Current through Register Vol. 46, No. 12, March 20, 2024
(a)
(1) The board of trustees or the board of
directors, as the case may be, of a thrift may determine to convert the
institution to stock-form of ownership, and to seek the superintendent's
approval therefor, by first securing the approval of its plan of conversion by
a majority of the entire board of such trustees or directors, at a meeting duly
held upon not less than 15 days' notice (or upon such shorter notice, or
without notice, provided all the members of such board waive in writing such
15-day notice period), said notice to contain a copy of the plan of conversion
proposed to be filed with the superintendent.
(2) Following the approval of the plan of
conversion by the board of trustees or directors, the converting institution
shall promptly provide public notice of its plan to convert to stock form. Such
public notice shall be made by means of the posting of a notice in a
conspicuous place in the principal and branch offices (which term shall not
include separate electronic facilities) of the institution, the issuance of a
press release containing all material details of the proposed conversion (and
such other information required to make the press release not false or
misleading) and the placing of an advertisement containing such material
details (and such other information, if any) in a newspaper of general
circulation in the communities where the principal offices and branches of the
converting institution are located. Thereafter, such institution shall file
with the superintendent for approval an application for conversion containing
all of the information required by section
86.13
of this Part. The superintendent's approval or disapproval shall be given
within 60 days after the superintendent shall have acknowledged to the
applicant that the contents of the application and the required documents and
exhibits are substantially complete and acceptable in the form
submitted.
(3) If approved, such
institution shall submit the plan of conversion to its eligible account
holders, for approval at a meeting held upon written notice given no less than
20 days nor more than 45 days prior to the date of such meeting. Separate
notices shall be sent to joint account holders at each address appearing on the
records of the institution as the address of a joint account holder, except
that only one notice need be sent to joint account holders residing at the same
address. Such notice shall be sent by first class mail postage prepaid and
shall consist of a notice of meeting and shall be accompanied by a proxy card
and either a proxy statement or a short-form proxy statement, each to comply
with the provisions of section
86.14 of this
Part. The proxy card: shall indicate in boldface type whether the proxy is
solicited on behalf of the management; shall provide specifically designated
blank spaces for dating and signing such proxy card; shall identify clearly and
impartially each matter or group of related matters intended to be acted upon
at the meeting; shall be clearly labeled "revocable proxy" in boldface type;
shall describe any charter or other requirement restricting or conditioning
voting by proxy; shall contain an acknowledgment by the person giving the proxy
that he has received a proxy statement prior to signing the form of proxy;
shall contain the date, time and place of meeting, if practicable; shall
provide by a box or otherwise, a means whereby the depositor or shareholder
solicited is afforded an opportunity to specify by ballot a choice between
approval or disapproval of each matter referred to therein as intended to be
acted upon; and shall indicate in boldface type how the proxy shall be voted on
each such matter as to which no choice is so specified. Only one joint account
holder must sign a proxy card sent in connection with a joint account, if
clearly stated on the proxy card. No such proxy shall confer authority to vote
at any meeting other than the meeting (or any adjournment thereof) to vote on
conversion. A proxy may be deemed to confer authority to vote with respect to
matters incident to the conduct of such meeting. The proxy statement or form of
proxy shall provide that the votes represented by the proxy will be voted;
that, where the depositor or shareholder solicited specifies by means of a
ballot a choice with respect to any matter to be acted upon, the votes will be
voted in accordance with the specifications so made; and that if no choice is
specified, the votes will be cast as indicated in boldface on the proxy
card.
