EXHIBIT 99.5
SOUTHBANC SHARES, M.H.C.
907 N. MAIN STREET
ANDERSON, SOUTH CAROLINA 29621
(864) 225-0241
NOTICE OF SPECIAL MEETING OF MEMBERS
TO BE HELD ON MARCH __, 1998
Notice is hereby given that a special meeting ("Special Meeting") of
members of SouthBanc Shares, M.H.C. ("MHC") will be held at the main office of
Perpetual Bank, A Federal Savings Bank, 907 N. Main Street, Anderson, South
Carolina, on _________, March __, 1998, at __:00 _.m., Eastern Time. Business
to be taken up at the Special Meeting shall be:
(1) To approve an Amended Plan of Conversion from Mutual Holding Company
to Stock Holding Company and Agreement and Plan of Reorganization
("Plan of Conversion") between the MHC and Perpetual Bank, A Federal
Savings Bank ("Savings Bank"), pursuant to which the Savings Bank
organized SouthBanc Shares, Inc. ("Holding Company") and, upon
consummation of the following transactions, the Savings Bank will
become a wholly owned subsidiary of the Holding Company: (i) the MHC,
which currently owns 53.03% of the outstanding shares of common stock
of the Savings Bank, will convert from mutual holding company to a
federal interim stock savings bank ("Interim A") and simultaneously
merge with and into the Savings Bank, with the Savings Bank as the
surviving entity; (ii) the Savings Bank will merge with and into an
interim stock savings bank ("Interim B") to be formed as a wholly
owned subsidiary of the Holding Company, with the Savings Bank being
the surviving entity; (iii) the outstanding shares of common stock of
the Savings Bank (other than those held by the MHC which will be
canceled) ("Public Savings Bank Shares") will be exchanged for shares
of common stock of the Holding Company ("Exchange Shares") pursuant to
a ratio that will result in the holders of such shares owning in the
aggregate the same percentage of the outstanding shares of common
stock of the Holding Company as they currently own in the Savings
Bank, before giving effect to such stockholders purchasing additional
shares of common stock of the Holding Company ("Conversion Shares") in
a concurrent stock offering by the Holding Company ("Conversion
Offerings") or by the Savings Bank's employee stock ownership plan
thereafter or receiving cash in lieu of fractional Exchange Shares;
and (iv) the offer and sale of Conversion Shares by the Holding
Company in the Conversion Offerings (collectively, "Conversion and
Reorganization"), all undertaken pursuant to the laws of the United
States and the rules and regulations of the Office of Thrift
Supervision; and
(2) To consider and vote upon any other matters that may lawfully come
before the Special Meeting.
Note: As of the date of mailing of this Notice, the Board of Directors is
not aware of any other matters that may come before the Special Meeting.
The members entitled to vote at the Special Meeting shall be those members
of the MHC at the close of business on ____________, 1998, and who continue as
members until the Special Meeting, and should the Special Meeting be, from time
to time, adjourned to a later time, until the final adjournment thereof.
BY ORDER OF THE BOARD OF DIRECTORS
SYLVIA B. REED
SECRETARY
Anderson, South Carolina
February __, 1998
PLEASE SIGN AND RETURN PROMPTLY EACH PROXY CARD YOU RECEIVE IN THE ENCLOSED
POSTAGE-PAID ENVELOPE. THIS WILL ASSURE NECESSARY REPRESENTATION AT THE SPECIAL
MEETING, BUT WILL NOT PREVENT YOU FROM VOTING IN PERSON IF YOU SO DESIRE. THE
PROXY IS SOLICITED ONLY FOR THIS SPECIAL MEETING (AND ANY ADJOURNMENTS THEREOF)
AND WILL NOT BE USED FOR ANY OTHER MEETING. YOU MAY REVOKE YOUR WRITTEN PROXY
BY WRITTEN INSTRUMENT DELIVERED TO SYLVIA B. REED, SECRETARY, SOUTHBANC SHARES,
M.H.C., AT THE ABOVE ADDRESS AT ANY TIME PRIOR TO OR AT THE SPECIAL MEETING.
SOUTHBANC SHARES, M.H.C.
907 N. MAIN STREET
ANDERSON, SOUTH CAROLINA 29621
(864) 225-0241
PROXY STATEMENT
MARCH ___, 1998
YOUR PROXY, IN THE FORM ENCLOSED, IS SOLICITED BY THE BOARD OF DIRECTORS OF
SOUTHBANC SHARES, M.H.C. FOR USE AT A SPECIAL MEETING OF MEMBERS TO BE HELD ON
_________, MARCH __, 1998, 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.
PURPOSE OF MEETING -- SUMMARY
A special meeting of members ("Special Meeting") of SouthBanc Shares,
M.H.C. ("MHC") will be held at the main office of Perpetual Bank, A Federal
Savings Bank, 907 N. Main Street, Anderson, South Carolina, on _________, March
__, 1998, at __:00 __.m., Eastern Time, for the purpose of considering and
voting upon an Amended Plan of Conversion and Agreement and Plan of
Reorganization ("Plan of Conversion"), which, if approved by a majority of the
total votes of the members eligible to be cast, will permit Perpetual Bank, A
Federal Savings Bank ("Savings Bank") to become a subsidiary of the Holding
Company, a newly organized Delaware corporation formed by the Savings Bank. The
reorganization of the Savings Bank and the acquisition of control of the Savings
Bank by the Holding Company are collectively referred to herein as the
"Conversion and Reorganization."
Pursuant to the MHC's Federal Mutual Holding Company Charter, depositors of
the Savings Bank, and borrowers of the Savings Bank with a loan outstanding as
of October 26, 1993 and for as long as such loan remains outstanding, are
members of the MHC. Members entitled to vote on the Plan of Conversion are
members of the MHC as of ____________, 1998 ("Voting Record Date") who continue
as members until the Special Meeting, and should the Special Meeting be, from
time to time, adjourned to a later time, until the final adjournment thereof.
The Conversion and Reorganization requires the approval of not less than a
majority of the total votes eligible to be cast at the Special Meeting.
Pursuant to the Plan of Conversion, (i) the MHC will convert from a
federally-chartered mutual holding company to a federally-chartered interim
stock savings bank (i.e. Interim A) and simultaneously merge with and into the
----
Savings Bank, pursuant to which the MHC will cease to exist and the shares of
common stock, par value $1.00 per share of the Savings Bank ("Savings Bank
Common Stock") held by the MHC will be canceled, and (ii) Interim A will then
merge with and into the Savings Bank. As a result of the merger of Interim A
with and into the Savings Bank, the Savings Bank will become a wholly owned
subsidiary of the Holding Company and the shares of Savings Bank Common Stock
held by persons other than the MHC ("Public Savings Bank Shares") will be
converted into shares of common stock of the Holding Company ("Exchange Shares")
pursuant to a ratio ("Exchange Ratio"), which will result in the holders of such
shares owning in the aggregate approximately the same percentage of the Common
Stock to be outstanding upon the completion of the Conversion and Reorganization
as the percentage of Savings Bank Common Stock owned by them in the aggregate
immediately prior to consummation of the Conversion and Reorganization, but
before giving effect to (a) the payment of cash in lieu of issuing fractional
Exchange Shares and (b) any Conversion Shares (defined below) purchased by the
Savings Bank's stockholders in the Conversion Offerings (defined below).
As part of the Plan of Conversion, nontransferable rights to subscribe
("Subscription Rights") for up to 1,983,750 shares (which may be increased to
2,281,312 shares under circumstances described in footnote 4 of the
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table appearing on the cover page of the Prospectus) of Common Stock
("Conversion Shares") have been granted, in order of priority, to (i) depositors
with $50.00 or more on deposit at the Savings Bank as of the close of business
on June 30, 1996 ("Eligible Account Holders"), (ii) depositors with $50.00 or
more on deposit at the Savings Bank as of the close of business on December 31,
1997 ("Supplemental Eligible Account Holders"), and (iii) depositors of the
Savings Bank (other than Eligible Account Holders and Supplemental Eligible
Account Holders) as of the Voting Record Date, and borrowers of the Savings Bank
with loans outstanding as of the close of business on October 26, 1993 which
continue to be outstanding as of the close of business on the Voting Record Date
("Other Members"), subject to the priorities and purchase limitations set forth
in the Plan of Conversion ("Subscription Offering"). Concurrently, but subject
to the prior rights of Subscription Rights holders, the Holding Company is
offering the Conversion Shares for sale to members of the general public through
a direct community offering ("Direct Community Offering") with preference given
first to Public Stockholders as of the close of business on the Voting Record
Date (who are not Eligible Account Holders, Supplemental Eligible Account
Holders or Other Members) and then to natural persons and trusts of natural
persons who are permanent residents of Anderson or Oconee Counties of South
Carolina ("Local Community"). It is anticipated that any Conversion Shares not
subscribed for in the Subscription Offering or purchased in the Direct Community
Offering will be offered to eligible members of the general public on a best
efforts basis by a selling group of broker-dealers managed by Sandler O'Neill &
Partners, L.P. ("Sandler") in a syndicated community offering ("Syndicated
Community Offering"). The Subscription Offering, Direct Community Offering and
the Syndicated Community Offering are referred to collectively as the
"Conversion Offerings."
SOUTHBANC SHARES, M.H.C.
The MHC is the federally-chartered mutual holding company of the Savings
Bank. The MHC was formed in October 1993 as a result of the reorganization of
the Savings Bank into a federally chartered mutual holding company ("MHC
Reorganization"). The members of the MHC consist of depositors of the Savings
Bank and those current borrowers of the Savings Bank who had loans outstanding
as of the consummation date of the MHC Reorganization (October 26, 1993). The
MHC's sole business activity is holding the 800,000 shares of Savings Bank
Common Stock, which represents 53.02% of the outstanding shares as of the date
of this Prospectus. The MHC's main office is located at 907 N. Main Street,
Anderson, South Carolina 29621, and its telephone number is (864) 225-0241. As
part of the Conversion and Reorganization, the MHC will convert to a federally-
chartered interim stock savings bank and simultaneously merge with and into the
Savings Bank, with the Savings Bank as the surviving entity.
PERPETUAL BANK, A FEDERAL SAVINGS BANK
The Savings Bank is a federally chartered stock savings bank headquartered
in Anderson, South Carolina. The Savings Bank was originally chartered in 1906
and operated as a mutual institution without stockholders until October 1993, at
which time it reorganized into the mutual holding company structure. The
Savings Bank's deposits are insured by the Federal Deposit Insurance Corporation
("FDIC") up to applicable legal limits under the Savings Association Insurance
Fund. The Savings Bank, a member of the Federal Home Loan Bank ("FHLB") system,
is regulated by the Office of Thrift Supervision ("OTS") and the FDIC. At
September 30, 1997, the Savings Bank had total assets of $257.0 million, total
deposits of $201.0 million, and total stockholders' equity of $30.8 million, on
a consolidated basis.
On October 26, 1993, the MHC Reorganization was consummated and the Savings
Bank completed its initial stock offering by issuing 1,500,000 shares of Savings
Bank Common Stock at $10.00 per share, 1,385,000 shares (92.3%) of which were
sold to the MHC. The remaining 115,000 shares (7.7%) were issued to members of
the MHC, including officers, directors and employees of the Savings Bank.
In September 1996, the Savings Bank completed an additional offering of
Savings Bank Common Stock through the issuance of 585,000 shares at a price of
$19.25 to then existing members of the MHC ("Additional Offering"). In
connection with the closing of the Additional Offering, 585,000 shares of
Savings Bank Common
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Stock held by the MHC were canceled. Accordingly, upon consummation of the
Additional Offering on September 30, 1996, there were 1,504,601 shares of
Savings Bank Common Stock issued and outstanding, of which 800,000 (53.2%) were
held by the MHC and 704,601 shares (46.8%) were held by the Public Stockholders.
The Savings Bank considers Anderson and Oconee Counties in the northwestern
corner of South Carolina as its primary market area because a substantial
portion of its loan portfolio is secured by properties located in those
counties. The Savings Bank faces strong competition within its primary market
area. The Savings Bank also invests in loans secured by properties located
outside of its primary market area (predominately in Hilton Head Island, South
Carolina, and in the greater Greenville, South Carolina, area) as a result of
loan purchases from other lenders, including a mortgage banking company in which
a service corporation subsidiary of the Savings Bank has a one-third equity
interest.
The Savings Bank is primarily engaged in the business of attracting
deposits from the general public and using those funds, along with FHLB
advances, to originate and purchase one- to- four family mortgage loans. The
Savings Bank originates and purchases commercial real estate and construction
loans, as well as consumer loans and, to a lesser extent, commercial business
loans and multi-family real estate loans. Such latter type loans, which
totalled $71.7 million, or 40.1%, of net loans receivable at September 30, 1997,
are inherently riskier than one- to- four-family mortgage loans. As a
complement to its lending activities, the Savings Bank services mortgage loans
and invests in mortgage servicing rights.
In addition to its lending activities, the Savings Bank, through a service
corporation subsidiary, develops residential and commercial properties located
in its primary market area. The Savings Bank also invests in short-and
intermediate-term mortgage-backed securities, including collateralized mortgage
obligations ("CMOs").
The Savings Bank's principal office is located at 907 North Main Street,
Anderson, South Carolina 29621, and the telephone number at that office is (864)
225-0241. The Savings Bank also operates five branch offices.
