EXHIBIT 2
COMMUNITY BANK OF CENTRAL TEXAS, SSB
Smithville, Texas
PLAN OF CONVERSION
From Mutual to Stock Form of Organization
I. GENERAL
On December 14, 1999, the Board of Community Bank of Central Texas, ssb
(the "Bank") adopted this Plan of Conversion whereby the Bank would convert from
a mutual savings institution to a stock savings institution. The Plan includes,
as part of the Conversion, the concurrent formation of the Holding Company, to
be named in the future. The Plan provides that non-transferable subscription
rights to purchase Holding Company Conversion Stock will be offered first to
Eligible Account Holders of record as of the Eligibility Record Date, then to
the Holding Company and the Bank's Tax-Qualified Employee Plans, then to
Supplemental Eligible Account Holders of record as of the Supplemental
Eligibility Record Date, then to Other Members, and then to directors, officers
and employees. Concurrently with, at any time during, or promptly after the
Subscription Offering, and on a lowest priority basis, an opportunity to
subscribe may also be offered to the general public in a Direct Community
Offering or a Public Offering. The price of the Holding Company Conversion Stock
will be based upon an independent appraisal of the Bank and will reflect its
estimated pro forma market value, as converted. It is the desire of the Board of
Directors of the Bank to attract new capital to the Bank in order to increase
its capital, support future savings growth and increase the amount of funds
available for residential and other lending. The Converted Bank is also expected
to benefit from its management and other personnel having a stock ownership in
its business, since stock ownership is viewed as an effective performance
incentive and a means of attracting, retaining and compensating management and
other personnel. No change will be made in the Board of Directors or management
of the Bank as a result of the Conversion.
II. DEFINITIONS
Acting in Concert: The term "acting in concert" shall have the same
meaning given it in ss.574.2(c) of the rules and regulations of the Office of
Thrift Supervision, as applied by the FDIC.
Actual Subscription Price: The price per share, determined as provided
in Section V of the Plan, at which Holding Company Conversion Stock will be sold
in the Subscription Offering.
Affiliate: An "affiliate" of, or a Person "affiliated" with, a
specified Person, is a Person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by or is under common control with,
the Person specified.
Associate: The term "associate," when used to indicate a relationship
with any Person, means (i) any corporation or organization (other than the
Holding Company, the Bank or a majority-owned subsidiary of the Holding Company)
of which such Person is an officer or partner or is, directly or indirectly, the
beneficial owner of ten percent or more of any class of equity securities, (ii)
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 (iii) any relative or spouse of such Person, or any relative of
such spouse, who has the same home as such Person or who is a director or
officer of the Holding Company or the Bank or any subsidiary of the Holding
Company; provided, however, that any Tax-Qualified or Non-Tax-Qualified
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Employee Plan shall not be deemed to be an associate of any director or officer
of the Holding Company or the Bank, to the extent provided in Section V hereof.
Bank: Community Bank of Central Texas, ssb, or such other name as the
institution may adopt.
Commissioner: The Commissioner of the Texas Savings and Loan
Department.
Conversion: Change of the Bank's mutual charter and bylaws to a stock
charter and bylaws; sale by the Holding Company of Holding Company Conversion
Stock; and issuance and sale by the Converted Bank of its common stock to the
Holding Company, all as provided for in the Plan.
Converted Bank: The stock savings institution resulting from the
Conversion of the Bank in accordance with the Plan.
Department: The Texas Savings and Loan Department.
Deposit Account: Any withdrawable or repurchasable account or deposit
in the Bank including Savings Accounts and demand accounts.
Direct Community Offering: The offering to the general public of any
unsubscribed shares which may be effected as provided in Section V hereof.
Eligibility Record Date: The close of business on September 30, 1998.
Eligible Account Holder: Any Person holding a Deposit Account in the
Bank on the Eligibility Record Date.
Exchange Act: The Securities Exchange Act of 1934, as amended.
FDIC: The Federal Deposit Insurance Corporation.
Fed: The Board of Governors of the Federal Reserve System.
Holding Company: A corporation which upon completion of the Conversion
will own all of the outstanding common stock of the Converted Bank, and the name
of which will be selected in the future.
Holding Company Conversion Stock: Shares of common stock, par value
$.01 per share, to be issued by the Holding Company as a part of the Conversion.
Market Maker: A dealer (i.e., any Person who engages directly or
indirectly as agent, broker or principal in the business of offering, buying,
selling, or otherwise dealing or trading in securities issued by another Person)
who, with respect to a particular security, (i) regularly publishes bona fide,
competitive bid and offer quotations in a recognized inter-dealer quotation
system; or (ii) furnishes bona fide competitive bid and offer quotations on
request; and (iii) is ready, willing, and able to effect transactions in
reasonable quantities at his quoted prices with other brokers or dealers.
Maximum Subscription Price: The price per share of Holding Company
Conversion Stock to be paid initially by subscribers in the Subscription
Offering.
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Member: Any Person or entity that qualifies as a member of the Bank
pursuant to its charter and bylaws.
Non-Tax-Qualified Employee Plan: Any defined benefit plan or defined
contribution plan of the Bank or the Holding Company, such as an employee stock
ownership plan, stock bonus plan, profit-sharing plan or other plan, which with
its related trust does not meet the requirements to be "qualified" under Section
401 of the Internal Revenue Code.
Officer: An executive officer of the Holding Company or the Bank,
including the Chairman of the Board, President, Executive Vice Presidents,
Senior Vice Presidents in charge of principal business functions, Secretary and
Treasurer.
Order Forms: Forms to be used in the Subscription Offering to exercise
Subscription Rights.
Other Members: Members of the Bank, other than Eligible Account
Holders, Tax-Qualified Employee Plans or Supplemental Eligible Account Holders,
as of the Voting Record Date.
Person: An individual, a corporation, a partnership, an association, a
joint-stock company, a trust, any unincorporated organization, or a government
or political subdivision thereof.
