EXHIBIT 99.2
PROXY STATEMENT AND FORM OF PROXY TO BE
FURNISHED TO THE ASSOCIATION'S
ACCOUNT HOLDERS
FORM OF PROXY
REVOCABLE PROXY
WYMAN PARK FEDERAL SAVINGS & LOAN ASSOCIATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF WYMAN PARK FEDERAL SAVINGS & LOAN ASSOCIATION
The undersigned member of Wyman Park Federal Savings & Loan Association
(the "Association") hereby appoints the Board of Directors of the Association as
proxies to cast all votes which the undersigned member is entitled to cast at a
Special Meeting of Members to be held at the main office of the Association,
located at 11 West Ridgely Road, Lutherville, Maryland, at the hour and date
stated in the Proxy Statement, and at any and all adjournments and postponements
thereof, and to act with respect to all votes that the undersigned would be
entitled to cast, if then personally present, in accordance with the
instructions on the reverse side hereof:
to vote FOR or AGAINST the adoption of the Plan of Conversion providing
for the conversion of the Association from a federally chartered mutual savings
association to a federally chartered stock savings association as a wholly owned
subsidiary of Wyman Park Bancorporation, Inc., a newly organized Delaware
corporation formed by the Association for the purpose of becoming the holding
company for the Association, and the related transactions provided for in such
Plan of Conversion, including the adoption of an amended Federal Stock Charter
and Bylaws for the Association, pursuant to the laws of the United States and
the Rules and Regulations administered by the Office of Thrift Supervision.
This proxy will be voted as directed by the undersigned member. UNLESS
CONTRARY DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR ADOPTION OF THE PLAN
OF CONVERSION. In addition, this proxy will be voted at the discretion of the
Board of Directors upon any other matter as may properly come before the Special
Meeting.
The undersigned member may revoke this proxy at any time before it is
voted by delivering to the Secretary of the Association either by a written
revocation of the proxy or a duly executed proxy bearing a later date, or by
appearing at the Special Meeting and voting in person. The undersigned member
hereby acknowledges receipt of the Notice of Special Meeting and Proxy
Statement.
(IMPORTANT: PLEASE VOTE, DATE AND SIGN ON REVERSE SIDE)
WYMAN PARK FEDERAL SAVINGS & LOAN ASSOCIATION
Please Mark Votes Below
Approval of the Plan of Conversion
___ ___
FOR |___| AGAINST |___|
DATE _______________________, 1997
X ________________________________
X ________________________________
IMPORTANT: Please sign your name
name exactly as it appears on this
proxy. Joint accounts need only
one signature. When signing as an
attorney, administrator, agent,
corporation, officer, executor,
trustee or guardian, etc., please
add your full title to your
signature.
NOTE: IF YOU RECEIVE MORE THAN ONE PROXY CARD, PLEASE SIGN AND RETURN ALL
CARDS IN THE ACCOMPANYING ENVELOPE.
WYMAN PARK FEDERAL SAVINGS & LOAN ASSOCIATION
11 West Ridgely Road
Lutherville, Maryland 21903-5172
(410) 252-6450
NOTICE OF SPECIAL MEETING OF MEMBERS
Notice is hereby given that a Special Meeting of Members (the
"Special Meeting") of Wyman Park Federal Savings & Loan Association, ("Wyman
Park" or the "Association"), will be held at the main office of the Association
located at 11 West Ridgely Road, Lutherville, Maryland 21903-5172 on December
__, 1997 at __:__ _a.m., Lutherville, Maryland time. The purpose of this Special
Meeting is to consider and vote upon:
A plan to convert the Association from a federally chartered mutual
savings association to a federally chartered stock savings
association, including the adoption of a federal stock charter and
bylaws, with the concurrent sale of all the Association's common
stock to Wyman Park Bancorporation, Inc., a Delaware corporation
(the "Holding Company"), and sale by the Holding Company of shares
of its common stock; and
such other business as may properly come before the Special Meeting or any
adjournment thereof. Management is not aware of any such other business.
The members who shall be entitled to notice of and to vote at the
Special Meeting and any adjournment thereof are depositors of the Association at
the close of business on _____ __, 1997 who continue to be depositors as of the
date of the Special Meeting. In the event there are not sufficient votes for
approval of the Plan of Conversion at the time of the Special Meeting, the
Special Meeting may be adjourned from time to time in order to permit further
solicitation of proxies.
BY ORDER OF THE BOARD OF DIRECTORS
Allan B. Heaver
Chairman of the Board
Lutherville, Maryland
November __, 1997
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE
FOR APPROVAL OF THE PLAN OF CONVERSION BY COMPLETING THE
ENCLOSED PROXY CARD AND RETURNING IT IN THE ENCLOSED
POSTAGE-PAID ENVELOPE AS SOON AS POSSIBLE.
