(a) Management stock benefit plans.
(1) During the 12 months after the conversion,
the resulting stock holding company may implement a stock option plan
(Option Plan), an employee stock ownership plan or other tax-qualified
employee stock benefit plan (collectively, ESOP), and a management
recognition plan (MRP), provided the resulting stock holding company
meets all of the following requirements.
(i) The resulting stock
holding company discloses the plans in the proxy statement and offering
circular and indicates in the offering circular that there will be
a separate shareholder vote on the Option Plan and the MRP at least
six months after the conversion. No shareholder vote is required to
implement the ESOP. The ESOP must be tax-qualified.
(ii) The Option Plan does not exceed
more than ten percent of the number of shares that the resulting stock
holding company issued in the conversion.
(iii) (A) The ESOP
and MRP do not exceed, in the aggregate, more than ten percent of
the number of shares that the resulting stock holding company issued
in the conversion. If the resulting stock holding company has tangible
capital of ten percent or more following the conversion, the Board
may permit the ESOP and MRP to represent, in the aggregate, up to
12 percent of the number of shares issued in the conversion; and
(B) The MRP does not exceed
more than three percent of the number of shares that the resulting
stock holding company issued in the conversion. If the resulting stock
holding company has tangible capital of ten percent or more after
the conversion, the Board may permit the MRP to represent up to four
percent of the number of shares that the resulting stock holding company
issued in the conversion.
(iv) No individual receives more than
25 percent of the shares under any plan.
(v) The directors who are not the officers
do not receive more than five percent of the shares of the MRP or
Option Plan individually, or 30 percent of any such plan in the aggregate.
(vi) The shareholders
approve each of the Option Plan and the MRP by a majority of the total
votes eligible to be cast at a duly called meeting before the resulting
stock holding company establishes or implements the plan. The resulting
stock holding company may not hold this meeting until six months after
the conversion.
(vii) When the resulting stock holding company distributes proxies
or related material to shareholders in connection with the vote on
a plan, the resulting stock holding company states that the plan complies
with Board regulations and that the Board does not endorse or approve
the plan in any way. The resulting stock holding company may not make
any written or oral representations to the contrary.
(viii) The resulting stock holding company
does not grant stock options at less than the market price at the
time of grant.
(ix)
The resulting stock holding company does not fund the Option Plan
or the MRP at the time of the conversion.
(x) The plan does not begin to vest
earlier than one year after shareholders approve the plan, and does
not vest at a rate exceeding 20 percent per year.
(xi) The plan permits accelerated vesting
only for disability or death, or if the resulting stock holding company
undergoes a change of control.
(xii) The plan provides that the executive
officers or directors must exercise or forfeit their options in the
event the institution becomes critically undercapitalized under
the applicable regulatory capital requirements, is subject to Board
enforcement action, or receives a capital directive under section
263.83 of this chapter.
(xiii) The resulting stock holding company
files a copy of the proposed Option Plan or MRP with the Board and
certifies to the Board that the plan approved by the shareholders
is the same plan that the resulting stock holding company filed with,
and disclosed in, the proxy materials distributed to shareholders
in connection with the vote on the plan.
(xiv) The resulting stock holding company
files the plan and the certification with the Board within five calendar
days after the shareholders approve the plan.
(2) The resulting stock holding
company may provide dividend equivalent rights or dividend adjustment
rights to allow for stock splits or other adjustments to the stock
in the ESOP, MRP, and Option Plan.
(3) The restrictions in paragraph (a)(1)
of this section do not apply to plans implemented more than 12 months
after the conversion, provided that materials pertaining to any shareholder
vote regarding such plans are not distributed within the 12 months
after the conversion. If a plan adopted in conformity with paragraph
(a)(1) of this section is amended more than 12 months following the
conversion, the shareholders must ratify any material deviations to
the requirements in paragraph (a)(1) of this section.
(b) Restrictions on the
sale of conversion shares by directors, officers, and their associates.