Plan: This Plan of Conversion of the Bank, including any amendment
approved as provided in this Plan.
Public Offering: The offering for sale through the Underwriters to
selected members of the general public of any shares of Holding Company
Conversion Stock not subscribed for in the Subscription Offering or the Direct
Community Offering, if any.
Public Offering Price: The price per share at which any unsubscribed
shares of Holding Company Conversion Stock are initially offered for sale in the
Public Offering.
SAIF: Savings Association Insurance Fund.
Savings Account: The term "Savings Account" means any withdrawable
account in the Bank except a demand account.
SEC: Securities and Exchange Commission.
Special Meeting: The Special Meeting of Members called for the purpose
of considering and voting upon the Plan of Conversion.
Subscription Offering: The offering of shares of Holding Company
Conversion Stock for subscription and purchase pursuant to Section V of the
Plan.
Subscription Rights: Non-transferable, non-negotiable, personal rights
of the Bank's Eligible Account Holders, Tax-Qualified Employee Plans,
Supplemental Eligible Account Holders, Other Members, and directors, Officers
and employees to subscribe for shares of Holding Company Conversion Stock in the
Subscription Offering.
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Supplemental Eligibility Record Date: The last day of the calendar
quarter preceding approval of the Plan by the FDIC and the Department.
Supplemental Eligible Account Holder: Any person holding a Deposit
Account in the Bank (other than an officer or director and their associates) on
the Supplemental Eligibility Record Date.
Tax-Qualified Employee Plans: Any defined benefit plan or defined
contribution plan of the Bank or the Holding Company, such as an employee stock
ownership plan, stock bonus plan, profit-sharing plan or other plan, which with
its related trust meets the requirements to be "qualified" under Section 401 of
the Internal Revenue Code.
Underwriters: The investment banking firm or firms agreeing to offer
and sell Holding Company Conversion Stock in the Public Offering.
Voting Record Date: The date set by the Board of Directors in
accordance with applicable regulations for determining Members eligible to vote
at the Special Meeting.
III. STEPS PRIOR TO SUBMISSION OF PLAN OF CONVERSION TO THE MEMBERS FOR
APPROVAL
Prior to submission of the Plan of Conversion to its Members for
approval, the Bank must receive from the Department and the FDIC approval of the
Application for Approval of Conversion to convert to the stock form of
organization. The following steps must be taken prior to such regulatory
approval:
A. The Board of Directors shall adopt the Plan by not less than a
two-thirds vote.
B. The Bank shall notify its Members of the adoption of the Plan
by publishing a statement in a newspaper having a general
circulation in each community in which the Bank maintains an
office.
C. Copies of the Plan adopted by the Board of Directors shall be
made available for inspection at each office of the Bank.
D. The Bank will promptly cause an Application for Approval of
Conversion to be prepared and filed with the Department and
the FDIC, a Holding Company Application to be prepared and
filed with the Fed and a Registration Statement on Form SB-2
to be prepared and filed with the SEC.
E. Upon receipt of notice from the Department to do so, the Bank
shall notify its Members that it has filed the Application for
Approval of Conversion by posting notice in each of its
offices and by publishing notice in a newspaper having general
circulation in each community in which the Bank maintains an
office.
IV. CONVERSION PROCEDURE
Following approval of the application by the Department and
non-objection by the FDIC, the Plan will be submitted to a vote of the Members
at the Special Meeting. If the Plan is approved by Members holding a majority of
the total number of votes entitled to be cast at the Special Meeting, the Bank
will take
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all other necessary steps pursuant to applicable laws and regulations to convert
to a stock savings institution as part of a concurrent holding company formation
pursuant to the terms of the Plan.
The Holding Company Conversion Stock will be offered for sale in the
Subscription Offering at the Maximum Subscription Price to Eligible Account
Holders, Tax-Qualified Employee Plans, Supplemental Eligible Account Holders,
Other Members and directors, Officers and employees of the Bank, prior to or
within 45 days after the date of the Special Meeting. The Bank may, either
concurrently with, at any time during, or promptly after the Subscription
Offering, also offer the Holding Company Conversion Stock to and accept
subscriptions from other Persons in a Direct Community Offering or a Public
Offering; provided that the Bank's Eligible Account Holders, Tax-Qualified
Employee Plans, Supplemental Eligible Account Holders, Other Members and
directors, Officers and employees shall have the priority rights to subscribe
for Holding Company Conversion Stock as set forth in Section V of the Plan.
However, the Holding Company and the Bank may delay commencing the Subscription
Offering beyond such 45-day period in the event there exist unforeseen material
adverse market or financial conditions. If the Subscription Offering commences
prior to the Special Meeting, subscriptions will be accepted subject to the
approval of the Plan at the Special Meeting.
The period for the Subscription Offering and Direct Community Offering
will be not less than 20 days nor more than 45 days unless extended by the Bank.
Upon completion of the Subscription Offering and Direct Community Offering, if
any, any unsubscribed shares of Holding Company Conversion Stock may be sold
through the Underwriters to selected members of the general public in the Public
Offering. If for any reason all of the shares are not sold in the Subscription
Offering, Direct Community Offering, if any, and Public Offering, if any, the
Holding Company and the Bank will use their best efforts to obtain other
purchasers, subject to Department and FDIC approval, as required. Completion of
the sale of all shares of Holding Company Conversion Stock not sold in the
Subscription Offering is required within 45 days after termination of the
Subscription Offering, subject to extension of such 45-day period by the Holding
Company and the Bank with the approval of the OTS. The Holding Company and the
Bank may jointly seek one or more extensions of such 45-day period if necessary
to complete the sale of all shares of Holding Company Conversion Stock. In
connection with such extensions, subscribers and other purchasers will be
permitted to increase, decrease or rescind their subscriptions or purchase
orders to the extent required by the OTS in approving the extensions. Completion
of the sale of all shares of Holding Company Conversion Stock is required within
24 months after the date of the Special Meeting.
