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PLAN OF CONVERSION AND REORGANIZATION
of
AMERICAN SAVINGS, MHC
and
PLANS OF MERGER
between
AMERICAN SAVINGS, MHC, ASB HOLDING COMPANY
and
AMERICAN BANK OF NEW JERSEY
ADOPTED ON MAY 17, 2005
--------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section
Number Page
------ ----
<S> <C>
1.
Introduction...........................................................
1
2.
Definitions............................................................
3
3. General Procedure for Conversion and
Reorganization.................... 9
4. Total Number of Shares and Purchase Price of
Conversion
Stock..................................................... 11
5. Subscription Rights of Eligible Account Holders (First
Priority)....... 13
6. Subscription Rights of the Tax-Qualified Employee Stock
Benefit Plans (Second
Priority)...................................... 14
7. Subscription Rights of Supplemental Eligible Account
Holders
(Third
Priority).....................................................
14
8. Subscription Rights of Other Members (Fourth
Priority)................. 15
9. Community
Offering.....................................................
15
10. Syndicated Community Offering/Underwritten Public
Offering............. 16
11. Limitations on Subscriptions and Purchases of Conversion
Stock......... 17
12. Timing of Subscription Offering; Manner of Exercising
Subscription Rights and Order
Forms.................................. 19
13. Payment for Conversion
Stock........................................... 21
14. Account Holders in Nonqualified States or Foreign
Countries............ 22
15. Dissenters'
Rights..................................................... 22
16. Voting Rights of
Stockholders.......................................... 22
17. Liquidation
Account.................................................... 22
18. Transfer of Deposit
Accounts........................................... 24
19. Requirements Following Conversion and Reorganization for
Registration, Market Making and Stock Exchange
Listing............... 24
20. Directors and Officers of the Bank and the Holding
Company............. 24
21. Requirements for Stock Purchases by Directors and
Officers
Following the Conversion and
Reorganization........................... 25
22. Restrictions on Transfer of
Stock...................................... 25
23. Restrictions on Acquisition of Stock of the Holding
Company............ 26
24. Tax Rulings or
Opinions................................................ 26
25. Stock Compensation
Plans............................................... 27
26. Dividend and Repurchase Restrictions on
Stock.......................... 27
27. Payment of Fees to
Brokers............................................. 28
28. Effective
Date.........................................................
28
29. Amendment or Termination of the
Plan................................... 28
30. Interpretation of the
Plan............................................. 28
</TABLE>
Appendix A - MHC Plan of Merger between Interim Bank No. 1
(formerly the Mutual
Holding Company) and the Bank
Appendix B - Middle Tier Plan of Merger between Interim Bank No.
2 (formerly
Middle Tier Holding Company) and the Bank
Appendix C - Bank Plan of Merger between Interim Bank No. 3
(subsidiary of the
Holding Company) and the Bank
i
<PAGE>
PLAN OF CONVERSION AND REORGANIZATION
1. INTRODUCTION
------------
For purposes of this section, all capitalized terms have the
meaning
ascribed to them in Section 2.
In 1999, American Bank of New Jersey, formerly American Savings
Bank of
NJ (the "Bank"), a federally chartered mutual savings bank
reorganized into the
mutual holding company form of organization and converted to a
federal stock
savings bank (the "MHC Reorganization"). Subsequent to the MHC
Reorganization,
in October 2003, ASB Holding Company, a federally chartered
corporation which
owns all of the stock of the Bank ("Middle Tier Holding
Company"), sold
1,666,350 shares (or approximately 30%) of its common stock in a
subscription
offering at $10.00 per share and issued the remaining 70% to
American Savings,
MHC. A total of 5,554,500 shares of common stock of ASB Holding
Company ("Middle
Tier Holding Company Common Stock") were issued in connection
with the MHC Stock
Offering. Upon completion of these transactions, the Bank
remained the wholly
owned subsidiary of ASB Holding Company. As of March 31, 2005,
the MHC and the
Public Stockholders own an aggregate of 3,888,150 (70%) and
1,666,350 (30%) of
the outstanding Middle Tier Holding Company Common Stock,
respectively. Pursuant
to this Plan of Conversion, the Bank will form a new
state-chartered stock
holding company, ASB Holding Company ("Holding Company") and the
existing shares
of Middle Tier Holding Company Common Stock owned by Public
Stockholders will be
converted pursuant to an Exchange Ratio into shares of common
stock of the
Holding Company ("Holding Company Common Stock").
The Boards of Directors of the Mutual Holding Company, the
Middle Tier
Holding Company, the Holding Company and the Bank believe that a
conversion of
the Mutual Holding Company to stock form pursuant to this Plan
of Conversion is
in the best interests of the Mutual Holding Company and the
Bank, as well as the
best interests of their respective Members and Stockholders. The
Boards of
Directors have determined that this Plan of Conversion equitably
provides for
the interests of Members through the granting of subscription
rights and the
establishment of a liquidation account. The Conversion will
result in the Bank
being wholly owned by a state-chartered stock holding company
which is owned by
public stockholders, which is a more common structure and form
of ownership than
a mutual holding company. In addition, the Conversion will
result in the raising
of additional capital for the Bank and the Holding Company to
make investments
and acquisitions and should result in a more active and liquid
market for the
Holding Company Common Stock than currently exists for Middle
Tier Holding
Company Common Stock. The proceeds of the Conversion will enable
the Bank to
continue to grow its assets and branch office structure, while
still maintaining
a high level of regulatory capital. Finally, the Conversion is
designed to
enable the Bank and the Holding Company to compete more
effectively in a market
which is consolidating.
