EXHIBIT 2
PROVIDENT BANK
PLAN OF REORGANIZATION
FROM MUTUAL SAVINGS BANK
TO MUTUAL HOLDING COMPANY
AND STOCK ISSUANCE PLAN
TABLE OF CONTENTS
Page
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1. Introduction......................................................... 1
2. Definitions.......................................................... 1
3. The Reorganization................................................... 6
4. Conditions to Implementation of the Reorganization................... 8
5. Special Meeting of Members........................................... 9
6. Rights of Members of the MHC......................................... 9
7. Conversion of MHC to Stock Form...................................... 9
8. Timing of the Reorganization and Sale of Capital Stock............... 10
9. Number of Shares to be Offered....................................... 11
10. Independent Valuation and Purchase Price of Shares................... 11
11. Method of Offering Shares and Rights to Purchase Stock............... 12
12. Additional Limitations on Purchases of Common Stock.................. 15
13. Payment for Stock.................................................... 17
14. Manner of Exercising Subscription Rights Through Order Forms......... 18
15. Undelivered, Defective or Late Order Form; Insufficient Payment...... 19
16. Completion of the Stock Offering..................................... 19
17. Market for Common Stock.............................................. 19
18. Stock Purchases by Management Persons After the Offering............. 19
19. Resales of Stock by Management Persons............................... 20
20. Stock Certificates................................................... 20
21. Restriction on Financing Stock Purchases............................. 20
22. Stock Benefit Plans.................................................. 20
23. Post-Reorganization Filing and Market Making......................... 21
24. Payment of Dividends and Repurchase of Stock......................... 21
25. Reorganization and Stock Offering Expenses........................... 21
26. Employment and Other Severance Agreements............................ 21
27. Interpretation....................................................... 22
28. Amendment or Termination of the Plan................................. 22
Exhibits
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Exhibit A Charter and Bylaws of the Bank
Exhibit B Charter and Bylaws of the Holding Company
Exhibit C Charter and Bylaws of the Mutual Holding Company
1. INTRODUCTION
The Board of Directors of Provident Bank (the "Bank") has adopted this
Plan of Reorganization from Mutual Savings Association to Mutual Holding Company
and Stock Issuance Plan (the "Plan") pursuant to which the Bank proposes to
reorganize from a federally-chartered mutual savings association into the mutual
holding company structure (the "Reorganization") under the laws of the United
States of America and the regulations of the Office of Thrift Supervision
("OTS"). The mutual holding company (the "MHC") will be a mutually-owned
federal corporation, and all of the current ownership and voting rights of the
Members of the Bank will be transferred to the MHC. As part of the
Reorganization and the Plan, the Bank will convert to a federal stock savings
bank (the "Stock Bank") and will establish a stock holding company (the "Holding
Company") which will be a majority-owned subsidiary of the MHC at all times so
long as the MHC remains in existence. Concurrently with the Reorganization, the
Holding Company intends to offer for sale up to 49.9% of its Common Stock in the
Stock Offering. The Common Stock will be offered on a priority basis to
depositors and certain borrower members and Tax-Qualified Employee Plans of the
Bank, with any remaining shares offered to the public in a Community Offering.
The primary purpose of the Reorganization is to establish a holding
company and to convert the Bank to the stock form of ownership, which will
enable the Bank to compete and expand more effectively in the financial services
marketplace. The Reorganization will permit the Holding Company to issue
Capital Stock, which is a source of capital not available to mutual savings
associations. Since the Holding Company will not be offering all of its Common
Stock for sale to depositors and certain borrower members and the public in the
Stock Offering, the Reorganization will result in less capital raised in
comparison to a standard mutual-to-stock conversion. The Reorganization,
however, will also offer the Bank the opportunity to raise additional capital
since a majority of the Holding Company's Common Stock will be available for
sale in the future. It will also provide the Bank with greater flexibility to
structure and finance the expansion of its operations, including the potential
acquisition of other financial institutions. Lastly, the Reorganization will
enable the Bank to better manage its capital by (i) providing broader
acquisition and investment opportunities through the holding company structure,
and (ii) enabling the Bank to distribute capital to stockholders of the Holding
Company in the form of dividends and (iii) by enabling the Holding Company to
repurchase its common stock as market conditions warrant. Although the
Reorganization and Stock Offering will create a stock savings bank and stock
holding company, only a minority of the Common Stock will be offered for sale in
the Stock Offering. As a result, the Bank's mutual form of ownership and its
ability to remain an independent savings bank and to provide community-oriented
financial services will be preserved through the mutual holding company
structure. The Reorganization is subject to the approval of the OTS, and must
be adopted by the affirmative vote of a majority of the total votes eligible to
be cast by Voting Members.
2. DEFINITIONS
As used in this Plan, the terms set forth below have the following
meanings:
ACTING IN CONCERT: The term "acting in concert" shall have the
definition given in 12 C.F.R. (S)574.2(c). The determination of whether a group
is acting in concert shall be made by the Board of Directors of the Bank or
officers delegated by such Board and may be based on any evidence upon which the
Board or such delegatee chooses to rely.
AFFILIATE: An "affiliate" of, or a Person "affiliated" with, a
specified Person, is a Person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with
the Person specified.
ASSOCIATE: The term "Associate," when used to indicate a relationship
with any Person, means: (i) any corporation or organization (other than the
Bank, the Holding Company, the MHC or a majority-owned subsidiary of any
thereof) of which such Person is a director, officer or partner or is, directly
or indirectly, the beneficial owner of 10% or more of any class of equity
securities; (ii) any trust or other estate in which such Person has a
substantial beneficial interest or as to which such Person serves as trustee or
in a similar fiduciary capacity; (iii) any relative or spouse of such Person or
any relative of such spouse, who has the same home as such Person or who is a
director or officer of the Bank, the MHC, the Holding Company or any subsidiary
of the MHC or the Holding Company or any affiliate thereof; and (iv) any person
acting in concert with any of the persons or entities specified in clauses (i)
through (iii) above; provided, however, that any Tax-Qualified or Non-Tax-
Qualified Employee Plan shall not be deemed to be an associate of any director
or officer of the MHC, the Holding Company or the Bank, to the extent provided
in Sections 11-13 hereof. When used to refer to a Person other than an officer
or director of the Bank, the Bank in its sole discretion may determine the
Persons that are Associates of other Persons.
BANK: Provident Bank in its pre-Reorganization mutual form or post-
Reorganization stock form as indicated by the context.
CAPITAL STOCK: Any and all authorized stock of the Bank or the
Holding Company.
COMMON STOCK: Common stock issuable by the Holding Company in
connection with the Reorganization, including securities convertible into Common
Stock, pursuant to its stock charter.
COMMUNITY: Rockland County.
COMMUNITY OFFERING: The offering to certain members of the general
public of any unsubscribed shares in the Subscription Offering which may be
effected pursuant to Section 11 of this Plan. The Community Offering may
include a Syndicated Community Offering or public offering.
DEPOSIT ACCOUNT(S): Any withdrawable deposit(s) offered by the Bank,
including NOW account deposits, certificates of deposit, savings accounts,
demand deposits and IRA accounts and Keogh plans for which the Bank acts as
custodian or trustee.
EFFECTIVE DATE: The date upon which all necessary approvals have been
obtained to complete the Reorganization, and the Reorganization and Stock
Offering have been completed.
ELIGIBLE ACCOUNT HOLDER: Any person holding a Qualifying Deposit
on the Eligibility Record Date.
ELIGIBILITY RECORD DATE: December 31, 1996, the date for
determining who qualifies as an Eligible Account Holder.
EMPLOYEE PLANS: The Tax-Qualified and Non-Tax Qualified Employee
Plans of the Bank.
ESOP: The Bank's employee stock ownership plan.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended.
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FDIC: The Federal Deposit Insurance Corporation.
HOLA: The Home Owners' Loan Act, as amended.
HOLDING COMPANY: Provident Bancorp, Inc. the federal corporation
which will be majority-owned by the MHC and which will own 100% of the common
stock of the Bank.
