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Search Agreement and Plan of Merger by:
Exhibit 99.3
PLAN OF CONVERSION AND REORGANIZATION
OF
PROVIDENT BANCORP, MHC
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. INTRODUCTION .......................................................................... 1
2. DEFINITIONS ........................................................................... 2
3. PROCEDURES FOR CONVERSION ............................................................. 8
4. HOLDING COMPANY APPLICATIONS AND APPROVALS ............................................ 10
5. SALE OF SUBSCRIPTION SHARES ........................................................... 10
6. PURCHASE PRICE AND NUMBER OF SUBSCRIPTION SHARES ...................................... 11
7. RETENTION OF CONVERSION PROCEEDS BY THE HOLDING COMPANY ............................... 12
8. SUBSCRIPTION RIGHTS OF ELIGIBLE ACCOUNT HOLDERS (FIRST PRIORITY) ...................... 12
9. SUBSCRIPTION RIGHTS OF EMPLOYEE PLANS (SECOND PRIORITY) ............................... 13
10. SUBSCRIPTION RIGHTS OF SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDERS (THIRD PRIORITY) ......... 13
11. SUBSCRIPTION RIGHTS OF OTHER MEMBERS (FOURTH PRIORITY) ................................ 14
12. COMMUNITY OFFERING AND MERGER SHARES .................................................. 14
13. SYNDICATED COMMUNITY OFFERING/UNDERWRITTEN PUBLIC OFFERING ............................ 15
14. LIMITATION ON PURCHASES ............................................................... 16
15. PAYMENT FOR SUBSCRIPTION SHARES ....................................................... 17
16. MANNER OF EXERCISING SUBSCRIPTION RIGHTS THROUGH ORDER FORMS .......................... 18
17. UNDELIVERED, DEFECTIVE OR LATE ORDER FORM; INSUFFICIENT PAYMENT ....................... 19
18. RESIDENTS OF FOREIGN COUNTRIES AND CERTAIN STATES ..................................... 19
19. ESTABLISHMENT OF LIQUIDATION ACCOUNT .................................................. 20
19A. ESTABLISHMENT AND FUNDING OF CHARITABLE FOUNDATION .................................... 21
20. VOTING RIGHTS OF STOCKHOLDERS ......................................................... 22
21. RESTRICTIONS ON RESALE OR SUBSEQUENT DISPOSITION ...................................... 22
22. REQUIREMENTS FOR STOCK PURCHASES BY DIRECTORS AND OFFICERS FOLLOWING THE CONVERSION ... 23
23. TRANSFER OF DEPOSIT ACCOUNTS .......................................................... 23
24. REGISTRATION AND MARKETING ............................................................ 23
25. TAX RULINGS OR OPINIONS ............................................................... 23
26. STOCK BENEFIT PLANS AND EMPLOYMENT AGREEMENTS ......................................... 24
27. RESTRICTIONS ON ACQUISITION OF BANK AND HOLDING COMPANY ............................... 24
28. PAYMENT OF DIVIDENDS AND REPURCHASE OF STOCK .......................................... 25
29. CHARTER AND BYLAWS .................................................................... 26
30. CONSUMMATION OF CONVERSION AND EFFECTIVE DATE ......................................... 26
31. EXPENSES OF CONVERSION ................................................................ 26
32. AMENDMENT OR TERMINATION OF PLAN ...................................................... 26
33. CONDITIONS TO CONVERSION .............................................................. 26
34. INTERPRETATION ........................................................................ 27
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(i)
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EXHIBIT A AGREEMENT OF MERGER BETWEEN PROVIDENT BANCORP, INC. AND PROVIDENT
BANK
EXHIBIT B AGREEMENT OF MERGER BETWEEN PROVIDENT BANCORP, MHC AND PROVIDENT
BANK
EXHIBIT C AGREEMENT OF MERGER BETWEEN PROVIDENT BANK AND PROVIDENT INTERIM
BANK III
EXHIBIT D CERTIFICATE OF INCORPORATION OF THE HOLDING COMPANY
EXHIBIT E BYLAWS OF THE HOLDING COMPANY
(ii)
<PAGE>
PLAN OF CONVERSION AND REORGANIZATION OF
PROVIDENT BANCORP, MHC
1. INTRODUCTION
This Plan of Conversion and Reorganization (the "Plan") provides for the
conversion of Provident Bancorp, MHC, a federal mutual holding company (the
"Mutual Holding Company"), into the capital stock form of organization. The
Mutual Holding Company currently owns a majority of the common stock of
Provident Bancorp, Inc., a federal stock corporation (the "Mid-Tier Holding
Company") that owns 100% of the common stock of Provident Bank (the "Bank"), a
federal stock savings association that is headquartered in Montebello, New York.
A new Delaware stock holding company (the "Holding Company") will be established
as part of the Conversion and will succeed to all the rights and obligations of
the Mutual Holding Company and the Mid-Tier Holding Company and issue Holding
Company Common Stock in the Conversion and Merger. The purpose of the Conversion
is to convert the Mutual Holding Company to the capital stock form of
organization, which will, among other things, permit the Holding Company to
acquire the Acquiree Corporation in the Merger. The Holding Company will offer
its Common Stock in the Offering upon the terms and conditions set forth herein.
The subscription rights granted to Participants in the Subscription Offering are
set forth in Sections 8 through 11 hereof. All sales of Holding Company Common
Stock in the Community Offering, Syndicated Community Offering or Underwritten
Public Offering will be at the sole discretion of the Board of Directors of the
Bank and the Holding Company. As part of the Conversion and the Exchange
Offering, each Minority Stockholder will receive Holding Company Common Stock in
exchange for Minority Shares. The Conversion will have no impact on depositors,
borrowers or customers of the Bank. After the Conversion, the Bank's insured
deposits will continue to be insured by the FDIC to the extent provided by
applicable law.
In furtherance of the Bank's commitment to its community, this Plan
provides for the establishment of a charitable foundation as part of the
Conversion. The Foundation is intended to complement the Bank's existing
community reinvestment activities in a manner that will allow the Bank's local
communities to share in the growth and profitability of the Holding Company and
the Bank over the long term. Consistent with the Bank's goal, the Holding
Company intends to donate to the Foundation cash and shares of Common Stock, in
an aggregate amount equal to 4% of the value of the shares of Conversion Stock
sold in the Conversion.
This Plan has been adopted by the Boards of Directors of the Mutual
Holding Company, the Mid-Tier Holding Company and the Bank. This Plan also must
be approved by (i) a majority of the total number of votes entitled to be cast
by Voting Members of the Mutual Holding Company at a Special Meeting of Members
to be called for that purpose, and (ii) at least two-thirds of the outstanding
common stock of the Mid-Tier Holding Company at a Special Meeting of
Stockholders to be called for that purpose, including at least a majority of the
outstanding shares owned by Minority Stockholders. The OTS must approve this
Plan before it is presented to Voting Members and stockholders of the Mid-Tier
Holding Company for their approval.
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2. DEFINITIONS
For the purposes of this Plan, the following terms have the following
meanings:
Account Holder - Any Person holding a Deposit Account in the Bank.
Acquiree Bank - Ellenville National Bank, Ellenville, New York.
Acquiree Corporation - E.N.B. Holding Company, Inc., the bank holding
company, and its subsidiary national bank, that will be merged into the Holding
Company (or a subsidiary thereof) at the closing of, or following, the
Conversion.
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.
Affiliate - Any person that controls, is controlled by, or is under common
control with another person.
Appraised Value Range - The range of the estimated consolidated pro forma
market value of the Holding Company, which shall also be equal to the estimated
pro forma market value of the total number of shares of Conversion Stock to be
issued in the Conversion, as determined by the Independent Appraiser prior to
the Subscription Offering and as it may be amended from time to time thereafter.
The maximum and minimum of the Appraised Value Range may vary as much as 15%
above and 15% below, respectively, the midpoint of the Appraised Value Range.
