7. To telephone the local police, if they have not arrived, and the nearest office of the Federal Bureau of Investigation, or inform a designated officer or other employee who has this responsibility, that a robbery has been committed;

8. That if the robber leaves before the police arrive, assure that a designated officer or other employee waits outside the office, if it is safe to do so, to inform the police when they arrive that the robber has left;

9. To attempt to determine the names and addresses of other persons who witnessed the robbery or the escape, and request them to record their observations or to assist a designated officer or other employee in so doing;

10. To refrain from discussing the details of the robbery with others before recording the observations respecting the robber's physical features and other characteristics as hereinabove described and the direction of escape and description of vehicle used, if any.

ration may otherwise provide in supervisory cases.

(b) Provisions of prescribed forms. Any provision in a form prescribed under this part and covering the same subject matter as any provision of this part shall have the same force and effect as if it were a provision of this part.

(c) Conflicts with State law. (1) In the event an applicant finds that compliance with any provision of this part would be in conflict with applicable State law, the applicant may file with the Corporation a written request for waiver of compliance with such provision. Such request may be incorporated in the application for conversion; otherwise, the applicant shall file four copies of such request.

(2) In making any such request, the applicant shall:

(i) Specify the provision or provisions of this part with respect to which the applicant desires waiver;

(ii) Furnish an opinion of counsel demonstrating that applicable State law is in conflict with the specified provision or provisions of this part; and

(iii) Demonstrate that the requested waiver would not result in any effects that would be inequitable or detrimental to the applicant, its accountholders or other insured institutions or be contrary to the public interest.

[39 FR 9147, Mar. 7, 1974, as amended at 40 FR 19802, May 7, 1975]

§ 563b.2 Definitions.

(a) As used in this part and in the forms under this part, the following definitions apply, unless the context otherwise requires:

(1) Affiliate. An "affiliate" of, or a person “affiliated” with, a specified person, is a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the person specified.

(2) Amount. The term "amount", when used in regard to securities, means the principal amount if relating to evidences of indebtedness, the number of shares if relating to shares, and the number of units if relating to any other kind of security.

(3) Applicant. An “applicant" is an insured institution which has applied to convert pursuant to this part.

(4) Associate. The term "associate", when used to indicate a relationship with any person, means (i) any corporation or organization (other than the applicant or a majority-owned subsidiary of the applicant) of which such person is an officer or partner or is, directly or indirectly, the beneficial owner of 10 percent 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, 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 applicant or any of its parents or subsidiaries.

(5) Association members. The term "association members" refers to persons who, pursuant to the charter or bylaws of the applicant, are eligible to vote at the applicant's meeting at which conversion will be voted upon.

(6) Board. The term "Board" refers to the Federal Home Loan Bank Board.

(7) Capital stock. The term "capital stock" includes permanent stock, guaranty stock, permanent reserve stock, or any similar. certificate evidencing nonwithdrawable capital.

(8) Charter. The term "charter" includes articles of incorporation, articles of association, or any similar instrument, as amended, effecting

(either with or without filing with any governmental agency) the organization or creation of an incorporated or unincorporated person.

(9) Control. The term "control" (including the terms "controlling", "controlled by", and "under common control with") means the possession, direct or indirect, 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.

(10) Corporation. The term "Corporation" refers to the Federal Savings and Loan Insurance Corporation.

"dealer"

(11) Dealer. The term means any person who engages either for all or part of his time, directly or indirectly, as agent, broker, or principal, in the business of offering, buying, selling, or otherwise dealing or trading in securities issued by another person.

(12) Director. The term "director" means any director of a corporation or any person performing similar functions with respect to any organization whether incorporated or unincorporated.

(13) Eligibility record date. The term "eligibility record date" means the record date for determining eligible account holders of a converting institution.

(14) Eligible account holder. The term "eligible account holder" means any person holding a qualifying deposit as determined in accordance with § 563b.3(e).

(15) Employee. The term "employee" does not include a director or officer.

(16) Entitlement shares. The term "entitlement shares" means the shares of capital stock an eligible account holder is entitled to purchase determined computed under § 563b.3(c)(2).

as

(17) Equity security. The term "equity security" means any stock or similar security; or any security convertible, with or without consideration, into such a security, or carrying any warrant or right to subscribe to or purchase such security; or any such warrant or right.

(18) Insured institution. The term "insured institution" has the same meaning as in § 561.1 of this subchapter.

(19) Material. The term "material", when used to qualify a requirement for the furnishing of information as to any subject, limits the information required to those matters as to which an average prudent investor ought reasonably to be informed before purchasing an equity security of the applicant, or matters as to which an average prudent association member ought reasonably to be informed in voting upon the plan of conversion of the applicant.

