<PAGE>
<TABLE>
As filed with the Securities and Exchange Commission on June 11, 1999 Registration No.
<S> <C>
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Rome Bancorp, Inc.
(Name of small business issuer in its charter)
<TABLE>
<S> <C> <C>
Delaware 6035 Application Pending
(State or other jurisdiction of (Primary Standard Industrial Classification Code (I.R.S. Employer
incorporation or organization) Number) Identification No.)
</TABLE>
100 W. Dominick Street, Rome, NY 13440-5810
(315) 336-7300
(Address and telephone number of principal executive offices)
(Address of principal place of business or intended principal place of business)
__________________
Mr. Charles M. Sprock
President and Chief Executive Officer
The Rome Savings Bank
100 W. Dominick Street
Rome, New York 13440-5810
(315) 336-7300
Copy to:
V. Gerard Comizio, Esq.
Thacher Proffitt & Wood
1700 Pennsylvania Avenue, N.W. Suite 800
Washington, D.C. 20006
(202) 347-8400
(Name and address, and telephone of agent for service)
______________
Approximate date of proposed sale to the public: As soon as practicable after
this Registration Statement becomes effective.
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==================================================================================================================================
Title of Each Class of Securities Amount to be Proposed Maximum Offering Proposed Maximum Amount of
to be Registered registered(1) Price Per Share (2) Aggregate Offering Price (2) Registration Fee
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $ 0.01 par value 2,136,664 $8.00 $17,093,312 $4,752
==================================================================================================================================
</TABLE>
(1) Includes the maximum number of shares that may be issued in connection with
this offering.
(2) Estimated solely for the purpose of calculating the registration fee.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said section 8(a),
may determine.
<PAGE>
Rome Bancorp, Inc.
Cross Reference Sheet showing location in the Prospectus of information required
by Items of Form SB-2:
<TABLE>
<CAPTION>
Registration Statement Item and Caption Location or Headings in Prospectus
- --------------------------------------- ----------------------------------
<S> <C>
1. Front of Registration Statement and Outside Outside Front Cover Page
Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages Inside Front and Outside Back Cover Pages
of Prospectus
3. Summary Information and Risk Factors Summary; Risk Factors
4. Use of Proceeds How We Intend to Use the Proceeds form the Offering
5. Determination of Offering Price The Reorganization and the Offering - How We
Determined the Offering Range and the $8.00 Price Per
Share
6. Dilution Not Applicable
7. Selling Security Holders Not Applicable
8. Plan of Distribution Outside Front Cover Page; The Reorganization and the
Offering
9. Legal Proceedings Legal Proceedings
10. Directors, Executive Officers, Promoters Management
and Control Persons
11. Security Ownership of Certain Beneficial Mangement
Owners and Management
12. Description of Securities Description of Capital Stock of Rome Bancorp, Inc.
13. Interest of Named Experts and Counsel Not Applicable
14. Disclosure of Commission Position on Not Applicable
Indemnification for Securities Act Liabilities
15. Organization Within Last Five Years Not Applicable
16. Description of Business Summary; Risk Factors; Management's Discussion and
Analysis of Financial Condition and Results of Operations;
Business of The Rome Savings Bank; Business of Rome
Bancorp, Inc.; Business of Rome, MHC; Management;
Consolidated Financial Statements
17. Management's Discussion and Analysis or Management's Discussion and Analysis of Financial
Plan Condition and Results of Operations
18. Description of Property Business of Rome Savings Bank -- Properties
19. Certain Relationships and Related Management -- Certain Transactions with
Transactions Directors/Trustees and Executive Officers
20. Market for Common Equity and Related Front Cover Page; Summary -- Market for the Common
Stockholder Matters Stock; Risk Factors -- The market for common stock will
be limited; Market for the Common Stock
21. Executive Compensation Management
22. Financial Statements Consolidated Financial Statements
23. Changes in and Disagreements With Not Applicable
Accountants on Accounting and Financial
Disclosure
</TABLE>
<PAGE>
PROSPECTUS
[LOGO]
Rome Bancorp, Inc.
Proposed Holding Company for The Rome Savings Bank
Up To 2,136,664 Shares of Common Stock
Rome Bancorp, Inc. is a new corporation that is offering shares of its common
stock. The shares we are offering represent less than half of the outstanding
common stock of Rome Bancorp, Inc. The Rome Savings Bank formed Rome Bancorp,
Inc., to own The Rome Savings Bank as part of a reorganization of our structure.
Rome, MHC, a mutual savings bank holding company will own more than half of the
outstanding common stock of Rome Bancorp, Inc. We will list our common stock on
the Nasdaq Stock Market under the symbol "ROME."
-------------------------------------------------------------------
TERMS OF THE OFFERING
Price: $8.00 per share
<TABLE>
<CAPTION>
Minimum Maximum
----------- -----------
<S> <C> <C>
Number of shares..................................... 1,373,281 1,857,969
Underwriting commissions and expenses................ $ 832,147 $ 903,493
Net proceeds to Rome Bancorp, Inc.................... $10,154,101 $13,960,259
Net proceeds per share to Rome Bancorp, Inc.......... $ 7.39 $ 7.51
</TABLE>
We may sell up to 2,136,664 shares because of regulatory
considerations or changes in market or economic conditions.
-------------------------------------------------------------------
Please read the Risk Factors beginning on page 12.
These securities are not deposits or accounts and are not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency.
Neither the SEC, the Federal Deposit Insurance Corporation, the New York
State Department of Banking nor any state securities regulator has approved or
disapproved these securities or determined if this prospectus is accurate or
complete. it is illegal for anyone to tell you otherwise.
Sandler O'Neill & Partners, L.P.
[ ], 1999
<PAGE>
[MAP OF NEW YORK DIVIDED BY COUNTY WITH CLOSE-UP OF ONEIDA COUNTY
SHOWING NUMBER OF ROME SAVINGS BANK BRANCH OFFICES]
2
<PAGE>
SUMMARY
To more fully understand the offering, you should read this entire document
carefully, including the consolidated financial statements and the notes to the
consolidated financial statements.
Our Reorganization and Stock Offering
The Rome Savings Bank (Rome Savings) is reorganizing into the mutual
holding company structure. As part of the reorganization, Rome Bancorp, Inc.
(Rome Bancorp) is offering shares of its common stock to the public. After the
reorganization, Rome Bancorp will own Rome Savings.
The Companies
The Rome Savings Bank
We are a New York-chartered mutual savings bank. Our mission is to serve as
a profitable community-oriented provider of traditional banking products and
services to individuals and small business organizations, including products
such as residential and commercial mortgages, consumer loans, commercial loans,
personal loans to business owners and a variety of deposit products.
Rome Savings operates through 4 full service banking offices - three of
which are located in Rome and one in New Hartford, New York. As of June 30,
1998, we maintained a 7.4% share of all Oneida County, New York deposits,
positioning us as the fifth largest (in total deposits) depository institution
in Oneida County. At June 30, 1998, we maintained a 38.7% market share of all
reported funds on deposit in the City of Rome, making us the largest depository
institution in Rome. At March 31, 1999, we had assets of $224.3 million,
deposits of $191.9 million and equity of $28.9 million.
Rome Bancorp, Inc.
Rome Bancorp will be the stock holding company for Rome Savings after the
reorganization. Rome Bancorp has not engaged in any business to date.
Rome, MHC
Rome, MHC will own more than half of the outstanding common stock of Rome
Bancorp after the reorganization. We do not expect that Rome, MHC will engage
in any business activity other than owning a majority of the common stock of
Rome Bancorp and managing dividends it receives from Rome Bancorp. We do not
expect that Rome, MHC will waive dividends declared by Rome Bancorp. Rome, MHC
has not engaged in any business to date.
3
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The following are highlights of Rome Savings operating strategy:
. Community Banking.
-----------------
Rome Savings, as the only bank headquartered in Rome, NY, strives to
remain a leader in meeting the needs of the local community and in
providing high quality service with competitive fees and rates to the
individuals and small businesses which we have served since 1851. In
addition to residential lending, Rome Savings has a long standing
commitment to commercial real estate, commercial and consumer lending. The
major components of our community banking strategy are discussed below.
- Residential Lending.
-------------------
Rome Savings emphasizes the origination of residential mortgage loans.
At March 31, 1999, we had $65.9 million of residential mortgage loans,
representing 48.2% of our total loan portfolio. Following the
reorganization, we will seek to expand originations of mortgage loans
primarily through the marketing of and sale to the secondary market of
30 year fixed-rate mortgage loans. We believe that the expansion of
our residential lending portfolio will enhance our reputation as a
service-oriented institution which meets the needs of its local
community.
- Commercial Lending.
------------------
Unlike many savings banks, Rome Savings has a long standing commitment
to commercial lending in its market area. We originate commercial real
estate and commercial business loans both within and outside of Oneida
County, New York. As of March 31, 1999, 21.2% of our loan portfolio
consisted of commercial real estate loans and 12.7% consisted of
commercial loans. Following the reorganization, we will continue to
expand our commercial loan portfolio by targeting small- and medium-
sized businesses in the local market area and elsewhere in the greater
New York City metropolitan area. This expansion will allow us to
increase the yield on our loan portfolio and to diversify our assets
in order to continue to meet the needs of the individuals and small
businesses which we serve.
- Consumer Lending.
----------------
Rome Savings also has a tradition of placing significant emphasis on
consumer lending. As of March 31, 1999, 17.7% of our loan portfolio
consisted of consumer loans. We offer a wide variety of consumer loan
products including property improvement loans, new and used automobile
loans, secured and unsecured passbook loans and education loans. We
plan to begin offering home equity lines of credit in the fourth
quarter of 1999.
. Expanded Delivery Systems.
-------------------------
The increased use of alternative delivery channels has simplified and
reduced the costs of financial transactions for consumers, businesses and
financial institutions. In addition to conducting financial transactions
at branch offices, customers are increasingly using
4
<PAGE>
ATMs, online banking and online bill payment and electronic fund transfer
services. In response to these trends, we recently began offering our 24
hour Telebanker product which provides our customers with around the clock
access to their accounts through the use of a touch tone telephone.
. Capital Strength and Profitability.
----------------------------------
Our policy has always been to maintain the financial strength of Rome
Savings through risk management, a sound financial condition and consistent
earnings. At March 31, 1999, our ratio of equity to assets was 12.9%, our
return on average assets was 0.71% and our return on average equity was
5.45%. We plan to use the proceeds received in the offering to increase
our loan originations and our net income while maintaining our commitment
to capital strength and asset quality.
. Asset Quality.
-------------
Through our commitment to conservative loan underwriting guidelines and
investment in high grade assets, we have recently experienced low levels of
late payments and losses on loans. At March 31, 1999, our ratio of non-
performing assets to total assets was 0.38% and our ratio of allowance for
loan losses to non-performing loans was 330.1%. These ratios are favorable
compared to those of most other savings institutions.
. Interest Rate Strategy.
----------------------
Rome Savings seeks to maintain an acceptable balance between maximizing
yield potential and limiting exposure to changing interest rates. To
reduce the risk that our earnings will be hurt if interest rates change we:
(1) limit our fixed rate one- to four-family mortgage loans that we retain
in our loan portfolio to 20 years or less; (2) as of May 1999, began
originating 30 year fixed rate mortgages to be sold into the secondary
market; (3) emphasize investments with short- and intermediate-term
maturities of less than ten years; and (4) make commercial loans tied to
the prime rate.
5
<PAGE>
Description of Our Structure After the Reorganization
This chart shows our new structure, which is commonly referred to as a
mutual holding company structure, after the reorganization:
[CHART APPEARS HERE]
Persons Who Can Order Stock in the Offering
We are offering the shares of common stock of Rome Bancorp in what we call
a "subscription offering" in the order of priority listed below:
(1) Depositors with accounts at Rome Savings with total balances of at
least $100 on December 31, 1997;
(2) Our employee stock ownership plan, which will provide retirement
benefits to our employees; and
(3) Depositors with accounts at Rome Savings with total balances of at
least $100 on June 30, 1999;
The shares of common stock not purchased in the subscription offering will
be offered in what we call a "community offering" in the order of priority
listed below:
(1) Employees and depositors with accounts at Rome Savings opened after
June 30, 1999;
(2) Residents of Oneida County, New York; and
6
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(3) Other members of the public to whom we deliver a prospectus.
We may offer shares of common stock not purchased in either the subscription
offering or community offering to the public through a selling group of brokers
on a best efforts basis or in an underwritten public offering.
Terms of the Offering
We are offering between 1,373,281 and 1,857,969 shares of common stock of
Rome Bancorp to the public. The number of shares we sell in the offering may
increase by up to 15% to 2,136,664 shares as a result of changes in financial
markets. If we increase the number of shares we issue by up to 15%, you will not
have the opportunity to change or cancel your stock order. The offering price
is $8.00 per share. Sandler O'Neill & Partners, L.P. will use its best efforts
to assist us in selling our stock.
How We Determined the Offering Range and the $8.00 Price Per Share
The offering range is based on an independent appraisal of Rome Savings by
RP Financial, LC., an appraisal firm experienced in appraisals of savings
institutions. RP Financial has estimated that our market value at May 28, 1999,
was between $23.4 million and $31.6 million. This results in an offering of
between 1,373,281 and 1,857,969 shares of stock at an offering price of $8.00
per share because we are only offering 47% of our stock to the public. RP
Financial's estimate of our market value was based in part upon our financial
condition and results of operations and the effect of the additional capital
raised in this offering. RP Financial will update the independent appraisal
before we complete our reorganization.
Two of the factors that RP Financial considered in determining our market
value were the price-to-book ratio and the price-to-earnings ratio or P/E ratio.
The price-to-book ratio represents the price per share of stock divided by its
book value per share. After completion of the reorganization, each share of
Rome Bancorp common stock, including the shares we issue to Rome, MHC, will have
a book value of $11.49, assuming we sell 1,615,625 shares. This means that the
price you pay for each share in this offering will be 69.6% of the book value.
The P/E ratio represents the price per share of stock divided by earnings
or net income per share assuming investment of the proceeds. In our case, at
March 31, 1999, our P/E ratio would have been 14.29x, assuming we sell 1,615,625
shares of stock.
Limits on Your Purchase of the Common Stock
Your orders for common stock will be limited in the following ways:
(1) the minimum order is 25 shares;
(2) in the subscription offering, the maximum amount that an individual
with his or her associates may purchase is $150,000;
(3) in the community offering, the maximum amount that an individual with
his or her associates may purchase is $150,000;
7
<PAGE>
(4) the total amount that an individual with his or her associates may
purchase is $150,000; and
(5) if we receive orders for a greater number of shares than we are
offering, then we will allocate the shares that we issue as described
in "The Reorganization and The Offering--Limitations on Common Stock
Purchases;" this may result in your receiving a smaller number of
shares than you ordered.
We may increase both $150,000 purchase limitations if we do not receive orders
for at least 1,373,281 shares. For additional information on these purchase
limitations see "The Reorganization and The Offering -- Limitations on Common
Stock Purchases."
How You May Pay for Your Shares
In the subscription offering and the community offering you may only pay
for your shares by:
(1) personal check, official bank check or money order; or
(2) authorizing us to withdraw money from your deposit accounts maintained
with Rome Savings.
We will not accept wire transfers for payment of shares. We also cannot lend
funds to anyone for the purpose of purchasing shares.
You May not Sell or Transfer Your Subscription Rights
If you order stock in the subscription offering, you must state that you
are purchasing the stock for yourself and that you have no agreement or
understanding to sell or transfer your rights. We intend to take legal action
against you if you sell or give away your subscription rights. We will not
accept your order if we have reason to believe that you sold or transferred your
subscription rights.
Deadline for Orders of Common Stock
If you wish to purchase shares, you must submit, by mail, overnight courier
or by hand delivering to any of our offices, a properly completed stock order
form and certification, together with payment for the shares by 5:30 p.m.,
Eastern time, on [ ], 1999, unless we extend this deadline.
Termination of the Offering
The subscription offering will terminate at 5:30 p.m., Eastern time, on
[ ], 1999. We expect that the community offering will terminate at the same
time, but we may extend the date without notice to you, until [ ], 1999,
unless regulators approve a later date.
8
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Market for the Common Stock
We expect the common stock to trade on the Nasdaq Stock Market under the
symbol "ROME." Sandler O'Neill intends to make a market in the common stock but
it is under no obligation to do so.
How We Intend to Use the Proceeds We Raise from the Offering
Assuming we sell 1,857,969 shares in the subscription offering, we intend
to distribute the net proceeds from the offering as follows:
. $6.9 million will be contributed to Rome Savings;
. $1.2 million will be loaned to the employee stock ownership plan of
Rome Savings to fund its purchase of common stock; and
. $5.7 million will be retained by Rome Bancorp;
Rome Bancorp may use the net proceeds retained from the offering as a
possible source of funds to pay dividends to stockholders, to repurchase common
stock, to finance the possible acquisition of other financial institutions and
other businesses that are related to banking, to invest in securities or for
other general corporate purposes. Rome Savings may use the proceeds it receives
to fund new loans, to purchase mortgage-backed securities and investment
securities or for general corporate purposes, including the possible
establishment or acquisition of branch offices.
We Intend to Contribute Cash and Stock to a New Charitable Foundation
We intend to establish a charitable foundation, The Rome Savings Bank
Charitable Foundation, as part of our reorganization and offering to further our
commitment to the local community. We will fund the foundation with 2.0% of
shares of our common stock issued in the offering and $100,000 in cash. We plan
for the foundation to support charitable causes in our primary market area. If
we establish the foundation, then the amount of common stock sold to the public
will be less than if we completed the offering without the foundation. See "Risk
Factors - The establishment of The Rome Savings Bank Charitable Foundation will
reduce our earnings" for a further discussion of the financial impact of the
foundation.
Our Policy Regarding Dividends
We will consider paying a cash dividend on the common stock in the future.
We have not made any decisions relating to the amount or timing of any
dividends, if we decide to pay dividends. Our ability to pay dividends depends
on a number of factors including:
. the amount of net proceeds we receive in the offering;
. investment opportunities available to Rome Savings or Rome Bancorp;
. Rome Savings' capital requirements;
. our financial results;
. tax considerations; and
. general economic conditions.
9
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We do not guarantee that we will pay dividends, or that we will not reduce
or eliminate dividends in the future.
Our Directors, Officers and Employees Will Have Additional Compensation and
Benefit Programs After the Reorganization
We are adding new benefit plans for our officers and employees at no cost
to them:
. Employee Stock Ownership Plan. This plan will cover most of our
salaried employees. We will lend it money to buy up to 8% of the
shares we sell in the offering. It will buy them either in the
offering or in the open market. The plan will distribute the stock to
employees over a ten-year period as additional compensation for their
services.
. Benefit Restoration Plan. This plan will provide Charles M. Sprock,
Chairman, President & Chief Executive Officer additional benefits if
the tax laws limit his benefits or if he retires before the
distribution of all stock under the employee stock ownership plan.
We are also adding the following termination pay arrangement:
. Employment Agreement. We are entering into an employment agreement
with Mr. Sprock. If we discharge him without cause, or if he resigns
because we do not meet our obligations under this agreement, we must
make a termination payment.
We also plan to add the following stock-based benefit plans for our
directors, officers and employees:
. Stock Option Plan. Under this plan, we may grant our officers,
directors and employees options to purchase up to 10% of our
outstanding common stock, including shares issued to the foundation at
a price that is set on the date we grant the option. The price that
we set cannot be less than our stock's current trading price when we
grant the options, so the options will have value only if our stock
price increases. Recipients of options will have up to ten years to
exercise their options.
. Management Recognition Plan. This plan will allow selected officers,
directors and employees to receive up to 4% of our outstanding common
stock, including shares issued to the foundation, without making any
cash payment, if they work for us until the end of a specified service
period.
Assuming we sell 1,857,969 shares, we expect to ask our stockholders for
approval to grant options to purchase up to 185,797 of our shares and make stock
grants under a management recognition plan of up to 74,318 shares under the
plans described above. We will not implement a stock option plan or management
recognition plan unless our stockholders approve them. We do not expect to ask
our stockholders to approve these plans until at least six months after we
complete the offering. We expect to obtain the shares we would need for these
plans through stock repurchases.
10
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The following table presents the dollar value of the shares that we expect
to grant under the employee stock ownership plan and the contemplated management
recognition plan and of those to be granted under the stock option plan, and the
percentage of Rome Bancorp's outstanding common stock that will be represented
by these shares. We based the value of the shares for the employee stock
ownership plan and management recognition plan on a price of $8.00 per share and
the issuance of 1,857,969 shares of common stock.
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<CAPTION>
Percentage of
Value of common stock sold
Benefit plan shares granted in the offering
------------ -------------- -----------------
(In Thousands)
<S> <C> <C>
Employee stock ownership plan.... $1,189 8%
Management recognition plan...... 595 4%
Stock option plan................ - 10%
------ --
$1,784 22%
====== ==
</TABLE>
Possible Conversion of Rome, MHC to Stock Form
In the future, Rome, MHC may convert from the mutual to capital stock form,
in a transaction commonly known as a "second-step conversion." If Rome, MHC
were to undertake a second-step conversion, Rome Bancorp's public stockholders
would own approximately the same percentage of the resulting entity as they
owned prior to the second-step conversion. This percentage would be adjusted to
reflect the assets owned by Rome, MHC and any dividends waived by Rome, MHC.
The board of trustees has no current plan to undertake a "second-step conversion
transaction." For a description of this possible second-step conversion, see
"The Reorganization and The Offering -- Possible Conversion of Rome, MHC to
Stock Form."
How You May Obtain Additional Information Regarding the Offering
If you have any questions regarding the offering or the reorganization,
please call the Conversion Center at (315) [ ].
11
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RISK FACTORS
- --------------------------------------------------------------------------------
You should consider carefully the following risk factors before deciding
whether to invest in our common stock.
- --------------------------------------------------------------------------------
Changes in interest rates may hurt our profits.
To be profitable, we have to earn more money in interest and fees than we
pay as interest and other expenses. Of our residential mortgage loans, 72.6%
have interest rates that are fixed for the term of the loan. We primarily
originate loans with terms of up to 15 or 20 years, while our deposit accounts
consist of time deposit accounts with remaining terms to maturity of less than
one year, as well as demand deposits such as NOW and passbook accounts. We have
also recently begun to originate 30 year mortgages for sale to the secondary
market. If interest rates rise, the amount of interest we pay on deposits is
likely to increase more quickly than the amount of interest we receive on our
loans, mortgage-backed securities and investment securities. This could cause
our profits to decrease. Rising interest rates may also reduce the value of our
mortgage-backed securities and investment securities. If interest rates fall,
many borrowers may refinance more quickly, and interest rates on interest
earning assets could fall, and perhaps lower the interest rates on our
liabilities. This could also cause our profits to decrease. For additional
information on our exposure to interest rates, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Management of
Interest Rate Risk."
Low demand for mortgage, commercial and consumer loans may lower our
profitability.
Making loans is our primary business and primary source of profits. In the
past, our loan demand has decreased due to economic conditions in our primary
market area. If customer demand for loans decreases, our profits may decrease
because our alternative investments earn less revenue for us than residential,
commercial and consumer loans. Customer demand for loans could be reduced by a
weaker economy, an increase in unemployment, a decrease in real estate values,
an increase in interest rates or increased competition from other institutions.
After the reorganization our return on average equity will be low compared
to other companies. This could hurt the price of our common stock.
We will not be able to deploy the increased capital from this offering
immediately. Our ability to profitably leverage our new capital will be
significantly affected by industry competition for loans and deposits.
Initially, we intend to invest the net proceeds in short term investments which
generally have lower yields than residential mortgage loans. This will reduce
our return on average equity to a level that will be lower than our historical
ratios. For 1998, our return on average equity was 5.34%. Until we can
leverage our increased capital and grow interest-earning assets, we expect our
return on equity to be below the industry average, which may negatively impact
the value of your stock.
12
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Our stock price may fall below $8.00 following the offering like other recent
mutual holding company offerings.
Publicly traded stocks like ours may experience price fluctuations
following a public offering. These price fluctuations may be unrelated to the
operating performance of a particular company whose shares are traded. In
several cases, common stock issued by recently converted mutual holding
companies has traded below its initial public offering price. The purchase
price of our common stock in the offering is based on the independent appraisal
by RP Financial. After our shares begin trading, our trading price will be
determined by the marketplace, and may be influenced by many factors, including:
. prevailing interest rates;
. investor perceptions of Rome Bancorp; and
. general industry and economic conditions.
Due to the risk factors discussed in this section, as well as other
factors, we cannot assure you that following our reorganization to mutual
holding company form that the trading price of our common stock will be at or
above the $8.00 per share initial offering price.
Our local economy may affect our future growth possibilities.
Our market area is principally Oneida County, New York. In recent years,
the local economy has been recovering from the loss of certain key employers,
such as Griffiss Air Force Base in Rome and Martin Marietta in Utica. While we
expect the Oneida County economy to improve over the next several years, if the
local economy does not improve, it may have an impact on our ability to be
profitable.
Strong competition within our market area may reduce our customer base.
Competition in the banking and financial services industry is intense. We
have competed for customers by offering excellent service and competitive rates
on our loans and deposit products. We compete with commercial banks, savings
institutions, mortgage banking firms, credit unions, finance companies, mutual
funds, insurance companies, and brokerage and investment banking firms. Some of
these competitors have greater resources than we do and may offer services that
we do not provide. For example, although we now offer banking services via
telephone through our new Telebanker product and plan to offer PC banking by the
end of the year, we do not provide insurance products, trust or investment
services, or a wide variety of uninsured products. Customers who seek "one stop
shopping" may be drawn to institutions who provide such services. Our
profitability depends upon our continued ability to successfully compete in our
market area.
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The implementation of stock-based benefits will increase our future compensation
expense and reduce our earnings.
We intend to adopt a stock option plan which will provide for the granting
of options to purchase common stock, to adopt a management recognition plan that
will provide for awards of common stock to our eligible officers, employees and
directors and to have an employee stock ownership plan which will purchase
shares in the reorganization. The Management Recognition Plan and the ESOP will
increase our future costs of compensating our directors and employees. The cost
of these plans will vary based on our stock price.
Consumer, Commercial Business and Commercial Real Estate Lending increase
lending risk because of the geographic concentration of such loans and the
higher risk, that the loans will not be repaid.
We originate consumer, commercial real estate and commercial business loans
both inside and outside our primary market area. These types of loans generally
expose a lender to greater credit risk than loans secured by one-to-four family
real estate. These loans have higher risks than loans secured by residential
real estate because:
. Consumer Loans. Consumer loans (such as car loans) are collateralized
with assets that may not provide an adequate source of payment of the
loan due to depreciation, damage or loss;
. Commercial Real Estate Loans. Repayment of the loan is dependent on
income being generated in amounts sufficient to cover operating
expenses and debt service;
. Commercial Business Loans. Repayment is generally dependent upon the
successful operation of the borrower's business.
In addition, at March 31, 1999, 12.7% of our lending portfolio consisted of
loans located in the greater New York City metropolitan area. While those loans
were performing in accordance with their terms at March 31, 1999, no assurance
can be made that the New York City economy will continue at current levels or
that such loans will continue to perform in accordance with their terms in the
future.
The year 2000 issue could hurt our operations and our profits and could lower
the value of your stock.
We rely upon computers to conduct our daily business. Failure of any of
our computer systems, those of the parties we do business with or the public
infrastructure, including the electric and telephone companies, to process
transactions after January 1, 2000, may disrupt our ability to do routine
business and to service our customers. For example, we may not be able to
process withdrawals or deposits, prepare account statements or engage in any of
the transactions that constitute our normal operations. This could hurt our
profits. For additional information regarding the year 2000 issue, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Issues for the Year 2000."
14
<PAGE>
Rome, MHC'S Voting control over Rome Bancorp may prevent transactions you would
like.
Rome, MHC will own a majority of Rome Bancorp's common stock after the
reorganization. The same trustees and officers who manage Rome Savings will
manage Rome, MHC. The board of trustees of Rome, MHC will control the outcome
of most matters put to a vote of stockholders of Rome Bancorp. We cannot assure
you that the votes cast by Rome, MHC will be in your personal best interests as
a stockholder. For more information regarding your lack of voting control over
Rome Bancorp, see "Rome, MHC" and "Restrictions on Acquisition of Rome Bancorp
and Rome Savings Bank."
The establishment of The Rome Savings Bank Foundation will reduce our earnings.
Rome Bancorp intends to contribute to the Rome Savings Bank Foundation
shares of its common stock equal to 2.0% of the shares sold in the offering,
plus $100,000. This contribution will be a significant expense to Rome Bancorp
and will negatively affect our operating results and earnings for the year
ending December 31, 1999. The contribution to the foundation will reduce your
ownership in Rome Bancorp since fewer shares will be available for the public to
purchase in the offering.
Forward Looking Statements
This prospectus contains certain "forward-looking statements" which may be
identified by the use of such words as "believe," "expect," "anticipate,"
"should," "planned," "estimated" and "potential." Examples of forward-looking
statements include, but are not limited to, estimates with respect to our
financial condition, results of operations and business that are subject to
various factors which could cause actual results to differ materially from these
estimates and most other statements that are not historical in nature. These
factors include, but are not limited to, general and local economic conditions,
changes in interest rates, deposit flows, demand for mortgage and other loans,
real estate values, and competition; changes in accounting principles,
policies, or guidelines; changes in legislation or regulation; and other
economic, competitive, governmental, regulatory, and technological factors
affecting our operations, pricing, products and services.
15
<PAGE>
SELECTED FINANCIAL AND OTHER DATA
The selected data presented below under the captions "Selected Financial
Condition Data" and "Selected Operating Data" for, and as of the end of, each of
the years in the five-year period ended December 31, 1998, are derived from the
audited consolidated financial statements of The Rome Savings Bank and
subsidiaries. The consolidated financial statements as of December 31, 1998 and
1997 and for the years then ended are included elsewhere in this Prospectus.
The selected data presented below as of March 31, 1999 and for the three-month
periods ended March 31, 1999 and 1998 are derived from the unaudited
consolidated financial statements of The Rome Savings Bank and subsidiaries
included elsewhere in this Prospectus. Results for the three-month period ended
March 31, 1999 do not necessarily indicate the results that may be expected for
the year ending December 31, 1999.
<TABLE>
<CAPTION>
At March 31, At December 31,
------------ -----------------------------------------------
1999 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ----
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Selected Financial ConditioN Data:
Total assets............................ $224,279 $225,273 $214,356 $212,046 $214,823 $204,626
Loans, net.............................. 134,954 134,848 130,975 137,285 139,347 138,123
Securities.............................. 54,276 56,508 56,628 48,324 45,406 39,810
Total cash and cash equivalents......... 26,129 25,214 17,299 16,692 20,065 16,848
Other Assets............................ 2,895 2,874 2,487 2,668 2,588 2,553
Total deposits.......................... 191,926 189,130 184,496 184,579 188,358 180,458
Total equity............................ 28,939 28,662 26,794 24,886 24,133 22,009
Allowance for loan losses............... 1,898 1,956 1,742 1,708 1,645 1,579
Non-performing loans.................... 575 931 1,474 3,252 3,583 2,592
Non-performing assets................... 842 1,224 3,100 4,702 5,153 4,975
</TABLE>
<TABLE>
<CAPTION>
For the three Months ended
March 31, For the Year Ended December 31,
------------------------- ----------------------------------------------
1999 1998 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
(In thousands)
Selected Operating Data:
Interest income............................. $3,730 $3,807 $15,511 $15,542 $15,629 $15,660 $14,959
Interest expense............................ 1,733 1,781 7,203 7,311 7,487 7,148 6,061
------ ------ ------- ------- ------- ------- -------
Net interest income......................... 1,997 2,026 8,308 8,231 8,142 8,512 8,898
Provision for loan losses................... 0 75 390 360 1,850 767 300
------ ------ ------- ------- ------- ------- -------
Net interest income after provision
for loan losses.......................... 1,997 1,951 7,918 7,871 6,292 7,745 8,598
Non-interest income:
Service charges and other income............ 254 197 768 936 1,179 867 1,835
Net gain (loss) on sale of securities....... 0 139 314 157 410 (107) (12)
------ ------ ------- ------- ------- ------- -------
Total noninterest income.................... 254 336 1,082 1,093 1,589 760 1,823
Total noninterest expense................... 1,688 1,481 6,622 6,430 6,140 6,599 6,388
------ ------ ------- ------- ------- ------- -------
Income before income taxes.................. 563 806 2,378 2,534 1,741 1,906 4,033
Income taxes................................ 174 325 853 996 735 689 1,605
------ ------ ------- ------- ------- ------- -------
Income before cumulative effect of a........ 389 481 1,525 1,538 1,006 1,217 2,428
Cumulative effect of a change in
accounting principles net of tax.......... 0 0 0 0 0 0 (764)
------ ------ ------- ------- ------- ------- -------
Net income.................................. $ 389 $ 481 $ 1,525 $ 1,538 $ 1,006 $ 1,217 $ 1,664
====== ====== ======= ======= ======= ======= =======
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
At or for the Three At or For the
Months Ended March 31, Years Ended December 31,
-----------------------------------------------------------------------
Selected Financial Ratios and Other Data: 1999 1998 1998 1997 1996 1995 1994
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Performance Ratios:
Return on average assets.............................. 0.71% 0.91% 0.70% 0.71% 0.47% 0.58% 0.82%
Return on average equity.............................. 5.45% 7.01% 5.34% 5.79% 3.99% 5.26% 7.64%
Net interest rate spread (1).......................... 3.31% 3.47% 3.47% 3.52% 3.53% 3.89% 4.33%
Net interest margin (2)............................... 4.08% 4.13% 4.19% 4.13% 4.10% 4.42% 4.72%
Non-interest expense to average assets................ 3.08% 2.80% 3.04% 2.99% 2.85% 3.17% 3.13%
Efficiency ratio (3).................................. 74.99% 66.62% 72.96% 70.14% 65.87% 70.36% 59.52%
Average interest-earning assets to average
interest-bearing liabilities......................... 122.53% 118.46% 120.15% 116.83% 115.03% 114.51% 112.37%
Capital Ratios:
Average equity to average assets...................... 13.00% 12.95% 13.09% 12.34% 11.70% 11.11% 10.68%
Equity to assets...................................... 12.90% 12.59% 12.72% 12.50% 11.74% 11.23% 10.76%
Regulatory Capital Ratios:
Leverage capital...................................... 12.77% 12.54% 12.73% 12.33% 11.68% 11.19% 11.21%
Total risk-based capital.............................. 22.95% 22.92% 22.80% 22.20% 21.20% 21.40% 20.44%
Asset Quality Ratios:
Non-performing loans to total loans................... 0.42% 1.12% 0.68% 1.11% 2.34% 2.54% 1.86%
Non-performing assets to total assets................. 0.38% 1.40% 0.54% 1.45% 2.22% 2.40% 2.43%
Allowance for loan losses to non-performing
loans................................................ 330.09% 123.02% 210.32% 118.18% 52.52% 45.91% 60.92%
Allowance for loan losses to total loans.............. 1.39% 1.38% 1.43% 1.31% 1.23% 1.17% 1.13%
Other Data:
Number of deposit accounts............................ 33,483 32,767 34,693 34,003 34,218 34,536 34,434
Branches.............................................. 4 4 4 4 3 3 3
</TABLE>
__________________
(1) We determined this number by subtracting the weighted average cost of
average interest-bearing liabilities from the weighted average yield on
average interest-earning assets.
(2) We determined this ratio by dividing net interest income, after giving
effect to the reduction in state and federal income taxes from the
municipal securities, by average interest-earning assets.
(3) We determined this ratio by dividing total non-interest expense by the sum
of net interest income and total non-interest income (adjusted to exclude
net gains on securities transactions).
17
<PAGE>
THE ROME SAVINGS BANK
Rome Savings is a New York-chartered mutual savings bank, chartered in
1851. Rome Savings is the only bank headquartered in Rome, New York. Our
deposits are insured by the FDIC. We are examined and regulated by the New York
State Department of Banking and the FDIC. Rome Savings Bank's executive offices
are located at 100 W. Dominick Street, Rome, New York 13440 and its telephone
number is (315) 336-7300.
Rome Savings is a community and customer oriented retail savings bank
offering traditional deposit products, residential real estate mortgage loans
and consumer, commercial and commercial real estate loans. Rome Savings
operates through 4 full service banking offices -three of which are located in
Rome and one in New Hartford, New York. As of June 30, 1998, Rome maintained a
7.4% share of all Oneida County, New York deposits, positioning us as the fifth
largest (in total deposits) depository institution in Oneida County. At June
30, 1998, we maintained a 38.7% market share of all reported funds on deposit in
the City of Rome, making us the largest depository institution in Rome. At March
31, 1999, we had assets of $224.3 million, deposits of $191.9 million and equity
of $28.9 million.
At March 31, 1999, we had total loans of $136.9 million, of which $65.9
million, or 48.2%, were residential mortgage loans. Of the residential
mortgage loans outstanding at that date, 27.4% were adjustable-rate mortgage
loans and 72.6% were fixed-rate loans. We retain substantially all of the loans
that we originate. For further information on our operations and financial
condition, see "Business of Rome Savings Bank."
ROME BANCORP, INC.
Rome Bancorp is a Delaware corporation organized on June 9, 1999. Rome
Bancorp has not engaged in any business to date, and, in the future will serve
as the holding company of Rome Savings following the reorganization. A majority
of the outstanding shares of Rome Bancorp's common stock will be owned by Rome,
MHC. Rome Bancorp's executive offices are located at 100 W. Dominick Street,
Rome, New York 13440 and its telephone number is (315) 336-7300.
ROME, MHC
As part of our reorganization, Rome Savings will organize Rome, MHC as a
New York chartered mutual savings bank holding company which will be registered
as a bank holding company with the Federal Reserve Board. Persons who had
liquidation rights with respect to Rome Savings as of the date of the
reorganization will continue to have liquidation rights solely with respect to
Rome, MHC. Their liquidation rights in Rome, MHC will exist as long as they
maintain a deposit account at Rome Savings. Rome, MHC's executive offices are
located at 100 W. Dominick Street, Rome, New York 13440 and its telephone number
is (315) 336-7300.
Rome, MHC's principal assets will be the shares of common stock of Rome
Bancorp it receives in the reorganization and approximately $100,000 it receives
as its initial capitalization. At the present time, we expect that Rome, MHC
will not engage in any business activity other than its investment in a majority
of the common stock of Rome Bancorp and the management of any
18
<PAGE>
cash dividends received from Rome Bancorp. Federal and state law and regulations
require that as long as Rome, MHC is in existence it must own a majority of Rome
Bancorp's common stock. Federal and state law, regulations and the plan of
reorganization permit Rome, MHC to convert to the stock form of organization.
For additional information regarding a stock conversion, see "Regulation of Rome
Savings Bank and Rome Bancorp -- Possible Conversion of Rome, MHC to Stock
Form."
HOW WE INTEND TO USE THE PROCEEDS FROM THE OFFERING
The net proceeds will depend on the total number of shares of common stock
sold in the offering, which in turn will depend on RP Financial's appraisal,
regulatory and market considerations, and the expenses incurred in connection
with the offering. Although we will not be able to determine the actual net
proceeds from the sale of the common stock until we complete the offering, we
estimate the net proceeds to be between $10.1 million and $13.9 million.
Rome Bancorp intends to distribute the net proceeds from the offering as
follows:
<TABLE>
<CAPTION>
Number of Shares Sold
-----------------------
1,373,281 1,857,969
--------- ---------
(Dollars in Thousands)
<S> <C> <C>
Offering proceeds...................................... $ 10,986 $ 14,864
Offering expenses...................................... 832 903
Cash contribution to foundation........................ 100 100
Net offering proceeds.................................. 10,054 13,861
Less:
Proceeds contributed to Rome Savings................ 5,027 6,930
Proceeds used for loan to employee
stock ownership plan.............................. 879 1,18
---------- ----------
Proceeds remaining for general corporate purposes...... $ 4,148 $ 5,742
========== ==========
</TABLE>
If regulatory or market conditions change and we are required to sell
2,136,664 shares of stock, then we estimate the net proceeds to be $16.0
million. If we sell 2,136,664 shares of stock, then our loan to the employee
stock ownership plan would be $1.4 million.
The net proceeds may vary because total expenses relating to the
reorganization may be more or less than our estimates. For example, our
expenses would increase if a syndicated community offering or underwritten
public offering are used to sell shares not purchased in the subscription
offering and community offering. The net proceeds will also vary if the number
of shares to be sold in the offering is adjusted to reflect a change in the
estimated pro forma market value of Rome Bancorp and Rome Savings. Payments for
shares made through withdrawals from existing deposit accounts will not result
in the receipt of new funds for investment by Rome Savings but will result in a
reduction of Rome Savings' deposits and interest expense as funds are
transferred from interest-bearing time deposits or other deposit accounts.
19
<PAGE>
Rome Bancorp may use the proceeds it retains from the offering:
(1) to pay dividends to stockholders;
(2) to repurchase shares of common stock issued in the offering;
(3) to finance the possible acquisition of financial institutions or other
businesses that are related to banking;
(4) to invest in securities; and
(5) for general corporate purposes.
Rome Savings may use the proceeds it receives from the offering:
(1) to fund new loans;
(2) to purchase investment securities;
(3) to finance the possible establishment or acquisition of branch
offices; and
(4) for general corporate purposes.
OUR POLICY REGARDING DIVIDENDS
We will have the authority to declare dividends on our common stock upon
completion of the offering. We intend to consider a policy of paying cash
dividends on our common stock. We have not, however, decided when we will
declare a dividend or the amount of any dividend. Our board of directors will
decide on any future payment of dividends, depending upon our financial
condition, results of operations, tax considerations, industry standards,
economic conditions, regulatory restrictions that affect the payment of
dividends by Rome Savings to Rome Bancorp and any other relevant factors. We
cannot guarantee that we will pay dividends or that, if paid, we will not reduce
or eliminate dividends in the future.
If Rome Bancorp pays dividends to its stockholders, it will be required to
pay dividends to Rome, MHC, unless Rome, MHC elects to waive dividends. We do
not currently anticipate that Rome, MHC will waive dividends paid by Rome
Bancorp. Any decision to waive dividends will be subject to regulatory
approval. See "Regulation of Rome Savings Bank and Rome Bancorp -- Dividend
Waivers by Rome, MHC."
As the principal asset of Rome Bancorp, Rome Savings will provide the
principal source of funds for the payment of dividends by Rome Bancorp. New
York banking law provides that Rome Savings may pay dividends only out of its
net profits. Rome Savings must obtain the approval of the Superintendent of
Banking to pay dividends if the total of all dividends declared in any calendar
year will exceed net profits of the preceding two years, less any required
transfer to surplus or a fund for the retirement of any preferred stock. Rome
Savings may not declare dividends if the effect would cause its capital to be
reduced below the amount required by the
20
<PAGE>
Superintendent of Banks or the FDIC. See "The Reorganization and The Offering --
Effects of the Reorganization --Depositors' Rights If We Liquidate; Liquidation
Account."
Rome Bancorp is subject to the requirements of Delaware law which generally
limits dividends to an amount equal to the difference between the amount by
which total assets exceed total liabilities and the amount equal to the
aggregate par value of the outstanding shares of capital stock. If there is no
difference between these amounts, dividends are limited to net income for the
current and/or immediately preceding year.
Any payment of dividends by Rome Savings to Rome Bancorp, which would be
deemed to be drawn out of Rome Savings' bad debt reserves, would require a
payment of taxes at the then-current tax rate by Rome Savings on the amount of
earnings deemed to be removed from bad debt reserves for such distribution.
Rome Savings does not intend to make any distribution to Rome Bancorp that would
create this type of a tax liability. See "Taxation."
MARKET FOR THE COMMON STOCK
As a new company, Rome Bancorp has not previously issued common stock and
there is no established market for it. We expect the common stock to trade
under the symbol "ROME" on the Nasdaq Stock Market after the completion of the
offering. Sandler O'Neill has advised us that it intends to make a market in the
common stock following the reorganization, but is under no obligation to do so.
We will seek to encourage and assist additional market makers to make a market
in our common stock.
The development of an active trading market depends on the existence of
willing buyers and sellers or any market maker. The number of active buyers and
sellers of the common stock at any particular time may be limited. Under such
circumstances, you could have difficulty selling your shares on short notice
and, therefore, you should not view the common stock as a short-term investment.
We cannot assure you that an active and liquid trading market for the common
stock will develop or that, if it develops, it will continue, nor can we assure
you that if you purchase shares you will be able to sell them at or above $8.00
per share.
21
<PAGE>
REGULATORY CAPITAL COMPLIANCE
At March 31, 1999, we exceeded all regulatory capital requirements. The
following table shows our capital computed under generally accepted accounting
principles and our compliance with regulatory capital standards at March 31,
1999, on a historical and pro forma basis. We have assumed that the indicated
number of shares were sold as of March 31, 1999 and that Rome Savings received
50% of the net proceeds from the offering. For purposes of the table below, the
amount expected to be loaned to the ESOP and the cost of the shares expected to
be acquired by the management recognition plan are deducted from pro forma
regulatory capital. For a discussion of the capital requirements applicable to
Rome Savings, see "Regulation of Rome Savings Bank and Rome Bancorp -- Federal
banking Regulation - Capital Requirements."
<TABLE>
<CAPTION>
Pro Forma at March 31, 1999 Based Upon the Sale at $8.00 Per Share
--------------------------------------------------------------------------------------------
1,373,381 Shares 1,615,625 Shares 1,857,969 Shares
Historical at Sold Minimum of the Sold (Midpoint of Sold (Maximum of
March 31, 1999 Range) the Range) the Range)
------------------- -------------------- ------------------- -------------------
Percent Percent Percent Percent
of of of of
Amount Assets(2) Amount Assets(2) Amount Assets(2) Amount Assets(2)
------- --------- ------ --------- ------ --------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GAAP Capital (3)................ $28,939 12.9% $32,598 14.2% $33,317 14.5% $34,036 14.8%
======= ==== ======= ==== ======= ==== ======= ====
Leverage Capital:
Capital Level(4)............ $28,298 12.8 $31,957 14.1 $32,676 14.4 $33,395 14.6
Requirement(5).............. 8,867 4.0 9,049 4.0 9,084 4.0 9,119 4.0
------- ---- ------- ---- ------- ---- ------- ----
Excess...................... $19,431 8.8 $22,908 10.1 $23,592 10.4 $24,276 10.6
======= ==== ======= ==== ======= ==== ======= ====
Tier I Risk Based Capital:
Capital Level(4)(6)......... $30,257 23.0 $33,949 25.2 $34,674 25.7 $35,400 26.1
Requirement................. 10,545 8.0 10,758 8.0 10,799 8.0 10,841 8.0
------- ---- ------- ---- ------- ---- ------- ----
Excess...................... 19,712 15.0 23,191 17.2 23,875 17.7 24,559 18.1
======= ==== ======= ==== ======= ---- ======= ====
Total Risk-Based Capital:
Capital Level(4)(6)......... $28,298 21.5 $31,957 23.8 $32,676 24.2 $33,395 24.6
Requirement................. 5,273 4.0 5,379 4.0 5,400 4.0 5,420 4.0
------- ---- ------- ---- ------- ---- ------- ----
Excess...................... $23,025 17.5% $26,578 19.8% $27,276 20.2% $27,975 20.6%
======= ==== ======= ==== ======= ==== ======= ====
<CAPTION>
Pro Forma at March 31,
1999 Based Upon the
Sale at $8.00 Per Share
-----------------------
2,136,664 Shares Sold
(15% Above
Maximum of the
Range)(1)
------------------------
Percent
of
Amount Assets (2)
------ ----------
<S> <C> <C>
GAAP Capital (3)................ $34,862 15.1%
======= ====
Leverage Capital:
Capital Level(4)............ $34,221 14.9
Requirement(5).............. 9,159 4.0
------- ----
Excess...................... $25,062 10.9
======= ====
Tier I Risk Based Capital:
Capital Level(4)(6)......... $36,234 26.6
Requirement................. 10,888 8.0
------- ----
Excess...................... 25,346 18.6
======= ====
Total Risk-Based Capital:
Capital Level(4)(6)......... $34,221 25.1
Requirement................. 5,444 4.0
------- ----
Excess...................... $28,777 21.1
======= ====
</TABLE>
_______________
(1) As adjusted to give effect to an increase in the number of shares which
could occur due to an increase in the estimated price range of up to 15% as
a result of changes in market conditions or general financial and economic
conditions following the commencement of the offering.
(2) Leverage capital levels are shown as a percentage of "adjusted total
assets," and risk-based capital levels are shown as a percentage of "risk-
weighted assets," each as defined in the FDIC Regulations.
(3) Capital under generally accepted accounting principles (GAAP) includes the
net unrealized gain/loss, if any, on available-for-sale securities, which
is not recognized as capital under the FDIC capital ratio rules. See
"Regulation-Banking Regulation-Capital Requirements."
(4) Pro forma capital levels assume receipt by Rome Savings of 50% of the net
proceeds from the shares of common stock sold. These levels assume funding
by Rome Savings of the restricted stock plan equal to 4% of the common
stock issued, including repayment of Rome Bancorp's loan to the employee
stock ownership plan to enable the plan to purchase 8% of the common stock
issued.
(5) In order to be classified as "well-capitalized," Rome Savings must, in
addition to other requirements, have a Tier I risk-based capital ratio of
at least 6.00%, a total risk-based capital ratio of at least 10.00% and a
Tier 1 leverage ratio of at least 5.00%. See "Regulation of The Rome
Savings Bank and Rome Bancorp-Federal Banking Regulation-Capital
Requirements" and "-Enforcement."
(6) Assumes net proceeds are invested in assets that carry risk-weighting equal
to the actual risk weighting of Rome Savings' assets as of March 31, 1999.
22
<PAGE>
CAPITALIZATION
The following table presents the historical deposits and capitalization of
Rome Savings at March 31, 1999, and the pro forma consolidated capitalization of
Rome Bancorp after giving effect to the reorganization, based upon the sale of
the number of shares shown below and the other assumptions set forth under "Pro
Forma Data." The number of shares shown includes shares to be sold in the
conversion and shares intended to be contributed to be foundation. A change in
the number of shares sold in the offering may materially affect the
capitalization.
<TABLE>
<CAPTION>
Pro Forma Capitalization at March 31, 1999
--------------------------------------------------------
1,373,281 1,615,625 1,857,969 2,136,664 Shares
Shares Shares Shares (15% Above
Actual at (Minimum of Midpoint of (Maximum of Maximum of
March 31, 1999 Range) Range) Range) Range)(1)
-------------- ----------- ------------ ----------- ---------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Deposits(2)............................................... $191,926 $ 191,926 $ 191,926 $ 191,926 $191,926
======== ========== ========== ========== ========
Stockholders' equity:
Preferred stock, $.01 par value, 1,000,000............. - - - - -
shares authorized; none to be issued
Common stock, $.01 par value, 5,000,000................ - 29 34 40 45
shares authorized; to be issued as reflected(3)(4)
Additional paid-in capital(4).......................... - 10,592 12,573 14,554 16,830
Retained earnings(5)................................... 28,298 28,198 28,198 28,198 28,198
Less:
Expense of Contribution to Foundation.................. - (567) (650) (733) (827)
Tax Benefit of Contribution to Foundation.............. - 219 251 283 319
Plus:
Accumulated other comprehensive income................. 641 641 641 641 641
Less:
Common stock acquired by the employee.................. - (879) (1,034) (1,189) (1,367)
stock ownership plan (6)
Common stock acquired by the management
recognition plan (7)................................... - (439) (517) (595) (684)
-------- ---------- ---------- ---------- --------
Total stockholders' equity................................ $ 28,939 $ 37,794 $ 39,496 $ 41,199 $ 43,155
======== ========== ========== ========== ========
</TABLE>
_________________
(1) As adjusted to give effect to an increase in the number of shares which
could occur due to an increase in the offering range of up to 15% as a
result of changes in market or general financial and economic conditions
following the commencement of the offering.
(2) Does not reflect withdrawals from deposit accounts for the purchase of
common stock in the offering. Withdrawals from deposit accounts would
reduce pro forma deposits by the amount of such withdrawals.
(3) Reflects shares to be issued to Rome, MHC as follows: 1,490,156 shares at
the minimum of the estimated valuation range, 1,753,125 shares at the
midpoint, 2,016,094 at the maximum and 2,318,508 at 15% above the maximum.
(4) Reflects the issuance of shares sold in the offering at a value of $8.00 per
share. No effect has been given to the issuance of additional shares of
common stock pursuant to Rome Bancorp's proposed stock option plan intended
to be adopted by Rome Bancorp and presented for approval of stockholders at
a meeting of stockholders to be held at least six months following
completion of the offering.
(5) The retained earnings of Rome Savings will be substantially restricted after
the offering. The reduction in historical retained earnings reflects the
retention by Rome, MHC of $100,000 upon completion of the reorganization as
its initial capitalization.
(6) Assumes that 8% of the shares issued in connection with the offering will be
purchased by the employee stock ownership plan and the funds used to acquire
the employee stock ownership plan shares will be borrowed from Rome Bancorp.
The common stock acquired by the employee stock ownership plan is reflected
as a reduction of stockholders' equity.
(7) Assumes that, subsequent to the offering, an amount equal to 4% of the
shares of common stock issued in the offering is purchased by a management
recognition plan through open market purchases. The proposed management
recognition plan is intended to be adopted by Rome Bancorp and presented for
approval of stockholders at a meeting of stockholders to be held at least
six months, following completion of the offering. The common stock purchased
by the management recognition plan is reflected as a reduction of
stockholders' equity.
23
<PAGE>
PRO FORMA DATA
We can not determine the actual net proceeds from the sale of the common
stock until the offering is completed. However, we estimate that net proceeds
will be between $10,054,000 and $13,861,000, or $16,048,000 if the offering
range is increased by 15%, based upon the following assumptions:
. we will sell all shares of common stock in the subscription offering;
. we will pay Sandler O'Neill a fee equal to 2% of the aggregate
purchase price for sales in the subscription offering except for
shares sold to the employee stock ownership plan, employee benefit
plans, and officers, directors and their immediate families; and
. total expenses, including the marketing fees paid to Sandler O'Neill,
will be approximately $832,000 to 945,000.
We calculated the pro forma consolidated net income and stockholders'
equity of Rome Bancorp for the three months ended March 31, 1999 and the year
ended December 31, 1998, as if the common stock had been sold at the beginning
of those periods and the net proceeds had been invested at 4.7% and 4.5% for the
three months ended March 31, 1999 and the year ended December 31, 1998,
respectively. We chose this yield because it represents the yield on one-year
U.S. Government securities at March 31, 1999 and at December 31, 1998. In light
of changes in interest rates in recent periods, Rome Bancorp and Rome Savings
believe this rate more accurately reflects pro forma reinvestment rates than the
arithmetic average method. We assumed a tax rate of 38.6% for both periods. This
results in an after-tax yield of 2.9% for the three months ended March 31, 1999
and 2.8% for the year ended December 31, 1998.
We calculated historical and pro forma per share amounts by dividing
historical and pro forma amounts of pro forma consolidated net income and
stockholders' equity by the indicated number of shares of common stock. We
adjusted these figures to give effect to the shares purchased by the employee
stock ownership plan. We computed per share amounts for each period as if the
common stock was outstanding at the beginning of the periods, but we did not
adjust per share historical or pro forma stockholders' equity to reflect the
earnings on the estimated net proceeds. As discussed under "How We Intend to
Use the Proceeds from the Offering," Rome Bancorp intends to retain 50% of the
net proceeds from the offering and intends to make a loan to the employee stock
ownership plan to fund the employee stock ownership plan's purchase of 8% of the
common stock. The loan is assumed to be repaid in substantially equal principal
payments over a period of fifteen years.
The table below gives effect to the management recognition plan, which we
expect to adopt following the reorganization and present, along with the stock
option plan, to stockholders for approval at an annual or special meeting of
stockholders to be held at least six months following the completion of the
reorganization. If the management recognition plan is approved by stockholders,
the restricted stock plan will acquire an amount of common stock equal to 4% of
the shares of common stock sold in the offering, either through open market
purchases or from authorized but unissued shares of common stock, if
permissible. On preparing the table below we assumed that stockholder approval
has been obtained and that the shares acquired by the
24
<PAGE>
management recognition plan are purchased in the open market at the purchase
price. The stock is assumed to be awarded under the program in awards that vest
gradually over five years.
The table below does not give effect to:
(1) the shares to be reserved for issuance under the stock option plan,
which requires stockholder approval at a meeting following the
reorganization.
(2) withdrawals from deposit accounts for the purpose of purchasing common
stock in the reorganization;
(3) Rome Bancorp's results of operations after the reorganization; or
(4) the market price of the common stock after the reorganization.
The following pro forma information may not represent the financial effects
of the reorganization at the date on which the reorganization actually occurs
and you should not use the table to indicate future results of operations. Pro
forma stockholders' equity represents the difference between the stated amount
of assets and liabilities of Rome Bancorp computed in accordance with generally
accepted accounting principles. We did not increase or decrease stockholders'
equity to reflect the difference between the carrying value of loans and other
assets and market value. Pro forma stockholders' equity is not intended to
represent the fair market value of the common stock and may be different than
amounts that would be available for distribution to stockholders if we
liquidated.
25
<PAGE>
<TABLE>
<CAPTION>
At or for the Three Months Ended March 31, 1999
------------------------------------------------------------------------
2,136,664
1,373,281 1,615,625 1,857,969 Shares Sold at
Shares Sold at Shares Sold at Shares Sold at $8.00 Per Share
$8.00 Per Share $8.00 Per Share $8.00 Per Share (15% Above
(Minimum of (Midpoint of (Maximum of Maximum of
Range) Range) Range) Range) (5)
--------------- --------------- --------------- ---------------
(Dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Gross Proceeds........................................... $10,986 $ 12,925 $ 14,864 $ 17,093
Plus: shares issued to the foundation................ 467 550 633 727
------- ---------- ---------- ----------
Pro forma market capitalization.......................... $11,453 $ 13,475 $ 15,497 $ 17,820
Gross proceeds........................................... 10,986 12,925 14,864 17,093
Less cash contributions to foundation................. 100 100 100 100
Less expenses......................................... 832 868 903 945
------- ---------- ---------- ----------
Estimated net proceeds................................... $10,054 $ 11,957 $ 13,861 $ 16,048
Less: Common stock purchased by Employee Stock
Option Plan(1)....................................... (879) (1,034) (1,189) (1,367)
Less: Common stock purchased by Management........... (439) (517) (595) (684)
Recognition Plan(2).................................. ------- ---------- ---------- ----------
Estimated net proceeds, as adjusted................... $ 8,736 $ 10,406 $ 12,077 $ 13,997
======= ========== ========== ==========
Consolidated net income:
Historical income..................................... $ 389 $ 389 $ 389 $ 389
Pro forma income on net proceeds...................... 62 74 86 100
Pro forma Employee Stock Option Plan adjustment(1).... (9) (11) (12) (14)
Pro forma Management Recognition Plan adjustment(2)... (13) (16) (18) (21)
------- ---------- ---------- ----------
Pro forma net income.................................. $ 429 $ 436 $ 445 $ 454
======= ========== ========== ==========
Per share net income:
Historical income..................................... $ 0.14 $ 0.12 $ 0.10 $ 0.09
Pro forma income on net proceeds...................... 0.02 0.02 0.02 0.02
Pro forma Employee Stock Option Plan on net proceeds.. 0.00 0.00 0.00 0.00
Pro forma Management Recognition Plan Adjustment...... 0.00 0.00 0.00 0.00
------- ---------- ---------- ----------
Pro forma net income per share........................ $ 0.16 $ 0.14 $ 0.12 $ 0.11
======= ========== ========== ==========
Stockholders' equity:
Historical(4)......................................... $28,839 $ 28,839 $ 28,839 $ 28,839
Estimated net proceeds................................ 10,054 11,957 13,861 16,048
Plus: Shares issued to Foundation.................... 467 550 633 727
Less: Contribution to Foundation..................... (467) (550) (633) (727)
Plus: Tax benefit of the contribution to the
foundation........................................... 219 251 283 319
Less: Common stock acquired by Employee Stock
Option Plan(1)....................................... (879) (1,034) (1,189) (1,367)
Less: Common stock acquired by Management............ (439) (517) (595) (684)
Recognition Plan(2).................................. ------- ---------- ---------- ----------
Pro forma stockholders' equity(2)(3)(4)............... $37,794 $ 39,496 $ 41,199 $ 43,155
======= ========== ========== ==========
Stockholder's equity per share:
Historical............................................ $ 9.87 $ 8.39 $ 7.30 $ 6.34
Estimated net proceeds................................ 3.44 3.48 3.51 3.53
Plus: Shares issued to Foundation.................... 0.16 0.16 0.16 0.16
Less: Contribution to Foundation..................... (0.16) (0.16) (0.16) (0.16)
Plus: Tax benefit of the contribution to the
foundation........................................... 0.07 0.07 0.07 0.07
Less: Common stock acquired by Employee Stock
Option Plan(1)....................................... (0.30) (0.30) (0.30) (0.30)
Less: Common stock acquired by Management
Recognition Plan(2).................................. (0.15) (0.15) (0.15) (0.15)
------- ---------- ---------- ----------
Pro forma stockholders' equity per share(4)........... $ 12.93 $ 11.49 $ 10.43 $ 9.49
======= ========== ========== ==========
Offering price as a percentage of pro forma net
earnings per share(6)................................... 12.50 14.29 16.67 18.18
======= ========== ========== ==========
Offering price as a percentage of pro forma
stockholders' equity per share(6)....................... 61.87% 69.63% 76.70% 84.30%
======= ========== ========== ==========
</TABLE>
26
<PAGE>
_________________________
(1) It is assumed that 8% of the shares of common stock issued in connection
with our reorganization will be purchased by the employee stock ownership
plan. For purposes of this table, the funds used to acquire such shares
are assumed to have been borrowed by the employee stock ownership plan from
Rome Bancorp. The amount to be borrowed is reflected as a reduction of
stockholders' equity. ESOP expense is based upon generally accepted
accounting principles as described in accounting Statement of Position 93-
6. Generally accepted accounting principles require that as and when
shares pledged as security for an ESOP loan are committed to be released
from the loan (i.e., as the loan is repaid), ESOP expense is recorded based
upon the fair value of the shares at that time. Rome Savings intends to
make annual contributions to the employee stock ownership plan in an amount
at least equal to the principal and interest requirement of the debt. Rome
Saving's total annual payment of the employee stock ownership plan debt is
based upon 15 equal annual installments of principal, with an assumed
interest rate at 7.75%. The pro forma net income assumes: (i) that Rome
Savings's contribution to the employee stock ownership plan is equivalent
to the debt service requirement for the three months ended March 31, 1999,
and was made at the end of the period; (ii) that 1,831 shares at the
minimum of the offering range, 2,154 shares at the midpoint of the offering
range, 2,477 shares at the maximum of the offering range and 2,849 shares
at 15% above the maximum of the offering range, were committed to be
released during the three months ended March 31, 1999 at an average fair
value of $8.00 per share in accordance with SOP 93-6; and (iii) the
employee stock ownership plan shares committed to be released were
considered outstanding for the entire period for purposes of the net income
per share calculations.
(2) Gives effect to the management recognition plan expected to be adopted by
Rome Bancorp following the offering and presented for approval at a meeting
of stockholders. The management recognition plan intends to acquire an
amount of common stock equal to 4% of the shares of common stock issued in
connection with the offering, or 54,931 shares at the minimum of the
offering range, 64,625 shares at the midpoint of the offering range, 74,319
shares of the maximum of the offering range and 85,467 shares at 15% above
the maximum of the offering range, either through open market purchases, if
permissible, or from authorized but unissued shares of common stock or
treasury stock of Rome Bancorp, if any. In calculating the pro forma
effect of the management recognition plan, it is assumed that the shares
were acquired by the management recognition plan at the beginning of the
period presented in open market purchases at the purchase price and that 5%
of the amount contributed was an amortized expense during such period. The
issuance of authorized but unissued shares of Rome Bancorp's common stock
to the management recognition plan instead of open market purchases would
dilute the voting interests of existing stockholders by approximately 1.8%
and pro forma net income per share would be $0.15 at the minimum of the
offering range, $0.13 at the midpoint of the offering range, $0.12 at the
maximum of the offering range and $0.10 at 15% above the maximum of the
offering range. There can be no assurance that the actual purchase price
of the shares granted under the restricted stock plan will be equal to the
purchase price.
(3) No effect has been given to the issuance of additional shares of common
stock pursuant to the stock option plan expected to be adopted by Rome
Bancorp following the offering. Rome Bancorp expects to present the stock
option plan for approval at a meeting of stockholders. Under the stock
option plan, an amount equal to 10% of the common stock issued in
connection with the offering will be reserved for future issuance upon the
exercise of options to be granted under the stock option plan. The
issuance of common stock pursuant to the exercise of options under the
stock option plan will result in the dilution of existing stockholders'
interests. The effect of the implementation of the Stock Option Plan can
not be reasonable estimated because the number of options that may be
awarded cannot be determined; the exercise price of the options will depend
upon the market price on the date the options are awarded; the options will
vest gradually over five years; and the exercise of options is at the
discretion of the director, officer or employee holding the option. See
"Management-Benefit Plans-Stock Option Plan."
(4) The retained earnings of Rome Savings will continue to be substantially
restricted after the offering. Pro Forma retained earnings have been
reduced by $100,000 to reflect the initial capitalization of Rome, MHC.
(5) As adjusted to give effect to an increase in the number of shares which
could occur due to an increase in the offering range of up to 15% as a
result of changes in market or general considerations or changes in market
or general financial and economic conditions following the commencement of
the offering.
(6) Assuming 100% of the outstanding common stock of Rome Bancorp is issued to
the public rather than 49%, the offering price as a percentage of pro forma
stockholders' equity per share would be 48.78% at the minimum of the
offering range, 53.48 percent at the midpoint of the offering range, 57.60%
at the maximum of the offering range and 61.78% at 15% above the maximum of
the offering range and the ratio of offering price to pro forma net income
per share would be 11.76x at the minimum of the offering range, 13.33x at
the midpoint of the offering range, 14.29x at the maximum of the offering
range and 16.67x at 15% above the maximum of the offering range.
27
<PAGE>
<TABLE>
<CAPTION>
At or for the Year December 31, 1998
---------------------------------------------------------------------------
2,136,664
1,373,281 1,615,625 1,857,969 Shares Sold at
Shares Sold at Shares Sold at Shares Sold at $8.00 Per Share
$8.00 Per Share $8.00 Per Share $8.00 Per Share (15% Above
(Minimum of (Midpoint of (Maximum of Maximum of
Range) Range) Range) Range) (5)
--------------- --------------- --------------- ---------------
(Dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Gross Proceeds............................................. $10,986 $ 12,925 $ 14,864 $ 17,093
Plus: shares issued to the foundation.................. 467 550 633 727
------- ---------- ---------- ----------
Pro forma market capitalization............................ $11,453 $ 13,475 $ 15,497 $ 17,820
Gross proceeds............................................. 10,986 12,925 14,864 17,093
Less cash contributions to foundation................... 100 100 100 100
Less expenses........................................... 832 868 903 945
------- ---------- ---------- ----------
Estimated net proceeds..................................... $10,054 $ 11,957 $ 13,861 $ 16,048
Less: Common stock purchased by Employee Stock
Option Plan(1)......................................... (879) (1,034) (1,189) (1,367)
Less: Common stock purchased by Management
Recognition Plan(2).................................... (439) (517) (595) (684)
------- ---------- ---------- ----------
Estimated net proceeds, as adjusted..................... 8,736 10,406 12,077 13,997
Consolidated net income:
Historical income....................................... $ 1,525 $ 1,525 $ 1,525 $ 1,525
Pro forma income on net proceeds........................ 240 286 332 386
Pro forma Employee Stock Option Plan adjustment(1)...... (36) (42) (49) (56)
Pro forma Management Recognition Plan adjustment(2)..... (54) (63) (73) (84)
------- ---------- ---------- ----------
Pro forma net income.................................... $ 1,675 $ 1,706 $ 1,735 $ 1,771
======= ========== ========== ==========
Per share net income:
Historical income....................................... $ 0.54 $ 0.46 $ 0.40 $ 0.35
Pro forma income on net proceeds........................ 0.09 0.09 0.09 0.09
Pro forma Employee Stock Option Plan on net proceeds.... (0.01) (0.01) (0.01) (0.01)
Pro forma Management Recognition Plan Adjustment........ (0.02) (0.02) (0.02) (0.02)
------- ---------- ---------- ----------
Pro forma net income per share.......................... $ 0.60 $ 0.52 $ 0.46 $ 0.41
======= ========== ========== ==========
Stockholders' equity:
Historical(4)........................................... $28,562 $ 28,562 $ 28,562 $ 28,562
Estimated net proceeds.................................. 10,054 11,957 13,861 16,048
Plus: Shares issued to Foundation...................... 467 550 633 727
Less: Contribution to Foundation....................... (467) (550) (633) (727)
Plus: Tax benefit of the contribution to the
foundation............................................. 219 251 283 319
Less: Common stock acquired by Employee Stock
Option Plan(1)......................................... (879) (1,034) (1,189) (1,367)
Less: Common stock acquired by Management
Recognition Plan(2).................................... (439) (517) (595) (684)
------- ---------- ---------- ----------
Pro forma stockholders' equity(2)(3)(4)................. $37,517 $ 39,219 $ 40,922 $ 42,878
======= ========== ========== ==========
Stockholder's equity per share:
Historical.............................................. $ 9.87 $ 8.31 $ 7.23 $ 6.28
Estimated net proceeds.................................. 3.44 3.48 3.51 3.53
Plus: shares issued to Foundation...................... 0.16 0.16 0.16 0.16
Less: Contribution to Foundation....................... (0.16) (0.16) (0.16) (0.16)
Plus: Tax benefit of the contribution to the
foundation............................................. 0.07 0.07 0.07 0.07
Less: Common stock acquired by Employee Stock
Option Plan(1)......................................... (0.30) (0.30) (0.30) (0.30)
Less: Common stock acquired by Management
Recognition Plan(2).................................... (0.15) (0.15) (0.15) (0.15)
------- ---------- ---------- ----------
Pro forma stockholders' equity per share(4)............. $ 12.84 $ 11.41 $ 10.36 $ 9.43
======= ========== ========== ==========
Offering price as a percentage of pro forma net
earnings per share(6)..................................... 13.33 15.38 17.39 19.51
======= ========== ========== ==========
Offering price as a percentage of pro forma
stockholders' equity per share(6)......................... 62.31% 70.11% 77.22% 84.84%
======= ========== ========== ==========
</TABLE>
28
<PAGE>
_________________
(1) It is assumed that 8% of the shares of common stock issued in connection
with our reorganization will be purchased by the employee stock ownership
plan. For purposes of this table, the funds used to acquire such shares are
assumed to have been borrowed by the employee stock ownership plan from
Rome Bancorp. The amount to be borrowed is reflected as a reduction of
stockholders' equity. ESOP expense is based upon generally accepted
accounting principles as described in accounting Statement of Position 93-
6. Generally accepted accounting principles require that as and when shares
pledged as security for an ESOP loan are committed to be released from the
loan (i.e., as the loan is repaid), ESOP expense is recorded based upon the
fair value of the shares at that time. Rome Savings intends to make annual
contributions to the employee stock ownership plan in an amount at least
equal to the principal and interest requirement of the debt. Rome Saving's
total annual payment of the employee stock ownership plan debt is based
upon 15 equal annual installments of principal, with an assumed interest
rate at 7.75%. The pro forma net income assumes: (i) that Rome Savings's
contribution to the employee stock ownership plan is equivalent to the debt
service requirement for the year ended December 31, 1998, and was made at
the end of the period; (ii) that 7,324 shares at the minimum of the
offering range, 8,617 shares at the midpoint of the offering range, 9,910
shares at the maximum of the offering range and 11,395 shares at 15% above
the maximum of the offering range, were committed to be released during the
year ended December 31, 1998 at an average fair value of $8.00 per share in
accordance with SOP 93-6; and (iii) the employee stock ownership plan
shares committed to be released were considered outstanding for the entire
period for purposes of the net income per share calculations.
(2) Gives effect to the management recognition plan expected to be adopted by
Rome Bancorp following the offering and presented for approval at a meeting
of stockholders. The management recognition plan intends to acquire an
amount of common stock equal to 4% of the shares of common stock issued in
connection with the offering, or 54,931 shares at the minimum of the
offering range, 64,625 shares at the midpoint of the offering range, 74,319
shares of the maximum of the offering range and 85,467 shares at 15% above
the maximum of the offering range, either through open market purchases, if
permissible, or from authorized but unissued shares of common stock or
treasury stock of Rome Bancorp, if any. In calculating the pro forma effect
of the management recognition plan, it is assumed that the shares were
acquired by the management recognition plan at the beginning of the period
presented in open market purchases at the purchase price and that 20% of
the amount contributed was an amortized expense during such period. The
issuance of authorized but unissued shares of Rome Bancorp's common stock
to the management recognition plan instead of open market purchases would
dilute the voting interests of existing stockholders by approximately 3.85%
and pro forma net income per share would be $0.59 at the minimum of the
offering range, $0.51 at the midpoint of the offering range, $0.45 at the
maximum of the offering range and $0.40 at 15% above the maximum of the
offering range. There can be no assurance that the actual purchase price of
the shares granted under the restricted stock plan will be equal to the
purchase price.
(3) No effect has been given to the issuance of additional shares of common
stock pursuant to the stock option plan expected to be adopted by Rome
Bancorp following the offering. Rome Bancorp expects to present the stock
option plan for approval at a meeting of stockholders. Under the stock
option plan, an amount equal to 10% of the common stock issued in
connection with the offering will be reserved for future issuance upon the
exercise of options to be granted under the stock option plan. The issuance
of common stock pursuant to the exercise of options under the stock option
plan will result in the dilution of existing stockholders' interests. The
effect of the implementation of the Stock Option Plan can not be reasonable
estimated because the number of options that may be awarded cannot be
determined; the exercise price of the options will depend upon the market
price on the date the options are awarded; the options will vest gradually
over five years; and the exercise of options is at the discretion of the
trustee, officer or employee holding the option. See "Management-Benefit
Plans-Stock Option Plan."
(4) The retained earnings of Rome Savings will continue to be substantially
restricted after the offering. Pro Forma retained earnings have been
reduced by $100,000 to reflect the initial capitalization of Rome, MHC.
(5) As adjusted to give effect to an increase in the number of shares which
could occur due to an increase in the offering range of up to 15% as a
result of changes in market or general considerations or changes in market
or general financial and economic conditions following the commencement of
the offering.
(6) Assuming 100% of the outstanding common stock of Rome Bancorp is issued to
the public rather than 49%, the offering price as a percentage of pro forma
stockholders' equity per share would be 49.05% at the minimum of the
offering range, 53.76% at the midpoint of the offering range, 57.89% at the
maximum of the offering range and 62.11% at 15% above the maximum of the
offering range and the ratio of offering price to pro forma net income per
share would be 11.76x at the minimum of the offering range, 13.33x at the
midpoint of the offering range, 14.81x at the maximum of the offering range
and 16.67x at 15% above the maximum of the offering range.
29
<PAGE>
COMPARISON OF VALUATION AND PRO FORMA INFORMATION WITH AND WITHOUT FOUNDATION
If we do not establish the charitable foundation as part of the
reorganization, RP Financial has estimated that the pro forma aggregate market
value of Rome Bancorp would be approximately $28.5 million at the midpoint of
the estimated price range, which is approximately $1.0 million greater than the
pro forma aggregate market capitalization of Rome Bancorp, including the
foundation, and would result in a $1.0 million increase in the amount of common
stock that we offer for sale in the reorganization. For comparative purposes
only, set forth below are certain estimated pricing ratios and financial
information, assuming that the Foundation was not established and assuming the
Conversion as completed at March 31, 1999. However, these are just estimates. At
the midpoint, the pro forma price to book value ratio and pro forma price to
earnings ratio without the foundation would be 70.80% and 15.38%, respectively,
compared to 69.63% and 14.29%, respectively, with the foundation. Further,
assuming the standpoint of the estimated offering range; pro forma stockholders'
equity per share and pro forma earnings per share without the foundation would
be $11.30 and $0.13, respectively, and $11.49 and $0.14, respectively, with the
foundation. We cannot assure you that, in the event the foundation was not
formed, the appraisal prepared at that time would have concluded that the pro
forma market value of Rome Bancorp would be the same as was estimated by RP
Financial.
<TABLE>
<CAPTION>
At the Minimum At the Midpoint At the Maximum
---------------------- ---------------------- ----------------------
With No With No With No
Foundation Foundation Foundation Foundation Foundation Foundation
---------- ---------- ---------- ---------- ---------- ----------
(Dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
Estimated offering amount.......................... 10,986 11,870 12,925 13,965 14,864 16,060
Pro forma market capitalization.................... 11,453 11,870 13,475 13,965 15,497 16,060
Total assets....................................... 233,134 233,777 234,836 235,581 236,539 237,387
Total liabilities.................................. 195,340 195,340 195,340 195,340 195,340 195,340
Pro forma shareholders' equity..................... 37,794 38,437 39,496 40,241 41,199 42,047
Pro forma consolidated net income.................. 429 433 436 443 445 451
Pro forma shareholders' equity per share........... 12.93 12.69 11.49 11.30 10.43 10.26
Pro forma consolidated net income per share........ 0.16 0.14 0.14 0.13 0.12 0.11
Pro Forma Pricing Ratios:
Offering price as a percentage of pro
forma shareholders' equity per share.......... 61.87% 63.04% 69.63% 70.80% 76.70% 77.97%
Offering price to pro forma net
income per share................................ 12.50 14.29 14.29 15.38 16.67 18.18
Pro Forma Market Capitalization to assets....... 4.91% 5.08% 5.74% 5.93% 6.55% 6.77%
Pro Forma Financial Ratios:
Return on assets................................ 0.74% 0.74% 0.74% 0.75% 0.75% 0.76%
Return on shareholders' equity.................. 4.54% 4.51% 4.42% 4.40% 4.32% 4.29%
Shareholders' equity to assets.................. 16.21% 16.45% 16.82% 17.09% 17.42% 17.72%
<CAPTION>
At the Maximum,
As Adjusted
----------------------
With No
Foundation Foundation
---------- ----------
<S> <C> <C>
Estimated offering amount.......................... 17,093 18,469
Pro forma market capitalization.................... 17,820 18,469
Total assets....................................... 238,495 239,461
Total liabilities.................................. 195,340 195,340
Pro forma shareholders' equity..................... 43,155 44,121
Pro forma consolidated net income.................. 454 461
Pro forma shareholders' equity per share........... 9.49 9.36
Pro forma consolidated net income per share........ 0.11 0.10
Pro Forma Pricing Ratios:
Offering price as a percentage of pro
forma shareholders' equity per share.......... 84.30% 85.47%
Offering price to pro forma net
income per share................................ 18.18 20.00
Pro Forma Market Capitalization to assets....... 7.47% 7.72%
Pro Forma Financial Ratios:
Return on assets................................ 0.76% 0.77%
Return on shareholders' equity.................. 4.21% 4.18%
Shareholders' equity to assets.................. 18.09% 18.43%
</TABLE>
30
<PAGE>
THE ROME SAVINGS BANK
CONSOLIDATED STATEMENTS OF INCOME
The following Consolidated Statements of Income of Rome Savings for the
years ended December 31, 1998 and 1997 have been derived from the audited
consolidated financial statements which appear beginning on page F-1 of this
Prospectus. All information contained in this Prospectus for the three months
ended March 31, 1999 and 1998 is unaudited. In the opinion of management, all
adjustments necessary for a fair representation of those interim periods have
been included and are of a normal recurring nature. Results for the three-month
period ending March 31, 1999 do not necessarily indicate the results that may be
expected for the year ending December 31, 1999. These Consolidated Statements
of Income should be read with the Consolidated Financial Statements and Notes
and Management's Discussion and Analysis of Financial Condition and Results of
Operations included in this Prospectus.
<TABLE>
<CAPTION>
For the Three Months Years ended
Ended March 31, December 31,
-------------------- -----------------
1999 1998 1998 1997
-------------------- -----------------
(In thousands)
<S> <C> <C> <C> <C>
Interest income:
Loans............................................................................ $2,822 $2,832 $11,334 $11,532
Securities....................................................................... 733 808 3,464 3,341
Other short-term investments..................................................... 175 167 713 669
------ ------ ------- -------
Total interest income........................................................ 3,730 3,807 15,511 15,542
Interest expense on deposits........................................................ 1,733 1,781 7,203 7,311
------ ------ ------- -------
Net interest income.......................................................... 1,997 2,026 8,308 8,231
Provision for loan losses........................................................... - 75 390 360
------ ------ ------- -------
Net interest income after provision for loan losses.......................... 1,997 1,951 7,918 7,871
------ ------ ------- -------
Non-interest income:
Service charges.................................................................. 130 131 562 517
Net gain on sale of securities................................................... - 139 314 157
Other income..................................................................... 124 66 206 419
------ ------ ------- -------
Total non-interest income.................................................... 254 336 1,082 1,093
------ ------ ------- -------
Non-interest expenses:
Salaries and employee benefits................................................... 920 747 3,263 3,126
Building, occupancy and equipment................................................ 349 276 1,187 1,094
Real estate owned, net........................................................... 7 53 383 385
ATM service fees................................................................. 44 41 169 154
Contributions.................................................................... 11 16 152 192
Other............................................................................ 357 348 1,468 1,479
------ ------ ------- -------
Total non-interest expenses.................................................. 1,688 1,481 6,622 6,430
------ ------ ------- -------
Income before income tax expense............................................. 563 806 2,378 2,534
Income tax expense.................................................................. 174 325 853 996
------ ------ ------- -------
Net income................................................................... $ 389 $ 481 $ 1,525 $ 1,538
====== ====== ======= =======
</TABLE>
31
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
-----------------------------------------------------------------------------
This discussion and analysis reflects Rome Savings' consolidated financial
statements and other relevant statistical data and is intended to enhance
your understanding of our financial condition and results of operations. You
should read the information in this section in conjunction with Rome Savings'
consolidated financial statements and their notes beginning on page F-1 of
this prospectus, and the other statistical data provided in this prospectus.
-----------------------------------------------------------------------------
General
Rome Savings' results of operations depend primarily on net interest
income. Net interest income is the difference between the interest income we
earn on our interest-earning assets, primarily mortgage loans and investment
securities, and the interest we pay on our interest-bearing liabilities,
primarily time deposits and savings deposits. Our results of operations are also
affected by our provision for loan losses, non-interest income and non-interest
expense. Non-interest expense consists primarily of salaries and employee
benefits, occupancy expenses and other general and administrative expenses.
Non-interest income consists mainly of service fees and charges. Our results of
operations may also be affected significantly by general and local economic and
competitive conditions, particularly those with respect to changes in market
interest rates, government policies and actions of regulatory authorities.
Management Strategy
Our primary management strategy has been to offer savings deposits and
traditional banking products to individuals and small businesses to increase
earnings and manage growth. We seek to differentiate ourselves by emphasizing
commercial, commercial real estate and consumer loans in addition to residential
mortgages and by providing high quality service with competitive fees and rates
to the individuals and small businesses which we have served since 1851. We
also try to limit our exposure to changes in interest rates by monitoring and
managing our interest rate-sensitive assets and liabilities. To accomplish
these strategies, we:
(1) emphasize our traditional strengths -- the providing of residential
and commercial mortgages, consumer loans, commercial loans, personal
credit to business owners and a variety of deposit products;
(2) offer competitive rates and free checking to individuals to attract
new deposits and to maintain our existing deposit base;
(3) offer expanded delivery systems and new products to our customers;
(4) maintain our capital strength, profitability and asset quality;
(5) manage growth primarily through internal expansion; and
(6) meet the needs of our local community through a community-based and
service-oriented approach to banking.
32
<PAGE>
After completion of the reorganization, we expect to continue to grow our
base of interest earning assets by expanding our loan portfolio and by using
borrowings, where appropriate, to supplement deposits as a funding source. We
also intend to grow by adding new branch offices. We may also use proceeds from
the offering to acquire branch offices and make other acquisitions. See "How We
Intend to Use the Proceeds from the Offering."
Management of Interest Rate Risk
As a financial institution, our primary component of market risk is
interest rate volatility. Fluctuations in interest rates will ultimately impact
both our level of income and expense recorded on a large portion of our assets
and liabilities. Fluctuations in interest rates will also affect the market
value of all interest-earning assets, other than those which possess a short
term to maturity.
During 1998, we operated under a "flat yield curve" in a low interest rate
environment. A flat yield curve environment features little difference in
interest rates offered on short-term and long-term investments. In that
environment, we experienced both increased interest rate competition related to
loan originations and above-average prepayment rates related to mortgage loans
and mortgage-backed securities, both of which adversely impact long-term
profitability. The flat yield curve environment and modest declines in market
interest rates experienced during 1998 reduced our interest rate spread compared
to the prior year. Recent troubled economic conditions in several nations
throughout Europe, Asia, and South and Central America have created interest
rate volatility for U.S. Government and agency obligations. We cannot predict
at this time what, if any, effect these conditions will have on the local and
regional economy, and real estate market.
Due to the nature of our operations, we are not subject to foreign currency
exchange or commodity price risk. Instead, our real estate loan portfolio,
concentrated in Oneida County, New York, is subject to risks associated with the
local economy. We do not own any trading assets.
The primary goals of our interest rate management strategy are to:
(1) limit fluctuations in net interest margin as interest rates vary up or
down; and
(2) control variations in the market value of assets, liabilities and net
worth as interest rates vary.
We seek to coordinate asset and liability decisions so that, under changing
interest rate scenarios, earnings will remain within an acceptable range.
To achieve the objectives of managing interest rate risk, our Asset
Liability Management Committee meets monthly to discuss and monitor the market
interest rate environment relative to interest rates that are offered on our
products. This committee consists of the Chairman, Vice President in charge of
branch operations, Vice President of commercial lending, Vice President in
charge of residential lending, the Chief Financial Officer and five other
members of the Board of Trustees in addition to the Chairman. The Asset
Liability Management Committee presents
33
<PAGE>
periodic reports to the Board of Trustees at its regular meetings, as well as to
the Executive Committee.
Historically, our lending activities have emphasized one- to four-family
mortgage loans. Our primary source of funds has been deposits, consisting
primarily of time deposits, which have substantially shorter terms to maturity
than the loan portfolio. We have employed certain strategies to manage the
interest rate risk inherent in the asset/liability mix, including but not
limited to:
(1) limiting terms of fixed rate one- to four-family mortgage loan
originations which are retained in our portfolio to 20 years or less;
(2) beginning in May, 1999, originating and selling 30 year fixed-rate
mortgages in the secondary market;
(3) maintaining the diversity of our existing loan portfolio through the
origination of commercial real estate, commercial and consumer lending
which typically have variable rates and shorter terms than residential
mortgages; and
(4) emphasizing investments with short- and intermediate-term maturities
of less than ten years.
The prevailing low interest rate environment has resulted in increased
demand for longer-term fixed-rate first mortgage loans. The result has been an
increase in the proportion of fixed-rate loans in our portfolio. This trend may
have an adverse impact on our net interest income, particularly in a rising
interest rate environment.
In addition, the actual amount of time before mortgage loans are repaid can
be significantly impacted by changes in mortgage prepayment rates and market
interest rates. Mortgage prepayment rates will vary due to a number of factors,
including the regional economy in the area where the underlying mortgages were
originated, seasonal factors, demographic variables and the assumability of the
underlying mortgages. However, the major factors affecting prepayment rates are
prevailing interest rates, related mortgage refinancing opportunities and
competition. We monitor interest rate sensitivity so that we can make
adjustments to our asset and liability mix on a timely basis.
Net Interest Income at Risk
We use a simulation model to monitor interest rate risk. This model
reports the net interest income at risk under three different interest rate
environments. Specifically, an analysis of changes in net interest income
assuming changes in interest rates, both up and down 300 basis points from
current rates over the 12 month period following the current financial statement
is performed. Net interest income is measured for each of the three twelve
month periods following the balance sheet date.
The changes in interest income and interest expense due to changes in
interest rates reflect the interest sensitivity of the Bank's interest earning
assets and interest bearing liabilities. For example, in a rising interest rate
environment, the interest income from an adjustable rate
34
<PAGE>
mortgage will increase depending on its repricing characteristics while the
interest income from a fixed rate loan would not increase until it was repaid
loaned out at a higher interest rate.
The table below sets forth as of March 31, 2000, March 31, 2001 and March
31, 2002, the estimated changes in net interest income that would result from a
300 basis point change in interest rates over the applicable twelve-month
period.
<TABLE>
<CAPTION>
For the twelve months ended March 31,
-------------------------------------------------------
2000 2001 2002
----------------- ----------------- -----------------
Changes in
Interest Rate Percent Percent Percent
(basis points) Amount Change Amount Change Amount Change
- --------------- ------ -------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
300 $8,652 (0.36)% $8,438 (8.61)% $8,631 (3.98)%
0 8,683 - 9,233 - 8,989 -
-300 $8,353 (3.80)% $9,612 4.10 % $9,024 0.39 %
</TABLE>
Gap Analysis. Another method Rome Savings uses to monitor interest rate
risk is the gap analysis. The matching of the repricing characteristics of
assets and liabilities may be analyzed by examining the extent to which such
assets and liabilities are "interest rate sensitive" and by monitoring a
financial institution's interest rate sensitivity "gap." An asset or liability
is said to be "interest rate sensitive" within a specific time period if it will
mature or reprice within that time period. The interest rate sensitivity gap is
defined as the difference between the amount of interest-earning assets maturing
or repricing within a specific time period and the amount of interest-bearing
liabilities maturing or repricing within that same time period.
A gap is considered positive when the amount of interest-earnings assets
maturing or repricing within a specific time period exceeds the amount of
interest-bearing liabilities maturing or repricing within that specific time
period. A gap is considered negative when the amount of interest-bearing
liabilities maturing or repricing within a specific time period exceeds the
amount of interest-earning assets maturing or repricing within the same period.
During a period of rising interest rates, a financial institution with a
negative gap position would be expected, absent the effects of other factors, to
experience a greater increase in the costs of its liabilities relative to the
yields of its assets and thus the institution's net interest income would likely
decrease. An institution with a positive gap position would be expected, absent
the effect of other factors, to experience the opposite result. Conversely,
during a period of falling interest rates, a negative gap would tend to result
in an increase in net interest income while a positive gap would tend to reduce
net interest income.
At March 31, 1999, based on the assumptions below, our interest-bearing
liabilities maturing or repricing within one year exceeded our interest-earning
assets maturing or repricing within the same period by $15.2 million. This
represented a negative cumulative one-year interest rate sensitivity gap of
7.3%, and a ratio of cumulative interest-earning assets maturing or repricing
within one year to cumulative interest-bearing liabilities maturing or repricing
within one year of 83.1%. Our negative gap position could more adversely
impact our net interest
35
<PAGE>
income in a rising rate environment than if we had a positive gap position. Our
policy sets an objective of maintaining the one year cumulative gap between a
negative 20% of total assets to a positive 20% of total assets.
The following table presents the amounts of our interest-earning assets and
interest-bearing liabilities outstanding at March 31, 1999, which we anticipate
to reprice or mature in each of the future time periods shown. Except as stated
below, we determined the amounts of assets and liabilities shown which reprice
or mature during a particular period in accordance with the earlier of the term
to repricing or the contractual maturity of the asset or liability. The
information presented in the following table is also based on the following
assumptions:
(1) we assumed an annual prepayment rate of 8.0% for mortgage loans
repricing or maturing after one year;
(2) we assumed an annual prepayment rate of 18.0% for mortgage-backed
securities repricing or maturing after one year;
(3) we reported federal agency securities with call options, that we
believed would be called, at the earlier of the next call date or
contractual maturity date;
(4) we reported savings accounts that had no stated maturity using decay
rates of: 3.5% in less than six months, 3.5% in six months to one
year, 7.0% in one year to two years, 7.0% in two years to three years,
14.0% in three years to five years, and 65.0% in over five years.
Further, we assumed approximately 27% of these accounts would reprice
in the first year; and
(5) we reported money market accounts and interest bearing demand accounts
as immediately repriceable.
Deposit decay rates, as reflected in items 4 and 5 above, are based on
regulatory guidance, as modified by our historical experience. Deposit decay
rates, prepayment rates and anticipated call dates can have a significant impact
on the estimated interest sensitivity gap. While we believe that our
assumptions are reasonable, they may not be indicative of actual future deposit
decay activity, mortgage and mortgage-backed securities prepayments, and the
actual timing of federal agency calls.
36
<PAGE>
<TABLE>
<CAPTION>
Amounts Maturing or Repricing as of March 31, 1999
----------------------------------------------------------------------------
Less than 6 Months
Three 3-6 to Over 5
Months Months 1 Year 1-3 Years 3-5 Years Years Total
--------- ------ -------- --------- --------- ------ --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Federal funds sold and other
interest bearing deposits...................... $17,738 $ 0 $ 0 $ 0 $ 0 $ 0 $ 17,738
Securities....................................... 6,329 6,317 4,122 13,387 1,870 22,251 54,276
Mortgage loans................................... 5,744 5,317 9,173 26,761 17,223 31,051 95,269
Other loans...................................... 12,155 4,619 3,341 12,281 4,865 4,322 41,583
Total interest-earning assets.................... 41,966 16,253 16,636 52,429 23,958 57,624 208,866
Interest-bearing liabilities:
Savings accounts................................. 6,470 6,470 12,941 5,271 47,246 0 78,398
Money market accounts............................ 6,353 0 0 0 0 0 6,353
Other interest bearing accounts.................. 717 0 0 0 0 1,877 2,594
Time accounts.................................... 17,325 15,882 23,899 21,180 5,866 0 84,152
Total interest-bearing liabilities............... 30,865 22,352 36,840 26,451 53,112 1,877 171,497
Interest sensitivity gap........................... 11,101 (6,099) (20,204) 25,978 (29,154) 55,747
Cumulative interest sensitivity gap................ 11,101 5,002 (15,202) 10,776 (18,378) 37,369
Ratio of cumulative gap to total
interest-earning assets.......................... 5.31% 2.39% (7.28)% 5.16% (8.80)% 17.89%
Ratio of cumulative gap to total assets............ 4.95% 2.23% (6.78)% 4.80% (8.19)% 16.66%
Ratio of interest-earning assets to
interest-bearing liabilities..................... 135.97% 72.71% 45.16% 198.21% 45.11% 3,070.01% 121.79%
</TABLE>
The methods used in the previous table have some shortcomings. For
example, although certain assets and liabilities may have similar maturities or
periods to repricing, they may react in different degrees to changes in market
interest rates. Interest rates on certain types of assets and liabilities may
fluctuate in advance of changes in market interest rates, while interest rates
on other types may lag behind changes in market rates. Certain assets, such as
adjustable-rate loans, have features which limit changes in interest rates on a
short-term basis and over the life of the loan. If interest rates change,
prepayment and early withdrawal levels would likely deviate significantly from
those assumed in calculating the table. Finally, the ability of borrowers to
make payments on their adjustable-rate loans may decrease if interest rates
increase.
Analysis of Net Interest Income
Net interest income represents the difference between the interest income
we earn on our interest-earning assets, such as mortgage loans, mortgage-backed
securities and investment securities, and the expense we pay on interest-bearing
liabilities, such as time deposits. Net interest income depends on our volume
of interest-earning assets and interest-bearing liabilities and the interest
rates we earned or paid on them.
37
<PAGE>
Average Balance Sheet
The following tables present certain information regarding Rome Savings
financial condition and net interest income at and for the three months ended
March 31, 1999 and 1998 and for the years ended December 31, 1998, 1997 and
1996. The tables present the average yield on interest-earning assets and the
average cost of interest-bearing liabilities for the periods indicated. We
derived the yields and costs by dividing income or expenses by the average
balances of interest-earning assets or interest-bearing liabilities,
respectively, for the periods shown. We derived average balances from daily
balances over the periods indicated. Interest income includes fees which we
considered adjustments to yields.
<TABLE>
<CAPTION>
At March 31, For the Three Months Ended March 31,
1999 1999 1998
------------------- -------------------------------- ----------------------------
Weighted Average Average
Average Average Yield/ Average Yield/
Balance Yield Balance Interest Cost Balance Interest Cost
------- -------- ------- -------- ------- ------- -------- -------
Assets: (Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans(1)................................. 134,954 8.25% 135,222 2,822 8.35% 131,643 2,832 8.61%
Securities(2)............................ 54,276 6.23% 56,832 819 5.84% 54,904 808 5.97%
Federal funds sold & other interest
bearing deposits........................ $ 17,738 5.00% $ 14,993 $ 175 4.73% $ 12,281 $ 167 5.51%
-------- -------- ------ ---- -------- ------ ----
Total interest-earning assets........... 206,968 207,047 3,816 7.47% 198,828 3,807 7.77%
Noninterest-earning assets.................. 17,311 15,561 15,983
-------- -------- --------
Total Assets............................ 224,279 222,608 214,811
Liabilities and Equity:
Interest-bearing liabilities:
Savings accounts......................... 78,398 3.05% 76,684 587 3.10% 74,791 572 3.10%
Time deposits............................ 84,152 5.08% 84,124 1,091 5.26% 85,274 1,154 5.49%
Money market accounts.................... 6,353 3.09% 5,578 43 3.13% 5,288 42 3.22%
Other interest bearing deposits.......... 2,594 2.00% 2,585 12 1.88% 2,491 13 2.12%
-------- -------- ------ ---- -------- ------ ----
Total interest-bearing
liabilities......................... 171,497 168,971 1,733 4.16% 167,844 1,781 4.30%
Non-interest bearing deposits............... 20,429 19,349 16,035
Other liabilities........................... 3,414 5,359 3,104
-------- -------- --------
Total liabilities........................ 195,340 193,679 186,983
Equity...................................... 28,939 28,929 27,828
-------- -------- --------
Total liabilities and equity............. $224,279 $222,608 $214,811
======== ======== ========
Net interest income......................... 2,083 2,026
Net interest rate spread(3)................. 3.31% 3.47%
Net interest margin (4)..................... 4.08% 4.13%
Ratio of interest-earning assets
to interest-bearing liabilities.......... 1.23x 1.18x
Tax equivalent adjustment on securities..... 86 0
------ ------
Interest income per consolidated
financial statements....................... $1,997 $2,026
====== ======
</TABLE>
(Notes appear on following page.)
38
<PAGE>
<TABLE>
<CAPTION>
For the Year Ended December 31,
-----------------------------------------------------------------------------------------------
1998 1997 1996
---------------------------- ---------------------------- ----------------------------
Average Average Average
Average Yield/ Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost Balance Interest Cost
------- -------- ------- ------- -------- ------- ------- -------- -------
Assets: (Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans(1)..................... 132,282 11,334 8.57% 133,262 11,532 8.65% 137,891 12,063 8.75%
Securities(2)................ 56,585 3,627 6.41% 53,566 3,341 6.24% 51,242 3,056 5.96%
Federal funds sold & other
interest bearing deposits... $ 13,298 $ 713 5.36% $ 12,248 $ 669 5.46% $ 9,521 $ 510 5.36%
-------- ------- ---- -------- ------- ---- -------- ------- ----
Total interest-earning
assets.................. 202,165 15,674 7.75% 199,076 15,542 7.81% 198,654 15,629 7.87%
Noninterest-earning assets...... 15,989 16,224 16,891
-------- -------- --------
Total Assets............. 218,154 215,300 215,545
Liabilities and Equity:
Interest-bearing liabilities:
Savings accounts............. 75,438 2,340 3.10% 75,845 2,354 3.10% 77,695 2,417 3.11%
Time deposits................ 84,497 4,624 5.47% 86,105 4,709 5.47% 87,725 4,860 5.54%
Money market accounts........ 5,596 180 3.22% 6,160 202 3.28% 4,960 162 3.27%
Other interest bearing
deposits.................... 2,732 59 2.16% 2,295 46 2.00% 2,324 48 2.07%
-------- ------- ---- -------- ------- ---- -------- ------- ----
Total interest-bearing
liabilities............. 168,263 7,203 4.28% 170,405 7,311 4.29% 172,704 7,487 4.34%
Non-interest bearing deposits... 18,064 15,643 15,016
Other liabilities............... 3,280 2,689 2,599
-------- -------- --------
Total liabilities............ 189,607 188,737 190,319
Equity.......................... 28,547 26,563 25,226
-------- -------- --------
Total liabilities and
equity...................... $218,154 $215,300 $215,545
======== ======== ========
Net interest income............. 8,471 8,231 8,142
Net interest rate spread(3)..... 3.47% 3.52% 3.53%
Net interest margin (4)......... 4.19% 4.13% 4.10%
Ratio of interest-earning
assets to interest-bearing
liabilities................. 1.20x 1.17x 1.15x
Tax equivalent adjustment on
securities..................... 163 0 0
------- ------- -------
Net interest income per
consolidated financial
statements.................... $ 8,308 $ 8,231 $ 8,142
======= ======= =======
</TABLE>
_____________________
(1) Amounts are net of allowance for loan losses but include non-accrual loans.
Interest is recognized on non-accrued loans only as and when received.
(2) Securities are included at amortized cost, with net unrealized gains or
losses on securities available for sale included as a component of non-
interest-earning assets. Securities include Federal Home Loan Bank of New
York stock. Tax equivalent adjustment for Bank qualified municipals is also
included.
(3) Net interest rate spread represents the difference between the weighted
average yield on interest-earning assets and the weighted average cost of
interest-bearing liabilities.
(4) Net interest margin represents net interest income as a percentage of
average interest-earning assets.
39
<PAGE>
Rate/Volume Analysis. The following table analyzes the dollar amount of
changes in interest income and interest expense for major components of
interest-earning assets and interest-bearing liabilities. It shows the amount of
the change in interest income or expense caused by either changes in outstanding
balances (volume) or changes in interest rates. The effect of a change in volume
is measured by applying the average rate during the first period of the volume
change between the two periods. The effect of changes in rate is measured by
applying the change in rate between the two periods to the average volume during
the first period. Changes attributable to both rate and volume, which cannot be
segregated, have been allocated proportionately to the change due to volume and
the change due to rate.
<TABLE>
<CAPTION>
Three Months Ended March 31, Year Ended December 31, Year Ended December 31,
1999 vs. 1998 1998 vs. 1997 1997 vs.1996
Increase/(decrease) Increase/(decrease) Increase/(decrease)
Due to Due to Due to
---------------------------- --------------------------- -------------------------------
Volume Rate Net Volume Rate Net Volume Rate Net
------- -------- -------- -------- -------- ------- ---------- ------- ---------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets:
Interest-earning assets:
Loans........................... $ 76 $ (86) $(10) $ (88) $(110) $(198) $(396) $(135) $(531)
Securities...................... 29 (18) 11 193 93 286 139 146 285
Federal funds sold & other
interest bearing deposits..... 34 (26) 8 57 (13) 44 149 10 159
----- ----- ---- ----- ----- ----- ------ ----- -----
Total interest-earning assets. 139 (130) 9 162 (30) 132 (108) 21 (87)
Interest-bearing liabilities:
Savings accounts................ 15 0 15 (14) - (14) (56) (7) (63)
Time deposits................... (15) (48) (63) (85) - (85) (90) (61) (151)
Money market accounts........... 2 (1) 1 (18) (4) (22) 39 1 40
Other interest bearing
deposits...................... - (1) (1) 9 4 13 (1) (1) (2)
----- ----- ---- ----- ----- ----- ------ ----- -----
Total interest-
bearing liabilities.......... 2 (50) (48) (108) - (108) (108) (68) (176)
----- ----- ---- ----- ----- ----- ------ ----- -----
Net change in net interest
income.......................... $ 137 $ (80) $ 57 $ 270 $ (30) $ 240 $ - $ 89 $ 89
===== ===== ==== ===== ===== ===== ====== ===== =====
</TABLE>
40
<PAGE>
Comparison of Financial Condition at March 31, 1999 and December 31, 1998
Rome Savings' total assets decreased $994,000 or .4% to $224.3 million at
March 31, 1999, from $225.3 million at December 31, 1998.
Although total assets decreased over the three month period, total loans,
net of the allowance for loan losses, remained essentially unchanged at $135.0
million at March 31, 1999, versus $134.8 million at December 31, 1998. The
modest increase for the first quarter in net loans reflected normal seasonal
patterns in the Bank's lending area. Almost 70% of our loan portfolio is in
mortgage loans which typically do not see significant origination activity until
the spring season.
Securities decreased $2.2 million or 3.9% to $54.3 million at March 31,
1998 from $50.4 million at December 31, 1998. This decline reflected the
relative lack of attractiveness of fixed income security yields compared to
prior periods when the spread in yield between these securities and the Bank's
interest bearing deposits was greater. Federal funds sold, which are overnight
investments, decreased $1.4 million or 10.4% to $12 million at March 31, 1998.
Levels of federal funds sold may vary significantly as they represent our daily
investment of excess liquidity.
The balance of total deposits increased $2.8 million or 1.5% to $191.9
million at March 31, 1998. This growth occurred primarily in savings accounts
which increased $2.5 million or 3.2% to $78.4 million at March 31, 1999 and
money market accounts which increased $930,000 or 17.1% to $6.4 million. These
increases reflected the relative attractiveness in yield of these non-maturity
accounts to alternative money market investments available to our depositors as
a result of the relatively "flat yield curve" in interest rates existing during
that period.
Total equity increased $277,000 or 1.0% to $28.9 million primarily as a
result of earnings of $389,000 for the quarter offset by a decrease of $112,000
in the unrealized gain in the Bank's available for sale securities for the
quarter.
Comparison of Operating Results for the Three Months Ended March 31, 1999 and
1998.
General
Net income was $389,000 for the first quarter of 1999, a decrease of
$92,000 or 19.1% compared to $481,000 for the first quarter of 1998. The
decrease was primarily attributable to an increase in non-interest expense and a
decrease in non-interest income; these changes were partially offset by a
$151,000 decrease in income tax expense.
Interest Income
Total interest income decreased $77,000 or 2.0% to $3.7 million for the
first quarter of 1999 compared with $3.8 million for the first quarter of 1998.
In the second quarter of 1998 however, Rome Savings began purchasing municipal
securities for their higher after tax yield in
41
<PAGE>
comparison to comparable risk taxable securities. After giving effect to the
reduction in state and federal income taxes from these securities, interest
income increased $9,000 or .2% to $3.8 million for the three months ended March
31, 1999. The increase in tax equivalent interest income occurred as a result of
an $8.2 million increase in earning assets from $198.8 million for the first
three months of 1998 to $207.0 million for the first three months of 1999. This
increase was spread across all of the three major earning assets categories. The
increase in interest income resulting from the increase in average balances was
partially offset by a reduction in yield on the Bank's earning assets from 7.77%
for the first quarter of 1998 to 7.47% for the first quarter of 1999. The lower
interest rate environment along with the relatively flat yield curve that
prevailed during 1998 and the first quarter of 1999 resulted in the downward
repricing of our interest rate-sensitive assets. In addition, the average yield
on our assets was affected by the refinancing of many of our existing loans to
loans with lower interest rates.
Reported interest income from securities decreased $75,000 from $808,000
for the three months ended March 31, 1998 to $733,000 or 10.23% for the three
months ended March 31, 1999. Interest on loans decreased $10,000 or .4% to $2.8
million for the same period. While total net loans outstanding actually
increased from an average of $131.6 million in the first quarter of 1998 to
$135.2 million in the first quarter of 1999, the average yield on the portfolio
declined from 8.6% to 8.4% due primarily to general declines in interest rates.
Finally, interest on federal funds sold and interest bearing deposits increased
$8,000 or 4.8% to $175,000. This increase resulted from a $2.7 million increase
in these temporary investments which was partially offset by a decline in their
yield from 5.5% for the first quarter of 1998 to 4.7% for the first quarter of
1999.
Interest Expense
Interest expense on deposits decreased $48,000 or 2.7% to $1.7 million for
the first three months of 1999 in comparison to the same period in 1998.
Interest expense on time deposits which accounted for 63.0% of interest expense
on deposits, decreased $63,000 or 5.5% to $1.1 million for the first three
months of 1999. The decrease in interest expense on time deposits was partially
offset by a $15,000 or 2.6% increase in interest expense on savings accounts to
$587,000 for the first quarter of 1999.
The overall decrease in interest expense was attributable to a 14 basis
point decrease in the average cost of those liabilities to 4.16% for the first
quarter of 1999 compared with 4.30% for the first quarter of 1998. This
decrease reflects the overall lower interest rate environment that prevailed
during the end of 1998 and the first quarter of 1999. The decrease in the cost
of interest-bearing liabilities was offset by an increase of $1.1 million, or
.7%, in the average balance of total interest-bearing liabilities to $169.0
million for the first three months of 1999 compared with $167.8 million for the
first three months of 1998. The major component of the increase in the average
balance of interest-bearing liabilities was a $1.9 million, or 2.5%, increase to
$76.7 million in the average balance of savings deposits during the first
quarter of 1999 compared with an average balance of $74.8 million during the
first quarter of 1998.
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Net Interest Income
Net interest income for the first quarter of 1999 decreased $29,000 or
1.4%, to $2.0 million compared with $2.03 million for the first quarter of 1998.
Net interest rate spread, the difference between the yield on average total
interest-earning assets and the cost of average total interest-bearing
liabilities, decreased 16 basis points to 3.31% for the first three months of
1999 from 3.47% for the prior year. Net interest margin, represented by net
interest income divided by average total interest-earning assets, decreased 5
basis points to 4.08% for the first three months of 1999 compared with 4.13% for
1998. These decreases were primarily due to slight declines in the interest
rates we paid on our interest-bearing deposits, while interest-earning assets
continued to reprice downward more significantly during the same time period.
Provision for Loan Losses
The provision for loan losses results from management's analysis of the
adequacy of the Bank's allowance for loan losses. If management determines that
an increase in the allowance is warranted then the increase in accomplished
through a provision for loan losses which is charged as an expense on the Bank's
income statement. The Bank did not make any provision for loan losses during
the first quarter of 1999 in comparison to $75,000 for the first quarter of
1998. During 1999, the Bank believed that no additional provision for loan
losses was required in light of the level of its allowance at the beginning of
1999, a decline in total non-performing loans during 1998 and 1999 from much
higher levels during the four prior years and other factors. Management believed
the March 31, 1999 allowance for loan losses to be adequate at 1.39% of total
loans.
Future provisions for loan losses will continue to be based upon our
assessment of the overall loan portfolio and the underlying collateral, trends
in non-performing loans, current economic conditions and other relevant factors
in order to maintain the allowance for loan losses at adequate levels to provide
for probable losses. Rome Savings also takes into account the local economy and
real estate values in determining the provision for loan losses.
Non-Interest Income
Non-interest income includes service fees, other income and net gains on
sales of securities. Total non-interest income decreased $82,000 or 24.4%, to
$254,000 for the first three months of 1999 compared with $336,000 for the first
three months of 1998. The decrease is primarily due to the absence in the first
quarter of 1999 of any gains on net securities transactions, whereas we realized
gains of $139,000 on net securities transactions in the prior year's first three
months. In the first quarter of 1998, substantially all of this gain was from
the sale of shares in one "large cap" institutional mutual fund.
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Non-Interest Expense
Total non-interest expense increased $207,000 or 14.0%, to $1.7 million
during the first quarter of 1999 compared with $1.5 million for the quarter
ended March 31, 1998. Salaries and employee benefits and net building,
occupancy and equipment expense comprised 75.2% of total non-interest expense
for the first quarter of 1999. Salaries and employee benefits increased
$173,000 or 23.2% to $920,000 for the first quarter of 1999 compared with
$747,000 for the first quarter of 1998. Of this increase, $55,000 represented a
vacation accrual for all employees while pension expense increased $46,000. The
latter was principally related to the final amortization of the transition asset
in 1998. The balance of the increase of $72,000 represented routine salary
increases as well as increased costs for the Bank's post employment benefits
other than pensions. Equipment expense increased $70,000 or 56% to $194,000 in
the first quarter of 1999 as compared to $124,000 in the first quarter of 1998.
The increase was largely attributable to the Bank's installation of new software
and hardware to replace aging equipment, ensure Year 2000 readiness, and to
expand its customer services.
Income Taxes
Income tax expense decreased $151,000 to $174,000 for the first three
months of 1999 compared with $325,000 for the first three months of 1998. This
decrease reflected a lower pretax income for the three months ending March 31,
1999 of $563,000 compared with $806,000 for the same period in 1998. It also
reflected a decline in the Bank's effective tax rate to 30.9% for the first
three months of 1999 from 40.3% for the first three months of 1998. The decline
in the effective tax rate reflects the Bank's decision to invest in nontaxable
municipal bonds.
Comparison of Financial Condition at December 31, 1998 and 1997
Rome Savings' total assets increased $10.9 million, or 5.1%, to $225.3
million at December 31, 1998 from $214.4 million at December 31, 1997.
At December 31, 1998, loans had increased $4.1 million, or 3.1%, to $136.8
million, while securities available for sale remained essentially unchanged at
$55 million. Securities held to maturity decreased $209,000 to $1.5 million at
December 31, 1998. Federal funds sold increased $4.6 million, or 52.3%, to
$13.4 million at December 31, 1998 from $8.8 million at December 31, 1997.
The growth in total assets was funded primarily by an increase of $4.6
million, or 2.5%, in total deposits to $189.1 million at December 31, 1998
compared with $184.5 million at December 31, 1997. Non-interest bearing demand
accounts increased $4.0 million or 24.6% to $20.2 million at December 31, 1998
compared with $16.2 million at December 31, 1997. This growth occurred as a
result of the Bank's marketing efforts to promote its recent conversion to
"free" personal checking accounts. Interest-bearing deposits increased
$643,000, or 0.4%, to $168.9 million at December 31, 1998, compared to $168.3
million at December 31, 1997. Of our interest-bearing deposits, savings and
money market deposits increased $1.5 million, or 1.9%, to $81.4 million at
December 31, 1998 from $79.9 million at December 31, 1997. The
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increase in savings and money market deposits at December 31, 1998 was partially
offset by a decrease in time deposits of $1.1 million, or 1.3%, to $84.7 million
compared with $85.8 million at December 31, 1997. Advance payments by borrowers
for property taxes and insurance and interest bearing checking made up the
balance of total deposits accounting for $2.8 million at December 31, 1998 and
$2.6 million at December 31, 1997.
Our total equity increased $1.9 million, or 7.0%, to $28.7 million at
December 31, 1998, from $26.8 million at December 31, 1997, due to the retention
of $1.5 million of net income for 1998, and an increase of $343,000 in other
comprehensive income related to unrealized gains on securities available for
sale.
Comparison of Operating Results for the Years Ended December 31, 1998 and 1997
General
Net income was $1.5 million for 1998, which is unchanged from 1997. A
$192,000 increase in non-interest expense was partially offset by a decrease in
income tax expense of $143,000.
Interest Income
Total interest income remained essentially unchanged at $15.5 million for
both 1998 and 1997. Total interest income increased $132,000 to $15.7 million
for 1998 compared to $15.5 million for 1997 after giving effect to the reduction
of state and federal income taxes from the municipal securities. The average
balance of earning assets increased $3.1 million. The yield on earning assets
decreased from 7.81% for 1997 to 7.75% for 1998 due to a general decline in
interest rates. Interest on loans decreased $198,000 or 1.7% to $11.3 million
in 1998 from $11.5 million in 1997 due to a decrease of $1.0 million in the
average balance of loans combined with a decline in their yield from 8.65% to
8.57%. Stagnant loan demand as a result of employment losses in the mid 1990s
has restrained the growth in the our loan portfolio. Interest on securities
increased $286,000 or 8.6%, to $3.6 million for 1998 from $3.3 million for 1997
while interest on federal funds sold and interest bearing deposits increased
$44,000 or 6.6% to $713,000 for 1998.
The average balance of securities increased $3 million or 5.6% in 1998 as
the Bank sought alternative deployment of excess funding from the increase in
deposits due to the timing of loan production. The yield on the Bank's security
portfolio increased to 6.41% in 1998 from 6.24% the year before because of
higher capital gains dividends from the Bank's investment in an institutional
stock mutual fund.
Interest Expense
Interest expense on deposits decreased $108,000 or 1.5%, to $7.2 million
for 1998 compared with $7.3 million for 1997. Interest expense on time
deposits, which accounted for
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64.2% of interest expense on deposits, decreased $85,000 or 1.8%, to $4.6
million for 1998 from $4.7 million for 1997. This decrease resulted from a
decline in the average balance of time deposits of $1.6 million to $84.5
million. Interest expense on other interest bearing deposits decreased $23,000
largely as a result of a decline in the average balance of savings and money
market accounts outstanding. Overall, the average cost of total interest bearing
deposits remained virtually unchanged at 4.28% for 1998 versus 4.29% for 1997.
