EXHIBIT 99.2
REVOCABLE PROXY
COMMUNITY BANK OF CENTRAL TEXAS, ssb
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
COMMUNITY BANK OF CENTRAL TEXAS, ssb.
The undersigned member of Community Bank of Central Texas, ssb (the "Bank")
hereby appoints the Board of Directors of the Bank as proxies to cast all votes
which the undersigned member is entitled to cast at a Special Meeting of Members
to be held at the main office of the Bank, located at 312 Main Street,
Smithville, Texas, at the hour and date stated in the Proxy Statement, and at
any and all adjournments and postponements thereof, and to act with respect to
all votes that the undersigned would be entitled to cast, if then personally
present, in accordance with the instructions on the reverse side hereof to vote
FOR or AGAINST:
The adoption of the Plan of Conversion to convert the Bank
from a Texas chartered mutual savings bank to a Texas
chartered stock savings bank, including the adoption of a
stock savings bank charter and bylaws, with the simultaneous
issuance of its common stock to CBCT Bancshares, Inc., a
Maryland corporation (the "Company") and sale by the Company
of shares of its Common Stock.
This proxy will be voted as directed by the undersigned member. UNLESS
CONTRARY DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR ADOPTION OF THE PLAN
OF CONVERSION. In addition, this proxy will be voted at the discretion of the
Board of Directors upon any other matter as may properly come before the Special
Meeting.
The undersigned member may revoke this proxy at any time before it is
voted by delivering to the Secretary of the Bank either by a written revocation
of the proxy or a duly executed proxy bearing a later date, or by appearing at
the Special Meeting and voting in person. The undersigned member hereby
acknowledges receipt of the Notice of Special Meeting and Proxy Statement.
(IMPORTANT: PLEASE VOTE, DATE AND SIGN ON REVERSE SIDE)
COMMUNITY BANK OF CENTRAL TEXAS, SSB
Please Mark Votes Below
Approval of the Plan of Conversion
FOR o AGAINST o
DATE: , 2000
X
X
IMPORTANT: Please sign your name exactly as
it appears on this proxy. Joint accounts
need only one signature. When signing as an
attorney, administrator, agent, cor
poration, officer, executor, trustee or
guardian, etc., please add your full title
to your signature.
NOTE: IF YOU RECEIVE MORE THAN ONE PROXY CARD, PLEASE SIGN AND
RETURN ALL CARDS IN THE ACCOMPANYING ENVELOPE.
COMMUNITY BANK OF CENTRAL TEXAS, ssb
312 Main Street
Smithville, Texas 78957-2035
(512) 237-2482
NOTICE OF SPECIAL MEETING OF MEMBERS
Notice is hereby given that a Special Meeting of Members (the "Special
Meeting") of Community Bank of Central Texas, ssb ("Community Bank" or the
"Bank") will be held at the main office of the Bank located at 312 Main Street,
Smithville, Texas 78957-2035 on ___________, 2000 at _:__ _.m., Smithville,
Texas time. The purpose of this Special Meeting is to consider and vote upon a
plan to convert the Bank from a Texas chartered mutual savings institution to a
Texas chartered stock savings institution, including the adoption of a stock
savings bank charter and bylaws, with the concurrent sale of all the Bank's
common stock to CBCT Bancshares, Inc., a Maryland corporation (the "Holding
Company"), and sale by the Holding Company of shares of its common stock; and
such other business as may properly come before the Special Meeting or any
adjournment thereof. Management is not aware of any such other business.
The members who shall be entitled to notice of and to vote at the
Special Meeting and any adjournment thereof are holders of deposit accounts at
the Bank at the close of business on ________________ and borrowers of the Bank
as of _____________ who continue as borrowers as of ________________. In the
event there are not sufficient votes for approval of the Plan of Conversion at
the time of the Special Meeting, the Special Meeting may be adjourned from time
to time in order to permit further solicitation of proxies.
BY ORDER OF THE BOARD OF DIRECTORS
----------------------
Chairman of the Board
Smithville, Texas
___________, 2000
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YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE
FOR APPROVAL OF THE PROPOSALS BY COMPLETING THE
ENCLOSED PROXY CARD AND RETURNING IT IN THE ENCLOSED
POSTAGE-PAID ENVELOPE AS SOON AS POSSIBLE.
YOUR VOTE IS VERY IMPORTANT.
