EXHIBIT 99.5
[NAUGATUCK VALLEY SAVINGS AND LOAN LOGO]
333 CHURCH STREET
NAUGATUCK, CONNECTICUT 06770
(203) 720-5000
NOTICE OF SPECIAL MEETING OF DEPOSITORS
On [MEETING DATE], Naugatuck Valley Savings and Loan will hold a
special meeting of depositors at [MEETING LOCATION]. The meeting will begin at
[MEETING TIME], local time. At the meeting, depositors will consider and act on
the following:
1. The plan of reorganization and minority stock issuance
pursuant to which Naugatuck Valley Savings and Loan will be
reorganized into the mutual holding company structure. As part
of the voting on the plan of reorganization, depositors will
be approving the proposed charters and bylaws for Naugatuck
Valley Savings and Loan, Naugatuck Valley Financial
Corporation and Naugatuck Valley Mutual Holding Company
attached to the plan of reorganization. Pursuant to the plan
of reorganization, Naugatuck Valley Financial Corporation will
issue 55% of its common stock to Naugatuck Valley Mutual
Holding Company, a federally chartered mutual holding company
that will be formed pursuant to the plan of reorganization,
will offer for sale to eligible depositors 43% of its common
stock and, assuming approval of Proposal 2, will contribute 2%
of its common stock to Naugatuck Valley Savings and Loan
Foundation;
2. The establishment of Naugatuck Valley Savings and Loan
Foundation, a Delaware non-stock corporation, dedicated to the
promotion of charitable purposes within the Greater Naugatuck
Valley of Connecticut and neighboring communities, and the
contribution of a number of shares of authorized but unissued
Naugatuck Valley Financial Corporation common stock in an
amount equal to 2% of the common stock issued in the
reorganization concurrently with completion of the
reorganization of Naugatuck Valley Savings and Loan into the
mutual holding company form of organization; and
3. Such other business that may properly come before the special
meeting or any adjournment of the special meeting.
NOTE: The Board of Directors is not aware of any such other
business at this time.
The Board of Directors has fixed [RECORD DATE] as the record date for the
determination of depositors of Naugatuck Valley Savings and Loan entitled to
notice of and to vote at the special meeting and at any adjournment of the
special meeting. Only depositors of Naugatuck Valley Savings and Loan, as of
[RECORD DATE], will be entitled to vote at the special meeting.
PLEASE COMPLETE AND SIGN THE ENCLOSED PROXY CARD(S) SOLICITED BY THE
BOARD OF DIRECTORS AND MAIL THE PROXY CARD(S) PROMPTLY IN THE ENCLOSED PROXY
REPLY ENVELOPE. THE PROXY WILL NOT BE USED IF YOU ATTEND THE MEETING AND VOTE IN
PERSON.
NOT VOTING WILL HAVE THE SAME EFFECT AS VOTING AGAINST THE PROPOSALS.
VOTING DOES NOT OBLIGATE YOU TO PURCHASE STOCK IN OUR STOCK OFFERING.
By Order of the Board of Directors
Bernadette A. Mole
Corporate Secretary
Naugatuck, Connecticut
[MAIL DATE]
QUESTIONS AND ANSWERS
FOR DEPOSITORS OF NAUGATUCK VALLEY SAVINGS AND LOAN, S.B.
You should read this document and the accompanying prospectus (which
includes a detailed index) for more information about the mutual holding company
reorganization and the related stock offering.
Q. WHAT IS THE PLAN OF REORGANIZATION AND MINORITY STOCK ISSUANCE?
A. Naugatuck Valley Savings and Loan is undergoing a transaction referred
to as a mutual holding company reorganization. In addition, in
connection with the reorganization, Naugatuck Valley Savings and Loan
is undergoing a charter conversion. Currently, Naugatuck Valley Savings
and Loan is a Connecticut-chartered mutual (meaning no stockholders)
savings bank. As a result of the reorganization and charter conversion,
Naugatuck Valley Savings and Loan will become a federally chartered
stock savings bank in the mutual holding company structure with two
holding companies. Naugatuck Valley Savings and Loan will form a new
federally chartered stock holding company, Naugatuck Valley Financial,
that will sell 43% of its common stock to the public and the Naugatuck
Valley Savings and Loan employee stock ownership plan and will issue
55% of its common stock to Naugatuck Valley Mutual, a mutual holding
company to be formed by Naugatuck Valley Savings and Loan. As part of
the reorganization, we also intend to contribute 2% of the common stock
issued in the reorganization to the Naugatuck Valley Savings and Loan
Foundation, a charitable foundation we will form. After the
reorganization, Naugatuck Valley Financial will own 100% of Naugatuck
Valley Savings and Loan's common stock.
Q. WHAT ARE THE REASONS FOR THE PLAN OF REORGANIZATION AND MINORITY STOCK
ISSUANCE?
A. Our primary reasons for the reorganization are to:
o structure our business in a form that will enable us to access
capital markets;
o permit us to control the amount of capital being raised to
enable us to prudently deploy the proceeds of the offering;
o support future lending and growth;
o enhance our ability to attract and retain qualified directors,
management and staff through stock-based compensation plans;
and
o support future branching activities and/or the acquisition of
other financial institutions or financial services companies
or their assets.
Q. WHAT IS THE NAUGATUCK VALLEY SAVINGS AND LOAN FOUNDATION?
A. To continue our long-standing commitment to our local communities, we
intend to establish a charitable foundation, the Naugatuck Valley
Savings and Loan Foundation, as part of the reorganization. We will
fund the foundation with 2% of the shares of our common stock issued in
the reorganization. The Naugatuck Valley Savings and Loan Foundation
will make grants and donations to non-profit and community groups and
projects located within our market area.
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Q. WILL I SEE CHANGES AT NAUGATUCK VALLEY SAVINGS AND LOAN?
A. It will be business as usual. The reorganization, an internal
restructuring, will alter our corporate form of organization, but not
our business relationships. Naugatuck Valley Savings and Loan's Board
of Directors, management and employees will continue to serve our
customers in the same office.
