EXHIBIT 2
PLAN OF CONVERSION
of
GUARANTY FEDERAL BANCSHARES, M.H.C.
and
AGREEMENT AND PLAN OF REORGANIZATION
between
GUARANTY FEDERAL BANCSHARES, M.H.C.
and
GUARANTY FEDERAL SAVINGS BANK
as amended
TABLE OF CONTENTS
Section
Number Page
------ ----
1. Introduction............................................................................ 1
2. Definitions............................................................................. 3
3. General Procedure for Conversion and Reorganization..................................... 9
4. Total Number of Shares and Purchase Price of
Conversion Stock...................................................................... 11
5. Subscription Rights of Eligible Account Holders (First Priority)........................ 12
6. Subscription Rights of the Tax-Qualified Employee Stock
Benefit Plans (Second Priority)....................................................... 13
7. Subscription Rights of Supplemental Eligible Account Holders
(Third Priority)...................................................................... 14
8. Subscription Rights of Other Members (Fourth Priority).................................. 15
9. Public Stockholders' Offering .......................................................... 16
10. Community Offering, Syndicated Community Offering
and Other Offerings................................................................... 16
11. Limitations on Subscriptions and Purchases of Conversion Stock........................... 18
12. Timing of Subscription Offering; Manner of Exercising
Subscription Rights and Order Forms................................................... 19
13. Payment for Conversion Stock............................................................ 21
14. Account Holders in Nonqualified States or Foreign Countries............................. 22
15. Voting Rights of Stockholders........................................................... 23
16. Liquidation Account..................................................................... 23
17. Transfer of Deposit Accounts............................................................ 24
18. Requirements Following Conversion and Reorganization for
Registration, Market Making and Stock Exchange Listing................................ 25
19. Directors and Officers of the Bank...................................................... 25
20. Requirements for Stock Purchases by Directors and Officers
Following the Conversion and Reorganization............................................ 25
21. Restrictions on Transfer of Stock....................................................... 25
22. Restrictions on Acquisition of Stock of the Holding Company............................. 26
23. Tax Rulings or Opinions................................................................. 27
24. Stock Compensation Plans................................................................ 27
25. Dividend and Repurchase Restrictions on Stock........................................... 27
26. Payment of Fees to Brokers.............................................................. 28
27. Effective Date.......................................................................... 28
28. Amendment or Termination of the Plan.................................................... 28
29. Interpretation of the Plan.............................................................. 29
Appendix A - Plan of Merger between the Mutual Holding Company and the Bank
Appendix B - Plan of Reorganization between the Bank, Interim B and the Holding
Company
i
1. INTRODUCTION
For purposes of this section, all capitalized terms have the meaning
ascribed to them in Section 2.
In April 1995, Guaranty Federal Savings Bank, a federally chartered mutual
savings institution reorganized into the mutual holding company form of
organization and consummated a sale of stock to its members. To accomplish this
transaction, the Bank organized a federally chartered, stock savings bank as a
wholly owned subsidiary. The mutual Bank then transferred substantially all of
its assets and liabilities to the stock Bank in exchange for shares of Bank
Common Stock, and reorganized itself into a federally chartered mutual holding
company known as Guaranty Federal Bancshares, M.H.C. and sold shares of Bank
Common Stock to parties other than the MHC. As of the date hereof, the Mutual
Holding Company and the Public Stockholders own an aggregate of 68.9% and 31.1%
of the outstanding Bank Common Stock, respectively.
The Boards of Directors of the Mutual Holding Company and the Bank believe
that a conversion of the Mutual Holding Company to stock form and reorganization
of the Bank pursuant to this Plan of Conversion is in the best interests of the
Mutual Holding Company and the Bank, as well as the best interests of their
respective Members and Stockholders. The Boards of Directors have determined
that this Plan of Conversion equitably provides for the interests of Members
through the granting of subscription rights and the establishment of a
liquidation account. The Conversion and Reorganization will result in the Bank
being wholly owned by a stock holding company, which is a more common structure
and form of ownership than a mutual holding company. In addition, the Conversion
and Reorganization will result in the raising of additional capital for the Bank
and the Holding Company and should result in a more active and liquid market for
the Holding Company Common Stock than currently exists for the Bank Common
Stock, although there can be no assurances that this will be the case. Finally,
the Conversion and Reorganization has been structured to reunite the accumulated
earnings and profits tax attribute retained by the Mutual Holding Company with
the retained earnings of the Bank through a tax-free reorganization. This will
increase the Bank's ability to pay dividends in the future.
If the Bank had undertaken a standard conversion involving the formation of
a stock holding company in 1995, applicable OTS regulations would have required
a greater amount of Bank Common Stock to be sold than was sold in the Bank's
initial public offering undertaken with the mutual holding company
reorganization. In addition, if a standard conversion had been conducted in
1995, management of the Bank believed that it would have been difficult to
profitably and prudently invest the larger amount of capital that would have
been raised, when compared to the amount of net proceeds raised in the Bank's
initial public offering. A standard conversion in 1995 also would have
immediately eliminated all aspects of the mutual form of organization and
possibly could have subjected the Bank to interference from stockholders and to
an unwanted acquisition or other change in control of the Bank.
1
Subsequent to the decision of the Boards of Directors to form a the Mutual
Holding Company, there have been changes in the policies of the OTS relating to
mutual holding companies. In addition, market conditions for the stocks of
savings institutions and their holding companies have improved. The Bank has
also gained experience in being a company required to meet the filing
requirements of the Securities and Exchange Act of 1934 and in conducting
stockholder meetings and other stockholder matters, such as communications,
press releases, NASD matters and dividend payments. In light of the foregoing,
the Boards of Directors of the Mutual Holding Company and the Bank believe (i)
that it is in the best interests of such companies and their respective Members
and Stockholders to reorganize into the stock form of organization at this time,
and (ii) that the most feasible way to do so is through the Conversion and the
Reorganization.
In connection with the Conversion and Reorganization, the Bank will form a
new first-tier, wholly owned subsidiary known as Guaranty Federal Bancshares,
Inc. which will become the Holding Company upon consummation of the Conversion
and Reorganization. The Holding Company will in turn form Interim B as a wholly
owned subsidiary. As described in more detail herein, the Mutual Holding Company
will convert to an interim federal stock savings bank and will simultaneously
merge with and into the Bank pursuant to the Plan of Merger included as Appendix
A hereto, pursuant to which the Mutual Holding Company will cease to exist and a
liquidation account will be established by the Bank for the benefit of depositor
Members as of specified dates and Interim B will then merge with and into the
Bank pursuant to the Plan of Reorganization included as Appendix B hereto,
pursuant to which the Bank will become a wholly owned subsidiary of the Holding
Company. In connection therewith, each share of Bank Common Stock outstanding
immediately prior to the effective time thereof that is held by Public
Stockholders shall be automatically converted, without further action by the
holder thereof, into and become the right to receive shares of Holding Company
Common Stock based on the Exchange Ratio, plus cash in lieu of any fractional
share interest.
In connection with the Conversion and Reorganization, the Holding Company
will offer shares of Conversion Stock in the Offerings as provided herein.
Shares of Conversion Stock will be offered in a Subscription Offering in
descending order of priority to Eligible Account Holders, Tax-Qualified Employee
Stock Benefit Plans, Supplemental Eligible Account Holders and Other Members.
Remaining shares may be subscribed for by Public Stockholders in the Public
Stockholders' Offering. Any shares of Conversion Stock remaining unsold after
the Subscription Offering and the Public Stockholders' Offering will be offered
for sale to the public through a Community Offering and/or Syndicated Community
Offering, as determined by the Boards of Directors of the Holding Company and
the Bank in their sole discretion.
The Conversion and Reorganization is intended to provide support to the
Bank's lending and investment activities and thereby enhance the Bank's
capabilities to serve the borrowing and other financial needs of the communities
it serves. The use of the Holding Company will provide greater organizational
flexibility and facilitate possible acquisitions and diversification.
2
This Plan is subject to the approval of the OTS and also must be approved by
(1) at least a majority of the total number of votes eligible to be cast by
Voting Members of the Mutual Holding Company at the Special Meeting and (2)
holders of at least two-thirds of the outstanding Bank Common Stock at the
Stockholders' Meeting. In addition, the Primary Parties have conditioned the
consummation of the Conversion and Reorganization on the approval of the Plan by
at least a majority of the votes cast, in person or by proxy, by the Public
Stockholders at the Stockholders' Meeting.
After the Conversion and Reorganization, the Bank will continue to be
regulated by the OTS, as its chartering authority, and by the FDIC, which
insures the Bank's deposits. In addition, the Bank will continue to be a member
of the Federal Home Loan Bank System, and all insured savings deposits will
continue to be insured by the FDIC up to the maximum amount provided by law.
2. DEFINITIONS
As used in this Plan, the terms set forth below have the following meanings:
Actual Purchase Price means the price per share at which the Conversion
Stock is ultimately sold by the Holding Company in the Offerings in accordance
with the terms hereof.
Affiliate means a Person who, directly or indirectly, through one or more
intermediaries, controls or is controlled by or is under common control with the
Person specified.
Associate, when used to indicate a relationship with any Person, means (i) a
corporation or organization (other than the Mutual Holding Company, the Bank, a
majority-owned subsidiary of the Bank or the Holding Company) of which such
Person is a director, officer or partner or is, directly or indirectly, the
beneficial owner of 10% or more of any class of equity securities, (ii) any
trust or other estate in which such Person has a substantial beneficial interest
or as to which such Person serves as trustee or in a similar fiduciary capacity,
provided, however, that such term shall not include any Tax-Qualified Employee
Stock Benefit Plan of the Holding Company or the Bank in which such Person has a
substantial beneficial interest or serves as a trustee or in a similar fiduciary
capacity, and (iii) any relative or spouse of such Person, or any relative of
such spouse, who has the same home as such Person or who is a director or
officer of the Holding Company or the Bank or any of the subsidiaries of the
foregoing.
Bank means Guaranty Federal Savings Bank in its mutual or stock form or
Guaranty Federal Savings Bank following consummation of the Conversion and
Reorganization, as the context of the reference indicates.
Bank Common Stock means the common stock of the Bank, par value $1.00 per
share, which stock is not and will not be insured by the FDIC or any other
governmental authority.
3
Bank Merger means the merger of Interim B with and into the Bank pursuant to
the Plan of Reorganization included as Appendix B hereto.
Code means the Internal Revenue Code of 1986, as amended.
Community Offering means the offering for sale by the Holding Company of any
shares of Conversion Stock not subscribed for in the Subscription Offering or
Public Stockholders' Offering to (i) natural persons residing in the Local
Community, and (ii) such other Persons within or without the State of Missouri
as may be selected by the Holding Company and the Bank within their sole
discretion.
Control (including the terms "controlling," "controlled by," and "under
common control with") means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
Conversion and Reorganization means (i) the conversion of the Mutual Holding
Company to an interim federal stock savings association and the subsequent
merger, pursuant to which the Mutual Holding Company will cease to exist, (ii)
the Bank Merger, pursuant to which the Bank will become a wholly owned
subsidiary of the Holding Company and, in connection therewith, each share of
Bank Common Stock outstanding immediately prior to the effective time thereof
that is held by Public Stockholders shall automatically be converted, without
further action by the holder thereof, into and become the right to receive
shares of Holding Company Common Stock based on the Exchange Ratio, plus cash in
lieu of any fractional share interest, and (iii) the issuance of Conversion
Stock by the Holding Company in the Offerings as provided herein, which will
increase the number of shares of Holding Company Common Stock outstanding and
the capitalization of the Holding Company and the Bank.
Conversion Stock means the Holding Company Common Stock to be issued and
sold in the Offerings pursuant to the Plan of Conversion.
Deposit Account means savings and demand accounts, including passbook
accounts, money market deposit accounts and negotiable order of withdrawal
accounts, and certificates of deposit and other authorized accounts of the Bank
held by a Member.
Director, Officer and Employee means the terms as applied respectively to
any person who is a director, officer or employee of the Mutual Holding Company,
the Bank or any subsidiary thereof.