VOTING RIGHTS AND VOTE REQUIRED FOR APPROVAL
The MHC's Board of Directors has fixed the close of business on
___________, 1998 as the record date for the determination of members entitled
to notice of and to vote at the Special Meeting. All holders of savings or
other authorized accounts of the Savings Bank, and borrowers of the Savings Bank
with loans outstanding as of October 26, 1993 and for as long as such loans
remain outstanding, are members of the Savings Bank under its current charter.
All members of record as of the close of business on the Voting Record Date who
continue to be members on the date of the Special Meeting or any adjournment
thereof will be entitled to vote at the Special Meeting or such adjournment.
Each eligible depositor member 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 the depositor's savings accounts in the Savings Bank as of the
Voting Record Date. Borrowers with loans outstanding as of October 26, 1993,
which continue to be outstanding as of the Voting Record Date will be entitled
to cast one vote for the period of time such borrowings remain in existence. No
member is entitled to cast more than 1,000 votes. Any number of members present
and voting, represented in person or by proxy, at the Special Meeting will
constitute a quorum.
Approval of the Plan of Conversion will require the affirmative vote of a
majority of the total outstanding votes of the MHC's members eligible to be cast
at the Special Meeting. As of the Voting Record Date for the Special Meeting,
there were approximately _________ votes eligible to be cast, of which _________
votes may be cast by depositor members and ___ votes may be cast by borrower
members.
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PROXIES
Members may vote at the Special Meeting or any adjournment thereof in
person or by proxy. Enclosed is a proxy which may be used by any eligible
member to vote on the Plan of Conversion. All properly executed proxies
received by management 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, all proxies will be voted on such matters in accordance with the best
judgment of the proxy holders named therein. If the enclosed proxy is returned,
it may be revoked at any time before it is voted by written notice to the
Secretary of the Savings Bank, by submitting a later dated proxy, or by
attending and voting in person at the Special Meeting. The proxies being
solicited are only for use at the Special Meeting and at any and all
adjournments thereof and will not be used for any other meeting. Management is
not aware of any other business to be presented at the Special Meeting.
The trustees for individual retirement accounts at the Savings Bank,
will vote in favor of the Plan of Conversion, unless the beneficial owner
executes and returns the enclosed proxy for the Special Meeting or attends the
Special Meeting and votes in person.
To the extent necessary to permit approval of the Plan of Conversion,
proxies may be solicited by officers, directors or regular employees of the MHC,
in person, by telephone or through other forms of communication. Such persons
will be reimbursed by the MHC for their reasonable out-of-pocket expenses
incurred in connection with such solicitation. If necessary, the Special
Meeting may be adjourned to an alternative date.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THE
PLAN OF CONVERSION. VOTING IN FAVOR OF THE PLAN OF CONVERSION WILL NOT OBLIGATE
ANY VOTER TO PURCHASE ANY CONVERSION SHARES.
THE CONVERSION AND REORGANIZATION
THE OTS HAS APPROVED THE PLAN OF CONVERSION SUBJECT TO ITS APPROVAL BY
THE MEMBERS OF THE SAVINGS BANK AND THE STOCKHOLDERS OF THE SAVINGS BANK
ENTITLED TO VOTE THEREON AND TO THE SATISFACTION OF CERTAIN OTHER CONDITIONS
IMPOSED BY THE OTS IN ITS APPROVAL. OTS APPROVAL DOES NOT CONSTITUTE A
RECOMMENDATION OR ENDORSEMENT OF THE PLAN OF CONVERSION.
GENERAL
On September 22, 1997, the Boards of Directors of the MHC and the
Savings Bank unanimously adopted, and on December 22, 1997, unanimously amended,
the Plan of Conversion, pursuant to which the MHC will convert from a mutual
holding company to a stock holding company and the Savings Bank simultaneously
reorganize as a wholly-owned subsidiary of the Holding Company, a newly formed
Delaware corporation. THE FOLLOWING DISCUSSION OF ALL MATERIAL ASPECTS OF THE
PLAN OF CONVERSION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE PLAN OF
CONVERSION, WHICH IS ATTACHED HERETO AS EXHIBIT A. The OTS has approved the Plan
of Conversion subject to its approval by the members of the MHC entitled to vote
on the matter at the Special Meeting of Members called for that purpose to be
held on ____________, 1998, its approval by the stockholders of the Savings Bank
entitled to vote on the matter at the Stockholders' Meeting called for that
purpose to be held on ____________, 1998, and its approval by the stockholders
of the Savings Bank (excluding the MHC) entitled to vote on the matter at the
Stockholders' Meeting, and subject to the satisfaction of certain other
conditions imposed by the OTS in its approval.
Pursuant to the Plan of Conversion, (i) the MHC will convert from a
federally-chartered mutual holding company to a federally-chartered interim
stock savings bank (i.e. Interim A) and simultaneously merge with and into the
----
Savings Bank, pursuant to which the MHC will cease to exist and the shares of
Savings Bank Common Stock held by the MHC will be canceled, and (ii) Interim A
will then merge with and into the Savings Bank. As a result
4
of the merger of Interim A with and into the Savings Bank, the Savings Bank will
become a wholly owned subsidiary of the Holding Company and the Public Savings
Bank Shares will be converted into the Exchange Shares pursuant to the Exchange
Ratio, which will result in the holders of such shares owning in the aggregate
approximately the same percentage of the Common Stock to be outstanding upon the
completion of the Conversion and Reorganization (i.e., the Conversion Shares and
----
the Exchange Shares) as the percentage of Savings Bank Common Stock owned by
them in the aggregate immediately prior to consummation of the Conversion and
Reorganization, but before giving effect to (a) the payment of cash in lieu of
issuing fractional Exchange Shares and (b) any shares of Conversion Stock
purchased by the Savings Bank's stockholders in the Conversion Offerings.
As part of the Conversion and Reorganization, the Holding Company is
offering Conversion Shares in the Subscription Offering to holders of
Subscription Rights in the following order of priority: (i) Eligible Account
Holders (depositors of the Savings Bank with $50.00 or more on deposit as of the
close of business on June 30, 1996); (ii) Supplemental Eligible Account Holders
(depositors of the Savings Bank with $50.00 or more on deposit as of the close
of business on December 31, 1997); and (iii) Other Members (depositors of the
Savings Bank as of the close of business on ___________, 1998 and borrowers of
the Savings Bank with loans outstanding as of the close of business on October
26, 1993, which continue to be outstanding as of the close of business on
__________, 1997).
Concurrently with the Subscription Offering, any Conversion Shares not
subscribed for in the Subscription Offering may be offered for sale in the
Direct Community Offering to members of the general public, with priority being
given first to Public Stockholders as of the close of business on the Voting
Record Date (who are not Eligible Account Holders, Supplemental Eligible Account
Holders or Other Members) and then to natural persons and trusts of natural
persons residing in the Local Community. Conversion Shares not sold in the
Subscription and Direct Community Offerings may be offered in the Syndicated
Community Offering. Regulations require that the Direct Community and
Syndicated Community Offerings be completed within 45 days after completion of
the fully extended Subscription Offering unless extended by the Savings Bank or
the Holding Company with the approval of the regulatory authorities. If the
Syndicated Community Offering is determined not to be feasible, the Board of
Directors of the Savings Bank will consult with the regulatory authorities to
determine an appropriate alternative method for selling the unsubscribed
Conversion Shares. The Plan of Conversion provides that the Conversion and
Reorganization must be completed within 24 months after the date of the approval
of the Plan of Conversion by the members of the MHC.
No sales of Common Stock may be completed, either in the Subscription
Offering, Direct Community Offering or Syndicated Community Offerings unless the
Plan of Conversion is approved by the members of the MHC and the stockholders of
the Savings Bank.
The completion of the Conversion Offerings, however, is subject to
market conditions and other factors beyond the Savings Bank's control. No
assurance can be given as to the length of time after approval of the Plan of
Conversion at the Special Members Meeting and the Stockholders Meeting that will
be required to complete the Direct Community or Syndicated Community Offerings
or other sale of the Conversion Shares. If delays are experienced, significant
changes may occur in the estimated pro forma market value of the MHC and the
Savings Bank, as converted, together with corresponding changes in the net
proceeds realized by the Holding Company from the sale of the Conversion Shares.
If the Conversion and Reorganization is terminated, the Savings Bank would be
required to charge all Conversion and Reorganization expenses against current
income.
Orders for Conversion Shares will not be filled until at least
1,466,250 Conversion Shares have been subscribed for or sold and the OTS
approves the final valuation and the Conversion and Reorganization closes. If
the Conversion and Reorganization is not completed within 45 days after the last
day of the fully extended Subscription Offering and the OTS consents to an
extension of time to complete the Conversion and Reorganization, subscribers
will be given the right to increase, decrease or rescind their subscriptions.
Unless an affirmative indication is received from subscribers that they wish to
continue to subscribe for shares, the funds will be returned promptly, together
with accrued interest at the Savings Bank's passbook rate from the date payment
is received until
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the funds are returned to the subscriber. If such period is not extended, or,
in any event, if the Conversion and Reorganization is not completed, all
withdrawal authorizations will be terminated and all funds held will be promptly
returned together with accrued interest at the Savings Bank's passbook rate from
the date payment is received until the Conversion and Reorganization is
terminated.
PURPOSES OF CONVERSION AND REORGANIZATION
The MHC, as a federally chartered mutual holding company, does not
have stockholders and has no authority to issue capital stock. As a result of
the Conversion and Reorganization, the Holding Company will be structured in the
form used by holding companies of commercial banks, most business entities and a
growing number of savings institutions. The holding company form of
organization will provide the Holding Company with the ability to diversify the
Holding Company's and the Savings Bank's business activities through acquisition
of or mergers with both stock savings institutions and commercial banks, as well
as other companies. Although there are no current arrangements, understandings
or agreements regarding any such opportunities, the Holding Company will be in a
position after the Conversion and Reorganization, subject to regulatory
limitations and the Holding Company's financial position, to take advantage of
any such opportunities that may arise.
In their decision to pursue the Conversion and Reorganization, the
Board of Directors of the MHC and the Savings Bank considered various regulatory
uncertainties associated with the mutual holding company structure including the
ability to waive dividends in the future as well as the general uncertainty
regarding a possible elimination of the federal savings association charter.
The Conversion and Reorganization will be important to the future
growth and performance of the holding company organization by providing a larger
capital base to support the operations of the Savings Bank and Holding Company
and by enhancing their future access to capital markets, their ability to
diversify into other financial services related activities, and their ability to
provide services to the public. Since the MHC's ownership interest in the
Savings Bank is 53.03% as of the date of the Prospectus, the Savings Bank
currently does not have the ability to raise additional capital through the sale
of additional shares of Savings Bank Common Stock because OTS regulations
require that the MHC hold a majority of the outstanding shares of Savings Bank
Common Stock.
The Conversion and Reorganization also will result in an increase in
the number of shares of Common Stock to be outstanding as compared to the number
of outstanding shares of Public Savings Bank Shares which will increase the
likelihood of the development of an active and liquid trading market for the
Common Stock. In addition, the Conversion and Reorganization permit the Holding
Company to engage in stock repurchases without adverse federal income tax
consequences, unlike the Savings Bank. Currently, the Holding Company has no
plans or intentions to engage in any stock repurchases.
An additional benefit of the Conversion and Reorganization will be an
increase in the accumulated earnings and profits of the Savings Bank for federal
income tax purposes. When the Savings Bank (as a mutual institution)
transferred substantially all of its assets and liabilities to its stock savings
bank successor in the MHC Reorganization, its accumulated earnings and profits
tax attribute was not able to be transferred to the Savings Bank because no tax-
free reorganization was involved. Accordingly, this tax attribute was retained
by the Savings Bank when it converted its charter to that of the MHC, even
though the underlying retained earnings were transferred to the Savings Bank.
The Conversion and Reorganization has been structured to re-unite the
accumulated earnings and profits tax attribute retained by the MHC in the MHC
Reorganization with the retained earnings of the Savings Bank by merging the MHC
with and into the Savings Bank in a tax-free reorganization. This transaction
will increase the Savings Bank's ability to pay dividends to the Holding Company
in the future.
If the Savings Bank had undertaken a standard conversion involving the
formation of a stock holding company in 1993, applicable OTS regulations would
have required a greater amount of common stock to be sold than the amount of net
proceeds raised in the MHC Reorganization. Management believed that it was
advisable to profitably invest the $946,000 of net proceeds raised in the MHC
Reorganization and the $10.7 million of net
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proceeds raised in the Additional Offering prior to raising the larger amount of
capital that would have been raised in a standard conversion. A standard
conversion in 1993 also would have immediately eliminated all aspects of the
mutual form of organization.
In light of the foregoing, the Boards of Directors of the Primary
Parties believe that the Conversion and Reorganization is in the best interests
of the MHC and the Savings Bank, their respective members and stockholders, and
the communities served by the Savings Bank.
EFFECTS OF CONVERSION AND REORGANIZATION ON DEPOSITORS AND BORROWERS OF THE
SAVINGS BANK
GENERAL. Prior to the Conversion and Reorganization, each depositor
in the Savings Bank has both a deposit account in the institution and a pro rata
ownership interest in the net worth of the MHC based upon the balance in his or
her account, which interest may only be realized in the event of a liquidation
of the MHC. However, this ownership interest is tied to the depositor's account
and has no tangible market value separate from such deposit account. A
depositor who reduces or closes his or her account receives a portion or all of
the balance in the account but nothing for his or her ownership interest in the
net worth of the MHC, which is lost to the extent that the balance in the
account is reduced.
Consequently, the depositors of the Savings Bank normally have no way
to realize the value of their ownership interest in the MHC, which has
realizable value only in the unlikely event that the MHC is liquidated. In such
event, the depositors of record at that time, as owners, would share pro rata in
any residual surplus and reserves of the MHC after other claims are paid.
