HOLDERS (FIRST PRIORITY)
A. Each Eligible Account Holder shall receive, without payment,
nontransferable subscription rights to subscribe in the Subscription Offering
for a number of shares equal to up to the greater of 5% of the Subscription
Shares, .10% of the total offering for shares, or fifteen times the product
(rounded down to the next whole number) obtained by multiplying the number of
shares of Subscription Shares issued in the Conversion by a fraction of which
the numerator is the amount of the Eligible Account Holder's Qualifying Deposit
and the denominator is the total amount of Qualifying Deposits of all Eligible
Account Holders, in each case on the Eligibility Record Date, subject to the
provisions of Section 14.
B. In the event that Eligible Account Holders exercise subscription rights
for a number of Subscription Shares in excess of the total number of such shares
eligible for subscription, the Subscription Shares shall be allocated among the
subscribing Eligible Account Holders so as to permit each subscribing Eligible
Account Holder to purchase a number of shares sufficient to make his or her
total allocation of Subscription Shares equal to the lesser of 100 shares or the
number of shares for which such Eligible Account Holder has subscribed. Any
remaining shares will be allocated among the subscribing Eligible Account
Holders whose subscriptions remain unsatisfied in the proportion that the amount
of the Qualifying Deposit of each Eligible Account Holder whose subscription
remains unsatisfied bears to the total amount of the Qualifying Deposits of all
Eligible Account Holders whose subscriptions remain unsatisfied. If the amount
so allocated exceeds the amount subscribed for by any one or more Eligible
Account Holders, the excess shall be reallocated (one or more times as
necessary) on the same basis among those Eligible Account Holders whose
subscriptions are still not fully satisfied until all available shares have been
allocated.
9
C. Subscription rights of Directors, Officers and their Associates as
Eligible Account Holders which are based on deposits made by such persons during
the twelve (12) months preceding the Eligibility Record Date shall be
subordinated to the subscription rights of all other Eligible Account Holders.
9. SUBSCRIPTION RIGHTS OF EMPLOYEE PLANS (SECOND PRIORITY)
The Employee Plans of the Holding Company and the Bank shall receive,
without payment, subscription rights to purchase in the aggregate up to 8% of
the Holding Company Common Stock offered in the Subscription Offering, including
any shares of Holding Company Common Stock to be issued in the Offering as a
result of an increase in the maximum of the Offering Range after commencement of
the Subscription Offering and prior to completion of the Conversion. Consistent
with applicable laws and regulations and practices and policies of the OTS, the
Employee Plans may use funds contributed by the Holding Company or the Bank
and/or borrowed from an independent financial institution to exercise such
subscription rights, and the Holding Company and the Bank may make scheduled
discretionary contributions thereto, provided that such contributions do not
cause the Holding Company or the Bank to fail to meet any applicable regulatory
capital requirements. The Employee Plans shall not be deemed to be Associates or
Affiliates of or Persons Acting in Concert with any Director or Officer of the
Holding Company or the Bank.
10. SUBSCRIPTION RIGHTS OF SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDERS (THIRD
PRIORITY)
A. Each Supplemental Eligible Account Holder shall receive, without
payment, nontransferable subscription rights to subscribe in the Subscription
Offering for a number of shares equal to up to the greater of 5% of the
Subscription Shares, or fifteen times the product (rounded down to the next
whole number) obtained by multiplying the number of shares of Subscription
Shares issued in the Conversion by a fraction of which the numerator is the
amount of the Supplemental Eligible Account Holder's Qualifying Deposit and the
denominator is the total amount of Qualifying Deposits of all Supplemental
Eligible Account Holders, in each case on the Supplemental Eligibility Record
Date, subject to the availability of sufficient shares after filling in full all
subscription orders of the Eligible Account Holders and Employee Plans and to
the purchase limitations specified in Section 14.
B. In the event that Supplemental Eligible Account Holders exercise
subscription rights for a number of Subscription Shares in excess of the total
number of such shares eligible for subscription, the Subscription Shares shall
be allocated among the subscribing Supplemental Eligible Account Holders so as
to permit each such subscribing Supplemental Eligible Account Holder, to the
extent possible, to purchase a number of shares sufficient to make his or her
total allocation of Subscription Shares equal to the lesser of 100 shares or the
number of shares for which each such Supplemental Eligible Account Holder has
subscribed. Any remaining shares will be allocated among the subscribing
Supplemental Eligible Account Holders whose subscriptions remain unsatisfied in
the proportion that the amount of the Qualifying Deposit of each such
Supplemental Eligible Account Holder bears to the total amount of the Qualifying
Deposits of all Supplemental Eligible Account Holders whose subscriptions remain
unsatisfied. If the amount so allocated exceeds the amount subscribed for by any
one or more Supplemental Eligible Account Holders, the excess shall be
reallocated (one or more times as necessary) among those Supplemental Eligible
Account Holders whose subscriptions are still not fully satisfied on the same
principle until all available shares have been allocated or all subscriptions
satisfied.
