Plan of Distribution and Marketing Arrangements
Offering materials have been initially distributed to certain persons by mail,
with additional copies made available through our stock information center and
Sandler O'Neill. All prospective purchasers are to send payment directly to
Savings Institute, where such funds will be held in a segregated savings account
and not released until the offering is completed or terminated.
We have engaged Sandler O'Neill, a broker-dealer registered with the NASD, as a
financial and marketing advisor in connection with the offering of our common
stock. In its role as financial and marketing advisor, Sandler O'Neill will
assist us in the offering as follows:
(1) consulting as to the securities marketing implications of any
aspect of the plan of reorganization and minority stock
issuance or related corporate documents;
(2) reviewing with our Board of Directors the financial and
securities marketing implications of the independent
appraiser's appraisal of the common stock;
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(3) reviewing all offering documents, including the
prospectus, stock order forms and related offering
materials (we are responsible for the preparation and
filing of such documents);
(4) assisting in the design and implementation of a marketing
strategy for the offering;
(5) assisting us in preparing for meetings with potential investors
and broker-dealers; and
(6) providing such other general advice and assistance
regarding financial and marketing aspects of the
offering.
For these services, Sandler O'Neill will receive a fee of 1.0% of the aggregate
dollar amount of the common stock sold in the offering, excluding shares sold to
the employee stock ownership plan, to the foundation and to our officers,
employees and directors and their immediate families. If there is a syndicated
community offering, Sandler O'Neill will receive a management fee of 1.0% of the
aggregate dollar amount of the common stock sold in the syndicated community
offering. The total fees payable to Sandler O'Neill and other NASD member firms
in the syndicated community offering shall not exceed 7.0% of the aggregate
dollar amount of the common stock sold in the syndicated community offering.
We also will reimburse Sandler O'Neill for its legal fees and expenses
associated with its marketing effort, up to a maximum of $50,000. If the plan of
reorganization and minority stock issuance is terminated or if Sandler O'Neill
terminates its agreement with us in accordance with the provisions of the
agreement, Sandler O'Neill will only receive reimbursement of its reasonable
out-of-pocket expenses. We will indemnify Sandler O'Neill against liabilities
and expenses (including legal fees) incurred in connection with certain claims
or liabilities arising out of or based upon untrue statements or omissions
contained in the offering material for the common stock, including liabilities
under the Securities Act of 1933.
We have also engaged Sandler O'Neill to act as conversion agent in connection
with the offering. In its role as conversion agent, Sandler O'Neill will assist
us in the offering as follows: (1) consolidation of accounts and development of
a central file; (2) preparation of order and/or request forms; (3) organization
and supervision of the stock information center; and (4) subscription services.
For these services, Sandler O'Neill will receive a fee of $25,000 and
reimbursement for its reasonable out-of-pocket expenses. We have made an advance
payment of $5,000 to Sandler O'Neill for these services.
Sandler O'Neill has not prepared any report or opinion constituting a
recommendation or advice to us or to persons who subscribe for stock, nor has it
prepared an opinion as to the fairness to us of the purchase price or the terms
of the stock to be sold. Sandler O'Neill expresses no opinion as to the prices
at which common stock to be issued may trade.
Our directors and executive officers may participate in the solicitation of
offers to purchase common stock. Other trained employees may participate in the
offering in ministerial capacities, providing clerical work in effecting a sales
transaction or answering questions of a ministerial nature. Other questions of
prospective purchasers will be directed to executive officers or registered
representatives. We will rely on Rule 3a4-1 of the Exchange Act, so as to permit
officers, directors, and employees to participate in the sale of the common
stock. No officer, director, or employee will be compensated for his
participation by the payment of commissions or other remuneration based either
directly or indirectly on the transactions in the common stock.
Procedure for Purchasing Shares in the Subscription and Community Offerings
Use of Order Forms. To purchase shares in the subscription offering, you must
submit a properly completed and executed order form to us by 12:00 Noon, Eastern
time, on [DATE 1]. Your order form must be accompanied by full payment for all
of the shares subscribed for or include appropriate authorization in the space
provided on the order form for withdrawal of full payment from a deposit account
with Savings Institute. To
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purchase shares in the community offering, you must submit a properly completed
and executed order form to us, accompanied by the required payment for each
share subscribed for, before the community offering terminates, which may be on,
or at any time after, the end of the subscription offering. Our interpretation
of the terms and conditions of the plan of reorganization and minority stock
issuance and of the acceptability of the order forms will be final.