Upon consummation of the Conversion and Reorganization, permanent
nonwithdrawable capital stock will be created to represent the ownership of the
net worth of the Holding Company. The Common Stock is separate and apart from
deposit accounts and cannot be and is not insured by the FDIC or any other
governmental agency. Certificates are issued to evidence ownership of the
permanent stock. The stock certificates are transferable, and therefore the
stock may be sold or traded if a purchaser is available with no effect on any
deposit and/or loan account(s) the seller may hold in the Savings Bank.
CONTINUITY. The Conversion and Reorganization will not interrupt the
Savings Bank's normal business of accepting deposits and making loans. The
Savings Bank will continue to be subject to regulation by the OTS and the FDIC.
After the Conversion and Reorganization, the Savings Bank will continue to
provide services for depositors and borrowers under current policies by its
present management and staff.
The directors and officers of the Savings Bank at the time of the
Conversion and Reorganization will continue to serve as directors and officers
of the Savings Bank after the Conversion and Reorganization. The directors and
officers of the Holding Company consist of individuals currently serving as
directors and officers of the MHC and the Savings Bank, and they generally will
retain their positions in the Holding Company after the Conversion and
Reorganization.
EFFECT ON PUBLIC SAVINGS BANK SHARES. Under the Plan of Conversion,
upon consummation of the Conversion and Reorganization, the Public Savings Bank
Shares shall be converted into Exchange Shares based upon the Exchange Ratio
without any further action on the part of the holder thereof. Upon surrender of
the Public Savings Bank Shares, Common Stock will be issued in exchange for such
shares. See "-- Delivery and Exchange of Stock Certificates."
Upon consummation of the Conversion and Reorganization, the Public
Stockholders will become stockholders of the Holding Company. For a description
of certain changes in the rights of stockholders as a result of the Conversion
and Reorganization.
7
VOTING RIGHTS. Presently, depositors and borrowers of the Savings
Bank are members of, and have voting rights in, the MHC as to all matters
requiring membership action. Upon completion of the Conversion and
Reorganization, the MHC will cease to exist and all voting rights in the Savings
Bank will be vested in the Holding Company as the sole stockholder of the
Savings Bank. Exclusive voting rights with respect to the Holding Company will
be vested in the holders of Common Stock. Depositors and borrowers of the
Savings Bank will not have voting rights in the Holding Company after the
Conversion and Reorganization, except to the extent that they become
stockholders of the Holding Company.
SAVINGS ACCOUNTS AND LOANS. The Savings Bank's savings accounts,
account balances and existing FDIC insurance coverage of savings accounts will
not be affected by the Conversion and Reorganization. Furthermore, the
Conversion and Reorganization will not affect the loan accounts, loan balances
or obligations of borrowers under their individual contractual arrangements with
the Savings Bank.
TAX EFFECTS. The Savings Bank has received an opinion from Breyer &
Aguggia, Washington, D.C., that the Conversion and Reorganization will
constitute a nontaxable reorganization under Section 368(a)(1)(A) of the
Internal Revenue Code of 1986, as amended ("Code"). Among other things, the
opinion provides that: (i) the conversion of the MHC from a mutual holding
company to a federally-chartered interim stock savings bank (i.e., Interim A)
----
and its simultaneous merger with and into the Savings Bank, with the Savings
Bank as the surviving entity will qualify as a reorganization within the meaning
of Section 368(a)(1)(A) of the Code, (ii) no gain or loss will be recognized by
the Savings Bank upon the receipt of the assets of the MHC in such merger, (iii)
the merger of Interim B with and into the Savings Bank, with the Savings Bank as
the surviving entity, will qualify as a reorganization within the meaning of
Section 368(a)(1)(A) of the Code, (iv) no gain or loss will be recognized by
Interim B upon the transfer of its assets to the Savings Bank, (v) no gain or
loss will be recognized by the Savings Bank upon the receipt of the assets of
Interim B, (vi) no gain or loss will be recognized by the Holding Company upon
the receipt of Savings Bank Common Stock solely in exchange for Common Stock,
(vii) no gain or loss will be recognized by the Public Stockholders upon the
receipt of Exchange Shares in exchange for their Public Savings Bank Shares,
(viii) the basis of the Exchange Shares to be received by the Public
Stockholders will be the same as the basis of the Public Savings Bank Shares
surrendered in exchange therefor, before giving effect to any payment of cash in
lieu of fractional Exchange Shares, (ix) the holding period of the Exchange
Shares to be received by the Public Stockholders will include the holding period
of the Public Savings Bank Shares, provided that the Public Savings Bank Shares
were held as a capital asset on the date of the exchange, (x) no gain or loss
will be recognized by the Holding Company upon the sale of shares of Conversion
Shares in the Conversion Offerings, (xi) the Eligible Account Holders,
Supplemental Eligible Account Holders and Other Members will recognize gain, if
any, upon the issuance to them of withdrawable savings accounts in the Savings
Bank following the Conversion and Reorganization, interests in the liquidation
account and nontransferable subscription rights to purchase Conversion Stock,
but only to the extent of the value, if any, of the subscription rights, and
(xii) the tax basis to the holders of Conversion Shares purchased in the
Conversion Offerings will be the amount paid therefor, and the holding period
for the Conversion Shares will begin on the date of consummation of the
Conversion Offerings, if purchased through the exercise of Subscription Rights,
and on the day after the date of purchase, if purchased in the Community
Offering or the Syndicated Community Offering. Unlike a private letter ruling
issued by the Internal Revenue Service ("IRS"), an opinion of counsel is not
binding on the IRS and the IRS could disagree with the conclusions reached
therein. In the event of such disagreement, no assurance can be given that the
conclusions reached in an opinion of counsel would be sustained by a court if
contested by the IRS.
Based upon past rulings issued by the IRS, the opinion provides that
the receipt of Subscription Rights by Eligible Account Holders, Supplemental
Eligible Account Holders and Other Members under the Plan of Conversion will be
taxable to the extent, if any, that the Subscription Rights are deemed to have a
fair market value. RP Financial, LC. ("RP Financial") a financial consulting
firm retained by the Savings Bank, whose findings are not binding on the IRS,
has issued a letter indicating that the Subscription Rights do not have any
value, based on the fact that such rights are acquired by the recipients without
cost, are nontransferable and of short duration and afford the recipients the
right only to purchase shares of the Common Stock at a price equal to its
estimated fair market value, which will be the same price paid by purchasers in
the Direct Community Offering for unsubscribed shares
8
of Common Stock. If the Subscription Rights are deemed to have a fair market
value, the receipt of such rights may only be taxable to those Eligible Account
Holders, Supplemental Eligible Account Holders and Other Members who exercise
their Subscription Rights. The Savings Bank could also recognize a gain on the
distribution of such Subscription Rights. Eligible Account Holders,
Supplemental Eligible Account Holders and Other Members are encouraged to
consult with their own tax advisors as to the tax consequences in the event the
Subscription Rights are deemed to have a fair market value.
The Savings Bank has also received an opinion from Evans, Carter,
Kunes & Bennett, P.C., Charleston, South Carolina, that, assuming the Conversion
and Reorganization does not result in any federal income tax liability to the
Savings Bank, its account holders, or the Holding Company, implementation of the
Plan of Conversion will not result in any South Carolina tax liability to such
entities or persons.
The opinions of Breyer & Aguggia and Evans, Carter, Kunes & Bennett,
P.C. and the letter from RP Financial are filed as exhibits to the Registration
Statement.
PROSPECTIVE INVESTORS ARE URGED TO CONSULT WITH THEIR OWN TAX ADVISORS
REGARDING THE TAX CONSEQUENCES OF THE CONVERSION AND REORGANIZATION PARTICULAR
TO THEM.
LIQUIDATION ACCOUNT. In the unlikely event of a complete liquidation
of the MHC, each depositor of the Savings Bank would receive his or her pro rata
share of any assets of the MHC remaining after payment of claims of all
creditors. Each depositor's pro rata share of such remaining assets would be in
the same proportion as the value of his or her deposit account was to the total
value of all deposit accounts in the Savings Bank at the time of liquidation.
After the Conversion and Reorganization, each depositor, in the event of a
complete liquidation of the Savings Bank, would have a claim as a creditor of
the same general priority as the claims of all other general creditors of the
Savings Bank. However, except as described below, his or her claim would be
solely in the amount of the balance in his or her deposit account plus accrued
interest. Each stockholder would not have an interest in the value or assets of
the Savings Bank or the Holding Company above that amount.
The Plan of Conversion provides for the establishment, upon the
completion of the Conversion and Reorganization, of a special "liquidation
account" for the benefit of Eligible Account Holders and Supplemental Eligible
Account Holders in an amount equal to the amount of any dividends waived by the
MHC plus the greater of (i) the Savings Bank's retained earnings of $12.9
million at March 31, 1993, the date of the latest statement of financial
condition contained in the final offering circular utilized in the MHC
Reorganization, or (ii) 53.02% of the Savings Bank's total stockholders' equity
as reflected in its latest statement of financial condition contained in the
final Prospectus utilized in the Conversion Offerings. As of the date of the
Prospectus, the initial balance of the liquidation account would be $____
million. Each Eligible Account Holder and Supplemental Eligible Account Holder,
if he or she were to continue to maintain his or her deposit account at the
Savings Bank, would be entitled, upon a complete liquidation of the Savings Bank
after the Conversion and Reorganization to an interest in the liquidation
account prior to any payment to the Holding Company as the sole stockholder of
the Savings Bank. Each Eligible Account Holder and Supplemental Eligible
Account Holder would have an initial interest in such liquidation account for
each deposit account, including passbook accounts, transaction accounts such as
checking accounts, money market deposit accounts and certificates of deposit,
held in the Savings Bank at the close of business on June 30, 1996 or December
31, 1997, as the case may be. Each Eligible Account Holder and Supplemental
Eligible Account Holder will have a pro rata interest in the total liquidation
account for each of his or her deposit accounts based on the proportion that the
balance of each such deposit account on the Eligibility Record Date (June 30,
1996) or the Supplemental Eligibility Record Date (December 31, 1997), as the
case may be, bore to the balance of all deposit accounts in the Savings Bank on
such date.
If, however, on any September 30 annual closing date of the Savings
Bank, commencing September 30, 1998, the amount in any deposit account is less
than the amount in such deposit account on June 30, 1996 or December 31, 1997,
as the case may be, or any other annual closing date, then the interest in the
liquidation account
9
relating to such deposit account would be reduced by the proportion of any such
reduction, and such interest will cease to exist if such deposit account is
closed. In addition, no interest in the liquidation account would ever be
increased despite any subsequent increase in the related deposit account. Any
assets remaining after the above liquidation rights of Eligible Account Holders
and Supplemental Eligible Account Holders are satisfied would be distributed to
the Holding Company as the sole stockholder of the Savings Bank.
THE SUBSCRIPTION, DIRECT COMMUNITY AND SYNDICATED COMMUNITY OFFERINGS
SUBSCRIPTION OFFERING. In accordance with the Plan of Conversion,
nontransferable Subscription Rights to purchase the Conversion Shares have been
issued to persons and entities entitled to purchase the Conversion Shares in the
Subscription Offering. The amount of Conversion Shares which these parties may
purchase will be subject to the availability of the Conversion Shares for
purchase under the categories set forth in the Plan of Conversion. Subscription
priorities have been established for the allocation of stock to the extent that
the Conversion Shares are available. These priorities are as follows:
Category 1: Eligible Account Holders. Each depositor with $50.00 or
more on deposit at the Savings Bank as of the close of business on June 30, 1996
will receive nontransferable Subscription Rights to subscribe for up to 50,000
Conversion Shares, one-tenth of one percent of the total offering of Conversion
Shares or 15 times the product (rounded down to the next whole number) obtained
by multiplying the total number of Conversion Shares to be issued by a fraction
of which the numerator is the amount of qualifying deposit of the Eligible
Account Holder and the denominator is the total amount of qualifying deposits of
all Eligible Account Holders. If the exercise of Subscription Rights in this
category results in an oversubscription, Conversion Shares will be allocated
among subscribing Eligible Account Holders so as to permit each Eligible Account
Holder, to the extent possible, to purchase a number of shares sufficient to
make such person's total allocation equal 100 shares or the number of shares
actually subscribed for, whichever is less. Thereafter, unallocated shares will
be allocated among subscribing Eligible Account Holders proportionately, based
on the amount of their respective qualifying deposits as compared to total
qualifying deposits of all Eligible Account Holders. Subscription Rights
received by officers and directors in this category based on their increased
deposits in the Savings Bank in the one year period preceding June 30, 1996 are
subordinated to the Subscription Rights of other Eligible Account Holders.
Category 2: Supplemental Eligible Account Holders. Each depositor
with $50.00 or more on deposit as of the close of business on December 31, 1997
will receive nontransferable Subscription Rights to subscribe for up to the
greater of 50,000 Conversion Shares, one-tenth of one percent of the total
offering of Common Stock or 15 times the product (rounded down to the next whole
number) obtained by multiplying the total number of Conversion Shares to be
issued by a fraction of which the numerator is the amount of qualifying deposits
of the Supplemental Eligible Account Holder and the denominator is the total
amount of qualifying deposits of all Supplemental Eligible Account Holders. If
the exercise of Subscription Rights in this category results in an
oversubscription, Conversion Shares 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 equal 100 shares or the number of shares
actually subscribed for, whichever is less. Thereafter, unallocated shares will
be allocated among subscribing Supplemental Eligible Account Holders
proportionately, based on the amount of their respective qualifying deposits as
compared to total qualifying deposits of all Supplemental Eligible Account
Holders.
