As filed with the Securities and Exchange Commission on March 23,2000
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
CBCT BANCSHARES, INC.
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(Exact name of registrant as specified in its charter)
Maryland 6035 Applied For
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(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
312 Main Street, Smithville, Texas 78957-2035
(512) 237-2482
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(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
Brad M. Hurta, President
CBCT Bancshares, Inc.
312 Main Street
Smithville, Texas 78957-2035
(512) 237-2482
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(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Please send copies of all communications to:
Martin L. Meyrowitz, P.C.
Beth A. Freedman, Esq.
SILVER, FREEDMAN & TAFF, L.L.P.
(a limited liability partnership including professional corporations)
1100 New York Avenue, NW
Seventh Floor, East Tower
Washington, DC 20005-3934
(202) 414-6100
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are being offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. [X]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
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<S> <C> <C> <C> <C>
Proposed Maximum Proposed Maximum
Title of Each Class of Amount to be Offering Price Aggregate Amount of
Securities to be Registered Registered(1) Per Share (1) Offering Price(1) Registration Fee
Common Stock, par value
$.01 per share 304,175 shares $10.00 $3,041,750 $803.00 (1)
<FN>
(1) Estimated solely for the purpose of calculating the registration fee.
</FN>
</TABLE>
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
PROSPECTUS
Up to 304,175 Shares of Common Stock
CBCT Bancshares, Inc.
(Proposed Holding Company for Community Bank of Central Texas, ssb)
================================================================================
Community Bank is converting from the mutual to the stock form of
organization. As part of the conversion, Community Bank will issue all of its
common stock to CBCT Bancshares, Inc. CBCT Bancshares, Inc. has been formed to
be the holding company for Community Bank.
================================================================================
TERMS OF THE OFFERING
Maximum,
Minimum Maximum as adjusted
Per Share Price.............................. $ 10.00 $ 10.00 $ 10.00
Number of Shares............................. 195,500 264,500 304,175
Underwriting Commission and Other Expenses... 380,000 380,000 380,000
Net Proceeds to CBCT Bancshares, Inc......... 1,575,000 2,265,000 2,661,750
Please refer to "Risk Factors" beginning on page 8 of this document.
Keefe, Bruyette & Woods, Inc. will use its best efforts to assist CBCT
Bancshares, Inc. in selling at least the minimum number of shares but does not
guarantee that this number will be sold.
The offering to depositors and borrowers of Community Bank will end at
12:00 Noon, Smithville, Texas time, on[_____________], 2000. CBCT Bancshares,
Inc. will hold all funds of subscribers in an interest-bearing savings account
at Community Bank until the conversion is completed or terminated. Funds will be
returned promptly with interest if the conversion is terminated.
These securities are not deposits or accounts and are not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency.
Neither the Securities and Exchange Commission, the Federal Deposit
Insurance Corporation, the Texas Savings and Loan Department, nor any other
federal agency or state securities regulator has approved or disapproved these
securities or determined if this prospectus is accurate or complete. Any
representation to the contrary is a criminal offense.
For information on how to subscribe, call the Stock Information Center
at (512) [___]-[____].
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KEEFE, BRUYETTE & WOODS, INC.
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[__________________], 2000
<PAGE>
[MAP of Registrant's market area to be produced here.]
<PAGE>
SUMMARY
This summary highlights selected information from this document and may
not contain all the information that is important to you. To understand the
stock offering fully, you should read this entire document carefully, including
the financial statements and the notes to the financial statements.
The Companies:
CBCT Bancshares, Inc.
312 Main Street
Smithville, Texas 78957
CBCT Bancshares, Inc. will be the holding company for Community Bank
when our conversion to stock form is complete. CBCT Bancshares, Inc. was formed
in March 2000. It has not engaged in any business.
After completing the conversion we will appear as shown below:
PUBLIC STOCKHOLDERS
-----------------------------
|
|
100% of the common stock
-----------------------------
CBCT BANCSHARES, INC.
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|
|
100% of the common stock
-----------------------------
COMMUNITY BANK
-----------------------------
Community Bank of Central Texas, ssb
312 Main Street
Smithville, Texas 78957
Community Bank is a Texas chartered mutual savings bank. At December
31, 1999, we had total assets of $42.8 million, deposits of $32.4 million and
total equity of $3.0 million. We are changing our structure by becoming a stock
savings bank.
We are a community-oriented savings bank serving primarily Bastrop
County in Texas through its main office located in Smithville, Texas. We
emphasize residential mortgage lending, primarily originating one-to four-family
mortgage loans. We also originate commercial real estate loans and a wide
variety of consumer loans.
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<PAGE>
The Stock Offering
We are converting to stock form and offering common stock to the public
primarily to better allow us to grow through expanded operations, as well as
through increased branching and acquisitions. The stock form will also give us
more flexibility to increase our capital position. See "Community Bank's
Conversion - Our Reasons for the Corporate Change."
We are offering between 195,500 and 264,500 shares of CBCT Bancshares,
Inc. at $10.00 per share. Because of changes in financial market conditions
before we complete the conversion, the number of shares we offer may increase to
304,175 shares with the approval of the Texas Savings and Loan Department and
the Federal Deposit Insurance Corporation and without any notice to you. If so,
you will not have the chance to change or cancel your stock order.
Keefe, Bruyette & Woods, Inc. will assist us in selling the stock. For
further information about Keefe, Bruyette & Woods, Inc.'s role in the offering,
see "Community Bank's Conversion - Marketing Arrangements."
How We Determined the Offering Range and the $10.00 Price Per Share
The independent appraisal by Ferguson & Company, dated as of February
29, 2000, established the offering range. This appraisal was based on our
financial condition and operations and the effect of the additional capital
raised in the conversion. The $10.00 price per share was determined by our board
of directors and is the price most commonly used in stock offerings involving
conversions of mutual savings institutions. Ferguson & Company will update the
appraisal before the completion of the conversion.
Terms of the Offering
We are offering the shares of common stock to those with subscription
rights in the following order of priority:
(1) Depositors with us on September 30, 1998.
(2) The CBCT Bancshares, Inc. employee stock ownership plan.
(3) Depositors with us on March 31, 2000.
(4) Other members of Community Bank on [____________], 2000.
(5) Community Bank's directors, officers and employees.
Shares of common stock not subscribed for in the subscription offering
will be offered to the general public in a direct community offering and, if
necessary, a public offering. See pages [___] to [___].
4
<PAGE>
Termination of the Offering
The subscription offering will end at Noon, Smithville, Texas time on
[__________], 2000. If all of the shares are not subscribed for in the
subscription offering and we do not get orders for the remaining shares by
[____________], 2000, we will either:
(1) promptly return any payment you made to us, with interest, or
cancel any withdrawal authorization you gave us; or
(2) extend the offering, if allowed, and give you notice of the
extension and of your rights to cancel or change your order.
If we extend the offering and you do not respond to the
notice, then we will cancel your order and return your
payment, with interest, or cancel any withdrawal authorization
you gave us. The offering must be completed or terminated by
[_____________], 2001.
How We Will Use the Proceeds Raised From the Sale of Common Stock
We intend to use the net proceeds received from the stock offering,
assuming completion of the offering at the maximum of the estimated offering
range, as follows:
$1,026,700 Retained by CBCT Bancshares, Inc. and initially placed
in short-term investments for general corporate purposes
211,600 Employee stock ownership plan loan
1,026,700 Used to buy the stock of Community Bank
----------
$2,265,000 Net proceeds from stock offering
==========
We intend to use the proceeds at Community Bank for future lending and
investment, in addition to general corporate purposes.
We Currently Intend to Pay a Cash Dividend in the Future
We currently plan to pay cash dividends in the future. However, the
amount and timing of any dividends has not yet been determined. Based on our
earnings history and the proceeds from the conversion, we believe we will have
the financial ability to pay dividends, but future dividends are not guaranteed
and will depend on our ability to pay them. See page [__].
Benefits to Management from the Offering
We intend to establish the CBCT Bancshares, Inc. employee stock
ownership plan which will purchase 8% of the shares sold in the conversion. A
loan from CBCT Bancshares, Inc. to the plan, funded by a portion of the proceeds
from this offering, will be used to purchase these shares. If shares are not
available for purchase by the employee stock ownership plan in the subscription
offering, then the plan will purchase the shares in the open market. The
employee
5
<PAGE>
stock ownership plan will provide a retirement benefit to all employees eligible
to participate in the plan.
We also intend to adopt a stock option plan and a restricted stock plan
for the benefit of directors, officers and employees, subject to shareholder
approval. If we adopt the restricted stock plan, some of these individuals will
be awarded stock at no cost to them. As a result, both the employee stock
ownership plan and the restricted stock plan will increase the voting control of
management without a cash outlay.
The following table presents the total value of the shares of common
stock, at the maximum of the offering range, which would be acquired by the
employee stock ownership plan and the total value of all shares to be available
for award and issuance under the restricted stock plan. The table assumes that
the value of the shares is $10.00 per share. The table does not include a value
for the options because the price paid for the option shares will be equal to
the fair market value of the common stock on the day that the options are
granted. As a result, financial gains can be realized under an option only if
the market price of common stock increases.
Percentage of
Estimated Shares Issued
Value of Shares in the Offering
Employee Stock Ownership Plan..... $211,600 8.0%
Restricted Stock Awards........... 105,800 4.0
Stock Options..................... --- 10.0
-------- ----
Total........................ $317,400 22.0%
======== ====
In addition, upon completion of the conversion, we intend to enter into
an employment agreement with Brad M. Hurta, president and chief executive
officer of Community Bank. The employment agreement is designed to assist us in
maintaining a stable and competent management team after the conversion. The
employment agreement will have a term of three years and provide for an annual
base salary in an amount not less than this individual's current salary. Mr.
Hurta currently has a base salary of $70,000.
For a further discussion of benefits to management, see "Management."
How to Purchase Common Stock
Note: Once we receive your order, you cannot cancel or change it
without our consent. If CBCT Bancshares, Inc. intends to sell fewer than 195,500
shares or more than 304,175 shares, all subscribers will be notified and given
the opportunity to change or cancel their orders. If you do not respond to this
notice, we will return your funds promptly with interest.
If you want to subscribe for shares you must complete an original stock
order form and send it, together with full payment or withdrawal authorization,
to Community Bank in the postage-paid envelope provided. You must sign the
certification that is part of the stock order form. We must receive your stock
order form before the end of the offering period.
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<PAGE>
You may pay for shares in any of the following ways:
o By cash, if delivered in person to the home office of
Community Bank.
o By check or money order made payable to CBCT Bancshares, Inc.
o By authorizing a withdrawal from an account at Community Bank.
To use funds in an Individual Retirement Account at Community
Bank, you must transfer your account to a self-directed
account with an unaffiliated institution or broker. Please
contact the conversion center at least one week before the end
of the offering for assistance.
We will pay interest on your subscription funds at the rate Community
Bank pays on passbook accounts from the date it receives your funds until the
conversion is completed or terminated. All funds authorized for withdrawal from
deposit accounts with Community Bank will earn interest at the applicable
account rate until the conversion is completed, currently 2.5%. There will be no
early withdrawal penalty for withdrawals from certificates of deposit used to
pay for stock.
Stock Information Center
If you have any questions regarding the offering or our conversion to
stock form, please call the Stock Information Center at (512) [___]-[____].
Subscription Rights
Subscription rights are not allowed to be transferred and we will act
to ensure that you do not transfer your subscription rights. We will not accept
any stock orders that we believe involve the transfer of subscription rights.
Important Risks in Owning CBCT Bancshares, Inc.'s Common Stock
Before you decide to purchase stock, you should read the "Risk Factors"
section on pages 8 to 10 of this document.
7
<PAGE>
RISK FACTORS
You should consider these risk factors, in addition to the other
information in this prospectus, before deciding whether to make an investment in
this stock.
Rising interest rates may hurt our profits.
To be profitable, we have to earn more money in interest we receive on
loans and investments we make than we pay to our depositors and lenders in
interest. If interest rates rise, our net interest income could be reduced if
interest paid on interest-bearing liabilities, such as deposits and borrowings,
increases more quickly than interest received on interest-earning assets, such
as loans, mortgage-related and investment securities. In addition, rising
interest rates may hurt our income because they may reduce the demand for loans
and the value of our mortgage-related and investment securities. For a further
discussion of how changes in interest rates could impact us, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations - Asset
and Liability Management and Market Risk."
After this offering, our return on equity will be low compared to other
companies and our compensation expenses will increase. This could negatively
impact the price of our stock.
The proceeds we will receive from the sale of our common stock will
significantly increase our capital and it will take us time to fully use this
capital in our business operations. Our compensation expenses will also increase
because of the costs associated with the employee stock ownership and
stock-based incentive plans. Therefore, we expect our return on equity to be
below our historical level and less than our regional and national peers. This
low return on equity could hurt our stock price. We cannot guarantee when or if
we will achieve returns on equity that are comparable to industry peers. For
further information regarding pro forma income and expenses, see "Pro Forma
Data."
Our loan portfolio possesses increased risk due to our substantial number of
consumer, construction and commercial real estate and commercial business loans.
Our consumer, construction and commercial real estate, and commercial
business loans accounted for more than one-third of our total loan portfolio as
of December 31, 1999. Generally, we consider these types of loans to involve a
higher degree of risk compared to first mortgage loans on one- to four-family,
owner occupied residential properties. In addition, we plan to increase our
emphasis on commercial real estate and commercial business lending. Because of
our planned increased emphasis on and increased investment in commercial real
estate and commercial business loans, we may determine it necessary to increase
the level of our provision for loan losses. Increased provisions for loan losses
would hurt our profits. For further information concerning the risks associated
with consumer, multi-family and commercial real estate and commercial business
loans, see "Business of the Bank - Lending Activities" and "--Asset Quality."
8
<PAGE>
We intend to grant stock options and restricted stock to the board and
management following the conversion which could reduce your ownership interest.
If approved by a vote of the shareholders, we intend to establish a
stock option plan with a number of shares equal to 10% of the shares issued in
the conversion and a restricted stock plan with a number of shares equal to 4%
of the shares issued in the conversion, worth approximately $106,000 at the
purchase price and assuming the maximum of the estimated offering range, for the
benefit of directors, officers and employees of CBCT Bancshares, Inc. and
Community Bank. Stock options are paid for by the recipient in an amount equal
to the fair market value of the stock on the date of the grant. This payment is
not made until the option is actually exercised by the recipient. Restricted
stock is a bonus paid in the form of stock rather than cash, and is not paid for
by the recipient. Awards under these plans will reduce the ownership interest of
all stockholders. For further discussion regarding these plans, see "Pro Forma
Data" and "Management - Benefits - Other Stock Benefit Plans."
The amount of common stock we will control, our articles of incorporation and
bylaws and state and federal statutory provisions could discourage hostile
acquisitions of control.
Our board of directors and executive officers intend to purchase
approximately 18% of our common stock at the maximum of the estimated offering
range. These purchases, together with the purchase of 8% of the shares by the
employee stock ownership plan, as well as the potential acquisition of common
stock through the proposed stock option plan and restricted stock plan will
result in significant inside ownership of CBCT Bancshares, Inc. This inside
ownership and provisions in our articles of incorporation and bylaws may have
the effect of discouraging attempts to acquire CBCT Bancshares, Inc., a proxy
contest for control of CBCT Bancshares, Inc., the assumption of control of CBCT
Bancshares, Inc. by a holder of a large block of common stock and the removal of
CBCT Bancshares, Inc.'s management, all of which certain shareholders might
think are in their best interests. These provisions include, among other things:
o the staggered terms of the members of the board of directors;
o an 80% shareholder vote requirement for the approval of any
merger or consolidation of CBCT Bancshares, Inc. into any
entity that directly or indirectly owns 5% or more of CBCT
Bancshares, Inc. voting stock if the transaction is not
approved in advance by at least a majority of the
disinterested members of CBCT Bancshares, Inc.'s board of
directors;
o supermajority shareholder vote requirements for the approval
of certain amendments to CBCT Bancshares, Inc.'s articles of
incorporation and bylaws;
o a prohibition on any holder of common stock voting more than
10% of the outstanding common stock;
o elimination of cumulative voting by shareholders in the
election of directors;
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o restrictions on the acquisition of our equity securities; and
o the authorization of 5,000,000 shares of preferred stock that
could be issued without shareholder approval on terms or in
circumstances that could deter a future takeover attempt.
In addition, the Maryland business corporation law, the state where
CBCT Bancshares, Inc. is incorporated, provides for certain restrictions on
acquisition of CBCT Bancshares, Inc., and federal law contains restrictions on
acquisitions of control of savings and loan holding companies such as CBCT
Bancshares, Inc.
Holders of CBCT Bancshares, Inc. common stock may not be able to sell
their shares when desired if a liquid trading market does not develop or for
$10.00 or more per share even if a liquid trading market develops.
We have never issued common stock to the public. Consequently, there is
no established market for the common stock. We cannot predict whether a liquid
trading market in shares of CBCT Bancshares, Inc.'s common stock will develop or
how liquid that market might become. Persons purchasing shares may not be able
to sell their shares when they desire if a liquid trading market does not
develop or sell them at a price equal to or above $10.00 per share even if a
liquid trading market develops.
10
<PAGE>
SELECTED FINANCIAL AND OTHER DATA
The summary information presented below under "Selected Financial
Condition Data" and "Selected Operations Data" for, and as of the end of, each
of the years ended December 31 is derived from our audited consolidated
financial statements. The following information is only a summary and you should
read it in conjunction with our financial statements and notes beginning on page
F-2.
<TABLE>
<CAPTION>
At December 31,
---------------------------------------
1999 1998 1997
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(Dollars in Thousands)
<S> <C> <C> <C>
Selected Financial Condition Data:
Total assets $42,833 $39,829 $33,579
Loans receivable, net 21,693 20,890 21,370
Securities available for sale, at fair value:
Mortgage-backed securities 15,898 7,031 2,497
Other securities 379 445 290
Securities to be held to maturity, at cost:
Mortgage-backed securities --- 5,838 6,567
Other securities --- 175 205
Deposits 32,354 32,138 30,221
Federal Home Loan Bank borrowings 7,392 4,000 ---
Total equity 2,999 3,343 3,027
</TABLE>
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------------
1999 1998 1997
------------ --------------- ----------
(Dollars in Thousands)
<S> <C> <C> <C>
Selected Operations Data:
Interest and dividend income $ 3,050 $ 2,589 $ 2,525
Interest expense (1,902) (1,560) (1,484)
------- ------- -------
Net interest income 1,148 1,029 1,041
Provision for loan losses --- --- (3)
------- ------- -------
Net interest income after loan losses 1,148 1,029 1,038
------- ------- -------
Other operating income:
Service charges and fees 113 83 71
Net securities gains 76 30 ---
Net gains on sales of loans 51 51 ---
Gain on sale of other real estate owned --- --- ---
Total other operating income 240 164 71
------- ------- -------
Other operating expenses:
Compensation and benefits (454) (349) (366)
Occupancy and equipment expense (183) (138) (103)
Other operating expenses (512) (403) (378)
------- ------- -------
Total other operating expenses (1,149) (890) (847)
------- ------- -------
Income before income taxes 239 303 262
Income tax expense (71) (91) (86)
------- ------- -------
Net income $ 168 $ 212 $ 176
=------ ------- -------
</TABLE>
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Years Ended December 31,
-----------------------------
1999 1998 1997
-------- ---------- ---------
Key Operating Ratios and Other Data:
Performance ratios:
Return on assets (1) 0.39% 0.60% 0.52%
Return on equity (2) 5.29% 6.69% 5.81%
Net interest margin (3) 2.79% 3.11% 3.21%
Operating expense divided by average assets 2.65% 2.52% 2.49%
Average interest-bearing assets divided by
average interest-bearing liabilities 104% 106% 107%
Quality ratios:
Non-performing assets divided by total assets 0.16% 0.29% 0.13%
Allowance for loan losses to
non-performing loans 293% 174% 374%
Allowance for loan losses to gross loans 0.91% 0.86% 0.73%
Capital ratios:
Equity to total assets at end of period 7.00% 8.39% 9.01%
Average equity to average assets 7.33% 9.01% 8.95%
Tier 1 risk-based capital ratio 15.00% 16.70% 16.90%
Total risk-based capital ratio 15.90% 18.70% 17.80%
Other data:
Number of full service offices 1 1 1
- ----------------------------
(1) Ratio of net income to average total assets
(2) Ratio of net income to average equity
(3) Net interest income divided by average earning assets
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CBCT BANCSHARES, INC.
CBCT Bancshares, Inc. was incorporated under Maryland law to hold all
of the stock of Community Bank. CBCT Bancshares, Inc. has received Federal
Reserve Board approval to become a bank holding company and is subject to
regulation by that agency. After we complete the conversion, CBCT Bancshares,
Inc. will be a bank holding company, which means that it will own a banking
institution. Bank holding companies are limited to banking and financial
services-related activities. See "How We are Regulated - CBCT Bancshares, Inc."
CBCT Bancshares, Inc. will have no significant assets other than all of the
outstanding shares of common stock of Community Bank, the net proceeds it keeps
and its loan to the CBCT Bancshares, Inc. employee stock ownership plan. CBCT
Bancshares, Inc. will have no significant liabilities. See "How We Intend to Use
the Proceeds." Initially, the management of CBCT Bancshares, Inc. and Community
Bank will be substantially the same. CBCT Bancshares, Inc. intends to utilize
the support staff and offices of Community Bank from time to time and will pay
Community Bank for these services. If CBCT Bancshares, Inc. expands or changes
its business in the future, we may hire our own employees.
We believe the proposed holding company structure will give us more
flexibility to change our business activities by forming new companies which we
own, or by buying other companies, including other financial institutions and
financial services companies. We do not have any current plans to do these
things. CBCT Bancshares, Inc. intends to pay for its business activities with
the proceeds it keeps from the conversion and the money we earn from investing
the proceeds, as well as from dividends from Community Bank. See "Our Policy
Regarding Dividends."
The principal executive offices of CBCT Bancshares, Inc. will be
located at 312 Main Street, Smithville, Texas 78957, and its telephone number
will be (512) 237-2482.
COMMUNITY BANK OF CENTRAL TEXAS, ssb
Community Bank is a Texas chartered and federally insured mutual
savings bank with one full service office. At December 31, 1999, Community Bank
had total assets of $42.8 million, total deposits of $32.4 million and equity of
$3.0 million. For more information regarding the business and operations of
Community Bank, see "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Business of Community Bank."
Community Bank is examined and regulated by the Texas Savings and Loan
Department and the Federal Deposit Insurance Corporation. Community Bank is
required to have certain reserves set by the Federal Reserve Board and is a
member of the Federal Home Loan Bank of Dallas, which is one of the 12 regional
banks in the Federal Home Loan Bank System.
The executive offices of Community Bank are located at 312 Main Street,
Smithville, Texas 78957, and its telephone number is (512) 237-2482.
13
<PAGE>
HOW WE INTEND TO USE THE PROCEEDS
Although the actual net proceeds from the sale of the shares of common
stock cannot be determined until the conversion is completed, we presently
anticipate that the net proceeds from the sale of the shares of common stock
will be between $1.6 million and $2.3 million and up to $2.7 million assuming an
increase in the estimated value of the common stock sold in the conversion by
15%. See "Pro Forma Data" and "Community Bank's Conversion - How We Determined
Our Price and the Number of Shares to be Issued in the Stock Offering" as to the
assumptions used to arrive at such amounts.
We intend to use the net proceeds received from the stock offering,
assuming completion of the offering at the maximum of the estimated offering
range, as follows:
$1,026,700 Retained by CBCT Bancshares, Inc. and initially placed
in short-term investments for general corporate purposes
211,600 Employee stock ownership plan loan
1,026,700 Used to buy the stock of Community Bank
----------
$2,265,000 Net proceeds from stock offering
==========
CBCT Bancshares, Inc. will retain 50% of the net conversion proceeds
and will purchase all of the capital stock of Community Bank to be issued in the
conversion in exchange for the remaining conversion proceeds, net of the loan to
be made to the employee stock ownership plan. CBCT Bancshares, Inc. intends to
use a portion of the net proceeds to make a loan directly to the employee stock
ownership plan to enable the employee stock ownership plan to purchase up to
8.0% of the shares of common stock issued in the offering. Based upon the
issuance of 195,500 shares of common stock and 264,500 shares of common stock at
the minimum and maximum of the estimated offering range, respectively, the loan
to the employee stock ownership plan would be $156,000 and $212,000,
respectively. See "Management - Benefits - Employee Stock Ownership Plan." The
remaining net proceeds retained by CBCT Bancshares, Inc. initially may be used
to invest in U.S. Government and federal agency securities of various
maturities, mortgage-backed or other securities, deposits in either Community
Bank or other financial institutions, or a combination thereof. The net proceeds
may ultimately be used to:
o support Community Bank's lending activities;
o repay borrowings from the Federal Home Loan Bank in the
ordinary course of business; or
o support the future expansion of operations through the
establishment of additional banking offices or other customer
facilities or through acquisitions of other financial
institutions or branch offices, although no such acquisition
transactions are specifically being considered at this time.
The net proceeds from the conversion may also be used for other business and
investment purposes, including the payment of regular or special cash dividends,
possible repurchases of the
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common stock or returns of capital. Management of CBCT Bancshares, Inc. may
consider expanding or diversifying its activities, as such opportunities become
available.
Following the six-month anniversary of the completion of the
conversion, to the extent permitted by the Texas Savings and Loan Department and
the FDIC and based upon then existing facts and circumstances, CBCT Bancshares,
Inc.'s board of directors may determine to repurchase shares of common stock,
subject to any applicable statutory and regulatory requirements. Such facts and
circumstances may include but not be limited to:
o market and economic factors such as the price at which the
stock is trading in the market, the volume of trading, the
attractiveness of other investment alternatives in terms of
the rate of return and risk involved in the investment, the
ability to increase the book value and/or earnings per share
of the remaining outstanding shares, and an improvement in
CBCT Bancshares, Inc.'s return on equity;
o the avoidance of dilution to stockholders by not having to
issue additional shares to cover the exercise of stock options
or to fund employee stock benefit plans; and
o any other circumstances in which repurchases would be in the
best interests of CBCT Bancshares, Inc. and its stockholders.
Any stock repurchases will be subject to the determination of CBCT Bancshares,
Inc.'s board of directors that Community Bank will be capitalized in excess of
all applicable regulatory requirements after any such repurchases.
The portion of the net proceeds used by CBCT Bancshares, Inc. to
purchase the capital stock of Community Bank will be added to Community Bank's
general funds to be used for general corporate purposes, including increased
lending activities. While the amount of net proceeds received by Community Bank
will further strengthen Community Bank's capital position, which already
substantially exceeds all regulatory requirements, Community Bank is not
converting to stock form primarily to raise capital. After the conversion, based
upon the maximum of the estimated offering range, Community Bank's tangible
capital ratio will be approximately 9.6%. As a result, Community Bank will
continue to be a well-capitalized institution.
The net proceeds may vary because total expenses of the conversion may
be more or less than those estimated. The net proceeds will also vary if the
number of shares to be issued in the conversion is adjusted to reflect a change
in the estimated pro forma market value of Community Bank. Payments for shares
made through withdrawals from existing deposit accounts at Community Bank will
not result in the receipt of new funds for investment by Community Bank but will
result in a reduction of Community Bank's interest expense and liabilities as
funds are transferred from interest-bearing certificates or other deposit
accounts.
15
<PAGE>
MARKET FOR THE COMMON STOCK
CBCT Bancshares, Inc. and Community Bank have never issued capital
stock, and, consequently, there is no established market for the common stock at
this time. The development of a liquid public market depends on the existence of
willing buyers and sellers, the presence of which is not within the control of
CBCT Bancshares, Inc., Community Bank or any market maker. Accordingly, the
number of active buyers and sellers of the common stock at any particular time
may be limited.
OUR POLICY REGARDING DIVIDENDS
The board of directors of CBCT Bancshares, Inc. currently intends to
pay cash dividends on the common stock in the future. However, the amount and
timing of any dividends has not yet been determined. The payment of dividends
will depend upon a number of factors, including capital requirements, CBCT
Bancshares, Inc.'s and Community Bank's financial condition and results of
operations, tax considerations, statutory and regulatory limitations and general
economic conditions. No assurances can be given that any dividends will be paid
or that, if paid, will not be reduced or eliminated in future periods. Special
cash dividends, stock dividends or returns of capital may, to the extent
permitted by regulations, be paid in addition to, or in lieu of, regular cash
dividends. CBCT Bancshares, Inc. intends to file consolidated tax returns with
Community Bank. Accordingly, it is anticipated that any cash distributions made
by CBCT Bancshares, Inc. to its stockholders would be treated as cash dividends
and not as a non-taxable return of capital for federal and state tax purposes.
Dividends from CBCT Bancshares, Inc. will depend, in large part, upon
receipt of dividends from Community Bank, because CBCT Bancshares, Inc.
initially will have no source of income other than dividends from Community
Bank, earnings from the investment of proceeds from the sale of shares of common
stock retained by CBCT Bancshares, Inc., and interest payments with respect to
CBCT Bancshares, Inc.'s loan to the employee stock ownership plan. A regulation
of the FDIC imposes limitations on "capital distributions" by savings
institutions. See "How We are Regulated - Limitations on Dividends and Other
Capital Distributions."
Any payment of dividends by Community Bank to CBCT Bancshares, Inc.
which would be deemed to be drawn out of Community Bank's bad debt reserves
would require a payment of taxes at the then-current tax rate by Community Bank
on the amount of earnings deemed to be removed from the reserves for such
distribution. Community Bank does not intend to make any distribution to CBCT
Bancshares, Inc. that would create such a federal tax liability. See "Taxation."
16
<PAGE>
PRO FORMA DATA
The actual net proceeds from the sale of the common stock cannot be
determined until the conversion is completed. However, net proceeds are
currently estimated to be between $1.6 million and $2.3 million, or $2.7 million
in the event the estimated offering range is increased by 15%, based upon the
following assumptions:
o all shares of common stock will be sold through
non-transferable rights to subscribe for the common stock, in
order of priority, to Eligible Account Holders, the employee
stock ownership plan, Supplemental Eligible Account Holders,
Other Members and Directors, Officers and Employees;
o Keefe, Bruyette & Woods, Inc. will receive a fee of $75,000
upon completion of the conversion;
o total expenses, including the marketing fees paid to Keefe,
Bruyette & Woods, Inc. are estimated to be approximately
$380,000. Actual expenses may vary from those estimated.
Pro forma consolidated net income and stockholders' equity of CBCT
Bancshares, Inc. have been calculated for the year ended December 31, 1999, as
if the common stock to be issued in the conversion had been sold at the
beginning of the period and the net proceeds had been invested at 5.95%, which
represents the yield on one-year U.S. Government securities at December 31,
1999. In light of changes in interest rates in recent periods, this yield is
deemed by CBCT Bancshares, Inc. and Community Bank to more accurately reflect
available reinvestment rates than the arithmetic average method. The effect of
withdrawals from deposit accounts for the purchase of common stock has not been
reflected. A tax rate of 36.0% has been assumed for periods resulting in an
after-tax yield of 3.81% for the year ended December 31, 1999. Historical and
pro forma per share amounts have been calculated by dividing historical and pro
forma amounts by the indicated number of shares of common stock, as adjusted to
give effect to the shares purchased by the employee stock ownership plan and the
restricted stock plan. See Note 5 to the tables below. No effect has been given
in the pro forma stockholders' equity calculations for the assumed earnings on
the net proceeds. As discussed under "How We Intend to Use the Proceeds," CBCT
Bancshares, Inc. intends to make a loan to fund the purchase of 8.0% of the
common stock by the employee stock ownership plan and intends to retain up to
50% of the net proceeds from the conversion.
No effect has been given in the tables to the issuance of additional
shares of common stock pursuant to the proposed stock option plan. See
"Management - Benefits - Other Stock Benefit Plans." The table below gives
effect to the restricted stock plan, which is expected to be adopted by CBCT
Bancshares, Inc. following the conversion and presented along with the stock
option plan to stockholders for approval at an annual or special meeting of
stockholders to be held at least six months following the completion of the
conversion. If the restricted stock plan is approved by stockholders, the
restricted stock plan intends to acquire an amount of common stock equal to 4.0%
of the shares of common stock issued in the conversion, either through open
market purchases or from authorized but unissued shares of common stock, if
permissible. The
17
<PAGE>
table below assumes that stockholder approval has been obtained, as to which
there can be no assurance, and that the shares acquired by the restricted stock
plan are purchased in the open market at $10.00 per share. No effect has been
given to CBCT Bancshares, Inc.'s results of operations after the conversion, the
market price of the common stock after the conversion or a less than 4.0%
purchase by the restricted stock plan.
The following pro forma information may not be representative of the
financial effects of the foregoing transactions at the dates on which such
transactions actually occur and should not be taken as indicative of future
results of operations. Pro forma stockholders' equity represents the difference
between the stated amount of assets and liabilities of CBCT Bancshares, Inc.
computed in accordance with generally accepted accounting principles ("GAAP").
The following tables give effect to the issuance of authorized but
unissued shares of the common stock to the foundation concurrently with the
completion of the conversion. The pro forma stockholders' equity is not intended
to represent the fair market value of the common stock and may be different than
amounts that would be available for distribution to stockholders in the event of
liquidation.
18
<PAGE>
<TABLE>
<CAPTION>
At or For the Year Ended December 31, 1999
-----------------------------------------------------------------------------
304,175 Shares
195,500 Shares 230,000 Shares 264,500 Shares Sold at $10.00
Sold at $10.00 Sold at 10.00 Sold at $10.00 Per Share
Per Share Per Share Per Share (Maximum of Range,
(Minimum of Range) (Midpoint of Range) (Maximum of Range) as Adjusted)(1)
------------------ ------------------- ------------------ -------------------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Gross proceeds..................................... $ 1,955 $ 2,300 $ 2,645 $ 3,042
Less offering expenses and commissions............. (380) (380) (380) (380)
-------- --------- --------- ---------
Estimated net conversion proceeds............... 1,575 1,920 2,265 2,662
Less: Common stock acquired by employee stock
ownership plan............................ (156) (184) (212) (243)
Less: Common stock acquired by
restricted stock plan..................... (78) (92) (106) (122)
-------- --------- --------- ---------
Estimated proceeds available for investment(2).. $ 1,340 $ 1,644 $ 1,948 $ 2,297
======== ========= ========= =========
Net income(3):
Historical...................................... $ 168 $ 168 $ 168 $ 168
Pro Forma adjustments:
Net income from proceeds..................... 51 63 74 87
Employee stock ownership plan(4)............. (10) (12) (14) (16)
Restricted stock plan(5)..................... (10) (12) (14) (16)
-------- --------- --------- ---------
Pro forma net income...................... $ 199 $ 207 $ 215 $ 224
======== ========= ========= =========
Net income per share(3)(6):
Historical...................................... $ 0.96 $ 0.82 $ 0.71 $ 0.62
Pro Forma adjustments:
Net income from proceeds..................... 0.29 0.30 0.31 0.32
Employee stock ownership plan(4)............. (0.06) (0.06) (0.06) (0.06)
Restricted stock plan(5)..................... (0.06) (0.06) (0.06) (0.06)
-------- --------- --------- ---------
Pro forma basic earnings per share........ $ 1.14 $ 1.00 $ 0.91 $ 0.82
======== ========= ========= =========
Number of shares used in calculating basic earnings
per share(6).................................... 175,168 206,080 236,992 272,541
======== ========= ========= =========
Stockholders' equity (book value):
Historical...................................... $ 2,999 $ 2,999 $ 2,999 $ 2,999
Estimated net conversion proceeds............... 1,575 1,920 2,265 2,662
Less common stock acquired by:
Employee stock ownership plan................ (156) (184) (212) (243)
Restricted stock plan........................ (78) (92) (106) (122)
-------- --------- --------- ---------
Pro forma stockholders' equity............ $ 4,339 $ 4,643 $ 4,947 $ 5,296
======== ========= ========= =========
Stockholder's equity per share:
Historical...................................... $ 15.34 $ 13.04 $ 11.34 $ 9.68
Estimated net conversion proceeds............... 8.06 8.35 8.56 8.75
Less common stock acquired by:
Employee stock ownership plan................ (0.80) (0.80) (0.80) (0.80)
Restricted stock plan........................ (0.40) (0.40) (0.40) (0.40)
-------- --------- --------- ---------
Pro forma stockholders' equity per share.. $ 22.20 $ 20.19 $ 18.70 $ 17.41
======== ========= ========= =========
Pro forma price to book value...................... 45.1% 49.5% 53.5% 57.4%
Pro forma price to earnings ratio.................. 8.8 10.0 11.0 12.2
Number of shares used in calculating equity per share 195,500 230,000 264,500 304,175
</TABLE>
(Footnotes on next page)
19
<PAGE>
- -----------------
(1) As adjusted to give effect to an increase in the number of shares which
could occur due to an increase in the estimated offering range of up to
15% to reflect changes in market and financial conditions following the
commencement of the conversion.
(2) Estimated net proceeds, as adjusted, consist of the estimated net
proceeds from the conversion minus (i) the proceeds attributable to the
purchase by the employee stock ownership plan and (ii) the value of the
shares to be purchased by the restricted stock plan, subject to
stockholder approval, after the conversion at an assumed purchase price
of $10.00 per share.
(3) It is assumed that 8.0% of the shares of common stock issued in the
conversion will be purchased by the employee stock ownership plan with
funds loaned by CBCT Bancshares, Inc. CBCT Bancshares, Inc. and
Community Bank intend to make annual contributions to the employee
stock ownership plan in an amount at least equal to the principal and
interest requirement of the debt. The pro forma net earnings assumes
(i) that the loan to the employee stock ownership plan is payable over
10 years, with the employee stock ownership plan shares having an
average fair value of $10.00 per share in accordance with SOP 93-6,
entitled "Employers' Accounting for Employee Stock Ownership Plans," of
the AICPA, and (ii) the effective tax rate was 36.0% for the period.
See "Management - Benefits -- Employee Stock Ownership Plan."
(4) It is assumed that the restricted stock plan will purchase, following
stockholder approval of such plan, a number of shares of common stock
equal to 4.0% of the shares of common stock issued in the conversion
for issuance to directors, officers and employees. Funds used by the
restricted stock plan to purchase the shares initially will be
contributed to the restricted stock plan by CBCT Bancshares, Inc. It is
further assumed that the shares were acquired by the restricted stock
plan at the beginning of the period presented in open market purchases
at the purchase price and that 20% of the amount contributed, net of
taxes at 36%, was an amortized expense during the year ended December
31, 1999. Statement of Financial Accounting Standards ("SFAS") No. 128
requires that unvested shares under the restricted stock plan be
excluded from the basic net income per share calculation and included
in the diluted net income per share calculation only if they are
dilutive under the treasury stock method. The issuance of authorized
but unissued shares of common stock pursuant to the restricted stock
plan in the amount of 4.0% of the common stock sold in the offering
would dilute the voting interests of existing stockholders by
approximately 3.8% and under such circumstances pro forma net earnings
per share for the year ended December 31, 1999 would be $1.10, $.98,
$.89 and $.80 at the minimum, midpoint, maximum and 15% above the
maximum of the estimated offering range, respectively, and pro forma
stockholders' equity per share at December 31, 1999 would be $21.73,
$19.80, $18.37 and $17.13 at the minimum, midpoint, maximum and 15%
above the maximum of such range, respectively. There can be no
assurance that the actual purchase price of shares purchased by or
issued to the restricted stock plan will be equal to the purchase
price. See "Management - Benefits -- Other Stock Benefit Plans."
(5) Basic net income per share calculations are determined by taking the
number of shares assumed to be sold in the conversion and, (a) in
accordance with SOP 93-6, subtracting the ESOP shares which have not
been committed for release and (b) in accordance with SFAS No. 128,
subtracting the restricted stock plan shares which have not vested.
Diluted net income per share calculations are determined by adding the
dilutive portion of the unvested restricted stock plan shares to the
number of shares used to determine basic net income per share. The
unvested restricted stock plan shares are deemed to be for future
services and not dilutive under the treasury stock method. Set forth
below is a reconciliation of the number of shares used in making the
net income per share calculations:
Maximum,
Minimum Midpoint Maximum as Adjusted
---------- ---------- -------- -----------
Total shares issued................. 195,500 230,000 264,500 304,175
Less shares sold to ESOP............ 15,640 18,400 21,160 24,334
Less restricted stock plan shares... 7,820 9,200 10,580 12,167
------- ------- ------- -------
Sub-total................. 172,040 202,400 232,760 267,674
Plus ESOP shares assumed committed
to be released................. 1,564 1,840 2,116 2,433
------- ------- ------- -------
Plus restricted stock plan shares
assumed vested................. 1,564 1,840 2,116 2,433
Number of shares used in calculating
basic net income per share..... 175,168 206,080 236,992 272,541
Plus dilutive effect of unvested
restricted stock plan shares... 0 0 0 0
------- ------- ------- -------
Number of shares used in calculating 175,168 206,080 236,992 272,541
diluted net income per share...
(6) No effect has been given to the issuance of additional shares of common
stock pursuant to the stock option plan, which will be adopted by CBCT
Bancshares, Inc. following the conversion and presented for approval by
stockholders at an annual or special meeting of stockholders of CBCT
Bancshares, Inc. held at least six months following the completion of
the conversion. If the stock option plan is approved by stockholders,
an amount equal to 10% of the common stock issued in the conversion, or
19,550 shares at the minimum of the estimated offering range, 23,000
shares at the midpoint of the range, 26,450 shares at the maximum of
the range and 30,418 shares at 15% above the maximum of the range,
respectively, will be reserved for future issuance upon the exercise of
options to be granted under the stock option plan. The issuance of
common stock pursuant to the exercise of options under the stock option
plan will result in the dilution of existing stockholders' voting
interests by approximately 9.1%. Assuming stockholder approval of the
stock option plan, that all these options were exercised at the
beginning of the period at an exercise price of $10.00 per share and
that the shares to fund the restricted stock plan are acquired through
open market purchases at the purchase price, pro forma net earnings per
share for the year ended December 31, 1999 would be $1.03, $.92, $.84,
and $.76 at the minimum, midpoint, maximum and 15% above the maximum of
the estimated offering range, respectively, and pro forma stockholders'
equity per share at December 31, 1999 would be $20.70, $18.94, $17.63
and $16.50 at the minimum, midpoint, maximum and 15% above the maximum
of the range, respectively. See "Management - Benefits -- Other Stock
Benefit Plan."
20
<PAGE>
CAPITALIZATION
The following table presents the historical capitalization of Community
Bank at December 31, 1999, and the pro forma consolidated capitalization of CBCT
Bancshares, Inc. after giving effect to the conversion, based upon the sale of
the number of shares shown below and the other assumptions set forth under "Pro
Forma Data."
<TABLE>
<CAPTION>
-----------------------------------------------------------
195,500 230,000 264,500 304,175 Shares
Shares at Shares at Shares at at $10
Capitalization $10 per $10 per $10 per per Share
of Bank at Share Share Share (Maximum
December 31, (Minimum (Midpoint (Maximum of Range
1999 of Range) of Range) of Range) as Adjusted)
-------------- --------- --------- --------- --------------
(In Thousands)
<S> <C> <C> <C> <C> <C>
Deposits(2)................................... $32,354 $32,354 $32,354 $32,354 $32,354
Borrowings.................................... 7,392 7,392 7,392 7,392 7,392
------- ------- ------- ------- -------
Total deposits and borrowings.............. $39,746 $39,746 $39,746 $39,746 $39,746
======= ======= ======= ======= =======
Capital Stock:
Preferred stock, $0.01 par value per share:
authorized - 1,000,000 shares
assumed outstanding - none.............. $ - $ - $ - $ - $ -
Common stock, $0.01 par value per share:
authorized - 4,000,000 shares;
shares to be outstanding - as shown(3).. - 2 2 3 3
Paid-in capital............................... - 1,573 1,918 2,262 2,659
Less:
Common stock to be acquired by
employee stock ownership plan(4)........ - (156) (184) (212) (243)
Common stock to be acquired by
restricted stock plan(5)................ - (78) (92) (106) (122)
Retained earnings - substantially restricted.. 3,214 3,214 3,214 3,214 3,214
Unrealized losses on available-for-sale
securities, net of tax..................... (215) (215) (215) (215) (215)
------- ------- ------- ------- -------
Total stockholders' equity.................... $ 2,999 $ 4,339 $ 4,643 $ 4,947 $ 5,296
======= ======= ======= ======= =======
- ----------------
<FN>
(1) As adjusted to give effect to an increase in the number of shares which
could occur due to an increase in the estimated offering range of up to
15% to reflect changes in market and financial conditions following the
commencement of the conversion.
(2) Does not reflect withdrawals from deposit accounts for the purchase of
common stock in the conversion. Any withdrawals would reduce pro forma
deposits by the amount of the withdrawals.
(3) Reflects the issuance of the shares of common stock to be sold in the
conversion. No effect has been given to the issuance of additional
shares of common stock pursuant to the proposed stock option plan. See
"Pro Forma Data" and "Management - Benefits - Other Stock Benefit
Plans."
(4) Assumes that 8.0% of the common stock issued in the conversion will be
purchased by the employee stock ownership plan, which is reflected as a
reduction from stockholders' equity. The employee stock ownership plan
shares will be purchased with funds loaned to the employee stock
ownership plan by CBCT Bancshares, Inc. See "Pro Forma Data" and
"Management - Benefits -Employee Stock Ownership Plan."
(5) CBCT Bancshares, Inc. intends to adopt the restricted stock plan and to
submit such plan to stockholders at an annual or special meeting of
stockholders held at least six months following the completion of the
conversion. If the plan is approved by stockholders, CBCT Bancshares,
Inc. intends to contribute sufficient funds to the restricted stock
plan to enable the plan to purchase a number of shares of common stock
equal to 4.0% of the common stock issued in the conversion. Assumes
that stockholder approval has been obtained and that the shares have
been purchased in the open market at the purchase price. However, in
the event CBCT Bancshares, Inc. issues authorized but unissued shares
of common stock to the restricted stock plan in the amount of 4.0% of
the common stock issued in the conversion, the voting interests of
existing stockholders would be diluted approximately 3.8%. The shares
are reflected as a reduction of stockholders' equity. See "Pro Forma
Data" and "Management - Benefits - Other Stock Benefit Plans."
</FN>
</TABLE>
21
<PAGE>
COMMUNITY BANK
EXCEEDS ALL REGULATORY CAPITAL REQUIREMENTS
At December 31, 1999, Community Bank exceeded all of the regulatory
capital requirements applicable to it. The table sets forth the historical
regulatory capital of Community Bank at December 31, 1999 and the pro forma
regulatory capital of Community Bank after giving effect to the conversion,
based upon the sale of the number of shares shown in the table. The pro forma
regulatory capital amounts reflect the receipt by Community Bank of 50% of the
net stock proceeds, minus expenses and the amounts to be loaned to the employee
stock ownership plan. The pro forma risk-based capital amounts assume the
investment of the net proceeds received by Community Bank in assets which have a
risk-weight of 20% under applicable regulations, as if such net proceeds had
been received and so applied at December 31, 1999.
<TABLE>
<CAPTION>
Maximum,
Historical at Minimum Midpoint Maximum as adjusted,
December 31, 1999 195,500 230,000 264,500 of 304,175
Shares Sold Shares Sold Shares Sold Shares Sold Shares Sold
at $10.00 at $10.00 at $10.00 at $10.00 at $10.00
per Share per Share per Share per Share per Share
----------------- -------------- -------------- -------------- --------------
Amount Percent(1) Amount Percent Amount Percent Amount Percent Amount Percent
------ ---------- ------ ------- ------ ------- ------ ------- ------ -------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital under generally accepted
accounting principles..................... $2,999 7.0% $3,709 8.5% $3,867 8.8% $4,026 9.2% $4,209 9.6%
====== ==== ====== ==== ====== ==== ====== ==== ====== ====
Tier 1 leverage capital...................... $3,214 7.5% $3,924 9.0% $4,082 9.3% $4,241 9.6% $4,424 10.0%
Tier 1 capital requirement................... 1,722 4.0 1,750 4.0 1,757 4.0 1,763 4.0 1,770 4.0
------ ---- ------ ---- ------ ---- ------ ---- ------ ----
Excess.................................... $1,492 3.5% $2,174 5.0% $2,325 5.3% $2,478 5.6% $2,654 6.0%
====== ==== ====== ==== ====== ==== ====== ==== ====== ====
Tier 1 risk adjusted capital................. $3,214 15.0% $3,924 18.2% $4,082 18.9% $4,241 19.6% $4,424 20.4%
Tier 1 risk adjusted capital requirement..... 858 4.0 864 4.0 865 4.0 867 4.0 858 4.0
------ ---- ------ ---- ------ ---- ------ ---- ------ ----
Excess.................................... $2,356 11.0% $3,060 14.2% $3,217 14.9% $3,374 15.6% $3,556 16.4%
====== ==== ====== ==== ====== ==== ====== ==== ====== ====
Risk-based capital........................... $3,412 15.9% $4,122 19.1% $4,280 19.8% $4,439 20.5% $4,622 21.3%
Risk-based capital requirement............... 1,717 8.0 1,728 8.0 1,731 8.0 1,733 8.0 1,736 8.0
------ ---- ------ ---- ------ ---- ------ ---- ------ ----
Excess.................................... $1,695 7.9% $2,394 11.1% $2,549 11.8% $2,706 12.5% $2,886 13.3%
====== ==== ====== ==== ====== ==== ====== ==== ====== ====
- ----------------
<FN>
(1) Adjusted total or adjusted risk-weighted assets, as appropriate.
</FN>
</TABLE>
22
<PAGE>
COMMUNITY BANK'S CONVERSION
The board of directors of Community Bank and the Texas Savings and Loan
Department have approved the plan of conversion. The Texas Savings and Loan
Department approval is subject to approval of the plan of conversion by our
members and to the satisfaction of certain other conditions imposed by the Texas
Savings and Loan Department. Texas Savings and Loan Department approval does not
constitute a recommendation or endorsement of the plan of conversion.
General
On December 14, 1999, we adopted a plan of conversion, pursuant to
which we will convert from a Texas-chartered mutual savings bank to a
Texas-chartered stock savings bank and at the same time become a wholly owned
subsidiary of CBCT Bancshares, Inc. The conversion will include adoption of the
proposed stock charter and bylaws, which will authorize us to issue capital
stock. Under the plan, Community Bank common stock is being sold to CBCT
Bancshares, Inc. and CBCT Bancshares, Inc. common stock is being offered to our
eligible depositors and borrowers, the employee stock ownership plan, directors,
officers and employees, other members, and then to the public. The conversion
will be accounted for at historical cost in a manner similar to a pooling of
interests. The Federal Reserve Board has approved CBCT Bancshares, Inc.'s
application to become a bank holding company and to acquire all of the Community
Bank's common stock to be issued in the conversion.
The shares of CBCT Bancshares, Inc. common stock are first being
offered in a subscription offering to holders of subscription rights. To the
extent shares of common stock remain available after the subscription offering,
shares may be offered in a direct community offering on a best efforts basis
through Keefe, Bruyette & Woods in such a manner as to promote a wide
distribution of the shares. The direct community offering, if any, may commence
with, at any time during, or as soon as practicable after the commencement of
the subscription offering. Shares not subscribed for in the subscription
offering and direct community offering may be offered for sale on a best efforts
basis in a public offering conducted by Keefe, Bruyette & Woods. We have the
right, in our sole discretion, to accept or reject, in whole or in part, any
orders to purchase shares of common stock received in the direct community
offering and the public offering. See "- Offering of CBCT Bancshares, Inc.
Common Stock."
Subscriptions for shares will be subject to the maximum and minimum
purchase limitations set forth in the plan of conversion. See "- Limitations on
Stock Purchases."
The completion of the offering is subject to market conditions and
other factors beyond our control. No assurance can be given as to the length of
time following approval of the plan at the meeting of our members that will be
required to complete the sale of shares being offered in the conversion. If
delays are experienced, significant changes may occur in the estimated offering
range with corresponding changes in the offering price and the net proceeds to
be realized by us from the sale of the shares. In the event the conversion is
terminated, we will charge all conversion expenses against current income and
any funds collected by us in the offering will be promptly returned, with
interest, to each subscriber.
23
<PAGE>
Our Reasons for the Corporate Change
As a mutual institution, Community Bank has no authority to issue
shares of capital stock and consequently has no access to market sources of
equity capital. Only by generating and retaining earnings from year to year is
Community Bank able to increase its capital position.
As a stock corporation upon completion of the conversion, Community
Bank will be organized in the form used by commercial banks, most major
corporations and a majority of savings institutions. The ability to raise new
equity capital through the issuance and sale of Community Bank's or CBCT
Bancshares, Inc.'s capital stock will allow Community Bank the flexibility to
increase its capital position more rapidly than by accumulating earnings and at
times deemed advantageous by the board of directors of Community Bank. It will
also support future growth and expanded operations, including increased lending
and investment activities, as business and regulatory needs require. The ability
to attract new capital also will help Community Bank address the needs of the
communities it serves and enhance its ability to make acquisitions or expand
into new businesses. The acquisition alternatives available to Community Bank
are quite limited as a mutual institution. After the conversion, Community Bank
will have increased ability to merge with other institutions and CBCT
Bancshares, Inc. may acquire control of other stock savings institutions and
retain the acquired institution as a separate subsidiary of CBCT Bancshares,
Inc. Finally, the ability to issue capital stock will enable Community Bank to
establish stock compensation plans for directors, officers and employees, giving
them equity interests in CBCT Bancshares, Inc. and greater incentive to improve
its performance. For a description of the stock compensation plans which will be
adopted by us in connection with the conversion, see "Management."
After considering the advantages and disadvantages of the conversion,
as well as applicable fiduciary duties and alternative transactions, the board
of directors of Community Bank approved the conversion as being in the best
interests of Community Bank and equitable to its account holders.
Effects of the Conversion
General. The conversion will have no effect on Community Bank's present
business of accepting deposits and investing its funds in loans and other
investments permitted by law. The conversion will not result in any change in
the existing services provided to depositors and borrowers, or in our existing
office, management and staff. Community Bank will continue to be subject to
regulation, supervision and examination by the Texas Savings and Loan Department
and the FDIC.
Deposits and Loans. Each holder of a deposit account in Community Bank
at the time of the conversion will continue as an account holder in Community
Bank after the conversion, and the conversion will not affect the deposit
balance, interest rate or other terms of such accounts. Each account will be
insured by the FDIC to the same extent as before the conversion. Depositors in
Community Bank will continue to hold their existing certificates, passbooks and
other evidence of their accounts. The conversion will not affect the loan terms
of any borrower from Community Bank. The amount, interest rate, maturity,
security for and obligations under
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each loan will remain as they existed prior to the conversion. See "-- Voting
Rights" and "--Depositors' Rights if We Liquidate" below for a discussion of the
effects of the conversion on the voting and liquidation rights of the depositors
of Community Bank.
Continuity. During the conversion process, the normal business of
Community Bank of accepting deposits and making loans will continue without
interruption. Following completion of the conversion, Community Bank will
continue to be subject to regulation by the Texas Savings and Loan Department,
and FDIC insurance of accounts will continue without interruption. After the
conversion, Community Bank will continue to provide services for depositors and
borrowers under current policies and by its present management and staff.
The board of directors presently serving Community Bank will serve as
the board of directors of Community Bank after the conversion. The initial
members of the board of directors of CBCT Bancshares, Inc. will consist of the
individuals currently serving on the board of directors of Community Bank. After
the conversion, the voting stockholders of CBCT Bancshares, Inc. will elect
approximately one-third of CBCT Bancshares, Inc.'s directors annually. All
current officers of Community Bank will retain their positions with Community
Bank after the conversion.
Voting Rights. After completion of the conversion, depositor and
borrower members will have no voting rights in Community Bank or CBCT
Bancshares, Inc. and, therefore, will not be able to elect directors of
Community Bank or CBCT Bancshares, Inc. or to control their affairs. Currently
these rights are held by depositors and borrowers of Community Bank. After the
conversion, voting rights in CBCT Bancshares, Inc. will be vested exclusively in
the stockholders of CBCT Bancshares, Inc., which will own all of the stock of
Community Bank. Each holder of common stock will be entitled to vote on any
matter to be considered by the stockholders of CBCT Bancshares, Inc., subject to
the provisions of CBCT Bancshares, Inc.'s articles of incorporation.
Depositor's Rights if We Liquidate. We have no plans to liquidate,
either before or after the completion of the conversion. However, if there
should ever be a complete liquidation of Community Bank, either before or after
conversion, deposit account holders would receive the protection of insurance by
the FDIC up to applicable limits. In addition, liquidation rights before and
after the conversion would be as follows:
Liquidation Rights in Present Mutual Institution. In addition to the
protection of FDIC insurance up to applicable limits, in the event of
the complete liquidation of Community Bank, each holder of a deposit
account would receive his or her pro rata share of any assets of
Community Bank remaining after payment of claims of all creditors
(including the claims of all depositors in the amount of the withdrawal
value of their accounts). Each holder's pro rata share of the remaining
assets, if any, would be in the same proportion of the assets as the
balance in his or her deposit account was to the aggregate balance in
all our deposit accounts at the time of liquidation.
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Liquidation Rights in Proposed Converted Institution. After conversion,
each deposit account holder, in the event of the complete liquidation
of Community Bank, would have a claim of the same general priority as
the claims of all our other general creditors in addition to the
protection of FDIC insurance up to applicable limits. Therefore, except
as described below, the deposit account holder's claim would be solely
in the amount of the balance in his or her deposit account plus accrued
interest. A deposit account holder would have no interest in the assets
of Community Bank above that amount, if any.
The plan of conversion provides for the establishment, upon the
completion of the conversion, of a special "liquidation account" for
the benefit of eligible account holders (i.e., eligible depositors at
September 30, 1998) and supplemental account holders (i.e., eligible
depositors at March 31, 2000). Each eligible account holder and
supplemental eligible account holder, if he or she continues to
maintain his or her deposit account with Community Bank, would be
entitled upon the complete liquidation of Community Bank after
conversion, to an interest in the liquidation account prior to any
payment to stockholders. Each eligible account holder would have an
initial interest in the liquidation account for each deposit account
held with Community Bank on the qualifying date, September 30, 1998.
Each supplemental eligible account holder would have a similar interest
as of that qualifying date, March 31, 2000. The interest as to each
deposit account would be in the same proportion of the total
liquidation account as the balance of the deposit account on the
qualifying dates was to the aggregate balance in all the deposit
accounts of eligible account holders and supplemental eligible account
holders on the qualifying dates. However, if the amount in the deposit
account on any annual closing date (December 31) is less than the
amount in the account on the respective qualifying dates, then the
interest in this special liquidation account would be reduced at that
time by an amount proportionate to any reduction, and the interest
would cease to exist if the deposit account was closed. The interest in
the special liquidation account will never be increased despite any
increase in the related deposit account after the respective qualifying
dates.
Any assets remaining after the above liquidation rights of eligible
account holders and supplemental eligible account holders were
satisfied would be distributed to CBCT Bancshares, Inc. as the sole
stockholder of Community Bank.
Tax Effects of the Conversion. Community Bank has received an opinion
from its special counsel, Silver, Freedman & Taff, L.L.P., Washington, D.C., as
to the material federal income tax consequences of the conversion to Community
Bank and CBCT Bancshares, Inc., and as to the generally applicable material
federal income tax consequences of the conversion on Community Bank's account
holders and to persons who purchase common stock in the offering.
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The opinion provides that, among other things:
o Community Bank's adoption of a charter in stock form will
qualify as a tax-free reorganization under Internal Revenue
Code of 1986, as amended, Section 368(a)(1)(F);
o no gain or loss will be recognized by Community Bank solely as
a result of the conversion to stock form;
o no gain or loss will be recognized by Community Bank's account
holders upon the issuance to them of accounts in Community
Bank, in stock form, immediately after the conversion, in the
same dollar amounts and on the same terms and conditions as
their accounts at Community Bank immediately prior to the
conversion;
o the tax basis of each account holder's interest in the
liquidation account received in the conversion will be equal
to the value, if any, of that interest on the date and at the
time of the conversion;
o the tax basis of the common stock purchased in the conversion
will be equal to the amount paid therefor; increased, in the
case of common stock acquired pursuant to the exercise of
subscription rights, by the fair market value, if any, of such
subscription rights;
o the holding period of the common stock purchased pursuant to
the exercise of subscription rights will commence upon the
exercise of such holder's subscription rights and, in all
other cases, the holding period of purchased common stock will
commence on the date following the date of such purchase; and
o gain or loss will be recognized by account holders upon the
receipt or exercise of subscription rights in the conversion,
but only to the extent the subscription rights are deemed to
have value, as discussed below.
The opinion of Silver, Freedman & Taff, L.L.P. is based in part upon,
and subject to the continuing validity in all material respects through the date
of the conversion of various representations of Community Bank and upon certain
assumptions and qualifications, including that the conversion is completed in
the manner and according to the terms provided in the plan of conversion. This
opinion is also based upon the Internal Revenue Code, regulations now in effect
or proposed, current administrative rulings and practice and judicial authority,
all of which are subject to change and any change may be made with retroactive
effect. Unlike private letter rulings received from the IRS, an opinion is not
binding upon the IRS and there can be no assurance that the IRS will not take a
position contrary to the positions reflected in this opinion, or that this
opinion will be upheld by the courts if challenged by the IRS.
Community Bank has also obtained an opinion from outside tax advisors
that the income tax effects of the conversion under Texas tax laws will be
substantially the same as described above with respect to federal income tax
laws.
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CBCT Bancshares, Inc. and Community Bank have received a letter from
Ferguson & Company, stating its belief that the subscription rights do not have
any value, based on the fact that these rights are acquired by the recipients
without cost, are nontransferable and of short duration, and give the recipients
the right only to purchase the common stock at a price equal to its estimated
fair market value, which will be the same price as the purchase price for the
unsubscribed shares of common stock. If the subscription rights granted to
eligible subscribers are deemed to have an ascertainable value, receipt of these
rights would be taxable probably only to those eligible subscribers who exercise
the subscription rights, either as a capital gain or ordinary income, in an
amount equal to such value, and CBCT Bancshares, Inc. and Community Bank could
recognize gain on any distribution. Eligible subscribers are encouraged to
consult with their own tax advisor as to the tax consequences in the event that
subscription rights are deemed to have an ascertainable value. Unlike private
rulings, the letter of Ferguson & Company is not binding on the IRS, and the IRS
could disagree with conclusions reached in the letter. In the event of any
disagreement, there can be no assurance that the IRS would not prevail in a
judicial or administrative proceeding.
How We Determined Our Price and the Number of Shares to be Issued in the Stock
Offering
The plan of conversion requires that the purchase price of the common
stock must be based on the appraised pro forma market value of CBCT Bancshares,
Inc. and Community Bank, as determined on the basis of an independent valuation.
Community Bank has retained Ferguson & Company to make this valuation. For its
services in making this appraisal, Ferguson & Company's fees and out-of-pocket
expenses are estimated to be $17,500. Community Bank has agreed to indemnify
Ferguson & Company and any employees of Ferguson & Company who act for or on
behalf of Ferguson & Company in connection with the appraisal against any and
all loss, cost, damage, claim, liability or expense of any kind, including
claims under federal and state securities laws, arising out of any misstatement
or untrue statement of a material fact or an omission to state a material fact
in the information supplied by Community Bank to Ferguson & Company, unless
Ferguson & Company is determined to be negligent or otherwise at fault.
An appraisal has been made by Ferguson & Company in reliance upon the
information contained in this prospectus, including the financial statements.
Ferguson & Company also considered the following factors, among others:
o the present and projected operating results and financial
condition of CBCT Bancshares, Inc. and Community Bank and the
economic and demographic conditions in Community Bank's
existing marketing areas;
o certain historical, financial and other information relating
to Community Bank;
o a comparative evaluation of the operating and financial
statistics of Community Bank with those of other similarly
situated publicly traded thrift holding companies; the
aggregate size of the offering of the common stock;
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o the impact of the conversion on Community Bank's net worth and
earnings potential;
o the proposed dividend policy of CBCT Bancshares, Inc. and
Community Bank; and
o the trading market for securities of comparable institutions
and general conditions in the market for such securities.
In its review of the appraisal provided by Ferguson & Company, the board of
directors reviewed the methodologies and the appropriateness of the assumptions
used by Ferguson & Company in addition to the factors listed above, and the
board of directors believes that these assumptions were reasonable.
On the basis of the foregoing, Ferguson & Company has advised CBCT
Bancshares, Inc. and Community Bank that in its opinion, dated February 29,
2000, the estimated pro forma market value of the common stock on a fully
converted basis ranged from a minimum of $2.0 million to a maximum of $2.6
million with a midpoint of $2.3 million. The board of directors of Community
Bank determined that the common stock should be sold at $10.00 per share. Based
on the estimated offering range and the purchase price, the number of shares of
common stock that CBCT Bancshares, Inc. will issue will range from between
195,500 shares and 264,500 shares, with a midpoint of 230,000 shares. The
estimated offering range may be amended with the approval of the Texas Savings
and Loan Department and the FDIC, if required, or if necessitated by subsequent
developments in the financial condition of CBCT Bancshares, Inc. and Community
Bank or market conditions generally, or to fill the order of the employee stock
ownership plan. In the event the estimated offering range is updated to amend
the value of the common stock below $2.0 million or above $3.0 million, which is
the maximum of the estimated offering range, as adjusted by 15%, a new appraisal
will be filed with the Texas Savings and Loan Department and the FDIC.
Based upon market and financial conditions, in the event CBCT
Bancshares, Inc. receives orders for common stock in excess of $2.6 million (the
maximum of the estimated offering range) and up to $3.0 million (the maximum of
the estimated offering range, as adjusted by 15%), CBCT Bancshares, Inc. may be
required by the Texas Savings and Loan Department and the FDIC to accept all
such orders. No assurances, however, can be made that CBCT Bancshares, Inc. will
receive orders for common stock in excess of the maximum of the estimated
offering range or that, if these orders are received, that all orders will be
accepted because CBCT Bancshares, Inc.'s final valuation and number of shares to
be issued are subject to the receipt of an updated appraisal from Ferguson &
Company which reflects an increase in the valuation and the approval of the
increase by the Texas Savings and Loan Department and the FDIC. There is no
obligation or understanding on the part of management to take and/or pay for any
shares in order to complete the conversion.
Ferguson & Company's valuation is not intended, and must not be
construed, as a recommendation of any kind as to the advisability of purchasing
these shares. Ferguson & Company did not independently verify the consolidated
financial statements and other
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information provided by Community Bank, nor did Ferguson & Company value
independently the assets or liabilities of Community Bank. The valuation
considers Community Bank as a going concern and should not be considered as an
indication of the liquidation value of Community Bank. Moreover, because this
valuation is necessarily based upon estimates and projections of a number of
matters, all of which are subject to change from time to time, no assurance can
be given that persons purchasing common stock in the offerings will thereafter
be able to sell such shares at prices at or above the purchase price or in the
range of the valuation described above.
Prior to completion of the conversion, the maximum of the estimated
offering range may be increased up to 15% and the number of shares of common
stock may be increased to 304,175 shares to reflect changes in market and
financial conditions, without the resolicitation of subscribers. See "--
Limitations on Stock Purchases" as to the method of distribution and allocation
of additional shares that may be issued in the event of an increase in the
estimated offering range to fill unfilled orders in the subscription offering.
No sale of shares of common stock in the conversion may be completed
unless prior to such completion Ferguson & Company confirms that nothing of a
material nature has occurred which, taking into account all relevant factors,
would cause it to conclude that the aggregate value of the common stock to be
issued is materially incompatible with the estimate of the aggregate
consolidated pro forma market value of CBCT Bancshares, Inc. and Community Bank.
If this confirmation is not received, CBCT Bancshares, Inc. may cancel the
conversion, extend the offering period and establish a new estimated offering
range and/or estimated price range, extend, reopen or hold a new offering or
take any other action the Texas Savings and Loan Department or the FDIC may
permit.
Depending upon market or financial conditions following the start of
the subscription offering, the total number of shares of common stock may be
increased or decreased without a resolicitation of subscribers, provided that
the product of the total number of shares times the purchase price is not below
the minimum or more than 15% above the maximum of the estimated offering range.
In the event market or financial conditions change so as to cause the aggregate
purchase price of the shares to be below the minimum of the estimated offering
range or more than 15% above the maximum of such range, purchasers will be
resolicited and be permitted to continue their orders, in which case they will
need to reconfirm their subscriptions prior to the expiration of the
resolicitation offering or their subscription funds will be promptly refunded
with interest at Community Bank's passbook rate of interest, or be permitted to
modify or rescind their subscriptions. Any change in the estimated offering
range must be approved by the Texas Savings and Loan Department and the FDIC. If
the number of shares of common stock issued in the conversion is increased due
to an increase of up to 15% in the estimated offering range to reflect changes
in market or financial conditions, persons who subscribed for the maximum number
of shares will be given the opportunity to subscribe for the adjusted maximum
number of shares. See "-- Limitations on Stock Purchases."
An increase in the number of shares of common stock as a result of an
increase in the estimated pro forma market value would decrease both a
subscriber's ownership interest and CBCT Bancshares, Inc.'s pro forma net income
and stockholders' equity on a per share basis
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while increasing pro forma net income and stockholders' equity on an aggregate
basis. A decrease in the number of shares of common stock would increase both a
subscriber's ownership interest and CBCT Bancshares, Inc.'s pro forma net income
and stockholders' equity on a per share basis while decreasing pro forma net
income and stockholders' equity on an aggregate basis. See "Risk Factors - We
intend to grant stock options and restricted stock to the board and management
following the change in structure and stock offering which could further reduce
your voting interest" and "Pro Forma Data."
Copies of the appraisal report of Ferguson & Company, including any
amendments, and the detailed report of the appraiser setting forth the method
and assumptions for the appraisal are available for inspection at the main
office of Community Bank and the other locations specified under "Additional
Information."
Subscription Offering and Subscription Rights
Under the plan of conversion, rights to subscribe for the purchase of
common stock have been granted to the following persons in the following order
of descending priority:
o depositors of Community Bank as of the close of business on
September 30, 1998 ("Eligible Account Holders"),
o tax-qualified employee plans, ("Tax-Qualified Employee
Plans"),
o depositors of Community Bank as of the close of business on
March 31, 2000 ("Supplemental Eligible Account Holders"),
o borrowers and depositors of Community Bank, as of the close of
business on ___________, 2000, other than Eligible Account
Holders or Supplemental Eligible Account Holders ("Other
Members") and
o directors, officers and employees of Community Bank.
All subscriptions received will be subject to the availability of common stock
after satisfaction of all subscriptions of all persons having prior rights in
the subscription offering and to the maximum and minimum purchase limitations
set forth in the plan of conversion and as described below under "-- Limitations
on Stock Purchases."
Preference Category No.1: Eligible Account Holders. Each Eligible
Account Holder shall receive, without payment, first priority, nontransferable
subscription rights to subscribe for shares of common stock in an amount equal
to the greater of:
(1) $100,000 or 10,000 shares of common stock;
(2) one-tenth of one percent of the total offering of shares of
common stock; or
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(3) 15 times the product, rounded down to the next whole number,
obtained by multiplying the total number of shares of common
stock to be issued by a fraction, of which the numerator is
the amount of the qualifying deposit of the Eligible Account
Holder and the denominator is the total amount of qualifying
deposits of all Eligible Account Holders in Community Bank in
each case as of the close of business on September 30, 1998,
the "Eligibility Record Date," subject to the overall purchase
limitations. See "-- Limitations on Stock Purchases."
If there are not sufficient shares available to satisfy all
subscriptions, shares first will be allocated among subscribing Eligible Account
Holders so as to permit each such Eligible Account Holder, to the extent
possible, to purchase a number of shares sufficient to make his total allocation
equal to the lesser of the number of shares subscribed for or 100 shares.
Thereafter, any shares remaining will be allocated among the subscribing
Eligible Account Holders whose subscriptions remain unfilled pro rata in the
proportion that the amounts of their respective qualifying deposits bear to the
total amount of qualifying deposits of all subscribing Eligible Account Holders
whose subscriptions remain unfilled. For example, if an Eligible Account Holder
with an unfilled subscription has qualifying deposits totaling $100, and the
total amount of qualifying deposits for Eligible Account Holders with unfilled
subscriptions was $1,000, then the number of shares that may be allocated to
fill this Eligible Account Holder's subscription would be 10% of the shares
remaining available, up to the amount subscribed for.
To ensure proper allocation of stock, each Eligible Account Holder must
list on his subscription order form all accounts in which he has an ownership
interest. Failure to list an account could result in fewer shares being
allocated than if all accounts had been disclosed. The subscription rights of
Eligible Account Holders who are also directors or officers of Community Bank or
their associates will be subordinated to the subscription rights of other
Eligible Account Holders to the extent attributable to increased deposits in the
year preceding September 30, 1998.
Preference Category No. 2: Tax-Qualified Employee Plans. Each
Tax-Qualified Employee Plan, including the employee stock ownership plan shall
be entitled to receive, without payment therefor, second priority,
nontransferable subscription rights to purchase up to 10% of common stock,
provided that individually or in the aggregate these plans, other than that
portion of the plans which is self-directed, shall not purchase more than 10% of
the shares of common stock, including any increase in the number of shares of
common stock after the date hereof as a result of an increase of up to 15% in
the maximum of the estimated offering range. The employee stock ownership plan
intends to purchase 8.0% of the shares of common stock issued in the conversion,
or 15,640 shares and 21,160 shares based on the minimum and maximum of the
estimated offering range, respectively. Subscriptions by any of the
Tax-Qualified Employee Plans will not be aggregated with shares of common stock
purchased directly by or which are otherwise attributable to any other
participants in the subscription and direct community offerings, including
subscriptions of any of Community Bank's directors, officers, employees or
associates thereof. Subscription rights received pursuant to this category shall
be subordinated to all rights received by Eligible Account Holders to purchase
shares pursuant to preference category No.1. See "Management - Benefits --
Employee Stock Ownership Plan."
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Preference Category No. 3: Supplemental Eligible Account Holders. To
the extent that there are sufficient shares remaining after satisfaction of
subscriptions by Eligible Account Holders and the Tax-Qualified Employee Plans,
each Supplemental Eligible Account Holder shall be entitled to receive, without
payment therefor, third priority, nontransferable subscription rights to
subscribe for shares of common stock in an amount equal to the greater of:
(1) $100,000 or 10,000 shares of common stock;
(2) one-tenth of one percent of the total offering of shares of
common stock; or
(3) 15 times the product, rounded down to the next whole number,
obtained by multiplying the total number of shares of common
stock to be issued by a fraction, of which the numerator is
the amount of the qualifying deposit of the Supplemental
Eligible Account Holder and the denominator of which is the
total amount of qualifying deposits of all Supplemental
Eligible Account Holders in Community Bank in each case on the
close of business on March 31, 2000, the "Supplemental
Eligibility Record Date," subject to the overall purchase
limitations. See "-- Limitations on Stock Purchases."
If there are not sufficient shares available to satisfy all
subscriptions of all Supplemental Eligible Account Holders, available shares
first will be allocated among subscribing Supplemental Eligible Account Holders
so as to permit each Supplemental Eligible Account Holder, to the extent
possible, to purchase a number of shares sufficient to make his total
allocation, including the number of shares, if any, allocated in accordance with
preference category No.1, equal to the lesser of the number of shares subscribed
for or 100 shares. Thereafter, any shares remaining available will be allocated
among the Supplemental Eligible Account Holders whose subscriptions remain
unfilled pro rata in the proportion that the amounts of their respective
qualifying deposits bear to the total amount of qualifying deposits of all
subscribing Supplemental Eligible Account Holders whose subscriptions remain
unfilled.
Preference Category No. 4: Other Members. To the extent that there are
sufficient shares remaining after satisfaction of subscriptions by Eligible
Account Holders, the Tax-Qualified Employee Plans and Supplemental Eligible
Account Holders, each Other Member shall receive, without payment therefor,
fourth priority, nontransferable subscription rights to subscribe for shares of
CBCT Bancshares, Inc. common stock, up to the greater of $100,000 or 10,000
shares of common stock or one-tenth of one percent of the total offering of
shares of common stock in the offerings, subject to the overall purchase
limitations. See "-- Limitations on Stock Purchases."
In the event the Other Members subscribe for a number of shares which,
when added to the shares subscribed for by Eligible Account Holders, the
Tax-Qualified Employee Plans and Supplemental Eligible Account Holders, is in
excess of the total number of shares of common stock offered in the conversion,
available shares will be allocated among the subscribing Other Members pro rata
in the same proportion that his number of votes on the close of business on
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__________, 2000, the date for determining voting members entitled to vote at
the special meeting, which we call the voting record date, bears to the total
number of votes on the voting record date of all subscribing Other Members on
that date. This number of votes shall be determined based on Community Bank's
mutual charter and bylaws in effect on the date of approval by members of the
plan of conversion.
Preference Category No. 5: Directors, officers and employees. To the
extent that there are sufficient shares remaining after satisfaction of all
subscriptions by Eligible Account Holders, the Tax-Qualified Employee Plans,
Supplemental Eligible Account Holders and Other Members, then directors,
officers and employees of Community Bank as of the date of the commencement of
the subscription offering shall be entitled to receive, without payment, fifth
priority, nontransferable subscription rights to purchase in this category an
aggregate of up to 25% of the common stock being offered. The maximum amount of
shares which may be purchased under this category by any person is $100,000 of
common stock. The ability of directors, officers and employees to purchase
common stock under this category is in addition to rights which are otherwise
available to them under the plan of conversion as they may fall within higher
priority categories, and the plan of conversion generally allows these persons
to purchase in the aggregate up to 35% of common stock sold in the offerings.
See "-- Limitations on Stock Purchases."
In the event of an oversubscription in this category, the shares
available shall be allocated pro rata among all of the subscribing directors,
officers and employees in this category.
Expiration Date for the Subscription Offering. The subscription
offering will expire at noon, Smithville, Texas time, on ________, 2000, the
"subscription expiration date," unless extended for up to 45 days or for such
additional periods by CBCT Bancshares, Inc. and Community Bank as may be
approved by the Texas Savings and Loan Department. The subscription offering may
not be extended beyond ________, 2002. Subscription rights which have not been
exercised prior to the subscription expiration date, unless extended, will
become void.
CBCT Bancshares, Inc. and Community Bank will not execute orders until
at least the minimum number of shares of common stock, 195,500 shares, have been
subscribed for or otherwise sold. If all shares have not been subscribed for or
sold within 45 days after the subscription expiration date, unless this period
is extended with the consent of the Texas Savings and Loan Department and the
FDIC, all funds delivered to Community Bank pursuant to the subscription
offering will be returned promptly to the subscribers with interest and all
withdrawal authorizations will be canceled. If an extension beyond the 45-day
period following the subscription expiration date is granted, CBCT Bancshares,
Inc. and Community Bank will notify subscribers of the extension of time and of
any rights of subscribers to modify or rescind their subscriptions.
Direct Community Offering
To the extent that shares remain available for purchase after
satisfaction of all subscriptions of Eligible Account Holders, the Tax-Qualified
Employee Plans, Supplemental Eligible Account Holders, Other Members and
directors, officers and employees of Community
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Bank, we anticipate we will offer shares pursuant to the plan of conversion to
members of the general public who receive a prospectus, with a preference given
to natural persons residing in the county in which Community Bank has its
office. These natural persons are referred to as preferred subscribers. Persons,
together with an associate or group of persons acting in concert with these
persons, may not subscribe for or purchase more than $100,000 of common stock in
the direct community offering, if any. CBCT Bancshares, Inc. and Community Bank
may limit total subscriptions in the direct community offering so as to assure
that the number of shares available for the public offering may be up to a
specified percentage of the number of shares of common stock. Finally, CBCT
Bancshares, Inc. and Community Bank may reserve shares offered in the direct
community offering for sales to institutional investors. The opportunity to
subscribe for shares of common stock in any direct community offering will be
subject to the right of CBCT Bancshares, Inc. and Community Bank, in their sole
discretion, to accept or reject any orders in whole or in part from any person
either at the time of receipt of an order or as soon as practicable following
the subscription expiration date. The direct community offering, if any, shall
be for a period of not less than 20 days nor more than 45 days unless extended
by CBCT Bancshares, Inc. and Community Bank, and shall commence concurrently
with, during or promptly after the subscription offering.
In the event of an oversubscription for shares in the direct community
offering, shares may be allocated, to the extent shares remain available, first
to each preferred subscriber whose order is accepted by CBCT Bancshares, Inc.
Thereafter, shares may be allocated to cover the orders of any other person
subscribing for shares in the direct community offering so that each person
subscribing for shares may receive 1,000 shares, if available, and thereafter on
a pro rata basis to persons based on the amount of their respective
subscriptions.
Public Offering
As a final step in the conversion, the plan of conversion provides
that, if feasible, all shares of common stock not purchased in the subscription
offering and direct community offering may be offered for sale to selected
members of the general public in a public offering through an underwriter. We
call this the public offering. It is expected that the public offering will
commence as soon as practicable after termination of the subscription offering
and the direct community offering, if any. CBCT Bancshares, Inc. and Community
Bank, in their sole discretion, have the right to reject orders in whole or in
part received in the public offering. Neither Keefe, Bruyette & Woods nor any
registered broker-dealer shall have any obligation to take or purchase any
shares of common stock in the public offering; however, Keefe, Bruyette & Woods
has agreed to use its best efforts in the sale of shares in the public offering.
The price at which common stock is sold in the public offering will be
the same price at which shares are offered and sold in the subscription offering
and direct community offering. No person, by himself or herself, or with an
associate or group of persons acting in concert, may purchase more than $100,000
of common stock in the public offering, subject to the maximum purchase
limitations. See "-- Limitations on Stock Purchases."