To ensure that your stock purchase eligibility and priority are properly
identified, you must list all accounts on the order form, giving all names in
each account, the account number and the approximate account balance as of the
appropriate eligibility date. We will strive to identify your ownership in all
accounts, but cannot guarantee we will identify all accounts in which you have
an ownership interest.
We need not accept order forms that are received after the expiration of the
subscription offering or community offering, as the case may be, or that are
executed defectively or that are received without full payment or without
appropriate withdrawal instructions. In addition, we are not obligated to accept
orders submitted on photocopied or facsimiled stock order forms. We have the
right to waive or permit the correction of incomplete or improperly executed
order forms, but do not represent that we will do so. Under the plan of
reorganization and minority stock issuance, our interpretation of the terms and
conditions of the plan of reorganization and minority stock issuance and of the
order form will be final. Once received, an executed order form may not be
modified, amended or rescinded without our consent unless the offering has not
been completed within 45 days after the end of the subscription offering, unless
extended.
The reverse side of the order form contains a regulatorily mandated
certification form. We will not accept order forms where the certification form
is not executed. By executing and returning the certification form, you will be
certifying that you received this prospectus and acknowledging that the common
stock is not a deposit account and is not insured or guaranteed by the federal
government. You also will be acknowledging that you received disclosure
concerning the risks involved in this offering. The certification form could be
used as support to show that you understand the nature of this investment.
To ensure that each purchaser receives a prospectus at least 48 hours before the
end of the offering, as required by Rule 15c2-8 under the Securities Exchange
Act of 1934, no prospectus will be mailed any later than five days before that
date or hand delivered any later than two days before that date. Execution of
the order form will confirm receipt or delivery under Rule 15c2-8. Order forms
will be distributed only when preceded or accompanied by a prospectus.
Payment for Shares. Payment for subscriptions may be made by check, bank draft
or money order, or by authorization of withdrawal from deposit accounts
maintained with Savings Institute. Appropriate means by which withdrawals may be
authorized are provided on the order form. No wire transfers or third party
checks will be accepted. Orders submitted by subscribers that total $50,000 or
more must be paid by official bank certified check, a check issued by a
NASD-registered broker-dealer or by withdrawal authorization from a deposit
account maintained with Savings Institute. Interest will be paid on payments
made by check, bank draft or money order at our passbook rate from the date
payment is received at the stock information center until the completion or
termination of the offering. If payment is made by authorization of withdrawal
from deposit accounts, the funds authorized to be withdrawn from a deposit
account will continue to accrue interest at the contractual rates until
completion or termination of the offering, unless the certificate matures after
the date of receipt of the order form but before closing or termination of the
offering, in which case funds will earn interest at the passbook rate from the
date of maturity until the offering is completed or terminated, but a hold will
be placed on the funds, making them unavailable to the depositor until
completion or termination of the offering. When the offering is completed, the
funds received in the offering will be used to purchase the shares of common
stock ordered. The shares of common stock issued in the offering cannot and will
not be insured by the Federal Deposit Insurance Corporation or any other
government agency. If the offering is not consummated for any reason, all funds
submitted will be promptly refunded with interest as described above.
If a subscriber authorizes us to withdraw the amount of the purchase price from
his or her deposit account, we will do so as of the completion of the offering,
though the account must contain the full amount necessary for
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payment at the time the subscription order is received. We will waive any
applicable penalties for early withdrawal from certificate accounts. If the
remaining balance in a certificate account is reduced below the applicable
minimum balance requirement at the time funds are actually transferred under the
authorization, the certificate will be canceled at the time of the withdrawal,
without penalty, and the remaining balance will earn interest at our passbook
rate.
The employee stock ownership plan will not be required to pay for the shares
subscribed for at the time it subscribes, but rather may pay for shares of
common stock subscribed for upon the completion of the offering; provided that
there is in force from the time of its subscription until the completion of the
offering loan commitment from an unrelated financial institution or from us to
lend to the employee stock ownership plan, at that time, the aggregate purchase
price of the shares for which it subscribed.