Q. ARE ALL CUSTOMERS ELIGIBLE TO VOTE ON THE PLAN OF REORGANIZATION AND
MINORITY STOCK ISSUANCE AND THE ESTABLISHMENT AND FUNDING OF THE
CHARITABLE FOUNDATION?
A. All depositors of Naugatuck Valley Savings and Loan as of [RECORD DATE]
are eligible to vote, and have been mailed this proxy statement and
proxy card(s).
Q. WHY SHOULD I VOTE ON THE PLAN OF REORGANIZATION AND MINORITY STOCK
ISSUANCE AND ON THE ESTABLISHMENT AND FUNDING OF THE CHARITABLE
FOUNDATION?
A. You are not required to vote on either of the two proposals. However,
in order for us to implement the plan of reorganization, complete the
stock offering and establish and fund the charitable foundation, we
must receive the affirmative vote of a majority of the total votes
eligible to be cast by our depositors on both proposals. Voting does
not obligate you to purchase shares of common stock in the offering.
The charitable foundation will only be established and funded if both
proposals are approved. If the plan of reorganization is approved and
the charitable foundation is not approved, we may determine to complete
the reorganization without the establishment of the charitable
foundation.
Q. WHAT HAPPENS IF I DO NOT VOTE?
A. Your vote is very important. If you do not vote all the proxy card(s)
you receive it will have the same effect as voting against the plan of
reorganization and the establishment and funding of the charitable
foundation. Without sufficient favorable votes for the plan of
reorganization, we cannot proceed with the reorganization and related
stock offering.
The proposal to establish and fund the charitable foundation will be
effective only upon the approval of the plan of reorganization as set
forth in Proposal 1.
Q. HOW DO I VOTE?
A. Mark your vote, sign each proxy card enclosed and return the card(s) to
us, in the enclosed proxy reply envelope. PLEASE VOTE PROMPTLY. NOT
VOTING HAS THE SAME EFFECT AS VOTING "AGAINST" THE PLAN OF
REORGANIZATION AND THE ESTABLISHMENT AND FUNDING OF THE CHARITABLE
FOUNDATION.
Q. HOW MANY VOTES ARE AVAILABLE TO ME?
A. Depositors are entitled to one vote for each $100 on deposit. No
depositor may cast more than 1,000 votes. Proxy cards are not imprinted
with the applicable numbers of votes. However, votes will be
automatically tallied by computer upon receipt of the returned proxy
cards.
Q. WHY DID I RECEIVE MORE THAN ONE PROXY CARD?
A. If you had more than one deposit account on [RECORD DATE], you may have
received more than one proxy card, depending on the ownership structure
of your accounts. THERE ARE NO DUPLICATE CARDS - PLEASE PROMPTLY VOTE
ALL THE PROXY CARDS THAT WE SENT TO YOU.
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Q. MORE THAN ONE NAME APPEARS ON MY PROXY CARD(S). WHO MUST SIGN?
A. The names reflect the registration (ownership) of your deposit
account(s). Proxy cards for joint deposit accounts require the
signature of only one of the owners. Proxy cards for trust or custodian
accounts must be signed by the trustee or the custodian, not the
beneficiary whose name is on the account.
Q. WILL THE REORGANIZATION HAVE ANY EFFECT ON MY DEPOSIT AND LOAN ACCOUNTS
AT NAUGATUCK VALLEY SAVINGS AND LOAN?
A. No. The account number, amount, interest rate and withdrawal rights of
each deposit account will remain unchanged. Deposits will continue to
be federally insured by the Federal Deposit Insurance Corporation, up
to the legal limits. Loans and rights of borrowers will not be
affected. You will no longer have voting rights as a depositor of
Naugatuck Valley Savings and Loan. Only Naugatuck Valley Financial
Corporation public stockholders and members of Naugatuck Valley Mutual
Holding Company will have voting rights in Naugatuck Valley Financial
Corporation and Naugatuck Valley Mutual Holding Company, respectively.
QUESTIONS?
Call our Information Center
at _____________
9:30 a.m. to 4:00 p.m. Eastern Daylight Time, Monday through Friday.
The Information Center is closed weekends and bank holidays.
Your Vote Is Very Important. Please Promptly Mail Your Proxy Card(s).
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NAUGATUCK VALLEY SAVINGS AND LOAN
- --------------------------------------------------------------------------------
PROXY STATEMENT
- --------------------------------------------------------------------------------
This proxy statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Naugatuck Valley Savings and Loan to be
used at a special meeting of depositors. The special meeting will be held at the
[MEETING LOCATION] on [MEETING DATE] at [MEETING TIME], local time. This proxy
statement and the enclosed proxy cards are being first mailed to depositors on
or about [MAIL DATE].
VOTING AND PROXY PROCEDURE
WHO CAN VOTE AT THE MEETING
The Board of Directors has fixed [RECORD DATE] as the record date for
the determination of depositors entitled to notice of and to vote at the special
meeting and at any postponement or adjournment of the special meeting. All
depositors of Naugatuck Valley Savings and Loan, as of [RECORD DATE], will be
entitled to vote at the special meeting.
Each depositor as of the close of business on [RECORD DATE] will be
entitled to cast one vote per $100, or fraction thereof, of the participation
value of all of such depositor's deposit accounts in Naugatuck Valley Savings
and Loan as of the close of business on [RECORD DATE]. However, no depositor may
cast more than 1,000 votes. In general, accounts held in different ownership
capacities will be treated as separate accounts for purposes of applying the
1,000 vote limitation. For example, if two persons hold a $100,000 account in
their joint names and each of the persons also holds a separate $100,000 account
in their own name, each person would be entitled to 1,000 votes for the separate
account and they would together be entitled to cast 1,000 votes on the basis of
the joint account. Our records indicate that as of the close of business on
[RECORD DATE], there were approximately ________ depositors entitled to cast a
total of ________ votes at the special meeting.
