Mail Stop 3628
September 2, 2005
Via facsimile (312) 984-3150 and U.S. Mail
John E. Freechack, Esquire
Barack Ferrazzano Kirschbaum Perlman & Nagelberg LLP
333 West Wacker Drive, Suite 2700
Chicago, Illinois 60606
Re: Iowa First Bancshares Corp.
Schedule 13E-3
File No. 5-80899
Filed August 5, 2005
Preliminary Proxy Statement on Schedule 14A,
Filed August 5, 2005
File No. 2-89283
Dear Mr. Freechack:
We have reviewed your filings and have the following
comments.
Where indicated, we think you should revise your documents in
response to these comments. If you disagree, we will consider
your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
supplemental information so we may better understand your
disclosure.
After reviewing this information, we may or may not raise
additional
comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
Schedule 13E-3
Item 13. Financial Statements, page 9
1. We note that subsection (a) of this disclosure attempts to
incorporate by reference financial information that is
incorporated
by reference in your proxy statement. Please revise to eliminate
this "double incorporation." See 12b-23(b) of the Exchange Act.
Schedule 14A
General
2. Rule 14a-4(b)(1) requires you to separately break out on the
proxy
card each matter to be voted on. Separate matters may be cross-
conditioned upon one another, such that one will not pass unless
the
other does. See the September 2004 interim supplement to the
Division of Corporation Finance`s Manual of Publicly Available
Telephone Interpretations, available on our Web site at
www.sec.gov.
In this regard, what consideration was given to the need to
unbundle
the proposal to include two separate proposals, one representing
the
reverse stock split and one representing the forward stock split?
Your proxy statement suggests that the reverse and forward stock
splits may be separate matters that should be presented separately
on
the proxy card for shareholder vote. Our belief is based on the
fact
that you have attached two different amendments to the company`s
articles of incorporation, which appears to indicate that state
law
and the company`s governing instruments dictate that both matters
are
subject to a shareholder vote. Please revise to allow
shareholders
to separately vote on the reverse and forward stock splits, or
explain why, based on our telephone interpretation and the
reasoning
articulated in this comment, separation is not required.
3. Please provide a pro forma beneficial ownership table to
disclose
the beneficial owners of 5% or more of each class of Iowa First`s
voting securities after the amendment to its articles of
incorporation.
4. Please revise to clarify that the proxy statement and the form
of
proxy are preliminary copies. See Rule 14a-6(e)(1).
Summary Term Sheet, page 1
Fairness of the Split Transaction; Board Recommendation, page 3
5. In the interest of balanced disclosure, please revise to also
summarize the countervailing factors as they apply to the board`s
recommendation as to the fairness of the transaction to the
unaffiliated security holders that will be cashed out and those
that
will remain. For example, we note the discussion of these
countervailing factors on page 26.
6. You disclose that your board is "primarily" comprised of
independent directors. Please revise to specifically disclose the
number of independent directors on your board, as well as the
number
of total directors. Also, disclose the criteria upon which you
are
judging independence.
7. You disclose here and throughout the proxy statement that a
security holder may determine whether or not to remain a security
holder after the split transaction by acquiring sufficient shares
so
that they hold at least 1,000 shares immediately prior to the
split
transaction or selling sufficient shares so that they hold less
than
1,000 shares immediately prior to the split transaction is a
positive
factor in support of the fairness of the transaction. However,
unaffiliated security holders who elect to do so will hold a very
small percentage of the company controlled by others with no
public
market through which to liquidate their shares, and no guarantee
of
any future dividends. Accordingly, explain how the board viewed
the
opportunity to purchase shares in the open market as a factor that
favored the fairness of this transaction to unaffiliated security
holders. Further, explain how this supports your determination as
to
fairness in light of the current lack of liquidity and infrequent
trading of your common stock. In this regard, you should explain
any
difficulty that security holders may have in trying to acquire or
dispose of common stock prior to the split transaction.
Purpose and Structure of the Split Transaction, page 5
8. We note that the board will have the discretion to determine if
and when to effect the split transaction, and reserves the right
to
abandon the transaction even if it is approved by the
shareholders.
Please briefly discuss the circumstances under which the board may
decide to abandon the transaction.
9. We refer you to the discussion regarding the treatment of
shares
held in "street name." You indicate that security holders should
talk to their broker, nominee or agent to determine how they
expect
the reclassification transaction to affect them. Explain whether
a
security holder may convert their shares so that they hold them of
record rather than in street or may purchase additional shares,
dispose of shares or change their ownership structure to be
certain
they either get cashed out or remain a security holder of Iowa
First.