(20) Member. The term "member" means any person qualifying as a member of an insured institution pursuant to its charter or bylaws.

(21) Offer. The term "offer", "offer to sell", or "offer of sale” shall include every attempt or offer to dispose of, or solicitation of an offer to buy, a security or interest in a security, for value. These terms shall not include preliminary negotiations or agreements between an applicant and any underwriter or among underwriters who are or are to be in privity of contract with an applicant.

(22) Officer. The term "officer" means the chairman of the board, president, 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.

(23) Person. The term "person" means an individual, a corporation, a partnership, an association, a jointstock company, a trust, any unincorporated organization, or a government or political subdivision thereof.

(24) Proxy. The term "proxy" includes every form of authorization by which a person is, or may be deemed to be, designated to act for an association member in the exercise of his voting rights in the affairs of an insured institution. Such an authorization may take the form of failure to dissent or object.

(25) Purchase. The terms "purchase" and "buy" include every contract to purchase, buy, or otherwise acquire a security or interest in a security for value.

(26) Sale. The terms "sale" and "sell" include every contract to sell or otherwise dispose of a security or interest in a security for value; but such terms do not include an exchange of securities in connection with a merger or acquisition approved by the Board or the Corporation.

(27) Savings account. The term "savings account" has the same meaning as in § 561.11 of this subchapter and includes certificates of deposit.

(28) Security. The term "security" includes any note, stock, treasury

stock, bond, debenture, transferable share, investment contract, votingtrust certificate, or in general, any instrument commonly known as a “security"; or any certificate of interest or participation in, temporary or interim certificate for, receipt for, or warrant or right to subscribe to or purchase, any of the foregoing.

(29) Solicitation; solicit. The terms "solicitation" and "solicit" refer to (i) any request for a proxy whether or not accompanied by or included in a form of proxy; (ii) any request to execute, not execute, or revoke a proxy; or (iii) the furnishing of a form of proxy or other communication to association members under circumstances reasonably calculated to result in the procurement, withholding, or revocatin of a proxy. The terms do not apply, however, to the furnishing of a form of proxy to an association member upon the unsolicited request of such association member, the performance of acts required by § 563b.5(f), or to the performance by any person of ministerial acts on behalf of a person soliciting a proxy.

(30) Subscription offering. The term "subscription offering" refers to the offering of shares of capital stock, through nontransferable subscription rights issued to: (i) Eligible account holders as required by § 563b.3(c) (2) and (3); (ii) members entitled to vote at the meeting called to consider the conversion permitted by § 563b.3(d)(7); (iii) directors, officers and employees, permitted by § 563b.3(d)(1); and (iv) eligible account holders as permitted by § 563b.3(d) (2) and (4).

as

as

(31) Subsidiary. A “subsidiary” of a specified person is an affiliate controlled by such person, directly or indirectly through one or more intermediaries.

(32) Supervisory Agent. The term "Supervisory Agent" means (i) the President of the Bank of the Federal Home Loan Bank district in which the applicant has its principal office, or (ii) any other person who is specifically designated as an agent by the Corporation to act in its behalf in the administration of this part.

(33) Underwriter. The term "underwriter" means any person who has purchased from an applicant with a view to, or offers or sells for an applicant in connection with, the distribution of any security, or participates or has a direct or indirect participation in the direct or indirect underwriting of any such undertaking; but such term shall not include a person whose interest is limited to a commission from an underwriter or dealer not in excess of the usual and customary distributors' or sellers' commission. The term "principal underwriter" means an underwriter in privity of contract with the applicant or other issuer of securities as to which he is the underwriter.

(b) Terms defined in other parts of this subchapter, when used in this part, shall have the meanings given in such definitions, to the extent such definitions are not inconsitent with the definitions contained in this part, unless the context otherwise requires. [39 FR 9147, Mar. 7, 1974, as amended at 40 FR 19802, May 7, 1975]

§ 563b.3 General principles for conversions.

(a) Findings of Federal Home Loan Bank Board. (1) The regulations contained in this part are promulgated to provide rules by which mutual insured institutions may convert to the stock form of organization on an equitable basis. In determining the equity of conversion standards and procedures, the Board, both directly and as operating head of the Corporation, finds that it is necessary to consider the effects of various standards and procedures that might be adopted, not only on an individual applicant but also on the entire system of insured institutions. Indeed, the Board believes that it has a public responsibility also to consider the effects on financial institutions which are not thrift institutions and on thrift institutions which are not subject to the Board's regulatory jurisdiction. If a particular method of conversion would unacceptably threaten the financial stability of such institutions, or a substantial portion of them, the Board cannot consider such method of conversion to be on an equitable basis. Further, if a

particular method of conversion would tend to force individual mutual insured institutions to convert to the stock form irrespective of whether such institutions or the communities they serve would be benefited thereby, the Board cannot consider such a method of conversion to be on an equitable basis.