1
<PAGE>
In the current transaction, (i) the Middle Tier Holding Company
will
convert into an interim federal stock savings bank, which will
merge with and
into the Bank, and (ii) the Mutual Holding Company will convert
into an interim
federal stock savings bank and merge with and into the Bank,
pursuant to which
merger Mutual Holding Company will cease to exist and the shares
of Middle Tier
Holding Company Stock held by the Mutual Holding Company will be
canceled. The
Mutual Holding Company will cease to exist and a liquidation
account will be
established for the benefit of depositor Members as of specified
dates. Shares
of Middle Tier Holding Company Common Stock held by Public
Stockholders shall be
automatically converted into the right to receive shares of
Holding Company
Common Stock based on an Exchange Ratio plus cash in lieu of any
fractional
share interest.
In connection with the Conversion and Mergers, the Holding
Company will
offer shares of Conversion Stock in the Offerings as provided
herein. Shares of
Conversion Stock will be offered in a Subscription Offering in
descending order
of priority to Eligible Account Holders, Tax-Qualified Employee
Stock Benefit
Plans, Supplemental Eligible Account Holders and Other Members.
Any shares of
Conversion Stock remaining unsold after the Subscription
Offering will be
offered for sale to the public through a Community Offering
and/or Syndicated
Community Offering and/or Underwritten Public Offering, as
determined by the
Boards of Directors of the Holding Company and the Bank in their
sole
discretion.
The Conversion is intended to raise capital and provide support
to the
Bank's lending and investment activities and thereby enhance the
Bank's
capabilities to serve the borrowing and other financial needs of
the communities
it serves. The use of the Holding Company will provide greater
organizational
flexibility and facilitate acquisitions and the opening and/or
purchase of
additional branch offices.
This Plan is subject to the approval of the OTS and also must
be
approved by (1) at least a majority of the total number of votes
eligible to be
cast by Voting Members of the Mutual Holding Company at the
Special Meeting, (2)
the vote of at least two-thirds of the outstanding shares of
Middle Tier Holding
Company Common Stock at the Stockholders' Meeting and (3) the
vote at the
Stockholders' Meeting of at least a majority of the shares of
Middle Tier
Holding Company Common Stock held by the Public
Stockholders.
After the Conversion, the Bank will continue to be regulated by
the
OTS, as its chartering authority, and by the FDIC, which insures
the Bank's
deposits. In addition, the Bank will continue to be a member of
the Federal Home
Loan Bank System, and all insured savings deposits will continue
to be insured
by the FDIC up to the maximum amount provided by law.
2
<PAGE>
2. DEFINITIONS
-----------
As used in this Plan, the terms set forth below have the
following
meanings:
Account Holder means any person holding a Deposit Account in the
Bank.
--------------
Acting in Concert. The term Acting in Concert means (i)
knowing
------------------
participation in a joint activity or interdependent conscious
parallel action
towards a common goal whether or not pursuant to an express
agreement; or (ii) a
combination or pooling of voting or other interests in the
securities of an
issuer for a common purpose pursuant to any contract,
understanding,
relationship, agreement or other arrangement, whether written or
otherwise. A
person or company which acts in concert with another person or
company ("other
party") shall also be deemed to be acting in concert with any
person or company
who is also acting in concert with that other party, except that
any
tax-qualified employee stock benefit plan will not be deemed to
be acting in
concert with its trustee or a person who serves in a similar
capacity solely for
the purpose of determining whether stock held by the trustee and
stock held by
the plan will be aggregated. The Holding Company and the Bank
may determine, in
their sole discretion, whether purchasers are "acting in
concert" based upon
joint account relationships and/or shared addresses on the
records of the Bank.
Actual Purchase Price means the price per share at which the
Conversion
---------------------
Stock is ultimately sold by the Holding Company in the Offerings
in accordance
with the terms hereof.
Affiliate means a Person who, directly or indirectly, through
one or
---------
more intermediaries, controls or is controlled by or is under
common control
with the Person specified.
Associate, when used to indicate a relationship with any Person,
means
---------
(i) a corporation or organization (other than the Holding
Company, the Mutual
Holding Company, the Middle Tier Holding Company, the Bank, a
majority-owned
subsidiary of the Holding Company, Bank or the Middle Tier
Holding Company) 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, provided, however, that such
term shall not
include any Tax-Qualified Employee Stock Benefit Plan of the
Holding Company or
the Bank in which such Person has a substantial beneficial
interest or serves as
a trustee or in a similar fiduciary capacity, and (iii) any
relative or spouse
of such Person, or any relative of such spouse, who has the same
home as such
Person or who is a director or officer of the Holding Company,
the Mutual
Holding Company, the Middle Tier Holding Company or the Bank or
any of the
subsidiaries of the foregoing.
Bank means American Bank of New Jersey (formerly American
Savings Bank
----
of NJ) in its current stock form as a subsidiary of the Middle
Tier Holding
Company or American Bank as a subsidiary of the Holding Company
following
consummation of the Conversion and Reorganization, as the
context of the
reference indicates.
3
<PAGE>
Bank Common Stock means the common stock of the Bank, par value
$0.10
-----------------
per share, which stock is not and will not be insured by the
FDIC or any other
governmental authority.
Bank Merger means the merger of Interim Bank No. 3, a subsidiary
of the
-----------
Holding Company, with and into the Bank.
Code means the Internal Revenue Code of 1986, as amended.