Effects of the Split Transaction, page 5
10. We note on page 6 that you disclose that the directors and
executive officers have interests in this transaction. Please
revise
to briefly disclose the "interests" that your officers and
directors
have in this transaction. Also, confirm that the compensation to
be
received by your officers and directors will not increase as a
result
of this transaction and that there will not be any material
alterations to the existing executive agreements that will be
favorable to your executive officers as a result of this
transaction.
To the extent that there are material differences between the
interests of your officers and directors and the unaffiliated
security holders in this transaction, prominently provide a
summary
of the interests and potential conflicts of interests of
affiliates
under a separate heading in your "Summary Term Sheet."
11. We note that your directors and executive officers will own a
greater percentage of common stock on a post-split basis. Please
disclose the increase.
Financing of the Split Transaction, page 7
12. You disclose that you intend to borrow funds and that you are
discussing terms with various potential lenders. Please disclose,
under this subheading, the total amount of funds or other
consideration to be used in this transaction. Also, update the
disclosure regarding your discussions with various potential
lenders.
To the extent known, disclose the information required by Item
1007
of Regulation M-A. Further, you should briefly address the
consequences as they relate to this transaction if Iowa First is
unable to borrow the necessary funds.
Vote Required for Approval, page 8
13. Disclose the treatment of broker non-votes for purposes of
counting the votes and determining whether a quorum is present.
Refer to Item 21(b) of Schedule 14A.
Questions and Answers about the Split Transaction, page 10
14. It appears that your Questions and Answers section repeats a
great deal of information from the Summary Term Sheet. Please
revise
to eliminate unnecessary repetition. In particular, we suggest
you
limit the Questions and Answers section to procedural matters
relating to the meeting.
Can I change my vote after I have mailed my proxy card?, page 10
15. Briefly describe how a shareholder may revoke a proxy.
Special factors, p. 11
Overview of the Split Transaction, page 14
16. We note your disclosure that your shares will continue to be
traded on the OTCBB. In view of the fact that you will no longer
have a registered class of securities, advise of the basis of your
belief that you will be able to continue to have your common stock
traded on the OTCBB.
Background of the Split Transaction, page 15
17. You disclose that the board met on December 16, 2004 and then
in
March of 2005. Expand to discuss any actions taken by the
company,
including management, regarding the transaction during the period
between board meetings. Provide similar disclosure for the time
period between March of 2005 and July 18, 2005.
18. We note that management provided reports to your board of
directors reviewing the potential advantages and disadvantages of
becoming a private company at the board meeting in December of
2004
and March of 2005. Please revise to provide a materially complete
summary of these reports. To the extent that these reports are
materially different, please disclose.
19. We note that MB&R determined that a reasonable range of the
fair
value of your common stock was $36.20 and $40.54. Expand your
disclosure to explain in more detail how the board ultimately
derived
the $38.00 per share price.
Reasons for the Split Transaction; Fairness of the Split
Transaction;
Board Recommendation, page 21
20. We refer you to the countervailing factors discussed on page
26
and 28. Please revise to ensure that you include a reasonably
thorough discussion of the detriments of the reverse stock split.
See Instruction 2 of Item 1013 of Regulation M-A. For example,
but
without limitation, it appears that one of the adverse effects of
the
reverse stock split will be that unaffiliated security holders
will
be required to surrender their shares involuntarily in exchange
for a
cash price determined by your board and that shareholders will not
have the right as a result of the reverse stock split to liquidate
their shares at a time and for a price of their choosing. Also,
revise to discuss that the company will no longer be subject to
the
provisions of the Sarbanes-Oxley Act or the liability provisions
of
the Exchange Act and that the officers of the company will no
longer
be required to certify the accuracy of its financials statements.
Also, it appears that the unaffiliated security holders that will
continue as security holders will find that the common stock will
be
less liquid following this going private transaction as you
discuss
on the bottom of page 43.
21. We note that you intend to provide security holders with
annual
reports after going private. Please disclose how you plan to
disseminate these reports.
22. Expand to address the loss of the benefits of registration
under
Section 12 of the Securities Exchange Act of 1934 as a potential
negative associated with this transaction.
23. We note on page 29 that in evaluating the $38.00 per share
price
the board considered whether this constitutes fair value in
relation
to the net book value of Iowa First. However, it does not appear
that you provide a discussion of this evaluation. As you know,
all
of the factors listed in Instruction 2 to Item 1014 of Regulation
M-A
are generally relevant to the fairness determination in a Rule
13e-3
transaction and should be discussed. Revise the discussion of the
board`s fairness determination to address all of the factors
listed
in Instruction 2 to Item 1014 of Regulation M-A, including net
book
value. See Question and Answer No. 20 of Exchange Act Release No.