HOLDING COMPANY APPLICATION: The Holding Company Application on Form
H(e)-1 to be submitted by the Bank to the OTS to have the Holding Company
acquire the common stock of the Bank.
INDEPENDENT APPRAISER: The appraiser retained by the Bank to prepare
an appraisal of the pro forma market value of the Bank and the Holding Company.
MANAGEMENT PERSON: Any Officer or director of the Bank or any
Affiliate of the Bank, and any person acting in concert with any such Officer or
director.
MARKET MAKER: A dealer (i.e., any person who engages directly or
indirectly as agent, broker, or principal in the business of offering, buying,
selling or otherwise dealing or trading in securities issued by another person)
who, with respect to a particular security, (1) regularly publishes bona fide
competitive bid and offer quotations on request, and (2) is ready, willing and
able to effect transactions in reasonable quantities at the dealer's quoted
prices with other brokers or dealers.
MEMBERS: Any person or entity who qualifies as a member of the
Bank pursuant to its charter and bylaws.
MHC: Provident Bancorp, MHC, the mutual holding company resulting from
the Reorganization.
MINORITY OWNERSHIP INTEREST: The shares of the Holding Company's
Common Stock owned by persons other than the MHC, expressed as a percentage of
the total shares of Holding Company Common Stock issued and outstanding.
MINORITY STOCK OFFERING: One or more offerings of less than 50% in
the aggregate of the outstanding Common Stock of the Holding Company to persons
other than the MHC.
MINORITY STOCKHOLDER: Any owner of the Holding Company's Common
Stock, other than the MHC.
NON-VOTING STOCK: Any Capital Stock other than Voting Stock.
NOTICE: The Notice of Mutual Holding Company Reorganization to be
submitted by the Bank to the OTS to notify the OTS of the Reorganization and the
Stock Offering.
OFFICER: An executive officer of the Holding Company or the Bank,
including the Chief Executive Officer, President, Senior Vice Presidents in
charge of principal business functions, Secretary, Treasurer and any other
person performing similar functions.
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OTHER MEMBER: Any person who is a Member of the Bank at the close of
business on the Voting Record Date who is not an Eligible Account Holder or
Supplemental Eligible Account Holder, or Tax-Qualified Employee Plan.
OTS: The Office of Thrift Supervision, and any successor thereto.
PARENT: A company that controls another company, either directly or
indirectly through one or more subsidiaries.
PERSON: An individual, corporation, partnership, association, joint-
stock company, trust (including Individual Retirement Accounts and KEOGH
Accounts), unincorporated organization, government entity or political
subdivision thereof or any other entity.
PLAN: This Plan of Reorganization from Mutual Savings Bank to Mutual
Holding Company and Stock Issuance Plan.
PURCHASE PRICE: The price per share, determined as provided in this
Plan, at which the Common Stock will be sold in the Stock Offering.
QUALIFYING DEPOSIT: The aggregate balance of all Deposit Accounts of
an Eligible Account Holder as of the close of business on the Eligibility Record
Date or of a Supplemental Eligible Account Holder as of the close of business on
the Supplemental Eligibility Record Date, as the case may be, provided such
aggregate balance is not less than $50.
REGULATIONS: The regulations of the OTS regarding mutual holding
companies.
REORGANIZATION: The reorganization of the Bank into the mutual
holding company structure including the organization of the MHC, the Holding
Company and the Bank in stock form pursuant to this Plan.
RESIDENCE: The terms "residence," "reside," "resided" or "residing"
as used herein with respect to any person shall mean any Person who occupied a
dwelling within the Bank's Community, has an intent to remain with the Community
for a period of time, and manifests the genuineness of that intent by
establishing an ongoing physical presence within the Community together with an
indication that such presence within the Community is something other than
merely transitory in nature. To the extent the Person is a corporation or other
business entity, the principal place of business or headquarters shall be in the
Community. To the extent a Person is a personal benefit plan, the circumstances
of the beneficiary shall apply with respect to this definition. In the case of
all other benefit plans, the circumstances of the trustee shall be examined for
purposes of this definition. The Bank may utilize deposit or loan records or
such other evidence provided to it to make a determination as to whether a
Person is a resident. In all cases, however, such a determination shall be in
the sole discretion of the Bank.
SEC: The Securities and Exchange Commission.
SPECIAL MEETING: The Special Meeting of Members called for the purpose
of voting on the Plan.
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STOCK BANK: The federally chartered stock savings bank that will
succeed to the Bank upon completion of the Reorganization.
STOCK OFFERING: The offering of Common Stock of the Holding Company
to persons other than the MHC, in a Subscription Offering and, to the extent
shares remain available, in a Community Offering.
SUBSCRIPTION OFFERING: The offering of Common Stock of the Holding
Company for subscription and purchase pursuant to Section 11 of this Plan.
SUBSIDIARY: A company that is controlled by another company, either
directly or indirectly through one or more subsidiaries.
SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDER: Any Person holding a Qualifying
Deposit on the Supplemental Eligibility Record Date, who is not an Officer or
director of the Bank, or an Associate of an Officer or director of the Bank.
SUPPLEMENTAL ELIGIBILITY RECORD DATE: The last day of the calendar
quarter preceding approval of the Plan by the OTS.
SYNDICATED COMMUNITY OFFERING: The offering of Common Stock following
or contemporaneously with the Community Offering through a syndicate of broker-
dealers.
TAX-QUALIFIED EMPLOYEE PLAN: Any defined benefit plan or defined
contribution plan (including any employee stock ownership plan, stock bonus
plan, profit-sharing plan, or other plan) of the Bank, the Holding Company, the
MHC or any of their affiliates, which, with its related trusts, meets the
requirements to be qualified under Section 401 of the Internal Revenue Code.
The term Non-Tax-Qualified Employee Plan means any defined benefit plan or
defined contribution plan which is not so qualified.
VOTING MEMBERS: Those Members of the Bank as of the Voting Record
Date.
VOTING RECORD DATE: The date established by the Bank for determining
which Members are entitled to vote on the Plan.
VOTING STOCK:
(1) Voting Stock means common stock or preferred stock, or similar
interests if the shares by statute, charter or in any manner, entitle the
holder:
(i) To vote for or to select directors of the Bank or the
Holding Company; and
(ii) To vote on or to direct the conduct of the operations or
other significant policies of the Bank or the Holding
Company.
(2) Notwithstanding anything in paragraph (1) above, preferred
stock is not "Voting Stock" if:
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(i) Voting rights associated with the preferred stock are
limited solely to the type customarily provided by statute
with regard to matters that would significantly and
adversely affect the rights or preferences of the preferred
stock, such as the issuance of additional amounts or classes
of senior securities, the modification of the terms of the
preferred stock, the dissolution of the Bank, or the payment
of dividends by the Bank when preferred dividends are in
arrears;
(ii) The preferred stock represents an essentially passive
investment or financing device and does not otherwise
provide the holder with control over the issuer; and
(iii) The preferred stock does not at the time entitle the holder,
by statute, charter, or otherwise, to select or to vote for
the selection of directors of the Bank or the Holding
Company.
(3) Notwithstanding anything in paragraphs (1) and (2) above, "Voting
Stock" shall be deemed to include preferred stock and other securities that,
upon transfer or otherwise, are convertible into Voting Stock or exercisable to
acquire Voting Stock where the holder of the stock, convertible security or
right to acquire Voting Stock has the preponderant economic risk in the
underlying Voting Stock. Securities immediately convertible into Voting Stock
at the option of the holder without payment of additional consideration shall be
deemed to constitute the Voting Stock into which they are convertible; other
convertible securities and rights to acquire Voting Stock shall not be deemed to
vest the holder with the preponderant economic risk in the underlying Voting
Stock if the holder has paid less than 50% of the consideration required to
directly acquire the Voting Stock and has no other economic interest in the
underlying Voting Stock.
3. THE REORGANIZATION
A. ORGANIZATION OF THE HOLDING COMPANIES AND THE BANK
As part of the Reorganization the Bank will convert to a federal stock
savings bank, and will establish the Holding Company and the MHC as federal
corporations. The Reorganization will be effected as follows, or in any manner
approved by the OTS that is consistent with the purposes of this Plan and
applicable laws and regulations.
