<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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HUDSON CITY BANCORP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CERTIFICATE OF INCORPORATION)
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<TABLE>
<S> <C> <C>
DELAWARE 6035 PENDING
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD (IRS EMPLOYER IDENTIFICATION NO.)
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER)
</TABLE>
WEST 80 CENTURY ROAD
PARAMUS, NEW JERSEY 07652
(201) 967-1900
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
LEONARD S. GUDELSKI
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
HUDSON CITY SAVINGS BANK
WEST 80 CENTURY ROAD
PARAMUS, NEW JERSEY 07652
(201) 967-1900
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
COPIES TO:
ROBERT C. AZAROW, ESQ.
OMER S. J. WILLIAMS, ESQ.
THACHER PROFFITT & WOOD
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(212) 912-7400
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after this Registration Statement becomes effective. If any of the
securities being registered on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, check
the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) REGISTRATION FEE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par
value..................... 87,020,500 $10.00 $870,205,000 $241,917
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</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 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 SECTION 8(a), MAY
DETERMINE.
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<PAGE> 2
PROSPECTUS
[LOGO]
HUDSON CITY BANCORP, INC.
Proposed Holding Company for Hudson City Savings Bank
Up to 87,020,500 Shares of Common Stock
Hudson City 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 Hudson City Bancorp. Hudson City Savings Bank formed
Hudson City Bancorp to own Hudson City Savings Bank as part of a reorganization
of our structure. More than half of the outstanding common stock of Hudson City
Bancorp will be owned by Hudson City, MHC, a mutual savings bank holding
company. The common stock of Hudson City Bancorp will be listed for trading on
the Nasdaq National Market System under the symbol "HCBK."
TERMS OF THE OFFERING
PRICE: $10.00 PER SHARE
<TABLE>
<CAPTION>
Minimum Maximum
------------ ------------
<S> <C> <C>
Number of shares ............................ 55,930,000 75,670,000
Underwriting commissions and expenses ....... $ 9,709,000 $ 11,888,000
Net proceeds to Hudson City Bancorp ......... $549,591,000 $744,812,000
Net proceeds per share to Hudson City Bancorp $ 9.83 $ 9.84
</TABLE>
We may sell up to 87,020,500 shares because of regulatory
considerations or changes in market or economic conditions.
PLEASE READ THE RISK FACTORS BEGINNING ON PAGE [ ].
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 Securities and Exchange Commission, the Federal Deposit Insurance
Corporation, the Commissioner of Banking and Insurance of the State of New
Jersey nor any state securities regulator has approved or disapproved these
securities or determined if this prospectus is accurate or complete. Any
representation to the contrary is a criminal offense.
RYAN, BECK & CO.
[ ], 1999
<PAGE> 3
[MAP OF NEW JERSEY DIVIDED BY COUNTY AND SHOWING NUMBER OF
HUDSON CITY SAVINGS BANK BRANCH OFFICES PER COUNTY]
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SUMMARY
To more fully understand the offering, you should read this entire document
carefully, including the financial statements and the notes to the financial
statements.
OUR REORGANIZATION AND STOCK OFFERING
Hudson City Savings Bank is reorganizing into the mutual holding company
structure. As part of the reorganization, Hudson City Bancorp is offering shares
of its common stock to the public. After the reorganization, Hudson City Bancorp
will own Hudson City Savings.
THE COMPANIES
HUDSON CITY SAVINGS BANK
Hudson City Savings is a community and customer oriented savings bank that
provides financial services primarily to individuals and families. We seek to
differentiate ourselves from our competitors by providing high quality service
while maintaining low operating costs. Our assets are almost evenly divided
between residential mortgage loans and mortgage-backed and other investment
securities. Deposits provide the funds for the loans and investments we make.
Hudson City Savings has 75 branches located in Bergen, Burlington, Camden,
Essex, Gloucester, Hudson, Middlesex, Monmouth, Morris, Ocean, Passaic, Union
and Warren counties in New Jersey. At December 31, 1998, we had assets of $7.75
billion, deposits of $6.81 billion and equity of $901 million. We are the
largest savings institution by asset size headquartered in New Jersey.
HUDSON CITY BANCORP, INC.
Hudson City Bancorp, Inc. will be the holding company for Hudson City
Savings Bank after the reorganization. Hudson City Bancorp has not engaged in
any business to date.
HUDSON CITY, MHC
Hudson City, MHC will own more than half of the outstanding common stock of
Hudson City Bancorp after the reorganization. We do not expect that Hudson City,
MHC will engage in any business activity other than owning a majority of the
common stock of Hudson City Bancorp and managing dividends it receives from
Hudson City Bancorp. We do not expect that Hudson City, MHC will waive dividends
declared by Hudson City Bancorp.
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FINANCIAL HIGHLIGHTS OF HUDSON CITY SAVINGS INCLUDE:
- - Residential Lending.
Hudson City Savings is the third largest originator of residential mortgage
loans in our market area. We originate the majority of these loans for our
own portfolio, rather than for sale, and we service the loans we originate.
At December 31, 1998, we had $3.57 billion of residential mortgage loans,
representing 97.6% of our total loan portfolio.
- - Commitment to Cost Control.
We have been effective at controlling our costs of operations. As a result
of these efforts, our ratio of operating expenses to average assets was
0.84% for 1998. Our efficiency ratio, a commonly used industry ratio that
measures the cost of producing each dollar of revenue, was 29.58%. These
ratios are favorable compared to other savings institutions.
- - Interest Rate Strategy.
To reduce the risk that our earnings will be hurt if interest rates change,
we have invested in adjustable-rate mortgage-backed securities that are
guaranteed by U.S. government agencies. At December 31, 1998, we had $2.17
billion of these securities. As part of our interest rate management
strategy, we also originate adjustable-rate residential mortgage loans. At
December 31, 1998, we had $1.85 billion of these loans.
- - Asset Quality.
Through our commitment to residential lending and investment in
mortgage-backed securities, we have had low levels of losses on loans and
late payments. At December 31, 1998, our ratio of non-performing assets to
total assets was 0.21% and our ratio of allowance for loan losses to
non-performing loans was 115.47%. These ratios are favorable compared to
those of most other savings institutions.
- - Capital Strength and Profitability.
Our policy has always been to maintain the financial strength of Hudson
City Savings through conservative risk management, a sound financial
condition, consistent earnings and efficient operations. At December 31,
1998, our ratio of equity to assets was 11.62%, our return on average
assets was 1.24% and our return on average equity was 10.90%.
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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:
[DEPOSITORS IN HUDSON CITY SAVINGS BANK]
|
|
limited voting rights and
rights upon liquidation
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|
|
|
[HUDSON CITY, MHC] [PUBLIC STOCKHOLDERS]
| |
| |
53% of Hudson City Bancorp's 47% of Hudson City Bancorp's
Common Stock Common Stock
| |
| |
| |
| |
--------[HUDSON CITY BANCORP, INC.]-------
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100% ownership
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[HUDSON CITY SAVINGS BANK]
PERSONS WHO CAN ORDER STOCK IN THE OFFERING
We are offering the shares of common stock of Hudson City Bancorp in what
we call a "subscription offering" in the order of priority listed below:
(1) Depositors with accounts at Hudson City 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 Hudson City Savings with total balances of
at least $100 on March 31, 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) Depositors with accounts at Hudson City Savings with total balances of
at least $100 on [ ], 1999;
(2) Residents of New Jersey; and
(3) Other members of the public to whom we deliver a prospectus.
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In order to assure a successful offering, we have the right to grant an
overriding priority for institutional investors over other purchasers in the
community offering for up to 25% of the shares we sell in the offering. 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 55,930,000 and 75,670,000 shares of common stock of
Hudson City Bancorp to the public. The number of shares we sell in the offering
may increase by 15% to 87,020,500 shares as a result of changes in financial
markets. If we increase the number of shares we issue, you will not have the
opportunity to change or cancel your stock order. The offering price is $10.00
per share. Ryan, Beck & Co., Inc. will use its best efforts to assist us in
selling our stock.
HOW WE DETERMINED THE OFFERING RANGE AND THE $10.00 PRICE PER SHARE
The offering range is based on an independent appraisal of Hudson City
Savings by RP Financial, LC., an appraisal firm experienced in appraisals of
savings institutions. RP Financial has estimated that our market value at March
[ ], 1999, is between $1.19 billion and $1.61 billion. This results in an
offering of between 55,930,000 and 75,670,000 shares of stock at an offering
price of $10.00 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's independent appraisal will be
updated 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
Hudson City Bancorp common stock, including the shares we issue to Hudson City,
MHC, will have a book value of $9.65, assuming we sell 75,670,000 shares. This
means that the price you pay for each share in this offering will be 103.63% of
the book value.
The P/E ratio represents the price per share of stock divided by earnings
or net income per share. In our case, for 1998, our P/E ratio will be 14.29x,
assuming we sell 75,670,000 shares of stock.
The $10.00 price per share was determined by our board of managers and is
the price per share most commonly used in stock offerings involving conversions
of savings institutions.
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;
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(2) in the subscription offering, the maximum amount that an individual
may purchase is $500,000;
(3) in the community offering, the maximum amount that an individual with
his or her associates may purchase is $500,000; if you purchase
$500,000 of common stock in the subscription offering you may still
purchase up to $500,000 of common stock in the community offering;
(4) the total amount that an individual purchase is $2,500,000; 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 the $500,000 and $2.5 million purchase limitations if we do
not receive orders for at least 55,930,000 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 Hudson City Savings.
We may accept wire transfers from institutional investors in the community
offering under the procedures described in "The Reorganization and The Offering-
Procedure for Purchasing Shares in Subscription and Community Offerings- Payment
for Shares."
YOU MAY NOT SELL OR TRANSFER YOUR SUBSCRIPTION RIGHTS
If you order stock in the subscription offering, you will be required to
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 anyone who sells or gives away their 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 or by overnight
courier, a properly completed stock order form, together with payment for the
shares, to the Stock Information Center by 10:00 a.m., eastern time, on [ ],
1999, unless we extend this
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deadline. You must submit your order forms by mail or overnight courier. You may
not drop off your order forms at any of our branch offices.
TERMINATION OF THE OFFERING
The subscription offering will terminate at 10:00 a.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.
MARKET FOR THE COMMON STOCK
We expect the common stock to trade on the Nasdaq National Market System of
The Nasdaq Stock Market under the symbol "HCBK." Ryan, Beck 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 75,670,000 shares in the subscription offering, we intend
to distribute the net proceeds from the offering as follows:
- $372.4 million will be contributed to Hudson City Savings;
- $60.5 million will be loaned to the employee stock ownership plan of
Hudson City Savings to fund its purchase of common stock; and
- $311.9 million will be retained by Hudson City Bancorp;
Hudson City 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. Hudson City 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.
OUR POLICY REGARDING DIVIDENDS
We currently plan to pay an annual cash dividend of $0.20 per share,
payable quarterly at $0.05 per share starting the first quarter after we
complete the reorganization. We do not guarantee that we will pay dividends, or
that we will not reduce or eliminate dividends in future periods.
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OUR DIRECTORS, OFFICERS AND EMPLOYEES WILL HAVE ADDITIONAL
COMPENSATION AND BENEFIT PROGRAMS AFTER THE REORGANIZATION
We are adding two 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 thirty-year period as additional compensation for
their services.
- ESOP Restoration Plan. This plan will provide selected executive
officers additional benefits if the tax laws limit their benefits or
if they retire before the distribution of all stock under the employee
stock ownership plan.
We are also adding the following termination pay arrangements:
- Employment Agreements and Change of Control Agreements. We are
entering into employment agreements with Mr. Gudelski, our Chairman
and Chief Executive Officer, Mr. Hermance, our President and Chief
Operating Officer, and Mr. Tassillo, our Executive Vice President and
Treasurer. If we discharge one of them without cause, or if one of
them resigns because we do not meet our obligations under these
agreements, we must make a termination payment. We are also entering
into change of control agreements with four First Vice Presidents.
These agreements have termination provisions similar to those in the
employment agreements, but they apply only if there is a change of
control.
- Outside Directors Consultation Plan. We have added change of control
protections to this plan. The protections will assure that each of our
outside directors receives benefits if a change of control prematurely
ends his or her service.
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 our stock 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 shares of our stock, without making
any cash payment, if they work for us until the end of a specified
service period or attain other performance goals.
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Assuming we sell 75,670,000 shares, we expect to ask our stockholders for
approval to grant options to purchase up to 7,567,000 of our shares and make
stock grants under a management recognition plan of up to 3,026,800 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.
The following table presents the dollar value of the shares that we expect
to grant under the employee stock ownership and the contemplated management
recognition plans and of those to be granted under the stock option plan, and
the percentage of Hudson City 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 $10.00 per
share and the issuance of 75,670,000 shares of common stock.
<TABLE>
<CAPTION>
Percentage of
Value of common stock sold
Benefit plan shares granted in the offering
- ---------------------------------- -------------- -----------------
(In Thousands)
<S> <C> <C>
Employee stock ownership plan..... $60,536 8%
Management recognition plan ...... 30,268 4%
Stock option plan ................ -- 10%
------- -------
$90,804 22%
======= =======
</TABLE>
POSSIBLE CONVERSION OF HUDSON CITY, MHC TO STOCK FORM
In the future, Hudson City, MHC may convert from the mutual to capital
stock form, in a transaction commonly known as a "second-step conversion." If
Hudson City, MHC were to undertake a second-step conversion, Hudson City
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 Hudson City, MHC and
any dividends waived by Hudson City, MHC. The board of managers 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 Hudson City, 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 Stock Information Center at (201) [ ].
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RISK FACTORS
You should consider carefully the following risk factors before
deciding whether to invest in our common stock.
RISING 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, 48.1%
have interest rates that are fixed for the term of the loan. We originate loans
with terms of up to 30 years, while 70.0% of our deposit accounts consist of
time deposit accounts with remaining terms to maturity of less than one year. 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 would cause our
profits to decrease. Rising interest rates may also reduce the value of our
mortgage-backed securities and investment securities. 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 LOANS MAY LOWER OUR PROFITABILITY.
Making residential mortgage loans is our primary business and primary
source of profits. If customer demand for residential mortgage loans decreases,
our profits may decrease because our alternative investments earn less revenue
for us than residential mortgage loans. Customer demand for residential mortgage
loans could be reduced by a weaker economy, an increase in unemployment, a
decrease in real estate values or an increase in interest rates.
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 10.90%. 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.
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
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offer services that we do not provide. For example, we do not provide insurance
products, trust or investment services, telephonic banking, banking services
through home computers or other technologically advanced services. Customers who
seek "one stop shopping" may be drawn to these institutions. Our profitability
depends upon our continued ability to successfully compete in our market area.
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. In addition, we intend to adopt a restoration plan
that will supplement the benefits to select executive officers under the
employee stock ownership plan. These plans will increase our future costs of
compensating our directors and employees. The cost of these plans will vary
based on our stock price.
THE YEAR 2000 PROBLEM 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 the
new year 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 Problem," see "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Issues for the Year 2000."
HUDSON CITY, MHC'S VOTING CONTROL OVER HUDSON CITY BANCORP MAY PREVENT
TRANSACTIONS YOU WOULD LIKE.
Hudson City, MHC will own a majority of Hudson City Bancorp's common stock
after the reorganization. Hudson City, MHC will be managed by the same directors
and officers who manage Hudson City Savings. The board of directors of Hudson
City, MHC will control the outcome of most matters put to a vote of stockholders
of Hudson City Bancorp. We cannot assure you that the votes cast by Hudson City,
MHC will be in your personal best interests as a stockholder. For more
information regarding your lack of voting control over Hudson City Bancorp, see
"Hudson City, MHC" and "Restrictions on Acquisition of Hudson City Bancorp and
Hudson City Savings Bank."
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SELECTED FINANCIAL AND OTHER DATA
The summary information presented below under "Selected Financial Condition
Data," "Selected Operating Data" and "Selected Financial Ratios and Other Data"
at or for each of the years presented is derived in part from the audited
financial statements of Hudson City Savings. The following information is only a
summary and you should read it in conjunction with our financial statements and
notes beginning on page F-1.
<TABLE>
<CAPTION>
AT DECEMBER 31,
----------------------------------------------------------------------------------
1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
SELECTED FINANCIAL CONDITION DATA:
Total assets ...................... $7,752,260 $7,313,999 $6,672,429 $5,429,142 $4,891,555
Loans ............................. 3,659,407 3,463,803 3,171,458 2,791,802 2,606,059
Investment securities available for
sale ............................ 785,031 654,726 595,870 563,655 263,685
Mortgage-backed securities held to
maturity ........................ 3,070,931 3,022,225 2,710,078 1,865,930 1,642,927
Total cash and cash equivalents ... 156,875 95,674 121,601 133,032 86,431
Foreclosed real estate, net ....... 1,026 1,410 2,385 3,440 1,942
Total deposits .................... 6,807,339 6,465,956 5,918,971 4,757,813 4,296,932
Total equity ...................... 900,606 807,713 719,077 638,944 565,941
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
SELECTED OPERATING DATA:
Total interest income .................. $520,791 $500,442 $429,278 $363,102 $310,048
Interest expense on deposits ........... 311,084 297,484 242,667 195,543 133,746
-------- -------- -------- -------- --------
Net interest income .................. 209,707 202,958 186,611 167,559 176,302
Provision for loan losses .............. 2,400 2,850 2,275 1,000 789
-------- -------- -------- -------- --------
Net interest income after
provision for loan losses ......... 207,307 200,108 184,336 166,559 175,513
-------- -------- -------- -------- --------
Non-interest income:
Service charges and other income ..... 4,930 4,710 3,896 4,212 3,864
Gains on net securities transactions 24 1,594 152 307 482
-------- -------- -------- -------- --------
Total non-interest income ......... 4,954 6,304 4,048 4,519 4,346
-------- -------- -------- -------- --------
Total non-interest expense ........... 63,492 62,919 60,958 61,054 65,056
-------- -------- -------- -------- --------
Income before income tax expense ....... 148,769 143,493 127,426 110,024 114,803
Income tax expense ................ 55,500 53,500 46,595 42,250 41,778
-------- -------- -------- -------- --------
Net income ............................. $ 93,269 $ 89,993 $ 80,831 $ 67,774 $ 73,025
======== ======== ======== ======== ========
</TABLE>
13
<PAGE> 15
<TABLE>
<CAPTION>
AT OR FOR THE
YEARS ENDED DECEMBER 31,
-----------------------------------------------------------------
SELECTED FINANCIAL RATIOS AND OTHER DATA: 1998 1997 1996 1995 1994
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
PERFORMANCE RATIOS:
Return on average assets ......................... 1.24% 1.27% 1.33% 1.32% 1.55%
Return on average equity ......................... 10.90 11.79 11.93 11.24 13.71
Net interest rate spread (1) ..................... 2.16 2.28 2.50 2.70 3.39
Net interest margin (2) .......................... 2.85 2.94 3.14 3.35 3.86
Non-interest expense to average assets ........... 0.84 0.89 1.00 1.19 1.38
Efficiency ratio (3) ............................. 29.58 30.30 32.00 35.54 36.11
Average interest-earning assets to average
interest-bearing liabilities .................... 1.16X 1.15X 1.16X 1.17X 1.16X
CAPITAL RATIOS:
Average equity to average assets ................. 11.35% 10.79% 11.11% 11.72% 11.32%
Equity to assets ................................. 11.62 11.04 10.78 11.77 11.57
REGULATORY CAPITAL RATIOS:
Leverage capital ................................. 11.93 11.37 11.69 12.24 11.91
Total risk-based capital ......................... 39.23 37.60 35.15 33.77 30.73
ASSET QUALITY RATIOS:
Non-performing loans to total loans .............. 0.42 0.47 0.53 0.75 0.84
Non-performing assets to total assets ............ 0.21 0.24 0.29 0.45 0.49
Allowance for loan losses to non-performing loans 115.47 96.85 76.89 56.91 52.89
Allowance for loan losses to total loans ......... 0.48 0.45 0.41 0.43 0.44
OTHER DATA:
Number of deposit accounts ....................... 484,991 480,414 456,847 397,210 368,271
Branches ......................................... 75 75 74 71 69
</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 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 of $24,000 for 1998, $1,594,000 for
1997, $152,000 for 1996, $307,000 for 1995 and $482,000 for 1994).
14
<PAGE> 16
HUDSON CITY SAVINGS BANK
Hudson City Savings is a New Jersey chartered mutual savings bank,
chartered in 1868. Hudson City Savings is the largest mutual savings bank in the
country by asset size. Our deposits are insured by the FDIC. We are examined and
regulated by the Department of Banking and Insurance of the State of New Jersey
and the FDIC. Hudson City Savings Bank's executive offices are located at West
80 Century Road, Paramus, New Jersey 07652 and its telephone number is (201)
967-1900.
Hudson City Savings is a community and customer oriented retail savings
bank offering traditional deposit products, residential real estate mortgage
loans and, to a lesser extent, consumer loans. Hudson City Savings operates
through 75 full service banking offices located in Bergen, Burlington, Camden,
Essex, Gloucester, Hudson, Middlesex, Monmouth, Morris, Ocean, Passaic, Union
and Warren counties in New Jersey. As of June 30, 1998, Hudson City maintained a
5.0% share of all New Jersey deposits, and ranked fifth in the size of deposits
overall. In 1997, our deposit base represented 6% of our market area's total
reported deposits, positioning us as the fifth largest (in dollar volume)
depository institution in the area. On a state-wide level, we also ranked as the
fifth largest depository institution with a 4.6% share of all reported funds on
deposit at the end of 1997. At December 31, 1998, we had total assets of $7.75
billion, total deposits of $6.81 billion and total equity of $901 million.
At December 31, 1998, we had total loans of $3.66 billion, of which $3.57
billion, or 97.6%, were first mortgage loans. Of the residential mortgage loans
outstanding at that date, 51.9% were adjustable-rate mortgage loans and 48.1%
were fixed-rate loans. We retain substantially all of the loans that we
originate. We also invest in mortgage-backed and investment securities,
consisting primarily of U.S. government and government agency securities.
Mortgage-backed securities equaled $3.07 billion or 39.6% of our total assets at
December 31, 1998. For further information on our operations and financial
condition, see "Business of Hudson City Savings Bank."
HUDSON CITY BANCORP, INC.
Hudson City Bancorp is a newly organized Delaware corporation organized on
March 3, 1999. Hudson City Bancorp has not engaged in any business to date, and,
in the future will serve as a holding company of Hudson City Savings following
the reorganization. A majority of the outstanding shares of Hudson City
Bancorp's common stock will be owned by Hudson City, MHC. Hudson City Bancorp's
executive offices are located at West 80 Century Road, Paramus, New Jersey 07652
and its telephone number is (201) 967-1900.
HUDSON CITY, MHC
As part of our reorganization in structure, Hudson City Savings will
organize Hudson City, MHC as a New Jersey 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 Hudson City
Savings as of the date of the reorganization will continue to have liquidation
rights solely with respect to Hudson City, MHC. Their liquidation rights in
Hudson City, MHC will exist as long as they maintain a deposit account of Hudson
City
15
<PAGE> 17
Savings. Hudson City, MHC's executive offices are located at West 80 Century
Road, Paramus, New Jersey 07652 and its telephone number is (201) 967-1900.
Hudson City, MHC's principal assets will be the shares of common stock of
Hudson City Bancorp it receives in the reorganization and approximately $200,000
it receives as its initial capitalization. At the present time, we expect that
Hudson City, MHC will not engage in any business activity other than its
investment in a majority of the common stock of Hudson City Bancorp and the
management of any cash dividends received from Hudson City Bancorp. Federal and
state law and regulations require that as long as Hudson City, MHC is in
existence it must own a majority of Hudson City Bancorp's common stock. Federal
and state law, regulations, and the plan of reorganization, permit Hudson City,
MHC to convert to the stock form of organization. For additional information
regarding a stock conversion, see "Regulation of Hudson City Savings Bank and
Hudson City Bancorp -- Possible Conversion of Hudson City 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 $549.6 million and $744.8 million.
HUDSON CITY BANCORP INTENDS TO DISTRIBUTE THE NET PROCEEDS FROM THE
OFFERING AS FOLLOWS:
<TABLE>
<CAPTION>
NUMBER OF SHARES SOLD
--------------------------------
55,930,000 75,670,000
------------ ------------
<S> <C> <C>
Offering proceeds ............................... $559,300,000 $756,700,000
Offering expenses ............................... 9,709,000 11,888,000
------------ ------------
Net offering proceeds ........................... 549,591,000 744,812,000
Less:
Proceeds contributed to Hudson City Savings .... 274,795,500 372,406,000
Proceeds used for loan to employee
stock ownership plan ......................... 44,744,000 60,536,000
------------ ------------
Proceeds remaining for general corporate purposes $230,051,500 $311,870,000
============ ============
</TABLE>
If regulatory or market conditions change and we are required to sell
87,020,500 shares of stock, then we estimate the net proceeds to be $857.1
million. If we sell 87,020,500 shares of stock, then our loan to the employee
stock ownership plan would be $69.6 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 are adjusted to reflect a change in the estimated pro
forma market value of Hudson City Bancorp and Hudson City Savings. Payments for
shares made through
16
<PAGE> 18
withdrawals from existing deposit accounts will not result in the receipt of new
funds for investment by Hudson City Savings but will result in a reduction of
Hudson City Savings' deposits and interest expense as funds are transferred from
interest-bearing time deposits or other deposit accounts.
HUDSON CITY 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.
HUDSON CITY SAVINGS MAY USE THE PROCEEDS IT RECEIVES FROM THE OFFERING:
(1) to fund new loans;
(2) to purchase mortgage-backed securities and investment securities;
(3) to finance the possible establishment or acquisition of branch
offices; and
(4) for general corporate purposes.
OUR POLICY REGARDING DIVIDENDS
Hudson City Bancorp currently plans to pay a cash dividend at an annual
rate of $0.20 per share. The dividend would be declared and payable quarterly at
a rate of $0.05 per share starting with the first quarter after the
reorganization. The payment of dividends will be subject to determination of our
board of directors, which will take into account, among other factors, our
financial condition, results of operations, tax considerations, industry
standards, economic conditions and regulatory restrictions that affect the
payment of dividends by Hudson City Savings to Hudson City Bancorp. We can not
guarantee that we will pay dividends or that, if paid, that we will not reduce
or eliminate dividends in the future.
If Hudson City Bancorp pays dividends to its stockholders, it will be
required to pay dividends to Hudson City, MHC, unless Hudson City, MHC elects to
waive dividends. We do not currently anticipate that Hudson City, MHC will waive
dividends paid by Hudson City Bancorp. Any decision to waive dividends will be
subject to regulatory approval. See "Regulation of Hudson City Savings Bank and
Hudson City Bancorp -- Dividend Waivers by Hudson City, MHC."
As the principal asset of Hudson City Bancorp, Hudson City Savings will
provide the principal source of funds for the payment of dividends by Hudson
City Bancorp. New Jersey law provides that dividends may be paid by Hudson City
Savings only out of net income, earned
17
<PAGE> 19
surplus or undivided profits. However, Hudson City Savings will not be permitted
to pay dividends on its capital stock if, among other things, its stockholders'
equity would be reduced below the amount required for the liquidation account.
See "The Reorganization and The Offering -- Effects of the Reorganization --
Depositors' Rights If We Liquidate; Liquidation Account."
Hudson City 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 Hudson City Savings to Hudson City Bancorp,
which would be deemed to be drawn out of Hudson City Savings' bad debt reserves,
would require a payment of taxes at the then-current tax rate by Hudson City
Savings on the amount of earnings deemed to be removed from bad debt reserves
for such distribution. Hudson City Savings does not intend to make any
distribution to Hudson City Bancorp that would create this type of a tax
liability. See "Taxation."
MARKET FOR THE COMMON STOCK
We have not previously issued common stock, and there is currently no
established market for the common stock. We have received conditional approval
from The Nasdaq Stock Market to have our common stock quoted on the National
Market System of The Nasdaq Stock Market under the symbol "HCBK" after the
reorganization. One of the requirements for continued quotation of the common
stock on The Nasdaq Stock Market is that there be at least three market makers
for the common stock. Ryan, Beck 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 at least two additional market
makers to make a market in its common stock.
Making a market involves maintaining bid and asked quotations and being
able, as principal, to effect transactions in reasonable quantities at those
quoted prices. Various securities laws and other regulatory requirements apply
to these activities. While we believe that there will be other broker-dealers to
act as market makers for our common stock, we can not guarantee you that there
will be three or more market makers for the common stock.
Additionally, the development of a liquid public market depends on the
existence of willing buyers and sellers, the presence of which is not within our
control, 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 can not assure
you than 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 $10.00 per share or
that quotations will be available on The Nasdaq Stock Market as contemplated.
18
<PAGE> 20
REGULATORY CAPITAL COMPLIANCE
At December 31, 1998, we exceeded all regulatory capital requirements. Set
forth below is a summary of our capital computed under generally accepted
accounting principles and our compliance with regulatory capital standards at
December 31, 1998, on a historical and pro forma basis. We have assumed that the
indicated number of shares were sold as of December 31, 1998 and that Hudson
City 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 restricted stock plan are deducted
from pro forma regulatory capital. For a discussion of the capital requirements
applicable to Hudson City Savings, see "Regulation of Hudson City Savings Bank
and Hudson City Bancorp -- Federal Banking Regulation Capital Requirements."
<TABLE>
<CAPTION>
PRO FORMA AT DECEMBER 31, 1998 BASED UPON THE SALE AT $10.00 PER SHARE
------------------------------------------------------------------------------------------
55,930,000 SHARES 65,800,000 SHARES
HISTORICAL AT (MINIMUM OF THE (MIDPOINT OF THE
DECEMBER 31, 1998 RANGE) RANGE)
-------------------------- -------------------------- --------------------------
PERCENT PERCENT PERCENT
OF OF OF
AMOUNT ASSETS(2) AMOUNT ASSETS(2) AMOUNT ASSETS(2)
---------- --------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
GAAP Capital (3) ......... $ 900,606 11.62% $1,108,086 13.92% $1,145,047 14.32%
========== ===== ========== ===== ========== =====
Leverage Capital:
Capital Level(4) ..... $ 898,494 11.93% $1,105,974 14.29% $1,142,935 14.70%
Requirement(5) ....... 225,985 3.00 232,216 3.00 233,324 3.00
---------- ----- ---------- ----- ---------- -----
Excess ............... $ 672,509 8.93% $ 873,758 11.29 $ 909,611 11.70%
========== ===== ========== ===== ========== =====
Tier I Risk Based Capital:
Capital Level(4)(6) .. $ 898,494 38.48% $1,105,974 47.36% $1,142,935 48.94%
Requirement .......... 93,409 4.00 95,907 4.00 96,352 4.00
---------- ----- ---------- ----- ---------- -----
Excess ............... $ 805,085 34.48% $1,010,067 43.36% $1,046,583 44.94%
========== ===== ========== ===== ========== =====
Total Risk-Based Capital:
Capital Level(4)(6) .. $ 916,206 39.23% $1,123,686 46.87% $1,160,647 48.18%
Requirement .......... 186,818 8.00 191,815 8.00 192,703 8.00
---------- ----- ---------- ----- ---------- -----
Excess ............... $ 729,388 31.23% $ 931,871 38.87% $ 967,944 40.18%
========== ===== ========== ===== ========== =====
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA AT DECEMBER 31, 1998 BASED UPON THE SALE AT $10.00 PER SHARE
----------------------------------------------------------------------
87,020,500 SHARES
75,670,000 SHARES (15% ABOVE
(MAXIMUM OF THE MAXIMUM OF THE
RANGE) RANGE)(1)
-------------------------- -------------------------
PERCENT PERCENT
OF OF
AMOUNT ASSETS(2) AMOUNT ASSETS(2)
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
GAAP Capital (3) ......... $1,182,008 14.71% $1,224,514 15.16%
========== ===== ========== =====
Leverage Capital:
Capital Level(4) ..... $1,179,896 15.10% $1,222,402 15.56%
Requirement(5) ....... 234,433 3.00 235,708 3.00
---------- ----- ---------- -----
Excess ............... $ 945,463 12.10% $ 986,694 12.56%
========== ===== ========== =====
Tier I Risk Based Capital:
Capital Level(4)(6) .. $1,179,896 50.52% $1,222,902 52.35%
Requirement .......... 96,796 4.00 97,307 4.00
---------- ----- ---------- -----
Excess ............... $1,083,100 46.52% $1,125,095 48.35%
========== ===== ========== =====
Total Risk-Based Capital:
Capital Level(4)(6) .. $1,197,608 49.49% $1,240,114 50.98%
Requirement .......... 193,592 8.00 194,614 8.00
---------- ----- ---------- -----
Excess ............... $1,004,016 41.49% $1,045,500 42.98%
========== ===== ========== =====
</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 "total assets,"
and risk-based capital levels are calculated on the basis of a
percentage of "risk-weighted assets," each as defined in the FDIC
Regulations.
(3) GAAP is defined as Generally Accepted Accounting Principles.
(4) Pro forma capital levels assume receipt by Hudson City Savings of 50%
of the net proceeds from the shares of common stock sold at the
minimum, midpoint and maximum of the offering range. These levels
assume funding by Hudson City Savings of the restricted stock plan
equal to 4% of the common stock issued, including repayment of Hudson
City Bancorp's loan to the employee stock ownership plan to enable the
plan to purchase 8% of the common stock issued.
(5) The current leverage capital requirement for savings banks is 3% of
total adjusted assets for savings banks that receive the highest
supervisory ratings for safety and soundness and that are not
experiencing or anticipating significant growth. The current leverage
capital ratio applicable to all other savings banks is 4% to 5%.
(6) Assumes net proceeds are invested in assets that carry risk-weighting
equal to the actual risk weighting of Hudson City Savings' assets as
of December 31, 1998.
19
<PAGE> 21
CAPITALIZATION
The following table presents the historical deposits and capitalization of
Hudson City Savings at December 31, 1998, and the pro forma consolidated
capitalization of Hudson City 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." A change in the number of shares
sold in the offering may affect materially the capitalization.
<TABLE>
<CAPTION>
PRO FORMA CAPITALIZATION AT DECEMBER 31, 1998
---------------------------------------------------------------
55,930,000 65,800,000 75,670,000 87,020,500 SHARES
SHARES SHARES SHARES (15% ABOVE
(MINIMUM OF (MIDPOINT OF (MAXIMUM OF MAXIMUM OF
HISTORICAL RANGE) RANGE) RANGE) RANGE)(1)
---------- ---------- ------------ ----------- -----------------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Deposits(2) ......................................... $6,807,339 $6,807,339 $6,807,339 $6,807,339 $6,807,339
========== ========== ========== ========== ==========
Stockholders' equity:
Preferred stock, $.01 par value, 200,000,000
shares authorized; none to be issued .......... $ -- $ -- $ -- $ -- $ --
---------- ---------- ---------- ---------- ----------
Common stock, $.01 par value, 800,000,000
shares authorized; to be issued as reflected(3) -- 1,190 1,400 1,610 1,852
---------- ---------- ---------- ---------- ----------
Additional paid-in capital(4) ................... -- 548,401 645,802 743,202 855,212
---------- ---------- ---------- ---------- ----------
Retained earnings(5) ............................ 899,933 899,733 899,733 899,733 899,733
Plus:
Accumulated other comprehensive income .......... 673 673 673 673 673
Less:
Common stock acquired by the employee stock
ownership plan (6) .................................. -- 44,744 52,640 60,536 69,616
---------- ---------- ---------- ---------- ----------
Common stock acquired by the restricted stock
plan (7) ............................................ -- 22,372 26,320 30,268 34,808
---------- ---------- ---------- ---------- ----------
Total stockholders' equity .......................... $ 900,606 $1,382,881 $1,468,648 $1,554,414 $1,653,046
========== ========== ========== ========== ==========
</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 Hudson City, MHC as follows:
63,070,000 shares at the minimum of the estimated valuation range,
74,200,000 shares at the midpoint, 85,330,000 at the maximum and
98,129,500 at 15% above the maximum.
(4) Reflects the issuance of shares sold in the offering at a value of
$10.00 per share. No effect has been given to the issuance of
additional shares of common stock pursuant to Hudson City Bancorp's
proposed stock option plan intended to be adopted by Hudson City
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 Hudson City Savings will be substantially
restricted after the offering. The reduction in historical retained
earnings of reflects the retention by Hudson City, MHC of $200,000
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 Hudson City Bancorp. The common stock acquired by the
employee stock ownership plan is reflected as reduction of
stockholders' equity.
(7) Assumes that, subsequent to the offering, as 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
Hudson City 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.
20
<PAGE> 22
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 $549.6 million and $744.8 million, or $857.1 million 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 Ryan, Beck a fee equal to 1.20% 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, excluding the marketing fees paid to Ryan, Beck, will
be approximately $13.1 million.
We calculated the pro forma consolidated net income and stockholders'
equity of Hudson City Bancorp for 1998, as if the common stock had been sold at
the beginning of the year and the net proceeds had been invested at 4.52%. We
chose this yield because it represents the yield on one-year U.S. Government
securities at December 31, 1998. In light of changes in interest rates in recent
periods, Hudson City Bancorp and Hudson City Savings believe this rate more
accurately reflects pro forma reinvestment rates than the arithmetic average
method. We assumed a tax rate of 37.3% for the period. This results in an
after-tax yield of 2.83% for 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," Hudson City 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 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 restricted stock plan are
purchased in the open market at the purchase price.
21
<PAGE> 23
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) Hudson City 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 Hudson City 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.
22
<PAGE> 24
<TABLE>
<CAPTION>
AT OR FOR THE YEAR DECEMBER 31, 1998
-------------------------------------------------
55,930,000
SHARES SOLD AT 65,800,000
$10.00 PER SHARES SOLD AT
SHARE $10.00 PER SHARE
(MINIMUM OF (MIDPOINT OF
RANGE) RANGE)
------------- ----------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
Gross proceeds ........................................................... $ 559,300 $ 658,000
Less: offering expenses and commissions ................................. 9,709 10,798
------------- -------------
Estimated net proceeds ................................................... 549,591 647,202
------------- -------------
Less:
Common stock purchased by the employee stock ownership plan(1) .......... 44,744 52,640
Common stock purchased by the management recognition plan(2) ............ 22,372 26,320
------------- -------------
Estimated net proceeds, as adjusted ..................................... $ 482,475 $ 568,242
============= =============
Net income:
Historical ............................................................... $ 93,269 $ 93,269
Pro forma income on net proceeds, as adjusted ............................ 13,654 16,081
Pro forma employee stock ownership plan adjustment (1) .................. (935) (1,100)
Pro forma management recognition plan adjustment (2) .................... (2,805) (3,301)
------------- -------------
Pro forma net income ..................................................... $ 103,183 $ 104,949
============= =============
Per share net income (3):
Historical .............................................................. $ 0.83 $ 0.70
Pro forma income on net proceeds, as adjusted ........................... 0.12 0.12
Pro forma employee stock ownership plan adjustment (1) .................. (0.01) (0.01)
Pro forma management recognition plan adjustment (2) .................... (0.02) (0.02)
------------- -------------
Pro forma net income per share ........................................... $ 0.92 $ 0.79
============= =============
Number of shares outstanding for pro forma net income per share
calculations(1) ........................................................ 112,884,987 132,805,867
Stockholders' equity:
Historical .............................................................. $ 900,406 $ 900,406
Estimated net proceeds .................................................. 549,591 647,202
Less: Common stock acquired by employee stock ownership plan (1) ........ (44,744) (52,640)
Less: Common stock acquired by management recognition plan(2) ........... (22,372) (26,320)
------------- -------------
Pro forma stockholders' equity (2) (4) (5) ............................... $ 1,382,881 $ 1,468,648
============= =============
Stockholders' equity per share (3):
Historical .............................................................. $ 7.57 $ 6.43
Estimated net proceeds .................................................. 4.62 4.62
Less: Common stock acquired by employee stock ownership plan (1) ........ (0.38) (0.38)
Less: Common stock acquired by management recognition plan (2) .......... (0.19) (0.19)
------------- -------------
Pro forma stockholders' equity per share(5) .............................. $ 11.62 $ 10.48
============= =============
Offering price as a percentage of pro forma stockholders' equity per share 86.06% 95.42%
============= =============
Offering price to pro forma net income per share ......................... 10.87x 12.66x
============= =============
</TABLE>
<PAGE> 25
<TABLE>
<CAPTION>
AT OR FOR THE YEAR DECEMBER 31, 1998
---------------------------------------
87,020,500
75,670,000 SHARES SOLD AT
SHARES SOLD AT $10.00 PER SHARE
$10.00 PER SHARE (15% ABOVE
(MAXIMUM OF MAXIMUM OF
RANGE) RANGE) (6)
---------------- ----------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
Gross proceeds ........................................................... $ 756,700 $ 870,205
Less: offering expenses and commissions ................................. 11,888 13,141
------------- -------------
Estimated net proceeds ................................................... 744,812 857,064
------------- -------------
Less:
Common stock purchased by the employee stock ownership plan(1) .......... 60,536 69,616
Common stock purchased by the management recognition plan(2) ............ 30,268 34,808
------------- -------------
Estimated net proceeds, as adjusted ..................................... $ 654,008 $ 752,640
============= =============
Net income:
Historical ............................................................... $ 93,269 $ 93,269
Pro forma income on net proceeds, as adjusted ............................ 18,508 21,300
Pro forma employee stock ownership plan adjustment (1) .................. (1,265) (1,455)
Pro forma management recognition plan adjustment (2) .................... (3,796) (4,365)
------------- -------------
Pro forma net income ..................................................... $ 106,716 $ 108,749
============= =============
Per share net income (3):
Historical .............................................................. $ 0.61 $ 0.53
Pro forma income on net proceeds, as adjusted ........................... 0.12 0.12
Pro forma employee stock ownership plan adjustment (1) .................. (0.01) (0.01)
Pro forma management recognition plan adjustment (2) .................... (0.02) (0.02)
------------- -------------
Pro forma net income per share ........................................... $ 0.70 $ 0.62
============= =============
Number of shares outstanding for pro forma net income per share
calculations(1) ........................................................ 152,726,747 175,635,759
Stockholders' equity:
Historical .............................................................. $ 900,406 $ 900,406
Estimated net proceeds .................................................. 744,812 857,064
Less: Common stock acquired by employee stock ownership plan (1) ........ (60,536) (69,616)
Less: Common stock acquired by management recognition plan(2) ........... (30,268) (34,808)
------------- -------------
Pro forma stockholders' equity (2) (4) (5) ............................... $ 1,554,414 $ 1,653,046
============= =============
Stockholders' equity per share (3):
Historical .............................................................. $ 5.59 $ 4.86
Estimated net proceeds .................................................. 4.63 4.63
Less: Common stock acquired by employee stock ownership plan (1) ........ (0.38) (0.38)
Less: Common stock acquired by management recognition plan (2) .......... (0.19) (0.19)
------------- -------------
Pro forma stockholders' equity per share(5) .............................. $ 9.65 $ 8.92
============= =============
Offering price as a percentage of pro forma stockholders' equity per share 103.63% 112.11%
============= =============
Offering price to pro forma net income per share ......................... 14.29x 16.13x
============= =============
</TABLE>
(See footnotes on next page)
23
<PAGE> 26
- -------------------------------
(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 Hudson City Bancorp. The amount to be
borrowed is reflected as a reduction of stockholders' equity. Hudson
City 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. Hudson City Saving's total annual
payment of the employee stock ownership plan debt is based upon 30
equal annual installments of principal, with an assumed interest rate
at 7.75%. The pro forma net income assumes: (i) that Hudson City
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 149,147
shares at the minimum of the offering range, 175,467 shares at the
midpoint of the offering range, 201,787 shares at the maximum of the
offering range and 232,055 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 $10.00 per share in
accordance with SOP 93-6; and (iii) only the employee stock ownership
plan shares committed to be released were considered outstanding for
purposes of the net income per share calculations.
(2) Gives effect to the management recognition plan expected to be adopted
by Hudson City Bancorp following the offering and presented for
approval at a meeting of stockholders. The management recognition
stock 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
2,237,200 shares at the minimum of the offering range, 2,632,000
shares at the midpoint of the offering range, 3,026,800 shares of the
maximum of the offering range and 3,480,820 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 Hudson City 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 Hudson City Bancorp's common stock to the restricted stock
plans instead of open market purchases would dilute the voting
interests of existing stockholders by approximately 1.81% and pro
forma net income per share would be $0.90 at the minimum of the
offering range, $0.77 at the midpoint of the offering range, $0.69 at
the maximum of the offering range and $0.61 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) The per share calculations are determined by adding the number of
shares assumed to be issued to Hudson City, MHC and sold in the
offering and for purposes of calculating income per share, in
accordance with SOP 93-6, subtracting 4,325,253 shares at the minimum
of the offering range, 5,088,533 shares at the midpoint of the
offering range, 5,851,813 shares at the maximum of the offering range
and 6,729,585 shares of 15% above the maximum of the offering range
representing the employee stock ownership plan shares which have not
been committed for release during the year ended December 31, 1998.
Thus, it is assumed at December 31, 1998 that 119,000,000 shares of
common stock are outstanding at the minimum of the offering range,
140,000,000 shares of common stock are outstanding at the midpoint of
the offering range, 161,000,000 shares of common stock are outstanding
at the maximum of the offering range and 185,150,000 shares of common
stock are outstanding at 15% above the maximum of the offering range.
Assuming the uncommitted employee stock ownership plan shares were not
subtracted from the number of shares of common stock outstanding at
December 31, 1998, the offering price as a multiple of pro forma net
income per share would be 11.36x at the minimum of the offering range,
16.67x at 15% above the maximum of the estimated offering range,
respectively. For purposes of calculating pro forma stockholders'
equity per share, it is assumed that shares outstanding total
119,000,000 shares at the minimum of the offering range, 140,000,000
shares at the midpoint of the offering range, 161,000,000 shares at
the maximum of the offering range and 185,150,000 shares at 15% above
the maximum of the offering range.
(4) 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 Hudson City Bancorp following the offering. Hudson City 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, or 5,593,000
shares at the minimum of the offering range, 6,580,000 shares at the
midpoint of the offering range, 7,567,000 shares of the maximum of the
offering range and 8,702,050 shares at 15% above the maximum of the
offering range, 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. Assuming all options were exercised at the beginning of the
period at an exercise price of $10.00 per share, the pro forma net
income per share would be $0.88 at the minimum of the offering range,
$0.76 at the midpoint of the offering range, $0.68 at the maximum of
the offering range and $0.60 at 15% above the maximum of the offering
range, and pro forma stockholder's equity per share would be $11.56 at
the minimum of the offering range, $10.48 at the midpoint of the
offering range, $9.68 at the maximum of the offering range and $8.99
at 15% above the maximum of the offering range.
(5) The retained earnings of Hudson City Savings will continue to be
substantially restricted after the offering. Pro Forma retained
earnings have been reduced by $200,000 to reflect the initial
capitalization of Hudson City, MHC.
(6) 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.
24
<PAGE> 27
HUDSON CITY SAVINGS BANK
STATEMENTS OF INCOME
These Statements of Income of Hudson City Savings for the years ended December
31, 1998, 1997 and 1996 have been audited by KPMG LLP, independent certified
public accountants. The Independent Auditors' Report thereon appears on page F-2
of this prospectus. These Statements of Income should be read in conjunction
with the Financial Statements and accompanying Notes to Financial Statements
beginning on page F-7 of this prospectus and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" beginning on page [ ]
of this prospectus.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------
1998 1997 1996
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Interest income:
Interest and fees on first mortgage loans .................................. $259,320 $245,432 $221,930
Interest and fees on consumer and other loans .............................. 7,272 7,685 8,135
Interest on mortgage-backed securities ..................................... 201,592 201,323 157,050
Interest on investment securities held to maturity:
Taxable .................................................................... 54 -- --
Exempt from federal taxes ................................................. 48 61 112
Interest and dividends on investment securities available for sale - taxable 49,666 43,140 37,587
Interest on federal funds sold ............................................. 2,839 2,801 4,464
-------- -------- --------
Total interest income ...................................................... 520,791 500,442 429,278
Interest expense on deposits ................................................ 311,084 297,484 242,667
-------- -------- --------
Net interest income ...................................................... 209,707 202,958 186,611
Provision for loan losses ................................................... 2,400 2,850 2,275
-------- -------- --------
Net interest income after provision for loan losses ........................ 207,307 200,108 184,336
-------- -------- --------
Non-interest income:
Service charges and other income ........................................... 4,930 4,710 3,896
Gains on net securities transactions ....................................... 24 1,594 152
-------- -------- --------
Total non-interest income .................................................. 4,954 6,304 4,048
-------- -------- --------
Non-interest expense:
Salaries and employee benefits ............................................. 39,260 38,781 37,034
Net occupancy expense ...................................................... 11,753 11,888 11,941
Federal deposit insurance assessment ....................................... 783 757 43
Amortization of goodwill ................................................... 1,610 1,771 2,030
Computer and related services .............................................. 1,212 1,104 1,150
Other expense .............................................................. 8,874 8,618 8,760
-------- -------- --------
Total non-interest expense ........................................... 63,492 62,919 60,958
-------- -------- --------
Income before income tax expense ............................................ 148,769 143,493 127,426
Income tax expense .......................................................... 55,500 53,500 46,595
-------- -------- --------
Net income .................................................................. $ 93,269 $ 89,993 $ 80,831
======== ======== ========
</TABLE>
25
<PAGE> 28
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This discussion and analysis reflects Hudson City Savings' 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 Hudson City Savings'
Financial Statements and accompanying Notes to Financial Statements beginning on
page [ ] of this prospectus, and the other statistical data provided elsewhere
in this prospectus.
GENERAL
Hudson City 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, mortgage-backed
securities 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. Future changes in applicable law, regulations or government
policies may materially impact us. Additionally, our lending activity is
concentrated in loans secured by real estate located in New Jersey. Accordingly,
our results of operations are affected by regional market and economic
conditions.
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. 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.
MANAGEMENT STRATEGY
Our primary management strategy has been to offer savings deposits and
residential mortgage loans to increase earnings and manage growth. We seek to
differentiate ourselves by providing high quality service to our customers while
maintaining low costs. 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:
26
<PAGE> 29
(1) emphasize the origination of one- to four-family residential mortgage
loans;
(2) purchase adjustable-rate mortgage-backed securities to supplement loan
originations and to assist in the management of interest rate risk;
(3) offer competitive rates to attract new deposits and to maintain our
existing deposit base;
(4) seek to be a low cost provider of financial services by controlling
operating expenses;
(5) manage growth primarily through internal expansion; and
(6) provide attentive service to customers.
After completion of the reorganization, we expect to continue to grow
through expansion using borrowings to supplement deposits as a funding source.
We also intend to grow by adding new branch offices. This strategy has been
successful for us in the past. 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 can not 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 New Jersey, is subject to risks associated with the local
economy. We do not own any trading assets. We did not engage in any hedging
transactions that use derivative instruments (such as interest rate swaps and
caps) during 1998 and did not have any such hedging transactions in place at
27
<PAGE> 30
December 31, 1998. In the future, we may, with approval of our board of
directors, engage in hedging transactions utilizing derivative instruments.
The primary objectives of our interest rate management strategy are to:
(1) evaluate the interest rate risk inherent in certain balance sheet
accounts;
(2) determine the appropriate level of interest rate risk given our
business plan, the current business environment and our capital and
liquidity requirements; and
(3) manage interest rate risk in a manner consistent with the approved
guidelines and policies set by our board of managers.
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 Committee meets weekly to discuss and monitor the market interest rate
environment compared to interest rates that are offered on our products. This
committee consists of the Chief Executive Officer, the Chief Operating Officer
and the Investment Officer. The Asset Liability Committee presents periodic
reports to the board of managers at its regular meetings, as well as a
comprehensive quarterly report to the Asset Management Committee of the board of
managers. The quarterly reports address the results of activities and strategies
and the effect that changes in interest rates will have on our results of
operations and the present value of our equity.
Historically, our lending activities have emphasized one- to four-family
first and second 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:
(1) purchasing mortgage-backed securities with adjustable-rate features;
(2) purchasing shorter-term federal agency securities with call options;
and
(3) emphasizing the origination of 15 year fixed-rate and adjustable-rate
first mortgage loans.
We believe that the frequent repricing of our adjustable-rate mortgage
loans and adjustable-rate securities, which reduces the exposure to interest
rate fluctuations, will benefit our long-term profitability. Although we have
emphasized the origination of variable-rate mortgage products, the prevailing
low interest rate environment has resulted in the increased demand for
fixed-rate first mortgage loans. The result has been an increase in the
proportion of fixed-rate loans in our portfolio. This 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 and
mortgage-backed securities 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
28
<PAGE> 31
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.
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 a decrease in the institution's net interest
income. 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 December 31, 1998, 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 $1.29 billion. This
represented a negative cumulative one-year interest rate sensitivity gap of
16.6%, and a ratio of interest-earning assets maturing or repricing within one
year to interest-bearing liabilities maturing or repricing within one year of
74.6%. Our negative gap position could more adversely impact our net interest
income in a rising rate environment than if we had a positive gap position. Our
policy sets a maximum negative cumulative one-year gap as a percent of total
assets at 22%, and a maximum positive cumulative one-year gap as a percent of
total assets at 5%. Our policy also sets the ratio of interest-earning assets
maturing or repricing within one year to interest-bearing liabilities at one
year to a minimum of 65% and a maximum of 107%.
The following table presents the amounts of our interest-earning assets and
interest-bearing liabilities outstanding at December 31, 1998, 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 16.0% for mortgage loans
repricing or maturing after one year;
29
<PAGE> 32
(2) we assumed an annual prepayment rate of 20.0% 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 and interest-bearing demand accounts that had no
stated maturity using decay rates of: 2.5% in less than six months,
2.5% in six months to one year, 25% in one year to two years, 30% in
two years to three years, 20% in three years to five years, and 20% in
over five years; and
(5) we reported money market accounts using decay rates of: 25% in less
than six months, 25% in six months to one year, 25% in one year to two
years, and 25% in two years to three years.
Deposit decay rates, as reflected 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. We have excluded non-accrual loans from the table.
30
<PAGE> 33
<TABLE>
<CAPTION>
AT DECEMBER 31, 1998
--------------------------------------------------------------------------
SIX MORE THAN MORE THAN MORE THAN
MONTHS SIX MONTHS ONE YEAR TWO YEARS TO
OR LESS TO ONE YEAR TO TWO YEARS THREE YEARS
----------- ----------- ------------ -----------
(DOLLARS IN THOUSANDS)
INTEREST-EARNING ASSETS:
<S> <C> <C> <C> <C>
First mortgage loans .................. $ 429,749 $ 460,492 $ 474,957 $ 439,691
Consumer and other loans .............. 28,347 952 1,783 2,731
Federal funds sold .................... 69,800 -- -- --
Mortgage-backed securities ............ 1,228,497 1,127,667 143,131 115,710
Investment securities (1) ............. 401,027 34,716 419 1,105
----------- ----------- ----------- -----------
Total interest-earning assets .... 2,157,420 1,623,827 620,290 559,237
----------- ----------- ----------- -----------
INTEREST-BEARING LIABILITIES:
Savings accounts ....................... 21,453 22,346 207,621 249,145
Interest-bearing demand accounts ....... 2,511 2,511 25,109 30,131
Money market accounts .................. 126,300 126,300 126,300 126,301
Time deposits .......................... 3,345,325 1,419,844 254,084 22,331
----------- ----------- ----------- -----------
Total interest-bearing liabilities 3,495,589 1,571,001 613,114 427,908
----------- ----------- ----------- -----------
Interest sensitivity gap ................... $(1,338,169) $ 52,826 $ 7,176 $ 131,329
=========== =========== =========== ===========
Cumulative interest sensitivity gap ........ $(1,338,169) $(1,285,343) $(1,278,167) $(1,146,838)
=========== =========== =========== ===========
Cumulative interest sensitivity gap
as a percentage of total assets ........ (17.26)% (16.58)% (16.49)% (14.79)%
Cumulative interest-earning
assets as a percentage of
interest-bearing liabilities ........... 61.72% 74.63% 77.50% 81.22%
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31, 1998
----------------------------------------------------
MORE THAN
THREE YEARS MORE THAN
TO FIVE YEARS FIVE YEARS TOTAL
------------- ----------- -----------
(DOLLARS IN THOUSANDS)
INTEREST-EARNING ASSETS:
<S> <C> <C> <C>
First mortgage loans .................. $ 456,614 $ 1,298,101 $ 3,559,604
Consumer and other loans .............. 13,883 38,891 86,587
Federal funds sold .................... -- -- 69,800
Mortgage-backed securities ............ 92,862 363,064 3,070,931
Investment securities (1) ............. 194,127 155,030 786,424
----------- ----------- -----------
Total interest-earning assets .... 757,486 1,855,086 7,573,346
----------- ----------- -----------
INTEREST-BEARING LIABILITIES:
Savings accounts ....................... 166,097 166,097 832,759
Interest-bearing demand accounts ....... 20,087 20,087 100,436
Money market accounts .................. -- -- 505,201
Time deposits .......................... 14,298 -- 5,055,882
----------- ----------- -----------
Total interest-bearing liabilities 200,482 186,184 6,494,278
----------- ----------- -----------
Interest sensitivity gap ................... $ 557,004 $ 1,668,902 $ 1,079,068
=========== =========== ===========
Cumulative interest sensitivity gap ........ $ (589,834) $ 1,079,068
=========== ===========
Cumulative interest sensitivity gap
as a percentage of total assets ........ (7.61)% 13.92%
Cumulative interest-earning
assets as a percentage of
interest-bearing liabilities .......... 90.65% 116.62%
</TABLE>
(1) If we classified our investment securities available for sale at
December 31, 1998 within the one-year maturing or repricing category,
net interest-bearing liabilities maturing or repricing within one year
would have exceeded interest-earning assets maturing or repricing
within the same time period by $936.1 million, representing a
cumulative one-year gap of negative 12.07% of total assets.
31
<PAGE> 34
The methods used in the previous table has 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.
Present Value of Equity. In addition to the gap analysis table, we also use
a simulation model to monitor interest rate risk. This model reports the present
value of equity in different interest rate environments, assuming an
instantaneous and permanent interest rate shock to all interest rate-sensitive
assets and liabilities. The present value of equity is the difference between
the present value of expected cash flows of interest rate-sensitive assets and
liabilities. The changes in market value of assets and liabilities due to
changes in interest rates reflect the interest sensitivity of those assets and
liabilities as their values are derived from the characteristics of the asset or
liability (i.e., fixed rate, adjustable-rate, caps, floors) relative to the
current interest rate environment. For example, in a rising interest rate
environment the fair market value of a fixed rate asset will decline, whereas
the fair market value of an adjustable-rate asset, depending on its repricing
characteristics, may not decline. Increases in the market value of assets will
increase the present value of equity whereas decreases in market value of assets
will decrease the present value of equity. Conversely, increases in the market
value of liabilities will decrease the present value of equity whereas decreases
in the market value of liabilities will increase the present value of equity.
The following table presents the estimated present value of equity over a
range of interest rate change scenarios at December 31, 1998. The present value
ratio shown in the table is the present value of equity as a percent of the
present value of total assets in each of the different rate environments. For
purposes of this table, we have made assumptions such as prepayment rates and
decay rates similar to those used for the gap analysis table.
32
<PAGE> 35
<TABLE>
<CAPTION>
PRESENT VALUE OF EQUITY AS PERCENT OF
PRESENT VALUE OF EQUITY PRESENT VALUE OF ASSETS
CHANGE IN -------------------------------------------- --------------------------------------
INTEREST RATES DOLLAR DOLLAR PERCENT PRESENT VALUE PERCENT
(BASIS POINTS) AMOUNT CHANGE CHANGE RATIO CHANGE
- -------------- ---------- ---------- -------- ------------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
200 $ 892,561 $ (239,291) (21.14)% 11.92% (17.45)%
150 961,328 (170,524) (15.07) 12.68 (12.19)
100 1,029,126 (102,726) (9.08) 13.40 (7.20)
50 1,085,211 (46,641) (4.12) 13.98 (3.19)
0 1,131,852 -- -- 14.44 --
(50) 1,132,983 1,131 0.10 14.40 (0.28)
(100) 1,119,106 (12,746) (1.13) 14.20 (1.66)
(150) 1,108,808 (23,044) (2.04) 14.03 (2.84)
(200) 1,092,321 (39,531) (3.49) 13.80 (4.43)
</TABLE>
As in the case of the gap analysis table, the methods we used in the
previous table have some shortcomings. This type of modeling requires that we
make assumptions which may not reflect the manner in which actual yields and
costs respond to changes in market interest rates. For example, we assume the
composition of the interest rate-sensitive assets and liabilities will remain
constant over the period being measured and that all interest rate shocks will
be uniformly reflected across the yield curve, regardless of the duration to
maturity or repricing. The table assumes that we will take no action in response
to the changes in interest rates. In addition, prepayment estimates and other
assumptions within the model are subjective in nature, involve uncertainties,
and, therefore, cannot be determined with precision. Accordingly, although the
present value of equity model may provide an estimate of our interest rate risk
at a particular point in time, such measurements are not intended to and do not
provide a precise forecast of the effect of changes in interest rates on our
present value of equity.
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.
33
<PAGE> 36
Average Balance Sheet
The following table presents certain information regarding Hudson City
Savings' financial condition and net interest income for 1998, 1997 and 1996.
The table presents 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 expense by the average balance 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>
YEARS ENDED DECEMBER 31,
1998 1997
-------------------------------- --------------------------------
AVERAGE AVERAGE
AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST COST BALANCE INTEREST COST
---------- ---------- ------- ---------- ---------- -------
ASSETS: (DOLLARS IN THOUSANDS)
INTEREST-EARNING ASSETS:
<S> <C> <C> <C> <C> <C> <C>
First mortgage loans, net (1) ................. $3,426,309 $ 259,320 7.57% $3,193,099 $ 245,432 7.69%
Consumer and other loans ...................... 84,782 7,272 8.58 86,476 7,685 8.89
Federal funds sold ............................ 55,264 2,839 5.14 52,760 2,801 5.31
Mortgage-backed securities .................... 3,053,628 201,592 6.60 2,949,557 201,323 6.83
Investment securities ......................... 743,151 49,768 6.70 629,050 43,201 6.87
---------- ---------- ---------- ----------
Total interest-earning assets ............... 7,363,134 520,791 7.07 6,910,942 500,442 7.24
---------- ----------
Non-interest-earning assets ................... 172,142 164,203
---------- ----------
Total assets ................................. $7,535,276 $7,075,145
========== ==========
LIABILITIES AND EQUITY:
INTEREST-BEARING LIABILITIES:
Savings accounts .............................. $ 834,057 $ 22,777 2.73% $ 845,600 $ 23,837 2.82%
Interest-bearing demand accounts .............. 92,276 1,959 2.12 88,924 1,868 2.10
Money market accounts ......................... 498,337 14,329 2.88 508,218 14,859 2.92
Time deposits ................................. 4,913,089 272,019 5.54 4,556,812 256,920 5.64
---------- ---------- ---------- ----------
Total interest-bearing liabilities ........... 6,337,759 311,084 4.91 5,999,554 297,484 4.96
---------- ---------- ---------- ----------
NON-INTEREST-BEARING LIABILITIES:
Non-interest-bearing deposits ................. 286,322 262,072
Other non-interest-bearing liabilities ........ 55,667 50,117
---------- ----------
Total non-interest-bearing liabilities ......... 341,989 312,189
---------- ----------
Total liabilities ............................ 6,679,748 6,311,743
Equity ........................................ 855,528 763,402
---------- ----------
Total liabilities and equity ................. $7,535,276 $7,075,145
========== ==========
Net interest income/net interest rate spread (2) $ 209,707 2.16% $ 202,958 2.28%
========== ==========
Net interest-earning assets/net
interest margin (3) ........................... $1,025,375 2.85% $ 911,388 2.94%
========== ==========
Ratio of interest-earning assets to
interest-bearing liabilities .................. 1.16X 1.15X
</TABLE>
<TABLE>
<CAPTION>
1996
------------------------------------------------
AVERAGE
AVERAGE YIELD/
BALANCE INTEREST COST
---------- ---------- -------
ASSETS: (DOLLARS IN THOUSANDS)
INTEREST-EARNING ASSETS:
<S> <C> <C> <C>
First mortgage loans, net (1) ................. $2,858,926 $ 221,930 7.76%
Consumer and other loans ...................... 90,045 8,135 9.03
Federal funds sold ............................ 86.551 4,464 5.16
Mortgage-backed securities .................... 2,336,817 157,050 6.72
Investment securities ......................... 566,784 37,699 6.65
---------- ----------
Total interest-earning assets ............... 5,939,123 429,278 7.23
----------
Non-interest-earning assets ................... 156,815
----------
Total assets ................................. $6,095,938
==========
LIABILITIES AND EQUITY:
INTEREST-BEARING LIABILITIES:
Savings accounts .............................. $ 881,291 $ 25,209 2.86%
Interest-bearing demand accounts .............. 85,031 1,820 2.14
Money market accounts ......................... 534,558 15,825 2.96
Time deposits ................................. 3,631,959 199,813 5.50
---------- ----------
Total interest-bearing liabilities ........... 5,132,839 242,667 4.73
---------- ----------
NON-INTEREST-BEARING LIABILITIES:
Non-interest-bearing deposits ................. 242,615
Other non-interest-bearing liabilities ........ 43,191
----------
Total non-interest-bearing liabilities ......... 285,806
----------
Total liabilities ............................ 5,418,645
Equity ........................................ 677,293
----------
Total liabilities and equity ................. $6,095,938
==========
Net interest income/net interest rate spread (2) $ 186,611 2.50%
==========
Net interest-earning assets/net
interest margin (3) ........................... $ 806,284 3.14%
==========
Ratio of interest-earning assets to
interest-bearing liabilities .................. 1.16X
</TABLE>
- --------------------------------
(1) Amount is net of deferred loan fees and allowance for loan losses and
includes non-performing loans.
(2) We determined net interest spread by subtracting the weighted average
cost of average interest-bearing liabilities from the weighted average
yield on average interest-earning assets.
(3) We determined net interest margin by dividing net interest income by
average interest-earning assets.
34
<PAGE> 37
Rate/Volume Analysis. The following table presents the extent to which
changes in interest rates and changes in the volume of interest-earning assets
and interest-bearing liabilities have affected our interest income and interest
expense during the periods indicated. Information is provided in each category
with respect to:
(1) changes attributable to changes in volume (changes in volume
multiplied by prior rate);
(2) changes attributable to changes in rate (changes in rate multiplied by
prior volume); and
(3) the net change.
The changes attributable to the combined impact of volume and rate have been
allocated proportionately to the changes due to volume and the changes due to
rate.
<TABLE>
<CAPTION>
1998 COMPARED TO 1997 1997 COMPARED TO 1996
------------------------------------ ------------------------------------
INCREASE (DECREASE) INCREASE (DECREASE)
IN NET INTEREST INCOME DUE TO IN NET INTEREST INCOME DUE TO
------------------------------------ ------------------------------------
VOLUME RATE NET VOLUME RATE NET
-------- -------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
First mortgage loans, net ....... $ 17,698 $ (3,810) $ 13,888 $ 25,705 $ (2,203) $ 23,502
Consumer and other loans ........ (149) (264) (413) (319) (131) (450)
Federal funds sold .............. 130 (92) 38 (1,790) 127 (1,663)
Mortgage-backed securities ...... 6,983 (6,714) 269 41,787 2,486 44,273
Investment securities ........... 7,665 (1,098) 6,567 4,245 1,257 5,502
-------- -------- -------- -------- -------- --------
Total .................... 32,327 (11,978) 20,349 69,628 1,536 71,164
-------- -------- -------- -------- -------- --------
INTEREST-BEARING LIABILITIES:
Savings accounts ................ (322) (738) (1,060) (1,010) (362) (1,372)
Interest-bearing demand accounts 71 20 91 82 (34) 48
Money market accounts ........... (286) (244) (530) (772) (194) (966)
Time deposits ................... 19,793 (4,694) 15,099 52,032 5,075 57,107
-------- -------- -------- -------- -------- --------
Total ................... 19,256 (5,656) 13,600 50,332 4,485 54,817
-------- -------- -------- -------- -------- --------
Net change in net interest income $ 13,071 $ (6,322) $ 6,749 $ 19,296 $ (2,949) $ 16,347
======== ======== ======== ======== ======== ========
</TABLE>
COMPARISON OF FINANCIAL CONDITION AT DECEMBER 31, 1998 AND DECEMBER 31, 1997
Hudson City Savings' total assets increased $438.3 million, or 6.0%, to
$7.75 billion at December 31, 1998 from $7.31 billion at December 31, 1997.
At December 31, 1998, loans increased $195.6 million, or 5.7%, to $3.66
billion, while investment securities available for sale increased $130.3
million, or 19.9%, to $785.0 million. Mortgage-backed securities held to
maturity, which amounted to 39.6% of total assets at December 31, 1998,
increased $48.7 million, or 1.6%, to $3.07 billion at December 31, 1998 from
$3.02 billion at December 31, 1997. These increases reflect our strategy of
emphasizing the origination of one- to four-family residential mortgage loans,
supplemented by the purchase of investment securities and mortgage-backed
securities. Additionally, federal funds sold which are overnight investments,
increased $45.2 million, or 183.7%, to $69.8 million at December 31, 1998 from
$24.6 million at December 31, 1997. Levels of federal funds sold may vary
significantly as they represent our daily investment of excess liquidity.
35
<PAGE> 38
The growth in total assets was funded primarily by an increase of $341.4
million, or 5.3%, in total deposits to $6.81 billion at December 31, 1998,
compared with $6.47 billion at December 31, 1997. Interest-bearing deposits
accounted for $300.6 million, or 88.0%, of the growth in total deposits and were
$6.49 billion at December 31, 1998, an increase of 4.9% from $6.19 billion at
December 31, 1997. Of our interest-bearing deposits, time deposits increased
$288.2 million, or 6.0%, to $5.06 billion at December 31, 1998 from $4.77
billion at December 31, 1997. The increase in time deposits primarily reflects
an increase in time deposits with original maturities of less than twenty-four
months. The growth in interest-bearing deposits primarily reflects our strategy
of offering competitive interest rates on time deposits and the relative
stability of the remainder of the deposit base.
Total equity increased $92.9 million, or 11.5%, to $900.6 million at
December 31, 1998, from $807.7 million at December 31, 1997, primarily due to
$93.3 million of net income for 1998.
COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
GENERAL
Net income was $93.3 million for 1998, an increase of $3.3 million, or
3.7%, compared with net income of $90.0 million for 1997. The increase was
primarily attributable to a $6.7 million increase in net interest income offset
by a $1.4 million decrease in total non-interest income and a $2.0 million
increase in income tax expense.
INTEREST INCOME
Total interest income increased $20.4 million, or 4.1%, to $520.8 million
for 1998 compared with $500.4 million for 1997. Interest and fees on first
mortgage loans accounted for $13.9 million, or 68.1%, of the increase in total
interest income as it increased to $259.3 million for 1998. This represents a
5.7% increase over interest and fees on first mortgage loans of $245.4 million
for 1997. Interest and dividends on investment securities available for sale -
taxable increased $6.6 million, or 15.3%, to $49.7 million for 1998 compared
with $43.1 million for 1997.
The increase in total interest income was due to a $452.2 million, or 6.5%,
increase in the average balance of total interest-earning assets to $7.36
billion for 1998 compared with $6.91 billion for 1997. The average balance of
first mortgage loans, net, increased $233.2 million, or 7.3%, to $3.43 billion
for 1998 compared with $3.19 billion for 1997. This increase primarily reflects
our continued emphasis on one- to four-family mortgage loan originations, which
increased $268.1 million, or 39.6%, to $944.9 million during 1998 from $676.8
million in 1997. The average balance of mortgage-backed securities increased
$104.1 million, or 3.5%, to $3.05 billion for 1998 compared with $2.95 billion
for 1997. The average balance of investment securities increased $114.1 million,
or 18.1%, to $743.2 million for 1998 compared with $629.1 million for 1997.
These increases reflect our continued strategy of controlled internal growth and
the use of our investments to increase interest income while managing interest
rate risk.
The increase in total interest-earning assets was partially offset by a 17
basis point decrease in the average yield on interest-earning assets to 7.07%
for 1998 from 7.24% for 1997.
36
<PAGE> 39
The average yield on first mortgage loans, net, decreased 12 basis points to
7.57% for 1998 compared with 7.69% for the prior year. The average yield on
mortgage-backed securities decreased 23 basis points to 6.60% for 1998 compared
with 6.83% for 1997. The average yield on investment securities decreased 17
basis points to 6.70% for 1998 compared with 6.87% for 1997. The lower interest
rate environment along with the relatively flat yield curve that prevailed
during 1998 and the end of 1997 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.
INTEREST EXPENSE
Interest expense on deposits increased $13.6 million, or 4.6%, to $311.1
million for 1998 compared with $297.5 million for 1997. Interest expense on time
deposits, which accounted for 87.4% of interest expense on deposits, increased
$15.1 million, or 5.9%, to $272.0 million for 1998 from $256.9 million for 1997.
The increase of $15.1 million in interest expense on time deposits was partially
offset by a $1.0 million, or 4.2%, decrease in interest expense on savings
accounts to $22.8 million for 1998 from $23.8 million for 1997.
The overall increase in interest expense was attributable to an increase of
$338.2 million, or 5.6%, in the average balance of total interest-bearing
liabilities to $6.34 billion for 1998 compared with $6.00 billion for 1997. The
major component of the increase in the average balance of interest-bearing
liabilities was a $356.3 million, or 7.8%, increase to $4.91 billion in the
average balance of time deposits during 1998 compared with an average balance of
time deposits of $4.56 billion during 1997. This increase reflects our strategy
of funding asset growth through competitive pricing of our time deposit
products. The impact of the increase in the average balance of total
interest-bearing liabilities was slightly offset by a 5 basis point decrease in
the average cost of total interest-bearing liabilities to 4.91% for 1998
compared with 4.96% for 1997. This decrease reflects the overall lower interest
rate environment that prevailed during 1998 and the end of 1997.
NET INTEREST INCOME
Net interest income for 1998 increased $6.7 million, or 3.3%, to $209.7
million compared with $203.0 million for 1997. Net interest rate spread, the
difference between the average yield on average total interest-earning assets
and the average cost of average total interest-bearing liabilities, decreased 12
basis points to 2.16% for 1998 from 2.28% for the prior year. Net interest
margin, represented by net interest income divided by average total
interest-earning assets, decreased 9 basis points to 2.85% for 1998 compared
with 2.94 % for 1997. These decreases were primarily due to slight declines in
interest rates we paid on our interest-bearing deposits, while interest-earning
assets continued to reprice downward more significantly in 1998.
PROVISION FOR LOAN LOSSES
During 1998 we provided $2.4 million for loan losses, compared to $2.9
million for 1997. Net loan charge-offs were approximately $0.3 million for both
1998 and 1997. This resulted in the allowance for loan losses, which is
established through a provision for loan losses charged
37
<PAGE> 40
against income, increasing by $2.1 million, or 13.5%, to $17.7 million at
December 31, 1998, from $15.6 million at December 31, 1997.
The decline in the provision for loan losses reflects an overall decline in
non-performing loans. The increase in the allowance for loan losses reflects the
continued growth in the loan portfolio. At December 31, 1998, the allowance for
loan losses as a percentage of loans was 0.48% compared with 0.45% at December
31, 1997. As a percentage of non-performing loans at December 31, 1998, the
allowance for loan losses was 115.5%, compared with 96.9% for 1997.
Non-performing loans which we defined as non-accruing loans and accruing loans
delinquent 90 days or more decreased $0.8 million, or 5.0%, to $15.3 million at
December 31, 1998 from $16.1 million at December 31, 1997.
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 estimated losses.
NON-INTEREST INCOME
Non-interest income includes service fees on deposit accounts, other
service charges and net gains on sales of securities. Total non-interest income
decreased $1.3 million, or 20.6%, to $5.0 million for 1998 compared with $6.3
million for 1997. The decrease is primarily due to a $1.6 million decrease in
the gain on net securities transactions from the prior year. In 1997,
substantially all of our gain on net securities transactions was from the sale
of common stock of a federal government agency.
NON-INTEREST EXPENSE
Total non-interest expense increased $0.6 million, or 1.0%, to $63.5
million during 1998 compared with $62.9 million for the prior year. Salaries and
employee benefits and net occupancy expense comprised 80.4% of total
non-interest expense for 1998. Salaries and employee benefits increased $0.5
million, or 1.3%, to $39.3 million for 1998 compared with $38.8 million for
1997, reflecting routine salary increases partially offset by a decrease in
benefits expense. Non-interest expense also includes amortization of goodwill of
$1.6 million for 1998. We expect to fully amortize the remaining goodwill during
1999.
Our efficiency ratio (determined by dividing non-interest expense by the
sum of net interest income and non-interest income, excluding gains on
securities transactions) was 29.6% for 1998 compared with 30.3% for 1997. The
efficiency ratio reflects our efforts to control operating expenses by
increasing operating efficiencies. The ratio of non-interest expense to average
assets was 0.84% for 1998 and 0.89% for 1997.
INCOME TAXES
Income tax expense increased $2.0 million, or 3.7%, to $55.5 million for
1998 compared with $53.5 million for 1997, resulting in a stable effective tax
rate of 37.3% for both 1998 and 1997.
38
<PAGE> 41
COMPARISON OF FINANCIAL CONDITION AT DECEMBER 31, 1997 AND 1996
Hudson City Savings' total assets increased $641.6 million, or 9.6%, to
$7.31 billion at December 31, 1997 from $6.67 billion at December 31, 1996.
At December 31, 1997, loans increased $292.3 million, or 9.2%, to $3.46
billion, while investment securities available for sale increased $58.8 million,
or 9.9%, to $654.7 million. Mortgage-backed securities held to maturity, which
comprise 41.3% of total assets at December 31, 1997, increased $312.1 million,
or 11.5%, to $3.02 billion at December 31, 1997. Federal funds sold decreased
$27.6 million, or 52.9%, to $24.6 million at December 31, 1997 from $52.2
million at December 31, 1996.
The growth in total assets was funded primarily by an increase of $547.0
million, or 9.2%, in total deposits to $6.47 billion at December 31, 1997
compared with $5.92 billion at December 31, 1996. Interest-bearing deposits
accounted for $524.5 million, or 95.9%, of the growth in total deposits and were
$6.19 billion at December 31, 1997, an increase of 9.3% from $5.67 billion at
December 31, 1996. Of our interest-bearing deposits, time deposits increased
$565.0 million, or 13.5%, to $4.77 billion at December 31, 1997 from $4.20
billion at December 31, 1996. Slightly offsetting the increase in time deposits
at December 31, 1997 was a decrease in savings deposits of $22.6 million, or
2.6%, to $835.1 million compared with $857.7 million at December 31, 1996. Money
market deposits at December 31, 1997 were $500.0 million, reflecting a decrease
of $20.1 million, or 3.9%, from $520.1 million at December 31, 1996. Demand
deposits increased to $272.3 million at December 31, 1997, an increase of $22.5
million, or 9.0%, compared with $249.8 million at December 31, 1996.
Our total equity increased $88.6 million, or 12.3%, to $807.7 million at
December 31, 1997, from $719.1 million at December 31, 1996, primarily due to
$90.0 million of net income for 1997, partially offset by $1.4 million of
accumulated other comprehensive income related to unrealized losses on
investment securities available for sale.
COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
GENERAL
Net income was $90.0 million for 1997, an increase of $9.2 million, or
11.4%, compared with net income of $80.8 million for 1996. The increase was
primarily attributable to a $16.4 million increase in net interest income and an
increase of $2.3 million in total non-interest income offset by an increase in
total non-interest expense and income tax expense of $2.0 million and $6.9
million, respectively.
INTEREST INCOME
Total interest income increased $71.1 million, or 16.6%, to $500.4 million
for 1997 compared with $429.3 million for 1996. Interest on mortgage-backed
securities accounted for $44.2 million, or 62.2%, of the 1997 increase in total
interest income. The increase of $44.2 million in interest on mortgage-backed
securities represented a 28.1% increase to $201.3 million for 1997 compared with
$157.1 million for 1996. Interest and fees on first mortgage loans increased
$23.5 million, or 10.6%, to $245.4 million for 1997, compared with $221.9
million for
39
<PAGE> 42
the prior year. Additionally, interest and dividends on investment securities
available for sale-taxable increased $5.5 million, or 14.6%, to $43.1 million
for 1997 from $37.6 million for 1996, while interest on federal funds sold
decreased $1.7 million, or 37.8% to $2.8 million for 1997.
The increase in total interest income was primarily due to a $971.8
million, or 16.4 %, increase in the average balance of total interest-earning
assets to $6.91 billion for 1997 compared with $5.94 billion for 1996. During
1996 and 1997 it was our strategy to significantly increase our size through
internal growth. The focus of this growth was increasing our deposit base and
deploying the funds generated by increasing loan originations and investments in
mortgage-backed securities. The significant increase in the average balance of
total interest-earning assets in 1997 was the result of our deployment of the
funds we generated by deposit growth during 1996 and 1997. The average balance
of first mortgage loans, net, increased $334.2 million, or 11.7%, to $3.19
billion for 1997 compared with $2.86 billion for 1996, while the average balance
of mortgage-backed securities increased $612.7 million, or 26.2%, to $2.95
billion for 1997 compared with $2.34 billion for 1996. In addition, the average
balance of investment securities increased by $62.3 million, or 11.0%, to $629.1
million in 1997 compared with $566.8 million in 1996, reflecting the deployment
of excess funding from the increase in deposits.
The average yield on interest-earning assets remained constant at 7.24% for
1997 compared with 7.23% for 1996. The average yield on first mortgage loans,
net, decreased 7 basis points, to 7.69% for 1997 from 7.76% for the prior year.
The average yield on mortgage-backed securities increased 11 basis points to
6.83% for 1997 from 6.72% for 1996. The average yield on investment securities
increased 22 basis points to 6.87% for 1997 from 6.65% for 1996. A slight upward
trend in overall market interest rates during 1996 allowed us to invest deposits
in higher-yielding mortgage-backed securities and investment securities. This
resulted in higher yields on mortgage-backed securities and investment
securities for 1997.
INTEREST EXPENSE
Interest expense on deposits increased $54.8 million, or 22.6%, to $297.5
million for 1997 compared with $242.7 million for 1996. Interest expense on time
deposits, which accounted for 86.4% of interest expense on deposits, increased
$57.1 million, or 28.6%, to $256.9 million for 1997 from $199.8 million for
1996. The $57.1 million increase in interest expense on time deposits was
partially offset by a $1.4 million, or 5.6 %, decrease in interest expense on
savings accounts to $23.8 million for 1997 from $25.2 million for 1996.
The overall increase in interest expense on deposits was attributable to an
increase of $866.7 million, or 16.9%, in the average balance of total
interest-bearing liabilities to $6.00 billion for 1997 compared with $5.13
billion for 1996. The increase reflects our intent in 1996 and 1997 to
significantly increase our deposit base by aggressively pricing our time
deposits. Accordingly, the major component of the net increase in the average
balance of interest-bearing liabilities was a $924.9 million, or 25.5%, increase
to $4.56 billion in the average balance of time deposits during 1997 compared
with $3.63 billion during 1996. The average balance of interest-bearing demand
accounts increased $3.9 million, or 4.6%, to $88.9 million for 1997 from $85.0
million for 1996. The increases in the average balance of time deposits and
interest-bearing demand accounts during 1997 were partially offset by a $35.7
million, or 4.1%, decrease in the average balance of lower-costing savings
accounts to $845.6 million during 1997 from $881.3 million during 1996.
Additionally, the average balance of lower-costing money market accounts
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<PAGE> 43
decreased $26.4 million, or 4.9%, to $508.2 million during 1997 compared with
$534.6 million for 1996.
The average cost of total interest-bearing deposits increased to 4.96% for
1997 compared with 4.73% for 1996, primarily due to our aggressive pricing
strategy and the resulting shift in the deposit mix to higher-costing time
deposits.
NET INTEREST INCOME
Net interest income for 1997 increased $16.4 million, or 8.8%, to $203.0
million compared with $186.6 million for 1996. Net interest rate spread
decreased 22 basis points to 2.28% for 1997 from 2.50% for the prior year. Net
interest margin decreased 20 basis points to 2.94% for 1997 compared with 3.14%
for 1996. While we grew significantly during 1996, the cost of that growth, in
terms of a flat average yield on interest-earning assets and an overall increase
in the cost of interest-bearing deposits, resulted in a lower net interest
spread and net interest margin.
PROVISION FOR LOAN LOSSES
During 1997 and 1996, we provided $2.9 million and $2.3 million,
respectively, for loan losses. Net loan charge-offs were $0.3 million for 1997
and $1.1 million for 1996. This resulted in the allowance for loan losses
increasing $2.6 million, or 20.0%, to $15.6 million at December 31, 1997, from
$13.0 million at December 31, 1996. The increase in the provision reflects the
continued increase in the loan portfolio during 1997. At December 31, 1997, the
allowance for loan losses as a percentage of loans was 0.45% compared with 0.41%
at December 31, 1996. As a percentage of non-performing loans at December 31,
1997, the allowance for loan losses was 96.9% compared with 76.9% at December
31, 1996. Non-performing loans, defined as non-accruing loans and accruing loans
delinquent 90 days or more, decreased $0.9 million, or 5.3%, to $16.1 million at
December 31, 1997 from $17.0 million at December 31, 1996.
Historically, the majority of the loans we originated have been one- to
four-family mortgage loans. At December 31, 1997, 97.5% of our total loan
portfolio was comprised of first mortgage loans, substantially all of which were
secured by properties located in the state of New Jersey.
NON-INTEREST INCOME
Total non-interest income for 1997 was $6.3 million, an increase of $2.3
million, or 57.5%, from $4.0 million for 1996. The increase was primarily due to
a $1.4 million increase in gain on net securities transactions from the sale of
common stock of a federal government agency. Additionally, service fees and
other income were $4.7 million, an increase of $0.8 million, or 20.5%, from $3.9
million for 1996. The increase was primarily due to service fees generated from
increased levels of deposits.
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<PAGE> 44
NON-INTEREST EXPENSE
Total non-interest expense increased $1.9 million, or 3.1%, to $62.9
million during 1997 compared with $61.0 million for the prior year. Salaries and
employee benefits and net occupancy expense comprised 80.5% of total
non-interest expense for 1997. Salaries and employee benefits increased $1.8
million, or 4.9%, to $38.8 million for 1997 compared with $37.0 million for
1996, primarily due to routine salary increases. Net occupancy expense remained
stable at $11.9 million for both 1997 and 1996.
The ratio of non-interest expense to average assets was 0.89% for 1997 and
1.00% for 1996. Our efficiency ratio was 30.3% for 1997 compared with 32.0% for
1996.
INCOME TAXES
Income tax expense increased $6.9 million, or 14.8%, to $53.5 million for
1997 compared with $46.6 million for 1996, resulting in effective tax rates of
37.3% and 36.6% for 1997 and 1996, respectively.
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 agreements with approved broker-dealers. Reverse
repurchase agreements are agreements which allow us to borrow money using our
securities as collateral. At December 31, 1998, 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 and purchase of one-
to four-family real estate loans, the purchase of mortgage-backed securities,
and to a lesser extent, the purchase of investment securities. During 1998 we
originated and purchased loans of approximately $1.02 billion and during 1997 we
originated and purchased loans of approximately $722.1 million. Purchases of
mortgage-backed securities were $1.22 billion for 1998 and $883.5 million for
1997, while purchases of investment securities were $790.0 million for 1998 and
$522.1 million for 1997.
These investing activities were funded by deposit growth, principal
payments on mortgage loans and mortgage-backed securities, calls and maturities
on investment securities, and funds provided by our operating activities.
Principal repayments on loans and mortgage-backed securities totaled $1.99
billion during 1998, compared to $995.0 million during 1997.
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<PAGE> 45
Maturities and calls of investment securities totaled $659.7 million during 1998
and $418.5 million during 1997. Sales of loans and investment securities
provided cash flows of $4.1 million during 1998 and $43.8 million during 1997.
At December 31, 1998, Hudson City Savings had loan commitments to borrowers
of approximately $161.5 million, and available home equity and overdraft lines
of credit of approximately $53.4 million. Commitments to purchase
mortgage-backed securities were approximately $256.7 million at December 31,
1998. Total deposits increased $341.4 million during 1998 and $547.0 million
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 $4.77 billion 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 Hudson City 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 December 31, 1998, we exceeded each of the applicable regulatory capital
requirements. Our leverage (tier 1) capital was $898.5 million, or 11.93%, at
December 31, 1998. In order to be classified as "well-capitalized" by the FDIC
we were required to have leverage (tier 1) capital of $376.6 million, or 5.00%.
To be classified as a well-capitalized bank by the FDIC, we must also have a
risk-based total capital ratio of 10.00%. At December 31, 1998, we had a
risk-based total capital ratio of 39.23%. See "Regulation of Hudson City Savings
Bank and Hudson City Bancorp" for a discussion of the regulatory capital
requirements applicable to Hudson City 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.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial position and measure
those instruments at fair value.
SFAS No. 133 is effective for all quarters of those years beginning after
June 15, 1999. This statement should not be applied retroactively to financial
statements of prior periods. We do not expect that our adoption of SFAS No. 133
will have a material impact on our financial position or results of operations.
In October 1998, the Financial Accounting Standards Board issued SFAS No.
134, "Accounting for Mortgage-Backed Securities Retained after the
Securitization of Mortgage Loans Held for Sale by a Mortgage Banking
Enterprise." This statement is an amendment of SFAS No. 65, "Accounting for
Certain Mortgage Banking Activities" and requires that after the
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<PAGE> 46
securitization of mortgage loans held for sale, an entity engaged in mortgage
banking activities classify the resulting mortgage-backed securities or other
retained interests on the basis of its ability and intent to sell or hold those
investments. This statement is effective for the first quarter beginning after
December 15, 1998. Our adoption of SFAS No. 134 will not have a material impact
on our financial position or results of operations.
ISSUES FOR THE YEAR 2000
Background. A significant challenge that is confronting the business
community, including Hudson City 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.
Financial institution regulators have focused on Y2K compliance in recent
years and have issued guidance concerning the responsibilities of our management
and our board of managers. The Federal Financial Institutions Examination
Council (FFIEC), a group comprised of representatives from the various financial
institution regulators, has issued several interagency statements on Y2K issues.
These statements have required financial institutions to evaluate their Y2K
exposure, measure their risk to Y2K issues and prepare a plan to remedy the Y2K
issue. Financial institutions also are required to examine the Y2K implications
of their reliance on third-party vendors and the potential impact of Y2K issues
on customers, borrowers and suppliers.
Federal banking regulators have also issued safety and soundness guidelines
to be used in conjunction with routine regulatory examinations. Failure by
federally-regulated institutions to adequately address the Y2K issue may result
in supervisory action, including the reduction of the institution's supervisory
rating, the denial of applications for approval of mergers or acquisitions, the
denial of applications for approval of new branch openings, or the imposition of
civil money penalties.
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. 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 affect on our suppliers and
service providers. Should we experience a Y2K failure that can not readily be
fixed, it may result in a significant adverse impact on our financial condition
and results of operations.
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State of Readiness. We believe that technology plays a critical role in our
overall business strategy. We have consistently attempted to stay current with
technological advances in the industry. In this regard, the board of managers
and senior management have consistently supported investment in established and
proven technologies. Because of this philosophy, the board of managers and
senior management have been actively engaged in managing our Year 2000 project.
Management has consistently allocated both human and financial resources to this
project to achieve the objectives and time frames mandated by the FFIEC.
The core of our computer processing system is an in-house, vendor
maintained and supported main frame computer and a vendor-maintained and
supported integrated financial systems software package. We completed our
conversion to the current system in 1993. We believe that many of our
applications critical to daily operations have been Y2K compliant for some time.
Calculations involving dates for maturities beyond 1999 on both savings and
mortgage instruments have been in place and functioning since the systems'
conversion in 1993.
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 the
appointment of the Y2K Review Team in August 1996 and the subsequent
development of a formal Action Plan in June 1997. The Review Team, through
the development of the Action Plan, identified the issues to be resolved,
defined objectives to be achieved and outlined an approach to resolve our
Y2K issues.
Assessment Phase - During this phase, the Review Team, with
significant input from department leaders, 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.
The Compliance Control Sheet identifies and monitors Y2K readiness for all
systems and applications identified during this phase. Initially, we
prioritized the items based on their perceived business impact on our
operations. We decided to fix, upgrade, replace or abandon any systems that
we identified as having Y2K issues. Although we update the Compliance
Control Sheet as we acquire new technology, and the status of individual
items changes as systems go through subsequent phases, this assessment
phase of the project is substantially complete.
We also have reviewed our customer base to determine whether they pose
any significant Y2K risks. Our customer base consists primarily of
individual depositors and residential mortgage loan borrowers. Individually
these customers are not likely to pose significant Y2K risks to our
operations. However, it is not possible at this time to evaluate the
indirect risks 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, 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.
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<PAGE> 48
Our information services department is actively involved with both of
these providers as large customers of each. We were a test-site for the Y2K
compliant upgrade that was received in May 1998 for the integrated
financial systems software package. By July 1998, the Y2K upgrade for this
package was put into current production without Y2K-related problems. Other
significant systems have generally been upgraded to Y2K compliant versions
of vendor-supported software. In certain situations, we replaced existing
non-compliant systems with new Y2K compliant hardware and software. We have
relatively few data transmission interfaces with third-party servicers and
substantially all of these systems have been renovated for Year 2000
compliance. We have no mission-critical systems that we developed on our
own.
The Review Team continues 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. In July 1998, after the Y2K compliant version of our
integrated financial systems software package was put into current
production, we commenced Y2K testing by creating a separate test
environment dedicated to this task. After initial testing by our
information services department, we undertook a bank-wide testing
initiative. Individual department personnel, the Training Department and
the Internal Audit Department, all became involved in the testing of this
operationally critical software. The validation phase of this mission
critical system was completed by December 31, 1998 and it will continue to
be tested throughout 1999 as new, more routine, upgrades are received.
During the testing process to date, we have not identified any significant
Y2K problems relating to any upgraded system. All Y2K compliant upgraded
systems have been installed and put into production.
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. Although we
currently estimate that the total cost of the Y2K project, excluding the
reallocation of internal resources, will be approximately $1.0 million, of which
we have already incurred $0.8 million, we can not guarantee that such costs
would not become material in the future.
Contingency Planning. Regulatory guidance requires that we consider two
types of contingency planning:
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(1) remediation contingency planning, which addresses the failure of an
institution to successfully fix, test or implement its Y2K readiness
plan; and
(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, the Review Team understands 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.
IMPACT OF INFLATION AND CHANGING PRICES
The Financial Statements and accompanying Notes of Hudson City 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 due the effects of inflation.
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BUSINESS OF HUDSON CITY SAVINGS BANK
GENERAL
Hudson City Savings is a community and customer oriented retail savings
bank offering traditional deposit products, residential real estate mortgage
loans and, to a lesser extent, consumer loans. In addition, Hudson City Savings
purchases mortgage-backed securities, securities issued by the U.S. Government
and agencies and other investments permitted by applicable laws and regulations.
Except for community-related investments, we have not recently originated or
invested in commercial real estate loans or loans secured by multi-family
residences or commercial/industrial business loans, although we have the legal
authority to make such loans. We retain substantially all of the loans we
originate.
Our revenues are derived principally from interest on our mortgage loans
and mortgage-backed securities 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, although we expect to do so in the future. See
"Business of Hudson City Savings Bank" and " -- Source of Funds."
MARKET AREA
We conduct our operations out of our executive office in Paramus, Bergen
County, New Jersey, and 75 branches located in 13 counties throughout the state
of New Jersey. As of June 30, 1998, we had a 5.0% share of all New Jersey
deposits and we ranked fifth in the size of deposits overall. We operate in
three primary markets: northern New Jersey, the New Jersey shore, and
southwestern New Jersey in the suburbs outside of Philadelphia. Overall, the
counties in which we operate reflect 82% of the entire population of New Jersey,
providing us with access to a large base of potential customers.
Our market areas provide distinct differences in demographics and economic
characteristics. The northern New Jersey market (including Bergen, Essex,
Hudson, Middlesex, Morris, Passaic, Union and Warren Counties) represents the
greatest concentration of population, deposits and income in the State. The
combination of these counties represents 54% of the entire New Jersey population
and 55% of New Jersey households. The northern New Jersey market also represents
the greatest concentration of Hudson City Savings retail operations -- both
lending and deposit gathering -- and based on its high level of economic
activity, we believe that the northern New Jersey markets provide the most
significant opportunities for future growth. The New Jersey shore market
(including Monmouth and Ocean counties) represents a strong concentration of
population and income, and is an increasingly popular resort and retirement
economy -- providing healthy opportunities for deposit growth and residential
lending. The southwestern New Jersey market (including Burlington, Camden and
Glouchester counties) consists of communities adjacent to the Philadelphia
metropolitan area and represents the smallest concentration of deposits for
Hudson City Savings.
Our future growth opportunities will be influenced by growth, stability of
the statewide and regional economies, other demographic population trends and
the competitive environment. We believe that we have developed lending products
and marketing strategies to address the diverse credit-related needs of the
residents in our market area.
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COMPETITION
We face intense competition both in making loans and attracting deposits.
New Jersey 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 Jersey 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 insurance products, trust
or investment services, telephonic banking, banking services through home
computers or other technologically advanced services. 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, mutual
funds, insurance companies and brokerage and investment banking firms. Our most
direct competition for deposits has historically come from commercial banks,
savings banks, savings and loan associations and credit unions. We face
additional competition for deposits from short-term money market funds and other
corporate and government securities funds and from brokerage firms and insurance
companies.
LENDING ACTIVITIES
Loan Portfolio Composition. Our loan portfolio primarily consists of one-
to four-family residential first mortgage loans. To a lesser degree, the loan
portfolio includes consumer and other loans, including home equity credit lines
and fixed-rate second mortgage loans. We have not originated commercial real
estate loans or loans secured by multi-family residences since the early 1980's
and we do not originate construction loans. We stopped originating commercial/
industrial business loans in 1993, although we have the legal authority to make
such loans. In 1998, we purchased participation interests in multi-family and
commercial first mortgage loans through community-based organizations amounting
to $0.8 million.
At December 31, 1998, we had total loans of $3.66 billion, of which $3.57
billion, or 97.6%, were first mortgage loans. Of residential mortgage loans
outstanding at that date, 51.9% were adjustable-rate mortgage or ARM loans and
48.1% were fixed-rate loans. The remainder of our loans at December 31, 1998,
amounting $86.6 million, or 2.4% of total loans, consisted of consumer and other
loans, primarily home equity credit lines and fixed-rate second mortgage loans.
Commercial real estate and multi-family mortgage loans outstanding at December
31, 1998 totaled $2.9 million, or 0.1% of total 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.
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The following table presents the composition of our loan portfolio in
dollar amounts and in percentages of the total portfolio at the dates indicated.
