Exhibit 2.1
PLAN OF CONVERSION
OF
JEFFERSON BANCSHARES, M.H.C.
TABLE OF CONTENTS
PAGE
----
1. Introduction .................................................................... 1
2. Definitions ..................................................................... 3
3. General Procedure for Conversion and Reorganization ............................. 9
4. Total Number of Shares and Purchase Price of Conversion Stock ................... 11
5. Subscription Rights of Eligible Account Holders (First Priority) ................ 12
6. Subscription Rights of Tax-qualified Employee Stock Benefit Plans (Second
Priority) ...................................................................... 13
7. Subscription Rights of Supplemental Eligible Account Holders (Third
Priority) ...................................................................... 13
8. Subscription Rights of Other Members (Fourth Priority) .......................... 14
9. Community Offering, Syndicated Community Offering and Other Offerings ........... 14
10. Limitations on Subscriptions and Purchases of Conversion Stock .................. 16
11. Timing of Subscription Offering; Manner of Exercising Subscription Rights
and Order Forms ................................................................ 18
12. Payment for Conversion Stock .................................................... 20
13. Account Holders in Nonqualified States or Foreign Countries ..................... 21
14. Voting Rights of Shareholders ................................................... 22
15. Liquidation Account ............................................................. 22
16. Transfer of Deposit Accounts .................................................... 23
17. Requirements Following Conversion for Registration, Making and Stock
Exchange Listing ............................................................... 24
18. Directors and Officers of the Association ....................................... 24
19. Requirements for Stock Purchases by Directors and Officers the Conversion
and Reorganization ............................................................. 24
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20. Establishment and Funding of Charitable Foundation ................................. 24
21. Restrictions on Transfer of Stock .................................................. 25
22. Restrictions on Voting Holding Company Common Stock ................................ 26
23. Tax Rulings or Opinions ............................................................ 26
24. Stock Compensation Plans ........................................................... 26
25. Dividend and Repurchase Restrictions on Stock ...................................... 26
26. Payment of Fees to Brokers ......................................................... 27
27. Effective Date ..................................................................... 27
28. Amendment or Termination of the Plan ............................................... 27
29. Interpretation of the Plan ......................................................... 27
ANNEX A Agreement and Plan of Merger by and between Jefferson Bancshares,
M.H.C. and Jefferson Federal Savings and Loan Association of
Morristown
ANNEX B Agreement and Plan of Merger by and among Jefferson Federal Savings
and Loan Association of Morristown, Jefferson Bancshares, Inc. and
Jefferson Interim Savings Association
ii
1. INTRODUCTION.
For purposes of this section, all capitalized terms have the meanings
ascribed to them in Section 2.
On May 13, 1994, Jefferson Federal Savings and Loan Association of
Morristown, a federally chartered mutual savings association ("Jefferson
Federal"), reorganized into the mutual holding company form of organization. To
accomplish this transaction, Jefferson Federal organized a federally chartered,
stock-form savings association known as Jefferson Federal Savings and Loan
Association of Morristown (the "Association"). The Association simultaneously
issued 1,550,000 shares of its common stock to a newly formed federally
chartered mutual holding company known as Jefferson Bancshares, M.H.C. (the
"Mutual Holding Company") and sold 300,000 of its shares of common stock to
depositors of the Association, including directors, officers and employees of
the Association.
The Boards of Directors of the Mutual Holding Company and the
Association believe that a conversion of the Mutual Holding Company to stock
form and reorganization of the Association pursuant to this Plan of Conversion
is in the best interests of the Mutual Holding Company and the Association, as
well as the best interests of their respective Members and Shareholders. The
Boards of Directors determined that this Plan of Conversion equitably provides
for the interests of Members through the granting of subscription rights and the
establishment of a liquidation account. The Conversion and Reorganization will
result in the raising of additional capital for the Association and the Holding
Company and is expected to result in a more active and liquid market for the
Holding Company Common Stock than currently exists for the Association Common
Stock. In addition, the Conversion and Reorganization have been structured to
re-unite the accumulated earnings and profits tax attribute retained by the
Mutual Holding Company with the retained earnings of the Association through a
tax-free reorganization. Finally, the Conversion and Reorganization is designed
to enable the Association and the Holding Company to more effectively compete in
the financial services marketplace.
If the Association had undertaken a standard conversion involving the
formation of a stock holding company in 1994, applicable OTS regulations would
have required a greater amount of stock to be sold than the amount raised in
connection with the formation of the Mutual Holding Company. In addition, if a
standard conversion had been conducted in 1994, management of the Association
believed that it may have been difficult to invest prudently in a timely manner
the larger amount of capital that would have been raised, when compared to the
net proceeds raised in connection with the formation of the Mutual Holding
Company. A standard conversion in 1994 also would have immediately eliminated
all aspects of the mutual form of organization.
The Association recognized $2.6 million in net proceeds from the sale
of its common stock in 1994 in connection with the formation of the Mutual
Holding Company. The Association has pursued a plan of controlled growth since
the formation of the Mutual Holding Company and total assets have increased from
$151.1 million at December 31, 1994 to $260.4 million at December 31, 2002. Such
growth reflects the Association's efforts to become a full-service community
financial institution. The Association remains committed to controlled growth
and diversification. The
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additional funds received in a Conversion will facilitate the Association's
ability to continue to grow in accordance with its business plan, through both
internal growth and acquisitions of other institutions or branch offices. The
Association believes that its current mutual holding company form has impeded,
and may continue to impede, its ability to undertake certain of such
acquisitions. Given the current consolidation efforts in the banking industry in
general and in the Association's market area in particular, the Association
believes that there will be significant acquisition opportunities in the future.
The Association believes that a Conversion will enhance its ability to continue
its growth through acquisitions and will support its ability to more fully serve
the borrowing and other financial needs of the communities it serves. The
Association also has gained experience in meeting the filing requirements of the
Securities Exchange Act of 1934 and in conducting shareholder meetings and
attending to other shareholder matters, such as communications, press releases,
and dividend payments. In light of the foregoing, the Boards of Directors of the
Mutual Holding Company and the Association believe that it is in the best
interests of such companies and their respective Members and Shareholders to
raise additional capital at this time, and that the most feasible way to do so
is through the Conversion and Reorganization.
In connection with the Conversion and Reorganization, the Association
will form a new first-tier, wholly-owned subsidiary known as Jefferson
Bancshares, Inc., a Tennessee corporation, which will become the Holding Company
upon consummation of the Conversion and Reorganization. The Holding Company will
in turn form a federally chartered interim savings association ("Interim") as a
wholly-owned subsidiary. As described in more detail in Section 3, the Mutual
Holding Company will convert from the mutual form to a federal interim stock
savings association and simultaneously merge with and into the Association
pursuant to the Agreement and Plan of Merger included as Annex A hereto,
pursuant to which the Mutual Holding Company will cease to exist and a
liquidation account will be established by the Association for the benefit of
depositor Members as of specified dates, and Interim will then merge with and
into the Association pursuant to the Agreement and Plan of Merger included as
Annex B hereto, pursuant to which the Association will become a wholly owned
subsidiary of the Holding Company. In connection therewith, each share of
Association Common Stock outstanding immediately prior to the effective time
thereof shall be automatically converted, without further action by the holder
thereof, into and become the right to receive shares of Holding Company Common
Stock based on the Exchange Ratio, plus cash in lieu of any fractional share
interest. In connection with the Conversion and Reorganization, the Holding
Company will offer shares of Conversion Stock in the Offerings as provided
herein. Shares of Conversion Stock will be offered in a Subscription Offering in
descending order of priority to Eligible Account Holders, Tax-Qualified Employee
Stock Benefit Plans, Supplemental Eligible Account Holders and Other Members.
The Subscription Rights granted in connection with the Subscription Offering are
non-transferrable. Any shares of Conversion Stock remaining unsold after the
Subscription Offering will be offered for sale to the public through a Community
Offering and/or Syndicated Community Offering, as determined by the Boards of
Directors of the Holding Company and the Association in their sole discretion.
In furtherance of the Association's commitment to its community, this
Plan of Conversion provides for the establishment of a charitable foundation as
part of the Conversion and Reorganization. The charitable foundation is intended
to complement the Association's existing community reinvestment activities in a
manner that will allow the Association's local community
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to share in the growth and profitability of the Holding Company and the
Association over the long term. Consistent with the Association's goal, the
Holding Company intends to donate to the charitable foundation immediately
following the Conversion and Reorganization a number of shares of its authorized
but unissued common stock in an amount up to 8% of the Holding Company Common
Stock issued in the Conversion and Reorganization.
This Plan was adopted by the Boards of Directors of the Mutual Holding
Company and the Association on March 3, 2003.
This Plan and the formation of the Foundation are subject to the
approval of the OTS and each must be adopted by (1) at least a majority of the
total number of votes eligible to be cast by Voting Members of the Mutual
Holding Company at the Special Meeting and (2) holders of at least two-thirds of
the outstanding Association Common Stock at the Shareholders' Meeting. In
addition, the Primary Parties have conditioned the consummation of the
Conversion and Reorganization on the approval of the Plan and the formation of
the Foundation by at least a majority of the votes cast, in person or by proxy,
by the Public Shareholders at the Shareholders' Meeting.
After the Conversion and Reorganization, the Association will continue
to be regulated by the OTS, as its chartering authority, and by the FDIC, which
insures the Association's deposits. In addition, the Association will continue
to be a member of the Federal Home Loan Bank System and all insured savings
deposits will continue to be insured by the FDIC up to the maximum provided by
law.
2. DEFINITIONS.
As used in this Plan, the terms set forth below have the following
meaning:
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 understanding; 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 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 and participants or
beneficiaries of any such Tax- Qualified Employee Stock Benefit Plan will not be
deemed to be acting in concert solely as a result of their common interests as
participants or beneficiaries. 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 Directors of the
Association 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 or Schedules 13G with the SEC with respect to other
companies. Directors of
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the Holding Company, the Association, and the Mutual Holding Company shall not
be deemed to be Acting in Concert solely as a result of their membership on any
such board or boards.
ACTUAL PURCHASE PRICE means the price per share at which the Conversion
Stock is ultimately sold by the Holding Company in the Offerings in accordance
with the terms hereof.
AFFILIATE means a Person who, directly or indirectly, through one or
more intermediaries, controls or is controlled by or is under common control
with the Person specified.
ASSOCIATE, when used to indicate a relationship with any Person, means
(i) a corporation or organization (other than the Mutual Holding Company, the
Association or a majority-owned subsidiary of the Association or the Holding
Company) of which such Person is a senior 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, provided, however, that such term shall not
include any Tax-Qualified Employee Stock Benefit Plan of the Holding Company or
the Association in which such Person has a substantial beneficial interest or
serves as a trustee or in a similar fiduciary capacity, 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 Holding Company or the
Association or any of their subsidiaries.
ASSOCIATION means Jefferson Federal Savings and Loan Association of
Morristown, a federally chartered savings association.
ASSOCIATION COMMON STOCK means the common stock of the Association, par
value $1.00 per share, which stock is not and will not be insured by the FDIC or
any other governmental authority, a majority of which is currently held by the
Mutual Holding Company and subsequent to the Conversion and Reorganization, all
of which will be held by the Holding Company.
BANK MERGER means the merger of Interim with and into the Association
pursuant to the Agreement and Plan of Merger included as Annex B hereto.
CODE means the Internal Revenue Code of 1986, as amended.
COMMUNITY OFFERING means the offering for sale by the Holding Company
of any shares of Conversion Stock not subscribed for in the Subscription
Offering to such Persons within or without the State of Tennessee as may be
selected by the Holding Company and the Association in their sole discretion and
to whom a copy of the Prospectus is delivered by or on behalf of the Holding
Company.
