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any person, means (i) any corporation or (13) Eligibility record date. The te organization (other than the applicant "eligibility record date” means the record or a majority-owned subsidiary of the date for determining eligible accoz applicant) of which such person is an holders of a converting institution officer or partner or is, directly or in (14) Eligible account holder. The ter: directly, the beneficial owner of 10 per "eligible account holder” means any pe: cent or more of any class of equity secur son holding a savings account in a ca ities, (ii) any trust or other estate in verting institution on the eligibility reo which such person has a substantial ord date. beneficial interest or as to which such (15) Employee. The term "employed person serves as trustee or in a similar does not include a director or officer fiduciary capacity, and (iii) any rel (16) Entitlement shares. The ter ative or spouse of such person, or any "entitlement shares” refers to the share relative of such spouse, who has the same of capital stock which an eligible accou. home as such person or who is a director holder is entitled to purchase on the bac

. or officer of the applicant or any of its of the amount of his qualifying depok: parents or subsidiaries.

determined in accordance wi (5) Association members. The term $ 563b.3(e). "association members" ref to persons

(17) E ity security. The term “equit who, pursuant to the charter or bylaws security" means any stock or similar of the applicant, are eligible to vote at curity; or any security convertible, the applicant's meeting at which conver or without consideration, into such sion will be voted upon.

security, or carrying any warrant or right (6) Board. The term "Board” refers to to subscribe to or purchase such security the Federal Home Loan Bank Board. or any such warrant or right.

(7) Capital stock. The term "capital (18) Insured institution. The term instock" includes permanent stock, guar

sured institution" has the same meants anty stock, permanent reserve stock, or as in $ 561.1 of this subchapter. any similar certificate evidencing non (19) Material. The term "materia." withdrawable capital.

when used to qualify a requirement :c (8) Charter. The term "charter" in the furnishing of information as to an cludes articles of incorporation, articles subject, limits the information required of association, or any similar instrument,

to those matters as to which an average as amended, effecting (either with or prudent investor ought reasonably to be without filing with any governmental

informed before purchasing an equity agency) the organization or creation of security of the applicant, or matters a an incorporated or unincorporated per

to which an average prudent associatiot son.

member ought reasonably to be informed (9) Control. The term "control" (in in voting upon the plan of conversion de cluding the terms "controlling”, "con the applicant. trolled by", and "under common control (20) Member. The term "member? with”) means the possession, direct or in means any person qualifying as a mendirect, of the power to direct or cause the ber of an insured institution pursuant to direction of the management and policies

its charter or bylaws. of a person, whether through the owner (21) Offer. The term "offer", "offer to ship of voting securities, by contract, or sell", or "offer of sale" shall include etery otherwise.

attempt or offer to dispose of, or solici(10) Corporation. The term "Corpora tation of an offer to buy, & security or tion” refers to the Federal Savings and Interest in a security, for value. These Loan Insurance Corporation.

terms shall not include preliminary ne(11) Dealer. The term "dealer" means gotiations or agreements between an apany person who engages either for all or plicant and any underwriter or among part of his time, directly or indirectly, as underwriters who are or are to be in agent, broker, or principal, in the busi privity of contract with an applicant

. ness of offering, buying, selling, or other (22) Officer. The term "officer" means wise dealing or trading in securities is the chairman of the board, president, sued by another person.

vice-president, secretary, treasurer a (12) Director. The term "director” principal financial officer, comptroller ar means any director of a corporation or principal accounting officer, and any any person performing similar functions other person performing similar funewith respect to any organization whether tions with respect to any organization incorporated or unincorporated.

whether incorporated or unincorporated.

(23) Person. The term "person" means 5 study applications Aled after the in individual, a corporation, a partner Board's announcement of July 26, 1972, hip, an association, a joint-stock com that it would accept study applications jany, a trust, any unincorporated or to obtain additional information releganization, or a government or political vant to the possible termination of its ubdivision thereof.

