Exhibit 2.1
CONFIDENTIAL
WESTBOROUGH SAVINGS BANK
PLAN OF REORGANIZATION
FROM A MUTUAL SAVINGS BANK
TO A MUTUAL HOLDING COMPANY
AND STOCK ISSUANCE PLAN
AS ADOPTED BY THE BOARD OF TRUSTEES
ON MARCH 15, 1999
AS AMENDED AS OF APRIL 15, 1999
TABLE OF CONTENTS
1. INTRODUCTION - BUSINESS PURPOSE........................................1
2. DEFINITIONS............................................................2
3. THE REORGANIZATION.....................................................8
4. CONDITIONS TO IMPLEMENTATION OF THE REORGANIZATION....................11
5. SPECIAL MEETING OF CORPORATORS AND VOTE REQUIRED TO
APPROVE THE PLAN......................................................12
6. CHARTERS AND BYLAWS...................................................12
7. LIQUIDATION AND VOTING RIGHTS.........................................12
8. CONVERSION OF MHC TO STOCK FORM.......................................13
9. TIMING OF THE REORGANIZATION AND SALE OF CAPITAL STOCK................14
10. NUMBER OF SHARES TO BE OFFERED........................................15
11. INDEPENDENT VALUATION AND PURCHASE PRICE OF SHARES....................15
12. METHOD OF OFFERING SHARES AND RIGHTS TO PURCHASE STOCK................16
13. ADDITIONAL LIMITATIONS ON PURCHASES OF COMMON STOCK...................19
14. PAYMENT FOR STOCK.....................................................21
15. MANNER OF EXERCISING SUBSCRIPTION RIGHTS THROUGH
ORDER FORMS...........................................................22
16. UNDELIVERED, DEFECTIVE OR LATE ORDER FORM;
INSUFFICIENT PAYMENT.................................................23
17. COMPLETION OF THE STOCK OFFERING......................................24
18. MARKET FOR COMMON STOCK...............................................24
19. STOCK PURCHASES BY MANAGEMENT PERSONS AFTER
THE STOCK OFFERING....................................................24
20. RESALES OF STOCK BY MANAGEMENT PERSONS................................24
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21. STOCK CERTIFICATES....................................................24
22. RESTRICTION ON FINANCING STOCK PURCHASES..............................25
23. STOCK BENEFIT PLANS...................................................25
24. POST-REORGANIZATION FILING AND MARKET MAKING..........................25
25. LIQUIDATION ACCOUNT...................................................26
26. EMPLOYMENT AND OTHER SEVERANCE AGREEMENTS.............................27
27. PAYMENT OF DIVIDENDS AND REPURCHASE OF STOCK..........................27
28. REORGANIZATION AND STOCK OFFERING EXPENSES............................28
29. INTERPRETATION........................................................28
30. AMENDMENT OR TERMINATION OF THE PLAN..................................28
Exhibits
Exhibit A Charter and Bylaws of the Bank
Exhibit B Articles of Organization and Bylaws of the Stock Holding Company
Exhibit C Charter and Bylaws of the Mutual Holding Company
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1. INTRODUCTION - BUSINESS PURPOSE
The Board of Trustees of Westborough Savings Bank (the "Bank") has adopted
this Plan of Reorganization From a Mutual Savings Bank to a Mutual Holding
Company and Stock Issuance Plan (the "Plan") pursuant to which the Bank proposes
to reorganize from a state-chartered mutual savings bank into the mutual holding
company structure (the "Reorganization") under the laws of the Commonwealth of
Massachusetts and the regulations of the Division of Banks of the Commonwealth
of Massachusetts (the "Division") and the Federal Deposit Insurance Corporation
("FDIC"), and other applicable federal laws and regulations. As part of the
Reorganization and the Plan, the Bank will establish (i) a
Massachusetts-chartered stock savings bank (the "Stock Bank") that will succeed
to all of the rights and obligations of the Bank as set forth in the Plan; (ii)
a Massachusetts-chartered mutual holding company (the "MHC"), and (iii) a
Massachusetts incorporated mid-tier stock holding company (the "Stock Holding
Company"). The Stock Holding Company will be a majority-owned subsidiary of the
MHC at all times so long as the MHC remains in existence, and the
Massachusetts-chartered stock savings bank resulting from the Reorganization
(the Stock Bank) will become a wholly-owned subsidiary of the Stock Holding
Company. Concurrently with the Reorganization, the Stock Holding Company intends
to offer for sale up to 49% of its Common Stock in the Stock Offering on a
priority basis to qualifying depositors and Tax-Qualified Employee Plans of the
Bank, with any remaining shares offered to the public in a Community Offering.
The primary purpose of the Reorganization is to establish a holding
company and to convert the Bank to the stock form of ownership, which will
enable the Bank to compete and expand more effectively in the financial services
marketplace. The Reorganization will permit the Stock Holding Company to issue
Capital Stock, which is a source of capital not available to mutual savings
banks. Since the Stock Holding Company will not be offering all of its common
stock for sale to depositors and the public in the Stock Offering, the
Reorganization will result in less capital raised in comparison to a standard
mutual-to-stock conversion. The Reorganization, however, will offer the Bank the
opportunity to raise additional capital since a majority of the Stock Holding
Company's common stock will be available for sale in the future, subject to
regulatory approval. It will also greatly enhance the Bank's ability to (a)
expand its franchise through increased lending, (b) make necessary capital
investments in facilities and technology, (c) diversify products offered to
customers and (d) establish new branch locations. Lastly, the Reorganization
will enable the Bank to better manage its capital by providing broader
investment opportunities through the holding company structure, and by enabling
the Bank to distribute capital to stockholders of the Stock Holding Company in
the form of dividends. Although the Reorganization and Stock Offering will
create a stock savings bank and stock holding company, only a minority of the
Common Stock will be offered for sale in the Stock Offering. As a result, the
Bank's mutual form of ownership and its ability to remain an independent savings
bank and to provide community-oriented financial services will be preserved
through the mutual holding company structure.
The Reorganization, and certain transactions incidental to the
Reorganization, are subject to the approval of the Division, the Board of Bank
Incorporation (the "BBI"), the Board of Governors of the Federal Reserve System
(the "FRB") and the FDIC, and must be approved by the affirmative vote of at
least (i) a majority of the Bank's corporators, and (ii) a majority of the
Bank's Independent Corporators (who must constitute not less than 60% of all
corporators) at an annual meeting or a
special meeting called for such purpose. By approving the Plan, the corporators
will also be approving all steps necessary and incidental to the formation of
the Stock Bank, the Stock Holding Company, and the MHC, including any merger
necessary to consummate the Reorganization.
Sections 1 through 8 and Sections 28 and 29 of this Plan shall constitute
the Westborough Savings Bank Plan of Reorganization from a Mutual Savings Bank
to a Mutual Holding Company (the "Reorganization Plan"). Section 2 and Sections
9 through 29 of this Plan shall constitute the Westborough Savings Bank Stock
Issuance Plan (the "Stock Issuance Plan").