CONTROL (including the terms "controlling," "controlled by," and "under
common control with") means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
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CONVERSION AND REORGANIZATION means (i) the conversion of the Mutual
Holding Company from mutual form to a federal interim stock savings association
and the subsequent Mutual Holding Company Merger, pursuant to which the Mutual
Holding Company will cease to exist, (ii) the Bank Merger, pursuant to which the
Association will become a wholly owned subsidiary of the Holding Company and, in
connection therewith, each share of Association Common Stock outstanding
immediately prior to the effective time thereof shall automatically be
converted, without further action by the holder thereof, into and become the
right to receive shares of Holding Company Common Stock based on the Exchange
Ratio, plus cash in lieu of any fractional share interest, and (iii) the
issuance of Conversion Stock by the Holding Company in the Offerings as provided
herein, which will increase the number of shares of Holding Company Common Stock
outstanding and the capitalization of the Holding Company and the Association.
All such transactions shall occur substantially simultaneously.
CONVERSION STOCK means the Holding Company Common Stock to be issued
and sold in the Offerings pursuant to the Plan of Conversion.
DEPOSIT ACCOUNT means with any withdrawable account as defined in
Section 561.42 of the Rules and Regulations of the OTS, including a demand
account as defined in Section 561.16 of the Rules and Regulations of the OTS.
ELIGIBLE ACCOUNT HOLDER means 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 to be
established pursuant to Section 15 hereof.
ELIGIBILITY RECORD DATE means the date for determining Qualifying
Deposits of Eligible Account Holders and is the close of business on December
31, 2001.
ESTIMATED PRICE RANGE means the range of the estimated aggregate pro
forma market value of the total number of shares of Conversion Stock to be
issued in the Offerings, as determined by the Independent Appraiser in
accordance with Section 4 hereof.
EXCHANGE RATIO means the rate at which shares of Holding Company Common
Stock will be exchanged for shares of Association Common Stock held by the
Public Shareholders in connection with the Bank Merger. The exact rate (which
shall be rounded to the nearest ten-thousandth) shall be determined by the
Mutual Holding Company and the Association in order to ensure that upon
consummation of the Conversion and Reorganization the Public Shareholders will
own in the aggregate approximately the same percentage of the Holding Company
Common Stock to be outstanding upon completion of the Conversion and
Reorganization as the percentage of Association Common Stock owned by them in
the aggregate immediately prior to consummation of the Conversion and
Reorganization, before giving effect to (a) cash paid in lieu of any fractional
interests of Holding Company Common Stock, (b) any shares of Conversion Stock
purchased by the Public Shareholders or Tax-Qualified Employee Stock Benefit
Plans in the Offerings and (c) any shares of Holding Company Common Stock
contributed to the Foundation.
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EXCHANGE SHARES mean the shares of Holding Company Common Stock to be
issued to the Public Shareholders in connection with the Bank Merger.
FDIC means the Federal Deposit Insurance Corporation or any successor
thereto.
FOUNDATION means the charitable foundation that will qualify as an
exempt organization under Section 501(c)(3) of the Code that will be established
by the Holding Company and the Association immediately following consummation of
the Conversion and Reorganization.
HOLDING COMPANY means Jefferson Bancshares, Inc., a stock corporation
to be organized under the laws of the State of Tennessee. Such corporation will
be initially formed as a first-tier, wholly owned subsidiary of the Association.
Upon completion of the Conversion and Reorganization, the Holding Company shall
hold all of the outstanding capital stock of the Association.
HOLDING COMPANY COMMON STOCK means the common stock of the Holding
Company, par value $.01 per share, which stock cannot and will not be insured by
the FDIC or any other governmental authority.
INDEPENDENT APPRAISER means the independent investment banking or
financial consulting firm retained by the Holding Company and the Association to
prepare an appraisal of the estimated pro forma market value of the Conversion
Stock.
INITIAL PURCHASE PRICE means the price per share to be paid initially
by Participants for shares of Conversion Stock subscribed for in the
Subscription Offering and by Persons for shares of Conversion Stock ordered in
the Community Offering and/or Syndicated Community Offering.
INTERIM means Jefferson Interim Savings Association, which will be
formed as a first-tier, wholly-owned subsidiary of the Holding Company to
facilitate the Bank Merger.
MEMBER means any Person qualifying as a member of the Mutual Holding
Company in accordance with its mutual charter and bylaws and the laws of the
United States.
MUTUAL HOLDING COMPANY means Jefferson Bancshares, M.H.C.
MUTUAL HOLDING COMPANY MERGER means the merger of the Mutual Holding
Company (following its conversion into a federal interim stock savings
association) with and into the Association pursuant to the Agreement and Plan of
Merger included as Annex A hereto.
OFFERINGS mean the Subscription Offering, the Community Offering and
the Syndicated Community Offering.
OFFICER means the chairman of the board of directors, president, chief
executive officer, vice-president, secretary, treasurer or principal financial
officer, comptroller or principal accounting
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officer and any other person performing similar functions with respect to any
organization whether incorporated or unincorporated.
ORDER FORM means the form or forms to be provided by the Holding
Company, containing all such terms and provisions as set forth in Section 11
hereof, to a Participant or other Person by which Conversion Stock may be
ordered in the Offerings.
OTHER MEMBER means a Voting Member who is not an Eligible Account
Holder or a Supplemental Eligible Account Holder.
OTS means the Office of Thrift Supervision or any successor thereto.
PARTICIPANT means any Eligible Account Holder, Tax-Qualified Employee
Stock Benefit Plan, Supplemental Eligible Account Holder or Other Member.
PERSON means an individual, a corporation, a partnership, an
association, a joint stock company, a limited liability company, a limited
liability partnership, a trust, an unincorporated organization or a government
or any political subdivision thereof.
PLAN and PLAN OF CONVERSION mean this Plan of Conversion as adopted by
the Boards of Directors of the Mutual Holding Company and the Association and
any amendment hereto approved as provided herein. The Board of Directors of the
Holding Company shall adopt this Plan as soon as practicable following its
organization, and the Board of Directors of Interim shall adopt the Agreement
and Plan of Merger included as Annex B hereto as soon as practicable following
its organization.
PRIMARY PARTIES mean the Mutual Holding Company, the Association and
the Holding Company.
PROSPECTUS means the one or more documents to be used in offering the
Conversion Stock in the Offerings.
PUBLIC OFFERING means an underwritten firm commitment offering to the
public through one or more underwriters.
PUBLIC SHAREHOLDERS mean those Persons who own shares of Association
Common Stock, excluding the Mutual Holding Company, as of the Voting Record
Date.
QUALIFYING DEPOSIT means the aggregate balance of all Deposit Accounts
in the Association 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.
SEC means the Securities and Exchange Commission.
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SPECIAL MEETING means the Special Meeting of Members of the Mutual
Holding Company called for the purpose of submitting this Plan and the formation
of the Foundation to the Members for their approval, including any adjournments
of such meeting.
SHAREHOLDERS mean those Persons who own shares of Association Common
Stock.
SHAREHOLDERS' MEETING means the annual or special meeting of
Shareholders of the Association called for the purpose of submitting this Plan
and the formation of the Foundation to the Shareholders for their approval,
including any adjournments of such meeting.
SUBSCRIPTION OFFERING means the offering of the Conversion Stock to
Participants.
SUBSCRIPTION RIGHTS mean nontransferable rights to subscribe for
Conversion Stock granted to Participants pursuant to the terms of this Plan.
SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDER means any Person, except directors
and Officers of the Association and their Associates, holding a Qualifying
Deposit at the close of business on the Supplemental Eligibility Record Date.
SUPPLEMENTAL ELIGIBILITY RECORD DATE, if applicable, means the date for
determining Qualifying Deposits of Supplemental Eligible Account Holders and
shall be required if the Eligibility Record Date is more than 15 months prior to
the date of the latest amendment to the Application for Conversion filed by the
Mutual Holding Company prior to approval of such application by the OTS. If
applicable, the Supplemental Eligibility Record Date shall be the last day of
the calendar quarter preceding OTS approval of the Application for Conversion
submitted by the Mutual Holding Company pursuant to this Plan of Conversion.
SYNDICATED COMMUNITY OFFERING means the offering for sale by a
syndicate of broker-dealers to the general public of shares of Conversion Stock
not purchased in the Subscription Offering and the Community Offering.
TAX-QUALIFIED EMPLOYEE STOCK BENEFIT PLAN means any defined benefit
plan or defined contribution plan, such as an employee stock ownership plan,
stock bonus plan, profit-sharing plan or other plan, which is established for
the benefit of the employees of the Holding Company and/or the Association and
which, with its related trust, meets the requirements to be "qualified" under
Section 401 of the Code as from time to time in effect. A "Non-Tax-Qualified
Employee Stock Benefit Plan" is any defined benefit plan or defined contribution
stock benefit plan which is not so qualified.
VOTING MEMBER means a Person who at the close of business on the Voting
Record Date is entitled to vote as a Member of the Mutual Holding Company in
accordance with its mutual charter and bylaws.
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VOTING RECORD DATE means the date or dates for determining the
eligibility of Members to vote at the Special Meeting and of Shareholders to
vote at the Shareholders' Meeting, as applicable.
3. GENERAL PROCEDURE FOR CONVERSION AND REORGANIZATION.
(a) After the Association's organization of the Holding Company and
the receipt of all requisite regulatory approvals, the Holding Company will form
Interim as a first-tier, wholly owned subsidiary of the Holding Company, and the
Board of Directors of Interim shall adopt the Agreement and Plan of Merger
included as Annex B hereto by at least a two-thirds vote. In addition, the
Holding Company shall approve such Agreement and Plan of Merger in its capacity
as the sole shareholder of Interim.
(b) An application for the Conversion and Reorganization, including
the Plan and all other requisite material (the "Application for Conversion"),
shall be submitted to the OTS for approval. The Mutual Holding Company and the
Association also will cause notice of the adoption of the Plan by the Boards of
Directors of the Mutual Holding Company and the Association to be given by
publication in a newspaper having general circulation in each community in which
an office of the Association is located and will cause copies of the Plan to be
made available at each office of the Mutual Holding Company and the Association
for inspection by Members and Shareholders. The Mutual Holding Company and the
Association will again cause to be published, in accordance with the
requirements of applicable regulations of the OTS, a notice of the filing with
the OTS of an application to convert the Mutual Holding Company from mutual to
stock form and will post the notice of the filing for the Application for
Conversion in each of their offices.
(c) Promptly following receipt of requisite approval of the OTS, this
Plan and the formation of the Foundation will be submitted to the Members for
their consideration and approval at the Special Meeting. The Mutual Holding
Company may, at its option, mail to all Members as of the Voting Record Date, at
their last known address appearing on the records of the Mutual Holding Company
and the Association, a proxy statement in either long or, to the extent
permitted by applicable law and regulation, summary form describing the Plan
which will be submitted to a vote of the Members at the Special Meeting. The
Holding Company also shall mail to all such Members (as well as other
Participants) either a Prospectus and Order Form for the purchase of Conversion
Stock or, to the extent permitted by applicable law and regulation, 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 the provisions of
Section 13 hereof. In addition, all such Members will receive, or be given the
opportunity to request by returning a postage-prepaid card which will be
distributed with the proxy statement, letter or other written communication, a
copy of the articles of incorporation and bylaws of the Holding Company. The
Plan and the formation of the Foundation each must be approved by the
affirmative vote of at least a majority of the total number of votes eligible to
be cast by Voting Members at the Special Meeting.
(d) Subscription Rights to purchase shares of Conversion Stock will
be issued without payment therefor to Eligible Account Holders, Tax-Qualified
Employee Stock Benefit Plans,
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Supplemental Eligible Account Holders, if any, and Other Members, as set forth
in Sections 5, 6, 7 and 8 hereof.
(e) The Association shall file preliminary proxy materials with the
OTS in order to seek the approval of the Plan by its Shareholders. Promptly
following clearance of such proxy materials and the receipt of any other
requisite approval of the OTS, the Association will mail definitive proxy
materials to all Shareholders as of the Voting Record Date, at their last known
address appearing on the records of the Association, for their consideration and
approval of this Plan at the Shareholders' Meeting. The Plan and the formation
of the Foundation each must be approved by the holders of at least two-thirds of
the outstanding Association Common Stock as of the Voting Record Date. In
addition, the Primary Parties have conditioned the consummation of the
Conversion and Reorganization on the approval of the Plan and the formation of
the Foundation by at least a majority of the votes cast, in person or by proxy,
by the Public Shareholders at the Shareholders' Meeting.