Eligible Account Holder means any Person holding a Qualifying Deposit on the
Eligibility Record Date for purposes of determining subscription rights and
establishing subaccount balances in the liquidation account to be established
pursuant to the provision herein.
4
Eligibility Record Date means the date for determining Qualifying Deposits
of Eligible Account Holders and is the close of business on December 31, 1995.
Estimated Price Range means the range of the estimated aggregate pro forma
market value of the Conversion Stock to be issued in the Offerings, as
determined by the Independent Appraiser in accordance with Section 4 hereof.
Exchange Ratio means the rate at which shares of Holding Company Common
Stock will be exchanged for shares of Bank Common Stock held by the Public
Stockholders in connection with the Bank Merger. The exact rate shall be
determined by the Mutual Holding Company and the Bank in order to ensure that
upon consummation of the Conversion and Reorganization the Public Stockholders
will own in the aggregate approximately the same percentage of the Holding
Company Common Stock to be outstanding upon completion of the Conversion and
Reorganization as the percentage of Bank Common Stock owned by them in the
aggregate on the Effective Date, as adjusted in accordance with OTS policy to
reflect any special dividends declared by the Bank and waived by the Mutual
Holding Company, but before giving effect to (a) cash paid in lieu of any
fractional interests of Holding Company Common Stock and (b) any shares of
Conversion Stock purchased by the Public Stockholders in the Offerings or
tax-qualified employee stock benefit plans thereafter.
Exchange Shares means the shares of Holding Company Common Stock to be
issued to the Public Stockholders in connection with the Bank Merger.
FDIC means the Federal Deposit Insurance Corporation or any successor
thereto.
Holding Company means Guaranty Federal Bancshares, Inc., a corporation to be
organized under the laws of the State of Delaware. Such corporation will
initially be formed as a first-tier, wholly owned subsidiary of the Bank. Upon
completion of the Conversion and Reorganization, the Holding Company shall hold
all of the outstanding capital stock of the Bank.
Holding Company Common Stock means the Common Stock of the Holding Company,
par value $.10 per share, which stock cannot and will not be insured by the FDIC
or any other governmental authority.
Independent Appraiser means the independent investment banking or financial
consulting firm retained by the Holding Company and the Bank to prepare an
appraisal of the estimated pro forma market value of the Conversion Stock.
Initial Purchase Price means the price per share to be paid initially by
Participants for shares of Conversion Stock subscribed for in the Subscription
Offering, Public Stockholders for shares of Conversion Stock ordered in the
Public Stockholders' Offering and by Persons for shares of Conversion Stock
ordered in the Community Offering and/or Syndicated Community Offering.
5
Interim A means Guaranty Federal Interim Bancshares, an interim federal
stock savings bank, which will be formed as a result of the conversion of
Guaranty Federal Bancshares, M.H.C. into the stock form of organization.
Interim B means Guaranty Federal Interim Savings Bank, which will be formed
as a first-tier, wholly owned subsidiary of the Holding Company to facilitate
the Bank Merger.
Local Community means all counties in which the Bank has its home office or
a branch office.
Member means any Person qualifying as a member of the Mutual Holding Company
in accordance with its mutual charter and bylaws and the laws of the United
States.
MHC Merger means the merger of Interim A with and into the Bank pursuant to
the Plan of Merger included as Appendix A hereto.
Mutual Holding Company means Guaranty Federal Bancshares, M.H.C. prior to
its conversion into an interim federal stock savings bank.
Offerings means the Subscription Offering, the Public Stockholders Offering,
the Community Offering and the Syndicated Community Offering, if applicable.
Officer means the president, senior vice-president, secretary, treasurer or
principal financial officer, comptroller or principal accounting officer and any
other person performing similar functions with respect to any organization
whether incorporated or unincorporated.
Order Form means the form or forms provided by the Holding Company,
containing all such terms and provisions as set forth herein, to a Participant
or other Person by which Conversion Stock may be ordered in the Offerings.
Other Member means a Voting Member who is not an Eligible Account Holder or
a Supplemental Eligible Account Holder.
OTS means the Office of Thrift Supervision or any successor thereto.
Participant means any Eligible Account Holder, Tax-Qualified Employee Stock
Benefit Plan, Supplemental Eligible Account Holder and Other Member.
Person means an individual, a corporation, a partnership, an association, a
joint stock company, a trust, an unincorporated organization or a government or
any political subdivision thereof.
Plan and Plan of Conversion means this Plan of Conversion and Agreement and
Plan of Reorganization as adopted by the Boards of Directors of the Mutual
Holding Company and the
6
Bank and any amendment hereto approved as provided herein. The Board of
Directors of the Holding Company shall adopt this Plan as soon as practicable
following its organization, and the Board of Directors of Interim B shall adopt
the Plan of Reorganization included as Appendix B hereto as soon as practicable
following its organization.
Primary Parties means the Mutual Holding Company, the Bank and the Holding
Company.
Prospectus means the one or more documents to be used in offering the
Conversion Stock in the Offerings.
Public Stockholders means those Persons who own shares of Bank Common Stock,
excluding the Mutual Holding Company, as of the Stockholder Voting Record Date.
Public Stockholders' Offering means the offering for sale by the Holding
Company of any shares of Conversion Stock not subscribed for in the Subscription
Offering to Public Stockholders, at the sole discretion of the Bank and Holding
Company.
Qualifying Deposit means the aggregate balance of all Deposit Accounts in
the Bank of (i) an Eligible Account Holder at the close of business on the
Eligibility Record Date, provided such aggregate balance is not less than $50,
and (ii) a Supplemental Eligible Account Holder at the close of business on the
Supplemental Eligibility Record Date, provided such aggregate balance is not
less than $50.
Resident means any person who, on the date designated for that category of
subscriber in the Plan, maintained a bona fide residence within the Local
Community and has manifested an intent to remain within the Local Community for
a period of time. The designated dates for Eligible Account Holders,
Supplemental Eligible Account Holders and Other Members are the Eligibility
Record Date, the Supplemental Eligibility Record Date and the Voting Record
Date, respectively. To the extent the person is a corporation or other business
entity, the principal place of business or headquarters must be within the Local
Community in order to qualify as a Resident. To the extent the person is a
personal benefit plan, the circumstances of the beneficiary shall apply with
respect to this definition. In the case of all other benefit plans,
circumstances of the trustee shall be examined for purposes of this definition.
The Bank may utilize deposit or loan records or such other evidence provided to
it to make a determination as to whether a person is a bona fide resident of the
Local Community. Subscribers in the Community Offering who are natural persons
also will have a purchase preference if they were residents of the Local
Community on the date of the Prospectus. In all cases, however, such
determination shall be in the sole discretion of the Bank and Holding Company.
SEC means the Securities and Exchange Commission.
Special Meeting means the Special Meeting of Members of the Mutual Holding
Company called for the purpose of submitting this Plan to the Members for their
approval, including any adjournments of such meeting.
7
Stockholders means those Persons who own shares of Bank Common Stock.
Stockholders' Meeting means the annual or special meeting of Stockholders of
the Bank called for the purpose of submitting this Plan to the Stockholders for
their approval, including any adjournments of such meeting.
Stockholder Voting Record Date means the date for determining the Public
Stockholders of the Bank eligible to vote at the Stockholders' Meeting.
Subscription Offering means the offering of the Conversion Stock to
Participants.
Subscription Rights means nontransferable rights to subscribe for Conversion
Stock granted to Participants pursuant to the terms of this Plan.
Supplemental Eligible Account Holder means any Person holding a Qualifying
Deposit at the close of business on the Supplemental Eligibility Record Date.
Supplemental Eligibility Record Date, if applicable, means the date for
determining Qualifying Deposits of Supplemental Eligible Account Holders and
shall be required if the Eligibility Record Date is more than 15 months prior to
the date of the latest amendment to the Application for Conversion filed by the
Mutual Holding Company prior to approval of such application by the OTS. If
applicable, the Supplemental Eligibility Record Date shall be the last day of
the calendar quarter preceding OTS approval of the Application for Conversion
submitted by the Mutual Holding Company pursuant to this Plan of Conversion.
Syndicated Community Offering means the offering for sale by a syndicate of
broker-dealers to the general public of shares of Conversion Stock not purchased
in the Subscription Offering and the Community Offering.
Tax-Qualified Employee Stock Benefit Plan means any defined benefit plan or
defined contribution plan, such as an employee stock ownership plan, stock bonus
plan, profit-sharing plan or other plan, which is established for the benefit of
the employees of the Holding Company and the Bank and which, with its related
trust, meets the requirements to be "qualified" under Section 401 of the Code as
from time to time in effect. A "Non-Tax-Qualified Employee Stock Benefit Plan"
is any defined benefit plan or defined contribution stock benefit plan which is
not so qualified.
Voting Member means a Person who at the close of business on the Voting
Record Date is entitled to vote as a Member of the Mutual Holding Company in
accordance with its mutual charter and bylaws.
Voting Record Date means the date or dates for determining the eligibility
of Members to vote at the Special Meeting.
8
3. GENERAL PROCEDURE FOR CONVERSION AND REORGANIZATION
A. After the Bank's organization of the Holding Company and the receipt of
all requisite regulatory approvals, the Holding Company will form Interim B as a
first-tier, wholly owned subsidiary of the Holding Company, and the Board of
Directors of Interim B shall adopt the Plan of Reorganization included as
Appendix B hereto by at least a two-thirds vote. In addition, the Holding
Company shall approve such Plan of Reorganization in its capacity as the sole
stockholder of Interim B.
B. An application for the Conversion and Reorganization, including the Plan
and all other requisite material (the "Application for Conversion"), shall be
submitted to the OTS for approval. The Mutual Holding Company and the Bank also
will cause notice of the adoption of the Plan by the Boards of Directors of the
Mutual Holding Company and the Bank to be given by publication in a newspaper
having general circulation in each community in which an office of the Bank is
located; and will cause copies of the Plan to be made available at each office
of the Mutual Holding Company and the Bank for inspection by Members and
Stockholders. The Mutual Holding Company and the Bank will cause to be
published, in accordance with the requirements of applicable regulations of the
OTS, a notice of the filing with the OTS of an application to convert the Mutual
Holding Company from mutual to stock form.
C. Promptly following receipt of requisite approval of the OTS, this Plan
will be submitted to the Members for their consideration and approval at the
Special Meeting. The Mutual Holding Company may, at its option, mail to all
Members as of the Voting Record Date, at their last known address appearing on
the records of the Mutual Holding Company and the Bank, a proxy statement in
either long or summary form describing the Plan which will be submitted to a
vote of the Members at the Special Meeting. The Holding Company also shall mail
to all such Members (as well as other Participants) either a Prospectus and
Order Form for the purchase of Conversion Stock or a letter informing them of
their right to receive a Prospectus and Order Form and a postage prepaid card to
request such materials, subject to the provisions herein. The Plan must be
approved by the affirmative vote of at least a majority of the total number of
votes eligible to be cast by Voting Members at the Special Meeting.
D. Subscription Rights to purchase shares of Conversion Stock will be
issued without payment therefor to Eligible Account Holders, Tax-Qualified
Employee Plans, Supplemental Eligible Account Holders and Other Members.
E. The Bank shall file preliminary proxy materials with the OTS in order to
seek the approval of the Plan by its Stockholders. Promptly following clearance
of such proxy materials and the receipt of any other requisite approval of the
OTS, the Bank will mail definitive proxy materials to all Stockholders as of the
Stockholder Voting Record Date, at their last known address appearing on the
records of the Bank, for their consideration and approval of this Plan at the
Stockholders' Meeting. The Plan must be approved by the holders of at least
two-thirds of the outstanding Bank Common Stock as of the Voting Record Date. In
addition, the Primary
9
Parties have conditioned the consummation of the Conversion and Reorganization
on the approval of the Plan by at least a majority of the votes cast, in person
or by proxy, by the Public Stockholders as of the Stockholder Voting Record Date
at the Stockholders' Meeting.
F. The Holding Company shall submit or cause to be submitted an Application
H-(e)1 or H-(e)1-S to the OTS for approval of the acquisition of the Bank. Such
application also shall include applications to form Interim A and Interim B. In
addition, an application to merge Interim A and the Bank and an application to
merge Interim B and the Bank shall be filed with the OTS, either as an exhibit
to the Application H-(e)1 or H-(e)1-S or separately. All notices required to be
published in connection with such applications shall be published at the times
required.