The appraisal upon which the Appraised Value Range is based may be an appraisal
of the Holding Company, or of the Holding Company and any Acquiree Corporation.
Associate - The term Associate when used to indicate a relationship with
any person, means (i) any corporation or organization (other than the Mid-Tier
Holding Company, the Bank or a majority-owned subsidiary of the Bank) 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 that for the purposes of this Plan relating to subscriptions in the
offering, the term "Associate" does not include any Non-Tax-Qualified Employee
Stock Benefit Plan or any Tax-Qualified Employee Stock Benefit Plan in which a
person has a substantial beneficial interest or serves as a trustee or in a
similar fiduciary capacity, and except that, for purposes of aggregating total
shares that may be held by Officers and Directors the term "Associate" does not
include any Tax-Qualified Employee Stock
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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 the Mid-Tier Holding Company, the Bank or the Holding Company, or any
of its parents or subsidiaries.
Bank - Provident Bank, Montebello, New York.
Bank Merger - The merger of Interim with the Bank as set forth in this
Plan.
Code - The Internal Revenue Code of 1986, as amended.
Community - The New York counties of Rockland and Orange.
Community Offering - The offering for sale to certain members of the
general public directly by the Holding Company of shares not subscribed for in
the Subscription Offering.
Control - (including the terms "controlled by," "controlling" and "under
common control with") means the possession, directly or indirectly, of the power
to direct or cause the direction of the management or policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
Conversion - The conversion and reorganization of the Mutual Holding
Company to stock form pursuant to this Plan, and all steps incident or necessary
thereto, including the Offering and the Exchange Offering.
Conversion Stock - The Subscription Shares and the Exchange Shares.
Deposit Account - Any withdrawable account, including, without limitation,
savings, time, demand, NOW accounts, money market, certificate and passbook
accounts.
Director - A member of the Board of Directors of the Bank, the Mid-Tier
Holding Company, the Holding Company or the Mutual Holding Company, as
appropriate in the context.
Eligible Account Holder - 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.
Eligibility Record Date - The date for determining Eligible Account
Holders of the Bank, which is June 30, 2002.
Employees - All Persons who are employed by the Bank, the Mid-Tier Holding
Company or the Mutual Holding Company.
Employee Plans - Any one or more Tax-Qualified Employee Stock Benefit
Plans of the Bank or the Holding Company, including any ESOP and 401(k) Plan.
ESOP - The Bank's Employee Stock Ownership Plan and related trust.
Exchange Offering - The offering and exchange of Holding Company Common
Stock to Minority Stockholders in exchange for Minority Shares.
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Exchange Ratio - The rate at which shares of Common Stock are exchanged
for Minority Shares upon consummation of the Conversion. The Exchange Ratio
shall be determined as of the closing of the Conversion and shall be the rate
that will result in the Minority Stockholders owning in the aggregate the same
percentage of the outstanding shares of Holding Company Common Stock immediately
upon completion of the Conversion as the percentage of Mid-Tier Holding Company
common stock owned by them in the aggregate immediately prior to the
consummation of the Conversion.
Exchange Shares - The shares of Holding Company Common Stock issued to
Minority Stockholders in the Exchange Offering.
FDIC - The Federal Deposit Insurance Corporation.
Foundation: The charitable foundation that will qualify as an exempt
organization under Section 501(c)(3) of the Internal Revenue Code of 1986, as
amended, the establishment and funding of which is contemplated by Section 19A
herein.
Holding Company - The Delaware corporation formed for the purpose of
acquiring all of the shares of capital stock of the Bank in connection with the
Conversion. Shares of Holding Company Common Stock will be issued in the
Conversion to Participants and others in the Conversion.
Holding Company Common Stock - The common stock, par value $0.01 per
share, of the Holding Company.
Independent Appraiser - The appraiser retained by the Mutual Holding
Company and the Bank to prepare an appraisal of the pro forma market value of
the Conversion Stock.
Interim - Provident Interim Bank III, the interim federal savings bank
subsidiary of the Holding Company established to effect the Conversion.
Liquidation Account - The interest in the Bank received by Eligible
Account Holders and Supplemental Account Holders in exchange for their interest
in the Mutual Holding Company in connection with the Conversion.
Majority Ownership Interest - The percentage of common stock of the
Mid-Tier Holding Company owned by the Mutual Holding Company immediately prior
to the completion of the Conversion.
Member - Any Person or entity who qualifies as a member of the Mutual
Holding Company pursuant to is charter and bylaws.
Merger - The merger of the Acquiree Corporation into the Holding Company
(or a subsidiary thereof) with the Holding Company as the resulting corporation,
which shall occur after consummation of the Conversion.
Merger Shares - Any shares of Holding Company Common Stock issued to
stockholders of Acquiree Corporation in consideration of the Merger.
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MHC Merger - The conversion of the Mutual Holding Company into an interim
stock savings bank and subsequent merger with and into the Bank, which shall
occur immediately prior to completion of the Conversion, as set forth in this
Plan.
Mid-Tier Holding Company - Provident Bancorp, Inc., the federal
corporation that owns 100% of the Bank's Common Stock and any successor thereto.
Mid-Tier Merger - The conversion of the Mid-Tier Holding Company into an
interim stock savings bank and subsequent merger with and into the Bank, which
shall occur immediately prior to completion of the Conversion, as set forth in
this Plan.
Minority Shares - Any outstanding common stock of the Mid-Tier Holding
Company, or shares of common stock of the Mid-Tier Holding Company issuable upon
the exercise of options or grant of stock awards, owned by persons other than
the Mutual Holding Company.
Minority Ownership Interest - The percentage of the Mid-Tier Holding
Company's common stock held by stockholders other than the Mutual Holding
Company immediately prior to the completion of the Conversion.
Minority Stockholder - Any owner of Minority Shares.
Mutual Holding Company - Provident Bancorp, MHC, the mutual holding
company of the Mid-Tier Holding Company.
Offering - The offering and issuance, pursuant to this Plan, of Holding
Company Common Stock in a Subscription Offering, Community Offering, Syndicated
Community Offering or Underwritten Public Offering, as the case may be. The term
"Offering" includes any shares of Holding Company Common Stock that (i) are
offered for sale but not purchased in the Subscription Offering and Community
Offering, and (ii) are issued to stockholders of Acquiree Corporation in
consideration of the Merger. The term "Offering" does not include Holding
Company Common Stock issued in the Exchange Offering.
Offering Range - The range of the number of shares of Holding Company
Stock offered for sale in the Offering multiplied by the Subscription Price. The
Offering Range shall be equal to the Appraised Value Range multiplied by the
Majority Ownership Interest, divided by the Subscription Price.
Officer - An executive officer of the Bank, the Mid-Tier Holding Company,
the Holding Company or the Mutual Holding Company as appropriate in the context,
which includes the Chief Executive Officer, President, Senior Vice Presidents,
Executive Vice President in charge of principal business functions, Secretary
and Controller and any Person performing functions similar to those performed by
the foregoing persons.
Order Form - Any form (together with any cover letter and acknowledgments)
sent to any Participant or Person containing among other things a description of
the alternatives available to such Person under the Plan and by which any such
Person may make elections regarding subscriptions for Subscription Shares.
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Other Member - Any person holding a Deposit Account on the Voting Record
Date who is not an Eligible Account Holder or Supplemental Eligible Account
Holder.
OTS - The Office of Thrift Supervision, a division of the United States
Department of Treasury.
Participant - Any Eligible Account Holder, Employee Plan, Supplemental
Eligible Account Holder, or Other Member.
Person - An individual, a corporation, a partnership, an association, a
joint-stock company, a trust (including Individual Retirement Accounts and KEOGH
Accounts), any unincorporated organization, a government or political
subdivision thereof or any other entity.
Plan - This Plan of Conversion and Reorganization of the Mutual Holding
Company as it exists on the date hereof and as it may hereafter be amended in
accordance with its terms.
