FOUNDATION SAVINGS BANK
25 GARFIELD PLACE
CINCINNATI, OHIO 45202
(513) 721-0120
NOTICE OF SPECIAL MEETING OF MEMBERS
Notice is hereby given that a Special Meeting of Members of Foundation
Savings Bank (the "Bank") will be held at , Cincinnati, Ohio, on
, 1996, at .m., local time (the "Special Meeting"), for the
following purposes, all of which are more completely set forth in the
accompanying Summary Proxy Statement:
1. To consider and act upon a resolution to approve the Plan of
Conversion (the "Plan"), a copy of which is attached to the Summary Proxy
Statement as Exhibit A, pursuant to which the Bank would convert from a
mutual savings and loan association incorporated under the laws of the State
of Ohio to a permanent capital stock savings and loan association
incorporated under the laws of the State of Ohio (the "Conversion") and
become a wholly-owned subsidiary of Foundation Bancorp, Inc., an Ohio
corporation organized for the purpose of acquiring all of the capital stock
to be issued by the Bank in the Conversion;
2. To consider and act upon a resolution to adopt the Amended Articles
of Incorporation of the Bank, a copy of which is attached to the Plan as
Exhibit I;
3. To consider and act upon a resolution to adopt the Amended
Constitution of the Bank, a copy of which is attached to the Plan as Exhibit
II; and
4. To transact such other business as may properly come before the
Special Meeting and any adjournments thereof.
Only those members of the Bank who have a savings deposit or a loan of
record at the Bank at the close of business on , 1996, are members of
the Bank entitled to notice of and to vote at the Special Meeting and any
adjournments thereof. WHETHER OR NOT YOU EXPECT TO ATTEND THE SPECIAL MEETING,
WE URGE YOU TO CONSIDER THE ACCOMPANYING SUMMARY PROXY STATEMENT CAREFULLY, TO
COMPLETE THE ENCLOSED PROXY CARD(S) AND TO RETURN THE COMPLETED PROXY CARD(S) TO
THE BANK IN THE ENCLOSED POSTAGE-PAID RETURN ENVELOPE AS SOON AS POSSIBLE TO
ASSURE THAT YOUR VOTE(S) WILL BE COUNTED.
By Order of the Board of Directors
Laird L. Lazelle,
President
Cincinnati, Ohio
, 1996
FOUNDATION SAVINGS BANK
25 GARFIELD PLACE
CINCINNATI, OHIO 45202
(513) 721-0120
SUMMARY PROXY STATEMENT
INTRODUCTION
The enclosed proxy (the "Proxy") is being solicited by the Board of
Directors of Foundation Savings Bank (the "Bank") for use at a Special Meeting
of Members of the Bank to be held at , Cincinnati, Ohio, on
, 1996, at .m., local time, and at any adjournments thereof
(the "Special Meeting"). The Special Meeting is being held for the following
purposes:
1. To consider and act upon a resolution to approve the Plan of
Conversion (the "Plan"), a copy of which is attached hereto as Exhibit A,
pursuant to which the Bank would convert from a mutual savings and loan
association incorporated under the laws of the State of Ohio to a permanent
capital stock savings and loan association incorporated under the laws of
the State of Ohio (the "Conversion") and become a wholly-owned subsidiary of
Foundation Bancorp, Inc., (the "Holding Company"), an Ohio corporation
organized for the purpose of acquiring all of the capital stock to be issued
by the Bank in the Conversion;
2. To consider and act upon a resolution to adopt the Amended Articles
of Incorporation of the Bank (the "Amended Articles"), a copy of which is
attached to the Plan as Exhibit I;
3. To consider and act upon a resolution to adopt the Amended
Constitution of the Bank (the "Amended Constitution"), a copy of which is
attached to the Plan as Exhibit II; and
4. To transact such other business as may properly come before the
Special Meeting.
The Board of Directors of the Bank has unanimously adopted the Plan. The
Plan has also been approved by the Office of Thrift Supervision (the "OTS") and
the Ohio Department of Commerce, Division of Financial Institutions (the
"Division"), subject to the approval of the Plan by the members of the Bank at
the Special Meeting and the satisfaction of certain other conditions.
The approval of the Plan will have the effect of (i) terminating the voting
rights of the present members of the Bank and (ii) modifying, and eventually
eliminating, their right to receive any surplus in the event of a complete
liquidation of the Bank. Except for certain rights in the special liquidation
account established by the Plan (the "Liquidation Account"), such voting and
liquidation rights after the Conversion will vest exclusively in the holders of
the common shares of the Holding Company. See "THE CONVERSION -- Principal
Effects of the Conversion."
During and upon the completion of the Conversion, the Bank will continue to
provide services to depositors and borrowers pursuant to its current policies at
its existing office. In addition, the Bank will continue to be a member of the
Federal Home Loan Bank (the "FHLB") of Cincinnati and savings accounts at the
Bank will continue to be insured up to applicable limits by the Federal Deposit
Insurance Corporation (the "FDIC").
This Summary Proxy Statement is dated , 1996, and is first being
mailed, together with the Prospectus of the Holding Company dated ,
1996 (the "Prospectus"), in respect of the common shares of the Holding Company
to be issued in connection with the Conversion (the "Common Shares"), to members
of the Bank on or about , 1996.
VOTING RIGHTS AND VOTE REQUIRED FOR APPROVAL
All depositors having a savings account of record with the Bank on
, 1996 (the "Voting Record Date"), and all borrowers having a loan of
record on the Voting Record Date are members of the Bank eligible to vote at the
Special Meeting and at any adjournments thereof ("Voting Members").
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Voting Members who are depositors will be entitled to cast one vote for each
$100, and a proportionate fractional vote for an amount of less than $100, of
the withdrawable value of their savings accounts on the Voting Record Date.
Voting Members who are borrowers will be entitled to cast one vote each.
A savings account or a loan account in which one or more persons has an
interest shall be deemed to be held by only one Voting Member for the purpose of
voting at the Special Meeting. Any questions as to the eligibility of a member
to vote, the number of votes allocated to each Voting Member or any other matter
relating to voting will be resolved at the time of the Special Meeting by
reference to the records of the Bank.
The Bank records disclose that, as of the Voting Record Date, there were
votes entitled to be cast at the Special Meeting, a majority of which
are required to approve the Plan. A vote of three-fifths of the votes cast in
person or by proxy at the Special Meeting is required to adopt the Amended
Articles and the Amended Constitution of the Bank.
The Bank, as the custodian of the Individual Retirement Accounts ("IRAs") at
the Bank, is empowered to vote at the Special Meeting all votes eligible to be
cast with respect to each IRA. On the Voting Record Date, there were
votes eligible to be cast with respect to IRAs at the Bank, which represents
% of the total votes eligible to be cast at the Special Meeting. The Board of
Directors has indicated that it intends to cast all of the votes under IRAs in
favor of the approval of the Plan, unless contrary instructions are received
from IRA holders. IRA holders who wish to give such instructions may do so by
returning the enclosed Proxy.
PROXIES
Voting Members may vote in person or by proxy at the Special Meeting. For
Voting Members wishing to vote in person, ballots will be distributed at the
Special Meeting. For Voting Members wishing to vote by proxy at the Special
Meeting, the enclosed Proxy may be completed and given in accordance with this
Summary Proxy Statement. Any other proxy held by the Bank will not be used by
the Bank for the Special Meeting.
A Proxy will be voted in the manner indicated thereon or, in the absence of
specific instructions, will be voted FOR the approval of the Plan, FOR the
adoption of the Amended Articles and FOR the adoption of the Amended
Constitution. Without affecting any vote previously taken, a Voting Member may
revoke a Proxy at any time before such proxy is exercised by executing and
delivering a later dated proxy or by giving the Bank notice of revocation in
writing or in open meeting at the Special Meeting. Attendance at the Special
Meeting will not, of itself, revoke a Proxy.
Proxies may be solicited by the directors, officers and employees of the
Bank in person or by telephone, telegraph or mail, for use only at the Special
Meeting and any adjournments thereof and will not be used for any other meeting.
The cost of soliciting Proxies will be borne by the Bank.
MANAGEMENT'S RECOMMENDATIONS AND REASONS FOR CONVERSION
THE BOARD OF DIRECTORS RECOMMENDS THAT MEMBERS VOTE FOR THE APPROVAL OF THE
PLAN AND THE ADOPTION OF THE AMENDED ARTICLES AND THE AMENDED CONSTITUTION OF
THE BANK.
The principal factors considered by the Bank's Board of Directors in
reaching the decision to pursue a mutual-to-stock conversion are the uncertain
future of the mutual form of ownership generally and the numerous competitive
disadvantages which the Bank faces if it maintains its mutual form. These
disadvantages relate to a variety of factors, including growth opportunities,
employee retention and regulatory uncertainty.
If the Bank is to continue to grow and prosper, the mutual form of
organization is the least desirable form from a competitive standpoint. The
opportunities for a mutual savings and loan association to expand through
mutual-to-mutual mergers or acquisitions are limited because cash is the only
form of consideration a mutual institution can offer to another institution.