Net Interest Income
Net interest income for 1998 was $8.3 million as compared with $8.2 million
for 1997. Net interest income on a tax equivalent basis for 1998 was $8.5
million as compared with $8.2 million for 1997. Net interest rate spread, the
difference between the yield on average total interest-earning assets and the
cost of average total interest-bearing liabilities, decreased 5 basis points to
3.47% for 1998 from 3.52% for the prior year. This decrease was primarily due
to slight declines in the interest rates we paid on our interest-bearing
deposits, while interest-earning assets continued to reprice downward more
significantly in 1998. Net interest margin, represented by net interest income
divided by average total interest-earning assets, increased 6 basis points to
4.19% for 1998 compared with 4.13% for 1997. This increase in margin occurred
as a result of the increase in the ratio of interest-earning assets to interest-
bearing liabilities from 1.17 times in 1997 to 1.20 times in 1998 which offset
the effect of the narrowing interest rate spread.
Provision for Loan Losses
During 1998, we provided $390,000 for loan losses, compared to $360,000 for
1997. Net loan charge-offs were $176,000 for 1998 versus $326,000 for 1997.
This resulted in the allowance for loan losses increasing by $214,000 or 12.3%
to $1.96 million at December 31, 1998, from $1.74 million at December 31, 1997.
The allowance for loan losses as a percent of non-performing loans at
December 31, 1998 was 210.1%, compared with 118.2% for 1997. This improvement
resulted form a decline in non-performing loans to $930,000 at December 31, 1998
from $1.5 million at December 31, 1997. In addition to the nonperforming loans,
management has identified, through normal internal credit review procedures,
$3.5 million of "potential problem loans" at December 31, 1998. These problem
loans are defined as loans not included as non-performing loans, but about which
management has developed information regarding possible credit problems, which
may cause the borrowers future difficulties in complying with loan repayments.
The current level of allowance for loan losses reflects risks related to the
weakness in the local economy and the recent decline in real estate values in
Oneida County as reflected by the City of Rome's decision to decrease property
tax assessments in 1998.
Future provisions for loan losses will continue to be based upon our
assessment of the overall loan portfolio and the underlying collateral, trends
in non-performing loans, current
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economic conditions and other relevant factors in order to maintain the
allowance for loans losses at adequate levels to provide for probable losses.
Non-Interest Income
Non-interest income included service charges, other income and net gains on
sales of securities. Total non-interest income was essentially unchanged from
1997 to 1998.
Service charges increased $45,000 or 8.7%. Securities gains increased
$157,000 or 100.0% to $314,000. These gains reflect realized gains on the sale
of fixed income and stock mutual fund investments.
Finally, other income decreased $213,000 or 50.8% reflecting a decrease of
$125,000 in income from other real estate owned and a $55,000 decrease
representing a recovery in 1997 of an investment in Nationar, a former
correspondent bank which was closed by the New York Superintendent of Banks in
1995.
Non-Interest Expense
Total non-interest expense increased $192,000 or 3.0%, to $6.6 million
during 1998 compared with $6.4 million for the prior year. Salaries and employee
benefits accounted for 71.4% of the increase rising to $3.3 million in 1998 from
$3.1 million in the prior year. Of this, $80,000 was related to the
implementation of a supplemental executive retirement plan for senior management
while the remainder represented routine salary increases. Building, occupancy,
and equipment expenses increased $93,000 or 8.5% to $1.2 million from $1.1
million in the prior year reflecting higher equipment costs related to the
Bank's installation of new computer equipment to assure its readiness for the
year 2000 and to improve customer service.
Income Taxes
Income taxes decreased $143,000 or 14.4% to $853,000 from $996,000 in the
prior year resulting in effective tax rates of 35.9% in 1998 and 39.3% in 1997,
respectively. The decrease in the effective tax rate reflects our decision to
invest in nontaxable municipal bonds during 1998.
Liquidity and Capital Resources
The term "liquidity" refers to our ability to generate adequate amounts of
cash to fund loan originations, loan purchases, deposit withdrawals and
operating expenses. Our primary sources of funds are deposits, scheduled
amortization and prepayments of loan principal and mortgage-backed securities,
maturities and calls of investment securities and funds provided by our
operations. We also have a written agreement that allows us to borrow up to
$25.0 million in federal funds from a correspondent bank. In addition, we may
enter into reverse repurchase
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agreements with approved broker-dealers. Reverse repurchase agreements are
agreements which allow us to borrow money using our securities as collateral. At
March 31, 1999, we had no outstanding borrowings.
Loan repayments and maturing investment securities are a relatively
predictable source of funds. However, deposit flows, calls of investment
securities and prepayments of loans and mortgage-backed securities are strongly
influenced by interest rates, general and local economic conditions and
competition in the marketplace. These factors reduce the predictability of the
timing of these sources of funds.
Our primary investing activities are the origination of one- to four-family
real estate loans, commercial real estate, commercial, consumer installment
loans, and to a lesser extent, the purchase of investment securities. For the
year ending December 31, 1998, we originated loans of approximately $36.0
million and during the year ending December 31, 1997 we originated loans of
approximately $24.8 million. Purchases of investment securities were $20.9
million for 1998 and $20.3 million for 1997.
At March 31, 1999, Rome Savings had loan commitments to borrowers of
approximately $4.1 million, and available letters and lines of credit of
approximately $5.1 million. Total deposits increased $4.6 million during 1998
and $83,000 during 1997. Deposit flows are affected by the level of interest
rates, the interest rates and products offered by competitors and other factors.
Time deposit accounts scheduled to mature within one year were $54.9 million at
December 31, 1998. Based on our deposit retention experience and current
pricing strategy, we anticipate that a significant portion of these time
deposits will remain with Rome Savings. We are committed to maintaining a
strong liquidity position; therefore, we monitor our liquidity position on a
daily basis. We anticipate that we will have sufficient funds to meet our
current funding commitments.
At March 31, 1999, we exceeded each of the applicable regulatory capital
requirements. Our leverage (Tier 1) capital was $28.3 million, or 12.8% of
average assets, at March 31, 1999. In order to be classified as "well-
capitalized" by the FDIC we were required to have leverage (Tier 1) capital of
$11.1 million, or 5.0%. To be classified as a well-capitalized bank by the
FDIC, we must also have a risk-based total capital ratio of 10.0%. At March 31,
1999 we had a risk-based total capital ratio of 23.0%. See "Regulation of Rome
Savings Bank and Rome Bancorp" for a discussion of the regulatory capital
requirements applicable to Rome Savings and see "Regulatory Capital Compliance"
for information regarding the impact of the offering on our capital position.
We do not anticipate any material capital expenditures, nor do we have any
balloon or other payments due on any long-term obligations or any off-balance
sheet items other than the commitments and unused lines of credit noted above.
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Recent Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share." SFAS No. 128 requires the calculation of basic and diluted earnings per
share. It establishes rules for calculating diluted earnings per share based
upon the effect of agreements by publicly traded companies to issue additional
stock. SFAS No. 128 is now effective and will require Rome Bancorp, after the
conversion, to report in addition to basic earnings per share, fully diluted
earnings per share which would show, for example, the effect on earnings per
share of the exercise of outstanding stock options, if any.
In June, 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". This statement establishes comprehensive
accounting and reporting requirements for derivative instruments and hedging
activities. The statement requires companies to recognize all derivatives as
either assets or liabilities, with the instruments measured at fair value. The
accounting for gains and losses resulting from changes in fair value of the
derivative instrument depends on the intended use of the derivative and the type
of risk being hedged. This statement is effective for all fiscal quarters of
fiscal years beginning after June 15, 2000, although earlier adoption is
permitted. The Company does not currently invest in derivative instruments,
therefore the provisions of SFAS No. 133 are not expected to have a significant
effect on the financial statements of the Company. SFAS No. 133 also permits
certain reclassifications of securities among the trading, available-for-sale
and held-to-maturity classifications. The Company has no current intention to
reclassify any securities pursuant to SFAS No. 133.
In October 1998, the FASB issued SFAS No. 134, "Accounting for Mortgage-
Backed Securities Retained After the Securitization of Mortgage Loans Held for
Sale by a Mortgage Banking Enterprise", which amends SFAS No. 65, "Accounting
for Certain Mortgage Banking Activities". This statement conforms the
subsequent accounting for securities retained after the securitization of
mortgage loans by a mortgage banking enterprise with the accounting for such
securities by a non-mortgage banking enterprise. This statement is effective
for the first quarter beginning after December 15, 1998, and did not have any
impact on our financial position or results of operations as we do not currently
securitize mortgage loans.
Year 2000
Background. A significant challenge that is confronting the business
community, including Rome Savings and its competitors, centers on the inability
of many computer systems and software applications to recognize the Year 2000
(referred to as the "Y2K issue"). Many existing computer systems and software
applications originally were programmed to provide only two digits to identify
the calendar year. With the Year 2000 (Y2K) approaching, these systems and
applications may recognize "00" as 1900 rather than the Year 2000. If the Y2K
issue is not resolved, our operations could be adversely affected due to the
date-sensitive nature of much of our financial information.
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Risk. Similar to other financial institutions and companies that utilize
computer technology, our operations may be significantly affected by the Y2K
issue because of our reliance on electronic data processing technology and date-
sensitive information. The Y2K issue also impacts other aspects of our non-
technical business processes, including telephone systems and copiers. If the
Y2K issue is not adequately addressed, and systems are not modified to properly
identify the Year 2000, computer systems and software applications may fail or
create erroneous information.
If we are affected by the Y2K issue, information that relies on dates, such
as interest calculations, loan payment schedules and other operating functions,
could be significantly incorrect. We may not be able to process withdrawals or
deposits, prepare account statements, or engage in any of the many transactions
that constitute our normal operations. Our inability to adequately address the
Y2K issue could also have a significant adverse effect on our suppliers and
service providers. Should we experience a Y2K failure that cannot readily be
fixed, it may result in a significant adverse impact on our financial condition
and results of operations.
State of Readiness. In order to address the Year 2000 issue, we have begun
a process to identify the areas that will be affected by the Year 2000 problem.
We formed a basic action plan in September 1997 to evaluate the effects of the
Year 2000 on Rome Savings and to formulate a contingency plan for any critical
systems which are not effectively reprogrammed. As discussed below, we believe
that we have considered all material Year 2000 issues and that we are taking the
proper action to correct them.
Our action plan for the Year 2000, in accordance with regulatory guidance,
outlines our plans to achieve a successful transition to the Year 2000. The
following summarizes the various phases of our Y2K plan:
Awareness Phase - This initial phase of the Y2K project involved
---------------
defining the problem, obtaining executive level support and developing an
overall strategy. This phase was completed in September, 1997.
Assessment Phase - During this phase, we developed an inventory
----------------
listing of all internal computer systems and software applications, as well
as third-party vendors and suppliers upon whom we rely for goods and
services. We decided to fix, upgrade, replace or abandon any systems that
we identified as having Y2K issues. The status of individual items changes
as systems go through subsequent phases. This assessment phase of the
project is substantially complete.
We have reviewed our customer base to determine if they pose any
significant Y2K risks. Our customer base consists primarily of individual
depositors and residential mortgage borrowers. We also have commercial
borrowers in our customer base. We do not anticipate any significant Y2K
risks posed by our potential borrwowers, as many of our loans are
collateralized by the underlying property. These customers are not likely
to pose significant Y2K risks to our operations. However, it is not
possible at this time to
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evaluate the indirect costs which could be faced if the employers of our
individual customers encounter unresolved Y2K issues.
Renovation Phase - As previously discussed, our most mission critical
----------------
system is the integrated financial systems software package that includes
our loans, deposits, general ledger and other miscellaneous applications.
This integrated main frame software system was developed by Data
Dimensions, Inc. ("DID"), and is currently maintained and supported by, a
recognized provider. The mainframe computer system was also manufactured
by, and is currently maintained by, a well-known national computer hardware
company.
We continue to monitor the Y2K progress of those third-parties who
provide us with services or products to ensure that they are taking
adequate measures in addressing the Y2K issue. We are seeking written
assurances from these third-parties as to their current Year 2000
compliance or that they are in the process of addressing the Y2K issue.
However, we can not assure you that these third-parties will be prepared
for the Y2K issue. The failure of these third-parties to achieve Y2K
compliance may have an adverse impact on our operations.
Validation/Implementation Phases - The validation phase is considered
--------------------------------
to be the most critical stage of the Y2K readiness process. It is designed
to test the ability of the renovated systems to accurately process date
sensitive data. All Y2K compliant upgraded systems have been installed and
put into production. This phase was substantially completed as of March
31, 1999.
Use of Resources. Managing the Year 2000 project has resulted in
additional direct and indirect costs. Direct costs include charges by third-
party software vendors for product replacements, upgrades and enhancements,
costs involved in testing for Y2K compliance, costs for customer awareness
programs, etc. Indirect costs consist primarily of time devoted to the project
by existing employees for project development and implementation, the testing of
systems, monitoring third-party vendor and service provider progress, and the
development of contingency plans. The costs of the Y2K project have not been
significant to date, and we believe that the total cost of the project will not
be material to our results of operations or financial condition in any one year.
We currently estimate that the total cost of the Y2K project, excluding the
reallocation of internal resources, will be approximately $575,000, of which we
have already incurred $565,000. We cannot guarantee that the Y2K costs would
not result in additional costs to Rome Savings in the future.
Contingency Planning. Regulatory guidance requires that we consider two
types of contingency planning:
(1) remediation contingency planning, which addresses the failure of an
institution to successfully fix, test or implement its Y2K readiness
plan; and
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(2) business resumption contingency planning, which addresses the risks
associated with the failure of systems at critical dates, such as
January 1, 2000.
The regulatory guidance provides that if a mission critical application or
system has been remediated, tested and implemented, a remediation contingency
plan is not required. Based on the overall progress of our Y2K project,
specifically the testing and implementation results relative to the integrated
financial systems software package, our Review Team has concluded that a
remediation contingency plan is not required for mission critical applications.
While we expect to complete our Y2K project in a timely manner, we can not
guarantee that the systems of companies with whom we conduct business, will also
be completed in a timely manner. The failure of these entities to adequately
address the Y2K issue could adversely affect our ability to conduct business.
To address the risks associated with the failure of mission critical
systems at critical dates, we are currently developing a business resumption
contingency plan. We are developing contingency or alternate plans for our
mission critical systems on a department-by- department basis in anticipation of
potential unplanned system difficulties or third-party failures at January 1,
2000 or dates beyond. However, we understand that certain events beyond our
control, such as extended power outages and loss of telecommunications, may
diminish our ability to provide minimum levels of service. Failure of these
services will affect companies, individuals and the government, and can not be
remedied by anyone other than the responsible party. For some systems,
contingency plans will consist of using or reverting to manual systems until the
problems can be corrected. Consistent with regulatory guidance, we expect to
complete our business resumption contingency plan by June 30, 1999. We do not
anticipate any adverse material impact on our operations as a result of the Y2K
issue.
Significant Y2K failures in the our systems or in the system's third
parties (or third parties upon whom they depend) could have a material adverse
effect on our financial condition and results of operation. Rome Savings
believes that its reasonably likely worst-case Y2K scenario is (i) a material
increase in the our credit losses due to Y2K problems for the Rome Savings'
borrowers and obligors, and (ii) disruption in financial markets causing
liquidity stress to Rome Savings. The magnitude of these potential credit
losses and disruption cannot be determined at this time.
Impact of Inflation and Changing Prices
The consolidated financial statements and related notes of Rome Savings
have been prepared in accordance with generally accepted accounting principles
(GAAP). GAAP generally requires the measurement of financial position and
operating results in terms of historical dollars without consideration for
changes in the relative purchasing power of money over time due to inflation.
The impact of inflation is reflected in the increased cost of our operations.
Unlike industrial companies, our assets and liabilities are primarily monetary
in nature. As a result, changes in market interest rates have a greater impact
on performance than the effects of inflation.
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Business of Rome Savings Bank
General
Rome Savings is a community and customer oriented retail savings bank
offering traditional deposit products, residential mortgage loans, commercial
real estate, commercial and consumer loans. In addition, Rome Savings purchases
securities issued by the U.S. Government and government agencies, municipal
securities, mortgage-backed securities, and other investments permitted by
applicable laws and regulations. We retain substantially all of the loans we
originate with the exception of the 30 year fixed-rate mortgages which we began
to originate under a program that was initiated in May, 1999.
Our revenues are derived principally from interest on our loans and
interest and dividends on our investment securities. Our primary sources of
funds are deposits, scheduled amortization and prepayments of loan principal and
mortgage-backed securities, maturities and calls of investment securities and
funds provided by operations. We have not borrowed funds in recent years. See
"Business of Rome Savings Bank" and " -- Source of Funds."
Market Area
We conduct our operations out of our executive office in Rome, New York and
three branches located in Oneida County, New York. As of June 30, 1998, we had
a 7.4% share of all Oneida County deposits and we ranked fifth in the size of
deposits overall in the county. In addition, we had a 38.7% share of all
deposits in Rome, New York, which ranked us first in the size of deposits
overall in Rome.
Our geographic market area for loans and deposits is principally Oneida
County, New York. The local economy is recovering from the loss of certain key
employers such as Griffiss Air Force Base in Rome and Martin Marietta in Utica.
As a result, the local market is not dependent on one key employer. For the six
month period ended September 30, 1998, 79.5% of the total employment of 106,002
in Oneida County was from private employers, while the remaining 20.5%
represented federal, state and local municipality employment. The employment
sectors include:
. services (excluding financial);
. wholesale and retail trade; and
. manufacturing.
53
<PAGE>
Similar to national trends, most of the job growth being realized in Oneida
County has been in service related industries and service jobs now account for
the largest portion of the workforce. Our market area also includes a growing
number of healthcare, engineering, software and technical firms which have
located in Oneida County in order to take advantage of the well-educated work
force consisting of current and former military and defense industry personnel.
Rome, New York is located 15 miles west of Utica and 50 miles east of Syracuse.
On occasion and depending on market conditions, we also originate loans in
the greater New York City metropolitan area and outside of New York State. At
March 31, 1999, 12.7% of our total loan portfolio consisted of loans located in
the New York City area, while 1.2% consisted of loans made outside of New York.
Our future growth opportunities will be influenced by growth and stability
in the regional and statewide economies, other demographic population trends and
the competitive environment. We believe that we have developed lending products
and marketing strategies to address the credit-related needs of the residents in
our market area.
Competition
We face intense competition both in making loans and attracting deposits.
New York has a high concentration of financial institutions, many of which are
branches of large money center and regional banks which have resulted from the
consolidation of the banking industry in New York and surrounding states. Some
of these competitors have greater resources than we do and may offer services
that we do not provide. For example, we do not provide trust or investment
services, or credit cards, and do not yet provide banking services through home
computers. Customers who seek "one stop shopping" may be drawn to these
institutions.
Our competition for loans comes principally from commercial banks, savings
institutions, mortgage banking firms, credit unions, finance companies,
insurance companies and brokerage and investment banking firms. Our most direct
competition for deposits has historically come from credit unions, commercial
banks, savings banks and savings and loan associations. We face additional
competition for deposits from short-term money market funds, corporate and
government securities funds, and from brokerage firms, mutual funds, and
insurance companies.
Lending Activities
Loan Portfolio Composition. Rome Savings has a long standing commitment to
originating for portfolio commercial real estate, commercial, and consumer loans
in addition to the traditional emphasis on residential lending.
At March 31, 1999, we had total loans of $136.9 million, of which $65.9
million, or 48.2%, were one- to four-family residential mortgages. Of
residential mortgage loans outstanding at that date, 27.4% were adjustable-rate
mortgage or ARM loans and 72.6% were fixed-rate loans. The remainder of our
loans at March 31, 1999, amounting to $70.9 million, or
54
<PAGE>
51.8% of total loans, consisted of commercial real estate, commercial loans and
consumer loans. We originate commercial real estate and commercial business
loans both within and outside of Oneida County, New York. As of March 31, 1999,
21.2% of our loan portfolio was in commercial real estate loans and 12.7% was in
commercial loans. In addition, as of March 31, 1999, 17.7% of our loan portfolio
was in consumer loans. We also originate guaranteed student loans.
Our loans are subject to federal and state law and regulations. The
interest rates we charge on loans are affected principally by the demand for
loans, the supply of money available for lending purposes and the interest rates
offered by our competitors. These factors are, in turn, affected by general and
local economic conditions, monetary policies of the federal government,
including the Federal Reserve Board, legislative tax policies and governmental
budgetary matters.
55
<PAGE>
The following table sets forth the composition of the Bank's mortgage and
other loan portfolios in dollar amounts and in percentages at the dates
indicated.
<TABLE>
<CAPTION>
At March 31, At December 31,
----------------- ----------------------------------------------------------------
1999 1998 1997 1996
----------------- ------------------- ------------------- ------------------
Percent Percent Percent Percent
of of of of
Amount Total Amount Total Amount Total Amount Total
-------- ------- --------- ------- -------- ------- -------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mortgage loans:
One to four family................... $ 65,912 48.16% $ 65,752 48.06% $ 66,154 49.85% $ 67,739 48.74%
Commercial real estate............... 29,033 21.21% 29,499 21.56% 28,440 21.43% 31,830 22.90%
Construction & land.................. 324 0.24% 391 0.29% 936 0.70% 725 0.52%
-------- ------ -------- ------ -------- ------ -------- ------
Total mortgage loans............... 95,269 69.61% 95,642 69.91% 95,530 71.98% 100,294 72.16%
Commercial loans........................ 17,328 12.66% 17,271 12.62% 15,197 11.45% 18,374 13.22%
Consumer loans:
Automobile........................... 9,669 7.06% 9,460 6.92% 8,325 6.27% 5,958 4.29%
Education loans...................... 5,610 4.10% 5,224 3.82% 5,226 3.94% 6,378 4.59%
Property improvement and
equipment.......................... 1,876 1.37% 2,108 1.54% 2,264 1.71% 2,429 1.74%
All other............................ 7,100 5.20% 7,099 5.19% 6,175 4.65% 5,560 4.00%
-------- ------ -------- ------ -------- ------ -------- ------
24,255 17.73% 23,891 17.47% 21,990 16.57% 20,325 14.62%
-------- -------- -------- --------
Total loans............................. 136,852 100.00% 136,804 100.00% 132,717 100.00% $138,993 100.00%
====== ====== ====== ======
Less: Allowance for loan losses........ 1,898 1,956 1,742 1,708
-------- -------- -------- --------
Loans, net.............................. $134,954 $134,848 $130,975 $137,285
======== ======== ======== ========
<CAPTION>
----------------------------------------
1995 1994
------------------ ------------------
Percent Percent
of of
Amount Total Amount Total
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Mortgage loans:
One to four family................... $ 64,020 45.40% $ 63,239 45.27%
Commercial real estate............... 34,487 24.46% 34,200 24.48%
Construction & land.................. 983 0.70% 1,383 0.99%
-------- ------ -------- ------
Total mortgage loans............... 99,490 70.56% 98,822 70.74%
Commercial loans........................ 19,682 13.96% 20,178 14.44%
Consumer loans:
Automobile........................... 5,746 4.08% 5,230 3.74%
Education loans...................... 7,376 5.23% 5,767 4.13%
Property improvement
and equipment....................... 2,578 1.83% 2,835 2.03%
All other............................ 6,120 4.34% 6,870 4.92%
-------- ------ -------- ------
21,820 15.48% 20,702 14.82%
-------- --------
Total loans............................. 140,992 100.00% 139,702 100.00%
====== ======
Less: Allowance for loan losses........ 1,645 1,579
-------- --------
Loans, net.............................. $139,347 $138,123
======== ========
</TABLE>
56
<PAGE>
Loan Maturity. The following table presents the contractual maturity of
our loans at March 31, 1999 and December 31, 1998. The table does not include
the effect of prepayments or scheduled principal amortization.
<TABLE>
<CAPTION>
At March 31, 1999
------------------------------------------
Commercial and
Mortgage Loans Consumer Loans Total
-------------- --------------- --------
(In thousands)
<S> <C> <C> <C>
Amounts due:
Within one year................... $ 557 $13,402 $ 13,959
After one year:
One to three years.............. 2,955 8,715 11,670
Three to five years............. 3,863 10,833 14,746
Five to ten years............... 22,940 7,618 30,558
Ten to twenty years............. 50,586 965 51,551
Over twenty years............... 14,368 - 14,368
------- ------- --------
Total due after one year...... 94,712 28,181 122,893
------- ------- --------
Total loans................... $95,269 $41,583 136,852
Allowance for loan losses......... (1,898)
--------
Net loans..................... $134,954
========
</TABLE>
<TABLE>
<CAPTION>
At December 31, 1998
---------------------------------------------
Commercial and
Mortgage Loans Consumer Loans Total
-------------- -------------- ---------
(In thousands)
<S> <C> <C> <C>
Amounts due:
Within one year.................. $ 939 $13,299 $ 14,238
After one year:
One to three years............. 3,100 8,780 11,880
Three to five years............ 3,132 10,417 13,549
Five to ten years.............. 22,567 7,846 30,413
Ten to twenty years............ 50,701 820 51,521
Over twenty years.............. 15,203 - 15,203
------- ------- --------
Total due after one year..... 94,703 27,863 122,556
------- ------- --------
Total loans.................. $95,642 $41,162 136,804
Allowance for loan losses........ (1,956)
--------
Net loans.................... $134,848
========
</TABLE>
57
<PAGE>
The following tables present, as of March 31, 1999 and December 31, 1998,
the dollar amount of all loans, due after March 31, 2000 and December 31, 1999,
and whether these loans have fixed interest rates or adjustable interest rates.
<TABLE>
<CAPTION>
Due After March 31, 2000
-------------------------------
Fixed Adjustable Total
------- ---------- ---------
(In thousands)
<S> <C> <C> <C>
Mortgage loans................................ $66,187 $28,525 $ 94,712
Commercial and consumer loans................. 26,637 1,544 28,181
------- ------- --------
Total loans due after one-year................ $92,824 $30,069 $122,893
======= ======= ========
</TABLE>
<TABLE>
<CAPTION>
Due After December 31, 1999
-------------------------------
Fixed Adjustable Total
-------- ---------- ---------
(In thousands)
<S> <C> <C> <C>
Mortgage loans................................ $65,496 $29,207 $ 94,703
Commercial and consumer loans................. 26,236 1,627 27,863
------- ------- --------
Total loans due after one-year................ $91,732 $30,834 $122,566
======= ======= ========
</TABLE>
58
<PAGE>
The following table presents our loan originations, purchases, sales and
principal payments for the periods indicated.
<TABLE>
<CAPTION>
For the Three Months
Ended March 31, For the Year Ended December 31,
-------------------- -------------------------------
1999 1998 1998 1997 1996
-------- -------- -------- -------- --------
(In thousands)
<S> <C> <C> <C> <C> <C>
Total loans:
Balance outstanding at beginning of period............. $136,804 $132,717 $132,717 $138,993 $140,992
Originations:
Mortgage loans........................................... 2,442 2,789 13,890 7,237 15,188
Commercial and consumer loans............................ 4,841 4,459 21,178 17,524 17,551
-------- -------- -------- -------- --------
Total originations................................ 7,283 7,248 35,068 24,761 32,739
Less:
Principal repayments:
Mortgage loans........................................... (2,621) (2,438) (14,097) (10,802) (12,932)
Commercial and consumer loans............................ (4,112) (3,526) (15,492) (15,850) (15,556)
-------- -------- -------- -------- --------
Total principal payments.......................... (6,733) (5,964) (28,682) (26,652) (28,488)
Transfers to foreclosed real estate......................... (34) (52) (397) (910) (1,076)
Loan sales - guaranteed student loans....................... (251) - (1,491) (2,816) (3,293)
Loans charged off........................................... (217) (14) (411) (659) (1,881)
-------- -------- -------- -------- --------
Balance outstanding at end of period..................... $136,852 $133,935 $136,804 $132,717 $138,993
======== ======== ======== ======== ========
</TABLE>
Residential Mortgage Lending. We emphasize the origination of mortgage
loans secured by one- to four-family properties that serve as the primary
residence of the owner. As of March 31, 1999, loans on one- to four-family
residential properties accounted for $65.9 million, or 48.2%, of our total loan
portfolio. Of residential mortgage loans outstanding on that date, 27.4% were
ARM loans and 72.6% were fixed rate loans. Following the reorganization, we
will seek to expand our residential lending activities with the proceeds
received in the offering primarily through the marketing and sale to the
secondary market of 30 year fixed-rate mortgage loans. We believe that the
expansion of our residential lending will enhance our reputation as a service-
oriented institution which meets the needs of our local community.
Most of our loan originations are from existing or past customers, members
of our local communities or referrals from local real estate agents, attorneys
and builders. We believe that our branch offices are a significant source of
new loan generation.
Our mortgage loan originations are generally for terms from 10 to 20 years,
amortized on a monthly basis with interest and principal due each month.
Residential real estate loans may remain outstanding for significantly shorter
periods than their contractual terms as borrowers may refinance or prepay loans
at their option without penalty. Conventional residential
59
<PAGE>
mortgage loans granted by the Bank customarily contain "due-on-sale" clauses
which permit the Bank to accelerate the indebtedness of the loan upon transfer
of ownership of the mortgage property.
As of May 1, 1999, we began offering conventional mortgage loans for terms
of up to 30 years using standard Fannie Mae documents. Our current intention is
to sell qualifying fixed rate 30 year loans in the secondary market and to
continue retaining fixed rate loans with maturities of 20 years or less. We
lend up to a maximum loan-to-value ratio on mortgage loans secured by owner-
occupied properties of 80% of the lesser of the appraised value or purchase
price of the property, with the condition that private mortgage insurance is
required on loans with a loan-to-value ratio in excess of 80%. We lend up to a
maximum loan-to-value ratio of 90%. To a lesser extent we originate non-
conforming loans which are tailored for the local community, but which may not
satisfy the various requirements imposed by Fannie Mae. On occasion, the Bank
makes loans for the construction of a primary residence.
We also offer adjustable-rate mortgage loans with a maximum term of 30
years. Adjustable-rate loans offered by Rome Savings include loans which provide
for an interest rate which is based on the interest paid on U.S. Treasury
securities of corresponding terms plus a margin of up to 2.75%. We currently
offer adjustable-rate loans with initial rates below those which would prevail
under the foregoing computations, based upon our determination of market factors
and competitive rates for adjustable-rate loans in our market area. For
adjustable-rate loans, borrowers are qualified at the initial rate.
Our adjustable-rate mortgages include limits on increase or decrease in the
interest rate of the loan. The interest rate may increase or decrease by a
maximum 2.0% per adjustment with a ceiling rate over the life of the loan. The
retention of adjustable-rate mortgage loans in our loan portfolio helps reduce
exposure to changes in interest rates. However, there are unquantifiable credit
risks resulting from potential increased costs to the borrower as a result of
the pricing of adjustable-rate mortgage loans. During periods of rising
interest rates, the risk of default on adjustable-rate mortgage loans may
increase due to the upward adjustment of interest cost to the borrower.
During the year ended December 31, 1998, we originated $1.7 million in
adjustable-rate mortgage loans and $7.6 million in fixed-rate loans.
Approximately 34.6% of all residential loan originations during fiscal 1998 were
refinancings of loans already in our portfolio. At March 31, 1999, Rome
Savings' loan portfolio included $18.1 million in adjustable-rate one- to four-
family residential mortgage loans or 13.2% of our total loan portfolio, and
$47.9 million in fixed-rate one- to four-family residential mortgage loans, or
35.0% of our total loan portfolio.
Commercial Real Estate Loans. We originate commercial real estate loans to
finance the purchase of real property, which generally consists of developed
real estate. In underwriting commercial real estate loans, consideration is
given to the property's historic cash flow, current and projected occupancy,
location and physical condition. At March 31, 1999, our commercial real estate
loan portfolio consisted of 168 loans, totaling $29.0 million, or 21.2% of total
loans. Our largest loan is a commercial real estate loan with an outstanding
balance of $1.2 million at
60
<PAGE>
March 31, 1999 secured by a commercial property located in Westbury, New York.
The balance of the commercial real estate portfolio consists of loans which are
collateralized by properties in our normal lending area. To a lesser extent,
commercial real estate loans are secured by out of market properties. Our
commercial real estate loan portfolio is diverse, and does not have any
significant loan concentration by type of property or borrower. Our loan policy
specifies the threshold for industry concentration at 6% of assets. The largest
concentration of loans are those in the health care industry which compose
approximately 3% of the loan portfolio. We lend up to a maximum loan-to-value
ratio of 75% on commercial properties and require a minimum debt coverage ratio
of 1.25.
Commercial real estate lending involves additional risks compared with one-
to four-family residential lending. Because payments on loans secured by
commercial real estate properties are often dependent on the successful
operation or management of the properties, and/or the collateral value of the
commercial real estate securing the loan, repayment of such loans may be
subject, to a greater extent, to adverse conditions in the real estate market or
the economy. Also, commercial real estate loans typically involve large loan
balances to single borrowers or groups of related borrowers. Our loan policies
limit the amount of loans to a single borrower or group of borrowers to reduce
this risk.
Because of increased risks associated with commercial real estate loans,
commercial real estate loans generally have a higher rate and shorter term than
residential mortgage loans. Commercial real estate loans are generally offered
at variable rates tied to prime rate. The term of such loans generally does not
exceed 20 years.
Commercial Loans. In addition to commercial real estate loans, we also
engage in small business commercial lending, including business installment
loans, lines of credit and other commercial loans. We have worked to develop a
niche of making commercial loans to small and medium sized businesses in a wide
variety of industries located in and outside of our market area. At March 31,
1999, our commercial loan portfolio consisted of 472 loans, totaling $17.3
million, or 12.7% of total loans.
Unless otherwise structured as a mortgage on commercial real estate, such
loans generally are limited to terms of five years or less. Substantially all
such commercial loans have variable interest rates tied to the prime rate.
Whenever possible, we collateralize these loans with a lien on commercial real
estate, or alternatively, with a lien on business assets and equipment and the
personal guarantees from principals of the borrower. Interest rates on
commercial loans generally have higher yields than residential mortgages.
We offer commercial services administered by the Rome Savings commercial
loan department which are designed to give business owners borrowing
opportunities for modernization, inventory, equipment, construction,
consolidation, real estate, working capital, vehicle purchases and the
refinancing of existing corporate debt.
Commercial loans are generally considered to involve a higher degree of
risk than residential mortgage loans because the collateral may be in the form
of intangible assets and/or inventory subject to market obsolescence. Commercial
loans may also involve relatively large
61
<PAGE>
loan balances to single borrowers or groups of related borrowers, with the
repayment of such loans typically dependent on the successful operation and
income stream of the borrower. Such risks can be significantly affected by
economic conditions. In addition, commercial business lending generally requires
substantially greater oversight efforts compared to residential real estate
lending. We utilize the services of an outside consultant to conduct on-site
reviews of the commercial loan portfolio to ensure adherence to underwriting
standards and policy requirements.
Consumer Loans. The Bank offers a variety of consumer loans to meet
customer demand and the needs of the community and to increase the yield on its
loan portfolio. Consumer loans are generally offered at a higher rate and
shorter term than residential loans. Examples of our consumer loans include:
. property improvement loans;
. new and used automobile loans;
. recreational vehicles, boats and conversion vans;
. motorcycles, ATVs, snowmobiles and equipment loans;
. secured passbook loans, unsecured loans;
. property improvement loans;
. education loans; and
. mobile or manufactured home loans.
At March 31, 1999, the consumer loan portfolio totaled $24.3 million or 17.7% of
total loans. Consumer loans generally are offered for terms of up to five or 10
years, depending on the collateral, at fixed interest rates. We expect consumer
lending to be an area of gradual lending growth, with installment loans
continuing to account for the major portion of our consumer lending volume.
Auto loans currently comprise the largest portion of the consumer loan portfolio
at 39.9%, which consists primarily of loans for used cars.
We make loans secured by deposit accounts up to 90.0% of the amount of the
depositor's savings account balance. We also make other consumer loans, which
may or may not be secured. The terms of such loans vary depending on the
collateral.
We make loans for automobiles, both new and used, directly to the
borrowers. The term of automobile loans is generally limited to five years. The
financial terms of the loans are determined by the age and condition of the
collateral. We obtain a title lien on the vehicle and collision insurance
policies are required on all these loans. We pay a referral fee of no more than
$200 to automobile dealers who refer customers to us. There is no difference in
interest rates and terms for customers who are referred and those who are not.
Consumer loans are generally originated at higher interest rates than
residential mortgage loans but also tend to have a higher credit risk than
residential loans due to the loan being unsecured or secured by rapidly
depreciable assets. Despite these risks, our level of consumer loan
delinquencies generally has been low. No assurance can be given, however, that
our delinquency rate on consumer loans will continue to remain low in the
future, or that we will not incur future losses on these activities.
62
<PAGE>
Loan Approval Procedures and Authority. As established by the Board of Trustees,
our lending policies provide that the maximum mortgage amount is $300,000, with
minimum mortgage amounts generally limited to $20,000. Once we receive a
completed application, each mortgage application is presented to the Residential
Mortgage Committee (which consists of bank officers) for approval. Loans over
$60,000 must also be presented to the Executive Committee or the Lending
Committee, which consists solely of Bank officers, for a second approval. All
commercial mortgages over $75,000 must be approved by the Lending Committee,
Executive Committee, or the Board of Trustees.
The following describes our current lending procedures. Upon receipt of a
completed loan application from a prospective borrower, we order a credit report
and we verify certain other information. If necessary, we obtain additional
financial or credit related information. We require an appraisal for all
mortgage loans including loans made to refinance existing mortgage loans.
Appraisals are performed by licensed or certified third-party appraisal firms
which have been approved by our Board of Trustees. We require title insurance
on all secondary market mortgage loans and certain other loans. We require
borrowers to obtain hazard insurance, and if applicable, we may require
borrowers to obtain flood insurance prior to closing. Available to borrowers is
the option to advance funds on a monthly basis together with each payment of
principal and interest to a mortgage escrow account from which we make
disbursements for items such as real estate taxes, flood insurance, and private
mortgage insurance premiums, if required.
Asset Quality
One of our key operating objectives has been and continues to be to
maintain a high level of asset quality. Through a variety of strategies,
including, but not limited to, borrower workout arrangements and aggressive
marketing of foreclosed properties, we have been proactive in addressing problem
and non-performing assets. These strategies, as well as our high proportion of
one- to four-family mortgage loans, our maintenance of sound credit standards
for new loan originations and our loan administration procedures, have resulted
in historically low delinquency ratios and, in recent years, a reduction in non-
performing assets. These factors have helped strengthen our financial
condition.
Delinquent Loans and Foreclosed Assets. When a borrower fails to make required
payments on a loan, we take a number of steps to induce the borrower to cure the
delinquency and restore the loan to a current status. In the case of mortgage
loans, our mortgage servicing department is responsible for collection
procedures from the 15th day up to the 120th day of delinquency. A reminder
letter requesting prompt payment is sent on the 25th day. A late charge notice
is sent at 30 days. At 30 days we also attempt to establish telephone contact
with the borrower. If no contact is established, progressively stronger
collection letters are sent on the 45th and 55th days of delinquency. Late
charge notices are sent on the 30th and 60th days of the delinquency. Between
the 60th and 90th day of delinquency, if telephone contact has not been
established or if there has been mail returned, the collector or his assistant
makes a physical inspection of the property. When contact is made with the
borrower at any time prior to foreclosure, we attempt to obtain full payment of
the amount delinquent or work out a repayment schedule with the
63
<PAGE>
borrower in order to avoid foreclosure. It has been our experience that most
loan delinquencies are cured within 105 days and no legal action is taken.
We send the "right to cure" foreclosure notice when a loan is approximately
75 days delinquent. This contains a "right to cure" clause that gives our
customer the terms which must be met within 30 days of the date the letter is
sent in order to avoid foreclosure action. After this letter expires, we send
the loan to committee for approval to foreclose. We commence foreclosure if the
loan is not brought current by the 120th day of delinquency unless specific
limited circumstances warrant an exception. We hold property foreclosed upon as
other real estate owned. We carry foreclosed real estate at its fair market
value less estimated selling costs. If a foreclosure action is commenced and the
loan is brought current, paid in full or refinanced before the foreclosure sale,
we either sell the real property securing the loan at the foreclosure sale or
sell the property as soon thereafter as practical. The collection procedures
for Federal Housing Association (FHA) and Veterans' Administration (VA) one- to
four family mortgage loans follow the collection guidelines outlined by those
agencies.
The collection procedures for consumer, commercial, and other loans,
excluding student loans, include our sending periodic late notices and letters
to a borrower once a loan is past due. We attempt to make direct contact with a
borrower once a loan is 15 days past due. We follow the same collection
procedure as mortgages in our attempts to reach individuals by telephone and
sending them letters and notices. Supervisory personnel in our lending area and
in our collection area review loans 30 days or more delinquent on a regular
basis. If collection activity is unsuccessful after 120 days, we may charge off
a loan and/or refer the matter to our legal counsel for further collection
effort. Loans deemed uncollectable by our Collection Department are proposed
for charge-off. All loan charge-offs regardless of amount are to be approved by
the senior loan officer or the president of the bank. Those charge-offs in
excess of $2,500 must be approved by a second senior officer and reported to the
Executive Committee or the Lending Committee at its next scheduled meeting. The
collection procedures for guaranteed student loans follow those specified by
federal and state guidelines.
Our policies require that management continuously monitor the status of the
loan portfolio and report to the Board of Trustees on a monthly basis. These
reports include information on delinquent loans and foreclosed real estate and
our actions and plans to cure the delinquent status of the loans and to dispose
of the real estate.
64
<PAGE>
The following table sets forth the Bank's delinquent loans at the dates
indicated.
<TABLE>
<CAPTION> December 31,
----------------------------------------------------------
March 31, 1999 1998 1997
---------------------------------------- ------------------------------------- -----------------
60-89 Days 90 Days or More 60-89 Days 90 Days or More 60-89 Days
------------------ ------------------- ----------------- ------------------ -----------------
Principal Principal Principal Principal Principal
No. of Balance of No. of Balance of No. of Balance No. of Balance No. of Balance
Loans Loans Loans Loans Loans of Loans Loans of Loans Loans of Loans
----- ----- ----- ----- ----- -------- ----- -------- ----- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mortgage loans............ 2 $ 49 4 $ 131 3 $ 134 7 $ 455 6 $ 358
Commercial loans.......... 3 273 6 402 3 14 7 437 5 86
Consumer loans............ 13 42 9 42 12 54 13 38 35 95
-- ----- -- ----- -- ----- -- ----- -- -----
Total..................... 18 364 19 575 18 202 27 930 46 539
== ===== == ===== == ===== == ===== == =====
Delinquent loans to
total loans............. 0.27% 0.42% 0.15% 0.68% 0.41%
<CAPTION>
-----------------------------------------------------------
1996
----------------- ----------------------------------------
90 Days or More 60-89 Days 90 Days or More
----------------- ------------------- -------------------
Principal Principal Principal
No. of Balance No. of Balance No. of Balance
Loans of Loans Loans of Loans Loans of Loans
----- -------- ----- -------- ----- --------
<S> <C> <C> <C> <C> <C> <C>
Mortgage loans........... 12 $ 933 5 $ 157 19 $2,263
Commercial loans......... 8 398 4 112 25 839
Consumer loans........... 38 143 47 157 27 150
-- ------ -- ----- ---- ------
Total.................... 58 1,474 56 426 71 $3,252
== ====== == ===== ==== ======
Delinquent loans to
total loans............ 1.11% 0.31% 2.34%
</TABLE>
65
<PAGE>
Non-performing assets totaled $842,000 at March 31, 1999 compared with $1.2
million at December 31, 1998 and $3.1 million at December 31, 1997. Our
$575,000 in loans delinquent 90 days or more at March 31, 1999 were comprised
primarily of three commercial loans with an average principal balance of
approximately $134,000. At March 31, 1999, our largest loan delinquent 90 days
or more had a balance of $150,000.
The following table presents information regarding non-accrual mortgage and
consumer and other loans, accruing loans delinquent 90 days or more, and
foreclosed real estate as of the dates indicated. If all non-accrual loans had
been performing in accordance with their original terms and had been outstanding
from the earlier of the beginning of the period or origination, we would have
recorded interest income on these loans of approximately $13,956 for the three
months ended March 31, 1999 and $88,098 million for 1998, as compared to $4,771
and $61,969 million, respectively, for these periods which was included in
interest income.
<TABLE>
<CAPTION>
At March 31, At December 31,
------------ ----------------------------------------------------------
1999 1998 1997 1996 1995 1994
------------ ---------- ---------- ---------- ---------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Nonaccruing loans:
Mortgage loans............................ $ 0 $ 355 $ 591 $ 959 $ 648 $ 1,335
Commercial loans.......................... 402 439 397 839 849 726
Consumer loans............................ 3 5 55 89 113 60
------- ------- -------- -------- -------- -------
Total................................. 405 799 1,043 1,887 1,610 2,121
Accruing loans delinquent.................... 170 131 431 1,365 1,973 471
90 days or more
Total non-performing loans................... 575 930 1,474 3,252 3,583 2,592
Foreclosed real estate, net.................. 267 294 1,626 1,450 1,570 2,383
Total non-performing assets.................. 842 1,224 3,100 4,702 5,153 4,975
Non-performing loans to total loans.......... 0.42% 0.68% 1.11% 2.34% 2.54% 1.86%
Non-performing assets to total assets........ 0.38% 0.54% 1.45% 2.22% 2.40% 2.43%
</TABLE>
With the exception of first mortgage loans insured or guaranteed by the FHA
or VA or for which the borrower has obtained private mortgage insurance, we stop
accruing income on loans when interest or principal payments are 90 days in
arrears or earlier when the timely collectibility of such interest or principal
is doubtful. We designate loans on which we stop accruing income as non-accrual
loans and we reverse outstanding interest that we previously credited. We may
recognize income in the period that we collect it, when the ultimate
collectibility of principal is no longer in doubt. We return a non-accrual loan
to accrual status when factors indicating doubtful collection no longer exist.
We define the population of impaired loans to be all non-accrual commercial
real estate and commercial loans greater than $250,000. Impaired loans are
individually assessed to determine whether a loan's carrying value is not in
excess of the fair value of the collateral or the present value of the loan's
cash flows. Smaller balance homogeneous loans that are collectively evaluated
for impairment, such as residential mortgage loans and consumer loans, are
66
<PAGE>
specifically excluded from the impaired loan portfolio. We had no loans
classified as impaired at March 31, 1999, and at December 31, 1998 and 1997. In
addition, at March 31, 1999 and December 31, 1998 and 1997, we had no loans
classified at troubled debt restructuring, as defined in SFAS No. 15.
Foreclosed real estate consists of property we acquired through foreclosure
or deed in lieu of foreclosure. Foreclosed real estate properties are initially
recorded at the lower of the recorded investment in the loan or fair value.
Thereafter, we carry foreclosed real estate at fair value less estimated selling
costs.
Allowance for Loan Losses. The following table sets forth activity in the
Bank's allowance for loan losses and other ratios at or for the dates indicated.
<TABLE>
<CAPTION>
As or For the Three
Months Ended
March 31, At or For the Years Ended December 31,
----------------------- --------------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ---------- ---------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at beginning of period......... $ 1,956 $ 1,742 $ 1,742 $ 1,708 $1,645 $1,579 $1,715
Provision for loan losses.............. 0 75 390 360 1,850 767 300
Charge-offs:
Mortgage loans...................... 159 0 191 290 379 550 185
Commercial loans.................... 48 6 111 247 1,364(1) 40 208
Consumer loans...................... 10 8 109 122 138 124 58
------- ------- ------- ------- ------ ------ ------
217 14 411 659 1,881 714 451
Recoveries............................. 159 46 235 333 94 13 15
Net charge-offs (recoveries)........... 58 (32) 176 326 1,787 701 436
Balance at end of period............... 1,898 1,849 1,956 1,742 1,708 1,645 1,579
Ratio of net charge-offs to
average loans outstanding
during the period..................... 0.04% (0.02)% 0.13% 0.24% 1.28% 0.50% 0.29%
Allowance for loan losses as
a percent of loans.................... 1.39% 1.38% 1.43% 1.31% 1.23% 1.17% 1.13%
Allowance for loan losses as
a percent of non-performing
loans................................. 330.09% 123.02% 210.32% 118.18% 52.52% 45.91% 60.92%
</TABLE>
___________________
(1) Includes a $1.0 million loss from the fraud-related bankruptcy of a
commercial loan customer.
67
<PAGE>
The allowance for loan losses is a valuation account that reflects our
evaluation of the losses inherent in our loan portfolio. We maintain the
allowance through provisions for loan losses that we charge to income. We
charge losses on loans against the allowance for loan losses when we believe the
collection of loan principal is unlikely.
Our evaluation of risk in maintaining the allowance for loan losses
includes the review of all loans on which the collectibility of principal may
not be reasonably assured. We consider the following factors as part of this
evaluation: our historical loan loss experience, known and inherent risks in the
loan portfolio, the estimated value of the underlying collateral and current
economic and market trends. There may be other factors that may warrant our
consideration in maintaining an allowance at a level sufficient to provide for
probable losses. Although we believe that we have established and maintained
the allowance for loan losses at adequate levels, future additions may be
necessary if economic and other conditions in the future differ substantially
from the current operating environment.
In addition, various regulatory agencies, as an integral part of their
examination process, periodically review our loan and foreclosed real estate
portfolios and the related allowance for loan losses and valuation allowance for
foreclosed real estate. These agencies, including the FDIC, may require us to
increase the allowance for loan losses or the valuation allowance for foreclosed
real estate based on their judgments of information available to them at the
time of their examination, thereby adversely affecting our results of
operations.
For the year ended December 31, 1998, we increased our allowance for loan
losses through a $390,000 provision for loan losses based on our evaluation of
the items discussed above. We did not provide for a provision for loan losses
for the three months ended March 31, 1999. Because of the recent decline in
non-performing assets, the Bank's ratio of allowance for loan losses as a
percentage of non-performing loans increased to 330.1% at March 31, 1999.
Despite this increase, the Bank believes that its allowance for loan losses
accurately reflects the level of risk in its loan portfolio. In addition to the
non-performing loans, management has identified, through normal internal credit
review procedures, $4.3 million in "potential problem loans" at March 31, 1999.
These problem loans are defined as loans not included as non-performing loans,
but about which management has developed information regarding possible credit
problems, which may cause the borrowers future difficulties in complying with
loan repayments. The current high level of this ratio reflects the risks
associated with the weakness of the local economy and the continuing decline in
real estate values in Oneida County as reflected by the City of Rome's decision
to decrease the tax assessment on real property in 1998. In addition, the Bank
believes that its historically low level of non-performing assets reflects in
part the high level of charge-offs from 1994 to 1997 and does not necessarily
reflect the level of risk in the portfolio. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Comparison of
Operating Results for the Three Months Ended March 31, 1999 and 1998 and the
Years Ended December 31, 1998 and 1997 -- Provision for Loan Losses."
68
<PAGE>
The following table presents our allocation of the allowance for loan
losses by loan category and the percentage of loans in each category to total
loans at the periods indicated.
<TABLE>
<CAPTION>
At March 31, 1999 At December 31, 1998 At December 31, 1997
------------------------------- ------------------------------ ------------------------------
Percentage Loans in Percentage Loans in Percentage Loans in
of Each of Each of Each
Allowance Category Allowance Category Allowance Category
to Total to Total to Total to Total to Total to Total
Amount Allowance Loans Amount Allowance Loans Amount Allowance Loans
------ --------- --------- ------ --------- -------- ------ --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mortgage loans: (Dollars in thousands)
One to four family.......... $ 341 17.96% 48.16% $ 331 16.92% 48.06% $ 405 23.25% 49.85%
Commercial real estate...... 680 35.83% 21.21% 792 40.49% 21.56% 684 39.27% 21.43%
Construction & land......... 7 0.37% 0.24% 10 0.51% 0.29% 7 0.40% 0.70%
------ ------ ------ ------ ------ ------ ----- ------ ------
Total mortgage loans...... 1,028 54.16% 69.61% 1,133 57.92% 69.91% 1,096 62.92% 71.98%
Commercial loans............... 650 34.25% 12.66% 594 30.37% 12.62% 440 25.26% 11.45%
Consumer loans................. 220 11.59% 17.73% 229 11.71% 17.47% 206 11.82% 16.57%
Total allowance for
loans losses............ 1,898 100.00% 100.00% 1,956 100.00% 100.00% 1,742 100.00% 100.00%
</TABLE>
<TABLE>
<CAPTION>
At December 31, 1996 At December 31, 1995 At December 31, 1994
---------------------------- ----------------------------- ------------------------------
Percentage Loans in Percentage Loans in Percentage Loans in
of Each of Each of Each
Allowance Category Allowance Category Allowance Category
to Total to Total to Total to Total to Total to Total
Amount Allowance Loans Amount Allowance Loans Amount Allowance Loans
------ --------- -------- ------ ---------- -------- ------ --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mortgage loans: (Dollars in thousands)
One to four family.......... $ 424 24.82% 48.73% $ 269 16.35% 45.40% $ 265 16.78% 45.27%
Commercial real estate...... 654 38.29% 22.91% 734 44.62% 24.46% 761 48.19% 24.48%
Construction & land......... 8 0.47% 0.52% 11 0.67% 0.70% 14 0.89% 0.99%
------ ------ ------ ------ ------ ------ ------ ------ ------
Total mortgage loans...... 1,086 63.58% 72.16% 1,014 61.64% 70.56% 1,040 65.86% 70.74%
Commercial loans............... 466 27.28% 13.22% 491 29.85% 13.96% 402 25.46% 14.44%
Consumer loans................. 156 9.14% 14.62% 140 8.51% 15.48% 137 8.68% 14.82%
Total allowance for
loans losses............ 1,708 100.00% 100.00% 1,645 100.00% 100.00% 1,579 100.00% 100.00%
</TABLE>
69
<PAGE>
Investment Activities
The Board of Trustees reviews and approves our investment policy on an
annual basis. The Board of Trustees has delegated primary responsibility for
ensuring that the guidelines in the investment policy are followed by the
Treasurer/Chief Financial Officer. The Treasurer reports to the Asset Liability
Management Committee and to the Executive Committee between its monthly meeting
dates.
Our investment policy is designed primarily to manage the interest rate
sensitivity of our assets and liabilities, to generate a favorable return
without incurring undue interest rate and credit risk, to complement our lending
activities and to provide and maintain liquidity within established guidelines.
In establishing our investment strategies, we consider our interest rate
sensitivity, the types of securities to be held, liquidity and other factors.
New York chartered savings banks have authority to invest in various types of
assets, including U.S. Government obligations, securities of various federal
agencies, obligations of States and Municipalities, mortgage-backed securities,
certain time deposits of insured banks and savings institutions, certain
bankers' acceptances, repurchase agreements, loans of federal funds, and,
subject to certain limits, corporate debt and equity securities, commercial
paper and mutual funds.
The specific goals of our investment policy include maintaining Rome
Savings' primary liquidity consisting of investments in federal funds, interest
bearing deposits, and fixed income investments maturing within one year less
non-deposit borrowings, in a range of 8% to 20% of total assets. At March 31,
1999 and December 31, 1998, our primary liquidity ratio was 13.95% and 14.7%,
respectively. For information regarding the carrying values, yields and
maturities of our investment securities, see "-- Carrying Values, Yields and
Maturities."
We classify securities as held to maturity or available for sale at the
date of purchase. Held to maturity securities are reported at cost, adjusted for
amortization of premium and accretion of discount. Available for sale
securities are reported at fair market value. We classify U.S. Government
securities and U.S. Government Agency securities, as available for sale. These
securities predominately have maturities of less than five years although the
Bank also invests in adjustable rate U.S. Government agency securities with
maturities up to 15 years. Our mortgage-backed securities, all of which are
directly or indirectly insured or guaranteed by Freddie Mac, GNMA or Fannie Mae,
consist of both 30 year securities and seven year balloon securities. The
latter are so named because they mature (i.e. balloon) prior to completing their
normal 30 year amortization. The 30 year mortgage backed securities are
classified as held to maturity while the seven year balloon securities are
classified as available for sale.
We also invest in state and municipal obligations with a maturity of ten
years or less rated at least AA by Moody's, Standard & Poors, or Fitch. We
invest in these securities because of their favorable after tax yields in
comparison to U.S. Government and U.S. Government Agency securities of
comparable maturity. These securities are classified as available for sale.
Finally, the Bank has investments in FHLB stock and other equity securities
which are classified as "available for sale." Equity securities represent an
investment in one institutional mutual fund which is exclusively available to
financial institutions.
70
<PAGE>
The following table presents our investment securities activities for the
periods indicated.
<TABLE>
<CAPTION>
For the Quarter Ended
March 31, For the Year Ended December 31,
----------------------- -------------------------------------
1999 1998 1998 1997 1996
---------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
Carrying value at beginning of period
Available-For-Sale............................... $ 55,036 $ 54,947 $ 54,947 $ 46,798 $ 43,787
Carrying value at beginning of period Held-
To-Maturity...................................... 1,472 1,681 1,681 1,525 1,619
-------- -------- -------- --------- --------
Total value beginning of period............... 56,508 56,628 56,628 48,323 45,406
Purchases:
Available for sale............................. 4,057 3 21,086 19,803 28,096
Held to Maturity............................... - - 107 448 129
Calls:
Available for sale............................. (1,000) (1,000) (5,000) 0 0
Maturities:
Available for sale............................. (5,000) (3,000) (16,000) (9,000) (15,840)
Sales:
Available for sale............................. (304) (607) (3,302) (8,884)
Principal repayments:
Available for sale............................. (45) 0 0 0
Held to maturity............................... (52) (41) (314) (291) (222)
Premium & discount amortization; net:
Available for sale............................. (6) 32 38 29 62
Held to maturity............................... 0 0 (2) (1) (0)
Change in unrealized gains....................... (186) 147 572 619 (424)
Net (decrease) increase in investment
securities..................................... (2,232) (4,163) (120) 8,305 2,917
Carrying value at end of period AFS.............. 52,856 50,825 55,036 54,947 46,798
Carrying value at end of period HTM.............. 1,420 1,640 1,472 1,681 1,525
Total portfolio at end of period................. 54,276 52,465 56,508 56,628 48,323
</TABLE>
71
<PAGE>
The following table presents the composition of our money market
investments, investment securities and mortgage-backed securities portfolios in
dollar amount and in percentage of each investment type at the dates indicated.
It also presents the coupon type for the mortgage-backed securities portfolio.
<TABLE>
<CAPTION>
At March 31, At December 31,
---------------------------------------------------------------------------------------------
1999 1998 1997
---------------------------------------------------------------------------------------------
Amortized Percent of Fair Amortized Percent of Fair Amortized Percent of Fair
Cost Total (1) Value Cost Total (1) Value Cost Total (1) Value
--------- ---------- --------- ---------- ----------- -------- ---------- ----------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Held to Maturity:
Mortgage-backed securities
GNMA....................... $ 669 1.26% $ 722 $ 718 1.30% $ 773 $ 919 1.64% $ 994
FHLMC...................... 30 0.06% 33 32 0.05% 36 40 0.07% 47
U.S. Government Securities. 502 0.94% 510 502 0.91% 513 504 0.90% 514
Other bonds................ 219 0.41% 219 220 0.40% 220 218 0.39% 218
------- ------ ------- ------- ------ ------- ------- ------ -------
Total held to maturity... 1,420 2.67% 1,484 1,472 2.66% 1,542 1,681 3.00% 1,773
------- ------ ------- ------- ------ ------- ------- ------ -------
Available for sale:
U.S. Government securities. 19,022 35.75% 19,145 22,031 39.87% 22,242 35,015 62.59% 35,190
U.S. Government agencies... 10,286 19.33% 10,415 10,041 18.17% 10,138 16,132 28.84% 16,170
State and Municipal
Obligations............... 13,092 24.61% 13,247 12,392 22.43% 12,660 0 0.00% 0
Mortgage-backed securities
FNMA..................... 2,008 3.77% 1,998 2,013 3.65% 2,000 0 0.00% 0
FHLMC.................... 2,970 5.58% 2,957 3,011 5.45% 2,996 0 0.00% 0
------- ------ ------- ------- ------ ------- ------- ------ -------
Total available for sale
debt securities.............. 47,378 89.04% 47,762 49,488 89.57% 50,036 51,147 91.43% 51,360
Equity securities.......... 3,646 6.86% 4,331 3,546 6.42% 4,253 2,370 4.24% 2,840
FHLB stock................. 763 1.43% 763 747 1.35% 747 747 1.33% 747
------- ------ ------- ------- ------ ------- ------- ------ -------
Total available for sale. 51,787 97.33% 52,856 53,781 97.34% 55,036 54,264 97.00% 54,947
------- ------ ------- ------- ------ ------- ------- ------ -------
Total investment
securities.............. $53,207 100.00% $54,340 $55,253 100.00% $56,578 $55,945 100.00% $56,720
======= ====== ======= ======= ====== ======= ======= ====== =======
<CAPTION>
--------------------------------
1996
--------------------------------
Amortized Percent of Fair
Cost Total (1) Value
---------- ----------- --------
<S> <C> <C> <C>
Held to Maturity:
Mortgage-backed securities
GNMA....................... $ 1,094 2.27% $ 1,175
FHLMC...................... 53 0.11% 61
U.S. Government Securities. 201 0.42% 206
Other bonds................ 177 0.36% 180
------- ------ -------
Total held to maturity... 1,525 3.16% 1,622
------- ------ -------
Available for sale:
U.S. Government securities. 32,960 68.30% 32,961
U.S. Government agencies... 12,008 24.88% 11,962
State and Municipal
Obligations............... 0 0.00% 0
Mortgage-backed securities
FNMA..................... 0 0.00% 0
FHLMC.................... 0 0.00% 0
------- ------ -------
Total available for sale
debt securities.............. 44,968 93.18% 44,923
Equity securities.......... 1,032 2.14% 1,141
FHLB stock................. 734 1.52% 734
------- ------ -------
Total available for sale. 46,734 96.84% 46,798
------- ------ -------
Total investment
securities.............. $48,259 100.00% $48,420
======= ====== =======
</TABLE>
______________________
(1) Based on amortized cost.
72
<PAGE>
Carrying Values, Yields and Maturities. The following table sets forth the
scheduled maturities, book value, market value and weighted average yields for
the Bank's debt securities at March 31, 1999.
<TABLE>
<CAPTION>
More Than One Year More Than Five Years
One Year or Less to Five Years to Ten Years More Than Ten Years
- ----------------------------------------------------------------------------------------------------------------------------
Weighted Weighted Weighted Weighted
Carrying Average Carrying Average Carrying Average Carrying Average
Value Yield Value Yield Value Yield Value Yield
- ----------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Available for sale
securities:
U.S. Government Securities..... $13,084 6.13% $ 6,061 5.91% $ 0 0.00% $ 0 0.00%
U.S. Government Agencies....... 0 0.00% 7,176 6.67% 1,248 5.19% 1,991 6.07%
State and Municipal
Obligations................... 0 0.00% 326 6.26% 12,822 6.31% 99 6.44%
Mortgage-backed securities..... 0 0.00% 0 0.00% 4,955 5.79% 0 0.00%
------- ---- ------- ---- ------- ---- ------ -----
13,084 6.13% 13,563 6.32% 19,025 6.10% 2,090 6.09%
Held to maturity
securities:
U.S. Government Securities..... 502 6.64% 0 0.00% 0 0.00% 0 0.00%
Mortgage-backed securities..... 0 0.00% 44 6.71% 258 8.69% 397 10.73%
Other.......................... 0 0.00% 0 0.00% 0 0.00% 219 7.52%
------- ---- ------- ---- ------- ---- ------ -----
502 6.64% 44 6.71% 258 8.69% 616 9.59%
------- ---- ------- ---- ------- ---- ------ -----
Total Debt Securities.......... $13,586 6.15% $13,607 6.32% $19,283 6.14% $2,706 6.88%
======= ==== ======= ==== ======= ==== ====== =====
<CAPTION>
Total
- -----------------------------------------------------------
Weighted
Carrying Average
Value Yield
- -----------------------------------------------------------
<S> <C> <C>
Available for sale
securities:
U.S. Government Securities........ $19,145 6.06%
U.S. Government Agencies.......... 10,415 6.38%
State and Municipal
Obligations...................... 13,247 6.31%
Mortgage-backed securities........ 4,955 5.79%
------- ----
47,762 6.17%
Held to maturity
securities:
U.S. Government Securities........ 502 6.64%
Mortgage-backed securities........ 699 9.72%
Other............................. 219 7.52%
------- ----
1,420 8.29%
------- ----
Total Debt Securities............. $49,182 6.23%
======= ====
</TABLE>
73
<PAGE>
Carrying Values, Yields and Maturities. The following table sets forth
the scheduled maturities, book value, market value and weighted average yields
for the Bank's debt securities at December 31, 1998.
<TABLE>
<CAPTION>
More Than One Year More Than Five Years
One Year or Less to Five Years to Ten Years More Than Ten Years
------------------------------------------------------------------------------------------
Weighted Weighted Weighted Weighted
Carrying Average Carrying Average Carrying Carrying Carrying Carrying
Value Yield Value Yield Value Yield Value Yield
------------------------------------------------------------------------------------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Available for sale securities:
U.S. Government Securities............ $18,126 6.00% $ 4,116 6.26% $ 0 0.00% $ 0 0.00%
U.S. Government Agencies.............. 0 0.00% 8,204 6.54% 0 0.00% 1,934 6.15%
State and Municipal
Obligations.......................... 0 0.00% 0 0.00% 12,660 6.26% 0 0.00%
Mortgage-backed securities............ 0 0.00% 0 0.00% 4,996 5.80% 0 0.00%
------- ---- ------- ---- ------- ---- ------ -----
18,126 6.00% 12,320 6.45% 17,656 6.13% 1,934 6.15%
Held to maturity securities:
U.S. Government Securities............ 0 0.00% 502 6.64% 0 0.00% 0 0.00%
Mortgage-backed securities............ 0 0.00% 50 6.74% 150 8.37% 550 10.55%
Other................................. 0 0.00% 0 0.00% 0 0.00% 220 7.52%
------- ---- ------- ---- ------- ---- ------ -----
0 0.00% 552 6.65% 150 8.37% 770 9.68%
------- ---- ------- ---- ------- ---- ------ -----
Total Debt Securities................. $18,126 6.00% $12,871 6.46% $17,806 6.14% $2,704 7.16%
======= ==== ======= ==== ======= ==== ====== =====
<CAPTION>
Total
---------------------------
Weighted
Carrying Carrying
Value Yield
--------------------------
<S> <C> <C>
Available for sale securities:
U.S. Government Securities................... $22,242 6.05%
U.S. Government Agencies..................... 10,138 6.47%
State and Municipal
Obligations................................. 12,660 6.26%
Mortgage-backed securities................... 4,996 5.80%
------- ----
50,036 6.16%
Held to maturity securities:
U.S. Government Securities................... 502 6.64%
Mortgage-backed securities................... 750 9.86%
Other........................................ 220 7.52%
------- ----
1,472 8.41%
------- ----
Total Debt Securities $51,508 6.22%
======= ====
</TABLE>
74
<PAGE>
Sources of Funds
General. Deposits, scheduled amortization and prepayments of loan
principal, maturities and calls of investments securities and funds provided by
operations are our primary sources of funds for use in lending, investing and
for other general purposes. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
Deposits. We offer a variety of deposit accounts having a range of
interest rates and terms. We currently offer regular savings deposits
(consisting of passbook and statement savings accounts), interest-bearing demand
accounts, non-interest-bearing demand accounts, money market accounts and time
deposits.
Deposit flows are influenced significantly by general and local economic
conditions, changes in prevailing interest rates, pricing of deposits and
competition. Our deposits are primarily obtained from areas surrounding our
offices and we rely primarily on paying competitive rates, service and long-
standing relationships with customers to attract and retain these deposits. We
do not use brokers to obtain deposits.
When we determine our deposit rates, we consider local competition, U.S.
Treasury securities offerings and the rates charged on other sources of funds.
Core deposits (defined as savings deposits, money market accounts and demand
accounts) represented 54.8% of total deposits on March 31, 1999 and 53.7% on
December 31, 1998. At March 31, 1999 and December 31, 1998, time deposits with
remaining terms to maturity of less than one year amounted to $57.1 million and
$54.9 million, respectively. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Analysis of Net Interest
Income" for information relating to the average balances and costs of our
deposit accounts for the three months ended March 31, 1999 and 1998 and years
ended December 31, 1998, 1997 and 1996.
The following table presents our deposit activity for the periods
indicated.
<TABLE>
<CAPTION>
For the Three Months
Ended March 31, For the Year Ended December 31,
----------------------- ------------------------------------
1999 1998 1998 1997 1996
---------- ---------- ---------- ---------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Total deposits at beginning of period................ $189,130 $184,496 $184,496 $184,579 $188,358
Net deposits (withdrawals)........................... 1,063 674 (2,569) (7,394) (11,266)
Interest credited on deposit accounts................ 1,733 1,781 7,203 7,311 7,487
Total deposits at end of period...................... 191,926 186,951 189,130 184,496 184,579
Total increase (decrease) in
deposit accounts.................................. 2,796 2,455 4,634 (83) (3,779)
Percentage increase (decrease)....................... 1.48% 1.33% 2.51% (0.04)% (2.01)%
</TABLE>
75
<PAGE>
At March 31, 1999, we had $10.8 million in time deposits with balances of
$100,000 and over maturing as follows:
<TABLE>
<CAPTION>
Maturity Period Amount
------------------------------------ --------------
(In thousands)
<S> <C>
Three months or less................ $ 1,703
Over three months through six months 2,401
Over six months through 12 months... 2,700
Over 12 months...................... 4,004
-------
Total............................... $10,808
=======
</TABLE>
The following table presents the distribution of our deposit accounts at
the dates indicated by dollar amount and percent of portfolio, and the weighted
average nominal interest rate on each category of deposits.
<TABLE>
<CAPTION>
At March 31, At December 31,
----------------------------- -----------------------------------------------------------------
1999 1998 1997
----------------------------- ------------------------------- --------------------------------
Weighted Weighted Weighted
Percent average Percent average Percent average
of total nominal of total nominal of total nominal
Amount deposits rate Amount deposits rate Amount deposits rate
-------- -------- -------- -------- -------- -------- -------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Savings........................ $ 78,398 40.85% 3.05% $ 75,935 40.15% 3.05% $ 75,047 40.68% 3.05%
Money market................... 6,353 3.31% 3.10% 5,423 2.87% 3.10% 4,804 2.60% 3.20%
Other interest bearing......... 2,594 1.35% 2.45% 2,802 1.48% 2.95% 2,574 1.40% 3.05%
Noninterest bearing............ 20,429 10.64% n/a 20,231 10.70% n/a 16,240 8.80% n/a
-------- ------ -------- ------ -------- ------
Total................... 107,774 56.15% 104,391 55.20% 98,665 53.48%
-------- ------ -------- ------ -------- ------
Time Deposits:
Original maturities of:
Three months or less........ 946 0.49% 3.76% 957 0.50% 3.76% 944 0.51% 4.10%
Over three months to
twelve months.............. 39,783 20.73% 4.48% 39,646 20.96% 4.76% 41,408 22.44% 5.03%
Twelve months to
twenty-four months......... 13,761 7.17% 5.17% 13,995 7.40% 5.28% 12,566 6.81% 5.24%
Twenty-four months to
thirty-six months.......... 8,739 4.56% 5.34% 8,996 4.76% 5.38% 10,358 5.62% 5.66%
Thirty-six months to
forty-eight months........ 2,992 1.56% 5.60% 3,176 1.68% 5.90% 2,992 1.62% 5.97%
Forty-eight months to
sixty months............... 17,931 9.34% 6.18% 17,969 9.50% 6.18% 17,563 9.52% 6.11%
-------- ------ ---- -------- ------ ---- -------- ------ ----
Total time deposits......... 84,152 43.85% 5.08% 84,739 44.80% 5.24% 85,831 46.52% 5.38%
-------- ------ -------- ------ -------- ------
Total deposits................. $191,926 100.00% $189,130 100.00% $184,496 100.00%
======== ====== ======== ====== ======== ======
<CAPTION>
--------------------------------
1996
--------------------------------
Weighted
Percent Average
Of Total Nominal
Amount Deposits Rate
-------- -------- --------
<S> <C> <C> <C>
Savings........................ $ 76,258 41.31% 3.05%
Money market................... 4,389 2.38% 3.20%
Other interest bearing......... 2,319 1.26% 3.05%
Noninterest bearing............ 15,090 8.18% n/a
-------- ------
Total................... 98,056 53.13%
-------- ------
Time Deposits:
Original maturities of:
Three months or less........ 638 0.34% 3.90%
Over three months to
twelve months.............. 41,771 22.63% 4.92%
Twelve months to
twenty-four months......... 14,186 7.68% 5.53%
Twenty-four months to
thirty-six months.......... 10,883 5.90% 5.62%
Thirty-six months to
forty-eight months......... 3,043 1.65% 5.69%
Forty-eight months to
sixty months............... 16,002 8.67% 6.09%
-------- ------ ----
Total time deposits......... 86,523 46.87% 5.34%
-------- ------
Total deposits................. $184,579 100.00%
======== ======
</TABLE>
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<PAGE>
The following table presents, by rate category, the amount of our time
deposit accounts outstanding at the dates indicated.
<TABLE>
<CAPTION>
At March 31, At December 31,
------------ ----------------------------------
1999 1998 1997 1996
------------ ---------- ---------- ----------
(In thousands)
<S> <C> <C> <C> <C>
Time Deposit Accounts:
4.00% or less............ $ 946 $ 957 $ 0 $ 638
4.01%-4.50%.............. 28,353 11,082 1,013 1,404
4.51%-5.00%.............. 7,899 14,922 16,954 41,213
5.01%-5.50%.............. 21,130 31,540 44,777 20,302
5.51%-6.00%.............. 18,088 18,036 13,159 8,600
over 6.00%............... 7,736 8,202 9,928 14,366
------- ------- ------- -------
Total................ $84,152 $84,739 $85,831 $86,523
======= ======= ======= =======
</TABLE>
The following table presents, by rate category, the remaining period to
maturity of time deposit accounts outstanding as of March 31, 1999.
<TABLE>
<CAPTION>
Within
three Three to Six months One to two Two to Over three
Months six months to one year years three years years Total
-------- ---------- ----------- ---------- ----------- --------- -------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Time Deposit Accounts:
4.00% or less............. $ 946 $ 0 $ 0 $ 0 $ 0 $ 0 $ 946
4.01%-4.50%............... 6,315 7,118 11,768 2,447 447 258 28,353
4.51%-5.00%............... 777 1,662 2,318 1,005 883 1,254 7,899
5.01%-5.50%............... 8,841 5,973 3,038 1,645 1,414 219 21,130
5.51%-6.00%............... 0 988 3,472 7,420 2,119 4,089 18,088
over 6.00%................ 416 142 3,303 3,829 0 46 7,736
------- ------- ------- ------- ------ ------ -------
Total................. $17,295 $15,883 $23,899 $16,346 $4,863 $5,866 $84,152
======= ======= ======= ======= ====== ====== =======
</TABLE>
Borrowings. We do not currently borrow funds to finance our lending and
investing activities. We intend, however, to borrow funds in the future. We
may borrow funds pursuant to reverse repurchase agreements, whereby we sell an
asset with an agreement to repurchase it at some future date. We are a member
of the Federal Home Loan Bank of New York and have available a line of credit of
$21,205,000.
Subsidiary Activities
Rome Savings has three subsidiaries, 100 On the Mall Corporation,
Clocktower Insurance Agency Incorporated and Clocktower Financial Corporation.
100 On the Mall acts as a manager, and developer of real estate. Its only
activity is ownership of Rome Savings' main office building and premises.
Clocktower Insurance owns real estate for future expansion, which is currently
being leased to a Dunkin Donuts franchise adjacent to one of our branch offices.
Clocktower Financial is an inactive mortgage banking subsidiary.
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<PAGE>
Properties
We conduct our business through our executive office, operations center and
three banking offices which had an aggregate net book value of $1,858,000
million as of March 31, 1999.
<TABLE>
<CAPTION>
Leased or Net Book Value
Location Owned March 31, 1999
- -------------------------------------- -------------- --------------
(In Thousands)
<S> <C> <C>
Executive Office:
100 West Dominick St
Rome, NY........................... Owned $ 952
Branch Offices:
1629 Black River Boulevard
Rome, NY........................... Owned $ 358
1300 Erie Boulevard
Rome, NY........................... Owned $1,101
82 Seneca Turnpike
New Hartford, NY................... Owned $ 126
Accounting Center:
139 West Dominick Street
Rome, NY........................... Owned $ 422
</TABLE>
Legal Proceedings
We are not involved in any pending legal proceedings other than routine
legal proceedings occurring in the ordinary course of business. We believe that
these routine legal proceedings, in the aggregate, are immaterial to our
financial condition and results of operations.
Personnel
As of March 31, 1999, we had 85 full-time employees and 21 part-time
employees. The employees are not represented by a collective bargaining unit
and we consider our relationship with our employees to be good.
BUSINESS OF ROME BANCORP, INC.
Rome Bancorp has not engaged in any business to date. Upon completion of
the reorganization, Rome Bancorp will own Rome Savings. Rome Bancorp will
retain up to 50% of the net proceeds from the offering. We will invest our
initial capital as discussed in "How We Intend to Use the Proceeds from the
Offering."
In the future, Rome Bancorp may pursue other business activities, including
the acquisition of other financial institutions or other entities, borrowing
funds for investment in Rome Savings and diversification of Rome Bancorp's
operations. Rome Bancorp has no current plans for such activities. Our cash
flow will depend upon earnings from the investment of the portion of net
proceeds we retain and any dividends Rome Bancorp receives from Rome Savings.
Initially, Rome Bancorp will neither own nor lease any property, but will
instead use the
78
<PAGE>
premises, equipment and furniture of Rome Savings. At the present time, we
intend to employ only persons who are officers of Rome Savings, to serve as
officers of Rome Bancorp. However, we will use the support staff of Rome Savings
from time to time. Rome Bancorp will not separately compensate these employees,
Rome Bancorp will hire additional employees, as appropriate, to the extent it
expands its business in the future. See "How We Intend to Use the Proceeds from
the Offering."
REGULATION OF ROME SAVINGS BANK AND
ROME BANCORP
General
Rome Savings Bank is a New York chartered savings bank, and its deposit
accounts are insured up to applicable limits by the Federal Deposit Insurance
Corporation (FDIC) under the Bank Insurance Fund (BIF). Rome Savings is subject
to extensive regulation, examination and supervision by the New York State
Banking Department (Banking Department) as its chartering agency, and by the
FDIC as the deposit insurer. Rome Savings must file reports with the Banking
Department and the FDIC concerning its activities and financial condition, and
it must obtain regulatory approval prior to entering into certain transactions,
such as mergers with, or acquisitions of, other depository institutions and
opening or acquiring branch offices. The Banking Department and the FDIC
conduct periodic examinations to assess Rome Savings Bank's compliance with
various regulatory requirements. This regulation and supervision establishes a
comprehensive framework of activities in which a savings bank can engage and is
intended primarily for the protection of the deposit insurance fund and
depositors. The regulatory structure also gives the regulatory authorities
extensive discretion in connection with their supervisory and enforcement
activities and examination policies, including policies with respect to the
classification of assets and the establishment of adequate loan loss reserves
for regulatory purposes.
Rome, MHC and Rome Bancorp, as bank holding companies controlling Rome
Savings, will be subject to the Bank Holding Company Act of 1956, as amended
(BHCA), and the rules and regulations of the Federal Reserve Board (FRB) under
the BHCA and to the provisions of the New York State Banking Law and the
regulations of the Banking Department under the Banking Law applicable to bank
holding companies. Rome, MHC and Rome Bancorp will be required to file reports
with, and otherwise comply with the rules and regulations of the FRB and the
Banking Department. Rome Bancorp will be required to file certain reports with,
and otherwise comply with, the rules and regulations of the SEC under the
federal securities laws.
Any change in such laws and regulations, whether by the Banking Department,
the FDIC, the FRB or through legislation, could have a material adverse impact
on Rome, MHC, Rome Bancorp and Rome Savings and their operations and
stockholders.
- --------------------------------------------------------------------------------
Certain of the laws and regulations applicable to Rome, MHC, Rome Bancorp and
Rome Savings are summarized below or elsewhere in this prospectus. These
summaries do not purport to be complete and are qualified in their entirety by
reference to such laws and regulations.
- --------------------------------------------------------------------------------
79
<PAGE>
New York Banking Regulation
Activity Powers. The Bank derives its lending, investment and other
activity powers primarily from the applicable provisions of the New York Banking
Law and its related regulations. Under these laws and regulations, savings
banks, including Rome Savings Bank, generally may, invest in:
(1) real estate mortgages;
(2) consumer and commercial loans;
(3) specific types of debt securities, including certain corporate debt
securities and obligations of federal, state and local governments and
agencies;
(4) certain types of corporate equity securities; and
(5) certain other assets.
A savings bank may also exercise trust powers upon approval of the Banking
Department. The exercise of these lending, investment and activity powers are
limited by federal law and the related regulations. See "-- Federal Banking
Regulation -- Activity Restrictions on State-Chartered Banks" below.
Loans-to-One-Borrower Limitations. With certain specified exceptions, a
New York chartered savings bank may not make loans or extend credit to a single
borrower and to entities related to the borrower in an aggregate amount that
would exceed 15% of the bank's net worth, plus an additional 10% of the bank's
net worth if secured by the requisite collateral. Rome Savings currently
complies with applicable loans-to-one-borrower limitations. At March 31, 1999,
Rome Savings' limit on loans to one borrower was $7.2 million. As a result of
the offering, Rome Savings' limit on loans to one borrower will increase to $9.9
million (at the midpoint of the offering range.)
Dividends. Under the New York Banking Law, a stock savings bank may
declare and pay a dividend on its capital stock only to the extent that the
payment of the dividend would not impair the capital stock of the savings bank.
In addition, Rome Savings cannot declare and pay dividends without regulatory
approval in any calendar year in excess of its "net profits" of the current year
combined with its "retained net profits" of the two preceding years, less any
required transfer to surplus or a fund for the retirement of preferred stock.
Federal law may also limit the amount of dividends that may be paid by Rome
Savings. See "-- Federal Banking Regulation -- Prompt Corrective Action" below.
This restriction will apply to Rome Savings after the reorganization.
Community Reinvestment Act. Rome Savings is also subject to provisions of
the Banking Law that, like the provisions of the federal Community Reinvestment
Act ("federal CRA"), impose continuing and affirmative obligations upon a
banking institution organized in the State of New York to serve the credit needs
of its local community ("New York CRA"). See
80
<PAGE>
"Federal Banking Regulation -- Community Reinvestment Act" below. Pursuant to
the New York CRA, a bank must file with the Banking Department copies of all
federal CRA reports, and the Banking Department is required to consider a bank's
New York CRA rating when reviewing an application by the bank to engage in
certain transactions, including mergers, asset purchases and the establishment
of branch offices or automated teller machines, and provides that such
assessment may serve as a basis for the denial of any such application. The New
York CRA requires the Banking Department to make a written assessment of a
bank's compliance with the New York CRA and to make such assessment available to
the public. The Banking Department adopted, effective December 3, 1997,
performance-focused regulations that were intended to parallel the current CRA
regulations of the federal banking agencies and to promote consistency in New
York CRA evaluations by considering more objective criteria. The regulations
require a biennial assessment of a bank's compliance with the New York CRA,
utilizing a four-tiered rating system, and require the Banking Department to
make available to the public such rating and a written summary of the assessment
results. The Bank's latest New York CRA rating from the Banking Department, was
a rating of "Satisfactory."
Enforcement. Under the Banking Law, the Banking Department may issue an
order to a New York-chartered banking institution to appear and explain an
apparent violation of law, to discontinue unauthorized or unsafe practices and
to keep prescribed books and accounts. Upon a finding by the Banking Department
that any director, trustee or officer of any banking organization has violated
any law, or has continued unauthorized or unsafe practices in conducting the
business of the banking organization after having been notified by the Banking
Department to discontinue such practices, the Banking Department may remove such
director, trustee or officer from office after notice and an opportunity to be
heard. The Bank does not know of any past or current practice, condition or
violation that might lead to any proceeding by the Banking Department against
the Bank or any of its trustees or officers.
Federal Banking Regulation
Capital Requirements. FDIC regulations require BIF-insured banks, such as
Rome Savings, to maintain minimum levels of capital. The FDIC regulations
define two classes of capital known as Tiers.
Tier 1 capital is comprised of the sum of common stockholders' equity
(excluding the net unrealized appreciation or depreciation, net of tax, from
available-for-sale securities), non-cumulative perpetual preferred stock
(including any related surplus) and minority interests in consolidated
subsidiaries, minus all intangible assets (other than qualifying servicing
rights), and any net unrealized loss on marketable equity securities.
The components of Tier 2 capital currently include cumulative perpetual
preferred stock, certain perpetual preferred stock for which the dividend rate
may be reset periodically, mandatory convertible securities, subordinated debt,
intermediate preferred stock, 45% of the unrealized gain on marketable equity
securities, and allowance for possible loan losses. Allowance for possible loan
losses includible in Tier 2 capital is limited to a maximum of 1.25% of risk-
weighted assets. Overall, the amount of Tier 2 capital that may be included in
total capital can not exceed 100% of Tier 1 capital.
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<PAGE>
The FDIC regulations establish a minimum leverage capital requirement for
banks in the strongest financial and managerial condition, with a rating of 1
(the highest examination rating of the FDIC for banks) under the Uniform
Financial Institutions Rating System, of not less than a ratio of 3.0% of Tier 1
capital to total assets. For all other banks, the minimum leverage capital
requirement is 4 percent, unless a higher leverage capital ratio is warranted by
the particular circumstances or risk profile of the depository institution.
The FDIC regulations also require that savings banks meet a risk-based
capital standard. The risk-based capital standard requires the maintenance of a
ratio of total capital (which is defined as the sum of Tier 1 capital and Tier 2
capital) to risk-weighted assets of at least 8% and a ratio of Tier 1 capital to
risk-weighted assets of at least 4%. In determining the amount of risk-weighted
assets, all assets, plus certain off balance sheet items, are multiplied by a
risk-weight of 0% to 100%, based on the risks the FDIC believes are inherent in
the type of asset or item.
The federal banking agencies, including the FDIC, have also adopted
regulations to require an assessment of an institution's exposure to declines in
the economic value of a bank's capital due to changes in interest rates when
assessing the bank's capital adequacy. Under such a risk assessment, examiners
will evaluate a bank's capital for interest rate risk on a case-by-case basis,
with consideration of both quantitative and qualitative factors. According to
the agencies, applicable considerations include the quality of the bank's
interest rate risk management process, the overall financial condition of the
bank and the level of other risks at the bank for which capital is needed.
Institutions with significant interest rate risk may be required to hold
additional capital. The agencies also issued a joint policy statement providing
guidance on interest rate risk management, including a discussion of the
critical factors affecting the agencies' evaluation of interest rate risk in
connection with capital adequacy.
The following table shows Rome Savings' leverage ratio, its Tier 1 risk-
based capital ratio, and its total risk-based capital ratio, at March 31, 1999:
<TABLE>
<CAPTION>
As of March 31, 1999
--------------------------------------------------------------------
Minimum Capital For Classification as
Bank Actual Adequacy Well-Capitalized
------------------- -------------------- ---------------------
Amount Ratio Amount Ratio Amount Ratio
-------- ------- -------- ------- -------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Leverage (Tier 1) capital............ $28,298 12.8% $ 8,867 *4% $11,084 *5%
Risk-based capital:
Tier 1............................ 28,298 21.5% 5,272 *4% 7,909 *6%
Total............................. $30,257 23.0% $10,545 *8% $13,181 *10%
</TABLE>
* Greater than and equal to
As the table shows, Rome Savings exceeded the minimum capital requirements
at the date indicated.
Activity Restrictions on State-Chartered Banks. Section 24 of the Federal
Deposit Insurance Act, as amended (FDIA), which was added by the Federal Deposit
Insurance Corporation Improvement Act of 1991 (FDICIA), generally limits the
activities and investments of state-chartered FDIC insured banks and their
subsidiaries to those permissible for federally
82
<PAGE>
chartered national banks and their subsidiaries, unless such activities and
investments are specifically exempted by Section 24 or consented to by the FDIC.
Section 24 provides an exception for investments by a bank in common and
preferred stocks listed on a national securities exchange or the shares of
registered investment companies if
(1) the bank held such types of investments during the 14-month period
from September 30, 1990 through November 26, 1991;
(2) the state in which the bank is chartered permitted such investments as
of September 30, 1991; and
(3) the bank notifies the FDIC and obtains approval from the FDIC to make
or retain such investments. Upon receiving such FDIC approval, an
institution's investment in such equity securities will be subject to
an aggregate limit up to the amount of its Tier 1 capital.
Rome Savings received approval from the FDIC to retain and acquire such equity
investments subject to a maximum permissible investment equal to the lesser of
100% of Rome Savings' Tier 1 capital or the maximum permissible amount specified
by the Banking Act. Section 24 also provides an exception for majority owned
subsidiaries of a bank, but Section 24 limits the activities of such
subsidiaries to those permissible for a national bank, permissible under Section
24 of the FDIA and the FDIC regulations issued pursuant thereto, or as approved
by the FDIC.
Before making a new investment or engaging in a new activity not
permissible for a national bank or otherwise permissible under Section 24 of the
FDIC regulations thereunder, an insured bank must seek approval from the FDIC to
make such investment or engage in such activity. The FDIC will not approve the
activity unless the bank meets its minimum capital requirements and the FDIC
determines that the activity does not present a significant risk to the FDIC
insurance funds.
Enforcement. The FDIC has extensive enforcement authority over insured
savings banks, including Rome Savings. This enforcement authority includes,
among other things, the ability to assess civil money penalties, to issue cease
and desist orders and to remove directors and officers. In general, these
enforcement actions may be initiated in response to violations of laws and
regulations and to unsafe or unsound practices.
The FDIC is required, with certain exceptions, to appoint a receiver or
conservator for an insured state bank if that bank is "critically
undercapitalized." For this purpose, "critically undercapitalized" means having
a ratio of tangible capital to total assets of less than 2%. The FDIC may also
appoint a conservator or receiver for a state bank on the basis of the
institution's financial condition or upon the occurrence of certain events,
including:
(1) insolvency (whereby the assets of the bank are less than its
liabilities to depositors and others);
(2) substantial dissipation of assets or earnings through violations of
law or unsafe or unsound practices;
83
<PAGE>
(3) existence of an unsafe or unsound condition to transact business;
(4) likelihood that the bank will be unable to meet the demands of its
depositors or to pay its obligations in the normal course of business;
and
(5) insufficient capital, or the incurring or likely incurring of losses
that will deplete substantially all of the institution's capital with
no reasonable prospect of replenishment of capital without federal
assistance.
Deposit Insurance. Pursuant to FDICIA, the FDIC established a system for
setting deposit insurance premiums based upon the risks a particular institution
poses to its deposit insurance fund. Under the risk-based deposit insurance
assessment system, the FDIC assigns an institution to one of three capital
categories based on the institution's financial information, as of the reporting
period ending six months before the assessment period. The three capital
categories are (1) well capitalized, (2) adequately capitalized and (3)
undercapitalized using capital ratios that are substantially similar to the
prompt corrective action capital ratios discussed below. See "-- Federal
Banking Regulation -- Prompt Corrective Action" below. The FDIC also assigns an
institution to supervisory subgroup based on a supervisory evaluation provided
to the FDIC by the institution's primary federal regulator and information that
the FDIC determines to be relevant to the institution's financial condition and
the risk posed to the deposit insurance funds (which may include, if applicable,
information provided by the institution's state supervisor).
An institution's assessment rate depends on the capital category and
supervisory category to which it is assigned. Under the risk-based assessment
system, there are nine assessment risk classifications (i.e., combinations of
capital groups and supervisory subgroups) to which different assessment rates
are applied. A institution's rate of deposit insurance assessments will depend
upon the capital and supervisory subcategory to which the bank is assigned by
the FDIC. Assessment rates for deposit insurance currently range from 0 basis
points to 27 basis points. The capital and supervisory subgroup to which an
institution is assigned by the FDIC is confidential and may not be disclosed.
Any increase in insurance assessments could have an adverse effect on the
earnings of insured institutions, including Rome Savings.
Under the Deposit Insurance Funds Act of 1996 ("Funds Act"), the assessment
base for the payments on the bonds ("FICO bonds") issued in the late 1980's by
the Financing Corporation to recapitalize the now defunct Federal Savings and
Loan Insurance Corporation was expanded to include, beginning January 1, 1997,
the deposits of BIF-insured institutions, such as Rome Savings. Until December
31, 1999, or such earlier date on which the last savings association ceases to
exist, the rate of assessment for BIF-assessable deposits will be one-fifth of
the rate imposed on deposits insured by the Savings Association Insurance Fund
(SAIF). The annual rate of assessments for the payments on the FICO bonds for
the quarterly period beginning on October 1, 1998 was 0.01164% for BIF-
assessable deposits and 0.0582% for SAIF-assessable deposits and was 0.0122% for
BIF-assessable deposits and 0.0610% for SAIF-assessable deposits for the
quarterly period beginning on January 1, 1999.
Under the FDIA, the FDIC may terminate the insurance of an institution's
deposits upon a finding that the institution has engaged in unsafe or unsound
practices, is in an unsafe or unsound condition to continue operations or has
violated any applicable law, regulation, rule, order or
84
<PAGE>
condition imposed by the FDIC. The management of Rome Savings does not know of
any practice, condition or violation that might lead to termination of deposit
insurance.
Transactions with Affiliates of Rome Savings. Transactions between an
insured bank, such as Rome Savings, and any of its affiliates is governed by
Sections 23A and 23B of the Federal Reserve Act. An affiliate of a bank is any
company or entity that controls, is controlled by or is under common control
with the bank. Currently, a subsidiary of a bank that is not also a depository
institution is not treated as an affiliate of the bank for purposes of Sections
23A and 23B, but the FRB has proposed treating any subsidiary of a bank that is
engaged in activities not permissible for bank holding companies under the Bank
Holding Company Act of 1956, as amended (BHCA), as an affiliate for purposes of
Sections 23A and 23B. Sections 23A and 23B (1) limit the extent to which the
bank or its subsidiaries may engage in "covered transactions" with any one
affiliate to an amount equal to 10% of such bank's capital stock and surplus,
and limit on all such transactions with all affiliates to an amount equal to 20%
of such capital stock and surplus and (2) require that all such transactions be
on terms that are consistent with safe and sound banking practices. The term
"covered transaction" includes the making of loans, purchase of assets, issuance
of guarantees and other similar types of transactions. Further, most loans by a
bank to any of its affiliates must be secured by collateral in amounts ranging
from 100 to 130 percent of the loan amounts. In addition, any covered
transaction by a bank with an affiliate and any purchase of assets or services
by a bank from an affiliate must be on terms that are substantially the same, or
at least as favorable, to the bank as those that would be provided to a non-
affiliate.
Prohibitions Against Tying Arrangements. Banks are subject to the
prohibitions of 12 U.S.C. (S) 1972 on certain tying arrangements. A depository
institution is prohibited, subject to certain exceptions, from extending credit
to or offering any other service, or fixing or varying the consideration for
such extension of credit or service, on the condition that the customer obtain
some additional service from the institution or certain of its affiliates or not
obtain services of a competitor of the institution.
Uniform Real Estate Lending Standards. Pursuant to FDICIA, the federal
banking agencies adopted uniform regulations prescribing standards for
extensions of credit that are secured by liens on interests in real estate or
made for the purpose of financing the construction of a building or other
improvements to real estate. Under the joint regulations adopted by the federal
banking agencies, all insured depository institutions must adopt and maintain
written policies that establish appropriate limits and standards for extensions
of credit that are secured by liens or interests in real estate or are made for
the purpose of financing permanent improvements to real estate. These policies
must establish loan portfolio diversification standards, prudent underwriting
standards (including loan-to-value limits) that are clear and measurable, loan
administration procedures, and documentation, approval and reporting
requirements. The real estate lending policies must reflect consideration of
the Interagency Guidelines for Real Estate Lending Policies that have been
adopted by the federal bank regulators.
The Interagency Guidelines, among other things, require a depository
institution to establish internal loan-to-value limits for real estate loans
that are not in excess of the following supervisory limits:
85
<PAGE>
(1) for loans secured by raw land, the supervisory loan-to-value limit is
65% of the value of the collateral;
(2) for land development loans (i.e., loans for the purpose of improving
unimproved property prior to the erection of structures), the
supervisory limit is 75%;
(3) for loans for the construction of commercial, multi-family or other
non-residential property, the supervisory limit is 80%;
(4) for loans for the construction of one- to four-family properties, the
supervisory limit is 85%; and
(5) for loans secured by other improved property (e.g., farmland,
completed commercial property and other income-producing property
including non-owner occupied, one- to four-family property), the limit
is 85%.
Although no supervisory loan-to-value limit has been established for owner-
occupied, one to four-family and home equity loans, the Interagency Guidelines
state that for any such loan with a loan-to-value ratio that equals or exceeds
90% at origination, an institution should require appropriate credit enhancement
in the form of either mortgage insurance or readily marketable collateral.
Community Reinvestment Act. Under the Community Reinvestment Act (CRA),
any insured depository institution, including Rome Savings, has a continuing and
affirmative obligation consistent with its safe and sound operation to help meet
the credit needs of its entire community, including low and moderate income
neighborhoods. The CRA does not establish specific lending requirements or
programs for financial institutions nor does it limit an institution's
discretion to develop the types of products and services that it believes are
best suited to its particular community. The CRA requires the FDIC, in
connection with its examination of a savings bank, to assess the depository
institution's record of meeting the credit needs of its community and to take
such record into account in its evaluation of certain applications by such
institution, including applications for additional branches and acquisitions.
Among other things, current CRA regulations establish an evaluation system
that rates an institution based on its actual performance in meeting community
needs. In particular, the evaluation system focuses on three tests:
(1) a lending test, to evaluate the institution's record of making loans
in its service areas;
(2) an investment test, to evaluate the institution's record of investing
in community development projects, affordable housing, and programs
benefitting low or moderate income individuals and businesses; and
(3) a service test, to evaluate the institution's delivery of services
through its branches, ATMs and other offices.
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The CRA requires the FDIC to provide a written evaluation of an
institution's CRA performance utilizing a four-tiered descriptive rating system
and requires public disclosure of an institution's CRA rating. Rome received a
"satisfactory" rating on its last CRA exam in January 1998.
Safety and Soundness Standards. Pursuant to the requirements of FDICIA, as
amended by the Riegle Community Development and Regulatory Improvement Act of
1994, each federal banking agency, including the FDIC, has adopted guidelines
establishing general standards relating to internal controls, information and
internal audit systems, loan documentation, credit underwriting, interest rate
exposure, asset growth, asset quality, earnings, and compensation, fees and
benefits. In general, the guidelines require, among other things, appropriate
systems and practices to identify and manage the risks and exposures specified
in the guidelines. The guidelines prohibit excessive compensation as an unsafe
and unsound practice and describe compensation as excessive when the amounts
paid are unreasonable or disproportionate to the services performed by an
executive officer, employee, director, or principal stockholder.
In addition, the FDIC adopted regulations to require a bank that is given
notice by the FDIC that it is not satisfying any of such safety and soundness
standards to submit a compliance plan to the FDIC. If, after being so notified,
a bank fails to submit an acceptable compliance plan or fails in any material
respect to implement an accepted compliance plan, the FDIC may issue an order
directing corrective and other actions of the types to which a significantly
undercapitalized institution is subject under the "prompt corrective action"
provisions of FDICIA. If a bank fails to comply with such an order, the FDIC
may seek to enforce such an order in judicial proceedings and to impose civil
monetary penalties.
Prompt Corrective Action. FDICIA also established a system of prompt
corrective action to resolve the problems of undercapitalized institutions. The
FDIC, as well as the other federal banking regulators, adopted regulations
governing the supervisory actions that may be taken against undercapitalized
institutions. The regulations establish five categories, consisting of "well
capitalized," "adequately capitalized," "undercapitalized," "significantly
undercapitalized" and "critically undercapitalized." The FDIC's regulations
defines the five capital categories as follows: Generally, an institution will
be treated as "well capitalized" if its ratio of total capital to risk-weighted
assets is at least 10%, its ratio of Tier 1 capital to risk-weighted assets is
at least 6%, its ratio of Tier 1 capital to total assets is at least 5%, and it
is not subject to any order or directive by the FDIC to meet a specific capital
level. An institution will be treated as "adequately capitalized" if its ratio
of total capital to risk-weighted assets is at least 8%, its ratio of Tier 1
capital to risk-weighted assets is at least 4%, and its ratio of Tier 1 capital
to total assets is at least 4% (3% if the bank receives the highest rating under
the Uniform Financial Institutions Rating System) and it is not a well-
capitalized institution. An institution that has total risk-based capital of
less than 8%, Tier 1 risk-based-capital of less than 4% or a leverage ratio that
is less than 4% (or less than 3% if the institution is rated a composite "1"
under the Uniform Financial Institutions Rating System) would be considered to
be "undercapitalized." An institution that has total risk-based capital of less
than 6%, Tier 1 capital of less than 3% or a leverage ratio that is less than 3%
would be considered to be "significantly undercapitalized," and an institution
that has a tangible capital to assets ratio equal to or less than 2% would be
deemed to be "critically undercapitalized."
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The severity of the action authorized or required to be taken under the
prompt corrective action regulations increases as a bank's capital decreases
within the three undercapitalized categories. All banks are prohibited from
paying dividends or other capital distributions or paying management fees to any
controlling person if, following such distribution, the bank would be
undercapitalized. The FDIC is required to monitor closely the condition of an
undercapitalized bank and to restrict the growth of its assets. An
undercapitalized bank is required to file a capital restoration plan within 45
days of the date the bank receives notice that it is within any of the three
undercapitalized categories, and the plan must be guaranteed by any parent
holding company. The aggregate liability of a parent holding company is limited
to the lesser of:
(1) an amount equal to the five percent of the bank's total assets at the
time it became "undercapitalized," and
(2) the amount that is necessary (or would have been necessary) to bring
the bank into compliance with all capital standards applicable with
respect to such bank as of the time it fails to comply with the plan.
If a bank fails to submit an acceptable plan, it is treated as if it were
"significantly undercapitalized." Banks that are significantly or critically
undercapitalized are subject to a wider range of regulatory requirements and
restrictions.
The FDIC has a broad range of grounds under which it may appoint a receiver
or conservator for an insured depository bank. If one or more grounds exist for
appointing a conservator or receiver for a bank, the FDIC may require the bank
to issue additional debt or stock, sell assets, be acquired by a depository bank
holding company or combine with another depository bank. Under FDICIA, the FDIC
is required to appoint a receiver or a conservator for a critically
undercapitalized bank within 90 days after the bank becomes critically
undercapitalized or to take such other action that would better achieve the
purposes of the prompt corrective action provisions. Such alternative action
can be renewed for successive 90-day periods. However, if the bank continues to
be critically undercapitalized on average during the quarter that begins 270
days after it first became critically undercapitalized, a receiver must be
appointed, unless the FDIC makes certain findings that the bank is viable.
Loans to a Bank's Insiders
Federal Regulation. A bank's loans to its executive officers, directors,
any owner of 10% or more of its stock (each, an insider) and any of certain
entities affiliated to any such person (an insider's related interest) are
subject to the conditions and limitations imposed by Section 22(h) of the
Federal Reserve Act and the FRB's Regulation O thereunder. Under these
restrictions, the aggregate amount of the loans to any insider and the insider's
related interests may not exceed the loans-to-one-borrower limit applicable to
national banks, which is comparable to the loans-to-one-borrower limit
applicable to Rome Savings' loans. See "New Jersey Banking Regulation -- Loans-
to-One Borrower Limitations." All loans by a bank to all insiders and insiders'
related interests in the aggregate may not exceed the bank's unimpaired capital
and unimpaired surplus. With certain exceptions, loans to an executive officer,
other than loans for the education of the officer's children and certain loans
secured by the officer's
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residence, may not exceed the lesser of (1) $100,000 or (2) the greater of
$25,000 or 2.5% of the bank's capital and unimpaired surplus. Regulation O also
requires that any proposed loan to an insider or a related interest of that
insider be approved in advance by a majority of the board of directors of the
bank, with any interested director not participating in the voting, if such
loan, when aggregated with any existing loans to that insider and the insider's
related interests, would exceed either (1) $500,000 or (2) the greater of
$25,000 or 5% of the bank's unimpaired capital and surplus. Generally, such
loans must be made on substantially the same terms as, and follow credit
underwriting procedures that are not less stringent than, those that are
prevailing at the time for comparable transactions with other persons.
An exception is made for extensions of credit made pursuant to a benefit or
compensation plan of a bank that is widely available to employees of the bank
and that does not give any preference to insiders of the bank over other
employees of the bank.
In addition, provisions of the BHCA prohibit extensions of credit to a
bank's insiders and their related interests by any other institution that has a
correspondent banking relationship with the bank, unless such extension of
credit is on substantially the same terms as those prevailing at the time for
comparable transactions with other persons and does not involve more than the
normal risk of repayment or present other unfavorable features.
New York Regulation. Provisions of the New York Banking Law impose
conditions and limitations on the liabilities to a savings bank of its directors
and executive officers and of corporations and partnerships controlled by such
persons that are comparable in many respects to the conditions and limitations
imposed on the loans and extensions of credit to insiders and their related
interests under Regulation O, as discussed above. However, New York law does
not affect loans to shareholders owning more than 10% or more of the savings
bank's stock. Under applicable New York law, savings banks that comply with the
requirements of Regulation O are deemed to be in compliance with the
requirements of the New York law.
Federal Home Loan Bank System
Rome Savings is a member of the Federal Home Loan Bank of New York, which
is one of the 12 regional Federal Home Loan Banks in the FLHB system. Each of
the federal home loan banks are subject to supervision and regulation by the
Federal Housing Finance Board, and each acts as a central credit facility
primarily for its member institutions. As a member, Rome Savings is required to
hold shares of capital stock in the FLHBNY in an amount at least equal to the
greater of 1% of the aggregate unpaid principal of its home mortgage loans, home
purchase contracts and similar obligations at the beginning of each year, or
1/20 of its advances (borrowings) form the FLHBNY. Rome Savings was in
compliance with this requirement with an investment in FLHBNY stock at March 31,
1999 of $763,200.
Each FHLB serves as a reserve or central bank for its member institutions
within its assigned region. Each is funded primarily from proceeds derived from
the sale of consolidated obligations of the FHLB system. It offers advances to
members in accordance with policies and procedures established by the FHFB and
the board of directors of the FLHB. Long term advances may only be made for the
purpose of providing funds for residential housing finance.
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Federal Reserve System
Under FRB regulations, Rome Savings is required to maintain non-interest-
earning reserves against its transaction accounts (primarily NOW and regular
checking accounts). The current FRB regulations generally require that reserves
of 3% must be maintained against aggregate transaction accounts of $46.5 million
or less (subject to adjustment by the FRB) and an initial reserve of $1.4
million plus 10% (subject to adjustment by the FRB between 8% and 14%) against
that portion of total transaction accounts in excess of $46.5 million. The
first $4.9 million of otherwise reservable balances (subject to adjustments by
the FRB) are exempted from the reserve requirements. Rome Savings is in
compliance with the foregoing requirements. Because required reserves must be
maintained in the form of either vault cash, a non-interest-bearing account at a
Federal Reserve Bank or a pass-through account as defined by the FRB, the effect
of this reserve requirement is to reduce Rome Savings' interest-earning assets.
Holding Company Regulation
Federal Regulation. After the reorganization, Rome, MHC and Rome Bancorp
will be governed as bank holding companies. Bank holding companies are subject
to examination, regulation and periodic reporting under the BHCA, as
administered by the FRB. The FRB has adopted capital adequacy guidelines for
bank holding companies on a consolidated basis substantially similar to those of
the FDIC for Rome Savings. As of March 31, 1999, the total capital and Tier 1
capital ratios for Rome, MHC and Rome Bancorp would, on a pro forma basis,
exceed these minimum capital requirements. See "Regulatory Capital Compliance"
above.
As bank holding companies, Rome, MHC and Rome Bancorp will be required to
obtain the prior approval of the FRB to acquire all, or substantially all, of
the assets of any bank or bank holding company. Prior FRB approval will be
required for Rome, MHC or Rome Bancorp to acquire direct or indirect ownership
or control of any voting securities of any bank or bank holding company if,
after giving effect to such acquisition, it would, directly or indirectly, own
or control more than 5% of any class of voting shares of such bank or bank
holding company.
A bank holding company is required to give the FRB prior written notice of
any purchase or redemption of its outstanding equity securities if the gross
consideration for the purchase or redemption, when combined with the net
consideration paid for all such purchases or redemptions during the preceding 12
months, will be equal to 10% or more of the company's consolidated net worth.
The FRB may disapprove such a purchase or redemption if it determines that the
proposal would constitute an unsafe and unsound practice, or would violate any
law, regulation, FRB order or directive, or any condition imposed by, or written
agreement with, the FRB. Such notice and approval is not required for a bank
holding company that would be treated as "well capitalized" under applicable
regulations of the FRB, that has received a composite "1" or "2" rating at its
most recent bank holding company inspection by the FRB, and that is not the
subject of any unresolved supervisory issues.
In addition, a bank holding company is generally prohibited from engaging
in, or acquiring direct or indirect control of any company engaged in, non-
banking activities. One of the principal exceptions to this prohibition is for
activities found by the FRB to be so closely
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related to banking or managing or controlling banks as to be a proper incident
thereto. Some of the principal activities that the FRB has determined by
regulation to be so closely related to banking as to be a proper incident
thereto are:
(1) making or servicing loans;
(2) performing certain data processing services;
(3) providing discount brokerage services;
(4) acting as fiduciary, investment or financial advisor;
(5) leasing personal or real property;
(6) making investments in corporations or projects designed primarily to
promote community welfare; and
(7) acquiring a savings and loan association.
Regulations of the FRB provide that a bank holding company must serve as a
source of strength to any of its subsidiary banks and must not conduct its
activities in an unsafe or unsound manner. Under the prompt corrective action
provisions of FDICIA, a bank holding company parent of an undercapitalized
subsidiary bank would be directed to guarantee, within limitations, the capital
restoration plan that is required of such an undercapitalized bank. See "--
Federal Banking Regulation -- Prompt Corrective Action" above. If the
undercapitalized bank fails to file an acceptable capital restoration plan or
fails to implement an accepted plan, the Federal Reserve Board may prohibit the
bank holding company parent of the undercapitalized bank from paying any
dividend or making any other form of capital distribution without the prior
approval of the FRB.
Under the Federal Deposit Insurance Act, depository institutions are liable
to the FDIC for losses suffered or anticipated by the FDIC in connection with
the default of a commonly controlled depository institution or any assistance
provided by the FDIC to such an institution in danger of default. This law
would have potential applicability if Rome, MHC or Rome Bancorp ever acquired as
a separate subsidiary another depository institution in addition to Rome
Savings.
New York Regulation. Under the New York Banking Law, certain companies
owning or controlling banks are regulated as a bank holding company. For the
purposes of the Banking Law, the term "bank holding company," is defined
generally to include any "company" that, directly or indirectly, either (a)
controls the election of a majority of the directors or (b) owns, controls or
holds with power to vote more than 10% of the voting stock of a bank holding
company or, if the company is a banking institution, another banking
institution, or 10% or more of the voting stock of each of two or more banking
institutions. The term "company" is defined to include corporations,
partnerships and other types of business entities, chartered or doing business
in New York, and the term "banking institution" is defined to include commercial
banks, stock savings banks and stock savings and loan associations. A company
controlling, directly or indirectly, only one banking institution in New York
will not be deemed to be a bank holding
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company for the purposes of the Banking Law. Under the Banking Law, the prior
approval of the Banking Department is required before:
. any action is taken that causes any company to become a bank holding
company;
. any action is taken that causes any banking institution to become or
to be merged or consolidated with a subsidiary of a bank holding
company;
. any bank holding company acquires direct or indirect ownership or
control of more than 5% of the voting stock of a banking institution;
. any bank holding company or subsidiary thereof acquires all or
substantially all of the assets of a banking institution; or
. any action is taken that causes any bank holding company to merge or
consolidate with another bank holding company.
Additionally, certain restrictions apply to New York bank holding companies
regarding the acquisition of banking institutions that have been chartered for
five years or less and are located in smaller communities. Directors, officers
and employees of a New York bank holding company are subject to limitations
regarding their affiliation with securities underwriting or distribution firms
and with other bank holding companies, and directors and executive officers are
subject to limitations regarding loans obtained from certain of the holding
company's banking subsidiaries. Although the Company will not be a bank holding
company for purposes of the New York Banking Law upon the effective date of the
conversion, any future acquisition of ownership, control, or the power to vote
10% or more of the voting stock of another banking institution or bank holding
company would cause it to become such.
Mutual Holding Company Regulation. Under the New York Banking Law, Rome,
MHC may exercise all powers and privileges of a New York chartered mutual
savings bank, except the power to take deposits. As a bank holding company,
Rome, MHC will also be subject to the limitations on activities imposed on a
bank holding company under the BHCA.
Acquisition of Rome Bancorp
Under applicable law, as summarized below, no person may acquire control of
Rome Bancorp or Rome Savings without first obtaining approval of such
acquisition of control by the FRB and the Banking Department.
Federal Restrictions. Under the federal Change in Bank Control Act (CBCA),
any person (including a company), or group acting in concert, seeking to acquire
10% or more of the outstanding shares of Rome Bancorp's common stock will be
required to submit prior notice to the FRB, unless the FRB has found that the
acquisition of such shares will not result in a change in control of Rome
Bancorp. Under the CBCA, the FRB has 60 days within which to act on such
notices, taking into consideration certain factors, including the financial and
managerial resources of the acquiror, the convenience and needs of the
communities served by Rome Bancorp and Rome Savings, and the anti-trust effects
of the acquisition. Under the BHCA, any company would be required to obtain
prior approval from the FRB before it may obtain "control" of Rome
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Bancorp within the meaning of the BHCA. Control generally is defined under the
BHCA to mean the ownership or power to vote 25% more of any class of voting
securities of Rome Bancorp or the ability to control in any manner the election
of a majority of Rome Bancorp's directors.
New York Change in Bank Control Restrictions. Under the New York Banking
Law , the prior approval of the Banking Department is required before any action
is taken that causes any company to acquire direct or indirect control of a
banking institution that is organized in the State of New York. For this
purpose, the term "company" is defined to include corporations, partnerships and
other types of business entities, chartered or doing business in New York, and
an individual or combination of individuals acting in concert and residing or
doing business in New York. The term "control" is defined generally to mean the
power to direct or cause the direction of the management and policies of the
banking institution and is presumed to exist if the company owns, controls or
holds with power to vote 10% or more of the voting stock of the banking
institution.
Dividend Waivers by Rome, MHC
It has been the policy of many mutual holding companies to waive the
receipt of dividends declared by its savings institution subsidiary. In
connection with its approval of the reorganization, however, it is expected that
the Federal Reserve Board will impose certain conditions on the waiver by Rome,
MHC of dividends paid on the common stock by Rome Bancorp. In particular, the
Federal Reserve Board is expected to require that Rome, MHC obtain the prior
approval of the Federal Reserve Board before Rome, MHC may waive any dividends
from Rome Bancorp. As of the date hereof, we are not aware that the Federal
Reserve Board has given its approval to any waiver of dividends by any mutual
holding company that has requested such approval.
We also expect that the terms of the Federal Reserve Board approval of the
reorganization will require that the amount of any dividends waived by Rome, MHC
will not be available for payment to its public stockholders of Rome Bancorp
(i.e., stockholders except for Rome, MHC) and that such amount will be excluded
from Rome Bancorp's capital for purposes of calculating dividends payable to the
public stockholders. Moreover, Rome Savings is required to maintain the
cumulative amount of dividends waived by Rome, MHC in a restricted capital
account that would be added to the liquidation account established in the
reorganization. This amount would not be available for distribution to public
stockholders. See "The Reorganization and The Offering -- Effects of the
Reorganization -- Depositors' Rights If We Liquidate; Liquidation Account." The
restricted capital account and liquidation account amounts would not be
reflected in Rome Savings' consolidated financial statements, but would be
considered as a notational or memorandum account of Rome Savings. These
accounts would be maintained in accordance with the laws, rules, regulations and
policies of the Banking Department and the plan of reorganization. The plan of
reorganization also provides that if Rome, MHC converts to stock form in the
future, (commonly referred to as a second step conversion), any waived dividends
would reduce the percentage of the converted company's shares of common stock
issued to public stockholders in connection with any such transaction. For
additional information regarding the possible second step conversion of Rome,
MHC, see "The Reorganization and The Offering -- Possible Conversion of Rome,
MHC to Stock Form."
