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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement.
[ ] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY
RULE 14a-6(e)(2)).
[ ] Definitive Proxy Statement.
[ ] Definitive Additional Materials.
[ ] Soliciting Material Pursuant to Section 240.14A-11(c) or Section 240.14a-12
BLUE RIVER BANCSHARES, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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PERSONS WHO ARE TO RESPOND TO THE COLLECTION OF INFORMATION CONTAINED IN THIS
FORM ARE NOT REQUIRED TO RESPOND UNLESS THE FORM DISPLAYS A CURRENTLY VALID OMB
CONTROL NUMBER.
SEC 1913 (11-01)
[BLUE RIVER LOGO]
To Our Shareholders:
Our Board of Directors has called a Special Meeting of Shareholders, as
described in the enclosed Notice of Special Meeting of Shareholders and Proxy
Statement. The Special Meeting is being called so that our shareholders may
consider and act upon matters necessary to enable us to raise capital through
the issuance of shares of common stock. The material features of the proposed
issuance that you are being asked to vote on are as follows:
- We would issue 546,348 shares of common stock, or approximately
22.7% of our issued and outstanding stock after the closing of
the private placement, to two current directors and other
accredited investors;
- The two current directors that would participate in the private
placement are Russell Breeden, III and Wayne C. Ramsey. Messrs.
Breeden and Ramsey were added to the Board of Directors in
September 2002 in connection with the first phase of this
two-phased private placement.
- We issued 309,348 shares of common stock to Messrs. Breeden and
Ramsey and L. Gene Tanner in connection with the first phase of
the private placement. If the shares issued in the first phase of
the private placement, the shares to be issued in the second
phase of the private placement and the shares previously owned by
all of the investors are combined, the investors will own an
aggregate of 925,337 shares of common stock, or approximately
38.5% of our issued and outstanding common stock after the
closing of the second phase.
- The purchase price for the shares to be issued is $4.73 per
share, for a total purchase price of $2,584,000.
- The proposed per share purchase price is below book value ($6.02
per share as of September 30, 2002) and below market value the
day before we announced the transaction ($5.05 per share on June
6, 2002). The proposed per share purchase price is above the
market value as of November 22, 2002 ($4.49 per share).
For more detailed information regarding the proposed transaction,
including the background of the proposed transaction, see the section entitled
"Proposal One" and "Purpose and Background of the First Closing and the Proposed
Private Placement and Other Related Matters" in the enclosed Proxy Statement.
We had net losses of $2,176,000 for 2001 and $3,132,886 for the nine
months ended September 30, 2002, $2,429,081 of which was primarily attributable
to the change in accounting principle related to goodwill impairment. We are
currently designated by the Office of Thrift Supervision to be in "troubled
condition." We believe we need the capital to be raised in the proposed private
placement to grow and achieve profitability. However, please be aware there are
some risks involved if the stock issuance is approved, including, without
limitation, the following:
- Your percentage of voting power will decrease;
- Our book value per share and earnings per share will decrease;
- This issuance may result in a "change in control";
- There may be a possible effect on the market price of our shares;
and
- Certain of the investors may become significant shareholders.
You should carefully consider each of these risks which are discussed
in more detail beginning on page 4 of the Proxy Statement under the heading
"Proposal One -- Effects and Risks of Shareholder Approval."
We are excited that two of the proposed investors are now serving as
directors on our Board of Directors. As stated above, Messrs. Breeden and Ramsey
were added to our Board of Directors for terms ending in 2003 and 2005,
respectively. This brings the current size of the Board of Directors to nine. At
the annual meeting of the shareholders of the Company in 2003, Mr. Breeden will
be entitled to designate another director of the Company for a three-year term
bringing the size of the Board of Directors to ten. As such, after the 2003
annual meeting, Messrs. Breeden and Ramsey and Mr. Breeden's designee will hold
three of the ten Board seats, or approximately 30% of the Board.
OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE STOCK ISSUANCE.
Your vote is important, regardless of the number of shares you own.
Please vote as soon as possible to make sure that your shares are represented at
the Special Meeting. To vote your shares, please complete and return the
enclosed proxy card. You may also cast your vote in person at the Special
Meeting.
Very truly yours,
/s/ Steven R. Abel /s/ Lawrence T. Toombs
Steven R. Abel Lawrence T. Toombs
Chairman of the Board President
BLUE RIVER BANCSHARES, INC.
29 EAST WASHINGTON STREET
SHELBYVILLE, INDIANA 46176
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD _______________ ____, 2002
To the Shareholders of Blue River Bancshares, Inc.:
A special meeting of shareholders (the "Special Meeting") of Blue River
Bancshares, Inc. (the "Company") will be held on ______________, _____________
___, 2002, at ___:__ a.m., local time, at Shelby County Bank, 29 East Washington
Street, Shelbyville, Indiana, for the following purposes:
1. To consider and vote upon a proposal to approve the issuance of up
to 546,348 shares of our common stock in a private placement for $4.73 per
share; and
2. To transact such other business as may properly come before the
Special Meeting and any adjournment or postponement thereof.
The foregoing items of business are more fully described in the proxy
statement accompanying this notice.