(f) The Holding Company shall submit or cause to be submitted a
holding company application to the OTS for approval of the acquisition of the
Association. Such application also shall include an application to form Interim.
In addition, an application to merge the Mutual Holding Company (following its
conversion into a federal interim stock savings association) and the
Association, and an application to merge Interim and the Association shall be
filed with the OTS, either as exhibits to the holding company application or
separately. All notices required to be published in connection with such
applications shall be published at the times required.
(g) The Holding Company shall file a Registration Statement with the
SEC to register the Holding Company Common Stock to be issued in the Conversion
and Reorganization under the Securities Act of 1933, as amended, and shall
register such Holding Company Common Stock under any applicable state securities
laws. Upon registration and after the receipt of all required regulatory
approvals, the Conversion Stock shall be first offered for sale in a
Subscription Offering to Eligible Account Holders, Tax-Qualified Employee Stock
Benefit Plans, Supplemental Eligible Account Holders, if any, and Other Members.
It is anticipated that any shares of Conversion Stock remaining unsold after the
Subscription Offering will be sold through a Community Offering and/or a
Syndicated Community Offering. The purchase price per share for the Conversion
Stock shall be a uniform price determined in accordance with Section 4 hereof.
The Holding Company shall contribute to the Association an amount of the net
proceeds received by the Holding Company from the sale of Conversion Stock as
shall be determined by the Boards of Directors of the Holding Company and the
Association and as shall be approved by the OTS.
(h) The effective date of the Conversion and Reorganization shall be
the date set forth in Section 27 hereof. Upon the effective date, the following
transactions shall occur:
(i) The Mutual Holding Company shall convert into a federal
interim stock savings association and simultaneously merge with and into the
Association in the Mutual Holding Company Merger, with the Association being the
surviving institution. As a result of the Mutual Holding Company Merger, (x) the
shares of Association Common Stock held by the Mutual Holding Company (following
its conversion to a federal interim stock savings association) shall be
10
extinguished and (y) Members of the Mutual Holding Company will be granted
interests in the liquidation account to be established by the Association
pursuant to Section 15 hereof.
(ii) Interim shall merge with and into the Association pursuant
to the Bank Merger, with the Association being the surviving institution. As a
result of the Bank Merger, (x) the shares of Holding Company Common Stock held
by the Association shall be extinguished; (y) the shares of Association Common
Stock held by the Public Shareholders shall be converted into the right to
receive shares of Holding Company Common Stock based upon the Exchange Ratio,
plus cash in lieu of any fractional share interest based upon the Actual
Purchase Price; and (z) the shares of common stock of Interim held by the
Holding Company shall be converted into shares of Bank Common Stock on a
one-for-one basis, with the result that the Association shall become a wholly
owned subsidiary of the Holding Company. In addition, as a result of the Bank
Merger, options to purchase shares of Association Common Stock which are
outstanding immediately prior to consummation of the Conversion and
Reorganization 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.
(iii) The Holding Company shall sell the Conversion Stock in the
Offerings, as provided herein.
(i) The Primary Parties may retain and pay for the services of
financial and other advisors and investment bankers to assist in connection with
any or all aspects of the Conversion and Reorganization, including in connection
with the Offerings the payment of fees to brokers and investment bankers for
assisting Persons in completing and/or submitting Order Forms. All fees,
expenses, retainers and similar items shall be reasonable.
4. TOTAL NUMBER OF SHARES AND PURCHASE PRICE OF CONVERSION STOCK.
(a) The aggregate price at which shares of Conversion Stock shall be
sold in the Offerings shall be based on a pro forma valuation of the aggregate
market value of the Conversion Stock prepared by the Independent Appraiser. The
valuation shall be based on financial information relating to the Primary
Parties, market, financial and economic conditions, a comparison of the Primary
Parties with selected publicly-held financial institutions and holding companies
and with comparable financial institutions and holding companies and such other
factors as the Independent Appraiser may deem to be important. The valuation
shall be stated in terms of an Estimated Price Range, the maximum of which shall
generally be no more than 15% above the average of the minimum and maximum of
such price range and the minimum of which shall generally be no more than 15%
below such average. The valuation shall be updated during the Conversion and
Reorganization as market and financial conditions warrant and as may be required
by the OTS.
(b) Based upon the independent valuation, the Boards of Directors of
the Primary Parties shall fix the Initial Purchase Price and the number (or
range) of shares of Conversion Stock to be offered in the Subscription Offering,
Community Offering and/or Syndicated Community Offering.
11
The Actual Purchase Price and the total number of shares of Conversion Stock to
be issued in the Offerings shall be determined by the Boards of Directors of the
Primary Parties upon conclusion of the Offerings in consultation with the
Independent Appraiser and any financial advisor or investment banker retained by
the Primary Parties in connection therewith.
(c) Subject to the approval of the OTS, the Estimated Price Range may
be increased or decreased to reflect market, financial and economic conditions
prior to completion of the Conversion and Reorganization, and under such
circumstances the Primary Parties may increase or decrease the total number of
shares of Conversion Stock to be issued in the Conversion and Reorganization to
reflect any such change. Notwithstanding anything to the contrary contained in
this Plan, no resolicitation of subscribers shall be required and subscribers
shall not be permitted to modify or cancel their subscriptions unless the gross
proceeds from the sale of the Conversion Stock issued in the Conversion and
Reorganization are less than the minimum or more than 15% above the maximum of
the Estimated Price Range set forth in the Prospectus. In the event of an
increase in the total number of shares offered in the Conversion and
Reorganization due to an increase in the Estimated Price Range, the priority of
share allocation shall be as set forth in this Plan.
5. SUBSCRIPTION RIGHTS OF ELIGIBLE ACCOUNT HOLDERS (FIRST PRIORITY).
(a) Each Eligible Account Holder shall receive, without payment,
Subscription Rights to purchase up to the greater of (i) $500,000 of Conversion
Stock (or such maximum purchase limitation as may be established for the
Community Offering and/or Syndicated Community Offering), (ii) one-tenth of 1%
of the total offering of shares in the Subscription Offering and (iii) 15 times
the product (rounded down to the next whole number) obtained by multiplying the
total number of shares of Conversion Stock offered in the Subscription Offering
by a fraction, of which the numerator is the amount of the Qualifying Deposits
of the Eligible Account Holder and the denominator is the total amount of all
Qualifying Deposits of all Eligible Account Holders, in each case subject to
Sections 10 and 13 hereof.
(b) In the event of an oversubscription for shares of Conversion
Stock pursuant to Section 5(a), available shares shall be allocated among
subscribing Eligible Account Holders so as to permit each such Eligible Account
Holder, to the extent possible, to purchase a number of shares which will make
his or her total allocation equal to the lesser of the number of shares
subscribed for or 100 shares. Any available shares remaining after each
subscribing Eligible Account Holder has been allocated the lesser of the number
of shares subscribed for or 100 shares shall be allocated among the subscribing
Eligible Account Holders in the proportion which the Qualifying Deposit of each
such subscribing Eligible Account Holder bears to the total Qualifying Deposits
of all such subscribing Eligible Account Holders whose orders are unfilled,
provided that no fractional shares shall be issued. Subscription Rights of
Eligible Account Holders who are also directors or Officers of the Holding
Company or the Association and their Associates shall be subordinated to those
of other Eligible Account Holders to the extent that they are attributable to
increased deposits during the one-year period preceding the Eligibility Record
Date.
12
6. SUBSCRIPTION RIGHTS OF TAX-QUALIFIED EMPLOYEE STOCK BENEFIT PLANS
(SECOND PRIORITY).
Tax-Qualified Employee Stock Benefit Plans shall receive, without
payment, Subscription Rights to purchase in the aggregate up to 10% of the
Holding Company Common Stock issued in the Conversion and Reorganization,
including (i) any shares of Holding Company Common Stock to be issued in the
Conversion and Reorganization as a result of an increase in the Estimated Price
Range after commencement of the Subscription Offering and prior to completion of
the Conversion and Reorganization and (ii) any shares of Holding Company Common
Stock contributed to the Foundation. The subscription rights granted to
Tax-Qualified Employee Stock Benefit Plans shall be subject to the availability
of shares of Conversion Stock after taking into account the shares of Conversion
Stock purchased by Eligible Account Holders; provided, however, that in the
event that the total number of shares of Conversion Stock is increased to any
amount greater than the number of shares representing the maximum of the
Estimated Price Range as set forth in the Prospectus ("Maximum Shares"), the
ESOP shall have a priority right to purchase any such shares exceeding the
Maximum Shares up to an aggregate of 8% of Holding Company Common Stock issued
in the Conversion and Reorganization, including any shares of Holding Company
Common Stock contributed to the Foundation. Shares of Conversion Stock purchased
by any individual participant ("Plan Participant") in a Tax-Qualified Employee
Stock Benefit Plan using funds therein pursuant to the exercise of subscription
rights granted to such Participant in his individual capacity as a Participant
and/or purchases by such Plan Participant in the Community Offering shall not be
deemed to be purchases by a Tax-Qualified Employee Stock Benefit Plan for
purposes of calculating the maximum amount of Conversion Stock that
Tax-Qualified Employee Stock Benefit Plans may purchase pursuant to the first
sentence of this Section 6 if the individual Plan Participant controls or
directs the investment authority with respect to such account or subaccount.
Consistent with applicable laws and regulations and policies and practices of
the OTS, the Tax-Qualified Employee Stock Benefit Plans may use funds
contributed by the Holding Company or the Association and/or borrowed from an
independent financial institution to exercise such Subscription Rights, and the
Holding Company and the Association may make scheduled discretionary
contributions thereto, provided that such contributions do not cause the Holding
Company or the Association to fail to meet any applicable regulatory capital
requirement.
7. SUBSCRIPTION RIGHTS OF SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDERS (THIRD
PRIORITY).
(a) In the event that the Eligibility Record Date is more than 15
months prior to the date of the latest amendment to the Application for
Conversion filed prior to OTS approval, then, and only in that event, a
Supplemental Eligibility Record Date shall be set and each Supplemental Eligible
Account Holder shall receive, without payment, Subscription Rights to purchase
up to the greater of (i) $500,000 of Conversion Stock in the Subscription
Offering (or such maximum purchase limitation as may be established for the
Community Offering and/or Syndicated Community Offering), (ii) one-tenth of 1%
of the total offering of shares in the Subscription Offering and (iii) 15 times
the product (rounded down to the next whole number) obtained by multiplying the
total number of shares of Conversion Stock offered in the Subscription Offering
by a fraction, of which the numerator is the amount of the Qualifying Deposits
of the Supplemental Eligible Account
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Holder and the denominator is the total amount of all Qualifying Deposits of all
Supplemental Eligible Account Holders, in each case subject to Sections 10 and
13 hereof and the availability of shares of Conversion Stock for purchase after
taking into account the shares of Conversion Stock purchased by Eligible Account
Holders and Tax-Qualified Employee Stock Benefit Plans through the exercise of
Subscription Rights under Sections 5 and 6 hereof.
(b) In the event of an oversubscription for shares of Conversion
Stock pursuant to Section 7(a), available shares shall be allocated among
subscribing Supplemental Eligible Account Holders so as to permit each such
Supplemental Eligible Account Holder, to the extent possible, to purchase a
number of shares sufficient to make his or her total allocation (including the
number of shares, if any, allocated in accordance with Section 5(a)) equal to
the lesser of the number of shares subscribed for or 100 shares. Any remaining
available shares shall be allocated among subscribing Supplemental Eligible
Account Holders in the proportion that the amount of their respective Qualifying
Deposits bears to the total amount of the Qualifying Deposits of all such
subscribing Supplemental Eligible Account Holders whose orders are unfilled,
provided that no fractional shares shall be issued.