(2) The Board has determined that a method of conversion which provides a so-called "windfall" distribution to the account holders of a converting mutual insured institution would create strong incentives for significant shifts of savings funds among insured institutions and other financial institutions and that such shifts of savings funds would unacceptably threaten the financial stability of such institutions. The Board has also determined that a method of conversion which provides a so-called "windfall" distribution would tend to force individual mutual insured institutions to convert to the stock form irrespective of whether such institutions or the communities they serve would be benefited thereby. The Board therefore finds that no method of conversion can be considered equitable unless such "windfall" distribution is virtually eliminated. The Board further finds that such "windfall" distribution is not virtually eliminated by methods of conversion under which the control of such distribution is intended to be effected by systems of averaging or weighting deposits, by restricting transferability of the capital stock of converted insured institutions, by placing such stock in escrow or trust, by delayed distribution of such stock or its equivalent in cash by placing such stock in escrow or trust, by delayed distribution of such stock or its equivalent in cash, or by segregating the net worth accounts of converted insured institutions and proportionally allocating the future income of such institutions to such accounts, or by any of the foregoing methods taken in combination. The Board also finds that, in order for conversion regulations to be effective against the undesirable results of such "windfall" distributions, the basic provisions of such regulations must operate with sub

40 028 0-79-44

stantial uniformity with respect to mutual insured institutions on a national scale.

(3) The regulations contained in this part, while providing the account holder with rights to a share in the equity of the converting mutual insured institution in the event of a subsequent complete liquidation, are designed virtually to eliminate the "windfall" aspect of conversion and the resulting disruptive effect on the economy. Accordingly, the Board finds that these regulations provide a means by which mutual insured institutions may convert to stock form on an equitable basis.

(b) General requirements. No application for conversion shall be approved by the Corporation if:

(1) The plan of conversion adopted by the applicant's board of directors is not in accordance with the provisions of this part;

(2) The conversion would result in any reduction of the Federal insurance reserve or would cause the applicant to fail to meet any net worth requirement of § 563.13 of this subchapter;

(3) The conversion may result in a taxable reorganization of the applicant under the Internal Revenue Code of 1954, as amended; or

(4) The converted institution would not have its accounts insured by the Corporation.

(c) Required provisions in plan of conversion. The plan of conversion shall:

(1) Provide that the converting insured 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 insured institution, based on an independent valuation, as provided in § 563b.7.

(2) Provide that each eligible account holder shall receive without payment, nontransferable subscription rights to purchase entitlement shares in an amount equal to the product (rounded down to the next whole number) obtained by multiplying the total number of shares of capital stock to be issued by a fraction of which the numerator is the amount of the qualifying deposit of the eligible account

holder and the denominator is the total amount of qualifying deposits of all eligible account holders in the converting insured institution.

(3) Provide that each eligible account holder shall receive, without payment, additional nontransferable subscription rights to purchase additional shares, subject to paragraphs (d)(4), (d)(5), (d)(6) and the following conditions:

(i) The maximum number of additional shares which an eligible account holder may subscribe for under this paragraph (c)(3) shall be the greater of:

(A) 100 shares; or

(B) Ten times the number of shares computed pursuant to paragraph

(c)(2) of this section;

(ii) The number of nontransferable subscription rights to purchase entitlement shares received by an account holder in accordance with paragraph (c)(2) of this section shall be applied in partial satisfaction of the subscription rights to be distributed pursuant to this paragraph (c)(3); and

(iii) In the event of an oversubscription for additional shares pursuant to this paragraph (c)(3), shares shall be allocated among the subscribing eligible account holders as follows:

(A) Any shares not subscribed for in accordance with paragraph (c)(2) of this section shall be allocated among subscribing eligible account holders so as to permit each such account holder, to the extent possible, to purchase a number of shares sufficient to make his total allocation (including the number of shares allocated in accordance with paragraph (c)(2) of this section) equal to 100 shares.

(B) Any shares not allocated in accordance with paragraph (c)(3)(iii)(A) of this section shall be allocated

among the subscribing eligible account holders on such equitable basis, related to the amounts of their respective qualifying deposits, as may be provided in the plan of conversion.

(4) Provide that the sales price of the shares of capital stock to be sold in the conversion shall be a uniform price determined in accordance with § 563b.7; and specify the underwriting and/or other marketing arrangements