----
Community Offering means the offering for sale by the Holding
Company
-------------------
of any shares of Conversion Stock not subscribed for in the
Subscription
Offering to (i) Public Stockholders, (ii) natural persons
residing in the Local
Community, and (iii) such other Persons within or without the
State of New
Jersey as may be selected by the Holding Company and the Bank
within their sole
discretion.
Control (including the terms "controlling," "controlled by," and
"under
-------
common control with") means the possession, directly or
indirectly, of the power
to direct or cause the direction of the management and policies
of a Person,
whether through the ownership of voting securities, by contract
or otherwise.
Conversion and Reorganization means (i) the conversion of the
Mutual
-------------------------------
Holding Company to an interim federal stock savings bank and the
subsequent
merger, pursuant to which the Mutual Holding Company will cease
to exist, (ii)
the conversion of Middle Tier Holding Company to an interim
federal stock
savings bank and merger into Bank, and (iii) the issuance of
Conversion Stock by
the Holding Company in the Offerings as provided herein.
Conversion Stock means the Holding Company Common Stock to be
issued
-----------------
and sold in the Offerings pursuant to the Plan of
Conversion.
Deposit Account means savings and demand accounts, including
passbook
---------------
accounts, money market deposit accounts and negotiable order of
withdrawal
accounts, and certificates of deposit and other authorized
accounts of the Bank
held by a Member.
Director, Officer and Employee means the terms as applied
respectively
-------------------------------
to any person who is a director, officer or employee of the
Mutual Holding
Company, the Bank, the Middle Tier Holding Company, the Holding
Company or any
subsidiary thereof.
Effective Date means the effective date of the Conversion
and
----------------
Reorganization, as set forth in Section 28 hereof.
Eligible Account Holder means any Person holding a Qualifying
Deposit
------------------------
on the Eligibility Record Date for purposes of determining
subscription rights
and establishing subaccount balances in the liquidation account
to be
established pursuant to the provision herein.
Eligibility Record Date means the date for determining
Qualifying
-------------------------
Deposits of Eligible Account Holders and is the close of
business on March 31,
2004.
4
<PAGE>
Estimated Price Range means the range of the estimated aggregate
pro
----------------------
forma market value of the Conversion Stock to be issued in the
Offerings, as
determined by the Independent Appraiser in accordance with
Section 4 hereof.
Exchange Ratio means the rate at which shares of Holding Company
Common
--------------
Stock will be received by the Public Stockholders in exchange
for their Middle
Tier Holding Company Common Stock. The exact rate shall be
determined by the
Mutual Holding Company and the Holding Company in order to
ensure that upon
consummation of the Conversion and Reorganization, the Public
Stockholders will
own in the aggregate approximately the same percentage of the
Holding Company
Common Stock to be outstanding upon completion of the Conversion
and
Reorganization as the percentage of Middle Tier Holding Company
Common Stock
owned by them in the aggregate on the Effective Date, but before
giving effect
to (a) cash paid in lieu of any fractional interests of Middle
Tier Holding
Company Common Stock and (b) any shares of Conversion Stock
purchased by the
Public Stockholders in the Offerings or tax- qualified employee
stock benefit
plans thereafter. No fractions of a share of Holding Company
Common Stock shall
be issued; such fractional share interests shall instead be
automatically
converted into cash based upon the Actual Purchase Price.
Exchange Shares means the shares of Holding Company Common Stock
to be
----------------
issued to the Public Stockholders in connection with the merger
of Interim Bank
No. 1 (formerly Mutual Holding Company ("MHC Merger") with and
into the Bank.
FDIC means the Federal Deposit Insurance Corporation or any
successor
----
thereto.
Holding Company means ASB Holding Company, a corporation
newly
----------------
organized under the laws of the State of New Jersey or any other
state selected
by the Boards of Directors of the Holding Company and the Bank.
At the
completion of the Reorganization, the Bank will become a wholly
owned subsidiary
of the Holding Company.
Holding Company Common Stock means the Common Stock of the
Holding
-------------------------------
Company, par value $.10 per share, which stock cannot and will
not be insured by
the FDIC or any other governmental authority.
Independent Appraiser means the independent investment banking
or
----------------------
financial consulting firm retained by the Holding Company and
the Bank to
prepare an appraisal of the estimated pro forma market value of
the Conversion
Stock.
Initial Purchase Price means the price per share to be paid
initially
------------------------
by Participants for shares of Conversion Stock subscribed for in
the
Subscription Offering and by Public Stockholders and other
Persons for shares of
Conversion Stock ordered in the Community Offering and/or
Syndicated Community
Offering.
Interim Bank No. 1 means the interim federal stock savings bank
that
------------------
will be formed as a result of the conversion of American
Savings, MHC into the
stock form of organization.
5
<PAGE>
Interim Bank No. 2 means the interim federal stock savings bank
that
------------------
will be formed as a result of the conversion of Middle Tier
Holding Company into
an interim federal stock savings bank.
Interim Bank No. 3 mean an interim federal stock savings bank
wholly
------------------
owned by the Holding Company, which will be merged with and into
the Bank.
Local Community means all counties in which the Bank has its
home
----------------
office or a branch office.
Member means any Person qualifying as a member of the Mutual
Holding
------
Company in accordance with its mutual charter and bylaws and the
laws of the
United States.
Mergers means the completion of the MHC Merger, the Middle Tier
Merger,
-------
and the Bank Merger.
MHC Merger means the merger of Interim Bank No. 1 (formerly
Mutual
-----------
Holding Company) with and into the Bank.
Middle Tier Merger means the merger of Interim Bank No. 2
(formerly
--------------------
Middle Tier Holding Company) with and into the Bank.