8. SUBSCRIPTION RIGHTS OF OTHER MEMBERS (FOURTH PRIORITY).
(a) Each Other Member shall receive, without payment, Subscription
Rights to purchase up to the greater of (i) $500,000 of Conversion Stock in the
Subscription Offering (or such maximum purchase limitation as may be established
for the Community Offering and/or Syndicated Community Offering) and (ii)
one-tenth of 1% of the total offering of shares in the Subscription Offering,
subject to Sections 10 and 13 hereof and the availability of shares of
Conversion Stock for purchase after taking into account the shares of Conversion
Stock purchased by Eligible Account Holders, Tax-Qualified Employee Stock
Benefit Plans and Supplemental Eligible Account Holders, if any, through the
exercise of Subscription Rights under Sections 5, 6 and 7 hereof.
(b) If, pursuant to this Section 8, Other Members subscribe for a
number of shares of Conversion Stock in excess of the total number of shares of
Conversion Stock remaining, available shares shall be allocated among
subscribing Other Members so as to permit each such Other Member, to the extent
possible, to purchase a number of shares which will make his or her total
allocation equal to the lesser of the number of shares subscribed for or 100
shares. Any remaining shares shall be allocated among subscribing Other Members
on a pro rata basis in the same proportion as each such Other Member's
subscription bears to the total subscriptions of all such subscribing Other
Members, provided that no fractional shares shall be issued.
9. COMMUNITY OFFERING, SYNDICATED COMMUNITY OFFERING AND OTHER OFFERINGS.
(a) If less than the total number of shares of Conversion Stock are
sold in the Subscription Offering, it is anticipated that all remaining shares
of Conversion Stock shall, if practicable, be sold in a Community Offering.
Subject to the requirements set forth herein, the manner in which the Conversion
Stock is sold in the Community Offering shall have as the objective the
achievement of the widest possible distribution of such stock.
14
(b) In the event of a Community Offering, all shares of Conversion
Stock which are not subscribed for in the Subscription Offering shall be offered
for sale by means of a direct community marketing program, which may provide for
the use of brokers, dealers or investment banking firms experienced in the sale
of financial institution securities. Any available shares in excess of those not
subscribed for in the Subscription Offering will be available for purchase by
members of the general public to whom a Prospectus is delivered by the Holding
Company or on its behalf, with preference given first to Public Shareholders and
second to natural persons and trusts of natural persons residing in Cocke,
Grainger, Greene, Hamblen, Hawkins, Jefferson, Knox or Sevier County, Tennessee
("Preferred Subscribers").
(c) A Prospectus and Order Form shall be furnished to such Persons as
the Primary Parties may select in connection with the Community Offering, and
each order for Conversion Stock in the Community Offering shall be subject to
the absolute right of the Primary Parties to accept or reject any such order in
whole or in part either at the time of receipt of an order or as soon as
practicable following completion of the Community Offering. Available shares
will be allocated first to each Preferred Subscriber whose order is accepted in
an amount equal to the lesser of 100 shares or the number of shares subscribed
for by each such Preferred Subscriber, if possible. Thereafter, unallocated
shares shall be allocated among the Preferred Subscribers whose accepted orders
remain unsatisfied in the same proportion that the unfilled order of each bears
to the total unfilled orders of all Preferred Subscribers whose accepted orders
remain unsatisfied, provided that no fractional shares shall be issued. If there
are any shares remaining after all accepted orders by Preferred Subscribers have
been satisfied, such remaining shares shall be allocated to other members of the
general public who purchase in the Community Offering, applying the same
allocation described above for Preferred Subscribers.
(d) The amount of Conversion Stock that any Person may purchase in
the Community Offering shall not exceed $500,000 of Conversion Stock, provided,
however, that this amount may be increased to up to 5% of the total offering of
shares of Conversion Stock, subject to any required regulatory approval but
without the further approval of Members of the Mutual Holding Company or the
Shareholders of the Association; and provided further that, to the extent
applicable, and subject to the preferences set forth in Section 9(b) and (c) of
this Plan and the limitations on purchases of Conversion Stock set forth in this
Section 9(d) and Section 10 of this Plan, orders for Conversion Stock in the
Community Offering shall first be filled to a maximum of 2% of the total number
of shares of Conversion Stock sold in the Offerings and thereafter any remaining
shares shall be allocated on an equal number of shares basis per order until all
orders have been filled. The Primary Parties may commence the Community Offering
concurrently with, at any time during, or as soon as practicable after the end
of, the Subscription Offering, and the Community Offering must be completed
within 45 days after the completion of the Subscription Offering, unless
extended by the Primary Parties with any required regulatory approval.
(e) Subject to such terms, conditions and procedures as may be
determined by the Primary Parties, all shares of Conversion Stock not subscribed
for in the Subscription Offering or ordered in the Community Offering may be
sold by a syndicate of broker-dealers to the general public in a Syndicated
Community Offering. Each order for Conversion Stock in the Syndicated Community
Offering shall be subject to the absolute right of the Primary Parties to accept
or reject
15
any such order in whole or in part either at the time of receipt of an order or
as soon as practicable after completion of the Syndicated Community Offering.
The amount of Conversion Stock that any Person may purchase in the Syndicated
Community Offering shall not exceed $500,000 of Conversion Stock, provided,
however, that this amount may be increased to up to 5% of the total offering of
shares of Conversion Stock, subject to any required regulatory approval but
without the further approval of Members of the Mutual Holding Company or the
Shareholders of the Association; and provided further that, to the extent
applicable, and subject to the limitations on purchases of Conversion Stock set
forth in this Section 9(e) and Section 10 of this Plan, orders for Conversion
Stock in the Syndicated Community Offering shall first be filled to a maximum of
2% of the total number of shares of Conversion Stock sold in the Offerings and
thereafter any remaining shares shall be allocated on an equal number of shares
basis per order until all orders have been filled. The Primary Parties may
commence the Syndicated Community Offering concurrently with, at any time
during, or as soon as practicable after the end of, the Subscription Offering
and/or Community Offering, and the Syndicated Community Offering must be
completed within 45 days after the completion of the Subscription Offering,
unless extended by the Primary Parties with any required regulatory approval.
(f) The Holding Company and the Association may sell any shares of
Conversion Stock remaining following the Subscription Offering, Community
Offering and/or the Syndicated Community Offering in a Public Offering. The
provisions of Section 10 hereof shall not be applicable to the sales to
underwriters for purposes of the Public Offering but shall be applicable to
sales by the underwriters to the public. The price to be paid by the
underwriters in such an offering shall be equal to the Actual Purchase Price
less an underwriting discount to be negotiated among such underwriters and the
Association and the Holding Company, subject to any required regulatory approval
or consent.
(g) If for any reason a Syndicated Community Offering or public
offering of shares of Conversion Stock not sold in the Subscription Offering and
the Community Offering cannot be effected, or in the event that any
insignificant residue of shares of Conversion Stock is not sold in the
Subscription Offering, Community Offering or Syndicated Community Offering, the
Primary Parties shall use their best efforts to obtain other purchasers for such
shares in such manner and upon such conditions as may be satisfactory to the
OTS.
10. LIMITATIONS ON SUBSCRIPTIONS AND PURCHASES OF CONVERSION STOCK.
The following limitations shall apply to all purchases of Holding
Company Common Stock in the Conversion:
(a) The maximum amount of Conversion Stock that may be subscribed for
or purchased in all categories in the Offerings by any Person, together with any
Associate or group of Persons Acting in Concert, shall not exceed $750,000,
except for Tax-Qualified Employee Stock Benefit Plans.
16
(b) The maximum number of shares of Conversion Stock which may be
purchased in the Conversion and Reorganization by the ESOP shall not exceed 8%
and all Tax-Qualified Employee Stock Benefit Plans shall not exceed 10% of the
total number of shares of Holding Company Common Stock issued in the Conversion
and Reorganization, in each instance, including (i) any shares which may be
issued in the event of an increase in the maximum of the Estimated Price Range
to reflect changes in market, financial and economic conditions after
commencement of the Subscription Offering and prior to completion of the
Offerings and (ii) any shares of Holding Company Common Stock contributed to the
Foundation; provided, however, that purchases of Conversion Stock which are made
by Plan Participants pursuant to the exercise of subscription rights granted to
such Plan Participant in his or her individual capacity as a Participant or
purchases by a Plan Participant in the Community Offering using the funds
thereof held in Tax-Qualified Employee Stock Benefit Plans shall not be deemed
to be purchases by a Tax-Qualified Employee Stock Benefit Plan for purposes of
this Section 10(b).
(c) Except in the case of Tax-Qualified Employee Stock Benefit Plans
in the aggregate, as set forth in Section 10(b) hereof, and certain Eligible
Account Holders and Supplemental Eligible Account Holders, as set forth in
Sections 5(a)(ii) and (iii) and 7(a)(ii) and (iii) hereof, and in addition to
the other restrictions and limitations set forth herein, the maximum amount of
Holding Company Common Stock that any Person together with any Associate or
group of Persons Acting in Concert may, directly or indirectly, subscribe for or
purchase in the Conversion and Reorganization, when combined with Exchange
Shares received (which, for this purpose, shall not include any shares held in
any of the Tax Qualified Employee Stock Benefit Plans or Non-Tax Qualified Stock
Benefit Plans of the Holding Company or the Association), shall not exceed 2% of
the total number of shares of Holding Company Common Stock issued in the
Conversion and Reorganization.
(d) The number of shares of Conversion Stock that directors and
Officers of the Holding Company or the Association and their Associates may
purchase in the aggregate in the Offerings shall not exceed 30% of the total
number of shares of Conversion Stock sold in the Offerings, including any shares
which may be issued in the event of an increase in the maximum of the Estimated
Price Range to reflect changes in market, financial and economic conditions
after commencement of the Subscription Offering and prior to completion of the
Offerings.
(e) No Person may purchase fewer than 25 shares of Conversion Stock
in the Offerings, to the extent such shares are available; provided, however,
that if the Actual Purchase Price is greater than $20.00 per share, such minimum
number of shares shall be adjusted so that the aggregate Actual Purchase Price
for such minimum shares will not exceed $500.00.
(f) For purposes of the foregoing limitations and the determination
of Subscription Rights, (i) directors, Officers and employees of the Holding
Company, the Association or their subsidiaries shall not be deemed to be
Associates or a group Acting in Concert solely as a result of their capacities
as such, (ii) shares purchased by Tax-Qualified Employee Stock Benefit Plans
shall not be attributable to the individual trustees or beneficiaries of any
such plan for purposes of determining compliance with the limitations set forth
in Section 10(c) or Section 10(d) hereof, (iii) Exchange Shares shall be valued
at the Actual Purchase Price, and (iv) shares purchased by a Tax-Qualified
Employee Stock Benefit Plan pursuant to instructions of an individual in an
account in
17
such plan in which the individual has the right to direct the investment,
including any plan of the Association qualified under Section 401(k) of the
Code, shall be aggregated and included in that individual's purchases and not
attributed to the Tax-Qualified Employee Stock Benefit Plan.
(g) Subject to any required regulatory approval and the requirements
of applicable laws and regulations, but without further approval of the Members
of the Mutual Holding Company or the Shareholders of the Association, the
Primary Parties may increase or decrease any of the individual or aggregate
purchase limitations set forth herein to a percentage which does not exceed 5%
of the total offering of shares of Holding Company Common Stock in the
Conversion and Reorganization whether prior to, during or after the Subscription
Offering, Community Offering and/or Syndicated Community Offering. In the event
that an individual purchase limitation is increased after commencement of the
Subscription Offering or any other offering, the Primary Parties shall permit
any Person who subscribed for the maximum number of shares of Conversion Stock
to purchase an additional number of shares, so that such Person shall be
permitted to subscribe for the then maximum number of shares permitted to be
subscribed for by such Person, subject to the rights and preferences of any
Person who has priority Subscription Rights. In the event that any of the
individual or aggregate purchase limitations are decreased after commencement of
the Subscription Offering or any other offering, the orders of any Person who
subscribed for more than the new purchase limitation shall be decreased by the
minimum amount necessary so that such Person shall be in compliance with the
then maximum number of shares permitted to be subscribed for by such Person.