11. SUBSCRIPTION RIGHTS OF OTHER MEMBERS (FOURTH PRIORITY)
A. Each Other Member shall receive, without payment, nontransferable
subscription rights to subscribe in the Subscription Offering for a number of
Subscription Shares equal to up to the greater of 5% of the Subscription Shares,
or .10% of the total offering of shares, subject to the purchase limitation
specified in Section 14.
B. In the event that such Other Members subscribe for a number of
Subscription Shares which, when added to the Subscription Shares subscribed for
by the Eligible Account Holders, Employee Plans and Supplemental
10
Eligible Account Holders, is in excess of the total number of Subscription
Shares to be issued, the subscriptions of such Other Members will be allocated
to Other Members in proportion to the amounts of their relative subscriptions.
12. COMMUNITY OFFERING (FIFTH PRIORITY)
If less than the total number of shares of Holding Company Common Stock to
be subscribed for in the Offering are sold in the Subscription Offering, shares
remaining unsubscribed for may be made available for purchase in the Community
Offering to certain members of the general public. In the Community Offering,
any person together with any Associate or group of persons Acting in Concert may
purchase up to 5% of the Subscription Shares, subject to the purchase
limitations specified herein. The shares may be made available in the Community
Offering through a direct community marketing program which may provide for a
broker, dealer, consultant or investment banking firm experienced and expert in
the sale of savings institutions securities. Such entities may be compensated on
a fixed fee basis or on a commission basis, or a combination thereof. Shares
offered in the Community Offering will be available for purchase by the general
public with preference given first to Minority Stockholders and then to natural
persons residing in the Community, in each case in proportion to the amounts of
the subscriptions. Any excess of shares may be made available for purchase by
the general public. The Holding Company shall make the distribution of the
Conversion Stock to be sold in the Community Offering in such a manner as to
promote a wide distribution of Conversion Stock. The Holding Company reserves
the right to reject any or all orders, in whole or in part, which are received
in the Community Offering. The number of shares of Conversion Stock that any
person may purchase in the Community Offering shall be subject to the purchase
limitations specified in Section 14; provided, however, that the shares
purchased in the Subscription Offering by any person together with an Associate
or group of persons acting in concert shall be counted toward meeting the
maximum purchase limitations found in this Section.
13. SYNDICATED COMMUNITY OFFERING
If feasible, the Board of Directors may determine to offer Subscription
Shares not subscribed for in the Subscription and Community Offerings in a
Syndicated Community Offering, subject to such terms, conditions and procedures
as may be determined by the Holding Company, in a manner that will achieve the
widest distribution of the Holding Company Common Stock subject to the right of
the Bank to accept or reject in whole or in part any subscriptions in the
Syndicated Community Offering. In the Syndicated Community Offering, any person
together with any Associate or group of Persons acting in concert may purchase
up to 5% of the Subscription Shares, subject to the purchase limitations
specified in Section 14; provided, however, that the shares purchased in the
Subscription Offering by any Person together with an Associate or group of
Persons acting in concert shall be counted toward meeting the maximum purchase
limitation found in this Section. Provided that if the Subscription Offering has
begun, the Bank may begin the Syndicated Community Offering at any time after
the mailing to the Members of the Proxy Statement to be used in connection with
the Special Meeting of Members, provided that the completion of the offer and
sale of the Conversion Stock shall be conditioned upon the approval of this Plan
by the Voting Members. If the Syndicated Community Offering does not begin
pursuant to the provisions of the preceding sentence, the Syndicated Community
Offering will begin as soon as practicable following the date upon which the
Subscription and Community Offerings terminate.
Alternatively, if a Syndicated Community Offering is not held, the Bank
shall have the right to sell any Subscription Shares remaining following the
Subscription and Community Offerings in an underwritten firm commitment public
offering. The provisions of Section 14 shall not be applicable to sales to
underwriters for purposes of such an offering but shall be applicable to the
sales by the underwriters to the public. The price to be paid by the
underwriters in such an offering shall be equal to the Subscription Price less
an underwriting discount to be negotiated among such underwriters and the Bank,
which will in no event exceed an amount deemed to be acceptable by the OTS.
If for any reason a Syndicated Community Offering or an underwritten firm
commitment public offering of shares of Conversion Stock not sold in the
Subscription and Community Offerings cannot be effected, or in the event that
any insignificant residue of shares of Conversion Stock is not sold in the
Subscription and Community Offerings or in the Syndicated Community or
underwritten firm commitment public offering, other arrangements will be made
11
for the disposition of unsubscribed shares by the Bank, if possible. Such other
purchase arrangements will be subject to the approval of the OTS.