34-17719.
Valuation of Financial Advisor; Fairness Opinion, page 30
24. Although we understand that you filed the opinion and final
report of MB&R as an exhibit to your Schedule 13E-3, we remind you
that that each and every report, opinion, consultation, proposal,
or
presentation, whether written or oral, preliminary or final,
received
by the company or any affiliates from any third party and
materially
related to this offer constitutes a separate Item 1015 report that
must be described in detail in the document and, if written, filed
as
an exhibit to Schedule 13E-3. This requirement includes final and
preliminary reports. For example, supplementally confirm that you
have described in detail all oral presentations made to the board
by
MB&R concerning the valuation methodologies that it used in
preparing
its opinion. In addition, you should file as exhibits to the
Schedule 13E-3 any materials used to present information to the
Board
such as board books, slides, etc.
25. We note that the summary of MB&R`s opinion is qualified in its
entirety by the full text of the opinion. A qualification of this
type appears to be inconsistent with the requirement that all
material information be provided in the information statement.
Please revise.
26. You must disclose the projections and underlying assumptions
given to MB&R and used to formulate its opinion. See Item 1015 of
Regulation M-A. For example, we note your reference to management
projections on page 32.
27. Expand in greater detail how MB&R assessed the fairness of the
premium being paid in this proposed transaction. That is, we note
that the Comparable Transaction Analysis yielded a higher per
share
value than that being paid for shares cashed out in this reverse
stock split. How did MB&R and your board consider this?
28. We note that MB&R used a range of terminal values of 13 to 19
times year five`s projected earnings and a range of discount rates
that ranged from 10% to 12%. Please expand your discussion to
further explain why MB&R chose those terminal values and discount
rates.
Financial Information, page 56
29. Please revise the presentation of your financial statements to
disclose the ratio of earnings to fixed charges in a manner
consistent with Item 503(d) of Regulation S-K. See Item
1010(c)(4)
of Regulation M-A. Be advised that although we understand that
Item
503(d) of Regulation S-K refers to registered debt securities or
preference equity securities, the ratio of earnings to fixed
charges
required by Item 1010(c)(4) is not limited to circumstances in
which
a company has registered debt securities and/or preference equity
securities. Rather, Item 1010(c)(4) of Regulation M-A requires
that
Community Financial present its ratio of earnings to fixed charges
"in a manner consistent with 503(d) of Regulation S-K." The fixed
charges referred to by the item requirement are not limited to
those
associated with registered debt or preference equity securities
and
should be presented in all circumstances in which the company has
any
fixed charges.
30. We refer you to the pro forma financial statements on page 57.
Similar to the above comment, please revise to include all of the
pro
forma information required by Item 1010(b) of Regulation M-A. In
this regard, it does not appear that your pro forma information
contains the ratio of earnings to fixed charges. Also, your pro
forma information should be presented for the most recent fiscal
year
and the latest interim period.
Forward Looking Statements, page 61
31. The disclaimer in the first paragraph of this section is
inconsistent with your amendment obligations under Rule 13e-3 and
the
proxy rules. Under those provisions, you have an affirmative
obligation to revise the disclosure whenever it changes
materially.
Please delete.
Information Incorporated by Reference, page 47
32. Please confirm that you plan to deliver the annual report and
quarterly report that you are incorporating by reference within
this
proxy statement or otherwise advise. See Item 13(b)(2) of
Regulation
14A.
33. Neither Rule 13e-3 nor Schedule 14A allow you to forward
incorporate by reference to documents not yet filed. If you wish
to
incorporate by reference such future filings, you must amend to
specifically name them. Please delete the statement to the
contrary
in this section.
Closing
As appropriate, please amend your filing in response to these
comments. You may wish to provide us with marked copies of the
amendment to expedite our review. Please furnish a cover letter
with
your amendment that keys your responses to our comments and
provides
any requested supplemental information. Detailed cover letters
greatly facilitate our review. Please understand that we may have
additional comments after reviewing your amendment and responses
to
our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have made.
In connection with responding to our comments, please provide,
in
writing, a statement from the Iowa First Bancshares acknowledging
that:
* the company is responsible for the adequacy and accuracy of the
disclosure in the filing;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filing or in
response to our comments on your filing.
You may contact me at (202) 551-3456 with any questions.
Sincerely,
Jeffrey B. Werbitt
Attorney Advisor
Office of Mergers &
Acquisitions
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John E. Freechack, Esquire
Barack Ferrazzano Kirschbaum Perlman & Nagelberg LLP
August 2, 2005
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