Category 3: Other Members. Each depositor of the Savings Bank as of
the close of business on the Voting Record Date (___________, 1998) and each
borrower with a loan outstanding as of the close of business on October 26,
1993, which continues to be outstanding as of the close of business on the
Voting Record Date, will receive nontransferable Subscription Rights to purchase
up 50,000 Conversion Shares to the extent shares are available following
subscriptions by Eligible Account Holders and Supplemental Eligible Account
Holders. In the event of an oversubscription in this category, the available
shares will be allocated proportionately based on the amount of the respective
subscriptions.
10
SUBSCRIPTION RIGHTS ARE NONTRANSFERABLE. PERSONS SELLING OR OTHERWISE
TRANSFERRING THEIR RIGHTS TO SUBSCRIBE FOR COMMON STOCK IN THE SUBSCRIPTION
OFFERING OR SUBSCRIBING FOR COMMON STOCK ON BEHALF OF ANOTHER PERSON WILL BE
SUBJECT TO FORFEITURE OF SUCH RIGHTS AND POSSIBLE FURTHER SANCTIONS AND
PENALTIES IMPOSED BY THE OTS OR ANOTHER AGENCY OF THE U.S. GOVERNMENT. EACH
PERSON EXERCISING SUBSCRIPTION RIGHTS WILL BE REQUIRED TO CERTIFY THAT HE OR SHE
IS PURCHASING SUCH SHARES SOLELY FOR HIS OR HER OWN ACCOUNT AND THAT HE OR SHE
HAS NO AGREEMENT OR UNDERSTANDING WITH ANY OTHER PERSON FOR THE SALE OR TRANSFER
OF SUCH SHARES. ONCE TENDERED, SUBSCRIPTION ORDERS CANNOT BE REVOKED WITHOUT
THE CONSENT OF THE SAVINGS BANK AND THE HOLDING COMPANY.
The Holding Company and the Savings Bank will make reasonable attempts
to provide a Prospectus and related offering materials to holders of
Subscription Rights. However, the Subscription Offering and all Subscription
Rights under the Plan of Conversion will expire at Noon, Eastern Time, on the
Expiration Date, whether or not the Savings Bank has been able to locate each
person entitled to such Subscription Rights. ORDERS FOR COMMON STOCK IN THE
SUBSCRIPTION OFFERING RECEIVED IN HAND BY THE SAVINGS BANK AFTER THE EXPIRATION
DATE WILL NOT BE ACCEPTED. The Subscription Offering may be extended by the
Holding Company and the Savings Bank up to ______, 1998 without the OTS's
approval. OTS regulations require that the Holding Company complete the sale of
Conversion Shares within 45 days after the close of the Subscription Offering.
If the Direct Community Offering and the Syndicated Community Offerings are not
completed by __________, 1998 (or ___________, 1998, if the Subscription
Offering is fully extended), all funds received will be promptly returned with
interest at the Savings Bank's passbook rate and all withdrawal authorizations
will be canceled or, if regulatory approval of an extension of the time period
has been granted, all subscribers and purchasers will be given the right to
increase, decrease or rescind their orders. If an extension of time is
obtained, all subscribers will be notified of such extension and of the duration
of any extension that has been granted, and will be given the right to increase,
decrease or rescind their orders. If an affirmative response to any
resolicitation is not received by the Holding Company from a subscriber, the
subscriber's order will be rescinded and all funds received will be promptly
returned with interest (or withdrawal authorizations will be canceled). No
single extension can exceed 90 days.
DIRECT COMMUNITY OFFERING. Concurrently with the Subscription
Offering, Conversion Shares will be offered by the Holding Company to certain
members of the general public in a Direct Community Offering, with preference
given first to Public Stockholders as of the close of business on the Voting
Record Date (who are not eligible to subscribe for Conversion Shares in the
Subscription Offering) and then to natural persons and trusts of natural persons
residing in the Local Community. Purchasers in the Direct Community Offering
are eligible to purchase up to 50,000 Conversion Shares. In the event an
insufficient number of shares are available to fill orders in the Direct
Community Offering, the available shares will be allocated on a pro rata basis
determined by the amount of the respective orders. The Direct Community
Offering will terminate on the Expiration Date, unless extended by the Holding
Company and the Savings Bank, with approval of the OTS. Any extensions beyond
45 days after the close of the fully extended Subscription Offering would
require a resolicitation of orders, wherein subscribers for the maximum numbers
of shares of Common Stock would be, and certain other large Subscribers in the
discretion of the Holding Company and the Savings Bank may be, given the
opportunity to continue their orders, in which case they will need to reconfirm
affirmatively their subscriptions prior to the expiration of the resolicitation
offering or their subscription funds will be promptly refunded with interest at
the Savings Bank's passbook rate, or be permitted to modify or cancel their
orders. THE RIGHT OF ANY PERSON TO PURCHASE SHARES IN THE DIRECT COMMUNITY
OFFERING IS SUBJECT TO THE ABSOLUTE RIGHT OF THE HOLDING COMPANY AND THE SAVINGS
BANK TO ACCEPT OR REJECT SUCH PURCHASES IN WHOLE OR IN PART. IF AN ORDER IS
REJECTED IN PART, THE PURCHASER DOES NOT HAVE THE RIGHT TO CANCEL THE REMAINDER
OF THE ORDER. THE HOLDING COMPANY PRESENTLY INTENDS TO TERMINATE THE DIRECT
COMMUNITY OFFERING AS SOON AS IT HAS RECEIVED ORDERS FOR ALL SHARES AVAILABLE
FOR PURCHASE IN THE CONVERSION AND REORGANIZATION.
If all of the Common Stock offered in the Subscription Offering is
subscribed for, no Common Stock will be available for purchase in the Direct
Community Offering and all funds submitted pursuant to the Direct Community
Offering will be promptly refunded with interest.
11
SYNDICATED COMMUNITY OFFERING. The Plan of Conversion provides that
all shares of Common Stock not purchased in the Subscription Offering and Direct
Community Offering may be offered for sale to certain members of the general
public in a Syndicated Community Offering through a syndicate of registered
broker-dealers to be managed by Sandler O'Neill acting as agent of the Holding
Company. THE HOLDING COMPANY AND THE SAVINGS BANK HAVE THE RIGHT TO REJECT
ORDERS, IN WHOLE OR PART, IN THEIR SOLE DISCRETION IN THE SYNDICATED COMMUNITY
OFFERING. Neither Sandler O'Neill nor any registered broker-dealer shall have
any obligation to take or purchase any shares of the Common Stock in the
Syndicated Community Offering; however, Sandler O'Neill has agreed to use its
best efforts in the sale of shares in the Syndicated Community Offering.
Conversion Shares sold in the Syndicated Community Offering also will
be sold at the $20.00 Purchase Price. See "-- Stock Pricing, Exchange Ratio and
Number of Shares to be Issued." No person will be permitted to subscribe for
more than 50,000 Conversion Shares in the Syndicated Community Offering. See "-
- - Plan of Distribution and Selling Commissions" for a description of the
commission to be paid to the selected dealers and to Sandler O'Neill.
Sandler O'Neill may enter into agreements with selected dealers to
assist in the sale of shares in the Syndicated Community Offering. During the
Syndicated Community Offering, selected dealers may only solicit indications of
interest from their customers to place orders with the Holding Company as of a
certain date ("Order Date") for the purchase of shares of Conversion Stock.
When and if Sandler O'Neill and the Holding Company believe that enough
indications of interest and orders have been received in the Subscription
Offering, the Direct Community Offering and the Syndicated Community Offering to
consummate the Conversion and Reorganization, Sandler O'Neill will request, as
of the Order Date, selected dealers to submit orders to purchase shares for
which they have received indications of interest from their customers. Selected
dealers will send confirmations to such customers on the next business day after
the Order Date. Selected dealers may debit the accounts of their customers on a
date which will be three business days from the Order Date ("Settlement 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 remit funds to
the account that the Holding Company established for each selected dealer. Each
customer's funds so forwarded to the Holding Company, along with all other
accounts held in the same title, will be insured by the FDIC up to the
applicable $100,000 legal limit. After payment has been received by the Holding
Company from selected dealers, funds will earn interest at the Savings Bank's
passbook rate until the completion of the Conversion Offerings. At the
completion of the Conversion and Reorganization, the funds received in the
Conversion Offerings will be used to purchase the shares of Common Stock
ordered. The shares issued in the Conversion and Reorganization cannot and will
not be insured by the FDIC or any other government agency. In the event the
Conversion and Reorganization is not consummated as described above, funds with
interest will be returned promptly to the selected dealers, who, in turn, will
promptly credit their customers' brokerage accounts.
The Syndicated Community Offering may terminate on or at any time
subsequent to the Expiration Date, but no later than 45 days after the close of
the Subscription Offering, unless extended by the Holding Company and the
Savings Bank, with approval of the OTS.
In the event the Savings Bank is unable to find purchasers from the
general public for all unsubscribed shares, other purchase arrangements will be
made by the Board of Directors of the Savings Bank, if feasible. Such other
arrangements will be subject to the approval of the OTS. The OTS may grant one
or more extensions of the offering period, provided that (i) no single extension
exceeds 90 days, (ii) subscribers are given the right to increase, decrease or
rescind their subscriptions during the extension period, and (iii) the
extensions do not go more than two years beyond the date on which the members
approved the Plan of Conversion. If the Conversion and Reorganization is not
completed within 45 days after the close of the Subscription Offering, either
all funds received will be returned with interest (and withdrawal authorizations
canceled) or, if the OTS has granted an extension of time, all subscribers will
be given the right to increase, decrease or rescind their subscriptions at any
time prior to 20 days before the end of the extension period. If an extension
of time is obtained, all subscribers will be notified of such extension and of
their rights to modify their orders. If an affirmative response to any
resolicitation is not
12
received by the Holding Company from a subscriber, the subscriber's order will
be rescinded and all funds received will be promptly returned with interest (or
withdrawal authorizations will be canceled).
PERSONS IN NON-QUALIFIED STATES. The Holding Company and the Savings
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, the Holding Company and the
Savings Bank are 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 (i) a small number of persons otherwise eligible to
subscribe for shares of Common Stock reside in such state or (ii) the Holding
Company or the Savings Bank determines that compliance with the securities laws
of such state would be impracticable for reasons of cost or otherwise, including
but not limited to a request or requirement that the Holding Company and the
Savings Bank or their officers, directors or trustees register as a broker,
dealer, salesman or selling agent, under the securities laws of such state, or a
request or requirement to register or otherwise qualify the Subscription Rights
or Common Stock for sale or submit any filing with respect thereto in such
state. Where the number of persons eligible to subscribe for shares in one
state is small, the Holding Company and the Savings Bank will base their
decision as to whether or not to offer the Common Stock in such state on a
number of factors, including the size of accounts held by account holders in the
state, the cost of reviewing the registration and qualification requirements of
the state (and of actually registering or qualifying the shares) or the need to
register the Holding Company, its officers, directors or employees as brokers,
dealers or salesmen.
PLAN OF DISTRIBUTION AND SELLING COMMISSIONS
The Primary Parties have engaged Sandler O'Neill as a financial and
marketing advisor in connection with the Offering, and Sandler O'Neill has
agreed to use its best efforts to assist the Holding Company with the
solicitation of subscriptions and purchase orders for Conversion Shares in the
Conversion Offerings. The services to be rendered by Sandler O'Neill include
the following: (i) consulting as to the securities marketing implications of any
aspect of the Plan of Conversion or related corporate documents; (ii) reviewing
with the Board of Directors RP Financial's appraisal of the aggregate pro forma
market value of the MHC and the Savings Bank, as converted; (iii) reviewing all
offering documents, including the Prospectus, stock order forms and related
offering materials; (iv) assisting in the design and implementation of a
marketing strategy for the Conversion Offerings; (v) assisting in obtaining all
requisite regulatory approvals, (vi) assisting management in scheduling and
preparing for meetings with potential investors and broker-dealers; and (vii)
providing such other general advice and assistance as may be requested to
promote the successful completion of the Conversion Offerings. In addition,
Sandler O'Neill will manage the Syndicated Community Offering, if necessary.
The engagement of Sandler O'Neill and the services performed thereunder,
including any "due diligence" investigation of the operations of the Primary
Parties, should not be construed as an endorsement or recommendation of the
suitability of an investment in the Common Stock or a verification of the
accuracy or completeness of the information contained herein. Sandler O'Neill
has not prepared any report or opinion constituting a recommendation or advice
to the Primary Parties or to persons who may purchase Conversion Shares
regarding the suitability of an investment in the Common Stock or as to the
prices at which the Common Stock may trade after the consummation of the
Conversion and Reorganization.