Keefe, Bruyette & Woods may enter into agreements with broker-dealers
to assist in the sale of the shares in the public offering, although no
agreements of this kind exist as of the date
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<PAGE>
of this prospectus. No orders may be placed or filled by or for a selected
dealer during the subscription offering. After the close of the subscription
offering, Keefe, Bruyette & Woods will instruct selected dealers as to the
number of shares to be allocated to each selected dealer. Only after the close
of the subscription offering and upon allocation of shares to selected dealers
may selected dealers take orders from their customers. During the subscription
offering and direct community offering, selected dealers may only solicit
indications of interest from their customers to place orders with CBCT
Bancshares, Inc. as of a certain order date for the purchase of shares of CBCT
Bancshares, Inc. common stock. If Keefe, Bruyette & Woods and Community Bank
believe that not enough indications of interest and orders have been received in
the subscription offering and direct community offering to consummate the
conversion, Keefe, Bruyette & Woods will request, as of the order date, selected
dealers to submit orders to purchase shares for which they have previously
received indications of interest from their customers. Selected dealers will
send confirmations of the orders to such customers on the next business day
after the order date. Selected dealers will debit the accounts of their
customers on the settlement date, which date will be three business days from
the order date. Customers who authorize selected dealers to debit their
brokerage accounts are required to have the funds for payment in their account
on but not before the settlement date. On the settlement date, selected dealers
will deposit funds to the account established by Community Bank for each
selected dealer. Each customer's funds forwarded to Community Bank, along with
all other accounts held in the same title, will be insured by the FDIC up to
$100,000 in accordance with applicable FDIC regulations. After payment has been
received by Community Bank from selected dealers, funds will earn interest at
Community Bank's passbook rate until the completion or termination of the
conversion. Funds will be promptly returned, with interest, in the event the
conversion is not consummated as described above.
The public offering will be completed within 90 days after the
termination of the subscription offering, unless extended by Community Bank with
the approval of the Texas Savings and Loan Department. See "-- How We Determined
Our Price and the Number of Shares to be Issued in the Stock Offering" above for
a discussion of rights of subscribers, if any, in the event an extension is
granted.
Persons Who are Not Permitted to Participate in the Stock Offering
Community Bank will make reasonable efforts to comply with the
securities laws of all states in the United States in which persons entitled to
subscribe for stock pursuant to the plan of conversion reside. However,
Community Bank is not required to offer stock in the subscription offering to
any person who resides in a foreign country or resides in a state of the United
States with respect to which:
o the number of persons otherwise eligible to subscribe for
shares under the plan of conversion who reside in such
jurisdiction is small;
o the granting of subscription rights or the offer or sale of
shares of common stock to these persons would require any of
CBCT Bancshares, Inc. and Community Bank or their officers,
directors or employees, under the laws of that jurisdiction,
to register as a broker, dealer, salesman or selling agent or
to register or otherwise
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<PAGE>
qualify its securities for sale in that jurisdiction or to
qualify as a foreign corporation or file a consent to service
of process in that jurisdiction; or
o the registration, qualification or filing in the judgment of
Community Bank would be impracticable or unduly burdensome for
reasons of cost or otherwise.
Where the number of persons eligible to subscribe for shares in one state is
small, Community Bank will base its decision as to whether or not to offer the
common stock in that state on a number of factors, including but not limited to
the size of accounts held by account holders in the state, the cost of
registering or qualifying the shares or the need to register Community Bank, its
officers, directors or employees as brokers, dealers or salesmen.
Limitations on Stock Purchases
The plan of conversion includes the following limitations on the number
of shares of CBCT Bancshares, Inc. common stock which may be purchased in the
conversion:
(1) No fewer than 25 shares of common stock may be purchased, to
the extent shares are available;
(2) Each Eligible Account Holder may subscribe for and purchase in
the subscription offering up to the greater of:
(a) $100,000 or 10,000 shares of common stock;
(b) one-tenth of one percent of the total offering of
shares of common stock; or
(c) 15 times the product, rounded down to the next whole
number, obtained by multiplying the total number of
shares of common stock to be issued by a fraction, of
which the numerator is the amount of the qualifying
deposit of the Eligible Account Holder and the
denominator is the total amount of qualifying
deposits of all Eligible Account Holders in Community
Bank in each case as of the close of business on the
Eligibility Record Date, subject to the overall
limitation in clause (7) below;
(3) The Tax-Qualified Employee Plans, including an employee stock
ownership plan, may purchase in the aggregate up to 10% of the
shares of common stock issued in the conversion, including any
additional shares issued in the event of an increase in the
estimated offering range; although at this time the employee
stock ownership plan intends to purchase only 8.0% of these
shares;
(4) Each Supplemental Eligible Account Holder may subscribe for
and purchase in the subscription offering up to the greater
of:
(a) $100,000 or 10,000 shares of common stock;
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<PAGE>
(b) one-tenth of one percent of the total offering of
shares of common stock; or
(c) 15 times the product, rounded down to the next whole
number, obtained by multiplying the total number of
shares of common stock to be issued by a fraction, of
which the numerator is the amount of the qualifying
deposit of the Supplemental Eligible Account Holder
and the denominator is the total amount of qualifying
deposits of all Supplemental Eligible Account Holders
in Community Bank in each case as of the close of
business on the Supplemental Eligibility Record Date,
subject to the overall limitation in clause (7)
below;
(5) Each Other Member may subscribe for and purchase in the
subscription offering up to the greater of $100,000 or 10,000
shares of common stock or one-tenth of one percent of the
total offering of shares of common stock, subject to the
overall limitation in clause (7) below;
(6) Persons purchasing shares of common stock in the direct
community offering or public offering may purchase in the
direct community offering or public offering up to $100,000 or
10,000 shares of common stock, subject to the overall
limitation in clause (7) below;
(7) Except for the Tax-Qualified Employee Plans, and the Eligible
Account Holders and Supplemental Eligible Account Holders
whose subscription rights are based upon the amount of their
deposits, as a result of (2)(c) and (4)(c) above the maximum
number of shares of CBCT Bancshares, Inc. common stock
subscribed for or purchased in all categories of the offerings
by any person, together with associates of and groups of
persons acting in concert with such persons, shall not exceed
$100,000 or 10,000 shares of common stock; and
(8) No more than 25% of the total number of shares offered for
sale in the subscription offering may be purchased by
directors, officers and employees of Community Bank in the
fifth priority category in the subscription offering. No more
than 35% of the total number of shares offered for sale in the
conversion may be purchased by directors and officers of
Community Bank and their associates in the aggregate,
excluding purchases by the Tax-Qualified Employee Plans.
Subject to any required regulatory approval and the requirements of
applicable laws and regulations, but without further approval of the members of
Community Bank, the boards of directors of CBCT Bancshares, Inc. and Community
Bank may, in their sole discretion, increase the individual amount permitted to
be subscribed for to a maximum of 9.99% of the number of shares sold in the
conversion, provided that orders for shares exceeding 5% of the shares being
offered in the conversion shall not exceed, in the aggregate, 10% of the shares
being offered in the conversion. Requests to purchase additional shares of
common stock will be allocated by the
38
<PAGE>
boards of directors on a pro rata basis giving priority in accordance with the
preference categories set forth in this prospectus.
The term "associate" when used to indicate a relationship with any
person means:
o any corporation or organization, other than Community Bank,
CBCT Bancshares, Inc., or a majority-owned subsidiary of any
of them, of which the person is a director, officer or partner
or is directly or indirectly the beneficial owner of 10% or
more of any class of equity securities;
o any trust or other estate in which the person has a
substantial beneficial interest or as to which the person
serves as trustee or in a similar fiduciary capacity;
o any relative or spouse of the person, or any relative of the
spouse, who has the same home as the person or who is a
director or officer of Community Bank, CBCT Bancshares, Inc.
or any affiliate thereof; and
o any person acting in concert with any of the persons or
entities specified above;
provided, however, that Tax-Qualified or Non-Tax Qualified Employee Plans shall
not be deemed to be an associate of any director or officer of Community Bank or
CBCT Bancshares, Inc., to the extent provided in the plan of conversion. When
used to refer to a person other than an officer or director of Community Bank,
the board of directors of Community Bank or officers delegated by the board of
directors in their sole discretion may determine the persons that are associates
of other persons.
The term "acting in concert" is defined to mean knowing participation
in a joint activity or interdependent conscious parallel action towards a common
goal whether or not pursuant to an express agreement, or a combination or
pooling of voting or other interests in the securities of an issuer for a common
purpose pursuant to any contract, understanding, relationship, agreement or
other arrangement, whether written or otherwise. A person or company which acts
in concert with another person or company shall also be deemed to be acting in
concert with any person or company who is also acting in concert with that other
party, except that the Tax-Qualified Employee Plans will not be deemed to be
acting in concert with their trustees or a person who serves in a similar
capacity solely for the purpose of determining whether stock held by the trustee
and stock held by each plan will be aggregated. The determination of whether a
group is acting in concert shall be made solely by the board of directors of
Community Bank or officers delegated by the board of directors and may be based
on any evidence upon which the board or delegatee chooses to rely.
Marketing Arrangements
CBCT Bancshares, Inc. and Community Bank have retained Keefe, Bruyette
& Woods to consult with and to advise Community Bank, and to assist CBCT
Bancshares, Inc., on a best efforts basis, in the distribution of the shares of
common stock in the subscription offering and
39
<PAGE>
direct community offering. The services that Keefe, Bruyette & Woods will
provide include, but are not limited to:
o training the employees of Community Bank who will perform
certain ministerial functions in the subscription offering and
direct community offering regarding the mechanics and
regulatory requirements of the stock offering process;
o managing the stock information centers by assisting interested
stock subscribers and by keeping records of all stock orders;
o preparing marketing materials; and
o assisting in the solicitation of proxies from Community Bank's
members for use at the special meeting.
For its services, Keefe, Bruyette & Woods will receive a management fee
of $25,000 and a success fee of $50,000. The success fee paid to Keefe, Bruyette
& Woods will be in addition to the amount of the management fee. In the event
that selected dealers are used to assist in the sale of shares of CBCT
Bancshares, Inc. common stock in the direct community offering, these dealers
will be paid a fee of up to 5.5% of the total purchase price of the shares sold
by such dealers. CBCT Bancshares, Inc. and Community Bank have agreed to
indemnify Keefe, Bruyette & Woods against certain claims or liabilities,
including certain liabilities under the Securities Act of 1933, as amended, and
will contribute to payments Keefe, Bruyette & Woods may be required to make in
connection with any such claims or liabilities.
Sales of shares of CBCT Bancshares, Inc. common stock will be made by
registered representatives affiliated with Keefe, Bruyette & Woods or by the
broker-dealers managed by Keefe, Bruyette & Woods. Keefe, Bruyette & Woods has
undertaken that the shares of CBCT Bancshares, Inc. common stock will be sold in
a manner which will ensure that the distribution standards of the Nasdaq Stock
Market will be met. A stock information center will be established at Community
Bank's office in Smithville, Texas. CBCT Bancshares, Inc. will rely on Rule
3a4-1 of the Securities Exchange Act of 1934 and sales of CBCT Bancshares, Inc.
common stock will be conducted within the requirements of this rule, so as to
permit officers, directors and employees to participate in the sale of CBCT
Bancshares, Inc. common stock in those states where the law permits. No officer,
director or employee of CBCT Bancshares, Inc. or Community Bank will be
compensated directly or indirectly by the payment of commissions or other
remuneration in connection with his or her participation in the sale of common
stock.
Procedure for Purchasing Shares in the Subscription Offering
To ensure that each purchaser receives a prospectus at least 48 hours
before the subscription expiration date, unless extended, in accordance with
Rule 15c2-8 of the Securities Exchange Act of 1934, no prospectus will be mailed
any later than five days prior to that date or hand delivered any later than two
days prior to that date. Execution of the order form will confirm receipt or
delivery in accordance with Rule 15c2-8. Order forms will only be distributed
with a prospectus.
40
<PAGE>
To purchase shares in the subscription offering, an executed order form
with the required payment for each share subscribed for, or with appropriate
authorization for withdrawal from a deposit account at Community Bank, which may
be given by completing the appropriate blanks in the order form, must be
received by Community Bank by noon, Smithville, Texas time, on the subscription
expiration date, unless extended. In addition, CBCT Bancshares, Inc. and
Community Bank will require a prospective purchaser to execute a certification
in the form required by applicable regulations in connection with any sale of
common stock. Order forms which are not received by this time or are executed
defectively or are received without full payment, or appropriate withdrawal
instructions, are not required to be accepted. In addition, Community Bank will
not accept orders submitted on photocopied or facsimiled order forms nor order
forms unaccompanied by an executed certification form. Community Bank has the
right to waive or permit the correction of incomplete or improperly executed
forms, but does not represent that it will do so. Once received, an executed
order form may not be modified, amended or rescinded without the consent of
Community Bank, unless the conversion has not been completed within 45 days
after the end of the subscription offering, or this period has been extended.
In order to ensure that Eligible Account Holders, Tax-Qualified
Employee Plans, Supplemental Eligible Account Holders, Other Members and
directors, officers and employees are properly identified as to their stock
purchase priority, depositors as of the close of business on the Eligibility
Record Date, September 30, 1998, or the Supplemental Eligibility Record Date,
March 31, 2000, and depositors and borrowers as of the close of business on the
voting record date, __________, 2000, must list all accounts on the stock order
form giving all names in each account and the account numbers.
Payment for subscriptions may be made:
o by check or money order;
o by authorization of withdrawal from deposit accounts
maintained with Community Bank (including a certificate of
deposit); or
o in cash, if delivered in person at any full-service banking
office of Community Bank, although we request that you
exchange cash for a check with any of our tellers;
No wire transfers will be accepted. Interest will be paid on payments made by
cash, check or money order at our then-current passbook rate from the date
payment is received until completion of the conversion. If payment is made by
authorization of withdrawal from deposit accounts, the funds authorized to be
withdrawn from a deposit account will continue to accrue interest at the
contractual rate, but may not be used by the subscriber until all of CBCT
Bancshares, Inc. common stock has been sold or the plan of conversion is
terminated, whichever is earlier.
If a subscriber authorizes Community Bank to withdraw the amount of the
purchase price from his deposit account, Community Bank will do so as of the
effective date of the conversion.
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<PAGE>
Community Bank will waive any applicable penalties for early withdrawal from
certificate accounts.
In the event of an unfilled amount of any subscription order, Community
Bank will make an appropriate refund or cancel an appropriate portion of the
related withdrawal authorization, after completion of the conversion. If for any
reason the conversion is not consummated, purchasers will have refunded to them
all payments made, with interest, and all withdrawal authorizations will be
canceled in the case of subscription payments authorized from accounts at
Community Bank.
If any Tax-Qualified Employee Plans or Non-Tax-Qualified Employee Plans
subscribe for shares during the subscription offering, these plans will not be
required to pay for the shares subscribed for at the time they subscribe, but
rather, may pay for shares of common stock subscribed for at the purchase price
upon completion of the subscription offering and direct community offering, if
all shares are sold, or upon completion of the public offering if shares remain
to be sold in the offering. In the event that, after the completion of the
subscription offering, the amount of shares to be issued is increased above the
maximum of the estimated valuation range included in this prospectus, the
Tax-Qualified and Non-Tax-Qualified Employee Plans will be entitled to increase
their subscriptions by a percentage equal to the percentage increase in the
amount of shares to be issued above the maximum of the estimated valuation
range, provided that the subscription will continue to be subject to applicable
purchase limits and stock allocation procedures.
Owners of self-directed IRAs may use the assets of their IRAs to
purchase shares of CBCT Bancshares, Inc. common stock in the subscription
offering and direct community offering. ERISA provisions and IRS regulations
require that officers, directors and 10% stockholders who use self-directed IRA
funds to purchase shares of common stock in the offerings make the purchases for
the exclusive benefit of the IRAs. IRAs maintained at Community Bank are not
self-directed IRAs and any interested parties wishing to use IRA funds for stock
purchases may do so, but are advised to contact the stock information center at
(512) ________ for additional information.
The records of Community Bank will be deemed to control with respect to
all matters related to the existence of subscription rights and one's ability to
purchase shares of common stock in the subscription offering.
Restrictions on Transfer of Subscription Rights and Shares
Pursuant to applicable rules and regulations, no person with
subscription rights may transfer or enter into any agreement or understanding to
transfer the legal or beneficial ownership of the subscription rights issued
under the plan of conversion or the shares of common stock to be issued upon
their exercise. Such rights may be exercised only by the person to whom they are
granted and only for that person's account. Each person exercising subscription
rights will be required to certify that the person is purchasing shares solely
for the person's own account and that the person has no agreement or
understanding regarding the sale or transfer of the shares. Regulations also
prohibit any person from offering or making an announcement of an offer or
42
<PAGE>
intent to make an offer to purchase such subscription rights or shares of common
stock prior to the completion of the conversion.
Community Bank will refer to the Texas Savings and Loan Department and
the FDIC any situations that it believes may involve a transfer of subscription
rights and will not honor orders believed by it to involve the transfer of such
rights.
Delivery of Certificates
Certificates representing common stock issued in the conversion will be
mailed by CBCT Bancshares, Inc.'s transfer agent to the persons entitled thereto
at the addresses of the persons appearing on the stock order form as soon as
practicable following completion of the conversion. Any certificates returned as
undeliverable will be held by CBCT Bancshares, Inc. until claimed by persons
legally entitled to them or otherwise disposed of in accordance with applicable
law. Until certificates for common stock are available and delivered to
subscribers, they may not be able to sell the shares of common stock for which
they have subscribed, even though trading of the common stock may have
commenced.
Required Approvals
Various regulatory approvals are required in order to consummate the
conversion. The Texas Savings and Loan Department has approved the plan of
conversion and the FDIC has issued its non-objection to the conversion, subject
to approval by Community Bank's members and other standard conditions. CBCT
Bancshares, Inc.'s holding company application with the Federal Reserve Board
has been approved.
CBCT Bancshares, Inc. is required to make certain filings with state
securities regulatory authorities in connection with the issuance of CBCT
Bancshares, Inc. common stock in the offerings.
Restrictions on Purchase or Transfer of Shares After the Conversion
All shares of common stock purchased in connection with the conversion
by a director or an executive officer of CBCT Bancshares, Inc. and Community
Bank will be subject to a restriction that the shares not be sold for a period
of one year following the conversion except in the event of the death of the
director or officer or pursuant to a merger or similar transaction approved by
the Texas Savings and Loan Department. Each certificate for restricted shares
will bear a legend giving notice of this restriction on transfer, and
instructions will be issued to the effect that any transfer within this time
period of any certificate or record ownership of the shares other than as
provided above is a violation of the restriction. Any shares of common stock
issued at a later date within this one year period as a stock dividend, stock
split or otherwise with respect to the restricted stock will be subject to the
same restrictions.
Purchases of common stock of CBCT Bancshares, Inc. by directors,
executive officers and their associates during the three-year period following
completion of the conversion may be made only through a broker or dealer
registered with the SEC, except with the prior written
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<PAGE>
approval of the Texas Savings and Loan Department. This restriction does not
apply, however, to negotiated transactions involving more than 1% of CBCT
Bancshares, Inc.'s outstanding common stock or to certain purchases of stock
pursuant to an employee stock benefit plan.
Pursuant to FDIC regulations, CBCT Bancshares, Inc. will generally be
prohibited from repurchasing any shares of the common stock for a period of
three years following the conversion other than pursuant to (a) an offer to all
stockholders on a pro rata basis which is approved by the FDIC or (b) the
repurchase of qualifying shares of a director, if any.
The above limitations are subject to FDIC policies which generally
provide that CBCT Bancshares, Inc. may repurchase its capital stock provided:
o no repurchases occur within the first six months following the
conversion;
o repurchases during the second six months following the
conversion do not exceed 5% of its outstanding capital stock,
subject to certain exceptions, and repurchases prior to the
third anniversary of the conversion do not exceed 25% of its
outstanding capital stock;
o repurchases prior to the third anniversary of the conversion
are part of an open-market stock repurchase program;
o the repurchases do not cause Community Bank to become
undercapitalized; and
o Community Bank provides to the FDIC no later than 10 days
prior to the commencement of a repurchase program written
notice containing a full description of the program to be
undertaken and the program is not disapproved by the FDIC.
The FDIC may permit stock repurchases in excess of these amounts prior to the
third anniversary of the conversion if exceptional circumstances are shown to
exist.
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PROPOSED PURCHASES BY MANAGEMENT
The following table sets forth, for each of Community Bank's directors
and for all of the directors and executive officers as a group, the proposed
purchases of common stock, assuming sufficient shares are available to satisfy
their subscriptions. The amounts include shares that may be purchased through
individual retirement accounts and by associates.
<TABLE>
<CAPTION>
At the Minimum of the At the Maximum of
Estimated Offering Range Estimated Offering Range
------------------------------- ------------------------------
As a Percent As a Percent
Number of of Shares Number of of Shares
Name Amount Shares Offered Shares Offered
- ---------------------------------------- ------------ ----------------- ------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Vernon L. Richards $ 10,000 1,000 0.51% 1,000 0.38%
Clinton M. Wright 1,000 100 0.05 100 0.04
Mike C. Maney 100,000 10,000 5.12 10,000 3.78
Gordon N. Fowler 100,000 10,000 5.12 10,000 3.78
James A. Cowan 100,000 10,000 5.12 10,000 3.78
Rodney E. Langer 25,000 2,500 1.28 2,500 0.95
Brad M. Hurta 30,000 3,000 1.53 3,000 1.13
Georgina Chronis 1,500 150 0.08 150 0.06
Barry W. Hannath 100,000 10,000 5.12 10,000 3.78
Lynn D. Frerich 7,500 750 0.38 750 0.28
Nancy M. Janeck 2,000 200 0.10 200 0.08
All directors and executive
officers as a group (11 persons) 477,000 47,700 24.40% 47,700 18.03%
</TABLE>
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<PAGE>
Consolidated Statements of Income
Years Ended December 31, 1999, 1998, and 1997
1999 1998 1997
------------ ------------ ------------
Interest and dividend income:
Interest and fees on loans $1,877,775 $1,888,503 $1,768,018
Debt securities:
Taxable 1,001,765 513,324 648,525
Tax-exempt 9,486 11,140 12,326
Interest on deposits in banks 131,211 146,170 68,163
Dividends 30,051 30,099 28,131
---------- ---------- ----------
Total interest and dividend income 3,050,288 2,589,236 2,525,163
---------- ---------- ----------
Interest expense:
Deposits 1,542,254 1,545,409 1,476,640
Federal Home Loan Bank advances 360,107 15,099 7,498
---------- ---------- ----------
Total interest expense 1,902,361 1,560,508 1,484,138
---------- ---------- ----------
Net interest income 1,147,927 1,028,728 1,041,025
Provision for loan losses - - 3,253
---------- ---------- ----------
Net interest income after
provision for loan losses 1,147,927 1,028,728 1,037,772
---------- ---------- ----------
Noninterest income:
Service charges and other income 112,915 82,949 70,885
Net gains on sales of loans 51,231 51,050 -
Net gains on sales of securities 76,091 30,396 -
---------- ---------- ----------
Total noninterest income 240,237 164,395 70,885
---------- ---------- ----------
Noninterest expenses:
Salaries and employee benefits 454,406 348,560 365,820
Occupancy and equipment expenses 183,201 138,390 102,603
Other operating expenses 511,767 403,251 378,201
---------- ---------- ----------
Total noninterest expenses 1,149,374 890,201 846,624
---------- ---------- ----------
Income before income taxes 238,790 302,922 262,033
Income tax expense 71,108 90,618 86,340
---------- ---------- ----------
Net income $ 167,682 $ 212,304 $ 175,693
========== ========== ==========
Notes to consolidated financial statements form an integral part of these
statements.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
The following discussion is intended to assist in understanding the
financial condition and results of operations of Community Bank. The discussion
and analysis does not include any comments relating to CBCT Bancshares, Inc.,
since CBCT Bancshares, Inc. has no significant operations. The information
contained in this section should be read in conjunction with the consolidated
financial statements and the accompanying notes to consolidated financial
statements and the other sections contained in the prospectus.
Community Bank's results of operations depend primarily on its net
interest income, which is the difference between interest income on
interest-earning assets, which principally consist of loans and mortgage-backed
and investment securities, and interest expense on interest-bearing liabilities,
which principally consist of deposits and borrowings. Community Bank's results
of operations also are affected by the level of its noninterest income and
expenses and income tax expense.
Forward-Looking Statements
This prospectus contains forward-looking statements which are based on
assumptions and describe future plans, strategies and expectations of CBCT
Bancshares, Inc. and Community Bank. These forward-looking statements are
generally identified by use of the words "believe," "expect," "intend,"
"anticipate," "estimate," "project," or similar words. Our ability to predict
results or the actual effect of future plans or strategies is uncertain. Factors
which could have a material adverse effect on our operations include, but are
not limited to, changes in interest rates, general economic conditions,
legislative/regulatory changes, monetary and fiscal policies of the U.S.
Government, including policies of the U.S. Treasury and the Federal Reserve
Board, the quality or composition of the loan or investment portfolios, demand
for loan products, deposit flows, competition, demand for financial services in
our market areas and accounting principles and guidelines. These risks and
uncertainties should be considered in evaluating forward-looking statements and
you should not rely too much on these statements.
Management Strategy
Our strategy is to operate as an independent, retail oriented financial
institution dedicated to serving the needs of customers in our market area. Our
commitment is to provide a broad range of products and services to meet the
needs of our customers. As part of this commitment, we are looking to increase
our emphasis on commercial and consumer business products and services. In
addition, we are continually looking at cost-effective ways to expand our market
area.
47
<PAGE>
Financial highlights of our strategy include:
o Continuing as a Diversified Lender. We have been successful in
diversifying our loan portfolio to reduce our reliance on any
one type of loan. Since 1997, we have increased the percentage
of our loan portfolio consisting of consumer and commercial
real estate and commercial business loans from 26% to 46% as
of December 31, 1999. This diversification, however, increases
the potential credit risk of our loan portfolio. See "Risk
Factors - Our loan portfolio possesses increased risk due to
our substantial percentage of consumer and commercial real
estate and commercial business loans."
o Continuing Our Strong Asset Quality. Since 1995, our ratio of
non-performing assets to total assets has not exceeded .42%
and at December 31, 1999 this ratio was .16%.
o Continuing Our Strong Capital Position. As a result of our
conservative risk management and consistent profitability, we
have historically maintained a strong capital position. At
December 31, 1999, our ratio of equity to total assets was
7.0%.
o Efforts to Increase Transaction Accounts. As part of our
emphasis on commercial and consumer business products and
services, we are attempting to increase our non-certificate
deposit accounts, including transaction accounts. During 1999,
our non-certificate deposit accounts increased from $6.0
million to $7.0 million.
All of these are designed to improve our profitability.
Asset and Liability Management and Market Risk
Our Risk When Interest Rates Change. The rates of interest we earn on
assets and pay on liabilities generally are established contractually for a
period of time. Market interest rates change over time. Our loans generally have
longer maturities than our deposits. Accordingly, our results of operations,
like those of other financial institutions, are impacted by changes in interest
rates and the interest rate sensitivity of our assets and liabilities. The risk
associated with changes in interest rates and our ability to adapt to these
changes is known as interest rate risk and is our most significant market risk.
How We Measure Our Risk of Interest Rate Changes. As part of our
attempt to manage our exposure to changes in interest rates and comply with
applicable regulations, we monitor our interest rate risk. In monitoring
interest rate risk we continually analyze and manage assets and liabilities
based on their payment streams and interest rates, the timing of their
maturities, and their sensitivity to actual or potential changes in market
interest rates.
In order to minimize the potential for adverse effects of material and
prolonged increases in interest rates on our results of operations, we have
adopted investment/asset and liability
48
<PAGE>
management policies to better match the maturities and repricing terms of our
interest-earning assets and interest-bearing liabilities. The board of directors
sets and recommends the asset and liability policies of Community Bank which are
implemented by the investment/asset and liability management committee. The
investment/asset and liability management committee is chaired by Mike Maney and
is comprised of members of our board of directors and senior management. The
purpose of the investment/asset and liability management committee is to
communicate, coordinate and control asset/liability management consistent with
our business plan and board approved policies. The investment/asset and
liability management committee establishes and monitors the volume and mix of
assets and funding sources taking into account relative costs and spreads,
interest rate sensitivity and liquidity needs. The objectives are to manage
assets and funding sources to produce results that are consistent with
liquidity, capital adequacy, growth, risk and profitability goals. The
investment/asset and liability management committee generally meets on a monthly
basis to review, among other things, economic conditions and interest rate
outlook, current and projected liquidity needs and capital position, anticipated
changes in the volume and mix of assets and liabilities and interest rate risk
exposure limits versus current projections pursuant to net present value of
portfolio equity analysis and income simulations. The investment/asset and
liability management committee recommends appropriate strategy changes based on
this review. The President or his designee is responsible for reviewing and
reporting on the effects of the policy implementations and strategies to the
board of directors, at least quarterly.
In order to manage our assets and liabilities and achieve the desired
liquidity, credit quality, interest rate risk, profitability and capital
targets, we have focused our strategies on:
o originating adjustable rate mortgage loans and commercial
business loans,
o originating shorter-term consumer loans,
o managing our deposits to establish stable deposit
relationships,
o acquiring longer-term borrowings at fixed interest rates, when
appropriate, to offset the negative impact of longer-term
fixed rate loans in our loan portfolio, and
o selling to the secondary market fixed-rate residential loans
originated by us.
At times, depending on the level of general interest rates, the relationship
between long- and short-term interest rates, market conditions and competitive
factors, the investment/asset and liability management committee may determine
to increase our interest rate risk position somewhat in order to maintain our
net interest margin. In the future, we intend to increase our emphasis on the
origination of relatively short-term and/or adjustable rate loans.
The investment/asset and liability management committee regularly
reviews interest rate risk by forecasting the impact of alternative interest
rate environments on net interest income and market value of portfolio equity,
which is defined as the net present value of an institution's existing assets,
liabilities and off-balance sheet instruments, and evaluating such impacts
against
49
<PAGE>
the maximum potential changes in net interest income and market value of
portfolio equity that are authorized by the board of directors of Community
Bank.
The following table presents the contractual maturities and repricing
data of the Bank's interest-earning assets and interest-bearing liabilities,
commonly called a "gap" report. It gives an indication of the Bank's interest
rate sensitivity position; however, it is used by management in conjunction with
other reports to determine plans and strategies for managing the interest rate
risk of the Bank. The gap report has limitations; for example, all savings, NOW,
and money market deposit accounts are shown as maturing within the 90 day
timeframe; in reality, these deposits are relatively stable and do not turn over
or reprice as frequently as the static gap report suggests. In addition, no
prepayment assumptions have been made with regard to interest-earning assets.
<TABLE>
<CAPTION>
Within 90 days 1 to 3 Over
90 days to 1 Year Years 3 Years Total
--------- ---------- --------- ------------ ---------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Interest-Earning Assets:
Deposits in banks $ 1,691 $ --- $ --- $ --- $ 1,691
Investment securities --- 4,319 72 11,886 16,277
Loans 1,435 2,779 4,101 13,577 21,892
Other interest-earning assets --- --- --- 496 496
-------- -------- -------- -------- ---------
Total interest-earning assets 3,126 7,098 4,173 25,959 40,356
======== ======== ======== ======== =========
Interest-Bearing Liabilities:
Passbook savings accounts 1,770 --- --- --- 1,770
NOW and money market accounts 4,851 --- --- --- 4,851
Time deposit accounts 7,920 12,444 3,972 1,019 25,355
Federal Home Loan Bank advances 1,234 1,720 4,438 --- 7,392
-------- -------- -------- -------- ---------
Total interest-bearing liabilities 15,775 14,164 8,410 1,019 39,368
======== ======== ======== ======== =========
Interest sensitivity gap $(12,649) $ (7,066) $ (4,237)
======== ======== ========
Cumulative gap $(12,649) $(19,715) $(23,952)
======== ======== ========
Ratio of interest-earning assets to
interest-bearing liabilities (19.82)% (50.11)% (49.62)%
======== ======== ========
</TABLE>
As with any method of measuring interest rate risk, certain
shortcomings are inherent in the method of analysis presented in the foregoing
tables. For example, although certain assets and liabilities may have similar
maturities or periods to repricing, they may react in different degrees to
changes in market interest rates. Also, the interest rates on certain types of
assets and liabilities may fluctuate in advance of changes in market interest
rates, while interest rates on other types may lag behind changes in market
rates. Additionally, certain assets, such as adjustable rate mortgage loans,
have features which restrict changes in interest rates on a short-term basis and
over the life of the asset. Further, if interest rates change, expected rates of
prepayments on loans and early withdrawals from certificates could deviate
significantly from those assumed in calculating the table.
50
<PAGE>
Changes in Financial Condition from December 31, 1998 to December 31, 1999
General. Our total assets increased by $3.0 million or 7.5% to $42.8
million at December 31, 1999 compared to $39.8 million at December 31, 1998. The
increase was primarily due to a $2.8 million or 20.7% increase in securities,
which totaled $16.3 million at December 31, 1999 compared to $13.5 million at
December 31, 1998.
Loans. Our net loan portfolio increased from $20.9 million at December
31, 1998 to $21.7 million at December 31, 1999. The increase in the loan
portfolio over this time period was due to increased loan demand caused by our
efforts to expand Community Bank's commercial and consumer lending. The loan
portfolio increased in all categories, except the one-to four-family category,
with the largest increase occurring in the commercial real estate category, from
$2.9 million at December 31, 1998 to $3.7 million at December 31, 1999.
Securities. Available for sale securities amounted to $16.3 million at
December 31, 1999, and $7.5 million at December 31, 1998. The increase of $8.8
million or 117% was primarily due to the reclassification of securities held to
maturity into the available-for-sale category and the purchase of additional
securities partially match-funded by Federal Home Loan Bank advances, to
increase income.
Liabilities. Our total liabilities increased $3.3 million or 9.0% to
$39.8 million at December 31, 1999 compared to $36.5 million at December 31,
1998. This increase was due primarily to an increase in Federal Home Loan Bank
advances of $3.4 million, principally to fund the increase in securities and
loans.
Equity. Total equity amounted to $3.0 million at December 31, 1999 and
$3.3 million or 8.4% at December 31, 1998. The decrease in equity over the
period was due to a change in accumulated other comprehensive income from a gain
of $300,000 at December 31, 1998 to a loss of $215,000 at December 31, 1999,
partially offset by net income of $168,000 during 1999. The changes in
accumulated other comprehensive income resulted from net unrealized losses in
our available-for-sale securities due to an increase in interest rates.
51
<PAGE>
Average Balances, Net Interest Income, Yields Earned and Rates Paid
The following table presents for the periods indicated the total dollar
amount of interest income from average interest-earning assets and the resultant
yields, as well as the interest expense on average interest-bearing liabilities,
expressed both in dollars and rates. No tax equivalent adjustments were made.
All average balances are monthly average balances. Nonaccruing loans have been
included in the table as loans carrying a zero yield.
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------------------------------------------------------
1999 1998
------------------------------------------- --------------------------------------------
Interest Interest
Average Earned/ Yield/ Average Earned/ Yield/
Balance Paid Rate Balance Paid Rate
------------ -------------- -------------- ------------- -------------- ----------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-Earning Assets:
Deposits in banks $ 2,633 $ 131 4.98% $ 2,537 $ 146 5.75%
Investment securities 16,505 1,011 6.13 8,752 524 5.99
Loans 21,500 1,878 8.73 21,322 1,889 8.86
Other interest-earning assets 544 30 5.51 494 30 6.07
-------- ------- ------- -------- ------- ------
Total interest-earning assets 41,182 3,050 7.41 33,105 2,589 7.82
------- ------- ------- ------
Noninterest-earning assets 2,130 2,228
-------- --------
Total assets $ 43,312 $ 35,333
======== ========
Interest-Bearing Liabilities:
Passbook savings accounts $ 1,520 $ 41 2.70 $ 1,241 $ 34 2.74
NOW and money market accounts 5,015 133 2.65 4,091 113 2.76
Time deposit accounts 26,305 1,368 5.20 25,662 1,398 5.48
Federal Home Loan Bank advances 6,716 360 5.36 296 15 5.07
-------- ------- ------- -------- ------- ------
Total interest-bearing liabilities 39,556 1,902 4.81 31,290 1,560 4.99
------- ------- ------- ------
Noninterest-bearing liabilities and
equity 3,756 4,043
-------- --------
Total liabilities and equity $43,312 $35,333
======== ========
Net interest income $ 1,148 $ 1,029
======= =======
Net interest spread (1) 2.60% 2.83%
====== ======
Net interest margin(2) 2.79% 3.11%
====== ======
<FN>
- ------------------
(1) The net interest spread is the difference between the average rate on
interest-earning assets and interest-bearing liabilities.
(2) The net interest margin is net interest income divided by average
earning assets.
</FN>
</TABLE>
52
<PAGE>
Rate/Volume Analysis
The following table presents the dollar amount of changes in interest
income and interest expense for major components of interest-earning assets and
interest-bearing liabilities. For each category of interest-earning assets and
interest-bearing liabilities, information is provided on changes attributable to
(1) changes in volume, which are changes in volume multiplied by the old rate,
and (2) changes in rate, which are changes in rate multiplied by the old volume.
Changes attributable to both rate and volume which cannot be segregated have
been allocated proportionately to the change due to volume and the change due to
rate.
Years Ended December 31,
1999 vs. 1998
-------------------------------------
Increase (decrease)
due to Total
-------------------------- Increase
Volume Rate (Decrease)
------------ ------------ ----------
Interest income: (Dollars in Thousands)
Deposits in banks $ 6 $ (21) $ (15)
Investment securities 464 23 487
Loans 16 (27) (11)
Other earning assets 3 (3) ---
-------- ------- -------
Total interest income 489 (28) 461
-------- ------- -------
Interest expense:
Savings accounts 7 --- 7
NOW and money market accounts 26 (6) 20
Time deposit accounts 35 (65) (30)
Federal Home Loan Bank advances 326 19 345
-------- ------- -------
Total interest expense 394 (52) 342
-------- ------- -------
Net interest income $ 95 $ 24 $ 119
======== ======= =======
53
<PAGE>
The following table presents the weighted average yields earned on
loans, investments and other interest-earning assets, and the weighted average
rates paid on savings and borrowings and the resultant interest rate spreads at
December 31, 1999.
At
December 31,
1999
------------
Weighted average yield on:
Deposits in banks............................. 4.77%
Investment securities......................... 6.06%
Loans receivable.............................. 8.63%
FHLB stock.................................... 5.72%
Combined weighted average yield on
interest-earning assets................... 7.39%
Weighted average rate paid on:
Savings accounts.............................. 2.50%
NOW money market accounts..................... 2.65%
Time deposit accounts......................... 4.93%
Federal Home Loan Bank advances............... 5.29%
Combined weighted average rate paid on
interest-bearing liabilities.............. 4.61%
Spread.......................................... 2.78%
====
Comparison of Results of Operations for the Years Ended December 31, 1998 and
1999
General. We reported net income of $168,000 for the year ended December
31, 1999 and $212,000 for the year ended December 31, 1998.
Net Interest Income. Net interest income increased $119,000 or 11.6% to
$1.1 million for 1999 compared to 1998, reflecting a $461,000 or 17.8% increase
in interest income, partially offset by a $342,000 or 21.9% increase in interest
expense. Our interest rate spread decreased to 2.60% for 1999 compared to 2.83%
for 1998. In addition, the ratio of average interest-earning assets to average
interest-bearing liabilities decreased to 104% for 1999 compared to 106% for
1998.
Interest Income. The increase in interest income during the year ended
December 31, 1999 was primarily due to an increase in the average balance of
interest-earning assets offset by a lower yield. The average balance of the
securities portfolio increased $7.8 million or 88.6% to $16.5 million for 1999
due to the shift of assets from short term money funds to investment securities
and the purchase of securities partially match-funded by Federal Home Loan Bank
advances to increase income. The average yield earned on our interest-earning
assets decreased from 7.82% in 1998 to 7.41% in 1999, primarily due to a general
decrease in market rates of interest.
Interest Expense. The increase in interest expense during the year
ended December 31, 1999 was primarily due to the increase of $6.4 million or
246.9% in the average balance of
54
<PAGE>
Federal Home Loan Bank advances, primarily to fund the increase in securities
and, to a lesser extent, loan growth. The average rate paid on interest-bearing
liabilities decreased from 4.99% in 1998 to 4.81% in 1999, due to a general
decrease in market rates of interest, partially offset by an increase in the
average rate paid on advances from 5.07% in 1998 to 5.36% in 1999.
Provision for Loan Losses. For the years ended December 31, 1999 and
1998, there was no provision for loan losses. At December 31, 1999, the ratio of
our allowance for loan losses to non-performing loans was 293%, and the ratio of
our allowance for loan losses to total loans was 0.91%. See "Business of
Community Bank - Asset Quality - Allowance for Loan Losses."
Other Operating Income. Other operating income amounted to $240,000 and
$164,000 for the years ended December 31, 1999 and 1998, respectively. The
increase consisted primarily of a $76,000 net gain from the sale of securities
in 1999 compared to a $30,000 net gain in 1998, as well as a $30,000 increase in
service charges and other income. The increase in service charges and other
income was primarily due to an increase in rental income from third party
brokerage activity.
Other Operating Expenses. Other operating expenses increased $259,000
or 29.1% to $1.1 million for the year ended December 31, 1999 compared to
$890,000 for the year ended December 31, 1998. This increase was primarily due
to a $105,000 or 30.1% increase in compensation and benefits, a $45,000 or 32.6%
increase in occupancy and equipment costs and a $109,000 or 27.0% increase in
other expenses. These increases resulted principally as a result of increased
staffing, occupancy and other expenses related to a proposed new branch, which
opened only as a loan production office and was subsequently closed.
Approximately $50,000 was also related to Year 2000 expenses.
Liquidity and Commitments
We are required to maintain minimum levels of investments that qualify
as liquid assets under government regulations. Liquidity may increase or
decrease depending upon the availability of funds and comparative yields on
investments in relation to the return on loans. Historically, we have maintained
liquid assets at levels above the minimum requirements and above levels believed
to be adequate to meet the requirements of normal operations, including
potential deposit outflows. Cash flow projections are regularly reviewed and
updated to assure that adequate liquidity is maintained. At December 31, 1999,
our regulatory liquidity ratio, which is our liquid assets as a percentage of
net withdrawable savings deposits with a maturity of one year or less and
current borrowings, was 51.18%.
Community Bank's liquidity, represented by cash and cash equivalents
and certain investment securities, is a product of its operating, investing and
financing activities. Our primary sources of funds are deposits, amortization,
prepayments and maturities of outstanding loans and mortgage-backed securities,
maturities and sales of investment securities and other short-term investments
and funds provided from operations. While scheduled payments from the
amortization of loans and mortgage-backed securities and maturing investment
securities and short-term investments are relatively predictable sources of
funds, deposit flows and loan prepayments are greatly influenced by general
interest rates, economic conditions and
55
<PAGE>
competition. In addition, we invest excess funds in short-term interest-earning
assets, which provide liquidity to meet lending requirements. We also generate
cash through borrowings. We utilize Federal Home Loan Bank advances to leverage
our capital base and provide funds for our lending and investment activities,
and to enhance our interest rate risk management.
Liquidity management is both a daily and long-term function of business
management. Excess liquidity is generally invested in short-term investments
such as overnight deposits or U.S. Agency securities. On a longer term basis, we
maintain a strategy of investing in various lending products as described in
greater detail under "Business of Community Bank - Lending Activities." We use
our sources of funds primarily to meet ongoing commitments, to pay maturing time
deposits and savings withdrawals, to fund loan commitments and to maintain our
portfolio of mortgage-backed securities and investment securities. At December
31, 1999, the total approved loan origination commitments outstanding amounted
to $1.6 million. At the same date, the unadvanced portion of construction loans
was $795,000. There were no outstanding letters of credit at December 31, 1999.
Time deposits scheduled to mature in one year or less at December 31, 1999,
totaled $20.4 million. Investment and mortgage-backed securities scheduled to
mature in less than one year at December 31, 1999 totaled $35,000. Based on
historical experience, management believes that a significant portion of
maturing deposits will remain with Community Bank. Community Bank anticipates
that we will continue to have sufficient funds, through deposits and borrowings,
to meet its current commitments.
Capital
Consistent with our goal to operate a sound and profitable financial
organization, we actively seek to maintain a "well capitalized" institution in
accordance with regulatory standards. Total equity was $3.0 million at December
31, 1999, or 7.0% of total assets on that date. As of December 31, 1999, we
exceeded all capital requirements of the FDIC and the Texas Savings and Loan
Department. Our regulatory capital ratios at December 31, 1999 were as follows:
core capital 7.8%; Tier I risk-based capital, 15.0%; and total risk-based
capital, 15.9%. The regulatory capital requirements to be considered well
capitalized are 5.0%, 6.0% and 10.0%, respectively.
Impact of Inflation
The consolidated financial statements presented herein have been
prepared in accordance with generally accepted accounting principles. These
principles require the measurement of financial position and operating results
in terms of historical dollars, without considering changes in the relative
purchasing power of money over time due to inflation.
Our primary assets and liabilities are monetary in nature. As a result,
interest rates have a more significant impact on our performance than the
effects of general levels of inflation. Interest rates, however, do not
necessarily move in the same direction or with the same magnitude as the price
of goods and services, since such prices are affected by inflation. In a period
of rapidly rising interest rates, the liquidity and maturities structures of our
assets and liabilities are critical to the maintenance of acceptable performance
levels.
56
<PAGE>
The principal effect of inflation, as distinct from levels of interest
rates, on earnings is in the area of noninterest expense. Such expense items as
employee compensation, employee benefits and occupancy and equipment costs may
be subject to increases as a result of inflation. An additional effect of
inflation is the possible increase in the dollar value of the collateral
securing loans that we have made. We are unable to determine the extent, if any,
to which properties securing our loans have appreciated in dollar value due to
inflation.
BUSINESS OF CBCT BANCSHARES, INC.
Community Bank is converting to the stock form of organization and will
become a wholly owned subsidiary of CBCT Bancshares, Inc. CBCT Bancshares, Inc.
initially will not be an operating company and, after the conversion, is not
expected to engage in any significant business activity other than to hold the
common stock of Community Bank and the employee stock ownership plan loan, and
to invest the funds retained by it.
CBCT Bancshares, Inc. is not expected to own or lease real or personal
property initially, but will instead use the facilities of Community Bank. At
the present time, CBCT Bancshares, Inc. does not intend to employ any persons
other than certain officers of Community Bank, but will utilize the support
staff of Community Bank from time to time.
BUSINESS OF COMMUNITY BANK
General
Our principal business consists of attracting retail deposits from the
general public and investing those funds primarily in permanent loans secured by
first mortgages on owner-occupied, one- to four-family residences and a variety
of consumer loans. We also originate commercial real estate and, to a much
lesser extent, construction and commercial business loans.
Our revenues are derived principally from interest on loans and
investment and mortgage-backed securities. We also generate revenue from service
charges and other income.
We offer a variety of deposit accounts having a wide range of interest
rates and terms, which generally include savings accounts, money market
accounts, NOW and non-interest bearing demand deposit accounts and time deposit
accounts with varied terms ranging from 30 days to 60 months. We solicit
deposits in our primary market area of Bastrop County and we have not accepted
brokered deposits.
Market Area
We intend to continue to be a community-oriented financial institution
offering a variety of financial services to meet the needs of the communities we
serve. We are headquartered in Smithville, Texas, and have one full service
banking office primarily serving Bastrop County, Texas. We also originate loans
in our primary market area and the greater metropolitan Austin, Texas area. See
"-Consumer and Other Lending."
57
<PAGE>
Lending Activities
General. Our mortgage loans carry either a fixed or an adjustable rate
of interest. Mortgage loans are generally long-term and amortize on a monthly
basis with principal and interest due each month. Our fixed rate one- to
four-family residential loans are originated for sale to the secondary market.
At December 31, 1999, our net loan portfolio totaled $21.7 million, which
constituted 50.7% of our total assets.
Secured loans up to $10,000 may be approved by the consumer loan
officer, up to $25,000 by the vice president of lending and up to $75,000 by the
President. Any secured loan over the individual approval limits must be approved
by the executive committee. Unsecured loans may be approved by these individuals
up to $1,000, $5,000 and $10,000, respectively.
At December 31, 1999, the maximum amount which we could have loaned to
any one borrower and the borrower's related entities was approximately $500,000.
Our largest lending relationship to a single borrower or group of related
borrowers consisted of one loan for $327,000 secured by a homestead located in
Austin, Texas. At December 31, 1999, this loan was current and performing in
accordance with its terms.
58
<PAGE>
The following table presents information concerning the composition of
Community Bank's loan portfolio in dollar amounts and in percentages as of the
dates indicated.
<TABLE>
<CAPTION>
December 31,
-----------------------------------------------------
1999 1998 1997
---------------- -------------- ----------------
Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ -------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Real Estate Loans:
One- to four-family residential $11,627 53% $13,218 63% $15,876 74%
Multi-family residential 137 1 --- --- --- ---
------- --- ------- --- ------- ---
Total residential loans 11,764 54 13,218 63 15,876 74
Commercial real estate 4,122 18 2,940 14 2,581 12
Construction loans 1,125 5 864 4 582 3
------- --- ------- --- ------- ---
Total real estate loans 17,011 77 17,022 81 19,039 89
------- --- ------- --- ------- ---
Consumer Loans:
Home equity 568 3 455 2 79 ---
Automobile loans 3,040 14 2,853 13 1,825 8
Other personal and installment loans 1,315 6 783 4 626 3
------- --- ------- --- ------- ---
Total consumer loans 4,923 23 4,091 19 2,530 11
------- --- ------- --- ------- ---
Unearned discount --- (3) (3)
Unamortized loan fees and costs (42) (39) (39)
------- ------- -------
Total loans 21,892 100% 21,071 100% 21,527 100%
=== === ===
Allowance for loan losses (199) (181) (157)
------- ------- -------
Net loans receivable $21,693 $20,890 $21,370
======= ======= =======
</TABLE>
59
<PAGE>
The following schedule illustrates the contractual maturity of
Community Bank's loan portfolio at December 31, 1999. Mortgages which have
adjustable or renegotiable interest rates are shown as maturing in the period
during which the contract is due. The schedule does not reflect the effects of
possible prepayments or enforcement of due-on-sale clauses.
Over One
One Year Year to Over Five
or Less Five Years Years Total
--------- ---------- --------- -------
(In Thousands)
One- to four-family residential loans $1,684 $ 6,432 $3,511 $11,627
All other loans 2,530 7,000 777 10,307
------ -------- ------ -------
$4,214 $ 13,432 $4,288 21,934
====== ======== ======
Unamortized fees and costs (42)
Allowance for loan losses (199)
-------
Net loans $21,693
=======
Of our total loans of $21.9 million at December 31, 1999, approximately
$11.6 million have fixed rates of interest and approximately $10.3 million have
adjustable rates of interest.
One- to Four-Family Residential Real Estate Lending. At December 31,
1999, one- to four-family residential mortgage loans totaled $11.6 million, or
53% of our gross loan portfolio. We generally underwrite our one- to four-family
loans based on the applicant's employment and credit history and the appraised
value of the subject property. Presently, we lend up to 90% of the lesser of the
appraised value or purchase price for one- to four-family residential loans. For
loans with a loan-to-value ratio in excess of 80%, we generally require private
mortgage insurance in order to reduce our exposure below 80%. Properties
securing our one- to four-family loans are generally appraised by independent
fee appraisers approved by the board of directors. We require our borrowers to
obtain title and hazard insurance, and flood insurance, if necessary, in an
amount not less than the value of the property improvements.
We currently originate one- to four-family mortgage loans on either a
fixed- or adjustable-rate basis, as consumer demand dictates. Our pricing
strategy for mortgage loans includes setting interest rates that are competitive
with Freddie Mac and other local financial institutions, and consistent with our
internal needs. Adjustable-rate mortgage, or ARM loans, are offered with either
a one-year, three-year or, to a lesser extent, five-year term to the initial
repricing date. After the initial period, the interest rate for each ARM loan
adjusts on an annual basis. We use the weekly average of the appropriate term
Treasury Bill Constant Maturity to reprice our ARM loans. During the year ended
December 31, 1999, we originated $1.4 million of one- to four-family ARM loans
and $5.3 million of one- to four-family fixed rate mortgage loans.
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<PAGE>
Fixed-rate loans originated for sale to the secondary market are
secured by one- to four-family residences and have contractual maturities of up
to 30 years, they are generally fully amortizing, with payments due monthly. A
significant change in the current level of interest rates could alter the
average life of a residential loan in our portfolio considerably. Our one- to
four-family loans do not contain prepayment penalties and do not permit negative
amortization of principal. Most are written using underwriting guidelines which
make them saleable in the secondary market. Our real estate loans generally
contain a "due on sale" clause allowing us to declare the unpaid principal
balance due and payable upon the sale of the security property.
Our one- to four-family residential ARM loans are fully amortizing
loans with contractual maturities of up to 30 years and payments due monthly.
Our ARM loans generally provide for specified minimum and maximum interest
rates, with a lifetime cap and floor, and a periodic adjustment on the interest
rate over the rate in effect on the date of origination. As a consequence of
using caps, the interest rates on these loans may not be as rate sensitive as is
our cost of funds.
ARM loans generally pose different credit risks than fixed-rate loans,
primarily because as interest rates rise, the borrower's payment rises,
increasing the potential for default. We have not experienced difficulty with
the payment history for these loans. See "- Asset Quality --Non-Performing
Assets" and "-- Classified Assets." At December 31, 1999, our one- to
four-family ARM loan portfolio totaled $[__] million, or [__]% of our gross loan
portfolio. At that date the fixed-rate one- to four-family mortgage loan
portfolio totaled $[__] million, or [__]% of our gross loan portfolio.
Multi-Family Residential and Commercial Real Estate Lending. We offer a
variety of multi-family residential and commercial real estate loans. These
loans are secured primarily by small retail establishments, rental properties,
small office buildings and storage facilities located in our primary market
area. At December 31, 1999, multi-family residential and commercial real estate
loans totaled $4.3 million or 19% of our gross loan portfolio.
Our currently originated loans secured by multi-family residential and
commercial real estate are originated with an adjustable interest rate. The
interest rate on these loans is generally tied to the prime rate of interest.
Loan-to-value ratios on our multi-family residential and commercial real estate
loans typically do not exceed 70% of the appraised value of the property
securing the loan. These loans typically require monthly payments, are fully
amortizing and have maximum maturities of 20 years.
Loans secured by multi-family residential and commercial real estate
are underwritten based on the income producing potential of the property and the
financial strength of the borrower. The net operating income, which is the
income derived from the operation of the property less all operating expenses,
must be sufficient to cover the payments related to the outstanding debt. We may
require an assignment of rents or leases in order to be assured that the cash
flow from the project will be used to repay the debt. Appraisals on properties
securing multi-family residential and commercial real estate loans are performed
by independent state licensed fee appraisers approved by the board of directors.
See "-- Loan Originations, Purchases, Sales and Repayments."
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Loans secured by multi-family residential and commercial real estate
properties are generally larger and involve a greater degree of credit risk than
one- to four-family residential mortgage loans. Because payments on loans
secured by multi-family residential and commercial real estate properties are
often dependent on the successful operation or management of the properties,
repayment of such loans may be subject to adverse conditions in the real estate
market or the economy. If the cash flow from the project is reduced, or if
leases are not obtained or renewed, the borrower's ability to repay the loan may
be impaired. See "- Asset Quality -- NonPerforming Loans."
Construction and Development Lending. We originate construction loans
to builders and to individuals for the construction of their residences.
Substantially all of these loans are secured by property located within our
market area or within the greater metropolitan Austin, Texas area. At December
31, 1999, we had $1.1 million in construction and development loans outstanding,
representing 5% of our gross loan portfolio.
Construction and development loans are obtained through continued
business with builders who have previously borrowed from us, from walk-in
customers and through referrals from existing customers and realtors. The
application process includes submission of accurate plans, specifications and
costs of the project to be constructed. These items are used as a basis to
determine the appraised value of the subject property. Loans are based on the
lesser of current appraised value and the cost of construction, including the
land and the building. We generally conduct regular inspections of the
construction project being financed.
Loans to individuals for the construction of their residences may be
either short term construction financing or a construction/permanent loan which
automatically converts to a long term mortgage consistent with our one- to
four-family residential loan products. Loan-to-value ratios on our construction
and development loans typically do not exceed 85% of the appraised value of the
project on an as completed basis. Single family construction loans with a
loan-to-value ratio over 80% require private mortgage insurance.
Because of the uncertainties inherent in estimating construction and
development costs and the market for the project upon completion, it is
relatively difficult to evaluate accurately the total loan funds required to
complete a project, the related loan-to-value ratios and the likelihood of
ultimate success of the project. These loans also involve many of the same risks
discussed above regarding commercial real estate loans and tend to be more
sensitive to general economic conditions than many other types of loans. In
addition, payment of interest from loan proceeds can make it difficult to
monitor the progress of a project.
Consumer and Other Lending. Consumer loans generally have shorter terms
to maturity, which reduces our exposure to changes in interest rates, and carry
higher rates of interest than do one- to four-family residential mortgage loans.
In addition, management believes that offering consumer loan products helps to
expand and create stronger ties to our existing customer base by increasing the
number of customer relationships and providing cross-marketing opportunities. At
December 31, 1999, our consumer loan portfolio totaled $4.9 million, or 23% of
our gross loan portfolio. We offer a variety of secured consumer loans,
including home equity loans, auto loans, boat and recreational vehicle loans and
loans secured by savings deposits. We
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<PAGE>
also offer a limited amount of unsecured loans. We originate our consumer loans
in our market area.
Our home equity loans totaled $568,000, and comprised 3% of our gross
loan portfolio at December 31, 1999. These loans may be originated in amounts,
together with the amount of the existing first mortgage, of up to 80% of the
value of the property securing the loan. The term to maturity on our home equity
loans may be up to 20 years.
We originate auto loans, boat loans and recreational vehicle loans on a
direct basis. These loans totaled $3.0 million at December 31, 1999, or 14% of
our gross loan portfolio. Auto, boat and recreational vehicle loans may be
written for up to five years and usually have fixed rates of interest. Loan to
value ratios for automobile loans are up to 100% of the sales price for new
autos and up to 100% of value on used cars, based on valuation from official
used car guides.
Consumer loans may entail greater risk than do one- to four-family
residential mortgage loans, particularly in the case of consumer loans which are
secured by rapidly depreciable assets, such as automobiles, boats and
recreational vehicles. In these cases, any repossessed collateral for a
defaulted loan may not provide an adequate source of repayment of the
outstanding loan balance. As a result, consumer loan collections are dependent
on the borrower's continuing financial stability and, thus, are more likely to
be adversely affected by job loss, divorce, illness or personal bankruptcy. See
"Risk Factors - Our Loan Portfolio Possesses Increased Risk Due to Our
Substantial Number of Consumer, Commercial and Construction Real Estate and
Commercial Business Loans."
We intend to expand our consumer and other lending in the future to
include commercial business lending. Commercial business loans are loans
extended to finance local businesses and include short term loans to finance
machinery and equipment purchases and inventory.
Unlike residential mortgage loans, commercial business loans are
typically made on the basis of the borrower's ability to make repayment from the
cash flow of the borrower's business. As a result, the availability of funds for
the repayment of commercial business loans may be substantially dependent on the
success of the business itself (which, in turn, is often dependent in part upon
general economic conditions). Commercial business loans are usually, but not
always, secured by business assets. However, the collateral securing the loans
may depreciate over time, may be difficult to appraise and may fluctuate in
value based on the success of the business.
Loan Originations, Purchases, Sales and Repayments
We originate loans through referrals from real estate brokers and
builders, our marketing efforts, and our existing and walk-in customers. While
we originate both adjustable-rate and fixed-rate loans, our ability to originate
loans is dependent upon customer demand for loans in our market areas. Demand is
affected by local competition and the interest rate environment. During the last
several years, due to low market interest rates, our dollar volume of
fixed-rate, one- to four-family loans has exceeded the dollar volume of the same
type of adjustable-rate loans. From time to time, we sell fixed rate, one- to
four-family residential loans. Furthermore,
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during the past few years, we, like many other financial institutions, have
experienced significant prepayments on loans due to the low interest rate
environment prevailing in the United States.
In periods of economic uncertainty, the ability of financial
institutions, including us, to originate or purchase large dollar volumes of
real estate loans may be substantially reduced or restricted, with a resultant
decrease in interest income.
The following table shows the loan origination and repayment activities
of Community Bank for the periods indicated, and includes loans originated for
both our own portfolio and for sale in the secondary market.
Years Ended December 31,
---------------------------
1999 1998
------------ --------------
(In Thousands)
Total loans, beginning of year $21,071 $21,527
------- -------
Loan originations:
Real estate mortgage loans 9,414 7,450
Consumer loans 2,405 2,564
Other loans 173 194
------- -------
Total loan originations 11,992 10,208
------- -------
Loan repayments and sales (11,171) (10,664)
------- -------
Total loans, end of year $21,892 $21,071
======= =======
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<PAGE>
Asset Quality
When a borrower fails to make a payment on a mortgage loan on or before
the default date, we mail a delinquency notice to the borrower when the loan is
10 days past due. When the loan is 15 days past due, we mail a subsequent
delinquent notice to the borrower. All delinquent accounts are reviewed by loan
personnel, who attempt to cure the delinquency by contacting the borrower once
the loan is 30 days past due. If the loan becomes 60 days delinquent, the
collector will generally contact by phone or send a personal letter to the
borrower in order to identify the reason for the delinquency. Once the loan
becomes 90 days delinquent, contact with the borrower is made requesting payment
of the delinquent amount in full, or the establishment of an acceptable
repayment plan to bring the loan current. If an acceptable repayment plan has
not been agreed upon, loan personnel will generally refer the account to legal
counsel, with instructions to prepare a notice of intent to foreclose. The
notice of intent to foreclose allows the borrower up to 30 days to bring the
account current. Once the loan becomes 120 days delinquent, and an acceptable
repayment plan has not been agreed upon, the collection officer will turn over
the account to our legal counsel with instructions to initiate foreclosure.
For consumer loans a similar process is followed, with the initial
written contact being made once the loan is 7 days past due. Follow-up contacts
are generally on an accelerated basis compared to the mortgage loan procedure.
Delinquent Loans. The following table sets forth our loans delinquent
60 - 89 days by type, number, amount and percentage of type at December 31,
1999.
<TABLE>
<CAPTION>
Loans Delinquent For:
------------------------------------------------ Total Loans Delinquent
60-89 Days 90 Days and Over 60 Days and Over
------------------------ ------------------------ -----------------------
Percent Percent Percent
of Loan of Loan of Loan
Number Amount Category Number Amount Category Number Amount Category
------- ------- -------- ------ ------- --------- ------ ------- --------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Real Estate:
- ------------
Residential......... --- $ --- ---% 1 $ 60 0.50% 1 $ 60 0.50%
Commercial.......... --- --- --- --- --- --- --- --- ---
Construction........ --- --- --- --- --- --- --- --- ---
Other:
- ------------
Consumer............. --- --- --- 3 8 0.18 --- 8 0.18
Commercial........... --- --- --- --- --- --- 3 --- ---
---- ------ ---- ---- ----- ----- ---- ----- -----
Total.................. --- $ --- 4 $ 68 4 $ 68
==== ====== ==== ===== ==== =====
</TABLE>
65
<PAGE>
Non-Performing Assets. The table below sets forth the amounts and
categories of non-performing assets in our loan portfolio. Non-performing assets
consist of non-accrual loans, accruing loans past due 90 days and more, and
foreclosed assets. Loans to a customer whose financial condition has
deteriorated are considered for non-accrual status whether or not the loan is 90
days and over past due. All consumer installment loans past due 90 days and over
are classified as non-accrual. On non-accrual loans, interest income is not
recognized until actually collected. At the time the loan is placed on
non-accrual status, interest previously accrued but not collected is reversed
and charged against current income.
Foreclosed assets consist of real estate and other assets which have
been acquired through foreclosure on loans. At the time of foreclosure, assets
are recorded at the lower of their estimated fair value less selling costs or
the loan balance, with any write-down charged against the allowance for loan
losses. Any future write-downs, expenses related to the assets, and any gain or
loss. At all dates presented, we had no troubled debt restructurings which
involve forgiving a portion of interest or principal on any loans or making
loans at a rate materially less than that of market rates.
December 31,
----------------------------------
1999 1998 1997
--------- ------------- ----------
(In Thousands)
Non-accruing loans:
One-to-four family residential $ 60 $ 84 $ 26
Consumer 1 17 14
------- ------- -------
Total 61 101 40
------- ------- -------
Accruing loans past due 90 days and over:
One-to-four family residential --- 3 ---
Consumer 7 --- 2
------- ------- -------
Total 7 3 2
Total non-performing loans 68 104 42
======= ======= =======
Foreclosed assets --- --- ---
Total non-performing assets $ 68 $ 104 $ 42
Allowance for loan losses $ 199 $ 181 $ 157
======= ======= =======
Coverage of non-performing loans 293% 174% 374%
======= ======= =======
Non-performing assets as a percentage
of total assets 0.16% 0.26% 0.13%
======= ======= =======
Other Loans of Concern. In addition to the non-performing assets set
forth in the table above, as of December 31, 1999, there was also an aggregate
of $144,000 in net book value of loans with respect to which known information
about the possible credit problems of the borrowers have caused management to
have doubts as to the ability of the borrowers to comply with present loan
repayment terms and which may result in the future inclusion of such items in
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<PAGE>
the non-performing asset categories. These loans have been considered in
management's determination of the adequacy of our allowance for loan losses.
Classified Assets. Regulations provide for the classification of loans
and other assets, such as debt and equity securities considered by regulators to
be of lesser quality, as "substandard," "doubtful" or "loss." An asset is
considered "substandard" if it is inadequately protected by the current net
worth and paying capacity of the obligor or of the collateral pledged, if any.
"Substandard" assets include those characterized by the "distinct possibility"
that the insured institution will sustain "some loss" if the deficiencies are
not corrected. Assets classified as "doubtful" have all of the weaknesses
inherent in those classified "substandard," with the added characteristic that
the weaknesses present make "collection or liquidation in full," on the basis of
currently existing facts, conditions, and values, "highly questionable and
improbable." Assets classified as "loss" are those considered "uncollectible"
and of such little value that their continuance as assets without the
establishment of a specific loss reserve is not warranted.
When an insured institution classifies problem assets as either
substandard or doubtful, it may establish general allowances for loan losses in
an amount deemed prudent by management and approved by the board of directors.
General allowances represent loss allowances which have been established to
recognize the inherent risk associated with lending activities, but which,
unlike specific allowances, have not been allocated to particular problem
assets. When an insured institution classifies problem assets as "loss," it is
required either to establish a specific allowance for losses equal to 100% of
that portion of the asset so classified or to charge off such amount. An
institution's determination as to the classification of its assets and the
amount of its valuation allowances is subject to review by the FDIC, which may
order the establishment of additional general or specific loss allowances.
In connection with the filing of our periodic reports with the FDIC and
in accordance with our classification of assets policy, we regularly review the
problem assets in our portfolio to determine whether any assets require
classification in accordance with applicable regulations. On the basis of
management's review of our assets, at December 31, 1999, we had classified
$209,000 of our assets as substandard, $6,000 as doubtful and $3,000 as loss.
The total amount classified represented 7.26% of our equity capital and 0.5% of
our assets at December 31, 1999.
Provision for Loan Losses. The provision for loan losses is charged to
income to bring our allowance for loan losses to a level deemed appropriate by
management based on the factors discussed below under "-- Allowance for Loan
Losses." The provision for loan losses during the year ended December 31, 1999
was based on management's review of such factors which indicated that the
allowance for loan losses was adequate to cover losses inherent in the loan
portfolio as of December 31, 1999.
Allowance for Loan Losses. We maintain an allowance for loan losses to
absorb losses inherent in the loan portfolio. The allowance is based on ongoing,
quarterly assessments of the estimated losses inherent in the loan portfolio.
Our methodology for assessing the appropriateness of the allowance consists of
several key elements, which include the formula allowance, specific allowances
for identified problem loans and portfolio segments and the unallocated
allowance. In addition, the allowance incorporates the results of measuring
impaired
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loans as provided in SFAS No. 114, "Accounting by Creditors for Impairment of a
Loan" and SFAS No. 118, "Accounting by Creditors for Impairment of a Loan -
Income Recognition and Disclosures." These accounting standards prescribe the
measurement methods, income recognition and disclosures related to impaired
loans.
The formula allowance is calculated by applying loss factors to
outstanding loans based on the internal risk evaluation of the loans or pools of
loans. Changes in risk evaluations of both performing and nonperforming loans
affect the amount of the formula allowance. Loss factors are based both on our
historical loss experience as well as on significant factors that, in
management's judgment, affect the collectibility of the portfolio as of the
evaluation date.
The appropriateness of the allowance is reviewed by management based
upon its evaluation of then-existing economic and business conditions affecting
our key lending areas and other conditions, such as credit quality trends
(including trends in nonperforming loans expected to result from existing
conditions), collateral values, loan volumes and concentrations, specific
industry conditions within portfolio segments and recent loss experience in
particular segments of the portfolio that existed as of the balance sheet date
and the impact that such conditions were believed to have had on the
collectibility of the loan. Senior management reviews these conditions quarterly
in discussions with our senior credit officers. To the extent that any of these
conditions is evidenced by a specifically identifiable problem credit or
portfolio segment as of the evaluation date, management's estimate of the effect
of such condition may be reflected as a specific allowance applicable to such
credit or portfolio segment. Where any of these conditions is not evidenced by a
specifically identifiable problem credit or portfolio segment as of the
evaluation date, management's evaluation of the loss related to this condition
is reflected in the unallocated allowance. The evaluation of the inherent loss
with respect to these conditions is subject to a higher degree of uncertainty
because they are not identified with specific problem credits or portfolio
segments.
The allowance for loan losses is based on estimates of losses inherent
in the loan portfolio. Actual losses can vary significantly from the estimated
amounts. Our methodology as described permits adjustments to any loss factor
used in the computation of the formula allowance in the event that, in
management's judgment, significant factors which affect the collectibility of
the portfolio as of the evaluation date are not reflected in the loss factors.
By assessing the estimated losses inherent in the loan portfolio on a quarterly
basis, we are able to adjust specific and inherent loss estimates based upon any
more recent information that has become available.
At December 31, 1999, our allowance for loan losses was $199,000 or
.91% of the total loan portfolio and approximately 293% of total non-performing
loans. Assessing the adequacy of the allowance for loan losses is inherently
subjective as it requires making material estimates, including the amount and
timing of future cash flows expected to be received on impaired loans, that may
be susceptible to significant change. In the opinion of management, the
allowance, when taken as a whole, is adequate to absorb reasonable estimated
loan losses inherent in our loan portfolios.
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<PAGE>
The following table sets forth an analysis of our allowance for loan
losses.
Years Ended December 31,
----------------------------
1999 1998 1997
------- ---------- ---------
(Dollars in Thousands)
Total loans outstanding (at end of period) $21,892 $21,071 $21,527
======= ======= =======
Average loans outstanding (period to date) $21,485 $21,299 $19,901
======= ======= =======
Allowance for loan losses, beginning of period $ 181 $ 157 $ 157
Loan charge-offs:
One-to-four family residential --- --- --
Consumer loans (12) --- (3)
Total loan charge-offs (12) --- (3)
------- ------- -------
Loan recoveries:
One-to-four family residential 30 24 ---
Consumer loans --- --- ---
------- ------- -------
Total loan recoveries 30 24 ---
------- ------- -------
Net loan (charge-offs) recoveries 18 24 (3)
Provision charged to operations --- --- 3
------- ------- -------
Allowance for loan losses, end of period $ 199 $ 181 $ 157
======= ======= =======
Ratio of net loan charge-offs during the period
to average loans outstanding 0.08% (0.11)% 0.02%
==== ===== ====
Provision as a percentage of average loans 0.00% 0.00% 0.02%
==== ===== ====
Allowance as a percentage of total loans 0.91% 0.86% 0.73%
==== ===== ====
At December 31, 1999, Community Bank had no specific loan loss reserves
and general, unallocated loan loss reserves of $199,000. We believe that
anticipated loan losses over the next year will not exceed these amounts.
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Investment Activities
The Bank is authorized to invest in various types of liquid assets,
including United States Treasury obligations, securities of various federal
agencies, including callable agency securities, certain certificates of deposit
of insured banks and savings institutions, certain bankers' acceptances,
repurchase agreements and federal funds. Subject to various restrictions,
savings institutions may also invest their assets in investment grade commercial
paper and corporate debt securities and mutual funds whose assets conform to the
investments that a federally chartered savings institution is otherwise
authorized to make directly. See "How We Are Regulated Community Bank" for a
discussion of additional restrictions on our investment activities.
The president has the basic responsibility for the management of our
investment portfolio, subject to the direction and guidance of the
investment/asset liability committee. The president considers various factors
when making decisions, including the marketability, maturity and tax
consequences of the proposed investment. The maturity structure of investments
will be affected by various market conditions, including the current and
anticipated slope of the yield curve, the level of interest rates, the trend of
new deposit inflows, and the anticipated demand for funds via deposit
withdrawals and loan originations and purchases.
The current objectives of our investment portfolio are to provide
liquidity when loan demand is high, to assist in maintaining earnings when loan
demand is low and to maximize earnings while satisfactorily managing risk,
including credit risk, reinvestment risk, liquidity risk and interest rate risk.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations - Asset and Liability Management and Market Risk."
Our investment securities currently consist of state and political
subdivision securities, mortgage-backed securities, and corporate obligations.
See Note 2 of the Notes to Consolidated Financial Statements. Our
mortgage-backed securities portfolio currently consists of securities issued
under government-sponsored agency programs.
While mortgage-backed securities, carry a reduced credit risk as
compared to whole loans, these securities remain subject to the risk that a
fluctuating interest rate environment, along with other factors like the
geographic distribution of the underlying mortgage loans, may alter the
prepayment rate of the mortgage loans and so affect both the prepayment speed,
and value, of the securities.
Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities," requires that investments be
categorized as "held to maturity," "trading securities" or "available for sale,"
based on management's intent as to the ultimate disposition of each security.
Statement of Financial Accounting Standards No. 115 allows debt securities to be
classified as "held to maturity" and reported in financial statements at
amortized cost only if the reporting entity has the positive intent and ability
to hold those securities to maturity. Securities that might be sold in response
to changes in market interest rates, changes in the security's prepayment risk,
increases in loan demand, or other similar factors cannot be classified as "held
to maturity." Debt and equity securities held for current resale are classified
as "trading securities." These securities are reported at fair value, and
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<PAGE>
unrealized gains and losses on the securities would be included in earnings.
Community Bank does not currently use or maintain a trading account. Debt and
equity securities not classified as either "held to maturity" or "trading
securities" are classified as "available for sale." These securities are
reported at fair value, and unrealized gains and losses on the securities are
excluded from earnings and reported, net of deferred taxes, as a separate
component of equity.
The following table sets forth the composition of our investment and
mortgage-related securities portfolio and other investments at the dates
indicated. Our investment securities portfolio at December 31, 1999, did not
contain securities of any issuer with an aggregate book value in excess of 10%
of our equity capital, excluding those issued by the United States Government or
its agencies, other than one investment in G.E. Capital Mortgage Services, Inc.
with a total market value of $4.2 million as of December 31, 1999.
<TABLE>
<CAPTION>
December 31,
----------------------------------------------
1999 1998 1997
--------------- --------------- --------------
Carrying % of Carrying % of Carrying % of
Value Total Value Total Value Total
-------- ------ -------- ------ -------- -----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Securities available for sale
(at fair value):
State and political subdivisions $ 148 1% $ --- ---% $ --- ---%
Mortgage-backed securities 15,898 98 7,031 94 2,497 90
Other 231 1 445 6 290 10
------- --- ------ --- ------ ---
Total $16,277 100% $7,476 100% $2,787 100%
======= === ====== === ====== ===
Securities to be held to maturity
(at amortized cost):
State and political subdivisions $ --- ---% $ 175 3% $ 205 3%
Mortgage-backed securities --- --- 5,838 97 6,567 97
Other --- --- --- --- --- ---
------- --- ------ --- ------ ---
Total $ --- ---% $6,013 100% $6,772 100%
======= === ====== === ====== ===
</TABLE>
71
<PAGE>
The composition and maturities of the investment securities and
mortgage-backed securities portfolio, excluding Federal Home Loan Bank stock and
our trading portfolio as of December 31, 1999 are indicated in the following
table.
<TABLE>
<CAPTION>
Less than 1 Year 1 to 5 Years 5 to 10 Years Over 10 Years Total Securities
----------------- -------------- -------------- ---------------- -----------------
Average Average Average Average Average
Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield
-------- -------- ------ ------- ------ ------- ------- ------- ------- ---------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Securities available for sale:
State and political subdivisions $ 35 5.75% $110 5.75% $ --- ---% $ --- ---% $ 145 5.75%
Mortgage-backed securities --- --- --- --- 971 5.47 14,926 6.20 15,898 6.16
Other --- --- --- --- --- --- 234 --- 234 ---
---- ---- ---- ---- ----- ---- ------- ---- ------- ----
Total $ 35 5.75% $110 5.75 $ 971 5.47% $15,160 6.11% $16,277 6.06%
==== ==== ==== ==== ===== ==== ======= ==== ======= ====
</TABLE>
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<PAGE>
Sources of Funds
General. Our sources of funds are deposits, borrowings, payment of
principal and interest on loans, interest earned on or maturation of other
investment securities and funds provided from operations.
Deposits. We offer a variety of deposit accounts to both consumer and
businesses having a wide range of interest rates and terms. Our deposits consist
of NOW accounts, time deposit accounts, savings and money market and demand
accounts and certificates of deposit. We solicit deposits in our market areas
and have not accepted brokered deposits. We primarily rely on competitive
pricing policies, marketing and customer service to attract and retain these
deposits.
The flow of deposits is influenced significantly by general economic
conditions, changes in money market and prevailing interest rates and
competition. The variety of deposit accounts we offer has allowed us to be
competitive in obtaining funds and to respond with flexibility to changes in
consumer demand. We have become more susceptible to short-term fluctuations in
deposit flows, as customers have become more interest rate conscious. We try to
manage the pricing of our deposits in keeping with our asset/liability
management, liquidity and profitability objectives, subject to competitive
factors. Based on our experience, we believe that our deposits are relatively
stable sources of funds. Despite this stability, our ability to attract and
maintain these deposits and the rates paid on them has been and will continue to
be significantly affected by market conditions.
The following table sets forth our deposit flows during the periods
indicated.
Years Ended December 31,
---------------------------------
1999 1998 1997
--------- ----------- -----------
(Dollars in Thousands)
Deposits to deposit accounts................ $ 36,324 $ 27,635 $ 20,005
Withdrawals from deposit accounts........... (37,292) (26,924) (20,923)
Interest credited to deposit accounts....... 1,184 1,206 1,159
-------- -------- --------
Net increase........................... 216 1,917 241
Opening balance of deposit accounts......... 32,138 30,221 29,980
-------- -------- --------
Ending balance of deposit accounts.......... $32,354 $32,138 $30,221
======== ======== ========
Percent annual increase in deposit accounts. 0.67% 6.34% 0.80%
=== ==== ====
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The following table sets forth the dollar amount of savings deposits in
the various types of deposit programs we offered at the dates indicated.
December 31
--------------------------------------
1999 1998
------------------ -------------------
Amount Percent Amount Percent
-------- --------- ----------- -------
(Dollars in Thousands)
Noninterest-bearing accounts $ 377 1% $ 200 1%
Savings accounts 1,770 5 1,326 4
NOW and money market accounts 4,852 15 4,438 14
------- ---
Total non-certificates 6,999 21
------- ---
Certificates of deposit:
4.00% to 4.99% 15,230 47
5.00% to 5.99% 7,120 22
6.00% to 6.99% 3,005 10
------- ---
Total certificates 25,355 79 26,174 81
------- --- ------- ---
Total deposits $32,354 100% $32,138 100%
======= === ======= ===
The following table shows rate and maturity information for Community
Bank's certificates of deposit as of December 31, 1999.
Weighted Average
Amount Rate
-------------- ----------------
(Dollars in Thousands)
Certificate accounts maturing within:
One month $ 3,492 5.38%
One to three months 4,329 4.69
Three to six months 6,169 4.93
Six to nine months 3,533 4.91
Nine to twelve months 2,842 4.71
Twelve to eighteen months 2,814 4.81
Eighteen months to two years 784 4.92
Over two years 1,392 5.33
-------- ----
Total $ 25,355 4.93%
======== ====
The following table indicates the amount of Community Bank's
certificates of deposit and other deposits by time remaining until maturity as
of December 31, 1999.
Maturity
Over
3 Months 3 to 12 Over
or Less Months 12 months Total
----------- ------------- -------------- ---------
(In Thousands)
Certificates of deposit
less than $100,000....... $7,186 $10,992 $4,278 $22,456
Certificates of deposit
of $100,000 or more...... 635 1,552 712 2,899
------ ------- ------ -------
Total certificates of
deposit.................. $7,821 $12,544 $4,990 $25,355
====== ======= ====== =======
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Borrowings. Although deposits are our primary source of funds, we may
utilize borrowings when they are a less costly source of funds, and can be
invested at a positive interest rate spread, when we desire additional capacity
to fund loan demand or when they meet our asset/liability management goals. Our
borrowings historically have consisted of advances from the Federal Home Loan
Bank of Dallas. See Note 8 of the Notes to Consolidated Financial Statements.
We may obtain advances from the Federal Home Loan Bank of Dallas upon
the security of certain of our mortgage loans and mortgage-backed securities.
These advances may be made pursuant to several different credit programs, each
of which has its own interest rate, range of maturities and call features. At
December 31, 1999, we had $7.4 million in Federal Home Loan Bank advances
outstanding.
The following table sets forth certain information as to our Federal
Home Loan Bank advances for the periods indicated.
Years Ended December 31,
------------------------------
1999 1998
------------- --------------
(Dollars in Thousands)
Federal Home Loan Bank advances:
Maximum balance $ 8,000 $ 4,000
Average monthly balance 6,716 296
Amount outstanding at end of year 7,392 4,000
Weighted average interest rate of advances 5.36% 5.07%
Subsidiary and Other Activities
At December 31, 1999, Community Bank had a $1,000 investment in an
inactive subsidiary. The subsidiary was engaged in securities brokerage
activities through a third party from 1993 through 1998. Effective January 1,
1999, its operations were combined into Community Bank and the subsidiary became
inactive.
