Current through Register Vol. 46, No. 12, March 20, 2024
(a) A plan of conversion (except to the
extent governed by inconsistent provisions of section
86.6
or by section
86.12
of this Part) shall, in addition to the requirements of section
86.4
of this Part, contain provisions to the effect that:
(1)
(i)
Each eligible account holder shall receive, without payment, nontransferable
subscription rights to purchase capital stock of the converting institution in
an amount no less than the maximum purchase limitation established for the
public offering under paragraph (3) of this subdivision. In the event of an
oversubscription for such shares, after shares have been allocated among
subscribing eligible account holders so as to permit each such account holder,
to the extent possible, to purchase 100 shares, shares shall be allocated among
subscribing eligible account holders on such equitable basis, related to the
amounts of their respective accounts, as may be provided in the plan of
conversion.
(ii) Subscription
rights to purchase capital stock received by officers, directors, trustees, and
their associates, of the converting institution based on their increased
deposits or shares in the converting institution in the one-year period
preceding the eligibility record date shall be subordinated to all other
subscription rights to purchase shares of capital stock granted pursuant to
this Part.
(iii) The provisions of
subparagraph (i) of this paragraph notwithstanding, a plan of conversion may
contain a provision that gives the tax-qualified employee stock benefit plans
of the converting institution (and, where applicable, a holding company formed
in connection with its conversion to stock form) subscription rights to
purchase up to 10 percent of the shares to be issued by the converting
institution, and which subordinates the subscription rights of eligible account
holders to those of such tax-qualified employee stock benefit plans.
(2) Management of the converting
institution collectively shall not be entitled to purchase more than 25 percent
of the capital stock issued by the converting institution in a public offering
of such stock, and no person (alone, or acting together with any other person
or in concert with any group of persons) shall be entitled to purchase more
than five percent of such stock in such public offering. Any shares of capital
stock purchased pursuant to the exercise of subscription rights shall be
included with the shares purchased in a public offering for purposes of
determining if the above-described 25 percent and 5 percent limitations have
been violated. As used in this section, the term management shall refer to
directors or trustees and executive officers; provided, however, that such
persons shall not be deemed to be acting together or in concert solely as a
result of their board membership or employment.
(3) Any shares of the converting institution
not sold to depositors or shareholders with subscription rights shall be sold
in a public offering through an underwriter, or otherwise in whole or in part
to the public without an underwriter, subject to the converting institution
demonstrating to the superintendent the feasibility of the method of sale and
to such conditions as may be provided in the plan of conversion. Such
conditions shall include, but not be limited to:
(i) a condition limiting purchases in the
public offering by any person together with any associate or group of persons
acting in concert to an aggregate of no more than five percent of the total
amount of shares offered;
(ii) a
condition requiring the stock to be offered and sold in the public offering to
be offered and sold in a manner that will achieve a reasonably wide
distribution of such stock.
(4) The converting institution shall:
(i) promptly following the conversion
register the capital stock issued in connection therewith pursuant to the
Securities Exchange Act of 1934 and undertake not to deregister such capital
stock for a period of three years after such registration;
(ii) use its best efforts to encourage and
assist a market maker to establish and maintain a market for the capital stock
issued in connection with the conversion; and
(iii) use its best efforts to list the shares
of capital stock issued in connection with the conversion on a national or
regional securities exchange or on the NASDAQ quotation system.
(5) The notice of meeting, proxy
card, and proxy statement or short-form proxy statement sent to each eligible
account holder as required by section
86.4(a)(3)
of this Part shall be accompanied by a subscription offering circular and
subscription order form. Separate and readily distinguishable postage-paid
envelopes shall be provided for the return of proxy cards and subscription
order forms.
(b) A plan
of conversion providing for the public offering of the capital stock of a
converting institution may contain provisions to the effect that:
(1) Shares of the converting institution not
sold in the subscription offering or in a public offering pursuant to this
section not exceeding one percent of the aggregate shares issued, may be sold
in such other manner as provided in the plan of conversion.
(2) Any person exercising subscription rights
to purchase capital stock shall be required to purchase a minimum of 25 shares
to the extent such shares are available for purchase. In no event shall the
aggregate price for any minimum purchase of shares exceed $500.
(3) Instead of a separate subscription
offering, all subscription rights issued in connection with the conversion
shall be exercisable by delivery of properly completed and executed order forms
to the underwriters or selling group for the public offering. Orders for stock
in the public offering shall not be filled until after orders of persons
exercising subscription rights have been filled.
(4) The converting institution shall not be
required to issue subscription rights to, or accept orders for the purchase of
shares of capital stock from, persons who are residents of a foreign
country.