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Rome, MHC does not expect to initially waive dividends declared by Rome
Bancorp. If Rome, MHC decides that it is in its best interest to waive a
particular dividend to be paid by Rome Bancorp and the Federal Reserve Board
approves such waiver, then Rome Bancorp would pay such dividend only to its
public stockholders. The amount of the dividend waived by Rome, MHC would be
treated in the manner described above. Rome, MHC's decision as to whether or
not to waive a particular dividend will depend on a number of factors, including
Rome, MHC's capital needs, the investment alternatives available to Rome, MHC as
compared to those available to Rome Bancorp, and the possibility of regulatory
approvals. We can not guarantee:
. that after the reorganization, Rome, MHC will waive dividends paid by
Rome Bancorp;
. that if the application is made to waive a dividend, that the Federal
Reserve Board will approve such dividend waiver request; or
. what conditions may be imposed by the Federal Reserve Board on any
dividend waiver.
TAXATION
Federal
General. The following discussion is intended only as a summary and does
not purport to be a comprehensive description of the tax rules applicable to
Rome Savings, Rome, MHC or Rome Bancorp. For federal income tax purposes, Rome
Savings reports its income on the basis of a taxable year ending December 31,
using the accrual method of accounting, and is generally subject to federal
income taxation in the same manner as other corporations. Following the
reorganization, Rome Savings and Rome Bancorp will constitute an affiliated
group of corporations and, therefore, will be eligible to report their income on
a consolidated basis. Because MHC will own less than 80% of the common stock, it
will not be a member of such affiliated group and will report its income on a
separate return. Rome Savings is not currently under audit by the Internal
Revenue Service and has not been audited by the IRS during the past five years.
Bad Debt Reserves. The Bank, as a "small bank" (one with assets having an
adjusted tax basis of $500 million or less) is permitted to maintain a tax
reserve for bad debts based on the six-year average experience method. Pursuant
to the Small Business Job Protection Act of 1996, the Bank is now recapturing
(taking into income) over a multi-year period a portion of the balance of its
tax bad debt reserve as of December 31, 1995. The tax liability associated with
the recapture has been adequately provided for in the Bank's consolidated
financial statements.
Distributions. To the extent that Rome Savings makes "non-dividend
distributions" to stockholders, such distributions will be considered to result
in distributions from Rome Savings' unrecaptured tax bad debt reserve "base year
reserve," i.e., its reserve as of December 31, 1987, to the extent thereof and
then from its supplemental reserve for losses on loans, and an amount based on
the amount distributed will be included in Rome Savings' taxable income. Non-
dividend distributions include distributions in excess of Rome Savings' current
and accumulated
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earnings and profits, distributions in redemption of stock and distributions in
partial or complete liquidation. However, dividends paid out of Rome Savings'
current or accumulated earnings and profits, as calculated for federal income
tax purposes, will not constitute non-dividend distributions and, therefore,
will not be included in Rome Savings' income.
The amount of additional taxable income created from a non-dividend
distribution is equal to the lesser of Rome Savings' base year reserve and
supplemental reserve for losses on loans or an amount that, when reduced by the
tax attributable to the income, is equal to the amount of the distribution.
Thus, in certain situations, approximately one and one-half times the non-
dividend distribution would be includable in gross income for federal income tax
purposes, assuming a 35% federal corporate income tax rate. Rome Savings does
not intend to pay dividends that would result in the recapture of any portion of
its bad debt reserves.
Corporate Alternative Minimum Tax. The alternative minimum tax (AMT) rules
have been devised to ensure that at least a minimum amount of income tax is paid
by high-income corporate taxpayers who take advantage of substantial tax savings
due to the use of certain tax deductions and exemptions. In essence, the AMT
functions as a recapture mechanism, reclaiming some of the tax deductions and
credits utilized by these taxpayers when calculating their regular federal
income tax liability. In general, a corporation's alternative minimum taxable
income (AMTI) is equal to its regular taxable income, increased by its
preference items for the year and adjusted by computing certain items under
special rules that negate the acceleration of certain tax benefits which are
available under the regular tax rules. The AMT rate is 20% . Such preference
items include adjustments for tax exempt interest, excess bad debt deductions,
accelerated depreciation deductions and net operating loss carryforwards.
Elimination of Dividends; Dividends Received Deduction. Rome Bancorp may
exclude from its income 100% of dividends received from Rome Savings as a member
of the same affiliated group of corporations. Because, following the
reorganization, Rome, MHC will not be a member of such affiliated group, it will
not qualify for such 100% dividends exclusion, but will be entitled to deduct
80% of the dividends it receives from Rome Bancorp so long as it owns more than
20% of the common stock.
State
New York State Taxation. Rome Savings is subject to the New York State
Franchise Tax on Banking Corporations in an annual amount equal to the greater
of (1) 9% of the Bank's "entire net income" allocable to New York State during
the taxable year, or (2) the applicable alternative minimum tax. The
alternative minimum tax is generally the greatest of (a) 0.01% of the value of
the taxable assets allocable to New York State with certain modifications, (b)
3% of the Bank's "alternative entire net income" allocable to New York State or
(c) $250. Entire net income is similar to federal taxable income, subject to
certain modifications and alternative entire net income is equal to entire net
income without certain adjustments. For purposes of computing its entire net
income, the Rome Savings is permitted a deduction for an addition to the reserve
for losses on qualifying real property loans. Rome Savings is currently using a
six-year average experience method, similar to the federal method to compute
their New York State bad debt deduction as they exceed the 12% of deposits
limitation and does not qualify to compute additions to the reserve with the
percentage method.
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New York State passed legislation in August 1996 that incorporated into New
York State tax law provisions for the continued use of bad debt reserves in a
manner substantially similar to the provisions that applied under federal law
prior to the enactment of the 1996 Act discussed above. This legislation
enabled the Bank to avoid the recapture of the New York State tax bad debt
reserves that otherwise would have occurred as a result of the changes in
federal law and to continue to utilize the reserve method for computing its bad
debt deduction. However, the New York bad debt reserve is subject to recapture
for "non-dividend distributions" in a manner similar to the recapture of federal
bad debt reserves for such distributions. See "-- Federal Taxation --
Distributions." Also, the New York bad debt reserve is subject to recapture in
the event that the Bank fails to satisfy certain definitional tests relating to
its assets and the nature of its business.
Delaware State Taxation. As a Delaware holding company not earning income
in Delaware, Rome Bancorp is exempted from Delaware Corporate income tax but is
required to file annual returns and pay annual fees and a franchise tax to the
State of Delaware.
MANAGEMENT
Shared Management Structure
Rome Bancorp has the same directors and executive officers as the current
trustees and executive officers of Rome Savings. We expect that Rome Bancorp
and Rome Savings will continue to have common directors and common executive
officers until there is a business reason to establish separate management
structures.
To date, Rome Savings has compensated its trustees and executive officers
for their services. Rome Bancorp does not pay any additional compensation. We
expect to continue this practice after the reorganization until we have a
business reason to establish separate compensation programs. Until then, we
expect Rome Bancorp to reimburse Rome Savings for a part of the compensation
paid to each director and executive officer that is proportionate to the amount
of time which he or she devotes to performing services for Rome Bancorp.
Directors
Composition of Our Boards. Rome Bancorp has eight directors. Each belongs
to one of three classes with staggered 3-year terms of office. Two directors
are in Class One and have terms expiring in 2000. Three are in Class Two and
have terms expiring in 2001. Three are in Class Three and have terms expiring
in 2002. At each of the Rome Bancorp annual stockholder meetings, the
stockholders elect directors to fill the seats of those directors whose terms
are expiring in that year and any vacant seats. Rome Bancorp, as the sole
stockholder of Rome Savings, elects the Rome Savings directors.
Rome Savings currently has eight trustees. Each trustee is elected by the
board of trustees to serve until age 72. Upon the consummation of the
reorganization, the directors of Rome Savings will be divided into three classes
with staggered 3-year terms of office, similar to Rome Bancorp's Board of
Directors.
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<PAGE>
Who Our Directors Are. The following table states our directors' names,
their ages as of their birthdays in 1998, their positions, the years they began
serving as directors (including time spent on the Board of Trustees of Rome
Savings in mutual form before the reorganization) and the years their current
terms as directors will expire:
<TABLE>
<CAPTION>
Bank Bancorp Bancorp
Trustee Director Term
Name Age Positions Since Since Expires
---- --- --------- ------- -------- -------
<S> <C> <C> <C> <C> <C>
Bruce R. Engelbert 61 Director of the Bank and Bancorp 1982 1999
David C. Grow 55 Director of the Bank and Bancorp 1993 1999
Kirk B. Hinman 47 Director of the Bank and Bancorp 1994 1999
T. Richard Leidig 67 Director of the Bank and Bancorp 1976 1999
Richard H. McMahon 68 Director of the Bank and Bancorp 1969 1999
Charles M. Sprock 59 Chairman, President and Chief 1980 1999
Executive Officer of the Bank and
Bancorp
Michael J. Valentine 56 Director of the Bank and Bancorp 1993 1999
Marion C. Scoville 68 Director of the Bank and Bancorp 1994 1999
</TABLE>
Our Directors' Backgrounds. The business experience of our directors is as
follows:
Charles M. Sprock has been Chairman of the Board, President and Chief
Executive Officer of the Bank since 1980. He currently serves as director for
the Institutional Investors Mutual Fund in New York City and also the Canterbury
Printing Company of Rome, Inc. in Rome, New York.
Bruce R. Engelbert has served as a director since 1982. From 1982 to 1995,
he was the President and 50% shareholder of Engelbert's Jewelers, Inc., a
retail jewelry business with one store in Rome, New York and another in New
Hartford, New York.
David C. Grow has been a director since 1993. He has been a partner at the
law firm of McMahon, Grow & Getty since 1975 which acts as counsel to Rome
Savings and conducts a general legal practice emphasizing real estate, estates
and banking.
Kirk B. Hinman became a director in 1994. He has also served as president
of the Rome Strip Steel Company, Inc. since 1989. His other directorships
include the Canterbury Printing Company of Rome, Inc., Enviromaster
International, Bartell Machinery Systems Corp. and Blue Cross Blue Shield of
Utica-Watertown, Inc.
T. Richard Leidig joined as a director in 1976. He is currently self-
employed as a business consultant. He served as Vice President of
Administration of Rome Cable Corp. until retiring from that position in 1986.
Richard H. McMahon became a director in 1969. He has been a partner at the
law firm of McMahon, Grow & Getty since 1964 which serves as counsel for Rome
Savings and engages in a general legal practice emphasizing real estate, estates
and banking.
Michael J. Valentine has served as a director since 1993. He has been the
President of Mele Manufacturing Company, Inc. in Utica, New York since 1985.
This company
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<PAGE>
manufactures and imports products in the jewel case, stationery, custom
packaging and sports flooring businesses.
Marion C. Scoville has served as a director since 1994. She is currently
the Corporate Secretary and the Executive Assistant to the President. Ms.
Scoville has been with Rome Savings since 1956.
Meetings of the Board of Trustees and its Committees
Our board of trustees meets on a monthly basis and may hold additional
special meetings. During 1998, the Rome Savings Board of Trustees held 12
regular meetings and 2 special meetings.
The Board of Trustees of Rome Savings and the Board of Directors of Rome
Bancorp maintain Executive, Examining and Management Committees with identical
compositions. The Board of Trustees of Rome Savings also maintains an Asset
Liability Management Committee.
Executive Committee The Executive Committee exercises the powers of the
Board of Trustees in between Board meetings. It
approves loans within the Rome Savings authority and
reviews the loan portfolio.
Messrs. Engelbert, Hinman, McMahon, Sprock and
Valentine currently serve as members of the Committee.
Mr. Sprock is the Chairman. The Committee met 24 times
during 1998.
Examining Committee The Examining Committee oversees the audit process.
Meetings are called by our internal auditors.
Messrs. Engelbert, Hinman, Leidig and Valentine
currently serve as members of the Committee. Mr. Leidig
is the Chairman. The Committee met 1 time during 1998.
Management Committee The Management Committee assesses the structure of the
management team and the overall performance of Rome
Savings. It oversees executive compensation by
approving salary increases and reviews general
personnel matters such as staff performance
evaluations.
Messrs. Hinman, McMahon, Sprock and Valentine serve on
the Committee. Mr. McMahon acts as Chairman. The
Committee met 6 times during 1998.
Asset Liability The Rome Savings Asset Liability Management Committee
Management Committee ("ALCO") meets with the Treasurer to oversee Rome
Savings' investments and asset liability structure.
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<PAGE>
Messrs. Engelbert, Hinman, Leidig, McMahon, Sprock and
Valentine currently serve on the Committee. The
Committee met 12 times in 1998.
Director Compensation
Meeting Fees. Rome Savings pays a fee to each of its non-employee trustees
for attendance at each board meeting and each meeting of a committee of which
they are members. The following table sets forth the fees per meeting in effect
for 1999:
Board of Trustees Meeting $800
Executive Committee 275
All Other Committees 225
Rome Savings paid fees totaling $129,565 to its non-employee trustees for the
year ended December 31, 1998.
Annual Retainer. Effective as of the completion of the
reorganization, non-employee directors of Rome Savings will be paid an annual
retainer equal to $8,000.
Executive Officers
Executive Officers Who are Not Directors or Trustees. In addition to Mr. Sprock
and Ms. Scoville, Rome Bancorp and Rome Savings have the following executive
officers:
Anthony B. Bauer, age 62, currently serves as Senior Vice President, a position
he has held for the last year. He began as Vice President in 1985. As the
Senior Vice President in charge of Operations, he supervises the checking, loan
servicing, and data processing departments.
David C. Nolan, age 45, has been the Treasurer and Chief Financial Officer
since 1993. His experience at the bank includes positions as the Chief
Accounting Officer, Manager of the Asset Liabilities Management Committee
("ALCO"), and Manager of fixed income portfolios.
James F. Sullivan, age 51, is currently the Vice President and Senior Loan
Officer of the bank, an office which he has held since 1997. He is responsible
in this capacity for the bank's loan portfolio. Beginning in 1992, he was first
the Assistant Vice President, and then the Vice President, in charge of
commercial lending for the bank.
D. Bruce Fraser, age 48, is the Vice President in charge of Branch
Administration and Security. Mr. Fraser oversees the operations of the branches
and security for Rome Savings.
Jeannette Remp Sawyer, age 68, is the Vice President in charge of Residential
Mortgage Lending.
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<PAGE>
Executive Officer Compensation
Summary Compensation Table. The following table provides information about
the compensation paid for 1998 to our Chief Executive Officer. No other
officer's total annual salary and bonus for 1998 was at least $100,000.
<TABLE>
<CAPTION>
Annual Compensation
------------------------------------------
Name and Other Annual All Other
Principal Position Year Salary ($) Bonus ($) Compensation ($) (1) Compensation (2)
------------------ ---- ---------- --------- -------------------- ----------------
<S> <C> <C> <C> <C> <C>
Charles M. Sprock 1998 $199,732 -- $5,500 $9,140
Chairman, President and
Chief Executive Officer
</TABLE>
________________________
(1) $4,000 for club memberships and $1,500 for the use of an automobile.
(2) Includes the following components: (1) $5,000 employer contribution by
Rome Savings to a 401(k) plan for the benefit of Mr. Sprock; and (2) $4,140
as the premium cost for life insurance coverage under the group term
insurance plan, which has no cash surrender value.
Employment Agreements
Rome Bancorp intends to enter into an employment agreement with Mr. Charles
M. Sprock to secure his services as Chairman, President and Chief Executive
Officer. The employment agreement will take effect on the effective date of the
reorganization. It has a rolling three-year term which a decision of the
executive or decision of Rome Bancorp may convert to a fixed three-year term.
This agreement provides for a minimum annual salary of $250,000, and
participation on generally applicable terms and conditions in other compensation
and fringe benefit plans. It also guarantees customary corporate
indemnification and errors and omissions insurance coverage throughout the
employment term and for six years after termination.
Rome Bancorp may terminate Mr. Sprock's employment, and he may resign, at
any time with or without cause. However, in the event of termination by Rome
Bancorp during the term without cause, we will owe Mr. Sprock severance benefits
generally equal to the value of the cash compensation and fringe benefits that
the executive would have received if he had continued working for an additional
three years. The same severance benefits would be payable if he resigns during
the term following: a loss of title, office or membership on the board of
directors; material reduction in duties, functions or responsibilities;
involuntary relocation of Mr. Sprock's principal place of employment to a
location over 50 miles in distance from Rome Savings' principal office in Rome,
New York; or other material breach of contract by Rome Bancorp which is not
cured within 30 days. Mr. Sprock may resign for any reason following a change
in control and collect severance benefits as if he had been discharged without
cause. The employment agreement also provides certain uninsured death and
disability benefits.
If Rome Bancorp experiences a change in ownership, a change in effective
ownership or control or a change in the ownership of a substantial portion of
their assets as contemplated by section 280G of the Internal Revenue Code, a
portion of any severance payments under the employment agreement might
constitute an "excess parachute payment" under current federal tax laws. Any
excess parachute payment would be subject to a 20% federal excise tax payable by
the executive. Neither Rome Savings nor Rome Bancorp could claim a federal
income tax deduction
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<PAGE>
for an excess parachute payment. The employment agreement requires Rome Bancorp
to indemnify Mr. Sprock against the financial effects of such an excise tax.
Benefit Plans
Pension Plans. Rome Savings maintains a tax-qualified pension plan that
covers substantially all employees who are age 21 and have at least one year of
service. Rome Savings also maintains a nonqualified Supplemental Executive
Retirement Plan that provides a supplemental retirement benefit to Mr. Sprock
equal in value to the additional benefits he would have been provided under the
tax-qualified pension plan but for the limits on benefits under tax-qualified
pension plans imposed by the Internal Revenue Code. The following table shows
the estimated aggregate benefits payable under the tax-qualified pension plan
and the Supplemental Executive Retirement Plan upon retirement at age 65 with
various years of service and average compensation combinations.
<TABLE>
<CAPTION>
Average Years of Benefit Service
-------------------------------------------------
Compensation(1) 10 15 20 25 30
---------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
$ 75,000 $15,000 $22,500 $ 30,000 $ 37,500 $ 45,000
$ 100,000 20,000 30,000 40,000 50,000 60,000
$ 125,000 25,000 37,500 50,000 62,500 75,000
$ 150,000 30,000 45,000 60,000 75,000 90,000
$ 160,000 32,000 48,000 64,000 80,000 96,000
$ 200,000 40,000 60,000 80,000 100,000 120,000
$ 250,000 50,000 75,000 100,000 125,000 150,000
</TABLE>
_________________
(1) Average compensation is average base salary, as reported in the "Salary"
column of the Summary Compensation Table, for the highest three consecutive
years of employment within the final 10 years of employment. Tax laws
impose a limit ($160,000 for individuals retiring in 1998) on the average
compensation that may be counted in computing benefits under the tax-
qualified pension plan. For Mr. Sprock, benefits based on average
compensation in excess of this limit are payable by the Supplemental
Executive Retirement Plan.
The benefits shown in the preceding table are annual benefits payable in
the form of a single life annuity and are not subject to any deduction for
Social Security benefits or other offset amounts. As of December 31, 1998, Mr.
Sprock's average compensation was $192,101, and the number of years of service
credited to him under the plans was 30 years, the maximum that may be credited
under the plans. As of December 31, 1998, Mr. Sprock's total annual benefit
under the tax-qualified pension plan and the Supplemental Executive Retirement
Plan was $119,832, payable in the form of a life annuity commencing at age 65.
401(k) Plan. Rome Savings maintains a tax-qualified 401(k) defined
contribution plan for employees who have attained age 21 and have at least one
year of service. Eligible employees may make pre-tax contributions to the plan
through salary reduction elections from 1% to 15% of annual compensation,
subject to limitations of the Internal Revenue Code (for 1998, the annual limit
was $10,000). Rome Savings makes a matching contribution to the plan equal to
50% of the first six percent of annual compensation contributed to the plan on a
pre-tax basis by the eligible employee.
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<PAGE>
Employee Stock Ownership Plan. This plan is a tax-qualified plan that
covers substantially all salaried employees who have at least one year of
service and have attained age 21 and will take effect at the completion of the
reorganization.
Rome Bancorp intends to lend this plan enough money to purchase 8% of the
shares issued to investors other than Rome Bancorp, MHC. The plan will purchase
these shares from Rome Bancorp to the extent that shares are available after
filling the subscriptions of eligible account holders. Otherwise, the plan will
purchase these shares in private transactions or on the open market after
completion of the reorganization to the extent that shares are available for
purchase on reasonable terms. If this plan cannot purchase the shares that it
wants directly from Rome Bancorp in the offering, there is no assurance that it
will purchase shares after the reorganization, or that such purchases will occur
during any particular time period or at any particular price.
Although contributions to this plan will be discretionary, Rome Savings
Bank intends to contribute enough money each year to make the required principal
and interest payments on the loan from Rome Bancorp. It is expected that this
loan will be for a term of 10 to 20 years and will call for level annual
payments of principal and interest. The plan will initially pledge the shares it
purchases as collateral for the loan and hold them in a suspense account.
The plan will not distribute the pledged shares right away. Instead, it
will release a portion of the pledged shares annually. The plan will allocate
the shares released each year among the accounts of participants in proportion
to their salary for the year. For example, if a participant's salary for a year
represents 1% of the total salaries of all participants for the year, the plan
would allocate to that participant 1% of the shares released for the year.
Participants direct the voting of shares allocated to their accounts. Shares in
the suspense account will usually be voted in a way that mirrors the votes which
participants cast for shares in their individual accounts.
This plan may purchase additional shares in the future, and may do so using
borrowed funds, cash dividends, periodic employer contributions or other cash
flow.
Benefit Restoration Plan. Effective as of the reorganization, Rome Bancorp
intends to adopt a Benefit Restoration Plan for Mr. Sprock. This plan will
provide Mr. Sprock with the benefits that would otherwise be due to him as a
participant in the 401(k) plan and the employee stock ownership plan if such
benefits were not limited by certain provisions of the Internal Revenue Code.
In addition, in the event Mr. Sprock retires prior to the end of the ESOP loan
term, the plan will provide Mr. Sprock a benefit equal to the value of the
shares of Rome Bancorp that would have been allocated to his account under the
ESOP had he remained employed through the end of the ESOP loan term.
Rome Bancorp intends to establish an irrevocable "grantor trust" to hold
assets for the payment of benefits under this plan. The assets of the trust are
considered to be part of the general assets of Rome Bancorp and will be subject
to the claims of its general creditors. Earnings on the trust's assets will be
taxable to Rome Bancorp.
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<PAGE>
Effect of the Reorganization on Existing Compensation Plans; Effect of a
Second Step Conversion Transaction on Existing and Future Benefit Plans and
Compensation Agreements. Our employment agreements, Employee Stock Ownership
Plan, and Benefit Restoration Plan provide additional and accelerated benefits
if we experience a change of control. Neither, the reorganization nor a second
step conversion will trigger additional benefits or accelerate benefits under
any of the plans or agreements.
Future Stock Benefit Plans
Stock Option Plan. We intend to implement a stock option plan for our
directors and officers after the reorganization. Applicable regulations
prohibit us from implementing this plan until 6 months after the reorganization.
If we implement this plan within one year after the reorganization, applicable
regulations require that we first obtain the approval of the holders of a
majority of the outstanding shares of Rome Bancorp that are not owned by Rome,
MHC. We have not decided whether we will implement this plan before or after
the one-year anniversary of the reorganization.
We expect to adopt a stock option plan that will authorize the Management
Committee to grant options to purchase up to 10% of the shares issued to
investors other than Rome, MHC over a period of 10 years. The Management
Committee will decide which directors and officers will receive options and what
the terms of those options will be. However, no stock option will permit its
recipient to purchase shares at a price that is less than the fair market value
of a share on the date the option is granted, and no option will have a term
that is longer than 10 years. If we implement a stock option plan before the
first anniversary of the reorganization, applicable regulations will require
that we observe the following restrictions:
. We must limit the total number of shares that are optioned to outside
directors to 30% of the shares authorized for the plan.
. We must also limit the number of shares that are optioned to any one
outside director to 5% of the shares authorized for the plan and the
number of shares that are optioned to any executive officer to 25% of
the shares that are authorized for the plan.
. We must not permit the options to become vested at a more rapid rate
than 20% per year beginning on the first anniversary of stockholder
approval of the plan.
. We must not permit accelerated vesting for any reason other than
death or disability.
After the first anniversary of the reorganization, we may amend the plan to
change or remove these restrictions. If we adopt a stock option plan within one
year after the reorganization, we expect to amend the plan later to remove these
restrictions and to provide for accelerated vesting in cases of retirement and
change of control.
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<PAGE>
We may obtain the shares needed for this plan by issuing additional shares
or through stock repurchases. Because we cannot issue new shares that would
reduce Rome, MHC's ownership position to less than a majority of Rome Bancorp's
outstanding shares, we expect to obtain most or all of the shares for this plan
through stock repurchases.
We expect the stock option plan will permit the Management Committee to
grant either incentive stock options that qualify for special federal income tax
treatment or non-qualified stock options that do not qualify for special
treatment. Incentive stock options may be granted only to employees and will
not create federal income tax consequences when they are granted. If they are
exercised during employment or within three months after termination of
employment, the exercise will not create federal income tax consequences either.
When the shares acquired on exercise of an incentive stock option are resold,
the seller must pay federal income taxes on the amount by which the sales price
exceeds the purchase price. This amount will be taxed at capital gains rates if
the sale occurs at least two years after the option was granted and at least one
year after the option was exercised. Otherwise, it is taxed as ordinary income.
Non-qualified stock options may be granted to either employees or non-
employees such as directors, consultants and other service providers. Incentive
stock options that are exercised more than three months after termination of
employment are treated as non-qualified stock options. Non-qualified stock
options will not create federal income tax consequences when they are granted.
When they are exercised, federal income taxes must be paid on the amount by
which the fair market value of the shares acquired by exercising the option
exceeds the exercise price. When the shares acquired on exercise of a non-
qualified stock option are resold, the seller must pay federal income taxes on
the amount by which the sales price exceeds the purchase price plus the amount
included in ordinary income when the option was exercised. This amount will be
taxed at capital gains rates, which will vary depending upon the time that has
elapsed since the exercise of the option.
When a non-qualified stock option is exercised, Rome Bancorp and Rome
Savings may be allowed a federal income tax deduction for the same amount that
the option holder includes in his or her ordinary income. This amount may be
the same as the related compensation expense or it may be different. When an
incentive stock option is exercised, there is no tax deduction unless the shares
acquired are resold sooner than two years after the option was granted or one
year after the option was exercised.
Management Recognition Plan. We intend to implement a management
recognition plan for our directors and officers after the reorganization.
Applicable regulations prohibit us from implementing this plan until 6 months
after the reorganization. If we implement this plan within one year after the
reorganization, the regulations require that we first obtain the approval of the
holders of a majority of the outstanding shares of Rome Bancorp that are not
held by Rome, MHC. We have not decided whether we will implement this plan
before or after the one-year anniversary of the reorganization.
We expect to adopt a management recognition plan that will authorize the
Management Committee to make restricted stock awards of up to 4% of the shares
issued to investors other than Rome, MHC. The Management Committee will decide
which directors and officers will receive restricted stock and what the terms of
those awards will be. If we implement a
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<PAGE>
management recognition plan before the first anniversary of the reorganization,
applicable regulations will require that we observe the following restrictions:
. We must limit the total number of shares that are awarded to outside
directors to 30% of the shares authorized for the plan.
. We must also limit the number of shares that are awarded to any one
outside director to 5% of the shares authorized for the plan and the
number of shares that are awarded to any executive officer to 25% of
the shares that are authorized for the plan.
. We must not permit the awards to become vested at a more rapid rate
than 20% per year beginning on the first anniversary of stockholder
approval of the plan.
. We must not permit accelerated vesting for any reason other than
death or disability.
After the first anniversary of the reorganization, we may amend the plan to
change or remove these restrictions. If we adopt a management recognition plan
within one year after the reorganization, we expect to amend the plan later to
remove these restrictions and to provide for accelerated vesting in cases of
retirement and change of control.
We may obtain the shares needed for this plan by issuing additional shares
or through stock repurchases. Because we cannot issue new shares that would
reduce the Rome, MHC ownership position to less than a majority of Rome
Bancorp's outstanding shares, we expect to obtain most or all of the shares for
this plan through stock repurchases.
Restricted stock awards under this plan may feature employment restrictions
that require continued employment for a period of time for the award to be
vested. They may feature restrictions that require the achievement of specified
corporate or individual performance goals for the award to be vested. Or, they
may feature a combination of employment and performance restrictions. Awards
are not vested unless the specified employment restrictions and performance
goals are met. However, pending vesting, the award recipient may have voting
and dividend rights. When an award becomes vested, the recipient must include
the current fair market value of the vested shares in his income for federal
income tax purposes. Rome Bancorp and Rome Savings may be allowed a federal
income tax deduction in the same amount. Depending on the nature of the
restrictions attached to the restricted stock award, Rome Bancorp and Rome
Savings may have to recognize a compensation expense for accounting purposes
ratably over the vesting period or in a single charge when the performance
conditions are satisfied.
Certain Transactions with Managers and Executive Officers
We make residential mortgage loans to employees. These loans bear interest
at the same rate as loans offered to non-employee borrowers minus one-quarter
percent interest. The mortgage loans otherwise have the same underwriting terms
that apply to non-employee borrowers.
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<PAGE>
We retain the law firm of McMahon, Grow & Getty. David C. Grow and Richard
H. McMahon, both directors of Rome Bancorp, Rome Savings and Rome, MHC, are
partners of McMahon, Grow & Getty. For 1998, we paid $78,686 in legal fees to
this law firm.
Proposed Purchases of Common Stock by Management
The following table presents, for each of our trustees and executive
officers, the amount of stock they wish to purchase in the offering. We have
assumed that a sufficient number of shares will be available to satisfy their
subscriptions. The amounts include shares that may be purchased through
individual retirement accounts and by associates of the managers and executive
officers. None of our trustees or executive officers expects to purchase more
than 1.0% of our common stock. Collectively our trustees and executive officers
expect to purchase a total of 164,687 shares, or 8.86% of shares we sell in the
offering (assuming the sale of 1,857,969 shares of common stock).
<TABLE>
<CAPTION>
NUMBER
NAME AMOUNT OF SHARES
---------------------------------------- ------------ ------------
<S> <C> <C>
Directors:
Bruce. R. Engelbert .................... $ 150,000 18,750
David C. Grow .......................... $ 100,000 12,500
Kirk B. Hinman ......................... $ 150,000 18,750
T. Richard Leidig ...................... $ 150,000 18,750
Richard H. McMahon ..................... $ 150,000 18,750
Marion C. Scoville. .................... $ 30,000 3,750
Charles M. Sprock. ..................... $ 150,000 18,750
Michael J. Valentine ................... $ 150,000 18,750
Executive Officers who are not Directors:
Anthony B. Bauer ....................... $ 10,000 1,250
D. Bruce Fraser ........................ $ 2,500 312
David C. Nolan ......................... $ 150,000 18,750
James F. Sullivan ...................... $ 25,000 3,125
Jeannette Remp Sawyer .................. $ 100,000 12,500
---------- -------
Total to be purchased by directors and
executive officers $1,317,500 164,687
========== =======
</TABLE>
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<PAGE>
The Reorganization And The Offering
- --------------------------------------------------------------------------------
The Board of Trustees of Rome Savings has adopted and the Superintendent of the
New York State Department of Banking has approved the amended plan of
reorganization, subject to approval by Rome Savings' depositors entitled to
vote on the plan and the satisfaction of certain other conditions.
Approval by the Superintendent does not constitute a recommendation or
endorsement of the reorganization by the Superintendent.
- --------------------------------------------------------------------------------
General
On May 26, 1999, Rome Savings' Board of Trustees unanimously adopted the
amended plan of reorganization pursuant to which Rome Savings will convert and
reorganize into a mutual holding company structure. This reorganization
includes the formation of an intermediate stock holding company, Rome Bancorp,
and the offering by Rome Bancorp of a minority of its shares to depositors of
Rome Savings and certain other persons. Under the terms of the plan of
reorganization, Rome Bancorp will own all of the common stock of Rome Savings
and Rome, MHC will own more than half of the common stock of Rome Bancorp. The
reorganization will be effected as described under "--Tax Aspects" or in any
other manner that is permitted by the Superintendent and the FDIC and is
consistent with the intent of the plan of reorganization. See "Description of
Our Structure after the Reorganization " in the Summary section of this
prospectus for a chart which reflects our structure after the reorganization.
Rome Bancorp and Rome, MHC have requested approval from the Federal Reserve
Bank of New York to become bank holding companies and to acquire Rome Savings.
The plan of reorganization was approved by the Superintendent, and Rome Savings
has received a notice of intent not to object to the plan of reorganization from
the FDIC, subject to, among other things, approval of the plan of reorganization
by the depositors of Rome Savings.
Rome Savings has called a special meeting of depositors for this purpose
which will be held on [ ], 1999. Depositors with deposit accounts totaling at
least $100 at Rome Savings on June 30, 1999 will be entitled to vote at the
special meeting. The plan of reorganization must be approved by (1) a majority
of the amount of votes entitled to be cast by voting depositors at the special
meeting; and (2) the affirmative vote of at least 75% in amount of deposit
liabilities of voting depositors represented in person or by proxy eligible to
vote at the Special Meeting. We will complete the reorganization only upon
completion of the sale of the shares of common stock offered in this prospectus
and approval of the plan of reorganization by the voting depositors.
The aggregate price of the shares of common stock to be issued in the
reorganization will be within the offering range. The offering range has been
established by the Board of Trustees to be between $11.0 and $14.9 and is based
upon an independent appraisal of the estimated pro forma market value of the
common stock of Rome Bancorp. The appraisal was prepared by RP Financial, a
consulting firm experienced in the valuation and appraisal of savings
institutions. All shares of common stock to be issued and sold in the
reorganization will be sold at the same price of $8.00 per share. The
independent appraisal will be affirmed or, if necessary, updated at the
completion of the offering. See "How We Determined the Offering Range and the
$8.00 Price Per Share" for additional information as to the determination of the
estimated pro forma market value of the common stock.
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<PAGE>
- --------------------------------------------------------------------------------
The following is a brief summary of pertinent aspects of the reorganization.
The summary is qualified in its entirety by reference to the provisions of the
amended plan of reorganization. A copy of the plan is available from Rome
Savings upon request and is available for inspection at the offices of Rome
Savings and at the office of the Superintendent. The plan is also filed as an
exhibit to the Registration Statement of which this prospectus is a part,
copies of which may be obtained from the SEC. See "Where You Can Find
Additional Information."
- --------------------------------------------------------------------------------
Reasons for the Reorganization
Conversion of Rome Savings to a capital stock savings bank and its
acquisition by Rome Bancorp will permit Rome Bancorp to issue common stock,
which is a source of capital not available to mutual savings banks.
Rome Savings' mutual form of ownership will be preserved in Rome, MHC.
Rome, MHC, as a mutual savings bank holding company, will own at least a
majority of the common stock of Rome Bancorp as long as Rome, MHC remains in
existence. The reorganization will allow Rome Savings to achieve certain
benefits of a stock company without a loss of control that is possible in a full
savings institution conversion from mutual to stock form. In a standard
conversion, a newly converted savings institution or its newly formed holding
company sells 100% of its common stock in a single stock offering. The mutual
holding company structure also will give Rome Bancorp flexibility to issue its
common stock at various times and in varying amounts as market conditions
permit, rather than in a single stock offering. This makes the deployment of
the capital that we raise more manageable.
The proceeds from the sale of common stock of Rome Bancorp will provide
Rome Savings with new capital, which will support future deposit growth and
expanded operations. The ability of Rome Bancorp to sell additional common stock
also will enable Rome Bancorp and Rome Savings to increase their capital in
response to any future regulatory capital requirement levels. While Rome Savings
currently exceeds all regulatory capital requirements, the sale of common stock
in connection with the reorganization will assist Rome Savings with the orderly
preservation and expansion of its capital base and will provide flexibility to
respond to sudden and unanticipated capital needs.
In addition, since Rome Savings competes with local and regional banks not
only for customers, but also for employees, we believe that the ability of Rome
Bancorp to issue common stock will also afford us the opportunity to attract and
retain management and employees through various stock benefit plans, including
incentive stock option plans, stock award plans and employee stock ownership
plans.
After completion of the reorganization, the unissued common and preferred
stock authorized by Rome Bancorp's Certificate of Incorporation will permit Rome
Bancorp to raise additional equity capital through further sales of securities
and to issue securities in connection with possible acquisitions, subject to
market conditions and any required regulatory approval of an offering. Rome
Bancorp currently has no plans with respect to additional offerings of
securities. Following the reorganization, Rome Bancorp intends to use stock-
related incentive
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programs to attract and retain executive and other personnel for itself and its
subsidiaries. See "Management."
The mutual holding company form of organization will provide additional
flexibility to diversify Rome Savings' business activities through newly-formed
subsidiaries, or through acquisitions of or mergers with both mutual and stock
savings institutions, as well as other companies. Although there are no current
arrangements, understandings or agreements, written or oral, regarding any such
opportunities, Rome Bancorp will be in a position after the reorganization to
take advantage of any such favorable opportunities that may arise. See "How We
Intend to Use the Proceeds from the Offering" for a description of our intended
use of proceeds.
While there are benefits associated with the mutual holding company form of
organization, this form of organization involves additional costs associated
with its maintenance and regulation, including additional administrative
expenses, taxes and regulatory filings or examination fees.
After considering the advantages and disadvantages of the reorganization,
as well as applicable fiduciary duties, the Board of Trustees of Rome Savings
unanimously approved the reorganization as being in the best interests of Rome
Savings, its depositors and the communities it serves.
Effects of the Reorganization
General. Each depositor in a mutual savings bank has both a deposit
account in the institution and a pro rata ownership interest in the equity of
the savings institution based upon the balance in the depositor's account. This
ownership interest may only be realized in the event of a liquidation of the
savings institution. However, this ownership interest is tied to the depositor's
account and has no tangible market value separate from such deposit account. Any
depositor who opens a deposit account obtains a pro rata ownership interest in
the equity of the institution without any additional payment beyond the amount
of the deposit. A depositor who reduces or closes their account receives the
balance in the account but receives nothing for such depositor's ownership
interest in the equity of the institution, which is lost to the extent that the
balance in the account is reduced. Consequently, depositors of a mutual savings
bank have no way to realize the value of their ownership interest, except in the
unlikely event that the mutual savings bank is liquidated. In such event, the
depositors of record at that time would share pro rata in any residual surplus
and reserves after other claims, including claims of depositors to the amounts
of their deposits, are paid.
When a mutual savings bank converts to stock form, permanent non-
withdrawable capital stock is created to represent the ownership of the
institution's equity and the former pro rata ownership of depositors is
thereafter represented exclusively by their liquidation rights. Such capital
stock is separate and apart from deposit accounts and cannot be and is not
insured by the FDIC or any other governmental agency. Certificates are issued
to evidence ownership of the capital stock. The stock certificates are
transferable, and, therefore, the stock may be sold or traded with no effect on
any deposit account the seller may hold in the institution.
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Continuity. During the reorganization process, and after completion of the
reorganization, the routine business of Rome Savings of accepting deposits and
making loans will continue without interruption. Rome Savings will continue to
be subject to regulation by the Superintendent and the FDIC. After the
reorganization, Rome Savings will continue to provide services for depositors
and borrowers under current policies by its management and staff.
The Board of Trustees serving Rome Savings immediately before the
reorganization will serve as directors of Rome Savings after the reorganization.
The directors of Rome Bancorp and Rome, MHC will consist of all of the
individuals currently serving on the Board of Trustees of Rome Savings. We
anticipate that all officers of Rome Savings serving immediately before the
reorganization will retain their positions after the reorganization. See
"Management."
Deposit Accounts and Loans. Under the plan of reorganization, each
depositor in Rome Savings at the time of the reorganization will automatically
continue as a depositor after the reorganization. Each deposit account will
remain the same with respect to deposit balance, interest rate and other terms,
except to the extent affected by withdrawals made to purchase common stock in
the offering. See "-- Procedure for Purchasing Shares in Subscription and
Community Offerings." Each deposit account will be insured by the FDIC to the
same extent as before the reorganization (i.e., up to $100,000 per depositor).
Depositors will continue to hold their existing certificates of deposit,
passbooks and other evidences of their accounts.
Furthermore, no loan outstanding from Rome Savings will be affected by the
reorganization, and the amount, interest rate, maturity and security for each
loan will remain as they were contractually fixed prior to the reorganization.
Voting Rights of Depositors. Voting rights and control of Rome Savings, as
a mutual savings bank, are vested in the Board of Trustees. After the
reorganization, direction of Rome Savings will be under the control of the Board
of Directors of Rome Savings. Rome Bancorp, as the holder of all of the
outstanding common stock of Rome Savings, will have exclusive voting rights with
respect to any matters concerning Rome Savings requiring stockholder approval,
including the election of directors of Rome Savings.
After the reorganization, the holders of the common stock of Rome Bancorp
will have exclusive voting rights with respect to any matters concerning Rome
Bancorp. These voting rights will be exclusive except to the extent Rome
Bancorp in the future issues preferred stock with voting rights. Each holder of
common stock will be entitled to vote on any matters to be considered by Rome
Bancorp's stockholders, including the election of directors of Rome Bancorp,
subject to the restrictions and limitations set forth in Rome Bancorp's
Certificate of Incorporation. These restrictions and limitations are discussed
below.
By virtue of its ownership of a majority of the outstanding shares of
common stock, Rome, MHC will be able to elect all members of the Board of
Directors of Rome Bancorp and generally will be able to control the outcome of
most matters presented to the stockholders of Rome Bancorp for resolution by
vote. However, current regulations and regulatory policies require that
adoption of a stock option plan, restricted stock plan or second step conversion
of Rome, MHC be approved by a majority vote of the shares held by the public
stockholders (i.e., all stockholders except Rome, MHC).
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Rome, MHC will be controlled by its Board of Trustees, which will initially
consist of the current trustees of Rome Savings. Under the mutual form of
ownership, existing trustees elect new trustees, which can perpetuate existing
management and control of Rome, MHC, and thereby Rome Bancorp and Rome Savings.
Depositors' Rights if We Liquidate; Liquidation Account. In the unlikely
event of a complete liquidation of Rome Savings in its current mutual form, each
depositor would receive a pro rata share of any assets of Rome Savings remaining
after payment of claims of all creditors (including the claims of all depositors
to the withdrawable value of their accounts). Each depositor's pro rata share of
such liquidating distribution would be in the same proportion as the value of
such depositor's deposit account was to the total value of all deposit accounts
in Rome Savings at the time of liquidation.
Upon a complete liquidation of Rome Savings after the reorganization, each
depositor would have a claim as a creditor of the same general priority as the
claims of all other general creditors of Rome Savings. However, except as
described below, a depositor's claim would be solely for the amount of the
balance in such depositor's deposit account plus accrued interest. Such
depositor would not have an interest in the value or assets of Rome Savings
above that amount. Instead, the holder of Rome Savings' common stock (i.e.,
Rome Bancorp) would be entitled to any assets remaining upon a liquidation of
Rome Savings.
The plan of reorganization provides for the establishment, upon the
completion of the reorganization, of a special "liquidation account" for the
benefit of eligible account holders and supplemental eligible account holders in
an amount equal to the net worth of Rome Savings as of the date of its latest
balance sheet contained in this prospectus. Upon a complete liquidation of Rome
Savings after the reorganization, each eligible account holder and supplemental
eligible account holder, who continues to maintain such account holder's deposit
account at Rome Savings, would be entitled to an interest in the liquidation
account prior to any payment to the holders of Rome Savings' capital stock.
Each eligible account holder and supplemental eligible account holders will have
a pro rata interest in the total liquidation account for the account holder's
deposit accounts based on the proportion that the aggregate balance of such
person's qualifying deposit accounts on December 31, 1997 (the eligibility
record date) and June 30, 1999 (the supplemental eligibility record date), as
applicable, bore to the aggregate balance of all qualifying deposit accounts of
all eligible account holders and supplemental eligible account holders. For
this purpose, qualifying deposit accounts include all savings, time, demand,
negotiable orders of withdraw (NOW), money market and passbook accounts
maintained at Rome Savings (excluding any escrow accounts).
If, however, on any annual closing date (i.e., the anniversary of the
eligibility record date or supplemental eligibility record date, as applicable)
of Rome Savings, commencing on or after the effective date of the
reorganization, the amount in any deposit account is less than the amount in
such deposit account on December 31, 1997 (with respect to an eligible account
holder), or June 30, 1999 (with respect to a supplemental eligible account
holder) or any other annual closing date, then the interest in the liquidation
account relating to the deposit account would be reduced from time to time by
the proportion of any such reduction, and such interest will cease to exist if
such deposit account is closed. For purposes of the liquidation account, time
deposit accounts will be deemed to be closed upon maturity regardless of
renewal. In addition, no
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interest in the liquidation account would ever be increased despite any
subsequent increase in the related deposit account.
Any assets remaining after the above liquidation rights of eligible account
holders and supplemental eligible account holders are satisfied would be
distributed to Rome Bancorp as the sole stockholder of Rome Savings.
Upon a complete liquidation of Rome Bancorp, each holder of shares of the
common stock of Rome Bancorp, including Rome, MHC, would be entitled to receive
a pro rata share of Rome Bancorp's assets, following payment of all debts,
liabilities and claims of greater priority of or against Rome Bancorp including
the rights of depositors in the liquidation account of Rome Savings, if any.
If liquidation of Rome, MHC occurs following completion of the
reorganization, all depositors of Rome Savings at that time will be entitled,
pro rata to the value of their deposit accounts, to a distribution of any assets
of Rome, MHC remaining after payment of all debts and claims of creditors.
Tax Aspects. The reorganization may be effected in any manner approved by
the Superintendent that is consistent with the purposes of the plan of
reorganization and applicable law, regulations and policies. However, Rome
Savings intends to consummate the reorganization using a series of transactions
as described below. This structure enables Rome Savings to retain all of its
historical tax attributes and produces significant savings to Rome Savings
because it simplifies regulatory approvals and conditions associated with the
completion of the reorganization.
The merger structure will be accomplished as follows:
(1) Rome Savings will organize Rome, MHC initially as an interim New York
stock savings bank as its wholly owned subsidiary;
(2) Rome, MHC will organize a capital stock corporation under Delaware law
(i.e., Rome Bancorp) as its wholly owned subsidiary that will
subsequently hold 100% of Rome Savings' common stock;
(3) Rome, MHC will also organize an interim New York stock savings bank as
its wholly owned subsidiary ("Interim") and the following transactions
will occur simultaneously;
(4) Rome Savings will exchange its charter for a New York stock savings
bank charter (the "Conversion");
(5) Rome, MHC (while in its stock form) will cancel its outstanding stock
and exchange its charter for a New York mutual savings bank holding
company charter;
(6) Interim will merge with and into Rome Savings with Rome Savings being
the surviving institution; and
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(7) the initially issued stock of Rome Savings (which will be
constructively received by former Rome Savings depositors when Rome
Savings becomes a stock savings bank pursuant to step (4)) will be
issued to Rome, MHC in exchange for liquidation interests in Rome, MHC
which will be held by Rome Savings' depositors.
Rome, MHC will then contribute 100% of the stock of Rome Savings to Rome
Bancorp, which will be a wholly owned subsidiary of Rome, MHC. Rome Bancorp
will subsequently offer for sale 47% of its common stock pursuant to the plan of
reorganization. As a result of these transactions, (a) Rome Savings will be a
wholly owned subsidiary of Rome Bancorp; (b) Rome Bancorp will be a majority
owned subsidiary of Rome, MHC; and (c) the depositors of Rome Savings will hold
membership interests in Rome, MHC.
Under this structure: (i) the conversion is intended to be a tax-free
reorganization under Code section 368(a)(1)(F); and (ii) the exchange of the
shares of Rome Savings' initial common stock deemed constructively received by
depositors for membership interests in Rome, MHC (the "Exchange") is intended to
be a tax-free exchange under Code section 351.
Under the plan of reorganization, consummation of the reorganization is
conditioned upon, among other things, the prior receipt by Rome Savings of
either a private letter ruling from the IRS and from the New York taxing
authorities or an opinion of Rome Savings' counsel as to the federal income tax
consequences and from KPMG LLP as to the New York income tax consequences of the
reorganization to Rome Savings' (in both its mutual and stock form), Rome
Bancorp and the eligible account holders and supplemental account holders. In
Revenue Procedure 99-3, 1999-1 I.R.B. 103, the IRS announced that it will not
rule on whether a transaction qualifies as a tax-free reorganization under Code
section 368(a)(1)(F) or as a tax-free exchange of stock for stock in the
formation of a holding company under Code section 351, but that it will rule on
significant sub-issues that must be resolved to determine whether the
transaction qualifies under either of these Code sections.
Rome Savings has requested a private letter ruling from the IRS regarding
certain significant sub-issues associated with the reorganization. Based in
part upon this private letter ruling and certain representations of Rome Savings
or its officers, Thacher Proffitt & Wood will issue its opinion regarding
certain federal income tax consequences of the reorganization. We can not assure
you that we will obtain a private letter ruling.
In the following discussion, "Mutual Bank" refers to Rome Savings before
the reorganization and "Stock Bank" refers to Rome Savings after the
reorganization.
With regard to the reorganization, Thacher Proffitt & Wood intends to issue
an opinion that:
(1) the Conversion will constitute a "reorganization" under Code section
368(a)(1)(F), and Rome Savings (in either its status as Mutual Bank or
Stock Bank) will recognize no gain or loss as a result of the
Conversion;
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(2) the basis of each asset of Mutual Bank received by Stock Bank in the
Conversion will be the same as Mutual Bank's basis for such asset
immediately prior to the Conversion;
(3) the holding period of each asset of Mutual Bank received by Stock Bank
in the reorganization will include the period during which such asset
was held by Mutual Bank prior to the Conversion;
(4) For purposes of Code section 381(b), Stock Bank will be treated as if
there had been no reorganization and, accordingly, the taxable year of
the Mutual Bank will not end on the effective date and the tax
attributes of Mutual Bank (subject to application of Code sections
381, 382, and 384), including Mutual Bank's tax bad debt reserves and
earnings and profits, will be taken into account by Stock Bank as if
there had been no conversion.
(5) Mutual Bank's qualifying depositors will recognize no gain or loss
upon their constructive receipt of shares of Stock Bank common stock
solely in exchange for their membership interest in Mutual Bank;
(6) no gain or loss will be recognized by the depositors of Rome Savings
(formerly Mutual Bank) upon the transfer to Rome, MHC of shares of
Stock Bank common stock they constructively received in the Conversion
in exchange for membership interests in Rome, MHC; and
(7) no gain or loss will be recognized by depositors of Mutual Bank upon
the issuance to them of deposits in Stock Bank in the same dollar
amount as their deposits in the Mutual Bank.
Unlike private rulings of the IRS, an opinion of counsel is not binding on
the IRS and the IRS could disagree with conclusions reached in the opinion. If
there is a disagreement, we can not guarantee that the IRS would not prevail in
a judicial or administrative proceeding.
KPMG LLP intends to opine, subject to the limitations and qualifications in
its opinion, that, for purposes of the New York corporate income tax, the
reorganization will not become a taxable transaction to Rome Savings (in either
its status as Mutual Bank or Stock Bank), Rome, MHC, Rome Bancorp, the
stockholders of Rome Bancorp or the depositors of Rome Savings.
Accounting Consequences. The reorganization will be accounted for in a
manner similar to a pooling-of-interests under generally accepted accounting
principles. Accordingly, the carrying value of our assets, liabilities, and
capital will be unaffected by the reorganization and will be reflected in the
Rome Bancorp's and Rome Savings' consolidated financial statements based on
their historical amounts.
Why we are establishing The Rome Savings Bank Charitable Foundation
General. In order to further our commitment to the local community, the
plan of reorganization provides for the establishment of a charitable foundation
in connection with the
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reorganization. The plan provides that Rome Savings and Rome Bancorp will
incorporate the foundation under Delaware law as a non-stock corporation, and
will fund the foundation with Rome Bancorp common stock. We believe that the
funding of the foundation with common stock is a means to establish a common
bond between Rome Savings and its community, enabling the community to share in
the potential growth and success of Rome Bancorp. The funding of the foundation
with stock also provides the foundation with a potentially larger endowment than
if Rome Bancorp contributed cash to the foundation since, as a shareholder, the
foundation will share in the potential growth and success of Rome Bancorp. As
such, the contribution of stock to the foundation has the potential to provide a
self-sustaining funding mechanism which reduces the amount of cash that Rome
Bancorp, if it were not making the stock donation, would have to contribute to
the foundation in future years in order to maintain a level amount of charitable
grants and donations. By further enhancing Rome Savings's visibility and
reputation in its local community, we believe that the foundation will enhance
the long-term value of our community banking franchise. We will dedicate the
foundation to charitable purposes within our local community, including
community development activities.
Purpose of the Foundation. The purpose of the foundation is to provide
funding to support charitable causes and community development activities. In
recent years, Rome Savings has emphasized community lending and community
development activities within our local community. We received a satisfactory
CRA rating in our last CRA examination. We are forming the foundation to
complement our existing community activities, not to replace them. We intend to
continue to emphasize community lending and community development activities
following the reorganization. These activities, however, are not our sole
corporate purpose. We will dedicate the foundation completely to community
activities and the promotion of charitable causes, and may be able to support
such activities in ways that are not presently available to us. The Board of
Trustees believes the establishment of a charitable foundation is consistent
with Rome Savings' commitment to community service. The Board also believes
that the funding of the foundation with common stock is a means of enabling Rome
Savings' community to share in the potential growth and success of Rome Bancorp
after completion of the reorganization. The foundation will accomplish that goal
by:
. providing for continued ties between the foundation and Rome Savings
and forming a partnership with the community;
. enabling Rome Savings and Rome Bancorp to develop a unified
charitable donation strategy;
. centralizing the responsibility for administration and allocation of
corporate charitable funds.
We do not expect the contribution to the foundation to take the place of Rome
Savings' traditional community lending and charitable activities.
Structure of the Foundation. We will incorporate the foundation under
[Delaware] law as a non-stock corporation. The foundation's Certificate of
Incorporation provides that it is organized only for charitable purposes,
including community development, as stated in Section 501(c)(3) of the Code. The
foundation's Certificate of Incorporation also provides that no part of the net
earnings of the foundation will inure to the benefit of, or be distributable to
its directors, officers or members. A majority of the Board of Directors of the
foundation will consist of
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individuals who are officers or trustees of Rome Savings, and the remaining
members of the Board will consist of civic and community leaders within our
local community. A Nominating Committee of the Board, comprised of a minimum of
three members of the Board, will nominate individuals eligible for election to
the Board of Directors. The members of the foundation, who are comprised of its
Board members, will elect the directors at the annual meeting of the foundation
from those nominated by the Nominating Committee. Only persons serving as
directors of the foundation qualify as members of the foundation, with voting
authority. Directors will be divided into three classes with each class
appointed for three-year staggered terms.
The authority for the affairs of the foundation will be vested in the Board
of Directors of the foundation. The directors of the foundation will be
responsible for establishing the policies of the foundation with respect to
grants or donations by the foundation, consistent with the foundation's
purposes. Although no formal policy governing foundation grants exists at this
time, the foundation's Board of Directors will adopt a policy upon establishment
of the foundation. As directors of a non-profit corporation, directors of the
foundation will at all times:
. be bound by their fiduciary duty to advance the foundation's
charitable goals;
. to protect the assets of the foundation; and
. to act in a manner consistent with the charitable purpose for which
the foundation is established.
The directors of the foundation will also be responsible for directing the
activities of the foundation, including the management of the Rome Bancorp
common stock held by the foundation. However, as a condition to receiving the
non-objection of the FDIC to Rome Savings reorganization, the foundation will
commit in writing to the FDIC that all shares of common stock will be voted in
the same ratio as all other shares of the common stock on all proposals
considered by shareholders of Rome Bancorp; provided, however, that, consistent
with the condition, the FDIC shall waive this voting restriction under certain
circumstances if compliance with the voting restriction would:
(a) cause a violation of the law of the State of Delaware;
(b) cause the foundation to lose its tax-exempt status, or cause the IRS
to deny the foundation's request for a determination that it is an
exempt organization or otherwise have a material and adverse tax
consequence on the foundation; or
(c) cause the foundation to be subject to an excise tax under Section 4941
of the Code.
In order for the FDIC to waive such voting restriction, Rome Bancorp's or the
foundation's legal counsel must render an opinion satisfactory to FDIC that
compliance with the voting restriction would have an effect described in clauses
(a), (b) or (c) above. Under those circumstances, the FDIC shall grant a waiver
of the voting requirement upon submission of such legal opinion(s) by the Rome
Bancorp or the foundation that are satisfactory to the FDIC. In the event that
the FDIC were to waive such voting requirement, the directors would direct the
voting of the common stock held by the foundation. There can be no assurances
that a legal opinion addressing these issues will be rendered, or if rendered,
that the FDIC will grant an unconditional waiver of the
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voting restriction. In no event will the voting restriction survive the sale of
shares of the common stock held by the foundation.
The foundation's place of business will be located at Rome Savings'
administrative offices. Initially, we expect the foundation to have no
employees but to utilize our staff. The Board of Directors of the foundation
will appoint officers to manage the operations of the foundation. Rome Savings
has provided the FDIC with a commitment that, to the extent applicable, it will
comply with the affiliate restrictions set forth in Sections 23A and 23B of the
Federal Reserve Act with respect to any transactions between Rome Savings and
the foundation.
Rome Bancorp intends to capitalize the foundation with common stock in an
amount equal to 2.0% of the total amount of common stock to be sold in
connection with the reorganization. At the minimum, midpoint and maximum of the
estimated price range, the contribution to the foundation would equal 58,437,
68,750 and 79,062 shares, which would have a market value of $467,496, $550,000
and $632,496, respectively, assuming the purchase price of $8.00 per share. Rome
Bancorp and Rome Savings are (or have) determined to fund the foundation with
common stock to form a bond with the community in a manner that allows the
community to share in the potential growth and success of Rome Bancorp and Rome
Savings.
The foundation will receive working capital from any dividends that may be
paid on Rome Bancorp's common stock in the future, and subject to applicable
federal and state laws, loans collateralized by the common stock or from the
proceeds of the sale of any of the common stock in the open market from time to
time as may be permitted to provide the foundation with additional liquidity. As
a private foundation under Section 501(c)(3) of the Code, the foundation will be
required to distribute annually in grants or donations, a minimum of 5% of the
average fair market value of its net investment assets. One of the conditions
imposed on the gift of common stock by Rome Bancorp is that the amount of common
stock that may be sold by the foundation in any one year shall not exceed 5% of
the average market value of the assets held by the foundation, except where the
Board of Directors of the foundation determines that the failure to sell an
amount of common stock greater than such amount would result in a long-term
reduction of the value of the foundation's assets and as such would jeopardize
the foundation's capacity to carry out its charitable purposes. Upon completion
of the reorganization and the contribution of shares to the foundation
immediately following the reorganization, Rome Bancorp would have 2,291,874,
3,437,500 and 3,953,125 shares issued and outstanding at the minimum, midpoint
and maximum of the Estimated Price Range. Because the Rome Bancorp will have an
increased number of shares outstanding, the voting and ownership interests of
shareholders in Rome Bancorp's common stock would be diluted by []%, as compared
to their interests in Rome Bancorp if the foundation was not established. For
additional discussion of the dilutive effect, see "Pro Forma Data."
Tax Considerations. Thacher Proffitt & Wood has advised Rome Bancorp and
Rome Savings that an organization created for the above purposes would qualify
as an organization exempt from taxation under Section 501(c)(3) of the Code, and
would likely be classified as a private foundation. The foundation will submit
an application to the IRS to be recognized as an exempt organization. If the
foundation files an application within 15 months from the date of its
organization, and if the IRS approves the application, the effective date of the
foundation's status as a Section 501(c)(3) organization will be retroactive to
the date of its organization. Thacher
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Proffitt & Wood, however, has not rendered any advice on the condition to the
contribution to be agreed to by the foundation which requires that all shares of
Rome Bancorp common stock held by the foundation must be voted in the same ratio
as all other outstanding shares of common stock on all proposals considered by
shareholders of Rome Bancorp. Consistent with this condition, in the event that
Rome Bancorp or the foundation receives an opinion of its legal counsel that
compliance with this voting restriction would have the effect of causing the
foundation to lose its tax-exempt status or otherwise have a material and
adverse tax consequence on the foundation, or subject the foundation to an
excise tax for "self-dealing" under Section 4941 of the Code, the FDIC will
waive such voting restriction upon submission by Rome Bancorp or the foundation
of a legal opinion(s) to that effect satisfactory to the FDIC. See "--
Regulatory Conditions Imposed on the foundation."
Under the Code, Rome Bancorp is generally entitled to a deduction for
charitable contributions in an amount not exceeding 10% of its taxable income
(computed without regard to the contributions) for the year of the contribution,
and any contributions in excess of the deductible amount may generally be
carried forward and deducted in Rome Bancorp's five succeeding taxable years,
subject, in each such year, to the 10% of taxable income limitation. Rome
Bancorp and Rome Savings believe that the reorganization presents a unique
opportunity to establish and fund a charitable foundation given the substantial
amount of additional capital being raised in the reorganization. In making such
a determination, Rome Savings and Rome Bancorp considered the dilutive impact of
the contribution of common stock to the foundation on the common stock available
to be offered for sale in the reorganization. Based on such considerations,
Rome Bancorp and Rome Savings believe that the contribution to the foundation in
excess of the 10% annual limitation is justified given Rome Savings' capital
position and its earnings, the substantial additional capital being raised in
the reorganization and the potential benefits of the foundation to the
community. In this regard, assuming the sale of the common stock at the maximum
of the Estimated Price Range, Rome Savings would have pro forma consolidated
capital of $[] million or []% of pro forma consolidated assets and the Bank's
pro forma leverage and risk-based capital ratios would be []% and []%,
respectively. See "Regulatory Capital Compliance," "Capitalization," and
"Comparison of Valuation and Pro Forma Information with No foundation." Thus,
the amount of the contribution will not adversely impact the financial condition
of Rome Savings and Rome Bancorp, and the Rome Bancorp and Rome Savings
therefore believe that the amount of the charitable contribution is reasonable
and will not raise safety and soundness concerns.
Rome Bancorp and Rome Savings have received the opinion of Thacher Proffitt
& Wood that Rome Bancorp's contribution of its own stock to the foundation would
not constitute an act of self-dealing, and that Rome Savings will be entitled to
a deduction in the amount of the fair market value of the stock at the time of
the contribution, subject to the 10% of taxable income limitation. As discussed
above, Rome Savings will generally be able to carry forward and deduct any
portion of the contribution in excess of such 10% limitation for five years
following the year of the contribution. If Rome Savings and the foundation had
been established in the fiscal year ended December 31, 1998, Rome Savings would
have been entitled to a charitable contribution deduction in its taxable year
ended December 31, 199_ of approximately $[] and would have been able to carry
forward and deduct approximately $[] million over its next succeeding five
taxable years (based on the Bank's pre-tax income for 199[] and a contribution
in 199[] of
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Common Stock equal to $[]). Assuming the close of the offerings at the midpoint
of the estimated price range, we estimate that the entire amount of the
contribution should be deductible over a six-year period. We do not expect to
make any further contributions to the foundation within the first five years
following the initial contribution. After that time, we may consider future
contributions to the foundation. Any decisions would be based on an assessment
of, among other factors, the financial condition of Rome Bancorp and Rome
Savings at that time, the interests of shareholders and depositors of Rome
Bancorp and Rome Savings, and the financial condition and operations of the
foundation.
Although we have received the opinion of Thacher Proffitt & Wood that Rome
Bancorp is entitled to a deduction for the charitable contribution, there can be
no assurances that the IRS will recognize the foundation as an organization
exempt from taxation under section 501(c)(3) of the Code or that the deduction
will be permitted. If the IRS successfully maintains that the foundation is not
so exempt or that the deduction is not permitted, our tax benefit related to the
contribution to the foundation would be expensed without tax benefit, resulting
in a reduction in earnings in the year in which the IRS makes such a
determination. See "Risk Factors -- Establishment of Charitable Foundation."
In general, the income of a private foundation is exempt from federal and
New York taxation. However, investment income, such as interest, dividends and
capital gains, will be subject to a federal excise tax of 2.0%. The foundation
will be required to make an annual filing with the IRS within four and one-half
months after the close of the foundation's taxable year to maintain its tax-
exempt status. The foundation will also be required to publish a notice that the
annual information return will be available for public inspection for a period
of 180 days after the date of public notice. The information return for a
private foundation must include, among other things, an itemized list of all
grants made or approved, showing the amount of each grant, the recipient, any
relationship between a grant recipient and the foundation's managers, and a
concise statement of the purpose of each grant. The foundation will also be
required to file an annual report with the Charities Bureau of the Office of the
Attorney General of the State of New York.
Regulatory Conditions Imposed on the Foundation. Establishment of the
foundation is subject to the following conditions to be agreed to by the
foundation in writing as a condition to receiving the FDIC's non-objection of
reorganization of Rome Savings:
. the foundation will be subject to examination by the FDIC;
. the foundation must comply with supervisory directives imposed by the
FDIC;
. the foundation will operate in accordance with written policies
adopted by the board of directors, including a conflict of interest
policy; and
. any shares of common stock held by the foundation must be voted in
the same ratio as all other outstanding shares of common stock on all
proposals considered by shareholders; provided, however, that,
consistent with the condition, the FDIC shall waive this voting
restriction under certain circumstances, as discussed in "Structure of
the Foundation" above.
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How We Determined the Offering Range and the $8.00 Price Per Share
The plan of reorganization requires that the purchase price of the common
stock must be based on the appraised pro forma market value of the common stock,
as determined on the basis of an independent valuation. Rome Savings and Rome
Bancorp have retained RP Financial to make the independent valuation. RP
Financial's fees for its services in making such appraisal are estimated to be
$25,000. Rome Savings and Rome Bancorp will indemnify RP Financial and its
employees and affiliates against losses (including any losses in connection with
claims under the federal securities laws) arising out of its services as
appraiser, except where RP Financial's liability results from its negligence or
bad faith.
An appraisal has been made by RP Financial in reliance upon the information
contained in this prospectus, including the financial statements. RP Financial
also considered the following factors, among others:
. the present and projected operating results and financial condition
of Rome Bancorp and Rome Savings, and the economic and demographic
conditions in Rome Savings' existing market area;
. historical, financial and other information relating to Rome Savings;
. a comparative evaluation of the operating and financial statistics of
Rome Savings with those of other publicly traded mutual holding
companies;
. the aggregate size of the offering of the common stock;
. the impact of the reorganization on Rome Savings' equity and earnings
potential;
. the proposed dividend policy of Rome Bancorp and Rome Savings; and
. the trading market for securities of comparable institutions and
general conditions in the market for such securities.
Two of the factors that RP Financial considered in determining our market
value were the price-to-book ratio and the price-to-earnings ratio or P/E ratio.
The price-to-book ratio represents the price per share of stock divided by its
book value or equity per share.
The P/E ratio represents the price per share of stock divided by earnings
or net income per share. RP Financial considered our P/E ratio and our price-
to-book ratio on a fully converted basis, which is a common standard used for
evaluating the pricing of mutual holding companies.
On the basis of the foregoing, RP Financial has advised Rome Bancorp and
Rome Savings that, in its opinion, dated May 28, 1999, the estimated pro forma
market value of the common stock on a fully converted basis ranged from a
minimum of $23.4 million to a maximum of $31.6 million with a midpoint of $27.5
million (the "estimated valuation range").
The Board of Trustees of Rome Savings held a meeting to review and discuss
the original appraisal report prepared by RP Financial. Representatives of RP
Financial participated in the meeting to explain the contents of the appraisal
report. The board of trustees reviewed the
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methods that RP Financial used to determine the pro forma market value of the
common stock and the appropriateness of the assumptions that RP Financial used
in determining this value. The board of trustees determined that 47% of the
shares to be issued by Rome Bancorp will be offered to public stockholders. In
addition the board of trustees determined that the common stock will be sold at
$8.00 per share.
The Board of Trustees established an offering range of $11.0 million to
$14.9 million, with a midpoint of $12.9 million. Rome Bancorp expects to issue
between 1,373,281 and 1,857,969 shares of common stock for the offering. The
offering range takes into account that Rome Savings must be a majority-owned
subsidiary of Rome Bancorp or Rome, MHC as long as Rome, MHC is in existence.
The estimated valuation range and the offering range may be amended with the
approval of the Superintendent and FDIC (if required), due to subsequent
developments in the financial condition of Rome Bancorp or Rome Savings or
market conditions generally.
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The valuation prepared by RP Financial is not intended, and must not be
construed, as a recommendation of any kind as to the advisability of purchasing
such shares. RP Financial did not independently verify the financial statements
and other information provided by Rome Savings, nor did RP Financial value
independently the assets or liabilities of Rome Savings. The valuation
considers Rome Savings as a going concern and should not be considered as an
indication of the liquidation value of Rome Savings. Moreover, because such
valuation is necessarily based upon estimates and projections of a number of
matters, all of which are subject to change from time to time, no assurance can
be given that persons purchasing such shares in the reorganization will
thereafter be able to sell such shares at prices at or above the purchase
price.
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The maximum of the estimated valuation range may be increased up to 15% and
the number of shares of common stock to be issued in the reorganization may be
increased to 2,136,664 shares due to regulatory considerations, changes in the
market and general financial and economic conditions without the resolicitation
of subscribers. See "-- Limitations on Common Stock Purchases" as to the method
of distribution and allocation of additional shares that may be issued in the
event of an increase in the estimated valuation range to fill unfilled orders in
the subscription and community offerings.
We may not sell any shares of common stock unless RP Financial confirms to
Rome Savings, Rome Bancorp, the Superintendent and the FDIC that, to the best of
its knowledge, nothing of a material nature has occurred which, taking into
account all relevant factors, would cause RP Financial to conclude that the
aggregate value of the common stock is incompatible with its estimate of the pro
forma market value of the common stock at the conclusion of the offering.
If RP Financial confirms at the conclusion of the offering that the pro
forma market value of the common stock is not more than the maximum and not less
than the minimum of the estimated valuation range then, with the approval of the
Superintendent and the FDIC, the number of shares of common stock to be issued
in the offering will be not more than 1,857,969 shares and not less than
1,373,281 shares. If RP Financial concludes that the pro forma market
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value of the common stock is greater than the maximum of the estimated valuation
range but not more than 15% above the maximum of the estimated valuation range,
then the number of shares of common stock to be issued may be increased to not
more than 2,136,664 shares. In addition, all shares purchased in the offering
will be purchased for the purchase price of $8.00 per share. If the number of
shares issued in the reorganization is increased due to an increase of up to 15%
in the estimated valuation range to reflect changes in market or financial
conditions, persons who subscribed for the maximum number of shares will not be
given the opportunity to subscribe for any additional shares. See "--
Limitations on Common Stock Purchases."
If RP Financial concludes that the pro forma market value of the common
stock is either more than 15% above the maximum of the estimated valuation range
or less than the minimum of the estimated valuation range, Rome Savings and Rome
Bancorp, after consulting with the Superintendent and the FDIC, may:
(1) terminate the plan and return all funds promptly with interest at Rome
Savings' passbook rate of interest on payments made by check, bank
check or money order;
(2) establish a new estimated valuation range and either;
(a) hold new subscription and community offerings; or
(b) provide subscribers the opportunity to change or cancel their
orders (a "resolicitation");
(3) take such other actions as permitted by the Superintendent and the
FDIC in order to complete the reorganization.
If a resolicitation is commenced, unless an affirmative response is received
from a subscriber within a designated period of time, all funds will be promptly
returned to the subscriber as described above.
An increase in the number of shares to be issued in the reorganization as a
result of an increase in the estimated pro forma market value of common stock
would decrease both a subscriber's ownership interest and Rome Bancorp's pro
forma net earnings and stockholders' equity on a per share basis while
increasing pro forma net earnings and stockholders' equity on an aggregate
basis. A decrease in the number of shares to be issued in the reorganization
would increase both a subscriber's ownership interest and Rome Bancorp's pro
forma net earnings and stockholders' equity on a per share basis while
decreasing pro forma net earnings and stockholders' equity on an aggregate
basis. For a presentation of the effects of such changes see "Pro Forma Data."
To fund the foundation, the number of shares issued in the offering will
increase by the number of shares equal to 4.3% of the common stock sold in the
offering.
If all shares of common stock are not sold through the subscription and
community offerings, then Rome Savings and Rome Bancorp expect to offer the
remaining shares in a syndicated community offering, which would commence during
or just after the subscription offering. See "-- Syndicated Community Offering."
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Copies of the appraisal report of RP Financial, including any amendments
thereto, and the detailed memorandum of the appraiser setting forth the method
and assumptions for such appraisal are available for inspection at the main
office of Rome Savings and the other locations specified under "Where You Can
Find Additional Information."
Subscription Offering and Subscription Rights
In accordance with the plan of reorganization, rights to subscribe for the
purchase of common stock have been granted under the plan of reorganization to
the following persons in the following order of priority:
(1) depositors with deposits in Rome Savings with balances aggregating
$100 or more ("qualifying deposits") as of December 31, 1997
("eligible account holders"); for this purpose, deposit accounts
include all savings, time, demand, negotiable orders of withdrawal
(NOW), money market and passbook accounts maintained at Rome Savings
(excluding any escrow accounts);
(2) tax-qualified employee benefit plans of Rome Bancorp, Rome Savings or
Rome, MHC, including the employee stock ownership plan;
(3) depositors with qualifying deposits in Rome Savings on June 30, 1999,
other than (i) those depositors who would otherwise qualify as
eligible account holders or (ii) managers or executive officers of
Rome Savings or their associates ("supplemental eligible account
holders").
All subscriptions received will be subject to the availability of common stock
after satisfaction of all subscriptions of all persons having prior rights in
the subscription offering and to the maximum and minimum purchase limitations
set forth in the plan of reorganization and as described below under "--
Limitations on Common Stock Purchases."
Priority 1: Eligible Account Holders. Each eligible account holder will
receive, as first priority and without payment therefor, non-transferable rights
to subscribe for shares of common stock in the subscription offering.
Subscriptions by eligible account holders are subject to maximum and minimum
purchase limitations. See "-- Limitations on Common Stock Purchases."
If there are not sufficient shares available to satisfy all subscriptions,
shares first will be allocated so as to permit each subscribing eligible account
holder to purchase a number of shares sufficient to make such eligible account
holder's total allocation equal to the lesser of 100 shares or the number of
shares subscribed for. Thereafter, unallocated shares will be allocated among
the remaining subscribing eligible account holders whose subscriptions remain
unfilled in the proportion that the amounts of their respective aggregate
qualifying deposits bear to the total amount of qualifying deposits of all
remaining eligible account holders whose subscriptions remain unfilled. However,
no fractional shares shall be issued.
To ensure a proper allocation of stock, each eligible account holder must
list on the stock order form all deposit accounts in which such eligible account
holder had an ownership interest at December 31, 1997. Failure to list an
account could result in fewer shares being allocated than if
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all accounts had been disclosed. The subscription rights of eligible account
holders who are also trustees or executive officers of Rome Savings or their
associates will be subordinated to the subscription rights of other eligible
account holders to the extent attributable to increased deposits in the one-year
period preceding December 31, 1997.
Priority 2: The Tax-Qualified Employee Benefit Plans. To the extent that
there are sufficient shares remaining after satisfaction of the subscriptions by
eligible account holders, the tax-qualified employee benefit plans, including
the employee stock ownership plan, will receive, as a second priority and
without payment therefor, non-transferable subscription rights to purchase up to
10% of the common stock to be issued in the offering. As a tax-qualified
employee benefit plan, the employee stock ownership plan intends to purchase 8%
of the shares to be issued in the offering, or 109,862 shares, based on the
issuance of 1,373,281 shares at the minimum of the offering range or 148,637
shares based on the issuance of 1,857,969 at the maximum of the offering range.
Subscriptions by the employee stock ownership plan will not be aggregated with
shares of common stock purchased directly by or which are otherwise attributable
to any other participants in the subscription and community offerings, including
subscriptions of any of Rome Savings' managers, officers, employees or
associates thereof. To the extent shares are not available in the offering to
fill all or part of the purchase order of the employee stock ownership plan,
this plan intends to purchase shares in private transactions or on the open
market after completion of the offering.
Priority 3: Supplemental Eligible Account Holders. Each supplemental
eligible account holder will receive, as a third priority and without payment
therefor, non-transferable rights to subscribe for shares of common stock in the
subscription offering. Subscriptions by supplemental eligible account holders
are subject to maximum and minimum purchase limitations. See "--Limitations on
Common Stock Purchases."
If there are not sufficient shares available to satisfy all subscriptions
of all supplemental eligible account holders, after purchases by eligible
account holders and the tax-qualified employee benefit plans, available shares
first will be allocated among subscribing supplemental eligible account holders
so as to permit each supplemental eligible account holder to purchase a number
of shares sufficient to make such supplemental eligible account holder's total
allocation equal to the lesser of 100 shares or the number of shares subscribed
for. Thereafter, unallocated shares will be allocated among the remaining
subscribing supplemental eligible account holders whose subscriptions remain
unfilled in the proportion that the amounts of their respective aggregate
qualifying deposits bear to the total amount of qualifying deposits of all
remaining supplemental eligible account holders whose subscriptions remain
unfilled. However, no fractional shares shall be issued.
To ensure a proper allocation of stock, each supplemental eligible account
holder must list on the stock order form all deposit accounts in which such
supplemental eligible account holder had an ownership interest at June 30, 1999.
Failure to list an account could result in fewer shares being allocated than if
all accounts had been disclosed.
Expiration Date for the Subscription Offering. The subscription offering
will expire at 5:30 p.m., Eastern time, on [ ], 1999, unless we extend this
period for an initial period of up to 45 days. We may further extend this period
for additional 60 day periods with the approval of
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the Superintendent and, if necessary, the FDIC. Subscription rights which have
not been exercised prior to the expiration date, as extended, will become void.
If all shares have not been subscribed for or sold by the expiration date,
as extended, all funds delivered to Rome Savings will be returned with interest
promptly to the subscribers and all withdrawal authorizations will be canceled.
If an extension beyond the 45-day period following the expiration date is
granted, Rome Savings will notify subscribers of the extension of time and of
any rights of subscribers to change or cancel their orders. Each extension may
not exceed 60 days, and all extensions, in the aggregate, may not last beyond
[ ].
Persons in Non-qualified States or Foreign Countries. Rome Bancorp and Rome
Savings will make reasonable efforts to comply with the securities laws of all
states in the United States in which persons entitled to subscribe for stock
pursuant to the plan or reorganization reside. However, Rome Savings and Rome
Bancorp are not required to offer stock in the subscription offering to any
person who resides in a foreign country.
Community Offering
To the extent that shares remain available for purchase after satisfaction
of all subscriptions received in the subscription offering, Rome Savings may
offer shares pursuant to the plan of reorganization in the community offering to
the following persons in the following order of priority:
(1) employees and depositors of Rome Savings after June 30, 1999 (we refer
to this group as "other depositors");
(2) "residents" of Oneida County, New York, which definition includes
persons who occupy a dwelling within Oneida County, New York and
establish an ongoing physical presence within the County, together
with an indication that such presence is not merely transitory in
nature (the determination of resident status will be made by Rome
Savings, in its sole discretion);
(3) other persons to whom we deliver a prospectus.
Orders received in the community offering are subject to maximum and
minimum purchase limitations. See "-- Limitations on Common Stock Purchases."
The community offering, if any, shall commence concurrently with or subsequent
to the commencement of the subscription offering and shall terminate no later
than 45 days after the expiration of the subscription offering unless extended
by Rome Savings and Rome Bancorp, with the approval of the Superintendent and
the FDIC, if necessary.
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The opportunity to subscribe for shares of common stock in the community
offering category is subject to the right of Rome Savings and Rome Bancorp, in
their discretion, to accept or reject any such orders in whole or in part
either at the time of receipt of an order or as soon as practicable following
the expiration date. If Rome Bancorp rejects a subscription in part, the
subscriber will not have the right to cancel the remainder of his or her
subscription.
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Marketing and Underwriting Arrangements
Sandler O'Neill & Partners, L.P. Rome Savings, Rome Bancorp and Rome, MHC
have engaged Sandler O'Neill Corporate Strategies, a division of Sandler O'Neill
& Partners, L.P. as an independent financial advisor in connection with the
offering of the common stock. Sandler O'Neill has also agreed to use its best
efforts to assist Rome Bancorp with the solicitation of subscriptions and orders
for shares of common stock in the offering.
Sandler O'Neill will receive a fee for services provided in connection with
the offering equal to 2% of the aggregate purchase price of common stock sold in
the offering. No fees will be paid to Sandler O'Neill with respect to any
shares of common stock purchased by any director, officer or employee of Rome
Savings or Rome Bancorp or members of their immediate families or any employee
benefit plan of the Bank, established for the benefit of the Bank's directors,
officers and employees. If there is a syndicated community offering, we will
pay Sandler O'Neill a fee equal to 1.5% of the aggregate purchase price of
common stock sold in the syndicated community offering. However, the aggregate
fees payable to Sandler O'Neill and any selected dealers in connection with any
syndicated community offering will not exceed 2.0% of the aggregate purchase
price of the common stock sold in the syndicated community offering. Sandler
O'Neill will also be reimbursed for its reasonable out-of-pocket expenses,
including legal fees of up to $100,000.
In the event Sandler O'Neill is terminated under certain circumstances or
the reorganization is terminated by Rome Savings, no fees shall be payable by
Rome Savings. However, Sandler O'Neill will be entitled to reimbursement for its
reasonable out-of-pocket expenses (including legal fees). Rome Bancorp, Rome,
MHC and Rome Savings have agreed to indemnify and hold Sandler O'Neill and its
affiliates harmless from and against any and all losses, claims, damages, and
liabilities, joint or several, to which Sandler O'Neill may become subject under
applicable federal or state law related to or arising out of the services to be
provided by Sandler O'Neill pursuant to its engagement by Rome Savings and Rome
Bancorp as financial advisor in connection with the reorganization, including
certain liabilities under the Securities Act. Total fees to Sandler O'Neill are
estimated to be $182,147 and $253,493 at the minimum and the maximum of the
offering range, respectively. See "Pro Forma Data" for the assumptions used to
arrive at these estimates.
Directors and Employees. Directors, trustees and executive officers of
Rome Bancorp and Rome Savings may participate in the solicitation of offers to
purchase common stock. Other employees of Rome Savings may participate in the
offering in ministerial capacities or provide clerical work in effecting a sales
transaction. Such other employees have been instructed not to solicit offers to
purchase common stock or provide advice regarding the purchase of common
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stock. Rome Bancorp will rely on Rule 3a4-1 under the Exchange Act, and sales of
common stock will be conducted within the requirements of Rule 3a4-1, so as to
permit officers, trustees, directors and employees to participate in the sale of
common stock. No officer, trustee, director or employee of Rome Bancorp or Rome
Savings will be compensated in connection with his or her participation by the
payment of commissions or other remuneration based either directly or indirectly
on transactions in common stock.
Procedure for Purchasing Shares in Subscription and Community Offerings
Use of Order Forms. To purchase shares in the subscription offering and
the community offering, an executed order form with the required payment for
each share subscribed for, or with appropriate authorization for withdrawal from
a subscriber's deposit account at Rome Savings (which may be given by completing
the appropriate blanks in the stock order form), must be received by Rome
Savings by 5:30 p.m., Eastern time, on the expiration date. You can submit your
order form by mail or overnight courier. You may also drop off your order forms
at any of our branch offices. Stock order forms which are not received by such
time or are executed defectively or are received without full payment (or
correct withdrawal instructions) are not required to be accepted. In addition,
we are not obligated to accept orders submitted on photocopied or facsimiled
order forms. We have the power to waive or permit the correction of incomplete
or improperly executed forms, but do not represent that we will do so. Once
received, an executed order form may not be modified, amended or rescinded
without our consent unless subscribers are resolicited or the reorganization has
not been completed within 45 days after the end of the subscription offering,
unless such 45 day period has been extended.
In order to ensure that eligible account holders, supplemental eligible
account holders and other depositors are properly identified as to their stock
purchase eligibility and priority, depositors must list on the stock order form
all deposit accounts as of the applicable eligibility record date giving all
names in each account and the account numbers.
To ensure that each purchaser receives a prospectus at least 48 hours prior
to the expiration date for the offering, in accordance with Rule 15c2-8 of the
Exchange Act, no prospectus will be mailed later than five days prior to such
date or hand delivered any later than two days prior to such date. Execution of
the stock order form will confirm receipt or delivery in accordance with Rule
15c2-8. Order forms will only be distributed when preceded or accompanied by a
prospectus.
Payment for Shares. Payment for subscriptions may be made by check, bank
check or money order or by authorization of withdrawal from deposit accounts
maintained with Rome Savings except for IRA accounts. No cash or wire transfers
will be accepted. Interest will be paid on payments made by check, bank check or
money order at Rome Savings' passbook rate of interest from the date payment is
received until the completion or termination of the reorganization. If payment
is made by authorization of withdrawal from deposit accounts, the funds
authorized to be withdrawn will continue to accrue interest at the contractual
rates until completion or termination of the reorganization, but a hold
immediately will be placed on such funds, thereby making them unavailable to the
depositor.
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If a subscriber validly authorizes Rome Savings to withdraw the amount of
the purchase price from a deposit account at Rome Savings, the withdrawal will
be made as of the completion of the reorganization. Rome Savings will waive any
applicable penalties for early withdrawal from time deposit accounts. If the
remaining balance in a certificate account is reduced below the applicable
minimum balance requirement at the time that the funds actually are transferred
under the authorization, the certificate will be canceled at the time of the
withdrawal, without penalty, and the remaining balance will be converted into a
statement savings account and will earn interest at the passbook rate. If the
certificate account matures and is renewed prior to the termination or
completion of the offering, then the hold will remain in place. If the
certificate account matures but is not renewed prior to the completion of the
offering, then the funds placed on hold will be converted into a statement
savings account and will earn interest at the passbook rate.
The employee stock ownership plan will not be required to pay for the
shares subscribed for at the time it subscribes. Rather, the employee stock
ownership plan may pay for such shares of common stock subscribed for at the
purchase price upon completion of the offering; provided, that there is in force
from the time of its subscription until such time, a loan commitment acceptable
to Rome Bancorp from an unrelated financial institution or Rome Bancorp to lend
to the employee stock ownership plan the aggregate purchase price of the shares
for which it subscribed. Rome Bancorp intends to provide such a loan to the
employee stock ownership plan.
Owners of self-directed Individual Retirement Accounts ("IRAs") may use the
assets of such IRAs to purchase shares of common stock in the subscription and
community offerings, provided that such IRAs are not maintained at Rome Savings.
Persons with IRAs maintained at Rome Savings must have their accounts
transferred to an unaffiliated institution or broker to purchase shares of
common stock in the subscription and community offerings. In addition, the
provisions of ERISA and IRS regulations require that officers, trustees and ten
percent stockholders who use self-directed IRA funds to purchase shares of
common stock in the subscription and community offerings make such purchases for
the exclusive benefit of the IRAs. Assistance on how to transfer IRAs maintained
at Rome Savings can be obtained from the conversion center. Depositors
interested in using funds in an IRA to purchase common stock should contact the
conversion center as soon as possible.
Certificates representing shares of common stock purchased will be mailed
to purchasers to the addresses specified in properly completed order forms, as
soon as practicable following completion of the sale of all shares of common
stock. Any certificates returned as undeliverable will be disposed of in
accordance with applicable law.
Restrictions on Transfer of Subscription Rights and Shares of Common Stock
Prior to the completion of the reorganization, regulations prohibit any
person with subscription rights from transferring or entering into any agreement
or understanding to transfer the legal or beneficial ownership of the
subscription rights issued under the plan of reorganization or the shares of
common stock to be issued upon their exercise. Such rights may be exercised only
by the person to whom they are granted and only for such person's account. Each
person exercising such subscription rights will be required to certify that such
person is purchasing
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shares solely for such person's own account and that such person has no
agreement or understanding regarding the sale or transfer of such shares. The
regulations also prohibit any person from offering or making an announcement of
an offer or an intent to make an offer to purchase such subscription rights or
shares of common stock prior to the completion of the reorganization.
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Rome Savings and Rome Bancorp will pursue any and all legal and equitable
remedies (including forfeiture) in the event they become aware of the transfer
of subscription rights and will not honor orders known by them to involve the
transfer of such rights.
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Syndicated Community Offering
The amended plan of reorganization provides that all shares of common stock
not purchased in the subscription offering or the community offering may be
offered for sale to the general public in a syndicated community offering on a
best efforts basis through a selling group of broker-dealers to be arranged by
Sandler O'Neill acting as agent of Rome Bancorp. Sandler O'Neill has not
selected any particular broker-dealers to participate in a syndicated community
offering. As an alternative to a syndicated community offering, Rome Bancorp
and Rome Savings may instead elect to offer for sale such remaining shares to or
through underwriters in a public offering, as described under "-- Public
Offering Alternative." Rome Bancorp and Rome Savings have reserved the right to
reject orders in whole or in part in their sole discretion in the syndicated
community offering. If Rome Bancorp or Rome Savings rejects an order in part,
the subscriber will not have the right to cancel the remainder of the
subscription. Neither Sandler O'Neill nor any registered broker-dealer shall
have any obligation to take or purchase any shares of the common stock in the
syndicated community offering. However, Sandler O'Neill has agreed to use its
best efforts in the sale of shares in any syndicated community offering.
The syndicated community offering will terminate no more than 45 days
following the expiration date, unless extended by Rome Bancorp with the approval
of the Superintendent and FDIC. Such extensions may not be beyond [ ].
See "-- How We Determined the Offering Range and the $8.00 Price Per Share"
above for a discussion of rights of subscribers, if any, in the event an
extension is granted.
Public Offering Alternative
As an alternative to a syndicated community offering, we may offer for sale
shares of common stock not sold in the subscription offering or the community
offering to or through underwriters ("public offering"). Certain provisions
restricting the purchase and transfer of common stock shall not be applicable to
sales to underwriters for purposes of a public offering. Any underwriter shall
agree to purchase such shares from Rome Bancorp with a view to reoffering them
to the general public, subject to certain terms and conditions described in the
plan of reorganization. If the public offering is utilized, then Rome Bancorp
will amend the registration statement, which contains this prospectus, to
reflect the specific terms of such public offering alternative, including,
without limitation, the terms of any underwriting agreements, commission
structure and plan of distribution.
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Limitations on Common Stock Purchases
The plan of reorganization includes the following limitations on the number
of shares of common stock which may be purchased during the reorganization:
(1) The aggregate amount of outstanding common stock of Rome Bancorp owned
or controlled by persons other than Rome, MHC, at the close of the
offering will be less than 50% of Rome Bancorp's total outstanding
common stock;
(2) No subscription for fewer than 25 shares will be accepted;
(3) Except for the tax-qualified employee benefit plans, the maximum
amount of shares of common stock subscribed for or purchased in all
categories of the reorganization by any person, together with
associates of, and groups of persons acting in concert with, such
persons, shall not exceed $150,000;
(4) Each eligible account holder may subscribe for and purchase common
stock in the subscription offering in an amount up to $150,000,
subject to increase as described below;
(5) The tax-qualified employee benefit plans are permitted to purchase up
to 10% of the shares of common stock issued in the offering and, as a
tax-qualified employee benefit plan, the employee stock ownership plan
intends to purchase 8% of the shares of common stock issued in the
offering;
(6) Each supplemental eligible account holder may subscribe for and
purchase common stock in the subscription offering in an amount up to
$150,000, subject to increase as described below;
(7) Persons purchasing shares of common stock in the community offering,
together with associates of and groups of persons acting in concert
with such persons, may purchase common stock in the community offering
in an amount up to $150,000 subject to increase as described below;
(8) Each person purchasing shares of common stock in the syndicated
community offering, or the public offering alternative (exclusive of
underwriters), may purchase common stock in the syndicated community
offering in an amount up to $150,000, subject to increase as described
below; and
(9) The trustees and officers of Rome Savings and their associates in the
aggregate, excluding purchases by the tax-qualified employee benefit
plans, may purchase up to 25% of shares we sell in the offering.
An eligible account holder or supplemental eligible account holder may not
purchase individually in the subscription offering more than $150,000 of common
stock. The overall maximum limit is $150,000 for the offering. The $150,000
limitation applies to the individual purchases in the offering, aggregated with
purchases by the person's associates and those persons acting in concert with
the purchaser.
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Subject to any required regulatory approval and the requirements of
applicable laws and regulations, but without further approval of the depositors
of Rome Savings, both the $150,000 individual amount permitted to be subscribed
for and the $150,000 overall maximum purchase limitation may be increased up to
a maximum of 5% of the shares offered for sale in the offering, exclusive of an
increase in the total number of shares issued due to an increase in the offering
range of up to 15% (i.e., up to 92,898 shares), at the sole discretion of Rome
Bancorp and Rome Savings. It is currently anticipated that the individual and
overall maximum purchase limitations may be increased if, after a community
offering, Rome Bancorp has not received subscriptions for an aggregate amount
equal to at least the minimum of the offering range. If the maximum purchase
limitations are increased, subscribers for the maximum amount will be, and
certain other large subscribers in the sole discretion of Rome Bancorp and Rome
Savings may be, given the opportunity to increase their subscriptions up to the
then applicable limit. Requests to purchase additional shares of common stock
under this provision will be determined by the Board of Directors of Rome
Bancorp and the Board of Trustees of Rome Savings and, if approved, allocated on
a pro rata basis giving priority in accordance with the priorities set forth in
the amended plan of reorganization and described herein.
If we sell 2,136,664 shares, the additional shares will be allocated in
accordance with the priorities and procedures described in "--Subscription
Offering and Subscription Rights" and "--Community Offering."
The term "associate" of a person is defined to mean:
(1) any corporation or organization (other than Rome Bancorp, Rome, MHC,
Rome Savings or a majority-owned subsidiary of Rome Savings) of which
such person is an officer or a general or limited partner or is
directly or indirectly, either alone or with one or more members of
his or her immediate family, the beneficial owner of 10% or more of
any class of equity securities;
(2) 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, except that the term "associate" does
not include any employee stock benefit plan maintained by Rome Bancorp
or Rome Savings in which a person has a substantial beneficial
interest or serves as a trustee or in a similar fiduciary capacity,
and except that, for purposes of aggregating total shares that may be
acquired or held by officers and directors and their associates; and
(3) 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, trustee or
officer of Rome Bancorp, Rome, MHC or Rome Savings.
We have the sole discretion to determine whether prospective purchasers are
"associates" or "acting in concert."
Trustees, directors and officers are not treated as associates of each other
solely by virtue of holding such positions.
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Certain Restrictions on Purchase or Transfer of Shares After the Reorganization
All shares of common stock purchased in connection with the reorganization
by a trustee or an executive officer of Rome Savings, Rome, MHC or Rome Bancorp,
or their associates, will be subject to a restriction that the shares not be
sold for a period of one year following the reorganization, except in the event
of the death or judicial declaration of incompetence of such director or
executive officer. Each certificate for restricted shares will bear a legend
giving notice of this restriction on transfer, and instructions will be issued
to the effect that any transfer within such time period of any certificate or
record ownership of such shares other than as provided above is a violation of
the restriction. Any shares of common stock issued at a later date as a stock
dividend, stock split, or otherwise, with respect to such restricted stock will
be subject to the same restrictions. The directors and executive officers of
Rome Bancorp and Rome Savings will also be subject to the federal insider
trading rules and any other applicable requirements of the federal securities
laws.
Purchases of outstanding shares of common stock of Rome Bancorp by
directors, executive officers of Rome Bancorp, Rome, MHC or Rome Savings (and
any person who was an executive officer or trustee of Rome Savings or an
executive officer or director of Rome, MHC or Rome Bancorp at any time after the
date on which the Board of Trustees of Rome Savings adopted the plan of
reorganization), and their associates during the three-year period following
reorganization may be made only through a broker or dealer registered with the
SEC, except with the prior written approval of the Superintendent. This
restriction does not apply, however, to the purchase of stock pursuant to the
stock option plan or the restricted stock plan to be established after the
reorganization.
Interpretation, Amendment and Termination
All interpretations of the plan of reorganization by the Board of Rome
Savings will be final, subject to the authority of the Superintendent and FDIC.
The plan of reorganization provides that, if deemed necessary or desirable by
the Board of Trustees of Rome Savings, the plan of reorganization may be
substantively amended prior to the solicitation of proxies from depositors by a
vote of the Board of Trustees. Amendment of the plan or reorganization
thereafter requires the approval of the Superintendent and the FDIC. The plan of
reorganization will terminate if the sale of all shares of stock being offered
pursuant to the plan of reorganization is not completed prior to 24 months after
the date of the approval of the plan of reorganization by the Superintendent
unless a longer time period is permitted by governing laws and regulations. The
plan of reorganization may be terminated by a vote of the Board of Trustees of
Rome Savings at any time prior to the special meeting of depositors, and
thereafter by such a vote with the approval of the Superintendent and the FDIC.
Possible Conversion of Rome, MHC to Stock Form
Federal and state regulations and the plan of reorganization permit Rome,
MHC to convert from mutual stock form. Such a transaction is commonly known as a
"second-step conversion". There can be no assurance when, if ever, a second-step
conversion will occur, and
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the Board of Trustees has no current intention or plan to undertake a second-
step conversion. In a second-step conversion, Rome, MHC would merge with and
into Rome Savings or Rome Bancorp, with Rome Savings or Rome Bancorp as the
resulting entity. Certain depositors of Rome Savings would receive the right to
subscribe for additional shares of the resulting entity. The additional shares
of common stock of the holding company issued in the second step conversion
would be sold at their aggregate pro forma market value.
In a second-step conversion, each share of common stock outstanding
immediately prior to the completion of the second-step conversion held by
persons other than Rome, MHC would be automatically converted into and become
the right to receive a number of shares of common stock of Rome Bancorp
determined pursuant to an exchange ratio. This exchange ratio would ensure that
after the second-step conversion, subject to the adjustments described below (if
required by the applicable banking regulators) and any adjustment to reflect the
receipt of cash in lieu of fractional shares, the percentage of the to-be-
outstanding shares of the resulting entity issued to stockholders other than
Rome, MHC in exchange for their common stock would be equal to the percentage of
the outstanding shares of common stock held by public stockholders immediately
prior to the second-step conversion.
As set forth in the plan of reorganization, the percentage of the to-be-
outstanding shares of the resulting entity issued in exchange for public shares
would be adjusted to reflect (i) the aggregate amount of dividends waived by
Rome, MHC, if any, and (ii) the market value of the assets of Rome, MHC, other
than common stock of Rome Bancorp. Pursuant to this adjustment, the percentage
of the to-be outstanding shares of the resulting entity issued to public
stockholders in exchange for their minority shares (the "Adjusted Minority
Ownership Percentage") is equal to the percentage of the outstanding shares of
common stock held by public stockholders multiplied by the dividend waiver
fraction. The dividend waiver fraction is equal to the product of (a) a
fraction, of which the numerator is equal to Rome Bancorp's stockholders' equity
at the time of the second-step conversion less the aggregate amount of dividends
waived by Rome, MHC, and the denominator is equal to Rome Bancorp's
stockholders' equity at the time of the second-step conversion, and (b) a
fraction, of which the numerator is equal to the appraised pro forma market
value of the resulting entity in the second-step conversion minus the value of
Rome, MHC's assets other than common stock and the denominator is equal to the
appraised pro forma market value of the resulting entity in the second-step
conversion.
RESTRICTIONS ON ACQUISITION OF ROME BANCORP
AND ROME SAVINGS
General
The plan of reorganization provides for the conversion of Rome Savings from
the mutual to the stock form of organization and the concurrent formation of a
stock holding company and a mutual holding company. See "The Reorganization and
The Offering -- General." Certain provisions in Rome Bancorp's certificate of
incorporation and Bylaws and in its benefit plans and agreements entered into in
connection with the reorganization, together with provisions of the Delaware
General Corporation Law (DGCL) and certain governing regulatory restrictions,
may have anti-takeover effects.
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Mutual Holding Company Structure
The mutual holding company structure will restrict the ability of our
stockholders to effect a change of control of management because, as long as
Rome, MHC remains in existence as a mutual savings bank holding company, it will
control a majority of our voting stock. Moreover, the trustees of Rome, MHC will
be the directors of Rome Bancorp and the directors of Rome Savings. Rome, MHC
will be able to elect all of the members of the Board of Directors of Rome
Bancorp, and as a general matter, will be able to control the outcome of all
matters presented to the stockholders of Rome Bancorp for vote. Therefore, a
change in control of Rome Bancorp or Rome Savings cannot occur unless Rome, MHC,
first converts to the stock form of organization or is dissolved. See "The
Reorganization and The Offering -- Possible Conversion of Rome, MHC to Stock
Form."
Rome Bancorp's Certificate of Incorporation and Bylaws
Rome Bancorp's Certificate of Incorporation and Bylaws contain a number of
provisions, relating to corporate governance and certain rights of stockholders,
that might discourage future takeover attempts. As a result, stockholders who
might desire to participate in such transactions may not have an opportunity to
do so. In addition, such provisions will also render the removal of the Board of
Directors or management of Rome Bancorp more difficult.
- --------------------------------------------------------------------------------
The following description is necessarily general and qualified by reference to
the Certificate of Incorporation and Bylaws. See "Where You Can Find Additional
Information" as to how to obtain a copy of these documents.
- --------------------------------------------------------------------------------
Limitation on Voting Rights. The Certificate of Incorporation of Rome
Bancorp provides that any person, other than Rome, MHC, who beneficially owns
more than 10% of the outstanding Common Stock shall be allowed only one one-
hundredth (1/100) of a vote with respect of each share held in excess of such
10%. Beneficial ownership of shares includes shares beneficially owned by such
person or any of his affiliates, shares which such person or his affiliates have
the right to acquire upon the exercise of conversion rights or options and
shares as to which such person and his affiliates have or share investment or
voting power, but shall not include shares beneficially owned by the ESOP or
shares that are subject to a revocable proxy and that are not otherwise
beneficially owned or deemed by Rome Bancorp to be beneficially owned by such
person and his affiliates. This restriction on voting may only be amended by
approval of the Board of Directors and the affirmative vote of the holders of a
majority of the outstanding shares of capital stock who are eligible to vote on
such matters.
Three Classes of Directors on the Board; Power of Directors to Fill
Vacancies. The board of directors of Rome Bancorp is required by the Certificate
of Incorporation and bylaws to be divided into three classes which are as equal
in size as is possible. One of the three classes of directors is required to be
elected annually by stockholders of Rome Bancorp for three-year terms. A
classified board promotes continuity and stability of management of Rome Bancorp
but makes it more difficult for stockholders to change a majority of the
directors because it generally takes at least two annual elections of directors
for this to occur. In addition, any vacancy occurring on the Board, including a
vacancy created by an increase in the number of directors or
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resulting from death, resignation, retirement, disqualification, removal from
office or other cause, shall be filled for the remainder of the unexpired term
exclusively by the directors then in office.
Removal of Directors. The Certificate of Incorporation of Rome Bancorp
provides that a director may be removed from the Board of Directors prior to the
expiration of his or her term only for cause, upon the affirmative vote of at
least 80% of the outstanding shares of voting stock. In the absence of these
provisions, the vote of the holders of a majority of the shares of Rome Bancorp
could remove the entire Board, with cause, and replace it with persons of such
holders' choice.
Votes of Stockholders. Rome Bancorp's Certificate of Incorporation provides
that there will not be cumulative voting of stockholders for the election of
Rome Bancorp's directors. No cumulative voting means that Rome, MHC, as the
holder of a majority of the shares voted at a meeting of stockholders, may elect
all directors of Rome Bancorp to be elected at that meeting. This could prevent
public stockholder representation on Rome Bancorp's Board of Directors. In
addition, the Certificate of Incorporation also provides that any action
required or permitted to be taken by the stockholders of Rome Bancorp may be
taken only at an annual or special meeting and prohibits stockholder action by
written consent in lieu of a meeting.
Authorized but Unissued Shares of Capital Stock. Following the offering,
Rome Bancorp will have authorized but unissued shares of preferred stock and
common stock. See "Description of Capital Stock of Rome Bancorp." Although these
shares could be used by the Board of Directors of Rome Bancorp to make it more
difficult or to discourage an attempt to obtain control of Rome Bancorp through
a merger, tender offer, proxy contest or otherwise, such uses will be unlikely
since Rome, MHC owns a majority of the common stock of Rome Bancorp.
Stockholder Vote Required to Approve Business Combinations with Principal
Stockholders. The Certificate of Incorporation requires the approval of the
holders of at least 80% of Rome Bancorp's outstanding shares of voting stock,
together with the affirmative vote of at least 50% of the outstanding shares of
voting stock not beneficially owned by an "Interested Stockholder" to approve
certain "Business Combinations" and related transactions. Under Delaware law,
absent this provision, Business Combinations, including mergers, consolidations
and sales of all or substantially all of the assets of a corporation must,
subject to certain exceptions, be approved by the vote of the holders of only a
majority of the outstanding shares of Common Stock and any other affected class
of stock.
The vote of at least 80% of the stockholders is required in connection with
any transaction involving an Interested Stockholder except (1) in cases where
the proposed transaction has been approved in advance by a majority of those
members of Rome Bancorp's Board of Directors who are unaffiliated with the
Interested Stockholder and were directors prior to the time when the Interested
Stockholder became an Interested Stockholder or (2) if the proposed transaction
meets certain conditions set forth therein which are designed to afford the
stockholders a fair price in consideration for their shares in which case, if a
stockholder vote is required, approval of only a majority of the outstanding
shares of voting stock would be sufficient.
The term "Interested Stockholder" is defined to include any individual,
corporation, partnership or other entity (other than Rome, MHC, Rome Bancorp or
its subsidiary or any
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employee benefit plan maintained by Rome Bancorp or its subsidiary) which owns
beneficially or controls, directly or indirectly, 10% or more of the outstanding
shares of voting stock of Rome Bancorp.
A "Business Combination" means:
(1) any merger or consolidation of Rome Bancorp or any of its subsidiaries
with or into any Interested Stockholder or its affiliate;
(2) any sale, lease, exchange, mortgage, pledge, transfer, or other
disposition to or with any Interested Stockholder or its affiliate of
5% or more of the assets of Rome Bancorp or combined assets of Rome
Bancorp and its subsidiary;
(3) the issuance or transfer to any Interested Stockholder or its
affiliate by Rome Bancorp (or any subsidiary) of any securities of
Rome Bancorp other than on a pro rata basis to all stockholders;
(4) the adoption of any plan for the liquidation or dissolution of Rome
Bancorp proposed by or on behalf of any Interested Stockholder or its
affiliate;
(5) any reclassification of securities, recapitalization, merger or
consolidation of Rome Bancorp which has the effect of increasing the
proportionate share of Common Stock or any class of equity or
convertible securities of Rome Bancorp owned directly or indirectly by
an Interested Stockholder or its affiliate; and
(6) the acquisition by Rome Bancorp or its subsidiary of any securities of
an Interested Stockholder or its affiliates or associates.
Evaluation of Offers. The Certificate of Incorporation of Rome Bancorp
further provides that the Board of Directors of Rome Bancorp shall when
evaluating any offer to Rome Bancorp from another party to
. make a tender or exchange offer for any outstanding equity security
of Rome Bancorp;
. merge or consolidate Rome Bancorp with another corporation or entity;
or
. purchase or otherwise acquire all or substantially all of the
properties and assets of Rome Bancorp,
in connection with the exercise of its judgment in determining what is in the
best interest of Rome Bancorp and the stockholders of Rome Bancorp, give due
consideration to the extent permitted by law to all relevant factors, including,
without limitation, the financial and managerial resources and future prospects
of the other party, the possible effects on the business of Rome Bancorp and its
subsidiaries and on the employees, customers, suppliers and creditors of Rome
Bancorp and its subsidiaries, and the effects on the communities in which Rome
Bancorp's and its subsidiaries' facilities are located.
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By having these standards in the Certificate of Incorporation of Rome
Bancorp, the Board of Directors may be in a stronger position to oppose such a
transaction if the Board concludes that the transaction would not be in the best
interests of Rome Bancorp, even if the price offered is significantly greater
than the then market price of any equity security of Rome Bancorp.
Amendment of Certificate of Incorporation and Bylaws. The Certificate of
Incorporation provides that certain provisions of the Certificate of
Incorporation may not be altered, amended, repealed or rescinded without the
affirmative vote of either (1) not less than a majority of the authorized number
of directors and, if one or more Interested Stockholders exist, by not less than
a majority of the Disinterested Directors (as defined in the Certificate of
Incorporation) or (2) the holders of not less than [two-thirds] of the total
votes eligible to be cast by the holders of all outstanding shares of the
capital stock of Rome Bancorp entitled to vote thereon and, if the alteration,
amendment, repeal, or rescission is proposed by or on behalf of an Interested
Stockholder or a director who is an Affiliate or Associate of an Interested
Stockholder, by the affirmative vote of the holders of not less than a majority
of the total votes eligible to be cast by holders of all outstanding shares
entitled to vote thereon not beneficially owned by an Interested Stockholder or
an Affiliate or Associate thereof. Amendment of the provision relating to
business combinations must also be approved by either (i) a majority of the
Disinterested Directors, or (ii) the affirmative vote of not less than eighty
percent (80%) of the total number of votes eligible to be cast by the holders of
all outstanding shares of the voting stock, voting together as a single class,
together with the affirmative vote of not less than fifty percent (50%) of the
total number of votes eligible to be cast by the holders of all outstanding
shares of the voting stock not beneficially owned by any Interested Stockholder
or Affiliate or Associate thereof, voting together as a single class.
Furthermore, Rome Bancorp's Certificate of Incorporation provides that
provisions of the Bylaws that contain supermajority voting requirements may not
be altered, amended, repealed or rescinded without a vote of the Board or
holders of capital stock entitled to vote thereon that is not less than the
super majority specified in such provision. Absent these provisions, the DGCL
provides that a corporation's certificate of incorporation and by laws may be
amended by the holders of a majority of the corporation's outstanding capital
stock. The Certificate of Incorporation also provides that the Board of
Directors is authorized to make, alter, amend, rescind or repeal any of Rome
Bancorp's Bylaws in accordance with the terms thereof, regardless of whether the
Bylaw was initially adopted by the stockholders. However, this authorization
neither divests the stockholders of their right, nor limits their power to
adopt, amend, rescind or repeal any Bylaw under the DGCL. These provisions could
have the effect of discouraging a tender offer or other takeover attempt where
the ability to make fundamental changes through Bylaw amendments is an important
element of the takeover strategy of the acquiror.
Stockholder Nominations and Proposals. The Bylaws of Rome Bancorp also
require a stockholder who intends to nominate a candidate for election to the
Board of Directors, or to raise new business at an annual stockholder meeting to
give approximately 90 days notice in advance of the anniversary of the prior
year's annual stockholders' meeting to the Secretary of Rome Bancorp. The notice
provision requires a stockholder who desires to raise new business to provide
certain information to Rome Bancorp concerning the nature of the new business,
the stockholder and the stockholder's interest in the business matter.
Similarly, a stockholder who
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wishes to nominate any person for election as a director must provide Rome
Bancorp with certain information concerning the nominee and the proposing
stockholder.
Anti-Takeover Effects of Rome Bancorp's Certificate of Incorporation, Bylaws and
Benefit Plans Adopted in the Reorganization
The provisions described above are intended to reduce Rome Bancorp's
vulnerability to takeover attempts and certain other transactions which have not
been negotiated with and approved by members of its Board of Directors. The
provisions of the employment agreements, the change of control agreements, the
management recognition plan and the stock option plan to be established may also
discourage takeover attempts by increasing the costs to be incurred by Rome
Savings and Rome Bancorp in the event of a takeover. See "Management --
Employment Agreements," and "-- Benefits -- Stock Option Plan."
Rome Bancorp's Board of Directors believes that the provisions of the
Certificate of Incorporation, Bylaws and benefit plans to be established are in
the best interests of Rome Bancorp and its stockholders. An unsolicited non-
negotiated proposal can seriously disrupt the business and management of a
corporation and cause it great expense. Accordingly, the Board of Directors
believes it is in the best interests of Rome Bancorp and its stockholders to
encourage potential acquirors to negotiate directly with management and that
these provisions will encourage such negotiations and discourage non-negotiated
takeover attempts. It is also the Board of Directors' view that these provisions
should not discourage persons from proposing a merger or other transaction at a
price that reflects the true value of Rome Bancorp and that otherwise is in the
best interests of all stockholders.
Delaware Corporate Law
The State of Delaware has a statute designed to provide Delaware
corporations with additional protection against hostile takeovers. The takeover
statute, which is codified in Section 203 of the DGCL, is intended to discourage
certain takeover practices by impeding the ability of a hostile acquiror to
engage in certain transactions with the target company.
In general, Section 203 provides that a "Person" who owns 15% or more of
the outstanding voting stock of a Delaware corporation may not consummate a
merger or other business combination transaction with such corporation at any
time during the three-year period following the date such "Person" acquired 15%
of the outstanding voting stock. The term "business combination" is defined
broadly to cover a wide range of corporate transactions including mergers, sales
of assets, issuances of stock, transactions with subsidiaries and the receipt of
disproportionate financial benefits.
The statute exempts the following transactions from the requirements of
Section 203:
(1) any business combination if, prior to the date a person acquired 15%
of the voting stock, the Board of Directors approved either the
business combination or the transaction which resulted in the
stockholder acquiring 15%;
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(2) any business combination involving a person who acquired at least 85%
of the outstanding voting stock in the same transaction in which 15%
was acquired (with the number of shares outstanding calculated without
regard to those shares owned by the corporation's directors who are
also officers and by certain employee stock plans);
(3) any business combination that is approved by the Board of Directors
and by a two-thirds vote of the outstanding voting stock not owned by
the interest party; and
(4) certain business combinations that are proposed after the corporation
had received other acquisition proposals and which are approved or not
opposed by a majority of certain continuing members of the board of
directors.
A corporation may exempt itself from the requirement of the statute by adopting
an amendment to its Certificate of Incorporation or Bylaws electing not to be
governed by Section 203 of the Delaware General Corporation Law. At the present
time, the Board of Directors does not intend to propose any such amendment.
Regulatory Restrictions
Federal Change in Bank Control Act. Federal law provides that no person,
acting directly or indirectly or through or in concert with one or more other
persons, may acquire control of a bank unless the FDIC has been given 60 days
prior written notice. For this purpose, the term "control" means the acquisition
of the ownership, control or holding of the power to vote 25% or more of any
class of a bank holding company's voting stock, and the term "company" includes
an individual, corporation, partnership, and various other entities, acting
individually or in concert. In addition, an acquiring person is presumed to
acquire control if the person acquires the ownership, control or holding of the
power to vote of 10% or more of any class of the holding company's voting stock
if (a) Rome Bancorp's shares are registered pursuant to Section 12 of the
Exchange Act or (b) no other person will own, control or hold the power to vote
a greater percentage of that class of voting securities. The Federal Reserve
Board is authorized by the change in bank control act and its own regulations to
disapprove a proposed transaction on certain specified grounds. Accordingly, the
prior approval of the Federal Reserve Bank would be required before any person
could acquire 10% or more of the Common Stock of Rome Bancorp.
Federal Bank Holding Company Act. Federal law provides that no company may
acquire control of a bank holding company without the prior approval of the
Federal Reserve. Any company that acquires control becomes a "bank holding
company" subject to registration, examination and regulation by the Federal
Reserve. Pursuant to federal regulations, the term "company" is defined to
include banks, corporations, partnerships, associations, and certain trusts and
other entities, and the term "control" is deemed to exist if a company has
voting control of at least 25% of any class of a bank's voting stock, and may be
found to exist if a company controls in any manner the election of a majority of
the directors of the bank or has the power to exercise a controlling influence
over the management or policies of the bank. In addition, a bank holding company
must obtain Federal Reserve Board approval prior to acquiring voting control of
more
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than 5% of any class of voting stock of a bank or another bank holding company.
The foregoing restrictions do not apply to the acquisition of stock by one or
more tax-qualified employee stock benefit plans, provided that the plan or plans
do not have beneficial ownership in the aggregate of more than 25 percent of any
class of our equity security.
An acquisition of control of a bank that requires the prior approval of the
Federal Reserve Board under the Bank Holding Company Act is not subject to the
notice requirements of the Change in Bank Control Act. Accordingly, the prior
approval of the Federal Reserve Board under the Bank Holding Company Act would
be required (a) before any bank holding company could acquire 5% or more of the
Common Stock of Rome Bancorp and (b) before any other company could acquire 25%
or more of the Common Stock of Rome Bancorp.
The Federal Reserve may prohibit an acquisition of control if:
(1) it would result in a monopoly or substantially lessen competition;
(2) the financial condition of the acquiring person might jeopardize the
financial stability of the institution; or
(3) the competence, experience or integrity of the acquiring person
indicates that it would not be in the interest of the depositors or of
the public to permit the acquisition of control by such person.