Competition
We face strong competition in originating real estate and other loans
and in attracting deposits. Competition in originating real estate loans comes
primarily from other savings institutions, commercial banks, credit unions and
mortgage bankers. Other savings institutions, commercial banks, credit unions
and finance companies provide vigorous competition in consumer lending.
We attract all of our deposits through our branch office system.
Competition for those deposits is principally from other savings institutions,
commercial banks and credit unions located in the same community, as well as
mutual funds and other alternative investments. We compete for these deposits by
offering superior service and a variety of deposit accounts at
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competitive rates. As of December 31, 1999, we believe that we hold less than
10% of the deposits in our primary market area.
Employees
At December 31, 1999, we had a total of 16 employees, including two
part-time employees. Our employees are not represented by any collective
bargaining group. Management considers its employee relations to be good.
Properties
At December 31, 1999, we had one full service office. We own the office
building in which our home office and executive offices are located, which was
built in 1994. We also hold a piece of real estate in Manor, Texas for possible
future expansion. The net book value of our investment in premises, equipment
and leaseholds, excluding computer equipment, was approximately $1.3 million at
December 31, 1999.
We believe that our current facilities are adequate to meet the present
and immediately foreseeable needs of Community Bank and CBCT Bancshares, Inc.
We utilize a third party service provider to maintain our data base of
depositor and borrower customer information. The net book value of the data
processing and computer equipment utilized by us at December 31, 1999 was
approximately $50,000.
Legal Proceedings
From time to time we are involved as plaintiff or defendant in various
legal actions arising in the normal course of business. We do not anticipate
incurring any material liability as a result of such litigation.
MANAGEMENT
Management of CBCT Bancshares, Inc.
The board of directors of CBCT Bancshares, Inc. consists of the same
individuals who serve as directors of Community Bank. The board of directors of
CBCT Bancshares, Inc. is divided into three classes, as equal as possible. The
directors shall be elected by the stockholders of CBCT Bancshares, Inc. for
three year terms, or until their successors are elected. One class of directors,
consisting of James A. Cowan and Mike C. Maney, has a term of office expiring at
the first annual meeting of stockholders. A second class, consisting of Georgina
Chronis and Rodney E. Langer, has a term of office expiring at the second annual
meeting of stockholders. The third class, consisting of Gordon N. Fowler, Jr.,
Brad M. Hurta and Barry Hannath, has a term of office expiring at the third
annual meeting of stockholders.
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The following individuals are executive officers of CBCT Bancshares,
Inc. and hold the offices set forth below opposite their names.
Executive Position Held with
- ------------------ ------------------------------------------------------
Brad Hurta President and Chief Executive Officer
Lynn Frerich Vice President, Chief Operating Officer and Secretary
The executive officers of CBCT Bancshares, Inc. are elected annually
and hold office until their respective successors have been elected or until
death, resignation or removal by the board of directors.
Information concerning the principal occupations, employment and
compensation of the directors and executive officers of CBCT Bancshares, Inc. is
set forth under "- Management of Community Bank" and "- Executive Officers Who
Are Not Directors." Directors of CBCT Bancshares, Inc. initially will not be
compensated by CBCT Bancshares, Inc. but will serve and be compensated by
Community Bank. It is not anticipated that separate compensation will be paid to
directors of CBCT Bancshares, Inc. until such time as these persons devote
significant time to the separate management of CBCT Bancshares, Inc. affairs,
which is not expected to occur until CBCT Bancshares, Inc. becomes actively
engaged in additional businesses other than holding the stock of Community Bank.
CBCT Bancshares, Inc. may determine that such compensation is appropriate in the
future.
Management of Community Bank
Because Community Bank is a mutual savings bank, its members have
elected its board of directors. Upon completion of the conversion, the directors
of Community Bank immediately prior to the conversion will continue to serve as
directors of Community Bank in stock form. The board of directors of Community
Bank in stock form will consist of seven directors divided into three classes,
with approximately one-third of the directors elected at each annual meeting of
stockholders. Because CBCT Bancshares, Inc. will own all the issued and
outstanding capital stock of Community Bank following the conversion, the board
of directors of CBCT Bancshares, Inc. will elect the directors of Community
Bank.
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<PAGE>
The following table sets forth certain information regarding the board
of directors of Community Bank.
Term of
Director Office
Name Age(1) Positions Held With Since Expires
- -------------------------- ------ ----------------------- --------- --------
Vernon L. Richards 70 Director 1991 2000
Clinton M. Wright 70 Director 1993 2000
Mike C. Maney 49 Director 1991 2000
Gordon N. Fowler 50 Director 1992 2000
James A. Cowan 56 Director 1996 2000
Rodney E. Langer 58 Director 1999 2000
Brad M. Hurta 34 President and Director 1999 2000
Georgina Chronis 43 Director 1999 2000
Barry W. Hannath 55 Director 1983 2000
- -------------------------
(1) As of December 31, 1999.
The business experience of each director for at least the past five
years is set forth below.
Vernon L. Richards. Mr. Richards retired in 1986 as an executive with
Southwestern bell Telephone company. Mr. Richards currently has ranching
interests in Smithville, Texas.
Clinton M. Wright. Ms. Wright is the President and Financial Director
of Pendergrass- People's Mortuary, Inc. in Smithville, Texas. Ms. Wright has
held these positions since 1985.
Mike C. Maney. Mr. Maney has been the owner of Maney Tax Service, a tax
preparation service since 1999. Previously, he was the Foreman-Gas Measurement
for Western Gas Resources, a natural gas pipeline, a position he retired from in
October 1998, after 17 years.
Gordon N. Fowler, Jr. Mr. Fowler is the owner/operator of Diamond F
Ranch, a cattle operation located in Rosanky, Texas. Prior to 1997, Mr. Fowler
was the ranch manager of Double D Ranch, located in Rosanky, Texas.
James A. Cowan. Mr. Cowan is a self-employed consultant in the
telecommunications field.
Rodney E. Langer. Mr. Langer retired as a Captain with Delta Airlines
in July 1997.
Brad M. Hurta. Mr. Hurta is the President of Community Bank, a position
he has held since May 1999. Prior to this, he was the Senior Vice President of
First State Bank, Smithville, Texas.
Georgina Chronis. Ms. Chronis is the President of Clara Inc., which
operates La Cabana Restaurant Chevron Store in Smithville, Texas. Ms. Chronis
has held this position since 1985.
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<PAGE>
Barry W. Hannath. Mr. Hannath is a self-employed rancher. From 1975
until 1993, Mr. Hannath was the President and Chief Executive Officer of Hannath
Inc., a grocery store.
Executive Officers Who Are Not Directors
Each of the executive officers of CBCT Bancshares, Inc. will retain
office following the conversion. Officers are elected annually by the board of
directors of CBCT Bancshares, Inc. The business experience for at least the past
five years for each of the executive officers of CBCT Bancshares, Inc. who do
not serve as directors is set forth below.
Lynn D. Frerich. Age 29 years. Mr. Frerich serves as Vice President and
Chief Operating Officer. He has been employed by Community Bank since 1999.
Prior to joining, he was the Branch Manager of First State Bank of Bastrop,
Texas.
Nancy M. Janecek. Age 56 years. Ms. Janecek is a Vice President of CBCT
Bancshares, Inc., at Community Bank. She has held this position since 1993, and
originally started with Community Bank in 1986.
Meetings and Committees of the Board of Directors
Our board of directors meets monthly. During the year ended December
31, 1999, the board of directors held 15 meetings. No director attended fewer
than 75% of the total meetings of the board of directors and committees on which
such board member served during this period.
We currently have standing Audit, Asset Review, Asset/Liability,
Management Investment and Executive Committees. We do not have a standing
Nominating Committee; rather, the Executive Committee performs this function.
The Audit Committee is comprised of Vernon Richards, Clinton Wright,
and Gordon Fowler, Jr. The Audit Committee meets as needed. The Audit Committee
recommends the independent auditors and reviews the audit report prepared by the
independent auditors. This committee met five times in 1999. The Audit Committee
also reviews the policies of the Bank and recommends approval to the Board.
The Asset Review Committee is chaired by James Cowan, who is designated
the Asset Review Officer and Clinton Wright and Gordon Fowler, Jr. as members.
The Asset Review Committee meets quarterly or more frequently on an as needed
basis. The Asset Review Committee reviews, identifies and classifies Community
Bank's assets based on credit risk, in accordance with regulatory guidelines.
This committee is also responsible for reviewing asset valuation and
classification policies, as well as developing and monitoring asset disposition.
This committee met four times in 1999.
The Management Investment Committee is comprised of Brad Hurta, James
Cowan, and Barry Hannath with Mike Maney as Chairman. The Management Investment
Committee meets as needed. The Management Investment Committee reviews and
monitors Community Bank' investment portfolio, liquidity position and interest
rate risk. The committee is also responsible
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<PAGE>
for reviewing and establishing loan and deposit interest rates. This committee
met 15 times in 1999.
The Executive Committee is comprised of Brad Hurta, Mike Maney and
Vernon Richards with Barry Hannath as Chairman. The Executive Committee meets at
least monthly or on an as needed basis. The Executive Committee is authorized to
conduct any business which the full board of directors may conduct. The
committee specifically reviews loan applications and the underwriting policy,
monitors the performance of senior management and accounting personnel. In
addition, the committee acts as a search and nominating committee for board
members and senior management. This committee met 44 times in 1999.
Directors' Compensation
Members of Community Bank's board of directors receive a fee of $375
per meeting attended and $100 per committee meeting attended.
Executive Compensation
The following table sets forth a summary of certain information
concerning the compensation paid by Community Bank, including amounts deferred
to future periods by the officers, for services rendered in all capacities
during the year ended December 31, 1999 to the President and Chief Executive
Officer of Community Bank. No other executive officer of Community Bank received
salary and bonus exceeding $100,000.
<TABLE>
<CAPTION>
Summary Compensation Table
- ---------------------------------------------------------------------------------------------------
Long Term
Compensation
Annual Compensation Awards
------------------------------ -------------------
Other Restricted
Annual Stock All Other
Fiscal Compensation Award Options Compen-
Name and Principal Position Year Salary Bonus ($)(1) ($)(2) (#)(2) sation
- ----------------------------- ------ ----------- ------ ------------ ---------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Brad M. Hurta, 1999 $44,692(3) $--- --- --- --- $---
President and Chief Executive
Officer
<FN>
- -------------
(1) This amount does not include personal benefits or perquisites which did
not exceed the lesser of $50,000 or 10% of the named individuals'
salary and bonus.
(2) As a mutual institution, Community Bank does not have any stock option
or restricted stock plans. CBCT Bancshares, Inc. does, however, intend
to adopt such plans following the conversion. See "- Benefits -- Other
Stock Benefit Plans."
(3) Employment began May 27, 1999.
</FN>
</TABLE>
Benefits
General. Community Bank currently provides health and welfare benefits
to its employees, including hospitalization, comprehensive medical insurance,
dental insurance and life
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<PAGE>
insurance, subject to certain deductibles and copayments by employees. Community
Bank also provides certain retirements benefits. See Note [16] of the Notes to
Consolidated Financial Statements.
401(k) and Profit Sharing Plan. Community Bank has a qualified,
tax-exempt savings and profit-sharing plan with a cash or deferred feature
qualifying under Section 401(k) of the Internal Revenue Code. Employees of CBCT
Bancshares, Inc. and Community Bank may participate in this plan, beginning on
the first of January or July after the employee has completed three months of
service. Employees of CBCT Bancshares, Inc. and Community Bank who are active
participants and have worked at least 1,000 hours during the plan year, are
eligible for matching contributions.
Participants are permitted to make salary reduction contributions to
the 401(k) Plan of up to 12% of the participant's annual salary. In addition,
Community Bank may match the participant's contribution on a dollar for dollar
basis up to 100% of the participant's before-tax contribution up to a maximum
contribution by Community Bank of 3% of the participant's annual salary for the
year. Community Bank may also make discretionary contributions. All participant
contributions and earnings are fully and immediately vested. The percentage of a
participant's ownership in Community Bank's contributions vest 100% after five
years of service, 20% per year, with Community Bank. However in the event of
retirement, permanent disability or death, a participant will automatically
become 100% vested in the value of all contributions by Community Bank and
earnings thereon, regardless of the number of years of employment with Community
Bank.
Participants may invest amounts contributed to their 401(k) Plan
accounts in one or more investment options available under the 401(k) Plan. Each
participant receives an annual statement which provides information regarding,
among other things, the market value of his investments and contributions made
to the 401(k) Plan on the participant's behalf. Participants are permitted to
borrow against their account balance in the 401(k) Plan. For the year ended
December 31, 1999, Community Bank's contribution to the 401(k) Plan on behalf of
Mr. Hurta was $0.
Employee Stock Ownership Plan. CBCT Bancshares, Inc. intends to adopt
an employee stock ownership plan for employees of CBCT Bancshares, Inc. and
Community Bank to become effective upon the conversion. Employees of CBCT
Bancshares, Inc. and Community Bank who have been credited with at least 1,000
hours of service during a twelve month period are eligible to participate in the
employee stock ownership plan.
As part of the conversion, it is anticipated that the employee stock
ownership plan will borrow funds from CBCT Bancshares, Inc. The employee stock
ownership plan will use these funds to purchase up to 8.0% of the common stock
issued in the conversion. It is anticipated that this loan will equal 100% of
the aggregate purchase price of the common stock acquired by the employee stock
ownership plan. The loan to the employee stock ownership plan will be repaid
principally from Community Bank's contributions to the employee stock ownership
plan over a period of 15 years, and the collateral for the loan will be the
common stock purchased by the employee stock ownership plan. The interest rate
for the loan is expected to be the minimum rate
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<PAGE>
prescribed by the Internal Revenue Code. CBCT Bancshares, Inc. may, in any plan
year, make additional discretionary contributions for the benefit of plan
participants in either cash or shares of common stock, which may be acquired
through the purchase of outstanding shares in the market or from individual
stockholders, upon the original issuance of additional shares by CBCT
Bancshares, Inc. or upon the sale of treasury shares by CBCT Bancshares, Inc.
These purchases, if made, would be funded through additional borrowings by the
employee stock ownership plan or additional contributions from CBCT Bancshares,
Inc. The timing, amount and manner of future contributions to the employee stock
ownership plan will be affected by various factors, including prevailing
regulatory policies, the requirements of applicable laws and regulations and
market conditions.
Shares purchased by the employee stock ownership plan with the proceeds
of the loan will be held in a suspense account and released to participants'
accounts as debt service payments are made. Shares released from the employee
stock ownership plan will be allocated to each eligible participant's employee
stock ownership plan account based on the ratio of each such participant's
compensation to the total compensation of all eligible employee stock ownership
plan participants. Forfeitures will be reallocated among remaining participating
employees and may reduce any amount CBCT Bancshares, Inc. might otherwise have
contributed to the employee stock ownership plan. The account balances of
participants within the employee stock ownership plan will become 100% vested
after five years of service. Credit for eligibility and vesting is given for
years of service with Community Bank prior to adoption of the employee stock
ownership plan. In the case of a "change in control," as defined in the employee
stock ownership plan, which triggers a termination of the employee stock
ownership plan, participants will become immediately fully vested in their
account balances. Benefits are payable upon retirement or other separation from
service. CBCT Bancshares, Inc.'s contributions to the employee stock ownership
plan are not fixed, so benefits payable under the employee stock ownership plan
cannot be estimated.
[First Bankers Trust, Quincy, Illinois] will serve as trustee of the
employee stock ownership plan. Under the employee stock ownership plan, the
trustee must vote all allocated shares held in the employee stock ownership plan
in accordance with the instructions of the participating employees, and
unallocated shares will be voted in the same ratio on any matter as those
allocated shares for which instructions are given.
GAAP requires that any third party borrowing by the employee stock
ownership plan be reflected as a liability on CBCT Bancshares, Inc.' statement
of financial condition. Since the employee stock ownership plan is borrowing
from CBCT Bancshares, Inc., this obligation is not treated as a liability, but
will be excluded from stockholders' equity. If the employee stock ownership plan
purchases newly issued shares from CBCT Bancshares, Inc., total stockholders'
equity would neither increase nor decrease, but per share stockholders' equity
and per share net earnings would decrease as the newly issued shares are
allocated to the employee stock ownership plan participants.
The employee stock ownership plan will be subject to the requirements
of ERISA, and the regulations of the IRS and the Department of Labor thereunder.
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<PAGE>
Other Stock Benefit Plans. In the future, we intend to adopt a stock
option plan and a restricted stock plan for the benefit of selected directors,
officers and employees. We anticipate that the stock option plan and restricted
stock plan will have reserved a number of shares equal to 10% and 4%,
respectively, of the CBCT Bancshares, Inc. common stock sold in the conversion.
Grants of common stock pursuant to the restricted stock plan will be issued
without cost to the recipient. If a determination is made to implement a stock
option plan or restricted stock plan, it is anticipated that any such plans will
be submitted to stockholders for their consideration at which time stockholders
would be provided with detailed information regarding such plan. If such plans
are approved, and effected, they will have a dilutive effect on CBCT Bancshares,
Inc. stockholders as well as affect CBCT Bancshares, Inc.' net income and
stockholders' equity, although the actual results cannot be determined until
such plans are implemented. Any such stock option plan or restricted stock plan
will not be implemented less than six months after the date of the completion of
the conversion, subject to continuing Texas Savings and Loan Department
jurisdiction.
Employment Agreement for Brad M. Hurta. In connection with the
conversion, Community Bank intends to enter into a three-year employment
agreement with Mr. Hurta. Under the employment agreement, the initial salary
level will be Mr. Hurta's current salary of $70,000, and the agreement also
provides for equitable participation by Mr. Hurta in Community Bank's employee
benefit plans. The salary may be increased at the discretion of the board of
directors. The agreement may be terminated by Community Bank at any time or by
the executive if he is assigned duties inconsistent with his initial position,
duties, responsibilities and status. In the event that Mr. Hurta's employment is
terminated without cause or upon his voluntary termination following the
occurrence of an event described in the preceding sentence, Community Bank would
be required to honor the terms of the agreement through the expiration of the
contract, including payment of then current cash compensation and continuation
of employee benefits.
The employment agreement also provides for a severance payment and
other benefits if Mr. Hurta is involuntarily terminated because of a change in
control of CBCT Bancshares, Inc. or Community Bank. The agreement authorizes
severance payments on a similar basis if Mr. Hurta involuntarily terminates his
employment following a change in control because he is assigned duties
inconsistent with his position, duties, responsibilities and status immediately
prior to the change in control.
The maximum value of the severance benefits under the employment
agreements is 2.99 times the executive's average annual W-2 compensation during
the five calendar year period prior to the effective date of the change in
control (base amount). Assuming that a change in control had occurred at
December 31, 1999 Mr. Hurta would be entitled to a payment of approximately
$133,630. Section 280G of the Internal Revenue Code provides that severance
payments that equal or exceed three times the individual's base amount are
deemed to be "excess parachute payments" if they are conditioned upon a change
in control. Individuals receiving parachute payments in excess of three times of
their base amount are subject to a 20% excise tax on the amount of the excess
payments. If excess parachute payments are made, CBCT Bancshares, Inc. and
Community Bank would not be entitled to deduct the amount of the excess
payments. The employment agreement provides that severance and other payments
that are
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<PAGE>
subject to a change in control will be reduced as much as necessary to ensure
that no amounts payable to the executive will be considered excess parachute
payments.
Loans and Other Transactions with Officers and Directors
Community Bank has followed a policy of granting loans to officers and
directors, which fully complies with all applicable federal regulations. Loans
to directors and executive officers are made in the ordinary course of business
and on the same terms and conditions as those of comparable transactions with
non-insider employees prevailing at the time, in accordance with our
underwriting guidelines, and do not involve more than the normal risk of
collectibility or present other unfavorable features.
All loans we make to our directors and executive officers are subject
to regulations restricting loans and other transactions with affiliated persons
of Community Bank. Loans to all directors and executive officers and their
associates totaled approximately $321,000 at December 31, 1999, which was 11% of
our equity at that date. All loans to directors and executive officers were
performing in accordance with their terms at December 31, 1999.
HOW WE ARE REGULATED
Set forth below is a brief description of certain laws and regulations
which are applicable to CBCT Bancshares, Inc. and Community Bank. The
description of these laws and regulations, as well as descriptions of laws and
regulations contained elsewhere herein, does not purport to be complete and is
qualified in its entirety by reference to the applicable laws and regulations.
Legislation is introduced from time to time in the United States
Congress that may affect the operations of CBCT Bancshares, Inc. and Community
Bank. In addition, the regulations governing CBCT Bancshares, Inc. and Community
Bank may be amended from time to time by the Texas Savings and Loan Department
and the FDIC. Any such legislation or regulatory changes in the future could
adversely affect CBCT Bancshares, Inc. or Community Bank. No assurance can be
given as to whether or in what form any such changes may occur.
General
Community Bank, as a Texas chartered savings bank, is subject to both
state and federal regulation and oversight by the Texas Savings and Loan
Department and the FDIC extending to all aspects of its operations. Community
Bank also is subject to requirements established by the Federal Reserve Board.
Community Bank is required to file periodic reports with the Texas Savings and
Loan Department and the FDIC and is subject to periodic examinations by the
Texas Savings and Loan Department and the FDIC. The investment and lending
authority of Community Bank is prescribed by state laws and regulations, and
Community Bank is prohibited from engaging in any activities not permitted by
such laws and regulations. Such regulation and supervision primarily is intended
for the protection of depositors and not for the purpose of protecting
shareholders. This regulatory oversight will continue to apply to Community Bank
following the reorganization.
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<PAGE>
The Texas Savings and Loan Department regularly examines Community Bank
and prepares reports for the consideration of Community Bank's board of
directors on any deficiencies that it may find in Community Bank's operations.
The FDIC also has the authority to examine Community Bank in its role as the
administrator of the Bank Insurance Fund. Community Bank's relationship with its
depositors and borrowers also is regulated to a great extent by both Federal and
state laws, especially in such matters as the ownership of savings accounts and
the form and content of Community Bank's mortgage requirements. Any change in
such regulations, whether by the FDIC, the Texas Savings and Loan Department or
Congress, could have a material adverse impact on CBCT Bancshares, Inc. and
Community Bank and their operations.
CBCT Bancshares, Inc.
Pursuant to regulations of the Federal Reserve Board and the terms of
CBCT Bancshares, Inc.'s Maryland articles of incorporation, the purpose and
powers of CBCT Bancshares, Inc. are to pursue any or all of the lawful
objectives of a bank holding company and to exercise any of the powers accorded
to a bank holding company.
Community Bank
General. As a state chartered savings bank, the Bank derives its
authority from, and is governed by, the provisions of the Texas Savings Bank Act
(the "Texas Act") and rules and regulations of the Texas Department. The Texas
Act and regulations of the Texas Department are administered by the Texas
Savings and Loan Commissioner (the "Commissioner").
Investments and Deposit Accounts. The Texas Act imposes restrictions on
the amounts and types of loans that may be made by a state savings bank,
generally bringing these restrictions into parity with the regulation of
federally chartered institutions. The manner of establishing deposit accounts
and evidencing the same is prescribed, as are the obligations of the Bank with
respect to withdrawals from deposit accounts and redemptions of deposit
accounts.
Branch Offices. Pursuant to the Texas Act and the regulations issued
thereunder, the Commissioner may permit the Bank to establish branch offices
after giving consideration to the promotion of public need, market conditions
and financial and managerial capability of the Bank to establish and maintain
each branch office sought. Interested parties, which include any savings and
loan association or branch thereof, together with any others deemed to be
interested parties by the Commissioner, are permitted to protest the
establishment of such branches and may request a hearing before the Commissioner
regarding this matter.
Consolidation or Merger. The Texas Act provides that savings banks may
consolidate or merge, subject to approval of the Commissioner, when the
Commissioner finds that such merger or consolidation is not in restraint of
trade, would not significantly curtail competition or impair other financial
institutions.
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Examination. The Texas Department conducts and supervises the
examination of state chartered savings banks. An insured association such as the
Bank will also be examined periodically by the FDIC.
Supervision. The Commissioner has general supervisory authority over
savings banks and their holding companies. Upon his finding that a savings bank
is in violation of any provision of the Act or regulations, or is engaging in
unsafe or unsound practices, or is failing to maintain adequate documentary or
accounting records, he may order the savings bank or its holding company to
discontinue the violation or practice, or to establish necessary records. Upon
failure of any savings bank, its holding company or any participating person to
comply with his order, the Commissioner may issue upon the violating party (i)
an order to cease and desist from continuing such a particular action, (ii) a
removal or prohibition order suspending or prohibiting the person participating
in such violation from the affairs of the savings bank, (iii) an order requiring
divestiture of control of the savings bank, (iv) an order requiring the payment
of a civil penalty in an amount of not more than $25,000, or (v) an order
placing the affairs of the savings bank under the control of a conservator who
will manage the savings bank under the direction of the Commissioner.
Furthermore, if it appears doubtful to the Commissioner that a savings bank
subject to such a conservatorship order can be successfully rehabilitated, the
Commissioner may close the savings bank and liquidate it.
Change of Control. A change of control of a savings bank (and therefore
the holding company) may not occur unless an application is made and approved by
the Commissioner. For the purposes of Texas law, control shall be deemed to
exist if any person owns or controls 25% or more of the voting securities of a
savings bank. Similar to federal law, there is a presumption of control if any
person owns or controls 10% or more of the voting securities of the savings bank
Holding Companies. The Commissioner also has the authority to regulate
and examine the holding companies of Texas chartered savings banks. Each holding
company is required by Texas law to register with the Commissioner within 90
days after becoming a holding company. Such holding companies, like that of the
Bank, must file with the Commissioner reports concerning its operations. The
Commissioner also has enforcement powers over such holding companies similar to
those applicable to savings banks.
Applicable Corporate Law. In addition to the laws of Texas specifically
governing savings banks and their holding companies, the Bank and Horizon are
also subject to Texas corporate law, to the extent such law does not conflict
with the laws specifically governing savings banks and their holding companies.
Insurance of Accounts and Regulation by the FDIC
Community Bank is a member of the Bank Insurance Fund, which is
administered by the FDIC. Deposits are insured up to the applicable limits by
the FDIC and such insurance is backed by the full faith and credit of the United
States Government. As insurer, the FDIC imposes deposit insurance premiums and
is authorized to conduct examinations of and to require reporting by
FDIC-insured institutions. It also may prohibit any FDIC-insured institution
from
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engaging in any activity the FDIC determines by regulation or order to pose a
serious risk to the Bank Insurance Fund or the Bank Insurance Fund. The FDIC
also has the authority to initiate enforcement actions against savings
institutions and may terminate the deposit insurance if it determines that the
institution has engaged in unsafe or unsound practices or is in an unsafe or
unsound condition.
The FDIC's deposit insurance premiums are assessed through a risk-based
system under which all insured depository institutions are placed into one of
nine categories and assessed insurance premiums based upon their level of
capital and supervisory evaluation. Under the system, institutions classified as
well capitalized (i.e., a core capital ratio of at least 5%, a ratio of Tier 1
or core capital to risk-weighted assets ("Tier 1 risk-based capital") of at
least 6% and a risk-based capital ratio of at least 10%) and considered healthy
pay the lowest premium while institutions that are less than adequately
capitalized (i.e., core or Tier 1 risk-based capital ratios of less than 4% or a
risk-based capital ratio of less than 8%) and considered of substantial
supervisory concern pay the highest premium. Risk classification of all insured
institutions is made by the FDIC for each semi-annual assessment period.
The FDIC is authorized to increase assessment rates, on a semi-annual
basis, if it determines that the reserve ratio of the Bank Insurance Fund will
be less than the designated reserve ratio of 1.25% of Bank Insurance Fund
insured deposits. In setting these increased assessments, the FDIC must seek to
restore the reserve ratio to that designated reserve level, or such higher
reserve ratio as established by the FDIC.
Community Reinvestment Act
Under the Community Reinvestment Act, every FDIC-insured institution
has a continuing and affirmative obligation consistent with safe and sound
banking practices to help meet the credit needs of its entire community,
including low and moderate income neighborhoods. The Community Reinvestment Act
does not establish specific lending requirements or programs for financial
institutions nor does it limit an institution's discretion to develop the types
of products and services that it believes are best suited to its particular
community, consistent with the Community Reinvestment Act. Due to the heightened
attention being given to the Community Reinvestment Act in the past few years,
Community Bank may be required to devote additional funds for investment and
lending in its local community. Community Bank was examined for Community
Reinvestment Act compliance as of May 11, 1999, and received a rating of
satisfactory.
Transactions with Affiliates
Generally, transactions between a savings institution or its
subsidiaries and its affiliates are required to be on terms as favorable to the
institution as transactions with non-affiliates. In addition, certain of these
transactions, such as loans to an affiliate, are restricted to a percentage of
the institution's capital. Affiliates of Community Bank include CBCT Bancshares,
Inc. and any company which is under common control with Community Bank. In
addition, a savings institution may not lend to any affiliate engaged in
activities not permissible for a bank holding company or acquire the securities
of most affiliates.
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Certain transactions with directors, officers or controlling persons
are also subject to conflict of interest regulations enforced by the regulators.
These conflict of interest regulations and other statutes also impose
restrictions on loans to these persons and their related interests. Among other
things, these loans must generally be made on terms substantially the same as
loans to unaffiliated individuals.
Federal Securities Law
The stock of CBCT Bancshares, Inc. is registered with the SEC under the
Securities Exchange Act of 1934, as amended. CBCT Bancshares, Inc. will be
subject to the information, proxy solicitation, insider trading restrictions and
other requirements of the SEC under the Securities Exchange Act of 1934.
CBCT Bancshares, Inc. stock held by persons who are affiliates of CBCT
Bancshares, Inc. may not be resold without registration unless sold in
accordance with certain resale restrictions. Affiliates are generally considered
to be officers, directors and principal stockholders. If CBCT Bancshares, Inc.
meets specified current public information requirements, each affiliate of CBCT
Bancshares, Inc. will be able to sell in the public market, without
registration, a limited number of shares in any three-month period.
Federal Reserve System
The Federal Reserve Board requires all depository institutions to
maintain non-interest bearing reserves at specified levels against their
transaction accounts, primarily checking, NOW and Super NOW checking accounts.
At December 31, 1999, Community Bank was in compliance with these reserve
requirements.
Savings institutions are authorized to borrow from the Federal Reserve
Bank "discount window," but Federal Reserve Board regulations require
institutions to exhaust other reasonable alternative sources of funds, including
Federal Home Loan Bank borrowings, before borrowing from the Federal Reserve
Bank.
Federal Home Loan Bank System
Community Bank is a member of the Federal Home Loan Bank of Dallas,
which is one of 12 regional Federal Home Loan Banks, that administers the home
financing credit function of savings institutions. Each Federal Home Loan Bank
serves as a reserve or central bank for its members within its assigned region.
It is funded primarily from proceeds derived from the sale of consolidated
obligations of the Federal Home Loan Bank System. It makes loans or advances to
members in accordance with policies and procedures, established by the board of
directors of the Federal Home Loan Bank, which are subject to the oversight of
the Federal Housing Finance Board. All advances from the Federal Home Loan Bank
are required to be fully secured by sufficient collateral as determined by the
Federal Home Loan Bank. In addition, all long-term advances are required to
provide funds for residential home financing.
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As a member, Community Bank is required to purchase and maintain stock
in the Federal Home Loan Bank of Dallas. At December 31, 1999, Community Bank
had $496,400 in Federal Home Loan Bank stock, which was in compliance with this
requirement. In past years, Community Bank has received substantial dividends on
its Federal Home Loan Bank stock. Over the past five fiscal years such dividends
have averaged 5.84% and were 5.44% for 1999.
Under federal law the Federal Home Loan Banks are required to provide
funds for the resolution of troubled savings institutions and to contribute to
low- and moderately priced housing programs through direct loans or interest
subsidies on advances targeted for community investment and low- and
moderate-income housing projects. These contributions have affected adversely
the level of Federal Home Loan Bank dividends paid and could continue to do so
in the future. These contributions could also have an adverse effect on the
value of Federal Home Loan Bank stock in the future. A reduction in value of
Community Bank's Federal Home Loan Bank stock may result in a corresponding
reduction in Community Bank's capital.
For the year ended December 31, 1999, dividends paid by the Federal
Home Loan Bank of Dallas to Community Bank totaled $26,100, as compared to
$26,800 for 1998.
TAXATION
Federal Taxation
General. CBCT Bancshares, Inc. and Community Bank will be subject to
federal income taxation in the same general manner as other corporations, with
some exceptions discussed below. The following discussion of federal taxation is
intended only to summarize certain pertinent federal income tax matters and is
not a comprehensive description of the tax rules applicable to CBCT Bancshares,
Inc. or Community Bank. Community Bank's federal income tax returns have been
closed without audit by the IRS through its year ended December 31, 1996.
Following the conversion, CBCT Bancshares, Inc. anticipates that it
will file a consolidated federal income tax return with Community Bank
commencing with the first taxable year after completion of the conversion.
Accordingly, it is anticipated that any cash distributions made by CBCT
Bancshares, Inc. to its stockholders would be considered to be taxable dividends
and not as a non-taxable return of capital to stockholders for federal and state
tax purposes.
Method of Accounting. For federal income tax purposes, Community Bank
currently reports its income and expenses on the cash method of accounting and
uses a fiscal year ending on December 31, for filing its federal income tax
return.
Bad Debt Reserves. Prior to the Small Business Job Protection Act,
Community Bank was permitted to establish a reserve for bad debts under the
percentage of taxable income method and to make annual additions to the reserve
utilizing that method. These additions could, within specified formula limits,
be deducted in arriving at taxable income. As a result of the Small Business Job
Protection Act, savings associations of Community Bank's size may now use the
experience method in computing bad debt deductions beginning with their 1996
Federal tax return. In addition, federal legislation requires Community Bank to
recapture, over a six year
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period, the excess of tax bad debt reserves at December 31, 1997 over those
established as of the base year reserve balance as of December 31, 1987. The
amount of such reserve subject to recapture as of December 31, 1999 for
Community Bank is approximately $13,000.
Taxable Distributions and Recapture. Prior to the Small Business Job
Protection Act, bad debt reserves created prior to the year ended December 31,
1997, were subject to recapture into taxable income should Community Bank fail
to meet certain thrift asset and definitional tests. New federal legislation
eliminated these thrift related recapture rules. However, under current law,
pre-1988 reserves remain subject to recapture should Community Bank make certain
non-dividend distributions or cease to maintain a thrift/bank charter.
Minimum Tax. The Internal Revenue Code imposes an alternative minimum
tax at a rate of 20% on a base of regular taxable income plus certain tax
preferences, called alternative minimum taxable income. The alternative minimum
tax is payable to the extent such alternative minimum taxable income is in
excess of an exemption amount. Net operating losses can offset no more than 90%
of alternative minimum taxable income. Certain payments of alternative minimum
tax may be used as credits against regular tax liabilities in future years.
Community Bank has not been subject to the alternative minimum tax, nor do we
have any such amounts available as credits for carryover.
Net Operating Loss Carryovers. A financial institution may carryback
net operating losses to the preceding two taxable years and forward to the
succeeding 20 taxable years. This provision applies to losses incurred in
taxable years beginning after August 6, 1997. For losses incurred in the taxable
years prior to August 6, 1997, the carryback period was three years and the
carryforward period was 15 years. At December 31, 1999, Community Bank had no
net operating loss carryforwards for federal income tax purposes.
Corporate Dividends-Received Deduction. CBCT Bancshares, Inc. may
eliminate from its income dividends received from Community Bank as a wholly
owned subsidiary of CBCT Bancshares, Inc. if it elects to file a consolidated
return with Community Bank. The corporate dividends-received deduction is 100%
or 80%, in the case of dividends received from corporations with which a
corporate recipient does not file a consolidated tax return, depending on the
level of stock ownership of the payor of the dividend. Corporations which own
less than 20% of the stock of a corporation distributing a dividend may deduct
70% of dividends received or accrued on their behalf.
State Taxation
The State of Texas does not have a corporate income tax, but it does
have a corporate franchise tax. Prior to January 1, 1992, savings banks had been
exempt from the corporate franchise tax. The tax for the year 1999 is the higher
of 0.25% of taxable capital, usually the amount of paid in capital plus retained
earnings, or 4.5% of "net taxable earned surplus." "Net taxable earned surplus"
is net income for federal income tax purposes increased by the compensation of
directors and executive officers and decreased by interest on obligations
guaranteed by the U.S. government. Net income cannot be reduced by net operating
loss carryforwards from years prior to 1991, and operating loss carryovers are
limited to five years.
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RESTRICTIONS ON ACQUISITION
OF CBCT BANCSHARES, INC. AND COMMUNITY BANK
The principal federal regulatory restrictions which affect the ability
of any person, firm or entity to acquire CBCT Bancshares, Inc., Community Bank
or their respective capital stock are described below. Also discussed are
certain provisions in CBCT Bancshares, Inc.'s articles of incorporation and
bylaws which may be deemed to affect the ability of a person, firm or entity to
acquire CBCT Bancshares, Inc.
Federal Law
CBCT Bancshares, Inc. has filed with the SEC a registration statement
under the Securities Act, for the registration of CBCT Bancshares, Inc. common
stock to be issued pursuant to the conversion. Upon completion of the
conversion, CBCT Bancshares, Inc. common stock will be registered with the SEC
under Section 12(g) of the Securities Exchange Act of 1934, as amended. CBCT
Bancshares, Inc. will then be subject to the proxy and tender offer rules,
insider trading reporting requirements and restrictions, and certain other
requirements under the Exchange Act, including periodic reports and quarterly
and annual financial data.
The registration under the Securities Act of shares of CBCT Bancshares,
Inc. common stock to be issued in the conversion does not cover the resale of
such shares. Shares of CBCT Bancshares, Inc. common stock purchased by persons
who are not affiliates of CBCT Bancshares, Inc. may be sold without
registration. Shares purchased by an affiliate of CBCT Bancshares, Inc. will be
subject to the resale restrictions of Rule 144 under the Securities Act. If CBCT
Bancshares, Inc. meets the current public information requirements of Rule 144
under the Securities Act, each affiliate of CBCT Bancshares, Inc. who complies
with the other conditions of Rule 144 (including those that require the
affiliate's sale to be aggregated with those of certain other persons) would be
able to sell in the public market, without registration, a number of shares not
to exceed, in any three-month period, the greater of (i) 1% of the outstanding
shares of CBCT Bancshares, Inc. or (ii) the average weekly volume of trading in
such shares during the preceding four calendar weeks.
Articles of Incorporation and Bylaws of CBCT Bancshares, Inc.
The following discussion is a summary of certain provisions of the
articles of incorporation and bylaws of CBCT Bancshares, Inc. that relate to
corporate governance. The description is necessarily general and qualified by
reference to the articles of incorporation and bylaws.
Directors. Certain provisions of CBCT Bancshares, Inc.'s articles of
incorporation and bylaws will impede changes in majority control of the board of
directors. CBCT Bancshares, Inc.'s articles of incorporation provide that the
board of directors will be divided into three classes, with directors in each
class elected for three-year staggered terms except for the initial directors.
Thus, assuming a board of three directors or more, it would take two annual
elections to replace a majority of CBCT Bancshares, Inc.'s board. CBCT
Bancshares, Inc.'s articles of incorporation also provide that the size of the
board of directors may be increased or
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decreased only by a majority vote of the whole board or by a vote of 80% of the
shares eligible to be voted at a duly constituted meeting of stockholders called
for such purpose. The bylaws also provide that any vacancy occurring in the
board of directors, including a vacancy created by an increase in the number of
directors, shall be filled for the remainder of the unexpired term by a majority
vote of the directors then in office. Finally, the bylaws impose certain notice
and information requirements in connection with the nomination by stockholders
of candidates for election to the board of directors or the proposal by
stockholders of business to be acted upon at an annual meeting of stockholders.
The articles of incorporation provide that a director may only be
removed for cause by the affirmative vote of 80% of the shares eligible to vote.
Restrictions on Call of Special Meetings. The articles of incorporation
of CBCT Bancshares, Inc. provides that a special meeting of stockholders may be
called only through a resolution of the board of directors and only for business
as directed by the board. Stockholders are not authorized to call a special
meeting.
Absence of Cumulative Voting. CBCT Bancshares, Inc.'s articles of
incorporation do not provide for cumulative voting rights in the election of
directors.
Authorization of Preferred Stock. The articles of incorporation of CBCT
Bancshares, Inc. authorizes 1,000,000 shares of serial preferred stock, $.01 par
value. CBCT Bancshares, Inc. is authorized to issue preferred stock from time to
time in one or more series subject to applicable provisions of law, and the
board of directors is authorized to fix the designations, powers, preferences
and relative participating, optional and other special rights of such shares,
including voting rights, which could be multiple or as a separate class, and
conversion rights. In the event of a proposed merger, tender offer or other
attempt to gain control of CBCT Bancshares, Inc. that the board of directors
does not approve, it might be possible for the board of directors to authorize
the issuance of a series of preferred stock with rights and preferences that
would impede the completion of such a transaction. If CBCT Bancshares, Inc.
issued any preferred stock which disparately reduced the voting rights of the
common stock, the common stock could be required to be delisted from the Nasdaq
System. An effect of the possible issuance of preferred stock, therefore, may be
to deter a future takeover attempt. The board of directors has no present plans
or understandings for the issuance of any preferred stock and does not intend to
issue any preferred stock except on terms which the board deems to be in the
best interests of CBCT Bancshares, Inc. and its stockholders.
Limitation on Voting Rights. The articles of incorporation of CBCT
Bancshares, Inc. provide that in no event shall any record owner of any
outstanding common stock which is beneficially owned, directly or indirectly, by
a person who beneficially owns more than 10% of the then outstanding shares of
common stock, be entitled or permitted to any vote in respect of the shares held
in excess of the 10% limit. This limitation would not stop any person from
soliciting or voting proxies from other beneficial owners for more than 10% of
the common stock. This includes shares beneficially owned by any affiliate of a
person, shares which a person or his affiliates have the right to acquire upon
the exercise of conversion rights or options and shares as to which a person and
his affiliates have or share investment or voting power, but shall
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not include shares beneficially owned by directors, officers and employees of
Community Bank or CBCT Bancshares, Inc. This provision will be enforced by the
board of directors to limit the voting rights of persons beneficially owning
more than 10% of the stock and thus could be utilized in a proxy contest or
other solicitation to defeat a proposal that is desired by a majority of the
stockholders.
Procedures for Certain Business Combinations. CBCT Bancshares, Inc.'s
articles of incorporation require that certain business combinations, including
transactions initiated by management, between CBCT Bancshares, Inc., or any
majority-owned subsidiary thereof, and a 10% or more stockholder either (i) be
approved by at least 80% of the total number of outstanding voting shares,
voting as a single class, of CBCT Bancshares, Inc., (ii) be approved by
two-thirds of the board of directors (i.e., persons serving prior to the 10%
stockholder reaching that ownership level) or (iii) involve consideration per
share generally equal to that paid by the 10% stockholder when it acquired its
block of stock.
It should be noted that, since the board and management intend to
purchase approximately $477,000 of the shares offered in the conversion and may
control the voting of additional shares through the ESOP and proposed restricted
stock plan and stock option plan, the board and management may be able to block
the approval of combinations requiring an 80% vote even where a majority of the
stockholders vote to approve such combinations.
Amendments to the Articles of Incorporation and Bylaws. Amendments to
CBCT Bancshares, Inc.'s articles of incorporation must be approved by CBCT
Bancshares, Inc.'s board of Directors and also by a majority of the outstanding
shares of CBCT Bancshares, Inc.'s voting stock; provided, however, that approval
by at least 80% of the outstanding voting stock is generally required for
amendment of certain provisions, including provisions relating to number,
classification, election and removal of directors; amendment of bylaws; call of
special stockholder meetings; offers to acquire and acquisitions of control;
director liability; certain business combinations; power of indemnification; and
amendments to provisions relating to the foregoing in the articles of
incorporation.
The bylaws may be amended by a majority vote of the board of directors
or the affirmative vote of at least 80% of the total votes eligible to be voted
at a duly constituted meeting of stockholders.
Purpose and Takeover Defensive Effects of CBCT Bancshares, Inc.'s
Articles of Incorporation and Bylaws. We believe that the provisions described
above are prudent and will reduce CBCT Bancshares, Inc.'s vulnerability to
takeover attempts and certain other transactions which have not been negotiated
with and approved by its board of directors. These provisions will also assist
us in the orderly deployment of the conversion proceeds into productive assets
during the initial period after the conversion. We believe these provisions are
in the best interest of Community Bank and of CBCT Bancshares, Inc. CBCT
Bancshares, Inc.'s board will be in the best position to determine the true
value of CBCT Bancshares, Inc. and to negotiate more effectively for what may be
in the best interests of our stockholders. Accordingly, we believe that it is in
the best interests of CBCT Bancshares, Inc. and its stockholders to encourage
potential acquirors to negotiate directly with the board of directors of CBCT
Bancshares, Inc. and
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that these provisions will encourage such negotiations and discourage hostile
takeover attempts. It is also our view that these provisions should not
discourage persons from proposing a merger or other transaction at prices
reflective of the true value of CBCT Bancshares, Inc. and which is in the best
interests of all stockholders.
Attempts to take over financial institutions and their holding
companies have recently become increasingly common. Takeover attempts which have
not been negotiated with and approved by the board of directors present to
stockholders the risk of a takeover on terms which may be less favorable than
might otherwise be available. A transaction which is negotiated and approved by
the board of directors, on the other hand, can be carefully planned and
undertaken at an opportune time in order to obtain maximum value for CBCT
Bancshares, Inc. and its stockholders, with due consideration given to matters
such as the management and business of the acquiring corporation and maximum
strategic development of CBCT Bancshares, Inc.'s assets.
An unsolicited takeover proposal can seriously disrupt the business and
management of a corporation and cause it great expense. Although a tender offer
or other takeover attempt may be made at a price substantially above then
current market prices, these offers are sometimes made for less than all of the
outstanding shares of a target company. As a result, stockholders may be
presented with the alternative of partially liquidating their investment at a
time that may be disadvantageous, or retaining their investment in an enterprise
which is under different management and whose objectives may not be similar to
those of the remaining stockholders. The concentration of control, which could
result from a tender offer or other takeover attempt, could result in CBCT
Bancshares, Inc. no longer being a reporting company with the SEC and therefore
deprive CBCT Bancshares, Inc.'s remaining stockholders of the benefits of the
disclosure requirements of the Federal securities laws.
Despite our belief as to the benefits to stockholders of these
provisions of CBCT Bancshares, Inc.'s articles of incorporation and bylaws,
these provisions may also have the effect of discouraging a future takeover
attempt which would not be approved by CBCT Bancshares, Inc.'s board, but
pursuant to which stockholders may receive a substantial premium for their
shares over then current market prices. As a result, stockholders who might
desire to participate in such a transaction may not have any opportunity to do
so. These provisions will also render the removal of CBCT Bancshares, Inc.'s
board of directors and of management more difficult. CBCT Bancshares, Inc. will
enforce the voting limitation provisions of the articles of incorporation in
proxy solicitations and accordingly could utilize these provisions to defeat
proposals that are favored by a majority of the stockholders. We, however, have
concluded that the potential benefits outweigh the possible disadvantages.
Pursuant to applicable law, at any annual or special meeting of its
stockholders after the conversion, CBCT Bancshares, Inc. may adopt additional
charter provisions regarding the acquisition of its equity securities that would
be permitted to a Maryland corporation. CBCT Bancshares, Inc. does not presently
intend to propose the adoption of further restrictions on the acquisition of
CBCT Bancshares, Inc.'s equity securities.
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Benefit Plans
In addition to the provisions of CBCT Bancshares, Inc.'s articles of
incorporation and bylaws described above, certain benefit plans of CBCT
Bancshares, Inc. and Community Bank adopted in connection with the conversion
contain provisions which also may discourage hostile takeover attempts which the
board of directors of Community Bank might conclude are not in the best
interests of CBCT Bancshares, Inc., CBCT Bancshares, Inc. and Community Bank or
CBCT Bancshares, Inc.'s stockholders. For a description of the benefit plans and
the provisions of such plans relating to changes in control of CBCT Bancshares,
Inc. or Community Bank, see "Management - Benefits."
DESCRIPTION OF CAPITAL STOCK OF
CBCT BANCSHARES, INC.
General
CBCT Bancshares, Inc. is authorized to issue four million shares of
common stock having a par value of $0.01 per share and one million shares of
preferred stock having a par value of $0.01 per share. CBCT Bancshares, Inc.
currently expects to issue up to a maximum of 264,500 shares of common stock, or
304,175 shares in the event that the maximum of the estimated offering range is
increased by 15%, and no shares of preferred stock in the conversion. Each share
of CBCT Bancshares, Inc.'s common stock will have the same relative rights as,
and will be identical in all respects with, each other share of common stock.
Upon payment of the purchase price for the common stock in accordance with the
plan of conversion, all of the stock will be duly authorized, fully paid and
nonassessable. Presented below is a description of all aspects of CBCT
Bancshares, Inc.'s capital stock which are deemed material to an investment
decision with respect to the conversion.
The common stock of CBCT Bancshares, Inc. will represent
nonwithdrawable capital, will not be an account of an insurable type, and will
not be insured by the FDIC.
Common Stock
Distributions. CBCT Bancshares, Inc. can pay dividends if, as and when
declared by its board of directors, subject to compliance with limitations which
are imposed by law. See "Our Policy Regarding Dividends." The holders of common
stock of CBCT Bancshares, Inc. will be entitled to receive and share equally in
these dividends as they may be declared by the board of directors of CBCT
Bancshares, Inc. out of funds legally available therefor. If CBCT Bancshares,
Inc. issues preferred stock, the holders thereof may have a priority over the
holders of the common stock with respect to dividends.
Voting Rights. Upon the effective date of the conversion, the holders
of common stock of CBCT Bancshares, Inc. will possess exclusive voting rights in
CBCT Bancshares, Inc. Each holder of common stock will be entitled to one vote
per share and will not have any right to cumulate votes in the election of
directors. Under certain circumstances, shares in excess of 10% of the issued
and outstanding shares of common stock may be considered "excess shares" and,
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accordingly, not be entitled to vote. See "Restrictions on Acquisition of CBCT
Bancshares, Inc. and Community Bank." If CBCT Bancshares, Inc. issues preferred
stock, holders of the preferred stock may also possess voting rights.
Liquidation. In the event of any liquidation, dissolution or winding up
of Community Bank, CBCT Bancshares, Inc., as holder of Community Bank's capital
stock, would be entitled to receive, after payment or provision for payment of
all debts and liabilities of Community Bank, including all deposit accounts and
accrued interest thereon, all assets of Community Bank available for
distribution. In the event of liquidation, dissolution or winding up of CBCT
Bancshares, Inc., the holders of its common stock would be entitled to receive,
after payment or provision for payment of all its debts and liabilities, all of
the assets of CBCT Bancshares, Inc. available for distribution. If preferred
stock is issued, the holders thereof may have a priority over the holders of the
common stock in the event of liquidation or dissolution.
Rights to Buy Additional Shares. Holders of the common stock of CBCT
Bancshares, Inc. will not be entitled to preemptive rights with respect to any
shares which may be issued. Preemptive rights are the priority right to buy
additional shares if CBCT Bancshares, Inc. issues more shares in the future. The
common stock is not subject to redemption.
Preferred Stock
None of the shares of CBCT Bancshares, Inc.'s authorized preferred
stock will be issued in the conversion. This stock may be issued with
preferences and designations as the board of directors may from time to time
determine. The board of directors can, without stockholder approval, issue
preferred stock with voting, dividend, liquidation and conversion rights which
could dilute the voting strength of the holders of the common stock and may
assist management in impeding an unfriendly takeover or attempted change in
control. CBCT Bancshares, Inc. has no present plans to issue preferred stock.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for CBCT Bancshares, Inc. common stock
is
----------------------------.
EXPERTS
Our consolidated financial statements for the year ended December 31,
1999 included in this prospectus have been audited by the independent accounting
firm of Padgett, Stratemann & Co., L.L.P. Our consolidated financial statements
for the years ended December 31, 1998 and 1997 have been audited by the
independent accounting firm Seidel Schroeder & Company. As set forth in their
reports appearing elsewhere herein and in the registration statement, and are
included in reliance upon the reports of these firms given upon their authority
as experts in accounting and auditing.
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Ferguson & Company has consented to the publication herein of the
summary of its report to Community Bank setting forth its opinion as to the
estimated pro forma market value of the common stock upon conversion and its
letter with respect to subscription rights.
LEGAL AND TAX OPINIONS
The legality of the common stock and the federal income tax
consequences of the conversion has been passed upon for Community Bank by
Silver, Freedman & Taff, L.L.P., Washington, D.C., special counsel to Community
Bank and CBCT Bancshares, Inc. The Texas income tax consequences of the
conversion will be passed upon for Community Bank by Olive LLP. Certain legal
matters will be passed upon for Keefe, Bruyette & Woods, Inc. by Selman, Munson
& Lerner, P.C., Austin, Texas.
ADDITIONAL INFORMATION
CBCT Bancshares, Inc. has filed with the SEC a registration statement
under the Securities Act of 1933 with respect to the common stock offered
hereby. As permitted by the rules and regulations of the SEC, this prospectus
does not contain all the information set forth in the registration statement.
This information, including the appraisal report which is an exhibit to the
registration statement, can be examined without charge at the public reference
facilities of the SEC located at 450 Fifth Street, N.W., Washington, D.C. 20549,
and copies of this material can be obtained from the SEC at prescribed rates. In
addition, the SEC maintains a web site (http://www.sec.gov) that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the SEC, including CBCT Bancshares,
Inc. The statements contained in this prospectus as to the contents of any
contract or other document filed as an exhibit to the registration statement
are, of necessity, brief descriptions thereof and are not necessarily complete;
each statement is qualified by reference to the contract or document. Community
Bank also maintains a website (www.cbank1.com) which contains various
information about Community Bank.
In connection with the conversion, CBCT Bancshares, Inc. has registered
its common stock with the SEC under Section 12 of the Securities Exchange Act of
1934, and, upon such registration, CBCT Bancshares, Inc. and the holders of its
stock will become subject to the proxy solicitation rules, reporting
requirements and restrictions on stock purchases and sales by directors,
officers and greater than 10% stockholders, the annual and periodic reporting
and certain other requirements of the Securities Exchange Act of 1934. Under the
plan of conversion, CBCT Bancshares, Inc. has undertaken that it will not
terminate this registration for a period of at least three years following the
conversion.
A copy of the plan of conversion, the articles of incorporation and the
charter and bylaws of CBCT Bancshares, Inc. and Community Bank are available
without charge from Community Bank. Requests for such information should be
directed to: Stockholder Relations, Community Bank, 312 Main Street, Smithville,
Texas 78957.
97
<PAGE>
COMMUNITY BANK OF CENTRAL TEXAS, ssb
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Independent Auditors' Report................................................F-2
Consolidated Balance Sheet as of December 31, 1999 and 1998.................F-3
Consolidated Statement of Income for the Years Ended
December 31, 1999, 1998 and 1997...........................................46
Consolidated Statement of Equity Capital for the Years Ended
December 30, 1999, 1998 and 1997..........................................F-4
Consolidated Statement of Cash Flows for the Years Ended
December 31, 1999, 1998 and 1997..........................................F-5
Notes to Consolidated Financial Statements..................................F-7
All schedules are omitted because the required information is not
applicable or is included in the Consolidated Financial Statements and related
Notes.
The financial statements of CBCT Bancshares, Inc. have been omitted
because CBCT Bancshares, Inc. has not yet issued any stock, has no assets or
liabilities, and has not conducted any business other than that of an
organizational nature.
F-1
<PAGE>
Independent Auditors' Report
The Board of Directors
Community Bank of Central Texas and Subsidiary
Smithville, Texas
We have audited the accompanying consolidated balance sheet of
Community Bank of Central Texas and Subsidiary as of December 31, 1999, and the
related consolidated statements of income, changes in equity, and cash flows for
the year then ended. These consolidated financial statements are the
responsibility of the Bank's management. Our responsibility is to express an
opinion on these financial statements based on our audit. The consolidated
financial statements of Community Bank of Central Texas and Subsidiary for the
years ended December 31, 1998 and 1997 were audited by other auditors whose
report, dated February 19, 1999, expressed an unqualified opinion on those
statements.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Community
Bank of Central Texas and Subsidiary as of December 31, 1999, and the results of
their operations and their cash flows for the year then ended, in conformity
with generally accepted accounting principles.
/s/ Padgett, Stratemann & Co.
Certified Public Accountants
January 13, 2000
F-2
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Community Bank of Central Texas and Subsidiary
Smithville, Texas
We have audited the accompanying consolidated statements of financial conditions
of Community Bank of Central Texas and Subsidiary as of December 31, 1998 and
1997, and the related consolidated statements of income, comprehensive income,
changes in equity, and cash flows for the years then ended. These financial
statements are the responsibility of the Bank's management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Community Bank of
Central Texas and Subsidiary as of December 31, 1998 and 1997, and the results
of their operations and their cash flows for the years then ended in conformity
with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the consolidated
financial statements taken as a whole. The consolidating information in Schedule
I and II is presented for purposes of additional analysis of the consolidated
financial statements rather than to present the financial position and results
of operations of the individual companies. Such information has been subjected
to the auditing procedures applied in the audits of the consolidated financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the consolidated financial statements taken as a whole.
/s/ SEIDEL SCHROEDER & COMPANY
February 19, 1999
F-2
<PAGE>
Community Bank of Central Texas and Subsidiary
Consolidated Balance Sheets
December 31, 1999 and 1998
<TABLE>
<CAPTION>
Assets
1999 1998
Cash and cash equivalents: ---------------- --------------
<S> <C> <C>
Cash and noninterest bearing due from banks $ 561,388 $ 96,349
Interest bearing due from banks 1,691,432 2,853,510
------------- ------------
Total cash and cash equivalents 2,252,820 2,949,859
Securities available for sale 16,277,090 7,476,467
Securities to be held to maturity (fair value of $5,974,165 in 1998) - 6,013,250
Federal Home Loan Bank stock -- at cost 496,400 470,300
Loans held for sale 363,325 349,432
Loans -- net allowance for loan losses of $198,683
($180,697 in 1998) 21,693,104 20,890,237
Bank premises and equipment -- net 1,355,082 1,389,867
Accrued interest receivable 253,342 225,982
Prepaid expenses and other assets 141,959 63,954
------------- ------------
$ 42,833,122 $ 39,829,348
============= ============
Liabilities and Equity
Liabilities
Deposits:
Noninterest bearing $ 377,094 $ 199,805
Interest bearing 31,977,075 31,937,934
------------- ------------
Total deposits 32,354,169 32,137,739
Advances from borrowers for taxes and insurance 46,810 39,230
Advances from Federal Home Loan Bank 7,392,134 4,000,000
Accrued interest payable and other liabilities 40,710 309,209
------------- ------------
Total liabilities 39,833,823 36,486,178
Equity
Retained earnings 3,213,922 3,046,240
Accumulated other comprehensive income (loss) (214,623) 296,930
------------- ------------
Total equity 2,999,299 3,343,170
------------- ------------
$ 42,833,122 $ 39,829,348
============= ============
</TABLE>
Notes to consolidated financial statements form an integral part of these
statements.
F-3
<PAGE>
Community Bank of Central Texas and Subsidiary
Consolidated Statements of Changes in Equity
Years Ended December 31, 1999, 1998, and 1997
<TABLE>
<S> <C> <C> <C>
Accumulated
Other
Retained Comprehensive
Earnings Income (Loss) Total
--------------- ------------------ ----------
Balance at January 1, 1997 $2,658,243 $138,675 $2,796,918
Comprehensive income:
Net income -- year ended December 31, 1997 175,693 - 175,693
Change in net unrealized gain on securities available for
sale, net of reclassification adjustment and tax effect - 54,341 54,341
---------- -------- ----------
Total comprehensive income 175,693 54,341 230,034
---------- -------- ----------
Balance at December 31, 1997 2,833,936 193,016 3,026,952
Comprehensive income:
Net income -- year ended December 31, 1998 212,304 - 212,304
Change in net unrealized gain on securities available for
sale, net of reclassification adjustment and tax effect - 103,914 103,914
---------- -------- ----------
Total comprehensive income 212,304 103,914 316,218
---------- -------- ----------
Balance at December 31, 1998 3,046,240 296,930 3,343,170
Comprehensive income:
Net income -- year ended December 31, 1999 167,682 - 167,682
Change in net unrealized loss on securities available for
sale, net of reclassification adjustment and tax effect - (511,553) (511,553)
---------- -------- ----------
Total comprehensive income (loss) 167,682 (511,553) (343,871)
---------- -------- ----------
Balance at December 31, 1999 $3,213,922 $ (214,623) $2,999,299
========== ======== ==========
</TABLE>
Notes to consolidated financial statements form an integral part of these
statements.
F-4
<PAGE>
Community Bank of Central Texas and Subsidiary
Consolidated Statements of Cash Flows
Years Ended December 31, 1999, 1998, and 1997
Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
<S> <C> <C> <C>
1999 1998 1997
Cash Flows From Operating Activities -------------- ------------- ------------
Net income $ 167,682 $ 212,304 $ 175,693
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 107,437 77,123 60,814
Net gains on sales of securities (76,091) (30,396) -
Provision for loan losses - - 3,253
Deferred income taxes 12,265 (1,136) 19,940
Federal Home Loan Bank stock dividends (26,100) (26,800) (25,300)
Net change in:
Loans held for sale (13,893) (341,516) -
Accrued interest receivable and other assets (80,580) (781) (4,171)
Accrued interest payable and other liabilities (35,016) (29,337) 90,315
Other -- net 1,975 (49,944) (18,494)
------------ ------------ ------------
Net cash provided by (used in) operating activities 57,679 (190,483) 302,050
------------ ------------ ------------
Cash Flows From Investing Activities
Net change in interest-bearing deposits in banks - 500,000 (500,000)
Activity in available-for-sale securities:
Sales 1,867,884 224,917 -
Maturities and prepayments 2,217,707 566,965 534,854
Purchases (4,227,401) (5,299,211) -
Activity in held-to-maturity securities:
Maturities and prepayments 1,465,074 1,724,214 1,179,565
Purchases (4,853,824) (993,750) -
Loan originations and collections -- net (784,907) 489,753 (3,247,863)
Capital expenditures (47,815) (353,585) (45,057)
Proceeds from sale of foreclosed assets - - 16,226
------------ ------------ ------------
Net cash used in investing activities (4,363,282) (3,140,697) (2,062,275)
------------ ------------ ------------
</TABLE>
Notes to consolidated financial statements form an integral part of these
statements.
F-5
<PAGE>
Community Bank of Central Texas and Subsidiary
Consolidated Statements of Cash Flows
Years Ended December 31, 1999, 1998, and 1997
Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
<S> <C> <C> <C>
1999 1998 1997
----------- ------------ ------------
Cash Flows From Financing Activities
Net change in deposits $ 216,430 $1,916,786 $ 241,104
Proceeds of Federal Home Loan Bank advances 4,000,000 4,000,000 -
Repayment of Federal Home Loan Bank advances (607,866) - -
Other -- net - (6,864) (12,240)
----------- ---------- -----------
Net cash provided by financing activities $ 3,608,564 $5,909,922 $ 228,864
----------- ---------- -----------
Net increase (decrease) in cash
and cash equivalents (697,039) 2,578,742 (1,531,361)
Cash and cash equivalents at beginning of year 2,949,859 371,117 1,902,478
----------- ---------- -----------
Cash and cash equivalents at end of year $ 2,252,820 $2,949,859 $ 371,117
=========== ========== ===========
Schedules of Other Cash Flow Information
Interest paid on deposits and borrowed funds $ 1,882,031 $1,544,909 $ 1,484,138
=========== ========== ===========
Income taxes paid (refunded) $ 118,614 $ 128,804 $ (17,983)
=========== ========== ===========
</TABLE>
Notes to consolidated financial statements form an integral part of these
statements.
F-6
<PAGE>
Community Bank of Central Texas and Subsidiary
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies
The accounting and reporting policies of Community Bank of Central Texas (Bank)
and its wholly-owned subsidiary, Central State Service Corporation, conform to
generally accepted accounting principles and to general practices within the
banking industry. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. Material
estimates that are particularly susceptible to significant change in the near
term relate to the determination of the allowance for loan losses and the
valuation of other real estate owned and deferred tax assets. Following is a
summary of the Bank's more significant accounting and reporting policies:
Organization and Charter
The Bank is chartered in the state of Texas as a state savings bank. It is
currently organized as a mutual form of organization, so it does not have any
stock investors or ownership. However, the Bank plans to convert to a stock
company in 2000 (see note 14).
Comprehensive Income
The Bank adopted SFAS No. 130, Reporting Comprehensive Income, as of January 1,
1998. Accounting principles generally require that recognized revenue, expenses,
and gains and losses be included in net income. Although certain changes in
assets and liabilities, such as unrealized gains and losses on
available-for-sale securities, are reported as a separate component of the
equity section of the balance sheet, such items, along with net income, are
components of comprehensive income. The adoption of SFAS No. 130 had no effect
on the Bank's net income or equity.
Consolidation
The consolidated financial statements include the accounts of the Bank and its
wholly-owned subsidiary, Central State Service Corporation. Central State
Service Corporation was formed to engage in securities brokerage activities
through a third party. Effective in December 1998, these activities were
transferred to the Bank's accounts and the subsidiary became inactive. All
significant intercompany balances and transactions have been eliminated in
consolidation.
F-7
<PAGE>
Community Bank of Central Texas and Subsidiary
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies (continued)
Business
The Bank provides a variety of financial services to individuals and small
businesses through its office in Smithville, Texas. Its primary deposit products
are savings and term certificate accounts, and its primary lending products are
residential mortgage loans, commercial real estate loans, and consumer
installment loans.
Significant Group Concentrations of Credit Risk
Most of the Bank's activities are with customers located in Bastrop County,
Texas and surrounding counties. Note 2 discusses the types of securities in
which the Bank invests. Note 3 discusses the types of lending in which the Bank
engages. The Bank does not have any significant concentrations to any one
industry or customer.
Securities
The Bank's investments in securities are classified in three categories and
accounted for as follows:
Trading Securities. Government bonds held principally for resale in the
near term and mortgage-backed securities held for sale in conjunction with the
Bank's mortgage banking activities are classified as trading securities and
recorded at their fair values. Unrealized gains and losses on trading securities
are included in other income. The Bank did not have any securities classified as
trading during 1999 or 1998.
Securities to Be Held to Maturity. Bonds, notes, and debentures for
which the Bank has the positive intent and ability to hold to maturity are
reported at cost adjusted for amortization of premiums and accretion of
discounts, which are recognized in interest income using the interest method
over the period to maturity.
Securities Available for Sale. Securities available for sale are
recorded at fair value and consist of bonds, notes, and debentures not
classified as trading securities nor as securities to be held to maturity.
Unrealized holding gains and losses on securities available for sale are
excluded from earnings and reported in other comprehensive income, net of tax
effect. Gains and losses on the sale of securities available for sale are
determined using the specific-identification method and are included in
earnings. Premiums and discounts are recognized in interest income using the
interest method over the period to maturity.
F-8
<PAGE>
Community Bank of Central Texas and Subsidiary
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies (continued)
Securities (continued)
Declines in the fair value of individual held-to-maturity and available-for-sale
securities below their cost that are other than temporary result in write-downs
of the individual securities to their fair value. The related write-downs are
included in earnings as realized losses.
Loans Held for Sale
Loans originated and intended for sale in the secondary market are carried at
the lower of cost or estimated fair value in the aggregate. Net unrealized
losses, if any, are recognized through a valuation allowance by charges to
income.
Loans
Loans that management has the intent and ability to hold for the foreseeable
future, or until maturity or payoff, are reported at their outstanding principal
adjusted for any charge-offs, the allowance for loan losses, and any deferred
fees or costs on originated loans.
Loan origination fees, net of certain direct origination costs, are deferred and
recognized as an adjustment of the related loan yield using the interest method.
The accrual of interest on mortgage and commercial loans is discontinued at the
time the loan is 90 days delinquent unless the credit is well secured and in
process of collection. Consumer loans are typically charged off no later than
120 days past due. In all cases, loans are placed on nonaccrual or charged off
at an earlier date if collection of principal or interest is considered
doubtful.
All interest accrued but not collected for loans that are placed on nonaccrual
or charged off is reversed against interest income. The interest on these loans
is accounted for on the cash basis or cost recovery method, until qualifying for
return to accrual. Loans are returned to accrual status when all the principal
and interest amounts contractually due are brought current and future payments
are reasonably assured.
F-9
<PAGE>
Community Bank of Central Texas and Subsidiary
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies (continued)
Allowance for Loan Losses
The allowance for loan losses is established as losses are estimated to have
occurred through a provision for loan losses charged to earnings. Loan losses
are charged against the allowance when management believes the uncollectibility
of a loan balance is confirmed. Subsequent recoveries, if any, are credited to
the allowance.
The allowance for loan losses is evaluated on a regular basis by management and
is based upon management's periodic review of the collectibility of the loans in
light of historical experience, the nature and volume of the loan portfolio,
adverse situations that may affect the borrower's ability to repay, estimated
value of any underlying collateral, and prevailing economic conditions. This
evaluation is inherently subjective as it requires estimates that are
susceptible to significant revision as more information becomes available.
A loan is considered impaired when, based on current information and events, it
is probable that the Bank will be unable to collect the scheduled payments of
principal or interest when due according to the contractual terms of the loan
agreement. Factors considered by management in determining impairment include
payment status, collateral value, and the probability of collecting scheduled
principal and interest payments when due. Loans that experience insignificant
payment delays and payment shortfalls generally are not classified as impaired.
Management determines the significance of payment delays and payment shortfalls
on a case-by-case basis, taking into consideration all of the circumstances
surrounding the loan and the borrower, including the length of the delay, the
reasons for the delay, the borrower's prior payment record, and the amount of
the shortfall in relation to the principal and interest owed. Impairment is
measured on a loan-by-loan basis for commercial and construction loans by either
the present value of expected future cash flows discounted at the loan's
effective interest rate, the loan's obtainable market price, or the fair value
of the collateral if the loan is collateral dependent.
Large groups of smaller balance homogeneous loans are collectively evaluated for
impairment. Accordingly, the Bank does not separately identify individual
consumer and residential loans for impairment disclosures.
F-10
<PAGE>
Community Bank of Central Texas and Subsidiary
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies (continued)
Servicing
Servicing assets are recognized as separate assets when rights are acquired
through purchase or through sale of financial assets. Capitalized servicing
rights are reported in other assets and are amortized into noninterest income in
proportion to, and over the period of, the estimated future net servicing income
of the underlying financial assets. Servicing assets are evaluated for
impairment based upon the fair value of the rights as compared to amortized
cost. Impairment is determined by stratifying rights by predominant
characteristics, such as interest rates and terms. Fair value is determined
using prices for similar assets with similar characteristics, when available, or
based upon discounted cash flows using market-based assumptions. Impairment is
recognized through a valuation allowance for an individual stratum, to the
extent that fair value is less than the capitalized amount for the stratum.
Bank Premises and Equipment
Land is carried at cost. Bank premises and equipment are stated at cost, net of
accumulated depreciation. Depreciation is recognized on straight-line and
accelerated methods over the estimated useful lives of the assets. The estimated
useful lives range from 3 to 30 years.
Pension Costs and Postretirement Benefits
Pension costs under the Bank's 401(k) plan are charged to salaries and employee
benefits expense and are funded as accrued.
The Bank does not have any postretirement benefit obligations.
Foreclosed Assets
Assets acquired through, or in lieu of, loan foreclosure are held for sale and
are initially recorded at fair value at the date of foreclosure, establishing a
new cost basis. Subsequent to foreclosure, valuations are periodically performed
by management and the assets are carried at the lower of carrying amount or fair
value less cost to sell. Revenue and expenses from operations and changes in the
valuation allowance are included in net expenses from foreclosed assets.
F-11
<PAGE>
Community Bank of Central Texas and Subsidiary
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies (continued)
Income Taxes
Deferred income tax assets and liabilities are determined using the liability
(or balance sheet) method. Under this method, the net deferred tax asset or
liability is determined based on the tax effects of the temporary differences
between the book and tax bases of the various balance sheet assets and
liabilities and gives current recognition to changes in tax rates and laws.
Cash and Cash Equivalents
For purposes of presentation in the consolidated statements of cash flows, cash
and cash equivalents include cash and noninterest and interest bearing due from
banks.
Off-Balance Sheet Financial Instruments
In the ordinary course of business, the Bank has entered into off-balance sheet
financial instruments consisting of commitments to extend credit under mortgage,
construction, and consumer line of credit loans. Such financial instruments are
recorded in the consolidated financial statements when they are funded or
related fees are incurred or received.
Derivative Financial Instruments
The Bank does not utilize derivative financial instruments as part of its
asset/liability management.
Transfers of Financial Assets
Transfers of financial assets are accounted for as sales, when control over the
assets has been surrendered. Control over transferred assets is deemed to be
surrendered when (1) the assets have been isolated from the Bank, (2) the
transferee obtains the right (free of conditions that constrain it from taking
advantage of that right) to pledge or exchange the transferred assets, and (3)
the Bank does not maintain effective control over the transferred assets through
an agreement to repurchase them before their maturity.
Reclassifications
Certain amounts have been reclassified from prior presentations at December 31,
1998 and 1997 to conform to classifications at December 31, 1999. There is no
effect on previously reported net income or retained earnings.
F-12
<PAGE>
Community Bank of Central Texas and Subsidiary
Notes to Consolidated Financial Statements
2. Investment Securities
The amortized cost and fair value of securities, with gross unrealized gains and
losses, follows:
<TABLE>
<CAPTION>
December 31, 1999
----------------------------------------------------
Gross Gross Approximate
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
------------- ---------- ------------- -------------
<S> <C> <C> <C> <C>
Securities Available for Sale
Debt securities:
State and municipal $ 145,000 $ 2,938 $ - $ 147,938
Mortgage-backed 16,452,470 2,097 556,602 15,897,965
----------- -------- -------- -----------
Total debt securities 16,597,470 5,035 556,602 16,045,903
Marketable equity securities 4,806 226,381 - 231,187
----------- -------- -------- -----------
$16,602,276 $231,416 $556,602 $16,277,090
=========== ======== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
December 31, 1998
------------------------------------------------
Securities Available for Sale
<S> <C> <C> <C> <C>
Debt securities:
Mortgage- backed $ 7,020,379 $ 34,811 $ 24,118 $ 7,031,072
Marketable equity securities 6,768 438,627 - 445,395
----------- -------- -------- -----------
$ 7,027,147 $473,438 $ 24,118 $ 7,476,467
=========== ======== ======== ===========
Securities to Be Held to
Maturity
Debt securities:
State and municipal $ 175,000 $ - - $ 175,000
Mortgage-backed 5,838,250 7,806 46,891 5,799,165
----------- -------- -------- -----------
$ 6,013,250 $ 7,806 $ 46,891 $ 5,974,165
=========== ======== ======== ===========
</TABLE>
F-13
<PAGE>
Community Bank of Central Texas and Subsidiary
Notes to Consolidated Financial Statements
2. Investment Securities (continued)
The amortized cost and fair value of debt securities by contractual maturity at
December 31, 1999 follows:
Amortized Fair
Cost Value
-------------- -------------
Within one year $ 35,000 $ 35,365
Over one year through five years 110,000 112,573
----------- -----------
145,000 147,938
Mortgage-backed securities 16,452,470 15,897,965
----------- -----------
$16,597,470 $16,045,903
=========== ===========
None of the Bank's investment securities were pledged at December 31, 1999 or
1998.
For the years ended December 31, 1999, 1998, and 1997, proceeds from sales of
securities available for sale amounted to $1,867,884, $224,917, and $0,
respectively. Gross realized gains amounted to $126,091, $30,396, and $0,
respectively. Gross realized losses amounted to $50,000, $0, and $0,
respectively. The tax provision applicable to these net realized gains and
losses amounted to $25,871, $10,335, and $0, respectively.
During the year ended December 31, 1999, the Bank adopted the provisions of FASB
Statement No. 133, Accounting for Derivative Instruments and Hedging Activities.
In connection with the adoption, the Bank transferred all of its investment
securities classified as held-to-maturity to the available-for-sale category. At
the date of transfer, the securities transferred had an amortized cost of
$9,412,000, a fair value of $9,254,000, and an unrealized loss of $158,000. The
transfer was made to increase the ability of the Bank to manage its investments
securities portfolio in order to achieve its asset/liability management goals.
The adoption of FASB Statement No. 133 did not affect any other accounting
policies of the Bank.
F-14
<PAGE>
Community Bank of Central Texas and Subsidiary
Notes to Consolidated Financial Statements
3. Loans and Allowance for Loan Losses
A summary of the balances of loans follows:
December 31,
-------------------------------
1999 1998
------------ -----------
Mortgage loans on real estate:
Residential 1-4 family $12,068,681 $14,009,636
Commercial 3,582,000 2,940,000
Construction 2,343,987 1,716,102
Second mortgages - 13,776
Equity lines of credit 127,000 68,000
----------- -----------
18,121,668 18,747,514
Commercial loans 412,825 -
Consumer installment loans 4,353,523 3,294,975
----------- -----------
22,888,016 22,042,489
Less:
Allowance for loan losses 198,683 180,697
Unadvanced loan funds 953,911 932,279
Net deferred loan fees 42,318 39,276
----------- -----------
$21,693,104 $20,890,237
=========== ===========
At December 31, 1999 and 1998, the Bank's loans secured by 1-4 family residences
were pledged as collateral for advances received from the Federal Home Loan Bank
(see note 8).
F-15
<PAGE>
Community Bank of Central Texas and Subsidiary
Notes to Consolidated Financial Statements
3. Loans and Allowance for Loan Losses (continued)
An analysis of the allowance for loan losses follows:
Years Ended December 31,
--------------------------------
1999 1998 1997
---------- ---------- ----------
Balance at beginning of year $180,697 $157,345 $157,149
Provision for loan losses - - 3,253
Loans charged off (12,305) - (3,057)
Recoveries of loans previously charged off 30,291 23,352 -
-------- -------- --------
Balance at end of year $198,683 $180,697 $157,345
======== ======== ========
At December 31, 1999 and 1998, the Bank had loans of $0 and $18,726,
respectively, that were classified as impaired without a valuation allowance.
During 1999, 1998, and 1997, the average balance of these loans was $0, $19,006,
and $19,547, respectively. During 1999, 1998, and 1997, interest income was
recognized on a cash basis on these loans amounting to $0, $1,380, and $1,302,
respectively.
Loans on which the accrual of interest has been discontinued amounted to $60,000
and $86,687 as of December 31, 1999 and 1998, respectively, for which impairment
has not been recognized. If interest on the loans had been recognized at the
original interest rates, interest income would have increased $1,475, $3,055,
and $862 for the years ended December 31, 1999, 1998, and 1997, respectively.
No additional funds are committed to be advanced in connection with impaired or
nonaccrual loans.
4. Servicing
Loans serviced for others are not included in the accompanying consolidated
balance sheets. The unpaid principal balance of mortgage and other loans
serviced for others was $5,278,102 and $2,971,334 at December 31, 1999 and 1998,
respectively.
F-16
<PAGE>
Community Bank of Central Texas and Subsidiary
Notes to Consolidated Financial Statements
4. Servicing (continued)
The balance of capitalized servicing rights included in prepaid expenses and
other assets at December 31, 1999 and 1998 was $72,753 and $39,910,
respectively. There is no valuation allowance related to these amounts. The fair
value of these rights approximates their book value, using fair value
calculations with a discount rate of 8% and an estimated life of seven years.
For the years ended December 31, 1999 and 1998, $43,053 and $41,874 of servicing
rights were capitalized, respectively, and amortization was $10,210 and $1,964,
respectively. There were no servicing rights capitalized or amortized during the
year ended December 31, 1997.
5. Bank Premises and Equipment
Components of bank premises and equipment included in the consolidated balance
sheets were as follows:
December 31,
-------------------------------------
1999 1998
-------------- ------------
Land $ 336,054 $ 336,054
Buildings 1,072,324 1,072,908
Equipment and furniture 282,678 260,991
----------- -----------
1,691,056 1,669,953
Less accumulated depreciation 335,974 280,086
----------- -----------
$ 1,355,082 $ 1,389,867
=========== ===========
Depreciation expense for the years ended December 31, 1999, 1998, and 1997
amounted to $65,363, $52,221, and $45,408, respectively.
The Bank did not have any significant long-term lease obligations at December
31, 1999.
F-17
<PAGE>
Community Bank of Central Texas and Subsidiary
Notes to Consolidated Financial Statements
6. Foreclosed Assets
The Bank had no other real estate owned or other foreclosed assets at December
31, 1999 or 1998.
7. Deposits
The aggregate amount of certificates of deposit (CDS), each with a minimum
denomination of $100,000, was $2,899,244 at December 31, 1999 ($3,004,735 in
1998).
At December 31, 1999 the scheduled maturities of CDS are as follows:
Year ending December 31,
2000 $20,364,855
2001 3,598,777
2002 1,391,401
-----------
$25,355,033
===========
8. Advances From Federal Home Loan Bank
Advances received from the Federal Home Loan Bank are at fixed interest rates
that range from 4.97% to 5.44%. Advances are received pursuant to a collateral
pledge and security agreements giving the Federal Home Loan Bank a security
interest in the Bank's loans secured by 1-4 family residences.