2. DEFINITIONS
As used in the Plan, the terms set forth below have the following
meanings:
ACTING IN CONCERT: The term "acting in concert" means (a) knowing
participation in a joint activity or interdependent conscious parallel action
towards a common goal, whether or not pursuant to an express agreement; or (b)
persons seeking to combine or pool their voting or other interests in the
securities of an issuer for a common purpose, pursuant to any contract,
understanding, relationship, agreement or other arrangement, whether written or
otherwise. When persons act together for such purpose, their group is deemed to
have acquired their stock. The determination of whether a group is acting in
concert shall be made solely by the Board of Trustees of the Bank or the Board
of Investment and may be based on any evidence upon which the Board or such
delegatee chooses to rely, including, without limitation, joint account
relationships or the fact that such Persons have filed joint Schedules 13D with
the SEC with respect to other companies.
ACTUAL SUBSCRIPTION PRICE: The price per share, determined as provided in
the Plan, at which the Common Stock will be sold in the Subscription Offering.
AFFILIATE: An "affiliate" of, or a person "affiliated" with, a specified
person, is a person that directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with the
person specified.
APPLICATION: The application, including a copy of the Plan, submitted by
the Bank to the Commissioner for approval of the Reorganization and Stock
Offering.
ASSOCIATE: The term "Associate," when used to indicate a relationship with
any Person, means: (i) any corporation or organization (other than the Bank, the
Stock 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, trustee or officer of the MHC, the Stock Holding Company or the Bank,
to the extent
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provided in Sections 11-13. 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: Westborough Savings Bank in its pre-Reorganization mutual form.
BBI: The Board of Bank Incorporation.
BHCA: The Bank Holding Company Act of 1956, as amended.
BIF: The Bank Insurance Fund.
BMA: The Bank Merger Act.
BOARD OF INVESTMENT: The Bank's Board of Investment.
CAPITAL STOCK: Any and all authorized stock of the Bank or the Stock
Holding Company.
COMMISSIONER: The Office of the Commissioner of Banks of the Commonwealth
of Massachusetts.
COMMUNITY: The Towns of Grafton, Hopkinton, Northborough, Shrewsbury,
Southborough, and Westborough.
COMMUNITY OFFERING: The offering to certain members of the general public
in the community of any unsubscribed shares in the Subscription Offering which
may be effected pursuant to the Plan. The Community Offering may include a
Syndicated Community Offering.
COMMON STOCK: The Common Stock to be issued by the Stock Holding Company
to the MHC and to the public in the Stock Offering in connection with the
Reorganization and Stock Offering.
CORPORATOR: A member of the Bank's Board of Incorporation.
DEPOSIT ACCOUNT(S): Any withdrawable deposit(s) offered by the Bank,
including NOW account deposits, certificates of deposit, demand deposits and IRA
accounts and Keogh plans for which the Bank acts as custodian or trustee.
DIVISION: The Division of Banks of the Commonwealth of Massachusetts.
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 Stock Bank is completed.
ELIGIBLE ACCOUNT HOLDER: Any person holding a Qualifying Deposit on the
Eligibility Record Date.
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ELIGIBILITY RECORD DATE: December 31, 1997, the date for determining who
qualifies as an Eligible Account Holder.
ESOP: The Bank's employee stock ownership plan.
ESTIMATED VALUATION RANGE: The range of the estimated pro forma market
value of the total number of shares of Common Stock, as determined by the
Independent Appraiser prior to the Subscription Offering and as it may be
amended from time to time thereafter.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended.
FDIC: The Federal Deposit Insurance Corporation.
FRB: The Board of Governors of the Federal Reserve System.
HOLDING COMPANY APPLICATION: The holding company application to be
submitted by the MHC and the Stock Holding Company to the FRB to have the MHC
and the Stock Holding Company acquire direct and indirect control 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 Stock Holding
Company.
INDEPENDENT CORPORATOR: A Corporator who is not an employee, officer,
trustee or "significant borrower" of the Bank.
INDEPENDENT VALUATION: The estimated pro forma market value of the Stock
Holding Company and the Bank as determined by the Independent Appraiser.
INFORMATION STATEMENT: The Notice and Information Statement on
Reorganization from a Mutual Savings Bank to a Mutual Holding Company to be
mailed to the Corporators of the Bank prior to the Special Meeting of
Corporators.
LIQUIDATION ACCOUNT: The liquidation account established pursuant to the
Plan.
MANAGEMENT PERSON: Any officer, trustee or Corporator of the Bank, the
Stock Holding Company or the MHC.
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, (i) regularly publishes bona fide
competitive bid and offer quotations on request, and (ii) is ready, willing and
able to effect transactions in reasonable quantities at the dealer's quoted
prices with other brokers or dealers.
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MHC: Westborough Bancorp, MHC, the mutual holding company resulting from
the Reorganization.
MINORITY OWNERSHIP INTEREST: The shares of the Stock Holding Company's
Common Stock owned by persons other than the MHC.
MINORITY STOCKHOLDER: Any owner of the Stock Holding Company's Common
Stock, other than the MHC.
MINORITY STOCK OFFERING: One or more offerings of up to 49% in the
aggregate of the outstanding Common Stock of the Stock Holding Company to
persons 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 FDIC and the Division to notify the FDIC and the
Division of the Reorganization and the Stock Offering.
OFFERING RANGE: The aggregate purchase price of the Common Stock to be
sold in the Stock Offering based on the Independent Valuation expressed as a
range which may vary within 15% above or 15% below the midpoint of such range,
with a possible adjustment by up to 15% above the maximum of such range. The
Offering Range will be based on the Estimated Valuation Range, but will
represent a Minority Ownership Interest equal to up to 49% of the Common Stock.
OFFICER: The Chairman of the Board, the President, any officer of the
level of vice president or above, the Clerk and the Treasurer of the Bank.
PERSON: An individual, corporation, partnership, association, joint-stock
company, trust (including Individual Retirement Accounts and KEOGH Accounts),
unincorporated organization, government entity or political subdivision thereof
or any other entity.
PLAN: This Plan of Reorganization from Mutual Savings Bank to Mutual
Holding Company and Stock Issuance Plan.
QUALIFYING DEPOSIT: The aggregate balances of all Deposit Accounts of an
Eligible Account Holder as of the close of business on the Eligibility Record
Date or of a Supplemental Eligible Account Holder as of the close of business on
the Supplemental Eligibility Record Date, as the case may be, provided such
aggregate balance is not less than $50.
REGULATIONS: The regulations of the Division regarding mutual holding
companies and conversion to stock form.
REORGANIZATION: The reorganization of the Bank into the mutual holding
company structure including the organization of the MHC, the Stock Holding
Company and the Stock Bank pursuant to the Plan.
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SEC: The Securities and Exchange Commission.
SPECIAL MEETING: The Special Meeting of Corporators called for the purpose
of voting on the Plan.
STOCK BANK: The Massachusetts chartered stock savings bank resulting from
the Reorganization in accordance with the Plan.
STOCK HOLDING COMPANY: Westborough Financial Services, Inc., the
intermediate stock holding company that will be a Massachusetts corporation
which will be majority-owned by the MHC and which will own 100% of the common
stock of the Bank.
STOCK ISSUANCE PLAN: The portion of this Plan relating to the Stock
Offering including Section 2 and Sections 9 through 29 of this Plan.
STOCK OFFERING: The offering of Common Stock of the Stock Holding Company
to persons other than the MHC, in a Subscription Offering and, to the extent
shares remain available, in a Community Offering and Syndicated Community
Offering.
SUBSCRIPTION OFFERING: The offering of Common Stock of the Stock Holding
Company for subscription and purchase pursuant to the 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 or a Tax-Qualified Employee Plan of the Bank, or an officer,
director, trustee or Corporator of the Bank, or any Associate thereof.