Although the
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Bank does not have any specific acquisitions planned at this time, the
Conversion will position the Bank to take advantage of any acquisition
opportunities which may present themselves. Because a conversion to stock form
is a time-consuming and complex process, the Bank cannot wait until a
prospective acquisition arises to embark on the conversion process.
As an increasing number of the Bank's competitors convert to stock form and
acquire the ability to use stock-based compensation programs, the Bank, in
mutual form, would be at a disadvantage when it comes to attracting and
retaining qualified management. The Bank believes that the employee stock
ownership plan (the "ESOP") established for all employees and the stock option
plan (the "Stock Option Plan") and the recognition and retention plan (the
"RRP") proposed for directors and management are important tools in achieving
such goals, even though the Bank will be required to wait until at least six
months after the Conversion to implement the Stock Option Plan and the RRP. See
"MANAGEMENT -- Stock Benefit Plans" in the Prospectus.
Another benefit of the Conversion will be an increase in capital.
Notwithstanding the Bank's currently strong capital position, the importance of
higher levels of capital cannot be ignored in the current interest rate
environment. As has been amply demonstrated in the past, changing accounting
principles, interest rate shifts and changing regulations can threaten even
well-capitalized institutions. As a mutual institution, the Bank can only
increase capital through retained earnings or the issuance of subordinated
debentures, which do not count as tier 1 capital for regulatory capital
purposes. Capital that may seem unnecessary now may help the Bank withstand
future threats to its capital. See "REGULATION -- Office of Thrift Supervision
- -- Regulatory Capital Requirements" in the Prospectus.
THE BUSINESS OF THE HOLDING COMPANY
The Holding Company was incorporated under Ohio law in April 1996 at the
direction of the Bank for the purpose of purchasing all of the capital stock of
the Bank to be issued in connection with the Conversion. The Holding Company has
not conducted and will not conduct any business before the completion of the
Conversion other than business related to the Conversion. Upon the consummation
of the Conversion, the Holding Company will be a unitary savings and loan
holding company, the principal assets of which initially will be the capital
stock of the Bank, the investments made with the net proceeds retained from the
sale of Common Shares in connection with the Conversion and a loan to be made by
the Holding Company to the ESOP to facilitate the ESOP's purchase of Common
Shares in the Conversion. See "USE OF PROCEEDS."
The office of the Holding Company is located at 25 Garfield Place,
Cincinnati, Ohio 45202, and its telephone number is (513) 721-0120.
THE BUSINESS OF THE BANK
The Bank is a mutual savings and loan association which was organized under
Ohio law in 1888. As an Ohio savings and loan association, the Bank is subject
to supervision and regulation by the OTS and the Division. The Bank conducts
business from its office at 25 Garfield Place in Cincinnati, Ohio. The principal
business of the Bank is the origination of permanent mortgage loans secured by
first mortgages on one- to four-family residential real estate located in
Hamilton County, Ohio and the contiguous Ohio counties of Clermont, Butler and
Warren and the Kentucky counties of Boone and Kenton. The Bank also originates
mortgage loans secured by multifamily real estate (over four units) and
nonresidential real estate in its primary market area. See "THE BUSINESS OF THE
BANK -- Lending Activities" in the Prospectus. In addition to real estate
lending, the Bank originates a limited number of secured and unsecured consumer
loans. For liquidity and interest rate risk management purposes, the Bank
invests in interest-bearing deposits in other financial institutions, U.S.
Government and agency obligations, mortgage-backed securities and other
investments permitted by applicable law. See "THE BUSINESS OF THE BANK --
Investment Activities" in the Prospectus. Funds for lending and other investment
activities are obtained primarily from savings deposits, which are
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insured up to applicable limits by the FDIC in the Savings Association Insurance
Fund, and principal repayments on loans. Advances from the FHLB of Cincinnati
are utilized from time to time when other sources of funds are inadequate to
fund loan demand. See "THE BUSINESS OF THE BANK -- Deposits and Borrowings" in
the Prospectus.
THE CONVERSION
THE OTS AND THE DIVISION HAVE APPROVED THE PLAN, SUBJECT TO THE APPROVAL OF
THE PLAN BY THE MEMBERS OF THE BANK ENTITLED TO VOTE ON THE PLAN AND SUBJECT TO
THE SATISFACTION OF CERTAIN OTHER CONDITIONS IMPOSED BY THE OTS AND THE
DIVISION. OTS AND DIVISION APPROVAL DOES NOT CONSTITUTE A RECOMMENDATION OR
ENDORSEMENT OF THE PLAN.
GENERAL
The Board of Directors of the Bank has unanimously adopted the Plan and
recommends that the Voting Members of the Bank approve the Plan at the Special
Meeting. During and upon completion of the Conversion, the Bank will continue to
provide the services presently offered to depositors and borrowers, will
maintain its existing office and will retain its existing management and
employees.
Based on an independent appraisal of the pro forma market value of the Bank,
as converted, as of April 12, 1996, the aggregate purchase price of the Common
Shares to be offered in a subscription offering (the "Subscription Offering")
and a concurrent community offering (the "Community Offering") ranges from a
minimum of $2,975,000 to a maximum of $4,025,000 (the "Valuation Range"),
resulting in a range of 297,500 to 402,500 Common Shares at $10 per share. The
actual number of shares sold in connection with the Conversion will be
determined upon completion of the Subscription Offering and the Community
Offering (collectively, the "Offering") based on the final valuation of the
Bank, as converted. See "Pricing and Number of Common Shares to be Sold."
In accordance with the Plan, nontransferable subscription rights to purchase
Common Shares at a price of $10 per share are being offered in the Subscription
Offering, subject to the rights and restrictions established by the Plan, to (a)
eligible depositors of the Bank as of May 31, 1995 (the "Eligibility Record
Date"), (b) the ESOP and (c) members of the Bank eligible to vote at the Special
Meeting ("Other Eligible Members"). To the extent that all of the Common Shares
are not subscribed for in the Subscription Offering, the remaining Common Shares
are concurrently being offered to the general public in the Community Offering,
in which preference will be given to natural persons residing in Hamilton
County, Ohio. See "Community Offering."
The minimum number of Common Shares any person may purchase in the Offering
is 25. Except for the ESOP, which may purchase up to 8% of the total Common
Shares sold in the Offering, (i) no Eligible Account Holder (hereinafter
defined), Supplemental Eligible Account Holder (hereinafter defined), if any, or
Other Eligible Member may purchase in the Offering more than 2.5% of the total
Common Shares sold in the Offering, (ii) no person, together with his or her
Associates (hereinafter defined) and other persons acting in concert with him or
her, may purchase in the Community Offering more than 2.5% of the total Common
Shares sold in the Offering, and (iii) no person, together with his or her
Associates and other persons acting in concert with him or her, may purchase
more than 5% of the total Common Shares sold in the Offering. In connection with
the exercise of subscription rights arising from a deposit account or a loan
account in which two or more persons have an interest, the aggregate maximum
number of Common Shares which the persons having an interest in such account may
purchase is 2.5% of the total Common Shares sold in the Offering. Subject to OTS
regulations, the maximum purchase limitation may be increased or decreased after
the commencement of the Offering in the sole discretion of the Boards of
Directors of the Holding Company and the Bank. If the maximum purchase
limitation is increased to more than 2.5% of the Common Shares, persons who have
subscribed for 2.5% of the Common Shares will be given the opportunity to
increase their subscriptions. See "Limitations on Purchase of Common Shares."
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OTS and Ohio regulations require the completion of the Conversion within 24
months after the date of the approval of the Plan by the Voting Members of the
Bank. The commencement and completion of the Conversion will be subject to
market conditions and other factors beyond the Bank's control. Due to changing
economic and market conditions, no assurance can be given as to the length of
time that will be required to complete the sale of the Common Shares. If delays
are experienced, significant changes may occur in the estimated pro forma market
value of the Bank. In such circumstances, the Bank may also incur substantial
additional printing, legal and accounting expenses in completing the Conversion.
In the event the Conversion is not successfully completed, the Bank will be
required to charge all Conversion expenses against current earnings.
PRINCIPAL EFFECTS OF THE CONVERSION
VOTING RIGHTS. Savings account holders and borrowers who are members of the
Bank in its mutual form will have no voting rights in the Bank as converted and
will not participate, therefore, in the election of directors or otherwise
control the Bank's affairs. Voting rights in the Holding Company will be held
exclusively by its shareholders and voting rights in the Bank will be held
exclusively by the Holding Company. Each holder of the Holding Company's common
shares will be entitled to one vote for each share owned on any matter to be
considered by the Holding Company's shareholders. See "DESCRIPTION OF AUTHORIZED
SHARES."
SAVINGS ACCOUNTS AND LOANS. Savings accounts in the Bank, as converted,
will be equivalent in amount, interest rate and other terms to the present
savings accounts in the Bank, and the existing FDIC insurance on such deposits
will not be affected by the Conversion. The Conversion will not affect the terms
of loan accounts or the rights and obligations of borrowers under their
individual contractual arrangements with the Bank.