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------------------------------------------------------
1998 1997 1996
PERCENT PERCENT PERCENT
OF OF OF
AMOUNT TOTAL AMOUNT TOTAL AMOUNT TOTAL
---------- ------- ---------- ------- ---------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
FIRST MORTGAGE LOANS:
One- to four-family ............. $3,516,947 96.10% $3,327,371 96.07% $3,039,412 95.84%
FHA/VA .......................... 52,958 1.45 45,868 1.32 37,541 1.18
Multi-family and commercial ..... 2,911 0.08 3,553 0.10 6,517 0.21
---------- ------ ---------- ------ ---------- ------
Total first mortgage loans ... 3,572,816 97.63 3,376,792 97.49 3,083,470 97.23
---------- ------ ---------- ------ ---------- ------
CONSUMER AND OTHER LOANS:
Fixed-rate second mortgages ...... 56,118 1.53 50,198 1.45 45,808 1.44
Home equity credit lines ......... 28,045 0.77 30,211 0.87 33,511 1.06
Guaranteed student ............... 216 0.01 4,315 0.12 6,085 0.19
Other ............................ 2,212 0.06 2,287 0.07 2,584 0.08
---------- ------ ---------- ------ ---------- ------
Total consumer and other loans 86,591 2.37 87,011 2.51 87,988 2.77
---------- ------ ---------- ------ ---------- ------
Total loans ............. 3,659,407 100.00% 3,463,803 100.00% 3,171,458 100.00%
====== ====== ======
LESS:
Deferred loan fees ............... 11,146 12,076 11,622
Allowance for loan losses......... 17,712 15,625 13,045
---------- ---------- ----------
Net loans .................... $3,630,549 $3,436,102 $3,146,791
========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
-----------------------------------------
1995 1994
PERCENT PERCENT
OF OF
AMOUNT TOTAL AMOUNT TOTAL
---------- ------- ---------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
FIRST MORTGAGE LOANS:
One- to four-family ............. $2,642,117 94.64% $2,433,987 93.40%
FHA/VA .......................... 46,365 1.66 57,142 2.19
Multi-family and commercial ..... 11,163 0.40 16,396 0.63
---------- ------ ---------- ------
Total first mortgage loans ... 2,699,645 96.70 2,507,525 96.22
---------- ------ ---------- ------
CONSUMER AND OTHER LOANS:
Fixed-rate second mortgages ...... 42,508 1.52 41,394 1.59
Home equity credit lines ......... 37,960 1.36 42,856 1.64
Guaranteed student ............... 7,990 0.29 9,691 0.37
Other ............................ 3,699 0.13 4,593 0.18
---------- ------ ---------- ------
Total consumer and other loans 92,157 3.30 98,534 3.78
---------- ------ ---------- ------
Total loans ............. 2,791,802 100.00% 2,606,059 100.00%
====== ======
LESS:
Deferred loan fees ............... 11,170 11,269
Allowance for loan losses......... 11,906 11,566
---------- ----------
Net loans .................... $2,768,726 $2,583,224
========== ==========
</TABLE>
50
<PAGE> 53
Loan Maturity. The following table presents the contractual maturity of our
loans at December 31, 1998. The table does not include the effect of prepayments
or scheduled principal amortization. Prepayments and scheduled principal
amortization on first mortgage loans totaled $784.3 million for 1998, $396.9
million for 1997 and $376.6 million for 1996.
<TABLE>
<CAPTION>
AT DECEMBER 31, 1998
---------------------------------------------------
FIRST MORTGAGE CONSUMER
LOANS AND OTHER LOANS TOTAL
-------------- --------------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
AMOUNTS DUE:
Within one year ............... $ 441 $ 1,773 $ 2,214
---------- ---------- ----------
After one year:
One to three years ...... 7,701 3,611 11,312
Three to five years ....... 28,048 14,511 42,559
Five to ten years ......... 443,963 22,965 466,928
Ten to twenty years ....... 863,049 43,731 906,780
Over twenty years ......... 2,229,614 -- 2,229,614
---------- ---------- ----------
Total due after one year 3,572,375 84,818 3,657,193
---------- ---------- ----------
Total loans ............ $3,572,816 $ 86,591 3,659,407
========== ==========
LESS:
Deferred loan fees ............ 11,146
Allowance for loan losses .. 17,712
----------
Net loans .............. $3,630,549
==========
</TABLE>
The following table presents, as of December 31, 1998, the dollar amount of
all loans, due after December 31, 1999, and whether these loans have fixed
interest rates or adjustable interest rates.
<TABLE>
<CAPTION>
DUE AFTER DECEMBER 31, 1999
--------------------------------------------------
FIXED ADJUSTABLE TOTAL
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
First mortgage loans ............ $1,719,680 $1,852,695 $3,572,375
Consumer and other loans ........ 56,773 28,045 84,818
---------- ---------- ----------
Total loans due after one-year $1,776,453 $1,880,740 $3,657,193
========== ========== ==========
</TABLE>
51
<PAGE> 54
The following table presents our loan originations, purchases, sales and
principal payments for the periods indicated.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------
1998 1997 1996
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Total loans:
Balance outstanding at beginning of period $3,463,803 $3,171,458 $2,791,802
---------- ---------- ----------
Originations:
First mortgage loans .................... 944,911 676,831 756,141
Consumer and other loans ................. 41,375 29,037 28,224
---------- ---------- ----------
Total originations .................. 986,286 705,868 784,365
---------- ---------- ----------
Purchases:
One- to four-family first mortgage loans . 22,900 -- 8,558
FHA/VA first mortgage loans .............. 14,952 15,948 --
Other first mortgage loans ............... 787 250 --
---------- ---------- ----------
Total purchases ..................... 38,639 16,198 8,558
---------- ---------- ----------
Less:
Principal repayments:
First mortgage loans ..................... 784,289 396,906 376,633
Consumer and other loans ................. 37,546 28,913 31,249
---------- ---------- ----------
Total principal payments ............ 821,835 425,819 407,882
---------- ---------- ----------
Transfers to foreclosed real estate ........... 3,353 2,801 4,241
---------- ---------- ----------
Loan sales - guaranteed student loans ......... 4,133 1,101 1,144
---------- ---------- ----------
Balance outstanding at end of period .... $3,659,407 $3,463,803 $3,171,458
========== ========== ==========
</TABLE>
Residential Mortgage Lending. Our primary lending emphasis is the
origination of first mortgage loans secured by one- to four-family properties
that serve as the primary or secondary residence of the owner. We do not allow
any borrower to have more than two outstanding first mortgage loans to us at any
one time. We do not offer loans secured by cooperative apartment units or
interests therein. In addition to our loan originations, we have purchased one-
to four-family first mortgage loans in recent years including purchases of $37.9
million in 1998. Since the early 1980's, we have originated substantially all of
our one- to four-family first mortgage loans for retention in our portfolio.
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 extensive branch network is a significant
source of new loan generation. We also employ a small staff of representatives
who call on real estate professionals to disseminate information regarding our
loan programs and take applications directly from their clients. These
representatives are paid for each origination. In addition, we use the services
of licensed mortgage bankers and brokers for mortgage loan originations.
52
<PAGE> 55
We currently offer loans that conform to underwriting standards that are
based on standards specified by FannieMae ("conforming loans") and also
originate non-conforming loans, as described below. These loans may be
fixed-rate one- to four-family mortgage loans or adjustable-rate one- to
four-family mortgage loans with maturities of between 5 and 30 years. The
non-conforming loans generally follow FannieMae guidelines except for the loan
amounts and the loans processed as limited documentation loans, as discussed
below. FannieMae guidelines limit loans to $240,000; our non-conforming loans
may exceed such limits. The average size of our one- to four-family mortgage
loans originated in 1998 was approximately $207,000. The overall average size of
our one- to four-family first mortgage loans was approximately $139,000 at
December 31, 1998. We are an approved seller/servicer for FannieMae and an
approved servicer for FreddieMac. From time to time we have sold loans in the
secondary market although we have not done so recently.
Our originations of first mortgage loans amounted to $944.9 million in
1998, $676.8 million in 1997 and $756.1 million in 1996. A significant number of
our first mortgage loan originations have been the result of refinancing of our
existing loans due to the relatively low interest rate levels over the past
three years. Total refinancings of our existing first mortgage loans were as
follows:
<TABLE>
<CAPTION>
PERCENTAGE OF FIRST
MORTGAGE LOAN
AMOUNT ORIGINATIONS
------------- -------------------
(IN MILLIONS)
<S> <C> <C>
1998 $204.0 21.6%
1997 50.0 7.4
1996 77.8 10.3
</TABLE>
We offer a variety of ARMs and fixed-rate one- to four-family mortgage
loans with maximum loan to value ratios that depend on the type of property and
the size of loan involved. The loan to value ratio is the loan amount divided by
the appraised value of the property. The loan to value ratio is a measure
commonly used by financial institutions to determine exposure to risk. Except
for loans to low to moderate income home mortgage applicants, described below,
loans on owner-occupied one- to four-family homes of up to $500,000 are subject
to a maximum loan to value ratio of 80%. However, we make loans in amounts up to
$400,000 with a 90% loan to value ratio if the borrower obtains private mortgage
insurance. Loans secured by single family investment properties are subject to a
maximum loan to value ratio of 75%. Loan to value ratios of 75% or less are also
required for one- to four-family loans in excess of $500,000 and less than
$750,000. Loans in excess of $750,000 and up to $1,000,000 are subject to a
maximum 70% loan to value ratio.
We currently offer fixed-rate mortgage loans in amounts up to $1.0 million
with a maximum term of 30 years secured by one- to four-family residences. We
price our interest rates on fixed rate loans to be competitive in light of
market conditions.
We currently offer a variety of ARM loans secured by one- to four-family
residential properties that initially adjust after one year, five years or ten
years. After the initial adjustment period, ARM loans adjust on an annual basis.
The ARM loans that we currently originate have a maximum 30 year amortization
period and are subject to the same loan to value ratios applicable
53
<PAGE> 56
to fixed-rate mortgage loans described above. The interest rates on ARM loans
fluctuate based upon a fixed spread above the average yield on United States
treasury securities, adjusted to a constant maturity of one year ("constant
treasury maturity index") and generally are subject to a maximum increase of 2%
per adjustment period and a limitation on the aggregate adjustment of either 5%
or 6% over the life of the loan, depending upon the type of loan. We offer ARM
loans with initial interest rates below the interest rate that we determine by a
fixed spread above the constant treasury maturity index ("fully indexed rate").
As of December 31, 1998, the initial discounted rate on these loans was 75 to
288 basis points below the current fully indexed rate. We originated $294.0
million of one- to four-family ARM loans in 1998. At December 31, 1998, 52.7% of
our one- to four-family mortgage loans consisted of ARM loans.
The volume and types of ARM loans we originate have been affected by the
level of market interest rates, competition, consumer preferences and the
availability of funds. During 1998, we experienced a decreased demand for ARM
loans due to the continued low interest rate environment. Although we will
continue to offer ARM loans, we cannot guarantee that we will be able to
originate a sufficient volume of ARM loans to increase or maintain the
proportion that these loans bear to our total loans.
The retention of ARM loans in our loan portfolio helps reduce our exposure
to increases in interest rates. However, ARM loans can pose credit risks
different from the risks inherent in fixed-rate loans, primarily because as
interest rates rise, the underlying payments of the borrower may rise. This
increases the potential for default. The marketability of the underlying
property also may be adversely affected. In order to minimize risks, we evaluate
borrowers of one-year ARM loans based on their ability to repay the loans at the
fully indexed rate. In an effort to further reduce interest rate risk, we have
not in the past, nor do we currently, originate ARM loans which provide for
negative amortization of principal.
In addition to our full documentation loan program, we process some loans
as limited documentation loans. We have originated these loans for 10 years.
Loans eligible for limited documentation processing are ARM loans and 15 and 30
year fixed-rate loans to owner-occupied primary and second home applicants.
These loans are available in amounts up to 75% of the lower of the appraised
value or purchase price of the property. The maximum loan amount for limited
documentation loans is $500,000. We do not charge borrowers additional fees for
limited documentation loans. We require applicants for limited documentation
loans to complete a Freddie Mac/Fannie Mae loan application and request income,
assets and credit history information from the borrower. Additionally, we obtain
credit reports from outside vendors on all borrowers. We also look at other
information to ascertain the credit history of the borrower. Applicants with
delinquent credit histories usually do not qualify for the limited documentation
processing, although relatively minor delinquencies which are adequately
explained will not prohibit processing as a limited documentation loan. We
reserve the right to verify income and asset information and verify such
information where we believe circumstances require verification.
Limited documentation loans involve higher risks compared to loans with
full documentation as there is a greater opportunity for borrowers to falsify
their income and ability to service their debt. We believe that the limited
documentation program has not had a material adverse effect on our asset
quality. See "-- Asset Quality." Unseasoned limited documentation loans are not
readily salable in the secondary market as whole loans. In addition, these loans
may not readily be pooled or securitized. We do not believe that an inability to
sell such loans will
54
<PAGE> 57
have a material adverse impact on our liquidity needs, because internally
generated sources of liquidity are expected to be sufficient to meet our
liquidity needs. See "Managements' Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources" and "--
Source of Funds."
In addition to our standard mortgage and consumer credit products, since
1992, we have developed mortgage programs designed to address the credit needs
of low- to moderate-income home mortgage applicants, first-time home buyers and
low- to moderate-income home improvement loan applicants. We define low-to
moderate-income applicants as borrowers residing in low-to-moderate income
census tracts or households with income not greater than 80% of the median
income in the county where the subject property is located. Our low- to
moderate-income home improvement loans are discussed under "-- Consumer Loans."
Among the features of the low- to moderate-income home mortgage and first-time
home buyer's programs are reduced rates, lower down payments, reduced fees and
closing costs, and generally less restrictive requirements for qualification
compared with our traditional one- to four-family mortgage loans. For instance,
certain of these programs currently provide for loans with up to 95% loan to
value ratios and rates which are 25 to 75 basis points lower than our
traditional mortgage loans. In 1998, we provided $69.8 million in mortgage loans
to home buyers under these programs.
Consumer Loans. At December 31, 1998, $86.6 million, or 2.4%, of our total
loans consisted of consumer and other loans, primarily home equity credit lines
and fixed-rate second mortgage loans. Consumer loans generally have shorter
terms to maturity, which reduces our exposure to changes in interest rates.
Consumer loans also carry higher rates of interest than do one- to four-family
residential mortgage loans. In addition, we believe that offering consumer loan
products helps to expand and create stronger ties to our existing customer base
by increasing the number of customer relationships and providing cross-marketing
opportunities.
Our home equity credit line loans, which totaled $28.1 million, or 0.8% of
total loans at December 31, 1998, are adjustable-rate loans secured by a second
mortgage on owner-occupied one- to four-family residences located in the State
of New Jersey. Current interest rates on home equity credit lines are based on
the "prime rate" as published in the "Money Rates" section of The Wall Street
Journal (the "index"). Interest rates on home equity credit lines are adjusted
monthly based upon changes in the index. Minimum monthly principal payments on
currently offered home equity lines of credit are based on 1/240th of the
outstanding principal balance or $100, whichever is greater. The maximum credit
line available is $200,000. The underwriting standards applicable to these loans
generally are the same as one- to four-family first mortgage loans, except that
the combined loan to value ratio, including the balance of the first mortgage,
cannot exceed 80% of the appraised value of the property.
We also offer fixed-rate second mortgage loans in amounts up to $200,000
secured by owner-occupied one- to four-family residences for terms of up to 15
years. At December 31, 1998 these loans totaled $56.1 million, or 1.5% of total
loans. Interest rates on fixed-rate second mortgage loans are periodically set
by our Consumer Loan Department based on market conditions. The underwriting
terms and procedures applicable to these loans are substantially the same as for
our home equity credit line loans.
We also offer fixed-rate second mortgage loans to low-to-moderate income
borrowers in amounts up to $20,000. The borrower must use a portion of the loan
proceeds for home
55
<PAGE> 58
improvements or the satisfaction of an existing obligation. The underwriting
standards under this program are similar to those for standard second mortgage
loans, except that the combined maximum loan to value ratio is 90%.
At December 31, 1998, guaranteed student loans amounted to $0.2 million, as
a result of the sale of $4.1 million of our total student loan portfolio during
the year to the Student Loan Marketing Association (Sallie Mae). We currently
participate in a program sponsored by Sallie Mae through which we expect to sell
all future student loans to Sallie Mae. We will sell these loans after we
completely disburse loan proceeds. We originated total student loans of $0.4
million during 1998.
In the past, we offered commercial/industrial loans primarily for business
investment, business expansion and working capital requirements, generally to
businesses located within our market areas. We no longer make such loans, and at
December 31, 1998, we had three remaining commercial/industrial loans totaling
$0.7 million. Other consumer loans totaled $1.5 million at December 31, 1998,
and consisted of collateralized passbook loans, overdraft protection loans,
automobile loans and unsecured personal loans.
Multi-family and Commercial Real Estate Loans. In the past, we originated
loans secured by multi-family properties, primarily apartment buildings, and
commercial real estate properties, primarily warehouses, shopping centers and
commercial business properties. We have not originated a multi-family mortgage
loan or commercial real estate loan since the early 1980's except for our
purchase of participations in multi-family and commercial first mortgage loans
through community-based organizations, amounting to $0.8 million in 1998.
Loans secured by multi-family and commercial real estate properties are
generally larger and involve a greater degree of credit risk than one- to
four-family residential mortgage loans. Such loans typically involve large
balances to single borrowers or groups of related borrowers. Because payments on
loans secured by multi-family and commercial real estate properties are often
dependent on the successful operation or management of the properties, repayment
of such loans may be subject to adverse conditions in the real estate market or
the economy. If the cash flow from the project decreases, or if leases are not
obtained or renewed, the borrower's ability to repay the loan may be impaired.
Loan Approval Procedures and Authority. Our lending policies provide that
our Mortgage Officer and Assistant Mortgage Officer have authority to approve
one- to four-family mortgage loans in amounts up to $500,000. Loans in excess of
$500,000 require the approval of either of the foregoing officers as well as our
Chief Executive Officer or Chief Operating Officer. Home equity credit lines and
fixed-rate second mortgage loans in principal amounts of $25,000 or less are
approved by one of our designated loan underwriters. Home equity loans in excess
of $25,000 up to the $200,000 maximum are approved by an underwriter and either
our Consumer Loan Officer, Chief Executive Officer or Chief Operating Officer. A
weekly listing of loan approvals is entered into the minutes of the Executive
Committee of the board of managers.
The following describes our current lending procedures. Upon receipt of a
completed loan application from a prospective borrower, we order a credit report
and, except for loans originated as limited documentation loans, we verify
certain other information. If necessary, we obtain additional financial or
credit related information. We require an appraisal for all mortgage loans,
except for some loans made to refinance existing mortgage loans. Appraisals are
56
<PAGE> 59
performed by our in-house appraisal department or by licensed or certified
third-party appraisal firms. Currently, most appraisals are performed by
third-party appraisers and are reviewed by our appraisal department. We require
title insurance on all mortgage loans, except for home equity credit lines and
fixed-rate second mortgage loans. For these loans, we require evidence of
previous title insurance. We require borrowers to obtain hazard insurance and we
may require borrowers to obtain flood insurance prior to closing. We require
borrowers 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 owned properties, we have been proactive in addressing problem and
non-performing assets. These strategies, as well as our concentration on one- to
four-family mortgage lending, our maintenance of sound credit standards for new
loan originations and relatively favorable economic and real estate market
conditions 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 90th day of delinquency. Specific
procedures include a late charge notice being sent at the time a payment is over
15 days past due with a second notice being sent at the time the payment becomes
30 days past due. We also establish telephone contact at that time with the
borrower. We send additional letters if no contact is established by
approximately the 45th day of delinquency. On the 60th day of delinquency, we
send another letter followed by continued telephone contact. Between the 30th
and the 60th day of delinquency, if telephone contact has not been established,
an independent contractor 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 or work out a repayment schedule with the borrower in
order to avoid foreclosure. It has been our experience that most loan
delinquencies are cured within 90 days and no legal action is taken.
We send foreclosure notices when a loan is 90 days delinquent and we
transfer the loan to the foreclosure/bankruptcy section for referral to legal
counsel. We commence foreclosure proceedings if the loan is not brought current
between the 90th and 120th day of delinquency unless specific limited
circumstances warrant an exception. We hold property foreclosed upon as
foreclosed real estate. We carry foreclosed real estate at its fair market value
less estimated selling costs. If a foreclosure action is commenced and the loan
is not brought current, paid in full or refinanced before the foreclosure sale,
we either sell the real property securing the loan by a foreclosure sale or sell
the property as soon thereafter as practicable. The collection procedures for
Federal Housing Association (FHA) and Veterans' Association (VA) one- to
four-family mortgage loans follow the collection guidelines outlined by those
agencies.
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<PAGE> 60
The collection procedures for consumer and other loans, excluding student
loans, include our sending periodic late notices to a borrower once a loan is
past due. We attempt to make direct contact with a borrower once a loan becomes
30 days past due. Supervisory personnel in our Consumer Loan Collection
Department review loans 60 days or more delinquent on a regular basis. If
collection activity is unsuccessful after 90 days, we may charge-off a loan or
refer the matter to our legal counsel for further collection effort. Loans we
deem to be uncollectible are proposed for charge-off by our Collection
Department. Charge-offs of consumer loans require the approval of our Consumer
Loan Officer and our Chief Executive Officer or Chief Operating Officer. 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 managers on a monthly basis. These
reports include information on delinquent loans and foreclosed real estate.
At December 31, 1998, 1997 and 1996, loans delinquent 60 days to 89 days
and 90 days or more were as follows:
<TABLE>
<CAPTION>
1998 1997
------------------------------------------- -----------------------------------------
60-89 DAYS 90 DAYS OR MORE 60-89 DAYS 90 DAYS OR MORE
-------------------- -------------------- ------------------- -------------------
PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL
NO. OF BALANCE OF NO. OF BALANCE OF NO. OF BALANCE OF NO. OF BALANCE OF
LOANS LOANS LOANS LOANS LOANS LOANS LOANS LOANS
------- ---------- ------- ---------- ------ ---------- ------ ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
One- to four-family
first mortgages . 58 $ 5,660 116 $13,554 78 $ 9,095 126 $15,214
FHA/VA first
mortgages ....... 23 769 36 1,781 33 346 45 595
Consumer and other
loans ........... 3 47 8 4 14 215 51 325
------- ------- ------- ------- ------ ------- ------ -------
Total delinquent
loans ........... 84 $ 6,476 160 $15,339 125 $ 9,656 222 $16,134
======= ======= ======= ======= ====== ======= ====== =======
Delinquent loans to
total loans ..... 0.18% 0.42% 0.28% 0.47%
</TABLE>
<TABLE>
<CAPTION>
1996
----------------------------------------------
60-89 DAYS 90 DAYS OR MORE
-------------------- --------------------
PRINCIPAL PRINCIPAL
NO. OF BALANCE OF NO. OF BALANCE OF
LOANS LOANS LOANS LOANS
------- ---------- ------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
One- to four-family
first mortgages . 83 $ 9,406 117 $15,715
FHA/VA first
mortgages ....... 38 497 51 758
Consumer and other
loans ........... 40 186 70 493
------- ------- ------- -------
Total delinquent
loans ........... 161 $10,089 238 $16,966
======= ======= ======= =======
Delinquent loans to
total loans ..... 0.32% 0.53%
</TABLE>
Non-performing assets totaled $16.4 million at December 31, 1998 compared
with $17.5 million at December 31, 1997. Our $15.3 million in loans delinquent
90 days or more at December 31, 1998 were comprised primarily of 152 one- to
four-family first mortgage loans (including FHA/VA first mortgage loans) with an
average principal balance of approximately $101,000. At December 31, 1998, our
largest loan delinquent 90 days or more had a balance of $497,000.
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 $0.8 million for 1998,
as compared to $0.2 million, which was included in interest income.
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<PAGE> 61
<TABLE>
<CAPTION>
AT DECEMBER 31,
-------------------------------------------------------
1998 1997 1996 1995 1994
------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Non-accrual first mortgage loans ........ $13,212 $15,103 $15,546 $19,226 $19,070
Non-accrual consumer and other loans .... 4 325 493 666 1,245
Accruing loans delinquent 90 days or more 2,123 706 927 1,028 1,551
------- ------- ------- ------- -------
Total non-performing loans ............. 15,339 16,134 16,966 20,920 21,866
Foreclosed real estate, net ............. 1,026 1,410 2,385 3,440 1,942
------- ------- ------- ------- -------
Total non-performing assets ............ $16,365 $17,544 $19,351 $24,360 $23,808
======= ======= ======= ======= =======
Non-performing loans to total loans ..... 0.42% 0.47% 0.53% 0.75% 0.84%
Non-performing assets to total assets ... 0.21 0.24 0.29 0.45 0.49
</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 multi-family loans. 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 specifically excluded from
the impaired loan portfolio. We had no loans classified as impaired at December
31, 1998 and 1997.
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, net of a valuation allowance account established through provisions
charged to income, which result from the ongoing periodic valuations of
foreclosed real estate properties.
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<PAGE> 62
Allowance for Loan Losses. The following table presents the activity in our
allowance for loan losses at or for the periods indicated.
<TABLE>
<CAPTION>
AT OR FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance at beginning of period ......... $ 15,625 $ 13,045 $ 11,906 $ 11,566 $ 11,261
-------- -------- -------- -------- --------
Provision for loan losses .............. 2,400 2,850 2,275 1,000 789
-------- -------- -------- -------- --------
Charge-offs:
First mortgage loans .............. 283 288 1,002 652 466
Consumer and other loans .......... 53 42 158 35 89
-------- -------- -------- -------- --------
Total charge-offs .............. 336 330 1,160 687 555
Recoveries ............................. (23) (60) (24) (27) (71)
-------- -------- -------- -------- --------
Net charge-offs ................... 313 270 1,136 660 484
-------- -------- -------- -------- --------
Balance at end of period ............... $ 17,712 $ 15,625 $ 13,045 $ 11,906 $ 11,566
======== ======== ======== ======== ========
Net charge-offs to average loans ....... 0.01% 0.01% 0.04% 0.02% 0.02%
Allowance for loan losses to total loans 0.48 0.45 0.41 0.43 0.44
Allowance for loan losses to
non-performing loans ................. 115.47 96.85 76.89 56.91 52.89
</TABLE>
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
estimated 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.
During 1998, we increased our allowance for loan losses through a $2.4
million provision for loan losses based on our evaluation of the items discussed
above. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Comparison of Operating Results for the Years Ended
December 31, 1998 and 1997 -- Provision for Loan Losses."
60
<PAGE> 63
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 December 31, 1998, 1997, 1996, 1995 and 1994.
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
------------------- ------------------- -------------------- -------------------- --------------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
OF OF OF OF OF
LOANS IN LOANS IN LOANS IN LOANS IN LOANS IN
CATEGORY CATEGORY CATEGORY CATEGORY CATEGORY
TO TOTAL TO TOTAL TO TOTAL TO TOTAL TO TOTAL
LOAN CATEGORY AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS
- ------------- ------- ---------- ------- ---------- ------- ---------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
First mortgage loans:
One-to four-
family ........... $11,168 96.10% $ 9,409 96.07% $ 8,770 95.84% $ 9,076 94.64% $ 8,692 93.40%
Other ............. 29 1.53 48 1.42 65 1.39 121 2.06 213 2.82
------- ------ ------- ------ ------- ------ ------- ------ ------- ------
Total first
mortgage loans .... 11,197 97.63 9,457 97.49 8,835 97.23 9,197 96.70 8,905 96.22
Consumer and
other loans ......... 656 2.37 662 2.51 675 2.77 715 3.30 821 3.78
Unallocated .......... 5,859 -- 5,506 -- 3,535 -- 1,994 -- 1,840 --
------- ------ ------- ------ ------- ------ ------- ------ ------- ------
Total allowance
for loan losses .. $17,712 100.00% $15,625 100.00% $13,045 100.00% $11,906 100.00% $11,566 100.00%
======= ====== ======= ====== ======= ====== ======= ====== ======= ======
</TABLE>
INVESTMENT ACTIVITIES
Investment Securities. The board of managers reviews and approves our
investment policy on an annual basis. The Chief Executive Officer, Chief
Operating Officer and Investment Officer, as authorized by the board, implement
this policy. Management reports securities transactions to the Executive
Committee of the board of managers on a weekly basis. The board of managers
reviews our investment activity on a monthly basis.
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 or "gap" position, the types of securities to be held, liquidity and
other factors. New Jersey chartered savings banks have authority to invest in
various types of assets, including U.S. Treasury obligations, securities of
various federal agencies, 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.
Our investment policy prohibits participation in hedging programs, options
or futures transactions or interest rate swaps and also prohibits the purchase
of non-investment grade bonds. In the future we may amend our policy to allow us
to engage in hedging transactions. Our investment policy also provides that we
will not engage in any practice that the FFIEC considers to be an unsuitable
investment practice. In addition, the policy provides that we shall attempt to
maintain primary liquidity consisting of investments in cash, cash in banks,
money market investments and securities with remaining maturities of less than
five years in an amount equal to 5% of total deposits. At December 31, 1998, our
primary liquidity ratio was 7.1%. For information regarding the carrying values,
yields and maturities of our investment securities and mortgage-backed
securities, see "-- Carrying Values, Yields and Maturities."
61
<PAGE> 64
We classify securities as trading, 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 currently have no
securities classified as trading. We classify obligations of the U.S. Government
and federal agencies, corporate bonds, and common stock as "available for sale."
We classify municipal bonds as held to maturity. We have both the ability and
positive intent to hold these investments to maturity. We did not sell any
investment securities during 1998.
Mortgage-backed Securities. All of our mortgage-backed securities are
directly or indirectly insured or guaranteed by FreddieMac, GNMA or FannieMae.
We classify our entire mortgage-backed securities portfolio as "held to
maturity" and we have both the ability and positive intent to hold these
securities to maturity.
At December 31, 1998, mortgage-backed securities held to maturity totaled
$3.07 billion, or 39.6% of total assets. At December 31, 1998, the
mortgage-backed securities portfolio had a weighted average yield of 6.82% and a
market value of approximately $3.11 billion. Of the mortgage-backed securities
we held at December 31, 1998, $897.2 million, or 29.2%, had fixed rates and
$2.17 billion, or 70.8%, had adjustable-rates. Mortgage-backed securities at
December 31, 1998 included real estate mortgage investment conduits (REMICs),
which are securities derived by reallocating cash flows from mortgage
pass-through securities or from pools of mortgage loans held by a trust. REMICS
are a form of, and are often referred to as, collateralized mortgage obligations
(CMOs). We classify all of these securities as held to maturity.
Our REMICs have fixed coupon rates ranging from 5.00% to 7.50% and had a
weighted average yield of 5.81% at December 31, 1998. At December 31, 1998,
REMICs totaled $62.9 million, which constituted 2.1% of the mortgage-backed
securities portfolio, or 0.8% of total assets. Our REMICs had an expected
average life of one year at December 31, 1998. For a further discussion of our
investment policies, including those for mortgage-backed securities, see "--
Investment Securities." Purchases of mortgage-backed securities may decline in
the future to offset any significant increase in demand for one- to four-family
mortgage loans. We did not sell any of our mortgage-backed securities during
1998.
Mortgage-backed securities generally yield less than the loans that
underlie such securities because of the cost of payment guarantees or credit
enhancements that reduce credit risk. However, mortgage-backed securities are
more liquid than individual mortgage loans and may be used to collateralize our
borrowings. In general, mortgage-backed securities issued or guaranteed by GNMA,
FannieMae and FreddieMac are weighted at no more than 20% for risk-based capital
purposes, compared to the 50% risk weighting assigned to most non-securitized
residential mortgage loans.
While mortgage-backed securities carry a reduced credit risk as compared to
whole loans, they remain subject to the risk of a fluctuating interest rate
environment. Along with other factors, such as the geographic distribution of
the underlying mortgage loans, changes in interest rates may alter the
prepayment rate of those mortgage loans and affect both the prepayment rates and
value of mortgage-backed securities.
62
<PAGE> 65
The following table presents our investment securities and mortgage-backed
securities activities for the periods indicated.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------------------------
1998 1997 1996
----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
INVESTMENT SECURITIES:
Carrying value at beginning of period ...... $ 656,192 $ 596,945 $ 565,967
----------- ----------- -----------
Purchases:
Held to maturity ....................... 403 600 --
Available for sale ..................... 789,577 521,529 404,929
Calls:
Held to maturity ....................... (476) (209) (1,211)
Available for sale ..................... (607,651) (337,547) (80,072)
Maturities:
Held to maturity ....................... -- -- (25)
Available for sale ..................... (51,550) (80,700) (288,463)
Sales:
Available for sale ...................... -- (41,163) (55)
Premium and discount amortization, net ..... 536 (1,074) (2,999)
Decrease in unrealized gains ............... (607) (2,189) (1,126)
----------- ----------- -----------
Net increase in investment securities ...... 130,232 59,247 30,978
----------- ----------- -----------
Carrying value at end of period ............ $ 786,424 $ 656,192 $ 596,945
=========== =========== ===========
MORTGAGE-BACKED SECURITIES HELD TO MATURITY:
Carrying value at beginning of period ...... $ 3,022,225 $ 2,710,078 $ 1,865,930
----------- ----------- -----------
Purchases .................................. 1,222,352 883,502 1,227,291
Principal payments ......................... (1,168,674) (569,189) (382,631)
Premium and discount amortization, net ..... (4,972) (2,166) (512)
----------- ----------- -----------
Net increase in mortgage-backed securities . 48,706 312,147 844,148
----------- ----------- -----------
Carrying value at end of period ............ $ 3,070,931 $ 3,022,225 $ 2,710,078
=========== =========== ===========
</TABLE>
63
<PAGE> 66
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 DECEMBER 31,
-----------------------------------------------------------------------
1998 1997
---------------------------------- -----------------------------------
CARRYING PERCENT OF FAIR CARRYING PERCENT OF FAIR
VALUE TOTAL (1) VALUE VALUE TOTAL (1) VALUE
---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
MONEY MARKET INVESTMENTS:
Federal funds sold ........................ $ 69,800 100.00% $ 69,800 $ 24,600 100.00% $ 24,600
========== ======== ========== ========== ======== ==========
INVESTMENT SECURITIES:
HELD TO MATURITY:
Municipal bonds .......................... $ 1,393 0.18% $ 1,420 $ 1,466 0.22% $ 1,503
---------- -------- ---------- ---------- -------- ----------
AVAILABLE FOR SALE:
United States government and agencies .... 782,436 99.49 782,436 650,014 99.06 650,014
Corporate bonds (2) ...................... 2,595 0.33 2,595 4,712 0.72 4,712
---------- -------- ---------- ---------- -------- ----------
Total available for sale ................ 785,031 99.82 785,031 654,726 99.78 654,726
---------- -------- ---------- ---------- -------- ----------
Total investment securities ............ $ 786,424 100.00% $ 786,451 $ 656,192 100.00% $ 656,229
========== ======== ========== ========== ======== ==========
MORTGAGE-BACKED SECURITIES HELD TO MATURITY:
BY ISSUER:
GNMA pass-through certificates ........... $2,093,591 68.17% $2,111,219 $2,061,928 68.23% $2,114,789
FNMA pass-through certificates ........... 674,061 21.95 686,275 568,479 18.81 577,930
FHLMC pass-through certificates .......... 240,414 7.83 245,995 293,802 9.72 301,632
FHLMC, FNMA and GNMA - REMICs ............. 62,865 2.05 62,880 98,016 3.24 97,385
---------- -------- ---------- ---------- -------- ----------
Total mortgage-backed securities ........ $3,070,931 100.00% $3,106,369 $3,022,225 100.00% $3,091,736
========== ======== ========== ========== ======== ==========
BY COUPON TYPE:
Adjustable-rate .......................... $2,173,728 70.78% $2,187,054 $2,174,034 71.93% $2,223,690
Fixed-rate ............................... 897,203 29.22 919,315 848,191 28.07 868,046
---------- -------- ---------- ---------- -------- ----------
Total mortgage-backed securities ........ $3,070,931 100.00% $3,106,369 $3,022,225 100.00% $3,091,736
========== ======== ========== ========== ======== ==========
TOTAL INVESTMENT PORTFOLIO ................. $3,927,155 $3,962,620 $3,703,017 $3,772,565
========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
----------------------------------
1996
----------------------------------
CARRYING PERCENT OF FAIR
VALUE TOTAL (1) VALUE
---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
MONEY MARKET INVESTMENTS:
Federal funds sold ........................ $ 52,200 100.00% $ 52,200
========== ======== ==========
INVESTMENT SECURITIES:
HELD TO MATURITY:
Municipal bonds .......................... $ 1,075 0.18% $ 1,110
---------- -------- ----------
AVAILABLE FOR SALE:
United States government and agencies .... 556,442 93.21 556,442
Corporate bonds (2) ...................... 39,428 6.61 39,428
---------- -------- ----------
Total available for sale ................ 595,870 99.82 595,870
---------- -------- ----------
Total investment securities ............ $ 596,945 100.00% $ 596,980
========== ======== ==========
MORTGAGE-BACKED SECURITIES HELD TO MATURITY:
BY ISSUER:
GNMA pass-through certificates ........... $1,704,383 62.89% $1,744,977
FNMA pass-through certificates ........... 540,087 19.93 539,006
FHLMC pass-through certificates .......... 313,044 11.55 318,799
FHLMC, FNMA and GNMA - REMICs ............. 152,564 5.63 151,753
---------- -------- ----------
Total mortgage-backed securities ........ $2,710,078 100.00% $2,754,535
========== ======== ==========
BY COUPON TYPE:
Adjustable-rate .......................... $1,840,985 67.93% $1,877,097
Fixed-rate ............................... 869,093 32.07 877,438
---------- -------- ----------
Total mortgage-backed securities ........ $2,710,078 100.00% $2,754,535
========== ======== ==========
TOTAL INVESTMENT PORTFOLIO ................. $3,359,223 $3,403,715
========== ==========
</TABLE>
(1) Based on carrying value for each investment type.
(2) In 1996, includes common stock with a carrying and fair value of
$1,335.
64
<PAGE> 67
Carrying Values, Yields and Maturities. The table below presents
information regarding the carrying values, weighted average yields and
contractual maturities of our money market investments, investment securities
and mortgage-backed securities at December 31, 1998. Mortgage-backed securities
are presented by issuer and by coupon type.
<TABLE>
<CAPTION>
AT DECEMBER 31, 1998
-----------------------------------------------------------------------------------
MORE THAN ONE YEAR MORE THAN FIVE YEARS TO
ONE YEAR OR LESS TO FIVE YEARS TEN YEARS
------------------------ ------------------------- -----------------------
WEIGHTED WEIGHTED WEIGHTED
CARRYING AVERAGE CARRYING AVERAGE CARRYING AVERAGE
VALUE YIELD VALUE YIELD VALUE YIELD
-------- ------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
MONEY MARKET INVESTMENTS:
Federal funds sold ......................... $ 69,800 4.75% $ -- --% $ -- --%
==========
INVESTMENT SECURITIES:
HELD TO MATURITY:
Municipal bonds ............................ $ -- -- $ 100 6.28 $ 390 6.22
-------- --------
AVAILABLE FOR SALE:
United States government and agencies ...... 10,169 4.78 306,156 6.02 466,111 6.54
Corporate bonds ............................ 25 9.00 2,291 6.62 279 5.22
-------- -------- --------
Total available for sale ................... 10,194 4.79 308,447 6.02 466,390 6.54
-------- -------- --------
Total investment securities ................ $ 10,194 4.79 $308,547 6.02 $466,780 6.54
======== ======== ========
MORTGAGE-BACKED SECURITIES HELD TO MATURITY:
BY ISSUER:
GNMA pass-through certificates ............. $ -- -- $ 735 7.92 $ 18,722 9.83
FNMA pass-through certificates ............. -- -- -- -- 132,047 6.73
FHLMC pass-through certificates ............ -- -- 3,179 9.65 14,607 9.16
FHLMC, FNMA and GNMA - REMICs .............. 3,743 6.21 -- -- 48,730 5.56
-------- -------- --------
Total mortgage-backed securities ........... $ 3,743 6.21 $ 3,914 9.33 $214,106 6.90
======== ======== ========
BY COUPON TYPE:
Adjustable-rate ............................ $ -- -- $ -- -- $ 934 7.21
Fixed-rate ................................. 3,743 6.21 3,914 9.33 213,172 6.90
-------- -------- --------
Total mortgage-backed securities ........... $ 3,743 6.21 $ 3,914 9.33 $214,106 6.90
======== ======== ========
TOTAL INVESTMENT PORTFOLIO ................. $ 83,737 4.82% $312,461 6.07% $680,886 6.65%
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31, 1998
----------------------------------------------------------
MORE THAN TEN YEARS TOTAL
-------------------------- -------------------------
WEIGHTED WEIGHTED
CARRYING AVERAGE CARRYING AVERAGE
VALUE YIELD VALUE YIELD
---------- --------- ---------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
MONEY MARKET INVESTMENTS:
Federal funds sold ......................... $ -- --% $ 69,800 4.75%
==========
INVESTMENT SECURITIES:
HELD TO MATURITY:
Municipal bonds ............................ $ 903 6.43 $ 1,393 6.36
---------- ----------
AVAILABLE FOR SALE:
United States government and agencies ...... -- -- 782,436 6.31
Corporate bonds ............................ -- -- 2,595 6.49
---------- ----------
Total available for sale ................... -- -- 785,031 6.31
---------- ----------
Total investment securities ................ $ 903 6.43 $ 786,424 6.31
========== ==========
MORTGAGE-BACKED SECURITIES HELD TO MATURITY:
BY ISSUER:
GNMA pass-through certificates ............. $2,074,134 6.73 $2,093,591 6.76
FNMA pass-through certificates ............. 542,014 7.00 674,061 6.95
FHLMC pass-through certificates ............ 222,628 7.16 240,414 7.31
FHLMC, FNMA and GNMA - REMICs .............. 10,392 6.82 62,865 5.81
---------- ----------
Total mortgage-backed securities ........... $2,849,168 6.82 $3,070,931 6.82
========== ==========
BY COUPON TYPE:
Adjustable-rate ............................ $2,172,794 6.73 $2,173,728 6.73
Fixed-rate ................................. 676,374 7.09 897,203 7.05
---------- ----------
Total mortgage-backed securities ........... $2,849,168 6.82 $3,070,931 6.82
========== ==========
TOTAL INVESTMENT PORTFOLIO ................. $2,850,071 6.82% $3,927,155 6.68%
========== ==========
</TABLE>
65
<PAGE> 68
SOURCES OF FUNDS
General. Deposits, scheduled amortization and prepayments of loan principal
and mortgage-backed securities, 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. We currently do not use
borrowings or reverse repurchase agreements as sources of funds, although we
have the ability to purchase up to $25.0 million in federal funds from a
correspondent bank. 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.
We also offer IRA and Keogh accounts.
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 regular savings deposits, money market accounts and
demand accounts) represented 25.7% of total deposits on December 31, 1998. At
December 31, 1998 time deposits with remaining terms to maturity of less than
one year amounted to $4.77 billion. 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 years ended December 31, 1998, 1997 and 1996.
The following table presents our deposit activity for the periods
indicated.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------------
1998 1997 1996
---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Total deposits at beginning of period $6,465,956 $5,918,971 $4,757,813
Net deposits ........................ 30,301 249,525 918,358
Interest credited, net penalties .... 311,082 297,460 242,800
---------- ---------- ----------
Total deposits at end of period ..... $6,807,339 $6,465,956 $5,918,971
========== ========== ==========
Net increase ........................ $ 341,383 $ 546,985 $1,161,158
========== ========== ==========
Percentage increase ................. 5.28% 9.24% 24.41%
</TABLE>
66
<PAGE> 69
At December 31, 1998, we had $516.1 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 ............... $241,133
Over three months through six months 133,512
Over six months through 12 months .. 120,840
Over 12 months ..................... 20,599
--------
Total ............................. $516,084
========
</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 DECEMBER 31,
-----------------------------------------------------------------------------------
1998 1997
-------------------------------------- --------------------------------------
WEIGHTED WEIGHTED
PERCENT AVERAGE PERCENT AVERAGE
OF TOTAL NOMINAL OF TOTAL NOMINAL
AMOUNT DEPOSITS RATE AMOUNT DEPOSITS RATE
---------- -------- -------- ---------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Savings ............................. $ 832,759 12.23% 2.60% $ 835,062 12.91% 2.75%
Interest-bearing demand ............. 100,436 1.48 2.00 90,869 1.41 2.00
Money market ........................ 505,201 7.42 2.78 500,029 7.73 2.93
Demand .............................. 313,061 4.60 -- 272,326 4.21 --
---------- ------ ---------- ------
Total ............................. 1,751,457 25.73 2.15 1,698,286 26.26 2.32
---------- ------ ---------- ------
Time Deposits:
Time deposits $100,000 and over .... 516,084 7.58 5.26 460,982 7.13 5.60
Time deposits less than $100,000
with original maturities of:
Three months or less .............. 436,186 6.41 4.88 473,105 7.32 5.27
Over three months to twelve months 1,351,892 19.86 5.18 1,328,888 20.55 5.60
Twelve months to twenty-four months 1,942,691 28.54 5.37 1,695,908 26.24 5.72
Twenty-four months to thirty-six
months ............................ 238,792 3.51 5.54 232,782 3.60 5.68
Thirty-six months to forty-eight
months ............................ 20,628 0.30 5.30 32,142 0.50 5.65
Forty-eight months to sixty months 4,539 0.07 5.50 8,017 0.12 5.34
Sixty months and over ............. 39,140 0.57 5.51 58,362 0.90 5.36
IRA and Keogh accounts ............ 505,930 7.43 5.46 477,484 7.38 5.66
---------- ------ ---------- ------
Total time deposits ............... 5,055,882 74.27 5.29 4,767,670 73.74 5.62
---------- ------ ---------- ------
Total deposits .................... $6,807,339 100.00% 4.48% $6,465,956 100.00% 4.75%
========== ====== ==== ========== ====== ====
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------------------------------
1996
---------------------------------------
WEIGHTED
PERCENT AVERAGE
OF TOTAL NOMINAL
AMOUNT DEPOSITS RATE
---------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Savings ............................. $ 857,731 14.49% 2.80%
Interest-bearing demand ............. 88,557 1.50 2.00
Money market ........................ 520,141 8.79 2.93
Demand .............................. 249,857 4.22 --
---------- ------
Total ............................. 1,716,286 29.00 2.39
---------- ------
Time Deposits:
Time deposits $100,000 and over .... 375,399 6.34 5.62
Time deposits less than $100,000
with original maturities of:
Three months or less .............. 474,269 8.01 5.54
Over three months to twelve months 1,387,771 23.44 5.69
Twelve months to twenty-four months 1,189,676 20.10 5.47
Twenty-four months to thirty-six
months ............................ 215,375 3.64 5.76
Thirty-six months to forty-eight
months ............................ 50,444 0.85 5.40
Forty-eight months to sixty months 16,373 0.28 5.03
Sixty months and over ............. 61,517 1.04 5.35
IRA and Keogh accounts ............ 431,861 7.30 5.53
---------- ------
Total time deposits ............... 4,202,685 71.00 5.58
---------- ------
Total deposits .................... $5,918,971 100.00% 4.66%
========== ====== ====
</TABLE>
67
<PAGE> 70
The following table presents, by rate category, the amount of our time
deposit accounts outstanding at December 31, 1998, 1997 and 1996.
<TABLE>
<CAPTION>
AT DECEMBER 31,
--------------------------------------------
1998 1997 1996
---------- ---------- ----------
TIME DEPOSIT ACCOUNTS: (IN THOUSANDS)
<S> <C> <C> <C>
4.00% or less.............. $ 1,530 $ 1,755 $ 1,712
4.01%-4.50% ............... 4,335 8 4,314
4.51%-5.00% ............... 1,501,902 39,212 62,513
5.01%-5.50% ............... 2,342,518 659,235 715,937
5.51%-6.00% ............... 1,196,373 4,040,522 3,321,591
over 6.01% ................ 9,224 26,938 96,618
---------- ---------- ----------
Total .................. $5,055,882 $4,767,670 $4,202,685
========== ========== ==========
</TABLE>
The following table presents, by rate category, the remaining period to
maturity of time deposit accounts outstanding as of December 31, 1998.
<TABLE>
<CAPTION>
PERIOD TO MATURITY FROM DECEMBER 31, 1998
------------------------------------------------------------------------------------------------
WITHIN THREE TO SIX MONTHS ONE TO TWO TWO TO THREE OVER THREE
THREE MONTHS SIX MONTHS TO ONE YEAR YEARS YEARS YEARS TOTAL
------------ ---------- ----------- ---------- ----------- ---------- ----------
TIME DEPOSIT ACCOUNTS: (IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
4.00% or less................ $ 1,530 $ -- $ -- $ -- $ -- $ -- $ 1,530
4.01%-4.50% ................. 349 684 1,397 1,905 -- -- 4,335
4.51%-5.00% ................. 531,874 483,845 439,690 38,393 4,326 3,774 1,501,902
5.01%-5.50% ................. 824,194 565,982 814,216 111,128 16,474 10,524 2,342,518
5.51%-6.00% ................. 646,646 288,947 160,304 99,088 1,388 -- 1,196,373
over 6.01% .................. 502 772 4,237 3,570 143 -- 9,224
------------ ---------- ----------- ---------- ----------- ---------- ----------
Total .................. $ 2,005,095 $1,340,230 $ 1,419,844 $ 254,084 $ 22,331 $ 14,298 $5,055,882
============ ========== =========== ========== =========== ========== ==========
</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 not a member of
the Federal Home Loan Bank System, however, we may consider becoming a member in
the future. Membership in the Federal Home Loan Bank System would provide us
with additional sources for borrowings.
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<PAGE> 71
PROPERTIES
We conduct our business through our executive office, operations center and
75 banking offices which had an aggregate net book value of $24.1 million as of
December 31, 1998. We are changing the location of our office in Garfield, New
Jersey. The lease at our current location in Garfield expires in 2000. We have
signed a new lease to expire in 2009.
<TABLE>
<CAPTION>
ORIGINAL DATE
LEASED OR LEASED OR DATE OF LEASE
LOCATION OWNED ACQUIRED EXPIRATION
<S> <C> <C> <C>
EXECUTIVE OFFICE:
West 80 Century Road
Paramus, NJ .................................. Owned 1978 --
OPERATIONS CENTER:
161 Harristown Road
Glen Rock, NJ ................................ Leased 1995 2000
BERGEN COUNTY:
680-684 Anderson Avenue
Cliffside Park, NJ ........................... Owned 1973 --
80 Union Avenue
Cresskill, NJ ................................ Owned 1974 --
408 East Madison Avenue
Dumont, NJ ................................... Leased 1995 2005
330 Kinderkamack Road
Emerson, NJ .................................. Owned 1974 --
50 East Palisade Avenue
Englewood, NJ ................................ Leased 1987 2001
303 Main Street
Fort Lee, NJ ................................. Owned 1977 --
169 Lanza Avenue
Garfield, NJ ................................. Leased 1981 2000
897 Prospect Street
Glen Rock, NJ ................................ Owned 1972 --
304 Essex Street
Lodi, NJ ..................................... Owned 1973 --
115 Franklin Turnpike
Mahwah, NJ ................................... Leased 1997 2007
715 River Road
New Milford, NJ .............................. Owned 1978 --
379 Ramapo Valley Road
Oakland, NJ .................................. Owned 1976 --
249 Kinderkamack Road
Oradell, NJ .................................. Owned 1970 --
West 80 Century Road
Paramus, NJ .................................. Owned 1978 --
57 West Main Street
Ramsey, NJ ................................... Leased 1976 2006
89 Interstate Shopping Center
Ramsey, NJ ................................... Leased 1995 2010
94 North Maple Avenue
Ridgewood, NJ ................................ Leased 1976 2002
</TABLE>
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<PAGE> 72
<TABLE>
<CAPTION>
ORIGINAL DATE
LEASED OR LEASED OR DATE OF LEASE
LOCATION OWNED ACQUIRED EXPIRATION
<S> <C> <C> <C>
1070 Main Street
River Edge, NJ ............................... Leased 1976 2010
632 Westwood Avenue
River Vale, NJ ............................... Leased 1979 2009
790 Queen Anne Road
Teaneck, NJ .................................. Owned 1971 --
7 East Prospect Street
Waldwick, NJ ................................. Owned 1969 --
261 Godwin Avenue
Wyckoff, NJ .................................. Leased 1971 2003
BURLINGTON COUNTY:
1406 Route 130
Cinnaminson, NJ .............................. Leased 1979 2004
CAMDEN COUNTY:
90 Barclay Center
Cherry Hill, NJ .............................. Leased 1974 2004
2335 Church Road
Cherry Hill, NJ .............................. Owned 1976 --
116 Kings Highway East
Haddonfield, NJ .............................. Owned 1975 --
ESSEX COUNTY:
232 South Livingston Avenue
Livingston, NJ ............................... Owned 1975 --
277 Eisenhower Parkway
Livingston, NJ ............................... Leased 1995 2010
62-64 Main Street
Millburn, NJ ................................. Leased 1974 2000
157 Seventh Avenue
Newark, NJ ................................... Leased 1950 2010
72 Mount Vernon Place
Newark, NJ ................................... Leased 1955 2003
60 Park Place
Newark, NJ ................................... Leased 1988 2002
313 Henry Street
Orange, NJ ................................... Owned 1963 --
288 Main Street
Orange, NJ ................................... Leased 1954 2001
187 Eagle Rock Avenue
Roseland, NJ ................................. Owned 1958 --
767 Bloomfield Avenue
West Caldwell, NJ ............................ Leased 1975 2009
GLOUCESTER COUNTY:
1002 Mantua Pike
Woodbury Heights, NJ ......................... Owned 1977 --
HUDSON COUNTY:
1018 Washington Street
Hoboken, NJ .................................. Leased 1996 2006
587 Summit Avenue
Jersey City, NJ .............................. Owned 1920 --
</TABLE>
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<PAGE> 73
<TABLE>
<CAPTION>
ORIGINAL DATE
LEASED OR LEASED OR DATE OF LEASE
LOCATION OWNED ACQUIRED EXPIRATION
<S> <C> <C> <C>
600 Summit Avenue (Drive-In)
Jersey City, NJ .............................. Owned 1977 --
2530 Kennedy Boulevard
Jersey City, NJ .............................. Owned 1928 --
532 Ocean Avenue
Jersey City, NJ .............................. Owned 1947 --
495 Manila Avenue
Jersey City, NJ .............................. Owned 1970 --
216 Passaic Avenue
Kearny, NJ ................................... Leased 1980 2006
7533 Bergenline Avenue
North Bergen, NJ ............................. Owned 1958 --
MIDDLESEX COUNTY:
355 Applegarth Road
Cranbury, NJ ................................. Leased 1981 2010
MONMOUTH COUNTY:
351 West Main Street
Freehold, NJ ................................. Leased 1977 2003
455 County Road
Marlboro, NJ ................................. Leased 1996 2006
75 Highway 35
Middletown, NJ ............................... Leased 1983 2002
1 Paddock Plaza
West Long Branch, NJ ......................... Leased 1977 2017
MORRIS COUNTY:
641 Shunpike Road
Chatham, NJ .................................. Leased 1970 2005
209 Route 206 South
Chester, NJ .................................. Leased 1982 2002
10 West Main Street
Denville, NJ ................................. Leased 1981 2010
18 James Street
Florham Park, NJ ............................. Leased 1974 2009
977 Valley Road
Gillette, NJ ................................. Leased 1974 2009
340 Main Street
Madison, NJ .................................. Leased 1974 2000
240 Baldwin Road
Parsippany, NJ ............................... Owned 1992 --
150 Newark-Pompton Turnpike
Pequannock, NJ ............................... Leased 1969 2002
148 Center Grove Road
Randolph, NJ ................................. Leased 1979 1999
OCEAN COUNTY:
335 Atlantic City Boulevard
Bayville, NJ ................................. Leased 1991 2001
731 Brick Boulevard
Brick, NJ .................................... Owned 1974 --
55 Brick Boulevard
Brick, NJ .................................... Leased 1974 2004
</TABLE>
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<PAGE> 74
<TABLE>
<CAPTION>
ORIGINAL DATE
LEASED OR LEASED OR DATE OF LEASE
LOCATION OWNED ACQUIRED EXPIRATION
<S> <C> <C> <C>
782 Lacey Road
Forked River, NJ ............................. Leased 1981 2000
2100 Route 70
Lakehurst, NJ ................................ Owned 1981 --
167-169 Kennedy Boulevard
Lakewood, NJ ................................. Leased 1976 2002
1328 River Avenue
Lakewood, NJ ................................. Leased 1989 2004
1000 Route 70
Lakewood, NJ ................................. Leased 1994 2004
577 Lakehurst Road
Toms River, NJ ............................... Owned 1974 --
PASSAIC COUNTY:
887 Allwood Road
Clifton, NJ .................................. Land Lease 1974 2010
217 Berdan Avenue
Wayne, NJ .................................... Leased 1991 2004
35A Marshall Hill Road
West Milford, NJ ............................. Leased 1981 2005
UNION COUNTY:
341 Springfield Avenue
Summit, NJ ................................... Owned 1979 --
365 Tucker Avenue
Union, NJ .................................... Owned 1975 --
119 Central Avenue
Westfield, NJ ................................ Leased 1974 2002
WARREN COUNTY:
200 Grand Avenue
Hackettstown, NJ ............................. Leased 1970 2002
1965 Route 57
Mansfield, NJ ................................ Leased 1978 2003
</TABLE>
LEGAL PROCEEDINGS
Except for the cases described below, 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.
On October 2, 1997, a purported class action entitled James W. Smith, et
al. v. Hudson City Savings Bank (L-11184-97) was commenced in the Law Division
of New Jersey Superior Court, Essex County against Hudson City Savings on behalf
of persons who obtained loans from Hudson City Savings secured by residential
real property in New Jersey, and who paid an attorney review fee to Hudson City
in connection with their loans. Plaintiff alleges further that the potential
class includes thousands of borrowers and involves millions of dollars in review
fees. Plaintiff claims that the attorney fees paid to Hudson City violate a
provision of New Jersey law which prescribes circumstances under which such fees
can be charged by a lender and a provision of New Jersey law prohibition
consumer fraud. Plaintiff seeks an injunction, an order requiring a form of
warning or public notice, compensatory damages, treble damages, costs,
attorneys' fees,
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<PAGE> 75
an order requiring disgorgement, interest and punitive damages. Hudson City
Savings filed an answer denying liability. This suit was voluntarily stayed by
the parties on or about September 9, 1998 pending the outcome of an appeal (the
"Appeal") in certain other New Jersey attorney review fee lawsuits involving
different parties.
The Appeal, heard on a consolidated basis in the cases of Kelly v. Chase
Manhattan Mortgage Corp., Iverson v. Collective Bank and Turner v. First Union,
was decided by the Appellate Division of the New Jersey Superior Court on or
about July 9, 1998. The Appellate Division ruled, among other things, that
lenders are permitted to charge attorney review fees for the review of loan
documents submitted by a borrower or by the borrower's attorney and clarified
the interpretation of part of the statute's language.
Following the Appellate Division's decision in the Appeal, the Supreme
Court of New Jersey granted a motion for leave to appeal on or about November
18, 1998 and a motion for leave to cross-appeal on or about January 27, 1999.
The New Jersey Supreme Court will review the Appellate Division's ruling in the
appeal. Meanwhile, the Smith action remains stayed.
On or about April 30, 1998, a purported class action was commenced against
Hudson City Savings, in the Law Division of New Jersey Superior Court, Bergen
County entitled Elizabeth C. Bogdanowicz, et al. v. Hudson City Savings Bank
(L-4110-98) on behalf of a putative class of persons who borrowed funds from
Hudson City from and after January 29, 1993. Plaintiffs allege that the putative
class consists of thousands of borrowers who were charged attorney review fees
by Hudson City Savings. Plaintiffs claim that the attorney review fee violated
the New Jersey fee statute. Plaintiffs also assert claims for unjust enrichment.
Plaintiffs seek compensatory damages, costs, fees, injunctive relief and treble
damages. This action has also been stayed voluntarily by the parties pending the
outcome of the Appeal.
We believe that these two lawsuits, are without merit and we intend to
aggressively defend our interests.
PERSONNEL
As of December 31, 1998, we had 864 full-time employees and 100 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 HUDSON CITY BANCORP, INC.
Hudson City Bancorp has not engaged in any business to date. Upon
completion of the reorganization, Hudson City Bancorp will own Hudson City
Savings. Hudson City 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, Hudson City Bancorp may pursue other business activities,
including the acquisition of other financial institutions or other entities,
borrowing funds for investment in Hudson City Savings and diversification of
Hudson City Bancorp's operations. Hudson City 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 Hudson City Bancorp
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<PAGE> 76
receives from Hudson City Savings. Initially, Hudson City Bancorp will neither
own nor lease any property, but will instead use the premises, equipment and
furniture of Hudson City Savings. At the present time, we intend to employ only
persons who are officers of Hudson City Savings, to serve as officers of Hudson
City Bancorp. However, we will use the support staff of Hudson City Savings from
time to time. These persons will not be separately compensated by Hudson City
Bancorp. Hudson City 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 HUDSON CITY SAVINGS BANK AND
HUDSON CITY BANCORP
GENERAL
Hudson City Savings Bank is a New Jersey 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). Hudson City
Savings is subject to extensive regulation, examination and supervision by the
Commissioner of the New Jersey Department of Banking and Insurance (the
"Department") as its chartering agency, and by the FDIC as the deposit insurer.
Hudson City Savings must file reports with the Commissioner 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 Commissioner and the FDIC conduct periodic examinations to assess
Hudson City 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.
Hudson City, MHC and Hudson City Bancorp, as bank holding companies
controlling Hudson City 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 Jersey Banking Act
of 1948 (the "New Jersey Banking Act") and the regulations of the Department
under the Banking Act applicable to bank holding companies. Hudson City, MHC and
Hudson City Bancorp will be required to file reports with, and otherwise comply
with the rules and regulations of the FRB and the Department. Hudson City
Bancorp will be required to file certain reports with, and otherwise comply
with, the rules and regulations of the Securities and Exchange Commission under
the federal securities laws.
Any change in such laws and regulations, whether by the Department, the
FDIC, the FRB or through legislation, could have a material adverse impact on
Hudson City, MHC, Hudson City Bancorp and Hudson City Savings and their
operations and stockholders.
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<PAGE> 77
Certain of the laws and regulations applicable to Hudson City, MHC, Hudson
City Bancorp and Hudson City 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.
NEW JERSEY BANKING REGULATION
Activity Powers. The Bank derives its lending, investment and other
activity powers primarily from the applicable provisions of the New Jersey
Banking Act and its related regulations. Under these laws and regulations,
savings banks, including Hudson City 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 invest pursuant to a "leeway" power that permits
investments not otherwise permitted by the Banking Act. "Leeway" investments
must comply with a number of limitations on the individual and aggregate amounts
of "leeway" investments. A savings bank may also exercise trust powers upon
approval of the Department. New Jersey savings banks may also exercise any power
authorized for federally chartered savings banks unless the Department
determines otherwise. 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
Jersey 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 capital funds. A savings bank may lend an
additional 10% of the bank's capital funds if secured by collateral meeting the
requirements of the New Jersey Banking Act. Hudson City Savings currently
complies with applicable loans-to-one-borrower limitations.
Dividends. Under the New Jersey Banking Act, 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, a stock savings bank may not pay a dividend if the surplus of the
savings bank would, after the payment of the dividend, be reduced unless after
such reduction the surplus was 50% or more of the bank's capital stock. Federal
law may also limit the amount of dividends that may be paid by Hudson City
Savings. See "-- Federal Banking Regulation -- Prompt Corrective Action" below.
While this restriction does not currently apply to Hudson City Savings, it will
apply after the reorganization.
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<PAGE> 78
Minimum Capital Requirements. Regulations of the Department impose on New
Jersey chartered depository institutions, including Hudson City Savings, minimum
capital requirements similar to those imposed by the FDIC on insured state
banks. See "-- Federal Banking Regulation."
Examination and Enforcement. The Commissioner may examine Hudson City
Savings whenever it deems an examination advisable. The Commissioner examines
Hudson City Savings at least every two years. The Department may order any
savings bank to discontinue any violation of law or unsafe or unsound business
practice and may direct any director, officer, attorney or employee of a savings
bank engaged in an objectionable activity, after the Department has ordered the
activity to be terminated, to show cause at a hearing before the Department why
such person should not be removed.
FEDERAL BANKING REGULATION
Capital Requirements. FDIC regulations require BIF-insured banks, such as
Hudson City Savings, to maintain minimum levels of capital. The FDIC regulations
define two Tiers, or classes, of capital.
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 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.
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 3.0% plus an additional cushion of at least 100 to 200 basis
points; as a result, the minimum leverage capital ratio for such banks consists
of a ratio of Tier 1 capital to total assets of not less than 4 percent. The
FDIC and the other federal banking regulators have proposed amendments to their
minimum capital regulations to provide that the minimum leverage capital ratio
for a depository institution that has not been assigned the highest composite
rating of 1 under the Uniform Financial Institutions Rating System will be 4%,
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
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<PAGE> 79
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 Hudson City Savings' leverage ratio, its Tier 1
risk-based capital ratio, and its total risk-based capital ratio, at December
31, 1998:
<TABLE>
<CAPTION>
As of December 31, 1998
-----------------------------------------------------------------------------
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 $898,494 11.93% $301,314 4.00% $376,642 5.00%
Risk-based capital:
Tier 1 ................. 898,494 38.48 93,409 4.00 140,114 6.00
Total .................. 916,206 39.23 186,818 8.00 233,523 10.00
</TABLE>
As the table shows, Hudson City Savings exceeded the minimum capital
adequacy 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 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.
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<PAGE> 80
Hudson City 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 Hudson City 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 are limited 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 Hudson City 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;
(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 bank or
savings association posed to its deposit insurance funds. 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. The FDIC also assigns an institution to one of three
supervisory subcategories within each capital group. With respect to the capital
ratios, institutions are classified as well capitalized, adequately
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<PAGE> 81
capitalized or under capitalization using ratios that are substantially similar
to the prompt corrective action capital ratios discussed 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 final 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. 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. A bank's rate of deposit insurance assessments will depend
upon the category and subcategory to which the bank is assigned by the FDIC. Any
increase in insurance assessments could have an adverse effect on the earnings
of insured institutions, including Hudson City 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 Hudson City 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 condition imposed by the
FDIC. The management of Hudson City Savings does not know of any practice,
condition or violation that might lead to termination of deposit insurance.
Transactions with Affiliates of Hudson City Savings. Transactions between
an insured bank, such as Hudson City 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,
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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. Section 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:
(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
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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 Hudson City 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 replace the prior process-based
assessment factors with a new evaluation system that would rate an institution
based on its actual performance in meeting community needs. In particular, the
new 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.
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. Hudson City
Savings has received "satisfactory" ratings in its CRA examinations. However,
from September 23, 1996 to June 22, 1998, Hudson City Savings had a "needs to
improve" CRA rating. Hudson City Savings' latest CRA rating, dated June 22,
1998, was "satisfactory."
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
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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."
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.
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The FDIC has a broad range of grounds under which it may appoint a receiver
or conservator for an insured depositary 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 Hudson City 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 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 Jersey Regulation. Provisions of the New Jersey Banking Act 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
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the conditions and limitations imposed on the loans and extensions of credit to
insiders and their related interests under Regulation O, as discussed above. The
Banking Act also provides that a savings bank that is in compliance with
Regulation O is deemed to be in compliance with such provisions of the Banking
Act.
FEDERAL RESERVE SYSTEM
Under FRB regulations, Hudson City Savings is required to maintain
non-interest-earning reserves against its transaction accounts (primarily NOW
and regular checking accounts). The 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. Hudson City 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 Hudson City Savings' interest-earning
assets.
HOLDING COMPANY REGULATION
Federal Regulation. After the reorganization, Hudson City, MHC and Hudson
City 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 Hudson City Savings. As of December 31, 1998, Hudson City Bancorp's
total capital and Tier 1 capital ratios for Hudson City, MHC and Hudson City
Bancorp would, on a pro forma basis, exceed these minimum capital requirements.
See "Regulatory Capital Compliance."
As bank holding companies, Hudson City, MHC and Hudson City 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 Hudson City, MHC or Hudson City 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
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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 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.
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 Hudson City, MHC or Hudson City Bancorp ever
acquired as a separate subsidiary a depository institution in addition to Hudson
City Savings.
New Jersey Regulation. Under the Banking Act, a company owning or
controlling a savings bank is regulated as a bank holding company. The Banking
Act defines the terms "company" and "bank holding company" as such terms are
defined under the BHCA. Each bank holding company controlling a New Jersey
chartered bank or savings bank must file certain reports with the Commissioner
and is subject to examination by the Commissioner.
ACQUISITION OF HUDSON CITY BANCORP
Under federal law and under the Banking Act, no person may acquire control
of Hudson City Bancorp or Hudson City Savings without first obtaining, as
summarized below, approval of such acquisition of control by the FRB and the
Commissioner.
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 Hudson City 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 Hudson City
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
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managerial resources of the acquiror, the convenience and needs of the
communities served by Hudson City Bancorp and Hudson City 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
Hudson City 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 Hudson City Bancorp or the ability to control in any manner
the election of a majority of Hudson City Bancorp's directors.
New Jersey Restrictions. The Banking Act requires prior approval of the
Commissioner before any person may acquire a New Jersey bank holding company,
such as Hudson City Bancorp. For this purpose, the term "person" is defined
broadly to mean a natural person or a corporation, company, partnership, or
other forms of organized entities. The term "acquire" is defined differently for
an existing bank holding company and for other companies or persons. A bank
holding company will be treated as "acquiring" a New Jersey bank holding company
if the bank holding company acquires more than 5% of any class of the voting
shares of the bank holding company. Any other person will be treated as
"acquiring" a New Jersey bank holding company if it acquires ownership or
control of more than 25% of any class of the voting shares of the bank holding
company.
DIVIDEND WAIVERS BY HUDSON CITY, 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 Hudson
City, MHC of dividends paid on the common stock by Hudson City Bancorp. In
particular, the Federal Reserve Board is expected to require that Hudson City,
MHC obtain the prior approval of the Federal Reserve Board before Hudson City,
MHC may waive any dividends from Hudson City 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 Hudson
City, MHC will not be available for payment to its public stockholders of Hudson
City Bancorp (i.e., stockholders except for Hudson City, MHC) and that such
amount will be excluded from Hudson City Bancorp's capital for purposes of
calculating dividends payable to the public stockholders. Moreover, Hudson City
Savings is required to maintain the cumulative amount of dividends waived by
Hudson City, 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 Hudson City Savings' financial
statements, but would be considered as a notational or memorandum account of
Hudson City Savings. These accounts would be maintained in accordance with the
laws, rules, regulations and policies of the Commissioner of Banking and
Insurance of New Jersey and the plan of reorganization. The plan of
reorganization also provides that if Hudson City, 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
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connection with any such transaction. For additional information regarding the
possible second step conversion of Hudson City, MHC, see "The Reorganization and
The Offering -- Possible Conversion of Hudson City, MHC to Stock Form."
Hudson City, MHC does not expect to initially waive dividends declared by
Hudson City Bancorp. If Hudson City, MHC decides that it is in its best interest
to waive a particular dividend to be paid by Hudson City Bancorp and the Federal
Reserve Board approves such waiver, then Hudson City Bancorp would pay such
dividend only to its public stockholders. The amount of the dividend waived by
Hudson City, MHC would be treated in the manner described above. Hudson City,
MHC's decision as to whether or not to waive a particular dividend will depend
on a number of factors, including Hudson City, MHC's capital needs, the
investment alternatives available to Hudson City, MHC as compared to those
available to Hudson City Bancorp, and the possibility of regulatory approvals.
We can not guarantee:
- that after the reorganization, Hudson City, MHC will waive dividends
paid by Hudson City 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
Hudson City Savings, Hudson City, MHC or Hudson City Bancorp. For federal income
tax purposes, Hudson City 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, Hudson City Savings and Hudson City
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. Hudson City 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. Pursuant to the Small Business Job Protection Act of
1996, Hudson City Savings is no longer permitted to use the reserve method of
accounting for bad debts, and 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. Since Hudson City Savings has already provided a deferred tax
liability equal to the amount of such recapture, the recapture will not
adversely impact Hudson City Savings' financial condition or results of
operations.
Distributions. To the extent that Hudson City Savings makes "non-dividend
distributions" to stockholders, such distributions will be considered to result
in distributions from Hudson City Savings' unrecaptured tax bad debt reserve
"base year reserve," i.e., its reserve as of
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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 Hudson City Savings' taxable income. Non-dividend distributions
include distributions in excess of Hudson City Savings' current and accumulated
earnings and profits, distributions in redemption of stock and distributions in
partial or complete liquidation. However, dividends paid out of Hudson City
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 Hudson City Savings' income.
The amount of additional taxable income created from a non-dividend
distribution is equal to the lesser of Hudson City 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. Hudson City
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 Internal Revenue Code of 1986, as
amended, imposes a tax ("AMT") on alternative minimum taxable income ("AMTI") at
a rate of 20%. Only 90% of AMTI can be offset by net operating loss carryovers
of which Hudson City Savings currently has none. AMTI is also adjusted by
determining the tax treatment of certain items in a manner that negates the
deferral of income resulting from the regular tax treatment of those items.
Thus, Hudson City Savings' AMTI is increased by an amount equal to 75% of the
amount by which Hudson City Savings' adjusted current earnings exceeds its AMTI
(determined without regard to this adjustment and prior to reduction for net
operating losses). Although the corporate environmental tax of 0.12% of the
excess of AMTI (with certain modifications) over $2.0 million has expired, under
current Administration proposals, such tax will be retroactively reinstated for
taxable years beginning after December 31, 1997 and before January 1, 2009.
Elimination of Dividends; Dividends Received Deduction. Hudson City Bancorp
may exclude from its income 100% of dividends received from Hudson City Savings
as a member of the same affiliated group of corporations. Because, following the
reorganization, Hudson City, 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 Hudson City Bancorp so long as it
owns more than 20% of the common stock.
STATE
New Jersey State Taxation. Hudson City Savings files New Jersey Savings
Institution income tax returns. Generally, the income of savings institutions in
New Jersey, which is calculated based on federal taxable income, subject to
certain adjustments, is subject to New Jersey tax. Hudson City Savings is not
currently under audit with respect to its New Jersey income tax returns and
Hudson City Savings' state tax returns have not been audited for the past five
years.
Hudson City Bancorp will be required to file a New Jersey income tax return
and will generally be subject to a state income tax rate that is currently
higher than income tax rates for savings institutions in New Jersey. However, if
Hudson City Bancorp meets certain requirements,
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it may be eligible to elect to be taxed as a New Jersey Investment Company,
which would allow Hudson City Bancorp to be taxed at a rate that is currently
lower than income tax rates for savings institutions in New Jersey.
Delaware State Taxation. As a Delaware holding company not earning income
in Delaware, Hudson City 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.
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MANAGEMENT
SHARED MANAGEMENT STRUCTURE
Hudson City Bancorp's directors and executive officers are the same as
Hudson City Savings'. We expect that Hudson City Bancorp and Hudson City Savings
will continue to have common directors and common executive officers until there
is a business reason to establish separate management structures.
To date, Hudson City Savings has compensated its directors and executive
officers for their services. Hudson City 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 Hudson City Bancorp to reimburse Hudson City 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 Hudson City Bancorp.
DIRECTORS
Composition of Our Boards. We have 11 directors. Each belongs to one of
three classes with staggered 3-year terms of office. Four directors are in Class
One and have terms expiring in 2000. Three are in Class Two and have terms
expiring in 2001. Four are in Class Three and have terms expiring in 2002. At
each of Hudson City Bancorp's annual stockholder meetings, the stockholders
elect directors to fill the seats of the directors whose terms are expiring in
that year and any vacant seats. Hudson City Bancorp, as Hudson City Savings'
sole stockholder, elects Hudson City Savings' directors.
Who Our Directors Are. The following table states our directors' names,
their ages as of their birthdays in 1998, their positions, the years when they
began serving as directors (including time spent on the Board of Managers of
Hudson City Savings in mutual form before the reorganization) and the years when
their current terms of office as directors will expire:
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<TABLE>
<CAPTION>
BANK BANCORP
DIRECTOR DIRECTOR TERM
NAME AGE POSITIONS SINCE SINCE EXPIRES
<S> <C> <C> <C> <C> <C>
Verne S. Atwater 78 Director of the Bank and Bancorp 1983 1999 2002
John D. Birchby 52 Director of the Bank and Bancorp 1980 1999 2000
Kenneth L. Birchby 83 Chairman Emeritus and Director of the Bank and 1966 1999 2001
Bancorp
Victoria H. Bruni 56 Director of the Bank and Bancorp 1996 1999 2000
William J. Cosgrove 65 Director of the Bank and Bancorp 1995 1999 2001
Andrew J. Egner, Jr. 74 Director of the Bank and Bancorp 1984 1999 2000
Leonard S. Gudelski 64 Chairman, Chief Executive Officer and Director 1971 1999 2000
of the Bank and Bancorp
Ronald E. Hermance, Jr. 51 President, Chief Operating Officer and Director 1988 1999 2002
of the Bank and Bancorp
John W. Klie 73 Director of the Bank and Bancorp 1970 1999 2002
Donald O. Quest 59 Director of the Bank and Bancorp 1983 1999 2001
Arthur V. Wynne, Jr. 65 Director of the Bank and Bancorp 1984 1999 2002
</TABLE>
Our Directors' Backgrounds. The business experience of each of our
directors is as follows:
LEONARD S. GUDELSKI is Chairman of the Board and Chief Executive Officer.
He joined the Bank as Vice President in 1969 after having been employed for 13
years at a savings bank in Connecticut. In 1971 he was elected Executive Vice
President and a member of the board of managers. Subsequent promotions were to
President and Chief Operating Officer in 1981, President and Chief Executive
Officer in 1989 and Chairman, President and Chief Executive Officer in 1996. He
became Chairman and Chief Executive Officer in 1997. He is a graduate of the
University of Connecticut with a degree in economics and has completed various
industry-related graduate level courses.
RONALD E. HERMANCE, JR. has served as President and Chief Operating Officer
of Hudson City Savings since January 1997. Mr. Hermance previously was Senior
Executive Vice President, Chief Operating Officer and has been a member of the
board of managers of Hudson City Savings since 1988. Prior to joining Hudson
City Savings, Mr. Hermance was Chief Financial Officer of Southold Savings Bank
on Long Island, New York. In addition to his most recent service, Mr. Hermance
served in various lending capacities in both a commercial bank and a thrift
institution.
VERNE S. ATWATER, PH. D. has served as an Instructor of the Executive
M.B.A. Program and a Professor of Finance, Emeritus in Residence at the Lubin
Business School of Pace University since 1982. He has also been a member of the
board of directors of Marcel Decker, Inc. since 1997.
JOHN D. BIRCHBY, ESQ. has been a partner in the law firm of Dieffenbach,
Witt & Birchby since 1975. He was a member of the Supreme Court District Ethics
Committee for Bergen County of the State of New Jersey from 1990 to 1994. He is
the son of Kenneth L. Birchby.
KENNETH L. BIRCHBY has been the Chairman Emeritus of Hudson City Savings
since 1996. Mr. Birchby joined Hudson City Savings in 1966 as Executive Vice
President, became President and Chief Executive Officer in 1968 and retired from
this position in 1989. He became Chairman
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of Hudson City Savings in 1981 and served in this capacity until 1996. He is the
father of John D. Birchby, Esq.
VICTORIA H. BRUNI has been Vice President for Administration and Finance at
Ramapo College of New Jersey since 1993. From 1964 to 1993 she served in various
positions at New Jersey Bell Telephone Co., including attorney, Treasurer, and
Assistant Secretary.
WILLIAM J. COSGROVE has been employed as an Executive Vice President of
Marketing at Citadel Group Representatives, Inc., a reinsurance intermediary,
since 1993 and has served as Trustee of the John Hancock Funds since 1991.
ANDREW J. EGNER, JR. is retired, having been employed in various capacities
by Hudson City Savings from 1984 to his retirement in 1989.
JOHN W. KLIE is retired, having served as Vice President of Henry Klie,
Inc., an insurance agency, from 1950 to 1989 and as consultant to the Otterstedt
Agency, an insurance agency, from 1989 to 1996. Mr. Klie is a past President of
the New Jersey Association of Independent Insurance Agents.
DONALD O. QUEST, M.D. has been a neurological surgeon since 1976, a
professor at Columbia University since 1989 and an attending physician at Valley
Hospital and Columbia-Presbyterian Medical Center since 1978.
ARTHUR V. WYNNE, JR. has been in a partner in Burrelle's Information
Services, a media research service company, since 1960, a partner in 3W
Partners, a real estate firm, since 1980, a Vice President of Video Monitoring
Service of America, a television transcripts company, since 1987 and a Vice
President of New England Newsclip Agency since 1972.
MEETINGS OF THE BOARD OF DIRECTORS AND ITS COMMITTEES
Our boards of directors meet on a monthly basis except for August and may
hold additional special meetings. During 1998, Hudson City Savings' Board of
Managers held 11 regular meetings and 1 special meeting.
The Board of Directors of Hudson City Savings and the Board of Directors of
Hudson City Bancorp maintain Executive, Audit, Human Resources and Nominating
Committees with identical compositions. Hudson City Savings' Board of Directors
also maintains an Asset Management Committee. No committee of Hudson City
Bancorp's Board of Directors held any meetings in 1998.
The Executive Committee consists of Messrs. Atwater, K. Birchby, J.
Birchby, Gudelski, Hermance and Klie. Mr. Gudelski serves as Chairman. The
Executive Committee exercises the powers of the Board of Directors in between
its meetings. It met 52 times during 1998.
The Audit Committee consists of Messrs. Atwater, Klie and Wynne, with Mr.
Atwater serving as Chairman. This committee reviews the annual audit prepared by
the independent accountants, recommends the appointment of accountants and
receives reports from the internal audit department of Hudson City Savings. It
met 11 times during 1998.
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The Human Resources Committee consists of Messrs. Gudelski, Hermance,
Cosgrove, Quest and Ms. Bruni with Mr. Quest serving as Chairman. This committee
provides advice and recommendations to the Board of Directors in the areas of
employee salaries and benefit programs. It met five times during 1998.
The Nominating Committee consists of Mr. Atwater who is Chairman and
Messrs. Cosgrove and Quest. This Committee nominates individuals for election to
the Board of Directors and senior management. It met one time during 1998.
Hudson City Savings' Asset Management Committee consists of Messrs.
Gudelski, Hermance, K. Birchby, J. Birchby, Cosgrove and Egner with Mr. Egner
serving as the Chairman. This committee has general oversight of Hudson City
Savings' investments and the management of its interest rate risk. It met four
times during 1998.
DIRECTOR COMPENSATION
Meeting Fees. Hudson City Savings pays a fee to each of its non-management
directors for attendance at each board meeting and each meeting of a committee
of which they are members. The following table sets forth the meeting fees in
effect for 1998 and 1999:
<TABLE>
<CAPTION>
Position 1998 1999
<S> <C> <C> <C>
Board $ 2,700 $ 3,000
Executive Committee Member 490 540
Audit Committee Member 440 490
Chair 500 550
Human Resources Committee Member 725 800
Chair 780 860
Asset Management Committee Member 725 800
Chair 780 860
Nominating Committee Member 725 800
Chair 780 860
</TABLE>
Hudson City Savings paid fees totaling $458,000 to its non-employee directors
for the year ended December 31, 1998.
Outside Directors Consultation Plan. This plan provides continued
compensation following termination of service as a director to eligible outside
directors who agree to serve as consultants to Hudson City Savings. A director
is eligible if he or she retires after attaining age 65 and completing 10 years
of service as an outside director. The monthly consulting fee is equal to 5% of
the fee for attendance at a meeting of the board of directors in effect at the
date of termination of service as a director multiplied by the number of full
years of service an outside director, to a maximum of 20 years. A director's
consulting arrangement will continue for 120 months or until an earlier date
when the director withdraws from the performance of consulting services. If a
change of control occurs, this plan will terminate and all of its obligations
will be settled by lump sum payment. In computing these lump sums, each
non-employee director will be presumed to have attained age 65 and completed 20
years of service.
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Agreements for the Deferral of Directors Fees. This plan allows the
deferral of fees for service on the board of directors and its committees.
Deferred amounts bear interest, credited quarterly, at the highest interest rate
which Hudson City Savings paid to its customers on savings and time deposits
during the quarter. Hudson City Savings pays the deferred amounts plus accrued
interest following the director's termination of service. These benefits are
general, unsecured obligations of Hudson City Savings and are not separately
funded.
EXECUTIVE OFFICERS
Executive Officers Who are Not Directors. In addition to Messrs. Gudelski
and Hermance, Hudson City Bancorp and Hudson City Savings have the following
executive officers:
JOHN M. TASSILLO has worked for Hudson City Savings since 1969 and has
served as Executive Vice President and Treasurer since 1989. Mr. Tassillo is
responsible for the accounting, data processing, purchasing, checking, ATM
control, and compliance areas of Hudson City Savings. Mr. Tassillo, is a
Certified Public Accountant. He is a graduate of St. Peter's College in New
Jersey and the Graduate School of Savings Banking at Brown University.
V. BARRY CORRIDON has been First Vice President of Mortgage Servicing of
Hudson City Savings since 1995 and a Vice President from 1982 to 1995. He is
responsible for the administration of our mortgage portfolio, supervision of new
loan set-up, post-closing, payoffs, mortgage accounting, collections and
foreclosures.
JAMES C. KRANZ has been First Vice President and Investment Officer of
Hudson City Savings since 1989. He is responsible for investments, cash flow
management and management of interest rate risk. Mr. Kranz joined Hudson City
Savings in 1983.
THOMAS E. LAIRD has been First Vice President and Mortgage Officer of
Hudson City Savings since 1991. He is responsible for new loan procurement and
administration of Hudson City Savings' Mortgage Origination Department. Mr.
Laird has worked for Hudson City Savings since 1974.
MICHAEL B. LEE has served as First Vice President of Bank Operations of
Hudson City Savings since 1989. He is responsible for branch administration,
training and customer retirement products. He joined Hudson City Savings in
1971.
EXECUTIVE OFFICER COMPENSATION
Summary Compensation Table. The following table provides information about
the compensation paid for 1998 to our Chief Executive Officer and to the four
other most highly compensated executive officers whose total annual salary and
bonus for 1998 was at least $100,000.
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<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION (4)
---------------------------------------------------- --------------------
NAME AND OTHER ANNUAL ALL OTHER
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) (1) COMPENSATION ($) (2) LTIP PAYOUTS ($) (3) COMPENSATION
- --------------------------- ------ ---------- ------------- -------------------- -------------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Leonard S. Gudelski
Chairman and Chief
Executive Officer 1998 $754,770 $ 286,435 -- $ 1,248,912 $ 68,165
Ronald E. Hermance, Jr.
President and Chief 1998 $305,308 $ 104,555 -- $ 425,796 $ 23,438
Operating Officer
John M. Tassillo
Executive Vice 1998 $203,231 $ 61,462 -- $ 237,048 $ 13,444
President and Treasurer
James Kranz
First Vice President - 1998 $155,293 $ 7,775 -- $ 111,258 $ 8,439
Investment Officer
Michael B. Lee 1998 $109,908 $ 5,420 -- $ 78,078 $ 6,123
First Vice President
and Secretary
</TABLE>
- -----------------------------
(1) Includes the following employer contributions to Hudson City Savings
Bank Profit Incentive Bonus Plan, a tax-qualified profit-sharing plan,
which the executive officer could have elected to receive in cash: Mr.
Gudelski, $8,000; Mr. Hermance, $8,000; Mr. Tassillo, $8,000; Mr.
Kranz, $7,775; and Mr. Lee, $5,420. Also includes the following
bonuses under Hudson City Savings Bank Annual Incentive Plan, a
non-qualified performance-based compensation plan, earned for 1998 and
paid in 1999: Mr. Gudelski, $278,435; Mr. Hermance, $96,555; and Mr.
Tassillo, $53,462.
(2) The Bank provides its executive officers with certain non-cash
benefits and perquisites, such as the use of Bank-owned or leased
automobiles. Management of the Bank believes that the aggregate value
of these benefits for 1998 did not, in the case of any executive
officer, exceed $50,000 or 10% of the aggregate salary and annual
bonus reported for him in the Summary Compensation Table.
(3) Represents amounts payable in 1999 under Hudson City Savings Bank
Long-Term Incentive Plan, a non-qualified performance-based
compensation plan, based on achievement of performance goals
established for the three-year period ended December 31, 1998. This
plan has been administered so that payments have been made once every
three years. Includes amounts which may have been deferred by the
executive officer pursuant to an individual non-qualified deferred
compensation arrangement.
(4) Includes the following components: (1) employer contributions to
Hudson City Savings Bank Profit Incentive Bonus Plan which the
executive officer could not elect to receive in cash - Mr. Gudelski,
$8,000; Mr. Hermance, $8,000; Mr. Tassillo, $8,000; Mr. Kranz, $7,775;
and Mr. Lee, $5,420; (2) amounts accrued under Hudson City Savings
Bank Supplemental Savings Plan, a non-qualified deferred compensation
plan - Mr. Gudelski, $58,400; Mr. Hermance, $14,100; and Mr. Tassillo,
$4,000; and (3) the premium cost for life insurance coverage under
Hudson City Savings Bank Supplemental Death Benefit Plan for Senior
Officers - Mr. Gudelski, $1,765; Mr. Hermance, $1,338; Mr. Tassillo,
$1,444; Mr. Kranz, $664; and Mr. Lee, $703.
EMPLOYMENT AGREEMENTS
Hudson City Bancorp and Hudson City Savings have jointly entered into
employment agreements with Messrs. Gudelski, Hermance and Tassillo to secure
their services as Chairman and Chief Executive Officer, President and Chief
Operating Officer, and Executive Vice President and Treasurer. The employment
agreements will take effect on the effective date of the reorganization. They
have rolling three-year terms which a decision of the executive or joint
decision of Hudson City Bancorp and Hudson City Savings may convert to a fixed
three-year term. These agreements provide for minimum annual salaries of
$784,000, $317,000 and $212,000, respectively, and participation on generally
applicable terms and conditions in other compensation and fringe benefit plans.
They also guarantee customary corporate indemnification and errors and omissions
insurance coverage throughout the employment term and for six years after
termination.
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Hudson City Bancorp and Hudson City Savings may terminate each executive's
employment, and each executive may resign, at any time with or without cause.
However, in the event of termination during the term without cause, they will
owe the executive 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 the executive 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 the executive's
principal place of employment to a location over 25 miles in distance from
Hudson City Savings' principal office in Paramus, New Jersey and over 25 miles
from the executive's principal residence; or other material breach of contract
by Hudson City Bancorp or Hudson City Savings which is not cured within 30 days.
For 60 days after a change of control, each executive may resign for any reason
and collect severance benefits as if he had been discharged without cause. The
employment agreements also provide certain uninsured death and disability
benefits.
If Hudson City Bancorp or Hudson City Savings 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 agreements 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 Hudson City Savings nor
Hudson City Bancorp could claim a federal income tax deduction for an excess
parachute payment. The employment agreements require Hudson City Bancorp to
indemnify each executive against the financial effects of such an excise tax.
CHANGE OF CONTROL AGREEMENTS
Hudson City Bancorp and Hudson City Savings have jointly entered into
two-year change of control agreements with Messrs. Corridon, Kranz, Laird and
Lee. The term of these agreements is perpetual until Hudson City Savings gives
notice of non-extension, at which time the term is fixed for two years.
Generally, Hudson City Savings may terminate the employment of any officer
covered by these agreements, with or without cause, at any time prior to a
change of control without obligation for severance benefits. However, if Hudson
City Bancorp or Hudson City Savings signs a merger or other business combination
agreement, or if a third party makes a tender offer or initiates a proxy
contest, it could not terminate an officer's employment without cause without
liability for severance benefits. The severance benefits would generally be
equal to the value of the cash compensation and fringe benefits that the officer
would have received if he or she had continued working for an additional two
years. Hudson City Savings would pay the same severance benefits if the officer
resigns after a change of control following a loss of title, office or
membership on the Board of Directors, material reduction in duties, functions or
responsibilities, involuntary relocation of his or her principal place of
employment to a location over 25 miles from Hudson City Savings' principal
office on the day before the change of control and over 25 miles from the
officer's principal residence or other material breach of contract which is not
cured within 30 days. These agreements also provide certain uninsured disability
benefits.
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If Hudson City Savings or Hudson City 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
change of control agreements might constitute an "excess parachute payment"
under current federal tax laws. Any excess parachute payment would be subject to
a federal excise tax payable by the officer and would be non-deductible by
Hudson City Savings and Hudson City Bancorp for federal income tax purposes. The
change of control agreements do not provide a tax indemnity.
Similar change of control agreements providing severance benefits equal to
one year's compensation and benefits are in effect for the 31 Vice Presidents of
Hudson City Savings.
BENEFIT PLANS
Severance Pay Plan. This plan provides severance benefits to salaried
employees with one year of service who are not parties to individual employment
or change of control agreements and are discharged without cause due to a change
of control. Severance benefits include two weeks' base salary for each year of
service for officers and one week's base salary for non-officer employees. The
minimum severance benefit is two weeks' base salary and the maximum is 26 weeks'
base salary. Employees entitled to severance also receive continued
employer-paid life and health insurance coverage for up to one year after
termination of employment as well as professional outplacement and job
assistance services. These same benefits are available to an employee who
resigns after a change of control following a material adverse change in title,
position or responsibilities, involuntary relocation to a worksite requiring
that the officer move his place of residence to avoid an unreasonable commute, a
reduction in base salary of more than 20%, or assignment to duties, offices or
working space involving unreasonable personal embarrassment.
Annual Incentive Plan. This plan provides an opportunity for officers with
titles of Senior Vice President and above to earn cash bonuses each year.
Currently only Messrs. Gudelski, Hermance and Tassillo are eligible for this
plan. The bonuses are a percentage of each officer's annual rate of base salary.
The percentage varies based on the officer's position and Hudson City Savings'
net operating income (before taxes and extraordinary items, but after interest
expense) relative to a target which the Board of Directors establishes during
the first quarter of the year. Hudson City Savings typically pays these bonuses
shortly after the end of the year, but payment may be deferred to a later date
at the election of the participant. Deferred amounts bear interest at prescribed
rates. Deferred amounts plus accrued interest are general, unsecured obligations
of Hudson City Savings and are not separately funded.
Long-Term Incentive Plan. This plan permits employees selected by the Human
Resources Committee to earn additional cash bonuses based on achievement of
performance goals set for periods longer than one year. Under this plan, the
Human Resources Committee grants participation units to selected employees. Each
unit represents a dollar amount that will be paid at the end of a three-year
performance period if specified performance targets are met. The Human Resources
Committee may also establish lower unit values for performance that exceeds a
minimum threshold but is below the target and higher unit values for performance
that exceeds the target. In 1999, Hudson City Savings made payments for units
granted for the three-year period beginning January 1, 1996 and ending December
31, 1998. Hudson City Savings'
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performance relative to target levels of asset growth and return on assets for
this period determined the value of these units. This plan has been administered
so that payments have been made only once every three years.
Generally, participants must remain employed through the end of the
relevant performance period to receive payment for units. There are exceptions
for death, disability or retirement during the performance period. In addition,
in the event of a change of control, the terms of the plan abbreviate the
performance period for any outstanding units and provide for pro-rated payments
based on performance to the date of the change of control.
Pension Plans. The Hudson City Savings Bank Employees' Retirement Plan is a
tax-qualified plan that covers substantially all salaried employees who are age
21 and have at least one year of service. The Supplemental Executive Retirement
Plan covers selected executive officers and currently covers Messrs. Gudelski,
Hermance and Tassillo. The following table shows the estimated aggregate
benefits payable under the Employees' Retirement Plan and the Supplemental
Executive Retirement Plan upon retirement at age 65 in 1998 with various years
of service and average final compensation combinations.
<TABLE>
<CAPTION>
Years of Service
Average Final ---------------------------------------------------------------------------------
Compensation (1) 15 20 25 30 35 (2)
- ------------------ --------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
$ 100,000 $ 30,000 $ 40,000 $ 50,000 $ 60,000 $ 60,000
$ 125,000 $ 37,500 $ 50,000 $ 62,500 $ 75,000 $ 75,000
$ 150,000 $ 45,000 $ 60,000 $ 75,000 $ 90,000 $ 90,000
$ 160,000 $ 48,000 $ 64,000 $ 80,000 $ 96,000 $ 96,000
$ 175,000 $ 52,500 $ 70,000 $ 87,500 $ 105,000 $ 105,000
$ 200,000 $ 60,000 $ 80,000 $ 100,000 $ 120,000 $ 120,000
$ 300,000 $ 90,000 $ 120,000 $ 150,000 $ 180,000 $ 180,000
$ 400,000 $ 120,000 $ 160,000 $ 200,000 $ 240,000 $ 240,000
$ 500,000 $ 150,000 $ 200,000 $ 250,000 $ 300,000 $ 300,000
$ 750,000 $ 225,000 $ 300,000 $ 375,000 $ 450,000 $ 450,000
$ 1,000,000 $ 300,000 $ 400,000 $ 500,000 $ 600,000 $ 600,000
</TABLE>
- -------------------------
(1) Average final compensation is average base salary, as reported in the
"Salary" column of the Summary Compensation Table, for the highest
three consecutive years during the final 10 years of employment. Tax
laws impose a limit ($160,000 for individuals retiring in 1998) on the
average final compensation that may be counted in computing benefits
under the Employees' Retirement Plan. The Employees' Retirement Plan
may also pay benefits accrued as of January 1, 1994 based on tax law
limits then in effect. For Messrs. Gudelski, Hermance and Tassillo,
benefits based on average final compensation in excess of this limit
are payable by the Supplemental Executive Retirement Plan.
(2) The Employees' Retirement Plan and the Supplemental Executive
Retirement Plan do not count service in excess of 30 years in the
benefit formula.
Tax laws impose a limit ($130,000 for individuals retiring in 1998) on the
annual benefit that the Employees' Retirement Plan may pay. The Employees'
Retirement Plan may also pay additional benefits accrued as of January 1, 1983
based on tax laws then in effect. For Messrs. Gudelski, Hermance and Tassillo,
benefits based on average final 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
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amounts. At December 31, 1998, the average final compensation and estimated
years of service of the executive officers named in the Summary Compensation
Table were: Mr. Gudelski: $708,923, 29 years of service; Mr. Hermance: $282,321,
10 years of service; Mr. Tassillo, $188,417, 29 years of service; Mr. Kranz:
$147,317, 15 years of service; and Mr. Lee: $103,424, 27 years of service.
Savings Plans. The Profit Incentive Bonus Plan of Hudson City Savings Bank
is a tax-qualified defined contribution plan for substantially all salaried
employees who have attained age 21 and have at least one year of service. Each
year, Hudson City Savings makes a contribution to this plan equal to 10% of each
eligible employee's base salary. Participants may choose to receive up to 50% of
this contribution currently in cash. The plan holds the balance on a tax
deferred basis. Because it will begin contributing to an employee stock
ownership plan after the reorganization, Hudson City Savings has reduced its
contributions to this plan to 5% of base salary paid after March 31, 1999. It
will permit a cash election for the full amount of the reduced contribution.
This plan has an individual account for each participant's contributions
and allows each participant to direct the investment of his or her account. One
permitted investment is Hudson City Bancorp common stock. The plan itself is not
an eligible account holder. However, participants who are eligible account
holders may use their subscription rights to purchase stock for their plan
accounts. This plan will purchase common stock for other participants from
Hudson City Bancorp in the initial offering, to the extent that shares are
available to investors who are not eligible account holders, and in open market
transactions. Participants will direct the voting of shares purchased for their
plan accounts.
The Supplementary Savings Plan of Hudson City Savings Bank is a
non-qualified plan that provides additional benefits to certain participants
whose benefits under the Profit Incentive Bonus Plan are limited by tax law
limitations applicable to tax-qualified plans.