At December 31, 1999, the scheduled repayments of principal due on outstanding
advances are as follows:
Year ending December 31,
2000 $2,954,037
2001 2,007,229
2002 2,063,389
2003 367,479
----------
$7,392,134
==========
F-18
<PAGE>
Community Bank of Central Texas and Subsidiary
Notes to Consolidated Financial Statements
9. Federal Income Tax
The provision for federal income tax consisted of the following:
Years Ended December 31,
--------------------------------------------
1999 1998 1997
------------ ---------------- ------------
Currently paid or payable $58,843 $91,754 $66,400
Deferred 12,265 (1,136) 19,940
------- ------- -------
$71,108 $90,618 $86,340
======= ======= =======
The provision for federal income tax is less than that computed by applying the
federal statutory rate of 34% as indicated in the following analysis:
Years Ended December 31,
--------------------------------
1999 1998 1997
--------- ---------- ---------
Tax based on statutory rate $81,188 $102,993 $89,091
Effect of tax-exempt income (12,886) (9,657) (4,191)
Interest and other nondeductible expenses 2,042 1,083 664
Other -- net 764 (3,801) 776
------- -------- -------
$71,108 $ 90,618 $86,340
======= ======== =======
F-19
<PAGE>
Community Bank of Central Texas and Subsidiary
Notes to Consolidated Financial Statements
9. Federal Income Tax (continued)
The components of the deferred income tax asset (liability) included in other
assets and liabilities were as follows:
December 31,
------------------------------
1999 1998
Deferred tax assets related to: -------------- ---------------
Allowance for loan losses $ 90,673 $ 89,332
Loan origination fees and costs 12,433 12,482
Net unrealized depreciation on securities
available for sale 110,563 -
---------- ----------
213,669 101,814
Less valuation allowance 89,332 89,332
---------- ----------
Total deferred tax assets 124,337 12,482
---------- ----------
Deferred tax liabilities related to:
Depreciation (21,701) (19,491)
Cash method of accounting for tax purposes (79,096) (66,564)
Net unrealized appreciation on securities
available for sale - (152,389)
Other (11,020) (12,205)
---------- ----------
Total deferred tax liabilities (111,817) (250,649)
---------- ----------
Net deferred tax asset (liability) $ 12,520 $ (238,167)
========== ==========
The deferred tax asset valuation allowance decreased by $1,039 during the year
ended December 31, 1998.
F-20
<PAGE>
Community Bank of Central Texas and Subsidiary
Notes to Consolidated Financial Statements
10. Off-Balance Sheet Activities
The Bank is a party to credit related financial instruments with off-balance
sheet risk in the normal course of business to meet the financing needs of its
customers. These financial instruments include commitments to extend credit
under mortgage and construction loan agreements and consumer lines of credit.
Such commitments involve, to varying degrees, elements of credit and interest
rate risk in excess of the amount recognized in the consolidated balance sheets.
The Bank's exposure to credit loss is represented by the contractual amount of
these commitments. The Bank follows the same credit policies in making
commitments as it does for on-balance sheet instruments.
The following commitments to extend credit were outstanding:
December 31,
-----------------------------------
1999 1998
-------------- --------------
Real estate:
Fixed rate $1,412,441 $2,140,397
Variable rate 1,036,860 1,159,667
Consumer 49,045 110,214
---------- ----------
$2,498,346 $3,410,278
========== ==========
Amounts expected to be sold in the
secondary mortgage market $1,070,902 $1,433,157
========== ==========
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. The Bank evaluates each customer's creditworthiness on
a case-by-case basis. The amount of collateral obtained, if it is deemed
necessary by the Bank upon extension of credit, is based on management's credit
evaluation of the counterparty. Collateral held is usually first-lien
residential mortgage property.
The Bank did not have any letters of credit outstanding at December 31, 1999 and
1998.
F-21
<PAGE>
Community Bank of Central Texas and Subsidiary
Notes to Consolidated Financial Statements
11. Related Party Transactions
In the ordinary course of business, the Bank has granted loans to principal
officers and directors and their affiliates (related parties) amounting to
$321,356 at December 31, 1999 and $346,243 at December 31, 1998. During the year
ended December 31, 1999, total principal additions were $91,138 and total
principal payments were $116,025.
Deposits from related parties held by the Bank at December 31, 1999 amounted to
$363,966.
Amounts paid to related parties for products and services were $18,831, $3,964,
and $354 for the years ended December 31, 1999, 1998, and 1997, respectively.
12. Employee Benefits
The Bank has a 401(k) plan for the benefit of substantially all employees. The
Bank's contribution is determined annually by the Board of Directors. The Bank
contributed $4,919, $6,033, and $6,323 to the plan for the years ended December
31, 1999, 1998, and 1997, respectively.
13. Minimum Regulatory Capital Requirements
The Bank is subject to various regulatory capital requirements administered by
federal and state banking agencies. Failure to meet minimum capital requirements
can initiate certain mandatory and possibly additional discretionary actions by
regulators that, if undertaken, could have a direct material effect on the
Bank's consolidated financial statements. Under capital adequacy guidelines and
the regulatory framework for prompt corrective action, the Bank must meet
specific capital guidelines that involve quantitative measures of their assets,
liabilities, and certain off-balance sheet items as calculated under regulatory
accounting practices. The capital amounts and classification are also subject to
qualitative judgments by the regulators about components, risk weightings, and
other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the
following table) of total and Tier 1 capital (as defined in the regulations) to
risk-weighted assets (as defined), and of Tier 1 capital (as defined) to average
assets (as defined). Management believes, as of December 31, 1999 and 1998, that
the Bank met all capital adequacy requirements to which it is subject.
F-22
<PAGE>
Community Bank of Central Texas and Subsidiary
Notes to Consolidated Financial Statements
13. Minimum Regulatory Capital Requirements (continued)
As of December 31, 1999, the most recent notification from the regulators
categorized the Bank as well capitalized under the regulatory framework for
prompt corrective action. To be categorized as well capitalized, an institution
must maintain minimum total risk-based, Tier 1 risk-based, and Tier 1 leverage
ratios as set forth in the following tables. There are no conditions or events
since the notification that management believes have changed the Bank's
category. The Bank's actual capital amounts and ratios as of December 31, 1999
and 1998 are also presented in the table.
<TABLE>
<CAPTION>
Minimum
to Be Well
Minimum Capitalized Under
Capital Prompt Corrective
Actual Requirement Action Provisions
-------------------- ---------------------- -------------------
Amount Ratio Amount Ratio Amount Ratio
---------- --------- ------------ --------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
December 31, 1999:
Total Capital to Risk-
Weighted Assets $3,412,000 15.9% $1,715,000 8.0% $2,143,600 10.0%
Tier 1 Capital to Risk-
Weighted Assets $3,214,000 15.0% $857,000 4.0% $1,286,000 6.0%
Tier 1 Capital to Average
Assets $3,214,000 7.8% $1,653,000 4.0% $2,066,500 5.0%
December 31, 1998:
Total Capital to Risk-
Weighted Assets $3,402,000 18.7% $1,456,000 8.0% $1,820,000 10.0%
Tier 1 Capital to Risk-
Weighted Assets $3,042,000 16.7% $728,000 4.0% $1,092,000 6.0%
Tier 1 Capital to Average
Assets $3,042,000 8.6% $1,414,000 4.0% $1,768,000 5.0%
</TABLE>
F-23
<PAGE>
Community Bank of Central Texas and Subsidiary
Notes to Consolidated Financial Statements
14. Pending Conversion to a Stock Company
In December 1999, the Board of Directors of the Bank approved a plan of
conversion from a mutual savings bank to a capital stock bank. The transaction
is subject to approval by the various regulatory agencies. If approved, the Bank
expects to conduct a stock offering during the second quarter of 2000.
F-24
<PAGE>
<TABLE>
<S> <C>
No person has been authorized to give any information or to make
any representation other than as contained in this prospectus in
connection with the offering made hereby, and, if given or made,
such other information or representation must not be relied upon as
having been authorized by CBCT Bancshares, Inc., Community
Bank or Keefe, Bruyette & Woods, Inc. This prospectus does not
constitute an offer to sell or a solicitation of an offer to buy any of
the securities offered hereby to any person in any jurisdiction in
which such offer or solicitation is not authorized or in which the UP TO
person making such offer or solicitation is not qualified to do so, or
to any person to whom it is unlawful to make such offer or 304,175 SHARES
solicitation in such jurisdiction. Neither the delivery of this
prospectus nor any sale hereunder shall under any circumstances
create any implication that there has been no change in the affairs
of CBCT Bancshares, Inc. or Community Bank since any of the
dates as of which information is furnished herein or since the date
hereof.
-------------- CBCT BANCSHARES, INC.
(Proposed Holding Company for
TABLE OF CONTENTS Community Bank of Central Texas, ssb)
Page
Summary...............................................................[___]
Risk Factors..........................................................[___]
Selected Financial and Other Data.....................................[___]
Recent Developments...................................................[___]
Management's Discussion and Analysis of
Recent Financial Information.........................................[___]
CBCT Bancshares, Inc..................................................[___]
Community Bank Savings Bank...........................................[___] COMMON STOCK
How We Intend to Use the Proceeds.....................................[___]
Market for the Common Stock...........................................[___]
Our Policy Regarding Dividends........................................[___]
Pro Forma Data........................................................[___]
Comparison of Valuation and Pro Forma Information
With No Foundation.................................................[___] --------------
Capitalization........................................................[___]
Community Bank Exceeds All Regulatory Capital PROSPECTUS
Requirements.......................................................[___] --------------
Community Bank's Conversion...........................................[___]
Proposed Purchases by Management......................................[___]
Management's Discussion and Analysis of Financial
Condition and Results of Operations................................[___]
Business of CBCT Bancshares, Inc......................................[___] KEEFE, BRUYETTE & WOODS, INC.
Business of Community Bank............................................[___]
Management ...........................................................[___]
How We Are Regulated..................................................[___]
Taxation..............................................................[___] ____________, 2000
Restrictions on Acquisition of CBCT Bancshares, Inc.
and Community Bank.................................................[___]
Description of Capital Stock of CBCT Bancshares, Inc..................[___]
Transfer Agent and Registrar..........................................[___]
Experts...............................................................[___]
Legal and Tax Opinions................................................[___]
Additional Information................................................[___]
Index to Consolidated Financial Statements.............................F-1
Until the later of __________, 2000 or 25 days after the commencement of the
public offering, if any, all dealers effecting transactions in the registered
securities, whether or not participating in this distribution, may be required
to deliver a prospectus. This is in addition to the obligation of dealers to
deliver a prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions.
</TABLE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers
-----------------------------------------
Article 12 of CBCT Bancshares, Inc.'s Articles of Incorporation
provides for indemnification of current and former directors and officers or
individuals serving any other entity at the request of CBCT Bancshares, Inc., to
the fullest extent required or permitted under Maryland law. In addition,
Article 12 provides for the indemnification of other employees and agents to the
extent authorized by the Board of Directors and permitted under Maryland law.
Article 12 also provides CBCT Bancshares, Inc. with the authority to purchase
insurance for indemnification purposes. The indemnification provisions set forth
within Article 12 are non-exclusive in nature, however, CBCT Bancshares, Inc.
shall not be liable for any payment under Article 12 to the extent that said
person entitled to be indemnified has actually received payment under any
insurance policy, agreement or otherwise of the amounts indemnifiable under
Article 12.
Section 2-418 of the General Corporation Law of the State of Maryland
permits a corporation to indemnify a person against judgments, penalties,
settlements and reasonable expenses unless it is proven that (1) the conduct of
the person was material to the matter giving rise to the proceeding and the
person acted in bad faith or with "active and deliberate dishonesty," (2) the
person actually received an improper benefit or (3) in the case of a criminal
proceeding, the person had reason to believe that his conduct was unlawful.
Maryland law provides that where a person is a defendant in a
derivative proceeding, the person may not be indemnified if the person is found
liable to the corporation. Maryland law also provides that a person may not be
indemnified in any proceeding alleging improper personal benefit to the person
in which the person was found liable on the grounds that personal benefit was
improperly received.
Maryland law further provides that unless otherwise provided in the
corporation's Articles of Incorporation, a director or officer (but not an
employee or agent) who is successful on the merits or otherwise in defense of
any proceeding must be indemnified against reasonable expenses. The Articles of
Incorporation do not otherwise provide a bar against mandatory indemnification.
Finally, Section 2-418 of the General Corporation Law also permits
expenses incurred by a person in defending a proceeding to be paid by the
corporation in advance of the final disposition of the proceeding upon the
receipt of an undertaking by the director or officer to repay this amount if it
is ultimately determined that he or she is not entitled to be indemnified by the
corporation against these expenses. The person seeking indemnification of
expenses must affirm in writing that he or she believes in good faith that he or
she has met the applicable standard for indemnification of expenses.
II-1
<PAGE>
Item 25. Other Expenses of Issuance and Distribution
-------------------------------------------
Set forth below is an estimate of the amount of fees and expenses
(other than underwriting discounts and commissions) to be incurred in connection
with the issuance of the shares.
Counsel fees and expenses........................................... $ 95,000
Accounting fees and expenses........................................ 50,000
Appraisal and business plan preparation fees and expenses........... 23,000
Conversion Agent fees and expenses.................................. 10,000
Underwriting fees(1) (including financial advisory fee and expenses) 80,000
Underwriter's counsel fees and expenses............................. 25,000
Printing, postage and mailing....................................... 50,000
Registration and Filing Fees........................................ 15,000
Blue Sky fees and expenses.......................................... 5,000
Stock Transfer Agent and Certificates............................... 5,000
Other expenses(1)................................................... 22,000
TOTAL.......................................................... $380,000
- ------------------
(1) Based on maximum of Estimated Valuation Range.
Item 26. Recent Sales of Unregistered Securities
---------------------------------------
The Registrant is newly incorporated, solely for the purpose of acting
as the holding company of the Community Bank of Central Texas, ssb, pursuant to
the Plan of Conversion (filed as Exhibit 2 herein), and no sales of its
securities have occurred to date.
Item 27. Exhibits and Financial Statement Schedules
------------------------------------------
See the Exhibit Index filed as part of this Registration Statement.
Item 28. Undertakings
------------
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration
Statement to:
(i) Include any Prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
(ii) Reflect in the Prospectus any facts or events arising
after the effective date of the Registration
Statement (or the most recent post-effective
amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the
information set forth in the Registration Statement;
and
II-2
<PAGE>
(iii) Include any material information with respect to the
plan of distribution not previously disclosed in the
Registration Statement or any material change to such
information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new Registration Statement relating to
the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and it will be governed by the final adjudication
of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of
prospectus filed as part of this Registration Statement in
reliance upon Rule 430A and contained in a form of prospectus
filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of
this Registration Statement as of the time it was declared
effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that
contains a form of prospectus shall be deemed to be a new
Registration Statement relating to the securities offered
therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this Registration
Statement to be signed on its behalf by the undersigned, in the City of
Smithville, State of Texas, on March 22, 2000.
CBCT BANCSHARES, INC.
By: /s/ Brad M. Hurta
--------------------------------------
Brad M. Hurta, President and
Chief Executive Officer
(Duly Authorized Representative)
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Brad M. Hurta his true and lawful
attorney-in-fact and agent, with full power of substitution and re-substitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and all other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorney-in-fact and agent full power and authority to do and
perform each and every act and thing requisite and necessary to be done, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all said attorney-in-fact and agent or his substitute
or substitutes may lawfully do or cause to be done by virtue hereof.
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
/s/ Brad M. Hurta /s/ Vernon L. Richards
- ------------------------------------- --------------------------------------
Brad M. Hurta Vernon L. Richards
President, Chief Executive Officer Director
and Director (Chief Financial and
Accounting Officer)
March 22, 2000 March 22, 2000
- ------------------------------ --------------------------------
/s/ Clinton M. Wright /s/ Mike C. Maney
- ------------------------------------- --------------------------------------
Clinton M. Wright Mike C. Maney
Director Director
March 22, 2000 March 22, 2000
- ------------------------------ --------------------------------
II-4
<PAGE>
/s/ Gordon N. Fowler /s/ James A. Cowan
- ------------------------------------- --------------------------------------
Gordon N. Fowler James A. Cowan
Director Director
March 22, 2000 March 22, 2000
- ------------------------------ --------------------------------
/s/ Rodney E. Langer /s/ Georgina Chronis
- ------------------------------------- --------------------------------------
Rodney E. Langer Georgina Chronis
Director Director
March 22, 2000 March 22, 2000
- ------------------------------ --------------------------------
/s/ Barry W. Hannath
- -------------------------------------
Barry W. Hannath
Director
March 22, 2000
- ------------------------------
II-5
<PAGE>
As filed with the Securities and Exchange Commission on March 23, 2000
Registration No. 333-________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
EXHIBITS
TO
FORM SB-2
UNDER
THE SECURITIES ACT OF 1933
CBCT BANCSHARES, INC.
312 Main Street
Smithville, Texas 78957-2035
<PAGE>
EXHIBIT INDEX
Exhibits:
1.1 Letter Agreement regarding management, marketing and consulting
services
1.2 Form of Agency Agreement*
2 Plan of Conversion
3.1 Articles of Incorporation of the Holding Company
3.2 Bylaws of the Holding Company
3.3 Charter of Bank in stock form
3.4 Bylaws of Bank in stock form
4 Form of Stock Certificate of the Holding Company
5 Opinion of Silver, Freedman & Taff, L.L.P. with Respect to Legality
of Stock
8.1 Opinion of Silver, Freedman & Taff, L.L.P. with respect to Federal
income tax consequences of the Stock Conversion
8.2 Opinion of Padgett, Stratemann & Co., L.L.P. with respect to Texas
income tax consequences of the Stock Conversion*
10.1 Form of Employment Agreement
10.2 Letter Agreement regarding Appraisal Services and Business Plan
Preparation*
10.3 Employee Stock Ownership Plan
21 Subsidiaries
23.1 Consent of Silver, Freedman & Taff, L.L.P.
23.2 Consent of Padgett, Stratemann & Co., L.L.P.
22.3 Consent of Seidel Schroeder & Company
23.4 Consent of Ferguson & Company
24 Power of Attorney (set forth on signature page)
27 Financial Data Schedule
99.1 Appraisal*
99.2 Proxy Statement and form of proxy to be furnished to the Bank's account
holders
99.3 Stock Order Form and Order Form Instructions
99.4 Certification
99.5 Question and Answer Brochure
99.6 Advertising, Training and Community Informational Meeting
Materials
99.7 Letter of Appraiser with respect to Subscription Rights
* To be filed supplementally or by amendment.
EXHIBIT 1.1
November 24, 1999
Mr. Brad Hurta
Chief Executive Officer
Community Bank of Central Texas
312 Main Street
Smithville, TX 78957-2035
Dear Mr. Hurta:
This proposal is in connection with Community Bank of Central Texas (the
"Client" or "Bank") intention to convert from a mutual to a capital stock form
of organization (the "Conversion"). In order to effect the Conversion, it is
contemplated that all of the Bank's common stock to be outstanding pursuant to
the Conversion will be issued to a holding company (the "Company") to be formed
by the Bank, and that the Company will offer and sell shares of its common stock
first to eligible persons (pursuant to the Bank's Plan of Conversion) in a
Subscription and Community Offering.
Charles Webb & Company ("Webb"), a Division of Keefe, Bruyette and Woods, Inc.
("KBW"), will act as the Bank's and the Company's exclusive financial advisor
and marketing agent in connection with the Conversion. This letter sets forth
selected terms and conditions of our engagement.
1. Advisory/Conversion Services. As the Bank's and Company's financial advisor
and marketing agent, Webb will provide the Bank and the Company with a
comprehensive program of conversion services designed to promote an orderly,
efficient, cost-effective and long-term stock distribution. Webb will provide
financial and logistical advice to the Bank and the Company concerning the
offering and related issues. Webb will assist in providing conversion
enhancement services intended to maximize stock sales in the Subscription
Offering and to residents of the Bank's market area, if necessary, in the
Community Offering.
Webb shall provide financial advisory services to the Bank which are typical in
connection with an equity offering and include, but are not limited to, overall
financial analysis of the client with a focus on identifying factors which
impact the valuation of the common stock and provide the appropriate
recommendations for the betterment of the equity valuation.
Additionally, post conversion financial advisory services will include advice on
shareholder relations, after-market trading, dividend policy (for both regular
and special dividends), stock
<PAGE>
Mr. Brad Hurta
November 24, 1999
Page 2 of 5
repurchase strategy and communication with market makers. Prior to the closing
of the offering, Webb shall furnish to client a Post-Conversion reference manual
which will include specifics relative to these items. (The nature of the
services to be provided by Webb as the Bank's and the Company's financial
advisor and marketing agent is further described in Exhibit A attached hereto.)
2. Preparation of Offering Documents. The Bank, the Company and their counsel
will draft the Registration Statement, Application for Conversion, Prospectus
and other documents to be used in connection with the Conversion. Webb will
attend meetings to review these documents and advise you on their form and
content. Webb and its counsel will draft appropriate agency agreement and
related documents as well as marketing materials other than the Prospectus.
3. Due Diligence Review. Prior to filing the Registration Statement, Application
for Conversion or any offering or other documents naming Webb as the Bank's and
the Company's financial advisor and marketing agent, Webb and their
representatives will undertake substantial investigations to learn about the
Bank's business and operations ("due diligence review") in order to confirm
information provided to us and to evaluate information to be contained in the
Banks and/or the Company's offering documents. The Bank agrees that it will make
available to Webb all relevant information, whether or not publicly available,
which Webb reasonably requests, and will permit Webb to discuss with management
the operations and prospects of the Bank. Webb will treat all material
non-public information as confidential. The Bank acknowledges that Webb will
rely upon the accuracy and completeness of all information received from the
Bank, its officers, directors, employees, agents and representatives,
accountants and counsel including this letter to serve as the Bank's and the
Company's financial advisor and marketing agent.
4. Regulatorv Filings. The Bank and/or the Company will cause appropriate
offering documents to be filed with all regulatory agencies including, the
Securities and Exchange Commission ("SEC"), the National Association of
Securities Dealers ("NASD"), Federal Deposit Insurance Corp. ("FDIC") and such
state securities commissioners as may be determined by the Bank.
5. Agencv Agreement. The specific terms of the conversion services, conversion
offering enhancement and syndicated offering services contemplated in this
letter shall be set forth in a mutually agreed upon Agency Agreement between
Webb and the Bank and the Company to be executed prior to commencement of the
offering, and dated the date that the Company's Prospectus is declared effective
and/or authorized to be disseminated by the appropriate regulatory agencies, the
SEC, the NASD, the FDIC and such state securities commissioners and other
regulatory agencies as required by applicable law.
6. Representations, Warranties and Covenants. The Agency Agreement will provide
for to be
<PAGE>
Mr. Brad Hurta
November 24, 1999
Page 3 of 5
agreed upon representations, warranties and covenants by the Bank and Webb, and
for the Company to indemnify Webb and their controlling persons (and, if
applicable, the members of the selling group and their controlling persons), and
for Webb to indemnify the Bank and the Company against certain liabilities,
including, without limitation, liabilities under the Securities Act of 1933.
7. Fees. For the services hereunder, the Bank and/or Company shall pay the
following fees to Webb at closing unless stated otherwise:
(a) Management Fee. A Management Fee of $25,000 payable in four
consecutive monthly installments of $6,250 commencing with the
signing of this letter. Such fees shall be deemed to have been
earned when due. Should the Conversion be terminated for any
reason not attributable to the action or inaction of Webb,
Webb shall have earned and be entitled to be paid fees
accruing through the stage at which point the termination
occurred.
(b) With respect to the Conversion, a Success Fee of $50,000.
Notwithstanding anything contained herein to the contrary, the
total amount that Client shall pay Webb relating to the
Management Fee in 7(a) above, the Success Fee in 7(b) above
and the expense reimbursement set forth in Section 9 below
shall not exceed $105,000.
(c) Broker-Dealer Pass-Through. If any shares of the Company's
stock remain available after the subscription offering, at the
request of the Bank, Webb will seek to form a syndicate of
registered broker-dealers to assist in the sale of such common
stock on a best efforts basis, subject to the terms and
conditions set forth in the selected dealers agreement. Webb
will endeavor to distribute the common stock among dealers in
a fashion which best meets the distribution objectives of the
Bank and the Plan of Conversion. Webb will be paid a fee not
to exceed 5.5% of the aggregate Purchase Price of the shares
of common stock sold by them. From this fee, Webb will pass
onto selected broker-dealers, who assist in the syndicated
community, an amount competitive with gross underwriting
discounts charged at such time for comparable amounts of stock
sold at a comparable price per share in a similar market
environment. Fees with respect to purchases affected with the
assistance of a broker/dealer other than Webb shall be
transmitted by Webb to such broker/dealer. The decision to
utilize selected broker-dealers will be made by the Bank upon
consultation with Webb. In the event, with respect to any
stock purchases, fees are paid pursuant to this subparagraph
7(c), such fees shall be in lieu of, and not in addition to,
payment pursuant to subparagraph 7(a), and 7(b). Mr. Brad
Hurta November 24, 1999 Page 4 of 5
8. Additional Services. Webb further agrees to provide financial advisory
assistance to the Company and the Bank for a period of one year following
completion of the Conversion, including formation of a dividend policy and share
repurchase program, assistance with shareholder reporting and shareholder
relations mailers, general advice on mergers and acquisitions and other related
financial matters, without the payment by the Company and the Bank of any fees
in addition to those set forth in Section 7 hereof. Nothing in this Agreement
shall require the Company and the Bank to obtain such services from Webb.
Following this initial one year term, if both parties wish to continue the
relationship, a fee will be negotiated and an agreement entered into at that
time.
9. Expenses. The Bank will bear those expenses of the proposed offering
customarily borne by issuers, including, without limitation, regulatory filing
fees, SEC, "Blue Sky," and NASD filing and registration fees; the fees of the
Bank's accountants, attorneys, appraiser, transfer agent and registrar,
printing, mailing and marketing and syndicate expenses associated with the
Conversion; the fees set forth in Section 7; and fees for "Blue Sky" legal work.
If Webb incurs expenses on behalf of Client, Client will reimburse Webb for such
expenses.
Webb shall be reimbursed for reasonable out-of-pocket expenses, including costs
of travel, meals and lodging, photocopying, telephone, facsimile and couriers.
The selection of Webb's counsel will be done by Webb, with the approval of the
Bank. The Bank will reimburse Webb for the fees and expenses of its counsel
which will not exceed $25,000.
10. Conditions. Webb's willingness and obligation to proceed hereunder shall be
subject to, among other things, satisfaction of the following conditions in
Webb's opinion, which opinion shall have been formed in good faith by Webb after
reasonable determination and consideration of all relevant factors: (a) full and
satisfactory disclosure of all relevant material, financial and other
information in the disclosure documents and a determination by Webb, in its sole
discretion, that the sale of stock on the terms proposed is reasonable given
such disclosures; (b) no material adverse change in the condition or operations
of the Bank subsequent to the execution of the agreement; and (c) no adverse
market conditions at the time of offering which in Webb's opinion make the sale
of the shares by the Company inadvisable.
12. Benefit. This Agreement shall inure to the benefit of the parties hereto and
their respective successors and to the parties indemnified pursuant to the terms
and conditions of the Agency Agreement and their successors, and the obligations
and liabilities assumed hereunder by the parties hereto shall be binding upon
their respective successors provided, however, that this Agreement shall not be
assignable by Webb.
13. Definitive Agreement. This letter reflects Webb's present intention of
proceeding to work with the Bank on its proposed Conversion. It does not create
a binding obligation on the part of
<PAGE>
Mr. Brad Hurta
November 24, 1999
Page 5 of 5
the Bank, the Company or Webb except as to the agreement to maintain the
confidentiality of non-public information set forth in Section 3, the payment of
certain fees as set forth in Section 7(a) and 7(b) and the assumption of
expenses as set forth in Section 9, all of which shall constitute the binding
obligations of the parties hereto and which shall survive the termination of
this Agreement or the completion of the services furnished hereunder and shall
remain operative and in full force and effect. You further acknowledge that any
report or analysis rendered by Webb pursuant to this engagement is rendered for
use solely by the management of the Bank and its agents in connection with the
Conversion. Accordingly, you agree that you will not provide any such
information to any other person without our prior written consent.
Webb acknowledges that in offering the Company's stock no person will be
authorized to give any information or to make any representation not contained
in the offering prospectus and related offering materials filed as part of a
registration statement to be declared effective in connection with the offering.
Accordingly, Webb agrees that in connection with the offering it will not give
any unauthorized information or make any unauthorized representation. We will be
pleased to elaborate on any of the matters discussed in this letter at your
convenience.
If the foregoing correctly sets forth our mutual understanding, please so
indicate by signing and returning the original copy of this letter to the
undersigned.
Very truly yours,
CHARLES WEBB & COMPANY,
A DIVISION OF KEEFE, BRUYETTE & WOODS, INC.
By:___________________
Patricia A. McJoynt
Executive Vice President
COMMUNITY BANK OP CENTRAL TEXAS
By:________________________ _______________Date:
Brad Hurta
Chief Executive Officer
<PAGE>
EXHIBIT A
CONVERSION SERVICES PROPOSAL
TO SECURITY FEDERAL BANK
Charles Webb & Company provides thrift institutions converting from mutual to
stock form of ownership with a comprehensive program of conversion services
designed to promote an orderly, efficient, cost-effective and long-term stock
distribution. The following list is representative of the conversion services,
if appropriate, we propose to perform on behalf of the Bank.
General Services
Assist management and legal counsel with the design of the transaction
structure.
Analyze and make recommendations on bids from printing, transfer
agent, and appraisal firms.
Assist officers and directors in obtaining bank loans to purchase
stock, if requested.
Assist in drafting and distribution of press releases as required or
appropriate.
Conversion Offering Enhancement Services
Establish and manage Stock Information Center at the Bank. Stock
Information Center personnel will track prospective investors; record stock
orders; mail order confirmations; provide the Bank's senior management with
daily reports; answer customer inquiries; and handle special situations as they
arise.
Assign Webb's personnel to be at the Bank through completion of the
Subscription and Community Offerings to manage the Stock Information Center,
meet with prospective shareholders at individual and community information
meetings, solicit local investor interest through a tele-marketing campaign,
answer inquiries, and otherwise assist in the sale of stock in the Subscription
and Community Offerings. This effort will be lead by a Principal of Webb/KBW.
Create target investor list based upon review of the Bank's depositor
base.
Provide intensive financial and marketing input for drafting of the
prospectus.
Conversion Offering Enhancement Services- Continued
Prepare other marketing materials, including prospecting letters and
brochures, and media advertisements.
Arrange logistics of community information meeting(s) as required.
Prepare audio-visual presentation by senior management for community
information meeting(s).
Prepare management for question-and-answer period at community
information meeting(s).
Attend and address community information meeting(s) and be available to
answer questions.
Broker-Assisted Sales Services.
Arrange for broker information meeting(s) as required.
Prepare audio-visual presentation for broker information meeting(s).
Prepare script for presentation by senior management at broker
information meeting(s).
Prepare management for question-and-answer period at broker information
meeting(s).
Attend and address broker information meeting(s) and be available to
answer questions.
Produce confidential broker memorandum to assist participating brokers
in selling the Bank's common stock.
Aftermarket Support Services.
Webb will use their best efforts to secure market making and on-going
research commitment from at least two NASD firms, one of which will be Keefe,
Bruyette & Woods, Inc.
EXHIBIT 2
COMMUNITY BANK OF CENTRAL TEXAS, SSB
Smithville, Texas
PLAN OF CONVERSION
From Mutual to Stock Form of Organization
I. GENERAL
On December 14, 1999, the Board of Community Bank of Central Texas, ssb
(the "Bank") adopted this Plan of Conversion whereby the Bank would convert from
a mutual savings institution to a stock savings institution. The Plan includes,
as part of the Conversion, the concurrent formation of the Holding Company, to
be named in the future. The Plan provides that non-transferable subscription
rights to purchase Holding Company Conversion Stock will be offered first to
Eligible Account Holders of record as of the Eligibility Record Date, then to
the Holding Company and the Bank's Tax-Qualified Employee Plans, then to
Supplemental Eligible Account Holders of record as of the Supplemental
Eligibility Record Date, then to Other Members, and then to directors, officers
and employees. Concurrently with, at any time during, or promptly after the
Subscription Offering, and on a lowest priority basis, an opportunity to
subscribe may also be offered to the general public in a Direct Community
Offering or a Public Offering. The price of the Holding Company Conversion Stock
will be based upon an independent appraisal of the Bank and will reflect its
estimated pro forma market value, as converted. It is the desire of the Board of
Directors of the Bank to attract new capital to the Bank in order to increase
its capital, support future savings growth and increase the amount of funds
available for residential and other lending. The Converted Bank is also expected
to benefit from its management and other personnel having a stock ownership in
its business, since stock ownership is viewed as an effective performance
incentive and a means of attracting, retaining and compensating management and
other personnel. No change will be made in the Board of Directors or management
of the Bank as a result of the Conversion.
II. DEFINITIONS
Acting in Concert: The term "acting in concert" shall have the same
meaning given it in ss.574.2(c) of the rules and regulations of the Office of
Thrift Supervision, as applied by the FDIC.
Actual Subscription Price: The price per share, determined as provided
in Section V of the Plan, at which Holding Company Conversion Stock will be sold
in the Subscription Offering.
Affiliate: An "affiliate" of, or a Person "affiliated" with, a
specified Person, is a Person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by or is under common control with,
the Person specified.
Associate: The term "associate," when used to indicate a relationship
with any Person, means (i) any corporation or organization (other than the
Holding Company, the Bank or a majority-owned subsidiary of the Holding Company)
of which such Person is an officer or partner or is, directly or indirectly, the
beneficial owner of ten percent or more of any class of equity securities, (ii)
any trust or other estate in which such Person has a substantial beneficial
interest or as to which such Person serves as trustee or in a similar fiduciary
capacity, and (iii) any relative or spouse of such Person, or any relative of
such spouse, who has the same home as such Person or who is a director or
officer of the Holding Company or the Bank or any subsidiary of the Holding
Company; provided, however, that any Tax-Qualified or Non-Tax-Qualified
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Employee Plan shall not be deemed to be an associate of any director or officer
of the Holding Company or the Bank, to the extent provided in Section V hereof.
Bank: Community Bank of Central Texas, ssb, or such other name as the
institution may adopt.
Commissioner: The Commissioner of the Texas Savings and Loan
Department.
Conversion: Change of the Bank's mutual charter and bylaws to a stock
charter and bylaws; sale by the Holding Company of Holding Company Conversion
Stock; and issuance and sale by the Converted Bank of its common stock to the
Holding Company, all as provided for in the Plan.
Converted Bank: The stock savings institution resulting from the
Conversion of the Bank in accordance with the Plan.
Department: The Texas Savings and Loan Department.
Deposit Account: Any withdrawable or repurchasable account or deposit
in the Bank including Savings Accounts and demand accounts.
Direct Community Offering: The offering to the general public of any
unsubscribed shares which may be effected as provided in Section V hereof.
Eligibility Record Date: The close of business on September 30, 1998.
Eligible Account Holder: Any Person holding a Deposit Account in the
Bank on the Eligibility Record Date.
Exchange Act: The Securities Exchange Act of 1934, as amended.
FDIC: The Federal Deposit Insurance Corporation.
Fed: The Board of Governors of the Federal Reserve System.
Holding Company: A corporation which upon completion of the Conversion
will own all of the outstanding common stock of the Converted Bank, and the name
of which will be selected in the future.
Holding Company Conversion Stock: Shares of common stock, par value
$.01 per share, to be issued by the Holding Company as a part of the Conversion.
Market Maker: A dealer (i.e., any Person who engages directly or
indirectly as agent, broker or principal in the business of offering, buying,
selling, or otherwise dealing or trading in securities issued by another Person)
who, with respect to a particular security, (i) regularly publishes bona fide,
competitive bid and offer quotations in a recognized inter-dealer quotation
system; or (ii) furnishes bona fide competitive bid and offer quotations on
request; and (iii) is ready, willing, and able to effect transactions in
reasonable quantities at his quoted prices with other brokers or dealers.
Maximum Subscription Price: The price per share of Holding Company
Conversion Stock to be paid initially by subscribers in the Subscription
Offering.
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Member: Any Person or entity that qualifies as a member of the Bank
pursuant to its charter and bylaws.
Non-Tax-Qualified Employee Plan: Any defined benefit plan or defined
contribution plan of the Bank or the Holding Company, such as an employee stock
ownership plan, stock bonus plan, profit-sharing plan or other plan, which with
its related trust does not meet the requirements to be "qualified" under Section
401 of the Internal Revenue Code.
Officer: An executive officer of the Holding Company or the Bank,
including the Chairman of the Board, President, Executive Vice Presidents,
Senior Vice Presidents in charge of principal business functions, Secretary and
Treasurer.
Order Forms: Forms to be used in the Subscription Offering to exercise
Subscription Rights.
Other Members: Members of the Bank, other than Eligible Account
Holders, Tax-Qualified Employee Plans or Supplemental Eligible Account Holders,
as of the Voting Record Date.
Person: An individual, a corporation, a partnership, an association, a
joint-stock company, a trust, any unincorporated organization, or a government
or political subdivision thereof.
Plan: This Plan of Conversion of the Bank, including any amendment
approved as provided in this Plan.
Public Offering: The offering for sale through the Underwriters to
selected members of the general public of any shares of Holding Company
Conversion Stock not subscribed for in the Subscription Offering or the Direct
Community Offering, if any.
Public Offering Price: The price per share at which any unsubscribed
shares of Holding Company Conversion Stock are initially offered for sale in the
Public Offering.
SAIF: Savings Association Insurance Fund.
Savings Account: The term "Savings Account" means any withdrawable
account in the Bank except a demand account.
SEC: Securities and Exchange Commission.
Special Meeting: The Special Meeting of Members called for the purpose
of considering and voting upon the Plan of Conversion.
Subscription Offering: The offering of shares of Holding Company
Conversion Stock for subscription and purchase pursuant to Section V of the
Plan.
Subscription Rights: Non-transferable, non-negotiable, personal rights
of the Bank's Eligible Account Holders, Tax-Qualified Employee Plans,
Supplemental Eligible Account Holders, Other Members, and directors, Officers
and employees to subscribe for shares of Holding Company Conversion Stock in the
Subscription Offering.
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Supplemental Eligibility Record Date: The last day of the calendar
quarter preceding approval of the Plan by the FDIC and the Department.
Supplemental Eligible Account Holder: Any person holding a Deposit
Account in the Bank (other than an officer or director and their associates) on
the Supplemental Eligibility Record Date.
Tax-Qualified Employee Plans: Any defined benefit plan or defined
contribution plan of the Bank or the Holding Company, such as an employee stock
ownership plan, stock bonus plan, profit-sharing plan or other plan, which with
its related trust meets the requirements to be "qualified" under Section 401 of
the Internal Revenue Code.
Underwriters: The investment banking firm or firms agreeing to offer
and sell Holding Company Conversion Stock in the Public Offering.
Voting Record Date: The date set by the Board of Directors in
accordance with applicable regulations for determining Members eligible to vote
at the Special Meeting.
III. STEPS PRIOR TO SUBMISSION OF PLAN OF CONVERSION TO THE MEMBERS FOR
APPROVAL
Prior to submission of the Plan of Conversion to its Members for
approval, the Bank must receive from the Department and the FDIC approval of the
Application for Approval of Conversion to convert to the stock form of
organization. The following steps must be taken prior to such regulatory
approval:
A. The Board of Directors shall adopt the Plan by not less than a
two-thirds vote.
B. The Bank shall notify its Members of the adoption of the Plan
by publishing a statement in a newspaper having a general
circulation in each community in which the Bank maintains an
office.
C. Copies of the Plan adopted by the Board of Directors shall be
made available for inspection at each office of the Bank.
D. The Bank will promptly cause an Application for Approval of
Conversion to be prepared and filed with the Department and
the FDIC, a Holding Company Application to be prepared and
filed with the Fed and a Registration Statement on Form SB-2
to be prepared and filed with the SEC.
E. Upon receipt of notice from the Department to do so, the Bank
shall notify its Members that it has filed the Application for
Approval of Conversion by posting notice in each of its
offices and by publishing notice in a newspaper having general
circulation in each community in which the Bank maintains an
office.
IV. CONVERSION PROCEDURE
Following approval of the application by the Department and
non-objection by the FDIC, the Plan will be submitted to a vote of the Members
at the Special Meeting. If the Plan is approved by Members holding a majority of
the total number of votes entitled to be cast at the Special Meeting, the Bank
will take
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all other necessary steps pursuant to applicable laws and regulations to convert
to a stock savings institution as part of a concurrent holding company formation
pursuant to the terms of the Plan.
The Holding Company Conversion Stock will be offered for sale in the
Subscription Offering at the Maximum Subscription Price to Eligible Account
Holders, Tax-Qualified Employee Plans, Supplemental Eligible Account Holders,
Other Members and directors, Officers and employees of the Bank, prior to or
within 45 days after the date of the Special Meeting. The Bank may, either
concurrently with, at any time during, or promptly after the Subscription
Offering, also offer the Holding Company Conversion Stock to and accept
subscriptions from other Persons in a Direct Community Offering or a Public
Offering; provided that the Bank's Eligible Account Holders, Tax-Qualified
Employee Plans, Supplemental Eligible Account Holders, Other Members and
directors, Officers and employees shall have the priority rights to subscribe
for Holding Company Conversion Stock as set forth in Section V of the Plan.
However, the Holding Company and the Bank may delay commencing the Subscription
Offering beyond such 45-day period in the event there exist unforeseen material
adverse market or financial conditions. If the Subscription Offering commences
prior to the Special Meeting, subscriptions will be accepted subject to the
approval of the Plan at the Special Meeting.
The period for the Subscription Offering and Direct Community Offering
will be not less than 20 days nor more than 45 days unless extended by the Bank.
Upon completion of the Subscription Offering and Direct Community Offering, if
any, any unsubscribed shares of Holding Company Conversion Stock may be sold
through the Underwriters to selected members of the general public in the Public
Offering. If for any reason all of the shares are not sold in the Subscription
Offering, Direct Community Offering, if any, and Public Offering, if any, the
Holding Company and the Bank will use their best efforts to obtain other
purchasers, subject to Department and FDIC approval, as required. Completion of
the sale of all shares of Holding Company Conversion Stock not sold in the
Subscription Offering is required within 45 days after termination of the
Subscription Offering, subject to extension of such 45-day period by the Holding
Company and the Bank with the approval of the OTS. The Holding Company and the
Bank may jointly seek one or more extensions of such 45-day period if necessary
to complete the sale of all shares of Holding Company Conversion Stock. In
connection with such extensions, subscribers and other purchasers will be
permitted to increase, decrease or rescind their subscriptions or purchase
orders to the extent required by the OTS in approving the extensions. Completion
of the sale of all shares of Holding Company Conversion Stock is required within
24 months after the date of the Special Meeting.
V. STOCK OFFERING
A. Total Number of Shares and Purchase Price of Conversion Stock
The total number of shares of Holding Company
Conversion Stock to be issued in the Conversion will be
determined jointly by the Boards of Directors of the Holding
Company and the Bank prior to the commencement of the
Subscription Offering, subject to adjustment if necessitated
by market or financial conditions prior to consummation of the
Conversion. The total number of shares of Holding Company
Conversion Stock shall also be subject to increase in
connection with any oversubscriptions in the Subscription
Offering or Direct Community Offering.
The aggregate price for which all shares of Holding
Company Conversion Stock will be sold will be based on an
independent appraisal of the estimated total pro forma market
value of the Holding Company and the Converted Bank. Such
appraisal shall be
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performed in accordance with appropriate regulatory guidelines
and will be updated as appropriate under or required by
applicable regulations.
The appraisal will be made by an independent
investment banking or financial consulting firm experienced in
the area of thrift institution appraisals. The appraisal will
include, among other things, an analysis of the historical and
pro forma operating results and net worth of the Converted
Bank and a comparison of the Holding Company, the Converted
Bank and the Holding Company Conversion Stock with comparable
thrift institutions and holding companies and their respective
outstanding capital stocks.
Based upon the independent appraisal, the Boards of
Directors of the Holding Company and the Bank will jointly fix
the Maximum Subscription Price.
If, following completion of the Subscription Offering
and Direct Community Offering, if any, a Public Offering is
effected, the Actual Subscription Price for each share of
Holding Company Conversion Stock will be the same as the
Public Offering Price at which unsubscribed shares of Holding
Company Conversion Stock are initially offered for sale by the
Underwriters in the Public Offering.
If, upon completion of the Subscription Offering,
Direct Community Offering, if any, and Public Offering, if
any, all of the Holding Company Conversion Stock is subscribed
for or only a limited number of shares remain unsubscribed
for, subject to Part VII hereof, the Actual Subscription Price
for each share of Holding Company Conversion Stock will be
determined by dividing the estimated appraised aggregate pro
forma market value of the Holding Company and the Converted
Bank, based on the independent appraisal as updated upon
completion of the Subscription Offering or other sale of all
of the Holding Company Conversion Stock, by the total number
of shares of Holding Company Conversion Stock to be issued by
the Holding Company upon Conversion. Such appraisal will then
be expressed in terms of a specific aggregate dollar amount
rather than as a range.
B. Subscription Rights
Non-transferable Subscription Rights to purchase
Holding Company Conversion Stock will be issued without
payment therefor to Eligible Account Holders, Tax-Qualified
Employee Plans, Supplemental Eligible Account Holders, Other
Members and directors, Officers and employees of the Bank as
set forth below.
1. Preference Category No. 1: Eligible Account Holders
Each Eligible Account Holder shall receive
non-transferable Subscription Rights to subscribe for
shares of Holding Company Conversion Stock in an
amount equal to the greater of $100,000, or one-tenth
of one percent (.10%) of the total offering of
shares, or 15 times the product (rounded down to the
next whole number) obtained by multiplying the total
number of shares of Holding Company Conversion Stock
to be issued by a fraction of which the numerator is
the amount of the Deposit Accounts of the Eligible
Account Holder and the denominator is the total
amount of Deposit Accounts of all Eligible Account
Holders in the Bank in each case on the Eligibility
Record Date.
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If sufficient shares are not available,
shares shall be allocated first to permit each
subscribing Eligible Account Holder to purchase to
the extent possible 100 shares, and thereafter among
each subscribing Eligible Account Holder pro rata in
the same proportion that his Deposit Accounts bear to
the total Deposit Accounts of all subscribing
Eligible Account Holders whose subscriptions remain
unsatisfied.
Non-transferable Subscription Rights to
purchase Holding Company Conversion Stock received by
directors and Officers of the Bank and their
Associates, based on their increased deposits in the
Bank in the one-year period preceding the Eligibility
Record Date, shall be subordinated to all other
subscriptions involving the exercise of
non-transferable Subscription Rights of Eligible
Account Holders.
2. Preference Category No. 2: Tax-Qualified Employee
Plans
Each Tax-Qualified Employee Plan shall be
entitled to receive non-transferable Subscription
Rights to purchase up to 10% of the shares of Holding
Company Conversion Stock, provided that singly or in
the aggregate such plans (other than that portion of
such plans which is self-directed) shall not purchase
more than 10% of the shares of the Holding Company
Conversion Stock. Subscription Rights received
pursuant to this Category shall be subordinated to
all rights received by Eligible Account Holders to
purchase shares pursuant to Category No. 1.
3. Preference Category No. 3: Supplemental Eligible
Account Holders
Each Supplemental Eligible Account Holder
shall receive non-transferable Subscription Rights to
subscribe for shares of Holding Company Conversion
Stock in an amount equal to the greater of $100,000,
or one-tenth of one percent (.10%) of the total
offering of Holding Company Conversion Stock, or 15
times the product (rounded down to the next whole
number) obtained by multiplying the total number of
shares of Holding Company Conversion Stock to be
issued by a fraction of which the numerator is the
amount of the Deposit Accounts of the Supplemental
Eligible Account Holder and the denominator is the
total amount of Deposit Accounts of all Supplemental
Eligible Account Holders in the Bank in each case on
the Supplemental Eligibility Record Date.
Subscription Rights received pursuant to
this Category shall be subordinated to all
Subscription Rights received by Eligible Account
Holders and Tax-Qualified Employee Plans pursuant to
Category Nos. 1 and 2 above.
Any non-transferable Subscription Rights to
purchase shares received by an Eligible Account
Holder in accordance with Category No. 1 shall reduce
to the extent thereof the Subscription Rights to be
distributed to such person pursuant to this Category.
In the event of an oversubscription for
shares under this Category, the shares available
shall be allocated first to permit each subscribing
Supplemental Eligible Account Holder, to the extent
possible, to purchase a number of shares
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sufficient to make his total allocation (including
the number of shares, if any, allocated in accordance
with Category No. 1) equal to 100 shares, and
thereafter among each subscribing Supplemental
Eligible Account Holder pro rata in the same
proportion that his Deposit Accounts bear to the
total Deposit Accounts of all subscribing
Supplemental Eligible Account Holders whose
subscriptions remain unsatisfied.
4. Preference Category No. 4: Other Members
Each Other Member shall receive
non-transferable Subscription Rights to subscribe for
shares of Holding Company Conversion Stock remaining
after satisfying the subscriptions provided for under
Category Nos. 1 through 3 above, subject to the
following conditions:
a. Each Other Member shall be entitled to
subscribe for an amount of shares equal to
the greater of $100,000, or one-tenth of one
percent (.10%) of the total offering of
Holding Company Conversion Stock, to the
extent that Holding Company Conversion Stock
is available.
b. In the event of an oversubscription for
shares under this Caterogy, the shares
available shall be allocated among the
subscribing Other Members pro rata in the
same proportion that his number of votes on
the Voting Record Date bears to the total
number of votes on the Voting Record Date of
all subscribing Other Members on such date.
Such number of votes shall be determined
based on the Bank's mutual charter and
bylaws in effect on the date of approval by
members of the Plan.
5. Preference Category No. 5: Directors, Officers and
Employees
Each director, Officer and employee of the
Bank as of the date of the commencement of the
Subscription Offering shall be entitled to receive
non-transferable Subscription Rights to purchase
shares of the Holding Company Conversion Stock to the
extent that shares are available after satisfying
subscriptions under Category Nos. 1 through 4 above.
The shares which may be purchased under this Category
are subject to the following conditions:
a. The total number of shares which may be
purchased under this Category may not exceed
25% of the number of shares of Holding
Company Conversion Stock.
b. The maximum amount of shares which may be
purchased under this Category by any Person
is $100,000 of Holding Company Conversion
Stock. In the event of an oversubscription
for shares under this Category, the shares
available shall be allocated pro rata among
all subscribers in this Category.
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C. Direct Community Offering and Public Offering
1. Any shares of Holding Company Conversion Stock not
subscribed for in the Subscription Offering may be
offered for sale in a Direct Community Offering. This
may involve an offering of all unsubscribed shares
directly to the general public with a preference to
those natural persons residing in the counties in
which the Bank has an office. The purchase price per
share to the general public in a Direct Community
Offering shall be the same as the Actual Subscription
Price. The Holding Company and the Bank may use an
investment banking firm or firms on a best efforts
basis to sell the unsubscribed shares in the
Subscription and Direct Community Offering. The
Holding Company and the Bank may pay a commission or
other fee to such investment banking firm or firms as
to the shares sold by such firm or firms in the
Subscription and Direct Community Offering and may
also reimburse such firm or firms for expenses
incurred in connection with the sale. The Holding
Company Conversion Stock will be offered and sold in
the Direct Community Offering, if any, in accordance
with applicable Department and FDIC regulations, so
as to achieve the widest distribution of the Holding
Company Conversion Stock. No person, by himself or
herself, or with an Associate or group of Persons
acting in concert, may subscribe for or purchase more
than $100,000 of Holding Company Conversion Stock in
the Direct Community Offering, if any. Further, the
Bank may limit total subscriptions under this Section
V.C.1 so as to assure that the number of shares
available for the Public Offering may be up to a
specified percentage of the number of shares of
Holding Company Conversion Stock. Finally, the Bank
may reserve shares offered in the Direct Community
Offering for sales to institutional investors.
In the event of an oversubscription for shares in the
Direct Community Offering, shares may be allocated
(to the extent shares remain available) first to
cover orders of natural persons residing in the
counties in which the Bank has an office, then to
cover the orders of any other person subscribing for
shares in the Direct Community Offering so that each
such person may receive 1,000 shares, and thereafter,
on a pro rata basis to such persons based on the
amount of their respective subscriptions.
The Bank and the Holding Company, in their sole
discretion, may reject subscriptions, in whole or in
part, received from any Person under this Section
V.C.1. Further, the Bank and the Holding Company may,
at their sole discretion, elect to forego a Direct
Community Offering and instead effect a Public
Offering as described below.
2. Any shares of Holding Company Conversion Stock not
sold in the Subscription Offering or in the Direct
Community Offering, if any, may then be sold through
the Underwriters to selected members of the general
public in the Public Offering. It is expected that
the Public Offering will commence as soon as
practicable after termination of the Subscription
Offering and the Direct Community Offering, if any.
The Bank and the Holding Company, in their sole
discretion, may reject any subscription, in whole or
in part, received in the Public Offering. The Public
Offering shall be completed within 45 days after the
termination of the Subscription
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Offering, unless such period is extended as provided
in Section IV hereof. No person, by himself or
herself, or with an Associate or group of Persons
acting in concert, may purchase more than $100,000 of
Holding Company Conversion Stock in the Public
Offering, if any.
3. If for any reason any shares remain unsold after the
Subscription Offering, Direct Community Offering, if
any, and Public Offering, if any, the Boards of
Directors of the Holding Company and the Bank will
seek to make other arrangements for the sale of the
remaining shares of Holding Company Conversion Stock.
Such other arrangements will be subject to the
approval of the Department and the FDIC, as
applicable, and to compliance with applicable
securities laws.
D. Additional Limitations Upon Purchases of Shares of Holding
Company Conversion Stock
The following additional limitations shall be imposed
on all purchases of Holding Company Conversion Stock in the
Conversion:
1. No Person, by himself or herself, or with an
Associate or group of Persons acting in concert, may
subscribe for or purchase in the Conversion a number
of shares of Holding Company Conversion Stock which
exceeds an amount of shares equal to $100,000. For
purposes of this paragraph, an Associate of a Person
does not include a Tax-Qualified or Non-Tax Qualified
Employee Plan in which the Person has a substantial
beneficial interest or serves as a trustee or in a
similar fiduciary capacity. Moreover, for purposes of
this paragraph, shares held by one or more
Tax-Qualified or Non-Tax Qualified Employee Plans
attributed to a Person shall not be aggregated with
shares purchased directly by or otherwise
attributable to that Person.
2. Directors and Officers and their Associates may not
purchase in all categories in the Conversion an
aggregate of more than 35% of the Holding Company
Conversion Stock. For purposes of this paragraph, an
Associate of a Person does not include any
Tax-Qualified Employee Plan. Moreover, any shares
attributable to the Officers and directors and their
Associates, but held by one or more Tax-Qualified
Employee Plans shall not be included in calculating
the number of shares which may be purchased under the
limitation in this paragraph.
3. The minimum number of shares of Holding Company
Conversion Stock that may be purchased by any Person
in the Conversion is 25 shares, provided sufficient
shares are available.
4. The Boards of Directors of the Holding Company and
the Bank may, in their sole discretion, increase the
maximum purchase limitation referred to in paragraph
1 of this subpart D, up to 9.99%, provided that
orders for shares exceeding 5% of the Holding Company
Conversion Stock offered in the Conversion shall not
exceed, in the aggregate, 10% of the Holding Company
Conversion Stock being offered in the Conversion.
Requests to purchase additional shares of Holding
Company Conversion Stock under this provision will be
allocated by the Boards of Directors on a pro rata
basis giving priority in accordance with the priority
rights set forth in this Section V.
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Depending upon market and financial conditions, the
Boards of Directors of the Holding Company and the Bank, with
the approval of the Department and the FDIC, as applicable,
and without further approval of the Members, may increase or
decrease any of the above purchase limitations.
For purposes of this Section V, the directors of the
Holding Company and the Bank shall not be deemed to be
Associates or a group acting in concert solely as a result of
their serving in such capacities.
Each Person purchasing Holding Company Conversion
Stock in the Conversion shall be deemed to confirm that such
purchase does not conflict with the above purchase
limitations.
E. Restrictions and Other Characteristics of Holding Company
Conversion Stock Being Sold
1. Transferability. Holding Company Conversion Stock
purchased by Persons other than directors and
Officers of the Holding Company or the Bank will be
transferable without restriction. Shares purchased by
directors or Officers shall not be sold or otherwise
disposed of for value for a period of one year from
the date of Conversion, except for any disposition of
such shares (i) following the death of the original
purchaser, or (ii) resulting from an exchange of
securities in a merger or acquisition approved by the
applicable regulatory authorities. Any transfers that
could result in a change in control of the Bank or
the Holding Company or result in the ownership by any
Person or group acting in concert of more than 10% of
any class of the Bank's or the Holding Company's
equity securities are subject to the prior approval
of the Department and the FDIC, as applicable.
The certificates representing shares of Holding
Company Conversion Stock issued to directors and
Officers shall bear a legend giving appropriate
notice of the one-year holding period restriction.
Appropriate instructions shall be given to the
transfer agent for such stock with respect to the
applicable restrictions relating to the transfer of
restricted stock. Any shares of common stock of the
Holding Company subsequently issued as a stock
dividend, stock split, or otherwise, with respect to
any such restricted stock, shall be subject to the
same holding period restrictions for Holding Company
or Bank directors and Officers as may be then
applicable to such restricted stock.
No director or Officer of the Holding Company or of
the Bank, or Associate of such a director or Officer,
shall purchase any outstanding shares of capital
stock of the Holding Company for a period of three
years following the Conversion without the prior
written approval of the Commissioner and, as
applicable, the FDIC, except through a broker or
dealer registered with the SEC or in a "negotiated
transaction" involving more than one percent of the
then-outstanding shares of common stock of the
Holding Company. As used herein, the term "negotiated
transaction" means a transaction in which the
securities are offered and the terms and arrangements
relating to any sale are arrived at through direct
communications between the seller or any Person
acting on its behalf and the purchaser or his
investment representative. The term "investment
representative" shall mean a professional
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investment advisor acting as agent for the purchaser
and independent of the seller and not acting on
behalf of the seller in connection with the
transaction.
2. Repurchase and Dividend Rights. Any cash dividend by
the Converted Bank or stock repurchase by the Holding
Company during the first three years following
Conversion will, to the extent required, be made in
accordance with Department and, to the extent
applicable, FDIC policies as in effect at the time of
such cash dividends or stock repurchase.
3. Voting Rights. After Conversion, holders of Deposit
Accounts will not have voting rights in the Bank or
the Holding Company. Exclusive voting rights as to
the Bank will be vested in the Holding Company, as
the sole stockholder of the Bank. Voting rights as to
the Holding Company will be held exclusively by its
stockholders.
F. Exercise of Subscription Rights; Order Forms
1. If the Subscription Offering occurs concurrently with
the solicitation of proxies for the Special Meeting,
the subscription prospectus and Order Form may be
sent to each Eligible Account Holder, Tax-Qualified
Employee Plan, Supplemental Eligible Account Holder,
Other Member, and director, Officer and employee at
their last known address as shown on the records of
the Bank. However, the Bank may, and if the
Subscription Offering commences after the Special
Meeting the Bank shall, furnish a subscription
prospectus and Order Form only to Eligible Account
Holders, Tax-Qualified Employee Plans, Supplemental
Eligible Account Holders, Other Members, and
directors, Officers and employees who have returned
to the Bank by a specified date prior to the
commencement of the Subscription Offering a post card
or other written communication requesting a
subscription prospectus and Order Form. In such
event, the Bank shall provide a postage-paid post
card for this purpose and make appropriate disclosure
in its proxy statement for the solicitation of
proxies to be voted at the Special Meeting and/or
letter sent in lieu of the proxy statement to those
Eligible Account Holders, Tax-Qualified Employee
Plans or Supplemental Eligible Account Holders who
are not Members on the Voting Record Date.
2. Each Order Form will be preceded or accompanied by a
subscription prospectus describing the Holding
Company and the Converted Bank and the shares of
Holding Company Conversion Stock being offered for
subscription and containing all other information
required by the Department, the FDIC or the SEC, or
necessary to enable Persons to make informed
investment decisions regarding the purchase of
Holding Company Conversion Stock.
3. The Order Forms (or accompanying instructions) used
for the Subscription Offering will contain, among
other things, the following:
(i) A clear and intelligible explanation of the
Subscription Rights granted under the Plan
to Eligible Account Holders, Tax-Qualified
Employee Plans, Supplemental Eligible
Account Holders, Other Members, and
directors, Officers and employees;
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(ii) A specified expiration date by which Order
Forms must be returned to and actually
received by the Bank or its representative
for purposes of exercising Subscription
Rights, which date will be not less than 20
days after the Order Forms are mailed by the
Bank;
(iii) The Maximum Subscription Price to be paid
for each share subscribed for when the Order
Form is returned;
(iv) A statement that 25 shares is the minimum
number of shares of Holding Company
Conversion Stock that may be subscribed for
under the Plan;
(v) A specifically designated blank space for
indicating the number of shares being
subscribed for;
(vi) A set of detailed instructions as to how to
complete the Order Form including a
statement as to the available alternative
methods of payment for the shares being
subscribed for;
(vii) Specifically designated blank spaces for
dating and signing the Order Form;
(viii) An acknowledgment that the subscriber has
received the subscription prospectus;
(ix) A statement of the consequences of failing
to properly complete and return the Order
Form, including a statement that the
Subscription Rights will expire on the
expiration date specified on the Order Form
unless such expiration date is extended by
the Holding Company and the Bank, and that
the Subscription Rights may be exercised
only by delivering the Order Form, properly
completed and executed, to the Bank or its
representative by the expiration date,
together with required payment of the
Maximum Subscription Price for all shares of
Holding Company Conversion Stock subscribed
for;
(x) A statement that the Subscription Rights are
non-transferable and that all shares of
Holding Company Conversion Stock subscribed
for upon exercise of Subscription Rights
must be purchased on behalf of the Person
exercising the Subscription Rights for his
own account; and
(xi) A statement that, after receipt by the Bank
or its representative, a subscription may
not be modified, withdrawn or canceled
without the consent of the Bank.
G. Method of Payment
Payment for all shares of Holding Company Conversion
Stock subscribed for, computed on the basis of the Maximum
Subscription Price, must accompany all completed Order Forms.
Payment may be made in cash (if presented in Person), by
check, or, if the
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subscriber has a Deposit Account in the Bank (including a
certificate of deposit), the subscriber may authorize the Bank
to charge the subscriber's Deposit Account.
If a subscriber authorizes the Bank to charge his or
her Deposit Account, the funds will continue to earn interest,
but may not be used by the subscriber until all Holding
Company Conversion Stock has been sold or the Plan is
terminated, whichever is earlier. The Bank will allow
subscribers to purchase shares by withdrawing funds from
certificate accounts without the assessment of early
withdrawal penalties with the exception of prepaid interest in
the form of promotional gifts. In the case of early withdrawal
of only a portion of such account, the certificate evidencing
such account shall be canceled if the remaining balance of the
account is less than the applicable minimum balance
requirement, in which event the remaining balance will earn
interest at the passbook rate. This waiver of the early
withdrawal penalty is applicable only to withdrawals made in
connection with the purchase of Holding Company Conversion
Stock under the Plan. Interest will also be paid, at not less
than the then-current passbook rate, on all orders paid in
cash, by check or money order, from the date payment is
received until consummation of the Conversion. Payments made
in cash, by check or money order will be placed by the Bank in
an escrow or other account established specifically for this
purpose.
In the event of an unfilled amount of any
subscription order, the Converted Bank will make an
appropriate refund or cancel an appropriate portion of the
related withdrawal authorization, after consummation of the
Conversion, including any difference between the Maximum
Subscription Price and the Actual Subscription Price (unless
subscribers are afforded the right to apply such difference to
the purchase of additional whole shares). If for any reason
the Conversion is not consummated, purchasers will have
refunded to them all payments made and all withdrawal
authorizations will be canceled in the case of subscription
payments authorized from Deposit Accounts at the Bank.
If any Tax-Qualified Employee Plans or
Non-Tax-Qualified Employee Plans subscribe for shares during
the Subscription Offering, such plans will not be required to
pay for the shares subscribed for at the time they subscribe,
but may pay for such shares of Holding Company Conversion
Stock subscribed for upon consummation of the Conversion. In
the event that, after the completion of the Subscription
Offering, the amount of shares to be issued is increased above
the maximum of the appraisal range included in the
subscription prospectus, the Tax Qualified and Non-Tax
Qualified Employee Plans shall be entitled to increase their
subscriptions by a percentage equal to the percentage increase
in the amount of shares to be issued above the maximum of the
appraisal range provided that such subscriptions shall
continue to be subject to applicable purchase limits and stock
allocation procedures.
H. Undelivered, Defective or Late Order Forms; Insufficient
Payment
The Boards of Directors of the Holding Company and
the Bank shall have the absolute right, in their sole
discretion, to reject any Order Form, including but not
limited to, any Order Forms which (i) are not delivered or are
returned by the United States Postal Service (or the addressee
cannot be located); (ii) are not received back by the Bank or
its representative, or are received after the expiration date
specified thereon; (iii) are defectively completed or
executed; (iv) are not accompanied by the total required
payment for the shares of Holding Company Conversion Stock
subscribed for (including cases in
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<PAGE>
which the subscribers' Deposit Accounts or certificate
accounts are insufficient to cover the authorized withdrawal
for the required payment); or (v) are submitted by or on
behalf of a Person whose representations the Boards of
Directors of the Holding Company and the Bank believe to be
false or who they otherwise believe, either alone or acting in
concert with others, is violating, evading or circumventing,
or intends to violate, evade or circumvent, the terms and
conditions of the Plan. In such event, the Subscription Rights
of the Person to whom such rights have been granted will not
be honored and will be treated as though such Person failed to
return the completed Order Form within the time period
specified therein. The Bank may, but will not be required to,
waive any irregularity relating to any Order Form or require
submission of corrected Order Forms or the remittance of full
payment for subscribed shares by such date as the Bank may
specify. The interpretation of the Holding Company and the
Bank of the terms and conditions of the Plan and of the proper
completion of the Order Form will be final, subject to the
authority of the Department and, if applicable, the FDIC.
I. Member in Non-Qualified States or in Foreign Countries
The Holding Company and the Bank will make reasonable
efforts to comply with the securities laws of all states in
the United States in which Persons entitled to subscribe for
Holding Company Conversion Stock pursuant to the Plan reside.
However, no shares will be offered or sold under the Plan to
any such Person who (1) resides in a foreign country or (2)
resides in a state of the United States in which a small
number of Persons otherwise eligible to subscribe for shares
under the Plan reside or as to which the Holding Company and
the Bank determine that compliance with the securities laws of
such state would be impracticable for reasons of cost or
otherwise, including, but not limited to, a requirement that
the Holding Company or the Bank or any of their Officers,
directors or employees register, under the securities laws of
such state, as a broker, dealer, salesman or agent. No
payments will be made in lieu of the granting of Subscription
Rights to any such Person.
VI. ORGANIZATION CERTIFICATE AND BYLAWS
A. As part of the Conversion, the Bank will take all appropriate
steps to amend its organization certificate to read in the
form of a stock savings institution articles of incorporation
as prescribed by the Department and, if applicable, the FDIC.
A copy of the proposed stock articles of incorporation is
available upon request. By their approval of the Plan, the
Members of the Bank will thereby approve and adopt such
articles of incorporation.
B. The Bank will also take appropriate steps to amend its bylaws
to read in the form prescribed by the Department and, if
applicable, the FDIC for a stock savings institution. A copy
of the proposed stock bylaws is available upon request.
C. The effective date of the adoption of the Bank's stock
articles of incorporation and bylaws shall be the date of the
issuance and sale of the Holding Company Conversion Stock as
specified by the Department and, as applicable, the FDIC.
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VII. HOLDING COMPANY ARTICLES OF INCORPORATION
A copy of the articles of incorporation of the Holding Company will be
made available to Members upon request.
VIII. DIRECTORS OF THE CONVERTED BANK
Each Person serving as a member of the Board of Directors of the Bank
at the time of the Conversion will thereupon become a director of the Converted
Bank.
IX. STOCK OPTION AND INCENTIVE PLAN AND RECOGNITION AND RETENTION PLAN
In order to provide an incentive for directors, Officers and employees
of the Holding Company and its subsidiaries (including the Converted Bank), the
Board of Directors of the Holding Company intends to adopt, subject to
shareholder approval, a stock option and incentive plan and a recognition and
retention plan following the Conversion.
X. CONTRIBUTIONS TO TAX-QUALIFIED EMPLOYEE PLANS
The Converted Bank and the Holding Company may in their discretion make
scheduled contributions to any Tax-Qualified Employee Plans, provided that any
such contributions which are for the acquisition of Holding Company Conversion
Stock, or the repayment of debt incurred for such an acquisition, do not cause
the Converted Bank to fail to meet its regulatory capital requirements.
XI. SECURITIES REGISTRATION AND MARKET MAKING
Promptly following the Conversion, the Holding Company will register
its stock with the SEC pursuant to the Exchange Act. In connection with the
registration, the Holding Company will undertake not to deregister such stock,
without the approval of the Department and, if applicable, the FDIC, for a
period of three years thereafter.
The Holding Company shall use its best efforts to encourage and assist
two or more market makers to establish and maintain a market for its common
stock promptly following Conversion. The Holding Company will also use its best
efforts to cause its common stock to be quoted on the Nasdaq System or to be
listed on a national or regional securities exchange.
XII. STATUS OF SAVINGS ACCOUNTS AND LOANS SUBSEQUENT TO CONVERSION
Each Deposit Account holder shall retain, without payment, a
withdrawable Deposit Account or Accounts in the Converted Bank, equal in amount
to the withdrawable value of such account holder's Deposit Account or Accounts
prior to Conversion. All Deposit Accounts will continue to be insured by the
SAIF up to the applicable limits of insurance coverage, and shall be subject to
the same terms and conditions (except as to voting and liquidation rights) as
such Deposit Account in the Bank at the time of the Conversion. All loans shall
retain the same status after Conversion as such loans had prior to Conversion.
XIII. LIQUIDATION ACCOUNT
For purposes of granting to Eligible Account Holders and Supplemental
Eligible Account Holders who continue to maintain Deposit Accounts at the
Converted Bank a priority in the event of a complete
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liquidation of the Converted Bank, the Converted Bank will, at the time of
Conversion, establish a liquidation account in an amount equal to the net worth
of the Bank as shown on its latest statement of financial condition contained in
the final offering circular used in connection with the Conversion. The creation
and maintenance of the liquidation account will not operate to restrict the use
or application of any of the regulatory capital accounts of the Converted Bank;
provided, however, that such regulatory capital accounts will not be voluntarily
reduced below the required dollar amount of the liquidation account. Each
Eligible Account Holder and Supplemental Eligible Account Holder shall, with
respect to the Deposit Account held, have a related inchoate interest in a
portion of the liquidation account balance ("subaccount balance").
The initial subaccount balance of a Deposit Account held by an Eligible
Account Holder and/or Supplemental Eligible Account Holder shall be determined
by multiplying the opening balance in the liquidation account by a fraction of
which the numerator is the amount of the Deposit Accounts on the Eligibility
Record Date and/or the Supplemental Eligibility Record Date and the denominator
is the total amount of the Deposit Accounts of all Eligible Account Holders and
Supplemental Eligible Account Holders on such record dates in the Bank. For
Deposit Accounts in existence at both dates, separate subaccounts shall be
determined on the basis of the deposit balance in such Deposit Accounts on such
record dates. Such initial subaccount balance shall not be increased, and it
shall be subject to downward adjustment as provided below.
If the deposit balance in any Deposit Account of an Eligible Account
Holder or Supplemental Eligible Account Holder at the close of business on any
annual closing date subsequent to the record date is less than the lesser of (i)
the deposit balance in such Deposit Account at the close of business on any
other annual closing date subsequent to the Eligibility Record Date or the
Supplemental Eligibility Record Date or (ii) the amount of the deposit balance
in such Deposit Account on the Eligibility Record Date or Supplemental
Eligibility Record Date, the subaccount balance shall be reduced in an amount
proportionate to the reduction in such deposit balance. In the event of a
downward adjustment, the subaccount balance shall not be subsequently increased,
notwithstanding any increase in the deposit balance of the related Deposit
Account. If all funds in such Deposit Account are withdrawn, the related
subaccount balance shall be reduced to zero.
In the event of a complete liquidation of the Converted Bank (and only
in such event), each Eligible Account Holder and Supplemental Eligible Account
Holder shall be entitled to receive a liquidation distribution from the
liquidation account in the amount of the then-current adjusted subaccount
balances for Deposit Accounts then held before any liquidation distribution may
be made to stockholders. No merger, consolidation, bulk purchase of assets with
assumptions of Deposit Accounts and other liabilities, or similar transactions
with another institution the accounts of which are insured by the SAIF, shall be
considered to be a complete liquidation. In such transactions, the liquidation
account shall be assumed by the surviving institution.
XIV. RESTRICTIONS ON ACQUISITION OF CONVERTED ASSOCIATION
Regulations of the Department and the FDIC limit acquisitions, and
offers to acquire, direct or indirect beneficial ownership of more than 10% of
any class of an equity security of the Converted Bank or the Holding Company. In
addition, consistent with the regulations of the Department and the FDIC, the
articles of incorporation of the Converted Bank shall provide that for a period
of five years following completion of the Conversion: (i) no Person (i.e., no
individual, group acting in concert, corporation, partnership, association,
joint stock company, trust, or unincorporated organization or similar company,
syndicate, or any other group formed for the purpose of acquiring, holding or
disposing of securities of an
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insured institution) shall directly or indirectly offer to acquire or acquire
beneficial ownership of more than 10% of any class of the Converted Bank's
equity securities. Shares beneficially owned in violation of this charter
provision shall not be counted as shares entitled to vote and shall not be voted
by any Person or counted as voting shares in connection with any matter
submitted to the shareholders for a vote. This limitation shall not apply to any
offer to acquire or acquisition of beneficial ownership of more than 10% of the
common stock of the Converted Bank by a corporation whose ownership is or will
be substantially the same as the ownership of the Converted Bank, provided that
(i) the offer or acquisition is made more than one year following the date of
completion of the Conversion; (ii) stockholders shall not be permitted to
cumulate their votes for elections of directors; and (iii) special meetings of
the stockholders relating to changes in control or amendment of the charter may
only be called by the Board of Directors.
XV. AMENDMENT OR TERMINATION OF PLAN
If necessary or desirable, the Plan may be amended at any time prior to
submission of the Plan and proxy materials to the Members by a two-thirds vote
of the respective Boards of Directors of the Holding Company and the Bank. After
submission of the Plan and proxy materials to the Members, the Plan may be
amended by a two-thirds vote of the respective Boards of Directors of the
Holding Company and the Bank only with the concurrence of the Department and the
FDIC, if applicable. In the event that the Bank determines that for tax purposes
or otherwise it is in the best interest of the Bank to convert from a mutual to
a stock institution without the concurrent formation of a holding company, the
Plan may be substantively amended, with Department and FDIC approval, if
applicable, in such respects as the Board of Directors of the Bank deems
appropriate to reflect such change from a holding company conversion to a direct
conversion. In the event the Plan is so amended, common stock of the Bank will
be substituted for Holding Company Conversion Stock in the Subscription, Direct
Community or Public Offerings, and subscribers will be resolicited as described
in Section V hereof. Any amendments to the Plan (including amendments to reflect
the elimination of the concurrent holding company formation) made after approval
by the Members with the concurrence of the Department and the FDIC, if
applicable, shall not necessitate further approval by the Members unless
otherwise required.
The Plan may be terminated by a two-thirds vote of the Bank's Board of
Directors at any time prior to the Special Meeting of Members, and at any time
following such Special Meeting with the concurrence of the Department and the
FDIC, if applicable. In its discretion, the Board of Directors of the Bank may
modify or terminate the Plan upon the order or with the approval of the
Department and the FDIC, if applicable, and without further approval by Members.
The Plan shall terminate if the sale of all shares of Holding Company Conversion
Stock is not completed within 24 months of the date of the Special Meeting. A
specific resolution approved by a majority of the Board of Directors of the Bank
is required in order for the Bank to terminate the Plan prior to the end of such
24-month period.
XVI. EXPENSES OF THE CONVERSION
The Holding Company and the Bank shall use their best efforts
to assure that expenses incurred by them in connection with the Conversion shall
be reasonable.
XVII. TAX RULING
Consummation of the Conversion is expressly conditioned upon prior
receipt of either a ruling of the United States Internal Revenue Service or an
opinion of tax counsel with respect to federal taxation, and either a ruling of
the Texas taxation authorities or an opinion of tax counsel or other tax advisor
with respect
P18
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to Texas taxation, to the effect that consummation of the transactions
contemplated herein will not be taxable to the Holding Company or the Converted
Bank.
XVIII. EXTENSION OF CREDIT FOR PURCHASE OF STOCK
The Bank may not knowingly loan funds or otherwise extend credit to any
Person to purchase in the Conversion shares of Holding Company Conversion Stock.
P19
EXHIBIT 3.1
ARTICLES OF INCORPORATION
OF
CBCT BANCSHARES, INC.
The Undersigned, Brad M. Hurta, whose address is 312 Main Street,
Smithville, Texas, being at least 18 years of age, acting as sole incorporator,
does hereby form a corporation under the General Laws of the State of Maryland
having the following Articles:
ARTICLE 1. Name. The name of the corporation is CBCT Bancshares, Inc.
(herein the "Corporation").
ARTICLE 2. Principal Office. The address of the principal office of the
Corporation in the State of Maryland is c/o The Corporation Trust Incorporated,
300 East Lombard Street, Baltimore, Maryland 21202.
ARTICLE 3. Purpose. The purpose of the Corporation is to engage in any
lawful act or activity for which the corporation may be organized under the
General Corporation Law of the State of Maryland (the "MGCL").
ARTICLE 4. Resident Agent. The name and address of the registered agent
of the Corporation in the State of Maryland is The Corporation Trust
Incorporated, 300 East Lombard Street, Baltimore, Maryland 21202. Said resident
agent is a Maryland corporation.
ARTICLE 5. Initial Directors. The number of directors constituting the
initial board of directors of the Corporation is seven, which number may be
increased or decreased pursuant to the Bylaws of the Corporation and ARTICLE 9
of the Articles of Incorporation, but shall never be less than the minimum
number permitted by the MGCL now or hereafter in force. The names of the persons
who are to serve as directors until their successors are elected and qualified,
are:
Name Term to Expire in
Georgina Chronis 2002
James A. Cowan 2001
Gordon N. Fowler 2003
Barry Hannah 2003
Brad M. Hurta 2003
Rodney E. Langer 2002
Mike C. Maney 2001
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ARTICLE 6.
Capital Stock. The total number of shares of capital stock which the
Corporation shall have the authority to issue is five million (5,000,000) shares
consisting of:
1. One million (1,000,000) shares of preferred stock, par value one
cent ($.0l) per share (the "Preferred Stock"); and
2. Four million (4,000,000) shares of common stock, par value one cent
($.0l) per share (the "Common Stock").
The aggregate par value of all the authorized of capital stock is fifty
thousand dollars ($50,000). Except to the extent required by governing law, rule
or regulation, the shares of capital stock may be issued from time to time by
the Board of Directors without further approval of the stockholders of the
Corporation. The Corporation shall have the authority to purchase its capital
stock out of funds lawfully available therefore which funds shall include,
without limitation, the Corporation's unreserved and unrestricted capital
surplus.
B. Preferred Stock. The Board of Directors is hereby expressly
authorized, subject to any limitations prescribed by law, to provide for the
issuance of the shares of Preferred Stock in series, to establish from time to
time the number of shares to be included in each such series, and to fix the
designation, powers, preferences and rights of the shares of each such series
and any qualifications, limitations or restrictions thereof. The number of
authorized shares of the Preferred Stock may be increased or decreased (but not
below the number of shares thereof then outstanding) by the affirmative vote of
the holders of a majority of the Common Stock, without a vote of the holders of
the Preferred Stock, or of any series thereof, unless a vote of any such holders
is required pursuant to the terms of the Preferred Stock.
C. Common Stock. Except as provided for in the Articles of
Incorporation (or any resolution or resolutions adopted by the Board of
Directors pursuant hereto) the exclusive voting power shall be vested in the
Common Stock, the holders thereof being entitled to one vote for each share of
such Common Stock standing in the holder's name on the books of the Corporation.
Subject to any rights and preferences of any class of stock having preferences
over the Common Stock, holders of Common Stock shall be entitled to such
dividends as may be declared by the Board of Directors out of funds lawfully
available therefor. Upon any liquidation, dissolution or winding up of the
affairs of the Corporation, whether voluntary or involuntary, holders of Common
Stock shall be entitled to receive pro rata the remaining assets of the
Corporation after payment or provision for payment of all debts and liabilities
of the Corporation and payment or provision for payment of any amounts owed to
the holders of any class of stock having preference over the Common Stock on
distributions on liquidation, dissolution or winding up of the Corporation.
D. Restrictions on Voting Rights of the Corporation's Equity
Securities.
1. Notwithstanding any other provision of these Articles of
Incorporation, in no event shall any record owner of any outstanding
Common Stock which is beneficially
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owned, directly or indirectly, by a person who, as of any record date
for the determination of stockholders entitled to vote on any matter,
beneficially owns in excess of 10% of the then-outstanding shares of
Common Stock (the "Limit"), be entitled, or permitted to any vote in
respect of the shares held in excess of the Limit. The number of votes
which may be cast by any record owner by virtue of the provisions
hereof in respect of Common Stock beneficially owned by such person
owning shares in excess of the Limit shall be a number equal to the
total number of votes which a single record owner of all Common Stock
owned by such person would be entitled to cast, multiplied by a
fraction, the numerator of which is the number of shares of such class
or series beneficially owned by such person and owned of record by such
record owner and the denominator of which is the total number of shares
of Common Stock beneficially owned by such person owning shares in
excess of the Limit.
2. The following definitions shall apply to this Section D of
this Article.
(a) An "affiliate" of a specified person shall mean a
person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under
common control with, the person specified.