As part of the Reorganization: (i) the Bank will organize an interim
stock savings bank as a wholly-owned subsidiary ("Interim One"); (ii) Interim
One will organize an interim stock savings bank as a wholly-owned subsidiary
("Interim Two"); (iii) Interim One will organize the Holding Company as a
wholly-owned subsidiary; (iv) the Bank will exchange its charter for a federal
stock savings bank charter to become the Stock Bank and Interim One will
exchange its charter for a federal mutual holding company charter to become the
MHC; (v) simultaneously with step (iv), Interim Two will merge with and into the
Stock Bank with the Stock Bank as the resulting institution; (vi) all of the
initially issued stock of the Stock Bank will be transferred to the MHC in
exchange for membership interests in the MHC; and (vii) the MHC will contribute
the capital stock of the Stock Bank to the Holding Company, and the Stock Bank
will become a wholly-owned subsidiary of the Holding Company. Contemporaneously
with the Reorganization, the Holding Company will offer for sale in the Stock
Offering shares of Common Stock representing the pro forma market value of the
Holding Company and the Bank. Upon consummation of the Reorganization,
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the legal existence of the Bank will not terminate, but the Stock Bank will be a
continuation of the Bank, and all property of the Bank, including its right,
title, and interest in and to all property of whatsoever kind and nature,
interest and asset of every conceivable value or benefit then existing or
pertaining to the Bank, or which would inure to the Bank immediately by
operation of law and without the necessity of any conveyance or transfer and
without any further act or deed, will vest in the Stock Bank. The Stock Bank
will have, hold, and enjoy the same in its right and fully and to the same
extent as the same was possessed, held, and enjoyed by the Bank. The Stock Bank
will continue to have, succeed to, and be responsible for all the rights,
liabilities and obligations of the Bank and will maintain its headquarters and
operations at the Bank's present locations.
Upon consummation of the Reorganization, substantially all of the
assets and liabilities (including the savings accounts, demand accounts, tax and
loan accounts, United States Treasury general accounts, or United States
Treasury Time Deposit Accounts, as defined in the OTS regulations) of the Bank
shall be become the assets and liabilities of the Stock Bank, which will
thereupon become an operating savings bank subsidiary of the Holding Company and
of the MHC. The Bank will apply to the OTS to have the Holding Company receive
or retain (as the case may be) up to 50% of the net proceeds of the Stock
Offering, or such other amount as may be determined by the Board of Directors.
The Stock Bank may distribute additional capital to the Holding Company
following the Reorganization, subject to the OTS regulations governing capital
distributions.
B. EFFECT ON DEPOSIT ACCOUNTS AND BORROWINGS
Each deposit account in the Bank on the Effective Date will remain a
deposit account in the Stock Bank in the same amount and upon the same terms and
conditions, and will continue to be federally insured up to the legal maximum by
the FDIC in the same manner as the deposit account existed in the Bank
immediately prior to the Reorganization. Upon consummation of the
Reorganization, all loans and other borrowings from the Bank shall retain the
same status with the Stock Bank after the Reorganization as they had with the
Bank immediately prior to the Reorganization.
C. THE BANK
Upon completion of the Reorganization the Stock Bank will be
authorized to exercise any and all powers, rights and privileges of, and will be
subject to all limitations applicable to, capital stock savings banks under
federal law. A copy of the proposed Charter and Bylaws of the Stock Bank is
attached hereto as Exhibit A and made a part of this Plan. The Reorganization
will not result in any reduction of the amount of retained earnings (other than
the assets of the Bank retained by or distributed to the Holding Company or the
MHC), undivided profits, and general loss reserves that the Bank had prior to
the Reorganization. Such retained earnings and general loss reserves will be
accounted for by the MHC, the Holding Company and the Stock Bank on a
consolidated basis in accordance with generally accepted accounting principles.
The initial members of the Board of Directors of the Stock Bank will
be the members of the existing Board of Directors of the Bank. The Stock Bank
will be wholly-owned by the Holding Company. The Holding Company will be
wholly-owned by its stockholders who will consist of the MHC and the persons who
purchase Common Stock in the Stock Offering and any subsequent Minority Stock
Offering. Upon the Effective Date of the Reorganization, the voting and
membership rights of Members will be transferred to the MHC, subject to the
conditions specified below.
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D. THE HOLDING COMPANY
The Holding Company will be authorized to exercise any and all powers,
rights and privileges, and will be subject to all limitations applicable to
savings and loan holding companies and mutual holding companies under federal
law and regulations. The initial members of the Board of Directors of the
Holding Company will be the existing Board of Directors of the Bank.
Thereafter, the voting stockholders of the Holding Company will elect
approximately one-third of the Holding Company's directors annually. A copy of
the proposed Charter and Bylaws of the Holding Company is attached as Exhibit B
and are made part of this Plan.
The Holding Company will have the power to issue shares of Capital
Stock to persons other than the MHC. However, so long as the MHC is in
existence, the MHC will be required to own at least a majority of the Voting
Stock of the Holding Company. The Holding Company may issue any amount of Non-
Voting Stock to persons other than the MHC. The Holding Company will be
authorized to undertake one or more Minority Stock Offerings of less than 50% in
the aggregate of the total outstanding Common Stock of the Holding Company, and
the Holding Company intends to offer for sale up to 49.9% of its Common Stock in
the Stock Offering.
E. THE MUTUAL HOLDING COMPANY
As a mutual corporation, the MHC will have no stockholders. The
members of the MHC will have exclusive voting authority as to all matters
requiring a vote of members under the Charter of the MHC. Persons who have
membership rights with respect to the Bank under its existing Charter
immediately prior to the Reorganization shall continue to have such rights
solely with respect to the MHC after the Reorganization so long as such persons
remain depositors or borrowers, as the case may be, of the Bank after the
Reorganization. In addition, all persons who become depositors of the Stock
Bank following the Reorganization will have membership rights with respect to
the MHC. The rights and powers of the MHC will be defined by the MHC's Charter
and Bylaws (a copy of which is attached to this Plan as Exhibit C and made a
part hereof) and by the statutory and regulatory provisions applicable to
savings and loan holding companies and mutual holding companies. In particular,
the MHC shall be subject to the limitations and restrictions imposed on savings
and loan holding companies by Section 10(o)(5) of the HOLA.
The initial members of the Board of Directors of the MHC will be the
existing Board of Directors of the Bank. Thereafter, approximately one-third of
the directors of the MHC will be elected annually by the members of the MHC who
will consist of the former Members of the Bank and all persons who become
depositors of the Bank after the Reorganization.
4. CONDITIONS TO IMPLEMENTATION OF THE REORGANIZATION
Consummation of the Reorganization is expressly conditioned upon the
following:
A. Approval of the Plan by a majority of the Board of Directors of the
Bank.
B. The filing of a Reorganization Notice, including the Plan, with the
OTS and either:
(i) The OTS has given written notice of its intent not to disapprove
the Reorganization; or
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(ii) Sixty days have passed since the OTS received the Reorganization
Notice and deemed it sufficient under ' 516.2(c) of the OTS
regulations, and the OTS has not given written notice that the
Reorganization is disapproved or extended for an additional 30
days the period during which disapproval may be issued.
C. The filing of a holding company application with and approval by the
OTS pursuant to the HOLA for the Holding Company and MHC to become
savings and loan holding companies by owning or acquiring 100% of the
common stock of the Stock Bank and the Holding Company, respectively,
to be issued in connection with the Reorganization.
D. Submission of the Plan to the Voting Members for approval pursuant to
a Proxy Statement and form of proxy cleared in advance by the OTS, and
such Plan is approved by a majority of the total votes of the Voting
Members eligible to be cast at a meeting held at the call of the
directors in accordance with the procedures prescribed by the Bank's
Charter and Bylaws.