Based upon negotiations between the Primary Parties and Sandler
O'Neill, Sandler O'Neill will receive a fee equal to 1.50% of the aggregate
purchase price of Conversion Shares sold in the Subscription and Community
Offerings. No fees will be paid to Sandler O'Neill on subscriptions by any
director, officer or employee of the Primary Parties or members of their
immediate families. In the event that a selected dealers agreement is entered
into in connection with a Syndicated Community Offering, the Primary Parties
will pay a fee to such selected dealers, any sponsoring dealer's fees, and a
management fee to Sandler O'Neill of 1.75% for shares sold by a National
Association of Securities Dealers, Inc. ("NASD") member firm, other than Sandler
O'Neill, pursuant to a selected dealers agreement; provided, however, that any
fees payable to Sandler O'Neill for any Conversion Shares sold by them pursuant
to such a selected dealers agreement shall not exceed 1.75% of the aggregate
purchase price of such shares and that the aggregate fees payable to Sandler
O'Neill and selected dealers shall not exceed 7.0% of the aggregate purchase
price of such shares. Sandler O'Neill will also be reimbursed for its
reasonable out-of-pocket
13
expenses, including legal fees, for these services, in an amount not to exceed
$75,000. Notwithstanding the foregoing, in the event the Conversion Offerings
are not consummated or Sandler O'Neill ceases, under certain circumstances after
the subscription solicitation activities are commenced, to provide assistance to
the Primary Parties, Sandler O'Neill will be entitled to be reimbursed for its
reasonable out-of-pocket expenses as described above. The Primary Parties have
agreed to indemnify Sandler O'Neill in connection with certain claims or
liabilities, including certain liabilities under the Securities Act. Sandler
O'Neill has received advances towards its fees totalling $25,000. Total
marketing fees to Sandler O'Neill are expected to be $428,625, $506,250,
$583,875 and $673,145 at the minimum, midpoint, maximum, and 15% above the
maximum of the Estimated Valuation Range, respectively.
The management and employees of the Primary Parties may participate in
the Conversion Offerings in clerical capacities, providing administrative
support in effecting sales transactions or answering questions of a mechanical
nature relating to the proper execution of the order form. Management of the
Primary Parties may answer questions regarding the respective businesses of the
Primary Parties. Other questions of prospective purchasers, including questions
as to the advisability or nature of the investment, will be directed to
registered representatives. The management and employees of the Primary Parties
have been instructed not to solicit offers to purchase Conversion Shares or to
provide advice regarding the purchase of Conversion Shares. None of the Primary
parties' employees or directors who participate in the Conversion Offerings will
receive any special compensation or other remuneration for such activities.
None of the Primary Parties' personnel participating in the
Subscription and Community Offering are registered or licensed as a broker or
dealer or an agent of a broker or dealer. The Primary Parties' personnel will
assist in the above-described sales activities pursuant to an exemption from
registration as a broker or dealer provided by Rule 3a4-1 ("Rule 3a4-1")
promulgated under the Securities Exchange Act of 1934, as amended ("Exchange
Act"). Rule 3a4-1 generally provides that an "associated person of an issuer"
of securities shall not be deemed a broker solely by reason of participation in
the sale of securities of such issuer if the associated person meets certain
conditions. Such conditions include, but are not limited to, that the
associated person participating in the sale of an issuer's securities not be
compensated in connection therewith at the time of participation, that such
person not be associated with a broker or dealer and that such person observe
certain limitations on his participation in the sale of securities. For
purposes of this exemption, "associated person of an issuer" is defined to
include any person who is a director, officer or employee of the issuer or a
company that controls, is controlled by or is under common control with the
issuer.
PROCEDURE FOR PURCHASING SHARES IN THE SUBSCRIPTION AND DIRECT COMMUNITY
OFFERINGS
To ensure that each purchaser receives a prospectus at least 48 hours
prior to the Expiration Date in accordance with Rule 15c2-8 under the Exchange
Act, no Prospectus will be mailed any later than five days prior to such date or
hand delivered any later than two days prior to such 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. The Savings Bank will
accept for processing only orders submitted on original Order Forms. The
Savings Bank is not obligated to accept orders submitted on photocopied or
telecopied Order Forms. ORDERS CANNOT AND WILL NOT BE ACCEPTED WITHOUT THE
EXECUTION OF THE CERTIFICATION APPEARING ON THE REVERSE SIDE OF THE ORDER FORM.
To purchase shares in the Subscription Offering, an executed Order
Form with the required full payment for each share subscribed for, or with
appropriate authorization for withdrawal of full payment from the subscriber's
deposit account with the Savings Bank (which may be given by completing the
appropriate blanks in the Order Form), must be received by the Savings Bank by
Noon, Eastern Time, on the Expiration Date. Order Forms which are not received
by such time or are executed defectively or are received without full payment
(or without appropriate withdrawal instructions) are not required to be
accepted. The Holding Company and the Savings Bank have the right to waive or
permit the correction of incomplete or improperly executed Order Forms, but do
not represent that they will do so. Pursuant to the Plan of Conversion, the
interpretation by the Holding Company and the Savings Bank of the terms and
conditions of the Plan of Conversion and of the Order Form will be final. In
order to purchase shares in the Direct Community Offering, the Order Form,
accompanied by the required payment
14
for each share subscribed for, must be received by the Savings Bank prior to the
time the Direct Community Offering terminates, which may be on or at any time
subsequent to the Expiration Date. Once received, an executed Order Form may
not be modified, amended or rescinded without the consent of the Savings Bank
unless the Conversion and Reorganization has not been completed within 45 days
after the end of the Subscription Offering, unless such period has been
extended.
In order to ensure that Eligible Account Holders, Supplemental
Eligible Account Holders and Other Members are properly identified as to their
stock purchase priorities, depositors as of the close of business on the
Eligibility Record Date (June 30, 1996) and/or the Supplemental Eligibility
Record Date (December 31, 1997) and/or the Voting Record Date (___________,
1998) must list all accounts on the Order Form giving all names in each account,
the account number and the approximate account balance as of such date.
Full payment for subscriptions may be made (i) in cash if delivered in
person at the Stock Information Center, (ii) by check, bank draft, or money
order, or (iii) by authorization of withdrawal from deposit accounts maintained
with the Savings Bank. Appropriate means by which such withdrawals may be
authorized are provided on the Order Form. No wire transfers will be accepted.
Interest will be paid on payments made by cash, check, bank draft or money order
at the Savings Bank's passbook rate from the date payment is received until the
completion or termination of the Conversion and Reorganization. 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 rates until completion or termination of the Conversion and
Reorganization (unless the certificate matures after the date of receipt of the
Order Form but prior to closing, in which case funds will earn interest at the
passbook rate from the date of maturity until consummation of the Conversion and
Reorganization), but a hold will be placed on such funds, thereby making them
unavailable to the depositor until completion or termination of the Conversion
and Reorganization. At the completion of the Conversion and Reorganization, the
funds received in the Conversion Offerings will be used to purchase the shares
of Common Stock ordered. THE SHARES OF COMMON STOCK ISSUED IN THE CONVERSION
AND REORGANIZATION CANNOT AND WILL NOT BE INSURED BY THE FDIC OR ANY OTHER
GOVERNMENT AGENCY. If the Conversion and Reorganization is not consummated for
any reason, all funds submitted will be promptly refunded with interest as
described above.
If a subscriber authorizes the Savings Bank to withdraw the amount of
the aggregate Purchase Price from his or her deposit account, the Savings Bank
will do so as of the effective date of Conversion and Reorganization, though the
account must contain the full amount necessary for payment at the time the
subscription order is received. The Savings Bank will waive any applicable
penalties for early withdrawal from certificate accounts. If the remaining
balance in a certificate account is reduced below the applicable minimum balance
requirement at the time that the funds actually are transferred under the
authorization the certificate will be canceled at the time of the withdrawal,
without penalty, and the remaining balance will earn interest at the Savings
Bank's passbook rate.
Individual retirement accounts ("IRAs") maintained in the Savings Bank
do not permit investment in the Common Stock. A depositor interested in using
his or her IRA funds to purchase Common Stock must do so through a self-directed
IRA. Since the Savings Bank does not offer such accounts, it will allow such a
depositor to make a trustee-to-trustee transfer of the IRA funds to a trustee
offering a self-directed IRA program with the agreement that such funds will be
used to purchase Conversion Shares. There will be no early withdrawal or IRS
interest penalties for such transfers. The new trustee would hold the
Conversion Shares in a self-directed account in the same manner as the Savings
Bank now holds the depositor's IRA funds. An annual administrative fee may be
payable to the new trustee. Depositors interested in using funds in a Savings
Bank IRA to purchase Common Stock should contact the Stock Information Center so
that the necessary forms may be forwarded for execution and returned prior to
the Expiration Date. In addition, the provisions of ERISA and IRS regulations
require that officers, directors and 10% shareholders who use self-directed IRA
funds to purchase shares of Common Stock in the Subscription Offering, make such
purchases for the exclusive benefit of IRAs.
15
STOCK PRICING, EXCHANGE RATIO AND NUMBER OF SHARES TO BE ISSUED
The Plan of Conversion requires that the purchase price of the
Conversion Shares must be based on the appraised pro forma market value of the
Conversion Shares, as determined on the basis of an independent valuation. The
Primary Parties have retained RP Financial to make such valuation. For its
services in making such appraisal and any expenses incurred in connection
therewith, RP Financial will receive a maximum fee of $30,000 plus out-of-pocket
expenses, together with a fee of no greater than $7,500 plus out-of-pocket
expenses for the preparation of a business plan and other services performed in
connection with the Holding Company's holding company application to the OTS.
The Primary Parties have agreed to indemnify RP Financial and its employees and
affiliates against certain losses (including any losses in connection with
claims under the federal securities laws) arising out of its services as
appraiser, except where RP Financial's liability results from its negligence or
bad faith.
The appraisal has been prepared by RP Financial in reliance upon the
information contained in this Prospectus, including the Consolidated Financial
Statements. RP Financial also considered the following factors, among others:
the present and projected operating results and financial condition of the
Primary Parties and the economic and demographic conditions in the Savings
Bank's existing market area; certain historical, financial and other information
relating to the Savings Bank; a comparative evaluation of the operating and
financial statistics of the Savings Bank with those of other similarly situated
publicly-traded companies located in South Carolina and other regions of the
United States; the aggregate size of the offering of the Conversion Shares; the
impact of the Conversion and Reorganization on the Savings Bank's capital and
earnings potential; the proposed dividend policy of the Holding Company and the
Savings Bank; and the trading market for the Savings Bank Common Stock and
securities of comparable companies and general conditions in the market for such
securities.
On the basis of the foregoing, RP Financial has advised the Primary
Parties in its opinion that the estimated pro forma market value of the MHC and
the Savings Bank, as converted, was $65.1 million as of December 5, 1997.
Because the holders of the Public Savings Bank Shares will continue to hold the
same aggregate percentage ownership interest in the Holding Company as they
currently hold in the Savings Bank (before giving effect to the payment of cash
in lieu of issuing fractional Exchange Shares and any Conversion Shares
purchased by the Savings Bank's stockholder in the Conversion Offerings), the
appraisal was multiplied by 53.02%, which represents the MHC's percentage
interest in the Savings Bank. The resulting amount represents the midpoint of
the valuation ($65.1 million), and the minimum and maximum of the valuation were
set at 15% below and above the midpoint, respectively, resulting in a range of
$55.3 million to $74.8 million. The Boards of Directors of the Primary Parties
determined that the Conversion Shares would be sold at $20.00 per share,
resulting in a range of 1,466,250 to 1,983,750 Conversion Shares being offered.
Upon consummation of the Conversion and Reorganization, the Conversion Shares
and the Exchange Shares will represent approximately 53.02% and 46.98%,
respectively, of the Holding Company's total outstanding shares. The Boards of
Directors of the Primary Parties reviewed RP Financial's appraisal report,
including the methodology and the assumptions used by RP Financial, and
determined that the Estimated Valuation Range was reasonable and adequate. The
Boards of Directors of the Primary Parties also established the formula for
determining the Exchange Ratio. Based upon such formula and the Estimated
Valuation Range, the Exchange Ratio ranged from a minimum of 1.83281 to a
maximum of 2.47969 Exchange Shares for each Public Savings Bank Shares, with a
midpoint of 2.15625. Based upon these Exchange Ratios, the Holding Company
expects to issue between 1,299,231 and 1,757,783 shares of Exchange Shares to
the holders of Public Savings Bank Shares outstanding immediately prior to the
consummation of the Conversion and Reorganization. The Estimated Valuation
Range and the Exchange Ratio may be amended with the approval of the OTS, if
required, or if necessitated by subsequent developments in the financial
condition of any of the Primary Parties or market conditions generally. If the
appraisal is updated to below $55.3 million or above $86.1 million (the maximum
of the Estimated Valuation Range, as adjusted by 15%), such appraisal will be
filed with the SEC by post-effective amendment.
Based upon current market and financial conditions and recent
practices and policies of the OTS, in the event the Holding Company receives
orders for Conversion Shares in excess of $39.7 million (the maximum of the
Estimated Valuation Range) and up to $45.6 million (the maximum of the Estimated
Valuation Range, as adjusted
16
by 15%), the Holding Company may be required by the OTS to accept all such
orders. No assurances, however, can be made that the Holding Company will
receive orders for Conversion Shares in excess of the maximum of the Estimated
Valuation Range or that, if such orders are received, that all such orders will
be accepted because the Holding Company's final valuation and number of shares
to be issued are subject to the receipt of an updated appraisal from RP
Financial which reflects such an increase in the valuation and the approval of
such increase by the OTS. There is no obligation or understanding on the part
of management to take and/or pay for any shares of Conversion Shares to complete
the Conversion Offerings.
RP Financial's valuation is not intended, and must not be construed,
as a recommendation of any kind as to the advisability of purchasing such
shares. RP Financial did not independently verify the Savings Bank's
Consolidated Financial Statements and other information provided by the Savings
Bank and the MHC, nor did RP Financial value independently the assets or
liabilities of the Savings Bank. The valuation considers the Savings Bank and
the MHC as going concerns and should not be considered as an indication of the
liquidation value of the Savings Bank and the MHC. Moreover, because such
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 Conversion Shares or receiving Exchange Shares
in the Conversion and Reorganization will thereafter be able to sell such shares
at prices at or above the Purchase Price or in the range of the foregoing
valuation of the pro forma market value thereof.