(b) "Beneficial ownership" shall be determined
pursuant to Rule 13d-3 of the General Rules and Regulations
under the Securities Exchange Act of 1934 (or any successor
rule or statutory provision), or, if said Rule 13d-3 shall be
rescinded and there shall be no successor rule or statutory
provision thereto, pursuant to said Rule 13d-3 as in effect on
December 31, 1999; Provided, however, that a person shall, in
any event, also be deemed the "beneficial owner" of any Common
Stock:
(1) which such person or any of its
affiliates beneficially owns, directly or indirectly;
or
(2) which such person or any of its
affiliates has (i) the right to acquire (whether such
right is exercisable immediately or only after the
passage of time), pursuant to any agreement,
arrangement or understanding (but shall not be deemed
to be the beneficial owner of any voting shares
solely by reason of an agreement, contract, or other
arrangement with this Corporation to effect any
transaction which is described in any one or more of
the clauses of Section A of ARTICLE 10) or upon the
exercise of conversion rights, exchange rights,
warrants, or options or otherwise, or (ii) sole or
shared voting or investment power with respect
thereto pursuant to any agreement, arrangement,
understanding, relationship or otherwise (but shall
not be deemed to be the beneficial owner of any
voting shares solely by reason of a revocable proxy
granted for a particular meeting of stockholders,
pursuant to a public solicitation of proxies for such
meeting, with respect to shares of which neither such
person nor any such affiliate is otherwise deemed the
beneficial owner), or
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<PAGE>
(3) which are beneficially owned, directly
or indirectly, by any other person with which such
first mentioned person or any of its affiliates acts
as a partnership, limited partnership, syndicate or
other group pursuant to any agreement, arrangement or
understanding for the purpose of acquiring, holding,
voting or disposing of any shares of capital stock of
this Corporation;
and provided further, however, that (1) no director or officer
of this Corporation (or any affiliate of any such director or
officer) shall, solely by reason of any or all of such
directors or officers acting in their capacities as such, be
deemed, for any purposes hereof, to beneficially own any
Common Stock beneficially owned by any other such director or
officer (or any affiliate thereof), and (2) neither any
employee stock ownership or similar plan of this Corporation
or any subsidiary of this Corporation nor any trustee with
respect thereto (or any affiliate of such trustee) shall,
solely by reason of such capacity of such trustee, be deemed,
for any purposes hereof, to beneficially own any Common Stock
held under any such plan. For purposes of computing the
percentage beneficial ownership of Common Stock of a person,
the outstanding Common Stock shall include shares deemed owned
by such person through application of this subsection but
shall not include any other Common Stock which may be issuable
by this Corporation pursuant to any agreement, or upon
exercise of conversion rights, warrants or options, or
otherwise. For all other purposes, the outstanding Common
Stock shall include only Common Stock then outstanding and
shall not include any Common Stock which may be issuable by
this Corporation pursuant to any agreement, or upon the
exercise of conversion rights, warrants or options, or
otherwise.
(c) A "Person" shall mean any individual, firm,
corporation, or other entity.
(d) The Board of Directors shall have the power to
construe and apply the provisions of this section and to make
all determinations necessary or desirable to implement such
provisions, including but not limited to matters with respect
to (1) the number of shares of Common Stock beneficially owned
by any person, (2) whether a person is an affiliate of
another, (3) whether a person has an agreement, arrangement,
or understanding with another as to the matters referred to in
the definition of beneficial ownership, (4) the application of
any other definition or operative provision of this Section to
the given facts, or (5) any other matter relating to the
applicability or effect of this Section.
3. The Board of Directors shall have the right to demand that
any person who is reasonably believed to beneficially own Common Stock
in excess of the Limit (or holds of record Common Stock beneficially
owned by any person in excess of the Limit) (a "Holder in Excess")
supply the Corporation with complete information as to (a) the record
owner(s) of all shares beneficially owned by such Holder in Excess, and
(b) any other factual matter relating to the applicability or effect of
this section as may reasonably be requested
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<PAGE>
of such Holder in Excess. The Board of Directors shall further have the
right to receive from any Holder in Excess reimbursement for all
expenses incurred by the Board in connection with its investigation of
any matters relating to the applicability or effect of this section on
such Holder in Excess, to the extent such investigation is deemed
appropriate by the Board of Directors as a result of the Holder in
Excess refusing to supply the Corporation with the information
described in the previous sentence.
4. Except as otherwise provided by law or expressly provided
in this Section D, the presence, in person or by proxy, of the holders
of record of shares of capital stock of the Corporation entitling the
holders thereof to cast one-third of the votes (after giving effect, if
required, to the provisions of this Section) entitled to be cast by the
holders of shares of capital stock of the Corporation entitled to vote
shall constitute a quorum at all meetings of the stockholders, and
every reference in these Articles of Incorporation to a majority or
other proportion of capital stock (or the holders thereof) for purposes
of determining any quorum requirement or any requirement for
stockholder consent or approval shall be deemed to refer to such
majority or other proportion of the votes (or the holders thereof) then
entitled to be cast in respect of such capital stock.
5. Any constructions, applications, or determinations made by
the Board of Directors, pursuant to this Section in good faith and on
the basis of such information and assistance as was then reasonably
available for such purpose, shall be conclusive and binding upon the
Corporation and its stockholders.
6. In the event any provision (or portion thereof) of this
Section D shall be found to be invalid, prohibited or unenforceable for
any reason, the remaining provisions (or portions thereof) of this
Section shall remain in full force and effect, and shall be construed
as if such invalid, prohibited or unenforceable provision had been
stricken herefrom or otherwise rendered inapplicable, it being the
intent of this Corporation and its stockholders that each such
remaining provision (or portion thereof) of this Section D remain, to
the fullest extent permitted by law, applicable and enforceable as to
all stockholders, including stockholders owning an amount of stock over
the Limit, notwithstanding any such finding.
E. Voting Rights of Certain Control Shares. Notwithstanding
any contrary provision of law, the provisions of Subtitle 7 of Title 3 of the
MGCL, now or hereafter in force, shall not apply to the voting rights of the
Common Stock of the Corporation as to all existing and future holders of Common
Stock of the Corporation.
F. Majority Vote. Notwithstanding any provision of law
requiring the authorization of any action by a greater proportion than a
majority of the total number of shares of all classes of capital stock or of the
total number of shares of any class of capital stock, such action shall be valid
and effective if authorized by the affirmative vote of the holders of a majority
of the total number of shares of all classes outstanding and entitled to vote
thereon, except as otherwise provided in the Articles of Incorporation.
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<PAGE>
ARTICLE 7. Preemptive Rights. No holder of the capital stock of the
Corporation or series of stock or of options, warrants or other rights to
purchase shares of any class or series of stock or of other securities of the
Corporation shall have any preemptive right to purchase or subscribe for any
unissued capital stock of any class or series, or any unissued bonds,
certificates of indebtedness, debentures or other securities convertible into or
exchangeable for capital stock of any class or series or carrying any right to
purchase stock of any class or series.
ARTICLE 8. Directors.
A. Management of the Corporation. The business and affairs of
the Corporation shall be managed by or under the direction of the Board of
Directors. In addition to the powers and authority expressly conferred upon them
by Statute or by the Articles of Incorporation or the Bylaws of the Corporation,
the directors are hereby empowered to exercise all such powers and do all such
acts and things as may be exercised or done by the Corporation.
B. Number, Class and Terms of Directors; Cumulative Voting.
The number of directors shall be fixed from time to time exclusively by the
Board of Directors pursuant to a resolution adopted by a majority of the Board.
The directors, other than those who may be elected by the holders of any class
or series of Preferred Stock, shall be divided into three classes, as nearly
equal in number as reasonably possible, with the term of office of the first
class to expire at the conclusion of the first annual meeting of stockholders,
the term of office of the second class to expire at the conclusion of the annual
meeting of stockholders one year thereafter and the term of office of the third
class to expire at the conclusion of the annual meeting of stockholders two
years thereafter, with each director to hold office until his or her successor
shall have been duly elected and qualified. At each annual meeting of
stockholders, directors elected to succeed those directors whose terms expire
shall be elected for a term of office to expire at the third succeeding annual
meeting of stockholders after their election, with each director to hold office
until his or her successor shall have been duly elected and qualified.
Stockholders shall not be permitted to cumulate their votes in the election of
directors.
C. Vacancies. Subject to the rights of the holders of any
series of Preferred Stock then outstanding, newly created directorships
resulting from any increase in the authorized number of directors or any
vacancies on the Board of Directors resulting from death, resignation,
retirement, disqualification, removal from office or other cause shall be filled
only by a majority vote of the directors then in office, though less than a
quorum. A director so chosen by the remaining directors shall hold office until
the next succeeding annual meeting of stockholders, at which time the
stockholders shall elect a director to hold office for the balance of the term
then remaining. No decrease in the number of directors constituting the Board of
Directors shall shorten the term of any incumbent director.
D. Removal. Subject to the rights of the holders of any series
of Preferred Stock then outstanding, any directors, or the entire Board of
Directors, may be removed from office at any time, but only for cause and then
only by the affirmative vote of the holders of at least 80% of the combined
voting power of all of the then-outstanding shares of capital stock of the
Corporation
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<PAGE>
entitled to vote generally in the election of directors (after giving effect to
the provisions of ARTICLE 6 of the Articles of Incorporation) voting together as
a single class.
E. Stockholder Proposals and Nominations of Directors. For any
stockholder proposal to be presented in connection with an annual meeting of
stockholders of the Corporation, including any nomination or proposal relating
to the nomination of a director to be elected to the Board of Directors of the
Corporation, the stockholder must have given timely written notice thereof to
the Secretary of the Corporation in the manner and containing the information
required by the Bylaws of the Corporation. Stockholder proposals to be presented
in connection with a special meeting of stockholders will be presented by the
Corporation only to the extent required by Section 2-502 of the MGCL and the
Bylaws of the Corporation.
ARTICLE 9. Bylaws. The Board of Directors is expressly empowered to
adopt, amend or repeal the Bylaws of the Corporation. Any adoption, amendment or
repeal of the Bylaws of the Corporation by the Board of Directors shall require
the approval of a majority of the total number of directors which the
Corporation would have if there were no vacancies on the Board of Directors. The
stockholders shall also have power to adopt, amend or repeal the Bylaws of the
Corporation. In addition to any vote of the holders of any class or series of
stock of this Corporation required by law or by the Articles of Incorporation,
the affirmative vote of the holders of at least 80% of the voting power of all
of the then-outstanding shares of the capital stock of the Corporation entitled
to vote generally in the election of directors (after giving effect to the
provisions of ARTICLE 6 hereof), voting together as a single class, shall be
required to adopt, amend or repeal any provisions of the Bylaws of the
Corporation.
ARTICLE 10. Approval of Certain Business Combinations.
A. Super-majority Voting Requirement; Business Combination
Defined. In addition to any affirmative vote required by law or the Articles of
Incorporation, and except as otherwise expressly provided in this Section:
1. any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with (a) any Interested Stockholder
(as hereinafter defined) or (b) any other corporation (whether or not
itself an Interested Stockholder) which is, or after such merger or
consolidation would be, an Affiliate (as hereinafter defined) of an
Interested Stockholder; or
2. any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of transactions) to
or with any Interested Stockholder, or any Affiliate of any Interested
Stockholder, of any assets of the Corporation or any Subsidiary having
an aggregate Fair Market Value (as hereafter defined) equaling or
exceeding 25% or more of the combined assets of the Corporation and its
Subsidiaries, or
3. the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or a series of transactions) of any
securities of the Corporation or any Subsidiary to any Interested
Stockholder or any Affiliate of any Interested Stockholder in exchange
for
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<PAGE>
cash, securities or other property (or a combination thereof) having an
aggregate Fair Market Value equaling or exceeding 25% of the combined
assets of the Corporation and its Subsidiaries except pursuant to an
employee benefit plan of the Corporation or any Subsidiary thereof; or
4. the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation proposed by or on behalf of any
Interested Stockholder or any Affiliate of any Interested Stockholder;
or
5. any reclassification of securities (including any reverse
stock split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any
other transaction (whether or not with or into or otherwise involving
an Interested Stockholder) which has the effect, directly or
indirectly, of increasing the proportionate share of the outstanding
shares of any class of equity or convertible securities of the
Corporation or any Subsidiary which is directly or indirectly owned by
any Interested Stockholder or any Affiliate of any Interested
Stockholder (a "Disproportionate Transaction"); provided, however, that
no such transaction shall be deemed a Disproportionate Transaction if
the increase in the proportionate ownership of the Interested
Stockholder or Affiliate as a result of such transaction is no greater
than the increase experienced by the other stockholders generally;
shall require the affirmative vote of the holders of at least 80% of the voting
power of the then-outstanding shares of stock of the Corporation entitled to
vote in the election of directors (the "Voting Stock"), voting together as a
single class. Such affirmative vote shall be required notwithstanding the fact
that no vote may be required, or that a lesser percentage may be specified, by
law or by any other provisions of the Articles of Incorporation or any Preferred
Stock or in any agreement with any national securities exchange or quotation
system or otherwise.
The term "Business Combination" as used in this Article shall
mean any transaction which is referred to in any one or more of paragraphs 1
through 5 of Section A of this Article.
B. Exception to Super-majority Voting Requirement. The
provisions of Section A of this Article shall not be applicable to any
particular Business Combination, and such Business Combination shall require
only the affirmative vote of the majority of the outstanding shares of capital
stock entitled to vote, or such vote as is required by law or by the Articles of
Incorporation, if, in the case of any Business Combination that does not involve
any cash or other consideration being received by the stockholders of the
Corporation solely in their capacity as stockholders of the Corporation, the
condition specified in the following paragraph 1 is met or, in the case of any
other Business Combination, all of the conditions specified in either of the
following paragraphs 1 and 2 are met:
1. The Business Combination shall have been approved by a
majority of the Disinterested Directors (as hereinafter defined).
2. All of the following conditions shall have been met:
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(a) The aggregate amount of the cash and the Fair
Market Value as of the date of the consummation of the
Business Combination of consideration other than cash to be
received per share by the holders of Common Stock in such
Business Combination shall at least be equal to the higher of
the following:
(i) (if applicable) the Highest Per Share
Price, including any brokerage commissions, transfer
taxes and soliciting dealers' fees, paid by the
Interested Stockholder or any of its Affiliates for
any shares of Common stock acquired by it (i) within
the two-year period immediately prior to the first
public announcement of the proposal of the Business
Combination (the "Announcement Date"), or (ii) in the
transaction in which it became an Interested
Stockholder, whichever is higher.
(ii) the Fair Market Value per share of
Common Stock on the Announcement Date or on the date
on which the Interested Stockholder became an
Interested Stockholder (such latter date is referred
to in this Article as the "Determination Date"),
whichever is higher.
(b) The aggregate amount of the cash and the Fair
Market Value as of the date of the consummation of the
Business Combination or consideration other than cash to be
received per share by holders of shares of any class of
outstanding Voting Stock other than Common Stock shall be at
least equal to the highest of the following (it being intended
that the requirements of this subparagraph (b) shall be
required to be met with respect to every such class of
outstanding Voting Stock, whether or not the Interested
Stockholder has previously acquired any shares of a particular
class of Voting Stock):
(i) (if applicable) the Highest Per Share
Price (as hereinafter defined), including any
brokerage commissions, transfer taxes and soliciting
dealers' fees, paid by the Interested Stockholder for
any shares of such class of Voting Stock acquired by
it (i) within the two-year period immediately prior
to the Announcement Date, or (ii) in the transaction
in which it became an Interested Stockholder,
whichever is higher;
(ii) (if applicable) the highest
preferential amount per share to which the holders of
shares of such class of Voting Stock are entitled in
the event of any voluntary or involuntary
liquidation, dissolution or winding up of the
Corporation; and
(iii) the Fair Market Value per share of
such class of Voting Stock on the Announcement Date
or on the Determination Date, whichever is higher.
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(c) The consideration to be received by holders of a
particular class of outstanding Voting Stock (including Common
Stock) shall be in cash or in the same form as the Interested
Stockholder has previously paid for shares of such class of
Voting Stock. If the Interested Stockholder has paid for
shares of any class of Voting Stock with varying forms of
consideration, the form of consideration to be received per
share by holders of shares of such class of Voting Stock shall
be either cash or the form used to acquire the largest number
of shares of such class of Voting Stock previously acquired by
the Interested Stockholder. The price determined in accordance
with Section B.2. of this Article shall be subject to
appropriate adjustment in the event of any stock dividend,
stock split, combination of shares or similar event.
(d) After such Interested Stockholder has become an
Interested Stockholder and prior to the consummation of such
Business Combination; (i) except as approved by a majority of
the Disinterested Directors, there shall have been no failure
to declare and pay at the regular date therefor any full
quarterly dividends (whether or not cumulative) on any
outstanding stock having preference over the Common Stock as
to dividends or liquidation; (ii) there shall have been (X) no
reduction in the annual rate of dividends paid on the Common
Stock (except as necessary to reflect any subdivision of the
Common Stock), except as approved by a majority of the
Disinterested Directors, and (Y) an increase in such annual
rate of dividends as necessary to reflect any reclassification
(including any reverse stock split), recapitalization,
reorganization or any similar transaction which has the effect
of reducing the number of outstanding shares of Common Stock,
unless the failure to so increase such annual rate is approved
by a majority of the Disinterested Directors; and (iii)
neither such Interested Stockholder nor any of its Affiliates
shall have become the beneficial owner of any additional
shares of Voting Stock except as part of the transaction which
results in such Interested Stockholder becoming an Interested
Stockholder.
(e) After such Interested Stockholder has become an
Interested Stockholder, such Interested Stockholder shall not
have received the benefit, directly or indirectly (except
proportionately as a stockholder), of any loans, advances,
guarantees, pledges or other financial assistance or any tax
credits or other tax advantages provided by the Corporation,
whether in anticipation of or in connection with such Business
Combination or otherwise.
(f) A proxy or information statement describing the
proposed Business Combination and complying with the
requirements of the Securities Exchange Act of 1934 and the
rules and regulations thereunder (or any subsequent provisions
replacing such Act, rules or regulations) shall be mailed to
stockholders of the Corporation at least 30 days prior to the
consummation of such Business Combination (whether or not such
proxy or information statement is required to be mailed
pursuant to such Act or subsequent provisions).
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C. Certain Definitions. For the purposes of this Article:
1. A "Person" shall include an individual, a group acting in
concert, a corporation, a partnership, an association, a joint venture,
a pool, a joint stock company, a trust, an unincorporated organization
or similar company, a syndicate or any other group formed for the
purpose of acquiring, holding or disposing of securities.
2. "Interested Stockholder" shall mean any Person (other than
the Corporation or any holding company or Subsidiary thereof) who or
which:
(a) is the beneficial owner, directly or indirectly,
of more than 10% of the voting power of the outstanding Voting
Stock; or
(b) is an Affiliate of the Corporation and at any
time within the two-year period immediately prior to the date
in question was the beneficial owner, directly or indirectly,
of 10% or more of the voting power of the then-outstanding
Voting Stock; or
(c) is an assignee of or has otherwise succeeded to
any shares of Voting Stock which were at any time within the
two-year period immediately prior to the date in question
beneficially owned by any Interested Stockholder, if such
assignment or succession shall have occurred in the course of
a transaction or series of transactions not involving a public
offering within the meaning of the Securities Act of 1933.
3. A Person shall be a "beneficial owner" of any Voting Stock:
(a) which such Person or any of its Affiliates or
Associates (as hereinafter defined) beneficially owns,
directly or indirectly within the meaning of Rule 13d-3 under
the Securities Exchange Act of 1934, as in effect on December
31, 1999; or
(b) which such Person or any of its Affiliates or
Associates has (i) the right to acquire (whether such right is
exercisable immediately or only after the passage of time),
pursuant to any agreement, arrangement or understanding or
upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise, or (ii) the right to vote
pursuant to any agreement, arrangement or understanding (but
neither such Person nor any such Affiliate or Associate shall
be deemed to be the beneficial owner of any shares of Voting
Stock solely by reason of a revocable proxy granted for a
particular meeting of stockholders, pursuant to a public
solicitation of proxies for such meeting, and with respect to
which shares neither such Person nor any such Affiliate or
Associate is otherwise deemed the beneficial owner); or
(c) which are beneficially owned, directly or
indirectly within the meaning of Rule 13d-3 under the
Securities Exchange Act of 1934, as in effect on December 31,
1999, by any other Person with which such Person or any of its
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Affiliates or Associates has any agreement, arrangement or
understanding for the purposes of acquiring, holding, voting
(other than solely by reason of a revocable proxy as described
in Subparagraph (b) of this Paragraph 3) or in disposing of
any shares of Voting Stock;
provided, however, that, in the case of any employee stock ownership or
similar plan of the Corporation or of any Subsidiary in which the
beneficiaries thereof possess the right to vote any shares of Voting
Stock held by such plan, no such plan nor any trustee with respect
thereto (nor any Affiliate of such trustee), solely by reason of such
capacity of such trustee, shall be deemed, for any purposes hereof, to
beneficially own any shares of Voting Stock held under any such plan.
4. For the purpose of determining whether a Person is an
Interested Stockholder pursuant to Section C.2., the number of shares
of Voting Stock deemed to be outstanding shall include shares deemed
owned through application of this Section C.3. but shall not include
any other shares of Voting Stock which may be issuable pursuant to any
agreement, arrangement or understanding, or upon exercise of conversion
rights, warrants or options, or otherwise.
5. "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as in effect on
December 31, 1999.
6. "Subsidiary" means any corporation of which a majority of
any class of equity security is owned, directly or indirectly, by the
Corporation; Provided, however, that for the purposes of the definition
of Interested Stockholder set forth in this Section C.2., the term
"Subsidiary" shall mean only a corporation of which a majority of each
class of equity security is owned, directly or indirectly, by the
Corporation.
7. "Disinterested Director" means any member of the Board of
Directors who is unaffiliated with the Interested Stockholder and was a
member of the Board of Directors prior to the time that the Interested
Stockholder became an Interested Stockholder, and any director who is
thereafter chosen to fill any vacancy on the Board of Directors or who
is elected and who, in either event, is unaffiliated with the
Interested Stockholder, and in connection with his or her initial
assumption of office is recommended for appointment or election by a
majority of Disinterested Directors then on the Board of Directors.
8. "Fair Market Value" means: (a) in the case of stock, the
highest closing sales price of the stock during the 30-day period
immediately preceding the date in question of a share of such stock on
the Nasdaq System or any system then in use, or, if such stock is
admitted to trading on a principal United States securities exchange
registered under the Securities Exchange Act of 1934, Fair Market Value
shall be the highest sale price reported during the 30-day period
preceding the date in question, or, if no such quotations are
available, the Fair Market Value on the date in question of a share of
such stock as determined by the Board of Directors in good faith, in
each case with respect to any class of
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stock, appropriately adjusted for any dividend or distribution in
shares of such stock or in combination or reclassification of
outstanding shares of such stock into a smaller number of shares of
such stock, and (b) in the case of property other than cash or stock,
the Fair Market Value of such property on the date in question as
determined by the Board of Directors in good faith.
9. Reference to "Highest Per Share Price" shall in each case
with respect to any class of stock reflect an appropriate adjustment
for any dividend or distribution in shares of such stock or any stock
split or reclassification of outstanding shares of such stock into a
greater number of shares of such stock or any combination or
reclassification of outstanding shares of such stock into a smaller
number of shares of such stock.
10. In the event of any Business Combination in which the
Corporation survives, the phrase "consideration other than cash to be
received" as used in Sections B.2.(a) and B.2.(b) of this ARTICLE 10
shall include the shares of Common Stock and/or the shares of any other
class of outstanding Voting Stock retained by the holders of such
shares.
D. Construction and Interpretation. A majority of the
Disinterested Directors of the Corporation shall have the power and duty to
determine for the purposes of this Article, on the basis of information known to
them after reasonable inquiry, (a) whether a person is an Interested
Stockholder; (b) the number of shares of Voting Stock beneficially owned by any
person; (c) whether a person is an Affiliate or Associate of another; and (d)
whether the assets which are the subject of any Business Combination have, or
the consideration to be received for the issuance or transfer of securities by
the Corporation or any Subsidiary in any Business Combination has, an aggregate
Fair Market Value equaling or exceeding 25% of the combined assets of the
Corporation and its Subsidiaries. A majority of the Disinterested Directors
shall have the further power to interpret all of the terms and provisions of
this Article.
E. Fiduciary Duty. Nothing contained in this Article shall be
construed to relieve any Interested Stockholder from any fiduciary obligation
imposed by law.
F. Maryland Business Combination Statute. Notwithstanding any
contrary provision of law, the provisions of Sections 3-601 through 3-604 of the
MGCL, as now and hereafter in force, shall not apply to any business combination
(as defined in Section 3-601(e) of the MGCL, as now and hereafter in force), of
the Corporation.
ARTICLE 11. Evaluation of Certain Offers. The Board of Directors of the
Corporation, when evaluating any offer of another Person (as defined in ARTICLE
10 hereof) to (A) make a tender or exchange offer for any equity security of the
Corporation, (B) merge or consolidate the Corporation with another corporation
or entity, or (C) purchase or otherwise acquire all or substantially all of the
properties and assets of the Corporation, may, in connection with the exercise
of its judgment in determining what is in the best interest of the Corporation
and its stockholders, give due consideration to all relevant factors, including,
without limitation, the social and economic effect of acceptance of such offer
on the Corporation's present and future customers and employees and those of its
Subsidiaries (as defined in ARTICLE 10 hereof); on the communities in which the
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Corporation and its Subsidiaries operate or are located; on the ability of the
Corporation to fulfill its corporate objectives as a financial institution
holding company and on the ability of its subsidiary financial institution to
fulfill the objectives of a federally insured financial institution under
applicable statutes and regulations.
ARTICLE 12. Indemnification, etc. of Directors and Officers.
A. Indemnification. The Corporation shall indemnify (1) its
current and former directors and officers, whether serving the Corporation or at
its request any other entity, to the fullest extent required or permitted by the
MGCL now or hereafter in force (but, in the case of any amendment, only to the
extent that such amendment permits the Corporation to provide broader
indemnification rights than such law permitted the Corporation to provide prior
to such amendment), including the advancement of expenses under the procedures
and to the fullest extent permitted by law, and (2) other employees and agents
to such extent as shall be authorized by the Board of Directors and permitted by
law; provided, however, that, except as provided in Section B hereof with
respect to proceedings to enforce rights to indemnification, the Corporation
shall indemnify any such indemnitee in connection with a proceeding (or part
thereof) initiated by such indemnitee only if such proceeding (or part thereof)
was authorized by the Board of Directors of the Corporation.
B. Procedure. If a claim under Section A of this Article is
not paid in full by the Corporation within 60 days after a written claim has
been received by the Corporation, except in the case of a claim for an
advancement of expenses, in which case the applicable period shall be 20 days,
the indemnitee may at any time thereafter bring suit against the Corporation to
recover the unpaid amount of the claim. If successful in whole or in part in any
such suit, the indemnitee shall also be entitled to be reimbursed the expense of
prosecuting or defending such suit. It shall be a defense to any action for
advancement of expenses that the Corporation has not received both (i) an
undertaking as required by law to repay such advances in the event it shall
ultimately be determined that the standard of conduct has not been met and (ii)
a written affirmation by the indemnitee of his good faith belief that the
standard of conduct necessary for indemnification by the Corporation has been
met. Neither the failure of the Corporation (including its Board of Directors,
independent legal counsel, or its stockholders) to have made a determination
prior to the commencement of such suit that indemnification of the indemnitee is
proper in the circumstances because the indemnitee has met the applicable
standard of conduct set forth in the MGCL, nor an actual determination by the
Corporation (including its Board of Directors, independent legal counsel, or its
stockholders) that the indemnitee has not met such applicable standard of
conduct, shall create a presumption that the indemnitee has not met the
applicable standard of conduct or, in the case of such a suit brought by the
indemnitee, be a defense to such suit. In any suit brought by the indemnitee to
enforce a right to indemnification or to an advancement of expenses hereunder,
or by the Corporation to recover an advancement of expenses pursuant to the
terms of an undertaking, the burden of proving that the indemnitee is not
entitled to be indemnified, or to such advancement of expenses, under this
Article or otherwise shall be on the Corporation.
C. Non-Exclusivity. The rights to indemnification and to the
advancement of expenses conferred in this Article shall not be exclusive of any
other right which any person may
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have or hereafter acquire under any statute, the Corporation's Articles of
Incorporation, Bylaws, agreement, vote of stockholders or Disinterested
Directors or otherwise.
D. Insurance. The Corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or other
enterprise against any expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under the MGCL.
E. Miscellaneous. The Corporation shall not be liable for any
payment under this Article in connection with a claim made by any indemnitee to
the extent such indemnitee has otherwise actually received payment under any
insurance policy, agreement, or otherwise, of the amounts otherwise
indemnifiable hereunder. The rights to indemnification and to the advancement of
expenses conferred in Sections A and B of this Article shall be contract rights
and such rights shall continue as to an indemnitee who has ceased to be a
director or officer and shall inure to the benefit of the indemnitee's heirs,
executors and administrators.
Any repeal or modification of this Article shall not in any way
diminish any rights to indemnification or advancement of expenses of such
director or officer or the obligations of the Corporation arising hereunder with
respect to events occurring, or claims made, while this Article is in force.
ARTICLE 13. Limitation of Liability. An officer or director of the
Corporation, as such, shall not be liable to the Corporation or its stockholders
for money damages, except (i) to the extent that it is proved that the person
actually received an improper benefit or profit in money, property or services
for the amount of the benefit or profit in money, property or services actually
received; (ii) to the extent that a judgment or other final adjudication adverse
to the person is entered in a proceeding based on a finding in the proceeding
that the person's action, or failure to act, was the result of active and
deliberate dishonesty and was material to the cause of action adjudicated in the
proceeding; or (iii) to the extent otherwise required by the MGCL. If the MGCL
is amended to further eliminate or limit the personal liability of officers and
directors, then the liability of officers and directors of the Corporation shall
be eliminated or limited to the fullest extent permitted by MGCL, as so amended.
Any repeal or modification of the foregoing paragraph by the
stockholders of the Corporation shall not adversely affect any right or
protection of a director or officer of the Corporation existing at the time of
such repeal or modification.
ARTICLE 14. Amendment of the Articles of Incorporation. The Corporation
reserves the right to amend or repeal any provision contained in the Articles of
Incorporation in the manner prescribed by the MGCL and all rights conferred upon
stockholders are granted subject to this reservation; Provided, however, that,
notwithstanding any other provision of the Articles of Incorporation or any
provision of law which might otherwise permit a lesser vote or no vote, but in
addition to any vote of the holders of any class or series of the stock of this
Corporation required by law or by the Articles of Incorporation, the affirmative
vote of the holders of at least 80% of the
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voting power of all of the then-outstanding shares of the capital stock of the
Corporation entitled to vote generally in the election of directors (after
giving effect to the provisions of ARTICLE 6), voting together as a single
class, shall be required to amend or repeal this ARTICLE 14, Sections B, D or E
of ARTICLE 6, ARTICLE 8, ARTICLE 9, ARTICLE 10 or ARTICLE 12.
ARTICLE 15. Name and Address of Incorporator. The name and mailing
address of the sole incorporator are as follows:
NAME MAILING ADDRESS
Brad M. Hurta 312 Main Street
Smithville, Texas 78957
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I, THE UNDERSIGNED, being the incorporator, for the purpose of forming a
corporation under the laws of the State of Maryland, do make, file and record
the Articles of Incorporation, do certify that the facts herein stated are true,
and, accordingly, have hereto set my hand this ____ day of March 2000.
---------------------------------
Brad M. Hurta, Incorporator
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EXHIBIT 3.2
CBCT BANCSHARES, INC.
BYLAWS
ARTICLE I
STOCKHOLDERS
Section 1.01. Annual Meeting. An annual meeting of the stockholders,
for the election of directors to succeed those whose terms expire and for the
transaction of such other business as may properly come before the meeting,
shall be held at such place, on such date, and at such time as the Board of
Directors shall each year fix.
Section 1.02. Special Meetings. Subject to the rights of the holders of
any class or series of preferred stock of the Corporation, special meetings of
stockholders of the Corporation may be called by the President or by the Board
of Directors pursuant to a resolution adopted by a majority of the total number
of directors which the Corporation would have if there were no vacancies on the
Board of Directors (hereinafter the "Whole Board"). Special meetings of the
stockholders shall be called by the Secretary at the request of stockholders
only on the written request of stockholders entitled to cast at least a majority
of all the votes entitled to be cast at the meeting. Such written request will
state the purpose or purposes of the meeting and the matters proposed to be
acted upon at the meeting, and shall be delivered at the home office of the
Corporation addressed to the President or the Secretary. The Secretary shall
inform the stockholders who make the request of the reasonable estimated cost of
preparing and mailing a notice of the meeting and, upon payment of these costs
to the Corporation, notify each stockholder entitled to notice of the meeting.
Section 1.03. Notice of Meetings. Not less than ten nor more than 90
days before each stockholders' meeting, the Secretary shall give written notice
of the meeting to each stockholder entitled to vote at the meeting and to each
other stockholder entitled to notice of the meeting. The notice shall state the
time and place of the meeting and, if the meeting is a special meeting or notice
of the purpose is required by statute, the purpose of the meeting. Notice is
given to a stockholder when it is personally delivered to the stockholder, left
at the stockholder's usual place of business, or mailed to the stockholder at
his or her address as it appears on the records of the Corporation.
Notwithstanding the foregoing provisions, each person who is entitled to notice
waives notice if such person, before or after the meeting, signs a waiver of the
notice which is filed with the records of the stockholders' meeting, or is
present at the meeting in person or by proxy.
Section 1.04. Adjournment. A meeting of stockholders convened on the
date for which it was called may be adjourned from time to time without further
notice to a date not more than 120 days after the original record date. At any
adjourned meeting, any business may be transacted which might have been
transacted at the original meeting.
Section 1.05. Quorum; Voting. At any meeting of the stockholders, the
presence in person or by proxy of stockholders entitled to cast at least
one-third of all the votes entitled to be cast at the meeting constitutes a
quorum for all purposes, unless or except to the extent that the presence of a
larger number may be required by law. Where a separate vote by a class or
classes is required, a majority of the shares of such class or classes, present
in person or represented by proxy, shall constitute a quorum entitled to take
action with respect to that vote on that matter. A majority of all votes cast at
a meeting at which a quorum is present is sufficient to approve any matter which
properly comes before the meeting.
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If a quorum shall fail to attend any meeting, the chairman of the
meeting or the holders of a majority of the shares of stock entitled to vote who
are present, in person or by proxy, may adjourn the meeting to another place,
date or time.
Section 1.06. General Right to Vote; Proxies. Unless the Articles of
Incorporation provides for a greater or lesser number of votes per share or
limits or denies voting rights, each outstanding share of stock, regardless of
class, is entitled to one vote on each matter submitted to a vote at a meeting
of stockholders. In all elections for directors, directors shall be determined
by a plurality of the votes cast, and except as otherwise required by law or as
provided in the Articles of Incorporation, all other matters shall be determined
by a majority of the votes cast at the meeting.
A stockholder may vote the stock the stockholder owns of record either
in person or by proxy. A stockholder may sign a writing authorizing another
person to act as proxy. Signing may be accomplished by the stockholder or the
stockholder's authorized agent signing the writing or causing the stockholder's
signature to be affixed to the writing by any reasonable means, including
facsimile signature. A stockholder may authorize another person to act as proxy
by transmitting, or authorizing the transmission of a telegram, cablegram,
datagram, or other means of electronic transmission to the person authorized to
act as proxy or to a proxy solicitation firm, proxy support service
organization, or other person authorized by the person who will act as proxy to
receive the transmission. Unless a proxy provides otherwise, it is not valid
more than 11 months after its date. A proxy is revocable by a stockholder at any
time without condition or qualification unless the proxy states that it is
irrevocable and the proxy is coupled with an interest. A proxy may be made
irrevocable for so long as it is coupled with an interest. The interest with
which a proxy may be coupled includes an interest in the stock to be voted under
the proxy or another general interest in the Corporation or its asset or
liabilities.
Section 1.07. Conduct of Business.
(a) The chairman of any meeting of stockholders shall determine the
order of business and the procedure at the meeting, including such regulation of
the manner of voting and the conduct of discussion as seem to him or her in
order.
(b) Nominations of persons for election to the Board of Directors and
the proposal of business to be considered by the stockholders may be made at an
annual meeting of stockholders (a) pursuant to the Corporation's notice of
meeting, (b) by or at the direction of the Board of Directors or (c) by any
stockholder of the Corporation who was a stockholder of record at the time of
giving notice provided for in Section 1.09, who is entitled to vote at the
meeting and who complied with the notice procedures set forth in Section 1.09.
Nominations of persons for election to the Board of Directors and the proposal
of business to be considered by the stockholders may be made at a special
meeting of stockholders only pursuant to the Corporation's notice of meeting.
The chairman of the meeting shall have the power and duty to determine whether a
nomination or any business proposed to be brought before the meeting was made in
accordance with the procedures set forth in Section 1.09 and, if any proposed
nomination or business is not in compliance with Section 1.09, to declare that
such defective nomination or proposal be disregarded.
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Section 1.08. Conduct of Voting. The Board of Directors shall, in
advance of any meeting of stockholders, appoint one or more persons as
inspectors of election, to act at the meeting or any adjournment thereof and
make a written report thereof, in accordance with applicable law. At all
meetings of stockholders the proxies and ballots shall be received, and all
questions touching the qualification of voters and the validity of proxies, the
acceptance or rejection of votes not otherwise specified by these Bylaws, the
Articles of Incorporation or law, shall be decided or determined by the
inspector of elections. All voting, including on the election of directors but
excepting where otherwise required by law, may be by a voice vote; provided,
however, that upon demand therefore by a stockholder entitled to vote or his or
her proxy, a stock vote shall be taken. Every stock vote shall be taken by
ballot, each of which shall state the name of the stockholder or proxy voting
and such other information as may be required under the procedure established
for the meeting. Every vote taken by ballot shall be counted by an inspector or
inspectors appointed by the chairman of the meeting. No candidate for election
as a director at a meeting shall serve as an inspector at such meeting.
Section 1.09. Stockholder Proposals. For any stockholder proposal to be
presented in connection with an annual meeting of stockholders of the
Corporation (including proposals made under rule 14a-8 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")), including any nomination
or proposal relating to the nomination of a director to be elected to the Board
of Directors of the Corporation, the stockholders must have given timely notice
thereof in writing to the Secretary of the Corporation. To be timely, a
stockholder's notice shall be delivered to the Secretary at the principal
executive offices of the Corporation not less than 90 days or more than 120 days
prior to the first anniversary of the preceding year's annual meeting; provided,
however, that in the event that the date of the annual meeting is advanced by
more than 30 days or delayed by more than 60 days from such anniversary date,
notice by the stockholder to be timely must be so delivered not earlier than the
120th day prior to such annual meeting and not later than the close of business
on the later of the 90th day prior to such annual meeting or the tenth day
following the day on which notice of the date of annual meeting was mailed or
public announcement of the date of such meeting is first made. No adjournment or
postponement of an annual meeting shall commence a new period for the giving of
notice of a stockholder proposal hereunder. Such stockholder's notice shall set
forth (a) as to each person whom the stockholder proposes to nominate for
election or reelection as a director all information relating to such person
that is required to be disclosed in solicitations of proxies for election of
directors, or is otherwise required, in each case pursuant to Regulation 14A
under the Exchange Act (including such person's written consent to being named
in the proxy statement as a nominee and to serving as a director if elected);
(b) as to any other business that the stockholder proposes to bring before the
meeting, a brief description of the business desired to be brought before the
meeting, the reasons for conducting such business at the meeting and any
material interest in such business of such stockholder and of the beneficial
owner, if any, on whose behalf the proposal is made; and (c) as to the
stockholder giving the notice and the beneficial owner, if any, on whose behalf
the nomination or proposal is made, (i) the name and address of such
stockholder, as they appear on the Corporation's books, and of such beneficial
owner and (ii) the class and number of shares of stock of the Corporation which
are owned beneficially and of record by such stockholders and such beneficial
owner.
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Section 1.10. Informal Action by Stockholders. Any action required or
permitted to be taken at a meeting of stockholders may be taken without a
meeting if there is filed with the records of the stockholders' meetings a
unanimous written consent which sets forth the action and is signed by each
stockholder entitled to vote on the matter and a written waiver of any right to
dissent signed by each stockholder entitled to notice of the meeting but not
entitled to vote at the meeting.
Section 1.11. List of Stockholders. At each meeting of stockholders, a
full, true and complete list of all stockholders entitled to vote at such
meeting, showing the number and class of shares held by each and certified by
the transfer agent for such class or by the Secretary, shall be furnished by the
Secretary.
ARTICLE II
BOARD OF DIRECTORS
Section 2.01. Function of Directors, Number and Term of Office. The
business and affairs of the Corporation shall be managed by or under the
direction of the Board of Directors. The number of directors shall be as
provided for in the Articles of Incorporation. The Board of Directors shall
annually elect a Chairman of the Board and a President from among its members
and shall designate, when present, either the Chairman of the Board or the
President to preside at its meetings.
No person shall be eligible for election, reelection, appointment or
reappointment to the board of directors if he or she is then 70 or more years of
age. No director shall serve beyond the annual meeting of the Corporation
immediately following his or her 70th birthday.
The directors, other than those who may be elected by the holders of
any class or series of preferred stock, shall be divided into three classes, as
nearly equal in number as reasonably possible, with the term of office of the
first class to expire at the conclusion of the first annual meeting of
stockholders, the term of office of the second class to expire at the conclusion
of the annual meeting of stockholders one year thereafter and the term of office
of the third class to expire at the conclusion of the annual meeting of
stockholders two years thereafter, with each director to hold office until his
or her successor shall have been duly elected and qualified. At each annual
meeting of stockholders, commencing with the first annual meeting, directors
elected to succeed those directors whose terms expire shall be elected for a
term of office to expire at the third succeeding annual meeting of stockholders
after their election, with each director to hold office until his or her
successor shall have been duly elected and qualified.
Section 2.02. Vacancies and Newly Created Directorships. A vacancy on
the board of Directors may be filled only in accordance with the provisions of
the Articles of Incorporation. Subject to the rights of the holders of any class
of stock separately entitled to elect one or more directors, a majority of the
remaining directors, whether or nor sufficient to constitute a quorum, may fill
a vacancy on the Board of Directors which results from any cause. A director so
chosen by the remaining directors shall hold office until the next succeeding
annual meeting of stockholders, at which time the stockholders shall elect a
director to hold office for the balance of the term then remaining.
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Any director or the entire Board of Directors may be removed only in
accordance with the provisions of the Articles of Incorporation.
Section 2.03. Regular Meetings. Regular meetings of the Board of
Directors shall be held at such place or places, on such date or dates, and at
such time or times as shall have been established by the Board of Directors and
publicized among all directors. A notice of each regular meeting shall not be
required.
Section 2.04. Special Meetings. Special meetings of the Board of
Directors may be called by one-third (1/3) of the directors then in office
(rounded up to the nearest whole number) or by the President and shall be held
at such place, on such date, and at such time as they or he or she shall fix.
Notice of the place, date, and time of each such special meeting shall be given
to each director by whom it is not waived by mailing written notice not less
than five days before the meeting or by telegraphing or telexing or by facsimile
or electronic transmission of the same not less than 24 hours before the
meeting. Unless otherwise indicated in the notice thereof, any and all business
may be transacted at a special meeting. No notice of any meeting of the Board of
Directors need be given to any director who attends except where a director
attends a meeting for the express purpose of objecting to the transaction of any
business because the meeting is not lawfully called or convened, or to any
director who, in writing executed and filed with the records of the meeting
either before or after the holding thereof, waives such notice. Any special
meeting of the Board of Directors may adjourn from time to time to reconvene at
the same or some other place, and no notice need be given of any such adjourned
meeting other than by announcement.
Section 2.05. Quorum. At any meeting of the Board of Directors, a
majority of the authorized number of directors then constituting the Board shall
constitute a quorum for all purposes. If a quorum shall fail to attend any
meeting, a majority of those present may adjourn the meeting to another place,
date, or time, without further notice or waiver thereof.
Section 2.06. Participation in Meetings By Conference Telephone.
Members of the Board of Directors, or of any committee thereof, may participate
in a meeting of such Board or committee by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other at the same time and such participation shall
constitute presence in person at such meeting.
Section 2.07. Conduct of Business. At any meeting of the Board of
Directors, business shall be transacted in such order and manner as the Board
may from time to time determine, and all matters shall be determined by the vote
of a majority of the directors present, except as otherwise provided herein or
required by law. Action may be taken by the Board of Directors without a meeting
if all members thereof consent thereto in writing, and the writing or writings
are filed with the minutes of proceedings of the Board of Directors.
Section 2.08. Powers. The Board of Directors may, except as otherwise
required by law, exercise all such powers and do all such acts and things as may
be exercised or done by the Corporation, including, without limiting the
generality of the foregoing, the unqualified power:
(i) To declare dividends from time to time in accordance
with law;
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(ii) To purchase or otherwise acquire any property, rights or
privileges on such terms as it shall determine;
(iii) To authorize the creation, making and issuance, in such
form as it may determine, of written obligations of every kind, negotiable or
non-negotiable, secured or unsecured, and to do all things necessary in
connection therewith;
(iv) To remove any officer of the Corporation with or without
cause, and from time to time to devolve the powers and duties of any officer
upon any other person for the time being;
(v) To confer upon any officer of the Corporation the power to
appoint, remove and suspend subordinate officers, employees and agents;
(vi) To adopt from time to time such stock, option, stock
purchase, bonus or other compensation plans for directors, officers, employees
and agents of the Corporation and its subsidiaries as it may determine;
(vii) To adopt from time to time such insurance, retirement,
and other benefit plans for directors, officers, employees and agents of the
Corporation and its subsidiaries as it may determine; and
(viii) To adopt from time to time regulations, not
inconsistent with these Bylaws, for the management of the Corporation's business
and affairs.
Section 2.09. Compensation of Directors. Directors, as such, may
receive, pursuant to resolution of the Board of Directors, fixed fees (and
expenses, if any) and other compensation for their services as directors,
including, without limitation, their services as members of committees of the
Board of Directors.
Section 2.10. Presumption of Assent. A director of the Corporation who
is present at a meeting of the Board of Directors at which action on any
corporate matter is taken shall be presumed to have assented to the action taken
unless his or her dissent or abstention shall be entered in the minutes of the
meeting or unless he or she shall file his or her written dissent to such action
with the person acting as the secretary of the meeting before the adjournment
thereof or shall forward such dissent by certified mail, return receipt
requested, to the Secretary of the Corporation immediately after the adjournment
of the meeting. Such right to dissent shall not apply to a director who votes in
favor of such action.
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ARTICLE III
COMMITTEES
Section 3.01. Committees of the Board of Directors. The Board of
Directors may appoint from among its members an Executive Committee and other
committees composed of one or more directors and delegate to these committees
any of the powers of the Board of Directors, except the power to authorize
dividends on stock, elect directors, issue stock other than as provided in the
next sentence, recommend to the stockholders any action which requires
stockholder approval, amend these Bylaws, or approve any merger or share
exchange which does not require stockholder approval. If the Board of Directors
has given general authorization for the issuance of stock providing for or
establishing a method or procedure for determining the maximum number of shares
to be issued, a committee of the Board of Directors, in accordance with that
general authorization or any stock option or other plan or program adopted by
the Board of Directors, may authorize or fix the terms of stock subject to
classification or reclassification and the terms on which any stock may be
issued, including all terms and conditions required or permitted to be
established or authorized by the Board of Directors. Any committee so designated
may exercise the power and authority of the Board of Directors if the resolution
which designated the committee or a supplemental resolution of the Board of
Directors shall so provide. In the absence or disqualification of any member of
any committee in his or her place, the member or members of the committee
present at the meeting and not disqualified from voting, whether or not he or
she or they constitute a quorum, may by unanimous vote appoint another member of
the Board of Directors to act at the meeting in the place of the absent or
disqualified member.
Section 3.02. Conduct of Business. Each committee may determine the
procedural rules for meeting and conducting its business and shall act in
accordance therewith, except as otherwise provided herein or required by law.
Adequate provision shall be made for notice to members of all meetings,
one-third (1/3) of the members shall constitute a quorum unless the committee
shall consist of one or two members, in which event one member shall constitute
a quorum; and all matters shall be determined by a majority vote of the members
present. Action may be taken by any committee without a meeting if all members
thereof consent thereto in writing, and the writing or writings are filed with
the minutes of the proceedings of such committee.
Section 3.03. Nominating Committee. The Board of Directors may appoint
a Nominating Committee of the Board, consisting of not less than three members,
one of which shall be the President if, and only so long as, the President
remains in office as a member of the Board of Directors. The Nominating
Committee shall have authority (i) to review any nominations for election to the
Board of Directors made by a stockholder of the Corporation pursuant to Section
1.07 of these Bylaws in order to determine compliance with such Bylaw and (ii)
to recommend to the Board of Directors nominees for election to the Board of
Directors to replace those directors whose terms expire at the annual meeting of
stockholders next ensuing.
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ARTICLE IV
OFFICERS
Section 4.01. Generally.
(a) The Board of Directors as soon as may be practicable after the
annual meeting of stockholders shall choose a President, a Secretary and a
Treasurer and from time to time may choose such other officers as it may deem
proper. The President shall be chosen from among the directors. Any number of
offices may be held by the same person, except no person may serve concurrently
as both President and Vice President of the Corporation.
(b) The term of office of all officers shall be until the next
annual election of officers and until their respective successors are chosen,
but any officer may be removed from office at any time by the affirmative vote
of a majority of the authorized number of directors then constituting the Board
of Directors.
(c) All officers chosen by the Board of Directors shall each
have such powers and duties as generally pertain to their respective offices,
subject to the specific provisions of this ARTICLE IV. Such officers shall also
have such powers and duties as from time to time may be conferred by the Board
of Directors or by any committee thereof.
Section 4.02. President. The President shall be the chief executive
officer and, subject to the control of the Board of Directors, shall have
general power over the management and oversight of the administration and
operation of the Corporation's business and general supervisory power and
authority over its policies and affairs. The President shall see that all orders
and resolutions of the Board of Directors and of any committee thereof are
carried into effect.
Each meeting of the stockholders and of the Board of Directors shall be
presided over by such officer as has been designated by the Board of Directors
or, in his or her absence, by such officer or other person as is chosen at the
meeting. The Secretary or, in his or her absence, the General Counsel of the
Corporation or such officer as has been designated by the Board of Directors or,
in his or her absence, such officer or other person as is chosen by the person
presiding, shall act as secretary of each such meeting.
Section 4.03. Vice President. The Vice President or Vice Presidents, if
any, shall perform the duties of the President in the President's absence or
during his or her disability to act. In addition, the Vice Presidents shall
perform the duties and exercise the powers usually incident to their respective
offices and/or such other duties and powers as may be properly assigned to them
from time to time by the Board of Directors, the Chairman of the Board or the
President.
Section 4.04. Secretary. The Secretary or an Assistant Secretary shall
issue notices of meetings, shall keep their minutes, shall have charge of the
seal and the corporate books, shall perform such other duties and exercise such
other powers as are usually incident to such offices and/or such other duties
and powers as are properly assigned thereto by the Board of Directors, the
Chairman of the Board or the President.
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Section 4.05. Treasurer. The Treasurer shall have charge of all monies
and securities of the Corporation, other than monies and securities of any
division of the Corporation which has a treasurer or financial officer appointed
by the Board of Directors, and shall keep regular books of account. The funds of
the Corporation shall be deposited in the name of the Corporation by the
Treasurer with such banks or trust companies or other entities as the Board of
Directors from time to time shall designate. The Treasurer shall sign or
countersign such instruments as require his or her signature, shall perform all
such duties and have all such powers as are usually incident to such office
and/or such other duties and powers as are properly assigned to him or her by
the Board of Directors, the Chairman of the Board or the President, and may be
required to give bond, payable by the Corporation, for the faithful performance
of his duties in such sum and with such surety as may be required by the Board
of Directors.
Section 4.06. Assistant Secretaries and Other officers. The Board of
Directors may appoint one or more assistant secretaries and one or more
assistants to the Treasurer, or one appointee to both such positions, which
officers shall have such powers and shall perform such duties as are provided in
these Bylaws or as may be assigned to them by the Board of Directors, the
Chairman of the Board or the President.
Section 4.07. Action with Respect to Securities of Other Corporations.
Unless otherwise directed by the Board of Directors, the President, or any
officer of the Corporation authorized by the President, shall have power to vote
and otherwise act on behalf of the Corporation, in person or by proxy, at any
meeting of stockholders of or with respect to any action of stockholders of any
other corporation in which this Corporation may hold securities and otherwise to
exercise any and all rights and powers which this Corporation may possess by
reason of its ownership of securities in such other Corporation.
ARTICLE V
STOCK
Section 5.01. Certificates of Stock. Each stockholder shall be entitled
to a certificate signed by, or in the name of the Corporation by, the President
or a Vice President, and by the Secretary or an Assistant Secretary, or the
Treasurer or an Assistant Treasurer, certifying the number of shares owned by
him or her. Any or all of the signatures on the certificate may be by facsimile.
Section 5.02. Transfers of Stock. Transfers of stock shall be made only
upon the transfer books of the Corporation kept at an office of the Corporation
or by transfer agents designated to transfer shares of the stock of the
Corporation. Except where a certificate is issued in accordance with Section
5.06, an outstanding certificate for the number of shares involved shall be
surrendered for cancellation before a new certificate is issued therefore.
Section 5.03. Record Dates or Closing of Transfer Books. The Board of
Directors may set a record date or direct that the stock transfer books be
closed for a stated period for the purpose of making any proper determination
with respect to stockholders, including which stockholders are entitled to
notice of a meeting, vote at a meeting, receive a dividend, or be allotted other
rights. The record date may not be prior to the close of business on the day the
record date is fixed nor, subject
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to Section 1.04, more than 90 days before the date on which the action requiring
the determination will be taken; the transfer books may not be closed for a
period longer than 20 days; and, in the case of a meeting of stockholders, the
record date or the closing of the transfer books shall be at least ten days
before the date of the meeting.
Section 5.04. Stock Ledger. The Corporation shall maintain a stock
ledger which contains the name and address of each stockholder and the number of
shares of stock of each class which the stockholder holds. The stock ledger may
be in written form or in any other form which can be converted within a
reasonable time into written form for visual inspection. The original or a
duplicate of the stock ledger shall be kept at the offices of a transfer agent
for the particular class of stock or, if none, at the principal executive
offices of the Corporation.
Section 5.05. Certification of Beneficial Owners. The Board of
Directors may adopt by resolution a procedure by which a stockholder of the
Corporation may certify in writing to the Corporation that any shares of stock
registered in the name of the stockholder are held for the account of a
specified person other than the stockholder. The resolution shall set forth the
class of stockholders who may certify; the purpose for which the certification
may be made; the form of certification and the information to be contained in
it; if the certification is with respect to a record date or closing of the
stock transfer books, the time after the record date or closing of the stock
transfer books within which the certification must be received by the
Corporation; and any other provisions with respect to the procedure which the
Board of Directors considers necessary or desirable. On receipt of a
certification which complies with the procedure adopted by the Board of
Directors in accordance with this Section, the person specified in the
certification is, for the purpose set forth in the certification, the holder of
record of the specified stock in place of the stockholder who makes the
certification.
Section 5.06. Lost Stock Certificates. The Board of Directors of the
Corporation may determine the conditions for issuing a new stock certificate in
place of one which is alleged to have been lost, stolen, or destroyed, or the
Board of Directors may delegate such power to any officer or officers of the
Corporation. In their discretion, the Board of Directors or such officer or
officers may require the owner of the certificate to give a bond, with
sufficient surety, to indemnify the Corporation against any loss or claim
arising as a result of the issuance of a new certificate. In their discretion,
the Board of Directors or such officer or officers may refuse to issue such new
certificate save upon the order of some court having jurisdiction in the
premises.
Section 5.07. Regulations. The issue, transfer, conversion and
registration of certificates of stock shall be governed by such other
regulations as the Board of Directors may establish.
ARTICLE VI
FINANCE
Section 6.01. Checks, Drafts, Etc. All checks, drafts and orders for
the payment of money, notes and other evidences of indebtedness, issued in the
name of the Corporation, shall, unless otherwise provided by resolution of the
Board of Directors, be signed by the Chairman of the Board,
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the President, a Vice-President, an Assistant Vice-President, the Treasurer, an
Assistant Treasurer, the Secretary or an Assistant Secretary.
Section 6.02. Annual Statement of Affairs. The President or chief
accounting officer shall prepare annually a full and correct statement of the
affairs of the Corporation, to include a balance sheet and a financial statement
of operations for the preceding fiscal year. The statement of affairs shall be
submitted at the annual meeting of the stockholders and, within 20 days after
the meeting, placed on file at the Corporation's principal office.
Section 6.03. Fiscal Year. The fiscal year of the Corporation shall be
the 12 calendar months ending on December 31 in each year.
Section 6.04. Dividends. If declared by the Board of Directors at any
meeting thereof, the Corporation may pay dividends on its shares in cash,
property, or in shares of the capital stock of the Corporation, unless such
dividend is contrary to law or to a restriction contained in the Articles of
Incorporation.
Section 6.05. Loans. No loans shall be contracted on behalf of the
Corporation and no evidence of indebtedness shall be issued in its name unless
authorized by the Board of Directors. Such authority may be general or confined
to specific instances.
Section 6.06. Deposits. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
in any of its duly authorized depositories as the Board of Directors may select.
ARTICLE VII
MISCELLANEOUS
Section 7.01. Facsimile Signatures. In addition to the provisions for
use of facsimile signatures elsewhere specifically authorized in these Bylaws,
facsimile signatures of any officer or officers of the Corporation may be used
whenever and as authorized by the Board of Directors or a committee thereof.
Section 7.02. Corporate Seal. The Board of Directors may provide a
suitable seal, containing the name of the Corporation, which seal shall be in
the charge of the Secretary. If and when so directed by the Board of Directors
or a committee thereof, duplicates of the seal may be kept and used by the
Treasurer or by an Assistant Secretary or Assistant Treasurer.
Section 7.03. Reliance upon Books, Reports and Records. Each director,
each member of any committee designated by the Board of Directors, and each
officer and agent of the Corporation shall, in the performance of his or her
duties, be fully protected in relying in good faith upon the books of account or
other records of the Corporation and upon such information, opinions, reports or
statements presented to the Corporation by any of its officers or employees, or
committees of the Board of Directors so designated, or by any advisor,
accountant, appraiser or other experts or
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consultants selected by the Board of Directors or officers of the Corporation,
regardless of whether such expert or consultant may also be a director.
Section 7.04. Notices. Except as otherwise specifically provided herein
or required by law, all notices required to be given to any stockholder,
director, officer, employee or agent shall be in writing and may in every
instance be effectively given by hand delivery to the recipient thereof, by
depositing such notice in the mail, postage paid, by sending such notice by
prepaid telegram or mailgram or by sending such notice by facsimile machine or
other electronic transmission. Any such notice shall be addressed to such
stockholder, director, officer, employee or agent at his or her last known
address as the same appears on the books of the Corporation. The time when such
notice is received, if hand delivered or dispatched, if delivered through the
mail, by telegram or mailgram or by facsimile machine or other electronic
transmission, shall be the time of the giving of the notice.
Section 7.05. Waivers. A written waiver of any notice, signed by a
stockholder, director, officer, employee or agent, whether before or after the
time of the event for which notice is to be given, shall be deemed equivalent to
the notice required to be given to such stockholder, director, officer, employee
or agent. Neither the business nor the purpose of any meeting need be specified
in such a waiver.
Section 7.06. Time Periods. In applying any provision of these Bylaws
which requires that an act be done or not be done a specified number of days
prior to an event or that an act be done during a period of a specified number
of days prior to an event, calendar days shall be used, the day of the doing of
the act shall be excluded and the day of the event shall be included.
ARTICLE VIII
AMENDMENTS
The Bylaws of the Corporation may be adopted, amended or repealed as
provided in ARTICLE 9 of the Articles of Incorporation.
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EXHIBIT 3.3
COMMUNITY BANK OF CENTRAL TEXAS, SSB
ARTICLES OF INCORPORATION
(by conversion and continuation of Community Bank of
Central Texas, ssb, a mutual savings bank, to a
capital stock savings bank)
THAT we, the undersigned citizens of the State of Texas, do hereby
adopt these Articles of Incorporation for Community Bank of Central Texas, ssb
(the "Savings Bank") in compliance with the provisions of the Texas Savings Bank
Code (Subtitle C, Texas Finance Code) and the Rules and Regulations Applicable
to Texas Savings Banks (7 TAC, ss.75.1, et.seq.). The Savings Bank is
incorporated by the conversion of Community Bank of Central Texas, ssb, a mutual
savings bank, to a capital stock savings bank.
ARTICLE I - CORPORATE TITLE
The full corporate title of the Savings Bank shall be Community Bank of
Central Texas, ssb.
ARTICLE II - OFFICE AND REGISTERED AGENT
The address of the home office of the Savings Bank shall be 312 Main
Street, Smithville, Bastrop County, Texas 78957-2035. The name of its registered
agent at such address is Brad M. Hurta.
ARTICLE III - DURATION
The duration of the Savings Bank shall be perpetual.
ARTICLE IV - PURPOSE AND POWERS
The purposes of the Savings Bank shall be the pursuit of any and all
lawful objectives of a state savings bank chartered under the Texas Savings Bank
Code and the exercise of all express, implied and incidental powers confirmed
thereby and by all amendments and supplements thereto, subject to all applicable
laws and lawful and applicable rules, regulations and orders of the Texas
Savings and Loan Department and the Federal Deposit Insurance Corporation.
ARTICLE V - CAPITAL STOCK
A. General. The total number of shares of all classes of capital stock
which the Savings Bank is authorized to issue is (written amount) (numerical
amount) , all of which shall be common stock of par value of $ per share [ OR of
which (numerical amount) shall be common stock, par value of $ per share and
(numerical amount) shall be preferred stock of no par value]. The shares of
capital stock may be issued from time to time as authorized by the Board of
Directors of the Savings Bank without the approval of its shareholders, except
as otherwise provided by governing law, rule or regulation.
The consideration for the issuance of the shares shall be paid in full
before their issuance and shall not be less than the par value, and the Savings
Bank shall not loan funds against the shares of its outstanding capital stock.
Neither promissory notes nor future services shall constitute payment or partial
payment for the issuance of shares of the Savings Bank. The consideration for
the shares shall be cash, tangible or intangible property (to the extent direct
investment in such property would be permitted to the Savings Bank), labor,
services actually performed for the Savings Bank, or any combination of the
foregoing. In the absence of actual fraud in the transaction, the value of such
property, labor or services, as determined by the Board of Directors of the
Savings Bank, shall be conclusive. Upon payment of such consideration, such
shares shall be deemed to be fully paid and nonassessable. In the case of a
stock dividend, that part of the surplus of the Savings Bank which is
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transferred to stated capital upon the issuance of shares as a share dividend
shall be deemed to be the consideration for their issuance.
Nothing contained in this Article shall entitle the holders of any
class or series of capital stock to vote as a separate class or series or to
more than one vote per share; provided, that this restriction on voting
separately by class or series shall not apply:
(i) to any provision which would authorize the holders of
preferred stock, voting as a class or series, to elect some
members of the Board of Directors, but less than a majority
thereof, in the event of default in the payment of dividends
on any class or series of preferred stock;
(ii) to any provision which would require the holders of preferred
stock, voting as a class or series, to approve the merger or
consolidation of the Savings Bank with another corporation or
the sale, lease or conveyance of properties or business in
exchange for securities of a corporation other than the
Savings Bank if the preferred stock is exchanged for
securities of such other corporation; provided, that no
provision may require such approval for transactions
undertaken with the assistance or pursuant to the direction of
the Federal Deposit Insurance Corporation, the Texas Savings
and Loan Department or any other federal or state agency with
jurisdiction; or
(iii) to any amendment which would adversely change the specific
terms of any class or series of capital stock as set forth in
this Article, including any amendment which would create or
enlarge any class or series ranking prior thereto in rights
and preferences. An amendment which increases the number of
authorized shares of any class or series of capital stock, or
substitutes the surviving association in a merger or
consolidation for the Savings Bank, shall not be considered to
be such an adverse change.
The holders of shares of common stock shall exclusively possess all
voting power. Each holder of shares of common stock shall be entitled to one
vote for each share held by such holder.
There shall be no cumulative voting.
B. Common Stock. In the event of any liquidation, dissolution or
winding up of the Savings Bank, the holders of shares of common stock (and the
holders of any class or series of stock entitled to participate with the common
stock in the distribution of assets) thereof shall be entitled, after payment or
provision for payment of all debts and liabilities of the Savings Bank, to
receive the remaining assets of the Savings Bank available for distribution in
cash or in kind after: (I) payment or provision for payment of the Savings
Bank's debts and liabilities; and (ii) distributions or provisions for
distributions to holders of any class or series of stock having preference over
the common stock in the liquidation, dissolution or winding up of the Savings
Bank. Each share of common stock shall have the same relative rights as, and be
identical in all respects with, all the other shares of common stock.
C. Preferred Stock. The Savings Bank may provide in supplementary
sections to these Articles for one or more classes of preferred stock, which
shall be separately identified. The shares of any class may be divided into and
issued in series, with each series separately designated so as to distinguish
the shares thereof from the shares of all other series and classes. The terms of
each series shall be set forth in a supplementary section to the Articles. All
shares of the same class shall be identical except as to the following relative
rights and preferences, as to which there may be variations between different
series:
(a) the distinctive serial designation and the number of
shares constituting such series;
(b) the dividends, if any, payable on such series,
whether any such dividends shall be cumulative, and
if so, from what dates, the conditions and dates upon
which such dividends shall be payable, the preference
or relation which such dividends shall bear to the
dividends payable on any shares of stock of any other
class or any other series of this class;
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(c) whether the shares of such series shall have voting
rights, in addition to any voting rights provided by
law, and, if so, the terms of such voting rights,
which may be general or limited;
(d) whether the shares of such series shall be redeemable
and, if so, the times, the price(s) at which, and the
terms and conditions on which, such shares may be
redeemed;
(e) the amount or amounts payable upon shares of such
series upon, and the rights of the holders of such
series in, the voluntary or involuntary liquidation,
dissolution or winding up, or upon any distribution
of the assets, of the Savings Bank;
(f) whether the shares of such series shall be subject to
the operation of a retirement or sinking fund, and,
if so, the extent to and manner in which any such
retirement or sinking fund shall be applied to the
purchase or redemption of the shares of such series
for retirement or other corporate purposes and the
terms and provisions relative to the operation
thereof;
(g) whether the shares of such series shall be
convertible into, or exchangeable for, shares of any
other class or any series of a class or any other
securities of the Savings Bank and, if so, the
conversion price(s) or the rate(s) of exchange, and
the adjustments thereof, if any, at which such
conversion or exchange may be made, and any other
terms and conditions of such conversion or exchange;
(h) the price or other consideration for which the shares
of such series shall be issued;
(i) whether the shares of such series which are redeemed
or converted shall have the status of authorized but
unissued shares of preferred stock and whether such
shares may be reissued as shares of the same or any
other series of preferred stock;
(j) the limitations and restrictions, if any, to be
effective while any shares of such series are
outstanding upon the payment of dividends or the
making of other distributions on, and upon the
purchase, redemption or other acquisition by the
Savings Bank of, the common stock or shares of stock
of any other class or any other series of this class;
(k) the conditions or restrictions, if any, upon the
creation of indebtedness of the Savings Bank or upon
the issue of any additional stock, including
additional shares of such series or of any other
series of this class or of any other class; and
(l) any other powers, preferences and relative,
participating, optional and other special rights, and
any qualifications, limitations and restrictions
thereof.
Each share of each series of preferred stock shall have the same
relative rights as and be identical in all respects with all the other shares of
the same series, except that shares of any one series issued at different times
may differ as to the dates from which dividends thereon shall accrue and/or be
cumulative.
Prior to the issuance of any preferred stock established by a
supplementary section to these Articles adopted by the Board of Directors, the
Savings Bank shall file with the Savings and Loan Commissioner of the State of
Texas (the "Commissioner") a dated copy of that supplementary section to these
Articles establishing and designating the series and fixing and determining the
relative rights and preferences thereof. If the supplementary section to these
Articles conforms to Section 92.209 of the Texas Finance Code (the "Code") and
other applicable sections of the Code, the Commissioner shall file it in his
office, and after it is so filed the supplementary section shall be considered
an amendment to these Articles.
D. Preemptive Rights. No holder of capital stock of the Savings Bank
shall be entitled as such, as a matter of right or otherwise, to subscribe for
or purchase any part of any new or additional stock issue or debt of any class
or series whatsoever, of the Savings Bank, or of securities convertible into
equity or debt of any class whatsoever, whether now or hereafter authorized, or
whether issued for cash or other consideration or by way of a dividend.
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ARTICLE VI - DIRECTORS
A. Qualification and Number. The Savings Bank shall be under the
direction of a Board of Directors. In order to be eligible to serve on such
Board, directors must meet the qualification requirements of Section 92.153 of
the Code or any successor provision thereto which may be applicable. Except as
provided in the Savings Bank's Bylaws, directors shall be elected annually by
such vote of the stockholders as may be required by applicable law, voting in
person or by proxy and shall serve until their successors have been elected and
qualified. Cumulative voting shall not be permitted. Except as otherwise fixed
pursuant to the provisions of Article V hereof relating to the rights of the
holders of any class or series of stock having a preference over the common
stock as to dividends or upon liquidation to elect additional directors, the
number of directors shall be determined as stated by resolution adopted at any
annual meeting of stockholders or any special meeting of stockholders called for
that purpose. The authorized number of Directors, as fixed by or in the manner
provided by the Savings Bank's Bylaws, shall be not fewer than five (5) nor more
than twenty-one (21).
B. Vacancies. Except as otherwise fixed pursuant to the provisions of
Article V hereof relating to the rights of the holders of any class or series of
stock having a preference over the common stock as to dividends or upon
liquidation to elect directors, any vacancy occurring in the Board of Directors
shall be filled by the affirmative vote of a majority of the Board of Directors,
whether or not a quorum is present, or by a sole remaining director, and any
director so chosen shall hold office for the remainder of the term to which the
director has been selected and until such director's successor shall have been
elected and qualified. No decrease in the number of directors shall shorten the
term of any incumbent director, except as provided in Subsection C to this
Article.
C. Removal. Subject to the rights of any class or series of stock
having preference over the common stock as to dividends or upon liquidation to
elect directors, any director (including persons elected by directors to fill
vacancies in the Board of Directors) may be removed from office with or without
cause by an affirmative vote of not less than a majority of the votes eligible
to be cast by stockholders at a duly constituted meeting of stockholders called
expressly for such purpose. At least 30 days prior to such meeting of
stockholders, written notice shall be sent to the director whose removal will be
considered at the meeting.
D. Discharge of Duties. In discharging the duties of their respective
positions, the Board of Directors, committees of the Board of Directors and
individual directors shall, in considering the best interests of the Savings
Bank, consider the effects of any action upon the employees of the Savings Bank
and its subsidiaries, the depositors and borrowers of the Savings Bank, the
communities in which offices or other establishments of the Savings Bank or any
subsidiary are located and all other pertinent factors.
ARTICLE VII - INDEMNIFICATION OF DIRECTORS,
OFFICERS, EMPLOYEES AND AGENTS
A. Indemnification. Subject to the exceptions contained in Article
VIII, the Savings Bank shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative, arbitrative or
investigative, any appeal in such action, suit or proceeding and any inquiry or
investigation which could lead to such an action, suit or proceeding, by reason
of the fact that such person is or was a Director, officer, employee or agent of
the Savings Bank or any predecessor of the Savings Bank, or is or was serving at
the request of the Savings Bank or any predecessor of the Savings Bank as a
Director, officer, employee, partner, venturer, proprietor, trustee, agent or
similar functionary ("Management Official") of another foreign or domestic
corporation, partnership, joint venture, sole proprietorship, trust, employee
benefit plan or other enterprise ("Other Entity"), against expenses (including
court costs and attorneys' fees), judgments, penalties, fines, excise taxes and
amounts paid in connection with such action, suit or proceeding to the full
extent authorized by law.
B. Advancement of Expenses. Reasonable expenses incurred by a Director,
officer, employee or agent of the Savings Bank in defending an action, suit or
proceeding described in Article VII.A shall be paid by the Savings Bank in
advance of the final disposition of such action, suit or proceeding, as
authorized by the Board of Directors, only upon receipt of (i) a written
affirmation by or on behalf of such person of his good faith
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belief that he has met the standards of conduct necessary for indemnification
pursuant to applicable law, and (ii) a written undertaking to repay such amount
if it shall ultimately be determined that the person has not met such standards
or that indemnification against expenses incurred by him in connection with such
action, suit or proceeding is prohibited by law.
C. Other Rights and Remedies. The indemnification provided in this
Article VII shall not be deemed exclusive of any other rights to which those
seeking indemnification or advancement of expenses may be entitled under these
Articles, the Savings Bank's Bylaws, any insurance or other agreement, vote of
shareholders or disinterested Directors or otherwise, both as to actions in
their official capacities and as to actions in other capacities while holding
such offices, and shall continue as to a person who has ceased to be a Director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such person, provided that no indemnification
shall be made to or on behalf of an individual if a judgment or other final
adjudication establishes that his acts or omissions (i) were in breach of his
duty of loyalty to the Savings Bank or its shareholders, (ii) were not in good
faith or involved a knowing violation of law, or (iii) resulted in the receipt
of an improper personal benefit.
D. Insurance. Upon resolution passed by the Board of Directors, the
Savings Bank may purchase and maintain insurance on behalf of any person who is
or was a Director, officer, employee or agent of the Savings Bank, or was
serving at the request of the Savings Bank as a Management official of an Other
entity, against any liability asserted against him or incurred by him in any
such capacity, or arising out of his status as such, whether or not the Savings
Bank would have the power to indemnify him against such liability under the
provisions of these Articles.
E. Modification. The duties of the Savings Bank to indemnify and to
advance expenses to a Director, officer, employee or agent provided in the
Article VII shall be in the nature of a contract between the Savings Bank and
each such individual, and no amendment or repeal of any provision of this
Article VII shall alter, to the detriment of such individual, the right of such
individual to the advancement of expenses of indemnification related to a claim
based on an act or failure to act which took place prior to such amendment or
repeal.
ARTICLE VIII - LIMITED LIABILITY OF DIRECTORS
No Director shall be liable to the Savings Bank or its shareholders for
monetary damages for an act or omission in the Director's capacity as a
Director, except that this Article VIII does not authorize the elimination or
limitation of the liability of a Director to the extent the Director is found
liable for (i) a breach of the Director's duty of loyalty to the Savings Bank or
its shareholders; (ii) an act or omission not in good faith which constitutes a
breach of duty of the Director to the Savings Bank or an act or omission which
involves intentional misconduct or a knowing violation of the law; (iii) a
transaction from which the Director received an improper benefit, whether or not
the benefit resulted from an action taken within the scope of the Director's
office; or (iv) an act or omission for which the liability of a Director is
expressly provided by an applicable statute.
ARTICLE IX - AMENDMENT
The Savings Bank, by resolution adopted by a majority vote of those
entitled to vote attending an annual meeting or a special meeting called for
such purpose, reserves the right to amend, alter, change or repeal any provision
contained in these Articles in the manner now or hereafter prescribed by law,
and all rights conferred upon shareholders herein are granted subject to this
reservation. No amendment, addition, alteration, change or repeal of these
Articles shall be made unless it is first approved by the Board of Directors
pursuant to a resolution adopted by the affirmative vote of a majority of the
Directors then in office and thereafter is approved by the holders of a majority
of the shares of the Savings Bank entitled to vote generally in an election of
Directors, voting together as a single class, as well as such additional vote of
the preferred stock as may be required by the provisions of any series thereof,
provided that, notwithstanding anything contained in these Articles to the
contrary, the affirmative vote of the holders of at least two/thirds of the
shares of the Savings Bank entitled to vote generally in an election of
Directors, voting together as a single class, as well as such additional vote of
the preferred stock as may be required by the provisions of any series thereof,
shall be required to amend, adopt, alter, change or repeal any provision
inconsistent with these Articles.
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WE, THE UNDERSIGNED, for the purpose of forming a capital stock savings
bank by conversion from a mutual savings bank pursuant to the Code do make these
Articles of Incorporation, hereby declaring and certifying that this is our act
and deed and that the facts herein stated are true, and accordingly have
hereunto set our hands to be effective this ______________ day of ____________,
2000.
DIRECTORS:
----------------------------------------
Georgina Chronis
----------------------------------------
James A. Cowan
----------------------------------------
Gordon N. Fowler
----------------------------------------
Barry Hannath
----------------------------------------
Brad M. Hurta
----------------------------------------
Rodney E. Langer
----------------------------------------
Mike C. Maney
STATE OF TEXAS ss.
COUNTY OF BASTROP ss.
BEFORE ME, the undersigned authority, on this day personally appeared
Georgina Chronis, James A. Cowan, Gordon N. Fowler, Barry Hannath, Brad M.
Hurta, Rodney E. Langer, and Mike C. Maney, each known to me to be the person
whose name is subscribed to the foregoing instrument, and upon his/her oath
SWORE that the statements contained therein are true and that he/she executed
the same for the purposes and consideration therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the day of
, 2000.
Notary Public, State of Texas
(Notary Seal & Stamp)
APPROVAL OF COMMISSIONER
Approved this ______________ day of ___________, 2000, to be
effective the _____________ day of____________, 2000.
James L. Pledger, Commissioner
Texas Savings and Loan Department
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EXHIBIT 3.4
COMMUNITY BANK OF CENTRAL TEXAS, SSB
BYLAWS
ARTICLE I - OFFICES
Section 1.1. Principal Office and Registered Agent. The principal
office of Community Bank of Central Texas, ssb shall located and established at
312 Main Street, Smithville, Texas 78957-2035, in the county of Bastrop, Texas.
The registered agent shall have a business address identical to the principal
office of the savings bank.
Section 1.2. Other Offices. The savings bank may have other offices
within or outside the State of Texas as such place or places as the board of
directors may from time to time determine.
ARTICLE II - STOCKHOLDERS
Section 2.1. Annual Meeting. An annual meeting of the stockholders for
the election of directors and for the transaction of other business of the
savings bank shall be held within 120 days after the end of the savings bank's
fiscal year on the fourth Tuesday of March, if not a legal holiday, and if a
legal holiday, then on the next day following which is not a legal holiday, or
at such other date as may be determined by the board of directors and stated in
the notice of the meeting. The meeting shall be held at such time and place as
may be determined by the board of directors and stated in the notice of the
meeting.
Section 2.2. Special Meetings. Special meetings of the stockholders for
any purpose may be called at any time by: (i) the board of directors pursuant to
a written request approved by the affirmative vote of a majority of the
directors, then in office; (ii) the chairman of the board; (iii) the chief
executive officer; or (iv) the president.
Section 2.3. Notice of Meetings. A written notice stating the place,
day, and hour for the meeting and the purpose(s) for which the meeting is called
shall be either delivered personally or mailed to each stockholder of record
entitled to vote at such meeting at least ten (10) days prior to such meeting.
If mailed, such notice shall be deemed to be delivered when deposited in the
mail, addressed to the stockholder at the address as it appears on the stock
transfer books or records of the savings bank, with postage pre-paid. It shall
not be necessary to give any notice of transacted thereat (unless a new record
date is fixed therefor), other than an announcement at the meeting at which the
adjournment was taken.
Section 2.4. Place of Meetings. All meetings of the stockholders of the
savings bank shall be held at the principal place of business of the savings
bank, or at such other place as shall be determined from time to time by the
board of directors, and the place at which any such meeting shall be held must
be stated in the notice of the meeting.
Section 2.5. Conduct of Meetings. Annual and special meetings shall be
presided over by the chairman of the board, the chief executive officer, or the
president, or if neither the
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chairman of the board, chief executive officer nor the president is present, by
such other officer as designated by the board of directors. The presiding
officer shall determine the order of the business and the procedure at the
meeting, including such regulation of the manner of voting and conduct of the
discussion.
Section 2.6. Record Date. For the purpose of determining the
stockholders entitled to notice of and to vote at any meeting of the
stockholders or any adjournment thereof, or stockholders entitled to receive
payment of a dividend, or to make a determination of stockholders for any other
proper purpose, the board of directors shall fix in advance a date as a record
date for any such determination of stockholders. Such date shall not be more
than 60 days and in the case of a meeting of stockholders, not less than 10
before any such meeting. At least 10 days before each meeting of stockholders, a
complete record of stockholders entitled to vote shall be made, arranged in
alphabetical order, with the address of and number of shares held by each, which
record shall be kept on file at the registered office of the savings bank for a
period of ten days prior to such meeting. The record shall be kept open at the
time and place of the meeting for the inspection of any stockholder. The
original stock transfer books shall constitute prima facie evidence of the
stockholders entitled to examine such record or transfer books or to vote any
meeting of stockholders.
Section 2.7. Quorum. A majority of the outstanding shares of stock of
the savings bank entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of stockholders. If less than a majority of the
outstanding shares is represented at a meeting, a majority of the shares so
represented may adjourn the meeting from time to time without further notice. At
such adjourned meeting at which a quorum is determined to be present or
represented, any business may be transacted which might have been transacted at
the meeting as originally notified. The stockholders present at a duly organized
meeting may continue to transact business until adjournment, notwithstanding the
withdrawal of enough stockholders to constitute less than a quorum.
Section 2.8. Proxies. At all meetings of stockholders, a stockholder
may vote either in person or by proxy executed in writing by the stockholder or
by his or her duly authorized attorney in fact. Proxies solicited on behalf of
management shall be voted as directed by the stockholder or, in the absence of
such direction as determined by a majority of the board of directors. No proxy
shall be valid for more than eleven months from the date of its execution.
Section 2.9. Waiver of Notice. Any notice required to be given to any
stockholder, may be subject to a waiver thereof in writing, signed by the person
or persons entitled to such notice, whether before or after the time stated
therein for the meeting, and such waiver of notice shall be equivalent to giving
such notice in a timely manner.
Section 2.10. Voting Shares in the Name of Two or More Persons. When
ownership stands in the name of two or more persons, in the absence of written
directions to the savings bank to the contrary, at any meeting of the
stockholders of the savings bank any one or more of such stockholders may cast,
in person or by proxy, all votes to which such ownership is entitled. In the
event an attempt is made to cast conflicting votes, in person or by proxy, by
the several persons in whose names shares of stock is held, the vote or votes to
which those persons are
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entitled shall be cast as directed by a majority of those holding such stock and
present in person or by proxy at such meeting, but no votes shall be cast for
such stock if a majority cannot agree.
Section 2.11. Voting of Shares by Certain Holders.