E. All necessary approvals have been obtained from the OTS in connection
with the adoption of the charter and bylaws of the MHC, the Holding
Company and the Stock Bank, the conversion of the Bank to a stock
charter, and any transfer of assets and liabilities of the Bank to the
Stock Bank pursuant to the Plan; and all conditions specified or
otherwise imposed by the OTS in connection with the issuance of a
notice of intent not to disapprove the Notice have been satisfied.
5. SPECIAL MEETING OF MEMBERS
Subsequent to the approval of the Plan by the OTS, the Special Meeting
shall be scheduled in accordance with the Bank's Bylaws. Promptly after receipt
of approval and at least 20 days but not more than 45 days prior to the Special
Meeting, the Bank shall distribute proxy solicitation materials to all Voting
Members. The proxy solicitation materials shall include a proxy statement, and
other documents authorized for use by the regulatory authorities. A copy of the
Plan will be made available to Voting Members upon request. Pursuant to the
Regulations, an affirmative vote of not less than a majority of the total
outstanding votes of the Voting Members is required for approval of the Plan.
Voting may be in person or by proxy. The OTS shall be notified promptly of the
actions of the Voting Members.
6. RIGHTS OF MEMBERS OF THE MHC
Following the Reorganization, all persons who had membership rights
with respect to the Bank as of the date of the Reorganization will continue to
have such rights solely with respect to the MHC. All existing proxies granted
by members of the Bank to the Board of Directors of the Bank shall automatically
become proxies granted to the Board of Directors of the MHC. In addition, all
persons who become depositors of the Stock Bank subsequent to the Reorganization
also will have membership rights with respect to the MHC. In each case, no
person who ceases to be the holder of a deposit account with the Stock Bank
after the Reorganization shall have any membership or rights with respect to the
MHC. Borrowers of the Stock Bank who were borrower members of the Bank at the
time of Reorganization will have the same membership rights in the MHC as they
had in the Bank immediately prior to the Reorganization for so long as their
pre-Reorganization borrowings remain outstanding. Borrowers will not receive
membership rights in connection with any new borrowings made after the
Reorganization.
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7. CONVERSION OF MHC TO STOCK FORM
Following the completion of the Reorganization, the MHC may elect to
convert to stock form in accordance with applicable law (a "Conversion
Transaction"). There can be no assurance when, if ever, a Conversion
Transaction will occur.
In a Conversion Transaction, the MHC would merge with and into the
Stock Bank or the Holding Company, with the Stock Bank or the Holding Company as
the resulting entity, and the members of the MHC would receive the right to
subscribe for a number of shares of common stock of the Holding Company, as
determined by the formula set forth in the following paragraphs. The additional
shares of Common stock of the Holding Company issued in the Conversion
Transaction would be sold at their aggregate pro forma market value as
determined by an Independent Appraisal.
Any Conversion Transaction shall be fair and equitable to Minority
Stockholders. In any Conversion Transaction, Minority Stockholders, if any,
will be entitled without additional consideration to maintain the same
percentage ownership interest in the Holding Company after the Conversion
Transaction as their percentage ownership interest in the Holding Company
immediately prior to the Conversion Transaction (i.e., the "Minority Ownership
Interest"), subject only to the following adjustments (if required by federal or
state law, regulation, or regulatory policy) to reflect: (i) the cumulative
effect of the aggregate amount of dividends waived by the MHC; and (ii) the
market value of assets of the MHC (other than common stock of the Holding
Company).
The adjustment referred to in clause (i) of the preceding paragraph
above would require that the Minority Ownership Interest (expressed as a
percentage) be adjusted by multiplying the Minority Ownership Interest by the
following fraction:
(Holding Company stockholders' equity immediately prior to Conversion
---------------------------------------------------------------------
Transaction) - (aggregate amount of dividends waived by MHC)
------------------------------------------------------------
Holding Company stockholders' equity immediately prior to Conversion Transaction
The Minority Ownership Interest (expressed as a percentage) shall also
be adjusted to reflect any assets of the MHC (other than Common Stock of the
Holding Company) by multiplying it by the following fraction:
(pro forma market value of Holding Company) - (market value of assets of MHC
----------------------------------------------------------------------------
other than Holding Company common stock)
----------------------------------------
pro forma market value of Holding Company
At the sole discretion of the Board of Directors of the MHC and the
Holding Company, a Conversion Transaction may be effected in any other manner
necessary to qualify the Conversion Transaction as a tax-free reorganization
under applicable federal and state tax laws, provided such Conversion
Transaction does not diminish the rights and ownership interest of Minority
Stockholders as set forth in the preceding paragraphs. If a Conversion
Transaction does not occur, the MHC will always own a majority of the Voting
Stock of the Holding Company. Management of the Bank has no current intention
to conduct a Conversion Transaction.
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A Conversion Transaction would require the approval of applicable
federal regulators, and would be presented to a vote of the members of the MHC.
Federal regulatory policy requires that in any Conversion Transaction the
members of the MHC will be accorded the same stock purchase priorities as if the
MHC were a mutual savings bank converting to stock form.
8. TIMING OF THE REORGANIZATION AND SALE OF CAPITAL STOCK
The Bank intends to consummate the Reorganization as soon as feasible
following the receipt of all approvals referred to in Section 4 of the Plan.
Subject to the approval of the OTS, the Holding Company intends to commence the
Stock Offering concurrently with the proxy solicitation of Members. The Holding
Company may close the Stock Offering before the Special Meeting, provided that
the offer and sale of the Common Stock shall be conditioned upon approval of the
Plan by the Members at the Special Meeting. The Bank's proxy solicitation
materials may permit certain Members to return to the Bank by a reasonable date
certain a postage paid card or other written communication requesting receipt of
the prospectus if the prospectus is not mailed concurrently with the proxy
solicitation materials. The Stock Offering shall be conducted in compliance
with the securities offering regulations of the SEC. The Bank will not finance
or loan funds to any person to purchase Common Stock.
9. NUMBER OF SHARES TO BE OFFERED
The total number of shares (or range thereof) of Common Stock to be
issued and offered for sale pursuant to the Plan shall be determined initially
by the Board of Directors of the Bank and the Holding Company in conjunction
with the determination of the Independent Appraiser. The number of shares to be
offered may be adjusted prior to completion of the Stock Offering. The total
number of shares of Common Stock that may be issued to persons other than the
MHC at the close of the Stock Offering must be less than 50% of the issued and
outstanding shares of Common Stock of the Holding Company.
10. INDEPENDENT VALUATION AND PURCHASE PRICE OF SHARES
All shares of Common Stock sold in the Stock Offering shall be sold at
a uniform price per share, which shall be the Purchase Price. The Purchase
Price and number of shares to be outstanding shall be determined by the Board of
Directors of the Holding Company on the basis of the estimated pro forma market
value of the Holding Company and the Bank. The aggregate purchase price for the
Common Stock will not be inconsistent with such market value of the Holding
Company and the Bank. The pro forma market value of the Holding Company and the
Bank will be determined for such purposes by the Independent Appraiser.
Prior to the commencement of the Stock Offering, an estimated
valuation range will be established, which range may vary within 15% above to
15% below the midpoint of such range, and up to 15% greater than the maximum of
such range, as determined by the Board of Directors at the time of the Stock
Offering and consistent with OTS regulations. The Holding Company intends to
sell up to 49.9% of its common in the Stock Offering. The number of shares of
Common Stock to be issued and the ownership interest of the MHC may be increased
or decreased by the Holding Company, taking into consideration any change in the
independent valuation and other factors, at the discretion of the Board of
Directors of the Bank and the Holding Company.
Based upon the independent valuation as updated prior to the
commencement of the Stock Offering, the Board of Directors may establish the
minimum and maximum percentage of shares of the Holding
11
Company Common Stock that will be offered for sale in the Stock Offering, or it
may fix the percentage of shares of Common Stock that will be offered for sale
in the Stock Offering. In the event the percentage of shares offered for sale is
not fixed in the Stock Offering, the Minority Ownership Interest resulting from
the Stock Offering will be determined as follows: (a) the product of (x) the
total number of shares of Common Stock sold by the Holding Company and (y) the
Purchase Price, divided by (b) the aggregate pro forma market value of the Bank
and the Holding Company upon the closing of the Stock Offering as determined by
the Independent Appraiser.