Prospectus - The one or more documents used in offering the Conversion
Stock.
Qualifying Deposit - 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 - Any Person who occupies a dwelling within the Community, has a
present intent to remain within the Community for a period of time, and
manifests the genuineness of that intent by establishing an ongoing physical
presence within the Community together with an indication that such presence
within the Community is something other than merely transitory in nature. To the
extent the person is a corporation or other business entity, the principal place
of business or headquarters shall be in the Community. To the extent a person is
a personal benefit plan, the circumstances of the beneficiary shall apply with
respect to this definition. In the case of all other benefit plans,
circumstances of the trustee shall be examined for purposes of this definition.
The Mutual Holding Company and the Bank may utilize deposit or loan records or
such other evidence provided to it to make a determination as to whether a
person is a resident. In all cases, however, such a determination shall be in
the sole discretion of the Mutual Holding Company and the Bank. A Participant
must be a "Resident" for purposes of determining whether such person "resides"
in the Community as such term is used in this Plan.
SEC - The Securities and Exchange Commission.
Special Meeting of Members - The special meeting of Voting Members and any
adjournments thereof held to consider and vote upon this Plan.
Special Meeting of Stockholders - The special meeting of stockholders of
the Mid-Tier Holding Company and any adjournments thereof held to consider and
vote upon the Plan.
Subscription Offering - The offering of Subscription Shares to
Participants.
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Subscription Price - The price per Subscription Share to be paid by
Participants and others in the Offering. The Subscription Price will be
determined by the Board of Directors of the Holding Company and fixed prior to
the commencement of the Subscription Offering.
Subscription Shares - Shares of Holding Company Common Stock offered for
sale in the Offering including Merger Shares issued as described in Section 12.
Subscription Shares do not include shares of Holding Company Common Stock issued
in exchange for Minority Shares in the Exchange Offering.
Supplemental Eligible Account Holder - Any Person, other than Directors
and Officers of the Bank and the Mid-Tier Holding Company and their Associates,
holding a Qualifying Deposit on the Supplemental Eligibility Record Date, who is
not an Eligible Account Holder.
Supplemental Eligibility Record Date - The date for determining
Supplemental Eligible Account Holders, which shall be the last day of the
calendar quarter preceding OTS approval of the application for conversion.
Syndicated Community Offering - The offering of Subscription Shares, at
the sole discretion of the Holding Company, following the Subscription and
Community Offerings through a syndicate of broker-dealers.
Tax-Qualified Employee Stock Benefit Plan - 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, with its related trust, meets
the requirements to be "qualified" under Section 401 of the Internal Revenue
Code. The Bank may make scheduled discretionary contributions to a tax-qualified
employee stock benefit plan, provided such contributions do not cause the Bank
to fail to meet its regulatory capital requirements. A "Non-Tax-Qualified
Employee Stock Benefit Plan" is any defined benefit plan or defined contribution
plan which is not so qualified.
Underwritten Public Offering - 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 pursuant to Section 13.
Underwriter - Any one or more investment banking firms that agrees 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, or issued to stockholders of Acquiree
Corporation.
Voting Member - Any Person who at the close of business on the Voting
Record Date is entitled to vote as a Member of the Mutual Holding Company
pursuant to its charter and bylaws.
Voting Record Date - The date fixed by the Directors for determining
eligibility to vote at the Special Meeting of Members and/or the Special Meeting
of Stockholders.
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3. PROCEDURES FOR CONVERSION
A. After approval of the Plan by the Boards of Directors of the Bank, the
Mid-Tier Holding Company and the Mutual Holding Company, the Plan together with
all other requisite material shall be submitted to the OTS for approval. Notice
of the adoption of the Plan by the Board of Directors of the Bank and the Board
of Directors of the Mutual Holding Company and the submission of the Plan to the
OTS for approval will be published in a newspaper having general circulation in
each community in which an office of the Bank is located, and copies of the Plan
will be made available at each office of the Bank for inspection by depositors.
The Mutual Holding Company also will publish a notice of the filing with the OTS
of an application to convert in accordance with the provisions of the Plan.
B. Promptly following approval by the OTS, the Plan will be submitted to a
vote of (i) the Voting Members at the Special Meeting of Members, and (ii) the
Stockholders of the Mid-Tier Holding Company at the Special Meeting of
Stockholders. The Mutual Holding Company will mail to all Voting Members, at
their last known address appearing on the records of the Bank, a proxy statement
in either long or summary form describing the Plan, which will be submitted to a
vote of Voting Members at the Special Meeting of Members. The Holding Company
also will mail to all Participants either a Prospectus and Order Form for the
purchase of Subscription Shares 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 other provisions of this Plan. In addition, all
Participants will receive, or be given the opportunity to request by either
returning a postage prepaid card which will be distributed with the proxy
statement or by letter addressed to the Bank's Secretary, a copy of the Plan as
well as the articles of incorporation or bylaws of the Holding Company. Upon
approval of the Plan by at least (i) a majority of the total number of votes
entitled to be cast by Voting Members, (ii) two-thirds of the outstanding common
stock of the Mid-Tier Holding Company, and (iii) a majority vote of Minority
Stockholders present in person or by proxy, the Mutual Holding Company, the
Holding Company and the Bank will take all other necessary steps pursuant to
applicable laws and regulations to consummate the Conversion and Offering. The
Conversion must be completed within 24 months of the approval of the Plan by
Voting Members, unless a longer time period is permitted by governing laws and
regulations.
C. The Conversion will be effected as follows, or in any other manner that
is consistent with the purposes of this Plan and applicable laws and
regulations, including a merger of the Mutual Holding Company into the Mid-Tier
Holding Company followed immediately by the Offering. The choice of which method
to use to effect the Conversion will be made by the Board of Directors of the
Mutual Holding Company immediately prior to the closing of the Conversion. Each
of the steps set forth below shall be deemed to occur in such order as is
necessary to consummate the Conversion pursuant to the Plan, the intent of the
Board of Directors of the Mutual Holding Company and the Board of Directors of
the Bank, and applicable federal and state regulations and policy. Approval of
the Plan by Voting Members and stockholders of the Mid-Tier Holding Company also
shall constitute approval of each of the transactions necessary to implement the
Plan.
(1) The Bank will establish the Holding Company as a first-tier
Delaware-chartered stock holding company subsidiary.
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(2) Holding Company will charter Interim.
(3) The Mid-Tier Holding Company will convert to an interim stock
savings bank (which shall continue to be referred to as the
"Mid-Tier Holding Company") and merge with and into the Bank
(the "Mid-Tier Merger") with the Bank as the resulting entity
pursuant to the Agreement of Merger attached hereto as Exhibit
A between the Mid-Tier Holding Company and the Bank, whereby
the Mutual Holding Company will receive, and Minority
Stockholders will constructively receive, shares of Bank
common stock in exchange for their Mid-Tier Holding Company
common stock.
(4) Immediately after the Mid-Tier Merger, the Mutual Holding
Company will convert to an interim stock savings bank and will
merge with and into the Bank (the "MHC Merger") pursuant to
the Agreement of Merger attached hereto as Exhibit B between
the Mutual Holding Company and the Bank, whereby the shares of
Bank common stock held by the Mutual Holding Company will be
canceled and each Eligible Account Holder and Supplemental
Eligible Account Holder will receive an interest in a
Liquidation Account of the Bank in exchange for such person's
interest in the Mutual Holding Company.
(5) Immediately after the MHC Merger and the Mid-Tier Merger,
Interim will merge with and into the Bank with the Bank as the
surviving entity (the "Bank Merger") pursuant to the Agreement
of Merger between the Bank and Interim attached hereto as
Exhibit C. Constructive shareholders of the Bank (i.e.,
Minority Stockholders immediately prior to the Conversion)
will exchange the shares of Bank common stock that they
constructively received in the Mid-Tier Merger for Holding
Company Common Stock.