Description of Capital Stock Rome Bancorp
General
Rome Bancorp is authorized to issue five million (5,000,000) shares of
common stock having a par value of $.01 per share and one million (1,000,000)
shares of preferred stock having a par value of $.01 per share. Rome Bancorp
currently expects to sell 1,373,281 shares of common stock (or 1,857,969 in the
event of an increase of 15% in the estimated valuation range) to purchasers of
common stock in the offering. In addition, Rome Bancorp expects to issue
2,016,094 shares of the common stock to Rome, MHC (or 2,318,508 in the event of
an increase of 15% in the estimated valuation range). Rome Bancorp will not
issue any shares of preferred stock in the offering. Except as discussed above
in "Restrictions on Acquisition of Rome Bancorp and Rome Savings," each share of
Rome Bancorp's common stock will have the same relative rights as, and will be
identical in all respects with, every other share of common stock. Upon payment
of the purchase price for the common stock in accordance with the plan of
reorganization, all such stock will be duly authorized, fully paid and non-
assessable.
The shares of common stock:
. are not deposit accounts and are subject to investment risk;
. are not insured or guaranteed by the FDIC, or any other government
agency; and
. are not guaranteed by Rome Bancorp, Rome, MHC or Rome Savings.
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Common Stock
Dividends. Rome Bancorp can pay dividends out of statutory surplus or from
net profits if, as and when declared by its Board of Directors. The payment of
dividends by Rome Bancorp is subject to limitations which are imposed by law.
See "Our Policy Regarding Dividends" and "Regulation of Rome Savings Bank and
Rome Bancorp." Rome, MHC currently does not intend to waive any dividends paid
by Rome Bancorp. The owners of common stock of Rome Bancorp, including Rome,
MHC, will be entitled to receive and share equally in such dividends as may be
declared by the Board of Directors out of funds legally available therefor. If
Rome Bancorp issues preferred stock, the holders of the preferred stock may have
a priority over the holders of the common stock with respect to dividends.
Voting Rights. Upon the effective date of the reorganization, the holders
of common stock of Rome Bancorp will possess exclusive voting rights in Rome
Bancorp. They will elect Rome Bancorp's Board of Directors and act on such other
matters as are required to be presented to them under Delaware law or Rome
Bancorp's Certificate of Incorporation or as are otherwise presented to them by
the Board of Directors. Each holder of common stock will be entitled to one vote
per share and will not have any right to cumulate votes in the election of
directors. Under certain circumstances, shares in excess of 10% of Rome
Bancorp's common stock, exclusive of the shares held by Rome, MHC, may be
considered "Excess Shares" and may therefore not be entitled to vote. See
"Restrictions on Acquisition of Rome Bancorp and Rome Savings." If Rome Bancorp
issues preferred stock, holders of the preferred stock may also possess voting
rights. Certain matters, including the removal of directors, the approval of
business combinations and amending the Certificate of Incorporation or Bylaws,
may require an 80% or two-thirds stockholder vote. See "Restrictions on
Acquisition of Rome Bancorp and Rome Savings."
Liquidation. In the event of any liquidation, dissolution or winding up of
Rome Savings, Rome Bancorp, as owner of Rome Savings' capital stock, would be
entitled to receive, after payment or provision for payment of all debts and
liabilities of Rome Savings (including all deposit accounts and accrued interest
thereon) and after distribution of the balance in the special liquidation
account to eligible account holders and the supplemental eligible account
holders (see "The Reorganization and The Offering -- Effects of the
Reorganization -- Liquidation Rights"), all assets of Rome Savings available for
distribution. In the event of liquidation, dissolution or winding up of Rome
Bancorp, the holders of its common stock would be entitled to receive, after
payment or provision for payment of all its debts and liabilities, all of the
assets of Rome Bancorp available for distribution. If preferred stock is issued,
the holders thereof may have a priority over the holders of the common stock in
the event of the liquidation or dissolution.
Preemptive Rights; Redemption. Holders of the common stock of Rome Bancorp
will not be entitled to preemptive rights with respect to any shares which may
be issued. The common stock is not subject to redemption.
141
<PAGE>
Preferred Stock
Rome Bancorp will not issue any shares of its authorized preferred stock in
the reorganization. We may issue preferred stock with such preferences and
designations as the Board of Directors may from time to time determine. The
board of directors can, without stockholder approval, issue preferred stock with
voting, dividend, liquidation and conversion rights which could dilute the
voting strength of the holders of the common stock and may assist management in
impeding an unfriendly takeover or attempted change in control.
LEGAL AND TAX OPINIONS
The legality of the issuance of the common stock being offered and certain
matters relating to the reorganization and federal taxation will be passed upon
for us by Thacher Proffitt & Wood, Washington, DC. Certain matters relating to
state taxation will be passed upon for us by KPMG LLP. Certain legal matters
will be passed upon for us by Sandler O'Neill & Partners, L.P. by Silver,
Freedman & Taff, L.L.P. Washington, DC.
EXPERTS
The consolidated financial statements of The Rome Savings Bank and
subsidiaries as of December 31, 1998 and 1997, and for the years then ended,
have been included herein and in the registration statement filed with the SEC
in reliance upon the report of KPMG LLP, independent certified public
accountants, appearing elsewhere herein, and upon the authority of said firm as
experts in accounting and auditing.
RP Financial has consented to the publication in this document of a summary
of its letter to Rome Savings setting forth its opinion as to the estimated pro
forma market value of Rome Savings in the converted form and its opinion setting
forth the value of subscription rights and to the use of its name and statements
with respect to it appearing in this document.
REGISTRATION REQUIREMENTS
Our common stock is registered pursuant to Section 12(g) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). We will be subject to the
information, proxy solicitation, insider trading restrictions, tender offer
rules, periodic reporting and other requirements of the SEC under the Exchange
Act. We may not deregister the common stock under the Exchange Act for a period
of at least three years following the reorganization.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We are subject to the informational requirements of the Exchange Act and
must file reports and other information with the SEC.
We have filed with the SEC a registration statement on Form [SB-2] under
the Securities Act of 1933, as amended, with respect to the common stock offered
in this document. As
142
<PAGE>
permitted by the rules and regulations of the SEC, this document does not
contain all the information set forth in the registration statement. You may
examine this information without charge at the public reference facilities of
the SEC located at 450 Fifth Street, N.W., Washington, D.C. 20549. You may
obtain copies of this material from the SEC at prescribed rates. You may obtain
information on the operations of the Public Reference Room by calling the SEC at
1-800-SEC-0330. The SEC also maintains an Internet address ("web site") that
contains reports, proxy and information statements and other information
regarding registrants, including Rome Bancorp, that file electronically with the
SEC. The address for this web site is "http://www.sec.gov."
The statements contained in this document as to the contents of any
contract or other document filed as an exhibit to the Form SB-2 are, of
necessity, brief descriptions and are not necessarily complete; each such
statement is qualified by reference to such contract or document.
A copy of Rome Bancorp's Certificate of Incorporation and Bylaws, as well
as those of Rome Savings and Rome, MHC, are available without charge from Rome
Savings. Copies of the plan of reorganization are also available from Rome
Savings without charge.
Rome Savings has filed notice of mutual holding company reorganization with
the New York State Department of. In addition, Rome Savings has filed copies of
that application with the FDIC. Rome Bancorp has filed an application with the
Federal Reserve Board of New York to become a bank holding company. This
prospectus omits certain information contained in those applications.
143
<PAGE>
THE ROME SAVINGS BANK
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Independent Auditors' Report........................................... F-2
Consolidated Statements of Financial Condition at
December 31, 1998 and 1997 and at March 31, 1999 (unaudited)..... F-3
Consolidated Statements of Income for the
years ended December 31, 1998 and 1997 and
for the three months ended March 31, 1999 and 1998 (unaudited)... F-4
Consolidated Statements of Equity and Comprehensive Income
for the years ended December 3111998 and 1997
and for the three months ended March 31, 1999 (unaudited)........ F-5
Consolidated Statements of Cash Flows for the three years
ended December 31, 1998 and 1997 and for the
three months ended March 31, 1999 and 1998 (unaudited)........... F-6
Notes to Consolidated Financial Statements............................. F-7
- -------------------------------------------------------------------------------
Other schedules are omitted as they are not required or are not applicable or
the required information is shown in the consolidated financial statements or
related notes.
Financial statements of Rome, MHC and Rome Bancorp, Inc. have not been provided
because they have conducted no operations. Rome, MHC has not yet been organized
and Rome Bancorp, Inc. has no assets and no liabilities.
- --------------------------------------------------------------------------------
F-1
<PAGE>
Independent Auditors' Report
The Board of Trustees
The Rome Savings Bank:
We have audited the accompanying consolidated statements of condition of The
Rome Savings Bank and subsidiaries as of December 31, 1998 and 1997, and the
related consolidated statements of income, equity and comprehensive income, and
cash flows for each of the years then ended. These consolidated financial
statements are the responsibility of the Bank's management. Our responsibility
is to express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of The Rome Savings
Bank and subsidiaries at December 31, 1998 and 1997, and the results of their
operations and their cash flows for each of the years then ended, in conformity
with generally accepted accounting principles.
/s/ KPMG LLP
February 5, 1999
Syracuse, New York
F-2
<PAGE>
THE ROME SAVINGS BANK AND SUBSIDIARIES
Consolidated Statements of Condition
March 31, 1999 and December 31, 1998 and 1997
(in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
------------------------
Assets 1999 1998 1997
---------- ---------- ----------
(unaudited)
<S> <C> <C> <C>
Cash and due from banks $ 8,391 6,136 7,925
Federal funds sold and other
interest bearing deposits 17,738 19,078 9,374
Securities available for sale, at fair
value 52,856 55,036 54,947
Securities held to maturity (fair
value of $1,484 (unaudited),
$1,542 and $1,773 at March
31, 1999 and December 31,
1998 and 1997, respectively) 1,420 1,472 1,681
Loans 136,852 136,804 132,717
Less: Allowance for loan
losses 1,898 1,956 1,742
---------- ---------- ----------
Net loans 134,954 134,848 130,975
Premises and equipment, net 3,929 3,957 3,740
Accrued interest receivable 1,829 1,578 1,601
Other real estate owned 267 294 1,626
Other assets 2,895 2,874 2,487
---------- ---------- ----------
Total assets $ 224,279 225,273 214,356
========== ========== ==========
Liabilities
Liabilities:
Deposits:
Non-interest bearing 20,429 20,231 16,240
Savings 78,398 75,935 75,047
Money market 6,353 5,423 4,804
Time 84,152 84,739 85,831
Other interest bearing 2,594 2,802 2,574
---------- ---------- ----------
Total deposits 191,926 189,130 184,496
Due to broker -- 4,026 --
Other liabilities 3,414 3,455 3,066
---------- ---------- ----------
Total liabilities 195,340 196,611 187,562
---------- ---------- ----------
Equity:
Surplus fund 5,687 5,687 5,687
Retained earnings 22,611 22,222 20,697
Accumulated other
comprehensive income 641 753 410
---------- ---------- ----------
Total equity 28,939 28,662 26,794
---------- ---------- ----------
Total liabilities and
equity $ 224,279 225,273 214,356
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
THE ROME SAVINGS BANK AND SUBSIDIARIES
Consolidated Statements of Income
Three months ended March 31, 1999 and 1998 and
years ended December 31, 1998 and 1997
(in thousands)
<TABLE>
<CAPTION>
Three months Years ended
ended March 31, December 31,
--------------------- ---------------------
1999 1998 1998 1997
--------- --------- --------- ---------
(unaudited)
<S> <C> <C> <C> <C>
Interest income:
Loans $ 2,822 2,832 11,334 11,532
Securities 733 808 3,464 3,341
Other short-term investments 175 167 713 669
--------- --------- --------- ---------
Total interest income 3,730 3,807 15,511 15,542
Interest expense on deposits 1,733 1,781 7,203 7,311
--------- --------- --------- ---------
Net interest income 1,997 2,026 8,308 8,231
Provision for loan losses -- 75 390 360
--------- --------- --------- ---------
Net interest income
after provision for
loan losses 1,997 1,951 7,918 7,871
--------- --------- --------- ---------
Non-interest income:
Service charges 130 131 562 517
Net gain on sale of securities -- 139 314 157
Other income 124 66 206 419
--------- --------- --------- ---------
Total non-interest
income 254 336 1,082 1,093
--------- --------- --------- ---------
Non-interest expenses:
Salaries and employee
benefits 920 747 3,263 3,126
Building, occupancy and
equipment 349 276 1,187 1,094
Real estate owned, net 7 53 383 385
ATM service fees 44 41 169 154
Contributions 11 16 152 192
Other 357 348 1,468 1,479
--------- --------- --------- ---------
Total non-interest
expenses 1,688 1,481 6,622 6,430
--------- --------- --------- ---------
Income before income
tax expense 563 806 2,378 2,534
Income tax expense 174 325 853 996
--------- --------- --------- ---------
Net income $ 389 481 1,525 1,538
========= ========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
THE ROME SAVINGS BANK AND SUBSIDIARIES
Consolidated Statements of Equity and Comprehensive Income
Three months ended March 31, 1999 and
years ended December 31, 1998 and 1997
(in thousands)
<TABLE>
<CAPTION>
Accumulated Other
Surplus Retained Comprehensive
Fund Earnings Income Total
----------- ---------- ----------------- -------
<S> <C> <C> <C> <C>
Balances at
December 31, 1996 $ 5,533 19,313 40 24,886
Comprehensive income:
Net income -- 1,538 -- 1,538
Change in net unrealized
gain on available for sale
securities, net of taxes -- -- 370 370
----------- ---------- ---------------- -------
Total comprehensive
income -- -- -- 1,908
----------- ---------- ---------------- -------
Statutory allocation of net
income to surplus 154 (154) -- --
----------- ---------- ---------------- -------
Balances at December 31, 1997 5,687 20,697 410 26,794
Comprehensive income:
Net income -- 1,525 -- 1,525
Change in net unrealized
gain on available for sale
securities, net of taxes -- -- 343 343
----------- ---------- ---------------- -------
Total comprehensive
income -- -- -- 1,868
----------- ---------- ---------------- -------
Balances at
December 31, 1998 5,687 22,222 753 28,662
Comprehensive income:
Net income (unaudited) -- 389 -- 389
Change in net unrealized
gain on available for sale
securities, net of taxes
(unaudited) -- -- (112) (112)
----------- ---------- ---------------- -------
Total comprehensive
income (unaudited) -- -- -- 277
----------- ---------- ---------------- -------
Balances at March 31, 1999
(unaudited) $ 5,687 22,611 641 28,939
=========== ========== ================ =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
THE ROME SAVINGS BANK AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Three months ended March 31, 1999 and 1998 and
years ended December 31, 1998 and 1997
(in thousands)
<TABLE>
<CAPTION>
Three months Years ended
ended March 31, December 31,
------------------- -------------------
1999 1998 1998 1997
---------- ------- --------- --------
(unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 389 481 1,525 1,538
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 129 92 418 394
(Increase) decrease in accrued
interest receivable (251) (244) 23 95
Provision for loan losses -- 75 390 360
Net gains on sales of securities -- (139) (314) (157)
Proceeds from sale of education loans 251 -- 1,491 2,816
Net (gains) losses on sale of
real estate owned (5) 1 21 119
Write down of real estate owned -- -- 199 --
Amortization and accretion of
premiums and discounts 6 (32) (36) (27)
(Decrease) increase in other liabilities (41) (24) 389 485
Deferred income tax 13 (39) (194) (36)
Decrease (increase) in other assets 40 (201) (422) (31)
---------- ------- --------- --------
Net cash provided
by operating activities 531 (30) 3,490 5,556
---------- ------- --------- --------
Cash flows from investing activities:
Net (increase) decrease in loans (391) (1,238) (6,151) 2,224
Proceeds from sales of securities
available for sale -- 443 921 3,459
Proceeds from maturities
and principal reductions of
securities available for sale 6,045 4,000 21,000 9,000
Purchases of securities available for sale (8,083) (3) (17,060) (19,803)
Purchases of securities held to maturity -- -- (107) (448)
Proceeds from maturities and
principal reductions of
securities held to maturity 52 41 314 291
Proceeds from sale of real estate owned 66 138 1,509 614
Additions to premises and equipment (101) (30) (635) (203)
---------- ------- --------- --------
Net cash (used in) provided
by investing activities (2,412) 3,351 (209) (4,866)
---------- ------- --------- --------
Cash flows from financing activities:
Decrease in time deposits (587) (668) (1,092) (692)
Increase (decrease) in other deposits 3,383 3,123 5,726 609
---------- ------- --------- --------
Net cash provided by
(used in) financing
activities 2,796 2,455 4,634 (83)
---------- ------- --------- --------
Net increase (decrease) in cash and cash
equivalents 915 5,776 7,915 607
Cash and cash equivalents at beginning of year 25,214 17,299 17,299 16,692
---------- ------- --------- --------
Cash and cash equivalents at end of year $ 26,129 23,075 25,214 17,299
========== ======= ========= ========
Supplemental disclosure of cash flow information:
Non-cash investing activities:
Change in securities purchased not settled $ (4,026) -- 4,026 --
Additions to real estate owned 34 52 397 910
Cash paid during the period for:
Interest 1,733 1,781 7,203 7,311
Income taxes 374 401 1,023 603
========== ======= ========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
THE ROME SAVINGS BANK AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Three months ended March 31, 1999 and 1998 (unaudited) and
years ended December 31, 1998 and 1997
(1) Adoption of Plan of Conversion
On January 22, 1999, the Board of Trustees of The Rome Savings Bank (the
Bank) adopted the Amended and Restated Plan of Reorganization (the Plan),
pursuant to which the Bank will reorganize into the mutual holding company
form of organization as a wholly-owned subsidiary of Rome Bancorp, Inc., a
mid-tier stock holding company that will be a majority-owned subsidiary of
Rome MHC (the MHC). Following receipt of all required regulatory approvals,
the approval of the depositors of the Bank entitled to vote on the Plan,
and the satisfaction of all other conditions precedent to the
Reorganization, the Bank will consummate the Reorganization. Pursuant to
the Plan, the Reorganization will be effected in a manner that is
consistent with applicable New York and federal law and regulations.
Contemporaneously with the Reorganization, Rome Bancorp, Inc. will sell a
Minority Interest in shares of Common Stock in a public stock offering
(Offering). Subsequent to the Reorganization and Offering, the minority
interest will represent 49% or less of the Rome Bancorp, Inc.'s outstanding
shares, with the MHC owning at least 51%.
The Reorganization will be accounted for as a change in corporate form with
no resulting change in the historical basis of the Bank's assets,
liabilities and equity. At the time of the reorganization, the Bank will
establish a liquidation account in an amount equal to its capital as of the
date of the latest statement of financial condition appearing in the final
prospectus. The liquidation account will be maintained for the benefit of
both eligible and supplemental eligible account holders who continue to
maintain their accounts at the Bank after the reorganization. The
liquidation account will be reduced annually to the extent that eligible
account holders have reduced their qualifying deposits as of each
anniversary date. Subsequent increases will not restore an eligible account
holder's interest in the liquidation account. In the event of a complete
liquidation, each eligible account holder will be entitled to receive a
distribution from the liquidation account in an amount proportionate to the
current adjusted qualifying balances for account then held.
In connection with the reorganization, the Bank proposes to create a
charitable foundation to be funded by the holding company by contributing a
number of authorized but unissued shares of common stock or grants of cash
to the charitable foundation, immediately following the reorganization.
Such contribution, once made, will not be recoverable by the Bank or the
holding company. The holding company will recognize expense equal to the
fair value of the stock in the quarter in which the contribution occurs,
which is expected to be the third or fourth quarter of 1999. Such expense
will reduce earnings and could have a material impact on the Bank's
earnings for such quarter and for 1999.
The cost of reorganization will be deferred and reduce the proceeds from
the sale of the minority interest. If the reorganization is not completed,
all costs will be charged to expense.
F-7 (Continued)
<PAGE>
THE ROME SAVINGS BANK AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Three months ended March 31, 1999 and 1998 (unaudited) and
years ended December 31, 1998 and 1997
(2) Business
The Bank is organized under the laws of New York. The Bank provides
financial services primarily to individuals and small- to medium-sized
businesses, operating four branches in Oneida County of New York State. The
Bank is subject to regulation by the New York State Banking Department and
the Federal Deposit Insurance Corporation (FDIC) as a mutual savings bank.
(3) Summary of Significant Accounting Policies
(a) Basis of Presentation
The consolidated financial statements have been prepared in conformity
with generally accepted accounting principles. Certain prior year
amounts have been reclassified to conform to the current year
classifications. A description of the significant accounting policies
is presented below. In preparing the consolidated financial
statements, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities as of the
date of the balance sheet and disclosures of contingent assets and
liabilities and the reported amounts of revenues and expenses for the
period. Actual results could differ from those estimates.
The consolidated financial statements include the accounts of The Rome
Savings Bank and its wholly-owned subsidiaries. All intercompany
accounts and transactions are eliminated in consolidation.
(b) Securities
The Bank classifies its debt securities as either available-for-sale
or held-to-maturity as the Bank does not hold any securities
considered to be trading. Held-to-maturity securities are those debt
securities the Bank has the ability and intent to hold until maturity.
All other debt securities are classified as available for sale.
Available-for-sale securities are recorded at fair value. Held-to-
maturity securities are recorded at amortized cost. Unrealized holding
gains and losses, net of the related tax effect, on available-for-sale
securities are excluded from earnings and reported as accumulated
other comprehensive income, a component of net worth, until realized.
A decline in the fair value of an available-for-sale or held-to-
maturity security below cost that is deemed to be other than temporary
is charged to earnings resulting in the establishment of a new cost
basis for the security.
F-8 (Continued)
<PAGE>
THE ROME SAVINGS BANK AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Three months ended March 31, 1999 and 1998 (unaudited) and
years ended December 31, 1998 and 1997
Premiums and discounts are amortized or accreted over the life of the
related security as an adjustment to yield using the interest method.
Dividend and interest income are recognized when earned. Purchases and
sales are recorded on a trade date basis with settlement occurring
shortly thereafter. Realized gains and losses on securities sold are
derived using the specific identification method for determining the
cost of securities sold.
(c) Loans
Loans are reported at the principal amount outstanding. Origination
fees and certain direct origination costs related to lending
activities are recognized in the period that the loan is closed. The
difference between origination fees and the related direct origination
costs are not material. The Bank has the ability and intent to hold
its loans to maturity except for education loans which are sold to a
third party upon reaching repayment status.
Interest on loans is accrued and included in income at contractual
rates applied to principal outstanding. The accrual of interest on
loans (including impaired loans) is generally discontinued, and
previously accrued interest is reversed when loan payments are 90 days
or more past due or when, by the judgment of management,
collectibility becomes uncertain. Subsequent recognition of income
occurs only to the extent that repayment is received. Loans are
generally returned to an accrual status when both principal and
interest are current and the loan is determined to be performing in
accordance with the applicable loan terms. When the future
collectibility of the recorded loan balance is expected, interest
income may be recognized on a cash basis.
(d) Allowance for Loan Losses
The allowance for loan losses is increased by the provision for loan
losses charged to operations and is decreased by the charge-off of
loans, net of recoveries. Loans are charged off when management
determines that ultimate success of the loan's collectibility is
remote.
Management's evaluation of the adequacy of the allowance considers the
Bank's historical loan loss experience, review of specific loans,
current economic conditions and such other factors considered
appropriate to estimate losses. Management uses presently available
information to estimate probable losses on loans; however, future
additions to the allowance may be necessary based on changes in
estimates, assumptions or economic conditions. In addition, various
regulatory agencies, as an integral part of their examination process,
periodically review the Bank's allowance for loan losses and may
require the Bank to recognize additions to the allowance based on
their judgment of information available to them at the time of their
examination.
F-9 (Continued)
<PAGE>
THE ROME SAVINGS BANK AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Three months ended March 31, 1999 and 1998 (unaudited) and
years ended December 31, 1998 and 1997
The allowance for loan losses is periodically evaluated by management
in order to maintain the allowance at a level sufficient to absorb
potential loan losses based upon known and inherent risks in the loan
portfolio.
The Bank estimates losses on impaired loans based on the present value
of expected future cash flows (discounted at the loan's effective
interest rate) or the fair value of the underlying collateral if the
loan is collateral dependent. An impairment loss exists if the
recorded investment in a loan exceeds the value of the loan as
measured by the aforementioned methods. Impairment losses are included
as a component of the allowance for loan losses. A loan is considered
impaired when it is probable that the Bank will be unable to collect
all amounts due according to the contractual terms of the loan
agreement. Generally, all commercial mortgage loans and commercial
loans greater than $250,000 in a nonaccrual status (90 days or more
delinquent) are considered impaired. Commercial mortgage loans and
commercial loans less than $250,000 and all residential mortgage
loans, consumer loans and education loans are evaluated collectively
by portfolio since they are homogenous and generally carry smaller
individual balances. The Bank recognizes interest income on impaired
loans using the cash basis of income recognition.
(e) Real Estate Owned
Real estate acquired through foreclosure or deed in lieu of
foreclosure is recorded at the lower of the unpaid loan balance on the
property at the date of transfer, or fair value less estimated costs
to sell. Write-downs from cost to fair value which are required at the
time of foreclosure are charged to the allowance for loan losses.
Adjustments to the carrying value of such properties that result from
subsequent declines in value are charged to operations in the period
in which the declines occur.
(f) Premises and Equipment
Land is carried at cost and buildings and improvements and furniture
and equipment are carried at cost less accumulated depreciation and
amortization. Depreciation is computed on the straight-line method
over the estimated useful lives of the assets (7 to 40 years for
buildings and 3 to 10 years for furniture and equipment). Amortization
of leasehold improvements is computed on the straight-line method over
the shorter of the lease term or the estimated useful life of the
improvements.
F-10 (Continued)
<PAGE>
THE ROME SAVINGS BANK AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Three months ended March 31, 1999 and 1998 (unaudited) and
years ended December 31, 1998 and 1997
(g) Employee Benefit Plans
On January 1, 1998, the Bank adopted Statement of Financial Accounting
Standards (SFAS) No. 132, Employers' Disclosures about Pensions and
Other Postretirement Benefits. SFAS No. 132 revises employers'
disclosures about pension and postretirement benefit plans, but does
not change the accounting for these plans.
The Bank maintains a non-contributory defined benefit pension plan
that covers substantially all employees. The benefits under the
pension plan are based on the employee's years of service and
compensation. The projected unit credit method is utilized for
measuring net periodic pension costs over the employees' service
lives. The Bank's funding policy is to contribute annually at least
the minimum required to meet the funding standards set forth under
provisions of the Employee Retirement Income Security Act of 1974.
The Bank also has a defined contribution 401(k) Savings Plan for all
full time salaried employees. Employees are permitted to contribute up
to 15% of base pay to the Savings Plan, subject to certain
limitations. The Bank matches 50% of each employee's contributions up
to a limit of 3% of the employee's base pay.
The Bank provides health care and life insurance benefits to retired
employees. The estimated costs of providing benefits are accrued over
the years the employees render services necessary to earn those
benefits.
(h) Income Taxes
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income
in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in the period that
includes the enactment date.
(i) Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents
include cash on hand, amounts due from banks, and federal funds sold
which represents short-term highly liquid investments.
F-11 (Continued)
<PAGE>
THE ROME SAVINGS BANK AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Three months ended March 31, 1999 and 1998 (unaudited) and
years ended December 31, 1998 and 1997
(j) Financial Instruments With Off-Balance Sheet Risk
The Bank does not engage in the use of derivative financial
instruments. The Bank's off-balance sheet financial instruments are
limited to commitments to extend credit.
(k) Comprehensive Income
On January 1, 1998, the Bank adopted the provisions of SFAS No. 130,
Reporting Comprehensive Income. SFAS No. 130 establishes standards for
reporting and display of comprehensive income and its components. At
the Bank, comprehensive income represents net income and the net
change in unrealized gains or losses on securities available for sale,
net of taxes, and is presented in the consolidated statements of
equity and comprehensive income. Prior year consolidated financial
statements have been reclassified to conform to the requirements of
SFAS No. 130.
(l) Segment Reporting
During 1998, the Bank adopted SFAS No. 131, Disclosures about Segments
of Enterprise and Related Information. SFAS No. 131 requires public
companies to report certain financial and other information about key
revenue-producing segments for which such information is available and
utilized by the chief operating decision maker. Specific information
to be reported for individual segments include profit and loss,
certain revenue and expense items, and total assets. As a community-
oriented financial institution, substantially all of the Bank's
operations involve the delivery of loan and deposit products to
customers. Management makes operating decisions and assesses
performance based on an ongoing review of these community banking
operations, which constitute the Bank's only operating segment for
financial reporting purposes. Therefore, the adoption of SFAS No. 131
did not result in any changes in the Bank's reporting.
F-12 (Continued)
<PAGE>
THE ROME SAVINGS BANK AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Three months ended March 31, 1999 and 1998 (unaudited) and
years ended December 31, 1998 and 1997
(4) Securities
Securities are summarized as follows (in thousands):
<TABLE>
<CAPTION>
March 31, 1999
--------------------------------------------------
(unaudited)
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- ------
<S> <C> <C> <C> <C>
Available-for-sale:
U.S. Government securities $ 19,022 123 -- 19,145
U.S. Government agencies 10,286 129 -- 10,415
State and Municipal
obligations 13,092 163 8 13,247
Mortgage-backed securities 4,978 -- 23 4,955
--------- ----- --- ------
Total debt securities 47,378 415 31 47,762
FHLB stock 763 -- -- 763
Equity securities 3,646 688 3 4,331
--------- ----- --- ------
$ 51,787 1,103 34 52,856
========= ===== === ======
Held-to-maturity:
U.S. Government securities 502 8 -- 510
Mortgage-backed securities 699 56 -- 755
Other bonds 219 -- -- 219
--------- ----- --- ------
$ 1,420 64 -- 1,484
========= ===== === ======
</TABLE>
<TABLE>
<CAPTION>
December 31, 1998
--------------------------------------------------
(unaudited)
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- ------
<S> <C> <C> <C> <C>
Available-for-sale:
U.S. Government securities $ 22,031 211 -- 22,242
U.S. Government agencies 10,041 97 -- 10,138
State and Municipal
obligations 12,392 269 1 12,660
Mortgage-backed securities 5,024 -- 28 4,996
--------- ----- --- ------
Total debt securities 49,488 577 29 50,036
FHLB stock 747 -- -- 747
Equity securities 3,546 708 1 4,253
--------- ----- --- ------
$ 53,781 1,285 30 55,036
========= ===== === ======
Held-to-maturity:
U.S. Government securities 502 11 -- 513
Mortgage-backed securities 750 59 -- 809
Other bonds 220 -- -- 220
--------- ----- --- ------
$ 1,472 70 -- 1,542
========= ===== === ======
</TABLE>
F-13 (Continued)
<PAGE>
THE ROME SAVINGS BANK AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Three months ended March 31, 1999 and 1998 (unaudited) and
years ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
December 31, 1997
--------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- -----
<S> <C> <C> <C> <C>
Available-for-sale:
U.S. Government securities $ 35,015 189 14 35,190
U.S. Government agencies 16,132 67 29 16,170
------- --- --- ------
Total debt securities 51,147 256 43 51,360
FHLB stock 747 -- -- 747
Equity securities 2,370 471 1 2,840
------- --- --- ------
$54,264 727 44 54,947
======= === === ======
Held-to-maturity:
U.S. Government securities 504 10 -- 514
Mortgage-backed securities 959 82 -- 1,041
Other bonds 218 -- -- 218
------- --- --- ------
$ 1,681 92 -- 1,773
======= === === ======
</TABLE>
The following table presents the amortized cost and fair value of debt
securities based on the scheduled maturity date (in thousands):
<TABLE>
<CAPTION>
March 31, 1999
----------------------
(unaudited)
Amortized Fair
Cost Value
--------- -------
<S> <C> <C>
Available-for-sale:
Due within one year $ 13,025 13,084
Due after one year through five years 13,473 13,563
Due after five years through ten years 18,891 19,025
Due after ten years 1,989 2,090
-------- ------
$ 47,378 47,762
======== ======
Held-to-maturity:
Due within one year 502 510
Due after one year through five years 44 44
Due after five years through ten years 258 275
Due after ten years 616 655
-------- ------
$ 1,420 1,484
======== ======
</TABLE>
F-14 (Continued)
<PAGE>
THE ROME SAVINGS BANK AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Three months ended March 31, 1999 and 1998 (unaudited) and
years ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
December 31, 1998
----------------------
Amortized Fair
Cost Value
--------- -------
<S> <C> <C>
Available-for-sale:
Due within one year $ 18,004 18,126
Due after one year through five years 12,183 12,320
Due after five years through ten years 17,416 17,656
Due after ten years 1,885 1,934
-------- ------
$ 49,488 50,036
======== ======
Held-to-maturity:
Due after one year through five years 552 564
Due after five years through ten years 150 157
Due after ten years 770 821
-------- ------
$ 1,472 1,542
======== ======
</TABLE>
Gross gains of $139,000 were realized on sales of securities during the
three months ended March 31, 1998 (unaudited). There were no gross gains
realized on sales of securities during the three months ended March 31,
1999. There were no gross losses realized on sales of securities during the
three months ended March 31, 1999 and 1998 (unaudited). Gross gains of
$314,000 and $157,000 were realized on sales of securities in 1998 and
1997, respectively. There were no gross losses realized on sales of
securities in 1998 and 1997. There were no sales of held to maturity
securities during the three month period ended March 31, 1999, or in 1998
or 1997.
(5) Loans
Loans are summarized as follows (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
------------------
1999 1998 1997
----------- -------- -------
(unaudited)
<S> <C> <C> <C>
Mortgage loans:
Residential $ 65,912 65,752 66,154
Commercial 29,033 29,499 28,440
Construction and land 324 391 936
-------- ------- -------
95,269 95,642 95,530
-------- ------- -------
Other loans:
Commercial 17,328 17,271 15,197
Automobile loans 9,669 9,460 8,325
Property improvement
and equipment 1,876 2,108 2,264
Education 5,610 5,224 5,226
Other consumer 7,100 7,099 6,175
-------- ------- -------
41,583 41,162 37,187
-------- ------- -------
$136,852 136,804 132,717
======== ======= =======
</TABLE>
F-15
<PAGE>
THE ROME SAVINGS BANK AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Three months ended March 31, 1999 and 1998 (unaudited) and
years ended December 31, 1998 and 1997
Changes in the allowance for loan losses are summarized as follows (in
thousands):
<TABLE>
<CAPTION>
Three months ended Years ended
March 31, December 31,
------------------ ------------
1999 1998 1998 1997
---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C>
Balance at beginning of
period $ 1,956 1,742 1,742 1,708
Provision charged to
operations -- 75 390 360
Recoveries 159 46 235 333
Loans charged off (217) (14) (411) (659)
------- ----- ----- -----
Balance at end of period $ 1,898 1,849 1,956 1,742
======= ===== ===== =====
</TABLE>
At March 31, 1999 (unaudited), December 31, 1998 and 1997, there were no
impaired loans. The Bank recognized no interest on impaired loans during
the three months ended March 31, 1999 and 1998 (unaudited) and the years
ended December 31, 1998 and 1997.
The principal balances of loans not accruing interest amounted to $405,000
(unaudited), $799,000 and $1,043,000 at March 31, 1999, December 31, 1998
and 1997, respectively. The differences between the amount of interest
income that would have been recorded if nonaccrual loans had been paid in
accordance with their original terms and the amount of interest income that
was recorded during the three-month periods ended March 31, 1999 and 1998
(unaudited) and during the years ended December 31, 1998 and 1997 was
immaterial.
Loans serviced for others totaled $4,331,000 (unaudited) at March 31, 1999
and $4,627,000 and $6,824,000 at December 31, 1998 and 1997, respectively.
A substantial portion of the Bank's loans are mortgage and consumer loans
in Oneida County. Accordingly, the ultimate collectibility of a substantial
portion of the Bank's loan portfolio is susceptible to changes in market
conditions in this area. A majority of the Bank's loan portfolio is secured
by real estate.
The Bank's concentrations of credit risk are disclosed in the schedule of
loan classifications. Other than general economic risks, management is not
aware of any material concentrations of credit risk to any industry or
individual borrower.
F-16
<PAGE>
THE ROME SAVINGS BANK AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Three months ended March 31, 1999 and 1998 (unaudited) and
years ended December 31, 1998 and 1997
(6) Premises and Equipment
Premises and equipment at December 31 are summarized as follows (in
thousands):
<TABLE>
<CAPTION>
March 31, December 31,
--------------
1999 1998 1997
--------- ---- ----
(unaudited)
<S> <C> <C> <C>
Land $ 836 836 827
Buildings and improvements 4,392 4,384 4,348
Furniture and equipment 4,783 4,690 4,100
------- ----- -----
10,011 9,910 9,275
Less accumulated
depreciation and
amortization 6,082 5,953 5,535
------- ----- -----
$ 3,929 3,957 3,740
======= ===== =====
</TABLE>
Depreciation and amortization expense included in building, occupancy and
equipment expense amounted to $129,000 and $92,000 during the three months
ended March 31, 1999 and 1998 (unaudited), respectively, and $418,000 and
$394,000 during the years ended December 31, 1998 and 1997, respectively.
(7) Deposits
Contractual maturities of time deposits are summarized as follows (in
thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
--------- ------------
(unaudited)
<S> <C> <C>
Within one year $ 57,077 54,850
One through two years 16,346 18,001
Two through three years 4,863 6,290
Three through four years 3,178 2,907
Four through five years 2,688 2,691
-------- ------
Total time deposits $ 84,152 84,739
======== ======
</TABLE>
F-17 (Continued)
<PAGE>
THE ROME SAVINGS BANK AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Three months ended March 31, 1999 and 1998 (unaudited) and
years ended December 31, 1998 and 1997
At March 31, 1999 and December 31, 1998 and 1997, time deposits with
balances of $100,000 or more totaled approximately $10,808,000 (unaudited),
$10,244,000 and $9,339,000, respectively.
(8) Borrowings
At March 31, 1999 (unaudited) and December 31, 1998, the Bank had available
an unused line of credit of $21,205,000 with the Federal Home Loan Bank of
New York which is subject to review and renewal. There were no outstanding
borrowings for the periods ended at March 31, 1999 (unaudited) and December
31, 1998 and 1997
(9) Income Taxes
Total income taxes were allocated as follows (in thousands):
<TABLE>
<CAPTION>
Three months ended Years ended
March 31, December 31,
------------------ -------------
1999 1998 1998 1997
------- ----- ----- -----
<S> <C> <C> <C> <C>
Income from operations $ 174 325 853 996
Changes in net worth, for
unrealized gains (losses)
on securities
available-for-sale (74) 59 229 249
----- ---- ----- -----
$ 100 384 1,082 1,245
===== ==== ===== =====
</TABLE>
F-18 (Continued)
<PAGE>
THE ROME SAVINGS BANK AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Three months ended March 31, 1999 and 1998 (unaudited) and
years ended December 31, 1998 and 1997
The components of income tax expense (benefit) attributable to income from
operations consist of (in thousands):
<TABLE>
<CAPTION>
Three months ended Years ended
March 31, December 31,
------------------ -------------
1999 1998 1998 1997
------ ---- ----- -----
(unaudited)
<S> <C> <C> <C> <C>
Current:
Federal $ 123 297 825 869
State 38 67 222 163
----- ---- ----- -----
161 364 1,047 1,032
----- ---- ----- -----
Deferred:
Federal 10 (34) (147) (31)
State 3 (5) (47) (5)
----- ---- ----- -----
13 (39) (194) (36)
----- ---- ----- -----
$ 174 325 853 996
===== ==== ===== =====
</TABLE>
Actual tax expense differs from "expected" tax expense, computed by
applying the U.S. Federal statutory tax rate of 34% to income before income
taxes as follows (in thousands):
<TABLE>
<CAPTION>
Three months ended Years ended
March 31, December 31,
------------------ -------------
1999 1998 1998 1997
------ ---- ----- -----
(unaudited)
<S> <C> <C> <C> <C>
Computed "expected" tax
expense $ 191 274 809 862
Increases (decreases) in
income taxes
resulting from:
State taxes, net of
Federal tax benefit 27 41 116 104
Tax exempt interest (46) -- (87) --
Other, net 2 10 15 30
----- ---- ---- ----
$ 174 325 853 996
===== ==== ==== ====
30.9% 40.3% 35.9% 39.3%
===== ==== ==== ====
</TABLE>
F-19 (Continued)
<PAGE>
THE ROME SAVINGS BANK AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Three months ended March 31, 1999 and 1998 (unaudited) and
years ended December 31, 1998 and 1997
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are (in
thousands):
<TABLE>
<CAPTION>
March 31, December 31,
-------------
1999 1998 1997
-------- ---- -----
(unaudited)
<S> <C> <C> <C>
Deferred tax assets:
Losses on real estate
owned $ 96 104 129
Allowance for loan losses 526 549 398
Accrued postretirement
benefits 712 698 662
Deferred compensation 150 147 90
Other 40 39 38
------ ----- -----
Total gross deferred
tax assets 1,524 1,537 1,317
------ ----- -----
Deferred tax liabilities:
Accumulated depreciation
on premises and
equipment 101 98 98
Prepaid pension cost 222 224 159
Unrealized gains on
available-for-sale
securities 428 502 273
Other 55 56 95
------ ----- -----
Total gross deferred
tax liabilities 806 880 625
------ ----- -----
Net deferred tax
assets $ 718 657 692
====== ===== =====
</TABLE>
F-20 (Continued)
<PAGE>
THE ROME SAVINGS BANK AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Three months ended March 31, 1999 and 1998 (unaudited) and
years ended December 31, 1998 and 1997
Realization of deferred tax assets is dependent upon the generation of
future taxable income or the existence of sufficient taxable income within
the carryback period. A valuation allowance is provided when it is more
likely than not that some portion of the deferred tax assets will not be
realized. In assessing the need for a valuation allowance, management
considers the scheduled reversal of the deferred tax liabilities, the level
of historical taxable income and projected future taxable income over the
periods in which the temporary differences comprising the deferred tax
assets will be deductible. Management believes that no valuation allowance
is necessary.
Included in retained earnings at December 31, 1998 is approximately
$3,351,000 representing aggregate provisions for loan losses taken under
the Internal Revenue Code. Use of these reserves for purposes other than to
absorb losses on loans, or if the institution fails to qualify as a bank
for Federal income tax purposes, would result in taxable income to the
Bank. It is not anticipated that this amount will be used in any manner
that will create taxable income.
F-21 (Continued)
<PAGE>
THE ROME SAVINGS BANK AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Three months ended March 31, 1999 and 1998 (unaudited) and
years ended December 31, 1998 and 1997
(10) Employee Benefits
The following table sets forth the changes in the plans' accumulated
benefit obligations, fair value of assets and funded status and amounts
recognized in the consolidated statements of condition at December 31, 1998
and 1997:
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
--------------------------- -----------------------
1998 1997 1998 1997
(in thousands) ----------- ------------- ---------- -----------
<S> <C> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at
beginning of year $ 5,542 5,095 1,521 1,420
Service cost 148 130 36 30
Interest cost 396 377 127 103
Amendments -- -- 31 --
Actuarial loss (gain) 454 76 369 28
Benefits paid (476) (136) (68) (60)
Participant contributions -- -- 18 --
----------- ------ ------ ------
Benefit obligation
at end of year 6,064 5,542 2,034 1,521
----------- ------ ------ ------
Change in plan assets:
Fair value of plan assets
at beginning of year 7,165 5,994 -- --
Actual return on plan
assets (12) 1,307 -- --
Employer contributions -- -- 50 60
Participant contributions -- -- 18 --
Benefits paid (476) (136) (68) (60)
----------- ------ ------ ------
Fair value of plan
assets at end of year 6,677 7,165 -- --
----------- ------ ------ ------
Funded status 613 1,623 (2,034) (1,521)
Unrecognized net
actuarial loss (gain) 9 (1,060) 258 (111)
Net transition asset (15) (113) -- --
Unrecognized prior
service cost (47) (54) 28 --
----------- ------ ------ ------
Prepaid (accrued)
benefit cost $ 560 396 (1,748) (1,632)
=========== ====== ====== ======
Assumptions as of
December 31:
Discount rate 6.5% 7.25% 6.5% 7.25%
Expected return
on plan assets 8.0% 8.0% -- --
Rate of compensation
increase 4.5% 5.0% -- --
</TABLE>
F-22 (Continued)
<PAGE>
THE ROME SAVINGS BANK AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Three months ended March 31, 1999 and 1998 (unaudited) and
years ended December 31, 1998 and 1997
The components of net periodic benefit cost includes the following:
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
----------------------------------- -----------------------------------
(in thousands) 1998 1997 1998 1997
---------------- ----------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Service cost $ 148 130 36 30
Interest cost 396 377 127 103
Expected return on assets (568) (474) -- --
Amortization (140) (106) 2 (1)
---------------- ----------------- ---------------- -----------------
Net periodic benefit
cost (benefit) $ (164) (73) 165 132
================ ================= ================ =================
</TABLE>
There is no assumed increase in the per capita cost of current health care
benefits since the employer contributions are fixed with the retiree paying
for any cost increases.
For the three months ended March 31, 1999, net pension costs were $6,000
(unaudited) and for the three months ended March 31, 1998, the net pension
benefit was $40,000 (unaudited). Other postretirement benefit expense for
the three months ended March 31, 1999 and 1998 was $45,000 (unaudited) and
$33,000 (unaudited), respectively.
Contributions to the defined contribution 401(k) Savings Plan were
approximately $13,000 and $15,000 during the three months ended March 31,
1999 and 1998 (unaudited), respectively, and $56,000 and $53,000 during the
years ended December 31, 1998 and 1997, respectively.
(Continued)
F-23
<PAGE>
THE ROME SAVINGS BANK AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Three months ended March 31, 1999 and 1998 (unaudited) and
years ended December 31, 1998 and 1997
(11) Comprehensive Income
The following summarizes the components of other comprehensive income:
<TABLE>
<CAPTION>
Three months ended Years ended
March 31, December 31,
--------------------------------- ----------------------------------
1999 1998 1998 1997
--------------- --------------- ---------------- ---------------
(unaudited)
<S> <C> <C> <C> <C>
Net unrealized holding gains
on available-for-sale
securities $ (186) 286 886 776
Reclassification adjustment for
net realized gain on sale of
available-for-sale
securities -- (139) (314) (157)
--------------- --------------- ---------------- ---------------
Other comprehensive income,
before tax (186) 147 572 619
Deferred tax expense (benefit) 74 (59) (229) (249)
--------------- --------------- ---------------- ---------------
Other comprehensive
income, net of tax $ (112) 88 343 370
=============== =============== ================ ===============
</TABLE>
(12) Commitments and Contingencies
The Bank is a party to financial instruments with off-balance sheet risk
in the normal course of business to meet the financing needs of its
customers. These financial instruments consist of commitments to extend
credit and involve, to varying degrees, elements of credit, market and
interest rate risk in excess of the amounts recognized in the consolidated
balance sheet. Credit risk represents the accounting loss that would be
recognized at the reporting date if obligated counterparties failed
completely to perform as contracted. Market risk represents risk that
future changes in market prices make financial instruments less valuable.
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Since some of the commitments
are expected to expire without being drawn upon, the total commitment
amounts do not necessarily represent future cash requirements. The Bank
evaluates each customer's creditworthiness on a case-by-case basis. The
amount of collateral obtained, if deemed necessary by the Bank upon
extension of credit, is based on management's evaluation of the customer's
financial position. Collateral held varies, but may include real estate,
accounts receivable, inventory, property, plant and equipment and income-
producing commercial properties. Substantially all commitments to extent
credit, if exercised, will represent loans secured by real estate.
(Continued)
F-24
<PAGE>
THE ROME SAVINGS BANK AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Three months ended March 31, 1999 and 1998 (unaudited) and
years ended December 31, 1998 and 1997
At March 31, 1999 and December 31, 1998 and 1997 the Bank was committed to
originate mortgage and other loans of approximately $3,920,000 (unaudited),
$3,576,000 and $1,425,000 respectively. Commitments under unused lines of
credit and letters of credit were approximately $5,272,000 (unaudited),
$5,718,000 and $5,573,000 at March 31, 1999, and at December 31, 1998 and
1997, respectively.
The Bank's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for loan commitments is represented
by the contractual or notional amount of these instruments. The Bank uses
the same credit policies in making commitments as it does for on-balance
sheet instruments. The Bank controls its credit risk through credit
approvals, limits, and monitoring procedures.
In the normal course of business, there are various outstanding legal
proceedings. In the opinion of management, the aggregate amount involved in
such proceedings is not material to the financial condition or results of
operations of the Bank.
(13) Regulatory Matters
The Bank is regulated by the Federal Deposit Insurance Corporation (FDIC)
and the State of New York Banking Department and is subject to the capital
adequacy requirements of the FDIC.
Under capital adequacy guidelines and the regulatory framework for prompt
corrective action, the Bank must meet specific guidelines that involve
quantitative measures of assets, liabilities, and certain off-balance sheet
items as calculated under regulatory accounting practices. Capital amounts
are also subject to qualitative judgments by the FDIC about components,
risk weightings, and other factors. Failure to meet minimum capital
requirements can initiate certain mandatory, and possibly additional
discretionary, actions by the FDIC that, if undertaken, could have a direct
material effect on the Bank's financial statement.
The Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA),
established capital levels for which insured institutions are categorized
as well capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized, or critically undercapitalized.
As of December 31, 1997, the most recent notification from the FDIC
categorized the bank as well capitalized under the regulatory framework for
prompt corrective actions. To be categorized as well as capitalized, the
Bank must meet the minimum ratios as set forth in the table. There have
been no conditions or events since that notification that management
believes have changed the Bank's category. Management believes, as of March
31, 1999 and December 31, 1998, that the Bank meets all capital adequacy
requirements to which it is subject.
(Continued)
F-25
<PAGE>
THE ROME SAVINGS BANK AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Three months ended March 31, 1999 and 1998 (unaudited) and
years ended December 31, 1998 and 1997
The following is a summary of the Bank's actual capital amounts and ratios
compared to the FDIC minimum capital adequacy requirements and the FDIC
requirements for classification as a well capitalized institution under
prompt corrective action provisions (dollars in thousands):
<TABLE>
<CAPTION>
To be classified as
well-capitalized under
Minimum capital prompt corrective
Actual adequacy requirements action provisions
----------------------------- ------------------------------ -----------------------------
Amount Ratio Amount Ratio Amount Ratio
------------- ------------- --------------- ------------ --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
As of March 31, 1999:
Total capital (to risk
weighted assets) greater than greater than
(unaudited): $ 30,257 23.0% 10,545 or equal to 8% 13,181 or equal to 10%
Tier 1 Capital (to risk
weighted assets) greater than greater than
(unaudited): $ 28,298 21.5% 5,272 or equal to 4% 7,909 or equal to 6%
Tier 1 Capital (to
average assets) greater than greater than
(unaudited): $ 28,298 12.8% 8,867 or equal to 4% 11,084 or equal to 5%
As of December 31, 1998:
Total capital (to risk greater than greater than
weighted assets): $ 29,869 22.8% 10,480 or equal to 8% 13,100 or equal to 10%
Tier 1 Capital (to risk greater than greater than
weighted assets): $ 27,909 21.3% 5,240 or equal to 4% 7,860 or equal to 6%
Tier 1 Capital (to greater than greater than
average assets): $ 27,909 12.7% 8,768 or equal to 4% 10,961 or equal to 5%
As of December 31, 1997:
Total capital (to risk greater than greater than
weighted assets): $ 27,962 22.2% 10,094 or equal to 8% 12,617 or equal to 10%
Tier 1 Capital (to risk greater than greater than
weighted assets): $ 26,383 20.9% 5,047 or equal to 4% 7,570 or equal to 6%
Tier 1 Capital (to greater than greater than
average assets): $ 26,383 12.3% 8,559 or equal to 4% 10,699 or equal to 5%
</TABLE>
* means greater than or equal to
(Continued)
F-26
<PAGE>
THE ROME SAVINGS BANK AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Three months ended March 31, 1999 and 1998 (unaudited) and
years ended December 31, 1998 and 1997
(14) Fair Value of Financial Instruments
The following methods and assumptions were used by the Bank in estimating
fair values of financial instruments:
Cash and cash equivalents: The fair values are considered to
approximate the carrying values, as reported in the statement of
condition.
Securities: Fair values of securities are based on exchange quoted
market prices, where available. If quoted market prices are not
available, fair values are based on quoted market prices of similar
instruments.
Loans: For variable rate loans that reprice frequently and loans due
on demand with no significant change in credit risk, fair values are
considered to approximate carrying values. The fair values for certain
mortgage loans (e.g., one-to-four family residential) and other
consumer loans are based on quoted market prices of similar loans sold
on the secondary market, adjusted for differences in loan
characteristics. The fair values for other loans (e.g., commercial
real estate and rental property mortgage loans) are estimated using
discounted cash flow analyses, using interest rates currently being
offered for loans with similar terms to borrowers of similar credit
rating. The carrying amount of accrued interest approximates its fair
value.
Deposits: The fair values of demand deposits (interest and non-
interest checking) are, by definition, equal to the amount payable on
demand at the reporting date (i.e., their carrying amounts). Fair
values for fixed-rate certificates of deposits, savings and club
accounts, and money market accounts are estimated using a discounted
cash flow calculation that applies interest rates currently being
offered on these products to a schedule of aggregated expected monthly
maturities on time deposits.
Off-balance-sheet instruments: Fair values for the Bank's
off-balance-sheet instruments (lines of credit and commitments to fund
loans) are based on fees currently charged to enter into similar
agreements, taking into account the remaining terms of the agreements
and the counterparties' credit standing. The fair value of these
financial instruments is immaterial and has therefore been excluded
from the table below.
(Continued)
F-27
<PAGE>
THE ROME SAVINGS BANK AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Three months ended March 31, 1999 and 1998 (unaudited) and
years ended December 31, 1998 and 1997
The estimated carrying values and fair values of the Bank's financial
instruments are as follows (in thousands):
<TABLE>
<CAPTION>
December 31,
-----------------------------------------------------------------------
March 31, 1999 1998 1997
----------------------------------- ----------------------------------- ----------------------------------
Carrying Fair Carrying Fair Carrying Fair
Amount Value Amount Value Amount Value
---------------- ---------------- ---------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
(unaudited)
Financial assets:
Cash and cash
equivalents $ 26,129 26,129 25,214 25,214 17,299 17,299
Securities 54,276 54,340 56,508 56,578 56,628 56,720
Loans, net 134,954 137,604 134,848 137,594 130,975 134,534
Financial
liabilities:
Deposits 191,926 192,650 189,130 189,706 184,496 184,624
</TABLE>
Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial instrument.
These estimates are subjective in nature and involve uncertainties and
matters of significant judgment and, therefore, cannot be determined with
precision. Changes in assumptions could significantly affect the estimates.
F-28
<PAGE>
================================================================================
You should rely only on the information contained in this document or that to
which we have referred you. We have not authorized anyone to provide you with
information that is different. This document does not constitute an offer to
sell, or the solicitation of an offer to buy, any of the securities offered
hereby to any person in any jurisdiction in which such offer or solicitation
would be unlawful. The affairs of rome savings bank or Rome Bancorp, Inc. may
change after the date of this prospectus. Delivery of this document and the
sales of shares made hereunder does not mean otherwise.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Summary.................................................... 3
Risk Factors............................................... 12
Selected Financial and Other Data.......................... 16
Rome Savings Bank.......................................... 18
Rome Bancorp, Inc.......................................... 18
Rome, MHC.................................................. 18
How We Intend to Use the Proceeds from the Offering........ 19
Our Policy Regarding Dividends............................. 20
Market for the Common Stock................................ 21
Regulatory Capital Compliance.............................. 22
Capitalization............................................. 23
Pro Forma Data............................................. 24
Rome Savings Bank Statements of Income..................... 31
Management's Discussion and Analysis of
Financial Condition and Results of Operations.............. 32
Business of Rome Savings Bank.............................. 52
Business of Rome Bancorp, Inc.............................. 77
Regulation of Rome Savings Bank and
Rome Bancorp.......................................... 78
Taxation................................................... 93
Management................................................. 95
The Reorganization and the Offering........................ 106
Restrictions on Acquisition of Rome Bancorp
and Rome Savings...................................... 132
Description of Capital Stock Rome Bancorp.................. 139
Legal and Tax Opinions..................................... 141
Experts.................................................... 141
Registration Requirements.................................. 141
Where You Can Find Additional Information.................. 141
Index to Financial Statements.............................. F-1
</TABLE>
Until the later of [ ], 1999 or 25 days after commencement of the offering,
all dealers effecting transactions in these securities, whether or not
participating in this offering, may be required to deliver a prospectus. This is
in addition to the dealers' obligation to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments or subscriptions.
Up to 2,136,664 Shares of
Common Stock
ROME BANCORP, INC.
Proposed Holding Company
for The Rome Savings Bank
_____________
PROSPECTUS
_____________
Sandler O'Neill & Partners, l.p.
[ ], 1999
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law ("DGCL"), empowers a
Delaware corporation to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding (other than an action by or in the right of the corporation)
by reason of the fact that such person is or was a director, officer, employee
or agent of another corporation or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interest of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. Similar indemnity is authorized for such persons against expenses
(including attorneys' fees) actually and reasonably incurred in connection with
the defense or settlement of any such threatened, pending or completed action or
suit if such person acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the corporation, and provided
further that (unless a court of competent jurisdiction otherwise provides) such
person shall not have been adjudged liable to the corporation. Any such
indemnification may be made only as authorized in each specific case upon a
determination by the stockholders or disinterested directors or by independent
legal counsel in a written opinion that indemnification is proper because the
indemnitee has met the applicable standard of conduct.
Section 145 further authorizes a corporation to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
of a director, officer, employee or agent of another corporation or enterprise,
against any liability asserted against him, and incurred by him in any such
capacity, or arising out of his status as such, whether or not the corporation
would otherwise have the power to indemnify him under Section 145.
Article IX of the Certificate of Incorporation of Rome Bancorp, Inc. (the
"Company") provides that a director shall not be personally liable to the
Company or its stockholders for damages for breach of his fiduciary duty as a
director, except to the extent such exemption from liability or limitation
thereof is expressly prohibited by the DGCL. Article X, Section 1 of the
Company's Certificate of Incorporation requires the Company, among other things,
to indemnify to the fullest extent permitted by the DGCL, any person who is or
was or has agreed to become a director or officer of the company, who was or is
made a party to, or is threatened to be made a party to, or has become a witness
in, any threatened, pending or completed action, suit or proceeding, including
actions or suits by or in the right of the Company, by reason of such agreement
or service or the fact that such person is, was or has agreed to serve as a
director, officer, employee or agent of another corporation or organization at
the request of the Company.
Article X, Section 11 also empowers the Company to purchase and maintain
insurance to protect itself and its directors, officers, employees and agents
and those who were or have agreed to become directors, officers, employees or
agents, against any liability, regardless of whether or not the Company would
have the power to indemnify those persons against such liability under the law
or the provisions set forth in the Certificate of Incorporation; provided that
such insurance is available on acceptable terms as
II-1
<PAGE>
determined by a vote of the Board of Directors. The Company is also authorized
by its Certificate of Incorporation to enter into individual indemnification
contracts with directors, officers, employees and agents which may provide
indemnification rights and procedures different from those set forth in the
Certificate of Incorporation. The Company expects to purchase directors' and
officers' liability insurance consistent with the provisions of the Certificate
of Incorporation as soon as practicable.
Article VII of the Bank's Bylaws provide that it shall indemnify any person
against whom an action is brought or threatened because that person is or was a
director or officer of the Bank or the Company for: (a) any amount for which
that person becomes liable under a judgment in such action; and (b) reasonable
costs and expenses, including reasonable attorneys' fees, actually paid or
incurred by that person in defending or settling such action, or in enforcing
his or her rights under the indemnification section of the bylaws if he or she
attains a favorable judgment in such enforcement action.
Article VI of the Bylaws of Rome, MHC (the "Mutual Company") provide that
the Mutual Company shall indemnify its officers and trustees to the fullest
extent permitted by law.
The Company is party to an Employment Agreement with each of Mr. Charles M.
Sprock, Mr. David C. Nolan and Mr. James F. Sullivan ("Senior Executives").
These Employment Agreements provide for the Company to indemnify the Senior
Executives to the fullest extent permitted under Delaware law, during the
Employment Period and for a period of six years thereafter against personal
liability for acts in connection with service to the Company.
Item 25. Other Expenses of Issuance and Distribution.
<TABLE>
<S> <C>
New York State Banking Department Application Fee.................. $ 10,000
SEC Registration Fee (1)........................................... 4,750
National Association of Securities Dealers filing fee.............. 5,000
Nasdaq Listing Fee................................................. 7,750
Printing, postage and mailing...................................... 80,000
Legal fees and expenses............................................ 350,000
Placement Agent's fees and commissions............................. 170,000
Placement Agent's expenses (including counsel fees)................ 50,000
Accounting fees and expenses....................................... 100,000
Appraiser's fees and expenses (including preparing business plan).. 35,000
Conversion agent fees and expenses................................. 5,000
Certificate printing............................................... 1,500
Blue Sky fees and expenses (including fees of counsel)............. 5,000
Miscellaneous...................................................... 1,000
--------
TOTAL.............................................................. $825,000
========
</TABLE>
- -------------------------------
(1) Actual expenses based upon the registration and sale of 1,857,969 shares
each at $8.00 per share. All other expenses are estimated.
II-2
<PAGE>
Item 26. Recent Sales of Unregistered Securities.
None.
Item 27. Exhibits and Financial Statement Schedules.
The exhibits and financial statement schedules filed as a part of this
Registration Statement are as follows:
(a) List of Exhibits. (Filed herewith unless otherwise noted.)
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
Engagement letter, dated January 27, 1999, between The Rome
1.1 Savings Bank and Sandler, O'Neill & Partners, L.P.
1.2 Draft Form of Agency Agreement*
Amended Plan of Reorganization from Mutual Savings Bank to
2.1 Mutual Holding Company and Stock Issuance Plan of The Rome
Savings Bank
3.1 Certificate of Incorporation of Rome Bancorp, Inc.
3.2 Bylaws of Rome Bancorp, Inc.
3.3 Restated Organization Certificate of The Rome Savings Bank
3.4 Bylaws of The Rome Savings Bank
3.5 Organization Certificate of Rome, MHC
3.6 Bylaws of Rome, MHC
Certificate of Incorporation of Rome Bancorp, Inc. (See
4.1 Exhibit 3.1)
4.2 Bylaws of Rome Bancorp, Inc. (See Exhibit 3.2)
4.3 Form of Stock Certificate of Rome Bancorp, Inc.
Form of Opinion of Thacher Proffitt & Wood re: legality of
5.1 securities to be registered
Form of Opinion of Thacher Proffitt & Wood re: federal tax
8.1 matters
8.2 Form of Opinion of KPMG LLP re: state and local tax matters*
8.3 Letter from RP Financial regarding Subscription Rights
10.1 Form of Employee Stock Ownership Plan of Rome Bancorp, Inc.
Form of Executive Employment Agreement, by and between
10.2 Charles M. Sprock and Rome Bancorp, Inc.
10.3 Form of Benefit Restoration Plan of Rome Bancorp, Inc.
21.1 Subsidiaries of the Registrant
Consent of Thacher Proffitt & Wood (included in Exhibits 5.1
23.1 and 8.1 to this Registration Statement)
23.2 Consent of KPMG LLP
23.4 Consent of RP Financial
</TABLE>
II-3
<PAGE>
<TABLE>
<S> <C>
24.1 Powers of Attorney (Included in Signature Page of this
Registration Statement)**
27.1 Financial Data Schedule (only filed in electronic format)
99.1 Appraisal Report of RP Financial*
99.2 Draft Marketing Materials in connection with the Offering*
</TABLE>
*To be filed by amendment.
** Included with signature page.
(b) Financial Statement Schedules.
Financial statements of The Rome Savings Bank as of and for the year ended
December 31, 1998 and 1997 and as of and for the three months ended March 31,
1999 and 1998 (included in pp. F-1 -- F-28 of the Prospectus).
Item 28. Undertakings.
The undersigned Registrant hereby undertakes to provide to the agent at the
closing specified in the Agency Agreement, certificates in such denominations
and registered in such names as required by the agent to permit prompt delivery
to each purchaser.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
In accordance with to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Rome, State of New York, on May 26, 1999.
Rome Bancorp, Inc.
By: /s/ Charles M. Sprock
-------------------------------------
Charles M. Sprock
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENT, that each person whose signature appears
below constitutes and appoints Charles M. Sprock and V. Gerard Comizio, Esq. as
the true and lawful attorney-in-fact and agent, with full power of substitution
and resubstitution, for him or her and in his or her name, place and stead, in
any and all capacities to sign the Form SB-2 Registration Statement and any and
all amendments thereto, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the U.S. Securities and Exchange
Commission, granting unto each said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done as fully to all intents and purposes as he or she might or could do
in person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement was signed by the following persons in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ Charles M. Sprock Chairman, President and Chief May 26, 1999
- ------------------------------- Executive Officer
Charles M. Sprock (principal executive officer)
/s/ David C. Nolan Chief Financial Officer May 26, 1999
- ------------------------------- (principal accounting officer)
David C. Nolan
/s/ Bruce R. Engelbert Director May 26, 1999
- -------------------------------
Bruce R. Engelbert
/s/ David C. Grow Director May 26, 1999
- -------------------------------
David C. Grow
/s/ Kirk B. Hinman Director May 26, 1999
- -------------------------------
Kirk B. Hinman
/s/ T. Richard Leidig Director May 26, 1999
- -------------------------------
T. Richard Leidig
/s/ Richard H. McMahon Director May 26, 1999
- -------------------------------
Richard H. McMahon
/s/ Marion Scoville Director May 26, 1999
- -------------------------------
Marion Scoville
/s/ Michael J. Valentine Director May 26, 1999
- -------------------------------
Michael J. Valentine
</TABLE>
II-5
<PAGE>
Exhibit 1.1
[LETTERHEAD OF SANDLER O'NEILL APPEARS HERE]
January 27, 1999
Mr. Charles M. Sprock
Chairman, President and Chief Executive Officer
The Rome Savings Bank
100 On the Mall
Rome, New York 13440-5810
Dear Mr. Sprock:
Sandler O'Neill Corporate Strategies, a division of Sandler O'Neill &
Partners, L.P. ("Sandler O'Neill"), is pleased to act as an independent
financial advisor to The Rome Savings Bank (the "Bank") in connection with the
Bank's proposed reorganization into mutual holding company form (the
"Reorganization"), including the offer and sale of certain shares of the common
stock (the "Common Stock") of the Bank (or a middle-tier stock holding company)
to the Bank's depositors in a Subscription Offering, to member of the Bank's
community in a Direct Community Offering and, under certain circumstances, to
the general public in a Syndicated Community Offering (collectively, the
"Offerings"). For purposes of this letter, the term "Actual Purchase Price"
shall mean the price at which the shares of the common stock are sold in the
Offerings. This letter is to confirm the terms and conditions of our engagement.
ADVISORY SERVICES
- -----------------
Sandler O'Neill will act as a consultant and advisor to the Bank and will
work with the Bank's management, counsel, accountants and other advisors in
connection with the Reorganization and the Offerings. We anticipate that our
services will include the following, each as may be necessary and as the Bank
may reasonably request:
1. Consulting as to the securities marketing implications of any aspect
of the Plan of Reorganization or related corporate documents;
2. Reviewing with the Board of Directors the independent appraiser's
appraisal of the Common Stock, particularly with regard to aspects of
the appraisal involving the methodology employed;
<PAGE>
The Rome Savings Bank
January 27, 1999 Sandler O'Neill
Page 2
3. Reviewing all offering documents, including the Prospectus, stock
order forms and related offering materials (it being understood that
preparation and filing of such documents will be the responsibility of
the Bank and its counsel);
4. Assisting in the design and implementation of a marketing strategy for
the Offerings;
5. Assisting in obtaining all requisite regulatory approvals;
6. Assisting Bank management in scheduling and preparing for meetings
with potential investors and broker-dealers; and
7. Providing such other general advice and assistance as may be requested
to promote the successful completion of the Offering.
SYNDICATED COMMUNITY OFFERING
- -----------------------------
If any shares of the Common Stock remain available after the expiration of
the Subscription Offering and the Direct Community Offering, at the request of
the Bank and subject to the continued satisfaction of the conditions set forth
in the second paragraph under the caption "Definitive Agreement" below, Sandler
O'Neill will seek to form a syndicate of registered dealers to assist in the
sale of such Common Stock in a Syndicated Community Offering on a best efforts
basis, subject to the terms and conditions set forth in a selected dealers
agreement. Sandler O'Neill will endeavor to limit the aggregate fees to be paid
by the Bank under any such selected dealers agreement to an amount competitive
with gross underwriting discounts charged at such time for underwritings of
comparable amounts of stock sold at a comparable price per share in a similar
market environment, which shall not exceed 6% of the Aggregate Actual Purchase
Price of the shares sold under such agreements. Sandler O'Neill will endeavor to
distribute the Common Stock among dealers in a fashion which best meets the
distribution objectives of the Bank and the requirements of the Plan of
Reorganization, which may result in limiting the allocation of stock to certain
selected dealers. It is understood that in no event shall Sandler O'Neill be
obligated to act as a selected dealer or to take or purchase any shares of the
Common Stock.
<PAGE>
The Rome Savings Bank
January 27, 1999
Page 3
FEES
- ----
If the Reorganization is consummated, the Bank agrees to pay Sandler
O'Neill for its services hereunder the fees set forth below:
1. a fee of two percent (2%) of the aggregate Actual Purchase Price of
the shares of common stock sold in the Subscription Offering and in
the Direct Community Offering, excluding in each case shares purchased
by (i) any employee benefit plan of the bank (or any holding company
of the Bank) established for the benefit of the Bank's directors,
officers and employees, and (ii) any director, officer or employee of
the Bank or members of their immediate families; and
2. with respect to any shares of the Common Stock sold by an NASD member
firm (other than Sandler O'Neill) under any selected dealers agreement
in the Syndicated Community Offering, (a) the sales commission payable
to the selected dealer under such agreement, (b) any sponsoring
dealer's fees, and (c) a management fee to Sandler O'Neill of one and
one half percent (1 1/2%). Any fees payable to Sandler O'Neill for
common stock sold by Sandler O'Neill under any such agreement shall be
limited to an aggregate of two percent (2%) of the Actual Purchase
Price of such shares.
If (i) Sandler O'Neill's engagement hereunder is terminated for any of the
reasons provided for under the second paragraph of the section of this letter
captioned "Definitive Agreement," or (ii) the Reorganization is terminated by
the Bank, no fees shall be payable by the Bank to Sandler O'Neill hereunder;
however, the Bank shall reimburse Sandler O'Neill for its reasonable
out-of-pocket expenses (including legal fees) incurred in connection with its
engagement hereunder.
All fees payable to Sandler O'Neill hereunder shall be payable in cash at
the time of the closing of the Reorganization, or upon the termination of
Sandler O'Neill's engagement hereunder or termination of the Reorganization, as
the case may be. In recognition of the long lead times involved in the
reorganization process, the Bank agrees to make advance payments to Sandler
O'Neill in the aggregate amount of $50,000, $25,000 of which shall be payable
upon execution of this letter and the remaining $25,000 of which shall be
payable upon commencement of the Subscription Offering, which shall be credited
against any fees or reimbursement of expenses payable hereunder.
<PAGE>
The Rome Savings Bank
January 27, 1999 Sandler O'Neill
Page 4
COSTS AND EXPENSES
- ------------------
In addition to any fees that may be payable to Sandler O'Neill hereunder
and the expenses to be borne by the Bank pursuant to the following paragraph,
the Bank agrees to reimburse Sandler O'Neill, upon request made from time to
time, for its reasonable out-of-pocket expenses (including legal fees) incurred
in connection with its engagement hereunder, regardless of whether the
Reorganization is consummated, including, without limitation, legal fees,
advertising, promotional, syndication, and travel expenses, up to a maximum of
$100,000; provided, however, that Sandler O'Neill shall document such expenses
-------- -------
to the reasonable satisfaction of the Bank. The provisions of this paragraph are
not intended to apply to or in any way impair the indemnification provisions of
this letter.
As is customary, the Bank will bear all other expenses incurred in
connection with the Reorganization and the Offerings, including, without
limitation, (i) the cost of obtaining all securities and bank regulatory
approvals, including any required NASD filing fees; (ii) the cost of printing
and distributing the offering materials; (iii) the costs of blue sky
qualification (including fees and expenses of blue sky counsel) of the shares in
the various states; (iv) listing fees; and (v) all fees and disbursements of the
Bank's counsel, accountants, conversion agent and other advisors. In the event
Sandler O'Neill incurs any such fees and expenses on behalf of the Bank, the
Bank will reimburse Sandler O'Neill for such fees and expenses whether or not
the Reorganization is consummated; provided, however, that Sandler O'Neill shall
-------- -------
not incur any substantial expenses on behalf of the Bank pursuant to this
paragraph without the prior approval of the Bank.
DUE DILIGENCE REVIEW
- --------------------
Sandler O'Neill's obligation to perform the services contemplated by this
letter shall be subject to the satisfactory completion of such investigation and
inquiries relating to the Bank, its respective directors, officers, agents and
employees, as Sandler O'Neill and its counsel in their sole discretion may deem
appropriate under the circumstances. In this regard, the Bank agrees that, at
its expense, it will make available to Sandler O'Neill all information which
Sandler O'Neill requests, and will allow Sandler O'Neill the opportunity to
discuss with the Bank's management the financial condition, business and
operations of the Bank. The Bank acknowledges that Sandler O'Neill will rely
upon the accuracy and completeness of all information received from the Bank and
its directors, trustees, officers, employees, agents, independent accountants
and counsel.
<PAGE>
The Rome Savings Bank
January 27, 1999 Sandler O'Neill
Page 5
BLUE SKY MATTERS
- ----------------
The Bank agrees that if Sandler O'Neill's counsel does not serve as counsel
with respect to blue sky matters in connection with the Offerings, the Bank will
cause the counsel performing such services to prepare a Blue Sky Memorandum
related to the Offerings including Sandler O'Neill's participation therein and
shall furnish Sandler O'Neill a copy thereof addressed to Sandler O'Neill or
upon which such counsel shall state Sandler O'Neill may rely.
CONFIDENTIALITY
- ---------------
Other than disclosure to other firms made part of any syndicate of selected
dealers or as required by law or regulation or legal process, Sandler O'Neill
agrees that it will not disclose any Confidential Information relating to the
Bank obtained in connection with its engagement hereunder (whether or not the
Reorganization is consummated). As used in this paragraph, the term
"Confidential Information" shall not include information which (i) is or becomes
generally available to the public other than as a result of a disclosure by
Sandler O'Neill, (ii) was available to Sandler O'Neill on a non-confidential
basis prior to its disclosure to Sandler O'Neill by the Bank, or (iii) becomes
available to Sandler O'Neill on a non-confidential basis from a person other
than the Bank who is not otherwise known to Sandler O'Neill upon due inquiry to
be bound not to disclose such information pursuant to a contractual, legal or
fiduciary obligation.
INDEMNIFICATION
- ---------------
Since Sandler O'Neill will be acting on behalf of the Bank (and any holding
companies created as part of the Reorganization) in connection with the
Reorganization, and the offerings, the holding companies and the Bank agree to
indemnify and hold Sandler O'Neill and its affiliates and their respective
partners, directors, officers, employees, agents and controlling persons within
the meaning of Section 15 of the Securities Act of 1933 or Section 20 of the
Securities Exchange Act 1934 (Sandler O'Neill and each such person being an
"Indemnified Party") harmless from and against any and all losses, claims,
damages and liabilities, joint or several, to which such Indemnified Party may
become subject under applicable federal or state law, or otherwise, related to
or arising out of the Reorganization or the engagement of Sandler O'Neill
pursuant to, or the performance by Sandler O'Neill of the services contemplated
by, this letter, and will reimburse any Indemnified Party for all expenses
(including reasonable legal fees and expenses) as they are incurred, including
expenses incurred in connection with the investigation of, preparation for or
defense of any pending or threatened claim or any action or proceeding arising
therefrom, whether or not such Indemnified Party is a party; provided, however,
-------- -------
that the Bank and the holding
<PAGE>
The Rome Savings Bank
January 27, 1999
Page 6
companies will not be liable in any such case to the extent that any such loss,
claim, damage, liability or expense (i) arises out of or is based upon any
untrue statement of a material fact or the omission of a material fact required
to be stated therein or necessary to make not misleading any statements
contained in any proxy statement or prospectus (preliminary or final), or any
amendment or supplement thereto, or any of the applications, notices, filings or
documents related thereto made in reliance on and in conformity with written
information furnished to the Bank by Sandler O'Neill expressly for use therein,
or (ii) is primarily attributable to the gross negligence, willful misconduct
or bad faith of Sandler O'Neill. If the foregoing indemnification is unavailable
for any reason, the Bank and the holding companies agree to contribute to such
losses, claims, damages, liabilities and expenses in the proportion that its
financial interest in the Reorganization and offerings bears to that of Sandler
O'Neill.
DEFINITIVE AGREEMENT
- --------------------
Sandler O'Neill and the Bank agree that (a) except as set forth in clause
(b), the foregoing represents the general intention of the Bank and Sandler
O'Neill with respect to the services to be provided by Sandler O'Neill in
connection with the Offerings, which will serve as a basis for Sandler O'Neill
commencing activities, and (c) the only legal and binding obligations of the
Bank, the holding companies and Sandler O'Neill with respect to the subject
matter hereof shall be (1) the Bank's obligation to reimburse costs and expenses
pursuant to the section captioned "Costs and Expenses," (2) those set forth
under the captions "Confidentiality" and "Indemnification," and (3) as set forth
in a duly negotiated and executed definitive Agency Agreement to be entered into
prior to the commencement of the Subscription Offering relating to the services
of Sandler O'Neill in connection with the Offerings. Such Agency Agreement shall
be in form and content satisfactory to Sandler O'Neill, the Bank and the holding
companies and their respective counsel and shall contain standard
indemnification provisions consistent herewith.
Sandler O'Neill's execution of such Agency Agreement shall also be subject
to (i) Sandler O'Neill's satisfaction with its investigation of the Bank's
business, financial condition and results of operations, (ii) preparation of
offering materials that are satisfactory to Sandler O'Neill and its counsel,
(iii) compliance with all relevant legal and regulatory requirements to the
reasonable satisfaction of Sandler O'Neill's counsel, (iv) agreement that the
price established by the independent appraiser is reasonable and (v) market
conditions at the time of the proposed offering. Sandler O'Neill may terminate
this agreement if such Agency Agreement is not entered into prior to December
31, 1999.
<PAGE>
The Rome savings Bank
January 27, 1999 Sandler O'Neill
Page 7
Please confirm that the foregoing correctly sets forth our agreement by
signing and returning to Sandler O'Neill the duplicate copy of this letter
enclosed herewith.
Very truly yours,
Sandler O'Neill & Partners, L.P.
By: Sandler O'Neill & Partners Corp.,
the sole general partner
By: /s/ Mark B. Cohen
-------------------------
Mark B. Cohen
Vice President
Accepted and agreed to as of
the date first above written:
The Rome Savings Bank
By: /s/ Charles M. Sprook
---------------------------------------------
Mr. Charles M. Sprook
Chairman, President and Chief Executive Officer
<PAGE>
EXHIBIT 2.1
----------------------------------------------------------------------
----------------------------------------------------------------------
Amended Plan of Reorganization
of
The Rome Savings Bank
As adopted by the Board of Trustees
On May 26, 1999
----------------------------------------------------------------------
----------------------------------------------------------------------
<PAGE>
Table Of Contents
<TABLE>
<CAPTION>
ARTICLE I
Definitions
-----------
Article II
----------
Procedure for Approval of the Reorganization
--------------------------------------------
<S> <C>
Section 2.01 Application and Notice............................................ -8-
Section 2.02 Approval of Plan by Voting Depositors; the Special Meeting........ -8-
Section 2.03 Company Approvals................................................. -9-
ARTICLE III
Sale of Common Stock
--------------------
Section 3.01 In General........................................................ -9-
Section 3.02 Reorganization into Mutual Holding Company........................ -10-
Section 3.03 Pricing and Number of Shares of Common Stock;
Independent Appraiser............................................. -13-
Section 3.04 Subscription Rights............................................... -15-
Section 3.05 Community Offering................................................ -18-
Section 3.06 Subscription and Community Offering Procedures;
Order Forms....................................................... -19-
Section 3.07 Payment for Common Stock.......................................... -20-
Section 3.08 Syndicated Community Offering..................................... -22-
Section 3.09 Public Offering Alternative....................................... -22-
Section 3.10 Restrictions on Purchase and Transfer of Common Stock............. -23-
Section 3.11 Time Limits for Sale of Shares; Effect of Inability to Sell....... -24-
Section 3.12 Establishment and Funding of Foundation........................... -25-
Section 3.13 Enforcement of Terms and Conditions............................... -25-
ARTICLE IV
Certain Restrictions
--------------------
Section 4.01 Sale of Shares Purchased by Trustees, Directors or Officers........ -26-
Section 4.02 Subsequent Purchases of Shares by Trustees, Directors
and Officers....................................................... -26-
Section 4.03 Acquisition of Control............................................. -27-
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
ARTICLE V
Effect of Reorganization; Certain Covenants and Agreements
----------------------------------------------------------
<S> <C>
Section 5.01 Restated Organization Certificate and Adoption
of New By-Laws...................................... -28-
Section 5.02 Effect of Reorganization............................ -28-
Section 5.03 Liquidation Account................................. -28-
Section 5.04 Voting Rights....................................... -29-
Section 5.05 Issuance of Stock................................... -30-
Section 5.06 Directors of Converted Bank......................... -30-
Section 5.07 Employment Agreements............................... -30-
Section 5.08 Market for the Common Stock......................... -31-
Section 5.09 Stock Repurchases and Stock Benefit Plans........... -31-
ARTICLE VI
Tax Ruling Requirement; Amendment and Termination; Miscellaneous
----------------------------------------------------------------
Section 6.01 Conditions to Reorganization........................ -31-
Section 6.02 Amendment or Termination of the Plan................ -31-
Section 6.03 Completion Date..................................... -32-
Section 6.04 Expenses of the Reorganization...................... -32-
Section 6.05 Interpretation...................................... -32-
Section 6.06 Severability........................................ -32-
Section 6.07 Miscellaneous....................................... -32-
</TABLE>
-ii-
<PAGE>
Plan of Reorganization
of
The Rome Savings Bank
Introductory Statement
This Plan of Reorganization (the "Plan") provides for the
reorganization of The Rome Savings Bank from a New York mutual savings bank to a
New York mutual holding company. Wherever appropriate for purposes of this Plan
of Reorganization, capitalized terms shall have the meanings assigned to them
under Article I hereof. The Bank is currently a mutual savings bank duly
organized and validly existing under the laws of the State of New York. As part
of the Reorganization and the Plan, the Bank will convert to a New York
chartered stock savings bank (the "Stock Bank") and will establish Rome
Community Bancorp, Inc. (the "Company") as a Delaware corporation and Rome, MHC
(the "MHC") as a New York mutual holding company. The principal office of the
Bank is located at 100 West Dominick Street, in the City of Rome, County of
Oneida, State of New York.
The purpose of the Reorganization is to increase the Bank's equity
capital base and facilitate future access to capital markets. The
Reorganization will provide the Bank with a more flexible operating structure,
which will enable the Bank to compete more effectively with other financial
institutions. The larger equity capital base resulting from the Reorganization
will enhance the Bank's ability to pursue lending and investment opportunities
as well as opportunities for growth and expansion. The Bank's Board of Trustees
also believes that the decline in the number of mutual institutions, as well as
the decline in the assets and deposits of mutual institutions, will place mutual
institutions at a disadvantage to stock institutions. The Board of Trustees of
the Bank currently contemplates that all of the stock of the Stock Bank shall be
held by Rome Community Bancorp, Inc., a business corporation to be organized
under the laws of the State of Delaware, and that the Company will issue and
sell its capital stock pursuant to this Plan and that the Company will be a
majority owned subsidiary of the MHC at all times so long as the MHC remains in
existence. The use of the two-tier mutual holding company structure will
provide greater organizational flexibility to the Bank.
In furtherance of the Bank's commitment to its communities, the Plan
provides for the establishment of a charitable Foundation as part of the
Reorganization. The Foundation is intended to complement the Bank's existing
community reinvestment activities to allow the Bank's local communities to share
in the growth and profitability of the Company and the Bank over the long term.
To this end, the Company intends to donate to the charitable Foundation a number
of shares of its authorized but unissued Common Stock up to 3% of the Common
Stock issued in the Reorganization.
<PAGE>
This Plan has been unanimously approved by the Board of Trustees of
the Bank, based upon its determination that the Reorganization is in the best
interests of the Bank, its depositors and the communities served by the Bank.
This Plan sets forth the terms and conditions of the Reorganization, and the
procedures for effecting the same. This Plan must be approved by the
Superintendent or his or her designees, must not be objected to by the FDIC and
certain waivers, if required, may be granted by the Banking Board. This Plan
must also be approved by the affirmative vote of at least seventy-five percent
(75%) in amount of deposit liabilities of Voting Depositors represented in
person or by proxy and eligible to vote at the Special Meeting, and by the
affirmative vote of at least a majority of the amount of votes eligible to be
cast by Voting Depositors at the Special Meeting.
Upon the Reorganization, each Person having a Deposit Account at the
Bank prior to the Reorganization will continue to have a Deposit Account,
without payment therefor, in the same amount and subject to the same terms and
conditions (except for liquidation rights) as in effect prior to the
Reorganization. After the Reorganization, the Bank will succeed to all the
rights, interests, duties and obligations as existed before the Reorganization,
including, but not limited to, all rights and interests of the Bank in and to
its assets and properties, whether real, personal or mixed. The Bank will
continue to be a member of the Federal Home Loan Bank System. All of the Bank's
insured Deposit Accounts will continue to be insured by the Bank Insurance Fund
of the FDIC to the extent provided by applicable law.
ARTICLE I
Definitions
-----------
As used in this Plan of Reorganization, the following terms shall have
the following meanings:
"Account Holder" shall mean any Person holding a Deposit Account in
the Bank.
"Acting in Concert" shall mean (i) knowing participation in a joint
activity or interdependent conscious parallel action towards a common goal
whether or not pursuant to an express agreement or understanding; or (ii) a
combination or pooling of voting or other interests in the securities of an
issuer for a common purpose pursuant to any contract, understanding,
relationship, agreement or other arrangement, whether written or otherwise. A
Person or company which acts in concert with another Person ("other party")
shall also be deemed to be acting in concert with any Person who is also acting
in concert with that other party, except that any Tax-Qualified Employee Stock
Benefit Plan will not be deemed to be acting in concert with its trustee or a
Person who serves in a similar capacity solely for the purpose of determining
whether stock held by the trustee and stock held by the plan will be aggregated,
and participants or beneficiaries of any such Tax-Qualified Employee Stock
Benefit Plan will not be deemed to be acting in concert solely as a result of
their common interests as participants or beneficiaries.
"Actual Purchase Price" shall mean the price per share at which the
Common Stock is ultimately sold in accordance with the terms hereof.
-2-
<PAGE>
"Affiliate" shall mean a Person who, directly or indirectly, through
one or more intermediaries, controls or is controlled by or is under common
control with the Person specified.
"Associate," when used to indicate a relationship with any Person,
shall mean (a) any corporation or organization (other than the Company, the Bank
or a majority-owned subsidiary of the Bank) of which such Person is an officer
or partner or is, directly or indirectly, either alone or with one or more
members of his or her immediate family, the beneficial owner of 10% or more of
any class of equity securities; (b) 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, except that for the purposes of
Sections 3.04(a) and 3.10, the term "Associate" does not include any Tax-
Qualified Employee Stock Benefit Plan or any Non-Tax-Qualified Employee Stock
Benefit Plan in which a Person has a substantial beneficial interest or serves
as a trustee or in a similar fiduciary capacity, and except that, for purposes
of aggregating total shares that may be acquired or held by Officers and
Trustees and their Associates, the term "Associate" does not include any Tax-
Qualified Employee Stock Benefit Plan; and (c) 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 Company, the Bank or any of the Bank's
subsidiaries.
"Bank" shall mean The Rome Savings Bank in its mutual form or in its
stock form, as the context of the reference requires.
"Banking Board" shall mean the Banking Board of the State of New York.
"Banking Law" shall mean the Banking Law of the State of New York.
"Benefit Plan" shall mean any Tax-Qualified Employee Stock Benefit
Plan or any Non-Tax-Qualified Employee Stock Benefit Plan.
"Common Stock" shall mean all of the shares of common stock, par value
$.01 per share, offered and issued pursuant to this Plan by the Company. The
Common Stock will not be insured by the FDIC.
"Community Offering" shall mean the offering for sale to certain
members of the general public directly by the Bank or the Company, if utilized,
of any shares of the Common Stock not subscribed for in the Subscription
Offering in accordance with Section 3.05.
"Company" shall mean Rome Community Bancorp, Inc., a corporation to be
organized under the laws of the State of Delaware.
"Control" (including the terms "controlling," "controlled by" and
"under common control with") shall mean 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 of such Person, the
ownership of voting securities of any company that possesses such power, or
otherwise.
-3-
<PAGE>
"Conversion" shall mean (a) the restatement of the Bank's organization
certificate to authorize the issuance of capital stock in accordance with the
Banking Law and the Conversion Regulations and to otherwise conform to the
requirements applicable to a New York stock savings bank and (b) the issuance of
the common stock of the Bank in accordance with this Plan.
"Conversion Regulations" shall mean Part 86 of the General Regulations
of the Banking Board of the State of New York ("Part 86"), Article VI-C of the
Consolidated Laws of the State of New York ("Article VI-C") and the regulations
of the FDIC applicable to mutual to stock Conversions, 12 C.F.R. (S) 303.15, to
the extent such regulations preempt or supplement Part 86 and/or Article VI-C.
"Deposit Account" shall mean all deposits of the Bank as such term is
used in Section 9019 of the Banking Law of New York, and includes without
limitation, savings, time, demand, negotiable orders of withdrawal (NOW), money
market and passbook accounts maintained by the Bank.
"Depositor" shall mean any Person owning a Deposit Account.
"Director" shall mean a member of the Board of Trustees of the Bank
after the Reorganization or a member of the Board of Directors of the Company or
the Board of Trustees of the MHC.
"Effective Date" shall mean the effective date of the Reorganization
on which all of the Common Stock is issued and sold and on which the
Superintendent endorses his or her approval on the Bank's Restated Organization
Certificate and causes such Certificate to be filed in the Office of the
Superintendent and upon which all necessary approvals are obtained to consummate
the Reorganization.
"Eligibility Record Date" shall mean December 31, 1997, the date
established by the Board of Trustees of the Bank as the date for determining
Eligible Account Holders.
"Eligible Account Holder" shall mean any Depositor of the Bank who
owned a Qualifying Deposit on the Eligibility Record Date.
"Estimated Price Range" shall mean the range of the minimum and
maximum aggregate values determined by the Board of Trustees of the Bank within
which the aggregate offering price of Common Stock sold in the Reorganization
will fall. The Estimated Price Range will be within the estimated aggregate pro
forma market value of the Common Stock, as determined by the Independent
Appraiser in accordance with Section 3.04.
"FDIC" shall mean the Federal Deposit Insurance Corporation.
"FRB" shall mean the Board of Governors of the Federal Reserve System.
-4-
<PAGE>
"Foundation" shall mean a non-stock Delaware corporation that is a
tax-exempt organization under Section 501(c)(3) of the Internal Revenue Code
formed by the Bank and the Company to which shares of Common Stock shall be
transferred upon the Reorganization.
"Holders of Subscription Rights" shall mean the Tax-Qualified Employee
Stock Benefit Plans, Eligible Account Holders, and Supplemental Eligible Account
Holders who have Subscription Rights pursuant to Section 3.04.
"Independent Appraiser" shall mean the independent Person retained by
the Bank to prepare an appraisal of the estimated pro forma market value of the
Common Stock. Such Person shall be experienced and expert in the area of
corporate appraisal and acceptable to the Superintendent.
"Internal Revenue Code" shall mean the Internal Revenue Code of 1986,
as amended.
"Maximum Subscription Price" shall mean the price per share to be
remitted by subscribers for shares of Common Stock in the Subscription Offering
and the Community Offering.
"MHC" shall mean Rome, MHC, the New York mutual holding company
resulting from the Reorganization.
"Minority Stockholder" shall mean any owner of the Company's Common
Stock, other than the MHC.
"Minority Stock Offerings" shall mean one or more offerings of less
than 50% in the aggregate of the outstanding Common Stock of the Company to
persons other than the MHC.
"Non-Tax-Qualified Employee Stock Benefit Plan" shall mean any stock
option, bonus stock or restricted stock plan or other employee benefit plan that
is not a "Tax-Qualified Employee Stock Benefit Plan" and that is maintained by
the Company or the Bank for the benefit of officers, employees or directors of
the Company, the Bank or any Affiliate of either of them and that, by its terms,
is authorized or required to purchase Common Stock.
"Officer" shall mean an executive officer of the Company, the MHC or
the Bank, which includes the chairman of the board, chief executive officer,
president, any vice president in charge of a principal business function or
functions or who otherwise has a policy-making function, secretary, treasurer or
principal financial officer, comptroller or principal accounting officer, and
any person performing functions similar to those performed by the foregoing
persons with respect to any incorporated or unincorporated organization.
"Order Form" shall mean the form provided by the Company or the Bank
that subscribers must use to order Common Stock in the Subscription Offering and
Community Offering.
"Overallotment Option" shall mean the option, which may be granted to
the Underwriters in any Syndicated Community Offering or Public Offering, to
purchase, on the same terms as other shares are purchased in such Syndicated
Community Offering or Public Offering, up
-5-
<PAGE>
to an additional fifteen percent of the shares of the Common Stock offered in
the Subscription Offering.
"Oversubscription Provision" shall mean the increase in the number of
shares of Common Stock that may be offered to subscribers in the Subscription
Offering and the Community Offering pursuant to Section 3.03(b) hereof.
"Person" shall mean any corporation, partnership, trust,
unincorporated association, any other entity or any natural person.
"Plan" or "Plan of Reorganization" shall mean this Plan of
Reorganization, including any amendments thereto.
"Prospectus" shall mean the Prospectus to be used in offering the
Common Stock in the Subscription Offering and the Community Offering.
"Proxy Statement" shall mean the document to be used to solicit
proxies from Voting Depositors to vote at the Special Meeting.
"Public Offering" shall mean the offering of certain shares of Common
Stock in accordance with Section 3.09 hereof.
"Public Offering Price" shall mean the price at which the shares of
Common Stock are offered in the Public Offering.
"Qualifying Deposit" shall mean one or more Deposit Accounts with the
Bank totaling, in the aggregate, at least one hundred dollars ($100.00).
"Reorganization" shall mean the reorganization of the Bank into the
MHC and the organization of the Company as a subsidiary of the MHC and the Stock
Bank as a subsidiary of the Company pursuant to this Plan.
"SEC" shall mean the Securities and Exchange Commission.
"Special Meeting" shall mean the Special Meeting of Depositors to be
called for the purpose of submitting the Plan to the Voting Depositors for their
approval.
"Stock Offering" shall mean the offering of the Common Stock of the
Company to persons other than the MHC, on a priority basis as set forth in, and
subject to the limitations of, the Plan.
"Subaccount Balance" shall mean, with respect to each Eligible Account
Holder and Supplemental Eligible Account Holder, the portion of the liquidation
account that such Eligible Account Holder and Supplemental Eligible Account
Holder would be entitled to receive pursuant to the Conversion Regulations in
the event of a complete liquidation of the Bank subsequent to the
Reorganization. The initial Subaccount Balance of each Eligible Account Holder
and Supplemental
-6-
<PAGE>
Eligible Account Holder shall be determined in accordance with Section
86.4(f)(4) of the Conversion Regulations.
"Subscription Offering" shall mean the offering of the Common Stock to
Eligible Account Holders, Supplemental Eligible Account Holders and Tax
Qualified Employee Benefit Plans in accordance with Section 3.04 hereof.
"Subscription Rights" shall mean the rights described in Section 3.04
hereof.
"Superintendent" shall mean the Superintendent of Banks of the State
of New York.
"Supplemental Eligibility Record Date" shall mean the supplemental
record date for determining Supplemental Eligible Account Holders, which is the
last day of the calendar quarter preceding the Superintendent's approval of the
Plan of Reorganization.
"Supplemental Eligible Account Holder" shall mean any Depositor of the
Bank (other than an Eligible Account Holder) who owned a Qualifying Deposit on
the Supplemental Eligibility Record Date.
"Syndicated Community Offering" shall mean the offering of Common
Stock following the Subscription and Community Offerings through a syndicate of
broker-dealers, if any.
"Syndicated Community Offering Price" shall mean the per share price
submitted with orders for shares of Common Stock in the Syndicated Community
Offering, if any.
"Tax-Qualified Employee Stock Benefit Plan" shall mean any defined
benefit plan or defined contribution plan, such as an employee stock ownership
plan, stock bonus plan, profit-sharing plan or other plan, that is maintained by
the Company or the Bank for the benefit of the officers or employees of the
Company, the Bank, or any Affiliate of either of them; that, by its terms, is
authorized or required to purchase Common Stock, and that, with its related
trust, meets the requirements to be "qualified" under Section 401 of the
Internal Revenue Code. The Bank may make scheduled discretionary contributions
to a Tax-Qualified Employee Stock Benefit Plan, provided that, among other
things, such contributions do not cause the Bank to fail to meet its regulatory
capital requirements.
"Trustee" shall mean a member of the Board of Trustees of the Bank
prior to the Reorganization.
"Underwriters" shall mean any investment banking firm or firms
purchasing or distributing the Common Stock to be offered in a Public Offering,
if any.
"Underwriting Agreement" shall mean the agreement between the Company
and the Underwriters pursuant to which the Underwriters agree to purchase or
distribute certain shares of the Common Stock for offering in a Public Offering,
if any.
-7-
<PAGE>
"Voting Depositor" shall mean any Depositor of the Bank who owns a
Qualifying Deposit on the Voting Record Date.
"Voting Record Date" shall mean the date fixed by the Board of
Trustees of the Bank as the date for determining Depositors of the Bank entitled
to notice of and to vote at the Special Meeting.
ARTICLE II
Procedure for Approval of the Reorganization
--------------------------------------------
Section 2.01 Application and Notice.
----------------------
This Plan, having been duly adopted by the Board of Trustees of the
Bank, will be submitted, together with an Application for Reorganization in the
forms required by the Conversion Regulations, to the Superintendent for
approval, to the Banking Board to request certain waivers, if required, and to
the FDIC for non-objection. Following approval of this Plan by the Board of
Trustees of the Bank, the Bank will cause notice of the adoption of the Plan,
and of its intention to convert to stock form and to reorganize into two-tier
mutual holding company form, to be conspicuously posted at its home office and
each of its branch offices. The Bank will also issue a press release containing
all of the material terms of the proposed Reorganization and will place an
advertisement containing such material terms in a newspaper having general
circulation in the communities in which the principal office and branches of the
Bank are located.
Section 2.02 Approval of Plan by Voting Depositors; the Special Meeting.
----------------------------------------------------------
(a) Following (i) approval of the Bank's Application for
Conversion by the Superintendent, (ii) the non-objection of the FDIC and (iii)
the receipt of all necessary waivers of the Banking Board, the Bank shall submit
the Plan to the Bank's Voting Depositors for approval at the Special Meeting.
The Bank shall mail to each Voting Depositor, at his or her last known address
appearing on the records of the Bank, a copy of the Plan and the proposed
Restated Organization Certificate of the Bank and proposed By-Laws of the Bank,
the proposed Certificate of Incorporation of the Company and proposed By-Laws of
the Company, a Notice of Special Meeting, Proxy Card and Subscription Order Form
and a long-form Proxy Statement (which contains a detailed description of the
Reorganization and contains offering material relating to the Subscription
Offering) in the forms required by the Conversion Regulations, describing the
Plan and certain other matters relating to the Bank and its Reorganization.
Separate and readily distinguishable postage-paid envelopes shall be provided
for the return of Proxy Cards and Subscription Order Forms.
(b) At the Special Meeting, each Voting Depositor shall be
entitled to cast one vote in person or by proxy for every one hundred dollars
($100.00) such Voting Depositor had on deposit with the Bank as of the Voting
Record Date; provided, however, that no Voting Depositor shall be eligible to
cast more than one thousand (1,000) votes. The Board of Trustees shall appoint
an independent custodian and tabulator to receive and hold proxies to be voted
at the Special Meeting and count the votes cast in favor of and in opposition to
the Plan.
-8-
<PAGE>
(c) The Superintendent shall be notified of the results of the
Special Meeting by a certificate signed by the President and Secretary of the
Bank within five days after the conclusion of the Special Meeting. The Plan must
be approved by the affirmative vote of at least seventy-five percent (75%) in
amount of deposit liabilities of the Voting Depositors represented in person or
by proxy at the Special Meeting and by the affirmative vote of at least a
majority of the amount of votes entitled to be cast by Voting Depositors at the
Special Meeting. If the Plan is so approved, the Bank will take all other
necessary steps to effect the Reorganization subject to the terms and conditions
of the Plan. If the Plan is not so approved, upon conclusion of the Special
Meeting and any adjournment or postponement thereof, the Plan shall not be
implemented without further vote and all funds submitted in the Subscription
Offering and Community Offering will be returned to subscribers, with interest
as provided herein, and all withdrawal authorizations will be canceled.
Section 2.03 Company Approvals.
-----------------
The Board of Trustees of the Bank intends to take all necessary steps
to form the Company and the MHC. The Bank will be a wholly owned subsidiary of
the Company (unless the Company is not utilized in the Reorganization) and the
Company will be a majority owned subsidiary of the MHC. If the Company is
utilized, upon the Reorganization, the Bank will issue its capital stock to the
Company, and the Company will issue and sell the Common Stock in accordance with
this Plan. The Company will make timely applications for any requisite
regulatory approvals, including an Application with the Superintendent, a
Holding Company Application with the FRB, and a Registration Statement on Form
S-1 to be filed with the SEC.
ARTICLE III
Sale of Common Stock
--------------------
Section 3.01 In General.
----------
(a) As soon as practicable after adoption of the Plan by the
Board of Trustees of the Bank and the Board of Directors of the Company, the
Company shall register the Common Stock under the Securities Act of 1933, as
amended, and any applicable state laws. After registration of the Common Stock
and receipt of all required regulatory approvals, the Company will be authorized
to undertake one or more Minority Stock Offerings of less than 50% in the
aggregate of the total outstanding Common Stock to the Holders of Subscription
Rights in the respective priorities set forth in Section 3.04; provided,
however, that no offer for sale of the Common Stock shall be made prior to the
mailing to Voting Depositors of the Proxy Statement for the Special Meeting.
Shares of Common Stock not subscribed for in the Subscription Offering will be
offered for sale in a Community Offering. Any Common Stock remaining unsold upon
completion of the Subscription Offering and Community Offering may be offered
for sale in a Syndicated Community Offering or a Public Offering or in some
other manner as determined by the Board of Trustees of the Bank and the Board of
Directors of the Company with the approval of the Superintendent. Any such
Syndicated Community or Public Offering shall be conducted in a manner that is
intended to achieve a reasonably wide distribution of the Common Stock.
-9-
<PAGE>
(b) The Community Offering may be commenced concurrently with the
Subscription Offering; provided, however, that any orders received in the
Community Offering shall be subject to availability of shares upon conclusion of
the Subscription Offering. The offer and sale of Common Stock prior to the
Special Meeting shall, however, be conditioned upon approval of the Plan by the
Voting Depositors. The sale of all Common Stock subscribed for in the
Subscription and Community Offerings will be consummated simultaneously on the
date the sale of Common Stock in any Syndicated Community Offering or Public
Offering is consummated and only if all Common Stock is sold.
(c) The sales price per share of the Common Stock shall be a uniform
price determined in accordance with Section 86.5(c) of the Conversion
Regulations and Section 3.03 hereof, except that the price to be paid by or
through the Underwriters in connection with a Syndicated Community Offering or
Public Offering may be less a negotiated Underwriters' commission or discount.
The Bank may also elect to offer to pay fees on a per share basis to qualifying
brokers, as determined by the Bank in its sole discretion, who assist Persons in
determining to purchase shares in the Subscription and Community Offerings.
(d) The Board of Trustees of the Bank may determine for any reason at
any time prior to the issuance of the Common Stock not to utilize a two-tier
mutual holding company form of organization in the Reorganization. If the Board
of Trustees of the Bank determines not to complete the Reorganization utilizing
two-tier mutual holding company form of organization, the capital stock of the
Bank will be issued and sold in accordance with the Plan. In such case, the
Company's registration statement on Form S-l will be withdrawn from the SEC, the
Bank will take all steps necessary to complete the Reorganization to a mutual
holding company form of organization, including filing any necessary documents
with the FDIC, and will issue and sell the Common Stock in accordance with this
Plan and the MHC will own a majority of the Common Stock of the Bank. In such
event, any subscriptions or orders received for Common Stock of the Company
shall be deemed to be subscriptions or orders for Common Stock of the Bank on
the same terms and conditions that such provisions apply to the Common Stock of
the Company. In that event all references to the Company in this Plan shall be
deemed to refer to the Bank or shall have no effect, as the context requires,
and the Bank shall take such steps as permitted or required by the
Superintendent or the SEC.
Section 3.02 Reorganization into Mutual Holding Company.
------------------------------------------
As part of the Reorganization, the Bank will convert to a New York
chartered stock savings bank, and will establish the Company as a Delaware
corporation and the MHC as a New York mutual holding company. The Reorganization
will be effected as follows, or in any manner approved by the Superintendent
that is consistent with the purposes of this Plan and applicable laws and
regulations.
As part of the Reorganization: (i) the Bank will organize an interim stock
savings bank as a wholly-owned subsidiary ("Interim One"); (ii) Interim One will
organize an interim stock savings bank as a wholly-owned subsidiary ("Interim
Two"); (iii) Interim One will organize the Company as a wholly-owned subsidiary;
(iv) the Bank will exchange its organization certificate for a stock savings
bank organization certificate to become the Stock Bank and Interim One will
exchange its
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organization certificate for a mutual holding company organization certificate
to become the MHC; (v) Interim Two will merge with and into the Stock Bank with
the Stock Bank as the resulting institution; (vi) all of the initially issued
stock of the Stock Bank will be transferred to the MHC in exchange for
membership interests in the MHC; and (vii) the MHC will contribute the capital
stock of the Stock Bank to the Company and the Stock Bank will become a wholly-
owned subsidiary of the Company. Contemporaneously with the Reorganization, the
Company will offer for sale in the Stock Offering shares of Common Stock
representing up to 49.9% the pro forma market value of the Company and the Bank.
Steps (iv) through (vii) of the Reorganization and the Stock Offering will occur
simultaneously.
Upon the consummation of the Reorganization, the legal existence of the
Bank will not terminate, but the Stock Bank will be a continuation of the Bank,
and all property of the Bank, including its right, title, and interest in all
property of whatsoever kind and nature, interest and asset of every conceivable
value or benefit then existing or pertaining to the Bank, or which would inure
to the Bank immediately by operation of law and without the necessity of any
conveyance or transfer and without any further act or deed, will vest in the
Stock Bank. The Stock Bank will have, hold, and enjoy the same in its right and
fully and to the same extent as the same was possessed, held, and enjoyed by the
Bank. The Stock Bank will continue to have, succeed to, and be responsible for
all the rights, liabilities and obligations of the Bank and will maintain its
headquarters and operations at the Bank's present locations.
Upon consummation of the Reorganization, substantially all of the assets
and liabilities (including the savings accounts, demand accounts, tax and loan
accounts, United States Treasury general accounts, or United States Treasury
Time Deposit Accounts, as defined in the Conversion Regulations) of the Bank
shall become the assets and liabilities of the Stock Bank, which will thereupon
become an operating savings bank subsidiary of the Company and of the MHC. The
Bank will apply to the Superintendent to have the Company receive or retain (as
the case may be) up to 50% of the net proceeds of the Stock Offering, or such
other amount as may be determined by the Board of Directors. The Stock Bank may
distribute additional capital to the Company following the Reorganization,
subject to the New York banking regulations governing capital distributions.
A. Effect on Deposit Accounts and Borrowings
Each deposit account in the Bank on the Effective Date will remain a
deposit account in the Stock Bank in the same amount and upon the same terms and
conditions, and will continue to be federally insured up to the legal maximum by
the FDIC in the same manner as deposit account existed in the Bank immediately
prior to the Reorganization. Upon consummation of the Reorganization, all loans
and other borrowings from the Bank shall retain the same status with the Stock
Bank after the Reorganization as they had with the Bank immediately prior to the
Reorganization.
B. The Bank
Upon completion of the Reorganization, the Stock Bank will be authorized to
exercise any and all powers, rights and privileges of, and will be subject to
all limitations applicable to, capital stock savings banks under federal law.
The Reorganization will not result in any reduction of the
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amount of retained earnings and general loss reserves will be accounted for by
the MHC, the Company and the Stock Bank on a consolidated basis in accordance
with generally accepted accounting principles.
The initial members of the Board of Directors of the Stock Bank will be the
members of the existing Board of Directors of the Bank. The Stock Bank will be
wholly-owned by the Company. The Company will be wholly-owned by its
stockholders who will consist of the MHC and, initially, the persons who
purchase Common Stock in the Stock Offering. Upon the Effective Date of the
Reorganization, the voting and membership rights of Depositors will be
transferred to the MHC, subject to the conditions specified below.
C. The Company
The Company will be authorized to exercise any and all powers, rights and
privileges, and will be subject to all limitations applicable to savings and
loan holding companies and mutual holding companies under New York and federal
law and regulations. The initial members of the Board of Directors of the
Company will be appointed by the Bank. Thereafter, the voting stockholders of
the Company will elect approximately one-third of the Company's directors
annually.
The Company will have the power to issue shares of Common Stock to persons
other than the MHC. However, so long as the MHC is in existence, the MHC will
be required to own at least a majority of the Voting Stock of the Company. The
Company may issue any amount of Non-Voting Stock to persons other than the MHC.
The Company will be authorized to undertake one or more Minority Stock Offerings
of less than 50% in the aggregate of the total outstanding Common Stock of the
Company, and the Company intends to offer for sale up to 49.9% of its Common
Stock in the Stock Offering.
D. The Mutual Company
As a mutual corporation, the MHC will have no stockholders. The depositors
of the Stock Bank will have exclusive voting authority as to all matters
requiring a vote of members under the Organization certificate of the MHC.
Persons who have membership rights with respect to the Bank under its existing
Organization Certificate immediately prior to the Reorganization shall continue
to have such rights solely with respect to the MHC after Reorganization so long
as such persons remain depositors of the Stock Bank after the Reorganization.
In addition, all persons who become depositors of the Stock Bank following the
Reorganization will have membership right with respect to the MHC. The rights
and powers of the MHC will be defined by the MHC's Organization Certificate and
Bylaws and by the statutory and regulatory provisions applicable to savings and
loan holding companies and mutual holding companies. In particular, the MHC
shall be subject to the limitations and restrictions imposed on savings and loan
holding companies by Section 10(o)(5) of the HOLA.
The initial members of the Board of Directors of the MHC will be the
existing Board of Directors of the Bank and any additional persons as may be
appointed by the Bank. Thereafter, approximately one-third of the directors of
the MHC will be elected annually by the members of the
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MHC who will consist of the former Depositors of the Bank and all persons who
become depositors of the Bank after the Reorganization.
E. Use of Proceeds
Upon the issuance of the Common Stock, the Company will contribute to
the Bank at least 50% of the net Stock Offering proceeds. The Company will
retain $100,000 of the net proceeds of the sale of the Common Stock. A greater
percentage may be retained in the discretion of the Boards of Trustees of the
Bank and the Board of Directors of the Company. The Bank believes that the
Stock Offering proceeds will provide economic strength to the Company and the
Bank for the future in a highly competitive and regulated environment. The
Reorganization will also facilitate any expansion through acquisitions of
financial service organizations, any diversification into other related
businesses and any engagement in other business and investment purposes,
including the possible payment of dividends and possible future repurchases of
the Common Stock as permitted by the Conversion Regulations.
Section 3.03 Pricing and Number of Shares of Common Stock; Independent
---------------------------------------------------------
Appraiser.
---------
(a) All shares sold in the Reorganization shall be sold at a
uniform price per share, the Actual Purchase Price, which shall be no more than
$40.00 per share and no less than $5.00 per share. The aggregate price at which
the Common Stock shall be sold shall be consistent with the estimated pro forma
market value of such Common Stock on the Effective Date of the Reorganization,
based upon an independent valuation as provided for in this Section 3.03. The
Bank shall cause the Independent Appraiser to prepare a pro forma valuation of
the aggregate market value of the Common Stock, which shall be submitted to the
Superintendent and the FDIC as part of the Bank's Application for Conversion,
such valuation to be stated in terms of an Estimated Price Range, the maximum of
which shall be no more than 15% above the average of the minimum and maximum of
such price range and the minimum of which shall be no more than 15% below such
average. From time to time, as appropriate or as required by the Conversion
Regulations or the Superintendent, the Bank shall cause the Independent
Appraiser to review developments subsequent to its valuation to determine
whether the Estimated Price Range should be revised. Such valuation shall be
prepared in accordance with the Conversion Regulations.
(b) Based on the valuation of the Independent Appraiser pursuant
to Section 3.03(a) hereof, the Board of Trustees of the Bank and the Board of
Directors of the Company shall fix the Maximum Subscription Price and the number
of shares to be offered. The total number of shares of Common Stock offered
shall be subject to increase or decrease at any time prior to any Syndicated
Community Offering or Public Offering or other method of sale to reflect changes
in market and financial conditions. In the event that the aggregate purchase
price of the Common Stock is below the minimum of the Estimated Price Range, or
materially above the maximum of the Estimated Price Range, resolicitation of
purchasers may be required; provided, that up to a 15% increase above the
maximum of the Estimated Price Range will not be deemed material so as to
require a resolicitation. Up to a 15% increase in the number of shares to be
issued which is supported by an appropriate change in the estimated pro forma
market value of the Common Stock will not be deemed to be material so as to
require a resolicitation of subscriptions. In the event that the aggregate
purchase price of the Common Stock is below the minimum of the Estimated Price
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Range or in excess of 15% above the maximum of the Estimated Price Range, and a
resolicitation is required, such resolicitation shall be effected in such manner
and within such time as the Company or the Bank shall establish, with the
approval of the Superintendent or the FDIC, if required. The total number of
shares of Common Stock offered will be subject to increase in connection with
the exercise of any Overallotment Option or the Oversubscription Provision,
provided that any additional number of shares of Common Stock issued for these
purposes shall not exceed 15% of the total number of shares of the Common Stock
offered in the Subscription Offering. The total number of shares of Common
Stock that may be issued to persons other than the MHC must be no greater than
49.9% of the issued and outstanding shares of Common Stock of the Company.
(c) If the number of shares of Common Stock to be sold in the
Reorganization, excluding any number of shares to be issued in connection with
any Overallotment Option or the Oversubscription Provision, is increased after
commencement of the Subscription Offering, any Person who subscribed for the
maximum number of shares of Common Stock shall be permitted to purchase an
additional number of shares such that such Person shall be permitted to
subscribe for the then maximum number of shares permitted to be subscribed for
by such Person as adjusted to take into account the increase in the number of
shares to be sold, subject to the rights and preferences of any Person who has
priority Subscription Rights. If either the individual purchase limitation or
the number of shares of Common Stock, excluding any number of shares to be
issued in connection with any Overallotment Option or the Oversubscription
Provision, is decreased after commencement of the Subscription Offering, the
order of any Person who subscribed for the maximum number of shares of Common
Stock shall be decreased by the minimum amount necessary so that such Person
shall be in compliance with the then maximum number of shares permitted to be
subscribed for by such Person. The Company shall not otherwise be required to
offer subscribers the right to modify or rescind their subscriptions as a result
of any increase or decrease in the number of shares of Common Stock offered,
unless otherwise required by this Plan or by the Superintendent.
(d) In the event shares of Common Stock are sold in excess of the
maximum of the Estimated Price Range (the "Adjusted Maximum"), such shares will
be allocated in the following order of priority: (i) in the event that there is
an oversubscription at the Eligible Account Holder level, to fill unfulfilled
subscriptions of Eligible Account Holders in accordance with Section 3.04(a);
(ii) to fill the Tax-Qualified Employee Stock Benefit Plans' subscriptions in
accordance with Section 3.04(b); (iii) in the event there is an oversubscription
at the Supplemental Eligible Account Holder level, to fill unfulfilled
subscriptions of Supplemental Eligible Account Holders in accordance with
Section 3.04(c); and (iv) to fill unfulfilled Subscriptions in the Community
Offering in accordance with Section 3.05.