V. STOCK OFFERING
A. Total Number of Shares and Purchase Price of Conversion Stock
The total number of shares of Holding Company
Conversion Stock to be issued in the Conversion will be
determined jointly by the Boards of Directors of the Holding
Company and the Bank prior to the commencement of the
Subscription Offering, subject to adjustment if necessitated
by market or financial conditions prior to consummation of the
Conversion. The total number of shares of Holding Company
Conversion Stock shall also be subject to increase in
connection with any oversubscriptions in the Subscription
Offering or Direct Community Offering.
The aggregate price for which all shares of Holding
Company Conversion Stock will be sold will be based on an
independent appraisal of the estimated total pro forma market
value of the Holding Company and the Converted Bank. Such
appraisal shall be
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performed in accordance with appropriate regulatory guidelines
and will be updated as appropriate under or required by
applicable regulations.
The appraisal will be made by an independent
investment banking or financial consulting firm experienced in
the area of thrift institution appraisals. The appraisal will
include, among other things, an analysis of the historical and
pro forma operating results and net worth of the Converted
Bank and a comparison of the Holding Company, the Converted
Bank and the Holding Company Conversion Stock with comparable
thrift institutions and holding companies and their respective
outstanding capital stocks.
Based upon the independent appraisal, the Boards of
Directors of the Holding Company and the Bank will jointly fix
the Maximum Subscription Price.
If, following completion of the Subscription Offering
and Direct Community Offering, if any, a Public Offering is
effected, the Actual Subscription Price for each share of
Holding Company Conversion Stock will be the same as the
Public Offering Price at which unsubscribed shares of Holding
Company Conversion Stock are initially offered for sale by the
Underwriters in the Public Offering.
If, upon completion of the Subscription Offering,
Direct Community Offering, if any, and Public Offering, if
any, all of the Holding Company Conversion Stock is subscribed
for or only a limited number of shares remain unsubscribed
for, subject to Part VII hereof, the Actual Subscription Price
for each share of Holding Company Conversion Stock will be
determined by dividing the estimated appraised aggregate pro
forma market value of the Holding Company and the Converted
Bank, based on the independent appraisal as updated upon
completion of the Subscription Offering or other sale of all
of the Holding Company Conversion Stock, by the total number
of shares of Holding Company Conversion Stock to be issued by
the Holding Company upon Conversion. Such appraisal will then
be expressed in terms of a specific aggregate dollar amount
rather than as a range.
B. Subscription Rights
Non-transferable Subscription Rights to purchase
Holding Company Conversion Stock will be issued without
payment therefor to Eligible Account Holders, Tax-Qualified
Employee Plans, Supplemental Eligible Account Holders, Other
Members and directors, Officers and employees of the Bank as
set forth below.
1. Preference Category No. 1: Eligible Account Holders
Each Eligible Account Holder shall receive
non-transferable Subscription Rights to subscribe for
shares of Holding Company Conversion Stock in an
amount equal to the greater of $100,000, or one-tenth
of one percent (.10%) of the total offering of
shares, or 15 times the product (rounded down to the
next whole number) obtained by multiplying the total
number of shares of Holding Company Conversion Stock
to be issued by a fraction of which the numerator is
the amount of the Deposit Accounts of the Eligible
Account Holder and the denominator is the total
amount of Deposit Accounts of all Eligible Account
Holders in the Bank in each case on the Eligibility
Record Date.
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If sufficient shares are not available,
shares shall be allocated first to permit each
subscribing Eligible Account Holder to purchase to
the extent possible 100 shares, and thereafter among
each subscribing Eligible Account Holder pro rata in
the same proportion that his Deposit Accounts bear to
the total Deposit Accounts of all subscribing
Eligible Account Holders whose subscriptions remain
unsatisfied.
Non-transferable Subscription Rights to
purchase Holding Company Conversion Stock received by
directors and Officers of the Bank and their
Associates, based on their increased deposits in the
Bank in the one-year period preceding the Eligibility
Record Date, shall be subordinated to all other
subscriptions involving the exercise of
non-transferable Subscription Rights of Eligible
Account Holders.
2. Preference Category No. 2: Tax-Qualified Employee
Plans
Each Tax-Qualified Employee Plan shall be
entitled to receive non-transferable Subscription
Rights to purchase up to 10% of the shares of Holding
Company Conversion Stock, provided that singly or in
the aggregate such plans (other than that portion of
such plans which is self-directed) shall not purchase
more than 10% of the shares of the Holding Company
Conversion Stock. Subscription Rights received
pursuant to this Category shall be subordinated to
all rights received by Eligible Account Holders to
purchase shares pursuant to Category No. 1.
3. Preference Category No. 3: Supplemental Eligible
Account Holders
Each Supplemental Eligible Account Holder
shall receive non-transferable Subscription Rights to
subscribe for shares of Holding Company Conversion
Stock in an amount equal to the greater of $100,000,
or one-tenth of one percent (.10%) of the total
offering of Holding Company Conversion Stock, or 15
times the product (rounded down to the next whole
number) obtained by multiplying the total number of
shares of Holding Company Conversion Stock to be
issued by a fraction of which the numerator is the
amount of the Deposit Accounts of the Supplemental
Eligible Account Holder and the denominator is the
total amount of Deposit Accounts of all Supplemental
Eligible Account Holders in the Bank in each case on
the Supplemental Eligibility Record Date.
Subscription Rights received pursuant to
this Category shall be subordinated to all
Subscription Rights received by Eligible Account
Holders and Tax-Qualified Employee Plans pursuant to
Category Nos. 1 and 2 above.
Any non-transferable Subscription Rights to
purchase shares received by an Eligible Account
Holder in accordance with Category No. 1 shall reduce
to the extent thereof the Subscription Rights to be
distributed to such person pursuant to this Category.