(6) Immediately after the Bank Merger, the Holding Company will
sell the Subscription Shares in the Offering.
D. As part of the Conversion, each of the Minority Shares shall
automatically, without further action of the holder thereof, be converted into
and become the right to receive Holding Company Common Stock based upon the
Exchange Ratio. The basis for exchange of Minority Shares for Holding Company
Common Stock shall be fair and reasonable. Options to purchase shares of
Mid-Tier Holding Company common stock which are outstanding immediately prior to
the consummation of the Conversion 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.
E. The Holding Company shall register the Conversion Stock with the SEC
and any appropriate state securities authorities. In addition, the Mid-Tier
Holding Company shall prepare
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preliminary proxy materials as well as other applications and information for
review by the SEC in connection with the solicitation of stockholder approval of
the Plan.
F. All assets, rights, interests, 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 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 documents 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
other fiduciary in the same manner and to the same extent as such rights,
franchises, and interests and powers were held or enjoyed by the 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 prior to the Conversion, including
liabilities for all debts, obligations and contracts of the Mid-Tier Holding
Company, matured or unmatured, whether accrued, absolute, contingent or
otherwise and whether or not reflected or reserved against on balance sheets,
books or accounts or records of the Mid-Tier Holding Company.
G. The Certificate of Incorporation of the Holding Company (the
"Certificate") shall read in the form of Exhibit D.
H. The home office and branch offices of the Bank shall be unaffected by
the Conversion. The executive offices of the Holding Company shall be located at
the current offices of the Mutual Holding Company and Mid-Tier Holding Company.
I. The Boards of Directors of the Holding Company and the Bank also intend
to take all necessary steps to establish the Foundation and to fund the
Foundation in the manner set forth in Section 19A hereof.
4. HOLDING COMPANY APPLICATIONS AND APPROVALS
The Boards of Directors of the Mutual Holding Company, the Mid-Tier
Holding Company, the Holding Company and the Bank will take all necessary steps
to convert the Mutual Holding Company to stock form, form the Holding Company
and complete the Offering. The Holding Company shall make timely applications to
the OTS and filings with the SEC for any requisite regulatory approvals to
complete the Conversion.
5. SALE OF SUBSCRIPTION SHARES
The Subscription Shares will be offered simultaneously in the Subscription
Offering to the Participants in the respective priorities set forth in this
Plan. The Subscription Offering may begin as early as the mailing of the Proxy
Statement for the Special Meeting of Members. The Holding Company Common Stock
will not be insured by the FDIC. The Bank will not knowingly lend funds or
otherwise extend credit to any Person to purchase shares of Holding Company
Common Stock.
Any shares of Holding Company Common Stock for which subscriptions have
not been received in the Subscription Offering may be issued in the Community
Offering. The
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Subscription Offering may begin prior to the Special Meeting of Members and, in
that event, the Community Offering also may begin prior to the Special Meeting
of Members. The offer and sale of Holding Company Common Stock prior to the
Special Meeting of Members, however, is subject to the approval of the Plan by
Voting Members and stockholders of the Mid-Tier Holding Company.
If feasible, any shares of Holding Company Common Stock remaining after
the Subscription Offering, and the Community Offering should one be conducted,
will be sold in a Syndicated Community Offering or Underwritten Public Offering,
or in any manner that will achieve the widest distribution of the Holding
Company Common Stock. The Syndicated Community Offering and/or Underwritten
Public Offering may be conducted in addition to, or instead of, a Community
Offering. The issuance of Holding Company Common Stock in any Subscription
Offering and any Community Offering will be consummated simultaneously on the
date the sale of Holding Company Common Stock in the Syndicated Community
Offering or Underwritten Public Offering is consummated and only if the required
minimum number of shares of Holding Company Common Stock has been issued.
6. PURCHASE PRICE AND NUMBER OF SUBSCRIPTION SHARES
The total number of shares (or a range thereof) of Conversion Stock to be
offered in the Conversion will be determined jointly by the Boards of Directors
of the Mutual Holding Company, the Mid-Tier Holding Company and the Holding
Company immediately prior to the commencement of the Subscription and Community
Offerings, and will be based on the Appraised Value Range and the Subscription
Price. The Offering Range will be equal to the Appraised Value Range multiplied
by the Majority Ownership Percentage. The estimated pro forma consolidated
market value of the Holding Company will be subject to adjustment within the
Appraised Value Range if necessitated by market or financial conditions, with
the receipt of any required approvals of the OTS, and the maximum of the
Appraised Value Range may be increased by up to 15% subsequent to the
commencement of the Subscription Offering to reflect changes in market and
financial conditions or demand for the shares. The number of shares of
Conversion Stock issued in the Conversion will be equal to the estimated pro
forma consolidated market value of the Holding Company, as may be amended,
divided by the Subscription Price, and the number of Subscription Shares issued
in the Offering will be equal to the product of (i) the estimated pro forma
consolidated market value of the Holding Company, as may be amended, divided by
the Subscription Price, and (ii) the Majority Ownership Interest.
In the event that the Subscription Price multiplied by the number of
shares of Conversion Stock to be issued in the Conversion is below the minimum
of the Appraised Value Range, or materially above the maximum of the Appraised
Value Range, a resolicitation of purchasers may be required, provided that up to
a 15% increase above the maximum of the Appraised Value Range will not be deemed
material so as to require a resolicitation. Any such resolicitation shall be
effected in such manner and within such time as the Bank and the Mutual Holding
Company shall establish, if all required regulatory approvals are obtained.
Notwithstanding the foregoing, shares of Conversion Stock will not be
issued unless, prior to the consummation of the Conversion, the Independent
Appraiser confirms to the Bank, the Mutual Holding Company, the Holding Company,
and the OTS, that, to the best knowledge
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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 multiplied by the Subscription Price is incompatible with its
estimate of the aggregate consolidated pro forma market value of the Holding
Company. If such confirmation is not received, the Holding Company may cancel
the Offering, extend the Conversion and establish a new Subscription Price
and/or Appraised Value Range, extend, reopen or hold a new Offering, or take
such other action as the OTS may permit.
The Holding Company Common Stock to be issued in the Conversion shall be
fully paid and nonassessable.
7. RETENTION OF CONVERSION PROCEEDS BY THE HOLDING COMPANY
The Holding Company may retain up to 50% of the proceeds of the Offering.
The Holding Company believes that the Offering proceeds will provide economic
strength to the Holding Company and the Bank for the future in a highly
competitive and regulated financial services environment and would facilitate
the continued expansion through acquisitions of financial service organizations,
continued diversification into other related businesses and for other business
and investment purposes, including the possible payment of dividends and
possible future repurchases of the Holding Company Common Stock as permitted by
applicable federal and state regulations and policy.
8. SUBSCRIPTION RIGHTS OF ELIGIBLE ACCOUNT HOLDERS (FIRST PRIORITY)
A. Each Eligible Account Holder shall have nontransferable subscription
rights to subscribe for in the Subscription Offering up to the greater of 50,000
shares of Holding Company Common Stock, 0.10% of the total number of shares of
Holding Company Common Stock issued in the Offering, or fifteen times the
product (rounded down to the next whole number) obtained by multiplying the
number of Subscription Shares offered in the Offering by a fraction of which the
numerator is the amount of the Eligible Account Holder's Qualifying Deposit and
the denominator is the total amount of Qualifying Deposits of all Eligible
Account Holders, in each case on the Eligibility Record Date, subject to the
provisions of Section 14.
