N.Y. Comp. Codes R. & Regs. Tit. 3 § 86.4 - General provisions relating to the conversion (other than a conversion effected pursuant to any contrary provisions of section 86.12 of this part) of a t

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

Notes

N.Y. Comp. Codes R. & Regs. Tit. 3 § 86.4

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