YOUR VOTE IS VERY IMPORTANT.
----------------------------
SUMMARY OF PROPOSED CONVERSION
This summary does not purport to be complete and is qualified in
its entirety by the more detailed information contained in the remainder of this
Proxy Statement and the accompanying Prospectus.
Under its present "mutual" form of organization, Wyman Park has no
stockholders. Its deposit account holders and certain borrowers are members of
the Association and have voting rights in that capacity. In the unlikely event
of liquidation, the Association's deposit account holders would have the sole
right to receive any assets of the Association remaining after payment of its
liabilities (including the claims of all deposit account holders to the
withdrawal value of their deposits). Under the Plan of Conversion (the "Plan of
Conversion") to be voted on at the Special Meeting, the Association would be
converted into a federally chartered savings association organized in stock
form, and all of the Association's common stock would be sold concurrently to
the Holding Company (the "Conversion"). The Holding Company will offer and sell
its common stock (the "Common Stock") in an offering to, in order of priority,
(i) Wyman Park's depositors as of March 31, 1996 ("Eligible Account Holders"),
(ii) tax-qualified employee plans of Wyman Park and the Holding Company
("Tax-Qualified Employee Plans") including the Holding Company's Employee Stock
Ownership Plan (the "ESOP"), provided, however, that the Tax-Qualified Employee
Plans shall have first priority Subscription Rights to the extent that the total
number of shares of Common Stock sold in the Conversion exceeds the maximum of
the Estimated Valuation Range as defined below, (iii) Wyman Park's depositors as
of September 30, 1997 ("Supplemental Eligible Account Holders"), (iv) depositors
and certain borrowers as of both October 17, 1990 and as of ________, 1997
("Other Members"), and (v) its employees, officers and directors (the
"Subscription Offering").
Concurrent with the Subscription Offering, to the extent the Common
Stock is not all sold to the persons in the foregoing categories, the Holding
Company will offer Common Stock to members of the general public to whom a
prospectus (the "Prospectus") has been delivered, with first preference to
natural persons residing in Baltimore and Anne Arundel Counties, Maryland ("the
Community Offering"). The Subscription Offering and the Community Offering are
referred to collectively as the "Subscription and Community Offerings." Voting
and liquidation rights with respect to the Association would thereafter be held
by the Holding Company, except to the limited extent of the liquidation account
(the "Liquidation Account") that will be established for the benefit of Eligible
and Supplemental Eligible Account Holders of the Association and voting and
liquidation rights in the Holding Company would be held only by those persons
who become stockholders of the Holding Company through purchase of shares of its
Common Stock. See "Description of the Plan of Conversion - Principal Effects of
Conversion - Liquidation Rights of Depositor Members."
THE CONVERSION WILL NOT AFFECT THE BALANCE, INTEREST RATE OR FEDERAL
INSURANCE PROTECTION OF ANY SAVINGS DEPOSIT, AND NO PERSON WILL BE OBLIGATED
TO PURCHASE ANY STOCK IN THE CONVERSION.
Business Purposes
for Conversion Net Conversion proceeds are expected to increase the capital
of Wyman Park, which will support the expansion of its
financial services to the public. The conversion to stock
form and the use of a holding company structure are also
expected to enhance its ability to expand through possible
mergers and acquisitions (although no such transactions are
contemplated at this time) and will facilitate its future
access to the capital markets. The Association will continue
to be subject to comprehensive regulation and examination by
the Office of Thrift Supervision, Department of Treasury
("OTS") and the Federal Deposit Insurance Corporation
("FDIC").
Subscription
Offering As part of the Conversion, Common Stock is being offered for
sale in the Subscription Offering, in the priorities
summarized below, to the Association's (i) Eligible Account
Holders, (ii) Tax-Qualified Employee Plans, (iii)
Supplemental Eligible Account Holders, (iv) Other Members,
and (v) its employees, officers and directors.
i
Subscription Rights
of Eligible
Account Holders Each Eligible Account Holder has been given non-transferable
rights to subscribe for an amount equal to the greater of
$100,000 of Common Stock, one-tenth of one percent of the
total number of shares offered in the Subscription Offering
or 15 times the product (rounded down to the next whole
number) obtained by multiplying the total number of shares
to be issued by a fraction of which the numerator is the
amount of qualifying deposits of such subscriber and the
denominator is the total qualifying deposits of all account
holders in this category on the qualifying date.