Middle Tier Holding Company means ASB Holding Company, a
corporation
-------------------
organized under the laws of the United States that, since the
completion of the
MHC Reorganization in 1999, has held all of the outstanding
capital stock of the
Bank.
Middle Tier Holding Company Common Stock means the Common Stock
of the
-----------------------------------------
Middle Tier Holding Company, par value $.10 per share, which
stock cannot and
will not be insured by the FDIC or any other governmental
authority.
Mutual Holding Company means American Savings, MHC prior to
its
------------------------
conversion into an interim federal stock savings bank.
Offerings means the Subscription Offering, the Community
Offering, the
---------
Syndicated Community Offering and Underwritten Public Offering,
if applicable.
Officer means the president, chief executive officer, executive
vice
-------
presidents, senior vice presidents in charge of principal
business functions,
secretary, treasurer or principal financial officer, comptroller
or principal
accounting officer and any other person performing similar
functions with
respect to any organization whether incorporated or
unincorporated.
Order Form means the form or forms provided by the Holding
Company,
----------
containing all such terms and provisions as set forth herein, to
a Participant
or other Person by which Conversion Stock may be ordered in the
Offerings.
6
<PAGE>
Other Member means a Voting Member who is not an Eligible
Account
-------------
Holder or a Supplemental Eligible Account Holder.
OTS means the Office of Thrift Supervision or any successor
thereto.
---
Participant means any Eligible Account Holder, Tax-Qualified
Employee
-----------
Stock Benefit Plan, Supplemental Eligible Account Holder and
Other Member.
Person means an individual, a corporation, a partnership, an
------
association, a joint-stock company, a limited liability company,
a trust, an
unincorporated organization, or a government or political
subdivision of a
government.
Plan and Plan of Conversion mean this Plan of Conversion and
-------------------------------
Reorganization and Plan of Merger as adopted by the Boards of
Directors of the
Mutual Holding Company, the Middle Tier Holding Company and the
Bank and any
amendments hereto approved as provided herein. The Board of
Directors of Interim
No. 1, Interim No. 2 and Interim No. 3 shall adopt the Plans of
Merger included
as Appendices hereto as soon as practicable following their
organization.
Primary Parties means the Middle Tier Holding Company, Mutual
Holding
---------------
Company, the Bank and the Holding Company.
Prospectus means the one or more documents to be used in
offering the
----------
Conversion Stock in the Offerings.
Public Stockholders means those Persons who own shares of Middle
Tier
--------------------
Holding Company Common Stock, excluding the Mutual Holding
Company, as of the
Stockholder Voting Record Date.
Qualifying Deposit means the aggregate balance of all Deposit
Accounts
-------------------
in the Bank of (i) an Eligible Account Holder at the close of
business on the
Eligibility Record Date, provided such aggregate balance is not
less than $50,
and (ii) a Supplemental Eligible Account Holder at the close of
business on the
Supplemental Eligibility Record Date, provided such aggregate
balance is not
less than $50.
Resident means any person who, on the date designated for that
category
--------
of subscriber in the Plan, maintained a bona fide residence
within the Local
Community and has manifested an intent to remain within the
Local Community for
a period of time. The designated dates for Eligible Account
Holders,
Supplemental Eligible Account Holders and Other Members are the
Eligibility
Record Date, the Supplemental Eligibility Record Date and the
Voting Record
Date, respectively. To the extent the person is a corporation or
other business
entity, the principal place of business or headquarters must be
within the Local
Community in order to qualify as a Resident. To the extent the
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,
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 bona
fide
7
<PAGE>
resident of the Local Community. Subscribers in the Community
Offering who are
natural persons also will have a purchase preference if they
were residents of
the Local Community on the date of the Prospectus. In all cases,
however, such
determination shall be in the sole discretion of the Bank and
the Holding
Company.
SEC means the Securities and Exchange Commission.
---
Special Meeting means the Special Meeting of Members of the
Mutual
----------------
Holding Company called for the purpose of submitting this Plan
to the Members
for their approval, including any adjournments of such
meeting.
Stockholders means those Persons who own shares of Holding
Company
------------
Common Stock.
Stockholders' Meeting means the annual or special meeting of
-----------------------
stockholders of Middle Tier Holding Company called for the
purpose of submitting
this Plan to the Stockholders for their approval, including any
adjournments of
such meeting.
Stockholder Voting Record Date means the date for determining
the
---------------------------------
Public Stockholders of the Middle Tier Holding Company eligible
to vote at the
Stockholders' Meeting.
Subscription Offering means the offering of the Conversion Stock
to
----------------------
Participants.
Subscription Rights means nontransferable rights to subscribe
for
--------------------
Conversion Stock granted to Participants pursuant to the terms
of this Plan.
Supplemental Eligible Account Holder means any Person holding
a
---------------------------------------
Qualifying Deposit at the close of business on the Supplemental
Eligibility
Record Date.
Supplemental Eligibility Record Date, if applicable, means the
date for
------------------------------------
determining Qualifying Deposits of Supplemental Eligible Account
Holders and
shall be required if the Eligibility Record Date is more than 15
months prior to
the date of the latest amendment to the Application for
Conversion filed by the
Mutual Holding Company prior to approval of such application by
the OTS. If
applicable, the Supplemental Eligibility Record Date shall be
the close of
business last day of the calendar quarter preceding OTS approval
of the
Application for Conversion submitted by the Mutual Holding
Company pursuant to
this Plan of Conversion.