No sale of Conversion Shares or issuance of Exchange Shares may be
consummated unless prior to such consummation RP Financial confirms that nothing
of a material nature has occurred which, taking into account all relevant
factors, would cause it to conclude that the Purchase Price is materially
incompatible with the estimate of the pro forma market value of a share of
Common Stock upon consummation of the Conversion and Reorganization. If such is
not the case, a new Estimated Valuation Range may be set, a new Exchange Ratio
may be determined based upon the new Estimated Valuation Range, a new
Subscription and Community Offering and/or Syndicated Community Offering or
Public Offering may be held or such other action may be taken as the Primary
Parties shall determine and the OTS may permit or require.
Depending upon market or financial conditions following the
commencement of the Subscription Offering, the total number of Conversion Shares
to be issued in the Conversion Offerings 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 Valuation 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 Valuation Range or more than 15% above the
maximum of such range, purchasers will be resolicited (i.e., permitted to
----
continue their orders, in which case they will need to affirmatively reconfirm
their subscriptions prior to the expiration of the resolicitation offering or
their subscription funds will be promptly refunded with interest at the Savings
Bank's passbook rate of interest, or be permitted to modify or rescind their
subscriptions). Any increase or decrease in the number of Conversion Shares
will result in a corresponding change in the number of Exchange Shares, so that
upon consummation of the Conversion and Reorganization, the Conversion Shares
and the Exchange Shares will represent approximately 53.02% and 46.98%,
respectively, of the Holding Company's total outstanding shares of Common Stock
(exclusive of the effects of the exercise of outstanding stock options).
An increase in the number of Conversion Shares as a result of an
increase in the appraisal of the estimated pro forma market value would decrease
both a subscriber's ownership interest and the Holding Company's pro forma net
earnings and stockholders' equity on a per share basis while increasing pro
forma net earnings and stockholders' equity on an aggregate basis. A decrease in
the number of Conversion Shares would increase both a subscriber's ownership
interest and the Holding Company's pro forma net earnings and stockholders'
equity on a per share basis while decreasing pro forma net earnings and
stockholders' equity on an aggregate basis. See "PRO FORMA DATA."
17
The appraisal report of RP Financial has been filed as an exhibit to
this Registration Statement and Application for Conversion of which this
Prospectus is a part and is available for inspection in the manner set forth
under "ADDITIONAL INFORMATION."
LIMITATIONS ON PURCHASES OF CONVERSION SHARES
The Plan of Conversion provides for certain limitations to be placed
upon the purchase of Common Shares by eligible subscribers and others in the
Conversion and Reorganization. Each subscriber must subscribe for a minimum of
25 Conversion Shares. The Plan of Conversion provides for the following
purchase limitations: (i) no person may purchase in either the Subscription
Offering, Direct Community Offering or Syndicated Community Offering more 50,000
Conversion Shares, (ii) no person, together with associates of or persons acting
in concert with such person, may purchase in either the Subscription Offering,
Direct Community Offering or Syndicated Community Offering more than 50,000
Conversion Shares, (iii) the maximum number of shares of Conversion Shares which
may be subscribed for or purchased in all categories in the Conversion and
Reorganization by any person, when combined with any Exchange Shares received,
shall not exceed 50,000 shares of Common Stock to be issued in the Conversion
and Reorganization, and (iv) the maximum number of shares of Conversion Shares
which may be subscribed for or purchased in all categories in the Conversion and
Reorganization by any person, together with any associate or any group of
persons acting in concert, when combined with any Exchange Shares received,
shall not exceed 50,000 shares of Common Stock to be issued in the Conversion
and Reorganization. For purposes of the Plan of Conversion, the directors are
not deemed to be acting in concert solely by reason of their Board membership.
Pro rata reductions within each Subscription Rights category will be made in
allocating shares to the extent that the maximum purchase limitations are
exceeded.
BECAUSE OTS POLICY REQUIRES THAT THE MAXIMUM PURCHASE LIMITATION
INCLUDES EXCHANGE SHARES TO BE ISSUED TO PUBLIC STOCKHOLDERS IN EXCHANGE FOR
THEIR PUBLIC SAVINGS BANK SHARES, CERTAIN PUBLIC STOCKHOLDERS MAY BE LIMITED IN
THEIR ABILITY TO PURCHASE CONVERSION SHARES, OR EVEN PREVENTED FROM PURCHASING
CONVERSION SHARES.
The Boards of Directors of the Primary Parties may, in their sole
discretion, increase the maximum purchase limitation set forth above up to 9.99%
of the Conversion Shares sold in the Conversion and Reorganization, provided
that orders for shares which exceed 5% of the Conversion Shares sold in the
Conversion and Reorganization may not exceed, in the aggregate, 10% of the
shares sold in the Conversion and Reorganization. The Savings Bank and the
Holding Company do not intend to increase the maximum purchase limitation unless
market conditions are such that an increase in the maximum purchase limitation
is necessary to sell a number of shares in excess of the minimum of the
Estimated Valuation Range. If the Boards of Directors decide to increase the
purchase limitation above, persons who subscribed for the maximum number of
Conversion Shares will be, and other large subscribers in the discretion of the
Holding Company and the Savings Bank may be, given the opportunity to increase
their subscriptions accordingly, subject to the rights and preferences of any
person who has priority Subscription Rights.
The term "acting in concert" is defined in the Plan of Conversion to
mean (i) knowing participation in a joint activity or interdependent conscious
parallel action towards a common goal whether or not pursuant to an express
agreement; or (ii) 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. In general, a person who acts in concert with another party shall
also be deemed to be acting in concert with any person who is also acting in
concert with that other party.
The term "associate" of a person is defined in the Plan of Conversion
to mean (i) any corporation or organization (other than the Savings Bank or a
majority-owned subsidiary of the Savings Bank) of which such person is an
officer or partner or is, directly or indirectly, the beneficial owner of 10% 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 (excluding tax-qualified
employee plans); and (iii) any relative or spouse of such person, or any
relative of such spouse, who either has the same home as such person or
18
who is a director or officer of the Savings Bank or any of its parents or
subsidiaries. For example, a corporation of which a person serves as an officer
would be an associate of such person and, therefore, all shares purchased by
such corporation would be included with the number of shares which such person
could purchase individually under the above limitations.
The term "officer" is defined in the Plan of Conversion to mean an
executive officer of the Savings Bank, including its Chairman of the Board,
President, Executive Vice Presidents, Senior Vice Presidents, Vice Presidents in
charge of principal business functions, Secretary and Treasurer.
Common Shares purchased pursuant to the Conversion and Reorganization
will be freely transferable, except for shares purchased by directors and
officers of the Savings Bank and the Holding Company and by NASD members. See
"-- Restrictions on Transferability by Directors and Officers and NASD Members."
DELIVERY AND EXCHANGE OF STOCK CERTIFICATES
CONVERSION STOCK. Certificates representing Conversion Shares will be
mailed by the Holding Company's transfer agent to the persons entitled thereto
at the addresses of such persons appearing on the Order Form as soon as
practicable following the consummation of the Conversion and Reorganization.
Any undeliverable certificates will be held by the Holding Company until claimed
by persons legally entitled thereto or otherwise disposed according to
applicable law. Purchasers of Conversion Shares may be unable to sell such
shares until certificates are available and delivered to them.
EXCHANGE SHARES. After the consummation of the Conversion and
Reorganization, each holder of a certificate(s) theretofore evidencing issued
and outstanding shares of Savings Bank Common Stock (other than the MHC), upon
surrender of the same to an agent, duly appointed by the Holding Company, which
is anticipated to be the transfer agent for the Common Stock ("Exchange Agent"),
shall be entitled to receive in exchange therefor a certificate(s) representing
the number of full Exchange Shares based on the Exchange Ratio. The Exchange
Agent shall mail a form of letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to such certificate shall
pass, only upon delivery of such certificate to the Exchange Agent) advising
such holder of the terms of the Exchange Offering and the procedure for
surrendering to the Exchange Agent such certificates in exchange for a
certificate(s) evidencing Common Stock. THE SAVINGS BANK STOCKHOLDERS SHOULD
NOT FORWARD SAVINGS BANK COMMON STOCK CERTIFICATES TO THE SAVINGS BANK OR THE
EXCHANGE AGENT UNTIL THEY HAVE RECEIVED THE TRANSMITTAL LETTER.
No holder of a certificate theretofore representing shares of Savings
Bank Common Stock shall be entitled to receive any dividends on the Common
Stock until the certificate representing such shares is surrendered in exchange
for certificates representing shares of Common Stock. In the event that
dividends are declared and paid by the Holding Company in respect of Common
Stock after the consummation of the Conversion and Reorganization, but before
surrender of certificates representing shares of Savings Bank Common Stock,
dividends payable in respect of shares of Common Stock not then issued shall
accrue (without interest). Any such dividends shall be paid (without interest)
upon surrender of the certificates representing such shares of Savings Bank
Common Stock. After the consummation of the Conversion and Reorganization, the
Holding Company shall be entitled to treat certificates representing shares of
Savings Bank Common Stock as evidencing ownership of the number of full shares
of Common Stock into which the shares of Savings Bank Common Stock represented
by such certificates shall have been converted, notwithstanding the failure on
the part of the holder thereof to surrender such certificates.
The Holding Company shall not be obligated to deliver a certificate(s)
representing shares of Common Stock to which a holder of Savings Bank Common
Stock would otherwise be entitled as a result of the Conversion and
Reorganization until such holder surrenders the certificate(s) representing the
shares of Savings Bank Common Stock for exchange as provided above, or, in
default thereof, an appropriate affidavit of loss and indemnity agreement and/or
a bond as may be required in each case by the Holding Company. If any
certificate evidencing shares of Common Stock is to be issued in a name other
than that in which the certificate evidencing Savings Bank Common
19
Stock surrendered in exchange therefor is registered, it shall be a condition of
the issuance thereof that the certificate so surrendered shall be properly
endorsed and otherwise in proper form for transfer and that the person
requesting such exchange pay to the Exchange Agent any transfer or other tax
required by reason of the issuance of a certificate for shares of Common Stock
in any name other than that of the registered holder of the certificate
surrendered or otherwise establish to the satisfaction of the Exchange Agent
that such tax has been paid or is not payable.
RESTRICTIONS ON REPURCHASE OF STOCK
Pursuant to OTS regulations, OTS-regulated savings associations (and
their holding companies) may not for a period of three years from the date of an
institution's mutual-to-stock conversion repurchase any of its common stock from
any person, except in the event of (i) an offer made to all of its stockholders
to repurchase the common stock on a pro rata basis, approved by the OTS; or (ii)
the repurchase of qualifying shares of a director; or (iii) a purchase in the
open market by a tax-qualified or non-tax-qualified employee stock benefit plan
in an amount reasonable and appropriate to fund the plan. Furthermore,
repurchases of any common stock are prohibited if the effect thereof would cause
the association's regulatory capital to be reduced below (a) the amount required
for the liquidation account or (b) the regulatory capital requirements imposed
by the OTS. Repurchases are generally prohibited during the first year
following conversion. Upon ten days' written notice to the OTS, and if the OTS
does not object, an institution may make open market repurchases of its
outstanding common stock during years two and three following the conversion,
provided that certain regulatory conditions are met and that the repurchase
would not adversely affect the financial condition of the association. Any
repurchases of common stock by the Holding Company would be subject to these
regulatory restrictions unless the OTS would provide otherwise.
RESTRICTIONS ON TRANSFERABILITY BY DIRECTORS AND OFFICERS AND NASD MEMBERS
Shares of Common Stock purchased in the Conversion Offerings by
directors and officers of the Holding Company may not be sold for a period of
one year following consummation of the Conversion and Reorganization, except in
the event of the death of the stockholder or in any exchange of the Common Stock
in connection with a merger or acquisition of the Holding Company. Shares of
Common Stock received by directors or officers through the Employee Stock
Ownership Plan ("ESOP") or the Management Recognition Plan ("MRP") or upon
exercise of options issued pursuant to the Stock Option Plan or purchased
subsequent to the Conversion and Reorganization are not subject to this
restriction. Accordingly, shares of Common Stock issued by the Holding Company
to directors and officers shall bear a legend giving appropriate notice of the
restriction and, in addition, the Holding Company will give appropriate
instructions to the transfer agent for the Holding Company's Common Stock with
respect to the restriction on transfers. Any shares issued to directors and
officers as a stock dividend, stock split or otherwise with respect to
restricted Common Stock shall be subject to the same restrictions.
Purchases of outstanding shares of Common Stock of the Holding Company
by directors, executive officers (or any person who was an executive officer or
director of the Savings Bank after adoption of the Plan of Conversion and
Reorganization) and their associates during the three-year period following
Conversion and Reorganization may be made only through a broker or dealer
registered with the SEC, except with the prior written approval of the OTS.
This restriction does not apply, however, to negotiated transactions involving
more than 1% of the Holding Company's outstanding Common Stock or to the
purchase of stock pursuant to the Stock Option Plan.
The Holding Company has filed with the SEC a registration statement
under the Securities Act for the registration of the Common Stock to be issued
pursuant to the Conversion and Reorganization. The registration under the
Securities Act of shares of the Common Stock to be issued in the Conversion and
Reorganization does not cover the resale of such shares. Shares of Common Stock
purchased by persons who are not affiliates of the Holding Company may be resold
without registration. Shares purchased by an affiliate of the Holding Company
will be subject to the resale restrictions of Rule 144 under the Securities Act.