Our Board of Directors has fixed the close of business on _____________
__, 2002 as the record date for determining the shareholders entitled to notice
of and to vote at the Special Meeting and at any adjournment or postponement
thereof.
By Order of the Board of Directors,
D. Warren Robison
Secretary
Shelbyville, Indiana
_________ __, 2002
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF PROPOSAL 1.
ALL OF OUR SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE SPECIAL MEETING IN
PERSON. HOWEVER, WHETHER OR NOT YOU EXPECT TO ATTEND THE SPECIAL MEETING IN
PERSON, YOU ARE URGED TO MARK, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD AS
PROMPTLY AS POSSIBLE IN THE POSTAGE-PREPAID ENVELOPE PROVIDED TO ENSURE YOUR
REPRESENTATION AND THE PRESENCE OF A QUORUM AT THE SPECIAL MEETING. IF YOU SEND
IN YOUR PROXY CARD AND THEN DECIDE TO ATTEND THE SPECIAL MEETING TO VOTE YOUR
SHARES IN PERSON, YOU MAY STILL DO SO. YOUR PROXY IS REVOCABLE BY COMPLYING WITH
THE PROCEDURES SET FORTH IN THE ATTACHED PROXY STATEMENT.
BLUE RIVER BANCSHARES, INC.
29 EAST WASHINGTON STREET
SHELBYVILLE, INDIANA 46176
PROXY STATEMENT
FOR SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD _______________ __, 2002
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors
(the "Board of Directors") of Blue River Bancshares, Inc., an Indiana
corporation (the "Company"), for use at the special meeting of shareholders to
be held on _______________, ______________ ____, 2002, at _____ a.m., local time
(the "Special Meeting"), or at any adjournment or postponement thereof, for the
purposes set forth herein and in the accompanying Notice of Special Meeting. The
Special Meeting will be held at Shelby County Bank, 29 East Washington Street,
Shelbyville, Indiana. The Company intends to mail this proxy statement and the
enclosed proxy card, on or about ______________ ___, 2002, to all shareholders
entitled to vote at the Special Meeting.
SOLICITATION
The solicitation of proxies will be conducted by mail, and we will bear
all attendant costs. These costs will include the expense of preparing and
mailing to our shareholders proxy solicitation materials for the Special Meeting
and reimbursements paid to brokerage firms and others for their expenses
incurred in forwarding solicitation materials regarding the Special Meeting to
beneficial owners of our common stock. In addition, we may conduct further
solicitation personally, telephonically, by facsimile or via electronic mail
through our officers, directors and employees, none of whom will receive
additional compensation for assisting with the solicitation.
RECORD DATE; VOTING SECURITIES
The close of business on ______________ ___, 2002, has been fixed as
the record date (the "Record Date") for determining the holders of shares of our
common stock entitled to notice of and to vote at the Special Meeting. At the
close of business on the Record Date, we had __________ shares of common stock
outstanding.
VOTING RIGHTS
Each outstanding share of common stock on the Record Date is entitled
to one vote on all matters to be voted upon at the Special Meeting, except for
shares issued in a recent private placement. See "Proposal 1 - Vote Required."
Votes cast by proxy or in person at the Special Meeting will be tabulated by the
Company. The Company also will determine whether a quorum is present. Under our
Bylaws, the holders of a majority of the stock outstanding and entitled to vote
at the Special Meeting, present in person or by proxy, shall constitute a quorum
with respect to the Special Meeting.
1
If an executed proxy is returned and the shareholder has abstained from
voting on any matter, the shares represented by such proxy will be considered
present at the meeting for purposes of determining a quorum and for purposes of
calculating the vote, but it will not be considered to have been voted in favor
of such matter. If an executed proxy is returned by a broker holding shares in
"street name" indicating that the broker does not have discretionary authority
as to certain shares to vote on one or more matters, such shares will be
considered present at the meeting for purposes of determining a quorum, but will
not be considered to be represented at the meeting for purposes of calculating
the vote with respect to such matters.
The proposal presented at the Special Meeting will be approved if a
majority of the shares of common stock present in person or represented by proxy
vote for the proposal. Broker nonvotes are not counted as votes for or against
the proposal. Abstentions are counted in determining the total number of votes
cast on a proposal. An abstention has the effect of a negative vote.
Under rules adopted by the Nasdaq Marketplace Rules, the "Initial
Investors" named in Proposal 1, will not be entitled to vote at the Special
Meeting the shares of common stock acquired by them in the First Closing.
REVOCABILITY OF PROXIES
Any proxy may be revoked by the person giving it at any time before its
use by:
- delivering to the Secretary of the Company, a written notice of
revocation;
- duly executing and delivering to the Company a proxy bearing
a later date; or
- attending the Special Meeting and voting in person.
Attendance at the Special Meeting will not, by itself, revoke a proxy.
2
PROPOSAL 1
APPROVAL FOR PURPOSES OF THE NATIONAL ASSOCIATION OF SECURITIES
DEALERS, INC. RULE 4350(I) OF THE ISSUANCE OF THE COMPANY'S COMMON STOCK
IN CONNECTION WITH THE COMPANY'S PRIVATE PLACEMENT AS DESCRIBED IN
THIS PROPOSAL 1
INTRODUCTION
At this Special Meeting, our shareholders are being asked to consider
and approve one proposal: the issuance of common stock in connection with a
private placement which is described below. This Special Meeting is being held
because of certain shareholder approval requirements of The Nasdaq Stock Market,
also described below.