TAX CONSEQUENCES. The consummation of the Conversion is expressly
conditioned on receipt by the Bank of a private letter ruling from the Internal
Revenue Service or an opinion of counsel to the effect that the Conversion will
constitute a tax-free reorganization as defined in Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"). The Bank intends to
proceed with the Conversion based upon an opinion rendered by its special
counsel, Vorys, Sater, Seymour and Pease, to the following effect:
(1) The Conversion constitutes a reorganization within the meaning of
Section 368(a)(1)(F) of the Code, and no gain or loss will be recognized by
the Bank in its mutual form or in its stock form as a result of the
Conversion. The Bank in its mutual form and the Bank in its stock form will
each be a "party to a reorganization" within the meaning of Section 368(b)
of the Code;
(2) No gain or loss will be recognized by the Bank upon the receipt of
money from the Holding Company in exchange for the capital stock of the
Bank, as converted;
(3) The assets of the Bank will have the same basis in its hands
immediately after the Conversion as they had in its hands immediately prior
to the Conversion and the holding period of the assets of the Bank after the
Conversion will include the period during which the assets were held by the
Bank before the Conversion;
(4) No gain or loss will be recognized by the deposit account holders of
the Bank upon the issuance to them, in exchange for their respective
withdrawable deposit accounts in the Bank immediately prior to the
Conversion, of withdrawable deposit accounts in the Bank immediately after
the Conversion, in the same dollar amount as their withdrawable deposit
accounts in the Bank immediately prior to the Conversion, plus, in the case
of Eligible Account Holders and Supplemental Eligible Account Holders, the
interests in the Liquidation Account (hereinafter defined) of the Bank, as
described below;
(5) The basis of the withdrawable deposit accounts in the Bank held by
its deposit account holders immediately after the Conversion will be the
same as the basis of their deposit accounts in the Bank immediately prior to
the Conversion. The basis of the interests in the Liquidation
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Account received by the Eligible Account Holders and Supplemental Eligible
Account Holders will be zero. The basis of the nontransferable subscription
rights received by Eligible Account Holders, Supplemental Eligible Account
Holders and Other Eligible Members will be zero (assuming that at
distribution such rights have no ascertainable fair market value);
(6) No gain or loss will be recognized by Eligible Account Holders,
Supplemental Eligible Account Holders or Other Eligible Members upon the
distribution to them of nontransferable subscription rights to purchase
Common Shares (assuming that at distribution such rights have no
ascertainable fair market value), and no taxable income will be realized by
such Eligible Account Holders, Supplemental Eligible Account Holders or
Other Eligible Members as a result of their exercise of such nontransferable
subscription rights;
(7) The basis of the Common Shares purchased by members of the Bank
pursuant to the exercise of subscription rights will be the purchase price
thereof (assuming that such rights have no ascertainable fair market value
and that the purchase price is not less than the fair market value of the
shares on the date of such exercise), and the holding period of such shares
will commence on the date of such exercise. The basis of the Common Shares
purchased other than by the exercise of subscription rights will be the
purchase price thereof (assuming in the case of the other subscribers that
the opportunity to buy in the Subscription Offering has no ascertainable
fair market value) and the holding period of such shares will commence on
the day after the date of the purchase;
(8) For purposes of Section 381 of the Code, the Bank will be treated as
if there had been no reorganization. The taxable year of the Bank will not
end on the effective date of the Conversion. Immediately after the
Conversion, the Bank in its stock form will succeed to and take into account
the tax attributes of the Bank in its mutual form immediately prior to the
Conversion, including the Bank's earnings and profits or deficit in earnings
and profits;
(9) The bad debt reserves of the Bank in its mutual form immediately
prior to the Conversion will not be required to be restored to the gross
income of the Bank in its stock form as a result of the Conversion and
immediately after the Conversion such bad debt reserves will have the same
character in the hands of the Bank in its stock form as they would have had
if there had been no Conversion. The Bank in its stock form will succeed to
and take into account the dollar amounts of those accounts of the Bank in
its mutual form which represent bad debt reserves in respect of which the
Bank in its mutual form has taken a bad debt deduction for taxable years
ending on or before the Conversion; and
(10) Regardless of book entries made for the creation of the Liquidation
Account, the Conversion will not diminish the accumulated earnings and
profits of the Bank available for the subsequent distribution of dividends
within the meaning of Section 316 of the Code. The creation of the
Liquidation Account on the records of the Bank will have no effect on its
taxable income, deductions for additions to reserves for bad debts under
Section 593 of the Code or distributions to stockholders under Section
593(e) of the Code.
For Ohio tax purposes, the tax consequences of the Conversion will be
as follows:
(1) The Bank is a "financial institution" for State of Ohio tax
purposes, and the Conversion will not change such status;
(2) The Bank is subject to the Ohio corporate franchise tax on
"financial institutions," which is imposed annually at a rate of 1.5% of the
Bank's equity capital determined in accordance with generally accepted
accounting principles ("GAAP"), and the Conversion will not change such
status;
(3) As a "financial institution," the Bank is not subject to any tax
based upon net income or net profit imposed by the State of Ohio, and the
Conversion will not change such status;
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(4) The Conversion will not be a taxable transaction to the Bank in its
mutual or stock form for purposes of the Ohio corporate franchise tax. As a
consequence of the Conversion, however, the annual Ohio corporate franchise
tax liability of the Bank will increase if the taxable net worth of the Bank
(i.e., book net worth computed in accordance with GAAP at the close of the
Bank's taxable year for federal income tax purposes) increases thereby; and
(5) The Conversion will not be a taxable transaction to any deposit
account holder or borrower member of the Bank in its mutual or stock form
for purposes of the Ohio corporate franchise tax and the Ohio personal
income tax.
The Bank has received an opinion from Keller & Company, a firm which
evaluates and appraises financial institutions ("Keller"), to the effect that
the subscription rights have no ascertainable fair market value because the
rights are received by specified persons at no cost, may not be transferred and
are of short duration. The IRS could challenge the assumption that the
subscription rights have no ascertainable fair market value.
LIQUIDATION ACCOUNT. In the unlikely event of a complete liquidation of the
Bank in its present mutual form, each depositor in the Bank would receive a pro
rata share of any assets of the Bank remaining after payment of the claims of
all creditors, including the claims of all depositors to the withdrawable value
of their savings accounts. A depositor's pro rata share of such remaining assets
would be the same proportion of such assets as the value of such depositor's
savings deposits bears to the total aggregate value of all savings deposits in
the Bank at the time of liquidation.
In the event of a complete liquidation of the Bank in its stock form after
the Conversion, each savings depositor would have a claim of the same general
priority as the claims of all other general creditors of the Bank. Except as
described below, each depositor's claim would be solely in the amount of the
balance in such depositor's savings account plus accrued interest. The depositor
would have no interest in the assets of the Bank above that amount. Such assets
would be distributed to the shareholders of the Bank.
For the purpose of granting a limited priority claim to the assets of the
Bank in the event of a complete liquidation thereof to Eligible Account Holders
and Supplemental Eligible Account Holders who continue to maintain savings
accounts at the Bank after the Conversion, the Bank will, at the time of the
Conversion, establish the Liquidation Account in an amount equal to the retained
earnings of the Bank as of March 31, 1996. The Liquidation Account will not
operate to restrict the use or application of any of the regulatory capital of
the Bank.
Each Eligible Account Holder and Supplemental Eligible Account Holder will
have a separate inchoate interest (the "Subaccount") in a portion of the
Liquidation Account for Qualifying Deposits held on the Eligibility Record Date
or June 30, 1996 (the "Supplemental Eligibility Record Date").
The balance of each initial Subaccount shall be an amount determined by
multiplying the amount in the Liquidation Account by a fraction, the numerator
of which is the closing balance in the account holder's account as of the close
of business on the Eligibility Record Date or the Supplemental Eligibility
Record Date and the denominator of which is the total amount of all Qualifying
Deposits of Eligible Account Holders on the Eligibility Record Date or the
Supplemental Eligibility Record Date. The balance of each Subaccount may be
decreased but will never be increased. If, at the close of business on the last
day of any fiscal year subsequent to the Eligibility Record Date or the
Supplemental Eligibility Record Date, the balance in the savings account to
which a Subaccount relates is less than the lesser of (i) the deposit balance in
such savings account at the close of business on any other annual closing date
subsequent to the Eligibility Record Date or the Supplemental Eligibility Record
Date or (ii) the amount of the Qualifying Deposit as of the Eligibility Record
Date or the Supplemental Eligibility Record Date, the balance of the Subaccount
for such savings account shall be adjusted proportionately to the reduction in
such savings account balance. In the event of any such downward adjustment, such
Subaccount balance shall not be subsequently increased notwithstanding any
increase in the deposit balance of the related savings account. If any savings
account is closed, its related Subaccount shall be reduced to zero upon such
closing.
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In the event of a complete liquidation of the converted Bank (and only in
such event), each Eligible Account Holder and Supplemental Eligible Account
Holder shall receive from the Liquidation Account a distribution equal to the
current balance in each of such account holder's Subaccounts before any
liquidation distribution may be made to the shareholders of the Bank. Any assets
remaining after satisfaction of such liquidation rights and the claims of the
Bank's creditors would be distributed to the shareholders of the Bank. No
merger, consolidation, purchase of bulk assets or similar combination or
transaction with another financial institution, the deposits of which are
insured by the FDIC, will be deemed to be a complete liquidation for this
purpose and, in any such transaction, the Liquidation Account shall be assumed
by the surviving institution.