Syndicated Community Offering means the offering for sale by
a
-------------------------------
syndicate of broker- dealers to the general public of shares of
Conversion Stock
not purchased in the Subscription Offering and the Community
Offering.
Tax-Qualified Employee Stock Benefit Plan means any defined
benefit
--------------------------------------------
plan or defined contribution plan, such as an employee stock
ownership plan,
stock bonus plan, profit-sharing plan or other plan, which is
established for
the benefit of the employees of the Holding Company and the Bank
and which, with
its related trust, meets the requirements to be "qualified"
under Section 401 of
the Code as from time to time in effect. A "Non-Tax-Qualified
Employee Stock
Benefit
8
<PAGE>
Plan" is any defined benefit plan or defined contribution stock
benefit plan
which is not so qualified.
Underwritten Public Offering means the offering of Holding
Company
------------------------------
Common Stock following or concurrently with the Subscription
Offering and any
Community or Syndicated Community Offering by one or more
underwriters on a firm
commitment basis.
Underwriter means one or more investment banking firms that
agree in
-----------
connection with the Conversion to purchase from the Holding
Company and sell to
the public in an Underwritten Public Offering shares of Holding
Company Common
Stock not subscribed for in the Subscription Offering, the
Community Offering or
any Syndicated Community Offering.
Voting Member means a Person who at the close of business on the
Voting
-------------
Record Date is entitled to vote as a Member of the Mutual
Holding Company in
accordance with its mutual charter and bylaws.
Voting Record Date means the date or dates for determining
the
--------------------
eligibility of Members to vote at the Special Meeting.
3. GENERAL PROCEDURE FOR CONVERSION AND REORGANIZATION
---------------------------------------------------
A. An Application for the Conversion and Reorganization,
including the
Plan and all other requisite material (the "Application for
Conversion"), shall
be submitted to the OTS for approval. The Mutual Holding
Company, the Middle
Tier Holding Company and the Bank also will cause notice of the
adoption of the
Plan by the Boards of Directors of the Mutual Holding Company,
the Middle Tier
Holding Company and the Bank to be given by publication in a
newspaper having
general circulation in each community in which an office of the
Bank is located
and will cause copies of the Plan to be made available at each
office of the
Mutual Holding Company, the Middle Tier Holding Company and the
Bank for
inspection by Members and Stockholders. The Mutual Holding
Company, the Middle
Tier Holding Company and the Bank will cause to be published, in
accordance with
the requirements of applicable regulations of the OTS, a notice
of the filing
with the OTS of an application to convert the Mutual Holding
Company from mutual
to stock form.
B. Promptly following receipt of requisite approval of the OTS,
this
Plan will be submitted to the Members for their consideration
and approval at
the Special Meeting. The Mutual Holding Company may, at its
option, mail to all
Members as of the Voting Record Date, at their last known
address appearing on
the records of the Mutual Holding Company and the Bank, a proxy
statement in
either long or summary form describing the Plan which will be
submitted to a
vote of the Members at the Special Meeting. The Holding Company
also shall mail
to all such Members (as well as other Participants) either a
Prospectus and
Order Form for the purchase of Conversion Stock or a letter
informing them of
their right to receive a Prospectus and Order Form and a postage
prepaid card to
request such materials, subject to the provisions herein. The
Plan must be
approved by the affirmative vote of at least a majority of the
total number of
votes eligible to be cast by Voting Members at the Special
Meeting.
9
<PAGE>
C. Subscription Rights to purchase shares of Conversion Stock
will be
issued without payment therefor to Eligible Account Holders,
Tax-Qualified
Employee Plans, Supplemental Eligible Account Holders and Other
Members.
D. The Middle Tier Holding Company shall file preliminary
proxy
materials with the OTS in order to seek the approval of the Plan
by its
Stockholders. Promptly following clearance of such proxy
materials and the
receipt of any other requisite approval of the OTS, the Middle
Tier Holding
Company will mail definitive proxy materials to all Stockholders
as of the
Stockholder Voting Record Date, at their last known address
appearing on the
records of the Middle Tier Holding Company, for their
consideration and approval
of this Plan at the Stockholders' Meeting. The Plan must be
approved by (a) the
vote of at least two-thirds of the outstanding shares of Middle
Tier Holding
Company Common Stock as of the Stockholder Voting Record Date
and (b) the vote
of at least a majority of the shares of Middle Tier Holding
Company Common Stock
held by the Public Stockholders as of the Stockholder Voting
Record Date.
E. The Mutual Holding Company shall apply to convert to a
federal
interim stock savings bank.
F. The Middle Tier Holding Company shall apply to convert to a
federal
interim stock savings bank.
G. The Holding Company shall file a Registration Statement with
the SEC
to register the Holding Company Common Stock to be issued in the
Conversion and
Merger under the Securities Act of 1933, as amended, and shall
register such
Holding Company Common Stock under any applicable state
securities laws. Upon
registration and after the receipt of all required regulatory
approvals, the
Conversion Stock shall be first offered for sale in a
Subscription Offering to
Eligible Account Holders, Tax-Qualified Employee Stock Benefit
Plans,
Supplemental Eligible Account Holders and Other Members. It is
anticipated that
any shares of Conversion Stock remaining unsold after the
Subscription Offering
will be sold through a Community Offering and/or a Syndicated
Community
Offering. The purchase price per share for the Conversion Stock
shall be a
uniform price determined in accordance with the provisions
herein. The Holding
Company shall contribute to the Bank an amount of the net
proceeds received by
the Holding Company from the sale of Conversion Stock as shall
be determined by
the Boards of Directors of the Holding Company and the Bank and
as shall be
approved by the OTS.