Notwithstanding the foregoing, no sale of Common Stock may be
consummated unless, prior to such consummation, the Independent Appraiser
confirms to the Holding Company, the Bank and to the OTS that, to the best
knowledge of the Independent Appraiser, nothing of a material nature has
occurred which, taking into account all relevant factors, would cause the
Independent Appraiser to conclude that the aggregate value of the Common Stock
at the Purchase Price is incompatible with its estimate of the aggregate
consolidated pro forma market value of the Holding Company and the Bank. If
such confirmation is not received, the Holding Company may cancel the Stock
Offering, extend the Stock Offering and establish a new price range and/or
estimated price range, extend, reopen or hold a new Stock Offering or take such
other action as the OTS may permit.
The estimated market value of the Holding Company and the Bank shall
be determined for such purpose by an Independent Appraiser on the basis of such
appropriate factors as are not inconsistent with OTS regulations. The Common
Stock to be issued in the Stock Offering shall be fully paid and nonassessable.
The aggregate amount of outstanding Common Stock that may be owned or
controlled by persons other than the MHC parent at the close of the Stock
Offering shall be less than 50% of the Holding Company's total outstanding
Common Stock.
If there is a Community Offering and/or Syndicated Community Offering
of shares of Common Stock not subscribed for in the Subscription Offering, the
price per share at which the Common Stock is sold in such Community Offering or
Syndicated Community Offering shall be equal to the Purchase Price at which the
Common Stock is sold to persons in the Subscription Offering.
11. METHOD OF OFFERING SHARES AND RIGHTS TO PURCHASE STOCK
In descending order of priority, the opportunity to purchase Common
Stock shall be given in the Subscription Offering to: (1) Eligible Account
Holders; (2) Tax-Qualified Employee Plans; (3) Supplemental Eligible Account
Holders; (4) Other Members; and (5) directors, officers and employees of the
Bank. Any shares of Common Stock that are not subscribed for in the Subscription
Offering may at the discretion of the Bank and the Holding Company be offered
for sale in a Community Offering or a Syndicated Community Offering. The
minimum purchase by any Person shall be 25 shares. The Holding Company may use
its discretion in determining whether prospective purchasers are "residents,"
"associates," or "acting in concert" as defined in the Plan, and in interpreting
any and all other provisions of the Plan. All such determinations are in the
sole discretion of the Holding Company, and may be based on whatever evidence
the Holding Company chooses to use in making any such determination.
12
In addition to the priorities set forth below, the Board of Directors
may establish other priorities for the purchase of Common Stock, subject to the
approval of the OTS. The priorities for the purchase of shares in the Stock
Offering are as follows:
A. SUBSCRIPTION OFFERING
PRIORITY 1: ELIGIBLE ACCOUNT HOLDERS. Each Eligible Account Holder
shall be given the opportunity to purchase up to the greater of $200,000 of
Common Stock offered in the Stock Offering or 15 times the product (rounded
down to the next whole number) obtained by multiplying the total number of
shares to be issued in the Stock Offering by a fraction of which the numerator
is the amount of the Eligible Account Holder's Qualifying Deposit and the
denominator is the total amount of Qualifying Deposits of all Eligible Account
Holders, in each case on the Supplemental Eligibility Record Date; provided that
the Holding Company may, in its sole discretion and without further notice to or
solicitation of subscribers or other prospective purchasers, increase such
maximum purchase limitation to 5% of the maximum number of shares offered in the
Stock Offering or decrease such maximum purchase limitation to .1% of the
maximum number of shares offered in the Stock Offering, subject to the overall
purchase limitation set forth in Section 12. Subscription rights to purchase
Common Stock received by Officers and Directors and their Associates based on
their increased deposits in the Bank in the one year period preceding the
Eligibility Record Date shall be subordinated to all other subscriptions
involving the exercise of subscription rights by Eligible Account Holders in
their capacity as such. If there are insufficient shares available to satisfy
all subscriptions of Eligible Account Holders, shares will be allocated to
Eligible Account Holders so as to permit each such subscribing Eligible Account
Holder to purchase a number of shares sufficient to make his total allocation
equal to the lesser of 100 shares or the number of shares subscribed for.
Thereafter, unallocated shares will be allocated pro rata to remaining
subscribing Eligible Account Holders whose subscriptions remain unfilled in the
same proportion that each such subscriber's Qualifying Deposit bears to the
total amount of Qualifying Deposits of all subscribing Eligible Account Holders
whose subscriptions remain unfilled. To ensure proper allocation of stock, each
Eligible Account Holder must list on his subscription order form all accounts in
which he had an ownership interest as of the Eligibility Record Date.
PRIORITY 2: TAX-QUALIFIED EMPLOYEE PLANS. The Tax-Qualified Employee
Plans shall be given the opportunity to purchase in the aggregate up to 10% of
the Common Stock issued in the Stock Offering. In the event of an
oversubscription in the Stock Offering, subscriptions for shares by the Tax-
Qualified Employee Plans may be satisfied, in whole or in part, out of
authorized but unissued shares of the Holding Company subject to the maximum
purchase limitations applicable to such plans and set forth in Section 12, or
may be satisfied, in whole or in part, through open market purchases by the Tax-
Qualified Employee Plans subsequent to the closing of the Stock Offering. In
the event that the number of shares offered is increased as a result of an
increase in the Independent Valuation, the ESOP will have a priority right to
fill its subscription in whole or in part prior to all other subscriptions.
PRIORITY 3: SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDERS. To the extent
there are sufficient shares remaining after satisfaction of subscriptions by
Eligible Account Holders, and the Tax-Qualified Employee Plans, each
Supplemental Eligible Account Holder shall have the opportunity to purchase up
to the greater of $200,000 of Common Stock offered in the Stock Offering or 15
times the product (rounded down to the next whole number) obtained by
multiplying the total number of shares to be issued in the Stock Offering by a
fraction of which the numerator is the amount of the Supplemental Eligible
Account Holder's Qualifying Deposit and the denominator is the total amount of
Qualifying Deposits of all Supplemental Eligible Account Holders, in each case
on the Supplemental Eligibility Record Date, provided that the Bank
13
may, in its sole discretion and without further notice to or solicitation of
subscribers or other prospective purchasers, increase such maximum purchase
limitation to 5% of the maximum number of shares offered in the Stock Offering
or decrease such maximum purchase limitation to 0.1% of the maximum number of
shares offered in the Stock Offering subject to the overall purchase limitations
set forth in Section 12. In the event Supplemental Eligible Account Holders
subscribe for a number of shares which, when added to the shares subscribed for
by Eligible Account Holders, and the Tax-Qualified Employee Plans, the shares of
Common Stock will be allocated among subscribing Supplemental Eligible Account
Holders so as to permit each subscribing Supplemental Eligible Account Holder to
purchase a number of shares sufficient to make his total allocation equal to the
lesser of 100 shares or the number of shares subscribed for. Thereafter,
unallocated shares will be allocated to each subscribing Supplemental Eligible
Account Holder whose subscription remains unfilled in the same proportion that
such subscriber's Qualifying Deposits on the Supplemental Eligibility Record
Date bear to the total amount of Qualifying Deposits of all subscribing
Supplemental Eligible Account Holders whose subscriptions remain unfilled. To
ensure proper allocation of stock, each Supplemental Eligible Account Holder
must list on his subscription order form all accounts in which he had an
ownership interest as of the Supplemental Eligibility Record Date.
PRIORITY 4: OTHER MEMBERS. To the extent that there are sufficient
shares remaining after satisfaction of subscriptions by Eligible Account
Holders, the Tax-Qualified Employee Plans and Supplemental Eligible Account
Holders, each Other Member shall have the opportunity to purchase up to $200,000
of Common Stock offered in the Stock Offering, provided that the Bank may, in
its sole discretion and without further notice to or solicitation of subscribers
or other prospective purchasers, increase such maximum purchase limitation to 5%
of the maximum number of shares offered in the Stock Offering or decrease such
maximum purchase limitation to .1% of the maximum number of shares offered in
the Stock Offering, subject to the overall purchase limitations set forth in
Section 12. In the event Other Members subscribe for a number of shares which,
when added to the shares subscribed for by the Eligible Account Holders, Tax-
Qualified Employee Plans and Supplemental Eligible Account Holders is in excess
of the total number of shares offered in the Stock Offering, the subscriptions
of such Other Members will be allocated among subscribing Other Members on a pro
rata basis based on the size of such Other Members' orders.