In the event of an oversubscription for
shares under this Category, the shares available
shall be allocated first to permit each subscribing
Supplemental Eligible Account Holder, to the extent
possible, to purchase a number of shares
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sufficient to make his total allocation (including
the number of shares, if any, allocated in accordance
with Category No. 1) equal to 100 shares, and
thereafter among each subscribing Supplemental
Eligible Account Holder pro rata in the same
proportion that his Deposit Accounts bear to the
total Deposit Accounts of all subscribing
Supplemental Eligible Account Holders whose
subscriptions remain unsatisfied.
4. Preference Category No. 4: Other Members
Each Other Member shall receive
non-transferable Subscription Rights to subscribe for
shares of Holding Company Conversion Stock remaining
after satisfying the subscriptions provided for under
Category Nos. 1 through 3 above, subject to the
following conditions:
a. Each Other Member shall be entitled to
subscribe for an amount of shares equal to
the greater of $100,000, or one-tenth of one
percent (.10%) of the total offering of
Holding Company Conversion Stock, to the
extent that Holding Company Conversion Stock
is available.
b. In the event of an oversubscription for
shares under this Caterogy, the shares
available shall be allocated among the
subscribing Other Members pro rata in the
same proportion that his number of votes on
the Voting Record Date bears to the total
number of votes on the Voting Record Date of
all subscribing Other Members on such date.
Such number of votes shall be determined
based on the Bank's mutual charter and
bylaws in effect on the date of approval by
members of the Plan.
5. Preference Category No. 5: Directors, Officers and
Employees
Each director, Officer and employee of the
Bank as of the date of the commencement of the
Subscription Offering shall be entitled to receive
non-transferable Subscription Rights to purchase
shares of the Holding Company Conversion Stock to the
extent that shares are available after satisfying
subscriptions under Category Nos. 1 through 4 above.
The shares which may be purchased under this Category
are subject to the following conditions:
a. The total number of shares which may be
purchased under this Category may not exceed
25% of the number of shares of Holding
Company Conversion Stock.
b. The maximum amount of shares which may be
purchased under this Category by any Person
is $100,000 of Holding Company Conversion
Stock. In the event of an oversubscription
for shares under this Category, the shares
available shall be allocated pro rata among
all subscribers in this Category.
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C. Direct Community Offering and Public Offering
1. Any shares of Holding Company Conversion Stock not
subscribed for in the Subscription Offering may be
offered for sale in a Direct Community Offering. This
may involve an offering of all unsubscribed shares
directly to the general public with a preference to
those natural persons residing in the counties in
which the Bank has an office. The purchase price per
share to the general public in a Direct Community
Offering shall be the same as the Actual Subscription
Price. The Holding Company and the Bank may use an
investment banking firm or firms on a best efforts
basis to sell the unsubscribed shares in the
Subscription and Direct Community Offering. The
Holding Company and the Bank may pay a commission or
other fee to such investment banking firm or firms as
to the shares sold by such firm or firms in the
Subscription and Direct Community Offering and may
also reimburse such firm or firms for expenses
incurred in connection with the sale. The Holding
Company Conversion Stock will be offered and sold in
the Direct Community Offering, if any, in accordance
with applicable Department and FDIC regulations, so
as to achieve the widest distribution of the Holding
Company Conversion Stock. No person, by himself or
herself, or with an Associate or group of Persons
acting in concert, may subscribe for or purchase more
than $100,000 of Holding Company Conversion Stock in
the Direct Community Offering, if any. Further, the
Bank may limit total subscriptions under this Section
V.C.1 so as to assure that the number of shares
available for the Public Offering may be up to a
specified percentage of the number of shares of
Holding Company Conversion Stock. Finally, the Bank
may reserve shares offered in the Direct Community
Offering for sales to institutional investors.
In the event of an oversubscription for shares in the
Direct Community Offering, shares may be allocated
(to the extent shares remain available) first to
cover orders of natural persons residing in the
counties in which the Bank has an office, then to
cover the orders of any other person subscribing for
shares in the Direct Community Offering so that each
such person may receive 1,000 shares, and thereafter,
on a pro rata basis to such persons based on the
amount of their respective subscriptions.
The Bank and the Holding Company, in their sole
discretion, may reject subscriptions, in whole or in
part, received from any Person under this Section
V.C.1. Further, the Bank and the Holding Company may,
at their sole discretion, elect to forego a Direct
Community Offering and instead effect a Public
Offering as described below.
2. Any shares of Holding Company Conversion Stock not
sold in the Subscription Offering or in the Direct
Community Offering, if any, may then be sold through
the Underwriters to selected members of the general
public in the Public Offering. It is expected that
the Public Offering will commence as soon as
practicable after termination of the Subscription
Offering and the Direct Community Offering, if any.
The Bank and the Holding Company, in their sole
discretion, may reject any subscription, in whole or
in part, received in the Public Offering. The Public
Offering shall be completed within 45 days after the
termination of the Subscription
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Offering, unless such period is extended as provided
in Section IV hereof. No person, by himself or
herself, or with an Associate or group of Persons
acting in concert, may purchase more than $100,000 of
Holding Company Conversion Stock in the Public
Offering, if any.
3. If for any reason any shares remain unsold after the
Subscription Offering, Direct Community Offering, if
any, and Public Offering, if any, the Boards of
Directors of the Holding Company and the Bank will
seek to make other arrangements for the sale of the
remaining shares of Holding Company Conversion Stock.
Such other arrangements will be subject to the
approval of the Department and the FDIC, as
applicable, and to compliance with applicable
securities laws.