(4) A vote of 75 percent in
amount of deposit liabilities or book value of outstanding shares, as the case
may be, represented in person or by proxy at such meeting shall be required for
approval of the plan. No specific minimum amount of deposits or shares shall be
required to be present either in person or by proxy at such meeting in order to
constitute a quorum for the transaction of business. No eligible account holder
may cast more than 1,000 votes at such meeting. The board of trustees or board
of directors, as the case may be, shall appoint an independent custodian and
tabulator to receive and hold the proxy cards and to count the votes cast in
favor of and in opposition to the plan of conversion. In the event provision is
made for the receipt of proxies at offices of the converting institution,
proxies must be deposited unopened in sealed containers that are maintained and
delivered unopened in a sealed state to the custodian and tabulator. Such
custodian and tabulator shall not be affiliated with any party with an interest
in the transaction, including any financial advisor, underwriter, appraiser,
law firm or proxy solicitation firm engaged by the board of trustees or
directors in connection with the conversion.
(5) A depositor or shareholder shall be
eligible to vote if he shall have met the requirements of section
9019 of the Banking Law as of the
eligibility record date.
(6) Within
five days after the meeting of shareholders or depositors (which is any event
shall be before the amended organization certificate of the converting thrift
is filed pursuant to subdivision [c] of this section), the president and
secretary of the converting institution shall certify to the superintendent the
result of the vote taken at such meeting.
(b) The application for conversion shall be
in the form prescribed by section
86.13
of this Part and shall be accompanied by the fee specified in section
1.2 of
Supervisory Policy G 1 of this Title.
(c) When the superintendent shall have
determined to approve or disapprove the application for conversion, he or she
shall so advise the converting institution in writing and, in the case of a
determination of approval, and after the converting institution shall have
completed arrangements to sell its shares and shall have taken such other steps
as may be required hereunder, the superintendent, if satisfied that the
requirements of this Part have been met, shall endorse his or her approval on
the amended organization certificate and shall cause it to be filed in the
office of the superintendent and with the clerk of the county in which the
converting institution's principal office is located. At the time the
conversion from mutual to stock form becomes effective, the converting
institution shall cease to be a mutual institution and shall simultaneously
become a stock-form institution, and all the property of the mutual institution
shall remain as the property of the stock-form institution. All of the rights,
powers, franchises, debts, liabilities, obligations and duties of the mutual
institution shall continue as such in the stock-form institution and all share
interests (in the case of savings and loan associations) and deposits (in the
case of savings banks) therein shall remain as deposits of equal value and
character of such stock-form institution. The corporate existence of the
converting mutual institution shall not terminate, and such converted
stock-form institution shall be a continuation of the mutual form institution
which existed immediately before the filing of the amended organization
certificate.
(d)
(1) To the extent consistent with applicable
law, a converting institution will be required to make available a list of the
names and addresses of all of its eligible account holders to any eligible
account holder requesting such list. The eligible account holder requesting
such list shall be required to pay the reasonable costs incurred by the
converting institution in producing such list. Such list shall not contain any
information regarding the amount of deposits or shares held in the accounts of
the eligible account holders, except that the converting institution shall be
required to disclose the aggregate book value of all such deposits or shares.
Such list shall be made available with reasonable promptness so as to permit
any eligible account holder to conduct a proxy solicitation of the other
eligible account holders in advance of the meeting convened to approve the
proposed conversion. Any eligible account holder who requests a list of
eligible account holders pursuant to this subdivision shall submit with such
request a declaration concerning his or her eligibility to vote on the
conversion and a statement indicating the purposes for which the list will be
used and shall submit a notarized affidavit, affirmation or similar document
attesting that the eligible account holder:
(i) will not use the list for any purpose
other than to solicit other eligible account holders with respect to the same
solicitation commenced by the thrift;
(ii) will not disclose the information
appearing on the list to any person other than an employee or agent of such
eligible account holder to the extent necessary to effectuate the communication
or solicitation; and
(iii) will
return the list and all copies thereof in his or her possession to the
converting institution no later than the date of the meeting of eligible
account holders, as such date may be postponed or extended.
(2) Subject to the receipt of the
items listed in paragraph (1) of this subdivision, the thrift shall respond to
any bona fide request for a list of eligible account holders with reasonable
promptness and such list shall be complete (unless the eligible account holder
has requested a more limited list of eligible account holders) and accurate.
The list shall be in the form requested to the extent that such form is
available to the thrift without undue burden or expense.