G. The Holding Company shall file a Registration Statement with the SEC to
register the Holding Company Common Stock to be issued in the Conversion and
Reorganization under the Securities Act of 1933, as amended, and shall register
such Holding Company Common Stock under any applicable state securities laws.
Upon registration and after the receipt of all required regulatory approvals,
the Conversion Stock shall be first offered for sale in a Subscription Offering
to Eligible Account Holders, Tax-Qualified Employee Stock Benefit Plans,
Supplemental Eligible Account Holders and Other Members. It is anticipated that
any shares of Conversion Stock remaining unsold after the Subscription Offering
will be sold first through the Public Stockholders' Offering and then through a
Community Offering and/or a Syndicated Community Offering. The purchase price
per share for the Conversion Stock shall be a uniform price determined in
accordance with the provisions herein. The Holding Company shall contribute to
the Bank an amount of the net proceeds received by the Holding Company from the
sale of Conversion Stock as shall be determined by the Boards of Directors of
the Holding Company and the Bank and as shall be approved by the OTS.
H. The Effective Date of the Conversion and Reorganization shall be the
date set forth in Section 27 hereof. Upon the effective date, the following
transactions shall occur:
(i) The Mutual Holding Company shall convert into an interim federal
stock savings bank, Interim A, and Interim A shall simultaneously merge
with and into the Bank in the MHC Merger, with the Bank being the surviving
institution. As a result of the MHC Merger, (a) the shares of Bank Common
Stock currently held by the Mutual Holding Company shall be extinguished
and (b) Members of the Mutual Holding Company will be granted interests in
the liquidation account to be established by the Bank pursuant to Section
16 hereof.
(ii) Interim B shall merge with and into the Bank pursuant to the Bank
Merger, with the Bank being the surviving institution. As a result of the
Bank Merger, (a) the shares of Holding Company Common Stock held by the
Bank shall be extinguished; (b) the shares of the Bank Common Stock held by
the Public Stockholders shall be converted into the right to receive shares
of Holding Company Common Stock based upon the Exchange Ratio, plus cash in
lieu of any fractional share interest based upon the Actual
10
Purchase Price; and (c) the shares of common stock of Interim B held by the
Holding Company shall be converted into shares of Bank Common Stock on a
one-for-one basis, with the result that the Bank shall become a wholly
owned subsidiary of the Holding Company.
(iii) The Holding Company shall sell the Conversion Stock in the
Offerings, as provided herein.
I. The Primary parties may retain and pay for the services of financial and
other advisors and investment bankers to assist in connection with any or all
aspects of the Conversion and Reorganization, including in connection with the
Offerings, the payment of fees to brokers and investment bankers for assisting
Persons in completing and/or submitting Order Forms. All fees, expenses,
retainers and similar items shall be reasonable.
4. TOTAL NUMBER OF SHARES AND PURCHASE PRICE OF CONVERSION
STOCK
A. The aggregate price at which shares of Conversion Stock shall be sold in
the Offerings shall be based on a pro forma valuation of the aggregate market
value of the Conversion Stock prepared by the Independent Appraiser. The
valuation shall be based on financial information relating to the Primary
Parties, market, financial and economic conditions, a comparison of the Primary
Parties with selected publicly held financial institutions and holding companies
such other factors as the Independent Appraiser may deem to be important. The
valuation shall be stated in terms of an Estimated Price Range, the maximum of
which shall generally be no more than 15% above the average of the minimum and
maximum of such price range and the minimum of which shall generally be no more
than 15% below such average. The valuation shall be updated during the
Conversion and Reorganization as market and financial conditions warrant and as
may be required by the OTS.
B. Based upon the independent valuation, the Boards of Directors of the
Primary Parties shall fix the Initial Purchase Price and the number (or range)
of shares of Conversion Stock ("Offering Range") to be offered in the Offerings.
The Actual Purchase Price and the total number of shares of Conversion Stock to
be issued in the Offerings shall be determined by the Boards of Directors of the
Primary Parties upon conclusion of the Offerings in consultation with the
Independent Appraiser and any financial advisor or investment banker retained by
the Primary Parties in connection therewith.
C. Subject to the approval of the OTS, the Estimated Price Range may be
increased or decreased prior to completion of the Conversion and Reorganization
to reflect changes in market, financial and economic conditions since the
commencement of the Offerings, and under such circumstances the Primary Parties
may correspondingly increase or decrease the total number of shares of
Conversion Stock to be issued in the Conversion and Reorganization to reflect
any such change. Notwithstanding anything to the contrary contained in this
Plan, no resolicitation
11
of subscribers shall be required and subscribers shall not be permitted to
modify or cancel their subscriptions unless the aggregate funds received from
the offer of the Conversion Stock in the Conversion and Reorganization are less
than the minimum or (excluding purchases, if any, by the Holding Company's and
the Bank's Tax-Qualified Employee Stock Benefit Plans) more than 15% above the
maximum of the Estimated Price Range set forth in the Prospectus. In the event
of an increase in the total number of shares offered in the Conversion and
Reorganization due to an increase in the Estimated Price Range, the priority of
share allocation shall be as set forth in this Plan, provided, however, that
such priority will have no effect whatsoever on the ability of the Tax-Qualified
Employee Stock Benefit Plans to purchase additional shares pursuant to Section
4.D.
D. (i) In the event that Tax-Qualified Employee Stock Benefit Plans are
unable to purchase the number of shares subscribed for by such Tax-Qualified
Employee Stock Benefit Plans due to an oversubscription for shares of Conversion
Stock pursuant to Section 5 hereof, Tax- Qualified Employee Stock Benefit Plans
may purchase from the Holding Company, and the Holding Company may sell to the
Tax-Qualified Employee Stock Benefit Plans, such additional shares ("Additional
Shares") of Holding Company Common Stock necessary to fill the subscriptions of
the Tax-Qualified Employee Stock Benefit Plans, provided that such Additional
Shares may not exceed 8% of the total number of shares of Conversion Stock sold
in the Conversion and Reorganization. The sale of Additional Shares, if
necessary, will occur contemporaneously with the sale of the Conversion Stock.
The sale of Additional Shares to Tax- Qualified Employee Stock Benefit Plans by
the Holding Company is conditioned upon receipt by the Holding Company of a
letter from the Independent Appraiser to the effect that such sale would not
have a material effect on the Conversion and Reorganization or the Actual
Purchase Price and the approval of the OTS. The ability of the Tax-Qualified
Employee Stock Benefit Plans to purchase up to an additional 8% of the total
number of shares of Conversion Stock sold in the Conversion and Reorganization
shall not be affected or limited in any manner by the priorities or purchase
limitations otherwise set forth in this Plan of Conversion.
(ii) Notwithstanding anything to the contrary contained in this Plan, if
the final valuation of the Conversion Stock exceeds the maximum of the Estimated
Price Range, up to 8% of the total number of shares of Conversion Stock sold in
the Conversion and Reorganization may be sold to Tax-Qualified Stock Benefit
Plans prior to filling any other orders for Conversion Stock from such shares in
excess of the maximum of the Estimated Price Range.
5. SUBSCRIPTION RIGHTS OF ELIGIBLE ACCOUNT HOLDERS
(FIRST PRIORITY)
A. Each Eligible Account Holder shall receive, without payment,
nontransferable Subscription Rights to purchase, subject to the further
limitations of Section 11 hereof, up to the greater of (i) the maximum purchase
limitation set forth in Section 11 hereof, (ii) one-tenth of 1% of the total
offering of shares of Conversion Stock in the Subscription Offering, and (iii)
15 times the product (rounded down to the next whole number) obtained by
multiplying the total number of shares of Conversion Stock offered in the
Subscription Offering by a fraction, of
12
which the numerator is the amount of the Qualifying Deposit of the Eligible
Account Holder and the denominator is the total amount of all Qualifying
Deposits of all Eligible Account Holders, subject to Section 14 hereof.
B. In the event of an oversubscription for shares of Conversion Stock
pursuant to the provisions herein, available shares shall be allocated among
subscribing Eligible Account Holders so as to permit each such Eligible Account
Holder, to the extent possible, to purchase a number of shares which will make
his or her total allocation equal to the lesser of the number of shares
subscribed for or 100 shares. Any available shares remaining after each such
subscribing Eligible Account Holder has been allocated the lesser of the number
of shares subscribed for or 100 shares shall be allocated among the subscribing
Eligible Account Holders in the proportion which the Qualifying Deposit of each
such subscribing Eligible Account Holder bears to the total Qualifying Deposits
of all such subscribing Eligible Account Holders whose orders are unfilled,
provided that no fractional shares shall be issued. Subscription Rights of
Eligible Account Holders who are also Directors or Officers and their Associates
shall be subordinated to those of other Eligible Account Holders to the extent
that they are attributable to increased deposits during the one-year period
preceding the Eligibility Record Date.
6. SUBSCRIPTION RIGHTS OF THE TAX-QUALIFIED EMPLOYEE STOCK
BENEFIT PLANS (SECOND PRIORITY)
Notwithstanding the purchase limitations discussed below, Tax-Qualified
Employee Stock Benefit Plans of the Holding Company and the Bank shall receive,
without payment, Subscription Rights to purchase in the aggregate up to 10% of
the Conversion Stock, including first priority to purchase any shares of
Conversion Stock to be issued in the Conversion and Reorganization as a result
of an increase in the Estimated Price Range after commencement of the
Subscription Offering and prior to completion of the Conversion and
Reorganization. Consistent with applicable laws, regulations, policies and
practices of the OTS, Tax-Qualified Employee Stock Benefit Plans may use funds
contributed by the Holding Company or the Bank and/or borrowed from an
independent third party to exercise such Subscription Rights, and the Holding
Company and the Bank may make scheduled discretionary contributions thereto,
provided that such contributions do not cause the Holding Company or the Bank to
fail to meet any applicable regulatory capital requirement.
7. SUBSCRIPTION RIGHTS OF SUPPLEMENTAL ELIGIBLE ACCOUNT
HOLDERS (THIRD PRIORITY)
A. In the event that the Eligibility Record Date is more than 15 months
prior to the date of the latest amendment to the Application for Conversion
filed prior to OTS approval, then, and only in that event, a Supplemental
Eligibility Record Date shall be set and each Supplemental Eligible Account
Holder shall, subject to the further limitations of Section 11 hereof, receive,
without payment, Subscription Rights to purchase up to the greater of (i) the
maximum purchase limitation set forth in Section 11 hereof, (ii) one-tenth of 1%
of the total offering of shares of Conversion Stock in the Subscription
Offering, and (iii) 15 times the product (rounded down to
13
the next whole number) obtained by multiplying the total number of shares of
Conversion Stock offered in the Subscription Offering by a fraction, of which
the numerator is the amount of the Qualifying Deposits of the Supplemental
Eligible Account Holder and the denominator is the total amount of all
Qualifying Deposits of all Supplemental Eligible Account Holders, subject to
Section 14 hereof and the availability of shares of Conversion Stock for
purchase after taking into account the shares of Conversion Stock purchased by
Eligible Account Holders and Tax- Qualified Employee Stock Benefit Plans though
the exercise of Subscription Rights under Sections 5 and 6 hereof.
B. In the event of an oversubscription for shares of Conversion Stock,
available shares shall be allocated among subscribing Supplemental Eligible
Account Holders so as to permit each such Supplemental Eligible Account Holder,
to the extent possible, to purchase a number of shares sufficient to make his
total allocation (including the number of shares, if any, allocated in
accordance with Section 5.A) equal to the lesser of the number of shares
subscribed for or 100 shares. Any remaining available shares shall be allocated
among subscribing Supplemental Eligible Account Holders in the proportion that
the Qualifying Deposits of each bears to the total amount of the Qualifying
Deposits of all such subscribing Supplemental Eligible Account Holders whose
orders are unfilled, provided that no fractional shares shall be issued.