Subscription Rights
of Tax-Qualified
Employee Plans The Association's Tax-Qualified Employee Plans have been
given non-transferable rights to subscribe, individually and
in the aggregate, for up to 10% of the total number of
shares sold in the Conversion after satisfaction of
subscriptions of Eligible Account Holders. Notwithstanding
the foregoing, to the extent orders for shares exceed the
maximum of the appraisal range, Tax-Qualified Employee Plans
shall be afforded a first priority to purchase shares sold
above the maximum of the appraisal range. It is anticipated
that Tax-Qualified Employee Plans will purchase 8% of the
Common Stock sold in the Conversion.
Subscription Rights
of Supplemental
Eligible Account
Holders After satisfaction of subscriptions of Eligible Account
Holders and Tax- Qualified Employee Plans, each Supplemental
Eligible Account Holder (other than directors and officers
of the Association) has been given non-transferable rights
to subscribe for an amount equal to the greater of $100,000
of Common Stock, one-tenth of one percent of the total
number of shares offered in the Conversion or 15 times the
product (rounded down to the whole next number) obtained by
multiplying the total number of shares to be issued by a
fraction of which the numerator is the amount of qualifying
deposits of such subscriber and the denominator is the total
qualifying deposits of all account holders in this category
on the qualifying date. The subscription rights of each
Supplemental Eligible Account Holder shall be reduced to the
extent of such person's subscription rights as an Eligible
Account Holder.
Subscription Rights
of Other Members Each Other Member has been given non-transferable rights to
subscribe for an amount equal to the greater of $100,000 of
Common Stock or one-tenth of one percent of the total number
of shares offered in the Conversion after satisfaction of
the subscriptions of the Association's Eligible Account
Holders, Tax-Qualified Employee Plans and Supplemental
Eligible Account Holders.
Subscription Rights
of Association
Personnel Each individual employee, officer and director of the
Association has been given the right to purchase up to
$100,000 of Common Stock after satisfaction of the
subscriptions of Eligible Account Holders, Tax-Qualified
Employee Plans, Supplemental Eligible Account Holders and
Other Members. Total shares subscribed for by the employees,
officers and directors in this category may not exceed 24%
of the total shares offered in the Conversion.
Purchase
Limitations No person (other than a Tax-Qualified Employee Plan) by
himself or herself or with an associate, and no group of
persons acting in concert, may subscribe for or purchase
more than $100,000 of Common Stock offered in the
Conversion. Officers and directors and their associates may
not purchase, in the aggregate, more than 34% of the shares
to be sold in the Conversion. For purposes of the Plan, the
members of the Board of
ii
Directors are not deemed to be acting in concert solely by
reason of their Board membership.
Expiration Date of
the Subscription
Offering All subscriptions for Common Stock must be received by
_:00 _.m., Lutherville, Maryland time on ________ __, 1997.
How to Subscribe
for Shares For information on how to subscribe for Common Stock being
offered in the Conversion, please read the Prospectus and
the order form and instructions accompanying this Proxy
Statement. Subscriptions will not become effective until the
Plan of Conversion has been approved by the Association's
members and all of the Common Stock offered in the
Conversion has been subscribed for or sold in the
Subscription and Community Offerings or through such other
means as may be approved by the OTS.
Price of
Common Stock All sales of Common Stock in the Offering will be made at
the same price per share which is currently expected to be
$10.00 per share on the basis of an independent appraisal of
the pro forma market value of the Association and the
Holding Company upon Conversion. On the basis of a
preliminary appraisal by Ferguson & Company, Inc.
("Ferguson"), which has been reviewed by the OTS, a minimum
of _________ and a maximum of _________ shares will be
offered in the Conversion. See "The Conversion - Stock
Pricing and Number of Shares to be Issued" in the
Prospectus.
Tax Consequences The Association has received an opinion from its special
counsel, Silver, Freedman & Taff, L.L.P., stating that the
Conversion is a nontaxable reorganization under Section
368(a)(1)(F) of the Internal Revenue Code. The Association
has also received an opinion from Wooden & Benson, Chartered
stating that the Conversion will not be a taxable
transaction for Maryland income tax purposes.
Required Vote Approval of the Plan of Conversion will require the
affirmative vote of a majority of all votes eligible to be
cast at the Special Meeting.
YOUR BOARD OF DIRECTORS URGES YOU TO VOTE FOR
THE PLAN OF CONVERSION
iii
WYMAN PARK FEDERAL SAVINGS & LOAN ASSOCIATION
PROXY STATEMENT
SPECIAL MEETING OF MEMBERS TO BE HELD ON ________ __, 1997
PURPOSE OF MEETING
This Proxy Statement is being furnished to you in connection with
the solicitation on behalf of the Board of Directors of Wyman Park Federal
Savings & Loan Association ("Wyman Park Federal" or the "Association") of the
proxies to be voted at the Special Meeting of Members (the "Special Meeting") of
the Association to be held at the Association's main office located at 11 West
Ridgely Road, Lutherville, Maryland, on ________ __, 1997 at __:__ _.m.,
Lutherville, Maryland time, and at any adjournments thereof. The Special Meeting
is being held for the purpose of considering and voting upon a Plan of
Conversion under which the Association would be converted (the "Conversion")
from a federally chartered mutual savings association into a federally chartered
stock savings association, the concurrent sale of all the common stock of the
stock savings association to Wyman Park Bancorporation, Inc. (the "Holding
Company"), a Delaware corporation, and the sale by the Holding Company of shares
of its common stock (the "Common Stock") and such other business as may properly
come before the meeting and any adjournment thereof.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF THE ASSOCIATION RECOMMENDS THAT
YOU VOTE TO APPROVE THE PLAN OF CONVERSION.