(h) The Primary Parties shall have the right to take all such action
as they may, in their sole discretion, deem necessary, appropriate or advisable
in order to monitor and enforce the terms, conditions, limitations and
restrictions contained in this Section 10 and elsewhere in this Plan and the
terms, conditions and representations contained in the Order Form, including,
but not limited to, the absolute right (subject only to any necessary regulatory
approvals or concurrences) to reject, limit or revoke acceptance of any
subscription or order and to delay, terminate or refuse to consummate any sale
of Conversion Stock which they believe 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 Primary Parties and their respective Boards
shall be free from any liability to any Person on account of any such action.
(i) Notwithstanding anything to the contrary contained in this Plan
and except as may otherwise be required by the OTS, the Public Shareholders will
not have to sell any Association Common Stock or be limited in receiving
Exchange Shares even if their ownership of Association Common Stock when
converted into Exchange Shares would exceed an applicable purchase limitation;
provided, however, that a Public Shareholder who would exceed an applicable
purchase limitation may be precluded from purchasing Conversion Stock in the
Offerings.
11. TIMING OF SUBSCRIPTION OFFERING; MANNER OF EXERCISING SUBSCRIPTION
RIGHTS AND ORDER FORMS.
(a) The Subscription Offering may be commenced concurrently with or
at any time after the mailing to Voting Members of the Mutual Holding Company
and Shareholders of the
18
Association of the proxy statement(s) to be used in connection with the Special
Meeting and the Shareholders' Meeting. The Subscription Offering may be closed
before the Special Meeting and the Shareholders' Meeting, provided that the
offer and sale of the Conversion Stock shall be conditioned upon the approval of
the Plan by the Voting Members of the Mutual Holding Company and the
Shareholders of the Association at the Special Meeting and the Shareholders'
Meeting, respectively.
(b) The exact timing of the commencement of the Subscription Offering
shall be determined by the Primary Parties in consultation with the Independent
Appraiser and any financial or advisory or investment banking firm retained by
them in connection with the Conversion. The Primary Parties may consider a
number of factors, including, but not limited to, their current and projected
future earnings, local and national economic conditions, and the prevailing
market for stocks in general and stocks of financial institutions in particular.
The Primary Parties shall have the right to withdraw, terminate, suspend, delay,
revoke or modify any such Subscription Offering, at any time and from time to
time, as they in their sole discretion may determine, without liability to any
Person, subject to compliance with applicable securities laws and any necessary
regulatory approval or concurrence.
(c) The Primary Parties shall, promptly after the SEC has declared
the Registration Statement, which includes the Prospectus, effective and all
required regulatory approvals have been obtained, distribute or make available
the Prospectus, together with Order Forms for the purchase of Conversion Stock,
to all Participants for the purpose of enabling them to exercise their
respective Subscription Rights, subject to Section 13 hereof. To the extent
permitted by applicable law and regulation, the Primary Parties may elect to
mail a Prospectus and Order Form only to those Participants who request such
materials by returning a postage-paid card to the Primary Parties by a date
specified in the letter informing them of their Subscription Rights. Under such
circumstances, the Subscription Offering shall not be closed prior to the
expiration of 30 days after the mailing by the Primary Parties of the
postage-paid card to Participants.
(d) A single Order Form for all Deposit Accounts maintained with the
Association by an Eligible Account Holder and any Supplemental Eligible Account
Holder may be furnished, irrespective of the number of Deposit Accounts
maintained with the Association on the Eligibility Record Date and Supplemental
Eligibility Record Date, respectively. No person holding a subscription right
may exceed any otherwise applicable purchase limitation by submitting multiple
orders for Conversion Stock. Multiple orders are subject to adjustment, as
appropriate, on a pro rata basis and deposit balances will be divided equally
among such orders in allocating shares in the event of an oversubscription.
(e) The recipient of an Order Form shall have no less than 20 days
and no more than 45 days from the date of mailing of the Order Form (with the
exact termination date to be set forth on the Order Form) to properly complete
and execute the Order Form and deliver it to the Primary Parties. The Primary
Parties may extend such period by such amount of time as they determine is
appropriate. Failure of any Participant to deliver a properly executed Order
Form to the Primary Parties, along with full payment (or authorization for full
payment by withdrawal) for the shares of Conversion Stock subscribed for, within
the time limits prescribed, shall be deemed a waiver and
19
release by such person of any rights to subscribe for shares of Conversion
Stock. Each Participant shall be required to confirm to the Primary Parties by
executing an Order Form that such Person has fully complied with all of the
terms, conditions, limitations and restrictions in the Plan.
(f) The Primary Parties shall have the absolute right, in their sole
discretion and without liability to any Participant or other Person, to reject
any Order Form, including, but not limited to, any Order Form that is (i)
improperly completed or executed; (ii) not timely received; (iii) not
accompanied by the proper and full payment (or authorization of withdrawal for
full payment) or, in the case of institutional investors in the Community
Offering, not accompanied by an irrevocable order together with a legally
binding commitment to pay the full amount of the purchase price prior to 48
hours before the completion of the Offerings; or (iv) submitted by a Person
whose representations the Primary Parties believe to be false or who they
otherwise believe, either alone, or Acting in Concert with others, is violating,
evading or circumventing, or intends to violate, evade or circumvent, the terms
and conditions of the Plan. Furthermore, in the event Order Forms (i) are not
delivered and are returned to the Association or the Mutual Holding Company by
the Untied States Postal Service or the Association or the Mutual Holding
Company is unable to locate the addressee, or (ii) are not mailed pursuant to a
"no mail" order placed in effect by the account holder, the subscription rights
of the person to which such rights have been granted will lapse as though such
person failed to return the contemplated Order Form within the time period
specified thereon. The Primary Parties may, but will not be required to, waive
any irregularity on any Order Form or may require the submission of corrected
Order Forms or the remittance of full payment for shares of Conversion Stock by
such date as they may specify. The interpretation of the Primary Parties of the
terms and conditions of the Order Forms shall be final and conclusive.
12. PAYMENT FOR CONVERSION STOCK.
(a) Payment for shares of Conversion Stock subscribed for by
Participants in the Subscription Offering and payment for shares of Conversion
Stock ordered by Persons in the Community Offering shall be equal to the Initial
Purchase Price multiplied by the number of shares which are being subscribed for
or ordered, respectively. Such payment may be made in cash, if delivered in
person, or by check or money order at the time the Order Form is delivered to
the Primary Parties. The Primary Parties, in their sole and absolute discretion,
may also elect to receive payment for shares of Conversion Stock by wire
transfer. In addition, the Primary Parties may elect to provide Participants
and/or other Persons who have a Deposit Account with the Association the
opportunity to pay for shares of Conversion Stock by authorizing the Association
to withdraw from such Deposit Account an amount equal to the aggregate Initial
Purchase Price of such shares. If the Actual Purchase Price is less than the
Initial Purchase Price, the Primary Parties shall refund the difference to all
Participants and other Persons, unless the Primary Parties choose to provide
Participants and other Persons the opportunity on the Order Form to elect to
have such difference applied to the purchase of additional whole shares of
Conversion Stock. If the Actual Purchase Price is more than the Initial Purchase
Price, the Primary Parties shall reduce the number of shares of Conversion Stock
ordered by Participants and other Persons and refund any remaining amount which
is attributable to a fractional share interest, unless the Primary Parties
choose to provide Participants and other Persons the opportunity to increase the
Actual Purchase Price submitted by them.
20
(b) Consistent with applicable laws and regulations and policies and
practices of the OTS, payment for shares of Conversion Stock subscribed for by
Tax-Qualified Employee Stock Benefit Plans may be made with funds contributed by
the Holding Company and/or the Association and/or funds obtained pursuant to a
loan from an unrelated financial institution pursuant to a loan commitment which
is in force from the time that any such plan submits an Order Form until the
closing of the transactions contemplated hereby.
(c) If a Participant or other Person authorizes the Association to
withdraw the amount of the Initial Purchase Price from his or her Deposit
Account, the Association shall have the right to make such withdrawal or to
freeze funds equal to the aggregate Initial Purchase Price upon receipt of the
Order Form. Notwithstanding any regulatory provisions regarding penalties for
early withdrawals from certificate accounts, the Association may allow payment
by means of withdrawal from certificate accounts without the assessment of such
penalties. In the case of an early withdrawal of only a portion of such account,
the certificate evidencing such account shall be canceled if any applicable
minimum balance requirement ceases to be met. In such case, the remaining
balance will earn interest at the regular passbook rate. However, where any
applicable minimum balance is maintained in such certificate account, the rate
of return on the balance of the certificate account shall remain the same as
prior to such early withdrawal. This waiver of the early withdrawal penalty
applies only to withdrawals made in connection with the purchase of Conversion
Stock and is entirely within the discretion of the Primary Parties.
(d) The Association shall pay interest, at not less than the passbook
rate, for all amounts paid in cash, by check or money order to purchase shares
of Conversion Stock in the Subscription Offering and the Community Offering from
the date payment is received until the date the Conversion and Reorganization is
completed or terminated.
(e) The Association shall not knowingly loan funds or otherwise
extend credit to any Participant or other Person to purchase Conversion Stock.
(f) Each share of Conversion Stock shall be non-assessable upon
payment in full of the Actual Purchase Price.
13. ACCOUNT HOLDERS IN NONQUALIFIED STATES OR FOREIGN COUNTRIES.
The Primary Parties shall make reasonable efforts to comply with the
securities laws of all jurisdictions in the United States in which Participants
reside. However, no Participant will be offered or receive any Conversion Stock
under the Plan if such Participant resides in a foreign country or resides in a
jurisdiction of the United States with respect to which all of the following
apply: (a) there are few Participants otherwise eligible to subscribe for shares
under this Plan who reside in such jurisdiction; (b) the granting of
Subscription Rights or the offer or sale of shares of Conversion Stock to such
Participants would require any of the Primary Parties or their respective
directors and Officers, under the laws of such jurisdiction, to register as a
broker-dealer, salesman or selling agent or to register or otherwise qualify the
Conversion Stock for sale in such jurisdiction, or any of the Primary Parties
would be required to qualify as a foreign corporation or file a consent to
service of process in such jurisdiction; and (c) such registration,
qualification or filing in the
21
judgment of the Primary Parties would be impracticable or unduly burdensome for
reasons of cost or otherwise.
14. VOTING RIGHTS OF SHAREHOLDERS.
Following consummation of the Conversion and Reorganization, voting
rights with respect to the Association shall be held and exercised exclusively
by the Holding Company as holder of all of the Association's outstanding voting
capital stock, and voting rights with respect to the Holding Company shall be
held and exercised exclusively by the holders of the Holding Company's voting
capital stock.
15. LIQUIDATION ACCOUNT.
(a) At the time of the Mutual Holding Company Merger, the Association
shall establish a liquidation account in an amount equal to the greater of (i)
$11,153,000, which is equal to 100% of the retained earnings of the Association
as of December 31, 1993, the date of the latest statement of financial condition
contained in the final offering circular utilized in the formation of the Mutual
Holding Company, or (ii) the percentage of the outstanding shares of the common
stock of the Association owned by the Mutual Holding Company prior to the Bank
Merger, multiplied by the Association total shareholders' equity as reflected in
its latest statement of financial condition contained in the final Prospectus
utilized in the Conversion and Reorganization. The function of the liquidation
account will be to preserve the rights of certain holders of Deposit Accounts in
the Association who maintain such accounts in the Association following the
Conversion and Reorganization to a priority to distributions in the unlikely
event of a liquidation of the Association subsequent to the Conversion and
Reorganization.
(b) The liquidation account shall be maintained for the benefit of
Eligible Account Holders and Supplemental Eligible Account Holders, if any, who
maintain their Deposit Accounts in the Association after the Conversion and
Reorganization. Each such account holder will, with respect to each Deposit
Account held, have a related inchoate interest in a portion of the liquidation
account balance, which interest will be referred to in this Section 15 as the
"subaccount balance." All Deposit Accounts having the same social security
number will be aggregated for purposes of determining the initial subaccount
balance with respect to such Deposit Accounts, except as provided in Section
15(d) hereof.