PROPOSED PRIVATE PLACEMENT
General Terms. We are seeking your approval to issue shares of common
stock to Russell Breeden, III, Wayne C. Ramsey and L. Gene Tanner (collectively,
the "Initial Investors") and certain accredited investors (together with the
Initial Investors, the "Additional Investors") at a purchase price of $4.73 per
share (the "Second Closing"). The proposed purchase price of $4.73 per share is
below book value per share and was below the market value of our common stock
the day before we announced the transaction. The proposed purchase price is
above the market value of our shares of common stock as of a recent date ($4.49
per share as of November 22, 2002). The aggregate number of shares of common
stock to be issued in connection with the Second Closing to the Additional
Investors will be 546,348, or approximately 22.7% of the issued and outstanding
stock following the Second Closing. The Second Closing is the second phase of a
two-phased private placement which is governed by a stock purchase agreement
(the "Purchase Agreement") that the Company entered into on June 7, 2002 with
the Initial Investors. The first phase of the private placement occurred on
September 17, 2002. On that date, we sold an aggregate of 309,889 shares of our
common stock to the Initial Investors (the "First Closing").
Reasons for the Private Placement. The Company lost $1,276,000 in 2001
and $3,132,886 for the nine months ended September 30, 2002, $2,429,081 of which
was primarily attributable to the change in accounting principle related to
goodwill impairment. It is currently designated by the Office of Thrift
Supervision to be in "troubled condition." At its current capital levels, it is
not expected to grow or become profitable in the near term. The Company believes
that the additional capital to be received by the Company in the private
placement would permit it to grow and become profitable much sooner than it
otherwise would. See "Purpose and Background of the First Closing and the
Proposed Private Placement and Other Related Matters."
Board Representation. In connection with the First Closing, Russell
Breeden, III and Wayne C. Ramsey were added to the Board of Directors of the
Company for terms ending in 2003 and 2005, respectively. This brings the current
size of the Board of Directors to nine. At the annual meeting of the
shareholders of the Company in 2003, Mr. Breeden will be entitled to designate
another director of the Company for a three-year term bringing the size of the
Board of Directors to ten. Mr. Breeden also was added to the Board of Directors
of Shelby County Bank (the "Bank") for a term ending in 2003. After the 2003
annual meeting of shareholders (assuming Mr. Breeden and his designee are
re-elected), Messrs Breeden and Ramsey and Mr. Breeden's designee will hold
three of the Company's ten Board seats, or approximately 30% of the Board. Most
actions by the Board require at least a majority of the Board's approval;
however, these three directors, assuming they would vote similarly, would only
need another three directors to vote similarly in order to have control over
matters submitted to the Board.
3
Use of Proceeds. The gross proceeds to be received in connection with
the Second Closing will be approximately $2,584,000, assuming that we sell
546,348 shares of common stock, and the net proceeds will be approximately
$2,509,000. We intend to use the net proceeds from the Second Closing for
working capital and for such other general corporate purposes as our Board of
Directors may determine from time to time, including investments in other
financial institutions approved by our Board of Directors. There are currently
no plans or discussions relating to such investments and there can be no
assurances that such investments will ever be made. See "Proposal 1 - Effects
and Risks of Shareholder Approval". The net proceeds from the Second Closing
will be initially invested in investment securities.
Subscribers. In the Second Closing, we intend to sell shares of common
stock only to investors who are "accredited investors" under Rule 501 of
Regulation D promulgated by the SEC under the Securities Act of 1933, as amended
(the "Securities Act"). It is currently contemplated that the Second Closing
will occur five days after the shareholders of the Company approve Proposal 1.
EFFECT AND RISKS OF SHAREHOLDER APPROVAL
We intend to issue 546,348 shares of our common stock to the Additional
Investors at the Second Closing. Together with the 309,889 shares of our common
stock which were issued in connection with the First Closing and shares that
were previously owned by the Additional Investors, the Additional Investors
would collectively own approximately 925,337 shares of our common stock, or
approximately 38.5% of the issued and outstanding shares following the Second
Closing. Shareholders should consider the following factors which may affect
them, as well as the other information contained in this proxy statement, in
evaluating the proposal to approve the Second Closing.
Possible Effect on Market Price. Sales by the investors of a
substantial number of shares of our common stock in the public market, or the
perception that such sales might occur, could have a material adverse effect on
the price of our common stock. Such sales, however, are prohibited under the
securities laws for one year following the purchase of the shares, absent an
exemption from, or registration under, the Securities Act. If the price of our
common stock were to decrease, we may be unable to maintain the minimum bid
price required for our shares to comply with minimum listing requirements of
Nasdaq and our common stock could be delisted from Nasdaq.
Shareholders Will Experience Immediate Dilution of $0.31 Book Value Per
Share. The Second Closing will have a dilutive effect on our book value per
share. As of September 30, 2002, the Company had a book value of approximately
$6.02 per share of common stock. Book value per share is equal to our total
assets minus total liabilities divided by the number of shares of common stock
outstanding. If the Second Closing is approved and completed, there will be an
increase in the number of shares issued and outstanding which will cause the
book value to decrease to $5.71 per share.