(a) Shares standing in the name of another corporation may be voted by
an officer, agent or proxy as the bylaws of such corporation may prescribe, or,
in the absence of such provision, as the board of directors of such corporation
may determine. Shares held by an administrator, executor, guardian or
conservator may be voted by him, either in person or proxy, without a transfer
of such shares into his name. Shares standing in the name of a trustee may be
voted by him, either in person or by proxy, but no trustee shall be entitled to
vote shares held by him without a transfer of such shares into his name. Shares
standing in the name of a receiver may be voted by such receiver, without the
transfer thereof into his name if authority to do so is contained in an
appropriate order of the court or other public authority by which such receiver
was appointed. A stockholder whose shares are pledged shall be entitled to vote
such shares until the shares have been transferred into the name of the pledgee,
and thereafter the pledgee shall be entitled to vote the shares so transferred.
(b) Neither treasury shares of its own stock held by the savings bank,
nor shares held by another corporation, if majority of the shares entitled to
vote for the election of directors of such other corporation are held by the
savings bank, shall be voted at any meeting or counted in determining the total
number of outstanding shares at any given time for purposes of any meeting.
Section 2.12. Inspectors. For each meeting of stockholders, the board
of directors may appoint one or more inspectors of election. If for any meeting
the inspector(s) appointed by the board of directors shall be unable to act or
the board of directors shall fail to appoint any inspector, one or more
inspectors may be appointed at the meeting by the chairman thereof. Such
inspector(s) shall conduct the voting in each election of directors and, as
directed by the board of directors or the chairman of the meeting, the voting on
the matters to be voted on at such meeting, and after the voting shall make a
certificate of the vote taken. Inspectors need not be stockholders.
ARTICLE III. BOARD OF DIRECTORS
Section 3.1. Number and Powers.
(a) The management of all the affairs, property and interest of the
savings bank shall be vested in a board of directors. The board of directors
shall consist of at least five persons as of the effective date of these Amended
and Restated Bylaws; the number of directors shall be fixed, from time to time,
by resolution of the board of directors, subject to such limitations as may be
set forth in the Articles. Directors need not be residents of the State of Texas
but must meet the qualification requirements set forth in the Articles. In
addition to the powers and authorities expressly conferred upon by the Articles
and these Bylaws, the board of directors may exercise all such powers of the
savings bank and do all lawful acts and things as are not by statute, the
Articles, or these Bylaws directed or required to be exercised or done by the
stockholders.
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(b) No person shall be eligible for election, reelection, appointment
or reappointment to the board of directors if he or she is then 70 or more years
of age. No director shall serve beyond the annual meeting of the Savings Bank
immediately following his or her 70th birthday.
(c) The directors, other than those who may be elected by the holders
of any class or series of preferred stock, shall be divided into three classes,
as nearly equal in number as reasonably possible, with the term of office of the
first class to expire at the conclusion of the first annual meeting of
stockholders, the term of office of the second class to expire at the conclusion
of the annual meeting of stockholders one year thereafter and the term of office
of the third class to expire at the conclusion of the annual meeting of
stockholders two years thereafter, with each director to hold office until his
or her successor shall have been duly elected and qualified. At each annual
meeting of stockholders, commencing with the first annual meeting, directors
elected to succeed those directors whose terms expire shall be elected for a
term of office to expire at the third succeeding annual meeting of stockholders
after their election, with each director to hold office until his or her
successor shall have been duly elected and qualified.
Section 3.2. Change in Number. The number of directors may at any time
be increased or decreased by a vote of a majority of the whole board of
directors, provided that no decrease shall have the effect of shortening the
term of any incumbent director except as provided in Section 3.5 hereunder.
Section 3.3. Vacancies. In the event of a vacancy on the board of
directors, the remaining directors shall have full power and authority to
continue direction of the savings bank until such vacancy is filled. All
vacancies in the board of directors, whether caused by resignation, death or
otherwise, shall be filled by election at an annual or special meeting of the
stockholders called for that purpose or by an affirmative vote of the remaining
directors.
Section 3.4. Resignation. Any director may resign at any time by
sending a written notice of such resignation to the principal office of the
savings bank addressed to the chairman of the board, the chief executive officer
or the president. Unless otherwise specified, such resignation shall take effect
upon receipt of the chairman of the board, the chief executive officer or the
president.
Section 3.5. Removal of Directors. Directors may be removed with or
without cause at any special or annual meeting of the stockholders, by an
affirmative vote of a majority of the number of shares of stock present, in
person or by proxy, at such meeting and entitled to vote for the election of
such director, if notice of intention to act upon such matter shall have been
given in the notice calling such meeting.
Section 3.6. Regular Meetings. Regular meeting of the board of
directors or any such committee may be held without notice at the principal
office of the savings bank or at such other place or places, either within or
without the State of Texas, as the board of directors or such committee, as the
case may be, may from time to time designate. The annual meeting of the board of
directors shall be held without notice immediately after the adjournment of the
annual meeting of stockholders.
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Section 3.7. Special Meetings. Special meetings of the board of
directors may be called at any time by the chairman, the chief executive
officer, the president or by a majority of the whole board of directors, to be
held at the home office of the savings bank or at such other place or places as
the board of directors or the person or persons calling such meeting may from
time to time designate. Notice of all special meetings of the board of directors
shall be given to each director at least two days before the date of the
meeting. Such notice need not specify the business to be transacted nor the
purpose of the meeting.
Section 3.8. Quorum. A majority of the whole board of directors shall
be necessary at all meetings to constitute a quorum for the transaction of
business. If less than a majority is present at a meeting of the whole board of
directors, a majority of the directors present may adjourn the meeting from time
to time, without notice other than the announcement at the meeting, until a
quorum shall be present. The act of a majority of the whole board of directors
present at a meeting at which a quorum is present shall be the act of the board
of directors, unless the act of a greater number is required by law, the
Articles or these Bylaws.
Section 3.9. Remuneration. By resolution of the board of directors, a
reasonable fixed sum and expenses of attendance, if any, may be allowed for
attendance at such regular or special meetings of such board. Members of
standing or special committees may, by resolution of the board of directors, be
allowed like compensation for attending committee meetings.
Section 3.10. Action by Directors Without a Meeting. Any action
required or which may be taken at a meeting of the directors, or of a committee
thereof, may be taken without a meeting if a consent in writing, setting forth
the action so taken or to be taken, shall be signed by all of the directors, or
all of the members of the committee, as the case may be. Such consent shall have
the same effect as a unanimous vote.
Section 3.11. Action of Directors by Communications Equipment. Any
action required or which may be taken at a meeting of directors, or of a
committee thereof, may be taken by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other at the same time. Such participation shall
constitute presence in person but shall not constitute attendance for the
purpose of remuneration pursuant to Section 3.9 hereof.
ARTICLE IV. COMMITTEES
Section 4.1. Committees. The board of directors, by resolution passed
by a majority of the entire board of directors, may from time to time designate
members of the board of directors to constitute committees, including an
executive committee and an audit committee, which shall in each case consist of
such number of directors, not less than two, and shall have and may exercise
such powers as the board of directors may determine and specify in the
respective resolutions appointing them. The board of directors shall have the
power at any time to change the number and members (with or without cause) of
any such committee, to fill vacancies and to discharge any such committee.
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ARTICLE V. OFFICERS
Section 5.1. Designations. The officers of the savings bank shall be a
president, chairman of the board, chief executive officer, secretary, treasurer,
and such vice presidents, assistant secretaries and assistant treasurers as the
board may designate, who shall be elected by a majority vote of the directors at
their first meeting after the annual meeting of stockholders, and who shall hold
office until their successors are elected and qualify. Any two or more offices
may be held by the same person, except the offices of the chief executive
officer and the president may not be a secretary.
Section 5.2. Powers and Duties. The officers of the savings bank shall
have such authority and perform such duties as the board of directors may from
time to time authorize or determine. In the absence of action by the board of
directors, the officers shall have such powers and duties as generally pertain
to their respective offices.
Section 5.3. Vacancies. Vacancies in any office rising from any cause
may be filled by a majority vote of the board of directors at any regular or
special meeting of the board for the unexpired portion of the term.
Section 5.4. Other Officers. Directors may appoint such other officers
and agents as it shall deem necessary or expedient, who shall hold their offices
for such terms and shall exercise such powers and perform such duties as shall
be determined from time to time by the board of directors.
Section 5.5. Term. The officers of the savings bank shall hold office
until their successors are chosen and qualify or until such officer's death,
resignation or removal in the manner herein provided. The board of directors may
authorize the savings bank to enter into an employment contract with any officer
in accordance with applicable law or regulation; but no such contract shall
impair the right of the board of directors to remove any officer at any time.
Section 5.6. Removal. Any officer or agent elected or appointed by the
board of directors may be removed at any time, with or without cause, by the
affirmative vote of a majority of the whole board of directors, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed.
ARTICLE VI. CAPITAL STOCK
Section 6.1. Certificates. Certificates of stock shall be issued in
numerical order, and each stockholder shall be entitled to a certificate signed
by the chief executive officer, the president, or a vice president and the
secretary and may be sealed with the seal of the savings bank or a facsimile
thereof. The signatures of such officers may be facsimiles if the certificate is
manually signed on behalf of a transfer agent, or registered by a registrar,
other than the savings bank itself or an employee of the savings bank. If an
officer who has signed or whose facsimile signature has been placed upon such
certificate ceases to be an officer before the certificate is
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issued, it may be issued by the savings bank with the same effect as if the
person were an officer on the date of issue. Each stock certificate shall state:
(a) That the savings bank is organized under the laws of the State of
Texas;
(b) The name of the person to whom issued;
(c) The number and class of shares and the designation of the series,
if any, which such certificate represents; and
(d) The par value of each share represented by such certificate, or a
statement that such shares are without par value.
Section 6.2. Transfers.
(a) Transfers of stock shall be made only upon the stock transfer books
of the savings bank, kept at the registered office of the savings bank or at its
principal place of business, or at the office of its transfer agent or register,
and before a new certificate is issued the old certificate shall be surrendered
for cancellation. The board of directors may, by resolution, open a share
register in any state of the United States, and may employ an agent or agents to
keep such register, and to record transfers of shares therein.
(b) Shares of stock shall be transferred by delivery of the
certificates therefor, accompanied either by an assignment in writing on the
back of the certificate or an assignment separate from the certificate, or by
written power of attorney to sell, assign and transfer the same, signed by the
holder of said certificate. No shares of stock shall be transferred on the books
of the savings bank until the outstanding certificates therefor have been
surrendered to the savings bank.
Section 6.3. Registered Owner. Registered stockholders shall be treated
by the savings bank as the holders in fact of the stock standing in their
respective names and the savings bank shall not be bound to recognize any
equitable or other claim to or interest in any share on the part of any other
person, whether or not it shall have express or other notice thereof, except as
expressly provided below or by the laws of the State of Texas. The savings bank
may adopt by resolution a procedure whereby a stockholder of the savings bank
may certify in writing to the savings bank that all or a portion of the shares
registered in the name of such stockholder are held for the account of a
specified person or persons. The resolution shall set forth:
(a) The classification of stockholder who may certify;
(b) The purpose or purposes for which the certification may be made;
(c) The form of certification and information to be contained therein;
(d) If the certification is with respect to a record date or closing of
the stock transfer books, the date within which the certification must
be received by the savings bank; and
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(e) Such other provisions with respect to the procedure as are deemed
necessary or desirable.
Upon receipt by the savings bank of a certification complying with the
above requirements, the persons specified in the certification shall be deemed,
for the purpose or purposes set forth in the certification, to be the holders of
record of the number of shares specified in place of the stockholder making the
certification.
Section 6.4. Mutilated, Lost or Destroyed Certificates. In case of any
mutilation, loss or destruction of any certificate of stock, another may be
issued in its place upon receipt of proof of such mutilation, loss or
destruction. The board of directors may impose conditions on such issuance and
may require the giving of satisfactory bond or indemnity to the savings bank in
such sum as they might determine or establish such other procedures as they deem
necessary.
Section 6.5. Shares of Another Corporation. Shares owned by the savings
bank in another corporation, domestic or foreign, may be voted by such officer,
agent or proxy as the board of directors may determine or, in the absence of
such determination, by the chief executive officer, or the president of the
savings bank.
ARTICLE VII. CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 7.1. Contracts. The board of directors may authorize any
officer, employee or agent of the savings bank to enter into any contract or
execute and deliver any instrument in the name and on behalf of the savings
bank. Such authority may be general or confined to specific instances.
Section 7.2. Loans. No loans shall be contracted on behalf of the
savings bank and no evidence of indebtedness shall be issued in its name unless
authorized by the board of directors. Such authority may be general or confined
to specific instances.
Section 7.3. Checks, Drafts, Etc. All checks, drafts or other orders
for the payment of money, notes, or other evidences of indebtedness issued in
the name of the savings bank shall be signed by one or more officers, employees
or agents of the savings bank in such a manner as shall from time to time be
determined by the board of directors.
Section 7.4. Deposits. All funds of the savings bank not otherwise
employed shall be deposited from time to time to the credit of the savings bank
in any of its duly authorized depositories as the board of directors may select.
Section 7.5. Fidelity Bonds. A blanket indemnity bond, as required by
law, covering all officers, employees and any director of the savings bank when
performing the duty of an employee or officer shall be maintained by the savings
bank, which is satisfactory to the Savings and Loan Commissioner of Texas and
the Federal Deposit Insurance Corporation.
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ARTICLE VIII. INDEMNIFICATION AND LIMITATION OF LIABILITY
Directors, officers, agents and employees of the savings bank shall be
indemnified and the personal liability of directors shall be limited, as
provided in the Articles.
ARTICLE IX. FISCAL YEAR; ANNUAL AUDIT
The fiscal year of the savings bank shall end on the 31st day of
December of each year. The savings bank shall be subject to an annual audit as
of the end of its fiscal year by independent public accountants appointed by and
responsible to the board of directors.
ARTICLE X. DIVIDENDS
Subject to the terms of the savings bank's Articles and applicable
statute, the board of directors may, from time to time, declare, and the savings
bank may pay, dividends on its outstanding shares of capital stock.
ARTICLE XI. SEAL
The corporate seal of the savings bank shall be in such form and bear
such inscription as may be adopted by resolution of the board of directors, or
by usage of the officers on behalf of the association.
ARTICLE XII. BOOKS AND RECORDS
The savings bank shall keep correct and complete books and records of
account and shall keep minutes and proceedings of its stockholders and board of
directors; and it shall keep at its registered office or principal place of
business, or at the office of its transfer agent or registrar, a record of its
stockholders, giving the names and addresses of all stockholders and the number
and class of the shares held by each. Any books, records and minutes may be in
written form or any other form capable of being converted into written form
within a reasonable time.
ARTICLE XIII. AMENDMENTS AND CONSTRUCTION
Section 8.1. Amendment. The board of directors or stockholders may
adopt, alter, amend or repeal these Bylaws, subject to the right of the
stockholders to rescind any board action with regard to the Bylaws at a regular
or special meeting of the stockholders called expressly for such purpose.
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Section 8.2. Severability. If any portion of the Bylaws shall be
invalid or inoperative, then, so far as is reasonable, the remainder of these
Bylaws shall be considered valid and operative and effect shall be given to the
intent manifested by the portion held invalid and inoperative.
As adopted by resolution of the board of directors of Community Bank of
Central Texas, ssb on [________________________________] and as approved by the
Savings Bank's sole stockholder on [________________________________] , 2000.
Secretary
APPROVED this day of , 2000.
Savings and Loan Commissioner of Texas
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EXHIBIT 4
NUMBER
COMMON STOCK
CUSIP No. __________________
CBCT BANCSHARES, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF MARYLAND
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NONASSESSABLE SHARES OF COMMON STOCK, PAR VALUE $.01 PER SHARE
OF
CBCT Bancshares, Inc.
(the "Corporation"), a Maryland corporation. The shares represented by this
certificate are transferable only on the stock transfer books of the Corporation
by the holder of record hereof, or by his duly authorized attorney or legal
representative, upon the surrender of this certificate properly endorsed. This
certificate is not valid until countersigned and registered by the Corporation's
transfer agent and registrar. THIS SECURITY IS NOT A DEPOSIT OR ACCOUNT AND IS
NOT FEDERALLY INSURED OR GUARANTEED.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
executed by the facsimile signatures of its duly authorized officers and has
caused a facsimile of its corporate seal to be hereunto affixed.
DATED
_________________ Brad M. Hurta
Corporate Secretary [Seal] President and Chief Executive Officer
Countersigned and Registered:
[ Name ]
Transfer Agent and Registrar
<PAGE>
CBCT BANCSHARES, INC.
The shares represented by this certificate are issued subject to all
the provisions of the Articles of Incorporation and Bylaws of CBCT Bancshares,
Inc. (the "Corporation") as from time to time amended (copies of which are on
file at the principal executive offices of the Corporation).
The Corporation's Articles of Incorporation provides that no "person"
(as defined in the Articles of Incorporation) who "beneficially owns" (as
defined in the Articles of Incorporation) in excess of 10% of the outstanding
shares of the Corporation shall be entitled to vote any shares held in excess of
such limit. This provision of the Articles of Incorporation shall not apply to
an acquisition of securities of the Corporation by an employee stock purchase
plan or other employee benefit plan of the Corporation or any of its
subsidiaries.
The Corporation's Articles of Incorporation also includes a provision
the general effect of which is to require the affirmative vote of the holders of
80% of the outstanding voting shares of the Corporation to approve certain
"business combinations" (as defined in the Articles of Incorporation) between
the Corporation and a stockholder owning in excess of 10% of the outstanding
shares of the Corporation. However, only the affirmative vote of a majority of
the outstanding shares or such vote as is otherwise required by law (rather than
the 80% voting requirement) is applicable to the particular transaction if it is
approved by a majority of the "disinterested directors" (as defined in the
Articles of Incorporation) or, alternatively, the transaction satisfies certain
minimum price and procedural requirements.
The Corporation will furnish to any stockholder upon request and
without charge a full statement of the powers, designations, preferences and
relative participating, optional or other special rights of each authorized
class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights, to the extent that the same have
been fixed, and of the authority of the board of directors to designate the same
with respect to other series. Such request may be made to the Corporation or to
its Transfer Agent and Registrar.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT Custodian
------- --------
TEN ENT - as tenants by the entirety (Cust) (Minor)
JT TEN - as joint tenants with right of Under Uniform Gift to Minors Act -
survivorship and not as tenants (State)
in common. UNIF TRANS MIN ACT Custodian
(Cust) (Minor)
Under Uniform Transfers to Minors Act -
(State)
Additional abbreviations may also be used though not in
the above list.
For Value Received, hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- ------------------------------ (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS,
INCLUDING ZIP CODE, OF ASSIGNEE)
- ------------------------------
Shares of Common Stock represented by the
within certificate, and do hereby
irrevocably constitute and appoint
____________________________ Attorney to
transfer the said shares on the books of the
within named Corporation with full power of
substitution in the premises.
Dated
NOTICE: THE SIGNATURE TO THIS
ASSIGNMENT MUST CORRESPOND WITH
THE NAME AS WRITTEN UPON THE
FACE OF THE CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERATION
OR ENLARGEMENT OR ANY CHANGE
WHATEVER.
EXHIBIT 5
[SILVER, FREEDMAN & TAFF, L.L.P. LETTERHEAD]
March 22, 2000
The Board of Directors
CBCT Bancshares, Inc.
312 Main Street
Smithville, Texas 78957-2035
Re: Registration Statement
Under the Securities Act of 1933
Gentlemen:
This opinion is rendered in connection with the Registration Statement
to be filed on Form SB-2 with the Securities and Exchange Commission under the
Securities Act of 1933 relating to the 304,175 shares of Common Stock of CBCT
Bancshares, Inc. (the "Company"), par value $.01 per share, to be issued. As
counsel, we have reviewed the Articles of Incorporation of the Company and such
other documents as we have deemed appropriate for the purpose of this opinion.
We are rendering this opinion as of the time the Registration Statement referred
to above becomes effective.
Based on the foregoing, we are of the opinion that the shares of Common
Stock of the Company covered by the aforesaid Registration Statement will, when
sold, be validly issued, fully paid and non-assessable shares of Common Stock of
the Company.
Very truly yours,
/s/ Silver, Freedman & Taff, L.L.P.
SILVER, FREEDMAN & TAFF, L.L.P.
EXHIBIT 8.1
[LETTERHEAD OF SILVER, FREEDMAN & TAFF, L.L.P.]
March 15, 2000
Board of Directors
Community Bank of Central Texas, ssb
312 Main Street
Smithville, TX 78957-2035
RE: Federal Income Tax Opinion Relating To The Conversion Of Community Bank
of Central Texas ssb From A State-Chartered Mutual Savings and Loan
Association To A State-Chartered Stock Institution Under Section
368(a)(1)(F) of the Internal Revenue Code of 1986, As Amended
Gentlemen:
In accordance with your request set forth hereinbelow is the opinion of
this firm relating to the federal income tax consequences of the conversion of
Community Bank of Central Texas, ssb ("Mutual") from a state mutual to a state
stock institution pursuant to the provisions of Section 368(a)(1)(F) of the
Internal Revenue Code of 1986, as amended (the "Code").
Capitalized terms used herein which are not expressly defined herein
shall have the meaning ascribed to them in the Plan of Conversion dated December
4, 1999 (the "Plan").
The following assumptions have been made in connection with our
opinions hereinbelow:
1. The Conversion is implemented in accordance with the terms
of the Plan and all conditions precedent contained in the Plan shall be
performed or waived prior to the consummation of the Conversion.
<PAGE>
Board of Directors
March 15, 2000
Page 2
2. No amount of the savings accounts and deposits of Mutual,
as of the Eligibility Record Date or the Supplemental Eligibility
Record Date, will be excluded from participating in the liquidation
account of Converted Bank. To the best of the knowledge of the
management of Mutual there is not now, nor will there be at the time of
the Conversion, any plan or intention, on the part of the depositors in
Mutual to withdraw their deposits following the Conversion. Deposits
withdrawn immediately prior to or immediately subsequent to the
Conversion (other than maturing deposits) are considered in making
these assumptions.
3. Holding Company and Converted Bank each have no plan or
intention to redeem or otherwise acquire any of the Holding Company
Conversion Stock to be issued in the proposed transaction.
4. Immediately following the consummation of the proposed
transaction, Converted Bank will possess the same assets and
liabilities as Mutual held immediately prior to the proposed
transaction, plus substantially all of the net proceeds from the sale
of its stock to Holding Company except for assets used to pay expenses
of the Conversion. The liabilities transferred to Converted Bank were
incurred by Mutual in the ordinary course of business.
5. No cash or property will be given to holders of Deposit
Accounts in lieu of Subscription Rights or an interest in the
liquidation account of Converted Bank.
6. Following the Conversion, Converted Bank will continue to
engage in its business in substantially the same manner as Mutual
engaged in business prior to the Conversion, and it has no plan or
intention to sell or otherwise dispose of any of its assets, except in
the ordinary course of business.
7. There is no plan or intention for Converted Bank to be
liquidated or merged with another corporation following the
consummation of the Conversion.
8. The fair market value of each Deposit Account plus an
interest in the liquidation account of Converted Bank will, in each
instance, be approximately equal to the fair market value of each
Deposit Account of Mutual plus the interest in the residual equity of
Mutual surrendered in exchange therefor.
9. Mutual, Converted Bank and Holding Company are each
corporations within the meaning of Section 7701(a)(3) of the Code.
10. Holding Company has no plan or intention to sell or
otherwise dispose of the stock of Converted Bank received by it in the
proposed transaction.
11. Both Converted Bank and Holding Company have no plan or
intention, either currently or at the time of Conversion, to issue
additional shares of common stock following the
<PAGE>
Board of Directors
March 15, 2000
Page 3
proposed transaction, other than shares that may be issued to employees
and/or directors pursuant to certain stock option and stock incentive
plans or that may be issued to employee benefit plans.
12. If all of the net proceeds from the sale of Holding
Company Conversion Stock had been contributed by Holding Company to
Converted Bank in exchange for common stock of Converted Bank in the
transaction, as opposed to Holding Company retaining a portion of such
net proceeds (the "retained proceeds"), and Converted Bank immediately
thereafter made a distribution of the retained proceeds to Holding
Company, Converted Bank would have sufficient current and accumulated
earnings and profits for tax purposes such that the distribution would
not result in the recapture of any portion of its bad debt reserves of
Converted Bank for federal income tax reporting.
13. Assets used to pay expenses of the Conversion and all
distributions (except for regular, normal interest payments and other
payments in the normal course of business made by Mutual immediately
preceding the transaction) will in the aggregate constitute less than
1% of the net assets of Mutual and any such expenses and distributions
will be paid by Converted Bank from the proceeds of the sale of Holding
Company Conversion Stock.
14. All distributions to holders of Deposit Accounts in their
capacity as Deposit Account holders (except for regular, normal
interest payments made by Mutual), will, in the aggregate, constitute
less than 1% of the fair market value of the net assets of Mutual.
15. At the time of the proposed transaction, the fair market
value of the assets of Mutual on a going concern basis (including
intangibles) will equal or exceed the amount of its liabilities plus
the amount of liabilities to which such assets are subject. Mutual will
have a positive regulatory net worth at the time of the Conversion.
16. Mutual is not under the jurisdiction of a court in a Title
11 or similar case within the meaning of Section 368(a)(3)(A) of the
Code. The proposed transaction does not involve a receivership,
foreclosure, or similar proceeding before a federal or state agency
involving a financial institution to which Section 585 of the Code
applies.
17. Mutual's Eligible Account Holders and Supplemental
Eligible Account Holders will pay expenses of the Conversion solely
attributable to them, if any.
18. The liabilities of Mutual assumed by Converted Bank plus
the liabilities, if any, to which the transferred assets are subject
were incurred by Mutual in the ordinary course of its business and are
associated with the assets being transferred.
19. There will be no purchase price advantage for Mutual's
Deposit Account holders who purchase Holding Company Conversion Stock.
<PAGE>
Board of Directors
March 15, 2000
Page 4
20. Neither Mutual nor Converted Bank is an investment company
as defined in Sections 368(a)(2)(F)(iii) and (iv) of the Code.
21. None of the compensation to be received by any Deposit
Account holder-employees of Mutual or Holding Company will be separate
consideration for, or allocable to, any of their deposits in Mutual. No
interest in the liquidation account of Converted Bank will be received
by any Deposit Account holder-employees as separate consideration for,
or will otherwise be allocable to, any employment agreement, and the
compensation paid to each Deposit Account holder-employee, during the
twelve-month period preceding or subsequent to the Conversion, will be
for services actually rendered and will be commensurate with amounts
paid to the third parties bargaining at arm's-length for similar
services. No shares of Holding Company Conversion Stock will be issued
to or purchased by any Deposit Account holder-employee of Mutual or
Holding Company at a discount or as compensation in the proposed
transaction.
22. No creditors of Mutual or the depositors in their role as
creditors, have taken any steps to enforce their claims against Mutual
by instituting bankruptcy or other legal proceedings, in either a court
or appropriate regulatory agency, that would eliminate the proprietary
interests of the Members prior to the Conversion of Mutual including
depositors as the equity holders of Mutual.
23. The proposed transaction does not involve the payment to
Converted Bank or Mutual of financial assistance from federal agencies
within the meaning of Notice 89-102, 1989-40 C.B. 1.
24. On a per share basis, the purchase price of Holding
Company Conversion Stock will be equal to the fair market value of such
stock at the time of the completion of the proposed transaction.
25. Mutual has received or will receive an opinion from
Ferguson and Company ("Appraiser's Opinion"), which concludes that the
Subscription Rights to be received by Eligible Account Holders,
Supplemental Eligible Account Holders and other eligible subscribers do
not have any ascertainable fair market value, since they are acquired
by the recipients without cost, are non-transferable and of short
duration, and afford the recipients a right only to purchase Holding
Company Conversion Stock at a price equal to its estimated fair market
value, which will be the same price paid for unsubscribed shares of
Holding Company Conversion Stock in the Direct Community Offering, if
any, or Public Offering, if any.
26. Mutual will not have any net operating losses, capital
loss carryovers or built-in losses at the time of the Conversion.
<PAGE>
Board of Directors
March 15, 2000
Page 5
OPINION
Based solely on the assumptions set forth hereinabove and our analysis
and examination of applicable federal income tax laws, rulings, regulations,
judicial precedents and the Appraiser's Opinion, we are of the opinion that if
the transaction is undertaken in accordance with the above assumptions:
(1) The Conversion will constitute a reorganization within the meaning of
Section 368(a)(1)(F) of the Code. Neither Mutual nor Converted Bank
will recognize any gain or loss as a result of the transaction (Rev.
Rul. 80-105, 1980-1 C.B. 78). Mutual and Converted Bank will each be a
party to a reorganization within the meaning of Section 368(b) of the
Code.
(2) Converted Bank will recognize no gain or loss upon the receipt of money
and other property, if any, in the Conversion, in exchange for its
shares. (Section 1032(a) of the Code.)
(3) No gain or loss will be recognized by Holding Company upon the receipt
of money for Holding Company Conversion Stock. (Section 1032(a) of the
Code.)
(4) The basis of Mutual's assets in the hands of Converted Bank will be the
same as the basis of those assets in the hands of Mutual immediately
prior to the transaction. (Section 362(b) of the Code.)
(5) Converted Bank's holding period of the assets of Mutual will include
the period during which such assets were held by Mutual prior to the
Conversion. (Section 1223(2) of the Code.)
(6) Converted Bank, for purposes of Section 381 of the Code, will be
treated as if there had been no reorganization. The tax attributes of
Mutual enumerated in Section 381(a) of the Code will be taken into
account by Converted Bank as if there had been no reorganization.
Accordingly, the tax year of Mutual will not end on the effective date
of the Conversion. The part of the tax year of Mutual before the
Conversion will be includible in the tax year of Converted Bank after
the Conversion. Therefore, Mutual will not have to file a federal
income tax return for the portion of the tax year prior to the
Conversion. (Rev. Rul. 57-276, 1957-1 C.B. 126.)
(7) Depositors will realize gain, if any, upon the constructive issuance to
them of withdrawable deposit accounts of Converted Bank, Subscription
Rights and/or interests in the liquidation account of Converted Bank.
Any gain resulting therefrom will be recognized, but only in an amount
not in excess of the fair market value of the liquidation accounts
and/or Subscription Rights received. The liquidation accounts will have
nominal, if any, fair market value. Based solely on the accuracy of the
conclusion reached in the Appraiser's Opinion, and our reliance on such
opinion, that the Subscription Rights have no value at the time of
distribution or exercise, no gain or loss will be required to be
recognized by depositors upon receipt or distribution of Subscription
<PAGE>
Board of Directors
March 15, 2000
Page 6
Rights. (Section 1001 of the Code.) See Paulsen v. Commissioner, 469
U.S. 131,139 (1985). Likewise, based solely on the accuracy of the
aforesaid conclusion reached in the Appraiser's Opinion, and our
reliance thereon, we give the following opinions: (a) no taxable income
will be recognized by the borrowers, directors, officers and employees
of Mutual upon the distribution to them of Subscription Rights or upon
the exercise or lapse of the Subscription Rights to acquire Holding
Company Conversion Stock at fair market value; (b) no taxable income
will be realized by the depositors of Mutual as a result of the
exercise or lapse of the Subscription Rights to purchase Holding
Company Conversion Stock at fair market value. Rev. Rul. 56-572, 1956-2
C.B. 182; and (c) no taxable income will be realized by Mutual,
Converted Bank or Holding Company on the issuance or distribution of
Subscription Rights to depositors of Mutual to purchase shares of
Holding Company Conversion Stock at fair market value. (Section 311 of
the Code.)
Notwithstanding the Appraiser's Opinion, if the Subscription
Rights are subsequently found to have a fair market value, income may
be recognized by various recipients of the Subscription Rights (in
certain cases, whether or not the rights are exercised) and Holding
Company and/or Converted Bank may be taxable on the distribution of the
Subscription Rights. (Section 311 of the Code.) In this regard, the
Subscription Rights may be taxed partially or entirely at ordinary
income tax rates.
(8) The creation of the liquidation account on the records of Converted
Bank will have no effect on Mutual's or Converted Bank's taxable
income, deductions, or tax bad debt reserve.
(9) A depositor's basis in the Deposit Accounts of Converted Bank will be
the same as the basis of his Deposit Accounts in Mutual. (Section 1012
of the Code.) Based upon the Appraiser's Opinion, the basis of the
Subscription Rights will be zero. The basis of the interest in the
liquidation account of Converted Bank received by Eligible Account
Holders and Supplemental Eligible Account Holders will be equal to the
cost of such property, i.e., the fair market value of the proprietary
interest in Mutual, which in this transaction we assume to be zero.
(10) The basis of Holding Company Conversion Stock to its shareholders will
be the purchase price thereof. (Section 1012 of the Code.)
(11) A shareholder's holding period for Holding Company Conversion Stock
acquired through the exercise of the Subscription Rights shall begin on
the date on which the Subscription Rights are exercised. (Section
1223(6) of the Code.) The holding period for the Holding Company
Conversion Stock purchased pursuant to the Direct Community Offering,
Public Offering or under other purchase arrangements will commence on
the date following the date on which such stock is purchased. (Rev.
Rul. 70-598, 1970-2 C.B. 168).
(12) Regardless of any book entries that are made for the establishment of a
liquidation account, the reorganization will not diminish the
accumulated earnings and profits of Mutual available for the subsequent
distribution of dividends, within the meaning of Section 316 of
<PAGE>
Board of Directors
March 15, 2000
Page 7
the Code. Section 1.312-11(b) and (c) of the Regulations. Converted
Bank will succeed to and take into account the earnings and profits or
deficit in earnings and profits of Mutual as of the date of Conversion.
The above opinions are effective to the extent that Mutual is solvent.
No opinion is expressed about the tax treatment of the transaction if Mutual is
insolvent. Whether or not Mutual is solvent will be determined at the end of the
taxable year in which the transaction is consummated.
No opinion is expressed as to the tax treatment of the transaction
under the provisions of any of the other sections of the Code and Income Tax
Regulations which may also be applicable thereto, or to the tax treatment of any
conditions existing at the time of, or effects resulting from, the transaction
which are not specifically covered by the opinions set forth above.
Respectfully submitted,
SILVER, FREEDMAN & TAFF
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of
this ___ day of __________, 2000, by and between Community Bank of Central
Texas, ssb (hereinafter referred to as the "Bank" whether in mutual or stock
form), and Brad M. Hurta (the "Employee").
WHEREAS, the Employee is currently serving as President and Chief
Executive Officer of the Bank; and
WHEREAS, the Bank has adopted a plan of conversion whereby the Bank
will convert to capital stock form as the subsidiary of CBCT Bancshares, Inc.
(the "Holding Company"), subject to the approval of the Bank's members, the
Texas Savings and Loan Department, the Federal Deposit Insurance Corporation and
the Board of Governors of the Federal Reserve System (the "Conversion"); and
WHEREAS, the board of directors of the Bank ("Board of Directors")
recognizes that, as is the case with publicly held corporations generally, the
possibility of a change in control of the Holding Company and/or the Bank may
exist and that such possibility, and the uncertainty and questions which it may
raise among management, may result in the departure or distraction of key
management personnel to the detriment of the Bank, the Holding Company and their
respective stockholders; and
WHEREAS, the Board of Directors believes it is in the best interests of
the Bank to enter into this Agreement with the Employee in order to assure
continuity of management of the Bank and to reinforce and encourage the
continued attention and dedication of the Employee to the Employee's assigned
duties without distraction in the face of potentially disruptive circumstances
arising from the possibility of a change in control of the Holding Company or
the Bank, although no such change is now contemplated; and
WHEREAS, the Board of Directors has approved and authorized the
execution of this Agreement with the Employee to take effect as stated in
Section 2 hereof;
NOW, THEREFORE, in consideration of the foregoing and of the respective
covenants and agreements of the parties herein, it is AGREED as follows:
1. Definitions.
(a) The term "Change in Control" means the occurrence of any
one of the following events: (1) an event of a nature that results in an
acquisition of control of the Holding Company or the Bank within the meaning of
the Bank Holding Company Act or the Change in Bank Control Act and applicable
regulations thereunder (or any successor statute or regulation); (2) an event
with respect to the Holding Company that would be required to be reported in
response to Item 1 of the Current Report on Form 8-K, as in effect on the date
of this Agreement, pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 (the "Exchange Act"); (3) any person (as the term is used in
Sections 13(d) and 14(d) of the Exchange Act) is or becomes the beneficial owner
(as defined in Rule 13d-3 under the Exchange Act) directly or indirectly of
securities of the Holding
1
<PAGE>
Company or the Bank representing 25% or more of the combined voting power of the
Holding Company's or the Bank's outstanding securities; (4) individuals who are
members of the Board of Directors of the Holding Company as of the date of this
Agreement (the "Incumbent Board") cease for any reason to constitute at least a
majority thereof, provided that any person becoming a director subsequent to the
date of this Agreement whose election was approved by a vote of at least
three-quarters of the directors comprising the Incumbent Board, or whose
nomination for election by the Holding Company's stockholders was approved by
the nominating committee serving under the Incumbent Board, shall be considered
a member of the Incumbent Board; (5) consummation of a reorganization, merger,
consolidation or similar transaction in which the Holding Company is not the
resulting entity; (6) consummation of a reorganization, merger, consolidation or
similar transaction in which the Holding Company is the resulting entity and at
the completion of which the stockholders of the Holding Company who were
stockholders of the Holding Company immediately prior to the transaction hold
less than 60% of the outstanding stock of the Holding Company immediately after
consummation of the transaction; or (7) a sale of all or substantially all of
the assets of the Holding Company or a transaction or related transactions at
the conclusion of which all or substantially all of the assets of the Bank (i)
are not directly or indirectly held by the Holding Company or (ii) are directly
or indirectly held by the Holding Company but the stockholders of the Holding
Company immediately prior to the transaction or related transactions hold less
than 60% of the outstanding stock of the Holding Company immediately after the
transaction or related transactions; provided that the term "Change in Control"
shall not include an acquisition of securities by an employee benefit plan of
the Holding Company or any of its subsidiaries. In the application of
regulations under the Bank Holding Company Act or the Change in Bank Control Act
to a determination of a Change in Control under this Agreement, determinations
to be made by the applicable federal banking regulator under such regulations
shall be made by the Board of Directors.
(b) The term "Commencement Date" means the date of completion
of Conversion.
(c) The term "Date of Termination" means the earlier of (1)
the date upon which the Bank gives notice to the Employee of the termination of
the Employee's employment with the Bank or (2) the date upon which the Employee
ceases to serve as an employee of the Bank.
(d) The term "Involuntary Termination" means termination of
the employment of Employee without the Employee's express written consent, and
shall include a material diminution of or interference with the Employee's
duties, responsibilities and benefits as President and Chief Executive Officer
of the Bank, including (without limitation) any of the following actions unless
consented to in writing by the Employee: (1) a change in the principal workplace
of the Employee to a location outside of a 30 mile radius from the Bank's
headquarters office as of the date hereof; (2) a material demotion of the
Employee; (3) a material reduction in the number or seniority of other Bank
personnel reporting to the Employee or a material reduction in the frequency
with which, or in the nature of the matters with respect to which, such
personnel are to report to the Employee, other than as part of a Bank- or
Holding Company-wide reduction in staff; (4) a material adverse change in the
Employee's salary, perquisites, benefits, contingent benefits or vacation, other
than as part of an overall program applied uniformly and with equitable effect
to all members of the senior management of the Bank or the Holding Company; and
(5) a material permanent increase in the required hours of work or the workload
of the Employee. The term "Involuntary Termination" does
2
<PAGE>
not include Termination for Cause or termination of employment due to
retirement, death, disability or suspension or temporary or permanent
prohibition from participation in the conduct of the Bank's affairs under
Section 8 of the Federal Deposit Insurance Act ("FDIA").
(e) The terms "Termination for Cause" and "Terminated for
Cause" mean termination of the employment of the Employee because of the
Employee's personal dishonesty, incompetence, willful misconduct, breach of a
fiduciary duty involving personal profit, intentional failure to perform stated
duties, willful violation of any law, rule, or regulation (other than traffic
violations or similar offenses) or final cease-and-desist order, or material
breach of any provision of this Agreement. The Employee shall not be deemed to
have been Terminated for Cause unless and until there shall have been delivered
to the Employee a copy of a resolution, duly adopted by the affirmative vote of
not less than a majority of the entire membership of the Board of Directors at a
meeting of the Board called and held for such purpose (after reasonable notice
to the Employee and an opportunity for the Employee, together with the
Employee's counsel, to be heard before the Board), stating that in the good
faith opinion of the Board the Employee has engaged in conduct described in the
preceding sentence and specifying the particulars thereof in detail.
2. Term. The term of this Agreement shall be a period of three years
commencing on the Commencement Date, subject to earlier termination as provided
herein. Beginning on the first anniversary of the Commencement Date, and on each
anniversary thereafter, the term of this Agreement shall be extended for a
period of one year in addition to the then-remaining term, provided that the
Bank has not given notice to the Employee in writing at least 90 days prior to
such anniversary that the term of this Agreement shall not be extended further.
3. Employment. The Employee is employed as President and Chief
Executive Officer of the Bank. As such, the Employee shall render administrative
and management services as are customarily performed by persons situated in
similar executive capacities, and shall have such other powers and duties of an
officer of the Bank as the Board of Directors may prescribe from time to time.
4. Compensation.
(a) Salary. The Bank agrees to pay the Employee during the
term of this Agreement the salary established by the Board of Directors, which
shall be at least the Employee's salary in effect as of the Commencement Date.
The amount of the Employee's salary shall be reviewed by the Board of Directors,
beginning not later than the first anniversary of the Commencement Date.
Adjustments in salary or other compensation shall not limit or reduce any other
obligation of the Bank under this Agreement. The Employee's salary in effect
from time to time during the term of this Agreement shall not thereafter be
reduced.
(b) Discretionary Bonuses. The Employee shall be entitled to
participate in an equitable manner with all other executive officers of the Bank
in discretionary bonuses as authorized and declared by the Board of Directors to
its executive employees. No other compensation provided for in this Agreement
shall be deemed a substitute for the Employee's right to participate in such
bonuses when and as declared by the Board of Directors.
3
<PAGE>
(c) Expenses. The Employee shall be entitled to receive prompt
reimbursement for all reasonable expenses incurred by the Employee in performing
services under this Agreement in accordance with the policies and procedures
applicable to the executive officers of the Bank, provided that the Employee
accounts for such expenses as required under such policies and procedures.
5. Benefits.
(a) Participation in Retirement and Employee Benefit Plans.
The Employee shall be entitled to participate in all plans relating to pension,
thrift, profit-sharing, group life insurance, medical and dental coverage,
education, cash bonuses, and other retirement or employee benefits or
combinations thereof, in which the Bank's executive officers participate.
(b) Fringe Benefits. The Employee shall be eligible to
participate in, and receive benefits under, any fringe benefit plans which are
or may become applicable to the Bank's executive officers.
6. Vacations; Leave. The Employee shall be entitled to annual paid
vacation in accordance with the policies established by the Bank's Board of
Directors for executive officers and to voluntary leave of absence, with or
without pay, from time to time at such times and upon such conditions as the
Board of Directors may determine in its discretion.
7. Termination of Employment.
(a) Involuntary Termination. The Board of Directors may
terminate the Employee's employment at any time, but, except in the case of
Termination for Cause, termination of employment shall not prejudice the
Employee's right to compensation or other benefits under this Agreement. In the
event of Involuntary Termination other than in connection with or within 12
months after a Change in Control, (1) the Bank shall pay to the Employee during
the remaining term of this Agreement the Employee's salary at the rate in effect
immediately prior to the Date of Termination, payable in such manner and at such
times as such salary would have been payable to the Employee under Section 4(a)
if the Employee had continued to be employed by the Bank, and (2) the Bank shall
provide to the Employee during the remaining term of this Agreement health
benefits as maintained by the Bank for the benefit of its executive officers
from time to time during the remaining term of the Agreement or substantially
the same health benefits as the Bank maintained for its executive officers
immediately prior to the Date of Termination.
(b) Termination for Cause. In the event of Termination for
Cause, the Bank shall pay the Employee the Employee's salary through the Date of
Termination, and the Bank shall have no further obligation to the Employee under
this Agreement.
(c) Voluntary Termination. The Employee's employment may be
voluntarily terminated by the Employee at any time upon 90 days' written notice
to the Bank or such shorter period as may be agreed upon between the Employee
and the Board of Directors of the Bank. In the event of such voluntary
termination, the Bank shall be obligated to continue to pay to the Employee
4
<PAGE>
the Employee's salary and benefits only through the Date of Termination, at the
time such payments are due, and the Bank shall have no further obligation to the
Employee under this Agreement.
(d) Change in Control. In the event of Involuntary Termination
in connection with or within 12 months after a Change in Control which occurs at
any time while the Employee is employed under this Agreement, the Bank shall,
subject to Section 8 of this Agreement, (1) pay to the Employee in a lump sum in
cash within 25 business days after the Date of Termination an amount equal to
299% of the Employee's "base amount" as defined in Section 280G of the Internal
Revenue Code of 1986, as amended (the "Code"); and (2) provide to the Employee
during the remaining term of this Agreement such health benefits as are
maintained for executive officers of the Bank from time to time during the
remaining term of this Agreement or substantially the same health benefits as
the Bank maintained for its executive officers immediately prior to the Date of
Termination.
(e) Death; Disability. In the event of the death of the
Employee while employed under this Agreement and prior to any termination of
employment, the Employee's estate, or such person as the Employee may have
previously designated in writing, shall be entitled to receive from the Bank the
salary of the Employee through the last day of the calendar month in which the
Employee died. If the Employee becomes disabled as defined in the Bank's then
current disability plan, if any, or if the Employee is otherwise unable to serve
as President and Chief Executive Officer, the Employee shall be entitled to
receive group and other disability income benefits of the type, if any, then
provided by the Bank for executive officers.
8. Certain Reduction of Payments by the Bank. Notwithstanding any other
provision of this Agreement, if the value and amounts of benefits under this
Agreement, together with any other amounts and the value of benefits received or
to be received by the Employee in connection with a Change in Control would
cause any amount to be nondeductible by the Bank or the Holding Company for
federal income tax purposes pursuant to Section 280G of the Code, then amounts
and benefits under this Agreement shall be reduced (not less than zero) to the
extent necessary so as to maximize amounts and the value of benefits to the
Employee without causing any amount to become nondeductible by the Bank or the
Holding Company pursuant to or by reason of such Section 280G. The Employee
shall determine the allocation of such reduction among payments and benefits to
the Employee.
9. No Mitigation. The Employee shall not be required to mitigate the
amount of any salary or other payment or benefit provided for in this Agreement
by seeking other employment or otherwise, nor shall the amount of any payment or
benefit provided for in this Agreement be reduced by any compensation earned by
the Employee as the result of employment by another employer, by retirement
benefits after the Date of Termination or otherwise.
10. Attorneys Fees. In the event the Bank exercises its right of
Termination for Cause, but it is determined by a court of competent jurisdiction
or by an arbitrator pursuant to Section 17 that cause did not exist for such
termination, or if in any event it is determined by any such court or arbitrator
that the Bank has failed to make timely payment of any amounts owed to the
Employee under this Agreement, the Employee shall be entitled to reimbursement
for all reasonable costs,
5
<PAGE>
including attorneys' fees, incurred in challenging such termination or
collecting such amounts. Such reimbursement shall be in addition to all rights
to which the Employee is otherwise entitled under this Agreement.
11. No Assignments.
(a) This Agreement is personal to each of the parties hereto,
and neither party may assign or delegate any of its rights or obligations
hereunder without first obtaining the written consent of the other party;
provided that the Bank shall require any successor or assign (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Bank, by an assumption
agreement in form and substance satisfactory to the Employee, to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Bank would be required to perform it if no such succession or
assignment had taken place. Failure of the Bank to obtain such an assumption
agreement prior to the effectiveness of any such succession or assignment shall
be a breach of this Agreement and shall entitle the Employee to compensation
from the Bank in the same amount and on the same terms as the compensation
pursuant to Section 7(d) hereof. For purposes of implementing the provisions of
this Section 11(a), the date on which any such succession becomes effective
shall be deemed the Date of Termination.
(b) This Agreement and all rights of the Employee hereunder
shall inure to the benefit of and be enforceable by the Employee's personal and
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Employee should die while any
amounts would still be payable to the Employee hereunder if the Employee had
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to the Employee's devisee,
legatee or other designee or if there is no such designee, to the Employee's
estate.
12. Notice. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when personally delivered or sent by certified
mail, return receipt requested, postage prepaid, to the Bank at its home office,
to the attention of the Board of Directors with a copy to the Secretary of the
Bank, or, if to the Employee, to such home or other address as the Employee has
most recently provided in writing to the Bank.
13. Amendments. No amendments or additions to this Agreement shall be
binding unless in writing and signed by both parties, except as herein otherwise
provided.
14. Headings. The headings used in this Agreement are included solely
for convenience and shall not affect, or be used in connection with, the
interpretation of this Agreement.
15. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
6
<PAGE>
16. Governing Law. This Agreement shall be governed by the laws of the
United States to the extent applicable and otherwise by the laws of the State of
Texas.
17. Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator's award in any court having
jurisdiction.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE
ENFORCED BY THE PARTIES.
Attest: Community Bank of Central Texas, ssb
- --------------------- ---------------------------
Secretary By:
Its:
Employee
----------------------------
Brad M. Hurta
7
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EXHIBIT 10.3
CBCT BANCSHARES, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
Effective as of January 1, 2000
<PAGE>
CBCT BANCSHARES, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
TABLE OF CONTENTS
PREAMBLE......................................................................1
ARTICLE I
DEFINITION OF TERMS AND CONSTRUCTION.....................................2
1.1 Definitions..............................................2
Account..................................................2
Act......................................................2
Administrator............................................2
Annual Additions.........................................2
Authorized Leave of Absence..............................3
Beneficiary..............................................3
Board of Directors.......................................3
Break....................................................3
Code.....................................................3
Compensation.............................................3
Date of Hire.............................................3
Disability...............................................4
Disability Retirement Date...............................4
Early Retirement Date....................................4
Effective Date...........................................4
Eligibility Period.......................................4
Employee.................................................4
Employee Stock Ownership Account.........................4
Employee Stock Ownership Contribution....................4
Employee Stock Ownership Suspense Account................4
Employer.................................................4
Employer Securities......................................5
Entry Date...............................................5
Exempt Loan..............................................5
Exempt Loan Suspense Account.............................5
Financed Shares..........................................5
Former Participant.......................................5
Fund.....................................................5
Highly Compensated Employees.............................5
Highly Compensated Former Employees......................6
Hour of Service..........................................6
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Investment Adjustments...................................6
Leased Employee..........................................6
Limitation Year..........................................7
Normal Retirement Date...................................7
Participant..............................................7
Plan.....................................................7
Plan Year................................................7
Qualified Domestic Relations Order.......................7
Related Employer.........................................7
Retirement...............................................8
Service..................................................8
Sponsor..................................................8
Trust Agreement..........................................8
Trustee..................................................8
Valuation Date...........................................8
Year of Eligibility Service..............................8
Year of Vesting Service..................................8
1.2 Plurals and Gender...............................................8
1.3 Incorporation of Trust Agreement.................................8
1.4 Headings.........................................................9
1.5 Severability.....................................................9
1.6 References to Governmental Regulations...........................9
1.7 Notices..........................................................9
1.8 Evidence.........................................................9
1.9 Action by Employer...............................................9
ARTICLE II
PARTICIPATION...........................................................10
2.1 Commencement of Participation...................................10
2.2 Termination of Participation....................................10
2.3 Resumption of Participation.....................................10
2.4 Determination of Eligibility....................................10
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2.5 Restricted Participation........................................11
ARTICLE III
CREDITED SERVICE........................................................12
3.1 Service Counted for Eligibility Purposes........................12
3.2 Service Counted for Vesting Purposes............................12
3.3 Credit for Pre-Break Service....................................12
3.4 Service Credit During Authorized Leaves.........................12
3.5 Service Credit During Maternity or Paternity Leave..............13
3.6 Ineligible Employees............................................13
ARTICLE IV
CONTRIBUTIONS...........................................................14
4.1 Employee Stock Ownership Contribution...........................14
4.2 Time and Manner of Employee Stock Ownership Contribution........14
4.3 Records of Contributions........................................15
4.4 Erroneous Contributions.........................................15
ARTICLE V
ACCOUNTS, ALLOCATIONS AND INVESTMENTS...................................17
5.1 Establishment of Separate Participant Accounts..................17
5.2 Establishment of Suspense Accounts..............................17
5.3 Allocation of Earnings, Losses and Expenses.....................18
5.4 Allocation of Forfeitures.......................................18
5.5 Allocation of Employee Stock Ownership Contribution.............18
5.6 Limitation on Annual Additions..................................18
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5.7 Erroneous Allocations...........................................20
5.8 Value of Participant's Account..................................21
5.9 Investment of Account Balances..................................21
ARTICLE VI
RETIREMENT, DEATH AND DESIGNATION OF BENEFICIARY........................22
6.1 Normal Retirement...............................................22
6.2 Early Retirement................................................22
6.3 Disability Retirement...........................................22
6.4 Death Benefits..................................................22
6.5 Designation of Beneficiary and Manner of Payment................23
ARTICLE VII
VESTING AND FORFEITURES.................................................24
7.1 Vesting on Death, Disability and Normal Retirement..............24
7.2 Vesting on Termination of Participation.........................24
7.3 Disposition of Forfeitures......................................24
ARTICLE VIII
EMPLOYEE STOCK OWNERSHIP PROVISIONS.....................................26
8.1 Right to Demand Employer Securities.............................26
8.2 Voting Rights...................................................26
8.3 Nondiscrimination in Employee Stock Ownership Contribution......26
8.4 Dividends.......................................................27
8.5 Exempt Loans....................................................27
8.6 Exempt Loan Payments............................................28
8.7 Put Option......................................................30
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8.8 Diversification Requirements....................................30
8.9 Independent Appraiser...........................................31
8.10 Nonterminable Rights............................................31
ARTICLE IX
PAYMENTS AND DISTRIBUTIONS..............................................32
9.1 Payments on Termination of Service - In General.................32
9.2 Commencement of Payments........................................32
9.3 Mandatory Commencement of Benefits..............................32
9.4 Required Beginning Dates........................................35
9.5 Form of Payment.................................................35
9.6 Payments Upon Termination of Plan...............................35
9.7 Distributions Pursuant to Qualified Domestic Relations Orders...36
9.8 Cash-Out Distributions..........................................36
9.9 ESOP Distribution Rules.........................................37
9.10 Direct Rollover.................................................37
9.11 Waiver of 30-day Notice.........................................38
9.12 Re-employed Veterans............................................38
9.13 Share Legend....................................................38
ARTICLE X
PROVISIONS RELATING TO TOP-HEAVY PLANS..................................39
10.1 Top-Heavy Rules to Control......................................39
10.2 Top-Heavy Plan Definitions......................................39
10.3 Calculation of Accrued Benefits.................................40
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10.4 Determination of Top-Heavy Status...............................42
10.5 Determination of Super Top-Heavy Status.........................42
10.6 Minimum Contribution............................................42
10.7 Vesting.........................................................43
ARTICLE XI
ADMINISTRATION..........................................................45
11.1 Appointment of Administrator....................................45
11.2 Resignation or Removal of Administrator.........................45
11.3 Appointment of Successors: Terms of Office, Etc................45
11.4 Powers and Duties of Administrator..............................45
11.5 Action by Administrator.........................................47
11.6 Participation by Administrator..................................47
11.7 Agents..........................................................47
11.8 Allocation of Duties............................................47
11.9 Delegation of Duties............................................47
11.10 Administrator's Action Conclusive...............................48
11.11 Compensation and Expenses of Administrator......................48
11.12 Records and Reports.............................................48
11.13 Reports of Fund Open to Participants............................48
11.14 Named Fiduciary.................................................48
11.15 Information from Employer.......................................49
11.16 Reservation of Rights by Employer...............................49
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11.17 Liability and Indemnification...................................49
ARTICLE XII
CLAIMS PROCEDURE........................................................50
12.1 Notice of Denial................................................50
12.2 Right to Reconsideration........................................50
12.3 Review of Documents.............................................50
12.4 Decision by Administrator.......................................50
12.5 Notice by Administrator.........................................50
ARTICLE XIII
AMENDMENTS, TERMINATION AND MERGER......................................52
13.1 Amendments......................................................52
13.2 Effect of Change In Control.....................................52
13.3 Consolidation or Merger of Trust................................54
13.4 Bankruptcy or Insolvency of Employer............................54
13.5 Voluntary Termination...........................................55
13.6 Partial Termination of Plan or Permanent
Discontinuance of Contributions..............................55
ARTICLE XIV
MISCELLANEOUS...........................................................56
14.1 No Diversion of Funds...........................................56
14.2 Liability Limited...............................................56
14.3 Facility of Payment.............................................56
14.4 Spendthrift Clause..............................................56
14.5 Benefits Limited to Fund........................................57
14.6 Cooperation of Parties..........................................57
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14.7 Payments Due Missing Persons....................................57
14.8 Governing Law...................................................57
14.9 Nonguarantee of Employment......................................58
14.10 Counsel.........................................................58
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CBCT BANCSHARES, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
PREAMBLE
Effective as of January 1, 2000, CBCT Bancshares, Inc. a
federally-chartered corporation (the "Sponsor"), has adopted the CBCT
Bancshares, Inc. Employee Stock Ownership Plan in order to enable Participants
to share in the growth and prosperity of the Sponsor and its wholly owned
subsidiary, Community Bank of Central Texas, ssb, and to provide Participants
with an opportunity to accumulate capital for their future economic security by
accumulating funds to provide retirement, death and disability benefits. The
Plan is a stock bonus plan designed to meet the applicable requirements of
Section 409 of the Code and of an employee stock ownership plan, as defined in
Section 4975(e)(7) of the Code and Section 407(d)(6) of the Act. The employee
stock ownership plan is intended to invest primarily in "qualifying employer
securities" as defined in Section 4975(e)(8) of the Code. The Sponsor intends
that the Plan will qualify under Sections 401(a) and 501(a) of the Code and will
comply with the provisions of the Act. The Plan has been drafted to comply with
all applicable provisions of law, as in effect on the Effective Date of the
Plan,
The terms of this Plan shall apply only with respect to Employees
of the Employer on and after January 1, 2000.
1
<PAGE>
ARTICLE I
DEFINITION OF TERMS AND CONSTRUCTION
1.1 Definitions.
Unless a different meaning is plainly implied by the context, the
following terms as used in this Plan shall have the following meanings:
"Account" shall mean a Participant's or Former Participant's entire
accrued benefit under the Plan, including the balance credited to his Employee
Stock Ownership Account and any other account described in Section 5.1.
"Act" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, or any successor statute, together with the
applicable regulations promulgated thereunder.
"Administrator" shall mean the fiduciary provided for in Article
XI.
"Annual Additions" shall mean, with respect to each Participant,
the sum of those amounts allocated to the Participant's Account under this Plan
and accounts under any other qualified defined contribution plan to which the
Employer or a Related Employer contributes for any Limitation Year, consisting
of the following:
(1) Employer contributions;
(2) Forfeitures;
(3) Employee contributions (if any);
(4) amounts allocated to an individual medical account, as defined
in Code Section 415(1) which is part of a pension or annuity plan maintained by
the Employer (to the extent required under Code Section 415); and
(5) amounts derived from contributions which are attributable to
post-retirement medical benefits allocated to the separate account of a Key
Employee under a welfare benefit plan (as defined in Code Section 419(e)).
Annual Additions shall not include any Investment Adjustment.
Annual Additions also shall not include employer contributions which are used by
the Trust to pay interest on an Exempt Loan nor any forfeitures of Employer
Securities purchased with the proceeds of an Exempt Loan, provided that not more
than one-third of the employer contributions are allocated to Participants who
are Highly Compensated Employees.
2
<PAGE>
"Authorized Leave of Absence" shall mean an absence from Service
with respect to which the Employee may or may not be entitled to Compensation
and which meets any one of the following requirements:
(1) Service in any of the armed forces of the United States for up
to 36 months, provided that the Employee resumes Service within 90 days after
discharge, or such longer period of time during which such Employee's employment
rights are protected by law; or
(2) Any other absence or leave expressly approved and granted by
the Employer which does not exceed 24 months, provided that the Employee resumes
Service at or before the end of such approved leave period. In approving such
leaves of absence, the Employer shall treat all Employees on a uniform and
nondiscriminatory basis.
"Beneficiary" shall mean such legal or natural persons, who may be
designated contingently or successively, as may be designated by the Participant
pursuant to Section 6.5 to receive benefits after the death of the Participant,
or in the absence of a valid designation, such persons specified in Section
6.5(b) to receive benefits after the death of the Participant.
"Board of Directors" shall mean the Board of Directors of the
Sponsor.
"Break" shall mean a Plan Year during which an Employee fails to
complete more than 500 Hours of Service.
"Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time, or any successor statute, together with the applicable
regulations promulgated thereunder.
"Compensation" shall mean the amount of remuneration paid to an
Employee by the Employer for services rendered to the Employer during a Plan
Year, including base salary and commissions (but only with respect to the amount
of commissions specified as compensation for purposes of the Plan in the current
agreement between an Employee and the Employer), elective deferrals to a cash or
deferred arrangement described in Code Section 401(k), and any amount
contributed on a pre-tax salary reduction basis to a cafeteria plan described in
Section 125 of the Code, but excluding bonuses, overtime, amounts paid by the
Employer or accrued with respect to this Plan or any other qualified or
non-qualified unfunded plan of deferred compensation or other employee welfare
plan to which the Employer contributes, payments for group insurance, medical
benefits, reimbursement for expenses, and other forms of extraordinary pay, and
excluding amounts accrued for a prior Plan Year. Notwithstanding anything herein
to the contrary, the annual Compensation of each Participant taken into account
under the Plan for any purpose during any Plan Year shall not exceed $170,000,
as adjusted from time to time in accordance with Section 401(a)(17) of the Code.
"Date of Hire" shall mean the date on which an Employee shall
perform his first Hour of Service. Notwithstanding the foregoing, in the event
that an Employee incurs one or more consecutive Breaks after his initial Date of
Hire which results in the forfeiture of his pre-Break
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<PAGE>
Service pursuant to Section 3.3, his "Date of Hire" shall thereafter be the date
on which he completes his first Hour of Service after such Break or Breaks.
"Disability" shall mean a physical or mental impairment which
prevents a Participant from performing the duties assigned to him by the
Employer and which either has caused the Social Security Administration to
classify the individual as "disabled" for purposes of Social Security or has
been determined by a qualified physician selected by the Administrator.
"Disability Retirement Date" shall mean the first day of the month
after which a Participant incurs a Disability.
"Early Retirement Date" shall mean the first day of the month
coincident with or next following the later of the date on which a Participant
attains age 55 and completes 5 Years of Vesting Service.
"Effective Date" shall mean January 1, 2000.
"Eligibility Period" shall mean the period of 12 consecutive months
commencing on an Employee's Date of Hire. Succeeding Eligibility Periods after
the initial Eligibility Period shall be based on Plan Years, the first of which
shall include the first anniversary of an Employee's Date of Hire.
"Employee" shall mean any person who is classified as an employee
by the Employer or a Related Employer, including officers, but excluding
directors in their capacity as such.
"Employee Stock Ownership Account" shall mean the separate
bookkeeping account established for each Participant pursuant to Section 5.1(a).
"Employee Stock Ownership Contribution" shall mean the cash,
Employer Securities, or both that are contributed to the Plan by the Employer
pursuant to Article IV.
"Employee Stock Ownership Suspense Account" shall mean the
temporary account in which the Trustee may maintain any Employee Stock Ownership
Contribution that is made prior to the last day of the Plan Year for which it is
made, as described in Section 5.2.
"Employer" shall mean CBCT Bancshares, Inc., a federally-chartered
corporation, and its wholly owned subsidiary, Community Bank of Central Texas,
ssb, or any successors to the aforesaid corporations by merger, consolidation or
otherwise, which may agree to continue this Plan, or any Related Employer or any
other business organization which, with the consent of the Sponsor, shall agree
to become a party to this Plan. To the extent required by the Code or the Act,
references herein to the Employer shall also include all Related Employers,
whether or not they are participating in this Plan.
4
<PAGE>
"Employer Securities" shall mean the common stock issued by CBCT
Bancshares, Inc., a federally-chartered corporation. Such term shall also mean,
in the discretion of the Board of Directors, any other common stock issued by
the Employer or any Related Employer having voting power and dividend rights
equal to or in excess of:
(1) that class of common stock of the Employer or a Related
Employer having the greatest voting power, and
(2) that class of common stock of the Employer or a Related
Employer having the greatest dividend rights.
Non-callable preferred stock shall be treated as Employer Securities if such
stock is convertible at any time into stock which meets the requirements of (1)
and (2) next above and if such conversion is at a conversion price which (as of
the date of the acquisition by the Plan) is reasonable. For purposes of the last
preceding sentence, preferred stock shall be treated as non-callable if, after
the call, there will be a reasonable opportunity for a conversion which meets
the requirements of the last preceding sentence.
"Entry Date" shall mean each January 1 and July 1.
"Exempt Loan" shall mean a loan described at Section 4975(d)(3) of
the Code to the Trustee to purchase Employer Securities for the Plan, made or
guaranteed by a disqualified person, as defined at Section 4975(e)(2) of the
Code, including, but not limited to, a direct loan of cash, a purchase money
transaction, an assumption of an obligation of the Trustee, an unsecured
guarantee or the use of assets of such disqualified person as collateral for
such a loan.
"Exempt Loan Suspense Account" shall mean the account to which
Financed Shares are initially credited until they are released in accordance
with Section 8.5.
"Financed Shares" shall mean the Employer Securities acquired by
the Trustee with the proceeds of an Exempt Loan and which are credited to the
Exempt Loan Suspense Account until they are released in accordance with Section
8.5.
"Former Participant" shall mean any previous Participant whose
participation has terminated but who has a vested Account in the Plan which has
not been distributed in full.
"Fund" shall mean the trust fund maintained by the Trustee pursuant
to the Trust Agreement in order to provide for the payment of the benefits
specified in the Plan.
"Highly Compensated Employee" means an Employee who (a) at any time
during the current or preceding Plan Year was a "five percent owner" as defined
in Code Section 416(i)(1)(B), or (b) who received compensation (within the
meaning of Code Section 414(q)(4)) during the preceding Plan Year from the
Company in excess of $80,000 (adjusted at such time and in such manner as is
provided in Code Section 414(q)(1)(B)). The Company shall limit the number of
5
<PAGE>
Employees who qualify as a Highly Compensated Participant under this subsection
(b) to those Employees who are in the top-paid group of employees (as determined
in accordance with Code Section 414(q)(3)) for such preceding year, in such
manner as prescribed by treasury regulations. The determination of who is a
Highly Compensated Employee, including the determination of the number and
identity of Employees in the "top-paid group," will be made in accordance with
Section 414(q) of the Code and the regulations thereunder.
Highly Compensated Former Employee shall mean a former Employee who
was either a (1) Highly Compensated Employee when such Employee separated from
Service, or (2) a Highly Compensated Employee at any time after attaining age
55.
"Hour of Service" shall mean each hour for which an Employee is
directly or indirectly paid or entitled to payment by the Employer or a Related
Employer for the performance of duties or for reasons other than the performance
of duties (such as vacation time, holidays, sickness, disability, paid lay-offs,
jury duty and similar periods of paid nonworking time). To the extent not
otherwise included, Hours of Service shall also include each hour for which back
pay, irrespective of mitigation of damages, is either awarded or agreed to by
the Employer or a Related Employer. Hours of working time shall be credited on
the basis of actual hours worked, even though compensated at a premium rate for
overtime or other reasons. In computing and crediting Hours of Service for an
Employee under this Plan, the rules set forth in Sections 2530.200b-2(b) and (c)
of the Department of Labor Regulations shall apply, said sections being herein
incorporated by reference. Hours of Service shall be credited to the Plan Year
or other relevant period during which the services were performed or the
nonworking time occurred, regardless of the time when compensation therefor may
be paid. Any Employee for whom no hourly employment records are kept by the
Employer or a Related Employer shall be credited with 45 Hours of Service for
each calendar week in which he would have been credited with a least one Hour or
Service under the foregoing provisions, if hourly records were available. Solely
for purposes of determining whether a Break for participation and vesting
purposes has occurred in an Eligibility Period or a Plan Year, an individual who
is absent from work for maternity or paternity reasons shall receive credit for
the Hours of Service which would otherwise have been credited to such individual
but for such absence, or in any case in which such hours cannot be determined, 8
Hours of Service per day of such absence. For purposes of this definition, an
absence from work for maternity or paternity reasons means an absence (1) by
reason of the pregnancy of the individual, (2) by reason of the birth of a child
of the individual, (3) by reason of the placement of a child with the individual
in connection with the adoption of such child by such individual, or (4) for
purposes of caring for such child for a period beginning immediately following
such birth or placement. The Hours of Service credited under this provision
shall be credited (1) in the computation period in which the absence begins if
the crediting is necessary to prevent a Break in that period, or (2) in all
other cases, in the following computation period.
"Investment Adjustments" shall mean the increases and/or decreases
in the value of a Participant's Account attributable to earnings, gains, losses
and expenses of the Fund, as set forth in Section 5.3.
"Leased Employee" shall mean any person (other than an employee of
the Employer) who pursuant to an agreement between the Employer and any other
person ("leasing organization") has performed services for the Employer (or for
the Employer and related persons determined in
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accordance with Section 414(n)(6) of the Code) on a substantially full-time
basis for a period of at least one year, and such services are performed under
primary direction or control by the Employer. Contributions or benefits provided
a Leased Employee by the leasing organization which are attributable to services
performed for the Employer shall be treated as provided by the Employer. A
Leased Employee shall not be considered an Employee of the Employer if: (a) such
employee is covered by a money purchase pension plan providing: (1) a
nonintegrated employer contribution rate of at least ten percent (10%) of
compensation, as defined in Section 415(c)(3) of the Code, (2) immediate
participation, and (3) full and immediate vesting; and (2) leased employees do
not constitute more than twenty percent (20%) of the Employer nonhighly
compensated workforce.
"Limitation Year" shall mean the Plan Year.
"Normal Retirement Date" shall mean the date on which a Participant
attains age 65 or the fifth anniversary of the date he commenced participation
in the Plan.
"Participant" shall mean an Employee who has met all of the
eligibility requirements of the Plan and who is currently included in the Plan
as provided in Article II hereof; provided, however, that the term "Participant"
shall not include (1) Leased Employees, (2) any Employee who is regularly
employed outside the Employer's own offices in connection with the operation and
maintenance of buildings or other properties acquired through foreclosure or
deed, (3) any individual who is employed by a Related Employer that has not
adopted the Plan in accordance with the terms of the Plan, (4) any Employee who
is a non-resident alien individual and who has no earned income from sources
within the United States, or (5) any Employee who is included in a unit of
Employees covered by a collective-bargaining agreement with the Employer or a
Related Employer that does not expressly provide for participation of such
Employees in the Plan, where there has been good-faith bargaining between the
Employer or a Related Employer and Employees' representatives on the subject of
retirement benefits. To the extent required by the Code or the Act, or
appropriate based on the context, references herein to Participant shall include
Former Participant.
"Plan" shall mean the CBCT Bancshares, Inc. Employee Stock
Ownership Plan, as described herein or as hereafter amended from time to time.
"Plan Year" shall mean any 12 consecutive month period commencing
on each January 1 and ending on the next following December 31.
"Qualified Domestic Relations Order" shall mean any judgment,
decree or order that satisfies the requirements to be a "qualified domestic
relations order," as defined in Section 414(p) of the Code.
"Related Employer" shall mean any entity that is:
(1) a member of a controlled group of corporations that includes
the Employer, while it is a member of such controlled group (within the meaning
of Section 414(b) of the Code);
(2) a member of a group of trades or businesses under common
control with the Employer, while it is under common control (within the meaning
of Section 414(c) of the Code);
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(3) a member of an affiliated service group that includes the
Employer, while it is a member of such affiliated service group (within the
meaning of Section 414(m) of the Code); or
(4) a leasing or other organization that is required to be
aggregated with the Employer pursuant to the provisions of Section 414(n) or
414(o) of the Code.
For the purpose of applying the limitations of Section 5.6 of the Plan (relating
to the Code Section 415 limitations), the provisions of Paragraphs (1) and (2)
above shall be applied taking into account the modifications required by Code
Section 415(h).
"Retirement" shall mean termination of employment which qualifies
as early, normal or Disability retirement as described in Article VI.
"Service" shall mean, for purposes of eligibility to participate
and vesting, employment with the Employer or any Related Employer, and for
purposes of allocation of the Employee Stock Ownership Contribution and
forfeitures, employment with the Employer.
"Sponsor" shall mean CBCT Bancshares, Inc., a federally-chartered
corporation.
"Trust Agreement" shall mean the agreement, by and between CBCT
Bancshares, Inc., a federally-chartered corporation, and the Trustee.
"Trustee" shall mean the trustee or trustees by whom the assets of
the Plan are held, as provided in the Trust Agreement, or his or their
successors.
"Valuation Date" shall mean the last day of each Plan Year. The
Trustee may make additional valuations at such times and for such purposes as
determined to be necessary or appropriate, at the direction of the
Administrator, but in no event may the Administrator request additional
valuations by the Trustee more frequently than quarterly. Whenever such date
falls on a Saturday, Sunday or holiday, the preceding business day shall be the
Valuation Date.
"Year of Eligibility Service" shall mean an Eligibility Period
during which an Employee is credited with at least 1,000 Hours of Service,
except as otherwise specified in Article III.
"Year of Vesting Service" shall mean a Plan Year during which an
Employee is credited with at least 1,000 Hours of Service, except as otherwise
specified in Article III.
1.2 Plurals and Gender.
Where appearing in the Plan and the Trust Agreement, the masculine
gender shall include the feminine and neuter genders, and the singular shall
include the plural, and vice versa, unless the context clearly indicates a
different meaning.
1.3 Incorporation of Trust Agreement.
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The Trust Agreement, as the same may be amended from time to time,
is intended to be and hereby is incorporated by reference into this Plan. All
contributions made under the Plan will be held, managed and controlled by the
Trustee pursuant to the terms and conditions of the Trust Agreement.
1.4 Headings.
The headings and sub-headings in this Plan are inserted for the
convenience of reference only and are to be ignored in any construction of the
provisions hereof.
1.5 Severability.
In case any provision of this Plan shall be held illegal or void,
such illegality or invalidity shall not affect the remaining provisions of this
Plan, but shall be fully severable, and the Plan shall be construed and enforced
as if said illegal or invalid provisions had never been inserted herein.
1.6 References to Governmental Regulations.
References in this Plan to regulations issued by the Internal
Revenue Service, the Department of Labor, or other governmental agencies shall
include all regulations, rulings, procedures, releases and other position
statements issued by any such agency.
1.7 Notices.
Any notice or document required to be filed with the Administrator
or Trustee under the Plan will be properly filed if delivered or mailed by
registered mail, postage prepaid, to the Administrator in care of the Sponsor or
to the Trustee, each at its principal business offices. Any notice required
under the Plan may be waived in writing by the person entitled to notice.
1.8 Evidence.
Evidence required of anyone under the Plan may be by certificate,
affidavit, document or other information which the person acting on it considers
pertinent and reliable, and signed, made or presented by the proper party or
parties.
1.9 Action by Employer.
Any action required or permitted to be taken by any entity
constituting the Employer under the Plan shall be by resolution of its Board of
Directors or by a person or persons authorized by its Board of Directors.
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ARTICLE II
PARTICIPATION
2.1 Commencement of Participation.
(a) Any Employee who is otherwise eligible to become a Participant
shall initially become a Participant on the Entry Date coincident with or next
following the date on which he completes one (1) Year of Eligibility Service,
provided he is employed by the Employer on that Entry Date.
(b) Any Employee who had satisfied the requirements set forth in
Section 2.1(a) during the 12 consecutive month period prior to the Effective
Date shall become a Participant on the Effective Date, provided he is still
employed by the Employer on the Effective Date.
2.2 Termination of Participation.
After commencement or resumption of his participation, an Employee
shall remain a Participant during each consecutive Plan Year thereafter until
the earliest of the following dates:
(a) His actual Retirement date;
(b) His date of death; or
(c) The last day of a Plan Year during which he incurs a Break.
2.3 Resumption of Participation.
(a) Any Participant whose employment terminates and who resumes
Service before he incurs a Break shall resume participation immediately on the
date he is reemployed.
(b) Except as otherwise provided in Section 2.3(c), any Participant
who incurs one or more Breaks and resumes Service shall resume participation
retroactively as of the first day of the first Plan Year in which he completes a
Year of Eligibility Service after such Break(s).
(c) Any Participant who incurs one or more Breaks and resumes
Service, but whose pre-Break Service is not reinstated to his credit pursuant to
Section 3.3, shall be treated as a new Employee and shall again be required to
satisfy the eligibility requirements contained in Section 2.1(a) before resuming
participation on the appropriate Entry Date, as specified in Section 2.1(a).
2.4 Determination of Eligibility.
The Administrator shall determine the eligibility of Employees in
accordance with the provisions of this Article. For each Plan Year, the Employer
shall furnish the Administrator a list of all Employees, indicating their Date
of Hire, their Hours of Service during their Eligibility Period,
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their date of birth, the original date of their reemployment with the Employer,
if any, and any Breaks they may have incurred.
2.5 Restricted Participation
Subject to the terms and conditions of the Plan, during the period
between the Participant's date of termination of participation in the Plan (as
described in Section 2.2) and the distribution of his entire Account (as
described in Article IX), and during any period that a Participant does not meet
the requirements of Section 2.1(a) or is employed by a Related Employer that is
not participating in the Plan, the Participant or, in the event of the
Participant's death, the Beneficiary of the Participant, will be considered and
treated as a Participant for all purposes of the Plan, except as follows:
(a) the Participant will not share in the Employee Stock Ownership
Contribution and forfeitures (as described in Sections 7.2 and 7.3), except as
provided in Sections 5.4 and 5.5; and
(b) the Beneficiary of a deceased Participant cannot designate a
Beneficiary under Section 6.5.
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ARTICLE III
CREDITED SERVICE
3.1 Service Counted for Eligibility Purposes.
Except as provided in Section 3.3, all Years of Eligibility Service
completed by an Employee shall be counted in determining his eligibility to
become a Participant on and after the Effective Date, whether such Service was
completed before or after the Effective Date.
3.2 Service Counted for Vesting Purposes.
All Years of Vesting Service completed by an Employee (including
Years of Vesting Service completed prior to the Effective Date) shall be counted
in determining his vested interest in this Plan, except the following:
(a) Service which is disregarded under the provisions of Section
3.3;
(b) Service prior to the Effective Date of this Plan if such
Service would have been disregarded under the "break in service" rules (within
the meaning of Section 1.411(a)-5(b)(6) of the Treasury Regulations).
3.3 Credit for Pre-Break Service.
Upon his resumption of participation following one or a series of
consecutive Breaks, an Employee's pre-Break Service shall be reinstated to his
credit for eligibility and vesting purposes only if either:
(a) He was vested in any portion of his accrued benefit at the time
the Break(s) began; or
(b) The number of his consecutive Breaks does not equal or exceed
the greater of 5 or the number of his Years of Eligibility Service or Years of
Vesting Service, as the case may be, credited to him before the Breaks began.
Except as provided in the foregoing, none of an Employee's Service
prior to one or a series of consecutive Breaks shall be counted for any purpose
in connection with his participation in this Plan thereafter.
3.4 Service Credit During Authorized Leaves.
An Employee shall receive no Service credit under Section 3.1 or
3.2 during any Authorized Leave of Absence. However, solely for the purpose of
determining whether he has incurred a Break during any Plan Year in which he is
absent from Service for one or more Authorized Leaves of Absence, he shall be
credited with 45 Hours of Service for each week during
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any such leave period. Notwithstanding the foregoing, if an Employee fails to
return to Service on or before the end of a leave period, he shall be deemed to
have terminated Service as of the first day of such leave period and his credit
for Hours of Service, determined under this Section 3.4, shall be revoked.
Notwithstanding anything contained herein to the contrary, an Employee who is on
an Authorized Leave of Absence by reason of military service shall be given
Service credit under this Plan for such military leave period to the extent, and
for all purposes, required by law.
3.5 Service Credit During Maternity or Paternity Leave.
For purposes of determining whether a Break has occurred for
participation and vesting purposes, an individual who is on maternity or
paternity leave shall be deemed to have completed Hours of Service during such
period of absence, all in accordance with the definition of Hours of Service.
Notwithstanding the foregoing, no credit shall be given for such Hours of
Service unless the individual furnishes to the Administrator such timely
information as the Administrator may reasonably require to determine:
(a) that the absence from Service was attributable to one of the
maternity or paternity reasons enumerated in the definition of Hour of Service;
and
(b) the number of days of such absence.
In no event, however, shall any credit be given for such leave other than for
determining whether a Break has occurred.
3.6 Ineligible Employees.
Notwithstanding any provisions of this Plan to the contrary, any
Employee who is ineligible to participate in this Plan either because of his
failure
(a) To meet the eligibility requirements contained in Article II;
or
(b) To be a Participant,
shall, nevertheless, earn Years of Eligibility Service and Years of Vesting
Service pursuant to the rules contained in this Article III. However, such
Employee shall not be entitled to an allocation of any contributions or
forfeitures hereunder unless and until he becomes a Participant in this Plan,
and then, only during his period of participation.