SUPPLEMENTAL ELIGIBILITY RECORD DATE: The supplemental record date for
determining who qualifies as a Supplemental Eligible Account Holder. The
Supplemental Eligibility Record Date shall be December 31, 1998.
SYNDICATED COMMUNITY OFFERING: At the discretion of the Bank and the Stock
Holding Company, the offering of Common Stock following or contemporaneously
with the Community Offering through a syndicate of broker-dealers.
TAX-QUALIFIED EMPLOYEE PLAN: Any defined benefit plan or defined
contribution plan (including the ESOP, any stock bonus plan, profit-sharing
plan, or other plan) of the Bank, the Stock 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 Benefit Plan means any defined benefit plan or
defined contribution plan which is not so qualified.
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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 Stock
Holding Company; and
(ii) To vote on or to direct the conduct of the operations or other
significant policies of the Bank or the Stock 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 Stock Holding
Company, or the payment of dividends by the Bank or the Stock
Holding Company 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 Stock 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 establish the Stock Holding
Company as a Massachusetts corporation and the MHC as a Massachusetts
corporation. The Reorganization will be effected as follows, or in any other
manner approved by the Commissioner that is consistent with the purposes of the
Plan and applicable laws and regulations.
(i) The Bank will cause to be organized a Massachusetts chartered
de novo mutual savings bank (the "De Novo Bank");
(ii) The De Novo Bank will reorganize into the MHC and will form a
de novo stock savings bank subsidiary (the "Stock Bank"), and
all of the assets and liabilities of the De Novo Bank will be
transferred to the Stock Bank;
(iii) The Bank will merge with and into the Stock Bank with the
Stock Bank as the resulting entity;
(iv) The MHC will organize the Stock Holding Company as a separate
wholly-owned subsidiary of the MHC;
(v) The MHC will contribute all of the shares of common stock of
the Stock Bank to the Stock Holding Company, which will result
in the MHC owning 100% of the Common Stock of the Stock
Holding Company and the Stock Holding Company owning 100% of
the common stock of the Stock Bank; and
(vi) The Stock Holding Company will offer to sell up to 49% of its
Common Stock in the Subscription Offering and, if applicable,
the Community Offering.
Contemporaneously with the Reorganization, the Stock Holding Company will
offer for sale in the Stock Offering shares of Common Stock representing up to
49% of the pro forma market value of the Stock Holding Company and the Bank.
Such shares will not be covered by deposit insurance. 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. The Stock Bank may distribute
additional capital to the Stock
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Holding Company following the Reorganization, subject to the applicable
regulations governing capital distributions.
Upon completion of the Reorganization and Stock Offering, the MHC, the
Stock Holding Company and the Stock Bank will be structured as follows:
----------------------------------------------------------------
Public
The MHC Stockholders
----------------------------------------------------------------
More than 50% of Less than 50% of
the Common Stock the Common Stock
----------------------------------------------------------------
-------------------------------------------------
The Stock Holding Company
-------------------------------------------------
100% of the
Common Stock
-------------------------------------------------
-------------------------------------------------
The Stock Bank
-------------------------------------------------
B. EFFECT ON DEPOSIT ACCOUNTS AND BORROWINGS
Each deposit account in the Bank upon consummation of the Reorganization
will become a deposit account in the Stock Bank in the same amount and on the
same terms and conditions, and such deposit account will continue to be insured
by the FDIC and the Depositors Insurance Fund in the same manner, as the deposit
account existed in the Bank immediately prior to the Reorganization. Upon
consummation of the Reorganization, all loans and other borrowings from the Bank
shall retain the same status with the Stock Bank after the Reorganization as
they had with the Bank immediately prior to the Reorganization.
C. THE BANK
Upon completion of the Reorganization, the Stock Bank will be authorized
to exercise any and all powers, rights and privileges of, and will be subject to
all limitations applicable to, stock savings banks under Massachusetts law. A
copy of the proposed Charter and Bylaws of the Stock Bank is attached hereto as
EXHIBIT A and is made a part of the Plan. The Reorganization will not result in
any reduction of the amount of retained earnings (other than the assets of the
Bank that are transferred to other capital stock accounts or retained by or
distributed to the Stock Holding Company or the Mutual Holding Company),
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 Stock Holding Company and the Stock Bank on a consolidated
basis in accordance with generally accepted accounting principles.
The members of the Board of Directors of the Stock Bank will consist of
persons who are the members of the Board of Trustees of the Bank. The Stock Bank
will be wholly-owned by the Stock Holding Company and the Stock Holding Company,
as the sole holder of the outstanding
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Capital Stock of the Stock Bank, shall have exclusive voting rights in the Stock
Bank. The Stock 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,
any liquidation rights of depositors of the Bank under Massachusetts law will be
transferred to the MHC and/or the Stock Bank and the Stock Holding Company,
subject to the conditions specified below.
D. THE STOCK HOLDING COMPANY
The Stock Holding Company will be chartered as a Massachusetts corporation
and will be authorized to exercise any and all powers, rights and privileges,
and will be subject to all limitations applicable to bank holding companies
under applicable federal and Massachusetts laws and regulations. The initial
members of the Board of Directors of the Stock Holding Company will be the
members of the existing Board of Trustees of the Bank at the time of the
Reorganization. Thereafter, the voting stockholders of the Stock Holding Company
will elect annually approximately one-third of the Stock Holding Company's
directors. A copy of the Articles of Organization and Bylaws of the Stock
Holding Company is attached as EXHIBIT B and is made part of this Plan.
The Stock 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 Stock Holding Company. The Stock Holding Company may issue any
amount of Non-Voting Stock to persons other than the MHC. The Stock Holding
Company will be authorized to undertake one or more Minority Stock Offerings of
up to 49% in the aggregate of the total outstanding Common Stock of the Stock
Holding Company, and, based upon current market conditions and the capital needs
of the Bank, the Stock Holding Company currently intends to offer for sale up to
30% of its Common Stock in the Stock Offering.
E. THE MUTUAL HOLDING COMPANY
As a mutual corporation, the MHC will have no stockholders. The trustees
of the MHC will have exclusive voting authority as to all matters relating to
the MHC except as otherwise provided to Corporators of the MHC under its
chartering instruments and other applicable law. The initial members of the
Board of Trustees of the MHC will consist of all of the members of the Board of
Trustees of the Bank at the time of the Reorganization. Thereafter,
approximately one-third of the trustees of the MHC will be elected annually by
the Corporators of the MHC. The initial members of the Corporators of the MHC
will consist of all of the existing Corporators of the Bank. Thereafter,
Corporators of the MHC will be appointed pursuant to the chartering instruments
of the MHC and applicable law.
Any liquidation rights of depositors that existed under Massachusetts law
prior to the Reorganization shall continue in the MHC following the
Reorganization. The rights and powers of the MHC will be defined by the MHC's
Charter and Bylaws (a copy of which is attached to the Plan as EXHIBIT C and
made a part of the Plan) and by applicable statutory and regulatory provisions
of Massachusetts and federal law.
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4. CONDITIONS TO IMPLEMENTATION OF THE REORGANIZATION
Consummation of the Reorganization is expressly conditioned upon prior
occurrence of the following:
A. Approval of the Plan by the affirmative vote of a majority of the
Board of Trustees of the Bank.
B. Approval of the Plan by the affirmative vote of a majority of the
Corporators at a regular or special meeting of such Corporators, and
by the affirmative vote of a majority of Independent Corporators
(who shall constitute not less than 60% of all Corporators).