Shareholders Will Experience Substantial Dilution of Voting Power. If
the Second Closing is approved, you will experience a substantial dilution of
your voting power. If a shareholder owned 1% of the issued and outstanding
shares of the Company the day before the Second Closing, that shareholder would
only own .77% of the issued and outstanding shares of the Company after the
Second Closing. However, the Company intends to conduct a rights offering which
may permit participating shareholders to maintain their percentage of ownership
as of the date prior to the First Closing. See "Purpose and Background of the
First Closing and the Proposed Private Placement and Other Related
Matters - Rights Offering".
Our Future Earnings Per Share May Be Diluted. If the Second Closing is
approved and is completed, there will be 546,348 shares issued by the Company.
The increase in the number of shares issued and outstanding may cause any of our
future earnings per share to decrease.
4
Initial Investors Will Be Significant Shareholders. Upon the completion
of the Second Closing, the Initial Investors will beneficially own an aggregate
of approximately 25.2% of our issued and outstanding common stock following the
Second Closing and will be among our largest shareholders. As significant
shareholders, the Initial Investors may be able to influence matters submitted
to our shareholders for a vote.
Change of Control. Together with the 309,889 shares of our common stock
which were issued in connection with the First Closing and shares that were
previously owned by the Additional Investors, the Additional Investors would
collectively own approximately 925,337 shares of our common stock, or
approximately 38.5% of the issued and outstanding shares following the Second
Closing. Most actions submitted to shareholders require at least a majority of
the shareholders' approval; however, if the Additional Investors voted
similarly, they would only need approximately 12% of the issued and outstanding
shares to vote in the same manner in order to have control over matters
submitted to the shareholders.
Discretion in Use of Proceeds. The Second Closing is intended to raise
funds primarily for working capital. While management currently has no
definitive plans, if opportunities arise, some of the proceeds of the offering
may also be used by the Company or the Bank to finance acquisitions of, or
invest in, other financial institutions, or of branches of other institutions,
or to finance expansion into other lines of business closely related to banking.
See "Proposal One -- Use of Proceeds." Our acquisition of other financial
institutions is subject to certain risks that could adversely affect our
financial condition and profitability. These risks may include, among others,
incorrectly assessing the financial institution's financial condition and future
earnings potential or encountering difficulty in implementing our business
strategy for the acquired financial institution.
EFFECT OF FAILURE TO OBTAIN SHAREHOLDER APPROVAL
Our Board of Directors has determined that the Second Closing will be
in our best interest and in the best interest of our shareholders because
receipt of the proceeds from the Second Closing will enable us to infuse
additional capital into the Company and, if necessary, the Bank. During 2001,
our net losses were $2,176,000 and for the nine months ended September 30, 2002,
we had net losses of $3,132,886, $2,429,081 of which was primarily attributable
to the change in accounting principle related to goodwill impairment. We are
deemed in "troubled condition" by the Office of Thrift Supervision. Our current
capital levels impeded our ability to grow and become profitable. We intend to
use the capital to be raised at the Second Closing to grow the Company,
including investments in other financial institutions, and provide, if needed,
additional support for the Bank's operating and capital needs. In addition, if
we are unable to obtain shareholder approval of this Proposal 1, we will be
unable to complete the Second Closing and would have to pursue other financial
and operational alternatives in order to raise more capital to achieve these
objectives. If we cannot raise additional funds by completing the Second
Closing, we will be forced to look for sources of alternative capital which,
even if available, may be on terms substantially less favorable to us.
If we are unsuccessful in obtaining additional capital, or if the terms
of such financing are onerous, it could cause us to, among other things:
- be subject to further OTS restrictions;
- grow minimally in the foreseeable future; and
- delay our efforts to reach profitability.
5
Furthermore, if we are unsuccessful in obtaining additional financing,
or if the terms of such financing are onerous, we may be unable to maintain the
minimum bid price required for our shares to comply with the minimum listing
requirements of Nasdaq and our common stock could be delisted from Nasdaq.
DISSENTERS' RIGHTS
Under Indiana law, shareholders are not entitled to dissenters' rights
with respect to the transactions contemplated by this Proposal 1.
VOTE REQUIRED
Under the Nasdaq Approval Rules, the minimum vote which will constitute
shareholder approval of this Proposal 1 is the affirmative vote of a majority of
the total votes present in person or represented by proxy at the Special
Meeting.
Any shares issued in the First Closing must be excluded from the vote
on Proposal 1 because of the Nasdaq Approval Rules.
WHY WE ARE SEEKING SHAREHOLDER APPROVAL
Our common stock is listed on The Nasdaq Small Cap Market ("Nasdaq").
Each issuer listed on Nasdaq must comply with Nasdaq's Marketplace Rules to
obtain listing and continue listing of the issuer's securities. Nasdaq
Marketplace Rule 4350(i) requires Nasdaq issuers, such as us, to obtain the
approval of its shareholders before certain events occur.
