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EXHIBIT 2
ATLANTIC LIBERTY SAVINGS, F.A.
PLAN OF REORGANIZATION
FROM MUTUAL SAVINGS ASSOCIATION
TO MUTUAL HOLDING COMPANY
AND STOCK ISSUANCE PLAN
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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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
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 . . . . . . . . . . . . . . . . . . . . . . . . . . 10
10. Independent Valuation and Purchase Price of Shares . . . . . . . . . . . . . . . . 10
11. Method of Offering Shares and Rights to Purchase Stock . . . . . . . . . . . . . . 11
12. Additional Limitations on Purchases of Common Stock . . . . . . . . . . . . . . . 14
13. Payment for Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
14. Completion of the Stock Offering . . . . . . . . . . . . . . . . . . . . . . . . . 16
15. Market for Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
16. Stock Purchases by Management Persons After the Offering . . . . . . . . . . . . . 16
17. Resales of Stock by Management Persons . . . . . . . . . . . . . . . . . . . . . . 16
18. Stock Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
19. Restriction on Financing Stock Purchases . . . . . . . . . . . . . . . . . . . . . 17
20. Stock Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
21. Post-Reorganization Filing and Market Making . . . . . . . . . . . . . . . . . . . 17
22. Employment and Other Severance Agreement . . . . . . . . . . . . . . . . . . . . . 18
23. Payment of Dividends and Repurchase of Stock . . . . . . . . . . . . . . . . . . . 18
24. Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
25. Reorganization and Stock Offering Expenses . . . . . . . . . . . . . . . . . . . . 18
26. Amendment or Termination of the Plan . . . . . . . . . . . . . . . . . . . . . . . 18
Exhibits
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
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1. INTRODUCTION
The Board of Directors of Atlantic Liberty Savings, F.A. (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 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 Tax-Qualified Employee Plans of the Bank, with any remaining
shares offered to the public in a Direct Community Offering.
The Reorganization will permit the Holding Company to issue Capital
Stock, which is a source of capital not available to mutual savings
associations. It will also provide the Bank with greater flexibility to
structure and finance the expansion of its operations. At the same time, the
Bank's mutual form of ownership and its ability to provide community-oriented
financial services will be preserved through the MHC, which will at all times
control at least a majority of the Voting Stock of the Holding Company as long
as the MHC remains in existence. 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 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. Section 574.2(c). The determination of
whether a group is acting in concert shall be made solely 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.
ACTUAL SUBSCRIPTION PRICE: The price per share, determined as
provided in this Plan, at which the Common Stock will be sold in the
Subscription Offering.
AFFILIATE: Any Person that controls, is controlled by, or is
under common control with another person.
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 Stock 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,
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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: Atlantic Liberty Savings, F.A. in its
pre-Reorganization form and 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.
DEPOSIT ACCOUNT(S): Any withdrawable deposit(s) in the Bank,
including certificates of deposit, in excess of $50.
DIRECT 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 Direct
Community Offering may include a syndicated community offering or public
offering.
EFFECTIVE DATE: The date upon which all necessary approvals
have been obtained to consummate the Reorganization, and the transfer of assets
and liabilities of the Bank to the Bank in its stock form is completed.
ELIGIBLE ACCOUNT HOLDER: Any person holding a Qualifying
Deposit on the Eligibility Record Date.
ELIGIBILITY RECORD DATE: June 30, 1996, the date for
determining who qualifies as an Eligible Account Holder.
ESOP: The Bank's employee stock ownership plan.
EXCHANGE ACT: The Securities Exchange Act of 1934, as
amended.
FDIC: The Federal Deposit Insurance Corporation.
HOLA: The Home Owners' Loan Act, as amended.
HOLDING COMPANY: Brooklyn Heights Bancorp, 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 and Company 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.
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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.
MARKETING AGENT: The broker-dealer responsible for organizing
and managing the Stock Offering and sale of the Common Stock.
MARKET MAKER: A dealer (i.e., any person who engages directly
or indirectly as agent, broker, or principal in the business of offering,
buying, selling or otherwise dealing or trading in securities issued by another
person) who, with respect to a particular security, (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: Atlantic Liberty, MHC, the mutual holding company
resulting from the Reorganization.
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.
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
Association to Mutual Holding Company and Stock Issuance Plan.
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QUALIFYING DEPOSIT: The aggregate balance of each Deposit
Account 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.
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.
SAIF: The Savings Association Insurance Fund, which is a
division of the FDIC.
SEC: The Securities and Exchange Commission.
SPECIAL MEETING: The Special Meeting of Members called for
the purpose of voting on the Plan.
STOCK BANK: The federally chartered stock savings bank
resulting from the Reorganization in accordance with the Plan.
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 Direct 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
Eligible Account Holder, a Tax-Qualified Employee Plan or 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 Direct 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 Stock Benefit Plan means any
defined benefit plan or defined contribution plan which is not so qualified.
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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:
(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.
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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, 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
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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.
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
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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
(ii) Sixty days have passed since the OTS received the
Reorganization Notice and deemed it sufficient under
Section 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 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 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 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
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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 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 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.
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. If the Conversion Transaction does not occur, the MHC
will always own a majority of the Common Stock of the Holding Company.
In a Conversion Transaction, the MHC would merge with and into the
Bank or the Holding Company, with the Bank or the Holding Company as the
resulting entity, and the depositors of the Bank 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.
In any Conversion Transaction, Minority Stockholders, if any, will be
entitled 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 be adjusted by
multiplying the Minority Ownership Interest by the following fraction:
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(Holding Company stockholders' equity immediately prior to Conversion
Transaction) - (aggregate amount of dividends waived by MHC)
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Holding Company stockholders' equity immediately prior to Conversion
Transaction
The adjustment referred to in clause (ii) above would further adjust
the Minority Ownership Interest 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)
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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.