14. LIMITATION ON PURCHASES
The following limitations shall apply to all purchases of shares of
Conversion Stock:
A. The maximum number of Subscription Shares which may be subscribed for or
purchased in all categories in the Offering by any Person or Participant
together with any Associate or group of Persons Acting in Concert shall not
exceed 5% of the Subscription Shares, except for the Employee Plans which may
subscribe for up to 8% of the Holding Company Common Stock offered in the
Subscription Offering (including shares issued in the event of an increase in
the maximum of the Offering Range of 15%); provided, however, that, in the event
the maximum purchase limitation is increased, orders for Subscription Shares in
the Community Offering and in the Syndicated Offering (or, alternatively, an
underwritten firm commitment public offering), if any, shall, as determined by
the Bank, first be filled to a maximum of 1,000 shares and thereafter remaining
shares shall be allocated, on an equal number of shares basis per order until
all orders have been filled.
B. The maximum number of shares of Holding Company Common Stock which may
be purchased in all categories of the Offering by Officers and Directors of the
Bank and their Associates in the aggregate, when combined with Exchange Shares
received by such persons, shall not exceed 25% of the Conversion Stock offered
in the Conversion.
C. The maximum number of Subscription Shares which may be subscribed for or
purchased in all categories in the Offering by any Person or Participant
together with any Associate or group of Persons Acting in Concert, together with
Exchange Shares received in the Share Exchange by any such Person, or
Participant together with any Associate or group of Persons Acting in Concert,
shall not exceed 9.9% of the shares issued in the Conversion. Pursuant to this
limitation, certain depositors who are also stockholders of the Mid-Tier Holding
Company may not be permitted to purchase Holding Company Conversion Stock in the
Offering.
D. A minimum of 25 shares of Holding Company Common Stock must be purchased
by each Person purchasing shares in the Offering to the extent those shares are
available; provided, however, that in the event the minimum number of shares of
Holding Company Common Stock purchased times the price per share exceeds $500,
then such minimum purchase requirement shall be reduced to such number of shares
which when multiplied by the price per share shall not exceed $500, as
determined by the Board.
If the number of shares of Holding Company Common Stock otherwise
allocable pursuant to Sections 8 through 13, inclusive, to any Person or that
Person's Associates would be in excess of the maximum number of shares permitted
as set forth above, the number of shares of Holding Company Common Stock
allocated to each such person shall be reduced to the lowest limitation
applicable to that Person, and then the number of shares allocated to each group
consisting of a Person and that Person's Associates shall be reduced so that the
aggregate allocation to that Person and his or her Associates complies with the
above limits, and such maximum number of shares shall be reallocated among that
Person and his or her Associates as they may agree, or in the absence of an
agreement, in proportion to the shares subscribed by each (after first applying
the maximums applicable to each Person, separately).
Depending upon market or financial conditions, the Board of Directors of
the Holding Company, with the approval of the OTS and without further approval
of the Members, may decrease or further increase the purchase limitations in
this Plan, provided that the maximum purchase limitations may not be increased
to a percentage in excess of 5% of the shares issued in the Conversion except as
provided below. If the Holding Company increases the maximum purchase
limitations, the Holding Company is only required to resolicit Persons who
subscribed for the maximum purchase amount and may, in the sole discretion of
the Holding Company resolicit certain other large subscribers. In the event that
the maximum purchase limitation is increased to 5% of the shares issued in the
Conversion, such limitation may be further increased to 9.99%, provided that
orders for Holding Company Common Stock exceeding 5% of the shares of Conversion
Stock issued in the Conversion shall not exceed in the aggregate 10%
12
of the total shares of Conversion Stock issued in the Conversion. Requests to
purchase additional shares of the Conversion Stock in the event that the
purchase limitation is so increased will be determined by the Board of Directors
of the Holding Company in its sole discretion.
In the event of an increase in the total number of shares offered in the
Subscription Offering due to an increase in the maximum of the Offering Range of
up to 15% (the "Adjusted Maximum"), the additional shares will be used in the
following order of priority: (i) to fill the Employee Plans' subscription to the
Adjusted Maximum; (ii) in the event that there is an oversubscription at the
Eligible Account Holder, Supplemental Eligible Account Holder, Other Member, or
Minority Stockholder levels, to fill unfulfilled subscriptions of such
subscribers according to such respective priorities exclusive of the Adjusted
Maximum; and (iii) to fill unfulfilled subscriptions in the Community Offering
exclusive of the Adjusted Maximum with preference given first to Minority
Stockholders and then to natural persons residing in the Community.
For purposes of this Section 14, the Directors of the Bank, the Mid-Tier
Holding Company and the Holding Company shall not be deemed to be Associates or
a group affiliated with each other or otherwise Acting in Concert solely as a
result of their being Directors of the Bank, the Mid-Tier Holding Company or the
Holding Company.
Each Person purchasing Holding Company Common Stock in the Conversion shall
be deemed to confirm that such purchase does not conflict with the above
purchase limitations contained in this Plan.