Two of the events that require shareholder approval because of Rule
4350(i) are as follows and are referred to as the "Nasdaq Approval Rules":
- In connection with a transaction other than a public offering
involving the sale, issuance or potential issuance by the company
of common stock (or securities convertible into or exercisable
for common stock) equal to 20% or more of the common stock or 20%
or more of the voting power outstanding before the issuance for
less than the greater of book or market value of the stock; and
- When the issuance or potential issuance will result in a change
of control of the issuer.
Because the common stock issued at the First Closing involved the
issuance by the Company of 19.999% of our common stock issued and outstanding on
September 16, 2002 (one day before the First Closing) and because the amount of
common stock proposed to be issued at the Second Closing exceeds .001% (assuming
the First Closing and the Second Closing are viewed as a series of related
transactions) of our common stock issued and outstanding on September 16, 2002,
and the purchase price for the Second Closing is below book value, the Second
Closing is subject to Rule 4350(i) and, therefore, requires the approval of our
shareholders.
Nasdaq has not adopted any rule on what constitutes a "change of
control." Nasdaq has indicated that, generally, it views an issuance of more
than 30% of an issuer's outstanding voting securities of shares as a change of
control. We have only one class of voting securities issued and outstanding --
our common stock. If all 546,348 shares of common stock are issued at the Second
Closing, those shares would represent approximately 22.7% of the Company's
common stock issued and outstanding after the
6
Second Closing. However, the shares issued in the First and Second Closings
together would constitute 35.6% (this percentage does not reflect the shares
owned by the Additional Investors before the First and Second Closings)of our
outstanding shares following the Second Closing which could constitute a change
of control requiring the approval of our shareholders under the Nasdaq Approval
Rules.
BOARD RECOMMENDATION
The Board of Directors of the Company has carefully considered the
proposed private placement and recommends that the shareholders of the Company
vote "FOR" approval of Proposal 1. Messrs. Breeden and Ramsey have abstained
from this recommendation because of their interest in the First Closing and in
the Second Closing.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF PROPOSAL 1.
7
PURPOSE AND BACKGROUND OF THE
FIRST CLOSING AND THE PROPOSED PRIVATE PLACEMENT
AND OTHER RELATED MATTERS
On July 10, 2000 the Office of Thrift Supervision (the "OTS") issued a
letter which formally designated the Bank to be in "troubled condition" based
upon the preliminary findings of the OTS' then ongoing examination of the Bank.
The OTS expressed supervisory concern relating to the Bank's management,
operating losses, interest rate risk sensitivity, internal controls and loan
documentation. Under the letter, the Bank is subject to the following
restrictions:
- no increase in total assets during any quarter in excess of an
amount equal to interest credited on deposits during the quarter
without prior written approval of the OTS;
- prior OTS approval of all executive compensation and agreements
and the hiring of any executive officer, director or consultant
or changing the responsibilities of any current executive
officer;
- prior notice to the OTS of all transactions between the Bank
and its affiliates;
- prior OTS approval of all transactions between the Bank and
third parties outside the normal course of business; and
- no golden parachute payments by the Bank, unless permissible
under applicable law.
On February 7, 2001 the OTS issued a letter which formally designated
the Company to be in "troubled condition" because of the results of the March
13, 2000 examination. This letter places restrictions on the Company to notify
the OTS at least 30 days prior to adding or replacing of members of the Board of
Directors, or employing or changing responsibilities of senior executive
officers. The letter also prohibits golden parachute payments unless such
payments are permitted by regulation.
On April 5, 2001, the OTS notified the Bank in writing that the
business plan and budget submitted by the Bank had been approved. Although the
Bank is no longer subject to the growth restrictions previously imposed by the
OTS, the Bank may not make any significant changes to its business plan and
budget without prior approval of the OTS. The Bank's business plan and budget
contemplates minimal growth in the foreseeable future. However, there can be no
assurances that the Bank will grow. In fact, depending on business conditions,
including available capital, the Bank's size may decrease.
Our business plan provides that we desire to maintain the Bank at a
"well-capitalized" level. We have accomplished this in part by reducing the size
of the Bank and limiting the number and size of our commercial lending. Although
the Bank has maintained its "well-capitalized" level, the impact has been to
restrict the Bank's ability to grow. Since 2001, in order to provide for the
future growth of the Bank, our Board of Directors has discussed raising
additional capital and has considered various options. Without additional
capital, additional earning assets could not be acquired to maintain a
"well-capitalized" institution. Although raising additional capital would have a
dilutive effect on our shareholders, the Board of Directors believes that this
capital is critical to the long-term growth and success of the Bank and the
Company.
8
Our Board of Directors has met to discuss various ways to raise capital
through equity offerings, both through public and private issuances, trust
preferred offerings and additional debt. The other alternatives to raise capital
were not as attractive as the private placements. The public issuance of shares
would require additional costs associated with an underwriter's commission and
related expenses. Further, the success of a public sale was not as viable as a
purchase agreement with the Initial Investors. We viewed the trust preferred
offerings as not attractive because of the Bank's current inability to pay
dividends to the Company in order to support the distributions associated with
the trust preferred offering. For similar reasons we viewed debt financing as
not attractive.
We also considered strategic options for increasing shareholder value,
including potential business combinations with other institutions. We believed
that due to our recent losses and our high level of non-performing loans that a
business combination was not practicable. Further, we believe that any such
combination would eliminate our desire for operating as an independent community
bank.
