Wis. Admin. Code Department of Financial Institutions DFI-SB 22.07 - Stock issuance plans

(1) APPROVAL REQUIRED.

(a) No savings bank subsidiary of a mutual holding company, including a resulting or acquiree savings bank, may, directly or indirectly, issue stock to persons other than its mutual holding company parent without the prior written approval of the division.

(b) The division shall approve a proposed stock issuance plan upon determining that all of the following criteria are met:

1. The plan contains all the provisions required by this section.

2. The plan is consistent with the savings bank's articles of incorporation, including the type and amount of stock that may be issued.

3. The plan would provide the savings bank, its mutual holding company and any other savings bank subsidiaries of the mutual holding company with sufficient capital and would not be detrimental to the savings bank, its mutual holding company, members of the mutual holding company or the interests of depositors of the savings bank.

4. The proposed price or price range, the classification and any terms or conditions of the stock to be issued are reasonable.

5. The savings bank furnishes all information required by the division.

6. The plan is approved by the members of the mutual holding company or, if the plan is part of a reorganization plan under s. DFI-SB 22.06, by members of the reorganizing savings bank, at a meeting of members held under the bylaws of the mutual holding company or the reorganizing savings bank.

7. The proposed issuance complies with all other applicable laws.

(c) In determining whether the criteria of par. (b) are met, the division may consider the following factors:

1. The savings bank's size, capital position and quality of management.

2. The savings bank's business objective.

3. The dollar amount and number of shares to be issued pursuant to the plan.

4. The market conditions which may affect the plan.

5. The existence of a trading market in, or methods of later resale or repurchase, of the stock to be issued under the plan.

6. Any benefits provided to the savings bank through employee or director incentive aspects of the plan.

7. The impact, if any, of the participation or non- participation in the offering by members of the mutual holding company parent of the savings bank or other shareholders.

(2) PRICING OF STOCK. Each application for approval of a proposed stock issuance shall state and explain the proposed sales price or price range if it is not possible to specify the exact price at the time. Those materials shall:

(a) Support the reasonableness of the proposed price or price range and demonstrate to the satisfaction of the division that it was prepared by independent persons who are experienced and expert in corporate valuations. A person does not lack independence merely because he or she will participate in effecting a sale of the stock under the plan or will receive a fee for services rendered in connection with preparation of the pricing materials.

(b) Contain a brief summary of data sufficient to support its conclusions.

(c) If the proposed price or price range is based upon a capitalization of the projected income of the savings bank after the issuance of the stock, indicate the basis for determination of the income to be derived from the proceeds of the stock sale, demonstrate the appropriateness of the earnings multiple used and include all assumptions regarding future earnings growth. If the proposed price or price range is based upon a comparison of the stock of the savings bank with the issued and outstanding stock of other stock savings banks or similar institutions, those institutions shall be reasonably comparable to the savings bank in terms of size, asset composition, market area, competitive conditions, profit history, expected future earnings, and other stated relevant factors.

(d) If the proposed price or price range includes any discount due to the minority status of the stock to be offered, state the amount of the discount and explain how that discount was determined.

(e) Any additional information about the pricing which the division may request.

(3) OFFERING RESTRICTIONS.

(a) No representation may be made regarding the offer or sale of any stock issued under this section that the price or price range has been approved or disapproved by the division or that the division has endorsed the accuracy or adequacy of any offering or sales document disseminated.

(b) In connection with the offer, sale or purchase of stock, no person may:

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 to make the statements made not misleading, in light of the circumstances.

3. Engage in any act, practice or course of business which operates or would operate as a fraud or deceit upon a purchaser or seller.

(4) MANDATORY PROVISIONS. Each stock issuance plan shall:

(a) Describe all significant terms of the proposed stock issuance and shall attach a copy of each proposed stock certificate form, any proposed stock order form and any agreement or other document defining or limiting the rights of stockholders.

(b) Provide that:

1. The aggregate outstanding voting common stock owned or controlled by persons other than the mutual holding company at the close of the issuance shall be less than 50% of the total number of shares of outstanding voting common stock. This provision may be omitted if the issuance will be conducted by a savings bank that was in the stock form when acquired by its mutual holding company parent if the savings bank is not a resulting savings bank or an acquiree savings bank. Any stock which has no present or contingent voting rights may be issued by a savings bank subsidiary of a mutual holding company to persons other than the savings bank's mutual holding company, consistent with applicable law.

2. After the stock issuance, the savings bank shall comply with all applicable federal and state securities registration requirements.

3. The savings bank shall not offer or sell any stock to any person, other than a stock benefit plan of the savings bank, the savings bank's parent or any of its affiliates, whose purchase would be financed by funds loaned to the person by the savings bank or any of its affiliates.

4. If necessary, the savings bank's articles of incorporation shall be amended to authorize the stock issuance.

5. The expenses incurred in connection with the issuance shall be reasonable and specified in the plan.

6. If proposed as part of a reorganization plan, the plan may be amended or terminated in the same manner as the reorganization plan under s. DFI-SB 22.06.

7. The plan will be terminated if not completed within a time specified in the plan unless an extension is requested in writing for good cause shown and approved in writing by the division.

(5) OPTIONAL PROVISIONS. A stock issuance plan may provide that:

(a) If the stock issuance is part of a reorganization plan, the offering may be commenced concurrently with or after the mailing of any proxy statements to the members of the reorganizing savings bank and any acquiree savings bank. The offering may be concluded prior to the required membership votes if the offer and sale of the stock is conditioned upon the approval of the reorganization plan and issuance plan by the members of the reorganizing savings bank and any acquiree savings bank.

(b) Any stock not sold in the offering may be sold in any other manner provided in the stock issuance plan that is approved by the division in writing.

(c) In lieu of shares of stock, the savings bank may issue and sell units of securities consisting of stock and long-term warrants or other equity securities, in which event any reference in this section to stock shall apply to units of equity securities unless the context otherwise specifies or requires.

(d) Purchases of stock by persons or entities acting in concert, or by associates, may not exceed a limit established under the terms of the stock issuance plan.

Notes

Wis. Admin. Code Department of Financial Institutions DFI-SB 22.07

CR Register, February, 1994, No. 458, eff. 3-1-94; correction in (4) (b) 6. made under s. 13.93(2m) (b) 7, Stats., Register January 2006 No. 601.

This section interprets or implements s. 214.095, Stats.