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.
Hudson City Bancorp intends to lend this plan enough money to purchase 8%
of the shares issued to investors other than Hudson City, MHC (3.76% of the
total number of shares issued in the reorganization). The plan will purchase
these shares from Hudson City 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 Hudson City 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, Hudson City
Savings intends to contribute enough money each year to make the required
principal and interest payments on the loan from Hudson City Bancorp. It is
expected that this loan will be for a term of 30 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.
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The plan will not distribute the pledged shares right away. Instead, it
will release a portion of the pledged shares annually. Assuming we complete the
reorganization before September 30, 1999, if the plan repays its loan as
scheduled over a 30-year term we expect that 1/60th of the shares will be
released in 1999, 1/30th of the shares will be released annually in 2000 through
2028, and the remaining 1/60th of the shares will be released in 2029. The plan
will allocate the shares released each year among the accounts of participants
in proportion to their base salary for the year. For example, if a participant's
base salary for a year represents 1% of the total base 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.
ESOP Restoration Plan. The ESOP Restoration Plan of Hudson City Savings
Bank is a non-qualified plan that provides supplemental benefits to certain
executives who are prevented from receiving the full benefits contemplated by
the Employee Stock Ownership Plan's benefit formula. The supplemental payments
consist of payments representing shares that cannot be allocated to participants
under the Employee Stock Ownership Plan due to the legal limitations imposed on
tax-qualified plans and, in the case of participants who retire before the
repayment in full of the Employee Stock Ownership Plan's loan, payments
representing the shares that would have been allocated if employment had
continued through the full term of the loan.
Post-Retirement Death Benefit for Senior Officers. Hudson City Savings has
entered into approximately 78 post-retirement death benefit agreements with
officers at the assistant vice president level and higher. These agreements
provide a death benefit to each officer's beneficiary if the officer's
employment continues until retirement and he or she dies after retirement. The
amount of the death benefit ranges from $25,000 for assistant vice presidents to
$50,000 for the President or the Chairman. To finance this benefit, Hudson City
Savings has purchased whole life insurance policies on the lives of these
officers. This death benefit is in addition to the benefits provided under the
group life insurance plan generally applicable to all employees.
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, change of control
agreements, Employee Stock Ownership Plan, ESOP Restoration Plan, Supplementary
Savings Plan, Supplemental Executive Retirement Plan and Outside Directors
Consultation Plan provide additional and accelerated benefits if we experience a
change of control. The reorganization will not trigger additional benefits or
accelerate benefits under any of the plans or agreements. However, a second step
conversion will accelerate benefits under the Supplemental Executive Retirement
Plan.
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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 Hudson City Bancorp that are not owned by
Hudson City, 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 Human
Resources Committee to grant options to purchase up to 10% of the shares issued
to investors other than Hudson City, MHC (4.7% of the shares issued in the
reorganization) over a period of 10 years. The Human Resources 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.
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 Hudson City, MHC's ownership position to less than a majority of Hudson
City 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 Human Resources 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
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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.
Hudson City Bancorp and Hudson City Savings will recognize compensation
expense for accounting purposes when stock options are exercised. The
measurement of this expense will depend on whether treasury shares or newly
issued shares are used to complete the option exercise. When a non-qualified
stock option is exercised, Hudson City Bancorp and Hudson City 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 Hudson City Bancorp that are
not held by Hudson City, 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
Human Resources Committee to make restricted stock awards of up to 4% of the
shares issued to investors other than Hudson City, MHC (1.88% of the shares
issued in the reorganization). The Human Resources Committee will decide which
directors and officers will receive restricted stock and what the terms of those
awards will be. If we implement a 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.
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- 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 Hudson City, MHC's ownership position to less than a majority of Hudson
City 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. Hudson City Bancorp and Hudson City 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, Hudson City Bancorp and
Hudson City 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.
LIMITATIONS ON FEDERAL TAX DEDUCTIONS FOR EXECUTIVE OFFICER COMPENSATION
As a private entity, Hudson City Savings has been subject to federal tax
rules which permit it to claim a federal income tax deduction for a reasonable
allowance for salaries or other compensation for personal services actually
rendered. Following the reorganization, federal tax laws may limit this
deduction to $1 million each tax year for each executive officer named in the
summary compensation table in Hudson City Bancorp's proxy statement for that
year. This limit will not apply to non-taxable compensation under various
broad-based retirement and fringe benefit plans, to compensation that is
"qualified performance-based compensation" under applicable law or to
compensation that is paid in satisfaction of commitments that arose before the
reorganization. Hudson City Bancorp and Hudson City Savings expect that the
Human Resources Committee will take this deduction limitation into account with
other relevant factors in establishing the compensation levels of their
executive officers and in setting the terms of
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compensation programs. However, there is no assurance that all compensation paid
to our executive officers will be deductible for federal income tax purposes. To
the extent that compensation paid to any executive officer is not deductible,
the net after-tax cost of providing the compensation will be higher and the net
after-tax earnings of Hudson City Bancorp and Hudson City Savings will be
reduced.
CERTAIN TRANSACTIONS WITH MANAGERS AND EXECUTIVE OFFICERS
We do not make loans to our officers or managers. However, we do make
residential mortgage loans to our other 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.
We retain the law firm of Dieffenbach Witt & Birchby. John D. Birchby, a
director of Hudson City Bancorp, Hudson City Savings and Hudson City, MHC, has
been a partner of Dieffenbach, Witt & Birchy since 1975. For 1998, we paid
$326,939 to the law firm under our retainer agreement. The firm also received
$905,000 from borrowers of Hudson City Savings to review loan documentation. We
also rent 2,450 square feet of office space to Dieffenbach Witt & Birchby at an
annual rate of $10.00 per square foot. The space is rented on a month-to-month
basis. We believe that the rent we receive from the law firm is less than the
rent we could receive from an unrelated third party in the current real estate
market.
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PROPOSED PURCHASES OF COMMON STOCK BY MANAGEMENT
The following table presents, for each of our managers 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 managers or executive officers expect to purchase more
than 0.2% of our common stock. Collectively our managers and executive officers
expect to purchase a total of 651,000 shares, or 0.9% of shares we sell in the
offering (assuming the sale of 75,670,000 shares of common stock).
<TABLE>
<CAPTION>
NUMBER
NAME AMOUNT OF SHARES
- ------------------------------------------------ ---------- ---------
<S> <C> <C>
Directors:
Verne S. Atwater $ 50,000 5,000
John D. Birchby 1,000,000 100,000
Kenneth L. Birchby 1,000,000 100,000
Victoria H. Bruni 50,000 5,000
William J. Cosgrove 100,000 10,000
Andrew J. Egner, Jr. 400,000 40,000
Leonard S. Gudelski 1,000,000 100,000
Ronald E. Hermance, Jr. 800,000 80,000
John W. Klie 75,000 7,500
Donald O. Quest 200,000 20,000
Arthur V. Wynne, Jr. 510,000 51,000
Executive Officers who are not Directors:
V. Barry Corridon 200,000 20,000
James C. Kranz 250,000 25,000
Thomas E. Laird 275,000 27,500
Michael B. Lee 100,000 10,000
John M. Tassillo 500,000 50,000
</TABLE>
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THE REORGANIZATION AND THE OFFERING
The Board of Managers of Hudson City Savings has adopted and the Commissioner of
the Department of Banking and Insurance of New Jersey has approved the plan of
Reorganization, subject to approval by Hudson City Savings' depositors entitled
to vote on the plan and the satisfaction of certain other conditions.
Approval by the Commissioner does not constitute a recommendation or endorsement
of the reorganization by the Commissioner.
GENERAL
On February 11, 1999, Hudson City Savings' Board of Managers unanimously
adopted the plan of reorganization pursuant to which Hudson City Savings will
convert and reorganize into a mutual savings bank holding company structure.
This reorganization includes the formation of an intermediate stock holding
company, Hudson City Bancorp, and the offering by Hudson City Bancorp of a
minority of its shares to depositors of Hudson City Savings and certain other
persons. Under the terms of the plan of reorganization, Hudson City Bancorp will
own Hudson City Savings and Hudson City, MHC will own more than half of Hudson
City Bancorp. The reorganization will be effected as described under "--Tax
Aspects" or in any other manner that is permitted by the Commissioner 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.
Hudson City Bancorp and Hudson City, MHC have requested approval from the
Federal Reserve Bank of New York to become bank holding companies and to acquire
Hudson City Savings. The plan of reorganization was approved by the
Commissioner, and Hudson City 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 Hudson City Savings
depositors.
Hudson City Savings has called a special meeting of depositors for this
purpose and will be held on [ ], 1999. Depositors with deposit accounts
totalling at least $100 at Hudson City Savings on [ ], 1999 will be entitled to
vote at the special meeting. The plan of reorganization must be approved by a
majority of the amount of votes entitled to be cast 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 Managers to be between $559,300,000 and $756,700,000
and is based upon an independent appraisal of the estimated pro forma market
value of the common stock of Hudson City 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 ($10.00) 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
$10.00 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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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 plan
of reorganization. A copy of the plan is available from Hudson City Savings upon
request and is available for inspection at the offices of Hudson City Savings
and at the office of the Commissioner. 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
Formation of Hudson City Savings as a capital stock savings bank subsidiary
of Hudson City Bancorp will permit Hudson City Bancorp to issue common stock,
which is a source of capital not available to mutual savings banks.
Hudson City Savings' mutual form of ownership will be preserved in Hudson
City, MHC. Hudson City, MHC, as a mutual savings bank holding company, will own
at least a majority of the common stock of Hudson City Bancorp as long as Hudson
City, MHC remains in existence. The reorganization will allow Hudson City
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 Hudson City
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 Hudson City Bancorp will
provide Hudson City Savings with new capital, which will support future deposit
growth and expanded operations. The ability of Hudson City Bancorp to sell
additional common stock also will enable Hudson City Bancorp and Hudson City
Savings to increase their capital in response to any future regulatory capital
requirement levels. While Hudson City Savings currently exceeds all regulatory
capital requirements, the sale of common stock in connection with the
reorganization, will assist Hudson City Savings with the orderly preservation
and expansion of its capital base and will provide flexibility to respond to
sudden and unanticipated capital needs.
After completion of the reorganization, the unissued common and preferred
stock authorized by Hudson City Bancorp's Certificate of Incorporation will
permit Hudson City 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. Hudson City Bancorp currently has no plans with respect to
additional offerings of securities. Following the reorganization, Hudson City
Bancorp intends to use stock-related incentive 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 Hudson City 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, Hudson City Bancorp will be in a
position after the
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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 Managers of Hudson City
Savings unanimously approved the reorganization as being in the best interests
of Hudson City 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
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 such depositor's 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.
Continuity. While the reorganization is being accomplished, and after
completion of the reorganization, the routine business of Hudson City Savings of
accepting deposits and making loans will continue without interruption. Hudson
City Savings will continue to be subject to regulation by the Commissioner and
the FDIC. After the reorganization, Hudson City Savings will continue to provide
services for depositors and borrowers under current policies by its management
and staff.
The Board of Managers serving Hudson City Savings immediately before the
reorganization will serve as directors of Hudson City Savings after the
reorganization. The directors of Hudson City Bancorp and Hudson City, MHC will
consist of all of the individuals
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currently serving on the Board of Managers of Hudson City Savings. We anticipate
that all officers of Hudson City 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 Hudson City 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 Hudson City 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 Hudson City
Savings, as a mutual savings bank, are vested in the Board of Managers. After
the reorganization, direction of Hudson City Savings will be under the control
of the Board of Directors of Hudson City Savings. Hudson City Bancorp, as the
holder of all of the outstanding common stock of Hudson City Savings, will have
exclusive voting rights with respect to any matters concerning Hudson City
Savings requiring stockholder approval, including the election of directors of
Hudson City Savings.
After the reorganization, the holders of the common stock of Hudson City
Bancorp will have exclusive voting rights with respect to any matters concerning
Hudson City Bancorp. These voting rights will be exclusive except to the extent
Hudson City 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 Hudson City Bancorp's stockholders, including the election of
directors of Hudson City Bancorp, subject to the restrictions and limitations
set forth in Hudson City Bancorp's Certificate of Incorporation discussed below.
By virtue of its ownership of a majority of the outstanding shares of
common stock, Hudson City, MHC will be able to elect all members of the Board of
Directors of Hudson City Bancorp and generally will be able to control the
outcome of most matters presented to the stockholders of Hudson City 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 Hudson City, MHC be approved by a majority vote of the shares held
by the public stockholders (i.e., all stockholders except Hudson City, MHC).
Hudson City, MHC will be controlled by its Board of Directors, which will
initially consist of the current managers of Hudson City Savings. Under the
mutual form of ownership, existing directors elect new directors, which can
perpetuate existing management and control of Hudson City, MHC, and thereby
Hudson City Bancorp and Hudson City Savings.
Depositors' Rights if We Liquidate; Liquidation Account. In the unlikely
event of a complete liquidation of Hudson City Savings in its current mutual
form, each depositor would receive a pro rata share of any assets of Hudson City
Savings remaining after payment of claims of all creditors (including the claims
of all depositors to the withdrawable value of their accounts).
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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 Hudson City Savings at the time of
liquidation.
Upon a complete liquidation of Hudson City 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 Hudson City
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
Hudson City Savings above that amount. Instead, the holder of Hudson City
Savings' common stock (i.e., Hudson City Bancorp) would be entitled to any
assets remaining upon a liquidation of Hudson City 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 Hudson City Savings as of the date of its
latest balance sheet contained in this prospectus. Upon a complete liquidation
of Hudson City Savings after the reorganization, each eligible account holder
and supplemental eligible account holder, who continues to maintain such account
holder's deposit account at Hudson City Savings, would be entitled to an
interest in the liquidation account prior to any payment to the holders of
Hudson City 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 March 31, 1999
(the supplemental eligibility record date), as applicable, bore to the aggregate
balance of all qualifying deposit account 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 Hudson City 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 Hudson City 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 March 31, 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 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 Hudson City Bancorp as the sole stockholder of Hudson City
Savings.
Upon a complete liquidation of Hudson City Bancorp, each holder of shares
of the common stock of Hudson City Bancorp, including Hudson City, MHC, would be
entitled to receive a pro rata share of Hudson City Bancorp's assets, following
payment of all debts,
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liabilities and claims of greater priority of or against Hudson City Bancorp
including the rights of depositors in the liquidation account of Hudson City
Savings, if any.
If liquidation of Hudson City, MHC occurs following completion of the
reorganization, all depositors of Hudson City Savings at that time will be
entitled, pro rata to the value of their deposit accounts, to a distribution of
any assets of Hudson City, MHC remaining after payment of all debts and claims
of creditors.
Tax Aspects. The reorganization may be effected in any manner approved by
the Commissioner that is consistent with the purposes of the plan of
reorganization and applicable law, regulations and policies. However, Hudson
City Savings intends to consummate the reorganization using a series of
transactions as described below. This structure enables Hudson City Savings to
retain all of its historical tax attributes and produces significant savings to
Hudson City Savings because it simplifies regulatory approvals and conditions
associated with the completion of the reorganization.
The merger structure will be accomplished as follows:
(1) Hudson City Savings will organize Hudson City, MHC initially as an
interim New Jersey stock savings bank as its wholly owned subsidiary;
(2) Hudson City, MHC will organize a capital stock corporation under
Delaware law (i.e., Hudson City Bancorp) as Hudson City Savings'
wholly owned subsidiary that will subsequently hold 100% of Hudson
City Savings' common stock;
(3) Hudson City, MHC will also organize an interim New Jersey stock
savings bank as its wholly owned subsidiary ("Interim"). The following
transactions will then occur simultaneously;
(4) Hudson City Savings will exchange its charter for a New Jersey stock
savings bank charter (the "Conversion");
(5) Hudson City, MHC (while in its stock form) will cancel its outstanding
stock and exchange its charter for a New Jersey mutual savings bank
holding company charter;
(6) Interim will merge with and into Hudson City Savings with Hudson City
Savings being the surviving institution; and
(7) the initially issued stock of Hudson City Savings (which will be
constructively received by former Hudson City Savings depositors when
Hudson City Savings becomes a stock savings bank pursuant to step (4))
will be issued to Hudson City, MHC in exchange for liquidation
interests in Hudson City, MHC which will be held by Hudson City
Savings' depositors.
Hudson City, MHC will then contribute 100% of the stock of Hudson City Savings
to Hudson City Bancorp, which is a wholly owned subsidiary of Hudson City, MHC.
Hudson City Bancorp will subsequently offer for sale 47% of its common stock
pursuant to the plan of reorganization. As a result of these transactions, (a)
Hudson City Savings will be a wholly owned subsidiary of Hudson City Bancorp;
(b) Hudson City Bancorp will be a majority owned subsidiary of Hudson
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City, MHC; and (c) the depositors of Hudson City Savings will hold liquidation
interests in Hudson City, 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 Hudson City Savings' initial common stock deemed constructively
received by depositors for liquidation interests in Hudson City, 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 Hudson City Savings
of either a private letter ruling from the IRS and from the New Jersey taxing
authorities or an opinion of Hudson City Savings' counsel as to the federal
income tax consequences and from KPMG LLP as to the New Jersey income tax
consequences of the reorganization to Hudson City Savings' (in both its mutual
and stock form), Hudson City Bancorp and the eligible account holders and
supplemental account holders. In Revenue Procedure 96-3, 1996-1 I.R.B. 82, 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.
Hudson City 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
Hudson City 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 Hudson City Savings
before the reorganization and "Stock Bank" refers to Hudson City 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 Hudson City Savings (in either its status as Mutual
Bank or Stock Bank) will recognize no gain or loss as a result of the
conversion;
(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 conversion and, accordingly, the taxable year of the
Mutual Bank will not end on the effective date of the Stock Bank will
be treated as if there had been no conversion 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
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earnings and profits, will be taken into account by Stock Bank as if
the Stock Bank will be treated as if there had been no conversion had
not occurred.
(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 interest (i.e., liquidation rights) in
Mutual Bank;
(6) no gain or loss will be recognized by the depositors of Hudson City
Savings (formerly Mutual Bank) upon the transfer to Hudson City, MHC
of shares of Stock Bank common stock they constructively received in
the conversion in exchange for interests (i.e., liquidation rights) in
Hudson City, 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 Jersey corporate income tax, the
reorganization will not become a taxable transaction to Hudson City Savings (in
either its status as Mutual Bank or Stock Bank), Hudson City, MHC, Hudson City
Bancorp, the stockholders of Hudson City Bancorp or the depositors of Hudson
City 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
Hudson City Bancorp's and Hudson City Savings' consolidated financial statements
based on their historical amounts.
HOW WE DETERMINED THE OFFERING RANGE AND THE $10.00 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. Hudson City Savings and
Hudson City 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 $125,000. Hudson City Savings and Hudson City 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:
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- the present and projected operating results and financial condition of
Hudson City Bancorp and Hudson City Savings, and the economic and
demographic conditions in Hudson City Savings' existing market area;
- historical, financial and other information relating to Hudson City
Savings;
- a comparative evaluation of the operating and financial statistics of
Hudson City Savings with those of other similarly situated publicly
traded mutual holding companies savings associations and savings
institutions located in Hudson City Savings;
- the aggregate size of the offering of the common stock;
- the impact of the reorganization on Hudson City Savings' equity and
earnings potential;
- the proposed dividend policy of Hudson City Bancorp and Hudson City
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 per share. After completion of the reorganization, each share of
Hudson City Bancorp common stock, including the shares we issue to Hudson City,
MHC, will have a book value of $9.65, assuming we sell 75,670,000 shares. This
means that the price you pay for each share in this offering will be 103.63% of
the book value.
The P/E ratio represents the price per share of stock divided by earnings
or net income per share. In our case, for 1998, our P/E ratio as adjusted to
reflect the issuance of our stock in the offering, would be 14.29x, assuming we
sell 75,670,000 shares of stock.
On the basis of the foregoing, RP Financial has advised Hudson City Bancorp
and Hudson City Savings that, in its opinion, dated March [ ], 1999, the
estimated pro forma market value of the common stock on a fully converted basis
ranged from a minimum of $1.19 billion to a maximum of $1.61 billion with a
midpoint of $1.40 billion (the "estimated valuation range").
The board of managers of Hudson City 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 managers reviewed the 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 managers determined that 47% of the shares to be issued by
Hudson City Bancorp will be offered to public stockholders. In addition the
board of managers determined that the common stock will be sold at $10.00 per
share, which is the price most commonly used in stock offerings involving
converting savings institutions.
The board of managers established an offering range of $559.3 million to
$756.7 million, with a midpoint of $658.0 million. Hudson City Bancorp expects
to issue between 55,930,000 and 75,670,000 shares of common stock. The offering
range takes into account that Hudson City
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Savings must be a majority-owned subsidiary of Hudson City Bancorp or Hudson
City, MHC as long as Hudson City, MHC is in existence. The estimated valuation
range and the offering range may be amended with the approval of the
Commissioner and FDIC (if required), due to subsequent developments in the
financial condition of Hudson City Bancorp or Hudson City Savings or market
conditions generally.
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 Hudson City Savings, nor did RP Financial
value independently the assets or liabilities of Hudson City Savings. The
valuation considers Hudson City Savings as a going concern and should not be
considered as an indication of the liquidation value of Hudson City 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.
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 87,020,500 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
Hudson City Savings, Hudson City Bancorp, the Commissioner 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 Commissioner and the FDIC, the number of shares of common stock to be
issued in the offering will be not more than 75,670,000 shares and not less than
55,930,000 shares. If RP Financial concludes that the pro forma market 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 87,020,500 shares. In addition, all shares purchased in the offering will
be purchased for the purchase price of $10.00 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."
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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, Hudson City Savings
and Hudson City Bancorp, after consulting with the Commissioner and the FDIC,
may:
(1) terminate the Plan and return all funds promptly with interest at
Hudson City 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"); or
(3) take such other actions as permitted by the Commissioner 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 Hudson City 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 Hudson City 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."
If all shares of common stock are not sold through the subscription and
community offerings, then Hudson City Savings and Hudson City 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."
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 Hudson City 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 Hudson City Savings with balances
aggregating $100 or more ("qualifying deposits") as of December 31,
1997 ("eligible account
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holders"); for this purpose, deposit accounts include all savings,
time, demand, negotiable orders of withdrawal (NOW), money market and
passbook accounts maintained at Hudson City Savings (excluding any
escrow accounts);
(2) tax-qualified employee benefit plans of Hudson City Bancorp, Hudson
City Savings or Hudson City, MHC, including the employee stock
ownership plan;
(3) depositors with qualifying deposits in Hudson City Savings on March
31, 1999, other than (i) those depositors who would otherwise qualify
as eligible account holders or (ii) managers or executive officers of
Hudson City 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 his or her 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 all accounts had
been disclosed. The subscription rights of eligible account holders who are also
managers or executive officers of Hudson City 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 4,474,400 shares, based on the
issuance of 55,930,000 shares at the minimum of the offering range or 6,053,600
shares based on the issuance of 75,670,000 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
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participants in the subscription and community offerings, including
subscriptions of any of Hudson City 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 his or her stock order form all deposit accounts in which
such supplemental eligible account holder had an ownership interest at March 31,
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 10:00 a.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 the Commissioner 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 Hudson City 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, Hudson City 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. Hudson City Bancorp
and Hudson City 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,
Hudson City Savings and Hudson City Bancorp are not required to offer stock in
the subscription offering to any person who resides in a foreign country.
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COMMUNITY OFFERING
To the extent that shares remain available for purchase after satisfaction
of all subscriptions received in the subscription offering, Hudson City 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) depositors in Hudson City Savings (other than an eligible account
holders or supplemental eligible account holders) who own deposits on
[________], 1999 (we refer to this group as "other depositors");
(2) "residents" of New Jersey, which definition includes persons who
occupy a dwelling within New Jersey and establish an ongoing physical
presence within the State, together with an indication that such
presence is not merely transitory in nature (the determination of
resident status will be made by Hudson City Savings, in its sold
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 Hudson City Savings and Hudson City Bancorp, with the approval of the
Commissioner and the FDIC, if necessary.
The opportunity to subscribe for shares of common stock in the community
offering category is subject to the right of Hudson City Savings and Hudson City
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 Hudson City Bancorp rejects a subscription in
part, the subscriber will not have the right to cancel the remainder of his or
her subscription.
In offering the unsubscribed for shares to the public in the community
offering, Hudson City Bancorp and Hudson City Savings may initially reserve
shares of common stock for sale to institutional investors, who need not be
other depositors or residents of New Jersey, up to the lesser of (1) 25% of the
shares we sell in the offering or (2) the number of shares not subscribed for in
the subscription offering or by "other depositors" in the community offering.
These institutional investors may purchase the reserved shares only after all
orders of other depositors have been filled.
If there is an oversubscription for shares in the community offering,
shares will be allocated on a priority basis in the following order: other
depositors of Hudson City Savings, institutional investors, residents of New
Jersey and other members of the general public. If an oversubscription occurs in
the other depositors category, shares will be allocated first to each subscriber
whose order is accepted by Hudson City Savings in an amount equal to the lesser
of 100 shares or the number of shares subscribed for by each such subscriber, if
possible. Thereafter, we will allocate the unallocated shares among such
subscribers whose order remains unsatisfied on a pro rata basis, based on order
size, until the remaining shares have been allocated. If an
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oversubscription occurs among residents of New Jersey, allocation of shares will
be made in the same manner as for other depositors.
MARKETING AND UNDERWRITING ARRANGEMENTS
Ryan, Beck & Co., Inc. Hudson City Savings, Hudson City Bancorp and Hudson
City, MHC have engaged Ryan, Beck & Co. as a financial and marketing advisor in
connection with the offering of the common stock. Ryan, Beck has agreed to use
its best efforts to assist Hudson City Bancorp with the solicitation of
subscriptions and orders for shares of common stock in the offering. Ryan, Beck
has also agreed to assist with the solicitation of votes for the special meeting
of depositors.
Ryan, Beck will receive, as compensation, an advisory and management fee of
$150,000. Ryan, Beck will also receive fees for services provided in connection
with the offering equal to 1.20% of the aggregate purchase price of common stock
sold in the offering. No fees will be paid to Ryan, Beck with respect to any
shares of common stock purchased by any manager, manager emeritus, director,
executive officer or employee of Hudson City Savings or Hudson City Bancorp or
members of their immediate families or the ESOP. If there is a syndicated
community offering, we will pay Ryan, Beck a fee equal to 1.20% of the aggregate
purchase price of common stock sold in the syndicated community offering.
However, the aggregate fees payable to Ryan, Beck and any selected dealers in
connection with any syndicated community offering will not exceed 6.00% of the
aggregate purchase price of the common stock sold in the syndicated community
offering. Ryan, Beck will also be reimbursed for its reasonable out-of-pocket
expenses, including legal fees of up to $125,000 and non-legal expenses up to a
maximum of $50,000.
If the event the offering is not consummated by December 31, 1999 or Ryan,
Beck ceases, under certain circumstances, to provide assistance to Hudson City
Bancorp, Ryan, Beck will be entitled to the $150,000 advisory and management fee
and reimbursement for its reasonable out-of-pocket expenses as described above.
Hudson City Bancorp and Hudson City Savings have agreed to indemnify Ryan, Beck
for costs and expenses in connection with certain claims or liabilities related
to or arising out of the services to be provided by Ryan, Beck pursuant to its
engagement by Hudson City Savings and Hudson City Bancorp as financial advisor
in connection with the reorganization, including certain liabilities under the
Securities Act. Total fees to Ryan, Beck are estimated to be $6.1 million and
$8.3 million 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, managers and executive officers of
Hudson City Bancorp and Hudson City Savings may participate in the solicitation
of offers to purchase common stock. Other employees of Hudson City 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 stock. Hudson City 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, managers, directors and
employees to participate in the sale of common stock. No officer, manager,
director or employee of Hudson City Bancorp or Hudson City 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.
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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 Hudson City Savings (which may be given by
completing the appropriate blanks in the stock order form), must be received by
Hudson City Savings by 10:00 a.m., eastern time, on the expiration date. You
must submit your order form by mail or overnight courier. You may not 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 Hudson City Savings except for IRA accounts, money market
accounts that have check-writing privileges, NOW accounts, checking or demand
accounts and other transaction accounts, as specified on the order form. No cash
or wire transfers will be accepted. Interest will be paid on payments made by
check, bank check or money order at Hudson City 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. Hudson City Bancorp shall have the
right, in its sole discretion, to permit institutional investors to submit
irrevocable orders together with a legally binding commitment for payment and to
thereafter pay for the shares of common stock for which they subscribe in the
community offering at any time prior to 48 hours before the completion of the
reorganization. This payment may be made by wire transfer.
If a subscriber validly authorizes Hudson City Savings to withdraw the
amount of the purchase price from a deposit account at Hudson City Savings, the
withdrawal will be made as of the completion of the reorganization. Hudson City
Savings will waive any applicable penalties
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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.
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 Hudson City Bancorp from an unrelated financial institution or Hudson City
Bancorp to lend to the employee stock ownership plan the aggregate purchase
price of the shares for which it subscribed. Hudson City 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 Hudson City
Savings. Persons with IRAs maintained at Hudson City 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. Instructions on how to transfer IRAs
maintained at Hudson City Savings can be obtained from the stock information
center. Depositors interested in using funds in an IRA to purchase common stock
should contact the stock information 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 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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Hudson City Savings and Hudson City 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.
SYNDICATED COMMUNITY OFFERING
The 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 Ryan,
Beck acting as agent of Hudson City Bancorp. Ryan, Beck has not selected any
particular broker-dealers to participate in a syndicated community offering. As
an alternative to a syndicated community offering, Hudson City Bancorp and
Hudson City 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." Hudson City Bancorp and Hudson City Savings have reserved
the right to reject orders in whole or in part in their sole discretion in the
syndicated community offering. If Hudson City Bancorp or Hudson City Savings
rejects an order in part, the subscriber will not have the right to cancel the
remainder of his or her subscription. Neither Ryan, Beck 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, Ryan, Beck 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 Hudson City Bancorp with the
approval of the Commissioner and FDIC. Such extensions may not be beyond [ ].
See "-- How We Determined the Offering Range and the $10.00 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 such public offering. Any underwriter
shall agree to purchase such shares from Hudson City 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 Hudson City Bancorp will amend the Registration Statement, of which this
prospectus is a part, 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.
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:
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(1) The aggregate amount of outstanding common stock of Hudson City
Bancorp owned or controlled by persons other than Hudson City, MHC, at
the close of the offering will be less than 50% of Hudson City
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 $2,500,000;
(4) Each eligible account holder may subscribe for and purchase common
stock in the subscription offering in an amount up to $500,000,
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
$500,000, 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 $500,000, subject to increase as described below;
(8) Each persons 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 $500,000, subject to increase as described
below; and
(9) The managers and officers of Hudson City 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 $500,000 of common
stock. An eligible account holder or supplemental eligible account holder,
however, may acquire up to the overall maximum purchase limit of $2,500,000 by
also purchasing in the community offering and the syndicated community offering
or the public offering. The $2,500,000 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.
Subject to any required regulatory approval and the requirements of
applicable laws and regulations, but without further approval of the depositors
of Hudson City Savings, both the $500,000 individual amount permitted to be
subscribed for and the $2.5 million overall maximum
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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
3,783,500 shares), at the sole discretion of Hudson City Bancorp and Hudson City
Savings. It is currently anticipated that the individual and overall maximum
purchase limitations may be increased if, after a community offering, Hudson
City 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 Hudson City Bancorp and Hudson City
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 Hudson City
Bancorp and the Board of Managers of Hudson City Savings and, if approved,
allocated on a pro rata basis giving priority in accordance with the priorities
set forth in the plan of reorganization and described herein.
If we sell 87,020,500 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 Hudson City Bancorp,
Hudson City, MHC, Hudson City Savings or a majority-owned subsidiary
of Hudson City 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 Hudson City
Bancorp or Hudson City 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, manager or
officer of Hudson City Bancorp, Hudson City, MHC or Hudson City
Savings.
We have the sole discretion to determine whether prospective purchasers are
"associates" or "acting in concert."
Managers, 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 manager or an executive officer of Hudson City Savings, Hudson City, MHC or
Hudson City 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 Hudson City Bancorp and Hudson City 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 Hudson City Bancorp by
directors, executive officers of Hudson City Bancorp, Hudson City, MHC or Hudson
City Savings (and any person who was an executive officer or manager of Hudson
City Savings or an executive officer or director of Hudson City, MHC or Hudson
City Bancorp at any time after the date on which the Board of Managers of Hudson
City 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
Commissioner. 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 Hudson
City Savings will be final, subject to the authority of the Commissioner and
FDIC. The plan of reorganization provides that, if deemed necessary or desirable
by the Board of Managers of Hudson City Savings, the plan of reorganization may
be substantively amended prior to the solicitation of proxies from depositors by
a vote of the Board of Managers. Amendment of the plan or reorganization
thereafter requires the approval of the Commissioner 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 Commissioner
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 Managers of
Hudson City Savings at any time prior to the special meeting of depositors, and
thereafter by such a vote with the approval of the Commissioner and the FDIC.
POSSIBLE CONVERSION OF HUDSON CITY, MHC TO STOCK FORM
Federal and state regulations and the plan of reorganization permit Hudson
City, 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 the board of managers has no current
intention or plan to undertake a second-step conversion. In a second-step
conversion, Hudson City, MHC would merge with and into Hudson City Savings or
Hudson City Bancorp, with Hudson City Savings or Hudson City Bancorp as the
resulting entity.
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Certain depositors of Hudson City 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 Hudson City, MHC would be automatically converted into and
become the right to receive a number of shares of common stock of Hudson City
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 Hudson City, 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 Hudson City, MHC, if any, and (ii) the market value of the assets of Hudson
City, MHC, other than common stock of Hudson City 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 Hudson City Bancorp's
stockholders' equity at the time of the second-step conversion less the
aggregate amount of dividends waived by Hudson City, MHC, and the denominator is
equal to Hudson City 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 Hudson City, 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.
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RESTRICTIONS ON ACQUISITION OF HUDSON CITY BANCORP
AND HUDSON CITY SAVINGS
GENERAL
The plan of reorganization provides for the conversion of Hudson City
Savings from the mutual to the stock form of organization and the concurrent
formation of a holding company and a mutual holding company. See "The
Reorganization and The Offering -- General." Certain provisions in Hudson City
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.
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
Hudson City, MHC remains in existence as a mutual savings bank holding company,
it will control a majority of our voting stock. Moreover, the directors of
Hudson City, MHC will be the directors of Hudson City Bancorp and the directors
of Hudson City Savings. Hudson City, MHC will be able to elect all of the
members of the Board of Directors of Hudson City Bancorp, and as a general
matter, will be able to control the outcome of all matters presented to the
stockholders of Hudson City Bancorp for vote. Therefore, a change in control of
Hudson City Bancorp or Hudson City Savings cannot occur unless Hudson City, MHC,
first converts to the stock form of organization or is dissolved. See "The
Reorganization and The Offering -- Possible Conversion of Hudson City, MHC to
Stock Form."
HUDSON CITY BANCORP'S CERTIFICATE OF INCORPORATION AND BYLAWS
Hudson City 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 Hudson City 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 Hudson
City Bancorp provides that any person, other than Hudson City, 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
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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
Hudson City 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 Hudson City 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 class is required to be elected
annually by stockholders of Hudson City Bancorp for three-year terms. A
classified board promotes continuity and stability of management of Hudson City
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 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 Hudson City
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 a majority of the outstanding shares of voting stock, provided, however,
that in the event that Hudson City, MHC, is dissolved, a vote of at least 80% of
the outstanding voting stock will be required to remove a director. In the
absence of these provisions, the vote of the holders of a majority of the shares
of Hudson City Bancorp could remove the entire Board, with or without cause, and
replace it with persons of such holders' choice.
Votes of Stockholders. Hudson City Bancorp's Certificate of Incorporation
provides that there will not be cumulative voting of stockholders for the
election of Hudson City Bancorp's directors. No cumulative voting means that
Hudson City, MHC, as the holder of a majority of the shares voted at a meeting
of stockholders, may elect all directors of Hudson City Bancorp to be elected at
that meeting. This could prevent public stockholder representation on Hudson
City 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 Hudson City 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,
Hudson City Bancorp will have authorized but unissued shares of preferred stock
and common stock. See "Description of Capital Stock of Hudson City Bancorp."
Although these shares could be used by the Board of Directors of Hudson City
Bancorp to make it more difficult or to discourage an attempt to obtain control
of Hudson City Bancorp through a merger, tender offer, proxy contest or
otherwise, such uses will be unlikely since Hudson City, MHC owns a majority of
the common stock of Hudson City 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 Hudson City 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.
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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 Hudson City 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 Hudson City, MHC, Hudson
City Bancorp or its subsidiary or any employee benefit plan maintained by Hudson
City Bancorp or its subsidiary) which owns beneficially or controls, directly or
indirectly, 10% or more of the outstanding shares of voting stock of Hudson City
Bancorp.
A "Business Combination" means:
(1) any merger or consolidation of Hudson City 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 Hudson City Bancorp or combined assets of
Hudson City Bancorp and its subsidiary;
(3) the issuance or transfer to any Interested Stockholder or its
affiliate by Hudson City Bancorp (or any subsidiary) of any securities
of Hudson City Bancorp other than on a pro rata basis to all
stockholders;
(4) the adoption of any plan for the liquidation or dissolution of Hudson
City Bancorp proposed by or on behalf of any Interested Stockholder or
its affiliate;
(5) any reclassification of securities, recapitalization, merger or
consolidation of Hudson City Bancorp which has the effect of
increasing the proportionate share of Common Stock or any class of
equity or convertible securities of Hudson City Bancorp owned directly
or indirectly by an Interested Stockholder or its affiliate; and
(6) the acquisition by Hudson City Bancorp or its subsidiary of any
securities of an Interested Stockholder or its affiliates or
associates.
Evaluation of Offers. The Certificate of Incorporation of Hudson City
Bancorp further provides that the Board of Directors of Hudson City Bancorp
shall when evaluating any offer to Hudson City Bancorp from another party to
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- make a tender or exchange offer for any outstanding equity security of
Hudson City Bancorp;
- merge or consolidate Hudson City Bancorp with another corporation or
entity; or
- purchase or otherwise acquire all or substantially all of the
properties and assets of Hudson City Bancorp,
in connection with the exercise of its judgment in determining what is in the
best interest of Hudson City Bancorp and the stockholders of Hudson City
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
Hudson City Bancorp and its subsidiaries and on the employees, customers,
suppliers and creditors of Hudson City Bancorp and its subsidiaries, and the
effects on the communities in which Hudson City Bancorp's and its subsidiaries'
facilities are located.
By having these standards in the Certificate of Incorporation of Hudson
City 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 Hudson City Bancorp, even if the price offered is
significantly greater than the then market price of any equity security of
Hudson City 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 Hudson City 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, Hudson City 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,
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amend, rescind or repeal any of Hudson City 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 Hudson City 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 Hudson City
Bancorp. The notice provision requires a stockholder who desires to raise new
business to provide certain information to Hudson City Bancorp concerning the
nature of the new business, the stockholder and the stockholder's interest in
the business matter. Similarly, a stockholder who wishes to nominate any person
for election as a director must provide Hudson City Bancorp with certain
information concerning the nominee and the proposing stockholder.
ANTI-TAKEOVER EFFECTS OF HUDSON CITY BANCORP'S
CERTIFICATE OF INCORPORATION, BYLAWS AND
BENEFIT PLANS ADOPTED IN THE REORGANIZATION
The provisions described above are intended to reduce Hudson City 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 Hudson
City Savings and Hudson City Bancorp in the event of a takeover. See "Management
- -- Employment Agreements," and "-- Benefits -- Stock Option Plan."
Hudson City 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 Hudson City 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 Hudson City 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 Hudson City
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 DECL., is intended to
discourage certain takeover practices by impeding the ability of a hostile
acquiror to engage in certain transactions with the target company.
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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%;
(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) Hudson City 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 Hudson City Bancorp.
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<PAGE> 136
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 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 Hudson City Bancorp and (b) before any other company could
acquire 25% or more of the Common Stock of Hudson City 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 HUDSON CITY BANCORP
GENERAL
Hudson City Bancorp is authorized to issue eight hundred million
(800,000,000) shares of common stock having a par value of $.01 per share and
two hundred million (200,000,000) shares of preferred stock having a par value
of $.01 per share. Hudson City Bancorp currently expects to sell 75,670,000
shares of common stock (or 87,020,500 in the event of an increase of 15% in the
Estimated Valuation Range) to purchasers of common stock in the offering. In
addition, Hudson City Bancorp expects to issue 85,330,000 shares of the common
stock to Hudson City, MHC (or 98,129,500 in the event of an increase of 15% in
the Estimated Valuation Range). Hudson City Bancorp will not issue any shares of
preferred stock in the offering. Except as discussed above in "Restrictions on
Acquisition of Hudson City Bancorp and Hudson City Savings," each share of
Hudson City 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
134
<PAGE> 137
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 Hudson City Bancorp, Hudson City, MHC or Hudson
City Savings.
COMMON STOCK
Dividends. Hudson City 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 Hudson City Bancorp is subject to limitations which are
imposed by law. See "Our Policy Regarding Dividends" and "Regulation of Hudson
City Savings Bank and Hudson City Bancorp." Hudson City, MHC currently does not
intend to waive any dividends paid by Hudson City Bancorp. The Owners of common
stock of Hudson City Bancorp, including Hudson City, 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 Hudson City 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 Hudson City Bancorp will possess exclusive voting rights in
Hudson City Bancorp. They will elect Hudson City Bancorp's Board of Directors
and act on such other matters as are required to be presented to them under
Delaware law or Hudson City 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 Hudson City Bancorp's common stock, exclusive of the shares
held by Hudson City, MHC, may be considered "Excess Shares" and may therefore
not be entitled to vote. See "Restrictions on Acquisition of Hudson City Bancorp
and Hudson City Savings." If Hudson City 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 Hudson City
Bancorp and Hudson City Savings."
Liquidation. In the event of any liquidation, dissolution or winding up of
Hudson City Savings, Hudson City Bancorp, as owner of Hudson City Savings'
capital stock, would be entitled to receive, after payment or provision for
payment of all debts and liabilities of Hudson City 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 Hudson
City Savings available for distribution. In the event of liquidation,
dissolution or winding up of Hudson City Bancorp, the holders of its common
stock would be entitled to receive, after payment or provision for payment of
all its debts and liabilities,
135
<PAGE> 138
all of the assets of Hudson City 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 Hudson City
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.
PREFERRED STOCK
Hudson City Bancorp will not issue any shares of its authorized preferred
stock in the reorganization. We may issue 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, New York, New York and Jersey City, New
Jersey. Certain matters relating to state taxation will be passed upon for us by
KPMG LLP. Certain legal matters will be passed upon for Ryan, Beck & Co. by
Pitney, Hardin, Kipp & Szuch, Morristown, New Jersey.
EXPERTS
The statements of condition of Hudson City Savings as of December 31, 1998
and 1997 and statements of income, changes in equity and cash flows for each of
the years in the three years ended December 31, 1998 have been included in this
prospectus in reliance upon the report of KPMG LLP, independent certified public
accountants, appearing elsewhere in this prospectus, 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 Hudson City Savings setting forth its opinion as to the
estimated pro forma market value of Hudson City 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.
136
<PAGE> 139
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 S-1 under the
Securities Act of 1933, as amended, with respect to the common stock offered in
this document. As 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 Hudson City 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 S-1 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 Hudson City Bancorp's Certificate of Incorporation and Bylaws, as
well as those of Hudson City Savings and Hudson City, MHC, are available without
charge from Hudson City Savings. Copies of the plan of reorganization are also
available from Hudson City Savings without charge.
Hudson City Savings has filed notice of mutual holding company
reorganization with the Department of Banking and Insurance of New Jersey. In
addition, Hudson City Savings has filed copies of that application with the
FDIC. Hudson City 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.
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<PAGE> 140
INDEX TO FINANCIAL STATEMENTS
HUDSON CITY SAVINGS BANK
<TABLE>
<S> <C>
Independent Auditors' Report................................ F-2
Statements of Financial Condition at December 31, 1998 and
1997...................................................... F-3
Statements of Income for each of the three years in the
period ended December 31, 1998............................ F-4
Statements of Changes in Equity for each of the three years
in the period ended December 31, 1998..................... F-5
Statements of Cash Flows for each of the three years in the
period ended December 31, 1998............................ F-6
Notes to Financial Statements............................... F-7
</TABLE>
Other schedules are omitted as they are not required or are not applicable or
the required information is shown in the financial statements or related notes.
Financial statements of Hudson City, MHC and Hudson City Bancorp, Inc. have not
been provided because they have conducted no operations. Hudson City, MHC has
not yet been organized and Hudson City Bancorp, Inc. has no assets and no
liabilities.
<PAGE> 141
[LETTERHEAD OF KPMG LLP, SHORT HILLS, NEW JERSEY]
INDEPENDENT AUDITORS' REPORT
The Board of Managers
Hudson City Savings Bank:
We have audited the statements of condition of Hudson City Savings Bank as of
December 31, 1998 and 1997, and the related statements of income, changes in
equity, and cash flows for each of the years in the three-year period ended
December 31, 1998. These financial statements are the responsibility of
management. Our responsibility is to express an opinion on these 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 financial statements referred to above present fairly, in
all material respects, the financial position of Hudson City Savings Bank as of
December 31, 1998 and 1997, and the results of its operations and its cash flows
for each of the years in the three-year period ended December 31, 1998, in
conformity with generally accepted accounting principles.
KPMG LLP
February 12, 1999
F-2
<PAGE> 142
HUDSON CITY SAVINGS BANK
STATEMENTS OF CONDITION
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1998 1997
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash and due from banks (note 3)............................ $ 87,075 $ 71,074
Federal funds sold.......................................... 69,800 24,600
---------- ----------
Total cash and cash equivalents........................ 156,875 95,674
Investment securities held to maturity, market value of
$1,420 in 1998 and $1,503 in 1997 (note 4)................ 1,393 1,466
Investment securities available for sale, at market value
(note 4).................................................. 785,031 654,726
Mortgage-backed securities held to maturity, market value of
$3,106,369 in 1998 and $3,091,736 in 1997 (note 5)........ 3,070,931 3,022,225
Loans (note 6).............................................. 3,659,407 3,463,803
Less:
Deferred loan fees..................................... 11,146 12,076
Allowance for loan losses (note 6)..................... 17,712 15,625
---------- ----------
Net loans............................................ 3,630,549 3,436,102
Foreclosed real estate, net (note 7)........................ 1,026 1,410
Accrued interest receivable................................. 49,041 49,751
Banking premises and equipment, net (note 8)................ 29,064 29,197
Other assets (note 11)...................................... 28,350 23,448
---------- ----------
Total Assets........................................... $7,752,260 $7,313,999
========== ==========
LIABILITIES AND EQUITY
Deposits (note 9):
Interest-bearing.......................................... $6,494,278 $6,193,630
Noninterest-bearing....................................... 313,061 272,326
---------- ----------
Total deposits......................................... 6,807,339 6,465,956
Accrued expenses and other liabilities (note 10)............ 44,315 40,330
---------- ----------
Total liabilities...................................... 6,851,654 6,506,286
---------- ----------
Retained earnings (notes 11 and 14)......................... 899,933 806,664
Accumulated other comprehensive income...................... 673 1,049
---------- ----------
Total equity........................................... 900,606 807,713
---------- ----------
Commitments and contingencies (notes 8 and 12)
Total Liabilities and Equity........................... $7,752,260 $7,313,999
========== ==========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE> 143
HUDSON CITY SAVINGS BANK
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1998 1997 1996
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Interest Income:
Interest and fees on first mortgage loans (note 6)....... $259,320 $245,432 $221,930
Interest and fees on consumer and other loans............ 7,272 7,685 8,135
Interest on mortgage-backed securities................... 201,592 201,323 157,050
Interest on investment securities held to maturity (note
4):
Taxable............................................... 54 -- --
Exempt from federal taxes............................. 48 61 112
Interest and dividends on investment securities available
for sale -- taxable (note 4).......................... 49,666 43,140 37,587
Interest on federal funds sold........................... 2,839 2,801 4,464
-------- -------- --------
Total interest income............................ 520,791 500,442 429,278
Interest expense on deposits (note 9)...................... 311,084 297,484 242,667
-------- -------- --------
Net interest income................................. 209,707 202,958 186,611
Provision for loan losses (note 6)......................... 2,400 2,850 2,275
-------- -------- --------
Net interest income after provision for loan
losses........................................... 207,307 200,108 184,336
-------- -------- --------
Non-interest income:
Service charges and other income......................... 4,930 4,710 3,896
Gains on net securities transactions (note 4)............ 24 1,594 152
-------- -------- --------
Total non-interest income........................ 4,954 6,304 4,048
-------- -------- --------
Non-interest expense:
Salaries and employee benefits (note 10)................. 39,260 38,781 37,034
Net occupancy expense (note 8)........................... 11,753 11,888 11,941
Federal deposit insurance assessment..................... 783 757 43
Amortization of goodwill (note 11)....................... 1,610 1,771 2,030
Computer and related services............................ 1,212 1,104 1,150
Other expense............................................ 8,874 8,618 8,760
-------- -------- --------
Total non-interest expense....................... 63,492 62,919 60,958
-------- -------- --------
Income before income tax expense................. 148,769 143,493 127,426
Income tax expense (note 11)............................... 55,500 53,500 46,595
-------- -------- --------
Net income.......................................... $ 93,269 $ 89,993 $ 80,831
======== ======== ========
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE> 144
HUDSON CITY SAVINGS BANK
STATEMENTS OF CHANGES IN EQUITY
<TABLE>
<CAPTION>
ACCUMULATED
OTHER
RETAINED COMPREHENSIVE TOTAL
EARNINGS INCOME EQUITY
-------- ------------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Balance at December 31, 1995........................... $635,840 $3,104 $638,944
--------
Comprehensive Income:
Net Income........................................ 80,831 -- 80,831
Other comprehensive income:
Unrealized holding losses arising during period
(net of tax of $(370))....................... -- (604) (604)
Reclassification adjustment for gains in net
income (net of tax of $(58))................. -- (94) (94)
-------- ------ --------
Total Comprehensive Income........................ 80,133
--------
Balance at December 31, 1996........................... 716,671 2,406 719,077
--------
Comprehensive Income:
Net Income........................................ 89,993 -- 89,993
Other comprehensive income:
Unrealized holding losses arising during period
(net of tax of $(225))....................... -- (369) (369)
Reclassification adjustment for gains in net
income (net of tax of $(606))................ -- (988) (988)
-------- ------ --------
Total Comprehensive Income........................ 88,636
--------
Balance at December 31, 1997........................... 806,664 1,049 807,713
--------
Comprehensive Income:
Net Income........................................ 93,269 -- 93,269
Other comprehensive income:
Unrealized holding losses arising during period
(net of tax of $(223))....................... -- (361) (361)
Reclassification adjustment for gains in net
income (net of tax of $(9)).................. -- (15) (15)
-------- ------ --------
Total Comprehensive Income........................ 92,893
--------
Balance at December 31, 1998........................... $899,933 673 900,606
======== ====== ========
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE> 145
HUDSON CITY SAVINGS BANK
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------
1998 1997 1996
----------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net Income......................................... $ 93,269 $ 89,993 $ 80,831
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, accretion and amortization
expense....................................... 6,052 5,505 5,761
Provision for loan losses....................... 2,400 2,850 2,275
Gains on net securities transactions............ (24) (1,594) (152)
Deferred tax (benefit) expense.................. (3,907) (1,695) 1,643
Net proceeds from foreclosed real estate........ 3,565 3,683 5,089
Decrease (increase) in accrued interest
receivable.................................... 710 (5,679) (3,124)
Increase in other assets........................ (2,374) (1,709) (2,717)
Increase in accrued expenses and other
liabilities................................... 3,985 5,949 1,996
----------- --------- -----------
Net Cash Provided by Operating Activities............ 103,676 97,303 91,602
----------- --------- -----------
Cash Flows from Investing Activities:
Net increase in loans.............................. (157,887) (275,675) (372,032)
Purchases of loans................................. (38,639) (16,198) (8,558)
Principal collection of mortgage-backed
securities...................................... 1,168,674 569,189 382,631
Purchases of mortgage-backed securities............ (1,222,352) (883,502) (1,227,291)
Proceeds from maturities and calls of investment
securities held to maturity..................... 489 209 1,302
Purchases of investment securities held to
maturity........................................ (403) (600) --
Proceeds from maturities and calls of investment
securities available for sale................... 659,212 418,269 368,538
Proceeds from sales of investment securities
available for sale.............................. -- 42,735 138
Purchases of investment securities available for
sale............................................ (789,577) (521,529) (404,929)
Purchases of premises and equipment, net........... (3,375) (3,113) (3,990)
----------- --------- -----------
Net Cash Used in Investing Activities................ (383,858) (670,215) (1,264,191)
----------- --------- -----------
Cash Flows from Financing Activities:
Net increase in deposits........................... 341,383 546,985 1,161,158
----------- --------- -----------
Net Cash Provided by Financing Activities............ 341,383 546,985 1,161,158
----------- --------- -----------
Net Increase (decrease) in Cash and Cash
Equivalents........................................ 61,201 (25,927) (11,431)
Cash and Cash Equivalents at Beginning of Year....... 95,674 121,601 133,032
----------- --------- -----------
Cash and Cash Equivalents at End of Year............. $ 156,875 $ 95,674 $ 121,601
=========== ========= ===========
Supplemental Disclosures:
Interest paid...................................... $ 312,004 $ 298,270 $ 243,447
=========== ========= ===========
Income taxes paid.................................. $ 59,101 $ 55,052 $ 45,391
=========== ========= ===========
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE> 146
HUDSON CITY SAVINGS BANK
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Basis of Presentation
The following are the significant accounting and reporting policies applied
by Hudson City Savings Bank (the "Bank"), which conform with generally accepted
accounting principles and general practices within the savings bank industry.
In preparing the 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 statements of condition and income for the
period. Actual results could differ from these estimates. A material estimate
that is particularly susceptible to significant change in the near term relates
to the determination of the allowance for loan losses.
b) Comprehensive Income
Effective January 1, 1998, the Bank adopted the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive
Income." SFAS No. 130 establishes standards for reporting and presentation of
comprehensive income and its components in a full set of financial statements.
Under SFAS No. 130, comprehensive income is divided into net income and other
comprehensive income. Other comprehensive income includes items previously
recorded directly to equity, such as unrealized gains and losses on securities
available for sale.
Comprehensive income is presented in the statements of changes in equity.
SFAS No. 130 requires only additional disclosures and does not affect the Bank's
financial position or results of operations. Prior year financial statements
have been reclassified to conform to the requirements of SFAS No. 130.
c) Statements of Cash Flows
For purposes of reporting cash flows, cash and cash equivalents includes
cash on hand, amounts due from banks and federal funds sold. Generally, federal
funds are sold for one-day periods.
Transfers of loans to foreclosed real estate of $3,353,000, $2,801,000 and
$4,241,000 for the years ended December 31, 1998, 1997 and 1996, respectively,
did not result in cash receipts or cash payments.
d) Investment Securities
Investment securities are classified as either held to maturity or
available for sale. Investment securities classified as held to maturity are
stated at cost, adjusted for amortization of premiums and accretion of
discounts, which are recognized as adjustments to interest income, using a
method that approximates level yield. The Bank has both the ability and the
positive intent to hold these investment securities to maturity. Securities
available for sale are carried at fair value, with unrealized gains and losses,
net of tax, reported as a component of other comprehensive income, which is
included in equity.
Realized gains and losses are recognized when securities are sold or called
using the specific identification method. The estimated fair market value of all
investment securities is determined by use of quoted market prices.
F-7
<PAGE> 147
HUDSON CITY SAVINGS BANK
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1998, 1997 AND 1996
e) Mortgage-Backed Securities
Mortgage-backed securities include pass-through certificates, which
represent participating interests in pools of long-term first mortgage loans
originated and serviced by third-party issuers of the securities, and real
estate mortgage conduits ("REMICs"), which are debt securities that are secured
by mortgage loans or other mortgage-backed securities.
These securities are classified as held to maturity and, accordingly, are
stated at cost, adjusted for amortization of premiums and accretion of
discounts. Such amortization and accretion is included in interest income based
on a method which approximates the level yield method. Premiums are amortized
and discounts are accreted over the estimated average life of the contract.
Gains and losses are recognized when securities are sold using the specific
identification method. The estimated fair market value of these securities is
determined by use of quoted market prices. The Bank has the positive intent and
ability to hold mortgage-backed securities to maturity.
Mortgage-backed securities are subject to prepayments. The level of
prepayments is related to the general level of interest rates. The higher the
rate of prepayments, the shorter the effective maturity of the security.
f) Loans
Loans are stated at their principal amounts outstanding. Interest income on
loans is accrued and credited to income as earned. Net loan origination fees are
deferred and amortized to interest income over the life of the loan as an
adjustment to the loan's yield, using the level yield method.
The accrual of income on loans is generally discontinued when interest or
principal payments are 90-days in arrears or when the timely collection of such
income is doubtful. Loans on which the accrual of income has been discontinued
are designated as nonaccrual loans and outstanding interest previously credited
is reversed. It is recognized subsequently in the period collected only when the
ultimate collection of principal is not in doubt. A nonaccrual loan is returned
to accrual status when factors indicating doubtful collection no longer exist.
The Bank defines the population of impaired loans to be all nonaccrual
commercial real estate and multi-family loans. Impaired loans are individually
assessed to determine that the loan's carrying value is not in excess of the
fair value of the collateral or the present value of the loan's expected future
cash flows. Smaller balance homogeneous loans that are collectively evaluated
for impairment, such as residential mortgage loans and consumer loans, are
specifically excluded from the impaired loan portfolio. There were no loans
classified as impaired by the Bank at December 31, 1998 and 1997.
g) Allowance for Loan Losses
The allowance for loan losses is a valuation account established through a
provision for loan losses charged to income. Losses on loans are charged against
the allowance when management believes the collection of the principal is
unlikely. Subsequent recoveries, if any, are generally credited to the
allowance. The allowance is based on such factors as the Bank's loan loss
experience, known and inherent risks in the loan portfolio, the estimated value
of underlying collateral, current economic and market trends, and other factors
which may warrant recognition in maintaining an allowance at a level sufficient
to provide for estimated loan losses.
In addition, various regulatory agencies, as an integral part of their
examination process, periodically review the Bank's allowance for loan losses.
Such agencies may require the Bank to
F-8
<PAGE> 148
HUDSON CITY SAVINGS BANK
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1998, 1997 AND 1996
recognize additions to the allowance based on their judgments of information
available to them at the time of their examination.
h) Foreclosed Real Estate
Foreclosed real estate is property acquired through foreclosure and deed in
lieu of foreclosure. Foreclosed properties are initially recorded at the lower
of the recorded investment in the loan or fair market value. Thereafter, the
property is carried at fair market value less estimated selling costs. Fair
market value is generally based on recent appraisals.
Subsequent provisions, which may result from the ongoing periodic
valuations of these properties, are charged to income in the period in which
they are identified and credited to a valuation allowance account. Foreclosed
real estate is reported net of the valuation allowance. Carrying costs, such as
maintenance and taxes, are charged to operating expenses as incurred.
i) Banking Premises and Equipment
Land is carried at cost. Buildings, leasehold improvements and furniture,
fixtures and equipment are carried at cost, less accumulated depreciation and
leasehold amortization. Buildings are depreciated over their estimated useful
lives using the straight-line method. Furniture, fixtures and equipment are
depreciated over their estimated useful lives using the double-declining balance
method. Leasehold improvements are amortized over the shorter of their estimated
useful lives or the term of the respective leases. The costs for major
improvements and renovations are capitalized, while maintenance, repairs and
minor improvements are charged to operating expenses as incurred. Gains and
losses on dispositions are reflected currently as other non-interest income or
expense.
j) Income Taxes
The Bank files federal and New Jersey state tax returns on a calendar year
basis. Under the liability method of accounting for income taxes, a deferred tax
liability is recognized for all taxable temporary differences and a deferred tax
asset is recognized for all deductible temporary differences. The Bank takes
into account changes in the tax law and rates when valuing the deferred income
tax amounts.
For federal income tax reporting purposes, under tax law that existed prior
to 1996, the Bank reported its loan loss provisions by using the reserve method
allowed for qualified thrift lender institutions. The Bank's bad debts reserve
for income tax reporting purposes was increased by annual tax loan loss
provisions (tax return deductions) that were determined based on a percentage of
the Bank's reported annual taxable income. Actual net loan losses were charged
directly against the tax basis bad debts reserve. Legislation was enacted in
August 1996, which repealed for tax purposes the percentage of taxable income
bad debt reserve method. As a result, the Bank must instead use the specific
charge-off method to compute its bad debt deduction. The legislation also
requires the Bank to recapture its post-1987 net additions to its tax bad debt
reserves. The Bank has previously provided for this liability in the financial
statements.
k) Employee Benefit Plans
Effective January 1, 1998, the Bank adopted the provisions of SFAS No. 132,
"Employers Disclosures about Pensions and Other Postretirement Benefits." SFAS
No. 132 revises disclosures only and does not affect the Bank's financial
position or results of operations. Prior year financial statement disclosures
have been revised to conform to the requirements of SFAS No. 132.
F-9
<PAGE> 149
HUDSON CITY SAVINGS BANK
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1998, 1997 AND 1996
The Bank maintains certain noncontributory benefit plans which cover all
employees who have met the eligibility requirements of the plans. Certain health
care and life insurance benefits are provided for retired employees. The
expected cost of benefits provided for retired employees is actuarially
determined and accrued ratably from the date of hire to the date the employee is
fully eligible to receive the benefits.
l) Goodwill
Goodwill, included in other assets, is being amortized to expense on a
straight-line basis over a 15-year period. Unamortized goodwill amounted to
$1,441,000 and $3,051,000 at December 31, 1998 and 1997, respectively.
2. PLAN OF REORGANIZATION (UNAUDITED)
On February 11, 1999, the board of managers of Hudson City Savings Bank
adopted a Plan of Reorganization and Stock Issuance (the "Plan"), where the Bank
will convert and reorganize from a New Jersey-chartered mutual savings bank into
a two-tiered mutual savings bank holding company structure (the
"Reorganization"). Under the terms of the Plan, Hudson City Savings Bank will be
a wholly-owned subsidiary of Hudson City Bancorp, Inc., a Delaware corporation
(the "Company"), and the Company will be a majority-owned subsidiary of Hudson
City, MHC, a New Jersey-chartered mutual savings bank holding company (the
"MHC").
In connection with the Reorganization, the Company will offer for sale to
its depositors and the public 47% of its common stock. The number of shares of
common stock to be offered and the price for such shares will be determined by
the board of managers based upon an appraisal of the Bank to be made by an
independent appraisal firm. At least the minimum number of shares offered in the
offering must be sold for the offering to be completed.
The Plan provides that when the Reorganization is completed, a "liquidation
account" will be established in an amount equal to the total equity of the Bank
as of the latest practicable date prior to the Reorganization. The liquidation
account is established to provide a limited priority claim to the assets of the
Bank to "eligible account holders" and "supplemental eligible account holders",
as defined in the Plan, who continue to maintain deposits in the Bank after the
Reorganization. In the unlikely event of a complete liquidation of the Bank, and
only in such event, each eligible account holder and supplemental eligible
account holder would receive a liquidation distribution, prior to any payment to
the holder of the Bank's common stock. This distribution would be based upon
each eligible account holder's and supplemental account holder's proportionate
share of the then total remaining qualifying deposits.
Direct costs of the Reorganization will be deferred and will reduce the
proceeds of the offering. If the Reorganization is not completed, all costs
would be charged to expense.
3. RESTRICTIONS ON CASH AND DUE FROM BANKS
The Bank is required to maintain cash reserves on deposit with the Federal
Reserve Bank based on deposits. The average amount of the reserves on deposit
for the years ended December 31, 1998 and 1997 was approximately $15,068,000 and
$14,011,000, respectively.
F-10
<PAGE> 150
HUDSON CITY SAVINGS BANK
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1998, 1997 AND 1996
4. INVESTMENT SECURITIES
The amortized cost and estimated fair market value of investment securities
at December 31 are as follows:
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR MARKET
COST GAINS LOSSES VALUE
--------- ---------- ---------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
1998
HELD TO MATURITY
Municipal bonds............................... $ 1,393 $ 29 $ (2) $ 1,420
======== ====== ===== ========
AVAILABLE FOR SALE
United States government and agencies......... $781,330 $1,772 $(666) $782,436
Corporate bonds............................... 2,617 11 (33) 2,595
-------- ------ ----- --------
Total available for sale................. $783,947 $1,783 $(699) $785,031
======== ====== ===== ========
1997
HELD TO MATURITY
Municipal bonds............................... $ 1,466 $ 37 $ -- $ 1,503
======== ====== ===== ========
AVAILABLE FOR SALE
United States government and agencies......... $648,277 $2,606 $(869) $650,014
Corporate bonds............................... 4,758 18 (64) 4,712
-------- ------ ----- --------
Total available for sale................. $653,035 $2,624 $(933) $654,726
======== ====== ===== ========
</TABLE>
The amortized cost and estimated fair market value of investment securities
held to maturity and investment securities available for sale at December 31,
1998, by contractual maturity, are shown below. The expected maturity will
differ from the contractual maturity because issuers may have the right to call
or prepay obligations.
<TABLE>
<CAPTION>
ESTIMATED
AMORTIZED FAIR MARKET
COST VALUE
--------- -----------
(IN THOUSANDS)
<S> <C> <C>
HELD TO MATURITY
Due after one year through five years....................... $ 100 $ 98
Due after five years through ten years...................... 390 411
Due after ten years......................................... 903 911
-------- --------
Total held to maturity................................. $ 1,393 $ 1,420
======== ========
AVAILABLE FOR SALE
Due in one year or less..................................... $ 10,194 $ 10,194
Due after one year through five years....................... 308,432 308,447
Due after five years through ten years...................... 465,321 466,390
-------- --------
Total available for sale............................... $783,947 $785,031
======== ========
</TABLE>
F-11
<PAGE> 151
HUDSON CITY SAVINGS BANK
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1998, 1997 AND 1996
Interest and dividend income for the years ended December 31, 1998, 1997
and 1996 consists of the following:
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
United States government and agencies................ $49,429 $42,134 $31,937
Municipal bonds...................................... 102 61 112
Corporate bonds...................................... 237 1,006 5,625
Common stock......................................... -- -- 25
------- ------- -------
Total interest and dividend income.............. $49,768 $43,201 $37,699
======= ======= =======
</TABLE>
Gross realized gains on calls of investment securities available for sale
during 1998 were $11,000. Gross realized gains on calls of investment securities
held to maturity during 1998 were $13,000.
Gross realized gains on calls of investment securities available for sale
during 1997 were $22,000. Gross realized gains and losses on sales of investment
securities available for sale during 1997 were $1,577,000 and $5,000,
respectively.
Gross realized gains and losses on investment securities held to maturity
called by the issuer in 1996 were $75,000 and $9,000, respectively. Gross
realized gains and losses on investment securities available for sale called by
the issuer in 1996 were $6,000 and $3,000, respectively. During 1996, gross
realized gains on the sale of investment securities available for sale were
$83,000.
The carrying value of securities pledged as required security for deposits
and for other purposes required by law amounted to $5,142,000 and $4,090,000 at
December 31, 1998 and 1997, respectively.
5. MORTGAGE-BACKED SECURITIES
The amortized cost and estimated fair market value of mortgage-backed
securities held to maturity at December 31 are as follows:
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR MARKET
COST GAINS LOSSES VALUE
---------- ---------- ---------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
1998
GNMA pass-through certificates.............. $2,093,591 $19,610 $(1,982) $2,111,219
FNMA pass-through certificates.............. 674,061 12,219 (5) 686,275
FHLMC pass-through certificates............. 240,414 5,581 -- 245,995
FHLMC, FNMA and GNMA -- REMICs.............. 62,865 91 (76) 62,880
---------- ------- ------- ----------
Total mortgage-backed securities....... $3,070,931 $37,501 $(2,063) $3,106,369
========== ======= ======= ==========
1997
GNMA pass-through certificates.............. $2,061,928 $52,861 $ -- $2,114,789
FNMA pass-through certificates.............. 568,479 9,451 -- 577,930
FHLMC pass-through certificates............. 293,802 7,830 -- 301,632
FHLMC, FNMA and GNMA -- REMICs.............. 98,016 79 (710) 97,385
---------- ------- ------- ----------
Total mortgage-backed securities....... $3,022,225 $70,221 $ (710) $3,091,736
========== ======= ======= ==========
</TABLE>
F-12
<PAGE> 152
HUDSON CITY SAVINGS BANK
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1998, 1997 AND 1996
6. LOANS AND ALLOWANCE FOR LOAN LOSSES
Loans at December 31 are summarized as follows:
<TABLE>
<CAPTION>
1998 1997
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
First mortgage loans:
One-to four-family...................................... $3,516,947 $3,327,371
FHA/VA.................................................. 52,958 45,868
Multi-family and commercial............................. 2,911 3,553
---------- ----------
Total first mortgage loans........................... 3,572,816 3,376,792
---------- ----------
Consumer and other loans:
Fixed-rate second mortgages............................. 56,118 50,198
Home equity credit lines................................ 28,045 30,211
Guaranteed student...................................... 216 4,315
Other................................................... 2,212 2,287
---------- ----------
Total consumer and other loans....................... 86,591 87,011
---------- ----------
Total loans..................................... $3,659,407 $3,463,803
========== ==========
</TABLE>
Substantially all of the Bank's loans are secured by first or second liens
on real estate property located in the state of New Jersey. The ultimate ability
to collect the loan portfolio and realize the carrying value of real estate is
subject to changes in the region's real estate market and future economic
conditions.
The following is a comparative summary of (a) loans on which the accrual of
income has been discontinued and (b) loans which are contractually past due
90-days or more but have not been classified nonaccrual at December 31:
<TABLE>
<CAPTION>
1998 1997
------- -------
(IN THOUSANDS)
<S> <C> <C>
Non-accrual loans........................................ $13,216 $15,428
Accruing loans delinquent 90-days or more................ 2,123 706
------- -------
Total............................................... $15,339 $16,134
======= =======
</TABLE>
The total amount of interest income received during the year on nonaccrual
loans outstanding at December 31, 1998, 1997 and 1996 amounted to $178,000,
$186,000 and $198,000, respectively. Additional interest income totaling
$828,000, $996,000 and $1,050,000 on non-accrual loans would have been
recognized in 1998, 1997 and 1996, respectively, if interest on all such loans
had been recorded based upon original contract terms. The Bank is not committed
to lend additional funds to borrowers on non-accrual status.
F-13
<PAGE> 153
HUDSON CITY SAVINGS BANK
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1998, 1997 AND 1996
An analysis of the allowance for loan losses at December 31 follows:
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Balance at beginning of year.......................... $15,625 $13,045 $11,906
------- ------- -------
Charge-offs........................................... (336) (330) (1,160)
Less recoveries....................................... 23 60 24
------- ------- -------
Net charge-offs....................................... (313) (270) (1,136)
------- ------- -------
Provision for loan losses............................. 2,400 2,850 2,275
------- ------- -------
Balance at end of year................................ $17,712 $15,625 $13,045
======= ======= =======
</TABLE>
7. FORECLOSED REAL ESTATE, NET
Foreclosed real estate, net, at December 31 is summarized as follows:
<TABLE>
<CAPTION>
1998 1997
------ ------
(IN THOUSANDS)
<S> <C> <C>
Foreclosed real estate..................................... $1,058 $1,477
Valuation allowance........................................ (32) (67)
------ ------
Total foreclosed real estate, net..................... $1,026 $1,410
====== ======
</TABLE>
An analysis of the valuation allowance for foreclosed real estate at
December 31 follows:
<TABLE>
<CAPTION>
1998 1997
----- -----
(IN THOUSANDS)
<S> <C> <C>
Balance at beginning of year................................ $ 67 $ 83
Provision for write-downs................................... 148 87
Write-downs................................................. (183) (103)
----- -----
Balance at end of year...................................... $ 32 $ 67
===== =====
</TABLE>
8. BANKING PREMISES AND EQUIPMENT, NET
A summary of the net carrying value of banking premises and equipment at
December 31 is as follows:
<TABLE>
<CAPTION>
1998 1997
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Land................................................... $ 4,291 $ 4,291
Building............................................... 29,507 28,693
Leasehold improvements................................. 9,638 9,301
Furniture, fixtures and equipment...................... 27,758 25,534
-------- --------
71,194 67,819
Accumulated depreciation and amortization.............. (42,130) (38,622)
-------- --------
Total banking premises and equipment.............. $ 29,064 $ 29,197
======== ========
</TABLE>
F-14
<PAGE> 154
HUDSON CITY SAVINGS BANK
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1998, 1997 AND 1996
Amounts charged to net occupancy expense for depreciation and amortization
of banking premises and equipment amounted to $3,508,000, $3,587,000 and
$3,809,000 in 1998, 1997 and 1996, respectively.
The Bank has entered into non-cancelable operating lease agreements with
respect to banking premises and equipment. It is expected that many agreements
will be renewed at expiration in the normal course of business. Future minimum
rental commitments required under operating leases that have initial or
remaining non-cancelable lease terms in excess of one year are as follows (in
thousands):
<TABLE>
<CAPTION>
YEAR AMOUNT
- ---- -------
<S> <C>
1999............................................... $ 2,465
2000............................................... 2,357
2001............................................... 2,204
2002............................................... 1,911
2003............................................... 1,655
Thereafter......................................... 7,198
-------
Total......................................... $17,790
=======
</TABLE>
Net occupancy expense includes gross rental expense for certain bank
premises of $2,752,000 in 1998, $2,790,000 in 1997, and $2,622,000 in 1996, and
rental income of $608,000, $603,000 and $499,000 for the respective years.
9. DEPOSITS
Deposits at December 31 are summarized as follows:
<TABLE>
<CAPTION>
1998 1997
--------------------- ---------------------
BALANCE PERCENT BALANCE PERCENT
---------- ------- ---------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Savings.......................................... $ 832,759 12.23% $ 835,062 12.91%
Demand........................................... 313,061 4.60 272,326 4.21
Interest-bearing demand.......................... 100,436 1.48 90,869 1.41
Money market..................................... 505,201 7.42 500,029 7.73
Time deposits.................................... 5,055,882 74.27 4,767,670 73.74
---------- ------ ---------- ------
Total deposits.............................. $6,807,339 100.00% $6,465,956 100.00%
========== ====== ========== ======
</TABLE>
Time deposits $100,000 and over amounted to $516,084,000 and $460,982,000
at December 31, 1998 and 1997, respectively. Interest expense on time deposits
$100,000 and over for the years ended December 31, 1998, 1997 and 1996 was
$27,241,000, $24,279,000 and $16,729,000, respectively. Included in demand
accounts are mortgage escrow deposits of $39,098,000 and $38,662,000 at December
31, 1998 and 1997, respectively.
F-15
<PAGE> 155
HUDSON CITY SAVINGS BANK
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1998, 1997 AND 1996
Scheduled maturities of time deposits are as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
- ---- --------------
(IN THOUSANDS)
<S> <C>
1999........................................... $4,765,169
2000........................................... 254,084
2001........................................... 22,331
2002........................................... 4,305
2003........................................... 9,993
----------
Total..................................... $5,055,882
==========
</TABLE>
10. EMPLOYEE BENEFIT PLANS
The Bank maintains certain non-contributory benefit plans which cover all
employees, and retired employees, who have met eligibility requirements of the
plans. Benefits for the qualified and non-qualified defined benefit retirement
plans are based primarily on years of service and compensation. The Bank's
funding of the qualified retirement plan is actuarially determined on an annual
basis. It is the Bank's policy to fund the qualified retirement plan
sufficiently to meet the minimum requirements set forth in the Employee
Retirement Income Security Act of 1974. The non-qualified retirement plan, for
certain executive officers, is unfunded and has a benefit obligation of
$2,500,000 at December 31, 1998 and $2,100,000 at December 31, 1997. The Bank
provides certain health care and life insurance benefits to eligible retired
employees ("other benefits"). Participants generally become eligible for retiree
health care and life insurance benefits after ten years of service.
The following table shows the change in benefit obligation, the change in
plan assets, and the funded status for the retirement plans and other benefits
at December 31:
<TABLE>
<CAPTION>
RETIREMENT PLANS OTHER BENEFITS
------------------- --------------------
1998 1997 1998 1997
-------- ------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Change in Benefit Obligation:
Benefit obligation at beginning of year........ $ 46,906 $41,427 $ 29,770 $ 29,458
Service cost................................... 2,267 2,057 1,452 1,468
Interest cost.................................. 3,178 3,041 1,865 1,979
Actuarial loss (gain).......................... 2,018 1,636 (2,431) (2,572)
Benefits paid.................................. (1,272) (1,255) (566) (563)
-------- ------- -------- --------
Benefit obligation at end of year.............. 53,097 46,906 30,090 29,770
-------- ------- -------- --------
Change in Plan Assets:
Fair value of plan assets at beginning of
year........................................ 58,116 47,583 -- --
Actual return on plan assets................... 10,446 10,037 -- --
Employer contribution.......................... 85 1,752 566 563
Benefits paid.................................. (1,272) (1,256) (566) (563)
-------- ------- -------- --------
Fair value of plan assets at end of year....... 67,375 58,116 -- --
-------- ------- -------- --------
Funded Status............................... 14,278 11,210 (30,090) (29,770)
</TABLE>
F-16
<PAGE> 156
HUDSON CITY SAVINGS BANK
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
RETIREMENT PLANS OTHER BENEFITS
------------------- --------------------
1998 1997 1998 1997
-------- ------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Unrecognized transition asset.................. (1,197) (1,596) -- --
Unrecognized prior service cost................ 7 20 -- --
Unrecognized net actuarial (gain) loss......... (10,126) (6,990) 704 3,135
-------- ------- -------- --------
Prepaid (accrued) benefit cost.............. $ 2,962 $ 2,644 $(29,386) $(26,635)
======== ======= ======== ========
</TABLE>
Net periodic benefit (income) cost at December 31 included the following
components:
<TABLE>
<CAPTION>
RETIREMENT PLANS OTHER BENEFITS
----------------------------- --------------------------
1998 1997 1996 1998 1997 1996
------- ------- ------- ------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Service cost...................... $ 2,267 $ 2,057 $ 2,193 $1,452 $1,468 $1,636
Interest cost..................... 3,178 3,041 2,829 1,865 1,979 2,000
Expected return on assets......... (5,167) (4,228) (3,701) -- -- --
Amortization of:
Net (gain) loss................. (124) 24 15 -- 43 300
Unrecognized prior service
cost......................... 13 13 13 -- -- --
Unrecognized remaining net
assets....................... (399) (399) (345) -- -- --
------- ------- ------- ------ ------ ------
Net periodic benefit (income)
cost....................... $ (232) $ 508 $ 1,004 $3,317 $3,490 $3,936
======= ======= ======= ====== ====== ======
</TABLE>
The following are the weighted average assumptions used in accounting for
the benefit plans at December 31:
<TABLE>
<CAPTION>
RETIREMENT
PLANS OTHER BENEFITS
------------ --------------
1998 1997 1998 1997
---- ---- ----- -----
<S> <C> <C> <C> <C>
Discount rate........................................... 6.50% 7.00% 6.50% 7.00%
Expected return on assets............................... 9.00 9.00 -- --
Rate of compensation increase........................... 5.75 6.25 -- --
</TABLE>
Assumed health care cost trend rates used to measure the expected cost of
other benefits for 1999 were 9.00% for Medicare-eligible retirees and 10.00% for
non-Medicare eligible retirees. The rates were assumed to decrease gradually to
4.50% for 2006 and remain at that level thereafter.
Assumed health care cost trend rates have a significant effect on the
amounts reported for health care plans. A 1% change in the assumed health care
cost trend rate would have the following effects on other benefits:
<TABLE>
<CAPTION>
1% INCREASE 1% DECREASE
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Effect on total service cost and interest cost...... $ 741 $ (556)
Effect on other benefit obligations................. 5,312 (4,120)
</TABLE>
The Bank maintains a tax-deferred profit incentive bonus savings plan based
on the Bank's profitability. All employees are eligible after one year of
employment and the attainment of age 21. The expense amounted to $1,995,000,
$1,913,000 and $1,823,000 in 1998, 1997 and 1996, respectively.
F-17
<PAGE> 157
HUDSON CITY SAVINGS BANK
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1998, 1997 AND 1996
The Bank also maintains certain incentive plans to recognize key executives
who are able to make substantial contributions to the long-term success and
financial strength of the Bank. At the end of each performance period, the value
of the award is determined in accordance with established criteria. Participants
can elect cash payment or elect to defer the award until retirement. The current
long-term performance period is January 1, 1996 to December 31, 1998. The
expense related to these plans amounted to $1,723,000 in 1998, $1,694,000 in
1997 and $1,542,000 in 1996.
11. INCOME TAXES
Income tax expense for each of the years in the three-year period ended
December 31, 1998 is summarized as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
FEDERAL:
- --------
Current............................................... $54,500 $50,706 $41,108
Deferred (benefit) expense............................ (3,600) (1,561) 1,513
------- ------- -------
Total Federal.................................... 50,900 49,145 42,621
------- ------- -------
STATE:
- -----
Current............................................... 4,907 4,489 3,844
Deferred (benefit) expense............................ (307) (134) 130
------- ------- -------
Total state...................................... 4,600 4,355 3,974
------- ------- -------
Total income tax expense......................... $55,500 $53,500 $46,595
======= ======= =======
</TABLE>
Not included in the above table is income tax benefit of $232,000, $831,000
and $428,000 for 1998, 1997 and 1996, respectively, which represents the income
tax benefit on the net unrealized losses of securities available for sale.
The amounts reported as income tax expense vary from the amounts that would
be reported by applying the statutory federal income tax rate to income before
income taxes due to the following:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Income before income tax expense................... $148,769 $143,493 $127,426
Statutory income tax rate.......................... 35% 35% 35%
-------- -------- --------
Computed expected income tax expense............... 52,069 50,223 44,599
State income taxes, net of federal income tax
benefit.......................................... 2,990 2,831 2,583
Amortization of goodwill........................... 564 620 710
Tax-exempt interest................................ (126) (125) (146)
Other, net......................................... 3 (49) (1,151)
-------- -------- --------
Income tax expense............................... $ 55,500 $ 53,500 $ 46,595
======== ======== ========
</TABLE>
F-18
<PAGE> 158
HUDSON CITY SAVINGS BANK
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1998, 1997 AND 1996
The net deferred tax asset at December 31 consists of the following:
<TABLE>
<CAPTION>
1998 1997
------- -------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Discount accretion........................................ $ 2,867 $ 3,641
Deferred loan origination fees............................ 2,135 2,568
Postretirement benefits................................... 11,239 10,231
Book loan loss reserve.................................... 6,730 5,938
Mortgage premium amortization............................. 2,124 1,458
Nonaccrual interest income................................ 477 598
Other..................................................... 5,313 4,372
------- -------
30,885 28,806
------- -------
Deferred tax liabilities:
Tax bad debt reserve...................................... 10,399 12,478
Net unrealized gain on securities available for sale...... 411 643
Retirement Plan........................................... 2,073 1,804
Other..................................................... 1,198 1,216
------- -------
14,081 16,141
------- -------
Net deferred tax asset................................. $16,804 $12,665
======= =======
</TABLE>
The net deferred tax asset represents the anticipated federal and state tax
benefits expected to be realized in future years upon the utilization of the
underlying tax attributes comprising this balance. In management's opinion, in
view of the Bank's previous, current and projected future earnings trends, such
net deferred tax asset will more likely than not be fully realized. Accordingly,
no valuation allowance was deemed to be required at December 31, 1998 and 1997.
At December 31, 1998 and 1997, the Bank's bad debt reserve for federal
income tax reporting purposes was approximately $77,000,000 and $82,000,000,
respectively. Retained earnings at December 31, 1998 and 1997 included
approximately $49,000,000 for which no deferred income taxes have been provided.
This amount represents the base year allocation of income to bad debt deduction
for tax purposes. Under SFAS No. 109, this amount is treated as a permanent
difference and deferred taxes are not recognized unless it appears that it will
be reduced and result in taxable income in the foreseeable future. Events that
would result in taxation of these reserves include failure to qualify as a bank
for tax purposes or distributions in complete or partial liquidation.
12. OFF-BALANCE SHEET RISK AND CONTINGENCIES
The Bank is a party to commitments to extend credit in the normal course of
business to meet the financial needs of its customers. Commitments to extend
credit are agreements to lend money to a customer as long as there is no
violation of any condition established in the contract. Commitments to fund
first mortgage loans generally have fixed expiration dates or other termination
clauses, whereas home equity lines of credit have no expiration date. Since some
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 credit-worthiness on a case-by-case basis.
At December 31, 1998, the Bank had fixed and variable rate first mortgage
loan commitments to extend credit of approximately $124,557,000 and $36,925,000,
respectively, and unused home equity
F-19
<PAGE> 159
HUDSON CITY SAVINGS BANK
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1998, 1997 AND 1996
and overdraft lines of credit of approximately $53,421,000. Commitments to
purchase mortgage-backed securities amounted to $256,667,000 at December 31,
1998. No commitments are included in the accompanying financial statements.
There is no exposure to credit loss in the event the other party to commitments
to extend credit does not exercise its rights to borrow under the commitment.
In the normal course of business, there are various outstanding legal
proceedings. In the opinion of management, the financial statements of the Bank
will not be materially affected as a result of such legal proceedings.
13. FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of financial instruments represents the estimated amounts at
which the asset or liability could be exchanged in a current transaction between
willing parties, other than in a forced liquidation sale. These estimates are
subjective in nature, involve uncertainties and matters of judgment and,
therefore, cannot be determined with precision. Changes in assumptions could
significantly affect the estimates. Further, certain tax implications related to
the realization of the unrealized gains and losses could have a substantial
impact on these fair value estimates and have not been incorporated into any of
the estimates.
Carrying amounts of cash, due from banks and Federal funds sold are
considered to approximate fair value. The fair value of fixed rate one- to
four-family mortgages and fixed rate home equity loans is generally estimated
using the present value of expected future cash flows. The fair value of
adjustable rate one-to four-family mortgages and home equity loans with
adjustable interest rates is estimated using market prices. For time deposits,
the fair value is estimated by discounting estimated future cash flows using
currently offered rates for deposits of a similar maturity. For deposit
liabilities payable on demand, the fair value is estimated by discounting
estimated future cash flows using a regulatory borrowing rate most closely
associated with maturity date ranges that were established using the Bank's
history and regulatory guidelines. The fair value of off-balance sheet
commitments is not material.
Other important elements which are not deemed to be financial assets or
liabilities and therefore, not considered in these estimates include the value
of the Bank's retail branch delivery system, its existing core deposit base,
banking premises and equipment, and goodwill.
The estimated fair value of the Bank's financial instruments at December 31
are summarized as follows:
<TABLE>
<CAPTION>
1998 1997
------------------------ ------------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS:
Cash and due from banks................... $ 87,075 $ 87,075 $ 71,074 $ 71,074
Federal funds sold........................ 69,800 69,800 24,600 24,600
Investment securities held to maturity.... 1,393 1,420 1,466 1,503
Investment securities available for
sale.................................... 785,031 785,031 654,726 654,726
Mortgage-backed securities held to
maturity................................ 3,070,931 3,106,369 3,022,225 3,091,736
Loans..................................... 3,659,407 3,751,860 3,463,803 3,548,733
LIABILITIES:
Deposits.................................. 6,807,339 6,667,637 6,465,956 6,324,806
</TABLE>
F-20
<PAGE> 160
HUDSON CITY SAVINGS BANK
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1998, 1997 AND 1996
14. REGULATORY CAPITAL
Deposits at the Bank are insured up to standard limits of coverage provided
by the Bank Insurance Fund ("BIF") of the Federal Deposit Insurance Corporation
("FDIC"). The Bank is a New Jersey state chartered savings bank and is subject
to comprehensive regulation, supervision and periodic examinations by the FDIC
and by the New Jersey State Department of Banking.
FDIC regulations require banks to maintain minimum levels of regulatory
capital. Under the regulations in effect at December 31, 1998, the Bank was
required to maintain (a) a minimum leverage ratio of Tier 1 capital to total
adjusted assets of 4.0%, and (b) minimum ratios of Tier 1 and total capital to
risk-weighted assets of 4.0% and 8.0 %, respectively.
Under its prompt corrective action regulations, the FDIC is required to
take certain supervisory actions (and may take additional discretionary actions)
with respect to an undercapitalized institution. Such actions could have a
direct material effect on the institution's financial statements. The
regulations establish a framework for the classification of savings institutions
into five categories: well-capitalized, adequately-capitalized,
undercapitalized, significantly undercapitalized, and critically
undercapitalized. Generally, an institution is considered well-capitalized if it
has a leverage (Tier 1) capital ratio of at least 5.0%; a Tier 1 risk-based
capital ratio of at least 6.0%; and a total risk-based capital ratio of at least
10.0%.
The foregoing capital ratios are based in part on specific quantitative
measures of assets, liabilities and certain off-balance sheet items as
calculated under regulatory accounting practices. Capital amounts and
classifications are also subject to qualitative judgments by the FDIC about
capital components, risk weightings and other factors.
Management believes that, as of December 31, 1998, the Bank meets all
capital adequacy requirements to which it is subject. Further, the most recent
FDIC notification categorized the Bank as a well-capitalized institution under
the prompt corrective action regulations. There have been no conditions or
events since that notification that management believes have changed the Bank's
capital classification.
The following is a summary of the Bank's actual capital amounts and ratios
as of December 31, 1998 and 1997, compared to the FDIC minimum capital adequacy
requirements and the FDIC requirements for classification as a well-capitalized
institution:
<TABLE>
<CAPTION>
FDIC REQUIREMENTS
------------------------------------------
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>
DECEMBER 31, 1998
Leverage (Tier 1) capital.......... $898,494 11.93% $301,314 4.00% $376,642 5.00%
Risk-based capital:
Tier 1........................... 898,494 38.48 93,409 4.00 140,114 6.00
Total............................ 916,206 39.23 186,818 8.00 233,523 10.00
DECEMBER 31, 1997
Leverage (Tier 1) capital.......... $803,615 11.37% $282,836 4.00% $353,546 5.00%
Risk-based capital:
Tier 1........................... 803,615 36.88 87,160 4.00 130,740 6.00
Total............................ 819,240 37.60 174,320 8.00 217,901 10.00
</TABLE>
F-21
<PAGE> 161
HUDSON CITY SAVINGS BANK
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1998, 1997 AND 1996
15. RECENT ACCOUNTING PRONOUNCEMENT
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial position and measure
those instruments at fair value.
SFAS No. 133 is effective for all fiscal quarters of fiscal years beginning
after June 15, 1999. This statement should not be applied retroactively to
financial statements of prior periods. The adoption of the provisions of SFAS
No. 133 is not expected to have a material impact on the financial position or
results of operations of the Bank.
In October 1998, the Financial Accounting Standards Board issued SFAS No.
134, "Accounting for Mortgage-Backed Securities Retained after the
Securitization of Mortgage Loans Held for Sale by a Mortgage Banking
Enterprise." This statement is an amendment of SFAS No. 65, "Accounting for
Certain Mortgage Banking Activities," and requires that after the securitization
of mortgage loans held for sale, an entity engaged in mortgage banking
activities classify the resulting mortgage-backed securities or other retained
interests based on its ability and intent to sell or hold those investments.
This statement is effective for the first fiscal quarter beginning after
December 15, 1998. The adoption of the provisions of SFAS No. 134 is not
expected to have a material impact on the financial position or results of
operations of the Bank.
F-22
<PAGE> 162
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 HUDSON CITY SAVINGS BANK OR HUDSON CITY
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
Page
Summary 3
Risk Factors 11
Selected Financial and Other Data 13
Hudson City Savings Bank 15
Hudson City Bancorp, Inc. 15
Hudson City, MHC 15
How We Intend to Use the Proceeds from the Offering 16
Our Policy Regarding Dividends 17
Market for the Common Stock 18
Regulatory Capital Compliance 19
Capitalization 20
Pro Forma Data 21
Hudson City Savings Bank Statements of Income 25
Management's Discussion and Analysis of
Financial Condition and Results of Operations 26
Business of Hudson City Savings Bank 48
Business of Hudson City Bancorp, Inc. 73
Regulation of Hudson City Savings Bank and
Hudson City Bancorp 74
Taxation 87
Management 90
The Reorganization and the Offering 106
Restrictions on Acquisition of Hudson City Bancorp
and Hudson City Savings 128
Description of Capital Stock Hudson City Bancorp 134
Legal and Tax Opinions 136
Experts 136
Registration Requirements 136
Where You Can Find Additional Information 137
Index to Financial Statements F-1
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 87,020,500 SHARES OF
COMMON STOCK
HUDSON CITY BANCORP, INC.
PROPOSED HOLDING COMPANY
FOR HUDSON CITY SAVINGS BANK
PROSPECTUS
Ryan, Beck & Co.
[ ], 1999
<PAGE> 163
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<S> <C>
New Jersey State Banking Department application fee......... $ 10,000
SEC registration fee(1)..................................... 241,917
National Association of Securities Dealers filing fee(1).... 30,500
Nasdaq National Market Listing Fee(1)....................... 95,000
Printing, postage and mailing............................... 1,300,000
Legal fees and expenses..................................... 750,000
Marketing fees and selling commissions(1)................... 9,529,000
Financial advisor expenses (excluding legal fees)........... 150,000
Accounting fees and expenses................................ 185,000
Appraiser's fees and expenses (including preparing business
plan)..................................................... 165,000
Transfer agent and registrar fees and expenses.............. 25,000
Conversion agent fees and expenses.......................... 240,000
Certificate printing........................................ 11,000
Telephone, temporary help and other equipment............... 198,000
Blue Sky fees and expenses (including fees of counsel)...... 10,000
Miscellaneous............................................... 200,000
-----------
TOTAL....................................................... $13,140,417
===========
</TABLE>
- ---------------
(1) Actual expenses based upon the registration and sale of 87,020,500 at $10.00
per share. All other expenses are estimated.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law ("DGCL"), inter alia,
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 person 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
as 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
II-1
<PAGE> 164
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 Hudson City Bancorp, Inc.
(the "Company") provides that a director shall not be personally liable to the
Company or its shareholders 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 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 also empowers the Company to purchase and maintain insurance to
protect itself and its directors and officers, and those who were or have agreed
to become directors or officers, 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. The Company is also authorized by its Certificate of
Incorporation to enter into individual indemnification contracts with directors
and officers. Hudson City Savings Bank currently maintains and the Company
expects to purchase directors' and officers' liability insurance consistent with
the provisions of the Certificate of Incorporation as soon as practicable.
The Company expects to enter into employment agreements with certain
executive officers, which agreements are expected to require that the Company
will obtain a directors' and officers' liability policy for the benefit of such
officers or that the Company will indemnify such officers to the fullest extent
provided by law.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Not Applicable.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
The exhibits 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>
1.1 Engagement Letter, dated January 27, 1999, between Hudson
City Savings Bank and Ryan Beck & Co.
1.2 Form of Agency Agreement (To be filed by amendment)
2.1 Plan of Reorganization and Stock Issuance of Hudson City
Savings Bank
3.1 Certificate of Incorporation of Hudson City Bancorp, Inc.
3.2 Bylaws of Hudson City Bancorp, Inc.
4.1 Certificate of Incorporation of Hudson City Bancorp, Inc.
(See Exhibit 3.1)
4.2 Bylaws of Hudson City Bancorp, Inc. (See Exhibit 3.2)
4.3 Form of Stock Certificate of Hudson City Bancorp, Inc.
5.1 Opinion of Thacher Proffitt & Wood regarding legality of
shares
8.1 Form of Opinion of Thacher Proffitt & Wood regarding federal
taxation
8.2 Form of Opinion of KPMG LLP regarding New Jersey State
taxation
8.3 Letter of RP Financial, LC. regarding Subscription Rights
10.1 Employee Stock Ownership Plan of Hudson City Savings Bank
10.2 Profit Incentive Bonus Plan of Hudson City Savings Bank
</TABLE>
II-2
<PAGE> 165
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
10.3 Supplementary Savings Plan of Hudson City Savings Bank
10.4 Form of ESOP Loan Commitment Letter and ESOP Loan Documents
(To be filed by amendment)
10.5 Form of Employment Agreement by and among Hudson City
Savings Bank and Hudson City Bancorp, Inc. and certain
officers
10.6 Form of One-Year Change in Control Agreement by and among
Hudson City Savings Bank and Hudson City Bancorp, Inc. and
certain officers
10.7 Form of Two-Year Change in Control Agreement by and among
Hudson City Savings Bank and Hudson City Bancorp, Inc. and
certain officers
10.8 Severance Pay Plan of Hudson City Savings Bank
10.9 ESOP Restoration Plan of Hudson City Savings Bank
10.10 Hudson City Savings Bank Outside Directors Consultation Plan
10.11 Hudson City Savings Bank Supplemental Executive Retirement
Plan
10.12 Hudson City Savings Bank Annual Incentive Plan
10.13 Hudson City Savings Bank Long-Term Incentive Plan
10.14 Form of Post-Retirement Death Benefit for Senior Officers
10.15 Engagement Letter, dated February 3, 1999, between Hudson
City Savings Bank and RP Financial, LC. for conversion
appraisal services
10.16 Engagement Letter, dated February 3, 1999, between Hudson
City Savings Bank and RP Financial, LC. for services related
to the preparation of the business plan
21.1 Subsidiaries of Hudson City Bancorp, Inc.
23.1 Consent of KPMG LLP
23.2 Consent of Thacher Proffitt & Wood (Included in Exhibits 5.1
and 8.1)
23.3 Consent of RP Financial, LC.
24.1 Power of Attorney (Included in Signature Page of this
Registration Statement)
27.1 Financial Data Schedule (Submitted only with filing in
electronic format)
99.1 Appraisal Report of RP Financial, LC. (To be filed by
amendment)
99.2 Form of Marketing Materials to be used in connection with
the Offerings (To be filed by amendment)
</TABLE>
(b). Financial Statement Schedules.
All schedules have been omitted as not applicable or not required under the
rules of Regulation S-X.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any Prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the Prospectus any facts or events arising after
the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b)
if, in the aggregate, the changes in volume and price represent
no more than a 20%
II-3
<PAGE> 166
change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
Registration Statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment 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.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the Offering.
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.
Insofar as indemnification by the Registrant for liabilities arising under
the Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-4
<PAGE> 167
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Paramus, New Jersey, on March 11,
1999.
Hudson City Bancorp, Inc.
By: /s/ LEONARD S. GUDELSKI
------------------------------------
Leonard S. Gudelski
Chairman of the Board and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Ronald E. Hermance, Jr. 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 S-1 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.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement, has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
- ---- ----- ----
<S> <C> <C>
/s/ LEONARD S. GUDELSKI Director, Chairman of the Board and March 11, 1999
- ------------------------------------------ Chief Executive Officer (Principal
Leonard S. Gudelski executive officer)
/s/ RONALD E. HERMANCE, JR. Director, President and Chief March 11, 1999
- ------------------------------------------ Operating Officer (Principal
Ronald E. Hermance, Jr. financial officer)
/s/ VERNE S. ATWATER Director March 11, 1999
- ------------------------------------------
Verne S. Atwater
/s/ JOHN D. BIRCHBY Director March 11, 1999
- ------------------------------------------
John D. Birchby
/s/ KENNETH L. BIRCHBY Director March 11, 1999
- ------------------------------------------
Kenneth L. Birchby
/s/ VICTORIA H. BRUNI Director March 11, 1999
- ------------------------------------------
Victoria H. Bruni
</TABLE>
II-5
<PAGE> 168
<TABLE>
<CAPTION>
NAME TITLE DATE
- ---- ----- ----
<S> <C> <C>
/s/ WILLIAM J. COSGROVE Director March 11, 1999
- ------------------------------------------
William J. Cosgrove
/s/ ANDREW J. EGNER, JR. Director March 11, 1999
- ------------------------------------------
Andrew J. Egner, Jr.