During the fourth quarter of 2001, after learning of the declining
capital position of the Bank through our public announcements, the Initial
Investors contacted the Company about a possible equity investment. Our
management indicated that the proposed structure and terms of the transaction
were not attractive because the Initial Investors would purchase shares in the
market and not from the Company which would not allow us to increase the capital
of the Bank. Further, the Initial Investors requested changes to the composition
of the Board of Directors.
Our management met again with Mr. Breeden in January 2002, and believed
that it was appropriate for the Board of Directors to meet with Mr. Breeden.
This meeting took place in February 2002. This meeting focused on Mr. Breeden's
prior experience with financial institutions. Mr. Breeden explained that he
previously served as President and Vice Chairman of Harrington Bank, a $450
million thrift located in Richmond, Indiana. In addition, he previously served
as the Chairman and Chief Executive Officer of Community First Financial Group,
Inc., a $400 million multi-bank holding company with two banks located in
Indiana and one in California. Mr. Breeden also spent 20 years, from 1973 to
1993, with Raffensperger, Hughes and Co., Inc., an investment banking firm
located in Indianapolis, Indiana. He served as its President and Chief Executive
Officer during the last three years of his tenure with that firm.
Following this meeting, the Company informed Mr. Breeden of its
interest in continuing discussions with him and entered into a confidentiality
agreement in order to continue discussions and provide confidential information
to Mr. Breeden.
On April 18, 2002, Mr. Breeden presented to the Company a non-binding
letter of intent regarding structures for possible equity investments in the
Company. The letter indicated that further due diligence would be required
before any definitive agreement could be reached.
On April 23, 2002, our Board of Directors held a meeting and concluded
that additional negotiations were necessary. These negotiations related to the
composition of the Board of Directors and registration rights for the shares
purchased in the private placement. Following these additional negotiations, we
received a revised letter of intent on April 25, 2002.
On May 31, 2002, our Board of Directors met to consider a draft of the
stock purchase agreement submitted by the Initial Investors. The directors
reviewed outstanding issues relating to the stock issuance negotiations and the
related documents. The directors thoroughly discussed, together with outside
legal counsel, the proposed terms of the stock issuance, drafts of the necessary
documentation and the proceedings necessary to implement it. The directors
authorized our management to proceed towards
9
finalizing the stock purchase agreement. The negotiations relating to the stock
purchase agreement focused on:
- Whether the shares to be issued to the persons identified by the
Initial Investors would be a registered under the Securities Act
of 1933. The Purchase Agreement provides that these shares will
not be registered under the Act.
- Whether actions by the Company or the Bank outside of the
ordinary course would require the prior approval of Mr. Breeden.
The Purchase Agreement provides that the Company will consult
with Mr. Breeden prior to taking action outside of the ordinary
course.
- The payment by the Company of the Initial Investors' expenses.
The Purchase Agreement provides that the Company will pay up to
$50,000 of the Initial Investors' expenses.
- The ability for the Company to engage in negotiations or
discussions regarding acquisition proposals in the event the
Board of Directors of the Company determines that the failure to
engage in such negotiations or discussions would constitute a
breach of the directors' fiduciary duties. The Purchase Agreement
provides for this ability.
On June 5, 2002, our Board of Directors met to consider a revised draft
of the stock purchase agreement. After discussion of the agreement, the
directors decided to review the agreement further and ultimately approved the
agreement on June 7, 2002. On June 7, 2002, the Company and the Initial
Investors entered into a stock purchase agreement, and we publicly announced the
agreement for the stock issuance and related transactions.
The Initial Investors filed a Notice of Change of Control with the OTS.
On September 10, 2002, the OTS notified the Initial Investors that it did not
intend to disapprove the proposed acquisition of stock by the Initial Investors
and any individuals of high net worth identified by the Initial Investors in an
amount totaling 856,237 additional shares of newly issued common stock at a
purchase price of $4.73 per share.
On September 17, 2002, the Initial Investors completed their purchase
of 309,889 shares of common stock of the Company, comprising approximately
19.999% of the Company's issued and outstanding shares of common stock on
September 16, 2002, from the Company.
Prior to the date of this Proxy Statement, the Additional Investors
executed subscription agreements to purchase an aggregate of 546,348 of shares
of common stock of the Company at $4.73 per share for a total purchase price of
approximately $2,584,000. This price was negotiated by the Company and the
Initial Investors. This price is greater than the current market price per share
of common stock of the Company, but less than the current book value per share
of common stock of the Company. At the time the Company entered into the
Purchase Agreement, the price per share to be paid by the Initial Investors and
the Additional Investors was below the market price and book value per share.
Messrs. Breeden and Ramsey, directors of the Company, have agreed to purchase
176,300 and 67,200 shares of our common stock, respectively. Mr. Tanner also has
agreed to purchase 32,600 shares of our common stock. The subscription
agreements are contingent upon and subject to approval of this Proposal 1 by the
shareholders of the Company.