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ARTICLE IV
CONTRIBUTIONS
4.1 Employee Stock Ownership Contribution.
(a) Subject to all of the provisions of this Article IV, for each
Plan Year commencing on or after the Effective Date, the Employer shall make an
Employee Stock Ownership Contribution to the Fund in such amount as may be
determined by resolution of the Board of Directors in its discretion; provided,
however, that the Employer shall contribute an amount in cash not less than the
amount required to enable the Trustee to discharge any indebtedness incurred
with respect to an Exempt Loan in accordance with Section 8.6(c). If any part of
the Employee Stock Ownership Contribution under this Section 4.1 for any Plan
Year is in cash in an amount exceeding the amount needed to pay the amount due
during or prior to such Plan Year with respect to an Exempt Loan, such cash
shall be applied by the Trustee, as directed by the Administrator in its sole
discretion, either to the purchase of Employer Securities or to repay an Exempt
Loan. Contributions hereunder shall be in the form of cash, Employer Securities
or any combination thereof. In determining the value of Employer Securities
transferred to the Fund as an Employee Stock Ownership Contribution, the
Administrator may determine the average of closing prices of such securities for
a period of up to 90 consecutive days immediately preceding the date on which
the securities are contributed to the Fund. In the event that the Employer
Securities are not readily tradable on an established securities market, the
value of the Employer Securities transferred to the Fund shall be determined by
an independent appraiser in accordance with Section 8.9.
(b) In no event shall the Employee Stock Ownership Contribution
exceed for any Plan Year the maximum amount that may be deducted by the Employer
under Section 404 of the Code (taking into account contributions made under
other tax-qualified plans maintained by the Employer or a Related Employer), nor
shall such contribution cause the Employer to violate its regulatory capital
requirements. Each Employee Stock Ownership Contribution by the Employer shall
be deemed to be made on the express condition that the Plan, as then in effect,
shall be qualified under Sections 401(a) and 501(a) of the Code and that the
amount of such contribution shall be deductible from the Employer's income under
Section 404 of the Code.
4.2 Time and Manner of Employee Stock Ownership Contribution.
(a) The Employee Stock Ownership Contribution (if any) for each
Plan Year shall be paid to the Trustee in one lump sum or installments at any
time on or before the expiration of the time prescribed by law (including any
extensions) for filing of the Employer's federal income tax return for its
fiscal year ending concurrent with or during such Plan Year; provided, however,
that the Employee Stock Ownership Contribution (if any) for a Plan Year shall be
made in a timely manner to make any required payment of principal and/or
interest on an Exempt Loan for such Plan Year. Any portion of the Employee Stock
Ownership Contribution for each Plan Year that may be made prior to the last day
of the Plan Year shall, if there is an Exempt Loan outstanding at such time, at
the election of the Administrator, either (i) be applied immediately to make
payments on such Exempt Loan or (ii) be maintained by the Trustee in the
Employee Stock Ownership Suspense Account described in Section 5.2 until the
last day of such Plan Year.
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(b) If an Employee Stock Ownership Contribution for a Plan Year is
paid after the close of the Employer's fiscal year which ends concurrent with or
during such Plan Year but on or prior to the due date (including any extensions)
for filing of the Employer's federal income tax return for such fiscal year, it
shall be considered, for allocation purposes, as an Employee Stock Ownership
Contribution to the Fund for the Plan Year for which it was computed and
accrued, unless such contribution is accompanied by a statement to the Trustee,
signed by the Employer, which specifies that the Employee Stock Ownership
Contribution is made with respect to the Plan Year in which it is received by
the Trustee. Any Employee Stock Ownership Contribution paid by the Employer
during any Plan Year but after the due date (including any extensions) for
filing of its federal income tax return for the fiscal year of the Employer
ending on or before the last day of the preceding Plan Year shall be treated,
for allocation purposes, as an Employee Stock Ownership Contribution to the Fund
for the Plan Year in which the contribution is paid to the Trustee.
(c) Notwithstanding anything contained herein to the contrary, no
Employee Stock Ownership Contribution shall be made for any Plan Year during
which a limitations account created pursuant to Section 5.6(c)(3) is in
existence until the balance of such limitations account has been reallocated in
accordance with Section 5.6(c)(3).
4.3 Records of Contributions.
The Employer shall deliver at least annually to the Trustee, with
respect to the Employee Stock Ownership Contribution contemplated in Section
4.1, a certificate of the Administrator, in such form as the Trustee shall
approve, setting forth:
(a) The aggregate amount of such contribution, if any, to the Fund
for such Plan Year;
(b) The names, Internal Revenue Service identifying numbers and
current residential addresses of all Participants in the Plan;
(c) The amount and category of contributions to be allocated to
each such Participant; and
(d) Any other information reasonably required for the proper
operation of the Plan.
4.4 Erroneous Contributions.
(a) Notwithstanding anything herein to the contrary, upon the
Employer's written request, a contribution which was made by a mistake of fact,
or conditioned upon the initial qualification of the Plan, under Code Section
401(a), or upon the deductibility of the contribution under Section 404 of the
Code, shall be returned to the Employer by the Trustee within one year after the
payment of the contribution, the denial of the qualification or the disallowance
of the deduction (to the extent disallowed), whichever is applicable; provided,
however, that in the case of denial of the initial qualification of the Plan, a
contribution shall not be returned unless an Application for Determination has
been timely filed with the Internal Revenue Service. Any portion of a
contribution returned pursuant to this Section 4.4 shall be adjusted to reflect
its proportionate share of the losses of the Fund, but shall not be adjusted to
reflect any earnings or gains. Notwithstanding
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any provisions of this Plan to the contrary, the right or claim of any
Participant or Beneficiary to any asset of the Fund or any benefit under this
Plan shall be subject to and limited by this Section 4.4.
(b) In no event shall Employee contributions be accepted. Any such
Employee contributions (and any earnings attributable thereto) mistakenly
received by the Trustee shall promptly be returned to the Participant.
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ARTICLE V
ACCOUNTS, ALLOCATIONS AND INVESTMENTS
5.1 Establishment of Separate Participant Accounts.
The Administrator shall establish and maintain a separate Account
for each Participant in the Plan and for each Former Participant in accordance
with the provisions of this Article V. Such separate Account shall be for
bookkeeping purposes only and shall not require a segregation of the Fund, and
no Participant, Former Participant or Beneficiary shall acquire any right to or
interest in any specific assets of the Fund as a result of the allocations
provided for under this Plan.
(a) Employee Stock Ownership Accounts.
The Administrator shall establish a separate Employee Stock
Ownership Account in the Fund for each Participant. The Administrator may
establish subaccounts hereunder, an Employer Stock Account reflecting a
Participant's interest in Employer Securities held by the Trust, and an Other
Investments Account reflecting the Participant's interest in his Employee Stock
Ownership Account other than Employer Securities. Each Participant's Employer
Stock Account shall reflect his share of any Employee Stock Ownership
Contribution made in Employer Securities, his allocable share of forfeitures (as
described in Section 5.4), and any Employer Securities attributable to earnings
on such stock. Each Participant's Other Investments Account shall reflect any
Employee Stock Ownership Contribution made in cash, any cash dividends on
Employer Securities allocated and credited to his Employee Stock Ownership
Account (other than currently distributable dividends) and his share of
corresponding cash forfeitures, and any income, gains, losses, appreciation, or
depreciation attributable thereto.
(b) Distribution Accounts.
In any case where distribution of a terminated Participant's vested
Account is to be deferred, the Administrator shall establish a separate,
nonforfeitable account in the Fund to which the balance in his Employee Stock
Ownership Account in the Plan shall be transferred after such Participant incurs
a Break. Unless the Former Participant's distribution accounts are segregated
for investment purposes pursuant to Article IX, they shall share in Investment
Adjustments.
(c) Other Accounts.
The Administrator shall establish such other separate accounts for
each Participant as may be necessary or desirable for the convenient
administration of the Fund.
5.2 Establishment of Suspense Accounts.
The Administrator shall establish a separate Employee Stock
Ownership Suspense Account. There shall be credited to such account any Employee
Stock Ownership Contribution that may be made prior to the last day of the Plan
Year and that are allocable to the Employee Stock
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Ownership Suspense Account pursuant to Section 4.2(a). The Employee Stock
Ownership Suspense Account shall share proportionately as to time and amount in
any Investment Adjustments. As of the last day of each Plan Year, the balance of
the Employee Stock Ownership Suspense Account shall be added to the Employee
Stock Ownership Contribution and allocated to the Employee Stock Ownership
Accounts of Participants as provided in Section 5.5, except as provided herein.
In the event that the Plan takes an Exempt Loan, the Employer Securities
purchased thereby shall be allocated as Financed Shares to a separate Exempt
Loan Suspense Account, from which Employer Securities shall be released in
accordance with Section 8.5 and shall be allocated in accordance with Section
8.6(b).
5.3 Allocation of Earnings, Losses and Expenses.
As of each Valuation Date, any increase or decrease in the net
worth of the aggregate Employee Stock Ownership Accounts held in the Fund
attributable to earnings, losses, expenses and unrealized appreciation or
depreciation in each such aggregate account, as determined by the Trustee
pursuant to the Trust Agreement, shall be credited to or deducted from the
appropriate suspense accounts and all Participants' Employee Stock Ownership
Accounts (except segregated distribution accounts described in Section 5.1(b)
and the "limitations account" described in Section 5.6(c)(3)) in the proportion
that the value of each such account (determined immediately prior to such
allocation and before crediting any Employee Stock Ownership Contribution and
forfeitures for the current Plan Year but after adjustment for any transfer to
or from such accounts and for the time such funds were in such accounts) bears
to the value of all Employee Stock Ownership Accounts.
5.4 Allocation of Forfeitures.
As of the last day of each Plan Year, all forfeitures attributable
to the Employee Stock Ownership Accounts which are then available for
reallocation shall be, as appropriate, added to the Employee Stock Ownership
Contribution (if any) for such year and allocated among the Participants'
Employee Stock Ownership Accounts, as appropriate, in the manner provided in
Sections 5.5 and 5.6.
5.5 Allocation of Employee Stock Ownership Contribution.
As of the last day of each Plan Year for which the Employer shall
make an Employee Stock Ownership Contribution, the Administrator shall allocate
the Employee Stock Ownership Contribution (including reallocable forfeitures)
for such Plan Year to the Employee Stock Ownership Account of each Participant
who completed a Year of Vesting Service during that Plan Year. Such allocation
shall be made in the same proportion that each such Participant's Compensation
for such Plan Year bears to the total Compensation of all such Participants for
such Plan Year, subject to Section 5.6.
5.6 Limitation on Annual Additions.
(a) Notwithstanding any provisions of this Plan to the contrary,
the total Annual Additions credited to a Participant's Account under this Plan
(and accounts under any other defined
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contribution plan maintained by the Employer or a Related Employer) for any
Limitation Year shall not exceed the lesser of:
(1) 25% of the Participant's compensation (as defined below) for
such Limitation Year; or
(2) $30,000. Whenever otherwise allowed by law, the maximum amount
of $30,000 shall be automatically adjusted annually for cost-of-living increases
in accordance with Section 415(d) of the Code, and the highest such increase
effective at any time during the Limitation Year shall be effective for the
entire Limitation Year, without any amendment to this Plan.
(b) Solely for the purpose of this Section 5.6, the term
"compensation" is defined as wages, salaries, and fees for professional
services, pre-tax elective deferrals and salary reduction contributions under a
plan described in Section 401(k) or 125 of the Code, and other amounts received
(without regard to whether or not an amount is paid in cash) for personal
services actually rendered in the course of employment with the Employer or a
Related Employer, to the extent that the amounts are includable in gross income
(including, but not limited to, commissions paid to salesmen, compensation for
services on the basis of a percentage of profits, commissions on insurance
premiums, tips, bonuses, fringe benefits, and reimbursements or other expense
allowances under a nonaccountable plan (as described in Treas. Regs. Section
1.62-2(c)), and excluding the following:
(1) Employer contributions by the Employer or a Related Employer to
a plan of deferred compensation (other than elective deferrals under a plan
described in Section 401(k) of the Code) which are not includable in the
Employee's gross income for the taxable year in which contributed, or employer
contributions by the Employer or a Related Employer under a simplified employee
pension plan to the extent such contributions are deductible by the Employee, or
any distributions from a plan of deferred compensation;
(2) Amounts realized from the exercise of a non-qualified stock
option, or when restricted stock (or property) held by the Employee either
becomes freely transferable or is no longer subject to a substantial risk of
forfeiture;
(3) Amounts realized from the sale, exchange or other disposition
of stock acquired under a qualified stock option; and
(4) Other amounts which received special tax benefits (other than
pre-tax salary reduction contributions under a plan described in Section 125 of
the Code), or contributions made by the employer (whether or not under a salary
reduction agreement) towards the purchase of an annuity contract described in
section 403(b) of the Code (whether or not the contributions are actually
excludable from the gross income of the Employee).
(c) In the event that the limitations on Annual Additions described
in Section 5.6(a) above are exceeded with respect to any Participant in any
Limitation Year, as a result of the
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allocation of forfeitures, a reasonable error in estimating the Participant's
Compensation, a reasonable error in determining the amount of elective deferrals
(within the meaning of Code Section 402(g)(3)) that may be made with respect to
any individual under the limits of Code Section 415, or under other limited
facts and circumstances that the Commissioner of the Internal Revenue Service
finds justify the application of this Subsection, then the contributions
allocable to the Participant for such Limitation Year shall be reduced to the
minimum extent required by such limitations, in the following order of priority:
(1) The Administrator shall determine to what extent the Annual
Additions to any Participant's Employee Stock Ownership Account must be reduced
in each Limitation Year. The Administrator shall reduce the Annual Additions to
all other qualified, tax-exempt retirement plans maintained by the Employer or a
Related Employer in accordance with the terms contained therein for required
reductions or reallocations mandated by Section 415 of the Code before reducing
any Annual Additions in this Plan.
(2) If any further reductions in Annual Additions are necessary,
then the Employee Stock Ownership Contribution and forfeitures allocated during
such Limitation Year to the Participant's Employee Stock Ownership Account shall
be reduced. The amount of any such reductions in the Employee Stock Ownership
Contribution and forfeitures shall be reallocated to all other Participants in
the same manner as set forth under Sections 5.4 and 5.5.
(3) Any amounts which cannot be reallocated to other Participants
in a current Limitation Year in accordance with Section 5.6(c)(2) above because
of the limitations contained in Sections 5.6(a) and (d) shall be credited to an
account designated as the "limitations account" and carried forward to the next
and subsequent Limitation Years until it can be reallocated to all Participants
as set forth in Sections 5.4 and 5.5, as appropriate. No Investment Adjustments
shall be allocated to this limitations account. In the next and subsequent
Limitation Years, all amounts in the limitations account must be allocated in
the manner described in Sections 5.4 and 5.5, as appropriate, before any
Employee Stock Ownership Contribution may be made to this Plan for that
Limitation Year.
(4) In the event this Plan is voluntarily terminated by the
Employer under Section 13.5, any amounts credited to the limitations account
described in Section 5.6(c)(3) above which have not be reallocated as set forth
herein shall be distributed to the Participants who are still employed by the
Employer on the date of termination, in the proportion that each Participant's
Compensation bears to the Compensation of all Participants.
5.7 Erroneous Allocations.
No Participant shall be entitled to any Annual Additions or other
allocations to his Account in excess of those permitted under Sections 5.3, 5.4,
5.5, and 5.6. If it is determined at any time that the Administrator and/or
Trustee have erred in accepting and allocating any contributions or forfeitures
under this Plan, or in allocating Investment Adjustments, or in excluding or
including any person as a Participant, then the Administrator, in a uniform and
nondiscriminatory manner,
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shall determine the manner in which such error shall be corrected and shall
promptly advise the Trustee in writing of such error and of the method for
correcting such error. The accounts of any or all Participants may be revised,
if necessary, in order to correct such error. To the extent applicable, such
correction shall be made in accordance with the provisions of IRS Revenue
Procedure 98-22 (or any amendment or successor thereto).
5.8 Value of Participant's Account.
At any time, the value of a Participant's Account shall consist of
the aggregate value of his Employee Stock Ownership Account and his distribution
account, if any, determined as of the next-preceding Valuation Date. The
Administrator shall maintain adequate records of the cost basis of Employer
Securities allocated to each Participant's Employee Stock Ownership Account.
5.9 Investment of Account Balances.
The Employee Stock Ownership Accounts shall be invested primarily
in Employer Securities. All sales of Employer Securities by the Trustee
attributable to the Employee Stock Ownership Accounts of all Participants shall
be charged pro rata to the Employee Stock Ownership Accounts of all
Participants.
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ARTICLE VI
RETIREMENT, DEATH AND DESIGNATION OF BENEFICIARY
6.1 Normal Retirement.
A Participant who reaches his Normal Retirement Date and who shall
retire at that time shall thereupon be entitled to retirement benefits based on
the value of his Account, payable pursuant to the provisions of Section 9.1. A
Participant who remains in Service after his Normal Retirement Date shall not be
entitled to any retirement benefits until his actual termination of Service
thereafter (except as provided in Section 9.4), and he shall meanwhile continue
to participate in this Plan.
6.2 Early Retirement.
A Participant who reaches his Early Retirement Date may retire at
such time (or, at his election, as of the first day of any month thereafter
prior to his Normal Retirement Date) and shall thereupon be entitled to
retirement benefits based on the vested value of his Account, payable pursuant
to the provisions of Section 9.1.
6.3 Disability Retirement.
In the event a Participant incurs a Disability, he may retire on
his Disability Retirement Date and shall thereupon be entitled to retirement
benefits based on the value of his Account, payable pursuant to the provisions
of Section 9.1.
6.4 Death Benefits.
(a) Upon the death of a Participant before his Retirement or other
termination of Service, the value of his Account shall be payable pursuant to
the provisions of Section 9.1. The Administrator shall direct the Trustee to
distribute his Account to any surviving Beneficiary designated by the
Participant or, if none, to such persons specified in Section 6.5(b).
(b) Upon the death of a Former Participant, the Administrator shall
direct the Trustee to distribute any undistributed balance of his Account to any
surviving Beneficiary designated by him or, if none, to such persons specified
in Section 6.5(b).
(c) The Administrator may require such proper proof of death and
such evidence of the right of any person to receive the balance credited to the
Account of a deceased Participant or Former Participant as the Administrator may
deem desirable. The Administrator's determination of death and of the right of
any person to receive payment shall be conclusive.
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6.5 Designation of Beneficiary and Manner of Payment.
(a) Each Participant shall have the right to designate a
Beneficiary to receive the sum or sums to which he may be entitled upon his
death. The Participant may also designate the manner in which any death benefits
under this Plan shall be payable to his Beneficiary, provided that such
designation is in accordance with Section 9.5. Such designation of Beneficiary
and manner of payment shall be in writing and delivered to the Administrator,
and shall be effective when received by the Administrator while the Participant
is alive. The Participant shall have the right to change such designation by
notice in writing to the Administrator while the Participant is alive. Such
change of Beneficiary or the manner of payment shall become effective upon its
receipt by the Administrator while the Participant is alive. Any such change
shall be deemed to revoke all prior designations.
(b) If a Participant shall fail to designate validly a Beneficiary,
or if no designated Beneficiary survives the Participant, the balance credited
to his Account shall be paid to the person or persons in the first of the
following classes of successive preference Beneficiaries surviving at the death
of the Participant: the Participant's (1) widow or widower, (2) natural-born or
adopted children, (3) natural-born or adoptive parents, and (4) estate. The
Administrator shall determine which Beneficiary, if any, shall have been validly
designated or entitled to receive the balance credited to the Participant's
Account in accordance with the foregoing order of preference, and its decision
shall be binding and conclusive on all persons.
(c) Notwithstanding the foregoing, if a Participant is married on
the date of his death, the sum or sums to which he may be entitled under this
Plan upon his death shall be paid to his spouse, unless the Participant's spouse
shall have consented to the election of another Beneficiary. Such a spousal
consent shall be in writing and shall be witnessed either by a representative of
the Administrator or by a notary public. Any designation by an unmarried
Participant shall be rendered ineffective by any subsequent marriage, and any
consent of a spouse shall be effective only as to that spouse. If it is
established to the satisfaction of the Administrator that spousal consent cannot
be obtained because there is no spouse, because the spouse cannot be located, or
other reasons prescribed by governmental regulations, the consent of the spouse
may be waived, and the Participant may designate a Beneficiary or Beneficiaries
other than his spouse.
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ARTICLE VII
VESTING AND FORFEITURES
7.1 Vesting on Death, Disability and Normal Retirement.
Unless his participation in this Plan shall have terminated prior
thereto, upon a Participant's death, Disability or Normal Retirement Date
(whether or not he actually retires at that time) while he is still employed by
the Employer, the Participant's entire Account shall be fully vested and
nonforfeitable.
7.2 Vesting on Termination of Participation.
Upon termination of his participation in this Plan for any reason
other than death, Disability, or Normal Retirement, a Participant shall be
vested in a percentage of his Employee Stock Ownership Account, such vested
percentage to be determined under the following table, based on the Years of
Vesting Service (including Years of Vesting Service prior to the Effective Date)
credited to him at the time of his termination of participation:
Years of Vesting Service Percentage Vested
0 0%
1 20%
2 40%
3 60%
4 80%
5 or more 100%
Any portion of the Participant's Employee Stock Ownership Account
which is not vested at the time he incurs a Break shall thereupon be forfeited
and disposed of pursuant to Section 7.3. In such event, Employer Securities
shall be forfeited only after other assets. Distribution of the vested portion
of a terminated Participant's interest in the Plan shall be payable in any
manner permitted under Section 9.1.
7.3 Disposition of Forfeitures.
(a) In the event a Participant incurs a Break and subsequently
resumes both his Service and his participation in the Plan prior to incurring at
least 5 Breaks, the forfeitable portion of his Employee Stock Ownership Account
shall be reinstated to the credit of the Participant as of the date he resumes
participation.
(b) In the event a Participant terminates Service and subsequently
incurs a Break and receives a distribution of the entire nonforfeitable portion
of his Account, or in the event a Participant does not terminate Service, but
incurs at least 5 Breaks, or in the event that a Participant terminates Service
and incurs at least 5 Breaks but has not received such distribution,
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then the forfeitable portion of his Employee Stock Ownership Account, including
Investment Adjustments, shall be reallocated to other Participants, pursuant to
Section 5.4, as of the date the Participant incurs such Break or Breaks, as the
case may be.
(c) In the event a former Participant who had received a
distribution from the Plan is rehired, he shall repay the amount of his
distribution before the earlier of 5 years after the date of his rehire by the
Employer, or the close of the first period of 5 consecutive Breaks commencing
after the withdrawal, in order for any forfeited amounts to be restored to him.
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ARTICLE VIII
EMPLOYEE STOCK OWNERSHIP PROVISIONS
8.1 Right to Demand Employer Securities.
A Participant entitled to a distribution from his Account shall be
entitled to demand that his interest in the Account be distributed to him in the
form of Employer Securities, all subject to Section 9.9. The Administrator shall
notify the Participant of his right to demand distribution of his vested Account
balance entirely in whole shares of Employer Securities (with the value of any
fractional share paid in cash). However, if the charter or by-laws of the
Employer restrict ownership of substantially all of the outstanding Employer
Securities to Employees and the Trust, then the distribution of a Participant's
vested Account shall be made entirely in the form of cash or other property, and
the Participant is not entitled to a distribution in the form of Employer
Securities.
8.2 Voting Rights.
Each Participant with an Employee Stock Ownership Account shall be
entitled to direct the Trustee as to the manner in which the Employer Securities
in such account are to be voted. Employer Securities held in the Employee Stock
Ownership Suspense Account or the Exempt Loan Suspense Account shall be voted by
the Trustee on each issue with respect to which shareholders are entitled to
vote in the same proportion as the Participants who directed the Trustee as to
the manner of voting their shares in the Employee Stock Ownership Accounts with
respect to such issue. In the event that a Participant fails to give timely
voting instructions to the Trustee with respect to the voting of Employer
Securities that are allocated to his Employee Stock Ownership Account, the
Trustee shall vote such shares in its discretion.
8.3 Nondiscrimination in Employee Stock Ownership Contribution.
In the event that the amount of the Employee Stock Ownership
Contribution that would be required in any Plan Year to make the scheduled
payments on an Exempt Loan would exceed the amount that would otherwise be
deductible by the Employer for such Plan Year under Code Section 404, then no
more than one-third of the Employee Stock Ownership Contribution for the Plan
Year, which is also the Employer's taxable year, shall be allocated to the group
of Employees who are Highly Compensated Employees. The amount that may not
allocated to Highly Compensated Employees on account of the preceding sentence
shall be allocated among Participants who are not Highly Compensated Employees
as provided in Section 5.5 (but disregarding Highly Compensated Employees).
Notwithstanding the foregoing, contributions shall be made to Highly Compensated
Employees to the extent necessary to satisfy Section 10.6, and the allocations
to other Highly Compensated Employees shall be further adjusted to satisfy the
requirements of the first sentence of this Section 8.3 (with such amounts be
allocated as provided herein).
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8.4 Dividends.
Dividends paid with respect to Employer Securities credited to a
Participant's Employee Stock Ownership Account as of the record date for the
dividend payment may be allocated to the Participant's Employee Stock Ownership
Account, paid in cash to the Participant, or used by the Trustee to make
payments on an Exempt Loan, pursuant to the direction of the Administrator. If
the Administrator shall direct that the aforesaid dividends shall be paid
directly to Participants, the dividends paid with respect to such Employer
Securities shall be paid to the Plan, from which dividend distributions in cash
shall be made to the Participants with respect to the Employer Securities in
their Employee Stock Ownership Accounts within 90 days of the close of the Plan
Year in which the dividends were paid. If dividends on Employer Securities
already allocated to Participants' Employee Stock Ownership Accounts are used to
make payments on an Exempt Loan, the Employer Securities which are released from
the Exempt Loan Suspense Account shall first be allocated to each Employee Stock
Ownership Account in an amount equal to the amount of dividends that would have
been allocated to such Account if the dividends had not been used to make
payments on an Exempt Loan, and the remaining Employer Securities (if any) which
are released shall be allocated in the proportion that the value of each
Employee Stock Ownership Account bears to the value of all such Accounts, all in
accordance with Section 5.5 of the Plan and Section 404(k) of the Code.
Dividends on Employer Securities obtained pursuant to an Exempt Loan and still
held in the Exempt Loan Suspense Account may be used to make payments on an
Exempt Loan, as described in Section 8.6.
8.5 Exempt Loans.
(a) The Sponsor may direct the Trustee to obtain Exempt Loans. The
Exempt Loan may take the form of (i) a loan from a bank or other commercial
lender to purchase Employer Securities (ii) a loan from the Employer to the
Plan; or (iii) an installment sale of Employer Securities to the Plan. The
proceeds of any such Exempt Loan shall be used, within a reasonable time after
the Exempt Loan is obtained, only to purchase Employer Securities, repay the
Exempt Loan, or repay any prior Exempt Loan. Any such Exempt Loan shall provide
for no more than a reasonable rate of interest and shall be without recourse
against the Plan. The number of years to maturity under the Exempt Loan must be
definitely ascertainable at all times. The only assets of the Plan that may be
given as collateral for an Exempt Loan are Financed Shares acquired with the
proceeds of the Exempt Loan and Financed Shares that were used as collateral for
a prior Exempt Loan repaid with the proceeds of the current Exempt Loan. Such
Financed Shares so pledged shall be placed in an Exempt Loan Suspense Account.
No person or institution entitled to payment under an Exempt Loan shall have
recourse against Trust assets other than the Financed Shares, the Employer Stock
Ownership Contribution (other than contributions of Employer Securities) that is
available under the Plan to meet obligations under the Exempt Loan, and earnings
attributable to such Financed Shares and the investment of such contribution.
Any Employee Stock Ownership Contribution paid during the Plan Year in which an
Exempt Loan is made (whether before or after the date the proceeds of the Exempt
Loan are received), any Employee Stock Ownership Contribution paid thereafter
until the Exempt Loan has been repaid in full, and all earnings from investment
of such Employee Stock Ownership
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Contribution, without regard to whether any such Employee Stock Ownership
Contribution and earnings have been allocated to Participants' Employee Stock
Ownership Accounts, shall be available to meet obligations under the Exempt Loan
as such obligations accrue, or prior to the time such obligations accrue, unless
otherwise provided by the Employer at the time any such contribution is made.
Any pledge of Employer Securities shall provide for the release of Financed
Shares upon the payment of any portion of the Exempt Loan.
(b) For each Plan Year during the duration of the Exempt Loan, the
number of Financed Shares released from such pledge shall equal the number of
Financed Shares held immediately before release for the current Plan Year
multiplied by a fraction. The numerator of the fraction is the sum of principal
and interest paid in such Plan Year. The denominator of the fraction is the sum
of the numerator plus the principal and interest to be paid for all future
years. Such years will be determined without taking into account any possible
extension or renewal periods. If interest on any Exempt Loan is variable, the
interest to be paid in future years under the Exempt Loan shall be computed by
using the interest rate applicable as of the end of the Plan Year.
(c) Notwithstanding the foregoing, the Trustee may, in accordance
with the direction of the Administrator, obtain an Exempt Loan pursuant to the
terms of which the number of Financed Shares to be released from encumbrance
shall be determined with reference to principal payments only. In the event that
such an Exempt Loan is obtained, annual payments of principal and interest shall
be at a cumulative rate that is not less rapid at any time than level payments
of such amounts for not more than 10 years. The amount of interest in any such
annual loan repayment shall be disregarded only to the extent that it would be
determined to be interest under standard loan amortization tables. The
requirement set forth in the preceding sentence shall not be applicable from the
time that, by reason of a renewal, extension, or refinancing, the sum of the
expired duration of the Exempt Loan, the renewal period, the extension period,
and the duration of a new Exempt Loan exceeds 10 years.
8.6 Exempt Loan Payments.
(a) Payments of principal and interest on any Exempt Loan during a
Plan Year shall be made by the Trustee (as directed by the Administrator) only
from (1) the Employee Stock Ownership Contribution to the Trust made to meet the
Plan's obligation under an Exempt Loan (other than contributions of Employer
Securities) and from any earnings attributable to Financed Shares and
investments of such contributions (both received during or prior to the Plan
Year); (2) the proceeds of a subsequent Exempt Loan made to repay a prior Exempt
Loan; and (3) the proceeds of the sale of any Financed Shares. Such contribution
and earnings shall be accounted for separately by the Plan until the Exempt Loan
is repaid.
(b) Employer Securities released from the Exempt Loan Suspense
Account by reason of the payment of principal or interest on an Exempt Loan from
amounts allocated to Participants' Employee Stock Ownership Accounts shall
immediately upon release be allocated as set forth in Section 5.5.
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(c) The Employer shall contribute to the Trust sufficient amounts
to enable the Trust to pay principal and interest on any such Exempt Loans as
they are due, provided, however, that no such contribution shall exceed the
limitations in Section 5.6. In the event that such contributions by reason of
the limitations in Section 5.6 are insufficient to enable the Trust to pay
principal and interest on such Exempt Loan as it is due, then upon the
Administrator's direction the Employer shall:
(1) Make an Exempt Loan to the Trust in sufficient amounts to meet
such principal and interest payments. Such new Exempt Loan shall be subordinated
to the prior Exempt Loan. Employer Securities released from the pledge of the
prior Exempt Loan shall be pledged as collateral to secure the new Exempt Loan.
Such Employer Securities will be released from this new pledge and allocated to
the Employee Stock Ownership Accounts of the Participants in accordance with the
applicable provisions of the Plan;
(2) Purchase any Financed Shares in an amount necessary to provide
the Trustee with sufficient funds to meet the principal and interest repayments.
Any such sale by the Plan shall meet the requirements of Section 408(e) of the
Act; or
(3) Any combination of the foregoing.
However, the Employer shall not, pursuant to the provisions of this
subsection, do, fail to do or cause to be done any act or thing which would
result in a disqualification of the Plan as an employee stock ownership plan
under Section 4975(e)(7) of the Code.
In the event of default upon an Exempt Loan, the value of the Trust
fund transferred in satisfaction of the Exempt Loan shall not exceed the amount
of default. If the lender is a disqualified person (within the meaning of Code
Section 4975(e)(2)), then the Exempt Loan shall provide for a transfer of Trust
funds upon default only upon and to the extent of the failure of the Plan to
meet the payment schedule of the Exempt Loan.
(d) Except as provided in Section 8.1 above and notwithstanding any
amendment to or termination of the Plan which causes it to cease to qualify as
an employee stock ownership plan within the meaning of Section 4975(e)(7) of the
Code, or any repayment of an Exempt Loan, no shares of Employer Securities
acquired with the proceeds of an Exempt Loan obtained by the Trust to purchase
Employer Securities may be subject to a put, call or other option, or buy-sell
or similar arrangement, while such shares are held by the Plan or when such
shares are distributed from the Plan.
(e) If Employer Securities acquired with the proceeds of an Exempt
Loan is available for distribution and consists of more than one class, then a
Participant or his Beneficiary must receive substantially the same proportion of
each such class. If a portion of a Participant's Account is forfeited, Employer
Securities allocated to the Participant's Account shall be forfeited only after
other assets in the Participant's Account have been forfeited. If interest in
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more than one class of Employer Securities has been allocated to a Participant's
Account, the Participant must be treated as forfeiting the same proportion of
each such class.
8.7 Put Option.
In the event that the Employer Securities distributed to a
Participant are not readily tradable on an established market, the Participant
shall be entitled to require that the Employer repurchase the Employer
Securities under a fair valuation formula, as provided by governmental
regulations. The Participant or Beneficiary shall be entitled to exercise the
put option described in the preceding sentence for a period of not more than 60
days following the date of distribution of Employer Securities to him. If the
put option is not exercised within such 60-day period, the Participant or
Beneficiary may exercise the put option during an additional period of not more
than 60 days after the beginning of the first day of the first Plan Year
following the Plan Year in which the first put option period occurred, all as
provided in regulations promulgated by the Secretary of the Treasury.
If a Participant exercises the foregoing put option with respect to
Employer Securities that were distributed as part of a total distribution
pursuant to which a Participant's Employee Stock Ownership Account is
distributed to him in a single taxable year, the Employer or the Plan may elect
to pay the purchase price of the Employer Securities over a period not to exceed
5 years. Such payments shall be made in substantially equal installments not
less frequently than annually over a period beginning not later than 30 days
after the exercise of the put option. Reasonable interest shall be paid to the
Participant with respect to the unpaid balance of the purchase price, and
adequate security shall be provided with respect thereto. In the event that a
Participant exercises a put option with respect to Employer Securities that are
distributed as part of an installment distribution, if permissible under Section
9.5, the amount to be paid for such securities shall be paid not later than 30
days after the exercise of the put option.
8.8 Diversification Requirements.
Each Participant who has completed at least 10 years of
participation in the Plan and has attained age 55 may elect within 90 days after
the close of each Plan Year during his "qualified election period" to direct the
Plan as to the investment of at least 25 percent of his Employee Stock Ownership
Account (to the extent such percentage exceeds the amount to which a prior
election under this Section 8.8 had been made). For purposes of this Section
8.8, the term "qualified election period" shall mean the 6-Plan-Year period
beginning with the Plan Year in which the Participant attains age 55 (or, if
later, beginning with the Plan Year after the first Plan Year in which the
Employee first completes at least 10 years of participation in the Plan). In the
case of an Employee who has attained age 60 and completed 10 years of
participation in the prior Plan Year and in the case of the election year in
which any other Participant who has met the minimum age and service requirements
for diversification can make his last election hereunder, he shall be entitled
to direct the Plan as to the investment of at least 50 percent of his Employee
Stock Ownership Account (to the extent such percentage exceeds the amount to
which a prior election under this Section 8.8 had been made). The Plan shall
make available at least 3
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investment options (chosen by the Administrator in accordance with regulations
prescribed by the Department of Treasury) to each Participant making an election
hereunder. The Plan shall be deemed to have met the requirements of this Section
if the portion of the Participant's Employee Stock Ownership Account covered by
the election hereunder is distributed to the Participant or his designated
Beneficiary within 90 days after the period during which the election may be
made. In the absence of such a distribution, the Trustee shall implement the
Participant's election within 90 days following the expiration of the qualified
election period. Notwithstanding the foregoing, if the fair market value of the
Employer Securities allocated to the Employee Stock Ownership Account of a
Participant otherwise entitled to diversify hereunder is $500 or less as of the
Valuation Date immediately preceding the first day of any election period, then
such Participant shall not be entitled to an election under this Section 8.8 for
that qualified election period.
8.9 Independent Appraiser.
An independent appraiser meeting the requirements of the
regulations promulgated under Code Section 170(a)(1) shall value the Employer
Securities in those Plan Years when such securities are not readily tradable on
an established securities market.
8.10 Nonterminable Rights.
The provisions of this Article VIII shall continue to be applicable
to Employer Securities held by the Trustee, whether or not allocated to
Participants' and Former Participants' Accounts, even if the Plan ceases to be
an employee stock ownership plan, as defined in Section 4975(e)(7) of the Code.
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ARTICLE IX
PAYMENTS AND DISTRIBUTIONS
9.1 Payments on Termination of Service - In General.
All benefits provided under this Plan shall be funded by the value
of a Participant's vested Account in the Plan. As soon as practicable after a
Participant's Retirement, Disability, death or other termination of Service, the
Administrator shall ascertain the value of his vested Account, as provided in
Article V, and the Administrator shall hold or dispose of the same in accordance
with the following provisions of this Article IX.
9.2 Commencement of Payments.
(a) Distributions upon Retirement, Disability or Death. Upon a
Participant's Retirement, Disability or death, payment of benefits under this
Plan shall, unless the Participant otherwise elects (in accordance with Section
9.3), commence as soon as practicable after the Valuation Date next following
the date of the Participant's Retirement, Disability or death.
(b) Distribution following Termination of Service. Unless a
Participant elects otherwise, if a Participant terminates Service prior to
Retirement, Disability or death, he shall be accorded an opportunity to commence
receipt of benefits as soon as practicable after the Valuation Date next
following the date of his termination of Service. A Participant who terminates
Service with a vested Account balance shall be entitled to receive from the
Administrator a statement of his benefits. In the event that a Participant
elects not to commence receipt of distribution in accordance with this Section
9.2(b) after the Participant incurs a Break, the Administrator shall transfer
his vested Account balance to a distribution account. If a Participant's vested
Account balance does not exceed (or at the time of any prior distribution did
not exceed) $5,000, the Plan Administrator shall distribute the vested portion
of his Account balance as soon as administratively feasible without the consent
of the Participant or his spouse.
(c) Distribution of Accounts Greater Than $5,000. If the value of a
Participant's vested Account balance exceeds (or at the time of any prior
distribution exceeded) $5,000, and the Account balance is immediately
distributable, the Participant must consent to any distribution of such Account
balance. The Administrator shall notify the Participant of the right to defer
any distribution until the Participant's Account balance is no longer
immediately distributable. The consent of the Participant shall not be required
to the extent that a distribution is required to satisfy Code Section 401(a)(9)
or Code Section 415.
9.3 Mandatory Commencement of Benefits.
(a) Unless a Participant elects otherwise, in writing, distribution
of benefits will begin no later than the 60th day after the latest to occur of
the close of the Plan Year in which (i) the Participant attains age 65, (ii) the
tenth anniversary of the Plan Year in which the Participant
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commenced participation, or (iii) the Participant terminates Service with the
Employer and all Related Employers.
(b) In the event that the Plan shall be subsequently amended to
provide for a form of distribution other than a lump sum, as of the first
distribution calendar year, distributions, if not made in a lump sum, may be
made only over one of the following periods (or a combination thereof):
(i) the life of the Participant,
(ii) the life of the Participant and the designated Beneficiary,
(iii) a period certain not extending beyond the life expectancy of
the Participant, or
(iv) a period certain not extending beyond the joint and last
survivor expectancy of the Participant and a designated Beneficiary.
(c) In the event that the Plan shall be subsequently amended to
provide for a form of distribution other than a lump sum, if the Participant's
interest is to be distributed in other than a lump sum, the following minimum
distribution rules shall apply on or after the required beginning date:
(i) If a Participant's benefit is to be distributed over (1) a
period not extending beyond the life expectancy of the Participant or the joint
life and last survivor expectancy of the Participant and the Participant's
designated Beneficiary or (2) a period not extending beyond the life expectancy
of the designated Beneficiary, the amount required to be distributed for each
calendar year, beginning with distributions for the first distribution calendar
year, must at least equal the quotient obtained by dividing the Participant's
benefit by the applicable life expectancy.
(ii) The amount to be distributed each year, beginning with
distributions for the first distribution calendar year, shall not be less than
the quotient obtained by dividing the Participant's Account balance by the
lesser of (1) the applicable life expectancy, or (2) if the Participant's spouse
is not the designated Beneficiary, the applicable divisor determined from the
table set forth in Q&A-4 of section 1.401(a)(9)-2 of the Proposed Regulations.
Distributions after the death of the Participant shall be distributed using the
applicable life expectancy in subsection (iii) of Section 9.3(b) above as the
relevant divisor without regard to Proposed Regulations section 1.401(a)(9)-2.
(iii) The minimum distribution required for the Participant's first
distribution calendar year must be made on or before the Participant's required
beginning date. The minimum distribution for other calendar years, including the
minimum distribution for the distribution calendar year in which the
Participant's required beginning date occurs, must be made on or before December
31 of the distribution calendar year.
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(d) If a Participant dies after a distribution has commenced in
accordance with Section 9.3(b) but before his entire interest has been
distributed to him, the remaining portion of such interest shall be distributed
to his Beneficiary at least as rapidly as under the method of distribution in
effect as of the date of his death.
(e) If a Participant shall die before the distribution of his
Account balance has begun, the entire Account balance shall be distributed by
December 31 of the calendar year containing the fifth anniversary of the death
of the Participant, except in the following events:
(i) If any portion of the Participant's Account balance is payable
to (or for the benefit of) a designated Beneficiary over a period not extending
beyond the life expectancy of such Beneficiary and such distributions begin not
later than December 31 of the calendar year immediately following the calendar
year in which the Participant died; or
(ii) If any portion of the Participant's Account balance is payable
to (or for the benefit of) the Participant's spouse over a period not extending
beyond the life expectancy of such spouse and such distributions begin no later
than December 31 of the calendar year in which the Participant would have
attained age 70-1/2.
If the Participant has not made a distribution election by the time
of his death, the Participant's designated Beneficiary shall elect the method of
distribution no later than the earlier of (1) December 31 of the calendar year
in which distributions would be required to begin under this Article or (2)
December 31 of the calendar year which contains the fifth anniversary of the
date of death of the Participant. If the Participant has no designated
Beneficiary, or if the designated Beneficiary does not elect a method of
distribution, distribution of the Participant's entire interest shall be
completed by December 31 of the calendar year containing the fifth anniversary
of the Participant's death.
(f) For purposes of this Article, the life expectancy of a
Participant and his spouse may be redetermined but not more frequently than
annually. The life expectancy (or joint and last survivor expectancy) shall be
calculated using the attained age of the Participant (or designated Beneficiary)
as of the Participant's (or designated Beneficiary's) birthday in the applicable
calendar year reduced by one for each calendar year which has elapsed since the
date life expectancy was first calculated. If life expectancy is being
recalculated, the applicable life expectancy shall be the life expectancy as so
recalculated. The applicable calendar year shall be the first distribution
calendar year, and if life expectancy is being recalculated, such succeeding
calendar year. Unless otherwise elected by the Participant (or his spouse, if
applicable) by the time distributions are required to begin, life expectancies
shall be recalculated annually. Any election not to recalculate shall be
irrevocable and shall apply to all subsequent years. The life expectancy of a
nonspouse Beneficiary may not be recalculated.
(g) For purposes of Section 9.3(b) and 9.3(e), any amount paid to a
child shall be treated as if it had been paid to a surviving spouse if such
amount will become payable to the
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surviving spouse upon such child reaching majority (or other designated event
permitted under regulations).
(h) For distributions beginning before the Participant's death, the
first distribution calendar year is the calendar year immediately preceding the
calendar year which contains the Participant's required beginning date. For
distributions beginning after the Participant's death, the first distribution
calendar year is the calendar year in which distributions are required to begin
pursuant to this Article.
9.4 Required Beginning Dates.
The required beginning date of a Participant who is a 5-percent
owner of the Employer is the first day of April of the calendar year following
the calendar year in which the Participant attains age 70-1/2. The required
beginning date of a Participant who is not a 5-percent owner shall be April 1 of
the calendar year following the later of either: (i) the calendar year in which
the Participant attains age 70-1/2, or (ii) the calendar year in which the
Participant retires. A Participant is treated as a 5-percent owner for purposes
of this section if such Participant is a 5- percent owner as defined in section
416(i) of the Code (but without regard to whether the plan is top-heavy) at any
time during the Plan Year ending with or within the calendar year in which such
owner attains age 66-1/2 or any subsequent Plan Year. Once distributions have
begun to a 5-percent owner under this section, they must continue to be
distributed, even if the Participant ceases to be a 5-percent owner in a
subsequent year.
9.5 Form of Payment.
Each Participant's vested Account balance shall be distributed in a
lump sum payment. Notwithstanding the preceding sentence, but subject to Section
9.3, the Administrator may not distribute a lump sum without the Participant's
consent when the present value of a Participant's total Account balance is in
excess of $5,000. This form of payment shall be the normal form of distribution.
Furthermore, however, in the event that the Administrator must commence
distributions, as required by Section 9.4 herein, with respect to an Employee
who has attained age 70-1/2 and is still employed by the Employer, if the
Employee does not elect a lump sum distribution, payments shall be made in
installments in such amounts as shall satisfy the minimum distribution rules of
Section 9.3.
9.6 Payments Upon Termination of Plan.
Upon termination of this Plan pursuant to Sections 13.2, 13.4, 13.5
or 13.6, the Administrator shall continue to perform its duties and the Trustee
shall make all payments upon the following terms, conditions and provisions: The
Account balance of each affected Participant and Former Participant shall
immediately become fully vested and nonforfeitable; the Account balance of all
Participants and Former Participants shall be determined within 60 days after
such termination, and the Administrator shall have the same powers to direct the
Trustee in making payments as contained in Sections 9.1 and 13.5.
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9.7 Distributions Pursuant to Qualified Domestic Relations Orders.
Upon receipt of a domestic relations order, the Administrator shall
promptly notify the Participant and any alternate payee of receipt of the order
and the Plan's procedure for determining whether the order is a Qualified
Domestic Relations Order. While the issue of whether a domestic relations order
is a Qualified Domestic Relations Order is being determined, if the benefits
would otherwise be paid, the Administrator shall segregate in a separate account
in the Plan the amounts that would be payable to the alternate payee during such
period if the order were a Qualified Domestic Relations Order. If within 18
months the order is determined to be a Qualified Domestic Relations Order, the
amounts so segregated, along with the interest or investment earnings
attributable thereto, shall be paid to the alternate payee. Alternatively, if
within 18 months, it is determined that the order is not a Qualified Domestic
Relations Order or if the issue is still unresolved, the amounts segregated
under this Section 9.7, with the earnings attributable thereto, shall be paid to
the Participant or Beneficiary who would have been entitled to such amounts if
there had been no order. The determination as to whether the order is qualified
shall be applied prospectively. Thus, if the Administrator determines that the
order is a Qualified Domestic Relations Order after the 18-month period, the
Plan shall not be liable for payments to the alternative payee for the period
before the order is determined to be a Qualified Domestic Relations Order.
9.8 Cash-Out Distributions.
If a Participant receives a distribution of his entire vested
Account balance because of the termination of his participation in the Plan, the
Plan shall disregard a Participant's Service with respect to which such cash-out
distribution shall have been made, in computing his Account balance in the event
that a Former Participant shall again become an Employee and become eligible to
participate in the Plan. Such a distribution shall be deemed to be made on
termination of participation in the Plan if it is made not later than the close
of the second Plan Year following the Plan Year in which such termination
occurs. The forfeitable portion of a Participant's Account balance shall be
restored upon repayment to the Plan by such Former Participant of the full
amount of the cash-out distribution, provided that the Former Participant again
becomes an Employee. Such repayment must be made by the Employee not later than
the end of the 5-year period beginning with the date of the distribution.
Forfeitures required to be restored by virtue of such repayment shall be
restored from the following sources in the following order of preference: (i)
current forfeitures; (ii) an additional Employee Stock Ownership Contribution,
as appropriate, and as subject to Section 5.6; and (iii) investment earnings of
the Fund. In the event that a Participant's Account balance is totally
forfeitable, a Participant shall be deemed to have received a distribution of
zero upon his termination of Service. In the event of a return to Service within
5 years of the date of his deemed distribution, the Participant shall be deemed
to have repaid his distribution in accordance with the rules of this Section
9.8.
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9.9 ESOP Distribution Rules.
Notwithstanding any provision of this Article IX to the contrary,
the distribution of a Participant's Employee Stock Ownership Account (unless the
Participant elects otherwise in writing) shall commence as soon as
administratively feasible as of the first Valuation Date coincident with or next
following his death, Disability or termination of Service, but not later than 1
year after the close of the Plan Year in which the Participant separates from
Service by reason of the attainment of his Normal Retirement Date, Disability,
death or separation from Service. In addition, all distributions hereunder
shall, to the extent that the Participant's Account is invested in Employer
Securities, be made in the form of Employer Securities or cash, or a combination
of Employer Securities and cash, in the discretion of the Administrator, subject
to the Participant's right to demand Employer Securities in accordance with
Section 8.1. Fractional shares, however, may be distributed in the form of cash.
9.10 Direct Rollover.
(a) Notwithstanding any provision of the Plan to the contrary that
would otherwise limit a distributee's election under this Article IX, a
distributee may elect, at the time and in the manner prescribed by the
Administrator, to have any portion of an "eligible rollover distribution" paid
directly to an "eligible retirement plan" specified by the distributee in a
"direct rollover."
(b) For purposes of this Section 9.10, an "eligible rollover
distribution" is any distribution of all or any portion of the balance to the
credit of the distributee, except that an "eligible rollover distribution" does
not include: any distribution that is one of a series of substantially equal
periodic payments (not less frequently than annually) made for the life (or life
expectancy) of the distributee or the joint lives (or joint life expectancies)
of the distributee and the distributee's designated Beneficiary, or for a
specified period of ten years or more; any distribution to the extent such
distribution is required under section 401(a)(9) of the Code; and the portion of
any distribution that is not includable in gross income (determined without
regard to the exclusion for net unrealized appreciation with respect to Employer
Securities).
(c) For purposes of this Section 9.10, an "eligible retirement
plan" is an individual retirement account described in section 408(a) of the
Code, an individual retirement annuity described in section 408(b) of the Code,
an annuity plan described in section 403(a) of the Code, or a qualified trust
described in section 401(a) of the Code, that accepts the distributee's eligible
rollover distribution. However, in the case of an "eligible rollover
distribution" to the surviving spouse, an "eligible retirement plan" is an
individual retirement account or individual retirement annuity.
(d) For purposes of this Section 9.10, a distributee includes a
Participant or Former Participant. In addition, the Participant's or Former
Participant's surviving spouse and the Participant's or Former Participant's
spouse or former spouse who is the alternate payee under a Qualified Domestic
Relations Order are "distributees" with regard to the interest of the spouse or
former spouse.
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(e) For purposes of this Section 9.10, a "direct rollover" is a
payment by the Plan to the "eligible retirement plan" specified by the
distributee.
9.11 Waiver of 30-day Notice.
If a distribution is one to which Sections 401(a)(11) and 417 of
the Code do not apply, such distribution may commence less than 30 days after
the notice required under Section 1.411(a)-11(c) of the Income Tax Regulations
is given, provided that: (1) the Administrator clearly informs the Participant
that the Participant has a right to a period of at least 30 days after receiving
the notice to consider the decision of whether or not to elect a distribution
(and, if applicable, a particular distribution option), and (2) the Participant,
after receiving the notice, affirmatively elects a distribution.
9.12 Re-employed Veterans.
Notwithstanding any provision of the Plan to the contrary,
contributions, benefits, Plan loan repayment suspensions and Service credit with
respect to qualified military service will be provided in accordance with Code
Section 414(u).
9.13 Share Legend.
Employer Securities held or distributed by the Trustee may include
such legend restrictions on transferability as the Employer may reasonably
require in order to assure compliance with applicable Federal and State
securities and other laws.
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ARTICLE X
PROVISIONS RELATING TO TOP-HEAVY PLANS
10.1 Top-Heavy Rules to Control.
Anything contained in this Plan to the contrary notwithstanding, if
for any Plan Year the Plan is a top-heavy plan, as determined pursuant to
Section 416 of the Code, then the Plan must meet the requirements of this
Article X for such Plan Year.
10.2 Top-Heavy Plan Definitions.
Unless a different meaning is plainly implied by the context, the
following terms as used in this Article X shall have the following meanings:
(a) "Accrued Benefit" shall mean the account balances or accrued
benefits of an Employee, calculated pursuant to Section 10.3.
(b) "Determination Date" shall mean, with respect to any particular
Plan Year of this Plan, the last day of the preceding Plan Year (or, in the case
of the first Plan Year of the Plan, the last day of the first Plan Year). In
addition, the term "Determination Date" shall mean, with respect to any
particular plan year of any plan (other than this Plan) in a Required
Aggregation Group or a Permissive Aggregation Group, the last day of the plan
year of such plan which falls within the same calendar year as the Determination
Date for this Plan.
(c) "Employer" shall mean the Employer (as defined in Section
1.1(q)) and any entity which is (1) a member of a controlled group including
such Employer, while it is a member of such controlled group (within the meaning
of Section 414(b) of the Code), (2) in a group of trades or businesses under
common control with such Employer, while it is under common control (within the
meaning of Section 414(c) of the Code), and (3) a member of an affiliated
service group including such Employer, while it is a member of such affiliated
service group (within the meaning of Section 414(m) of the Code).
(d) "Key Employee" shall mean any Employee or former Employee (or
any Beneficiary of such Employee or former Employee, as the case may be) who, at
any time during the Plan Year or during the 4 immediately preceding Plan Years,
is one of the following:
(1) An officer of the Employer who has compensation greater than
50% of the amount in effect under Code 415(b)(1)(A) for the Plan Year; provided,
however, that no more than 50 Employees (or, if lesser, the greater of 3 or 10%
of the Employees) shall be deemed officers;
(2) One of the 10 Employees having annual compensation (as defined
in Section 415 of the Code) in excess of the limitation in effect under Section
415(c)(1)(A) of the Code, and owning (or considered as owning, within the
meaning of Section 318 of the Code) the largest interests in the Employer;
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(3) Any Employee owning (or considered as owning, within the
meaning of Section 318 of the Code) more than 5% of the outstanding stock of the
Employer or stock possessing more than 5% of the total combined voting power of
all stock of the Employer; or
(4) Any Employee having annual compensation (as defined in Section
415 of the Code) of more than $150,000 and who would be described in Section
10.2(d)(3) if "1%" were substituted for "5%" wherever the latter percentage
appears.
For purposes of applying Section 318 of the Code to the provisions
of this Section 10.2(d), Section 318(a)(2)(C) of the Code shall be applied by
substituting "5%" for "50%" wherever the latter percentage appears. In addition,
for purposes of this Section 10.2(d), the provisions of Section 414(b), (c) and
(m) shall not apply in determining ownership interests in the Employer. However,
for purposes of determining whether an individual has compensation in excess of
$150,000, or whether an individual is a Key Employee under Section 10.2(d)(1)
and (2), compensation from each entity required to be aggregated under Sections
414(b), (c) and (m) of the Code shall be taken into account. Notwithstanding
anything contained herein to the contrary, all determinations as to whether a
person is or is not a Key Employee shall be resolved by reference to Section 416
of the Code and any rules and regulations promulgated thereunder.
(e) "Non-Key Employee" shall mean any Employee or former Employee
(or any Beneficiary of such Employee or former Employee, as the case may be) who
is not considered to be a Key Employee with respect to this Plan.
(f) "Permissive Aggregation Group" shall mean all plans in the
Required Aggregation Group and any other plans maintained by the Employer which
satisfy Sections 401(a)(4) and 410 of the Code when considered together with the
Required Aggregation Group.
(g) "Required Aggregation Group" shall mean each plan (including
any terminated plan) of the Employer in which a Key Employee is (or in the case
of a terminated plan, had been) a Participant in the Plan Year containing the
Determination Date or any of the 4 preceding Plan Years, and each other plan of
the Employer which enables any plan of the Employer in which a Key Employee is a
Participant to meet the requirements of Sections 401(a)(4) and 410 of the Code.
10.3 Calculation of Accrued Benefits.
(a) An Employee's Accrued Benefit shall be equal to:
(1) With respect to this Plan or any other defined contribution
plan (other than a defined contribution pension plan) in a Required Aggregation
Group or a Permissive Aggregation Group, the Employee's account balances under
the respective plan, determined as of the most recent plan valuation date within
a 12-month period ending on the Determination Date, including contributions
actually made after the valuation date but before the Determination Date
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(and, in the first plan year of a plan, also including any contributions made
after the Determination Date which are allocated as of a date in the first plan
year).
(2) With respect to any defined contribution pension plan in a
Required Aggregation Group or a Permissive Aggregation Group, the Employee's
account balances under the plan, determined as of the most recent plan valuation
date within a 12-month period ending on the Determination Date, including
contributions which have not actually been made, but which are due to be made as
of the Determination Date.
(3) With respect to any defined benefit plan in a Required
Aggregation Group or a Permissive Aggregation Group, the present value of the
Employee's accrued benefits under the plan, determined as of the most recent
plan valuation date within a 12-month period ending on the Determination Date,
pursuant to the actuarial assumptions used by such plan, and calculated as if
the Employee terminated Service under such plan as of the valuation date (except
that, in the first plan year of a plan, a current Participant's estimated
Accrued Benefit as of the Determination Date shall be taken into account). The
present value of accrued benefit for a Participant shall be as determined using
a method which results in benefits accruing not more rapidly than the slowest
accrual rate permitted under Code Section 411(b)(1)(C).
(4) If any individual has not performed services for the Employer
maintaining the Plan at any time during the 5-year period ending on the
Determination Date, any Accrued Benefit for such individual shall not be taken
into account.
(b) The Accrued Benefit of any Employee shall be further adjusted
as follows:
(1) The Accrued Benefit shall be calculated to include all amounts
attributable to both Employer and Employee contributions, but shall exclude
amounts attributable to voluntary deductible Employee contributions, if any.
(2) The Accrued Benefit shall be increased by the aggregate
distributions made with respect to an Employee under the plan or plans, as the
case may be, during the 5-year period ending on the Determination Date.
(3) Rollover and direct plan-to-plan transfers shall be taken into
account as follows:
(A) If the transfer is initiated by the Employee and made
from a plan maintained by one employer to a plan maintained by
another unrelated employer, the transferring plan shall continue to
count the amount transferred; the receiving plan shall not count
the amount transferred.
(B) If the transfer is not initiated by the Employee or is
made between plans maintained by related employers, the
transferring plan shall no longer count the amount transferred; the
receiving plan shall count the amount transferred.
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(c) If any individual has not performed services for the Employer
at any time during the 5-year period ending on the Determination Date, any
Accrued Benefit for such individual (and the account of such individual) shall
not be taken into account.
10.4 Determination of Top-Heavy Status.
This Plan shall be considered to be a top-heavy plan for any Plan
Year if, as of the Determination Date, the value of the Accrued Benefits of Key
Employees exceeds 60% of the value of the Accrued Benefits of all eligible
Employees under the Plan. Notwithstanding the foregoing, if the Employer
maintains any other qualified plan, the determination of whether this Plan is
top-heavy shall be made after aggregating all other plans of the Employer in the
Required Aggregation Group and, if desired by the Employer as a means of
avoiding top-heavy status, after aggregating any other plan of the Employer in
the Permissive Aggregation Group. If the required Aggregation Group is
top-heavy, then each plan contained in such group shall be deemed to be
top-heavy, notwithstanding that any particular plan in such group would not
otherwise be deemed to be top-heavy. Conversely, if the Permissive Aggregation
Group is not top-heavy, then no plan contained in such group shall be deemed to
be top-heavy, notwithstanding that any particular plan in such group would
otherwise be deemed to be top-heavy. In no event shall a plan included in a
top-heavy Permissive Aggregation Group be deemed a top-heavy plan unless such
plan is also included in a top-heavy Required Aggregation Group.
10.5 Determination of Super Top-Heavy Status.
The Plan shall be considered to be a super top-heavy plan if, as of
the Determination Date, the Plan would meet the test specified in Section 10.4
above for classification as a top-heavy plan, except that "90%" shall be
substituted for "60%" whenever the latter percentage appears.
10.6 Minimum Contribution.
(a) For any Plan Year in which the Plan is top-heavy, each Non-Key
Employee who has met the age and service requirements, if any, contained in the
Plan, shall be entitled to a minimum contribution (which may include forfeitures
otherwise allocable) equal to a percentage of such Non-Key Employee's
compensation (as defined in Section 415 of the Code) as follows:
(1) If the Non-Key Employee is not covered by a defined benefit
plan maintained by the Employer, then the minimum contribution under this Plan
shall be 3% of such Non-Key Employee's compensation.
(2) If the Non-Key Employee is covered by a defined benefit plan
maintained by the Employer, then the minimum contribution under this Plan shall
be 5% of such Non-Key Employee's compensation.
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(b) Notwithstanding the foregoing, the minimum contribution
otherwise allocable to a Non-Key Employee under this Plan shall be reduced in
the following circumstances:
(1) The percentage minimum contribution required under this Plan
shall in no event exceed the percentage contribution made for the Key Employee
for whom such percentage is the highest for the Plan Year after taking into
account contributions under other defined contribution plans in this Plan's
Required Aggregation Group; provided, however, that this Section 10.7(b)(1)
shall not apply if this Plan is included in a Required Aggregation Group and
this Plan enables a defined benefit plan in such Required Aggregation Group to
meet the requirements of Section 401(a)(4) or 410 of the Code.
(2) No minimum contribution shall be required (or the minimum
contribution shall be reduced, as the case may be) for a Non-Key Employee under
this Plan for any Plan Year if the Employer maintains another qualified plan
under which a minimum benefit or contribution is being accrued or made on
account of such Plan Year, in whole or in part, on behalf of the Non-Key
Employee, in accordance with Section 416(c) of the Code.
(c) For purposes of this Section 10.6, there shall be disregarded
(1) any Employer contributions attributable to a salary reduction or similar
arrangement (except for purposes of determining the contribution rates on behalf
of Key Employees that form the basis of the minimum required contribution), or
(2) any Employer contributions to or any benefits under Chapter 21 of the Code
(relating to the Federal Insurance Contributions Act), Title II of the Social
Security Act, or any other federal or state law.
(d) For purposes of this Section 10.6, minimum contributions shall
be required to be made on behalf of only those Non-Key Employees, as described
in Section 10.7(a), who have not terminated Service as of the last day of the
Plan Year. If a Non-Key Employee is otherwise entitled to receive a minimum
contribution pursuant to this Section 10.6(d), the fact that such Non-Key
Employee failed to complete 1,000 Hours of Service or failed to make any
mandatory or elective contributions under this Plan, if any are so required,
shall not preclude him from receiving such minimum contribution.
10.7 Vesting.
(a) For any Plan Year in which the Plan is a top-heavy plan, a
Participant's Accrued Benefit derived from Employer contributions (not including
contributions made pursuant to Code Section 401(k), if any) shall continue to
vest according to the following schedule:
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Years of Service Completed Percentage Vested
Less than 1 0%
1 but less than 2 20%
2 but less than 3 40%
3 but less than 4 60%
4 but less than 5 80%
5 or more 100%
(b) For purposes of Section 10.7(a), the term "year of service"
shall have the same meaning as Year of Vesting Service, as modified by Section
3.2.
(c) If for any Plan Year the Plan becomes top-heavy and the vesting
schedule set forth in Section 10.7(a) becomes effective, then, even if the Plan
ceases to be top-heavy in any subsequent Plan Year, the vesting schedule set
forth in Section 10.7(a) shall remain applicable with respect to any Participant
who has completed 3 or more Years of Service.
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ARTICLE XI
ADMINISTRATION
11.1 Appointment of Administrator.
This Plan shall be administered by a committee consisting of up to
5 persons, whether or not Employees or Participants, who shall be appointed from
time to time by the Board of Directors to serve at its pleasure. The Sponsor may
require that each person appointed as an Administrator shall signify his
acceptance by filing an acceptance with the Sponsor. The term "Administrator" as
used in this Plan shall refer to the members of the committee, either
individually or collectively, as appropriate. The authority to control and
manage the operation and administration of the Plan is vested in the
Administrator appointed by the Board of Directors. The Administrator shall have
the rights, duties and obligations of an "administrator," as that term is
defined in section 3(16)(A) of the Act, and of a "plan administrator," as that
term is defined in Section 414(g) of the Code. In the event that the Sponsor
shall elect not to appoint any individuals to constitute a committee to
administer the Plan, the Sponsor shall serve as the Administrator hereunder.
11.2 Resignation or Removal of Administrator.
An Administrator shall have the right to resign at any time by
giving notice in writing, mailed or delivered to the Sponsor and to the Trustee.
Any Administrator who was an employee of the Employer at the time of his
appointment shall be deemed to have resigned as an Administrator upon his
termination of Service. The Board of Directors may, in its discretion, remove
any Administrator with or without cause, by giving notice in writing, mailed or
delivered to the Administrator and to the Trustee.
11.3 Appointment of Successors: Terms of Office, Etc.
Upon the death, resignation or removal of an Administrator, the
Sponsor may appoint, by Board of Directors' resolution, a successor or
successors. Notice of termination of an Administrator and notice of appointment
of a successor shall be made by the Sponsor in writing, with copies mailed or
delivered to the Trustee, and the successor shall have all the rights and
privileges and all of the duties and obligations of the predecessor.
11.4 Powers and Duties of Administrator.
The Administrator shall have the following duties and
responsibilities in connection with the administration of this Plan:
(a) To promulgate and enforce such rules, regulations and
procedures as shall be proper for the efficient administration of the Plan, such
rules, regulations and procedures to apply uniformly to all Employees,
Participants and Beneficiaries;
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(b) To exercise discretion in determining all questions arising in
the administration, interpretation and application of the Plan, including
questions of eligibility and of the status and rights of Participants,
Beneficiaries and any other persons hereunder;
(c) To decide any dispute arising hereunder strictly in accordance
with the terms of the Plan; provided, however, that no Administrator shall
participate in any matter involving any questions relating solely to his own
participation or benefits under this Plan;
(d) To advise the Employer and direct the Trustee regarding the
known future needs for funds to be available for distribution in order that the
Trustee may establish investments accordingly;
(e) To correct defects, supply omissions and reconcile
inconsistencies to the extent necessary to effectuate the Plan;
(f) To advise the Employer of the maximum deductible contribution
to the Plan for each fiscal year;
(g) To direct the Trustee concerning all matters requiring the
Administrator's direction pursuant to the provisions of this Plan and the Trust
Agreement;
(h) To advise the Trustee on all terminations of Service by
Participants, unless the Employer has so notified the Trustee;
(i) To confer with the Trustee on the settling of any claims
against the Fund;
(j) To make recommendations to the Board of Directors with respect
to proposed amendments to the Plan and the Trust Agreement;
(k) To file all reports with government agencies, Employees and
other parties as may be required by law, whether such reports are initially the
obligation of the Employer, the Plan or the Trustee;
(l) To have all such other powers as may be necessary to discharge
its duties hereunder; and
(m) To direct the Trustee to pay all expenses of administering this
Plan, except to the extent that the Employer pays such expenses.
Full discretion is granted to the Administrator to interpret the
Plan and to determine the benefits, rights and privileges of Participants,
Beneficiaries or other persons affected by this Plan. The Administrator shall
exercise its discretion under the terms of this Plan and shall administer the
Plan in accordance with its terms, such administration to be exercised uniformly
so that all persons similarly situated shall be similarly treated.
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11.5 Action by Administrator.
The Administrator may elect a Chairman and Secretary from among its
members and may adopt rules for the conduct of its business. A majority of the
members then serving shall constitute a quorum for the transaction of business.
All resolutions or other action taken by the Administrator shall be by vote of a
majority of those present at such meeting and entitled to vote. Resolutions may
be adopted or other action taken without a meeting upon written consent signed
by at least a majority of the members. All documents, instruments, orders,
requests, directions, instructions and other papers shall be executed on behalf
of the Administrator by either the Chairman or the Secretary of the
Administrator, if any, or by any member or agent of the Administrator duly
authorized to act on the Administrator's behalf.
11.6 Participation by Administrator.
No member of the committee constituting the Administrator shall be
precluded from becoming a Participant in the Plan if he would be otherwise
eligible, but he shall not be entitled to vote or act upon matters or to sign
any documents relating specifically to his own participation under the Plan,
except when such matters or documents relate to benefits generally. If this
disqualification results in the lack of a quorum, then the Board of Directors
shall appoint a sufficient number of temporary members of the committee
constituting the Administrator who shall serve for the sole purpose of
determining such a question.
11.7 Agents.
The Administrator may employ agents and provide for such clerical,
legal, actuarial, accounting, medical, advisory or other services as it deems
necessary to perform its duties under this Plan. The cost of such services and
all other expenses incurred by the Administrator in connection with the
administration of the Plan shall be paid from the Fund, unless paid by the
Employer.
11.8 Allocation of Duties.
The duties, powers and responsibilities reserved to the
Administrator may be allocated among its members so long as such allocation is
pursuant to written procedures adopted by the Administrator, in which case,
except as may be required by the Act, no Administrator shall have any liability,
with respect to any duties, powers or responsibilities not allocated to him, for
the acts of omissions of any other Administrator.
11.9 Delegation of Duties.
The Administrator may delegate any of its duties to any Employees
of the Employer, to the Trustee with its written consent, or to any other person
or firm, provided that the Administrator shall prudently choose such agents and
rely in good faith on their actions.
47
<PAGE>
11.10 Administrator's Action Conclusive.
Any action on matters within the authority of the Administrator
shall be final and conclusive except as provided in Article XII.
11.11 Compensation and Expenses of Administrator.
No Administrator who is receiving compensation from the Employer as
a full-time employee, as a director or agent, shall be entitled to receive any
compensation or fee for his services hereunder. Any other Administrator shall be
entitled to receive such reasonable compensation for his services as an
Administrator hereunder as may be mutually agreed upon between the Employer and
such Administrator. Any such compensation shall be paid from the Fund, unless
paid by the Employer. Each Administrator shall be entitled to reimbursement by
the Employer for any reasonable and necessary expenditures incurred in the
discharge of his duties.
11.12 Records and Reports.
The Administrator shall maintain adequate records of its actions
and proceedings in administering this Plan and shall file all reports and take
all other actions as it deems appropriate in order to comply with the Act, the
Code and governmental regulations issued thereunder.
11.13 Reports of Fund Open to Participants.
The Administrator shall keep on file, in such form as it shall deem
convenient and proper, all annual reports of the Fund received by the
Administrator from the Trustee, and a statement of each Participant's interest
in the Fund as from time to time determined. The annual reports of the Fund and
the statement of his Account balance, as well as a complete copy of the Plan and
the Trust Agreement and copies of annual reports to the Internal Revenue
Service, shall be made available by the Administrator to the Employer for
examination by each Participant during reasonable hours at the office of the
Employer, provided, however, that the statement of a Participant's Account
balance shall not be made available for examination by any other Participant.
11.14 Named Fiduciary.
The Administrator is the named fiduciary for purposes of Section
402 of the Act and shall be the designated agent for receipt of service of
process on behalf of the Plan. It shall use the care and diligence in the
performance of its duties under this Plan that are required of fiduciaries under
the Act. Nothing in this Plan shall preclude the Employer from purchasing
liability insurance to protect the Administrator with respect to its duties
under this Plan.
48
<PAGE>
11.15 Information from Employer.
The Employer shall promptly furnish all necessary information to
the Administrator to permit it to perform its duties under this Plan. The
Administrator shall be entitled to rely upon the accuracy and completeness of
all information furnished to it by the Employer, unless it knows or should have
known that such information is erroneous.
11.16 Responsibilities of Directors.
Subject to the rights reserved to the Board of Directors acting on
behalf of the Employer as set forth in this Plan, no member of the Board of
Directors shall have any duties or responsibilities under this Plan, except to
the extent he shall be acting in the capacity of an Administrator or Trustee.
11.17 Liability and Indemnification.
(a) To the extent not prohibited by the Act, the Administrator
shall not be responsible in any way for any action or omission of the Employer,
the Trustee or any other person in the performance of their duties and
obligations set forth in this Plan and in the Trust Agreement. To the extent not
prohibited by the Act, the Administrator shall also not be responsible for any
act or omission of any of its agents, or with respect to reliance upon advice of
its counsel (whether or not such counsel is also counsel to the Employer or the
Trustee), provided that such agents or counsel were prudently chosen by the
Administrator and that the Administrator relied in good faith upon the action of
such agent or the advice of such counsel.
(b) The Administrator shall not be relieved from responsibility or
liability for any responsibility, obligation or duty imposed upon it under this
Plan or under the Act. Except for its own gross negligence, willful misconduct
or willful breach of the terms of this Plan, the Administrator shall be
indemnified and held harmless by the Employer against liability or losses
occurring by reason of any act or omission of the Administrator to the extent
that such indemnification does not violate the Act or any other federal or state
laws.
49
<PAGE>
ARTICLE XII
CLAIMS PROCEDURE
12.1 Notice of Denial.
If a Participant or his Beneficiary is denied any benefits under
this Plan, either in whole or in part, the Administrator shall advise the
claimant in writing of the amount of his benefit, if any, and the specific
reasons for the denial. The Administrator shall also furnish the claimant at
that time with a written notice containing:
(a) A specific reference to pertinent Plan provisions;
(b) A description of any additional material or information
necessary for the claimant to perfect his claim, if possible, and an explanation
of why such material or information is needed; and
(c) An explanation of the Plan's claim review procedure.
12.2 Right to Reconsideration.
Within 60 days of receipt of the information described in 12.1
above, the claimant shall, if he desires further review, file a written request
for reconsideration with the Administrator.
12.3 Review of Documents.
So long as the claimant's request for review is pending (including
the 60-day period described in Section 12.2 above), the claimant or his duly
authorized representative may review pertinent Plan documents and the Trust
Agreement (and any pertinent related documents) and may submit issues and
comments in writing to the Administrator.
12.4 Decision by Administrator.
A final and binding decision shall be made by the Administrator
within 60 days of the filing by the claimant of his request for reconsideration;
provided, however, that if the Administrator feels that a hearing with the
claimant or his representative present is necessary or desirable, this period
shall be extended an additional 60 days.
12.5 Notice by Administrator.
The Administrator's decision shall be conveyed to the claimant in
writing and shall include specific reasons for the decision, written in a manner
calculated to be understood by the claimant, with specific references to the
pertinent Plan provisions on which the decision is based.
50
<PAGE>
The Administrator's decision shall be binding and conclusive with respect to all
persons interested therein unless the Administrator has no reasonable basis for
its decision.
51
<PAGE>
ARTICLE XIII
AMENDMENTS, TERMINATION AND MERGER
13.1 Amendments.
The Sponsor reserves the right at any time and from time to time,
for any reason and retroactively if deemed necessary or appropriate by it, to
the extent permissible under law, to conform with governmental regulations or
other policies, to amend in whole or in part any or all of the provisions of
this Plan, provided that:
(a) No amendment shall make it possible for any part of the Fund to
be used for, or diverted to, purposes other than for the exclusive benefit of
Participants or their Beneficiaries under the Trust Agreement, except to the
extent provided in Section 4.4;
(b) No amendment may, directly or indirectly, reduce the vested
portion of any Participant's Account balance as of the effective date of the
amendment or change the vesting schedule with respect to the future accrual of
Employer contributions for any Participants unless each Participant with 3 or
more Years of Vesting Service is permitted to elect to have the vesting schedule
in effect before the amendment used to determine his vested benefit;
(c) No amendment may eliminate an optional form of benefit; and.
(d) No amendment may increase the duties of the Trustee without its
consent.
Amendments may be made in the form of Board of Directors'
resolutions or separate written document. Copies of all amendments shall be
delivered to the Trustee.
13.2 Effect of Change In Control
(a) In the event of a "change in control" of the Sponsor, as
defined in paragraph (d) below, this Plan shall terminate at the effective time
of such change in control unless the Board of Directors shall affirmatively
determine prior to such effective time that the Plan shall not terminate.
Nothing in this Plan shall prevent the Sponsor from becoming a party to such a
change in control. In the event that the Board of Directors determines that the
Plan shall not terminate upon a change in control, any successor corporation or
other entity formed and resulting from such change in control shall have the
right to become the sponsor of this Plan by adopting the same by resolution. If,
within 180 days from the effective time of such change in control, such entity
does not affirmatively adopt this Plan, then this Plan shall automatically be
terminated, all affected Participants' and Former Participants' Account balances
shall become fully vested and nonforfeitable, and the Trustee shall make
payments to the persons entitled thereto in accordance with Article IX.
(b) In the event that the Plan terminates upon a change in control
in accordance with paragraph (a) above, the Account balances of all affected
Participants and Former
52
<PAGE>
Participants shall become fully vested and nonforfeitable, and the Trustee shall
either (i) make payments to each Participant and Beneficiary in accordance with
Section 9.5 or, (ii) in the discretion of the Sponsor, continue the Trust
Agreement and make distributions upon the contingencies and in all the
circumstances under which distributions would have been made, on a fully vested
basis, had there been no termination of the Plan.
(c) Notwithstanding any provision of the Plan to the contrary, at
and after the effective time of a change in control, whether or not the Plan
terminates at such time, each of the following provisions shall become
applicable; provided, however, that any such provision shall not apply if the
Board of Directors determines that such provision either (i) would adversely
affect the tax-qualified status of the Plan pursuant to Code Section 401(a),
(ii) would adversely affect the accounting treatment of the change in control as
a pooling of interests, if the Board of Directors desires that such treatment
apply, or (iii) should not apply for any other reason:
(1) The Plan shall be interpreted, maintained and operated
exclusively for the benefit of those individuals who are participating in the
Plan as of the effective time of the change in control and their Beneficiaries.
Notwithstanding the provisions of Section 2.1(a), no Employee shall become a
Participant for the first time at or after the effective time of a change in
control.
(2) After a Participant's Retirement, Disability or other
termination of Service, such Participant's Account, regardless of its value,
shall not be distributed and shall share in the allocation of the Employee Stock
Ownership Contribution and Investment Adjustments until such time as either (A)
the Fund is liquidated in connection with the termination of the Plan, or (B)
the Participant (or his Beneficiary) receives a full distribution of his Account
either upon his election in accordance with Section 9.2(c) or as required in
accordance with Section 8.8, 9.3 or 9.4.
(3) Upon the termination of the Plan, Employer Securities that are
allocated to the Exempt Loan Suspense Account and that are not used to repay an
Exempt Loan shall be allocated as Investment Adjustments in accordance with
Section 5.3.
(4) Employer Securities that are released from the Exempt Loan
Suspense Account in accordance with Section 8.5 shall be allocated to the
Employee Stock Ownership Account of each Participant in accordance with Section
5.5 (regardless of whether the Participant has satisfied the contribution
allocation requirements thereunder for that Plan Year).
(5) The Administrator shall consist of a committee selected by the
Board of Directors, and such committee shall have the exclusive authority (i) to
remove the Trustee and to appoint a successor trustee, (ii) to adopt amendments
to the Plan or the Trust Agreement to effectuate the provisions and intent of
this Section 13.2, and (iii) to perform any or all of the functions and to
exercise all of the discretion that are delegated to the Administrator pursuant
to Article XI.
53
<PAGE>
(6) Any application for a favorable determination letter with
respect to the tax-qualified status of the Plan under Code Section 401(a) with
respect to its termination shall be subject to the prior review, comment and
approval (which approval shall not be unreasonably withheld) of the
Administrator, as defined in paragraph (5) above.
(d) For purposes of this Section 13.2, the term "change in control"
means the occurrence of any one or more of the events specified in the following
clauses (i) through (iii): (i) any third person, including a "group" as defined
in Section 13(d)(3) of the Securities Exchange Act of 1934, shall become the
beneficial owner of shares of the Sponsor with respect to which 25% or more of
the total number of votes for the election of the Board of Directors may be
cast, (ii) as a result of, or in connection with, any cash tender offer, merger
or other business combination, sale of assets or contested election, or
combination of the foregoing, the persons who were directors of the Sponsor
shall cease to constitute a majority of the Board of Directors, or (iii) the
effective time of a transaction that is approved by the stockholders of the
Sponsor and that provides either for the Sponsor to cease to be an independent
publicly-owned corporation or for a sale or other disposition of all or
substantially all of the assets of the Sponsor.
13.3 Consolidation or Merger of Trust.
In the event of any merger or consolidation of the Fund with, or
transfer in whole or in part of the assets and liabilities of the Fund to,
another trust fund held under any other plan of deferred compensation maintained
or to be established for the benefit of all or some of the Participants of this
Plan, the assets of the Fund applicable to such Participants shall be
transferred to the other trust fund only if:
(a) Each Participant would receive a benefit under such successor
trust fund immediately after the merger, consolidation or transfer which is
equal to or greater than the benefit he would have been entitled to receive
immediately before the merger, consolidation or transfer (determined as if this
Plan and such transferee trust fund had then terminated);
(b) Resolutions of the Board of Directors, or of any new or
successor employer of the affected Participants, shall authorize such transfer
of assets, and, in the case of the new or successor employer of the affected
Participants, its resolutions shall include an assumption of liabilities imposed
under this Plan with respect to such Participants' inclusion in the new
employer's plan; and
(c) Such other plan and trust are qualified under Sections 401(a)
and 501(a) of the Code.
13.4 Bankruptcy or Insolvency of Employer.
In the event of (a) the Employer's legal dissolution or liquidation
by any procedure other than a consolidation or merger, (b) the Employer's
receivership, insolvency, or cessation of its business as a going concern, or
(c) the commencement of any proceeding by or against the
54
<PAGE>
Employer under the federal bankruptcy laws, or similar federal or state statute,
or any federal or state statute or rule providing for the relief of debtors,
compensation of creditors, arrangement, receivership, liquidation or any similar
event which is not dismissed within 30 days, this Plan shall terminate
automatically with respect to such entity on such date (provided, however, that
if a proceeding is brought against the Employer for reorganization under Chapter
11 of the United States Bankruptcy Code or any similar federal or state statute,
then this Plan shall terminate automatically if and when said proceeding results
in a liquidation of the Employer, or the approval of any Plan providing
therefor, or the proceeding is converted to a case under Chapter 7 of the
Bankruptcy Code or any similar conversion to a liquidation proceeding under
federal or state law including, but not limited to, a receivership proceeding).
In the event of any such termination as provided in the foregoing sentence, the
Trustee shall make payments to the persons entitled thereto in accordance with
Section 9.6 hereof.
