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Exhibit
2
PLAN OF
CONVERSION AND REORGANIZATION
of
HOME
FEDERAL MHC
HOME
FEDERAL BANCORP, INC.
and
HOME
FEDERAL BANK
Adopted
by the Boards of Directors on May 11, 2007 and amended on September
14, 2007
PLAN OF
CONVERSION AND REORGANIZATION
This PLAN OF CONVERSION AND
REORGANIZATION, dated as of May 11, 2007 and amended on September
14, 2007, is by and among Home Federal MHC, a federally-chartered
mutual holding company, Home Federal Bancorp, Inc., a
federally-chartered stock corporation, and Home Federal Bank, a
federally-chartered stock savings bank. For purposes of this Plan,
all capitalized terms shall have the meanings assigned to them in
Section II hereof.
I.
Introductory Statement
The Boards of Directors of the Primary
Parties have adopted this Plan to facilitate the reorganization of
the Mutual Holding Company from mutual to stock form. On December
6, 2004, the Savings Bank reorganized into the two-tiered mutual
holding company form of organization. In connection with that
transaction, the Mid-Tier Holding Company was formed to own all of
the stock of the Savings Bank and the Mid-Tier Holding Company
issued (i) 6,083,500 shares of its common stock to eligible
depositors of the Savings Bank and to the Home Federal Bancorp,
Inc. Employee Stock Ownership Plan; (ii) 146,004 shares to the Home
Federal Foundation, Inc.; (iii) 9,125,250 shares to the Mutual
Holding Company. Also in connection with that transaction the
Savings Bank converted from a federally-chartered mutual savings
and loan association to a federally chartered stock savings bank
and became the wholly owned subsidiary of the Mid-Tier Holding
Company.
As part of the Conversion and
Reorganization provided for herein, as described in more detail in
Section III , the Mutual Holding Company will convert from
mutual to stock form through a series of simultaneous mergers
pursuant to which (i) the Mutual Holding Company will cease to
exist and a liquidation account will be established by the Savings
Bank for the benefit of the holders of Deposit Accounts as of
specified dates, and (ii) the Savings Bank will become a wholly
owned subsidiary of the Holding Company. In addition, the Holding
Company will offer shares of Conversion Stock in the Offerings as
provided herein. At the discretion of the Boards of Directors of
the Primary Parties, the Conversion and Reorganization may be
effected in any other manner approved by the OTS that is consistent
with the purposes of this Plan and applicable laws and
regulations.
Pursuant to this Plan, shares of
Conversion Stock will be offered in a Subscription Offering
pursuant to Subscription Rights at the Purchase Price, first to
Eligible Account Holders, second to Tax-Qualified Employee Stock
Benefit Plans, third to Supplemental Eligible Account Holders and
fourth to Other Members. Concurrently with or immediately after the
Subscription Offering, shares not subscribed for in the
Subscription Offering will be offered as part of the Conversion to
the general public in a Direct Community Offering. Shares remaining
may then be offered to the general public in a Syndicated Community
Offering or otherwise. The aggregate Purchase Price of the
Conversion Stock will be based upon an independent appraisal of the
Holding Company’s Common Stock, giving effect to the
completion of the Conversion and Reorganization.
The Boards of Directors of the Primary
Parties believe that the conversion of the Mutual Holding Company
to stock form is in the best interests of the Primary Parties, as
well as the best interests of the Members of the Mutual Holding
Company and stockholders of the Mid-Tier Holding Company. The
Boards of Directors determined that this Plan equitably provides
for the interests of the Members through the granting of
Subscription Rights and the establishment of the Liquidation
Account. Further, these Boards of Directors determined that the
Plan is fair and equitable to the current public stockholders of
the Mid-Tier Holding Company and would not adversely impact the
stockholders’ equity of the Savings Bank. The Conversion and
Reorganization will result in the raising of additional capital for
the Savings Bank and the Holding Company. In addition, the
Conversion and Reorganization has been structured to re-unite the
accumulated earnings and profits retained by the Mutual Holding
Company with the retained earnings of the Holding Company through a
tax-free reorganization.
The Conversion and Reorganization are
intended to provide an additional source of capital not now
available in order to allow the Savings Bank and the Holding
Company to better serve the needs of the community through
increased lending to support continued growth in the Savings
Bank’s residential, residential development, construction
commercial real estate and commercial business loan portfolios, and
the potential opening or acquisition of additional branch offices.
The proposed structure will also provide a more flexible operating
structure for acquisitions of other financial institutions or other
businesses related to banking (although no mergers or acquisitions
are currently planned)
and other
general corporate purposes. Accordingly, the Boards of Directors of
the Primary Parties believe that it is in the best interests of the
companies and their respective constituencies to raise additional
capital at this time.
Consummation of the Conversion and
Reorganization is subject to the approval of this Plan and the
Conversion and Reorganization by : (i) a majority of the total
number of votes eligible to be cast at a special meeting of the
Members of the Mutual Holding Company to be called to consider and
vote on the Conversion and Reorganization (ii) the holders of a
majority of the outstanding shares of common stock of the Mid-Tier
Holding Company eligible to vote and (iii) the holders of a
majority of the outstanding shares of the Mid-Tier Holding Company,
excluding the shares held by the Mutual Holding Company. In
addition, in order to consummate the Conversion and Reorganization,
this Plan must be filed with and approved by the OTS in accordance
with the Regulations.
After the Conversion and Reorganization,
the Savings Bank will continue to be regulated by the OTS, as its
chartering authority, and by the FDIC, which insures the Savings
Bank’s deposits. The Holding Company will be regulated by the
OTS. In addition, all insured savings deposits will continue to be
insured by the FDIC up to the maximum amount provided by law. No
change will be made in the Board of Directors or management of the
Savings Bank as a result of the Conversion and
Reorganization.
II.
Definitions
As used in this Plan, the terms set
forth below have the following meanings:
A.