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SUMMARY OF PROPOSED CONVERSION
This summary does not purport to be complete and is qualified in its
entirety by the more detailed information contained in the remainder of this
proxy statement and the accompanying prospectus.
Under its present "mutual" form of organization, Community Bank has no
stockholders. Its deposit account holders are members of the Bank and have
voting rights in that capacity. In the unlikely event of liquidation, the Bank's
deposit account holders would have the sole right to receive any assets of the
Bank remaining after payment of its liabilities (including the claims of all
deposit account holders to the withdrawal value of their deposits). Under the
Plan of Conversion (the "Plan of Conversion") to be voted on at the Special
Meeting, the Bank will be converted into a Texas chartered savings institution
organized in stock form, and all of the Bank's common stock would be sold
concurrently to the Holding Company (the "Conversion"). The Holding Company will
offer and sell its common stock (the "Common Stock") in an offering to (1)
depositors of Community Bank as of the close of business on September 30, 1998
("Eligible Account Holders"), (2) tax-qualified employee plans of the Bank and
the Holding Company ("Tax-Qualified Employee Plans") provided, however, that the
Tax-Qualified Employee Plans shall have first priority Subscription Rights to
the extent that the total number of shares of Common Stock sold in the
Conversion exceeds the maximum of the appraisal range, (3) depositors of
Community Bank as of the close of business on March 31, 2000 ("Supplemental
Eligible Account Holders"), (4) borrowers and depositors of the Bank as of the
close of business on ________, 2000 who continue as borrowers as of October 31,
1999 and depositors as of October 31, 1998 who are not Eligible or Supplemental
Eligible Account Holders ("Other Members") and (5) employees, officers and
directors of the Bank (the "Subscription Offering"). It is anticipated that the
Tax-Qualified Employee Plans will purchase 8% of the Common Stock issued in the
Conversion.
To the extent the Common Stock is not all sold to the persons in the
foregoing categories, the Holding Company may offer and sell the remainder of
the Common Stock in a direct community offering ("Direct Community Offering") or
public offering ("Public Offering") through Keefe, Bruyette & Woods, Inc.
("KBW"). The Subscription Offering and the Public Offering and/or Direct
Community Offering are referred to collectively as the "Offering." Voting and
liquidation rights with respect to the Bank would thereafter be held by the
Holding Company, except to the limited extent of the liquidation account (the
"Liquidation Account") that will be established for the benefit of Eligible and
Supplemental Eligible Account Holders of the Bank and voting and liquidation
rights in the Holding Company would be held only by those persons who become
stockholders of the Holding Company through purchase of shares of its Common
Stock. See "Community Bank's Conversion - Effects of the Conversion- Depositor's
Rights If We Liquidate" in the prospectus.
THE CONVERSION WILL NOT AFFECT THE BALANCE, INTEREST RATE OR FEDERAL
INSURANCE PROTECTION OF ANY SAVINGS DEPOSIT, AND NO PERSON WILL BE OBLIGATED TO
PURCHASE ANY STOCK IN THE CONVERSION.
Business Purposes for Conversion Net Conversion proceeds are expected to
increase the capital of Community Bank,
which will support the expansion of its
financial services to the public. The
conversion to stock form and the use of a
holding company structure are also expected
to enhance its ability to expand through
possible mergers and acquisitions (although
no such transactions are contemplated at
this time) and will facilitate its future
access to the capital markets. The Bank will
continue to be subject to comprehensive
regulation and examination by the Federal
Deposit Insurance Corporation ("FDIC") and
the Texas Savings and Loan Department (the
"Department").
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Subscription Offering As part of the Conversion, Common Stock is
being offered for sale in the Subscription
Offering, in the priorities summarized
below, to the Bank's (1) Eligible Account
Holders, (2) Tax-Qualified Employee Plans,
(3) Supplemental Eligible Account Holders
(4) Other Members, and (5) employees,
officers and directors of the Bank. If
necessary, all shares of Common Stock not
purchased in the Subscription Offering, if
any, may be offered in connection with the
Direct Community Offering and/or Public
Offering for sale to selected persons
through KBW.