H. The Effective Date of the Conversion and Reorganization shall
be the
date set forth in Section 28 hereof. Upon the Effective Date,
the following
transactions shall occur:
(i) The Bank will establish the Holding Company as a
first-tier state-chartered stock holding company subsidiary.
(ii) The Holding Company will form an interim corporation
("Interim Bank No. 3"), a new, wholly owned first-tier
subsidiary with
an interim federal stock savings bank charter.
10
<PAGE>
(iii) Middle Tier Holding Company will adopt an interim
federal stock savings bank charter to be known as Interim Bank
No. 2;
Interim Bank No. 2 will then merge with and into the Bank
("Middle Tier
Merger"), with the Bank as the surviving entity. The Mutual
Holding
Company will receive, and Minority Stockholders will
constructively
receive, shares of Bank common stock in exchange for their
Middle Tier
Holding Company common stock.
(iv) Immediately following the Middle Tier Merger, the
Mutual
Holding Company will convert into an interim federal stock
savings bank
to be known as Interim Bank No. 1. Then, Interim Bank No. 1,
formerly
the Mutual Holding Company, will merge with and into the Bank
with the
Bank as the surviving entity ("MHC Merger"). The shares of Bank
Common
Stock previously held by the Mutual Holding Company (now Interim
Bank
No. 1) will be canceled. Eligible members of the Mutual Holding
Company
as of certain specified dates will be granted interests in a
liquidation account to be established by the Bank. The amount in
the
liquidation account will be the greater of (a) 100% of
retained
earnings as of March 31, 2003 (the date of the latest statement
of
financial condition contained in the final offering circular
utilized
in the Bank's initial stock offering), or (b) 70% of Middle
Tier
Holding Company's total shareholders' equity as reflected in its
latest
statement of financial condition.
(v) Immediately following the MHC Merger, Interim Bank No. 3
will merge with and into the Bank, with the Bank as the
surviving
entity ("Bank Merger"). As a result of the Bank Merger, Bank
stock
deemed held by Public Stockholders will be converted into
Holding
Company Common Stock based upon the Exchange Ratio which is
designed to
ensure that the same Public Stockholders will own, approximately
the
same percentage of Holding Company Common Stock as the
percentage of
Middle Tier Holding Company Common Stock owned by them
immediately
prior to the Conversion and Reorganization before giving effect
to (a)
cash paid in lieu of fractional shares and (b) any shares of
Holding
Company stock purchased by Public Stockholders in the
Offering.
(vi) Immediately after the Bank Merger, the Holding Company
shall sell the Conversion Stock in the Offerings, as provided
herein.
I. The Primary Parties may retain and pay for the services of
financial
and other advisors and investment bankers to assist in
connection with any or
all aspects of the Conversion and Reorganization, including in
connection with
the Offerings, the payment of fees to brokers and investment
bankers for
assisting Persons in completing and/or submitting and/or
processing Order Forms
and staffing and managing the stock sales center. All fees,
expenses, retainers
and similar items shall be reasonable.
4. TOTAL NUMBER OF SHARES AND PURCHASE PRICE OF CONVERSION
-------------------------------------------------------
STOCK
-----
A. The aggregate price at which shares of Conversion Stock shall
be
sold in the Offerings shall be based on a pro forma valuation of
the aggregate
market value of the Conversion
11
<PAGE>
Stock prepared by the Independent Appraiser. The valuation shall
be based on
financial information relating to the Primary Parties, market,
financial and
economic conditions, a comparison of the Primary Parties with
selected publicly
held financial institutions and holding companies such other
factors as the
Independent Appraiser may deem to be important. The valuation
shall be stated in
terms of an Estimated Price Range, the maximum of which shall
generally be no
more than 15% above the average of the minimum and maximum of
such price range
and the minimum of which shall generally be no more than 15%
below such average.
As mandated by OTS regulations, the amount of Conversion Stock
is based upon an
independent valuation, which is not approved or otherwise
determined by the
Holding Company or the Board of Directors. The valuation shall
be updated during
the Conversion as market and financial conditions warrant and as
may be required
by the OTS.
B. Based upon the independent valuation, the Initial Purchase
Price and
the number (or range) of shares of Conversion Stock ("Offering
Range") to be
offered in the Offerings shall be established. The Actual
Purchase Price and the
total number of shares of Conversion Stock to be issued in the
Offerings shall
be determined upon conclusion of the Offerings, subject to
review by the OTS and
in consultation with the Independent Appraiser.
C. Subject to the approval of the OTS, the Estimated Price Range
may be
increased or decreased prior to completion of the Conversion to
reflect changes
in market, financial and economic conditions since the
commencement of the
Offerings, and under such circumstances the total number of
shares of Conversion
Stock to be issued in the Conversion may correspondingly be
increased or
decreased, to reflect any such change. Notwithstanding anything
to the contrary
contained in this Plan, no resolicitation of subscribers shall
be required and
subscribers shall not be permitted to modify or cancel their
subscriptions
unless the aggregate funds received from the offer of the
Conversion Stock in
the Conversion are less than the minimum or (excluding
purchases, if any, by the
Holding Company's and the Bank's Tax-Qualified Employee Stock
Benefit Plans)
more than 15% above the maximum of the Estimated Price Range set
forth in the
Prospectus. In the event of an increase in the total number of
shares offered in
the Conversion due to an increase in the Estimated Price Range,
the priority of
share allocation shall be as set forth in this Plan, provided,
however, that
such priority will have no effect whatsoever on the ability of
the Tax-Qualified
Employee Stock Benefit Plans to purchase additional shares
pursuant to Section
4.D.