Acting in
Concert : (1) Knowing participation in a joint activity or
interdependent conscious parallel action towards a common goal
whether or not pursuant to an express agreement; or (2) 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. Persons living at the
same Residence, whether or not related, will be deemed to be Acting
in Concert, unless otherwise determined by the Boards of Directors
of the Primary Parties. A Person who acts in concert with another
Person (“other party”) shall also be deemed to be
acting in concert with any Person 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, and participants or
beneficiaries of any such Tax-Qualified Employee Stock Benefit Plan
will not be deemed to be acting in concert solely as a result of
their common interests as participants or beneficiaries. 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 Boards of Directors
of the Primary Parties or Officers designated by such Boards and
may be based on any evidence upon which the Board or such Officer
chooses to rely, including, without limitation, the fact that such
Persons have joint accounts at the Savings Bank or the fact that
such Persons have filed joint Schedules 13D or Schedules 13G with
the SEC with respect to other companies. Directors, Officers and
employees of the Primary Parties shall not be deemed to be Acting
in Concert solely as a result of their capacities as
such.
B.
Application for
Conversion : The Form AC and related application materials
submitted to the OTS for approval of the Conversion and
Reorganization.
C.
Associate :
When used to indicate a relationship with any Person, means (i) any
corporation or organization (other than the Primary Parties or a
majority-owned subsidiary of any of the Primary Parties) of which
such Person is an 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, except a
Tax-Qualified Employee Stock Benefit Plan 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 any of
the Primary Parties or their subsidiaries and (iv) any person
Acting in Concert with any of the persons or entities specified in
clauses (i) through (iii) above; provided, however, that any
Tax-Qualified or Non-Tax Qualified Employee Plan shall not be
deemed to be an Associate of any Director or Officer of the Primary
Parties solely as a result of their capacities as such. When used
to refer to a Person other than an Officer of Director of the
Savings Bank, the Savings Bank in its sole discretion may determine
the Persons that are Associates of other Persons.
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D.
Capital
Stock : Any and all authorized capital stock in the Savings
Bank.
E.
Conversion and
Reorganization : Conversion and Reorganization means: (i) the
conversion of Mid-Tier Holding Company to Interim One and the
subsequent Mid-Tier Holding Company Merger, pursuant to which the
Mid-Tier Holding Company will cease to exist; (ii) the conversion
of the Mutual Holding Company to Interim Two and the subsequent MHC
Merger, pursuant to which the Mutual Holding Company will cease to
exist; (iii) the formation of Interim Three and the Holding Company
Merger pursuant to which the Savings Bank will become a wholly
owned subsidiary of the Holding Company and, in connection
therewith, each share of Mid-Tier Holding Company Common Stock
outstanding immediately before the effective time thereof held by a
Minority Stockholder shall automatically be converted , without
further action by the holder thereof, into the right to receive
shares of Holding Company Common Stock based on the Exchange Ratio,
plus cash in lieu of any fractional interest; and (iv) the issuance
of Holding Company Common Stock in the Offerings as provided
herein.
F.
Conversion
Stock : Holding Company Common Stock to be issued and sold by
the Holding Company pursuant to this Plan.
G.
Deposit
Account : Any withdrawable account maintained at the Savings
Bank, including, without limitation, savings, time, demand, NOW,
money market, certificate and passbook accounts.
H.
Direct
Community Offering : The offering for sale of Conversion Stock
to the public.
I.
Director :
A member of the Board of Directors of any of the Primary
Parties.
J.
Eligible
Account Holder : Any Person holding a Qualifying Deposit on the
Eligibility Record Date.
K.
Eligibility
Record Date : The date for determining Qualifying Deposits of
Eligible Account Holdings shall be the close of business on March
31, 2006.
L.
Estimated
Valuation Range : The range of the minimum and maximum
estimated aggregate pro forma market value of the Conversion Stock
to be issued in the Offerings, as set forth in the independent
valuation prepared by the Independent Appraiser in accordance with
Section X.B hereof.
M.
ESOP : The
Tax-Qualified Employee Stock Benefit Plan adopted by the Holding
Company or the Savings Bank in connection with the Conversion and
Reorganization, the purpose of which shall be to acquire capital
stock of the Holding Company, including Conversion
Stock.
N.
Exchange
Ratio : Exchange Ratio means the rate at which shares of the
Holding Company Common Stock will be exchanged for shares of the
Mid-Tier Holding Company Common Stock held by Minority Stockholders
in connection with the Holding Company Merger. The exact rate shall
be determined by the Mutual Holding Company, the Mid-Tier Holding
Company and the Savings Bank to ensure that upon consummation of
the Conversion and Reorganization, the Minority Stockholders will
own in the aggregate the same percentage of Holding Company Common
Stock to be outstanding upon completion of the Conversion and
Reorganization as the percentage of Mid-Tier Holding Company Common
Stock owned by them in the aggregate immediately before the
Conversion and Reorganization, after giving effect to the assets
of, and any dividends waived by, the MHC, only if required by the
OTS, and before giving effect to: (i) cash paid in lieu of any
fractional shares of Holding Company Common Stock; and (ii) the
shares purchased by the Minority Stockholders in the
Offerings.
O.
Exchange
Shares : Exchange Shares means the shares of Holding Company
Common Stock to be issued to the Minority Stockholders in
connection with the Holding Company Merger.
P.
FDIC :
Federal Deposit Insurance Corporation.
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Q.
Holding
Company : Home Federal Bancorp, Inc., a stock corporation to be
organized under the laws of the State of Maryland. Such corporation
will be initially formed as a first-tier, wholly owned subsidiary
of the Savings Bank. Upon completion of the Conversion and
Reorganization, the Holding Company shall own all of the
outstanding capital stock of the Savings Bank.
R.
Holding Company
Application : The Holding Company’s application to the
OTS to become a savings and loan holding company.