C. Approval by the Commissioner of the Application, including the Plan,
the charter and bylaws of the Stock Bank and the MHC, and all other
transactions contemplated by the Plan for which approval is required
by the Commissioner; and approval by the BBI of the charter of the
DeNovo Bank and the Stock Bank.
D. Submission of the Notice to the FDIC and the Bank either (i)
receives a notice of intent not to object from the FDIC, or (ii) 60
days (subject to extension for an additional 60 days) have passed
following the acceptance of a complete FDIC Notice by the FDIC.
E. Approval by the FRB pursuant to the BHCA for the MHC and the Stock
Holding Company to become bank holding companies by owning or
acquiring, directly or indirectly, the majority of the Stock Bank's
common stock to be issued in connection with the Reorganization.
F. Approval by the FDIC pursuant to the BMA of the transfer of assets
and liabilities of the MHC to the Stock Bank and the merger of the
Bank into the Stock Bank in connection with the Reorganization.
G. Receipt by the Bank of either a private letter ruling from the
Internal Revenue Service or an opinion of the Bank's counsel as to
the federal income tax consequences of the Reorganization to the
MHC, the Stock Bank and the Bank.
H. Receipt by the Bank of either a private letter ruling of the
Massachusetts Department of Revenue or an opinion of counsel or the
Bank's independent public accountants as to the Massachusetts income
tax consequences of the Reorganization to the MHC, the Stock Bank
and Bank.
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5. SPECIAL MEETING OF CORPORATORS AND VOTE REQUIRED TO APPROVE THE
PLAN
Subsequent to the approval of the Plan by the Commissioner, the Special
Meeting shall be scheduled in accordance with the Bank's Bylaws. Promptly after
receipt of all regulatory approvals necessary to distribute the Information
Statement, the Bank shall distribute the Information Statement to all
Corporators. A copy of the Plan will be provided to all Corporators. Pursuant to
the Regulations, an affirmative vote of at least (i) a majority of the Bank's
total Corporators, and (ii) a majority of the Bank's Independent Corporators
(who shall constitute not less than 60% of all Corporators) voting at the
Special Meeting shall be required for approval of the Plan.
6. CHARTERS AND BYLAWS
Copies of the proposed Charter and Bylaws of the Stock Bank, the proposed
Articles of Organization and Bylaws of the Stock Holding Company and the
proposed Charter and Bylaws of the MHC are attached hereto as EXHIBITS A, B AND
C, respectively, and are made a part of this Plan. By their approval of this
Plan, the Corporators shall have approved and adopted the Charter and Bylaws of
the Bank, the Stock Holding Company and the MHC.
The total shares of Common Stock authorized under the Stock Holding
Company's Articles of Organization will exceed the shares of Common Stock to be
issued to the MHC and the Minority Stockholders in the Reorganization. In
addition, the Articles of Organization of the Stock Holding Company will contain
provisions that prohibit persons other than the Board of Directors of the Stock
Holding Company or committees of the Board of Directors of the Stock Holding
Company from calling special meetings of the stockholders of the Stock Holding
Company and require a supermajority vote by stockholders to call a special
meeting of stockholders.
7. LIQUIDATION AND VOTING RIGHTS
Following the Reorganization, each Eligible Account Holder and each
Supplemental Eligible Account Holder will have an interest in the Liquidation
Account established pursuant to the Plan so long as such person remains a
depositor of the Stock Bank after the Reorganization. In addition, following the
Reorganization, all depositors who had liquidation 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 for so long as they remain depositors of the
Stock Bank. In addition, all persons who become depositors of the Stock Bank
subsequent to the Reorganization also will have liquidation rights with respect
to the MHC. In each case, no person who ceases to be the holder of a Deposit
Account with the Bank after the Reorganization shall have any liquidation rights
with respect to the MHC. The MHC shall liquidate under M.G.L. c.167H, upon the
sale or acquisition of the Stock Holding Company or the Stock Bank to a bank
holding company or savings and loan holding company which is not a mutual
holding company, or upon the sale of the Stock Bank to a banking or thrift
institution that is not a subsidiary of a mutual holding company.
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8. CONVERSION OF MHC TO STOCK FORM
Following the completion of the Reorganization, the MHC may elect to
convert to stock form in accordance with M.G.L.c.167H, ss.9, the Massachusetts
conversion regulations set forth at 209 CMR Sections 33.01 et seq., and
applicable federal laws and regulations (a "Conversion Transaction"). There can
be no assurance when, if ever, a Conversion Transaction will occur, and the
Board of Trustees has no intent or plan to undertake a Conversion Transaction at
this time. If the Conversion Transaction does not occur, the MHC will always own
a majority of the Common Stock of the Stock Holding Company. The Board of
Trustees of the MHC and the Board of Directors of the Stock Holding Company will
not undertake a Conversion Transaction for three years following the Stock
Offering, unless compelling and valid business reasons exist to do so.
In a Conversion Transaction, the MHC would merge with and into the Stock
Bank or the Stock Holding Company at the discretion of the MHC, and qualifying
depositors of the Stock Bank would receive the right to subscribe for a number
of shares of common stock of the Stock Holding Company, as determined by the
formula set forth in the paragraphs below. The additional shares of Common Stock
of the Stock Holding Company issued in the Conversion Transaction would be sold
at their aggregate pro forma market value as determined by an Independent
Appraisal.
Any Conversion Transaction shall be fair and equitable to Minority
Stockholders. In any Conversion Transaction, Minority Stockholders, if any, will
be entitled without additional consideration to maintain the same percentage
ownership interest in the Stock Holding Company after the Conversion Transaction
as their ownership interest in the Stock Holding Company immediately prior to
the Conversion Transaction (i.e., the Minority Ownership Interest), subject only
to the following adjustments (if required by federal 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 Stock Holding Company).
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The adjustment referred to in clause (i) of the immediately preceding
paragraph above would require that the Minority Ownership Interest be adjusted
by multiplying the Minority Ownership Interest by the following fraction:
(Stock Holding Company stockholders' equity immediately preceding the
Conversion Transaction) - (aggregate amount of dividends waived by MHC)
-----------------------------------------------------------------------
Stock Holding Company stockholders' equity immediately preceding the Conversion
Transaction
The adjustment referred to in clause (ii) above would further adjust the
Minority Ownership Interest by multiplying the result obtained in the preceding
paragraph by the following fraction:
(proforma market value of Stock Holding Company) - (market value of
assets of MHC other than Stock Holding Company common stock)
------------------------------------------------------------
pro forma market value of Stock Holding Company
At the sole discretion of the Board of Trustees of the MHC and the Board
of Directors of the Stock 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 Stock Holding Company.
A Conversion Transaction would require the approval of applicable bank
regulators, and would be presented to a vote of the Corporators of the MHC and
the stockholders of the Stock Holding Company as of a voting record date prior
to the completion of the Conversion Transaction. Federal and state regulatory
policy requires that in any Conversion Transaction the depositors of the Stock
Bank will be accorded the same stock purchase priorities as if the MHC were a
mutual savings bank converting to stock form.
9. 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. The
Stock Holding Company may commence the Stock Offering concurrently with or at
any time after the mailing of the Information Statement to the Corporators. The
Stock Offering shall be conducted in compliance with the securities offering
regulations of the FDIC, the SEC and the Division. The Bank will not finance or
loan funds to any person to purchase Common Stock.