"moratorium” on conversions, and before (24) Proxy. The term “proxy” includes the Board's Resolution No. 72–1112 of very form of authorization by which a September 22, 1972, stating that the person is, or may be deemed to be, desig Board would not accept further study lated to act for an association member applications under its announcement of n the exercise of his voting rights in the July 26, 1972. ffairs of an insured institution. Such an (31) Subscription offering. The term authorization may take the form of fail term "subscription offering” refers to the ure to dissent or object.

offering, through nontransferable sub(25) Purchase. The terms "purchase" scription rights issued to eligible account and “buy” include every contract to pur holders, of shares of capital stock as rechase, buy, or otherwise acquire a se quired by $ 563b.3(c) (2) and (3). The curity or interest in a security for value. term also includes the offering of such

(26) Sale. The terms "sale” and “sell” shares, through subscriptions rights isinclude every contract to sell or otherwise sued to other account holders and/or dispose of a security or interest in a se borrowing members, as permitted by curity for value; but such terms do not $ 563b.3(d) (3), and the offering of such include an exchange of securities in con shares to directors, officers and emnection with a merger or acquisition ap ployees, as permitted by $ 563b.3(d) (4), proved by the Board or the Corporation. (32) Subsidiary. A "subsidiary” of a

(27) Savings account. The term "say specified person is an affiliate controlled ings account” has the same meaning by such person, directly or indirectly as in $ 561.11 of this subchapter and through one or more intermediaries. includes certificates of deposit.

(33) Supervisory Agent. The term "Su(28) Security. The term “security” in pervisory Agent” means (i) the President cludes any note, stock, treasury stock, of the Bank of the Federal Home Loan bond, debenture, transferable share, in Bank district in which the applicant has vestment contract, voting-trust certifi its principal office, or (ii) any other percate, or in general, any instrument com son who is specifically designated as an monly known as a "security”; or any cer agent by the Corporation to act in its tificate of interest or participation in, behalf in the administration of this part. temporary or interim certificate for, re (34) Underwriter. The term "underceipt for, or warrant or right to sub writer” means any person who has purscribe to or purchase, any of the chased from an applicant with a view foregoing.

to, or offers or sells for an applicant (29) Solicitation; solicit. The terms in connection with, the distribution of "solicitation" and "solicit” refer to (i) any security, or participates or has a any request for a proxy whether or not direct or indirect participation in the diaccompanied by or included in a form rect or indirect underwriting of any such of proxy; (ii) any request to execute, not undertaking; but such term shall not inexecute, or revoke a proxy; or (iii) the clude a person whose interest is limited furnishing of a form of proxy or other to a commission from an underwriter or communication to association members dealer not in excess of the usual and under circumstances reasonably calcu customary distributors' or sellers' comlated to result in the procurement, with mission. The term "principal underholding, or revocation of a proxy. The writer" means an underwriter in privity terms do not apply, however, to the fur of contract with the applicant or other nishing of a form of proxy to an asso issuer of securities as to which he is the ciation member upon the unsolicited re underwriter. quest of such association member, the (b) Terms defined in other parts of performance of acts required by $ 563b.5 this subchapter, when used in this part, (f), or to the performance by any person shall have the meanings given in such of ministerial acts on behalf of a per definitions, to the extent such definitions son soliciting a proxy.

are not inconsistent with the definitions (30) Study application. The term contained in this part, unless the context "study application" means any of the otherwise requires.

$ 563b.3 General principles for conver

under which the control of such distrim sions.

tion is intended to be effected by systext (a) Findings of Federal Home Loan

of averaging or weighting deposits, by Bank Board. (1) The regulations con

stricting transferability of the capita tained in this part are promulgated to

stock of converted insured institutione provide rules by which mutual insured

by placing such stock in escrow or tre. institutions may convert to the stock

by delayed distribution of such stock : form of organization on an equitable

its equivalent in cash by placing sun

stock in escrow or trust, by delayed dr. basis. In determining the equity of con

tribution of such stock or its equivale: version standards and procedures, the Board, both directly and as operating

in cash, or by segregating the net wort: head of the Corporation, finds that it is

accounts of converted insured institi

tions and proportionally allocating the necessary to consider the effects of vari

future income of such institutions : ous standards and procedures that might be adopted, not only on an individual

such accounts, or by any of the foregoir:

methods taken in combination. The applicant but also on the entire system of insured institutions, Indeed, the Board

Board also finds that, in order for ce believes that it has a public responsibility

version regulations to be effective agairs.

the undesirable results of such "ins also to consider the effects on financial institutions which are not thrift insti

fall" distributions, the basic provisions tutions and on thrift institutions which

of such regulations must operate with are not subject to the Board's regulatory

substantial uniformity with respect to jurisdiction. If a particular method of

mutual insured institutions on a nationa

scale. conversion would unacceptably threaten the financial stability of such institu

(3) The regulations contained in this tions, or a substantial portion of them, part, while providing the account holde the Board cannot consider such method

with rights to a share in the equity a of conversion to be on an equitable basis.