The Association is currently organized in "mutual" rather than
"stock" form, meaning that it has no stockholders and no authority under its
federal mutual charter to issue capital stock. The Association's Board of
Directors has adopted the Plan of Conversion providing for the Conversion. The
sale of Common Stock of the Holding Company, which was recently formed to become
the holding company of the Association, will substantially increase the
Association's net worth. The Holding Company will exchange approximately 50% of
the net proceeds from the sale of the Common Stock for the common stock of the
Association to be issued upon Conversion. The Holding Company expects to retain
the balance of the net proceeds as its initial capitalization, a portion of
which the Holding Company intends to lend to its Employee Stock Ownership Plan
to fund its purchase of Common Stock. This increased capital will support the
expansion of the Association's financial services to the public. The Board of
Directors of the Association also believes that the conversion to stock form and
the use of a holding company structure will enhance the Association's ability to
expand through possible mergers and acquisitions (although no such transactions
are contemplated at this time) and will facilitate its future access to the
capital markets.
The Board of Directors of the Association believes that the
Conversion will further benefit the Association by enabling it to attract and
retain key personnel through prudent use of stock-related incentive compensation
and benefit plans.
Voting in favor of the Plan of Conversion will not obligate any
person to purchase any Common Stock.
THE OFFICE OF THRIFT SUPERVISION ("OTS") HAS APPROVED THE PLAN OF
CONVERSION SUBJECT TO THE APPROVAL OF THE ASSOCIATION'S MEMBERS AND THE
SATISFACTION OF CERTAIN OTHER CONDITIONS. HOWEVER, SUCH APPROVAL DOES NOT
CONSTITUTE A RECOMMENDATION OR ENDORSEMENT OF THE PLAN OF CONVERSION BY THE OTS.
INFORMATION RELATING TO VOTING AT THE SPECIAL MEETING
The Board of Directors of the Association has fixed__________ __,
1997 as the voting record date ("Voting Record Date") for the determination of
members entitled to notice of the Special Meeting. All Association depositors
and certain borrowers are members of the Association under its current charter.
All Association members of record as
1
of the close of business on the Voting Record Date who continue to be members as
of the date of the Special Meeting will be entitled to vote at the Special
Meeting or any adjournment thereof.
Each depositor member (including IRA and Keogh account
beneficiaries) will be entitled at the Special Meeting to cast one vote for each
$100, or fraction thereof, of the aggregate withdrawal value of all of such
depositor's accounts in the Association as of the Voting Record Date, up to a
maximum of 1,000 votes. In general, accounts held in different ownership
capacities will be treated as separate memberships for purposes of applying the
1,000 vote limitation. For example, if two persons hold a $100,000 account in
their joint names and each of the persons also holds a separate account for
$100,000 in his own name, each person would be entitled to 1,000 votes for each
separate account and they would together be entitled to cast 1,000 votes on the
basis of the joint account. Where no proxies are received from IRA and Keogh
account beneficiaries, after due notification, the Association, as trustee of
these accounts, is entitled to vote these accounts in favor of the Plan of
Conversion.
Each borrower member of the Association as of both October 17, 1990
and the Voting Record Date, who continues to be a borrowers as of the date of
the Special Meeting will be entitled to cast one vote as a borrower members, in
addition to any vote be or she may be entitled to cast as a depositor.
Approval of the Plan of Conversion requires the affirmative vote of
a majority of the total outstanding votes of the Association's members eligible
to be cast at the Special Meeting. As of________ __, 1997, the Association had
approximately _______ members who were entitled to cast a total of approximately
_______ votes at the Special Meeting.
Association members may vote at the Special Meeting or any
adjournment thereof in person or by proxy. Any member giving a proxy will have
the right to revoke the proxy at any time before it is voted by giving written
notice to the Secretary of the Association, provided that such written notice is
received by the Secretary prior to the Special Meeting or any adjournment
thereof, or upon request if the member is present and chooses to vote in person.