Subscription Rights of Eligible Each Eligible Account Holder has been given
Account Holders non-transferable rights to subscribe for an
amount equal to the greater of $100,000 of
Common Stock, one-tenth of one percent of
the total number of shares offered in the
Subscription Offering or 15 times the
product (rounded down to the whole next
number) obtained by multiplying the total
number of shares to be issued by a fraction
of which the numerator is the amount of the
qualifying deposit of such subscriber and
the denominator is the total amount of the
qualifying deposits of all account holders
in this category on the qualifying date.
Subscription Rights of The Bank's Tax-Qualified Employee Plans have
Tax-Qualified Employee Plans been given non-transferable rights to
subscribe, individually and in the
aggregate, for up to 10% of the total number
of shares issued in the Conversion after
satisfaction of subscriptions of Eligible
Account Holders. Notwithstanding the
foregoing, to the extent orders for shares
exceed the maximum of the appraisal range,
Tax-Qualified Employee Plans shall be
afforded a first priority to purchase shares
sold above the maximum of the appraisal
range. It is anticipated that Tax-Qualified
Employee Plans will purchase 8% of the
Common Stock issued in the Conversion.
Subscription Rights of Supplemental After satisfaction of subscriptions of
Eligible Account Holders Eligible Account Holders and Tax- Qualified
Employee Plans, each Supplemental Eligible
Account Holder (other than directors and
officers of the Bank) has been given
non-transferable rights to subscribe for an
amount equal to the greater of $100,000 of
Common Stock, one-tenth of one percent of
the total number of shares offered in the
Conversion or 15 times the product (rounded
down to the whole next number) obtained by
multiplying the total number of shares to be
issued by a fraction of which the numerator
is the amount of qualifying deposits of such
subscriber and the denominator is the total
qualifying deposits of all account holders
in this category on the qualifying date. The
subscription rights of each Supplemental
Eligible Account Holder shall be reduced to
the extent of such person's subscription
rights as an Eligible Account Holder.
Subscription Rights of Other Each Other Member has been given
Members non-transferable rights to subscribe for an
amount equal to the greater of $100,000 of
Common Stock or one-tenth of one percent of
the total number of shares offered in the
Conversion after satisfaction of the
subscriptions of the Bank's Eligible Account
Holders, Tax-Qualified Employee Plans and
Supplemental Eligible Account Holders.
ii
Subscription Rights of Bank Each individual employee, officer and
Personnel director of the Bank has been given the
right to subscribe for an amount not to
exceed $100,000 of Common Stock after
satisfaction of the subscriptions of
Eligible Account Holders, Tax-Qualified
Employee Plans, Supplemental Eligible
Account Holders and Other Members. Total
shares subscribed for by the employees,
officers and directors in this category may
not exceed 35% of the total shares offered
in the Conversion.
Direct Community Offering and/or Subject to prior rights of holders of
Public Offering subscription rights, the Holding Company may
also offer the Common Stock for sale to
selected persons through KBW in a Direct
Community Offering and/or Public Offering.
Purchase Limitations (1) No person by himself or herself,
together with associates, or persons acting
in concert, may purchase more than $100,000
of Common Stock in the Conversion. (2) The
aggregate purchases of directors and
executive officers and their associates may
not exceed 35% of the total number of shares
offered in the Conversion. The purchase
limitations in (1) and (2) do not apply to
the Bank's Tax-Qualified Employee Plans. The
Board of Directors of the Holding Company
and the Bank may, in their sole discretion,
increase the maximum purchase limitation in
(1) up to 9.99% of the shares being offered
in the Conversion.
Expiration Date of the Subscription All subscriptions for Common Stock in
Offering connection with the Subscription Offering
must be received by 12:00 Noon, Smithville,
Texas time on _______________, 2000.
How to Subscribe for Shares For information on how to subscribe for
Common Stock being offered in the
Subscription Offering, please read the
prospectus and the order form and
instructions accompanying this proxy
statement. Subscriptions will not become
effective until the Plan of Conversion has
been approved by the Bank's members and all
of the Common Stock offered in the
Conversion has been subscribed for or sold
in the Offering or through such other means
as may be approved by the Department.
Price of Common Stock All sales of Common Stock in the Offering
will be made at the same price per share
(which is currently expected to be $10.00
per share) on the basis of an independent
appraisal of the pro forma market value of
the Bank and the Holding Company upon
Conversion. On the basis of a preliminary
appraisal by Ferguson & Company
("Ferguson"), which has been reviewed by the
Department, a minimum of 195,500 and a
maximum of 264,500 shares will be offered in
the Conversion. See "Community Bank's
Conversion -- How We Determined Our Price
and the Number of Shares to be Issued in the
Stock Offering" in the prospectus.