D. Additional Limitations Upon Purchases of Shares of Holding
Company Conversion Stock
The following additional limitations shall be imposed
on all purchases of Holding Company Conversion Stock in the
Conversion:
1. No Person, by himself or herself, or with an
Associate or group of Persons acting in concert, may
subscribe for or purchase in the Conversion a number
of shares of Holding Company Conversion Stock which
exceeds an amount of shares equal to $100,000. For
purposes of this paragraph, an Associate of a Person
does not include a Tax-Qualified or Non-Tax Qualified
Employee Plan in which the Person has a substantial
beneficial interest or serves as a trustee or in a
similar fiduciary capacity. Moreover, for purposes of
this paragraph, shares held by one or more
Tax-Qualified or Non-Tax Qualified Employee Plans
attributed to a Person shall not be aggregated with
shares purchased directly by or otherwise
attributable to that Person.
2. Directors and Officers and their Associates may not
purchase in all categories in the Conversion an
aggregate of more than 35% of the Holding Company
Conversion Stock. For purposes of this paragraph, an
Associate of a Person does not include any
Tax-Qualified Employee Plan. Moreover, any shares
attributable to the Officers and directors and their
Associates, but held by one or more Tax-Qualified
Employee Plans shall not be included in calculating
the number of shares which may be purchased under the
limitation in this paragraph.
3. The minimum number of shares of Holding Company
Conversion Stock that may be purchased by any Person
in the Conversion is 25 shares, provided sufficient
shares are available.
4. The Boards of Directors of the Holding Company and
the Bank may, in their sole discretion, increase the
maximum purchase limitation referred to in paragraph
1 of this subpart D, up to 9.99%, provided that
orders for shares exceeding 5% of the Holding Company
Conversion Stock offered in the Conversion shall not
exceed, in the aggregate, 10% of the Holding Company
Conversion Stock being offered in the Conversion.
Requests to purchase additional shares of Holding
Company Conversion Stock under this provision will be
allocated by the Boards of Directors on a pro rata
basis giving priority in accordance with the priority
rights set forth in this Section V.
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Depending upon market and financial conditions, the
Boards of Directors of the Holding Company and the Bank, with
the approval of the Department and the FDIC, as applicable,
and without further approval of the Members, may increase or
decrease any of the above purchase limitations.
For purposes of this Section V, the directors of the
Holding Company and the Bank shall not be deemed to be
Associates or a group acting in concert solely as a result of
their serving in such capacities.
Each Person purchasing Holding Company Conversion
Stock in the Conversion shall be deemed to confirm that such
purchase does not conflict with the above purchase
limitations.
E. Restrictions and Other Characteristics of Holding Company
Conversion Stock Being Sold
1. Transferability. Holding Company Conversion Stock
purchased by Persons other than directors and
Officers of the Holding Company or the Bank will be
transferable without restriction. Shares purchased by
directors or Officers shall not be sold or otherwise
disposed of for value for a period of one year from
the date of Conversion, except for any disposition of
such shares (i) following the death of the original
purchaser, or (ii) resulting from an exchange of
securities in a merger or acquisition approved by the
applicable regulatory authorities. Any transfers that
could result in a change in control of the Bank or
the Holding Company or result in the ownership by any
Person or group acting in concert of more than 10% of
any class of the Bank's or the Holding Company's
equity securities are subject to the prior approval
of the Department and the FDIC, as applicable.
The certificates representing shares of Holding
Company Conversion Stock issued to directors and
Officers shall bear a legend giving appropriate
notice of the one-year holding period restriction.
Appropriate instructions shall be given to the
transfer agent for such stock with respect to the
applicable restrictions relating to the transfer of
restricted stock. Any shares of common stock of the
Holding Company subsequently issued as a stock
dividend, stock split, or otherwise, with respect to
any such restricted stock, shall be subject to the
same holding period restrictions for Holding Company
or Bank directors and Officers as may be then
applicable to such restricted stock.
No director or Officer of the Holding Company or of
the Bank, or Associate of such a director or Officer,
shall purchase any outstanding shares of capital
stock of the Holding Company for a period of three
years following the Conversion without the prior
written approval of the Commissioner and, as
applicable, the FDIC, except through a broker or
dealer registered with the SEC or in a "negotiated
transaction" involving more than one percent of the
then-outstanding shares of common stock of the
Holding Company. As used herein, the term "negotiated
transaction" means a transaction in which the
securities are offered and the terms and arrangements
relating to any sale are arrived at through direct
communications between the seller or any Person
acting on its behalf and the purchaser or his
investment representative. The term "investment
representative" shall mean a professional
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investment advisor acting as agent for the purchaser
and independent of the seller and not acting on
behalf of the seller in connection with the
transaction.
2. Repurchase and Dividend Rights. Any cash dividend by
the Converted Bank or stock repurchase by the Holding
Company during the first three years following
Conversion will, to the extent required, be made in
accordance with Department and, to the extent
applicable, FDIC policies as in effect at the time of
such cash dividends or stock repurchase.
3. Voting Rights. After Conversion, holders of Deposit
Accounts will not have voting rights in the Bank or
the Holding Company. Exclusive voting rights as to
the Bank will be vested in the Holding Company, as
the sole stockholder of the Bank. Voting rights as to
the Holding Company will be held exclusively by its
stockholders.
F. Exercise of Subscription Rights; Order Forms
1. If the Subscription Offering occurs concurrently with
the solicitation of proxies for the Special Meeting,
the subscription prospectus and Order Form may be
sent to each Eligible Account Holder, Tax-Qualified
Employee Plan, Supplemental Eligible Account Holder,
Other Member, and director, Officer and employee at
their last known address as shown on the records of
the Bank. However, the Bank may, and if the
Subscription Offering commences after the Special
Meeting the Bank shall, furnish a subscription
prospectus and Order Form only to Eligible Account
Holders, Tax-Qualified Employee Plans, Supplemental
Eligible Account Holders, Other Members, and
directors, Officers and employees who have returned
to the Bank by a specified date prior to the
commencement of the Subscription Offering a post card
or other written communication requesting a
subscription prospectus and Order Form. In such
event, the Bank shall provide a postage-paid post
card for this purpose and make appropriate disclosure
in its proxy statement for the solicitation of
proxies to be voted at the Special Meeting and/or
letter sent in lieu of the proxy statement to those
Eligible Account Holders, Tax-Qualified Employee
Plans or Supplemental Eligible Account Holders who
are not Members on the Voting Record Date.