S.
Holding Company
Merger : Holding Company Merger means the merger of Interim
Three with and into the Savings Bank.
T.
Holding Company
Common Stock : The authorized common stock of the Holding
Company, par value $.01 per share.
U.
Holding Company
Stock : Any and all authorized capital stock of the Holding
Company.
V.
Independent
Appraiser : The independent financial consulting firm retained
by the Holding Company and the Savings Bank to prepare an appraisal
of the estimated pro forma market value of the Conversion
Stock.
W.
Interim One
: Interim One means Home Federal Interim One Savings Bank, which
will be the resultant entity following the conversion of the
Mid-Tier Holding Company and subsequently will be merged with and
into the Savings Bank.
X.
Interim Two
: Interim Two means Home Federal Interim Two Savings Bank, which
will be the resultant entity following the conversion of the Mutual
Holding Company and subsequently will be merged with and into the
Savings Bank.
Y.
Interim
Three : Interim Three means Home Federal Interim Three Savings
Bank, which will be formed as an interim federal stock savings bank
and a wholly subsidiary of the Holding Company to effect the
Holding Company Merger.
Z.
Liquidation
Account : The account to be established by the Savings Bank
pursuant to Section XIII hereof.
AA.
Local Community : Ada, Canyon, Gem and Elmore Counties of
the State of Idaho, the counties in which the Savings Bank
maintains offices.
BB.
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 in a recognized inter-dealer
quotation system or furnishes bona fide competitive bid and offer
quotations on request or (ii) furnishes bona fide competitive bid
and offer quotations on request and (iii) is ready, willing and
able to effect transactions in reasonable quantities at his quoted
prices with other brokers or dealers.
CC.
Member Proxy Statement : The document describing the
Conversion and Reorganization to be used in connection with the
solicitation of votes for the Special Meeting of
Members.
DD.
Members : All Persons or entities who qualify as a member of
the Mutual Holding Company in accordance with its mutual charter
and bylaws and applicable laws and regulations and shall include
any Person holding a Deposit Account as of the Record Date and
borrowers from the Savings Bank who had loan outstanding from the
Savings Bank as of December 6, 2004 that continued to be
outstanding as of the close of business on the Record
Date.
EE.
MHC Merger : MHC Merger means the merger of Interim Two, the
successor of the Mutual Holding Company following its conversion to
an interim federal stock savings bank, with and into the Savings
Bank.
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FF.
Mid-Tier Holding Company : Home Federal Bancorp, Inc., a
federally-chartered corporation.
GG.
Mid-Tier Holding Company Common Stock : Shares of common
stock, par value $.01 per share of the Mid-Tier Holding
Company.
HH.
Mid-Tier Holding Company Merger : The merger of the Mid-Tier
Holding Company (following its conversion to a federal interim
stock savings bank) with and into the Savings Bank.
II.
Minority
Stockholder : Minority Stockholder means any owner of Mid-Tier
Holding Company Common Stock, other than the Mutual Holding
Company.
JJ.
Mutual Holding
Company : Home Federal MHC, a federally chartered mutual
holding company.
KK. Non-Tax
Qualified Employee Plan : Any defined benefit plan or defined
contribution plan of the Savings Bank or the Holding Company, such
as an employee stock ownership plan, stock bonus plan, profit
sharing plan or other plan, which with its related trust does not
meet the requirements to be “qualified” under Section
401 of the Internal Revenue Code.
LL. Offering
Range : The range of the minimum and maximum aggregate values
determined by the Boards of Directors of the Primary Parties within
which the aggregate offering price of Conversion Stock sold in the
Conversion and Reorganization will fall. The Offering Range will be
within the estimated aggregate pro forma market value of the
Conversion Stock, as determined by the Independent Appraiser in
accordance with Section X.B hereof. The maximum of the
Offering Range shall be no more than 15% above the average of the
minimum and maximum of such range and the minimum of which shall be
no more than 15% below such average.
MM.
Offerings : The Subscription Offering, the Direct Community
Offering and Syndicated Community Offering, if any.
NN. Officer :
An executive officer of any of the Primary Parties, which includes
the Chairman, Chief Executive Officer, President, Executive Vice
President, Senior Vice Presidents, Vice Presidents in charge of
principal business functions, the Secretary and the Treasurer as
well as any other person performing similar functions.
OO. Order
Forms : Forms to be used to order Conversion Stock provided to
Participants in the Offerings pursuant to this Plan.
PP. Other
Member : Holder of a Deposit Account (other than Eligible
Account Holders or Supplemental Eligible Account Holders) and
borrowers from the Savings Bank as of the Record Date.
QQ. OTS : The
Office of Thrift Supervision of the United States Department of the
Treasury.
RR.
Participant : Any
Eligible Account Holder, Tax-Qualified Employee Stock Benefit Plan,
Supplemental Eligible Account Holder or Other Member.
SS.
Person : An individual, a corporation, a limited liability
company, a partnership, a limited liability partnership, an
association, a joint stock company, a trust, an unincorporated
organization or a government or any political subdivision
thereof.
TT.
Plan : This Plan of Conversion and Reorganization as adopted
by the Boards of Directors of the Primary Parties and any amendment
hereto approved as provided herein. The Boards of Directors of the
Holding Company and interim savings banks shall adopt this Plan as
soon as practicable following their organization.
UU. Primary
Parties : The Mutual Holding Company, the Mid-Tier Holding
Company and the Savings Bank.
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VV.
Prospectus : The one or more documents to be used in
offering the Conversion Stock in the Offerings.
WW.
Purchase Price : 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.
XX.
Qualifying Deposit : The aggregate balance of all Deposit
Accounts of (i) an Eligible Account Holder at the close of business
on the Eligibility Record Date and (ii) a Supplemental Eligible
Account Holding at the close of business on the Supplemental
Eligibility Record Date; provided, however, in either case that no
Deposit Account with a balance of less than $50 shall constitute a
Qualifying Deposit.