(c) Pricing and
sale of capital stock.
(1) No offer to sell
capital stock of a converting institution pursuant to a plan of conversion
providing for a public offering may be made prior to approval by the
superintendent of the application for conversion and until the preliminary
offering circular has been authorized for use by the superintendent. No sale of
capital stock may be made except by means of a final offering circular which
has been approved by the superintendent. The provisions of this paragraph shall
not apply to preliminary negotiations or agreements between a converting
institution and any underwriter or among underwriters who are to be in privity
of contract with the converting institution.
(2) Any preliminary offering circular which
has been authorized for use by the superintendent may be distributed in
connection with the offering at the same time as, or after, the proxy statement
is mailed to depositors or shareholders pursuant to this Part. No final
offering circular shall be distributed until it has been approved by the
superintendent. The approval of the final offering circular by the
superintendent shall not extend beyond the maximum time period specified for
the completion of the sale of all the capital stock in subdivision (e) of this
section, or beyond such period of time as the superintendent shall establish
upon a subsequent approval in the event of the granting of an extension of time
under subdivision (g) of this section.
(3) If the subscription offering is to
commence prior to the meeting of the depositors or shareholders held to vote on
the plan of conversion, the proxy statement authorized for use by the
superintendent shall set forth the estimated price range. Any preliminary
offering circular shall set forth the estimated price range. The maximum of
such price range should normally be no more than 15 percent above the average
of the minimum and maximum of such price range and the minimum should normally
be no more than 15 percent below such average. The maximum price used in the
price range should be no more than $40 per share and the minimum no less than
$5 per share.
(4) The materials
relating to the pricing of the capital stock referred to in paragraph (6) of
this subdivision shall be delivered to the superintendent before he approves
the plan of conversion. The superintendent will review the price information in
determining whether to approve an application for conversion when the offering
is to commence prior to the meeting of depositors or shareholders, and will
review such information in determining whether to approve the final offering
circular.
(5) Underwriting
commissions shall not exceed an amount or percentage per share acceptable to
the superintendent. No underwriting commissions shall be allowed or paid with
respect to shares of capital stock sold in the subscription offering, unless
the plan of conversion contains the provision permitted by paragraph (b)(4) of
this section; provided, however, that an underwriter may be reimbursed for
reasonable expenses actually incurred in connection with the subscription
offering where the public offering is so small that reasonable underwriting
commissions thereon would not be sufficient to cover total expenses reasonably
incurred by the underwriter.
(6)
The pricing information required under paragraph (4) of this subdivision shall
comply with the following guidelines:
(i) The
materials shall be prepared by persons independent of the converting
institution, experienced and expert in the area of corporate appraisal, and
acceptable to the superintendent.
(ii) The materials shall contain a full
appraisal, including a complete and detailed description of the elements that
make up an appraisal report, justification for the methodology employed and
sufficient support for the conclusions reached therein.
(iii) To the extent that the appraisal is
based on a capitalization of the pro forma income of the converted institution,
the materials must indicate the basis for determination of the income to be
derived from the proceeds of the sale of stock and demonstrate the
appropriateness of the earnings-multiple used, including assumptions made as to
future earnings growth. To the extent that the appraisal is based on comparison
of the capital stock of the converting institution with outstanding capital
stock of existing stock-form thrift institutions, such existing stock
institutions must be reasonably comparable to the converting institution in
terms of such factors as size, market area, competitive conditions, profit
history, and expected future earnings.
(7) In addition to the information required
in paragraph (6) of this subdivision, the converting institution shall submit
information demonstrating to the satisfaction of the superintendent the
independence and expertise of any person preparing materials under this
paragraph. However, a person will not be considered as lacking independence for
the reason that such person will participate in effecting a sale of capital
stock under the plan of conversion or will receive a fee from the converting
institution for services rendered in connection with such appraisal.
(8) In addition to the information required
in paragraphs (6) and (7) of this subdivision, the converting institution shall
file with the superintendent such additional information with respect to the
pricing of the capital stock of the institution as the superintendent may
request, including, without limitation, a full appraisal.
(d) Order forms for subscriptions.
(1) After receiving the approval of the
superintendent of its plan for conversion, a converting thrift shall submit
said plan to its eligible account holders as provided in section
86.4
of this Part by mailing to each eligible account holder a notice, proxy card
and proxy statement or short-form proxy statement conforming to the
requirements of section
86.14 of this
Part.
(2) Except as provided in
paragraph (a)(5) of this section, subscriptions for shares shall be accepted
from eligible account holders only to the extent that such holders have (i)
executed and delivered in person or by mail a purchase order in such form as
the converting institution shall prescribe, and (ii) accompanied such order
with payment (either direct or by authorizing withdrawal from a share or
deposit account). In the event that subscriptions are cancelled by the
converting institution for any lawful reason, payments for the same shall be
promptly refunded.