(3) As an alternative to providing a list of
eligible account holders, a thrift may at its discretion mail copies of any
proxy materials, form of proxy or other solicitation materials furnished by the
eligible account holder requesting such list to the other eligible account
holders. If the thrift elects to mail these materials itself, it shall notify
the eligible account holder requesting the list of such election and provide
such eligible account holder with information as to the number of other
eligible account holders, or any more limited group of eligible account holders
designated by the eligible account holder requesting the list, if available
under the thrift's data processing systems. The thrift shall also give the
eligible account holder requesting the list the estimated cost of mailing his
or her materials. The thrift shall mail such materials to the eligible account
holders designated by the requesting eligible account holder with reasonable
promptness, but in no event later than 48 hours after delivery of the material
to be mailed together with envelopes or other reasonable containers therefor,
postage or payment for postage and other reasonable expenses of effecting such
mailing; provided, however, that such materials need not be mailed prior to the
first day on which solicitation is made on behalf of management of the
converting institution. Except for information incorporated by reference to
management's own proxy statement, form of proxy or other solicitation
materials, neither management of the converting institution nor the converting
institution shall be responsible for the content of such materials.
(e) Any proxy solicitation in
connection with approval of a plan of conversion pursuant to this Part shall be
conducted in accordance with the following:
(1) Except as otherwise provided in section
86.6
of this Part, proxy solicitations subject to this Part may only be conducted by
the thrift or an eligible account holder or any person acting on behalf of the
foregoing. Notwithstanding the foregoing, any person may finance a proxy
solicitation conducted by an eligible account holder; provided that such
financing and the nature of the person's interest, if any, in the transaction
is disclosed. No person providing financing may engage in any activity that
would itself constitute a proxy solicitation or that would amount to a proxy
solicitation by an eligible account holder on behalf of that person.
(2) No proxy solicitation subject to this
Part shall be made unless each person solicited is concurrently furnished, or
has previously been furnished, a written proxy statement on form 86-PS, the use
of which has been approved by the Banking Department. Any eligible account
holder submitting a proxy statement for review by the Banking Department shall
do so no less than five business days prior to its intended use.
(3) All additional proxy solicitation
materials, including press releases, advertisements, and radio and television
scripts, shall be submitted to the Banking Department for review at least five
business days before their intended use. Proxy solicitation materials approved
for use by the Banking Department shall be distributed to eligible account
holders within 10 days of such authorization unless extended in writing by the
Banking Department.
(4) The fact
that a proxy statement, form of proxy or other proxy solicitation material has
been filed with or reviewed by the Banking Department and authorized for use
shall not be deemed a finding by the Banking Department that such material is
accurate or complete or not false or misleading, or that the Banking Department
has passed upon the merits of or endorsed or recommended any proposal contained
therein. No representation contrary to the foregoing shall be made by any
person.
(5) All proxy solicitation
materials used by or on behalf of an eligible account holder shall include, at
a minimum, the name of the eligible account holder soliciting the proxy or on
whose behalf the proxy is being solicited, the name of the person(s) soliciting
proxies on behalf of such eligible account holder, the length of time he or she
has been a depositor or shareholder, and the reasons he or she is making the
solicitation. If a proxy solicitation by an eligible account holder is being
financed by a third party, such party's identity and interest, if any, in the
transaction shall be disclosed.
(6)
All proxy solicitation materials used by or on behalf of an eligible account
holder shall solicit proxies only for an affirmative or negative vote with
respect to the plan of conversion approved by the board of trustees or
directors for presentation to eligible account holders and may not confer
discretionary authority.
(7)
Eligible account holders shall not engage in proxy solicitations at offices of
the thrift, except that, if the converting institution is making its proxy
solicitation materials available at its offices, it shall give any eligible
account holder conducting a proxy solicitation the opportunity to make his or
her proxy solicitation materials available at such locations. The converting
institution shall display such materials in clearly visible and accessible
locations in its offices and shall post a prominent and conspicuous notice of
their availability.