Tax Consequences The Bank has received an opinion from its
special counsel, Silver, Freedman & Taff,
L.L.P., stating that the Conversion is a
nontaxable reorganization under Section
368(a)(1)(F) of the Internal Revenue Code.
The Bank has also received an opinion from
Padgett, Stratemann & Co., L.L.P.
("Padgett") stating that the Conversion will
not be a taxable transaction for Texas
income tax purposes.
Required Vote Approval of the Plan of Conversion will
require the affirmative vote of a majority
of all votes eligible to be cast at the
Special Meeting.
YOUR BOARD OF DIRECTORS URGES YOU TO VOTE FOR
THE PLAN OF CONVERSION
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COMMUNITY BANK OF CENTRAL TEXAS, ssb
PROXY STATEMENT
SPECIAL MEETING OF MEMBERS TO BE HELD ON____________, 2000
PURPOSE OF MEETING
This proxy statement is being furnished to you in connection with the
solicitation on behalf of the Board of Directors of Community Bank of Central
Texas, ssb ("Community Bank" or the "Bank") of the proxies to be voted at the
Special Meeting of Members of the Bank (the "Special Meeting") to be held at the
main office of the Bank located at 312 Main Street, Smithville, Texas
78957-2035, on ___________, 2000 at _:__ _.m., Smithville, Texas time, and at
any adjournments thereof. The Special Meeting is being held for the purpose of
considering and voting upon a Plan of Conversion (the "Plan of Conversion")
under which the Bank would be converted (the "Conversion") from a Texas
chartered mutual savings institution into a Texas chartered stock savings
institution, the concurrent sale of all the common stock of the stock savings
institution to CBCT Bancshares, Inc. (the "Holding Company"), a Maryland
corporation, and the sale by the Holding Company of shares of its common stock
(the "Common Stock"), and such other business as may properly come before the
meeting and any adjournment thereof.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors of the Bank unanimously recommends that you vote
to approve the Plan of Conversion.
The Bank is currently organized in "mutual" rather than "stock" form,
meaning that it has no stockholders and no authority under its mutual charter to
issue capital stock. The Bank's Board of Directors has adopted the Plan of
Conversion providing for the Conversion. The sale of Common Stock of the Holding
Company, which was recently formed to become the holding company of the Bank,
will substantially increase the Bank's net worth. The Holding Company will
exchange 50% of the net proceeds from the sale of the Common Stock for the
common stock of the Bank to be issued upon Conversion. The Holding Company
expects to retain the balance of the net proceeds as its initial capitalization,
a portion of which the Holding Company intends to lend to the Employee Stock
Ownership Plan to fund its purchase of Common Stock. This increased capital will
support the expansion of the Bank's financial services to the public. The Board
of Directors of the Bank also believes that the conversion to stock form and the
use of a holding company structure will enhance the Bank's ability to expand
through possible mergers and acquisitions (although no such transactions are
contemplated at this time) and will facilitate its future access to the capital
markets.
The Board of Directors of the Bank believes that the Conversion will
further benefit the Bank by enabling it to attract and retain key personnel
through prudent use of stock-related incentive compensation and benefit plans.
The Board of Directors of the Holding Company intends to adopt a stock option
plan and a restricted stock plan following completion of the Conversion. See
"Management -- Benefits" in the accompanying prospectus.
Maryland was chosen as the state of incorporation because it provides
protections similar to Delaware with respect to takeover, indemnification and
limitations on liability, with reduced franchise taxes.
Voting in favor of the Plan of Conversion will not obligate any person
to purchase any Common Stock.
INFORMATION RELATING TO VOTING AT THE SPECIAL MEETING
The Board of Directors of the Bank has fixed __________, 2000 as the
voting record date ("Voting Record Date") for the determination of members
entitled to notice of the Special Meeting. All Bank depositors are members of
the Bank under its current charter. All Bank depositors of record as of the
close of business on the Voting Record
1
Date, and borrowers as of ____________, and the Voting Record Date, who continue
to be depositors and borrowers, respectively, as of the date of the Special
Meeting will be entitled to vote at the Special Meeting or any adjournment
thereof.