2. Each Order Form will be preceded or accompanied by a
subscription prospectus describing the Holding
Company and the Converted Bank and the shares of
Holding Company Conversion Stock being offered for
subscription and containing all other information
required by the Department, the FDIC or the SEC, or
necessary to enable Persons to make informed
investment decisions regarding the purchase of
Holding Company Conversion Stock.
3. The Order Forms (or accompanying instructions) used
for the Subscription Offering will contain, among
other things, the following:
(i) A clear and intelligible explanation of the
Subscription Rights granted under the Plan
to Eligible Account Holders, Tax-Qualified
Employee Plans, Supplemental Eligible
Account Holders, Other Members, and
directors, Officers and employees;
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(ii) A specified expiration date by which Order
Forms must be returned to and actually
received by the Bank or its representative
for purposes of exercising Subscription
Rights, which date will be not less than 20
days after the Order Forms are mailed by the
Bank;
(iii) The Maximum Subscription Price to be paid
for each share subscribed for when the Order
Form is returned;
(iv) A statement that 25 shares is the minimum
number of shares of Holding Company
Conversion Stock that may be subscribed for
under the Plan;
(v) A specifically designated blank space for
indicating the number of shares being
subscribed for;
(vi) A set of detailed instructions as to how to
complete the Order Form including a
statement as to the available alternative
methods of payment for the shares being
subscribed for;
(vii) Specifically designated blank spaces for
dating and signing the Order Form;
(viii) An acknowledgment that the subscriber has
received the subscription prospectus;
(ix) A statement of the consequences of failing
to properly complete and return the Order
Form, including a statement that the
Subscription Rights will expire on the
expiration date specified on the Order Form
unless such expiration date is extended by
the Holding Company and the Bank, and that
the Subscription Rights may be exercised
only by delivering the Order Form, properly
completed and executed, to the Bank or its
representative by the expiration date,
together with required payment of the
Maximum Subscription Price for all shares of
Holding Company Conversion Stock subscribed
for;
(x) A statement that the Subscription Rights are
non-transferable and that all shares of
Holding Company Conversion Stock subscribed
for upon exercise of Subscription Rights
must be purchased on behalf of the Person
exercising the Subscription Rights for his
own account; and
(xi) A statement that, after receipt by the Bank
or its representative, a subscription may
not be modified, withdrawn or canceled
without the consent of the Bank.
G. Method of Payment
Payment for all shares of Holding Company Conversion
Stock subscribed for, computed on the basis of the Maximum
Subscription Price, must accompany all completed Order Forms.
Payment may be made in cash (if presented in Person), by
check, or, if the
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subscriber has a Deposit Account in the Bank (including a
certificate of deposit), the subscriber may authorize the Bank
to charge the subscriber's Deposit Account.
If a subscriber authorizes the Bank to charge his or
her Deposit Account, the funds will continue to earn interest,
but may not be used by the subscriber until all Holding
Company Conversion Stock has been sold or the Plan is
terminated, whichever is earlier. The Bank will allow
subscribers to purchase shares by withdrawing funds from
certificate accounts without the assessment of early
withdrawal penalties with the exception of prepaid interest in
the form of promotional gifts. In the case of early withdrawal
of only a portion of such account, the certificate evidencing
such account shall be canceled if the remaining balance of the
account is less than the applicable minimum balance
requirement, in which event the remaining balance will earn
interest at the passbook rate. This waiver of the early
withdrawal penalty is applicable only to withdrawals made in
connection with the purchase of Holding Company Conversion
Stock under the Plan. Interest will also be paid, at not less
than the then-current passbook rate, on all orders paid in
cash, by check or money order, from the date payment is
received until consummation of the Conversion. Payments made
in cash, by check or money order will be placed by the Bank in
an escrow or other account established specifically for this
purpose.
In the event of an unfilled amount of any
subscription order, the Converted Bank will make an
appropriate refund or cancel an appropriate portion of the
related withdrawal authorization, after consummation of the
Conversion, including any difference between the Maximum
Subscription Price and the Actual Subscription Price (unless
subscribers are afforded the right to apply such difference to
the purchase of additional whole shares). If for any reason
the Conversion is not consummated, purchasers will have
refunded to them all payments made and all withdrawal
authorizations will be canceled in the case of subscription
payments authorized from Deposit Accounts at the Bank.
If any Tax-Qualified Employee Plans or
Non-Tax-Qualified Employee Plans subscribe for shares during
the Subscription Offering, such plans will not be required to
pay for the shares subscribed for at the time they subscribe,
but may pay for such shares of Holding Company Conversion
Stock subscribed for upon consummation of the Conversion. In
the event that, after the completion of the Subscription
Offering, the amount of shares to be issued is increased above
the maximum of the appraisal range included in the
subscription prospectus, the Tax Qualified and Non-Tax
Qualified Employee Plans shall be entitled to increase their
subscriptions by a percentage equal to the percentage increase
in the amount of shares to be issued above the maximum of the
appraisal range provided that such subscriptions shall
continue to be subject to applicable purchase limits and stock
allocation procedures.