(e) If all of the shares of Common Stock are subscribed for in the
Subscription Offering and the Community Offering, or are sold in some other
manner other than a Syndicated Community Offering or Public Offering, the Board
of Trustees of the Bank and the Board of Directors of the Company, in
consultation with the Independent Appraiser, shall determine the Actual Purchase
Price, subject to approval by the Superintendent. If all shares of the Common
Stock are not subscribed for and there is a Syndicated Community Offering or
Public Offering, the Board of Trustees of the Bank and the Board of Directors of
the Company, in consultation with the Underwriters and the Independent
Appraiser, shall determine the Syndicated Offering Price or the Public Offering
Price, as the case may be, subject to the approval of the Superintendent. If
there is
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a Syndicated Community Offering or a Public Offering, the Syndicated Offering
Price or the Public Offering Price, as the case may be, will determine the
Actual Purchase Price. Except for the purchase price of shares sold upon the
exercise of any Overallotment Option or the Oversubscription Provision, the
aggregate purchase price of the Common Stock shall be within the Estimated Price
Range, unless subscribers are offered the right to modify or rescind their
subscriptions.
(f) The Company shall not consummate any sale unless the
Independent Appraiser shall have confirmed to the Company, the Bank and the
Superintendent that nothing of a material nature has occurred that would cause
the Independent Appraiser to conclude that the aggregate purchase price of the
shares of Common Stock sold in the Reorganization, exclusive of the aggregate
purchase price of shares sold upon the exercise of the Overallotment Option or
the Oversubscription Provision, is incompatible with its estimate of the pro
forma market value of the Bank at the time of such sale. If the Independent
Appraiser is unable to so confirm, the Stock Offering may be canceled or the
Bank and the Company may extend the Reorganization, establish a new Estimated
Price Range, Actual Purchase Price, extend, reopen or hold a new Subscription
Offering and Community Offering, Syndicated Community Offering or Public
Offering, or take such other action as the Board of Trustees of the Bank and the
Board of Directors of the Company shall determine and the Superintendent shall
approve.
(g) The Common Stock to be issued pursuant to this Plan shall
upon issuance be fully paid and nonassessable.
Section 3.04 Subscription Rights.
-------------------
(a) Each Eligible Account Holder shall receive, as first priority
and without payment, nontransferable subscription rights to subscribe for shares
of Common Stock equal to an amount up to the greatest of (i) the amount
permitted to be subscribed for in the Community Offering, which amount is
currently equal to $150,000 of the Common Stock issued in the Stock Offering, as
specified in Section 3.05(d), and may be increased to 5.0% of the Common Stock
issued in the Stock Offering or decreased to one-tenth of one percent of the
shares of Common Stock issued in the Stock Offering. Such subscription is
subject to the maximum purchase limitation specified in Section 3.10(a) and the
minimum purchase limitation in Section 3.10(d) and exclusive of an increase in
the total number of shares issued due to an increase in the Estimated Price
Range of up to 15%. If Eligible Account Holders subscribe for a number of shares
of Common Stock that exceeds the total number of shares of Common Stock being
issued in the Stock Offering, the Common Stock shall be allocated among
subscribing Eligible Account Holders as follows:
(i) first, to the extent possible, each Eligible Account
Holder shall be entitled to subscribe for the entire amount of his or her
order, up to 100 shares;
(ii) second, each Eligible Account Holder subscribing for in
excess of 100 shares shall be entitled, with respect to such excess, to
subscribe for the same percentage of the total remaining shares to be
issued in the Stock Offering as the value of his or her Qualifying Deposits
represents to the aggregate value of the Qualifying Deposits of all
remaining Eligible Account Holders whose subscriptions remain unsatisfied;
provided, however, that no fractional shares shall be issued; and
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(iii) third, any shares then remaining shall be reallocated
(one or more times if necessary) among those Eligible Account Holders whose
subscriptions are not filled pursuant to subparagraphs (i) or (ii) above,
on the basis otherwise set forth in (ii) above until all available shares
have been allocated or all subscriptions satisfied.
Subscription Rights to purchase Common Stock received by Trustees and Officers
of the Bank, and their Associates, as Eligible Account Holders that are based on
their increased Deposit Accounts in the Bank in the one-year period preceding
the Eligibility Record Date shall be subordinated to the Subscription Rights of
all other Eligible Account Holders granted pursuant to the Conversion
Regulations and this Plan.
(b) The Tax-Qualified Employee Stock Benefit Plans shall receive,
without payment, as a second priority after the filling of subscriptions of
Eligible Account Holders, non-transferable Subscription Rights to purchase up to
a maximum of ten percent (10.0%) of the Common Stock issued in the Stock
Offering. If, after the filling of subscriptions of Eligible Account Holders, a
sufficient number of shares is not available to fill the subscriptions by such
plan, the subscription by such plan shall be filled to the maximum extent
possible. A Tax-Qualified Employee Stock Benefit Plan shall not be deemed to be
an Associate or Affiliate of, or a Person Acting in Concert with, any Director
or Officer of the Company or the Bank. Notwithstanding any provision contained
herein to the contrary, the Bank may make scheduled discretionary contributions
to a Tax-Qualified Employee Stock Benefit Plan; provided, among other things,
that such contributions do not cause the Bank to fail to meet its regulatory
capital requirements.
(c) Each Supplemental Eligible Account Holder shall receive, as third
priority and without payment, nontransferable Subscription Rights to subscribe
for shares of Common Stock equal to an amount up to the greatest of (i) the
amount permitted to be subscribed for in the Community Offering, which amount is
currently $150,000 of the Common Stock offered in the Stock Offering, as
specified in Section 3.05(d), and may be increased to 5.0% of the Common Stock
offered in the Stock Offering or decreased to one-tenth of one percent of the
total offering of shares of Common Stock. Such subscription is subject to the
maximum purchase limitation specified in Section 3.10(a) and the minimum
purchase limitation in Section 3.10(d) and exclusive of an increase in the total
number of shares issued due to an increase in the Estimated Price Range of up to
15%. If Supplemental Eligible Account Holders subscribe for a number of shares
of Common Stock that exceeds the total number of shares of Common Stock being
issued in the Stock Offering and available after purchases by Eligible Account
Holders and Tax-Qualified Employee Stock Benefit Plans, the Common Stock shall
be allocated among subscribing Supplemental Eligible Account Holders as follows:
(i) first, to the extent possible, each Supplemental Eligible
Account Holder shall be entitled to subscribe for the entire amount of his
or her order, up to 100 shares;
(ii) second, each Supplemental Eligible Account Holder
subscribing for in excess of 100 shares shall be entitled, with respect to
such excess, to subscribe for the same percentage of the total remaining
shares to be issued in the Stock Offering as the value
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of his or her Qualifying Deposits represents to the aggregate value of the
Qualifying Deposits of all remaining Supplemental Eligible Account Holders
whose subscriptions remain unsatisfied; provided, however, that no
fractional shares shall be issued; and
(iii) third, any shares then remaining shall be reallocated
(one or more times if necessary) among those Supplemental Eligible Account
Holders whose subscriptions are not filled pursuant to subparagraphs (i) or
(ii) above, on the basis otherwise set forth in (ii) above until all
available shares have been allocated or all subscriptions satisfied.
(d) Subscription Rights are non-transferable and may not be
exercised by or on behalf of any Person other than the Holder of Subscription
Rights. Prior to the Effective Date, no Person shall offer to transfer, enter
into any agreement or understanding to transfer, or transfer the legal or
beneficial ownership of any shares of Common Stock, except pursuant to or as
contemplated by this Plan.
(e) The Bank shall make reasonable efforts to comply with the
securities laws of all States in the United States in which Persons entitled to
subscribe for shares of Common Stock pursuant to the Plan reside. No Person
will be offered or sold any Common Stock in the Subscription Offering if such
Person resides in a foreign jurisdiction. No payment will be made in lieu of
the granting of Subscription Rights to any such Person.
Section 3.05 Community Offering.
------------------
Shares of Common Stock not subscribed for in the Subscription Offering
may be offered in a Community Offering, commencing concurrently with or
subsequent to the commencement of the Subscription Offering, subject to the
following terms and conditions:
(a) The Community Offering may be made to the those persons that
the Bank determines to be members of its community, including without
limitation, customers, employees, Officers, and Trustees of the Bank and their
immediate families, trusts or custodial arrangements forming part of an
Individual Retirement Account established pursuant to Section 408 of the
Internal Revenue Code, or part of a qualified retirement plan established
pursuant to Section 401(a) of the Internal Revenue Code and maintained for the
benefit of any such natural person, and certain institutional investors. Shares
of Common Stock offered in the Community Offering will be offered in the order
of priority listed below:
(i) First, to depositors with accounts at the Bank with
total balances of at least $100 at the commencement of the Community
Offering;
(ii) Second, to residents of Oneida County, New York; and
(iii) Third, to other members of the public.
(b) The Community Offering shall be completed no later than 45
days following the termination of the Subscription Offering, unless extended
with the approval of the Superintendent.
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(c) The Community Offering shall be by means of a direct marketing
program. The Bank or the Company may, if the Board of Trustees of the Bank and
the Board of Directors of the Company deem it advisable, engage the services of
a registered broker-dealer, consultant or investment banking firm, experienced
and expert in the sale of savings institution securities, to assist the Company
in the direct marketing program. The Company and the Bank shall make
distribution of the Common Stock to be sold in the Community Offering in such a
manner as to promote a reasonably wide distribution of Common Stock.
(d) Any Person subscribing for Common Stock pursuant to the
provisions of this Section 3.05 shall be required to purchase a minimum of 25
shares to the extent such shares are available for purchase. The maximum amount
that any Person, together with any Associate or group of Persons Acting in
Concert, may subscribe for in the Community Offering shall be $150,000 of the
Common Stock offered in the Reorganization; provided, however, that the amount
permitted to be purchased in the Community Offering may be increased to 5.0% of
the Common Stock issued in the Stock Offering or decreased to less than $150,000
without the further approval of depositors or resolicitation of subscribers. If
there are not sufficient shares available to fill all subscription requests, the
total number of shares available in the Community Offering shall be allocated to
each subscriber whose order is accepted, the shares available to such subscriber
will be allocated in the manner which permits each such person, to the extent
possible, to purchase the number of shares necessary to make his total
allocation of Common Stock equal to the lesser of 100 shares or the number of
shares subscribed for by such persons, thereafter, unallocated shares will be
allocated among such persons whose subscriptions remain unsatisfied on a 100
shares per order basis until all such orders have been filled or the remaining
shares have been allocated.
(e) The Bank shall make reasonable efforts to comply with the
securities laws of all States in the United States in which Persons entitled to
subscribe for shares of Common Stock pursuant to the Plan reside. No Person
will be offered or sold any shares of Common Stock in the Community Offering if
such Person resides in a foreign jurisdiction.
(f) Notwithstanding the foregoing, the Company reserves the
absolute right to accept or reject any or all orders in the Community Offering
in whole or in part for any reason not in contravention of any applicable law or
regulation.
Section 3.06 Subscription and Community Offering Procedures; Order Forms
-----------------------------------------------------------
(a) After the registration statement for the Common Stock has been
declared effective and all other required regulatory approvals have been
obtained, the Company shall distribute or make available the Prospectus,
together with Order Forms for the purchase of Common Stock, to the Holders of
Subscription Rights for the purpose of enabling them to exercise their
respective Subscription Rights. Such notice may be included with the Proxy
Statement for the Special Meeting and may also be included in a notice of the
pendency of the Reorganization and the Special Meeting sent to all Voting
Depositors. Each Order Form must be preceded or accompanied by the Prospectus
describing the Company, the Bank, the Common Stock, the Subscription Offering
and the Community Offering. Each Order Form shall contain such information as
may be required by the Conversion Regulations.
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(b) The Holders of Subscription Rights shall have a period of time
within which to complete and deliver an Order Form to the Company. The exact
date and time by which completed Order Forms must be received by the Company
shall be set forth on the Order Form; provided, that if the Holders of
Subscription Rights are required to return a postage-paid request card to
receive a Prospectus and Order Form, the Subscription Offering shall not
terminate until the expiration of five days after the Special Meeting unless a
shorter period of time is approved by the New York State Banking Department.
Failure of any Holder of Subscription Rights to deliver a properly executed
Order Form to the Company, together with full payment (or authorization for full
payment by withdrawal from a Deposit Account with the Bank) for the shares of
Common Stock subscribed for, within the time limits prescribed shall be deemed a
waiver and release by such Person of any Subscription Rights.
(c) The Company shall also distribute or make available the
Prospectus, together with Order Forms for the purchase of Common Stock, to
certain other Persons described in Section 3.05. A subscriber in the Community
Offering shall have a period of time within which to complete and deliver an
Order Form to the Company, which period of time shall end at the same time that
the Subscription Offering terminates, unless extended pursuant to Section
3.05(b). The exact date and time by which completed Order Forms must be
received by the Company shall be set forth on the Order Form.
(d) The Company may, subject to the provisions of this Plan and
any required approval of the Superintendent, extend the period during which an
Order Form must be completed and delivered to the Company. Any such extension
shall be for a period that the Board of Trustees of the Bank and the Board of
Directors of the Company determine is appropriate.
(e) The Company reserves the right to accept or reject orders on
photocopied or facsimilied order forms. The Company may, but will not be
required to, waive any irregularity on any Order Form, or require the submission
of corrected Order Forms or the remittance of full payment for subscribed shares
of Common Stock by such date as set forth in the Prospectus. The interpretation
by the Company of the terms and conditions of the Order Forms will be final and
binding on all subscribers.
Section 3.07 Payment for Common Stock.
------------------------
(a) Payment for shares of Common Stock subscribed for in the
Subscription Offering and in any Community, Syndicated Community or Public
Offerings shall be equal to the Maximum Subscription Price multiplied by the
number of shares that are being subscribed for. Such payment must, except as
noted below, be made at the time the Order Form is delivered to the Company and
may be made:
(i) in cash, if delivered in person, or by check, bank draft,
or money order, or
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(ii) if the subscriber has a Deposit Account in the Bank, the
subscriber may authorize the Bank to withdraw from such Deposit Account an
amount equal to the aggregate Maximum Subscription Price of the shares for
which the Person subscribed.
If the subscriber is a Benefit Plan of the Bank, the subscribing Benefit Plan
may pay for the shares of Common Stock at the Actual Purchase Price on or prior
to the Effective Date. If the subscribing Benefit Plan is an employee stock
ownership plan, it may pay on or prior to the Effective Date only if it has
received a loan commitment from the Company or a source of funding acceptable to
the Company, committing to advance to the Benefit Plan on or before the
Effective Date the aggregated Maximum Subscription Price of the shares for which
the Benefit Plan subscribed. Notwithstanding the foregoing, the Bank and the
Company shall have the right, in their sole discretion, to permit institutional
investors to submit contractually irrevocable orders in the Community Offering
and to thereafter submit payment for the Common Stock for which they are
subscribing in the Community Offering at any time prior to 48 hours before the
completion of the Reorganization, unless such 48-hour period is waived by the
Bank and the Company, in their sole discretion.
(b) If the Actual Purchase Price is less than the Maximum
Subscription Price, the difference will be promptly refunded to all subscribers
(or withdrawal authorizations from time or Deposit Accounts shall be reduced).
(c) If a subscriber authorizes a withdrawal of the amount of the
Maximum Subscription Price multiplied by the number of shares that are being
subscribed for from a time or Deposit Account with the Bank as payment for the
shares subscribed for, the Bank will have the right upon receipt of the Order
Form by the Company to make such withdrawal immediately or to place a hold on
such account equal to such aggregate Maximum Subscription Price. The Bank will
allow withdrawal from certificates of deposit for such payment without the
assessment of penalties; however, if the withdrawal results in the certificate
failing to meet any applicable minimum balance requirement, the certificate
evidencing the account may be canceled and the remaining balance transferred to
a statement savings account that will earn interest at the regular passbook
rate. Where any applicable required minimum balance is maintained in such
certificate account, the rate of return on the balance of the certificate
account will remain the same as prior to such early withdrawal. If the Bank
withdraws funds from a subscriber's time account, or places a hold on such
account, in accordance with this Section 3.07, and the time account matures
prior to the date the Reorganization is completed or terminated, the funds so
withdrawn or placed under a hold shall be transferred upon maturity of the time
account to a statement savings account that will earn interest at the regular
passbook rate.
(d) The Bank will pay interest, at not less than the passbook
rate, for all amounts paid in cash, by check, bank draft or money order to
purchase shares of the Common Stock in the Subscription Offering or Community
Offering from the date payment is received until the date the Reorganization is
completed or terminated. If any withdrawal from a time or Deposit Account made
pursuant to paragraph (c) above is made at any time prior to the date the
Reorganization is completed or terminated, the Bank shall pay interest to the
subscriber on the amount withdrawn as if such amount had remained in the account
from which it was withdrawn until the date the Reorganization is completed or
terminated.
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<PAGE>
(e) The Bank will not knowingly loan funds or otherwise extend
credit to any Person for the purpose of purchasing shares of the Common Stock.
(f) Wire transfers as payment for Common Stock will not be
permitted or accepted as proper payment.
Section 3.08 Syndicated Community Offering.
-----------------------------
(a) Shares of Common Stock not sold in the Subscription Offering
or the Community Offering may be offered for sale in a Syndicated Community
Offering, subject to such terms, conditions and procedures as may be determined
by the Bank, in a manner that is intended to achieve the a reasonably wide
distribution of the Common Stock subject to the right of the Bank to accept or
reject in whole or in part all subscriptions in the Syndicated Community
Offering.
(b) In the Syndicated Community Offering, any Person together with
any Associate or group of Persons Acting in Concert may purchase up to $150,000
of the Common Stock offered in the Reorganization subject to the maximum
purchase limitation specified in Section 3.10(a) and the minimum purchase
limitation specified in Section 3.10(d) and exclusive of an increase in the
total number of shares issued due to an increase in the Estimated Price Range of
up to 15%. However, the shares purchased in the Community Offering by any Person
together with an Associate or group of Persons Acting in Concert pursuant to
Section 3.06 shall be counted toward meeting the maximum purchase limitation
found in this Section 3.08.
(c) Provided that the Subscription Offering has commenced, the
Bank may commence the Syndicated Community Offering at any time after the
mailing to the depositors of the Proxy Statement to be used in connection with
the special meeting of depositors, provided that the completion of the offer and
sale of the Common Stock shall be conditioned upon the approval of this Plan by
Voting Depositors. If the Syndicated Community Offering is not sooner commenced
pursuant to the provisions of the preceding sentence, the Syndicated Community
Offering will be commenced as soon as practicable following the date upon which
the Subscription and Community Offerings terminate.
Section 3.09 Public Offering Alternative.
---------------------------
(a) Shares of Common Stock not sold in the Subscription Offering
or the Community Offering may, as an alternative to a Syndicated Community
Offering pursuant to Section 3.08, be offered for sale by the Company to or
through Underwriters. The provisions of Section 3.10 shall not be applicable to
sales to Underwriters for purposes of such a Public Offering. Any such
Underwriter shall agree to (a) purchase such shares from the Company with a view
to reoffering them to the general public; (b) use their best efforts to sell,
for the account of the Company, such shares to the general public; or (c) a
combination of (a) and (b), subject to the following terms and conditions:
(b) Any Underwriting Agreement shall provide that the Underwriters
shall agree to purchase all shares of the Common Stock not sold in the
Subscription Offering or the Community Offering, if any such shares are
purchased.
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<PAGE>
(c) The price paid to the Company by or through the Underwriters
for the Common Stock shall be the aggregate Public Offering Price for the shares
of Common Stock so offered, less discounts and commissions as negotiated between
the Bank, the Company and the Underwriters and approved by the Superintendent
and the National Association of Securities Dealers, Inc.
(d) The Underwriting Agreement shall be subject to the following
conditions and such other conditions as may be acceptable to the Bank, the
Company and the Superintendent:
(i) purchases in the Public Offering shall be subject to the
limitations of Section 3.10; and
(ii) the Company and its Underwriters shall use reasonable
efforts to assure that the stock to be offered and sold in the Public
Offering shall be offered and sold in a manner that, to the extent
practicable, will achieve a reasonably wide distribution of such stock.
(e) If for any reason a Syndicated Community Offering or a Public
Offering of shares of Common Stock not sold in the Subscription and Community
Offerings cannot be effected, or if any insignificant residue of shares of
Common Stock is not sold in the Subscription and Community Offerings or in the
Syndicated Community or Public Offering, other arrangements will be made for the
disposition of unsubscribed shares by the Bank, if possible. Such other
purchase arrangements will be subject to the approval of the Superintendent.
Section 3.10 Restrictions on Purchase and Transfer of Common Stock
-----------------------------------------------------
The following limitations shall apply to all purchases of Common
Stock:
(a) The aggregate amount of outstanding Common Stock of the
Company owned or controlled by persons other than the MHC at the close of the
Stock Offering shall be less than 50% of the Company's total outstanding Common
Stock.
(b) No Person, acting alone, acting together with any other
Person, or Acting in Concert with any group of Persons, shall be entitled to
purchase more than $150,000 of the Common Stock issued in the Stock Offering,
provided, however, that in the event the maximum purchase limitations set forth
in this Section 3.10(a) are increased pursuant to Section 3.10(e) below to more
than $150,000 of the shares of Common Stock offered, orders for Common Stock in
the Community Offering and in the Syndicated Community Offering (or the Public
Offering), if any, shall, as determined by the Bank and the Holding Company,
first be filled to a maximum of $150,000 of the total number of shares of Common
Stock offered and thereafter remaining shares shall be allocated on an equal
number of shares per order basis until all orders have been filled. For purposes
of applying this purchase limitation, the purchases of any Tax-Qualified
Employee Stock Benefit Plan shall not be subject to such purchase limitation,
and the purchases of any Benefit Plan shall not be aggregated with those of any
other Benefit Plan or other Person; provided, however, that any one or
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<PAGE>
more Tax-Qualified Employee Stock Benefit Plans may subscribe for up to and
including 10% of the Common Stock issued.
(c) The Officers and Trustees of the Bank and Officers and
Directors of the Company and their Associates, collectively, shall be entitled
to purchase up to and including 25% of the Common Stock issued in the Stock
Offering. In applying this limitation, Common Stock purchased by any one or more
Tax-Qualified Employee Stock Benefit Plan shall not be counted.
(d) Shares of Common Stock subscribed for in the Subscription
Offering, the Community Offering and any Syndicated Community Offering or Public
Offering or otherwise purchased shall be aggregated for purposes of determining
if the limitations of Section 3.10(a) and (b) have been violated.
(e) Any Person exercising Subscription Rights to purchase Common
Stock shall be required to purchase a minimum of 25 shares to the extent such
shares are available for purchase. However, in the event the minimum number of
shares of Common Stock that must be purchased times the price per share exceeds
five hundred dollars ($500.00), then the minimum purchase requirement shall be
reduced to such number of shares that, when multiplied by the price per share,
the aggregate price for any such minimum purchase of shares of Common Stock
shall not exceed five hundred dollars ($500.00).
(f) Depending upon market or financial conditions, the Board of
Trustees of the Bank and the Board of Directors of the Company, without further
approval of the subscribers, may decrease or increase the purchase limitations
in this Plan, provided that the maximum purchase limitations may not be
increased to a percentage in excess of 5.0%. If the Bank and the Company
increase such maximum purchase limitations, the Bank and the Company are only
required to resolicit Persons who subscribed for the maximum purchase amount and
may, in the sole discretion of the Bank and the Company, resolicit certain other
large subscribers.
(g) Each Person purchasing Common Stock in the Reorganization
shall be deemed to confirm that such purchase does not conflict with the
purchase limitations set forth in this Plan.
(h) As used in this Section 3.10, the Officers, Directors and
Trustees of the Bank and the Company shall not be deemed to be Associates or a
group affiliated with each other or otherwise Acting in Concert solely as a
result of their being Officers, Trustees or Directors of the Bank or the
Company.
(i) The Board of Directors of the Company has the right in its
sole discretion to reject any order submitted by a person whose representations
the Board of Directors believes to be false or who it otherwise believes, either
alone or acting in concert with others, is violating, circumventing, or intends
to violate, evade or circumvent the terms and conditions of this Plan.
Prior to the consummation of the Stock Offering, no person shall offer to
transfer, or enter into any agreement or understanding to transfer the legal or
beneficial ownership of any subscription rights or shares of Common Stock,
except pursuant to this Plan. Each person purchasing Common
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<PAGE>
Stock shall be deemed to confirm that such purchase does not conflict with the
above purchase limitations contained in this Plan.
Section 3.11 Time Limits for Sale of Shares; Effect of Inability to Sell.
-----------------------------------------------------------
All shares of Common Stock not subscribed for at the completion of the
Subscription Offering shall be sold within 45 days after completion of the
Subscription Offering, or such longer period as the Superintendent may approve.
If all shares are not sold as provided for herein, the Bank and the Company will
consult with the Superintendent to determine an alternative method of sale. In
such event and if required by the Superintendent or the SEC, a resolicitation of
those Persons who have subscribed for shares will be made. If such an
alternative method is not agreed upon, the Reorganization will not be effected,
the Bank will remain in mutual form, all funds submitted to the Bank and the
Company as payment for shares of the Common Stock will be returned to
subscribers, with interest as provided herein, and all withdrawal authorizations
will be canceled.
Section 3.12 Establishment and Funding of Foundation.
---------------------------------------
(a) As part of the Reorganization, the Company and the Bank intend
to establish the Foundation and to donate to the Foundation from authorized but
unissued shares up to 3.0% of the number of shares of Common Stock sold in the
Stock Offering. The Foundation is being formed in connection with the
Reorganization in order to complement the Bank's existing community reinvestment
activities and to share with the Bank's local communities a part of the Bank's
financial success as a locally headquartered, community-minded, financial
services institution. The funding of the Foundation with Common Stock of the
Company accomplishes this goal as it enables the community to share in the
growth and profitability of the Company and the Bank over the long-term.
(b) The Foundation will be dedicated to the promotion of
charitable purposes including community development, grants or donations to
support housing assistance, not-for-profit community groups and other types of
organizations or civic-minded projects. The Foundation will annually distribute
total grants to assist charitable organizations or to fund projects within its
local community of not less than 5% of the average fair value of Foundation
assets each year. In order to serve the purposes for which it was formed and to
maintain its qualification under Section 501(c)(3) of the Internal Revenue Code,
the Foundation may sell, on an annual basis, a limited portion of the Common
Stock contributed to it by the Company.
(c) A majority of the board of directors of the Foundation will be
comprised of individuals who are Officers or Directors of the Bank and the
remaining board members will be comprised of civic and community leaders from
within the Bank's local community. The board of directors of the Foundation
will be responsible for establishing the policies of the Foundation with respect
to grants or donations, consistent with the stated purposes of the Foundation.
The establishment and funding of the Foundation as part of the Reorganization is
subject to the approval of the Superintendent and, if applicable, the FDIC, as
more fully described in the Prospectus.
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<PAGE>
Section 3.13 Enforcement of Terms and Conditions.
-----------------------------------
The Bank and the Company shall have the right to take all such action
as they may, in their sole discretion, deem necessary, appropriate, or advisable
in order to monitor and enforce the terms, conditions, limitations and
restrictions contained in this Article III and elsewhere in this Plan and the
terms, conditions and representations contained in the Order Forms, including,
but not limited to, the right to require any subscriber or purchaser to provide
evidence, in a form satisfactory to the Bank, of such Person's eligibility to
subscribe for or purchase shares of the Common Stock under the terms of this
Plan and the absolute right (subject only to any necessary regulatory approvals
or concurrence) to reject, limit, or revoke acceptance of any subscription or
order and to delay, terminate, or refuse to consummate any sale of Common Stock
that they believe might violate, or is designed to, or is any part of a plan to
evade or circumvent such terms, conditions, limitations, restrictions, and
representations. Any such action shall be final, conclusive, and binding on all
Persons, and the Bank and the Company and their respective Board of Trustees and
Board of Directors shall be free from any liability to any Person on account of
any such action.
ARTICLE IV
Certain Restrictions
--------------------
Section 4.01 Sale of Shares Purchased by Trustees, Directors or Officers.
-----------------------------------------------------------
All shares of the Common Stock purchased or acquired (either directly
or indirectly) by the Trustees or Officers of the Bank or of the Company on
original issue in the Reorganization either directly from the Company (by
subscription or otherwise) or from the Underwriters (or otherwise beneficially
owned by such Trustees or Officers immediately after such original issuance)
shall be subject to the restriction that the shares shall not be sold for a
period of one year following the date of purchase. Such restriction shall not
apply to the shares of any such Trustee or Officer in the event of the death or
judicial declaration of incompetence of such Person or any exchange of such
shares in connection with a merger or acquisition of the Company or the Bank.
In addition, such restriction shall not apply to shares held by any Tax-
Qualified Employee Stock Benefit Plan. In connection with the shares of the
Common Stock that are subject to this restriction on resale:
(a) Each certificate for such shares shall bear a legend giving
appropriate notice of such restriction;
(b) Appropriate instructions shall be issued to the transfer agent
for the Common Stock with respect to applicable restrictions on transfer of
any such restricted stock; and
(c) Any shares issued as a stock dividend, stock split or
otherwise with respect to any such restricted stock shall be subject to the
same restrictions as applicable to such originally restricted stock until
the restrictions respecting such originally restricted stock are
terminated, and any certificate for such shares shall bear a legend
advising of such restrictions.
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<PAGE>
Section 4.02 Subsequent Purchases of Shares by Trustees, Directors and
---------------------------------------------------------
Officers.
- --------
For a period of three years following the Effective Date, no Officer
or Trustee of the Bank or no Officer or Director of the Company (or any person
who was an Officer or Trustee of the Bank or an Officer of Director of the
Company at any time after the date on which the Board of Trustees of the Bank
adopted this Plan), or Associate of any of them, shall, without the prior
written approval of the Superintendent, purchase or acquire direct or indirect
beneficial ownership of any shares of the capital stock of the Company, except
through a broker or dealer registered with the SEC. This restriction shall not
apply to any purchase or acquisition effected pursuant to any Benefit Plan or
the exercise of any options to purchase Common Stock granted pursuant to a stock
option plan.
Section 4.03 Acquisition of Control.
----------------------
(a) In accordance with the Conversion Regulations, for a period of
not less than five years (or such longer period as may be subsequently
authorized under the Conversion Regulations) following the Effective Date, no
Person or group of Persons Acting in Concert, other than the MHC, shall,
directly or indirectly, offer to acquire or acquire the beneficial ownership of
more than ten percent (10%) of any class of any equity security of the Company
or the Bank without the prior consent of the Superintendent.
(b) The Restated Organization Certificate of the Bank will contain
a provision stipulating that, for a period of five years following the Effective
Date, no Person or group of Persons Acting in Concert, except the Company (if a
two-tier mutual holding company form of organization is utilized or the MHC of a
single-tier mutual holding company form of organization is utilized), shall
directly or indirectly offer to acquire or acquire the beneficial ownership of
more than ten percent (10%) of any class of an equity security of the Bank,
without the prior written approval of the Superintendent. In addition, such
Restated Organization Certificate may also provide that, for a period of five
years following the Reorganization, shares beneficially owned in violation of
the above-described Restated Organization Certificate provision shall not be
entitled to vote and shall not be voted by any Person or counted as voting stock
in connection with any matter submitted to shareholders for a vote. In addition,
the Restated Organization Certificate will contain provisions providing that
special meetings of the shareholders relating to changes in control or amendment
of the Restated Organization Certificate may only be called by the Board of
Directors and that shareholders shall not be permitted to cumulate their votes
for the election of directors.
(c) The Certificate of Incorporation of the Company will contain a
provision to the effect that any record owner of any outstanding shares of the
Company's common stock other than the MHC who beneficially owns in excess of 10%
of such outstanding shares shall be entitled to cast only one -hundredth
(1/100) of one vote per share with respect to any shares held in excess of 10%.
In addition, the Certificate of Incorporation and By-Laws of the Company contain
provisions for staggered terms of the directors, noncumulative voting for
directors, limitations on the calling of special meetings, a fair price
provision for certain business combinations and certain notice requirements.
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<PAGE>
(d) For the purposes of this Section 4.03:
(i) The term "Person" includes an individual, a group Acting
in Concert, a corporation, a partnership, an association, a joint stock
company, a trust, an unincorporated organization or similar company, a
syndicate, or any other group formed for the purpose of acquiring, holding
or disposing of securities of an insured institution, and the term "Person"
does not include the Company or any majority-owned subsidiary thereof, the
MHC, or any majority-owned subsidiary thereof, or any Tax-Qualified
Employee Stock Benefit Plan or any trust or custodial arrangement
established in connection with any such plan; provided, that the plan or
plans do not have beneficial ownership in the aggregate of more than
twenty-five percent (25%) of any class of equity security of the Bank or
the Company;
(ii) The term "offer" includes every offer to buy or acquire,
solicitation of an offer to sell, tender offer for, or request or
invitation for tenders of, a security or interest in a security for value;
(iii) The term "acquire" includes every type of acquisition,
whether effected by purchase, exchange, operation of law or otherwise; and
(iv) The term "security" includes non-transferable
subscription rights issued pursuant to a plan of Reorganization as well as
a "security" as defined in 15 U.S.C. (S) 8c(a)(10).
ARTICLE V
Effect of Reorganization; Certain Covenants and Agreements
----------------------------------------------------------
Section 5.01 Restated Organization Certificate and Adoption of New By-
--------------------------------------------------------
Laws.
- ----
The Bank shall take all appropriate steps to restate its Organization
Certificate to read in the form of an Organization Certificate for a New York
stock savings bank as specified in the Banking Law and the regulations of the
New York Banking Board and approved by the Board of Trustees of the Bank. By
their approval of the Plan, the Voting Depositors of the Bank will thereby
approve and adopt such Restated Organization Certificate. The Bank shall also
take all appropriate steps to adopt By-Laws sufficient and appropriate for a New
York stock savings bank.
Section 5.02 Effect of Reorganization.
------------------------
On the Effective Date of the Reorganization, the Bank shall cease to
be a mutual institution and shall simultaneously become a stock institution.
All of the property, rights, powers, franchises, debts, liabilities, obligations
and duties of the mutual institution shall continue as such in the stock
institution and all deposits in the mutual institution shall remain as deposits
of equal character and value in the stock institution. The corporate existence
of the Bank shall not terminate, and the converted Bank shall be a continuation
of the mutual institution that existed immediately before the filing of the
Restated Organization Certificate.
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<PAGE>
Section 5.03 Liquidation Account.
-------------------
(a) A liquidation account shall be established and maintained for
the benefit of Eligible Account Holders and Supplemental Eligible Account
Holders who continue to maintain an account in the Bank in the event of a
complete liquidation of the Bank following the Reorganization. Each Eligible
Account Holder and Supplemental Eligible Account Holder shall, with respect to
each account held, have a related inchoate interest in a portion of the
liquidation account balance ("Subaccount Balance"). The initial liquidation
account balance shall be equal to the net worth of the Bank (determined in
accordance with generally accepted accounting principles) as set forth in its
most recent statement of financial condition contained in the Proxy Statement.
(b) In the event of a complete liquidation of the Bank (and only
in such event), each Eligible Account Holder and Supplemental Eligible Account
Holder shall be entitled to receive a liquidation distribution from the
liquidation account in the amount of the then-current adjusted Subaccount
Balance for each account of such holder after the Reorganization, before any
liquidation distribution may be made with respect to capital stock.
(c) The initial Subaccount Balance for an account held by an
Eligible Account Holder or a Supplemental Eligible Account Holder shall be
determined by multiplying the aggregate opening balance in the liquidation
account by a fraction of which the numerator is the amount of deposits or shares
in the account of such Eligible Account Holder or a Supplemental Eligible
Account Holder on the Eligibility Record Date or Supplemental Eligibility Record
Date, as applicable, and the denominator is the total amount of deposits or
shares owned by all Eligible Account Holders and Supplemental Eligible Account
Holders of the Bank on such applicable date. Such initial Subaccount Balance
shall not be increased, and it shall be subject to downward adjustments as
follows: If the deposit balance in any account of an Eligible Account Holder or
Supplemental Eligible Account Holder at the end of any period for which the Bank
has prepared audited financial statements subsequent to the Eligibility Record
Date is less than the lesser of: (i) the deposit balance in such account at the
end of any period for which the Bank has prepared audited financial statements
subsequent to the Eligibility Record Date; or (ii) the amount of the deposits as
of the Eligibility Record Date or the Supplemental Eligibility Record Date, as
applicable, the Subaccount Balance for such account shall be adjusted by
reducing such Subaccount Balance in an amount proportionate to the reduction in
such deposit balance. In the event of such a downward adjustment, the Subaccount
Balance shall not be subsequently increased, notwithstanding any increase in the
deposit balance of the related account. If any such account is closed, the
related Subaccount Balance shall be reduced to zero.
(d) Subsequent to the completion of the Reorganization, the Bank
shall not declare or pay a cash dividend on any of its capital stock if the
effect thereof would cause the net worth of the Bank to be reduced below the
amount required to maintain the liquidation account. For purposes of Section
86.4(g)(5) of the Conversion Regulations, a time account shall be deemed to be
closed upon its maturity date regardless of any renewal thereof. The Bank shall
not be required to set aside funds for the purpose of establishing the
liquidation account and, except as provided in this Section 5.03, the existence
of such account shall not operate to restrict the use or application of any of
the net worth accounts of the Bank subsequent to the Reorganization.
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<PAGE>
Section 5.04 Voting Rights.
-------------
Except as may be provided in the Restated Organization Certificate of
the Bank pursuant to any amendment thereto subsequent to the Effective Date of
the Reorganization, the holders of the capital stock of the Bank shall have
exclusive voting rights in the Bank upon the Effective Date of the
Reorganization. Except as may be provided in the Certificate of Incorporation
of the Company pursuant to any amendment thereto subsequent to the Effective
Date of the Reorganization, the holders of the Common Stock of the Company shall
have exclusive voting rights in the Company upon the Effective Date of the
Reorganization.
Section 5.05 Issuance of Stock.
-----------------
(a) Subsequent to the Effective Date of the Reorganization, the
Board of Directors of the Bank, subject to the provisions of the Restated
Organization Certificate and the By-Laws of the Bank, shall have the authority
to issue any of the authorized, unissued and unreserved shares of common and
preferred stock and to fix the relative rights, preferences and limitations of
such preferred stock. Except as may be required by the Banking Law or otherwise,
the Board of Directors of the Bank shall have sole discretion in the decision to
issue such shares and no shareholder approval will be required for the issuance
of such shares.
(b) Subsequent to the Effective Date of the Reorganization, the
Board of Directors of the Company, subject to the provisions of the Certificate
of Incorporation and the By-Laws of the Company, shall have the authority to
issue any of the authorized, unissued and unreserved shares of common and
preferred stock and to fix the relative designations, powers, preferences,
rights, qualifications, limitations and restrictions of such preferred stock.
Except as may be required by the Delaware General Corporation Law or otherwise,
the Board of Directors of the Company shall have sole discretion in the decision
to issue such shares and no shareholder approval will be required for the
issuance of such shares.
Section 5.06 Directors of Converted Bank.
---------------------------
Following the Reorganization, the business and affairs of the Bank
shall be managed by a Board of Directors, the members of which shall be the same
individuals who constituted the Board of Trustees of the Bank immediately prior
to the Reorganization. Upon the Effective Date of the Reorganization, the Board
of Directors of the Bank shall be divided into three classes with respect to
term of office, each class to contain, as near as may be possible, one-third of
the entire Board of Directors of the Bank. Each person serving as a Trustee of
the Bank on the Effective Date of the Reorganization shall be appointed by the
Board of Directors to one of the three classes and shall serve as a director
until the expiration of his term and until his successor is elected and
qualified. One class of directors shall have a term of office expiring at the
first annual meeting of shareholders, the second class shall have a term of
office expiring at the second annual meeting of shareholders and the third class
shall have a term of office expiring at the third annual meeting of
shareholders. Directors elected at each annual meeting of shareholders (other
than directors elected to fill vacancies) shall be elected to serve for a term
of three years and until their successors are elected and qualified.
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<PAGE>
Section 5.07 Employment Agreements.
---------------------
The Bank and the Company may enter into employment agreements with
such officers and employees and upon such terms and conditions as the Board of
Trustees of the Bank and the Board of Directors of the Company shall determine.
Section 5.08 Market for the Common Stock.
---------------------------
Upon the Effective Date of the Reorganization, or as soon thereafter
as practicable, the Common Stock shall be registered pursuant to the Securities
Exchange Act of 1934, as amended, and shall not be deregistered for a period of
three years following such registration. Additionally, the Company shall use
its best efforts to list the Common Stock on a national or regional securities
exchange or on the National Association of Securities Dealers Automated
Quotation System and to encourage and assist a market maker to establish and
maintain a market for the Common Stock.
Section 5.09 Stock Repurchases and Stock Benefit Plans.
-----------------------------------------
The Company, or the Bank if the Company is not utilized, will restrict
repurchases of Common Stock and the implementation of stock option and
management and employee stock benefit plans as required by the Conversion
Regulations, unless such requirements are waived by the appropriate regulatory
agency or agencies.
ARTICLE VI
Tax Ruling Requirement; Amendment and Termination;
--------------------------------------------------
Miscellaneous
-------------
Section 6.01 Conditions to Reorganization.
----------------------------
The Reorganization of the Bank pursuant to this Plan is expressly
conditioned upon the following:
(a) Prior receipt by the Bank of rulings of the United States
Internal Revenue Service and the State of New York taxing authorities, or
opinions of counsel, substantially to the effect that the Reorganization
will not result in any adverse federal or state tax consequences to
Eligible Account Holders, Supplemental Eligible Account Holders or Other
Depositors or to the Bank and the Company before or after the
Reorganization;
(b) The sale of all of the Common Stock offered in the
Reorganization;
(c) The completion of the Reorganization within the time period
specified in Section 6.03; and
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<PAGE>
(d) The non-objection of the FDIC to the Reorganization, the
approval of the Reorganization by the Superintendent, the approval of the
FRB of the Company's acquisition of the Common Stock of the Bank and the
Company's Registration Statement on Form S-1 is declared effective by the
SEC.
Section 6.02 Amendment or Termination of the Plan.
------------------------------------
This Plan will not, at the Effective Date of the Reorganization,
contain any provision that has been determined by the Superintendent, in
writing, to be inequitable or detrimental to the Bank or its depositors, or
contrary to the public interest. If deemed necessary or desirable by the Board
of Trustees of the Bank, this Plan may be substantively amended, as a result of
comments from regulatory authorities or otherwise, at any time prior to
solicitation of proxies from Voting Depositors to vote on the Plan and at any
time thereafter with the concurrence of the Superintendent. This Plan may be
terminated by the Board of Trustees of the Bank at any time prior to the Special
Meeting and at any time thereafter with the concurrence of the Superintendent.
By adoption of the Plan, the Voting Depositors of the Bank authorize the Board
of Trustees of the Bank to amend or terminate the Plan under the circumstances
set forth in this Section.
Section 6.03 Completion Date.
---------------
The Reorganization shall be completed within 24 months from the date
of approval of this Plan by the Superintendent.
Section 6.04 Expenses of the Reorganization.
------------------------------
The expenses incurred in the Reorganization shall be reasonable.
Section 6.05 Interpretation.
--------------
Subject to applicable law as set forth in Section 6.07, all
interpretations of this Plan and all applications of the provisions of this Plan
to particular circumstances by a majority of the Board of Trustees of the Bank
shall be final, subject to the authority of the Superintendent and the FDIC.
Section 6.06 Severability.
------------
If any term, provision, covenant or restriction contained in this Plan
is held by a court or a federal or state regulatory agency of competent
jurisdiction to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions contained in this Plan shall remain in
full force and effect, and shall in no way be affected, impaired or invalidated.
Section 6.07 Miscellaneous.
-------------
This Plan is to be governed by and construed in accordance with the
laws of the State of New York, without giving effect to any conflicts of laws
principles. None of the cover page, the table of contents or the article or
section headings are to be considered a part of this Plan, but are
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<PAGE>
included solely for convenience of reference and shall in no way define, limit,
extend or describe the scope or intent of any of the provisions hereof. Any
reference to a Section number or Article shall refer to a section or article of
this Plan, unless otherwise stated. Except for such rights as are set forth
herein for Eligible Account Holders, Supplemental Eligible Account Holders and
Other Depositors, this Plan shall create no rights in any Person. The terms
defined in this Plan have the meanings assigned to them in this Plan and include
the plural as well as the singular, and words of any gender shall include each
other gender where appropriate.
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<PAGE>
EXHIBIT 3.1
================================================================================
CERTIFICATE OF INCORPORATION
OF
ROME BANCORP, INC.
UNDER SECTION 102 OF
THE GENERAL CORPORATION LAW
OF THE STATE OF DELAWARE
================================================================================
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TABLE OF CONTENTS
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ARTICLE I: NAME............................................................................ -1-
ARTICLE II: REGISTERED OFFICE AND AGENT..................................................... -1-
ARTICLE III: PURPOSE......................................................................... -1-
ARTICLE IV: CAPITAL STOCK................................................................... -1-
Section 1. Shares, Classes and Series Authorized....................................... -1-
Section 2. Designations, Powers, Preferences, Rights, Qualifications,
Limitations and Restrictions Relating to the Capital Stock.................. -2-
ARTICLE V: LIMITATION ON BENEFICIAL OWNERSHIP OF STOCK..................................... -6-
Section 1. Applicability of Article.................................................... -4-
Section 2. Prohibitions Relating to Beneficial Ownership of Voting Stock............... -4-
Section 3. Excess Shares............................................................... -4-
Section 4. Powers of the Board of Directors............................................ -4-
Section 5. Severability................................................................ -5-
Section 6. Exclusions.................................................................. -5-
ARTICLE VI: BOARD OF DIRECTORS.............................................................. -6-
Section 1. Number of Directors......................................................... -6-
Section 2. Classification of Board..................................................... -6-
Section 3. Vacancies................................................................... -6-
Section 4. Removal of Directors........................................................ -7-
Section 5. Directors Elected by Preferred Shareholders................................. -7-
Section 6. Evaluation of Acquisition Proposals......................................... -7-
Section 7. Power to Call Special Meeting of Shareholders............................... -7-
ARTICLE VII: ACTION BY SHAREHOLDERS WITHOUT A MEETING........................................ -8-
ARTICLE VIII: CERTAIN BUSINESS COMBINATIONS.................................................. -8-
Section 1. Higher Vote Required for Certain Business Combinations...................... -8-
Section 2. When Higher Vote is Not Required............................................ -8-
Section 3. Definitions................................................................. -11-
Section 4. Powers of the Disinterested Directors....................................... -15-
Section 5. Effect on Fiduciary Obligations of Interested Shareholders.................. -15-
Section 6. Amendment, Repeal, Etc...................................................... -15-
ARTICLE IX: LIMITATION OF DIRECTOR LIABILITY................................................. -16-
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ARTICLE X: INDEMNIFICATION................................................................... -16-
Section 1. Actions, Suits or Proceedings Other than by or in the
Right of the Corporation.................................................... -16-
Section 2. Actions or Suits by or in the Right of the Corporation...................... -17-
Section 3. Indemnification for Costs, Charges and Expenses of a Successful
Party....................................................................... -17-
Section 4. Indemnification for Expenses of a Witness................................... -18-
Section 5. Determination of Right to Indemnification................................... -18-
Section 6. Advancement of Costs, Charges and Expenses.................................. -18-
Section 7. Procedure for Indemnification............................................... -19-
Section 8. Settlement.................................................................. -19-
Section 9. Other Rights; Continuation of Right to Indemnification; Individual
Contracts................................................................... -19-
Section 10. Savings Clause.............................................................. -20-
Section 11. Insurance................................................................... -20-
Section 12. Definitions................................................................. -20-
Section 13. Subsequent Amendment and Subsequent Legislation............................. -21-
ARTICLE XI: CONVERSION TRANSACTION........................................................... -22-
ARTICLE XII: AMENDMENTS...................................................................... -23-
Section 1. Amendments of Certificate of Incorporation.................................. -23-
Section 2. Amendments of Bylaws........................................................ -23-
ARTICLE XIII: NOTICES........................................................................ -24-
</TABLE>
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CERTIFICATE OF INCORPORATION
OF
ROME BANCORP, INC.
THE UNDERSIGNED, for the purpose of forming a corporation pursuant to
Section 102 of the General Corporation Law of the State of Delaware ("GCL"),
does hereby certify that this Certificate of Incorporation of Rome Bancorp, Inc.
was duly adopted in accordance with the provisions of Section 102 of the GCL,
and further certifies as follows:
ARTICLE I
NAME
The name of the corporation is Rome Bancorp, Inc. (the "Corporation").
ARTICLE II
REGISTERED OFFICE AND AGENT
The address of the registered office of the Corporation in the State
of Delaware is Corporation Trust Center, 1209 Orange Street in the City of
Wilmington, County of New Castle, 19801. The name of its registered agent at
such address is The Corporation Trust Company.
ARTICLE III
PURPOSE
The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the GCL.
ARTICLE IV
CAPITAL STOCK
Section 1. Shares, Classes and Series Authorized. The total number
of shares of all classes of capital stock which the Corporation shall have
authority to issue is six million (6,000,000) shares, of which one million
(1,000,000) shares shall be preferred stock, par value one cent ($.01) per share
(the "Preferred Stock"), and five million (5,000,000) shares shall be common
stock, par value one cent ($.01) per share (the "Common Stock"). The Preferred
Stock and Common Stock are sometimes hereinafter, collectively, referred to as
the "Capital Stock."
<PAGE>
Section 2. Designations, Powers, Preferences, Rights,
Qualifications, Limitations and Restrictions Relating to the Capital Stock. The
following is a statement of the designations, powers, preferences and rights in
respect of the classes of the Capital Stock, and the qualifications, limitations
or restrictions thereof, and of the authority with respect thereto expressly
vested in the Board of Directors of the Corporation (the "Board of Directors"):
(a) Preferred Stock. The Preferred Stock may be issued from time to
---------------
time in one or more series, the number of shares and any designation of each
series and the powers, preferences and rights of the shares of each series, and
the qualifications, limitations or restrictions thereof, to be as stated and
expressed in a resolution or resolutions providing for the issue of such series
adopted by the Board of Directors, subject to the limitations prescribed by law.
The Board of Directors in any such resolution or resolutions is expressly
authorized to state for each such series:
(i) the voting powers, if any, of the holders of shares of such
series in addition to any voting rights affirmatively required by law;
(ii) the rights of shareholders in respect of dividends, including,
without limitation, the rate or rates per annum and the time or times at
which (or the formula or other method pursuant to which such rate or rates
and such time or times may be determined) and conditions upon which the
holders of shares of such series shall be entitled to receive dividends and
other distributions, and whether any such dividends shall be cumulative or
non-cumulative and, if cumulative, the terms upon which such dividends
shall be cumulative;
(iii) whether any shares of the stock of each such series shall be
redeemable by the Corporation at the option of the Corporation or the
holder thereof and, if redeemable, the terms and conditions upon which any
shares of the stock of such series may be redeemed;
(iv) the amount payable and the rights or preferences to which the
holders of the stock of such series shall be entitled upon any voluntary or
involuntary liquidation, dissolution or winding up of the Corporation;
(v) the terms, if any, upon which shares of stock of such series
shall be convertible into, or exchangeable for, shares of stock of any
other class or classes or of any other series of the same or any other
class or classes, including the price or prices or the rate or rates of
conversion or exchange and the terms of adjustment, if any; and
(vi) any other powers, designations, preferences and relative,
participating, optional or other special rights, and qualifications,
limitations or restrictions thereof, so far as they are not inconsistent
with the provisions of this Certificate of Incorporation and to the full
extent now or hereafter permitted by the laws of the State of Delaware.
Subject to any limitations or restrictions stated in the resolution or
resolutions of the Board of Directors originally fixing the number of shares
constituting a series, the Board of Directors may by resolution or resolutions
likewise adopted increase (but not above the total number of authorized shares
of Preferred Stock) or decrease (but not below the number of shares of the
series
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then outstanding) the number of shares of the series subsequent to the issue of
shares of that series; and, in case the number of shares of any series shall be
so decreased, the shares constituting the decrease shall resume that status that
they had prior to the adoption of the resolution originally fixing the number of
shares constituting such series.
(b) Common Stock. Subject to Article V hereof and except as otherwise
------------
provided for by law, the shares of Common Stock shall entitle the holders
thereof to one vote for each share on all matters on which shareholders have the
right to vote. The holders of shares of Common Stock shall not be permitted to
cumulate their votes for the election of directors. Notwithstanding the
foregoing, except as otherwise required by law, holders of Common Stock, as
such, shall not be entitled to vote on any amendment to this Certificate of
Incorporation (including any Certificate of Designations relating to any series
of Preferred Stock) that relates solely to the terms of one or more outstanding
series of Preferred Stock if the holders of such affected series are entitled,
either separately or together with the holders of one or more other such series,
to vote thereon pursuant to this Certificate of Incorporation (including any
Certificate of Designations relating to any series of Preferred Stock) or
pursuant to the GCL.
Subject to the preferences, privileges and powers with respect to each
class or series of Preferred Stock having any priority over the Common Stock,
and the qualifications, limitations or restrictions thereof, the holders of the
Common Stock shall have and possess all rights pertaining to the Capital Stock;
provided, however, that in the event of any liquidation, dissolution, or winding
up of the Corporation, the holders of the Common Stock (and the holders of any
class or series of stock entitled to participate with the Common Stock in the
distribution of assets) shall be entitled to receive, in cash or in kind, the
assets of the Corporation available for distribution remaining after: (i)
payment or provision for payment of the Corporation's debts and liabilities;
(ii) distributions or provision for distributions in settlement of the
liquidation account, if any, established in connection with the reorganization
of The Rome Savings Bank, a New York savings bank (the "Bank"), into the mutual
savings bank holding company structure pursuant to which the Bank became a
wholly-owned subsidiary of the Corporation (the "Reorganization"); and (iii)
distributions or provisions for distributions to holders of any class or series
of Capital Stock having preference over the Common Stock in the liquidation,
dissolution, or winding up of the Corporation.
(c) No Class Vote On Changes In Authorized Number Of Shares Of
----------------------------------------------------------
Preferred Stock. Subject to the rights of the holders of any series of
- ---------------
Preferred Stock pursuant to the terms of this Certificate of Incorporation or
any resolution or resolutions providing for the issuance of such series of stock
adopted by the Board of Directors, the number of authorized shares of Preferred
Stock may be increased or decreased (but not below the number of shares thereof
then outstanding) by the affirmative vote of the holders of a majority of the
stock of the Corporation entitled to vote generally in the election of directors
irrespective of the provisions of Section 242(b)(2) of the GCL.
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ARTICLE V
LIMITATION ON BENEFICIAL OWNERSHIP OF STOCK
Section 1. Applicability of Article. The provisions of this Article
V shall become effective upon (i) the consummation of the Reorganization and
(ii) the concurrent acquisition by the Corporation of all of the outstanding
capital stock of the Bank (the "Effective Date"). All terms used in this Article
V and not otherwise defined herein shall have the meanings ascribed to such
terms in Section 3 of Article VIII, below.
Section 2. Prohibitions Relating to Beneficial Ownership of Voting
Stock. No Person (other than the Corporation, Rome, MHC, a New York chartered
mutual savings bank holding company (the "MHC"), any Subsidiary or any pension,
profit-sharing, stock bonus or other compensation plan maintained by the
Corporation, the MHC, or by a member of a controlled group of corporations or
trades or businesses of which the Corporation or the MHC is a member for the
benefit of the employees of the Corporation, the MHC, or any Subsidiary, or any
trust or custodial arrangement established in connection with any such plan)
shall directly or indirectly acquire or hold the beneficial ownership of more
than ten percent (10%) of the issued and outstanding shares of Voting Stock of
the Corporation, exclusive of the shares beneficially owned by the MHC. Any
Person so prohibited who directly or indirectly acquires or holds the beneficial
ownership of more than ten percent (10%) of the issued and outstanding shares of
Voting Stock, exclusive of the shares beneficially owned by the MHC, in
violation of this Section 2 shall be subject to the provisions of Sections 3 and
4 of this Article V, below. The Corporation is authorized to refuse to
recognize a transfer or attempted transfer of any shares of Voting Stock to any
Person who beneficially owns, or who the Corporation believes would become by
virtue of such transfer the beneficial owner of, more than ten percent (10%) of
shares of the Voting Stock, exclusive of the shares beneficially owned by the
MHC.
Section 3. Excess Shares. If, notwithstanding the foregoing
prohibition, a Person subject to the foregoing prohibition shall voluntarily or
involuntarily become or attempt to become the purported beneficial owner (the
"Purported Owner") of shares of Voting Stock in excess of ten percent (10%) of
the issued and outstanding shares of Voting Stock, exclusive of the shares
beneficially owned by the MHC, the number of shares in excess of ten percent
(10%) shall be deemed to be "Excess Shares," and the holder thereof shall be
entitled to cast only one one-hundredth (1/100) of one vote per share for each
Excess Share.
The restrictions set forth in this Article V shall be noted
conspicuously on all certificates evidencing ownership of shares of Voting
Stock.
Section 4. Powers of the Board of Directors.
(a) The Board of Directors may, to the extent permitted by law, from
time to time establish, modify, amend or rescind, by By-Law or otherwise,
regulations and procedures not inconsistent with the express provisions of this
Article V for the orderly application, administration and implementation of the
provisions of this Article V. Such procedures and regulations shall be
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kept on file with the Corporate Secretary of the Corporation and with the
Transfer Agent, shall be made available for inspection by the public and, upon
request, shall be mailed to any holder of shares of Voting Stock of the
Corporation.
(b) When it appears that a particular Person has become a Purported
Owner of Excess Shares in violation of Section 2 of this Article V, or of the
regulations or procedures of the Board of Directors with respect to this Article
V, and that the provisions of this Article V require application, interpretation
or construction, then a majority of the directors of the Corporation shall have
the power and duty to interpret all of the terms and provisions of this Article
V and to determine on the basis of information known to them after reasonable
inquiry all facts necessary to ascertain compliance with this Article V,
including, without limitation, (i) the number of shares of Voting Stock
beneficially owned by any Person or Purported Owner, (ii) whether a Person or
Purported Owner is an Affiliate or Associate of, or is acting in concert with,
any other Person or Purported Owner, (iii) whether a Person or Purported Owner
has an agreement, arrangement or understanding with any other Person or
Purported Owner as to the voting or disposition of any shares of the Voting
Stock, (iv) the application of any other definition or operative provision of
this Article V to the given facts or (v) any other matter relating to the
applicability or effect of this Article V.
The Board of Directors shall have the right to demand that any Person
who is reasonably believed to be a Purported Owner of Excess Shares (or who
holds of record shares of Voting Stock beneficially owned by any Person
reasonably believed to be a Purported Owner in excess of such limit) supply the
Corporation with complete information as to (i) the record owner(s) of all
shares of Voting Stock beneficially owned by such Person or Purported Owner and
(ii) any other factual matter relating to the applicability or effect of this
Article V as may reasonably be requested of such Person or Purported Owner.
Any applications, interpretations, constructions or any other
determinations made by the Board of Directors pursuant to this Article V, in
good faith and on the basis of such information and assistance as was then
reasonably available for such purpose, shall be conclusive and binding upon the
Corporation and its shareholders, and neither the Corporation nor any of its
shareholders shall have the right to challenge any such application,
interpretation, construction or determination.
Section 5. Severability. In the event any provision (or portion
thereof) of this Article V shall be found to be invalid, prohibited or
unenforceable for any reason, the remaining provisions (or portions thereof) of
this Article V shall remain in full force and effect, and shall be construed as
if such invalid, prohibited or unenforceable provision had been stricken
herefrom or otherwise rendered inapplicable, it being the intent of this
Corporation and its shareholders that each such remaining provision (or portion
thereof) of this Article V remain, to the fullest extent permitted by law,
applicable and enforceable as to all shareholders, including Purported Owners,
if any, notwithstanding any such finding.
Section 6. Exclusions. This Article V shall not apply to (a) any
offer or sale with a view towards public resale made exclusively by the
Corporation to any underwriter or underwriters acting on behalf of the
Corporation, or to the selling group acting on such underwriter's or under
writers' behalf, in connection with a public offering of the Common Stock; or
(b) any reclassification of securities (including any reverse stock split), or
recapitalization of the Corporation, or any merger
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<PAGE>
or consolidation of the Corporation with any of its Subsidiaries or any other
transaction or reorganization that does not have the effect, directly or
indirectly, of changing the beneficial ownership interests of the Corporation's
shareholders, other than pursuant to the exercise of any dissenters' appraisal
rights, except as a result of immaterial changes due to fractional share
adjustments, which changes do not exceed, in the aggregate, one percent (1%) of
the issued and outstanding shares of such class of equity or convertible
securities, exclusive if the shares beneficially owned by the MHC.
ARTICLE VI
BOARD OF DIRECTORS
Section 1. Number of Directors. The number of directors of the
Corporation shall be as determined only by resolution of the Board of Directors,
but shall not be less than seven (7) nor more than twenty (20) (other than
directors elected by holders of shares of one or more series of Preferred
Stock).
Section 2. Classification of Board. Subject to the rights of any
holders of shares of any series of Preferred Stock that may be issued by the
Corporation pursuant to a resolution or resolutions of the Board of Directors
providing for such issuance, and subject to the provisions hereof, the directors
of the Corporation shall be divided into three classes with respect to term of
office, each class to contain, as near as may be possible, one-third of the
entire number of the Board, with the terms of office of one class expiring each
successive year. One class of directors shall be initially elected for a term
expiring at the annual meeting of shareholders to be held in 2000, another class
shall be initially elected for a term expiring at the annual meeting of
shareholders to be held in 2001 and another class shall be initially elected for
a term expiring at the annual meeting of shareholders to be held in 2002. At
each annual meeting of shareholders, the successors to the class of directors
(other than directors elected by holders of shares of one or more series of
Preferred Stock) whose term expires at that time shall be elected by the
shareholders to serve until the annual meeting of shareholders held three years
next following and until their successors shall be elected and qualified.
In the event of any intervening changes in the authorized number of
directors (other than directors elected by holders of shares of one or more
series of Preferred Stock), only the Board of Directors shall designate the
class or classes to which the increases or decreases in directorships shall be
apportioned in order to achieve, as near as may be possible, equality of number
of directors among the classes; provided, however, that no such apportionment or
redesignation shall shorten the term of any incumbent director.
Unless and to the extent that the By-Laws so provide, elections of
directors need not be by written ballot.
Section 3. Vacancies. Subject to the limitations prescribed by law
and this Certificate of Incorporation, all vacancies on the Board of Directors,
including vacancies created by newly created directorships resulting from an
increase in the number of directors (subject to the
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provisions of Section 5 of this Article VI relating to directors elected by
holders of shares of one or more series of Preferred Stock), shall be filled
only by a vote of a majority of the directors then holding office, whether or
not a quorum, and any director so elected shall serve for the remainder of the
full term of the class of directors in which the new directorship was created or
the vacancy occurred and until such director's successor shall be elected and
qualified.
Section 4. Removal of Directors. Any or all of the directors
(subject to the provisions of Section 5 of this Article VI relating to directors
elected by holders of shares of one or more series of Preferred Stock) may be
removed at any time, but only for cause, and any such removal shall require the
vote, in addition to any vote required by law, of not less than eighty percent
(80%) of the total votes eligible to be cast by the holders of all outstanding
shares of Capital Stock entitled to vote generally in the election of directors
at a meeting of shareholders expressly called for that purpose. For purposes of
this Section 4, conduct worthy of removal for "cause" shall include, but not be
limited to (a) conduct as a director of the Corporation or any subsidiary of the
Corporation that involves willful material misconduct, breach of fiduciary duty
involving personal pecuniary gain or gross negligence in the performance of
duties, (b) conduct, whether or not as a director of the Corporation or a
subsidiary of the Corporation that involves dishonesty or breach of fiduciary
duty and is punishable by imprisonment for a term exceeding one year under state
or federal law or (c) removal of such person from the Board of Directors of the
Bank, if such person is so serving, in accordance with the Restated Organization
Certificate and By-Laws of the Bank.
Section 5. Directors Elected by Preferred Shareholders.
Notwithstanding anything set forth in this Certificate of Incorporation to the
contrary, the qualifications, term of office and provisions governing vacancies,
removal and other matters pertaining to directors elected by holders of shares
of one or more series of Preferred Stock shall be as set forth in a resolution
or resolutions adopted by the Board of Directors setting forth the designations,
preferences and rights relating to any such series of Preferred Stock pursuant
to Article IV, Section 2 hereof.
Section 6. Evaluation of Acquisition Proposals. The Board of
Directors of the Corporation, when evaluating any offer to the Corporation or to
the shareholders of the Corporation from another party to (a) purchase for cash,
or exchange any securities or property for, any outstanding equity securities of
the Corporation, (b) merge or consolidate the Corporation with another
corporation or (c) purchase or otherwise acquire all or substantially all of the
properties and assets of the Corporation, in connection with the exercise of its
judgment in determining what is in the best interests of the Corporation and its
shareholders, may give due consideration to the extent permitted by law not only
to the price or other consideration being offered, but also to all other
relevant factors, including, without limitation, the financial and managerial
resources and future prospects of the other party, the possible effects on the
business of the Corporation and its subsidiaries and on the employees,
customers, suppliers and creditors of the Corporation and its subsidiaries and
the effects on the communities in which the Corporation's and its subsidiaries'
facilities are located.
Section 7. Power to Call Special Meeting of Shareholders. Special
meetings of shareholders for any purpose may be called at any time only by
resolution of at least three-fourths of the Directors of the Corporation then in
office or by the Chairman, if one has been elected by the
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Board, or by the President and Chief Executive Officer. At a special meeting, no
business shall be transacted and no corporate action shall be taken other than
that stated in the notice of meeting prescribed by the By-Laws of the
Corporation.
ARTICLE VII
ACTION BY SHAREHOLDERS WITHOUT A MEETING
Except as otherwise provided for or fixed pursuant to the provisions
of Article IV of this Certificate of Incorporation relating to the rights of
holders of shares of any series of Preferred Stock, no action that is required
or permitted to be taken by the shareholders of the Corporation at any annual or
special meeting of shareholders may be effected by written consent of
shareholders in lieu of a meeting of shareholders.
ARTICLE VIII
CERTAIN BUSINESS COMBINATIONS
Section 1. Higher Vote Required for Certain Business Combinations.
In addition to any affirmative vote required by law, this Certificate of
Incorporation or by the provisions of any series of Preferred Stock that may at
the time be outstanding, and except as otherwise expressly provided for in
Section 2 of this Article VIII, any Business Combination, as hereinafter
defined, shall require the affirmative vote of not less than eighty percent
(80%) (to the extent permitted by law) of the total number of votes eligible to
be cast by the holders of all outstanding shares of Voting Stock, voting
together as a single class (it being understood, that for purposes of this
Article VIII, each share of Voting Stock shall have the number of votes granted
to it pursuant to Article IV and Article V of this Certificate of Incorporation
or in any resolution or resolutions of the Board of Directors for issuance of
shares of Preferred Stock), together (to the extent permitted by law) with the
affirmative vote of at least fifty percent (50%) of the total number of votes
eligible to be cast by the holders of all outstanding shares of Voting Stock not
beneficially owned by the Interested Shareholder involved or any Affiliate or
Associate thereof, voting together as a single class. Such affirmative vote
shall be required notwithstanding the fact that no vote may be required, or that
a lesser percentage may be specified, by law or in any agreement with any
national securities exchange or otherwise.
Section 2. When Higher Vote is Not Required. The provisions of
Section 1 of this Article VIII shall not be applicable to any particular
Business Combination, and such Business Combination shall require only such
affirmative vote as is required by law or any other provision of this
Certificate of Incorporation, if either (i) the Business Combination shall have
been approved by a majority of the Disinterested Directors then in office or
(ii) all of the conditions specified in the following subsections (a) through
(g) are met:
(a) The aggregate amount of the cash and the Fair Market Value as of
the Consummation Date of consideration other than cash to be received per share
by holders of Common Stock in such Business Combination shall be at least equal
to the higher of the following:
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(i) (if applicable) the highest per share price (including any
brokerage commissions, transfer taxes, soliciting dealers' fees, dealer-
management compensation and other expenses, including, but not limited to,
costs of newspaper advertisements, printing expenses and attorneys' fees
and expenses) paid by the Interested Shareholder for any shares of Common
Stock acquired by it (A) within the two-year period immediately prior to
the Announcement Date, or (B) in the transaction in which it became an
Interested Shareholder, whichever is higher, plus interest compounded
annually from the Determination Date through the Consummation Date at the
prime rate of interest of Citibank, N.A. (or other major bank headquartered
in New York City selected by a majority of the Disinterested Directors then
in office) from time to time in effect in New York City, less the aggregate
amount of any cash dividends paid and the Fair Market Value of any
dividends paid, other than in cash, per share of Common Stock from the
Determination Date through the Consummation Date in an amount up to but not
exceeding the amount of such interest payable per share of Common Stock; or
(ii) the Fair Market Value per share of Common Stock on the
Announcement Date or on the Determination Date, whichever is higher.
(b) The aggregate amount of the cash and the Fair Market Value as of
the Consummation Date of consideration other than cash to be received per share
by holders of shares of any class or series of outstanding Voting Stock, other
than Common Stock, in such Business Combination shall be at least equal to the
highest of the following (such requirement being applicable to each such class
or series of outstanding Voting Stock, whether or not the Interested Shareholder
has previously acquired any shares of such class or series of Voting Stock):
(i) (if applicable) the highest per share price (including any
brokerage commissions, transfer taxes, soliciting dealers' fees, dealer-
management compensation, and other expenses, including, but not limited to,
costs of newspaper advertisements, printing expenses and attorneys' fees
and expenses) paid by the Interested Shareholder for any shares of such
class or series of Voting Stock acquired by it (A) within the two-year
period immediately prior to the Announcement Date, or (B) in the
transaction in which it became an Interested Shareholder, whichever is
higher, plus interest compounded annually from the De termination Date
through the Consummation Date at the prime rate of interest of Citibank,
N.A. (or other major bank headquartered in New York City selected by a
majority of the Disinterested Directors then in office) from time to time
in effect in New York City, less the aggregate amount of any cash dividends
paid, and the Fair Market Value of any dividends paid other than in cash,
per share of such class or series of Voting Stock from the Determination
Date through the Consummation Date in an amount up to but not exceeding the
amount of such interest payable per share of such class or series of Voting
Stock;
(ii) (if applicable) the highest preferential amount per share
to which the holders of shares of such class or series of Voting Stock are
entitled in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation; or
(iii) the Fair Market Value per share of such class or series of
Voting Stock on the Announcement Date or on the Determination Date,
whichever is higher.
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(c) The consideration to be received by holders of any particular
class or series of outstanding Voting Stock (including Common Stock) in such
Business Combination shall be in cash or in the same form as the Interested
Shareholder has previously paid for shares of such class or series of Voting
Stock. If the Interested Shareholder has paid for shares of any class or series
of Voting Stock with varying forms of consideration, the form of consideration
for such class or series of Voting Stock in such Business Combination shall be
either cash or the form used to acquire the largest number of shares of such
class or series of Voting Stock previously acquired by it.
(d) The holders of all outstanding shares of Voting Stock not
beneficially owned by the Interested Shareholder immediately prior to the
Consummation Date shall be entitled to receive in such Business Combination cash
or other consideration for their shares in compliance with subsections (a), (b)
and (c) of this Section 2.
(e) After the Determination Date and prior to the Consummation Date:
(i) except as approved by a majority of the Disinterested
Directors then in office, there shall have been no failure to declare and
pay, or set aside for payment, at the regular date therefor any full
quarterly dividends (whether or not cumulative) on any outstanding
Preferred Stock;
(ii) there shall have been (A) no reduction in the annual rate
of dividends paid on the Common Stock (except as necessary to reflect any
subdivision of the Common Stock), except as approved by a majority of the
Disinterested Directors then in office, and (B) an increase in such annual
rate of dividends as necessary to reflect any reclassification (including
any reverse stock split), recapitalization, reorganization or any similar
transaction that has the effect of reducing the number of outstanding
shares of the Common Stock, unless the failure so to increase such annual
rate is approved by a majority of the Disinterested Directors then in
office; and
(iii) such Interested Shareholder shall not have become the
beneficial owner of any additional shares of Voting Stock except (a) as
part of the transaction that results in such Interested Shareholder
becoming an Interested Shareholder, (b) as the result of a stock dividend
paid by the Corporation or (c) upon the exercise or conversion of
securities of the Corporation issued pro rata to all holders of Common
Stock which are exercisable for or convertible into shares of Voting Stock.
(f) After the Determination Date, the Interested Shareholder shall
not have received the benefit, directly or indirectly (except proportionately as
a shareholder), of any loans, advances, guarantees, pledges or other financial
assistance or any tax credits or other tax advantages provided by or through the
Corporation or an Affiliate of the Corporation, whether in anticipation of or in
connection with such Business Combination or otherwise.
(g) A proxy or information statement describing the proposed Business
Combination in accordance with the requirements of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), whether or not the Corporation is then
subject to such requirements, and the rules and regulations thereunder (or any
subsequent provisions replacing such Exchange Act,
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rules or regulations) shall be mailed to shareholders of the Corporation at
least thirty (30) days prior to the consummation of such Business Combination
(whether or not such proxy or information statement is required to be mailed
pursuant to such Exchange Act or subsequent provisions). The first page of such
proxy or information statement shall prominently display the recommendation, if
any, that a majority of the Disinterested Directors then in office may choose to
make to the holders of Voting Stock regarding the proposed Business Combination.
Such proxy or information statement shall also contain, if a majority of the
Disinterested Directors then in office so requests, an opinion of a reputable
investment banking firm (which firm shall be engaged solely on behalf of the
shareholders of the Corporation other than the Interested Shareholder and shall
be selected by a majority of the Disinterested Directors then in office,
furnished with all information it reasonably requests and paid a reasonable fee
for its services by the Corporation upon the Corporation's receipt of such
opinion) as to the fairness (or lack of fairness) of the terms of the proposed
Business Combination from the point of view of the holders of Voting Stock other
than the Interested Shareholder.
Section 3. Definitions. For purposes of this Article VIII, the
following terms shall have the following meanings:
(a) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended, as in effect on the date of
filing by the Secretary of State of the State of Delaware of this Certificate of
Incorporation, whether or not the Corporation was then subject to such rule.
(b) "Announcement Date" shall mean the date of the first public
announcement of the proposal of the Business Combination.
(c) A Person shall be deemed the "beneficial owner," or to have
"beneficial ownership," of any shares of Voting Stock that:
(i) such Person or any of its Affiliates or Associates
beneficially owns, directly or indirectly; or
(ii) such Person or any or its Affiliates or Associates,
directly or indirectly, has (A) the right to acquire (whether such right is
exercisable immediately or only after the passage of time) pursuant to any
agreement, arrangement or understanding (but a Person shall not be deemed
to be the beneficial owner of any Voting Stock solely by reason of an
agreement, arrangement or understanding with the Corporation to effect a
Business Combination) or upon the exercise of conversion rights, exchange
rights, warrants or options, or otherwise, or (B) the right to vote, or to
direct the vote of, pursuant to any agreement, arrangement or understanding
(but neither such Person nor any Affiliate or Associate shall be deemed to
be the beneficial owner of any shares of Voting Stock solely by reason of a
revocable proxy granted for a particular meeting of shareholders, pursuant
to a public solicitation of proxies for such meeting, and with respect to
which shares neither such Person nor any Affiliate or Associate is
otherwise deemed the beneficial owner); or
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(iii) is beneficially owned, directly or indirectly, by any other
Person with which such first mentioned Person or any of its Affiliates or
Associates has any agreement, arrangement or understanding for the purpose
of acquiring, holding, voting (except to the extent contemplated by the
parenthetical clause of Section 3(c)(ii)(B)) or disposing of any shares of
Voting Stock;
provided, however, that no director or officer of the
Corporation (nor any Affiliate or Associate of any
such director or officer) (y) shall, solely by reason
of any or all of such directors or officers acting in
their capacities as such, be deemed, for any purposes
hereof, to beneficially own any Voting Stock of the
Corporation beneficially owned by any other such
director or officer (or any Affiliate or Associate
thereof) or (z) shall be deemed to beneficially own
any Voting Stock of the Corporation owned by any
pension, profit-sharing, stock bonus or other
compensation plan maintained by the Corporation or by
a member of a controlled group of corporations or
trades or businesses of which the Corporation is a
member for the benefit of employees of the
Corporation and/or any Subsidiary, or any trust or
custodial arrangement established in connection with
any such plan, not specifically allocated to such
Person's personal account.
(d) The term "Business Combination" shall mean any transaction that
is referred to in any one or more of the following paragraphs (i) through (vi):
(i) any merger or consolidation of the Corporation or any
Subsidiary (other than a merger pursuant to Section 253 of the GCL) with
(A) any Interested Shareholder or (B) any other entity (whether or not such
other entity is itself an Interested Shareholder) which is, or after such
merger or consolidation would be, an Affiliate or Associate of any
Interested Shareholder; or
(ii) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of transactions) to or
with any Interested Shareholder or any Affiliate or Associate of any
Interested Shareholder of any assets of the Corporation or any Subsidiary
having an aggregate Fair Market Value equal to five percent (5%) or more of
the total assets of the Corporation or the Subsidiary in question, as of
the end of its most recent fiscal year ending prior to the time the
determination is being made; or
(iii) the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or a series of transactions) of any
securities of the Corporation or any Subsidiary to any Interested
Shareholder or any Affiliate or Associate of any Interested Shareholder
other than (A) on a pro rata basis to all holders of Voting Stock, (B) in
connection with the exercise or conversion of securities issued pro rata
that are exercisable for, or convertible into, securities of the
Corporation or any Subsidiary or (C) the issuance or transfer of such
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securities having an aggregate Fair Market Value equal to less than one
percent (1%) of the aggregate Fair Market Value of all of the outstanding
Capital Stock; or
(iv) the adoption of any plan or proposal for the liquidation
or dissolution of the Corporation proposed by or on behalf of any
Interested Shareholder or any Affiliate or Associate of any Interested
Shareholder; or
(v) any reclassification of securities (including any reverse
stock split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any other
transaction (whether or not with or into or otherwise involving an
Interested Shareholder) which has the effect, directly or indirectly, of
increasing the proportionate share of the outstanding shares of any class
or series of equity or convertible securities of the Corporation or any
Subsidiary that is directly or indirectly owned by any Interested
Shareholder or any Affiliate or Associate of any Interested Shareholder,
except as a result of immaterial changes due to fractional share
adjustments, which changes do not exceed, in the aggregate, 1% of the
issued and outstanding shares of such class or series of equity or
convertible securities; or
(vi) the acquisition by the Corporation or a Subsidiary of any
securities of an Interested Shareholder or its Affiliates or Associates.
(e) "Consummation Date" shall mean the date of the consummation of
the Business Combination.
(f) "Determination Date" shall mean the date on which the Interested
Shareholder became an Interested Shareholder.
(g) "Disinterested Director" shall mean any member of the Board of
Directors of the Corporation who is not an Affiliate or Associate of, or
otherwise affiliated with, the Interested Shareholder and who either was a
member of the Board of Directors prior to the Determination Date, or was
recommended for election by a majority of the Disinterested Directors in office
at the time such director was nominated for election. If there is no Interested
Shareholder, each member of the Board of Directors shall be a Disinterested
Director.
(h) "Fair Market Value" shall mean (i) in the case of stock, the
highest closing price during the 30-day period immediately preceding the date in
question of a share of such stock on the Composite Tape for New York Stock
Exchange listed stocks or, if such stock is not quoted on such Composite Tape,
or if such stock is not listed on such Exchange, then on the principal United
States securities exchange registered under the Exchange Act, on which such
stock is listed, or, if such stock is not listed on any such exchange, then the
highest closing bid quotation with respect to a share of such stock during the
30-day period preceding the date in question on the Nasdaq Stock Market or any
system then in use, or, if no such quotation is available, then the fair market
value on the date in question of a share of such stock as determined in good
faith by a majority of the Disinterested Directors then in office, in each case
with respect to any class of stock, appropriately adjusted for any dividend or
distribution in shares of such stock or any stock split or reclassification of
outstanding shares of such stock into a greater number of shares of such stock
or
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any combination or reclassification of outstanding shares of such stock into a
smaller number of shares of such stock; and (ii) in the case of property other
than cash or stock, the fair market value of such property on the date in
question as determined in good faith by a majority of the Disinterested
Directors then in office.
(i) References to "highest per share price" shall in each case with
respect to any class of stock reflect an appropriate adjustment for any dividend
or distribution in shares of such stock or any stock split or reclassification
of outstanding shares of such stock into a greater number of shares of such
stock or any combination or reclassification of outstanding shares of such stock
into a smaller number of shares of such stock.
(j) "Interested Shareholder" shall mean any Person (other than the
Corporation, any Subsidiary or any pension, profit-sharing, stock bonus or other
compensation or employee benefit plan maintained by the Corporation or by a
member of a controlled group of corporations or trades or businesses of which
the Corporation is a member for the benefit of employees of the Corporation
and/or any Subsidiary, or any trust or custodial arrangement established in
connection with any such plan or holding Voting Stock for the purpose of funding
any such plan or funding employee lending for employees of the Corporation or
any Subsidiary) who or which:
(i) is the beneficial owner of ten percent (10%) or more of
the Voting Stock exclusive of the shares beneficially owned by the MHC; or
(ii) is an Affiliate or Associate of the Corporation and at any
time within the two-year period immediately prior to the date in question
was the beneficial owner of ten percent (10%) or more of the then
outstanding shares of Voting Stock exclusive of the shares beneficially
owned by the MHC; or
(iii) is an assignee of or has otherwise succeeded to any shares
of Voting Stock that were at any time within the two-year period
immediately prior to the date in question beneficially owned by any other
Interested Shareholder, if such assignment or succession shall have
occurred in the course of a transaction or series of transactions not
involving a public offering within the meaning of the Securities Act of
1933, as amended, and not executed on any exchange or in the over-the-
counter market through a registered broker or dealer.
In determining whether a Person is an Interested
Shareholder pursuant to this subsection (j), the number
of shares of Voting Stock deemed to be outstanding
shall include shares deemed owned through application
of subsection (c) of this Section 3 but shall not
include any other shares of Voting Stock that may be
issuable pursuant to any agreement, arrangement or
understanding, or upon exercise of conversion rights,
warrants or options, or otherwise.
(k) "Person" shall mean any corporation, partnership, trust,
unincorporated organization or association, syndicate, any other entity or a
natural person, together with any Affiliate or Associate of such Person or any
other Person acting in concert with such Person.
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(l) "Subsidiary" shall mean any corporation or entity of which a
majority of any class or series of equity securities is owned, directly or
indirectly, by the Corporation; provided, however, that for the purposes of the
definition of Interested Shareholder set forth in subsection (j) of this Section
3, the term "Subsidiary" shall mean only a corporation or entity of which a
majority of each class or series of outstanding voting securities is owned,
directly or indirectly, by the Corporation.
(m) "Voting Stock" shall mean all of the outstanding shares of
Capital Stock entitled to vote generally in the election of directors.
Section 4. Powers of the Disinterested Directors. When it appears
that a particular Person may be an Interested Shareholder and that the
provisions of this Article VIII need to be applied or interpreted, then a
majority of the directors of the Corporation who would qualify as Disinterested
Directors shall have the power and duty to interpret all of the terms and
provisions of this Article VIII, and to determine on the basis of information
known to them after reasonable inquiry of all facts necessary to ascertain
compliance with this Article VIII, including, without limitation, (a) whether a
Person is an Interested Shareholder, (b) the number of shares of Voting Stock
beneficially owned by any Person, (c) whether a Person is an Affiliate or
Associate of another, (d) the Fair Market Value of (i) the assets that are the
subject of any Business Combination, (ii) the securities to be issued or
transferred by the Corporation or any Subsidiary in any Business Combination,
(iii) the consideration other than cash to be received by holders of shares of
any class or series of Common Stock or Voting Stock other than Common Stock in
any Business Combination, (iv) the outstanding Capital Stock or (v) any other
item the Fair Market Value of which requires determination pursuant to this
Article VIII and (e) whether all of the applicable conditions set forth in
Section 2 of this Article VIII have been met with respect to any Business
Combination.
Any construction, application or determination made by the Board of
Directors or the Disinterested Directors pursuant to this Article VIII, in good
faith and on the basis of such information and assistance as was then reasonably
available for such purpose, shall be conclusive and binding upon the Corporation
and its shareholders, and neither the Corporation nor any of its shareholders
shall have the right to challenge any such construction, application or
determination.
Section 5. Effect on Fiduciary Obligations of Interested
Shareholders. Nothing contained in this Article VIII shall be construed to
relieve any Interested Shareholder from any fiduciary obligations imposed by
law.
Section 6. Amendment, Repeal, Etc. Notwithstanding any other
provisions of this Certificate of Incorporation or the By-Laws (and
notwithstanding the fact that a lesser percentage may be specified by law, this
Certificate of Incorporation or the By-Laws of the Corporation), in addition to
any affirmative vote required by applicable law and any voting rights granted to
or held by holders of Preferred Stock, any amendment, alteration, repeal or
rescission of any provision of this Article VIII must also be approved by either
(i) a majority of the Disinterested Directors or (ii) the affirmative vote of
not less than eighty percent (80%) of the total number of votes eligible to be
cast by the holders of all outstanding shares of the Voting Stock, voting
together as a single class, together with the affirmative vote of not less than
fifty percent (50%) of the total number of votes
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eligible to be cast by the holders of all outstanding shares of the Voting Stock
not beneficially owned by any Interested Shareholder or Affiliate or Associate
thereof, voting together as a single class.
ARTICLE IX
LIMITATION OF DIRECTOR LIABILITY
A director of the Corporation shall not be personally liable to the
Corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director, except to the extent such exemption from liability or
limitation thereof is expressly prohibited by the GCL as the same exists or may
hereafter be amended.
Any amendment, termination or repeal of this Article IX or any
provisions hereof shall not adversely affect or diminish in any way any right or
protection of a director of the Corporation existing with respect to any act or
omission occurring prior to the time of the final adoption of such amendment,
termination or repeal.
In addition to any requirements of law or of any other provisions of
this Certificate of Incorporation, the affirmative vote of the holders of not
less than eighty percent (80%) of the total number of votes eligible to be cast
by the holders of all outstanding shares of Capital Stock entitled to vote
thereon shall be required to amend, alter, rescind or repeal any provision of
this Article IX.
ARTICLE X
INDEMNIFICATION
Section 1. Actions, Suits or Proceedings Other than by or in the
Right of the Corporation. To the fullest extent permitted by the GCL, the
Corporation shall indemnify any person who is or was or has agreed to become a
director or officer of the Corporation who was or is made a party to or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason of the
fact that he or she is or was or has agreed to become a director or officer of
the Corporation, or is or was serving or has agreed to serve at the request of
the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, or by reason
of any action alleged to have been taken or omitted in such capacity, and the
Corporation may indemnify any other person who is or was or has agreed to become
an employee or agent of the Corporation who was or is made a party to or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason of the
fact that he or she is or was or has agreed to become an employee or agent of
the Corporation, or is or was serving or has agreed to serve at the request of
the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, or by reason
of any action alleged to have been taken or omitted in such capacity, against
costs, charges, expenses (including attorneys' fees and expenses), judgments,
fines and amounts paid in settlement actually and reasonably incurred by him or
her or
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on his or her behalf in connection with such action, suit or proceeding and any
appeal therefrom, if he or she acted in good faith and in a manner he or she
reasonably believed to be in, or not opposed to, the best interests of the
Corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement or conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
or she reasonably believed to be in, or not opposed to, the best interests of
the Corporation and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his or her conduct was unlawful.
Notwithstanding anything contained in this Article X, but subject to Section 7
hereof, the Corporation shall not be obligated to indemnify any director or
officer in connection with an action, suit or proceeding, or part thereof,
initiated by such person against the Corporation unless such action, suit or
proceeding, or part thereof, was authorized or consented to by the Board of
Directors.
Section 2. Actions or Suits by or in the Right of the Corporation.
To the fullest extent permitted by the GCL, the Corporation shall indemnify any
person who is or was or has agreed to become a director or officer of the
Corporation who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that he or
she is or was or has agreed to become a director or officer of the Corporation,
or is or was serving or has agreed to serve at the request of the Corporation as
a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, or by reason of any action alleged to
have been taken or omitted in such capacity, and the Corporation may indemnify
any other person who is or was or has agreed to become an employee or agent of
the Corporation who was or is made a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that he or
she is or was or has agreed to become an employee or agent of the Corporation,
or is or was serving or has agreed to serve at the request of the Corporation as
a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, or by reason of any action alleged to
have been taken or omitted in such capacity, against costs, charges and expenses
(including attorneys' fees and expenses) actually and reasonably incurred by him
or her or on his or her behalf in connection with the defense or settlement of
such action or suit and any appeal therefrom, if he or she acted in good faith
and in a manner he or she reasonably believed to be in, or not opposed to, the
best interests of the Corporation, except no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Corporation unless and only to the extent that the
Court of Chancery of Delaware or the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of such
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such costs, charges and expenses
which the Court of Chancery or such other court shall deem proper.
Notwithstanding anything contained in this Article X, but subject to Section 7
hereof, the Corporation shall not be obligated to indemnify any director or
officer in connection with an action or suit, or part thereof, initiated by such
person against the Corporation unless such action or suit, or part thereof, was
authorized or consented to by the Board of Directors.
Section 3. Indemnification for Costs, Charges and Expenses of a
Successful Party. To the extent that a present or former director or officer of
the Corporation has been success-
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ful, on the merits or otherwise (including, without limitation, the dismissal of
an action without prejudice), in defense of any action, suit or proceeding
referred to in Section 1 or 2 of this Article X, or in defense of any claim,
issue or matter therein, such person shall be indemnified against all costs,
charges and expenses (including attorneys' fees and expenses) actually and
reasonably incurred by such person or on such person's behalf in connection
therewith.
Section 4. Indemnification for Expenses of a Witness. To the extent
that any person who is or was or has agreed to become a director or officer of
the Corporation is made a witness to any action, suit or proceeding to which he
or she is not a party by reason of the fact that he or she was, is or has agreed
to become a director or officer of the Corporation, or is or was serving or has
agreed to serve as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, at the
request of the Corporation, such person shall be indemnified against all costs,
charges and expenses actually and reasonably incurred by such person or on such
person's behalf in connection therewith.
To the extent that any person who is or was or has agreed to become an
employee or agent of the Corporation is made a witness to any action, suit or
proceeding to which he or she is not a party by reason of the fact that he or
she was, is or has agreed to become an employee or agent of the Corporation, or
is or was serving or has agreed to serve as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, at the request of the Corporation, such person may be indemnified
against all costs, charges and expenses actually and reasonably incurred by such
person or on such person's behalf in connection therewith.
Section 5. Determination of Right to Indemnification. Any
indemnification under Section 1 or 2 of this Article X (unless ordered by a
court) shall be made, if at all, by the Corporation only as authorized in the
specific case upon a determination that indemnification of the director,
officer, employee or agent is proper under the circumstances because he or she
has met the applicable standard of conduct set forth in Section 1 or 2 of this
Article X. Any indemnification under Section 4 of this Article X (unless ordered
by a court) shall be made, if at all, by the Corporation only as authorized in
the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper under the circumstances. Such
determinations shall be made with respect to a person who is a director or
officer at the time of such determination (a) by a majority vote of directors
who were not parties to such action, suit or proceeding even though less than a
quorum of the Board of Directors, (b) by a committee of such directors
designated by majority vote of such directors, even though less than a quorum,
(c) if there are no such directors, or if such directors so direct, by
independent counsel in a written opinion or (d) by the shareholders of the
Corporation. To obtain indemnification under this Article X, any person referred
to in Section 1, 2, 3 or 4 of this Article X shall submit to the Corporation a
written request, including therewith such documents as are reasonably available
to such person and are reasonably necessary to determine whether and to what
extent such person is entitled to indemnification.
Section 6. Advancement of Costs, Charges and Expenses. Costs,
charges and expenses (including attorneys' fees and expenses) incurred by or on
behalf of a director or officer in defending a civil or criminal action, suit or
proceeding referred to in Section 1 or 2 of this Article X shall be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding; provided, however, that the payment of such costs, charges and
expenses incurred by or on
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behalf of a director or officer in advance of the final disposition of such
action, suit or proceeding shall be made only upon receipt of a written
undertaking, by or on behalf of the director or officer to repay all amounts so
advanced in the event that it shall ultimately be determined that such director
or officer is not entitled to be indemnified by the Corporation as authorized in
this Article X or by law. No security shall be required for such undertaking and
such undertaking shall be accepted without reference to the recipient's
financial ability to make repayment. The majority of the directors who were not
parties to such action, suit or proceeding may, upon approval of such director
or officer of the Corporation, authorize the Corporation's counsel to represent
such person, in any action, suit or proceeding, whether or not the Corporation
is a party to such action, suit or proceeding.
Section 7. Procedure for Indemnification. Any indemnification
under Section 1, 2, 3 or 4 of this Article X or advancement of costs, charges
and expenses under Section 6 of this Article X shall be made promptly, and in
any event within sixty (60) days (except indemnification to be determined by
shareholders which will be determined at the next annual or special meeting of
shareholders), upon the written request of the director or officer. The right to
indemnification or advancement of expenses as granted by this Article X shall be
enforceable by the director, officer, employee or agent in any court of
competent jurisdiction in the event the Corporation denies such request, in
whole or in part, or if no disposition of such request is made within sixty (60)
days of the request. Such person's costs, charges and expenses incurred in
connection with successfully establishing his or her right to indemnification or
advancement, to the extent successful, in any such action shall also be
indemnified by the Corporation. It shall be a defense to any such action (other
than an action brought to enforce a claim for the advancement of costs, charges
and expenses under Section 6 of this Article X where the required undertaking,
if any, has been received by the Corporation) that the claimant has not met the
standard of conduct set forth in Section 1 or 2 of this Article X, but the
burden of proving such defense shall be on the Corporation. Neither the failure
of the Corporation (including its directors, its independent counsel and its
shareholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in
Section 1 or 2 of this Article X, nor the fact that there has been an actual
determination by the Corporation (including its directors, its independent
counsel and its shareholders) that the claimant has not met such applicable
standard of conduct, shall be a defense to the action or create a presumption
that the claimant has not met the applicable standard of conduct.
Section 8. Settlement. The Corporation shall not be obligated to
reimburse the costs, charges and expenses of any settlement to which it has not
agreed. If, in any action, suit or proceeding (including any appeal) within the
scope of Section 1 or 2 of this Article X, the person to be indemnified shall
have unreasonably failed to enter into a settlement thereof offered or assented
to by the opposing party or parties in such action, suit or proceeding, then,
notwithstanding any other provision of this Article X, the indemnification
obligation of the Corporation to such person in connection with such action,
suit or proceeding shall not exceed the total of the amount at which settlement
could have been made and the expenses incurred by or on behalf of such person
prior to the time such settlement could reasonably have been effected.
Section 9. Other Rights; Continuation of Right to Indemnification;
Individual Contracts. The indemnification and advancement of costs, charges and
expenses provided by or granted pursuant to this Article X shall not be deemed
exclusive of any other rights
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to which any person seeking indemnification or advancement of costs, charges and
expenses may be entitled under law (common or statutory) or any By-Law,
agreement, policy of indemnification insurance or vote of shareholders or
directors or otherwise, both as to action in his or her official capacity and as
to action in any other capacity while holding office, and shall continue as to
any person who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the legatees, heirs, distributees, executors and
administrators of any such person. Nothing contained in this Article X shall be
deemed to prohibit the Corporation from entering into, and the Corporation is
specifically authorized to enter into, agreements with directors, officers,
employees and agents providing indemnification rights and procedures different
from those set forth herein. All rights to indemnification under this Article X
shall be deemed to be a contract between the Corporation and each director,
officer, employee or agent of the Corporation who serves or served in such
capacity (or is or was serving or has agreed to serve at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise) at any time while this
Article X is in effect.
Section 10. Savings Clause. If this Article X or any portion shall
be invalidated on any ground by any court of competent jurisdiction, the
Corporation shall nevertheless indemnify each director or officer, and may
indemnify each employee or agent, of the Corporation as to any costs, charges,
expenses (including attorneys' fees and expenses), judgments, fines and amounts
paid in settlement with respect to any action, suit or proceeding, whether
civil, criminal, administrative or investigative (including any action by or in
the right of the Corporation), to the full extent permitted by any applicable
portion of this Article X that shall not have been invalidated and to the
fullest extent permitted by applicable law.
Section 11. Insurance. The Corporation may purchase and maintain
insurance, at its expense, to protect itself and any person who is or was a
director, officer, employee or agent of the Corporation or is or was serving or
has agreed to serve at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any costs, charges or expenses, liability or loss
incurred by such person in any such capacity, or arising out of such person's
status as such, whether or not the Corporation would have the power to indemnify
such person against such costs, charges or expenses, liability or loss under the
Certificate of Incorporation or applicable law; provided, however, that such
insurance is available on acceptable terms as determined by a vote of the Board
of Directors. To the extent that any director, officer, employee or agent is
reimbursed by an insurance company under an indemnification insurance policy for
any costs, charges, expenses (including attorneys' fees and expenses),
judgments, fines and amounts paid in settlement to the fullest extent permitted
by any applicable portion of this Article X, the By-Laws, any agreement, the
policy of indemnification insurance or otherwise, the Corporation shall not be
obligated to reimburse the person to be indemnified in connection with such
proceeding.
Section 12. Definitions. For purposes of this Article X, the
following terms shall have the following meanings:
(a) "The Corporation" shall include, in addition to the resulting
corporation, any constituent corporation or entity (including any constituent of
a constituent) absorbed by way of an acquisition, consolidation, merger or
otherwise, which, if its separate existence had continued, would
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<PAGE>
have had power and authority to indemnify its directors, officers, employees or
agents so that any person who is or was a director, officer, employee or agent
of such constituent corporation or entity, or is or was serving at the written
request of such constituent corporation or entity as a director or officer of
another corporation, entity, partnership, joint venture, trust or other
enterprise, shall stand in the same position under the provisions of this
Article X with respect to the resulting or surviving corporation or entity as
such person would have with respect to such constituent corporation or entity if
its separate existence had continued;
(b) "Other enterprises" shall include employee benefit plans,
including, but not limited to, any employee benefit plan of the Corporation;
(c) "Director or officer" of the Corporation shall include any
director or officer of the Corporation who is or was or has agreed to serve at
the request of the Corporation as a director, officer, partner or trustee of
another corporation, partnership, joint venture, trust or other enterprise;
(d) "Serving at the request of the Corporation" shall include any
service that imposes duties on, or involves services by a director, officer,
employee or agent of the Corporation with respect to an employee benefit plan,
its participants or beneficiaries, including acting as a fiduciary thereof;
(e) "Fines" shall include any penalties and any excise or similar
taxes assessed on a person with respect to an employee benefit plan;
(f) To the fullest extent permitted by law, a person shall be deemed
to have acted in "good faith and in a manner he or she reasonably believed to be
in, or not opposed to, the best interests of the Corporation and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his or
her conduct was unlawful," if his or her action is based on the records or books
of account of the Corporation or another enterprise, or on information supplied
to him or her by the officers of the Corporation or another enterprise in the
course of their duties, or on the advice of legal counsel for the Corporation or
another enterprise or on information or records given or reports made to the
Corporation or another enterprise by an independent certified public accountant
or by an appraiser or other expert selected with reasonable care by the
Corporation or another enterprise; and
(g) A person shall be deemed to have acted in a manner "not opposed
to the best interests of the Corporation," as referred to in Sections 1 and 2 of
this Article X if such person acted in good faith and in a manner he or she
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan.
Section 13. Subsequent Amendment and Subsequent Legislation. Neither
the amendment, termination or repeal of this Article X or of relevant provisions
of the GCL or any other applicable laws, nor the adoption of any provision of
this Certificate of Incorporation or the By-Laws of the Corporation or of any
statute inconsistent with this Article X shall eliminate, affect or diminish in
any way the rights of any director, officer, employee or agent of the
Corporation to indemnification under the provisions of this Article X with
respect to any action, suit or proceeding arising out
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<PAGE>
of, or relating to, any actions, transactions or facts occurring prior to the
final adoption of any such amendment, termination, repeal, provision or statute.
If the GCL is amended to expand further the indemnification permitted
to directors and officers of the Corporation, then the Corporation shall
indemnify such persons to the fullest extent permitted by the GCL, as so
amended.
ARTICLE XI
CONVERSION TRANSACTION
The MHC may elect to convert to stock form in accordance with
applicable law (a "Conversion Transaction"). If the Conversion Transaction does
not occur, the MHC shall continue to own a majority of the Common Stock of the
Corporation.
In a Conversion Transaction, the MHC would merge with and into the
Bank or the Corporation (at the discretion of the MHC), and certain depositors
of the Bank would receive the right to subscribe for a number of shares of
common stock of the Corporation, as determined by the formula set forth in the
following paragraphs. The additional shares of Common Stock of the Corporation
issued in the Conversion Transaction would be sold at their aggregate pro forma
market value.
Any Conversion Transaction shall be fair and equitable to holders of
the Corporation's Common Stock other than the MHC (the "Minority Stockholders").
In any Conversion Transaction, Minority Stockholders, if any, shall be entitled
to maintain the same percentage ownership interest in the Corporation after the
Conversion Transaction as their percentage ownership interest in the Corporation
immediately prior to the Conversion Transaction ("the Minority Ownership
Interest"), subject only to adjustments set forth in the Plan of Reorganization
and Stock Issuance (the "Plan") of the Bank (if required by federal or state
law, regulation, or regulatory policy) to reflect: (i) the cumulative effect of
the aggregate amount of dividends waived by the MHC, if any, and (ii) the market
value of assets of the MHC (other than Common Stock of the Corporation).
The adjustment referred to in clause (i) of the preceding paragraph
above would require that the Minority Ownership Interest (expressed as a
percentage) be adjusted by multiplying the Minority Ownership Interest by a
following fraction, numerator of which is equal to the Corporation shareholders'
equity immediately preceding the Conversion Transaction less the aggregate
amount of dividends waived by the MHC, if any, and the denominator of which is
the Corporation shareholders' equity immediately preceding the Conversion
Transaction.
The Minority Ownership Interest (expressed as a percentage) shall also
be adjusted to reflect any assets of the MHC other than the Common Stock of the
Corporation by multiplying the result obtained in the preceding paragraph by a
fraction, the numerator of which is equal to the pro forma market value of
Corporation less the market value of assets of MHC (other than the Corporation's
common stock) and the denominator of which is equal to the pro forma market
value of the Corporation.
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<PAGE>
At the sole discretion of the Board of Directors of each of the MHC
and the Corporation, a Conversion Transaction may be effected in any other
manner necessary to qualify the Conversion Transaction as a tax-free
reorganization under applicable federal and state tax law, provided such
Conversion Transaction does not diminish the rights and ownership interest of
Minority Stockholders as set forth in the preceding paragraphs. If a Conversion
Transaction does not occur, the MHC shall continue to own a majority of the
Voting Stock of the Corporation.
ARTICLE XII
AMENDMENTS
Section 1. Amendments of Certificate of Incorporation. In addition
to any affirmative vote required by applicable law and any voting rights granted
to or held by holders of shares of any series of Preferred Stock, any
alteration, amendment, repeal or rescission (collectively, any "Change") of any
provision of this Certificate of Incorporation must be approved by the Board of
Directors and by the affirmative vote of the holders of a majority (or such
greater proportion as may otherwise be required pursuant to any specific
provision of this Certificate of Incorporation) of the total votes eligible to
be cast by the holders of all outstanding shares of Capital Stock entitled to
vote thereon; provided, however, that if any such Change relates to Section 13
of Article X or Articles V, VI, VII or XII of this Certificate of Incorporation,
such Change must also be approved either by (i) not less than a majority of the
authorized number of directors and, if one or more Interested Shareholders (as
defined in Article VIII hereof) exists, by not less than a majority of the
Disinterested Directors (as defined in Article VIII hereof), or (ii) the
affirmative vote of the holders of not less than two-thirds of the total votes
eligible to be cast by the holders of all outstanding shares of Capital Stock
entitled to vote thereon and, if the Change is proposed by or on behalf of an
Interested Shareholder or a director who is an Affiliate or Associate (as such
terms are defined in Article VIII hereof) of an Interested Shareholder, by the
affirmative vote of the holders of not less than a majority of the total votes
eligible to be cast by holders of all outstanding shares of Capital Stock
entitled to vote thereon not beneficially owned by an Interested Shareholder or
an Affiliate or Associate thereof. Subject to the foregoing, the Corporation
reserves the right to amend this Certificate of Incorporation from time to time
in any and as many respects as may be desired and as may be lawfully contained
in an original certificate of incorporation filed at the time of making such
amendment.
Except as may otherwise be provided in this Certificate of
Incorporation, the Corporation reserves the right at any time, and from time to
time, to amend, alter, change or repeal any provision contained in this
Certificate of Incorporation and to add or insert herein any other provisions
authorized by the laws of the State of Delaware at the time in force, in the
manner now or hereafter prescribed by law, and all rights, preferences and
privileges of any nature conferred upon shareholders, directors or any other
persons whomsoever by and pursuant to this Certificate of Incorporation in its
present form or as hereafter amended are granted subject to the rights reserved
in this Section 1.
Section 2. Amendments of Bylaws. In furtherance and not in
limitation of the powers conferred by statute, the Board of Directors of the
Corporation, upon the vote of two-thirds of the members of the entire Board, is
expressly authorized to make, alter, amend, rescind or repeal
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<PAGE>
from time to time any of the Bylaws of the Corporation in accordance with the
terms thereof; provided, however, that any Bylaw made by the Board of Directors
may be altered, amended, rescinded or repealed in accordance with the terms
thereof by the holders of two-thirds of the shares of Capital Stock entitled to
vote thereon at any annual meeting or at any special meeting called for that
purpose. Notwithstanding the foregoing, any provision of the Bylaws that
contains a supermajority voting requirement shall only be altered, amended,
rescinded or repealed by a vote of the Board of Directors or holders of shares
of Capital Stock entitled to vote thereon that is not less than the
supermajority specified in such provision.
ARTICLE XIII
NOTICES
The name and mailing address of the incorporator of this Corporation
is:
The Rome Savings Bank
100 W. Dominick Street
Rome, New York 13440
[Signature Page Follows]
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<PAGE>
The Rome Savings Bank caused this Certificate of Incorporation to be
signed by Charles M. Sprock, its Chairman, President and Chief Executive
Officer, and attested to by Marion C. Scoville, its Secretary, this 9th day of
June, 1999.
The Rome Savings Bank
By: /s/ Charles M. Sprock
-------------------------------------------
Charles M. Sprock
Chairman, President and Chief Executive
Officer
Attest:
/s/ Marion C. Scoville
- -------------------------------------
Marion C. Scoville
Secretary
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<PAGE>
EXHIBIT 3.2
================================================================================
BYLAWS
OF
ROME BANCORP, INC.
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
ARTICLE I
OFFICES
Section 1. Registered Office............................................ 2
Section 2. Additional Offices........................................... 2
ARTICLE II
SHAREHOLDERS
Section 1. Place of Meetings............................................ 2
Section 2. Annual Meetings.............................................. 2
Section 3. Special Meetings............................................. 2
Section 4. Notice of Meetings........................................... 2
Section 5. Waiver of Notice............................................. 3
Section 6. Fixing of Record Date........................................ 3
Section 7. Quorum....................................................... 3
Section 8. Conduct of Meetings.......................................... 4
Section 9. Voting; Voting of Shares in the Name of Two or More Persons.. 4
Section 10. Proxies...................................................... 4
Section 11. Inspectors of Election....................................... 5
Section 12. Procedure for Nominations.................................... 5
Section 13. Substitution of Nominees..................................... 6
Section 14. New Business................................................. 6
ARTICLE III
CAPITAL STOCK
Section 1. Certificates of Stock........................................ 8
Section 2. Transfer Agent and Registrar................................. 8
Section 3. Registration and Transfer of Shares.......................... 8
Section 4. Lost, Destroyed and Mutilated Certificates................... 8
Section 5. Holder of Record............................................. 9
ARTICLE IV
BOARD OF DIRECTORS
Section 1. Responsibilities; Number of Directors........................ 9
Section 2. Qualifications............................................... 9
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Page
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<S> <C>
Section 3. Age Limitation of Directors.................................. 9
Section 4. Regular and Annual Meetings.................................. 9
Section 5. Special Meetings............................................. 9
Section 6. Notice of Meetings; Waiver of Notice......................... 10
Section 7. Conduct of Meetings.......................................... 10
Section 8. Quorum and Voting Requirements............................... 10
Section 9. Informal Action by Directors................................. 10
Section 10. Resignation.................................................. 11
Section 11. Vacancies.................................................... 11
Section 12. Compensation................................................. 11
Section 13. Amendments Concerning the Board.............................. 11
ARTICLE V
COMMITTEES
Section 1. Standing Committees.......................................... 11
Section 2. Executive Committee.......................................... 12
Section 3. Audit Committee.............................................. 12
Section 4. Compensation Committee....................................... 13
Section 5. Nominating Committee......................................... 13
Section 6. Other Committees............................................. 13
ARTICLE VI
OFFICERS
Section 1. Designation of Executive Officers............................ 14
Section 2. Term of Office and Removal................................... 14
Section 3. Chairman of the Board........................................ 14
Section 4. Chief Executive Officer...................................... 14
Section 5. President.................................................... 15
Section 6. Vice Presidents.............................................. 15
Section 7. Secretary.................................................... 15
Section 8. Treasurer.................................................... 15
Section 9. Other Officers............................................... 15
Section 10. Compensation of Officers..................................... 15
ARTICLE VII
DIVIDENDS.................................................................. 16
ARTICLE VIII
AMENDMENTS................................................................. 16
</TABLE>
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<PAGE>
BYLAWS
OF
ROME BANCORP, INC.
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of Rome Bancorp,
Inc. (the "Corporation") in the State of Delaware shall be in the City of
Wilmington, County of New Castle.
Section 2. Additional Offices. The Corporation may also have offices
and places of business at such other places, within or without the State of
Delaware, as the Board of Directors (the "Board") may from time to time
designate or the business of the Corporation may require.
ARTICLE II
SHAREHOLDERS
Section 1. Place of Meetings. Meetings of shareholders of the
Corporation shall be held at such place, within or without the State of
Delaware, as may be fixed by the Board and designated in the notice of meeting.
If no place is so fixed, such meetings shall be held at the principal
administrative office of the Corporation.
Section 2. Annual Meetings. The annual meeting of shareholders of
the Corporation for the election of directors and the transaction of any other
business which may properly come before such meeting shall be held each year on
a date and at a time to be designated by the Board.
Section 3. Special Meetings. Special meetings of shareholders, for
any purpose or purposes, may be called at any time only by the Chairman, if one
has been elected by the Board, the President and Chief Executive Officer or by
resolution of at least three-fourths of the directors then in office. Special
meetings shall be held on the date and at the time and place as may be
designated by the Board. At a special meeting, no business shall be transacted
and no corporate action shall be taken other than that stated in the notice of
meeting.
Section 4. Notice of Meetings. Except as otherwise required by law,
written notice stating the place, date and hour of any meeting of shareholders
and, in the case of a special meeting, the purpose or purposes for which the
meeting is called, shall be delivered to each shareholder of record entitled to
vote at such meeting, either personally or by mail not less than
<PAGE>
ten (10) nor more than sixty (60) days before the date of such meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the U.S.
mail, with postage thereon prepaid, addressed to the shareholder at his or her
address as it appears on the stock transfer books or records of the Corporation
as of the record date prescribed in Section 6 of this Article II, or at such
other address as the shareholder shall have furnished in writing to the
Secretary. Notice of any special meeting shall indicate that the notice is
being issued by or at the direction of the person or persons calling such
meeting. When any meeting of shareholders, either annual or special, is
adjourned to another time or place, no notice of the adjourned meeting need be
given, other than an announcement at the meeting at which such adjournment is
taken giving the time and place to which the meeting is adjourned; provided,
however, that if the adjournment is for more than thirty (30) days, or, if after
adjournment, the Board fixes a new record date for the adjourned meeting, notice
of the adjourned meeting shall be given to each shareholder of record entitled
to vote at the meeting.
Section 5. Waiver of Notice. Notice of any annual or special meeting
need not be given to any shareholder who submits a signed waiver of notice of
any meeting, in person or by proxy or by his or her duly authorized attorney-in-
fact, whether before or after the meeting. The attendance of any shareholder at
a meeting, in person or by proxy, shall constitute a waiver of notice by such
shareholder, except where a shareholder attends a meeting for the express
purpose of objecting at the beginning of the meeting to the transaction of any
business because the meeting is not lawfully called or convened.
Section 6. Fixing of Record Date. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or shareholders entitled to receive payment of any
dividend or other distribution or the allotment of any rights, or in order to
make a determination of shareholders for any other proper purpose, the Board
shall fix a date as the record date for any such determination of shareholders,
which date shall not precede the date upon which the resolution fixing the
record date is adopted by the Board. Such date in any case shall be not more
than sixty (60) days and, in the case of a meeting of shareholders, not less
than ten (10) days prior to the date on which the particular action requiring
such determination of shareholders is to be taken. When a determination of
shareholders entitled to vote at any meeting of shareholders has been made as
provided in this Section 6, such determination shall, unless otherwise provided
by the Board, also apply to any adjournment thereof. If no record date is fixed,
(a) the record date for determining shareholders entitled to notice of or vote
at a meeting of shareholders shall be at the close of business on the day next
preceding the day on which the notice is given, or, if notice is waived, at the
close of business on the day next preceding the day on which the meeting is
held, and (b) the record date for determining shareholders for any other purpose
shall be at the close of business on the day on which the Board adopts the
resolution relating thereto.
Section 7. Quorum. The holders of record of a majority of the total
number of votes eligible to be cast in the election of directors, represented in
person or by proxy, shall constitute a quorum for the transaction of business at
a meeting of shareholders, except as otherwise provided by law, these Bylaws or
the Certificate of Incorporation. If less than a majority of such total number
of votes is represented at a meeting, a majority of the number of votes so
represented may adjourn the meeting from time to time without further notice,
provided, that if such adjournment is for more than thirty (30) days, a notice
of the adjourned meeting shall be given to each shareholder
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<PAGE>
of record entitled to vote at the meeting. At such adjourned meeting at which a
quorum is present, any business may be transacted that might have been
transacted at the meeting as originally called. When a quorum is once present to
organize a meeting of shareholders, such quorum is not broken by the subsequent
withdrawal of any shareholders.
Section 8. Conduct of Meetings. The Chairman shall serve as chairman
at all meetings of the shareholders or, if a Chairman has not been elected by
the Board or the Chairman is absent or otherwise unable to so serve, the
President and Chief Executive Officer shall serve as chairman. If the President
is absent or otherwise unable to so serve, such other person as shall be
appointed by a majority of the entire Board shall serve as chairman at any
meeting of shareholders held in such absence. The Secretary or, in his or her
absence, such other person as the chairman of the meeting shall appoint, shall
serve as secretary of the meeting. The chairman of the meeting shall conduct all
meetings of the shareholders in accordance with the best interests of the
Corporation and shall have the authority and discretion to establish reasonable
procedural rules for the conduct of such meetings, including such regulation of
the manner of voting and the conduct of discussion as he or she shall deem
appropriate. The chairman of the meeting shall also have the authority to
adjourn the meeting from time to time and from place to place as he or she may
deem necessary and in the best interests of the Corporation.
Section 9. Voting; Voting of Shares in the Name of Two or More
Persons. Except for the election of directors or as otherwise provided by
applicable law or regulation, the Certificate of Incorporation or these Bylaws,
at all meetings of shareholders, all matters shall be determined by a vote of
the holders of a majority of the number of votes eligible to be cast by the
holders of the outstanding shares of capital stock of the Corporation present
and entitled to vote thereat. Directors shall, except as otherwise required by
law, these Bylaws or the Certificate of Incorporation, be elected by a plurality
of the votes cast by each class of shares entitled to vote at a meeting of
shareholders, present and entitled to vote in the election.
If ownership of a share of voting stock of the Corporation stands in
the name of two or more persons, in the absence of written directions to the
Corporation to the contrary, any one or more of such shareholders may cast, in
person or by proxy, all votes to which such ownership is entitled. If an
attempt is made to cast conflicting votes by the several persons in whose names
shares of stock stand, the vote or votes to which those persons are entitled
shall be cast as directed by a majority of those holding such stock and present,
in person or by proxy, at such meeting. If such conflicting votes are evenly
split on any particular matter, each faction may vote the securities in question
proportionally, or any person voting the shares, or a beneficiary, if any, may
apply to the Court of Chancery of Delaware or such other court as may have
jurisdiction to appoint an additional person to act with the persons so voting
the shares, which shall then be voted as determined by a majority of such
persons and the person appointed by the Court.