COMMON SHARES. SHARES ISSUED UNDER THE PLAN CANNOT AND WILL NOT BE INSURED
BY THE FDIC. For a description of the characteristics of the Common Shares, see
"DESCRIPTION OF AUTHORIZED SHARES."
INTERPRETATION AND AMENDMENT OF THE PLAN
To the extent permitted by law, all interpretations of the Plan by the
Boards of Directors of the Holding Company and the Bank will be final. The Plan
may be amended by the Boards of Directors of the Holding Company and the Bank at
any time with the concurrence of the OTS and the Division. If the Bank
determines, upon advice of counsel and after consultation with the OTS and the
Division, that any such amendment is material, subscribers will be notified of
the amendment and will be provided the opportunity to increase, decrease or
cancel their subscriptions. Any person who does not affirmatively elect to
continue his subscription or elects to rescind his subscription before the date
specified in the notice will have all of his funds promptly refunded with
interest. Any person who elects to decrease his subscription will have the
appropriate portion of his funds promptly refunded with interest.
CONDITIONS AND TERMINATION
The completion of the Conversion requires the approval of the Plan by the
Voting Members of the Bank at the Special Meeting and the completion of the sale
of the Common Shares within 24 months following the date of such approval. If
these conditions are not satisfied, the Plan will automatically terminate and
the Bank will continue its business in the mutual form of organization. The Plan
may be voluntarily terminated by the Board of Directors at any time before the
Special Meeting and at any time thereafter with the approval of the OTS and the
Division.
SUBSCRIPTION OFFERING
THE SUBSCRIPTION OFFERING WILL EXPIRE AT .M., EASTERN TIME, ON
, 1996 (THE "SUBSCRIPTION EXPIRATION DATE"). SUBSCRIPTION RIGHTS NOT
EXERCISED BEFORE THE SUBSCRIPTION EXPIRATION DATE WILL BE VOID, WHETHER OR NOT
THE BANK HAS BEEN ABLE TO LOCATE THE PERSONS ENTITLED TO SUCH SUBSCRIPTION
RIGHTS.
Nontransferable subscription rights to purchase Common Shares are being
issued at no cost to all eligible persons and entities in accordance with the
preference categories established by the Plan, as described below. Each
subscription right may be exercised only by the person to whom it is issued and
only for his or her own account. EACH PERSON SUBSCRIBING FOR COMMON SHARES MUST
REPRESENT TO THE BANK THAT HE OR SHE IS PURCHASING THE COMMON SHARES FOR HIS OR
HER OWN ACCOUNT AND THAT HE OR SHE HAS NO AGREEMENT OR UNDERSTANDING WITH ANY
OTHER PERSON FOR THE SALE OR TRANSFER OF THE COMMON SHARES. ANY PERSON WHO
ATTEMPTS TO TRANSFER HIS OR HER SUBSCRIPTION RIGHTS MAY BE SUBJECT TO PENALTIES
AND SANCTIONS, INCLUDING LOSS OF THE SUBSCRIPTION RIGHTS.
The number of Common Shares which a person who has subscription rights may
purchase will be determined, in part, by the total number of Common Shares to be
issued and the availability of Common Shares for purchase under the preference
categories set forth in the Plan and certain other limitations. See "Limitations
on Purchases of Common Shares." The sale of any Common Shares pursuant to
subscriptions received is contingent upon approval of the Plan by the Voting
Members of the Bank at the Special Meeting.
9
The preference categories and preliminary purchase limitations which have
been established by the Plan, in accordance with applicable regulations, for the
allocation of Common Shares are as follows:
(a) Each account holder who has a Qualifying Deposit with the Bank on
the Eligibility Record Date (the "Eligible Account Holders") shall receive,
without payment therefor, the nontransferable right to purchase in the
Subscription Offering up to 2.5% of the total Common Shares sold in the
Offering. If the exercise of subscription rights in this Category 1 results
in an over-subscription, Common Shares will be allocated among subscribing
Eligible Account Holders in a manner which will, to the extent possible,
make the total allocation of each subscriber equal 100 shares or the amount
subscribed for, whichever is less. Any Common Shares remaining after such
allocation has been made will be allocated among the subscribing Eligible
Account Holders whose subscriptions remain unfilled in the proportion which
the amount of their respective Qualifying Deposits on the Eligibility Record
Date bears to the total Qualifying Deposits of all Eligible Account Holders
on such date. Notwithstanding the foregoing, Common Shares in excess of
402,500, the maximum of the Valuation Range, may be sold to the ESOP before
fully satisfying the subscriptions of Eligible Account Holders. For purposes
of this paragraph (a), increases in the Qualifying Deposits of directors and
executive officers of the Bank during the twelve months preceding the
Eligibility Record Date shall not be considered. No fractional shares will
be issued.
(b) The ESOP shall receive, without payment therefor, the
nontransferable right to purchase in the Subscription Offering Common Shares
in an aggregate amount of up to 10% of the Common Shares sold in the
Offering, provided that shares remain available after satisfying the
subscription rights of Eligible Account Holders up to the maximum of the
Valuation Range pursuant to paragraph (a) above. Although the Plan and OTS
regulations permit the ESOP to purchase up to 10% of the Common Shares, the
Holding Company anticipates that the ESOP will purchase 8% of the Common
Shares. If the ESOP is unable to purchase all or part of the Common Shares
for which it subscribes, the ESOP may purchase Common Shares on the open
market or may purchase authorized but unissued shares of the Holding
Company. If the ESOP purchases authorized but unissued shares from the
Holding Company, such purchases could have a dilutive effect on the
interests of the Holding Company's shareholders. See "RISK FACTORS --
Potential Impact of Benefit Plans on Net Earnings and Shareholders' Equity"
in the Prospectus.
(c) If the Eligibility Record Date is more than 15 months prior to the
date of the latest amendment to the Bank's conversion application filed with
the OTS, each account holder who has a Qualifying Deposit at the Bank as of
the Supplemental Eligibility Record Date (the "Supplemental Eligible Account
Holders"), will receive, without payment, the non-transferable right to
purchase in the Subscription Offering up to 2.5% of the total Common Shares
sold in the Offering, provided that shares remain available after satisfying
the subscription rights of Eligible Account Holders and the ESOP pursuant to
paragraphs (a) and (b) above. If the exercise of subscription rights by
Supplemental Eligible Account Holders results in an oversubscription, Common
Shares will be allocated among subscribing Supplemental Eligible Account
Holders in a manner which will, to the extent possible, make the total
allocation of each subscriber equal 100 shares or the amount subscribed for,
whichever is less. Any Common Shares remaining after such allocation has
been made will be allocated among the subscribing Supplemental Eligible
Account Holders whose subscriptions remain unfilled in the proportion which
the amount of their respective Qualifying Deposits on the Supplemental
Eligibility Record Date bears to the total Qualifying Deposits of all
Supplemental Eligible Account Holders on such date. No fractional shares
will be issued.
Subscription rights received by Supplemental Eligible Account Holders,
if any, will be subordinate to the subscription rights of Eligible Account
Holders and the ESOP.
(d) Each Other Eligible Member, other than an Eligible Account Holder or
Supplemental Eligible Account Holder, shall receive, without payment
therefor, the nontransferable right to
10
purchase in the Subscription Offering up to 2.5% of the Common Shares to be
sold in the Offering, provided that shares remain available after satisfying
the subscription rights of Eligible Account Holders, the ESOP and
Supplemental Eligible Account Holders pursuant to paragraphs (a), (b) and
(c) above. In the event of an oversubscription by Other Eligible Members,
the available Common Shares will be allocated among subscribing Other
Eligible Members in the same proportion that their subscriptions bear to the
total amount of subscriptions by all Other Eligible Members.
The subscription rights granted under this Plan are nontransferable. Each
subscription right may be exercised only by the person to whom it is issued and
only for such person's own account. Each person exercising subscription rights
will be required to certify that such person is purchasing for such person's own
account and that such person has no agreement or understanding for the sale or
transfer of the Common Shares to which such person subscribes. The Bank will use
the information provided on the Order Form to ensure that those persons
subscribing in the Subscription Offering have subscription rights and that the
orders submitted do not exceed applicable purchase limitations. In order to
ensure proper identification of subscription rights and proper allocations in
the event of an oversubscription, it is the responsibility of each subscriber to
provide correct account verification information and the correct address of the
subscriber's primary residence.
The Bank will make reasonable efforts to comply with the securities laws of
all states in the United States in which persons having subscription rights
reside. However, no such person will be offered or receive any Common Shares
under the Plan who resides in a foreign country or in a state of the United
States with respect to which each of the following apply: (i) under the
securities laws of such country or state, the granting of subscription rights or
the offer or sale of Common Shares to such persons would require the Holding
Company or its officers or directors to register as a broker or dealer or to
register or otherwise qualify its securities for sale in such country or state;
and (ii) such registration or qualification would be impracticable for reasons
of cost or otherwise.