(f)
A plan of conversion shall contain provisions to the effect that:
(1) The converting institution shall issue
and sell its capital stock at a total price equal to the estimated pro forma
market value of such stock in the converted institution (plus a control
premium, if applicable) based on an independent valuation, as provided in this
Part.
(2) An eligibility record
date shall be established which date shall be no more than 120 days and no less
than 30 days prior to the date on which the board of the converting institution
adopts the plan of conversion.
(3)
For a period of three years following the effective date of the conversion, no
officer, director, trustee (or any person who was an officer, director or
trustee at any time after the date on which the board adopts the plan of
conversion), or associate of any of them shall, without the prior written
approval of the superintendent, purchase or acquire direct or indirect
beneficial ownership of the capital stock of the converted institution, except
from a broker or dealer registered with the Securities and Exchange
Commission.
(4) The sale price of
the shares of capital stock to be sold in the conversion shall be a uniform
price determined in accordance with section
86.5(c)
of this Part.
(5) The conversion
must be completed within a specified time period after the date on which the
plan of conversion is approved by the superintendent. The time period shall be
not more than 24 months from the date on which the plan of conversion is
approved by the superintendent.
(6)
Each time, savings or share account holder of the converting mutual institution
shall become a withdrawable time or savings account in the converted stock-form
institution equal in withdrawable amount to the withdrawal value of such
account in the converting mutual institution.
(7) A liquidation account shall be
established and maintained for the benefit of the eligible account holders in
the event of a subsequent complete liquidation of the converted institution in
accordance with the provisions of subdivision (g) of this section.
(8) The holders of the capital stock of the
converted stock-form institution to be issued in connection with the conversion
shall have exclusive voting rights, except as may be provided in the
organization certificate as amended after the effective date of the
conversion.
(9) The plan of
conversion adopted by the converting institution's board of directors or
trustees may be substantively amended by such board as a result of comments
received from regulatory authorities or otherwise prior to the solicitation of
proxies from depositors or shareholders to vote on the plan of conversion and
at any time thereafter with the concurrence of the superintendent; and the
conversion (except a conversion effected pursuant to section
86.6[b]
of this Part) may be terminated by such board at any time prior to the meeting
of depositors or shareholders called to consider the plan of conversion and at
any time thereafter with the concurrence of the superintendent.
(10) All shares of capital stock of the
converting institution purchased or acquired (either directly or indirectly) by
directors, trustees or executive officers (as such form is defined by Part 70
of this Title) on original issue in the conversion either directly from the
institution (by subscription or otherwise) or from an underwriter (or otherwise
beneficially owned by such directors, trustees or executive officers
immediately after such original issuance) shall be subject to the restriction
that the shares shall not be sold for a period of not less than one year
following the date of purchase, except in the event of death or judicial
declaration of incompetency of the director, trustee or executive
officer.
(11) In connection with
shares of capital stock of the converted stock-form institution subject to
restriction on resale:
(i) each certificate
for such shares shall bear a legend giving appropriate notice of such
restriction;
(ii) appropriate
instructions shall be issued to the transfer agent for the converted
institution's capital stock with respect to applicable restrictions on transfer
of any such restricted stock; and
(iii) any shares issued as a stock dividend,
stock split or otherwise with respect to any such restricted stock may not be
sold until the restrictions respecting such originally restricted stock are
terminated, and any certificate for such shares shall bear a legend advising of
such restrictions.
(12)
The converting institution, and in the case of a conversion calling for the
formation of a holding company, such holding company, will restrict the
repurchases of its stock and the implementation of stock option and management
and employee stock benefit plans as provided in subdivision (h) of this
section.
(13) The expenses incurred
in the conversion shall be reasonable.
(14) No provision contained in such plan
shall be determined by the superintendent to be inequitable or detrimental to
the converting institution, its depositors or shareholders, or to be contrary
to the public interest.