B. In the event that Eligible Account Holders exercise subscription rights
for a number of Subscription Shares in excess of the total number of such shares
eligible for subscription, the Subscription Shares shall be allocated among the
subscribing Eligible Account Holders so as to permit each subscribing Eligible
Account Holder to purchase a number of shares sufficient to make his or her
total allocation of Subscription Shares equal to the lesser of 100 shares or the
number of shares for which such Eligible Account Holder has subscribed. Any
remaining shares will be allocated among the subscribing Eligible Account
Holders whose subscriptions remain unsatisfied in the proportion that the amount
of the Qualifying Deposit of each Eligible Account Holder whose subscription
remains unsatisfied bears to the total amount of the Qualifying Deposits of all
Eligible Account Holders whose subscriptions remain unsatisfied. If the amount
so allocated exceeds the amount subscribed for by any one or more Eligible
Account Holders, the excess shall be reallocated (one or more times as
necessary)
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among those Eligible Account Holders whose subscriptions are still not fully
satisfied on the same principle until all available shares have been allocated.
C. Subscription rights as Eligible Account Holders received by Directors
and Officers and their Associates that are based on deposits made by such
persons during the 12 months preceding the Eligibility Record Date shall be
subordinated to the subscription rights of all other Eligible Account Holders.
9. SUBSCRIPTION RIGHTS OF EMPLOYEE PLANS (SECOND PRIORITY)
The Employee Plans of the Holding Company and the Bank shall have
subscription rights to purchase in the aggregate up to 10% of the Subscription
Shares issued in the Offering, including any Subscription Shares to be issued as
a result of an increase in the maximum of the Offering Range after commencement
of the Subscription Offering and prior to completion of the Conversion.
Consistent with applicable laws and regulations and practices and policies, the
Employee Plans may use funds contributed by the Holding Company or the Bank
and/or borrowed from an independent financial institution 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 requirements. The Employee Plans shall not be deemed to be Associates or
Affiliates of or Persons Acting in Concert with any Director or Officer of the
Holding Company or the Bank. Alternatively, if permitted by the OTS, the
Employee Plans may purchase all or a portion of such shares in the open market.
10. SUBSCRIPTION RIGHTS OF SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDERS (THIRD
PRIORITY)
A. Each Supplemental Eligible Account Holder shall have nontransferable
subscription rights to subscribe for in the Subscription Offering up to the
greater of 50,000 shares of Holding Company Common Stock, 0.10% of the total
number of shares of Holding Company Common Stock issued in the Offering, or
fifteen times the product (rounded down to the next whole number) obtained by
multiplying the number of shares Subscription Shares offered in the Offering by
a fraction of which the numerator is the amount of the Supplemental Eligible
Account Holder's Qualifying Deposit and the denominator is the total amount of
Qualifying Deposits of all Supplemental Eligible Account Holders, in each case
on the Supplemental Eligibility Record Date, subject to the availability of
sufficient shares after filling in full all subscription orders of the Eligible
Account Holders and Employee Plans and to the purchase limitations specified in
Section 14.
B. In the event that Supplemental Eligible Account Holders exercise
subscription rights for a number of Subscription Shares in excess of the total
number of such shares eligible for subscription, the Subscription Shares shall
be allocated among the subscribing Supplemental Eligible Account Holders so as
to permit each such subscribing Supplemental Eligible Account Holder, to the
extent possible, to purchase a number of shares sufficient to make his or her
total allocation of Subscription Shares equal to the lesser of 100 shares or the
number of shares for which each such Supplemental Eligible Account Holder has
subscribed. Any remaining shares will be allocated among the subscribing
Supplemental Eligible Account Holders whose
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subscriptions remain unsatisfied in the proportion that the amount of the
Qualifying Deposit of each such Supplemental Eligible Account Holder bears to
the total amount of the Qualifying Deposits of all Supplemental Eligible Account
Holders whose subscriptions remain unsatisfied. If the amount so allocated
exceeds the amount subscribed for by any one or more Supplemental Eligible
Account Holders, the excess shall be reallocated (one or more times as
necessary) among those Supplemental Eligible Account Holders whose subscriptions
are still not fully satisfied on the same principle until all available shares
have been allocated.
11. SUBSCRIPTION RIGHTS OF OTHER MEMBERS (FOURTH PRIORITY)
A. Each Other Member shall have nontransferable subscription rights to
subscribe for in the Subscription Offering up to the greater of 50,000 shares of
Holding Company Common Stock or 0.10 of the total number of shares of Holding
Company Common Stock issued in the Offering, subject to the availability of
sufficient shares after filling in full all subscription orders of Eligible
Account Holders, Employee Plans and Supplemental Eligible Account Holders and to
the purchase limitations specified in Section 14.
B. In the event that such Other Members subscribe for a number of
Subscription Shares which, when added to the Subscription Shares subscribed for
by the Eligible Account Holders, Employee Plans and Supplemental Eligible
Account Holders, is in excess of the total number of Subscription Shares to be
issued, the available shares will be allocated to Other Members so as to permit
each such subscribing Other Member, to the extent possible, to purchase a number
of shares sufficient to make his or her total allocation of Subscription Shares
equal to the lesser of 100 shares or the number of shares for which each such
Other Member has subscribed. Any remaining shares will be allocated among the
subscribing Other Members whose subscriptions remain unsatisfied in the
proportion that the amount of the Qualifying Deposit of each such Other Member
bears to the total amount of the Qualifying Deposits of all Other Member whose
subscriptions remain unsatisfied.
12. COMMUNITY OFFERING AND MERGER SHARES
A. If subscriptions are not received for all Subscription Shares offered
for sale in the Subscription Offering, shares for which subscriptions have not
been received may be issued for sale in the Community Offering through a direct
community marketing program which may use a broker, dealer, consultant or
investment banking firm experienced and expert in the sale of savings
institutions securities. Such entities may be compensated on a fixed fee basis
or on a commission basis, or a combination thereof. In the event orders for
Holding Company Common Stock in the Community Offering exceed the number of
shares available for sale, shares may be allocated (to the extent shares remain
available) first to cover orders of natural persons residing in the Community,
next to cover orders of Minority Stockholders as of the Voting Record Date, next
to cover orders of any Person who holds a Deposit Account at the Acquiree Bank
on the Voting Record Date and thereafter to cover orders of other members of the
general public. In the event orders for Holding Company Common Stock in any of
these categories exceed the number of shares available for sale, shares any be
allocated on a pro rata basis within a category based on the amount of the
respective orders. The Holding Company shall use its best efforts consistent
with this Plan to distribute Holding Company Common Stock sold in the Community
Offering in such a manner as to promote the widest distribution practicable of
such stock. The Holding
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Company reserves the right to reject any or all orders in whole or in part,
which are received in the Community Offering. Any Person may purchase up to
50,000 shares of Holding Company Common Stock in the Community Offering, subject
to the purchase limitations specified in Section 14.
B. Notwithstanding A above, if subscriptions totaling at least the minimum
of the Offering Range are not received in the Subscription Offering in the
categories described in Sections 8 through 11 herein, then unsubscribed
Subscription Shares may be issued to stockholders of the Acquiree Corporation in
exchange for their shares of the Acquiree Corporation or in any other manner
that facilitates the completion of the Merger, provided that total Merger
Shares, including Merger Shares issued pursuant to this Section 12B, are less
than 50% of the outstanding Common Stock of the Holding Company immediately
after the closing of the Conversion and Merger.
13. SYNDICATED COMMUNITY OFFERING/UNDERWRITTEN PUBLIC OFFERING
If feasible, the Board of Directors may determine to offer Subscription
Shares not issued in the Subscription Offering, in a Syndicated Community
Offering and/or through an Underwriter in an Underwritten Public Offering, all
subject to such terms, conditions and procedures as may be determined by the
Holding Company, in a manner that will achieve the widest distribution of the
Holding Company Common Stock, subject to the right of the Holding Company to
accept or reject in whole or in part any subscriptions in the Syndicated
Community Offering. In the case of an Underwritten Public Offering, Subscription
Shares will be sold to an Underwriter for resale in an Underwritten Public
Offering. The price to be paid by the Underwriter for Subscription Shares will
be equal to the aggregate price at which such shares were offered in the
Subscription Offering, less the amount of an underwriting discount, which will
be negotiated by the Holding Company and the Underwriter. In the Syndicated
Community Offering and/or Underwritten Public Offering, any Person may purchase
up to 50,000 shares of Holding Company Common Stock, subject to the purchase
limitations specified in Section 14.