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10. 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 Trustees of the Bank and the Board of Directors of the Stock 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 no greater
than 49% of the issued and outstanding shares of Common Stock of the Stock
Holding Company.
11. INDEPENDENT VALUATION AND PURCHASE PRICE OF SHARES
The total number of shares of Common Stock to be issued and offered for
sale in the Stock Offering and the Estimated Valuation Range will be determined
jointly by the Board of Trustees of the Bank and the Board of Directors of the
Stock Holding Company immediately prior to the commencement of the Subscription
and Community Offerings, subject to adjustment thereafter if necessitated by
market or financial conditions, with the approval of the FDIC and the Division,
if necessary. In particular, the total number of shares may be increased by up
to 15% of the number of shares offered in the Subscription and Community
Offerings if the Estimated Valuation Range is increased subsequent to the
commencement of the Subscription and Community Offerings to reflect changes in
market and financial conditions and the aggregate purchase price is not more
than 15% above the maximum of the Estimated Valuation Range.
All shares sold in the Stock Offering will be sold at a uniform price per
share referred to in this Plan as the Actual Subscription Price. The aggregate
purchase price for all shares of Common Stock will not be inconsistent with the
estimated consolidated pro forma market value of the Stock Holding Company and
the Bank. The estimated consolidated pro forma market value of the Stock Holding
Company and the Bank will be determined for such purpose by the Independent
Appraiser. Prior to the commencement of the Subscription and Community
Offerings, an Offering Range will be established, which range will vary within
15% above to 15% below the midpoint of such range. The shares of Common Stock
being sold in the Stock Offering will represent a minority ownership interest in
the outstanding Common Stock of the Stock Holding Company equal to up to 49% of
the estimated pro forma market value of the Common Stock based upon the
Independent Valuation. The percentage of Common Stock offered for sale in the
Stock Offering and the Offering Range shall be determined by the Board of
Directors of the Stock Holding Company and the Board of Trustees of the Bank
prior to commencement of the Subscription Community Offerings, and will be
confirmed upon completion of the Stock Offering.
The number of shares of Common Stock to be issued in the Stock Offering
and the purchase price per share may be increased or decreased by the Stock
Holding Company. In the event that the aggregate purchase price of the Common
Stock is below the minimum of the Estimated Valuation Range, or materially above
the maximum of the Estimated Valuation Range, resolicitation of purchasers may
be required, provided that up to a 15% increase above the maximum of the
Estimated Valuation Range will not be deemed material so as to require a
resolicitation. Any such resolicitation shall be effected in such manner and
within such time as the Bank shall establish, with the approval of the FDIC and
the Division, if required. Up to a 15% increase in the number of
15
shares to be issued which is supported by an appropriate change in the estimated
pro forma market value of the Stock Holding Company will not be deemed to be
material so as to require a resolicitation of subscriptions. Based upon the
Independent Valuation as updated prior to the commencement of the Subscription
and Community Offerings, the Board of Directors of the Stock Holding Company
will fix the Actual Subscription Price. If there is a Syndicated Community
Offering of shares of Common Stock not subscribed for in the Subscription and
Community Offerings, the price per share at which the Common Stock is sold in
such Syndicated Community Offering shall be equal to the Actual Subscription
Price.
Notwithstanding the foregoing, no sale of Common Stock may be consummated
unless, prior to such consummation, the Independent Appraiser confirms to the
Stock Holding Company, the Bank and to the FDIC and the Division 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 per share is incompatible with its estimate of the
aggregate consolidated pro forma market value of the Stock Holding Company and
the Bank. An increase in the aggregate value of the Common Stock by up to 15%
would not be deemed to be material. If such confirmation is not received, the
Stock Holding Company may cancel the Stock Offering, extend the Stock Offering
and establish a new Actual Subscription Price and/or Estimated Valuation Range,
extend, reopen or hold a new Stock Offering or take such other action as the
FDIC and the Division may permit. The estimated market value of the Stock
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 FDIC and Division regulations. The Common Stock to be issued
in the Stock Offering shall be fully paid and nonassessable.
12. 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; and (3) Supplemental Eligible Account Holders.
Any shares of Common Stock that are not subscribed for in the Subscription
Offering at the discretion of the Bank and the Stock Holding Company may be
offered for sale in a Community Offering, or a Syndicated Community Offering on
terms and conditions and procedures satisfactory to the Bank and the Stock
Holding Company. The minimum purchase by any Person shall be 25 shares. The Bank
may use its discretion in determining whether prospective purchasers are
"residents," "associates," or "acting in concert," and in interpreting any and
all other provisions of the Plan. All such determinations are in the sole
discretion of the Bank, and may be based on whatever evidence the Bank chooses
to use in making any such determination.
16
In addition to the priorities set forth below, the Board of Trustees may
establish other priorities for the purchase of Common Stock, subject to the
approval of the Division and the FDIC. 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
receive non-transferrable subscription rights to subscribe for shares of Common
Stock offered in the Stock Offering in an amount equal to $100,000. 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 or her 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.
Subscription rights to purchase Common Stock received by Officers and trustees
of the Bank including associates of Officers and trustees, based on their
increased deposits in the Bank in the one year preceding the Eligibility Record
Date, shall be subordinated to the subscription rights of other Eligible Account
Holders. To ensure proper allocation of stock, each Eligible Account Holder must
list on his or her subscription order form all Deposit Accounts in which he or
she 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 Stock Holding Company subject to the maximum purchase limitations
applicable to such plans as set forth in Section 13, 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 receive non-transferable subscription rights to subscribe
for shares of Common Stock offered in the Stock Offering in an amount equal to
$100,000. In the event Supplemental Eligible Account Holders subscribe for a
number of shares which, when added to the shares subscribed for by Eligible
Account Holders and the Tax-Qualified Employee Plans, exceed available shares,
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
17
Deposits of all subscribing Supplemental Eligible Account Holders whose
subscriptions remain unfilled.
B. COMMUNITY OFFERING
Any shares of Common Stock not subscribed for in the Subscription Offering
may be offered for sale in a Community Offering. This will involve an offering
of all unsubscribed shares directly to the persons residing in the Community.
The Community Offering, if any, shall be for a period of not more than 45 days
unless extended by the Stock Holding Company and the Bank, and shall commence
concurrently with, during or promptly after the Subscription Offering. The Stock
Holding Company and the Bank may use an investment banking firm or firms on a
best efforts basis to sell the unsubscribed shares in the Subscription and
Community Offering. The Stock Holding Company and the Bank may pay a commission
or other fee to such investment banking firm or firms as to the shares sold by
such firm or firms in the Subscription and Community Offering and may also
reimburse such firm or firms for expenses incurred in connection with the sale.
The Community Offering may include a Syndicated Community Offering managed by
such investment banking firm or firms. The Common Stock will be offered and sold
in the Community Offering, in accordance with FDIC and Division regulations, so
as to achieve the widest distribution of the Common Stock. No Person, by
himself, or with an Associate or group of Persons Acting in Concert, may
subscribe for or purchase more than $100,000 of Common Stock offered in the
Community Offering.
In the event of an oversubscription for shares in the Community Offering,
shares may be allocated (to the extent shares remain available) first to cover
orders of natural persons residing in the Bank's Community, then to cover the
orders of any other Person subscribing for shares in the Community Offering so
that each such Person may receive 1,000 shares, and thereafter, on a pro rata
basis to such Persons based on the amount of their respective subscriptions.