Our individual retirement accounts (IRAs) do not permit investment in common
stock. A depositor interested in using his or her IRA funds to purchase common
stock must do so through a self-directed IRA. Since we do not offer those
accounts, we will allow a depositor to make a trustee-to-trustee transfer of the
IRA funds to a trustee offering a self-directed IRA program with the agreement
that the funds will be used to purchase our common stock in the offering. There
will be no early withdrawal or Internal Revenue Service interest penalties for
transfers. The new trustee would hold the common stock in a self-directed
account in the same manner as we now hold the depositor's IRA funds. An annual
administrative fee may be payable to the new trustee. Depositors interested in
using funds in an IRA with us to purchase common stock should contact the stock
information center as soon as possible so that the necessary forms may be
forwarded for execution and returned before the subscription offering ends. In
addition, federal laws and regulations require that officers, directors and 10%
shareholders who use self-directed IRA funds to purchase shares of common stock
in the subscription offering, make purchases for the exclusive benefit of IRAs.
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How We Determined the Offering Range and the $10.00 Purchase Price
Federal regulations require that the aggregate purchase price of the securities
sold in connection with the offering be based upon our estimated pro forma value
on a fully converted basis (i.e., taking into account the expected receipt of
proceeds from the sale of securities in the offering), as determined by an
independent appraisal. We have retained Keller & Company, Inc., which is
experienced in the evaluation and appraisal of business entities, to prepare the
independent appraisal. Keller & Company will receive fees totaling $23,000 for
its appraisal services, plus reasonable out-of-pocket expenses. We have agreed
to indemnify Keller & Company under certain circumstances against liabilities
and expenses, including legal fees, arising out of, related to, or based upon
the offering.
Keller & Company prepared the appraisal taking into account the pro forma impact
of the offering. For its analysis, Keller & Company undertook substantial
investigations to learn about our business and operations. We supplied financial
information, including annual financial statements, information on the
composition of assets and liabilities, and other financial schedules. In
addition to this information, Keller & Company reviewed our stock issuance
application as filed with the Office of Thrift Supervision and our registration
statement as filed with the Securities and Exchange Commission. Furthermore,
Keller & Company visited our facilities and had discussions with our management.
Keller & Company did not perform a detailed individual analysis of the separate
components of our assets and liabilities. We did not impose any limitations on
Keller & Company in connection with its appraisal.
In connection with its appraisal, Keller & Company reviewed the following
factors, among others:
the economic make-up of our primary market area;
our financial performance and condition in relation to publicly
traded companies that Keller & Company deemed comparable to us;
the specific terms of the offering of our common stock;
the pro forma impact of the additional capital raised in the reorganization;
our proposed dividend policy;
conditions of securities markets in general; and
the market for thrift institution common stock in particular.
Consistent with Office of Thrift Supervision appraisal guidelines, Keller &
Company's analysis utilized three selected valuation procedures, the price book
method, the price/core earnings method, and price/assets method, all of which
are described in its report. Keller & Company's appraisal report is filed as an
exhibit to the registration statement that we have filed with the Securities and
Exchange Commission. See "Where You Can Find More Information." Keller & Company
placed the greatest emphasis on the price/core earnings and price book methods
in estimating pro forma market value. Keller & Company compared the pro forma
price book and price/core earnings ratios for SI Financial Group to the same
ratios for a peer group of comparable companies. The peer group consisted of ten
publicly traded companies based in the New England, Mid-Atlantic and Midwestern
United States. The peer group included companies with:
average assets of $812.1 million;
average non-performing assets of 0.68% of total assets;
average net loans of 74.5% of total assets;
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average equity of 10.5% of total assets; and
average core income of 0.91% of average assets.
On the basis of the analysis in its report, Keller & Company has advised us
that, in its opinion, as of May 21, 2004, our estimated pro forma market value
on a fully converted basis was within the valuation range of $72.2 million and
$97.8 million with a midpoint of $85.0 million and that the estimated pro forma
market value of our shares of common stock held by persons other than SI
Bancorp, MHC and SI Financial Group Foundation, was within the valuation range
of $28.9 million to $39.1 million with a midpoint of $34.0 million. As a result,
we established the offering range of $28.9 million to $39.1 million, with a
midpoint of $34.0 million. Our Board of Directors reviewed Keller & Company's
appraisal report, including the methodology and the assumptions used by Keller &
Company, and determined that the offering range was reasonable and adequate.