All properly executed proxies received by the Board of Directors of
the Association will be voted in accordance with the instructions indicated
thereon by the members giving such proxies. If no instructions are given, such
proxies will be voted in favor of the Plan of Conversion. If any other matters
are properly presented at the Special Meeting and may properly be voted on, the
proxies solicited hereby will be voted on such matters in accordance with the
best judgment of the proxy holders named thereon. Management is not aware of any
other business to be presented at the Special Meeting.
If a proxy is not executed and is returned or the member does not
vote in person, the Association is prohibited by OTS regulations from using a
previously executed proxy to vote for the Conversion. As a result, failure to
vote may have the same effect as a vote against the Plan of Conversion.
To the extent necessary to permit approval of the Plan of
Conversion, proxies may be solicited by officers, directors or regular employees
of the Association, in person, by telephone or through other forms of
communication and, if necessary, the Special Meeting may be adjourned to a later
date. In addition, Trident Securities, Inc. will assist the Association in the
solicitation of proxies. Such persons will be reimbursed by the Association for
their expenses incurred in connection with such solicitation. The Association
will bear all costs of this solicitation. The proxies solicited hereby will be
used only at the Special Meeting and at any adjournment thereof.
DESCRIPTION OF THE PLAN OF CONVERSION
The Plan of Conversion to be presented for approval at the Special
Meeting provides for the Conversion to be accomplished through adoption of
amended charter and bylaws for the Association to authorize the issuance of
capital stock along with the concurrent formation of a holding company. As part
of the Conversion, the Plan of Conversion provides for the subscription offering
(the "Subscription Offering") of the Common Stock to the Association's (i)
Eligible Account Holders (deposit account holders as of March 31, 1996); (ii)
Tax-Qualified Employee Plans, (iii) Supplemental Eligible Account Holders
(deposit account holders as of September 30, 1997); (iv) Other Members (deposit
account holders and certain borrowers eligible to vote at the Special Meeting
who are not as Eligible Account Holders or Supplemental Eligible Account
Holders); and (v) the Association's employees, officers and directors.
Notwithstanding the foregoing, to the extent orders for shares exceed the
maximum of the appraisal range,
2
Tax-Qualified Employee Plans shall be afforded a first priority to purchase
shares sold above the maximum of the appraisal range. It is anticipated that
Tax-Qualified Employee Plans will purchase 8% of the Common Stock sold in the
Conversion. In addition, in the Community Offering, concurrent with the
Subscription Offering, members of the general public, with a first preference to
natural persons residing in Baltimore and Anne Arundel Counties, Maryland, will
be afforded the opportunity to purchase the Common Stock not subscribed for in
the Subscription Offering.
THE SUBSCRIPTION OFFERING HAS COMMENCED AS OF THE DATE OF MAILING
OF THIS PROXY STATEMENT. A PROSPECTUS EXPLAINING THE TERMS OF THE SUBSCRIPTION
OFFERING, INCLUDING HOW TO ORDER AND PAY FOR SHARES AND DESCRIBING THE BUSINESS
OF THE ASSOCIATION AND THE HOLDING COMPANY; ACCOMPANIES THIS PROXY STATEMENT AND
SHOULD BE READ BY ALL PERSONS WHO WISH TO CONSIDER SUBSCRIBING FOR COMMON STOCK.
THE SUBSCRIPTION OFFERING EXPIRES AT _:00 _.M., LUTHERVILLE, MARYLAND TIME ON
________ __, 1997 UNLESS EXTENDED BY THE ASSOCIATION AND THE HOLDING COMPANY.
The federal conversion regulations require that all stock offered
in a conversion must be sold in order for the conversion to become effective.
The conversion regulations require that the offering be completed within 45 days
after completion of the Subscription Offering period unless extended by the
Association and the Holding Company with the approval of the OTS. This 45-day
period expires ________ __, 1997 unless the Subscription Offering is extended.
If this is not possible, an occurrence that is currently not anticipated, the
Board of Directors of the Association and the Holding Company will consult with
the OTS to determine an appropriate alternative method of selling all
unsubscribed shares offered in the Conversion. The Plan of Conversion provides
that the Conversion must be completed within 24 months after the date of the
Special Meeting.
The Subscription and Community Offerings or any other sale of the
unsubscribed shares will be made as soon as practicable after the date of the
Special Meeting. No sales of shares may be completed, either in the Subscription
and Community Offerings or otherwise, unless the Plan of Conversion is approved
by the members of the Bank.
The commencement and completion of the Subscription and Community
Offerings, however, is subject to market conditions and other factors beyond the
Association's control. Due to adverse conditions in the stock market in the
past, a number of converting thrift institutions encountered significant delays
in completing their stock offerings or were not able to complete them at all. No
assurance can be given as to the length of time after approval of the Plan of
Conversion at the Special Meeting that will be required to complete the
Subscription and Community Offerings or other sale of the Common Stock to be
offered in the Conversion. If delays are experienced, significant changes may
occur in the estimated pro forma market value of the Holding Company's Common
Stock, together with corresponding changes in the offering price and the net
proceeds realized by the Association and the Holding Company from the sale of
the Common Stock. The Association and the Holding Company may also incur
substantial additional printing, legal, accounting and other expenses in
completing the Conversion.