The terms "residence," "reside," or "residing" as used herein with respect
to any person shall mean any person who occupies a dwelling within the Bank's
Community, has an intent to remain with the Community for a period of time, and
manifests the genuineness of that intent by establishing an ongoing physical
presence within the Community together with an indication that such presence
within the Community is something other than merely transitory in nature. To the
extent the Person is a corporation or other business entity, the principal place
of business or headquarters shall be in the Community. To the extent a person is
a personal benefit plan, the circumstances of the beneficiary shall apply with
respect to this definition. In the case of all other benefit plans, the
circumstances of the trustee shall be examined for purposes of this definition.
The Bank may utilize deposit or loan records or such other evidence provided to
it to make a determination as to whether a person is a resident. In all cases,
however, such a determination shall be in the sole discretion of the Bank.
The Bank and the Stock Holding Company, in their sole discretion, may
reject subscriptions, in whole or in part, received from any Person under this
Section 12.
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C. SYNDICATED COMMUNITY OFFERING
Any shares of Common Stock not sold in the Subscription Offering or in the
Community Offering, if any, may be offered for sale to the general public by a
selling group of broker-dealers in a Syndicated Community Offering, subject to
terms, conditions and procedures as may be determined by the Bank and the Stock
Holding Company in a manner that is intended to achieve the widest distribution
of the Common Stock subject to the rights of the Stock Holding Company to accept
or reject in whole or in part all order in the Syndicated Community Offering. It
is expected that the Syndicated Community Offering will commence as soon as
practicable after termination of the Subscription Offering and the Community
Offering, if any. The Syndicated Community Offering shall be completed within 45
days after the termination of the Subscription Offering, unless such period is
extended as provided herein. The Syndicated Community Offering price and the
underwriting discount in the Syndicated Community Offering shall be determined
by an underwriting agreement between the Stock Holding Company, the Bank and the
underwriters. Such underwriting agreement shall be filed with the FDIC, the
Division and the SEC.
If for any reason a Syndicated Community Offering of unsubscribed shares
of Common Stock cannot be effected and any shares remain unsold after the
Subscription Offering and the Community Offering, if any, the Boards of
Directors of the Stock 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 Division and the FDIC and to compliance with
applicable state and federal securities laws. Depending upon market and
financial conditions, the Board of Directors of the Stock Holding Company and
the Board of Trustees of the Bank, with the approval of the Commissioner and
FDIC, may increase or decrease any of the purchase limitations set forth in this
Section 12.
13. 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 Stock
Holding Company owned or controlled by persons other than the MHC at
the close of the Stock Offering shall not exceed 49% of the Stock
Holding Company's total outstanding Common Stock.
B. No Person or group of persons Acting in Concert, may purchase more
than $100,000 of Common Stock offered in the Stock Offering to
Persons other than the MHC, except that: (i) the Stock 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 up 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 13(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.
19
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 32% of the outstanding shares of Common Stock of the Stock
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 Plan or any Non-Tax-Qualified
Employee Benefit Plan 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 persons in the secondary market, shall
not exceed 32% of the stockholders' equity of the Stock Holding
Company held by persons other than the MHC. In calculating the
number of shares held by Management Persons and their Associates
under this paragraph or under the provisions of paragraph C of this
section, shares held by any Tax-Qualified Employee Benefit Plan or
any Non-Tax-Qualified Employee Benefit Plan of the Bank that are
attributable to such persons shall not be counted.
E. In the event of an increase in the total number of shares offered in
the Subscription Offering due to an increase in the maximum of the
Offering Range of up to 15% (the "Adjusted Maximum"), the additional
shares will be issued in the following order of priority: (i) to
fill the Employee Plans' subscription to the Adjusted Maximum; (ii)
in the event that there is an oversubscription at the Eligible
Account Holder or Supplemental Eligible Account Holder categories,
to fill unfulfilled subscriptions of such subscribers according to
their respective priorities set forth in this Plan.
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 Stock 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 Stock 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.
H. The Stock Holding Company, in its sole discretion, may make
reasonable efforts to comply with the securities laws of any state
in the United States in which its depositors reside, and will only
offer and sell the Common Stock in states in which
20
the offers and sales comply with such states' securities laws.
However, no person will be offered or allowed to purchase any Common
Stock under the Plan if he or she resides in a foreign country or in
a state of the United States with respect to which any of the
following apply: (i) a small number of persons otherwise eligible to
purchase shares under the Plan reside in such state or foreign
county; (ii) the offer or sale of shares of Common Stock to such
persons would require the Bank or its employees to register, under
the securities laws of such state or foreign country, as a broker or
dealer or to register or otherwise qualify its securities for sale
in such state or foreign country; or (iii) such registration or
qualification would be impracticable for reasons of cost or
otherwise.
Prior to the consummation of the Stock Offering, no Person shall offer to
transfer, or enter into any agreement or understanding to transfer the legal or
beneficial ownership of any subscription rights or shares of Common Stock,
except pursuant to this Plan. Each Person purchasing Common Stock shall be
deemed to confirm that such purchase does not conflict with the above purchase
limitations contained in this Plan.
EACH PERSON PURCHASING COMMON STOCK IN THE STOCK OFFERING WILL BE DEEMED
TO CONFIRM THAT SUCH PURCHASE DOES NOT CONFLICT WITH THE PURCHASE LIMITATIONS IN
THIS PLAN. ALL QUESTIONS CONCERNING WHETHER ANY PERSONS ARE ASSOCIATES OR A
GROUP ACTING IN CONCERT OR WHETHER ANY PURCHASE CONFLICTS WITH THE PURCHASE
LIMITATIONS IN THIS PLAN OR OTHERWISE VIOLATES ANY PROVISION OF THIS PLAN SHALL
BE DETERMINED BY THE BANK IN ITS SOLE DISCRETION. SUCH DETERMINATION SHALL BE
CONCLUSIVE, FINAL AND BINDING ON ALL PERSONS AND THE BANK MAY TAKE ANY REMEDIAL
ACTION, INCLUDING WITHOUT LIMITATION REJECTING THE PURCHASE OR REFERRING THE
MATTER TO THE COMMISSIONER FOR ACTION, AS IN ITS SOLE DISCRETION THE BANK MAY
DEEM APPROPRIATE.
14. PAYMENT FOR STOCK
All payments for Common Stock subscribed for or ordered in the Stock
Offering must be delivered in full to the Bank, together with a properly
completed and executed order form, or purchase order in the case of the
Syndicated Community Offering, on or prior to the expiration date specified on
the order form or purchase order, as the case may be, unless such date is
extended by the Bank; provided, that if the Employee Plans subscribe for shares
during the Subscription Offering, such plans will not be required to pay for the
shares at the time they subscribe but rather may pay for such shares of Common
Stock subscribed for by such plans at the Actual Subscription Price upon
consummation of the Stock Offering, provided that, in the case of the ESOP there
is in force from the time of its subscription until the consummation of the
Stock Offering, a loan commitment to lend to the ESOP, at such time, the
aggregated Actual Subscription Price of the shares for which it subscribed. The
Stock Holding Company or the Bank may make scheduled discretionary contributions
to an Employee Plan provided such contributions from the Bank, if any, do not
cause the Bank to fail to meet its regulatory capital requirement.