(c) In the event of a complete liquidation of the Association
subsequent to the Conversion and Reorganization (and only in such event), each
Eligible Account Holder and Supplemental Eligible Account Holder, if any, shall
be entitled to receive a liquidation distribution from the liquidation account
in the amount of the then current subaccount balances for Deposit Accounts then
held (adjusted as described below) before any liquidation distribution may be
made with respect to the capital stock of the Association. No merger,
consolidation, sale of bulk assets or similar combination transaction with
another FDIC-insured institution in which the Association is not the surviving
entity shall be considered a complete liquidation for this purpose. In any such
transaction, the liquidation account shall be assumed by the surviving entity.
22
(d) The initial subaccount balance for a Deposit Account held by an
Eligible Account Holder and Supplemental Eligible Account Holder, if any, shall
be determined by multiplying the opening balance in the liquidation account by a
fraction, of which the numerator is the amount of the Qualifying Deposits of
such account holder and the denominator is the total amount of Qualifying
Deposits of all Eligible Account Holders and Supplemental Eligible Account
Holders, if any. For Deposit Accounts in existence at both the Eligibility
Record Date and the Supplemental Eligibility Record Date, if any, separate
initial subaccount balances shall be determined on the basis of the Qualifying
Deposits in such Deposit Accounts on each such record date. Initial subaccount
balances shall not be increased, and shall be subject to downward adjustment as
provided below.
(e) If the aggregate deposit balance in the Deposit Account(s) of any
Eligible Account Holder or Supplemental Eligible Account Holder, if any, at the
close of business on any June 30 annual closing date, commencing on or after the
effective date of the Conversion and Reorganization, is less than the lesser of
(a) the aggregate deposit balance in such Deposit Account(s) at the close of
business on any other annual closing date subsequent to such record dates or (b)
the aggregate deposit balance in such Deposit Account(s) as of the Eligibility
Record Date or the Supplemental Eligibility Record Date, if any, the subaccount
balance for such Deposit Account(s) shall be adjusted by reducing such
subaccount balance in an amount proportionate to the reduction in such deposit
balance. In the event of such a downward adjustment, the subaccount balance
shall not be subsequently increased, notwithstanding any subsequent increase in
the deposit balance of the related Deposit Account(s). The subaccount balance of
an Eligible Account Holder or Supplemental Eligible Account Holder, if any, will
be reduced to zero if the Account Holder ceases to maintain a Deposit Account at
the Association that has the same social security number as appeared on his
Deposit Account(s) at the Eligibility Record Date or, if applicable, the
Supplemental Eligibility Record Date.
(f) Subsequent to the Conversion and Reorganization, the Association
may not pay cash dividends generally on deposit accounts and/or capital stock of
the Association, or repurchase any of the capital stock of the Association, if
such dividend or repurchase would reduce the Association's regulatory capital
below the aggregate amount of the then current subaccount balances for Deposit
Accounts then held; otherwise, the existence of the liquidation account shall
not operate to restrict the use or application of any of the net worth accounts
of the Association.
(g) For purposes of this Section 15, a Deposit Account includes a
predecessor or successor account which is held by an Account Holder with the
same social security number.
16. TRANSFER OF DEPOSIT ACCOUNTS.
Each Deposit Account in the Association at the time of the consummation
of the Conversion and Reorganization shall become, without further action by the
holder, a Deposit Account in the Association equivalent in withdrawable amount
to the withdrawal value (as adjusted to give effect to any withdrawal made for
the purchase of Conversion Stock), and subject to the same terms and conditions
(except as to voting and liquidation rights) as such Deposit Account in the
Association immediately preceding consummation of the Conversion and
Reorganization. Holders of Deposit Accounts in the Association shall not, as
such holders, have any voting rights.
23
17. REQUIREMENTS FOLLOWING CONVERSION FOR REGISTRATION, MAKING AND STOCK
EXCHANGE LISTING.
In connection with the Conversion and Reorganization, the Holding
Company shall register the Holding Company Common Stock pursuant to Section 12
of the Securities Exchange Act of 1934, as amended, and shall undertake not to
deregister such stock for a period of three years thereafter. The Holding
Company also shall use its best efforts to (i) encourage and assist a market
maker to establish and maintain a market for the Holding Company Common Stock
and (ii) list the Holding Company Common Stock on a national or regional
securities exchange or to have quotations for such stock disseminated on the
Nasdaq Stock Market.
18. DIRECTORS AND OFFICERS OF THE ASSOCIATION.
Each person serving as a director or Officer of the Association at the
time of the Conversion and Reorganization shall continue to serve as a director
or Officer of the Association for the balance of the term for which the person
was elected prior to the Conversion and Reorganization, and until a successor is
elected and qualified. The number, names, business addresses and terms of the
directors of the Association are set forth in the Plans of Merger included as
Annexes A and B hereto.
19. REQUIREMENTS FOR STOCK PURCHASES BY DIRECTORS AND OFFICERS THE
CONVERSION AND REORGANIZATION.
For a period of three years following the Conversion and
Reorganization, the directors and Officers of the Holding Company and the
Association and their Associates may not purchase, without the prior written
approval of the OTS, Holding Company Common Stock except from a broker-dealer
registered with the SEC. This prohibition shall not apply, however, to (i) a
negotiated transaction arrived at by direct negotiation between buyer and seller
and involving more than 1% of the outstanding Holding Company Common Stock and
(ii) purchases of stock made by and held by any Tax-Qualified Employee Stock
Benefit Plan (and purchases of stock made by and held by any Non-Tax-Qualified
Employee Stock Benefit Plan following the receipt of shareholder approval of
such plan) which may be attributable to individual Officers or directors. The
foregoing restriction on purchases of Holding Company Common Stock shall be in
addition to any restrictions that may be imposed by federal and state securities
laws.
20. ESTABLISHMENT AND FUNDING OF CHARITABLE FOUNDATION.
As part of the Conversion and Reorganization, the Holding Company and
the Association intend to establish the Foundation and donate to the Foundation
from authorized but unissued shares of Holding Company Common Stock, an amount
up to 8% of the number of shares of Holding Company Common Stock issued in the
Conversion and Reorganization. The Foundation is being formed in connection with
the Conversion and Reorganization in order to complement the Association's
existing community reinvestment activities and to share with the Association's
local community a part of the Association's financial success as a locally
headquartered, community minded, financial services institution. The funding of
the Foundation with Holding Company
24
Common Stock accomplishes this goal as it enables the community to share in the
growth and profitability of the Holding Company and the Association over the
long-term.
The Foundation will be dedicated to the promotion of charitable
purposes including grants or donations to support housing, not-for-profit
community groups and other types of organizations or civic-minded projects. The
Foundation annually will distribute total grants to assist charitable
organizations or to fund charitable projects within its local community of not
less than 5% of the average fair value of Foundation assets each year, less
certain expenses. In order to serve the purposes for which it was formed and
maintain its Section 501(c)(3) qualification, the Foundation may sell, on an
annual basis, a limited portion of the Holding Company Common Stock contributed
to it by the Holding Company.
The board of directors of the Foundation will be comprised of
individuals who are Officers and/or directors of the Holding Company or the
Association and, for at least five years after its organization, at least one
member of the Association's community who is not an Officer or director of the
Holding Company or the Association. The board of directors of the Foundation
will be responsible for establishing the policies of the Foundation with respect
to grants or donations, consistent with the stated purposes of the Foundation.
21. RESTRICTIONS ON TRANSFER OF STOCK.
All shares of Conversion Stock which are purchased by Persons other
than directors and Officers of the Holding Company or the Association shall be
transferable without restriction. Shares of Conversion Stock purchased by
directors and Officers of the Holding Company or the Association on original
issue from the Holding Company (by subscription or otherwise) shall be subject
to the restriction that such shares shall not be sold or otherwise disposed of
for value for a period of one year following the date of purchase, except for
any disposition of such shares following the death of the original purchaser or
pursuant to any merger or similar transaction approved by the OTS. The shares of
Conversion Stock issued by the Holding Company to such directors and Officers
shall bear the following legend giving appropriate notice of such one-year
restriction:
"The shares of stock evidenced by this Certificate are restricted as to
transfer for a period of one year from the date of this Certificate
pursuant to Part 563b of the Rules and Regulations of the Office of
Thrift Supervision. These shares may not be transferred during such
one-year period without a legal opinion of counsel for the Company that
said transfer is permissible under the provisions of applicable law and
regulation. This restrictive legend shall be deemed null and void after
one year from the date of this Certificate."
In addition, the Holding Company shall give appropriate instructions to the
transfer agent for the Holding Company Common Stock with respect to the
applicable restrictions relating to the transfer of restricted stock. Any shares
issued at a later date as a stock dividend, stock split or otherwise with
respect to any such restricted stock shall be subject to the same holding period
restrictions as may then be applicable to such restricted stock. The foregoing
restriction on transfer shall be in addition to any restrictions on transfer
that may be imposed by federal and state securities laws.
25
22. RESTRICTIONS ON VOTING HOLDING COMPANY COMMON STOCK.
The articles of incorporation of the Holding Company shall provide 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%.
23. TAX RULINGS OR OPINIONS.
Consummation of the Conversion and Reorganization is conditioned upon
prior receipt by the Primary Parties of either a ruling or an opinion of counsel
with respect to federal tax laws, and either a ruling or an opinion with respect
to Tennessee tax laws, to the effect that consummation of the transactions
contemplated hereby will not result in a taxable reorganization under the
provisions of the applicable codes or otherwise result in any adverse tax
consequences to the Primary Parties or to account holders receiving Subscription
Rights before or after the Conversion and Reorganization, except in each case to
the extent, if any, that Subscription Rights are deemed to have fair market
value on the date such rights are issued.
24. STOCK COMPENSATION PLANS.
(a) The Holding Company and the Association are authorized to adopt
Tax-Qualified Employee Stock Benefit Plans in connection with the Conversion and
Reorganization, including without limitation an employee stock ownership plan.
(b) The Holding Company and the Association also are authorized to
adopt stock option plans, restricted stock grant plans and other
Non-Tax-Qualified Employee Stock Benefit Plans, provided that no stock options
shall be granted, and no shares of Conversion Stock shall be purchased, pursuant
to any of such plans prior to the earlier of (i) the one-year anniversary of the
consummation of the Conversion and Reorganization or (ii) the receipt of
shareholder approval of such plans at either an annual or special meeting of
shareholders of the Holding Company held no earlier than six months following
the Conversion and Reorganization.
(c) Existing as well as any newly-created Tax-Qualified Employee
Stock Benefit Plans may purchase shares of Conversion Stock in the Offerings, to
the extent permitted by the terms of such benefit plans and this Plan.
(d) The Holding Company and the Association are authorized to enter
into employment or severance agreements with their executive officers.
25. DIVIDEND AND REPURCHASE RESTRICTIONS ON STOCK.
(a) Following consummation of the Conversion and Reorganization, any
repurchases of shares of capital stock by the Holding Company will be made in
accordance with then applicable laws and regulations.
26
(b) The Association may not declare or pay a cash dividend on, or
repurchase any of, its capital stock if the effect thereof would cause the
regulatory capital of the Association to be reduced below the amount required
for the liquidation account. Any dividend declared or paid on, or repurchase of,
the Association's capital stock also shall be in compliance with Section 563.146
of the Rules and Regulations of the OTS, or any successor thereto.
26. PAYMENT OF FEES TO BROKERS.
The Primary Parties may elect to offer to pay fees on a per share basis
to securities brokers who assist purchasers of Conversion Stock in the
Offerings.
27. EFFECTIVE DATE.
The effective date of the Conversion and Reorganization shall be the
date upon which the last of the following actions occurs: (i) the filing of
Articles of Combination with the OTS with respect to the Mutual Holding Company
Merger, (ii) the filing of Articles of Combination with the OTS with respect to
the Bank Merger and (iii) the closing of the issuance of the shares of
Conversion Stock in the Offerings. The filing of Articles of Combination
relating to the Mutual Holding Company Merger and the Bank Merger and the
closing of the issuance of shares of Conversion Stock in the Offerings shall not
occur until all requisite regulatory, Member and Shareholder approvals have been
obtained, all applicable waiting periods have expired and sufficient
subscriptions and orders for the Conversion Stock have been received. It is
intended that the closing of the Mutual Holding Company Merger, the Bank Merger
and the sale of shares of Conversion Stock in the Offerings shall occur
consecutively and substantially simultaneously.