15. PAYMENT FOR CONVERSION STOCK
All payments for Holding Company Common Stock subscribed for in the
Subscription, Community and Syndicated Community Offerings must be delivered in
full to the Holding Company, together with a properly completed and executed
Order Form and certification or acknowledgment form, or purchase order in the
case of the Syndicated Community Offering, on or prior to the expiration date of
the Offering; provided, however, that if the Employee Plans subscribe 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 Holding
Company Common Stock subscribed for by such plans at the Subscription Price upon
consummation of the Conversion. Notwithstanding the foregoing, the Holding
Company shall have the right, in its sole discretion, to permit institutional
investors to submit contractually irrevocable orders in the Offering and to
thereafter submit payment by wire transfer for the Holding Company Common Stock
for which they are subscribing in the Offering at any time prior to 48 hours
before the completion of the Conversion, unless such 48 hour period is waived by
the Holding Company in its sole discretion.
Payment for Holding Company Common Stock subscribed for shall be made
either in cash (if delivered in person), check, money order, certified or
teller's check or bank draft. Alternatively, subscribers in the Subscription and
Community Offerings may pay for the shares for which they have subscribed by
authorizing the Bank on the Order Form to make a withdrawal from the
subscriber's Deposit Account at the Bank in an amount equal to the Subscription
Price of such shares. Such authorized withdrawal, whether from a savings
passbook or certificate account, shall be without penalty as to premature
withdrawal. If the authorized withdrawal is from a certificate account, and the
remaining balance does not meet the applicable minimum balance requirement, the
certificate shall be canceled at the time of withdrawal, without penalty, and
the remaining balance will earn interest at the passbook rate. Funds for which a
withdrawal is authorized will remain in the subscriber's Deposit Account but may
not be used by the subscriber during the Subscription and Community Offerings.
Thereafter, the withdrawal will be given effect only to the extent necessary to
satisfy the subscription (to the extent it can be filled) at the Subscription
Price per share. Interest will continue to be earned on any amounts authorized
for withdrawal until such withdrawal is given effect. Interest will be paid by
the Bank at not less than the passbook annual rate on payments for Holding
Company Common Stock received in cash or by check. Such interest will be paid
from the date payment is received by the Bank until consummation or termination
of the Conversion. If for any reason the Conversion is not consummated, all
payments made by subscribers in the Subscription, Community and Syndicated
Community Offerings will be refunded to them with interest. In case of amounts
authorized for withdrawal from Deposit Accounts, refunds will be made by
canceling the authorization for withdrawal. The Bank is prohibited by regulation
from knowingly making any loans or granting any lines of credit for the purchase
of stock in the Conversion, and therefore, will not do so.
13
16. MANNER OF EXERCISING SUBSCRIPTION RIGHTS THROUGH ORDER FORMS
As soon as practicable after the Prospectus prepared by the Holding Company
and Bank has been declared effective by the SEC, Order Forms will be distributed
to the Eligible Account Holders, Employee Plans, Supplemental Eligible Account
Holders and Other Members at their last known addresses appearing on the records
of the Bank for the purpose of subscribing for shares of Holding Company Common
Stock in the Subscription Offering and will be made available for use by those
Persons entitled to purchase in the Community Offering. Notwithstanding the
foregoing, the Bank may elect to send Order Forms only to those Persons who
request them after receipt of such notice in a form approved by the OTS and
which is adequate to apprise the Eligible Account Holders, Employee Plans,
Supplemental Eligible Account Holders and Other Members of the pendency of the
Subscription Offering. Such notice may be included with the proxy statement for
the Special Meeting of Members and the proxy statement for the Special Meeting
of Stockholders and may also be included in the notice of the pendency of the
Conversion and the Special Meeting of Members sent to all Eligible Account
Holders in accordance with regulations of the OTS.
Each Order Form will be preceded or accompanied by a prospectus describing
the Holding Company, the Bank, the Holding Company Common Stock and the
Subscription and Community Offerings. Each Order Form will contain, among other
things, the following:
A. A specified date by which all Order Forms must be received by the
Holding Company, which date shall be not less than twenty (20), nor more
than forty-five (45) days, following the date on which the Order Forms are
mailed by the Holding Company, and which date will constitute the
termination of the Subscription Offering;
B. The Subscription Price per share for shares of Holding Company
Common Stock to be sold in the Subscription and Community Offerings;
C. A description of the minimum and maximum number of Subscription
Shares which may be subscribed for pursuant to the exercise of subscription
rights or otherwise purchased in the Community Offering;
D. Instructions as to how the recipient of the Order Form is to
indicate thereon the number of Subscription Shares for which such person
elects to subscribe and the available alternative methods of payment
therefor;
E. An acknowledgment that the recipient of the Order Form has received
a final copy of the prospectus prior to execution of the Order Form;
F. A statement to the effect that all subscription rights are
nontransferable, will be void at the end of the Subscription Offering, and
can only be exercised by delivering to the Holding Company within the
subscription period such properly completed and executed Order Form,
together with payment in the full amount of the aggregate purchase price as
specified in the Order Form for the shares of Holding Company Common Stock
for which the recipient elects to subscribe in the Subscription Offering
(or by authorizing on the Order Form that the Bank withdraw said amount
from the subscriber's Deposit Account at the Bank); and
G. A statement to the effect that the executed Order Form, once
received by the Holding Company, may not be modified or amended by the
subscriber without the consent of the Holding Company.