8. SUBSCRIPTION RIGHTS OF OTHER MEMBERS (FOURTH PRIORITY)
A. Each Other Member shall, subject to the further limitations of Section
11 hereof, receive, without payment, Subscription Rights to purchase up to the
greater of (i) the maximum purchase limitation set forth in Section 11 hereof
and (ii) one-tenth of 1% of the total offering of shares of Conversion Stock in
the Subscription Offering, in each case subject to Section 14 hereof and the
availability of shares of Conversion Stock for purchase after taking into
account the shares of Conversion Stock purchased by Eligible Account Holders,
Tax-Qualified Employee Stock Benefit Plans, and Supplemental Eligible Account
Holders, if any, through the exercise of Subscription Rights under Sections 5, 6
and 7 hereof.
B. If, pursuant to this Section, Other Members subscribe for a number of
shares of Conversion Stock in excess of the total number of shares of Conversion
Stock remaining, available shares shall be allocated among subscribing Other
Members so as to permit each such Other Members, to the extent possible, to
purchase a number of shares sufficient to make his total allocation equal to the
lesser of the number of shares subscribed or 100 shares. Any remaining available
shares shall be allocated among subscribing Other Members on a pro rata basis in
the same proportion as each such Other Member's subscription bears to the total
subscriptions of all such subscribing Other Members whose orders are unfilled,
provided that no fractional shares shall be issued.
14
9. PUBLIC STOCKHOLDERS' OFFERING
A. If less than the total number of shares of Conversion Stock are sold in
the Subscription Offering, all remaining shares of Conversion Stock shall,
subject to the further limitations of Section 11 hereof, be sold to Public
Stockholders as of the Stockholder Voting Record Date in an amount up to the
greater of (i) the maximum purchase limitation established for the Community
Offering and/or Syndicated Community Offering and (ii) one tenth of 1% of the
total offering of shares of Conversion Stock in the Subscription Offering, in
each case subject to Section 14 hereof and the availability of shares of
Conversion Stock for purchase after taking into account the shares of Conversion
Stock purchased by Eligible Account Holders, Tax- Qualified Employee Stock
Benefit Plans, Supplemental Eligible Account Holders and Other Members. The
Public Stockholders' Offering may commence concurrently with, at any time
during, or as soon as practicable after the end of the Subscription Offering.
The Public Stockholders' Offering must be completed within 45 days after the
completion of the Subscription Offering, unless extended by the Primary Parties
with any required regulatory approval. The ability of Public Stockholders to
purchase stock in the Public Stockholders' Offering is subject to the right of
the Primary Parties in their absolute discretion to accept or reject in whole or
in part all orders in the Public Stockholders' Offering.
B. If, pursuant to this Section, Public Stockholders as of the Stockholder
Voting Record Date subscribe for a number of shares of Conversion Stock in
excess of the total number of shares of Conversion Stock remaining, available
shares shall be allocated among subscribing Public Stockholders as of the
Stockholder Voting Record Date in an equitable manner as determined by the Board
of Directors, provided that no fractional shares shall be issued.
10. COMMUNITY OFFERING, SYNDICATED COMMUNITY OFFERING AND
OTHER OFFERINGS
A. If less than the total number of shares of Conversion Stock are sold in
the Subscription Offering and Public Stockholders' Offering, it is anticipated
that all remaining shares of Conversion Stock shall, if practicable, be sold in
a Community Offering and/or a Syndicated Community Offering. Subject to the
requirements set forth herein, the manner in which the Conversion Stock is sold
in the Community Offering and/or the Syndicated Community Offering shall have as
the objective the achievement of a wide distribution of such stock, subject to
the right of the Primary Parties, in their absolute discretion, to accept or
reject in whole or in part all orders in the Community Offering and/or
Syndicated Community Offering.
B. In the event of a Community Offering, all shares of Conversion Stock
which are not subscribed for in the Subscription Offering and Public
Stockholders' Offering shall be offered for sale by means of a direct community
marketing program, which may provide for the use of brokers, dealers or
investment banking firms experienced in the sale of financial institution
securities. Any available shares in excess of those not subscribed for in the
Subscription Offering and Public Stockholders' Offering will be available for
purchase by members of the
15
general public to whom a Prospectus is delivered by the Holding Company or on
its behalf, with preference given to natural persons who are Residents of the
Local Community ("Preferred Subscribers").
C. A Prospectus and Order Form shall be furnished to such Persons as the
Primary Parties may select in connection with the Community Offering, and each
order for Conversion Stock in the Community Offering shall be subject to the
absolute right of the Primary Parties to accept or reject any such order in
whole or in part either at the time of receipt of an order or as soon as
practicable following completion of the Community Offering. Available shares
will be allocated first to each Preferred Subscriber whose order is accepted in
an amount equal to the lesser of 100 shares or the number of shares subscribed
for by each such Preferred Subscriber, if possible. Thereafter, unallocated
shares shall be allocated among the Preferred Subscribers whose accepted orders
remain unsatisfied in an equitable manner as determined by the Board of
Directors. If there are any shares remaining after all accepted orders by
Preferred Subscribers have been satisfied, any remaining shares shall be
allocated to other members of the general public who place orders in the
Community Offering, applying the same allocation described above for Preferred
Subscribers.
D. The maximum amount of Conversion Stock that any Person may purchase in
the Community Offering shall, subject to the further limitations of Section 11
hereof, not exceed $250,000 provided, however, that this amount may be decreased
or increased to up to 5% of the total offering of shares in the Conversion and
Reorganization, subject to any required regulatory approval but without the
further approval of Members of the Mutual Holding Company or the Stockholders of
the Bank, subject to the preferences set forth in Section 10.B and 10.C of this
Plan. The Primary Parties may commence the Community Offering concurrently with,
at any time during, or as soon as practicable after the end of, the Subscription
Offering and Public Stockholders' Offering, and the Community Offering must be
completed within 45 days after the completion of the Subscription Offering and
Public Stockholders' Offering, unless extended by the Primary Parties with any
required regulatory approval.
E. Subject to such terms, conditions and procedures as may be determined by
the Primary Parties, all shares of Conversion Stock not subscribed for in the
Subscription Offering and Public Stockholders Offering or ordered in the
Community Offering may be sold by a syndicate of broker-dealers to the general
pubic in a Syndicated Community Offering. Each order for Conversion Stock in the
Syndicated Community Offering shall be subject to the absolute right of the
Primary Parties to accept or reject any such order in whole or in part either at
the time of receipt of an order or as soon as practicable after completion of
the Syndicated Community Offering. The amount of Conversion Stock that any
Person may purchase in the Syndicated Community Offering shall, subject to the
further limitations of Section 11 hereof, not exceed $250,000 provided, however,
that this amount may be decreased or increased to up to 5% of the total offering
of shares in the Conversion and Reorganization, subject to any required
regulatory approval but without the further approval of Members of the Mutual
Holding Company or the Stockholders of the Bank. The Primary Parties may
commence the Syndicated Community Offering concurrently with, at any time
during, or as soon as practicable after the
16
end of, the Subscription Offering, the Public Stockholders' Offering and/or
Community Offering. The Syndicated Community Offering must be completed within
45 days after the completion of the Subscription Offering, unless extended by
the Primary Parties with any required regulatory approval.
F. If for any reason a Syndicated Community Offering of shares of
Conversion Stock not sold in the Subscription Offering and the Community
Offering cannot be effected, or in the event that any insignificant residue of
shares of Conversion Stock is not sold in the Subscription Offering, Public
Stockholders' Offering, Community Offering or Syndicated Community Offering, the
Primary Parties shall use their best efforts to obtain other purchasers for such
shares in such manner and upon such conditions as may be satisfactory to the
OTS.
11. LIMITATIONS ON SUBSCRIPTIONS AND PURCHASES OF CONVERSION
STOCK
The following limitations shall apply to all purchases of Conversion
Stock:
A. The number of shares of Conversion Stock which may be purchased by any
Person (or persons through a single account), in the First Priority, Third
Priority and Fourth Priority in the Subscription Offering shall not exceed such
number of shares of Conversion Stock that when combined with Exchange Shares
received shall equal $250,000 of Holding Company Common Stock, except for
Tax-Qualified Employee Stock Benefit Plans, which in the aggregate may subscribe
for up to 8% of the Conversion Stock.
B. The number of shares of Conversion Stock which may be purchased by any
Person in the Public Stockholders, the Community and/or the Syndicated Community
Offerings shall not exceed such number of shares of Conversion Stock that when
combined with Exchange Shares received shall equal $250,000 of Holding Company
Common Stock.
C. Except for the Tax-Qualified Employee Stock Benefit Plans, the maximum
number of shares of Conversion Stock which may be purchased in all of the
combined categories of the Conversion and Reorganization by any Person (or
persons through a single account) together with any Associate or group of
persons Acting in Concert shall not exceed such number of shares of Conversion
Stock that when combined with Exchange Shares shall equal $320,850 of Holding
Company Common Stock.
D. The number of shares of Conversion Stock which Directors and Officers
and their Associates may purchase in the aggregate in the Offering shall not
exceed 31.7% of the total number of shares of Conversion Stock sold in the
Offerings, including any shares which may be issued in the event of an increase
in the maximum of the Estimated Price Range to reflect changes in market,
financial and economic conditions after commencement of the Subscription
Offering and prior to completion of the Offerings.
E. No Person may purchase fewer than 25 shares of Conversion Stock in the
Offerings, to the extent such shares are available; provided, however, that if
the Actual Purchase Price is greater than $20.00 per share, such minimum number
of shares shall be adjusted so that the aggregate Actual Purchase Price for such
minimum shares will not exceed $500.00.
17
F. For purposes of the foregoing limitations and the determination of
Subscription Rights, (i) Directors, Officers and Employees shall not be deemed
to be Associates or a group acting in concert solely as a result of their
capacities as such, (ii) shares purchased by Tax-Qualified Employee Stock
Benefit Plans shall not be attributable to the individual trustees or
beneficiaries of any such plan for purposes of determining compliance with the
limitations set forth in this Section, (iii) shares purchased by Tax-Qualified
Employee Stock Benefit Plans shall not be attributable to the individual
trustees or beneficiaries of any such plan for purposes of determining
compliance with the limitation set forth in this Section, and (iv) Exchange
Shares shall be valued at the Actual Purchase Price.
G. Subject to any required regulatory approval and the requirements of
applicable laws and regulations, but without further approval of the Members of
the Mutual Holding Company or the Stockholders of the Bank, the Primary Parties
may increase or decrease the individual or overall purchase limitations set
forth herein to a percentage which does not exceed 5% of the total shares of
Holding Company Common Stock issued in the Conversion and Reorganization whether
prior to, during or after the Subscription Offering, Community Offering and/or
Syndicated Community Offering. Notwithstanding the foregoing, the maximum
purchase limitation may be increased up to 9.99% provided that orders for
exceeding 5% of the shares being offered shall not exceed, in the aggregate, 10%
of the total offering. In the event that the individual or overall purchase
limitations are increased after commencement of the Subscription Offering or any
other offering, the Primary Parties shall permit any Person who subscribed for
the maximum number of shares of Conversion Stock (plus certain large subscribers
as determined in the sole discretion of the Primary Parties) to purchase an
additional number of shares, so that such Person shall be permitted to subscribe
for the then maximum number of shares permitted to be subscribed for by such
Person, subject to the rights and preferences of any Person who has priority
Subscription Rights. In the event that the individual or overall purchase
limitations are decreased after commencement of the Subscription Offering or any
other offering, the orders of any Person who subscribed for more than the new
purchase limitation shall be decreased by the minimum amount necessary so that
such Person shall be in compliance with the then maximum number of shares
permitted to be subscribed for by such Person.
H. The Primary Parties shall have the right to take all such action as they
may, in their sole discretion, deem necessary, appropriate or advisable in order
to monitor and enforce the terms, conditions, limitations and restrictions
contained in this Section and elsewhere in this Plan and the terms, conditions
and representations contained in the Order Form, including, but not limited to,
the absolute right (subject only to any necessary regulatory approvals or
concurrences) to reject, limit or revoke acceptance of any subscription or order
and to delay, terminate or refuse to consummate any sale of Conversion Stock
which they believe might violate, or is designed to, or is any part of a plan
to, evade or circumvent such terms, conditions, limitations, restrictions and
representations. Any such action shall be final, conclusive and binding on all
persons, and the Primary Parties and their respective Boards shall be free from
any liability to any Person on account of any such action.