/s/ JOHN W. KLIE Director March 11, 1999
- ------------------------------------------
John W. Klie
/s/ DONALD O. QUEST Director March 11, 1999
- ------------------------------------------
Donald O. Quest
/s/ ARTHUR V. WYNNE, JR. Director March 11, 1999
- ------------------------------------------
Arthur V. Wynne, Jr.
</TABLE>
II-6
<PAGE> 169
EXHIBIT LIST
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
1.1 Engagement Letter, dated January 27, 1999, between Hudson
City Savings Bank and Ryan Beck & Co.
1.2 Form of Agency Agreement (To be filed by amendment)
2.1 Plan of Reorganization and Stock Issuance of Hudson City
Savings Bank
3.1 Certificate of Incorporation of Hudson City Bancorp, Inc.
3.2 Bylaws of Hudson City Bancorp, Inc.
4.1 Certificate of Incorporation of Hudson City Bancorp, Inc.
(See Exhibit 3.1)
4.2 Bylaws of Hudson City Bancorp, Inc. (See Exhibit 3.2)
4.3 Form of Stock Certificate of Hudson City Bancorp, Inc.
5.1 Opinion of Thacher Proffitt & Wood regarding legality of
shares
8.1 Form of Opinion of Thacher Proffitt & Wood regarding federal
taxation
8.2 Form of Opinion of KPMG LLP regarding New Jersey State
taxation
8.3 Letter of RP Financial, LC. regarding Subscription Rights
10.1 Employee Stock Ownership Plan of Hudson City Savings Bank
10.2 Profit Incentive Bonus Plan of Hudson City Savings Bank
10.3 Supplementary Savings Plan of Hudson City Savings Bank
10.4 Form of ESOP Loan Commitment Letter and ESOP Loan Documents
(To be filed by amendment)
10.5 Form of Employment Agreement by and among Hudson City
Savings Bank and Hudson City Bancorp, Inc. and certain
officers
10.6 Form of One-Year Change in Control Agreement by and among
Hudson City Savings Bank and Hudson City Bancorp, Inc. and
certain officers
10.7 Form of Two-Year Change in Control Agreement by and among
Hudson City Savings Bank and Hudson City Bancorp, Inc. and
certain officers
10.8 Severance Pay Plan of Hudson City Savings Bank
10.9 ESOP Restoration Plan of Hudson City Savings Bank
10.10 Hudson City Savings Bank Outside Directors Consultation Plan
10.11 Hudson City Savings Bank Supplemental Executive Retirement
Plan
10.12 Hudson City Savings Bank Annual Incentive Plan
10.13 Hudson City Savings Bank Long-Term Incentive Plan
10.14 Form of Post-Retirement Death Benefit for Senior Officers
10.15 Engagement Letter, dated February 3, 1999, between Hudson
City Savings Bank and RP Financial, LC. for conversion
appraisal services
10.16 Engagement Letter, dated February 3, 1999, between Hudson
City Savings Bank and RP Financial, LC. for services related
to the preparation of the business plan
21.1 Subsidiaries of Hudson City Bancorp, Inc.
23.1 Consent of KPMG LLP
23.2 Consent of Thacher Proffitt & Wood (Included in Exhibits 5.1
and 8.1)
23.3 Consent of RP Financial, LC.
24.1 Power of Attorney (Included in Signature Page of this
Registration Statement)
27.1 Financial Data Schedule (Submitted only with filing in
electronic format)
</TABLE>
II-7
<PAGE> 170
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
99.1 Appraisal Report of RP Financial LC. (To be filed by
amendment)
99.2 Form of Marketing Materials to be used in connection with
the Offerings (To be filed by amendment)
</TABLE>
II-8
<PAGE> 1
Exhibit 1.1
[RYAN, BECK & CO. LETTERHEAD]
CONFIDENTIAL
January 27, 1999
Mr. Ronald E. Hermance, Jr.
President & Chief Operating Officer
Hudson City Savings Bank
West 80 Century Road
Paramus, New Jersey 07652
Re: Mutual Holding Company Formation - Subscription Enhancement, Proxy
Solicitation & Administrative Services
Dear Mr. Hermance:
Ryan, Beck & Co. ("Ryan, Beck") is pleased to submit this engagement letter
setting forth the terms of the proposed engagement between Ryan, Beck and Hudson
City Savings Bank, (the "Institution") in connection with the proposed formation
of a mutual holding company and sale of common stock by the Institution.
1. BACKGROUND ON RYAN, BECK
Ryan, Beck, Inc., was organized in 1946 and is one of the nation's leading
investment bankers for financial institutions. The firm is a registered
broker-dealer with the Securities and Exchange Commission, a member of the
National Association of Securities Dealers, Inc., Securities Industry
Association and a member of the Securities Investor Protection Corporation.
Ryan, Beck's corporate finance and research group represents one of the largest
such groups devoted solely to financial institution matters in the country.
Moreover, Ryan, Beck is one of the largest market makers in bank and thrift
stocks.
2. MUTUAL HOLDING COMPANY FORMATION AND STOCK OFFERING
It is our understanding that the Institution proposes to reorganize into a
two-tier mutual holding company structure (the "Reorganization") by forming a
mutual holding company and middle-tier holding company ("Holding Company")
pursuant to applicable regulations, whereby the Holding Company will sell up to
49% of its common stock (the "Common Stock") in a subscription offering with any
remaining shares sold in a community offering and/or underwritten public
offering (collectively the "Offering"). In connection therewith, the
Institution's Board of Directors will adopt a reorganization and stock issuance
plan (the "Plan") whereby shares of Common Stock will be offered for sale in the
Offering. In connection with the Reorganization and Offering, Ryan,
<PAGE> 2
Mr. Ronald E. Hermance, Jr.
January 27, 1999
Page 2
Beck proposes to act as financial advisor to the Institution with respect to the
Plan and selling agent/lead manager with respect to the subscription and
community offerings. Specific terms of services shall be set forth in a
definitive agency agreement (the "Definitive Agreement") between Ryan, Beck and
the Institution to be executed on the date the offering document is declared
effective by the appropriate regulatory authorities.
3. SERVICES TO BE PROVIDED BY RYAN, BECK
a. Advisory Services - Thorough planning is essential to a successful
offering. Ryan, Beck serves as lead coordinator of the marketing and
logistic efforts necessary to prepare for an offering. Our actions are
intended to clearly define responsibilities and timetables, while avoiding
costly surprises. We assume responsibility for the initial preparation of
marketing materials--saving you time and legal expense. Moreover, as your
investment banker, Ryan, Beck will evaluate the financial, marketing and
regulatory issues involved in the Offering. Our specific responsibilities
include:
- Review and advise with respect to the Plan;
- Review and provide input with respect to the Business Plan to be
prepared in connection with the Reorganization;
- Participate in drafting the Prospectus and assist in obtaining all
requisite regulatory approvals;
- Review and opine to the Board of Directors on the adequacy of the
appraisal process;
- Develop a marketing plan for the Offering including direct mail,
advertising, community meetings and telephone solicitation;
- Provide specifications and assistance in selecting data processing
assistance, printer and other professionals;
- Develop an operating plan for the Stock Sale Center (the "Center");
- Provide a list of equipment and supplies needed for the Center;
- Draft marketing materials including letters, brochures, slide show
script and advertisements; and
- Assist in arranging market-makers for post-reorganization trading.
b. Administrative Services and Stock Sale Center Management - Ryan, Beck will
manage all aspects of the Offering. A successful Offering requires an
enormous amount of attention to detail. Working knowledge and familiarity
with the law and "lore" of bank regulators, Securities and Exchange
Commission and NASD is essential. Ryan, Beck's experience in managing many
thrift reorganizations and mutual holding company minority stock offerings
will minimize the burden on your management and disruption to normal
banking business.
c. At the same time, our legal, accounting and regulatory background ensures
that details are attended to in a professional fashion. An Offering
requires accurate and timely record keeping
<PAGE> 3
Mr. Ronald E. Hermance, Jr.
January 27, 1999
Page 3
and reporting. Furthermore, customer inquiries must be handled
professionally and accurately. The Center centralizes all data and work
effort relating to the Offering.
Ryan, Beck will supervise and administer the Center. We will train Center
staff to help record stock orders, answer customer inquiries and handle
special situations as they arise. Center activities include the following:
- Provide experienced on-site registered representatives to minimize
disruption of day-to-day business.
- Identify and organize space for the Center, the focal point of sales
and proxy solicitation activity;
- Administer the Center. All substantive stock and proxy related
matters will be handled by employees of Ryan, Beck.
- Organize and implement all proxy solicitation efforts;
- Prepare procedures for processing proxies, stock orders and cash,
and for handling requests for information;
- Ryan, Beck will outsource all reorganization agent/data
processing/transfer agent functions. Ryan, Beck recommends
outsourcing such services to Chase/Mellon Shareholder Services. The
cost of such services will be borne by the Institution and are
subject to separate agreement;
- Provide scripts, training and guidance for the telephone team in
soliciting proxies and in the stock sales telemarketing effort;
- Educate the Institution's directors, officers and employees about
the Reorganization and Offering, their roles and relevant securities
laws;
- Train branch managers and customer-contact employees on the proper
response to stock purchase inquiries;
- Train and supervise Center staff assisting with proxy and order
processing;
- Prepare daily sales reports for management and ensure funds received
balance to such reports;
- Coordinate functions with the data processing agent, printer,
transfer agent, stock certificate printer and other professionals;
- Design and implement procedures for handling IRA and Keogh orders;
and
- Provide post-offering subscriber assistance and management of the
pro-ration process.
d. Securities Marketing Services - Ryan, Beck uses various sales techniques
including direct mail, advertising, community investor meetings, telephone
solicitation, and if necessary, selling group formation. The sales
approach is tailored to fit your specific situation. Our techniques are
designed to attract a stockholder base comprised largely of community
oriented individuals loyal to the Institution.
<PAGE> 4
Mr. Ronald E. Hermance, Jr.
January 27, 1999
Page 4
Our specific actions include:
- Assign licensed registered representatives from our staff to work at
the Center to solicit orders on behalf of the Institution from
eligible prospects who have been targeted as likely and desirable
stockholders;
- Assist management in developing a list of potential investors who
are viewed as priority prospects;
- Respond to inquiries concerning the Offering and investment
opportunities;
- Organize, coordinate and participate in community informational
meetings. These meetings are intended to both relieve customer
anxiety and attract potential investors. The meetings generate
widespread publicity for the Offering while providing local exposure
of the Institution and promoting favorable stockholder relations;
- Supervise and conduct a telemarketing campaign to identify prospects
from among the Institution's customer base;
- Continually advise management on market conditions and the
community's responsiveness to the Offering; and
- If appropriate and at the request of the Institution and the Holding
Company, arrange a syndicated community Offering involving a selling
group of selected broker-dealers acting on a "best efforts" basis to
assist in selling stock during the Offering. In so doing, prepare
broker "fact sheets" and arrange "road shows" for the purpose of
stimulating interest in the stock and informing the brokerage
community of the particulars of the Offering. Alternatively, if so
directed by the Institution and the Holding Company, Ryan, Beck will
lead manage a "stand-by" firm commitment underwriting including
other underwriters designated by the Holding Company;
- Coordinate efforts to maximize after-market support and
institutional sponsorship.
4. COMPENSATION
a. For its services hereunder, the Holding Company and/or the Institution
will pay to Ryan, Beck the following compensation in connection with the
Reorganization:
(1) An advisory and management fee of $150,000 in connection with the
advisory, administrative and proxy solicitation services set forth
in section 3.a. and 3.b. hereof (the "Management Fee");
(2) A fee of one and one-fifth percent (1.20%) of the dollar amount of
the Common Stock sold in the Offering, other than those shares sold
pursuant to (3) below. No fee shall be payable pursuant to this
subsection in connection with the sale of stock to officers,
directors, employees or immediate family of such persons
("Insiders") and qualified and non-qualified employee benefit plans
of the Institution or the Insiders.
<PAGE> 5
Mr. Ronald E. Hermance, Jr.
January 27, 1999
Page 5
(3) For stock sold by a group of NASD member firms (which will include
Ryan, Beck & Co.) under a selected dealers' agreement or
underwriting agreement (the "Selling Group"), a fee equal to one and
one-fifth percent (1.20%), which fee along with the fee payable
directly by the Institution to selected dealers shall not exceed
five to six percent (5.00% - 6.00%) in the aggregate. Ryan, Beck
will not commence sales of the stock through members of the Selling
Group without the specific prior approval of the Institution.
Such fees (less the amount of any advance payments) are to be paid to
Ryan, Beck at the closing of the Offering. As advance payments, the
Institution will pay Ryan, Beck $50,000 upon execution of this letter and
$100,000 upon commencement of the Offering, each of which will be offset
against compensation due hereunder at Closing. If, pursuant to a
resolicitation undertaken by the Institution, Ryan, Beck is required to
provide significant additional services, or expend significant additional
time, the parties shall mutually agree to the dollar amount of the
additional compensation due.
To the extent the Holding Company elects to employ broker-dealers to serve
as "stand-by" underwriters then any "stand-by" fees associated therewith
are to be paid separately by the Holding Company. Sales concessions paid
to such firms are covered by paragraph 4 (a)(3) above.
b. If (i) the Plan is abandoned or terminated by the Institution; (ii) the
Offering is not consummated by December 31, 1999; (iii) Ryan, Beck
terminates this relationship because there has been a material adverse
change in the financial condition or operations of the Institution since
December 31, 1998; or (iv) immediately prior to commencement of the
Offering, Ryan, Beck terminates this relationship because in its opinion,
which shall have been formed in good faith after reasonable determination
and consideration of all relevant factors, there has been a failure to
satisfactorily disclose all relevant information in the disclosure
documents or the existence of market conditions which might render the
sale of the shares by the Institution hereby contemplated inadvisable;
Ryan, Beck shall not be entitled to the fees set forth above under
subparagraph (a), but in addition to reimbursement of its reasonable
out-of-pocket expenses as set forth in paragraph 7 below, shall be
entitled to receive for its advisory and administrative services a fee of
$150,000.
5. MARKET MAKING
Ryan, Beck agrees to use its best efforts to maintain a market and to solicit
other broker-dealers to make a market in the Common Stock after the Offering so
that there are at least three market makers for the Common Stock after the
Offering.
<PAGE> 6
Mr. Ronald E. Hermance, Jr.
January 27, 1999
Page 6
6. DOCUMENTS
The Institution and its counsel will complete, file with the appropriate
regulatory authorities and, as appropriate, amend from time to time, the
information to be contained in the Institution's applications to banking and
securities regulators and any related exhibits thereto. In this regard, the
Institution and its counsel will prepare a prospectus and any other necessary
disclosure documents relating to the offering of the Common Stock in conformance
with applicable rules and regulations. As the Institution's financial advisor,
Ryan, Beck will in conjunction with counsel, conduct an examination of the
relevant documents and records of the Institution and will make such other
reasonable investigation as deemed necessary and appropriate under the
circumstances. The Institution agrees to make all such documents, records and
other information deemed necessary by Ryan, Beck, or its counsel, available to
them upon reasonable request. Ryan, Beck's counsel will prepare, subject to the
approval of the Institution's counsel, the Definitive Agreement. Ryan, Beck's
counsel shall be selected by Ryan, Beck, subject to the approval of the
Institution.
7. EXPENSES AND REIMBURSEMENT
The Institution will bear all of its expenses in connection with the
Reorganization and the Offering of its Common Stock including, but not limited
to, the Institution's attorney fees, NASD filing fees, "blue sky" legal fees,
expenses for appraisal, auditing and accounting services, advertising expenses,
printing expenses, temporary personnel expenses and the preparation of stock
certificates. In the event Ryan, Beck incurs such expenses on behalf of the
Institution, the Institution shall pay or reimburse Ryan, Beck for such
reasonable fees and expenses regardless of whether the Reorganization is
successfully completed. Ryan, Beck will not incur any single expense of more
than $2,000, pursuant to this paragraph without the prior approval of the
Institution.
The Institution also agrees to reimburse Ryan, Beck for reasonable out-of-pocket
expenses, including legal fees and expenses, incurred by Ryan, Beck in
connection with the services contemplated hereunder. Ryan, Beck will not incur
legal fees (excluding the out-of-pocket expenses of counsel) in excess of
$125,000 without the approval of the Institution. Other out-of-pocket expenses
will not exceed $50,000 without the approval of the Institution. The parties
acknowledge, however, that such caps may be increased by the mutual consent of
the Institution and Ryan, Beck in the event of any material delay in the
Offering which would require an update of the financial information in tabular
form contained in the Prospectus for a period later than that set forth in the
original Prospectus filing. Not later than three days before closing, we will
provide you with a detailed accounting of all reimbursable expenses to be paid
at closing.
8. BLUE SKY
To the extent required by applicable state law, Ryan, Beck and the Institution
will need to obtain or confirm exemptions, qualifications or registration of the
Common Stock under applicable state
<PAGE> 7
Mr. Ronald E. Hermance, Jr.
January 27, 1999
Page 7
securities laws and NASD policies. Such work will be performed by the
Institution's counsel and the cost of such legal work and related filing fees
will be paid by the Institution. The Institution will cause the counsel
performing such services to prepare a Blue Sky memorandum related to the
Offering including Ryan, Beck's participation therein and shall furnish Ryan,
Beck a copy thereof addressed to Ryan, Beck or upon which such counsel shall
state Ryan, Beck may rely.
9. AVAILABILITY OF "STARS" PROGRAM
As an additional service to the Institution, Ryan, Beck will make available for
a period of 1 year following the completion of the Offering, advisory services
through the Ryan, Beck Strategic Advisory Services ("STARS") program. The
undersigned will serve as the senior relationship manager for this program. If
the Institution elects to avail itself of the STARS program, Ryan, Beck will
meet with the Institution at its request. Ryan, Beck also will provide opinions
and recommendations, upon request, for the areas covered below:
Valuation Analysis
Merger and Acquisition Planning and Analysis
Merger and Acquisition Trends
Planning, Forecasting & Competitive Strategy
Capital, Asset & Liability Structure & Management
Stock Repurchase Programs
Dividend Policy
Dividend Reinvestment Programs
Market Development and Sponsorship of Bank Securities
Financial Disclosure
Financial Relations
Financial Reports
Branch Sales and Purchases
Stock Benefit Plan Analysis and Advisory
Stockholder & Investor Relations Presentations & Programs
Fairness Opinions
Scanning of Potential Acquisition Candidates
Based on Published Statement Information
(This screening does not extend to any in-depth merger and acquisition
analyses or studies which are available under Ryan, Beck's normal fee
schedule, and does not include retention of Ryan, Beck by the Institution
for any specific merger/acquisition situation.)
If the Institution elects to utilize the STARS program Ryan, Beck will waive the
regular retainer fee and hourly charges for this program for the first year. The
Institution also will reimburse Ryan, Beck's reasonable out-of-pocket expenses
incurred in conjunction with the performance of
<PAGE> 8
Mr. Ronald E. Hermance, Jr.
January 27, 1999
Page 8
these services. Such out-of-pocket expenses shall include travel, legal and
other miscellaneous expenses. Ryan, Beck will not incur any single expense in
excess of $2,000 pursuant to this paragraph without the prior approval of the
Institution.
If negotiations for a transaction conducted during the term of the STARS
Advisory Agreement described above result in the execution of a definitive
agreement and/or consummation of a transaction for which Ryan, Beck customarily
would be entitled to a fee for its advisory or other investment banking
services, Ryan, Beck shall receive a contingent advisory fee ("Advisory Fee") in
accordance with the terms of a separate engagement letter with respect to such
transaction.
10. INDEMNIFICATION
The Definitive Agreement will provide for indemnification of the type usually
found in underwriting agreements as to certain liabilities, including
liabilities under the Securities Act of 1933. The Institution also agrees to
defend, indemnify and hold harmless Ryan, Beck and its officers, directors,
employees and agents against all claims, losses, actions, judgments, damages or
expenses, including but not limited to reasonable attorneys' fees, arising
solely out of the engagement described herein, except that such indemnification
shall not apply to Ryan, Beck's own bad faith, willful misconduct or gross
negligence.
11. CONFIDENTIALITY
To the extent consistent with legal requirements and except as otherwise set
forth in the Prospectus, all information given to Ryan, Beck by the Institution,
unless publicly available or otherwise available to Ryan, Beck without
restriction to breach of any confidentiality agreement ("Confidential
Information"), will be held by Ryan, Beck in confidence and will not be
disclosed to anyone other than Ryan, Beck's agents without the Institution's
prior approval or used for any purpose other than those referred to in this
engagement letter. Upon any termination of its engagement, Ryan, Beck shall
promptly deliver to the Institution all materials specifically produced for it
and will return to the Institution all Confidential Information provided to
Ryan, Beck during the course of its engagement hereunder.
12. NASD MATTERS
Ryan, Beck has an obligation to file certain documents and to make certain
representations to the National Association of Security Dealers ("NASD") in
connection with the Reorganization. The Institution agrees to cooperate with
Ryan, Beck and provide such information as may be necessary for Ryan, Beck to
comply with all NASD requirements applicable to it in connection with its
participation as contemplated herein in the Reorganization. Ryan, Beck is and
will remain through
<PAGE> 9
Mr. Ronald E. Hermance, Jr.
January 27, 1999
Page 9
completion of the Reorganization a member in a good standing of the NASD and
will comply with all applicable NASD requirements.
13. OBLIGATIONS
(a) Except as set forth below, this engagement letter is merely a statement of
intent. While Ryan, Beck and the Institution agree in principle to the
contents hereof and propose to proceed promptly and in good faith to work
out the arrangements with respect to the Reorganization, any legal
obligations between Ryan, Beck and the Institution shall be only: (i)
those set forth herein in paragraphs 2, 3 and 4 regarding services and
payments; (ii) those set forth in paragraph 7 regarding reimbursement for
certain expenses; (iii) those set forth in paragraph 10 regarding
indemnification; (iv) those set forth in paragraph 11 regarding
confidentiality; and (v) as set forth in a duly negotiated and executed
Definitive Agreement.
(b) The obligation of Ryan, Beck to enter into the Definitive Agreement shall
be subject to there being, in Ryan, Beck's opinion, which shall have been
formed in good faith after reasonable determination and consideration of
all relevant factors: (i) no material adverse change in the condition or
operation of the Institution; (ii) satisfactory disclosure of all relevant
information in the disclosure documents and a determination that the sale
of stock is reasonable given such disclosures; (iii) no market conditions
which might render the sale of the shares by the Institution hereby
contemplated inadvisable; and (iv) agreement that the price established by
the independent appraiser is reasonable in the then prevailing market
conditions.
<PAGE> 10
Mr. Ronald E. Hermance, Jr.
January 27, 1999
Page 10
Please acknowledge your agreement to the foregoing by signing in the place
provided below and returning one copy of this letter to our office together with
the retainer payment in the amount of $50,000. We look forward to working with
you.
RYAN, BECK & CO., INC.
BY: /s/ Ben A. Plotkin
-------------------------------------------------
Ben A. Plotkin
Chairman & Chief Executive Officer
Accepted and Agreed to This 28th Day of January, 1999
HUDSON CITY SAVINGS BANK
BY: /s/ Ronald E. Hermance, Jr.
-------------------------------------------------
Ronald E. Hermance, Jr.
President & Chief Operating Officer
<PAGE> 1
Exhibit 2.1
================================================================================
PLAN OF REORGANIZATION
& STOCK ISSUANCE
OF
HUDSON CITY SAVINGS BANK
Adopted by the Board of Managers on February 11, 1999
As Amended and Restated as of March 11, 1999
================================================================================
<PAGE> 2
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS
.......................................................................Plan -- 3
ARTICLE II
THE REORGANIZATION
Section 2.01 General.................................................Plan -- 9
Section 2.02 Possible Conversion of MHC to a Federal MHC............Plan -- 10
Section 2.03 Second-Step Conversion; Conversion of MHC
to Stock Form..........................................Plan -- 10
ARTICLE III
PROCEDURE FOR APPROVAL OF THE REORGANIZATION
Section 3.01 Application and Notice.................................Plan -- 11
Section 3.02 Approval of Plan by Voting Depositors;
the Special Meeting....................................Plan -- 12
Section 3.03 Regulatory Approvals...................................Plan -- 12
ARTICLE IV
SALE OF COMMON STOCK
Section 4.01 In General.............................................Plan -- 13
Section 4.02 Proceeds from Reorganization into Mutual Holding
Company Structure......................................Plan -- 14
Section 4.03 Pricing and Number of Shares of Common Stock;
Independent Appraiser..................................Plan -- 14
Section 4.04 Subscription Rights....................................Plan -- 17
Section 4.05 Community Offering.....................................Plan -- 19
Section 4.06 Subscription and Community Offering Procedures;
Order Forms............................................Plan -- 20
Section 4.07 Payment for Common Stock...............................Plan -- 21
Section 4.08 Syndicated Community Offering..........................Plan -- 22
Section 4.09 Public Offering Alternative............................Plan -- 23
Section 4.10 Restrictions on Purchase and Transfer
of Common Stock........................................Plan -- 24
Section 4.11 Time Limits for Sale of Shares; Effect
of Inability to Sell...................................Plan -- 25
Section 4.12 Enforcement of Terms and Conditions....................Plan -- 25
Plan -- i
<PAGE> 3
ARTICLE V
CERTAIN RESTRICTIONS
Section 5.01 Sale of Shares Purchased by Managers, Directors or
Officers...............................................Plan -- 26
Section 5.02 Subsequent Purchases of Shares by Managers,
Directors and Officers.................................Plan -- 26
Section 5.03 Acquisition of Control.................................Plan -- 27
ARTICLE VI
EFFECT OF REORGANIZATION;
CERTAIN COVENANTS AND AGREEMENTS
Section 6.01 Charters and Bylaws...................................Plan -- 28
Section 6.02 Effect of Reorganization...............................Plan -- 28
Section 6.03 Liquidation Account....................................Plan -- 29
Section 6.04 Voting Rights..........................................Plan -- 30
Section 6.05 Issuance of Stock......................................Plan -- 30
Section 6.06 Directors of Converted Bank............................Plan -- 31
Section 6.07 Employment Agreements..................................Plan -- 31
Section 6.08 Market for the Common Stock............................Plan -- 31
Section 6.09 Stock Repurchases and Stock Benefit Plans..............Plan -- 31
Section 6.10 Payment of Dividends and Repurchase of Stock...........Plan -- 31
ARTICLE VII
TAX RULING REQUIREMENT; AMENDMENT
AND TERMINATION; MISCELLANEOUS
Section 7.01 Conditions to Reorganization...........................Plan -- 32
Section 7.02 Amendment or Termination of the Plan...................Plan -- 32
Section 7.03 Completion Date........................................Plan -- 33
Section 7.04 Expenses of the Reorganization.........................Plan -- 33
Section 7.05 Interpretation.........................................Plan -- 33
Section 7.06 Severability...........................................Plan -- 33
Section 7.07 Miscellaneous..........................................Plan -- 33
Exhibit A Proposed Certificate of Incorporation of Hudson City Savings Bank
Exhibit B Proposed Bylaws of Hudson City Savings Bank
Exhibit C Proposed Certificate of Incorporation of Hudson City, MHC
Exhibit D Proposed Bylaws of Hudson City, MHC
Exhibit E Proposed Certificate of Incorporation of Hudson City Bancorp,
Inc.
Exhibit F Proposed Bylaws of Hudson City Bancorp, Inc.
Plan -- ii
<PAGE> 4
PLAN OF REORGANIZATION
& STOCK ISSUANCE
OF
HUDSON CITY SAVINGS BANK
INTRODUCTORY STATEMENT
The Board of Managers of Hudson City Savings Bank has adopted this Plan of
Reorganization and Stock Issuance pursuant to which the Bank proposes to
reorganize from a New Jersey chartered mutual savings bank into the mutual
savings bank holding company structure. The Reorganization will be accomplished
under the laws of the State of New Jersey and the regulations of the Department
and the FDIC, and other applicable federal laws and regulations. As part of the
Reorganization and the Plan, the Bank will convert to a New Jersey chartered
stock savings bank, and will form or cause to be formed a New Jersey chartered
mutual savings bank holding company and a Delaware corporation to become an
intermediate stock holding company. The Holding Company will be a majority-owned
subsidiary of the MHC at all times that the MHC remains in existence, and the
Bank will become a wholly-owned subsidiary of the Holding Company. Concurrently
with the Reorganization, the Holding Company will offer for sale up to 49% of
its Common Stock in the Subscription Offering on a priority basis to Eligible
Account Holders, Tax-Qualified Employee Plans of the Bank and Supplemental
Eligible Account Holders. Any remaining shares may then be offered for sale in a
Community Offering. Any shares remaining after the Subscription Offering and the
Community Offering may be offered to the public in a Syndicated Community
Offering or a Public Offering. Wherever appropriate for purposes of this Plan,
capitalized terms shall have the meanings assigned to them under Article I
hereof.
The primary purpose of the Reorganization is to enable the Bank to compete
and expand more effectively in the financial services marketplace. Use of the
Holding Company is intended to provide greater organizational flexibility to the
Bank. The Reorganization will permit the Holding Company to issue capital stock,
which is a source of financing not available to mutual savings banks. The
Holding Company will not be offering all of its Common Stock for sale to
depositors and the public in the Offerings, and for this reason the
Reorganization will result in a smaller amount of capital raised in comparison
to a standard mutual-to-stock conversion. This will make deployment of offering
proceeds more manageable for the Bank. The Reorganization also will offer the
Bank more capital raising opportunities to effect future transactions, including
the acquisition of banks and other financial services companies. It will also
provide the Bank with greater flexibility to structure and finance the expansion
of its operations. The Reorganization will also enable the Bank to better manage
its capital by providing broader investment opportunities through the holding
company structure and by enabling the Bank to distribute excess capital to
shareholders of the Holding Company. As a result, the Bank's mutual form of
ownership and its ability to remain an independent savings bank and to provide
community-oriented financial services will be preserved through the mutual
holding company structure.
Plan -- 1
<PAGE> 5
This Plan has been unanimously approved by the Board of Managers of the
Bank and must be approved by the affirmative vote of at least a majority of the
eligible votes of Voting Depositors. Each Voting Depositor will be entitled to
cast one vote for each $100 or fraction thereof of deposits in the Bank on the
Voting Record Date. By approving the Plan, the Voting Depositors will also be
approving all steps necessary and incidental to the formation of the Bank (in
stock form), the Holding Company and the MHC, including any merger necessary to
consummate the Reorganization. The Reorganization is also subject to the
approval of the Commissioner, the Federal Reserve Board and the FDIC.
Upon the Reorganization, each Person having a Deposit Account at the Bank
prior to the Reorganization will continue to have a Deposit Account, without
further 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. 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.
Plan -- 2
<PAGE> 6
ARTICLE I
DEFINITIONS
As used in this Plan, 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 acting 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.
"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 Holding Company,
the MHC, the Bank or a majority-owned subsidiary of the Bank) of which such
Person is an officer or 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;
(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 4.04(a) and 4.10, 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 Managers, Officers 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 Holding
Company, the MHC, the Bank or any of the Bank's subsidiaries.
"Application" shall mean the application to be filed with the
Commissioner by the Bank in connection with the Reorganization.
Plan -- 3
<PAGE> 7
"Bank" shall mean Hudson City Savings Bank in its mutual form or in
its stock form, as the context of the reference requires.
"Banking Law" shall mean the Banking Act of 1948, as amended, of the
State of New Jersey.
"Benefit Plan" shall mean any Tax-Qualified Employee Stock Benefit
Plan or any Non-Tax-Qualified Employee Stock Benefit Plan.
"Commissioner" shall mean the Commissioner of Banking and Insurance
of the State of New Jersey.
"Common Stock" shall mean all of the shares of common stock, par
value $.01 per share, issued pursuant to this Plan by the Holding Company. The
Common Stock will not be insured by the FDIC.
"Community Offering" shall mean the offering for sale to Other
Depositors and certain members of the general public directly by the Bank or the
Holding Company, if utilized, of any shares of the Common Stock not subscribed
for in the Subscription Offering in accordance with Section 4.05.
"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.
"Department" shall mean the Department of Banking and Insurance of
the State of New Jersey.
"Deposit Account" shall mean all deposits of the Bank including
without limitation, savings, time, demand, negotiable orders of withdrawal
(NOW), money market and passbook accounts maintained by the Bank; provided,
however, that the term "Deposit Account" shall not include any escrow accounts
maintained at the Bank.
"Depositor" shall mean any Person owning a Deposit Account.
"Director" shall mean a member of the Board of Managers of the Bank
after the Reorganization or a member of the Board of Directors of the Holding
Company or the MHC.
"Effective Date" shall mean the effective date of the Reorganization
on which all of the Common Stock is issued and sold and the other transactions
contemplated by this Plan are consummated.
Plan -- 4
<PAGE> 8
"Eligibility Record Date" shall mean December 31, 1997, the date
established by the Board of Managers 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 Valuation Range" shall mean the range of the minimum and
maximum aggregate values of the estimated pro forma market value of the Common
Stock as set forth in the independant valuation prepared by the Independent
Appraiser, as determined in accordance with Section 4.03.
"FDIC" shall mean the Federal Deposit Insurance Corporation.
"FRB" shall mean the Board of Governors of the Federal Reserve
System.
"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 4.04.
"Holding Company" shall mean Hudson City Bancorp, Inc., a
corporation to be organized under the laws of the State of Delaware.
"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 Commissioner and the FDIC.
"Internal Revenue Code" shall mean the Internal Revenue Code of
1986, as amended.
"Manager" shall mean a member of the Board of Managers of the Bank
prior to the Reorganization.
"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 Hudson City, MHC, a mutual savings bank holding
company organized under the laws of the State of New Jersey.
"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 MHC, the Holding Company or the Bank for the benefit of officers, employees
or directors of the MHC, the Holding Company, the Bank or any Affiliate of any
of them and that, by its terms, is authorized or required to purchase Common
Stock.
Plan -- 5
<PAGE> 9
"Officer" shall mean an executive officer of the MHC, the Holding
Company 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.
"Offering Range" shall mean the range of the minimum and maximum
aggregate values determined by the Board of Managers of the Bank within which
the aggregate offering price of Common Stock sold in the Reorganization will
fall. The Offering 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 4.03. The maximum of the Offering Range shall be no more
than 15% above the average of the minimum and maximum of such range and the
minimum of which shall be no more than 15% below such average.
"Offerings" shall mean the Subscription Offering, the Community
Offering, the Syndicated Community Offering and the Public Offering,
collectively.
"Order Form" shall mean the form provided by the Holding Company or
the Bank that subscribers must use to order Common Stock in the Subscription
Offering and Community Offering.
"Other Depositors" shall mean any Depositor of the Bank (other than
an Eligible Account Holder or Supplemental Eligible Account Holder) who owns a
Qualifying Deposit on the Voting Record Date.
"OTS" shall mean the Office of Thrift Supervision.
"Overallotment Option" shall mean the option that 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 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 4.03(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 and Stock Issuance, including any amendments or supplements
thereto.
Plan -- 6
<PAGE> 10
"Prospectus" shall mean the Prospectus to be used in offering the
Common Stock in the Offerings.
"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 underwritten offering of certain
shares of Common Stock in accordance with Section 4.09 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).
"Regulations" shall mean the Banking Law, Subchapter 5 of Chapter 13
of Title 3 of the N.J.A.C. (the "NJ Regulations") and the regulations of the
FDIC applicable to mutual to stock conversions, 12 C.F.R. ss.ss. 303.15 and
333.4, to the extent such regulations preempt or supplement the NJ Regulations.
"Reorganization" shall mean (a) the reorganization of the Bank into
the mutual holding company structure including (i) the conversion of the Bank
into stock form and (ii) the organization of the MHC and the Holding Company and
(b) the issuance of the Common Stock in accordance with this Plan.
"Resident" and "residence" as used herein with respect to any person
shall mean any person who occupies a dwelling within the State of New Jersey and
establishes an ongoing physical presence within the State of New Jersey together
with an indication that such presence is something other than merely transitory
in nature. To the extent the person is a corporation or other business entity,
the principal place of business or headquarters shall be in the State of New
Jersey. To the extent a person is a personal benefit plan, the circumstances of
the beneficiary shall apply with respect to this definition. In the case of all
other benefit plans, the circumstances of the trustee shall be examined for
purposes of this definition. The Bank may utilize deposit or loan records or
such other evidence provided to it to make a determination as to whether a
person is a Resident. In all cases, however, such a determination shall be made
in the sole discretion of the Bank.
"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.
"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 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
Eligible Account Holder shall be determined in accordance with the Regulations.
Plan -- 7
<PAGE> 11
"Subscription Offering" shall mean the offering of the Common Stock
to Eligible Account Holders, Tax Qualified Employee Stock Benefit Plans and
Supplemental Eligible Account Holders in accordance with Section 4.04 hereof.
"Subscription Rights" shall mean the rights described in Section
4.04 hereof.
"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 Commissioner's approval of the
Plan.
"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, except Officers, Managers and their
Associates.
"Syndicated Community Offering" shall mean the best efforts offering
of Common Stock following the Subscription and Community Offerings through a
selling group of broker-dealers.
"Syndicated Community Offering Price" shall mean the per share price
submitted with orders for shares of Common Stock in the Syndicated Community
Offering.
"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 Holding Company, the MHC or the Bank for the benefit of the officers or
employees of the Holding Company, the MHC, the Bank, or any Affiliate of any 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.
"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
Holding 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.
"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
Managers of the Bank as the date for determining Depositors of the Bank entitled
to notice of and to vote at the Special Meeting, which date shall not be more
than 60 nor less than 10 days before the date of the Special Meeting.
Plan -- 8
<PAGE> 12
ARTICLE II
THE REORGANIZATION
Section 2.01 General. As part of the Reorganization, the Bank will
convert to a New Jersey chartered stock savings bank and will form or cause to
be formed the Holding Company as a Delaware corporation and the MHC as a New
Jersey mutual savings bank holding company. The Reorganization may be effected
in any manner approved by the Commission that is consistent with the purposes of
this Plan and applicable law and regulations. It is currently anticipated that
the Reorganization will be effected in accordance with the following procedures:
(i) the Bank shall organize an interim stock savings bank as a
wholly-owned subsidiary ("Interim One"); (ii) Interim One shall organize
an interim stock savings bank as a wholly-owned subsidiary ("Interim
Two"); (iii) Interim One shall organize the Holding Company as a
wholly-owned subsidiary; (iv) the Bank shall exchange its charter for a
New Jersey stock savings bank charter to become the Bank in stock form and
Interim One shall exchange its charter for a New Jersey mutual savings
bank holding company charter to become the MHC; (v) simultaneously with
step (iv), Interim Two shall merge with and into the Bank with the Bank as
the resulting institution; (vi) all of the initially issued stock of the
Bank shall be transferred to the MHC in exchange for membership interests
in the MHC; and (vii) the MHC shall contribute the capital stock of the
Bank to the Holding Company, and the Bank in stock form shall become a
wholly-owned subsidiary of the Holding Company.
Upon completion of the Reorganization and Offerings, the MHC, the
Holding Company and the Bank shall be structured as follows:
------------ ------------
MHC Public
Shareholders
------------ ------------
| |
At least Up to
51% of the 49% of the
Common Common
Stock Stock
| |
--------------------------------------------
Holding Company
--------------------------------------------
|
100% of the
Common Stock
|
--------------------------------------------
Bank
--------------------------------------------
Contemporaneously with the Reorganization, the Holding Company shall
offer for sale in the Offerings shares of Common Stock representing up to 49% of
the pro forma market value of the Holding Company and the Bank. Upon
consummation of the Reorganization, the legal existence of the Bank shall not
terminate, but the Bank in stock form, shall be a continuation of the
Plan -- 9
<PAGE> 13
Bank in mutual form and all property of the Bank in mutual form, including its
right, title, and interest in and to all property of whatsoever kind and nature,
shall inure to the Bank in stock form immediately by operation of law and
without the necessity of any conveyance or transfer and without any further act
or deed. Upon consummation of the Reorganization, substantially all of the
assets and liabilities (including all Deposit Accounts) of the Bank in mutual
form shall become the assets and liabilities of the Bank in stock form, which
shall thereupon become an operating savings bank subsidiary of the Holding
Company and of the MHC. The Bank in stock form shall continue to have, succeed
to, and be responsible for all the rights, liabilities and obligations of the
Bank in mutual form and shall maintain its headquarters and operations at the
Bank's current locations.
Section 2.02 Possible Conversion of MHC to a Federal MHC.
Upon completion of the Reorganization, the MHC shall be a New Jersey
chartered mutual savings bank holding company. The MHC, however, may elect to
convert its charter to a federal mutual holding company charter in the future.
In the event of such an election, the MHC would be regulated by the OTS. Such a
charter conversion would be subject to the approval of the Board of Directors of
the MHC, the OTS and the Commissioner.
Section 2.03 Second-Step Conversion; Conversion of MHC to Stock
Form.
Following the completion of the Reorganization, the MHC may elect to
convert to stock form in accordance with applicable law (a "Conversion
Transaction"). There can be no assurance when, if ever, a Conversion Transaction
shall occur, and the Board of Managers has no present intent or plan to
undertake a Conversion Transaction. If the Conversion Transaction does not
occur, the MHC shall continue to own a majority of the Common Stock of the
Holding Company.
In a Conversion Transaction, the MHC would merge with and into the
Bank or the Holding Company (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 Holding Company, as determined by the formula set
forth in the following paragraphs. The additional shares of Common Stock of the
Holding Company 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 Holding Company's Common Stock other than the MHC (the "Minority
Shareholders"). In any Conversion Transaction, Minority Shareholders, if any,
shall be entitled to maintain the same percentage ownership interest in the
Holding Company after the Conversion Transaction as their percentage ownership
interest in the Holding Company immediately prior to the Conversion Transaction
(the "Minority Ownership Interest"), subject only to the following adjustments
(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 Holding Company).
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 the
following fraction:
Plan -- 10
<PAGE> 14
(Holding Company shareholders' equity immediately preceding the Conversion
Transaction)-(aggregate amount of dividends waived by MHC, if any)
________________________________________________________________________________
Holding Company 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 Holding Company by multiplying the result obtained in the preceding
paragraph by the following fraction:
(pro forma market value of Holding Company)-
(market value of assets of MHC other than Holding Company common stock)
________________________________________________________________________________
pro forma market value of Holding Company
At the sole discretion of the Board of Directors of each 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 law, provided such
Conversion Transaction does not diminish the rights and ownership interest of
Minority Shareholders 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 Holding Company.
Under current federal and state regulatory policy, a Conversion
Transaction would require the approval of applicable regulatory authorities, and
would be presented to a vote of the depositors of the Bank and the shareholders
of the Holding Company as of a voting record date prior to the completion of the
Conversion Transaction. Federal and state regulatory policy requires that in any
Conversion Transaction eligible depositors of the Bank shall be accorded the
same stock purchase priorities as if the MHC were a mutual savings bank
converting to stock form.
ARTICLE III
PROCEDURE FOR APPROVAL OF THE REORGANIZATION
Section 3.01 Application and Notice.
This Plan, having been duly adopted by the Board of Managers of the
Bank, shall be submitted, together with an Application in the form required by
the Regulations, to the Commissioner for approval and to request certain
waivers, if required, and to the FDIC for non-objection. Following approval of
this Plan by the Board of Managers of the Bank, the Bank shall cause notice of
the adoption of the Plan, and of its intention to convert to stock form and to
reorganize into the mutual holding company structure, to be conspicuously posted
at its home office and each of its branch offices. The Bank shall also issue a
press release containing all of the material terms of the proposed
Reorganization and shall 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.
Plan -- 11
<PAGE> 15
Section 3.02 Approval of Plan by Voting Depositors; the Special
Meeting.
(a) Following (i) approval of the Bank's Application by the
Commissioner, (ii) the non-objection of the FDIC and (iii) the receipt of all
necessary waivers by the Commissioner, 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 Notice of Special Meeting, a proxy card and a Proxy
Statement (which contains a detailed description of the Reorganization) in the
forms required by the Regulations, describing the Plan and certain other matters
relating to the Bank and its Reorganization. If an Order Form and Prospectus are
included in the mailing, separate and readily distinguishable postage-paid
envelopes shall be provided for the return of proxy cards and Subscription Order
Forms.
(b) The Special Meeting shall be held upon written notice given no
less than 20 days nor more than 45 days prior to the date of the Special
Meeting. 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) of
Deposit Accounts such Voting Depositor had with the Bank as of the Voting Record
Date. The Board of Managers 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.
(c) The Commissioner shall be notified of the results of the Special
Meeting by a certificate signed by the appropriate Officers of the Bank promptly
after the conclusion of the Special Meeting. The Plan must be approved 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 shall 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 shall be returned
to subscribers, with interest as provided herein, and all withdrawal
authorizations shall be canceled.
Section 3.03 Regulatory Approvals.
The Board of Managers of the Bank intends to take all necessary
steps to form the Holding Company. The Holding Company will make timely
applications for any requisite regulatory approvals, including an Application
with the Commissioner, an application with the FRB, an application with the FDIC
and a Registration Statement on Form S-1 with the SEC.
ARTICLE IV
SALE OF COMMON STOCK
Section 4.01 In General.
(a) As soon as practicable after adoption of the Plan by the Board
of Managers of the Bank and the Board of Directors of the Holding Company, the
Holding Company shall register the Common Stock under the Securities Act of
1933, as amended, and, subject to Section 4.04 (e)
Plan -- 12
<PAGE> 16
hereof, any applicable state securities or "blue sky" laws. After registration
of the Common Stock and receipt of all required regulatory approvals, up to 49%
of the Common Stock will be offered for sale to the Holders of Subscription
Rights in the respective priorities set forth in Section 4.04; 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 may 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 Managers of the Bank and the Board of
Directors of the Holding Company with the approval of the Commissioner. 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.
(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.
(c) The sales price per share of the Common Stock shall be a uniform
price determined in accordance with the Regulations and Section 4.03 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 Managers of the Bank may determine for any reason
at any time prior to the issuance of the Common Stock not to utilize an
intermediate holding company form of organization in the Reorganization. If the
Board of Managers of the Bank determines not to complete the Reorganization
utilizing an intermediate holding company, up to 49% of the capital stock of the
Bank will be issued and sold in accordance with the Plan with the MHC holding
the remaining shares of the Bank. In such case, the Holding 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, including filing any
necessary documents with the FDIC and the Commissioner, and will issue and sell
the Common Stock in accordance with this Plan. In such event, any subscriptions
or orders received for Common Stock of the Holding 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 Holding
Company. In that event all references to the Holding 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 Commissioner
and the FDIC.
Plan -- 13
<PAGE> 17
Section 4.02 Proceeds from Reorganization into Mutual Holding
Company Structure.
Upon the issuance of the Common Stock, the Holding Company will
contribute to the Bank in at least 50% of the net Reorganization proceeds. The
Holding Company intends to retain up to 50% of the net proceeds of the sale of
the Common Stock. A lesser percentage may be retained in the discretion of the
Boards of Managers of the Bank and the Board of Directors of the Holding
Company. The Bank believes that the Reorganization proceeds will provide
economic strength to the Holding Company and the Bank for the future in a highly
competitive and regulated environment. The Reorganization will facilitate
expansion through acquisitions of financial service organizations,
diversification into other related businesses and 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 Regulations.
The above activities may also be engaged in by the Bank if the Holding Company
is eliminated.
Section 4.03 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. 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 4.03. 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
Commissioner and the FDIC as part of the Bank's applications, such valuation to
be stated in terms of an Estimated Valuation 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 Regulations or the
Commissioner, the Bank shall cause the Independent Appraiser to review
developments subsequent to its valuation to determine whether the Estimated
Valuation Range should be revised. Such valuation shall be prepared in
accordance with the Regulations. The shares of Common Stock being sold in the
Offerings will represent a minority ownership interest in the outstanding Common
Stock of the Holding Company equal to up to 49% of the estimated pro forma
market value of the Common Stock based upon the Independent Valuation. The
percentage of Common Stock offered for sale in the Offerings and the Offering
Range shall be determined by the Board of Directors of the Holding Company and
the Board of Managers of the Bank prior to commencement of the Subscription and
Community Offerings, and will be confirmed upon completion of the Offerings
based on the final or updated Independent Valuation submitted by the Independent
Appraiser.
(b) Based on the valuation of the Independent Appraiser pursuant to
Section 4.03(a) hereof, the Board of Managers of the Bank and the Board of
Directors of the Holding Company shall fix the Maximum Subscription Price and
the number of shares, or range thereof, 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. If the
aggregate purchase price of the
Plan -- 14
<PAGE> 18
Common Stock sold in the Offerings is below the minimum of the Offering Range,
or materially above the maximum of the Offering Range, resolicitation of
purchasers may be required; provided, that up to a 15% increase above the
maximum of the Offering 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. If the aggregate purchase price of the Common
Stock sold in the Offerings is below the minimum of the Offering Range or in
excess of 15% above the maximum of the Offering Range, and a resolicitation is
required, such resolicitation shall be effected in such manner and within such
time as the Holding Company or the Bank shall establish, with the approval of
the Commissioner 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 in the Offerings for these
purposes shall not exceed 15% of the total number of shares of the Common Stock
offered in the Subscription Offering.
(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 Holding 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 Commissioner.
(d) If the shares of Common Stock sold in the Subscription Offering
and the Community Offering are in excess of the maximum of the Offering Range
(the "Adjusted Maximum"), such shares will be allocated in the following order
of priority: (i) if there is an oversubscription at the Eligible Account Holder
level, to fill unfulfilled subscriptions of Eligible Account Holders in
accordance with Section 4.04(a); (ii) to fill the Tax-Qualified Employee Stock
Benefit Plans' subscriptions in accordance with Section 4.04(b); (iii) if there
is an oversubscription at the Supplemental Eligible Account Holder level, to
fill unfulfilled subscriptions of Supplemental Eligible Account Holders in
accordance with Section 4.04(c); and (iv) to fill unfulfilled subscriptions in
the Community Offering in accordance with Section 4.05.
(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 manner
other than a Syndicated
Plan -- 15
<PAGE> 19
Community Offering or Public Offering, the Board of Managers of the Bank and the
Board of Directors of the Holding Company, in consultation with the Independent
Appraiser, shall determine the Actual Purchase Price, subject to approval by the
Commissioner, if required. If all shares of the Common Stock offered are not
subscribed for and there is a Syndicated Community Offering or Public Offering,
the Board of Managers of the Bank and the Board of Directors of the Holding
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 Commissioner, if required. If
there is 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 Offering Range,
unless subscribers are offered the right to modify or rescind their
subscriptions.
(f) The Holding Company shall not consummate any sale unless the
Independent Appraiser shall have confirmed to the Holding Company, the Bank, the
FDIC and the Commissioner 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 Common Stock at the time of such sale. If the
Independent Appraiser is unable to so confirm, the Offering may be canceled or
the Bank and the Holding Company may extend the Reorganization, establish a new
Estimated Valuation Range and Offering Range, new 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
Managers of the Bank and the Board of Directors of the Holding Company shall
determine and the Commissioner shall approve.
(g) The Common Stock to be issued pursuant to this Plan shall upon
issuance be fully paid and nonassessable.
Section 4.04 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 the amount permitted to be subscribed for in the
Community Offering, which amount is currently equal to $500,000 of the Common
Stock offered in connection with the Reorganization, as specified in Section
4.05(e), and may be increased to 5% of the Common Stock offered 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%. Such subscription is subject to the maximum
purchase limitation specified in Section 4.10(b) and the minimum purchase
limitation in Section 4.10(e) and exclusive of an increase in the total number
of shares issued due to an increase in the Offering 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, the Common
Stock shall be allocated among subscribing Eligible Account Holders as follows:
Plan -- 16
<PAGE> 20
(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 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
(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.
Subscription Rights to purchase Common Stock received by Managers 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 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. If, after the filling of
subscriptions of Eligible Account Holders, a sufficient number of shares is not
available to fill the subscriptions by such plans, the subscription by such
plans 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, Manager or Officer of the Holding
Company, the MHC 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, non-transferable Subscription Rights to
subscribe for shares of Common Stock equal to an amount up to the amount
permitted to be subscribed for in the Community Offering, which amount is
currently $500,000 of the Common Stock offered in the Reorganization, as
specified in Section 4.05(e), and may be increased to 5% of the Common Stock
offered 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%. Such subscription
is subject to the maximum purchase limitation specified in Section 4.10(b) and
the minimum purchase limitation in Section 4.10(e) and exclusive of an increase
in the total number of shares issued due to an increase in the Offering 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 and available after purchases
Plan -- 17
<PAGE> 21
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 as the value 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.
(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 Holding Company and 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 4.05 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) Subject to the provisions of Section 4.05(d), the Common Stock
may be offered in the Community Offering to the following persons in the
following order of priority: (i) Other Depositors, (ii) Residents of New Jersey,
and (iii) certain other Persons that the Bank determines to be members of its
community.
(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 Commissioner and the FDIC, if applicable.
Plan -- 18
<PAGE> 22
(c) The Community Offering shall be by means of a direct marketing
program. The Bank or the Holding Company may, if the Board of Managers of the
Bank and the Board of Directors of the Holding 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 Holding Company in the direct marketing program. The Holding Company
and the Bank shall endeavor to 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) At the option of the Bank and the Holding Company in connection
with the Community Offering or the Syndicated Community Offering, a number of
shares equal to the lesser of (i) 25% of the Common Stock offered in the
Offerings and exclusive of an increase in the total number of shares issued due
to an increase in the Offering Range of up to 15% or (ii) the number of shares
of Common Stock not subscribed for in the Subscription Offering or by Other
Depositors, may be initially reserved for institutional investors who need not
be Other Depositors or Residents of New Jersey.
(e) Any Person subscribing for Common Stock in the Community
Offering 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 $500,000 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% of the Common Stock offered in the
Offering without the further approval of depositors or resolicitation of
subscribers and exclusive of an increase in the total number of shares issued
due to an increase in the Offering Range of up to 15%. Such subscription is
subject to the maximum purchase limitation specified in Section 4.10(b). 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,
subject to the reservation of shares set forth in Section 4.05(d), on a priority
basis, such that within each such priority, with respect 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 pro rata basis
until the remaining shares have been allocated.
(f) The Holding Company and 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.
(g) Notwithstanding the foregoing, the Holding 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.
Plan -- 19
<PAGE> 23
Section 4.06 Subscription and Community Offering Procedures; Order
Forms.
(a) After the registration statement for the Common Stock has been
declared effective by the SEC and all other required regulatory approvals have
been obtained, the Holding 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. Notwithstanding the foregoing, the Holding
Company may elect to send Order Forms only to those persons who request them
after such notice has been given as is approved by the Commissioner and is
adequate to apprise all Holders of Subscription Rights of the pendency of the
Subscription Offering. 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 Eligible Account Holders and
Supplemental Eligible Account Holders in accordance with the Regulations. Each
Order Form must be preceded or accompanied by the Prospectus describing the
Holding Company, the MHC, 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 Regulations.
(b) The Holders of Subscription Rights shall have a period of time
within which to complete and deliver an Order Form to the Holding Company. The
exact date and time by which completed Order Forms must be received by the
Holding Company, as well as the location for such delivery, shall be set forth
on the Order Form. Failure of any Holder of Subscription Rights to deliver a
properly completed and executed Order Form to the Holding Company, together with
full payment (or authorization for full payment by withdrawal from a designated
type of Deposit Account with the Bank) for the shares of Common Stock subscribed
for, within the time limits prescribed and to the location or locations
identified in the Order Form shall be deemed a waiver and release by such Person
of any Subscription Rights. The determination of whether an Order Form is
properly completed, executed and delivered shall be in the sole discretion of
the Bank and the Holding Company.
(c) The Company may also distribute or make available the
Prospectus, together with Order Forms for the purchase of Common Stock, to
certain other Persons described in Section 4.05. A subscriber in the Community
Offering shall have a period of time within which to complete and deliver an
Order Form to the Holding Company, which period of time shall end at the same
time that the Subscription Offering terminates, unless extended pursuant to
Section 4.05(b). The exact date and time by which completed Order Forms must be
received by the Holding Company shall be set forth on the Order Form.
(d) The Holding Company may, subject to the provisions of this Plan
and any required approval of the Commissioner, extend the period during which an
Order Form must be completed and delivered to the Holding Company. Any such
extension shall be for a period that the Board of Managers of the Bank and the
Board of Directors of the Holding Company determine is appropriate.
(e) The Company will reserve 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
Plan -- 20
<PAGE> 24
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 Holding Company of the
terms and conditions of the Order Forms will be final and binding on all
subscribers.
Section 4.07 Payment for Common Stock.
(a) Payment for shares of Common Stock subscribed for in the
Subscription Offering and in any Community Offering 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 Holding Company and may be made:
(i) by check, bank draft, or money order, or
(ii) by authorization to the Bank to withdraw from Deposit Accounts,
except for money market accounts, NOW accounts, checking or demand
accounts or other transactional accounts, an amount equal to the aggregate
Maximum Subscription Price of the shares for which the Person subscribed.
If the subscriber is a Benefit Plan, 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 but only if it has received a
loan commitment from the Holding Company or a source of funding acceptable to
the Holding Company, committing to advance to the Benefit Plan on or before the
Effective Date the aggregated Actual Purchase Price of the shares for which the
Benefit Plan subscribed. The Bank and the Holding Company may 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 Holding Company, in their sole discretion. Such
payment by institutional investors may be made by wire transfer.
(b) If the Actual Purchase Price is less than the Maximum
Subscription Price, the difference will either be promptly refunded to all
subscribers (or withdrawal authorizations from Deposit Accounts shall be
reduced) or, if the subscriber has so elected on a space that may be provided on
the Order Form, the difference (excluding accrued interest) will be applied to
the purchase of additional whole shares of Common Stock to the extent available,
and any remaining difference will be promptly refunded to all subscribers (or
withdrawal authorizations from 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 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 Holding Company to make such withdrawal immediately or to place a hold on
such Deposit Account equal to such aggregate Maximum Subscription Price. The
Bank
Plan -- 21
<PAGE> 25
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 certificate account, or places a hold on
such account, in accordance with this Section 4.07, and the certificate 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 certificate 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 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 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.
(e) The Bank will not knowingly lend funds or otherwise extend
credit to any Person for the purpose of purchasing shares of the Common Stock.
Section 4.08 Syndicated Community Offering.
(a) Shares of Common Stock not sold in the Subscription Offering or
the Community Offering, if any, may be offered for sale in a Syndicated
Community Offering, subject to such terms, conditions and procedures as may be
determined by the Bank or the Holding Company, in a manner that is intended to
achieve a reasonably wide distribution of the Common Stock subject to the right
of the Bank and the Holding Company 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 $500,000
of the Common Stock offered in the Reorganization subject to the maximum
purchase limitation specified in Section 4.10(b) and exclusive of an increase in
the total number of shares issued due to an increase in the Estimated Valuation
Range of up to 15%.
(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; 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
Plan -- 22
<PAGE> 26
as practicable following the date upon which the Subscription Offering and any
Community Offering terminate.
Section 4.09 Public Offering Alternative.
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 4.08, be offered for sale by the Holding Company to or
through Underwriters. The provisions of Section 4.10 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 Holding Company
with a view to reoffering them to the general public; (b) use their best efforts
to sell, for the account of the Holding Company, such shares to the general
public; or (c) a combination of (a) and (b), subject to the following terms and
conditions:
(a) 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 any Community Offering, if any such
shares are purchased.
(b) The price paid to the Holding 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 Holding Company and the
Underwriters and approved by the Commissioner, the FDIC (if applicable)
and the National Association of Securities Dealers, Inc.
(c) The Underwriting Agreement shall be subject to the
following conditions and such other conditions as may be acceptable to the
Bank, the Holding Company, the FDIC (if applicable) and the Commissioner:
(i) purchases in the Public Offering shall be subject to the
limitations of Section 4.10; and
(ii) the Holding Company and the 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.
(d) 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 Commissioner and the FDIC, if applicable.
Plan -- 23
<PAGE> 27
Section 4.10 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 Holding
Company owned or controlled by Persons other than the MHC shall not exceed 49%
of the Holding Company's 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 $2,500,000 of the Common Stock offered. 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 more Tax-Qualified Employee
Stock Benefit Plans may subscribe for up to and including 10% of the Common
Stock issued and sold in the Offerings.
(c) The Officers and Managers of the Bank and Officers and Directors
of the Holding Company, the MHC and their Associates, collectively, shall be
entitled to purchase up to and including 25% of the Common Stock issued and sold
in the Offerings. 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 4.10(b) and (c) 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, if 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
Managers of the Bank and the Board of Directors of the Holding 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% of the Common Stock offered in
the Offerings exclusive of an increase in the total number of shares issued due
to an increase in the Offering Range of up to 15%. If the Bank and the Holding
Company increase such maximum purchase limitations, the Bank and the Holding
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 Holding
Company, resolicit certain other large subscribers.
Plan -- 24
<PAGE> 28
(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 4.10, the Officers, Directors and
Managers of the Bank, the MHC and the Holding 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, Managers or Directors of the Bank or
the Holding Company.
Section 4.11 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 Commissioner, and the FDIC
if applicable, may approve. If all shares are not sold as provided for herein,
the Bank and the Holding Company will consult with the Commissioner to determine
an alternative method of sale. In such event and if required by the
Commissioner, the FDIC 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 Holding 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 4.12 Enforcement of Terms and Conditions.
The Bank and the Holding 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 IV 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, the MHC and the Holding Company and their respective
Board of Managers and Board of Directors shall be free from any liability to any
Person on account of any such action.
Plan -- 25
<PAGE> 29
ARTICLE V
CERTAIN RESTRICTIONS
Section 5.01 Sale of Shares Purchased by Managers, Directors or
Officers.
All shares of the Common Stock purchased or acquired (either
directly or indirectly) by the Managers or Officers of the Bank, the MHC or the
Holding Company, or their Associates, on original issue in the Reorganization
(or otherwise beneficially owned by such Managers or Officers immediately upon
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 Manager 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
Holding Company, the MHC 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.
Section 5.02 Subsequent Purchases of Shares by Managers, Directors
or Officers.
For a period of three years following the Effective Date, no Officer
or Manager of the Bank and no Officer or Director of the MHC or the Holding
Company (and any person who was an Officer or Manager of the Bank or an Officer
of Director of the MHC or the Holding Company at any time after the date on
which the Board of Managers of the Bank adopted this Plan), or Associate of any
of them, shall, without the prior written approval of the Commissioner, purchase
or acquire direct or indirect beneficial ownership of any shares of the capital
stock of the Holding 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 5.03 Acquisition of Control.
(a) The Certificate of Incorporation of the Bank, in stock form,
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
Holding Company (if an intermediate holding company
Plan -- 26
<PAGE> 30
form of organization is utilized) or MHC (if the Bank does not use an
intermediate stock holding company) 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. In addition, such Certificate of
Incorporation may also provide that, for a period of five years following the
Conversion, shares beneficially owned in violation of the above-described
Certificate of Incorporation 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 Certificate of
Incorporation will contain provisions providing that special meetings of the
shareholders relating to changes in control or amendment of the Certificate of
Incorporation may only be called by the Board of Directors and that shareholders
shall not be permitted to cumulate their votes.
(b) The Certificate of Incorporation of the Holding Company contains
a provision to the effect that any record owner of any outstanding shares of the
Holding Company's Common Stock (except for the MHC and certain other Persons)
who beneficially owns in excess of 10% of such outstanding shares, exclusive of
any shares beneficially owned by the MHC, shall be entitled to cast only one
one-hundredth (1/100) of one vote per share with respect to any shares held in
excess of such 10%. In addition, the Certificate of Incorporation and Bylaws of
the Holding Company contain provisions for staggered terms of the directors,
non-cumulative voting for directors, limitations on the calling of special
meetings, a fair price provision for certain business combinations and certain
notice requirements.
(c) For the purposes of this Section 5.03:
(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, 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. ss. 8c(a)(10).
Plan -- 27
<PAGE> 31
ARTICLE VI
EFFECT OF REORGANIZATION;
CERTAIN COVENANTS AND AGREEMENTS
Section 6.01 Charters and Bylaws.
(a) The Bank shall take all appropriate steps to adopt a Certificate
of Incorporation for a New Jersey stock savings bank as specified in the
Regulations and approved by the Board of Managers of the Bank. The Bank shall
also take all appropriate steps to adopt Bylaws sufficient and appropriate for a
New Jersey stock savings bank.
(b) The MHC shall take all appropriate steps to adopt a Certificate
of Incorporation for a New Jersey chartered mutual savings bank holding company
as specified in the Regulations and approved by the Board of Managers of the
Bank. The MHC shall also take all appropriate steps to adopt Bylaws sufficient
and appropriate for a New Jersey mutual savings bank holding company.
(c) The Holding Company shall take all appropriate steps to adopt a
Certificate of Incorporation for a Delaware corporation as specified in the
Delaware General Corporation Law and approved by the Board of Managers of the
Bank. The Holding Company shall also take all appropriate steps to adopt Bylaws
sufficient and appropriate for a Delaware corporation.
(d) Copies of the proposed certificates of incorporation and bylaws
of the Bank, in stock form, the MHC and the Holding Company are attached hereto
as exhibits A, B, C, D, E and F respectively and are made part of this Plan. By
their approval of the Plan, the Voting Depositors of the Bank will thereby
approve and adopt the certificates of incorporation of each of the Bank in stock
form, the MHC and the Holding Company.
Section 6.02 Effect of Reorganization.
On the Effective Date of the Reorganization, the legal existence of
the Bank shall not terminate, but the Bank in stock form shall be a continuation
of the Bank in mutual form and all property of the Bank in mutual form including
its right, title, and interest in and to all property of whatsoever kind and
nature, shall inure to the Bank in stock form immediately by operation of law
and without the necessity of any conveyance or transfer and without any further
act or deed. Upon consummation of the Reorganization, substantially all of the
assets and liabilities (including all Deposit Accounts) of the Bank in mutual
form shall become the assets and liabilities of the Bank in stock form, which
shall thereupon become an operating savings bank subsidiary of the Holding
Company and of the MHC. The Bank in stock form shall continue to have, succeed
to, and be responsible for all the rights, liabilities and obligations of the
Bank in mutual form and shall maintain its headquarters and operations at the
Bank's current locations.
Plan -- 28
<PAGE> 32
Section 6.03 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 each Supplemental Eligible Account Holder shall, with respect
to each account held, have a related inchoate interest in a 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 each 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 on the Eligibility Record Date or
such Supplemental Eligible Account Holders on the Supplemental Eligibility
Record Date, as applicable, and the denominator is the total amount of deposits
or shares owned by all Eligible Account Holders or Supplemental Eligible Account
Holders of the Bank on the 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
a 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 or Supplemental Eligibility Record Date, as applicable, is less than
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 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. 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 6.03, 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.
(e) Subsequent to the Effective Date of the Reorganization, all
depositors who had liquidation rights with respect to the Bank as of the date of
the Reorganization shall continue
Plan -- 29
<PAGE> 33
to have such rights solely with respect to the MHC for so long as they remain
depositors of the Bank. No person who ceases to be the holder of a Deposit
Account with the Bank after the Reorganization shall have any liquidation rights
with respect to the Bank or MHC.
Section 6.04 Voting Rights.
Except as may be provided in the Certificate of Incorporation 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 Holding Company pursuant to any amendment thereto subsequent to the
Effective Date of the Reorganization, the holders of the Common Stock of the
Holding Company shall have exclusive voting rights in the Holding Company upon
the Effective Date of the Reorganization.
Section 6.05 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 Certificate of
Incorporation and the Bylaws 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 applicable law and resolution, 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 Holding Company, subject to the provisions of the
Certificate of Incorporation and the Bylaws of the Holding 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 Holding 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, except in connection with a
Conversion Transaction as contemplated in Section 2.03.
Section 6.06 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 Managers 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 Manager 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 of the Bank, the second class shall have a
term of office expiring at the second annual
Plan -- 30
<PAGE> 34
meeting of shareholders of the Bank and the third class shall have a term of
office expiring at the third annual meeting of shareholders of the Bank.
Directors elected at each annual meeting of shareholders of the Bank (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.
Section 6.07 Employment Agreements.
The Bank, the MHC and the Holding Company may enter into employment
agreements with such officers and employees and upon such terms and conditions
as the Board of Managers of the Bank and the Board of Directors of each of the
MHC and Holding Company shall determine.
Section 6.08 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 Nasdaq Stock Market and to encourage and assist market makers
to establish and maintain a market for the Common Stock, if applicable.
Section 6.09 Stock Repurchases and Stock Benefit Plans.
The Holding Company, or the Bank if the Holding 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
Regulations, unless such requirements are waived by the appropriate regulatory
agency or agencies.
Section 6.10 Payment of Dividends and Repurchase of Stock.
The Holding Company may not declare or pay a cash dividend on, or
repurchase any of, its Common Stock if the effect thereof would cause its
regulatory capital or the regulatory capital of the Bank to be reduced below the
amount required (i) to maintain the Liquidation Account or (ii) under FDIC rules
and regulations, FRB rules and regulations or the Banking Law. Otherwise, the
Holding Company may declare dividends or make other capital distributions in
accordance with applicable laws and regulations. Subject to any applicable
regulatory approvals, the MHC may waive its right to receive dividends declared
by the Holding Company.
Plan -- 31
<PAGE> 35
ARTICLE VII
TAX RULING REQUIREMENT; AMENDMENT
AND TERMINATION; MISCELLANEOUS
Section 7.01 Conditions to Reorganization.
The Reorganization of the Bank pursuant to this Plan is conditioned
upon the following:
(a) Prior receipt by the Bank of rulings of the United States
Internal Revenue Service and the State of New Jersey 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 or Supplemental Eligible Account Holders or to the Bank and the Holding
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 7.03; and
(d) The non-objection of the FDIC to the Reorganization, the
approval of the Reorganization by the Commissioner, the approval of the FRB of
the Holding Company's acquisition of the common stock of the Bank and the
effectiveness of the Holding Company's Registration Statement on Form S-1.
Section 7.02 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 Commissioner or the FDIC,
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 Managers 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 Commissioner and the FDIC, if
applicable. This Plan may be terminated by the Board of Managers of the Bank at
any time prior to the Special Meeting and at any time thereafter with the
concurrence of the Commissioner and the FDIC, if applicable. By adoption of the
Plan, the Voting Depositors of the Bank authorize the Board of Managers of the
Bank to amend or terminate the Plan under the circumstances set forth in this
Section.
Section 7.03 Completion Date.
The Reorganization shall be completed within 24 months from the date
of approval of this Plan by the Commissioner.
Plan -- 32
<PAGE> 36
Section 7.04 Expenses of the Reorganization.
The expenses incurred in the Reorganization shall be reasonable.
Section 7.05 Interpretation.
Subject to applicable law as set forth in Section 7.07, all
interpretations of this Plan and all applications of the provisions of this Plan
to particular circumstances by a majority of the Board of Managers of the Bank
shall be final, subject to the authority of the Commissioner and the FDIC.
Section 7.06 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 7.07 Miscellaneous.
This Plan is to be governed by and construed in accordance with the
laws of the State of New Jersey, 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 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 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 and Supplemental Eligible Account Holders, 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.
Plan -- 33
<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
HUDSON CITY BANCORP, INC.
UNDER SECTION 102 OF
THE GENERAL CORPORATION LAW
OF THE STATE OF DELAWARE
<PAGE> 2
TABLE OF CONTENTS
Page
ARTICLE I
NAME
.............................................................................. 1
ARTICLE II
REGISTERED OFFICE AND AGENT
.............................................................................. 1
ARTICLE III
PURPOSE
.............................................................................. 1
ARTICLE IV
CAPITAL STOCK
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
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
i
<PAGE> 3
<TABLE>
<CAPTION>
ARTICLE VI
BOARD OF DIRECTORS
<S> <C>
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
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
ARTICLE X
INDEMNIFICATION
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....................................... 17
Section 5. Determination of Right to Indemnification....................................... 18
Section 6. Advancement of Costs, Charges and Expenses...................................... 18
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
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
Section 1. Amendments of Certificate of Incorporation....................................... 23
Section 2. Amendments of Bylaws............................................................. 23
ARTICLE XIII
NOTICES
................................................................................................ 24
</TABLE>
iii
<PAGE> 5
CERTIFICATE OF INCORPORATION
OF
HUDSON CITY 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 HUDSON
CITY 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 HUDSON CITY 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 One Billion (1,000,000,000) shares, of which Two
Hundred Million (200,000,000) shares shall be preferred stock, par value one
cent ($.01) per share (the "Preferred Stock"), and Eight Hundred Million
-1-
<PAGE> 6
(800,000,000) 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 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.
-2-
<PAGE> 7
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 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 Hudson City Savings Bank, a New Jersey 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
capital 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.
-3-
<PAGE> 8
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, Hudson City, MHC, a New
Jersey 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 Bylaw 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
underwriters' behalf, in connection with a public offering of the Common Stock;
or (b) any
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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 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
of 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 five (5) nor more than twenty-one (21) (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 Bylaws so provide, elections of
directors need not be by written ballot.
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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 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 a majority 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; provided, however, that in the
event of any Conversion Transaction (as defined in Article XI hereof), and
without any further action by the Board of Directors or the shareholders, the
removal of a director shall thereafter require the vote of not less than
eighty-percent (80%) of the total votes eligible to be cast by the holders of
all of the outstanding shares of capital stock entitled to vote thereon. 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
Certificate of Incorporation and Bylaws 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 entity 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.
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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 or by the President. 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 Bylaws 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:
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(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:
(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
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 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
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(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.
(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.
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(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, 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 Exchange Act, 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
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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
(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
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
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(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 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
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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, the MHC, 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.
(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,
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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 Bylaws (and
notwithstanding the fact that a lesser percentage may be specified by law, this
Certificate of Incorporation or the Bylaws 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 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.
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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.
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 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
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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 successful, 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
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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 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,
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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 to which any person seeking
indemnification or advancement of costs, charges and expenses may be entitled
under law (common or statutory) or any Bylaw, 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
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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 Bylaws, 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 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;
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(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 Bylaws 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 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.
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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.
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.
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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 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.
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ARTICLE XIII
NOTICES
The name and mailing address of the incorporator of this
Corporation is:
Hudson City Savings Bank
West 80 Century Road
Paramus, NJ 07652
[Signature Page Follows]
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Hudson City Savings Bank caused this Certificate of Incorporation
to be signed by Leonard S. Gudelski, its Chairman and Chief Executive Officer,
and attested to by Ronald E. Hermance, Jr., its President and Chief Operating
Officer, this 25th day of February, 1999.
Hudson City Savings Bank, Incorporator
By: /s/ Leonard S. Gudelski
-----------------------------------------
Name: Leonard S. Gudelski
Title: Chairman and Chief Executive Officer
Attest:
By: /s/ Ronald E. Hermance, Jr.
----------------------------------
Name: Ronald E. Hermance, Jr.
Title: President and Chief Operating Officer
Hudson City Bancorp, Inc.
<PAGE> 1
EXHIBIT 3.2
BYLAWS
OF
HUDSON CITY BANCORP, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
ARTICLE I
OFFICES
<S> <C>
Section 1. Registered Office............................................ 1
Section 2. Additional Offices........................................... 1
ARTICLE II
SHAREHOLDERS
Section 1. Place of Meetings............................................ 1
Section 2. Annual Meetings.............................................. 1
Section 3. Special Meetings............................................. 1
Section 4. Notice of Meetings........................................... 1
Section 5. Waiver of Notice............................................. 2
Section 6. Fixing of Record Date........................................ 2
Section 7. Quorum....................................................... 2
Section 8. Conduct of Meetings.......................................... 3
Section 9. Voting; Voting of Shares in the Name of Two or More Persons.. 3
Section 10. Proxies...................................................... 3
Section 11. Inspectors of Election....................................... 4
Section 12. Procedure for Nominations.................................... 4
Section 13. Substitution of Nominees..................................... 5
Section 14. New Business................................................. 5
ARTICLE III
CAPITAL STOCK
Section 1. Certificates of Stock........................................ 7
Section 2. Transfer Agent and Registrar................................. 7
Section 3. Registration and Transfer of Shares.......................... 7
Section 4. Lost, Destroyed and Mutilated Certificates................... 8
Section 5. Holder of Record............................................. 8
ARTICLE IV
BOARD OF DIRECTORS
Section 1. Responsibilities; Number of Directors........................ 8
Section 2. Qualifications............................................... 8
Section 3. Age Limitation of Directors.................................. 8
Section 4. Regular and Annual Meetings.................................. 8
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C>
Section 5. Special Meetings............................................. 9
Section 6. Notice of Meetings; Waiver of Notice......................... 9
Section 7. Conduct of Meetings.......................................... 9
Section 8. Quorum and Voting Requirements............................... 9
Section 9. Informal Action by Directors................................. 10
Section 10. Resignation.................................................. 10
Section 11. Vacancies.................................................... 10
Section 12. Compensation................................................. 10
Section 13. Amendments Concerning the Board.............................. 10
ARTICLE V
COMMITTEES
Section 1. Standing Committees.......................................... 10
Section 2. Executive Committee.......................................... 11
Section 3. Audit Committee.............................................. 11
Section 4. Compensation Committee....................................... 12
Section 5. Nominating Committee......................................... 12
Section 6. Other Committees............................................. 13
ARTICLE VI
OFFICERS
Section 1. Designation of Executive Officers............................ 13
Section 2. Term of Office and Removal................................... 13
Section 3. Chairman of the Board........................................ 13
Section 4. Chief Executive Officer...................................... 14
Section 5. President.................................................... 14
Section 6. Chief Operating Officer...................................... 14
Section 7. Vice Presidents. ........................................... 14
Section 8. Secretary.................................................... 14
Section 9. Treasurer.................................................... 15
Section 10. Comptroller.................................................. 15
Section 11. Other Officers............................................... 15
Section 12. Compensation of Officers..................................... 15
ARTICLE VII
DIVIDENDS
............................................................................... 15
</TABLE>
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<PAGE> 4
ARTICLE VIII
AMENDMENTS
........................................................................... 15
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<PAGE> 5
BYLAWS
OF
HUDSON CITY BANCORP, INC.
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office of HUDSON
CITY 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, the
President 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 ten
(10) nor more than sixty (60) days before the date of such meeting. If mailed,
such notice shall be
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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 of
record entitled to vote at the meeting. At such adjourned meeting at which a
quorum is present, any
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<PAGE> 7
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 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. 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 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
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<PAGE> 8
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 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
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<PAGE> 9
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
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
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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: (i) 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 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
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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 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
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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 five (5) nor more than twenty-one (21)
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 majority of the entire board,
and, in any event not less than three (3) 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 member of the Board,
except those in office as Managers of Hudson City Savings Bank, a New Jersey
chartered savings bank (the "Bank") on December 31, 1998, who has reached the
age of eighty shall be eligible for re-election. The term in office of any
directors, except those in office on December 31, 1998, shall expire at the
first annual meeting subsequent to his reaching the age of eighty. No person
shall be eligible for initial election as a director who is seventy years of age
or more.
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 or the
President. 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 percent (60%) 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) business 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 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 or such other director or officer as the Chairman
shall designate. If 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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<PAGE> 14
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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<PAGE> 15
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 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. There shall be an Executive
Committee of the Board, consisting of at least five (5) members, as shall be
appointed by Board resolution or these Bylaws. The Chairman shall be a member of
the Executive Committee. The Chief Executive Officer and the President shall be
ex-officio members of the Executive Committee, with power to vote on all matters
so long as they are also directors of the Corporation. A majority of the members
of the Executive Committee, and, in any event not less than three (3) members,
shall be non-officer directors. A quorum shall consist of at least four (4)
members of the Executive Committee, a majority of whom must be non-officer
directors, or such other number of members as the Board may establish by
resolution. 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 Executive Committee.
The Chairman, the President or such other director or officer
as the Chairman shall designate shall serve as chairman of the Executive
Committee. If the office of the Chairman is vacant, 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
present, 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
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<PAGE> 16
Committee shall meet as necessary at the call of the Chairman or at the call of
a majority of the members of the Executive Committee.
The Executive Committee shall, to the extent not inconsistent
with law, these Bylaws, the Certificate of Incorporation or resolutions adopted
by the Board, exercise all the powers and authority of the Board in the
management of the business and affairs of the Corporation in the intervals
between the meetings of the Board.
SECTION 3. AUDIT COMMITTEE. The Audit Committee shall consist
of at least three (3) members whose background and experience are financial
and/or business management related, none of whom shall be an officer or salaried
employee of the Corporation or its subsidiaries, an attorney who receives a fee
or other compensation for legal services rendered to the Corporation or any
other individual having a relationship which, in the opinion of the Board, would
interfere with the exercise of independent judgment 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. The Audit Committee shall meet annually, at the call of the chairman
of the committee 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 Corporation 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. 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 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
Corporation's internal auditing staff. 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 Audit Committee.
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 Corporation 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 annually at the call of
the chairman of the committee, 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 at which a quorum exists, including the chairman of the
committee
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<PAGE> 17
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 Corporation 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 and the President 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.
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
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<PAGE> 18
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 or the Chief Operating Officer 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 the Chairman. 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.
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<PAGE> 19
SECTION 6. CHIEF OPERATING OFFICER. The Chief Operating
Officer 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 and the direction of the Chief Executive Officer. The
Chief Operating Officer shall, under authority given to him or her, sign
instruments in the name of the Corporation. The Chief Operating Officer shall
have such other powers and duties as may be assigned to him by the Board, its
committees or the Chief Executive Officer.
SECTION 7. 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 and the Chief Operating Officer as permitted by the Board.
SECTION 8. 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, the
Chairman, the Chief Executive Officer, the President or the Chief Operating
Officer. 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, the Chairman,
the Chief Executive Officer, the President or the Chief Operating Officer.
SECTION 9. TREASURER. The Treasurer shall perform all acts and
duties as are generally incident to the office of the Treasurer.
SECTION 10. COMPTROLLER. The Comptroller shall be the chief
accounting officer of the Corporation and shall be responsible for the
maintenance of adequate internal systems and records. The Comptroller shall
maintain the general books of the Corporation relating to 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. The Comptroller shall prepare or cause to be
prepared all reports pertinent to his office as may be required by the Board or
regulatory authorities.
SECTION 11. 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 12. 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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<PAGE> 20
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> 1
EXHIBIT 4.3
HUDSON CITY 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
HUDSON CITY 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 Chairman of the Board and
Chief Executive Officer
<PAGE> 2
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> 3
HUDSON CITY BANCORP, INC.
The shares represented by this Certificate are issued subject to all
the provisions of the Certificate of Incorporation and Bylaws of HUDSON CITY
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 reorganization of Hudson
City Savings Bank (the "Bank") from a New Jersey mutual savings bank to a New
Jersey 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"), exclusive of the shares beneficially owned by Hudson
City, MHC. 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, exclusive of the
shares beneficially owned by Hudson City, MHC. 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:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not as tenants
in common
UNIF GIFT MIN ACT Custodian
----------------------
(Cust) (Minor)
under Uniform Gifts to Minors Act
-----------------
(State)
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> 1
Exhibit 5.1
[THACHER PROFFITT & WOOD LETTERHEAD]
Writer's Direct Dial
(212) 912-7815
March 12, 1999
Hudson City Bancorp, Inc.
West 80 Century Road
Paramus, New Jersey 07652
Ladies and Gentlemen:
We have acted as special counsel to Hudson City Bancorp, Inc., a
Delaware corporation (the "Company"), in connection with the registration under
the Securities Act of 1933, as amended, by the Company of an aggregate of
87,020,500 shares of Common Stock, par value $.01 per share (the "Shares"), of
the Company and the related preparation and filing by the Company with the
Securities and Exchange Commission of a Registration Statement on Form S-1 (the
"Registration Statement"). In rendering the opinion set forth below, we do not
express any opinion concerning law other than the federal law of the United
States and the corporate law of the State of Delaware.
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 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> 2
Hudson City Bancorp, Inc. Page 2
March 12, 1999
Based on the foregoing, we are of the opinion that the Shares to be
issued and sold by the Company have been duly authorized and, when issued and
sold as contemplated in the Registration Statement and the Plan of
Reorganization and Stock Issuance of Hudson City Savings Bank ("Bank"), 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 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 Bank's Application for Formation of a Mutual
Savings Bank Holding Company to the New Jersey Department of Banking and
Insurance (the "N.J. Application"), and to the reference to our firm under the
heading "Legal Matters" in the Prospectus which is part of such Registration
Statement and to the reference to our firm in the N.J. Application.
Very truly yours,
THACHER PROFFITT & WOOD
By /s/ Robert C. Azarow
Robert C. Azarow
<PAGE> 1
Exhibit 8.1
Internet ID: @thacherproffitt.com
_____ __, 1999
Hudson City Bancorp, Inc.
West 80 Century Road
Paramus, New Jersey 07652
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) Hudson City Savings Bank (the
"Bank") will convert from a New Jersey chartered mutual savings bank ("Mutual
Bank") into a New Jersey chartered stock savings bank ("Stock Bank") and become
the wholly-owned subsidiary of Hudson City Bancorp, Inc., a newly formed
Delaware capital stock corporation ("Stock Holding Company") and (ii) Stock
Holding Company will become a majority-owned subsidiary of Hudson City, MHC, a
newly formed New Jersey chartered mutual savings bank holding company ("Mutual
Holding Company"). These transactions and the related sale of Common Stock, also
discussed below, will be effected pursuant to the Plan of Reorganization and
Stock Issuance adopted by the Board of Managers of Mutual Bank on February 11,
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 and proposed sale of
common stock (the "Prospectus"). We are rendering this opinion pursuant to
Section 7.01 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.
The Reorganization will be effected, pursuant to the Plan, as follows:
1. Mutual Bank will organize Mutual Holding Company, which will initially
be organized in stock form and initially exist as Mutual Bank's
wholly-owned subsidiary.
2. Mutual Holding Company will organize two wholly-owned subsidiaries, one
of which will be Stock Holding Company, and the other of which will be an
interim stock savings bank ("Interim").
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Hudson City Savings Bank
_______, 1999 Page 2.
3. The following events will occur simultaneously pursuant to the Plan:
(i) Mutual Bank will exchange its charter for a New Jersey stock savings
bank charter and thereby become Stock Bank (the "Conversion"); (ii)
Interim will merge with and into Stock Bank with Stock Bank surviving;
(iii) Mutual Holding Company will cancel its stock and exchange its
charter for a New Jersey mutual savings bank holding company charter and
thereby become a mutual holding company the members of which (the "Mutual
Holding Company Members") will be the former depositors in Mutual Bank
immediately prior to these transactions ("Mutual Bank Members"). As a
mutual entity, Mutual Holding Company 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 Mutual Holding Company, and the Mutual
Holding Company Members will hold interests in Mutual Holding Company
comparable to the interests they previously held in Mutual Bank.
4. Mutual Holding Company will then contribute all of the stock of Stock
Bank to Stock Holding Company.
As a result of these transactions, Stock Bank will be a wholly-owned
subsidiary of Stock Holding Company and Stock Holding Company will be a
wholly-owned subsidiary of Mutual Holding Company. In substance, upon the
Conversion and pursuant to the other transactions described above, the Mutual
Bank Members will constructively receive the stock of Stock Bank and will then
exchange such stock for membership interests in Mutual Holding Company (the
"Exchange").
Simultaneously with the Reorganization, Stock Holding 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 certain
members of Mutual Bank, the Bank's employee stock ownership plan, other members
of Mutual Bank and, perhaps, 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 Mutual
Bank contained in the Bank's letter to us dated _____, 1999. 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 Mutual Bank or
Stock Bank) will recognize no gain or loss as a result of the Reorganization;
(2) the basis of each asset of Mutual Bank held by Stock Bank immediately
after the Conversion will be the same as Mutual Bank's basis for such asset
immediately prior to the Conversion;
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Hudson City Savings Bank
_______, 1999 Page 3.
(3) the holding period of each asset of Mutual Bank held by Stock Bank
immediately after the Conversion 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 of the Reorganization 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 the Reorganization had not
occurred;
(5) Mutual Bank Members will recognize no gain or loss upon their
constructive receipt of shares of Stock Bank common stock solely in exchange for
their interest (i.e., liquidation rights) in Mutual Bank;
(6) a Mutual Bank Member's basis in the shares of Stock Bank common stock
constructively received in the Conversion will be the same as the basis of the
Mutual Bank interest constructively surrendered in exchange therefor;
(7) a Mutual Bank Member's holding period for the shares of Stock Bank
common stock constructively received in the Conversion will include the holding
period of the Mutual Bank interest constructively surrendered in exchange
therefor; and
(8) 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 Mutual Bank.
(b) as regards the Exchange:
(9) the Exchange will qualify as an exchange of property for stock under
Code section 351;
(10) the shareholders of Stock Bank (the former Mutual Bank Members) will
recognize no gain or loss upon the transfer to Mutual Holding Company of the
shares of Stock Bank common stock they constructively received in the Conversion
in exchange for interests (i.e., liquidation rights) in Mutual Holding Company;
(11) the basis of the interest in Mutual Holding Company received by each
shareholder of Stock Bank in exchange for such shareholder's shares of Stock
Bank common stock will be equal to the basis of such shares of Stock Bank common
stock;
(12) the holding period of the interest in Mutual Holding Company received
by each shareholder of Stock Bank will, as of the date of the Exchange, be the
same as the holding period of the shares of Stock Bank common stock transferred
in exchange therefor, provided such shares of Stock Bank common stock were held
as a capital asset on the date of the Exchange;
(13) Mutual Holding Company will recognize no gain or loss upon its
receipt from the shareholders of Stock Bank of shares of Stock Bank common stock
in exchange for interests in Mutual Holding Company;
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Hudson City Savings Bank
_______, 1999 Page 4.
(14) Mutual Holding Company's basis for each share of Stock Bank common
stock received from a shareholder of Stock Bank in exchange for an interest in
Mutual Holding Company will be the equal to the basis of such share of common
stock in the hands of such Stock Bank shareholder; and
(15) Mutual Holding Company's holding period for each share of Stock Bank
common stock received from a shareholder of Stock Bank in exchange for an
interest in Mutual Holding Company 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 Stock Issuance Plan:
(16) no gain or loss will be recognized by Stock Bank upon the sale of
shares of Stock Bank common stock under the Stock Issuance Plan;
(17) no gain or loss will be recognized by Eligible Account Holders or
Supplemental Eligible Account Holders upon the distribution to them of
nontransferable subscription rights to purchase shares of Stock Bank common
stock under to the Stock Issuance 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 Stock Bank common stock
purchased under the Stock Issuance 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 Stock Bank common stock in (18), above, we have relied,
without independent verification, on the opinion of RP Financial, LC. 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
Stock Issuance 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 Reorganization - Tax
Aspects."
Very truly yours,
THACHER PROFFITT & WOOD
By:
<PAGE> 1
Board of Managers
Hudson City Savings Bank
West 80 Century Road
Paramus, New Jersey 07652
Dear Gentlemen:
You have requested our opinion as to certain State of New Jersey tax
consequences under the Corporation Business Tax, Savings Institution Tax, and
the Gross Income Tax of a plan of conversion and plan of reorganization of
Hudson City Savings Bank (the 'Mutual Bank')
On February 11, 1999, the Board of Managers of the 'Mutual Bank' adopted the
Plan of Reorganization and Stock Issuance (the "Plan") of Hudson City Savings
Bank. Capitalized terms not defined in this letter have the meanings assigned
to them in the Plan. The reorganization will be accomplished by the following
steps:
(1) The Mutual Bank will establish Mutual Holding Company to be organized as a
first-tier wholly owned subsidiary of the initial Mutual Bank.
(2) The Mutual Holding Company will form two wholly-owned subsidiaries, one of
which will be Stock Holding Company, and the other of which will be an
interim stock savings bank ("Interim"), solely to facilitate the
reorganization.
(3) The following events will occur simultaneously pursuant to the Plan: (i)
Mutual Bank will exchange its charter for a New Jersey stock savings bank
charter and thereby become Stock Bank (the "Conversion"); (ii) Interim will
merge with and into Stock Bank with Stock Bank surviving; (iii) Mutual
Holding Company will cancel its stock and exchange its charter for a New
Jersey mutual savings bank holding company charter and thereby become a
mutual holding company the members of which (the "Mutual Holding Company
Members") will be the former depositors in Mutual Bank immediately prior to
these transactions ("Mutual Bank Members"). As a mutual entity, Mutual
Holding Company 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 Mutual Holding Company, and the Mutual Holding
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Board of Managers
Hudson City Savings Bank
Company Members will hold interest in Mutual Holding Company comparable to
the interests they previously held in Mutual Bank.
(4) Mutual Holding Company will then contribute all of the stock of Stock Bank
to Stock Holding Company.
(5) The Stock Holding 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 certain members of Mutual Bank,
the Bank's employees stock ownership plan, other members of Mutual Bank and
perhaps, certain members of the general public.
As a result of these transactions, Stock Bank will be a wholly-owned subsidiary
of Stock Holding Company and Stock Holding Company will initially be a
wholly-owned subsidiary of Mutual Holding Company. In substance, upon the
Conversion and pursuant to the other transactions described above, the Mutual
Bank Members will constructively receive the stock of Stock Bank and will then
exchange such stock for membership interests in Mutual Holding Company (the
"exchange").
Our views as to the New Jersey tax consequences are based upon the opinion
("Federal Opinion") of Thacher Proffitt and Wood (dated ________, 1999) that the
transaction will qualify as a tax-free transaction under Sections 351 and
368(a)(1)(F) of the Internal Revenue Code (IRC), and that the Mutual Bank's
members will recognize no gain or loss.
NEW JERSEY CORPORATION BUSINESS TAX ACT
While the New Jersey Corporation Business Tax Act does not address tax-free
holding company formations or reorganizations, Section 54:10A-4(k) provides, in
part, that "the amount of a taxpayer's entire net income shall be deemed prima
facie to be equal in amount to the taxable income, before net operating loss
deduction and special deductions, which the taxpayer is required to report to
the United States Treasury Department for the purposes of computing its Federal
income tax...".
Under this Act, the Attorney General issued a formal opinion which states in
pertinent part that "...gain on liquidations of wholly-owned subsidiaries and
transfers of assets from one corporation to another ... which is not recognized
for Federal income tax purposes pursuant to Internal Revenue Code Section 332
and 368(a)(1)(C), respectively.
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Board of Managers
Hudson City Savings Bank
is not included in 'entire net income' for purposes of the New Jersey
Corporation Business Tax. The starting point for 'entire net income' is always
Federal taxable income" (emphasis supplied - Formal Opinion 1960 - No. 2,
February 10, 1960). The opinion does not address tax-free holding company
formations, transfers of assets in exchange for stock or reorganizations.
However, the rationale for such opinion will apply to such transactions under
the New Jersey Corporation Business Tax Act. Thus, no gain or will be
recognized by the Mutual Bank, Stock Bank, Mutual Holding Company, Stock
Holding Company, nor Interim if the transaction is not a taxable transaction
for Federal income tax purposes.
New Jersey Savings Institution Tax Act
While the New Jersey Savings Institution Tax Act does not address
reorganizations, the starting point in computing taxable income is as follows:
... For the purpose of this Act, the amount of a taxpayer's net income
shall be deemed prima facie to be equal in amount to the taxable income,
before net operating loss deduction and special deductions,which the
taxpayer is required to report to the United States Treasury Department for
the purposes of computing its Federal income tax ... (Sec. 54:10D-2).
The rational for Formal Opinion 1960 - No. 2, February 10, 1960 will also apply
to such reorganizations under the New Jersey Savings Institution Tax Act. Thus,
no gain or loss will be recognized by the Mutual Bank, Stock Bank or Interim if
the transaction is not a taxable transaction for Federal income tax purposes.
New Jersey Gross Income Tax
The New Jersey Gross Income Tax Act provides, in part, as follows:
Sec. 54A:2-1. "There is hereby imposed a tax ... on the New Jersey gross
income as herein defined ..."
Sec. 54A:5-1. "... New Jersey gross income shall consist of the following
categories of income:
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Board of Managers
Hudson City Savings Bank
(e) ... Net gains or net income ... derived from the sale, exchange, or
other disposition of property ... determined in accordance with the method
of accounting allowed for Federal income tax purposes ... The term 'net
gain or net income' shall not include gains or income from transactions to
the extent to which nonrecognition is allowed for Federal income tax
purposes. The term 'sale, exchange, or other disposition' shall not include
the exchange of stock or securities in a corporation a party to a
reorganization ...
For purposes of this clause, the term 'reorganization' means ... (iv) A
transfer by a corporation of all or a part of its assets to another
corporation if immediately after the transfer the transferor, or one or
more of its shareholders ... is in control of the corporation to which the
assets are transferred."
The above definition of a reorganization is similar to the general rule of
Section 368 of the Internal Revenue Code. Therefore, the reorganization of Bank
will not result in the recognition of taxable gain or loss to the Mutual Bank
Members or the stockholders of Stock Holding Company under the New Jersey Gross
Income Tax Act if the transaction is not a taxable transaction for Federal
income tax purposes.
It should be noted, however, that if the opportunity to purchase stock is
deemed to have an ascertainable value, the depositors would recognize New
Jersey taxable income (dividends) equal to the amount of such value recognized
for Federal income tax purposes.
SCOPE OF OPINION
Since this letter is rendered in advance of the closing of this transaction, we
have assumed that the transaction will be consummated in accordance with the
Plan, as well as all the information and representations referred to herein or
made to Thacher Proffitt and Wood. Any changes in the transaction could cause
us to modify our opinion.
Our opinion as expressed above is rendered only with respect to the State of
New Jersey tax consequences under the Corporation Business Tax, Savings
Institution Tax, and the Gross Income Tax of specific matters discussed herein,
and we express no opinion with respect to any other federal, state, local, or
foreign tax matters relating to the proposed transaction or legal aspect of the
offering. Our opinion is based on the facts and circumstances as stated herein,
whether directly or by reference to the Federal Opinion. It is expressly
understood and agreed to by Hudson City Savings Bank that KPMG is
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Board of Managers
Hudson City Savings Bank
relying solely on the Federal Opinion in all respects, including facts,
representations, and assumptions, relating to the federal tax consequences of
the matters described therein. KPMG has not independently verified the accuracy
of any fact, representation, opinion or other matter contained in the Federal
Opinion and should any fact, representation, opinion or other matter addressed
therein not be correct, it could cause the New Jersey opinion contained herein
to also be incorrect. If any of the facts and conditions are not entirely
complete or accurate, it is imperative that we be informed immediately, as the
inaccuracy or incompleteness could have a material effect on our conclusions. In
rendering our opinion, we are relying upon the relevant provisions of the
Revised Statutes of New Jersey (1937), as amended, the rules and regulations
thereunder and judicial and administrative interpretations thereof, which are
subject to change or modification by subsequent legislative, regulatory,
administrative, or judicial decisions. Any such changes could also have an
effect on the validity of our opinion. We undertake no responsibility to update
or supplement our opinion after its issuance. This opinion is not binding upon
any tax authority or any court and no assurance can be given that a position
contrary to that expressed herein will not be asserted by a tax authority and
ultimately sustained by a court.