28. AMENDMENT OR TERMINATION OF THE PLAN.
If deemed necessary or desirable by the Boards of Directors of the
Primary Parties, this Plan may be substantively amended, as a result of comments
from regulatory authorities or otherwise, at any time prior to the solicitation
of proxies from Members and Shareholders to vote on the Plan and at any time
thereafter with the concurrence of the OTS. Any amendment to this Plan made
after approval by the Members and Shareholders with the concurrence of the OTS
shall not necessitate further approval by the Members or Shareholders unless
otherwise required by the OTS. This Plan shall terminate if the sale of all
shares of Conversion Stock is not completed within 24 months from the date of
the Special Meeting. Prior to the earlier of the Special Meeting and the
Shareholders' Meeting, this Plan may be terminated by the Boards of Directors of
the Primary Parties without approval of the OTS; after the Special Meeting or
the Shareholders' Meeting, the Boards of Directors may terminate this Plan only
with the approval of the OTS.
29. INTERPRETATION OF THE PLAN.
All interpretations of this Plan and application of its provisions to
particular circumstances by a majority of each of the Boards of Directors of the
Primary Parties shall be final, subject to the authority of the OTS.
27
ANNEX A
AGREEMENT AND
PLAN OF MERGER
This Agreement and Plan of Merger, dated as of __________ ___, 2003, is
made by and between Jefferson Bancshares, M.H.C. ("MHC"), a federally chartered
mutual holding company, and Jefferson Federal Savings and Loan Association of
Morristown ("Association" or "Surviving Corporation"), a federally chartered
savings association (collectively, the "Constituent Corporations").
WITNESSETH:
WHEREAS, the MHC and the Association have adopted a Plan of Conversion
("Plan of Conversion") pursuant to which (i) the MHC will convert to a
federally-chartered interim stock savings bank and simultaneously merge with and
into the Association, with the Association as the surviving entity ("MHC
Merger"), (ii) the Association and a newly-formed interim federal savings bank
will merge, pursuant to which the Association will become a wholly-owned
subsidiary of a newly formed stock corporation ("Holding Company") ("Bank
Merger"), and (iii) the Holding Company will offer shares of its common stock in
the manner set forth in the Plan of Conversion (collectively, the "Conversion
and Reorganization"); and
WHEREAS, the MHC and the Association desire to provide for the terms
and conditions of the MHC Merger;
NOW, THEREFORE, the MHC and the Association hereby agree as follows:
1. EFFECTIVE DATE. The MHC Merger shall become effective on the date
specified in the endorsement of the Articles of Combination relating to the MHC
Merger by the Secretary of the Office of Thrift Supervision ("OTS") pursuant to
12 C.F.R. 552.13(k), or any successor thereto ("Effective Date").
2. THE MHC MERGER AND EFFECT THEREOF. Subject to the terms and
conditions set forth herein and the prior approval of the OTS of the Conversion
and Reorganization and the expiration of all applicable waiting periods, the MHC
shall convert from the mutual form to a federal interim stock savings bank and
simultaneously merge with and into the Association, which shall be the Surviving
Corporation. Upon consummation of the MHC Merger, the Surviving Corporation
shall be considered the same business and corporate entity as each of the
Constituent Corporations and the Surviving Corporation shall be subject to and
be deemed to have assumed all of the property, rights, privileges, powers,
franchises, debts, liabilities, obligations, duties and relationships of each of
the Constituent Corporations and shall have succeeded to all of each of their
relationships, fiduciary or otherwise, as fully and to the same extent as if
such property, rights, privileges, powers, franchises, debts, obligations,
duties and relationships had been originally
Annex A-1
acquired, incurred or entered into by the Surviving Corporation. In addition,
any reference to either of the Constituent Corporations in any contract or
document, whether executed or taking effect before or after the Effective Date,
shall be considered a reference to the Surviving Corporation if not inconsistent
with the other provisions of the contract or document; and any pending action or
other judicial proceeding to which either of the Constituent Corporations is a
party shall not be deemed to have abated or to have been discontinued by reason
of the MHC Merger, but may be prosecuted to final judgment, order or decree in
the same manner as if the MHC Merger had not occurred or the Surviving
Corporation may be substituted as a party to such action or proceeding, and any
judgment, order or decree may be rendered for or against it that might have been
rendered for or against either of the Constituent Corporations if the MHC Merger
had not occurred.
3. CANCELLATION OF ASSOCIATION COMMON STOCK HELD BY THE MUTUAL
HOLDING COMPANY AND MEMBER INTERESTS; LIQUIDATION ACCOUNT.
(a) On the Effective Date: (i) each share of common stock, $1.00 par
value per share, of the Association ("Association Common Stock") issued and
outstanding immediately prior to the Effective Date and held by the MHC shall,
by virtue of the MHC Merger and without any action on the part of the holder
thereof, be canceled, (ii) the interests in the MHC of any person, firm or
entity who or which qualified as a member of the MHC in accordance with its
mutual charter and bylaws and the laws of the United States prior to the MHC's
conversion from mutual to stock form ("Members") shall, by virtue of the MHC
Merger and without any action on the part of any Member, be canceled, and (iii)
the Association shall establish a liquidation account on behalf of each
depositor member of the MHC as provided for in the Plan of Conversion.
(b) At or after the Effective Date and prior to the Bank Merger, each
certificate or certificates theretofore, evidencing issued and outstanding
shares of Association Common Stock, other than any such certificate or
certificates held by the MHC, which shall be canceled, shall continue to
represent issued and outstanding shares of Association Common Stock.
4. RIGHTS OF DISSENT AND APPRAISAL ABSENT. No holder of Association
Common Stock shall have any dissenter or appraisal rights in connection with the
MHC Merger.
5. NAME OF SURVIVING CORPORATION. The name of the Surviving
Corporation shall be "Jefferson Federal Savings and Loan Association of
Morristown."
6. DIRECTORS OF THE SURVIVING CORPORATION. Upon and after the
Effective Date, until changed in accordance with the Charter and Bylaws of the
Surviving Corporation and applicable law, the number of directors of the
Surviving Corporation shall be seven. The names of those persons who, upon and
after the Effective Date, shall be directors of the Surviving Corporation are
set forth below. Each such director shall serve for the term which expires at
the annual meeting of stockholders of the Surviving Corporation in the year set
forth after his respective name, and until a successor is elected and qualified.
Annex A-2
Name Term Expires
---- ------------
Dr. Terry M. Brimer 2004
Dr. Jack E. Campbell 2003
Willliam T. Hale 2005
John F. McCrary, Jr. 2005
H. Scott Reams 2004
Anderson L. Smith 2003
William F. Young 2003
The address of each director is 120 Evans Avenue, Morristown, Tennessee
37814.
7. OFFICERS OF THE SURVIVING CORPORATION. Upon and after the
Effective Date, until changed in accordance with the Charter and Bylaws of the
Surviving Corporation and applicable law, the officers of the Association
immediately prior to the Effective Date shall be the officers of the Surviving
Corporation.
8. OFFICES. Upon the Effective Date, all offices of the Association
shall be offices of the Surviving Corporation. As of the Effective Date, the
home office of the Surviving Corporation shall remain at 120 Evans Avenue,
Morristown, Tennessee.
9. CHARTER AND BYLAWS. On and after the Effective Date, the Charter
of the Association as in effect immediately prior to the Effective Date shall be
the Charter of the Surviving Corporation until amended in accordance with the
terms thereof and applicable law, except that the Charter shall be amended to
provide for the establishment of a liquidation account in accordance with
applicable law and the Plan of Conversion. On and after the Effective Date, the
Bylaws of the Association as in effect immediately prior to the Effective Date
shall be the Bylaws of the Surviving Corporation until amended in accordance
with the terms thereof and applicable law.
10. STOCKHOLDER AND MEMBER APPROVALS. The affirmative votes of the
holders of Association Common Stock and of the Members as set forth in the Plan
of Conversion shall be required to approve the Plan of Conversion, of which this
Agreement and Plan of Merger is a part, on behalf of the Association and the
MHC, respectively.
11. ABANDONMENT OF PLAN. This Agreement and Plan of Merger may be
abandoned by either the MHC or the Association at any time before the Effective
Date in the manner set forth in the Plan of Conversion.
12. AMENDMENTS. This Agreement and Plan of Merger may be amended in
the manner set forth in the Plan of Conversion by a subsequent writing signed by
the parties hereto upon the approval of the Boards of Directors of the
Constituent Corporations.
Annex A-3
13. SUCCESSORS. This Agreement shall be binding on the successors of
the Constituent Corporations.
14. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Tennessee, except to the extent
superseded by the laws of the United States.
Annex A-4
IN WITNESS WHEREOF, the MHC and the Association have caused this
Agreement and Plan of Merger to be executed by their duly authorized officers as
of the day and year first above written.
Attest: JEFFERSON BANCSHARES, M.H.C.
_____________________________ By: _____________________________________
Dr. Jack E. Campbell Anderson L. Smith
Corporate Secretary President and Chief Executive Officer
Attest: JEFFERSON FEDERAL SAVINGS AND
LOAN ASSOCIATION OF MORRISTOWN
_____________________________ By: _____________________________________
Dr. Jack E. Campbell Anderson L. Smith
Corporate Secretary President and Chief Executive Officer
Annex A-5
ANNEX B
AGREEMENT AND
PLAN OF MERGER
This Agreement and Plan of Merger, dated as of _____________ ___, 2003,
is made by and among Jefferson Federal Savings and Loan Association of
Morristown ("Association" or the "Surviving Corporation"), a federally chartered
savings bank, Jefferson Bancshares, Inc. ("Holding Company"), a Tennessee
corporation, and Jefferson Interim Savings Association ("Interim"), an interim
federal stock savings bank.
WITNESSETH:
WHEREAS, the Association has organized the Holding Company as a
first-tier, wholly owned subsidiary for the purpose of becoming the stock
holding company of the Association upon completion of the Conversion and
Reorganization as defined in the Plan of Conversion adopted by the Boards of
Directors of Jefferson Bancshares, M.H.C. ("Mutual Holding Company") and the
Association; and
WHEREAS, the Mutual Holding Company, which owns a majority of the
outstanding common stock of the Association, par value $1.00 per share
("Association Common Stock"), will convert to a federally-chartered interim
stock savings bank and simultaneously merge with and into the Association
pursuant to the Plan of Conversion and the Agreement and Plan of Merger included
as Annex A thereto, pursuant to which all shares of Association Common Stock
held by the Mutual Holding Company will be canceled; and
WHEREAS, the formation of a stock holding company by the Association
will be facilitated by causing the Holding Company to become the sole
stockholder of a newly-formed interim stock savings bank ("Interim") and then
merge Interim with and into the Association, pursuant to which the Association
will reorganize as a wholly-owned subsidiary of the Holding Company
("Reorganization") and, in connection therewith, all outstanding shares of
Association Common Stock will be converted automatically into and become shares
of common stock of the Holding Company, par value $0.01 per share ("Holding
Company Common Stock"); and
WHEREAS, Interim is being organized by the officers of the Association
as an interim Federal stock savings association with the Holding Company as its
sole stockholder in order to effect the Reorganization; and
WHEREAS, the Association and Interim ("Constituent Corporations") and
the Holding Company desire to provide for the terms and conditions of the
Reorganization.
NOW, THEREFORE, the Association, Interim and the Holding Company hereby
agree as follows:
Annex B-1
1. EFFECTIVE DATE. The Reorganization shall become effective on the
date specified in the endorsement of the articles of combination relating to the
Reorganization by the Office of Thrift Supervision ("OTS") pursuant to 12 C.F.R.
ss.552.13(k), or any successor thereto ("Effective Date").