Deposits held in trust or other fiduciary capacity may be voted by the
trustee or other fiduciary to whom voting rights are delegated under the trust
instrument or other governing document or applicable law. In the case of IRA and
qualified plan accounts established at Naugatuck Valley Savings and Loan, the
beneficiary may direct the custodian's vote on the plan of reorganization and
establishment and funding of the charitable foundation by returning a completed
proxy card to Naugatuck Valley Savings and Loan.
VOTE REQUIRED
Any number of depositors present and voting, represented in person or
by proxy, at the special meeting will constitute a quorum.
You may vote in favor of or against each proposal. The adoption of the
plan of reorganization and the establishment and funding of the charitable
foundation each require approval by at least a majority of the total number of
votes entitled to be cast at the special meeting. If there are insufficient
votes for approval of the plan of reorganization and/or approval of the
establishment and funding of the charitable foundation at the time of the
special meeting, the special meeting may be adjourned to permit further
solicitation of proxies.
VOTING BY PROXY
Our Board of Directors is sending you this proxy statement for the
purpose of requesting that you allow your votes to be represented at the special
meeting by the persons named in the enclosed proxy card. All votes represented
at the special meeting by properly executed and dated proxies will be cast
according to the instructions indicated on the proxy card. If you sign, date and
return a proxy card without giving voting instructions, your votes will be cast
as recommended by our Board of Directors. Our Board of Directors recommends that
you vote FOR approval of the plan of reorganization and FOR approval of the
establishment and funding of the charitable foundation. Pre-existing proxies
cannot be utilized in connection with the proposed plan of reorganization and
the related transactions provided for in the plan of reorganization and/or the
establishment and funding of the charitable foundation. The proxies being
solicited by our Board of Directors are only for use at the special meeting and
at any adjournment of the special meeting and will not be used for any other
meeting.
If any matters not described in this proxy statement are properly
presented at the special meeting, the persons named in the proxy card will use
their own best judgment to determine how to cast your votes. This includes a
motion to adjourn or postpone the special meeting in order to solicit additional
proxies. We may adjourn or postpone the meeting in order to solicit additional
proxies if we have not received a sufficient number of votes to approve the plan
of reorganization and/or the establishment and funding of the charitable
foundation. However, no proxy that is voted against the plan of reorganization
and/or the establishment and funding of the charitable foundation will be voted
in favor of adjournment to solicit additional proxies. If the special meeting is
postponed or adjourned, your votes may be cast by the persons named in the proxy
card on the new special meeting date as well, unless you have revoked your
proxy. We do not know of any other matters to be presented at the special
meeting.
You may revoke your proxy at any time before the vote is taken at the
meeting. To revoke your proxy, you must either advise the Corporate Secretary of
Naugatuck Valley Savings and Loan in writing before your votes have been cast at
the special meeting, deliver a later-dated proxy, or attend the meeting and cast
your votes in person. Attendance at the special meeting will not in itself
constitute revocation of your proxy.
SOLICITATION OF PROXIES AND TABULATION OF THE VOTE
To the extent necessary to permit approval of the plan of
reorganization and the establishment and funding of the charitable foundation,
proxies may be solicited by certain of our officers, directors or employees by
telephone or through other forms of communication and, if necessary, the special
meeting may be adjourned to a later date. Such persons will be reimbursed by us
for their reasonable out-of-pocket expenses incurred in connection with such
solicitation. We will bear all costs associated with proxy solicitation and vote
tabulation. In addition, Ryan Beck & Co., Inc. may assist us in soliciting
proxies for the special meeting.
PROPOSAL 1 -- APPROVAL OF THE PLAN OF REORGANIZATION AND MINORITY STOCK ISSUANCE
GENERAL
On May 17, 2004, and as amended on June 15, 2004, our Board of
Directors unanimously adopted the plan of reorganization and minority stock
issuance. Under the plan of reorganization, we will reorganize into the mutual
holding company structure, convert from the mutual to stock form of organization
and become a wholly owned subsidiary of Naugatuck Valley Financial Corporation,
a federal stock corporation that we will form. In approving the plan of
reorganization, depositors will also be approving the proposed charters and
bylaws for Naugatuck Valley Savings and Loan, Naugatuck Valley Financial
Corporation and Naugatuck Valley Mutual Holding Company attached to the plan of
reorganization.
The plan of reorganization also includes the offering by Naugatuck
Valley Financial Corporation of 43% of its common stock to qualifying depositors
of Naugatuck Valley Savings and Loan in a subscription offering and, if
necessary, to members of the general public through a community offering and,
possibly, a syndicate of registered broker-dealers. Pursuant to the plan of
reorganization, Naugatuck Valley Financial Corporation will issue 55% of its
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common stock to Naugatuck Valley Mutual Holding Company. In addition, assuming
approval of establishment and funding of the charitable foundation, Naugatuck
Valley Financial Corporation will contribute 2% of its common stock to the
charitable foundation. The completion of the offering depends on market
conditions and other factors beyond our control. We can give no assurance as to
the length of time that will be required to complete the sale of the common
stock. If we experience delays, significant changes may occur in the appraisal
of Naugatuck Valley Financial Corporation and Naugatuck Valley Savings and Loan
as reorganized, which would require a change in the offering range. A change in
the offering range would result in a change in the net proceeds realized by
Naugatuck Valley Financial Corporation from the sale of the common stock. If the
reorganization is terminated, Naugatuck Valley Savings and Loan would be
required to charge all reorganization expenses against current income.
THE OFFICE OF THRIFT SUPERVISION APPROVED OUR PLAN OF REORGANIZATION,
SUBJECT TO, AMONG OTHER THINGS, APPROVAL OF THE PLAN OF REORGANIZATION BY
DEPOSITORS. HOWEVER, APPROVAL BY THE OFFICE OF THRIFT SUPERVISION DOES NOT
CONSTITUTE A RECOMMENDATION OR ENDORSEMENT OF THE PLAN OF REORGANIZATION.