The following is a brief summary of the Conversion and is qualified
in its entirety by reference to the Plan of Conversion, a complete copy of which
is attached hereto. The Association's federal stock charter and bylaws that will
become effective upon completion of the Conversion are available from the
Association upon request. A copy of the Holding Company's articles of
incorporation and bylaws are also available from the Association upon request.
Principal Effects of Conversion
Depositors. The Conversion will not change the amount, interest
rate, withdrawal rights or federal insurance protection of deposit accounts, or
affect deposit accounts in any way other than with respect to voting and
liquidation rights as discussed below.
Borrowers. The rights and obligations of borrowers under their loan
agreements with the Association will remain unchanged by the Conversion. The
principal amount, interest rate and maturity date of loans will remain as they
were contractually fixed prior to the Conversion.
Voting Rights of Members. Under the Association's current federal
mutual charter, depositors and certain borrowers have voting rights as members
of the Association with respect to the election of directors and certain other
affairs of the Association. After the Conversion, exclusive voting rights with
respect to all such matters will be vested
3
in the Holding Company as the sole stockholder of the Association. Depositors
and certain borrowers will no longer have any voting rights, except to the
extent that they become stockholders of the Holding Company through the purchase
of its Common Stock. Voting rights in the Holding Company will be held
exclusively by its stockholders.
Liquidation Rights of Depositor Members. Currently, in the unlikely
event of liquidation of the Association, any assets remaining after satisfaction
of all creditors' claims in full (including the claims of all depositors to the
withdrawal value of their accounts) would be distributed pro rata among the
depositors of the Association, with the pro rata share of each being the same
proportion of all such remaining assets as the withdrawal value of each
depositor's account is of the total withdrawal value of all accounts in the
Association at the time of liquidation. After the Conversion, the assets of the
Association would first be applied, in the event of liquidation, against the
claims of all creditors (including the claims of all depositors to the
withdrawal value of their accounts). Any remaining assets would then be
distributed to the persons who qualified as Eligible Account Holders or
Supplemental Eligible Account Holders under the Plan of Conversion to the extent
of their interests in a "Liquidation Account" that will be established at the
time of the completion of the Conversion and then to the Holding Company as the
sole stockholder of the Association's outstanding common stock. The
Association's depositors who did not qualify as Eligible Account Holders or
Supplemental Eligible Account Holders would have no right to share in any
residual net worth of the Association in the event of liquidation after the
Conversion, but would continue to have the right as creditors of the Association
to receive the full withdrawal value of their deposits prior to any distribution
to the Holding Company as the Association's sole stockholder. In addition, the
Association's deposit accounts will continue to be insured by the FDIC to the
maximum extent permitted by law, currently up to $100,000 per insured account.
The Liquidation Account will initially be established in an amount equal to the
net worth of the Association as of the date of the Association's latest
statement of financial condition contained in the final prospectus used in
connection with the Conversion. Each Eligible Account Holder and/or Supplemental
Eligible Account Holder will receive an initial interest in the Liquidation
Account in the same proportion as the balance in all of his qualifying deposit
accounts was of the aggregate balance in all qualifying deposit accounts of all
Eligible Account Holders and Supplemental Eligible Account Holders on March 31,
1996 or September 30, 1997, respectively. For accounts in existence on both
dates, separate subaccounts shall be determined on the basis of the qualifying
deposits in such accounts on the record dates. However, if the amount in the
qualifying deposit account on any annual closing date of the Association is less
than the lowest amount in such deposit account on the Eligibility Record Date
and/or Supplemental Eligibility Record Date, and any subsequent annual closing
date, this interest in the Liquidation Account will be reduced by an amount
proportionate to such reduction in the related deposit account and will not
thereafter be increased despite any subsequent increase in the related deposit
account.
The Association. Under federal law, the stock savings association
resulting from the Conversion will be deemed to be a continuation of the mutual
savings association rather than a new entity and will continue to have all of
the rights, privileges, properties, assets and liabilities of the Association
prior to the Conversion. The Conversion will enable the Association to issue
capital stock, but will not change the general objectives, purposes or types of
business currently conducted by the Association, and no assets of the
Association will be distributed in order to effect the Conversion, other than to
pay the expenses incident thereto. After the Conversion, the Association will
remain subject to examination and regulation by the OTS and will continue to be
a member of the Federal Home Loan Bank System. The Conversion will not cause any
change in the executive officers or directors of the Association.