13.5 Voluntary Termination.
The Board of Directors reserves the right to terminate this Plan at
any time by giving to the Trustee and the Administrator notice in writing of
such desire to terminate. The Plan shall terminate upon the date of receipt of
such notice, the Account balances of all affected Participants and Former
Participants shall become fully vested and nonforfeitable, and the Trustee shall
make payments to each Participant or Beneficiary in accordance with Section 9.6.
Alternatively, the Sponsor, in its discretion, may determine to continue the
Trust Agreement and to continue the maintenance of the Fund, in which event
distributions shall be made upon the contingencies and in all the circumstances
under which such distributions would have been made, on a fully vested basis,
had there been no termination of the Plan. In addition, an entity other than the
Sponsor that is participating in this Plan may terminate its participation in
the Plan on a prospective basis by action of its board of directors. Upon such
termination of participation, Participants who are employees of such entity
shall be entitled to distributions from this Plan in accordance with Article IX
and this Article XIII.
13.6 Partial Termination of Plan or Permanent Discontinuance of
Contributions.
In the event that a partial termination of the Plan shall be deemed
to have occurred, or if the Employer shall discontinue permanently its
contributions hereunder, the right of each affected Participant and Former
Participant in his Account balance shall be fully vested and nonforfeitable. The
Sponsor, in its discretion, shall decide whether to direct the Trustee to make
immediate distribution of such portion of the Fund assets to the persons
entitled thereto or to make distribution in the circumstances and contingencies
which would have controlled such distributions if there had been no partial
termination or permanent discontinuance of contributions.
55
<PAGE>
ARTICLE XIV
MISCELLANEOUS
14.1 No Diversion of Funds.
It is the intention of the Employer that it shall be impossible for
any part of the corpus or income of the Fund to be used for, or diverted to,
purposes other than for the exclusive benefit of the Participants or their
Beneficiaries, except to the extent that a return of the Employer's contribution
is permitted under Section 4.4.
14.2 Liability Limited.
Neither the Employer nor the Administrator, nor any agents,
employees, officers, directors or shareholders of any of them, nor the Trustee,
nor any other person, shall have any liability or responsibility with respect to
this Plan, except as expressly provided herein.
14.3 Facility of Payment.
If the Administrator shall receive evidence satisfactory to it that
a Participant or Beneficiary entitled to receive any benefit under the Plan is,
at the time when such benefit becomes payable, a minor, or is physically or
mentally incompetent to receive such benefit and to give a valid release
therefor, and that another person or an institution is then maintaining or has
custody of such Participant or Beneficiary and that no guardian, committee or
other representative of the estate of such Participant or Beneficiary shall have
been duly appointed, the Administrator may direct the Trustee to make payment of
such benefit otherwise payable to such Participant or Beneficiary, to such other
person or institution, including a custodian under a Uniform Gifts to Minors
Act, or corresponding legislation (who shall be an adult, a guardian of the
minor or a trust company), and the release of such other person or institution
shall be a valid and complete discharge for the payment of such benefit.
14.4 Spendthrift Clause.
Except as permitted by the Act or the Code, including in the case
of certain judgments and settlements described in subparagraph (C) of Section
401(a)(13) of the Code, no benefits or other amounts payable under the Plan
shall be subject in any manner to anticipation, sale, transfer, assignment,
pledge, encumbrance, charge or alienation. If the Administrator determines that
any person entitled to any payments under the Plan has become insolvent or
bankrupt or has attempted to anticipate, sell, transfer, assign, pledge,
encumber, charge or otherwise in any manner alienate any benefit or other amount
payable to him under the Plan or that there is any danger of any levy or
attachment or other court process or encumbrance on the part of any creditor of
such person entitled to payments under the Plan against any benefit or other
accounts payable to such person, the Administrator may, at any time, in its
discretion, and in accordance with applicable law, direct the Trustee to
withhold any or all payments to such person under the
56
<PAGE>
Plan and apply the same for the benefit of such person, in such manner and in
such proportion as the Administrator may deem proper.
14.5 Benefits Limited to Fund.
All contributions by the Employer to the Fund shall be voluntary,
and the Employer shall be under no legal liability to make any such
contributions, except as otherwise provided herein. The benefits of this Plan
shall be provided solely by the assets of the Fund, and no liability for the
payment of benefits under the Plan or for any loss of assets due to any action
or inaction of the Trustee shall be imposed upon the Employer.
14.6 Cooperation of Parties.
All parties to this Plan and any party claiming interest hereunder
agree to perform any and all acts and execute any and all documents and papers
which are necessary and desirable for carrying out this Plan or any of its
provisions.
14.7 Payments Due Missing Persons.
The Administrator shall direct the Trustee to make a reasonable
effort to locate all persons entitled to benefits under the Plan; however,
notwithstanding any provision in the Plan to the contrary, if, after a period of
5 years from the date such benefit shall be due, any such persons entitled to
benefits have not been located, their rights under the Plan shall stand
suspended. Before this provision becomes operative, the Trustee shall send a
certified letter to all such persons at their last known address advising them
that their interest in benefits under the Plan shall be suspended. Any such
suspended amounts shall be held by the Trustee for a period of 3 additional
years (or a total of 8 years from the time the benefits first became payable),
and thereafter such amounts shall be reallocated among current Participants in
the same manner that a current contribution would be allocated. However, if a
person subsequently makes a valid claim with respect to such reallocated amounts
and any earnings thereon, the Plan earnings or the Employer's contribution to be
allocated for the year in which the claim shall be paid shall be reduced by the
amount of such payment. Any such suspended amounts shall be handled in a manner
not inconsistent with regulations issued by the Internal Revenue Service and
Department of Labor.
14.8 Governing Law.
This Plan has been executed in the State of Texas, and all
questions pertaining to its validity, construction and administration shall be
determined in accordance with the laws of that State, except to the extent
superseded by the Act.
57
<PAGE>
14.9 Nonguarantee of Employment.
Nothing contained in this Plan shall be construed as a contract of
employment between the Employer and any Employee, or as a right of any Employee
to be continued in the employment of the Employer, or as a limitation of the
right of the Employer to discharge any of its Employees, with or without cause.
14.10 Counsel.
The Trustee and the Administrator may consult with legal counsel,
who may be counsel for the Employer and for the Administrator or the Trustee (as
the case may be), with respect to the meaning or construction of this Plan and
the Trust Agreement, their respective obligations or duties hereunder, or with
respect to any action or proceeding or any question of law, and they shall be
fully protected to the extent allowable by law with respect to any action taken
or omitted by them in good faith pursuant to the advice of legal counsel.
IN WITNESS WHEREOF, the Sponsor has caused these presents to be
executed by its duly authorized officers and its corporate seal to be affixed on
this _____ day of _______, 2000.
CBCT Bancshares, Inc.
ATTEST:
____________________________ By _________________________________
Brad Hurta,
Secretary President
[Corporate Seal]
58
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
(Upon the completion of Transaction)
State of
Percentage Incorporation
of or
Parent Subsidiary Ownership Organization
CBCT Bancshares, Inc. Community Bank of 100% Texas
Central Texas, ssb
It is contemplated that the financial statements of the Registrant will
be consolidated with Community Bank of Central Texas, ssb.
EXHIBIT 23.1
CONSENT OF COUNSEL
We consent to the use of our opinion, to the incorporation by reference
of such opinion as an exhibit to the Form SB-2 and to the reference to our firm
under the headings "Community Bank's Conversion - Effects of the Conversion --
Tax Effects of the Conversion", and "Legal and Tax Opinions" in the Prospectus
and proxy statement included in this Form SB-2. In giving this consent, we do
not admit that we are within the category of persons whose consent is required
under Section 7 of the Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission thereunder.
SILVER, FREEDMAN & TAFF, L.L.P.
Washington, D.C.
March 22, 2000
<PAGE>
EXHIBIT 23.2
[LETTERHEAD OF PADGETT, STRATEMANN & CO., L.L.P.]
INDEPENDENT AUDITORS' CONSENT
Community Bank of Central Texas, ssb
Smithville, Texas
We consent to the use in this Registration Statement on Form SB-2 for CBCT
Bancshares, Inc., of our report of Community Bank of Central Texas, ssb, dated
January 13, 2000, appearing in the Prospectus, which is a part of this
Registration Statement, and to the reference to us under the heading of
"Experts" in such Prospectus.
/s/ Padgett, Stratemann & Co.
San Antonio, Texas
March 14, 2000
<PAGE>
EXHIBIT 23.3
[SEIDEL SCHROEDER & COMPANY LETTERHEAD]
INDEPENDENT AUDITORS' CONSENT
Community Bank of Central Texas, ssb
Smithville, Texas
We consent to the use in this Registration Statement on Form SB-2 for CBCT
Bancshares, Inc., of our report of Community Bank of Central Texas, ssb, dated
February 19, 1999, appearing in the Prospectus, which is a part of this
Registration Statement, and to the reference to us under the heading of
"Experts" in such Prospectus.
/s/ Seidel, Schroeder & Company
Brenham, Texas
March 15, 2000
<PAGE>
EXHIBIT 23.4
[LETTERHEAD OF FERGUSON & COMPANY]
March 21, 2000
Board of Directors
Community Bank of Central Texas, ssb
312 Main Street
Smithville, Texas 78957
Directors:
We hereby consent to the use of our firm's name in the Application for
Conversion of Community Bank of Central Texas, Smithville, Texas, and any
amendments thereto, in the Form SB-2 Registration Statement of CBCT Bancshares,
Inc. and any amendments thereto, and in the Application for a Financial Services
Holding Company that is filed with the Federal Reserve. We also hereby consent
to the inclusion of, summary of, and references to our Appraisal Report and our
opinion concerning subscription rights in such filings including the Prospectus
of CBCT Bancshares, Inc.
Sincerely,
/s/ Charles M. Hebert
Charles M. Hebert
Principal
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 561
<INT-BEARING-DEPOSITS> 1,691
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 16,277
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 21,892
<ALLOWANCE> 199
<TOTAL-ASSETS> 42,833
<DEPOSITS> 32,354
<SHORT-TERM> 2,954
<LIABILITIES-OTHER> 88
<LONG-TERM> 4,438
0
0
<COMMON> 0
<OTHER-SE> 2,999
<TOTAL-LIABILITIES-AND-EQUITY> 42,833
<INTEREST-LOAN> 1,878
<INTEREST-INVEST> 1,041
<INTEREST-OTHER> 131
<INTEREST-TOTAL> 3,050
<INTEREST-DEPOSIT> 1,542
<INTEREST-EXPENSE> 1,902
<INTEREST-INCOME-NET> 1,148
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 76
<EXPENSE-OTHER> 1,149
<INCOME-PRETAX> 239
<INCOME-PRE-EXTRAORDINARY> 168
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 168
<EPS-BASIC> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 2.79
<LOANS-NON> 61
<LOANS-PAST> 7
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 144
<ALLOWANCE-OPEN> 181
<CHARGE-OFFS> 12
<RECOVERIES> 30
<ALLOWANCE-CLOSE> 199
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 199
</TABLE>
EXHIBIT 99.2
REVOCABLE PROXY
COMMUNITY BANK OF CENTRAL TEXAS, ssb
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
COMMUNITY BANK OF CENTRAL TEXAS, ssb.
The undersigned member of Community Bank of Central Texas, ssb (the "Bank")
hereby appoints the Board of Directors of the Bank as proxies to cast all votes
which the undersigned member is entitled to cast at a Special Meeting of Members
to be held at the main office of the Bank, located at 312 Main Street,
Smithville, Texas, at the hour and date stated in the Proxy Statement, and at
any and all adjournments and postponements thereof, and to act with respect to
all votes that the undersigned would be entitled to cast, if then personally
present, in accordance with the instructions on the reverse side hereof to vote
FOR or AGAINST:
The adoption of the Plan of Conversion to convert the Bank
from a Texas chartered mutual savings bank to a Texas
chartered stock savings bank, including the adoption of a
stock savings bank charter and bylaws, with the simultaneous
issuance of its common stock to CBCT Bancshares, Inc., a
Maryland corporation (the "Company") and sale by the Company
of shares of its Common Stock.
This proxy will be voted as directed by the undersigned member. UNLESS
CONTRARY DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR ADOPTION OF THE PLAN
OF CONVERSION. In addition, this proxy will be voted at the discretion of the
Board of Directors upon any other matter as may properly come before the Special
Meeting.
The undersigned member may revoke this proxy at any time before it is
voted by delivering to the Secretary of the Bank either by a written revocation
of the proxy or a duly executed proxy bearing a later date, or by appearing at
the Special Meeting and voting in person. The undersigned member hereby
acknowledges receipt of the Notice of Special Meeting and Proxy Statement.
(IMPORTANT: PLEASE VOTE, DATE AND SIGN ON REVERSE SIDE)
<PAGE>
COMMUNITY BANK OF CENTRAL TEXAS, SSB
Please Mark Votes Below
Approval of the Plan of Conversion
FOR o AGAINST o
DATE: , 2000
X
X
IMPORTANT: Please sign your name exactly as
it appears on this proxy. Joint accounts
need only one signature. When signing as an
attorney, administrator, agent, cor
poration, officer, executor, trustee or
guardian, etc., please add your full title
to your signature.
NOTE: IF YOU RECEIVE MORE THAN ONE PROXY CARD, PLEASE SIGN AND
RETURN ALL CARDS IN THE ACCOMPANYING ENVELOPE.
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COMMUNITY BANK OF CENTRAL TEXAS, ssb
312 Main Street
Smithville, Texas 78957-2035
(512) 237-2482
NOTICE OF SPECIAL MEETING OF MEMBERS
Notice is hereby given that a Special Meeting of Members (the "Special
Meeting") of Community Bank of Central Texas, ssb ("Community Bank" or the
"Bank") will be held at the main office of the Bank located at 312 Main Street,
Smithville, Texas 78957-2035 on ___________, 2000 at _:__ _.m., Smithville,
Texas time. The purpose of this Special Meeting is to consider and vote upon a
plan to convert the Bank from a Texas chartered mutual savings institution to a
Texas chartered stock savings institution, including the adoption of a stock
savings bank charter and bylaws, with the concurrent sale of all the Bank's
common stock to CBCT Bancshares, Inc., a Maryland corporation (the "Holding
Company"), and sale by the Holding Company of shares of its common stock; and
such other business as may properly come before the Special Meeting or any
adjournment thereof. Management is not aware of any such other business.
The members who shall be entitled to notice of and to vote at the
Special Meeting and any adjournment thereof are holders of deposit accounts at
the Bank at the close of business on ________________ and borrowers of the Bank
as of _____________ who continue as borrowers as of ________________. In the
event there are not sufficient votes for approval of the Plan of Conversion at
the time of the Special Meeting, the Special Meeting may be adjourned from time
to time in order to permit further solicitation of proxies.
BY ORDER OF THE BOARD OF DIRECTORS
----------------------
Chairman of the Board
Smithville, Texas
___________, 2000
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YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE
FOR APPROVAL OF THE PROPOSALS BY COMPLETING THE
ENCLOSED PROXY CARD AND RETURNING IT IN THE ENCLOSED
POSTAGE-PAID ENVELOPE AS SOON AS POSSIBLE.
YOUR VOTE IS VERY IMPORTANT.
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SUMMARY OF PROPOSED CONVERSION
This summary does not purport to be complete and is qualified in its
entirety by the more detailed information contained in the remainder of this
proxy statement and the accompanying prospectus.
Under its present "mutual" form of organization, Community Bank has no
stockholders. Its deposit account holders are members of the Bank and have
voting rights in that capacity. In the unlikely event of liquidation, the Bank's
deposit account holders would have the sole right to receive any assets of the
Bank remaining after payment of its liabilities (including the claims of all
deposit account holders to the withdrawal value of their deposits). Under the
Plan of Conversion (the "Plan of Conversion") to be voted on at the Special
Meeting, the Bank will be converted into a Texas chartered savings institution
organized in stock form, and all of the Bank's common stock would be sold
concurrently to the Holding Company (the "Conversion"). The Holding Company will
offer and sell its common stock (the "Common Stock") in an offering to (1)
depositors of Community Bank as of the close of business on September 30, 1998
("Eligible Account Holders"), (2) tax-qualified employee plans of the Bank and
the Holding Company ("Tax-Qualified Employee Plans") provided, however, that the
Tax-Qualified Employee Plans shall have first priority Subscription Rights to
the extent that the total number of shares of Common Stock sold in the
Conversion exceeds the maximum of the appraisal range, (3) depositors of
Community Bank as of the close of business on March 31, 2000 ("Supplemental
Eligible Account Holders"), (4) borrowers and depositors of the Bank as of the
close of business on ________, 2000 who continue as borrowers as of October 31,
1999 and depositors as of October 31, 1998 who are not Eligible or Supplemental
Eligible Account Holders ("Other Members") and (5) employees, officers and
directors of the Bank (the "Subscription Offering"). It is anticipated that the
Tax-Qualified Employee Plans will purchase 8% of the Common Stock issued in the
Conversion.
To the extent the Common Stock is not all sold to the persons in the
foregoing categories, the Holding Company may offer and sell the remainder of
the Common Stock in a direct community offering ("Direct Community Offering") or
public offering ("Public Offering") through Keefe, Bruyette & Woods, Inc.
("KBW"). The Subscription Offering and the Public Offering and/or Direct
Community Offering are referred to collectively as the "Offering." Voting and
liquidation rights with respect to the Bank would thereafter be held by the
Holding Company, except to the limited extent of the liquidation account (the
"Liquidation Account") that will be established for the benefit of Eligible and
Supplemental Eligible Account Holders of the Bank and voting and liquidation
rights in the Holding Company would be held only by those persons who become
stockholders of the Holding Company through purchase of shares of its Common
Stock. See "Community Bank's Conversion - Effects of the Conversion- Depositor's
Rights If We Liquidate" in the prospectus.
THE CONVERSION WILL NOT AFFECT THE BALANCE, INTEREST RATE OR FEDERAL
INSURANCE PROTECTION OF ANY SAVINGS DEPOSIT, AND NO PERSON WILL BE OBLIGATED TO
PURCHASE ANY STOCK IN THE CONVERSION.
Business Purposes for Conversion Net Conversion proceeds are expected to
increase the capital of Community Bank,
which will support the expansion of its
financial services to the public. The
conversion to stock form and the use of a
holding company structure are also expected
to enhance its ability to expand through
possible mergers and acquisitions (although
no such transactions are contemplated at
this time) and will facilitate its future
access to the capital markets. The Bank will
continue to be subject to comprehensive
regulation and examination by the Federal
Deposit Insurance Corporation ("FDIC") and
the Texas Savings and Loan Department (the
"Department").
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Subscription Offering As part of the Conversion, Common Stock is
being offered for sale in the Subscription
Offering, in the priorities summarized
below, to the Bank's (1) Eligible Account
Holders, (2) Tax-Qualified Employee Plans,
(3) Supplemental Eligible Account Holders
(4) Other Members, and (5) employees,
officers and directors of the Bank. If
necessary, all shares of Common Stock not
purchased in the Subscription Offering, if
any, may be offered in connection with the
Direct Community Offering and/or Public
Offering for sale to selected persons
through KBW.
Subscription Rights of Eligible Each Eligible Account Holder has been given
Account Holders non-transferable rights to subscribe for an
amount equal to the greater of $100,000 of
Common Stock, one-tenth of one percent of
the total number of shares offered in the
Subscription Offering or 15 times the
product (rounded down to the whole next
number) obtained by multiplying the total
number of shares to be issued by a fraction
of which the numerator is the amount of the
qualifying deposit of such subscriber and
the denominator is the total amount of the
qualifying deposits of all account holders
in this category on the qualifying date.
Subscription Rights of The Bank's Tax-Qualified Employee Plans have
Tax-Qualified Employee Plans been given non-transferable rights to
subscribe, individually and in the
aggregate, for up to 10% of the total number
of shares issued in the Conversion after
satisfaction of subscriptions of Eligible
Account Holders. Notwithstanding the
foregoing, to the extent orders for shares
exceed the maximum of the appraisal range,
Tax-Qualified Employee Plans shall be
afforded a first priority to purchase shares
sold above the maximum of the appraisal
range. It is anticipated that Tax-Qualified
Employee Plans will purchase 8% of the
Common Stock issued in the Conversion.
Subscription Rights of Supplemental After satisfaction of subscriptions of
Eligible Account Holders Eligible Account Holders and Tax- Qualified
Employee Plans, each Supplemental Eligible
Account Holder (other than directors and
officers of the Bank) has been given
non-transferable rights to subscribe for an
amount equal to the greater of $100,000 of
Common Stock, one-tenth of one percent of
the total number of shares offered in the
Conversion or 15 times the product (rounded
down to the whole next number) obtained by
multiplying the total number of shares to be
issued by a fraction of which the numerator
is the amount of qualifying deposits of such
subscriber and the denominator is the total
qualifying deposits of all account holders
in this category on the qualifying date. The
subscription rights of each Supplemental
Eligible Account Holder shall be reduced to
the extent of such person's subscription
rights as an Eligible Account Holder.
Subscription Rights of Other Each Other Member has been given
Members non-transferable rights to subscribe for an
amount equal to the greater of $100,000 of
Common Stock or one-tenth of one percent of
the total number of shares offered in the
Conversion after satisfaction of the
subscriptions of the Bank's Eligible Account
Holders, Tax-Qualified Employee Plans and
Supplemental Eligible Account Holders.
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Subscription Rights of Bank Each individual employee, officer and
Personnel director of the Bank has been given the
right to subscribe for an amount not to
exceed $100,000 of Common Stock after
satisfaction of the subscriptions of
Eligible Account Holders, Tax-Qualified
Employee Plans, Supplemental Eligible
Account Holders and Other Members. Total
shares subscribed for by the employees,
officers and directors in this category may
not exceed 35% of the total shares offered
in the Conversion.
Direct Community Offering and/or Subject to prior rights of holders of
Public Offering subscription rights, the Holding Company may
also offer the Common Stock for sale to
selected persons through KBW in a Direct
Community Offering and/or Public Offering.
Purchase Limitations (1) No person by himself or herself,
together with associates, or persons acting
in concert, may purchase more than $100,000
of Common Stock in the Conversion. (2) The
aggregate purchases of directors and
executive officers and their associates may
not exceed 35% of the total number of shares
offered in the Conversion. The purchase
limitations in (1) and (2) do not apply to
the Bank's Tax-Qualified Employee Plans. The
Board of Directors of the Holding Company
and the Bank may, in their sole discretion,
increase the maximum purchase limitation in
(1) up to 9.99% of the shares being offered
in the Conversion.
Expiration Date of the Subscription All subscriptions for Common Stock in
Offering connection with the Subscription Offering
must be received by 12:00 Noon, Smithville,
Texas time on _______________, 2000.
How to Subscribe for Shares For information on how to subscribe for
Common Stock being offered in the
Subscription Offering, please read the
prospectus and the order form and
instructions accompanying this proxy
statement. Subscriptions will not become
effective until the Plan of Conversion has
been approved by the Bank's members and all
of the Common Stock offered in the
Conversion has been subscribed for or sold
in the Offering or through such other means
as may be approved by the Department.
Price of Common Stock All sales of Common Stock in the Offering
will be made at the same price per share
(which is currently expected to be $10.00
per share) on the basis of an independent
appraisal of the pro forma market value of
the Bank and the Holding Company upon
Conversion. On the basis of a preliminary
appraisal by Ferguson & Company
("Ferguson"), which has been reviewed by the
Department, a minimum of 195,500 and a
maximum of 264,500 shares will be offered in
the Conversion. See "Community Bank's
Conversion -- How We Determined Our Price
and the Number of Shares to be Issued in the
Stock Offering" in the prospectus.
Tax Consequences The Bank has received an opinion from its
special counsel, Silver, Freedman & Taff,
L.L.P., stating that the Conversion is a
nontaxable reorganization under Section
368(a)(1)(F) of the Internal Revenue Code.
The Bank has also received an opinion from
Padgett, Stratemann & Co., L.L.P.
("Padgett") stating that the Conversion will
not be a taxable transaction for Texas
income tax purposes.
Required Vote Approval of the Plan of Conversion will
require the affirmative vote of a majority
of all votes eligible to be cast at the
Special Meeting.
YOUR BOARD OF DIRECTORS URGES YOU TO VOTE FOR
THE PLAN OF CONVERSION
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COMMUNITY BANK OF CENTRAL TEXAS, ssb
PROXY STATEMENT
SPECIAL MEETING OF MEMBERS TO BE HELD ON____________, 2000
PURPOSE OF MEETING
This proxy statement is being furnished to you in connection with the
solicitation on behalf of the Board of Directors of Community Bank of Central
Texas, ssb ("Community Bank" or the "Bank") of the proxies to be voted at the
Special Meeting of Members of the Bank (the "Special Meeting") to be held at the
main office of the Bank located at 312 Main Street, Smithville, Texas
78957-2035, on ___________, 2000 at _:__ _.m., Smithville, Texas time, and at
any adjournments thereof. The Special Meeting is being held for the purpose of
considering and voting upon a Plan of Conversion (the "Plan of Conversion")
under which the Bank would be converted (the "Conversion") from a Texas
chartered mutual savings institution into a Texas chartered stock savings
institution, the concurrent sale of all the common stock of the stock savings
institution to CBCT Bancshares, Inc. (the "Holding Company"), a Maryland
corporation, and the sale by the Holding Company of shares of its common stock
(the "Common Stock"), and such other business as may properly come before the
meeting and any adjournment thereof.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors of the Bank unanimously recommends that you vote
to approve the Plan of Conversion.
The Bank is currently organized in "mutual" rather than "stock" form,
meaning that it has no stockholders and no authority under its mutual charter to
issue capital stock. The Bank's Board of Directors has adopted the Plan of
Conversion providing for the Conversion. The sale of Common Stock of the Holding
Company, which was recently formed to become the holding company of the Bank,
will substantially increase the Bank's net worth. The Holding Company will
exchange 50% of the net proceeds from the sale of the Common Stock for the
common stock of the Bank to be issued upon Conversion. The Holding Company
expects to retain the balance of the net proceeds as its initial capitalization,
a portion of which the Holding Company intends to lend to the Employee Stock
Ownership Plan to fund its purchase of Common Stock. This increased capital will
support the expansion of the Bank's financial services to the public. The Board
of Directors of the Bank also believes that the conversion to stock form and the
use of a holding company structure will enhance the Bank's ability to expand
through possible mergers and acquisitions (although no such transactions are
contemplated at this time) and will facilitate its future access to the capital
markets.
The Board of Directors of the Bank believes that the Conversion will
further benefit the Bank by enabling it to attract and retain key personnel
through prudent use of stock-related incentive compensation and benefit plans.
The Board of Directors of the Holding Company intends to adopt a stock option
plan and a restricted stock plan following completion of the Conversion. See
"Management -- Benefits" in the accompanying prospectus.
Maryland was chosen as the state of incorporation because it provides
protections similar to Delaware with respect to takeover, indemnification and
limitations on liability, with reduced franchise taxes.
Voting in favor of the Plan of Conversion will not obligate any person
to purchase any Common Stock.
INFORMATION RELATING TO VOTING AT THE SPECIAL MEETING
The Board of Directors of the Bank has fixed __________, 2000 as the
voting record date ("Voting Record Date") for the determination of members
entitled to notice of the Special Meeting. All Bank depositors are members of
the Bank under its current charter. All Bank depositors of record as of the
close of business on the Voting Record
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Date, and borrowers as of ____________, and the Voting Record Date, who continue
to be depositors and borrowers, respectively, as of the date of the Special
Meeting will be entitled to vote at the Special Meeting or any adjournment
thereof.
Each depositor member (including IRA and Keogh account beneficiaries)
will be entitled at the Special Meeting to cast one vote for each $100, or
fraction thereof, of the aggregate withdrawal value of all of such depositor's
accounts in the Bank as of the Voting Record Date, up to a maximum of 1,000
votes. In general, accounts held in different ownership capacities will be
treated as separate memberships for purposes of applying the 1,000 vote
limitation. For example, if two persons hold a $100,000 account in their joint
names and each of the persons also holds a separate account for $100,000 in his
own name, each person would be entitled to 1,000 votes for each separate account
and they would together be entitled to cast 1,000 votes on the basis of the
joint account. Each qualifying member borrower is entitled to one vote in
addition to any other vote the borrower may otherwise have.
Approval of the Plan of Conversion requires the affirmative vote of a
majority of the total outstanding votes of the Bank's members eligible to be
cast at the Special Meeting. As of _________, 2000, the Bank had approximately
______ members who were entitled to cast a total of approximately ________ votes
at the Special Meeting.
Bank members may vote at the Special Meeting or any adjournment thereof
in person or by proxy. Any member giving a proxy will have the right to revoke
the proxy at any time before it is voted by giving written notice to the
Secretary of the Bank, provided that such written notice is received by the
Secretary prior to the Special Meeting or any adjournment thereof, or upon
request if the member is present and chooses to vote in person.
All properly executed proxies received by the Board of Directors of the
Bank will be voted in accordance with the instructions indicated thereon by the
members giving such proxies. If no instructions are given, such proxies will be
voted in favor of the Plan of Conversion. If any other matters are properly
presented at the Special Meeting and may properly be voted on, the proxies
solicited hereby will be voted on such matters in accordance with the best
judgment of the proxy holders named thereon. Management is not aware of any
other business to be presented at the Special Meeting.
If a proxy is not executed and is returned and the member does not vote
in person, the Bank is prohibited by Texas regulations from using a previously
executed proxy to vote for the Plan of Conversion. As a result, failure to vote
may have the same effect as a vote against the Plan of Conversion.
To the extent necessary to permit approval of the Plan of Conversion,
proxies may be solicited by officers, directors or regular employees of the
Bank, in person, by telephone or through other forms of communication and, if
necessary, the Special Meeting may be adjourned to a later date. In addition,
Keefe, Bruyette & Woods, Inc. ("KBW") will assist the Bank in the solicitation
of proxies. Such persons will be reimbursed by the Bank for their expenses
incurred in connection with such solicitation. The Bank will bear all costs of
this solicitation. The proxies solicited hereby will be used only at the Special
Meeting and at any adjournment thereof.
DESCRIPTION OF THE PLAN OF CONVERSION
The Texas Savings and Loan Department (the "Department") and the
Federal Deposit Insurance Corporation (the "FDIC") have approved the Plan of
Conversion subject to the approval of the Bank's members and the satisfaction of
certain other conditions. However, such approval does not constitute a
recommendation or endorsement of the Plan of Conversion by the Department or the
FDIC.
The Plan of Conversion to be presented for approval at the Special
Meeting provides for the Conversion to be accomplished through the adoption of
an amended charter and bylaws for the Bank to authorize the issuance of capital
stock along with the concurrent formation of a holding company. As part of the
Conversion, the Plan of Conversion provides for the subscription offering (the
"Subscription Offering") of the Common Stock to the Bank's (i) Eligible Account
Holders (depositors of the Bank as of the close of business on September 30,
1998); (ii) Tax-Qualified Employee Plans, (iii) Supplemental Eligible Account
Holders (depositors of the Bank as of the close of business of March 31, 2000);
(iv) Other Members (deposit account holders and borrowers eligible to vote at
the Special Meeting who are not Eligible Account Holders or Supplemental
Eligible Account Holders); and (v) the Bank's employees, officers and directors.
Notwithstanding the foregoing, to the extent orders for shares exceed the
maximum of the
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appraisal range, Tax-Qualified Employee Plans shall be afforded a first priority
to purchase shares sold above the maximum of the appraisal range. It is
anticipated that Tax-Qualified Employee Plans will purchase 8% of the Common
Stock issued in the Conversion. If necessary, all shares of Common Stock not
purchased in the Subscription Offering, if any, may be offered to selected
persons in a Direct Community Offering and/or a Public Offering through KBW.
The Subscription Offering has commenced as of the date of mailing of
this proxy statement. A prospectus explaining the terms of the Subscription
Offering, including how to order and pay for shares and describing the business
of the Bank and the Holding Company, accompanies this proxy statement and should
be read by all persons who wish to consider subscribing for Common Stock. The
Subscription Offering expires at 12:00 Noon, Smithville, Texas time on
____________, 2000, unless extended by the Bank and the Holding Company.
The Texas conversion regulations require that all stock offered in a
conversion must be sold in order for the conversion to become effective. The
conversion regulations require that the offering be completed within 45 days
after completion of the Subscription Offering period unless extended by the Bank
and the Holding Company with the approval of the Department. This 45-day period
expires __________, 2000 unless the Subscription Offering is extended. If this
is not possible, an occurrence that is currently not anticipated, the Board of
Directors of the Bank and the Holding Company will consult with the Department
to determine an appropriate alternative method of selling all unsubscribed
shares offered in the Conversion. The Plan of Conversion provides that the
Conversion must be completed within 24 months after the date of the Special
Meeting.
The Direct Community Offering and/or Public Offering or any other sale
of the unsubscribed shares will be made as soon as practicable after the
completion of the Subscription Offering. No sales of shares may be completed,
either in the Subscription Offering or otherwise, unless the Plan of Conversion
is approved by the members of the Bank.
The commencement and completion of the offering, however, is subject to
market conditions and other factors beyond the Bank's control. Due to adverse
conditions in the stock market in the past, a number of converting thrift
institutions encountered significant delays in completing their stock offerings
or were not able to complete them at all. No assurance can be given as to the
length of time after approval of the Plan of Conversion at the Special Meeting
that will be required to complete the Direct Community Offering and/or Public
Offering or other sale of the Common Stock to be offered in the Conversion. If
delays are experienced, significant changes may occur in the estimated pro forma
market value of the Holding Company's Common Stock, together with corresponding
changes in the offering price and the net proceeds realized by the Bank and the
Holding Company from the sale of the Common Stock. The Bank and the Holding
Company may also incur substantial additional printing, legal, accounting and
other expenses in completing the Conversion.
The following is a brief summary of the Conversion and is qualified in
its entirety by reference to the Plan of Conversion. A copy of the Plan of
Conversion, the proposed stock charter and bylaws of the Bank and the Holding
Company's articles of incorporation and bylaws are available from the Bank upon
request. Requests for copies of any such documents should be directed to: the
Secretary, Community Bank of Central Texas, ssb, 312 Main Street, Smithville,
Texas 78957-2035.
Principal Effects of Conversion
Depositors. The Conversion will not change the amount, interest rate,
withdrawal rights or federal insurance protection of deposit accounts, or affect
deposit accounts in any way other than with respect to voting and liquidation
rights as discussed below.
Borrowers. The rights and obligations of borrowers under their loan
agreements with the Bank will remain unchanged by the Conversion. The principal
amount, interest rate and maturity date of loans will remain as they were
contractually fixed prior to the Conversion.
Voting Rights of Members. Under the Bank's current state mutual
charter, depositors and certain borrowers have voting rights as members of the
Bank with respect to the election of directors and certain other affairs of the
Bank. After the Conversion, exclusive voting rights with respect to all such
matters will be vested in the Holding Company as the sole stockholder of the
Bank. Members will no longer have any voting rights, except to the extent that
they
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become stockholders of the Holding Company through the purchase of its Common
Stock. Voting rights in the Holding Company will be held exclusively by its
stockholders.
Liquidation Rights of Depositor Members. Currently, in the unlikely
event of liquidation of the Bank, any assets remaining after satisfaction of all
creditors' claims in full (including the claims of all depositors to the
withdrawal value of their accounts) would be distributed pro rata among the
depositors of the Bank, with the pro rata share of each being the same
proportion of all such remaining assets as the withdrawal value of each
depositor's account is of the total withdrawal value of all accounts in the Bank
at the time of liquidation. After the Conversion, the assets of the Bank would
first be applied, in the event of liquidation, against the claims of all
creditors (including the claims of all depositors to the withdrawal value of
their accounts). Any remaining assets would then be distributed to the persons
who qualified as Eligible Account Holders or Supplemental Eligible Account
Holders under the Plan of Conversion to the extent of their interests in a
"Liquidation Account" that will be established at the time of the completion of
the Conversion and then to the Holding Company as the sole stockholder of the
Bank's outstanding common stock. The Bank's depositors who did not qualify as
Eligible Account Holders or Supplemental Eligible Account Holders would have no
right to share in any residual net worth of the Bank in the event of liquidation
after the Conversion, but would continue to have the right as creditors of the
Bank to receive the full withdrawal value of their deposits prior to any
distribution to the Holding Company as the Bank's sole stockholder. In addition,
the Bank's deposit accounts will continue to be insured by the Federal Deposit
Insurance Corporation ("FDIC") to the maximum extent permitted by law, currently
up to $100,000 per insured account. The Liquidation Account will initially be
established in an amount equal to the net worth of the Bank as of the date of
the Bank's latest statement of financial condition contained in the final
prospectus used in connection with the Conversion. Each Eligible Account Holder
and/or Supplemental Eligible Account Holder will receive an initial interest in
the Liquidation Account in the same proportion as the balance in all of his or
her qualifying deposit accounts was of the aggregate balance in all qualifying
deposit accounts of all Eligible Account Holders and Supplemental Eligible
Account Holders on September 30, 1999 or March 31, 2000, respectively. For
accounts in existence on both dates, separate subaccounts shall be determined on
the basis of the qualifying deposits in such accounts on the record dates.
However, if the amount in the qualifying deposit account on any annual closing
date of the Bank is less than the lowest amount in such deposit account on the
Eligibility Record Date and/or Supplemental Eligibility Record Date, and any
subsequent annual closing date, this interest in the Liquidation Account will be
reduced by an amount proportionate to such reduction in the related deposit
account and will not thereafter be increased despite any subsequent increase in
the related deposit account.
The Bank. Under federal law, the stock savings bank resulting from the
Conversion will be deemed to be a continuation of the mutual savings bank rather
than a new entity and will continue to have all of the rights, privileges,
properties, assets and liabilities of the Bank prior to the Conversion. The
Conversion will enable the Bank to issue capital stock, but will not change the
general objectives, purposes or types of business currently conducted by the
Bank, and no assets of the Bank will be distributed in order to effect the
Conversion, other than to pay the expenses incident thereto. After the
Conversion, the Bank will remain subject to examination and regulation by the
Department and will continue to be a member of the Federal Home Loan Bank
System. The Conversion will not cause any change in the executive officers or
directors of the Bank.
Tax Consequences. The Bank has received an opinion of its special
counsel, Silver, Freedman & Taff, L.L.P., to the effect that (i) the Bank's
adoption of a charter in stock form will qualify as a tax-free reorganization
under Section 368(a)(1)(F) of the Internal Revenue Code of 1986, as amended;
(ii) no gain or loss will be recognized by the Bank solely as a result of the
conversion to stock form; (iii) no gain or loss will be recognized by the Bank's
account holders upon the issuance to them of accounts in the Bank, in stock
form, immediately after the Conversion, in the same dollar amounts and on the
same terms and conditions as their accounts at the Bank immediately prior to the
Conversion; (iv) the tax basis of each account holder's interest in the
liquidation account received in the Conversion will be equal to the value, if
any, of that interest on the date and at the time of the Conversion; (v) the tax
basis of the Common Stock purchased in the Conversion will be equal to the
amount paid therefor; increased, in the case of Common Stock acquired pursuant
to the exercise of Subscription Rights, by the fair market value, if any, of
such Subscription Rights; (vi) the holding period of the Common Stock purchased
pursuant to the exercise of Subscription Rights will commence upon the exercise
of such holder's Subscription Rights and, in all other cases, the holding period
of purchased Common Stock will commence on the date following the date of such
purchase; and (vii) gain or loss will be recognized by account holders upon the
receipt or exercise of Subscription Rights in the Conversion, but only to the
extent the Subscription Rights are deemed to have value, as discussed below.
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The opinion from Silver, Freedman & Taff, L.L.P. is based, among other
things, on certain assumptions, including the assumption that the exercise price
of the Subscription Rights to purchase Holding Company Common Stock will be
approximately equal to the fair market value of that stock at the time of the
completion of the proposed Conversion. With respect to the Subscription Rights,
the Bank has received a letter from Ferguson & Company ("Ferguson") which, based
on certain assumptions, concludes that the Subscription Rights to be received by
Eligible Account Holders, Supplemental Eligible Account Holders and other
eligible subscribers do not have any economic value at the time of distribution
or at the time the Subscription Rights are exercised, whether or not a Direct
Community and/or Public Offering takes place.
Notwithstanding the Ferguson Letter, if the Subscription Rights granted
to eligible subscribers are deemed to have an ascertainable value, receipt of
these rights would be taxable probably only to those eligible subscribers who
exercise the Subscription Rights, either as a capital gain or ordinary income,
in an amount equal to such value, and the Holding Company and the Bank could
recognize gain on any distribution.
With respect to Texas taxation, the Bank has received an opinion from
Padgett to the effect that the Texas tax consequences to the Bank, in its mutual
or stock form, the Holding Company, eligible account holders, parties receiving
Subscription Rights, parties purchasing Conversion stock, and other parties
participating in the Conversion will be the same as the federal income tax
consequences described above.
Unlike a private letter ruling, the opinions of Silver, Freedman &
Taff, L.L.P. and Padgett, as well as the Ferguson Letter, have no binding effect
or official status, and no assurance can be given that the conclusions reached
in any of those opinions would be sustained by a court if contested by the IRS
or the Indiana tax authorities.
Approval, Interpretation, Amendment and Termination
Under the Plan of Conversion, the letter from the Department giving
approval thereto, and applicable regulations, consummation of the Conversion is
subject to the satisfaction of the following conditions: (a) approval of the
Plan of Conversion by members of the Bank casting at least a majority of the
votes eligible to be cast at the Special Meeting; (b) sale of all of the Common
Stock to be offered in the Conversion; and (c) receipt of favorable rulings or
opinions of counsel as to the Texas tax consequences of the Conversion.
The Plan of Conversion may be substantively amended by the Boards of
Directors of the Bank and the Holding Company with the concurrence of the
Department. If the Plan of Conversion is amended, proxies which have been
received prior to such amendment will not be resolicited unless otherwise
required by the Department. Also, as required by regulations, the Plan of
Conversion provides that the transactions contemplated thereby may be terminated
by the Board of Directors of the Bank alone at any time prior to the Special
Meeting and may be terminated by the Board of Directors of the Bank at any time
thereafter with the concurrence of the Department, notwithstanding approval of
the Plan of Conversion by the members of the Bank at the Special Meeting. All
interpretations by the Bank and the Holding Company of the Plan of Conversion
and of the order form and related materials for the Subscription Offering will
be final, except as regards or affects the Department.
Judicial Review
Section 5(i)(2)(B) of the Home Owners' Loan Act, as amended, 12 U.S.C.
ss.1464(i)(2)(B) provides: (i) that persons aggrieved by a final action of the
Department which approves, with or without conditions, or disapproves a plan of
conversion, may obtain review of such final action only by filing a written
petition in the United States Court of Appeals for the circuit in which the
principal office or residence of such person is located, or in the United States
Court of Appeals for the District of Columbia, requesting that the final action
of the Department be modified, terminated or set aside, and (ii) that such
petition must be filed within 30 days after publication of notice of such final
action in the Federal Register, or 30 days after the date of mailing of the
notice and proxy statement for the meeting of the converting institution's
members at which the conversion is to be voted on, whichever is later. The
notice of the Special Meeting of the Bank's members to vote on the Plan of
Conversion described herein is included at the beginning of this proxy
statement. The statute and regulation referred to above should be consulted for
further information.
5
<PAGE>
ADDITIONAL INFORMATION
The information contained in the accompanying prospectus, including a
more detailed description of the Plan of Conversion, consolidated financial
statements of the Bank and a description of the capitalization and business of
the Bank and the Holding Company, including the Bank's directors and executive
officers and their compensation, the anticipated use of the net proceeds from
the sale of the Common Stock and a description of the Common Stock, is intended
to help you evaluate the Conversion and is incorporated herein by reference.
Your vote is very important to us. Please take a moment now to complete
and return your proxy card in the postage-paid envelope provided. You may still
attend the Special Meeting and vote in person even though you have voted your
proxy. Failure to submit a proxy will have the same effect as voting against the
Conversion.
If you have any questions, please call our Stock Information Center at
(___) __-____.
Important: you may be entitled to vote in more than one capacity.
Please sign, date and promptly return each proxy card you receive.
This proxy statement is not an offer to sell or the solicitation of an
offer to buy stock. The offer will be made only by the prospectus.
The Common Stock is not a deposit or account and is not federally
insured or guaranteed.
6
EXHIBIT 99.3
COMMUNITY BANK OF CENTRAL TEXAS, SSB REVOCABLE PROXY
Any member giving a proxy may revoke it at any time before it is voted by
delivering to the Secretary of Community Bank of Central Texas, ssb either a
written revocation of the proxy, or a duly executed proxy bearing a later date,
or by voting in person at the Special Meeting.
The undersigned hereby acknowledges receipt of a Notice of Special Meeting of
Members to be held on the XXth day of June, 2000 and a proxy statement for the
Special Meeting prior to the signing of this proxy.
____________________________________
Signature Date
____________________________________
Signature Date
NOTE: Please sign exactly as your
name appears on this Proxy. Only
one signature is required in the
case of a joint account. When
signing in a representative
capacity, please give title.
IMPORTANT: Please Detach, Sign and Return "ALL" proxies from "ALL" packets
received in the enclosed postage paid envelope.
FAILURE TO VOTE IS EFFECTIVELY THE SAME AS A "NO" VOTE.
- --------------------------------------------------------------------------------
CBCT Bancshares, Inc.
312 Main Street
Smithville, Texas 78957
(512) XXX-XXXX
Stock Order and Certification Form
- --------------------------------------------------------------------------------
Deadline: The Subscription Offering ends at 12:00 Noon, Smithville, Texas Time,
on June XX, 2000. Your original Stock Order and Certification Form, properly
executed and with the correct payment, must be received (not postmarked) at the
address on the top of this form, or at the Community Bank of Central Texas
office, by the deadline, or it will be considered void. Faxes or copies of this
form will not be accepted.
- --------------------------------------------------------------------------------
(1) Number of Shares (2) Total Amount Due
Price Per Share
_________________ x $10.00 = $ ___________________
Minimum - 25 shares
Maximum - Generally 10,000 shares; however, see the Prospectus.
- --------------------------------------------------------------------------------
Method of Payment
(3) |_| Enclosed is a check, bank draft or money order payable to CBCT
Bancshares, Inc. for $______________.
(4) |_| I authorize Community Bank of Central Texas to make withdrawals from my
certificate or savings account(s) shown below, and understand that the
amounts will not otherwise be available for withdrawal:
Account Number(s) Amount(s)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
=============================================-----------------------------------
Total Withdrawal
-----------------------------------
There is NO penalty for early withdrawal.
- --------------------------------------------------------------------------------
(5) Purchaser Information (check one)
a. |_| Eligible Account Holder - Check here if you were a depositor with $50 or
more on deposit with Community Bank as of September 30, 1998. Enter information
in Section 8 for all deposit accounts that you had at Community Bank on
September 30, 1998.
b. |_| Supplemental Eligible Account Holder - Check here if you were a depositor
with $50 or more on deposit with Community Bank as of March 31, 2000 but are not
an Eligible Account Holder. Enter information in Section 8 for all deposit
accounts that you had at Community Bank on March 31, 2000.
c. |_| Other Member - Check here if you were a depositor of Community Bank as of
XXX XX, 2000, but are not an Eligible Account Holder or a Supplemental Eligible
Account Holder. Enter information in Section 8 for all accounts that you had at
Community Bank on XXX XX, 2000.
d. |_| Directors, Officers and Employees of Community Bank to the extent you are
not included in 5a, b and c.
e. |_| General Public
- --------------------------------------------------------------------------------
(6) |_| Check here if you are a director, officer or employee of Community
Bank or a member of such person's immediate family (same household).
- --------------------------------------------------------------------------------
(7) |_| NASD Affiliation - see description on reverse side of this form.
- --------------------------------------------------------------------------------
(8) Please review the preprinted account information listed below. The
accounts printed below may not be all of your qualifying accounts or even
your accounts as of the earliest of the three dates if you have changed
names on the accounts. You should list any other accounts that you may
have or had with Community Bank in the box below. SEE THE STOCK ORDER FORM
INSTRUCTIONS SHEET FOR FURTHER INFORMATION. All subscription orders are
subject to the provisions of the Plan of Conversion.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Additional Qualifying Accounts
Account Title (Names on Accounts) Account Number
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Please Note: Failure to list all of your accounts may result in the loss of part
or all of your subscription rights. (additional space on back of form)
- --------------------------------------------------------------------------------
(9) Stock Registration - Please Print Legibly and Fill Out Completely
(Note: The stock certificate and all correspondence related to this stock
order will be mailed to the address provided below)
|_| Individual
|_| Joint Tenants
|_| Tenants in Common
|_| Uniform Transfer to Minors Act
|_| Uniform Gift to Minors Act
|_| Corporation
|_| Partnership
|_| Individual Retirement Account
|_| Fiduciary/Trust (Under Agreement Dated _________________)
- --------------------------------------------------------------------------------
Name Social Security or Tax I.D.
- --------------------------------------------------------------------------------
Name Social Security or Tax I.D.
- --------------------------------------------------------------------------------
Mailing Daytime
Address Telephone
- --------------------------------------------------------------------------------
Zip Evening
City State Code County Telephone
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Acknowledgment By signing below, I acknowledge receipt of the Prospectus dated
May XX, 2000 and understand I may not change or revoke my order once it is
received by CBCT Bancshares, Inc. I also certify that this stock order is for my
account and there is no agreement or understanding regarding any further sale or
transfer of these shares. Applicable regulations prohibit any persons from
transferring, or entering into any agreement directly or indirectly to transfer,
the legal or beneficial ownership of subscription rights or the underlying
securities to the account of another person. CBCT Bancshares, Inc. will pursue
any and all legal and equitable remedies in the event it becomes aware of the
transfer of subscription rights and will not honor orders known by it to involve
such transfer. Under penalties of perjury, I further certify that: (1) the
social security number or taxpayer identification number given above is correct
and (2) I am not subject to backup withholding. You must cross out this item (2)
in this acknowledgement if you have been notified by the Internal Revenue
Service that you are subject to backup withholding because of under-reporting
interest or dividends on your tax return. By signing below, I also acknowledge
that I have not waived any rights under the Securities Act of 1933 and the
Securities Exchange Act of 1934, both as amended.
Signature: THIS FORM MUST BE SIGNED AND DATED BELOW AND ON THE BACK OF THIS
FORM. This order is not valid if the Stock Order and Certification Form are not
both signed and properly completed. Your order will be filled in accordance with
the provisions of the Plan of Conversion as described in the Prospectus. An
additional signature is required only if payment is by withdrawal from an
account that requires more than one signature to withdraw funds.
- --------------------------------------------------------------------------------
Signature Date
- --------------------------------------------------------------------------------
Signature Date
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Office Use Only
Check # ___________ _________
Date Rec'd _______/_______ Ck. Amt. ___________ _________
Batch # __________ Order # __________________ Category _____________
- --------------------------------------------------------------------------------
<PAGE>
COMMUNITY BANK OF CENTRAL TEXAS, SSB REVOCABLE PROXY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF COMMUNITY BANK OF CENTRAL
TEXAS, SSB FOR USE AT A SPECIAL MEETING OF MEMBERS TO BE HELD ON XXXX XX, 2000
AND ANY ADJOURNMENT OF THAT MEETING, FOR THE PURPOSES SET FORTH IN THE FOREGOING
NOTICE OF SPECIAL MEETING. YOUR BOARD OF DIRECTORS AND MANAGEMENT URGE YOU TO
VOTE FOR THE PLAN OF CONVERSION.
The undersigned being a member of Community Bank of Central Texas, ssb, hereby
authorizes the Board of Directors of Community Bank of Central Texas, ssb or any
successors in their respective positions, as proxy, with full powers of
substitution, to represent the undersigned at the Special Meeting of Members of
Community Bank of Central Texas, ssb to be held at Community Bank of Central
Texas' main office at 312 Main Street, Smithville, Texas on XXXX XX, 2000, at
X:00 p.m., Smithville, Texas time, and at any adjournment of said meeting, to
act with respect to all votes that the undersigned would be entitled to cast, if
then personally present, as set forth below:
(1) To vote "FOR" or "AGAINST" a Plan of Conversion of Community
Bank of Central Texas, ssb pursuant to which Community Bank of Central Texas,
ssb will convert from a mutual savings institution, including the adoption of a
federal stock savings bank charter and bylaws, with simultaneous issuance of its
common stock to CBCT Bancshares, Inc., a Maryland corporation (the "Holding
Company") and sale by the Holding Company of shares of its common stock.
FOR AGAINST
|_| |_|
(2) To vote, in its discretion, upon such other business as may
properly come before the Special Meeting or any adjournment thereof. Management
is not aware of any other such business that may come before the Special
Meeting.
FOR AGAINST
|_| |_|
This proxy, if executed, will be voted "FOR" adoption of the Plan of Conversion
and for adjournment of the Special Meeting, if necessary, if no choice is made
herein. Please date and sign this proxy on the reverse side and return it in the
enclosed envelope.
- --------------------------------------------------------------------------------
CBCT Bancshares, Inc.
- --------------------------------------------------------------------------------
Item (7) continued - NASD Affiliation (this section only applies to those
individuals who meet the delineated criteria)
Check the box if you are a member of the National Association of Securities
Dealers, Inc. ("NASD"), a person associated with an NASD member, a member of the
immediate family of any such person to whose support such person contributes,
directly or indirectly, or the holder of an account in which an NASD member or
person associated with an NASD member has a beneficial interest. To comply with
conditions under which an exemption from the NASD's Interpretation With Respect
to Free-Riding and Withholding is available, you agree, if you have checked the
NASD affiliation box: (1) not to sell, transfer or hypothecate the stock for a
period of three months following the issuance and (2) to report this
subscription in writing to the applicable NASD member within one day of the
payment therefor.
Item (8) continued; Purchaser Information
Account Title (Names on Accounts) Account Number
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CERTIFICATION FORM
(This Certification Form Must Be Signed In Addition to the Stock Order Form)
I ACKNOWLEDGE THAT THE SHARES OF COMMON STOCK, $.01 PAR VALUE PER SHARE, OF
PEOPLES COMMUNITY BANCORP, INC. ARE NOT DEPOSITS OR AN ACCOUNT AND ARE NOT
FEDERALLY INSURED OR GUARANTEED BY THE PEOPLE'S BUILDING, LOAN AND SAVINGS
COMPANY OR BY THE FEDERAL GOVERNMENT.
If anyone asserts that the shares of Common Stock are federally insured or
guaranteed, or are as safe as an insured deposit, I should call the Office of
Thrift Supervision Midwest Regional Director, Frederick R. Casteel at (972)
281-2000.
I further certify that, before purchasing the Common Stock of CBCT Bancshares,
Inc. I received a copy of the Prospectus dated May XX, 2000 which discloses the
nature of the Common Stock being offered and describes the following risks
involved in an investment in the Common Stock under the heading "Risk Factors"
beginning on page XX of the Prospectus:
1. Rising interest rates may hurt our profits.
2. After this offering, our return on equity will be low compared to other
companies and our compensation expenses will increase. This could
negatively impact the price of our stock.
3. Our loan portfolio possesses increased risk due to our substantial number
of consumer, construction and commercial real estate and commercial
business loans.
4. We intend to grant stock options and restricted stock to the board and
management following the conversion which could reduce your ownership
interest.
5. The amount of common stock we will control, our articles of incorporation
and bylaws and state and federal statutory provisions could discourage
hostile acquisitions of control.
6. Holders of CBCT Bancshares, Inc. common stock may not be able to sell
their shares when desired if a liquid trading market does not develop or
for $10.00 or more per share even if a liquid trading market develops.
- --------------------------------------------------------------------------------
Signature Date
- --------------------------------------------------------------------------------
Signature Date
- --------------------------------------------------------------------------------
(Note: If shares are to be held jointly, both parties must sign)
EXECUTION OF THIS CERTIFICATION FORM WILL NOT CONSTITUTE A WAIVER OF ANY RIGHTS
THAT A PURCHASER MAY HAVE UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE
SHARES OF COMMON STOCK BEING OFFERED ARE NOT SAVINGS ACCOUNTS OR DEPOSITS AND
ARE NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR
ANY OTHER GOVERNMENT AGENCY.
<PAGE>
- --------------------------------------------------------------------------------
Stock Order Form Instructions - All subscription orders are subject to the
provisions of the Plan of Conversion. Item 1 and 2 - Fill in the number of
shares that you wish to purchase and the total payment due. The amount due is
determined by multiplying the number of shares ordered by the subscription price
of $10.00 per share. The minimum purchase is 25 shares. Generally, the maximum
purchase for any person is 10,000 shares (10,000 shares x $10.00 per share =
$100,000). No person, together with associates, as defined in the prospectus,
and persons acting in concert may purchase more than 10,000 shares (10,000
shares x $10.00 per share = $100,000) of the common stock offered in the
offering. For additional information, see "The Subscription Offering -
Limitations on Common Stock Purchases" in the Prospectus.
Item 3 - Payment for shares may be made in cash (only if delivered by you in
person, although we request that you exchange the cash for a check with a teller
at Community Bank of Central Texas, ssb ("Community Bank")) or by check, bank
draft or money order payable to CBCT BANKSHARES, INC. DO NOT MAIL CASH. Your
funds will earn interest at the passbook rate until the Conversion is completed.
Item 4 - To pay by withdrawal from a savings account or certificate at Community
Bank, insert the account number(s) and the amount(s) you wish to withdraw from
each account. If more than one signature is required for a withdrawal, all
signatories must sign in the signature box on the front of this form. To
withdraw from an account with checking privileges, please write a check.
Community Bank will waive any applicable penalties for early withdrawal from
certificate accounts. A hold will be placed on the account(s) for the amount(s)
you indicate to be withdrawn. Payments will remain in account(s) until the stock
offering closes and earn their respective rate of interest.
Item 5 - Please check the appropriate box to tell us the earliest of the three
dates that applies to you.
Item 6 - Please check this box if you are a director, officer or employee of
Community Bank, or a member of such person's household.
Item 7 - Please check this box if you have a National Association of Securities
Dealers, Inc. ("NASD") affiliation (as defined on the reverse side of the Stock
Order Form.)
Item 8 - Please review the preprinted qualifying account number(s) information.
The account number(s) listed may not be all of your account number(s). You
should list any other qualifying accounts that you may have or had with
Community Bank in the box located under the heading "Additional Qualifying
Accounts". These may appear on other stock order forms you have received. For
example, if you are ordering stock in just your name, you should list all of
your deposit accounts as of the earliest of the three dates that you were a
depositor. Similarly, if you are ordering stock jointly with another depositor,
you should list all deposit accounts under which either of you are owners, i.e.
individual accounts, joint accounts, etc. If you are ordering stock in your
minor child's or grandchild's name under the Uniform Transfer to Minors Act, the
minor must have had a deposit account on one of the three dates and you should
list only their account number(s). If you are ordering stock corporately, you
need to list just that corporation's deposit accounts, as your individual
account(s) do not qualify. Failure to list all of your qualifying accounts may
result in the loss of part or all of your subscription rights.
Item 9 - The stock transfer industry has developed a uniform system of
shareholder registrations that we will use in the issuance of CBCT Bancshares,
Inc. common stock. Please complete this section as fully and accurately as
possible, and be certain to supply your social security or Tax I.D. number(s)
and your daytime and evening phone numbers. We will need to call you if we
cannot execute your order as given. If you have any questions regarding the
registration of your stock, please consult your legal advisor. Subscription
rights are not transferable. If you are an eligible or supplemental eligible
account holder or other depositor, to protect your priority over other
purchasers as described in the Prospectus, you must take ownership in at least
one of the account holder's names.
(See Reverse Side for Stock Ownership Guide)
<PAGE>
- --------------------------------------------------------------------------------
Stock Ownership Guide
Individual - The stock is to be registered in an individual's name only. You may
not list beneficiaries for this ownership.
Joint Tenants - Joint tenants with rights of survivorship identifies two or more
owners. When stock is held by joint tenants with rights of survivorship,
ownership automatically passes to the surviving joint tenant(s) upon the death
of any joint tenant. You may not list beneficiaries for this ownership.
Tenants in Common - Tenants in common may also identify two or more owners. When
stock is to be held by tenants in common, upon the death of one co-tenant,
ownership of the stock will be held by the surviving co-tenant(s) and by the
heirs of the deceased co-tenant. All parties must agree to the transfer or sale
of shares held by tenants in common. You may not list beneficiaries for this
ownership.
Uniform Transfers To Minors Act - For residents of Texas and many states, stock
may be held in the name of a custodian for the benefit of a minor under the
Uniform Transfer to Minors Act. For residents in other states, stock may be held
in a similar type of ownership under the Uniform Gift to Minors Act of the
individual state. For either ownership, the minor is the actual owner of the
stock with the adult custodian being responsible for the investment until the
child reaches legal age. Only one custodian and one minor may be designated.
Instructions: On the first name line, print the first name, middle initial and
last name of the custodian, with the abbreviation "CUST" after the name. Print
the first name, middle initial and last name of the minor on the second name
line followed by the notation UTMA-TX or UGMA-Other State. List only the minor's
social security number.
Corporation/Partnership - Corporations/Partnerships may purchase stock. Please
provide the Corporation/Partnership's legal name and Tax I.D. To have depositor
rights, the Corporation/Partnership must have an account in the legal name.
Please contact the Stock Information Center to verify depositor rights and
purchase limitations.
Individual Retirement Account - Individual Retirement Account ("IRA") holders
may make stock purchases from their deposits through a prearranged
"trustee-to-trustee" transfer. Stock may only be held in a self-directed IRA.
Please contact the Stock Information Center if you have any questions about your
IRA account and please do not delay in exploring this option. Registration for
IRA's: On Name Line 1 - list the name of the broker or trust department followed
by CUST or TRUSTEE.
On Name Line 2 - FBO (for benefit of) YOUR NAME IRA a/c #______.
Address will be that of the broker / trust department to where the stock
certificate will be sent.
The Social Security / Tax I.D. number(s) will be either yours or your trustees,
as they direct.
Please list your phone numbers.
Fiduciary/Trust - Generally, fiduciary relationships (such as Trusts, Estates,
Guardianships, etc.) are established under a form of trust agreement or pursuant
to a court order. Without a legal document establishing a fiduciary
relationship, your stock may not be registered in a fiduciary capacity.
Instructions: On the first name line, print the first name, middle initial and
last name of the fiduciary if the fiduciary is an individual. If the fiduciary
is a corporation, list the corporate title on the first name line. Following the
name, print the fiduciary title such as trustee, executor, personal
representative, etc. On the second name line, print the name of the maker, donor
or testator or the name of the beneficiary. Following the name, indicate the
type of legal document establishing the fiduciary relationship (agreement, court
order, etc.). In the blank after "Under Agreement Dated," fill in the date of
the document governing the relationship.
The date of the document need not be provided for a trust created by a will.
(See Reverse Side for Stock Order Form Instructions)
CERTIFICATION
I ACKNOWLEDGE THAT THIS SECURITY IS NOT A DEPOSIT OR ACCOUNT AND IS
NOT FEDERALLY INSURED, AND IS NOT GUARANTEED BY COMMUNITY BANK OF CENTRAL TEXAS,
ssb, OR BY THE FEDERAL GOVERNMENT.
If anyone asserts that this security is federally insured or
guaranteed, or is as safe as an insured deposit, I should call the FDIC Regional
Director, [________________________] ([___]) [___-____].
I further certify that, before purchasing the common stock, par
value $0.01 per share of CBCT Bancshares, Inc., the proposed holding company for
Community Bank of Central Texas, ssb (the "Bank"), I received a prospectus dated
___________, 2000 (the "Prospectus").
The Prospectus that I received contains disclosure concerning the
nature of the security being offered and describes the risks involved in the
investment, including, but not limited to: vulnerability to changes in interest
rates; decreased return on average equity and increased expenses immediately
after conversion; competition; geographical concentration of loans; certain
anti-takeover provisions; voting control of shares by the board, management and
employee plans; low return of equity and low net interest margin; ESOP
compensation expense; absence of active market for common stock; risk of delayed
offering; dilutive effect of restricted stock plan and stock options; and
restrictions on repurchase of shares.
For a more detailed description of the risks involved in the
offering, see "Risk Factors" at pages __ through __ of the Prospectus.
In addition, the articles of incorporation of the Company requires
a vote of 80% of stockholders to remove directors, to approve certain business
combinations or to amend the certificate of incorporation, which may have the
effect of discouraging a future takeover attempt of the Company. For additional
information, see pages ___ through ___ of the Prospectus.
NOTE: If the stock is to be held jointly,
both parties must sign.
Signature:
Signature:
Date:
EXHIBIT 99.5
FACTS ABOUT CONVERSION
- --------------------------------------------------------------------------------
The Board of Directors of Community Bank of Central Texas, ssb ("Community
Bank") unanimously adopted a Plan of Conversion to convert from a Texas mutual
savings institution to a Texas capital stock savings institution (the
"Conversion").
This brochure answers some of the most frequently asked questions about the
Conversion and about your opportunity to invest in common shares of CBCT
Bancshares, Inc. (the "Holding Company"), the newly-formed corporation that will
become the holding company for Community Bank following the Conversion.
Investment in the common shares of CBCT Bancshares involves certain risks. For a
discussion of these risks and other factors, including a complete description of
the offering, investors are urged to read the accompanying Prospectus,
especially the discussion under the heading "Risk Factors".
WHY IS COMMUNITY BANK CONVERTING TO STOCK FORM?
- --------------------------------------------------------------------------------
The stock form of ownership is used by most business corporations and an
increasing number of savings institutions:
0 The stock form of organization offers many competitive advantages,
including growth opportunities and increased capital levels.
WILL THE CONVERSION AFFECT ANY OF MY DEPOSIT ACCOUNTS OR LOANS?
- --------------------------------------------------------------------------------
No. The Conversion will have no effect on the balance or terms of any savings
account or loan, and your deposits will continue to be federally insured by the
Federal Deposit Insurance Corporation ("FDIC") to the maximum legal limit. Your
savings account is not being converted into stock.
WHO IS ELIGIBLE TO PURCHASE COMMON SHARES IN THE SUBSCRIPTION OFFERING AND THE
COMMUNITY OFFERING?
- --------------------------------------------------------------------------------
Certain past and present depositors of Community Bank, the Holding Company's
Employee Stock Ownership Plan and certain members of the general public are
eligible to purchase common shares in the subscription offering and the
community offering.
HOW MANY COMMON SHARES ARE BEING OFFERED AND AT WHAT PRICE?
- --------------------------------------------------------------------------------
CBCT Bancshares is offering up to 264,500 common shares, subject to adjustment
as described in the Prospectus, at a price of $10.00 per share through the
Prospectus.
HOW MANY SHARES MAY I BUY?
- --------------------------------------------------------------------------------
The minimum order is 25 common shares. No person, together with associates of,
and persons acting in concert with such person, may purchase more than 10,000
common shares.
WILL THE COMMON SHARES BE INSURED?
- --------------------------------------------------------------------------------
No. Like any other common shares, the Holding Company's common shares will not
be insured.
DO MEMBERS HAVE TO BUY COMMON SHARES?
- --------------------------------------------------------------------------------
No. However, the Conversion will allow depositors of Community Bank an
opportunity to buy common shares and become shareholders of the holding company
for the local financial institution with which they do business.
HOW DO I ORDER COMMON SHARES?
- --------------------------------------------------------------------------------
You must complete the enclosed Stock Order and Certification Form. Instructions
for completing your Stock Order and Certification Form are contained in this
packet. Your order must be received by Noon, Smithville, Texas Time on June XX,
2000.
HOW MAY I PAY FOR MY COMMON SHARES?
- --------------------------------------------------------------------------------
First, you may pay for common shares by check, cash or money order. Interest
will be paid by Community Bank on these funds at the passbook rate, which is
currently X.00%, from the day the funds are received until the completion or
termination of the Conversion. Second, you may authorize us to withdraw funds
from your deposit account or certificate of deposit at Community Bank for the
amount of funds you specify for payment. You will not have access to these funds
from the day we receive your order until completion or termination of the
Conversion.
CAN I PURCHASE SHARES USING FUNDS IN MY HOME LOAN SAVINGS IRA ACCOUNT?
- --------------------------------------------------------------------------------
Federal regulations do not permit the purchase of common shares in connection
with the Conversion from your existing Community Bank IRA account. To
accommodate our depositors, we have made arrangements with an outside trustee to
allow such purchases.
Please call our Stock Information Center for additional information.
WILL DIVIDENDS BE PAID ON THE COMMON SHARES?
- --------------------------------------------------------------------------------
The Board of Directors of the Holding Company will consider whether to pay a
cash dividend in the future, subject to regulatory limits and requirements. No
decision has been made as to the amount or timing of such dividends, if any.
HOW WILL THE COMMON SHARES BE TRADED?
- --------------------------------------------------------------------------------
The Holding Company's stock is expected to trade on the OTC "Bulletin Board".
However, no assurance can be given that an active and liquid market will
develop.
ARE OFFICERS AND DIRECTORS OF COMMUNITY BANK PLANNING TO PURCHASE SHARES?
- --------------------------------------------------------------------------------
Yes! The officers and directors of Community Bank plan to purchase, in the
aggregate, $477,000 worth of shares or approximately 18.0% of the common shares
offered at the maximum of the offering range.
MUST I PAY A COMMISSION?
- --------------------------------------------------------------------------------
No. You will not be charged a commission or fee on the purchase of common shares
in the Conversion.
SHOULD I VOTE TO APPROVE THE PLAN OF CONVERSION?
- --------------------------------------------------------------------------------
Yes. Your "YES" vote is very important!
PLEASE VOTE, SIGN AND RETURN ALL PROXY CARDS!
WHY DID I GET SEVERAL PROXY CARDS?
- --------------------------------------------------------------------------------
If you have more than one account, you could receive more than one proxy card,
depending on the ownership structure of your accounts.
HOW MANY VOTES DO I HAVE?
- --------------------------------------------------------------------------------
Your proxy card(s) show(s) the number of votes you have. Every depositor is
entitled to cast one vote for each $100, and a proportionate fractional vote for
an amount of less than $100, on deposit as of the voting record date, up to 1000
votes.
MAY I VOTE IN PERSON AT THE SPECIAL MEETING?
- --------------------------------------------------------------------------------
Yes, but we would still like you to sign and mail your proxy today. If you
decide to revoke your proxy you may do so at any time before such proxy is
exercised by executing and delivering a later dated proxy or by giving written
notice of revocation in writing or in open meeting at the special meeting.
Attendance at the special meeting will not, of itself, revoke a proxy.
For Additional Information You May Call Our Stock Information Center Monday
through Friday.
STOCK INFORMATION CENTER
(513) XXX-XXXX
Community Bank
312 Main Street
Smithville, Texas 78957
- --------------------------------------------------------------------------------
Questions
and
Answers
- --------------------------------------------------------------------------------
CBCT Bancshares, Inc.
Holding Company for
Community Bank of Central Texas, ssb
THE COMMON SHARES BEING OFFERED ARE NOT SAVINGS ACCOUNTS OR DEPOSITS AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE BANK INSURANCE FUND,
THE SAVINGS ASSOCIATION INSURANCE FUND OR ANY OTHER GOVERNMENTAL AGENCY. THIS IS
NOT AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY SHARES. THE OFFER IS
MADE ONLY BY THE PROSPECTUS.
EXHIBIT 99.6
, 2000
Dear Friend:
We are pleased to announce that Community Bank of Central Texas, ssb ("Community
Bank") is converting from the mutual to the stock form of organization (the
"Conversion"). In connection with the Conversion, CBCT Bancshares, Inc.
("CBCT"), the newly-formed holding company for Community Bank, is offering
common shares in a subscription offering pursuant to a Plan of Conversion.
Because of your subscription rights as a former member of Community Bank, we are
sending you the following materials which describe the stock offering.
PROSPECTUS: This document provides detailed information about Community
Bank's operations and the proposed stock offering.
STOCK ORDER AND CERTIFICATION FORM: This form is used to purchase stock
by returning it with your payment in the enclosed business reply
envelope. The deadline for ordering stock is 12:00 Noon, Smithville,
Texas time, on _____________, 2000.
As a former depositor of Community Bank, you will have the opportunity to buy
common shares directly from CBCT in the offering without paying a commission or
fee. If you have additional questions regarding the Conversion and Offering,
please call us at ( ) - Monday through Friday, or stop by our Stock Information
Center located at 312 Main Street, Smithville, Texas.
We are pleased to offer you this opportunity to become a shareholder of CBCT
Bancshares, Inc.
Sincerely,
Brad M. Hurta
President and Chief Executive Officer
THE COMMON SHARES BEING OFFERED ARE NOT SAVINGS ACCOUNTS OR DEPOSITS AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE BANK INSURANCE FUND,
THE SAVINGS ASSOCIATION INSURANCE FUND OR ANY OTHER GOVERNMENT AGENCY. THIS IS
NOT AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY SHARES. THE OFFER IS
MADE ONLY BY THE PROSPECTUS.
<PAGE>
, 2000
Dear Member:
We are pleased to announce that Community Bank of Central Texas ("Community
Bank") is converting from the mutual to the stock form of organization (the
"Conversion"). In connection with the Conversion, CBCT Bancshares, Inc.
("CBCT"), the newly-formed holding company for Community Bank, is offering
common shares in a subscription offering pursuant to a Plan of Conversion.
To accomplish this Conversion, we need your participation in an important vote.
Enclosed is a proxy statement describing the Plan of Conversion and your voting
and subscription rights. The Plan of Conversion has been approved by the Office
of Thrift Supervision and now must be approved by you. YOUR VOTE IS VERY
IMPORTANT.
Enclosed, as part of the proxy materials, is your proxy card, the detachable
section on top of the order form having your name and address. This proxy card
should be signed and returned to us prior to the Special Meeting of Members to
be held on , 2000. Please take a moment now to sign the enclosed proxy card and
return it to us in the postage-paid envelope provided. FAILURE TO VOTE HAS THE
SAME EFFECT AS VOTING AGAINST THE CONVERSION.
The Board of Directors believes the Conversion will offer a number of advantages
such as an opportunity for depositors and certain borrowers of Community Bank to
become shareholders. Please remember:
0 Your deposit accounts will continue to be insured up to the maximum legal
limit by the Federal Deposit Insurance Corporation ("FDIC").
0 There will be no change in the balance, interest rate, or maturity of
any deposit accounts because of the Conversion.
0 Members have a right, but not an obligation, to buy CBCT common stock
and may do so without a commission or fee before it is offered to the
general public.
0 Like all stock, shares of CBCT common stock issued in this Offering
will not be insured by the FDIC.
Enclosed is a prospectus containing a complete discussion of the stock offering.
We urge you to read this material carefully. If you are interested in purchasing
the common shares of CBCT, you must submit your Stock Order and Certification
Form and payment prior to 12:00 Noon, Smithville, Texas time, on , 2000.
If you have additional questions regarding the Offering, please call us at ( ) -
, Monday through Friday, or stop by our Stock Information Center located at 312
Main Street, Smithville, Texas.
Sincerely,
Brad M. Hurta
President and Chief Executive Officer
THE SHARES OF COMMON STOCK BEING OFFERED IN THIS OFFERING ARE NOT SAVINGS
ACCOUNTS OR DEPOSITS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE BANK INSURANCE FUND OR THE SAVINGS ASSOCIATION INSURANCE FUND
OR ANY OTHER GOVERNMENT AGENCY. THIS IS NOT AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY SHARES. THE OFFER IS MADE ONLY BY THE PROSPECTUS.
<PAGE>
, 2000
Dear Prospective Investor:
We are pleased to announce that Community Bank of Central Texas ("Community
Bank") is converting from the mutual to the stock form of organization (the
"Conversion"). In connection with the Conversion, CBCT Bancshares, Inc.
("CBCT"), the newly-formed holding company for Community Bank, is offering
common shares in a subscription offering pursuant to a Plan of Conversion.
We have enclosed the following materials which will help you learn more about
the merits of CBCT common shares as an investment. Please read and review the
materials carefully.
PROSPECTUS: This document provides detailed information about Community
Bank operations and the proposed stock offering.
STOCK ORDER AND CERTIFICATION FORM: This form is used to purchase
common shares by returning it with your payment in the enclosed
business reply envelope. The deadline for ordering common shares is
12:00 Noon, Smithville, Texas, time, on , 2000.
We invite our loyal customers and members of the general public to become
shareholders of CBCT. Through this offering you have the opportunity to buy
common shares directly from CBCT without paying a commission or fee. The board
of directors and senior management of Community Bank fully support the offering.
If you have additional questions regarding the Offering, please call us at ( ) -
, Monday through Friday, or stop by our Stock Information Center located at 312
Main Street, Smithville, Texas.
Sincerely,
Brad M. Hurta
President and Chief Executive Officer
THE COMMON SHARES BEING OFFERED ARE NOT SAVINGS ACCOUNTS OR DEPOSITS AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE BANK INSURANCE FUND,
THE SAVINGS ASSOCIATION INSURANCE FUND OR ANY OTHER GOVERNMENT AGENCY. THIS IS
NOT AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY SHARES. THE OFFER IS
MADE ONLY BY THE PROSPECTUS.
<PAGE>
[GRAPHIC OMITTED]
KEEFE, BRUYETTE & WOODS, INC.
To Members and Friends of
Community Bank of Central Texas, ssb
- --------------------------------------------------------------------------------
Keefe, Bruyette & Woods, Inc. a member of the National Association of Securities
Dealers, Inc. ("NASD"), is assisting Community Bank of Central Texas, ssb
("Community Bank") in converting from the mutual to the stock form of
organization which will then become a wholly-owned subsidiary of a new holding
company, CBCT Bancshares, Inc. ("CBCT Bancshares"). In connection with the
conversion, CBCT Bancshares is offering shares of its common stock in a
subscription offering pursuant to a Plan of Conversion.
At the request of CBCT Bancshares, Inc., we are enclosing materials explaining
this process and your options, including an opportunity to invest in shares of
CBCT Bancshares, Inc. common stock being offered to customers of Community Bank
until 12:00 Noon, Smithville, Texas time, on June XX, 2000. Please read
carefully the enclosed offering materials, including the Prospectus, for a
complete discussion of the stock offering. CBCT Bancshares, Inc. has asked us to
forward these documents to you in view of certain requirements of the securities
laws in your state.
If you have any questions, please visit our Stock Information Center located at
312 Main Street, Smithville, Texas, or feel free to call the Stock Information
Center at (512) XXX-XXXX.
Very truly yours,
Keefe, Bruyette & Woods, Inc.
THE COMMON SHARES BEING OFFERED ARE NOT SAVINGS ACCOUNTS OR DEPOSITS AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE BANK INSURANCE FUND,
THE SAVINGS ASSOCIATION INSURANCE FUND OR ANY OTHER GOVERNMENT AGENCY. THIS IS
NOT AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY SHARES. THE OFFER IS
MADE ONLY BY THE PROSPECTUS.
<PAGE>
May XX, 2000
Dear Member:
We are pleased to announce that Community Bank of Central Texas, ssb ("Community
Bank") is converting from the mutual to the stock form of organization (the
"Conversion") which will then become a wholly-owned subsidiary of a new holding
company, CBCT Bancshares, Inc. In connection with the Conversion, CBCT
Bancshares, Inc. ("CBCT Bancshares") is offering shares of its common stock in a
subscription offering pursuant to a Plan of Conversion.
Unfortunately, CBCT Bancshares is unable to either offer or sell its common
shares to you because the small number of eligible subscribers in your
jurisdiction makes registration or qualification of the common shares under the
securities laws of your jurisdiction impractical, for reasons of cost or
otherwise. Accordingly, this letter should not be considered an offer to sell or
a solicitation of an offer to buy the common shares of CBCT Bancshares.
However, as a member of the Community Bank you have the right to vote on the
Plan of Conversion at the Special Meeting of Members to be held on June XX,
2000. Therefore, enclosed is a proxy card, a proxy statement (which includes the
Notice of the Special Meeting), a prospectus (which contains information
incorporated into the proxy statement) and a return envelope for your proxy
card.
We invite you to attend the Special Meeting of Members on June XX, 2000.
However, whether or not you are able to attend the meeting, please complete the
enclosed proxy card and return it in the enclosed envelope.
Sincerely,
Brad M. Hurta
President and Chief Executive Officer
EXHIBIT 99.7
[LETTTERHEAD OF FERGUSON & COMPANY]
March 21, 2000
Board of Directors
Community Bank of Central, Texas ssb
312 Main Street
Smithville, Texas 78957
Plan of Conversion, Subscription Rights
Dear Directors:
Terms used in this letter not otherwise defined herein have the same
meanings for such terms in the Plan of Conversion adopted by the Board of
Directors of Community Bank of Central Texas, ssb ("Community Bank" or the
"Bank"), under which the Bank will convert from a mutual savings association to
a stock savings association and issue all of the Association's stock to CBCT
Bancshares, Inc. (the "Holding Company"). Simultaneously, the Holding Company
will issue shares of common stock.
We understand that in accordance with the Plan of Conversion,
Subscription Rights to purchase shares of Common Stock in the Holding Company
are to be issued to (1) Eligible Account Holders, (2) The Bank's tax qualified
employee plans, (3) Supplemental Eligible Account Holders, and (4) Other
Members. Based solely upon our observation that the Subscription Rights will be
available to such parties without cost, will be legally non-transferable and of
short duration, and will afford such parties the right only to purchase shares
of Common Stock at the same price to be paid by members of the general public in
the Community Offering, but without undertaking any independent investigation of
state or federal laws or the position of the Internal Revenue Service with
respect to such issue, in our opinion:
(1) The Subscription Rights will have no ascertainable market value;
and
(2) The price at which the Subscription Rights are exercisable will not
be more or less than the pro forma market value of the shares upon issuance.
Changes in the local and national economy, the legislative and
regulatory environment, the stock market, interest rates and other external
forces (e.g., natural disasters or significant global events) occur from time to
time and may materially affect the value of thrift stocks as a whole or the
Holding Company's value. Accordingly, no assurance can be given that persons who
subscribe to shares of Common Stock in the Conversion will thereafter be able to
sell such shares at the same price paid in the Subscription Offering.
Sincerely,
/s/ Charles M. Hebert
Charles M. Hebert
Principal