Assuming that the shares are sold at $10.00 per share in the offering, the
estimated number of shares issued in the offering would be between 7,225,000 and
9,775,000, with a midpoint of 8,500,000 and the estimated number of shares
issued to persons other than SI Bancorp, MHC and SI Financial Group Foundation
would be between 2,890,000 and 3,910,000 with a midpoint of 3,400,000. The
purchase price of $10.00 per share was determined by discussion among us and
Sandler O'Neill, taking into account, among other factors, the requirement under
Office of Thrift Supervision regulations that the common stock be offered in a
manner that will achieve the widest distribution of the stock and desired
liquidity in the common stock after the offering.
Since the outcome of the offering relates in large measure to market conditions
at the time of sale, it is not possible for us to determine the exact number of
shares that we will issue at this time. The offering range may be amended, with
the approval of the Office of Thrift Supervision, if necessitated by
developments following the date of the appraisal in, among other things, market
conditions, our financial condition or operating results, regulatory guidelines
or national or local economic conditions.
If, upon completion of the subscription offering, at least the minimum number of
shares are subscribed for, Keller & Company, after taking into account factors
similar to those involved in its prior appraisal, will determine its estimate of
our pro forma market value as of the close of the subscription offering.
No shares will be sold unless Keller & Company confirms that, to the best of its
knowledge and judgment, nothing of a material nature has occurred that would
cause it to conclude that the actual total purchase price of the shares on an
aggregate basis was materially incompatible with its appraisal. If, however, the
facts do not justify that statement, the offering may be canceled, a new
offering range and price per share set and new subscription, community and
syndicated community offerings held. Under those circumstances, subscribers
would have the right to confirm, modify or cancel their subscriptions within a
specified period of time or else their subscription would be cancelled. If the
offering is terminated all subscriptions will be cancelled and subscription
funds will be returned promptly with interest, and holds on funds authorized for
withdrawal from deposit accounts will be released or reduced.
Depending on market and financial conditions, the number of shares sold to
persons other than SI Bancorp, MHC and SI Financial Group Foundation may be more
than 4,496,500 shares or less than 2,890,000 shares. If the total amount of
shares sold to persons other than SI Bancorp, MHC and SI Financial Group
Foundation is less than 2,890,000 or more than 4,496,500 (15% above the maximum
of the offering range), for aggregate gross proceeds of less than $28.9 million
or more than $45.0 million, subscription funds will be returned promptly with
interest to each subscriber unless he or she indicates otherwise. If Keller &
Company establishes a new valuation range, it must be approved by the Office of
Thrift Supervision.
In formulating its appraisal, Keller & Company relied upon the truthfulness,
accuracy and completeness of all documents we furnished to it. Keller & Company
also considered financial and other information from regulatory agencies, other
financial institutions, and other public sources, as appropriate. While Keller &
Company believes this information to be reliable, Keller & Company does not
guarantee the accuracy or completeness of the information and did not
independently verify the financial statements and other data provided by us or
independently value our assets or liabilities. The appraisal is not intended to
be, and must not be interpreted
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as, a recommendation of any kind as to the advisability of purchasing shares of
common stock. Moreover, because the appraisal must be based on many factors that
change periodically, there is no assurance that purchasers of shares in the
offering will be able to sell shares after the offering at prices at or above
the purchase price.
Copies of the appraisal report of Keller & Company, including any amendments to
the report, and the detailed memorandum of the appraiser setting forth the
method and assumptions for such appraisal are available for inspection at our
main office and the other locations specified under "Where You Can Find More
Information."
Limitations on Purchases of Shares
In addition to the purchase limitations described above under "-Subscription
Offering and Subscription Rights," "-Community Offering" and "-Syndicated
Community Offering," the plan of reorganization and minority stock issuance
provides for the following purchase limitations:
The aggregate amount of our outstanding common stock owned or
controlled by persons other than SI Bancorp, MHC at the close of
the offerings shall be less than 50.1% of our total outstanding
common stock.
Except for our tax-qualified employee stock benefit plans, no person,
either alone or together with associates of or persons acting in
concert with such person, may purchase in the aggregate more than
$300,000 of the common stock sold in the offering to persons other
than SI Bancorp, MHC (which equals 30,000 shares), subject to
increase as described below.