Tax Consequences. Consummation of the Conversion is expressly
conditioned upon prior receipt of either a ruling of the United States Internal
Revenue Service ("IRS") or an opinion letter of the Association's counsel with
respect to federal taxation, and either a ruling of the Maryland taxation
authorities or an opinion letter from the Association's accountants with respect
to Maryland taxation, to the effect that the Conversion will not be a taxable
transaction to the Holding Company, the Association or the Association's deposit
account holders receiving subscription rights.
The Association has received an opinion of its special counsel,
Silver, Freedman & Taff, L.L.P., to the effect that (i) the Conversion will
qualify as a reorganization under Section 368(a)(1)(F) of the Internal Revenue
Code of 1986, as amended, and no gain or loss will be recognized to the
Association in either its mutual form or its stock form by reason of the
proposed Conversion, (ii) no gain or loss will be recognized to the Association
in its stock form upon the receipt of money and other property, if any, from the
Holding Company for the stock of the Association; and no gain or loss will be
recognized to the Holding Company upon the receipt of money for Common Stock of
the Holding Company; (iii) the assets of the Association in either its mutual or
its stock form will have the same basis before and after the Conversion; (iv)
the holding period of the assets of the Association in its stock form will
include the period
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during which the assets were held by the Association in its mutual form prior to
Conversion; (v) gain, if any, will be realized by the depositors of the
Association upon the constructive issuance to them of withdrawable deposit
accounts of the Association in its stock form, nontransferable subscription
rights to purchase Holding Company Common Stock and/or interests in the
Liquidation Account (any such gain will be recognized by such depositors, but
only in an amount not in excess of the fair market value of the subscription
rights and Liquidation Account interests received); (vi) the basis of the
account holder's savings accounts in the Association after the Conversion will
be the same as the basis of his or her savings accounts in the Association prior
to the Conversion; (vii) the basis of each account holder's interest in the
Liquidation Account is assumed to be zero; (viii) based on the Ferguson Letter,
as hereinafter defined, the basis of the subscription rights will be zero; (ix)
the basis of the Holding Company Common Stock to its stockholders will be the
purchase price thereof; (x) a stockholder's holding period for Holding Company
Common Stock acquired through the exercise of subscription rights shall begin on
the date on which the subscription rights are exercised and the holding period
for the Conversion Stock purchased in the Subscription and Community Offering
will commence on the date following the date on which such stock is purchased;
(xi) the Association in its stock form will succeed to and take into account the
earnings and profits or deficit in earnings and profits, of the Association, in
its mutual form, as of the date of Conversion; (xii) the Association,
immediately after Conversion, will succeed to and take into account the bad debt
reserve accounts of the Association, in mutual form, and the bad debt reserves
will have the same character in the hands of the Association after Conversion as
if no Conversion had occurred; and (xiii) the creation of the Liquidation
Account will have no effect on the Association's taxable income, deductions or
addition to reserve for bad debts either in its mutual or stock form.
The opinion from Silver, Freedman & Taff, L.L.P. is based, among
other things, on certain assumptions, including the assumptions that the
exercise price of the Subscription Rights to purchase Holding Company Common
Stock will be approximately equal to the fair market value of that stock at the
time of the completion of the proposed Conversion. With respect to the
Subscription Rights, the Association will receive a letter from Ferguson &
Company, Inc. (the "Ferguson Letter") which, based on certain assumptions, will
conclude that the Subscription Rights to be received by Eligible Account
Holders, Supplemental Eligible Account Holders and other eligible subscribers do
not have any economic value at the time of distribution or at the time the
Subscription Rights are exercised, whether or not a Public Offering takes place.
The Association has also received an opinion of Silver, Freedman &
Taff, L.L.P. to the effect that, based in part on the Ferguson Letter: (i) no
taxable income will be realized by depositors as a result of the exercise of
non-transferable Subscription Rights to purchase shares of Holding Company
Common Stock at fair market value; (ii) no taxable income will be recognized by
borrowers, directors, officers and employees of the Association on the receipt
or exercise of Subscription Rights to purchase shares of Holding Company Common
Stock at fair market value; and (iii) no taxable income will be realized by the
Association or Holding Company on the issuance of Subscription Rights to
eligible subscribers to purchase shares of Holding Company Common Stock at fair
market value.
Notwithstanding the Ferguson Letter, if the Subscription Rights are
subsequently found to have a fair market value and are deemed a distribution of
property, it is Silver, Freedman & Taff, L.L.P.'s opinion that gain or income
will be recognized by various recipients of the Subscription Rights (in certain
cases, whether or not the rights are exercised) and the Association and/or the
Holding Company may be taxable on the distribution of the Subscription Rights.
In any event, all recipients are encouraged to consult with their own tax
advisors as to the tax consequences which may result.