COMMUNITY OFFERING
Concurrently with the Subscription Offering, the Holding Company is offering
Common Shares in the Community Offering, subject to the limitations set forth
below, to the extent such shares remain available after the satisfaction of all
orders received in the Subscription Offering. If subscriptions are received in
the Subscription Offering for at least 462,875 Common Shares, Common Shares may
not be available for purchase in the Community Offering. All sales of Common
Shares in the Community Offering will be at the same price per share as in the
Subscription Offering. THE COMMUNITY OFFERING MAY BE TERMINATED AT ANY TIME
AFTER ORDERS FOR AT LEAST 462,875 COMMON SHARES HAVE BEEN RECEIVED, BUT IN NO
EVENT LATER THAN , 1996 (THE "COMMUNITY EXPIRATION DATE"), WITHOUT THE
CONSENT OF THE OTS AND THE DIVISION.
In the event shares are available for the Community Offering, members of the
general public, each together with his or her Associates and other persons
acting in concert with him or her, may purchase up to 2.5% of the total Common
Shares sold in the Offering. If an insufficient number of Common Shares is
available to fill all of the orders received in the Community Offering, the
available Common Shares will be allocated in a manner to be determined by the
Boards of Directors of the Holding Company and the Bank, subject to the
following:
(i) Preference will be given to natural persons who are residents of
Hamilton County, Ohio, the county in which the office of the Bank is
located;
(ii) Orders received in the Community Offering will first be filled up
to the lesser of the number of shares subscribed for or 2% of the total
number of Common Shares offered, with any remaining shares allocated on an
equal number of shares per order basis until all orders have been filled;
and
11
(iii) The right of any person to purchase Common Shares in the Community
Offering is subject to the right of the Holding Company and the Bank to
accept or reject such purchases in whole or in part.
The term "resident", as used herein with respect to the Community Offering,
means any natural person who, on the date of submission of an Order Form,
maintained a bona fide residence within Hamilton County, Ohio.
LIMITATIONS ON PURCHASES OF COMMON SHARES
The Plan provides for certain additional limitations to be placed upon the
purchase of Common Shares. To the extent Common Shares are available, the
minimum number of Common Shares that may be purchased by any party is 25, or
$250. No fractional shares will be issued. Purchases in the Offering are further
subject to the limitations that (i) no Eligible Account Holder, Supplemental
Eligible Account Holder, if any, or Other Eligible Member may purchase in the
Offering more than 2.5% of the total Common Shares sold in the Offering, (ii) no
person, together with his or her Associates and other persons acting in concert
with him or her, may purchase in the Community Offering more than 2.5% of the
total Common Shares sold in the Offering, and (iii) no person, together with his
or her Associates and other persons acting in concert with him or her, may
purchase more than 5% of the total Common Shares sold in the Offering. In
connection with the exercise of subscription rights arising from a deposit
account or a loan account in which two or more persons have an interest, the
aggregate maximum number of Common Shares which the persons having an interest
in such account may purchase is 2.5% of the total Common Shares sold in the
Offering. Such limitation does not apply to the ESOP. Subject to applicable
regulations, the purchase limitation may be increased or decreased after the
commencement of the Offering by the Boards of Directors. A person's associates
consist of the following ("Associates"): (a) any corporation or organization
(other than the Bank) of which such person is an officer, partner or, directly
or indirectly, 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; and (c) any relative or spouse of such person, or relative
of such spouse, who either has the same home as such person or who is a director
or officer of the Bank.
Executive officers and directors of the Bank, together with their
Associates, may not purchase, in the aggregate, more than 35% of the total
Common Shares sold in the Offering. Shares acquired by the ESOP will not,
pursuant to regulations governing the Conversion, be aggregated with the shares
purchased by the directors, officers and employees of the Bank.
Purchases of Common Shares in the Offering are also subject to the change in
control regulations of the OTS which restrict direct and indirect purchases of
10% or more of the stock of any savings bank by any person or group of persons
acting in concert, under certain circumstances. See "RESTRICTIONS ON ACQUISITION
OF THE HOLDING COMPANY AND THE BANK -- Federal Law and Regulation" in the
Prospectus.
After the Conversion, the Common Shares, except for shares purchased by
affiliates of the Bank, will be freely transferable, subject to OTS and Division
regulations.
PLAN OF DISTRIBUTION
The offering of the Common Shares is made only pursuant to the Prospectus, a
copy of which has been provided with this Summary Proxy Statement and copies of
which are available at the office of the Bank. Officers and directors of the
Bank will be available to answer questions about the Conversion and may also
hold informational meetings for interested persons. Such officers and directors
will not be permitted to make statements about the Holding Company or the Bank
unless such information is also set forth in the Prospectus, nor will they
render investment advice. No officer, director or employee of the Holding
Company or the Bank will be compensated, directly or indirectly, for any
activities in connection with the offer or sale of Common Shares issued in the
Conversion.
12
To assist the Holding Company and the Bank in marketing the Common Shares,
the Holding Company and the Bank have retained Charles Webb & Company ("Webb"),
a broker-dealer registered with the SEC and a member of the National Association
of Securities Dealers. Webb will consult with and advise the Bank and assist
with the sale of the Common Shares in connection with the Conversion. The
services to be rendered by Webb include the following: (1) assisting the Holding
Company and the Bank in conducting the Subscription Offering and the Community
Offering; (2) training and educating Bank personnel about the Conversion
process; (3) organizing and conducting meetings to provide information to
prospective investors about the Conversion; (4) keeping records of orders for
Common Shares; and (5) assisting in the collection of proxies from members for
use at the Special Meeting.
For its services, Webb will receive a financial advisory fee in the amount
of $50,000. Selected Dealers will receive fees equal to 4% of the purchase price
of Common Shares sold, if any, pursuant to Selected Dealer Agreements. In
addition, the Holding Company will reimburse Webb for certain expenses,
including reasonable legal fees. Such expenses shall not exceed $30,000. Webb is
not obligated to purchase any Common Shares.
The Holding Company and the Bank have agreed to indemnify Webb and its
directors, officers, employees, agents and any controlling person against any
and all loss, liability, claim, damage or expense arising out of any untrue
statement, or alleged untrue statement, of a material fact contained in the
Summary Proxy Statement or the Prospectus, any application to regulatory
authorities, any "blue sky" application, or any other related document prepared
or executed by or on behalf of the Holding Company or the Bank with its consent
in connection with, or in contemplation of, the Conversion, or any omission
therefrom of a material fact required to be stated therein, unless such untrue
statement or omission, or alleged untrue statement or omission, was made in
reliance upon certain information furnished to the Bank by Webb expressly for
use in the Summary Proxy Statement or the Prospectus.
The Common Shares will be offered principally by the distribution of this
Prospectus and through activities conducted at the Conversion Information
Center, which will be located at the office of the Bank. The Conversion
Information Center will be staffed by one or more of Webb's employees, who will
be responsible for mailing materials relating to the Offering, responding to
questions regarding the Conversion and the Offering and processing stock orders.
A conspicuous legend that the Common Shares are not a federally-insured or
guaranteed deposit or account appears on all offering documents used in
connection with the Conversion and will appear on the certificates representing
the Common Shares. Any person purchasing Common Shares will be required to
execute the Stock Order Form certifying such person's knowledge that the Common
Shares are not federally-insured or guaranteed and that the purchaser has
received a Prospectus and understands the investment risk involved.
Sales of Common Shares will be made by registered representatives affiliated
with Webb. Management and the employees of the Bank may participate in the
Offering in clerical capacities, providing administrative support in effecting
sales transactions or answering questions relating to the proper execution of
the Stock Order Form. Management of the Bank may answer questions regarding the
business of the Bank. Other questions of prospective purchasers, including
questions as to the nature of the investment, will be directed to registered
representatives. Management and the employees of the Bank have been instructed
not to solicit offers to purchase Common Shares or to provide advice regarding
the purchase of Common Shares.
The Bank's personnel will assist in the above-described sales activities
pursuant to an exemption from registration as a broker or dealer provided by
Rule 3a4-1 promulgated under the Securities Exchange Act of 1934 (the "Exchange
Act"). Rule 3a4-1 generally provides that an "associated person of an issuer" of
securities shall not be deemed a broker solely by reason of participation in the
sale of securities of such issuer if the associated person meets certain
conditions. Such conditions include, but are not limited to, that the associated
person participating in the sale of an issuer's securities not be
13
compensated in connection therewith at the time of participation, that such
person not be associated with a broker or dealer and that such person observe
certain limitations on his participation in the sale of securities. For purposes
of this exemption, "associated person of an issuer" is defined to include any
person who is a director, officer or employee of the issuer or a company that
controls, is controlled by or is under common control with the issuer.
EFFECT OF EXTENSION OF COMMUNITY OFFERING
If the Community Offering extends beyond , 1996, persons who have
subscribed for Common Shares in the Subscription Offering or in the Community
Offering will receive a written notice that they have the right to increase,
decrease or rescind their subscriptions for Common Shares at any time prior to
20 days before the end of the extension period. Any person who does not
affirmatively elect to continue his subscription or elects to rescind his
subscription during any such extension will have all of his funds promptly
refunded with interest. Any person who elects to decrease his subscription
during any such extension shall have the appropriate portion of his funds
promptly refunded with interest.