CONSENT
We consent to the inclusion of this opinion as an exhibit to the Form S-1
Registration Statement of Hudson City Bancorp, Inc. and the references to and
summary of this opinion in such Form S-1 Registration Statement.
Very truly yours,
DRAFT
KPMG LLP
<PAGE> 1
Exhibit 8.3
[RP FINANCIAL, LC. Letterhead]
March 12, 1999
Board of Managers
Hudson City Savings Bank
West 80 Century Road
Paramus, New Jersey 07652
Re: Plan of Reorganization and Stock Issuance Plan: Subscription Rights
Members of the Board of Managers:
All capitalized terms not otherwise defined in this letter have the
meanings given to such terms in an amended Plan of Reorganization and Stock
Issuance Plan (the "Plan") adopted by the Board of Managers of Hudson City
Savings Bank ("Hudson City") on February 11, 1999. Pursuant to the Plan, Hudson
City will become a wholly-owned subsidiary of Hudson City Bancorp, Inc.
("Bancorp"), a federal corporation in organization, and Bancorp will issue a
majority of its Common Stock to Hudson City, MHC (the "MHC"), and will sell a
minority of its Common Stock to the public.
We understand that, in accordance with the Plan, Subscription Rights to
purchase shares of Common Stock in Bancorp are to be issued to: (1) Eligible
Account Holders; (2) the Tax-Qualified Employee Plans; (3) Supplemental Eligible
Account Holders; (4) Other Members; (5) Managers, Officers and Employees; (6)
residents of New Jersey; and (7) other members of the general public. 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 at the same price as will be paid by members of the general public,
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 estimated 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
stock as a whole or Bancorp'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.
Respectfully submitted,
RP FINANCIAL, LC.
<PAGE> 1
EXHIBIT 10.1
EMPLOYEE STOCK OWNERSHIP PLAN
OF
HUDSON CITY SAVINGS BANK
ADOPTED ON MARCH 4, 1999
EFFECTIVE AS OF OCTOBER 1, 1998
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ARTICLE I
DEFINITIONS
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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 BREAK IN SERVICE.......................................................................2
SECTION 1.8 CHANGE IN CONTROL......................................................................2
SECTION 1.9 CODE...................................................................................2
SECTION 1.10 COMMITTEE..............................................................................2
SECTION 1.11 DESIGNATED BENEFICIARY.................................................................2
SECTION 1.12 DISABILITY.............................................................................3
SECTION 1.13 DISCRETIONARY CONTRIBUTION.............................................................3
SECTION 1.14 DOMESTIC RELATIONS ORDER...............................................................3
SECTION 1.15 ELIGIBILITY COMPUTATION PERIOD.........................................................3
SECTION 1.16 EFFECTIVE DATE.........................................................................3
SECTION 1.17 ELIGIBLE EMPLOYEE......................................................................3
SECTION 1.18 ELIGIBLE MEMBER........................................................................4
SECTION 1.19 EMPLOYEE...............................................................................4
SECTION 1.20 EMPLOYMENT COMMENCEMENT DATE...........................................................4
SECTION 1.21 EMPLOYMENT RECOMMENCEMENT DATE.........................................................4
SECTION 1.22 ERISA..................................................................................4
SECTION 1.23 EXCHANGE ACT...........................................................................4
SECTION 1.24 FAIR MARKET VALUE......................................................................4
SECTION 1.25 FINANCED SHARE.........................................................................5
SECTION 1.26 FIVE PERCENT OWNER.....................................................................5
SECTION 1.27 FORFEITURES............................................................................5
SECTION 1.28 FORMER MEMBER..........................................................................5
SECTION 1.29 GENERAL INVESTMENT ACCOUNT.............................................................5
SECTION 1.30 HIGHLY COMPENSATED EMPLOYEE............................................................5
SECTION 1.31 HOUR OF SERVICE........................................................................5
SECTION 1.32 INVESTMENT ACCOUNT.....................................................................6
SECTION 1.33 INVESTMENT FUND........................................................................6
SECTION 1.34 LOAN REPAYMENT ACCOUNT.................................................................6
SECTION 1.35 LOAN REPAYMENT CONTRIBUTION............................................................6
SECTION 1.36 MATERNITY OR PATERNITY LEAVE...........................................................6
SECTION 1.37 MEMBER.................................................................................7
SECTION 1.38 MILITARY SERVICE.......................................................................7
SECTION 1.39 NAMED FIDUCIARY........................................................................7
SECTION 1.40 OFFICER................................................................................7
SECTION 1.41 ONE-YEAR BREAK IN SERVICE..............................................................7
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(i)
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SECTION 1.42 PARTICIPATING EMPLOYER.................................................................7
SECTION 1.43 PERIOD OF SERVICE......................................................................7
SECTION 1.44 PERIOD OF SEVERANCE....................................................................7
SECTION 1.45 PLAN...................................................................................8
SECTION 1.46 PLAN ADMINISTRATOR.....................................................................8
SECTION 1.47 PLAN YEAR..............................................................................8
SECTION 1.48 QUALIFIED DOMESTIC RELATIONS ORDER.....................................................8
SECTION 1.49 QUALIFIED MILITARY SERVICE.............................................................8
SECTION 1.50 QUALIFIED PARTICIPANT..................................................................8
SECTION 1.51 RETIREMENT.............................................................................8
SECTION 1.52 RETROACTIVE CONTRIBUTION...............................................................8
SECTION 1.53 SHARE..................................................................................8
SECTION 1.54 SHARE ACQUISITION LOAN.................................................................8
SECTION 1.55 SHARE INVESTMENT ACCOUNT...............................................................8
SECTION 1.56 TENDER OFFER...........................................................................9
SECTION 1.57 TOTAL COMPENSATION.....................................................................9
SECTION 1.58 TRUST..................................................................................9
SECTION 1.59 TRUST AGREEMENT........................................................................9
SECTION 1.60 TRUST FUND.............................................................................9
SECTION 1.61 TRUSTEE................................................................................9
SECTION 1.62 VALUATION DATE.........................................................................9
SECTION 1.63 YEAR OF ELIGIBILITY SERVICE............................................................9
SECTION 1.64 YEAR OF VESTING SERVICE................................................................9
ARTICLE II
MEMBERSHIP
SECTION 2.1 ELIGIBILITY FOR MEMBERSHIP............................................................10
SECTION 2.2 COMMENCEMENT OF MEMBERSHIP............................................................10
SECTION 2.3 TERMINATION OF MEMBERSHIP.............................................................11
SECTION 2.4 ADJUSTMENTS TO PERIOD OF SERVICE......................................................11
ARTICLE III
SPECIAL PROVISIONS
SECTION 3.1 MILITARY SERVICE......................................................................12
SECTION 3.2 MATERNITY OR PATERNITY LEAVE..........................................................12
SECTION 3.3 LEAVE OF ABSENCE......................................................................13
SECTION 3.4 TRANSFER BETWEEN FULL-TIME STATUS AND PART-TIME STATUS................................13
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(ii)
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ARTICLE IV
CONTRIBUTIONS BY MEMBERS NOT PERMITTED
SECTION 4.1 CONTRIBUTIONS BY MEMBERS NOT PERMITTED................................................14
ARTICLE V
CONTRIBUTIONS BY THE EMPLOYER
SECTION 5.1 IN GENERAL............................................................................14
SECTION 5.2 LOAN REPAYMENT CONTRIBUTIONS..........................................................14
SECTION 5.3 DISCRETIONARY CONTRIBUTIONS...........................................................15
SECTION 5.4 RETROACTIVE CONTRIBUTIONS.............................................................15
SECTION 5.5 TIME AND MANNER OF PAYMENT............................................................16
ARTICLE VI
SHARE ACQUISITION LOANS
SECTION 6.1 IN GENERAL............................................................................16
SECTION 6.2 COLLATERAL; LIABILITY FOR REPAYMENT...................................................17
SECTION 6.3 LOAN REPAYMENT ACCOUNT................................................................17
SECTION 6.4 RELEASE OF FINANCED SHARES............................................................18
SECTION 6.5 RESTRICTIONS ON FINANCED SHARES.......................................................19
ARTICLE VII
ALLOCATION OF CONTRIBUTIONS
SECTION 7.1 ALLOCATION AMONG ELIGIBLE MEMBERS.....................................................19
SECTION 7.2 ALLOCATION OF RELEASED SHARES OR OTHER PROPERTY.......................................19
SECTION 7.3 ALLOCATION OF DISCRETIONARY CONTRIBUTIONS.............................................19
ARTICLE VIII
LIMITATIONS ON ALLOCATIONS
SECTION 8.1 OPTIONAL LIMITATIONS ON ALLOCATIONS...................................................20
SECTION 8.2 GENERAL LIMITATIONS ON CONTRIBUTIONS..................................................20
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(iii)
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ARTICLE IX
VESTING
SECTION 9.1 VESTING...............................................................................24
SECTION 9.2 VESTING ON DEATH, DISABILITY, RETIREMENT OR CHANGE IN CONTROL.........................24
SECTION 9.3 FORFEITURES ON TERMINATION OF EMPLOYMENT..............................................24
SECTION 9.4 AMOUNTS CREDITED UPON RE-EMPLOYMENT...................................................24
SECTION 9.5 ALLOCATION OF FORFEITURES.............................................................25
ARTICLE X
THE TRUST FUND
SECTION 10.1 THE TRUST FUND........................................................................25
SECTION 10.2 INVESTMENTS...........................................................................25
SECTION 10.3 DISTRIBUTIONS FOR DIVERSIFICATION OF INVESTMENTS......................................26
SECTION 10.4 USE OF COMMINGLED TRUST FUNDS.........................................................27
SECTION 10.5 MANAGEMENT AND CONTROL OF ASSETS......................................................27
ARTICLE XI
VALUATION OF INTERESTS IN THE TRUST FUND
SECTION 11.1 ESTABLISHMENT OF INVESTMENT ACCOUNTS..................................................27
SECTION 11.2 SHARE INVESTMENT ACCOUNTS.............................................................28
SECTION 11.3 GENERAL INVESTMENT ACCOUNTS...........................................................28
SECTION 11.4 VALUATION OF INVESTMENT ACCOUNTS......................................................28
SECTION 11.5 ANNUAL STATEMENTS.....................................................................28
ARTICLE XII
SHARES
SECTION 12.1 SPECIFIC ALLOCATION OF SHARES.........................................................29
SECTION 12.2 DIVIDENDS.............................................................................29
SECTION 12.3 VOTING RIGHTS.........................................................................29
SECTION 12.4 TENDER OFFERS.........................................................................31
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(iv)
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ARTICLE XIII
PAYMENT OF BENEFITS
SECTION 13.1 IN GENERAL............................................................................32
SECTION 13.2 DESIGNATION OF BENEFICIARIES..........................................................32
SECTION 13.3 DISTRIBUTIONS TO MEMBERS..............................................................33
SECTION 13.4 MANNER OF PAYMENT.....................................................................34
SECTION 13.5 MINIMUM REQUIRED DISTRIBUTIONS........................................................34
SECTION 13.6 DIRECT ROLLOVER OF ELIGIBLE ROLLOVER DISTRIBUTIONS....................................35
SECTION 13.7 VALUATION OF SHARES UPON DISTRIBUTION.................................................37
SECTION 13.8 PUT OPTIONS...........................................................................37
SECTION 13.9 RIGHT OF FIRST REFUSAL................................................................38
ARTICLE XIV
CHANGE IN CONTROL
SECTION 14.1 DEFINITION OF CHANGE IN CONTROL; PENDING CHANGE IN CONTROL............................39
SECTION 14.2 VESTING ON CHANGE OF CONTROL..........................................................41
SECTION 14.3 REPAYMENT OF SHARE ACQUISITION LOAN...................................................41
SECTION 14.4 PLAN TERMINATION AFTER CHANGE IN CONTROL..............................................41
SECTION 14.5 AMENDMENT OF SECTION XIV..............................................................41
ARTICLE XV
ADMINISTRATION
SECTION 15.1 NAMED FIDUCIARIES.....................................................................42
SECTION 15.2 PLAN ADMINISTRATOR....................................................................42
SECTION 15.3 COMMITTEE RESPONSIBILITIES............................................................43
SECTION 15.4 CLAIMS PROCEDURE......................................................................45
SECTION 15.5 CLAIMS REVIEW PROCEDURE...............................................................45
SECTION 15.6 ALLOCATION OF FIDUCIARY RESPONSIBILITIES AND
EMPLOYMENT OF ADVISORS .............................................................46
SECTION 15.7 OTHER ADMINISTRATIVE PROVISIONS.......................................................46
</TABLE>
(v)
<PAGE> 7
<TABLE>
<CAPTION>
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<S> <C> <C>
ARTICLE XVI
AMENDMENT, TERMINATION AND TAX QUALIFICATION
SECTION 16.1 AMENDMENT AND TERMINATION BY HUDSON CITY SAVINGS BANK.................................47
SECTION 16.2 AMENDMENT OR TERMINATION OTHER THAN BY
HUDSON CITY SAVINGS BANK ...........................................................47
SECTION 16.3 CONFORMITY TO INTERNAL REVENUE CODE...................................................48
SECTION 16.4 CONTINGENT NATURE OF CONTRIBUTIONS....................................................48
ARTICLE XVII
SPECIAL RULES FOR TOP HEAVY PLAN YEARS
SECTION 17.1 IN GENERAL............................................................................49
SECTION 17.2 DEFINITION OF TOP HEAVY PLAN..........................................................49
SECTION 17.3 DETERMINATION DATE....................................................................50
SECTION 17.4 CUMULATIVE ACCRUED BENEFITS...........................................................50
SECTION 17.5 KEY EMPLOYEES.........................................................................50
SECTION 17.6 REQUIRED AGGREGATION GROUP............................................................51
SECTION 17.7 PERMISSIBLE AGGREGATION GROUP.........................................................52
SECTION 17.8 SPECIAL REQUIREMENTS DURING TOP HEAVY PLAN YEARS......................................52
ARTICLE XVIII
MISCELLANEOUS PROVISIONS
SECTION 18.1 GOVERNING LAW.........................................................................53
SECTION 18.2 NO RIGHT TO CONTINUED EMPLOYMENT......................................................53
SECTION 18.3 CONSTRUCTION OF LANGUAGE..............................................................53
SECTION 18.4 HEADINGS..............................................................................53
SECTION 18.5 MERGER WITH OTHER PLANS...............................................................53
SECTION 18.6 NON-ALIENATION OF BENEFITS............................................................54
SECTION 18.7 PROCEDURES INVOLVING DOMESTIC RELATIONS ORDERS........................................54
SECTION 18.8 LEASED EMPLOYEES......................................................................55
SECTION 18.9 STATUS AS AN EMPLOYEE STOCK OWNERSHIP PLAN............................................56
</TABLE>
(vi)
<PAGE> 8
EMPLOYEE STOCK OWNERSHIP PLAN
OF
HUDSON CITY SAVINGS BANK
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
Member to which is allocated such Member's share, if any, of all Financed Shares
and other property that are released from the Loan Repayment Account in
accordance with section 6.4, together with his share, if any, of any
Discretionary Contributions that may be made by a Participating Employer.
SECTION 1.2 AFFILIATED EMPLOYER means the Bank; any
corporation which is a member of a controlled group of corporations (as defined
in section 414(b) of the Code) that includes the Bank; any trade or business
(whether or not incorporated) that is under common control (as defined in
section 414(c) of the Code) with the Bank; 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 Bank; 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 Bank; and any other entity that is required to be aggregated with the
Bank 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 Eligible Members and consists of the aggregate base
compensation paid to an Employee by all Participating Employers during such
period, including 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 a
Participating 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;
<PAGE> 9
(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;
and excluding overtime, bonuses, employer contributions (other than pursuant to
a compensation reduction agreement) to any public or private pension,
retirement, savings, welfare or other benefit plan benefits received under any
such plan, and any other special form of payment. In no event, however, shall an
Employee's Allocation Compensation for any Plan Year include any compensation
in excess of $160,000. The $160,000 limitation set forth in the preceding
sentence shall be indexed in 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 Hudson City Savings Bank and any
successor thereto.
SECTION 1.5 BOARD means the Board of Directors of Hudson City
Savings Bank.
SECTION 1.6 BENEFICIARY means the person or persons designated
by a Member or Former Member 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 BREAK IN SERVICE means a Period of Severance of at
least 365 consecutive days.
SECTION 1.8 CHANGE IN CONTROL means an event described in
section 14.1.
SECTION 1.9 CODE means the Internal Revenue Code of 1986
(including the corresponding provisions of any succeeding law).
SECTION 1.10 COMMITTEE means the Employee Benefit Plans
Committee described in section 15.3.
SECTION 1.11 DESIGNATED BENEFICIARY means a natural person
designated by a Member or Former Member as a Beneficiary and shall not include
any Beneficiary designated by a person other than a Member or Former Member or
any Beneficiary other than a natural person. If a natural person is the
beneficiary of a trust which a Member or Former Member has named as his
Beneficiary, such natural person shall be treated as a Designated Beneficiary
if: (a) the trust is a valid trust under applicable state law (or would be a
valid trust except for the fact that it does not have a corpus); (b) the trust
is irrevocable or will, by its terms, become irrevocable upon the death of the
Member or Former Member; (c) the beneficiaries of the trust who are
beneficiaries with respect to the trust's interest as a Beneficiary are
identifiable from the terms of the trust instrument; and (d) the following
information is furnished to the Committee:
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<PAGE> 10
(i) by the Member or Former Member, if any distributions are
required to be made pursuant to section 13.5 prior to the death of the
Member or Former Member, either: (A) a copy of the trust instrument,
together with a written undertaking by the Member or Former Member to
furnish to the Committee a copy of any subsequent amendment within a
reasonable time after such amendment is made; or (B)(I) a list of all
of the beneficiaries of the trust (including contingent and
remainderman beneficiaries with a description of the conditions on
their entitlement); (II) a certification of the Member or Former Member
to the effect that, to the best of his knowledge, such list is correct
and complete and that the conditions of section 1.11(a), (b) and (c)
are satisfied; (III) a written undertaking to provide a new
certification to the extent that an amendment changes any information
previously certified; and (IV) a written undertaking to furnish a copy
of the trust instrument to the Committee on demand; and
(ii) by the trustee of the trust within nine months after the
death of the Member or Former Member, if any distributions are required
to be made pursuant to section 13.5 after the death of the Member or
Former Member, either: (A) a copy of the actual trust instrument for
the trust; or (B)(I) a final list of all of the beneficiaries of the
trust (including contingent and remainderman beneficiaries with a
description of the conditions on their entitlement) as of the date of
death; (II) a certification of the trustee to the effect that, to the
best of his knowledge, such list is correct and complete and that the
conditions of section 1.11(a), (b) and (c) are satisfied; and (III) a
written undertaking to furnish a copy of the trust instrument to the
Committee on demand.
SECTION 1.12 DISABILITY means a condition of total incapacity,
mental or physical, for further performance of duty with all Participating
Employers, which the Committee shall have determined, on the basis of competent
medical evidence, is likely to be permanent.
SECTION 1.13 DISCRETIONARY CONTRIBUTION means Shares or
amounts of money contributed to the Plan by the Participating Employers in
accordance with section 5.3.
SECTION 1.14 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 Member or Former Member.
SECTION 1.15 ELIGIBILITY COMPUTATION PERIOD with respect to
any Employee means: (a) the 12-consecutive-month period beginning on such
Employee's Employment Commencement Date or Employment Recommencement Date; and
(b) each Plan year beginning after such Employee's Employment Commencement Date
or Employment Recommencement Date and before a Break in Service.
SECTION 1.16 EFFECTIVE DATE means October 1, 1998.
SECTION 1.17 ELIGIBLE EMPLOYEE means an Employee who is
eligible for membership in the Plan in accordance with Article II.
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<PAGE> 11
SECTION 1.18 ELIGIBLE MEMBER means, for any Plan Year, an
Employee who is a Member during all or any part of such Plan Year and either
remains a Member on the last day of such Plan Year or terminated membership
during such Plan Year on account of termination of employment, death, Disability
or Retirement; provided, however, that no Employee shall be an Eligible Member
for the Plan Year that includes the effective date of the transaction pursuant
to which the Bank becomes a wholly owned subsidiary of Hudson City Bancorp, Inc.
if he terminates employment for any reason with all Participating Employers
prior to such effective date.
SECTION 1.19 EMPLOYEE means any person, including an officer,
who is employed by any Affiliated Employer.
SECTION 1.20 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 all Affiliated Employers, incurs a Break in Service
and subsequently returns to service with any Affiliated Employer, his Employment
Commencement Date shall be the date on which he first per forms an Hour of
Service following the Break in Service.
SECTION 1.21 EMPLOYMENT RECOMMENCEMENT DATE means the date
upon which an Employee is first credited with an Hour of Service after a Break
in Service.
SECTION 1.22 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 1.23 EXCHANGE ACT means the Securities Exchange Act of
1934, as amended from time to time (including the corresponding provisions of
any succeeding law).
SECTION 1.24 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 like 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 Quotation System, or, if no such
quotation is provided, on another similar system, selected by
the Committee, then in use; or
(iii) if sections 1.24(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.
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<PAGE> 12
(b) with respect to property other than Shares, the fair
market value determined in the manner determined by the Trustee.
SECTION 1.25 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 1.26(a), 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 1.26 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 any Affiliated Employer; or (b) stock possessing
more than 5% of the combined voting power of all classes of outstanding stock of
any Affiliated Employer.
SECTION 1.27 FORFEITURES means the amounts forfeited by
Members and Former Members 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 1.28 FORMER MEMBER means a Member whose participation
in the Plan has terminated pursuant to section 2.3.
SECTION 1.29 GENERAL INVESTMENT ACCOUNT means an Investment
Account established and maintained in accordance with Article XI.
SECTION 1.30 HIGHLY COMPENSATED EMPLOYEE means, for any Plan
Year, an Employee who:
(i) was a Five Percent Owner at any time during such
Plan Year or any prior Plan Year; or
(ii) received Total Compensation during the
immediately preceding Plan Year (A) in excess of $80,000 (or
such other amount as may be prescribed by the Secretary of the
Treasury pursuant to section 401(a)(17) of the Code); and (B)
if elected by the Plan Administrator in such form and manner
as the Secretary of the Treasury may prescribe, in excess of
the Total Compensation received for such preceding Plan Year
by at least 80% of the Employees.
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 1.31 HOUR OF SERVICE means each hour for which a
person is paid, or entitled to payment, for the performance of duties for any
Affiliated Employer, plus, solely for the purpose of computing the Years of
Eligibility Service of an Employee who is classified as a part-time Employee:
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<PAGE> 13
(a) each hour for which such person is paid, or entitled to
payments by an Affiliated Employer on account of a period during which
no duties are performed due to vacation, holiday, illness, incapacity
(including disability), layoff, jury duty, military duty, or leave of
absence. Hours under this section 1.31(a) 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
(b) each hour for which back pay, irrespective of mitigation
of damages, is either awarded or agreed to by any Affiliated Employer;
provided, however, that such hours have not previously been credited
under other provisions of this section 1.31; and provided, further,
that not more than 501 Hours of Service shall be credited under section
1.31(a) to such person on account of a single continuous period during
which such person performs no duties for an Affiliated Employer whether
or not such period occurs in a single Plan Year. Hours under this
section 1.31(b) shall be credited to the person for the Eligibility
Computation Period or Eligibility Computation Periods to which the
award or agreement pertains, rather than the Eligibility Computation
Period in which the award, agreement or payment is made.
Anything in this section 1.31 to the contrary notwithstanding, no Hours of
Service shall be credited for a payment made or due under a plan maintained
solely for the purpose of complying with applicable workmen's compensation or
disability insurance laws, or a payment which solely reimburses any person for
medical or medically-related expenses incurred by such person.
SECTION 1.32 INVESTMENT ACCOUNT means either a General
Investment Account or a Share Investment Account.
SECTION 1.33 INVESTMENT FUND means any one of the three or
more funds as may be established from time to time by the Committee which,
together with any and all Shares and other investments held under the Plan,
constitute the Trust Fund.
SECTION 1.34 LOAN REPAYMENT ACCOUNT means an account
established and maintained in accordance with section 6.3.
SECTION 1.35 LOAN REPAYMENT CONTRIBUTION means amounts of
money contributed to the Plan by the Participating Employers in accordance with
section 5.2.
SECTION 1.36 MATERNITY OR PATERNITY LEAVE means a person's
absence from work for 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.
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<PAGE> 14
SECTION 1.37 MEMBER means any person who has satisfied the
eligibility requirements set forth in section 2.1, who has become a Member in
accordance with section 2.2, and whose membership has not terminated under
section 2.3.
SECTION 1.38 MILITARY SERVICE means service in the armed
forces of the United States, including but not limited to Qualified Military
Service. It may also include, if and to the extent that the Board so provides
and if all Members and Former Members in like circumstances are similarly
treated, special service for the government of the United States and other
public service.
SECTION 1.39 NAMED FIDUCIARY means any person, committee,
corporation or organization as described in section 15.1.
SECTION 1.40 OFFICER means an Employee who is an
administrative executive in regular and continued service with 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.
SECTION 1.41 ONE-YEAR BREAK IN SERVICE means an Eligibility
Computation Period during which an Employee fails to complete more than 500
Hours of Service.
SECTION 1.42 PARTICIPATING EMPLOYER means the Bank, and any
successor thereto and any other Affiliated Employer which, with the prior
written approval of the Board of Directors of Hudson City Savings Bank and
subject to such terms and conditions as may be imposed by the Board of Directors
of Hudson City Savings Bank, shall adopt this Plan.
SECTION 1.43 PERIOD OF SERVICE means a period of consecutive
days commencing on a person's Employment Commencement Date and ending on the
date a Period of Severance begins, with any adjustments required under section
2.4. Except as otherwise provided in the Plan, a Period of Service "of year(s)"
means the quotient of the Period of Service divided by 365, and any fractional
part of a year shall for such purposes be disregarded.
SECTION 1.44 PERIOD OF SEVERANCE means a period of consecutive
days commencing with the earlier of:
(a) the date on which a person terminates service with all
Affiliated Employers by reason of resignation, retirement, discharge or
death; or
(b) the first anniversary of the date on which a person
terminates service with the Bank and all Affiliated Employers for any
other reason, including layoff, disability, leave of absence or any
other cessation of service not otherwise included as service under the
Plan;
and ending on the first date following such separation from service on which
such person performs an Hour of Service.
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<PAGE> 15
SECTION 1.45 PLAN means the Employee Stock Ownership Plan of
Hudson City Savings Bank, as amended from time to time.
SECTION 1.46 PLAN ADMINISTRATOR means the Committee or 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 1.47 PLAN YEAR means the period commencing on the
October 1, 1998 and ending on September 30, 1999 and each fiscal year ending on
each September 30th thereafter.
SECTION 1.48 QUALIFIED DOMESTIC RELATIONS ORDER means a
Domestic Relations Order that: (a) clearly specifies (i) the name and last known
mailing address of the Member or Former Member and of each person given rights
under such Domestic Relations Order, (ii) the amount or percentages of the
Member's or Former Member'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 1.49 QUALIFIED MILITARY SERVICE means with respect to
any person on any date, any service in the uniformed services of the United
States (as defined in chapter 43 of Title 38 of the United States Code)
completed prior to such date, but only if, on such date, such person is entitled
to re-employment rights with respect to an Affiliated Employer on account of
such service.
SECTION 1.50 QUALIFIED PARTICIPANT means a Member who has
attained age 55 and who has been a Member of the Plan for at least 10 years.
SECTION 1.51 RETIREMENT means: (a) any termination of
membership 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 (but not vested, whether
immediate or deferred) retirement allowance.
SECTION 1.52 RETROACTIVE CONTRIBUTION means a contribution
made on a retroactive basis in respect of a period of Qualified Military Service
in accordance with section 5.4.
SECTION 1.53 SHARE means a share of any class of stock issued
by any Affiliated Employer; provided 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 1.54 SHARE ACQUISITION LOAN means a loan obtained by
the Trustee in accordance with Article VI.
SECTION 1.55 SHARE INVESTMENT ACCOUNT means an Investment
Account established and maintained in accordance with Article XI.
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<PAGE> 16
SECTION 1.56 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
whether or not such offer constitutes a "tender offer" or an "exchange offer"
for purposes of the Exchange Act.
SECTION 1.57 TOTAL COMPENSATION for any person during any
period means the total compensation paid to such person during such period by
all Affiliated Employers which is required to be reported to such person on a
written statement under section 6041(d), 6051(a)(3) and 6052 of the Code, plus
any elective deferrals (within the meaning of section 402(g) of the Code) under
any qualified cash or deferred arrangement described in section 401(k) of the
Code and maintained by any Affiliated Employer, any tax-deferred annuity
described in section 403(b) of the Code and maintained by any Affiliated
Employer, any salary reduction simplified employee pension plan described in
section 408(k) of the Code and maintained by any Affiliated Employer, and any
salary reduction contributions under any cafeteria plan described in section 125
of the Code and maintained by any Affiliated Employer. In no event shall a
person's Total Compensation for any Plan 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 1.58 TRUST means the legal relationship created by the
Trust Agreement pursuant to which the Trustee holds the Trust Fund in trust.
SECTION 1.59 TRUST AGREEMENT means the agreement between the
Bank and the Trustee therein named or its successors pursuant to which the Trust
Fund shall be held in trust.
SECTION 1.60 TRUST FUND means the corpus (consisting of
contributions paid over to the Trustee and investments thereof), and all
earnings, appreciation 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 1.61 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 1.62 VALUATION DATE means the last business day of
each Plan Year and such other dates as the Plan Administrator may prescribe.
SECTION 1.63 YEAR OF ELIGIBILITY SERVICE means (a) in the case
of an Employee classified as a full-time employee, a Period of Service of one
year, and (b) in all other cases, an Eligibility Computation Period during which
the Employee completed at least 1,000 Hours of Service.
SECTION 1.64 YEAR OF VESTING SERVICE means a Period of Service
of one year.
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<PAGE> 17
ARTICLE II
MEMBERSHIP
SECTION 2.1 ELIGIBILITY FOR MEMBERSHIP.
(a) Only Eligible Employees may be or become Members of the
Plan. An Employee shall be an Eligible Employee if he (i) is employed by one or
more Participating Employers; (ii) is compensated primarily on a salaried basis;
(iii) has attained age 21; (iv) has completed at least one Year of Eligibility
Service; and (v) is not excluded under section 2.1(b).
(b) An Employee is not an Eligible Employee if he:
(i) does not receive Allocation Compensation for at least one
Participating Employer;
(ii) is an Employee who has waived any claim to participation
in the Plan;
(iii) 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;
(iv) is a "leased employee" as defined in section 18.8(a);
(v) is compensated primarily on an hourly, daily, commission,
fee or retainer basis;
(vi) is a building service Employee who is regularly required
to spend more than 50% of his working time servicing real estate other
than offices of Affiliated Employers;
(vii) is classified as an "independent contractor" by the
Employer, even if considered an employee under applicable law; or
(viii) is a mortgage field originator.
SECTION 2.2 COMMENCEMENT OF MEMBERSHIP.
Every Employee who is an Eligible Employee on the effective
date of the transaction whereby the Bank becomes a wholly owned subsidiary of
Hudson City Bancorp, Inc. shall automatically become a Member as of the
Effective Date. An Employee who becomes an Eligible Employee after the Effective
Date shall automatically become a Participant on the first
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<PAGE> 18
day of the calendar month coincident with or next following the date on which he
becomes an Eligible Employee.
SECTION 2.3 TERMINATION OF MEMBERSHIP.
Membership in the Plan shall cease, and a Member shall become
a Former Member, upon termination of employment with all Participating
Employers, death, Disability or Retirement, failure to return to work upon the
expiration of a leave of absence granted pursuant to section 3.3, becoming an
Employee who is excluded under section 2.1(b) or distribution of the entire
vested interest in his Account.
SECTION 2.4 ADJUSTMENTS TO PERIOD OF SERVICE.
(a) The Period of Service of an Employee shall include any
period during which the Employee is separated from the service of all Affiliated
Employers if such period is less than 365 consecutive days measured from the
date on which such Employee terminates service and ending with the first date
following such termination for which the Employee is credited with an Hour of
Service.
(b) The Period of Service of an Employee who returns to the
service of the Bank or any Affiliated Employer following a separation from
service shall commence with the first date following such separation from
service for which the Employee is credited with an Hour of Service. The Employee
shall be given credit for any Period of Service prior to such separation.
(c) The Period of Service of an Employee who is absent on
Maternity or Paternity Leave shall exclude any period of such absence that
occurs after the first anniversary of the commencement of such absence except to
the extent that such period constitutes an approved leave of absence under
section 3.3.
(d) An Employee's Period of Service shall also be adjusted to
the extent required by the Family and Medical Leave Act or any regulations
promulgated thereunder.
(e) Each Employee's Period of Service shall take into account
periods of employment with any Affiliated Employer prior to the Effective Date.
(f) Each Employee's Period of Service shall exclude periods of
employment prior to the attainment of age 18.
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<PAGE> 19
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 membership (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 continued employment
during the period of his absence. In the event of the re-employment of such
person by any Affiliated 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 uniformed services of the United States;
(b) release from hospitalization continuing after discharge
from the uniformed services of the United States for a period of not
more than one year; or
(c) 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 this section 3.2, in the event of an Employee's
absence from work in the service of all Affiliated Employers for a period in
excess of one year that commences on or after October 1, 1985 and that
constitutes Maternity or Paternity Leave for which the person is not paid or
entitled to payment by the Employer or any Affiliated Employer then solely for
purposes of determining when a Break in Service has occurred or when a Period of
Severance of five years has occurred, the period of such an absence commencing
on the first anniversary of such absence and ending on the second anniversary of
the commencement of such absence (or, if earlier, on the last day of such
absence) shall not be treated as a Period of Severance. In addition, solely for
purposes of determining whether a One-Year Break in Service has occurred, the
Employee shall be credited for the period of absence with the number of Hours of
Service equal to the lesser of:
(a) (i) the number of Hours of Service that would have been
credited to the Employee if he had continued working for an Affiliated
Employer during the period of such absence, or (ii) if the number of
Hours of Service prescribed under section 3.2(a)(i) cannot be
determined, 8 Hours of Service for each working day during the period
of absence, or
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<PAGE> 20
(b) 501 Hours of Service.
Such credit shall be given during the Eligibility Computation Period in which
such absence began, if necessary to prevent a One-Year Break in Service from
occurring during such Eligibility Computation Period, and in all other cases,
such credit shall be given during the immediately following Eligibility
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); (ii) the number of working days during such absence and (iii) the number
of Hours of Service ordinarily credited on each such working day.
SECTION 3.3 LEAVE OF ABSENCE.
In the event of temporary absence from work in the service of
all Affiliated Employers for any period of two years or less for which an
Employee shall have been granted a leave of absence by a Participating Employer,
the entire period of his absence shall be treated for purposes of vesting and
eligibility for membership (but not for purposes of eligibility to share in the
allocation of contributions in accordance with Article VII), as if he had
continued employment 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 membership 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 3.4 TRANSFER BETWEEN FULL-TIME STATUS AND PART-TIME
STATUS.
(a) In the event an Employee who is classified as a part-time
Employee is reclassified as a full-time Employee, his years of Eligibility
Service shall include (i) his Years of Eligibility Service determined as of the
last day of the last Eligibility Computation Period to end before the date of
the reclassification; plus (ii) if he completes at least 1,000 Hours of Service
during the Eligibility Period in which the reclassification occurs, one Year of
Eligibility Service for such Eligibility Computation Period and if he does not
complete at least 1,000 Hours of Service during such Eligibility Computation
Period, his Period of Service completed during such Eligibility Computation
Period; plus (iii) his Period of Service completed following the last day of the
Eligibility Computation Period in which the reclassification occurs.
(b) In the event an Employee who is classified as a full-time
Employee is reclassified as a part-time Employee, his Years of Eligibility
Service shall include (i) his Period of Service determined as of the last day of
the last Eligibility Computation Period to end before the date of the
reclassification; plus (ii) if he completes at least 1,000 Hours of Service
during the Eligibility Computation Period in which the reclassification occurs,
one Year of Eligibility Service for such Eligibility Computation Period and if
he does not complete at least 1,000 Hours of Service during such Eligibility
Computation Period, his Period of Service completed during such
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<PAGE> 21
Eligibility Computation Period; plus (c) his Years of Eligibility Service
completed following the last day of the Eligibility Computation Period in which
the reclassification occurs.
ARTICLE IV
CONTRIBUTIONS BY MEMBERS NOT PERMITTED
SECTION 4.1 CONTRIBUTIONS BY MEMBERS NOT PERMITTED.
Members 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 Participating Employers shall contribute to the Plan the amount, if
any, determined by the Board of Directors of Hudson City Savings Bank, 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, a
Discretionary 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 Participating Employers'
contributions, if any, to the Plan 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
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<PAGE> 22
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 Members for
such Plan Year in accordance with section 7.2.
SECTION 5.3 DISCRETIONARY CONTRIBUTIONS.
In the event that the amount of the Participating Employers'
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 a
Discretionary Contribution and shall be allocated among the Accounts of the
Eligible Members for such Plan Year in accordance with section 7.3.
SECTION 5.4 RETROACTIVE CONTRIBUTIONS.
A Participating Employer shall make a Retroactive Contribution
in respect of any individual previously employed by it who is re-employed by any
Affiliated Employer after December 12, 1994 following the completion of a period
of Qualified Military Service. Such Retroactive Contribution shall be made in
the following manner for each Plan Year that includes any part of the period of
Qualified Military Service:
(a) An allocation percentage shall be computed by dividing (i)
the sum of the Fair Market Value of all Financed Shares allocated to
Eligible Members for such Plan Year plus the dollar amount of all
Discretionary Contributions made in cash for such Plan Year plus the
Fair Market Value of all Discretionary Contributions made in Shares for
such Plan Year, divided by (ii) the aggregate amount of Allocation
Compensation used in the allocation for such Plan Year. Fair Market
Value for such purposes shall be determined as of the last day of the
Plan Year.
(b) A notional allocation shall be determined by multiplying
(A) the percentage determined under section 5.4(a) by (B) the
Allocation Compensation which the individual would have had for such
Plan Year if he had remained in the service of his Participating
Employer in the same capacity and earning Allocation Compensation and
Total Compensation at the annual rates in effect immediately prior to
the commencement of the Qualified Military Leave (or, if such rates are
not reasonably certain, at an annual rate equal to the actual
Allocation Compensation and Total Compensation, respectively, paid to
him for the 12-month period immediately preceding the Qualified
Military Service).
(c) An actual Retroactive Contribution for the Plan Year shall
be determined by computing the excess of (A) the notional allocation
determined under section 5.4(b) over (B) the sum of the dollar amount
of any Discretionary Contribution in cash, the Fair Market Value of any
Discretionary Contribution in Shares and the Fair Market Value of any
Financed Shares actually allocated to such individual for such Plan
Year.
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<PAGE> 23
SECTION 5.5 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 Discretionary Contribution or a Retroactive 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 Members in the case of a Discretionary
Contribution, to the Account of the Member for whom it is made in the case of a
Retroactive Contribution, and 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 of
Directors of Hudson City Savings Bank, 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 Committee 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.
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<PAGE> 24
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 or as provided in section 14.3, 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
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<PAGE> 25
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 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 or property 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
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<PAGE> 26
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.
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 MEMBERS.
Subject to the limitations of Article VIII, Discretionary
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
Members 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 Members for the
Plan Year in the proportion that each such Eligible Member's Allocation
Compensation for the portion of such Plan Year during which he was a Member
bears to the aggregate of such Allocation Compensation of all Eligible Members
for such Plan Year.
SECTION 7.3 ALLOCATION OF DISCRETIONARY CONTRIBUTIONS.
Subject to the limitations of Article VIII, in the event that
the Participating Employers makes Discretionary Contributions for a Plan Year,
such Discretionary Contribution shall be allocated among the Accounts of the
Eligible Members for such Plan Year in the
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<PAGE> 27
proportion that each such Eligible Member's Allocation Compensation for the
portion of such Plan Year during which he was a Member bears to the aggregate of
such Allocation Compensation of all Eligible Members for such Plan Year.
ARTICLE VIII
LIMITATIONS ON ALLOCATIONS
SECTION 8.1 OPTIONAL LIMITATIONS ON ALLOCATIONS.
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 Members 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 Member. 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 Member who are Highly
Compensated Employees, constitutes exactly one-third of the aggregate Allocation
Compensation taken into account for all Eligible Members.
SECTION 8.2 GENERAL LIMITATIONS ON CONTRIBUTIONS.
(a) No amount shall be allocated to a Member'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 Member's Total Compensation for such Limitation Year.
(b) In the case of a Member 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 Member's Annual Additions under
this Plan shall, in addition to the limitations provided under section 8.2(a),
be further limited so that the sum of the Member's Defined Contribution Plan
Fraction plus his Defined Benefit Plan Fraction does not exceed 1.0 for any
Limitation Year beginning prior to January 1, 2000; provided, however, that this
limitation shall only apply if and to the extent that the benefits under the
Employer's qualified defined benefit plan or any other qualified defined
contribution plan of the Employer are not limited so that such sum is not
exceeded.
(c) For purposes of this section 8.2, the following special
definitions shall apply:
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<PAGE> 28
(i) Annual Addition means the sum of the following amounts
allocated on behalf of a Member for a Limitation Year:
(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 Member's allocable
share, if any, of any forfeitures under such plans; plus
(B)(I) for Limitation Years that begin prior to
January 1, 1987, the lesser of (1) one-half of all
nondeductible voluntary contributions under any other
qualified defined contribution plan (whether or not
terminated) maintained by the Employer, or (2) the amount of
the nondeductible voluntary contributions under qualified
defined contribution plan (whether or not terminated)
maintained by the Employer in excess of 6% of such Member's
Total Compensation; and (II) for Limitation Years that begin
after December 31, 1986, the sum of all of the nondeductible
voluntary contributions under any other qualified defined
contribution plan (whether or not terminated) maintained by
the Employer;
(C) all Discretionary 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 Member'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 Members for such
Limitation Year.
Notwithstanding section 8.2(c)(i)(D), if, for any Limitation Year, the
aggregate amount of Discretionary 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 Discretionary
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 Hudson City Savings Bank, and all members
of a controlled group of corporations, as defined in section 414(b) of
the Code, as
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<PAGE> 29
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 Hudson City Savings
Bank 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 individual
for any Limitation Year, a fraction, the numerator of which is the
Projected Annual Benefit (determined as of the end of such Limitation
Year) of the Member 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
Member for such Limitation Year; and (B) in all other cases, the lesser
of (I) (except as provided in section 16.8(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 Member for such Limitation Year.
(iv) Defined Contribution Plan Fraction means, for any
individual for any Limitation Year, a fraction (A) the numerator of
which is the sum of such individual'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 individual 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 individual 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 Year during which
such individual 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 individual 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
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<PAGE> 30
8.2(c)(iv). If the sum of an individual's Defined Benefit Plan Fraction
and Defined Contribution Plan Fraction exceeded 1.0 as of September 30,
1983, then such individual'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.
(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 an individual's annual
retirement benefit (adjusted to the actuarial equivalent of a straight
life annuity if expressed in a form other than 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 individual will continue employment until the later
of such individual's current age or normal retirement age under such
plan, and that the individual'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 an individual'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 to Discretionary Contributions and 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 Member's Account. The amount by which any Member's Annual
Addition to this Plan is reduced shall be allocated in accordance with Articles
V and VII as a contribution by the Participating Employers in the next
succeeding Limitation Year.
(e) Prior to determining an individual's actual Total
Compensation for a Limitation Year, the Participating Employer may determine the
limitations under this section 8.2 for an individual on the basis of a
reasonable estimation of the individual's Total Compensation for the Limitation
Year that is uniformly determined for all individuals 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 individual's actual Total Compensation for the Limitation Year.
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<PAGE> 31
ARTICLE IX
VESTING
SECTION 9.1 VESTING.
Subject to the provisions of sections 9.2 and 14.1(a), the
balance credited to each Member's Account shall become vested in accordance with
the following schedule:
<TABLE>
<CAPTION>
Years of Vesting Vested
Service Percentage
<S> <C>
less than 1 year 0%
1 year but less than 2 years 20%
2 years but less than 3 years 40%
3 years but less than 4 years 60%
4 years but less than 5 years 80%
5 or more years 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 Member or of a person who is a Former
Member solely because he is excluded from membership 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 employment with all Affiliated Employers by
reason of death, Disability, Retirement or upon the occurrence of a Change in
Control.
SECTION 9.3 FORFEITURES ON TERMINATION OF EMPLOYMENT.
Upon the termination of employment of a Member or Former
Member 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, and is re-employed by any
Affiliated Employer prior to the occurrence of a Period of Severance of five
years, then:
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(i) an amount equal to the Fair Market Value of the Shares
forfeited, determined as of the date of forfeiture; and
(ii) 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 his
Participating 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 Discretionary 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.
Except to the extent provided to the contrary in section 10.3,
the Trust Fund shall be invested in:
(i) Shares;
(ii) such Investment Funds as may be established from time to
time by the Committee; and
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(iii) 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; provided, 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 DISTRIBUTIONS FOR DIVERSIFICATION OF INVESTMENTS.
(a) Notwithstanding section 10.2, each Qualified Member may:
(i) during the first 90 days of each of the first five Plan
Years to begin after the Plan Year in which he first becomes a
Qualified Member, 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 either distributed to him pursuant
to this section 10.3(a)(i) or transferred to the Profit Incentive Bonus
Plan of Hudson City Savings Bank to the extent permitted by such plan,
no later than 90 days after the last day that such election may be
made; and
(ii) during the first 90 days of the sixth Plan Year to begin
after the Plan Year in which he first becomes a Qualified Member 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 either distributed to
him pursuant to this section 10.3(a)(ii) or transferred to the Profit
Incentive Bonus Plan of Hudson City Savings Bank to the extent
permitted by such plan, no later than 90 days after the last day that
such election may be made.
For purposes of an election under this section 10.3, the balance credited to a
Member'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 and the 25% and 50% limitations shall apply
to such balance after the balance has been reduced by the amount of all amounts
distributed or transferred to the Profit Incentive Bonus Plan of Hudson City
Savings Bank under this section 10.3.
(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, and in no case later than 90 days
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
Member making the election to be distributed to such Qualified Member.
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(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. In no event, however, shall any election
under this section 10.3 result in more than 25% of the balance credited to the
Member's Account being distributed to the Member or transferred to the Profit
Incentive Bonus Plan of Hudson City Savings Bank , 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 distributed to the Member or transferred to the Profit
Incentive Bonus Plan of Hudson City Savings Bank, 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 Members, Former Members 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 Members, Former Members 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.
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
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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 purchased 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 Member
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.
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
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<PAGE> 36
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 Members, Former Members 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 Committee, either: (i) held in such
General Investment Account and invested in accordance with sections 10.2 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 as a result of such payment
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
Participating Employers as the Committee shall designate, at least 10 days prior
to the date of the meeting of
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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 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
Plan Administrator 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 Plan
Administrator 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 applicable record date; multiplied by (II) a
fraction, the numerator of which is the total number of affirmative
votes cast by Members, Former Members and the Beneficiaries of deceased
Former Members 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 Members, Former Members 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
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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.
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
Participating Employers 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 Committee 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 Plan Administrator 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 Plan
Administrator 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.
(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.
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(c) In the case of any Tender Offer, any Financed Shares held
in the Loan Repayment Account shall be dealt with as follows:
(i) on the last day for delivering Shares or otherwise
responding to such Tender Offer, a number of Financed Shares equal to
the product of (A) 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 (B) a fraction, the numerator of which is
the total number of Shares delivered from the Share Investment
Accounts of Members, Former Members 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 Members, Former
Members and Beneficiaries of deceased Former Members immediately prior
to the last day for delivering Shares or otherwise responding to such
Tender Offer, shall be delivered; and
(ii) a number of Financed Shares equal to the excess of (A)
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 (B) the number of Financed Shares to be
delivered pursuant to section 12.4(c)(i), 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.
ARTICLE XIII
PAYMENT OF BENEFITS
SECTION 13.1 IN GENERAL.
The balance credited to a Member's or Former Member'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.
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(b) A Member or Former Member 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 Member or Former Member designates an additional or a
different Beneficiary in accordance with this section 13.2; and
(ii) (A) the spouse of such Member or Former Member 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 Member or Former Member has previously
consented to such designation by signing a written waiver of any right
to consent to any designation made by the Member or Former Member, 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 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 MEMBERS.
(a) Except as provided in section 13.5, the vested portion of
the balance credited to a Former Member's Account shall be distributed to him in
a single distribution as of the last Valuation Date to occur in the Plan Year in
which he terminates employment with all Affiliated Employers or the Plan Year in
which he attains age 65, whichever is later; provided,
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however, that if the Former Member elects, at such time and in such manner as
the Plan Administrator may prescribe, that distribution be made as of an earlier
Valuation Date that coincides with or follows his termination of employment with
all Affiliated Employers, distribution shall be made as of such earlier
Valuation Date. The actual distribution shall be made within sixty days after
the applicable Valuation Date.
(b) In the event of the death of a Member or Former Member
before the date of actual distribution of the vested portion of the balance
credited to his Account, such vested portion shall be distributed to his
Beneficiary in a single distribution as of the first Valuation Date to occur
following the latest of (i) the date on which the Plan Administrator is notified
of the Member's or Former Member's death; and (ii) the date on which the Plan
Administrator determines the identity and location of the Member's or Former
Member's Beneficiary or Beneficiaries. The actual distribution shall be made
within sixty days after the applicable Valuation Date.
SECTION 13.4 MANNER OF PAYMENT.
Distributions made pursuant to section 13.3 or section 13.5
shall be made in the maximum number of whole Shares that are available, plus, if
necessary, an amount of money equal to any remaining amount of the distribution
that is less than the Fair Market Value of a whole Share.
SECTION 13.5 MINIMUM REQUIRED DISTRIBUTIONS.
(a) Required minimum distributions of a Member's or Former
Member's Account shall commence no later than:
(i) if the Member or Former Member was not a Five Percent
Owner at any time during the Plan Year ending in the calendar year in
which he attained age 70 1/2, during any of the four preceding Plan
Years or during any subsequent years, 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 all Affiliated Employers;
or
(ii) if the Member or Former Member attains age 70 1/2 after
December 31, 1998 and is or was a Five Percent Owner at any time during
the Plan Year ending in the calendar year in which he attained age 70
1/2, during any of the four preceding Plan Years or during any
subsequent years, 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
13.5(a) shall be made as follows:
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(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 Member's or Former Member'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 Member's or Former Member's life
expectancy (or, if his Beneficiary is a Designated Beneficiary, 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 Member's or Former Member'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 Member's or Former Member's life
expectancy (or, if his Beneficiary is a Designated Beneficiary, the
joint life and last survivor expectancy of him and his Beneficiary).
For purposes of this section 13.5, the life expectancy of a Member or Former
Member (or the joint life and last survivor expectancy of a Member or Former
Member and his Designated Beneficiary) for the calendar year in which the Member
or Former Member 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
Member's or Former Member'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 Member or Former Member attains
age 70 1/2, over (2) the number of whole years that have elapsed since the
Member or Former Member attained age 70 1/2.
(c) Payment of the distributions required to be made to a
Member or Former Member under this section 13.5 shall be made in accordance with
section 13.4.
SECTION 13.6 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.
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(b) The following rules shall apply with respect to Direct
Rollovers made pursuant to this section 13.6:
(i) A Member or Former Member 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 Member or Former Member elects a Direct Rollover of
a portion of an Eligible Rollover Distribution, that portion must be
equal to at least $500; and
(iii) A Member or Former Member 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 13.6 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 (10) 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
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that is not includible in gross income (determined without regard to
the exclusion for net unrealized appreciation with respect to employer
securities).
SECTION 13.7 VALUATION OF SHARES UPON DISTRIBUTION.
Notwithstanding any contrary provision in this Article XIII,
in the event that all or a portion of a payment of a distribution is to be made
in cash, the recipient 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.
SECTION 13.8 PUT OPTIONS.
(a) Subject to section 13.8(c) and except as provided
otherwise in section 13.8(b), each Member or Former Member to whom Shares are
distributed under the Plan, each Beneficiary of a deceased Member or Former
Member, including the estate of a deceased Member or Former Member, to whom
Shares are distributed under the Plan, and each person to whom such a Member,
Former Member or Beneficiary gives Shares that have been distributed under the
Plan shall have the right to require Hudson City Bancorp, Inc. to purchase from
him all or any portion of such Shares. A person shall exercise such right by
delivering to Hudson City Bancorp, Inc. a written notice, in such form and
manner as Hudson City Bancorp, Inc. may by written notice to such person
prescribe, setting forth the number of Shares to be purchased by Hudson City
Bancorp, Inc., the number of the stock certificate evidencing such person's
ownership of such Shares, and the effective date of the purchase. Such notice
shall be given at least 30 days in advance of the effective date of purchase,
and the effective date of purchase specified therein shall be, either within the
60 day period that begins on the date on which the Shares to be purchased by
Hudson City Bancorp, Inc. were distributed from the Plan or within the 60 day
period that begins on the first day of the Plan Year immediately following the
Plan Year in which the Shares to be purchased by Hudson City Bancorp, Inc. are
distributed from the Plan. As soon as practicable following its receipt of such
a notice, Hudson City Bancorp, Inc. 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 Valuation Date coincident with
or immediately preceding the effective date of the purchase.
(b) Hudson City Bancorp, Inc. shall have no obligation to
purchase any Share (i) pursuant to a notice that is not timely given, or on an
effective date of purchase that is not within the periods prescribed in section
13.8(a) or (ii) during a period in which Shares are publicly traded on an
established market.
(c) This section 13.8 shall not apply so long as Hudson City
Bancorp, Inc. is prohibited by law from redeeming or purchasing its own
securities.
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SECTION 13.9 RIGHT OF FIRST REFUSAL.
(a) Subject to section 13.9(d), for any period during which
Shares are not publicly traded in 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 13.9, shall sell such Shares to
any person other than Hudson City Bancorp, Inc. without first offering to sell
such Shares to Hudson City Bancorp, Inc. in accordance with this section 13.9.
(b) In the event that a person to whom this section 13.9
applies shall receive and desire to accept from a person other than Hudson City
Bancorp, Inc. an offer to purchase Shares to which this section 13.9 applies, he
shall furnish to Hudson City Bancorp, Inc. a written notice which shall:
(i) include a copy of such offer to purchase;
(ii) offer to sell to Hudson City Bancorp, Inc. 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
Valuation Date coincident with or immediately preceding the
date of such notice;
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 Hudson City Bancorp, Inc. does not accept his
offer to sell.
Such person shall refrain from accepting such offer to purchase for a period of
fourteen days following the date on which such notice is given.
(c) Subject to section 13.9(d), Hudson City Bancorp, Inc.
shall have the right to purchase the Shares covered by the offer to sell
contained in a notice given pursuant to section 13.9(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 13.9(b) is given. If Hudson City Bancorp, Inc. 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.
(d) This section 13.9 shall not apply so long as Hudson City
Bancorp, Inc. is prohibited by law from redeeming or purchasing its own
securities.
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ARTICLE XIV
CHANGE IN CONTROL
SECTION 14.1 DEFINITION OF CHANGE IN CONTROL; PENDING CHANGE
IN CONTROL.
(a) A Change in Control shall be deemed to have occurred upon
the happening of any of the following events:
(i) any event upon which any "person" (as such term is used in
sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended), other than (A) a trustee or other fiduciary holding
securities under any employee benefit plan maintained for the benefit
of employees of Hudson City Bancorp, Inc.; (B) a corporation owned,
directly or indirectly, by the stockholders of Hudson City Bancorp,
Inc. in substantially the same proportions as their ownership of stock
of Hudson City Bancorp, Inc.; or (C) any group constituting a person in
which employees of Hudson City Bancorp, Inc. are substantial members,
becomes the "beneficial owner" (as defined in Rule 13d-3 promulgated
under the Exchange Act), directly or indirectly, of securities issued
by Hudson City Bancorp, Inc. representing 25% or more of the combined
voting power of all of Hudson City Bancorp, Inc.'s then outstanding
securities; or
(ii) any event upon which the individuals who on the Effective
Date were members of the Board of Directors of Hudson City Bancorp,
Inc. together with individuals whose election by such Board or
nomination for election by Hudson City Bancorp, Inc.'s stockholders was
approved by the affirmative vote of at least two-thirds of the members
of such Board then in office who were either members of such Board on
the Effective Date or whose nomination or election was previously so
approved, cease for any reason to constitute a majority of the members
of such Board, but excluding, for this purpose, any such individual
whose initial assumption of office is in connection with an actual or
threatened election contest relating to the election of directors of
Hudson City Bancorp, Inc. (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Securities Exchange Act of
1934);as amended or
(iii) the consummation of either:
(A) a merger or consolidation of Hudson City Bancorp,
Inc. with any other corporation, other than a merger or
consolidation following which both of the following conditions
are satisfied:
(I) either (1) the members of the Board of
Directors of Hudson City Bancorp, Inc. immediately
prior to such merger or consolidation constitute at
least a majority of the members of the governing body
of the institution resulting from such merger or
consolidation; or (2) the shareholders of Hudson City
Bancorp, Inc.
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own securities of the institution resulting from such
merger or consolidation representing 60% or more of
the combined voting power of all such securities then
outstanding in substantially the same proportions as
their ownership of voting securities of Hudson City
Bancorp, Inc. before such merger or consolidation;
and
(II) the entity which results from such
merger or consolidation expressly agrees in writing
to assume and perform Hudson City Bancorp, Inc.'s
obligations under the Plan; or
(B) a complete liquidation of Hudson City Bancorp,
Inc. or an agreement for the sale or disposition by Hudson
City Bancorp, Inc. of all or substantially all of its assets;
or
(iv) any event that would be described in section 16.1 if
"Hudson City Savings Bank" were substituted for "Hudson City Bancorp,
Inc." therein.
In no event, however, shall the transaction by which Hudson City Savings Bank
converts from a mutual institution to a stock institution, or any transaction by
which a company wholly owned by Hudson City Savings Bank becomes the parent
company of Hudson City Savings Bank, be deemed a Change in Control.
(b) A Pending Change of Control shall be deemed to have
occurred upon the happening of any of the following events:
(i) approval by the stockholders of Hudson City Bancorp, Inc.
of a transaction, or a plan for the consummation of a transaction,
which, if consummated, would result in a Change in Control;
(ii) approval by the Board of Directors of Hudson City
Bancorp, Inc. of a transaction, or a plan for the consummation of a
transaction, which, if consummated, would result in a Change in
Control;
(iii) the commencement of a tender offer (within the meaning
of section 14(d)(i) of the Exchange Act, as amended) for securities
issued by Hudson City Bancorp, Inc., which, if completed, would result
in a Change in Control;
(iv) the furnishing or distribution of a proxy statement or
other document, whether or not in opposition to management, soliciting
proxies, consents or authorizations (within the meaning of section 14
of the Exchange Act) in respect of securities issued by Hudson City
Bancorp, Inc. in favor of any election, transaction or other action
which, if effected, would result in a Change in Control; or
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(v) any event which would be described in Sections 14.1(b)(i),
(ii), (iii) or (iv) if "Hudson City Savings Bank" were substituted for
"Hudson City Bancorp, Inc." therein.
SECTION 14.2 VESTING ON CHANGE OF CONTROL.
Notwithstanding any other provision of the Plan, 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 SHARE ACQUISITION LOAN.
Notwithstanding any other provision of the Plan, upon the
occurrence of a Change in Control, the Committee shall direct the Trustee to
sell a sufficient number of shares of Stock to repay any outstanding Share
Acquisition Loan, all remaining Shares which had been unallocated (or the
proceeds from the sale thereof, if applicable) shall be allocated among the
accounts of all individuals with undistributed Account balances on the effective
date of such Change in Control. Such allocation of Shares or proceeds shall be
in proportion to the balance credited to their Accounts immediately prior to
such allocation.
SECTION 14.4 PLAN TERMINATION AFTER CHANGE IN CONTROL.
Notwithstanding any other provision of the Plan, 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 SECTION XIV.
Notwithstanding any other provision of the Plan, this Section
14 of the Plan may be amended after the earliest date on which a Change in
Control or Pending Change in Control occurs, except (i) to the extent any
amendment is 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 or (ii) to the extent that the Bank, in its sole discretion, determines
than any such amendment is necessary in order to permit any transaction to which
the Bank, and/or its parent or affiliate, is or proposes to be a party to
qualify for "pooling of interests" accounting treatment.
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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 Employee
Benefit Plans Committee, or such Employee or officer as may be designated by the
Committee, 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 Commit tee;
(d) To require such proof of age or evidence of good health of
an Employee, Member or Former Member 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 Members, Former
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Members 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, Members, Former Members, Beneficiaries and any other
person having an interest under the Plan; provided, however, that any
question relating to inconsistency or omission in the Plan, or
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;
(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 Member, Former Member, 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.
The Plan Administrator shall have the power and authority necessary or
appropriate to carry out his responsibilities. The Plan Administrator may resign
only by giving at least 30 days' prior written notice of resignation to the
Committee, and such resignation shall be effective on the date specified in such
notice.
SECTION 15.3 COMMITTEE RESPONSIBILITIES.
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;
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(c) To hear and decide questions, including 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;
(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
facilitate 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.
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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.
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.
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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 a member of
the Committee, the Plan Administrator, 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 a member
of the Committee, nor any officer or Employee of the Employer to whom fiduciary
responsibilities are allocated by a Named 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.
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(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 HUDSON CITY SAVINGS
BANK
The Participating Employers expect to continue the Plan
indefinitely, but specifically reserve the right, in their sole discretion, at
any time, by appropriate action of their respective boards of directors or other
authorized officials , 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 Members, Former Members, Beneficiaries or other persons
entitled to benefits, and no such amendment or termination shall reduce the
accrued benefit of any Member, Former Member, 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 Participating 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 HUDSON
CITY SAVINGS BANK
In the event that a corporation or trade or business other
than Hudson City Savings Bank shall adopt this Plan, such corporation or trade
or business shall, by adopting the Plan, empower Hudson City Savings 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
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 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.
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SECTION 16.3 CONFORMITY TO INTERNAL REVENUE CODE.
The Participating Employers have 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 Participating Employers 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 Members, Former Members, 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 Discretionary 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 Participating Employers apply 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 Discretionary Contributions made by the
Participating Employers prior to the date of receipt of such a determination
may, at the election of the Participating Employers, be returned to the
Participating Employers within one year after the date of such determination.
(b) All Discretionary Contributions and Loan Repayment
Contributions to the Plan are made upon the condition that such Discretionary
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 Participating Employers, be returned to the Participating
Employers within one year after the deduction is disallowed.
(c) Any contribution to the Plan made by the Participating
Employers as a result of a mistake of fact may, at the election of the
Participating Employers, be returned to the Participating Employers within one
year after such contribution is made.
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ARTICLE XVII
SPECIAL RULES FOR TOP HEAVY PLAN YEARS
SECTION 17.1 IN GENERAL.
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 Determination 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.
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<PAGE> 57
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.
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 Discretionary 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:
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<PAGE> 58
(i) a Five Percent Owner;
(ii) a person who would be described in section 1.26 if the
number "1%" were substituted for the number "5%" in section 1.26 and
who has an annual Total Compensation from the Employer and any
Affiliated Employer of more than $160,000;
(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.
(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.
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<PAGE> 59
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 Discretionary 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 Discretionary 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.
(b) For any Top Heavy Plan Year beginning before January 1,
2000, 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).
-52-
<PAGE> 60
ARTICLE XVIII
MISCELLANEOUS PROVISIONS
SECTION 18.1 GOVERNING LAW.
The Plan shall be construed, administered and enforced
according to the laws of the State of New Jersey 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 Plan Administrator, the Committee or the Trustee, shall be held or construed
to confer upon any Employee any right to a continuation of employment by any
Affiliated Employer. Each Affiliated 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.
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.
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 Member, Former
Member, 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
-53-
<PAGE> 61
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) and (c), 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 Member, Former
Member 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 Member or Former Member 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 Member
or Former Member, or other person or his spouse, children or other dependents in
such manner and in such proportions as the Plan Administrator may deem proper.
(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.
(c) Notwithstanding anything in the Plan to the contrary, a
Member's, Former Member's or Beneficiary's Accounts under the Plan may be offset
by any amount such Member, Former Member 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 Member, Former Member 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 Member's, Former
Member's or Beneficiary's benefits under the Plan.
SECTION 18.7 PROCEDURES INVOLVING DOMESTIC RELATIONS ORDERS.
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
-54-
<PAGE> 62
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 an Affiliated Employer and any other person ("leasing
organization") has performed for the Affiliated Employer (or for the Affiliated
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 of a type historically performed by employees in the business
field of the Employer under the primary direction or control of an Affiliated
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)
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<PAGE> 63
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).
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.
-56-
<PAGE> 1
Exhibit 10.2
PROFIT INCENTIVE BONUS PLAN
OF
HUDSON CITY SAVINGS BANK
RESTATED AS OF OCTOBER 1, 1989
AND AS AMENDED THROUGH MARCH 11, 1999
<PAGE> 2
PROFIT INCENTIVE BONUS PLAN
OF
HUDSON CITY SAVINGS BANK
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS.................................................Page 1
1.01 "Accumulated Share".............................Page 1
1.02 "Actual Deferral Percentage"....................Page 1
1.03 "Adjustment Factor".............................Page 2
1.04 "Affiliated Company"............................Page 2
1.05 "Annual Dollar Limit"...........................Page 2
1.06 "Average Total Assets"..........................Page 2
1.07 "Bank"..........................................Page 3
1.08 "Bank Contributions"............................Page 3
1.09 "Beneficiary"...................................Page 3
1.10 "Board".........................................Page 3
1.11 "Break in Service"..............................Page 3
1.12 "Code"..........................................Page 3
1.13 "Committee".....................................Page 4
1.14 "Compensation"..................................Page 4
1.15 "Contribution Percentage".......................Page 4
1.16 "Corporate Insider".............................Page 4
1.17 "Disability"....................................Page 5
1.18 "Discretionary Transaction".....................Page 5
1.19 "Earnings"......................................Page 5
1.20 "Elective Bank Contribution"....................Page 5
1.21 "Eligible Employee".............................Page 5
1.22 "Employee"......................................Page 5
1.23 "Employer Stock Fund"...........................Page 6
1.24 "ERISA".........................................Page 6
1.25 "Forfeitures"...................................Page 6
1.26 "Former Member".................................Page 6
1.27 "Highly Compensated Employee"...................Page 6
1.28 "Hour of Service"..............................Page 10
1.29 "Income Available for Surplus".................Page 10
1.30 "Investment Funds".............................Page 10
1.31 "Leased Employee"..............................Page 11
1.32 "Member".......................................Page 11
1.33 "Named Fiduciary"..............................Page 11
1.34 "Net Operating Income".........................Page 11
1.35 "Optional Account".............................Page 11
1.36 "Personal Account".............................Page 11
1.37 "Personal Contributions".......................Page 11
1.38 "Plan".........................................Page 12
<PAGE> 3
TABLE OF CONTENTS
(Continued)
1.39 "Plan Administrator"...........................Page 12
1.40 "Plan Year"....................................Page 12
1.41 "Quarter"......................................Page 12
1.42 "Regular Account"..............................Page 12
1.43 "Retirement"...................................Page 12
1.44 "Rollover Account".............................Page 12
1.45 "Rollover Contribution"........................Page 12
1.46 "Severance Date"...............................Page 12
1.47 "Share"........................................Page 13
1.48 "Spousal Consent"..............................Page 13
1.49 "Statutory Compensation".......................Page 13
1.50 "Trust Agreement"..............................Page 14
1.51 "Trust Fund"...................................Page 14
1.52 "Trustee"......................................Page 14
1.53 "Valuation Date"...............................Page 14
1.54 "Vesting Service"..............................Page 14
1.55 "Year of Eligibility Service"..................Page 15
ARTICLE II MEMBERSHIP.................................................Page 16
2.01 Eligibility for Membership.....................Page 16
2.02 Commencement of Membership.....................Page 16
2.03 Termination of Membership......................Page 16
2.04 Participation or Reparticipation Following
Termination of Employment or Participation..Page 17
ARTICLE III SPECIAL PROVISIONS.........................................Page 18
3.01 Military Service...............................Page 18
3.02 Leave of Absence...............................Page 18
ARTICLE IV CONTRIBUTIONS..............................................Page 19
4.01 Bank Contributions.............................Page 19
4.02 Method of Allocation...........................Page 20
4.03 Payment of Bank Contributions..................Page 21
4.04 Cash or Deferred Election by a Member..........Page 21
4.05 Personal Contributions.........................Page 23
4.06 Rollover Contributions.........................Page 23
4.07 Limitations Affecting Highly
Compensated Employees.......................Page 24
4.08 Additional Discrimination Testing Provisions...Page 27
4.09 Maximum Annual Additions.......................Page 29
<PAGE> 4
TABLE OF CONTENTS
(Continued)
ARTICLE V MEMBER'S ACCOUNT...........................................Page 34
5.01 In General.....................................Page 34
5.02 The Regular Account............................Page 34
5.03 The Optional Account...........................Page 34
5.04 The Personal Account...........................Page 34
5.05 The Rollover Account...........................Page 34
ARTICLE VI VESTING....................................................Page 35
6.01 Method of Vesting..............................Page 35
6.02 Vesting on Termination of Membership...........Page 36
6.03 Forfeitures on Termination of Membership.......Page 36
6.04 Amounts Credited Upon Reemployment or
Reparticipation.............................Page 36
ARTICLE VII THE TRUST FUND.............................................Page 38
7.01 The Trust Fund.................................Page 38
7.02 The Investment Funds...........................Page 38
7.03 Management and Control of Assets...............Page 39
ARTICLE VIII INVESTMENT DIRECTIONS, CHANGES AND TRANSFERS...............Page 40
8.01 Investment Directions..........................Page 40
8.02 Change of Investment Directions................Page 40
8.03 Transfers Between Investment Funds.............Page 41
8.04 Valuation of Investment Units..................Page 41
8.05 Fractional Investment Units....................Page 41
8.06 Annual Statements..............................Page 41
ARTICLE IX INVESTMENTS IN EMPLOYER STOCK FUND.........................Page 43
9.01 In General.....................................Page 43
9.02 Restrictions on Investments by
Corporate Insiders..........................Page 43
9.03 Compliance with Securities Laws................Page 44
9.04 Voting Rights..................................Page 45
9.05 Tender Rights..................................Page 46
9.06 Appraisal Rights...............................Page 47
ARTICLE X PAYMENT OF BENEFITS........................................Page 49
10.01 In General.....................................Page 49
10.02 Payments during Employment.....................Page 49
10.03 Withdrawals of Rollover Contributions
During Employment...........................Page 53
10.04 Beneficiaries; Designation and Payment.........Page 53
10.05 Form of Payment Following Termination
of Membership...............................Page 55
<PAGE> 5
TABLE OF CONTENTS
(Continued)
10.06 Commencement of Payment Following Termination
of Membership...............................Page 56
10.07 Distribution in Shares.........................Page 57
10.08 Loans to Members...............................Page 58
10.09 Direct Transfer of Eligible Plan
Distributions...............................Page 60
10.10 Waiver of Notice Period........................Page 62
ARTICLE XI ADMINISTRATION OF PLAN.....................................Page 63
11.01 Named Fiduciaries..............................Page 63
11.02 Plan Administrator.............................Page 63
11.03 Employee Benefit Plans Committee...............Page 65
11.04 Committee Action...............................Page 65
11.05 Committee Responsibilities.....................Page 66
11.06 Claims Procedure...............................Page 67
11.07 Claims Review Procedure........................Page 68
11.08 Allocation of Fiduciary Responsibilities and
Employment of Advisors......................Page 69
11.09 Other Administrative Provisions................Page 69
ARTICLE XII AMENDMENT AND TERMINATION..................................Page 71
12.01 Amendment and Termination......................Page 71
12.02 Conformity to U.S. Internal Revenue Code.......Page 72
ARTICLE XIII MISCELLANEOUS PROVISIONS...................................Page 73
13.01 Governing Law..................................Page 73
13.02 No Right to Continued Employment...............Page 73
13.03 Construction of Language.......................Page 73
13.04 Merger with Other Plans........................Page 73
13.05 Non-alienation of Benefits.....................Page 74
13.06 Effect of Restatement..........................Page 75
13.07 Top-Heavy Provisions...........................Page 75
13.08 Distribution of Accounts Upon a Sale of
Assets or a Sale of a Subsidiary............Page 78
<PAGE> 6
PROFIT INCENTIVE BONUS PLAN
OF
HUDSON CITY SAVINGS BANK
ARTICLE I
DEFINITIONS
For the purposes of the Plan:
1.01 "Accumulated Share" means the total value of the interests of a Member,
Former Member, Employee or former Employee in the Trust Fund, including
amounts credited to his Regular Account, Optional Account, Personal
Account and Rollover Account as described in Article V.
1.02 "Actual Deferral Percentage" means, with respect to a specified group of
Eligible Employees, the average of the ratios, calculated separately for
each Employee in that group, of (a) the amount of Elective Bank
Contributions made pursuant to Section 4.04 for a Plan Year (including
Elective Bank Contributions returned to a Highly-Compensated Employee
under Section 4.04(c) and Elective Bank Contributions returned to any
Employee pursuant to Section 4.04(d)), to (b) the Employees' Statutory
Compensation for that entire Plan Year, provided that, upon direction of
the Committee, Statutory Compensation for a Plan Year shall only be
counted if received during the period an Employee is a Member. The Actual
Deferral Percentage for each group and the ratio determined for each
Employee in the group shall be calculated to the nearest one one-hundredth
of one percent. For purposes of determining the Actual Deferral Percentage
for a Plan Year, Elective Bank Contributions may be taken into account for
a Plan Year only if they:
(a) relate to compensation that either would have been received by the
Employee in the Plan Year but for the deferral election, or are
attributable to services performed by the Employee in the Plan Year
and would have been received by the Employee within 2 1/2 months
after the close of the Plan Year but for the deferral election,
(b) are allocated to the Employee as of a date within that Plan Year and
the allocation is not contingent on the participation or performance
of service after such date, and
(c) are actually paid to the Trustee no later than 12 months after the
end of the Plan Year to which the contributions relate.
<PAGE> 7
Page 2
1.03 "Adjustment Factor" means the cost of living adjustment factor prescribed
by the Secretary of the Treasury under Section 415(d) of the Code for
calendar years beginning on or after January 1, 1988, and applied to such
items and in such manner as the Secretary shall provide.
1.04 "Affiliated Company" means any company not participating in the Plan which
is a member of a controlled group of corporations (as defined in Section
414(b) of the Code) which also includes as a member the Bank; any trade or
business under common control (as defined in Section 414(c) of the Code)
with the Bank; any organization (whether or not incorporated) which is a
member of an affiliated service group (as defined in Section 414(m) of the
Code) which includes the Bank; and any other entity required to be
aggregated with the Bank pursuant to regulations under Section 414(o) of
the Code. Notwithstanding the foregoing sentence, for purposes of Section
4.09, the definitions in Sections 414(b) and (c) of the Code shall be
modified as provided in Section 415(h) of the Code.
1.05 "Annual Dollar Limit" means for Plan Years beginning on or after October
1, 1989 and before October 1, 1994, $200,000 multiplied by the Adjustment
Factor. Commencing with the 1994 Plan Year, the Annual Dollar Limit means
$150,000, except that if for any calendar year after 1994 the
Cost-of-Living Adjustment as hereinafter defined is equal to or greater
than $10,000, then the Annual Dollar Limit (as previously adjusted under
this Section) for any Plan Year beginning in any subsequent calendar year
shall be increased by the amount of such Cost-of-Living Adjustment,
rounded to the next lowest multiple of $10,000. The Cost-of-Living
Adjustment shall equal the excess of (i) $150,000 increased by the
adjustment made under Section 415(d) of the Code for the calendar year
except that the base period for purposes of Section 415(d)(1)(A) of the
Code shall be the calendar quarter beginning October 1, 1993 over (ii) the
Annual Dollar Limit in effect for the Plan Year beginning in the calendar
year.
1.06 "Average Total Assets" for any Plan Year means the sum of the value of the
total assets of the Bank, as shown on the books and records of the Bank,
as of the end of each month during the Plan Year and on September 30th of
the preceding Plan Year, divided by 13.
<PAGE> 8
Page 3
1.07 "Bank" means Hudson City Savings Bank or any successor by merger, purchase
or otherwise.
1.08 "Bank Contributions" means amounts contributed by the Bank pursuant to
Section 4.01 hereof.
1.09 "Beneficiary" means any person or persons who shall be designated by a
Member pursuant to the provisions of Section 10.04.
1.10 "Board" means the Board of Managers of the Bank.
1.11 "Break in Service" means a twelve-consecutive month period, commencing
with the next day after employment terminates, during which an Employee
performs no services for which he receives a salary from the Bank,
provided, however, that if the Eligible Employee's employment is
terminated or if the Employee is otherwise absent from work on account of
the Employee's pregnancy, birth of the Employee's child or placement of a
child with the Employee in connection with the adoption by the Employee of
such child or for purposes of caring for such child for a period following
such birth or placement, such Employee shall not incur a Break in Service
until the second anniversary of his Severance Date, provided the Employee
is not reemployed or does not return to active service prior to such date.
1.12 "Code" means the Internal Revenue Code of 1986, as amended from time to
time (including the corresponding provision of any succeeding law).
1.13 "Committee" means the Employee Benefit Plans Committee of the Bank,
appointed pursuant to Section 11.03.
1.14 "Compensation" means the regular remuneration paid to an Employee for
services rendered to the Bank, determined prior to any reduction pursuant
to a cafeteria plan as described in Section 125 of the Code, and excluding
any bonuses and pay for overtime or special pay, and
<PAGE> 9
Page 4
excluding the Bank's cost for any public or private employee benefit plan
including the Retirement Plan and this Plan, under rules uniformly
applicable to all employees similarly situated. However, for Plan Years
beginning after 1988, Compensation shall not exceed the Annual Dollar
Limit. The Annual Dollar Limit applies to the aggregate Compensation paid
to a Highly Compensated Employee referred to in Section 4.08(a), his
spouse and his lineal descendants who have not attained age 19 before the
end of the Plan Year. If, as a result of the application of the family
aggregation rule, the Annual Dollar Limit is exceeded, then the Limit
shall be pro-rated among the affected individuals in proportion to each
such individual's Compensation as determined under this Section 1.14 prior
to the application of the Limit.
1.15 "Contribution Percentage" means, with respect to a specified group of
Eligible Employees, the average of the ratios, calculated separately for
each Employee in that group, of (a) the sum of the Employee's Personal
Contributions for that Plan Year, to (b) his Statutory Compensation for
that entire Plan Year, provided that, upon direction of the Committee,
Statutory Compensation for a Plan Year shall only be counted if received
during the period an Employee is a Member. The Contribution Percentage for
each group and the ratio determined for each Employee in the group shall
be calculated to the nearest one one-hundredth of one percent.
1.16 "Corporate Insider" means any person who is required to file reports with
the Securities and Exchange Commission with respect to Shares of Hudson
City Bancorp, Inc. pursuant to section 16 of the Securities Exchange Act
of 1934, as amended.
1.17 "Disability" means a condition of total incapacity, mentally or
physically, for further performance of duty with the Bank, which the
Committee shall have determined on the basis of the certification of a
physician or physicians designated by the Committee is likely to be
permanent.
1.18 "Discretionary Transaction" means a transaction pursuant to this Plan or
any other employee benefit plan maintained by the Bank or any affiliate of
the Bank that: (a) is effected
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at the volition of a Corporate Insider; (b) results, directly or
indirectly, in the acquisition or disposition of beneficial ownership of
Shares by the Corporate Insider; (c) is not made in connection with the
death, disability, retirement or termination of employment of the
Corporate Insider; (d) is not required to be made available to the
Corporate Insider pursuant to any provision of the Code applicable to the
Plan; and (e) results in either intra-plan transfer involving Shares or an
investment fund which invests in Shares or a cash distribution or loan
funded by a volitional disposition of Shares or a beneficial interest in
Shares.
1.19 "Earnings" means the amount of earnings to be returned with any excess
deferrals, excess contributions or excess aggregate contributions under
Section 4.04 or 4.07 for a Plan Year, determined as of the last day of
such Plan Year under the Plan's method of allocating income to Members'
accounts pursuant to Article V.
1.20 "Elective Bank Contribution" means the amount of Bank contribution which a
Member elects to have contributed to the Plan in lieu of a cash payment
thereof.
1.21 "Eligible Employee" means an Employee who is eligible for membership in
the Plan, in accordance with Article II.
1.22 "Employee" means any person, including an officer, who is employed by the
Bank, excluding any Leased Employee.
1.23 "Employer Stock Fund" means an Investment Fund the purpose of which is to
invest primarily in Shares.
1.24 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time (including the corresponding provision of any
succeeding law).
1.25 "Forfeitures" means the amounts forfeited by Members (a) on account of
termination of membership prior to full vesting pursuant to Section 6.03
or (b) on a determination of
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dishonesty pursuant to Section 6.01(c), less amounts credited because of
reemployment, pursuant to Section 6.04.
1.26 "Former Member" means a Member whose membership in the Plan has
terminated.
1.27 "Highly Compensated Employee" means:
(a) With respect to any Plan Year for which an election is not made
under paragraph (b) below, any employee of the Bank or an Affiliated
Company (whether or not eligible for membership in the Plan) who
satisfies the criteria of paragraph (i), (ii) or (iii):
(i) During the look-back year the employee:
(A) received Statutory Compensation in excess of $75,000
multiplied by the Adjustment Factor;
(B) received Statutory Compensation in excess of $50,000
multiplied by the Adjustment Factor and was among the
highest 20 percent of employees for that year when
ranked by Statutory Compensation paid for that year
excluding, for purposes of determining the number of
such employees, such employees as the Bank may determine
on a consistent basis pursuant to Section 414(q)(8) of
the Code; or
(C) was at any time an officer of the Bank or an Affiliated
Company and received Statutory Compensation greater than
50 percent of the dollar limitation on maximum benefits
under Section 415(b)(1)(A) of the Code for such Plan
Year. The number of officers is limited to 50 (or, if
lesser, the greater of 3 employees or 10 percent of
employees excluding those employees who may. be excluded
in determining the top-paid group). If no officer has
Statutory Compensation in excess of 50 percent of the
dollar limitation on maximum benefits under Section
415(b)(1)(A) of the Code, the highest paid officer is
treated as a Highly Compensated Employee.
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(ii) During the determination year, the employee satisfies the
criteria under (A), (B) or (C) of (i) above and is one of the
100 highest paid employees of the Bank or an Affiliated
Company.
(iii) During the determination year or the look-back year the
employee was at any time a five percent owner of the Bank or
an Affiliated Company.
(iv) For purposes of Section 4.08(a), a Highly Compensated Employee
shall include a former employee who separated from service
prior to the determination year and who was a 5 percent owner
for either (i) the year he separated from service or (ii) any
determination year ending on or after the employee's 55th
birthday.
(v) The provisions of this paragraph shall be further subject to
such additional requirements as shall be described in Section
414(q) of the Code and its applicable regulations, which shall
override any aspects of this paragraph inconsistent therewith.
(b) In lieu of determining Highly Compensated Employees in accordance
with the provisions of paragraph (a) above, the Bank may, for any
Plan Year beginning on or after January 1, 1989, elect to determine
Highly Compensated Employees based on the simplified method provided
in IRS Revenue Procedure 93-42. With respect to any Plan Year for
which such an election is made, the term "Highly Compensated
Employee" means:
(i) any employee within the snapshot population who, for the Plan
Year:
(A) receives Statutory Compensation in excess of $75,000
multiplied by the Adjustment Factor;
(B) receives Statutory Compensation in excess of $50,000
multiplied by the Adjustment Factor and was among the
highest 20 percent of employees on the snapshot day when
ranked by Statutory Compensation paid for that Plan Year
excluding, for purposes of determining the number of
such employees, such employees as the Bank may determine
on a consistent basis pursuant to Section 414(q)(8) of
the Code; or
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(C) is an officer of the Bank or an Affiliated Company on
the snapshot day and receives Statutory Compensation
greater than 50 percent of the dollar limitation on
maximum benefits under Section 415(b)(1)(A) of the Code
for such Plan Year. The number of officers is limited to
50 (or, if lesser, the greater of 3 employees or 10
percent of employees excluding those employees who may
be excluded in determining the top-paid group). If no
officer has Statutory Compensation in excess of 50
percent of the dollar limitation on maximum benefits
under Section 415(b)(1)(A) of the Code, the highest paid
officer is treated as a Highly Compensated Employee; or
(D) the employee is a five percent owner of the Bank or an
Affiliated Company on the snapshot day; and
(ii) any employee of the Bank or an Affiliated Company during the
Plan Year who:
(A) terminated prior to the snapshot day and was a Highly
Compensated Employee in the prior year;
(B) terminated prior to the snapshot day and (i) was a 5
percent owner, (ii) has Statutory Compensation for the
Plan Year greater than or equal to the projected
Statutory Compensation of any employee who is treated as
a Highly Compensated Employee or (iii) was an officer
and has Statutory Compensation greater than or equal to
the projected Statutory Compensation of any other
officer who is a Highly Compensated Employee on the
snapshot day solely because that person is an officer;
or
(C) becomes employed subsequent to the snapshot day and (i)
is a 5 percent owner, (ii) has Statutory Compensation
for the Plan Year greater than or equal to the projected
Statutory Compensation of any employee who is treated as
a Highly Compensated Employee on the snapshot day
(except for employees who are Highly Compensated
Employees solely because they are 5 percent owners or
officers), or (iii) is an officer and has Statutory
Compensation greater than or
<PAGE> 14
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equal to the projected Statutory Compensation of any
other officer who is a Highly Compensated Employee on
the snapshot day solely because that person is an
officer.
The provisions of this paragraph (b) shall be further subject to
such additional requirements as shall be described in Section 414(q)
of the Code, and its applicable regulations, which are not
inconsistent with the foregoing provisions of this paragraph (b).
(c) For purposes of this Section 1.27, the following terms shall have
the following meanings:
(i) the 'determination year' means the Plan Year and the
'look-back year' means the 12-month period immediately
preceding the determination year. However, to the extent
permitted under regulations, the Committee may elect to
determine the status of Highly Compensated Employees on a
calendar year basis;
(ii) 'snapshot day' means the single day during the Plan Year as of
which the Bank is determining its Highly Compensated
Employees. Such day must be reasonably representative of the
workforce of the Bank and Affiliated Companies and the Plan's
coverage for the Plan Year;
(iii) 'snapshot population' means all employees of the Bank and
Affiliated Companies on the snapshot day; and
(iv) 'Statutory Compensation' has the same meaning as set forth in
Section 1.45 except that solely for purposes of determining
Highly Compensated Employees under paragraph (b) above, the
Bank may reasonably approximate an employee's Statutory
Compensation for the Plan Year (projected to the end of the
Plan Year if the snapshot day is not the last day of the Plan
Year).
(d) Notwithstanding the foregoing, employees who are nonresident aliens
and who receive no earned income from the Bank or an Affiliated
Company which constitutes income from sources within the United
States shall be disregarded for all purposes of this Section 1.27.
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1.28 "Hour of Service" means (a) each hour for which an Employee is paid or
entitled to payment for the performance of duties for the Bank or an
Affiliated Company, (b) each hour for which an Employee is paid or
entitled to payment by the Bank or an Affiliated Company for a period of
time during which no duties are performed (whether or not the employment
relationship has terminated) including, without limitation, vacation,
holiday, illness, incapacity (including disability), layoff or jury duty,
and (c) each hour for which back pay, irrespective of mitigation of
damages, is either awarded or agreed to by the Bank or an Affiliated
Company, excluding any hour credited under (a) or (b), which shall be
credited to the computation period or periods to which the award,
agreement or payment pertains rather than to the computation period in
which the award, agreement or payment is made. The hours of service
credited shall be determined as required by Title 29 of the Code of
Federal Regulations, Section 2530.200b-2(b), (c) and (f).
1.29 "Income Available for Surplus" for any Plan Year means the Net Operating
Income of the Bank, plus (or minus) (a) non-recurring income, expenses,
and charges, including, but not limited to, the net of all gains and
losses on the sale or other disposition of securities or other property,
both real and personal, less (b) interest payments to depositors, less (c)
all applicable taxes and less (d) the Bank Contributions to the Plan for
the Plan Year.
1.30 "Investment Funds" means the Savings Fund, the Equity Fund, the
Intermediate Bond Fund, and the Employer Stock Fund described in Article
VII, and/or such other fund or funds as may be established by the Trustee
at the direction of the Bank to constitute the Trust Fund.
1.31 "Leased Employee" means any person as so defined in Section 414(n) of the
Code. In the case of any person who is a Leased Employee immediately
before or after a period of service as an Employee, the entire period
during which he has performed services for the Bank or an Affiliated
Company as a Leased Employee shall be counted as service as an Employee
for all purposes of the Plan, except that he shall not, by reason of that
status, become a Member of the Plan.
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1.32 "Member" means any person who is a member of the Plan in accordance with
its provisions.
1.33 "Named Fiduciary" means any person, committee, corporation or organization
as described in Section 11.01.
1.34 "Net Operating Income" for any Plan Year means the gross operating income
of the Bank less operating expenses including, but not limited to,
depreciation, but excluding: (a) nonrecurring income, expenses or charges
including, but not limited to, the net of all gains and losses on the sale
or other disposition of securities or other property both real and
personal, (b) interest payments to depositors, (c) all applicable taxes,
and (d) the Bank Contributions to the Plan for the Plan Year.
1.35 "Optional Account" means the account which may be established and
maintained pursuant to Article V hereof for a Member for his Elective Bank
Contributions. The Optional Account consists of two subaccounts, Optional
Account A which includes Bank Contributions made on account of Plan Years
ending before October 1, 1980 and earnings thereon and Optional Account B
which includes the remaining portion of the Optional Account.
1.36 "Personal Account" means the account which may be established and
maintained pursuant to Article V hereof for a Member for his Personal
Contributions.
1.37 "Personal Contributions" means any amounts contributed by Members pursuant
to Section 4.05.
1.38 "Plan" means the Profit Incentive Bonus Plan of the Bank as, from time to
time, revised and amended. This Plan is intended to qualify as a
"profit-sharing plan" for purposes of the Code.
1.39 "Plan Administrator" means the Employee Benefit Plans Committee or any
person, committee, corporation or organization designated pursuant to
Section 11.02 to perform the responsibilities of that office.
<PAGE> 17
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1.40 "Plan Year" means each twelve month period ending on September 30th.
1.41 "Quarter" means the three month periods ending on the last day of
December, March, June and September.
1.42 "Regular Account" means the account established and maintained pursuant to
Article V hereof for each Member for his mandatory allocations of Bank
Contributions. The Regular Account consists of two subaccounts, Regular
Account A which includes Regular Contributions made on account of Plan
Years ending before October 1, 1980 and earnings thereon and Regular
Account B which includes the remaining portion of the Regular Account.
1.43 "Retirement" means (a) any termination of membership in the Plan at or
after attainment of age 65, and (b) any retirement under the Retirement
Plan of the Bank.
1.44 "Rollover Account" means the account which may be established and
maintained pursuant to Article V for an Employee for his Rollover
Contributions.
1.45 "Rollover Contribution" means any rollover accounts or rollover
contributions contributed by an Employee to the Plan pursuant to Section
4.06.
1.46 "Severance Date" means the earlier of (a) the date an employee quits,
retires, is discharged or dies, or (b) the first anniversary of the date
on which an employee is first absent from service, with or without pay,
for any reason such as vacation, sickness, disability, layoff or leave of
absence.
1.47 "Share" means a share of common stock, par value $.01, of Hudson City
Bancorp, Inc.
1.48 "Spousal Consent" means the written consent of a Member's spouse to the
Member's election of a specified form of benefit or designation of a
specified Beneficiary. That consent shall be witnessed by a Plan
representative or notary public and shall acknowledge the effect
<PAGE> 18
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on the spouse of the Member's election. The requirement for spousal
consent may be waived by the Committee if it believes there is no spouse,
or the spouse cannot be located, or because of such other circumstances as
may be established by applicable law.
1.49 "Statutory Compensation" means the wages, salaries, and other amounts paid
in respect of an employee for services actually rendered to the Bank or an
Affiliated Company, including by way of example, overtime, bonuses and
commissions, but excluding deferred compensation, stock options and other
distributions which receive special tax benefits under the Code. For
purposes of determining Highly Compensated Employees under Section 1.27
and key employees under Section 13.07, Statutory Compensation shall
include Elective Bank Contributions and amounts contributed on a Member's
behalf on a salary reduction basis to a cafeteria plan under Section 125
of the Code. For all other purposes, each Plan Year the Committee may
direct that Statutory Compensation shall include Elective Bank
Contributions and amounts contributed on a Member's behalf on a salary
reduction basis to a cafeteria plan under Section 125 of the Code. For
Plan Years beginning after 1988, Statutory Compensation shall not exceed
the Annual Dollar Limit, provided that such Limit shall not be applied in
determining Highly Compensated Employees under Section 1.27. The Annual
Dollar Limit applies to the aggregate Statutory Compensation paid to a
Highly Compensated Employee referred to in Section 4.08(a), his spouse and
his lineal descendants who have not attained age 19 before the close of
the Plan Year. If, as a result of the application of the family
aggregation rule, the Annual Dollar Limit is exceeded, then the Limit
shall be pro-rated among the affected individuals in proportion to each
such individual's Statutory Compensation as determined under this Section
1.49 prior to the application of the Limit.
1.50 "Trust Agreement" means the Agreement between the Bank and the Trustee
therein named or its successor pursuant to which the Trust Fund shall be
held in trust.
1.51 "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
<PAGE> 19
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by the Trustee under a trust agreement in accordance with the Plan, less
any depreciation thereof and any payments made therefrom pursuant to the
Plan.
1.52 "Trustee" means the trustee of the Trust Fund from time to time in office.
The Trustee shall be Bankers Trust Company, which shall serve as Trustee
until it is removed or resigns from office and is replaced by a successor
Trustee appointed by the Bank.
1.53 "Valuation Date" means the last day of a Quarter and such other days as
the Plan Administrator designates with the consent of the Trustee.
1.54 "Vesting Service" means, with respect to any employee, his period of
employment with the Bank or an Affiliated Company, whether or not as an
Eligible Employee as defined above, beginning on the date he first
completes an Hour of Service or on his 18th birthday, if later, and ending
on his Severance Date, provided that:
(a) if his employment is terminated and he is later reemployed within
one year of (i) his date of termination or (ii) the first day of an
absence from service immediately preceding his date of termination,
if earlier, the period between his Severance Date and his date of
reemployment shall be included in his Vesting Service;
(b) if he shall have been absent from the service of the Bank or an
Affiliated Company because of service in the Armed Forces of the
United States and if he shall have returned to the service of the
Bank or an Affiliated Company having applied to return while his
reemployment rights were protected by law, that absence shall be
included in his Vesting Service;
(c) if he is on a leave of absence approved by the Bank, under rules
uniformly applicable to all Employees similarly situated, the Bank
may authorize the inclusion in his Vesting Service of any portion of
that period of leave, not in excess of two years, which is not
included in his Vesting Service under (a) above; and
(d) if his employment is terminated and he is later reemployed, his
Vesting Service after reemployment shall be aggregated with his
previous period or periods of Vesting Service.
<PAGE> 20
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1.55 "Year of Eligibility Service" means, (i) with respect to a full-time
employee, the completion of a period of 12 consecutive months beginning on
the date he first completes an Hour of Service for which he is compensated
by the Bank (or an anniversary thereof) if at any time during such period
he performs services for which he is compensated by the Bank; and (ii)
with respect to a part-time employee, the completion of a 12-month period
of employment with the Bank or any Affiliated Company beginning on the
date he first completes an Hour of Service upon hire or rehire, or on any
anniversary of that date, in which he first completes at least 1,000 Hours
of Service. For purposes of this Section 1.51, a "full-time employee"
means any Employee who, on the basis of his regular, stated work schedule,
is classified as a full-time employee by the Bank, and a "part-time
employee" means any Employee who, on the basis of his regular, stated work
schedule, is classified as a part-time employee by the Bank.
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ARTICLE II
MEMBERSHIP
2.01 Eligibility for Membership
(a) Only Eligible Employees may be or become Members of the Plan. An
Employee shall be an Eligible Employee if:
(i) He has completed one Year of Eligibility Service;
(ii) He has attained age 21; and
(iii) He is receiving salary from the Bank.
(b) An Employee is not an Eligible Employee if he:
(i) is compensated principally on a daily, commission, fee or
retainer basis;
(ii) is a building service Employee who is regularly required to
spend more than 50% of his working time servicing real estate
other than offices of the Bank;
(iii) is an Employee or in a unit of Employees covered by a
collective bargaining agreement with the Bank 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
(iv) is a mortgage field originator.
2.02 Commencement of Membership
Unless excluded by Section 2.01(b): (a) an Employee who is a Member on
September 30, 1985, shall continue to be a Member; and (b) any other
Employee shall become a Member on the first day of the month, commencing
with October 1, 1985, next following the day on which he becomes an
Eligible Employee.
2.03 Termination of Membership
Membership in the Plan shall cease upon termination of employment with the
Bank, death, Disability, Retirement or becoming an Employee who is
excluded under Section 2.01(b). Notwithstanding the previous sentence, a
Former Member who is excluded under Section
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2.01(b), shall, while he is an Employee, be treated as a Member of the
Plan, except that he shall not be entitled to make Personal Contributions
or participate in Bank Contributions.
2.04 Participation or Reparticipation Following Termination of Employment or
Participation
(a) If an Eligible Employee terminates employment with the Bank and is
reemployed, he shall become an Eligible Employee again as of the
date he again becomes an Employee and shall become a Member as of
such date, provided that he is not excluded pursuant to Section
2.01(b).
(b) If an Eligible Employee ceases to be eligible or terminates
membership because he becomes an Employee who is excluded under
Section 2.01(b), he shall become (or again become) a Member as of
the first date he again ceases to be excluded pursuant to Section
2.01(b).
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ARTICLE III
SPECIAL PROVISIONS
3.01 Military Service
If a Member shall have been absent from the service of the Bank because of
service in the Armed Forces of the United States and if he shall have
returned to the service of the Bank having applied to return while his
reemployment rights were protected by law, he shall be deemed to have
continued during such period to be a Member. Failure to return to work
upon the expiration of the period of service in the Armed Forces shall
terminate membership in the Plan as of the date on which such period
ended.
3.02 Leave of Absence
Employment in the service of the Bank and membership in the Plan shall be
deemed continuous, and not terminated, in the event of temporary absence
from work in the service of the Bank for any period of two years or less
for which a Member shall have been granted a leave of absence by the Bank.
Failure to return to work upon the expiration of the period of leave of
absence granted by the Bank shall terminate membership in the Plan as of
the date on which such period ended. In granting leaves of absence for
purposes of this Plan, all employees in like circumstances shall be
similarly treated.
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ARTICLE IV
CONTRIBUTIONS
4.01 Bank Contributions
(a) As of the end of each Plan Year, the Board shall determine the Bank
Contributions for the Plan Year. The Bank Contributions for any Plan
Year shall be an amount equal to the lesser of:
(i) An amount that shall not reduce the amount of Income Available
for Surplus below $2,500 per $1,000,000 of Average Total
Assets for the Plan Year, or
(ii) 10% of the Compensation while a Member during such Plan Year,
of each such Member in the Plan at the end of such Plan Year
and each such Member whose death, Disability or Retirement
shall have occurred during such Plan Year,
but not exceeding the maximum amount which would be deductible by
the Bank for income tax purposes under the provisions of Section 404
of the Code. Notwithstanding the foregoing, the Board may, in its
discretion, waive the limitation under clause (i) above for any Plan
Year in which it finds that there have been extraordinary charges
against income, including, but not limited to, nonrecurring expenses
and losses realized from the sales of securities, and may also, upon
such finding, direct that the Bank Contributions for such Plan Year
be paid from accumulated earnings of the Bank.