Notwithstanding the above, the Holding Company reserves the right in its
sole discretion to accept or reject orders received on photocopied or
facsimilied order forms.
17. UNDELIVERED, DEFECTIVE OR LATE ORDER FORM; INSUFFICIENT PAYMENT
In the event Order Forms (a) are not delivered and are returned to the
Holding Company or the Bank by the United States Postal Service or the Holding
Company is unable to locate the addressee, (b) are not received back by the
Holding Company or are received by the Holding Company after the expiration date
specified thereon, (c) are
14
defectively filled out or executed, (d) are not accompanied by the full required
payment, or, in the case of institutional investors in the Community Offering,
by delivering irrevocable orders together with a legally binding commitment to
pay in cash, check, money order or wire transfer the full amount of the
Subscription Price prior to 48 hours before the completion of the Conversion,
unless waived by the Holding Company, for the shares of Holding Company Common
Stock subscribed for (including cases in which deposit accounts from which
withdrawals are authorized are insufficient to cover the amount of the required
payment), or (e) are not mailed pursuant to a "no mail" order placed in effect
by the account holder, the subscription rights of the Person to whom such rights
have been granted will lapse as though such Person failed to return the
completed Order Form within the time period specified thereon; provided,
however, that the Holding Company may, but will not be required to, waive any
immaterial irregularity on any Order Form or require the submission of corrected
Order Forms or the remittance of full payment for subscribed shares by such date
as the Holding Company may specify. The interpretation of the Holding Company of
terms and conditions of this Plan and of the Order Forms will be final, subject
to the authority of the OTS.
18. RESIDENTS OF FOREIGN COUNTRIES AND CERTAIN STATES
The Holding Company will make reasonable efforts to comply with the
securities laws of all States in the United States in which Persons entitled to
subscribe for shares of Holding Company Common Stock pursuant to this Plan
reside. However, no such Person will be issued subscription rights or be
permitted to purchase shares of Holding Company Common Stock in the Subscription
Offering if such Person resides in a foreign country; or in a State of the
United States with respect to which all of the following apply: (A) a small
number of Persons otherwise eligible to subscribe for shares under the Plan
reside in such state; (B) the issuance of subscription rights or the offer or
sale of shares of Holding Company Common Stock to such Persons would require the
Holding Company under the securities laws of such state, to register as a
broker, dealer, salesman or agent or to register or otherwise qualify its
securities for sale in such state; (C) such registration or qualification would
be impracticable for reasons of cost or otherwise.
19. ESTABLISHMENT OF LIQUIDATION ACCOUNT
The Mid-Tier Holding Company shall establish at the time of the MHC Merger,
and the Bank shall establish at the time of the Mid-Tier Merger, a liquidation
account in an amount equal to the greater of: (a) the sum of (i) the percentage
of the outstanding shares of the common stock of the Mid-Tier Holding Company
owned by the Mutual Holding Company multiplied by the Mid-Tier Holding Company's
total stockholders' equity as reflected in the latest statement of financial
condition contained in the final Prospectus utilized in the Conversion, and (ii)
the restricted retained earnings account that reflects certain dividends waived
by the Mutual Holding Company; or (b) the retained earnings of the Bank at the
time the Bank underwent its mutual holding company reorganization. Following the
Conversion, the Liquidation Account will be maintained by the Bank for the
benefit of the Eligible Account Holders and Supplemental Eligible Account
Holders who continue to maintain their Deposit Accounts at the Bank. Each
Eligible Account Holder and Supplemental Eligible Account Holder shall, with
respect to his Deposit Account, hold a related inchoate interest in a portion of
the liquidation account balance, in relation to his Deposit Account balance at
the Eligibility Record Date or Supplemental Eligibility Record Date,
respectively, or to such balance as it may be subsequently reduced, as
hereinafter provided.
In the unlikely event of a complete liquidation of the Bank (and only in
such event), following all liquidation payments to creditors (including those to
Account Holders to the extent of their Deposit Accounts) each Eligible Account
Holder and Supplemental Eligible Account Holder shall be entitled to receive a
liquidating distribution from the Liquidation Account, in the amount of the then
adjusted subaccount balance for his Deposit Account then held, before any
liquidation distribution may be made to any holders of the Bank's capital stock.
No merger, consolidation, purchase of bulk assets with assumption of Deposit
Accounts and other liabilities, or similar transactions with an FDIC-insured
institution, in which the Bank is not the surviving institution, shall be deemed
to be a complete liquidation for this purpose. In such transactions, the
liquidation account shall be assumed by the surviving institution.