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. 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
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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 offering
range will be established, which range may vary within 15% above to 15% below
the midpoint of such range, or within a greater range above or below the
midpoint, as determined by the Board of Directors at the time of 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.
Based upon the independent valuation as updated prior to the
commencement of the Stock Offering, the Board of Directors will establish the
minimum and maximum ownership percentage applicable to the Stock Offering.
The final minority ownership percentage (the "Minority Ownership Percentage")
will be determined as follows: (a) the product of (x) the total number of
shares of Common Stock and (y) the purchase price per share divided by (b) the
estimated aggregate pro forma market value of the Bank and the Holding Company
immediately after the Stock Offering as determined by the Independent
Appraiser, expressed in terms of a specific aggregate dollar amount rather than
as a range, upon the closing of the Stock Offering or sale of all the Common
Stock.
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 Direct 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 Direct Community Offering shall be equal to the
purchase price per share at which the Common Stock is sold to persons in the
Subscription Offering. Shares sold in the Direct Community Offering will be
subject to the same limitations as shares sold 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;
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(3) Supplemental Eligible Account Holders; (4) Other Members; and (5)
directors, officers and employees of the Bank pursuant to priorities
established by the Board of Directors. Any shares of Common Stock that are not
subscribed for in the Subscription Offering may be offered for sale in a Direct
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.
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 $50,000 of Common Stock
offered in the Stock Offering; 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 .5% of the maximum number of shares offered in
the Stock Offering, subject to the overall purchase limitation set forth in
Section 12. 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.
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 $50,000 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 0.5% 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
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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.
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 $50,000
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 .5% 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 $50,000 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 .5% 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. DIRECT COMMUNITY OFFERING/PUBLIC OFFERING
Any shares of Common Stock not subscribed for in the Subscription
Offering may be offered for sale in a Direct Community Offering. This will
involve an offering of all unsubscribed shares directly to the general public
with a preference to those natural persons residing in the counties in which
the Bank maintains its offices. The Direct 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 Direct 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 Direct Community Offering and may also reimburse such firm
or firms for expenses incurred in connection
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with the sale. The Direct 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 Direct 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
$50,000 of Common Stock offered in the Direct 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 public offering may be up to a
specified percentage of the number of shares of Common Stock. Finally, the
Bank may reserve shares offered in the Direct Community Offering for sales to
institutional investors.
In the event of an oversubscription for shares in the Direct Community
Offering, shares may be allocated (to the extent shares remain available) first
to cover any reservation of shares for a public 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 Direct 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).
Any shares of Common Stock not sold in the Subscription Offering or in
the Direct Community Offering, if any, shall then be sold to the underwriters
for resale to the general public in a public offering. It is expected that the
public offering will commence as soon as practicable after termination of the
Subscription Offering and the Direct Community Offering, if any. The public
offering shall be completed within 45 days after the termination of the
Subscription Offering, unless such period is extended as provided herein. The
public offering price and the underwriting discount shall be determined by an
underwriting agreement between the Holding Company, the Bank and the
underwriters. Such underwriting agreement shall be filed with the OTS and the
SEC.
If for any reason a public offering of unsubscribed shares of Common
Stock cannot be effected and any shares remain unsold after the Subscription
Offering and the Direct Community Offering, if any, the Boards of Directors of
the Holding Company and the Bank will seek to 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.
B. No Person, Associate thereof, or group of persons acting in
concert, may purchase more than $50,000 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
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such maximum purchase limitation to 5% of the number of shares
offered in the Stock Offering; (ii) Tax-Qualified Employee
Plans may purchase up to 10% of the shares offered 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 34% 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 Benefit 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 34% 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 offered 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.
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.
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13. PAYMENT FOR STOCK
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, money market or certificate account (other than a
certificate account held in an IRA) at the Bank in an amount equal to the
purchase price of such shares. Such authorized withdrawal, whether from a
savings, passbook or certificate account, shall be without penalty as to
premature withdrawal. If the authorized withdrawal is from a certificate
account, and the remaining balance does not meet the applicable minimum balance
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 until the
Common Stock has been sold or the 45-day period (or such longer period as may
be approved by the OTS) following the Stock Offering has expired, whichever
occurs first. 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 per share. Interest will continue to be earned on any
amounts authorized for withdrawal until such withdrawal is given effect. If
for any reason the Stock Offering is not consummated, all payments made by
subscribers in the Stock Offering will be refunded to them. In case of amounts
authorized for withdrawal from Deposit Accounts, refunds will be made by
canceling the authorization for withdrawal.
14. 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.
15. 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.
16. 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 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
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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.
17. 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.
18. STOCK CERTIFICATES
Each stock certificate shall bear a legend giving appropriate notice
of the restrictions set forth in Section 17 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.
19. 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.
20. 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 subject to the purchase priorities set forth
in this Plan. Subject to the approval of the OTS, 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. Any awards of Common
Stock or options under the Recognition Plan or stock option plans will be
subject to prior stockholder approval. This Plan shall specifically authorize
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, (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 10% of the number of shares of Common Stock issued in the Stock Offering.
Shares awarded to the Tax Qualified Employee Plans or pursuant to the
Recognition
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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.
21. 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.
22. EMPLOYMENT AND OTHER SEVERANCE AGREEMENT
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
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.
23. PAYMENT OF DIVIDENDS AND REPURCHASE OF STOCK
The Holding Company may not declare or pay a cash dividend on, or
repurchase any of, its Common Stock if the effect thereof would cause the
regulatory capital of the Bank to be reduced below the amount required under
Section 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. Subject to the approval of the OTS, the MHC
may waive its right to receive dividends declared by the Holding Company.
24. 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.
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.
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26. 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: August 19, 1997.
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