(b) If, on or before September 30, 1999, the Bank consummates a
transaction whereby it becomes a wholly owned subsidiary of a
corporation which issues stock to the public, the Bank Contributions
for the Plan Year ending September 30, 1999 shall be an amount equal
to the lesser of:
(i) An amount that shall not reduce the amount of Income Available
for Surplus below $2,500 per $1,000,000 of Average Assets for
the Plan Year, or
(ii) the sum of (A) 10% of the Compensation while a Member during
the period beginning October 1, 1998 and ending March 31, 1999
and (B) 5% of the Compensation while a Member during the
period beginning April 1, 1999
<PAGE> 25
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and ending September 30, 1999 of each such Member in the Plan
at the end of such Plan Year and each such Member whose death,
Disability or Retirement shall have occurred during the Pan
Year,
but not exceeding the maximum amount which would be deductible by
the Bank for income tax purposes under the provisions of Section 404
of the Code. Notwithstanding the foregoing, the Board may, in its
discretion, waive the limitation under clause (i) for any Plan Year
in which it finds that there have been extraordinary charges against
income, including, but not limited to, nonrecurring expenses and
losses realized from the sales of securities, and may also, upon
such finding, direct that Bank Contributions for such Plan Year be
paid from accumulated earnings of the Bank.
(c) If, on or before the last day of any Plan Year that begins after
September 30, 1999, the Bank has consummated a transaction whereby
it has become a wholly owned subsidiary of a corporation which
issues stock to the public, the Bank Contributions for any Plan Year
shall be an amount equal to the lesser of:
(i) An amount that shall not reduce the amount of Income Available
for Surplus below $2,500 per $1,000,000 of Average Total
Assets for the Plan Year, or
(ii) 5% of the Compensation while a Member during such Plan Year,
of each such Member in the Plan at the end of such Plan Year
and each such Member whose death, Disability or Retirement
shall have occurred during such Plan Year,
but not exceeding the maximum amount which would be deductible by
the Bank for income tax purposes under the provisions of Section 404
of the Code. Notwithstanding the foregoing, the Board may, in its
discretion, waive the limitation under clause (i) above for any Plan
Year in which it finds that there have been extraordinary charges
against income, including, but not limited to, nonrecurring expenses
and losses realized from the sales of securities, and may also, upon
such finding, direct that the Bank Contributions for such Plan Year
be paid from accumulated earnings of the Bank.
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4.02 Method of Allocation
The Bank Contributions for any Plan Year shall be allocated among the
Members of the Plan at the end of such Plan Year and those Members whose
death, Disability or Retirement shall have occurred during such Plan Year
in an amount which bears the same ratio to the total ratio to the total
amount so allocated as the Compensation of such person while a Member
during such Plan Year (or part of such Plan Year, as the case may be)
bears to the aggregate amount of the Compensation of all such persons
while Members during such Plan Year. Allocations of Bank Contributions
will not be discontinued or decreased because of a Member's attainment of
any age.
4.03 Payment of Bank Contributions
Subject to an election made by a Member pursuant to Section 4.04, the Bank
Contributions for any Plan Year shall be paid to the Trust Fund as of the
September Valuation Date for such Plan Year but before the due date of the
Bank's Federal income tax return for such year, including any extensions
thereof except for the Bank Contributions made pursuant to Section
4.01(b)(ii)(A) which shall be paid to the Trust Fund on May 31, 1999.
These amounts shall be credited to the accounts of Members pursuant to
Article V.
4.04 Cash or Deferred Election by a Member
(a) Subject to Section 4.07 and paragraph (b) below, each Member shall
be entitled to elect to receive in cash up to 50% (in multiples of
10%) of his allocation of Bank Contributions for any Plan Year
except in the case of Bank Contributions made pursuant to Sections
4.01(b) and 4.01(c) in which case each Member shall be entitled to
elect to receive in cash up to 100% (in multiples of 10%) of such
allocation. An election pursuant to this Section 4.04 shall be made
by filing notice, in the form and manner prescribed by the Plan
Administrator, on or before August 15th of the Plan Year for which
it is to be effective. Any such election may be changed or revoked
by further notice given, in the form and manner prescribed by the
Plan Administrator, on or before August 15th of such Plan Year, but
not thereafter, except as provided in Section 4.07(a). Payments to
Members pursuant to such an election shall be made as promptly
following the end of such Plan Year
<PAGE> 27
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as practicable, and in no event later than 2 1/2 months after the
close of the Plan Year. Notwithstanding the foregoing, in the case
of Bank Contributions made pursuant to Section 4.01(b)(ii)(A), an
election pursuant to this Section 4.04 shall be made by filing
notice, in the form and manner prescribed by the Plan Administrator,
on or before May 31, 1999 and any such election may be changed or
revoked by further notice given before such date, but not
thereafter, except as provided in Section 4.07(a). Payments to
Members pursuant to an election regarding Bank Contributions made
pursuant to Section 4.01(b)(ii)(A) shall be made no later that June
15, 1999. If a Member fails to make an election pursuant to this
Section 4.04(a) for any Plan Year, the Plan Administrator shall act
as if the Member had not elected to receive a cash payment.
(b) In no event shall the Member's Elective Bank Contributions and
similar contributions made on his behalf by the Bank or an
Affiliated Company to all plans, contracts or arrangements subject
to the provisions of Section 401(a)(30) of the Code in any calendar
year exceed $7,000 multiplied by the Adjustment Factor. A Member's
election regarding Elective Bank Contributions with respect to a
calendar year shall be limited, if necessary, to comply with the
provisions of this paragraph (b).
(c) In the event that the sum of the Elective Bank Contributions and
similar contributions to any other qualified defined contribution
plan maintained by the Bank or an Affiliated Company exceeds the
dollar limitation in paragraph (b) above for any calendar year, the
Member shall be deemed to have elected a return of Elective Bank
Contributions in excess of such limit ("excess deferrals") from this
Plan. The excess deferrals, together with Earnings, shall be
returned to the Member no later than the April 15 following the end
of the calendar year in which the excess deferrals were made. The
amount of excess deferrals to be returned for any calendar year
shall be reduced by any Elective Bank Contributions previously
returned to the Member under Section 4.07(a) for that calendar year.
<PAGE> 28
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(d) If a Member makes elective contributions under another qualified
defined contribution plan maintained by an employer other than the
Bank or an Affiliate Company for any calendar year and those
contributions when added to his Elective Bank Contributions exceed
the dollar limitation under paragraph (b) above for that calendar
year, the Member may allocate all or a portion of such excess
deferrals to this Plan. In that event, such excess deferrals,
together with Earnings, shall be returned to the Member no later
than the April 15 following the end of the calendar year in which
such excess deferrals were made. However, the Plan shall not be
required to return excess deferrals unless the Member notifies the
Committee, in writing, by March 1 of that following calendar year of
the amount of the excess deferrals allocated to this Plan. The
amount of any such excess deferrals to be returned for any calendar
year shall be reduced by any Elective Bank Contributions previously
returned to the Member under Section 4.07(a) for that calendar year.
4.05 Personal Contributions
The Plan Administrator may, in its discretion, for any Plan Year or Plan
Years, allow Members to make Personal Contributions under the Plan to the
Trust Fund. If authorized by the Plan Administrator for any Plan Year,
Personal Contributions shall be made, at the election of each Member, in
an amount not to exceed 10% of his Compensation for such Year, but in no
event in an amount less than $100. Personal Contributions shall be made at
such time or times and in such manner, including lump sum payments and
payroll deductions, as may be prescribed by the Plan Administrator.
Personal Contributions received from a Member by the Bank in any Plan Year
shall be paid to the Trust Fund and invested in his Personal Account as of
the September Valuation Date of such Plan Year and such other Valuation
Date as the Plan Administrator may designate for the investment of
Personal Contributions. Action by the Plan Administrator to allow Personal
Contributions shall be publicized to all Members, and this Section shall
be administered in a non-discriminatory manner.
<PAGE> 29
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4.06 Rollover Contributions
(a) Subject to such terms and conditions as may be established from time
to time by the Plan Administrator, the Plan may receive from a
Member, or an Employee who has not yet met the eligibility
requirements for membership but who is not excluded from membership
pursuant to Section 2.01(b), in cash, any amount previously received
(or deemed to be received) by him from a qualified plan. The Plan
may receive such amount either directly from the Member or Employee
or from an individual retirement account or from a qualified plan in
the form of a direct rollover. Notwithstanding the foregoing, the
Plan shall not accept any amount unless such amount is eligible to
be rolled over to a qualified trust in accordance with applicable
law and the Member or Employee provides evidence satisfactory to the
Plan Administrator that such amount qualifies for rollover
treatment. Unless received by the Plan in the form of a direct
rollover, the Rollover Contribution must be paid to the Trustee on
or before the 60th day after the day it was received by the Member
or Employee.
(b) Rollover Contributions, and amounts of income thereon, shall be
fully vested and shall be accounted for separately in a Member's
Rollover Account.
(c) An Employee shall be entitled to make investment directions and to
direct transfers among Investment Funds as provided in Article VIII,
with respect to his Rollover Contributions.
4.07 Limitations Affecting Highly Compensated Employees
(a) Limitation Based on Actual Deferral Percentage: For Plan Years on
and after January 1, 1987, the Actual Deferral Percentage for Highly
Compensated Employees who are Members shall not exceed the Actual
Deferral Percentage for all other Members multiplied by 1.25. If the
Actual Deferral Percentage for Highly Compensated Employees does not
meet the foregoing test, the Actual Deferral Percentage for Highly
Compensated Employees who are Members may not exceed the Actual
Deferral Percentage for all other Members by more than two
percentage
<PAGE> 30
Page 25
points, and the Actual Deferral Percentage for Highly Compensated
Employees may not be more than 2.0 times the Actual Deferral
Percentage for all other Members (or such lesser amount as the
Committee shall determine to satisfy the provisions of paragraph
(c)). If the effect of the elections filed pursuant to Section 4.04
for any Plan Year is to violate this paragraph, the following
provisions shall apply:
(i) The Committee may from August 16th through August 31st of such
Plan Year solicit cash elections from the Highly Compensated
Employees who failed to make an election under Section 4.04 or
solicit voluntarily amended elections from the Highly
Compensated Employees to result in compliance with this
paragraph. If such additional cash elections or voluntarily
amended elections result in compliance with this paragraph,
they will become irrevocable on August 31st of such Plan Year;
if not, such cash elections and voluntarily amended elections
shall have no effect, and the Committee shall require cash
elections be made or shall amend the elections of the Highly
Compensated Employees so as to result in compliance with this
paragraph in accordance with the procedure set forth in
subparagraph (ii) below. Cash elections or amended elections
made or solicited by the Committee under this paragraph need
not be in multiples of 10% of a Member's Bank Contributions.
(ii) The amount of Elective Bank Contributions elected by some or
all Highly Compensated Employees shall be reduced until the
provisions of this subparagraph are satisfied as follows: The
actual deferral ratio of the Highly- Compensated Employee with
the highest actual deferral ratio shall be reduced to the
extent necessary to meet the test or to cause such ratio to
equal the actual deferral ratio of the Highly-Compensated
Employee with the next highest ratio. This process will be
repeated until the actual deferral percentage test is passed.
Each ratio shall be rounded to the nearest one one- hundredth
of one percent of the Member's Statutory Compensation.
However, any excess contributions for any Plan Year shall be
reduced by any Elective Bank Contributions previously returned
to the Member under
<PAGE> 31
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Section 4.04 for that Plan Year. Elective Bank Contributions
shall then be made on behalf of the affected Highly
Compensated Employees in accordance with the revised election
limitations. In the event any Elective Bank Contributions are
required to be distributed from the Plan to achieve
compliance, any distribution of the excess contributions will
be made to the Highly Compensated Employees on the basis of
the respective portion of the excess contributions
attributable to each such Employee and shall be made, together
with Earnings thereon, before the close of the Plan Year
following the Plan Year for which those contributions were
made, and to the extent practicable within 2 1/2 months
following the end of the Plan Year for which the contributions
were made.
(b) Limitation Based on Contribution Percentage: For Plan Years on and
after January 1, 1987, the Contribution Percentage for Highly
Compensated Employees who are Members shall not exceed the
Contribution Percentage for all other Members multiplied by 1.25. If
the Contribution Percentage for the Highly Compensated Employees
does not meet the foregoing test, the Contribution Percentage for
Highly Compensated Employees who are Members may not exceed the
Contribution Percentage of all other Members by more than two
percentage points, and the Contribution Percentage for Highly
Compensated Employees may not be more than 2.0 times the
Contribution Percentage for all other Members (or such lesser amount
as the Committee shall determine to satisfy the provisions of
paragraph (c)). The Committee may implement rules limiting the
Personal Contributions which may be made by some or all Highly
Compensated Employees so that this limitation is satisfied. If the
Committee determines that the limitation under this paragraph (b)
has been exceeded in any Plan Year, the following provisions shall
apply:
(i) The amount of Personal Contributions made by some or all
Highly Compensated Employees in the Plan Year shall be reduced
until the provisions of this paragraph (b) are satisfied as
follows. The actual contribution ratio of the
Highly-Compensated Employee with the highest
<PAGE> 32
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actual contribution ratio shall be reduced to the extent
necessary to meet the test or to cause such ratio to equal the
actual contribution ratio of the Highly- Compensated Employee
with the next highest actual contribution ratio. This process
will be repeated until the actual contribution percentage test
is passed. Each ratio shall be rounded to the nearest one
one-hundredth of one percent of a Member's Statutory
Compensation.
(ii) Any Personal Contributions subject to reduction under this
paragraph (b), together with Earnings thereon ("excess
aggregate contributions"), shall be paid to the Member before
the close of the Plan Year following the Plan Year for which
the excess aggregate contributions were made and, to the
extent practicable, the repayment shall be made within 2 1/2
months of the close of the Plan Year in which the excess
aggregate contributions were made.
(c) Notwithstanding the provisions of paragraphs (a) and (b) above, in
no event shall the sum of the Actual Deferral Percentage of the
group of eligible Highly Compensated Employees and the Contribution
Percentage of such group, after applying the provisions of
paragraphs (a) and (b) above, exceed the "aggregate limit" as
provided in Section 401(m)(9) of the Code and the regulations issued
thereunder. In the event the aggregate limit is exceeded for any
Plan Year, the Contribution Percentages of the Highly Compensated
Employees shall be reduced to the extent necessary to satisfy the
aggregate limit in accordance with the procedure set forth in
paragraph (b) above.
4.08 Additional Discrimination Testing Provisions
(a) If any Highly Compensated Employee is either (i) a five percent
owner or (ii) one of the 10 highest paid Highly Compensated
Employees, then any Statutory Compensation paid to or any
contribution made by or on behalf of any member of his "family"
shall be deemed paid to or made by or on behalf of such Highly
Compensated Employee for purposes of Section 4.07, to the extent
required under regulations prescribed by the Secretary of the
Treasury or his delegate under Sections 401(k) and 401(m) of the
Code. The contributions required to be
<PAGE> 33
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aggregated under the preceding sentence shall be disregarded in
determining the Actual Deferral Percentage and Contribution
Percentage for the group of non- highly compensated employees for
purposes of Section 4.07. Any return of excess contributions or
excess aggregate contributions required under Section 4.07 with
respect to the family group shall be made by allocating the excess
contributions or excess aggregate contributions among the family
members in proportion to the contributions made by or on behalf of
each family member that is combined. For purposes of this paragraph,
the term "family" means, with respect to any employee, such
employee's spouse, any lineal ascendants or descendants and spouses
of such lineal ascendants or descendants.
(b) If any Highly Compensated Employee is a member of another qualified
plan of the Bank or an Affiliated Company, other than an employee
stock ownership plan described in Section 4975(e)(7) of the Code or
any other qualified plan which must be mandatorily disaggregated
under Section 410(b) of the Code, under which elective contributions
or matching contributions are made on behalf of the Highly
Compensated Employee or under which the Highly Compensated Employee
makes after-tax contributions, the Committee shall implement rules,
which shall be uniformly applicable to all employees similarly
situated, to take into account all such contributions for the Highly
Compensated Employee under all such plans in applying the
limitations of Section 4.07. If any other such qualified plan has a
plan year other than the Plan Year defined in Section 1.40, the
contributions to be taken into account in applying the limitations
of Section 4.07 will be those made in the plan years ending with or
within the same calendar year.
(c) In the event that this Plan is aggregated with one or more other
plans to satisfy the requirements of Sections 401(a)(4) and 410(b)
of the Code (other than for purposes of the average benefit
percentage test) or if one or more other plans is aggregated with
this Plan to satisfy the requirements of such sections of the Code,
then the provisions of Section 4.07 shall be applied by determining
the Actual Deferral Percentage and Contribution Percentage of
employees as if all such plans were a
<PAGE> 34
Page 29
single plan. If this Plan is permissively aggregated with any other
plan or plans for purposes of satisfying the provisions of Section
401(k)(3) of the Code, the aggregated plans must also satisfy the
provisions of Sections 401(a)(4) and 410(b) of the Code as though
they were a single plan. For Plan Years beginning after December 31,
1989, plans may be aggregated under this paragraph (c) only if they
have the same plan year.
(d) The Bank may elect to use Elective Bank Contributions to satisfy the
tests described in Section 4.07(b) and (c), provided that the test
described in Section 4.07(a) is met prior to such election, and
continues to be met following the Bank's election to shift the
application of those Elective Bank Contributions from Section
4.07(a) to Section 4.07(b).
4.09 Maximum Annual Additions
(a) No amount shall be allocated to a Member's Accumulated Share for any
Plan Year commencing on or after January 1, 1987 to the extent that
such allocation, when added to the Member's annual addition for that
Plan Year under any other qualified defined contribution plan of the
Bank or an Affiliated Company, would result in an annual addition of
an amount greater than the lesser of (i) $30,000 (or one-quarter of
the dollar limitation in effect under Section 415(b)(1)(A) of the
Code, if greater) or (ii) 25% of the Member's aggregate
remuneration. For purposes of this Section 4.09, the term "annual
addition" with respect to each Member under this Plan or any other
qualified defined contribution plan maintained by the Bank or an
Affiliated Company means the sum for any Plan Year of:
(i) all contributions by the Bank and Affiliated Companies
(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 maintained
by the Bank or any Affiliated Company, as well as the Member's
allocable share, if any, of any forfeitures under such plans;
plus
(ii) (A) for Plan Years that begin prior to January 1, 1987, the
lesser of (I) one-half of all nondeductible voluntary
contributions under any other qualified
<PAGE> 35
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defined contribution plan (whether or not terminated)
maintained by the Bank or any Affiliated Company, or (II) the
amount of the nondeductible voluntary contributions under a
qualified defined contribution plan (whether or not
terminated) maintained by the Bank or Affiliated Company in
excess of 6% of such Member's Statutory Compensation; and (B)
for Plan Years that begin after December 31, 1986, the sum of
all of the nondeductible voluntary contributions under any
other qualified defined contribution plan (whether or not
terminated) maintained by the Bank and all Affiliated
Companies,
that have been allocated to the Member's Accumulated Share under
this Plan or his accounts under any other such qualified defined
contribution plan. Any Elective Bank Contributions or Personal
Contributions which may have been distributed from the Plan under
the provisions of Section 4.07 shall be included in the annual
addition for the year allocated.
Notwithstanding the foregoing, if, for any Limitation Year, the
aggregate amount of employer contributions under a tax-qualified
employee stock ownership plan of the Bank or any Affiliated Company
that are allocated directly to the accounts of individuals who are
Highly Compensated Employees for that Limitation Year plus such
Highly Compensated Employees' allocable shares of any employer
contributions applied to the repayment of a securities acquisition
loan for such Limitation Year does not exceed one-third of the
aggregate of such employer contributions for all participating
employees for such Limitation Year, Annual Additions shall not
include any employer contributions used to pay interest on a
securities acquisition loan or any forfeitures of employer
securities purchased with the proceeds of a securities acquisition
loan for such Limitation Year.
(b) Notwithstanding the provisions of paragraph (a) above, in the case
of a Member who is also a participant in a qualified defined benefit
plan of the Bank or an Affiliated Company, his maximum annual
addition for any Plan Year that begins prior to October 1, 1993,
shall not exceed an adjusted annual addition determined as follows:
<PAGE> 36
Page 31
(i) Determine the defined benefit fraction.
(ii) Determine the defined contribution fraction.
(iii) Subtract the result of (i) from 1.0.
(iv) If the result of (iii) is equal to or greater than the result
of (ii), the maximum annual addition described in paragraph
(a) above shall apply without adjustment; if the result of
(iii) is less than the result of (ii), continue with steps
(v), (vi) and (vii) below.
(v) Multiply the denominator of the defined contribution fraction,
as described below, by the result of (iii).
(vi) Subtract the result of (v) from the numerator of the defined
contribution fraction, as described below.
(vii) Reduce the annual addition computed under paragraph (a) above
by the result of (vi); the result is the maximum annual
addition.
(c) In the case of a Member who is also a participant in another
qualified defined contribution plan of the Bank or an Affiliated
Company which is required to be aggregated with this Plan for
purposes of applying the limitations of paragraph (a) above, any
reduction in contributions required to satisfy the provisions of
paragraph (a) above shall first be applied to the contributions made
to this Plan.
(d) For purposes of this Section 4.09:
(i) The defined contribution fraction shall be a fraction the
numerator of which is the sum of:
(A) the current year's annual addition computed under
paragraph (a) above, and
(B) the annual additions made to the Member's Accumulated
Share or his accounts under any other qualified defined
contribution plan of the Bank or an Affiliated Company
in all prior years,
but reduced by any amount permitted by regulations promulgated
by the Commissioner of Internal Revenue, and the denominator
of which is the lesser of the following amounts determined for
each year of the Member's service:
<PAGE> 37
Page 32
(C) 1.25 multiplied by the maximum dollar amount allowed by
law for that year; or
(D) 1.4 multiplied by 25% of the Member's remuneration for
that year. At the direction of the Committee, the
portion of the denominator of that fraction with respect
to Plan Years ending before 1983 shall be computed as
the denominator for the Plan Year ending in 1982, as
determined under the law as then in effect, multiplied
by a fraction the numerator of which is the lesser of:
(E) $51,875, or
(F) 1.4 multiplied by 25% of the Member's remuneration for
the Plan Year ending in 1981,
and the denominator of which is the lesser of:
(G) $41,500, or
(H) 25% of the Member's remuneration for that Plan Year.
(ii) The defined benefit fraction for a Member who is a member of
one or more defined benefit plans of the Bank or an Affiliated
Company shall be a fraction the numerator of which is:
(A) the projected annual benefit of such Member under such
defined benefit plan or plans,
and the denominator of which is the lesser of:
(B) 1.25 multiplied by the maximum dollar amount allowed by
law for that year; or
(C) 1.4 multiplied by the Member's average annual
remuneration during the three consecutive calendar years
in his service as a member, under such defined benefit
plan or plans, affording the highest such average;
(iii) A defined contribution plan means a pension plan which
provides for an individual account for each member and for
benefits based solely upon the amount contributed to the
member's account, and any income, expenses, gains and losses
and any forfeitures of accounts of other members which may be
allocated to that member's accounts, subject to (iv) below;
and
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(iv) A defined benefit plan means any pension plan which is not a
defined contribution plan; however, in the case of a defined
benefit plan which provides a benefit which is based partly on
the balance of the separate account of a member, that plan
shall be treated as a defined contribution plan to the extent
benefits are based on the separate account of a member and as
a defined benefit plan with respect to the remaining portion
of the benefits under the plan.
(v) The term "remuneration" with respect to any Member shall mean
the wages, salaries and other amounts paid in respect of that
Member by the Bank or an Affiliated Company for personal
services actually rendered, determined after any reduction
pursuant to a cafeteria plan as described in Section 125 of
the Code, including (but not limited to) bonuses, overtime
payments and commissions, but excluding deferred compensation,
stock options and other distributions which receive special
tax benefits under the Code.
(e) A Member's annual addition to this Plan will be reduced, if and to
the extent necessary, so that the limitations of paragraphs (a), (b)
and (c) are not exceeded. Such reduction shall be made in accordance
with the following order of priority:
(i) The Member's Personal Contributions under Section 4.05 shall
be reduced to the extent necessary. The amount of such
reduction shall be returned to the Member, together with any
investment earnings thereon.
(ii) The Member's Elective Bank Contributions otherwise allocated
to a Member's Optional Account under Section 5.03 shall be
reduced to the extent necessary. The amount of the reduction
shall be paid to the Member, together with any earnings on the
contributions to be returned.
(iii) The Bank Contributions otherwise allocated to a Member's
Regular Account under Section 5.02 shall be reduced and the
amount of the reduction shall be used to reduce future Bank
Contributions.
<PAGE> 39
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ARTICLE V
MEMBER'S ACCOUNT
5.01 In General
The Committee shall maintain a Regular Account for each Member and,
wherever appropriate, shall also maintain an Optional Account for such
Member, a Personal Account for such Member and/or a Rollover Account for
such Member or Employee.
5.02 The Regular Account
A Member's Regular Account shall be credited with the mandatory 50% of the
Bank Contributions allocated to such Member in any Plan Year and shall be
paid to the Trust Fund for his account, except in the case of Bank
Contributions made pursuant to Sections 4.01(b) and 4.01(c) which shall be
credited entirely to a Member's Optional Account.
5.03 The Optional Account
A Member's Optional Account shall be credited with any balance of the Bank
Contributions allocated to such Member in any Plan Year and paid to the
Trust Fund for his account in excess of the 50% of such allocation
credited to the Member's Regular Account pursuant to Section 5.02, except
for Bank Contributions made pursuant to Sections 4.01(b) and 4.01(c) which
shall be credited to a Member's Optional Account in their entirety.
5.04 The Personal Account
An Employee's Personal Account shall be credited with any Personal
Contributions which he has made pursuant to Section 4.05.
5.05 The Rollover Account
An Employee's Rollover Account shall be credited with any Rollover
Contributions which he has made pursuant to Section 4.06.
<PAGE> 40
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ARTICLE VI
VESTING
6.01 Method of Vesting
(a) An Employee's Optional Account, Personal Account and Rollover
Account, and amounts of income thereon, shall always be fully vested
under the Plan.
(b) The Regular Account of a Member shall vest under the provisions of
clause (i) or (ii), whichever provides the Member with a greater
vested interest:
(i) The Member's Regular Account shall vest 20% upon the
conclusion of his first year as a Member and 20 % more at the
conclusion of each succeeding year of membership, but not more
than 100%. If a Former Member again becomes a Member, he shall
have the same percentage of vesting as at the time of
termination of membership.
(ii) The Member's Regular Account shall vest in accordance with the
number of years of Vesting Service beginning on January 1,
1974 and after he attains age 18 as follows:
Number of Years
of Vesting Service Vested Percentage
------------------ -----------------
under 3 0%
3 20
4 40
5 60
6 80
7 or more 100
In no event, however, shall the change in the vesting schedule
in clause (ii) effective as of October 1, 1989 reduce the
vested portion of a Member's Regular Account determined as of
that date, and in the case of a Member who had completed at
least three years of service as of that date, the vesting
provision in effect prior to that date
<PAGE> 41
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shall continue to be applicable to the extent that application
of that provision provides the Member with a greater vested
interest in his Accumulated Share than that provided under
clause (ii).
6.02 Vesting on Termination of Membership
Any previously unvested portion of the Regular Account of a Member shall
become fully vested in him immediately upon attainment of age 65, or, if
earlier, upon the termination of his membership by reason of death,
Disability or Retirement.
6.03 Forfeitures on Termination of Membership
Upon the termination of membership of a Member for any reason other than
death, Disability or Retirement, that portion of his Regular Account which
is not vested at the date of such termination shall be segregated in a
separate account until the Member has a period of Break in Service of five
years or receives a distribution of the vested portion of his Accumulated
Share, if earlier. If the Former Member is not reemployed by the Bank or
an Affiliated Company before he has a period of Break in Service of five
years or receives such a distribution, the unvested portion of his Regular
Account, so segregated, shall be forfeited. Units in the Investment Funds
which have been forfeited in accordance with the provisions of this
Section 6.03 or Section 6.01(c) shall be redeemed as of the September
Valuation Date of the Plan Year in which the forfeiture occurs, and the
proceeds of all such redemptions, less amounts, if any, required to be
credited because of reemployment pursuant to Section 6.04, shall be
applied to reduce the Bank Contributions for such Plan Year, or if the
Plan should be terminated, any amount not previously so applied shall be
credited ratably to the accounts of all Members in proportion to the
amount of the Bank Contributions credited to their respective accounts for
the last Plan Year for which contributions were made.
6.04 Amounts Credited Upon Reemployment or Reparticipation
(a) If an amount of a Member's Regular Account has been forfeited or is
held in a separate account in accordance with Section 6.03 above,
that amount shall be subsequently restored to the Member's Regular
Account provided he is reemployed by the Bank or an Affiliated
Company before he has a period of Break in Service of five years.
The
<PAGE> 42
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amount shall be credited from the proceeds of forfeitures which are
redeemed pursuant to Section 6.03 during the Plan Year in which he
again becomes a Member, unless the proceeds are insufficient, in
which case the Bank shall make an additional Bank Contribution to
his Regular Account in the amount of such deficiency. Amounts so
credited shall have the same degree of vesting as at the time of
termination of membership. In the event a Member received a
distribution of the vested portion of his Regular Account and is
subsequently restored to service and any portion of his unvested
Regular Account is restored under this Section 6.04, the vested
portion of a Member's Regular Account shall be determined as of any
subsequent date in accordance with IRS Reg. 1.411(a)(7)(d)(5).
<PAGE> 43
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ARTICLE VII
THE TRUST FUND
7.01 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 contain such
powers in the Trustee as to investment, control and disbursement of the
Trust Fund and such other provisions, not inconsistent with the Plan, 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.
7.02 The Investment Funds
The Trust Fund shall consist of the Savings Fund, the Equity Fund, the
Intermediate Bond Fund (effective as of July 1, 1994) and the Employer
Stock Fund (effective as of the date of the completion of the transaction
whereby the Bank becomes a wholly owned subsidiary of Hudson City Bancorp,
Inc.), each of which shall be administered and invested by the Trustee in
accordance with the provisions of the Plan and the Trust Agreement. The
Trust Agreement shall specify the types of investments which the Trustee
is authorized to make in the respective Investment Funds (or such other
funds, hereinafter provided for) to which reference should be made for a
complete description thereof. For identification purposes only, the
Investment Funds will consist primarily of:
(a) The Equity Fund: common stocks and investments convertible into
common stocks and stock of regulated investment companies and mutual
funds which themselves invest primarily in common stocks and
investments convertible into common stocks;
(b) The Savings Fund: savings accounts and time or other interest
bearing deposits in mutual savings banks, including the Bank;
(c) The Intermediate Bond Fund: U.S. government and corporate
fixed-income securities of varying maturities; and
(d) The Employer Stock Fund: Shares of Hudson City Bancorp, Inc.
<PAGE> 44
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The Trustee is also authorized to invest any amounts held or received by
it in any one or more of the Investment Funds, in short term obligations
of the U.S. Government, or agencies thereof, or in short term corporate
obligations or to retain uninvested, or sell investments to provide,
amounts of cash required for the purposes of any such Fund. The Trust Fund
shall also contain, in addition to or in place of one or more of the
Investment Funds described above, such other Investment Fund or Funds as
may, from time to time, be requested by the Bank and agreed to by the
Trustee.
7.03 Management and Control of Assets
All assets of the Plan shall be held by the Trustee in trust for the
exclusive benefit of Employees, Members, Former Members 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
Employees, Members, Former Members 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.
Notwithstanding the foregoing, the Bank may recover without interest the
amount of its Bank Contributions made on account of a mistake in fact,
reduced by any investment loss attributable to those contributions,
provided that such recovery is made within one year following the date on
which such Bank Contribution was made. The Bank's contributions to the
Plan are made conditioned upon their deductibility under Section 404 of
the Code. If all or part of the Bank's deductions for contributions to the
Plan are disallowed by the Internal Revenue Service, the portion of the
contributions to which the disallowance applies shall be returned to the
Bank without interest but reduced by any investment loss attributable to
those contributions. The return shall be made within one year after the
disallowance of deduction.
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ARTICLE VIII
INVESTMENT DIRECTIONS, CHANGES AND TRANSFERS
8.01 Investment Directions
(a) Upon first becoming a Member, such Member shall direct, in the form
and manner prescribed by the Plan Administrator, that any Personal
Contributions and his allocation of Bank Contributions paid to the
Trust Fund be applied, in such proportions as he may designate, to
the purchase for him of units in the Investment Funds. Any amounts
to be applied at any time for any Member to the purchase of units in
any of the Investment Funds shall be applied in multiples of 10%. To
the extent that a Member shall fail to make an investment direction,
any Personal Contributions and his allocation of Bank Contributions
shall be applied to the purchase for him of units in the Savings
Fund.
(b) An Employee who makes a Rollover Contribution shall designate his
investment direction for such contribution in accordance with
Section 8.01(a).
8.02 Change of Investment Directions
(a) By filing a notice not less than fifteen days before any Valuation
Date in the form and manner prescribed by the Plan Administrator, a
Member may change his investment direction. In such event, the new
investment direction shall become effective as of such Valuation
Date and apply to all of his Personal Contributions and Bank
Contributions to be invested as of such Valuation Date and
subsequent Valuation Dates. Such new investment direction shall only
be made in multiples of 10% as provided in Section 8.01(a). Only one
change of investment direction may be made by a Member in a Quarter.
(b) An Employee who makes a Rollover Contribution may direct transfers
among Investment Funds in accordance with Section 8.02(a).
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8.03 Transfers Between Investment Funds
(a) By filing a notice not less than fifteen days before any Valuation
Date in the form and manner prescribed by the Plan Administrator, a
Member may direct that multiples of 10% of the units in any
Investment Fund be redeemed and the proceeds applied to the purchase
for him of units in another Investment Fund or Funds, as the case
may be. Such transfer shall be effected as of such Valuation Date
and units redeemed and purchased shall have the value determined
therefor as of such Valuation Date. Only one such transfer between
Investment Funds may be made by a Member in a Quarter.
(b) An Employee who makes a Rollover Contribution may direct transfers
among Investment Funds in accordance with Section 8.03(a).
8.04 Valuation of Investment Units
Initially, the value of each unit in each Investment Fund shall be $1, and
one unit in any Fund shall be credited to each Member for each $1
applicable to the purchase for him of units in such Fund pursuant to
Section 8.01. Thereafter, the Plan Administrator shall determine the value
of units in each such Fund as of each Valuation Date by dividing the fair
market value of all property in each such Fund as of such Valuation Date
(after deducting any expenses or other amounts then properly chargeable
against the particular Fund) by the number of units then outstanding in
each such Fund.
8.05 Fractional Investment Units
For the purposes of this Article VIII, fractions of units computed to
three decimal points as well as whole units in any of the Investment Funds
may be redeemed or purchased for the credit of Members.
8.06 Annual Statements
There will 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
any Accumulated Share if the Plan were then terminated, a statement of his
interest in the Plan, including the fair market value of such
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interest, as of such date as shall be selected by the Plan Administrator,
which statement will 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 thirty days after the statement is mailed or
furnished to such person.
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ARTICLE IX
INVESTMENTS IN EMPLOYER STOCK FUND
9.01 In General
The provisions of this Article IX shall apply to the Employer Stock Fund
and to any Member, Former Member or Beneficiary who has an interest in the
Employer Stock Fund.
9.02 Restrictions on Investments by Corporate Insiders
Investment directions, investment direction changes, transfers among
investment funds, withdrawals during employment, distributions and loans made
pursuant to the terms of the Plan shall be subject to the following
restrictions:
(a) Any transfer among investment funds that results in an increase
in the portion of a Corporate Insider's Accumulated Share that is invested
in the Employer Stock Fund shall be given effect only if effected pursuant
to an election made at least six months after the most recent prior
election under this Plan or any other employee benefit plan of the Bank or
any affiliate of the Bank that resulted in a Discretionary Transaction
that constituted a disposition of beneficial ownership of Shares;
(b) Any transfer among investment funds that results in a decrease
in the portion of a Corporate Insider's Accumulated Share that is invested
in the Employer Stock Fund shall be given effect only if effected pursuant
to an election made at least six months after the most recent prior
election under this Plan or any other employee benefit plan of the Bank or
any affiliate of the Bank that resulted in a Discretionary Transaction
that constituted an acquisition of beneficial ownership of Shares;
(c) Any loan made under this Plan that is funded in whole or in part
through a disposition of any portion of the Corporate Insider's interest
in the Employer Stock Fund shall be made only if effected pursuant to an
election made at least six months after the most recent prior election
under this Plan or any other employee
<PAGE> 49
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benefit plan of the Bank or any affiliate of the Bank that resulted in a
Discretionary Transaction that constituted an acquisition of beneficial
ownership Shares; and
(d) Any cash distribution from a Corporate Insider's Accumulated
Share under the Plan (whether a withdrawal during service, a distribution
following termination of service or other type of distributions that does
not constitute a loan under the terms of the Plan) shall be made only if:
(i) effected pursuant to an election made at least six months after the
most recent prior election under this Plan or any other employee benefit
plan of the Bank or any affiliate of the Bank that resulted in a
Discretionary Transaction that constituted an acquisition of Shares, or
(ii) (A) not effected at the volition of the Corporate Insider, or (B)
effected in connection with the Corporate Insider's death, disability,
retirement or termination of employment, or (C) required to be made
available to the Corporate Insider pursuant to any applicable requirement
of the Code, or (D) effected pursuant to a domestic relations order
described in section 414(p) of the Code.
The restrictions set forth in this section 9.02 are intended to comply with the
requirements of Rule 16b-3 promulgated by the Securities and Exchange Commission
and shall be interpreted, applied and modified, in the discretion of the Plan
Administrator, to give effect to such intention.
9.03 Compliance with Securities Laws
To the extent that the Plan Administrator may determine necessary,
appropriate or advisable for the purpose of securing compliance with applicable
federal, state or local laws, rules or regulations applicable to trading in
Shares, the Plan Administrator may restrict the making or implementation of
investment or transfer directions by any individual with respect to the Employer
Stock Fund to those periods of time when such individual would, under the Bank's
securities trading policy, be permitted to buy or sell Shares directly for his
own account. The Plan Administrator may refuse to implement any such direction
that would result in a transaction that would be prohibited under such policy if
engaged in outside of the Plan.
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9.04 Voting Rights
Each person with an interest in the Employer Stock Fund shall have the
right to participate confidentially in the exercise of voting rights appurtenant
to Shares held in the Employer Stock Fund; provided, however, that such person
has an interest in the Employer Stock Fund as of the most recent Valuation Date
coincident with or preceding the applicable record date for which records are
available. Such participation shall be achieved by completing and filing with
the inspector of elections, the Trustee or such other person who shall be
independent of the issuer of Shares as the Plan Administrator 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 Plan Administrator. The inspector of elections, the Trustee or
such other person designated by the Plan Administrator 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 Plan Administrator in directing the
Trustee as to the manner in which such voting rights shall be exercised. As to
each matter in which the holders of Shares are entitled to vote, a number of
affirmative votes equal to the product of:
(a) the total number of Shares then held in the Employer Stock Fund
as of the applicable record date; and
(b) a fraction, the numerator of which is the aggregate value (as of
the Valuation Date coincident with or immediately preceding the applicable
record date) of the interests in the Employer Stock Fund of all persons
directing that an affirmative vote be cast, and the denominator of which
is the aggregate value (as of the Valuation Date coincident with or
immediately preceding the applicable record date) of the interests in the
Employer Stock Fund of all persons directing that an affirmative vote or a
negative vote be cast;
shall be cast. A number of negative votes equal to the excess of the total
number of Shares held in the Employer Stock Fund as of the applicable record
date, over the designated number of affirmative votes, shall be cast. The Plan
Administrator shall furnish, or cause to be furnished, to each person with an
interest in the Employer Stock Fund, all annual reports, proxy materials and
other information
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known to have been furnished by the issuer of Shares or by any proxy solicitor,
to the holders of Shares.
9.05 Tender Rights
Each person with an interest in the Employer Stock Fund shall have the
right to participate confidentially in the response to a tender offer, or to any
other offer, made to the holders of Shares generally, to purchase, exchange,
redeem or otherwise transfer Shares; provided, however, that such person had an
interest in the Employer Stock Fund as of the Valuation Date coincident with or
immediately preceding the first day for delivering Shares or otherwise
responding to such tender or other offer. Such participation shall be achieved
by completing and filing with the inspector of elections, the Trustee or such
other person who shall be independent of the issuer of Shares as the Plan
Administrator shall designate, at least 30 days prior to the last day for
delivering Shares or otherwise responding to such tender or other offer, a
written direction in the form and manner prescribed by the Plan Administrator.
The inspector of elections, the Trustee or such other person designated by the
Plan Administrator 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 Plan Administrator in directing the Trustee as to the number of Shares to
be delivered. On the last day for delivering Shares or otherwise responding to
such a tender or other offer, a number of Shares equal to the product of:
(a) the total number of Shares then held in the Employer Stock Fund;
and
(b) a fraction, the numerator of which is the aggregate value (as of
the Valuation Date coincident with or immediately preceding the first day
of delivering Shares or otherwise responding to such tender or other
offer) of the interests in the Employer Stock Fund of all persons
directing that Shares be delivered in response to such tender or other
offer, and the denominator of which is the aggregate value (as of the
Valuation Date coincident with or immediately preceding the first day for
delivering Shares or otherwise responding to such tender or other offer)
of the interests in the Employer Stock Fund of all persons directing that
Shares be delivered or that the delivery of Shares be withheld;
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shall be delivered in response to such tender or other offer. Delivery of
the remaining Shares then held in the Employer Stock Fund shall be
withheld. The Plan Administrator shall furnish, or cause to be furnished,
to each Member whose Account is invested in whole or in part in the
Employer Stock Fund, all information concerning such tender or other offer
furnished by the issuer of Shares, or information furnished by or on
behalf of the person making such tender or other offer.
9.06 Appraisal Rights
Each person with an interest in the Employer Stock Fund shall have the
right to participate confidentially in the exercise of dissent and appraisal
rights appurtenant to Shares held in the Employer Stock Fund; provided, however,
that such person has an interest in the Employer Stock Fund as of the most
recent Valuation Date coincident with or preceding the applicable record date
for which records are available. Such participation shall be achieved by
completing and filing with the inspector of elections, the Trustee or such other
person who shall be independent of the issuer of Shares as the Plan
Administrator 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 Plan Administrator. The
inspector of elections, the Trustee or such other person designated by the Plan
Administrator 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
Plan Administrator in directing the Trustee as to the manner in which such
dissent and appraisal rights shall be exercised. As to each matter giving rise
to dissent and appraisal rights, the Plan Administrator shall direct the Trustee
to exercise such rights as to a number of Shares equal to:
(a) the total number of Shares then held in the Employer Stock Fund
as of the applicable record date; and
(b) a fraction, the numerator of which is the aggregate value (as of
the Valuation Date coincident with or immediately preceding the applicable
record date) of the interests in the Employer Stock Fund of all persons
directing that dissent and appraisal rights be exercised be cast, and the
denominator of which is the aggregate
<PAGE> 53
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value (as of the Valuation Date coincident with or immediately preceding
the applicable record date) of the entirety of the Employer Stock Fund.
The Trustee shall not exercise dissent and appraisal rights with respect to the
remainder of the Shares held in the Employer Stock Fund. The Plan Administrator
shall furnish, or cause to be furnished, to each person with an interest in the
Employer Stock Fund, all annual reports, proxy materials and other information
known to have been furnished by the issuer of Shares or by any proxy solicitor,
to the holders of Shares with respect to availability, and consequences of
exercise, of dissent and appraisal rights.
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ARTICLE X
PAYMENT OF BENEFITS
10.01 In General
A Member's or Former Member's vested interest in his Accumulated Share
shall be paid only at the times, to the extent, in the manner and to the
persons provided in this Article X.
10.02 Payments during Employment
(a) Voluntary Withdrawals. On or after January 1, 1987 each Member shall
be entitled to withdraw not more often than once during each period
of six months, in the following order all or part of:
(i) the amount of his Personal Contributions made before 1987, not
to exceed his non-taxable basis, excluding earnings thereon
(or the value thereof, if less),
(ii) the amount of his Personal Contributions made on or after
January 1, 1987, with earnings thereon,
(iii) the amount of earnings attributable to his Personal
Contributions made before 1987,
(iv) his Bank Contributions in his Optional Account A, with
earnings thereon, and
(v) upon attaining age 59 1/2, the amount of his Bank
Contributions in his Optional Account B, with earnings
thereon.
If a Member makes a withdrawal pursuant to subparagraph (iv) or (v),
for purposes of his allocation of Bank Contributions pursuant to
Section 4.02 he shall be deemed to have had no Compensation during
the first three months while a Member during such Plan Year (or part
of such Plan Year, as the case may be). A Member must withdraw the
total amount available for withdrawal under subparagraphs (i)
through (iii) before making a withdrawal under subparagraphs (iv)
and (v).
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(b) Hardship Payments.
(i) Notwithstanding withdrawals permitted under Section 10.02(a),
each Member shall be entitled, in a case of Hardship, to apply
not more often than once in any period of twelve months to the
Plan Administrator, on a form provided by the Plan
Administrator, for a distribution of a portion or all of his
vested interest in his (A) Personal Account, (B) his Regular
Account, and (C) his Optional Account (excluding any earnings
credited to his Optional Account B on or after January 1,
1989). A withdrawal from a Member's Personal Account or
Regular Account shall require the furnishing of proof of
hardship satisfactory to the Committee pursuant to the
provisions of subparagraph (ii) below, and a withdrawal from a
Member's Optional Account shall require the furnishing of
proof of extreme hardship satisfactory to the Committee
pursuant to the provisions of subparagraph (iii) below.
(ii) A hardship withdrawal from a Member's Personal Account or
Regular Account will be approved by the Committee, under such
uniform rules as it shall adopt, for the following reasons:
(A) the inability of the Member to meet expenses incurred or
assumed as the result of an accident to, or illness of,
the Member or a member of his family,
(B) the expenses of education for a Member or the Member's
family,
(C) the purchase of a home, or
(D) any other event described in subparagraph (iii) below.
The Member shall certify to the Committee, on such form as the
Committee shall prescribe, that the financial need cannot be
met by reimbursement from insurance or by withdrawing all
available amounts from the Plan under Sections 10.02(a) and
10.03.
(iii) As a condition for a withdrawal from the Member's Optional
Account, there must exist with respect to the Member an
immediate and heavy financial need to draw upon his Optional
Account. The Committee shall presume the existence of such
immediate and heavy financial need if the requested withdrawal
is on account of any of the following:
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(A) expenses for medical care described in Section 213(d) of
the Code previously incurred by the Member, his spouse
or any of his dependents (as defined in Section 152 of
the Code) or necessary for those persons to obtain such
medical care;
(B) costs directly related to the purchase of a principal
residence of the Member (excluding mortgage payments);
(C) payment of tuition and related educational fees for the
next 12 months of post-secondary education of the
Member, his spouse or dependents;
(D) payment of amounts necessary to prevent eviction of the
Member from his principal residence or to avoid
foreclosure on the mortgage of his principal residence;
or
(E) the inability of the Member to meet such other expenses,
debts or other obligations recognized by the Internal
Revenue Service as giving rise to immediate and heavy
financial need for purposes of Section 401(k) of the
Code.
The amount of the withdrawal may not be in excess of the
amount of the financial need of the employee, including any
amounts necessary to pay any federal, state or local taxes and
any amounts necessary to pay any penalties reasonably
anticipated to result from the hardship distribution.
In evaluating the relevant facts and circumstances, the
Committee shall act in a nondiscriminatory fashion and shall
treat uniformly those Members who are similarly situated. The
Member shall furnish to the Committee such supporting
documents as the Committee may request in accordance with
uniform and nondiscriminatory rules prescribed by the
Committee.
(iv) As a further condition for a hardship withdrawal from a
Member's Optional Account, the Member must demonstrate that
the requested withdrawal is necessary to satisfy one of the
financial needs described above. The Member must certify to
the Committee, on such form as the Committee may prescribe,
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that the financial need cannot be relieved (1) through
reimbursement or compensation by insurance or otherwise, (2)
by reasonable liquidation of the Member's assets, to the
extent such liquidation would not itself cause an immediate
and heavy financial need, (3) by cessation of Elective Bank
Contributions and Personal Contributions, or (4) by other
distributions or nontaxable (at the time of the loan) loans
from the Plan or other plans of the Bank or Affiliated
Companies or by borrowing from commercial sources at a
reasonable rate in an amount sufficient to satisfy the need.
The actions listed are required to be taken to the extent
necessary to relieve the hardship but any action which would
have the effect of increasing the hardship need not be taken.
For purposes of this paragraph, there shall be attributed to
the Member those assets of the Member's spouse and minor
children which are reasonably available to the Member. The
Member shall furnish to the Committee such supporting
documents as the Committee may request in accordance with
uniform and nondiscriminatory rules prescribed by the
Committee. If, on the basis of the Member's certification and
the supporting documents, the Committee finds it can
reasonably rely on the Member's certification, then the
Committee shall find that the requested withdrawal is
necessary to meet the Member's financial need.
(c) Procedures. Withdrawals and payments pursuant to this Section 9.02
shall be made upon thirty days written notice (which notice shall be
irrevocable) to the Plan Administrator, on a form provided by the
Plan Administrator. Such withdrawals and payments shall be
determined as of the Valuation Date next following the filing of
such notice and shall be effected through the redemption of units
credited to the Member in the respective Investment Funds in
proportion to the value of the units then credited to such Member in
each of such Investment Funds. Payments to a Member pursuant to
Section 10.02(b) shall be made in the following order:
(i) the amount of his Personal Contributions made before 1987, not
to exceed his non-taxable basis, excluding earnings thereon,
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(ii) the amount of his Personal Contributions made on or after
January 1, 1987, with earnings thereon,
(iii) the amount of Earnings attributable to his Personal
Contributions made before 1987,
(iv) the vested portion of his Bank Contributions in his Regular
Account with earnings thereon,
(v) his Bank Contributions in his Optional Account A, with
earnings thereon, and then
(vi) the amount of his Bank Contributions in his Optional Account
B, with earnings credited thereon prior to January 1, 1989.
10.03 Withdrawals of Rollover Contributions During Employment
(a) An Employee or Member who has made a Rollover Contribution may
withdraw of any amount up to the value of his Rollover Contributions
and amount of income thereon which have been credited to his
Rollover Account for at least two years.
(b) Requests for withdrawals pursuant to this Section 10.03 shall be
made upon thirty days written notice (which notice shall be
irrevocable) to the Plan Administrator, on a form provided by, and
subject to such terms and conditions as may be prescribed from time
to time by the Plan Administrator. Such withdrawals shall be
determined and made as of the Valuation Date next following the
expiration of such thirty-day period and shall be effected through
the redemption of units credited to the Employee or Member in the
respective Investment Funds in proportion to the value of the units
then credited to such Employee or Member in each of such Investment
Funds.
10.04 Beneficiaries; Designation and Payment
(a) Upon the death of an Employee, Member or Former Member, his
Accumulated Share shall become payable, as provided in Section
10.05, to such Beneficiary, if any, designated by such person, as
shall survive him. If no Beneficiary designation is in effect at the
Member's death, or if no person so designated survives him, the
Member's surviving spouse shall be deemed to be the Beneficiary, or
if there is no spouse
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payment shall be made 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 discretion, shall
deem reasonable, to such one or more of the spouse and descendants
and blood relatives of such Employee, Member or Former Member and
such person or persons with whom such Employee, Member or Former
Member resided as the Plan Administrator may select.
(b) In the event that a Beneficiary entitled to payments hereunder shall
die after the death of the Employee, Member or Former Member who
designated him but prior to receiving payment of his interest in the
Accumulated Share of such Employee, Member or Former Member, then
the Accumulated Share of such Employee, Member or Former Member, or
any unpaid balance thereof, shall be paid as provided in Section
10.05, to such contingent beneficiary, if any, designated by such
Employee, Member or Former Member, as shall be living at the time
such payment is to be made, or if there is no such contingent
beneficiary then living, to the Member's surviving spouse, or if
there is no surviving spouse, to the executor or administrator of
the estate of such Employee, Member or Former Member, or if no such
executor or administrator is appointed within such time as the Plan
Administrator, in his discretion, shall deem reasonable, to such one
or more of the spouse and descendants and blood relatives of such
Employee, Member or Former Member and such person or persons with
whom such Employee, Member or Former Member resided as the Plan
Administrator may select.
(c) The designation of a Beneficiary (and of a contingent beneficiary)
shall be made in writing by the Employee, Member or Former Member in
the form and manner prescribed by the Plan Administrator, and shall
not be effective unless filed with the Plan Administrator prior to
the death of such person. If the Employee, Member or Former Member
is married, his spouse shall be deemed to be his sole Beneficiary
unless or until he elects another Beneficiary with Spousal Consent.
If an Employee, Member or Former Member and any Beneficiary or
contingent beneficiary designated by him shall die in such
circumstances that there shall be substantial doubt as to which
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of them shall have been the first to die, for all purposes of the
Plan the Employee, Member or Former Member shall be deemed to have
survived such Beneficiary or contingent beneficiary.
10.05 Form of Payment Following Termination of Membership
If the employment of an Employee shall terminate for any reason, including
death, his vested interest in his Accumulated Share shall be payable to
him or his Beneficiary in a cash lump sum distribution. However, if
requested by the person on a form provided by the Plan Administrator and
filed with the Plan Administrator and upon receipt of Spousal Consent, if
applicable, payment may be made in level annual installments over a period
not to exceed the lesser of fifteen years or the joint and last survivor
life expectancy of the person and his beneficiary, as of such Valuation
Date in each such year as may be requested by such person on such form,
and the amounts thereof shall be based on the values of his units in the
respective Investment Funds as of such Valuation Dates. Installment
payments shall be effected through the redemption of such person's units
in such Investment Funds in proportion to their total value, and any
portion of such person's vested interest which shall not have been so paid
or delivered shall continue to be held for his benefit, or for the benefit
of the person or persons who may be or become entitled thereto.
Subject to the provisions of Section 10.06(g), the Plan Administrator
shall, upon written application by a Member or beneficiary (or such other
person as may be entitled to benefits), made in such form and manner as
the Plan Administrator may prescribe, change the method of payment of
benefits, and/or agree that the balance of his Rollover Account (including
the amount of income thereon) be paid out in a method different from the
remainder of such person's Accumulated Share. The Bank Contributions,
including any amount elected to be received in cash pursuant to Section
4.04, of a Member for the Plan Year in which his employment terminates
because of death, Disability or Retirement shall be paid in a lump sum as
soon as practicable after the amount thereof has been determined, except
that if a lump sum benefit is to be paid in a Plan Year following the Plan
Year in which such termination occurs, or if benefits are to be paid in
installments, such allocation of Bank Contributions shall be paid to the
Trust Fund as of the September Valuation Date for the Plan Year in which
his
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employment terminates, and shall be credited to his accounts pursuant to
Article V hereof as part of his Accumulated Share.
10.06 Commencement of Payment Following Termination of Membership
(a) Except as otherwise provided in this Article, distribution of a
Member's Accumulated Share shall commence to the Member as soon as
administratively practicable following the later of (i) the Member's
termination of employment or (ii) the 65th anniversary of the
Member's date of birth (but not more than 60 days after the close of
the Plan Year in which the later of (i) or (ii) occurs).
(b) In lieu of a distribution as described in paragraph (a) above, a
Member may, in accordance with such procedures as the Committee
shall prescribe, elect to have the distribution of the vested
portion of his Accumulated Share commence as soon as
administratively practicable following any Valuation Date coincident
with or following his termination of employment, provided that such
date is not later than the later of the 65th anniversary of the
Member's date of birth or the thirteenth month following his
termination of employment, subject to paragraph (d) below.
(c) In the case of the death of a Member before his benefits commence,
the Member's Accumulated Share shall be distributed or shall
commence to be paid to his Beneficiary within one year following the
Member's date of death.
(d) In no event, however, shall the provisions of this Section operate
so as to allow the distribution of a Member's Accumulated Share to
begin later than the April 1 following the calendar year in which he
attains age 70 1/2, provided that such commencement shall not be
required with respect to a Member (i) who does not own more than
five percent of the outstanding stock of the Bank (or stock
possessing more than five percent of the total combined voting power
of all stock of the Bank) and (ii) who attained age 70 1/2 prior to
January 1, 1988. Furthermore, a Member who attained age 70 1/2 in
1988, had not retired as of January 1, 1989 and is not a five
percent owner shall not be required to commence payment until April
1, 1990.
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(e) Notwithstanding any provision of the Plan to the contrary, a lump
sum payment shall be made in lieu of all vested benefits if the
value of the vested portion of the Member's Accumulated Share
amounts to $3,500 or less. The lump sum payment shall be made as
soon as administratively practicable following the Member's
termination of employment.
(f) Until completely distributed under this Article X, the Accumulated
Share of a Member shall continue to be administered as part of the
funds of the Plan and the Member shall retain his investment rights
under the provisions of Article VIII.
(g) Notwithstanding any other provision of this Article X, all
distributions from this Plan shall conform to the regulations issued
under Section 401(a)(9) of the Code, including the incidental death
benefit provisions of Sections 401(a)(9)(G) of the Code. Further,
such regulations shall override any Plan provision that is
inconsistent with Section 401(a)(9) of the Code. Life expectancies
of Members and their spouses shall not be recalculated. If a Member
dies after payments have commenced, any payments continuing on to
his Beneficiary shall be distributed at least as rapidly as under
the method of distribution being used as of the Member's date of
death.
10.07 Distribution in Shares
Subject to such terms and conditions as may be established from time
to time by the Plan Administrator, the portion of any distribution that is
attributable to the interest of a Member, Former Member or Beneficiary in the
Employer Stock Fund shall, if the payment recipient so requests, be paid wholly
or partially in Shares. In such event, the maximum number of Shares to be
distributed shall be the number of whole Shares that could have been purchased
with the Member's, Former Member's or Beneficiary's interest in the Employer
Stock Fund on the basis of the value of such interest as of the Valuation Date
for the distribution and the fair market value of a Share on such Valuation
Date. Fair market value for this purpose shall be determined in such uniform and
nondiscriminatory manner as the Plan Administrator may prescribe. Any remaining
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vested balance of the Member, Former Member or Beneficiary in the Employer Stock
Fund shall be paid in cash or cash equivalents.
10.08 Loans to Members
(a) A Member who is an employee of the Bank or an Affiliated Company
may, in case of need, apply to the Plan Administrator for a loan in
an amount not to exceed the value of: that portion of the Member's
Accumulated Share which is withdrawable under Section 10.02(a)(i)
through (iii), plus the value of his vested Regular Account, plus,
in the case of a Member who has attained age 59 1/2, the value of
his Optional Account, but in no event shall the amount of the loan
exceed 50% of the value of the Member's vested interest in his
Accumulated Share; provided, however, in case of hardship as defined
in Section 10.02(b), a loan may be made up to 50% of the value of
the Member's vested interest in his Accumulated Share.
Notwithstanding the foregoing, a Member may borrow no more than
$50,000 reduced by the highest outstanding balance of loans to the
Member from the Plan during the one year period ending on the day
before the day the loan is made. All loans previously made shall be
subject to the rules in effect under the Plan at the time the loan
was made. If the Plan Administrator finds that such application has
merit under such uniform rules as it shall adopt, the Plan
Administrator shall direct the Trustee to make a loan to the Member.
(b) The period of repayment for any loan shall be arrived at by mutual
agreement between the Plan Administrator and the Member, but the
period shall not exceed three years unless the loan is to be used in
conjunction with the purchase of the principal residence of the
Member in which case the period may not exceed five years. Payments
of principal and interest will be made by payroll deductions or in a
manner agreed to by the Member and the Plan Administrator in
substantially level amounts, but no less frequently than quarterly,
in an amount sufficient to amortize the loan over the repayment
period. The interest rate to be charged on loans shall be determined
at the time of the loan application and shall be based on the
interest rates charged by persons in the business of lending money
for loans which would be made under similar circumstances. The
interest rate so determined for purposes of the Plan shall be fixed
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for the duration of each loan. Only one loan shall be outstanding to
any Member under this Section 10.08 at any time.
(c) A request for a loan shall be filed in the form and manner
prescribed by the Plan Administrator at least fifteen days before
the end of a Quarter; the loan, if approved by the Plan
Administrator under such uniform rules as it shall adopt, shall be
effected as of the Valuation Date for such Quarter, and the proceeds
disbursed to the Member as soon thereafter as practicable. As of
such Valuation Date, the amount of the loan is to be transferred
from the Investment Funds in which the Member's Accumulated Share is
invested pursuant to Article VIII to a special "Loan Fund" for the
Member under the Plan. The Loan Fund consists solely of the amount
transferred to the Loan Fund and is invested solely in the loan made
to the Member. The amount transferred to the Loan Fund shall be
pledged as security for the loan. Payments of principal on the loan
will reduce the amount held in the Member's Loan Fund. Those
payments, together with the attendant interest payment, will be
reinvested in the Investment Funds in accordance with the Member's
then effective investment election.
(d) A Member may prepay his loan on any Valuation Date, provided he pays
the full amount of the loan plus all interest accrued and unpaid
thereon. Upon default by a Member in any of the terms of a loan
under this Section 10.08, or if the employment of a Member
terminates when a loan is outstanding to him under this Section
10.08, the loan will become immediately due and payable, and the
Plan Administrator in such case shall charge the unpaid balance of
such loan, together with any interest accrued and unpaid thereon,
against the Member's vested interest in his Accumulated Share,
through a redemption of his units in the Loan Fund as of the
Valuation Date next following such event, provided, however, that
the Plan Administrator shall not levy against any portion of the
Member's Accumulated Share until such times as a distribution of the
amount could otherwise be made under the Plan. Whenever the unpaid
balance of a loan (plus any interest accrued and unpaid thereon) is
charged against a Member's interest in his Accumulated Share, it
shall be charged in the following order against:
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(i) the amount of his Personal Contributions made before 1987, not
to exceed his non-taxable basis, excluding earnings thereon;
(ii) the amount of his Personal Contributions made on or after
January 1, 1987, with earnings thereon,
(iii) the amount of earnings attributable to his Personal
Contributions made before 1987,
(iv) the amount of his vested Bank Contributions in his Regular
Account B, with earnings thereon,
(v) the amount of his vested Bank Contributions in his Regular
Account A, with earnings thereon,
(vi) the amount of his Bank Contributions in his Optional Account
A, with earnings thereon,
(vii) the amount of his Bank Contributions in his Optional Account
B, with earnings thereon.
(e) Any additional rules or restrictions as may be necessary to
implement and administer the loan program shall be in writing, and
communicated to Employees. Such further documentation is hereby
incorporated into the Plan by reference, and the Plan Administrator
is hereby authorized to make such revisions to these rules as he
deems necessary or appropriate, on the advice of counsel.
(f) To the extent required by law and under such rules as the Committee
shall adopt, loans shall also be made available on a reasonably
equivalent basis to any Beneficiary or former Employee (i) who
maintains an account balance under the Plan and (ii) who is still a
party-in-interest (within the meaning of Section 3(14) of ERISA).
10.09 Direct Transfer of Eligible Plan Distributions
A Member or Beneficiary may direct that an "eligible rollover
distribution" (as defined below) included in such payment be made directly
to an "eligible retirement plan" (as defined below).
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To effect such a direct transfer, the Member or Beneficiary must notify
the Plan Administrator that a direct transfer is desired and provide to
the Plan Administrator with the name of the eligible retirement plan to
which the payment is to be made and such other information regarding such
eligible retirement plan as the Plan Administrator may require. Such
notice shall be made in such form and at such times as the Plan
Administrator may prescribe. Upon receipt of such notice, the Plan
Administrator shall direct the Trustee to make a trust-to-trust transfer
of the eligible rollover distribution to the eligible retirement plan so
specified.
For purposes of this Section 10.08, an "eligible rollover distribution"
shall have the meaning set forth in Section 402(c)(4) of the Code and any
regulations promulgated thereunder. To the extent such meaning is not
inconsistent with the above references, an eligible rollover distribution
shall mean any distribution of all or any portion of the Member's
Accumulated Share, except that such term shall not include any
distribution which is one of a series of substantially equal periodic
payments (not less frequently than annually) made (i) for the life (or
life expectancy) of the Member or the joint lives (or joint life
expectancies) of the Member and a designated Beneficiary, or (ii) for a
period of ten years or more. Further, the term "eligible rollover
distribution" shall not include any distribution required to be made under
Section 401(a)(9) of the Code or any portion of a distribution that is not
includible in gross income (determined without regard to the exclusion for
net unrealized appreciation with respect to employer securities).
For purposes of this Section 10.08, an "eligible retirement plan" shall
have the meaning set forth in Section 402(c)(8) of the Code and any
regulations promulgated thereunder. To the extent such meaning is not
inconsistent with the above references, an eligible retirement plan shall
mean: (i) an individual retirement account described in Section 408(a) of
the Code; (ii) an individual retirement annuity described in Section
408(b) of the Code (other than an endowment contract), (iii) a qualified
trust described in Section 501 (a) of the Code, and (iv) an annuity plan
described in Section 403(a) of the Code.
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10.10 Waiver of Notice Period
Except as provided in the following sentence, if the value of the vested
interest of the Member's Accumulated Share exceeds $3,500, an election by
the Member to receive an in- service withdrawal under Section 10.02 or
10.03 or a distribution prior to his 65th birthday pursuant to Section
10.06(b) shall not be valid unless the written election is made (i) after
the Member has received the notice required under Section 1.411(a)-11(c)
of the Income Tax Regulations and (ii) within a reasonable time before the
effective date of the commencement of the distribution as prescribed by
said regulations. If a distribution is one to which Sections 401(a)(11)
and 417 of the Code do not apply, such distribution may commence less than
30 days after the notice required under Section 1.411(a)-11(c) of the
Income Tax Regulations is given, provided that:
(a) the Plan Administrator clearly informs the Member that he has a
right to a period of at least 30 days after receiving the notice to
consider the decision of whether or not to elect a distribution
(and, if applicable, a particular distribution option), and
(b) the Member, after receiving the notice, affirmatively elects a
distribution.
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ARTICLE XI
ADMINISTRATION OF PLAN
11.01 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
and the Trustee of the Plan. This Article XI 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.
11.02 Plan Administrator
The Plan Administrator shall be the Employee Benefit Plans Committee, or
such other Employee, officer, committee, corporation or organization as
may from time to time be designated by the Committee, as hereinafter
provided, and 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 such instructions, notices, information, materials and
certifications to the Trustee of the Plan as may be necessary or
appropriate in the administration of the Plan;
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(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 a Member
or Former Member, 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 Members, Former Members and other persons, as
shall be required of the Plan Administrator under ERISA;
(f) To determine in its discretion any questions 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
Bank, the Trustee, Members, Former Members and any other person
having an interest in the Plan; provided, however, that any question
relating to inconsistency or omission in the Plan, or 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 11.07, to review and dispose of
claims under the Plan filed pursuant to Section 11.06;
(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 Member, Former Member, beneficiary or any
other person entitled thereto, unless claim shall have been made
therefor by a duly appointed legal representative, 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 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;
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(i) To perform any duty or take any action which is specifically
allocated to the Plan Administrator under the Plan; and
(j) To discharge such other responsibilities or follow such directions
as may be assigned or given by the Committee or Board.
The Plan Administrator shall have the power and authority necessary or
appropriate to carry out his responsibilities.
The Plan Administrator may resign only by giving at least thirty days
prior written notice of resignation to the Committee and such resignation
shall be effective on the date specified in such notice.
11.03 Employee Benefit Plans Committee
There shall be an Employee Benefit Plans Committee. The members of the
Committee shall be appointed from time to time by the Board of Managers.
Each member shall serve for a period of one year and until his successor
is appointed. The Committee shall have the responsibilities enumerated in
Section 11.05. The Committee shall elect a Chairman and may appoint a
Secretary who may, but need not be a member of the Committee. Any filing
which is required or permitted to be made with the Committee shall be
deemed to be satisfactorily made upon mailing or delivering such filing to
the Secretary of the Committee, or if the office of Secretary is vacant,
to the Chairman of the Committee. A member of the Committee may resign
only by giving at least thirty days prior written notice of resignation to
the Chairman of the Board, and such resignation shall be effective on the
date specified in such notice.
11.04 Committee Action
The Committee shall hold meetings, at least twice annually, and may make
such administrative rules as it may deem proper. Any action of the
Committee shall be taken pursuant to a majority vote at a meeting, or
pursuant to the written consent of a majority of its members without a
meeting, and such action shall constitute the action of the Committee and
shall be binding in the same manner as if all members of the Committee had
joined therein.
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A majority of the members of the Committee shall constitute a quorum. The
Committee shall record minutes of any actions taken at its meetings or of
any other official action of the Committee and shall report to the Board
at least once each year on its activities.
The Plan Administrator, Trustee and any other person dealing with the
Committee shall be fully protected in relying upon any written notice,
instruction, direction or other communication signed by the Secretary of
the Committee or by two of the members of the Committee or by a
representative of the Committee authorized by the Committee to sign the
same in its behalf.
11.05 Committee Responsibilities
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 review procedure
contained in Section 10.07 of the Plan, taken from the decisions of
the Plan Administrator;
(c) To hear and decide in its sole discretion questions involving
interpretations of the Plan (and such other questions), as may be
referred to the Committee by the Plan Administrator;
(d) To review the performance of the Trustee 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;
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(f) To report to 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;
(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 and/or Alternate and to
fill a vacancy in either office;
(i) To perform any duty or take any action which is specifically
allocated to the Committee under the Plan; and
(j) To discharge such other responsibilities or follow such directions
as may be assigned or given by the Board.
The Committee shall have the power and authority necessary or appropriate
to carry out its responsibilities.
11.06 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.
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In the event that the claim is not granted and notice of denial of a claim
is not furnished by the thirtieth 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.
11.07 Claims Review Procedure
Any person whose claim filed pursuant to Section 11.06 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 ninety days after the mailing or delivery of
the written notice of denial provided for in Section 11.06, or, if such
notice is not provided, within ninety days after such claim is deemed
denied pursuant to Section 11.06. 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 sixty days after receipt
of 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 one hundred and twenty 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 Bank, and the Plan Administrator shall take appropriate action to
carry out such decision.
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11.08 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 made 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 Bank.
11.09 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
11.07 prior to initiating any claim for judicial review.
(b) No bond or other security need be required of a member of the
Committee, the Plan Administrator, and/or any officer or employee of
the Bank 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
11.09(c) pursuant to ERISA, no member of the Committee, the Plan
Administrator, or any officer or Employee of the Bank to whom
fiduciary responsibilities are allocated by a Named Fiduciary, shall
be personally liable by virtue of contract, agreement, bond or other
instrument made or executed by him or on his behalf, nor for any
loss unless resulting from his own gross negligence or willful
misconduct.
(d) The Plan Administrator or the Committee may, except with respect to
actions under
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Section 11.07, shorten, extend (but not beyond sixty days) or waive
the time 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 Committee or the Plan Administrator may direct that the costs of
services provided pursuant to Section 11.08, 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 Bank
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.
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ARTICLE XII
AMENDMENT AND TERMINATION
12.01 Amendment and Termination
(a) The Bank expects to continue the Plan indefinitely, but specifically
reserves the right, in its sole and uncontrolled discretion, at any
time, by appropriate action of the Board, taken at a meeting held
either in person or by telephone or other electronic means, or by
unanimous written consent in lieu of a meeting, 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
12.02, 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 the Members, Former Members, beneficiaries or
other persons entitled to benefits, and no such amendment or
termination shall reduce the interest of any Member, Former Member,
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 upon complete discontinuance of contributions under the
Plan, the account of each affected Member shall forthwith become
fully vested and shall be distributable in accordance with the
provisions of Article X.
(b) Upon termination of the Plan, Elective Bank Contributions, with
earnings thereon, shall only be distributed to Members if (i)
neither the Bank nor an Affiliated Company establishes or maintains
a successor defined contribution plan, and (ii) payment is made to
the Members in the form of a lump sum distribution (as defined in
Section 402(d)(4) of the Code, without regard to clauses (i) through
(iv) of subparagraph (A), subparagraph (B), or subparagraph (F)
thereof). For purposes of this paragraph, a "successor defined
contribution plan" is a defined contribution plan (other than an
employee stock ownership plan as defined in Section 4975(e)(7) of
the Code ("ESOP") or a simplified employee pension as defined in
Section 408(k) of the Code ("SEP")) which exists at the time the
Plan is terminated or within the 12 month period beginning on the
date all assets are distributed. However, in no event shall a
defined contribution
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plan be deemed a successor plan if fewer than two percent of the
employees who are eligible to participate in the Plan at the time of
its termination are or were eligible to participate under another
defined contribution plan of the Bank or an Affiliated Company
(other than an ESOP or a SEP) at any time during the period
beginning 12 months before and ending 12 months after the date of
the Plan's termination.
12.02 Conformity to U.S. Internal Revenue Code
The Bank has established the Plan with the intent that the Plan and Trust
Fund 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 by the Code as deductions in computing net income
of the Bank 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 in any provision
herein, the Plan and the Trust Agreement may be amended at any time
without prior notice to Members; Former Members, beneficiaries or any
other persons, if such amendment is deemed by the Board to be necessary or
appropriate to effectuate such intent.
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ARTICLE XIII
MISCELLANEOUS PROVISIONS
13.01 Governing Law
Except to the extent preempted by Federal law, the Plan shall be
construed, administered and enforced according to the laws of the State of
New Jersey.
13.02 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
Plan Administrator, Committee or Trustee, shall be held or construed to
confer upon any Employee any right to a continuation of employment by the
Bank. The Bank 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.
13.03 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 shall include the feminine.
13.04 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 Member, Former Member,
beneficiary and other person entitled to benefits, would (if the 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.
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13.05 Non-alienation of Benefits
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, engagements or
torts. Should any Member, Former Member, beneficiary 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 Member, Former Member, beneficiary or other person in the Plan
shall cease, and in that event such interest or right shall be held or
applied, at the direction of the Committee, for or to the benefit of such
Member, Former Member, beneficiary or other person or his spouse, children
or other dependents in such manner and in such proportions as the
Committee may deem proper. Notwithstanding the foregoing, payment shall be
made in accordance with the provisions of any judgment, decree, or order
which:
(a) creates for, or assigns to, a spouse, former spouse, child or other
dependent of a Member the right to receive all or a portion of the
Member's benefits under the Plan for the purpose of providing child
support, alimony payments or marital property rights to such spouse,
child or dependent,
(b) is made pursuant to a State domestic relations law,
(c) does not require the Plan to provide any type of benefit, or any
option, not otherwise provided under the Plan, and
(d) otherwise meets the requirements of Section 206(d) of ERISA.
Notwithstanding anything herein to the contrary, if the amount payable to the
alternate payee under the qualified domestic relations order is less than $3,500
such amount shall be paid in one lump sum as soon as practicable following the
qualification of the order. If the amount exceeds $3,500, it may be paid as soon
as practicable following the qualification of the order if the alternate payee
consents thereto; otherwise it may not be payable before the earliest of (i) the
Member's termination of employment, (ii) the time such amount could be withdrawn
under the Plan or (iii) the Member's attainment of age 50.
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13.06 Effect of Restatement
The Plan described herein shall, effective as of October 1, 1989, amend
and supersede all provisions of the Plan as in effect on September 30,
1989, except that certain provisions reflected in the restated Plan
document shall have a later effective date as follows:
(a) The reduction in the maximum annual compensation limitation set
forth in Sections 1.05, 1.14 and 1.49 shall be effective as of
October 1, 1994.
(b) The revised definition of Highly Compensated Employee set forth in
Section 1.27 shall be effective as of October 1, 1993.
(c) The change in the definition of "Net Operating Income" set forth in
Section 1.34 and the change in the Plan contribution formula set
forth in Section 4.01(a) shall be effective as of October 1, 1992.
(d) The addition of the Intermediate Bond Fund as an Investment Fund
under Section 7.02 of the Plan shall be effective as of July 1,
1994.
(e) The revisions to Sections 8.01, 8.02 and 8.03 to comply with the
provisions of Section 404(c) of ERISA shall be effective as of July
1, 1994.
(f) The revisions to the loan provision in Section 10.07 shall be
effective as of April 1, 1994.
(g) The direct rollover provision set forth in Section 10.08 and the
waiver of the 30-day notice period set forth in Section 9.09 shall
be effective as of January 1, 1993.
The rights of persons who terminated employment or retired prior to October 1,
1989, shall be governed by the terms of the Plan in effect at the time of such
termination or retirement except as may otherwise be required by law, and the
percentage of vesting of Members on September 30, 1989 shall not be reduced.
13.07 Top-Heavy Provisions
The provisions of this Section 13.07 shall become applicable under the
circumstances described in this Section.
(a) The following definitions apply to the terms used in this Section:
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(i) "applicable determination date" means the last day of the
preceding Plan Year;
(ii) "top-heavy ratio" means the ratio of (A) the value of the
aggregate of the Accumulated Shares under the Plan for key
employees to (B) the value of the aggregate of the Accumulated
Shares under the Plan for all key employees and non-key
employees;
(iii) "key employee" means an employee who is in a category of
employees determined in accordance with the provisions of
Sections 416(i)(1) and (5) of the Code and any regulations
thereunder, and where applicable, on the basis of the
Employee's Statutory Compensation from the Bank or an
Affiliated Company;
(iv) "non-key employee" means any Employee who is not a key
employee;
(v) "applicable Valuation Date" means the Valuation Date
coincident with or immediately preceding the last day of the
preceding Plan Year;
(vi) "required aggregation group" means any other qualified plan(s)
of the Bank or an Affiliated Company in which there are
members who are key employees or which enable(s) the Plan to
meet the requirements of Section 401(a)(4) or 410 of the Code;
and
(vii) "permissive aggregation group" means each plan in the required
aggregation group and any other qualified plan(s) of the Bank
or an Affiliated Company in which all members are non-key
employees, if the resulting aggregation group continues to
meet the requirements of Sections 401(a)(4) and 410 of the
Code.
(b) For purposes of this Section, the Plan shall be "top-heavy" with
respect to any Plan Year if as of the applicable determination date
the top-heavy ratio exceeds 60 percent. The top-heavy ratio shall be
determined as of the applicable Valuation Date in accordance with
Sections 416(g)(3) and (4) of the Code and Section 8.04 of this
Plan. For purposes of determining whether the Plan is top-heavy, the
Accumulated Shares under the Plan will be combined with the account
balances or the present value of accrued benefits under each other
plan in the required aggregation group and, in the
<PAGE> 82
Page 77
Bank's discretion, may be combined with the account balances or the
present value of accrued benefits under any other qualified plan in
the permissive aggregation group. Distributions made with respect to
a Member under the Plan during the five-year period ending on the
applicable determination date shall be taken into account for
purposes of determining the top-heavy ratio; distributions under
plans that terminated within such five-year period shall also be
taken into account, if any such plan contained key employees and
therefore would have been part of the required aggregation group.
(c) The following provisions shall be applicable to Members for any Plan
Year with respect to which the Plan is top-heavy:
(i) In lieu of the vesting schedule in Section 6.01 the following
shall apply:
Nonforfeitable
Years of Vesting Service Percentage
------------------------ ----------
less than 2 years 0%
2 years 20
3 years 40
4 years 60
5 years 80
6 or more years 100
provided that in no event shall the vested interest of a
Member in his Regular Account be less than the vested interest
determined under Section 6.01.
(ii) If the required minimum benefit is not provided by the
Employees' Retirement Plan of Hudson City Savings Bank for any
Member who is a non-key employee, then in each Plan Year, in
addition to the contributions otherwise provided under the
Plan, the Bank shall make contributions on behalf of any such
Member who is a non-key employee which, when added to the Bank
Contributions allocated to his Regular Account under Section
5.02 will be equal to a percentage of the Member's
remuneration for the Plan
<PAGE> 83
Page 78
Year, that percentage to be the lesser of 3% or the percentage
rate, determined for the key employee for whom that percentage
is the highest, equivalent to the fraction the numerator of
which is the contribution made on behalf of that key employee
by the Bank under Section 5.02 and Section 5.03, and the
denominator of which is the remuneration of the key employee
for that Plan Year. For purposes of this subparagraph (ii),
remuneration has the same meaning as set forth in Section
4.09(d)(v).
(iii) The multiplier "1.25" in Section 4.08(c)(i)(C) and (ii)(B)
shall be reduced to "1.0", and the dollar amount $51,875" in
Section 4.08(c)(i)(E) shall be reduced to $41,500".
(d) If the Plan is top-heavy with respect to a Plan Year and ceases to
be top-heavy for a subsequent Plan Year, the following provisions
shall be applicable:
(i) With respect to a Member who has completed at least five years
of Vesting Service (three years of Vesting Service effective
October 1, 1989) on or before the last day of the most recent
Plan Year for which the Plan was top-heavy, the vesting
schedule set forth in paragraph (b)(i) shall continue to be
applicable to the extent the application of that schedule
provides the Member with a greater vested interest in his
Regular Account than that provided under the provisions of
Section 6.01.
(ii) With respect to a Member who has completed at least two, but
less than five (three effective October 1, 1989), years of
Vesting Service on or before the last day of the most recent
Plan Year for which the Plan was top-heavy, the vested
percentage determined under paragraph (b)(i) above as of that
date shall continue to be applicable as the minimum vested
percentage of his Regular Account.
13.08 Distribution of Accounts Upon a Sale of Assets or a Sale of a Subsidiary
Upon the disposition by the Bank of at least 85 percent of the assets
(within the meaning of Section 409(d)(2) of the Code) used by the Bank in
a trade or business or upon the disposition by the Bank of its interest in
a subsidiary (within the meaning of Section 409(d)(3) of the
<PAGE> 84
Page 79
Code), Elective Bank Contributions, with earnings thereon, may be
distributed to those Members who continue in employment with the employer
acquiring such assets or with the sold subsidiary, provided that (a) the
Bank maintains the Plan after the disposition, (b) the buyer does not
adopt the Plan or otherwise become a participating employer in the Plan
and does not accept any transfer of assets or liabilities from the Plan to
a plan it maintains in a transaction subject to Section 414(l)(1) of the
Code, and (c) payment is made to the Member in the form of a lump sum
distribution (as defined in Section 402(d)(4) of the Code, without regard
to clauses (i) through (iv) of subparagraph (A), subparagraph (B), or
subparagraph (F) thereof).
<PAGE> 1
EXHIBIT 10.3
SUPPLEMENTARY SAVINGS PLAN
OF HUDSON CITY SAVINGS BANK
EFFECTIVE AS OF SEPTEMBER 25, 1987
<PAGE> 2
SUPPLEMENTARY SAVINGS PLAN
OF HUDSON CITY SAVINGS BANK
TABLE OF CONTENTS
Article Page
1. Definitions 1
2. Participation 3
3. Supplemental Savings Plan Contributions 5
4. Payment of Contributions and Benefits 6
5. General Provisions 8
6. Amendment or Termination 11
<PAGE> 3
INTRODUCTION
This Supplementary Savings Plan of Hudson City Savings Bank has been authorized
by the Board of Managers of Hudson City Savings Bank to be applicable effective
on and after September 25, 1987. The purpose of this Plan is to provide
supplemental benefits to certain employees of the Bank in addition to the
benefits that may be provided to such employees under the Profit Incentive Bonus
Plan of Hudson City Savings Bank.
<PAGE> 4
EXHIBIT 4.3
HUDSON CITY 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
HUDSON CITY 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 Chairman of the Board and
Chief Executive Officer
<PAGE> 5
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> 6
HUDSON CITY BANCORP, INC.
The shares represented by this Certificate are issued subject to all
the provisions of the Certificate of Incorporation and Bylaws of HUDSON CITY
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 reorganization of Hudson
City Savings Bank (the "Bank") from a New Jersey mutual savings bank to a New
Jersey 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"), exclusive of the shares beneficially owned by Hudson
City, MHC. 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, exclusive of the
shares beneficially owned by Hudson City, MHC. 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:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not as tenants
in common
UNIF GIFT MIN ACT Custodian
----------------------
(Cust) (Minor)
under Uniform Gifts to Minors Act
-----------------
(State)
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> 7
SUPPLEMENTARY SAVINGS PLAN
OF HUDSON CITY SAVINGS BANK
Article 1. Definitions
1.01 "Bank" shall mean Hudson City Savings Bank or any successor by merger,
purchase or otherwise, with respect to its employees.
1.02 "Board of Managers" shall mean the Board of Managers of the Bank.
1.03 "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
1.04 "Committee" shall mean the committee appointed by the Board of Managers
pursuant to Section 5.06 to administer the Plan.
1.05 "Effective Date" shall mean September 25, 1987.
1.06 "Eligible Employee" shall mean an employee of the Company who has been
selected by the Committee to participate in this Plan.
1.07 "Member" shall mean each Eligible Employee who has filed a Membership
Form as required under Section 2.02.
1.08 "Plan" shall mean this Supplementary Savings Plan of Hudson City
Savings Bank.
1.09. "Plan Year" shall mean the 12-month period commencing on October 1. The
first Plan Year shall begin October 1, 1986.
1.10 "Profit Incentive Account" shall mean all amounts credited to a Member
under Section 3.01 and earnings on those amounts pursuant to Section
3.02.
<PAGE> 8
Page 2
1.11 "Profit Incentive Bonus Plan" shall mean the Profit Incentive Bonus
Plan of Hudson City Savings Bank, as it may be amended from time to
time.
1.12 "Statutory Limitations" shall mean the individual and combined plan
limitations imposed on the benefits payable under the Profit Incentive
Bonus Plan in order to comply with Sections 415 and 401(a)(17) of the
Code and the limitations imposed under Sections 401(k)(3) and 402(g)(1)
of the Code.
<PAGE> 9
Page 3
Article 2. Participation
2.01 Eligibility
The Committee, in its sole discretion, shall select from time to time
those employees who shall be eligible to participate in this Plan.
Employees shall be notified of their eligibility for participation in
the Plan as soon as practicable after the Committee has made its
selection and in any event prior to the first day of the Plan Year for
which the Employee is designated an Eligible Employee, or, in the case
of the Plan Year including the Effective Date, prior to the last day of
such Plan Year.
2.02 Participation
An eligible Employee shall commence participation in the Plan as of the
Effective Date if he is selected by the Committee prior to that date or
as of any October 1 thereafter following his selection by the
Committee. Prior to the date an Employee commences participation in the
Plan, he must complete a Membership Form on which he irrevocably
designates the commencement date of payment, and the method of payment,
of his benefits payable hereunder in accordance with Sections 4.01 and
4.02.
As a condition of participation, a Member may also be required by the
Committee to provide such other information as the Committee may deem
necessary to properly administer the Plan.
2.03 Termination of Participation; Re-employment
(a) A Member's participation in the Plan shall cease upon his
termination of employment with the Bank. His Profit Incentive Account
shall be distributed as provided in Article 4 and, pending
distribution, shall continue to be credited with investment earnings as
provided in Section 3.02.
(b) Upon re-employment by the Bank, a former Member shall become a
Member again only if again selected by the Committee as
provided in this Article 2. In that event
<PAGE> 10
Page 4
any payment hereunder shall cease and his previous elections
of commencement of payments under Section 4.01 and form of
payments under Section 4.02 with respect to his Profit
Incentive Account shall remain in effect unless prior to his
re-employment such benefits have been completely distributed.
<PAGE> 11
Page 5
Article 3. Supplemental Savings Plan Contributions
3.01 Amount of Supplemental Savings Plan Contributions
For any Plan Year beginning on or after October 1, 1986, the amount of
contributions to be recorded on the books of the Bank on behalf of a
Member pursuant to this Article 3 shall be equal to the result of (i)
minus (ii) as follows:
(i) the amount of the Bank contributions which would have been made on
behalf of the Member under the Profit Incentive Bonus Plan if he were a
member thereunder, disregarding any reduction in Bank contributions
required under the Profit Incentive Bonus Plan due to the application
of the Statutory Limitations and assuming the Member did not make a
cash election pursuant to Section 4.04 of said Plan, minus
(ii) the amount of Bank contributions that were made by the Bank on
behalf of a Member under the Profit Incentive Bonus Plan for such Plan
Year, including any amounts paid in cash to the Member under .Section
4.04 of the Profit Incentive Bonus Plan.
3.02 Investment of Profit Incentive Account
At the end of each calendar quarter there shall be credited interest on
the balance of the Member's Profit Incentive Account as of the end of
such calendar quarter at the highest rate of interest credited on
certificates of deposit issued by the Bank during that calendar
quarter.
3.03 Vesting of Profit Incentive Account
The Member shall be fully vested in his Profit Incentive Account.
3.04 Individual Statements
The Committee shall maintain, or cause to be maintained, records
showing the individual balances of each Member's Profit Incentive
Account. At least once a year, each Member shall be furnished with a
statement setting forth the value of his Profit Incentive Account.
<PAGE> 12
Page 6
Article 4. Payment of Contributions and Benefits
4.01 Commencement of Payment
The distribution of the Member's Profit Incentive Account shall
commence as soon as administratively practicable on or after the first
day of the calendar quarter which coincides with or next follows the
occurrence of (a), (b), (c) or (d) below, as designated by the Member
on his Membership Form:
(a) the Member's termination of employment with the Bank,
(b) attainment of a designated age not earlier than age 59-1/2 nor
later than age 70-1/2,
(c) the earlier of (a) or (b) above, or
(d) the later of (a) or (b) above.
In the event a Member fails to designate a commencement date under this
Section 4.01, payment shall be made in accordance with subparagraph (a)
above. If a Member dies prior to reaching such commencement date,
payment shall be made upon his death to his Beneficiary.
4.02 Method of Payment
A Member's Profit Incentive Account shall be distributed to him, or in
the event of his death to his Beneficiary, in a cash single sum
payment. Notwithstanding the foregoing, a Member or former Member may
elect, subject to the Committee's approval, to receive distribution of
his Profit Incentive Account in annual installments over a period not
to exceed fifteen (15) years. The Member's election shall be made on
his Membership Form and shall be irrevocable. If a Member dies before
payment of the entire balance of his Profit Incentive Account, the
remaining balance shall be paid in a single sum to his Beneficiary.
4.03 Designation of Beneficiary
Each Member shall file with the Committee a written designation of one
or more persons as the Beneficiary who shall be entitled to receive the
amount, if any, payable under the Plan upon his death. A Member may,
from time to time, revoke or change his Beneficiary
<PAGE> 13
Page 7
designation without the consent of any prior Beneficiary by filing a
new designation with the Committee. The last such designation received
by the Committee shall be controlling; provided, however, that no
designation, or change or revocation thereof, shall be effective unless
received by the Committee prior to the Member's death, and in no event
shall it be effective as of a date prior to such receipt. If no such
Beneficiary designation is in effect at the time of a Member's death,
or if no designated Beneficiary survives the Member, the Member's
estate shall be deemed to have been designated his Beneficiary and
shall receive the payment of the amount, if any, payable under the Plan
upon his death.
4.04 Hardship
A Member's election under Section 4.01 shall be irrevocable except that
the Committee may, if it determines an economic hardship exists,
approve payment of all or part of a Member's Profit Incentive Account
prior to the date such Account is otherwise payable.
<PAGE> 14
Page 8
Article 5. General Provisions
5.01 Funding
(a) All amounts payable in accordance with this Plan shall
constitute a general unsecured obligation of the Company. Such
amounts, as well as any administrative costs relating to the
Plan, shall be paid out of the general assets of the Company,
to the extent not paid by a grantor trust established pursuant
to paragraph (b) below.
(b) The Company may, for administrative reasons, establish a
grantor trust for the benefit of Members participating in the
Plan. The assets of said trust will be held separate and apart
from other Company funds, and shall be used exclusively for
the purposes set forth in the Plan and the applicable trust
agreement, subject to the following conditions:
(i) the creation of said trust shall not cause the Plan
to be other than "unfunded" for purposes of Title I
of the Employee Retirement Income Security Act of
1974;
(ii) the Company shall be treated as "grantor" of said
trust for purposes of Section 677 of the Code; and
(iii) said trust agreement shall provide that its assets
may be used to satisfy claims of the Company's
general creditors, and the rights of such general
creditors are enforceable by them under federal and
state law.
5.02 No Contract of Employment
The establishment of the Plan shall not be construed as conferring any
legal rights upon any person for a continuation of employment, nor
shall it interfere with the rights of the Company to discharge any
employee and to treat him without regard to the effect which such
treatment might have upon him as a Member of the Plan.
<PAGE> 15
Page 9
5.03 Facility of Payment
In the event that the Committee shall find that a Member is unable to
care for his affairs because of illness or accident, the Committee may
direct that any benefit payment due him, unless claim shall have been
made therefor by a duly appointed legal representative, be paid to his
spouse, a child, a parent or other blood relative, or to a person with
whom he resides, and any such payment so made shall be a complete
discharge of the liabilities of the Plan therefor.
5.04 Withholding Taxes
The Company shall have the right to deduct from each payment to be made
under the Plan any required withholding taxes.
5.05 Nonalienation
Subject to any applicable law, no benefit under the Plan shall be
subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance or charge, and any attempt so to do
shall be void, nor shall any such benefit be in any manner liable for
or subject to garnishment, attachment, execution or levy, or liable for
or subject to the debts, contracts, liabilities, engagements or torts
of the Member.
5.06 Administration
(a) This Plan shall be administered by a Committee appointed by
the Board. The Committee shall interpret the Plan, establish
regulations to further the purposes of the Plan and take any
other action necessary to the proper operation of the Plan.
(b) Prior to paying any benefit under this Plan, the Committee may
require the Member, former Member, beneficiary or contingent
beneficiary to provide such information or material as the
Committee, in its sole discretion, shall deem necessary for it
to make any determination it may be required to make under
this Plan. The Committee may withhold payment of any benefit
under this Plan until it receives all such
<PAGE> 16
Page 10
information and material and is reasonably satisfied of its
correctness and genuineness.
(c) The Committee shall provide adequate notice in writing to any
Member, former Member, beneficiary or contingent beneficiary
whose claim for benefits under this Plan has been denied,
setting forth the specific reasons for such denial. A
reasonable opportunity shall be afforded to any such Member,
former Member, beneficiary or contingent beneficiary for a
full and fair review by the Committee of its decision denying
the claim. The Committee's decision on any such review shall
be final and binding on the Member, former Member, beneficiary
or contingent beneficiary and all other interested persons.
(d) All acts and decisions of the Committee shall be final and
binding upon all Members, former Members, beneficiaries and
contingent beneficiaries.
5.07 Construction
(a) The Plan is intended to constitute an unfunded deferred
compensation arrangement for a select group of management or
highly compensated personnel and all rights hereunder shall be
governed by and construed in accordance with the laws of the
State of New Jersey.
(b) The masculine pronoun shall mean the feminine wherever
appropriate.
<PAGE> 17
Page 11
Article 6. Amendment or Termination
The Board of Managers reserves the right to modify or to amend, in whole or in
part, or to terminate, this Plan at any time. However, no modification,
amendment or termination of the Plan shall adversely affect the right of any
Member to receive the benefits granted under the Plan by the Board of Managers
in respect of such Member as of the date of modification, amendment or
termination.
<PAGE> 1
EXHIBIT 10.5
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement") is made and
entered into as of [______________], 1999 by and among HUDSON CITY SAVINGS BANK,
a savings bank organized and operating under the laws of the State of New Jersey
and having an office at West 80 Century Road, Paramus, New Jersey 07652-1473
(the "Bank"), HUDSON CITY BANCORP, INC., a business corporation organized and
existing under the laws of the State of Delaware and having an office at West 80
Century Road, Paramus, New Jersey 07652-1473 (the "Company") and
[________________], an individual residing at [______________________] (the
"Executive").
INTRODUCTORY STATEMENT
The Bank is undertaking a reorganization through which it will
convert from a mutual savings to a stock savings bank and become a wholly owned
subsidiary of the Company, and the Company will become a majority-owned
subsidiary of Hudson City, MHC, a New Jersey mutual holding company (the
"Reorganization"). At the same time, the Company will sell less than fifty
percent (50%) of its outstanding common stock to the public in an initial public
offering. The Executive has served the Bank in an executive capacity for many
years and is familiar with the Bank's operations.
The Board of Managers of the Bank and the Board of Directors
of the Company have concluded that it is in the best interests of the Bank, the
Company and their prospective shareholders to secure a continuity in management
following the Reorganization. They also consider it desirable to establish a
working environment for the Executive which minimizes the personal distractions
that might result from possible business combinations in which the Company or
the Bank might be involved. For these reasons, the Board of Managers of the Bank
and the Board of Directors of the Company have decided to offer to enter into a
contract with the Executive for his future services. The Executive has accepted
this offer.
The terms and conditions which the Bank, the Company and the
Executive have agreed to are as follows.
AGREEMENT
SECTION 1. EMPLOYMENT.
The Company and the Bank hereby continue to employ the
Executive, and the Executive hereby accepts 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 Company and the Bank shall employ the Executive during
an initial period of three (3) years beginning on the effective date of the
Reorganization (the "Employment Commencement Date") and ending on the day before
the third (3rd) anniversary of the
<PAGE> 2
Employment Commencement Date, and during the period of any additional extensions
described in section 2(b) (the "Employment Period").
(b) On the day after the Employment Commencement Date and on
each day thereafter, the Employment Period shall be extended by one day, such
that on any date the Employment Period will expire on the day before the third
(3rd) anniversary of such date. These extensions shall continue in perpetuity
until discontinued by: (i) joint notice to the Executive given by the Bank and
the Company that they have elected to discontinue the extensions; (ii) notice by
the Executive to the Bank and the Company that he has elected to discontinue the
extensions; or (iii) termination of the Executive's employment with the Bank and
the Company, whether by resignation, discharge or otherwise. On the date on
which such a notice is deemed given, or on the effective date of a termination
of the Executive's employment with the Bank and the Company, the Employment
Period shall be converted to a fixed period of three (3) years ending on the day
before the third (3rd) anniversary of such date. Except as otherwise expressly
provided in this Agreement, any reference in this Agreement to the term
"Remaining Unexpired Employment Period" as of any date shall mean the period
beginning on such date and ending on the day before the third (3rd) anniversary
of the earliest of the date in question, any earlier date on which the Executive
or the Bank and the Company is deemed to have given a notice to discontinue
extensions of the Employment Period, and any earlier date on which the
Executive's employment with the Bank and the Company was terminated.
(c) Nothing in this Agreement shall be deemed to prohibit the
Company or the Bank from terminating the Executive's employment before the end
of the Employment Period with or without notice for any reason. This Agreement
shall determine the relative rights and obligations of the Bank, the Company and
the Executive in the event of any such termination. In addition, nothing in this
Agreement shall require the termination of the Executive's employment at the
expiration of the Employment Period. Any such continuation shall be on an
"at-will" basis unless the Bank, the Company and the Executive agree otherwise.
SECTION 3. DUTIES.
The Executive shall serve as [___________________] of the
Company and as [__________________] of the Bank, having such power, authority
and responsibility and performing such duties as are prescribed by or under
their respective By-Laws and as are customarily associated with such positions.
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 Bank and the
Company and shall use his best efforts to advance their respective best
interests.
SECTION 4. CASH COMPENSATION.