The initial subaccount balance for a Deposit Account held by an Eligible
Account Holder and Supplemental Eligible Account Holder shall be determined by
multiplying the opening balance in the Liquidation Account by a fraction, the
numerator of which is the amount of the Qualifying Deposits of such account
holder and the denominator
15
of which is the total amount of all Qualifying Deposits of all Eligible Account
Holders and Supplemental Eligible Account Holders. Such initial subaccount
balance shall not be increased, but shall be subject to downward adjustment as
described below.
If, at the close of business on any December 31 annual closing date,
commencing on or after the effective date of the Conversion, the deposit balance
in the Deposit Account of an Eligible Account Holder or Supplemental Eligible
Account Holder is less than the lesser of (i) the balance in the Deposit Account
at the close of business on any other annual closing date subsequent to the
Eligibility Record Date or Supplemental Eligibility Record Date, or (ii) the
amount of the Qualifying Deposit in such Deposit Account as of the Eligibility
Record Date or Supplemental Eligibility 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 deposit balance. In the event of
such downward adjustment, the subaccount balance shall not be subsequently
increased, notwithstanding any subsequent increase in the deposit balance of the
related Deposit Account. If any such Deposit Account is closed, the related
subaccount shall be reduced to zero.
The creation and maintenance of the Liquidation Account shall not operate
to restrict the use or application of any of the net worth accounts of the Bank,
except that the Bank shall not declare or pay a cash dividend on, or repurchase
any of, its capital stock if the effect thereof would cause its net worth to be
reduced below (i) the amount required for the Liquidation Account; or (ii) the
net worth requirements of the Bank contained in Part 567 of the Rules and
Regulations of the OTS.
20. VOTING RIGHTS OF STOCKHOLDERS
Following consummation of the Conversion, voting rights with respect to the
Bank shall be held and exercised exclusively by the holders of its capital
stock. The holders of the voting capital stock of the Holding Company shall have
the exclusive voting rights with respect to the Holding Company.
21. RESTRICTIONS ON RESALE OR SUBSEQUENT DISPOSITION
A. All Subscription Shares purchased by Directors or Officers of the
Holding Company or the Bank in the Offering shall be subject to the restriction
that, except as provided in this Section or as may be approved by the OTS, no
interest in such shares may be sold or otherwise disposed of for value for a
period of one year following the date of purchase in the Offering.
B. The restriction on disposition of Subscription Shares set forth above in
this Section shall not apply to the following:
(i) Any exchange of such shares in connection with a merger or
acquisition involving the Bank or the Holding Company, as the case may be,
which has been approved by the OTS; and
(ii) Any disposition of such shares following the death of the person
to whom such shares were initially sold under the terms of the Plan.
C. With respect to all Subscription Shares subject to restrictions on
resale or subsequent disposition, each of the following provisions shall apply:
(i) Each certificate representing shares restricted by this section
shall bear a legend prominently stamped on its face giving notice of the
restriction;
(ii) Instructions shall be issued to the stock transfer agent for the
Holding Company not to recognize or effect any transfer of any certificate
or record of ownership of any such shares in violation of the restriction
on transfer; and
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(iii) Any shares of capital stock of the Holding Company issued with
respect to a stock dividend, stock split, or otherwise with respect to
ownership of outstanding Subscription Shares subject to the restriction on
transfer hereunder shall be subject to the same restriction as is
applicable to such Conversion Stock.
22. REQUIREMENTS FOR STOCK PURCHASES BY DIRECTORS AND OFFICERS FOLLOWING THE
CONVERSION
For a period of three years following the Conversion, no Officer, Director
or their Associates shall purchase, without the prior written approval of the
OTS, any outstanding shares of Holding Company Common Stock except from a
broker-dealer registered with the SEC. This provision shall not apply to
negotiated transactions involving more than 1% of the outstanding shares of
Holding Company Common Stock, the exercise of any options pursuant to a stock
option plan or purchases of Holding Company Common Stock made by or held by any
Tax-Qualified Employee Stock Benefit Plan or Non-Tax-Qualified Employee Stock
Benefit Plan of the Bank or the Holding Company (including the Employee Plans)
which may be attributable to any Officer or Trustee. As used herein, the term
"negotiated transaction" means a transaction in which the securities are offered
and the terms and arrangements relating to any sale are arrived at through
direct communications between the seller or any person acting on its behalf and
the purchaser or his investment representative. The term "investment
representative" shall mean a professional investment advisor acting as agent for
the purchaser and independent of the seller and not acting on behalf of the
seller in connection with the transaction.
23. TRANSFER OF DEPOSIT ACCOUNTS
Each person holding a Deposit Account at the Bank at the time of Conversion
shall retain an identical Deposit Account at the Bank following Conversion in
the same amount and subject to the same terms and conditions (except as to
voting and liquidation rights).