PRIORITY 5: DIRECTORS, OFFICERS AND EMPLOYEES. To the extent that
shares remain available for purchase after satisfaction of all subscriptions of
the Eligible Account Holders, Tax-Qualified Employee Plans, Supplemental
Eligible Account Holders, and Other Members, employees, officers and directors
of the Bank shall have the opportunity to purchase up to $200,000 of the Common
Stock offered in the Stock Offering; provided that the Bank may, in its sole
discretion, and without further notice to or solicitation of subscribers or
other prospective purchasers, increase such maximum purchase limitation to 5% of
the maximum number of shares offered in the Stock Offering or decrease such
maximum purchase limitation to .1% of the maximum number of shares offered in
the Stock Offering, subject to the overall purchase limitations set forth in
Section 12. In the event that directors, officers and employees subscribe for a
number of shares, which, when added to the shares subscribed for by Eligible
Account Holders, Tax-Qualified Employee Plans, Supplemental Eligible Account
Holders, and Other Members is in excess of the total shares offered in the Stock
Offering, the subscriptions of such Persons will be allocated among directors,
officers and employees on a pro rata basis based on the size of each Person's
orders.
B. COMMUNITY OFFERING
Any shares of Common Stock not subscribed for in the Subscription
Offering may be offered for sale in a Community Offering. This will involve an
offering of all unsubscribed shares directly to the
14
general public with a preference to those natural persons residing in the
counties in which the Bank maintains its offices. The Community Offering, if
any, shall be for a period of not more than 45 days unless extended by the
Holding Company and the Bank, and shall commence concurrently with, during or
promptly after the Subscription Offering. The Holding Company and the Bank may
use an investment banking firm or firms on a best efforts basis to sell the
unsubscribed shares in the Subscription and Community Offering. The Holding
Company and the Bank may pay a commission or other fee to such investment
banking firm or firms as to the shares sold by such firm or firms in the
Subscription and Community Offering and may also reimburse such firm or firms
for expenses incurred in connection with the sale. The Community Offering may
include a syndicated community offering managed by such investment banking firm
or firms. The Common Stock will be offered and sold in the Community Offering,
in accordance with OTS regulations, so as to achieve the widest distribution of
the Common Stock. No person, by himself or herself, or with an Associate or
group of Persons acting in concert, may subscribe for or purchase more than
$400,000 of Common Stock offered in the Community Offering. Further, the Bank
may limit total subscriptions under this Section 11(B) so as to assure that the
number of shares available for the Syndicated Community Offering may be up to a
specified percentage of the number of shares of Common Stock. Any order received
from natural persons residing in the Bank's community will be given preference
in any Community Offering that is conducted currently with the Subscription
Offering. If a Community Offering is conducted, or continues, following the
conclusion of the Subscription Offering in order to sell the minimum number of
shares required to complete the Offering, the Bank may reserve shares offered in
such additional or continuing Community Offering for sales to institutional
investors.
In the event of an oversubscription for shares in the Community
Offering, shares may be allocated (to the extent shares remain available) first
to cover any reservation of shares for a Syndicated Community Offering or
institutional orders, next to cover orders of natural persons residing in the
counties in which the Bank maintains its offices, then to cover the orders of
any other person subscribing for shares in the Community Offering so that each
such person may receive 1,000 shares, and thereafter, on a pro rata basis to
such persons based on the amount of their respective subscriptions.
The Bank and the Holding Company, in their sole discretion, may reject
subscriptions, in whole or in part, received from any Person under this Section
11(B).
C. SYNDICATED COMMUNITY OFFERING
Any shares of Common Stock not sold in the Subscription Offering or in
the Community Offering, if any, may be offered for sale to the general public by
a selling group of broker-dealers in a Syndicated Community Offering, subject to
terms, conditions and procedures, including the timing of the offering, as may
be determined by the Bank and the Holding Company in a manner that is intended
to achieve the widest distribution of the Common Stock subject to the rights of
the Holding Company to accept or reject in whole or in part all order in the
Syndicated Community Offering. It is expected that the Syndicated Community
Offering would commence as soon as practicable after termination of the
Subscription Offering and the Community Offering, if any. The Syndicated
Community Offering shall be completed within 45 days after the termination of
the Subscription Offering, unless such period is extended as provided herein.
If for any reason a Syndicated Community Offering of unsubscribed
shares of Common Stock cannot be effected or is inadvisable and any shares
remain unsold after the Subscription Offering and the Community Offering, if
any, the Boards of Directors of the Holding Company and the Bank will seek to
15
make other arrangements for the sale of the remaining shares. Such other
arrangements will be subject to the approval of the OTS and to compliance with
applicable securities laws.
12. ADDITIONAL LIMITATIONS ON PURCHASES OF COMMON STOCK
Purchases of Common Stock in the Stock Offering will be subject to the
following purchase limitations:
A. The aggregate amount of outstanding Common Stock of the Holding
Company owned or controlled by persons other than MHC at the close of
the Stock Offering shall be less than 50% of the Holding Company's
total outstanding Common Stock.
A. No Person, together with Associates thereof, or group of persons
acting in concert, may purchase more than $400,000 of Common Stock
offered in the Stock Offering to persons other than the MHC, except
that: (i) the Holding Company may, in its sole discretion and without
further notice to or solicitation of subscribers or other prospective
purchasers, increase such maximum purchase limitation to 5% of the
number of shares sold in the Stock Offering; (ii) Tax-Qualified
Employee Plans may purchase up to 10% of the shares sold in the Stock
Offering; and (iii) for purposes of this subsection 12(B) shares to be
held by any Tax-Qualified Employee Plan and attributable to a person
shall not be aggregated with other shares purchased directly by or
otherwise attributable to such person.
C. The aggregate amount of Common Stock acquired in the Stock Offering by
all Management Persons and their Associates, exclusive of any stock
acquired by such persons in the secondary market, shall not exceed 25%
of the outstanding shares of Common Stock of the Holding Company held
by persons other than the MHC at the close of the Stock Offering. In
calculating the number of shares held by Management Persons and their
Associates under this paragraph or under the provisions of paragraph D
of this section, shares held by any Tax-Qualified Employee Plans of
the Bank that are attributable to such persons shall not be counted.
D. The aggregate amount of Common Stock acquired in the Stock Offering by
all Management Persons and their Associates, exclusive of any Common
Stock acquired by such plans or persons in the secondary market, shall
not exceed 25% of the stockholders' equity of the Holding Company
other than the MHC at the close of the Stock Offering.
E. The Boards of Directors of the Bank and the Holding Company may, in
their sole discretion, increase the maximum purchase limitation set
forth in paragraph 12(B) hereof to up to 9.9%, provided that orders
for Common Stock in excess of 5% of the number of shares of Common
Stock sold in the Stock Offering shall not in the aggregate exceed 10%
of the total shares of Common Stock offered in the Stock Offering
(except that this limitation shall not apply to purchases by Tax-
Qualified Employee Plans). If such 5% limitation is increased,
subscribers for the maximum amount will be, and certain other large
subscribers in the sole discretion of the Holding Company and the Bank
may be, given the opportunity to increase their subscriptions up to
the then applicable limit. Requests to purchase additional shares of
Common Stock under this provision will be determined by the Board of
Directors of the Holding Company, in its sole discretion.
16
F. Notwithstanding any other provision of this Plan, no person shall be
entitled to purchase any Common Stock to the extent such purchase
would be illegal under any federal law or state law or regulation or
would violate regulations or policies of the National Association of
Securities Dealers, Inc., particularly those regarding free riding and
withholding. The Holding Company and/or its agents may ask for an
acceptable legal opinion from any purchaser as to the legality of such
purchase and may refuse to honor any purchase order if such opinion is
not timely furnished.