(3) Each order
form shall be accompanied or preceded by an offering circular for the
subscription offering or the public offering, as the case may be, and a set of
detailed instructions explaining how to properly complete such order
forms.
(4) The maximum subscription
price stated on each order form shall be the amount to be paid when the order
form is returned. The maximum subscription price and the actual subscription
price shall be within the subscription price range stated in the offering
circular. If either the maximum subscription price or the actual subscription
price is not within the subscription price range stated in the offering
circular, the converting institution must obtain specific approval as to such
price from the superintendent. If appropriate, the superintendent will
condition his approval by requiring a resolicitation of proxies and/or order
forms. If the actual public offering price is less than the maximum
subscription price stated on the order form, the actual subscription price
shall be correspondingly reduced and the difference shall be refunded to those
who have paid the maximum subscription price unless the subscribers
affirmatively elect to have the difference applied to the purchase of
additional shares of capital stock.
(5) Each order form shall be prepared so as
to indicate to the person receiving it, in as simple, clear and intelligible a
manner as possible, the actions which are required or available to him with
respect to the form and the capital stock offered for purchase thereby.
Specifically, each order form shall:
(i)
indicate the maximum number of shares that may be purchased pursuant to the
subscription rights;
(ii) indicate
the period of time within which the subscription rights must be exercised,
which period of time shall be no less than 20 days and no more than 45 days
following the mailing of the subscription order form;
(iii) state the maximum subscription price
per share of capital stock;
(iv)
indicate any requirements as to the minimum number of shares of capital stock
which may be purchased;
(v) provide
a specifically designated blank space or spaces for indicating the number of
shares of capital stock which the eligible account holder wishes to
purchase;
(vi) indicate the manner
of required payment and, if such payment may be made by withdrawal from a
certificate of deposit, indicate whether such withdrawal may be made without
penalty. If payment is to be made by withdrawal from an account or certificate
of deposit, a box to check should be provided;
(vii) provide specifically designated blank
spaces for dating and signing the order form;
(viii) contain an acknowledgment by the
eligible account holder or other person signing the order form that he has
received an offering circular prior to so signing; and
(ix) indicate the consequences of failing to
properly complete and return the order form, including a statement that the
subscription rights are nontransferable and will become void at the end of the
subscription period. The order form may, and the instructions thereto shall,
indicate the place or places to which the order forms are to be returned and
when the order forms shall be deemed to be received by the converting
institution.
(6) The
order form may provide that it may not be modified without the converting
institution's consent after its receipt as set forth in the order form. If
payment is to be made by withdrawal from an account or certificate of deposit,
the converting institution may, but need not, cause such withdrawal to be made
upon receipt of the order form. If such withdrawal is made at any time prior to
the closing date of the public offering, the converting institution shall pay
interest to the eligible account holder on the amount withdrawn as if such
amount had remained in the account from which it was withdrawn until such
closing date.
(e) Period
for completion of sale. The sale of all shares of capital stock of the
converting insured institution to be made under the plan of conversion shall be
completed as promptly as possible and within 45 calendar days after the last
day of the subscription period unless extended by the superintendent.
(f) Interest on subscriptions. The converting
institution shall pay interest at not less than the passbook rate on the
amounts paid to the institution to purchase shares of capital stock in the
subscription offering from the date payment is received by the institution
until the conversion is completed or terminated.
(g) Extension of time to complete public
offering.
(1) The superintendent may grant one
or more extensions of the time required to complete the sale of all shares of
capital stock under subdivision (e) of this section, provided that no single
extension of time shall exceed 60 days.
(2) Immediately upon granting of an extension
of time pursuant to paragraph (1) of this subdivision, the converting
institution shall distribute to each subscriber in the offering a notice of the
extension of time, and of the right of each subscriber to increase, decrease or
rescind the subscription at any time prior to 20 days before the end of the
extension period or at any time prior to the date of the commencement of the
public offering.
(3) After the
expiration of the subscription period, the converting institution shall file
with the superintendent, for his approval, a notice to be delivered to
subscribers upon the occurrence of any event, circumstance, or change of
circumstance which would be material to the investment decision of a
subscriber. Any such notice distributed to subscribers shall grant to each
subscriber the right to increase, decrease or rescind his subscription for a
period which shall be no less than the greater of 10 days from the date of the
mailing of such notice or the period remaining in an extension of time granted
by the superintendent pursuant to and subject to the provisions of this
subdivision.