H. Undelivered, Defective or Late Order Forms; Insufficient
Payment
The Boards of Directors of the Holding Company and
the Bank shall have the absolute right, in their sole
discretion, to reject any Order Form, including but not
limited to, any Order Forms which (i) are not delivered or are
returned by the United States Postal Service (or the addressee
cannot be located); (ii) are not received back by the Bank or
its representative, or are received after the expiration date
specified thereon; (iii) are defectively completed or
executed; (iv) are not accompanied by the total required
payment for the shares of Holding Company Conversion Stock
subscribed for (including cases in
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which the subscribers' Deposit Accounts or certificate
accounts are insufficient to cover the authorized withdrawal
for the required payment); or (v) are submitted by or on
behalf of a Person whose representations the Boards of
Directors of the Holding Company and the Bank believe to be
false or who they otherwise believe, either alone or acting in
concert with others, is violating, evading or circumventing,
or intends to violate, evade or circumvent, the terms and
conditions of the Plan. In such event, the Subscription Rights
of the Person to whom such rights have been granted will not
be honored and will be treated as though such Person failed to
return the completed Order Form within the time period
specified therein. The Bank may, but will not be required to,
waive any irregularity relating to any Order Form or require
submission of corrected Order Forms or the remittance of full
payment for subscribed shares by such date as the Bank may
specify. The interpretation of the Holding Company and the
Bank of the terms and conditions of the Plan and of the proper
completion of the Order Form will be final, subject to the
authority of the Department and, if applicable, the FDIC.
I. Member in Non-Qualified States or in Foreign Countries
The Holding Company and the Bank will make reasonable
efforts to comply with the securities laws of all states in
the United States in which Persons entitled to subscribe for
Holding Company Conversion Stock pursuant to the Plan reside.
However, no shares will be offered or sold under the Plan to
any such Person who (1) resides in a foreign country or (2)
resides in a state of the United States in which a small
number of Persons otherwise eligible to subscribe for shares
under the Plan reside or as to which the Holding Company and
the Bank determine that compliance with the securities laws of
such state would be impracticable for reasons of cost or
otherwise, including, but not limited to, a requirement that
the Holding Company or the Bank or any of their Officers,
directors or employees register, under the securities laws of
such state, as a broker, dealer, salesman or agent. No
payments will be made in lieu of the granting of Subscription
Rights to any such Person.
VI. ORGANIZATION CERTIFICATE AND BYLAWS
A. As part of the Conversion, the Bank will take all appropriate
steps to amend its organization certificate to read in the
form of a stock savings institution articles of incorporation
as prescribed by the Department and, if applicable, the FDIC.
A copy of the proposed stock articles of incorporation is
available upon request. By their approval of the Plan, the
Members of the Bank will thereby approve and adopt such
articles of incorporation.
B. The Bank will also take appropriate steps to amend its bylaws
to read in the form prescribed by the Department and, if
applicable, the FDIC for a stock savings institution. A copy
of the proposed stock bylaws is available upon request.
C. The effective date of the adoption of the Bank's stock
articles of incorporation and bylaws shall be the date of the
issuance and sale of the Holding Company Conversion Stock as
specified by the Department and, as applicable, the FDIC.
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VII. HOLDING COMPANY ARTICLES OF INCORPORATION
A copy of the articles of incorporation of the Holding Company will be
made available to Members upon request.
VIII. DIRECTORS OF THE CONVERTED BANK
Each Person serving as a member of the Board of Directors of the Bank
at the time of the Conversion will thereupon become a director of the Converted
Bank.
IX. STOCK OPTION AND INCENTIVE PLAN AND RECOGNITION AND RETENTION PLAN
In order to provide an incentive for directors, Officers and employees
of the Holding Company and its subsidiaries (including the Converted Bank), the
Board of Directors of the Holding Company intends to adopt, subject to
shareholder approval, a stock option and incentive plan and a recognition and
retention plan following the Conversion.
X. CONTRIBUTIONS TO TAX-QUALIFIED EMPLOYEE PLANS
The Converted Bank and the Holding Company may in their discretion make
scheduled contributions to any Tax-Qualified Employee Plans, provided that any
such contributions which are for the acquisition of Holding Company Conversion
Stock, or the repayment of debt incurred for such an acquisition, do not cause
the Converted Bank to fail to meet its regulatory capital requirements.
XI. SECURITIES REGISTRATION AND MARKET MAKING
Promptly following the Conversion, the Holding Company will register
its stock with the SEC pursuant to the Exchange Act. In connection with the
registration, the Holding Company will undertake not to deregister such stock,
without the approval of the Department and, if applicable, the FDIC, for a
period of three years thereafter.
The Holding Company shall use its best efforts to encourage and assist
two or more market makers to establish and maintain a market for its common
stock promptly following Conversion. The Holding Company will also use its best
efforts to cause its common stock to be quoted on the Nasdaq System or to be
listed on a national or regional securities exchange.
XII. STATUS OF SAVINGS ACCOUNTS AND LOANS SUBSEQUENT TO CONVERSION
Each Deposit Account holder shall retain, without payment, a
withdrawable Deposit Account or Accounts in the Converted Bank, equal in amount
to the withdrawable value of such account holder's Deposit Account or Accounts
prior to Conversion. All Deposit Accounts will continue to be insured by the
SAIF up to the applicable limits of insurance coverage, and shall be subject to
the same terms and conditions (except as to voting and liquidation rights) as
such Deposit Account in the Bank at the time of the Conversion. All loans shall
retain the same status after Conversion as such loans had prior to Conversion.
XIII. LIQUIDATION ACCOUNT
For purposes of granting to Eligible Account Holders and Supplemental
Eligible Account Holders who continue to maintain Deposit Accounts at the
Converted Bank a priority in the event of a complete
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liquidation of the Converted Bank, the Converted Bank will, at the time of
Conversion, establish a liquidation account in an amount equal to the net worth
of the Bank as shown on its latest statement of financial condition contained in
the final offering circular used in connection with the Conversion. The creation
and maintenance of the liquidation account will not operate to restrict the use
or application of any of the regulatory capital accounts of the Converted Bank;
provided, however, that such regulatory capital accounts will not be voluntarily
reduced below the required dollar amount of the liquidation account. Each
Eligible Account Holder and Supplemental Eligible Account Holder shall, with
respect to the Deposit Account held, have a related inchoate interest in a
portion of the liquidation account balance ("subaccount balance").