24. REGISTRATION AND MARKETING
Within the time period required by applicable laws and regulations, the
Holding Company will register the securities issued in connection with the
Conversion pursuant to the Securities Exchange Act of 1934 (or will be a
successor issuer that succeeds to the registration of the Mid-Tier Holding
Company) and will not deregister such securities for a period of at least three
years thereafter, except that the maintenance of registration for three years
requirement may be fulfilled by any successor to the Bank or any holding company
of the Bank. In addition, the Bank or Holding Company will use its best efforts
to encourage and assist a market-maker to establish and maintain a market for
the Conversion Stock and to list those securities on a national or regional
securities exchange or the Nasdaq Stock Market.
25. TAX RULINGS OR OPINIONS
Consummation of the Conversion is expressly conditioned upon prior receipt
by the Mutual Holding Company, the Mid-Tier Holding Company and the Bank of
either a ruling or an opinion of counsel with respect to federal tax laws, and
either a ruling, an opinion of counsel, or a letter of advice from their tax
advisor with respect to New York tax laws, to the effect that consummation of
the transactions contemplated by the Conversion and this Plan will not result in
a taxable reorganization under the provisions of the applicable codes or
otherwise result in any adverse tax consequences to the Mutual Holding Company,
the Mid-Tier Holding Company, the Holding Company or the Bank, or the account
holders receiving subscription rights before or after the Conversion, except in
each case to the extent, if any, that subscription rights are deemed to have
value on the date such rights are issued.
26. STOCK BENEFIT PLANS AND EMPLOYMENT AGREEMENTS
A. The Holding Company and the Bank are authorized to adopt Tax-Qualified
Employee Stock Benefit Plans in connection with the Conversion, including
without limitation, an ESOP. Existing as well as any newly
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created Tax-Qualified Employee Stock Benefit Plans may purchase shares of
Conversion Stock in the Conversion, to the extent permitted by the terms of such
benefit plans and this Plan.
B. As a result of the Conversion, the Holding Company shall be deemed to
have ratified and approved the all stock benefit plans maintained by the Bank
and the Mid-Tier Holding Company and shall have agreed to issue (and reserve for
issuance) Holding Company Common Stock in lieu of common stock of the Mid-Tier
Holding Company pursuant to the terms of such benefit plans. Upon consummation
of the Conversion, the Mid-Tier Holding Company common stock held by such
benefit plans shall be converted into Holding Company Common Stock based upon
the Exchange Ratio. Also upon consummation of the Conversion, (i) all rights to
purchase, sell or receive Mid- Tier Holding Company common stock and all rights
to elect to make payment in Mid-Tier Holding Company common stock under any
agreement between the Bank or the Mid-Tier Holding Company and any Director,
Officer or Employee thereof or under any plan or program of the Bank or the
Mid-Tier Holding Company shall automatically, by operation of law, be converted
into and shall become an identical right to purchase, sell or receive Holding
Company Common Stock and an identical right to make payment in Holding Company
Common Stock under any such agreement between the Bank or the Mid-Tier Holding
Company and any Director, Officer or Employee thereof or under such plan or
program of the Bank, and (ii) rights outstanding under the any stock option plan
of the Bank or the Mid-Tier Holding Company shall be assumed by the Holding
Company and thereafter shall be rights only for shares of Holding Company Common
Stock, with each such right being for a number of shares of Holding Company
Common Stock based upon the Exchange Ratio and the number of shares of Mid-Tier
Holding Company common stock that were available thereunder immediately prior to
consummation of the Conversion, with the price adjusted to reflect the Exchange
Ratio but with no change in any other term or condition of such right.
C. The Holding Company and the Bank are authorized to enter into employment
agreements with their executive officers.
D. The Holding Company and the Bank are authorized to adopt stock option
plans, restricted stock grant plans and other Non-Tax-Qualified Employee Stock
Benefit Plans, provided that such plans conform to any applicable requirements
of OTS regulators.
27. RESTRICTIONS ON ACQUISITION OF BANK AND HOLDING COMPANY
A. In accordance with OTS regulations, for a period of three years from the
date of consummation of the Conversion, no Person, other than the Holding
Company, shall directly or indirectly offer to acquire or acquire the beneficial
ownership of more than 10% of any class of an equity security of the Bank
without the prior written consent of the OTS.
B. (i) The charter of the Bank may contain a provision stipulating that no
person, except the Holding Company, for a period of five years following the
closing date of the Conversion, shall directly or indirectly offer to acquire or
acquire the beneficial ownership of more than 10% of any class of an equity
security of the Bank, without the prior written approval of the OTS. In
addition, such charter may also provide that for a period of five years
following the closing date of the Conversion, shares beneficially owned in
violation of the above-described charter provision shall not be entitled to vote
and shall not be voted by any person or counted as voting stock in connection
with any matter submitted to stockholders for a vote. In addition, special
meetings of the stockholders relating to changes in control or amendment of the
charter may only be called by the Board of Directors, and shareholders shall not
be permitted to cumulate their votes for the election of directors.