(15) The
converting institution shall not loan funds or otherwise extend credit to any
person for the purpose of purchasing the capital stock of such
institution.
(g)
Liquidation account.
(1) Each converted
institution shall, at the time of conversion, establish a liquidation account
in an amount equal to at least the amount of net worth (determined in
accordance with generally accepted accounting principles) of the converting
institution as set forth in its latest statement of financial condition
contained in the proxy statement. The function of the liquidation account is to
establish a priority on liquidation by providing to eligible account holders
rights upon liquidation of the converted institution initially at least equal
to the rights that they have to the net worth of the institution if the
institution were to be liquidated immediately prior to conversion and, except
as provided in paragraph (2) of this subdivision, the existence of the
liquidation account shall not operate to restrict the use or application of any
of the net worth accounts of the converted institution.
(2) The liquidation account shall be
maintained by the converted institution for the benefit of eligible account
holders who maintain their accounts in such institution. Each such eligible
account holder shall, with respect to each account held, have a related
inchoate interest in a portion of the liquidation account balance.
(3) In the event of a complete liquidation of
the converted institution (and only in such event), each eligible account
holder shall be entitled to receive a liquidation distribution from the
liquidation account in the amount of the then-current adjusted subaccount
balance for each account of such holder then in the converted institution,
before any liquidation distribution may be made with respect to capital stock,
except with respect to any preferred stock issued in exchange for the surrender
at the time of the conversion of mutual capital certificates or other net worth
certificates which have been issued to its Federal deposit insurer by the
institution prior to such conversion. Preferred stock issued in exchange for
such certificates may receive distributions in liquidation prior to any
distribution to an eligible account holder with respect to the liquidation
account to the same extent that the holders of such certificates would have
been entitled to priority over the residual rights of depositors or
shareholders had the institution not been converted as of the date of
liquidation.
(4) The initial
subaccount balance for an account held by an eligible account holder shall be
determined by multiplying the aggregate opening balance in the liquidation
account by a fraction of which the numerator is the amount of deposits or
shares in the account of such eligible account holder on the eligibility record
date and the denominator is the total amount of deposits or shares owned by all
eligible account holders in the converting institution on such date. Such
initial subaccount balance shall not be increased, and it shall be subject to
downward adjustment as provided in paragraph (e)(5) of this section.
(5) If the deposit or share balance in any
account of an eligible account holder at the end of any period for which the
converted institution has prepared audited financial statements subsequent to
the eligibility record date is less than the lesser of:
(i) the deposit or share balance in such
account at the end of any period for which the converted institution has
prepared audited financial statements subsequent to the eligibility record
date; or
(ii) the amount of the
deposits or shares as of the eligibility record date, the subaccount balance
for such account shall be adjusted by reducing such subaccount balance in an
amount proportionate to the reduction in such deposit or share balance. In the
event of such a downward adjustment, the subaccount balance shall not be
subsequently increased, notwithstanding any increase in the deposit or share
balance of the related account. If any such account is closed, the related
subaccount balance shall be reduced to zero.
(h) Restrictions on repurchase of stock;
payment of dividends; and use of stock option and management or employee stock
benefit plans. Each institution that converts pursuant to this Part shall be
subject to the following conditions:
(1)
Except with the prior approval of the superintendent, no converted institution
or holding company of a converted institution may repurchase any of its
outstanding common stock prior to the first anniversary of the effective date
of the conversion. Nor, during the second and third years following conversion,
may there be a repurchase in excess of five percent of the holding company's or
converted institution's outstanding common stock in any 12-month period without
the prior approval of the superintendent. In determining whether to grant such
approval, the superintendent shall consider:
(i) the financial condition and history of
the holding company and/or the converted institution, as the case may
be;
(ii) the adequacy of its
capital structure;
(iii) its future
earnings prospects;
(iv) the
quality of its management;
(v)
whether such repurchase shall result in fair treatment to the holding company
or the converted institution, as the case may be; and
(vi) the public interest generally.