If the Holding Company meets the current public information requirements of Rule
144 under the Securities Act, each affiliate of the Holding Company 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
20
not to exceed, in any three-month period, the greater of (i) 1% of the
outstanding shares of the Holding Company or (ii) the average weekly volume of
trading in such shares during the preceding four calendar weeks. Provision may
be made in the future by the Holding Company to permit affiliates to have their
shares registered for sale under the Securities Act under certain circumstances.
Under guidelines of the NASD, members of the NASD and their associates
are subject to certain restrictions on the transfer of securities purchased in
accordance with Subscription Rights and to certain reporting requirements upon
purchase of such securities.
USE OF PROCEEDS
The net proceeds from the sale of the Common Stock offered hereby are
estimated to range from $29.3 million to $39.7 million, or up to $45.6 million
if the Estimated Valuation Range is increased by 15%. The Holding Company has
received conditional OTS approval to purchase all of the capital stock of the
Savings Bank to be issued in the Conversion and Reorganization in exchange for
50% of the net proceeds of the Conversion Offerings. This will result in the
Holding Company retaining approximately $14.2 million to $19.3 million of net
proceeds, or up to $22.2 million if the Estimated Valuation Range is increased
by 15%, and the Savings Bank receiving an equal amount.
Receipt of 50% of the net proceeds of the sale of the Common Stock
will increase the Savings Bank's capital and will support the expansion of the
Savings Bank's existing business activities. The Savings Bank will use the
funds contributed to it for general corporate purposes, including, initially,
lending and investment in short-term U.S. Government and agency obligations and
mortgage-backed securities.
The net proceeds retained by the Holding Company initially will be
invested primarily in short-term U.S. Government and agency obligations and
mortgage-backed securities or in a deposit account either at the Savings Bank or
another financial institution. Such proceeds will be available for additional
contributions to the Savings Bank in the form of debt or equity, to support
future diversification or acquisition activities, as a source of dividends to
the stockholders of the Holding Company and for future repurchases of Common
Stock to the extent permitted under Delaware law and federal regulations. The
Holding Company will also use a portion of the net proceeds retained by it to
refinance the ESOP's third party loan, which had an outstanding balance of
$804,000 at September 30, 1997.
The Holding Company will consider exploring opportunities to use such
funds to expand operations through acquiring or establishing additional branch
offices or acquiring other financial institutions. In addition, the Holding
Company may consider exploring opportunities to expand into non-traditional
lines of business, such as securities brokerage, insurance agency and real
estate development activities, to the extent permitted by applicable law.
Currently, there are no specific plans, arrangements, agreements or
understandings, written or oral, regarding any diversification activities.
Following consummation of the Conversion and Reorganization, the
Holding Company's Board of Directors will have the authority to adopt plans for
repurchases of Common Stock, subject to statutory and regulatory requirements.
Since the Holding Company has not yet issued stock, there currently is
insufficient information upon which an intention to repurchase stock could be
based. The facts and circumstances upon which the Board of Directors may
determine to repurchase stock in the future would include but are not limited
to: (i) 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 the ability to improve the Holding
Company's return on equity; (ii) 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 (iii) any other circumstances in which
repurchases would be in the best interests of the Holding Company and its
stockholders. Any stock repurchases will be subject to a determination by the
Board of Directors that both the Holding Company
21
and the Savings Bank will be capitalized in excess of all applicable regulatory
requirements after any such repurchases and that capital will be adequate,
taking into account, among other things, the level of nonperforming and
classified assets, the Holding Company's and the Savings Bank's current and
projected results of operations and asset/liability structure, the economic
environment and tax and other regulatory considerations. For a discussion of
the regulatory limitations applicable to stock repurchases and current OTS
policy with respect thereto.
MANAGEMENT OF THE HOLDING COMPANY
Directors shall be elected by the stockholders of the Holding Company
for staggered three-year terms, or until their successors are elected and
qualified, at the first annual meeting of stockholders following the
consummation of the Conversion and Reorganization. The Holding Company's Board
of Directors consists of seven persons, divided into three classes, each of
which will contain approximately one third of the Board. One class will have a
term of office expiring at the first annual meeting of stockholders; a second
class will have a term of office expiring at the second annual meeting of
stockholders; and a third class will have a term of office expiring at the third
annual meeting of stockholders.
The executive officers of the Holding Company are elected annually and
hold office until their respective successors have been elected and qualified or
until death, resignation or removal by the Board of Directors. The executive
officers of the Holding Company are:
Name Position
---- --------
Cordes G. Seabrook, Jr. Chairman of the Board
Robert W. Orr President and Chief Executive Officer
Thomas C. Hall Treasurer and Chief Financial Officer
Barry C. Visioli Senior Vice President
Sylvia B. Reed Corporate Secretary
Since the formation of the Holding Company, none of the executive officers,
directors or other personnel has received remuneration from the Holding Company.
For information concerning the principal occupations, employment and
compensation of the directors and executive officers of the Holding Company
during the past five years, see "MANAGEMENT OF THE SAVINGS BANK -- Biographical
Information."
MANAGEMENT OF THE SAVINGS BANK
DIRECTORS AND EXECUTIVE OFFICERS
The Board of Directors of the Savings Bank is presently composed of nine
members who are elected for terms of three years, approximately one-third of
whom are elected annually in accordance with the Bylaws of the Savings Bank.
The Savings Bank also has two non-voting Directors Emeriti. The executive
officers of the Savings Bank are elected annually by the Board of Directors and
serve at the Board's discretion. The following table sets forth information,
with respect to the directors and executive officers of the Savings Bank, all of
whom will continue to serve as directors and executive officers of the Savings
Bank and the Holding Company.
DIRECTORS
Director Current Term
Name Age (1) Position Since Expires
- ---- ------- -------- ----- -------
Harold A. "Drew" Pickens, Jr. 64 Chairman of Board 1977 1998
Robert W. "Lujack" Orr 49 President, Managing Officer 1989 1998
and a Director
(continued on following page)
22
DIRECTORS
Director Current Term
Name Age (1) Position Since Expires
- ---- ------- -------- ----- -------
Jack F. McIntosh 69 Director 1988 1999
Charles W. Fant, Jr. 71 Director 1977 1999
Cordes G. Seabrook, Jr. 70 Director 1976 1999
Richard C. Ballenger 49 Director 1996 1999
F. Stevon Kay 46 Director 1996 1999
Jim Gray Watson 68 Director 1976 1998
Martha S. Clamp 55 Director 1988 1997
J. Roy Martin, Jr. 79 Director Emeritus 1988 --
Wade A. Watson, Jr. 79 Director Emeritus 1989 --
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
Thomas C. Hall 50 Senior Vice President - -
and Treasurer
Barry C. Visioli 49 Senior Vice President - -
Sylvia B. Reed 57 Corporate Secretary - -
- ----------------------
(1) As of September 30, 1997.
BIOGRAPHICAL INFORMATION
Set forth below is certain information regarding the Directors and
executive officers of the Savings Bank. Unless otherwise stated, each Director
and executive officer has held his or her current occupation for the last five
years. There are no family relationships among or between the Directors or
executive officers.
Harold A. "Drew" Pickens, Jr. is the owner of Harold A. Pickens and Sons,
Inc., with which he has been affiliated since 1956. Mr. Pickens serves as an
Elder at First Presbyterian Church.
Robert W. "Lujack" Orr has been employed by the Savings Bank since 1974 and
has held a variety of positions, such as Senior Vice President/Funds Acquisition
and Executive Vice President, prior to assuming his current position as
President and Managing Officer on January 1, 1991. Mr. Orr is a member of the
Board of the Community Financial Institutions of South Carolina and he is
Secretary of the America's Community Bankers Association. He is active in
numerous civic organizations, serving as President of the YMCA, on the Board of
Directors of the Chamber of Commerce, on the Board of Visitors of Anderson
College, and as an Elder of Central Presbyterian Church. Mr. Orr is a director
of First Trust, the mortgage banking company in which a service corporation
subsidiary of the Savings Bank has an equity investment.
Jack F. McIntosh is a partner in the law firm of McIntosh and Sherard,
Anderson, South Carolina, with which he has been affiliated for 35 years.
McIntosh and Sherard serves as General Counsel for the Savings Bank's wholly-
owned subsidiary, United Service, since 1984. Mr. McIntosh is also a member of
the Board of the Alzheimer's Association and of Medical University for South
Carolina.
Charles W. Fant, Jr. is a partner in the architectural firm of Fant & Fant
Architects, Anderson, South Carolina, with which he has been affiliated since
1956. Mr. Fant is also active in the community, serving as a Trustee of Connie
Maxwell Children's Home and on the Board of Adjustment and Appeals for both the
City of Anderson and Anderson County, South Carolina.
23
Cordes G. Seabrook, Jr. is a partner in Value Systems, Gastonia, North
Carolina, an association management company. In this capacity, Mr. Seabrook is
the organizer and manager of the Textile Purchasing Association. Mr. Seabrook
is active in several community organizations, serving as a member of the Board
of Anderson Memorial Hospital, Anderson Area Arts Council, SCETV Endowment and
the Tri-County Tech Endowment. Mr. Seabrook is a minority stockholder and also
serves as a member of the Board of Directors of DS1, Greer, South Carolina, a
company that designs and manufactures security information systems.
Richard C. Ballenger is the President of City Glass Company and D&B Glass
Company, Inc., with which he has been affiliated since 1972. He serves as an
Elder at First Presbyterian Church, is a member of the Board of Directors of the
Anderson Rotary Club and is on the Advisory Board of the Salvation Army.
F. Stevon Kay is the President of Hill Electric Company, Inc., with which
he has been affiliated since 1969. He is a Board member of the Salvation Army
Boys and Girls Club and the President of the Anderson Youth Association. He
attends Concord Baptist Church.
Jim Gray Watson, the Savings Bank's former President and Chief Executive
Officer, was employed by the Savings Bank for 31 years prior to his retirement
in December 1990. Mr. Watson is also involved in numerous charitable and
community organizations.
Martha C. Clamp, a certified public accountant, was employed for six years
as a staff accountant for the accounting firm of Cole, Hook & Cleary, CPAs,
Anderson, South Carolina, and has been self-employed as an accountant since
1988. Ms. Clamp also serves as the Treasurer of the Foothills Sertoma Club, a
member of the Board of the Anderson County Easter Seals and the Anderson College
Alumni Board and as a Panel Allocation member of the United Way.
J. Roy Martin, Jr. served as a member of the Savings Bank's Board of
Directors from 1970 until 1988. Since 1988, Mr. Martin has served as a Director
Emeritus of the Savings Bank.
Wade A. Watson, Jr. served as a member of the Savings Bank's Board of
Directors from 1960 until 1989. Mr. Watson has served as a Director Emeritus of
the Savings Bank since 1989. Mr. Watson is the brother of the Savings Bank's
former President and Chief Executive Officer, Jim Gray Watson.
Thomas C. Hall has been employed by the Savings Bank since 1975 and
currently serves as Senior Vice President, Treasurer and Chief Financial Officer
responsible for areas of accounting, investments, data processing and deposits.
Mr. Hall is a member of the Financial Managers Society, a Board member of the
Foothills United Way, a member of the Institute of Management Accountants, and a
Board member of the University of South Carolina Alumni Association, Anderson
Chapter.
Barry C. Visioli has been affiliated with the Savings Bank since 1973. Mr.
Visioli serves as Senior Vice President and is responsible for Lending
Operations. He is a Council Member of the Salvation Army Boys and Girls Club, a
Board Member of the Family Counseling Agency and serves on the Anderson County
Board of Assessment Appeals. Mr. Visioli is a director of First Trust, the
mortgage banking company in which a service corporation subsidiary of the
Savings Bank has an equity investment.
Sylvia B. Reed joined the Savings Bank in 1986 and currently serves as
Corporate Secretary. Ms. Reed is a member and Treasurer of the Anderson Chapter
of the American Business Women's Association, which furnishes college
scholarships for students. She is a member of the choir at Taylor Memorial
Church.
24
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following tables set forth certain information concerning the
consolidated financial position and results of operations of the Savings Bank
and its subsidiaries at the dates and for the periods indicated. This
information is qualified in its entirety by reference to the detailed
information contained in the Consolidated Financial Statements and Notes thereto
presented elsewhere in the Prospectus.