DESCRIPTION OF THE REORGANIZATION
We are undergoing a transaction referred to as a mutual holding company
reorganization. Currently, we are a mutual (meaning no stockholders) savings
bank. The mutual holding company reorganization process that we are now
undertaking involves a series of transactions by which we will convert from the
mutual form of organization to the mutual holding company form of organization.
In the mutual holding company form or organization, we will be a federally
chartered stock savings bank and all of our stock will be owned by Naugatuck
Valley Financial Corporation. In addition, 45% of Naugatuck Valley Financial
Corporation's stock will be owned by the public, our employee stock ownership
plan and our charitable foundation, and 55% of Naugatuck Valley Financial
Corporation's stock will be owned by Naugatuck Valley Mutual Holding Company.
Naugatuck Valley Savings and Loan's depositors will become members of Naugatuck
Valley Mutual Holding Company.
After the reorganization, our ownership structure will be as follows:
--------------------------------
- -------------------------------- | PUBLIC |
| NAUGATUCK VALLEY MUTUAL | | STOCKHOLDERS (INCLUDING OUR |
| HOLDING COMPANY | | CHARITABLE FOUNDATION) |
- -------------------------------- --------------------------------
| ____% of | ___% of
| common | common
| stock | stock
| |
--------------------------------------------------------
| NAUGATUCK VALLEY FINANCIAL CORPORATION |
--------------------------------------------------------
| 100% of common
| stock
--------------------------------------------------------
| NAUGATUCK VALLEY SAVINGS AND LOAN |
--------------------------------------------------------
Consummation of the reorganization (including the offering of common
stock in the offering) is conditioned upon the approval of the plan of
reorganization by (i) the Office of Thrift Supervision and (ii) at least a
majority of the total number of votes eligible to be cast by depositors of
Naugatuck Valley Savings and Loan at the special meeting of depositors.
A detailed description of Naugatuck Valley Savings and Loan and the
proposed reorganization and related stock offering is contained in the
prospectus, which has been delivered with this proxy statement and which is
incorporated in this proxy statement by reference. Details of the reorganization
can be found in the prospectus section entitled "The Reorganization and Stock
Offering." A copy of the plan of reorganization and the attached charters and
bylaws of Naugatuck Valley Savings and Loan, Naugatuck Valley Financial
Corporation and Naugatuck Valley Mutual Holding Company are available upon
written request to Naugatuck Valley Savings and Loan at the address on the front
of this proxy statement. In order to receive timely delivery of the documents in
advance of the special meeting of depositors, you should make your request no
later than [RETURN DATE].
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THE ENCLOSED PROSPECTUS IS AN INTEGRAL PART OF THIS PROXY STATEMENT AND
CONTAINS DETAILED INFORMATION ABOUT NAUGATUCK VALLEY SAVINGS AND LOAN, NAUGATUCK
VALLEY FINANCIAL CORPORATION, NAUGATUCK VALLEY MUTUAL HOLDING COMPANY AND THE
REORGANIZATION, INCLUDING THE RIGHTS OF THE DEPOSITORS OF NAUGATUCK VALLEY
SAVINGS AND LOAN ENTITLED TO SUBSCRIBE FOR SHARES OF NAUGATUCK VALLEY FINANCIAL
CORPORATION COMMON STOCK IN THE STOCK OFFERING. YOU ARE URGED TO CONSIDER SUCH
INFORMATION CAREFULLY BEFORE SUBMITTING YOUR PROXY CARD(S).
THE ENCLOSED PROSPECTUS IS NOT AN OFFER TO SELL NOR A SUBSTITUTE OF ANY
OFFER TO BUY COMMON STOCK IN ANY JURISDICTION WHERE IT IS UNLAWFUL TO DO SO.
REASONS FOR REORGANIZATION
Our primary reasons for the reorganization are to:
o structure our business in a form that will enable us to access
capital markets;
o permit us to control the amount of capital being raised to
enable us to prudently deploy the proceeds of the offering;
o support future lending and growth;
o enhance our ability to attract and retain qualified directors,
management and staff through stock- based compensation plans;
and
o support future branching activities and/or the acquisition of
other financial institutions or financial services companies
or their assets.
The disadvantages of the reorganization considered by our Board of
Directors are:
o additional expense and effort of operating as a public company
listed on the Nasdaq Stock Market;
o the inability of stockholders other than Naugatuck Valley
Mutual Holding Company to obtain majority ownership of
Naugatuck Valley Financial Corporation and Naugatuck Valley
Savings and Loan, which may result in the perpetuation of our
management and board of directors; and
o the corporate ownership and regulatory policies relating to
the mutual holding company structure that may be adopted from
time to time which may have an adverse impact on stockholders
other than Naugatuck Valley Mutual Holding Company.
See "The Reorganization and Stock Offering-Reasons for the
Reorganization" in the prospectus for a more detailed discussion of the basis
upon which our Board of Directors determined to undertake the proposed
reorganization. As more fully discussed in that section and in other sections of
the prospectus, our Board of Directors believes that the plan of reorganization
is in the best interest of Naugatuck Valley Savings and Loan, its depositors and
the customers and communities it serves.
EFFECTS OF REORGANIZATION ON DEPOSITS, BORROWERS AND MEMBERS
While the reorganization is being accomplished, the normal business of
Naugatuck Valley Savings and Loan will continue without interruption, including
being regulated by the Office of Thrift Supervision and the Federal Deposit
Insurance Corporation. After the reorganization, we will continue to provide
services for our depositors and borrowers under current policies by our present
management and staff. In addition, the reorganization will not affect any
deposit accounts or borrower relationships with us.
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After the reorganization, direction of Naugatuck Valley Savings and
Loan will continue to be under the control of its board of directors. Naugatuck
Valley Financial Corporation, as the holder of all of the outstanding common
stock of Naugatuck Valley Savings and Loan, will have exclusive voting rights
with respect to any matters concerning Naugatuck Valley Savings and Loan
requiring stockholder approval, including the election of directors.