Section 10. Proxies. Each shareholder entitled to vote at any meeting
may vote either in person or by proxy. Unless otherwise specified in the
Certificate of Incorporation or in a resolution, or resolutions, of the Board
providing for the issuance of preferred stock, each shareholder entitled to vote
shall be entitled to one vote for each share of capital stock registered in his
or her name on the transfer books or records of the Corporation. Each
shareholder entitled to
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<PAGE>
vote may authorize another person or persons to act for him or her by proxy. All
proxies shall be by written instrument, signed by the shareholder or by his or
her attorney-in-fact, or by electronic transmission as permitted by law;
provided that such electronic transmission either sets forth or is submitted
with information from which it can be determined that such electronic
transmission was authorized by such shareholder. All proxies shall be filed with
the Secretary before being voted. No proxy shall be valid after three (3) years
from the date of its execution unless otherwise provided in the proxy. The
attendance at any meeting by a shareholder who shall have previously given a
proxy applicable thereto shall not, as such, have the effect of revoking the
proxy. The Corporation may treat any duly executed proxy as not revoked and in
full force and effect until it receives a duly executed instrument revoking it,
or a duly executed proxy bearing a later date.
Section 11. Inspectors of Election. In advance of any meeting of
shareholders, the Board shall, to the extent required by applicable law, appoint
one or more persons, other than officers, directors or nominees for office, as
inspectors of election to act at such meeting or any adjournment thereof. Such
appointment shall not be altered at the meeting. If inspectors of election are
not so appointed, the chairman of the meeting shall make such appointment at the
meeting. If any person appointed as inspector fails to appear or fails or
refuses to act at the meeting, the vacancy so created may be filled by
appointment by the Board in advance of the meeting or at the meeting by the
chairman of the meeting. The duties of the inspectors of election shall include
determining the number of shares outstanding and the voting power of each, the
shares represented at the meeting, the existence of a quorum, the validity and
effect of proxies, receiving votes, ballots or consents, hearing and deciding
all challenges and questions arising in connection with the right to vote,
counting and tabulating all votes, ballots or consents, determining the results
and doing such acts as are proper to the conduct of the election or the vote
with fairness to all shareholders. Any report or certificate made by them shall
be prima facie evidence of the facts stated and of the vote as certified by
them. Each inspector shall be entitled to a reasonable compensation for his or
her services, to be paid by the Corporation.
Section 12. Procedure for Nominations. Subject to the provisions
hereof, the Board, or a committee thereof, shall select nominees for election as
directors. Except in the case of a nominee substituted as a result of the
death, incapacity, withdrawal or other inability to serve of a nominee, the
Board, or a committee thereof, shall deliver written nominations to the
Secretary at least ninety (90) days prior to the date of the annual meeting.
Provided the Board, or committee thereof, makes such nominations, no nominations
for directors except those made by the Board or such committee shall be voted
upon at the annual meeting of shareholders unless other nominations by
shareholders are made in accordance with the provisions of this Section 12.
Nominations of individuals for election to the Board at an annual meeting of
shareholders may be made by any shareholder of record of the Corporation
entitled to vote for the election of directors at such meeting who provides
timely notice in writing to the Secretary as set forth in this Section 12. To
be timely, a shareholder's notice must be delivered to or received by the
Secretary not later than the following dates: (i) with respect to an election
of directors to be held at an annual meeting of shareholders, ninety (90) days
in advance of the anniversary of the previous year's annual meeting if the
current year's meeting is to be held within 30 days prior to, on the anniversary
date of, or after the anniversary of the previous year's annual meeting; and
(ii) with respect to an election to be held at an annual meeting of shareholders
held at a time other than within the time periods set forth in the
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<PAGE>
immediately preceding clause (i), or at a special meeting of shareholders for
the election of directors, the close of business on the tenth (10th) day
following the date on which notice of such meeting is first given to
shareholders. For purposes of this Section 12, notice shall be deemed to first
be given to shareholders when disclosure of such date of the meeting of
shareholders is first made in a press release reported to Dow Jones News
Services, Associated Press or comparable national news service, or in a document
publicly filed by the Corporation with the Securities and Exchange Commission
pursuant to Section 13, 14 or 15(d) of the Securities Exchange Act of 1934, as
amended. Such shareholder's notice shall set forth (a) as to each person whom
the shareholder proposes to nominate for election or re-election as a director,
(i) the name, age, business address and residence address of such person, (ii)
the principal occupation or employment of such person, (iii) such person's
written consent to serve as a director, if elected, and (iv) all such other
information regarding each nominee proposed by such shareholder as would be
required to be included in a proxy statement filed pursuant to the proxy rules
of the Securities and Exchange Commission (whether or not the Corporation is
then subject to such rules); and (b) as to the shareholder giving the notice (i)
the name, business address and residence address of such shareholder, (ii) the
class and number of shares of the Corporation which are owned of record by such
shareholder and the dates upon which he or she acquired such shares, (iii) a
description of all arrangements or understandings between the shareholder and
nominee and any other person or persons (naming such person or persons) pursuant
to which the nominations are to be made by the shareholder; (iv) the
identification of any person employed, retained or to be compensated by the
shareholder submitting the nomination or by the person nominated, or any person
acting on his or her behalf to make solicitations or recommendations to
shareholders for the purpose of assisting in the election of such director, and
a brief description of the terms of such employment, retainer or arrangement for
compensation; (v) a representation that the shareholder is a holder of record of
stock of the Corporation entitled to vote at such meeting and intends to appear
in person or by proxy at the meeting to propose such nomination; and (vi) a
representation whether the shareholder intends or is part of a group which
intends to (1) deliver a proxy statement and/or form of proxy to holders of at
least the percentage of the Corporation's outstanding capital stock required to
elect the nominee and/or (2) otherwise solicit proxies from shareholders in
support of such nomination. At the request of the Board, any person nominated by
the Board for election as a director shall furnish to the Secretary that
information required to be set forth in a shareholder's notice of nomination
which pertains to the nominee together with the required written consent. The
Corporation may also require any proposed nominee to furnish such other
information as it may reasonably require to determine the eligibility of such
proposed nominee to serve as a director of the Corporation. No person shall be
elected as a director of the Corporation unless nominated in accordance with the
procedures set forth in this Section 12.
The chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that a nomination was not properly brought before the
meeting in accordance with the provisions hereof, and, if he should so
determine, shall declare to the meeting that such nomination was not properly
brought before the meeting and shall not be considered.
Section 13. Substitution of Nominees. In the event that a person is
validly designated as a nominee in accordance with Section 12 of this Article II
and shall thereafter become unwilling or unable to stand for election to the
Board, the Board or a committee thereof may designate a substitute nominee upon
delivery, not fewer than five (5) days prior to the date of the
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meeting for the election of such nominee, of a written notice to the Secretary
setting forth such information regarding such substitute nominee as would have
been required to be delivered to the Secretary pursuant to Section 12 of this
Article II had such substitute nominee been initially proposed as a nominee.
Such notice shall include a signed consent to serve as a director of the
Corporation, if elected, of each such substituted nominee.
Section 14. New Business. Any new business to be taken up at the
annual meeting at the request of the Chairman or the President or by resolution
of at least three-fourths of the directors then in office shall be stated in
writing and filed with the Secretary at least fifteen (15) days before the date
of the annual meeting, and all business so stated, proposed and filed shall be
considered at the annual meeting, but, except as provided in this Section 14, no
other proposal shall be acted upon at the annual meeting. Any proposal offered
by any shareholder, may be made at the annual meeting and the same may be
discussed and considered, but unless properly brought before the meeting such
proposal shall not be acted upon at the meeting. For a proposal to be properly
brought before an annual meeting by a shareholder, the shareholder must be a
shareholder of record and have given timely notice thereof in writing to the
Secretary. To be timely, a shareholder's notice must be delivered to or received
by the Secretary not later than the following dates: with respect to an annual
meeting of shareholders, ninety (90) days in advance of the anniversary of the
previous year's annual meeting if current year's meeting is to be held within 30
days prior to, on the anniversary date of, or after the anniversary of the
previous year's annual meeting; and (ii) with respect to an annual meeting of
shareholders held at a time other than within the time periods set forth in the
immediately preceding clause (i), the close of business on the tenth (10th) day
following the date on which notice of such meeting is first given to
shareholders. For purposes of this Section 14, notice shall be deemed to first
be given to shareholders when disclosure of such date of the meeting of
shareholders is first made in a press release reported to Dow Jones News
Services, Associated Press or comparable national news service, or in a document
publicly filed by the Corporation with the Securities and Exchange Commission
pursuant to Section 13, 14 or 15(d) of the Securities Exchange Act of 1934, as
amended. A shareholder's notice to the Secretary shall set forth as to the
matter the shareholder proposes to bring before the annual meeting (a) a brief
description of the proposal desired to be brought before the annual meeting, the
reasons for conducting such business at the meeting and any material interest in
such business of such shareholder and the beneficial owner, if any, on whose
behalf the proposal is made; (b) the name and address of the shareholder
proposing such business; (c) the class and number of shares of the Corporation
which are owned of record by the shareholder and the dates upon which he or she
acquired such shares; (d) the identification of any person employed, retained,
or to be compensated by the shareholder submitting the proposal, or any person
acting on his or her behalf, to make solicitations or recommendations to
shareholders for the purpose of assisting in the passage of such proposal, and a
brief description of the terms of such employment, retainer or arrangement for
compensation; (e) a representation that the shareholder is a holder of record of
stock of the Corporation entitled to vote at such meeting and intends to appear
in person or by proxy at the meeting to propose such new business; (f) a
representation whether the shareholder intends or is part of a group which
intends to (1) deliver a proxy statement and/or form of proxy to holders of at
least the percentage of the Corporation's outstanding capital stock required to
approve or adopt the proposal and/or (2) otherwise solicit proxies from
shareholders in support of such proposal; and (g) all such other information
regarding such proposal as would be required to be included in a proxy statement
filed
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pursuant to the proxy rules of the Securities and Exchange Commission or
required to be delivered to the Corporation pursuant to the proxy rules of the
Securities and Exchange Commission (whether or not the Corporation is then
subject to such rules). This provision shall not prevent the consideration and
approval or disapproval at an annual meeting of reports of officers, directors
and committees of the Board or the management of the Corporation, but in
connection with such reports, no new business shall be acted upon at such annual
meeting unless stated and filed as herein provided. This provision shall not
constitute a waiver of any right of the Corporation under the proxy rules of the
Securities and Exchange Commission or any other rule or regulation to omit a
shareholder's proposal from the Corporation's proxy materials.
The chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that any new business was not properly brought before the
meeting in accordance with the provisions hereof, and, if the chairman should so
determine, the chairman shall declare to the meeting that such new business was
not properly brought before the meeting and shall not be considered.
ARTICLE III
CAPITAL STOCK
Section 1. Certificates of Stock. Certificates representing shares of
stock shall be in such form as shall be determined by the Board. Each
certificate shall state that the Corporation will furnish to any shareholder
upon request and without charge a statement of the powers, designations,
preferences and relative, participating, optional or other special rights of the
shares of each class or series of stock and the qualifications or restrictions
of such preferences and/or rights, or shall set forth such statement on the
certificate itself. The certificates shall be numbered in the order of their
issue and entered in the books of the Corporation or its transfer agent or
agents as they are issued. Each certificate shall state the registered holder's
name and the number and class of shares and shall be signed by the Chairman or
the President and the Secretary or any Assistant Secretary, and may, but need
not, bear the seal of the Corporation or a facsimile thereof. Any or all of the
signatures on the certificates may be facsimiles. In case any officer or
officers who shall have signed any such certificate shall cease to be such
officer or officers of the Corporation, whether because of death, resignation or
otherwise, before such certificate shall have been delivered by the Corporation,
such certificate may nevertheless be adopted by the Corporation and be issued
and delivered as though the person or persons who signed such certificate or
certificates had not ceased to be such officer or officers of the Corporation.
Section 2. Transfer Agent and Registrar. The Board shall have the
power to appoint one or more Transfer Agents and Registrars for the transfer and
registration of certificates of stock of any class and may require that stock
certificates be countersigned and registered by one or more of such Transfer
Agents and Registrars.
Section 3. Registration and Transfer of Shares. Subject to the
provisions of the Certificate of Incorporation of the Corporation, the name of
each person owning a share of the
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capital stock of the Corporation shall be entered on the books of the
Corporation together with the number of shares held by him or her, the numbers
of the certificates covering such shares and the dates of issue of such
certificates. Subject to the provisions of the Certificate of Incorporation of
the Corporation, the shares of stock of the Corporation shall be transferable on
the books of the Corporation by the holders thereof in person, or by their duly
authorized attorneys or legal representatives, on surrender and cancellation of
certificates for a like number of shares, accompanied by an assignment or power
of transfer endorsed thereon or attached thereto, duly executed, with such
guarantee or proof of the authenticity of the signature as the Corporation or
its agents may reasonably require and with proper evidence of payment of any
applicable transfer taxes. Subject to the provisions of the Certificate of
Incorporation of the Corporation, a record shall be made of each transfer.
Section 4. Lost, Destroyed and Mutilated Certificates. The holder of
any shares of stock of the Corporation shall immediately notify the Corporation
of any loss, theft, destruction or mutilation of the certificates therefor. The
Corporation may issue, or cause to be issued, a new certificate of stock in the
place of any certificate theretofore issued by it alleged to have been lost,
stolen or destroyed upon evidence satisfactory to the Corporation of the loss,
theft or destruction of the certificate and, in the case of mutilation, the
surrender of the mutilated certificate. The Corporation may, in its discretion,
require the owner of the lost, stolen or destroyed certificate, or his or her
legal representatives, to give the Corporation a bond sufficient to indemnify it
against any claim that may be made against it on account of the alleged loss,
theft, destruction or mutilation of any such certificate and the issuance of
such new certificate, or may refer such owner to such remedy or remedies as he
or she may have under the laws of the State of Delaware.
Section 5. Holder of Record. Subject to the provisions of the
Certificate of Incorporation of the Corporation, the Corporation shall be
entitled to treat the holder of record of any share or shares of stock as the
holder thereof in fact and shall not be bound to recognize any equitable or
other claim to or interest in such shares on the part of any other person,
whether or not it shall have express or other notice thereof, except as
otherwise expressly provided by law.
ARTICLE IV
BOARD OF DIRECTORS
Section 1. Responsibilities; Number of Directors. The business and
affairs of the Corporation shall be under the direction of the Board. The Board
shall consist of not less than seven (7) nor more than twenty (20) directors
(other than directors elected by the holders of shares of any series of
preferred stock). Within the foregoing limits, the number of directors shall be
determined only by resolution of the Board. A minimum of two (2) directors shall
be persons other than officers or employees of the Corporation or its
subsidiaries and shall not have a relationship which, in the opinion of the
Board (exclusive of such persons), would interfere with the exercise of
independent judgment in carrying out the responsibilities of a director.
Section 2. Qualifications. Each director shall be at least eighteen
(18) years of age.
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Section 3. Age Limitation of Directors. No director shall be
qualified to serve as such beyond the last day of the year in which he or she
reaches his or her seventy-fifth (75/th/) birthday. However, a director on
attaining age 75, shall be eligible for election as Director Emeritus subject to
the nomination procedures of Article II, Section 12.
Section 4. Regular and Annual Meetings. An annual meeting of the
Board for the election of officers shall be held, without notice other than
these Bylaws, immediately after, and at the same place as, the annual meeting of
the shareholders, or at such other time or place as the Board may fix by
resolution. The Board may provide, by resolution, the time and place, within or
without the State of Delaware, for the holding of regular meetings of the Board
without notice other than such resolution.
Section 5. Special Meetings. Special meetings of the Board may be
called for any purpose at any time by or at the request of the Chairman, if a
Chairman has been elected by the Board, or the President and Chief Executive
Officer. Special meetings of the Board shall also be called by the Secretary
upon the written request, stating the purpose or purposes of the meeting, of at
least sixty (60%) percent of the directors then in office, but in any event not
less than five (5) directors. The persons authorized to call special meetings
of the Board shall give notice of such meetings in the manner prescribed by
these Bylaws and may fix any place, within or without the Corporation's regular
business area, as the place for holding any special meeting of the Board called
by such persons. No business shall be conducted at a special meeting other than
that specified in the notice of meeting.
Section 6. Notice of Meetings; Waiver of Notice. Except as otherwise
provided in Section 4 of this Article IV, notice of each meeting shall be mailed
or otherwise given to each director at least two (2) days before the day of the
meeting to his or her address shown in the records of the Corporation, except in
the case of an emergency, in the discretion of the Chairman, if a Chairman has
been elected by the Board, or the President, shorter oral notice may be given.
The purpose of any special meeting shall be stated in the notice. Such notice
shall be deemed given when sent or given to any mail or courier service or
company providing electronic transmission service. Any director may waive notice
of any meeting by submitting a signed waiver of notice with the Secretary,
whether before or after the meeting. The attendance of a director at a meeting
shall constitute a waiver of notice of such meeting, except where a director
attends a meeting for the express purpose of objecting at the beginning of the
meeting to the transaction of any business because the meeting is not lawfully
called or convened.
Section 7. Conduct of Meetings. Meetings of the Board shall be
presided over by the Chairman, if a Chairman has been elected by the Board, or
such other director or officer as the Chairman shall designate. If a Chairman
has not been elected by the Board or the Chairman is absent or otherwise unable
to preside over the meeting, the presiding officer shall be the President. If
the President is absent or otherwise unable to preside over the meeting, the
presiding officer shall be such other person as shall be appointed by a majority
of the Board. The Secretary or, in his absence, a person appointed by the
Chairman (or other presiding person), shall act as secretary of the meeting.
The Chairman (or other person presiding) shall conduct all meetings of the Board
in accordance with the best interests of the Corporation and shall have the
authority and discretion to
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establish reasonable procedural rules for the conduct of Board meetings. Any one
or more directors may participate in a meeting of the Board or a committee of
the Board by means of a conference telephone or similar communications equipment
allowing all persons participating in the meeting to hear each other at the same
time. Participation by such means shall constitute presence in person at any
such meeting.
Section 8. Quorum and Voting Requirements. A quorum at any meeting of
the Board shall consist of not less than a majority of the directors then in
office or such greater number as shall be required by law, these Bylaws or the
Certificate of Incorporation, but not less than one-third (1/3) of the total
number. If less than a required quorum is present, the majority of those
directors present shall adjourn the meeting to another time and place without
further notice. At such adjourned meeting at which a quorum shall be
represented, any business may be transacted that might have been transacted at
the meeting as originally noticed. Except as otherwise provided by law, the
Certificate of Incorporation or these Bylaws, a majority vote of the directors
present at a meeting, if a quorum is present, shall constitute an act of the
Board.
Section 9. Informal Action by Directors. Unless otherwise restricted
by the Certificate of Incorporation or these Bylaws, any action required or
permitted to be taken at any meeting of the Board, or of any committee thereof,
may be taken without a meeting if all members of the Board or such committee, as
the case may be, consent thereto in writing, and the writing or writings are
filed with the minutes of proceedings of the Board or such committee.
Section 10. Resignation. Any director may resign at any time by
sending a written notice of such resignation to the principal office of the
Corporation addressed to the Chairman or the President. Unless otherwise
specified therein, such resignation shall take effect upon receipt thereof.
Section 11. Vacancies. To the extent not inconsistent with the
Certificate of Incorporation and subject to the limitations prescribed by law
and the rights of holders of Preferred Stock, vacancies in the office of
director, including vacancies created by newly created directorships resulting
from an increase in the number of directors, shall be filled only by a vote of a
majority of the directors then holding office, whether or not a quorum, at any
regular or special meeting of the Board called for that purpose. Subject to the
rights of holders of Preferred Stock, no person shall be so elected a director
unless nominated by the Nominating Committee. Subject to the rights of holders
of Preferred Stock, any director so elected shall serve for the remainder of the
full term of the class of directors in which the new directorship was created or
the vacancy occurred and until his or her successor shall be elected and
qualified.
Section 12. Compensation. From time to time, as the Board deems
necessary, the Board shall fix the compensation of directors, and officers of
the Corporation in such one or more forms as the Board may determine.
Section 13. Amendments Concerning the Board. The number and other
restrictions and qualifications for directors of the Corporation as set forth in
these Bylaws may be altered only by a vote, in addition to any vote required by
law, of two-thirds of the entire Board or by the affirmative vote of the holders
of record of not less than eighty percent (80%) of the total
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votes eligible to be cast by holders of all outstanding shares of capital stock
of the Corporation entitled to vote generally in the election of directors at a
meeting of the shareholders called for that purpose.
ARTICLE V
COMMITTEES
Section 1. Standing Committees. At each annual meeting of the Board,
the directors shall designate from their own number, by resolution, the
following committees:
(a) Executive Committee
(b) Audit Committee
(c) Compensation Committee
(d) Nominating Committee
which shall be standing committees of the Board. The Chairman, if one has been
elected by the Board, shall be a member of, and the Chief Executive Officer and
the President shall be ex-officio members of, with power to vote on all matters,
the Executive Committee. The Board shall appoint a director to fill any
vacancy on any committee of the Board. The members of the committees shall
serve at the pleasure of the Board.
Section 2. Executive Committee. The Executive Committee shall consist
of five members, none of whom shall be an officer or salaried employee of the
Bank or its subsidiaries, and such ex-officio or other members as shall be
appointed by Board resolution or these Bylaws. The membership of the Executive
Committee shall consist of the Chairman, if one has been elected, the President,
and four other members of the Board. If no Chairman has been elected, then one
additional member of the Board shall be appointed to the Executive Committee.
There shall also be elected at the annual meeting a first, second and third
alternate member of the Executive Committee, who shall act in the absence of
members of the Executive Committee upon the call of the Chairman, or, if no
Chairman has been elected, the President.
The Chairman shall serve as chairman of the Executive Committee or, if
no Chairman has been elected, the President shall serve as chairman of the
Executive Committee. In the absence of the chairman of the Executive Committee,
the committee shall designate from among its membership a person to preside at
any meeting held in such absence. The Executive Committee shall designate, from
its membership or otherwise, a secretary who shall report to the Board at its
next regular meeting all proceedings and actions taken by the Executive
Committee. The Executive Committee shall meet as necessary at the call of the
Chairman or, in the absence of the Chairman, at the call of a majority of the
members of the Executive Committee.
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Three members of the Executive Committee shall constitute a quorum for
the transaction of business. The vote of a majority present at any meeting,
including the chairman of the committee, who shall be eligible to vote, shall
constitute the action of the Executive Committee.
The Executive Committee shall, to the extent not inconsistent with
applicable law or these Bylaws, exercise all the powers of the Board in the
intervals between the meetings of the Board. The Executive Committee shall
generally oversee the affairs of the Bank and shall exercise such other powers
not reserved by the Board or delegated to officers or to other committees. The
Executive Committee shall also consider proposals from management in relation to
the election of officers and shall make recommendations to the Board in relation
to those nominated to officer positions.
Section 3. Audit Committee. The Audit Committee shall consist of at
least four members, none of whom shall be an officer or salaried employee of the
Bank or its subsidiaries, an attorney who receives a fee or other compensation
for legal services rendered to the Bank or any other individual having a
relationship which, in the opinion of the Board, would interfere with the
exercise of independent judgement in carrying out the responsibilities of a
director. At any regular meeting of the Board, any director who is otherwise
eligible to serve on the Audit Committee may be elected to fill a vacancy that
has occurred on the Audit Committee. The Board shall designate one member of the
committee to serve as chairman of the committee. Three members of the Audit
Committee shall constitute a quorum for the transaction of business.
The Audit Committee shall meet annually at the call of the chairman of
the committee, at a date not less than six months after the prior examination
and may hold such additional meetings as the chairman of the committee may deem
necessary, to examine, or cause to be examined, the records and affairs of the
Bank to determine its true financial condition, and shall present a report of
examination to the Board at the Board's next regular meeting following the
meeting of the Audit Committee and shall present a copy thereof to the
Superintendent, all in conformity with the provisions of the Banking Law. The
committee shall appoint, from its membership or otherwise, a secretary who
shall cause to be kept written minutes of all meetings of the committee. The
Audit Committee shall make, or cause to be made, such other examinations
(including any required by Section 254 of the Banking Law) as it may deem
advisable or whenever so directed by the Board and shall report thereon in
writing at a regular meeting of the Board. The Audit Committee shall make
recommendations to the Board in relation to the employment of accountants and
independent auditors and arrange for such other assistance as it may deem
necessary or desirable. The Audit Committee shall review and evaluate the
procedures and performance of the Bank's internal auditing staff.
Section 4. Compensation Committee. The Compensation Committee shall
consist of at least three (3) members, none of whom shall be an officer or
salaried employee of the Bank or its subsidiaries, as shall be appointed by
Board resolution or these Bylaws. The Board shall designate one member of the
committee to serve as chairman of the Compensation Committee, who shall have the
authority to adopt and establish procedural rules for the conduct of all
meetings of the committee.
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The Compensation Committee shall meet at least quarterly to assess the
structure of the management team and the overall performance of the Bank, and
may hold such additional meetings as the chairman may deem necessary. A quorum
shall consist of at least one-third of the voting members of the Compensation
Committee, and in no event less than two (2) voting members of the committee.
The vote of a majority of the voting members present at any meeting, including
the chairman of the committee who shall be eligible to vote, shall constitute
the action of the Compensation Committee. The committee shall appoint, from its
membership or otherwise, a secretary who shall cause to be kept written minutes
of all meetings of the committee.
The Compensation Committee shall be responsible for recommending to
the Board the compensation, employment arrangements and benefit programs for
officers of the Bank and its subsidiaries.
Section 5. Nominating Committee. The Nominating Committee shall
consist of at least three (3) members, none of whom shall be an officer or a
salaried employee of the Corporation or its subsidiaries. Notwithstanding the
foregoing, no director shall serve on the Nominating Committee in any capacity
in any year during which such director's term as a director is scheduled to
expire. The Nominating Committee shall review qualifications of and interview
candidates for the Board and shall make nominations for election of board
members in accordance with the provisions of these Bylaws in relation to those
suggestions to the Board. A quorum shall consist of at least one-third of the
members of the committee, and in no event less than two (2) members of the
committee. The vote of a majority of members present at any meeting at which a
quorum exists including the presiding member, who shall be eligible to vote,
shall constitute the action of the Nominating Committee.
Section 6. Other Committees. The Board may by resolution authorize
such other committees as from time to time it may deem necessary or appropriate
for the conduct of the business of the Corporation. The members of each
committee so authorized shall be appointed by the Board from members of the
Board. In addition, the Chairman, if one has been elected by the Board, the
President and Chief Executive Officer and the Secretary shall be ex-officio
members of each such committee. Each such committee shall exercise such powers
as may be assigned by the Board to the extent not inconsistent with law, these
Bylaws, the Certificate of Incorporation or resolutions adopted by the Board.
ARTICLE VI
OFFICERS
Section 1. Designation of Executive Officers. The Board shall, at
each annual meeting, elect a President and a Secretary, and may elect a Chairman
and such other officers as the Board from time to time may deem necessary or the
business of the Corporation may require. The Board shall designate either the
Chairman or the President as the Chief Executive Officer, and may designate the
President or an Executive Vice President to be the Chief Operating Officer. Any
number of offices may be held by the same person except that no person may
simultaneously hold the offices of President and Secretary.
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The election of all officers shall be made only by a vote of a
majority of the entire Board. If such election is not held at the meeting held
annually for the election of officers, such officers may be so elected at any
subsequent regular meeting or at a special meeting called for that purpose, in
the same manner above provided. Each person elected shall have such authority,
bear such title and perform such duties as provided in these Bylaws and as the
Board may prescribe from time to time. All officers elected or appointed by the
Board shall assume their duties immediately upon their election and shall hold
office at the pleasure of the Board. Whenever a vacancy occurs among the
officers, it may be filled at any regular or special meeting called for that
purpose, in the same manner as above provided.
Section 2. Term of Office and Removal. Each officer shall serve until
his or her successor is elected and duly qualified, the office is abolished or
he or she is removed. Any officer may be removed at any regular or special
meeting of the Board called for that purpose, with or without cause, by an
affirmative vote of a majority of the entire Board.
Section 3. Chairman of the Board. The Chairman may be the Chief
Executive Officer of the Corporation and shall, subject to the direction of the
Board, oversee all of the major activities of the Corporation and its
subsidiaries. The Chairman shall preside at all meetings of the shareholders;
preside at all meetings of the Board and the Executive Committee; make
recommendations to the Board regarding appointments to all committees; and sign
instruments in the name of the Corporation.
Section 4. Chief Executive Officer. The Chief Executive Officer of
the Corporation, subject to the direction of the Board, shall be responsible for
assuring that the policy decisions of the Board are implemented as formulated.
The Chief Executive Officer shall be responsible, in consultation with such
officers and members of the Board as he or she deems appropriate, for planning
the growth of the Corporation. The Chief Executive Officer shall be responsible
for shareholder relations, relations with investments bankers, other similar
financial institutions and financial advisors, and shall be empowered to
designate officers of the Corporation and its subsidiaries to assist in such
activities. The Chief Executive Officer shall be principally responsible for
exploring opportunities for mergers, acquisitions and new business. The Chief
Executive Officer shall have the general supervision and direction of all of the
Corporation's officers, subject to and consistent with policies enunciated by
the Board. The Chief Executive Officer shall under authority given to him or
her, sign instruments in the name of the Corporation. The Chief Executive
Officer shall have such other powers as may be assigned to such officer by the
Board, its committees or, if a Chairman other than the Chief Executive Officer
is elected by the Board, the Chairman. The Chief Executive Officer shall be a
member ex-officio, with power to vote on all matters, of all committees of the
Board, except the Audit Committee and the Compensation Committee.
Section 5. President. The President shall be the Chief Executive
Officer the President of the Corporation, as determined by the Board, and shall
be subject to the direction of the Board. The President shall perform such
duties as from time to time may be assigned to him by these Bylaws, the Board,
or, if elected by the Board, the Chairman. The President shall be a member
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ex-officio, with power to vote on all matters, of all committees of the Board,
except the Audit Committee and the Compensation Committee.
In the absence of or disability of the Chairman, or if the office of
the Chairman is vacant by reason of death, resignation, failure of the Board to
elect a Chairman or otherwise, the President or such other person who the Board
shall designate, shall exercise the powers and perform the duties which
otherwise would fall upon the Chairman. The President shall have the general
supervision and direction of all of the Corporation's operations and personnel,
subject to and consistent with policies enunciated by the Board. The President
shall, under authority given to him or her, sign instruments in the name of the
Corporation.
Section 6. Vice Presidents. Executive Vice Presidents, Senior Vice
Presidents and Vice Presidents may be appointed by the Board to perform such
duties as may be prescribed by these Bylaws, the Board or the Chief Executive
Officer as permitted by the Board.
Section 7. Secretary. The Secretary shall attend all meetings of the
Board and of the shareholders and shall record, or cause to be recorded, all
votes and minutes of all proceedings of the Board and of the shareholders in a
book or books to be kept for that purpose. The Secretary shall perform such
executive and administrative duties as may be assigned by the Board or the
President. The Secretary shall have charge of the seal of the Corporation, shall
submit such reports and statements as may be required by law or by the Board,
shall conduct all correspondence relating to the Board and its proceedings and
shall have such other powers and duties as are generally incident to the office
of Secretary and as may be assigned to him or her by the Board or the Chief
Executive Officer.
Section 8. Treasurer. The Treasurer shall be the chief accounting
officer of the Corporation and shall be responsible for the maintenance of
adequate systems and records. The Treasurer shall also be the chief financial
officer of the Corporation and shall keep a record of all assets, liabilities,
receipts, disbursements and other financial transactions and shall see that all
expenditures are made in accordance with procedures duly established from time
to time by the Board. The Treasurer shall make such reports as may be required
by the Board or as are required by law.
Section 9. Other Officers. Other officers appointed by the Board
shall have such authority and shall perform such duties as may be assigned to
them, from time to time, by the Board or the Chief Executive Officer.
Section 10. Compensation of Officers. The compensation of all officers
shall be fixed from time to time by the Board, upon the recommendation of the
Compensation Committee.
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ARTICLE VII
DIVIDENDS
The Board shall have the power, subject to the provisions of law and
the requirements of the Certificate of Incorporation, to declare and pay
dividends out of surplus (or, if no surplus exists, out of net profits of the
Corporation, for the fiscal year in which the dividend is declared and/or the
preceding fiscal year, except where there is an impairment of capital stock), to
pay such dividends to the shareholders in cash, in property or in shares of the
capital stock of the Corporation and to fix the date or dates for the payment of
such dividends.
ARTICLE VIII
AMENDMENTS
These Bylaws, except as provided by applicable law or the Certificate
of Incorporation, or as otherwise set forth in these Bylaws, may be amended or
repealed at any regular or special meeting of the entire Board by the vote of
two-thirds of the members of the entire Board; provided, however, that (a) a
notice specifying the change or amendment shall have been given at a previous
regular meeting and entered in the minutes of the Board; (b) a written statement
describing the change or amendment shall be made in the notice delivered to the
directors of the meeting at which the change or amendment shall be acted upon;
and (c) any Bylaw made by the Board may be altered, amended, rescinded or
repealed by the holders of shares of capital stock entitled to vote thereon at
any annual meeting or at any special meeting called for that purpose in
accordance with the percentage requirements set forth in the Certificate of
Incorporation and/or these Bylaws. Notwithstanding the foregoing, any provision
of these Bylaws that contains a supermajority voting requirement shall only be
altered, amended, rescinded or repealed by a vote of the Board or holders of
capital stock entitled to vote thereon that is not less than the supermajority
specified in such provision.
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<PAGE>
Exhibit 3.3
================================================================================
RESTATED ORGANIZATION CERTIFICATE
OF
THE ROME SAVINGS BANK
UNDER SECTION 8007 OF THE BANKING LAW
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
NAME....................................................... 1
ARTICLE II
PRINCIPAL OFFICE................................................ 1
ARTICLE III
CAPITAL STOCK
Section 1. Shares, Classes and Series Authorized........................................... 2
Section 2. Designations, Powers, Preferences, Rights, Qualifications,
Limitations and Restrictions Relating to the Capital Stock................... 2
ARTICLE IV
LIMITATION ON BENEFICIAL OWNERSHIP OF STOCK
Section 1. Prohibitions Relating to Beneficial Ownership of Voting Stock................... 4
Section 2. Excess Shares................................................................... 4
Section 3. Powers of the Board............................................................. 6
Section 4. Severability.................................................................... 6
Section 5. Exclusions...................................................................... 7
ARTICLE V
BOARD OF DIRECTORS
Section 1. Number of Directors............................................................. 7
Section 2. Classification of Board......................................................... 7
Section 3. Vacancies....................................................................... 8
Section 4. Removal of Directors............................................................ 8
Section 5. Evaluation of Acquisition Proposals............................................. 8
</TABLE>
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<PAGE>
<TABLE>
ARTICLE VI
<S> <C>
ACTION BY SHAREHOLDERS BY WRITTEN CONSENT................................. 9
ARTICLE VII
CERTAIN BUSINESS COMBINATIONS
Section 1. Higher Vote Required for Certain Business Combinations....................... 9
Section 2. When Higher Vote is Not Required............................................. 9
Section 3. Definitions.................................................................. 12
Section 4. Powers of the Disinterested Directors........................................ 16
Section 5. Effect on Fiduciary Obligations of Interested Shareholders................... 16
Section 6. Amendment, Repeal, Etc....................................................... 16
ARTICLE VIII
INDEMNIFICATION
Section 1. Right to Indemnification..................................................... 17
Section 2. Accrual of Right to Indemnification.......................................... 17
Section 3. Individual Indemnification Agreements........................................ 17
Section 4. Insurance.................................................................... 18
Section 5. Subsequent Amendment and Subsequent Legislation.............................. 18
ARTICLE IX
AMENDMENTS
Section 1. Amendments of Restated Organization Certificate.............................. 18
Section 2. Amendments of By-Laws........................................................ 19
</TABLE>
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<PAGE>
RESTATED ORGANIZATION CERTIFICATE
OF
THE ROME SAVINGS BANK
UNDER SECTION 8007 OF THE BANKING LAW
WE, CHARLES M. SPROCK and MARION C. SCOVILLE, being the President and
Chief Executive Officer and the Corporate Secretary, respectively, of The Rome
Savings Bank (the "Corporation"), in accordance with Section 8007 of the Banking
Law of the State of New York (the "Banking Law"), do hereby certify as follows:
FIRST, The name of the Corporation is THE ROME SAVINGS BANK.
SECOND, The Corporation was created under the name "The Rome Savings
Bank" by an Act of the Legislature of the State of New York, passed June 30,
1851, such Act having been amended and supplemented from time to time
thereafter. Under Section 1001(5) of the Banking Law, such Act is the
Organization Certificate of the Corporation.
THIRD, The text of the Organization Certificate of the Corporation is
hereby amended and restated in its entirety to read as follows:
ARTICLE I
NAME AND DURATION
-----------------
Section 1. Name. The name by which the Corporation is to be known is
THE ROME SAVINGS BANK.
Section 2. Duration. The duration of the Bank is perpetual.
ARTICLE II
PRINCIPAL OFFICE
----------------
The principal office of the Corporation is to be located at 100 W.
Dominick Street, in the City of Rome, County of Oneida, State of New York.
<PAGE>
ARTICLE III
CAPITAL STOCK
-------------
Section 1. Shares, Classes and Series Authorized. The total number
of shares of all classes of capital stock that the Corporation shall have
authority to issue is one million two hundred thousand (1,200,000) shares, of
which two hundred thousand (200,000) shares shall be preferred stock, par value
one cent ($.01) per share (the "Preferred Stock"), and one million (1,000,000)
shares shall be common stock, par value one cent ($.01) per share (the "Common
Stock"). The Preferred Stock and Common Stock are sometimes hereinafter
collectively referred to as the "Capital Stock."
Section 2. Designations, Powers, Preferences, Rights,
Qualifications, Limitations and Restrictions Relating to the Capital Stock. The
following is a statement of the designations, powers, preferences and rights in
respect of the classes of the Capital Stock, and the qualifications, limitations
or restrictions thereof, and of the authority with respect thereto expressly
vested in the Board of Directors of the Corporation (the "Board"):
(a) Preferred Stock. The Preferred Stock may be issued from time to
---------------
time in one or more series, the number of shares and any designation of each
series and the powers, preferences and rights of the shares of each series, and
the qualifications, limitations or restrictions thereof, to be as stated and
expressed in a resolution or resolutions providing for the issue of such series
adopted by the Board, subject to the limitations prescribed by law. The Board
in any such resolution or resolutions is expressly authorized to state for each
such series:
(i) the voting powers, if any, of the holders of shares of
such series in addition to any voting rights affirmatively required by law;
(ii) the rights of shareholders in respect of dividends,
including, without limitation, the rate or rates per annum and the time or
times at which (or the formula or other method pursuant to which such rates
and such time or times may be determined) and conditions upon which the
holders of shares of such series shall be entitled to receive dividends and
other distributions, and whether any such dividends shall be cumulative or
non-cumulative and, if cumulative, the terms upon which such dividends
shall be cumulative;
(iii) whether the shares of each such series shall be redeemable
by the Corporation at the option of the Corporation or the holder thereof,
and, if redeemable, the terms upon which the shares of such series may be
redeemed;
(iv) the amount payable and the rights or preferences to which
the holders of shares of such series shall be entitled upon any voluntary
or involuntary liquidation, dissolution or winding up of the Corporation;
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<PAGE>
(v) the terms, if any, upon which shares of such series shall
be convertible into, or exchangeable for, shares of any other class or
classes or of any other series of the same or any other class or classes,
including the price or prices or the rate or rates of conversion or
exchange and the terms of adjustment, if any; and
(vi) any other powers, designations, preferences, and relative,
participating, optional or other special rights, and qualifications,
limitations or restrictions thereof, so far as they are not inconsistent
with the provisions of this Restated Organization Certificate and to the
full extent now or hereafter permitted by the laws of the State of New
York.
All shares of the Preferred Stock of any one series shall be identical
to each other in all respects, except that shares of any one series issued at
different times may differ as to the dates from which dividends thereon, if
cumulative, shall be cumulative.
Subject to any limitations or restrictions stated in the resolution or
resolutions of the Board originally fixing the number of shares constituting a
series, the Board may by resolution or resolutions likewise adopted increase
(but not above the total number of authorized shares of that class) or decrease
(but not below the number of shares of the series then outstanding) the number
of shares of the series subsequent to the issue of shares of that series; and in
case the number of shares of any series shall be so decreased, the shares
constituting the decrease shall resume that status that they had prior to the
adoption of the resolution originally fixing the number of shares constituting
such series.
(b) Common Stock. Subject to Article IV hereof, the shares of
------------
Common Stock shall entitle the holders thereof to one vote for each share on all
matters upon which shareholders have the right to vote. The holders of shares of
Common Stock shall not be permitted to cumulate their votes for the election of
directors. Notwithstanding the foregoing, except as otherwise required by law,
holders of Common Stock, as such, shall not be entitled to vote on any amendment
to this Restated Organization Certificate (including any Certificate of
Designations relating to any series of Preferred Stock) that relates solely to
the terms of one or more outstanding series of Preferred Stock if the holders of
such affected series are entitled, either separately or together with the
holders of one or more other such series, to vote thereon pursuant to this
Restated Organization Certificate (including any Certificate of Designations
relating to any series of Preferred Stock) or pursuant to the laws of the State
of New York.
Subject to the preferences, privileges and powers with respect to
each class of Capital Stock of the Corporation having any priority over the
Common Stock, and the qualifications, limitations or restrictions thereof, the
holders of the Common Stock shall have and possess all rights pertaining to the
Capital Stock.
No holder of shares of Common Stock shall be entitled as such, as
a matter of preemptive right, to subscribe for, purchase or otherwise acquire
any part of any new or additional issue of shares of any class or series
whatsoever of the Corporation, or of securities convertible into shares of any
class or series whatsoever of the Corporation, or of any warrants or other
instruments evidencing rights or options to subscribe for, purchase or otherwise
acquire such shares or securities,
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<PAGE>
whether now or hereafter authorized or whether issued for cash or other
consideration or by way of dividend.
ARTICLE IV
LIMITATION ON BENEFICIAL OWNERSHIP OF STOCK
-------------------------------------------
Section 1. Prohibitions Relating to Beneficial Ownership of Voting
Stock. No Person, for a period of not less than three years following the date
of filing by the Superintendent of Banks of the State of New York (the
"Superintendent") of this Restated Organization Certificate, shall directly or
indirectly acquire or hold the beneficial ownership of more than ten percent
(10%) of the issued and outstanding Voting Stock of the Corporation. Any Person
so prohibited who directly or indirectly acquires or holds the beneficial
ownership of more than ten percent (10%) of the issued and outstanding Voting
Stock in violation of this Section 1 shall be subject to the provisions of
Sections 2 and 3 of this Article IV, below. All terms used in this Article IV
and not otherwise defined herein shall have the meanings ascribed to such terms
in Section 3 of Article VII, below, except that the term "Person" shall not
include the Rome, MHC (the "MHC"), the Corporation, any subsidiary of the
Corporation or any pension, profit-sharing, stock bonus or other compensation
plan maintained by the Corporation or by a member of a controlled group of
corporations or trades or businesses of which the Corporation is a member for
the benefit of the employees of the Corporation, and/or any subsidiary, or any
trust or custodial arrangement established in connection with any such plan.
Section 2. Excess Shares. The transfer of any shares of Voting Stock
that would result in a violation of Section 1 of this Article IV is prohibited
and shall be null and void. If, notwithstanding the foregoing prohibition, a
Person shall, voluntarily or involuntarily, become or attempt to become the
purported beneficial owner (the "Purported Owner") of shares of Voting Stock in
excess of ten percent (10%) of the issued and outstanding shares of Voting
Stock, the number of shares in excess of ten percent (10%) shall be deemed to be
"Excess Shares," and all of the following provisions (a) through (g) shall apply
to such Excess Shares:
(a) The Purported Owner shall not obtain any rights in and to the
Excess Shares, and the purported transfer of the Excess Shares to the Purported
Owner shall not be recognized by the transfer agent for such shares (the
"Transfer Agent"). Until such time as the Excess Shares are transferred to a
person whose acquisition thereof will not violate the limitation set forth in
Section 1 of this Article IV (a "Permitted Transferee"), the transferor of the
Excess Shares to the Purported Owner (the "Purported Owner's Transferor") shall
be deemed to have retained the Excess Shares and shall hold and be entitled to
exercise all rights incident to ownership of such Excess Shares. All Excess
Shares will continue to be issued and outstanding.
(b) If the Transfer Agent obtains possession of a certificate or
certificates representing Excess Shares, the Transfer Agent shall deliver such
certificate or certificates to a trustee nominated and appointed by the Board to
hold Excess Shares (the "Share Trustee"). Upon receipt of notice from the
Corporation of the existence of Excess Shares and the identity of the
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<PAGE>
Purported Owner of such Excess Shares, the Share Trustee shall take all lawful
action to cause the Purported Owner to deliver or cause delivery of the Excess
Shares and any indicia of ownership thereof to the Share Trustee. Upon obtaining
possession of such Excess Shares, the Share Trustee shall sell or cause the sale
of the Excess Shares to a Permitted Transferee in the then existing public
market or in such other commercially reasonable fashion as the Corporation shall
direct. In performing the duties herein imposed upon it, the Share Trustee shall
act at all times as the agent for the Purported Owner's Transferor.
(c) Upon acquisition of the Excess Shares by a Permitted Transferee,
the Permitted Transferee shall have and be entitled to exercise all rights
incident to the ownership of such Excess Shares.
(d) The proceeds realized from the sale of the Excess Shares to the
Permitted Transferee (the "Proceeds") shall be distributed as follows: (i)
first, to the Share Trustee for any costs incurred in respect of its
administration of the Excess Shares, (ii) second, to the Purported Owner, if
known, in an amount up to the amount paid by the Purported Owner, if
determinable, for the Excess Shares and (iii) the remaining Proceeds, if any,
shall be distributed to the Purported Owner's Transferor, if known, and, if the
Purported Owner's Transferor is not known, such remaining Proceeds shall be held
by the Corporation for the benefit of the Purported Owner's Transferor or such
other persons or entities, as their interests may appear. Notwithstanding
anything in this Article IV to the contrary, the Corporation shall at all times
be entitled to make application to any court of competent jurisdiction within
the State of New York for an adjudication of the respective rights and interests
of any Person in and to the Proceeds pursuant to this Article IV and applicable
law and for leave to pay the Proceeds into such court.
(e) Immediately upon the purported acquisition of any Excess Shares,
the Purported Owner thereof shall give, or cause to be given, written notice of
such acquisition to the Corporation. In addition, at the request of the
Corporation, each owner of shares of Voting Stock shall furnish to the
Corporation all information reasonably requested with respect to all shares of
Voting Stock directly and indirectly owned by such Person.
(f) Upon a determination by the Board that a Person has attempted or
may attempt to transfer or to acquire Excess Shares, the Board may take such
action as it deems advisable to refuse to give effect to such transfer or
acquisition on the books and records of the Corporation, including, without
limitation, any such action that shall cause the Transfer Agent to record the
Purported Owner's Transferor as the record owner of the Excess Shares, and to
institute proceedings to enjoin or rescind any such transfer or acquisition.
(g) The restrictions set forth in this Article IV shall be noted
conspicuously on all certificates evidencing ownership of shares of Voting
Stock.
-5-
<PAGE>
Section 3. Powers of the Board.
(a) The Board may, to the extent permitted by law, from time to time
establish, modify, amend or rescind, by By-Law or otherwise, regulations and
procedures not inconsistent with the express provisions of this Article IV for
the orderly application, administration and implementation of the provisions of
this Article IV. Such procedures and regulations shall be kept on file with the
Secretary of the Corporation and with the Transfer Agent, shall be made
available for inspection by the public and, upon request, shall be mailed to any
holder of shares of Voting Stock.
(b) When it appears that a particular Person has become a Purported
Owner of Excess Shares in violation of Section 1 of this Article IV and that the
provisions of this Article IV, or any of the rules and regulations of the Board
with respect to this Article IV, require application, interpretation or
construction, then a majority of the directors of the Corporation shall have the
power and duty to interpret all of the terms and provisions of this Article IV
and to determine on the basis of information known to them after reasonable
inquiry all facts necessary to ascertain compliance with this Article IV,
including, without limitation, (i) the number of shares of Voting Stock
beneficially owned by any Person or Purported Owner, (ii) whether a Person or
Purported Owner is an Affiliate or Associate of, or is acting in concert with,
any other Person or Purported Owner, (iii) whether a Person or Purported Owner
has an agreement, arrangement or understanding with any other Person or
Purported Owner as to the voting or disposition of any shares of Voting Stock,
(iv) the application of any other definition or operative provision of this
Article IV to the given facts or (v) any other matter relating to the
applicability or effect of this Article IV.
The Board shall have the right to demand that any Person who is
reasonably believed to be a Purported Owner of Excess Shares (or who holds of
record Voting Stock beneficially owned by any Person reasonably believed to be a
Purported Owner) supply the Corporation with complete information as to (i) the
record owner(s) of all shares of Voting Stock beneficially owned by such Person
or Purported Owner and (ii) any other factual matter relating to the
applicability or effect of this Article IV as may reasonably be requested of
such Person or Purported Owner.
Any applications, interpretations, constructions or any other
determinations made by the Board pursuant to this Article IV, in good faith and
on the basis of such information and assistance as was then reasonably available
for such purpose, shall be conclusive and binding upon the Corporation and its
shareholders and neither the Corporation nor any of its shareholders shall have
the right to challenge any such application, interpretation, construction or
determination.
Section 4. Severability. In the event any provision (or portion
thereof) of this Article IV shall be found to be invalid, prohibited or
unenforceable for any reason, the remaining provisions (or portions thereof) of
this Article IV shall remain in full force and effect, and shall be construed as
if such invalid, prohibited or unenforceable provision had been stricken
herefrom or otherwise rendered inapplicable, it being the intent of this
Corporation and its shareholders that each such remaining provision (or portion
thereof) of this Article IV remain, to the fullest extent permitted by law,
applicable and enforceable as to all shareholders, including Purported Owners,
if any, notwithstanding any such finding.
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<PAGE>
Section 5. Exclusions. This Article IV shall not apply to (a) any
offer or sale with a view towards public resale made exclusively by the
Corporation to any underwriter or underwriters acting on behalf of the
Corporation, or to the selling group acting on such underwriter's or
underwriters' behalf, in connection with a public offering of the Common Stock;
(b) any corporation formed by the Corporation in connection with its conversion
from mutual to stock form to acquire all of the shares of capital stock of the
Corporation to be issued in connection with such conversion; or (c) any
reclassification of securities (including any reverse stock split), or
recapitalization of the Corporation, or any merger or consolidation of the
Corporation with any of its Subsidiaries or any other transaction or
reorganization (including a transaction in which the Corporation shall form a
holding company) that does not have the effect, directly or indirectly, of
changing the beneficial ownership interests of the Corporation's shareholders,
other than pursuant to the exercise of any appraisal rights, except as a result
of immaterial changes due to fractional share adjustments, which changes do not
exceed, in the aggregate, one percent (1%) of the issued and outstanding shares
of such class of equity or convertible securities.
ARTICLE V
BOARD OF DIRECTORS
------------------
Section 1. Number of Directors. The number of directors of the
Corporation shall not be less than seven (7) nor more than twenty (20). Within
such limitations, the number of directors shall be determined by the By-Laws of
the Corporation or by resolution of the Board.
Section 2. Classification of Board. Subject to the rights of any
holders of shares of any series of Preferred Stock that may be issued by the
Corporation pursuant to a resolution or resolutions of the Board providing for
such issuance, the directors of the Corporation shall be divided into three
classes with respect to term of office, each class to contain, as near as may be
possible, one-third of the entire number of the Board, with the terms of office
of one class expiring each successive year. At each annual meeting of
shareholders, the successors to the class of directors whose term expires at
that time shall be elected by the shareholders to serve until the annual meeting
of shareholders held three years next following and until their successors shall
be elected and qualified.
In the event of any intervening changes in the authorized number of
directors, the Board shall designate the class or classes to which the increase
or decrease in directorships shall be apportioned and may designate one or more
directorships as directorships of another class in order to achieve, as near as
may be possible, equality of number of directors among the classes; provided,
however, that no such apportionment or redesignation shall shorten the term of
any incumbent director.
Unless and to the extent that the By-Laws so provide, elections of
directors need not be by written ballot.
Section 3. Vacancies. Subject to the limitations prescribed by law,
the By-Laws and this Restated Organization Certificate, all vacancies in the
office of director, including vacancies
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<PAGE>
created by newly created directorships resulting from an increase in the number
of directors, shall be filled by the shareholders, except that vacancies not
exceeding one-third of the entire Board may be filled by the affirmative vote of
a majority of the directors then in office. No person shall be elected a
director unless nominated at a previous regular or special meeting, called for
that purpose, upon the recommendation of the Board, or a committee appointed by
the Board. Any director so elected shall serve for the remainder of the full
term of the class of directors in which the new directorship was created or the
vacancy occurred and until his successor shall be elected and qualified.
Section 4. Removal of Directors. Any or all of the directors may be
removed at any time, but only for cause, and any such removal shall require the
vote, in addition to any vote required by law, of not less than eighty percent
(80%) of the total votes eligible to be cast by the holders of all outstanding
shares of Capital Stock entitled to vote generally in the election of directors
at a meeting of shareholders expressly called for that purpose. For purposes of
this Section 4, conduct worthy of removal for "cause" shall mean (a) conduct as
a director of the Corporation or any subsidiary of the Corporation that involves
willful material misconduct, breach of fiduciary duty involving personal
pecuniary gain or gross negligence in the performance of duties, or (b) conduct,
whether or not as a director of the Corporation or a subsidiary of the
Corporation, that involves dishonesty or breach of fiduciary duty and is
punishable by imprisonment for a term exceeding one year under state or federal
law.
Section 5. Evaluation of Acquisition Proposals. The Board, when
evaluating any offer to the Corporation or to the shareholders of the
Corporation from another party relating to a change or potential change in
control of the Corporation, including, without limitation, any offer to (a)
purchase for cash or exchange any securities or property for any outstanding
equity securities of the Corporation, (b) merge or consolidate the Corporation
with another corporation or (c) purchase or otherwise acquire all or
substantially all of the properties and assets of the Corporation, in connection
with the exercise of its judgment in determining what is in the best interest of
the Corporation and its shareholders, may give due consideration not only to the
price or other consideration being offered, but also to all other relevant
factors, including, without limitation, (1) both the long-term and the short-
term interests of the Corporation and its shareholders and (2) the effects that
the Corporation's actions may have in the short-term or in the long-term upon
any of the following: (i) the prospects for potential growth, development,
productivity and profitability of the Corporation; (ii) the Corporation's
current employees; (iii) the Corporation's retired employees and other
beneficiaries receiving or entitled to receive retirement, welfare or similar
benefits from or pursuant to any plan sponsored, or agreement entered into, by
the Corporation; (iv) the Corporation's customers and creditors; and (v) the
ability of the Corporation to provide, as a going concern, goods, services,
employment opportunities and employment benefits and otherwise to contribute to
the communities in which is does business.
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<PAGE>
ARTICLE VI
ACTION BY SHAREHOLDERS BY WRITTEN CONSENT
-----------------------------------------
Whenever shareholders of the Corporation are required or permitted to
take any action by vote at any annual or special meeting, such action may be
taken without a meeting upon written consent, setting forth the action so taken,
signed by the holders of all outstanding shares of Capital Stock entitled to
vote thereon.
ARTICLE VII
INDEMNIFICATION
---------------
Section 1. Right to Indemnification. The Corporation shall, to the
maximum extent authorized or permitted and in the manner provided by the Banking
Law and any applicable federal law, indemnify any person who is made, or
threatened to be made, a party to any action, suit or proceeding, whether civil,
criminal or administrative, by reason of the fact that such person, or such
person's testator or intestate, is or was a trustee, director or officer of the
Corporation or one of the Corporation's subsidiaries, or any predecessor of the
Corporation, or serves or served any other corporation, or any partnership,
association, joint venture, trust, employee benefit plan, conference or other
group or enterprise in any capacity at the request of the Corporation or one of
the Corporation's subsidiaries, or any predecessor of the Corporation, against
judgments, fines, amounts paid in settlement and reasonable expenses, including
attorneys' fees actually and reasonably incurred, and the Corporation shall
advance any related expense in full. Employees or agents of the Corporation may
be similarly indemnified. Such right of indemnification and advancement shall be
in addition to and not exclusive of any other rights or remedies to which such
person may be or become entitled under any statute, insurance policy, agreement,
by-law or otherwise.
Section 2. Accrual of Right to Indemnification. In addition to the
Corporation's obligation to indemnify under Section 1 of this Article VII, the
Corporation's obligation to indemnify, and any person's right to
indemnification, under this Article VII shall accrue as of the time of the
accrual of the cause of action asserted in the threatened or pending action,
suit, or proceeding, and no subsequent change in this Restated Organization
Certificate or the By-Laws of the Corporation shall have any effect on the
Corporation's obligation to indemnify or a person's right to indemnification.
The provisions of this Article VII shall be deemed to be a contract between the
Corporation and each director, trustee and officer of the Corporation who serves
in such capacity at any time while this Article VII is in effect, and any
subsequent change of this Article VII shall not affect the rights or obligations
then existing with respect to any state of facts then or theretofore existing as
it relates to any action or proceeding therefore or thereafter brought or
threatened based in whole or in part upon any such state of facts.
Section 3. Individual Indemnification Agreements. In addition to
the Corporation's obligation to indemnify under Sections 1 and 2 of this Article
VII, the Board may also,
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<PAGE>
to the maximum extent permitted by law, in its discretion, approve agreements
between the Corporation and one or more directors, officers or employees of the
Corporation under which the Corporation would indemnify such directors, officers
and employees in the event that any such person is made, or threatened to be
made, a party to any action or proceeding, whether civil, criminal or
administrative, by reason of the fact that such person is or was a trustee,
director, officer or employee of the Corporation or one of the Corporation's
subsidiaries, or any predecessor of the Corporation, or serves or served any
other corporation, or any partnership, association, joint venture, trust,
employee benefit plan, conference or other group or enterprise in any capacity
at the request of the Corporation or one of the Corporation's subsidiaries, or
any predecessor of the Corporation, against judgments, fines, amounts paid in
settlement and reasonable expenses, including attorneys' fees actually and
reasonably incurred.
Section 4. Insurance. The Corporation may, but shall not be
obliged to, purchase and maintain insurance on behalf of any person who is or
was a director, trustee or officer of the Corporation or is or was serving at
the request of the Corporation as a director, trustee or officer of another
corporation of any type or kind, domestic or foreign, against any liability
asserted against such person and incurred by such person in any such capacity,
or arising out of such person's status as such, whether or not the Corporation
would have the power to indemnify such person against such liability under the
provisions of this Article VII.
Section 5. Subsequent Amendment and Subsequent Legislation. Neither
the amendment, termination or repeal of this Article VII or of relevant
provisions of the Banking Law or any other applicable laws, nor the adoption of
any provision of this Restated Organization Certificate or the By-Laws of the
Corporation or of any statute inconsistent with this Article VII shall
eliminate, affect or diminish in any way the rights of any director, officer,
employee or agent of the Corporation to indemnification under the provisions of
this Article VII with respect to any action, suit or proceeding arising out of,
or relating to, any actions, transactions or facts occurring prior to the final
adoption of such amendment, termination or repeal.
If the Banking Law is amended to expand further the indemnification
permitted to directors, officers, employees or agents of the Corporation, then
the Corporation shall indemnify such persons to the fullest extent permitted by
the Banking Law as so amended.
ARTICLE VIII
AMENDMENTS
----------
Section 1. Amendments of Restated Organization Certificate. In
addition to any affirmative vote required by applicable law and any voting
rights granted to or held by holders of shares of Preferred Stock, any
alteration, amendment, repeal or rescission (collectively, any "Change") of any
provision of this Restated Organization Certificate must be approved by a
majority of the directors of the Corporation then in office and by the
affirmative vote of the holders of a majority (or such greater proportion as may
otherwise be required pursuant to any specific provision of this Restated
Organization Certificate) of the total votes eligible to be cast by the holders
of all
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<PAGE>
outstanding shares of Capital Stock entitled to vote thereon. Subject to
the foregoing, the Corporation reserves the right to amend this Restated
Organization Certificate from time to time in any and as many respects as may be
desired and as may be lawfully contained in an original organization certificate
filed at the time of making such amendment.
Except as may otherwise be provided in this Restated Organization
Certificate, the Corporation reserves the right at any time, and from time to
time, to amend, alter, change or repeal any provision contained in this Restated
Organization Certificate, and to add or insert herein any other provisions
authorized by the laws of the State of New York at the time in force, in the
manner now or hereafter prescribed by law, and all rights, preferences and
privileges of any nature conferred upon shareholders, directors or any other
persons whomsoever by and pursuant to this Restated Organization Certificate in
its present form or hereafter amended are granted subject to the rights reserved
in this Section 1.
Section 2. Amendments of By-Laws. The By-Laws of the Corporation,
except as provided by applicable law or this Restated Organization Certificate,
or as otherwise provided by the By-Laws, may be amended or repealed by the Board
or by vote of the shareholders entitled to vote in the election of directors;
provided, however, that no amendment to the By-Laws shall be made by the Board
unless notice of the proposed amendment shall have been given at the previous
meeting of the Board.
FOURTH, This amendment and restatement of the Organization Certificate
was authorized by a majority vote of the members of the Board of Trustees of the
Corporation.
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<PAGE>
IN WITNESS WHEREOF, we have made, signed and acknowledged this
certificate in duplicate, this ___th day of April, 1999.
______________________________
Charles M. Sprock
President and
Chief Executive Officer
______________________________
Marion C. Scoville
Corporate Secretary
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<PAGE>
STATE OF NEW YORK )
ss.:
COUNTY OF ONEIDA )
On the __th day of April, 1999, before me personally came CHARLES M.
SPROCK, to me known and known to me to be the individual described in and who
executed the foregoing instrument, and he duly acknowledged to me that he
executed the same.
_________________________
Notary Public
(Seal)
STATE OF NEW YORK )
ss.:
COUNTY OF ONEIDA )
On the __th day of April, 1999, before me personally came MARION C.
SCOVILLE, to me known and known to me to be the individual described in and who
executed the foregoing instrument, and she duly acknowledged to me that she
executed the same.
_________________________
Notary Public
(Seal)
<PAGE>
EXHIBIT 3.4
================================================================================
BYLAWS
OF
THE ROME SAVINGS BANK
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
ORGANIZATION................................ 1
------------
ARTICLE II
SHAREHOLDERS................................ 1
------------
Section 1. Annual Meetings................................................ 1
Section 2. Special Meetings............................................... 1
Section 3. Notice of Meetings............................................. 1
Section 4. Waiver of Notice............................................... 2
Section 5. Fixing of Record Date.......................................... 2
Section 6. Quorum......................................................... 2
Section 7. Conduct of Meetings............................................ 2
Section 8. Proxies........................................................ 3
Section 9. Voting; Voting of Shares in the Name of Two or More Persons.... 3
Section 10. Inspectors of Election......................................... 3
Section 11. Procedure for Nominations...................................... 4
Section 12. New Business................................................... 4
ARTICLE III
CAPITAL STOCK............................... 4
-------------
Section 1. Certificates of Stock.......................................... 4
Section 2. Transfer Agent and Registrar................................... 5
Section 3. Registration and Transfer of Shares............................ 5
Section 4. Lost, Destroyed and Mutilated Certificates..................... 5
Section 5. Holder of Record............................................... 6
ARTICLE IV
BOARD OF DIRECTORS............................. 6
------------------
Section 1. Responsibilities; Number of Directors.......................... 6
Section 2. Qualifications................................................. 6
Section 3. Mandatory Retirement........................................... 6
Section 4. Regular and Annual Meetings.................................... 6
</TABLE>
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<TABLE>
<S> <C>
Section 5. Special Meetings................................................ 6
Section 6. Conduct of Meetings............................................. 7
Section 7. Notice of Meetings; Waiver of Notice............................ 7
Section 8. Quorum and Voting Requirements.................................. 7
Section 9. Resignation..................................................... 7
Section 10. Removal......................................................... 8
Section 11. Vacancies....................................................... 8
Section 12. Compensation.................................................... 8
ARTICLE V
COMMITTEES.................................. 8
----------
Section 1. Standing Committees............................................. 8
Section 2. Executive Committee............................................. 9
Section 3. Audit Committee................................................. 9
Section 4. Compensation Committee.......................................... 10
Section 5. Other Committees................................................ 10
ARTICLE VI
OFFICERS................................... 11
--------
Section 1. Designation of Executive Officers............................... 11
Section 2. Term of Office and Removal...................................... 11
Section 3. Chairman of the Board........................................... 11
Section 4. Chief Executive Officer......................................... 11
Section 5. President....................................................... 12
Section 7. Vice Presidents................................................. 12
Section 8. Secretary....................................................... 12
Section 9. Treasurer....................................................... 12
Section 10. Other Officers.................................................. 13
Section 11. Compensation of Officers........................................ 13
ARTICLE VII
AMENDMENTS OF BYLAWS............................. 13
--------------------
</TABLE>
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<PAGE>
BYLAWS
OF
THE ROME SAVINGS BANK
ARTICLE I
ORGANIZATION
------------
This corporation shall be known as The Rome Savings Bank (the "Bank").
The principal office of the Bank shall be located in the State of New York, in
the County of Oneida, in the City of Rome. Subject to applicable banking laws
and any required approval of the Superintendent of Banks of the State of New
York (the "Superintendent"), the Bank may also have other offices at such other
places as the Board of Directors (the "Board") may from time to time designate
or the business of the Bank may require.
ARTICLE II
SHAREHOLDERS
------------
Section 1. Annual Meetings. The annual meeting of shareholders of the
Bank for the election of directors and the transaction of any other business as
may properly come before such meeting shall be held each year on a date to be
fixed by the Board, at such time and at such place in a city, town or village in
which any office of the Bank is located.
Section 2. Special Meetings. Special meetings of the shareholders,
for any purpose or purposes, may be called at any time by the Chairman, if one
has been elected by the Board, the Chief Executive Officer or by resolution of
at least three-fourths of the entire Board, and shall be called by the Chairman,
if one has been elected, the President or the Secretary of the Bank upon the
written request of the holders of three-fourths of all the outstanding capital
stock of the Bank entitled to vote at the meeting. Special meetings shall be
held at such time and at such place as may be designated by the Board. At a
special meeting, no business shall be transacted and no corporate action shall
be taken other than that stated in the notice of meeting.
Section 3. Notice of Meetings. Written notice stating the place, day
and hour of any meeting of shareholders and the purpose or purposes for which
the meeting is called shall be delivered to each shareholder of record entitled
to vote at such meeting, either personally or by mail, not less than 10 nor more
than 50 days before the date of such meeting. If mailed, such notice shall be
deemed to be delivered when deposited in the U.S. mail, with postage thereon
prepaid, addressed to the shareholder at his or her address as it appears on the
stock transfer books or records of the Bank as of the record date prescribed in
Section 5 of this Article II, or at such other address as the
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<PAGE>
shareholder shall have furnished in writing to the Secretary of the Bank. Notice
of any special meeting shall indicate that the notice is being issued by or at
the direction of the person or persons calling such meeting. When any meeting of
shareholders, either annual or special, is adjourned to another time or place,
no notice of the adjourned meeting need be given, other than an announcement at
the meeting at which such adjournment is taken giving the time and place to
which the meeting is adjourned. However, if, after adjournment, the Board fixes
a new record date for the adjourned meeting, notice of the adjourned meeting
shall be given to each shareholder of record on the new record date.
Section 4. Waiver of Notice. Notice of any annual or special meeting
need not be given to any shareholder who submits a signed waiver of notice, in
person or by proxy, whether before or after the meeting. The attendance of any
shareholder at a meeting, in person or by proxy, without protesting prior to the
conclusion of the meeting the lack of notice of such meeting, shall constitute a
waiver of notice by such shareholder.
Section 5. Fixing of Record Date. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or shareholders entitled to receive payment of any
dividend or the allotment of any rights, or in order to make a determination of
shareholders for any other proper purpose, the Board shall fix in advance a date
as the record date for any such determination of shareholders. Such date in any
case shall be not more than 50 days and, in the case of a meeting of
shareholders, not less than 10 days, prior to the date on which the particular
action requiring such determination of shareholders is to be taken. When a
determination of shareholders entitled to vote at any meeting of shareholders
has been made as provided in this Section 5, such determination shall, unless
otherwise provided by the Board, also apply to any adjournment thereof.
Section 6. Quorum. The holders of a majority of the shares of the
capital stock of the Bank issued and outstanding and entitled to vote thereat,
represented in person or by proxy, shall constitute a quorum at a meeting of
shareholders, except as otherwise provided by law, these Bylaws or the Restated
Organization Certificate of the Bank. If less than a majority of such shares are
represented at a meeting, a majority of the shares so represented may adjourn
the meeting from time to time without further notice. At such adjourned meeting
at which a quorum shall be represented, any business may be transacted that
might have been transacted at the meeting as originally noticed. When a quorum
is once present to organize a meeting, such quorum is not broken by the
subsequent withdrawal of any shareholders.
Section 7. Conduct of Meetings. The Chairman shall serve as chairman
at all meetings of the shareholders or, if a Chairman has not been elected by
the Board or the Chairman is absent or otherwise unable to so serve, the
President shall serve as chairman. If the President is absent or otherwise
unable to so serve, such other person as shall be appointed by a majority of the
entire Board shall serve as chairman at any meeting of shareholders held in such
absence. The Secretary of the Bank or, if the Secretary is absent or otherwise
unable to so serve, such other person as the chairman of the meeting shall
appoint, shall serve as secretary of the meeting. The chairman of the meeting
shall conduct all meetings of the shareholders in accordance with the best
interests of the Bank and shall have the authority and discretion to establish
reasonable procedural rules for
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<PAGE>
the conduct of such meetings, including such regulation of the manner of voting
and the conduct of discussion as he or she shall deem appropriate. The chairman
of the meeting shall also have the authority to adjourn the meeting from time to
time and from place to place as he or she may deem necessary and in the best
interests of the Bank.
Section 8. Proxies. Each shareholder entitled to vote at any meeting
may vote either in person or by proxy. All proxies shall be in writing, signed
by the shareholder or by his or her duly authorized attorney-in-fact, and shall
be filed with the Secretary of the Bank before being voted. No proxy shall be
valid after the expiration of 11 months from the date of its execution unless
otherwise provided in the proxy. The attendance at any meeting by a shareholder
who shall have previously given a proxy applicable thereto shall not, as such,
have the effect of revoking the proxy. The Bank may treat any duly executed
proxy as not revoked and in full force and effect until it receives a duly
executed instrument revoking it, or a duly executed proxy bearing a later date.
Section 9. Voting; Voting of Shares in the Name of Two or More
Persons. Except for the election of directors or as otherwise provided by law or
the Restated Organization Certificate of the Bank, at all meetings of
shareholders all matters shall be determined by a majority vote of the
shareholders present and entitled to vote thereat. Directors shall, except as
otherwise required by law or the Restated Organization Certificate of the Bank,
be elected by a plurality of the votes cast by the shareholders entitled to vote
in the election.
When ownership of shares stands in the name of two or more persons, in
the absence of written directions to the Bank to the contrary, at any meeting of
the shareholders of the Bank any one or more of such shareholders may cast, in
person or by proxy, all votes to which such ownership is entitled. If an attempt
is made to cast conflicting votes, in person or by proxy, by several persons in
whose names shares of stock stand, the vote or votes to which those persons are
entitled shall be cast as directed by a majority of those holding such stock and
present, in person or by proxy, at such meeting. If such conflicting votes are
evenly split on any particular matter, each faction may vote the securities in
question proportionally or any person voting the shares, or a beneficiary, if
any, may apply to the Supreme Court of New York or such other court as may have
jurisdiction to appoint an additional person to act with the persons so voting
the shares, which shall then be voted as determined by a majority of such
persons and the person appointed by the court.
Section 10. Inspectors of Election. In advance of any meeting of
shareholders, the Board may appoint one or more persons, other than officers,
directors or nominees for office, as inspectors of election to act at such
meeting or any adjournment thereof. Such appointment shall not be altered at the
meeting. If inspectors of election are not so appointed, the chairman of the
meeting may make such appointment at the meeting. In case any person appointed
as inspector fails to appear or fails or refuses to act, the vacancy may be
filled by appointment by the Board in advance of the meeting or at the meeting
by the chairman of the meeting. The duties of the inspectors of election shall
include: determining the number of shares outstanding and the voting power of
each share, the shares represented at the meeting, the existence of a quorum and
the validity and effect of proxies; receiving votes, ballots or consents;
hearing and deciding all challenges and questions arising in connection with the
right to vote; counting and tabulating all votes, ballots or consents;
determining the results; and doing such acts as are proper to the conduct of the
election or the vote
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<PAGE>
with fairness to all shareholders. On request of the person presiding at the
meeting or any shareholder entitled to vote thereat, the inspectors shall make a
report in writing of any challenge, question or matter determined by them and
execute a certificate of any fact found by them. Any report or certificate made
by them shall be prima facie evidence of the facts stated and of the vote as
certified by them. Each inspector shall be entitled to a reasonable compensation
for his or her services, to be paid by the Bank.
Section 11. Procedure for Nominations. The Board, or a committee
appointed by the Board, shall select the nominees for election as directors of
the Bank. Except in the case of a nominee substituted as a result of the death,
incapacity, withdrawal or other inability to serve of a nominee, the Board shall
deliver written nominations to the Secretary of the Bank at least 30 days prior
to the date of the annual meeting. Provided the Board, or a committee appointed
by the Board, makes such nominations, no nominations for directors except those
made by the Board or such committee shall be voted upon at the annual meeting of
shareholders unless other nominations by shareholders are made in accordance
with the provisions of this Section 11. Nominations of individuals for election
to the Board at an annual meeting of shareholders may be made by any shareholder
of the Bank entitled to vote for the election of directors at such meeting who
provides timely notice in writing to the Secretary of the Bank.
Section 12. New Business. Any new business to be taken up at the
annual meeting at the request of the Chairman, if one has been elected by the
Board, or the President shall be stated in writing and filed with the Secretary
of the Bank at least 15 days before the date of the annual meeting, and all
business so stated, proposed and filed shall be considered at the annual
meeting. Any proposal offered by any shareholder who is not a director or
executive officer of the Bank may be made at the annual meeting and the same may
be discussed and considered, but unless properly brought before the meeting such
proposal shall not be acted upon at the meeting. For a proposal to be properly
brought before an annual meeting by a shareholder, the shareholder must have
given timely notice thereof in writing to the Secretary of the Bank. This
provision shall not prevent the consideration and approval or disapproval at an
annual meeting of reports of officers, directors and committees of the Board or
the management of the Bank, but in connection with such reports, no new business
shall be acted upon at such annual meeting unless stated and filed as herein
provided. This provision shall not constitute a waiver of any right of the Bank
under the proxy rules of the Federal Deposit Insurance Corporation or any other
rule or regulation to omit a shareholder's proposal from the Bank's proxy
materials.
ARTICLE III
CAPITAL STOCK
-------------
Section 1. Certificates of Stock. Certificates evidencing ownership
of shares of stock of the Bank shall be in such form as shall be approved by the
Board, provided that each certificate shall, when issued, state upon the face
thereof (a) that the Bank is a corporation organized under the laws of the State
of New York; (b) the name of the person to whom the certificate is issued; (c)
the number of shares, class and series, if any, that the certificate represents;
and (d) the
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<PAGE>
par value of each share represented by the certificate; and further provided
that each certificate shall, when issued, state upon the back thereof the
existence of any supermajority voting provisions in the Restated Organization
Certificate of the Bank required to be noted on such certificate under Section
6016 of the Banking Law of the State of New York (the "Banking Law"). Each
certificate shall further state that the Bank will furnish to any shareholder
upon request and without charge a statement of the rights and preferences of the
shares of each class or series of stock, or shall set forth such statement on
the certificate itself. The certificates shall be numbered in the order of their
issue and shall be signed by the Chairman, if one has been elected, the
President and the Secretary or any Assistant Secretary, and the seal of the Bank
or a facsimile thereof shall be impressed, affixed or reproduced thereon. If the
certificates are signed by a Transfer Agent acting on behalf of the Bank, or are
registered by a Registrar, the signatures of the officers of the Bank may be
facsimile signatures. In case any officer or officers who shall have signed any
such certificate or certificates shall cease to be such officer or officers of
the Bank, whether because of death, resignation or otherwise, before such
certificate or certificates shall have been delivered by the Bank, such
certificate or certificates may nevertheless be adopted by the Bank and be
issued and delivered as though the person or persons who signed such certificate
or certificates have not ceased to be such officer or officers of the Bank.
Section 2. Transfer Agent and Registrar. The Board shall have the
power to appoint one or more Transfer Agents and Registrars for the transfer and
registration of certificates of stock of any class, and may require that stock
certificates shall be countersigned and registered by one or more of such
Transfer Agents and Registrars.
Section 3. Registration and Transfer of Shares. Subject to the
provisions of the Restated Organization Certificate of the Bank, the name of
each person owning a share of the capital stock of the Bank shall be entered on
the books of the Bank together with the number of shares held by him or her, the
numbers of the certificates covering such shares and the dates of issue of such
certificates. The shares of stock of the Bank shall be transferable on the books
of the Bank by the holders thereof in person, or by their duly authorized
attorneys or legal representatives, on surrender and cancellation of
certificates for a like number of shares, accompanied by an assignment or power
of transfer endorsed thereon or attached thereto, duly executed, with such
guarantee or proof of the authenticity of the signature as the Bank or its
agents may reasonably require and with proper evidence of payment of all
applicable transfer taxes. A record shall be made of each transfer.
Section 4. Lost, Destroyed and Mutilated Certificates. The holder of
any shares of stock of the Bank shall immediately notify the Bank of any loss,
theft, destruction or mutilation of the certificates therefor. The Bank may
issue, or cause to be issued, a new certificate of stock in the place of any
certificate theretofore issued by it alleged to have been lost, stolen or
destroyed upon evidence satisfactory to the Bank of the loss, theft or
destruction of the certificate, and, in the case of mutilation, the surrender of
the mutilated certificate. The Board may, in its discretion, require the owner
of the lost, stolen or destroyed certificate, or his or her legal
representatives, to give the Bank a bond, in such sum not exceeding double the
value of the stock and with such surety or sureties as they may require, to
indemnify it against any claim that may be
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<PAGE>
made against it by reason of the issue of such new certificate and against all
other liability in the premises, or may refer such owner to such remedy or
remedies as he or she may have under the laws of the State of New York.
Section 5. Holder of Record. The Bank shall be entitled to treat the
holder of record of any share or shares of stock as the holder thereof in fact
and shall not be bound to recognize any equitable or other claim to or interest
in such shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise expressly provided by law.
ARTICLE IV
BOARD OF DIRECTORS
------------------
Section 1. Responsibilities; Number of Directors. The business and
affairs of the Bank shall be under the direction of its Board. The Board shall
consist of not less than 7 nor more than 20 directors. Within the foregoing
limits, the number of directors shall be determined by resolution of the Board.
Section 2. Qualifications. Each director shall be at least 18 years
of age and at least one-half of the directors shall be citizens of the United
States at the time of their election and during their continuance in office.
Section 3. Mandatory Retirement. No director shall be qualified to
serve as such beyond the last day of the year in which he or she reaches his or
her seventy-fifth (75th) birthday. However, a director on attaining age 75,
shall be eligible for election as Director Emeritus.
Section 4. Regular and Annual Meetings. The Board shall hold regular
meetings on the fourth Wednesday of each month, except when such Wednesday is a
holiday or, if for any other reason the President should deem a change in the
meeting date advisable, the regular meeting shall be held on the business day
not more than one week before or after the regular meeting date. An annual
meeting of the Board for the election of officers shall be held, without notice
other than these Bylaws, immediately after, and at the same place as, the annual
meeting of the shareholders of the Bank, or at such other time or place within
25 days following the annual meeting of shareholders as the Board may fix by
resolution.
Section 5. Special Meetings. Special meetings of the Board may be
called at any time by or at the request of the Chairman or the President.
Special meetings of the Board shall also be convened by the Secretary upon the
written request of at least three or more directors. The persons authorized to
call special meetings of the Board shall give notice of such meetings in the
manner prescribed by these Bylaws and may fix any place, within or without the
Bank's regular business area, as the place for holding any special meeting of
the Board called by such persons. No business shall be conducted at a special
meeting other than that specified in the notice of meeting.
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<PAGE>
Section 6. Conduct of Meetings. Meetings of the Board shall be
presided over by the Chairman, if a Chairman has been elected by the Board, or
such other director or officer as the Chairman shall designate. If a Chairman
has not been elected by the Board or the Chairman is absent or otherwise unable
to preside over the meeting, the presiding officer shall be the President. If
the President is absent or otherwise unable to preside over the meeting, the
presiding officer shall be the then senior member of the Board in terms of
length of service on the Board. The Secretary, or in the absence or disability
of the Secretary, a person appointed by the Chairman (or other presiding
person), shall act as secretary of the meeting. The Chairman (or other presiding
person) shall conduct all meetings of the Board in accordance with the best
interests of the Bank and shall have the authority and discretion to establish
reasonable procedural rules for the conduct of Board meetings. Any one or more
directors may participate in a meeting of the Board or committee thereof by
means of a conference telephone or communications equipment allowing all persons
participating in the meeting to hear each other at the same time. Participation
by such means shall constitute presence in person at any such meeting.
Section 7. Notice of Meetings; Waiver of Notice. At least two days
notice of meetings shall be given to each director if given in person or by
telephone, telegraph, telex, facsimile, TWX or other electronic transmission,
and at least two business days notice of meetings shall be given if notice is
given in writing and delivered by courier or by postage-prepaid mail. The
purpose of any special meeting shall be stated in the notice. Such notice shall
be deemed given when sent or given to any such mail or courier service or
company providing electronic transmission service. Any director may waive notice
of any meeting by filing a signed waiver of notice with the Secretary of the
Bank, whether before or after the meeting. The attendance of a director at a
meeting shall constitute a waiver of notice of such meeting if the director does
not protest, prior thereto or at its commencement, the lack of notice to such
director.
Section 8. Quorum and Voting Requirements. A quorum at any meeting
of the Board shall consist of not less than a majority of the entire Board or
such greater number as shall be required by law, these Bylaws or the Restated
Organization Certificate of the Bank. In no case shall such number be less than
five; provided the Chairman, President, a Senior Vice President, or one of the
Vice Presidents be among the number. If less than a quorum is present, the
majority of those directors present may adjourn the meeting to another time and
place without further notice. At such adjourned meeting at which a quorum shall
be represented, any business may be transacted that might have been transacted
at the meeting as originally noticed. Except as otherwise provided by law, the
Restated Organization Certificate of the Bank or these Bylaws, a majority vote
of the directors present at a meeting, if a quorum is present at the time of
such vote, shall constitute an act of the Board.
Section 9. Resignation. Any director may resign at any time by
sending a written notice of such resignation to the principal office of the Bank
addressed to the Chairman, if one has been elected, or the President. Unless
otherwise specified therein, such resignation shall take effect upon receipt
thereof.
Section 10. Removal. Notwithstanding any other provision of the
Restated Organization Certificate of the Bank or these Bylaws, any director or
the entire Board of the Bank
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<PAGE>
may be removed at any time, but only for cause and only by the affirmative vote
of the holders of record of not less than 80% of the outstanding shares of
capital stock of the Bank entitled to vote generally in the election of
directors at a meeting of the shareholders called for that purpose. For purposes
of this Section 10, conduct worthy of removal for "cause" shall mean (a) conduct
as a director of the Bank or a subsidiary of the Bank that involves willful
material misconduct, breach of fiduciary duty involving personal pecuniary gain
or gross negligence in the performance of duties or (b) conduct, whether or not
as a director of the Bank or a subsidiary of the Bank, that involves dishonesty
or breach of fiduciary duty and is punishable by imprisonment for a term
exceeding one year under state or federal law.
Section 11. Vacancies. Subject to the limitations prescribed by law,
the Restated Organization Certificate of the Bank and these Bylaws, all
vacancies in the office of director, including vacancies created by newly
created directorships resulting from an increase in the number of directors,
shall be filled by the shareholders, except that vacancies not exceeding one-
third of the entire Board may be filled by the affirmative vote of a majority of
the directors then holding office. No person shall be elected a director unless
nominated at a previous regular or special meeting, called for that purpose,
upon the recommendation of the Board, or a committee appointed by the Board. Any
director so elected shall serve for the remainder of the full term of the class
of directors in which the new directorship was created or the vacancy occurred
and until his successor shall be elected and qualified.
Section 12. Compensation. The compensation of the directors of the
Bank shall be fixed by a majority vote of the Board at a regular meeting.
ARTICLE V
COMMITTEES
----------
Section 1. Standing Committees. At each annual meeting of the Board,
the directors shall designate from their own number, by resolution adopted by a
majority of the entire Board, the following committees:
(a) Executive Committee
(b) Audit Committee
(c) Compliance Committee
(d) Compensation Committee
(e) ALCO Committee
(f) Lending Committee
which shall be standing committees of the Board. The Chairman, if one has been
elected, shall be a member of, and the Chief Executive Officer and the President
shall be ex-officio members of, with power to vote on all matters, the Executive
Committee. The Board shall appoint a director to fill any vacancy on any
committee of the Board. The members of the committees shall serve at the
pleasure of the Board.
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<PAGE>
Section 2. Executive Committee. The Executive Committee shall consist
of five members, none of whom shall be an officer or salaried employee of the
Bank or its subsidiaries, and such ex-officio or other members as shall be
appointed by Board resolution or these Bylaws. The membership of the Executive
Committee shall consist of the Chairman, if one has been elected, the President,
and four other members of the Board. If no Chairman has been elected, then one
additional member of the Board shall be appointed to the Executive Committee.
There shall also be elected at the annual meeting a first, second and third
alternate member of the Executive Committee, who shall act in the absence of
members of the Executive Committee upon the call of the Chairman, or, if no
Chairman has been elected, the President.
The Chairman shall serve as chairman of the Executive Committee or, if
no Chairman has been elected, the President shall serve as chairman of the
Executive Committee. In the absence of the chairman of the Executive Committee,
the committee shall designate from among its membership a person to preside at
any meeting held in such absence. The Executive Committee shall designate, from
its membership or otherwise, a secretary who shall report to the Board at its
next regular meeting all proceedings and actions taken by the Executive
Committee. The Executive Committee shall meet as necessary at the call of the
Chairman or, in the absence of the Chairman, at the call of a majority of the
members of the Executive Committee.
Three members of the Executive Committee shall constitute a quorum for
the transaction of business. The vote of a majority present at any meeting,
including the chairman of the committee, who shall be eligible to vote, shall
constitute the action of the Executive Committee.
The Executive Committee shall, to the extent not inconsistent with
applicable law or these Bylaws, exercise all the powers of the Board in the
intervals between the meetings of the Board. The Executive Committee shall
generally oversee the affairs of the Bank and shall exercise such other powers
not reserved by the Board or delegated to officers or to other committees. The
Executive Committee shall also consider proposals from management in relation to
the election of officers and shall make recommendations to the Board in relation
to those nominated to officer positions.
Section 3. Audit Committee. The Audit Committee shall consist of at
least four members, none of whom shall be an officer or salaried employee of the
Bank or its subsidiaries, an attorney who receives a fee or other compensation
for legal services rendered to the Bank or any other individual having a
relationship which, in the opinion of the Board, would interfere with the
exercise of independent judgement in carrying out the responsibilities of a
director. At any regular meeting of the Board, any director who is otherwise
eligible to serve on the Audit Committee may be elected to fill a vacancy that
has occurred on the Audit Committee. The Board shall designate one member of the
committee to serve as chairman of the committee. Three members of the Audit
Committee shall constitute a quorum for the transaction of business.
The Audit Committee shall meet annually at the call of the chairman of
the committee, at a date not less than six months after the prior examination
and may hold such additional meetings as the chairman of the committee may deem
necessary, to examine, or cause to
-9-
<PAGE>
be examined, the records and affairs of the Bank to determine its true financial
condition, and shall present a report of examination to the Board at the Board's
next regular meeting following the meeting of the Audit Committee and shall
present a copy thereof to the Superintendent, all in conformity with the
provisions of the Banking Law. The committee shall appoint, from its membership
or otherwise, a secretary who shall cause to be kept written minutes of all
meetings of the committee. The Audit Committee shall make, or cause to be made,
such other examinations (including any required by Section 254 of the Banking
Law) as it may deem advisable or whenever so directed by the Board and shall
report thereon in writing at a regular meeting of the Board. The Audit Committee
shall make recommendations to the Board in relation to the employment of
accountants and independent auditors and arrange for such other assistance as it
may deem necessary or desirable. The Audit Committee shall review and evaluate
the procedures and performance of the Bank's internal auditing staff.
Section 4. Compliance Committee. The Compliance Committee shall
consist of at least three (3) members of the Board of Directors. The Board shall
designate one member of the committee to serve as chairman of the Compliance
Committee, who shall have the authority to adopt and establish procedural rules
for the conduct of all meetings of the committee. The Compliance Committee will
meet at least quarterly to assess the condition of the Bank regarding all
compliance matters.
Section 5. Compensation Committee. The Compensation Committee shall
consist of at least three (3) members, none of whom shall be an officer or
salaried employee of the Bank or its subsidiaries, as shall be appointed by
Board resolution or these Bylaws. The Board shall designate one member of the
committee to serve as chairman of the Compensation Committee, who shall have the
authority to adopt and establish procedural rules for the conduct of all
meetings of the committee.
The Compensation Committee shall meet at least quarterly to assess the
structure of the management team and the overall performance of the Bank, and
may hold such additional meetings as the chairman may deem necessary. A quorum
shall consist of at least one-third of the voting members of the Compensation
Committee, and in no event less than two (2) voting members of the committee.
The vote of a majority of the voting members present at any meeting, including
the chairman of the committee who shall be eligible to vote, shall constitute
the action of the Compensation Committee. The committee shall appoint, from its
membership or otherwise, a secretary who shall cause to be kept written minutes
of all meetings of the committee.
The Compensation Committee shall be responsible for recommending to
the Board the compensation, employment arrangements and benefit programs for
officers of the Bank and its subsidiaries.
Section 6. ALCO Committee. The ALCO Committee shall consist of not
less than four members of the Board of Directors. The ALCO Committee will meet
monthly with the Treasurer to oversee the Bank's investments and asset liability
structure.
-10-
<PAGE>
Section 7. Lending Committee. The Lending Committee shall consist of
not less than three members of the Board of Directors. The Lending Committee
will meet monthly to review large commercial loan requests presented for
consideration. Loan approvals will be presented to the entire board on a monthly
basis.
Section 8. Other Committees. The Board may, by resolution adopted by
a majority of the entire Board at any meeting, authorize such other committees
as from time to time it may deem necessary or appropriate for the conduct of the
business of the Bank. The members of each committee so authorized shall be
appointed by the Board from members of the Board or employees of the Bank. Each
such committee shall exercise such powers as may be assigned by the Board to the
extent not inconsistent with these Bylaws or the Restated Organization
Certificate of the Bank. The Chairman, if one has been elected, and the
President shall be ex-officio members, with power to vote on all matters, of all
appointed committees.
ARTICLE VI
OFFICERS
--------
Section 1. Designation of Executive Officers. The Board shall, at
each annual meeting, elect a President, a Vice President, and Treasurer and a
Secretary. In addition, it may elect a Chairman, one or more Senior Vice
Presidents, an Auditor and one or more of Assistant Vice Presidents, Assistant
Treasurer and Assistant Secretaries. The Board shall also appoint one or more
attorneys, two or more appraisers and such other persons or officers as the
Board from time to time may deem necessary or the business of the Bank may
require. Of such officers, the Chairman, if any, and the President, shall be
directors and any Senior Vice President, and of the Vice Presidents, the
Treasurer or the Secretary may be Directors. Any number of offices may be held
by the same person except that no person may simultaneously hold the offices of
President and Secretary.
The election of all officers shall be made only by a vote of a
majority of the entire Board. If such election is not held at the meeting held
annually for the election of officers, such officers may be so elected at any
subsequent regular meeting or at a special meeting called for that purpose, in
the same manner above provided. Each person elected shall have such authority,
bear such title and perform such duties as provided in these Bylaws and as the
Board may prescribe from time to time. All officers elected or appointed by the
Board shall assume their duties immediately upon their election and shall hold
office at the pleasure of the Board. Whenever a vacancy occurs among the
officers, it may be filled at any regular or special meeting called for that
purpose, in the same manner as above provided.
Section 2. Term of Office and Removal. Each officer shall serve until
his or her successor is elected and duly qualified, the office is abolished or
he or she is removed. Any officer may be removed at any regular or special
meeting of the Board called for that purpose, with or without cause, by an
affirmative vote of a majority of the entire Board.
-11-
<PAGE>
Section 3. Chairman of the Board. The Chairman, if one has been
elected by the Board, shall preside at all meetings of the Board and perform all
the duties incident to such office and, in addition, shall perform such other
duties as the Board may assign to him or her. The Chairman shall also be
Chairman of the Executive Committee and an ex-officio officer of all committees
except the Audit Committee.
Section 4. Chief Executive Officer. The Chief Executive Officer of
the Bank, subject to the direction of the Board, shall be responsible for
assuring that the policy decisions of the Board are implemented as formulated.
The Chief Executive Officer shall be responsible, in consultation with such
officers and members of the Board as he deems appropriate, for planning the
growth of the Bank. The Chief Executive Officer shall be responsible for
shareholder relations, relations with investments bankers, other similar
financial institutions and financial advisors, and shall be empowered to
designate officers of the Bank and its subsidiaries to assist in such
activities. The Chief Executive Officer shall be principally responsible for
exploring opportunities for mergers, acquisitions and new business. The Chief
Executive Officer shall have the general supervision and direction of all of the
Bank's officers, subject to and consistent with policies enunciated by the
Board. The Chief Executive Officer shall under authority given to him, sign
instruments in the name of the Bank. The Chief Executive Officer shall have such
other powers as may be assigned to him by the Board, its committees or, if a
Chairman other than the Chief Executive Officer is elected by the Board, the
Chairman. The Chief Executive Officer shall be a member ex-officio, with power
to vote on all matters, of all committees of the Board, except the Audit
Committee and the Compensation Committee.
Section 5. President. The President shall be the Chief Executive
Officer of the Bank, as determined by the Board, and shall be subject to the
direction of the Board. The President shall perform such duties as from time to
time may be assigned to him by these Bylaws, the Board, or, if elected by the
Board, the Chairman. The President shall have the general supervision and
direction of all of the Bank's operations and personnel, subject to and
consistent with policies enunciated by the Board. The President shall, under
authority given to him, sign instruments in the name of the Bank. The President
shall be a member ex-officio, with power to vote on all matters, of all
committees of the Board, except the Audit Committee and the Compensation
Committee.
In the absence of or disability of the Chairman, or if the office of
the Chairman is vacant by reason of death, resignation, failure of the Board to
elect a Chairman or otherwise, the President or such other person who the Board
shall designate, shall exercise the powers and perform the duties which
otherwise would fall upon the Chairman.
Section 6. Vice Presidents. Senior Vice Presidents and Vice
Presidents may be appointed by the Board to perform such duties as may be
prescribed by these Bylaws, the Board or the Chief Executive Officer as
permitted by the Board. The Senior Vice Presidents shall perform all duties of
the President when so directed by the President or in the absence or inability
of the President to act, or on the direction of the Board. In the absence or
inability of the President or Senior Vice Presidents to act, one or more Vice
Presidents may be chosen to perform the duties of the President on the direction
of the Board.
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<PAGE>
Section 7. Corporate Secretary and Assistant to the President. It
shall be the duty of the Secretary to give notice of meetings of the Board. It
shall also be the Secretary's duty to keep the minutes of the proceedings of the
Board and of the Executive Committee. The Secretary shall have the
responsibility of filing and preserving all reports and documents which the Bank
is directed to file and preserve or which the Secretary shall be directed to
file. The Secretary shall have charge of the Bank's corporate seal and power to
affix such seal to documents and instruments executed on behalf of the Bank. The
Secretary shall have such other powers and duties as are generally incident to
the office of Secretary and as may be assigned to him or her by the Board, the
Executive Committee or by superior officers.
Section 9. Treasurer and Chief Financial Officer. The Treasurer,
under the direction of the President, shall:
(a) have immediate charge and management of the accounting and financial
affairs of the Bank;
(b) maintain records of all cash, stocks, bonds, other securities or other
property belonging to the Bank or deposited with the Bank;
(c) make all reports, records, statements and schedules required by law or
as may be requested by the Board or the Chairman; and
(d) perform such other administrative functions and executive duties as
may be assigned to him or her by the Board or the Chairman.
Section 10. Assistant Secretaries - Assistant Treasurers - Assistant
Vice Presidents.
(a) In the absence of the Secretary or Treasurer or a Vice President, the
powers and duties of such offices shall devolve upon the respective assistants,
as the President may prescribe.
(b) Each Assistant Secretary, Assistant Treasurer and Assistant Vice
President shall have such other powers and duties as shall be assigned to
him/her by the Board or by his/her superior officers.
Section 11. Business Development Officer. The Business Development
Officer will have the responsibility of developing new business by contacting
existing or potential customers to generate business loans and related personal
accounts with the bank.
Section 12. Auditor.
(a) The Auditor shall be accountable to the Board and shall make such
examination of the accounts records and transactions of the Bank as may be
required by the Board, and shall perform such other duties as are required in an
audit program approved by the Board.
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<PAGE>
(b) The Auditor shall be free to examine any department of Bank operation
without previous officer consultation.
(c) The Auditor shall maintain a summary record of dates of complete
audits, and shall make periodic comprehensive reports to the Board, which shall
include such suggestions and recommendations which the Auditor may consider it
advisable to make.
(d) In lieu of hiring an Auditor, the Board may hire and retain an outside
independent auditing firm to meet the requirements outlined above, if in
compliance with the requirements of the banking law.
Section 13. Compliance Officer. The Compliance Officer shall be
responsible for creating a compliance program and continually maintaining it;
implementing new regulations or changes to existing regulations; assisting in
updating and renewing Bank policies and procedures based upon regulatory
changes, internal audits, and examinations by regulatory agencies; establishing
and maintaining an ongoing program for training personnel; monitoring resolution
of consumer complaints; preparing for regulatory examinations and assuring an
adequate corrective action process exists.
Section 14. Administrative Assistant. The Board may appoint one or
more Administrative Assistants to serve under the direction of the Officers and
Assistant Officers defined above, with such duties and responsibilities as the
Board may direct.
Section 15. Other Officers. Other officers appointed by the Board
shall have such authority and shall perform such duties as may be assigned to
them, from time to time, by the Board or the Chief Executive Officer.
Section 16. Compensation of Officers. The compensation of all
officers shall be fixed from time to time by the Board, upon the recommendation
of the Compensation Committee. The salary of each officer for each calendar year
shall be fixed at the meeting of the Board held in December of the previous
year. No motion to change the salary of an officer of the Bank shall be voted
upon unless, at a previous regular or special meeting of the Board, notice of
the proposed change shall have been given.
ARTICLE VII
INDEMNIFICATION OF DIRECTORS, OFFICERS
--------------------------------------
AND EMPLOYEES
-------------
Section 1. Indemnification. The Bank shall indemnify any Director,
officer, former Director or former officer of the Bank, to the maximum extent
allowed by law, against judgments, fines, amounts paid in settlement and
reasonable attorneys' fees resulting from such person being made or threatened
to be made a party to any action or proceeding by reason of the fact that such
person was or is a Director or officer of the Bank, or served at the request of
the Bank in
-14-
<PAGE>
any capacity with any other corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise. The right to indemnification shall
continue to apply to the estate of a deceased Director or officer and his or her
executors and administrators. No indemnification may be made to or on behalf of
any Director or officer, unless expressly permitted by law or court order, if a
judgment or final adjudication adverse to the Director or officer establishes
that his or her acts were committed in bad faith or were the result of active
and deliberate dishonesty material to the cause of action so adjudicated, or
that he or she personally gained in fact a financial profit or other advantage
to which he or she was not legally entitled.
Section 2. Indemnification Rights are Non-exclusive. Such rights of
indemnification and reimbursement shall not be deemed exclusive of any other
rights to which such Director or officer may be entitled by law, agreement or
otherwise. Nothing contained in these Bylaws shall affect any right to
indemnification to which Bank employees other than Directors and officers may be
entitled by contract or otherwise under law.
ARTICLE VII
SURETY BONDS
------------
Bonds of recognized surety companies covering Directors, officers and
employees, shall be provided at the expense of the Bank as directed by the Board
of Directors or the Executive Committee.
ARTICLE VIII
CHECKS
------
All official checks for payment of any money shall be signed in such a
manner as is authorized by the Board of Directors.
ARTICLE X
DEPOSITS AND LOANS
------------------
Section 1. Assent to Bylaws and Rules and Regulations. The President
of the Bank, and the other officers of the Bank acting under his or her
direction, and the Board of Directors may from time to time adopt rules and
regulations governing the deposit accounts and loan programs offered by the
Bank. All such rules and regulations shall be submitted to the Board or the
Executive Committee for ratification but the failure to so submit rules and
regulations shall not render such rules or regulations void. Each depositor
shall be deemed to have assented to and shall be bound by the Bank's Bylaws and
Rules and regulations by virtue of making any deposit.
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<PAGE>
Section 2. Notice of Claims. A depositor must give the Bank written
notice of any claim against the Bank which is disclosed on or which could be
discovered based upon information contained in any account statement or
accompanying documents sent by the Bank to any customer. The written notice must
be received by the Bank within 30 days after the statement is received by the
depositor. If notice is not given as required, no claim may be made by the
depositor against the Bank regarding any matter so disclosed or any related
matter which could have been avoided if such notice had been given.
Section 3. Refusal of Deposits. The Board or any officer shall be at
liberty to refuse any deposit, limit the amount which may be deposited, return
all or part of any deposit, and close any account, except the Bank may not
return a deposit or close an account upon which the Bank has contracted to pay
interest at a fixed rate for a fixed period of time until such period of time
has expired.
Section 4. Lost Passbooks. If a depositor claims that a passbook is
lost, stolen, or destroyed, or that, because of other exceptional circumstances,
it cannot be produced without serious inconvenience to the depositor, written
notice thereof shall be given by the depositor to the Bank. Before issuing a
duplicate passbook, or making any payment on the account, the depositor must
present proof by affidavit of the loss of the original passbook, and of its
ownership satisfactory to the Bank. A waiting period may be imposed after
presentation of the affidavit before any payment is made or a replacement
passbook is issued. The Bank may also, in its discretion, require a bond of
indemnity satisfactory to the Bank, in an amount not to exceed double the total
balance of the account, and an agreement by the person to whom the duplicate
passbook is to be issued or the payment is to be made that such person will
indemnify and hold the Bank harmless for having issued such passbook or for
having made such payment.
Section 5. Withdrawals. Deposits and the interest accrued thereon may
be withdrawn personally or upon the written order of the depositor or by some
person legally authorized to act in depositor's behalf. Written orders signed by
the depositor requesting payment to himself or herself or to one or more other
persons may be honored by the Bank. Any payment made by the Bank to the
depositor in person or pursuant to any such written order shall discharge the
liability of the Bank to all persons to the extent of such payment. Interest on
passbook accounts may be paid by check payable to the order of the depositor
without presentation of a passbook if upon the written request of the depositor.
If expressly provided in the rules and regulations for any particular type of
deposit account, other than day of deposit / day of withdrawal accounts,
deposits withdrawn before the close of an interest period may be credited with
interest to the first day of the month in which such withdrawal is made.
Section 6. Assignments. No gift, assignment, or transfer of the whole
or any part of an account shall be binding upon the Bank unless all the
depositors on such account give the Bank at least fifteen (15) days advance
written notice thereof in such form as shall be satisfactory to the Bank and the
Bank agrees in writing to be bound by such gift, assignment or transfer. No such
gift, assignment or transfer shall affect in any way any claim or right of
offset that the Bank may have with respect to such account or any depositor
thereof.
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<PAGE>
Section 7. Notice to Depositors. All notices in relation to deposits
or depositors, amendments of these Bylaws, or amendments to the Rules and
Regulations of the Bank which are posted conspicuously in the offices of the
Bank shall be deemed to be actual notice to each depositor and, unless the
effectiveness is delayed as stated therein, they shall become effective
immediately upon posting. Any amendment to these Bylaws or to the Rules and
Regulations of the Bank shall be binding upon all depositors.
ARTICLE XI
MISCELLANEOUS
-------------
Section 1. Rules and Regulations. The Board may at any regular or
special meeting make rules and regulations for transacting, managing and
directing the affairs of the Bank with its customers and depositors and amend or
change the same by a majority vote of the Directors present.
Section 2. Signatures.
(a) Withdrawals of the Bank's funds from its depository banks or from The
Rome Savings Bank's in-house accounts, may be made on checks signed by any two
of the employees who may be specifically empowered to do so by resolution of the
Executive Committee.
(b) Ordinary payments for withdrawals may be made in currency by the
teller from the cash on hand in the Bank.
(c) All reports or other information required under the Banking Law, or
the Banking Department or any branch of the State or Federal Government, shall
be verified and signed by the President, a Senior Vice President, a Vice
President, the Treasurer, the Secretary, or any one of them.
Section 3. Mortgage Loans.
(a) No investment in any bond or mortgage shall be made except in
accordance with the Banking Law and subject to the regulations of the Banking
Department.
(b) In all cases of loans secured by a mortgage in real estate, the
mortgage loan office shall see that the bank at all times has a policy of
insurance covering the buildings thereon, issued by an insurance company
authorized by the Superintendent of Insurance to transact business in the State
of New York.
Section 4. Fidelity Bond. The Bank shall have in effect at all times
a fidelity bond covering its directors, officers, employees, attorneys and
agents, in an amount at least equal to the amount recommended for banks of its
size by the Insurance and Protective Committee of the American Bankers
Association, and in a form and with a company designated by the Board.
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<PAGE>
ARTICLE XII
DISASTER
--------
In the event there shall occur and be declared by appropriate
governmental authority a state of disaster which shall be of such severity as to
prevent the conduct and management of the affairs and business of the Bank by
its Board and officers as otherwise provided in these by laws, any two or more
available members of the then incumbent Executive Committee shall constitute a
quorum of that Committee for the full conduct and management of the affairs and
business of the Bank. If at such time there shall be no Executive Committee, or
if there shall not be two members of the then incumbent Executive Committee
available, then the majority of the Directors shall designate three Directors to
constitute the Executive Committee for the full conduct and management of the
affairs and business of the Bank and any two shall constitute a quorum of such
Committee. If, in any such emergency, any authorized place of business of this
Bank shall be unable to function because of the emergency, the business
ordinarily conducted at such location may be relocated elsewhere, in addition to
or in lieu of the locations theretofore authorized. Such relocation shall be as
designated by the Board, the Executive Committee or by such persons as are then,
in accordance with the resolutions adopted from time to time hereunder, dealing
with the conduct of the affairs of the Bank.
ARTICLE XIII
FISCAL YEAR; ANNUAL AUDIT
-------------------------
The fiscal year of the Bank shall end on the 31st day of December of
each year. The Bank shall be subject to an annual audit as of the end of its
fiscal year by independent public accountants appointed by and responsible to
the Board. The appointment of such accountants may be subject to annual
ratification by the shareholders.
ARTICLE XIV
DIVIDENDS
---------
Subject to the terms of the Bank's certificate of incorporation and
applicable law and regulation, the Board may, from time to time, declare, and
the Bank may pay, dividends on its outstanding shares of capital stock.
ARTICLE XV
CORPORATE SEAL
--------------
The Board shall have the power to adopt and alter the seal of the
Bank.
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<PAGE>
ARTICLE XVI
AMENDMENTS OF BYLAWS
--------------------
These Bylaws, except as provided by law or the Restated Organization
Certificate of the Bank, or as otherwise set forth in these Bylaws, may be
amended or repealed by the Board or by vote of the shareholders entitled to vote
in the election of directors; provided, however, that no amendment to these
Bylaws shall be made by the Board unless notice of the proposed amendment shall
have been given at the previous meeting of the Board. Notwithstanding the
foregoing, any provision of these Bylaws that contains a supermajority voting
requirement shall only be altered, amended, rescinded, or repealed by a vote of
the Board or the shareholders entitled to vote thereon that is not less than the
supermajority specified in such provision.
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<PAGE>
EXHIBIT 3.5
================================================================================
ORGANIZATION CERTIFICATE
OF
ROME, MHC
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 1. Corporate Title............................................... 1
Section 2. Principal and Registered Office............................... 1
Section 3. Duration...................................................... 1
Section 4. Purpose and Powers............................................ 1
Section 5. Capital....................................................... 1
Section 6. Incorporators................................................. 1
Section 7. Trustees...................................................... 2
Section 8. Limitation of Liability....................................... 2
Section 9. Conversion Transaction........................................ 2
Section 10. Indemnification............................................... 3
Section 11. Amendment..................................................... 5
</TABLE>
-i-
<PAGE>
ORGANIZATION CERTIFICATE
OF
ROME, MHC
Section 1. Corporate Title. The name of the mutual holding company hereby
chartered is ROME, MHC (the "MHC").
Section 2. Principal and Registered Office. The principal and registered
office of the MHC shall be located at 100 W. Dominick Street in the city of
Rome, Oneida County, New York.
Section 3. Duration. The duration of the MHC is perpetual.
Section 4. Purpose and Powers. The purpose of the MHC is to pursue any or
all of the lawful objectives of a New York chartered mutual holding company
chartered under Article VI-C of the New York Banking Law, and to exercise all of
the express, implied, and incidental powers conferred thereby and all acts
amendatory thereof and supplemental thereto, subject to the Constitution and the
laws of the State of New York as they are now in effect, or as they may
hereafter be amended, and subject to all lawful and applicable rules,
regulations, and orders of the New York State Banking Department (the "NYSBD").
Section 5. Capital. The MHC shall have no capital stock.
Section 6. Incorporators. The name, place of residence and citizenship of
each incorporator is set forth below:
<TABLE>
<CAPTION>
Full Name Residence Citizenship
- --------- --------- -----------
<S> <C> <C>
Charles M. Sprock 1843 North James Street New York/USA
Rome, NY 13440
Marion C. Scoville 10050 Florence Hill New York/USA
Camden, NY 13316
Richard H. McMahon 1905 North George Street New York/USA
Rome, NY 13340
T. Richard Leidig 1202 N. Madison Street New York/USA
Rome, NY 13440
Kirk B. Hinman 6402 Karlen Road New York/USA
Rome, NY 13440
</TABLE>
-1-
<PAGE>
<TABLE>
<CAPTION>
Full Name Residence Citizenship
- --------- --------- -----------
<S> <C> <C>
David C. Grow 1413 North George Street New York/USA
Rome, NY 13440
Michael J. Valentine 1109 North George Street New York/USA
Rome, NY 13440
Bruce R. Engelbert 8202 Pennystreet Road New York/USA
Rome, NY 13440-1436
David C. Nolan New York/USA
</TABLE>
Section 7. Trustees.
(a) The MHC shall be under the direction of a Board of Trustees (the
"Board"). The authorized number of trustees shall not be fewer than seven (7)
nor more than twenty (20), as fixed in the MHC's Bylaws.
(b) The trustees shall be divided into three classes. Subject to the
provisions of this Section, the members of each class shall be elected for a
term of three years and until their successors are elected and qualified. One
class shall be elected annually at the annual meeting of the Board. The term of
the first class shall expire at the first annual meeting of the Board; the term
of the second class shall expire at the second annual meeting of the Board; the
term of the third class shall expire at the third annual meeting of the Board.
At each subsequent annual meeting of the Board, trustees elected to succeed
those whose terms are expiring shall be elected for a term of office to expire
at the third succeeding annual meeting of the Board and when their respective
successors are elected and qualified. Trustees shall be elected by plurality
vote. The names and classes of such initial trustees are set forth below. The
business address of each initial trustee is 100 W. Dominick Street, Rome, New
York 13442.
Class One Class Two Class Three
- ------------------ ----------------- ------------------
Section 8. Conversion Transaction. The MHC may elect at any time to
convert to stock form in accordance with applicable law and regulation (a
"Conversion Transaction"). In a Conversion Transaction, the MHC would merge with
and into the Rome Savings Bank (the "Bank") or the Rome Community Bancorp, Inc.
(the "Holding Company") (at the discretion of the MHC), with the Bank or the
Holding Company as the resulting entity, and the depositors of the Bank will
receive the right to subscribe for a number of shares of common stock of the
stock holding company (the "Holding Company"), as determined by the formula set
forth in the following paragraphs. The
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<PAGE>
additional shares of common stock of the Holding Company issued in the
Conversion Transaction shall be sold at their aggregate pro forma market value.
In any Conversion Transaction, shareholders other than the MHC
("Minority Shareholders"), if any, will be entitled to maintain the same
percentage ownership in the Holding Company after the Conversion Transaction as
their ownership interest in the Holding Company immediately prior to the
Conversion Transaction (the "Minority Ownership Interest"), subject only to
adjustment (if required by federal or state law, regulations or regulation
policy) to reflect (i) the cumulative effect of the aggregate amount of the
dividends waived by the MHC, if any, and (ii) the market value of assets of the
MHC (other than common stock of the Holding Company).
The adjustment referred to in clause (i) above would require that the
Minority Ownership Interest be adjusted by multiplying the Minority Ownership
Interest by a fraction, the numerator of which is equal to the Holding Company's
shareholders' equity at the time of the Conversion Transaction less the
aggregate amount of dividends waived by the MHC, if any, and the denominator of
which is equal to the Holding Company's shareholders' equity at the time of the
Conversion Transaction.
The adjustment referred to in clause (ii) above would further adjust
the Minority Ownership Interest by multiplying it by a fraction, the numerator
of which is equal to the pro forma market value of the Holding Company less the
market value of the MHC's assets other than Holding Company stock, and the
denominator of which is equal to the pro forma market value of the Holding
Company.
At the sole discretion of the Board of the MHC and the Holding
Company, a Conversion Transaction may be effected in any other manner necessary
to qualify the Conversion Transaction as a tax-free reorganization under
applicable federal and state tax laws, provided such Conversion Transaction does
not diminish the rights and ownership interest of Minority Shareholders as set
forth in the preceding paragraphs of this Section. If a Conversion Transaction
does not occur, the MHC will continue to own a majority of the voting stock of
the Holding Company.
Section 9. Indemnification.
(a) The MHC shall, to the maximum extent authorized or permitted
and in the manner provided by the Banking Law and any applicable federal law,
indemnify any person who is made, or threatened to be made, a party to any
action, suit or proceeding, whether civil, criminal or administrative, by reason
of the fact that such person, or such person's testator or intestate, is or was
a trustee, director or officer of the MHC or one of the MHC's subsidiaries, or
any predecessor of the MHC, or serves or served any other corporation, or any
partnership, association, joint venture, trust, employee benefit plan,
conference or other group or enterprise in any capacity at the request of the
MHC or one of the MHC's subsidiaries, or any predecessor of the MHC, against
judgments, fines, amounts paid in settlement and reasonable expenses, including
attorneys' fees actually and reasonably incurred, and the MHC shall advance any
related expense in full. Employees or agents of the MHC may be similarly
indemnified. Such right of indemnification and advancement shall be
-3-
<PAGE>
in addition to and not exclusive of any other rights or remedies to which such
person may be or become entitled under any statute, insurance policy, agreement,
by-law or otherwise.
(b) Accrual of Right to Indemnification. In addition to the MHC's
obligation to indemnify under Section 1 of this Article VIII, the MHC's
obligation to indemnify, and any person's right to indemnification, under this
Article VIII shall accrue as of the time of the accrual of the cause of action
asserted in the threatened or pending action, suit, or proceeding, and no
subsequent change in this Organization Certificate or the By-Laws of the MHC
shall have any effect on the MHC's obligation to indemnify or a person's right
to indemnification. The provisions of this Article VIII shall be deemed to be a
contract between the MHC and each director, trustee and officer of the MHC who
serves in such capacity at any time while this Article VIII is in effect, and
any subsequent change of this Article VIII shall not affect the rights or
obligations then existing with respect to any state of facts then or theretofore
existing as it relates to any action or proceeding therefore or thereafter
brought or threatened based in whole or in part upon any such state of facts.
(c) Insurance. The Corporation may, but shall not be obliged to,
purchase and maintain insurance on behalf of any person who is or was a
director, trustee or officer of the Corporation or is or was serving at the
request of the Corporation as a director, trustee or officer of another
corporation of any type or kind, domestic or foreign, against any liability
asserted against such person and incurred by such person in any such capacity,
or arising out of such person's status as such, whether or not the Corporation
would have the power to indemnify such person against such liability under the
provisions of this Section 10.
(d) Subsequent Amendment and Subsequent Legislation. Neither the
amendment, termination or repeal of this Section 10 or of relevant provisions of
the Banking Law or any other applicable laws, nor the adoption of any provision
of this Restated Organization Certificate or the By-Laws of the Corporation or
of any statute inconsistent with this Section 10 shall eliminate, affect or
diminish in any way the rights of any director, officer, employee or agent of
the Corporation to indemnification under the provisions of this Article VIII
with respect to any action, suit or proceeding arising out of, or relating to,
any actions, transactions or facts occurring prior to the final adoption of such
amendment, termination or repeal.
