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Lots of firsts were accomplished with the recent conversion of New Haven Savings Bank to New Alliance Bancorp. William W. Bouton III, co-chairman of the business services department of Tyler Cooper & Alcorn, describes the process as a “perfect storm” of legal challenges. Bouton, who works in Tyler Cooper’s Hartford, Conn., office, was the lead counsel on the $1.7 billion deal. It was the largest bank conversion ever in the U.S., with more than $1 billion raised to make New Haven Savings Bank into a publicly held company. The remaining $700 million was used to buy Savings Bank of Manchester and Tolland Savings Bank. A deal that big doesn’t happen without its detractors. “The mayor [of New Haven] and some of the legislators came out against it,” Bouton said. Depositors did too. The focal point of the opposition was the issue of depositors having the right to vote on the conversion. “In Connecticut, the law does not provide for a depositor vote,” Bouton said, “yet it’s common in other areas of the country. The state banking commissioner did not require or provide any particular credit to a depositor vote.” One of the big challenges came from local unions and three depositors. William M. Bloss, a partner at Jacobs, Grudberg, Belt & Dow in New Haven, served as their local counsel for David P. Dean, of James & Hoffman in Washington, D.C. “From a legal point of view,” Bloss said, “the conversion raised the issue of first impression as to who owns a state-chartered savings bank. If we were right that the depositors owned the enterprise, I don’t think anybody believes the depositors would have thought this [the bank conversion] was a good idea.” Bloss believes the conversion sets up New Alliance for purchase by a larger, multi-state bank like Bank of America or Wachovia. Bloss and Dean argued in court that New Haven Savings Bank was founded under state statute. They said the value of the bank belonged to the depositors and the officers of the bank could not impugn that value without running afoul of the charter. The suit was filed at the state level but was dismissed because the court ruled that it should have been presented to state Banking Commissioner John Burke first. Bloss said no appeal has been filed. “There is still the issue of injunctive relief,” he said, “which is more complicated now that the conversion has gone through. There is still a tentative possibility of damages.” Bloss did not know if further action would be taken. Dean did not return a call to his office seeking comment. Bouton and the bank sought to silence their harshest opponents by creating a new $25 million charitable foundation. Previously the bank had established a $40 million foundation funded by stocks in the new bank. NHSB also had an existing foundation with $9 million in it. New Haven Mayor John DeStefano suggested the third foundation. “The mayor and others not associated with the bank will contribute to the governance of that foundation,” Bouton said. “We were looking to gather his support in connection with this conversion. We think it’s a good thing the bank and the mayor’s office have a good relationship.” To seal the deal, however, DeStefano is prevented from criticizing the bank while the foundation funding is in place. “In effect, we said, ‘If we do these kinds of community things, is that sufficient to show we’re good corporate citizens? If so don’t criticize us later,’” Bouton explained. The bank also assuaged the mayor’s opposition by creating a New Alliance for Neighborhoods. Funded with $27.5 million, it targets money for lending and development of low-cost and moderate-income housing. It is part of the bank’s community development corporation that invests in projects designed to improve the quality of life in the city. “It’s money that is dedicated to a specific set of projects,” Bouton said. “I can’t say the bank wouldn’t have done it anyway.” Bloss said the foundations are good steps, but people shouldn’t be impressed by the dollar figures. “Is it better to have that than not have it? Of course,” he said, “but compared to the value of the bank and its size, it’s a pretty moderate compromise. It’s not $40 million cash money. It’s $40 million if the stock price is at a certain point. It’s a good deal less than if $40 million in gold bullion was sitting in the vault.” Tyler Cooper’s relationship with NHSB began in earnest five years ago when Bouton became its regular outside counsel. Bouton had to establish a board of corporators for the bank to approve the conversion. Under state banking law, the corporators board had to include 25 or more people: 60 percent of whom had to be independent of the bank. “The antagonists attacked the independence of the corporators,” Bouton said, “on the basis of general principles of corporate governance that they said should apply.” From start to finish, the conversion took about 15 months. Discussions with Tolland Savings and Savings Bank of Manchester began in December 2002. The transactions were announced in July 2003. The deal received final FDIC and state approval on March 30. The initial public offering was made April 2. The IPO had challenges of its own, Bouton said. The Securities and Exchange Commission pushed the bank to draft language in its prospectus stating that the possibility existed of a spike in stock price when it was first tendered. “Securities lawyers are typically cautious in how they draft that language,” Bouton said. “They’re not supposed to tell people it’s a good deal.” Concerns were also expressed during the offering period that illegal activity might be taking place. “As the offering began,” Bouton said, “we began to hear rumors that depositors were being approached about selling their rights to outsiders, which is an indication of how popular the offering was, but it may also be illegal. The rights are personal. They’re supposed to be exercised by the depositors. We cooperated with the regulators and gathered whatever input we could on that activity.” During the course of the conversion and acquisition, Tyler Cooper had up to 17 attorneys working on it. On the deal side, about 10 lawyers were involved, while the seven-lawyer litigation team was headed by William S. Fish Jr., Tyler Cooper’s managing partner.

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