YY.
Record Date : Date which determines which Members are
entitled to vote at the Special Meeting of Members as determined by
the Board of Directors of the Mutual Holding Company and
Stockholders entitled to vote at the Special Meeting of
Stockholders as determined by the Board of Directors of the
Mid-Tier Holding Company.
ZZ.
Registration
Statement : The registration statement on Form S-1 or other
applicable forms filed by the Holding Company with the SEC for the
purpose of registering the Conversion Stock under the Securities
Act of 1933, as amended.
AAA.
Regulations : The rules and regulations of the
OTS.
BBB. Residence
: The terms “residence,” “reside,”
“resided” or “residing” as used herein with
respect to any person shall mean any person who occupied a dwelling
in the communities in which the Savings Bank does business, has an
intent to remain with such communities for a period of time, and
manifests the genuineness of that intent by establishing an ongoing
physical presence within such communities together with an
indication that such presence within such communities 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 these communities. 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 Primary
Parties 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. Unless the Primary Parties determine otherwise, Persons
having the same address and Persons exercising subscription rights
through Qualifying Deposits at the same address will be subject to
the overall purchase limitation contained in Section X.E.1.
Any such determination as to Residence or the purchase limitations
applicable to Persons at the same address shall be in the sole
discretion of the Boards of Directors of the Primary
Parties.
CCC.
Savings Bank : Home Federal Bank, a federally-chartered
stock savings bank.
DDD.
Savings Bank Common Stock : The common stock of the Savings
Bank, par value $1.00 per share, which stock is not and will not be
insured by the FDIC or any other governmental authority, all of
which will be held by the Holding Company.
EEE. SEC :
U.S. Securities and Exchange Commission.
FFF. Special
Meeting of Members : The special meeting of Members of the
Mutual Holding Company called for the purpose of considering and
voting on this Plan, including any adjournments of such
meeting.
GGG.
Special Meeting of Stockholders : The special meeting of
stockholders of the Mid-Tier Holding Company called for the purpose
of considering and voting on this Plan, including any adjournments
of such meeting.
HHH.
Stockholder Proxy Statement : The document used to solicit
approval of the Plan by the Minority Stockholders.
III.
Subscription Offering : The offering of Conversion Stock to
Participants in accordance with this Plan.
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JJJ.
Subscription Rights : Non-transferable, non-negotiable,
personal rights granted to Participants pursuant to the terms of
this Plan to purchase Conversion Stock.
KKK. Supplemental
Eligibility Record Date : The date for determining Qualifying
Deposits of Supplemental Eligible Account Holders and shall be the
last day of the calendar quarter preceding the approval of this
Plan by the OTS.
LLL. Supplemental
Eligible Account Holder : Any person holding a Qualifying
Deposit (other than an Officer or Director or their Associates) on
the Supplemental Eligibility Record Date provided, however, that
any Director or Officer of the Savings Bank employed, appointed or
elected for the first time to such office after the Eligibility
Record Date, and his or her Associates, shall not be precluded from
being a Supplemental Eligible Account Holder solely by reason of
holding such office.
MMM. Syndicated Community
Offering : 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 Direct Community
Offering.
NNN.
Tax Qualified-Employee Stock Benefit Plan : Any defined
benefit plan or defined contribution plan of the Savings Bank or
Holding Company, 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/or the
Savings Bank and which, with its related trust meets the
requirements to be “qualified” under section 401of the
Internal Revenue Code. A “non-tax-qualified employee stock
benefit plan” is any defined benefit plan or defined
contribution plan that is not so qualified.
III.
General
Procedure For Conversion and Reorganization .
A.
The Boards of Directors of each
of the Primary Parties shall adopt this Plan by a vote of not less
than two-thirds of its entire membership.
B.
An Application for Conversion
and Reorganization, including this Plan, will be submitted,
together with all requisite material, to the OTS for approval. The
Primary Parties also will cause notice of the adoption of this Plan
by their respective Boards of Directors to be given by publication
in a newspaper having general circulation in each community in
which an office of the Savings Bank is located; and will make
available copies of this Plan at each office of the Primary Parties
for inspection by Members. After receipt of notice from the OTS to
do so, the Primary Parties will post the notice of the filing of
the Application for Conversion in each of their offices and will
again publish, in accordance with the requirements of the
Regulations, a notice of the filing with the OTS of an application
to convert the Mutual Holding Company from mutual to stock
form.
C.
The Mid-Tier Holding Company
shall file a preliminary Stockholder Proxy Statement with the OTS
and the SEC to seek approval of the Plan by its stockholders.
Promptly following the clearance of such Stockholder Proxy
Statement and the receipt of any other requisite approval of the
OTS, the Mid-Tier Holding Company will mail definitive proxy
materials to all Minority Stockholders as of the Record Date, at
their last known address appearing on the records of the Mid-Tier
Holding Company, for their consideration and approval of the Plan
at the Special Meeting of Stockholders. The Minority Stockholders
shall have dissenters’ and appraisal rights in connection
with their vote on the Conversion and Reorganization to the extent
required by Section 552.14 of the Regulations.
D.
The Holding Company shall file
a Registration Statement with the SEC to register the Conversion
Stock under the Securities Act of 1933, as amended, and shall
further register the Conversion Stock under any applicable state
securities laws, subject to the limitations set forth in Section
X.J hereof. 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 Participants. It is
anticipated that any shares of Conversion Stock remaining unsold
after the Subscription Offering will be sold through a Direct
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 Section X
hereof. The Holding Company shall contribute to the Savings 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 Savings Bank and as shall
be approved by the OTS.
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E.