18
I. Notwithstanding anything to the contrary contained in this Plan, except
as may otherwise be required by the OTS, the Public Stockholders will not have
to sell any Bank Common Stock or be limited in receiving Exchange Shares even if
their ownership of Bank Common Stock when converted into Exchange Shares
pursuant to the Bank Merger would exceed an applicable purchase limitation;
however, they might be precluded from purchasing any Conversion Stock in the
Offerings.
12. TIMING OF SUBSCRIPTION OFFERING; MANNER OF EXERCISING
SUBSCRIPTION RIGHTS AND ORDER FORMS
A. The Subscription Offering may be commenced concurrently with or at any
time after the mailing to Voting Members of the Mutual Holding Company and
Stockholders of the Bank of the proxy statement(s) to be used in connection with
the Special Meeting and the Stockholders' Meeting. The Subscription Offering may
be closed before the Special Meeting and the Stockholders' Meeting, provided
that the offer and sale of the Conversion Stock shall be conditioned upon the
approval of the Plan by the Voting Members of the Mutual Holding Company and the
Stockholders of the Bank at the Special Meeting and the Stockholders' Meeting,
respectively.
B. The exact timing of the commencement of the Subscription Offering shall
be determined by the Primary Parties in consultation with the Independent
Appraiser and any financial or advisory or investment banking firm retained by
them in connection with the Conversion. The Primary Parties may consider a
number of factors, including, but not limited to, their current and projected
future earnings, local and national economic conditions, and the prevailing
market for stocks in general and stocks of financial institutions in particular.
The Primary Parties shall have the right to withdraw, terminate, suspend, delay,
revoke or modify any such Subscription Offering, at any time and from time to
time, as they in their sole discretion may determine, without liability to any
Person, subject to compliance with applicable securities laws and any necessary
regulatory approval or concurrence.
C. The Primary Parties shall, promptly after the SEC has declared the
Registration Statement, which includes the Prospectus, effective and all
required regulatory approvals have been obtained, distribute or make available
the Prospectus, together with Order Forms for the purchase of Conversion Stock,
to all Participants for the purpose of enabling them to exercise their
respective Subscription Rights, subject to Section 14 hereof. The Primary
Parties may elect to mail a Prospectus and Order Form only to those Participants
who request such materials by returning a postage-paid card to the Primary
Parties by a date specified in the letter informing them of their Subscription
Rights. Under such circumstances, the Subscription Offering shall not be closed
until the expiration of 30 days after the mailing by the Primary Parties of the
postage-paid card to Participants.
D. A single Order Form for all Deposit Accounts maintained with the Bank by
an Eligible Account Holder, Supplemental Eligible Account Holder and any Other
Member may be furnished, irrespective of the number of Deposit Accounts
maintained with the Bank on the
19
Eligibility Record Date and Supplemental Eligibility Record Date and the Voting
Record Date, respectively.
E. The recipient of an Order Form shall have no less than 20 days and no
more than 45 days from the date of mailing of the Order Form (with the exact
termination date to be set forth on the Order Form) to properly complete and
execute the Order Form and deliver it to the Primary Parties. The Primary
Parties may extend such period by such amount of time as they determine is
appropriate. Failure of any Participant to deliver a properly executed Order
Form to the Primary Parties, along with payment (or authorization for payment by
withdrawal) for the shares of Conversion Stock subscribed for, within time
limits prescribed, shall be deemed a waiver and release by such person of any
rights to subscribe for shares of Conversion Stock. Each Participant shall be
required to confirm to the Primary Parties by executing an Order Form that such
Person has fully complied with all of the terms, conditions, limitations and
restrictions in the Plan.
F. The Primary Parties shall have the absolute right, in their sole
discretion and without liability to any Participant or other Person, to reject
any Order Form, including, but not limited to, any Order Form that is (i)
improperly completed or executed; (ii) not timely received; (iii) not
accompanied by the proper payment (or authorization of withdrawal for payment)
or, in the case of institutional investors in the Community Offering, not
accompanied by an irrevocable order together with a legally binding commitment
to pay the full amount of the purchase price prior to 48 hours before the
completion of the Offerings; or (iv) submitted by a Person whose representations
the Primary Parties believe to be false or who they otherwise believe, either
alone, or acting in concert with others, is violating, evading or circumventing,
or intends to violate, evade or circumvent, the terms and conditions of the
Plan. The Primary Parties may, but will not be required to, waive any
irregularity on any Order Form or may require the submission of corrected Order
Forms or the remittance of full payment for shares of Conversion Stock by such
date as they may specify. The interpretation of the Primary Parties of the terms
and conditions of the Order Forms shall be final and conclusive.
13. PAYMENT FOR CONVERSION STOCK
A. Payment for shares of Conversion Stock subscribed for by Participants in
the Subscription Offering and payment for shares of Conversion Stock ordered by
Persons in the Stockholders' Offering, Community Offering and Syndicated
Community Offering (if applicable) shall be equal to the Initial Purchase Price
multiplied by the number of shares which are being subscribed for or ordered,
respectively. Such payment may be made in cash, if delivered in person, or by
check or money order at the time the Order Form is delivered to the Primary
Parties. In addition, the Primary Parties may elect to provide Participants
and/or other Persons who have a Deposit Account with the Bank the opportunity to
pay for shares of Conversion Stock by authorizing the Bank to withdraw from such
Deposit Account an amount equal to the aggregate Purchase Price of such shares.
If the Actual Purchase Price is less than the Initial Purchase Price, the
Primary Parties shall refund the difference to all Participants and other
Persons, unless the Primary Parties choose to provide Participants and other
Persons the opportunity on the Order Form to elect to have such difference
applied to the purchase of additional whole shares of Conversion Stock. If the
Actual Purchase Price is more than the Initial Purchase Price, the Primary
Parties shall reduce the number of shares of Conversion
20
Stock ordered by Participants and other Persons and refund any remaining amount
which is attributable to a fractional share interest, unless the Primary Parties
choose to provide Participants and other Persons the opportunity to increase the
amount of funds submitted to pay for their shares of Conversion Stock.
B. Consistent with applicable laws and regulations and policies and
practices of the OTS, payment for shares of Conversion Stock subscribed for by
Tax-Qualified Employee Stock Benefit Plans may be made with funds contributed by
the Holding Company and/or funds obtained pursuant to a loan from an independent
third party pursuant to a loan commitment which is in force from the time that
any such plan submits an Order Form until the closing of the transactions
contemplated hereby.
C. If a Participant or other Person authorizes the Bank to withdraw the
amount of the Initial Purchase Price from his or her Deposit Account, the Bank
shall have the right to make such withdrawal or to freeze funds equal to the
aggregate Initial Purchase Price upon receipt of the Order Form. Notwithstanding
any regulatory provisions regarding penalties for early withdrawals from
certificate accounts, the Bank may allow payment by means of withdrawal from
certificate accounts without the assessment of such penalties. In the case of an
early withdrawal of only a portion of such account, the certificate evidencing
such account shall be canceled if any applicable minimum balance requirement
ceases to be met. In such case, the remaining balance will be returned to the
depositor. However, where any applicable minimum balance is maintained in such
certificate account, the rate of return on the balance of the certificate
account shall remain the same as prior to such early withdrawal. This waiver of
the early withdrawal penalty applies only to withdrawals made in connection with
the purchase of Conversion Stock and is entirely within the discretion of the
Primary Parties.
D. The Bank shall pay interest, at not less than the passbook rate, for all
amounts paid in cash, by check or money order to purchase shares of Conversion
Stock in the Subscription Offering, Public Stockholders' Offering and the
Community Offering from the date payment is received until the date the
Conversion and Reorganization is completed or terminated.
E. The Bank shall not knowingly loan funds or otherwise extend credit to
any Participant or other Person to purchase Conversion Stock.
F. Each share of Conversion Stock shall be non-assessable upon payment in
full of the Actual Purchase Price.
14. ACCOUNTHOLDERS IN NONQUALIFIED STATES OR FOREIGN COUNTRIES
The Primary Parties shall make reasonable efforts to comply with the
securities laws of all jurisdictions in the United States in which Participants
reside. However, no Participant will be offered or receive any Conversion Stock
under the Plan if such Participant resides in a foreign country or resides in a
jurisdiction of the United States with respect to which any of the following
apply; (a) there are few Participants otherwise eligible to subscribe for shares
under
21
this Plan who reside in such jurisdiction; (b) the granting of Subscription
Rights or the offer or sale of shares of Conversion Stock to such Participants
would require any of the Primary Parties or their respective Directors and
Officers, under the laws of such jurisdiction, to register as a broker-dealer,
salesman or selling agent or to register or otherwise qualify the Conversion
Stock for sale in such jurisdiction, or any of the Primary Parties would be
required to qualify as a foreign corporation or file a consent to service of
process in such jurisdiction; and (c) such registration, qualification or filing
in the judgment of the Primary Parties would be impracticable or unduly
burdensome for reasons of cost or otherwise.
15. VOTING RIGHTS OF STOCKHOLDERS
Following consummation of the Conversion and Reorganization, voting rights
with respect to the Bank shall be held and exercised exclusively by the Holding
Company as holder of all of the Bank's outstanding voting capital stock, and
voting rights with respect to the Holding Company shall be held and exercised
exclusively by the holders of the Holding Company's voting capital stock.
16. LIQUIDATION ACCOUNT
A. At the time of the MHC Merger, the Bank shall establish a liquidation
account in an amount equal to the amount of the dividends from Bank Common Stock
waived by the Mutual Holding Company plus the greater of (i) the retained
earnings of the Bank as of the date of the latest statement of financial
condition contained in the final offering circular utilized in the Bank's
initial public offering, or (ii) the Bank's total stockholders' equity as
reflected in its latest statement of financial condition contained in the final
Prospectus utilized in the Conversion and Reorganization. The function of the
liquidation account will be to preserve the rights of certain holders of Deposit
Accounts in the association who maintain such accounts in the Bank following the
Conversion and Reorganization to priority to distributions in the unlikely event
of a liquidation of the Bank subsequent to the Conversion and Reorganization.
B. The liquidation account shall be maintained for the benefit of Eligible
Account Holders and Supplemental Eligible Account Holders, if any, who maintain
their Deposit Accounts in the Bank after the Conversion and Reorganization. Each
such account holder will, with respect to each Deposit Account held, have a
related inchoate interest in a portion of the liquidation account balance, which
interest will be referred to in this Section 16 as the "subaccount balance." All
Deposit Accounts having the same social security number will be aggregated for
purposes of determining the initial subaccount balance with respect to such
Deposit Accounts, except as provided in this Section.
C. In the event of a complete liquidation of the Bank subsequent to the
Conversion and Reorganization (and only in such event), each Eligible Account
Holder and Supplemental Eligible Account Holder, if any, shall be entitled to
receive a liquidation distribution from the liquidation account in the amount of
the then current subaccount balances for Deposit Accounts then held (adjusted as
described below) before any liquidation distribution may be made with
22
respect to the capital stock of the Bank. No merger, consolidation, sale of bulk
assets or similar combination transaction with another FDIC-insured institution
in which the Bank is not the surviving entity shall be considered a complete
liquidation for this purpose. In any merger or consolidation transaction, the
liquidation account shall be assumed by the surviving entity.
D. The initial subaccount balance for a Deposit Account held by an Eligible
Account Holder and Supplemental Eligible Account Holder, if any, shall be
determined by multiplying the opening balance in the liquidation account by a
fraction, of which the numerator is the amount of the Qualifying Deposits of
such account holder and the denominator is the total amount of Qualifying
Deposits of all Eligible Account Holders and Supplemental Eligible Account
Holders, if any. For Deposit Accounts in existence at both the Eligibility
Record Date and the Supplemental Eligibility Record Date, if any, separate
initial subaccount balances shall be determined on the basis of the Qualifying
Deposits in such Deposit Accounts on each such record date. Initial subaccount
balances shall not be increased, and shall be subject to downward adjustment as
provided below.