In consideration for the services to be rendered by the
Executive hereunder, the Bank and the Company shall pay to him a salary at an
initial annual rate of [____________] ([__________]), payable in approximately
equal installments in accordance with their respective customary payroll
practices for senior officers. The Bank's and the Company's respective Boards
-2-
<PAGE> 3
of Directors shall review the Executive's annual rate of salary at such times
during the Employment Period as they deem appropriate, but not less frequently
than once every twelve (12) months, and may, in their discretion, approve a
salary increase. 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 Boards of Directors of
the Bank and the Company may determine. 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 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 and the Bank, in accordance with the terms and conditions of such
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 and the Bank shall cause the Executive to be covered by
and named as an insured under any policy or contract of insurance obtained by
them to insure their directors and officers against personal liability for acts
or omissions in connection with service as an officer or director of the Company
or the Bank or service in other capacities at their request. 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.
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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 Boards of Directors of the Company and the Bank
(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.
SECTION 8. WORKING FACILITIES AND EXPENSES.
The Executive's principal place of employment shall be at the
Bank's executive offices at the address first above written, or at such other
location as the Bank, the Company and the Executive may mutually agree upon. The
Bank and the Company shall provide the Executive at his principal place of
employment with a private office, secretarial services and other support
services and facilities suitable to his positions 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 provide to the Executive for his
exclusive use an automobile owned or leased by the Company and appropriate to
his position, to be used in the performance of his duties hereunder, including
commuting to and from his personal residence. The Bank or the Company shall
reimburse the Executive for his ordinary and necessary business expenses,
including, without limitation, all expenses associated with his business use of
the aforementioned automobile, fees for memberships in such clubs and
organizations as the Executive and the Company shall mutually agree are
necessary and appropriate for business purposes, and his travel and
entertainment expenses incurred in connection with the performance of his duties
under this Agreement, in each case upon presentation to the payer of an itemized
account of such expenses in such form as the payer may reasonably require.
SECTION 9. TERMINATION OF EMPLOYMENT DUE TO DEATH.
The Executive's employment with the Bank and the Company shall
terminate, automatically and without any further action on the part of any party
to this Agreement, on the date of the Executive's death. In such event:
(a) The Bank and the Company shall pay to the Executive's
estate his earned but unpaid compensation (including, without
limitation, salary and all other items which constitute wages under
applicable law) as of the date of his termination of employment. This
payment shall 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 the date of the Executive's termination of employment.
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(b) The Company and the Bank shall provide the benefits, if
any, due to the Executive's estate, surviving dependents or his
designated beneficiaries under the employee benefit plans and programs
and compensation plans and pro grams maintained for the benefit of the
officers and employees of the Company and the Bank. The time and manner
of payment or other delivery of these benefits and the recipients of
such benefits shall be determined according to the terms and conditions
of the applicable plans and programs.
The payments and benefits described in sections 9(a) and (b) shall be referred
to in this Agreement as the "Standard Termination Entitlements."
SECTION 10. TERMINATION DUE TO DISABILITY.
The Bank and the Company may terminate the Executive's
employment upon a determination, by separate votes of a majority of the members
of the Boards of Directors of the Company and the Bank, acting in reliance on
the written advice of a medical professional acceptable to them, that the
Executive is suffering from a physical or mental impairment which, at the date
of the determination, has prevented the Executive from performing his assigned
duties on a substantially full-time basis for a period of at least one hundred
and eighty (180) days during the period of one (1) year ending with the date of
the determination or is likely to result in death or prevent the Executive from
performing his assigned duties on a substantially full-time basis for a period
of at least one hundred and eighty (180) days during the period of one (1) year
beginning with the date of the determination. In such event:
(a) The Bank and the Company shall pay and deliver to the
Executive (or in the event of his death before payment, to his estate
and surviving dependents and beneficiaries, as applicable) the Standard
Termination Entitlements.
(b) In addition to the Standard Termination Entitlements, the
Bank and the Company shall continue to pay the Executive his base
salary, at the annual rate in effect for him immediately prior to the
termination of his employment, during a period ending on the earliest
of: (i) the expiration of one hundred and eighty (180) days after the
date of termination of his employment; (ii) the date on which long-term
disability insurance benefits are first payable to him under any
long-term disability insurance plan covering employees of the Bank or
the Company (the "LTD Eligibility Date"); (iii) the date of his death;
and (iv) the expiration of the Remaining Unexpired Employment Period
(the "Initial Continuation Period"). If the end of the Initial
Continuation Period is neither the LTD Eligibility Date nor the date of
his death, the Company and the Bank shall continue to pay the Executive
his base salary, at an annual rate equal to sixty percent (60%) of the
annual rate in effect for him immediately prior to the termination of
his employment, during an additional period ending on the earliest of
the LTD Eligibility Date, the date of his death and the expiration of
the Remaining Unexpired Employment Period.
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A termination of employment due to disability under this section 10 shall be
effected by joint notice of termination given to the Executive by the Company
and the Bank and shall take effect on the later of the effective date of
termination specified in such notice or the date on which the notice of
termination is deemed given to the Executive.
SECTION 11. DISCHARGE WITH CAUSE.
(a) The Bank and the Company may terminate the Executive's
employment during the Employment Period, and such termination shall be deemed to
have occurred with "Cause" only if:
(i) the Board of Directors of the Bank and the Board of
Directors of the Company, by separate majority votes of their entire
membership, determine that the Executive (A) has willfully and
intentionally failed to perform his assigned duties under this
Agreement in any material respect (including, for these purposes, the
Executive's inability to perform such duties as a result of drug or
alcohol dependency); (B) has willfully and intentionally engaged in
dishonest or illegal conduct in connection with his performance of
services for the Company or the Bank or has been convicted of a felony;
(C) 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; or
(D) has willfully and intentionally breached the material terms of this
Agreement in any material respect; and
(ii) at least forty-five (45) days prior to the votes
contemplated by section 11(a)(i), the Bank and the Company have
provided the Executive with notice of their intent to discharge the
Executive for Cause, detailing with particularity the facts and
circumstances which are alleged to constitute Cause (the "Notice of
Intent to Discharge"); and
(iii) after the giving of the Notice of Intent to Discharge
and before the taking of the votes contemplated by section 11(a)(i),
the Executive (together with his legal counsel, if he so desires) is
afforded a reasonable opportunity to make both written and oral
presentations before the Boards of Directors of the Company and the
Bank for the purpose of refuting the alleged grounds for Cause for his
discharge; and
(iv) after the votes contemplated by section 11(a)(i), the
Company and the Bank have furnished to the Executive a notice of
termination which shall specify the effective date of his termination
of employment (which shall in no event be earlier than the date on
which such notice is deemed given) and include a copy of a resolution
or resolutions adopted by the Board of Directors of the Bank and the
Board of Directors of the Company, certified by their corporate
secretaries and signed by each member of their respective Board of
Directors voting in favor of adoption of the resolution(s), authorizing
the termination of the Executive's
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<PAGE> 7
employment with Cause and stating with particularity the facts and
circumstances found to constitute Cause for his discharge (the "Final
Discharge Notice").
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.
(b) If the Executive is discharged during the Employment
Period with Cause, the Company and the Bank shall pay and provide to him (or, in
the event of his death, to his estate, his surviving beneficiaries and his
dependents) the Standard Termination Entitlements only. Following the giving of
a Notice of Intent to Discharge, the Bank and the Company may temporarily
suspend the Executive's duties and authority and, in such event, may also
suspend the payment of salary and other cash compensation, but not the
Executive's participation in retirement, insurance and other employee benefit
plans. If the Executive is not discharged, or is discharged without Cause,
within forty-five (45) days after the giving of a Notice of Intent to Discharge,
payments of salary and cash compensation shall resume, and all payments withheld
during the period of suspension shall be promptly restored. If the Executive is
discharged with Cause not later than forty-five (45) days after the giving of
the Notice of Intent to Discharge, all payments withheld during the period of
suspension shall be deemed forfeited and shall not be included in the Standard
Termination Entitlements. If a Final Discharge Notice is given later than
forty-five (45) days, but sooner than ninety (90) days, after the giving of the
Notice of Intent to Discharge, all payments made to the Executive during the
period beginning with the giving of the Notice of Intent to Discharge and ending
with the Executive's discharge with Cause shall be retained by the Executive and
shall not be applied to offset the Standard Termination Entitlements. If the
Bank and the Company do not give a Final Discharge Notice to the Executive
within ninety (90) days after giving a Notice of Intent to Discharge, the Notice
of Intent to Discharge shall be deemed withdrawn and any future action to
discharge the Executive with Cause shall require the giving of a new Notice of
Intent to Discharge.
SECTION 12. DISCHARGE WITHOUT CAUSE.
The Bank and the Company may discharge the Executive at any
time during the Employment Period and, unless such discharge constitutes a
discharge with Cause:
(a) The Bank and the Company shall pay and deliver to the
Executive (or in the event of his death before payment, to his estate
and surviving dependents and beneficiaries, as applicable) the Standard
Termination Entitlements.
(b) In addition to the Standard Termination Entitlements:
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(i) During the Remaining Unexpired Employment Period,
the Bank and the Company shall provide for the Executive and
his dependents continued group life, health (including
hospitalization, medical and major medical), dental, accident
and long-term disability insurance benefits on substantially
the same terms and conditions (including any required
premium-sharing arrangements, co-payments and deductibles) in
effect for them immediately prior to the Executive's
termination. The coverage provided under this section 12(b)(i)
may, at the election of the Bank and the Company, be secondary
to the coverage provided as part of the Standard Termination
Entitlements and to any employer-paid coverage provided by a
subsequent employer or through Medicare, with the result that
benefits under the other coverages will offset the coverage
required by this section 12(b)(i).
(ii) The Bank and the Company shall make a lump sum
payment to the Executive (or, in the event of his death before
payment, to his estate), in an amount equal to the estimated
present value of the salary 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 period of
three (3) years ending immediately prior to the date of
termination (the "Salary Severance Payment"). The Salary
Severance Payment shall be computed using the following
formula:
(n) (BS/PR)
SSP = (Sigma) [-------------------------]
(1) [1 + (I / PR)](n)
where "SSP" is the amount of the Salary Severance Payment
(before the deduction of applicable federal, state and local
withholding taxes); "BS" is the highest annual rate of salary
achieved by the Executive during the period of three (3) years
ending immediately prior to the date of termination; "PR" is
the number of payroll periods that occur during a year under
the Company's and the Bank's normal payroll practices; "I"
equals the applicable federal short term rate established
under section 1274 of the Internal Revenue Code of 1986 (the
"Code") for the month in which the Executive's termination of
employment occurs (the "Short Term AFR") and "n" equals the
product of the Remaining Unexpired Employment Period at the
Executive's termination of employment (expressed in years and
fractions of years) multiplied by the number of payroll
periods that occur during a year under the Company's and the
Bank's normal payroll practices. The Salary Severance Payment
shall be made within five (5) business days after the
Executive's termination of employment and shall be in lieu of
any claim to a continuation of base salary which the Executive
might otherwise have and in lieu of cash severance benefits
under any
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<PAGE> 9
severance benefits program which may be in effect for officers
or employees of the Bank or the Company.
(iii) The Bank and the Company shall make a lump sum
payment to the Executive (or, in the event of his death before
payment, to his estate), in an amount equal to the estimated
present value of the annual bonuses 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 period
of three (3) years ending immediately prior to the date of
termination (the "Bonus Severance Payment"). The Bonus
Severance Payment shall be computed using the following
formula:
BSP = SSP x (ABP / ASP)
where "BSP" is the amount of the Bonus Severance Payment
(before the deduction of applicable federal, state and local
withholding taxes); "SSP" is the amount of the Salary
Severance Payment (before the deduction of applicable federal,
state and local withholding taxes); "ABP" is the aggregate of
the annual bonuses paid or declared (whether or not paid) for
the most recent period of three (3) calendar years to end on
or before the Executive's termination of employment; and "ASP"
is the aggregate base salary actually paid to the Executive
during such period of three (3) calendar years (excluding any
year for which no bonus was declared or paid). The Bonus
Severance Payment shall be made within five (5) business days
after the Executive's termination of employment and shall be
in lieu of any claim to a continuation of participation in
annual bonus plans of the Bank or the Company which the
Executive might otherwise have.
(iv) The Bank and the Company shall make a lump sum
payment to the Executive (or, in the event of his death before
payment, to his estate), in an amount equal to the estimated
present value of the long-term incentive bonuses that the
Executive would have earned if he had continued working for
the Company and the Bank during the Remaining Unexpired
Employment Period (the "Incentive Severance Payment"). The
Incentive Severance Payment shall be computed using the
following formula:
ISP = (SSP / RUP) x (ALTIP / ALTSP) x
Y
where "ISP" is the amount of the Incentive Severance Payment
(before the deduction of applicable federal, state and local
withholding taxes); "SSP" is the amount of the Salary
Severance Payment (before the deduction of applicable federal,
state and local withholding taxes); "ALTIP" is the
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<PAGE> 10
aggregate of the most recently paid or declared (whether or
not paid) long-term incentive compensation payments (but not
more than three (3) such payments) for performance periods
that end on or before the Executive's termination of
employment; and "ALTSP" is the aggregate base salary actually
paid to the Executive during the performance periods covered
by the payments included in "ALTIP" and excluding base salary
paid for any period for which no long-term incentive
compensation payment was declared or paid; "RUP" is the
Remaining Unexpired Employment Period, expressed in years and
fractions of years; and "Y" is the aggregate (expressed in
years and fractions of years) of the Remaining Unexpired
Employment Period plus the number of years and fraction of
years that have elapsed since the end of the last performance
period for which a long-term incentive payment has been
declared and paid. The Incentive Severance Payment shall be
made within five (5) business days after the Executive's
termination of employment and shall be in lieu of any claim to
a continuation of participation in long-term incentive
compensation plans of the Bank or the Company which the
Executive might otherwise have. Notwithstanding the foregoing,
the Incentive Severance Payment shall be zero if the
Executive's termination of employment occurs at a time when he
is not covered by any long-term incentive compensation plan.
(v) The Company and the Bank shall pay to the
Executive (or in the event of his death, to his estate), 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 tax-qualified and
non-tax-qualified defined benefit plans maintained by, or
covering employees of, the Company or the Bank (the "Pension
Plans") if he had continued working for the Company and the
Bank during the Remaining Unexpired Employment Period; over
(B) the present value of the benefits to which the Executive
and his spouse and/or designated beneficiaries are actually
entitled under such plans (the "Pension Severance Payment").
The Pension Severance Payment shall be computed according to
the following formula:
PSP = PPB - APB
where "PSP" is the amount of the Pension Severance Payment
(before deductions for applicable federal, state and local
withholding taxes); "APB" is the aggregate lump sum present
value of the actual vested pension benefits payable under the
Pension Plans in the form of a straight life annuity beginning
at the earliest date permitted under the Pension Plans,
computed on the basis of the Executive's life expectancy at
the earliest date on which payments under the Pension Plans
could begin, determined by reference to Table VI of section
1.72-9 of the Income Tax Regulations (the "Assumed Life
Expectancy"), and on the basis of an interest rate
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<PAGE> 11
assumption equal to the average bond-equivalent yield on
United States Treasury Securities with a Constant Maturity of
30 Years for the month prior to the month in which the
Executive's termination of employment occurs (the "30-Year
Treasury Rate"); and "PPB" is the lump sum present value of
the pension benefits (whether or not vested) that would be
payable under the Pension Plans in the form of a straight life
annuity beginning at the earliest date permitted under the
Pension Plans, computed on the basis that the Executive's
actual age at termination of employment is his attained age as
of his last birthday that would occur during the Remaining
Unexpired Employment Period, that his service for benefit
accrual purposes under the Pension Plans is equal to the
aggregate of his actual service plus the Remaining Unexpired
Employment Period, that his average compensation figure used
in determining his accrued benefit is equal to the highest
annual rate of salary achieved by the Executive during the
period of three (3) years ending immediately prior to the date
of termination, that the Executive's life expectancy at the
earliest date on which payments under the Pension Plans could
begin is the Assumed Life Expectancy and that the interest
rate assumption used is equal to the 30-Year Treasury Rate.
The Pension Severance Payment shall be made within five (5)
business days after the Executive's termination of employment
and shall be in lieu of any claim to any actual increase in
his accrued in the Pension Plans in respect of the Remaining
Unexpired Employment Period.
(vi) The Company and the Bank shall pay to the
Executive (or in the event of his death, to his estate) a lump
sum payment in an amount equal to the present value of the
additional employer contributions that would have been
credited directly to his account(s) under any and all
tax-qualified and non-tax qualified defined contribution plans
maintained by, or covering employees of, the Bank and the
Company (the "Non-ESOP DC Plans"), plus the fair market value
of the additional shares of employer securities or other
property that would have been allocated to his account as a
result of employer contributions or dividends under any
tax-qualified leveraged employee stock ownership plan and any
related non-tax-qualified supplemental plan maintained by, or
covering employees of, the Bank and the Company (the "ESOP
Plans") if he had continued in employment during the Remaining
Unexpired Employment Period (the "Defined Contribution
Severance Payment"). The Defined Contribution Severance
Payment shall be computed according to the following formula:
DCSP = [SSP x (EC / BS)] + [(STK + PROP) x Y]
where: "DCSP" is the amount of the Defined Contribution
Severance Payment (before deductions for applicable federal,
state and local withholding taxes); "SSP" is the amount of the
Salary Severance Payment (before deductions for applicable
federal, state and local withholding taxes);
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"EC" is the amount of employer contributions actually credited
to the Executive's accounts under the Non-ESOP Plans for the
last plan year to end before his termination of employment;
"BS" is the Executive's compensation taken into account in
computing EC; "Y" is the aggregate (expressed in years and
fractions of years) of the Remaining Unexpired Employment
Period and the number of years and fractions of years that
have elapsed between the end of plan year for which EC was
computed and the date of the Executive's termination of
employment; "STK" is the fair market value (determined by the
final reported sales price for stock of the same class on the
last trading day before the Executive's termination of
employment) of the employer securities actually allocated to
the Executive's accounts under the ESOP Plans in respect of
employer contributions and dividends applied to loan
amortization payments for the last plan year to end before his
termination of employment; and "PROP" is the fair market value
(determined as of the day before the Executive's termination
of employment using the same valuation methodology used to
value the assets of the ESOP Plans) of the property other than
employer securities actually allocated to the Executive's
accounts under the ESOP Plans in respect of employer
contributions and dividends applied to loan amortization
payments for the last plan year to end before his termination
of employment.
(vii) At the election of the Company made within 30
days following the Executive's termination of employment,
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 the purpose of computing this payment, 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.
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(viii) At the election of the Company made within 30
days following the Executive's termination of employment,
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, the Company and the
Bank shall make 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 computing this payment, 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.
The payments and benefits described in section 12(b) are referred to in this
Agreement as the "Additional Termination Entitlements".
SECTION 13. RESIGNATION.
(a) The Executive may resign from his employment with the Bank
and the Company at any time. A resignation under this section 13 shall be
effected by notice of resignation given by the Executive to the Company and the
Bank and shall take effect on the later of the effective date of termination
specified in such notice or the date on which the notice of termination is
deemed given to the Executive. The Executive's resignation of any of the
positions within the Bank or the Company to which he has been assigned shall be
deemed a resignation from all such positions.
(b) The Executive's resignation shall be deemed to be for
"Good Reason" if the effective date of resignation occurs within ninety (90)
days after any of the following:
(i) the failure of the Company or the Bank (whether by act or
omission of their respective Boards of Directors, or otherwise) to
appoint or re-appoint or elect or re-elect the Executive to the
position(s) with the Company and the Bank, specified in section 3 of
this Agreement or to a more senior office;
(ii) if the Executive is or becomes a member of the Board of
Directors of the Company or the Bank, the failure of their respective
shareholders (whether in an election in which the Executive stands as a
nominee or in an election where the Executive is not a nominee) to
elect or re-elect the Executive to membership at the expiration of his
term of membership, unless such failure is a result of the Executive's
refusal to stand for election;
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(iii) a material failure by the Company or the Bank, whether
by amendment of their respective certificates of incorporation or
organization, by-laws, action of their respective Boards of Directors
or otherwise, to vest in the Executive the functions, duties, or
responsibilities prescribed in section 3 of this Agreement; provided
that the Executive shall have given notice of such failure to the
Company and the Bank, and the Company or the Bank have not fully cured
such failure within thirty (30) days after such notice is deemed given;
(iv) any reduction of the Executive's rate of base salary in
effect from time to time, whether or not material, or any failure
(other than due to reasonable administrative error that is cured
promptly upon notice) to pay any portion of the Executive's
compensation as and when due;
(v) 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 package;
provided that the Executive shall have given notice of such material
adverse effect to the Company and the Bank, and the Company or the Bank
have not fully cured such failure within thirty (30) days after such
notice is deemed given;
(vi) any material breach by the Company or the Bank of any
material term, condition or covenant contained in this Agreement;
provided that the Executive shall have given notice of such material
adverse effect to the Company and the Bank, and the Company or the Bank
have not fully cured such failure within thirty (30) days after such
notice is deemed given; or
(vii) a change in the Executive's principal place of
employment to a place that is not the principal executive office of the
Bank, or a relocation of the Bank's principal executive office to a
location that is both more than twenty-five (25) miles away from the
Executive's principal residence and more than twenty-five (25) miles
away from the location of the Bank's principal executive office on the
date of this Agreement.
In all other cases, a resignation by the Executive shall be deemed to be without
Good Reason.
(c) In the event of the Executive's resignation before the
expiration of the Employment Period, the Company and the Bank shall pay and
deliver the Standard Termination Entitlements. In addition, if the Executive's
resignation is deemed to be a resignation with Good Reason, the Company and the
Bank shall also pay and deliver the Additional Termination Entitlements.
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SECTION 14. TERMS AND CONDITIONS OF THE ADDITIONAL TERMINATION
ENTITLEMENTS.
The Company, the Bank and the Executive hereby stipulate that
the damages which may be incurred by the Executive following any termination of
employment are not capable of accurate measurement as of the date first above
written and that the Additional Termination Entitlements 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, the Bank and the Executive further agree that the
Company and the Bank may condition the payment and delivery of the Additional
Termination Entitlements 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 15. TERMINATION UPON OR FOLLOWING A CHANGE OF CONTROL.
(a) A "Change of Control" shall be deemed to have occurred
upon the happening of any of the following events:
(i) the consummation of a reorganization, merger or
consolidation of the Company 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
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<PAGE> 16
entitled to vote generally in the election of directors by any person
or by any persons acting in concert;
(iii) a complete liquidation or dissolution of the Company;
(iv) the occurrence of any event if, immediately following
such event, at least 50% of the members of the Board of Directors of
the Company do not belong to any of the following groups:
(A) individuals who were members of the Board of
Directors of the Company on the date of this Agreement; or
(B) individuals who first became members of the Board of
Directors of the Company after the date of this Agreement
either:
(1) upon election to serve as a member of the Board
of Directors 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
(2) upon election by the shareholders of the Board of
Directors of the Company to serve as a member of such
board, but only if nominated for election by affirmative
vote of three-quarters of the members of the Board of
Directors 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 Directors of the Company; or
(v) any event which would be described in section 15(a)(i),
(ii), (iii) or (iv) if the term "Bank" were substituted for the term
"Company" therein.
In no event, however, shall a Change of Control be deemed to have occurred as a
result of any acquisition of securities or assets of the Company, the Bank, or a
subsidiary of either of them, by the Company, the Bank, or any subsidiary of
either of them, or by any employee benefit plan maintained by any of them. For
purposes of this section 15(a), the term "person" shall have the meaning
assigned to it under sections 13(d)(3) or 14(d)(2) of the Exchange Act.
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<PAGE> 17
(b) For purposes of this Agreement, a "Pending Change of
Control" shall mean: (i) the signing of a definitive agreement for a transaction
which, if consummated, would result in a Change of Control; (ii) the
commencement of a tender offer which, if successful, would result in a Change of
Control; or (iii) the circulation of a proxy statement seeking proxies in
opposition to management in an election contest which, if successful, would
result in a Change of Control.
(c) Notwithstanding anything in this Agreement to the
contrary, if the Executive's employment with the Bank and the Company terminates
due to death or disability within one (1) year after the occurrence of a Pending
Change of Control and if a Change of Control occurs within two (2) years after
such termination of employment, he (or in the event of his death, his estate)
shall be entitled to receive the Standard Termination Entitlements and the
Additional Termination Entitlements that would have been payable if a Change of
Control had occurred on the date of his termination of employment and he had
resigned with Good Reason immediately thereafter; provided, that payment shall
be deferred without interest until, and shall be payable immediately upon, the
actual occurrence of a Change of Control.
(d) Notwithstanding anything in this Agreement to the
contrary: (i) in the event of the Executive's resignation within sixty (60) days
after the occurrence of a Change of Control, he shall be entitled to receive the
Standard Termination Entitlements and Additional Termination Entitlements that
would be payable if his resignation were a resignation for Good Reason, without
regard to the actual circumstances of his resignation; and (ii) for a period of
one (1) year after the occurrence of a Change of Control, no discharge of the
Executive shall be deemed a discharge with Cause unless the votes contemplated
by section 11(a) of this Agreement are supported by at least two-thirds of the
members of the Board of Directors of the Company and the Bank at the time the
vote is taken who were also members of the Board of Directors of the Company and
the Bank immediately prior to the Change of Control.
(e) Notwithstanding anything in this Agreement to the
contrary, for purposes of computing the Additional Termination Entitlements due
upon a termination of employment that occurs, or is deemed to have occurred,
after a Change of Control, the Remaining Unexpired Employment Period shall be
deemed to be three (3) full years.
SECTION 16. TAX INDEMNIFICATION.
(a) If the Executive's employment terminates under
circumstances entitling him (or in the event of his death, his estate) to the
Additional Termination Entitlements, the Company shall pay to the Executive (or
in the event of his death, his estate) an additional amount intended to
indemnify him against the financial effects of the excise tax imposed on excess
parachute payments under section 280G of the Code (the "Tax Indemnity Payment").
The Tax Indemnity Payment shall be determined under the following formula:
E x P
X = ------------------------------------
1 - [(FI x (1 - SLI)) + SLI + E + M]
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<PAGE> 18
where
E = the percentage rate at which an 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
16;
FI = the highest marginal rate of income tax applicable to
the Executive under the Code for the taxable year in
question;
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.
Such computation shall be made at the expense of the Company by an attorney or a
firm of independent certified public accountants selected by the Executive and
reasonably satisfactory to the Company (the "Tax Advisor") and shall be based on
the following assumptions: (i) that a change in ownership, a change in effective
ownership or control, or a change in the ownership of a substantial portion of
the assets, of the Bank or the Company has occurred within the meaning of
section 280G of the Code (a "280G Change of Control"); (ii) that all direct or
indirect payments made to or benefits conferred upon the Executive on account of
his termination of employment are "parachute payments" within the meaning of
section 280G of the Code; and (iii) that no portion of such payments is
reasonable compensation for services rendered prior to the Executive's
termination of employment.
(b) With respect to any payment that is presumed to be a
parachute payment for purposes of section 280G of the Code, the Tax Indemnity
Payment shall be made to the Executive on the earlier of 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 the date the tax is required to be paid
by the Executive, unless, prior to such date, the Company delivers to the
Executive the written opinion, in form and substance reasonably satisfactory to
the Executive, of the Tax Advisor or of an attorney or firm of independent
certified public accountants selected by the Company and reasonably satisfactory
to the Executive, to the effect that the Executive has a reasonable basis on
which to conclude that (i) no 280G Change in Control has occurred, or (ii) all
or part of the payment or benefit in question is not a parachute payment for
purposes of section 280G of the Code, or (iii) all or a part of such payment or
benefit constitutes reasonable compensation for services rendered prior to the
280G Change of Control, or (iv) for some other reason which shall be set forth
in detail in such letter, no excise tax is due under section 4999 of the Code
with respect to such payment or benefit (the "Opinion Letter"). If the Company
delivers an Opinion Letter, the Tax Advisor shall recompute, and the Company
shall make, the Tax Indemnity Payment in reliance on the information contained
in the Opinion Letter.
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<PAGE> 19
(c) 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 with respect to which the Tax Indemnity Payment
is made, 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 16(b), when increased by the amount of the payment made to the
Executive under this section 16(c), or when reduced by the amount of the payment
made to the Company under this section 16(c), equals the amount that should have
properly been paid to the Executive under section 16(a). The interest paid to
the Company under this section 16(c) shall be determined at the rate provided
under section 1274(b)(2)(B) of the Code. The payment made to the Executive shall
include such amount of interest as is necessary to satisfy any interest
assessment made by the Internal Revenue Service and an additional amount equal
to any monetary penalties assessed by the Internal Revenue Service on account of
an underpayment of the excise tax. To confirm that the proper amount, if any,
was paid to the Executive under this section 16, the Executive shall furnish to
the Company a copy of each tax return which reflects a liability for an excise
tax, at least 20 days before the date on which such return is required to be
filed with the Internal Revenue Service. Nothing in this Agreement shall give
the Company any right to control or otherwise participate in any action, suit or
proceeding to which the Executive is a party as a result of positions taken on
his federal income tax return with respect to his liability for excise taxes
under section 4999 of the Code.
SECTION 17. 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 or the Bank, 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
any city or county in the State of New Jersey or any other county in which the
Company or the Bank maintains an office; provided, however, that this section 17
shall not apply if the Executive is entitled to the Additional Termination
Entitlements.
SECTION 18. 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 18
shall prevent the Executive, with or without the Company's consent, from
participating in or disclosing documents
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<PAGE> 20
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 19. SOLICITATION.
The Executive hereby covenants and agrees that, for a period
of one year following his termination of employment with the Company or 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 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 counties specified in section 17;
(b) provide any information, advice or recommendation with
respect to any such officer or employee of 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 counties
specified in section 17; 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 counties
specified in section 17;
(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 to terminate an existing business or commercial
relationship with the Company.
SECTION 20. 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 dis-
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<PAGE> 21
ability insurance 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 21. 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 22. 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:
[Executive name and address]
If to the Company or the Bank:
Hudson City Bancorp, Inc.
West 80 Century Road
Paramus, New Jersey 07652-1473
Attention: Chairman, Human Resources Committee
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<PAGE> 22
with a copy to:
Thacher Proffitt & Wood
Two World Trade Center
New York, New York 10048
Attention: W. Edward Bright, Esq.
SECTION 23. 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
(including any tax controversy) 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. Unless it is determined
that the Executive has acted frivolously or in bad faith, the Company shall pay
as incurred, to the full extent permitted by law, all legal fees and expenses
which the Executive may reasonably incur as a result of or in connection with
his consultation with legal counsel or arising out of any action, suit,
proceeding, tax controversy or contest (regardless of the outcome thereof) by
the Company, the Executive or others regarding the validity or enforceability
of, or liability under, any provision of this Agreement or any guarantee of
performance thereof (including as a result of any contest by the Executive about
the amount of any payment pursuant to this Agreement), plus in each case
interest on any delayed payment at the applicable Federal rate provided for in
section 7872(f)(2)(A) of the Code. This section 23(b) shall apply whether such
consultation, action, suit, proceeding or contest arises before, on, after or as
a result of a Change of Control.
SECTION 24. 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.
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<PAGE> 23
SECTION 25. 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 26. 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 27. 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 Jersey applicable to contracts entered into and to be performed
entirely within the State of New Jersey.
SECTION 28. 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 29. 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 30. 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.
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<PAGE> 24
SECTION 31. RELATIVE OBLIGATIONS OF THE BANK AND THE COMPANY.
The Company shall, with respect to the Executive's services
hereunder and the compensation therefor and with respect to any termination of
the Executive's employment, have all of the obligations imposed on the Bank
under this Agreement to the same extent as though the name of the Company were
substituted for the name of the Bank herein and the Executive shall, with
respect to the services hereunder and the compensation therefor and with respect
to any termination of the Executive's employment, have all of the rights,
privileges and duties relative to the Company as though the name of the Company
were substituted for the name of the Bank herein. If the Executive performs
services for both the Bank and the Company, any entitlement of the Executive to
severance compensation and other termination benefits under this Agreement shall
be determined on the basis of the aggregate compensation payable to the
Executive by the Bank and the Company, and liability therefor shall be
apportioned between the Bank and the Company in the same manner as compensation
paid to the Executive for services to each of them; provided, however, that the
Company shall be jointly and severally liable with the Bank for all obligations
of the Bank under this Agreement; and provided, further, that in no event shall
the Bank bear any liability for actions of, or obligations undertaken by, the
Company under this Agreement. It is the intent and purpose of this section 31
that the Executive have the same legal and economic rights that he would have if
all of his services were rendered to and all of his compensation were paid by
the Company. This section 31 shall be construed and enforced to give effect to
such intent and purpose.
SECTION 32. REQUIRED REGULATORY PROVISIONS.
Notwithstanding anything herein contained to the contrary, any
payments to the Executive by the Company or the Bank, 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.
Section 1828(k), and any regulations promulgated thereunder.
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<PAGE> 25
IN WITNESS WHEREOF, the Bank and the Company have 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 NAME]
HUDSON CITY SAVINGS BANK
Attest:
By By
---------------------------------- ------------------------------
Name: Name:
Title: Title:
[Seal]
HUDSON CITY BANCORP, INC.
Attest:
By By
---------------------------------- ------------------------------
Name: Name:
Title: Title:
[Seal]
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<PAGE> 1
EXHIBIT 10.6
ONE-YEAR CHANGE OF CONTROL AGREEMENT
This CHANGE OF CONTROL AGREEMENT (the "Agreement") is made and
entered into as of [______________], 1999 by and among HUDSON CITY SAVINGS BANK,
a savings bank organized and operating under the laws of the State of New Jersey
and having an office at West 80 Century Road, Paramus, New Jersey 07652-1473
(the "Bank"), HUDSON CITY BANCORP, INC., a business corporation organized and
existing under the laws of the State of Delaware and having an office at West 80
Century Road, Paramus, New Jersey 07652-1473 (the "Company") and
[________________], an individual residing at [______________________] (the
"Officer").
INTRODUCTORY STATEMENT
The Bank is undertaking a reorganization through which it will
convert from a mutual savings bank to a stock savings bank and become a wholly
owned subsidiary of the Company, and the Company will become a majority-owned
subsidiary of Hudson City, MHC, a New Jersey mutual holding company (the
"Reorganization"). At the same time, the Company will sell less than fifty
percent (50%) of its outstanding common stock to the public in an initial public
offering. The Officer has served the Bank as an officer and is familiar with the
Bank's operations.
The Board of Managers of the Bank and the Board of Directors
of the Company have concluded that it is in the best interests of the Bank, the
Company and their prospective shareholders to establish a working environment
for the Officer which minimizes the personal distractions that might result from
possible business combinations in which the Company or the Bank might be
involved following the Reorganization. To this end, the Bank and the Company
have decided to provide the Officer with assurance that his compensation will be
continued for a minimum period of one (1) year following termination of
employment (the "Assurance Period") if his employment terminates under specified
circumstances related to a business combination. The Board of Managers of the
Bank and the Board of Directors of the Company have decided to formalize this
assurance by entering into this Change of Control Agreement with the Officer.
The terms and conditions which the Bank, the Company and the
Officer have agreed to are as follows.
AGREEMENT
SECTION 1. EFFECTIVE DATE; TERM; CHANGE OF CONTROL AND PENDING
CHANGE OF CONTROL DEFINED.
(a) This Agreement shall take effect on the effective date of
the Reorganization (the "Effective Date") and shall be in effect during the
period (the "Term") beginning on the Effective Date of the Reorganization and
ending on the first anniversary of the date on which the Bank notifies the
Executive of its intent to discontinue the Agreement (the "Initial Expiration
Date") or, if later, the first anniversary of the latest Change of Control or
Pending Change of Control, as defined below, that occurs after the Effective
Date and before the Initial Expiration Date.
<PAGE> 2
(b) For all purposes of this Agreement, a "Change of Control"
shall be deemed to have occurred upon the happening of any of the following
events:
(i) the consummation of a reorganization, merger or
consolidation of the Company 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;
(iii) a complete liquidation or dissolution of the Company;
(iv) the occurrence of any event if, immediately following
such event, at least 50% of the members of the Board of Directors of
the Company do not belong to any of the following groups:
(A) individuals who were members of the Board of
Directors of the Company on the date of this Agreement; or
(B) individuals who first became members of the Board
of Directors of the Company after the date of this Agreement
either:
(1) upon election to serve as a member of
the Board of Directors 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
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<PAGE> 3
(2) upon election by the shareholders of the
Board of Directors of the Company to serve as a
member of such board, but only if nominated for
election by affirmative vote of three-quarters of the
members of the Board of Directors 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 Directors of the Company; or
(v) any event which would be described in section 1(b)(i),
(ii), (iii) or (iv) if the term "Bank" were substituted for the term
"Company" therein.
In no event, however, shall a Change of Control be deemed to have occurred as a
result of any acquisition of securities or assets of the Company, the Bank, or a
subsidiary of either of them, by the Company, the Bank, or any subsidiary of
either of them, or by any employee benefit plan maintained by any of them. For
purposes of this section 1(b), the term "person" shall have the meaning assigned
to it under sections 13(d)(3) or 14(d)(2) of the Exchange Act.
(c) For purposes of this Agreement, a "Pending Change of
Control" shall mean: (i) the signing of a definitive agreement for a transaction
which, if consummated, would result in a Change of Control; (ii) the
commencement of a tender offer which, if successful, would result in a Change of
Control; or (iii) the circulation of a proxy statement seeking proxies in
opposition to management in an election contest which, if successful, would
result in a Change of Control.
SECTION 2. DISCHARGE PRIOR TO A PENDING CHANGE OF CONTROL.
The Bank may discharge the Officer at any time prior to the
occurrence of a Pending Change of Control for any reason or for no reason. In
such event:
(a) The Bank shall pay to the Officer's estate his earned but
unpaid compensation (including, without limitation, salary and all
other items which constitute wages under applicable law) as of the date
of his termination of employment. This payment shall 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 the date of the
Officer's termination of employment.
(b) The Bank shall provide the benefits, if any, due to the
Officer's estate, surviving dependents or his designated beneficiaries
under the employee benefit plans and programs and compensation plans
and programs maintained for the benefit of the officers and employees
of the Bank. The time and manner of payment or
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other delivery of these benefits and the recipients of such benefits
shall be determined according to the terms and conditions of the
applicable plans and programs.
The payments and benefits described in sections 2(a) and (b) shall be referred
to in this Agreement as the "Standard Termination Entitlements."
SECTION 3. TERMINATION OF EMPLOYMENT DUE TO DEATH.
The Officer's employment with the Bank shall terminate,
automatically and without any further action on the part of any party to this
Agreement, on the date of the Officer's death. In such event, the Bank shall pay
and deliver to the Officer (and, in the event of his death before payment, to
his estate and surviving dependents and beneficiaries, as applicable) the
Standard Termination Entitlements.
SECTION 4. TERMINATION DUE TO DISABILITY AFTER CHANGE OF
CONTROL OR PENDING CHANGE OF CONTROL.
The Bank may terminate the Officer's employment during the
Term and after the occurrence of a Change of Control or a Pending Change of
Control upon a determination, by a majority vote of the members of the Board of
Directors of the Bank, acting in reliance on the written advice of a medical
professional acceptable to it, that the Officer is suffering from a physical or
mental impairment which, at the date of the determination, has prevented the
Officer from performing his assigned duties on a substantially full-time basis
for a period of at least one hundred and eighty (180) days during the period of
one (1) year ending with the date of the determination or is likely to result in
death or prevent the Officer from performing his assigned duties on a
substantially full-time basis for a period of at least one hundred and eighty
(180) days during the period of one (1) year beginning with the date of the
determination. In such event:
(a) The Bank shall pay and deliver to the Officer (or in the
event of his death before payment, to his estate and surviving
dependents and beneficiaries, as applicable) the Standard Termination
Entitlements.
(b) In addition to the Standard Termination Entitlements, the
Bank shall continue to pay the Officer his base salary, at the annual
rate in effect for him immediately prior to the termination of his
employment, during a period ending on the earliest of: (i) the
expiration of one hundred and eighty (180) days after the date of
termination of his employment; (ii) the date on which long-term
disability insurance benefits are first payable to him under any
long-term disability insurance plan covering employees of the Bank (the
"LTD Eligibility Date"); (iii) the date of his death; and (iv) the
expiration of the Assurance Period (the "Initial Continuation Period").
If the end of the Initial Continuation Period is neither the LTD
Eligibility Date nor the date of his death, the Bank shall continue to
pay the Officer his base salary, at an annual rate equal to sixty
percent (60%) of the annual rate in effect for him immediately prior to
the termination of his employment, during an additional
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period ending on the earliest of the LTD Eligibility Date, the date of
his death and the expiration of the Assurance Period.
A termination of employment due to disability under this section 4 shall be
effected by a notice of termination given to the Officer by the Bank and shall
take effect on the later of the effective date of termination specified in such
notice or the date on which the notice of termination is deemed given to the
Officer.
SECTION 5. DISCHARGE WITH CAUSE AFTER CHANGE OF CONTROL OR
PENDING CHANGE OF CONTROL.
(a) The Bank may terminate the Officer's employment with
"Cause" during the Term and after the occurrence of a Change of Control or
Pending Change of Control, but a termination shall be deemed to have occurred
with "Cause" only if:
(i) the Board of Directors of the Bank, by majority vote of
its entire membership, determine that the Officer (A) has willfully and
intentionally failed to perform his assigned duties under this
Agreement in any material respect (including, for these purposes, the
Officer's inability to perform such duties as a result of drug or
alcohol dependency); (B) has willfully and intentionally engaged in
dishonest or illegal conduct in connection with his performance of
services for the Bank or has been convicted of a felony; (C) 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 Bank; or (D) has willfully and
intentionally breached the material terms of this Agreement in any
material respect; and
(ii) at least forty-five (45) days prior to the vote
contemplated by section 1(b)(i), the Bank has provided the Officer with
notice of its intent to discharge the Officer for Cause, detailing with
particularity the facts and circumstances which are alleged to
constitute Cause (the "Notice of Intent to Discharge"); and
(iii) after the giving of the Notice of Intent to Discharge
and before the taking of the vote contemplated by section 5(a)(i), the
Officer (together with his legal counsel, if he so desires) is afforded
a reasonable opportunity to make both written and oral presentations
before the Board of Directors of the Bank for the purpose of refuting
the alleged grounds for Cause for his discharge; and
(iv) after the vote contemplated by section 5(a)(i), the Bank
has furnished to the Officer a notice of termination which shall
specify the effective date of his termination of employment (which
shall in no event be earlier than the date on which such notice is
deemed given) and include a copy of a resolution or resolutions adopted
by the Board of Directors of the Bank, certified by its corporate
secretary and signed by each member of the Board of Directors voting in
favor of adoption of the resolution(s), authorizing the termination of
the Officer's employment with Cause and stating with particularity the
facts and circumstances found to constitute Cause for his discharge
(the "Final Discharge Notice").
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<PAGE> 6
For purposes of this section 5, no act or failure to act, on the part of the
Officer, shall be considered "willful" unless it is done, or omitted to be done,
by the Officer in bad faith or without reasonable belief that the Officer's
action or omission was in the best interests of the Bank. Any act, or failure to
act, based upon authority given pursuant to a resolution duly adopted by the
Board of Directors of the Bank or based upon the written advice of counsel for
the Bank shall be conclusively presumed to be done, or omitted to be done, by
the Officer in good faith and in the best interests of the Bank.
(b) If the Officer is discharged with Cause during the Term
and after a Change of Control or Pending Change of Control, the Bank shall pay
and provide to him (or, in the event of his death, to his estate, his surviving
beneficiaries and his dependents) the Standard Termination Entitlements only.
Following the giving of a Notice of Intent to Discharge, the Bank may
temporarily suspend the Officer's duties and authority and, in such event, may
also suspend the payment of salary and other cash compensation, but not the
Officer's participation in retirement, insurance and other employee benefit
plans. If the Officer is not discharged, or is discharged without Cause, within
forty-five (45) days after the giving of a Notice of Intent to Discharge,
payments of salary and cash compensation shall resume, and all payments withheld
during the period of suspension shall be promptly restored. If the Officer is
discharged with Cause not later than forty-five (45) days after the giving of
the Notice of Intent to Discharge, all payments withheld during the period of
suspension shall be deemed forfeited and shall not be included in the Standard
Termination Entitlements. If a Final Discharge Notice is given later than
forty-five (45) days, but sooner than ninety (90) days, after the giving of the
Notice of Intent to Discharge, all payments made to the Officer during the
period beginning with the giving of the Notice of Intent to Discharge and ending
with the Officer's discharge with Cause shall be retained by the Officer and
shall not be applied to offset the Standard Termination Entitlements. If the
Bank does not give a Final Discharge Notice to the Officer within ninety (90)
days after giving a Notice of Intent to Discharge, the Notice of Intent to
Discharge shall be deemed withdrawn and any future action to discharge the
Officer with Cause shall require the giving of a new Notice of Intent to
Discharge.
SECTION 6. DISCHARGE WITHOUT CAUSE.
The Bank may discharge the Officer without Cause at any time
after the occurrence of a Change of Control or Pending Change of Control, and in
such event:
(a) The Bank shall pay and deliver to the Officer (or in the
event of his death before payment, to his estate and surviving
dependents and beneficiaries, as applicable) the Standard Termination
Entitlements.
(b) In addition to the Standard Termination Entitlements:
(i) During the Assurance Period, the Bank shall
provide for the Officer and his dependents continued group
life, health (including hospitalization, medical and major
medical), dental, accident and long-term disability insurance
benefits on substantially the same terms and conditions
(including any required premium-sharing arrangements,
co-payments and deductibles) in effect for them immediately
prior to the Officer's resignation. The coverage provided
under this section 6(b)(i) may, at the election of the Bank,
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<PAGE> 7
be secondary to the coverage provided as part of the Standard
Termination Entitlements and to any employer-paid coverage
provided by a subsequent employer or through Medicare, with
the result that benefits under the other coverages will offset
the coverage required by this section 6(b)(i).
(ii) The Bank shall make a lump sum payment to the
Officer (or, in the event of his death before payment, to his
estate), in an amount equal to the estimated present value of
the salary that the Officer would have earned if he had
continued working for the Bank during the Assurance Period at
the highest annual rate of salary achieved during the period
of three (3) years ending immediately prior to the date of
termination (the "Salary Severance Payment"). The Salary
Severance Payment shall be computed using the following
formula:
(n) (BS/PR)
SSP= (Sigma) [---------------------------]
(1) [1 + (I / PR)](n)
where "SSP" is the amount of the Salary Severance Payment
(before the deduction of applicable federal, state and local
withholding taxes); "BS" is the highest annual rate of salary
achieved by the Officer during the period of three (3) years
ending immediately prior to the date of termination; "PR" is
the number of payroll periods that occur during a year under
the Bank's normal payroll practices; "I" equals the applicable
federal short term rate established under section 1274 of the
Internal Revenue Code of 1986 (the "Code") for the month in
which the Officer's termination of employment occurs (the
"Short Term AFR") and "n" equals the product of the Assurance
Period at the Officer's termination of employment (expressed
in years and fractions of years) multiplied by the number of
payroll periods that occur during a year under the Bank's
normal payroll practices. The Salary Severance Payment shall
be made within five (5) business days after the Officer's
termination of employment and shall be in lieu of any claim to
a continuation of base salary which the Officer might
otherwise have and in lieu of cash severance benefits under
any severance benefits program which may be in effect for
officers or employees of the Bank.
(iii) The Bank shall make a lump sum payment to the
Officer (or, in the event of his death before payment, to his
estate), in an amount equal to the estimated present value of
the annual bonuses that the Officer would have earned if he
had continued working for the Bank during the Assurance Period
at the highest annual rate of salary achieved during the
period of three (3) years ending immediately prior to the date
of termination (the "Bonus Severance Payment"). The Bonus
Severance Payment shall be computed using the following
formula:
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<PAGE> 8
BSP = SSP x (ABP / ASP)
where "BSP" is the amount of the Bonus Severance Payment
(before the deduction of applicable federal, state and local
withholding taxes); "SSP" is the amount of the Salary
Severance Payment (before the deduction of applicable federal,
state and local withholding taxes); "ABP" is the aggregate of
the annual bonuses paid or declared (whether or not paid) for
the most recent period of three (3) calendar years to end on
or before the Officer's termination of employment; and "ASP"
is the aggregate base salary actually paid to the Officer
during such period of three (3) calendar years (excluding any
year for which no bonus was declared or paid). The Bonus
Severance Payment shall be made within five (5) business days
after the Officer's termination of employment and shall be in
lieu of any claim to a continuation of participation in annual
bonus plans of the Bank which the Officer might otherwise
have.
(iv) The Bank shall make a lump sum payment to the
Officer (or, in the event of his death before payment, to his
estate), in an amount equal to the estimated present value of
the long-term incentive bonuses that the Officer would have
earned if he had continued working for the Bank during the
Assurance Period (the "Incentive Severance Payment"). The
Incentive Severance Payment shall be computed using the
following formula:
ISP = (SSP / RAP) x (ALTIP / ALTSP) x Y
where "ISP" is the amount of the Incentive Severance Payment
(before the deduction of applicable federal, state and local
withholding taxes); "SSP" is the amount of the Salary
Severance Payment (before the deduction of applicable federal,
state and local withholding taxes); "ALTIP" is the aggregate
of the most recently paid or declared (whether or not paid)
long-term incentive compensation payments (but not more than
three (3) such payments) for performance periods that end on
or before the Officer's termination of employment; and "ALTSP"
is the aggregate base salary actually paid to the Officer
during the performance periods covered by the payments
included in "ALTIP" and excluding base salary paid for any
period for which no long-term incentive compensation payment
was declared or paid; "RAP" is the Assurance Period, expressed
in years and fractions of years; and "Y" is the aggregate
(expressed in years and fractions of years) of the Assurance
Period plus the number of years and fraction of years that
have elapsed since the end of the last performance period for
which a long-term incentive payment has been declared and
paid. The Incentive Severance Payment shall be made within
five (5) business days after the Officer's termination of
employment and shall be in lieu of any claim to a continuation
of participation in long-term incentive compensation plans of
the Bank which
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<PAGE> 9
the Officer might otherwise have. Notwithstanding the
foregoing, the Incentive Severance Payment shall be zero if
the Officer's termination of employment occurs at a time when
he is not covered by any long-term incentive compensation
plan.
(v) The Bank shall pay to the Officer (or in the
event of his death, to his estate), 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 tax-qualified and non-tax-qualified defined
benefit plans maintained by, or covering employees of, the
Bank (the "Pension Plans") if he had continued working for the
Bank during the Assurance Period; over (B) the present value
of the benefits to which the Officer and his spouse and/or
designated beneficiaries are actually entitled under such
plans (the "Pension Severance Payment"). The Pension Severance
Payment shall be computed according to the following formula:
PSP = PPB - APB
where "PSP" is the amount of the Pension Severance Payment
(before deductions for applicable federal, state and local
withholding taxes); "APB" is the aggregate lump sum present
value of the actual vested pension benefits payable under the
Pension Plans in the form of a straight life annuity beginning
at the earliest date permitted under the Pension Plans,
computed on the basis of the Officer's life expectancy at the
earliest date on which payments under the Pension Plans could
begin, determined by reference to Table VI of section 1.72-9
of the Income Tax Regulations (the "Assumed Life Expectancy"),
and on the basis of an interest rate assumption equal to the
average bond-equivalent yield on United States Treasury
Securities with a Constant Maturity of 30 Years for the month
prior to the month in which the Officer's termination of
employment occurs (the "30-Year Treasury Rate"); and "PPB" is
the lump sum present value of the pension benefits (whether or
not vested) that would be payable under the Pension Plans in
the form of a straight life annuity beginning at the earliest
date permitted under the Pension Plans, computed on the basis
that the Officer's actual age at termination of employment is
his attained age as of his last birthday that would occur
during the Assurance Period, that his service for benefit
accrual purposes under the Pension Plans is equal to the
aggregate of his actual service plus the Assurance Period,
that his average compensation figure used in determining
his accrued benefit is equal to the highest annual rate of
salary achieved by the Officer during the period of three (3)
years ending immediately prior to the date of termination,
that the Officer's life expectancy at the earliest date on
which payments under the Pension Plans could begin is the
Assumed Life Expectancy and that the interest rate assumption
used is equal to the 30-Year Treasury Rate. The Pension
Severance Payment shall be made within five (5) business days
after the Officer's termination of employment and shall be in
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lieu of any claim to any actual increase in his accrued
benefit in the Pension Plans in respect of the Assurance
Period.
(vi) The Bank shall pay to the Officer (or in the
event of his death, to his estate) a lump sum payment in an
amount equal to the present value of the additional employer
contributions that would have been credited directly to his
account(s) under any and all tax-qualified and non-tax
qualified defined contribution plans maintained by, or
covering employees of, the Bank (the "Non-ESOP DC Plans"),
plus the fair market value of the additional shares of
employer securities or other property that would have been
allocated to his account as a result of employer contributions
under any tax-qualified leveraged employee stock ownership
plan and any related non-tax-qualified supplemental plan
maintained by, or covering employees of, the Bank (the "ESOP
Plans") if he had continued in employment during the Assurance
Period (the "Defined Contribution Severance Payment"). The
Defined Contribution Severance Payment shall be computed
according to the following formula:
DCSP = [SSP x (EC / BS)] + [(STK + PROP) x Y]
where: "DCSP" is the amount of the Defined Contribution
Severance Payment (before deductions for applicable federal,
state and local withholding taxes); "SSP" is the amount of the
Salary Severance Payment (before deductions for applicable
federal, state and local withholding taxes); "EC" is the
amount of employer contributions actually credited to the
Officer's accounts under the Non-ESOP Plans for the last plan
year to end before his termination of employment; "BS" is the
Officer's compensation taken into account in computing EC; "Y"
is the aggregate (expressed in years and fractions of years)
of the Assurance Period and the number of years and fractions
of years that have elapsed between the end of plan year for
which EC was computed and the date of the Officer's
termination of employment; "STK" is the fair market value
(determined by the final reported sales price for stock of the
same class on the last trading day before the Officer's
termination of employment) of the employer securities actually
allocated to the Officer's accounts under the ESOP Plans in
respect of employer contributions and dividends applied to
loan amortization payments for the last plan year to end
before his termination of employment; and "PROP" is the fair
market value (determined as of the day before the Officer's
termination of employment using the same valuation methodology
used to value the assets of the ESOP Plans) of the property
other than employer securities actually allocated to the
Officer's accounts under the ESOP Plans in respect of employer
contributions and dividends applied to loan amortization
payments for the last plan year to end before his termination
of employment.
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<PAGE> 11
(vii) At the election of the Bank made within 30 days
following the Officer's termination of employment, upon the
surrender of options or appreciation rights issued to the
Officer under any stock option and appreciation rights plan or
program maintained by, or covering employees of, 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 the purpose of computing this payment, the Officer 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 Bank, even if he
is not vested under such plan or program.
(viii) At the election of the Bank made within 30
days following the Officer's termination of employment, upon
the surrender of any shares awarded to the Officer under any
restricted stock plan maintained by, or covering employees of,
the Bank, the Bank shall make 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 Officer's
termination of employment; multiplied by
(B) the number of shares which are being
surrendered.
For purposes of computing this payment, the Officer shall be
deemed fully vested in all shares awarded under any restricted
stock plan maintained by, or covering employees of, the Bank,
even if he is not vested under such plan.
The payments and benefits described in section 6(b) are referred to in this
Agreement as the "Additional Change of Control Entitlements".
SECTION 7. RESIGNATION.
(a) The Officer may resign from his employment with the Bank
at any time. A resignation under this section 7 shall be effected by notice of
resignation given by the Officer to the Bank and shall take effect on the later
of the effective date of termination specified in such notice or the date on
which the notice of termination is deemed given to the Officer. The Officer's
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resignation of any of the positions within the Bank or the Company to which he
has been assigned shall be deemed a resignation from all such positions.
(b) The Officer's resignation shall be deemed to be for "Good
Reason" if the effective date of resignation occurs during the Term, but on or
after the effective date of a Change of Control, and is on account of:
(i) the failure of the Bank (whether by act or omission of the
Board of Directors, or otherwise) to appoint or re-appoint or elect or
re-elect the Officer to the position with Bank that he held immediately
prior to the Change of Control (the "Assigned Office") or to a more
senior office;
(ii) if the Officer is or becomes a member of the Board of
Directors of the Bank, the failure of the shareholders of the Bank
(whether in an election in which the Officer stands as a nominee or in
an election where the Officer is not a nominee) to elect or re-elect
the Officer to membership at the expiration of his term of membership,
unless such failure is a result of the Officer's refusal to stand for
election;
(iii) a material failure by the Bank, whether by amendment of
the certificate of incorporation or organization, by-laws, action of
the Board of Directors of the Bank or otherwise, to vest in the Officer
the functions, duties, or responsibilities customarily associated with
the Assigned Office; provided that the Officer shall have given notice
of such failure to the Bank, and the Bank has not fully cured such
failure within thirty (30) days after such notice is deemed given;
(iv) any reduction of the Officer's rate of base salary in
effect from time to time, whether or not material, or any failure
(other than due to reasonable administrative error that is cured
promptly upon notice) to pay any portion of the Officer's compensation
as and when due;
(v) any change in the terms and conditions of any compensation
or benefit program in which the Officer participates which, either
individually or together with other changes, has a material adverse
effect on the aggregate value of his total compensation package;
provided that the Officer shall have given notice of such material
adverse effect to the Bank, and the Bank has not fully cured such
failure within thirty (30) days after such notice is deemed given;
(vi) any material breach by the Company or the Bank of any
material term, condition or covenant contained in this Agreement;
provided that the Officer shall have given notice of such material
adverse effect to the Company and the Bank, and
the Company or the Bank have not fully cured such failure within thirty
(30) days after such notice is deemed given; or
(vii) a change in the Officer's principal place of employment
to a place that is not the principal executive office of the Bank, or a
relocation of the Bank's
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<PAGE> 13
principal executive office to a location that is both more than
twenty-five (25) miles away from the Officer's principal residence and
more than twenty-five (25) miles away from the location of the Bank's
principal executive office on the day before the occurrence of the
Change of Control.
In all other cases, a resignation by the Officer shall be deemed to be without
Good Reason. In the event of resignation, the Officer shall state in his notice
of resignation whether he considers his resignation to be a resignation with
Good Reason, and if he does, he shall state in such notice the grounds which
constitute Good Reason. The Officer's determination of the existence of Good
Reason shall be conclusive in the absence of fraud, bad faith or manifest error.
(c) In the event of the Officer's resignation for any reason,
the Bank shall pay and deliver the Standard Termination Entitlements. In the
event of the Officer's resignation with Good Reason, the Bank shall also pay and
deliver the Additional Termination Entitlements.
SECTION 8. TERMS AND CONDITIONS OF THE ADDITIONAL TERMINATION
ENTITLEMENTS.
The Bank and the Officer hereby stipulate that the damages
which may be incurred by the Officer following any termination of employment are
not capable of accurate measurement as of the date first above written and that
the Additional Termination Entitlements constitute reasonable damages under the
circumstances and shall be payable without any requirement of proof of actual
damage and without regard to the Officer's efforts, if any, to mitigate damages.
The Bank and the Officer further agree that the Bank may condition the payment
and delivery of the Additional Termination Entitlements on the receipt of: (a)
the Officer's resignation from any and all positions which he holds as an
officer, director or committee member with respect to the Bank or any subsidiary
or affiliate of either of them; and (b) a release of the Bank and its officers,
directors, shareholders, subsidiaries and affiliates, in form and substance
satisfactory to the Bank, of any liability to the Officer, whether for
compensation or damages, in connection with his employment with the Bank and the
termination of such employment except for the Standard Termination Entitlements
and the Additional Termination Entitlements.
SECTION 9. NO EFFECT ON EMPLOYEE BENEFIT PLANS OR PROGRAMS.
The termination of the Officer's employment during the
Assurance Period or thereafter, whether by the Bank or by the Officer, shall
have no effect on the rights and obligations of the parties hereto under 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 insurance plans or such other employee benefit plans or programs, or
compensation plans or programs, as may be maintained by, or cover employees of,
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 Officer to which the Bank or 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.
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SECTION 10. SUCCESSORS AND ASSIGNS.
This Agreement will inure to the benefit of and be binding
upon the Officer, 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 or the Bank may be
sold or otherwise transferred. Failure of the Company to obtain from any
successor its express written assumption of the Company's or Bank's obligations
hereunder at least 60 days in advance of the scheduled effective date of any
such succession shall, if such succession constitutes a Change of Control,
constitute Good Reason for the Officer's resignation on or at any time during
the Term following the occurrence of such succession.
SECTION 11. 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 Officer:
[Officer name]
[Officer address]
[Officer address]
If to the Company or the Bank:
Hudson City Bancorp, Inc.
West 80 Century Road
Paramus, New Jersey 07652-1473
Attention: Chairman, Human Resources Committee
with a copy to:
Thacher Proffitt & Wood
Two World Trade Center
New York, New York 10048
Attention: W. Edward Bright, Esq.
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<PAGE> 15
SECTION 12. INDEMNIFICATION FOR ATTORNEYS' FEES.
(a) The Bank shall indemnify, hold harmless and defend the
Officer against reasonable costs, including legal fees and expenses, incurred
by him in connection with or arising out of any action, suit or proceeding
(including any tax controversy) 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 Bank's obligations hereunder shall be
conclusive evidence of the Officer'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 Bank'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 Bank may have against the Officer or others. In no event
shall the Officer be obligated to seek other employment or take any other action
by way of mitigation of the amounts payable to the Officer under any of the
provisions of this Agreement and such amounts shall not be reduced whether or
not the Officer obtains other employment. Unless it is determined that the
Officer has acted frivolously or in bad faith, the Bank shall pay as incurred,
to the full extent permitted by law, all legal fees and expenses which the
Officer may reasonably incur as a result of or in connection with his
consultation with legal counsel or arising out of any action, suit, proceeding,
tax controversy or contest (regardless of the outcome thereof) by the Bank, the
Officer or others regarding the validity or enforceability of, or liability
under, any provision of this Agreement or any guarantee of performance thereof
(including as a result of any contest by the Officer about the amount of any
payment pursuant to this Agreement), plus in each case interest on any delayed
payment at the applicable Federal rate provided for in section 7872(f)(2)(A) of
the Code.
SECTION 13. 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.
SECTION 14. 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.
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<PAGE> 16
SECTION 15. 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 16. 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 Jersey applicable to contracts entered into and to be performed
entirely within the State of New Jersey.
SECTION 17. 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 18. 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 19. REQUIRED REGULATORY PROVISIONS.
Notwithstanding anything herein contained to the contrary, any
payments to the Officer by the Company or the Bank, 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.
Section 1828(k), and any regulations promulgated thereunder.
SECTION 20. GUARANTY.
The Company hereby irrevocably and unconditionally guarantees
to the Officer the payment of all amounts, and the performance of all other
obligations, due from the Bank in accordance with the terms of this Agreement as
and when due without any requirement of presentment, demand of payment, protest
or notice of dishonor or nonpayment.
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<PAGE> 17
IN WITNESS WHEREOF, the Bank and the Company have caused this
Agreement to be executed and the Officer has hereunto set his hand, all as of
the day and year first above written.
----------------------------------
[OFFICER NAME]
HUDSON CITY SAVINGS BANK
Attest:
By By
----------------------------------- -------------------------------
Name: Name:
Title: Title:
[Seal]
HUDSON CITY BANCORP, INC.
Attest:
By By
----------------------------------- -------------------------------
Name: Name:
Title: Title:
[Seal]
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<PAGE> 1
EXHIBIT 10.7
TWO-YEAR CHANGE OF CONTROL AGREEMENT
This CHANGE OF CONTROL AGREEMENT (the "Agreement") is made and
entered into as of [______________], 1999 by and among HUDSON CITY SAVINGS BANK,
a savings bank organized and operating under the laws of the State of New Jersey
and having an office at West 80 Century Road, Paramus, New Jersey 07652-1473
(the "Bank"), HUDSON CITY BANCORP, INC., a business corporation organized and
existing under the laws of the State of Delaware and having an office at West 80
Century Road, Paramus, New Jersey 07652-1473 (the "Company") and
[________________], an individual residing at [______________________] (the
"Officer").
INTRODUCTORY STATEMENT
The Bank is undertaking a reorganization through which it will
convert from a mutual savings bank to a stock savings bank and become a wholly
owned subsidiary of the Company, and the Company will become a majority-owned
subsidiary of Hudson City, MHC, a New Jersey mutual holding company (the
"Reorganization"). At the same time, the Company will sell less than fifty
percent (50%) of its outstanding common stock to the public in an initial public
offering. The Officer has served the Bank as an officer and is familiar with the
Bank's operations.
The Board of Managers of the Bank and the Board of Directors of
the Company have concluded that it is in the best interests of the Bank, the
Company and their prospective shareholders to establish a working environment
for the Officer which minimizes the personal distractions that might result from
possible business combinations in which the Company or the Bank might be
involved following the Reorganization. To this end, the Bank and the Company
have decided to provide the Officer with assurance that his compensation will be
continued for a minimum period of two (2) years following termination of
employment (the "Assurance Period") if his employment terminates under specified
circumstances related to a business combination. The Board of Managers of the
Bank and the Board of Directors of the Company have decided to formalize this
assurance by entering into this Change of Control Agreement with the Officer.
The terms and conditions which the Bank, the Company and the
Officer have agreed to are as follows.
AGREEMENT
SECTION 1. EFFECTIVE DATE; TERM; CHANGE OF CONTROL AND
PENDING CHANGE OF CONTROL DEFINED.
(a) This Agreement shall take effect on the effective date of the
Reorganization (the "Effective Date") and shall be in effect during the period
(the "Term") beginning on the Effective Date of the Reorganization and ending on
the first anniversary of the date on which the Bank notifies the Executive of
its intent to discontinue the Agreement (the "Initial Expiration Date") or, if
later, the second anniversary of the latest Change of Control or Pending Change
of Control, as defined below, that occurs after the Effective Date and before
the Initial Expiration Date.
<PAGE> 2
(b) For all purposes of this Agreement, a "Change of Control"
shall be deemed to have occurred upon the happening of any of the following
events:
(i) the consummation of a reorganization, merger or consolidation
of the Company 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;
(iii) a complete liquidation or dissolution of the Company;
(iv) the occurrence of any event if, immediately following such
event, at least 50% of the members of the Board of Directors of the
Company do not belong to any of the following groups:
(A) individuals who were members of the Board of
Directors of the Company on the date of this Agreement; or
(B) individuals who first became members of the Board of
Directors of the Company after the date of this Agreement either:
(1) upon election to serve as a member of the
Board of Directors 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
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<PAGE> 3
(2) upon election by the shareholders of the Board
of Directors of the Company to serve as a member of such
board, but only if nominated for election by affirmative
vote of three-quarters of the members of the Board of
Directors 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 Directors of the
Company; or
(v) any event which would be described in section 1(b)(i), (ii),
(iii) or (iv) if the term "Bank" were substituted for the term "Company"
therein.
In no event, however, shall a Change of Control be deemed to have occurred as a
result of any acquisition of securities or assets of the Company, the Bank, or a
subsidiary of either of them, by the Company, the Bank, or any subsidiary of
either of them, or by any employee benefit plan maintained by any of them. For
purposes of this section 1(b), the term "person" shall have the meaning assigned
to it under sections 13(d)(3) or 14(d)(2) of the Exchange Act.
(c) For purposes of this Agreement, a "Pending Change of Control"
shall mean: (i) the signing of a definitive agreement for a transaction which,
if consummated, would result in a Change of Control; (ii) the commencement of a
tender offer which, if successful, would result in a Change of Control; or (iii)
the circulation of a proxy statement seeking proxies in opposition to management
in an election contest which, if successful, would result in a Change of
Control.
SECTION 2. DISCHARGE PRIOR TO A PENDING CHANGE OF CONTROL.
The Bank may discharge the Officer at any time prior to the
occurrence of a Pending Change of Control for any reason or for no reason. In
such event:
(a) The Bank shall pay to the Officer's estate his earned but
unpaid compensation (including, without limitation, salary and all other
items which constitute wages under applicable law) as of the date of his
termination of employment. This payment shall 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 the date of the Officer's termination
of employment.
(b) The Bank shall provide the benefits, if any, due to the
Officer's estate, surviving dependents or his designated beneficiaries
under the employee benefit plans and programs and compensation plans and
programs maintained for the benefit of the officers and employees of the
Bank. The time and manner of payment or other
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<PAGE> 4
delivery of these benefits and the recipients of such benefits shall be
determined according to the terms and conditions of the applicable plans
and programs.
The payments and benefits described in sections 2(a) and (b) shall be referred
to in this Agreement as the "Standard Termination Entitlements."
SECTION 3. TERMINATION OF EMPLOYMENT DUE TO DEATH.
The Officer's employment with the Bank shall terminate,
automatically and without any further action on the part of any party to this
Agreement, on the date of the Officer's death. In such event, the Bank shall pay
and deliver to the Officer (and, in the event of his death before payment, to
his estate and surviving dependents and beneficiaries, as applicable) the
Standard Termination Entitlements.
SECTION 4. TERMINATION DUE TO DISABILITY AFTER CHANGE OF
CONTROL OR PENDING CHANGE OF CONTROL.
The Bank may terminate the Officer's employment during the Term
and after the occurrence of a Change of Control or a Pending Change of Control
upon a determination, by a majority vote of the members of the Board of
Directors of the Bank, acting in reliance on the written advice of a medical
professional acceptable to it, that the Officer is suffering from a physical or
mental impairment which, at the date of the determination, has prevented the
Officer from performing his assigned duties on a substantially full-time basis
for a period of at least one hundred and eighty (180) days during the period of
one (1) year ending with the date of the determination or is likely to result in
death or prevent the Officer from performing his assigned duties on a
substantially full-time basis for a period of at least one hundred and eighty
(180) days during the period of one (1) year beginning with the date of the
determination. In such event:
(a) The Bank shall pay and deliver to the Officer (or in the
event of his death before payment, to his estate and surviving
dependents and beneficiaries, as applicable) the Standard Termination
Entitlements.
(b) In addition to the Standard Termination Entitlements, the
Bank shall continue to pay the Officer his base salary, at the annual
rate in effect for him immediately prior to the termination of his
employment, during a period ending on the earliest of: (i) the
expiration of one hundred and eighty (180) days after the date of
termination of his employment; (ii) the date on which long-term
disability insurance benefits are first payable to him under any
long-term disability insurance plan covering employees of the Bank (the
"LTD Eligibility Date"); (iii) the date of his death; and (iv) the
expiration of the Assurance Period (the "Initial Continuation Period").
If the end of the Initial Continuation Period is neither the LTD
Eligibility Date nor the date of his death, the Bank shall continue to
pay the Officer his base salary, at an annual rate equal to sixty
percent (60%) of the annual rate in effect for him immediately prior to
the termination of his employment, during an additional
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<PAGE> 5
period ending on the earliest of the LTD Eligibility Date, the date of
his death and the expiration of the Assurance Period.
A termination of employment due to disability under this section 4 shall be
effected by a notice of termination given to the Officer by the Bank and shall
take effect on the later of the effective date of termination specified in such
notice or the date on which the notice of termination is deemed given to the
Officer.
SECTION 5. DISCHARGE WITH CAUSE AFTER CHANGE OF CONTROL OR
PENDING CHANGE OF CONTROL.
(a) The Bank may terminate the Officer's employment with "Cause"
during the Term and after the occurrence of a Change of Control or Pending
Change of Control, but a termination shall be deemed to have occurred with
"Cause" only if:
(i) the Board of Directors of the Bank, by majority vote of its
entire membership, determine that the Officer (A) has willfully and
intentionally failed to perform his assigned duties under this Agreement
in any material respect (including, for these purposes, the Officer's
inability to perform such duties as a result of drug or alcohol
dependency); (B) has willfully and intentionally engaged in dishonest or
illegal conduct in connection with his performance of services for the
Bank or has been convicted of a felony; (C) 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 Bank; or (D) has willfully and intentionally breached the
material terms of this Agreement in any material respect; and
(ii) at least forty-five (45) days prior to the vote contemplated
by section 1(b)(i), the Bank has provided the Officer with notice of its
intent to discharge the Officer for Cause, detailing with particularity
the facts and circumstances which are alleged to constitute Cause (the
"Notice of Intent to Discharge"); and
(iii) after the giving of the Notice of Intent to Discharge and
before the taking of the vote contemplated by section 5(a)(i), the
Officer (together with his legal counsel, if he so desires) is afforded
a reasonable opportunity to make both written and oral presentations
before the Board of Directors of the Bank for the purpose of refuting
the alleged grounds for Cause for his discharge; and
(iv) after the vote contemplated by section 5(a)(i), the Bank has
furnished to the Officer a notice of termination which shall specify the
effective date of his termination of employment (which shall in no event
be earlier than the date on which such notice is deemed given) and
include a copy of a resolution or resolutions adopted by the Board of
Directors of the Bank, certified by its corporate secretary and signed
by each member of the Board of Directors voting in favor of adoption of
the resolution(s), authorizing the termination of the Officer's
employment with Cause and stating with particularity the facts and
circumstances found to constitute Cause for his discharge (the "Final
Discharge Notice").
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<PAGE> 6
For purposes of this section 5, no act or failure to act, on the part of the
Officer, shall be considered "willful" unless it is done, or omitted to be done,
by the Officer in bad faith or without reasonable belief that the Officer's
action or omission was in the best interests of the Bank. Any act, or failure to
act, based upon authority given pursuant to a resolution duly adopted by the
Board of Directors of the Bank or based upon the written advice of counsel for
the Bank shall be conclusively presumed to be done, or omitted to be done, by
the Officer in good faith and in the best interests of the Bank.
(b) If the Officer is discharged with Cause during the Term and
after a Change of Control or Pending Change of Control, the Bank shall pay and
provide to him (or, in the event of his death, to his estate, his surviving
beneficiaries and his dependents) the Standard Termination Entitlements only.
Following the giving of a Notice of Intent to Discharge, the Bank may
temporarily suspend the Officer's duties and authority and, in such event, may
also suspend the payment of salary and other cash compensation, but not the
Officer's participation in retirement, insurance and other employee benefit
plans. If the Officer is not discharged, or is discharged without Cause, within
forty-five (45) days after the giving of a Notice of Intent to Discharge,
payments of salary and cash compensation shall resume, and all payments withheld
during the period of suspension shall be promptly restored. If the Officer is
discharged with Cause not later than forty-five (45) days after the giving of
the Notice of Intent to Discharge, all payments withheld during the period of
suspension shall be deemed forfeited and shall not be included in the Standard
Termination Entitlements. If a Final Discharge Notice is given later than
forty-five (45) days, but sooner than ninety (90) days, after the giving of the
Notice of Intent to Discharge, all payments made to the Officer during the
period beginning with the giving of the Notice of Intent to Discharge and ending
with the Officer's discharge with Cause shall be retained by the Officer and
shall not be applied to offset the Standard Termination Entitlements. If the
Bank does not give a Final Discharge Notice to the Officer within ninety (90)
days after giving a Notice of Intent to Discharge, the Notice of Intent to
Discharge shall be deemed withdrawn and any future action to discharge the
Officer with Cause shall require the giving of a new Notice of Intent to
Discharge.
SECTION 6. DISCHARGE WITHOUT CAUSE.
The Bank may discharge the Officer without Cause at any time
after the occurrence of a Change of Control or Pending Change of Control, and in
such event:
(a) The Bank shall pay and deliver to the Officer (or in the
event of his death before payment, to his estate and surviving
dependents and beneficiaries, as applicable) the Standard Termination
Entitlements.
(b) In addition to the Standard Termination Entitlements:
(i) During the Assurance Period, the Bank shall provide
for the Officer and his dependents continued group life, health
(including hospitalization, medical and major medical), dental,
accident and long-term disability insurance benefits on
substantially the same terms and conditions (including any
required premium-sharing arrangements, co-payments and
deductibles) in effect for them immediately prior to the
Officer's resignation. The coverage provided under this section
6(b)(i) may, at the election of the Bank,
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<PAGE> 7
be secondary to the coverage provided as part of the Standard
Termination Entitlements and to any employer-paid coverage
provided by a subsequent employer or through Medicare, with the
result that benefits under the other coverages will offset the
coverage required by this section 6(b)(i).
(ii) The Bank shall make a lump sum payment to the
Officer (or, in the event of his death before payment, to his
estate), in an amount equal to the estimated present value of the
salary that the Officer would have earned if he had continued
working for the Bank during the Assurance Period at the highest
annual rate of salary achieved during the period of three (3)
years ending immediately prior to the date of termination (the
"Salary Severance Payment"). The Salary Severance Payment shall
be computed using the following formula:
n
SSP=(SIGMA) [ (BS/PR) ]
1 + (I / PR)]n
1
where "SSP" is the amount of the Salary Severance Payment (before
the deduction of applicable federal, state and local withholding
taxes); "BS" is the highest annual rate of salary achieved by the
Officer during the period of three (3) years ending immediately
prior to the date of termination; "PR" is the number of payroll
periods that occur during a year under the Bank's normal payroll
practices; "I" equals the applicable federal short term rate
established under section 1274 of the Internal Revenue Code of
1986 (the "Code") for the month in which the Officer's
termination of employment occurs (the "Short Term AFR") and "n"
equals the product of the Assurance Period at the Officer's
termination of employment (expressed in years and fractions of
years) multiplied by the number of payroll periods that occur
during a year under the Bank's normal payroll practices. The
Salary Severance Payment shall be made within five (5) business
days after the Officer's termination of employment and shall be
in lieu of any claim to a continuation of base salary which the
Officer might otherwise have and in lieu of cash severance
benefits under any severance benefits program which may be in
effect for officers or employees of the Bank.
(iii) The Bank shall make a lump sum payment to the
Officer (or, in the event of his death before payment, to his
estate), in an amount equal to the estimated present value of the
annual bonuses that the Officer would have earned if he had
continued working for the Bank during the Assurance Period at the
highest annual rate of salary achieved during the period of three
(3) years ending immediately prior to the date of termination
(the "Bonus Severance Payment"). The Bonus Severance Payment
shall be computed using the following formula:
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<PAGE> 8
BSP = SSP x (ABP / ASP)
where "BSP" is the amount of the Bonus Severance Payment (before
the deduction of applicable federal, state and local withholding
taxes); "SSP" is the amount of the Salary Severance Payment
(before the deduction of applicable federal, state and local
withholding taxes); "ABP" is the aggregate of the annual bonuses
paid or declared (whether or not paid) for the most recent period
of three (3) calendar years to end on or before the Officer's
termination of employment; and "ASP" is the aggregate base salary
actually paid to the Officer during such period of three (3)
calendar years (excluding any year for which no bonus was
declared or paid). The Bonus Severance Payment shall be made
within five (5) business days after the Officer's termination of
employment and shall be in lieu of any claim to a continuation of
participation in annual bonus plans of the Bank which the Officer
might otherwise have.
(iv) The Bank shall make a lump sum payment to the
Officer (or, in the event of his death before payment, to his
estate), in an amount equal to the estimated present value of the
long-term incentive bonuses that the Officer would have earned if
he had continued working for the Bank during the Assurance Period
(the "Incentive Severance Payment"). The Incentive Severance
Payment shall be computed using the following formula:
ISP = (SSP / RAP) x (ALTIP / ALTSP) x Y
where "ISP" is the amount of the Incentive Severance Payment
(before the deduction of applicable federal, state and local
withholding taxes); "SSP" is the amount of the Salary Severance
Payment (before the deduction of applicable federal, state and
local withholding taxes); "ALTIP" is the aggregate of the most
recently paid or declared (whether or not paid) long-term
incentive compensation payments (but not more than three (3) such
payments) for performance periods that end on or before the
Officer's termination of employment; and "ALTSP" is the aggregate
base salary actually paid to the Officer during the performance
periods covered by the payments included in "ALTIP" and excluding
base salary paid for any period for which no long-term incentive
compensation payment was declared or paid; "RAP" is the Assurance
Period, expressed in years and fractions of years; and "Y" is the
aggregate (expressed in years and fractions of years) of the
Assurance Period plus the number of years and fraction of years
that have elapsed since the end of the last performance period
for which a long-term incentive payment has been declared and
paid. The Incentive Severance Payment shall be made within five
(5) business days after the Officer's termination of employment
and shall be in lieu of any claim to a continuation of
participation in long-term incentive compensation plans of the
Bank which the Officer might otherwise have. Notwithstanding the
foregoing, the
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<PAGE> 9
Incentive Severance Payment shall be zero if the Officer's
termination of employment occurs at a time when he is not covered
by any long-term incentive compensation plan.
(v) The Bank shall pay to the Officer (or in the event of
his death, to his estate), 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 tax-qualified and non-tax-qualified defined benefit plans
maintained by, or covering employees of, the Bank (the "Pension
Plans") if he had continued working for the Bank during the
Assurance Period; over (B) the present value of the benefits to
which the Officer and his spouse and/or designated beneficiaries
are actually entitled under such plans (the "Pension Severance
Payment"). The Pension Severance Payment shall be computed
according to the following formula:
PSP = PPB - APB
where "PSP" is the amount of the Pension Severance Payment
(before deductions for applicable federal, state and local
withholding taxes); "APB" is the aggregate lump sum present value
of the actual vested pension benefits payable under the Pension
Plans in the form of a straight life annuity beginning at the
earliest date permitted under the Pension Plans, computed on the
basis of the Officer's life expectancy at the earliest date on
which payments under the Pension Plans could begin, determined by
reference to Table VI of section 1.72-9 of the Income Tax
Regulations (the "Assumed Life Expectancy"), and on the basis of
an interest rate assumption equal to the average bond-equivalent
yield on United States Treasury Securities with a Constant
Maturity of 30 Years for the month prior to the month in which
the Officer's termination of employment occurs (the "30-Year
Treasury Rate"); and "PPB" is the lump sum present value of the
pension benefits (whether or not vested) that would be payable
under the Pension Plans in the form of a straight life annuity
beginning at the earliest date permitted under the Pension Plans,
computed on the basis that the Officer's actual age at
termination of employment is his attained age as of his last
birthday that would occur during the Assurance Period, that his
service for benefit accrual purposes under the Pension Plans is
equal to the aggregate of his actual service plus the Assurance
Period, that his average compensation figure used in determining
his accrued benefit is equal to the highest annual rate of salary
achieved by the Officer during the period of three (3) years
ending immediately prior to the date of termination, that the
Officer's life expectancy at the earliest date on which payments
under the Pension Plans could begin is the Assumed Life
Expectancy and that the interest rate assumption used is equal to
the 30-Year Treasury Rate. The Pension Severance Payment shall be
made within five (5) business days after the Officer's
termination of employment and shall be in
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<PAGE> 10
lieu of any claim to any actual increase in his accrued benefit
in the Pension Plans in respect of the Assurance Period.
(vi) The Bank shall pay to the Officer (or in the event
of his death, to his estate) a lump sum payment in an amount
equal to the present value of the additional employer
contributions that would have been credited directly to his
account(s) under any and all tax-qualified and non-tax qualified
defined contribution plans maintained by, or covering employees
of, the Bank (the "Non-ESOP DC Plans"), plus the fair market
value of the additional shares of employer securities or other
property that would have been allocated to his account as a
result of employer contributions under any tax-qualified
leveraged employee stock ownership plan and any related
non-tax-qualified supplemental plan maintained by, or covering
employees of, the Bank (the "ESOP Plans") if he had continued in
employment during the Assurance Period (the "Defined Contribution
Severance Payment"). The Defined Contribution Severance Payment
shall be computed according to the following formula:
DCSP = [SSP x (EC / BS) + [(STK + PROP) x Y]
where: "DCSP" is the amount of the Defined Contribution Severance
Payment (before deductions for applicable federal, state and
local withholding taxes); "SSP" is the amount of the Salary
Severance Payment (before deductions for applicable federal,
state and local withholding taxes); "EC" is the amount of
employer contributions actually credited to the Officer's
accounts under the Non-ESOP Plans for the last plan year to end
before his termination of employment; "BS" is the Officer's
compensation taken into account in computing EC; "Y" is the
aggregate (expressed in years and fractions of years) of the
Assurance Period and the number of years and fractions of years
that have elapsed between the end of plan year for which EC was
computed and the date of the Officer's termination of employment;
"STK" is the fair market value (determined by the final reported
sales price for stock of the same class on the last trading day
before the Officer's termination of employment) of the employer
securities actually allocated to the Officer's accounts under the
ESOP Plans in respect of employer contributions and dividends
applied to loan amortization payments for the last plan year to
end before his termination of employment; and "PROP" is the fair
market value (determined as of the day before the Officer's
termination of employment using the same valuation methodology
used to value the assets of the ESOP Plans) of the property other
than employer securities actually allocated to the Officer's
accounts under the ESOP Plans in respect of employer
contributions and dividends applied to loan amortization payments
for the last plan year to end before his termination of
employment.
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<PAGE> 11
(vii) At the election of the Bank made within 30 days
following the Officer's termination of employment, upon the
surrender of options or appreciation rights issued to the
Officer under any stock option and appreciation rights plan or
program maintained by, or covering employees of, 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 the purpose of computing this payment, the Officer 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 Bank, even if he is
not vested under such plan or program.
(viii) At the election of the Bank made within 30 days
following the Officer's termination of employment, upon the
surrender of any shares awarded to the Officer under any
restricted stock plan maintained by, or covering employees of,
the Bank, the Bank shall make 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 Officer's termination of
employment; multiplied by
(B) the number of shares which are being
surrendered.
For purposes of computing this payment, the Officer shall be
deemed fully vested in all shares awarded under any restricted
stock plan maintained by, or covering employees of, the Bank,
even if he is not vested under such plan.
The payments and benefits described in section 6(b) are referred to in this
Agreement as the "Additional Change of Control Entitlements".
SECTION 7. RESIGNATION.
(a) The Officer may resign from his employment with the Bank at
any time. A resignation under this section 7 shall be effected by notice of
resignation given by the Officer to the Bank and shall take effect on the later
of the effective date of termination specified in such notice or the date on
which the notice of termination is deemed given to the Officer. The Officer's
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<PAGE> 12
resignation of any of the positions within the Bank or the Company to which he
has been assigned shall be deemed a resignation from all such positions.
(b) The Officer's resignation shall be deemed to be for "Good
Reason" if the effective date of resignation occurs during the Term, but on or
after the effective date of a Change of Control, and is on account of:
(i) the failure of the Bank (whether by act or omission of the
Board of Directors, or otherwise) to appoint or re-appoint or elect or
re-elect the Officer to the position with Bank that he held immediately
prior to the Change of Control (the "Assigned Office") or to a more
senior office;
(ii) if the Officer is or becomes a member of the Board of
Directors of the Bank, the failure of the shareholders of the Bank
(whether in an election in which the Officer stands as a nominee or in
an election where the Officer is not a nominee) to elect or re-elect the
Officer to membership at the expiration of his term of membership,
unless such failure is a result of the Officer's refusal to stand for
election;
(iii) a material failure by the Bank, whether by amendment of the
certificate of incorporation or organization, by-laws, action of the
Board of Directors of the Bank or otherwise, to vest in the Officer the
functions, duties, or responsibilities customarily associated with the
Assigned Office; provided that the Officer shall have given notice of
such failure to the Bank, and the Bank has not fully cured such failure
within thirty (30) days after such notice is deemed given;
(iv) any reduction of the Officer's rate of base salary in effect
from time to time, whether or not material, or any failure (other than
due to reasonable administrative error that is cured promptly upon
notice) to pay any portion of the Officer's compensation as and when
due;
(v) any change in the terms and conditions of any compensation or
benefit program in which the Officer participates which, either
individually or together with other changes, has a material adverse
effect on the aggregate value of his total compensation package;
provided that the Officer shall have given notice of such material
adverse effect to the Bank, and the Bank has not fully cured such
failure within thirty (30) days after such notice is deemed given;
(vi) any material breach by the Company or the Bank of any
material term, condition or covenant contained in this Agreement;
provided that the Officer shall have given notice of such material
adverse effect to the Company and the Bank, and the Company or the Bank
have not fully cured such failure within thirty (30) days after such
notice is deemed given; or
(vii) a change in the Officer's principal place of employment to
a place that is not the principal executive office of the Bank, or a
relocation of the Bank's
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<PAGE> 13
principal executive office to a location that is both more than
twenty-five (25) miles away from the Officer's principal residence and
more than twenty-five (25) miles away from the location of the Bank's
principal executive office on the day before the occurrence of the
Change of Control.
In all other cases, a resignation by the Officer shall be deemed to be without
Good Reason. In the event of resignation, the Officer shall state in his notice
of resignation whether he considers his resignation to be a resignation with
Good Reason, and if he does, he shall state in such notice the grounds which
constitute Good Reason. The Officer's determination of the existence of Good
Reason shall be conclusive in the absence of fraud, bad faith or manifest error.
(c) In the event of the Officer's resignation for any reason, the
Bank shall pay and deliver the Standard Termination Entitlements. In the event
of the Officer's resignation with Good Reason, the Bank shall also pay and
deliver the Additional Termination Entitlements.
SECTION 8. TERMS AND CONDITIONS OF THE ADDITIONAL TERMINATION
ENTITLEMENTS.
The Bank and the Officer hereby stipulate that the damages which
may be incurred by the Officer following any termination of employment are not
capable of accurate measurement as of the date first above written and that the
Additional Termination Entitlements constitute reasonable damages under the
circumstances and shall be payable without any requirement of proof of actual
damage and without regard to the Officer's efforts, if any, to mitigate damages.
The Bank and the Officer further agree that the Bank may condition the payment
and delivery of the Additional Termination Entitlements on the receipt of: (a)
the Officer's resignation from any and all positions which he holds as an
officer, director or committee member with respect to the Bank or any subsidiary
or affiliate of either of them; and (b) a release of the Bank and its officers,
directors, shareholders, subsidiaries and affiliates, in form and substance
satisfactory to the Bank, of any liability to the Officer, whether for
compensation or damages, in connection with his employment with the Bank and the
termination of such employment except for the Standard Termination Entitlements
and the Additional Termination Entitlements.
SECTION 9. NO EFFECT ON EMPLOYEE BENEFIT PLANS OR PROGRAMS.
The termination of the Officer's employment during the Assurance
Period or thereafter, whether by the Bank or by the Officer, shall have no
effect on the rights and obligations of the parties hereto under 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 insurance plans or
such other employee benefit plans or programs, or compensation plans or
programs, as may be maintained by, or cover employees of, 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 Officer to which the Bank or 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.
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<PAGE> 14
SECTION 10. SUCCESSORS AND ASSIGNS.
This Agreement will inure to the benefit of and be binding upon
the Officer, 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 or the Bank may be sold or otherwise
transferred. Failure of the Company to obtain from any successor its express
written assumption of the Company's or Bank's obligations hereunder at least 60
days in advance of the scheduled effective date of any such succession shall, if
such succession constitutes a Change of Control, constitute Good Reason for the
Officer's resignation on or at any time during the Term following the occurrence
of such succession.
SECTION 11. 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 Officer:
[Officer name]
[Officer address]
[Officer address]
If to the Company or the Bank:
Hudson City Bancorp, Inc.
West 80 Century Road
Paramus, New Jersey 07652-1473
Attention: Chairman, Human Resources Committee
with a copy to:
Thacher Proffitt & Wood
Two World Trade Center
New York, New York 10048
Attention: W. Edward Bright, Esq.
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<PAGE> 15
SECTION 12. INDEMNIFICATION FOR ATTORNEYS' FEES.
(a) The Bank shall indemnify, hold harmless and defend the
Officer against reasonable costs, including legal fees and expenses, incurred
by him in connection with or arising out of any action, suit or proceeding
(including any tax controversy) 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 Bank's obligations hereunder shall be
conclusive evidence of the Officer'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 Bank'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 Bank may have against the Officer or others. In no event
shall the Officer be obligated to seek other employment or take any other action
by way of mitigation of the amounts payable to the Officer under any of the
provisions of this Agreement and such amounts shall not be reduced whether or
not the Officer obtains other employment. Unless it is determined that the
Officer has acted frivolously or in bad faith, the Bank shall pay as incurred,
to the full extent permitted by law, all legal fees and expenses which the
Officer may reasonably incur as a result of or in connection with his
consultation with legal counsel or arising out of any action, suit, proceeding,
tax controversy or contest (regardless of the outcome thereof) by the Bank, the
Officer or others regarding the validity or enforceability of, or liability
under, any provision of this Agreement or any guarantee of performance thereof
(including as a result of any contest by the Officer about the amount of any
payment pursuant to this Agreement), plus in each case interest on any delayed
payment at the applicable Federal rate provided for in section 7872(f)(2)(A) of
the Code.
SECTION 13. 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.
SECTION 14. 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.
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<PAGE> 16
SECTION 15. 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 16. 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 Jersey applicable to contracts entered into and to be performed
entirely within the State of New Jersey.
SECTION 17. 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 18. 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 19. REQUIRED REGULATORY PROVISIONS.
Notwithstanding anything herein contained to the contrary, any
payments to the Officer by the Company or the Bank, 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.
Section 1828(k), and any regulations promulgated thereunder.
SECTION 20. GUARANTY.
The Company hereby irrevocably and unconditionally guarantees to
the Officer the payment of all amounts, and the performance of all other
obligations, due from the Bank in accordance with the terms of this Agreement as
and when due without any requirement of presentment, demand of payment, protest
or notice of dishonor or nonpayment.
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<PAGE> 17
IN WITNESS WHEREOF, the Bank and the Company have caused this
Agreement to be executed and the Officer has hereunto set his hand, all as of
the day and year first above written.
[OFFICER NAME]
HUDSON CITY SAVINGS BANK
Attest:
By By
Name: Name:
Title: Title:
[Seal]
HUDSON CITY BANCORP, INC.
Attest:
By By
Name: Name:
Title: Title:
[Seal]
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<PAGE> 1
EXHIBIT 10.8
SEVERANCE PAY PLAN
OF
HUDSON CITY SAVINGS BANK
ADOPTED ON MARCH 4, 1999
EFFECTIVE ON THE DATE OF CONVERSION
<PAGE> 2
TABLE OF CONTENTS
Page
ARTICLE I
PURPOSE
SECTION 1 STATEMENT OF PURPOSE.........................................1
ARTICLE II
DEFINITIONS
SECTION 2.1 ACQUIRED COMPANY.............................................1
SECTION 2.2 ACQUIRED EMPLOYEE............................................1
SECTION 2.3 AFFILIATED EMPLOYER..........................................2
SECTION 2.4 BANK.........................................................2
SECTION 2.5 BOARD........................................................2
SECTION 2.6 CAUSE........................................................2
SECTION 2.7 CHANGE OF CONTROL............................................2
SECTION 2.8 COMMITTEE....................................................4
SECTION 2.9 EMPLOYEE.....................................................4
SECTION 2.10 FDI ACT......................................................4
SECTION 2.11 INVOLUNTARY SEVERANCE........................................4
SECTION 2.12 OFFICER......................................................4
SECTION 2.13 PARTICIPATING EMPLOYER.......................................4
SECTION 2.14 PLAN.........................................................4
SECTION 2.15 PLAN ADMINISTRATOR...........................................5
SECTION 2.16 PLAN YEAR....................................................5
SECTION 2.17 SALARY.......................................................5
SECTION 2.18 SERVICE......................................................5
ARTICLE III
BENEFITS
SECTION 3.1 SEVERANCE BENEFITS FOR EMPLOYEES.............................5
SECTION 3.2 SEVERANCE BENEFITS FOR ACQUIRED EMPLOYEES....................6
SECTION 3.3 VESTING......................................................7
SECTION 3.4 BENEFITS CONTINGENT ON EXECUTION OF RELEASE..................8
(i)
<PAGE> 3
Page
ARTICLE IV
ADMINISTRATION
SECTION 4.1 NAMED FIDUCIARIES............................................8
SECTION 4.2 PLAN ADMINISTRATOR...........................................8
SECTION 4.3 COMMITTEE RESPONSIBILITIES..................................10
SECTION 4.4 CLAIMS PROCEDURE............................................10
SECTION 4.5 CLAIMS REVIEW PROCEDURE.....................................11
SECTION 4.6 ALLOCATION OF FIDUCIARY RESPONSIBILITIES
AND EMPLOYMENT OF ADVISORS.........................11
SECTION 4.7 OTHER ADMINISTRATIVE PROVISIONS.............................12
ARTICLE V
MISCELLANEOUS
SECTION 5.1 RIGHTS OF EMPLOYEES.........................................13
SECTION 5.2 NON-ALIENATION OF BENEFITS..................................13
SECTION 5.3 NON-DUPLICATION OF BENEFITS.................................13
SECTION 5.4 CONSTRUCTION................................................13
SECTION 5.5 HEADINGS....................................................13
SECTION 5.6 GOVERNING LAW...............................................14
SECTION 5.7 SEVERABILITY................................................14
SECTION 5.8 TERMINATION OR AMENDMENT....................................14
SECTION 5.9 REQUIRED REGULATORY PROVISIONS..............................14
SECTION 5.10 WITHHOLDING.................................................15
SECTION 5.11 STATUS AS WELFARE BENEFIT PLAN UNDER ERISA..................15
(ii)
<PAGE> 4
SEVERANCE PAY PLAN
OF
HUDSON CITY SAVINGS BANK
ARTICLE I
PURPOSE
SECTION 1 STATEMENT OF PURPOSE.
Hudson City Savings Bank adopts this Severance Pay Plan for
the benefit of its eligible Employees and those of other Participating
Employers. The Bank recognizes that, as a wholly owned subsidiary of a public
company, it will be subject to the possibility of a negotiated or unsolicited
change of control which may result in a loss of employment for some of its
Employees and that it may acquire other companies in transactions which may
result in a loss of employment for the employees of the Acquired Companies. The
purpose of the Plan is to encourage the Bank's Employees, those of other
Participating Employers and those of Acquired Companies to continue working for
their employers with their full time and attention devoted to their employer's
affairs by providing prescribed income security and job placement assistance in
the event of an Involuntary Severance following a Change of Control.
ARTICLE II
DEFINITIONS
For purposes of the Plan, the following terms shall have the
meanings assigned to them below, unless a different meaning is plainly indicated
by the context:
SECTION 2.1 ACQUIRED COMPANY means any company which is
acquired by, or merged or consolidated with, a Participating Employer and
designated as an Acquired Company by the Board of Directors of Hudson City
Savings Bank.
SECTION 2.2 ACQUIRED EMPLOYEE means a person who is employed
by an Acquired Company at the time when such company becomes an Acquired Company
and who becomes an employee of a Participating Employer immediately thereafter.
An Acquired Employee whose employment by all Participating Employers terminates
for any reason and who is subsequently reemployed by a Participating Employer
shall not be considered an Acquired Employee following such re-employment.
<PAGE> 5
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SECTION 2.3 AFFILIATED EMPLOYER means the Bank; any
corporation which is a member of a controlled group of corporations (as defined
in section 414(b) of the Code) that includes the Bank; any trade or business
(whether or not incorporated) that is under common control (as defined in
section 414(c) of the Code) with the Bank; 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 Bank; 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 Bank; and any other entity that is required to be aggregated with the
Bank pursuant to regulations under section 414(o) of the Code.
SECTION 2.4 BANK means Hudson City Savings Bank (or its
successors or assigns, whether by merger, consolidation, sale of assets,
statutory receivership, operation of law or otherwise).
SECTION 2.5 BOARD means the Board of Directors of Hudson City
Savings Bank.
