SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Act of 1934
Date of Report (Date of earliest event reported)................March 14, 1997
SOUTH BRANCH VALLEY BANCORP, INC.
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(Exact name of registrant as specified in its charter)
West Virginia 0-16587 55-0672148
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(State of other (Commission (I.R.S. Employer
jurisdiction File Number) Identification No.)
of incorporation)
310 North Main Street, Moorefield, West Virginia 26836
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(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code (304) 538-2353
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ITEM 5. OTHER EVENTS
EXECUTION OF STOCK PURCHASE AGREEMENT
As reported in the Form 8-K dated February 7, 1997, on February 7, 1997,
South Branch Valley Bancorp, Inc. ("South Branch") executed a Stock Purchase
Agreement (the "Stock Purchase Agreement") with Fred L. Haddad, Karen L. Haddad,
Larry Haddad, Susan Haddad, Lauren Haddad, Elizabeth Haddad and Paul E. White
(the "Sellers"), 350 MacCorkle Avenue, S.E., Station Place, Charleston, West
Virginia 25314 to purchase all 424,680 shares of Mr. Haddad's stock, or
approximately 35.4% of Capital State Bank, Inc. ("Capital State Bank"), a state
banking corporation located at 2402 Mountaineer Boulevard, South Charleston,
West Virginia 25309. South Branch will pay to the Sellers a purchase price of
$11.00 per share. The Stock Purchase Agreement is contingent on the happening of
various events, including but not limited to the ability of South Branch to
obtain all regulatory approvals prior to consummation of the purchase.
On March 12, 1997, South Branch executed a Stock Purchase Agreement with
Ferris, Baker Watts, Inc. to purchase an additional 50,000 shares of the Common
Stock of Capital State Bank at a purchase price of $10.25 per share. This
purchase was consummated on March 14, 1997. These shares, when added to the
424,680 shares of stock to be purchased under the Stock Purchase Agreement and
certain Affiliate Shares (defined below), would give South Branch an ownership
interest of approximately 40% in Capital State Bank.
SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATIONS
As stated in its 8-K filed on January 21, 1997, South Branch executed a
letter of intent dated January 15, 1997 (the "Letter of Intent") to purchase
275,000 shares, or approximately 23%, of Capital State Bank, Inc. ("Capital
State Bank") from Fred L. Haddad at a purchase price of $11.00 per share. The
Letter of Intent was contingent on the happening of several events, including
but not limited to (i) execution of a definitive stock purchase agreement; (ii)
the ability of South Branch to purchase an additional 149,680 shares of Capital
State Bank stock at a purchase price of $11.00 per share from the following
individuals: Karen L. Haddad - 10,000 shares, Larry Haddad - 20,000 shares,
Susan Haddad - 60,000 shares, Lauren Haddad - 15,000 shares, Elizabeth Haddad -
15,000 shares and Paul White 29,680 shares, (herein collectively referred to as
the "Additional Shares"); (iii) the ability of South Branch to obtain all
regulatory approvals; and (iv) completion of a due diligence review of
financial, legal, accounting and environmental matters that is satisfactory to
South Branch. At the time of filing of South Branch's 8-K dated January 21,
1997, letters of intent with the holders of the Additional Shares had not been
executed.
Since the filing of that 8-K, South Branch has (i) executed letters
of intent with the holders of the Additional Shares and (ii) executed a
definitive stock purchase agreement with Mr. Haddad and the holders of the
Additional Shares (the "Stock Purchase Agreement"). In addition, certain members
of the Board of Directors of South Branch own stock in Capital State Bank.
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Messrs. John W. Crites, H. Charles Maddy, III and Gary L. Hinkle each own 5,000,
300 and 1,000 shares, respectively (the "Affiliate Shares"). The acquisition of
Mr. Haddad's Shares and the Additional Shares (collectively the "Shares") and
the purchase of 50,000 additional Ferris, Baker Watts Shares reported herein,
combined with the Affiliate Shares, will result in South Branch owning
approximately 40% of Capital State Bank, Inc.