E. If the aggregate deposit balance in the Deposit Account(s) of any
Eligible Account Holder or Supplemental Eligible Account Holder, if any, at the
close of business on any June 30 annual closing date is less than the lesser of
(a) the aggregate deposit balance in such Deposit Account(s) at the close of
business on any other annual closing date subsequent to such record dates or (b)
the aggregate deposit balance in such Deposit Account(s) as of the Eligibility
Record Date or the Supplemental Eligibility Record Date, the subaccount balance
for such Deposit Accounts(s) shall be adjusted by reducing such subaccount
balance in an amount proportionate to the reduction in such deposit balance. In
the event of such a downward adjustment, the subaccount balance shall not be
subsequently increased, notwithstanding any subsequent increase in the deposit
balance of the related Deposit Account(s). The subaccount balance of an Eligible
Account Holder or Supplemental Eligible Account Holder, if any, will be reduced
to zero if the Account Holder ceases to maintain a Deposit Account at the Bank
that has the same social security number as appeared on his Deposit Account(s)
at the Eligibility Record Date or, if applicable, the Supplemental Eligibility
Record Date.
F. Subsequent to the Conversion and Reorganization, the Bank may not pay
cash dividends generally on deposit accounts and/or capital stock of the Bank,
if such dividend or repurchase would reduce the Bank's regulatory capital below
the aggregate amount of the then current subaccount balances for Deposit
Accounts then held; otherwise, the existence of the liquidation account shall
not operate to restrict the use or application of any of the net worth accounts
of the Bank.
G. For purposes of this Section, a Deposit Account includes a predecessor
or successor account which is held by an Account Holder with the same social
security number.
23
17. TRANSFER OF DEPOSIT ACCOUNTS
Each Deposit Account in the Bank at the time of the consummation of the
Conversion and Reorganization shall become, without further action by the
holder, a Deposit Account in the Bank equivalent in withdrawable amount to the
withdrawal value (as adjusted to give effect to any withdrawal made for the
purchase of Conversion Stock), and subject to the same terms and conditions
(except as to voting and liquidation rights) as such Deposit Account in the Bank
immediately preceding consummation of the Conversion and Reorganization. Holders
of Deposit Accounts in the Bank shall not, as such holders, have any voting
rights.
18. REQUIREMENTS FOLLOWING CONVERSION AND REORGANIZATION FOR
REGISTRATION, MARKET MAKING AND STOCK EXCHANGE LISTING
In connection with the Conversion and Reorganization, the Holding Company
shall register the Holding Company Common Stock pursuant to Section 12(g) of the
Securities Exchange Act of 1934, as amended, and shall undertake not to
deregister such stock for a period of three years thereafter. The Holding
Company also shall use its best efforts to (i) encourage and assist a market
maker to establish and maintain a market for the Holding Company Common Stock
and (ii) list the Holding Company Common Stock on a national or regional
securities exchange or to have quotations for such stock disseminated on the
National Association of Securities Dealers Automated Quotation System.
19. DIRECTORS AND OFFICERS OF THE BANK
Each person serving as a Director or Officer of the Bank at the time of the
Conversion and Reorganization shall continue to serve as a Director or Officer
of the Bank for the balance of the term for which the person was elected prior
to the Conversion and Reorganization, and until a successor is elected and
qualified.
20. REQUIREMENTS FOR STOCK PURCHASES BY DIRECTORS AND OFFICERS
FOLLOWING THE CONVERSION AND REORGANIZATION
For a period of three years following the Conversion and Reorganization,
the Directors and Officers of the Holding Company and the Bank and their
Associates may not purchase, without the prior written approval of the OTS,
Holding Company Common Stock except from a broker-dealer registered with the
SEC. This prohibition shall not apply, however, to (i) a negotiated transaction
arrived at by direct negotiation between buyer and seller and involving more
than 1% of the outstanding Holding Company Common Stock and (ii) purchases of
stock made by and held by any Tax-Qualified Employee Stock Benefit Plan (and
purchases of stock made by and held by any Non-Tax-Qualified Employee Stock
Benefit Plan following the receipt of stockholder approval of such plan) which
may be attributable to individual officers or directors.
The foregoing restriction on purchases of Holding Company Common Stock
shall be in addition to any restrictions that may be imposed by federal and
state securities laws.
24
21. RESTRICTIONS ON TRANSFER OF STOCK
All shares of the Conversion Stock which are purchased by Persons other
than Directors and Officers shall be transferable without restriction, except in
connection with a transaction proscribed by Section 22 of this Plan. Shares of
Conversion Stock purchased by Directors and Officers of the Holding Company and
the Bank on original issue from the Holding Company (by subscription or
otherwise) shall be subject to the restriction that such shares shall not be
sold or otherwise disposed of for value for a period of one year following the
date of purchase, except for any disposition of such shares following the death
of the original purchaser or pursuant to any merger or similar transaction
approved by the OTS. The shares of Conversion Stock issued by the Holding
Company to Directors and Officers shall bear the following legend giving
appropriate notice of such one-year restriction.
The shares of stock evidenced by this Certificate are restricted as to transfer
for a period of one year from the date of this Certificate pursuant to Part 563b
of the Rules and Regulations of the Office of Thrift Supervision. These shares
may not be transferred during such one-year period without a legal opinion of
counsel for the Company that said transfer is permissible under the provisions
of applicable law and regulation. This restrictive legend shall be deemed null
and void after one year from the date of this Certificate.
In addition, the Holding Company shall give appropriate instructions to the
transfer agent for the Holding Company Common Stock with respect to the
applicable restrictions relating to the transfer of restricted stock. Any shares
issued at a later date as a stock dividend, stock split or otherwise with
respect to any such restricted stock shall be subject to the same holding period
restrictions as may then be applicable to such restricted stock.
The foregoing restriction on transfer shall be in addition to any
restrictions on transfer that may be imposed by federal and state securities
laws.
22. RESTRICTIONS ON ACQUISITION OF STOCK OF THE HOLDING COMPANY
The articles of incorporation of the Holding Company shall prohibit any
Person together with Associates or groups of Persons acting in concert from
offering to acquire or acquiring, directly or indirectly, beneficial ownership
of more than 10% of any class of equity securities of the Holding Company, or of
securities convertible into more than 10% of any such class, for five years
following completion of the Conversion and Reorganization. The articles of
incorporation of the Holding Company also shall provide that all equity
securities beneficially owned by any Person in excess of 10% of any class of
equity securities during such five-year period shall be considered "excess
shares," and that excess shares shall not be counted as shares entitled to vote
and shall not be voted by any Person or counted as voting shares in connection
with any matters submitted to the stockholders for a vote. The foregoing
restrictions shall not apply to (i) any offer with a view toward public resale
made exclusively to the Holding Company by underwriters or a selling group
acting on this behalf, (ii) the purchase of shares by a Tax-
25
Qualified Employee Stock Benefit Plan established for the benefit of the
employees of the Holding Company and its subsidiaries which is exempt from
approval requirements under 12 C.F.R. ss.574.3(c)(1)(vi) or any successor
thereto, and (iii) any offer or acquisition approved in advance by the
affirmative vote of two-thirds of the entire Board of Directors of the Holding
Company. Directors, Officers or Employees of the Holding Company or the Bank or
any subsidiary thereof shall not be deemed to be Associates or a group acting in
concert with respect to their individual acquisition of any class of equity
securities of the Holding Company solely as a result of their capacities as
such.
23. TAX RULINGS OR OPINIONS
Consummation of the conversion and Reorganization is conditioned upon prior
receipt by the Primary Parties of either a ruling or an opinion of counsel with
respect to federal tax laws, and either a ruling or an opinion of counsel with
respect to Missouri tax laws, to the effect that consummation of the
transactions contemplated hereby will not result in a taxable reorganization
under the provisions of the applicable codes or otherwise result in any material
adverse tax consequences to the Primary Parties or to account holders receiving
Subscription Rights before or after the Conversion and Reorganization, except in
each case to the extent, if any, that Subscription Rights are deemed to have
fair market value on the date such rights are issued.
24. STOCK COMPENSATION PLANS
A. The Holding Company and the Bank are authorized to adopt Tax-Qualified
Employee Stock Benefit Plans in connection with the Conversion and
Reorganization, including without limitation an employee stock ownership plan.
B. The Holding Company and the Bank also are authorized to adopt stock
option plans, restricted stock grant plans and other Non-Tax-Qualified Employee
Stock Benefit Plans, provided that no stock options shall be granted, and no
shares of Conversion Stock shall be purchased, pursuant to any of such plans
prior to the earlier of (i) the one-year anniversary of the consummation of the
Conversion and Reorganization or (ii) the receipt of stockholder approval of
such plans at either the annual or special meeting of stockholders of the
Holding Company to be held not earlier than six months after the completion of
the Conversion and Reorganization.
C. Existing as well as any newly created Tax-Qualified Employee Stock
Benefit Plans may purchase shares of Conversion Stock in the Offerings, to the
extent permitted by the terms of such benefit plans and this Plan.
25. DIVIDEND AND REPURCHASE RESTRICTIONS ON STOCK
A. Except as may otherwise may be permitted by the OTS, the Holding Company
may not repurchase any shares of its capital stock during the first year
following consummation of the Conversion and Reorganization. During the second
and third years following consummation of the Conversion and Reorganization, the
Holding Company may not repurchase any of its capital
26
stock from any person, other than pursuant to (i) an offer to repurchase made by
the Holding Company on a pro rata basis to all of its stockholders and which is
approved by the OTS, (ii) the repurchase of qualifying shares of a director, if
any, (iii) purchases in the open market by a Tax-Qualified or Non-Tax-Qualified
Employee Stock Benefit Plan in an amount reasonable and appropriate to fund the
plan, or (iv) a repurchase program approved by the OTS.
B. The Bank may not declare or pay a cash dividend on, or repurchase any
of, its capital stock if the effect thereof would cause the regulatory capital
of the Bank to be reduced below the amount required for the liquidation account.
Any dividend declared or paid on, or repurchase of, the Bank's capital stock
also shall be in compliance with Section 563.134 of the Regulations Applicable
to All Savings Associations, or any successor thereto.
C. Notwithstanding anything to the contrary set forth herein, the Holding
Company may repurchase its capital stock to the extent and subject to the
requirements set forth in Section 563b.3(g)(3) of the Regulations Applicable to
All Savings Associations, or any successor thereto, or as otherwise may be
approved by the OTS.
26. PAYMENT OF FEES TO BROKERS
The Primary Parties may elect to offer to pay fees on a per share basis to
securities brokers who assist purchasers of Conversion Stock in the Offerings.
27. EFFECTIVE DATE
The Effective Date of the Conversion and Reorganization shall be the date
upon which the last of the following actions occurs: (i) the filing of Articles
of Combination with the OTS with respect to the MHC Merger, (ii) the filing of
Articles of Combination with the OTS with respect to the Bank Merger and (iii)
the closing of the issuance of the shares of Conversion Stock in the Offerings.
The filing of Articles of Combination relating to the MHC Merger and the Bank
Merger and the closing of the issuance of shares of Conversion Stock in the
Offerings shall not occur until all requisite regulatory, Member and Stockholder
approvals have been obtained, all applicable waiting periods have expired and
sufficient subscriptions and orders for the Conversion Stock have been received.
It is intended that the closing of the MHC Merger, the Bank Merger and the sale
of shares of Conversion Stock in the Offerings shall occur consecutively and
substantially simultaneously.
28. AMENDMENT OR TERMINATION OF THE PLAN
If deemed necessary or desirable by the Boards of Directors of the Primary
Parties, this Plan may be substantively amended, as a result of comments from
regulatory authorities or otherwise, at any time prior to the solicitation of
proxies from members and Stockholders to vote on the Plan and at any time
thereafter with the concurrence of the OTS. Any amendment to this Plan made
after approval by the Members and Stockholders with the concurrence of the OTS
shall not necessitate further approval by the Members or Stockholders unless
otherwise required by
27
the OTS. This Plan shall terminate if the sale of all shares of Conversion Stock
is not completed within 24 months from the date of the Special Meeting. Prior to
the earlier of the Special Meeting and the Stockholders' Meeting, this Plan may
be terminated by the Boards of Directors of the Primary Parties without approval
of the OTS; after the Special Meeting or the Stockholder's Meeting, the Boards
of Directors may terminate this Plan only with the approval of the OTS.