If the Banking Law is amended to expand further the indemnification
permitted to directors, officers, employees or agents of the Corporation, then
the Corporation shall indemnify such persons to the fullest extent permitted by
the Banking Law as so amended.
Section 11. Amendment. The MHC reserves the right to repeal,
alter, amend or rescind any provision contained in this Organization Certificate
in the manner now or hereafter prescribed by law.
[Signature Page Follows]
-4-
<PAGE>
ROME, MHC
IN WITNESS WHEREOF, we the incorporators have made, signed and acknowledged
this Certificate in duplicate, this ___ day of _____, 1999.
_____________________________________
Charles M. Sprock
Chairman, President and Chief
Incorporators:
________________________________ _____________________________________
Charles M. Sprock Marion C. Scoville
________________________________ _____________________________________
Richard H. McMahon T. Richard Leidig
________________________________ _____________________________________
Kirk B. Hinman David C. Grow
________________________________ _____________________________________
Michael J. Valentine Bruce R. Engelbert
________________________________
David C. Nolan
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<PAGE>
STATE OF NEW YORK )
) ss:
COUNTY OF ONEIDA )
On the ___th day of ________, 1999, there personally appeared before me
Charles M. Sprock, Marion C. Scoville, Richard H. McMahon, T. Richard Leidig,
Kirk B. Hinman, David C. Grow, Michael J. Valentine, Bruce R. Engelbert and
David C. Nolan, to me known to be the individuals described in and who executed
the foregoing certificate, and severally acknowledged to me that they executed
the same and that the contents thereof are true.
____________________________________
Notary Public
-6-
<PAGE>
EXHIBIT 3.6
================================================================================
BYLAWS
OF
ROME, MHC
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
BOARD OF TRUSTEES
Section 1. Trustees..................................................... 1
Section 2. Election of Trustees......................................... 1
Section 3. Classification of Board...................................... 1
Section 4. Removal...................................................... 1
Section 5. Age Limitation............................................... 1
Section 6. Informal Action by Trustees.................................. 1
Section 7. Vacancies.................................................... 2
ARTICLE II
MEETINGS
Section 1. Annual and Regular Meetings.................................. 2
Section 2. Notice....................................................... 2
Section 3. Special Meetings............................................. 2
Section 4. Quorum; Vote Required........................................ 2
Section 5. Conduct of Meetings.......................................... 2
ARTICLE III
COMMITTEES
Section 1. Standing Committees.......................................... 3
Section 2. Other Committees............................................. 3
Section 3. Vacancies.................................................... 3
Section 4. Quorum....................................................... 3
Section 5. Executive Committee.......................................... 3
Section 6. Nominating Committee......................................... 3
ARTICLE IV
OFFICERS
Section 1. Elections................................................... 4
Section 2. Term........................................................ 4
Section 3. Multiple Offices............................................ 4
Section 4. Chairman of the Board....................................... 4
Section 5. President................................................... 4
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 6. Chief Executive Officer..................................... 4
Section 7. Vice President.............................................. 5
Section 8. Treasurer................................................... 5
Section 9. Secretary................................................... 5
Section 10. Other Officers.............................................. 5
Section 11. Succession.................................................. 5
ARTICLE V
COMPENSATION AND BENEFITS
Section 1. Compensation................................................. 5
Section 2. Reimbursement................................................ 5
Section 3. Retirement and Benefits...................................... 5
ARTICLE VI
INDEMNIFICATION OF TRUSTEES, OFFICERS
AND EMPLOYEES
Section 1. Indemnification............................................. 6
Section 2. Indemnification Rights are Non-exclusive.................... 6
ARTICLE VII
AMENDMENT OF BYLAWS
Section 1. Procedure................................................... 6
Section 2. Required Vote............................................... 6
</TABLE>
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<PAGE>
BYLAWS
OF
ROME, MHC
ARTICLE I
BOARD OF TRUSTEES
Section 1. Trustees. Management and control of the property and
affairs of ROME, MHC (the "MHC") shall be vested in the shall Board of Trustees
(the "Board" or the "Board of Trustees") consisting of not less than seven (7)
and not more than twenty (20) trustees as the Board may fix by resolution in
accordance with the laws of the State of New York, but at least annually at the
annual meeting of the Board.
Section 2. Election of Trustees. Election of trustees shall be held
each year at the annual meeting of the Board. Members of the Board shall be
elected by a plurality of the members of the Board for a term of three years and
until their successors have been elected and qualified.
Section 3. Classification of Board. The trustees shall be divided
into three classes. Subject to the provisions of this Section, the members of
each class shall be elected for a term of three years and until their successors
are elected and qualified. One class shall be elected annually. The term of the
first class shall expire at the first annual meeting of the Board; the term of
the second class shall expire at the second annual meeting of the Board; the
term of the third class shall expire at the third annual meeting of the Board.
At each subsequent annual meeting of the Board, trustees elected to succeed
those whose terms are expiring shall be elected for a term of office to expire
at the third succeeding annual meeting of the Board and when their respective
successors are elected and qualified.
Section 4. Removal. Any member of the Board may be removed at any
time by a vote of three-fourths (3/4) of the entire membership of the Board at
the time in office.
Section 5. Age Limitation. No director shall be qualified to serve as
such beyond the last day of the year in which he or she reaches his or her
seventy-fifth (75/th/) birthday. However, a trustee, on attaining age 75, shall
be eligible for election as a Trustee Emeritus.
Section 6. Informal Action by Trustees. Unless otherwise restricted
by the Organization Certificate or these Bylaws, any action required or
permitted to be taken at any meeting of the Board, or of any committee thereof,
may be taken without a meeting if all members of the Board or such committee, as
the case may be, consent thereto in writing, and the writing or writings are
filed with the minutes of proceedings of the Board or such committee.
<PAGE>
Section 7. Vacancies. Whenever a vacancy occurs on the Board of
Trustees, the Board, unless it determines to decrease the size of the Board,
shall elect a new Trustee to fill such vacancy. The Board shall nominate the
person or persons to be elected Trustee at a regular board meeting prior to the
election of such person or persons. Trustees shall be elected by the affirmative
vote of a majority of the Trustees then in office.
ARTICLE II
MEETINGS
Section 1. Annual and Regular Meetings. An annual meeting of the
Board for the election of officers shall be held, without notice other than
these Bylaws, immediately after, and at the same place as, the annual meeting of
the shareholders of Rome Community Bancorp, Inc., a Delaware corporation, or at
such other time or place as the Board may fix by resolution. The Board shall
hold regular meetings at least quarterly at such time and place as the Board may
fix by resolution.
Section 2. Notice. The Board may provide, by resolution, the time and
place for the holdings of regular meetings of the Board without notice other
than such resolution.
Section 3. Special Meetings. A special meeting of the Board may be
called by the Chairman of the Board (the "Chairman" or "Chairman of the Board"),
the President, or in his or her absence, by a Senior Vice President or one of
the Vice Presidents, or by not less than three or more trustees. At least two
days notice of such meeting shall be given to each trustee in person or by mail,
telephone, telegraph, facsimile or electronic mail. The object of the meeting
shall be stated in such notice. Notice shall be effective when transmitted.
Section 4. Quorum; Vote Required. A majority of the members of the
Board shall constitute a quorum for the transaction of business; provided the
Chairman, President, a Senior Vice President or one of the Vice Presidents be
among the number. Unless otherwise required by law or regulation or otherwise
specified in these Bylaws, the acts of a majority of the trustees present at a
meeting of the Board at any time in office shall be the acts of the MHC.
Section 5. Conduct of Meetings. The Chairman of the Board shall
preside at all meetings of the Board. If the Chairman is absent or otherwise
unable to so serve, the President shall preside at a meeting of the Board. If
the President is absent or otherwise unable to so serve, such other person as
shall be appointed by a majority of the entire Board shall preside at a meeting
of the Board.
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<PAGE>
ARTICLE III
COMMITTEES
Section 1. Standing Committees. The Executive Committee and the
Nominating Committee shall be standing committees of the Board elected by the
Board from their own number at each annual meeting of the Board. Each committee
shall have its own chairman as appointed by the Board, unless otherwise
specified in these Bylaws.
Section 2. Other Committees. The Board may from time to time elect
such other committees as it may determine.
Section 3. Vacancies. Vacancies on any committee shall be filled by
the Board at any regular or special meeting.
Section 4. Quorum. A majority of any committee shall constitute a
quorum. Less than a majority, however, shall have the power to adjourn.
Section 5. Executive Committee.
(a) The Executive Committee shall consist of not less than five (5)
members of the Board. The Chairman of the Board and the President shall be
members so elected. At each regular meeting of the Board, the Chairman, with
the approval of the Board, shall appoint one (1) member of the Board who shall
serve as an additional member of the Executive Committee until the next regular
meeting of the Board and who shall have all of the power and authority of a
regular member of the Executive Committee. Such person's presence at the
meeting shall be considered for the purpose of determining whether or not there
is a quorum in attendance at such meeting.
(b) The Chairman shall preside at all meetings of the Executive
Committee, and in his absence, the President shall preside. If there be none of
the above available, the members of the Executive Committee will designate who
shall preside at the meeting.
(c) The Executive Committee shall meet at such time and place as it
may determine for the purpose of exercising all of the powers of the Board with
respect to the affairs of the MHC except those prohibited by the laws of the
State of New York.
(d) The minutes of each meeting of the Executive Committee shall be
presented to the Board at its next regular meeting.
Section 6. Nominating Committee.
(a) The Nominating Committee shall consist of not less than three (3)
members of the Board who are not officers of the MHC.
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<PAGE>
(b) The Nominating Committee shall meet at such time and place as it
may determine for the purpose of nominating persons for initial election or
reelection to the Board and persons for election to the positions of Chairman of
the Board, President and such other officers it deems appropriate.
(c) Any member of the Board may also nominate persons for initial
election or reelection to the Board and persons for election to any officer
position.
ARTICLE IV
OFFICERS
Section 1. Elections. The Board shall elect from their own number a
Chairman of the Board and a President. The Board may also elect a Senior Vice
President, one or more Vice Presidents, Vice Presidents, a Treasurer, a
Secretary and such other officers as it may deem necessary.
Section 2. Term. All officers shall hold office until the next
regular meeting of the Board following each annual meeting or until their
successors are elected and so qualify. Any officer may be removed at any time by
vote of majority of the entire membership of the Board at the time in office.
Section 3. Multiple Offices. One person may hold two offices except
that the offices of President and any rank of Vice President must be held by
different persons.
Section 4. Chairman of the Board. The Chairman of the Board shall
preside at all meetings of the Board and of the Executive Committee, and shall
perform such duties as the Board may from time to time assign to him or her. The
Chairman of the Board shall have such powers and duties as are generally
incident to the Chairman.
Section 5. President. The President shall be the Chief Executive
Officer. The President's duties will be those as defined for the Chief Executive
Officer.
Section 6. Chief Executive Officer. The Chief Executive Officer shall
be so designated by the Board and must also hold the title of Chairman of the
Board and/or President. The Chief Executive Officer shall have general charge,
supervision and control of the business and affairs of the MHC subject to the
direction of the Board and shall perform such duties as the Board may from time
to time assign to him or her. The Chief Executive Officer shall have such powers
and duties as are generally incident to the Chief Executive Officer.
Section 7. Vice President. Executive Vice Presidents, Senior Vice
Presidents and Vice Presidents may be appointed by the Board to perform such
duties as may be prescribed by these Bylaws, the Board or the Chief Executive
Officer as permitted by the Board.
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<PAGE>
Section 8. Treasurer. The Treasurer shall perform all acts and
duties as are generally incident to the office of the Treasurer.
Section 9. Secretary. The Secretary shall be required to keep the
minutes of the meetings of the Board and the minutes of the meetings of the
Executive Committee, shall also have charge of the seal of the MHC and be
authorized to sign on behalf of the MHC, and to attest the signature of the
Chairman, President or other officers of the MHC when such attestation may be
required. In the absence of the Secretary at such meetings, the presiding
officer shall appoint a person to act as Secretary at the meeting.
Section 10. Other Officers. All other officers shall have such
authority and shall perform such duties as may be assigned to them by the Chief
Executive Officer or the Board.
Section 11. Succession. In the absence of the Chief Executive
Officer, the duties and responsibilities of this office shall be performed by
the available officers in the following order:
(a) President; and
(b) any Vice President of the MHC in the order of seniority or as may
be designated by the Board.
ARTICLE V
COMPENSATION AND BENEFITS
Section 1. Compensation. The MHC may pay its non-officer trustees
reasonable compensation for attendance at meetings of the Board, for service
upon Committees or for other services rendered, as shall be fixed from time to
time by a vote of a majority of the Board. The MHC may pay its officers and
employees such reasonable compensation as may be from time to time fixed by the
Board.
Section 2. Reimbursement. The trustees, officers and employees of the
MHC shall be entitled to reimbursement for expenses incurred in the conduct of
their work for the MHC.
Section 3. Retirement and Benefits. The MHC may pay retirement and
other benefits to its officers and employees in the manner provided by the laws
and regulations of the State of New York.
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<PAGE>
ARTICLE VI
INDEMNIFICATION OF TRUSTEES, OFFICERS
AND EMPLOYEES
Section 1. Indemnification. The MHC shall indemnify any Trustee,
officer, former Trustee or former officer of the MHC, to the maximum extent
allowed by law, against judgments, fines, amounts paid in settlement and
reasonable attorneys' fees resulting from such person being made or threatened
to be made a party to any action or proceeding by reason of the fact that such
person was or is a Trustee or officer of the MHC, or served at the request of
the MHC in any capacity with any other corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise. The right to indemnification
shall continue to apply to the estate of a deceased Trustee or officer and his
or her executors and administrators. No indemnification may be made to or on
behalf of any Trustee or officer, unless expressly permitted by law or court
order, if a judgment or final adjudication adverse to the Trustee or officer
establishes that his or her acts were committed in bad faith or were the result
of active and deliberate dishonesty material to the cause of action so
adjudicated, or that he or she personally gained in fact a financial profit or
other advantage to which he or she was not legally entitled.
Section 2. Indemnification Rights are Non-exclusive. Such rights of
indemnification and reimbursement shall not be deemed exclusive of any other
rights to which such Trustee or officer may be entitled by law, agreement or
otherwise. Nothing contained in these Bylaws shall affect any right to
indemnification to which MHC employees other than Trustees and officers may be
entitled by contract or otherwise under law.
ARTICLE VII
AMENDMENT OF BYLAWS
Section 1. Procedure. Any amendment or revision of these Bylaws must
be presented in writing at a regular or special meeting of the Board of the MHC
and presented for adoption at a subsequent meeting of the Board; provided, that
notice of the intention to amend or revise these Bylaws is given in writing to
each member of the Board at least two (2) days prior to the date set for the
meeting at which the revision or amendment is to be acted upon.
Section 2. Required Vote. To amend or revise these Bylaws, the vote
of at least two-thirds (2/3) of the members of the Board, present at a meeting,
is required.
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<PAGE>
Exhibit 4.3
ROME BANCORP, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFIES THAT
is the owner of
FULLY PAID AND NONASSESSABLE SHARES OF
COMMON STOCK, $.01 PAR VALUE PER SHARE, OF
ROME BANCORP, INC.
(the "Corporation"), a corporation formed under the laws of the State of
Delaware. The shares represented by this Certificate are transferrable only on
the stock transfer books of the Corporation by the holder of record hereof, or
by his or her duly authorized attorney or legal representative, upon the
surrender of this Certificate properly endorsed. This Certificate is not valid
until countersigned and registered by the Corporation's transfer agent and
registrar. The shares represented by this Certificate are not insured by the
Federal Deposit Insurance Corporation or by any other government agency.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
executed by the facsimile signature of its duly authorized officers and has
caused a facsimile of its corporate seal to be hereunto affixed.
Dated:
By: By:
______________________ __________________________
Corporate Secretary President and Chief
Executive Officer
<PAGE>
RESTRICTION
[Note: to be used only on certain shares]
The shares, or any interest therein, represented by this Certificate may
not be sold or otherwise disposed of, directly or indirectly, by the registered
holder hereof for a period of one year from the date of issuance hereof, except
in the event of the death or judicial declaration of incompetency of the
registered holder.
<PAGE>
Rome Bancorp, Inc.
The shares represented by this Certificate are issued subject to all the
provisions of the Certificate of Incorporation and By-Laws of ROME Bancorp, Inc.
(the "Corporation") as from time to time amended (copies of which are on file at
the principal office of the Corporation), to all of which the holder by
acceptance hereof assents. The following description constitutes a summary of
certain provisions of, and is qualified in its entirety by reference to, the
Certificate of Incorporation.
The Certificate of Incorporation of the Corporation contains certain
provisions, applicable upon the effective date of the conversion of The Rome
Savings Bank (the "Bank") from a New York mutual savings bank to a New York
stock savings bank and the concurrent acquisition by the Corporation of all of
the outstanding capital stock of the Bank, that restrict persons from directly
or indirectly acquiring or holding, or attempting to acquire or hold, the
beneficial ownership of, in excess of 10% of the outstanding shares of capital
stock of the Corporation entitled to vote generally in the election of directors
("Voting Stock"). The Certificate of Incorporation contains a provision
pursuant to which the holders of shares in excess of 10% of the Voting Stock of
the Corporation are limited to one hundredth (1/100) of one vote per share with
respect to such shares in excess of the 10% limitation. In addition, the
Corporation is authorized to refuse to recognize a transfer or attempted
transfer of any shares of Voting Stock to any person who beneficially owns, or
who the Corporation believes would become by virtue of such transfer the
beneficial owner of, in excess of 10% of the Voting Stock. These restrictions
are not applicable to underwriters in connection with a public offering of the
common stock, certain reorganization transactions described in the Certificate
of Incorporation or to acquisitions of Voting Stock by the Corporation, any
majority-owned subsidiary of the Corporation, or any pension, profit-sharing,
stock bonus or other compensation plan maintained by the Corporation or by a
member of a controlled group of corporations or trades or businesses of which
the Corporation is a member for the benefit of the employees of the Corporation
and for any subsidiary, or any trust or custodial arrangement established in
connection with any such plan.
The Certificate of Incorporation of the Corporation contains provisions
providing that the affirmative vote of the holders of at least 80% of the Voting
Stock of the Corporation may be required to approve certain business
combinations and other transactions with persons who directly or indirectly
acquire or hold the beneficial ownership of in excess of 10% of the Voting Stock
of the Corporation.
The Corporation will furnish to any shareholder upon written request and
without charge, a statement of the powers, designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights. Such request may be made to the Corporation or to
its transfer agent and registrar.
_________________________
The following abbreviations when used in the inscription on the face of
this Certificate shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT..................Custodian...........
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of survivorship under Uniform Gifts to Minors Act......................
and not as tenants in common (State)
</TABLE>
Additional abbreviations may also be used though not in the above list
For value received, ___________________________________________________hereby
sell(s), assign(s) and transfer(s) unto ________________________________________
__________________________________shares of Common Stock evidenced by this
Certificate, and do(es) hereby irrevocably constitute(s) and appoint(s) ________
_______________________________as Attorney, to transfer the said shares on the
books of the herein named Corporation, with full power of substitution.
Date: ___________________________
Signature _____________________________
Signature _____________________________
NOTICE: The signature to this
assignment must correspond
with the name as written upon
the face of the Certificate,
in every particular, without
alteration or enlargement, or
any change whatsoever.
<PAGE>
EXHIBIT 5.1
[LETTERHEAD OF THACHER PROFFITT & WOOD]
[FORM OF OPINION]
______, 1999
Rome Bancorp, Inc.
c/o The Rome Savings Bank
100 W. Dominick Street
Rome, New York 13440
Re: Rome Bancorp, Inc.
------------------
Ladies and Gentlemen:
We have acted as special counsel to Rome Bancorp, a Delaware corporation
(the "Company"), in connection with the proposed registration under the
Securities Act of 1933, as amended, by the Company of an aggregate of 2,136,664
shares of Common Stock, $0.01 par value per share, of the Company (the
"Shares"), and the related preparation and filing by the Company with the
Securities and Exchange Commission of a Registration Statement on Form SB-2 (the
"Registration Statement") pursuant to the amended Plan of Reorganization (the
"Plan"). In rendering the opinion set forth below, we do not express any
opinion concerning law other than the federal law of the United States.
We have examined originals or copies, certified or otherwise identified, of
such documents, corporate records and other instruments, and have examined such
matters of law, as we have deemed necessary or advisable for purposes of
rendering the opinion set forth below. As to matters of fact, we have examined
and relied upon the representations of the Company contained in the Registration
Statement and, where we have deemed appropriate, representations or certificates
of officers of the Company or public officials. We have assumed the
authenticity of all documents submitted to us as originals, the genuineness of
all signatures, the legal capacity of natural persons and the conformity to the
originals of all documents submitted to us as copies. In making our examination
of any documents, we have assumed that all parties, other than the Company, had
the corporate power and authority to enter into and perform all obligations
thereunder, and, as to such parties, we have also assumed the due authorization
by all requisite action, the due execution and delivery of such documents, and
the validity and binding effect and enforceability thereof.
<PAGE>
Rome Bancorp, Inc.
June ___, 1999 Page 2.
Based on the foregoing, we are of the opinion that the Shares have been
duly authorized and, when issued and exchanged as contemplated in the
Registration Statement and the Plan, will be validly issued and outstanding,
fully paid and non-assessable.
In rendering the opinion set forth above, we have not passed upon and do
not purport to pass upon the application of securities or "blue-sky" laws of any
jurisdiction (except federal securities laws).
This opinion is given solely for the benefit of the Company and investors
who purchase shares of common stock of the Company pursuant to the Registration
Statement, and may not be relied upon by any other person or entity, nor quoted
in whole or in part, or otherwise referred to in any document without our
express written consent.
We consent to the filing of this opinion as an Exhibit to the Registration
Statement and to the reference to our name in the Prospectus contained in the
Registration Statement under the heading "Legal and Tax Opinions."
Very truly yours,
Thacher Proffitt & Wood
By:___________________
V. Gerard Comizio
<PAGE>
Exhibit 8.1
_______, 1999
Rome Bancorp, Inc.
100 W. Dominick Street
Rome, New York 13440
Dear Sirs:
You have requested our opinion regarding certain federal income tax
consequences of the proposed transactions (collectively, the "Reorganization"),
more fully described below, pursuant to which (i) Rome Savings Bank will convert
from a New York chartered mutual savings bank (the "Bank") into a New York
chartered stock savings bank ("Stock Bank") and become the wholly-owned
subsidiary of Rome Bancorp, Inc., a newly formed Delaware chartered capital
stock corporation (the "Company") and (ii) the Company will become a majority-
owned subsidiary of Rome, MHC, a New York mutual holding company that will be
chartered as of the closing date of the transaction (the "MHC"). These
transactions and the related sale of Company common stock, also discussed below,
will be effected pursuant to the Plan of Reorganization adopted by the Board of
Trustees of the Bank on January 22, 1999 (the "Plan"). The Reorganization and
its component and related transactions are described in the Plan and in the
Prospectus filed with the Securities and Exchange Commission in connection with
the Reorganization (the "Prospectus"). We are rendering this opinion pursuant
to Section 6.01 of the Plan. All capitalized terms used but not defined in this
letter shall have the meanings assigned to them in the Plan or Prospectus. For
purposes of this letter, the term "membership interests", with respect to either
the Bank or the MHC, shall mean the liquidation and limited voting rights in,
respectively, the Bank or the MHC.
The Reorganization will be effected, pursuant to the Plan, as follows:
1. The Bank will organize the MHC, which will initially be organized in
stock form and initially exist as the Bank's wholly-owned subsidiary.
<PAGE>
The Rome Bancorp, Inc.
________, 1999 Page 2.
2. The MHC will organize two wholly-owned subsidiaries, one of which will
be the Company, and the other of which will be an interim stock
savings bank ("Interim").
3. The following events will occur simultaneously pursuant to the Plan:
(i) the Bank will exchange its charter for a New York stock savings
bank charter and thereby become Stock Bank (the "Conversion"); (ii)
the MHC will cancel its stock and exchange its charter for a New York
mutual holding company charter and thereby become a mutual holding
company; (iii) Interim will merge with and into Stock Bank with Stock
Bank surviving, and the former holders of membership interests in the
Bank (former "Bank Members") will exchange the stock of Stock Bank
constructively received in the Conversion for membership interests in
the MHC (the "Exchange"). As a mutual entity, the MHC will not have
any authorized capital stock. As a result of the merger and charter
exchanges, Stock Bank will become a wholly-owned subsidiary of the
MHC, and the Bank Members will hold membership interests in the MHC
comparable to the membership interests they previously held in the
Bank.
4. The MHC will then contribute all of the stock of Stock Bank to the
Company.
As a result of these transactions, Stock Bank will be a wholly-owned
subsidiary of the Company and the Company will be a wholly-owned subsidiary of
the MHC. In substance, upon the Conversion and pursuant to the other
transactions described above, the Bank Members will constructively receive the
stock of Stock Bank and will then exchange such stock for membership interests
in the MHC.
Simultaneously with the Conversion and the Exchange, the Company will offer
to sell additional shares of its common stock pursuant to the Plan, with
priority subscription rights granted in descending order of priority to Eligible
Account Holders, certain employee stock benefit plans of the Bank, Supplemental
Eligible Account Holders, Other Depositors and to certain members of the general
public.
In connection with the opinions expressed below, we have examined and
relied upon originals, or copies certified or otherwise identified to our
satisfaction, of the Plan and the Prospectus and of such corporate records of
the parties to the Reorganization as we have deemed appropriate. We have also
relied, without independent verification, upon the representations of the Bank
contained in its letter to us dated of even date herewith. We have assumed that
such representations are true and that the parties to the Reorganization will
act in accordance with the Plan. In addition, we have made such investigations
of law as we have deemed appropriate to form a basis for the opinions expressed
below.
Based on and subject to the foregoing, it is our opinion that for federal
income tax purposes, under current law -
(a) as regards the Conversion:
(1) the Conversion will constitute a reorganization under section
368(a)(1)(F) of the Code, and the Bank (in either its status as the Bank or
Stock Bank) will recognize no gain or loss as a result of the Reorganization;
(2) the basis of each asset of the Bank held by Stock Bank immediately
after the Conversion will be the same as the Bank's basis for such asset
immediately prior to the Conversion;
<PAGE>
The Rome Bancorp, Inc.
________, 1999 Page 3.
(3) the holding period of each asset of the Bank held by Stock Bank
immediately after the Conversion will include the period during which such asset
was held by the Bank prior to the Conversion;
(4) for purposes of Code section 381(b), Stock Bank will be treated as if
there had been no reorganization and, accordingly, the taxable year of the Bank
will not end on the effective date of the Reorganization and the tax attributes
of the Bank (subject to application of Code sections 381, 382, and 384),
including the Bank's tax bad debt reserves and earnings and profits, will be
taken into account by Stock Bank as if the Reorganization had not occurred;
(5) no Bank Member will recognize gain or loss upon the constructive
receipt of shares of Stock Bank stock solely in exchange for such Bank Member's
membership interests in the Bank;
(6) a Bank Member's basis in the shares of Stock Bank stock constructively
received in the Conversion will be the same as the basis of the Bank membership
interests constructively surrendered in exchange therefor;
(7) a Bank Member's holding period for the shares of Stock Bank stock
constructively received in the Conversion will include the holding period of the
membership interests constructively surrendered in exchange therefor, provided
such membership interests were held as capital assets on the date of the
Exchange; and
(8) no Bank Member will recognize gain or loss upon the issuance to such
Bank Member of deposits in Stock Bank in the same dollar amount as such Bank
Member's deposits in the Bank.
(b) as regards the Exchange:
(9) the Exchange will qualify as an exchange of property for stock under
Code section 351;
(10) no shareholder of Stock Bank (i.e., a former Bank Member) will
recognize gain or loss upon the transfer to the MHC of Stock Bank stock
constructively received in the Conversion in exchange for membership interests
in the MHC;
(11) the basis of the membership interests in the MHC received by each
shareholder of Stock Bank in exchange for such shareholder's shares of Stock
Bank stock will be equal to the basis of such shares of Stock Bank stock;
(12) the holding period of the membership interests in the MHC received by
each shareholder of Stock Bank will, as of the date of the Exchange, be equal to
the holding period of the shares of Stock Bank stock transferred in exchange
therefor, provided such shares of Stock Bank stock were held as a capital asset
on the date of the Exchange;
(13) the MHC will recognize no gain or loss upon its receipt from the
shareholders of Stock Bank of shares of Stock Bank stock in exchange for
membership interests in the MHC;
(14) the MHC's basis for each share of Stock Bank stock received from a
shareholder of Stock Bank in exchange for membership interests in the MHC will
be equal to the basis of such share of stock in the hands of such Stock Bank
shareholder; and
<PAGE>
The Rome Bancorp, Inc.
________, 1999 Page 4.
(15) the MHC's holding period for each share of Stock Bank stock received
from a shareholder of Stock Bank in exchange for membership interests in the MHC
will, as the date of the Exchange, be the same as the holding period of such
shares in the hands of such Stock Bank shareholder.
(c) as regards the offering under the Plan:
(16) no gain or loss will be recognized by the Company upon the sale of
shares of the Company common stock under the Plan;
(17) no gain or loss will be recognized by Bank Members upon the
distribution to them of nontransferable subscription rights to purchase shares
of the Company common stock under the Plan, provided that the amount to be paid
for such shares is equal to the fair market value of such shares;
(18) the basis to the shareholders of shares of the Company common stock
purchased under the Plan pursuant to such subscription rights will be the amount
paid therefor and the holding period for such shares will begin on the date on
which such subscription rights are exercised.
In rendering our opinion in (17), above, and our opinion regarding the tax
basis of shares of the Company common stock in (18), above, we have relied,
without independent verification, on the opinion of _____________ that the
nontransferable subscription rights have no value.
This opinion is given solely for the benefit of the parties to the Plan,
the shareholders of Stock Bank and Eligible Account Holders, Supplemental
Eligible Account Holders and other investors who purchase shares pursuant to the
Plan, and may not be relied upon by any other party or entity or referred to in
any document without our express written consent. We consent to the filing of
this opinion as an exhibit to the [Form S-1 to be filed with the Securities and
Exchange Commission] and to the references to us in the Prospectus under "The
Reorganization and the Offering - Effects of the Reorganization - Tax Aspects."
Very truly yours,
THACHER PROFFITT & WOOD
By:
<PAGE>
Exhibit 8.3
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
June 9, 1999
Board of Trustees
The Rome Savings Bank
100 W. Dominick Street
Rome, New York 13440
Re: Plan of Reorganization: Subscription Rights
Gentlemen:
All capitalized terms not otherwise defined in this letter have the
meanings given such terms in the amended plan of reorganization adopted by the
Board of Trustees of The Rome Savings Bank ("Rome Savings" or the "Bank").
Pursuant to the plan of reorganization, Rome Savings will become a
wholly-owned subsidiary of Rome Bancorp, Inc. (the "Holding Company"), a
Delaware corporation, and the Holding Company will issue a majority of its
common stock to Rome, MHC and sell a minority of its common stock to the public.
We understand that in accordance with the plan of reorganization
subscription rights to purchase shares of common stock in the Holding Company
are to be issued to: (1) Eligible Account Holders; (2) Tax-Qualified Employee
Benefit Plans; and (3) Supplemental Eligible Account Holders. Based solely upon
our observation that the subscription rights will be available to such parties
without cost, will be legally non-transferable and of short duration, and will
afford such parties the right only to purchase shares of common stock in the
Holding Company at the same price as will be paid by members of the general
public in the Community Offering, but without undertaking any independent
investigation of state or federal law or the position of the Internal Revenue
Service with respect to this issue, we are of the belief that, as a factual
matter:
(1) the subscription rights will have no ascertainable market value; and,
(2) the price at which the subscription rights are exercisable will not be
more or less than the pro forma market value of the shares upon
issuance.
Changes in the local and national economy, the legislative and regulatory
environment, the stock market, interest rates, and other external forces (such
as natural disasters or significant world events) may occur from time to time,
often with great unpredictability and may materially impact the value of thrift
stocks as a whole or the Holding Company's value alone. Accordingly, no
assurance can be given that persons who subscribe to shares of common stock in
the Subscription Offering will thereafter be able to buy or sell such shares at
the same price paid in the Subscription Offering.
Sincerely,
/s/ Gregory E. Dunn
Gregory E. Dunn
Senior Vice President
- --------------------------------------------------------------------------------
Washington Headquarters
Rosslyn Center
1700 North Moore Street, Suite 2210 Telephone: (703) 528-1700
Arlington, VA 22209 Fax No.: (703) 528-1788
<PAGE>
EXHIBIT 10.1
Employee Stock Ownership Plan
of Rome Bancorp, Inc.
Adopted on May 26, 1999
Effective as of the Reorganization Date
<PAGE>
TABLE OF CONTENTS
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Article I
Definitions
Section 1.1 Account................................................. 1
Section 1.2 Affiliated Employer..................................... 1
Section 1.3 Allocation Compensation................................. 1
Section 1.4 Bank.................................................... 2
Section 1.5 Board................................................... 2
Section 1.6 Beneficiary............................................. 2
Section 1.7 Change in Control....................................... 2
Section 1.8 Code.................................................... 2
Section 1.9 Committee............................................... 2
Section 1.10 Computation Period...................................... 2
Section 1.11 Disability.............................................. 2
Section 1.12 Domestic Relations Order................................ 2
Section 1.13 Effective Date.......................................... 2
Section 1.14 Eligibility Computation Period.......................... 2
Section 1.15 Eligible Employee....................................... 2
Section 1.16 Eligible Participant.................................... 3
Section 1.17 Employee................................................ 3
Section 1.18 Employer................................................ 3
Section 1.19 Employment Commencement Date............................ 3
Section 1.20 ERISA................................................... 3
Section 1.21 ESOP Contribution....................................... 3
Section 1.22 Fair Market Value....................................... 3
Section 1.23 Financed Share.......................................... 4
Section 1.24 Five Percent Owner...................................... 4
Section 1.25 Forfeitures............................................. 4
Section 1.26 Former Participant...................................... 4
Section 1.27 General Investment Account.............................. 4
Section 1.28 Highly Compensated Employee............................. 4
Section 1.29 Hour of Service......................................... 4
Section 1.30 Investment Account...................................... 5
Section 1.31 Investment Fund......................................... 5
Section 1.32 Loan Repayment Account.................................. 5
Section 1.33 Loan Repayment Contribution............................. 5
Section 1.34 Maternity or Paternity Leave............................ 5
Section 1.35 Military Service........................................ 5
Section 1.36 Named Fiduciary......................................... 5
Section 1.37 Officer................................................. 5
Section 1.38 One-Year Break in Service............................... 6
Section 1.39 Participant............................................. 6
Section 1.40 Plan.................................................... 6
Section 1.41 Plan Administrator...................................... 6
Section 1.42 Plan Year............................................... 6
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Section 1.43 Qualified Domestic Relations Order...................... 6
Section 1.44 Qualified Participant................................... 6
Section 1.45 Retirement.............................................. 6
Section 1.46 Share................................................... 6
Section 1.47 Share Acquisition Loan.................................. 6
Section 1.48 Share Investment Account................................ 7
Section 1.49 Tender Offer............................................ 7
Section 1.50 Total Compensation...................................... 7
Section 1.51 Trust................................................... 7
Section 1.52 Trust Agreement......................................... 7
Section 1.53 Trust Fund.............................................. 7
Section 1.54 Trustee................................................. 7
Section 1.55 Valuation Date.......................................... 7
Section 1.56 Vesting Computation Period.............................. 7
Section 1.57 Year of Eligibility Service............................. 8
Section 1.58 Year of Vesting Service................................. 8
Article II
Participation
Section 2.1 Eligibility for Participation........................... 8
Section 2.2 Commencement of Participation........................... 8
Section 2.3 Termination of Participation............................ 8
Article III
Special Provisions
Section 3.1 Military Service........................................ 9
Section 3.2 Maternity or Paternity Leave............................ 9
Section 3.3 Adjustments to Years of Eligibility Service............. 10
Section 3.4 Leave of Absence........................................ 10
Section 3.5 Family and Medical Leave................................ 10
Section 3.6 Service with Uniformed Forces........................... 10
Article IV
Contributions by Participants Not Permitted
Section 4.1 Contributions by Participants Not Permitted............. 11
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Article V
Contributions by the Employer
Section 5.1 In General.............................................. 11
Section 5.2 Loan Repayment Contributions............................ 11
Section 5.3 ESOP Contributions...................................... 11
Section 5.4 Time and Manner of Payment.............................. 12
Article VI
Share Acquisition Loans
Section 6.1 In General.............................................. 12
Section 6.2 Collateral; Liability for Repayment..................... 13
Section 6.3 Loan Repayment Account.................................. 13
Section 6.4 Release of Financed Shares.............................. 14
Section 6.5 Restrictions on Financed Shares......................... 14
Article VII
Allocation of Contributions
Section 7.1 Allocation Among Eligible Participants.................. 15
Section 7.2 Allocation of Released Shares or Other Property......... 15
Section 7.3 Allocation of ESOP Contributions........................ 15
Section 7.4 Retroactive Contributions for Returning Veterans........ 15
Article VIII
Limitations on Allocations
Section 8.1 Optional Limitations on Allocations of Contributions.... 16
Section 8.2 General Limitations on Contributions.................... 16
Article IX
Vesting
Section 9.1 Vesting................................................. 19
Section 9.2 Vesting on Death, Disability, Retirement or Change in
Control............................................... 20
Section 9.3 Forfeitures on Termination of Employment................ 20
Section 9.4 Amounts Credited Upon Re-Employment..................... 20
Section 9.5 Allocation of Forfeitures............................... 20
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iii
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Article X
The Trust Fund
Section 10.1 The Trust Fund.......................................... 20
Section 10.2 Investments............................................. 21
Section 10.3 Diversification of Investments.......................... 21
Section 10.4 Use of Commingled Trust Funds........................... 22
Section 10.5 Management and Control of Assets........................ 22
Article XI
Valuation of Interests in the Trust Fund
Section 11.1 Establishment of Investment Accounts.................... 23
Section 11.2 Share Investment Accounts............................... 23
Section 11.3 General Investment Accounts............................. 23
Section 11.4 Valuation of Investment Accounts........................ 23
Section 11.5 Annual Statements....................................... 23
Article XII
Shares
Section 12.1 Specific Allocation of Shares........................... 24
Section 12.2 Dividends............................................... 24
Section 12.3 Voting Rights........................................... 24
Section 12.4 Tender Offers........................................... 26
Section 12.5 Dissent and Appraisal Rights............................ 28
Article XIII
Payment of Benefits
Section 13.1 In General.............................................. 29
Section 13.2 Designation of Beneficiaries............................ 29
Section 13.3 Distributions to Participants and Former Participants... 30
Section 13.4 Manner of Payment....................................... 33
Section 13.5 Put Options............................................. 33
Section 13.6 Right of First Refusal.................................. 34
Section 13.7 Minimum Required Distributions.......................... 34
Section 13.8 Direct Rollover of Eligible Rollover Distributions...... 36
Section 13.9 Valuation of Shares Upon Settlement to a Participant.... 37
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Article XIV
Change in Control
Section 14.1 Definition of Change in Control......................... 37
Section 14.2 Vesting on Change of Control............................ 38
Section 14.3 Repayment of Loan....................................... 38
Section 14.4 Plan Termination After Change in Control................ 39
Section 14.5 Amendment of Article XIV................................ 39
Article XV
Administration
Section 15.1 Named Fiduciaries....................................... 40
Section 15.2 Plan Administrator...................................... 40
Section 15.3 Committee Responsibilities.............................. 41
Section 15.4 Claims Procedure........................................ 42
Section 15.5 Claims Review Procedure................................. 43
Section 15.6 Allocation of Fiduciary Responsibilities and
Employment of Advisors................................ 43
Section 15.7 Other Administrative Provisions......................... 43
Article XVI
Amendment, Termination and Tax Qualification
Section 16.1 Amendment and Termination by Rome Bancorp, Inc.......... 44
Section 16.2 Amendment or Termination Other Than by Rome Bancorp,
Inc................................................... 44
Section 16.3 Conformity to Internal Revenue Code..................... 45
Section 16.4 Contingent Nature of Contributions...................... 45
Article XVII
Special Rules for Top Heavy Plan Years
Section 17.1 In General.............................................. 46
Section 17.2 Definition of Top Heavy Plan............................ 46
Section 17.3 Determination Date...................................... 47
Section 17.4 Cumulative Accrued Benefits............................. 47
Section 17.5 Key Employees........................................... 47
Section 17.6 Required Aggregation Group.............................. 48
Section 17.7 Permissible Aggregation Group........................... 48
Section 17.8 Special Requirements During Top Heavy Plan Years........ 48
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Article XVIII
Miscellaneous Provisions
Section 18.1 Governing Law........................................... 49
Section 18.2 No Right to Continued Employment........................ 50
Section 18.3 Construction of Language................................ 50
Section 18.4 Headings................................................ 50
Section 18.5 Merger with Other Plans................................. 50
Section 18.6 Non-alienation of Benefits.............................. 50
Section 18.7 Procedures Involving Domestic Relations Orders.......... 51
Section 18.8 Leased Employees........................................ 51
Section 18.9 Status as an Employee Stock Ownership Plan.............. 52
</TABLE>
vi
<PAGE>
Employee Stock Ownership Plan
of Rome Bancorp, Inc.
Article I
---------
Definitions
-----------
The following definitions shall apply for the purposes of the Plan,
unless a different meaning is clearly indicated by the context:
Section 1.1 Account means an account established for each
-------
Participant to which is allocated such Participant's share, if any, of all
Financed Shares and other property that are re leased from the Loan Repayment
Account in accordance with section 6.4, together with his share, if any, of any
ESOP Contributions that may be made by the Employer.
Section 1.2 Affiliated Employer means any corporation which is a
-------------------
member of a controlled group of corporations (as defined in section 414(b) of
the Code) that includes the Employer; any trade or business (whether or not
incorporated) that is under common control (as defined in section 414(c) of the
Code) with the Employer; any organization (whether or not incorporated) that is
a member of an affiliated service group (as defined in section 414(m) of the
Code) that includes the Employer; any leasing organization (as defined in
section 414(n) of the Code) to the extent that any of its employees are required
pursuant to section 414(n) of the Code to be treated as employees of the
Employer; and any other entity that is required to be aggregated with the
Employer pursuant to regulations under section 414(o) of the Code.
Section 1.3 Allocation Compensation during any period means the
-----------------------
compensation taken into account in determining the allocation of benefits and
contributions among Participants and consists of the aggregate compensation
received by an Employee from the Employer or any Affiliated Employer with
respect to such period as reported to the Internal Revenue Service as wages for
such period pursuant to section 6041(d), 6051(a)(3) and 6052 of the Code, plus
the amount by which such Employee's compensation with respect to such period has
been reduced pursuant to a compensation reduction agreement under the terms of
any of the following plans which may be maintained by the Employer:
(a) a qualified cash or deferred arrangement described in section
401(k) of the Code;
(b) a salary reduction simplified employee pension plan described in
section 408(k) of the Code;
(c) a tax deferred annuity plan described in section 403(b) of the
Code; or
(d) a cafeteria plan described in section 125 of the Code.
In no event, however, shall an Employee's Allocation Compensation for any
calendar year include any compensation in excess of $160,000, or any such other
amount as may be prescribed in
1
<PAGE>
accordance with regulations prescribed under section 401(a)(17) of the Code. If
there are less than twelve (12) months in the Plan Year, the $160,000 limitation
(as adjusted) shall be prorated by multiplying such limitation by a fraction,
the numerator of which is the number of months in the Plan Year and the
denominator of which is twelve (12).
Section 1.4 Bank means The Rome Savings Bank and any successor
----
thereto.
Section 1.5 Board means the Board of Directors of Rome Bancorp,
-----
Inc.
Section 1.6 Beneficiary means the person or persons designated by a
-----------
Participant or Former Participant or other person entitled to a benefit under
the Plan, or otherwise determined to be entitled to a benefit under the Plan.
If more than one person is designated, each shall have an equal share unless the
person making the designation directed otherwise. The word "person" includes an
individual, a trust, an estate or any other person that is permitted to be named
as a Beneficiary.
Section 1.7 Change in Control means an event described in section
-----------------
14.1.
Section 1.8 Code means the Internal Revenue Code of 1986, as
----
amended (including the corresponding provisions of any succeeding law).
Section 1.9 Committee means the Committee described in section
---------
15.3.
Section 1.10 Computation Period means an Eligibility Computation
------------------
Period or a Vesting Computation Period.
Section 1.11 Disability means a condition of total incapacity,
----------
mental or physical, for further performance of duty with the Employer or any
Affiliated Employer, which the Plan Administrator shall have determined, on the
basis of competent medical evidence, is likely to be permanent.
Section 1.12 Domestic Relations Order means a judgment, decree or
------------------------
order (including the approval of a property settlement) that is made pursuant to
a state domestic relations or community property law and relates to the
provision of child support, alimony payments, or marital property rights to a
spouse, child or other dependent of a Participant or Former Participant.
Section 1.13 Effective Date means the first day of the fiscal year
--------------
in which The Rome Savings Bank converts from a mutual savings bank to a stock
savings bank.
Section 1.14 Eligibility Computation Period means, with respect to
------------------------------
any person, (a) the 12-consecutive month period beginning on such person's
Employment Commencement Date and (b) each 12-consecutive month period that
begins on an anniversary of such person's Employment Commencement Date.
Section 1.15 Eligible Employee means an Employee who is eligible for
-----------------
participation in the Plan in accordance with Article II.
2
<PAGE>
Section 1.16 Eligible Participant means, for any Plan Year, an
--------------------
Employee who is a Participant on the last day of such Plan Year and an Employee
who was a Participant during part of such Plan Year and whose participation
ceased prior to the last day of such Plan Year on account of his Retirement,
Disability or death.
Section 1.17 Employee means any person, including an officer, who is
--------
employed by the Employer or an Affiliated Employer.
Section 1.18 Employer means Rome Bancorp, Inc. and any successor
--------
thereto and any Affiliated Employer which, with the prior written approval of
the Board of Directors of Rome Bancorp, Inc. and subject to such terms and
conditions as may be imposed by the Board of Directors of Rome Bancorp, Inc.,
shall adopt this Plan.
Section 1.19 Employment Commencement Date means the date on which a
----------------------------
person first performs an Hour of Service, except that if an Employee separates
from service with the Employer, incurs a One-Year Break in Service and
subsequently returns to service with the Employ er, his Employment Commencement
Date shall be the date on which he first performs an Hour of Service following
the One-Year Break in Service.
Section 1.20 ERISA means the Employee Retirement Income Security Act
-----
of 1974, as amended from time to time (including the corresponding provisions of
any succeeding law).
Section 1.21 ESOP Contribution means Shares or amounts of money
-----------------
contributed to the Plan by the Employer in accordance with section 5.3.
Section 1.22 Fair Market Value on any date means:
-----------------
(a) with respect to a Share:
(i) the final quoted sale price on the date in question (or, if
there is no reported sale on such date, on the last preceding date on which
any reported sale occurred) as reported in the principal consolidated
reporting system with respect to securities listed or admitted to trading
on the principal United States securities exchange on which like Shares are
listed or admitted to trading; or
(ii) if Shares are not listed or admitted to trading on any such
exchange, the closing bid quotation with respect to a Share on such date on
the Nasdaq Stock Market, or, if no such quotation is provided, on another
similar system, selected by the Plan Administrator, then in use; or
(iii) if sections 1.22(a)(i) and (ii) are not applicable, the fair
market value of a Share as determined by an appraiser independent of the
Employer and experienced and expert in the field of corporate appraisal.
(b) with respect to property other than Shares, the fair market
value determined in the manner determined by the Trustee.
3
<PAGE>
Section 1.23 Financed Share means: (a) a Share that has been
--------------
purchased with the proceeds of a Share Acquisition Loan, that has been allocated
to the Loan Repayment Account in accordance with section 6.3 and that has not
been released in accordance with section 6.4; or (b) a Share that constitutes a
dividend paid with respect to a Share described in section 1.46, that has been
allocated to the Loan Repayment Account in accordance with section 6.3 and that
has not been released in accordance with section 6.4.
Section 1.24 Five Percent Owner means, for any Plan Year, a person
------------------
who, during such Plan Year, owned (or was considered as owning for purposes of
section 318 of the Code): (a) more than 5% of the value of all classes of
outstanding stock of the Employer; or (b) stock possessing more than 5% of the
combined voting power of all classes of outstanding stock of the Employer.
Section 1.25 Forfeitures means the amounts forfeited by Participants
-----------
and Former Participants on termination of employment prior to full vesting,
pursuant to section 9.3, less amounts credited because of re-employment,
pursuant to section 9.4.
Section 1.26 Former Participant means a Participant whose
------------------
participation in the Plan has terminated pursuant to section 2.3.
Section 1.27 General Investment Account means an Investment Account
--------------------------
established and maintained in accordance with Article XI.
Section 1.28 Highly Compensated Employee means, for any Plan Year,
---------------------------
an Employee who:
(a) at any time during such Plan Year or the immediately preceding
Plan Year was a Five Percent Owner; or
(b) during the immediately preceding Plan Year received Total
Compensation for such Plan Year in excess of $80,000 (or such higher amount
as may be permitted under section 414(q) of the Code) and, if the Employer
so elects, is a member of the group consisting of the top 20% of Employees
when ranked on the basis of Total Compensation paid to Employees during
such Plan Year.
The determination of who is a Highly Compensated Employee will be made in
accordance with section 414(q) of the Code and the regulations thereunder.
Section 1.29 Hour of Service means:
---------------
(a) Each hour for which a person is paid, or entitled to payment, for
the performance of duties for the Bank or any Affiliated Employer. These
hours shall be credited to the person for the Computation Period or
Computation Periods in which the duties are performed; and
(b) Each hour for which a person is paid, or entitled to payment, by
the Bank or any Affiliated Employer on account of a period of time during
which no duties are performed (irrespective of whether the employment
relationship has terminated) due to vacation,
4
<PAGE>
holiday, illness, incapacity (including disability), layoff, jury duty,
military duty, or leave of absence. No more than 501 Hours of Service shall
be credited under this section 1.29(b) for any single continuous period
(whether or not such period occurs in a single Computation Period). Hours
under this section 1.29(b) shall be calculated and credited pursuant to
section 2530.200b-2 of the Department of Labor's regulations (or any
successor regulation), which are incorporated herein by reference; and
(c) Each hour for which back pay, irrespective of any mitigation of
damages, is either awarded or agreed to by the Bank or any Affiliated
Employer. The same Hours of Service shall not be credited both under
section 1.29(a) or (b), as the case may be, and under this section 1.29(c).
Hours under this section 1.29(c) shall be credited to the person for the
Computation Period or Computation Periods to which the award or agreement
pertains, rather than the Computation Period in which the award, agreement
or payment is made.
Section 1.30 Investment Account means either a General Investment
------------------
Account or a Share Investment Account.
Section 1.31 Investment Fund means any one of the three or more
---------------
funds as may be established from time to time by the Plan Administrator which,
together with any and all Shares and other investments held under the Plan,
constitute the Trust Fund.
Section 1.32 Loan Repayment Account means an account established and
----------------------
maintained in accordance with section 6.3.
Section 1.33 Loan Repayment Contribution means amounts of money
---------------------------
contributed to the Plan by the Employer in accordance with section 5.2.
Section 1.34 Maternity or Paternity Leave means a person's absence
----------------------------
from work for the Employer and all Affiliated Employers: (a) by reason of the
pregnancy of such person; (b) by reason of the birth of a child of such person;
(c) by reason of the placement of a child with the person in connection with the
adoption of such child by such person; or (d) for purposes of caring for a child
of such person immediately following the birth of the child or the placement of
the child with such person.
Section 1.35 Military Service means service in the armed forces of
----------------
the United States. It may also include, if and to the extent that the Board so
provides and if all Participants and Former Participants in like circumstances
are similarly treated, special service for the government of the United States
and other public service.
Section 1.36 Named Fiduciary means any person, committee,
---------------
corporation or organization as described in section 15.1.
Section 1.37 Officer means an Employee who is an administrative
-------
executive in regular and continued service with the Employer or any Affiliated
Employer; provided, however, that at no time shall more than the lesser of (a)
50 Employees or (b) the greater of: (i) 3 Employees or (ii) 10% of all employees
be treated as Officers. The determination of whether an employee is to be
considered an Officer shall be made in accordance with section 416(i) of the
Code.
5
<PAGE>
Section 1.38 One-Year Break in Service means, with respect to any
-------------------------
person: (a) for purposes of eligibility to participate, an Eligibility
Computation Period during which such person is credited with fewer than 501
Hours of Service and (b) for purposes of vesting, a Vesting Computation Period
during which such person is credited with fewer than 501 Hours of Service.
Section 1.39 Participant means any person who has satisfied the
-----------
eligibility requirements set forth in section 2.1, who has become a Participant
in accordance with section 2.2, and whose participation has not terminated under
section 2.3.
Section 1.40 Plan means the Employee Stock Ownership Plan of Rome
----
Bancorp, Inc. as amended from time to time.
Section 1.41 Plan Administrator means any person, committee,
------------------
corporation or organization designated in section 15.2, or appointed pursuant to
section 15.2, to perform the responsibilities of that office.
Section 1.42 Plan Year means the calendar year in which the
---------
Effective Date occurs, and each calendar year thereafter.
Section 1.43 Qualified Domestic Relations Order means a Domestic
----------------------------------
Relations Order that: (a) clearly specifies (i) the name and last known mailing
address of the Participant or Former Participant and of each person given rights
under such Domestic Relations Order, (ii) the amount or percentages of the
Participant's or Former Participant's benefits under this Plan to be paid to
each person covered by such Domestic Relations Order, (iii) the number of
payments or the period to which such Domestic Relations Order applies, and (iv)
the name of this Plan; and (b) does not require the payment of a benefit in a
form or amount that is (i) not otherwise provided for under the Plan, or (ii)
inconsistent with a previous Qualified Domestic Relations Order.
Section 1.44 Qualified Participant means a Participant who has
---------------------
attained age 55 and who has been a Participant in the Plan for at least 10
years.
Section 1.45 Retirement means: (a) any termination of participation
----------
in the Plan at or after attainment of age 65; and (b) any retirement under an
applicable qualified defined benefit plan of the Employer as in effect from time
to time with entitlement to a normal or early retirement allowance.
Section 1.46 Share means a share of any class of stock issued by the
-----
Employer or any Affiliated Employer; provided, however, that such share is a
"qualifying employer security" within the meaning section 409(l) of the Code and
section 407(d)(5) of ERISA.
Section 1.47 Share Acquisition Loan means a loan obtained by the
----------------------
Trustee in accordance with Article VI.
Section 1.48 Share Investment Account means an Investment Account
------------------------
established and maintained in accordance with Article XI.
6
<PAGE>
Section 1.49 Tender Offer means a tender offer made to holders of
------------
any one or more classes of Shares generally, or any other offer, made to holders
of any one or more classes of Shares generally, to purchase, exchange, redeem or
otherwise transfer Shares, whether for cash or other consideration.
Section 1.50 Total Compensation during any period means an
------------------
Employee's aggregate total compensation paid by the Employer and any Affiliated
Employer with respect to such period and reportable for federal income tax
purposes pursuant to section 6041(d), 6051(a)(3) and 6052 of the Code. In
addition, solely for purposes of identifying those Employees who are Highly
Compensated Employees, each Employee's Total Compensation shall include any
amounts by which the Employee's compensation paid by the Employer or any
Affiliated Employer has been reduced pursuant to a compensation reduction
agreement under the terms of any qualified cash or deferred arrangement
described in section 401(k) of the Code, any salary reduction simplified
employee pension plan described in section 408(k) of the Code, any tax deferred
annuity plan described in section 403(b) of the Code, or any cafeteria plan
described in section 125 of the Code. In no event, however, shall an Employee's
Total Compensation for any calendar year include any compensation in excess of
$160,000 (or such other amount as may be permitted under section 401(a)(17) of
the Code).
Section 1.51 Trust means the legal relationship created by the Trust
-----
Agreement pursuant to which the Trustee holds the Trust Fund in trust. The
Trust may be referred to as the "Employee Stock Ownership Plan Trust of Rome
Bancorp, Inc. and Affiliates."
Section 1.52 Trust Agreement means the agreement between Rome
---------------
Bancorp, Inc. and the Trustee therein named or its successors pursuant to which
the Trust Fund shall be held in trust.
Section 1.53 Trust Fund means the corpus (consisting of
----------
contributions paid over to the Trustee, and investments thereof), and all
earnings, appreciations or additions thereof and thereto, held by the Trustee
under the Trust Agreement in accordance with the Plan, less any depreciation
thereof and any payments made therefrom pursuant to the Plan.
Section 1.54 Trustee means the Trustee of the Trust Fund from time
-------
to time in office. The Trustee shall serve as Trustee until it is removed or
resigns from office and is replaced by a successor Trustee appointed in
accordance with the terms of the Trust Agreement.
Section 1.55 Valuation Date means the last business day of March,
--------------
June, September and December.
Section 1.56 Vesting Computation Period means, with respect to any
--------------------------
person, the 12-month period beginning on such person's Employment Commencement
Date and each Plan Year beginning after such Employment Commencement Date.
Section 1.57 Year of Eligibility Service means, with respect to any
---------------------------
person, an Eligibility Computation Period during which such person receives
credit for at least 1,000 Hours of Service.
7
<PAGE>
Section 1.58 Year of Vesting Service means, with respect to any
-----------------------
person, a Vesting Computation Period during which such person receives credit
for at least 1,000 Hours of Service. If an Employee has credit for 1,000 Hours
of Service in the Vesting Computation Period that includes his Employment
Commencement Date and 1,000 Hours of Service in the first Vesting Computation
Period that begins after his Employment Commencement Date, he shall receive
credit for two Years of Vesting Service even if such periods overlap.
Article II
----------
Participation
-------------
Section 2.1 Eligibility for Participation.
-----------------------------
(a) Only Eligible Employees may be or become Participants in the
Plan. An Employee shall be an Eligible Employee if he is a common law
employee of an Employer, has completed at least one Year of Eligibility
Service and is not excluded under section 2.1(b).
(b) An Employee is not an Eligible Employee if he:
(i) is an Employee who has waived any claim to participation in the
Plan; or
(ii) is an Employee or in a unit of Employees covered by a
collective bargaining agreement with the Employer where retirement benefits
were the subject of good faith bargaining, unless such agreement expressly
provides that Employees such as he be covered under the Plan; or
(iii) is a "leased employee" as defined in section 18.8(a).
Section 2.2 Commencement of Participation.
-----------------------------
Every Employee who is an Eligible Employee on the Effective Date shall
automatically become a Participant on the Effective Date. An Employee who
becomes an Eligible Employee after the Effective Date shall automatically become
a Participant on the first day of the month following the month in which he
becomes an Eligible Employee.
Section 2.3 Termination of Participation.
----------------------------
Participation in the Plan shall cease, and a Participant shall become
a Former Participant, upon termination of employment with the Employer, death,
Disability or Retirement, failure to return to work upon the expiration of a
leave of absence granted by the Employer pursuant to section 3.4 or becoming an
Employee who is excluded under section 2.1(b) or distribution of the entire
vested interest in his Account.
8
<PAGE>
Article III
-----------
Special Provisions
------------------
Section 3.1 Military Service.
----------------
In the case of a termination of employment of any Employee to enter
directly into Military Service, the entire period of his absence shall be
treated, for purposes of vesting and eligibility for participation (but not,
except as required by law, for purposes of eligibility to share in allocations
of contributions in accordance with Article VII), as if he had worked for the
Employer during the period of his absence. In the event of the re-employment of
such person by the Employer within a period of not more than six months:
(a) after he becomes entitled to release or discharge, if he has
entered into the armed forces; or
(b) after such service terminates, if he has entered into other
service defined as Military Service;
such period, also, shall be deemed to be Military Service.
Section 3.2 Maternity or Paternity Leave.
----------------------------
(a) Subject to section 3.2(c), in the event of an Employee's
absence from work in the service of the Employer and all Affiliated
Employers for a period:
(i) that commences on or after October 1, 1985;
(ii) for which the person is not paid or entitled to payment by the
Employer or any Affiliated Employer; and
(iii) that constitutes Maternity or Paternity Leave;
then the rules of section 3.2(b) shall apply.
(b) In cases of absence described in section 3.2(a), solely for
purposes of determining whether a One-Year Break in Service has occurred,
the person shall be credited for the period of an absence described in
section 3.2(a) with the number of Hours of Service equal to the lesser of:
(i) (A) the number of Hours of Service that would have been
credited to the person if he had continued working for the Bank or an
Affiliated Employer during the period of such absence, or (B) if the number
of Hours of Service prescribed under section 3.2(b)(i)(A) cannot be
determined, 8 Hours of Service for each working day during the period of
absence; or
9
<PAGE>
(ii) 501 Hours of Service.
Such credit shall be given during the Computation Period during which such
absence began, if necessary to prevent a One-Year Break in Service from
occurring during such Computation Period, and in all other cases, such
credit shall be given during the immediately following Computation Period.
(c) Notwithstanding anything in the Plan to the contrary, this
section 3.2 shall not apply unless the person furnishes to the Plan
Administrator such information as the Plan Administrator may reasonably
require in order to establish (i) that the person's absence is one
described in section 3.2(a), and (ii) the number of working days during
such absence.
Section 3.3 Adjustments to Years of Eligibility Service.
-------------------------------------------
The Years of Eligibility Service of an Employee who returns to the
employment of the Employer or any Affiliated Employer following a separation
from service shall include his Years of Eligibility Service prior to such
separation from service, and such an Employee shall be readmitted to
participation immediately upon his return to service if he is then an Eligible
Employee; provided, however, that if such separation from service includes a
One-Year Break in Service, such prior Years of Eligibility Service shall not be
included until he has completed one Year of Eligibility Service following his
return to service, and upon completion of such one Year of Eligibility Service,
he shall be readmitted to participation in the Plan with retroactive effect to
the date of his return to employment, if he is then an Eligible Employee, but he
shall not participate in any ESOP Contributions or Loan Repayment Contributions
allocated during the interim period.
Section 3.4 Leave of Absence.
----------------
In the event of temporary absence from work in the service of the
Employer and all Affiliated Employers for any period for which a Participant
shall have been granted a leave of absence by the Employer, the entire period of
his absence shall be treated for purposes of vesting and eligibility for
participation (but not for purposes of eligibility to share in the allocation of
contributions in accordance with Article VII), as if he had worked for the
Employer during the period of his absence. Absence from work for a period
greater than, or failure to return to work upon the expiration of, the period of
leave of absence granted by the Employer shall terminate participation in the
Plan as of the date on which such period ended. In granting leaves of absence
for purposes of the Plan, all Employees in like circumstances shall be similarly
treated.
Section 3.5 Family and Medical Leave.
------------------------
In the event of absence for a period recognized a family and medical
leave under the federal Family and Medical Leave Act of 1992, the period of such
absence shall be recognized for purposes of vesting and eligibility to
participate to the full extent required by law.
Section 3.6 Service with Uniformed Forces.
-----------------------------
Periods of service with the uniformed forces of the United States
shall be treated in the manner required pursuant to section 414(u) of the Code.
10
<PAGE>
Article IV
----------
Contributions by Participants Not Permitted
-------------------------------------------
Section 4.1 Contributions by Participants Not Permitted.
-------------------------------------------
Participants shall not be required, nor shall they be permitted, to
make contributions to the Plan.
Article V
---------
Contributions by the Employer
-----------------------------
Section 5.1 In General.
----------
Subject to the limitations of Article VIII, for each Plan Year, the
Employer shall contribute to the Plan the amount, if any, determined by the
Board, but in no event less than the amount described in section 5.2(a). The
amount contributed for any Plan Year shall be treated as a Loan Repayment
Contribution, an ESOP Contribution, or a combination thereof, in accordance with
the provisions of this Article V.
Section 5.2 Loan Repayment Contributions.
----------------------------
For each Plan Year, a portion of the Employer's contributions, if any,
to the Plan for such Plan Year equal to the sum of:
(a) the minimum amount required to be added to the Loan Repayment
Account in order to provide adequate funds for the payment of the principal
and interest then required to be repaid under the terms of any outstanding
Share Acquisition Loan obtained by the Trustee; plus
(b) the additional amount, if any, designated by the Committee to be
applied to the prepayment of principal or interest under the terms of any
outstanding Share Acquisition Loan obtained by the Trustee;
shall be treated as a Loan Repayment Contribution for such Plan Year. A Loan
Repayment Contribution for a Plan Year shall be allocated to the Loan Repayment
Account and shall be applied by the Trustee, in the manner directed by the
Committee, to the payment of accrued interest and to the reduction of the
principal balance of any Share Acquisition Loan obtained by the Trustee that is
outstanding on the date on which the Loan Repayment Contribution is made. To
the extent that a Loan Repayment Contribution for a Plan Year results in a
release of Financed Shares in accordance with section 6.4, such Shares shall be
allocated among the Accounts of Eligible Participants for such Plan Year in
accordance with section 7.2.
11
<PAGE>
Section 5.3 ESOP Contributions.
------------------
In the event that the amount of the Employer's contributions to the
Plan for a Plan Year exceeds the amount of the Loan Repayment Contributions for
such Plan Year, such excess shall be treated as an ESOP Contribution and shall
be allocated among the Accounts of the Eligible Participants for such Plan Year
in accordance with section 7.3.
Section 5.4 Time and Manner of Payment.
--------------------------
(a) Payment of contributions made pursuant to this Article V shall be
made:
(i) in cash, in the case of a Loan Repayment Contribution; and
(ii) in cash, in Shares or in a combination of cash and Shares, in the
case of an ESOP Contribution.
(b) Contributions made pursuant to this Article V for a Plan Year
shall be paid to the Trust Fund on or before the due date (including any
extensions thereof) of the Employer's federal income tax return for its
taxable year during which such Plan Year ends. All such contributions shall
be allocated to the Accounts of the Eligible Participants, in the case of
an ESOP Contribution, or to the Loan Repayment Account, in the case of a
Loan Repayment Contribution, as soon as is practicable following the
payment thereof to the Trust Fund.
Article VI
----------
Share Acquisition Loans
-----------------------
Section 6.1 In General.
----------
The Committee may, with the prior approval of the Board, direct the
Trustee to obtain a Share Acquisition Loan on behalf of the Plan, the proceeds
of which shall be applied on the earliest practicable date:
(a) to purchase Shares; or
(b) to make payments of principal or interest, or a combination of
principal and interest, with respect to such Share Acquisition Loan; or
(c) to make payments of principal and interest, or a combination of
principal and interest, with respect to a previously obtained Share
Acquisition Loan that is then outstanding.
Any such Share Acquisition Loan shall be obtained on such terms and conditions
as the Plan Administrator may approve; provided, however, that such terms and
conditions shall provide for the payment of interest at no more than a
reasonable rate and shall permit such Share Acquisition Loan to satisfy the
requirements of section 4975(d)(3) of the Code and section 408(b)(3) of ERISA.
12
<PAGE>
Section 6.2 Collateral; Liability for Repayment.
-----------------------------------
(a) The Committee may direct the Trustee to pledge, at the time a
Share Acquisition Loan is obtained, the following assets of the Plan as
collateral for such Share Acquisition Loan:
(i) any Shares purchased with the proceeds of such Share
Acquisition Loan and any earnings attributable thereto;
(ii) any Financed Shares then pledged as collateral for a prior
Share Acquisition Loan which is repaid with the proceeds of such Share
Acquisition Loan and any earnings attributable thereto; and
(iii) pending the application thereof to purchase Shares or repay a
prior Share Acquisition Loan, the proceeds of such Share Acquisition Loan
and any earnings attributable thereto.
Except as specifically provided in this section 6.2(a), no assets of the Plan
shall be pledged as collateral for the repayment of any Share Acquisition Loan.
(b) No person entitled to payment under a Share Acquisition Loan
shall have any right to the assets of the Plan except for:
(i) Financed Shares that have been pledged as collateral for such
Share Acquisition Loan pursuant to section 6.2(a);
(ii) Loan Repayment Contributions made pursuant to section 5.2; and
(iii) earnings attributable to Financed Shares described in section
6.2(b)(i) and to Loan Repayment Contributions described in section
6.2(b)(ii).
Except in the event of a default or a refinancing pursuant to which an existing
Share Acquisition Loan is repaid, the aggregate amount of all payments of
principal and interest made by the Trustee with respect to all Share Acquisition
Loans obtained on behalf of the Plan shall at no time exceed the aggregate
amount of all Loan Repayment Contributions theretofore made plus the aggregate
amount of all earnings (other than dividends paid in the form of Shares)
attributable to Financed Shares and to such Loan Repayment Contributions.
(c) Any Share Acquisition Loan shall be without recourse against
the Plan and Trust.
Section 6.3 Loan Repayment Account.
----------------------
In the event that one or more Share Acquisition Loans shall be
obtained, a Loan Repayment Account shall be established under the Plan. The
Loan Repayment Account shall be credited with all Shares acquired with the
proceeds of a Share Acquisition Loan, all Loan Repayment Contributions and all
earnings (including dividends paid in the form of Shares) or appreciation
attributable to such Shares and Loan Repayment Contributions. The Loan
Repayment Account shall
13
<PAGE>
be charged with all payments of principal and interest made by the Trustee with
respect to any Share Acquisition Loan, all Shares released in accordance with
section 6.4 and all losses, depreciation or expenses attributable to Shares or
to other property credited thereto. The Financed Shares, as well as any earnings
thereon, shall be allocated to such Loan Repayment Account and shall be
accounted for separately from all other amounts contributed under the Plan.
Section 6.4 Release of Financed Shares.
--------------------------
As of the last day of each Plan Year during which a Share Acquisition
Loan is outstanding, a portion of the Financed Shares purchased with the
proceeds of such Share Acquisition Loan and allocated to the Loan Repayment
Account shall be released. The number of Financed Shares released in any such
Plan Year shall be equal to the amount determined according to one of the
following methods:
(a) by computing the product of: (i) the number of Financed Shares
purchased with the proceeds of such Share Acquisition Loan and allocated to
the Loan Repayment Account immediately before the release is effected;
multiplied by (ii) a fraction, the numerator of which is the aggregate
amount of the principal and interest payments (other than payments made
upon the refinancing of a Share Acquisition Loan as contemplated by section
6.1(c)) made with respect to such Share Acquisition Loan during such Plan
Year, and the denominator of which is the aggregate amount of all principal
and interest remaining to be paid with respect to such Share Acquisition
Loan as of the first day of such Plan Year; or
(b) by computing the product of: (i) the number of Financed Shares
purchased with the proceeds of such Share Acquisition Loan and allocated to
the Loan Repayment Account immediately before the release is effected;
multiplied by (ii) a fraction, the numerator of which is the aggregate
amount of the principal payments (other than payments made upon the
refinancing of a Share Acquisition Loan as contemplated by section 6.1(c))
made with respect to such Share Acquisition Loan during such Plan Year, and
the denominator of which is the aggregate amount of all of principal
remaining to be paid with respect to such Share Acquisition Loan as of the
first day of such Plan Year; provided, however, that the method described
in this section 6.4(b) may be used only if the Share Acquisition Loan does
not extend for a period in excess of 10 years after the date of origination
and only to the extent that principal payments on such Share Acquisition
Loan are made at least as rapidly as under a loan of like principal amount
with a like interest rate and term requiring level amortization of
principal and interest.
The method to be used shall be specified in the documents governing the Share
Acquisition Loan or, if not specified therein, prescribed by the Committee, in
its discretion. In the event that property other than, or in addition to,
Financed Shares shall be held in the Loan Repayment Account and pledged as
collateral for a Share Acquisition Loan, then the property to be released
pursuant to this section 6.4 shall be property having a Fair Market Value
determined by applying the method to be used to the Fair Market Value of all
property pledged as collateral for such Share Acquisition Loan; provided,
however, that no property other than Financed Shares shall be released pursuant
to this section 6.4 unless all Financed Shares have previously been released.
14
<PAGE>
Section 6.5 Restrictions on Financed Shares.
-------------------------------
Except to the extent required under any applicable law, rule or
regulation, no Shares purchased with the proceeds of a Share Acquisition Loan
shall be subject to a put, call or other option, or to any buy-sell or similar
arrangement, while held by the Trustee or when distributed from the Plan. The
provisions of this section 6.5 shall continue to apply in the event that this
Plan shall cease to be an employee stock ownership plan, within the meaning of
section 4975(e)(7) of the Code.
Article VII
-----------
Allocation of Contributions
---------------------------
Section 7.1 Allocation Among Eligible Participants.
--------------------------------------
Subject to the limitations of Article VIII, ESOP Contributions for a
Plan Year made in accordance with section 5.3 and Financed Shares and other
property that are released from the Loan Repayment Account for a Plan Year in
accordance with section 6.4 shall be allocated among the Eligible Participants
for such Plan Year, in the manner provided in this Article VII.
Section 7.2 Allocation of Released Shares or Other Property.
-----------------------------------------------
Subject to the limitations of Article VIII, in the event that Financed
Shares or other property are released from the Loan Repayment Account for a Plan
Year in accordance with section 6.4, such released Shares or other property
shall be allocated among the Accounts of the Eligible Participants for the Plan
Year in the proportion that each such Eligible Participant's Allocation
Compensation for the portion of the Plan Year during which he was a Participant
bears to the aggregate Allocation Compensation of all Eligible Participants for
the portion of such Plan Year during which they were Eligible Participants.
Section 7.3 Allocation of ESOP Contributions.
--------------------------------
Subject to the limitations of Article VIII, in the event that the
Employer makes an ESOP Contribution for a Plan Year, such ESOP Contribution
shall be allocated among the Accounts of the Eligible Participants for such Plan
Year in the proportion that each such Eligible Participant's Allocation
Compensation for the portion of the Plan Year during which he was a Participant
bears to the aggregate Allocation Compensation of all Eligible Participants for
the portion of such Plan Year during which they were Eligible Participants.
Section 7.4 Retroactive Contributions for Returning Veterans.
------------------------------------------------
Notwithstanding anything in the Plan to the contrary, to the extent
required by section 414(u) of the Code, in the event of the reemployment, on or
after December 12, 1994, by the Employer of a Participant with statutory
reemployment rights following a period of service in the uniformed services of
the United States, such person shall be eligible for retroactive benefit
contributions or allocations under the Plan computed as though he or she had
continued working for an Employer during the period of uniformed service.
15
<PAGE>
Article VII
-----------
Limitations on Allocations
--------------------------
Section 8.1 Optional Limitations on Allocations of Contributions.
----------------------------------------------------
If, for any Plan Year, the application of sections 7.2 and 7.3 would
result in more than one-third of the number of Shares or of the amount of money
or property to be allocated thereunder being allocated to the Accounts of
Eligible Participants for such Plan Year who are also Highly Compensated
Employees for such Plan Year, then the Committee may, but shall not be required
to, direct that this section 8.1 shall apply in lieu of sections 7.2 and 7.3.
If the Committee gives such a direction, then the Committee shall impose a
maximum dollar limitation on the amount of Allocation Compensation that may be
taken into account for each Eligible Participant. The dollar limitation which
shall be imposed shall be the limitation which produces the result that the
aggregate Allocation Compensation taken into account for Eligible Participants
who are Highly Compensated Employees, constitutes exactly one-third of the
aggregate Allocation Compensation taken into account for all Eligible
Participants.
Section 8.2 General Limitations on Contributions.
------------------------------------
(a) No amount shall be allocated to a Participant's Account under
this Plan for any Limitation Year, to the extent that such an allocation
would result in an Annual Addition of an amount greater than the lesser of
(i) $30,000 (or such other amount as is permissible under section
415(c)(1)(A) of the Code, or (ii) 25% of the Participant's Total
Compensation for such Limitation Year.
(b) In the case of a Participant who may be entitled to benefits
under any qualified defined benefit plan (whether or not terminated) now in
effect or ever maintained by the Employer, such Participant's Annual
Additions under this Plan shall, in addition to the limitations provided
under section 8.2(a), be further limited so that for any Limitation Year
beginning prior to December 31, 1999, the sum of the Participant's Defined
Contribution Plan Fraction plus his Defined Benefit Plan Fraction does not
exceed 1.0 for any Limitation Year; provided, that this limitation shall
only apply if and to the extent that the benefits under the Employer's
Retirement Plan or any other defined contribution plan are not limited so
that such sum is not exceeded. In the case of a Participant who is entitled
to contributions under any other qualified defined contribution plan
maintained by the Employer, such Participant's Annual Additions under such
other plan or plans shall be limited to the extent necessary so that total
Annual Additions under all such plans and this Plan do not exceed the
limitations under this Article VIII before any limitation is applied under
this Plan. In the event that this Section 8.2 conflicts with such other
qualified defined benefit or qualified defined contribution plan or plans,
the Plan Administrator shall determine under which plan the Annual
Additions or benefits shall be limited.
(c) For purposes of this section 8.2, the following special
definitions shall apply:
(i) Annual Addition means the sum of the following amounts allocated
---------------
on behalf of a Participant for a Limitation Year:
16
<PAGE>
(A) all contributions by the Employer (including contributions
made under a salary reduction agreement pursuant to sections 401(k),
408(k) or 403(b) of the Code) under any qualified defined contribution
plan (other than this Plan) maintained by the Employer, as well as the
Participant's allocable share, if any, of any forfeitures under such
plans; plus
(B) (I) for Limitation Years that began prior to January 1,
1987, the lesser of (1) 50% of the Participant's voluntary
nondeductible contributions to all qualified defined contribution
plans maintained by the Employer, or (2) the amount by which the
Participant's nondeductible voluntary contributions to such plans
exceeds 6% of his Total Compensation; and (II) for Limitation Years
that begin after December 31, 1986, all of the Participant's voluntary
nondeductible contributions to such plans; plus
(C) all ESOP Contributions under this Plan; plus
(D) except as hereinafter provided in this section 8.2(c)(i),
a portion of the Employer's Loan Repayment Contributions to the Plan
for such Limitation Year which bears the same proportion to the total
amount of the Employer's Loan Repayment Contributions for the
Limitation Year that the number of Shares (or the Fair Market Value of
property other than Shares) allocated to the Participant's Account
pursuant to section 7.2 or 8.1, whichever is applicable, bears to the
aggregate number of Shares (or Fair Market Value of property other
than Shares) so allocated to all Participants for such Limitation
Year.
Notwithstanding section 8.2(c)(i)(D), if, for any Limitation Year, the
aggregate amount of ESOP Contributions allocated to the Accounts of the
individuals who are Highly Compensated Employees for such Limitation Year,
when added to such Highly Compensated Employees' allocable share of any
Loan Repayment Contributions for such Limitation Year, does not exceed one-
third of the total of all ESOP Contributions and Loan Repayment
Contributions for such Limitation Year, then that portion, if any, of the
Loan Repayment Contributions for such Limitation Year that is applied to
the payment of interest on a Share Acquisition Loan shall not be included
as an Annual Addition. In no event shall any Financed Shares, any
dividends or other earnings thereon, any proceeds of the sale thereof or
any portion of the value of the foregoing be included as an Annual
Addition.
(ii) Employer means Rome Bancorp, Inc. and all members of a
--------
controlled group of corporations, as defined in section 414(b) of the Code,
as modified by section 415(h) of the Code, all commonly controlled trades
or businesses, as defined in section 414(c) of the Code, as modified by
section 415(h) of the Code, all affiliated service groups, as defined in
section 414(m) of the Code, of which Rome Bancorp, Inc. is a member, as
well as any leasing organization, as defined in section 18.8, that employs
any person who is considered an employee under section 18.8 and any other
entity that is required to be aggregated with the Employer pursuant to
regulations under section 414(o) of the Code.
(iii) Defined Benefit Plan Fraction means, for any Participant for
-----------------------------
any Limitation Year, a fraction, the numerator of which is the Projected
Annual Benefit (determined as of
17
<PAGE>
the end of such Limitation Year) of the Participant under any qualified
defined benefit plans (whether or not terminated) maintained by the
Employer for the current and all prior Limitation Years, and the
denominator of which is as follows: (A) for Limitation Years ending prior
to January 1, 1983, the lesser of (I) the dollar limitation in effect under
section 415(b)(1) (A) of the Code for such Limitation Year, or (II) the
amount which may be taken into account under section 415(b)(1)(B) of the
Code with respect to such Participant for such Limitation Year; and (B) in
all other cases, the lesser of (I) (except as provided in section 17.8(b)
for a Top Heavy Plan Year) the product of 1.25 multiplied by the dollar
limitation in effect under section 415(b)(1)(A) of the Code for such
Limitation Year, or (II) the product of 1.4 multiplied by the amount which
may be taken into account under section 415(b)(1)(B) of the Code with
respect to such Participant for such Limitation Year.
(iv) Defined Contribution Plan Fraction means, for any Participant
----------------------------------
for any Limitation Year, a fraction (A) the numerator of which is the sum
of such Participant's Annual Additions (determined as of the end of such
Limitation Year) under this Plan and any other qualified defined
contribution plans (whether or not terminated) maintained by the Employer
for the current and all prior Limitation Years, and (B) the denominator of
which is as follows: (I) for Limitation Years ending prior to January 1,
1983, the sum of the lesser of the following amounts for such Limitation
Year and for each prior Limitation Year during which such Participant was
employed by the Employer: (1) the Maximum Permissible Amount for such
Limitation Year (without regard to section 415(c)(6) of the Code), or (2)
the amount which may be taken into account under section 415(c)(1)(B) of
the Code with respect to such Participant for such Limitation Year; and
(II) in all other cases, the sum of the lesser of the following amounts for
such Limitation Year and for each prior Limitation during which such
Participant was employed by the Employer: (1) (except as provided in
section 17.8(b) for a Top Heavy Plan Year) the product of 1.25 multiplied
by the Maximum Permissible Amount for such Limitation Year (determined
without regard to section 415(c)(6) of the Code), or (2) the product of 1.4
multiplied by the amount which may be taken into account under section
415(c)(1)(B) of the Code (or section 415(c)(7) of the Code, if applicable)
with respect to such Participant for such Limitation Year; provided,
however, that the Plan Administrator may, at his election, adopt the
transition rule set forth in section 415(e)(6) of the Code in making the
computation set forth in this section 8.2(c)(iv). If the sum of a
Participant's Defined Benefit Plan Fraction and Defined Contribution Plan
Fraction exceeded 1.0 as of September 30, 1983, then such Participant's
Defined Contribution Plan Fraction shall be determined under regulations to
be prescribed by the Secretary of the Treasury so that the sum of the
fractions does not exceed 1.0.
(v) Limitation Year means the Plan Year; provided, however, that if
---------------
the Employer changes the Limitation Year, the new Limitation Year shall
begin on a date within the Limitation Year in which the amendment is made.
(vi) Maximum Permissible Amount means (A) $25,000 (or such higher
--------------------------
amount as may be permitted under section 415(d) of the Code because of cost
of living increases) for Limitation Years beginning prior to January 1,
1983, and (B) the greater of (I) $30,000, or (II) 25% of the dollar
limitation in effect under section 415(b)(1)(A) of the Code for Limitation
Years beginning on or after January 1, 1983.
(vii) Projected Annual Benefit means a Participant's annual retirement
------------------------
benefit (adjusted to the actuarial equivalent of a straight life annuity if
expressed in a form other than
18
<PAGE>
a straight life or qualified joint and survivor annuity) under any
qualified defined benefit plan maintained by the Employer, whether or not
terminated, assuming that the Participant will continue employment until
the later of current age or normal retirement age under such plan, and that
the Participant's Total Compensation for the Limitation Year and all other
relevant factors used to determine benefits under such plan will remain
constant for all future Limitation Years.
(d) When a Participant's Annual Addition to this Plan must be reduced
to satisfy the limitations of section 8.2(a) or (b), such reduction shall
be applied first to ESOP Contributions; and second, if necessary, to Shares
allocated as a result of a Loan Repayment Contribution which are included
as an Annual Addition in such order as shall result in the smallest
reduction in the number of Shares allocable to the Participant's Account.
The amount by which any Participant's Annual Addition to this Plan is
reduced shall be allocated in accordance with Articles V and VII as a
contribution by the Employer in the next succeeding Limitation Year.
(e) Prior to determining a Participant's actual Total Compensation
for a Limitation Year, the Employer may determine the limitations under
this section 8.2 for a Participant on the basis of a reasonable estimation
of the Participant's Total Compensation for the Limitation Year that is
uniformly determined for all Participants who are similarly situated. As
soon as it is administratively feasible after the end of the Limitation
Year, the limitations of this section 8.2 shall be determined on the basis
of the Participant's actual Total Compensation for the Limitation Year.
Article IX
----------
Vesting
-------
Section 9.1 Vesting.
-------
Subject to the provisions of section 9.2, the balance credited to each
Employee's Account shall become vested in accordance with the following
schedule:
<TABLE>
<CAPTION>
Years of Vested
Vesting Service Percentage
--------------- ----------
<S> <C>
less than 3 0%
3 but less than 4 20%
4 but less than 5 40%
5 but less than 6 60%
6 but less than 7 80%
7 or more 100%
</TABLE>
Section 9.2 Vesting on Death, Disability, Retirement or Change in
-----------------------------------------------------
Control.
- -------
Any previously unvested portion of the remainder of the balance
credited to the Account of a Participant or of a person who is a Former
Participant solely because he is excluded from participation under section
2.1(b) shall become fully vested in him immediately upon attainment of age 65,
or, if earlier, upon the termination of his participation by reason of death,
Disability, Retirement or upon the occurrence of a Change in Control of the
Employer.
19
<PAGE>
Section 9.3 Forfeitures on Termination of Employment.
----------------------------------------
Upon the termination of employment of a Participant or Former
Participant for any reason other than death, Disability or Retirement, that
portion of the balance credited to his Account which is not vested at the date
of such termination shall be forfeited as of the last Valuation Date for the
Plan Year in which such termination of employment occurs. The proceeds of such
forfeitures, less amounts, if any, required to be credited because of re-
employment pursuant to section 9.4, shall be treated as Forfeitures and shall be
disposed of as provided in section 9.5.
Section 9.4 Amounts Credited Upon Re-Employment.
-----------------------------------
If an Employee forfeited any amount of the balance credited to his
Account upon his termination of employment with the Employer, and is re-employed
prior to the occurrence of five consecutive One-Year Breaks in Service, then:
(a) an amount equal to the Fair Market Value of the Shares forfeited,
determined as of the date of forfeiture; and
(b) the amount credited to his General Investment Account that was
forfeited, determined as of the date of forfeiture;
shall be credited back to his Account from the proceeds of forfeitures which are
redeemed pursuant to section 9.3 during the Plan Year in which he is re-
employed, unless such proceeds are insufficient, in which case the Employer
shall make an additional contribution in the amount of such deficiency.
Section 9.5 Allocation of Forfeitures.
-------------------------
Any Forfeitures that occur during a Plan Year shall be used to reduce
the contributions required of the Employer under the Plan and shall be treated
as Loan Repayment Contributions and ESOP Contributions in the proportions
designated by the Committee in accordance with Article V.
Article X
---------
The Trust Fund
--------------
Section 10.1 The Trust Fund.
--------------
The Trust Fund shall be held and invested under the Trust Agreement
with the Trustee. The provisions of the Trust Agreement shall vest such powers
in the Trustee as to investment, control and disbursement of the Trust Fund,
and such other provisions not inconsistent with the Plan, including provision
for the appointment of one or more "investment managers" within the meaning of
section 3(38) of ERISA to manage and control (including acquiring and disposing
of) all or any of the assets of the Trust Fund, as the Board may from time to
time authorize. Except as required by ERISA, no bond or other security shall be
required of any Trustee at any time in office.
Section 10.2 Investments.
-----------
20
<PAGE>
Except to the extent provided to the contrary in section 10.3, the
Trust Fund shall be invested in:
(a) Shares;
(b) such Investment Funds as may be established from time to time by
the Committee; and
(c) such other investments as may be permitted under the Trust
Agreement;
in such proportions as shall be determined by the Committee or, if so provided
under the Trust Agreement, as directed by one or more investment managers or by
the Trustee, in its discretion; pro vided, however, that the investments of the
Trust Fund shall consist primarily of Shares. Notwithstanding the immediately
preceding sentence, the Trustee may temporarily invest the Trust Fund in short-
term obligations of, or guaranteed by, the United States Government or an agency
thereof, or may retain uninvested, or sell investments to provide, amounts of
cash required for purposes of the Plan.
Section 10.3 Diversification of Investments.
------------------------------
(a) Notwithstanding section 10.2, each Qualified Participant may:
(i) during the first 90 days of each of the first four Plan Years to
begin after the Plan Year in which he first becomes a Qualified
Participant, elect that such percentage of the balance credited to his
Account as he may specify, but in no event more than 25% of the balance
credited to his Account, be invested in one or more of the Investment
Funds; and
(ii) during the first 90 days of the fifth Plan Year to begin after
the Plan Year in which he first becomes a Qualified Participant or of any
Plan Year thereafter, elect that such percentage of the balance credited to
his Account as he may specify, but in no event more than 50% of the balance
credited to his Account, be invested in one or more of the Investment
Funds.
For purposes of an election under this section 10.3, the balance credited to a
Participant's Account shall be the balance credited to his Account determined as
of the last Valuation Date to occur in the Plan Year immediately preceding the
Plan Year in which such election is made.
(b) An election made under section 10.3(a) shall be made in writing,
in the form and manner prescribed by the Plan Administrator, and shall be
filed with the Plan Administrator during the election period specified in
section 10.3(a). As soon as is practicable following the end of the
election period during which such election is made, the Plan Administrator
shall take such actions as are necessary to cause the specified percentage
of the balance credited to the Account of the Qualified Participant making
the election to be invested in the specified Investment Funds. Any
investments made pursuant to this section 10.3 shall be specifically
allocated to the General Investment Account of the Qualified Participant
for whom they are made.
21
<PAGE>
(c) An election made under section 10.3(a) may be changed or revoked
at any time during the election period described in section 10.3(a) during
which it is initially made, during any subsequent election period described
in section 10.3(a) or, upon at least 15 days' advance written notice given
in the form and manner prescribed by the Plan Administrator, as of the
first day of any calendar quarter of any Plan Year that begins after the
Participant first becomes a Qualified Participant. In no event, however,
shall any election under this section 10.3 result in more than 25% of the
balance credited to the Participant's Account being invested at the
direction of the Participant, if such election is made during a Plan Year
to which section 10.3(a)(i) applies, or result in more than 50% of the
balance credited to the Participant's Account being invested at the
direction of the Participant, if such election is made during the Plan Year
to which section 10.3(a)(ii) applies or thereafter.
Section 10.4 Use of Commingled Trust Funds.
-----------------------------
Subject to the provisions of the Trust Agreement, amounts held in the
Trust Fund may be invested in:
(a) any commingled or group trust fund described in section 401(a) of
the Code and exempt under section 501(a) of the Code; or
(b) any common trust fund exempt under section 584 of the Code
maintained exclusively for the collective investment of the assets of
trusts that are exempt under section 501(a) of the Code;
provided that the trustee of such commingled, group or common trust fund is a
bank or trust company.
Section 10.5 Management and Control of Assets.
--------------------------------
All assets of the Plan shall be held by the Trustee in trust for the
exclusive benefit of Participants, Former Participants and their Beneficiaries.
No part of the corpus or income of the Trust Fund shall be used for, or diverted
to, purposes other than for the exclusive benefit of Participants, Former
Participants and their Beneficiaries, and for defraying reasonable
administrative expenses of the Plan and Trust Fund. No person shall have any
interest in or right to any part of the earnings of the Trust Fund, or any
rights in, to or under the Trust Fund or any part of its assets, except to the
extent expressly provided in the Plan.
22
<PAGE>
Article XI
----------
Valuation of Interests in the Trust Fund
----------------------------------------
Section 11.1 Establishment of Investment Accounts.
------------------------------------
The Plan Administrator shall establish, or cause to be established,
for each person for whom an Account is maintained a Share Investment Account and
a General Investment Account. Such Share Investment Accounts and General
Investment Accounts shall be maintained in accordance with this Article XI.
Section 11.2 Share Investment Accounts.
-------------------------
The Share Investment Account established for a person in accordance
with section 11.1 shall be credited with: (a) all Shares allocated to such
person's Account; (b) all Shares pur chased with amounts of money or property
allocated to such person's Account; (c) all dividends paid in the form of Shares
with respect to Shares credited to his Account; and (d) all Shares purchased
with amounts credited to such person's General Investment Account. Such Share
Investment Account shall be charged with all Shares that are sold or exchanged
to acquire other investments or to provide cash and with all Shares that are
distributed in kind.
Section 11.3 General Investment Accounts.
---------------------------
The General Investment Account that is established for a person in
accordance with section 11.1 shall be credited with: (a) all amounts, other
than Shares, allocated to such person's Account; (b) all dividends paid in a
form other than Shares with respect to Shares credited to such person's Share
Investment Account; (c) the proceeds of any sale of Shares credited to such
person's Share Investment Account; and (d) any earnings attributable to amounts
credited to such person's General Investment Account. Such General Investment
Account shall be charged with all amounts credited thereto that are applied to
the purchase of Shares, any losses or depreciation attributable to amounts
credited thereto, any expenses allocable thereto and any distributions of
amounts credited thereto.
Section 11.4 Valuation of Investment Accounts.
--------------------------------
(a) The Plan Administrator shall determine, or cause to be
determined, the aggregate value of each person's Share Investment Account
as of each Valuation Date by multiplying the number of Shares credited to
such Share Investment Account on such Valuation Date by the Fair Market
Value of a Share on such Valuation Date.
(b) As of each Valuation Date, the Accounts of each Participant shall
be separately adjusted to reflect their proportionate share of any
appreciation or depreciation in the fair market value of the Investment
Funds, any income earned by the Investment Funds and any expenses incurred
by the Investment Funds, as well as any contributions, withdrawals or
distributions and investment transfers not posted as of the last Valuation
Date.
23
<PAGE>
Section 11.5 Annual Statements.
-----------------
There shall be furnished, by mail or otherwise, at least once in each
Plan Year to each person who would then be entitled to receive all or part of
the balance credited to any Account if the Plan were then terminated, a
statement of his interest in the Plan as of such date as shall be selected by
the Plan Administrator, which statement shall be deemed to have been accepted as
correct and be binding on such person unless the Plan Administrator receives
written notice to the contrary within 30 days after the statement is mailed or
furnished to such person.
Article XII
-----------
Shares
------
Section 12.1 Specific Allocation of Shares.
-----------------------------
All Shares purchased under the Plan shall be specifically allocated to
the Share Investment Accounts of Participants, Former Participants and their
Beneficiaries in accordance with section 11.2, with the exception of Financed
Shares, which shall be allocated to the Loan Repayment Account.
Section 12.2 Dividends.
---------
(a) Dividends paid with respect to Shares held under the Plan shall
be credited to the Loan Repayment Account, if paid with respect to Financed
Shares. Such dividends shall be: (i) applied to the payment of principal
and accrued interest with respect to any Share Acquisition Loan, if paid in
cash; or (ii) held in the Loan Repayment Account as Financed Shares for
release in accordance with section 6.4, if paid in the form of Shares.
(b) Dividends paid with respect to Shares allocated to a person's
Share Investment Account shall be credited to such person's Share
Investment Account. Cash dividends credited to a person's General
Investment Account shall be, at the direction of the Board, either: (i)
held in such General Investment Account and invested in accordance with
sections 11.2 and 11.3; (ii) distributed immediately to such person; (iii)
distributed to such person within 90 days of the close of the Plan Year in
which such dividends were paid; or (iv) used to make payments of principal
or interest on a Share Acquisition Loan; provided, however, that the Fair
Market Value of Financed Shares released from the Loan Repayment Account
equals or exceeds the amount of the dividend.
Section 12.3 Voting Rights.
-------------
(a) Each person shall direct the manner in which all voting rights
appurtenant to Shares allocated to his Share Investment Account will be
exercised, provided that such Shares were allocated to his Share Investment
Account as of the applicable record date. Such person shall, for such
purpose, be deemed a "named fiduciary" within the meaning of section
402(a)(2) of ERISA. Such a direction shall be given by completing and
filing with the inspector of elections, the Trustee or such other person
who shall be independent of the Employer as the Committee shall designate,
at least 10 days prior to the date of the meeting of holders of Shares at
which such voting rights will be exercised, a written direction in the form
and manner prescribed by the Committee. The inspector of elections, the
Trustee or
24
<PAGE>
such other person designated by the Committee shall tabulate the directions
given on a strictly confidential basis, and shall provide the Committee
with only the final results of the tabulation. The final results of the
tabulation shall be followed by the Committee in directing the Trustee as
to the manner in which such voting rights shall be exercised. The Committee
shall make a reasonable effort to furnish, or cause to be furnished, to
each person for whom a Share Investment Account is maintained all annual
reports, proxy materials and other information known by the Committee to
have been furnished by the issuer of the Shares, or by any solicitor of
proxies, to the holders of Shares.
(b) To the extent that any person shall fail to give instructions
with respect to the exercise of voting rights appurtenant to Shares
allocated to his Share Investment Account:
(i) the Trustee shall, with respect to each matter to be voted upon:
(A) cast a number of affirmative votes equal to the product of (I) the
number of allocated Shares for which no written instructions have been
given, multiplied by (II) a fraction, the numerator of which is the number
of allocated Shares for which affirmative votes will be cast in accordance
with written instructions given as provided in section 12.3(a) and the
denominator of which is the aggregate number of affirmative and negative
votes which will be cast in accordance with written instructions given as
aforesaid, and (B) cast a number of negative votes equal to the excess (if
any) of (I) the number of allocated Shares for which no written
instructions have been given over (II) the number of affirmative votes
being cast with respect to such allocated Shares pursuant to section
12.3(b)(i)(A); or
(ii) if the Trustee shall determine that it may not, consistent with
its fiduciary duties, vote the allocated Shares for which no written
instructions have been given in the manner described in section 12.3(b)(i),
it shall vote such Shares in such manner as it, in its discretion, may
determine to be in the best interests of the persons to whose Share
Investment Accounts such Shares have been allocated.
(c) (i) The voting rights appurtenant to Financed Shares shall be
exercised as follows with respect to each matter as to which holders of
Shares may vote:
(A) a number of votes equal to the product of (I) the total
number of votes appurtenant to Financed Shares allocated to the Loan
Repayment Account on the ap plicable record date; multiplied by (II)
a fraction, the numerator of which is the total number of affirmative
votes cast by Participants, Former Participants and the Benefi
ciaries of deceased Former Participants with respect to such matter
pursuant to section 12.3(a) and the denominator of which is the total
number of affirmative and negative votes cast by Participants, Former
Participants and the Beneficiaries of deceased Former Participants,
shall be cast in the affirmative; and
(B) a number of votes equal to the excess of (I) the total
number of votes appurtenant to Financed Shares allocated to the Loan
Repayment Account on the applicable record date, over (II) the number
of affirmative votes cast pursuant to section 12.3(c)(i)(A) shall be
cast in the negative.
To the extent that the Financed Shares consist of more than one class of Shares,
this section 12.3(c)(i) shall be applied separately with respect to each class
of Shares.
25
<PAGE>
(ii) If voting rights are to be exercised with respect to Financed
Shares as provided in section 12.3(c)(i)(A) and (B) at a time when there
are no Shares allocated to the Share Investment Accounts of Participants,
Former Participants and the Beneficiaries of deceased Former Participants,
then the voting rights appurtenant to Financed Shares shall be exercised as
follows with respect to each matter as to which holders of Shares may vote:
(A) Each person who is a Participant on the applicable record
date and who was a Participant on the last day of the Plan Year ending
on or immediately prior to such record date will be granted a number
of votes equal to the quotient, rounded to the nearest integral
number, of (I) such Participant's Allocation Compensation for the Plan
Year ending on or immediately prior to such record date (or for the
portion of such Plan Year during which he was a Participant); divided
by (II) $1,000.00; and
(B) a number of votes equal to the product of (I) the total
number of Financed Shares allocated to the Loan Repayment Account on
the applicable record date; multiplied by (II) a fraction, the
numerator of which is the total number of votes that are cast in the
affirmative with respect to such matter pursuant to section
12.3(c)(ii)(A) and the denominator of which is the total number of
votes that are cast either in the affirmative or in the negative with
respect to such matter pursuant to section 12.3(c)(ii)(A), shall be
cast in the affirmative; and
(C) a number of votes equal to the excess of (I) the total
number of Financed Shares allocated to the Loan Repayment Account on
the applicable record date, over (II) the number of affirmative votes
cast with respect to such matter pursuant to section 12.3(c)(ii)(B),
shall be cast in the negative.
To the extent that the Financed Shares consist of more than one class of Shares,
this section 12.3(c)(ii) shall be applied separately with respect to each class
of Shares.
Section 12.4 Tender Offers.
-------------
(a) Each person shall direct whether Shares allocated to his Share
Investment Account will be delivered in response to any Tender Offer. Such
person shall, for such purpose, be deemed a "named fiduciary" within the
meaning of section 402(a)(2) of ERISA. Such a direction shall be given by
completing and filing with the Trustee or such other person who shall be
independent of the Employer as the Committee shall designate, at least 10
days prior to the latest date for exercising a right to deliver Shares
pursuant to such Tender Offer, a written direction in the form and manner
prescribed by the Committee. The Trustee or other person designated by the
Committee shall tabulate the directions given on a strictly confidential
basis, and shall provide the Plan Administrator with only the final results
of the tabulation. The final results of the tabulation shall be followed
by the Committee in directing the number of Shares to be delivered. The
Committee shall make a reasonable effort to furnish, or cause to be
furnished, to each person for whom a Share Investment Account is
maintained, all information known by the Committee to have been furnished
by the issuer or by or on behalf of any person making such Tender Offer, to
the holders of Shares in connection with such Tender Offer.
26
<PAGE>
(b) To the extent that any person shall fail to give instructions
with respect to Shares allocated to his Share Investment Account:
(i) the Trustee shall (A) tender or otherwise offer for purchase,
exchange or redemption a number of such Shares equal to the product of (I)
the number of allocated Shares for which no written instructions have been
given, multiplied by (II) a fraction, the numerator of which is the number
of allocated Shares tendered or otherwise offered for purchase, exchange or
redemption in accordance with written instructions given as provided in
section 12.4(a) and the denominator of which is the aggregate number of
allocated Shares for which written instructions have been given as
aforesaid, and (B) withhold a number of Shares equal to the excess (if any)
of (I) the number of allocated Shares for which no written instructions
have been given over (II) the number of Shares being tendered or otherwise
offered pursuant to section 12.4(b)(i)(A); or
(ii) if the Trustee shall determine that it may not, consistent with
its fiduciary duties, exercise the tender or other rights appurtenant to
allocated Shares for which no written instructions have been given in the
manner described in section 12.4(b)(i), it shall tender, or otherwise
offer, or withhold such Shares in such manner as it, in its discretion, may
determine to be in the best interests of the persons to whose Share
Investment Accounts such Shares have been allocated.
(c) In the case of any Tender Offer, any Financed Shares held in the
Loan Repayment Account shall be dealt with as follows:
(i) If such Tender Offer occurs at a time when there are no Shares
allocated to the Share Investment Accounts of Participants, Former
Participants and the Beneficiaries of deceased Former Participants, then
the disposition of the Financed Shares shall be deter mined as follows:
(A) each person who is a Participant on the applicable record
date and who was a Participant on the last day of the Plan Year ending
on or immediately prior to such record date will be granted a number
of tender rights equal to the quotient, rounded to the nearest
integral number, of (I) such Participant's Allocation Compensation
for the Plan Year ending on or immediately prior to such record date
(or for the portion of such Plan Year during which he was a
Participant), divided by (II) $1,000.00; and
(B) on the last day for delivering Shares or otherwise
responding to such Tender Offer, a number of Shares equal to the
product of (I) the total number of Financed Shares allocated to the
Loan Repayment Account on the last day of the effective period of such
Tender Offer; multiplied by (II) a fraction, the numerator of which is
the total number of tender rights exercised in favor of the delivery
of Shares in response to the Tender Offer pursuant to section
12.4(c)(i)(A) and the denominator of which is the total number of
tender rights that are exercisable in response to the Tender Offer
pursuant to section 12.4(c)(i)(A), shall be delivered in response to
the Tender Offer; and
27
<PAGE>
(C) a number of Shares equal to the excess of (I) the total
number of Financed Shares allocated to the Loan Repayment Account on
the last day of the effective period of such Tender Offer; over (II)
the number of Shares to be delivered in response to the Tender Offer
pursuant to section 12.4(c)(i)(B), shall be withheld from delivery.
(ii) If such Tender Offer occurs at a time when the voting rights
appurtenant to such Financed Shares are to be exercised in accordance with
section 12.3(c)(i), then:
(A) on the last day for delivering Shares or otherwise
responding to such Tender Offer, a number of Financed Shares equal to
the product of (I) the total number of Financed Shares allocated to
the Loan Repayment Account on the last day of the effective period of
such Tender Offer; multiplied by (II) a fraction, the numerator of
which is the total number of Shares delivered from the Share Invest
ment Accounts of Participants, Former Participants and the
Beneficiaries of deceased Former Participants in response to such
Tender Offer pursuant to section 12.4(a), and the denominator of which
is the total number of Shares allocated to the Share Investment
Accounts of Participants, Former Participants and Beneficiaries of
deceased Former Participants immediately prior to the last day for
delivering Shares or otherwise responding to such Tender Offer, shall
be delivered; and
(B) a number of Financed Shares equal to the excess of (I) the
total number of Financed Shares allocated to the Loan Repayment
Account on the last day for delivering Shares or otherwise responding
to such Tender Offer; over (II) the number of Financed Shares to be
delivered pursuant to section 12.4(c)(ii)(A), shall be withheld from
delivery.
To the extent that the Financed Shares consist of more than one class of Shares,
this section 12.4(c) shall be applied separately with respect to each class of
Shares.
Section 12.5 Dissent and Appraisal Rights.
----------------------------
(a) Each person shall have the right to direct the manner in which
all dissent and appraisal rights appurtenant to Shares allocated to his
Share Investment Account will be exercised. Such person shall, for such
purpose, be deemed a "named fiduciary" within the meaning of section
402(a)(2) of ERISA. Such a direction shall be given by completing and
filing with the Trustee or such other person who shall be independent of
the Employer as the Committee shall designate, at least 10 days prior to
the latest date for exercising such dissent and appraisal rights, a written
direction in the form and manner prescribed by the Committee. The Trustee
or other person designated by the Committee shall tabulate the directions
given on a strictly confidential basis, and shall provide the Committee
with only the final results of the tabulation. The final results of the
tabulation shall be followed by the Committee in directing the Trustee as
to the manner in which such dissent and appraisal rights shall be
exercised. The Committee shall make a reasonable effort to furnish, or
cause to be furnished, to each person for whom a Share Investment Account
is maintained, all information known by the Committee to have been
furnished by the issuer or by or on behalf of any person to the holders of
Shares in connection with such dissent and appraisal rights.
28
<PAGE>
(b) To the extent that any person for whom a Share Investment Account
is maintained shall fail to give instructions with respect to dissent and
appraisal rights appurtenant to Shares attributable to his interest, the
Committee shall direct the Trustee to exercise dissent and appraisal rights
as to those Shares in such manner as the Committee shall determine to be in
the best interest of the person to whom such Shares are attributable.
Article XII
-----------
Payment of Benefits
-------------------
Section 13.1 In General.
----------
The balance credited to a Participant's or Former Participant's
Account under the Plan shall be paid only at the times, to the extent, in the
manner and to the persons provided in this Article XIII.
Section 13.2 Designation of Beneficiaries.
----------------------------
(a) Subject to section 13.2(b), any person entitled to a benefit
under the Plan may designate a Beneficiary to receive any amount to which
he is entitled that remains undistributed on the date of his death. Such
person shall designate his Beneficiary (and may change or revoke any such
designation) in writing in the form and manner prescribed by the Plan
Administrator. Such designation, and any change or revocation thereof,
shall be effective only if received by the Plan Administrator prior to such
person's death and shall become irrevocable upon such person's death.
(b) A Participant or Former Participant who is married shall
automatically be deemed to have designated his spouse as his Beneficiary,
unless, prior to the time such designation would, under section 13.2(a),
become irrevocable:
(i) the Participant or Former Participant designates an additional or
a different Beneficiary in accordance with this section 13.2; and
(ii) (A) the spouse of such Participant or Former Participant
consents to such designation in a writing that acknowledges the effect of
such consent and is witnessed by a Plan representative or a notary public;
or (B) the spouse of such Participant or Former Participant has
previously consented to such designation by signing a written waiver of any
right to consent to any designation made by the Participant or Former
Participant, and such waiver acknowledged the effect of the waiver and was
witnessed by a Plan representative or a notary public; or (C) it is
established to the satisfaction of a Plan representative that the consent
required under section 13.2(b)(ii)(A) may not be obtained because such
spouse cannot be located or because of other circumstances permitted under
regulations issued by the Secretary of the Treasury.
(c) In the event that a Beneficiary entitled to payments hereunder
shall die after the death of the person who designated him but prior to
receiving payment of his entire interest in the Account of the person who
designated him, then such Beneficiary's interest in the Account of such
person, or any unpaid balance thereof, shall be paid as provided in
29
<PAGE>
section 13.3 to the Beneficiary who has been designated by the deceased
Beneficiary, or if there is none, to the executor or administrator of the
estate of such deceased Beneficiary, or if no such executor or
administrator is appointed within such time as the Plan Administrator, in
his sole discretion, shall deem reasonable, to such one or more of the
spouse and descendants and blood relatives of such deceased Beneficiary as
the Plan Administrator may select. If a person entitled to a benefit under
the Plan and any of the Beneficiaries designated by him shall die in such
circumstances that there shall be substantial doubt as to which of them
shall have been the first to die, for all purposes of the Plan, the person
who made the Beneficiary designation shall be deemed to have survived such
Beneficiary.
(d) If no Beneficiary survives the person entitled to the benefit
under the Plan or if no Beneficiary has been designated by such person,
such benefit shall be paid to the executor or administrator of the estate
of such person, or if no such executor or administrator is appointed within
such time as the Plan Administrator, in his sole discretion, shall deem
reasonable, to such one or more of the spouse and descendants and blood
relatives of such deceased person as the Plan Administrator may select.
Section 13.3 Distributions to Participants and Former Participants.
-----------------------------------------------------
(a) (i) Subject to the provisions of section 13.7 with respect to
required minimum distributions, the vested portion of the balance credited
to a Participant's or a Former Participant's Account shall be distributed
to him commencing as of the last Valuation Date to occur in the Plan Year
in which the Participant or Former Participant terminates employment with
the Employer or attains age 65, whichever is later; unless the Participant
or Former Participant elects otherwise pursuant to section 13.3(a)(ii), and
the payment, or first in a series of payments, is actually made within
three months following such Valuation Date.
(ii) A Participant or Former Participant may, upon request on a form
provided by the Plan Administrator and filed with the Plan Administrator not
later than 15 days prior to the date on which his employment with the Employer
terminates, elect that his vested interest in his Account be paid commencing as
of any earlier or later Valuation Date after his termination of employment, but
in no event later than the last Valuation Date to occur in the calendar year in
which the Participant or Former Participant attains age 70 1/2, in which case
the payment, or first in a series of payments, shall be made within three months
following such Valuation Date.
(b) (i) Subject to section 13.3(b)(ii), the vested portion of the
balance credited to the Account of a Participant or Former Participant will
be paid to him, commencing as of the Valuation Date determined under
section 13.3(a), in substantially equal annual installments over a fixed
period equal to the greater of:
(A) five years; or
(B) if the vested portion of the balance credited to the Account
of the Par ticipant or Former Participant, determined as of the
Valuation Date determined under section 13.3(a), is greater than
$500,000 (or such larger amount as may be prescribed by the Secretary
of the Treasury pursuant to section 409(o) of the Code), the sum of
five years plus the lesser of (I) five additional years, or (II) one
additional year for
30
<PAGE>
each $100,000 (or fraction thereof) by which the vested portion of the
balance credit ed to the Participant's or Former Participant's Account
exceeds $500,000 (or such larger amount as may be prescribed by the
Secretary of the Treasury pursuant to section 409(o) of the Code).
(ii) A Participant or Former Participant may, upon request on a form
provided by the Plan Administrator and filed with the Plan Administrator not
later than 15 days prior to the date on which his employment terminates, elect
that the vested portion of the balance credited to his Account be paid,
commencing as of the Valuation Date determined under section 13.3(a):
(A) in substantially equal annual installments over a fixed
period not to exceed the lesser of (I) 10 years, or (II) the life
expectancy of the Participant or Former Participant, or, if his
Beneficiary is a natural person, the joint life and last survivor
expectancy of the Participant or Former Participant and his
Beneficiary; or
(B) subject to section 13.4, in a lump sum payment.
(c) If any person entitled to a benefit under the Plan dies before
his entire benefit has been distributed to him, then the remainder of such
benefit shall be paid to the Beneficiary designated by him under section
13.2 either:
(i) in a lump sum distribution as of the Valuation Date next
following the date of his death, and the amount thereof shall be based upon
the vested portion of the balance credited to his Account as of such
Valuation Date; or
(ii) if, prior to the death of the Participant or Former Participant
whose vested Account is being distributed, an election pursuant to section
13.3(b)(ii)(B) is in effect for him, in a lump sum distribution as of the
Valuation Date specified in such election, or, if earlier, as of the latest
Valuation Date that would permit payment to be made within five years after
the Participant's or Former Participant's death, and the amount thereof
shall be based upon the vested portion of the balance credited to his
Account as of such Valuation Date; or
(iii) if, prior to the death of the Participant or Former Participant
whose vested Account is being distributed, an election pursuant to section
13.3(b)(ii)(A) is in effect for him:
(A) over the period and at the times set forth in such
election, if distribution has begun prior to the Participant's or
Former Participant's death; or
(B) commencing at the time set forth in such election and over
the period set forth in such election (or, if less, over a period
equal to the life expectancy of the Beneficiary of the deceased
Participant or Former Participant), if the deceased Participant's or
Former Participant's spouse is his Beneficiary and distribution has
not begun prior to the deceased Participant's or Former Participant's
death; or
(C) commencing on the date specified in such election (or, if
earlier, the last Valuation Date that will permit payment to begin
within one year after the
31
<PAGE>
deceased Participant's or Former Participant's death) and over the
period set forth in such election (or, if less, over a period equal to
the life expectancy of the Beneficiary of the deceased Participant or
Former Participant), if the deceased Participant's or Former
Participant's Beneficiary is a natural person other than his spouse
and distribution has not begun prior to the deceased Participant's or
Former Participant's death;
and the amount thereof shall be based upon the vested portion of the
balance credited to his Account as of the Valuation Dates as of which
payments are determined; or
(iv) upon written application of the Beneficiary made in such form and
manner as the Plan Administrator may prescribe, at another time or in
another manner permitted under section 13.3(a) or (b), subject to the
following limitations:
(A) (I) If such Beneficiary is a natural person other than the
spouse of the deceased Participant or Former Participant whose vested
Account is being distributed, a distribution that commences within one
year after such deceased Participant's or Former Participant's death
shall be made over a fixed period that does not exceed the life
expectancy of such Beneficiary when distribution commences.
(II) If such Beneficiary is the spouse of the deceased
Participant or Former Participant whose vested Account is being
distributed, a distribution that commences no later than the later of:
(1) the date on which the deceased Participant or Former Participant
would have attained age 70 1/2 had he lived; or (2) the first
anniversary of the death of such deceased Participant or Former
Participant; shall be made over a fixed period that does not exceed
the life expectancy of such Beneficiary when distribution commences.
(III) In all other cases where the spouse of the deceased
Participant or Former Participant whose vested Account is being
distributed is not the Beneficiary, payment must be completed within
five years after the death of such deceased Participant or Former
Participant.
(B) In cases where distribution has commenced prior to the
death of the deceased Participant or Former Participant whose vested
Account is being distributed, distribution must be completed as least
as rapidly as under the method in effect prior to such deceased
Participant's or Former Participant's death.
Section 13.4 Manner of Payment.
-----------------
(a) Subject to section 13.4(b), payments of distributions made
pursuant to section 13.3 or section 13.7 shall be paid, in accordance with
the written direction of the person requesting the payment, in whole
Shares, in cash, or in a combination of cash and whole Shares. Such
written direction shall be given in such form and manner as the Plan
Administrator may prescribe. If no such direction is given, then payment
shall be made in the maximum number of whole Shares that may be acquired
with the amount of the payment,
32
<PAGE>
plus, if necessary, an amount of money equal to any remaining amount of the
payment that is less than the Fair Market Value of a whole Share.
(b) No distribution of a lump sum payment shall be made in cash to
the extent that the making of such distribution, when combined with all
other distributions to be made in cash as of the same Valuation Date, would
require the sale of Shares constituting 1% or more of all outstanding
Shares; provided, however, that this section 13.4(b) shall not apply to or
in respect of a Participant or Former Participant:
(i) following such Participant's or Former Participant's termination
of employment with the Employer on account of his Retirement or Disability;
or
(ii) following such Participant's or Former Participant's 65th
birthday; or
(iii) following the death of such Participant or Former Participant.