USE OF ORDER FORMS
Subscriptions for Common Shares in the Subscription Offering and the
Community Offering may be made only by completing and submitting a Stock Order
Form. Any person who desires to subscribe for Common Shares in the Subscription
Offering must do so by delivering to the Bank, by mail or in person, prior to
.m., Eastern Time, on , 1996, a properly executed and completed Stock
Order Form, together with full payment of the subscription price of $10 for each
Common Share for which subscription is made. No facsimile or photocopied Stock
Order Forms will be accepted.
AN EXECUTED STOCK ORDER FORM, ONCE RECEIVED BY THE BANK, MAY NOT BE
MODIFIED, AMENDED OR RESCINDED WITHOUT THE CONSENT OF THE BANK, UNLESS (I) THE
COMMUNITY OFFERING IS NOT COMPLETED BY , 1996, OR (II) THE FINAL
VALUATION OF THE BANK, AS CONVERTED, IS LESS THAN $2,975,000 OR MORE THAN
$4,628,750. IF EITHER OF THOSE EVENTS OCCURS, PERSONS WHO HAVE SUBSCRIBED FOR
COMMON SHARES IN THE OFFERING WILL BE GIVEN NOTICE THAT THEY HAVE A RIGHT TO
INCREASE, DECREASE OR RESCIND THEIR SUBSCRIPTIONS. ANY PERSON WHO DOES NOT
AFFIRMATIVELY ELECT TO CONTINUE HIS SUBSCRIPTION OR ELECTS TO RESCIND HIS
SUBSCRIPTION DURING ANY SUCH EXTENSION WILL HAVE ALL OF HIS FUNDS PROMPTLY
REFUNDED WITH INTEREST. ANY PERSON WHO ELECTS TO DECREASE HIS SUBSCRIPTION
DURING ANY SUCH EXTENSION WILL HAVE THE APPROPRIATE PORTION OF HIS FUNDS
PROMPTLY REFUNDED WITH INTEREST. IN ADDITION, IF THE MAXIMUM PURCHASE LIMITATION
IS INCREASED TO MORE THAN 2.5% OF THE COMMON SHARES, PERSONS WHO HAVE SUBSCRIBED
FOR 2.5% OF THE COMMON SHARES WILL BE GIVEN THE OPPORTUNITY TO INCREASE THEIR
SUBSCRIPTIONS.
PAYMENT FOR COMMON SHARES
Payment of the subscription price for all Common Shares for which a
subscription is made must accompany a completed Order Form in order for such
subscription to be valid. Payment for Common Shares may be made (i) in cash, if
delivered in person, (ii) by check, bank draft or money order, or (iii) by
authorization of withdrawal from savings accounts in the Bank (other than
non-self-directed IRAs and Keogh Accounts). The Bank cannot lend money or
otherwise extend credit to any person to purchase Common Shares.
Payments made in cash or by check, bank draft or money order will be placed
in a segregated savings account insured by the FDIC up to applicable limits
until the Conversion is completed or terminated. Interest will be paid by the
Bank on such account at the Bank's then current passbook savings account rate,
which is currently % with an annual percentage yield of %, from the date
payment is received until the Conversion is completed or terminated. Payments
made by check will not be deemed to have been received until such check has
cleared for payment.
Instructions for authorizing withdrawals from savings accounts are provided
in the Order Form. Once a withdrawal has been authorized, none of the designated
withdrawal amount may be used by a subscriber for any purpose other than to
purchase Common Shares, unless the Conversion is terminated. All sums authorized
for withdrawal will continue to earn interest at the contract rate for such
14
account or certificate until the completion or termination of the Conversion.
Interest penalties for early withdrawal applicable to certificate accounts will
be waived in the case of withdrawals authorized for the purchase of Common
Shares. If a partial withdrawal from a certificate account results in a balance
less than the applicable minimum balance requirement, the certificate will be
cancelled and the remaining balance will earn interest at the Bank's passbook
rate subsequent to the withdrawal.
In order to utilize funds in an IRA or Keogh account maintained at the Bank,
the funds must be transferred to a self-directed IRA or Keogh account that
permits the funds to be invested in stock. The beneficial owner of the IRA or
Keogh account must direct the trustee of the account to use funds from such
account to purchase Common Shares in connection with the Conversion. THIS CANNOT
BE DONE THROUGH THE MAIL. Persons who are interested in utilizing IRAs or Keogh
accounts at the Bank to subscribe for Common Shares should contact the
Conversion Information Center at (513) - for instructions and assistance.
Subscriptions will not be filled by the Bank until subscriptions have been
received in the Offering for up to 297,500 Common Shares, the minimum point of
the Valuation Range. If the Conversion is terminated, all funds delivered to the
Bank for the purchase of Common Shares will be returned with interest, and all
charges to savings accounts will be rescinded. If subscriptions are received for
at least 297,500 Common Shares, subscribers and other purchasers will be
notified by mail, promptly on completion of the sale of the Common Shares, of
the number of shares for which their subscriptions have been accepted. The funds
on deposit with the Bank for the purchase of Common Shares will be withdrawn and
paid to the Holding Company in exchange for the Common Shares. Certificates
representing Common Shares will be delivered promptly thereafter. The Common
Shares will not be insured by the FDIC.
If the ESOP subscribes for Common Shares in the Subscription Offering, it
will not be required to pay for the shares subscribed for at the time it
subscribes but may pay for such Common Shares upon consummation of the
Conversion.
SHARES TO BE PURCHASED BY MANAGEMENT PURSUANT TO SUBSCRIPTION RIGHTS
The following table sets forth certain information regarding the
subscription rights intended to be exercised by the directors and executive
officers of the Bank:
TOTAL PERCENT OF TOTAL AGGREGATE PURCHASE
NAME SHARES OFFERING(1) PRICE
- ------------------------------------------------- ----------- ------------------------- -----------------------
Mardelle Dickhaut................................ 3,500 1.00% $ 35,000
Ruth C. Emden.................................... 5,250 1.50 52,500
Laird L. Lazelle................................. 8,750 2.50 87,500
Robert E. Levitch................................ 7,000 2.00 70,000
Margo Liebert.................................... 2,500 0.71 25,000
Dianne K. Rabe................................... 3,500 1.00 35,000
Michael S. Schwartz.............................. 8,750 2.50 87,500
Paul L. Silverglade.............................. 8,750 2.50 87,500
Ivan J. Silverman................................ 8,750 2.50 87,500
All directors and executive officers as a
group(2)........................................ 74,250 21.21% $ 742,500
- ------------------------
(1) Assumes that 350,000 Common Shares will be sold in the Offering at $10 per
share and that a sufficient number of Common Shares will be available to
satisfy the intended purchases by directors and executive officers. See
"Pricing and Number of Common Shares to be Sold."
(2) Includes intended purchases by Associates of directors and executive
officers, to the extent known.
All purchases by executive officers and directors of the Bank are being made
for investment purposes only and with no present intent to resell.
15
PRICING AND NUMBER OF COMMON SHARES TO BE SOLD
The aggregate offering price of the Common Shares sold in the Offering will
be based on the pro forma market value of the shares as determined by an
independent appraisal of the Bank. Keller was retained by the Bank to prepare
such independent appraisal. Keller will receive a fee of $15,000 for its
appraisal and one update. Such amount includes out-of-pocket expenses.
Keller was selected by the Board of Directors because it has extensive
experience in the valuation of thrift institutions, particularly in the
mutual-to-stock conversion context. The Board of Directors interviewed Keller's
principal, reviewed the credentials of Keller's appraisal personnel and obtained
references and recommendations from other companies which have engaged Keller.
Keller is certified by the OTS as a mutual-to-stock conversion appraiser. The
Bank and Keller have no relationships which would affect Keller's independence.
The appraisal was prepared by Keller in reliance upon the information
contained herein. Keller also considered the following factors, among others:
the present and projected operating results and financial condition of the Bank
and the economic and demographic conditions in the Bank's existing market area;
the quality and depth of the Bank's management and personnel; certain historical
financial and other information relating to the Bank; a comparative evaluation
of the operating and financial statistics of the Bank with those of other thrift
institutions; the aggregate size of the Offering; the impact of the Conversion
on the Bank's regulatory capital and earnings potential; the trading market for
stock of comparable thrift institutions and thrift holding companies; and
general conditions in the markets for such stocks.
Three valuation methods were used by Keller: price to book value; price to
earnings; and price to assets. The most emphasis was placed on the price to book
value method. The price to book value method compares the pro forma book value
of the Bank, which takes into consideration the going concern value of a thrift
institution, to the book value of the comparable group. Upward and downward
adjustments are made, as appropriate, to account for variations between the Bank
and the comparable group on specific factors. The net Conversion proceeds are
included for purposes of determining the pro forma book value of the Bank. The
book value method focuses on the Bank's financial condition and does not give as
much consideration to earnings. The price to earnings method is used to
ascertain the multiple of earnings at which the Bank is likely to trade, based
on the multiple of earnings at which a comparable group of thrift institutions
trades. The comparable group consisted of ten thrift institutions located in the
Midwest which had similar operating and financial characteristics to the Bank.