the converting mutual insured instito

tion in the event of a subsequent comFurther, if a particular method of conversion would tend to force individual

plete liquidation, are designed virtua mutual insured institutions to convert

to eliminate the "windfall" aspect of corto the stock form irrespective of whether

version and the resulting disruptive elsuch institutions or the communities

fect on the economy. Accordingly, the they serve would be benefited thereby,

Board finds that these regulations pruthe Board cannot consider such a method

vide a means by which mutual insured of conversion to be on an equitable basis.

institutions may convert to stock for (2) The Board has determined that a on an equitable basis. method of conversion which provides a

(b) General requirements. No applica:

tion for preliminary approval of conter so-called "windfall" distribution to the account holders of a converting mutual

sion shall be approved by the Corpora.

tion ifinsured institution would create strong Incentives for significant shifts of say

(1) The plan of conversion adopted by ings funds among insured institutions the applicant's board of directors is not and other financial institutions and that

in accordance with the provisions of this such shifts of savings funds would un

part; acceptably threaten the financial stabil

(2) The conversion would result in ang ity of such Institutions. The Board has

reduction of the Federal insurance Tealso determined that a method of con

serve or would cause the applicant to version which provides so-called

fail to meet any net worth requirement

of $ 563.13 of this subchapter; "windfall" distribution would tend to

(3) The conversion may result in a force individual mutual insured institu

taxable reorganization of the applicant tions to convert to the stock form irre

under the Internal Revenue Code of spective of whether such institutions or

1954, as amended; or the communities they serve would be

(4) The converted institution would benefited thereby. The Board therefore

not have its accounts insured by the Corfinds that no method of conversion can

poration. be considered equitable unless such (c) Required provisions in plan of con"windfall” distribution is virtually elimi. version. The plan of conversion shall: nated. The Board further finds that such (1) Provide that the converting in"windfall” distribution is not virtually sured institution shall issue and sell eliminated by methods of conversion shares of its capital stock at a total price

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equal to the estimated pro forma mar scriptions, as may be provided in the ket value of such shares in the con plan of conversion. verted insured institution, based on an (3) Provide that each eligible account Independent valuation, as provided in holder shall also receive, without pay3 563b.7, less any discount permitted ment, nontransferable subscription rights under the plan pursuant to paragraph to purchase additional shares of capital (d) of this section.

stock, to the extent that such shares are (2) Provide that each eligible account available after satisfying the subscripholder shall receive, without payment, tions provided for under paragraph (c) nontransferable subscription rights to (2) of this section, subject to the followpurchase entitlement shares, subject to ing conditions: the following conditions:

(i) The subscription price per share (i) The subscription price per share shall be the price fixed in accordance shall be the price fixed in accordance with $ 563b.7 without any discount; with $ 563b.7, less any discount per (ii) The number of shares which an mitted under the plan pursuant to para eligible account holder may subscribe for graph (d) of this section;

under this paragraph (c)(3) may be (ii) The maximum number of entitle made subject to a limit of not less than ment shares which an eligible account 1 percent of the total offering of shares holder may subscribe for under this sub for each eligible account holder or group division (2) shall be the greater of: of eligible account holders affiliated with (A) 100 shares; or

each other or otherwise acting in con(B) Such number of shares as shall be cert; and equal to the quotient (rounded down to (iii) In the event of an oversubscription the next whole number) obtained by di for such additional shares, the shares viding the amount of the qualifying de available shall be allocated among the posit of the eligible account holder by subscribing eligible account holders on the subscription price per share;

a pro rata basis. (iii) In the event of an oversubscrip (4) Provide that all shares not purEtion for entitlement shares, the shares chased upon exercise of subscription shall be allocated among the subscribing rights shall be sold at the price detereligible account holders as follows:

mined in accordance with $ 563b.7; and (A) Each eligible account holder shall specify the underwriting or other mar• first be permitted to purchase such num keting arrangements to be made to asber of entitlement shares as shall be equal sure the sale of all unsubscribed entitleto the product (rounded down to the next ment shares. whole number) obtained by multiplying (5) Provide that each savings account the total number of shares of capital holder of the converting insured instistock to be issued by a fraction of which tution shall receive, without payment, a the numerator is the amount of the withdrawable savings account or acqualifying deposit of the eligible account counts in the converted insured instituholder and the denominator is the total tion equal in withdrawable amount to

amount of qualifying deposits of all eli the withdrawal value of such account I gible account holders in the converting holder's savings account or accounts in insured institution.