The source and amount of funds used or to be used in purchasing the Shares
will be (i) $178,690.50 in funds currently available from South Branch, and (ii)
a loan in an amount not to exceed $3,000,000 from the Potomac Valley Bank,
Petersburg, West Virginia. The source of the remaining $1,492,789.50 would be
funds available to South Branch as a result of its sale of authorized but
unissued shares of South Branch stock to certain directors at a purchase price
of $43.50. The directors who will purchase South Branch stock and the amount
they will purchase are as follows:
Amount of Shares
Applicant Owned
Director's Name Number of Shares Dollar Amount After Acquisition
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Number %
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John W. Crites 25,300 $1,100,550.00 51,205 12.40
Gary L. Hinkle 4,600 200,100.00 14,517 3.52
Jeffrey E. Hott 2,530 110,055.00 21,505 5.21
Oscar M. Bean 575 25,012.50 9,274 2.25
Donald W. Biller 506 22,011.00 6,626 1.61
Thomas J. Hawse, III 300 13,050.00 3,100 0.75
Mary Ann Ours 506 22,011.00 5,121 1.24
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34,317 $1,492,789.50 111,348 26.98
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As discussed more fully below, the proposed transaction with respect to the
Shares is subject to prior regulatory approval by state and federal bank
regulatory authorities. The purchase of the Ferris, Baker Watts Shares was not
subject to prior regulatory approval because the Ferris, Baker Watts Shares
constitute less than 5% of the issued and outstanding stock of Capital State
Bank. Regulatory approval is not required for purchases involving 5% or less.
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In the event regulatory approval is denied, all funds currently held in
escrow will be returned to the directors without interest and no shares of South
Branch stock will be issued. The proposed sale of stock is not part of an
overall plan by this group to obtain control of South Branch. The individuals
purchasing South Branch Stock have no voting rights to the shares nor do they
have the right to direct disposition of these shares.
The source and amount of funds for the purchase of the Ferris, Baker Watts
Shares was (I) a loan in the amount of $500,000 from The First National Bank of
Romney, 75 Rosemary Lane, P. O. Box 1037, Romney, West Virginia 26757; and (ii)
$12,500 in funds currently available.
PURPOSE OF TRANSACTION
The purpose of this transaction is to permit South Branch to obtain control
of Capital State Bank, Inc. At this time, it is the intention of South Branch to
accumulate enough stock to motivate its discussions with management of Capital
State Bank, Inc. and to enhance the prospects that the contemplated transaction
will be successfully consummated by reducing the possibility of a third party
making an unsolicited acquisition proposal.
At this time, South Branch is considering the option of seeking to acquire
the remaining shares of Capital State Bank, Inc., through a negotiated merger
proposal with current management. South Branch contemplates that if such merger
discussions occur, such proposal would include negotiations concerning the
resignation of certain board members and the filling of board vacancies. Since
the filing of its initial 8-K, pursuant to the Stock Purchase Agreement, two
directors of Capital State Bank, Inc., Karen L. Haddad and Paul White have
resigned. Since the filing of 8-K dated February 7, 1997, Larry Haddad has
resigned as Chairman of the Board of Directors. Charles Piccirillo is now acting
Chairman of the Board.
South Branch is a West Virginia bank holding company that is regulated by
the Federal Reserve Board under the Federal Bank Holding Company Act of 1956, as
amended and by the West Virginia Division of Banking. Capital State Bank, Inc.
is a non-member, West Virginia state banking corporation whose primary
regulators are the Federal Deposit Insurance Corporation and the West Virginia
Division of Banking. In order to consummate the purchase of the Shares
contemplated hereunder, South Branch and Capital State Bank, Inc. are each
required to file applications with their respective banking regulators for
approval of the proposed transaction prior to consummation. These regulatory
requirements could slow down or prevent the proposed acquisition of the Shares
by South Branch.
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INTEREST IN SECURITIES OF THE ISSUER
The aggregate number and percentage of the common stock of Capital State
Bank, Inc. beneficially owned by South Branch is 474,680 shares. This amount
combined with the Affiliate Shares will give South Branch approximately a 40%
ownership interest in Capital State Bank. Legal title to 424,680 of the total
shares (i.e. the Shares as defined herein) has not been transferred to South
Branch. Under applicable federal banking law, both South Branch and Capital
State must obtain prior approval of South Branch's acquisition of the Shares. In
furtherance of this transaction, South Branch has placed purchase price for the
Shares in escrow and the holders of the Shares have placed certificates
representing the Shares in escrow until regulatory approval has been obtained.
South Branch was not required under federal banking law to obtain prior approval
of the purchase of the Ferris, Baker Watts Shares since its beneficial ownership
will not exceed 5%, including the Affiliate Shares. Messrs. John W. Crites, H.
Charles Maddy, III and Gary L. Hinkle each own 5,000, 300 and 1,000 shares of
Capital State Bank, respectively.
CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS
WITH RESPECT TO SECURITIES OF THE ISSUER
South Branch borrowed $500,000 from The First National Bank of Romney to
finance the purchase price of the Ferris, Baker Watts Shares at an interest rate
of prime minus a quarter, which interest rate shall be adjusted annually.
CHS80651
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
South Branch Valley Bancorp, Inc.
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(Registrant)
March 27, 1997 /s/ H. Charles Maddy, III
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Date (Signature)