In calculating the price to earnings ratio, Keller used the Bank's core earnings
for the 12 months ended March 31, 1996. The use of core earnings eliminates
items which are not generated by the principle business activities of the Bank.
The price to assets method does not consider the Bank's financial condition or
earnings. Consequently, it is not heavily relied on in valuing financial
institutions.
The pro forma value of the Bank, as converted, determined by Keller, is
$3,500,000 as of May 14, 1996. The Valuation Range established in accordance
with the Plan is $2,975,000 to $4,025,000, which, based upon a per share
offering price of $10, will result in the sale of between 297,500 and 402,500
Common Shares. The total number of Common Shares sold in the Offering will be
determined in the discretion of the Board of Directors, based on the Valuation
Range. Pro forma shareholders' equity per share and pro forma earnings per share
decrease moving from the low end to the high end of the Valuation Range. See
"PRO FORMA DATA" in the Prospectus.
In the event that Keller determines at the close of the Conversion that the
aggregate pro forma value of the Bank is higher or lower than the pro forma
value, but is nevertheless equal to or greater than $2,975,000 or equal to or
less than $4,628,750, the Holding Company will make an appropriate adjustment by
raising or lowering the total number of Common Shares sold in the Offering
consistent with the final valuation. The total number of Common Shares sold in
the Offering will be determined in the discretion of the Board of Directors
consistent with the final valuation. If, due to changing market conditions, the
final valuation is less than $2,975,000 or more than $4,628,750, subscribers
16
will be given notice of such final valuation and the right to affirm, increase,
decrease or rescind their subscriptions. Any person who does not affirmatively
elect to continue his subscription or elects to rescind his subscription before
the date specified in the notice will have all of his funds promptly refunded
with interest. Any person who elects to decrease his subscription will have the
appropriate portion of his funds promptly refunded with interest.
THE APPRAISAL BY KELLER IS NOT INTENDED, AND MUST NOT BE CONSTRUED, AS A
RECOMMENDATION OF ANY KIND AS TO THE ADVISABILITY OF PURCHASING COMMON SHARES OR
VOTING TO APPROVE THE CONVERSION. IN PREPARING THE VALUATION, KELLER HAS RELIED
UPON AND ASSUMED THE ACCURACY AND COMPLETENESS OF THE AUDITED FINANCIAL
STATEMENTS AND STATISTICAL INFORMATION PROVIDED BY THE BANK. KELLER DID NOT
INDEPENDENTLY VERIFY THE FINANCIAL STATEMENTS AND OTHER INFORMATION PROVIDED BY
THE BANK, NOR DID KELLER VALUE INDEPENDENTLY THE ASSETS OR LIABILITIES OF THE
BANK. THE VALUATION CONSIDERS THE BANK ONLY AS A GOING CONCERN AND SHOULD NOT BE
CONSIDERED AS AN INDICATION OF THE LIQUIDATION VALUE OF THE BANK. 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 COMMON SHARES WILL THEREAFTER BE
ABLE TO SELL SUCH SHARES AT THE CONVERSION PURCHASE PRICE.
A copy of the complete appraisal is on file and open for inspection at the
offices of the OTS, 1700 G Street, N.W., Washington, D.C. 20552, at the Central
Regional Office of the OTS, 200 W. Madison Street, Suite 1300, Chicago, Illinois
60606, at the offices of the Division, 77 S. High Street, Columbus, Ohio 43215,
and at the offices of the Bank.
RESTRICTIONS ON REPURCHASE OF COMMON SHARES
Federal regulations generally prohibit the Holding Company from repurchasing
any of its capital stock for three years following the date of completion of the
Conversion, except as part of an open-market stock repurchase program during the
second and third years following the Conversion involving no more than 5% of the
Holding Company's outstanding capital stock during a twelve-month period. The
OTS has recently indicated, however, that it would permit repurchases beginning
after six months following the completion of the Conversion. In addition, after
such a repurchase, the Bank's regulatory capital must equal or exceed all
regulatory capital requirements. Before commencement of such a program, the
Holding Company must provide notice to the OTS, and the OTS may disapprove the
program if the OTS determines that it would adversely affect the financial
condition of the Bank or if it determines that there is no valid business
purpose for such repurchase. Such repurchase restrictions would not prohibit the
ESOP or the RRP from purchasing Common Shares during the first year following
the Conversion.
Ohio regulations prohibit the Holding Company from repurchasing shares
during the first year after the Conversion if the effect thereof would be the
failure of the Bank to meet its capital requirements.
RESTRICTIONS ON TRANSFERABILITY OF COMMON SHARES BY DIRECTORS AND OFFICERS
Common Shares purchased by directors and executive officers of the Holding
Company will be subject to the restriction that such shares may not be sold for
a period of one year following completion of the Conversion, except in the event
of the death of the shareholder. Common Shares issued by the Holding Company to
directors and executive officers will bear a legend giving appropriate notice of
the restriction imposed upon them. In addition, the Holding Company will give
appropriate instructions to the transfer agent (if any) for the Common Shares in
respect of the applicable restriction for transfer of any restricted shares. Any
shares issued as a stock dividend, stock split or otherwise in respect of
restricted shares will be subject to the same restrictions.
Subject to certain exceptions, for a period of three years following the
Conversion, no director or officer of the Holding Company or the Bank, or any of
their Associates, may purchase any common shares of the Holding Company without
the prior written approval of the OTS, except through a
17
broker-dealer registered with the SEC. This restriction will not apply, however,
to negotiated transactions involving more than 1% of a class of outstanding
common shares of the Holding Company or shares acquired by any stock benefit
plan of the Holding Company or the Bank.
The Common Shares, like the stock of most public companies, are subject to
the registration requirements of the Securities Act. Accordingly, the Common
Shares may be offered and sold only in compliance with such registration
requirements or pursuant to an applicable exemption from registration. Common
Shares received in the Conversion by persons who are not "affiliates" of the
Holding Company may be resold without registration. Common Shares received by
affiliates of the Holding Company will be subject to resale restrictions. An
"affiliate" of the Holding Company, for purposes of Rule 144, is a person who
directly, or indirectly through one or more intermediaries, controls, or is
controlled by or is under common control with, the Holding Company. Rule 144
generally requires that there be publicly available certain information
concerning the Holding Company and that sales subject to Rule 144 be made in
routine brokerage transactions or through a market maker. If the conditions of
Rule 144 are satisfied, each affiliate (or group of persons acting in concert
with one or more affiliates) is entitled to sell in the public market, without
registration, in any three-month period, a number of shares which does not
exceed the greater of (i) 1% of the number of outstanding shares of the Holding
Company or (ii) if the shares are admitted to trading on a national securities
exchange or reported through the automated quotation system of a registered
securities association, the average weekly reported volume of trading during the
four weeks preceding the sale.
OTHER
THE PLAN IS ATTACHED TO THIS SUMMARY PROXY STATEMENT AS EXHIBIT A AND SHOULD
BE REVIEWED CAREFULLY. ALL STATEMENTS MADE IN THIS SUMMARY PROXY STATEMENT AND
THE PROSPECTUS ARE HEREBY QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO THE PLAN.
THE ADOPTION OF THE PLAN BY THE VOTING MEMBERS AT THE SPECIAL MEETING WILL
AUTHORIZE THE BOARDS OF DIRECTORS OF THE HOLDING COMPANY AND THE BANK TO AMEND
OR TERMINATE THE PLAN. IF THE BOARDS OF DIRECTORS OF THE HOLDING COMPANY AND THE
BANK DETERMINE, UPON ADVICE OF COUNSEL AND AFTER CONSULTATION WITH THE OTS AND
THE DIVISION, THAT ANY SUCH AMENDMENT IS MATERIAL, SUBSCRIBERS WILL BE NOTIFIED
OF THE AMENDMENT AND WILL BE PROVIDED THE OPPORTUNITY TO INCREASE, DECREASE OR
CANCEL THEIR SUBSCRIPTIONS.
USE OF PROCEEDS
The following table presents the estimated gross and net proceeds from the
sale of the Common Shares in connection with the Conversion based on the
Valuation Range:
MINIMUM MID-POINT MAXIMUM MAXIMUM, AS ADJUSTED
------------- ------------- ------------- ---------------------
Gross proceeds................................ $ 2,975,000 $ 3,500,000 $ 4,025,000 $ 4,628,750
Less estimated expenses....................... 251,000 251,000 251,000 251,000
------------- ------------- ------------- -----------
Total net proceeds............................ $ 2,724,000 $ 3,249,000 $ 3,774,000 $ 4,377,750
------------- ------------- ------------- -----------
------------- ------------- ------------- -----------
The net proceeds may vary depending upon financial and market conditions at
the time of the completion of the Offering. See "THE CONVERSION -- Pricing and
Number of Common Shares to be Sold." Actual expenses may be more or less than
estimated. See "THE CONVERSION -- Plan of Distribution."