Each subscriber must subscribe for a minimum of 25 shares.
The aggregate amount of common stock acquired in the offerings, by any
non-tax-qualified employee stock benefit plan or any management person
and his or her associates, exclusive of any shares of common stock
acquired by such plan or management person and his or her associates in
the secondary market, shall not exceed 4.9% of the (i) outstanding
shares of common stock at the conclusion of the offerings or (ii) the
stockholders' equity of SI Financial Group at the conclusion of the
offerings. In calculating the number of shares held by management
persons and their associates, shares held by any tax-qualified or
non-tax qualified employee stock benefit plan that are attributable to
such person will not be counted.
The aggregate amount of common stock acquired in the offerings by
all of our stock benefit plans other than employee stock ownership
plans, shall not exceed 25% of the outstanding common stock held by
persons other than SI Bancorp, MHC.
The aggregate amount of common stock acquired in the offerings, by
any one or more tax-qualified employee stock benefit plans, exclusive
of any shares of common stock acquired by such plans in the secondary
market, shall not exceed 4.9% of (i) the outstanding shares of common
stock at the conclusion of the offerings or (ii) the stockholders'
equity of SI Financial Group at the conclusion of the offerings.
The aggregate amount of common stock acquired in the offerings by
all of our stock benefit plans other than employee stock ownership
plans, shall not exceed 25% of the outstanding common stock held by
persons other than SI Bancorp, MHC.
The aggregate amount of common stock acquired in the offerings, by all
non-tax-qualified employee stock benefit plans or management persons
and their associates, exclusive of any common stock acquired by such
plans or management persons and their associates in the secondary
market, shall not exceed 34% of (i) the outstanding shares of common
stock held by persons other than SI Bancorp, MHC at the conclusion of
the offering or (ii) the stockholders' equity of SI Financial Group
held by persons other than the SI Bancorp, MHC at the conclusion of the
offerings.
We may, in our sole discretion, increase the individual or aggregate purchase
limitation to up to 5% of the shares of common stock sold in the offerings to
persons other than SI Bancorp, MHC. We do not intend to increase the maximum
purchase limitation unless market conditions warrant an increase in the maximum
purchase limitation and the sale of a number of shares in excess of the minimum
of the offering range. If we decide to increase the purchase limitations,
persons who subscribed for the maximum number of shares of common stock will be
given the opportunity to increase their subscriptions accordingly, subject to
the rights and preferences of any person who has priority subscription rights.
We, in our discretion, also may give other large subscribers the right to
increase their subscriptions.
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The plan of reorganization and minority stock issuance defines "acting in
concert" to mean knowing participation in a joint activity or interdependent
conscious parallel action towards a common goal whether or not by an express
agreement or understanding; or a combination or pooling of voting or other
interests in the securities of an issuer for a common purpose under any
contract, understanding, relationship, agreement or other arrangement, whether
written or otherwise. In general, a person who acts in concert with another
party will also be deemed to be acting in concert with any person who is also
acting in concert with that other party. We may presume that certain persons are
acting in concert based upon, among other things, joint account relationships
and the fact that persons may have filed joint Schedules 13D or 13G with the
Securities and Exchange Commission with respect to other companies. For purposes
of the plan of reorganization and minority stock issuance, our directors are not
deemed to be acting in concert solely by reason of their Board membership.
The plan of reorganization and minority stock issuance defines "associate," with
respect to a particular person, to mean:
any corporation or organization other than SI Bancorp, MHC, SI
Financial Group or Savings Institute or a majority-owned subsidiary of
SI Bancorp, MHC, SI Financial Group or Savings Institute of which a
person is an officer or partner or is, directly or indirectly, the
beneficial owner of 10% or more of any class of equity securities;
any trust or other estate in which a person has a substantial
beneficial interest or as to which a person serves as trustee or in
a similar fiduciary capacity; and
any relative or spouse of a person, or any relative of a spouse, who
either has the same home as a person or who is a director or officer
of SI Bancorp, MHC, SI Financial Group or Savings Institute or any of
their subsidiaries.