With respect to Maryland taxation, the Association has received an
opinion from Wooden & Benson, Chartered to the effect that the Maryland tax
consequences to the Association, in its mutual or stock form, the Holding
Company, eligible account holders, parties receiving subscription rights,
parties purchasing conversion stock, and other parties participating in the
Conversion will be the same as the federal income tax consequences described
above.
Unlike a private letter ruling, the opinions of Silver, Freedman &
Taff, L.L.P. and Wooden & Benson, Chartered, as well as the Ferguson Letter,
have no binding effect or official status, and no assurance can be given that
the conclusions reached in any of those opinions would be sustained by a court
if contested by the IRS or the Maryland State tax authorities.
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Approval, Interpretation, Amendment and Termination
Under the Plan of Conversion, the letter from the OTS giving
approval thereto, and applicable regulations, consummation of the Conversion is
subject to the satisfaction of the following conditions: (a) approval of the
Plan of Conversion by members of the Association casting at least a majority of
the votes eligible to be cast at the Special Meeting; (b) sale of all of the
Common Stock to be offered in the Conversion; and (c) receipt of favorable
rulings or opinions as to the federal and Maryland tax consequences of the
Conversion.
The Plan of Conversion may be substantively amended by the Boards
of Directors of the Association and the Holding Company with the concurrence of
the OTS. If the Plan of Conversion is amended, proxies which have been received
prior to such amendment will not be resolicited unless otherwise required by the
OTS. Also, as required by the federal regulations, the Plan of Conversion
provides that the transactions contemplated thereby may be terminated by the
Board of Directors of the Association alone at any time prior to the Special
Meeting and may be terminated by the Board of Directors of the Association at
any time thereafter with the concurrence of the OTS, notwithstanding approval of
the Plan of Conversion by the members of the Association at the Special Meeting.
All interpretations by the Association and the Holding Company of the Plan of
Conversion and of the order forms and related materials for the Subscription
Offering will be final, except as regards or affects the OTS.
Judicial Review
Section 5(i)(2)(B) of the Home Owners' Loan Act, as amended, 12
U.S.C. ss.1464(i)(2)(B) and Section 563b.8(u) of the Rules and Regulations
promulgated thereunder (12 C.F.R. Section 563b.8(u)) provide: (i) that persons
aggrieved by a final action of the OTS which approves, with or without
conditions, or disapproves a plan of conversion, may obtain review of such final
action only by filing a written petition in the United States Court of Appeals
for the circuit in which the principal office or residence of such person is
located, or in the United States Court of Appeals for the District of Columbia,
requesting that the final action of the OTS be modified, terminated or set
aside, and (ii) that such petition must be filed within 30 days after
publication of notice of such final action in the Federal Register, or 30 days
after the date of mailing of the notice and proxy statement for the meeting of
the converting institution's members at which the conversion is to be voted on,
whichever is later. The notice of the Special Meeting of the Association's
members to vote on the Plan of Conversion described herein is included at the
beginning of this Proxy Statement. The statute and regulation referred to above
should be consulted for further information.
ADDITIONAL INFORMATION
The information contained in the accompanying Prospectus, including
a more detailed description of the Plan of Conversion, consolidated financial
statements of the Association and a description of the capitalization and
business of the Association and the Holding Company, including the Association's
directors and executive officers and their compensation, the anticipated use of
the net proceeds from the sale of the Common Stock and a description of the
Common Stock, is intended to help you evaluate the Conversion and is
incorporated by this reference.
YOUR VOTE IS VERY IMPORTANT TO US. PLEASE TAKE A MOMENT NOW TO
COMPLETE AND RETURN YOUR PROXY CARD IN THE POSTAGE-PAID ENVELOPE PROVIDED. YOU
MAY STILL ATTEND THE SPECIAL MEETING AND VOTE IN PERSON EVEN THOUGH YOU HAVE
VOTED YOUR PROXY. FAILURE TO SUBMIT A PROXY WILL HAVE THE SAME EFFECT AS VOTING
AGAINST THE CONVERSION.
If you have any questions, please call our Stock Information Center
at (___) ___-____.
IMPORTANT: YOU MAY BE ENTITLED TO VOTE IN MORE THAN ONE CAPACITY.
PLEASE SIGN, DATE AND PROMPTLY RETURN EACH PROXY CARD YOU RECEIVE.
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THIS PROXY STATEMENT IS NOT AN OFFER TO SELL OR THE SOLICITATION OF
AN OFFER TO BUY STOCK. THE OFFER WILL BE MADE ONLY BY THE PROSPECTUS.
THE COMMON STOCK IS NOT A DEPOSIT OR ACCOUNT AND IS NOT FEDERALLY
INSURED OR GUARANTEED.
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