Section 13.5 Put Options.
-----------
(a) Except as provided otherwise in section 13.5(b), each
Participant or Former Participant to whom Shares are distributed under the
Plan, each Beneficiary of a deceased Participant or Former Participant,
including the estate of a deceased Participant or Former Participant, to
whom Shares are distributed under the Plan, and each person to whom such a
Participant, Former Participant or Beneficiary gives Shares that have been
distributed under the Plan shall have the right to require the Employer to
purchase from him all or any portion of such Shares. A person shall
exercise such right by delivering to the Employer a written notice, in such
form and manner as the Employer may by written notice to such person
prescribe, setting forth the number of Shares to be purchased by the
Employer, the number of the stock certificate evidencing such person's
ownership of such Shares, and the effective date of purchase. Such notice
shall be given, and the effective date of the purchase specified therein
shall be, no later than the last day of the fifteenth calendar month to
begin after the date on which the Shares to be purchased by the Employer
were distributed from the Plan. As soon as practicable following its
receipt of such notice, the Employer shall take such actions as are
necessary to purchase the Shares specified in such notice at a price per
Share equal to the Fair Market Value of a Share determined as of the
effective date of the purchase.
(b) The Employer shall have no obligation to purchase any Share (i)
pursuant to a notice given, or on an effective date of purchase, after the
last day of the fifteenth calendar month to begin after the date on which
such Share was distributed from the Plan; (ii) following the earliest date
on which Shares are publicly traded on an established market; or (iii) if
the Employer is a "bank" within the meaning of section 581 of the Code and
is prohibited by law from redeeming or purchasing its own securities.
Section 13.6 Right of First Refusal.
----------------------
(a) For any period during which Shares are not publicly traded on
any established market, no person who owns Shares that were distributed
from the Plan, other than a person to whom such Shares were sold in
compliance with this section 13.6, shall sell such Shares
33
<PAGE>
to any person other than the Employer without first offering to sell such
Shares to the Employer (or person designated by the Employer) in accordance
with this section 13.6.
(b) In the event that a person to whom this section 13.6 applies
shall receive and desire to accept from a person other than the Employer a
bona fide offer to purchase Shares to which this section 13.6 applies, he
shall furnish to the Employer a written notice which shall:
(i) include a copy of such offer to purchase;
(ii) offer to sell to the Employer the Shares subject to such offer
to purchase at a price per Share that is equal to the greater of:
(A) the price per Share specified in such offer to purchase; or
(B) the Fair Market Value of a Share as of the date of purchase;
and otherwise upon the same terms and conditions as those specified in such
offer to purchase; and
(iii) include an indication of his intention to accept such offer to
purchase if the Employer does not accept his offer to sell.
(c) The Employer shall have the right to purchase the Shares covered
by the offer to sell contained in a notice given pursuant to section
13.6(b), on the terms and conditions specified in such notice, by written
notice given to the party making the offer to sell not later than the
fourteenth day after the notice described in section 13.6(b) is given. If
the Employer does not give such a notice during the prescribed fourteen day
period, then the person owning such Shares may accept the offer to purchase
described in the notice.
Section 13.7 Minimum Required Distributions.
------------------------------
(a) Required minimum distributions of a Participant's or Former
Participant's Account shall commence no later than:
(i) if the Participant or Former Participant is not a Five Percent
Owner at any time during the Plan Year ending in the calendar year in which
he attains age 70 1/2, the later of (A) the calendar year in which he
attains or attained age 70 1/2 or (B) the calendar year in which he
terminates employment with the Employer; or
(ii) if the Participant or Former Participant is or was a Five
Percent Owner at any time during the Plan Year ending in the calendar year
in which he attains age 70 1/2, the later of (A) the calendar year in which
he attains age 70 1/2 or (B) the calendar year in which he first becomes a
Five Percent Owner.
(b) The required minimum distributions contemplated by section
13.7(a) shall be made as follows:
34
<PAGE>
(i) The minimum required distribution to be made for the calendar
year for which the first minimum distribution is required shall be no later
than April 1st of the immediately following calendar year and shall be
equal to the quotient obtained by dividing (A) the vested balance credited
to the Participant's or Former Participant's Account as of the last
Valuation Date to occur in the calendar year immediately preceding the
calendar year in which the first minimum distribution is required (adjusted
to account for any additions thereto or subtractions therefrom after such
Valuation Date but on or before December 31st of such calendar year); by
(B) the Participant's or Former Participant's life expectancy (or, if his
Beneficiary is a natural person, the joint life and last survivor
expectancy of him and his Beneficiary); and
(ii) the minimum required distribution to be made for each calendar
year following the calendar year for which the first minimum distribution
is required shall be made no later than December 31st of the calendar year
for which the distribution is required and shall be equal to the quotient
obtained by dividing (A) the vested balance credited to the Participant's
or Former Participant's Account as of the last Valuation Date to occur in
the calendar year prior to the calendar year for which the distribution is
required (adjusted to account for any additions thereto or subtractions
therefrom after such Valuation Date but on or before December 31st of such
calendar year and, in the case of the distribution for the calendar year
immediately following the calendar year for which the first minimum
distribution is required, reduced by any distribution for the prior
calendar year that is made in the current calendar year); by (B) the
Participant's or Former Participant's life expectancy (or, if his
Beneficiary is a natural person, the joint life and last survivor
expectancy of him and his Beneficiary).
For purposes of this section 13.7, the life expectancy of a Participant or
Former Participant (or the joint life and last survivor expectancy of a
Participant or Former Participant and his designated Beneficiary) for the
calendar year in which the Participant or Former Participant attains age 70 1/2
shall be determined on the basis of Tables V and VI, as applicable, of section
1.72-9 of the Income Tax Regulations as of the Participant's or Former
Participant's and Beneficiary's birthday in such year. Such life expectancy or
joint life and last survivor expectancy for any subsequent year shall be equal
to the excess of (1) the life expectancy or joint life and last survivor
expectancy for the year in which the Participant or Former Participant attains
age 70 1/2, over (2) the number of whole years that have elapsed since the
Participant or Former Participant attained age 70 1/2.
(c) Payment of the distributions required to be made to a Participant
or Former Participant under this section 13.7 shall be made in accordance
with section 13.4.
Section 13.8 Direct Rollover of Eligible Rollover Distributions.
--------------------------------------------------
(a) A Distributee may elect, at the time and in the manner prescribed
by the Plan Administer, to have any portion of an Eligible Rollover
Distribution paid directly to an Eligible Retirement Plan specified by the
Distributee in a Direct Rollover.
(b) The following rules shall apply with respect to Direct Rollovers
made pursuant to this section 13.8:
35
<PAGE>
(i) A Participant may only elect to make a Direct Rollover of an
Eligible Rollover Distribution if such Eligible Rollover Distribution (when
combined with other Eligible Rollover Distributions made or to be made in
the same calendar year) is reasonably expected to be at least $200;
(ii) If a Participant elects a Direct Rollover of a portion of an
Eligible Rollover Distribution, that portion must be equal to at least
$500; and
(iii) A Participant may not divide his or her Eligible Rollover
Distribution into separate distributions to be transferred to two or more
Eligible Retirement Plans.
(c) For purposes of this section 13.8 and any other applicable
section of the Plan, the following definitions shall have the following
meanings:
(i) "Direct Rollover" means a payment by the Plan to the Eligible
Retirement Plan specified by the Distributee.
(ii) "Distributee" means an Employee or former Employee. In
addition, the Employee's or former Employee's surviving spouse and the
Employee's spouse or former spouse who is the alternate payee under a
Qualified Domestic Relations Order are considered Distributees with regard
to the interest of the spouse or former spouse.
(iii) "Eligible Retirement Plan" means an individual retirement
account described in section 408(a) of the Code, an individual retirement
annuity described in section 408(b) or the Code, an annuity plan described
in section 403(a) of the Code, or a qualified trust described in section
401(a) of the Code that accepts the Distributee's Eligible Rollover
Distribution. However, in the case of an Eligible Rollover Distribution to
the current or former spouse who is the alternative payee under a Qualified
Domestic Relations Order or to a surviving spouse, an Eligible Retirement
Plan is an individual retirement account or individual retirement annuity.
(iv) "Eligible Rollover Distribution" means any distribution of all
or any portion of the balance to the credit of the Distributee, except that
an Eligible Rollover Distribution does not include: any distribution that
is one of a series of substantially equal periodic payments (not less
frequently than annually) made for the life (or life expectancy) of the
Distributee or the joint lives (or joint life expectancies) of the
Distributee's designated Beneficiary, or for a specified period of ten
years or more; any distribution to the extent such distribution is required
under section 401(a)(9) of the Code; and the portion of any distribution
that is not includible in gross income (determined without regard to the
exclusion for net unrealized appreciation with respect to employer
securities).
Section 13.9 Valuation of Shares Upon Settlement to a Participant.
----------------------------------------------------
Notwithstanding any contrary provision in this Article XIII, in the
event that all or a portion of a payment of a distribution to a Participant is
to be made in cash, such Participant shall only be entitled to receive the
proceeds of the Shares allocated to his Account that are sold in connection with
such distribution and which are valued as of the date of such sale.
36
<PAGE>
Article XIV
-----------
Change in Control
-----------------
Section 14.1 Definition of Change in Control. A Change in Control
-------------------------------
of the Company ("Change in Control") shall be deemed to have occurred upon the
happening of any of the following events:
(i) approval by the stockholders of the Company of a transaction
that would result in the reorganization, merger or consolidation of the
Company, respectively, with one or more other persons, other than a
transaction following which:
(A) at least 51% of the equity ownership interests of the entity
resulting from such transaction are beneficially owned (within the
meaning of Rule 13d-3 promulgated under the Securities Exchange Act of
1934, as amended "Exchange Act") in substantially the same relative
proportions by persons who, immediately prior to such transaction,
beneficially owned (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) at least 51% of the outstanding equity ownership
interests in the Company; and
(B) at least 51% of the securities entitled to vote generally in
the election of directors of the entity resulting from such
transaction are beneficially owned (within the meaning of Rule 13d-3
promulgated under the Exchange Act) in substantially the same relative
proportions by persons who, immediately prior to such transaction,
beneficially owned (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) at least 51% of the securities entitled to vote
generally in the election of directors of the Company;
(ii) the acquisition of all or substantially all of the assets of the
Company or beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 25% or more of the outstanding
securities of the Company entitled to vote generally in the election of
directors by any person or by any persons acting in concert, or approval by
the stockholders of the Company of any transaction which would result in
such an acquisition;
(iii) a complete liquidation or dissolution of the Company, or
approval by the stockholders of the Company of a plan for such liquidation
or dissolution;
(iv) the occurrence of any event if, immediately following such
event, at least 50% of the members of the Board of the Company do not
belong to any of the following groups:
(A) individuals who were members of the Board of the Company on
the Effective Date; or
37
<PAGE>
(B) individuals who first became members of the Board of the
Company after the Effective Date either:
(I) upon election to serve as a member of the Board of the
Company by affirmative vote of three-quarters of the members of
such Board, or of a nominating committee thereof, in office at
the time of such first election; or
(II) upon election by the stockholders of the Company to
serve as a member of the Board of the Company, but only if
nominated for election by affirmative vote of three-quarters of
the members of the Board of the Company, or of a nominating
committee thereof, in office at the time of such first
nomination;
provided, however, that such individual's election or nomination did
not result from an actual or threatened election contest (within the
meaning of Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies or
consents (within the meaning of Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) other than by or on behalf of the
Board of the Company; or
(v) any event which would be described in section 12(a)(i), (ii),
(iii) or (iv) if the term "Bank" were substituted for the term "Company"
therein or any event that results in a "Change in Control of the Bank"
within the meaning of the "Change in Bank Control Act" and the rules and
regulations promulgated by the Federal Deposit Insurance Agency ("FDIC").
In no event, however, shall a Change in Control be deemed to have occurred as a
result of: (i) any acquisition of securities or assets of the Company, the Bank,
or a subsidiary of either of them, by the Company, the Bank, or a subsidiary of
either of them, or by any employee benefit plan maintained by any of them; or
(ii) the conversion of Rome MHC to a stock form company and the issuance of
additional shares of the Company in connection therewith. For purposes of this
section 12(a), the term "person" shall have the meaning assigned to it under
sections 13(d)(3) or 14(d)(2) of the Exchange Act.
Section 14.2 Vesting on Change of Control.
----------------------------
Upon the effective date of a Change in Control, the Account of each
person who would then, upon termination of the Plan, be entitled to a benefit,
shall be fully vested and nonforfeitable.
Section 14.3 Repayment of Loan.
-----------------
(a) Upon a Change in Control described in section 14.1(c) (or which
would be described in section 14.1(c) if "The Rome Savings Bank" were
substituted for "Rome Bancorp, Inc." thereunder), the Committee shall
direct the Trustee to sell a sufficient number of Shares to repay any
outstanding Share Acquisition Loan in full. The proceeds of such sale shall
be used to repay such Share Acquisition Loan. After repayment of the Share
38
<PAGE>
Acquisition Loan, all remaining Shares which had been unallocated (or the
proceeds thereof, if applicable) shall be allocated among the accounts of
all Participants who were employed by an Employer on the effective date of
such Change in Control. Such allocation of Shares or proceeds shall be
credited as of the date on which the Change in Control occurs to the
Accounts of each Participant who has not had a termination of participation
under section 2.3 as of such date (each, an "Affected Participant"), in
proportion to their Allocation Compensation, for the period, beginning on
the January 1 immediately preceding the date on which the Change in Control
occurs and ending on the date on which the Change in Control occurs. If any
amount cannot be allocated to an Affected Participant in the year of such
Change in Control as a result of the limitations of section 415 of the
Code, the amounts will be allocated in subsequent years to those persons
who were Affected Participants and who continue to be Participants in the
Plan until finally distributed to Affected Participants.
(b) In the event that the application of section 415 of the Code
prevents the allocation of all of the Shares or other assets released from
the Loan Repayment Account as provided in section 14.3(a) as of the
effective date of the Change in Control, each Affected Participant shall be
entitled to receive a supplemental benefit payment directly from the
Employer. The supplemental benefit payment to each Affected Participant
shall be an amount equal to the excess of:
(i) the total amount of Shares or other property that would be
allocated to such Affected Participant's Account under section 14.3(a) if
section 415 of the Code did not apply; over
(ii) the total of Shares or other property actually allocated to such
Affected Participant's Account under section 14.3(a).
Such payment (without offset for any allocations which may occur under this Plan
subsequent to the Change in Control) shall be made as soon as practicable, but
in any event within ten business days, after the effective date of the Change in
Control. This section 14.3(b) shall be treated as a separate, non-qualified
"excess benefit plan" within the meaning of section 3(34) of ERISA and shall be
interpreted, administered and enforced in a manner consistent with this
intention. To the extent that any Affected Participant is entitled to the same
or a similar payment under any other non-qualified plan, program or arrangement
of the Employer, any payment under this section 14.3(b) shall be coordinated
with the payments under such other non-qualified programs, plan or arrangements
in such manner as shall be determined by the Plan Administrator to be necessary
to prevent the duplication of benefits.
Section 14.4 Plan Termination After Change in Control.
----------------------------------------
After repayment of the loan and allocation of shares or proceeds as
provided in section 14.3, the Plan shall be terminated and all amounts shall be
distributed as soon as practicable.
Section 14.5 Amendment of Article XIV.
------------------------
Article XIV of the Plan may not be amended after a Change in Control
of the Employer unless required by the Internal Revenue Service as a condition
to the continued treatment of the Plan as a tax-qualified plan under section
401(a) of the Code.
39
<PAGE>
Article XV
----------
Administration
--------------
Section 15.1 Named Fiduciaries.
-----------------
The term "Named Fiduciary" shall mean (but only to the extent of the
responsibilities of each of them) the Plan Administrator, the Committee, the
Board and the Trustee. This Article XV is intended to allocate to each Named
Fiduciary the responsibility for the prudent execution of the functions assigned
to him or it, and none of such responsibilities or any other responsibility
shall be shared by two or more of such Named Fiduciaries. Whenever one Named
Fiduciary is required by the Plan or Trust Agreement to follow the directions of
another Named Fiduciary, the two Named Fiduciaries shall not be deemed to have
been assigned a shared responsibility, but the responsibility of the Named
Fiduciary giving the directions shall be deemed his sole responsibility, and the
responsibility of the Named Fiduciary receiving those directions shall be to
follow them insofar as such instructions are on their face proper under
applicable law.
Section 15.2 Plan Administrator.
------------------
There shall be a Plan Administrator, who shall be The Rome Savings
Bank, or such Employee or officer as may be designated by the Board, as
hereinafter provided, and who shall, subject to the responsibilities of the
Committee and the Board, have the responsibility for the day-to-day control,
management, operation and administration of the Plan (except trust duties). The
Plan Administrator shall have the following responsibilities:
(a) To maintain records necessary or appropriate for the
administration of the Plan;
(b) To give and receive such instructions, notices, information,
materials, reports and certifications to the Trustee as may be necessary or
appropriate in the administration of the Plan;
(c) To prescribe forms and make rules and regulations consistent with
the terms of the Plan and with the interpretations and other actions of the
Committee;
(d) To require such proof of age or evidence of good health of an
Employee, Participant or Former Participant or the spouse of either, or of
a Beneficiary as may be necessary or appropriate in the administration of
the Plan;
(e) To prepare and file, distribute or furnish all reports, plan
descriptions, and other information concerning the Plan, including, without
limitation, filings with the Secretary of Labor and communications with
Participants, Former Participants and other persons, as shall be required
of the Plan Administrator under ERISA;
(f) To determine any question arising in connection with the Plan,
and the Plan Administrator's decision or action in respect thereof shall be
final and conclusive and binding upon the Employer, the Trustee,
Participants, Former Participants, Beneficiaries and any other person
having an interest under the Plan; provided, however, that any question
relating
40
<PAGE>
to an inconsistency or an omission in the Plan, or an interpretation of the
provisions of the Plan, shall be referred to the Committee by the Plan
Administrator and the decision of the Committee in respect thereof shall be
final;
(g) Subject to the provisions of section 15.5, to review and dispose
of claims under the Plan filed pursuant to section 15.4 and appeals filed
pursuant to section 15.5;
(h) If the Plan Administrator shall determine that by reason of
illness, senility, insanity, or for any other reason, it is undesirable to
make any payment to a Participant, Former Participant, Beneficiary or any
other person entitled thereto, to direct the application of any amount so
payable to the use or benefit of such person in any manner that he may deem
advisable or to direct in his discretion the withholding of any payment
under the Plan due to any person under legal disability until a
representative competent to receive such payment in his behalf shall be
appointed pursuant to law;
(i) To discharge such other responsibilities or follow such
directions as may be assigned or given by the Committee or the Board; and
(j) To perform any duty or take any action which is allocated to the
Plan Administrator under the Plan.
Section 15.3 Committee Responsibilities.
--------------------------
There shall be a Committee consisting of not less than three persons,
who may, but need not be officers of the Bank and who shall be appointed by the
Board and serve at the pleasure of the Board. The Committee shall, subject to
the responsibilities of the Board, have the following responsibilities:
(a) To review the performance of the Plan Administrator;
(b) To hear and decide appeals, pursuant to the claims procedure
contained in section 15.5 of the Plan, taken from the decisions of the Plan
Administrator;
(c) To hear and decide questions, including the interpretation of the
Plan, as may be referred to the Committee by the Plan Administrator;
(d) To review the performance of the Trustee and such investment
managers as may be appointed in or pursuant to the Trust Agreement in
investing, managing and controlling the assets of the Plan;
(e) To the extent required by ERISA, to establish a funding policy
and method consistent with the objectives of the Plan and the requirements
of ERISA, and to review such policy and method at least annually;
(f) To report and make recommendations to the Board regarding changes
in the Plan, including changes in the operation and management of the Plan
and removal and replacement of the Trustee and such investment managers as
may be appointed in or pursuant to the Trust Agreement;
41
<PAGE>
(g) To designate an Alternate Plan Administrator to serve in the
event that the Plan Administrator is absent or otherwise unable to
discharge his responsibilities;
(h) To remove and replace the Plan Administrator or Alternate, or
both of them, and to fill a vacancy in either office;
(i) To the extent provided under and subject to the provisions of the
Trust Agreement, to appoint "investment managers" as defined in section
3(38) of ERISA to manage and control (including acquiring and disposing of)
all or any of the assets of the Plan;
(j) With the prior approval of the Board, to direct the Trustee to
obtain one or more Share Acquisition Loans;
(k) To develop and provide procedures and forms necessary to enable
Participants to give voting and tendering directions on a confidential
basis;
(l) To discharge such other responsibilities or follow such
directions as may be assigned or given by the Board; and
(m) To perform any duty or take any action which is allocated to the
Committee under the Plan.
The Committee shall have the power and authority necessary or appropriate to
carry out its responsibilities.
Section 15.4 Claims Procedure.
----------------
Any claim relating to benefits under the Plan shall be filed with the
Plan Administrator on a form prescribed by him. If a claim is denied in whole
or in part, the Plan Administrator shall give the claimant written notice of
such denial, which notice shall specifically set forth:
(a) The reasons for the denial;
(b) The pertinent Plan provisions on which the denial was based;
(c) Any additional material or information necessary for the claimant
to perfect his claim and an explanation of why such material or information
is needed; and
(d) An explanation of the Plan's procedure for review of the denial
of the claim.
In the event that the claim is not granted and notice of denial of a claim is
not furnished by the 30th day after such claim was filed, the claim shall be
deemed to have been denied on that day for the purpose of permitting the
claimant to request review of the claim.
Section 15.5 Claims Review Procedure.
-----------------------
42
<PAGE>
Any person whose claim filed pursuant to section 15.4 has been denied
in whole or in part by the Plan Administrator may request review of the claim by
the Committee, upon a form prescribed by the Plan Administrator. The claimant
shall file such form (including a statement of his position) with the Committee
no later than 60 days after the mailing or delivery of the written notice of
denial provided for in section 15.4, or, if such notice is not provided, within
60 days after such claim is deemed denied pursuant to section 15.4. The
claimant shall be permitted to review pertinent documents. A decision shall be
rendered by the Committee and communicated to the claimant not later than 30
days after receipt of the claimant's written request for review. However, if
the Committee finds it necessary, due to special circumstances (for example, the
need to hold a hearing), to extend this period and so notifies the claimant in
writing, the decision shall be rendered as soon as practicable, but in no event
later than 120 days after the claimant's request for review. The Committee's
decision shall be in writing and shall specifically set forth:
(a) The reasons for the decision; and
(b) The pertinent Plan provisions on which the decision is based.
Any such decision of the Committee shall be binding upon the claimant and the
Employer, and the Plan Administrator shall take appropriate action to carry out
such decision.
Section 15.6 Allocation of Fiduciary Responsibilities
and Employment of Advisors.
--------------------------
Any Named Fiduciary may:
(a) Allocate any of his or its responsibilities (other than trustee
responsibilities) under the Plan to such other person or persons as he or
it may designate, provided that such allocation and designation shall be in
writing and filed with the Plan Administrator;
(b) Employ one or more persons to render advice to him or it with
regard to any of his or its responsibilities under the Plan; and
(c) Consult with counsel, who may be counsel to the Employer.
Section 15.7 Other Administrative Provisions.
-------------------------------
(a) Any person whose claim has been denied in whole or in part must
exhaust the administrative review procedures provided in section 15.5 prior
to initiating any claim for judicial review.
(b) No bond or other security shall be required of the Plan
Administrator, a member of the Committee or any officer or Employee of the
Employer to whom fiduciary responsibilities are allocated by a Named
Fiduciary, except as may be required by ERISA.
(c) Subject to any limitation on the application of this section
15.7(c) pursuant to ERISA, neither the Plan Administrator, nor any member
of the Committee, nor any officer or Employee of the Employer to whom
fiduciary responsibilities are allocated by a Named
43
<PAGE>
Fiduciary, shall be liable for any act of omission or commission by himself
or by another person, except for his own individual willful and intentional
malfeasance.
(d) The Plan Administrator or the Committee may, except with respect
to actions under section 15.5, shorten, extend or waive the time (but not
beyond 60 days) required by the Plan for filing any notice or other form
with the Plan Administrator or the Committee, or taking any other action
under the Plan.
(e) The Plan Administrator or the Committee may direct that the costs
of services provided pursuant to section 15.6, and such other reasonable
expenses as may be incurred in the administration of the Plan, shall be
paid out of the funds of the Plan unless the Employer shall pay them.
(f) Any person, group of persons, committee, corporation or
organization may serve in more than one fiduciary capacity with respect to
the Plan.
(g) Any action taken or omitted by any fiduciary with respect to the
Plan, including any decision, interpretation, claim denial or review on
appeal, shall be conclusive and binding on all interested parties and shall
be subject to judicial modification or reversal only to the extent it is
determined by a court of competent jurisdiction that such action or
omission was arbitrary and capricious and contrary to the terms of the
Plan.
Article XVI
-----------
Amendment, Termination and Tax Qualification
--------------------------------------------
Section 16.1 Amendment and Termination by Rome Bancorp, Inc.
-----------------------------------------------
The Employer expects to continue the Plan indefinitely, but
specifically reserves the right, in its sole discretion, at any time, by
appropriate action of the Board, to amend, in whole or in part, any or all of
the provisions of the Plan and to terminate the Plan at any time. Subject to
the provisions of section 16.2, no such amendment or termination shall permit
any part of the Trust Fund to be used for or diverted to purposes other than for
the exclusive benefit of Participants, Former Participants, Beneficiaries or
other persons entitled to benefits, and no such amendment or termination shall
reduce the accrued benefit of any Participant, Former Participant, Beneficiary
or other person who may be entitled to benefits, without his consent. In the
event of a termination or partial termination of the Plan, or in the event of a
complete discontinuance of the Employer's contributions to the Plan, the
Accounts of each affected person shall forthwith become nonforfeitable and shall
be payable in accordance with the provisions of Article XIII.
Section 16.2 Amendment or Termination Other Than
by Rome Bancorp, Inc.
-----------------------------------
In the event that a corporation or trade or business other than Rome
Bancorp, Inc. shall adopt this Plan, such corporation or trade or business
shall, by adopting the Plan, empower Rome Bancorp, Inc. to amend or terminate
the Plan, insofar as it shall cover employees of such corporation or trade or
business, upon the terms and conditions set forth in section 16.1; provided,
however, that any such corporation or trade or business may, by action of its
board of directors or other governing body, amend or terminate the Plan, insofar
as it shall cover employees of such corporation or trade
44
<PAGE>
or business, at different times and in a different manner. In the event of any
such amendment or termination by action of the board of directors or other
governing body of such a corporation or trade or business, a separate plan shall
be deemed to have been established for the employees of such corporation or
trade or business, and the assets of such plan shall be segregated from the
assets of this Plan at the earliest practicable date and shall be dealt with in
accordance with the documents governing such separate plan.
Section 16.3 Conformity to Internal Revenue Code.
-----------------------------------
The Employer has established the Plan with the intent that the Plan
and Trust will at all times be qualified under section 401(a) and exempt under
section 501(a) of the Code and with the intent that contributions under the Plan
will be allowed as deductions in computing the net income of the Employer for
federal income tax purposes, and the provisions of the Plan and Trust Agreement
shall be construed to effectuate such intentions. Accordingly, notwithstanding
anything to the contrary hereinbefore provided, the Plan and the Trust Agreement
may be amended at any time without prior notice to Participants, Former
Participants, Beneficiaries or any other persons entitled to benefits, if such
amendment is deemed by the Board to be necessary or appropriate to effectuate
such intent.
Section 16.4 Contingent Nature of Contributions.
----------------------------------
(a) All ESOP Contributions to the Plan are conditioned upon the
issuance by the Internal Revenue Service of a determination that the Plan
and Trust are qualified under section 401(a) of the Code and exempt under
section 501(a) of the Code. If the Employer applies to the Internal
Revenue Service for such a determination within 90 days after the date on
which it files its federal income tax return for its taxable year that
includes the last day of the Plan Year in which the Plan is adopted, and if
the Internal Revenue Service issues a determination that the Plan and Trust
are not so qualified or exempt, all ESOP Contributions made by the Employer
prior to the date of receipt of such a determination may, at the election
of the Employer, be returned to the Employer within one year after the date
of such determination.
(b) All ESOP Contributions and Loan Repayment Contributions to the
Plan are made upon the condition that such ESOP Contributions and Loan
Repayment Contributions will be allowed as a deduction in computing the net
income of the Employer for federal income tax purposes. To the extent that
any such deduction is disallowed, the amount disallowed may, at the
election of the Employer, be returned to the Employer within one year after
the deduction is disallowed.
(c) Any contribution to the Plan made by the Employer as a result of
a mistake of fact may, at the election of the Employer, be returned to the
Employer within one year after such contribution is made.
Article XVI
-----------
Special Rules for Top Heavy Plan Years
--------------------------------------
Section 17.1 In General.
----------
45
<PAGE>
As of the Determination Date for each Plan Year, the Plan
Administrator shall determine whether the Plan is a Top Heavy Plan in accordance
with the provisions of this Article XVII. If, as of such Determination Date,
the Plan is a Top Heavy Plan, then the Plan Year immediately following such
Determination Date shall be a Top Heavy Plan Year and the special provisions of
this Article XVII shall be in effect; provided, however, that if, as of the
Determination Date for the Plan Year in which the Effective Date occurs, the
Plan is a Top Heavy Plan, such Plan Year shall be a Top Heavy Plan Year, and the
provisions of this Article XVII shall be given retroactive effect for such Plan
Year.
Section 17.2 Definition of Top Heavy Plan.
----------------------------
(a) Subject to section 17.2(c), the Plan is a Top Heavy Plan if, as
of a Determination Date: (i) it is not a member of a Required Aggregation
Group, and (ii)(A) the sum of the Cumulative Accrued Benefits of all Key
Employees exceeds 60% of (B) the sum of the Cumulative Accrued Benefits of
all Employees (excluding former Key Employees), former Employees (excluding
former Key Employees and other former Employees who have not performed any
services for the Employer or any Affiliated Employer during the immediately
preceding five Plan Years), and their Beneficiaries.
(b) Subject to section 17.2(c), the Plan is a Top Heavy Plan if, as
of a Deter mination Date: (i) the Plan is a member of a Required
Aggregation Group, and (ii)(A) the sum of the Cumulative Accrued Benefits
of all Key Employees under all plans that are members of the Required
Aggregation Group exceeds 60% of (B) the sum of the Cumulative Accrued
Benefits of all Employees (excluding former Key Employees), former
Employees (excluding former Key Employees and other former Employees who
have not performed any services for the Employer or any Affiliated Employer
during the immediately preceding five Plan Years), and their Beneficiaries
under all plans that are members of the Required Aggregation Group.
(c) Notwithstanding sections 17.2(a) and 17.2(b), the Plan is not a
Top Heavy Plan if, as of a Determination Date: (i) the Plan is a member of
a Permissible Aggregation Group, and (ii)(A) the sum of the Cumulative
Accrued Benefits of all Key Employees under all plans that are members of
the Permissible Aggregation Group does not exceed 60% of (B) the sum of the
Cumulative Accrued Benefits of all Employees (excluding former Key
Employees), former Employees (excluding former Key Employees and other
former Employees who have not performed any services for the Employer or
any Affiliated Employer during the immediately preceding five Plan Years),
and their Beneficiaries under all plans that are members of the Permissible
Aggregation Group.
Section 17.3 Determination Date.
------------------
The Determination Date for the Plan Year in which the Effective Date
occurs shall be the last day of such Plan Year, and the Determination Date for
each Plan Year beginning after the Plan Year in which the Effective Date occurs
shall be the last day of the preceding Plan Year. The Determination Date for
any other qualified plan maintained by the Employer for a plan year shall be the
last day of the preceding plan year of each such plan, except that in the case
of the first plan year of such plan, it shall be the last day of such first plan
year.
46
<PAGE>
Section 17.4 Cumulative Accrued Benefits.
---------------------------
(a) An individual's Cumulative Accrued Benefits under this Plan as
of a Determination Date are equal to the sum of:
(i) the balance credited to such individual's Account under this
Plan as of the most recent Valuation Date preceding the Determination Date;
(ii) the amount of any ESOP Contributions or Loan Repayment
Contributions made after such Valuation Date but on or before the
Determination Date; and
(iii) the amount of any distributions of such individual's Cumulative
Accrued Benefits under the Plan during the five year period ending on the
Determination Date.
For purposes of this section 17.4(a), the computation of an individual's
Cumulative Accrued Benefits, and the extent to which distributions, rollovers
and transfers are taken into account, will be made in accordance with section
416 of the Code and the regulations thereunder.
(b) For purposes of this Plan, the term "Cumulative Accrued
Benefits" with respect to any other qualified plan, shall mean the
cumulative accrued benefits determined for purposes of section 416 of the
Code under the provisions of such plans.
(c) For purposes of determining the top heavy status of a Required
Aggregation Group or a Permissible Aggregation Group, the Cumulative
Accrued Benefits under this Plan and the Cumulative Accrued Benefits under
any other plan shall be determined as of the Determination Date that falls
within the same calendar year as the Determination Dates for all other
members of such Required Aggregation Group or Permissible Aggregation
Group.
Section 17.5 Key Employees.
-------------
(a) For purposes of the Plan, the term Key Employee means any
employee or former employee of the Employer or any Affiliated Employer who
is at any time during the current Plan Year or was at any time during the
immediately preceding four Plan Years:
(i) a Five Percent Owner;
(ii) a person who would be described in section 1.24 if the number
"1%" were substituted for the number "5%" in section 1.24 and who has an
annual Total Compensation from the Employer and any Affiliated Employer of
more than $150,000;
(iii) an Officer of the Employer or any Affiliated Employer who has an
annual Total Compensation greater than 50% of the amount in effect under
section 415(b)(1)(A) of the Code for any such Plan Year; or
(iv) one of the ten persons owning the largest interests in the
Employer and having an annual Total Compensation from the Employer or any
Affiliated Employer in excess of the dollar limitation in effect under
section 415(c)(1)(A) of the Code for such Plan Year.
47
<PAGE>
(b) For purposes of section 17.5(a):
(i) for purposes of section 17.5(a)(iii), in the event the Employer
or any Affiliated Employer has more officers than are considered Officers,
the term Key Employee shall mean those officers, up to the maximum number,
with the highest annual compensation in any one of the five consecutive
Plan Years ending on the Determination Date; and
(ii) for purposes of section 17.5(a)(iv), if two or more persons have
equal ownership interests in the Employer, each such person shall be
considered as having a larger ownership interest than any such person with
a lower annual compensation from the Employer or any Affiliated Employer.
(c) For purposes of section 17.5(a): (i) a person's compensation from
Affiliated Employers shall be aggregated, but his ownership interests in
Affiliated Employers shall not be aggregated; (ii) an employee shall only
be deemed to be an officer if he has the power and responsibility of a
person who is an officer within the meaning of section 416 of the Code; and
(iii) the term Key Employee shall also include the Beneficiary of a
deceased Key Employee.
Section 17.6 Required Aggregation Group.
--------------------------
For purposes of this Article XVII, a Required Aggregation Group shall
consist of (a) this Plan; (b) any other qualified plans maintained by the
Employer and any Affiliated Employers that cover Key Employees; and (c) any
other qualified plans that are required to be aggregated for purposes of
satisfying the requirements of sections 401(a)(4) or 410(b) of the Code.
Section 17.7 Permissible Aggregation Group.
-----------------------------
For purposes of this Article XVII, a Permissible Aggregation Group
shall consist of (a) the Required Aggregation Group and (b) any other qualified
plans maintained by the Employer and any Affiliated Employers; provided,
however, that the Permissible Aggregation Group must satisfy the requirements of
sections 401(a)(4) and 410(b) of the Code.
Section 17.8 Special Requirements During Top Heavy Plan Years.
------------------------------------------------
(a) Notwithstanding any other provision of the Plan to the contrary,
for each Top Heavy Plan Year, in the case of a Participant (other than a
Key Employee) on the last day of such Top Heavy Plan Year who is not also a
participant in another qualified plan which satisfies the minimum
contribution and benefit requirements of section 416 of the Code with
respect to such Participant, the sum of the ESOP Contributions and Loan
Repayment Contributions made with respect to such Participant, when
expressed as a percentage of his Total Compensation for such Top Heavy Plan
Year, shall not be less than 3% of such Participant's Total Compensation
for such Top Heavy Plan Year or, if less, the highest combined rate,
expressed as a percentage of Total Compensation at which ESOP Contributions
and Loan Repayment Contributions were made on behalf of a Key Employee for
such Top Heavy Plan Year. The Employer shall make an additional
contribution to the Account of each Participant to the extent necessary to
satisfy the foregoing requirement.
48
<PAGE>
(b) For any Top Heavy Plan Year, the number "1.0" shall be
substituted for the number "1.25" in sections 8.2(c)(iii) and 8.2(c)(iv),
except that:
(i) this section 17.8(b) shall not apply to any individual for a Top
Heavy Plan Year that is not a Super Top Heavy Plan Year if the requirements
of section 17.8(a) would be satisfied for such Super Top Heavy Plan Year if
the number "4%" were substituted for the number 3% in section 17.8(a); and
(ii) this section 17.8(b) shall not apply to an individual for a Top
Heavy Plan Year if, during such Top Heavy Plan Year, there are no ESOP
Contributions or Loan Repayment Contributions allocated to such individual
under this Plan, there are no contributions under any other qualified
defined contribution plan maintained by the Employer, and there are no
accruals for such individual under any qualified defined benefit plan
maintained by the Employer.
For purposes of this section 17.8(b), the term Super Top Heavy Plan Year means a
Top Heavy Plan Year in which the Plan would meet the definitional requirements
of sections 17.2(a) or 17.2(b) if the term "90%" were substituted for the term
"60%" in sections 17.2(a), 17.2(b) and 17.2(c).
Article XVI
-----------
Miscellaneous Provisions
------------------------
Section 18.1 Governing Law.
-------------
The Plan shall be construed, administered and enforced according to
the laws of the State of New York without giving effect to the conflict of laws
principles thereof, except to the extent that such laws are preempted by federal
law.
Section 18.2 No Right to Continued Employment.
--------------------------------
Neither the establishment of the Plan, nor any provisions of the Plan
or of the Trust Agreement establishing the Trust Fund nor any action of the
Committee, the Plan Administrator or the Trustee, shall be held or construed to
confer upon any Employee any right to a continuation of employment by the
Employer. The Employer reserves the right to dismiss any Employee or other-
wise deal with any Employee to the same extent as though the Plan had not been
adopted.
Section 18.3 Construction of Language.
------------------------
Wherever appropriate in the Plan, words used in the singular may be
read in the plural, words used in the plural may be read in the singular, and
words importing the masculine gender may be read as referring equally to the
feminine and the neuter. Any reference to an Article or section number shall
refer to an Article or section of the Plan, unless otherwise indicated.
Section 18.4 Headings.
--------
49
<PAGE>
The headings of Articles and sections are included solely for
convenience of reference. If there is any conflict between such headings and
the text of the Plan, the text shall control.
Section 18.5 Merger with Other Plans.
-----------------------
The Plan shall not be merged or consolidated with, nor transfer its
assets or liabilities to, any other plan unless each Participant, Former
Participant, Beneficiary and other person entitled to benefits, would (if that
plan then terminated) receive a benefit immediately after the merger,
consolidation or transfer which is equal to or greater than the benefit he would
have been entitled to receive if the Plan had terminated immediately before the
merger, consolidation or transfer.
Section 18.6 Non-alienation of Benefits.
--------------------------
(a) Except as provided in section 18.6(b), the right to receive a
benefit under the Plan shall not be subject in any manner to anticipation,
alienation or assignment, nor shall such right be liable for or subject to
debts, contracts, liabilities or torts. Should any Participant, Former
Participant or other person attempt to anticipate, alienate or assign his
interest in or right to a benefit, or should any person claiming against
him seek to subject such interest or right to legal or equitable process,
all the interest or right of such Participant or Former Participant or
other person entitled to benefits in the Plan shall cease, and in that
event such interest or right shall be held or applied, at the direction of
the Plan Administrator, for or to the benefit of such Participant or Former
Participant, or other person or his spouse, children or other dependents in
such manner and in such proportions as the Plan Administrator may deem
proper. This prohibition on assignment shall also not apply to prevent a
benefit offset by any amount such Participant, Former Participant or
Beneficiary is required or ordered to pay to the Plan if:
(i) the order or requirement to pay arises: (A) under a judgment
issued on or after August 5, 1997 of conviction for a crime involving the
Plan; (B) under a civil judgment (including a consent order or decree)
entered by a court on or after August 5, 1997 in an action brought in
connection with a violation (or alleged violation) of part 4 of subtitle B
of title I of ERISA; or (C) pursuant to a settlement agreement entered into
on or after August 5, 1997 between the Participant, Former Participant or
Beneficiary and one or both of the United States Department of Labor and
the Pension Benefit Guaranty Corporation in connection with a violation (or
alleged violation) of part 4 of subtitle B of title I of ERISA by a
fiduciary or any other person; and
(ii) the judgment, order, decree or settlement agreement expressly
provides for the offset of all or part of the amount ordered or required to
be paid to the Plan against the Participant's, Former Participant's or
Beneficiary's benefits under the Plan.
(b) This section 18.6 shall not prohibit the Plan Administrator from
recognizing a Domestic Relations Order that is determined to be a Qualified
Domestic Relations Order in accordance with section 18.7.
Section 18.7 Procedures Involving Domestic Relations Orders.
----------------------------------------------
50
<PAGE>
Upon receiving a Domestic Relations Order, the Plan Administrator
shall segregate in a separate account or in an escrow account or separately
account for the amounts payable to any person pursuant to such Domestic
Relations Order, pending a determination whether such Domestic Relations Order
constitutes a Qualified Domestic Relations Order, and shall give notice of the
receipt of the Domestic Relations Order to the Participant or Former Participant
and each other person affected thereby. If, within 18 months after receipt of
such Domestic Relations Order, the Plan Administrator, a court of competent
jurisdiction or another appropriate authority determines that such Domestic
Relations Order constitutes a Qualified Domestic Relations Order, the Plan
Administrator shall direct the Trustee to pay the segregated amounts (plus any
interest thereon) to the person or persons entitled thereto under the Qualified
Domestic Relations Order. If it is determined that the Domestic Relations Order
is not a Qualified Domestic Relations Order or if no determination is made
within the prescribed 18-month period, the segregated amounts shall be
distributed as though the Domestic Relations Order had not been received, and
any later determination that such Domestic Relations Order constitutes a
Qualified Domestic Relations Order shall be applied only with respect to
benefits that remain undistributed on the date of such determination. The Plan
Administrator shall be authorized to establish such reasonable administrative
procedures as he deems necessary or appropriate to administer this section 18.7.
This section 18.7 shall be construed and administered so as to comply with the
requirements of section 401(a)(13) of the Code.
Section 18.8 Leased Employees.
----------------
(a) Subject to section 18.8(b), a leased employee shall be treated as
an Employee for purposes of the Plan. For purposes of this section 18.8,
the term "leased employee" means any person (i) who would not, but for the
application of this section 18.8, be an Employee and (ii) who pursuant to
an agreement between the Employer and any other person ("leasing
organization") has performed for the Employer (or for the Employer and
related persons determined in accordance with section 414(n)(6) of the
Code), on a substantially full-time basis for a period of at least one
year, services performed under the primary direction or control of the
Employer.
(b) For purposes of the Plan:
(i) contributions or benefits provided to the leased employee by the
leasing organization which are attributable to services performed for the
Employer shall be treated as provided by the Employer; and
(ii) section 18.8(a) shall not apply to a leased employee if:
(A) the number of leased employees performing services for the
Employer does not exceed 20% of the number of the Employer's Employees
who are not Highly Compensated Employees; and
(B) such leased employee is covered by a money purchase pension
plan providing (I) a nonintegrated contribution rate of at least 10%
of the leased employee's compensation; (II) immediate participation;
(III) full and immediate vesting; and (IV) coverage for all of the
employees of the leasing organization (other than employees who
perform substantially all of their services for the leasing
organization).
51
<PAGE>
Section 18.9 Status as an Employee Stock Ownership Plan.
------------------------------------------
It is intended that the Plan constitute an "employee stock ownership
plan," as defined in section 4975(e)(7) of the Code and section 407(d)(6) of
ERISA. The Plan shall be construed and administered to give effect to such
intent.
52
<PAGE>
EXHIBIT 10.2
Employment Agreement
This Employment Agreement ("the Agreement") is made and entered into
as of ______________, 1999 by and between Rome Bancorp, Inc., a business
corporation organized and existing under the laws of the State of Delaware and
having an office at 100 West Dominick Street, Rome, New York 13440-5810 ("the
Company") and Charles M. Sprock, an individual residing at 1843 North James
Street, Rome, New York 13440 (the "Executive").
W i t n e s s e t h :
Whereas, the Executive currently serves as President and Chief
Executive Officer of the Company and as President and Chief Executive Officer of
The Rome Savings Bank (the "Bank") and effective as of the date of this
Agreement (the "Effective Date"), the Bank has converted from a mutual savings
bank to a stock savings bank and has become the wholly owned subsidiary of the
Company; and
Whereas, the Company desires to assure for itself, the Bank and their
respective subsidiaries and affiliates the continued availability of the
Executive's services as provided in this Agreement and the ability of the
Executive to perform such services with a minimum of personal distraction in the
event of a pending or threatened Change of Control (as hereinafter defined); and
Whereas, the Executive is willing to continue to serve the Company,
the Bank and their respective subsidiaries and affiliates on the terms and
conditions hereinafter set forth;
Now, Therefore, in consideration of the premises and the mutual
covenants and conditions hereinafter set forth, the Company, the Bank and the
Executive hereby agree as follows:
Section 1. Employment.
----------
The Company and the Bank agree to continue to employ the Executive,
and the Executive hereby agrees to such continued employment, during the period
and upon the terms and conditions set forth in this Agreement.
Section 2. Employment Period; Remaining Unexpired Employment Period.
--------------------------------------------------------
(a) The terms and conditions of this Agreement shall be and remain in
effect during the period of employment established under this section 2
("Employment Period"). The Employment Period shall be for an initial term of
three years beginning on the Effective Date and ending on the third anniversary
date of this Agreement (each, an "Anniversary Date"), plus such extensions, if
any, as are provided pursuant to section 2(b).
(b) Except as provided in section 2(c) and subject to section 11(b),
beginning on the Effective Date, the Employment Period shall automatically be
extended for one additional day each day, unless either the Company or the
Executive elects not to extend the Agreement further by giving written notice
thereof to the other party, in which case the Employment Period shall end on
<PAGE>
the third anniversary of the date on which such written notice is given. For all
purposes of this Agreement, the term "Remaining Unexpired Employment Period" as
of any date shall mean the period beginning on such date and ending on the last
day of the Employment Period taking into account any extensions under this
section 2(b). Upon termination of the Executive's employment with the Company
and the Bank for any reason whatsoever, any daily extensions provided pursuant
to this section 2(b), if not theretofore discontinued, shall automatically
cease.
(c) Nothing in this Agreement shall be deemed to prohibit the Company
or the Bank at any time from terminating the Executive's employment during the
Employment Period with or without notice for any reason; provided, however, that
the relative rights and obligations of the Company and the Executive in the
event of any such termination shall be determined under this Agreement.
Section 3. Duties.
------
The Executive shall serve as President and Chief Executive Officer of
the Company and as President and Chief Executive Officer the Bank, having such
power, authority and responsibility and performing such duties as are prescribed
by or under the By-Laws of the Company and as are customarily associated with
such position. The Executive shall devote his full business time and attention
(other than during weekends, holidays, approved vacation periods, and periods of
illness or approved leaves of absence) to the business and affairs of the
Company and shall use his best efforts to advance the interests of the Company.
Section 4. Cash Compensation.
-----------------
In consideration for the services to be rendered by the Executive
hereunder, the Company shall continue to pay to him a salary at an annual rate
of $250,000, payable in approximately equal installments in accordance with the
Company's customary payroll practices for senior officers. The Board shall
review the Executive's annual rate of salary at such times during the Employment
Period as it deems appropriate, but not less frequently than once every twelve
months, and may, in its discretion, approve an increase therein. In addition to
salary, the Executive may receive other cash compensation from the Company or
the Bank for services hereunder at such times, in such amounts and on such terms
and conditions as the Board may determine from time to time.
Section 5. Employee Benefit Plans and Programs.
-----------------------------------
During the Employment Period, the Executive shall be treated as an
employee of the Company and the Bank and shall be entitled to participate in and
receive benefits under any and all qualified or non-qualified retirement,
pension, savings, profit-sharing or stock bonus plans, any and all group life,
health (including hospitalization, medical and major medical), dental, accident
and long term disability insurance plans, and any other employee benefit and
compensation plans (including, but not limited to, any incentive compensation
plans or programs, stock option and appreciation rights plans and restricted
stock plans) as may from time to time be maintained by, or cover employees of,
the Company or the Bank, in accordance with the terms and conditions of such
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<PAGE>
employee benefit plans and programs and compensation plans and programs and
consistent with the Company's and the Bank's customary practices.
Section 6. Indemnification and Insurance.
-----------------------------
(a) During the Employment Period and for a period of six years
thereafter, the Company or the Bank shall cause the Executive to be covered by
and named as an insured under any policy or contract of insurance obtained by it
to insure its directors and officers against personal liability for acts or
omissions in connection with service as an officer or director of the Company,
the Bank or service in other capacities at the request of the Company. The
coverage provided to the Executive pursuant to this section 6 shall be of the
same scope and on the same terms and conditions as the coverage (if any)
provided to other officers or directors of the Company and the Bank.
(b) To the maximum extent permitted under applicable law, during the
Employment Period and for a period of six years thereafter, the Company and the
Bank shall indemnify the Executive against and hold him harmless from any costs,
liabilities, losses and exposures to the fullest extent and on the most
favorable terms and conditions that similar indemnification is offered to any
director or officer of the Company and the Bank or any subsidiary or affiliate
thereof.
Section 7. Outside Activities.
------------------
The Executive may serve as a member of the boards of directors of such
business, community and charitable organizations as he may disclose to and as
may be approved by the Board (which approval shall not be unreasonably
withheld); provided, however, that such service shall not materially interfere
with the performance of his duties under this Agreement. The Executive may also
engage in personal business and investment activities which do not materially
interfere with the performance of his duties hereunder; provided, however, that
such activities are not prohibited under any code of conduct or investment or
securities trading policy established by the Company or the Bank and generally
applicable to all similarly situated Executives. The Executive may also serve
as an officer or director of the Bank on such terms and conditions as the
Company and the Bank may mutually agree upon, and such service shall not be
deemed to materially interfere with the Executive's performance of his duties
hereunder or otherwise result in a material breach of this Agreement. If the
Executive is discharged or suspended, or is subject to any regulatory
prohibition or restriction with respect to participation in the affairs of the
Bank, he shall continue to perform services for the Company in accordance with
this Agreement but shall not directly or indirectly provide services to or
participate in the affairs of the Bank in a manner inconsistent with the terms
of such discharge or suspension or any applicable regulatory order.
Section 8. Working Facilities and Expenses.
-------------------------------
The Executive's principal place of employment shall be at the
Company's and the Bank's executive offices at the address first above written,
or at such other location within 50 miles of the address at which the Company
shall maintain its principal executive offices, or at such other location as the
Company and the executive may mutually agree upon. The Company shall provide
the Executive at his principal place of employment with a private office,
secretarial services and oth-
-3-
<PAGE>
er support services and facilities suitable to his position with the Company and
the Bank and necessary or appropriate in connection with the performance of his
assigned duties under this Agreement. The Company shall reimburse the Executive
for his ordinary and necessary business expenses, including, without limitation,
the Executive's travel and entertainment expenses incurred in connection with
the performance of his duties under this Agreement, in each case upon
presentation to the Company of an itemized account of such expenses in such form
as the Company may reasonably require.
Section 9. Termination of Employment with Severance Benefits.
-------------------------------------------------
(a) The Executive shall be entitled to the severance benefits
described in section 9(b) in the event that:
(i) his employment with the Company and the Bank terminates during
the Employment Period as a result of the Executive's voluntary resignation
within 90 days following:
(A) the failure of the Board or the Board of Directors of the
Bank ("Bank Board") as the case may be, to appoint or re-appoint or
elect or re-elect the Executive to the position with the Company or
the Bank stated in section 3 of this Agreement (or a more senior
office);
(B) if the Executive is a member of the Board or the Bank Board
as the case may be, the failure of the shareholders of the Company or
the Bank to elect or re-elect the Executive to the Board or the Bank
Board or the failure of the Board or the Bank Board (or the nominating
committee thereof) to nominate the Executive for such election or re-
election;
(C) the expiration of a 30-day period following the date on
which the Executive gives written notice to the Company of its or the
Bank's material failure, whether by amendment of the Company's
Certificate of Incorporation, the Bank's Restated Organization
Certificate, the Company's By-Laws or the Bank's By-Laws, action of
the Board or the Bank Board or the Company's shareholders or the
Bank's shareholders or otherwise, to vest in the Executive the
functions, duties, or responsibilities prescribed in section 3 of this
Agreement, unless, during such 30-day period, the Company or the Bank
cures such failure; or
(D) the expiration of a 30-day period following the date on
which the Executive gives written notice to the Company of its or the
Bank's material breach of any term, condition or covenant contained in
this Agreement (including, without limitation any reduction of the
Executive's rate of base salary in effect from time to time and any
change in the terms and conditions of any compensation or benefit
program in which the Executive participates which, either individually
or together with other changes, has a material adverse effect on the
aggregate value of his total compensation
-4-
<PAGE>
package), unless, during such 30-day period, the Company or the Bank
cures such failure; or
(E) a change in the Executive's principal place of employment
for a distance in excess of 50 miles from the Bank's principal office
in Rome, New York; or
(ii) the Executive's employment with the Company and the Bank is
terminated by the Company and the Bank for any reason other than for
"cause" as provided in section 11(a).
(b) Upon the occurrence of any of the events described in section
9(a) of this Agreement, the Company shall pay and provide to the Executive (or,
in the event of his death thereafter and prior to payment, to his estate):
(i) his earned but unpaid salary (including, without limitation, all
items which constitute wages under applicable law and the payment of which
is not otherwise provided for in this section 9(b)) as of the date of the
termination of his employment with the Company and the Bank, such payment
to be made at the time and in the manner prescribed by law applicable to
the payment of wages but in no event later than 30 days after termination
of employment;
(ii) the benefits, if any, to which he is entitled as a former
employee under the employee benefit plans and programs and compensation
plans and programs maintained for the benefit of the Company's and the
Bank's officers and employees;
(iii) continued group life, health (including hospitalization, medical
and major medical), dental, accident and long term disability insurance
coverage in addition to that provided pursuant to section 9(b)(ii), for
the Remaining Unexpired Employment Period, equivalent to the coverage to
which he would have been entitled under such plans (as in effect on the
date of his termination of employment, or, if his termination of employment
occurs after a Change of Control, on the date of such Change of Control,
whichever benefits are greater), if he had continued working for the
Company and the Bank during the Remaining Unexpired Employment Period at
the highest annual rate of salary achieved during the Employment Period,
but taking into account any coverage provided from any subsequent employer;
(iv) within 30 days following the Executive's termination of
employment with the Company or the Bank, a lump sum payment, in an amount
equal to the present value of the salary (excluding any additional
payments made to the Executive in lieu of the use of an automobile) that
the Executive would have earned if he had continued working for the Company
and the Bank during the Remaining Unexpired Employment Period at the
highest annual rate of salary achieved during the Employment Period,
where such present value is to be determined using a discount rate equal to
the applicable short-term federal rate prescribed under section 1274(d) of
the Internal Revenue Code of 1986, as amended ("Code"), compounded using
the
-5-
<PAGE>
compounding periods corresponding to the Company's regular payroll periods
for its officers, such lump sum to be paid in lieu of all other payments of
salary provided for under this Agreement in respect of the period following
any such termination;
(v) within 30 days following the Executive's termination of
employment with the Company or the Bank, a lump sum payment in an amount
equal to the excess, if any, of:
(A) the present value of the aggregate benefits to which he
would be entitled under any and all qualified and non-qualified
defined benefit pension plan maintained by the Company or the Bank in
which Executive participates, if he were 100% vested thereunder and
had continued working for the Company and the Bank during the
Remaining Unexpired Employment Period at the highest annual rate of
salary achieved during the Employment Period; over
(B) the present value of the benefits to which he is actually
entitled under such defined benefit pension plans as of the date of
his termination;
where such present values are to be determined using the mortality tables
prescribed under section 415(b)(2)(E)(v) of the Code and a discount rate,
compounded monthly, equal to the annualized rate of interest prescribed by
the Pension Benefit Guaranty Corporation for the valuation of immediate
annuities payable under terminating single-employer defined benefit plans
for the month in which the Executive's termination of employment occurs
("Applicable PBGC Rate");
(vi) within 30 days following the Executive's termination of
employment with the Company or the Bank, a lump sum payment in an amount
equal to the present value of the additional employer contributions to
which he would have been entitled under any and all qualified and non-
qualified defined contribution plans maintained by the Company or the Bank
in which Executive participates, as if he were 100% vested thereunder and
had continued working for the Company and the Bank during the Remaining
Unexpired Employment Period at the highest annual rate of salary achieved
during the Employment Period and making the maximum amount of employee
contributions, if any, required under such plan or plans, such present
value to be determined on the basis of a discount rate, compounded using
the compounding period that corresponds to the frequency with which
employer contributions are made to the relevant plan, equal to the
Applicable PBGC Rate;
(vii) the payments that would have been made to the Executive under
any cash or stock bonus or long-term or short-term cash incentive
compensation plan maintained by, or covering employees of, the Company or
the Bank if he had continued working for the Company and the Bank during
the Remaining Unexpired Employment Period and had earned the maximum bonus
or incentive award in each
-6-
<PAGE>
calendar year that ends during the Remaining Unexpired Employment Period,
such payments to be equal to the product of:
(A) the maximum percentage rate at which an award was ever
available to the Executive under such incentive compensation plan;
multiplied by
(B) the salary that would have been paid to the Executive
during each such calendar year at the highest annual rate of salary
achieved during the Employment Period;
such payments to be made (without discounting for early payment) within 30
days following the Executive's termination of employment;
(viii) upon the surrender of options or appreciation rights issued
to the Executive under any stock option and appreciation rights plan or
program maintained by, or covering employees of, the Company or the Bank, a
lump sum payment in an amount equal to the product of:
(A) the excess of (I) the fair market value of a share of
stock of the same class as the stock subject to the option or
appreciation right, determined as of the date of termination of
employment, over (II) the exercise price per share for such option or
appreciation right, as specified in or under the relevant plan or
program; multiplied by
(B) the number of shares with respect to which options or
appreciation rights are being surrendered.
For purposes of this section 9(b)(viii), the Executive shall be deemed
fully vested in all options and appreciation rights under any stock option
or appreciation rights plan or program maintained by, or covering employees
of, the Company or the Bank, even if he is not vested under such plan or
program; and
(ix) upon the surrender of any shares awarded to the Executive under
any restricted stock plan maintained by, or covering employees of, the
Company or the Bank, a lump sum payment in an amount equal to the product
of:
(A) the fair market value of a share of stock of the same
class of stock granted under such plan, determined as of the date of
the Executive's termination of employment; multiplied by
(B) the number of shares which are being surrendered.
For purposes of this section 9(b)(ix), the Executive shall be deemed fully
vested in all shares awarded under any restricted stock plan maintained by,
or covering employees of, the Company or the Bank, even if he is not vested
under such plan.
-7-
<PAGE>
The Company and the Executive hereby stipulate that the damages which may be
incurred by the Executive following any such termination of employment are not
capable of accurate measurement as of the date first above written and that the
payments and benefits contemplated by this section 9(b) constitute reasonable
damages under the circumstances and shall be payable without any requirement of
proof of actual damage and without regard to the Executive's efforts, if any, to
mitigate damages. The Company and the Executive further agree that the Company
may condition the payments and benefits (if any) due under sections 9(b)(iii),
(iv), (v), (vi), (vii), (viii) and (ix) on the receipt of the Executive's
resignation from any and all positions which he holds as an officer, director or
committee member with respect to the Company, the Bank or any subsidiary or
affiliate of either of them.
Section 10. Death and Disability Benefits
-----------------------------
(a) In the event the Executive's employment with the Company
terminates during the Employment Period because of the Executive's death, then
the Company shall pay to the Executive's designated beneficiary for the one year
period following Executive's death, periodic payments equal in the aggregate to
the Executive's annual base salary as in effect on the date of his death. For
the one year period following Executive's death, Executive's dependents, as
defined under the group health (including hospitalization, medical and major
medical) and dental plans sponsored by the Company or the Bank from time to
time, shall be provided continued coverage under such plans, provided that they
continue to remit to the Company or Bank, as the case may be, any premium
payments Executive was required to pay for such coverage prior to his death.
The continued coverage provided under this section 10 shall be in addition to,
and shall not count as, coverage required to be provided under any applicable
law. For the purposes of this Agreement, Executives designated beneficiary shall
be the person designated as such by Executive in a writing submitted to the
Company. If no written designation is made, Executive's designated beneficiary
shall be his spouse or in the event he has no spouse, his estate.
(b) In the event that Executive's employment with the Company is
terminated because of his inability to perform his duties under this Agreement
by reason of illness or other physical or mental disability determined in the
discretion of the Board to be permanent, based on medical evidence the Board
finds acceptable, the Company shall continue to pay Executive his base salary in
effect as of the date he is determined to be permanently disabled, for the
Remaining Unexpired Employment Period, but reduced by any payments Executive
receives during such period under or pursuant to any short or long term
disability plan or policy sponsored by the Company or the Bank.
Section 11. Termination without Additional Company Liability. In the
------------------------------------------------
event that the Executive's employment with the Company shall terminate during
the Employment Period on account of:
(a) the discharge of the Executive for "cause," which, for purposes
of this Agreement, shall mean a discharge because the Board and the Bank
Board determine that the Executive: (i) has willfully and intentionally
failed to perform his assigned duties under this Agreement (including for
these purposes, the Executive's inability to perform such duties as a
result of drug or alcohol dependency); (ii) has willfully and intentionally
engaged in dishonest or illegal conduct in connection with his performance
of services for the Company
-8-
<PAGE>
or the Bank or has been convicted of a felony; (iii) has willfully
violated, in any material respect, any law, rule, regulation, written
agreement or final cease-and-desist order with respect to his performance
of services for the Company or the Bank, as determined by the Board and the
Bank Board; or (iv) has willfully and intentionally breached the material
terms of this Agreement; provided, however, that, if the Executive engages
in any of the acts described in section 11(a)(i) or (a)(iv) above, the
Company shall provide the Executive with written notice of its intent to
discharge the Executive for cause, and the Executive shall have 30 days
from the date on which the Executive receives such notice to cure any such
acts; and provided, further, that on and after the date that a Change of
Control occurs, a determination under this section 11 shall require the
affirmative vote of at least three-fourths of the members of the Board and
the Bank Board acting in good faith and such vote shall not be made prior
to the expiration of a 60-day period following the date on which the Board
and the Bank Board shall, by written notice to the Executive, furnish to
him a statement of its grounds for proposing to make such determination,
during which period the Executive shall be afforded a reasonable
opportunity to make oral and written presentations to the members of the
Board and the Bank Board, and to be represented by his legal counsel at
such presentations, to refute the grounds for the proposed determination;
or
(b) the Executive's voluntary resignation from employment with the
Company and the Bank (including retirement) for reasons other than those
specified in section 9(a)(i) or Section 12;
then the Company shall have no further obligations under this Agreement, other
than the payment to the Executive of his earned but unpaid salary as of the date
of the termination of his employment and the provision of such other benefits,
if any, to which he is entitled as a former employee under the Company's and the
Bank's employee benefit plans and programs and compensation plans and programs.
For purposes of this section 11, no act or failure to act, on the part of the
Executive, shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company and the
Bank. Any act, or failure to act, based upon authority given pursuant to a
resolution duly adopted by the Board and the Bank Board or based upon the
written advice of counsel for the Company or the Bank shall be conclusively
presumed to be done, or omitted to be done, by the Executive in good faith and
in the best interests of the Company and the Bank. The cessation of employment
of the Executive shall not be deemed to be for "cause" within the meaning of
section 11(a) unless and until there shall have been delivered to the Executive
a copy of a resolution duly adopted by the affirmative vote of three-fourths of
the members of the Board and the Bank Board at a meeting of the Board and the
Bank Board called and held for such purpose (after reasonable notice is provided
to the Executive and the Executive is given an opportunity, together with
counsel, to be heard before the Board and the Bank Board), finding that, in the
good faith opinion of the Board and the Bank Board, the Executive is guilty of
the conduct described in section 11(a) above, and specifying the particulars
thereof in detail.
-9-
<PAGE>
Section 12. Termination Upon or Following a Change of Control.
-------------------------------------------------
(a) A Change of Control of the Company ("Change of Control") shall
be deemed to have occurred upon the happening of any of the following events:
(i) approval by the stockholders of the Company of a transaction
that would result in the reorganization, merger or consolidation of the
Company, respectively, with one or more other persons, other than a
transaction following which:
(A) at least 51% of the equity ownership interests of the
entity resulting from such transaction are beneficially owned (within
the meaning of Rule 13d-3 promulgated under the Securities Exchange
Act of 1934, as amended "Exchange Act") in substantially the same
relative proportions by persons who, immediately prior to such
transaction, beneficially owned (within the meaning of Rule 13d-3
promulgated under the Exchange Act) at least 51% of the outstanding
equity ownership interests in the Company; and
(B) at least 51% of the securities entitled to vote generally
in the election of directors of the entity resulting from such
transaction are beneficially owned (within the meaning of Rule 13d-3
promulgated under the Exchange Act) in substantially the same relative
proportions by persons who, immediately prior to such transaction,
beneficially owned (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) at least 51% of the securities entitled to vote
generally in the election of directors of the Company;
(ii) the acquisition of all or substantially all of the assets of the
Company or beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 25% or more of the outstanding
securities of the Company entitled to vote generally in the election of
directors by any person or by any persons acting in concert, or approval by
the stockholders of the Company of any transaction which would result in
such an acquisition;
(iii) a complete liquidation or dissolution of the Company, or
approval by the stockholders of the Company of a plan for such liquidation
or dissolution;
(iv) the occurrence of any event if, immediately following such
event, at least 50% of the members of the Board of the Company do not
belong to any of the following groups:
(A) individuals who were members of the Board of the Company on
the date of this Agreement; or
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<PAGE>
(B) individuals who first became members of the Board of the
Company after the date of this Agreement either:
(I) upon election to serve as a member of the Board of the
Company by affirmative vote of three-quarters of the members of
such Board, or of a nominating committee thereof, in office at
the time of such first election; or
(II) upon election by the stockholders of the Company to
serve as a member of the Board of the Company, but only if
nominated for election by affirmative vote of three-quarters of
the members of the Board of the Company, or of a nominating
committee thereof, in office at the time of such first
nomination;
provided, however, that such individual's election or nomination did
not result from an actual or threatened election contest (within the
meaning of Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies or
consents (within the meaning of Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) other than by or on behalf of the
Board of the Company; or
(v) any event which would be described in section 12(a)(i), (ii),
(iii) or (iv) if the term "Bank" were substituted for the term "Company"
therein or any event that results in a "Change of Control of the Bank"
within the meaning of the "Change in Bank Control Act" and the rules and
regulations promulgated by the Federal Deposit Insurance Agency ("FDIC").
In no event, however, shall a Change of Control be deemed to have occurred as a
result of: (i) any acquisition of securities or assets of the Company, the Bank,
or a subsidiary of either of them, by the Company, the Bank, or a subsidiary of
either of them, or by any employee benefit plan maintained by any of them; or
(ii) the conversion of Rome MHC to a stock form company and the issuance of
additional shares of the Company in connection therewith. For purposes of this
section 12(a), the term "person" shall have the meaning assigned to it under
sections 13(d)(3) or 14(d)(2) of the Exchange Act.
(b) In the event of a Change of Control, Executive shall be entitled
to the payments and benefits described in Section 9(b) in the event of his
termination of employment with the Company under any of the following
circumstances:
(i) resignation, voluntary or otherwise, by Executive at any time
during the Employment Period following his demotion, loss of title, office
or significant authority or responsibility, or following any reduction in
any element of his package of compensation and benefits;
-11-
<PAGE>
(ii) resignation, voluntary or otherwise, by Executive at any time
during the Employment Period following any relocation of his principal
place of employment or any change in working conditions at such principal
place of employment which Executive, in his reasonable discretion,
determines to be embarrassing, derogatory or otherwise adverse;
(iii) resignation, voluntary or otherwise, by Executive at any time
during the Employment Period following the failure of any successor to the
Company in the Change of Control to include Executive in any compensation
or benefit program maintained by it or covering any of its executive
officers, unless Executive is already covered by a substantially similar
plan of the Company which is at least as favorable to him;
(iv) resignation, voluntary or otherwise, for any reason whatsoever
following the effective date of the Change of Control; or
(v) termination by the Company for any reason other than "cause" as
defined under section 11.
(c) In the event Executive's employment with the Company terminates
after a Change of Control under any of the circumstances described in section
12(b), Executive shall be entitled to the payments and benefits described in
section 9(b).
Section 13. Tax Indemnification.
-------------------
(a) This section 13 shall apply if the Executive's employment is
terminated upon or following (i) a Change of Control (as defined in section 12
of this Agreement); or (ii) a change "in the ownership or effective control" of
the Company or the Bank or "in the ownership of a substantial portion of the
assets" of the Company or the Bank within the meaning of section 280G of the
Code. If this section 13 applies, then, if for any taxable year, the Executive
shall be liable for the payment of an excise tax under section 4999 of the Code
with respect to any payment in the nature of compensation made by the Company,
the Bank or any direct or indirect subsidiary or affiliate of the Company or the
Bank to (or for the benefit of) the Executive, the Company shall pay to the
Executive an amount equal to X determined under the following formula:
X = E x P
----------------------------------------
1 - [(FI x (1 - SLI)) + SLI + E + M]
where
E = the rate at which the excise tax is assessed under section 4999
of the Code;
P = the amount with respect to which such excise tax is assessed,
determined without regard to this section 12;
FI = the highest marginal rate of income tax applicable to the
Executive under the Code for the taxable year in question;
-12-
<PAGE>
SLI = the sum of the highest marginal rates of income tax applicable
to the Executive under all applicable state and local laws for
the taxable year in question; and
M = the highest marginal rate of Medicare tax applicable to the
Executive under the Code for the taxable year in question.
With respect to any payment in the nature of compensation that is made to (or
for the benefit of) the Executive under the terms of this Agreement, or
otherwise, and on which an excise tax under section 4999 of the Code will be
assessed, the payment determined under this 12(a) shall be made to the
Executive on the earlier of (i) the date the Company, the Bank or any direct or
indirect subsidiary or affiliate of the Company or the Bank is required to
withhold such tax, or (ii) the date the tax is required to be paid by the
Executive.
(b) Notwithstanding anything in this section 13 to the contrary, in
the event that the Executive's liability for the excise tax under section 4999
of the Code for a taxable year is subsequently determined to be different than
the amount determined by the formula (X + P) x E, where X, P and E have the
meanings provided in section 13(a), the Executive or the Company, as the case
may be, shall pay to the other party at the time that the amount of such excise
tax is finally determined, an appropriate amount, plus interest, such that the
payment made under section 13(a), when increased by the amount of the payment
made to the Executive under this section 13(b) by the Company, or when reduced
by the amount of the payment made to the Company under this section 13(b) by the
Executive, equals the amount that should have properly been paid to the
Executive under section 13(a). The interest paid under this section 13(b) shall
be determined at the rate provided under section 1274(b)(2)(B) of the Code. To
confirm that the proper amount, if any, was paid to the Executive under this
section 13, the Executive shall furnish to the Company a copy of each tax return
which reflects a liability for an excise tax payment made by the Company, at
least 20 days before the date on which such return is required to be filed with
the Internal Revenue Service.
Section 14. Covenant Not To Compete.
-----------------------
The Executive hereby covenants and agrees that, in the event of his
termination of employment with the Company prior to the expiration of the
Employment Period, for a period of one year following the date of his
termination of employment with the Company and the Bank (or, if less, for the
Remaining Unexpired Employment Period), he shall not, without the written
consent of the Company, become an officer, employee, consultant, director or
trustee of any savings bank, savings and loan association, savings and loan
holding company, bank or bank holding company, or any direct or indirect
subsidiary or affiliate of any such entity, that entails working within Oneida
county or any other county in which the Company or the Bank maintains an office;
provided, however, that this section 14 shall not apply if the Executive's
employment is terminated for the reasons set forth in section 9(a).
-13-
<PAGE>
Section 15. Confidentiality.
---------------
Unless he obtains the prior written consent of the Company, the
Executive shall keep confidential and shall refrain from using for the benefit
of himself, or any person or entity other than the Company or any entity which
is a subsidiary of the Company or of which the Company is a subsidiary, any
material document or information obtained from the Company, or from its parent
or subsidiaries, in the course of his employment with any of them concerning
their properties, operations or business (unless such document or information is
readily ascertainable from public or published information or trade sources or
has otherwise been made available to the public through no fault of his own)
until the same ceases to be material (or becomes so ascertainable or available);
provided, however, that nothing in this section 15 shall prevent the Executive,
with or without the Company's consent, from participating in or disclosing
documents or information in connection with any judicial or administrative
investigation, inquiry or proceeding to the extent that such participation or
disclosure is required under applicable law.
Section 16. Solicitation.
------------
The Executive hereby covenants and agrees that, for a period of one
year following his termination of employment with the Company and the Bank, he
shall not, without the written consent of the Company and the Bank, either
directly or indirectly:
(a) solicit, offer employment to, or take any other action intended,
or that a reasonable person acting in like circumstances would expect, to
have the effect of causing any officer or employee of the Company, the Bank
or any of their respective subsidiaries or affiliates to terminate his or
her employment and accept employment or become affiliated with, or provide
services for compensation in any capacity what soever to, any savings
bank, savings and loan association, bank, bank holding company, savings and
loan holding company, or other institution engaged in the business of
accepting deposits, making loans or doing business within the county
specified in section 14;
(b) provide any information, advice or recommendation with respect to
any such officer or employee of any savings bank, savings and loan Bank,
bank, bank holding company, savings and loan holding company, or other
institution engaged in the business of accepting deposits, making loans or
doing business within the counties specified in section 14; that is
intended, or that a reasonable person acting in like circumstances would
expect, to have the effect of causing any officer or employee of the
Company, the Bank, or any of their respective subsidiaries or affiliates to
terminate his employment and accept employment or become affiliated with,
or provide services for compensation in any capacity whatsoever to, any
savings bank, savings and loan association, bank, bank holding company,
savings and loan holding company, or other institution engaged in the
business of accepting deposits, making loans or doing business within the
county specified in section 14;
-14-
<PAGE>
(c) solicit, provide any information, advice or recommendation or
take any other action intended, or that a reasonable person acting in like
circumstances would expect, to have the effect of causing any customer of
the Company, the Bank or any of their perspective subsidiaries to terminate
an existing business or commercial relationship with any of them.
Section 17. No Effect on Employee Benefit Plans or Programs.
-----------------------------------------------
The termination of the Executive's employment during the term of this
Agreement or thereafter, whether by the Company, by the Bank or by the
Executive, shall have no effect on the rights and obligations of the parties
hereto under the Company's or the Bank's qualified or non-qualified retirement,
pension, savings, thrift, profit-sharing or stock bonus plans, group life,
health (including hospitalization, medical and major medical), dental, accident
and long term disability in surance plans or such other employee benefit plans
or programs, or compensation plans or programs, as may be maintained by, or
cover employees of, the Company or the Bank from time to time; provided,
however, that nothing in this Agreement shall be deemed to duplicate any
compensation or benefits provided under any agreement, plan or program covering
the Executive to which the Company is a party and any duplicative amount payable
under any such agreement, plan or program shall be applied as an offset to
reduce the amounts otherwise payable hereunder.
Section 18. Successors and Assigns.
----------------------
This Agreement will inure to the benefit of and be binding upon the
Executive, his legal representatives and testate or intestate distributees, and
the Company and the Bank and their respective successors and assigns, including
any successor by merger or consolidation or a statutory receiver or any other
person or firm or corporation to which all or substantially all of the assets
and business of the Company may be sold or otherwise transferred. Failure of
the Company to obtain from any successor its express written assumption of the
Company's obligations hereunder at least 60 days in advance of the scheduled
effective date of any such succession shall be deemed a material breach of this
Agreement.
Section 19. Notices.
-------
Any communication required or permitted to be given under this
Agreement, including any notice, direction, designation, consent, instruction,
objection or waiver, shall be in writing and shall be deemed to have been given
at such time as it is delivered personally, or five days after mailing if
mailed, postage prepaid, by registered or certified mail, return receipt
requested, addressed to such party at the address listed below or at such other
address as one such party may by written notice specify to the other party:
If to the Executive:
Charles M. Sprock
1843 North James Street
Rome, New York 13440
-15-
<PAGE>
If to the Company or the Bank:
Rome Bancorp, Inc.
100 West Dominick Street,
Rome, New York 13440-5810
Attention: Chairman of the Board of Directors
----------------------------------
with a copy to:
Thacher Proffitt & Wood
1700 Pennsylvania Avenue, N.W., Suite 800
Washington, D.C. 20006
Attention: V. Gerard Comizio, Esq.
----------------------
Section 20. Indemnification for Attorneys' Fees.
-----------------------------------
(a) The Company shall indemnify, hold harmless and defend the
Executive against reasonable costs, including legal fees and expenses, incurred
by him in connection with or arising out of any action, suit or proceeding in
which he may be involved, as a result of his efforts, in good faith, to defend
or enforce the terms of this Agreement. For purposes of this Agreement, any
settlement agreement which provides for payment of any amounts in settlement of
the Company's or the Bank's obligations hereunder shall be conclusive evidence
of the Executive's entitlement to indemnification hereunder, and any such
indemnification payments shall be in addition to amounts payable pursuant to
such settlement agreement, unless such settlement agreement expressly provides
otherwise.
(b) The Company's obligation to make the payments provided for in
this Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim, right
or action which the Company may have against the Executive or others. In no
event shall the Executive be obligated to seek other employment or take any
other action by way of mitigation of the amounts payable to the Executive under
any of the provisions of this Agreement and such amounts shall not be reduced
whether or not the Executive obtains other employment.
Section 21. Severability.
------------
A determination that any provision of this Agreement is invalid or
unenforceable shall not affect the validity or enforceability of any other
provision hereof.
-16-
<PAGE>
Section 22. Waiver.
------
Failure to insist upon strict compliance with any of the terms,
covenants or conditions hereof shall not be deemed a waiver of such term,
covenant, or condition. A waiver of any provision of this Agreement must be
made in writing, designated as a waiver, and signed by the party against whom
its enforcement is sought. Any waiver or relinquishment of any right or power
hereunder at any one or more times shall not be deemed a waiver or
relinquishment of such right or power at any other time or times.
Section 23. Counterparts.
------------
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, and all of which shall constitute one and the
same Agreement.
Section 24. Governing Law.
-------------
Except to the extent preempted by federal law, this Agreement shall be
governed by and construed and enforced in accordance with the laws of the State
of New York applicable to contracts entered into and to be performed entirely
within the State of New York.
Section 25. Headings and Construction.
-------------------------
The headings of sections in this Agreement are for convenience of
reference only and are not intended to qualify the meaning of any section. Any
reference to a section number shall refer to a section of this Agreement, unless
otherwise stated.
Section 26. Entire Agreement; Modifications.
-------------------------------
This instrument contains the entire agreement of the parties relating
to the subject matter hereof, and supersedes in its entirety any and all prior
agreements, understandings or representations relating to the subject matter
hereof. No modifications of this Agreement shall be valid unless made in
writing and signed by the parties hereto.
Section 27. Non-duplication.
---------------
In the event that the Executive shall perform services for the Bank or
any other direct or indirect subsidiary or affiliate of the Company or the Bank,
any compensation or benefits provided to the Executive by such other employer
shall be applied to offset the obligations of the Company hereunder, it being
intended that this Agreement set forth the aggregate compensation and benefits
payable to the Executive for all services to the Company, the Bank and all of
their respective direct or indirect subsidiaries and affiliates.
-17-
<PAGE>
Section 28. Required Regulatory Provisions.
------------------------------
Notwithstanding anything herein contained to the contrary, any
payments to the Executive by the Company, whether pursuant to this Agreement or
otherwise, are subject to and conditioned upon their compliance with section
18(k) of the Federal Deposit Insurance Act, 12 U.S.C. (S)1828(k), and any
regulations promulgated thereunder.
-18-
<PAGE>
In Witness Whereof, the Company has caused this Agreement to be
executed and the Executive has hereunto set his hand, all as of the day and year
first above written.
Executive
___________________________________
Charles M. Sprock
ATTEST: Rome Bancorp, Inc.
By_______________________
Secretary By_________________________________
Name:
Title:
[Seal]
-19-
<PAGE>
EXHIBIT 10.3
Benefit Restoration Plan
Of
Rome Bancorp, Inc.
________________________________
Adopted on May 26, 1999
Effective as of the Reorganization Date
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Article I
---------
Definitions
-----------
Section 1.1 Affiliated Employer.................................. 1
Section 1.2 Applicable Limitation................................ 1
Section 1.3 Bank................................................. 1
Section 1.4 Beneficiary.......................................... 1
Section 1.5 Board................................................ 1
Section 1.7 Code................................................. 3
Section 1.8 Committee............................................ 3
Section 1.9 Company.............................................. 3
Section 1.10 Eligible Employee.................................... 3
Section 1.11 Employee............................................. 3
Section 1.12 Employer............................................. 3
Section 1.13 Employer Contributions............................... 3
Section 1.14 ERISA................................................ 3
Section 1.15 ESOP................................................. 3
Section 1.16 Exchange Act......................................... 3
Section 1.17 Fair Market Value of a Share......................... 3
Section 1.18 Former Participant................................... 4
Section 1.19 Savings Plan......................................... 4
Section 1.20 Participant.......................................... 4
Section 1.21 Plan................................................. 4
Section 1.22 Share................................................ 4
Section 1.23 Stock Unit........................................... 4
Section 1.24 Termination of Service............................... 4
Article II
----------
Participation
-------------
Section 2.1 Eligibility for Participation........................ 4
Section 2.2 Commencement of Participation........................ 5
Section 2.3 Termination of Participation......................... 5
Article III
-----------
Benefits To Participants
------------------------
</TABLE>
(i)
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 3.1 Supplemental Savings Benefit........................... 5
Section 3.2 Supplemental ESOP Benefits............................. 6
Section 3.3 Restored ESOP Benefits................................ 8
Article IV
----------
Death Benefits
--------------
Section 4.1 Supplemental Savings Plan Death Benefits............... 9
Section 4.2 Supplemental ESOP Death Benefits....................... 9
Section 4.3 Restored ESOP Death Benefits........................... 9
Section 4.4 Beneficiaries.......................................... 10
Article V
---------
Trust Fund
----------
Section 5.1 Establishment of Trust................................. 10
Section 5.2 Contributions to Trust................................. 10
Section 5.3 Unfunded Character of Plan............................. 11
Article VI
----------
Administration
--------------
Section 6.1 The Committee.......................................... 11
Section 6.2 Liability of Committee Members and their Delegates..... 12
Section 6.3 Plan Expenses.......................................... 12
Section 6.4 Facility of Payment.................................... 12
Article VII
-----------
Amendment and Termination
-------------------------
Section 7.1 Amendment by the Company............................... 13
Section 7.2 Termination............................................ 13
Section 7.3 Amendment or Termination by Other Employers............ 13
</TABLE>
(ii)
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Article VIII
------------
Miscellaneous Provisions
------------------------
Section 8.1 Construction and Language............................. 14
Section 8.2 Headings.............................................. 14
Section 8.3 Non-Alienation of Benefits............................ 14
Section 8.4 Indemnification....................................... 14
Section 8.5 Severability.......................................... 15
Section 8.6 Waiver................................................ 15
Section 8.7 Governing Law......................................... 15
Section 8.8 Taxes................................................. 15
Section 8.9 No Deposit Account.................................... 15
Section 8.10 No Right to Continued Employment...................... 15
Section 8.11 Status of Plan Under ERISA............................ 16
</TABLE>
(iii)
<PAGE>
Benefit Restoration Plan
------------------------
Of
--
Rome Bancorp, Inc.
------------------
Article I
---------
Definitions
-----------
Wherever appropriate to the purposes of the Plan, capitalized terms
shall have the meanings assigned to them under the Savings Plan or ESOP, as
applicable; provided, however, that the following special definitions shall
apply for purposes of the Plan, unless a different meaning is clearly indicated
by the context:
Section 1.1 Affiliated Employer means any corporation which is a
-------------------
member of a controlled group of corporations (as defined in section 414(b) of
the Code) that includes the Company; any trade or business (whether or not
incorporated) that is under common control (as defined in section 414(c) of the
Code) with the Company; any organization (whether or not incorporated) that is a
member of an affiliated service group (as defined in section 414(m) of the Code)
that includes the Company; any leasing organization (as defined in section
414(n) of the Code) to the extent that any of its employees are required
pursuant to section 414(n) of the Code to be treated as employees of the
Company; and any other entity that is required to be aggregated with the Company
pursuant to regulations under section 414(o) of the Code.
Section 1.2 Applicable Limitation means any of the following: (a)
---------------------
the limitation on annual compensation that may be recognized under a tax-
qualified plan for benefit computation purposes pursuant to section 401(a)(17)
of the Code; (b) the maximum limitation on annual additions to a tax-qualified
defined contribution plan pursuant to section 415(c) of the Code; (c) the
maximum limitation on aggregate annual benefits and annual additions under a
combination of tax-qualified defined benefit and defined contribution plans
maintained by a single employer pursuant to section 415(e) of the Code; (d) the
maximum limitation on annual elective deferrals to a qualified cash or deferred
arrangement pursuant to section 402(g) of the Code; (e) the annual limitation on
elective deferrals under a qualified cash or deferred arrangement by highly
compensated employees pursuant to section 401(k) of the Code; and (f) the annual
limitation on voluntary employee contributions by, and employer matching
contributions for, highly compensated employees pursuant to section 401(m) of
the Code.
Section 1.3 Bank means The Rome Savings Bank, a state stock savings
----
bank, and its successors or assigns.
Section 1.4 Beneficiary means any person, other than a Participant
-----------
or Former Participant, who is determined to be entitled to benefits under the
terms of the Plan.
Section 1.5 Board means the Board of Directors of Company.
-----
<PAGE>
Section 1.6 Code means the Internal Revenue Code of 1986 (including
----
the corresponding provisions of any prior law or succeeding law).
Section 1.7 Committee means the Compensation Committee of the Board
---------
of Directors of the Company, or such other person, committee or other entity as
shall be designated by or on behalf of the Board to perform the duties set forth
in Article VI.
Section 1.8 Company means Rome Bancorp, Inc., a Delaware
-------
corporation, or any successor thereto.
Section 1.9 Eligible Employee means an Employee who is eligible for
-----------------
participation in the Plan in accordance with the provisions of Article II.
Section 1.10 Employee means any person, including an officer, who is
--------
employed by the Employer.
Section 1.11 Employer means the Bank and any successor thereto and
--------
the Company and any successor thereto and any Affiliated Employer which, with
the prior written approval of the Board of Directors of the Bank and subject to
such terms and conditions as may be imposed by the Board, shall adopt this Plan.
Section 1.12 Employer Contributions means contributions by any
----------------------
Employer to the Savings Plan or the ESOP.
Section 1.13 ERISA means the Employee Retirement Income Security Act
-----
of l974, as amended from time to time (including the corresponding provisions of
any succeeding law).
Section 1.14 ESOP means the Employee Stock Ownership Plan of Rome
----
Bancorp, Inc., as amended from time to time (including the corresponding
provisions of any successor qualified employee stock ownership plan adopted by
the Company).
Section 1.15 Exchange Act means the Securities Exchange Act of 1934,
------------
as amended from time to time (including the corresponding provisions of any
succeeding law).
Section 1.16 Fair Market Value of a Share means, with respect to a
----------------------------
Share on a specified date:
(a) the final reported sales price on the date in question (or if
there is no reported sale on such date, on the last preceding date on which
any reported sale occurred) as reported in the principal consolidated
reporting system with respect to securities listed or admitted to trading
on the principal United States securities exchange on which the Shares are
listed or admitted to trading; or
2
<PAGE>
(b) if the Shares are not listed or admitted to trading on any such
exchange, the closing bid quotation with respect to a Share on such date on
the National Association of Securities Dealers Automated Quotations System,
or, if no such quotation is provided, on another similar system, selected
by the Committee, then in use; or
(c) if sections 1.16(a) and (b) are not applicable, the fair market
value of a Share as the Committee may determine.
Section 1.17 Former Participant means a person whose participation
------------------
in the Plan has terminated as provided under section 2.3.
Section 1.18 Savings Plan means the tax-qualified 401(k) plan
------------
maintained by the Company or the Bank from time to time.
Section 1.19 Participant means any person who is participating in
-----------
the Plan in accordance with its terms.
Section 1.20 Plan means the Benefit Restoration Plan of Rome
----
Bancorp, Inc. as amended from time to time (including the corresponding
provisions of any successor plan adopted by the Company).
Section 1.21 Share means a share of common stock, par value $.01
-----
per share, of Rome Bancorp, Inc.
Section 1.22 Stock Unit means a right to receive a payment under
----------
the Plan in an amount equal, on the date as of which such payment is made, to
the Fair Market Value of a Share.
Section 1.23 Termination of Service means an Employee's separation
----------------------
from service with all Employers as an Employee, whether by resignation,
discharge, death, disability, retirement or otherwise.
Article II
----------
Participation
-------------
Section 2.1 Eligibility for Participation.
-----------------------------
Only Eligible Employees may become Participants. An Employee shall
become an Eligible Employee if:
(a) he holds the office of Chief Executive Officer of the Bank or the
Company, or he has been designated an Eligible Employee by resolution of
the Board; and
3
<PAGE>
(b) he is a participant in the Savings Plan or the ESOP, or any
combination thereof, and the benefits to which he is entitled thereunder
are limited by one or more of the Applicable Limitations;
provided, however, that no person shall be named an Eligible Employee, nor shall
any person who has been an Eligible Employee continue as an Eligible Employee,
to the extent that such person's participation, or continued participation, in
the Plan would cause the Plan to fail to be considered maintained for the
primary purpose of providing deferred compensation for a select group of
management or highly compensated employees for purposes of ERISA.
Section 2.2 Commencement of Participation.
-----------------------------
An Employee shall become a Participant on the date when he first
becomes an Eligible Employee, unless the Committee shall, by resolution,
establish an earlier or later effective date of participation for a Participant.
Section 2.3 Termination of Participation.
----------------------------
Participation in the Plan shall cease on the earlier of (a) the date
of the Participant's Termination of Service or (b) the date on which he ceases
to be an Eligible Employee.
Article III
-----------
Benefits to Participants
------------------------
Section 3.1 Supplemental Savings Benefit.
----------------------------
(a) A Participant whose benefits under the Savings Plan are limited
by one or more of the Applicable Limitations shall be eligible for a
supplemental savings benefit under this Plan in an amount equal to:
(i) the aggregate amount of Employer Contributions (including any
reallocation of amounts forfeited upon the termination of employment of
others participating in the Savings Plan) that would have been credited to
the Participant's account under the Savings Plan in the absence of the
Applicable Limitations if for all relevant periods he had made the maximum
amount of elective deferrals, within the meaning of section 402(g)(3) of
the Code, or voluntary employee contributions, within the meaning of
section 401(a) of the Code, required to qualify for the maximum possible
allocation of Employer Contributions (and without regard to the amount of
elective deferrals or voluntary employee contributions actually made); over
(ii) the aggregate amount of Employer Contributions (including any
reallocation of amounts forfeited upon the termination of employment of
others
4
<PAGE>
participating in the Savings Plan) actually credited to the Participant's
account under the Savings Plan for such periods;
adjusted for earnings and losses as provided in section 3.1(b); provided,
however, that if the Participant dies before the payment of such supplemental
savings benefit begins, no benefit shall be payable under this section 3.1 and
the survivor benefit, if any, which may be payable shall be determined under
section 4.1.
(b) The Committee shall cause to be maintained a bookkeeping account
to reflect all Employer Contributions (including any reallocation of amounts
forfeited upon the termination of employment of others participating in the
Savings Plan) that cannot be made to a Participant's account under the Savings
Plan due to the Applicable Limitations and shall cause such bookkeeping account
to be credited with all such Employer Contributions as of the date on which such
Employer Contributions would have been credited to the Participant's account in
the Savings Plan in the absence of the Applicable Limitations. The balance
credited to such bookkeeping account shall be adjusted for earnings or losses as
follows:
(i) except as provided in section 3.1(b)(ii), the balance credited to
such bookkeeping account shall be credited with interest as of the last day
of each calendar month at a rate for such month equal to one-twelfth of the
annualized yield on 30-year Treasury Securities, Constant Maturities,
prescribed by the Commissioner of Internal Revenue for such month pursuant
to section 417(e) of the Code; or
(ii) if and to the extent permitted by the Committee, as though such
Employer Contributions had been contributed to a trust fund and invested,
for the benefit of the Participant, in such investments at such time or
times as the Participant shall have designated in such form and manner as
the Committee shall prescribe.
(c) The supplemental savings benefit payable to a Participant
hereunder shall be paid in a single lump sum as soon as practicable following
the last day of the calendar year in which the Participant's Termination of
Service occurs and shall be equal to the balance credited to his bookkeeping
account as of the last day of the last calendar month to end prior to the date
of payment. Notwithstanding the foregoing, a Participant may, within 30 days
after first becoming eligible to participate in the Plan for purposes of
receiving a supplemental savings benefit, specify that such supplemental savings
benefit be paid in a different form or commencing at a different time by filing
a written election, in such form and manner as the Committee may prescribe,
within such 30-day period.
Section 3.2 Supplemental ESOP Benefits.
--------------------------
(a) A Participant whose benefits under the ESOP are limited by one or
more of the Applicable Limitations shall be eligible for a supplemental ESOP
benefit under this Plan in an amount equal to the sum of:
5
<PAGE>
(i) a number of Stock Units equal to the excess (if any) of (A) the
aggregate number of Shares (including any reallocation of Shares forfeited
upon the termination of employment of others participating in the ESOP)
that would have been credited to the Participant's account under the ESOP
in the absence of the Applicable Limitations over (B) the number of Shares
actually credited to his account under the ESOP; plus
(ii) if and to the extent that Employer Contributions to the ESOP
result in allocations to the Participant's account of assets other than
Shares, an amount equal to the excess (if any) of (A) the aggregate amount
of Employer Contributions (including any reallocation of amounts forfeited
upon the termination of employment of others participating in the ESOP)
that would have been credited to the Participant's account under the ESOP
in the absence of the Applicable Limitations over (B) the aggregate amount
of Employer Contributions (including any reallocation of amounts forfeited
upon the termination of employment of others participating in the ESOP)
actually credited to the Participant's account under the ESOP;
adjusted for earnings and losses as provided section 3.2(b); provided, however,
that if the Participant dies before the payment of such supplemental ESOP
benefit begins, no benefit shall be payable under this section 3.2 and the
survivor benefit, if any, which may be payable shall be determined under section
4.2.
(b) The Committee shall cause to be maintained a bookkeeping account
to reflect all Shares and Employer Contributions (including any reallocation of
amounts forfeited upon the termination of employment of others participating in
the ESOP) that cannot be allocated to a Participant's account under the ESOP due
to the Applicable Limitations and shall cause such bookkeeping account to be
credited with such Employer Contributions and Stock Units reflecting such Shares
as of the date on which such Employer Contributions and Shares, respectively,
would have been credited to the Participant's account in the ESOP in the absence
of the Applicable Limitations. The balance credited to such bookkeeping account
shall be adjusted for earnings or losses as follows:
(i) all Stock Units shall be adjusted from time to time so that the
value of a Stock Unit on any date is equal to the Fair Market Value of a
Share on such date, and the number of Stock Units shall be adjusted as and
when appropriate to reflect any stock dividend, stock split, reverse stock
split, exchange, conversion, or other event generally affecting the number
of Shares held by all holders of Shares; and
(ii) (A) except as provided in section 3.2(b)(ii)(B), the balance
credited to such bookkeeping account that does not consist of Stock Units
shall be credited with interest as of the last day of each calendar month
at a rate for such month equal to one-twelfth of the annualized yield on
30-year Treasury Securities, Constant Maturities, prescribed by the
Commissioner of Internal Revenue for such month pursuant to section 417(e)
of the Code; or
6
<PAGE>
(B) if and to the extent permitted by the Committee, the balance
credited to such bookkeeping account that does not consist of Stock Units
shall be adjusted as though such Employer Contributions had been
contributed to a trust fund and invested, for the benefit of the
Participant, in such investments at such time or times as the Participant
shall have designated in such form and manner as the Committee shall
prescribe;
provided, however, that to the extent that the Participant shall receive on a
current basis any dividend paid with respect to Shares credited to his account
under the ESOP, the bookkeeping account established for him under this Plan
shall not be adjusted to reflect such dividend and, instead, the Participant
shall be paid an amount per Stock Unit equal to the dividend per Share received
by the Participant under the ESOP, at substantially the same time as such
dividend is paid under the ESOP.
(c) The supplemental ESOP benefit payable to a Participant hereunder
shall be paid in a single lump sum cash payment as soon as practicable following
the last day of the calendar year in which the Participant's Termination of
Service occurs and shall be in an amount equal to the balance credited to his
bookkeeping account. Notwithstanding the foregoing, a Participant may, within
30 days after first becoming eligible to participate in the Plan for purposes of
receiving a supplemental ESOP benefit, specify that such supplemental ESOP
benefit be paid in a different form or commencing at a different time by filing
a written election, in such form and manner as the Committee may prescribe,
within such 30 day period.
Section 3.3 Restored ESOP Benefits.
----------------------
(a) A Participant who satisfies section 2.1 shall be entitled to,
upon his Termination of Service upon or after attaining normal retirement age
under the terms of the ESOP, an unfunded, unsecured promise from the Bank to
receive an amount determined by:
(i) projecting the total number of Shares that would have been
allocated to the Participant's account under the terms of the ESOP had the
Participant continued in the employ of the Bank until the ESOP loan was
repaid in full and the final allocation of Shares acquired when the ESOP
loan was made ocurred; and then
(ii) multiplying the number of Shares determined in section 3.3(a)(ii)
above by the average of the closing prices of such Shares at the end of
each fiscal quarter during the preceding four fiscal quarters immediately
preceding (or such fewer quarters as the Participant has been a
Participant) to the Participant's retirement.
(b) The projection of Shares required by section 3.3(a)(i) above
shall be performed by a public accountant based on assumptions which the
Committee has approved as reasonable at the time the calculation of the benefit
payable to the Participant is performed.
(c) The restored ESOP benefit payable to a Participant hereunder
shall be paid in a single lump sum cash payment as soon as practicable following
the last day of the calendar year in which the Participant's Termination of
Service occurs and shall be in an amount determined
7
<PAGE>
pursuant to section 3.3(a) above. Notwithstanding the foregoing, a Participant
may, within 30 days after first becoming eligible to participate in the Plan for
purposes of receiving a restored ESOP benefit, specify that such restored ESOP
benefit be paid in a different form or commencing at a different time by filing
a written election, in such form and manner as the Committee may prescribe,
within such 30-day period.
Article IV
----------
Death Benefits
--------------
Section 4.1 Supplemental Savings Plan Death Benefits.
----------------------------------------
If a Participant who is eligible for a supplemental savings benefit
under section 3.1 dies before the payment of such benefit begins, a supplemental
survivor's savings benefit shall be payable to the Participant's Beneficiary
under this Plan in amount equal to the balance credited to the bookkeeping
account established for the Participant under section 32(b). Such benefit shall
be paid in a single lump sum cash payment as soon as practicable following the
death of the Participant and the bookkeeping account established for such
Participant pursuant to section 32(b) shall continue to be adjusted as provided
therein through the last day of the last calendar month to end prior to the date
of payment.
Section 4.2 Supplemental ESOP Death Benefits.
--------------------------------
If a Participant who is eligible for a supplemental ESOP benefit under
section 3.2 dies before the payment of such benefit begins, a supplemental ESOP
benefit shall be payable to the Participant's Beneficiary under this Plan in
amount equal to the balance credited to the bookkeeping account established for
the Participant under section 3.2(b). Such benefit shall be paid in a single
lump sum cash payment as soon as practicable following the death of the
Participant, and the bookkeeping account established for such Participant
pursuant to section 3.2(b) shall continue to be adjusted as provided therein
through the last day of the last calendar month to end prior to the date of
payment.
Section 4.3 Restored ESOP Death Benefits.
----------------------------
If a Participant who is eligible for a restored ESOP benefit under
section 3.3 dies before the payment of such benefit begins, a restored ESOP
benefit shall be payable to the Participant's Beneficiary under this Plan in
amount determined pursuant to section 3.3(b). Such benefit shall be paid in a
single lump sum cash payment as soon as practicable following the death of the
Participant.
Section 4.4 Beneficiaries.
-------------
A Participant or Former Participant may designate a Beneficiary or
Beneficiaries to receive any survivor benefits payable under the Plan upon his
death. Any such designation, or
8
<PAGE>
change therein or revocation thereof, shall be made in writing in the form and
manner prescribed by the Committee, shall be revocable until the death of the
Participant, and shall thereafter be irrevocable; provided, however, that any
change or revocation shall be effective only if received by the Committee prior
to the Participant's or Former Participant's death. If a Participant or Former
Participant shall die without having effectively named a Beneficiary, he shall
be deemed to have named his estate as his sole Beneficiary. If a Participant or
Former Participant and his designated Beneficiary shall die in circumstances
which give rise to doubt as to which of them shall have been the first to die,
the Participant or Former Participant shall be deemed to have survived the
Beneficiary. If a Participant or Former Participant designates more than one
Beneficiary, all shall be deemed to have equal shares unless the Participant or
Former Participant shall expressly provide otherwise.
Article V
---------
Trust Fund
----------
Section 5.1 Establishment of Trust.
----------------------
The Company may establish a trust fund which may be used to accumulate
funds to satisfy benefit liabilities to Participants, Former Participants and
their Beneficiaries under the Plan; provided, however, that the assets of such
trust shall be subject to the claims of the creditors of the Company in the
event that it is determined that the Company is insolvent; and provided,
further, that the trust agreement shall contain such terms, conditions and
provisions as shall be necessary to cause the Company to be considered the owner
of the trust fund for federal, state or local income tax purposes with respect
to all amounts contributed to the trust fund or any income attributable to the
investments of the trust fund. The Company shall pay all costs and expenses
incurred in establishing and maintaining such trust. Any payments made to a
Participant, Former Participant or Beneficiary from a trust established under
this section 51 shall offset payments which would otherwise be payable by the
Company in the absence of the establishment of such trust. Any such trust will
conform to the terms of the model trust described in Revenue Procedure 92-64, as
the same may be modified from time to time.
Section 5.2 Contributions to Trust.
----------------------
If a trust is established in accordance with section 51, the Company
shall make contributions to such trust in such amounts and at such times as may
be specified by the Committee or as may be required pursuant to the terms of the
agreement governing the establishment and operation of such trust.
Section 5.3 Unfunded Character of Plan.
--------------------------
Notwithstanding the establishment of a trust pursuant to section 51,
the Plan shall be unfunded for purposes of the Code and ERISA. Any liability of
the Bank, the Company or another Employer to any person with respect to benefits
payable under the Plan shall be based solely
9
<PAGE>
upon such contractual obligations, if any, as shall be created by the Plan, and
shall give rise only to a claim against the general assets of the Bank, the
Company or such Employer. No such liability shall be deemed to be secured by any
pledge or any other encumbrance on any specific property of the Bank, the
Company or any other Employer.
Article VI
----------
Administration
--------------
Section 6.1 The Committee.
-------------
Except for the functions reserved to the Bank or the Board, the
administration of the Plan shall be the responsibility of the Committee. The
Committee shall have the power and the duty to take all actions and to make all
decisions necessary or proper to carry out the Plan. The determination of the
Committee as to any question involving the general administration and
interpretation of the Plan shall be final, conclusive and binding. Any
discretionary actions to be taken under the Plan by the Committee shall be
uniform in their nature and applicable to all persons similarly situated.
Without limiting the generality of the foregoing, the Committee shall have the
following powers:
(a) to furnish to all Participants, upon request, copies of the Plan
and to require any person to furnish such information as it may request for
the purpose of the proper administration of the Plan as a condition to
receiving any benefits under the Plan;
(b) to make and enforce such rules and regulations and prescribe the
use of such forms as it shall deem necessary for the efficient
administration of the Plan;
(c) to interpret the Plan, and to resolve ambiguities,
inconsistencies and omissions, and the determinations of the Committee in
respect thereof shall be binding, final and conclusive upon all interested
parties;
(d) to decide on questions concerning the Plan in accordance with the
provisions of the Plan;
(e) to determine the amount of benefits which shall be payable to any
person in accordance with the provisions of the Plan, to hear and decide
claims for benefits, and to provide a full and fair review to any
Participant whose claim for benefits has been denied in whole or in part;
(f) to designate a person, who may or may not be a member of the
Committee, as "plan administrator" for purposes of the ERISA;
10
<PAGE>
(g) to allocate any such powers and duties to or among individual
members of the Committee; and
(h) the power to designate persons other than Committee members to
carry out any duty or power which would otherwise be a responsibility of
the Committee or Administrator, under the terms of the Plan.
Section 6.2 Liability of Committee Members and their Delegates
--------------------------------------------------
To the extent permitted by law, the Committee and any person to whom
it may delegate any duty or power in connection with administering the Plan, the
Bank, the Company, any Employer, and the officers and directors thereof, shall
be entitled to rely conclusively upon, and shall be fully protected in any
action taken or suffered by them in good faith in the reliance upon, any
actuary, counsel, accountant, other specialist, or other person selected by the
Committee, or in reliance upon any tables, valuations, certificates, opinions or
reports which shall be furnished by any of them. Further, to the extent
permitted by law, no member of the Committee, nor the Bank, the Company, any
Employer, nor the officers or directors thereof, shall be liable for any
neglect, omission or wrongdoing of any other members of the Committee, agent,
officer or employee of the Bank, the Company or any Employer. Any person
claiming benefits under the Plan shall look solely to the Employer for redress.
Section 6.3 Plan Expenses
-------------
All expenses incurred prior to the termination of the Plan that shall
arise in connection with the administration of the Plan (including, but not
limited to administrative expenses, proper charges and disbursements,
compensation and other expenses and charges of any actuary, counsel, accountant,
specialist, or other person who shall be employed by the Committee in connection
with the administration of the Plan), shall be paid by the Company.
Section 6.4 Facility of Payment.
-------------------
If the Company is unable to make payment to any Participant, Former
Participant Beneficiary, or any other person to whom a payment is due under the
Plan, because it cannot ascertain the identity or whereabouts of such
Participant, Former Participant Beneficiary, or other person after reasonable
efforts have been made to identify or locate such person (including a notice of
the payment so due mailed to the last known address of such Participant, Former
Participant Beneficiary, or other person shown on the records of the Employer),
such payment and all subsequent payments otherwise due to such Participant,
Former Participant, Beneficiary or other person shall be forfeited 24 months
after the date such payment first became due; provided, however, that such
payment and any subsequent payments shall be reinstated, retroactively, no later
than 60 days after the date on which the Participant, Former Participant,
Beneficiary, or other person is identified or located.
11
<PAGE>
Article VII
-----------
Amendment and Termination
-------------------------
Section 7.1 Amendment by the Company.
------------------------
The Company reserves the right, in its sole and absolute discretion,
at any time and from to time, by action of the Board, to amend the Plan in whole
or in part. In no event, however, shall any such amendment adversely affect the
right of any Participant, Former Participant or Beneficiary to receive any
benefits under the Plan in respect of participation for any period ending on or
before the later of the date on which such amendment is adopted or the date on
which it is made effective.
Section 7.2 Termination.
-----------
The Company also reserves the right, in its sole and absolute
discretion, by action of the Board, to terminate the Plan. In such event,
undistributed benefits attributable to participation prior to the date of
termination shall be distributed as though each Participant terminated
employment with the Bank, the Company and all other Employers as of the
effective date of termination of the Plan.
Section 7.3 Amendment or Termination by Other Employers.
-------------------------------------------
In the event that a corporation or trade or business other than the
Bank shall adopt this Plan, such corporation or trade or business shall, by
adopting the Plan, empower the Bank to amend or terminate the Plan, insofar as
it shall cover employees of such corporation or trade or business, upon the
terms and conditions set forth in sections 71 and 72; provided, however, that
any such corporation or trade or business may, by action of its board of
directors or other governing body, amend or terminate the Plan, insofar as it
shall cover employees of such corporation or trade or business, at different
times and in a different manner. In the event of any such amendment or
termination by action of the board of directors or other governing body of such
a corporation or trade or business, a separate plan shall be deemed to have been
established for the employees of such corporation or trade or business, and any
amounts set aside to provide for the satisfaction of benefit liabilities with
respect to Employees of such corporation or trade or business shall be
segregated from the assets set aside for the purposes of this Plan at the
earliest practicable date and shall be dealt with in accordance with the
documents governing such separate plan.
12
<PAGE>
Article VIII
------------
Miscellaneous Provisions
------------------------
Section 8.1 Construction and Language.
-------------------------
Wherever appropriate in the Plan, words used in the singular may be
read in the plural, words in the plural may be read in the singular, and words
importing the masculine gender shall be deemed equally to refer to the feminine
or the neuter. Any reference to an Article or section shall be to an Article or
section of the Plan, unless otherwise indicated.
Section 8.2 Headings.
--------
The headings of Articles and sections are included solely for
convenience of reference. If there is any conflict between such headings and
the text of the Agreement, the text shall control.
Section 8.3 Non-Alienation of Benefits.
--------------------------
Except as may otherwise be required by law, no distribution or payment
under the Plan to any Participant, Former Participant or Beneficiary shall be
subject in any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance or charge, whether voluntary or involuntary, and any attempt
to so anticipate, alienate, sell, transfer, assign, pledge, encumber or charge
the same shall be void; nor shall any such distribution or payment be in any way
liable for or subject to the debts, contracts, liabilities, engagements or torts
of any person entitled to such distribution or payment. If any Participant,
Former Participant or Beneficiary is adjudicated bankrupt or purports to
anticipate, alienate, sell, transfer, assign, pledge encumber or charge any such
distribution or payment, voluntarily or involuntarily, the Committee, in its
sole discretion, may cancel such distribution or payment or may hold or cause to
be held or applied such distribution or payment, or any part thereof, to or for
the benefit of such Participant, Former Participant or Beneficiary, in such
manner as the Committee shall direct; provided, however, that no such action by
the Committee shall cause the acceleration or deferral of any benefit payments
from the date on which such payments are scheduled to be made.
Section 8.4 Indemnification.
---------------
The Bank shall indemnify, hold harmless and defend each Participant,
Former Participant and Beneficiary, against their reasonable costs, including
legal fees, incurred by them or arising out of any action, suit or proceeding in
which they may be involved, as a result of their efforts, in good faith, to
defend or enforce the obligation of the Bank, the Company and any other Employer
under the terms of the Plan.
13
<PAGE>
Section 8.5 Severability.
------------
A determination that any provision of the Plan is invalid or
unenforceable shall not affect the validity or enforceability of any other
provision hereof.
Section 8.6 Waiver.
------
Failure to insist upon strict compliance with any of the terms,
covenants or conditions of the Plan shall not be deemed a waiver of such term,
covenant or condition. A waiver of any provision of the Plan must be made in
writing, designated as a waiver, and signed by the party against whom its
enforcement is sought. Any waiver or relinquishment of any right or power
hereunder at any one or more times shall not be deemed a waiver or
relinquishment of such right or power at any other time or times.
Section 8.7 Governing Law.
-------------
The Plan shall be construed, administered Section and enforced
according to the laws of the State of New York without giving effect to the
conflict of laws principles thereof, except to the extent that such laws are
preempted by the federal laws of the United States. Any payments made pursuant
to this Plan are subject to and conditioned upon their compliance with 12 U.S.C.
(S) 1828(k) and any regulations promulgated thereunder.
Section 8.8 Taxes.
-----
The Employer shall have the right to retain a sufficient portion of
any payment made under the Plan to cover the amount required to be withheld
pursuant to any applicable federal, state and local tax law.
Section 8.9 No Deposit Account.
------------------
Nothing in this Plan shall be held or construed to establish any
deposit account for any Participant or any deposit liability on the part of the
Bank. Participants' rights hereunder shall be equivalent to those of a general
unsecured creditor of each Employer.
Section 8.10 No Right to Continued Employment.
--------------------------------
Neither the establishment of the Plan, nor any provisions of the Plan
nor any action of the Plan Administrator, the Committee or any Employer shall be
held or construed to confer upon any Employee any right to a continuation of
employment by the Employer. The Employer reserves the right to dismiss any
Employee or otherwise deal with any Employee to the same extent as though the
Plan had not been adopted.
14
<PAGE>
Section 8.11 Status of Plan Under ERISA.
--------------------------
The Plan is intended to be (a) to the maximum extent permitted under
applicable laws, an unfunded, non-qualified excess benefit plan as contemplated
by section 3(36) of ERISA for the purpose of providing benefits in excess of the
limitations imposed under section 415 of the Code, and (b) to the extent not so
permitted, an unfunded, non-qualified plan maintained primarily for the purpose
of providing deferred compensation for highly compensated employees, as
contemplated by sections 201(2), 301(a)(3) and 401(a)(1) of ERISA. The Plan is
not intended to comply with the requirements of section 401(a) of the Code or to
be subject to Parts 2, 3 and 4 of Title I of ERISA. The Plan shall be
administered and construed so as to effectuate this intent.
15
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
The following is a list of the subsidiaries of Rome Bancorp, Inc. following
the Reorganization:
Name State of Incorporation
---- ----------------------
The Rome Savings Bank New York
<PAGE>
Exhibit 23.2
Independent Auditors' Consent
The Board of Trustees
The Rome Savings Bank:
We consent to the inclusion in the Registration Statement on Form SB-2 of Rome
Bancorp, Inc. of our audit report dated February 5, 1999, on the consolidated
statements of condition of The Rome Savings Bank and subsidiaries as of December
31, 1998 and 1997, and the related consolidated statements of income, equity and
comprehensive income and cash flows for each of the years in the two year period
ended December 31, 1998. We further consent to the use of our opinion included
herein regarding certain state income tax consequences of the proposed
reorganization and offering.
We also consent to the references to our firm under the headings "Effects of the
Reorganization - Tax Aspects," "Legal and Tax Opinions" and "Experts" in the
prospectus.
/s/ KPMG LLP
June 9, 1999
Syracuse, New York
<PAGE>
Exhibit 23.4
[Consent of RP Financial, L.C.]
RP Financial, L.C.
Board of Directors
June 9, 1999
June 9, 1999
Board of Trustees
The Rome Savings Bank
100 W. Dominick Street
Rome, New York 13440
Gentlemen:
We hereby consent to the use of our firm's name in the Form SB-2 Registration
Statement and any amendments thereto for Rome Bancorp, Inc. We also hereby
consent to the inclusion of, summary of and references to our Appraisal and our
statement concerning subscription rights in such filings including the
prospectus of Rome Bancorp, Inc.
Sincerely,
RP FINANCIAL, L.C.
/s/ Gregory E. Dunn
Senior Vice President
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
this schedule contains financial information extracted from the consolidated
balance sheets and the statements of income of Rome Bancorp, Inc. and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 8,391
<INT-BEARING-DEPOSITS> 5,738
<FED-FUNDS-SOLD> 12,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 52,856
<INVESTMENTS-CARRYING> 1,420
<INVESTMENTS-MARKET> 1,484
<LOANS> 136,852
<ALLOWANCE> 1,898
<TOTAL-ASSETS> 224,279
<DEPOSITS> 191,926
<SHORT-TERM> 0
<LIABILITIES-OTHER> 3,414
<LONG-TERM> 0
0
0
<COMMON> 0
<OTHER-SE> 28,939
<TOTAL-LIABILITIES-AND-EQUITY> 224,279
<INTEREST-LOAN> 2,822
<INTEREST-INVEST> 733
<INTEREST-OTHER> 175
<INTEREST-TOTAL> 3,730
<INTEREST-DEPOSIT> 1,733
<INTEREST-EXPENSE> 1,733
<INTEREST-INCOME-NET> 1,997
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,688
<INCOME-PRETAX> 563
<INCOME-PRE-EXTRAORDINARY> 563
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 389
<EPS-BASIC> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 4.08
<LOANS-NON> 405
<LOANS-PAST> 170
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,956
<CHARGE-OFFS> 217
<RECOVERIES> 159
<ALLOWANCE-CLOSE> 1,898
<ALLOWANCE-DOMESTIC> 1,898
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