(1) Directors and officers
who purchase conversion shares may not sell the shares for one year
after the date of purchase, except that in the event of the death
of the officer or director, the successor in interest may sell the
shares.
(2) The resulting
stock holding company must include notice of the restriction described
in paragraph (b)(1) of this section on each certificate of stock that
a director or officer purchases during the conversion or receives
in connection with a stock dividend, stock split, or otherwise with
respect to such restricted shares.
(3) The resulting stock holding company
must instruct the stock transfer agent about the transfer restrictions
in this section.
(4)
For three years after the resulting stock holding company converts,
the officers, directors, and their associates may purchase stock of
the resulting stock holding company only from a broker or dealer registered
with the Securities and Exchange Commission. However, the officers,
directors, and their associates may engage in a negotiated transaction
involving more than one percent of the outstanding stock, and may
purchase stock through any of the management or employee stock benefit
plans.
(c) Repurchase of conversion shares.
(1) The resulting stock holding company
may not repurchase its shares in the first year after the conversion
except:
(i) In extraordinary circumstances,
the resulting stock holding company may make open market repurchases
of up to five percent of the outstanding stock in the first year after
the conversion if the resulting stock holding company files a notice
under paragraph (d)(1) of this section and the Board does not disapprove
the repurchase. The Board will not approve such repurchases unless
the repurchase meets the standards in paragraph (d)(3) of this section,
and the repurchase is consistent with paragraph (c)(3) of this section.
(ii) The resulting
stock holding company may repurchase qualifying shares of a director
or conduct a Board approved repurchase pursuant to an offer made to
all shareholders of the stock holding company.
(iii) Repurchases to fund management
recognition plans that have been ratified by shareholders do not count
toward the repurchase limitations in this section. Repurchases in
the first year to fund such plans require prior written notification
to the Board.
(iv) Purchases
to fund tax qualified employee stock benefit plans do not count toward
the repurchase limitations in this section.
(2) After the first year, the
resulting stock holding company may repurchase the shares, subject
to all other applicable regulatory and supervisory restrictions and
paragraph (c)(3) of this section.
(3) All stock repurchases are subject to
the following restrictions.
(i) The resulting stock holding company
may not repurchase the shares if the repurchase will reduce its applicable
capital levels below the amount required for the liquidation account
under section 239.62(a). The resulting stock holding company must
comply with the capital distribution requirements of this subpart.
(ii) The restrictions
on share repurchases apply to a charitable organization under section
239.64(b). The resulting stock holding company must aggregate purchases
of shares by the charitable organization with the repurchases.
(d) Board review of repurchase of conversion shares.
(1) To repurchase stock in the first year
following conversion, other than repurchases under paragraphs (c)(1)(iii)
or (c)(1)(iv) of this section, the resulting stock holding company
must file a written notice with the appropriate Reserve Bank. The
resulting stock holding company must provide the following information:
(i) The proposed repurchase program;
(ii) The effect of the repurchases on
the regulatory capital and other capital levels; and
(iii) The purpose of the repurchases
and, if applicable, an explanation of the extraordinary circumstances
necessitating the repurchases.
(2) The resulting stock holding company
must file the notice with the appropriate Reserve Bank at least thirty
days before the resulting stock holding company begins the repurchase
program. The Board may extend its review of the notice for an additional
sixty days.
(3) The
resulting stock holding company may not repurchase the shares if the
Board objects to the repurchase program. The Board will not object
to the repurchase program if:
(i) The repurchase program
will not adversely affect the financial condition of the resulting
savings association;
(ii) The resulting stock holding company submits sufficient information
to evaluate the proposed repurchases;
(iii) The resulting stock holding company
demonstrate extraordinary circumstances and a compelling and valid
business purpose for the share repurchases; and
(iv) The repurchase program would not
be contrary to other applicable regulations.