Provided that the Subscription Offering has begun, the Holding Company may
begin the Syndicated Community Offering or Underwritten Public Offering at any
time, provided that the completion of the offer and sale of the Holding Company
Common Stock will be conditioned upon the approval of the Plan by Voting
Members. If the Syndicated Community Offering or Underwritten Public Offering
does not begin pursuant to the provisions of the preceding sentence, such
offering will begin as soon as practicable following the date upon which the
Subscription and Community Offerings terminate. The provisions of Section 14
shall not be applicable to sales to Underwriters in an Underwritten Public
Offering for purposes of such an offering, but shall be applicable to the sales
by the Underwriters to the public.
If for any reason a Syndicated Community Offering or an Underwritten
Public Offering of shares of Holding Company Common Stock not sold in the
Subscription and Community Offerings cannot be effected, or in the event that
any insignificant residue of shares of Holding Company Common Stock is not sold
in the Subscription and Community Offerings or in the Syndicated Community or
Underwritten Public Offering, if possible, the Holding Company will make other
arrangements for the disposition of unsubscribed shares aggregating at least the
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<PAGE>
minimum of the Offering Range. Such other purchase arrangements will be subject
to receipt of any required approval of the OTS.
14. LIMITATION ON PURCHASES
The following limitations shall apply to all purchases and issuances of
shares of Conversion Stock:
A. The maximum number of Holding Company Common Stock which may be
subscribed for or purchased in all categories in the Offering by any Person or
Participant together with any Associate or group of Persons Acting in Concert
shall not exceed 100,000 shares of Holding Company Common Stock, except that the
Employee Plans may subscribe for up to 10% of the Holding Company Common Stock
issued in the Offering (including shares issued in the event of an increase in
the maximum of the Offering Range of 15%).
B. The maximum number of shares of Holding Company Common Stock which may
be issued to or purchased in all categories of the Offering by Officers and
Directors and their Associates in the aggregate, when combined with Exchange
Shares received by such persons, shall not exceed 25% of the shares of Holding
Company Common Stock issued in the Conversion.
C. A minimum of 25 shares of Holding Company Common Stock must be
purchased by each Person purchasing shares in the Offering to the extent those
shares are available; provided, however, that in the event the minimum number of
shares of Holding Company Common Stock purchased times the price per share
exceeds $500, then such minimum purchase requirement shall be reduced to such
number of shares which when multiplied by the price per share shall not exceed
$500, as determined by the Board.
D. The maximum number of shares of Holding Company Common Stock that may
be subscribed for or purchased in the Offering by any Person or Participant
together with any Associate or group of Persons Acting in Concert, combined with
Exchange Shares received by any such Person or Participant together with any
Associate or group of Persons Acting in Concert, shall not exceed 5.0% of the
shares of Holding Company Common Stock issued and outstanding at the completion
of the Conversion, except that this limitation shall not apply to the Employee
Plans.
If the number of shares of Holding Company Common Stock otherwise
allocable pursuant to Sections 8 through 13, inclusive, to any Person or that
Person's Associates would be in excess of the maximum number of shares permitted
as set forth above, the number of shares of Holding Company Common Stock
allocated to each such person shall be reduced to the lowest limitation
applicable to that Person, and then the number of shares allocated to each group
consisting of a Person and that Person's Associates shall be reduced so that the
aggregate allocation to that Person and his or her Associates complies with the
above limits.
Depending upon market or financial conditions, the Board of Directors of
the Holding Company, with the receipt of any required approvals of the OTS and
without further approval of Voting Members, may decrease or increase the
purchase limitations in this Plan, provided that the maximum purchase
limitations may not be increased to a percentage in excess of 5% of the
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shares issued in the Offering except as provided below. If the Holding Company
increases the maximum purchase limitations, the Holding Company is only required
to resolicit Persons who subscribed for the maximum purchase amount in the
Subscription Offering and may, in the sole discretion of the Holding Company,
resolicit certain other large subscribers. In the event that the maximum
purchase limitation is increased to 5% of the shares issued in the Offering,
such limitation may be further increased to 9.99%, provided that orders for
Holding Company Common Stock exceeding 5% of the shares of Holding Company
Common Stock issued in the Offering shall not exceed in the aggregate 10% of the
total shares of Holding Company Common Stock issued in the Offering. Requests to
purchase additional shares of the Conversion Stock in the event that the
purchase limitation is so increased will be determined by the Board of Directors
of the Holding Company in its sole discretion.
In the event of an increase in the total number of shares offered in the
Subscription Offering due to an increase in the maximum of the Offering Range of
up to 15% (the "Adjusted Maximum"), the additional shares will be used to fill
the Employee Plans orders and then will be allocated in accordance with the
priorities set forth in this Plan.
For purposes of this Section 14, the Directors of the Bank, the Mid-Tier
Holding Company and the Holding Company shall not be deemed to be Associates or
a group affiliated with each other or otherwise Acting in Concert solely as a
result of their being Directors of the Bank, the Mid-Tier Holding Company or the
Holding Company.
Each Person purchasing Holding Company Common Stock in the Conversion
shall be deemed to confirm that such purchase does not conflict with the above
purchase limitations contained in this Plan.
15. PAYMENT FOR SUBSCRIPTION SHARES
All payments for Holding Company Common Stock subscribed for in the
Subscription Offering and Community Offering must be delivered in full to the
Bank or Holding Company, together with a properly completed and executed Order
Form, on or prior to the expiration date of the Offering; provided, however,
that if the Employee Plans subscribe for shares in the Subscription Offering,
such plans will not be required to pay for the shares at the time they subscribe
but rather may pay for such shares of Holding Company Common Stock subscribed
for by such plans at the Subscription Price upon consummation of the Conversion.
Payment for Holding Company Common Stock subscribed for shall be made by
check, money order or bank draft. Alternatively, subscribers in the Subscription
and Community Offerings may pay for the shares for which they have subscribed by
authorizing the Bank on the Order Form to make a withdrawal from the designated
types of Deposit Accounts at the Bank in an amount equal to the aggregate
Subscription Price of such shares. Such authorized withdrawal shall be without
penalty as to premature withdrawal. If the authorized withdrawal is from a
certificate account, and the remaining balance does not meet the applicable
minimum balance requirement, the certificate shall be canceled at the time of
withdrawal, without penalty, and the remaining balance will earn interest at the
passbook rate. Funds for which a withdrawal is authorized will remain in the
subscriber's Deposit Account but may not be used by the subscriber during the
Subscription and Community Offerings. Thereafter, the withdrawal will be
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<PAGE>
given effect only to the extent necessary to satisfy the subscription (to the
extent it can be filled) at the Subscription Price per share. Interest will
continue to be earned on any amounts authorized for withdrawal until such
withdrawal is given effect. Interest on funds received will be paid by the Bank
at not less than the passbook rate on payments for Holding Company Common Stock.
Such interest will be paid from the date payment is received by the Bank until
consummation or termination of the Conversion. If for any reason the Conversion
is not consummated, all payments made by subscribers in the Subscription and
Community Offerings will be refunded to them with interest. In case of amounts
authorized for withdrawal from Deposit Accounts, refunds will be made by
canceling the authorization for withdrawal. The Bank is prohibited by regulation
from knowingly making any loans or granting any lines of credit for the purchase
of stock in the Conversion, and therefore, will not do so.
16. MANNER OF EXERCISING SUBSCRIPTION RIGHTS THROUGH ORDER FORMS
As soon as practicable after the Prospectus prepared by the Holding
Company and Bank has been declared effective by the SEC, Order Forms will be
distributed to the Eligible Account Holders, Employee Plans, Supplemental
Eligible Account Holders and Other Members at their last known addresses
appearing on the records of the Bank for the purpose of subscribing for shares
of Holding Company Common Stock in the Subscription Offering and will be made
available for use by those Persons to whom a Prospectus is delivered.