21
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 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
Commissioner) 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. Interest will be paid by the
Bank at a rate established by the Bank on payment for Common Stock received in
cash or by check. Such interest will be paid from the date payment is received
by the Bank until consummation or termination of the Stock Offering. If for any
reason the Stock Offering is not consummated, all payments made by subscribers
in the Stock Offering will be refunded to them with interest. In case of amounts
authorized for withdrawal from Deposit Accounts, refunds will be made by
canceling the authorization for withdrawal.
15. MANNER OF EXERCISING SUBSCRIPTION RIGHTS THROUGH ORDER FORMS
As soon as practicable after the prospectus prepared by the Stock Holding
Company and the Bank has been declared effective by the Commissioner and the
SEC, copies of the prospectus and order forms will be distributed to all
Eligible Account Holders, Supplemental Eligible Account Holders and the Employee
Plans at their last known addresses appearing on the records of the Bank for the
purpose of subscribing for shares of Common Stock in the Subscription Offering
and will be made available for use by those Persons entitled to purchase in the
Community Offering.
Each order form will be preceded or accompanied by the prospectus
describing the Stock Holding Company, the Bank, the Common Stock and the
Subscription and Community Offerings.
Each order form will contain, among other things, the following:
A. A specified date by which all order forms must be received by the
Bank, which date shall be not less than 20, nor more than 45 days,
following the date on which the order forms are mailed by the Bank,
and which date will constitute the termination of the Subscription
Offering;
B. The purchase price per share for shares of Common Stock to be sold
in the Subscription and Community Offerings;
C. A description of the minimum and maximum number of shares of Common
Stock that may be subscribed for pursuant to the exercise of
Subscription Rights or otherwise purchased in the Community
Offering;
22
D. Instructions as to how the recipient of the order form is to
indicate thereon the number of shares of Common Stock for which such
Person elects to subscribe and the available alternative methods of
payment therefor;
E. An acknowledgment that the recipient of the order form has received
a final copy of the prospectus prior to execution of the order form;
F. A statement indicating the consequences of failing to properly
complete and return the order form, including a statement to the
effect that all subscription rights are nontransferable, will be
void at the end of the Subscription Offering, and can only be
exercised by delivering to the Bank within the subscription period
such properly completed and executed order form, together with cash
(if delivered in person), check or money order in the full amount of
the purchase price as specified in the order form for the shares of
Common Stock for which the recipient elects to subscribe in the
Subscription Offering (or by authorizing on the order form that the
Bank withdraw said amount from the subscriber's Deposit Account at
the Bank); and
G. A statement to the effect that the executed order form, once
received by the Bank, may not be modified or amended by the
subscriber without the consent of the Bank.
Notwithstanding the above, the Bank and the Stock Holding Company reserve
the right in their sole discretion to accept or reject orders received on
photocopied or facsimilied order forms.
16. UNDELIVERED, DEFECTIVE OR LATE ORDER FORM; INSUFFICIENT PAYMENT
In the event order forms (a) are not delivered and are returned to the
Bank by the United States Postal Service or the Bank is unable to locate the
addressee, (b) are not received back by the Bank or are received by the Bank
after the expiration date specified thereon, (c) are defectively filled out or
executed, (d) are not accompanied by the full required payment for the shares of
Common Stock subscribed for (including cases in which Deposit Accounts from
which withdrawals are authorized are insufficient to cover the amount of the
required payment), or (e) are not mailed pursuant to a "no mail" order placed in
effect by the account holder, the subscription rights of the Person to whom such
rights have been granted will lapse as though such Person failed to return the
contemplated order form within the time period specified thereon; provided, that
the Bank may, but will not be required to, waive any immaterial irregularity on
any order form or require the submission of corrected order forms or the
remittance of full payment for subscribed shares by such date as the Bank may
specify. The interpretation by the Bank of terms and conditions of this Plan and
of the order forms will be final, subject to the authority of the Commissioner
and the FDIC.
17. COMPLETION OF THE STOCK OFFERING
The Stock Offering will be terminated if not completed within 90 days from
the date of approval by the Commissioner, unless an extension is approved by the
Commissioner.
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18. MARKET FOR COMMON STOCK
If at the close of the Stock Offering the Stock Holding Company has more
than 300 shareholders of any class of stock, the Stock 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.
19. STOCK PURCHASES BY MANAGEMENT PERSONS AFTER THE STOCK 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 Commissioner, any Common Stock of the Stock Holding
Company, except from a broker-dealer registered with the SEC. The foregoing
shall not apply to (i) negotiated transactions involving more than 1% of the
outstanding Common Stock, or (ii) purchases of stock made by and held by any
Tax-Qualified or Non-Tax Qualified Employee Plan of the Stock Bank or the Stock
Holding Company even if such stock is attributable to Management Persons or
their Associates. In addition, without the prior written approval of the
Commissioner, no officer or director of the Stock Bank or their Associates shall
purchase capital stock from the Stock Bank for a period of three years following
the Reorganization.
20. 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 or substantial disability, as
determined by the Commissioner, of the Management Person or Associate.
21. STOCK CERTIFICATES
Each stock certificate shall bear a legend giving appropriate notice of
the restrictions set forth in Sections 19 and 20. Appropriate instructions shall
be issued to the Stock 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.
22. RESTRICTION ON FINANCING STOCK PURCHASES
The Stock 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 Stock Holding Company, Bank or any of their
Affiliates.
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23. STOCK BENEFIT PLANS
The Board of Directors of the Stock Bank and/or the Stock Holding Company
intend to adopt one or more stock benefit plans for the benefit of the
employees, officers and directors of the Stock Bank and Stock Holding Company,
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 the Plan.
Pursuant to the Regulations, the Bank and the Stock Holding Company may
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 Stock Holding Company may make scheduled discretionary contributions
to one or more Tax-Qualified Employee Plans to purchase Common Stock issued in
the Stock Offering or to purchase issued and outstanding shares of Common Stock
or authorized but unissued shares of Common Stock subsequent to the completion
of the Stock Offering, provided such contributions do not cause the Stock Bank
to fail to meet any of its regulatory capital requirements. This Plan
specifically authorizes the grant and issuance by the Stock Holding Company of
(i) awards of Common Stock after the Stock Offering pursuant to one or more
stock recognition and award plans (the "Recognition Plans") in an amount equal
to up to 4% of the number of shares of Common Stock issued in the Stock Offering
(and in an amount equal to up to 5% of the Common Stock issued in the Stock
Offering if the Recognition Plans are adopted more than one year after the
completion of the Stock Offering), (ii) options to purchase a number of shares
of the Stock Holding Company's Common Stock in an amount equal to up to 10% of
the number of shares of Common Stock issued in the Stock Offering and shares of
Common Stock issuable upon exercise of such options, and (iii) Common Stock to
one or more Tax Qualified Employee Plans, including the ESOP, at the closing of
the Stock Offering or at any time thereafter, in an amount equal to up to 8% of
the number of shares of Common Stock issued in the Stock Offering if the
Recognition Plans award Common Stock sooner than one year after the completion
of the Stock Offering, and up to 10% of the number of shares of Common Stock
issued in the Stock Offering if the Recognition Plans are adopted more than one
year after the completion of the Stock Offering. Shares awarded to the Tax
Qualified Employee Plans or pursuant to the Recognition Plans, and shares issued
upon exercise of options may be authorized but unissued shares of the Stock
Holding Company's Common Stock, or shares of Common Stock purchased by the Stock
Holding Company or such plans in the open market. The Recognition Plans and the
stock option plans will be subject to stockholder approval.