the converting insured institution. (B) Any shares not allocated in ac (6) Provide for the establishment and cordance with paragraph (c) (2) (iii) (A) maintenance of a liquidation account for of this section shall next be allocated the benefit of eligible account holders in among subscribing eligible account hold the event of a subsequent complete liquiers so as to permit each such account dation of the converted insured instituholder, to the extent possible, to pur

tion, in accordance with the provisions of chase a number of shares sufficient to paragraph (f) of this section. make his total allocation (including the (7) Provide for an eligibility record

number of shares allocated in accordance date, which shall be not less than 90 days i with paragraph (c) (2) (iii) (A) of this prior to the date of adoption of the plan section) equal to 100 shares.

by the converting insured institution's (C) Any shares not allocated in ac board of directors. cordance paragraph (c) (2) (iii) (A) and (8) Provide that the holders of the (B) of this section shall be allocated capital stock of the converted insured in

among the subscribing eligible account stitution shall have exclusive voting [ holders on such equitable basis, related rights, unless State law requires savings to the amounts of their respective sub account holders and/or borrowers of the

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converted insured institution to have (1) That each eligible account bolde voting rights, in which case the charter exercising subscription rights to peof the converted insured institution shall chase entitlement shares shall be (i) limit such voting rights to the mini quired to purchase up to a minimum d mum required by State law, and (ii) 25 shares to the extent such shares et provide for the management of the con available (but the aggregate price for at verted insured institution to solicit minimum share purchase shall not es: proxies from such savings account hold ceed $500). ers and/or borrowers in the same man (2) That eligible account holders exner as it solicits proxies from its share ercising subscription rights to purchas holders.

entitlement shares shall receive a ds. (9) Provide that the plan of conver count of not more than 10 percent sion adopted by the applicant's board of the price fixed in accordance wth $563b. 1 directors may be substantively amended subject to a restriction that such share by such board of directors as a result of shall not be sold for a period of not les comments from regulatory authorities than six months following the date or otherwise prior to the solicitation of purchase, except in the event of death a proxies from members to vote on the plan the shareholder. and at any time thereafter with the con (3) That savings account holders and currence of the Corporation; and that or borrowering members of the convertthe conversion may be terminated by ing insured institution, other than those such board of directors at any time prior who are eligible account holders, shal to final approval by the Corporation and receive, wthout payment, nontransferat any time thereafter with the concur able subscription rights to purchase rence of the Corporation.

shares of capital stock, to the extent that (10) Provide that all shares of capital shares are available after satisfying the stock purchased by directors and officers subscriptions of eligible account holders without a discount on original issue, provided for under paragraph (c) (2) either directly from the insured insti and (3) of this section, subject to the foltution (by subscription or otherwise) or lowing conditions: from an underwriter of such shares, shall (i) Each such account holder and/or be subject to the restriction that such borrowing member shall be entitled to shares shall not be sold for a period of subscribe for the purchase of up to 104 not less than one year following the date shares at a subscription price per share of purchase, except in the event of death equal to the price fixed in accordance of the shareholder.

with 8 563b.7, less such discount, not in (11) Provide that, in connection with excess of the discount provided for enshares of capital stock subject to restric titlement shares under paragraph (c) (? tion on sale for a period of time:

of this section, as may be provided in the (1) Each certificate for such stock shall plan of conversion; bear a legend giving appropriate notice (ii) Each such account holder and/or of such restriction:

borrowing member may also be given (ii) Appropriate instructions shall be rights to subscribe for additional shares issued to the transfer agent for the con of capital stock at a subscription price verted insured institution's capital stock per share equal to the price fixed in 3.cwith respect to applicable restrictions on cordance with 563b.7, without any distransfer of any such restricted stock; and

count, subject to a reasonable limitation (iii) Any shares issued as a stock divi

on the number of shares which may be dend, stock split or otherwise with respect

purchased by any person or group of alto any such restricted stock shall be sub

filiated persons or group of persons actject to the same restriction as may apply

ing in concert; to such restricted stock.

(iil) In the event of an oversubscrip(12) Contain no provision which the

tion for shares under the provisions of

this subdivision (3), the shares available Corporation shall determine to be in

shall be allocated among the subscribing equitable or detrimental to the applicant,

account holders and/or borrowing memits savings account holders or other in

bers on such equitable basis, related sured institutions or to be contrary to the the amounts of their respective subscrid, public interest.

tions, as may be provided in the plan of (d) Optional provisions in plan of con conversion; and version. The plan of conversion may pro (iv) If any shares purchased under the vide any or all of the following:

provisions of this paragraph (d) (3) are

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