All assets, rights, interest,
privileges, powers, franchises and property (real, personal and
mixed) of the Mid-Tier Holding Company shall be automatically
transferred to and vested in the Holding Company by virtue of the
Conversion and Reorganization without any deed or other document of
transfer. The Holding Company without any order or action on the
part of any court or otherwise and without any document of
assumption or assignment, shall hold and enjoy all of the
properties, franchises and interests, including appointments,
powers, designations, nominations and all other rights and
interests as the agent or fiduciary in the same manner and to the
same extent as such rights, franchises, interests and powers were
held or enjoyed by Mid-Tier Holding Company. The Holding Company
shall be responsible for all of the liabilities, restrictions and
duties of every kind and description of the Mid-Tier Holding
Company immediately before the Conversion and Reorganization,
including liabilities for all debts, obligations and contracts of
Mid-Tier Holding Company, matured or unmatured, whether accrued,
absolute, contingent or otherwise and whether or not reflected or
reserved against on balance sheets, book or accounts or records of
Mid-Tier Holding Company. By participating in the Conversion and
Reorganization, the Holding Company shall have approved the Home
Federal Employee Stock Ownership Plan, the Home Federal Bancorp
2005 Stock Option and Incentive Plan and the Home Federal Bancorp
2005 Recognition and Retention Plan, as in effect or hereafter
amended, as plans of the Holding Company and shall have agreed to
issue Holding Company Common Stock, in lieu of Mid-Tier Holding
Company Common Stock, as adjusted, to the extent appropriate, by
the Exchange Ratio, pursuant to the terms of those
plans.
F.
Promptly following approval of
the Application for Conversion by the OTS, this Plan will be
submitted to the Members for their consideration and approval at
the Special Meeting. The Mutual Holding Company shall mail to all
Members as of the Record Date, at their last known address
appearing on the records of the Savings Bank, the Member Proxy
Statement describing this Plan which will be submitted to a vote of
the Members at the Special Meeting. The Holding Company shall also
mail to Participants either a Prospectus and Order Form for the
purchase of Conversion Stock or a letter informing them or their
right to receive a Prospectus and Order Form and a postage prepaid
card to request such materials, subject to the provisions of
Section X hereof. In addition, Participants will receive, or
be given the opportunity to request by either returning a postage
prepaid card which will be distributed with the Member Proxy
Statement or letter or sending another written communication, a
copy of the articles of incorporation and bylaws of the Holding
Company.
G.
Subscription Rights will be
issued without payment therefor to the Participants as set forth in
Section X hereof.
H.
This Plan must be approved by:
(1) a majority of the total number of votes eligible to be cast at
the Special Meeting of Members of the Mutual Holding Company to be
called to consider and vote on the Conversion and Reorganization
(2) the holders of a majority of the outstanding shares of common
stock of the Mid-Tier Holding Company eligible to vote and (3) the
holders of a majority of the outstanding shares of the Mid-Tier
Holding Company, excluding the shares held by the Mutual Holding
Company.
I.
The effective date
of the Conversion and Reorganization shall be the date set forth in
Section IX hereof. Upon the effective date, the following
transactions shall occur:
(i) The Holding
Company will form Interim Three as its wholly owned subsidiary and
the Board of Interim Three shall adopt an agreement and plan of
merger providing for the Holding Company Merger by at least a
two-thirds vote. The Holding Company shall approve this agreement
and plan of merger in its capacity as sole stockholder of Interim
Three and the Mid-Tier Holding Company shall approve this agreement
and plan of merger in its capacity as sole stockholder of the
Savings Bank.
(ii) The Mutual
Holding Company shall convert from a federal mutual holding company
to Interim Two. The Mid-Tier Holding Company shall convert into
Interim One and simultaneously merge with and into the Savings Bank
in the Mid-Tier Merger, with the Savings Bank being the surviving
institution. Immediately thereafter, the Mutual Holding Company as
converted, shall merge with and into the Savings Bank in the MHC
Merger, with the Savings Bank being the surviving institution. As a
result of the MHC Merger and the Mid-Tier Merger: (a) the shares of
the Mid-Tier Holding Company Common Stock held by the Mutual
Holding Company (following its conversion to an interim federal
stock savings bank) shall be extinguished; and (b) Members of the
Mutual Holding Company will be granted interests in the Liquidation
Account.
8
(iii) Interim Three shall merge
with and into the Savings Bank pursuant to the Holding Company
Merger, with the Savings Bank being the surviving institution. As a
result of the Holding Company Merger: (a) the shares of Mid-Tier
Holding Company Common Stock held by the Savings Bank shall be
extinguished; (b) the shares of Mid-Tier Holding Company Common
Stock held by the Minority Stockholders shall be converted into the
right to receive shares of Holding Company Common Stock based upon
the Exchange Ratio, plus cash in lieu of any fractional share
interest based on the Purchase Price; and (c) the shares of common
stock of Interim Three held by the Holding Company shall be
converted into shares of Savings Bank Common Stock on a one-for-one
basis, with the result that the Savings Bank shall become a wholly
owned subsidiary of the Holding Company. In addition, as a result
of the Holding Company Merger, options to purchase shares of
Mid-Tier Holding Company Common Stock that are outstanding
immediately before the consummation of the Conversion and
Reorganization shall be converted into options to purchase shares
of Holding Company Common Stock, with the number of shares subject
to the option and the exercise price per share to be adjusted based
upon the Exchange Ratio so that the aggregate exercise price
remains unchanged, and with the duration of the option remaining
unchanged.
(iv) The
Holding Company shall sell an amount of Conversion Stock determined
in accordance with Section X hereof.
J.
The offices of the
Savings Bank shall be unaffected by the Conversion and
Reorganization.
K.
The Primary Parties shall
obtain an opinion of their tax advisors or a favorable ruling from
the United States Internal Revenue Service which shall state that
the Conversion and Reorganization will not result in any gain or
loss for Federal income tax purposes to the Primary Parties or the
Eligible Account Holders, Supplemental Eligible Account Holders and
Other Members. Receipt of a favorable opinion or ruling is a
condition precedent to the completion of the Conversion and
Reorganization.