The initial subaccount balance of a Deposit Account held by an Eligible
Account Holder and/or Supplemental Eligible Account Holder shall be determined
by multiplying the opening balance in the liquidation account by a fraction of
which the numerator is the amount of the Deposit Accounts on the Eligibility
Record Date and/or the Supplemental Eligibility Record Date and the denominator
is the total amount of the Deposit Accounts of all Eligible Account Holders and
Supplemental Eligible Account Holders on such record dates in the Bank. For
Deposit Accounts in existence at both dates, separate subaccounts shall be
determined on the basis of the deposit balance in such Deposit Accounts on such
record dates. Such initial subaccount balance shall not be increased, and it
shall be subject to downward adjustment as provided below.
If the deposit balance in any Deposit Account of an Eligible Account
Holder or Supplemental Eligible Account Holder at the close of business on any
annual closing date subsequent to the record date is less than the lesser of (i)
the deposit balance in such Deposit 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 deposit balance
in such Deposit Account on the Eligibility Record Date or Supplemental
Eligibility Record Date, the subaccount balance shall be reduced in an amount
proportionate to the reduction in such deposit balance. In the event of a
downward adjustment, the subaccount balance shall not be subsequently increased,
notwithstanding any increase in the deposit balance of the related Deposit
Account. If all funds in such Deposit Account are withdrawn, the related
subaccount balance shall be reduced to zero.
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 be entitled to receive a liquidation distribution from the
liquidation account in the amount of the then-current adjusted subaccount
balances for Deposit Accounts then held before any liquidation distribution may
be made to stockholders. No merger, consolidation, bulk purchase of assets with
assumptions of Deposit Accounts and other liabilities, or similar transactions
with another institution the accounts of which are insured by the SAIF, shall be
considered to be a complete liquidation. In such transactions, the liquidation
account shall be assumed by the surviving institution.
XIV. RESTRICTIONS ON ACQUISITION OF CONVERTED ASSOCIATION
Regulations of the Department and the FDIC limit acquisitions, and
offers to acquire, direct or indirect beneficial ownership of more than 10% of
any class of an equity security of the Converted Bank or the Holding Company. In
addition, consistent with the regulations of the Department and the FDIC, the
articles of incorporation of the Converted Bank shall provide that for a period
of five years following completion of the Conversion: (i) no Person (i.e., no
individual, group acting in concert, corporation, partnership, association,
joint stock company, trust, or unincorporated organization or similar company,
syndicate, or any other group formed for the purpose of acquiring, holding or
disposing of securities of an
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insured institution) shall directly or indirectly offer to acquire or acquire
beneficial ownership of more than 10% of any class of the Converted Bank's
equity securities. Shares beneficially owned in violation of this charter
provision shall not be counted as shares entitled to vote and shall not be voted
by any Person or counted as voting shares in connection with any matter
submitted to the shareholders for a vote. This limitation shall not apply to any
offer to acquire or acquisition of beneficial ownership of more than 10% of the
common stock of the Converted Bank by a corporation whose ownership is or will
be substantially the same as the ownership of the Converted Bank, provided that
(i) the offer or acquisition is made more than one year following the date of
completion of the Conversion; (ii) stockholders shall not be permitted to
cumulate their votes for elections of directors; and (iii) special meetings of
the stockholders relating to changes in control or amendment of the charter may
only be called by the Board of Directors.
XV. AMENDMENT OR TERMINATION OF PLAN
If necessary or desirable, the Plan may be amended at any time prior to
submission of the Plan and proxy materials to the Members by a two-thirds vote
of the respective Boards of Directors of the Holding Company and the Bank. After
submission of the Plan and proxy materials to the Members, the Plan may be
amended by a two-thirds vote of the respective Boards of Directors of the
Holding Company and the Bank only with the concurrence of the Department and the
FDIC, if applicable. In the event that the Bank determines that for tax purposes
or otherwise it is in the best interest of the Bank to convert from a mutual to
a stock institution without the concurrent formation of a holding company, the
Plan may be substantively amended, with Department and FDIC approval, if
applicable, in such respects as the Board of Directors of the Bank deems
appropriate to reflect such change from a holding company conversion to a direct
conversion. In the event the Plan is so amended, common stock of the Bank will
be substituted for Holding Company Conversion Stock in the Subscription, Direct
Community or Public Offerings, and subscribers will be resolicited as described
in Section V hereof. Any amendments to the Plan (including amendments to reflect
the elimination of the concurrent holding company formation) made after approval
by the Members with the concurrence of the Department and the FDIC, if
applicable, shall not necessitate further approval by the Members unless
otherwise required.
The Plan may be terminated by a two-thirds vote of the Bank's Board of
Directors at any time prior to the Special Meeting of Members, and at any time
following such Special Meeting with the concurrence of the Department and the
FDIC, if applicable. In its discretion, the Board of Directors of the Bank may
modify or terminate the Plan upon the order or with the approval of the
Department and the FDIC, if applicable, and without further approval by Members.
The Plan shall terminate if the sale of all shares of Holding Company Conversion
Stock is not completed within 24 months of the date of the Special Meeting. A
specific resolution approved by a majority of the Board of Directors of the Bank
is required in order for the Bank to terminate the Plan prior to the end of such
24-month period.
XVI. EXPENSES OF THE CONVERSION
The Holding Company and the Bank shall use their best efforts
to assure that expenses incurred by them in connection with the Conversion shall
be reasonable.
XVII. TAX RULING
Consummation of the Conversion is expressly conditioned upon prior
receipt of either a ruling of the United States Internal Revenue Service or an
opinion of tax counsel with respect to federal taxation, and either a ruling of
the Texas taxation authorities or an opinion of tax counsel or other tax advisor
with respect
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to Texas taxation, to the effect that consummation of the transactions
contemplated herein will not be taxable to the Holding Company or the Converted
Bank.
XVIII. EXTENSION OF CREDIT FOR PURCHASE OF STOCK
The Bank may not knowingly loan funds or otherwise extend credit to any
Person to purchase in the Conversion shares of Holding Company Conversion Stock.
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