After the reorganization, stockholders of Naugatuck Valley Financial
Corporation will have exclusive voting rights with respect to any matters
concerning Naugatuck Valley Financial Corporation requiring stockholder
approval. By virtue of its ownership of a majority of the outstanding shares of
common stock of Naugatuck Valley Financial Corporation, Naugatuck Valley Mutual
Holding Company will be able to control the outcome of most matters presented to
the stockholders for resolution by vote.
Holders of deposit accounts of Naugatuck Valley Savings and Loan will
become members of Naugatuck Valley Mutual Holding Company. Such persons will be
entitled to vote on all questions requiring action by the members of Naugatuck
Valley Mutual Holding Company, including the election of directors of Naugatuck
Valley Mutual Holding Company. In addition, all persons who become depositors of
Naugatuck Valley Savings and Loan following the reorganization will have
membership rights with respect to Naugatuck Valley Mutual Holding Company.
Borrowers will not receive membership rights.
See "The Reorganization and Stock Offering-Effects of Reorganization on
Deposits, Borrowers and Members" in the prospectus for a more detailed
discussion of the effect of the reorganization on the continuity of Naugatuck
Valley Savings and Loan, deposit accounts and loans, voting rights of members
and liquidation rights.
DIRECTORS AND EXECUTIVE OFFICERS
See "Our Management" in the prospectus for a discussion of the
directors and executive officers of Naugatuck Valley Savings and Loan.
MANAGEMENT COMPENSATION
See "Our Management" in the prospectus for a discussion of management
remuneration.
BUSINESS OF NAUGATUCK VALLEY SAVINGS AND LOAN
See "Our Business" in the prospectus for a discussion of the business
of Naugatuck Valley Savings and Loan. See also "Selected Financial and Other
Data," "Management's Discussion and Analysis of Results of Operations and
Financial Condition," "Regulation and Supervision" and "Federal and State
Taxation."
DESCRIPTION OF THE PLAN OF REORGANIZATION
The Office of Thrift Supervision has approved the plan of
reorganization, subject to its approval by Naugatuck Valley Savings and Loan's
depositors and the satisfaction of certain other conditions. However, approval
by the Office of Thrift Supervision does not constitute a recommendation or
endorsement of the plan of reorganization. See "The Reorganization and Stock
Offering" in the prospectus for a description of the plan of reorganization. See
also "Summary," "Pro Forma Data," "Subscriptions By Executive Officers and
Directors" and "Federal and State Taxation."
DESCRIPTION OF CAPITAL STOCK
See "Description of Naugatuck Valley Financial Corporation Capital
Stock" in the prospectus for a description of the common stock to be offered.
See also "Market for the Common Stock." Naugatuck Valley Financial Corporation
will, where practicable, use its best efforts to encourage and assist
professional market makers in establishing and maintaining a market for the
common stock of Naugatuck Valley Financial Corporation.
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CAPITALIZATION
See "Capitalization" in the prospectus for a description of the
capitalization of Naugatuck Valley Savings and Loan and the pro forma
capitalization of Naugatuck Valley Financial Corporation.
USE OF NEW CAPITAL
See "Use of Proceeds" in the prospectus for a description of the
purposes for which the net proceeds from the common stock to be sold are
intended to be invested or otherwise used.
NEW CHARTERS, BYLAWS OR OTHER DOCUMENTS
In approving the plan of reorganization, depositors will also be
approving the proposed charters and bylaws for Naugatuck Valley Savings and
Loan, Naugatuck Valley Financial Corporation and Naugatuck Valley Mutual Holding
Company attached to the plan of reorganization. Upon completion of the
reorganization, our mutual charter and bylaws will be extinguished and Naugatuck
Valley Savings and Loan will be governed by the stock charter and bylaws. See
"The Reorganization and Stock Offering" for disclosure concerning any material
differences in Naugatuck Valley Savings and Loan's mutual charter and bylaws and
Naugatuck Valley Savings and Loan's stock charter and bylaws.
In addition, although the Board of Directors of Naugatuck Valley
Financial Corporation is not aware of any effort that might be made to obtain
control of Naugatuck Valley Financial Corporation after the reorganization, the
Board of Directors believes it is appropriate to adopt certain provisions
permitted by federal regulations that may have the effect of deterring a future
takeover attempt that is not approved by Naugatuck Valley Financial
Corporation's Board of Directors. Such provisions include the following:
o a 10% limitation on voting rights for a period of five years
after the date of the reorganization;
o a classified board of directors divided into three classes,
each of which contains approximately one-third of the number
of directors;
o the board of directors' ability to fill vacancies on the board
and the ability of stockholders to remove directors only for
cause and only upon the vote of a majority of the outstanding
shares of voting stock;
o a director qualification provision regarding criminal or
dishonest actions;
o limitations on stockholder action by written consent and
calling of special meetings of stockholders;
o advance notice provisions for stockholder nominations and
proposals; and
o authorized but unissued shares of capital stock.
OTHER MATTERS
Naugatuck Valley Financial Corporation will register its capital stock
under Section 12(g) of the Securities Exchange Act, as amended, and it will not
deregister the stock for a period of at least three years in accordance with
applicable regulations.
FINANCIAL STATEMENTS
See "Financial Statements" included in the prospectus.
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CONSENTS OF EXPERTS AND REPORTS
See "Experts" in the prospectus for a description of the consents of
experts. See also "Financial Statements" included in the prospectus.
RECOMMENDATION OF OUR BOARD OF DIRECTORS
Our Board of Directors recommends that you vote FOR the proposal to
approve the plan of reorganization.
Voting for the plan of reorganization will not obligate you to purchase
any common stock.
PROPOSAL 2 -- APPROVAL OF THE CHARITABLE FOUNDATION
GENERAL
In furtherance of our commitment to our local community, the plan of
reorganization provides that we will establish Naugatuck Valley Savings and Loan
Foundation as a non-stock Delaware corporation in connection with the
reorganization. The foundation will be funded with Naugatuck Valley Financial
Corporation common stock, as further described below. By further enhancing our
visibility and reputation in our local community, we believe that the foundation
will enhance the long-term value of Naugatuck Valley Savings and Loan' community
banking franchise. The reorganization presents us with a unique opportunity to
provide a substantial and continuing benefit to our community and to receive the
associated tax benefits, without any significant cash outlay by us.