D. (i) In the event that Tax-Qualified Employee Stock Benefit
Plans are
unable to purchase the number of shares subscribed for by such
Tax-Qualified
Employee Stock Benefit Plans due to an oversubscription for
shares of Conversion
Stock pursuant to Section 5 hereof, Tax- Qualified Employee
Stock Benefit Plans
may (unless the Tax-Qualified Employee Stock Benefit Plans elect
to purchase
stock subsequent to the Offerings in the open market) purchase
from the Holding
Company, and the Holding Company may sell to the Tax-Qualified
Employee Stock
Benefit Plans, such additional shares ("Additional Shares") of
Holding Company
Common Stock necessary to fill the subscriptions of the
Tax-Qualified Employee
Stock Benefit Plans, provided that such Additional Shares may
not exceed 8% of
the total number of shares of Conversion Stock sold in the
Conversion. The sale
of Additional Shares, if necessary, will occur contemporaneously
with the sale
of the Conversion Stock. The sale of Additional Shares to
Tax-Qualified Employee
12
<PAGE>
Stock Benefit Plans by the Holding Company is conditioned upon
receipt by the
Holding Company of a letter from the Independent Appraiser to
the effect that
such sale would not have a material effect on the Conversion and
Reorganization
or the Actual Purchase Price and the approval of the OTS. The
ability of the
Tax-Qualified Employee Stock Benefit Plans to purchase up to an
additional 8% of
the total number of shares of Conversion Stock sold in the
Conversion shall not
be affected or limited in any manner by the priorities or
purchase limitations
otherwise set forth in this Plan of Conversion.
(ii) Notwithstanding anything to the contrary contained in
this Plan, if the final valuation of the Conversion Stock
exceeds the maximum of
the Estimated Price Range, up to 8% of the total number of
shares of Conversion
Stock sold in the Conversion may be sold to Tax- Qualified Stock
Benefit Plans
prior to filling any other orders for Conversion Stock from such
shares in
excess of the maximum of the Estimated Price Range. However, at
the election of
the Holding Company, the Tax-Qualified Stock Benefit Plans may,
in whole or in
part, fill their orders through open market purchases subsequent
to the closing
of the Offerings.
5. SUBSCRIPTION RIGHTS OF ELIGIBLE ACCOUNT HOLDERS
-----------------------------------------------
(FIRST PRIORITY)
----------------
A. Each Eligible Account Holder shall receive, without
payment,
nontransferable Subscription Rights to purchase, subject to the
further
limitations of Section 11 hereof, up to the greater of (i) the
maximum purchase
limitation set forth in Section 9 hereof, (ii) one-tenth of 1%
of the total
offering of shares of Conversion Stock in the Subscription
Offering, and (iii)
15 times the product (rounded down to the next whole number)
obtained by
multiplying the total number of shares of Conversion Stock
offered in the
Subscription Offering by a fraction, of which the numerator is
the amount of the
Qualifying Deposit of the Eligible Account Holder and the
denominator is the
total amount of all Qualifying Deposits of all Eligible Account
Holders, subject
to Section 14 hereof.
B. In the event of an oversubscription for shares of Conversion
Stock
pursuant to the provisions herein, available shares shall be
allocated among
subscribing Eligible Account Holders so as to permit each such
Eligible Account
Holder, to the extent possible, to purchase a number of shares
which will make
his total allocation equal to the lesser of the number of shares
subscribed for
or 100 shares. Any available shares remaining after each such
subscribing
Eligible Account Holder has been allocated the lesser of the
number of shares
subscribed for or 100 shares shall be allocated among the
subscribing Eligible
Account Holders in the proportion which the Qualifying Deposit
of each such
subscribing Eligible Account Holder bears to the total
Qualifying Deposits of
all such subscribing Eligible Account Holders whose orders are
unfilled,
provided that no fractional shares shall be issued. Subscription
Rights of
Eligible Account Holders who are also Directors or Officers and
their Associates
shall be subordinated to those of other Eligible Account Holders
to the extent
that they are attributable to increased deposits during the
one-year period
preceding the Eligibility Record Date.
13
<PAGE>
6. SUBSCRIPTION RIGHTS OF THE TAX-QUALIFIED EMPLOYEE STOCK
-------------------------------------------------------
BENEFIT PLANS (SECOND PRIORITY)
-------------------------------
Notwithstanding the purchase limitations discussed below,
Tax-Qualified
Employee Stock Benefit Plans of the Holding Company and the Bank
shall receive,
without payment, Subscription Rights to purchase in the
aggregate up to 10% of
the Conversion Stock, including first priority to purchase any
shares of
Conversion Stock to be issued in the Conversion and
Reorganization as a result
of an increase in the Estimated Price Range after commencement
of the
Subscription Offering and prior to completion of the Conversion
and
Reorganization. The Tax-Qualified Employee Stock Benefit Plans
may, in whole or
in part, fill their orders through open market purchases
subsequent to the
closing of the Offering. The Tax-Qualified Employee Stock
Benefit Plans shall
not be deemed to be Associates or Affiliates of or Persons
Acting in Concert
with any Director or Officer of the Mutual Holding Company, the
Holding Company
or the Bank. Consistent with applicable laws, regulations,
policies and
practices of the OTS, Tax-Qualified Employee Stock Benefit Plans
may use funds
contributed by the Holding Company or the Bank and/or borrowed
from an
independent third party to exercise such Subscription Rights,
and the Holding
Company and the Bank may make scheduled discretionary
contributions thereto,
provided that such contributions do not cause the Holding
Company or the Bank to
fail to meet any applicable regulatory capital requirement.