10
PRIOR PRIVATE PLACEMENT
Use of Proceeds. The gross proceeds received in connection with the
First Closing were approximately $1,464,000 and the net proceeds were
approximately $1,400,000. The Company contributed as capital approximately
$1,350,000 of the net proceeds to the Bank. The Bank intends to use this
contribution for working capital and for such other general corporate purposes
as its Board of Directors may determine from time to time. This contribution
increases the Bank's capital ratios and will enable it make additional loans
including commercial loans. Under the Purchase Agreement, the Company has agreed
to pay legal and accounting expenses and OTS filing fees of up to $50,000 on
behalf of the Initial Investors.
Restrictions on Transfer. During a one year period following the First
Closing, the Initial Investors have agreed that they will not offer, sell,
transfer or otherwise dispose of any or all of the shares of common stock
received under the Purchase Agreement without a written opinion of counsel
satisfactory to the Company that such disposition is exempt from the
registration requirements of the Securities Act, or unless an effective
registration statement under the Securities Act covering these securities
exists.
RIGHTS OFFERING
The Purchase Agreement contemplates that the Company will conduct a
rights offering following the Second Closing to its shareholders as of the date
prior to the First Closing, in the amount of 555,555 shares of common stock at
$4.50 per share. Each subscription right will entitle the shareholder to
purchase .3584 shares of common stock at the subscription price. The
shareholders who exercise their rights in full would also be able to subscribe,
at the subscription price, for shares that other right holders decline to
purchase, which may permit them to maintain a percentage interest in the Company
equal to their percentage interest prior to the First Closing.
11
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Company's common stock as of October 6, 2002 by (i) each person
known by the Company to be the beneficial owner of more than five percent of the
outstanding shares of the Company's common stock; (ii) each of the Company's
directors and the executive officers that would need to be named in the
"Executive Compensation - Summary Compensation Table" as required by the rules
and regulations of the SEC; (iii) all current directors and executive officers
as a group; and (iv) the Additional Investors as a group.
NUMBER OF PERCENTAGE OF NUMBER OF PERCENTAGE OF
SHARES OUTSTANDING SHARES OWNED OUTSTANDING
OWNED BEFORE SHARES OWNED AFTER THE SHARES OWNED
THE SECOND RIGHT TO BEFORE THE SECOND AFTER THE
NAME CLOSING(1) ACQUIRE(2) SECOND CLOSING(3) CLOSING(1) SECOND CLOSING(3)
- -----------------------------------------------------------------------------------------------------------------
Steven R. Abel(4) 16,823 27,400 2.3% 16,823 1.8%
- -----------------------------------------------------------------------------------------------------------------
Lawrence T. Toombs(5) 20,934 19,000 2.1% 20,934 1.6%
- -----------------------------------------------------------------------------------------------------------------
Wendell L. Bernard(6) 10,500 2,400 0.7% 10,500 .5%
- -----------------------------------------------------------------------------------------------------------------
Russell Breeden, III (7) (8) 263,371 0 14.2% 439,671 18.3%
- -----------------------------------------------------------------------------------------------------------------
Peter G. DePrez 13,500 600 0.8% 13,500 .6%
- -----------------------------------------------------------------------------------------------------------------
Wayne C. Ramsey (7)(9) 42,812 0 2.3% 110,012 4.6%
- -----------------------------------------------------------------------------------------------------------------
D. Warren Robison(10) 11,852 27,400 2.1% 11,852 1.6%
- -----------------------------------------------------------------------------------------------------------------
L. Gene Tanner (7) (11) 25,206 0 1.4% 57,806 2.4%
- -----------------------------------------------------------------------------------------------------------------
Ralph W. Van Natta(12) 1,116 2,400 0.2% 1,116 .2%
- -----------------------------------------------------------------------------------------------------------------
Michael J. Vaught 4,000 450 0.2% 4,000 .2%
- -----------------------------------------------------------------------------------------------------------------
Randy Collier 0 3,500 0.2% 0 .2%
- -----------------------------------------------------------------------------------------------------------------
Directors and Executive
Officers as a group (11
persons including those
listed above) 385,906 84,150 24.2% 629,406 28.7%
- -----------------------------------------------------------------------------------------------------------------
Additional Investors as a group 378,989 0 20.4% 925,337 38.5%
- -----------------------------------------------------------------------------------------------------------------
12
(1) Includes shares for which the named person:
- has sole voting and investment power; or
- has shared voting and investment power with a spouse.
Excludes shares that:
- are restricted stock holdings; or
- may be acquired through stock option exercises.
(2) Shares that can be acquired by executive officers and directors through
stock options exercisable within sixty days of the date of this proxy
statement.
(3) Percentage calculated by combining the number of shares owned with the
number of shares that can be acquired divided by the number of shares
outstanding plus the number of shares listed under the column "Right to
Acquire" by such person's name.
(4) Mr. Abel holds 1,000 shares jointly with his spouse. Mr. Abel's spouse
holds 5,198 shares individually.
(5) Mr. Toombs holds 11,800 shares jointly with his spouse.
(6) Mr. Bernard holds 4,500 shares jointly with his spouse. Mr. Bernard holds
6,000 shares in the name of Bernard Realty Inc.
(7) Based solely on information provided by such person in a Schedule 13D
filed with the Securities and Exchange Commission on October 18, 2002.
Included as reporting persons in the filing are Russell Breeden, III,
Wayne C. Ramsey and L. Gene Tanner. The reporting persons have sole power
to vote and dispose of an aggregate of 331,389 shares.