PURPOSE OF THE CHARITABLE FOUNDATION
We emphasize community lending and community activities. Naugatuck
Valley Savings and Loan Foundation is being formed to complement, not to replace
our existing community activities. Although we intend to continue to emphasize
community lending and community activities following the reorganization, such
activities are not our sole corporate purpose. Naugatuck Valley Savings and Loan
Foundation, on the other hand, will be dedicated completely to community
activities and the promotion of charitable causes, and may be able to support
such activities in manners that are not presently available to us. We believe
that Naugatuck Valley Savings and Loan Foundation will enable us to assist the
communities within our market area in areas beyond community development and
lending and will enhance our current activities under the Community Reinvestment
Act. Naugatuck Valley Savings and Loan received a "Satisfactory" rating in its
last Community Reinvestment Act examination by the Office of Thrift Supervision.
We further believe that the funding of Naugatuck Valley Savings and
Loan Foundation with Naugatuck Valley Financial Corporation common stock will
allow our community to share in the potential growth and success
of Naugatuck Valley Financial Corporation long after the reorganization.
Naugatuck Valley Savings and Loan Foundation will accomplish that goal by
providing for continued ties between it and Naugatuck Valley Savings and Loan,
thereby forming a partnership within the communities in the Greater Naugatuck
Valley of Connecticut.
We do not expect the contribution to Naugatuck Valley Savings and Loan
Foundation to take the place of our traditional community lending and charitable
activities. For the year ended December 31, 2003, we contributed $50,000 to
community organizations. We expect to continue making charitable contributions
within our community. In connection with the closing of the reorganization,
Naugatuck Valley Financial Corporation intends to contribute to Naugatuck Valley
Savings and Loan Foundation a number of shares of Naugatuck Valley Financial
Corporation common stock in an amount up to 2% of the common stock issued in the
reorganization, including shares issued to Naugatuck Valley Mutual Holding
Company and to the charitable foundation.
STRUCTURE OF THE CHARITABLE FOUNDATION
Naugatuck Valley Savings and Loan Foundation will be incorporated under
Delaware law as a non-stock corporation. The charter of Naugatuck Valley Savings
and Loan Foundation will provide that the corporation is organized exclusively
for charitable purposes as set forth in Section 501(c)(3) of the Internal
Revenue Code.
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Naugatuck Valley Savings and Loan Foundation's charter will further provide that
no part of the net earnings of the foundation will inure to the benefit of, or
be distributable to, its directors, officers or members.
We have selected three of our current directors, Messrs. Lengyel,
Mengacci and Roman, to serve on the initial board of directors of the
foundation. See "Our Management" in the prospectus for a discussion of the
initial members of the board of directors. As required by OTS regulation, we
also will select one additional person to serve on the initial board of
directors who will not be one of our officers or directors and who will have
experience with local charitable organizations and grant making. While there are
no plans to change the size of the initial board of directors during the year
following the completion of the reorganization, following the first anniversary
of the reorganization, the foundation may alter the size of and composition of
its board of directors. For five years after the reorganization, one seat on the
foundation's board of directors will be reserved for a person from our local
community who has experience with local community charitable organizations and
grant making and who is not one of our officers, directors or employees, and one
seat on the foundation's board of directors will be reserved for one of our
directors.
The board of directors of Naugatuck Valley Savings and Loan Foundation
will be responsible for establishing its grant and donation policies, consistent
with the purposes for which it was established. As directors of a nonprofit
corporation, directors of Naugatuck Valley Savings and Loan Foundation will at
all times be bound by their fiduciary duty to advance the foundation's
charitable goals, to protect its assets and to act in a manner consistent with
the charitable purposes for which the foundation is established. The directors
of Naugatuck Valley Savings and Loan Foundation also will be responsible for
directing the activities of the foundation, including the management and voting
of the common stock of Naugatuck Valley Financial Corporation held by the
foundation. However, as required by OTS regulations, all shares of common stock
held by Naugatuck Valley Savings and Loan Foundation must be voted in the same
ratio as all other shares of the common stock on all proposals considered by
shareholders of Naugatuck Valley Financial Corporation.
Naugatuck Valley Savings and Loan Foundation's place of business will
be located at our administrative offices. The board of directors of Naugatuck
Valley Savings and Loan Foundation will appoint such officers and employees as
may be necessary to manage its operations. To the extent applicable, we will
comply with the affiliates restrictions set forth in Sections 23A and 23B of the
Federal Reserve Act and the OTS regulations governing transactions between
Naugatuck Valley Savings and Loan and the foundation.
Naugatuck Valley Savings and Loan Foundation will receive working
capital from: (1) any dividends that may be paid on Naugatuck Valley Financial's
common stock in the future; (2) within the limits of applicable federal and
state laws, loans collateralized by the common stock; or (3) the proceeds of the
sale of any of the common stock in the open market from time to time. As a
private foundation under Section 501(c)(3) of the Internal Revenue Code,
Naugatuck Valley Savings and Loan Foundation will be required to distribute
annually in grants or donations a minimum of 5% of the average fair market value
of its net investment assets. One of the conditions imposed on the gift of
common stock by Naugatuck Valley Financial Corporation is that the amount of
common stock that may be sold by Naugatuck Valley Savings and Loan Foundation in
any one year shall not exceed 5% of the average market value of the assets held
by Naugatuck Valley Savings and Loan Foundation, except where the board of
directors of the foundation determines that the failure to sell an amount of
common stock greater than such amount would result in a long-term reduction of
the value of its assets and/or would otherwise jeopardize its capacity to carry
out its charitable purposes.