Each depositor member (including IRA and Keogh account beneficiaries)
will be entitled at the Special Meeting to cast one vote for each $100, or
fraction thereof, of the aggregate withdrawal value of all of such depositor's
accounts in the Bank as of the Voting Record Date, up to a maximum of 1,000
votes. In general, accounts held in different ownership capacities will be
treated as separate memberships for purposes of applying the 1,000 vote
limitation. For example, if two persons hold a $100,000 account in their joint
names and each of the persons also holds a separate account for $100,000 in his
own name, each person would be entitled to 1,000 votes for each separate account
and they would together be entitled to cast 1,000 votes on the basis of the
joint account. Each qualifying member borrower is entitled to one vote in
addition to any other vote the borrower may otherwise have.
Approval of the Plan of Conversion requires the affirmative vote of a
majority of the total outstanding votes of the Bank's members eligible to be
cast at the Special Meeting. As of _________, 2000, the Bank had approximately
______ members who were entitled to cast a total of approximately ________ votes
at the Special Meeting.
Bank members may vote at the Special Meeting or any adjournment thereof
in person or by proxy. Any member giving a proxy will have the right to revoke
the proxy at any time before it is voted by giving written notice to the
Secretary of the Bank, provided that such written notice is received by the
Secretary prior to the Special Meeting or any adjournment thereof, or upon
request if the member is present and chooses to vote in person.
All properly executed proxies received by the Board of Directors of the
Bank will be voted in accordance with the instructions indicated thereon by the
members giving such proxies. If no instructions are given, such proxies will be
voted in favor of the Plan of Conversion. If any other matters are properly
presented at the Special Meeting and may properly be voted on, the proxies
solicited hereby will be voted on such matters in accordance with the best
judgment of the proxy holders named thereon. Management is not aware of any
other business to be presented at the Special Meeting.
If a proxy is not executed and is returned and the member does not vote
in person, the Bank is prohibited by Texas regulations from using a previously
executed proxy to vote for the Plan of Conversion. As a result, failure to vote
may have the same effect as a vote against the Plan of Conversion.
To the extent necessary to permit approval of the Plan of Conversion,
proxies may be solicited by officers, directors or regular employees of the
Bank, in person, by telephone or through other forms of communication and, if
necessary, the Special Meeting may be adjourned to a later date. In addition,
Keefe, Bruyette & Woods, Inc. ("KBW") will assist the Bank in the solicitation
of proxies. Such persons will be reimbursed by the Bank for their expenses
incurred in connection with such solicitation. The Bank will bear all costs of
this solicitation. The proxies solicited hereby will be used only at the Special
Meeting and at any adjournment thereof.
DESCRIPTION OF THE PLAN OF CONVERSION
The Texas Savings and Loan Department (the "Department") and the
Federal Deposit Insurance Corporation (the "FDIC") have approved the Plan of
Conversion subject to the approval of the Bank's members and the satisfaction of
certain other conditions. However, such approval does not constitute a
recommendation or endorsement of the Plan of Conversion by the Department or the
FDIC.
The Plan of Conversion to be presented for approval at the Special
Meeting provides for the Conversion to be accomplished through the adoption of
an amended charter and bylaws for the Bank to authorize the issuance of capital
stock along with the concurrent formation of a holding company. As part of the
Conversion, the Plan of Conversion provides for the subscription offering (the
"Subscription Offering") of the Common Stock to the Bank's (i) Eligible Account
Holders (depositors of the Bank as of the close of business on September 30,
1998); (ii) Tax-Qualified Employee Plans, (iii) Supplemental Eligible Account
Holders (depositors of the Bank as of the close of business of March 31, 2000);
(iv) Other Members (deposit account holders and borrowers eligible to vote at
the Special Meeting who are not Eligible Account Holders or Supplemental
Eligible Account Holders); and (v) the Bank's employees, officers and directors.
Notwithstanding the foregoing, to the extent orders for shares exceed the
maximum of the
2
appraisal range, Tax-Qualified Employee Plans shall be afforded a first priority
to purchase shares sold above the maximum of the appraisal range. It is
anticipated that Tax-Qualified Employee Plans will purchase 8% of the Common
Stock issued in the Conversion. If necessary, all shares of Common Stock not
purchased in the Subscription Offering, if any, may be offered to selected
persons in a Direct Community Offering and/or a Public Offering through KBW.