L.
The Charter of the
Savings Bank shall be amended upon consummation of the Conversion
and Reorganization to reflect the Savings Bank’s Liquidation
Account obligation pursuant to Section XIII hereof. The
Bylaws of the Savings Bank shall be unaffected by the Conversion
and Reorganization.
M. 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 Subscription Offering, Direct Community
Offering and/or any Syndicated Community Offering, the payment of
fees to brokers and investment bankers for assisting Persons in
completing and/or submitting Order Forms.
IV.
Meeting of
Members
Upon receipt of approval of the
Application for Conversion by the OTS, the Special Meeting shall be
scheduled in accordance with the Mutual Holding Company’s
Bylaws. Promptly after receipt of approval from the OTS and at
least 20 days but not more than 45 days prior to the Special
Meeting, the Mutual Holding Company shall distribute proxy
solicitation materials to all Members and beneficial owners of
accounts held in fiduciary capacities where the beneficial owners
possess voting rights as of the Record Date. The proxy solicitation
materials shall include a copy of the Member Proxy Statement and
other documents authorized for use by the regulatory authorities
and may also include a copy of this Plan and/or the Prospectus. The
Mutual Holding Company shall also advise each Eligible Account
Holder and Supplemental Eligible Account Holder not entitled to
vote at the Special Meeting of the proposed Conversion and
Reorganization and the scheduled Special Meeting, and provide a
postage prepaid card on which to indicate whether he wishes to
receive the Prospectus, if the Subscription Offering is not held
concurrently with the proxy solicitation.
At the Special Meeting, an affirmative
vote of not less than a majority of the total outstanding votes of
the Members is required for approval of this Plan. For purposes of
voting at the Special Meeting, Members who are depositors of the
Savings Bank shall be entitled to cast one vote for each $100, or
fraction thereof, of the aggregate withdrawable value of all of the
depositor’s Deposit Accounts as of the Record Date, Members
who are borrowers shall be entitled to cast one vote, in addition
to any votes they may also be entitled to cast as depositors, and
no Member shall be entitled to cast more than 1,000 votes. Voting
may be in person or by proxy. The OTS shall be notified promptly of
the actions of the Members.
9
V.
Summary
Proxy Statement
The Member Proxy Statement furnished to
Members may be in summary form, provided that a statement is made
in bold-face type that a more detailed description of the
Conversion and Reorganization may be obtained by returning an
enclosed postage prepaid card or other written communication
requesting supplemental information. Without prior approval of the
OTS, the Special Meeting shall not be held less than 20 days after
the last day on which such supplemental information statement is
mailed to requesting Members. The supplemental information
statement may be combined with the Prospectus if the Subscription
Offering is commenced concurrently with or during the proxy
solicitation of Members for the Special Meeting.
VI.
Timing of
Subscription Offering
The Holding Company may commence the
Subscription Offering and, provided that the Subscription Offering
has commenced, may commence the Direct Community Offering
concurrently with or during the proxy solicitation of Members. The
Holding Company may close the Subscription Offering before the
Special Meeting, provided that the offer and sale of the Conversion
Stock shall be conditioned upon approval of this Plan by the
Members at the Special Meeting.
The exact timing of the commencement of
the Subscription Offering shall be determined by the Primary
Parties in consultation with the Independent Appraiser and any
financial or advisory or investment banking firm retained by them
in connection with the Conversion and Reorganization. The Primary
Parties may consider a number of factors in determining such
timing, including, but not limited to, their current and projected
future earnings, local and national economic conditions, and the
prevailing market for stocks in general and stocks of financial
institutions in particular. The Primary Parties shall have the
right to withdraw, terminate, suspend, delay, revoke or modify any
such Subscription Offering, at any time and from time to time, as
they in their sole discretion may determine, without liability to
any Person, subject to compliance with applicable securities laws
and any necessary regulatory approval or concurrence.
The Primary Parties shall, promptly
after: (1) the OTS has approved the Application for Conversion and
authorized the Member Proxy Statement and Prospectus for use, (2)
the OTS has approved the Mid-Tier Holding Company Merger and the
MHC Merger, (3) the SEC has declared the Registration Statement,
which includes the Prospectus, effective, (4) the SEC and OTS has
cleared the Stockholder Proxy Statement and (5) all other required
regulatory approvals have been obtained, distribute or make
available the Prospectus, together with Order Forms for the
purchase of Conversion Stock, to all Participants at their last
known addresses appearing on the records of the Savings Bank as of
the Record Date for the purpose of enabling them to exercise their
respective Subscription Rights.
VII.
Offering
Documents
The Mutual Holding Company’s
Member Proxy Statement may require Participants to return to the
Savings Bank by a reasonable certain date a postage prepaid card or
other written communication requesting receipt of a Prospectus with
respect to the Subscription Offering, provided that if the
Prospectus is not mailed concurrently with the proxy solicitation
materials, the Subscription Offering shall not be closed until the
expiration of 30 days after the mailing of the proxy solicitation
materials. If the Subscription Offering is not commenced within 45
days after the Special Meeting of Members, the Savings Bank may
transmit, not more than 30 days prior to the commencement of the
Subscription Offering, to each Eligible Account Holder,
Supplemental Eligible Account Holder and other eligible subscribers
who had been furnished with a Member Proxy Statement a notice which
shall state that the Savings Bank is not required to furnish a
Prospectus to them unless they return by a reasonable date certain
a postage prepaid card or other written communication requesting
the receipt of the Prospectus.
Prior to commencement of the Offerings,
the Holding Company shall file the Registration Statement. The
Holding Company shall not distribute the final Prospectus until the
Registration Statement containing same has been declared effective
by the SEC.