TAX CONSIDERATIONS
Our independent tax advisor has advised us that an organization created
for the above purposes should qualify as a Section 501(c)(3) exempt organization
under the Internal Revenue Code and should be classified as a private
foundation. Naugatuck Valley Savings and Loan Foundation will submit a timely
request to the Internal Revenue Service to be recognized as an exempt
organization. As long as Naugatuck Valley Savings and Loan Foundation files its
application for tax-exempt status within 15 months from the date of its
organization, and provided the Internal Revenue Service approves the
application, its effective date as a Section 501(c)(3) organization will be the
date of its organization. Our independent tax advisor, however, has not rendered
any advice on whether Naugatuck Valley Savings and Loan Foundation's tax exempt
status will be affected by the regulatory requirement that all shares of common
stock of Naugatuck Valley Financial Corporation held by Naugatuck Valley Savings
and
8
Loan Foundation must be voted in the same ratio as all other outstanding shares
of common stock of Naugatuck Valley Financial Corporation on all proposals
considered by shareholders of Naugatuck Valley Financial Corporation.
Naugatuck Valley Financial Corporation is authorized to make charitable
contributions. We believe that the reorganization presents a unique opportunity
to establish and fund a charitable foundation given the substantial amount of
additional capital being raised. In making such a determination, we considered
the dilutive impact of the contribution of common stock to Naugatuck Valley
Savings and Loan Foundation on the amount of common stock to be sold in the
reorganization. We believe that the contribution to Naugatuck Valley Savings and
Loan Foundation in excess of the 10% annual limitation on charitable deductions
described below is justified given Naugatuck Valley Savings and Loan's capital
position and its earnings, the substantial additional capital being raised in
the reorganization and the potential benefits of Naugatuck Valley Savings and
Loan Foundation within our community. See "Capitalization," "Regulatory Capital
Compliance," and "Comparison of Independent Valuation and Pro Forma Financial
Information With and Without the Foundation." The amount of the contribution
will not adversely impact our financial condition. We therefore believe that the
amount of the charitable contribution is reasonable given our pro forma capital
position and does not raise safety and soundness concerns.
We have received an opinion from our independent tax advisor that
Naugatuck Valley Financial's contribution of its stock to Naugatuck Valley
Savings and Loan Foundation should not constitute an act of self-dealing and
that we should be entitled to a deduction in the amount of the fair market value
of the stock at the time of the contribution less the nominal amount that
Naugatuck Valley Savings and Loan Foundation is required to pay Naugatuck Valley
Financial Corporation for such stock. We are permitted to deduct only an amount
equal to 10% of our annual taxable income in any one year. We are permitted
under the Internal Revenue Code to carry the excess contribution over the
five-year period following the contribution to Naugatuck Valley Savings and Loan
Foundation. We estimate that substantially all of the contribution should be
deductible over the six-year period. However, we do not have any assurance that
the Internal Revenue Service will grant tax-exempt status to the foundation.
Furthermore, even if the contribution is deductible, we may not have sufficient
earnings to be able to use the deduction in full. We do not expect to make any
further contributions to Naugatuck Valley Savings and Loan Foundation within the
first five years following the initial contribution, unless such contributions
would be deductible under the Internal Revenue Code. Any such decisions would be
based on an assessment of, among other factors, our financial condition at that
time, the interests of our shareholders and depositors, and the financial
condition and operations of the foundation.
Although we have received an opinion from our independent tax advisor
that we should be entitled to a deduction for the charitable contribution, there
can be no assurances that the Internal Revenue Service will recognize Naugatuck
Valley Savings and Loan Foundation as a Section 501(c)(3) exempt organization or
that the deduction will be permitted. In such event, our contribution to
Naugatuck Valley Savings and Loan Foundation would be expensed without tax
benefit, resulting in a reduction in earnings in the year in which the Internal
Revenue Service makes such a determination.
As a private foundation, earnings and gains, if any, from the sale of
common stock or other assets are exempt from federal and state income taxation.
However, investment income, such as interest, dividends and capital gains, is
generally taxed at a rate of 2.0%. Naugatuck Valley Savings and Loan Foundation
will be required to file an annual return with the Internal Revenue Service
within four and one-half months after the close of its fiscal year. Naugatuck
Valley Savings and Loan Foundation will be required to make its annual return
available for public inspection. The annual return for a private foundation
includes, among other things, an itemized list of all grants made or approved,
showing the amount of each grant, the recipient, any relationship between a
grant recipient and the foundation's managers and a concise statement of the
purpose of each grant.
REGULATORY CONDITIONS IMPOSED ON THE CHARITABLE FOUNDATION
Establishment of Naugatuck Valley Savings and Loan Foundation will be
subject to the following conditions imposed pursuant to the regulations of the
Office of Thrift Supervision:
1. the Office of Thrift Supervision can examine the foundation;
9
2. the foundation must comply with all supervisory directives
imposed by the Office of Thrift Supervision;
3. the foundation must provide annually to the Office of Thrift
Supervision a copy of the annual report that the foundation
submits to the Internal Revenue Service;
4. the foundation must operate according to written policies
adopted by its board of directors, including a conflict of
interest policy;
5. the foundation may not engage in self-dealing and must comply
with all laws necessary to maintain its tax-exempt status
under the Internal Revenue Code; and
6. the foundation must vote its shares in the same ratio as all
of the other shares voted on each proposal considered by the
shareholders of Naugatuck Valley Financial Corporation.
In addition, within six months of completing the reorganization,
Naugatuck Valley Savings and Loan Foundation must submit to the Office of Thrift
Supervision a three-year operating plan.
RECOMMENDATION OF OUR BOARD OF DIRECTORS
Our Board of Directors recommends that you vote FOR the proposal to
establish and fund the charitable foundation.
The charitable foundation will only be established and funded if both
Proposal 1 and Proposal 2 are approved. If the plan of reorganization is
approved and the charitable foundation is not approved, we may determine to
complete the reorganization without the establishment of the charitable
foundation.