The Holding Company will retain 50% of the net proceeds from the sale of the
Common Shares, approximately $1.62 million at the mid-point of the Valuation
Range. Such proceeds will be used by the Holding Company to lend up to $370,300
to the ESOP to acquire Common Shares in the Offering and for general corporate
purposes, which may include dividends, repurchases of Common Shares and
18
acquisitions of other financial institutions. The Holding Company presently has
no plans or agreements relating to any such acquisitions or repurchases. OTS
regulations generally prohibit stock repurchases in the six months following the
completion of the Conversion without the prior approval of the OTS. See "THE
CONVERSION -- Restrictions on Repurchase of Common Shares."
The remainder of the net proceeds received from the sale of the Common
Shares, approximately $1.25 million at the mid-point of the Valuation Range,
will be invested by the Holding Company in the capital stock to be issued by the
Bank to the Holding Company as a result of the Conversion. Such investment will
increase the regulatory capital of the Bank and will permit the Bank to expand
its lending and investment activities and to enhance customer services. The Bank
anticipates that such net proceeds will be used to originate mortgage loans.
MARKET FOR COMMON SHARES
There is presently no market for the Common Shares. The existence of a
market in the Common Shares upon the completion of the Conversion will depend
upon the presence in the marketplace of both willing buyers and willing sellers
at any given time. It is expected that the Common Shares will be quoted and
traded on the over-the-counter market through brokers participating on the
National Daily Quotation Service. Because of the limited size of the Offering,
however, it is unlikely that an active market for the common shares will develop
after the completion of the Conversion or, if such market does develop, that it
will continue. Investors should consider, therefore, the potentially illiquid
and long-term nature of an investment in the Common Shares. See "RISK FACTORS --
Limited Market for the Common Shares" in the Prospectus.
The appraisal of the pro forma market value of the Bank, as converted, does
not represent Keller's opinion as to the price at which the Common Shares may
trade. There can be no assurance that the Common Shares may later be resold at
the price at which they are purchased in connection with the Conversion.
DIVIDEND POLICY
The declaration and payment of dividends by the Holding Company will be
subject to the discretion of the Board of Directors of the Holding Company, to
the earnings and financial condition of the Holding Company and to general
economic conditions. If the Board of Directors of the Holding Company
determines, in the exercise of its discretion, that the net income, capital and
consolidated financial condition of the Holding Company and the general economy
justify the declaration and payment of dividends by the Holding Company, the
Board of Directors of the Holding Company may authorize the payment of dividends
on the Common Shares, subject to the limitation under Ohio law that a
corporation may pay dividends only out of surplus. There can be no assurance
that dividends will be paid on the Common Shares or, if paid, will continue to
be paid.
Other than earnings on the investment of the proceeds retained by the
Holding Company, the only source of income of the Holding Company will be
dividends periodically declared and paid by the Board of Directors of the Bank
on the common shares of the Bank held by the Holding Company. The declaration
and payment of dividends by the Bank to the Holding Company will be subject to
the discretion of the Board of Directors of the Bank, to the earnings and
financial condition of the Bank, to general economic conditions and to federal
and state restrictions on the payment of dividends by thrift institutions. Under
regulations of the OTS applicable to converted savings associations, the Bank
will not be permitted to pay a cash dividend on its capital stock after the
Conversion if its regulatory capital would, as a result of the payment of such
dividend, be reduced below the amount required for the Liquidation Account or
the applicable regulatory capital requirement prescribed by the OTS. See "THE
CONVERSION -- Principal Effects of the Conversion -- Liquidation Account" and
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS -- Liquidity and Capital Resources" in the Prospectus. The Bank may
not pay a dividend unless such dividend also complies with a regulation of the
OTS limiting capital distributions
19
by savings associations. Capital distributions, for purposes of such regulation,
include, without limitation, payments of cash dividends, repurchases and certain
other acquisitions by an association of its shares and payments to stockholders
of another association in an acquisition of such other association. See
"REGULATION -- Office of Thrift Supervision -- Limitations on Capital
Distributions" in the Prospectus.
DESCRIPTION OF AUTHORIZED SHARES
GENERAL
The Articles of Incorporation of the Holding Company authorize the issuance
of 2,000,000 common shares. The common shares authorized by the Holding
Company's Articles of Incorporation have no par value. Upon receipt by the
Holding Company of the purchase price therefor and subsequent issuance thereof,
each Common Share will be fully paid and nonassessable. The Common Shares of the
Holding Company will represent nonwithdrawable capital and will not and cannot
be insured by the FDIC. Each Common Share will have the same relative rights and
will be identical in all respects to every other Common Share.
The following is a summary description of the rights of the common shares of
the Holding Company, including the material express terms of such shares as set
forth in the Holding Company's Articles of Incorporation.
LIQUIDATION RIGHTS
In the event of the complete liquidation or dissolution of the Holding
Company, the holders of the Common Shares will be entitled to receive all assets
of the Holding Company available for distribution, in cash or in kind, after
payment or provision for payment of (i) all debts and liabilities of the Holding
Company, (ii) any accrued dividend claims, and (iii) any interests in the
Liquidation Account. See "THE CONVERSION -- Liquidation Account."
VOTING RIGHTS
The holders of the Common Shares will possess exclusive voting rights in the
Holding Company, unless preferred shares are issued. Each holder of Common
Shares will be entitled to one vote for each share held of record on all matters
submitted to a vote of holders of common shares. See "RESTRICTIONS ON
ACQUISITION OF THE HOLDING COMPANY AND THE BANK -- Articles of Incorporation of
the Holding Company -- Elimination of Cumulative Voting" in the Prospectus.
DIVIDENDS
The holders of the Common Shares will be entitled to the payment of
dividends when, as and if declared by the Board of Directors and paid out of
funds, if any, available under applicable laws and regulations for the payment
of dividends. The payment of dividends is subject to federal and state statutory
and regulatory restrictions. See "DIVIDEND POLICY," "REGULATION -- Office of
Thrift Supervision -- Limitations on Capital Distributions" in the Prospectus
and "TAXATION -- Federal Taxation" in the Prospectus for a description of
restrictions on the payment of cash dividends.
PREEMPTIVE RIGHTS
After the consummation of the Conversion, no shareholder of the Holding
Company will have, as a matter of right, the preemptive right to purchase or
subscribe for shares of any class, now or hereafter authorized, or to purchase
or subscribe for securities or other obligations convertible into or
exchangeable for such shares or which by warrants or otherwise entitle the
holders thereof to subscribe for or purchase any such share.
RESTRICTIONS ON ALIENABILITY
See "THE CONVERSION -- Restrictions on Transferability of Common Shares by
Directors and Officers" for a description of certain restrictions on the
transferability of Common Shares purchased
20
by officers and directors and "RESTRICTIONS ON ACQUISITION OF THE HOLDING
COMPANY AND THE BANK" in the Prospectus for information regarding regulatory
restrictions on acquiring Common Shares.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
Each director of the Bank currently receives a fee of $7,500 per year.
The following table presents certain information regarding the cash
compensation received by Laird L. Lazelle, President of the Bank. No other
executive officer of the Bank received compensation exceeding $100,000 during
fiscal 1995:
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
--------------------------------------
OTHER ANNUAL
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1)
- ------------------------------------------------------------------ --------- --------- --------- ----------------
Laird L. Lazelle 1995 $ 69,488 $ 5,200 $ 6,000
President and Chief Executive Officer
- ------------------------
(1) Consists of directors fees. Does not include amounts attributable to
miscellaneous benefits received by the named executive officer, the cost of
which was less than 10% of his annual salary and bonus.
EXPERTS
Keller has consented to the publication herein of the summary of its letter
to the Bank setting forth its opinion as to the estimated pro forma market value
of the Bank, as converted, and to the use of its name and statements with
respect to it appearing herein. The financial statements of the Bank as of March
31, 1996 and 1995, and for the fiscal years ended June 30, 1995, 1994 and 1993
have been included herein in reliance upon the report of Clark, Schaefer,
Hackett & Co., independent certified public accountants, appearing elsewhere
herein, and upon the authority of such firm as experts in auditing and
accounting.
LEGAL PROCEEDINGS
The Bank is not presently involved in any material legal proceedings. From
time to time, the Bank is a party to legal proceedings incidental to its
business to enforce its security interest in collateral pledged to secure loans
made by the Bank.
ADDITIONAL INFORMATION AND ORDER FORMS
The Prospectus contains the following: unaudited financial statements of the
Bank, including statements of income and retained earnings, for the nine months
ended March 31, 1996 and 1995; audited financial statements of the Bank,
including statements of income and retained earnings, for the three fiscal years
ended June 30, 1995, 1994 and 1993; management's discussion and analysis of
financial condition and results of operations; selected financial information of
the Bank for the five fiscal years ended September 30, 1995, 1994, 1993, 1992
and 1991; information concerning the capitalization of the Bank; a description
of the Bank's lending, savings and investment activities; and additional
information about the business and financial condition of the Bank. A copy of
the Prospectus accompanies this Summary Proxy Statement. To obtain an additional
copy of the Prospectus, contact the Bank's Conversion Information Center at
(513) - .
The Subscription Offering will commence on , 1996, and end at
.m., Eastern Time, on , 1996. Order Forms for purchases of
Common Shares in the Subscription Offering must be received by the Bank on or
before .m. Eastern Time, , 1996.
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