10
VIII. Combined
Subscription and Direct Community Offering
Instead of a separate Subscription
Offering, all Subscription Rights may be exercised by delivery of
properly completed and executed Order Forms to the Savings Bank or
selling group utilized in connection with the Direct Community
Offering and the Syndicated Community Offering. If a separate
Subscription Offering is not held, orders for Conversion Stock in
the Direct Community Offering shall first be filled pursuant to the
priorities and limitations stated in Section X.C ,
below.
IX.
Effective
Date
The effective date of the Conversion and
Reorganization shall be the date upon which the last of the
following actions occurs: (i) the filing of Articles of Merger with
the OTS with respect to the Holding Company Merger, or (ii) the
closing of the issuance of the shares of Conversion Stock in the
Offerings. The filing of Articles of Merger relating to the Holding
Company Merger and the closing of the issuance of shares of
Conversion Stock in the Offerings shall not occur until all
requisite regulatory, and Member and stockholder approvals have
been obtained, all applicable waiting periods have expired and
sufficient subscriptions and orders for the Conversion Stock have
been received. It is intended that the closing of the Holding
Company Merger and the sale of shares of Conversion Stock in the
Offerings shall occur consecutively and substantially
simultaneously. The closing of the sale of all shares of Conversion
Stock sold in the Offerings and the issuance of the Exchange Shares
shall occur simultaneously on the effective date of the Conversion
and Reorganization.
X.
Stock
Offering
A.
Number of
Shares
The number of shares of Conversion Stock
to be offered pursuant to this Plan shall be determined initially
by the Boards of Directors of the Primary Parties in conjunction
with the determination of the Estimated Valuation Range. The number
of shares to be offered may be subsequently adjusted by the Boards
of Directors of the Primary Parties prior to completion of the
Offerings.
B.
Independent
Evaluation and Purchase Price of Shares
The aggregate amount of Conversion Stock
to be sold in the Offerings shall be consistent with the estimated
pro forma market value of the Conversion Stock, based upon an
independent valuation as provided for in this Section X.B .
The Primary Parties shall cause the Independent Appraiser to
prepare a pro forma valuation of the aggregate market value of the
Holding Company Common Stock, giving effect to completion of the
Conversion and Reorganization, which shall be submitted to the OTS
as part of the Mutual Holding Company’s Application for
Conversion, such valuation to be expressed in terms of an Estimated
Valuation Range.
Prior to the commencement of the
Subscription Offering, an Estimated Valuation Range will be
established, which shall be equal to the estimated pro forma market
value of the Conversion Stock, as determined by the Independent
Appraiser. This amount will be based on a pro forma valuation
prepared by the Independent Appraiser of the aggregate market value
of the to be outstanding shares of Holding Company Common Stock
multiplied by the percentage equal to the Mutual Holding
Company’s ownership interest in all of the outstanding shares
Mid-Tier Holding Company Common Stock. The maximum of the Estimated
Valuation Range shall be no more than 15% above the average of the
minimum and maximum of such range and the minimum of which shall be
no more than 15% below such average. The maximum of the Estimated
Valuation Range may be increased by up to 15% subsequent to the
Subscription Offering to reflect changes in market and financial
conditions or demand for the shares. From time to time, as
appropriate or as required by applicable law or the OTS, the
Primary Parties shall cause the Independent Appraiser to review
developments subsequent to its valuation to determine whether the
Estimated Valuation Range should be revised.
Based on the Estimated Valuation Range,
the Boards of Directors of the Primary Parties shall determine the
Offering Range by fixing the Purchase Price and establishing a
range of the number of shares of Conversion Stock to be offered.
The total number of shares of Conversion Stock offered and the
Purchase Price shall be subject to increase
11
or
decrease at any time prior to any Syndicated Community Offering or
other method of sale to reflect changes in market and financial
conditions. If the aggregate purchase price of the Conversion Stock
sold in the Offerings is below the minimum of the Offering Range,
or materially above the maximum of the Offering Range,
resolicitation of purchasers may be required; provided, that up to
a 15% increase in the number of shares to be issued which is
supported by an appropriate change in the estimated pro forma
market value of the Conversion Stock, will not be deemed material
so as to require a resolicitation. If a resolicitation of
purchasers is required, it shall be effected in such manner and
within such time as the Primary Parties shall establish, with the
approval of the OTS.
Notwithstanding the foregoing, shares of
Conversion Stock will not be issued unless, prior to the
consummation of the Conversion and Reorganization, the Independent
Appraiser confirms to the Primary Parties and the OTS that, to the
best knowledge of the Independent Appraiser, nothing of a material
nature has occurred which, taking into account all relevant
factors, would cause the Independent Appraiser to conclude that the
number of shares of Conversion Stock issued in the Conversion and
Reorganization multiplied by the Purchase Price is incompatible
with the estimate of the aggregate consolidated pro forma market
value of the Conversion Stock. If such confirmation is not
received, the Primary Parties may cancel the Offerings, extend the
Conversion and Reorganization and establish a new Offering Range,
hold new Offerings, or take such other action as the OTS may
permit.
If subscriptions for shares of
Conversion Stock are in excess of the maximum of the Offering
Range, available shares shall be allocated in the following order
of priority: (i) if there is an oversubscription at the Eligible
Account Holder level, to fill unfulfilled subscriptions of Eligible
Account Holders in accordance with Section X.C.1 ; (ii) to
fill the Tax-Qualified Employee Stock Benefit Plans’
subscriptions in accordance with Section X.C.2 ; and (iii)
if there is an oversubscription at the Supplemental Eligible
Account Holder level, to fill unfulfilled subscriptions of
Supplemental Eligible Account Holders in accordance with Section
X.C.3 and (iv) if there is an oversubscription at the Other
Member level, to fill unfilled subscriptions of Other Members in
accordance with Section X.C.4 .
The Holding Company Common Stock to be
issued pursuant to this Plan shall upon issuance be fully paid and
non-assessable.