24. POST-REORGANIZATION FILING AND MARKET MAKING
If the Stock Holding Company has more than 300 stockholders of any class
of stock, the Stock 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.
25. LIQUIDATION ACCOUNT
The Stock Bank or the Stock Holding Company shall establish at the
completion of the Reorganization a Liquidation Account in an amount equal to the
product of (i) the percentage of the Stock Holding Company's Common Stock issued
in the Stock Offering, and (ii) the net worth of the
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Bank (determined in accordance with generally accepted accounting principles) as
set forth in the latest statement of financial condition contained in the
Prospectus used in connection with the Stock Offering. For example, if the Stock
Offering is for 30% of the Stock Holding Company's Common stock, then the
initial liquidation account shall be equal to 30% of the net worth of the Bank
as shown on its latest financial statement used in connection with the Stock
Offering. The Liquidation Account will be maintained by the Stock Bank and/or
the Stock Holding Company for the benefit of the Eligible Account Holders and
Supplemental Eligible Account Holders who continue to maintain Deposit Accounts
with the Stock Bank following the Reorganization. Each Eligible Account Holder
and Supplemental Eligible Account Holder shall, with respect to each Deposit
Account, hold a related inchoate interest in a portion of the Liquidation
Account balance, in relation to each Deposit Account balance at the Eligibility
Record Date or Supplemental Eligibility Record Date, as the case may be, or to
such balance as it may be subsequently reduced, as hereinafter provided. The
initial Liquidation Account balance shall not be increased, and shall be subject
to downward adjustment to the extent of any downward adjustment of any
subaccount balance of any Eligible Account Holder or Supplemental Eligible
Account Holder in accordance with 209 CMR 33.05(12).
In the unlikely event of a complete liquidation of the Stock Bank and the
Stock Holding Company (and only in such event), following all liquidation
payments to creditors (including those to depositors to the extent of their
Deposit Accounts) each Eligible Account Holder and Supplemental Eligible Account
Holder shall be entitled to receive a liquidating distribution from the
Liquidation Account, in the amount of the then-adjusted subaccount balances for
his or her deposit accounts then held, before any liquidating distribution may
be made to any holders of the Stock Holding Company's or Stock Bank's capital
stock. No Conversion Transaction and no merger, consolidation, reorganization,
purchase of bulk assets with assumption of deposit accounts and other
liabilities, or similar transactions with an FDIC-insured institution, in which
the Stock Bank or the Stock Holding Company is not the surviving institution,
shall be deemed to be a complete liquidation for this purpose. In such
transactions, the Liquidation Account shall be assumed by the surviving
institution.
The initial subaccount balance for a Deposit Account held by an Eligible
Account Holder and/or Supplemental Eligible Account Holder shall be determined
by multiplying the opening balance in the Liquidation Account by a fraction, the
numerator of which is the amount of such Eligible Account Holder's or
Supplemental Eligible Account Holder's Qualifying Deposit and the denominator of
which is the total amount of all Qualifying Deposits of all Eligible Account
Holders and Supplemental Eligible Account Holders in the Stock Bank. For Deposit
Accounts in existence on both dates, separate subaccounts shall be determined on
the basis of the Qualifying Deposits in such Deposit Accounts on such record
dates. Such initial subaccount balance shall not be increased by additional
Deposits, but shall be subject to downward adjustment as described below.
If, at the close of business on the last day of any period for which the
Stock Bank or the Stock Holding Company, as the case may be, has prepared
audited financial statements subsequent to the effective date of the
Reorganization, the deposit balance in the Deposit Account of an Eligible
Account Holder or Supplemental Eligible Account Holder is less than the lesser
of: (i) the balance in the Deposit Account at the close of business on the last
day of any period for which the Stock Bank or the Stock Holding Company, as the
case may be, has prepared audited financial statements
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subsequent to the Eligibility Record Date or Supplemental Eligibility Record
Date, or (ii) the amount in such Deposit Account as of the Eligibility Record
Date or Supplemental Eligibility Record Date, then the subaccount balance for
such Deposit Account shall be adjusted by reducing such subaccount balance in an
amount proportionate to the reduction in the balance of such Deposit Account. In
the event of such downward adjustment, the subaccount balance shall not be
subsequently increased, notwithstanding any subsequent increase in the deposit
balance of the related Deposit Account. If any such Deposit Account is closed,
the related subaccount shall be reduced to zero. For purposes of this Section, a
time account shall be deemed to be closed upon its maturity date regardless of
any renewal thereof. A distribution of each subaccount balance may be made only
in the event of a complete liquidation of the Stock Bank and the Stock Holding
Company subsequent to the Reorganization and only out of funds available for
such purpose after payment of all creditors.
Neither the Stock Bank nor the Stock Holding Company shall be required to
set aside funds for the purpose of establishing the Liquidation Account, and the
creation and maintenance of the Liquidation Account shall not operate to
restrict the use or application of any of the net worth accounts of the Stock
Bank, except that neither the Stock Bank nor the Stock Holding Company shall
declare or pay a cash dividend on, or repurchase any of, its capital stock if
the effect thereof would cause its net worth to be reduced below the amount
required for the Liquidation Account.
26. EMPLOYMENT AND OTHER SEVERANCE AGREEMENTS
Contemporaneously with the Reorganization, the Stock Bank and/or the Stock
Holding Company may enter into employment and/or severance arrangements with one
or more executive officers of the Stock Bank and/or the Stock Holding Company.
It is anticipated that any employment contracts entered into by the Bank and/or
the Stock 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 Stock Bank and/or the Stock
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 Stock Bank and/or the Stock 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 Commissioner.
27. PAYMENT OF DIVIDENDS AND REPURCHASE OF STOCK
The Stock Holding Company may not declare or pay a cash dividend on, or
repurchase any of, its Common Stock if the effect thereof would cause its
regulatory capital of the Bank to be reduced below the amount required to
maintain the Liquidation Account and under FDIC rules and regulations.
Otherwise, the Stock Holding Company may declare dividends or make other capital
distributions in accordance with applicable laws and regulations. Subject to any
applicable regulatory approvals, the MHC may waive its right to receive
dividends declared by the Stock Holding Company.
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28. REORGANIZATION AND STOCK OFFERING EXPENSES
The Regulations require that the expenses of the Reorganization must be
reasonable. The Bank will use its best efforts to assure that the expenses
incurred by the Bank and the Stock Holding Company in effecting the
Reorganization and the Stock Offering will be reasonable.
29. INTERPRETATION
All interpretations of the Plan and application of its provisions to
particular circumstances by a majority of the Board of Trustees of the Bank
shall be final, subject to the authority of the Commissioner.
30. AMENDMENT OR TERMINATION OF THE PLAN
If necessary or desirable, the terms of the Plan may be substantively
amended by a majority vote of the Bank's Board of Trustees as a result of
comments from regulatory authorities or otherwise, at any time prior to approval
of the Plan by the Corporators. At any time after approval of the Plan by the
Corporators, the terms of the Plan that relate to the Reorganization may be
amended by a majority vote of the Board of Trustees only with the concurrence of
the Commissioner. The Plan may be terminated by a majority vote of the Board of
Trustees at any time prior to the date of the Special Meeting, and may be
terminated by a majority vote of the Board of Trustees at any time thereafter
with the concurrence of the Commissioner.
The Plan shall be terminated if the Reorganization is not completed within
24 months from the date upon which the Corporators of the Bank approve the Plan,
and may not be extended by the Bank.
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