2. THE MERGER AND EFFECT THEREOF. Subject to the terms and
conditions set forth herein and the prior approval of the OTS of the Conversion
and the Reorganization, as defined in the Plan of Conversion, and the expiration
of all applicable waiting periods, Interim shall merge with and into the
Association, with the Association as the Surviving Corporation. Upon
consummation of the Reorganization, the Surviving Corporation shall be
considered the same business and corporate entity as each of the Constituent
Corporations and thereupon and thereafter all the property, rights, powers and
franchises of each of the Constituent Corporations shall vest in the Surviving
Corporation and the Surviving Corporation shall be subject to and be deemed to
have assumed all of the property, rights, privileges, powers, franchises, debts,
liabilities, obligations and duties of each of the Constituent Corporations and
shall have succeeded to all of each of their relationships, fiduciary or
otherwise, fully and to the same extent as if such property, rights, privileges,
powers, franchises, debts, obligations, duties and relationships had been
originally acquired, incurred or entered into by the Surviving Corporation. In
addition any reference to either of the Constituent Corporations in any contract
or document, whether executed or taking effect before or after the Effective
Date, shall be considered a reference to the Association if not inconsistent
with the other provisions of the contract or document; and any pending action or
other judicial proceeding of which either of the Constituent Corporations is a
party shall not be deemed to have abated or to have been discontinued by reason
of the Reorganization, but may be prosecuted to final judgment, order or decree
in the same manner as if the Reorganization had not occurred or the Surviving
Corporation may be substituted as a party to such action or proceeding, and any
judgment, order or decree may be rendered for or against it that might have been
rendered for or against either of the Constituent Corporations if the
Reorganization had not occurred.
3. CONVERSION OF STOCK.
(a) On the Effective Date, (i) each share of Association Common Stock
issued and outstanding immediately prior to the Effective Date shall, by virtue
of the Reorganization and without any action on the part of the holder thereof,
be converted into the right to receive Holding Company Common Stock based on the
Exchange Ratio, as defined in the Plan of Conversion, plus the right to receive
cash in lieu of any fractional share interest, as determined in accordance with
Section 3(c) hereof, (ii) each share of common stock, par value $1.00 per share,
of Interim ("Interim Common Stock") issued and outstanding immediately prior to
the Effective Date shall, by virtue of the Reorganization and without any action
on the part of the holder thereof, be converted into one share of Association
Common Stock, and (iii) each share of Holding Company Common Stock issued and
outstanding immediately prior to the Effective Date shall, by virtue of the
Reorganization and without any action on the part of the holder thereof, be
canceled. By voting in favor of this Plan of Reorganization, the Holding
Company, as the sole stockholder of Interim, shall have agreed (i) to issue
shares of Holding Company Common Stock in accordance with the terms hereof and
(ii) to
Annex B-2
cancel all previously issued and outstanding shares of Holding Company Common
Stock upon the effectiveness of the Reorganization.
(b) On and after the Effective Date, there shall be no registrations
of transfers on the stock transfer books of Interim or the Association of shares
of Interim Common Stock or Association Common Stock which were outstanding
immediately prior to the Effective Date.
(c) Notwithstanding any other provision hereof, no fractional shares
of Holding Company Common Stock shall be issued to holders of Association Common
Stock. In lieu thereof, the holder of shares of Association Common Stock
entitled to a fraction of a share of Holding Company Common Stock shall, at the
time of surrender of the certificate or certificates representing such holder
shares, receive an amount of cash equal to the product arrived at by multiplying
such fraction of a share of Holding Company Common Stock by the Actual Purchase
Price, as defined in the Plan of Conversion. No such holder shall be entitled to
dividends, voting rights or any other rights in respect of any fractional share.
4. EXCHANGE OF SHARES.
(a) At or after the Effective Date, each holder of a certificate or
certificates theretofore evidencing issued and outstanding shares of Association
Common Stock, upon surrender of the same to an agent, duly appointed by the
Holding Company ("Exchange Agent"), shall be entitled to receive in exchange
therefor certificate(s) representing the number full shares of Holding Company
Common Stock for which the shares of Association Common Stock theretofore
represented by the certificate or certificates so surrendered shall have been
converted as provided in Section 3(a) hereof. The Exchange Agent shall mail to
each holder of record of an outstanding certificate which immediately prior to
the Effective Date evidenced shares of Association Common Stock, and which is to
be exchanged for Holding Company Common Stock as provided in Section 3(a)
hereof, a form of letter of transmittal which shall specify that delivery shall
be effected, and risk of loss and title to such certificate shall pass, only
upon delivery of such certificate to the Exchange Agent advising such holder of
the terms of the exchange effected by the Reorganization and of the procedure
for surrendering to the Exchange Agent such certificate in exchange for
certificate or certificates evidencing Holding Company Common Stock.
(b) No holder of a certificate theretofore representing shares of
Association Common Stock shall be entitled to receive any dividends in respect
of the Holding Company Common Stock into which such shares shall have been
converted by virtue of the Bank Merger until the certificate representing such
shares of Association Common Stock is surrendered in exchange for certificates
representing shares of Holding Company Common Stock. In the event that dividends
are declared and paid by the Holding Company in respect of Holding Company
Common Stock after the Effective Date but prior to surrender of certificates
representing shares of Association Common Stock, dividends payable in respect of
shares of Holding Company Common Stock not then issued shall accrue (without
interest). Any such dividends shall be paid (without interest) upon surrender of
the certificates representing such shares of Association Common Stock. The
Holding Company shall
Annex B-3
be entitled, after the Effective Date, to treat certificates representing shares
of Association Common Stock as evidencing ownership of the number of full shares
of Holding Company Common Stock into which the shares of Association Common
Stock represented by such certificates shall have been converted,
notwithstanding the failure on the part of the holder thereof to surrender such
certificates.
(c) The Holding Company shall not be obligated to deliver a
certificate or certificates representing shares of Holding Company Common Stock
to which a holder of Association Common Stock would otherwise be entitled as a
result of the Reorganization until such holder surrenders the certificate or
certificates representing the shares of Association Common Stock for exchange as
provided in this Section 4, or, in default thereof, an appropriate affidavit of
loss and indemnification agreement and/or an indemnity bond as may be required
in each case by the Holding Company. If any certificate evidencing shares of
Holding Company Common Stock is to be issued in a name other than that in which
the Certificate evidencing Association Common Stock surrendered in exchanged
therefor is registered, it shall be a condition of the issuance thereof that the
certificate so surrendered shall be properly endorsed and otherwise in proper
form for transfer and that the person requesting such exchange pay to the
Exchange Agent any transfer or other tax required by reason of the issuance of a
certificate for shares of Holding Company Common Stock in any name other than
that of the registered holder of the certificate surrendered or otherwise
establish to the satisfaction of the Exchange Agent that such tax has been paid
or is not payable.
(d) If, between the date hereof and the Effective Date, the shares of
Association Common Stock shall be changed into a different number or class of
shares by reason of any reclassification, recapitalization, split-up,
combination, exchange of shares or readjustment or a stock dividend thereon
shall be declared with a record date within said period, the Exchange Ratio
specified in Section 3(a) hereof shall be adjusted accordingly.
5. RIGHTS OF DISSENT AND APPRAISAL ABSENT. Holders of Association
Common Stock shall dissenter or appraisal rights in connection with the
Reorganization to the extent required by 12 C.F.R. ss.552.14, or any successor
thereto.
6. NAME OF SURVIVING CORPORATION. The name of the Surviving
Corporation shall be "Jefferson Federal Bank."
7. DIRECTORS OF THE SURVIVING CORPORATION. Upon and after the
Effective Date, until changed in accordance with the Charter and Bylaws of the
Surviving Corporation and applicable law, the number of directors of the
Surviving Corporation shall be seven. The names of those persons who, upon and
after the Effective Date, shall be directors of the Surviving Corporation are
set forth below. Each such director shall serve for the term which expires at
the annual meeting of stockholders of the Surviving Corporation in the year set
forth after his respective name, and until a successor is elected and qualified.
Annex B-4
Name Term Expires
---- ------------
Dr. Terry M. Brimer 2004
Dr. Jack E. Campbell 2003
Willliam T. Hale 2005
John F. McCrary, Jr. 2005
H. Scott Reams 2004
Anderson L. Smith 2003
William F. Young 2003
The address of each director is 120 Evans Avenue, Morristown, Tennessee
37814.
8. OFFICERS OF THE SURVIVING CORPORATION. Upon and after the
Effective Date, until changed in accordance with the Charter and Bylaws of the
Surviving Corporation and applicable law, the officers of the Association
immediately prior to the Effective Date shall be the officers of the Surviving
Corporation.
9. OFFICES. Upon the Effective Date, all offices of the Association
shall be offices of the Surviving Corporation. As of the Effective Date, the
home office of the Surviving Corporation shall remain at 120 Evans Avenue,
Morristown, Tennessee 37814.
10. CHARTER AND BYLAWS. On and after the Effective Date, the Charter
and Bylaws of the Association as in effect immediately prior to the Effective
Date shall be the Charter and Bylaws of the Surviving Corporation until amended
in accordance with the terms thereof and applicable law.
11. SAVINGS ACCOUNTS. Upon the Effective Date, any savings accounts
of Interim, without reissue, shall be and become savings accounts of the
Surviving Corporation without change in their respective terms, including,
without limitation, maturity minimum required balances or withdrawal value.
12. STOCK COMPENSATION PLANS. By voting in favor of this Agreement,
the Holding Company shall have approved adoption of the Association's 1995 Stock
Option Plan and 1995 Management Development and Recognition Plan (collectively,
the "Plans") as plans of the Holding Company and shall have agreed to issue
Holding Company Common Stock in lieu of Association Common Stock pursuant to the
terms of such Plans. As of the Effective Date, rights outstanding under the
Plans 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 equal to the number of shares
of Savings Bank Common Stack that were available thereunder immediately prior to
the Effective Date times the Exchange Ratio, as defined in the plan of
conversion, and the price of each such right shall be adjusted to reflect the
Exchange Ratio and so that the aggregate purchase price of the right is
unaffected, but with no change in any other term or condition of such right. The
Holding Company
Annex B-5
shall make appropriate amendments to the Plans to reflect the adoption of the
Plans by the Holding Company without adverse effect upon the rights outstanding
thereunder.
13. STOCKHOLDER APPROVAL. The affirmative votes of the holders of
Association Common Stock set forth in the Plan of Conversion shall be required
to approve the Plan of Conversion, of which this Agreement and Plan of Merger is
a part, on behalf of the Association. The approval of the Holding Company, as
the sole holder of the Interim Common Stock, shall be required to approve the
Plan of Conversion, of which this Agreement and Plan of Merger is a part, on
behalf of Interim.
14. REGISTRATION; OTHER APPROVALS. In addition to the approvals set
forth in Sections 1 and 13 hereof and in the Plan of Conversion, the obligations
of the parties hereto to consummate the Reorganization shall be subject to the
Holding Company Common Stock to be issued hereunder in exchange for Association
Common Stock being registered under the Securities Act of 1933, as amended, and
registered or qualified under applicable state securities laws, as well as the
receipt of all other approvals, consents or waivers as the parties may deem
necessary or advisable.
15. ABANDONMENT OF PLAN. This Plan of Reorganization may be abandoned
by either the Association or Interim at any time before the Effective Date in
the manner set forth in the Plan of Conversion.
16. AMENDMENTS. This Plan of Reorganization may be amended in the
manner set forth in the Plan of Conversion by a subsequent writing signed by the
parties hereto upon the approval of the Board of Directors of each of the
parties hereto.
17. SUCCESSORS. This Plan of Reorganization shall be binding on the
successors of the parties hereto.
18. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Tennessee, except to the extent
superseded by the laws of the United States.
Annex B-6
IN WITNESS WHEREOF, the Parties hereto have cause this Plan of
Reorganization to be duly executed on its behalf by its officers thereunto duly
authorized, all as of the date first above written.
Attest: JEFFERSON FEDERAL SAVINGS AND LOAN
ASSOCIATION OF MORRISTOWN
__________________________ By: _____________________________________
Dr. Jack E. Campbell Anderson L. Smith
Corporate Secretary President and Chief Executive Officer
Attest: JEFFERSON BANCSHARES, INC.
__________________________ By: _____________________________________
Anderson L. Smith
Corporate Secretary President and Chief Executive Officer
Attest: JEFFERSON INTERIM SAVINGS
ASSOCIATION
__________________________ By: _____________________________________
Anderson L. Smith
Corporate Secretary President and Chief Executive Officer
Annex B-7