(e) Declaring and paying
dividends following conversion. The resulting stock holding company
may declare or pay a dividend on its shares after it converts if:
(1) The dividend will not reduce the regulatory
capital below the amount required for the liquidation account under
section 239.62(a);
(2) The resulting stock holding company complies with all applicable
regulatory capital requirements after it declares or pays dividends;
(3) The resulting stock
holding company complies with the capital distribution requirements
under this subpart; and
(4) The resulting stock holding company does not return any capital,
other than ordinary dividends, to purchasers during the term of the
business plan submitted with the conversion.
(f) Eligibility to acquire shares
after conversion.
(1) For three years after the resulting
stock holding company converts, no person may, directly or indirectly,
acquire or offer to acquire the beneficial ownership of more than
ten percent of any class of the equity securities without the Board’s
prior written approval. If a person violates this prohibition, the
resulting stock holding company may not permit the person to vote
shares in excess of ten percent, and may not count the shares in excess
of ten percent in any shareholder vote.
(2) A person acquires beneficial ownership
of more than ten percent of a class of shares when he or she holds
any combination of the stock or revocable or irrevocable proxies under
circumstances that give rise to a conclusive control determination
or rebuttable control determination under sections 238.21(a) and (d)
of this chapter. The Board will presume that a person has acquired
shares if the acquiror entered into a binding written agreement for
the transfer of shares. For purposes of this section, an offer is
made when it is communicated. An offer does not include non-binding
expressions of understanding or letters of intent regarding the terms
of a potential acquisition.
(3) Notwithstanding the restrictions in
this section:
(i) Paragraphs (f)(1) and (f)(2) of
this section do not apply to any offer with a view toward public resale
made exclusively to the resulting stock holding company, to the underwriters,
or to a selling group acting on behalf of the resulting savings association.
(ii) Unless the Board
objects in writing, any person may offer or announce an offer to acquire
up to one percent of any class of shares. In computing the one percent
limit, the person must include all of his or her acquisitions of the
same class of shares during the prior 12 months.
(iii) A corporation whose ownership
is, or will be, substantially the same as the ownership may acquire
or offer to acquire more than ten percent of the common stock, if
it makes the offer or acquisition more than one year after the resulting
stock holding company converts.
(iv) One or more of the tax-qualified
employee stock benefit plans may acquire the shares, if the plan or
plans do not beneficially own more than 25 percent of any class of
shares of the resulting savings association in the aggregate.
(v) An acquiror does not
have to file a separate application to obtain Board approval under
paragraph (f)(1) of this section, if the acquiror files an application
under part 238 of this chapter that specifically addresses the criteria
listed under paragraph (f)(4) of this section and the resulting stock
holding company does not oppose the proposed acquisition.
(4) The Board may deny
an application under paragraph (f)(1) of this section if the proposed
acquisition:
(i) Is contrary to the purposes of this
subpart;
(ii) Is
manipulative or deceptive;
(iii) Subverts the fairness of the conversion;
(iv) Is likely to injure
the resulting stock holding company;
(v) Is inconsistent with the plan to
meet the credit and lending needs of the proposed market area;
(vi) Otherwise violates
laws or regulations; or
(vii) Does not prudently deploy the conversion proceeds.
(g) Additional
requirements that apply following conversion. After conversion,
the resulting stock holding company must:
(1) Promptly register the shares under
the Securities Exchange Act of 1934 (15 U.S.C. 78a-78jj, as amended).
The resulting stock holding company may not deregister the shares
for three years.
(2)
Encourage and assist a market maker to establish and to maintain a
market for the shares. A market maker for a security is a dealer who:
(i) Regularly publishes bona fide competitive bid and offer quotations
for the security in a recognized inter-dealer quotation system;
(ii) Furnishes bona
fide competitive bid and offer quotations for the security on request;
or
(iii) May effect
transactions for the security in reasonable quantities at quoted prices
with other brokers or dealers.
(3) Use the best efforts to list the shares
on a national or regional securities exchange or on the
National Association of Securities Dealers Automated Quotation system.
(4) File
all post-conversion reports that the Board requires.