SECTION 2.6 CAUSE means, with respect to the conduct of an
Employee in connection with his employment with any Participating Employer,
personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty
involving personal profit, intentional failure to perform stated duties, willful
violation of any law, rule or regulation (other than traffic violations or
similar offenses) or final cease and desist order in each case as measured
against standards generally prevailing at the relevant time in the savings and
community banking industry; provided, however, that following a Change of
Control of the Bank or a company which owns 100% of the outstanding common stock
of the Bank, an Employee shall not be deemed to have been discharged for Cause
unless and until he shall have received a written notice of termination from the
Board, accompanied by a resolution duly adopted by affirmative vote of a
majority of the entire Board at a meeting called and held for such purpose
(after reasonable notice to the Employee and a reasonable opportunity for the
Employee to make oral and written presentations to the members of the Board, on
his own behalf, or through a representative, who may be his legal counsel, to
refute the grounds for the proposed determination) finding that in the good
faith opinion of the Board grounds exist for discharging the Employee for
"Cause".
SECTION 2.7 CHANGE OF CONTROL means the happening of any of
the following events:
(a) the occurrence of any event upon which any "person" (as
such term is used in sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended ("Exchange Act")), other than (A) a
trustee or other fiduciary holding securities under an employee benefit
plan maintained for the benefit of employees of Hudson City Bancorp,
Inc.; (B) a corporation owned, directly or indirectly, by the
stockholders of Hudson City Bancorp, Inc. in substantially the same
proportions as their ownership of stock of Hudson City Bancorp, Inc.;
or (C) any group constituting a person in which employees of Hudson
City Bancorp, Inc. are substantial members, becomes the "beneficial
owner" (as defined in Rule 13d-3 promulgated under the Exchange Act),
directly or indirectly, of securities issued
<PAGE> 6
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by Hudson City Bancorp, Inc. representing 25% or more of the combined
voting power of all of Hudson City Bancorp, Inc.'s then outstanding
securities; or
(b) the occurrence of any event upon which the individuals who
on the date the Plan is adopted are members of the Board, together with
individuals whose election by the Board or nomination for election by
Hudson City Bancorp, Inc.'s stockholders was approved by the
affirmative vote of at least two-thirds of the members of the Board
then in office who were either members of the Board on the date this
Plan is adopted or whose nomination or election was previously so
approved, cease for any reason to constitute a majority of the members
of the Board, but excluding, for this purpose, any such individual
whose initial assumption of office is in connection with an actual or
threatened election contest relating to the election of directors of
Hudson City Bancorp, Inc. (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act); or
(c) the shareholders of Hudson City Bancorp, Inc. approve
either:
(i) a merger or consolidation of Hudson City Bancorp,
Inc. with any other corporation, other than a merger or
consolidation following which both of the following conditions
are satisfied:
(A) either (1) the members of the Board of
Hudson City Bancorp, Inc. immediately prior to such
merger or consolidation constitute at least a
majority of the members of the governing body of the
institution resulting from such merger or
consolidation; or (2) the shareholders of Hudson City
Bancorp, Inc. own securities of the institution
resulting from such merger or consolidation
representing 80% or more of the combined voting power
of all such securities then outstanding in
substantially the same proportions as their ownership
of voting securities of Hudson City Bancorp, Inc.
before such merger or consolidation; and
(B) the entity which results from such
merger or consolidation expressly agrees in writing
to assume and perform Hudson City Bancorp, Inc.'s
obligations under the Plan; or
(ii) a plan of complete liquidation of Hudson City
Bancorp, Inc. or an agreement for the sale or disposition by
Hudson City Bancorp, Inc. of all or substantially all of its
assets; and
(d) any event that would be described in section 2.7(a), (b)
or (c) if "Hudson City Savings Bank" were substituted for "Hudson City
Bancorp, Inc." therein; and
<PAGE> 7
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(e) with respect to an Acquired Company, the transaction by
which such company becomes an Acquired Company.
In no event, however, shall the transaction by which the Bank converts from a
mutual savings bank to a stock savings bank, or any transaction by which a
company wholly owned by the Bank becomes the parent company of the Bank be
deemed a Change of Control.
SECTION 2.8 COMMITTEE means the Employee Benefit Plans
Committee described in section 4.3.
SECTION 2.9 EMPLOYEE means any person, including an Officer,
who is employed by a Participating Employer, other than: (a) a person who is
compensated primarily on an hourly, daily, commission, fee or retainer basis;
(b) a person who is classified as an "independent contractor" by a Participating
Employer even if considered an employee under applicable law; (c) a person who
is a mortgage field originator; (d) an Employee receiving long-term disability
benefits; (e) a person who is a building service employee who is regularly
required to spend more than 50% of his working time servicing real estate other
than offices of a Participating Employer or any Acquired Company; or (f) a
person who has an employment contract, change of control agreement or other
agreement with the Bank or who is covered by other programs which provide
severance benefits or by their terms exclude such person from participation in
this Plan.
SECTION 2.10 FDI ACT means the Federal Deposit Insurance Act,
as the same may be amended from time to time, and the corresponding provisions
of any successor statute.
SECTION 2.11 INVOLUNTARY SEVERANCE means (a) the discharge or
dismissal of an Employee by a Participating Employer other than for Cause, or
the resignation by the Employee from his position with a Participating Employer,
which resignation the Employee is asked or compelled by a Participating Employer
to tender other than for Cause; or (b) termination of employment at an
Employee's election within sixty (60) days after any action following a Change
of Control which, either alone or together with other actions, results in: (i)
the reduction in the Employee's Salary by more than 20%; (ii) the assignment of
the Employee to a job requiring relocation of his residence in order to be able
to commute without unreasonable difficulty, expense or inconvenience; (iii) the
assignment of the Employee to duties or to an office or working space which
involves unreasonable personal embarrassment; or (iv) a material adverse change
in the Employee's title, position or responsibilities at a Participating
Employer.
SECTION 2.12 OFFICER means, in the case of an Employee, an
officer of a Participating Employer and in the case of an Acquired Employee, a
person who is an officer of the Acquired Company immediately prior to the
closing of the transaction pursuant to which such company becomes an Acquired
Company.
SECTION 2.13 PARTICIPATING EMPLOYER means the Bank, and any
successor thereto and any other Affiliated Employer which, with the prior
written approval of the Board of Directors of Hudson City Savings Bank and
subject to such terms and conditions as may be imposed by the Board of Directors
of Hudson City Savings Bank, shall adopt this Plan.
<PAGE> 8
-5-
SECTION 2.14 PLAN means this Severance Pay Plan of Hudson City
Savings Bank, as the same may be amended from time to time.
SECTION 2.15 PLAN ADMINISTRATOR means the Committee or any
person, committee, corporation or organization designated in section 4.2, or
appointed pursuant to section 4.2, to perform the responsibilities of that
office.
SECTION 2.16 PLAN YEAR means the twelve month period ending
August 31st.
SECTION 2.17 SALARY means (a) in the case of an Employee, the
basic annual rate of salary of the Employee for his services to a Participating
Employer (excluding overtime, bonuses and other forms of additional
compensation) attained by the Employee during his employment with a
Participating Employer, and (b) in the case of an Acquired Employee, the basic
annual rate of salary of the Acquired Employee for his services to the Acquired
Company (excluding overtime, bonuses and other forms of additional compensation)
in effect for the Acquired Employee immediately before his employer becomes an
Acquired Company.
SECTION 2.18 SERVICE means service rendered by an Employee
that is, or would be, recognized under the Employee Stock Ownership Plan of
Hudson City Savings Bank for vesting purposes as of the date of the Employee's
Involuntary Severance.
ARTICLE III
BENEFITS
SECTION 3.1 SEVERANCE BENEFITS FOR EMPLOYEES.
(a) An Employee with at least one (1) year of Service whose
employment with all Participating Employers is terminated under circumstances
constituting an Involuntary Severance, other than for Cause, as a result of,
within twelve months following or within three (3) months prior to a Change of
Control with respect to Hudson City Savings Bank or Hudson City Bancorp, Inc.
shall be entitled to the following benefits:
(i) if the Employee is an Officer of a Participating Employer,
he shall be entitled, as severance pay, to a lump sum payment in an
amount equal to one week's Salary multiplied by twice the number of
weeks as the Employee has whole years of Service; or
(ii) if the Employee is not an Employee described in section
3.1(a)(i), he shall be entitled, as severance pay, to a lump sum
payment in an amount equal to one week's Salary multiplied by the same
number of weeks as the Employee has whole years of Service;
<PAGE> 9
-6-
provided, however, that in no event shall any Employee described in section
3.1(a)(i) or (ii) receive, as severance pay under this Plan, a lump sum payment
representing less than two weeks' Salary or more than twenty-six weeks' Salary.
The lump sum severance payment shall be made as soon as practicable after, but
in no case later than five business days following, the Employee's Involuntary
Severance.
(b) Each Employee who is entitled to payments under section
3.1(a)(i) or (ii) shall, for the period of one year following the Employee's
Involuntary Severance or until comparable benefits are provided by a new
employer, continue to be eligible for all of the health and life insurance
benefits provided under his Participating Employer's employee benefit plans and
programs as if he were still an Employee and working at his Participating
Employer.
(c) Each Employee who is entitled to benefits under section
3.1(a)(i) or (ii) shall also be entitled to outplacement services as follows:
(i) an Employee described in section 3.1(a)(i) shall be
entitled to utilize the services of an outplacement counseling firm at
his Participating Employer's expense for assistance in preparing a
resume, developing interviewing skills, identifying career
opportunities and evaluating job offers and for access to office and
secretarial facilities, provided that the fee for such services shall
not exceed 12% of the Employee's Salary; and
(ii) if the Employee is not an Employee described in section
3.1(a)(i), he shall be entitled to utilize the services of an
outplacement counseling firm at his Participating Employer's expense,
for assistance in preparing a resume, developing interviewing skills,
identifying career opportunities and evaluating job offers, provided
that the fee for such services shall not exceed 6% of the Employee's
Salary or $1,000, whichever is higher.
The outplacement firm utilized by any Employee or group of Employees shall be
selected by the Plan Administrator or, if permitted by the Plan Administrator,
selected by the Employee or Employees subject to the Plan Administrator's
approval.
SECTION 3.2 SEVERANCE BENEFITS FOR ACQUIRED EMPLOYEES.
(a) An Acquired Employee with at least one (1) year of Service
whose employment with all Participating Employers is terminated under
circumstances constituting an Involuntary Severance, other than for Cause,
within twelve months following a Change of Control with respect to the relevant
Acquired Company shall be entitled to the following benefits:
(i) if the Employee was an Officer of the Acquired Company, he
shall be entitled, as severance pay, to a lump sum payment in an amount
equal to one week's Salary multiplied by twice the number of weeks as
the Employee has whole years of Service; or
<PAGE> 10
-7-
(ii) if the Employee was not an Employee described in section
3.2(a)(i), he shall be entitled, as severance pay, to a lump sum
payment in an amount equal to one week's Salary multiplied by the same
number of weeks as the Employee has whole years of Service;
provided, however, that in no event shall any Employee described in section
3.2(a)(i) or (ii) receive, as severance pay under this Plan, a lump sum payment
representing less than two weeks' Salary or more than twenty-six weeks' Salary.
The lump sum severance payment shall be made as soon as practicable after, but
in no case later than five business days following, the Employee's Involuntary
Severance.
(b) Each Employee who is entitled to payments under section
3.2(a)(i) or (ii) shall, for the period of one year following the Employee's
Involuntary Severance or until comparable benefits are provided by a new
employer, continue to be eligible for all of the health and life insurance
benefits provided under his Participating Employer's employee benefit plans and
programs as if he were still an Employee and working at his Participating
Employer.
(c) Each Employee who is entitled to benefits under section
3.2(a)(i) or (ii) shall also be entitled to outplacement services as follows:
(i) an Employee described in section 3.2(a)(i) shall be
entitled to utilize the services of an outplacement counseling firm at
his Participating Employer's expense for assistance in preparing a
resume, developing interviewing skills, identifying career
opportunities and evaluating job offers and for access to office and
secretarial facilities, provided that the fee for such services shall
not exceed 12% of the Employee's Salary; and
(ii) if the Employee is not an Employee described in section
3.2(a)(i), he shall be entitled to utilize the services of an
outplacement counseling firm at his Participating Employer's expense,
for assistance in preparing a resume, developing interviewing skills,
identifying career opportunities and evaluating job offers, provided
that the fee for such services shall not exceed 6% of the Employee's
Salary or $1,000, whichever is higher.
The outplacement firm utilized by any Employee or group of Employees shall be
selected by the Plan Administrator or, if permitted by the Plan Administrator
selected by the Employee or Employees subject to the Plan Administrator's
approval.
SECTION 3.3 VESTING.
The benefits to be provided under this Article III of the Plan
to an Employee shall be completely vested and nonforfeitable upon the occurrence
of a Change of Control as described in sections 2.7(a), (b), (c) or (d).
<PAGE> 11
-8-
SECTION 3.4 BENEFITS CONTINGENT ON EXECUTION OF RELEASE.
The provision of severance, insurance and outplacement
assistance benefits under the Plan to any Employee or Acquired Employee shall be
subject to the condition that the Employee or Acquired Employee execute and
deliver to the Plan Administrator an instrument, in such form as the Plan
Administrator shall prescribe, which shall include a release in favor of the
Participating Employers. Such release shall include, but not be limited to, a
release of any claims which the Employee or Acquired Employee may have against
any Participating Employer under the Age Discrimination in Employment Act of
1967, as amended; the Fair Labor Standards Act, as amended; the Worker
Adjustment Retraining and Notification Act, as amended; the Civil Rights Act of
1964, as amended; Title VII of the Civil Rights Act of 1866, as amended; and any
other federal, state or local law, rule or regulation under which the Employee
or Acquired Employee may have a claim arising out of his employment with a
Participating Employer or the termination of such employment. No Participating
Employer shall have any obligation to provide benefits under this Plan to any
Employee or Acquired Employee who fails or refuses to sign and deliver such a
release.
ARTICLE IV
ADMINISTRATION
SECTION 4.1 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
and the Board. This Article IV 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 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 4.2 PLAN ADMINISTRATOR.
There shall be a Plan Administrator, who shall be the Employee
Benefit Plans Committee, or such Employee or officer as may be designated by the
Committee, as hereinafter provided, and who shall, subject to the
responsibilities of the Committee and the Board, have the
<PAGE> 12
-9-
responsibility for the day-to-day control, management, operation and
administration of the Plan. 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 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 or evidence of any matter from any
person as may be necessary or appropriate in the administration of the
Plan;
(e) To prepare and file, distribute or furnish all reports,
plan descrip tions, and other information concerning the Plan,
including, without limitation, filings with the Secretary of Labor and
employee communications as shall be required of the Plan Administrator
under ERISA;
(f) To determine any question arising in connection with the
Plan, including any question of Plan interpretation, and the Plan
Administrator's decision or action in respect thereof shall be final
and conclusive and binding upon all persons having an interest under
the Plan; provided however, that any question relating to inconsistency
or omission in the Plan, or 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) To review and dispose of claims under the Plan filed
pursuant to section 4.4 and appeals of claims decisions pursuant to
section 4.5;
(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 the person entitled thereto, to
direct the application of any amount so payable to the use or benefit
of such person in any manner that the Plan Administrator may deem
advisable or to direct in the Plan Administrator's 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 Committee or the Board; and
<PAGE> 13
-10-
(j) To perform any duty or take any action which is allocated
to the Plan Administrator under the Plan.
The Plan Administrator shall have the power and authority necessary or
appropriate to carry out his responsibilities. The Plan Administrator may resign
only be giving at least 30 days' prior written notice of resignation to the
Committee, and such resignation shall be effective on the date specified in such
notice.
SECTION 4.3 COMMITTEE RESPONSIBILITIES.
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 4.5 of the Plan, taken from the
decisions of the Plan Administrator;
(c) To hear and decide questions, including interpretation of
the Plan, as may be referred to the Committee by the Plan
Administrator;
(d) 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;
(e) To report and make recommendations to the Board regarding
changes in the Plan, including changes in the operation and management
of the Plan;
(f) To designate an Alternate Plan Administrator to serve in
the event that the Plan Administrator is absent or otherwise unable to
discharge his responsibilities;
(g) To remove and replace the Plan Administrator or Alternate,
or both of them, and to fill a vacancy in either office;
(h) To discharge such other responsibilities or follow such
directions as may be assigned or given by the Board; and
(i) To perform any duty or to take any action which is
allocated to the Committee under the Plan.
<PAGE> 14
-11-
The committee shall have the power and authority necessary or appropriate to
carry out its responsibilities.
SECTION 4.4 CLAIMS PROCEDURE.
Any claim relating to benefits under the Plan shall be filed
with the Plan Administrator on a form prescribed by it. 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 4.5 CLAIMS REVIEW PROCEDURE.
Any person whose claim filed pursuant to section 4.4 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 4.4, or, if such notice is not
provided, within 60 days after such claim is deemed denied pursuant to section
4.4. 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.
<PAGE> 15
-12-
Any such decision of the Committee shall be binding upon the claimant and the
Participating Employer, and the Plan Administrator shall take appropriate action
to carry out such decision.
SECTION 4.6 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 a
Participating Employer.
SECTION 4.7 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 4.5 prior
to initiating any claim for judicial review.
(b) No bond or other security shall be required of the Plan
Administrator, or any officer or employee of a Participating 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 4.7(c) pursuant to ERISA, neither the Plan Administrator, nor any
officer or employee of a Participating Employer to whom fiduciary
responsibilities are allocated by a Named 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 4.5, 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 Committee, or taking any other action under the Plan.
(e) Any person, group of persons, committee, corporation or
organization may serve in more than one fiduciary capacity with respect to the
Plan.
<PAGE> 16
-13-
(f) 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 the Bank and 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 V
MISCELLANEOUS
SECTION 5.1 RIGHTS OF EMPLOYEES.
No Employee shall have any right or claim to any benefit under
the Plan except in accordance with the provisions of the Plan. The establishment
of the Plan shall not be construed as conferring upon any Employee or other
person any legal right to a continuation of employment or to any terms or
conditions of employment, nor as limiting or qualifying the right of a
Participating Employer to discharge any Employee.
SECTION 5.2 NON-ALIENATION OF BENEFITS.
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.
SECTION 5.3 NON-DUPLICATION OF BENEFITS.
No provisions in this Plan shall be deemed to duplicate any
compensation or benefits provided under any agreement, plan or program covering
the Employee to which a Participating Employer 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 5.4 CONSTRUCTION.
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 the masculine gender may be read as referring equally to the feminine gender
or the neuter. Any reference to an Article or section number shall refer to an
Article or section of the Plan, unless otherwise indicated.
<PAGE> 17
-14-
SECTION 5.5 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 Plan, the text shall control.
SECTION 5.6 GOVERNING LAW.
The Plan shall be construed, administered and enforced
according to the laws of the State of New Jersey without giving effect to the
conflict of laws principles thereof, except to the extent that such laws are
preempted by federal law.
SECTION 5.7 SEVERABILITY.
The invalidity or unenforceability, in whole or in part, of
any provision of this Plan shall in no way affect the validity or enforceability
of the remainder of such provision or of any other provision of this Plan, and
any provision, or part thereof, deemed to be invalid or unenforceable shall be
reformed as necessary to render it valid and enforceable to the maximum possible
extent.
SECTION 5.8 TERMINATION OR AMENDMENT.
(a) The Participating Employers expect to continue the Plan
indefinitely, but, subject to the provisions of section 4 hereunder, the
Participating Employers expressly reserve the right to terminate or amend the
Plan, in whole or in part, at any time by action of the Board; provided,
however, that no such amendment or termination which adversely affects the
current or prospective rights of any Employee shall be effective earlier than
six (6) months after written notice thereof is given to such Employee.
(b) In the event that a corporation or trade or business other
than Hudson City Savings Bank shall adopt this Plan, such corporation or trade
or business shall, by adopting the Plan, empower Hudson City Savings 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
this section 5.8(a); 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.
<PAGE> 18
-15-
SECTION 5.9 REQUIRED REGULATORY PROVISIONS.
The following provision is included for the purposes of
complying with various laws, rules and regulations applicable to the Bank:
Notwithstanding anything herein contained to the contrary, any
payments to the Employee by the Bank, whether pursuant to this Plan or
otherwise, are subject to and conditioned upon their compliance with
section 18(k) of the FDI Act and any regulations promulgated
thereunder.
If and to the extent that the foregoing provision shall cease to be required by
applicable law, rule or regulation, the same shall become inoperative
automatically as though eliminated by formal amendment of the Plan.
SECTION 5.10 WITHHOLDING.
Payments from this Plan shall be subject to all applicable
federal, state and local income withholding taxes.
SECTION 5.11 STATUS AS WELFARE BENEFIT PLAN UNDER ERISA.
This Plan is an "employee welfare benefit plan" within the
meaning of section 3(1) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA") and shall be construed, administered and enforced according
to the provisions of ERISA.
<PAGE> 1
EXHIBIT 10.9
ESOP RESTORATION PLAN
OF
HUDSON CITY SAVINGS BANK
--------------------------------
EFFECTIVE ON THE DATE OF CONVERSION
<PAGE> 2
TABLE OF CONTENTS
Page
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 1.6 CHANGE IN CONTROL............................................2
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 CONTRIBUTIONS.......................................3
SECTION 1.13 ERISA........................................................3
SECTION 1.14 ESOP.........................................................3
SECTION 1.15 EXCHANGE ACT.................................................3
SECTION 1.16 FAIR MARKET VALUE OF A SHARE.................................4
SECTION 1.17 FORMER MEMBER................................................4
SECTION 1.18 MEMBER.......................................................4
SECTION 1.19 PARTICIPATING EMPLOYER.......................................4
SECTION 1.20 PLAN.........................................................4
SECTION 1.21 SHARE........................................................4
SECTION 1.22 STOCK UNIT...................................................4
SECTION 1.23 TERMINATION OF SERVICE.......................................4
ARTICLE II
MEMBERSHIP
SECTION 2.1 ELIGIBILITY FOR MEMBERSHIP...................................5
SECTION 2.2 COMMENCEMENT OF MEMBERSHIP...................................5
SECTION 2.3 TERMINATION OF MEMBERSHIP....................................5
(i)
<PAGE> 3
Page
ARTICLE III
BENEFITS TO MEMBERS
SECTION 3.1 SUPPLEMENTAL ESOP BENEFITS...................................6
SECTION 3.2 RESTORED ESOP BENEFITS......................................7
ARTICLE IV
DEATH BENEFITS
SECTION 4.1 SUPPLEMENTAL ESOP DEATH BENEFITS.............................8
SECTION 4.2 RESTORED ESOP DEATH BENEFITS.................................8
SECTION 4.3 BENEFICIARIES................................................9
ARTICLE V
TRUST FUND
SECTION 5.1 ESTABLISHMENT OF TRUST.......................................9
SECTION 5.2 CONTRIBUTIONS TO TRUST.......................................9
SECTION 5.3 UNFUNDED CHARACTER OF PLAN..................................10
ARTICLE VI
ADMINISTRATION
SECTION 6.1 THE COMMITTEE...............................................10
SECTION 6.2 LIABILITY OF COMMITTEE MEMBERS AND THEIR DELEGATES..........11
SECTION 6.3 PLAN EXPENSES...............................................11
SECTION 6.4 FACILITY OF PAYMENT.........................................11
ARTICLE VII
AMENDMENT AND TERMINATION
SECTION 7.1 AMENDMENT BY THE BANK.......................................12
SECTION 7.2 TERMINATION.................................................12
SECTION 7.3 AMENDMENT OR TERMINATION BY OTHER EMPLOYERS.................12
(ii)
<PAGE> 4
Page
ARTICLE VIII
MISCELLANEOUS PROVISIONS
SECTION 8.1 CONSTRUCTION AND LANGUAGE...................................13
SECTION 8.2 HEADINGS....................................................13
SECTION 8.3 NON-ALIENATION OF BENEFITS..................................13
SECTION 8.4 INDEMNIFICATION.............................................13
SECTION 8.5 SEVERABILITY................................................14
SECTION 8.6 WAIVER......................................................14
SECTION 8.7 GOVERNING LAW...............................................14
SECTION 8.8 WITHHOLDING.................................................14
SECTION 8.9 NO DEPOSIT ACCOUNT..........................................14
SECTION 8.10 RIGHTS OF EMPLOYEES.........................................14
SECTION 8.11 STATUS OF PLAN UNDER ERISA..................................15
(iii)
<PAGE> 5
BENEFIT RESTORATION PLAN
OF
HUDSON CITY SAVINGS BANK
ARTICLE I
DEFINITIONS
Wherever appropriate to the purposes of the Plan, capitalized
terms shall have the meanings assigned to them under the ESOP; 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 the Bank; any
corporation which is a member of a controlled group of corporations (as defined
in section 414(b) of the Code) that includes the Bank; any trade or business
(whether or not incorporated) that is under common control (as defined in
section 414(c) of the Code) with the Bank; 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 Bank; 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 Bank; and any other entity that is required to be aggregated with the
Bank 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 benefits payable by
a tax-qualified defined benefit plan pursuant to section 415(b) of the Code; (c)
the maximum limitation on annual additions to a tax-qualified defined
contribution plan pursuant to section 415(c) of the Code; (d) 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; (e) the maximum
limitation on annual elective deferrals to a qualified cash or deferred
arrangement pursuant to section 402(g) of the Code; (f) 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 (g) 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 Hudson City Savings Bank and any
successor thereto.
SECTION 1.4 BENEFICIARY means any person, other than a Member
or Former Member, who is determined to be entitled to benefits under the terms
of the Plan.
SECTION 1.5 BOARD means the Board of Directors of the Bank.
<PAGE> 6
SECTION 1.6 CHANGE IN CONTROL means the happening of any of
the following events:
(a) the occurrence of any event upon which any "person" (as
such term is used in sections 13(d) and 14(d) of the Exchange Act),
other than (i) a trustee or other fiduciary holding securities under an
employee benefit plan maintained for the benefit of employees of Hudson
City Bancorp, Inc.; (ii) a corporation owned, directly or indirectly,
by the stockholders of the Hudson City Bancorp, Inc. in substantially
the same proportions as their ownership of stock of Hudson City
Bancorp, Inc.; or (iii) any group constituting a person in which
employees of the Hudson City Bancorp, Inc. are substantial members,
becomes the "beneficial owner" (as defined in Rule 13d-3 promulgated
under the Exchange Act), directly or indirectly, of securities issued
by Hudson City Bancorp, Inc. representing 25% or more of the combined
voting power of all of Hudson City Bancorp, Inc.'s then outstanding
securities; or
(b) the occurrence of any event upon which the individuals who
were members of the Board as of the date this Plan was adopted,
together with individuals whose election by the Board or nomination for
election by Hudson City Bancorp, Inc.'s shareholders was approved by
the affirmative vote of at least two-thirds of the members of the Board
then in office who were either members of the Board on the date this
Plan is adopted or whose nomination or election was previously so
approved, cease for any reason to constitute a majority of the members
of the Board, but excluding, for this purpose, any such individual
whose initial assumption of office is in connection with an actual or
threatened election contest relating to the election of directors of
Hudson City Bancorp, Inc. (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act); or
(c) the shareholders of Hudson City Bancorp, Inc. approve
either:
(i) a merger or consolidation of Hudson City Bancorp,
Inc. with any other corporation, other than a merger or
consolidation following which both of the following conditions
are satisfied:
(A) either (1) the members of the Board of
Hudson City Bancorp, Inc. immediately prior to such
merger or consolidation constitute at least a
majority of the members of the governing body of the
institution resulting from such merger or
consolidation; or (2) the shareholders of Hudson City
Bancorp, Inc. own securities of the institution
resulting from such merger or consolidation
representing 80% or more of the combined voting power
of all such securities then outstanding in
substantially the same proportions as their
2
<PAGE> 7
ownership of voting securities of Hudson City
Bancorp, Inc. before such merger or consolidation;
and
(B) the entity which results from such
merger or consolidation expressly agrees in writing
to assume and perform Hudson City Bancorp, Inc.'s
obligations under the Plan; or
(ii) a plan of complete liquidation of Hudson City
Bancorp, Inc. or an agreement for the sale or disposition by
Hudson City Bancorp, Inc.
of all or substantially all of its assets; and
(d) any event that would be described in section 1.6(a), (b)
or (c) if "Hudson City Savings Bank" were substituted for "Hudson City
Bancorp, Inc." therein.
SECTION 1.7 CODE means the Internal Revenue Code of 1986
(including the corresponding provisions of any prior law or succeeding law).
SECTION 1.8 COMMITTEE means the Employee Benefit Plans
Committee of the Board of Directors of the Bank, 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 1.9 COMPANY means Hudson City Bancorp, Inc. or any
successor thereto.
SECTION 1.10 ELIGIBLE EMPLOYEE means an Employee who is
eligible for participation in the Plan in accordance with the provisions of
Article II.
SECTION 1.11 EMPLOYEE means any person, including an officer,
who is employed by any Affiliated Employer.
SECTION 1.12 EMPLOYER CONTRIBUTIONS means contributions by any
Participating Employer to 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
Hudson City Savings Bank, as amended from time to time (including the
corresponding provisions of any successor qualified employee stock ownership
plan adopted by the Bank).
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).
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<PAGE> 8
SECTION 1.16 FAIR MARKET VALUE OF A SHARE means, with respect
to a Share on a specified date:
(a) the final quoted 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 like Shares are listed or admitted to trading; or
(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 determined by an appraiser independent of
any Participating Employer and experienced and expert in the field of
corporate appraisal.
SECTION 1.17 FORMER MEMBER means a person whose membership in
the Plan has terminated as provided under section 2.3.
SECTION 1.18 MEMBER means any person who is participating in
the Plan in accordance with its terms.
SECTION 1.19 PARTICIPATING EMPLOYER means the Bank and any
successor thereto and the Company and any successor thereto and any other
Affiliated Employer which, with the prior written approval of the Board of
Directors of Hudson City Savings Bank and subject to such terms and conditions
as may be imposed by the Board of Directors of Hudson City Savings Bank, shall
adopt this Plan.
SECTION 1.20 PLAN means the ESOP Restoration Plan of Hudson
City Savings Bank, as amended from time to time (including the corresponding
provisions of any successor plan adopted by the Bank or Company).
SECTION 1.21 SHARE means a share of common stock, par value
$.01 per share, of Hudson City 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 Affiliated Employers as an Employee, whether by
resignation, discharge, death, disability, retirement or otherwise.
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<PAGE> 9
ARTICLE II
MEMBERSHIP
SECTION 2.1 ELIGIBILITY FOR MEMBERSHIP.
Only Eligible Employees may be or become Members. An Employee
shall become an Eligible Employee if:
(a) he holds the office of Chief Executive Officer, Chief
Operating Officer or Executive Vice President of the Bank or the
Company, or he has been designated an Eligible Employee by resolution
of the Board; and
(b) he is a Member of the ESOP 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 MEMBERSHIP.
An Employee shall become a Member 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 Member.
SECTION 2.3 TERMINATION OF MEMBERSHIP.
Membership in the Plan shall cease on the earlier of (a) the
date of the Member's Termination of Service or (b) the date on which he ceases
to be an Eligible Employee.
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<PAGE> 10
ARTICLE III
BENEFITS TO MEMBERS
SECTION 3.1 SUPPLEMENTAL ESOP BENEFITS.
(a) A Member 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:
(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
Member'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 Member'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 Member'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 Member's account
under the ESOP;
adjusted for earnings and losses as provided section 3.1(b); provided, however,
that if the Member dies before the payment of such supplemental ESOP 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,
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 Member'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 Member'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
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<PAGE> 11
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 3.1(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 quarter at the highest rate of interest credited on
certificates of deposit issued by the Bank during that calendar
quarter; or
(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
Member, in such investments at such time or times as the Member shall
have designated in such form and manner as the Committee shall
prescribe;
provided, however, that to the extent that the Member 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 Member shall be paid an
amount per Stock Unit equal to the dividend per Share received by the Member
under the ESOP, at substantially the same time as such dividend is paid under
the ESOP.
(c) The supplemental ESOP benefit payable to a Member
hereunder shall be paid in a single lump sum as soon as practicable following
the last day of the calendar year in which the Member's Termination of Service
occurs and shall be in an amount equal to the balance credited to his
bookkeeping account. Notwithstanding the foregoing, a Member 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 3.2 RESTORED ESOP BENEFITS.
(a) A Member who satisfies section 2.1 shall be entitled, upon
his Termination of Service upon or after attaining normal retirement age or
being eligible for an early retirement benefit under the terms of the Retirement
Plan, to 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 Member's account under the terms of the ESOP had the
Member continued in the employ of the Bank measured from the date the
Member was first eligible to participate in the ESOP until the ESOP
loan was repaid in full and the final allocation of Shares acquired
when the ESOP loan was made; and then
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<PAGE> 12
(ii) reducing the number of Shares projected in section
3.2(a)(i) above, by the actual number of Shares allocated to the Member
under the terms of the ESOP as of the last day of the final plan year
of the ESOP in which the Member was an active Member for purposes of
allocations under the ESOP; and
(iii) multiplying the number of Shares determined in section
3.2(a)(ii) above by the average of the closing prices of such Shares at
the end of each fiscal quarter during the preceding twelve fiscal
quarters immediately preceding (or such fewer quarters as the Member
has been a Member) the Member's retirement.
(b) The projection of Shares required by section 3.2(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 Member is performed.
(c) The restored ESOP benefit payable to a Member hereunder
shall be paid in a single lump sum as soon as practicable following the last day
of the calendar year in which the Member's Termination of Service occurs and
shall be in an amount determined pursuant to section 3.2(a) above.
Notwithstanding the foregoing, a Member 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 ESOP DEATH BENEFITS.
If a Member who is eligible for a supplemental ESOP benefit
under section 3.1 dies before the payment of such benefit begins, a supplemental
ESOP benefit shall be payable to the Member's Beneficiary under this Plan in
amount equal to the balance credited to the bookkeeping account established for
the Member under section 3.1(b). Such benefit shall be paid in a single lump as
soon as practicable following the death of the Member, and the bookkeeping
account established for such Member pursuant to section 3.1(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 RESTORED ESOP DEATH BENEFITS.
If a Member who is eligible for a restored ESOP benefit under
section 3.2 dies before the payment of such benefit begins, a restored ESOP
benefit shall be payable to the Member's Beneficiary under this Plan in amount
determined pursuant to section 3.2(b). Such benefit shall be paid in a single
lump as soon as practicable following the death of the Member.
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<PAGE> 13
SECTION 4.3 BENEFICIARIES.
A Member or Former Member may designate a Beneficiary or
Beneficiaries to receive any survivor benefits payable under the Plan upon his
death. Any such designation, or 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 Member, and shall thereafter be irrevocable;
provided, however, that any change or revocation shall be effective only if
received by the Committee prior to the Member's or Former Member's death. If a
Member or Former Member shall die without having effectively named a
Beneficiary, he shall be deemed to have named his estate as his sole
Beneficiary. If a Member or Former Member 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 Member or Former Member shall be deemed to have
survived the Beneficiary. If a Member or Former Member designates more than one
Beneficiary, all shall be deemed to have equal shares unless the Member or
Former Member 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 Members, Former Members 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
Member, Former Member or Beneficiary from a trust established under this section
5.1 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 5.1, 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.
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<PAGE> 14
SECTION 5.3 UNFUNDED CHARACTER OF PLAN.
Notwithstanding the establishment of a trust pursuant to
section 5.1, the Plan shall be unfunded for purposes of the Code and ERISA. Any
liability of the Bank, the Company or another Participating Employer to any
person with respect to benefits payable under the Plan shall be based solely
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 other Participating 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 Participating 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 Members, 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
10
<PAGE> 15
benefits, and to provide a full and fair review to any Member 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;
(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 Participating 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 Participating 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 Participating Employer. Any person claiming benefits under the Plan shall
look solely to the Participating 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 Bank.
SECTION 6.4 FACILITY OF PAYMENT.
If the Company is unable to make payment to any Member, Former
Member Beneficiary, or any other person to whom a payment is due under the Plan,
because it cannot ascertain the identity or whereabouts of such Member, Former
Member, 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 Member, Former Member, Beneficiary, or other
person shown on the records of the Employer), such payment and all subsequent
payments otherwise due to such Member, Former Member, Beneficiary or other
11
<PAGE> 16
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
Member, Former Member, Beneficiary, or other person is identified or located.
ARTICLE VII
AMENDMENT AND TERMINATION
SECTION 7.1 AMENDMENT BY THE BANK.
The Bank 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 Member, Former Member 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 Bank also reserve 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 Member terminated employment
with the Bank, the Company and all other Participating 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 7.1 and 7.2; 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.
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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 used in the plural may be read in the singular,
and the masculine gender may be read as referring equally to refer to the
feminine gender or the neuter. Any reference to an Article or section shall
refer 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 Member, Former Member 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 Member, Former
Member 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 Member, Former Member 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
Member, Former Member 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
Participating Employer under the terms of the Plan.
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<PAGE> 18
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 and enforced
according to the laws of the State of New Jersey without giving effect to the
conflict of laws principles thereof, except to the extent that such laws are
preempted by federal law. Any payments made pursuant to this Plan are subject to
and conditioned upon their compliance with 12 U.S.C. Section 1828(k) and any
regulations promulgated thereunder.
SECTION 8.8 WITHHOLDING.
Payments from this Plan shall be subject to all applicable
federal, state and local income withholding taxes.
SECTION 8.9 NO DEPOSIT ACCOUNT.
Nothing in this Plan shall be held or construed to establish
any deposit account for any Member or any deposit liability on the part of the
Bank. Members' rights hereunder shall be equivalent to those of a general
unsecured creditor of each Employer.
SECTION 8.10 RIGHTS OF EMPLOYEES.
No Employee shall have any right or claim to any benefit under
the Plan except in accordance with the provisions of the Plan. The establishment
of the Plan shall not be construed as conferring upon any Employee or other
person any legal right to a continuation of employment or to any terms or
conditions of employment, nor as limiting or qualifying the right of a
Participating Employer to discharge any Employee.
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<PAGE> 19
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> 1
EXHIBIT 10.10
HUDSON CITY Savings Bank
HUDSON CITY SAVINGS BANK
OUTSIDE DIRECTORS CONSULTATION PLAN
(As Amended and Restated)
1. PURPOSE. The purpose of the Plan is to promote the growth and
profitability of the Bank and the Company by ensuring that Hudson City Savings
Bank and Hudson City Bancorp, Inc. will be able to continue to have, as a
resource, the advice and expertise of those persons who have served in the
capacity of Outside Director of the Bank or the Company upon such persons
retirement from the Board of Directors.
2. DEFINITIONS.
(a) "Bank" means Hudson City Savings Bank.
(b) "Change of Control" means the occurrence of any of the
following events:
(i) the consummation of a reorganization, merger or
consolidation of the Company 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
<PAGE> 2
HUDSON CITY Savings Bank -2-
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;
(iii) a complete liquidation or dissolution of the Company;
(iv) the occurrence of any event if, immediately following
such event, at least 50% of the members of the Board of Directors of
the Company do not belong to any of the following groups:
(A) individuals who were members of the Board of
Directors of the Company on the date of this Agreement; or
(B) individuals who first became members of the Board
of Directors of the Company after the date of this Agreement
either:
(1) upon election to serve as a member of
the Board of Directors of the Company by affirmative
vote of three-quarters of the
<PAGE> 3
HUDSON CITY Savings Bank -3-
members of such board, or of a nominating committee
thereof, in office at the time of such first
election; or
(2) upon election by the shareholders of the
Board of Directors of the Company to serve as a
member of such board, but only if nominated for
election by affirmative vote of three-quarters of the
members of the Board of Directors 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 Directors of the Company; or
(v) any event which would be described in section 2(b)(i),
(ii), (iii) or (iv) if the term "Bank" were substituted for
the term "Company" therein.
In no event, however, shall a Change of Control be deemed to have occurred as a
result of any acquisition of securities or assets of the Company, the Bank, or a
subsidiary of either of them, by the Company, the Bank, or any subsidiary of
either of them, or by any employee benefit plan maintained by any of them. For
purposes of this section 2(b), the term "person" shall have the meaning assigned
to it under sections 13(d)(3) or 14(d)(2) of the Exchange Act.
(c) "Company" means Hudson City Bancorp, Inc.
<PAGE> 4
HUDSON CITY Savings Bank -4-
(d) "Consulting Director" means a Participant who has
satisfied the eligibility requirements of Paragraph 3 and who agrees to provide
Consulting Services to the Bank or the Company.
(e) "Consulting Services" means advice and consultation
provided to the Bank or the Company as requested from time to time by the Board
of Directors or any officer designated by the Board, not to exceed two (2) days
a month.
(f) "Monthly Benefit" means an amount equal to five percent
(5%) of the individual fee paid for attendance at a monthly Board Meeting to
Outside Directors as of the Participants' Termination Date, multiplied by the
number of full years of service as an Outside Director but not to exceed 20
years. For example, the monthly benefit for 12 years of service would be 60% and
the monthly benefit for 20 or more years of service would be 100%. (See
paragraph 3. ELIGIBILITY, for minimum service requirement).
(g) "Outside Director" means a person who is not an officer or
employee of the Bank and who is elected or appointed to the office of Director
of the Bank or the Company.
(h) "Participant" means a Consulting Director who meets the
eligibility requirements of Paragraph 3 and is entitled to receive benefits
hereunder.
(i) "Plan" means the Hudson City Savings Bank Outside
Directors Consultation Plan.
(j) "Termination Date" means the date of a Participant's
termination from service as an Outside Director of the Bank and the Company by
retirement or resignation, and notification to the Board of Directors of
Participants intention to serve as a Consulting Director.
<PAGE> 5
HUDSON CITY Savings Bank -5-
3. ELIGIBILITY. Any person who has served as an outside Director of the
Bank or the Company for a period of ten years and has attained the age of 65 and
who submits a written notice to the Board of Directors of his or her intention
to provide Consulting Services, shall be a Participant in the Plan. Any person
who has been removed for cause or is required to resign or is terminated due to
banking law or regulations, regardless of length of service, shall not be a
Participant in the Plan and shall have no rights to benefit hereunder; provided,
however, that termination of service following a failure to be elected to the
Board of Directors of the Company or the Bank by stockholders shall not be
deemed a removal for cause, a required resignation or a termination due to
banking law or regulations.
A Director's years of service as an Outside Manager of Orange
Savings Bank shall be counted toward eligibility and the calculation of the
monthly benefit. A Director's years of service as an Outside Manager of Hudson
City Savings Bank prior to its conversion from a mutual savings bank to a stock
savings bank shall be counted toward eligibility and the calculation of the
Monthly Benefit. A Director's years of service as an Outside Director of Hudson
City Bancorp, Inc. shall be counted toward eligibility and the calculation of
the Monthly Benefit (but shall not be double-counted in the case of simultaneous
service for the Bank and the Company).
4. BENEFITS. An eligible Participant shall, effective upon his or her
Termination Date, be designated a Consulting Director without any action
required by the Board of Directors, and such Consulting Director shall be paid a
Monthly Benefit in equal monthly installments, for the number of months such
Participant has agreed to provide Consulting Services as a Consulting Director,
not to exceed one hundred and twenty (120) months. At the expiration of the
period for which the
<PAGE> 6
HUDSON CITY Savings Bank -6-
Participant is entitled to benefits under this paragraph, his or her status as a
Consulting Director shall cease.
5. DEATH OF A PARTICIPANT. If a Participant dies, then the equivalent
of six (6) Monthly Benefits payable hereunder shall be paid to the Participants'
surviving spouse, if any, in one lump sum.
6. PROVISIONS UPON A CHANGE OF CONTROL. Notwithstanding anything in the
Plan to the contrary, the Plan shall terminate on the effective date of any
Change of Control. In such event:
(a) No Director or Participant (including a Director or
Participant whose service has terminated and who has
previously given a notice of intent to provide consulting
services) shall have any further obligation to provide
consulting services.
(b) Each Participant whose benefits are in pay status shall
receive a lump sum payment in full settlement of all payments
remaining to be paid. Such lump sum payment shall be equal to
the lump sum present value of the number of payments remaining
to be paid as of the date of the Change of Control, computed
assuming that payments are made monthly in advance and using a
discount rate equal to the applicable federal short-term rate
prescribed under section 1274 of the Internal Revenue Code for
the month prior to the month in which the Change of Control
occurs.
(c) Each Outside Director (but not Consulting Director) in service
on the date of a Change of Control whose benefits are not in
pay status shall receive a lump sum payment equal to a lump
sum present value of 120 monthly payments
<PAGE> 7
HUDSON CITY Savings Bank -7-
in an amount equal to the Monthly Benefit calculated as if the
date of the Change of Control was the Director's Termination
Date and such Director had 20 years of service as a Director.
Such lump sum payment shall be computed assuming the payments
are made monthly in advance beginning on the date of the
Change of Control and using a discount rate equal to the
applicable federal short-term rate prescribed under section
1274 of the Internal Revenue Code for the month prior to the
month in which the Change of Control occurs.
7. ASSUMPTION BY COMPANY. Effective upon the conversion of the Bank
from a mutual savings bank to a stock savings bank, the Company accepts this
Plan for the benefit of its Outside Directors and assumes all obligations
arising under this Plan deriving therefrom.
8. ADMINISTRATION. The Plan shall be administered by the Board of
Directors of the Bank. All interpretations of the Plan by the Board of Directors
shall be final and binding upon all persons having an interest in the Plan.
9. AMENDMENT. The Board of Directors of the Bank may amend, modify,
suspend or terminate this Plan at any time provided, however, that any
amendment, modification, suspension or termination shall not affect a
Participant then receiving payments pursuant to paragraph 4. In the event that a
corporation or trade or business other than Hudson City Savings Bank shall adopt
this Plan, such corporation or trade or business shall, by adopting the Plan,
empower Hudson City Savings 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 this Plan; provided, however, that any such
corporation or trade or business may, by action of its board of directors
<PAGE> 8
HUDSON CITY Savings Bank -8-
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.
<PAGE> 1
Exhibit 10.11
HUDSON CITY SAVINGS BANK
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
FOR
____________________________________
Hudson City Savings Bank ("Hudson") hereby establishes the
Supplemental Retirement Plan set forth in this instrument for
___________________________________________ and his beneficiaries as set forth
in the Employees' Retirement Plan of Hudson City Savings Bank.
1. Type of Plan
It is intended that this Plan shall be an unfunded plan maintained
by Hudson primarily for the purpose of providing deferred compensation benefits
for an individual management or highly compensated employee. The benefits
provided herein shall be paid exclusively out of Hudson's general assets.
Hudson's obligations to the Member or his beneficiaries shall be represented
merely by entries on Hudson's books of account, shall not be deemed a trust or
escrow account and the rights of the Member or his beneficiaries with respect
thereto shall be limited to that of an unsecured creditor of Hudson.
2. Membership
Eligibility for participation in this Plan shall be limited to
________________________________ a management employee of Hudson (herein
referred to as "Member").
3. Normal Retirement Benefit Formula
Upon retirement at Normal Retirement Date, the annual benefits
payable under this Supplemental Plan shall be equal to two percent (2%) of the
Member's Average Annual Compensation for each year of service, to a maximum of
thirty (30) years, or sixty percent (60%), reduced by the Member's Annual
Accrued Benefit as of such date as a participant in the Employees' Retirement
Plan of Hudson City Savings Bank. In computing a Member's Normal Retirement
Benefit, the following rules shall be followed:
a) The Member's Average Annual Compensation shall be the
average of the Member's Average Annual Compensation for the three (3) highest
consecutive years of service received by him during the ten (10) year period
ending with his termination of employment.
b) The Member's Annual Compensation shall be the aggregate of
all payments for services, excluding bonuses, commissions and overtime pay, paid
to the Member
<PAGE> 2
Page 2
during the year, and excluding contributions to the Employees' Retirement Plan
of Hudson City Savings Bank or other special or fringe benefits.
c) A Member shall be credited with a year of service for each
calendar year in which he works 1000 hours.
4. Normal Retirement Date
A Member shall be entitled to retire and to receive the Normal
Retirement Benefits provided by this Plan upon attainment of age sixty-five
(65).
5. Early Retirement Date
A Member shall be entitled to retire early and to receive the Early
Retirement Benefit provided by this Plan upon satisfaction of either of the
following:
a) attainment of age sixty (60) and completion of at least
five (5) years of service with Hudson, or
b) completion of thirty (30) years of service with the Bank.
6. Early Retirement Benefit
A Member's Early Retirement Benefit is the Member's Normal
Retirement Benefit computed as of the Member's Early Retirement Date, reduced by
five-twelfths of one percent for each of the first 120 months by which the
commencement date of the payment of the Early Retirement Benefits precedes the
commencement date for payment of the Normal Retirement Benefits under the Plan,
and further actuarially reduced for payment before age 55.
7. Disability Retirement
If the Member suffers "total and permanent disability" within the
meaning of the Employees' Retirement Plan of Hudson City Savings Bank and has
completed ten (10) years of service, he shall be entitled to receive a
Disability Benefit under this Plan. The Disability Benefit shall be the amount
which would be paid to the Member as a Normal Retirement Benefit, payable upon
his Disability Retirement Date.
8. Benefits Payable Upon Termination of Employment
a) A member who terminates his employment with the Bank on or
after his Normal Retirement Date, death or disability shall have a 100%
nonforfeitable right to his accrued benefit determined as of the date of his
termination of employment.
<PAGE> 3
Page 3
b) A member who terminates his employment prior to the
termination of this Plan for any reason other than those described in (a) above,
with less than 10 years of service, shall forfeit all rights to benefits under
this Plan. A member who has completed 10 years of service and who terminates his
employment with the Bank shall retain 100% nonforfeitable right to his accrued
benefit.
9. Change in Control
In the event of a change in control all benefits payable under this
plan shall become 100% nonforfeitable and no actuarial reductions will be
applied to those benefits. "Change in Control of the Bank" shall be deemed to
occur where and if:
a) The Bank merges with another Bank, or if the Bank converts
to a common stock entity;
b) 50% or more of the individuals who are directors of the
Corporation cease to constitute the Board during any period of two consecutive
years.
10. Pre-Retirement Joint and Survivor Annuity
In the event a Member dies before his retirement under this Plan and
he has completed 10 years of service, his spouse, or child up to age 21 if
surviving spouse dies, shall be entitled to receive a 100% Joint and Survivor
Annuity. The amount of the annuity is payable to the spouse in the same amount
which would have been paid to the Member if he had retired on the day before the
date of his death and begun to receive a "100% Joint and Survivor Annuity".
Under this form of annuity the Member receives an annuity for his life and, at
his death, his spouse (or child up to age 21 if surviving spouse dies) shall
receive 100% of the annuity.
Written election may be made to waive this preretirement joint and
survivor annuity. Such waiver will not be valid unless endorsed by members
spouse's notarized (or witnessed) consent. Election may be revoked at any time.
11. Form of Benefits
a) The normal form of benefits provided by this Plan for a
married member shall be a monthly 100% Joint and Survivor Annuity payable for
the life of the Member, beginning on the first day of the month coincident with
or next following the date of his retirement hereunder, and, upon his death, the
monthly payment shall continue to his surviving spouse for his
<PAGE> 4
Page 4
or her life, or child up to age 21 if surviving spouse dies. For an unmarried
member, the normal form of benefit shall be a monthly annuity for the life of
the member and ending with the monthly payment immediately preceding the date of
his death.
b) With the consent of Hudson, a member may receive an
alternative form of benefit which is the actuarial equivalent of the normal form
of benefit. This request for an alternative form of benefit must be made in
writing and shall be made effective only if the Participants' spouse
acknowledges the effect of such election and consents to it in writing. Such
consent must be witnessed by a member of the Committee or a notary public. Any
revocation will not preclude the Participant from making another election to
receive the 100% Joint and Survivor annuity (normal form) if the election is
made sixty (60) days prior to commencement of benefits.
c) The actuarial equivalent value of any benefit provided
under this Plan, including the death benefit shall be computed on the basis of
an eight percent (8%) interest assumption and the Unisex Pension Mortality Table
for 1984 with ages set back two years.
12. Non-Alienation of Benefits
Benefits under this Plan shall not be subject in any way to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or
charge, and any action by way of anticipating, alienating, selling,
transferring, assigning, pledging, encumbering, or charging the same shall be
void and of no effect; nor shall any such benefit be in any manner subject to
the debts, contracts or liabilities of the person entitled to such benefit.
However, in the event that a Member's benefits are garnished or attached by
order of any court of competent jurisdiction, Hudson shall be relieved from any
liability arising with respect to the amount due the Member or any beneficiary
hereunder, by reason of Hudson obeying any such order.
13. Amendment and Termination
This Plan may not be modified, amended, revised, revoked, terminated
or otherwise changed except by an instrument in writing which is executed by
both Member and an authorized officer of Employer.
<PAGE> 5
Page 5
14. Participation in Other Plans
Nothing contained herein shall preclude or disqualify Member from
participating in any employee benefit plan or other employee fringe benefit
program otherwise made generally available to Hudson's employees.
15. Governing Law
The implementation and interpretation of this Plan shall be governed
by and enforced in accordance with the laws of the State of New Jersey.
16. Binding Effect and Assignability
The rights and obligations of the parties hereto under this Plan
shall inure to the benefit of and shall be binding upon the heirs, successors
and assigns of both Hudson and Member, but shall not be assignable without the
written consent of both parties.
IN WITNESS WHEREOF, Hudson City Savings has caused this instrument
to be executed by its duly authorized officers and the individual party hereto
has executed this instrument this ____ day of_________________ , .
HUDSON CITY SAVINGS BANK
By: _____________________________________
Attest: _________________________________
Witness: Member:
_________________________________ _________________________________________
<PAGE> 1
EXHIBIT 10.12
HUDSON CITY SAVINGS BANK
INCORPORATED MARCH 27th 1868
HUDSON CITY SAVINGS BANK
ANNUAL INCENTIVE PLAN
Effective Date January 1, 1987
-1-
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I - THE PURPOSE............................................... -3-
ARTICLE II - PLAN SUMMARY.............................................. -3-
ARTICLE III - PARTICIPATION............................................. -4-
ARTICLE IV - DETERMINATION OF AWARD SIZE............................... -5-
ARTICLE V - PERFORMANCE MEASUREMENTS.................................. -7-
ARTICLE VI - DISTRIBUTION OF AWARDS.................................... -8-
ARTICLE VII - GENERAL PROVISIONS........................................ -8-
</TABLE>
-2-
<PAGE> 3
ARTICLE I
THE PURPOSE
1.1 The Annual Incentive Plan of Hudson City Savings Bank is designed to:
- Motivate selected individuals to achieve planned results;
- Share in increased growth and overall profitability of the Bank; and
- Reward individuals for achieving results.
ARTICLE II
PLAN SUMMARY
2.1 The Plan provides annual incentive awards based on the achievement of the
Bank's pre-established financial goals.
2.2 The Annual Incentive Plan (the "Plan") of the Hudson City Savings Bank
(the "Bank") is effective January 1, 1987. The annual Plan Year runs
concurrent with the Bank's fiscal year, January 1 to December 31, unless
otherwise recommended by the Salary Committee (the "Committee") and
approved by the Board of Directors (the "Board").
2.3 An Incentive pool is established based on the Bank's financial objectives.
The amount of the incentive pool is dependent on the attainment of
specified financial performance levels. The performance levels are
recommended by the Committee and approved by the Board. The "Annual
Target" is a specified level of net operating income (before taxes and
extraordinary items, after interest expense).
2.4 Participation is limited to a select group of key executives who are able
to directly influence the financial performance of the Bank.
2.5 The target award size established for each Participant is comparable to
market levels provided to similar participants as a percentage of base
salary. In addition to a target award, a threshold and maximum award is
specified for each Participant.
Example:
<TABLE>
<CAPTION>
Threshold Target Maximum
--------- ------ -------
<S> <C> <C> <C>
Chairman 17.5% 35.0% 52.5%
</TABLE>
-3-
<PAGE> 4
ARTICLE III
PARTICIPATION
3.1 Eligibility to participate in the Plan is limited to key executive
officers with direct influence on the Bank's earnings and long-term
growth. Participation in the Plan will be recommended by the Committee and
approved by the Board.
3.2 The positions included in the Plan are:
(a) Chief Executive Officer
(b) Chief Operating Officer
(c) Executive Vice President(s)
(d) Senior Vice President(s)
In the future, additional positions may be included in the Plan as deemed
appropriate by the Board.
3.3 An Individual may participate in the Plan beginning the first of the month
following his appointment to an eligible position.
3.4 A Participant must be actively employed on the date of distribution in
order to receive an award under this Plan, except as provided under
Section 7.1.
-4-
<PAGE> 5
ARTICLE IV
DETERMINATION OF AWARD SIZE
4.1 Each Participant will be eligible to earn an annual award which is a
percentage of his/her respective salary on January 1 of the Plan Year or
his/her employment commencement date, whichever is later.
4.2 In the event a Participant is promoted to another eligible position during
the year, the award will be prorated to reflect the individual's level of
incentive opportunity for the complete calendar months in each position.
4.3 The guideline incentives levels by position are as follows:
<TABLE>
<CAPTION>
Incentive Opportunity
----------------------------------------
Position Threshold Target Maximum
-------- --------- ------ -------
<S> <C> <C> <C>
Chief Executive Officer 17.5% 35.0% 52.5%
Chief Operating Officer 15.0 30.0 45.0
Executive Vice President 12.5 25.0 37.5
Senior Vice President 10.0 20.0 30.0
</TABLE>
The threshold award level represents the minimum payout under the Plan,
assuming that the Bank's performance warrants a payout under the terms of
the Plan.
4.4 The actual size of each Participant's incentive award will be calculated
on a pro rata basis reflecting the relationship between incentive
opportunity percentages and actual performance attained.
4.5 An example of a prorated award for the Chairman position assuming an
actual net operating income of $24 million and a base salary of $275,000
is as follows:
<TABLE>
<CAPTION>
PERFORMANCE LEVELS
(Net Operating Income)
------------------------------------------------------------------
Threshold Target Maximum
--------- ------ -------
<S> <C> <C>
$10 million $20 million $40 million
</TABLE>
-5-
<PAGE> 6
<TABLE>
<CAPTION>
AWARD LEVELS - Chairman
(Percent of Base Salary)
------------------------------------------------------------------
Threshold Target Maximum
--------- ------ -------
<S> <C> <C>
17.5% 35.0% 52.5%
</TABLE>
Award percentage equals: 20% of difference between the target and
maximum award percentages, plus the
target percentage. In this example,
3.5% + 35.0% = 38.5%.
Actual Perf. - Target Perf. = $24 MM - $20 MM - 20%,
--------------------------- ---------------
Maximum Perf. - Target Perf. $40 MM - $20 MM
20% x (Maximum Award - Target Award) + Target Award =
20% x (52.5% - 35.0%) + 35.0% = 38.5%
Award amount equals: Base salary multiplied by the award
percentage. In this example,
$275,000 x 38.5% = $105,900
(rounded to the next 100).
4.6 The annual incentive percentages indicated in Section 4.3 are a guideline;
each Participant's actual incentive levels will be recommended by the
Committee and approved by the Board for each Plan Year.
-6-
<PAGE> 7
ARTICLE V
PERFORMANCE MEASUREMENTS
5.1 An incentive pool will be funded based on the level of profitability
achieved by the Bank over an established performance threshold.
5.2 An Annual Target for the Bank's net operating income (before taxes and
extraordinary items, after interest expense) will be projected annually by
Senior Management, reviewed by the Committee and approved by the Board (by
the end of March) for the Plan Year ending the following December 31.
5.3 A threshold performance level and maximum performance level based on the
Annual Target will be established annually by the Committee and approved
by the Board. The threshold level will ensure that the Bank has obtained
an acceptable level of income before any incentives are paid out.
5.4 An example of the annual performance levels based on a threshold set at
50%of the Annual Target and a maximum set at 200% of the Annual is as
follows:
<TABLE>
<CAPTION>
PERFORMANCE LEVELS (Net Operating Income Before Taxes)
------------------------------------------------------------------
Threshold Target Maximum
--------- ------ -------
<S> <C> <C>
$10 million $20 million $40 million
</TABLE>
Any performance levels attained that are between the established levels
will receive pro rata treatment in calculating participant awards.
-7-
<PAGE> 8
ARTICLE VI
DISTRIBUTION OF AWARDS
6.1 Distribution of earned awards will be made within a reasonable period of
time following the close of the Bank's fiscal year and approval of
financial results by the Board.
6.2 In lieu of receiving a distribution of a cash award, each Participant may
voluntarily make a prior irrevocable election to defer all or part of
his/her potential award until some later specified date, in accordance
with a voluntary deferral agreement. The Participant's election must be
made prior to the beginning of the Plan Year for which the award will be
made.
6.3 Interest will be credited on undistributed awards subsequent to the
original date of distribution, at the rate specified in the deferral
agreement. Interest will be compounded on a quarterly basis. Preferred
earned awards and accrued interest will remain as general assets of the
Bank and will not be segregated or funded.
ARTICLE VII
GENERAL PROVISIONS
7.1 A Participant who retires, dies or becomes totally disabled will receive a
pro rata incentive award based on the number of complete months employed
in an eligible position during the Plan Year.
7.2 A Participant will forfeit all rights to benefits payable under the Plan
if the employee terminates for any reason (other than indicated in 7.1)
including voluntary termination, layoff, termination for cause; or the
individual being guilty of gross misconduct, misuse of Bank funds or
property, engagement in illegal activities affecting the Bank or
conviction of a felony or other serious crime.
7.3 In the event that accrued incentive funds are returned to the Bank due to
the termination and forfeiture of any allocated awards, such accrued funds
will be retained by the Bank.
7.4 Nothing contained in the Plan shall be construed to limit or affect in any
manner or degree the normal and usual powers of management, including the
right to terminate the employment of a Participant, or to remove any
Participant from the Plan.
7.5 The judgement of the Committee in administering this Plan and final
approval by the Board will be binding upon all officers and employees of
the Bank, whether or not selected as Participants under the terms of this
Plan.
7.6 The Bank maintains the sole right to modify, and/or discontinue this Plan
as it deems necessary. Such modifications or Plan termination will not
affect the payment of any awards which would have been earned and would
otherwise be payable up to the date of change or Plan termination.
-8-
<PAGE> 1
Exhibit 10.13
HUDSON CITY SAVINGS BANK
LONG-TERM INCENTIVE PLAN
Incorporating all amendments through January 14, 1999
ABRIDGED; DISTRIBUTION:
-----------------------
VICE PRESIDENTS
<PAGE> 2
Page 1 of 9
HUDSON CITY SAVINGS BANK
LONG-TERM INCENTIVE PLAN
1. PURPOSE OF THE PLAN
The purpose of the Long-Term Incentive Plan (the "Plan") is to recognize
key executives who are able to make substantial contributions to the
long-term success and financial strength of Hudson City Savings Bank ("the
Bank"). The Plan is designed to reward participants for their efforts to
further the Bank's long-term growth. The Plan also is intended to provide
a financial incentive which will stimulate key executives to remain with
the Bank.
2. PLAN SUMMARY
2.1 A long-term incentive plan in which "units" are granted to selected
executives (the "Participants").
2.2 Units have no guaranteed value when granted. Units may be given a
minimum value and appreciate over this minimum value in accordance
with a Unit Valuation Award Matrix ("Award Matrix") recommended by
the Salary Committee (the "Committee") and approved by the Board of
Managers (the "Board"). The number of units granted and the
frequency of grants will be determined by the Board.
2.3 The Committee will recommend, for approval by the Board, the
performance measures and the performance levels corresponding to
such measures for each performance period. The measures for the
first performance period (1987-1989) are surplus ratio and growth in
total deposits, with the relative value of the performance measures
indicated on the Award Matrix.
2.4 At the end of each three (3) year performance period, the value of
units will be determined in accordance with the established Award
Matrix. Participants will be paid a cash amount equivalent to the
unit value as specified in the award matrix multiplied by the number
of units granted, unless the Participant has made a prior election
to defer the earned award until retirement.
2.5 Units will vest to a Participant at the end of each three (3) year
performance period. Units not vested are subject to forfeiture in
the event the Participant terminates employment, except as provided
under Section 8.2.
2.6 The Plan is authorized for a twelve (12) year period beginning
January 1, 1999 and ending December 31, 2010, however, at the end of
any three (3) year performance period, the Plan may be amended or
terminated by board vote.
<PAGE> 3
Page 2 of 9
HUDSON CITY SAVINGS BANK
LONG-TERM INCENTIVE PLAN
3. DEFINITION OF TERMS
3.1 "Surplus ratio" is defined as the ratio of current surplus to total
deposits at the conclusion of the performance period.
3.2 "Growth in total deposits" is defined as the average annual growth
in total deposits, after crediting of dividends, for the designated
three (3) year performance period.
4. ELIGIBILITY
4.1 Participation in the Plan is limited to employees holding key
management positions which have significant and on-going impact on
the Bank's long-term growth. In determining the positions to which
units may be granted, thy Committee shall take into consideration
the duties of the respective positions, their present and potential
contribution to the Bank's growth, and such other factors as the
Committee deems relevant.
4.2 Each eligible position will be assigned to an award tier based on
organizational relationships and potential contribution. The
positions included in the Plan and corresponding tier assignments
are:
<TABLE>
<CAPTION>
TIER POSITION
---- --------
<S> <C>
1 Chief Executive Officer
2 Chief Operating Officer
3 Executive Vice President(s)
4 Senior Vice President(s)
5 First Vice President(s)
6 Vice President(s)
</TABLE>
5. ADMINISTRATION OF THE PLAN
5.1 Subject to the provisions set forth herein, the Plan shall be
administered by the Committee of the Board. Any Committee member who
is eligible to participate in the Plan shall not be eligible to vote
on matters related to the Plan.
<PAGE> 4
Page 3 of 9
HUDSON CITY SAVINGS BANK
LONG-TERM INCENTIVE PLAN
5.2 The Committee shall have the authority to:
- Recommend the number of performance units to be granted;
- Grant units at the beginning or during any performance period;
- Approve the valuation of granted units at the conclusion of
each performance period;
- Determine the duration and purpose of leaves of absence which
may be granted to a Participant without constituting a
termination of his/her employment for purposes of the Plan;
- Interpret the Plan's provisions;
- Recommend Plan amendments, as deemed necessary, to the Board
for approval; and
- Make all other determinations necessary and advisable for
administration of the Plan.
5.3 The Committee shall advise the Board of all determinations set forth
in Section 5.2. Furthermore, any amendment to the Plan requires
prior approval by the Board.
5.4 A majority of the Committee shall constitute a quorum and all
determinations of the Committee shall be made by a majority of its
members.
6. SIZE OF UNIT GRANTS
6.1 Each grant under this Plan shall be made in terms of a whole number
of performance units.
6.2 The number of performance units to be granted to each Participant at
the start of a performance period will be derived from a calculation
based on the Participant's salary as of January 1 of the first year
of the performance period, the length of the performance period, the
unit value at target level as provided under Section 9.2, and the
target competitive level of long-term incentive award opportunity as
determined by the Board.
6.3 Long-term incentive award levels are targeted for each tier and
position. Illustrated below is the level for Vice Presidents.
[Targeted award levels for other positions are restricted to the
Committee plan document.]
<PAGE> 5
Page 4 of 9
HUDSON CITY SAVINGS BANK
LONG-TERM INCENTIVE PLAN
<TABLE>
<CAPTION>
TARGET LONG-TERM AWARD AS A
TIER POSITION PERCENTAGE OF ANNUAL BASE SALARY
---- -------- --------------------------------
<S> <C> <C>
1 Chief Executive Officer 35%
2 Chief Operating Officer 30%
3 Executive Vice President(s) 25%
4 Senior Vice President(s) 20%
5 First Vice President(s) 15%
6 Vice President(s) 10%
</TABLE>
6.4 An example of a unit award calculation for a Vice President position
(Tier 5), assuming a base salary of $55,000. and a unit value of $25
at target, is as follows:
Step 1: Calculation of Target Award
Salary X Targeted Payout Level X Length of Performance
Period = Target Award $55,000 X .10 X 3 = $16,500
Step 2: Calculation of Number of Units
Target Award / Unit Value at Target = Number of Units
Awarded for Performance Period
$16,500/$25 = 660 Units
6.5 For purposes of calculating the initial unit grants for the first
performance period of the Plan (1987-1989), Participants' base
salaries as of January 1, 1987 will be used.
6.6 The size of the unit grant awarded to an executive hired or promoted
into an eligible position following the commencement of a
performance period will be prorated, based on the Participant's then
current salary.
6.7 Unit grants will be awarded during the performance period to a
Participant to reflect increases in base salary during the
performance period so that the final number of units awarded will
reflect the Participant's average salary over the length of the
performance period.
<PAGE> 6
Page 5 of 9
HUDSON CITY SAVINGS BANK
LONG-TERM INCENTIVE PLAN
7. FREQUENCY OF UNIT GRANTS
7.1 Units are granted at three (3) year intervals, that is, at the
beginning of the Plan's adoption (as of January 1, 1987) and at the
beginning of the fourth, seventh, and tenth fiscal years immediately
subsequent.
7.2 Unit grants will be awarded on a pro rata basis during a performance
period in the event that a Participant is promoted from one position
to a higher position resulting in a change in award tiers.
7.3 Unit grants will be awarded on a pro rata basis during a performance
period, to an executive hired or promoted into an eligible position
following the commencement of a performance period.
8. VESTING
8.1 Units granted, at the beginning of a performance period or during a
performance period, shall vest at the end of the three (3) year
performance period except as provided in Sections 8.2 and 8.3.
8.2 In the event of termination of employment by reason of death, total
disability, or retirement, vesting will accelerate for units granted
pro rata, based on the period of actual service during the
performance period.
8.3 A Participant who terminates employment other than as indicated in
Section 8.2 prior to the conclusion of a performance period, will
forfeit all rights to receive any awards granted during the current
performance period.
8.4 Prior to the start of a performance period, a Participant may make a
written irrevocable election to defer all or a portion of the value
of the units granted into an interest-bearing, deferred compensation
plan. The Committee may, at its discretion, limit the length of the
deferral period.
8.5 Deferred amounts will accrue interest. Interest will be compounded
on the last business day of each quarter at the highest Certificate
of Deposit rate paid by the Bank during that quarter.
8.6 A Participant may petition the Committee in the event that
extraordinary circumstances arise subsequent to his/her irrevocable
election to defer. If hardship is determined, the Committee may
grant a premature distribution to the Participant, prior to the
standard distribution at retirement.
<PAGE> 7
Page 6 of 9
HUDSON CITY SAVINGS BANK
LONG-TERM INCENTIVE PLAN
8.7 No grant under the Plan, nor any interest in a Participant's
account, may be pledged, sold or otherwise transferred to any other
person, except as specifically authorized in the Plan.
8.8 Granted units which are subsequently forfeited prior to vesting will
revert to the Bank.
9. VALUATION OF UNITS
9.1 At the beginning of each performance period, the Board establishes
the threshold, target and maximum levels associated with each
performance measure and applicable to each grant. In addition, the
Committee establishes an Award Matrix that indicates unit values at
various levels of performance.
9.2 Performance levels and corresponding unit values for the 1987-1989
performance period are:
<TABLE>
<CAPTION>
PERFORMANCE MEASURE THRESHOLD LEVEL TARGET LEVEL MAXIMUM LEVEL
- ------------------- --------------- ------------ -------------
<S> <C> <C> <C>
Surplus Ratio 8.0% 8.5% 9.0%
3-Year Average Annual
Growth in Deposits 4.0% 6.0% 8.0%
Unit Value $ 10 $ 25 $ 50
</TABLE>
9.3 Units have no guaranteed value when granted. Units will be given a
minimum value of $10.00 if the stated threshold performance levels
associated with the Bank's performance measures (surplus ratio and
three (3) year average annual growth in total deposits for the first
performance period) are attained at the conclusion of the applicable
performance period.
If the Bank's surplus ratio and/or three (3) year average annual
growth in total deposits is below the stated performance threshold,
the units will not receive any value. Units may appreciate in value
above the minimum value if the Bank's surplus ratio and/or three (3)
year average annual growth in total deposits is in excess of the
stated performance threshold at the conclusion of the performance
period.
9.4 The appreciated value is calculated as follows:
(A) Using end-of-year financial results for the Bank, the level of
each performance measurement achieved for the three (3) fiscal
years designated as the performance period will be determined.
<PAGE> 8
Page 7 of 9
HUDSON CITY SAVINGS BANK
LONG-TERM INCENTIVE PLAN
(B) The final unit value will be determined from the Award Matrix
approved for the applicable grant.
9.5 The Award Matrix, based on the 1987-1989 performance measures
indicated in Section 9.2, is presented in Exhibit A.
10. CASHING-IN OF UNITS
10.1 A lump-sum cash payment shall be made to each Participant for the
full value of granted units within four (4) months after the close
of the performance period, except to the extent that the value of
the granted units shall have been deferred pursuant to Section 8.4.
10.2 In the event of a change in control of the Bank, resulting in a
change in the composition of the Board by twenty percent (20%) or
more, caused by a sale, merger, or an initial public offering, the
date of the change shall signify the close of a performance period
and an immediate vesting of granted but as yet non-vested units.
11. NOTIFICATIONS
11.1 The Committee, upon making a grant of performance units, shall
notify the employee in writing that he/she is a Participant in the
Plan, indicating the number of units granted to the individual, the
date of grant, the performance period, the vesting schedule, the
performance measurements and the Award Matrix for unit valuation.
Notice to the Participant will also include a summary of the Plan.
11.2 The Committee shall notify each Participant of his/her status with
regard to the Plan following each change in the number of units
awarded.
11.3 Following the conclusion of each three (3) year performance period,
the Committee shall notify each Participant regarding the final
valuation of his/her award.
12. SALE, MERGER, OR CONVERSION TO PUBLICLY-TRADED STOCK
12.1 In the event of a change of ownership of the Bank resulting from an
initial public offering, sale or merger with another company, all
units granted, but not yet vested, will immediately vest to the
Participants and the unit value will be calculated using the
appropriate performance measures (i.e., surplus ratio and average
total deposit growth) as of the date of change of ownership.
12.2 In the event that the Bank makes an initial public offering and
stock is issued, the Board of Managers may at its discretion,
authorize a conversion of outstanding performance units (units
granted but not yet cashed-in as provided under
<PAGE> 9
Page 8 of 9
HUDSON CITY SAVINGS BANK
LONG-TERM INCENTIVE PLAN
Section 10.1). At such time, the Board would also establish a fixed
conversion rate and the date of such conversion for all outstanding
units.
13. GENERAL PROVISIONS
13.1 If a Participant terminates employment due to permanent disability,
death, or retirement, the individual, his/her designated
beneficiary, or the estate shall be eligible to receive a pro rata
award, based on the period of actual service during the performance
period, to be distributed at the conclusion of the performance
period. The value of the units shall be calculated in accordance
with the established Award Matrix at the conclusion of the
performance period.
13.2 Nothing contained in this Plan shall be construed to limit or effect
in any manner or degree the normal and usual powers of management,
including the right to terminate the employment of any Participant
or employee, or to remove any Participant from the Long-Term
Incentive Plan.
13.3 The judgment of the Committee in administering this Plan shall be
final and binding upon all officers and employees of the Bank,
whether or not selected as Participants under the terms of this
Plan.
13.4 The Board maintains the sole right to modify and/or discontinue this
Plan as it deems necessary. Such modifications and/or termination
will not affect the payment of any grants which have been awarded
and/or deferred up to the date of change or Plan termination and
which are otherwise payable.
13.5 Nothing in this Plan is intended to be in conflict with existing
Internal Revenue Codes, Standard Accounting Principles, or related
laws or regulations. Subsequent changes to these laws and
regulations will be incorporated into the Plan in order to ensure
that it remains in compliance.
<PAGE> 10
Page 9 of 9
HUDSON CITY SAVINGS BANK
LONG-TERM INCENTIVE PLAN
This page intentionally omitted.
<PAGE> 1
Exhibit 10.14
HUDSON CITY SAVINGS BANK
POST RETIREMENT DEATH BENEFIT FOR SENIOR OFFICERS
(a form of Deferred Compensation)
This Agreement entered into this _______ day of _____________ 19__ between
Hudson City Savings Bank, a corporation having its principle place of business
at West 80 Century Road, Paramus, N.J. (herein called the Bank and
_______________________________________________ herein called the Senior
Officer).
WITNESSETH:
WHEREAS, Senior Officer has been employed by the Bank since _________________
and by reason thereof has acquired experience and knowledge of considerable
value to the Bank, and
WHEREAS, the Bank wishes to offer an inducement to Senior Officers to remain in
its employ by providing a Death Benefit, a form of Deferred Compensation, such
benefit to be compensation beyond his regular salary for services which he has
rendered or will hereafter render, and such benefit may at the Bank's
discretion, be funded in part or whole by a life insurance policy on the life of
the Senior Officer or by other appropriate assets purchased by the Bank for
purposes of this Agreement, and
WHEREAS, if Senior Officer continues in the employ of the Bank until his
retirement,
NOW THEREFORE, it is mutually agreed as follows:
(1) The Bank which currently employs the Senior Officer at the time of
this Agreement, and Senior Officer enjoying such employment, accept the
conditions which are hereinafter set forth in the Agreement.
(2) As compensation for his services the Bank hereby agrees to provide
Senior Officer, and Senior Officer hereby agrees to accept from the Bank a Death
Benefit payable upon his death following retirement as defined in paragraph (3).
This benefit to be determined by the Board of Managers of the Bank. Such Death
Benefit to be according to officer levels as follows:
<TABLE>
<S> <C>
Assistant Vice President $25,000
Vice President 35,000
Senior or Executive Vice President 40,000
President or Chairman 50,000
</TABLE>
(3) Upon Senior Officer's retirement from the Bank under the provisions of
the Retirement Plan of Hudson City Savings Bank and he being immediately
eligible for a retirement benefit, the Bank commencing with the first day of
retirement will assume the liability for providing
(Page 1 of 3)
<PAGE> 2
HUDSON CITY SAVINGS BANK
to the Senior Officer the above stated Death Benefit, such benefit to be paid
upon the death of the Senior Officer by the Bank to the Officer's beneficiary or
estate.
(4) Should Senior Officer's employment terminate for any reason prior to
attaining retirement status, the Bank is not obligated to provide any Death
Benefit to the terminating Senior Officer.
(5) In the event the Senior Officer should die prior to attaining
retirement, the Bank shall retain any life insurance proceeds or other assets
purchased by the Bank for purposes of informally funding its obligations
hereunder, and neither the Senior Officer's estate nor any of his beneficiaries
shall have any claim against said assets.
(6) In the event Senior Officer should die after being retired and being
entitled to a Death Benefit, the Bank shall pay the full Death Benefit to such
person or persons as the Senior Officer may have designated or to his estate.
(7) The Death Benefit provided hereunder shall be in addition to Senior
Officer's annual salary and other benefits, as determined by the Board of
Managers of the Bank and shall not affect the right of the Senior Officer to
participate in any current or future Bank Retirement Plan or Profit Incentive
Bonus Plan or in any supplemental compensation arrangement which may become part
of the Bank's regular compensation and benefits structure.
(8) It is agreed that neither the spouse of the Senior Officer nor any
other designee, shall have any right to commute, sell, assign, transfer, or
otherwise convey the right to receive the benefit as provided in the Post
Retirement Death Benefit Plan, such benefit and right to thereto being declared
to be nonassignable and nontransferable; and, in the event of any attempted
assignment or transfer, the Bank shall have no further liability hereunder.
(9) If the Bank shall acquire any insurance policy or annuity contract or
any other asset in connection with liabilities assumed by it hereunder, it is
expressly understood and agreed that neither Senior Officer nor any beneficiary
of Senior Officer shall have any right with respect to, or claim against, such
policy or other asset for Senior Officer. Such policy or asset shall not be
deemed to be held under any trust for the benefit of Senior Officer or his
beneficiaries or to be held in any way as collateral security for the
fulfillment of the obligations of the Bank under this Agreement. It shall be and
remain, a general, unpledged, unrestricted asset of the Bank, and is not to be
considered as a Plan asset.
(10) The Bank agrees that it will not merge or consolidate with any other
company or organization, or permit its business activities to be taken over by
any other organization unless and until the succeeding or continuing company or
other organization shall expressly assume all obligations and liabilities herein
set forth.
(Page 2 of 3)
<PAGE> 3
HUDSON CITY SAVINGS BANK
(11) This Agreement may be revoked or amended in whole or in part by a
writing signed by both of the parties hereto.
(12) This Agreement does not constitute a contract of employment and the
Senior Officer's employment will continue as long as the Bank, in its sole
judgement, determines that the Officer's continued employment is in the Bank's
best interest.
IN WITNESS WHEREOF, the Bank has caused this Agreement to be signed in its
corporate name by its duly authorized officer, and impressed with its corporate
seal, attested by its Secretary, and Senior Officer has hereunto set his hand
and seal, all on the day and year first above written.
ATTEST: HUDSON CITY SAVINGS BANK
ATTEST:
By ____________________________(Seal)
______________________________
Witness 1st Vice President and Secretary
______________________________ ____________________________________
Witness President & Chief Executive Officer
______________________________ ____________________________________
Witness Senior Officer
(Page 3 of 3)
<PAGE> 1
EXHIBIT 10.15
[LETTERHEAD OF RP FINANCIAL, LC.]
February 3, 1999
Board of Managers
Hudson City Savings Bank
W 80 Century Road
Paramus, New Jersey 07652
Dear Members of the Board:
This letter sets forth the agreement between Hudson City Savings Bank,
Paramus, New Jersey ("Hudson City" or the "Bank"), and RP Financial, LC. ("RP
Financial") for the independent appraisal services pertaining to the Bank's
formation of a "two-tier" mutual holding company (the "Reorganization"),
including a mid-tier stock holding company and minority stock offering by the
mid-tier stock holding company (the "Stock Offering"). The specific appraisal
services to be rendered by RP Financial are described below. These appraisal
services will be rendered by a team of two to three senior consultants on staff
and will be directed by the undersigned.
Description of Conversion Appraisal Services
Prior to preparing the valuation report, RP Financial will conduct a
financial due diligence, including on-site interviews of senior management and
reviews of financial and other documents and records, to gain insight into the
Bank's operations, financial condition, profitability, market area, risks and
various internal and external factors which impact the pro forma value of the
Bank. RP Financial will prepare a written detailed valuation report of Hudson
City which will be fully consistent with applicable regulatory guidelines and
standard pro forma valuation practices. The appraisal report will include an
in-depth analysis of the Bank's financial condition and operating results, as
well as an assessment of the Bank's interest rate risk, credit risk and
liquidity risk. The appraisal report will describe the Bank's business
strategies, market area, prospects for the future and the intended use of
proceeds both in the short term and over the longer term. A peer group analysis
relative to publicly-traded savings institutions will be conducted for the
purpose of determining appropriate valuation adjustments relative to the group.
We will review pertinent sections of the applications and offering documents to
obtain necessary data and information for the appraisal, including the impact of
key deal elements on the appraised value, such as dividend policy, use of
proceeds and reinvestment rate, tax rate, conversion expenses and
characteristics of stock plans. The appraisal report will conclude with a
midpoint pro forma value which will establish the range of value, and reflect
the Stock Offering size determined by the Bank's Board of Managers. The
appraisal report may be periodically updated throughout the conversion process
and there will be at least one updated valuation prepared at the time of the
closing of the Stock Offering.
<PAGE> 2
Board of Managers
February 3, 1999
Page 2
RP Financial agrees to deliver the valuation appraisal and subsequent updates,
in writing, to Hudson City at the above address in conjunction with the filing
of the regulatory application. Subsequent updates will be filed promptly as
certain events occur which would warrant the preparation and filing of such
valuation updates. Further, RP Financial agrees to perform such other services
as are necessary or required in connection with the regulatory review of the
appraisal and respond to the regulatory comments, if any, regarding the
valuation appraisal and subsequent updates.
Fee Structure and Payment Schedule
Hudson City agrees to pay RP Financial a fixed fee of $125,000 for
preparation and delivery of the original appraisal report and a $10,000 fee for
each subsequent appraisal update, plus reimbursable expenses. Payment of these
fees shall be made according to the following schedule:
- $25,000 upon execution of the letter of agreement engaging RP
Financial's appraisal services;
- $100,000 upon delivery of the completed original appraisal
report; and
- $10,000 upon completion of each subsequent valuation update
that may be required.
The Bank will reimburse RP Financial for reasonable out-of-pocket
expenses incurred in preparation of the valuation. Such out-of-pocket expenses
will likely include travel, printing, telephone, facsimile, shipping, computer
and data services. RP Financial will agree to limit reimbursable expenses in
connection with this engagement and in connection with the preparation of a
regulatory business plan as described in the accompanying letter, subject to
written authorization from the Bank to exceed such level.
In the event Hudson City shall, for any reason, discontinue the
proposed Reorganization and Stock Offering prior to delivery of the completed
documents set forth above and payment of the respective progress payment fees,
Hudson City agrees to compensate RP Financial according to RP Financial's
standard billing rates for consulting services based on accumulated and
verifiable time expenses, not to exceed the respective fee caps noted above,
after giving full credit to the initial retainer fee. RP Financial's standard
billing rates range from $75 per hour for research associates to $250 per hour
for managing directors.
If during the course of the proposed transaction, unforeseen events
occur so as to materially change the nature or the work content of the services
described in this contract, the terms of said contract shall be subject to
renegotiation by Hudson City and RP Financial. Such unforeseen events shall
include, but not be limited to, major changes in the conversion regulations,
<PAGE> 3
Board of Managers
February 3, 1999
Page 3
appraisal guidelines or processing procedures as they relate to appraisals,
major changes in management or procedures, operating policies or philosophies,
and excessive delays or suspension of processing of conversion applications by
the regulators such that completion of the transaction requires the preparation
by RP Financial of a new appraisal or financial projections.
Representations and Warranties
Hudson City and RP Financial agree to the following:
1. The Bank agrees to make available or to supply to RP Financial
such information with respect to its business and financial condition as RP
Financial may reasonably request in order to provide the aforesaid valuation.
Such information heretofore or hereafter supplied or made available to RP
Financial shall include: annual financial statements, periodic regulatory
filings and material agreements, debt instruments, off balance sheet assets or
liabilities, commitments and contingencies, unrealized gains or losses and
corporate books and records. All information provided by the Bank to RP
Financial shall remain strictly confidential (unless such information is
otherwise made available to the public), and if the Reorganization and Stock
Offering are not consummated or the services of RP Financial are terminated
hereunder, RP Financial shall upon request promptly return to the Bank the
original and any copies of such information.
2. The Bank hereby represents and warrants to RP Financial that any
information provided to RP Financial does not and will not, to the best of the
Bank's knowledge, at the times it is provided to RP Financial, contain any
untrue statement of a material fact or fail to state a material fact necessary
to make the statements therein not false or misleading in light of the
circumstances under which they were made.
3. RP Financial hereby represents and warrants to the Bank that it
is familiar with the applicable laws, statutes, rules, regulations, policies,
procedures and practices pertaining to the preparation of appraisals in
connection with mutual holding company reorganizations and agrees to use its
best efforts to comply therewith in preparing the appraisal for the Bank.
4. (a) The Bank agrees that it will indemnify and hold harmless RP
Financial, any affiliates of RP Financial, the respective Directors, officers,
agents and employees of RP Financial or their successors and assigns who act for
or on behalf of RP Financial in connection with the services called for under
this agreement (hereinafter referred to as "RP Financial"), from and against any
and all losses, claims, damages and liabilities (including, but not limited to,
all losses and expenses in connection with claims under the federal securities
laws) attributable to (i) any untrue statement or alleged untrue statement of a
material fact contained in the financial statements or other information
furnished or otherwise provided by the Bank to RP Financial, either orally or in
writing; (ii) the omission or alleged omission of a material fact from the
financial statements or other information furnished or otherwise made available
by the Bank to RP Financial; or (iii) any
<PAGE> 4
Board of Managers
February 3, 1999
Page 4
action or omission to act by the Bank, or the Bank's respective officers,
Managers, employees or agents which action or omission is willful or negligent.
The Bank will be under no obligation to indemnify RP Financial hereunder if a
court determines that RP Financial was negligent or acted in bad faith with
respect to any actions or omissions of RP Financial related to a matter for
which indemnification is sought hereunder. Any time devoted by employees of RP
Financial to situations for which indemnification is provided hereunder, shall
be an indemnifiable cost payable by the Bank at the normal hourly professional
rate chargeable by such employee.
(b) RP Financial shall give written notice to the Bank of
such claim or facts within thirty days of the assertion of any claim or
discovery of material facts upon which RP Financial intends to base a claim for
indemnification hereunder. In the event the Bank elects, within ten business
days of the receipt of the original notice thereof, to contest such claim by
written notice to RP Financial, RP Financial will be entitled to be paid any
amounts payable by the Bank hereunder within five days after the final
determination of such contest either by written acknowledgement of the Bank or a
final judgment (including all appeals therefrom) of a court of competent
jurisdiction. If the Bank does not so elect, RP Financial shall be paid promptly
and in any event within thirty days after receipt by the Bank of the notice of
the claim.
(c) The Bank shall pay for or reimburse the reasonable
expenses, including reasonable attorneys' fees, incurred by RP Financial in
advance of the final disposition of any proceeding within thirty days of the
receipt of such request if RP Financial furnishes the Bank: (1) a written
statement of RP Financial's good faith belief that it is entitled to
indemnification hereunder; and (2) a written undertaking to repay the advance if
it ultimately is determined in a final adjudication of such proceeding that it
or he is not entitled to such indemnification. The Bank may assume the defense
of any claim (as to which notice is given in accordance with 3(b)) with counsel
reasonably satisfactory to RP Financial, and after notice from the Bank to RP
Financial of its election to assume the defense thereof, the Bank will not be
liable to RP Financial for any legal or other expenses subsequently incurred by
RP Financial (other than reasonable costs of investigation and assistance in
discovery and document production matters). Notwithstanding the foregoing, RP
Financial shall have the right to employ their own counsel in any action or
proceeding if RP Financial shall have concluded that a conflict of interest
exists between the Bank and RP Financial which would materially impact the
effective representation of RP Financial. In the event that RP Financial
concludes that a conflict of interest exists, RP Financial shall have the right
to select counsel reasonably satisfactory to the Bank which will represent RP
Financial in any such action or proceeding and the Bank shall reimburse RP
Financial for the reasonable legal fees and expenses of such counsel and other
expenses reasonably incurred by RP Financial. In no event shall the Bank be
liable for the fees and expenses of more than one counsel, separate from its own
counsel, for all indemnified parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising out of
the same allegations or circumstances. The Bank will not be liable under the
foregoing indemnification provision in respect of any compromise or settlement
of any action or proceeding made without its consent, which consent shall not be
unreasonably withheld.
<PAGE> 5
Board of Managers
February 3, 1999
Page 5
It is understood that, in connection with RP Financial's
above-mentioned engagement, RP Financial may also be engaged to act for the Bank
in one or more additional capacities, and that the terms of the original
engagement may be incorporated by reference in one or more separate agreements.
The provisions of Paragraph 3 herein shall apply to the original engagement, any
such additional engagement, any modification of the original engagement or such
additional engagement and shall remain in full force and effect following the
completion or termination of RP Financial's engagement(s). This agreement
constitutes the entire understanding of the Bank and RP Financial concerning the
subject matter addressed herein, and such contract shall be governed and
construed in accordance with the laws of the Commonwealth of Virginia. This
agreement may not be modified, supplemented or amended except by written
agreement executed by both parties.
Hudson City and RP Financial are not affiliated, and neither Hudson
City nor RP Financial has an economic interest in, or is held in common with,
the other and has not derived a significant portion of its gross revenues,
receipts or net income for any period from transactions with the other.
* * * * * * * * * * *
Please acknowledge your agreement to the foregoing by signing as
indicated below and returning to RP Financial a signed copy of this letter,
together with the initial retainer fee of $25,000.
Sincerely,
/s/ Ronald S. Riggins
-------------------------------
Ronald S. Riggins
President and Managing Director
Agreed To and Accepted By: /s/ Ronald E. Hermance, Jr.
-------------------------------
Ronald E. Hermance, Jr.
President
Upon Authorization by the Board of Managers For: Hudson City Savings Bank
Paramus, New Jersey
Date Executed: 2/4/99
------------------------------
<PAGE> 1
EXHIBIT 10.16
[LETTERHEAD OF RP FINANCIAL, LC.]
February 3, 1999
Board of Managers
Hudson City Savings Bank
W 80 Century Road
Paramus, New Jersey 07652
Dear Members of the Board:
This letter sets forth the agreement between Hudson City Savings Bank,
Paramus, New Jersey ("Hudson City" or the "Bank"), and RP Financial, LC. ("RP
Financial"), whereby the Bank has engaged RP Financial to prepare the regulatory
business plan and financial projections to be adopted by the Bank's Board of
Managers in conjunction with the concurrent mutual holding company
reorganization and minority stock offering. These services are described in
greater detail below.
Description of Proposed Services
RP Financial's business planning services will include the following
areas: (1) evaluating Hudson City's current financial and operating condition,
business strategies and anticipated strategies in the future; (2) analyzing and
quantifying the impact of business strategies, incorporating the use of net
offering proceeds both in the short and long term; (3) preparing detailed
financial projections on a quarterly basis for a period of at least three fiscal
years to reflect the impact of Board approved business strategies and use of
proceeds; (4) preparing the written business plan document which conforms with
applicable regulatory guidelines including a description of the use of proceeds
and how the convenience and needs of the community will be addressed; and (5)
preparing the detailed schedules of the capitalization of the Bank and mutual
holding company and related cash flows.
Contents of the business plan will include: Philosophy/Goals; Economic
Environment and Background; Lending, Leasing and Investment Activities; Deposit,
Savings and Borrowing Activity; Asset and Liability Management; Operations;
Records, Systems and Controls; Growth, Profitability and Capital; Responsibility
for Monitoring this Plan.
RP Financial agrees to prepare the business plan and accompanying
financial projections in writing such that the business plan can be filed with
the appropriate regulatory agencies prior to filing the appropriate
applications. RP Financial hereby represents and warrants to the Bank that it is
familiar with the applicable laws, statutes, rules, regulations, policies,
procedures and practices pertaining to the preparation of business plans for
converting savings banks in connection with mutual holding company
reorganizations and agrees to use its best efforts to comply therewith in
preparing the business plan for the Bank.
<PAGE> 2
Board of Managers
February 3, 1999
Page 2
Fee Structure and Payment Schedule
The Bank agrees to compensate RP Financial for preparation of the
business plan on a fixed fee basis of $20,000. Payment of the professional fees
shall be made upon delivery of the completed business plan.
The Bank also agrees to reimburse RP Financial for those direct
reasonable out-of-pocket expenses necessary and incidental to providing the
business planning services. Reimbursable expenses will likely include shipping,
telephone/facsimile printing, computer and data services, and shall be paid to
RP Financial as incurred and billed. RP Financial will agree to limit
reimbursable expenses in conjunction with the appraisal engagement, subject to
written authorization from the Bank to exceed such level.
In the event the Bank shall, for any reason, discontinue this planning
engagement prior to delivery of the completed business plan and payment of the
progress payment fee, the Bank agrees to compensate RP Financial according to RP
Financial's standard billing rates for consulting services based on accumulated
and verifiable time expenses, not to exceed the fixed fee described above, plus
reimbursable expenses incurred.
If during the course of the planning engagement, unforeseen events
occur so as to materially change the nature or the work content of the business
planning services described in this contract, the terms of said contract shall
be subject to renegotiation by the Bank and RP Financial. Such unforeseen events
may include changes in regulatory requirements as it specifically relates to
Hudson City or potential transactions which will dramatically impact the Bank
such as a pending acquisition or significant branch transaction.
* * * * * * * * * * *
Please acknowledge your agreement to the foregoing by signing as
indicated below and returning to RP Financial a signed copy of this letter.
Sincerely,
/s/ Ronald S. Riggins
Ronald S. Riggins
President and Managing Director
Agreed To and Accepted By: Ronald E. Hermance, Jr.
President /s/ Ronald E. Hermance, Jr.
Upon Authorization by the Board of Managers For: Hudson City Savings Bank
Paramus, New Jersey
<PAGE> 3
Board of Managers
February 3, 1999
Page 3
Date Executed: 2/4/99
___________________________________
<PAGE> 1
Exhibit 21.1
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
The following is a list of the subsidiaries of Hudson City Bancorp
following the Reorganization:
Name State of Incorporation
------------------------ ----------------------
Hudson City Savings Bank New Jersey
<PAGE> 1
INDEPENDENT AUDITORS' CONSENT
The Board of Managers
Hudson City Savings Bank:
We consent to the use of our report dated February 12, 1999 relating to the
statements of financial condition of Hudson City Savings Bank as of December
31, 1998 and 1997 and the related statements of income, changes in equity, and
cash flows for each of the years in the three-year period ended December 31,
1998, and to the reference to our firm under the headings "Experts," "Legal and
Tax Opinions," and "Statements of Income" in the registration statement/
prospectus, which registration statement/prospectus is also included in the
Application for Formation of Mutual Savings Bank Holding Company and related
applications with the Federal Deposit Insurance Corporation and the Federal
Reserve Board.
KPMG LLP
Short Hills, New Jersey
March 12, 1999
<PAGE> 1
EXHIBIT 23.3
March 12, 1999
Board of Managers
Hudson City Savings Bank
West 80 Century Road
Paramus, New Jersey 07652
Members of the Board of Managers:
We hereby consent to the use of our firm's name in the applications for
the conversion and holding company formation for Hudson City Savings Bank
("Hudson City") in which Hudson City will become a wholly-owned subsidiary of
Hudson City Bancorp, Inc. ("Bancorp"), a federal corporation in organization,
and Bancorp will issue a majority of its Common Stock to Hudson City, MHC (the
"MHC"), and will sell a minority of its Common Stock to the public. We also
hereby consent to the inclusion of, summary of and references to our Appraisal
Report and our statement concerning subscription rights in such filings
including the Prospectus of Hudson City Bancorp, Inc.
Respectfully submitted,
RP FINANCIAL, LC.
/s/ Ronald S. Riggins
------------------------
Ronald S. Riggins
President and Managing Director
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS STATEMENT CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM HUDSON CITY
SAVINGS BANK'S STATEMENT OF CONDITION AS OF DECEMBER 31, 1998 AND ITS STATEMENT
OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 87,075
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 69,800
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 785,031
<INVESTMENTS-CARRYING> 3,072,324
<INVESTMENTS-MARKET> 3,107,789
<LOANS> 3,659,407
<ALLOWANCE> 17,712
<TOTAL-ASSETS> 7,752,260
<DEPOSITS> 6,807,339
<SHORT-TERM> 0
<LIABILITIES-OTHER> 44,315
<LONG-TERM> 0
0
0
<COMMON> 0
<OTHER-SE> 900,606
<TOTAL-LIABILITIES-AND-EQUITY> 7,752,260
<INTEREST-LOAN> 266,592
<INTEREST-INVEST> 251,360
<INTEREST-OTHER> 2,839
<INTEREST-TOTAL> 520,791
<INTEREST-DEPOSIT> 311,084
<INTEREST-EXPENSE> 311,084
<INTEREST-INCOME-NET> 209,707
<LOAN-LOSSES> 2,400
<SECURITIES-GAINS> 24
<EXPENSE-OTHER> 63,492
<INCOME-PRETAX> 148,769
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 93,269
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 7.07
<LOANS-NON> 13,216
<LOANS-PAST> 2,123
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 15,625
<CHARGE-OFFS> 336
<RECOVERIES> 23
<ALLOWANCE-CLOSE> 17,712
<ALLOWANCE-DOMESTIC> 17,712
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 5,859
</TABLE>
