Introduction. For purposes of this section, all capitalized terms have the meanings ascribed to them in Section 1. The Board of Directors of the Bank has unanimously adopted this Plan of Reorganization and Minority Stock Issuance pursuant to which the Bank will reorganize into a mutual holding company structure under the laws of the United States. In accordance with the Plan, the Bank will convert from a New York State savings and loan association charter to a federal stock savings bank charter. The Charter... Conversion is subject to approval by the affirmative vote of either (i) sixty six and two thirds percent in amount of book value of all outstanding deposits of the Bank, or (ii) at least seventy five percent in amount of all outstanding deposits of the Bank represented at the Special Meeting of depositors. Conversion to a federal charter will allow the Bank to take advantage of federal preemption of state law regulating the Bank's activities and result in the Bank being subject to regulation by a single primary federal regulator, the OTS. As part of the Reorganization and in accordance with this Plan, a mutual holding company to be known as Lake Shore, MHC (the "MHC") will be established, as well as Lake Shore Bancorp, Inc. (the "Stock Holding Company"), which will be a federal corporation. In addition, a federally-chartered stock savings bank, which will be named Lake Shore Savings Bank, will also be established. The Stock Holding Company will be a majority-owned subsidiary of the MHC at all times so long as the MHC remains in existence, and the Bank will be a wholly-owned subsidiary of the Stock Holding Company. The Plan also provides that non-transferable subscription rights to purchase up to 49.99% of the common stock of the Stock Holding Company ("Conversion Stock") shall be granted to certain deposit account holders of the Bank pursuant to the Plan and in accordance with the regulations of the OTS. The Reorganization and the Offerings will permit the Bank to control the amount of capital being raised to enable the Bank to more prudently deploy the proceeds, while at the same time enabling the Bank to: (1) support future lending and operational growth, including branching activities and acquisitions of other financial institutions or financial services companies; (2) increase its ability to render services to the communities it serves; (3) compete more effectively with commercial banks and other financial institutions for new business opportunities; and (4) increase its equity capital base and access the capital markets when needed. In furtherance of the Bank's commitment to its community, the Plan provides for the establishment of a charitable foundation as part of the Reorganization and Offerings. The charitable foundation is intended to complement the Bank's existing community reinvestment activities in a manner that will allow the Bank's local communities to share in the growth and profitability of the Stock Holding Company and the Bank over the long term. Consistent with the Bank's goal, the Stock Holding Company intends to donate to the charitable foundation immediately following the Offerings a number of shares of its authorized but previously unissued Stock Holding Company Common Stock in an amount to equal an aggregate of up to 2% of the outstanding Stock Holding Company Common Stock (after such donation). This Plan is subject to the approval of the OTS and must be adopted by at least a majority of the total number of outstanding votes eligible to be cast by Voting Depositors at the Special Meeting. Pursuant to Section 10(o) of the Home Owner's Loan Act, as amended ("HOLA"), 12 U.S.C. 1470(o), and Section 6022(i)(1) of the HOLA, the Reorganization will be accomplished in accordance with the procedures contained in this Plan, the rules and regulations of the OTS, and as may otherwise be required by the OTS.View More