Notwithstanding the foregoing, the Holding Company may elect to send Order Forms
only to those Persons who request them after receipt of such notice in a form
approved by the OTS and which is adequate to apprise the Eligible Account
Holders, Employee Plans, Supplemental Eligible Account Holders and Other Members
of the pendency of the Subscription Offering. Such notice may be included with
the proxy statement for the Special Meeting of Members and also may be included
in the notice of the pendency of the Conversion and the Special Meeting of
Members sent to all Eligible Account Holders in accordance with regulations and
policy of the OTS.
Each Order Form will be preceded or accompanied by a prospectus describing
the Holding Company, the Bank, the Holding Company Common Stock and the
Offering. Each Order Form will contain, among other things, the following:
A. A specified date by which all Order Forms must be received by the Bank
or the Holding Company, which date shall be not less than 20 days, nor more than
45 days, following the date on which the Order Forms are mailed by the Holding
Company, and which date will constitute the termination of the Subscription
Offering unless extended;
B. The Subscription Price per share for shares of Holding Company Common
Stock to be sold in the Offering;
C. A description of the minimum and maximum number of Subscription Shares
which may be subscribed for pursuant to the exercise of subscription rights or
otherwise purchased in the Subscription and Community Offering;
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D. Instructions as to how the recipient of the Order Form is to indicate
thereon the number of Subscription Shares for which such person elects to
subscribe and the available alternative methods of payment therefor;
E. An acknowledgment that the recipient of the Order Form has received a
final copy of the prospectus prior to execution of the Order Form;
F. A statement to the effect that all subscription rights are
nontransferable, will be void at the end of the Subscription Offering, and can
only be exercised by delivering to the Holding Company within the subscription
period such properly completed and executed Order Form, together with payment in
the full amount of the aggregate purchase price as specified in the Order Form
for the shares of Holding Company Common Stock for which the recipient elects to
subscribe in the Subscription Offering (or by authorizing on the Order Form that
the Bank withdraw said amount from the subscriber's Deposit Account at the
Bank); and
G. A statement to the effect that the executed Order Form, once received
by the Holding Company, may not be modified or amended by the subscriber without
the consent of the Holding Company.
Notwithstanding the above, the Holding Company reserves the right in its
sole discretion to accept or reject orders received on photocopied or
facsimilied order forms.
17. UNDELIVERED, DEFECTIVE OR LATE ORDER FORM; INSUFFICIENT PAYMENT
In the event Order Forms (a) are not delivered and are returned, or notice
of nondelivery is given, to the Holding Company or the Bank by the United States
Postal Service, (b) are not received back by the Holding Company or are received
by the Holding Company after the expiration date specified thereon, (c) are
defectively filled out or executed, (d) are not accompanied by the full required
payment, unless waived by the Holding Company, for the shares of Holding Company
Common Stock subscribed for (including cases in which deposit accounts from
which withdrawals are authorized are insufficient to cover the amount of the
required payment), or (e) are not mailed pursuant to a "no mail" order placed in
effect by the account holder, the subscription rights of the Person to whom such
rights have been granted will lapse as though such Person failed to return the
completed Order Form within the time period specified thereon; provided,
however, that the Holding Company may, but will not be required to, waive any
immaterial irregularity on any Order Form or require the submission of corrected
Order Forms or the remittance of full payment for subscribed shares by such date
as the Holding Company may specify. The interpretation of the Holding Company of
terms and conditions of this Plan and of the Order Forms will be final, subject
to the authority of the OTS.
18. RESIDENTS OF FOREIGN COUNTRIES AND CERTAIN STATES
The Holding Company will make reasonable efforts to comply with the
securities laws of all States in the United States in which Persons entitled to
subscribe for shares of Holding Company Common Stock pursuant to this Plan
reside. However, no such Person will be issued subscription rights or be
permitted to purchase shares of Holding Company Common Stock in the Subscription
Offering if such Person resides in a foreign country; or in a State of the
United
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States with respect to which all of the following apply: (A) a small number of
Persons otherwise eligible to subscribe for shares under the Plan reside in such
state; (B) the issuance of subscription rights or the offer or sale of shares of
Holding Company Common Stock to such Persons would require the Holding Company
under the securities laws of such state, to register as a broker, dealer,
salesman or agent or to register or otherwise qualify its securities for sale in
such state; and (C) such registration or qualification would be impracticable
for reasons of cost or otherwise.
19. ESTABLISHMENT OF LIQUIDATION ACCOUNT
The Bank shall establish at the time of the MHC Merger, a Liquidation
Account in an amount equal to the greater of: (a) the percentage of the
outstanding shares of the common stock of the Mid-Tier Holding Company owned by
the Mutual Holding Company multiplied by the Mid-Tier Holding Company's total
stockholders' equity as reflected in the latest statement of financial condition
contained in the final Prospectus used in the Conversion, or (b) the retained
earnings of the Bank as of the latest financial statements set forth in the
prospectus used in connection with the Bank's initial mutual holding company
reorganization and minority stock offering. Following the Conversion, the
Liquidation Account will be maintained by the Bank for the benefit of the
Eligible Account Holders and Supplemental Eligible Account Holders who continue
to maintain their Deposit Accounts at the Bank. Each Eligible Account Holder and
Supplemental Eligible Account Holder shall, with respect to his Deposit Account,
hold a related inchoate interest in a portion of the Liquidation Account
balance, in relation to his Deposit Account balance at the Eligibility Record
Date or Supplemental Eligibility Record Date, respectively, or to such balance
as it may be subsequently reduced, as hereinafter provided.
In the unlikely event of a complete liquidation of the Bank (and only in
such event), following all liquidation payments to creditors (including those to
Account Holders to the extent of their Deposit Accounts) each Eligible Account
Holder and Supplemental Eligible Account Holder shall be entitled to receive a
liquidating distribution from the Liquidation Account, in the amount of the then
adjusted subaccount balance for his Deposit Account then held, before any
liquidation distribution may be made to any holders of the Bank's capital stock.
No merger, consolidation, purchase of bulk assets with assumption of Deposit
Accounts and other liabilities, or similar transactions with an FDIC-insured
institution, in which the Bank is not the surviving institution, shall be deemed
to be a complete liquidation for this purpose. In such transactions, the
Liquidation Account shall be assumed by the surviving institution.
The initial subaccount balance for a Deposit Account held by an Eligible
Account Holder and Supplemental Eligible Account Holder shall be determined by
multiplying the opening balance in the Liquidation Account by a fraction, the
numerator of which is the amount of the Qualifying Deposits of such account
holder and the denominator of which is the total amount of all Qualifying
Deposits of all Eligible Account Holders and Supplemental Account Holders. For
Deposit Accounts in existence at both the Eligibility Record Date and the
Supplemental Eligibility Record Date, separate initial subaccount balances shall
be determined on the basis of the Qualifying Deposits in such Deposit Account on
each such record date. Such initial subaccount balance shall not be increased,
but shall be subject to downward adjustment as described below.
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If, at the close of business on any December 31 annual closing date,
commencing on or after the effective date of the Conversion, the deposit balance
in the Deposit Account of an Eligible Account Holder or Supplemental Eligible
Account Holder is less than the lesser of (i) the balance in the Deposit Account
at the close of business on any other annual closing date subsequent to the
Eligibility Record Date or Supplemental Eligibility Record Date, or (ii) the
amount of the Qualifying Deposit in such Deposit Account as of the Eligibility
Record Date or Supplemental Eligibility Record Date, the subaccount balance for
such Deposit Account shall be adjusted by reducing such subaccount balance in an
amount proportionate to the reduction in such deposit balance. In the event of
such downward adjustment, the subaccount balance shall not be subsequently
increased, notwithstanding any subsequent increase in the deposit balance of the
related Deposit Account. If any such Deposit Account is closed, the related
subaccount shall be reduced to zero.