C.
Method of
Offering Shares
Subscription Rights shall be issued at
no cost to Eligible Account Holders, Tax-Qualified Employee Stock
Benefit Plans, Supplemental Eligible Account Holders and Other
Members pursuant to priorities established by this Plan and the
Regulations. In order to effect the Conversion and Reorganization,
all shares of Conversion Stock proposed to be issued in connection
with the Conversion and Reorganization must be sold and, to the
extent that shares are available, no subscriber shall be allowed to
purchase less than 25 shares; provided, however, that if the
purchase price is greater than $20 per share, the minimum number of
shares which must be subscribed for shall be adjusted so that the
aggregate actual purchase price required to be paid for such
minimum number of shares does not exceed $500. The priorities
established for the purchase of shares are as follows:
1.
Category 1:
Eligible Account Holders
a.
Each Eligible
Account Holder shall receive, without payment, Subscription Rights
entitling such Eligible Account Holder to purchase that number of
shares of Conversion Stock which is equal to the greater of the
maximum purchase limitation established for the Direct Community
Offering, one-tenth of one percent of the total offering or 15
times the product (rounded down to the next whole number) obtained
by multiplying the total number of shares of Conversion Stock to be
issued 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 Qualifying Deposits of all
Eligible Account Holders, in each case subject to Paragraphs X.E.
and X.J., below.
b.
In the event of an
oversubscription for shares of Conversion Stock pursuant to this
Category, shares of Conversion Stock shall be allocated among
subscribing Eligible Account Holders as follows:
12
(1)
Shares of
Conversion Stock shall be allocated so as to permit each such
Eligible Account Holder, to the extent possible, to purchase a
number of shares of Conversion Stock sufficient to make his total
allocation equal to 100 shares of Conversion Stock or the total
amount of his subscription, whichever is less.
(2)
Any shares of
Conversion Stock not so allocated shall be allocated among the
subscribing Eligible Account Holders on an equitable basis, related
to the amounts of their respective Qualifying Deposits as compared
to the total Qualifying Deposits of all Eligible Account Holders
whose subscriptions remain unfilled.
c.
Subscription Rights
received by Officers and Directors of the Primary Parties and their
Associates, as Eligible Account Holders, based on their increased
deposits in the Savings Bank in the one-year period preceding the
Eligibility Record Date shall be subordinated to all other
subscriptions involving the exercise of Subscription Rights
pursuant to this Category.
2.
Category 2: Tax-Qualified Employee Stock Benefit
Plans
a.
Tax-Qualified
Employee Stock Benefit Plans shall receive, without payment,
non-transferable Subscription Rights to purchase in the aggregate
up to10% of the Conversion Stock, including shares of Conversion
Stock to be issued in the Conversion and Reorganization as a result
of an increase in the estimated price range after the commencement
of the Subscription Offering and prior to the completion of the
Conversion and Reorganization. The Subscription Rights granted to
Tax-Qualified Stock Benefit Plans shall be subject to the
availability of shares of Conversion Stock after taking into
account the shares of Conversion Stock purchased by Eligible
Account Holders; provided, however, that in the event the number of
shares offered in the Conversion and Reorganization is increased to
an amount greater than the maximum of the estimated price range as
set forth in the Prospectus (“Maximum Shares”), the
Tax-Qualified Employee Stock Benefit Plans shall have the priority
right to purchase any such shares exceeding the Maximum Shares up
to an aggregate of 8% of the Conversion Shares. Shares of
Conversion Stock purchased by any individual participant in a
Tax-Qualified Employee Stock Benefit Plan using funds therein
pursuant to the exercise of Subscription Rights granted to such
participant in his individual capacity as an Eligible Account
Holder and/or Supplemental Eligible Account Holder and/or Other
Member and/or purchases by such participant in the Direct Community
Offering shall not be deemed to be purchases by a Tax-Qualified
Employee Stock Benefit Plan for purposes of calculating the maximum
amount of Conversion Stock that Tax-Qualified Employee Stock
Benefit Plans may purchase pursuant to the first sentence of this
subparagraph if the individual participant controls or directs the
investment authority with respect to such account or
subaccount.
b.
Tax-Qualified
Employee Stock Benefit Plans may use funds contributed or borrowed
by the Holding Company or the Savings Bank and/or borrowed from an
independent financial institution to exercise such Subscription
Rights, and the Holding Company and the Savings Bank may make
scheduled discretionary contributions thereto, provided that such
contributions do not cause the Holding Company or the Savings Bank
to fail to meet any applicable capital requirements.
3.
Category 3: Supplemental Eligible Account Holders
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 the OTS’s approval, then, and only in that
event, each Supplemental Eligible Account Holder shall receive,
without payment, Subscription Rights entitling such Supplemental
Eligible Account Holder to purchase that number of shares of
Conversion Stock which is equal to the greater of (i) the maximum
purchase limitation established for the Direct Community Offering,
(ii) one-tenth of one percent of the total offering or (iii)
15 times the product (rounded down to the next whole number)
obtained by multiplying the total number of shares of Conversion
Stock to be issued by a fraction of which the numerator is the
amount
13
of the Qualifying Deposit of
the Supplemental Eligible Account Holder and the denominator is the
total amount of the Qualifying Deposits of all Supplemental
Eligible Account Holders, in each case subject to Paragraphs X.E.
and X.J. below.
b.
Subscription Rights
received pursuant to this category shall be subordinated to
Subscription Rights granted to Eligible Account Holders and
Tax-Qualified Employee Stock Benefit Plans; therefore, any
Subscription Rights to purchase shares of Conversion Stock received
by an Eligible Account Holder in accordance with Category Number 1
or by a Tax-Qualified Employee Stock Benefit Plan in accordance
with Category Number 2 shall reduce to the extent thereof the
Subscription Rights to be distributed pursuant to this
Category.
c.
In the event
of
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