(2) No converted institution shall
declare or pay a cash dividend on any of its capital stock if the effect
thereof would cause the net worth of the converted institution to be reduced
below the amount required to maintain the liquidation account.
(3) For a period of at least one year from
the effective date of the conversion, no converted institution shall implement
any non-tax-qualified management of employee stock benefit plan or stock option
plan unless:
(i) each plan was fully
disclosed in the proxy solicitation and stock offering materials;
(ii) the total number of shares of common
stock for which options may be granted does not exceed 10 percent of the amount
of shares issued in the conversion;
(iii) the aggregate number of shares in
management and employee stock benefit plans does not exceed four percent of the
amount of shares issued in the conversion;
(iv) no individual shall receive more than 25
percent of the shares of any plan and directors who are not employees of the
institution shall not receive more than five percent of the stock individually,
or 30 percent in the aggregate, of any plan;
(v) all plans are approved by a majority of
the institution's stockholders, or in the case of a holding company formed in
connection with the conversion, its stockholders, prior to implementation and
no earlier than six months after the conversion;
(vi) the exercise price of options shall be
the market price at which the stock is trading at the date of grant;
and
(vii) no conversion stock is
used to fund management or employee stock benefit plans.
(i) Manipulative and deceptive
devices. In connection with the conversion of a thrift to stock form, or the
offer, sale or purchase of capital stock issued in connection with such
conversion, no institution, any director, officer or trustee thereof, any
person soliciting proxies or acting on behalf of any person soliciting proxies
in connection with such conversion, or any person seeking to acquire control of
such institution, shall:
(1) employ any
device, scheme or artifice to defraud;
(2) make any untrue statement of a material
fact, or omit to state a material fact necessary in order to make the
statements made, in the light of the circumstances under which they were made,
not misleading; or
(3) engage in
any act, transaction, practice, or course of business which operated or would
operate as a fraud or deceit upon a purchaser or seller of such capital
stock.
(j) No person may
offer to distribute cash or other valuable consideration to eligible account
holders in connection with any conversion other than, with the prior approval
of the superintendent, a supervisory conversion pursuant to section
86.12
of this Part.
(k) Acquisition of
the securities of converting and converted institutions.
(1) Prior to the completion of a conversion,
no person shall offer to transfer, or enter into any agreement or understanding
to transfer, the legal or beneficial ownership of the capital stock to be
issued in connection with the conversion, except pursuant to or contemplated by
the plan of conversion filed with the superintendent.
(2) Prior to the completion of a conversion,
no person shall make any offer, or any announcement of an offer, for any
security of the converting institution issued in connection with the conversion
nor shall any person knowingly acquire securities of the converted institution
issued in connection with the conversion in excess of the maximum purchase
limitations established in the institution's approved plan of
conversion.
(3) Except with the
prior approval of the superintendent, no person for a period of one year
following the date of the completion of the conversion shall directly or
indirectly acquire or offer to acquire the beneficial ownership of more than 10
percent of any class of capital stock of an institution converted in accordance
with the provisions of this Part. In addition to the provisions of this
section, the provisions of article III-A of the Banking Law shall apply to any
such acquisition.
(l)
Tax opinions and rulings. The superintendent may refuse to approve any plan of
conversion which may in the judgment of the superintendent result in a taxable
reorganization of the converting institution under the Internal Revenue Code of
1954, as amended.
(m) Consents of
experts. If any accountant, attorney, investment banker, appraiser, or other
person whose professions give authority to a statement made in any document
filed under this Part is named as having prepared, reviewed, passed upon, or
certified any part thereof, or any report or valuation for use in connection
therewith, the written consent of such person shall be filed with the
application for conversion. If any portion of a report of an expert is quoted
or summarized as such in any filing, the written consent of the expert shall
expressly state that the expert consents to such use. All written consents
filed pursuant to this subdivision shall be dated and signed manually. A list
of such consents shall be filed with the application for conversion. Where the
consent of the expert is contained in his report, a reference shall be made in
the list to the report containing such consent.