The Subscription Offering has commenced as of the date of mailing of
this proxy statement. A prospectus explaining the terms of the Subscription
Offering, including how to order and pay for shares and describing the business
of the Bank and the Holding Company, accompanies this proxy statement and should
be read by all persons who wish to consider subscribing for Common Stock. The
Subscription Offering expires at 12:00 Noon, Smithville, Texas time on
____________, 2000, unless extended by the Bank and the Holding Company.
The Texas conversion regulations require that all stock offered in a
conversion must be sold in order for the conversion to become effective. The
conversion regulations require that the offering be completed within 45 days
after completion of the Subscription Offering period unless extended by the Bank
and the Holding Company with the approval of the Department. This 45-day period
expires __________, 2000 unless the Subscription Offering is extended. If this
is not possible, an occurrence that is currently not anticipated, the Board of
Directors of the Bank and the Holding Company will consult with the Department
to determine an appropriate alternative method of selling all unsubscribed
shares offered in the Conversion. The Plan of Conversion provides that the
Conversion must be completed within 24 months after the date of the Special
Meeting.
The Direct Community Offering and/or Public Offering or any other sale
of the unsubscribed shares will be made as soon as practicable after the
completion of the Subscription Offering. No sales of shares may be completed,
either in the Subscription Offering or otherwise, unless the Plan of Conversion
is approved by the members of the Bank.
The commencement and completion of the offering, however, is subject to
market conditions and other factors beyond the Bank's control. Due to adverse
conditions in the stock market in the past, a number of converting thrift
institutions encountered significant delays in completing their stock offerings
or were not able to complete them at all. No assurance can be given as to the
length of time after approval of the Plan of Conversion at the Special Meeting
that will be required to complete the Direct Community Offering and/or Public
Offering or other sale of the Common Stock to be offered in the Conversion. If
delays are experienced, significant changes may occur in the estimated pro forma
market value of the Holding Company's Common Stock, together with corresponding
changes in the offering price and the net proceeds realized by the Bank and the
Holding Company from the sale of the Common Stock. The Bank and the Holding
Company may also incur substantial additional printing, legal, accounting and
other expenses in completing the Conversion.
The following is a brief summary of the Conversion and is qualified in
its entirety by reference to the Plan of Conversion. A copy of the Plan of
Conversion, the proposed stock charter and bylaws of the Bank and the Holding
Company's articles of incorporation and bylaws are available from the Bank upon
request. Requests for copies of any such documents should be directed to: the
Secretary, Community Bank of Central Texas, ssb, 312 Main Street, Smithville,
Texas 78957-2035.
Principal Effects of Conversion
Depositors. The Conversion will not change the amount, interest rate,
withdrawal rights or federal insurance protection of deposit accounts, or affect
deposit accounts in any way other than with respect to voting and liquidation
rights as discussed below.
Borrowers. The rights and obligations of borrowers under their loan
agreements with the Bank will remain unchanged by the Conversion. The principal
amount, interest rate and maturity date of loans will remain as they were
contractually fixed prior to the Conversion.
Voting Rights of Members. Under the Bank's current state mutual
charter, depositors and certain borrowers have voting rights as members of the
Bank with respect to the election of directors and certain other affairs of the
Bank. After the Conversion, exclusive voting rights with respect to all such
matters will be vested in the Holding Company as the sole stockholder of the
Bank. Members will no longer have any voting rights, except to the extent that
they
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become stockholders of the Holding Company through the purchase of its Common
Stock. Voting rights in the Holding Company will be held exclusively by its
stockholders.
