--------------------------------------------------------------------------------
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