(ii) The Certificate of Incorporation of the Holding Company will contain a
provision stipulating that in no event shall any record owner of any outstanding
shares of Holding Company Common Stock who beneficially owns in excess of 10% of
such outstanding shares be entitled or permitted to any vote in respect to any
shares held in excess of 10%. In addition, the Certificate of Incorporation and
Bylaws of the Holding Company contain provisions which provide for staggered
terms of the directors, noncumulative voting for directors, limitations on the
calling of special meetings, a fair price provision for certain business
combinations and certain notice requirements.
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C. For the purposes of this section:
(i) The term "person" includes an individual, a firm, a corporation or
other entity;
(ii) The term "offer" includes every offer to buy or acquire,
solicitation of an offer to sell, tender offer for, or request or
invitation for tenders of, a security or interest in a security for value;
(iii) The term "acquire" includes every type of acquisition, whether
effected by purchase, exchange, operation of law or otherwise; and
(iv) The term "security" includes non-transferable subscription rights
issued pursuant to a plan of conversion as well as a "security" as defined
in 15 U.S.C.ss. 8c(a)(10).
28. PAYMENT OF DIVIDENDS AND REPURCHASE OF STOCK
A. The Holding Company shall comply with any applicable OTS regulation in
the repurchase of any shares of its capital stock during the first three years
following consummation of the Conversion.
B. The Bank shall not declare or pay a cash dividend on, or repurchase any
of, its capital stock if the effect thereof would cause its regulatory capital
to be reduced below (i) the amount required for the liquidation account or (ii)
the federal regulatory capital requirement in Section 567.2 of the Rules and
Regulations of the OTS. Otherwise, the Bank may declare dividends or make
capital distributions in accordance with applicable law and regulations,
including 12 C.F.R. Section 563.134 or its successor.
29. CHARTER AND BYLAWS
By voting to adopt this Plan, Members of the Mutual Holding Company will be
voting to adopt a Stock Certificate of Incorporation and Bylaws for a Delaware
corporation attached as Exhibits D and E to this Plan.
30. CONSUMMATION OF CONVERSION AND EFFECTIVE DATE
The Effective Date of the Conversion shall be the date upon which the
Articles of Combination shall be filed with the OTS with respect to the MHC
Merger, the Mid-Tier Merger and the Bank Merger. The Articles of Combination
shall be filed with the OTS after all requisite regulatory, member and
stockholder approvals have been obtained, all applicable waiting periods have
expired, and sufficient subscriptions and orders for Subscription Shares have
been received. The Closing of the sale of all Subscription Shares sold in the
Subscription Offering, Community Offering and/or Syndicated Community Offering
shall occur simultaneously on the effective date of the Closing.
31. EXPENSES OF CONVERSION
The Mutual Holding Company, the Mid-Tier Holding Company, the Bank and the
Holding Company may retain and pay for the services of legal, financial and
other advisors to assist in connection with any or all aspects of the
Conversion, including the Offering, and such parties shall use their best
efforts to assure that such expenses shall be reasonable.
32. AMENDMENT OR TERMINATION OF PLAN
If deemed necessary or desirable, this Plan may be substantively amended as
a result of comments from regulatory authorities or otherwise at any time prior
to solicitation of proxies from Members and Bank stockholders to vote on this
Plan by the Board of Directors of the Mutual Holding Company, and at any time
thereafter by the Board of Directors of the Mutual Holding Company with the
concurrence of the OTS. Any amendment to this Plan made after approval by the
Members and Bank stockholders with the approval of the OTS shall not necessitate
further approval by the Members unless otherwise required by the OTS. This Plan
may be terminated by the Board of
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Directors of the Mutual Holding Company at any time prior to the Special Meeting
of Members and the Special Meeting of Stockholders to vote on this Plan, and at
any time thereafter with the concurrence of the OTS.
By adoption of the Plan, the Members of the Mutual Holding Company
authorize the Board of Directors of the Mutual Holding Company to amend or
terminate the Plan under the circumstances set forth in this Section.
33. CONDITIONS TO CONVERSION
Consummation of the Conversion pursuant to this Plan is expressly
conditioned upon the following:
A. Prior receipt by the Mutual Holding Company, the Mid-Tier Holding
Company, and the Bank of rulings of the United States Internal Revenue Service
and the New York State taxing authorities, or opinions of counsel or tax
advisers as described in Section 26 hereof;
B. The sale of the Subscription Shares offered in the Conversion; and
C. The completion of the Conversion within the time period specified in
Section 3 of this Plan.
34. INTERPRETATION
All interpretations of this Plan and application of its provisions to
particular circumstances by a majority of the Board of Directors of the Bank
shall be final, subject to the authority of the OTS.
Dated: January 31, 2000
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