Liquidation Rights of Depositor Members. Currently, in the unlikely
event of liquidation of the Bank, any assets remaining after satisfaction of all
creditors' claims in full (including the claims of all depositors to the
withdrawal value of their accounts) would be distributed pro rata among the
depositors of the Bank, with the pro rata share of each being the same
proportion of all such remaining assets as the withdrawal value of each
depositor's account is of the total withdrawal value of all accounts in the Bank
at the time of liquidation. After the Conversion, the assets of the Bank would
first be applied, in the event of liquidation, against the claims of all
creditors (including the claims of all depositors to the withdrawal value of
their accounts). Any remaining assets would then be distributed to the persons
who qualified as Eligible Account Holders or Supplemental Eligible Account
Holders under the Plan of Conversion to the extent of their interests in a
"Liquidation Account" that will be established at the time of the completion of
the Conversion and then to the Holding Company as the sole stockholder of the
Bank's outstanding common stock. The Bank's depositors who did not qualify as
Eligible Account Holders or Supplemental Eligible Account Holders would have no
right to share in any residual net worth of the Bank in the event of liquidation
after the Conversion, but would continue to have the right as creditors of the
Bank to receive the full withdrawal value of their deposits prior to any
distribution to the Holding Company as the Bank's sole stockholder. In addition,
the Bank's deposit accounts will continue to be insured by the Federal Deposit
Insurance Corporation ("FDIC") to the maximum extent permitted by law, currently
up to $100,000 per insured account. The Liquidation Account will initially be
established in an amount equal to the net worth of the Bank as of the date of
the Bank's latest statement of financial condition contained in the final
prospectus used in connection with the Conversion. Each Eligible Account Holder
and/or Supplemental Eligible Account Holder will receive an initial interest in
the Liquidation Account in the same proportion as the balance in all of his or
her qualifying deposit accounts was of the aggregate balance in all qualifying
deposit accounts of all Eligible Account Holders and Supplemental Eligible
Account Holders on September 30, 1999 or March 31, 2000, respectively. For
accounts in existence on both dates, separate subaccounts shall be determined on
the basis of the qualifying deposits in such accounts on the record dates.
However, if the amount in the qualifying deposit account on any annual closing
date of the Bank is less than the lowest amount in such deposit account on the
Eligibility Record Date and/or Supplemental Eligibility Record Date, and any
subsequent annual closing date, this interest in the Liquidation Account will be
reduced by an amount proportionate to such reduction in the related deposit
account and will not thereafter be increased despite any subsequent increase in
the related deposit account.
The Bank. Under federal law, the stock savings bank resulting from the
Conversion will be deemed to be a continuation of the mutual savings bank rather
than a new entity and will continue to have all of the rights, privileges,
properties, assets and liabilities of the Bank prior to the Conversion. The
Conversion will enable the Bank to issue capital stock, but will not change the
general objectives, purposes or types of business currently conducted by the
Bank, and no assets of the Bank will be distributed in order to effect the
Conversion, other than to pay the expenses incident thereto. After the
Conversion, the Bank will remain subject to examination and regulation by the
Department and will continue to be a member of the Federal Home Loan Bank
System. The Conversion will not cause any change in the executive officers or
directors of the Bank.
Tax Consequences. The Bank has received an opinion of its special
counsel, Silver, Freedman & Taff, L.L.P., to the effect that (i) the Bank's
adoption of a charter in stock form will qualify as a tax-free reorganization
under Section 368(a)(1)(F) of the Internal Revenue Code of 1986, as amended;
(ii) no gain or loss will be recognized by the Bank solely as a result of the
conversion to stock form; (iii) no gain or loss will be recognized by the Bank's
account holders upon the issuance to them of accounts in the Bank, in stock
form, immediately after the Conversion, in the same dollar amounts and on the
same terms and conditions as their accounts at the Bank immediately prior to the
Conversion; (iv) the tax basis of each account holder's interest in the
liquidation account received in the Conversion will be equal to the value, if
any, of that interest on the date and at the time of the Conversion; (v) the tax
basis of the Common Stock purchased in the Conversion will be equal to the
amount paid therefor; increased, in the case of Common Stock acquired pursuant
to the exercise of Subscription Rights, by the fair market value, if any, of
such Subscription Rights; (vi) the holding period of the Common Stock purchased
pursuant to the exercise of Subscription Rights will commence upon the exercise
of such holder's Subscription Rights and, in all other cases, the holding period
of purchased Common Stock will commence on the date following the date of such
purchase; and (vii) gain or loss will be recognized by account holders upon the
receipt or exercise of Subscription Rights in the Conversion, but only to the
extent the Subscription Rights are deemed to have value, as discussed below.
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The opinion from Silver, Freedman & Taff, L.L.P. is based, among other
things, on certain assumptions, including the assumption that the exercise price
of the Subscription Rights to purchase Holding Company Common Stock will be
approximately equal to the fair market value of that stock at the time of the
completion of the proposed Conversion. With respect to the Subscription Rights,
the Bank has received a letter from Ferguson & Company ("Ferguson") which, based
on certain assumptions, concludes that the Subscription Rights to be received by
Eligible Account Holders, Supplemental Eligible Account Holders and other
eligible subscribers do not have any economic value at the time of distribution
or at the time the Subscription Rights are exercised, whether or not a Direct
Community and/or Public Offering takes place.