29. INTERPRETATION OF THE PLAN
All interpretations of this Plan and application of its provisions to
particular circumstances by a majority of each of the Boards of Directors of the
Primary Parties shall be final, subject to the authority of the OTS.
28
APPENDIX A
PLAN OF MERGER
PLAN OF MERGER, dated as of __________ __, 199__ ("Plan of Merger") by and
between Guaranty Federal Savings Bank (the "Bank") and Guaranty Federal
Bancshares, M.H.C. ("Mutual Holding Company"). Unless otherwise noted, defined
terms shall have the same meaning as those set forth in the Plan of Conversion
of the Mutual Holding Company and the Agreement and Plan of Reorganization
between Guaranty Federal Bancshares, Inc. (the "Holding Company") and the Bank
("Plan") (of which this Plan of Merger is Appendix A thereto).
WITNESSETH:
WHEREAS, in April 1995, Guaranty Federal Savings Bank, a federally
chartered mutual savings bank (the "Savings Bank"), reorganized into the mutual
holding company form of organization whereby (i) the Savings Bank organized the
Bank, a federally chartered stock savings bank, as a wholly owned subsidiary;
(ii) the Savings Bank then transferred substantially all of its assets and
liabilities to the Bank in exchange for 2,152,635 or 68.9% of the shares of Bank
Common Stock, and reorganized itself into a federally chartered mutual holding
company known as Guaranty Federal Bancshares, M.H.C.;
WHEREAS, the Board of Directors of the Mutual Holding Company has
determined that it is in the best interests of the Mutual Holding Company and
its members to convert from the mutual to stock form of organization;
WHEREAS, the Bank is currently a majority owned subsidiary of the Mutual
Holding Company;
WHEREAS, the conversion of the Mutual Holding Company to stock form will be
facilitated by causing the Mutual Holding Company to convert from the mutual
form to a federal interim stock savings bank to be known as "Guaranty Federal
Interim Bancshares" ("Interim A") and simultaneously merge with the Bank
("Conversion"); and
WHEREAS, immediately upon completion of the Conversion, the Bank will form
a Delaware corporation (the Holding Company), which will in turn form a second
interim savings association ("Interim B"); Interim B will merge with and into
the Bank; and the Bank will become a wholly owned subsidiary of the Holding
Company ("Reorganization"). The existing minority stockholders of the Bank will
exchange their shares of Bank Common Stock for shares of common stock of the
Holding Company based upon an Exchange Ratio established in accordance with the
independent appraisal of the Bank upon merger with Interim A, and the remaining
shares will be sold in subscription and community offerings, giving priority
subscription rights as set forth in the Plan in accordance with OTS conversion
regulations.
A - 1
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein contained, and in accordance with federal law, the Bank and
the Mutual Holding Company hereby agree that, subject to the conditions
hereinafter set forth, the Mutual Holding Company shall convert from the mutual
form to a federal interim stock savings bank, and Interim B shall then be merged
with and into the Bank with the Bank as the surviving entity. The terms and
conditions of such merger shall be as follows:
1. Regulatory Approvals. The merger shall not become effective until
receipt of approval of the OTS and any other agency having jurisdiction over the
merger, if any.
2. Identity and Name of Resulting Bank. The resulting savings bank in the
Reorganization shall be the Bank.
3. Offices of Resulting Bank. The home office of the Bank, as the resulting
savings bank, shall be the Bank's office located at ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇. The locations of the branch offices of the resulting
savings bank shall be those of the Bank in existence on the date of this Plan of
Merger. In addition, the resulting savings bank shall operate branch offices at
such additional locations as may be approved by the OTS.
4. The Bank's Federal Charter and Bylaws. The federal stock charter and
bylaws of the Bank as in effect immediately prior to the effectiveness of the
Reorganization shall be amended as necessary to accomplish the Reorganization.
5. Effective Date. The effective date of the Conversion ("Effective Date")
shall be the date as soon as practicable after the issuance and/or execution by
the OTS and any other federal or state regulatory agencies, of all approvals,
certificates and documents as may be required in order to cause the Conversion
and the Reorganization to become effective.
6. Bank Stockholder Approval. The affirmative vote of the holders of
two-thirds of the outstanding Bank Common Stock and at least a majority of such
Bank Common Stock not held by the Mutual Holding Company voting at a meeting of
the stockholders shall be required to approve this Plan of Merger.
7. Mutual Holding Company Approval. The approval of a majority of the
members of the Mutual Holding Company, as of a specified date shall be required
to approve this Plan of Merger.
A - 2
8. Cancellation of Savings Bank Common Stock held by the Mutual Holding
Company and Member Interests; Liquidation Account.
(a) On the Effective Date, (i) each share of Bank Common Stock issued
and outstanding immediately prior to the Effective Date and held by the Mutual
Holding Company shall, by virtue of the Reorganization and without any action on
the part of the holder thereof, be canceled, (ii) the interests in the Mutual
Holding Company of any person, firm or entity who or which qualified as a member
of the Mutual Holding Company in accordance with its mutual charter and bylaws
and the laws of the United States prior to the Mutual Holding Company's
conversion from mutual to stock form (the "Members") shall, by virtue of the
Reorganization and without any action on the part of the holder thereof, be
canceled, and (iii) the Bank shall establish a liquidation account on behalf of
each depositor member of the Mutual Holding Company, as defined in the Plan, in
accordance with Section 16 of the Plan.
(b) At or after the Effective Date and prior to the Merger, each
certificate or certificates theretofore evidencing issued and outstanding shares
of Bank Common Stock, other than any such certificate or certificates held by
the Mutual Holding Company, which shall be canceled, shall continue to represent
issued and outstanding shares of Bank Common Stock.
9. Dissenting Shares. No Member of the Mutual Holding Company or
stockholder of the Bank shall have any dissenter or appraisal rights in
connection with the Conversion.
10. Deposits of the Bank. All deposit accounts of the Bank shall be and
will become deposits in the resulting savings bank without change in their
respective terms, interest rates, maturities, minimum required balances or
withdrawal values. After the Effective Date, the resulting savings bank will
continue to issue deposit accounts on the same basis as immediately prior to the
Effective Date.
11. Effect of Conversion. Upon the Effective Date of the Conversion and the
Reorganization, all assets and property (real, personal and mixed, tangible and
intangible, chooses in action, rights and credits) then owned by the Bank or the
Mutual Holding Company or which would inure to either of them, shall immediately
by operation of law and without any conveyance, transfer or further action,
become the property of the resulting savings bank, which shall have, hold and
enjoy them in its own right as fully and to the same extent as they were
possessed, held and enjoyed by the Bank and the Mutual Holding Company
immediately prior to the Effective Date of the Conversion. The resulting savings
bank shall be deemed to be a continuation of the entity of both the Bank and the
Mutual Holding Company and all of the rights and obligations of the Bank and the
Mutual Holding Company shall remain unimpaired; and the resulting savings bank,
upon the Effective Date of the Conversion, shall succeed to all those rights and
obligations and the duties and liabilities connected therewith.
12. Directors and Executive Officers. The persons who are the current
officers and directors of the Bank will be the directors and officers of the
resulting savings bank and such terms or positions will be unchanged.
A - 3
13. Abandonment of Plan of Merger. This Plan of Merger may be abandoned by
either the Bank or the Mutual Holding Company at any time before the Effective
Date in the manner set forth in Section 28 of the Plan.
14. Amendment of this Plan of Merger. This Plan of Merger may be amended or
modified at any time by mutual agreement of the Boards of Directors of the Bank
and the Mutual Holding Company in the manner set forth in Section 28 of the
Plan.
15. Governing Law. This Plan of Merger is made pursuant to, and shall be
construed and be governed by, the laws of the United States, and the rules and
regulations promulgated thereunder, including without limitation, the rules and
regulations of the OTS.
16. All Terms Included. This Plan of Merger sets forth all terms,
conditions, agreements and understandings of the Bank and the Mutual Holding
Company with respect to the Conversion.
17. Counterparts. This Plan of Merger may be executed in several identical
counterparts, each of which when executed by the Parties and delivered shall be
an original, but all of which together shall constitute a single instrument. In
making proof of this Plan of Merger, it shall not be necessary to produce or
account for more than one such counterpart.
A - 4
APPENDIX B
PLAN OF REORGANIZATION
PLAN OF REORGANIZATION, dated as of __________ __, 199__ ("Agreement"), by
and among Guaranty Federal Savings Bank, a federally chartered savings bank (the
"Bank"), Guaranty Federal Interim Savings Bank ("Interim B"), a to-be-formed
interim federal savings bank which will be organized for the sole purpose of
consummating the reorganization provided for herein, and Guaranty Federal
Bancshares, Inc. ("Holding Company"), a Delaware corporation wholly owned by the
Bank (such entities collectively referred to herein as the "Parties" or
individually as "Party"). Unless otherwise noted, defined terms shall have the
same meaning as those set forth in the Plan of Conversion of Guaranty Federal
Bancshares, M.H.C. (the "Mutual Holding Company") and the Agreement and Plan of
Reorganization between the Holding Company and the Bank (the "Plan") (of which
this Plan of Reorganization is an Appendix thereto).
W I T N E S S E T H:
_ _ _ _ _ _ _ _ _ _
WHEREAS, the Board of Directors of the Bank has determined that it is in
the best interests of the Bank and its stockholders for the Bank to be
reorganized into the holding company form of ownership;
WHEREAS, the Bank has caused the Holding Company to be organized under
Delaware law as a wholly owned subsidiary for the purpose of becoming the
holding company of the Bank;
WHEREAS, Interim B is being organized by the officers of the Bank as a
federally chartered interim stock savings bank with the Holding Company as its
sole stockholder in order to effect the Reorganization; and
WHEREAS, the formation of a holding company by the Bank will be effected by
causing the Holding Company to become the sole stockholder of Interim B, and
then merging Interim B with and into the Bank, so that as part of the merger all
of the outstanding shares of common stock of the Bank will be converted
automatically into and become shares of common stock of the Holding Company,
which will as a result thereof become the sole stockholder of the Bank (such
transactions collectively referred to as the "Reorganization");
WHEREAS, in connection with the Reorganization, the existing minority
stockholders of the Bank will exchange their shares of the Bank Common Stock for
shares of common of the Holding Company based upon an Exchange Ratio established
in accordance with the independent appraisal of the Bank upon merger with
Interim A, and the remaining shares will be sold in subscription and community
offerings, giving priority subscription rights as set forth in the Plan in
accordance with OTS conversion regulations; and
WHEREAS, the Bank and Interim B (the Bank and Interim B may be referred to
together the "Constituent Banks") and the Holding Company desire to provide
herein for the terms and conditions of the Reorganization.
B - 1
NOW, THEREFORE, the Bank, Interim B and the Holding Company do hereby agree
as follows:
1. Effective Date. The Reorganization shall become effective only upon the
effectiveness of the Conversion and the Reorganization on the date specified in
the endorsement of the articles of combination relating to the Reorganization by
the Secretary of the OTS pursuant to 12 C.F.R.
ss. 552.13(k), or any successor thereto (the "Effective Date").
2. The Merger and Effect Thereof. Subject to the terms and conditions set
forth herein, including, without limitation, the prior approval of the OTS and
the expiration of all applicable waiting periods, Interim B shall merge with and
into the Bank, which shall be the surviving bank (the "Surviving Bank"). Upon
consummation of the Reorganization, the Surviving Bank shall be considered the
same business and corporate entity as each of the Constituent Banks and
thereupon and thereafter all the property, rights, powers and franchises of each
of the Constituent Banks shall vest in the Surviving Bank and the Surviving Bank
shall be subject to and be deemed to have assumed all of the debts, liabilities,
obligations and duties of each of the Constituent Banks and shall have succeeded
to all of each of their relationships, fiduciary or otherwise, as fully and to
the same extent as if such property, rights, privileges, powers, franchises,
debts, obligations, duties and relationships had been originally acquired,
incurred or entered into by the Surviving Bank. In addition, any reference to
either of the Constituent Banks in any contract, will or document, whether
executed or taking effect before or after the Effective Date, shall be
considered a reference to the Surviving Bank if not inconsistent with the other
provisions of the contract, will or document; and any pending action or other
judicial proceeding to which either of the Constituent Banks is a party shall
not be deemed to have abated or to have been discontinued by reason of the
Reorganization, but may be prosecuted to final judgment, order or decree in the
same manner as if the Reorganization had not occurred or the Surviving Bank may
be substituted as a party to such action or proceeding, and any judgment, order
or decree may be rendered for or against it that might have been rendered for or
against either of the Constituent Banks if the Reorganization had not occurred.