The creation and maintenance of the Liquidation Account shall not operate
to restrict the use or application of any of the equity accounts of the Bank,
except that the Bank shall not declare or pay a cash dividend on, or repurchase
any of, its capital stock if the effect thereof would cause its equity to be
reduced below (i) the amount required for the Liquidation Account; or (ii) the
regulatory capital requirements of the Bank.
19A. ESTABLISHMENT AND FUNDING OF CHARITABLE FOUNDATION
As part of the Conversion, the Holding Company and the Bank intend to
establish the Foundation, which will qualify as an exempt organization under
Section 501(c)(3) of the Internal Revenue Code, and to donate to the Foundation
cash and shares of Common Stock, in an aggregate amount equal to 4% of the value
of the shares of Conversion Stock sold in the Conversion. The Foundation is
being formed in connection with the Conversion in order to complement the Bank's
existing community reinvestment activities and to share with the Bank's local
community a part of the Bank's financial success as a locally headquartered,
community minded, financial services institution. The funding of the Foundation
with Common Stock accomplishes this goal as it enables the community to share in
the growth and profitability of the Holding Company and the Bank over the long-
term.
The Foundation will be dedicated to the promotion of charitable purposes
including community development, grants or donations to support housing
assistance, not-for-profit community groups and other types of organizations or
civic-minded projects. The Foundation will annually distribute total grants to
assist charitable organizations or to fund projects within its local community
of not less than 5% of the average fair market value of Foundation assets each
year, less certain expenses. In order to serve the purposes for which it was
formed and maintain its Section 501(c)(3) qualification, the Foundation may
sell, on an annual basis, a limited portion of the Common Stock contributed to
it by the Holding Company.
The board of directors of the Foundation generally will be comprised of
individuals who are Officers and/or Directors of the Holding Company or the
Bank, except that at least one director of the Foundation will be (i)
independent of the Holding Company and the Bank and (ii) from the Bank's local
community. The board of directors of the Foundation will be responsible for
establishing the policies of the Foundation with respect to grants or donations,
consistent with the stated purposes of the Foundation.
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Establishment of the Foundation must be approved by a majority of the
total number of votes entitled to be cast by Voting Members, and by a majority
of the total number of votes entitled to be cast by Minority Stockholders.
20. VOTING RIGHTS OF STOCKHOLDERS
Following consummation of the Conversion, the holders of the voting
capital stock of the Holding Company shall have the exclusive voting rights with
respect to the Holding Company.
21. RESTRICTIONS ON RESALE OR SUBSEQUENT DISPOSITION
A. All Subscription Shares purchased by Directors or Officers of the
Holding Company or the Bank in the Offering shall be subject to the restriction
that, except as provided in this Section or as may be approved by the OTS, no
interest in such shares may be sold or otherwise disposed of for value for a
period of one year following the date of purchase in the Offering.
B. The restriction on disposition of Subscription Shares set forth above
in this Section shall not apply to the following:
(1) Any exchange of such shares in connection with a merger or
acquisition involving the Bank or the Holding Company, as the
case may be, which has been approved by the appropriate
federal regulatory agency; and
(2) Any disposition of such shares following the death of the
person to whom such shares were initially sold under the terms
of the Plan.
C. With respect to all Subscription Shares subject to restrictions on
resale or subsequent disposition, each of the following provisions shall apply:
(1) Each certificate representing shares restricted by this
section shall bear a legend prominently stamped on its face
giving notice of the restriction;
(2) Instructions shall be issued to the stock transfer agent for
the Holding Company not to recognize or effect any transfer of
any certificate or record of ownership of any such shares in
violation of the restriction on transfer; and
(3) Any shares of capital stock of the Holding Company issued with
respect to a stock dividend, stock split, or otherwise with
respect to ownership of outstanding Subscription Shares
subject to the restriction on transfer hereunder shall be
subject to the same restriction as is applicable to such
Conversion Stock.
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22. REQUIREMENTS FOR STOCK PURCHASES BY DIRECTORS AND OFFICERS FOLLOWING THE
CONVERSION
For a period of three years following the Conversion, no Officer, Director
or their Associates shall purchase, without the prior written approval of the
OTS, any outstanding shares of Holding Company Common Stock except from a
broker-dealer registered with the SEC. This provision shall not apply to
negotiated transactions involving more than 1% of the outstanding shares of
Holding Company Common Stock, the exercise of any options pursuant to a stock
option plan or purchases of Holding Company Common Stock made by or held by any
Tax-Qualified Employee Stock Benefit Plan or Non-Tax-Qualified Employee Stock
Benefit Plan of the Bank or the Holding Company (including the Employee Plans)
which may be attributable to any Officer or Director. As used herein, the term
"negotiated transaction" means a transaction in which the securities are offered
and the terms and arrangements relating to any sale are arrived at through
direct communications between the seller or any person acting on its behalf and
the purchaser or his investment representative. The term "investment
representative" shall mean a professional investment advisor acting as agent for
the purchaser and independent of the seller and not acting on behalf of the
seller in connection with the transaction.
23. TRANSFER OF DEPOSIT ACCOUNTS
Each person holding a Deposit Account at the Bank at the time of
Conversion shall retain an identical Deposit Account at the Bank following
Conversion in the same amount and subject to the same terms and conditions
(except as to voting and liquidation rights).
24. REGISTRATION AND MARKETING
Within the time period required by applicable laws and regulations, the
Holding Company will register the securities issued in connection with the
Conversion pursuant to the Securities Exchange Act of 1934 and will not
deregister such securities for a period of at least three years thereafter,
except that the maintenance of registration for three years requirement may be
fulfilled by any successor to the Holding Company. In addition, the Holding
Company will use its best efforts to encourage and assist a market-maker to
establish and maintain a market for the Conversion Stock and to list those
securities on a national or regional securities exchange or the Nasdaq Stock
Market.
25. TAX RULINGS OR OPINIONS
Consummation of the Conversion is expressly conditioned upon prior receipt
by the Mutual Holding Company, the Mid-Tier Holding Company and the Bank of
either a ruling or an opinion of counsel with respect to federal tax laws, and
either a ruling, an opinion of counsel, or a letter of advice from their tax
advisor with respect to applicable state tax laws, to the effect that
consummation of the transactions contemplated by the Conversion and this Plan
will not result in a taxable reorganization under the provisions of the
applicable codes or otherwise result in any adverse tax consequences to the
Mutual Holding Company, the Mid-Tier Holding Company, the Holding Company or the
Bank, or the account holders receiving subscription rights before or after the
Conversion, except in each case to the extent, if any, that subscription rights
are deemed to have value on the date such rights are issued.
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26. STOCK BENEFIT PLANS AND EMPLOYMENT AGREEMENTS
A. The Holding Company and the Bank are authorized to adopt Tax-Qualified
Employee Stock Benefit Plans in connection with the Conversion, including
without limitation, an ESOP. Existing as well as any newly created Tax-Qualified
Employee Stock Benefit Plans may purchase shares of Holding Company Common Stock
in the Offering, to the extent permitted by the terms of such benefit plans and
this Plan.
B. As a result of the Conversion, the Holding Company shall be deemed to
have ratified and approved all employee stock benefit plans maintained by the
Bank and the Mid-Tier Holding Company and shall have agreed to issue (and
reserve for issuance) Holding Company Common Stock in lieu of common stock of
the Mid-Tier Holding Company pursuant to the terms of such benefit plans. Upon
consummation of the Conversion, the Mid-Tier Holding Company common stock held
by such benefit plans shall be converted into Holding Company Common Stock based
upon the Exchange Ratio. Also upon consummation of the Conversion, (i) all
rights to purchase, sell or receive Mid-Tier Holding Company common