7. SUBSCRIPTION RIGHTS OF SUPPLEMENTAL ELIGIBLE ACCOUNT
----------------------------------------------------
HOLDERS (THIRD PRIORITY)
------------------------
A. In the event that the Eligibility Record Date is more than 15
months
prior to the date of the latest amendment to the Application for
Conversion
filed prior to OTS approval, then, and only in that event, a
Supplemental
Eligibility Record Date shall be set and each Supplemental
Eligible Account
Holder shall, subject to the further limitations of Section 11
hereof, receive,
without payment, Subscription Rights to purchase up to the
greater of (i) the
maximum purchase limitation set forth in Section 9 hereof, (ii)
one-tenth of 1%
of the total offering of shares of Conversion Stock in the
Subscription
Offering, and (iii) 15 times the product (rounded down to the
next whole number)
obtained by multiplying the total number of shares of Conversion
Stock offered
in the Subscription Offering by a fraction, of which the
numerator is the amount
of the Qualifying Deposits of the Supplemental Eligible Account
Holder and the
denominator is the total amount of all Qualifying Deposits of
all Supplemental
Eligible Account Holders, subject to Section 13 hereof and the
availability of
shares of Conversion Stock for purchase after taking into
account the shares of
Conversion Stock purchased by Eligible Account Holders and
Tax-Qualified
Employee Stock Benefit Plans though the exercise of Subscription
Rights under
Sections 5 and 6 hereof.
B. In the event of an oversubscription for shares of Conversion
Stock,
available shares shall be allocated among subscribing
Supplemental Eligible
Account Holders so as to permit each such Supplemental Eligible
Account Holder,
to the extent possible, to purchase a number of shares
sufficient to make his
total allocation (including the number of shares, if any,
allocated in
accordance with Section 5.A) equal to the lesser of the number
of shares
subscribed for or 100 shares. Any remaining available shares
shall be allocated
among subscribing Supplemental
14
<PAGE>
Eligible Account Holders in the proportion that the Qualifying
Deposits of each
bears to the total amount of the Qualifying Deposits of all such
subscribing
Supplemental Eligible Account Holders whose orders are unfilled,
provided that
no fractional shares shall be issued.
8. SUBSCRIPTION RIGHTS OF OTHER MEMBERS (FOURTH PRIORITY)
------------------------------------------------------
A. Each Other Member shall, subject to the further limitations
of
Section 11 hereof, receive, without payment, Subscription Rights
to purchase up
to the greater of (i) the maximum purchase limitation set forth
in Section 9
hereof and (ii) one-tenth of 1% of the total offering of shares
of Conversion
Stock in the Subscription Offering, in each case subject to
Section 14 hereof
and the availability of shares of Conversion Stock for purchase
after taking
into account the shares of Conversion Stock purchased by
Eligible Account
Holders, Tax-Qualified Employee Stock Benefit Plans, and
Supplemental Eligible
Account Holders, if any, through the exercise of Subscription
Rights under
Sections 5, 6 and 7 hereof.
B. If, pursuant to this Section, Other Members subscribe for a
number
of shares of Conversion Stock in excess of the total number of
shares of
Conversion Stock remaining, available shares shall be allocated
among
subscribing Other Members so as to permit each such Other
Members, to the extent
possible, to purchase a number of shares sufficient to make his
total allocation
equal to the lesser of the number of shares subscribed or 100
shares. Any
remaining available shares shall be allocated among subscribing
Other Members on
a pro rata basis in the same proportion as each such Other
Member's subscription
bears to the total subscriptions of all such subscribing Other
Members whose
orders are unfilled, provided that no fractional shares shall be
issued.
9. COMMUNITY OFFERING
------------------
A. If less than the total number of shares of Conversion Stock
are sold
in the Subscription Offering, it is anticipated that all
remaining shares of
Conversion Stock shall, if practicable, be sold in a Community
Offering. Subject
to the requirements set forth herein, the manner in which the
Conversion Stock
is sold in the Community Offering shall have as the objective
the achievement of
a wide distribution of such stock, subject to the right of the
Primary Parties,
in their absolute discretion, to accept or reject in whole or in
part all orders
in the Community Offering.
B. In the event of a Community Offering, all shares of
Conversion Stock
which are not subscribed for in the Subscription Offering shall
be offered for
sale by means of a direct community marketing program, which may
provide for the
use of brokers, dealers or investment banking firms experienced
in the sale of
financial institution securities. Any available shares in excess
of those not
subscribed for in the Subscription Offering will be available
for purchase by
members of the general public to whom a Prospectus is delivered
by the Holding
Company or on its behalf, with preference first given to Public
Stockholders as
of the Stockholder Voting Record Date and then to natural
persons who are
Residents of the Local Community ("Preferred Subscribers").
15
<PAGE>
C. A Prospectus and Order Form shall be furnished to such
Persons as
the Primary Parties may select in connection with the Community
Offering, and
each order for Conversion Stock in the Community Offering shall
be subject to
the absolute right of the Primary Parties to accept or reject
any such order in
whole or in part either at the time of receipt of an order or as
soon as
practicable following completion of the Community Offering.
Available shares
will be allocated first to each Preferred Subscriber whose order
is accepted in
an amount equal to the lesser of 100 shares or the number of
shares subscribed
for by each such Preferred Subscriber, if possible. Thereafter,
unallocated
shares shall be allocated among the Preferred Subscribers whose
accepted orders
remain unsatisfie
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