3. Conversion of Stock.
(a) On the Effective Date, (i) each share of common stock, par value
$1.00 per share, of the Bank ("the Bank Common Stock") issued and outstanding
immediately prior to the Effective Date shall, by virtue of the Reorganization
and without any action on the part of the holder thereof, be converted, pursuant
to the Exchange Ratio, into a fixed number of shares of common stock, par value
$.10 per share, of the Company ("Holding Company Common Stock"), (ii) each share
of common stock, par value $1.00 per share, of Interim B ("Interim B Common
Stock") issued and outstanding immediately prior to the Effective Date shall, by
virtue of the Reorganization and without any action on the part of the holder
thereof, be converted into one share of the Savings Bank Common Stock, and (iii)
each share of Holding Company Common Stock issued and outstanding immediately
prior to the Effective Date shall, by virtue of the Reorganization and without
any action on the part of the holder thereof, be canceled. The Company, as the
sole stockholder of Interim B, shall (i) issue shares of Company Common
B - 2
Stock in accordance with the terms hereof and (ii) cancel all previously issued
and outstanding shares of Holding Company Common Stock upon the effectiveness of
the Reorganization.
(b) On and after the Effective Date, there shall be no registration of
any transfers on the stock transfer books of Interim B or the Bank of shares of
Interim B Common Stock or the Bank Common Stock which were outstanding
immediately prior to the Effective Date.
4. Exchange of Shares.
(a) At or after the Effective Date, each holder of a certificate or
certificates theretofore evidencing issued and outstanding shares of the Bank
Common Stock, upon surrender of the same to an agent, duly appointed by the
Holding Company ("Exchange Agent"), shall be entitled to receive in exchange
therefor a certificate or certificates representing the number of full shares of
Holding Company Common Stock determined in accordance with the Exchange Ratio
provided in Section 3 hereof. The Exchange Agent will mail to each holder of
record of an outstanding certificate which immediately prior to the Effective
Date evidenced shares of the Bank Common Stock, and which is to be exchanged for
Holding Company Common Stock as provided in Section 3 hereof, a form of letter
of transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to such certificate shall pass, only upon delivery of such
certificate to the Exchange Agent) advising such holder of the terms of the
exchange effected by the Reorganization and of the procedure for surrendering to
the Exchange Agent such certificate in exchange for a certificate or
certificates evidencing Holding Company Common Stock.
(b) No holder of a certificate thereto representing shares of Bank
Common Stock shall be entitled to receive any dividends in respect of the
Holding Company Common Stock into which such shares shall have been converted by
virtue of the Conversion and Reorganization until the certificate representing
such shares of Bank Common Stock is surrendered in exchange for certificates
representing shares of Holding Company Common Stock. In the event that dividends
are declared and paid by the Holding Company in respect of Holding Company
Common Stock after the consummation of the Conversion and Reorganization but
prior to surrender of certificates representing shares of Bank Common Stock,
dividends payable in respect of shares of Bank Common Stock not then issued
shall accrue (without interest). Any such dividends shall be paid (without
interest) upon surrender of the certificates representing such shares of Bank
Common Stock. The Holding Company shall be entitled, after the consummation of
the Conversion and Reorganization, to treat certificates representing shares of
Bank Common Stock as evidencing ownership of the number of full shares of
Holding Company Common Stock into which the shares of Bank Common Stock
represented by such certificates shall have been converted, notwithstanding the
failure on the part of the holder thereof to surrender such certificates.
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(c) If any certificate evidencing shares of Company Common Stock is to
be issued in a name other than that in which the certificate evidencing the Bank
Common Stock surrendered in exchange therefor is registered, it shall be a
condition of the issuance thereof that the certificate so surrendered shall be
properly endorsed and otherwise in proper form for transfer and that the person
requesting such exchange pay to the Exchange Agent any transfer or other tax
required by reason of the issuance of a certificate for shares of Holding
Company Common Stock in any name other than that of the registered holder of the
certificate surrendered or otherwise establish to the satisfaction of the
Exchange Agent that such tax has been paid or is not payable.
(d) If, between the date hereof and the Effective Date, the shares of
Bank Common Stock shall be changed into a different number or class of shares by
reason of any reclassifica- tion, recapitalization, split-up, combination,
exchange of shares or readjustment, or a stock dividend thereon shall be
declared with a record date within said period, the Exchange Ratio specified in
Section 3(a) hereof shall be adjusted accordingly.
5. Dissenting Shares. Holders of shares of the Bank Common Stock shall not
be entitled to exercise dissenters' or appraisal rights in connection with the
Reorganization in accordance with 12 C.F.R. ss. 552.14, or any successor
thereto.
6. Name of Surviving Bank. The name of the Surviving Bank shall be
"Guaranty Federal Savings Bank."
7. Directors and Officers of the Surviving Bank. The persons who are the
current officers and directors of the Bank will be the directors and officers of
the Surviving Bank and their terms and positions will remain unchanged.
8. Offices. As of the Effective Date, the main office of the Surviving Bank
shall remain at ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ and the
location of the other offices of the Surviving Bank shall be those of the Bank
in existence on the date of this Plan of Reorganization. In addition, the
Surviving Bank shall operated branch offices at such additional locations as may
be approved by the OTS.
9. Charter and Bylaws. On and after the Effective Date, the Charter and
Bylaws of the Bank as in effect immediately prior to the Effective Date shall be
the Charter and Bylaws of the Surviving Bank until amended in accordance with
the terms thereof and applicable law. The Bank shall amend its Charter to
establish a liquidation account on behalf of each depositor member of the Mutual
Holding Company, as defined in the Plan, in accordance with Section 16 of the
Plan.
10. Savings Accounts. Upon the Effective Date, all savings accounts of the
Bank, without reissue, shall be and become savings accounts of the Surviving
Bank without change in their respective terms, including, without limitation,
maturity, minimum required balances or withdrawal value.
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11. Stock Compensation Programs. By voting in favor of this Agreement, the
Company shall have approved adoption of the Bank's existing stock compensation
programs, including the 1995 Stock Option Plan ("Option Plan"), and the
Recognition and Retention Plan and Trust ("RRP") as plans of the Company and
shall have agreed to issue Company Common Stock in lieu of Bank Common Stock
pursuant to the terms of such plans, subject to the Exchange Ratio set forth in
section 3 hereof. As of the Effective Date of the Reorganization, rights
outstanding under the Option Plan and RRP shall be assumed by the Company and
thereafter shall be rights only for shares of Company Common Stock, with each
such right being for a number of shares of Company Common Stock equal to the
number of shares of Bank Common Stock that were available thereunder immediately
prior to the Effective Date of the Reorganization, adjusted pursuant to the
Exchange Ratio, and with no change in any other term or condition of such right,
other then as needed to adjust the price or number of shares pursuant to the
Exchange Ratio. The Company shall make appropriate amendments to the Option Plan
and RRP to reflect their adoption by the Company without adverse effect upon the
options outstanding or rights thereunder.
12. Other Employment Agreements and Benefit Plans. At the Effective Date
and except as otherwise provided in Section 11 above, all rights to purchase,
sell or receive the Bank Common Stock and all rights to elect to make payment in
the Bank Common Stock under any agreement between the Bank and any director,
officer or employee thereof or under any plan or program of the Bank, shall
automatically, by operation of law, be converted into and shall become an
identical right to purchase, sell or receive Holding Company Common Stock and an
identical right to make payment in Holding Company Common Stock under any such
agreement between the Bank and any director, officer or employee thereof or
under such plan or program of the Bank, subject to the Exchange Ratio set forth
in Section 3 hereof.
13. Stockholder Approval. The affirmative vote of the holders of two-thirds
of the issued and outstanding the Bank Common Stock held by persons other than
the Mutual Holding Company shall be required to approve this Agreement on behalf
of the Bank. The approval of the Bank, as the sole holder of Holding Company
Common Stock, shall be required to approve this Plan of Reorganization on behalf
of the Holding Company and the approval of the Holding Company, as the sole
holder of Interim B Common Stock, shall be required to approve this Plan of
Reorganization on behalf of Interim B.
14. Registration; Other Approvals. In addition to the approvals set forth
in Sections 1 and 13 hereof, the Parties' obligations to consummate the
Reorganization shall be subject to the Holding Company Common Stock to be issued
hereunder in exchange for the Bank Common Stock being registered under the
Securities Act of 1933, as amended, and registered or qualified under applicable
state securities laws, as well as the receipt of all other approvals, consents
or waivers as the Parties may deem necessary or advisable.
15. Income Tax Matters. The Parties hereto shall have received an opinion
of counsel, or a private letter ruling from the Internal Revenue Service,
satisfactory to them in form and
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substance, with respect to the federal income tax consequences of this Plan of
Reorganization, including the formation of a holding company, as contemplated
herein.
16. Abandonment of Plan of Reorganization. This Plan of Reorganization may
be abandoned by the Bank, Interim B or the Holding Company at any time before
the Effective Date in the event that (a) any action, suit, proceeding or claim
has been instituted, made or threatened relating to the Plan of Reorganization
which shall make consummation of the transactions contemplated hereby
inadvisable in the opinion of the Bank, Interim B or the Holding Company, (b)
the Bank Common Stock, as the case may be, is no longer quoted on the National
Association of Securities Dealers Automated Quotations System, or (c) for any
other reason consummation of the transactions contemplated hereby is inadvisable
in the opinion of the Bank, Interim B or the Holding Company. Such abandonment
shall be effected by written notice by the Bank, Interim B or the Holding
Company to the other Parties hereto, authorized or approved by the Board of
Directors of the Party giving such notice. Upon the giving of such notice, this
Agreement shall be terminated and there shall be no liability hereunder or on
account of such termination on the part of the Bank, Interim B or the Holding
Company or the directors, officers, employees, agents or stockholders of any of
them. In the event of abandonment of this Plan of Reorganization, the Savings
Bank, if in existence, shall pay the fees and expenses incurred by itself, the
Bank, Interim B and the Holding Company in connection with this Plan of
Reorganization and the Reorganization.
17. Amendments. To the extent permitted by law, this Plan of Reorganization
may be amended by a subsequent writing signed by the Parties hereto upon the
approval of the Board of Directors of each of the Parties hereto and subject to
Section 28 of the Plan; provided, however, that the provisions of Section 3
hereof relating to the consideration to be exchanged for shares of the Bank
Common Stock shall not be amended after the meeting of stockholders of the Bank
at which this Agreement is considered so as to decrease the amount or change the
form of such consideration without the approval of such stockholders.
18. Successors. This Plan of Reorganization shall be binding on the
successors of the Bank, Interim B and the Holding Company.
19. Counterparts. This Plan of Reorganization may be executed in one or
more counterparts.
20. Governing Law. This Plan of Reorganization shall be governed by and
construed in accordance with the laws of the United States of America and, to
the extent not governed by such laws, the laws of the State of Delaware.
21. Execution by Interim B. The Bank and the Holding Company acknowledge
that as of the date hereof, Interim B is in organization and has not received
its charter from the OTS. Therefore, Interim B does not have the legal capacity
to execute this Plan of Reorganization as of the date hereof. The Holding
Company agrees to cause Interim B to execute this Plan of Reorganization
promptly following the organization of Interim B upon receipt of OTS approval
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for Interim B to be organized. The Bank and the Holding Company agree to be
bound by this Plan of Reorganization prior to and following such execution by
Interim B.
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