For example, a corporation of which a person serves as an officer would be an
associate of that person and, therefore, all shares purchased by the corporation
would be included with the number of shares that the person could purchase
individually under the purchase limitations described above. We have the right
in our sole discretion to reject any order submitted by a person whose
representations we believe to be false or who we otherwise believe, either alone
or acting in concert with others, is violating or circumventing, or intends to
violate or circumvent, the terms and conditions of the plan of reorganization
and minority stock issuance. Directors and officers are not treated as
associates of each other solely by virtue of holding such positions. We have the
sole discretion to determine whether prospective purchasers are "associates" or
"acting in concert."
Delivery of Certificates
Certificates representing the common stock sold in the offering will be mailed
by our transfer agent to the persons whose subscriptions or orders are filled at
the addresses of such persons appearing on the stock order form as soon as
practicable following completion of the offering. We will hold certificates
returned as undeliverable until claimed by the persons legally entitled to the
certificates or otherwise disposed of in accordance with applicable law. Until
certificates for common stock are available and delivered to subscribers,
subscribers may not be able to sell their shares, even though trading of the
common stock may have commenced.
Restrictions on Repurchase of Stock
Under Office of Thrift Supervision regulations, we may not for a period of one
year from the date of the completion of the offering repurchase any of our
common stock from any person, except (1) in an offer made to all shareholders to
repurchase the common stock on a pro rata basis, approved by the Office of
Thrift Supervision, (2) the repurchase of qualifying shares of a director, or
(3) repurchases to fund restricted stock plans or tax-qualified employee stock
benefit plans. Where extraordinary circumstances exist, the Office of Thrift
Supervision may approve the open market repurchase of up to 5% of our common
stock during the first year following the offering. To receive such approval, we
must establish compelling and valid business purposes for the repurchase to the
satisfaction of the Office of Thrift Supervision. Furthermore, repurchases of
any common stock are prohibited if
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they would cause Savings Institute's regulatory capital to be reduced below the
amount required under the regulatory capital requirements imposed by the Office
of Thrift Supervision.
Restrictions on Transfer of Shares After the Reorganization Applicable to
Officers and Directors
Common stock purchased in the offering will be freely transferable, except for
shares purchased by our directors and executive officers.
Shares of common stock purchased by our directors and executive officers may not
be sold for a period of one year following the offering, except upon the death
of the shareholder or unless approved by the Office of Thrift Supervision.
Shares purchased by these persons in the open market after the offering will be
free of this restriction. Shares of common stock issued to directors and
executive officers will bear a legend giving appropriate notice of the
restriction and, in addition, we will give appropriate instructions to our
transfer agent with respect to the restriction on transfers. Any shares issued
to directors and executive officers as a stock dividend, stock split or
otherwise with respect to restricted common stock will be similarly restricted.
Persons affiliated with us, including our directors and executive officers,
received subscription rights based only on their deposits with Savings Institute
as account holders. While this aspect of the offering makes it difficult, if not
impossible, for insiders to purchase stock for the explicit purpose of meeting
the minimum of the offering, any purchases made by persons affiliated with us
for the explicit purpose of meeting the minimum of the offering must be made for
investment purposes only, and not with a view towards redistribution.
Furthermore, as set forth above, Office of Thrift Supervision regulations
restrict sales of common stock purchased in the offering by directors and
executive officers for a period of one year following the offering.
Purchases of outstanding shares of our common stock by directors, officers, or
any person who becomes an executive officer or director after adoption of the
plan of reorganization and minority stock issuance, and their associates, during
the three-year period following the offering may be made only through a broker
or dealer registered with the Securities and Exchange Commission, except with
the prior written approval of the Office of Thrift Supervision. This restriction
does not apply, however, to negotiated transactions involving more than 1% of
our outstanding common stock or to the purchase of stock under stock benefit
plans.
We have filed with the Securities and Exchange Commission a registration
statement under the Securities Act of 1933 for the registration of the common
stock to be issued in the offering. This registration does not cover the resale
of the shares. Shares of common stock purchased by persons who are not
affiliates of us may be resold without registration. Shares purchased by an
affiliate of us will have resale restrictions under Rule 144 of the Securities
Act. If we meet the current public information requirements of Rule 144, each
affiliate of ours who complies with the other conditions of Rule 144, including
those that require the affiliate's sale to be aggregated with those of certain
other persons, would be able to sell in the public market, without registration,
a number of shares not to exceed, in any three-month period, the greater of 1%
of our outstanding shares or the average weekly volume of trading in the shares
during the preceding four calendar weeks. We may make future provision to permit
affiliates to have their shares registered for sale under the Securities Act
under certain circumstances.