REVIEW OF OFFICE OF THRIFT SUPERVISION ACTION
Any person aggrieved by a final action of the Office of Thrift
Supervision which approves, with or without conditions, or disapproves a plan of
reorganization pursuant to this part may obtain review of such action by filing
in the court of appeals of the United States for the circuit in which the
principal office or residence of such person is located, or in the United States
Court of Appeals for the District of Columbia, a written petition praying that
the final action of the Office of Thrift Supervision be modified, terminated or
set aside. Such petition must be filed within 30 days after the publication of
notice of such final action in the Federal Register, or 30 days after the
mailing by the applicant of the notice to members as provided for in 12 C.F.R.
ss. 563b.205, whichever is later. The further procedure for review is as
follows: A copy of the petition is forthwith transmitted to the Office of Thrift
Supervision by the clerk of the court and thereupon the Office of Thrift
Supervision files in the court the record in the proceeding, as provided in
Section 2112 of Title 28 of the United States Code. Upon the filing of the
petition, the court has jurisdiction, which upon the filing of the record is
exclusive, to affirm, modify, terminate, or set aside in whole or in part, the
final action of the Office of Thrift Supervision. Review of such proceedings is
as provided in Chapter 7 of Title 5 of the United States Code. The judgment and
decree of the court is final, except that they are subject to review by the
United States Supreme Court upon certiorari as provided in Section 1254 of Title
28 of the United States Code.
By Order of the Board of Directors
Bernadette A. Mole
Corporate Secretary
Naugatuck, Connecticut
[MAIL DATE]
10
REVOCABLE PROXY
NAUGATUCK VALLEY SAVINGS AND LOAN
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD
OF DIRECTORS OF NAUGATUCK VALLEY SAVINGS AND LOAN
The undersigned depositor of Naugatuck Valley Savings and Loan hereby
appoints the full Board of Directors as proxy to cast all votes which the
undersigned is entitled to cast at a special meeting of depositors to be held at
[MEETING LOCATION] at [MEETING TIME], [MEETING DATE], and at any and all
adjournments and postponements thereof, and to act with respect to all votes
that the undersigned would be entitled to cast, if then personally present, in
accordance with the instructions on the reverse side hereof:
1. FOR or AGAINST the plan of reorganization and minority stock
issuance pursuant to which Naugatuck Valley Savings and Loan
will be reorganized into the mutual holding company structure.
As part of voting on the plan of reorganization, depositors
will be approving the proposed charters and bylaws for
Naugatuck Valley Savings and Loan, Naugatuck Valley Financial
Corporation and Naugatuck Valley Mutual Holding Company
attached to the plan of reorganization. Pursuant to the plan
of reorganization, Naugatuck Valley Financial Corporation will
issue 55% of its common stock to Naugatuck Valley Mutual
Holding Company, a federally chartered mutual holding company
that will be formed pursuant to the plan of reorganization,
will offer for sale to eligible depositors 43% of its common
stock, and assuming approval of Proposal 2, will contribute 2%
of its common stock to Naugatuck Valley Savings and Loan
Foundation; and
2. FOR or AGAINST the establishment of Naugatuck Valley Savings
and Loan Foundation, a Delaware non-stock corporation,
dedicated to the promotion of charitable purposes within the
Greater Naugatuck Valley of Connecticut communities, and the
contribution of a number of shares of authorized but unissued
Naugatuck Valley Financial Corporation common stock in an
amount equal to 2% of the common stock issued in the
reorganization concurrently with completion of the
reorganization of Naugatuck Valley Savings and Loan into the
mutual holding company form of organization.
This proxy will be voted as directed by the undersigned depositor.
UNLESS CONTRARY DIRECTION IS GIVEN, THIS PROXY, PROPERLY SIGNED AND DATED, WILL
BE VOTED FOR ADOPTION OF THE PLAN OF REORGANIZATION AND FOR ESTABLISHMENT AND
FUNDING OF THE CHARITABLE FOUNDATION. In addition, this proxy will be voted at
the discretion of the Board of Directors upon any other matter as may properly
come before the special meeting.
The undersigned may revoke this proxy at any time before it is voted by
delivering to the Corporate Secretary of Naugatuck Valley Savings and Loan
either a written revocation of the proxy or a duly executed proxy bearing a
later date, or by appearing at the special meeting, filing a written revocation
and voting in person. The undersigned hereby acknowledges receipt of the notice
of special meeting of depositors and proxy statement and accompanying
prospectus.
IMPORTANT: PLEASE VOTE, DATE AND SIGN ON THE REVERSE SIDE. NOT VOTING WILL
HAVE THE SAME EFFECT AS VOTING AGAINST BOTH PROPOSALS.
VOTING DOES NOT OBLIGATE YOU TO BUY STOCK.
PLEASE MARK VOTE BY MARKING
ONE OF THE FOLLOWING BOXES AS
SHOWN [X]
1. The plan of reorganization and minority stock issuance pursuant to
which Naugatuck Valley Savings and Loan will be reorganized into the
mutual holding company structure (as described on the reverse side of
this proxy card).
FOR [ ] AGAINST [ ]
2. The establishment and funding of the Naugatuck Valley Savings and Loan
Foundation (as described on the reverse side of this proxy card).
FOR [ ] AGAINST [ ]
The undersigned hereby acknowledges receipt of a Notice of Special Meeting of
Depositors of Naugatuck Valley Savings and Loan called for [MEETING DATE] and a
Proxy Statement for the Special Meeting prior to the signing of this proxy.
SIGNATURE DATE:
- -------------------------------------------- -----------------------
SIGNATURE DATE:
- -------------------------------------------- -----------------------
NOTE: PLEASE SIGN, DATE AND PROMPTLY RETURN ALL PROXY CARDS IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE.
IMPORTANT: PLEASE SIGN YOUR NAME EXACTLY AS IT APPEARS ON THIS PROXY. JOINT
ACCOUNTS NEED ONLY ONE SIGNATURE. WHEN SIGNING AS AN ATTORNEY, ADMINISTRATOR,
AGENT, OFFICER, EXECUTOR, TRUSTEE, GUARDIAN, ETC., PLEASE ADD YOUR FULL TITLE TO
YOUR SIGNATURE.