Notwithstanding the Ferguson Letter, if the Subscription Rights granted
to eligible subscribers are deemed to have an ascertainable value, receipt of
these rights would be taxable probably only to those eligible subscribers who
exercise the Subscription Rights, either as a capital gain or ordinary income,
in an amount equal to such value, and the Holding Company and the Bank could
recognize gain on any distribution.
With respect to Texas taxation, the Bank has received an opinion from
Padgett to the effect that the Texas tax consequences to the Bank, in its mutual
or stock form, the Holding Company, eligible account holders, parties receiving
Subscription Rights, parties purchasing Conversion stock, and other parties
participating in the Conversion will be the same as the federal income tax
consequences described above.
Unlike a private letter ruling, the opinions of Silver, Freedman &
Taff, L.L.P. and Padgett, as well as the Ferguson Letter, have no binding effect
or official status, and no assurance can be given that the conclusions reached
in any of those opinions would be sustained by a court if contested by the IRS
or the Indiana tax authorities.
Approval, Interpretation, Amendment and Termination
Under the Plan of Conversion, the letter from the Department giving
approval thereto, and applicable regulations, consummation of the Conversion is
subject to the satisfaction of the following conditions: (a) approval of the
Plan of Conversion by members of the Bank casting at least a majority of the
votes eligible to be cast at the Special Meeting; (b) sale of all of the Common
Stock to be offered in the Conversion; and (c) receipt of favorable rulings or
opinions of counsel as to the Texas tax consequences of the Conversion.
The Plan of Conversion may be substantively amended by the Boards of
Directors of the Bank and the Holding Company with the concurrence of the
Department. If the Plan of Conversion is amended, proxies which have been
received prior to such amendment will not be resolicited unless otherwise
required by the Department. Also, as required by regulations, the Plan of
Conversion provides that the transactions contemplated thereby may be terminated
by the Board of Directors of the Bank alone at any time prior to the Special
Meeting and may be terminated by the Board of Directors of the Bank at any time
thereafter with the concurrence of the Department, notwithstanding approval of
the Plan of Conversion by the members of the Bank at the Special Meeting. All
interpretations by the Bank and the Holding Company of the Plan of Conversion
and of the order form and related materials for the Subscription Offering will
be final, except as regards or affects the Department.
Judicial Review
Section 5(i)(2)(B) of the Home Owners' Loan Act, as amended, 12 U.S.C.
ss.1464(i)(2)(B) provides: (i) that persons aggrieved by a final action of the
Department which approves, with or without conditions, or disapproves a plan of
conversion, may obtain review of such final action only by filing a written
petition in the United States Court of Appeals for the circuit in which the
principal office or residence of such person is located, or in the United States
Court of Appeals for the District of Columbia, requesting that the final action
of the Department be modified, terminated or set aside, and (ii) that such
petition must be filed within 30 days after publication of notice of such final
action in the Federal Register, or 30 days after the date of mailing of the
notice and proxy statement for the meeting of the converting institution's
members at which the conversion is to be voted on, whichever is later. The
notice of the Special Meeting of the Bank's members to vote on the Plan of
Conversion described herein is included at the beginning of this proxy
statement. The statute and regulation referred to above should be consulted for
further information.
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ADDITIONAL INFORMATION
The information contained in the accompanying prospectus, including a
more detailed description of the Plan of Conversion, consolidated financial
statements of the Bank and a description of the capitalization and business of
the Bank and the Holding Company, including the Bank's directors and executive
officers and their compensation, the anticipated use of the net proceeds from
the sale of the Common Stock and a description of the Common Stock, is intended
to help you evaluate the Conversion and is incorporated herein by reference.
Your vote is very important to us. Please take a moment now to complete
and return your proxy card in the postage-paid envelope provided. You may still
attend the Special Meeting and vote in person even though you have voted your
proxy. Failure to submit a proxy will have the same effect as voting against the
Conversion.
If you have any questions, please call our Stock Information Center at
(___) __-____.
Important: you may be entitled to vote in more than one capacity.
Please sign, date and promptly return each proxy card you receive.
This proxy statement is not an offer to sell or the solicitation of an
offer to buy stock. The offer will be made only by the prospectus.
The Common Stock is not a deposit or account and is not federally
insured or guaranteed.
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