Interpretation, Amendment and Termination
To the extent permitted by law, all interpretations by us of the plan of
reorganization and minority stock issuance will be final; however, such
interpretations have no binding effect on the Office of Thrift Supervision. The
plan of reorganization and minority stock issuance provides that, if deemed
necessary or desirable, we may substantively amend the plan of reorganization
and minority stock issuance as a result of comments from regulatory authorities
or otherwise.
Completion of the offering requires the sale of all shares of the common stock
within 90 days following approval of the plan of reorganization and minority
stock issuance by the Office of Thrift Supervision, unless an extension is
granted by the Office of Thrift Supervision. If this condition is not satisfied,
the plan of reorganization
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and minority stock issuance will be terminated and we will continue our
business. We may terminate the plan of reorganization and minority stock
issuance at any time.
Restrictions on Acquisition of SI Financial Group and Savings Institute
General
Certain provisions in the charter and bylaws of SI Financial Group may have
antitakeover effects. In addition, regulatory restrictions may make it more
difficult for persons or companies to acquire control of us.
Mutual Holding Company Structure
SI Financial Group owns all of the issued and outstanding common stock of
Savings Institute. Following completion of the offering, SI Bancorp, MHC will
own a majority of the issued and outstanding common stock of SI Financial Group.
As a result, management of SI Bancorp, MHC is able to exert voting control over
SI Financial Group and Savings Institute and will restrict the ability of the
minority stockholders of SI Financial Group to effect a change of control of
management. SI Bancorp, MHC, as long as it remains in the mutual form of
organization, will control a majority of the voting stock of SI Financial Group.
Charter and Bylaws of SI Financial Group
Although our Board of Directors is not aware of any effort that might be made to
obtain control of us after the offering, the Board of Directors believed it
appropriate to adopt certain provisions permitted by federal regulations that
may have the effect of deterring a future takeover attempt that is not approved
by our Board of Directors. The following description of these provisions is only
a summary and does not provide all of the information contained in our charter
and bylaws. See "Additional Information" as to where to obtain a copy of these
documents.
Limitation on Voting Rights. Our charter provides that no person, except SI
Bancorp, MHC or a tax-qualified employee stock benefit plan of ours, may
directly or indirectly acquire the beneficial ownership of more than 10% of any
class of an equity security of ours for a period of five years following the
offering. In the event shares are acquired in excess of 10%, those shares will
be considered "excess shares" and will not be counted as shares entitled to
vote.
Board of Directors.
Classified Board. Our Board of Directors is divided into three classes, each of
which contains approximately one-third of the number of directors. The
stockholders elect one class of directors each year for a term of three years.
The classified Board makes it more difficult and time consuming for a
stockholder group to fully use its voting power to gain control of the Board of
Directors without the consent of the incumbent Board of Directors.
Filling of Vacancies; Removal. The bylaws provide that any vacancy occurring in
the Board of Directors, including a vacancy created by an increase in the number
of directors, may be filled by a vote of a majority of the directors then in
office. A person elected to fill a vacancy on the Board of Directors will serve
until the next election of directors. Our bylaws provide that a director may be
removed from the Board of Directors before the expiration of his or her term
only for cause and only upon the vote of a majority of the outstanding shares of
voting stock. These provisions make it more difficult for stockholders to remove
directors and replace them with their own nominees.
Qualification. The bylaws provide that no person will be eligible to serve on
the Board of Directors who has in the past 10 years been subject to a
supervisory action by a financial regulatory agency that involved
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dishonesty or breach of trust or other bad actions, has been convicted of a
crime involving dishonesty or breach of trust that is punishable by a year or
more in prison, or is currently charged with such a crime, or has been found by
a regulatory agent or a court to have breached a fiduciary duty involving
personal profit or committed a wilful violation of any law governing banking
securities or insurance. These provisions may prevent stockholders from
nominating themselves or persons of their choosing for election to the Board of
Directors.