G. The Board of Directors of the Holding Company has the right in its
sole discretion to reject any order submitted by a person whose
representations the Board of Directors believes to be false or who it
otherwise believes, either alone or acting in concert with others, is
violating, circumventing, or intends to violate, evade or circumvent
the terms and conditions of this Plan.
Prior to the consummation of the Stock Offering, no person shall offer
to transfer, or enter into any agreement or understanding to transfer the legal
or beneficial ownership of any subscription rights or shares of Common Stock.
Each person purchasing Common Stock shall be deemed to confirm that such
purchase does not conflict with the above purchase limitations contained in this
Plan.
EACH PERSON PURCHASING COMMON STOCK IN THE STOCK OFFERING WILL BE
DEEMED TO CONFIRM THAT SUCH PURCHASE DOES NOT CONFLICT WITH THE PURCHASE
LIMITATIONS IN THIS PLAN. ALL QUESTIONS CONCERNING WHETHER ANY PERSONS ARE
ASSOCIATES OR A GROUP ACTING IN CONCERT OR WHETHER ANY PURCHASE CONFLICTS WITH
THE PURCHASE LIMITATIONS IN THIS PLAN OR OTHERWISE VIOLATES ANY PROVISION OF
THIS PLAN SHALL BE DETERMINED BY THE BANK IN ITS SOLE DISCRETION. SUCH
DETERMINATION SHALL BE CONCLUSIVE, FINAL AND BINDING ON ALL PERSONS AND THE BANK
MAY TAKE ANY REMEDIAL ACTION, INCLUDING WITHOUT LIMITATION REJECTING THE
PURCHASE OR REFERRING THE MATTER TO THE OTS FOR ACTION, AS IN ITS SOLE
DISCRETION THE BANK MAY DEEM APPROPRIATE.
13. PAYMENT FOR STOCK
All payments for Common Stock subscribed for or ordered in the Stock
Offering must be delivered in full to the Bank, together with a properly
completed and executed order form, or by such other procedure in the case of
the Syndicated Community Offering, on or prior to the expiration date specified
on the order form, as the case may be, unless such date is extended by the
Bank; provided, that if the Tax Qualified Employee Plans subscribe for shares
during the Subscription Offering, such plans will not be required to pay for the
shares at the time they subscribe but rather may pay for such shares of Common
Stock subscribed for by such plans upon consummation of the Stock Offering. The
Holding Company or the Bank may make scheduled discretionary contributions to
Employee Plans provided such contributions from the Bank, if any, do not cause
the Bank to fail to meet its regulatory capital requirement.
Payment for Common Stock shall be made either by check or money order,
or if a purchaser has a Deposit Account in the Bank, such purchaser may pay for
the shares subscribed for by authorizing the Bank to make a withdrawal from the
purchaser's passbook or certificate account at the Bank in an amount equal to
the aggregate Purchase Price of such shares. Such authorized withdrawal,
whether from a savings or certificate account, shall be without penalty as to
premature withdrawal. If the authorized withdrawal is from a certificate
account, and the remaining balance does not meet the applicable minimum balance
17
requirements, the certificate shall be canceled at the time of withdrawal,
without penalty, and the remaining balance will earn interest at the passbook
rate. Funds for which a withdrawal is authorized will remain in the purchaser's
Deposit Account but may not be used by the purchaser during the Stock
Offering. Thereafter, the withdrawal will be given effect only to the extent
necessary to satisfy the subscription (to the extent it can be filled) at the
Purchase Price. Interest will continue to be earned on any amounts authorized
for withdrawal until such withdrawal is given effect. Interest will be paid by
the Bank at a rate established by the Bank on payment for Common Stock received
by check or money order. Such interest will be paid from the date payment is
received by the Bank until consummation or termination of the Stock Offering.
If for any reason the Stock Offering is not consummated, all payments made by
subscribers in the Stock Offering will be refunded to them with interest. In
case of amounts authorized for withdrawal from Deposit Accounts, refunds will be
made by canceling the authorization for withdrawal.
14. MANNER OF EXERCISING SUBSCRIPTION RIGHTS THROUGH ORDER FORMS
As soon as practicable after the prospectus prepared by the Holding
Company and the Bank has been declared effective by the OTS and the SEC, copies
of the prospectus and order forms will be distributed to all Eligible Account
Holders, Supplemental Eligible Account Holders, the Employee Plans and
employees, officers and directors at their last known addresses appearing on the
records of the Bank for the purpose of subscribing for shares of Common Stock in
the Subscription Offering and will be made available for use by those persons
entitled to purchase in the Community Offering.
Each order form will be preceded or accompanied by the prospectus
describing the Holding Company, the Bank, the Common Stock and the Subscription
and Community Offerings. Each order form will contain, among other things, the
following:
A. A specified date by which all order forms must be received by the
Bank, which date shall be not less than 20, nor more than 45 days,
following the date on which the order forms are mailed by the Bank,
and which date will constitute the termination of the Subscription
Offering;
B. The Purchase Price for shares of Common Stock to be sold in the
Subscription and Community Offerings;
C. A description of the minimum and maximum number of shares of Common
Stock that may be subscribed for pursuant to the exercise of
subscription rights or otherwise purchased in the Community Offering;
D. Instructions as to how the recipient of the order form is to indicate
thereon the number of shares of Common Stock for which such Person
elects to subscribe and the available alternative methods of payment
therefor;
E. An acknowledgment that the recipient of the order form has received a
final copy of the prospectus prior to execution of the order form;
F. A statement indicating the consequences of failing to properly
complete and return the order form, including a statement to the
effect that all subscription rights are nontransferable, will be void
at the end of the Subscription Offering, and can only be exercised by
delivering to the Bank within the subscription period such properly
completed
18
and executed order form, together with check or money order
in the full amount of the Purchase Price as specified in the order
form for the shares of Common Stock for which the recipient elects to
subscribe in the Subscription Offering (or by authorizing on the order
form that the Bank withdraw said amount from the subscriber's Deposit
Account at the Bank); and
G. A statement to the effect that the executed order form, once received
by the Bank, may not be modified or amended by the subscriber without
the consent of the Bank.
Notwithstanding the above, the Bank and the Holding Company reserve
the right in their sole discretion to accept or reject orders received on
photocopied or facsimilied order forms.
15. UNDELIVERED, DEFECTIVE OR LATE ORDER FORM; INSUFFICIENT PAYMENT
In the event order forms (a) are not delivered and are returned to the
Bank by the United States Postal Service or the Bank is unable to locate the
addressee, (b) are not received back by the Bank or are received by the Bank
after the expiration date specified thereon, (c) are defectively filled out or
executed, (d) are not accompanied by the full required payment for the shares of
Common Stock subscribed for (including cases in which Deposit Accounts from
which withdrawals are authorized are insufficient to cover the amount of the
required payment), or (e) are not mailed pursuant to a "no mail" order placed
in effect by the account holder, the subscription rights of the Person to whom
such rights have been granted will lapse as though such Person failed to return
the contemplated order form within the time period specified thereon; provided,
that the Bank may, but will not be required to, waive any immaterial
irregularity on any order form or require the submission of corrected order
forms or the remittance of full payment for subscribed shares by such date as
the Bank may specify. The interpretation by the Bank of terms and conditions of
this Plan and of the order forms will be final, subject to the authority of the
OTS.
16. COMPLETION OF THE STOCK OFFERING
The Stock Offering will be terminated if not completed within 90 days
from the date of approval by the OTS, unless an extension is approved by the
OTS.
17. MARKET FOR COMMON STOCK
If at the close of the Stock Offering the Holding Company has more
than 100 shareholders of any class of stock, the Holding Company shall use its
best efforts to:
(i) encourage and assist a market maker to establish and maintain a market
for that class of stock; and
(ii) list that class of stock on a national or regional securities
exchange, or on the Nasdaq system.