(8) Mr. Breeden's business address is 20 North Meridian Street, Suite 800A,
Indianapolis, IN 46204. Mr. Breeden has agreed to purchase 176,300 shares
of our common stock if the Second Closing is approved. Mr. Breeden was
selected as a director under the Purchase Agreement. See "Proposal 1 --
Prior Private Placement."
(9) Mr. Ramsey's business address is LYNCH & Associates, 10644 Newburgh Road,
Newburgh, IN 47630. Mr. Ramsey has agreed to purchase 67,200 shares of our
common stock if the Second Closing is approved. Mr. Ramsey was selected as
a director under the Purchase Agreement. See "Proposal 1 - Prior Private
Placement."
(10) Mr. Robison holds 4,160 shares jointly with his spouse. Mr. Robison's
spouse holds 2,101 shares individually.
(11) Mr. Tanner's business address is NatCity Investments, 251 North Illinois
Street, Indianapolis, Indiana 46204. Mr. Tanner has agreed to purchase
32,600 shares of our common stock if the Second Closing is approved.
(12) Mr. Van Natta holds 697 shares jointly with his spouse.
MARKET FOR COMMON EQUITY
The following table sets forth the high and low sale prices for our
common stock for the quarters during the years indicated, as reported by Nasdaq.
Such prices reflect inter-dealer prices, without retail mark-up, markdown or
commission, and may not necessarily represent actual transactions.
2002 2001 2000 1999
---- ---- ---- ----
HIGH LOW HIGH LOW HIGH LOW HIGH LOW
---- --- ---- --- ---- --- ---- ---
1st Quarter $5.50 $4.15 $4.25 $3.06 $5.13 $3.94 $9.00 $7.00
2nd Quarter 5.23 4.40 4.85 3.43 4.63 3.50 7.88 6.50
3rd Quarter 4.91 4.25 4.70 3.31 4.75 3.56 7.00 4.50
4th Quarter 4.90 4.25 4.65 3.45 4.25 2.13 6.00 3.50
(through 11/22/02)
13
On November 22, 2002, our common stock closed at $4.49 per share.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS FOR ANNUAL MEETING
Proposals of shareholders intended to be presented at our next annual
meeting must be received by us no later than November 30, 2002 in order to be
considered for inclusion in our proxy materials and form of proxy for that
meeting. If the Company does not receive notice of any other matter that a
shareholder wishes to raise at the annual meeting in 2003 by 120 days prior to
the meeting and a matter is raised at that meeting, the proxies will have
discretionary authority to vote on the matter. All proposals and notifications
should be addressed to the Secretary. If a shareholder raises a matter at the
meeting that requires a shareholder vote, the person to whom you have given your
proxy will use his or her discretion to vote on the matter on your behalf.
OTHER MATTERS
Our Board of Directors knows of no other business that will be
presented to the Special Meeting. If any other business is properly brought
before the Special Meeting, proxies in the enclosed form will be voted in
respect thereof as the proxy holders deem advisable.
It is important that the proxies be returned promptly and that your
shares be represented. Shareholders are urged to mark, date, execute and
promptly return the accompanying proxy card in the enclosed envelope.
14
BLUE RIVER BANCSHARES, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR SPECIAL MEETING ON ___________ __, 2002
The undersigned shareholder of Blue River Bancshares, Inc. (the
"Company") acknowledges receipt of Notice of the Special Meeting of Shareholders
and Proxy Statement, each dated ________________ __, 2002, and the undersigned
revokes all prior proxies and appoints _____________ and ___________, or each of
them, as proxies for the undersigned, each with the power of substitution or
resubstitution, to vote all shares of common stock of the Company which the
undersigned would be entitled to vote at the Special Meeting of Shareholders to
be held at Shelby County Bank, 29 East Washington Street, Shelbyville, Indiana
at ____ a.m., local time on ___________ __, 2002, and any postponement or
adjournment thereof, and instructs said proxies to vote as follows:
1. To approve the issuance of up to 546,348 shares of our common stock
in a private placement for $4.73 per share.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. In their discretion, the proxies are authorized to vote upon such
other business as may properly come before the meeting.
PLEASE SIGN ON REVERSE SIDE
- ------------------------------------------------------------------------------
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE SPECIFICATIONS MADE. IF NO
SPECIFICATIONS ARE MADE, THIS PROXY WILL BE VOTED FOR PROPOSAL 1. ON ANY OTHER
MATTERS THAT MAY PROPERLY COME BEFORE THE SPECIAL MEETING, THIS PROXY WILL BE
VOTED IN ACCORDANCE WITH THE BEST JUDGMENT OF THE PROXIES. THIS PROXY MAY BE
REVOKED AT ANY TIME PRIOR TO ITS EXERCISE.
Dated this ____ day of __________, 2002
_______________________________________
(Signature of Shareholder)
_______________________________________
(Signature of Shareholder)
Please sign exactly as your name or
names appears on your stock certificate.
When signing as attorney, executor,
administrator, trustee or guardian,
please give full title as such. If
shares are held jointly, each holder
must sign.
PLEASE MARK, SIGN, DATE AND MAIL THIS PROXY CARD PROMPTLY, USING THE
ENCLOSED ENVELOPE.
15