Shareholder Action by Written Consent; Special Meetings of Shareholders. Our
shareholders must act only through an annual or special meeting or by unanimous
written consent. Our charter provides that for a period of five years following
the offering, special meetings of shareholders relating to a change in control
of us or amendments to our charter may be called only upon direction of the
Board of Directors. Subject to this restriction, the bylaws provide that holders
of not less than 10% of our outstanding shares may request the calling of a
special meeting. At a special meeting, shareholders may consider only the
business specified in the notice of meeting given by us. The provisions of our
charter and bylaws limiting shareholder action by written consent and calling of
special meetings of shareholders may have the effect of delaying consideration
of a shareholder proposal until the next annual meeting, unless a special
meeting is called at the request of a majority of the Board of Directors or
holders of not less than 10% of our outstanding shares. These provisions also
would prevent the holders of a majority of common stock from unilaterally using
the written consent procedure to take shareholder action.
Advance Notice Provisions for Shareholder Nominations and Proposals. Our bylaws
establish an advance notice procedure for shareholders to nominate directors or
bring other business before an annual meeting of shareholders. A person may not
be nominated for election as a director unless that person is nominated by or at
the direction of our Board of Directors or by a shareholder who has given
appropriate notice to us before the meeting. Similarly, a shareholder may not
bring business before an annual meeting unless the shareholder has given us
appropriate notice of its intention to bring that business before the meeting.
Our Secretary must receive notice of the nomination or proposal not less than 30
days before the annual meeting. A shareholder who desires to raise new business
must provide us with certain information concerning the nature of the new
business, the shareholder and the shareholder's interest in the business matter.
Similarly, a shareholder wishing to nominate any person for election as a
director must provide us with certain information concerning the nominee and the
proposing shareholder.
Advance notice of nominations or proposed business by shareholders gives our
Board of Directors time to consider the qualifications of the proposed nominees,
the merits of the proposals and, to the extent deemed necessary or desirable by
our Board of Directors, to inform shareholders and make recommendations about
those matters.
Authorized but Unissued Shares of Capital Stock. Following the offering, we will
have authorized but unissued shares of common and preferred stock. Our charter
authorizes the Board of Directors to establish one or more series of preferred
stock and, for any series of preferred stock, to determine the terms and rights
of the series, including voting rights, conversion rates, and liquidation
preferences. Although such shares of common and preferred stock could be issued
by the Board of Directors to render more difficult or to discourage an attempt
to obtain control of us by means of a merger, tender offer, proxy contest or
otherwise, it is anticipated that such uses will be unlikely given that SI
Bancorp, MHC must always own a majority of our common stock.
Regulatory Restrictions
Office of Thrift Supervision Regulations. Office of Thrift Supervision
regulations provide that for a period of three years following the date of the
completion of the offering, no person, acting singly or together with associates
in a group of persons acting in concert, will directly or indirectly offer to
acquire or acquire the beneficial ownership of more than 10% of our class of our
equity securities of without the prior written approval of the Office of Thrift
Supervision. Where any person, directly or indirectly, acquires beneficial
ownership of more than 10% of our class of any equity securities without the
prior written approval of the Office of Thrift Supervision, the securities
beneficially owned by such person in excess of 10% will not be voted by any
person or counted as voting shares in connection with any matter submitted to
the stockholders for a vote, and will not be counted as
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outstanding for purposes of determining the affirmative vote necessary to
approve any matter submitted to the stockholders for a vote.
Change in Bank Control Act. The acquisition of 10% or more of our outstanding
common stock may trigger the provisions of the Change in Bank Control Act. The
Office of Thrift Supervision has also adopted a regulation under the Change in
Bank Control Act which generally requires persons who at any time intend to
acquire control of a federally chartered savings association or its holding
company to provide 60 days prior written notice and certain financial and other
information to the Office of Thrift Supervision.
The 60-day notice period does not commence until the information is deemed to be
substantially complete. Control for these purposes exists in situations in which
the acquiring party has voting control of at least 25% of any class of our
voting stock or the power to direct our management or policies. However, under
Office of Thrift Supervision regulations, control is presumed to exist where the
acquiring party has voting control of at least 10% of any class of our voting
securities if specified "control factors" are present. The statute and
underlying regulations authorize the Office of Thrift Supervision to disapprove
a proposed acquisition on certain specified grounds.