18. STOCK PURCHASES BY MANAGEMENT PERSONS AFTER THE OFFERING
For a period of three years after the proposed Stock Offering, no
Management Person or his or her Associates may purchase, without the prior
written approval of the OTS, any Common Stock of the
19
Holding Company, except from a broker-dealer registered with the SEC, except
that the foregoing shall not apply to:
A. Negotiated transactions involving more than 1% of the outstanding
stock in the class of stock; or
B. Purchases of stock made by and held by any Tax-Qualified or Non-Tax
Qualified Employee Plan of the Stock Bank or the Holding Company even
if such stock is attributable to Management Persons or their
Associates.
19. RESALES OF STOCK BY MANAGEMENT PERSONS
Common Stock purchased by Management Persons and their Associates in
the Stock Offering may not be resold for a period of at least one year following
the date of purchase, except in the case of death of the Management Person or
Associate.
20. STOCK CERTIFICATES
Each stock certificate shall bear a legend giving appropriate notice
of the restrictions set forth in Section 19 above. Appropriate instructions
shall be issued to the Holding Company's transfer agent with respect to
applicable restrictions on transfers of such stock. Any shares of stock issued
as a stock dividend, stock split or otherwise with respect to such restricted
stock, shall be subject to the same restrictions as apply to the restricted
stock.
21. RESTRICTION ON FINANCING STOCK PURCHASES
The Holding Company will not offer or sell any of the Common Stock
proposed to be issued to any person whose purchase would be financed by funds
loaned to the person by the Holding Company, the Bank or any of their
Affiliates.
22. STOCK BENEFIT PLANS
The Board of Directors of the Bank and/or the Holding Company intend
to adopt one or more stock benefit plans for its employees, officers and
directors, including an ESOP, stock award plans and stock option plans, which
will be authorized to purchase Common Stock and grant options for Common Stock.
However, only the Tax-Qualified Employee Plans will be permitted to purchase
Common Stock in the Stock Offering on a priority basis as set forth in this
Plan. The Board of Directors of the Bank intends to establish the ESOP and
authorize the ESOP and any other Tax-Qualified Employee Plans to purchase in the
aggregate up to 10% of the Common Stock issued in the Stock Offering. The Stock
Bank or the Holding Company may make scheduled discretionary contributions to
one or more Tax-Qualified Employee Plans to purchase Common Stock issued in the
Stock Offering or to purchase issued and outstanding shares of Common Stock or
authorized but unissued shares of Common Stock subsequent to the completion of
the Stock Offering, provided such contributions do not cause the Stock Bank to
fail to meet any of its regulatory capital requirements. This Plan specifically
authorizes the grant and issuance by the Holding Company of (i) awards of Common
Stock after the Stock Offering pursuant to one or more stock recognition and
award plans (the "Recognition Plans") in an amount equal to up to 4% of the
number of shares of Common Stock issued in the Stock Offering (and in an amount
equal to up to 5% of the Common Stock issued in the Stock Offering if the
Recognition Plans are adopted more than one year after the completion
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of the Stock Offering), (ii) options to purchase a number of shares of the
Holding Company's Common Stock in an amount equal to up to 10% of the number of
shares of Common Stock issued in the Stock Offering and shares of Common Stock
issuable upon exercise of such options, and (iii) Common Stock to one or more
Tax Qualified Employee Plans, including the ESOP, at the closing of the Stock
Offering or at any time thereafter, in an amount equal to up to 8% of the number
of shares of Common Stock issued in the Stock Offering if the Recognition Plans
award Common Stock sooner than one year after the completion of the Stock
Offering, and up to 10% of the number of shares of Common Stock issued in the
Stock Offering if the Recognition Plans are adopted more than one year after the
completion of the Stock Offering. Shares awarded to the Tax Qualified Employee
Plans or pursuant to the Recognition Plans, and shares issued upon exercise of
options may be authorized but unissued shares of the Holding Company's Common
Stock, or shares of Common Stock purchased by the Holding Company or such plans
on the open market. Any awards of Common Stock under the Recognition Plans and
the stock option plans will be subject to prior stockholder approval.
23. POST-REORGANIZATION FILING AND MARKET MAKING
It is likely that there will be a limited market for the Common Stock
sold in the Stock Offering, and purchasers must be prepared to hold the Common
Stock for an indefinite period of time. If the Holding Company has more than 35
stockholders of any class of stock, the Holding Company shall register its
Common Stock with the SEC pursuant to the Exchange Act, and shall undertake not
to deregister such Common Stock for a period of three years thereafter.
24. PAYMENT OF DIVIDENDS AND REPURCHASE OF STOCK
The Holding Company may not declare or pay a cash dividend on its
Common Stock if the effect thereof would cause the regulatory capital of the
Bank to be reduced below the amount required under ' 567.2 of the OTS rules and
regulations. Otherwise, the Holding Company may declare dividends or make other
capital distributions in accordance with applicable laws and regulations.
Following completion of the Stock Offering, the Holding Company may repurchase
its Common Stock subject to ' 563b.3(g) of the OTS rules and regulations, as
long as such repurchases do not cause the regulatory capital of the Bank to be
reduced below the amount required under 12 C.F.R. ' 567.2. The MHC may from
time to time purchase Common Stock of the Holding Company. Subject to the
approval of the OTS, the MHC may waive its right to receive dividends declared
by the Holding Company.
25. REORGANIZATION AND STOCK OFFERING EXPENSES
The Regulations require that the expenses of any Stock Offering must
be reasonable. The Bank will use its best efforts to assure that the expenses
incurred by the Bank and the Holding Company in effecting the Reorganization and
the Stock Offering will be reasonable.
26. EMPLOYMENT AND OTHER SEVERANCE AGREEMENTS
Following or contemporaneously with the Reorganization, the Bank
and/or the Holding Company may enter into employment and/or severance
arrangements with one or more executive officers of the Bank and/or the Holding
Company. It is anticipated that any employment contracts entered into by the
Bank and/or the Holding Company will be for terms not exceeding three years and
that such contracts will provide for annual renewals of the term of the
contracts, subject to approval by the Board of Directors. The Bank and/or the
Holding Company also may enter into severance arrangements with one or more
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executive officers which provide for the payment of severance compensation in
the event of a change in control of the Bank and/or the Holding Company. The
terms of such employment and severance arrangements have not been determined as
of this time, but will be described in any prospectus circulated in connection
with the Stock Offering and will be subject to and comply with all regulations
of the OTS.
27. INTERPRETATION
All interpretations of this Plan and application of its provisions to
particular circumstances by a majority of the Board of Directors of the Bank
shall be final, subject to the authority of the OTS.
28. AMENDMENT OR TERMINATION OF THE PLAN
If necessary or desirable, the terms of the Plan may be substantially
amended by a majority vote of the Bank's Board of Directors as a result of
comments from regulatory authorities or otherwise, at any time prior to
submission of the Plan and proxy materials to the Members. At any time AFTER
submission of the Plan and proxy materials to the Members, the terms of the Plan
that relate to the Reorganization may be amended by a majority vote of the Board
of Directors only with the concurrence of the OTS. Terms of the Plan relating
to the Stock Offering including, without limitation, Sections 8 through 20, may
be amended by a majority vote of the Bank's Board of Directors as a result of
comments from regulatory authorities or otherwise at any time prior to the
approval of the Plan by the OTS and at any time thereafter with the concurrence
of the OTS. The Plan may be terminated by a majority vote of the Board of
Directors at any time prior to the earlier of approval of the Plan by the OTS
and the date of the Special Meeting, and may be terminated by a majority vote of
the Board of Directors at any time thereafter with the concurrence of the OTS.
In its discretion, the Board of Directors may modify or terminate the Plan upon
the order of the regulatory authorities without a resolicitation of proxies or
another meeting of the Members; however, any material amendment of the terms of
the Plan that relate to the Reorganization which occur after the Special Meeting
shall require a resolicitation of Members.
The Plan shall be terminated if the Reorganization is not completed
within 24 months from the date upon which the Members of the Bank approve the
Plan, and may not be extended by the Bank or the OTS.
Dated: April 23, 1998.
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