At September 30,
----------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
(In Thousands)
SELECTED FINANCIAL CONDITION DATA:
Total assets.......................................... $256,993 $209,827 $178,304 $171,533 $168,308
Cash and interest-bearing deposits.................... 13,499 13,585 6,630 8,700 5,797
Investment in limited partnership(1).................. 5,004 -- -- -- --
Investment securities available for sale.............. 11,326 2,494 800 299 --
Mortgage-backed securities available for sale......... 35,863 43,125 46,344 50,064 12,742
Mortgage-backed securities held for investment........ -- -- -- -- 45,935
Loans receivable, net................................. 178,772 140,758 116,539 104,852 97,004
Deposits.............................................. 201,002 160,244 148,709 143,380 143,871
Borrowings............................................ 15,000 16,000 8,000 10,500 8,500
Stockholders' equity.................................. 30,850 29,091 18,232 14,637 13,921
At September 30,
----------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
(In Thousands)
SELECTED OPERATING DATA:
Interest income....................................... $ 18,396 $ 14,921 $ 13,543 $ 12,075 $ 12,034
Interest expense...................................... 9,496 7,425 8,761 5,624 6,184
-------- -------- -------- -------- --------
Net interest income................................... 8,900 7,496 4,782 6,451 5,850
Provision for loan losses............................. 655 349 362 120 364
-------- -------- -------- -------- --------
Net interest income after provision for loan losses... 8,245 7,147 4,420 6,331 5,486
Other income.......................................... 1,855 1,927 3,231 1,565 1,613
General and administrative expenses................... 7,446 6,894 5,540 4,749 4,414
-------- -------- -------- -------- --------
Income before income taxes, change in accounting
method, and extraordinary item....................... 2,654 2,180 2,111 3,147 2,685
Income taxes.......................................... 926 756 194 1,064 947
-------- -------- -------- -------- --------
Income before change in method of
accounting for income taxes.......................... 1,728 1,424 1,917 2,083 1,738
Cumulative effect of change in method of
accounting for income taxes.......................... -- -- -- 350 --
-------- -------- -------- -------- --------
Net income............................................ $ 1,728 $ 1,424 $ 1,917 $ 2,433 $ 1,738
======== ======== ======== ======== ========
(footnotes on second following page)
25
Year Ended September 30,
-----------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
PER SHARE DATA:
Earnings per share(2):
Before cumulative effect of change in
accounting for income taxes............ $ 1.15 $ 0.95 $ 1.27 $ 1.39 N/A
Cumulative effect of change in
accounting for income taxes............ $ -- $ -- $ -- $ .23 N/A
---------- ---------- ---------- ----------
Net income.............................. $ 1.15 $ 0.95 $ 1.27 $ 1.62 N/A
========== ========== ========== ==========
Dividends per share(3).................... $ 1.35 $ 1.20 $ 1.05 $ 0.76 N/A
========== ========== ========== ==========
Weighted average shares outstanding....... 1,505,432 1,504,601 1,504,059 1,502,418 N/A
Year Ended September 30,
----------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
SELECTED OTHER DATA:
Number of:
Real estate loans outstanding............ 3,446 2,653 2,846 2,889 3,423
Deposit accounts......................... 32,361 26,135 21,490 16,676 16,735
Full-service offices..................... 6 5 5 4 3
(footnotes on following page)
26
KEY OPERATING RATIOS:
At or For the
Year Ended September 30,
---------------------------------------------------------
1997 1996 1995 1994 1993
----- ---- ---- ---- -----
Performance Ratios:
Return on average assets (net income divided by
average assets)................................... 0.72% 0.75% 0.92% 1.20%(4) 1.03%
Return on average equity (net income divided by
average equity)................................... 5.78 7.40 11.88 13.84(4) 13.36
Average equity to average assets................... 12.54 10.16 7.77 8.61 7.75
Interest rate spread (difference between yield
on interest-earning assets and average cost of
interest-bearing liabilities for the period)(5)... 3.57 3.85 3.61 3.54 3.26
Net interest margin (net interest income as a
percentage of average interest-earning assets
for the period)(5)................................ 3.96 4.16 2.90 3.86 3.59
Dividend payout ratio(3)........................... 117.39 126.32 82.68 46.91 N/A
Non-interest expense to average assets............. 3.20 3.72 2.74 2.74 2.63
Average interest-earning assets to average
interest-bearing liabilities...................... 109.36 107.69 86.56 109.36 108.66
Asset Quality Ratios:
Allowance for loan losses to total loans
at end of period................................. 1.04 1.08 1.08 0.92 0.91
Net charge-offs to average outstanding loans
during the period................................. 0.18 0.07 0.04 0.04 0.06
Ratio of non-performing assets to total assets..... 0.20 0.38 0.33 0.73 0.82
Capital Ratios:
Average equity to average assets................... 12.54 10.16 7.77 8.61 7.75
- ----------------------------
(1) Represents a 20.625% equity investment in a limited partnership that
invests in mortgage servicing rights.
(2) The Savings Bank was not a public company before fiscal 1994.
(3) Takes into account dividends waived by the MHC. All dividends to the MHC
have been waived since the first quarter of fiscal 1994. The dividend
payout ratio based only on dividends actually paid to Public Stockholders
was 55.19%, 22.40%, 6.53% and 3.71% for the years ended September 30, 1997,
1996, 1995 and 1994, respectively.
(4) Excludes the effect of the one-time change in method of accounting for
income taxes in fiscal 1994. Return on assets and return on average equity
were 1.40% and 16.16%, respectively.
(5) Excludes income on mutual funds totalling approximately $1.7 million in
fiscal 1995, which was reported as gains on sale and included in other
income.
27
PRO FORMA DATA
Under the Plan of Conversion, the Conversion Shares must be sold at a price
equal to the estimated pro forma market value of the MHC and the Savings Bank,
as converted, based upon an independent valuation. The Estimated Valuation
Range as of December 5, 1997 is from a minimum of $29.3 million to a maximum of
$39.7 million with a midpoint of $34.5 million or, at a price per share of
$20.00, a minimum number of shares of 1,466,250, a maximum number of shares of
1,983,750 and a midpoint number of shares of 1,725,000. The actual net proceeds
from the sale of the Conversion Shares cannot be determined until the Conversion
and Reorganization is completed. However, net proceeds set forth on the
following table are based upon the following assumptions: (i) Sandler O'Neill
will receive fees of $428,625, $506,250, $583,875 and $673,145 at the minimum,
midpoint, maximum and 15% above the Estimated Valuation Range, respectively (see
"THE CONVERSION AND REORGANIZATION -- Plan of Distribution and Selling
Commissions); (ii) all of the Conversion Shares will be sold in the Subscription
and Direct Community Offerings; and (iii) Conversion and Reorganization
expenses, excluding the fees paid to Sandler O'Neill, will total approximately
$560,000 at each of the minimum, midpoint, maximum and 15% above the Estimated
Valuation Range. Actual expenses may vary from this estimate, and the fees paid
will depend upon the percentages and total number of shares sold in the
Subscription, Direct Community and Syndicated Community Offerings and other
factors.
The pro forma consolidated net income of the Savings Bank for the year
ended September 30, 1997 has been calculated as if the Conversion and
Reorganization had been consummated at the beginning of the period and the
estimated net proceeds received by the Holding Company and the Savings Bank had
been invested at 5.68% at the beginning of the period, which represents the
yield on the one-year U.S. Treasury Bill at September 30, 1997. Although OTS
regulations require the use of the arithmetic average of the average yield on
all interest-earning assets and the average rate paid on all deposits in
computing investment returns on net proceeds, the yield on the one-year U.S.
Treasury Bill is used because management believes it more appropriately reflects
a market rate of return. As discussed under "USE OF PROCEEDS," the Holding
Company expects to retain 50% of the net proceeds of the Conversion Offerings
from which it will refinance the existing third-party ESOP loan, with an
outstanding balance of $804,000 at September 30, 1997. The new loan is expected
to have a 10-year term and an interest rate equal to the prime rate as published
in The Wall Street Journal on the closing date of the Conversion and
Reorganization (currently 8.50%). A pro forma after-tax return of 3.69% is used
for both the Holding Company and the Savings Bank for the period, after giving
effect to an incremental combined federal and state income tax rate of 35.0% for
the year ended September 30, 1997. Historical and pro forma per share amounts
have been calculated by dividing historical and pro forma amounts by the number
of shares of Common Stock indicated in the footnotes to the table. Per share
amounts have been computed as if the Common Stock had been outstanding at the
beginning of the period or at September 30, 1997, but without any adjustment of
per share historical or pro forma stockholders' equity to reflect the earnings
on the estimated net proceeds.
The following table summarizes the historical net income and stockholders'
equity of the Savings Bank and the pro forma consolidated net income and
stockholders' equity of the Holding Company for the periods and at the date
indicated, based on the minimum, midpoint and maximum of the Estimated Valuation
Range and based on a 15% increase in the maximum of the Estimated Valuation
Range. No effect has been given to: (i) the shares to be reserved for issuance
under the 1998 Stock Option Plan, which is expected to be voted upon by
stockholders at a meeting to be held no earlier than six months following
consummation of the Conversion and Reorganization; (ii) withdrawals from deposit
accounts for the purpose of purchasing Conversion Shares in the Conversion
Offerings; (iii) the issuance of shares from authorized but unissued shares to
the 1998 MRP, which is expected to be voted upon by stockholders at a meeting to
be held no earlier than six months following consummation of the Conversion and
Reorganization; or (iv) the establishment of a liquidation account for the
benefit of Eligible Account Holders and Supplemental Eligible Account Holders.
See "THE CONVERSION AND REORGANIZATION -- Stock Pricing, Exchange Ratio and
Number of Shares Issued."
THE FOLLOWING PRO FORMA INFORMATION MAY NOT BE REPRESENTATIVE OF THE
FINANCIAL EFFECTS OF THE CONVERSION AND REORGANIZATION AT THE DATE ON WHICH THE
CONVERSION AND REORGANIZATION ACTUALLY OCCURS AND SHOULD NOT BE TAKEN AS
INDICATIVE OF FUTURE RESULTS OF OPERATIONS. STOCKHOLDERS' EQUITY REPRESENTS THE
DIFFERENCE BETWEEN THE STATED AMOUNTS OF CONSOLIDATED ASSETS AND LIABILITIES OF
THE HOLDING COMPANY COMPUTED ACCORDING TO GAAP. STOCKHOLDERS' EQUITY HAS NOT
BEEN INCREASED OR DECREASED TO REFLECT THE DIFFERENCE BETWEEN THE CARRYING VALUE
OF LOANS AND OTHER ASSETS AND MARKET VALUE. STOCKHOLDERS' EQUITY IS NOT
INTENDED TO REPRESENT FAIR MARKET VALUE NOR DOES IT REPRESENT AMOUNTS THAT WOULD
BE AVAILABLE FOR DISTRIBUTION TO STOCKHOLDERS IN THE EVENT OF LIQUIDATION.
28
At or For the Year Ended September 30, 1997
-----------------------------------------------------------------------------
Minimum of Midpoint of Maximum of 15% Above
Estimated Estimated Estimated Maximum of
Valuation Valuation Valuation Estimated
Range Range Range Valuation Range(1)
---------- ---------- ---------- ------------------
1,466,250 1,725,000 1,983,750 2,281,312
Shares Shares Shares Shares
at $20.00 at $20.00 at $20.00 at $20.00
Per Share Per Share Per Share Per Share
--------- ---------- ---------- ----------
(In Thousands, Except Per Share Amounts)
Gross proceeds....................................... $ 29,325 $ 34,500 $ 39,675 $ 45,626
Less: estimated expenses............................. 990 1,070 1,150 1,240
---------- ---------- ---------- ----------
Estimated net proceeds............................... 28,335 33,430 38,525 44,386
Less: Common Stock to be acquired by
1998 MRP.................................... (1,173) (1,380) (1,587) (1,825)
Add: Assets consolidated from MHC(10).............. -- -- -- --
---------- ---------- ---------- ----------
Net investable proceeds......................... $ 27,162 $ 32,050 $ 36,938 $ 42,561
========== ========== ========== ==========
Consolidated net income:
Historical.......................................... 1,728 1,728 1,728 1,728
Pro forma income on net proceeds(2)................. 1,003 1,183 1,364 1,571
Pro forma 1996 MRP adjustments(3)................... (84) (84) (84) (84)
Pro forma 1998 MRP adjustments(4)................... (152) (179) (206) (237)
---------- ---------- ---------- ----------
Pro forma net income.............................. $ 2,496 $ 2,649 $ 2,803 $ 2,979
========== ========== ========== ==========
Consolidated net income per share(5)(6):
Historical.......................................... $ 0.64 $ 0.55 $ 0.47 $ 0.41
Pro forma income on net proceeds.................... 0.38 0.38 0.37 0.38
Pro forma 1996 MRP adjustments(3)................... (0.03) (0.03) (0.02) (0.02)
Pro forma 1998 MRP adjustments(4)................... (0.06) (0.06) (0.06) (0.06)
---------- ---------- ---------- ----------
Pro forma net income per share.................... $ 0.93 $ 0.84 $ 0.76 $ 0.71
========== ========== ========== ==========
Consolidated stockholders' equity (book value):
Historical(10)...................................... $ 31,731 $ 31,731 $ 31,731 $ 31,731
Estimated net proceeds.............................. 28,335 33,430 38,525 44,386
Less: Common Stock to be acquired by
ESOP...................................... (804) (804) (804) (804)
Common Stock acquired by
1996 MRP.................................. (938) (938) (938) (938)
Common Stock to be acquired by
1998 MRP(4)............................... (1,173) (1,380) (1,587) (1,825)
---------- ---------- ---------- ----------
Pro forma stockholders' equity(7)................. $ 57,151 $ 62,039 $ 67,927 $ 72,550
========== ========== ========== ==========
Consolidated stockholders' equity per share(6)(8):
Historical(4)(10)................................... $ 11.48 $ 9.76 $ 8.48 $ 7.38
Estimated net proceeds.............................. 10.24 10.27 10.29 10.32
Less: Common Stock acquired by
ESOP...................................... (0.29) (0.25) (0.21) (0.19)
Common Stock acquired by
1996 MRP(3)............................... (0.34) (0.29) (0.25) (0.22)
Common Stock to be acquired by
1998 MRP(3)............................... (0.42) (0.42) (0.42) (0.42)
---------- ---------- ---------- ----------
Pro forma stockholders' equity per share(9)....... $ 20.67 $ 19.07 $ 17.89 $ 16.87
========== ========== ========== ==========
Purchase Price as a percentage of pro forma
stockholders' equity per share...................... 96.76% 104.88% 111.79% 118.55%
========== ========== ========== ==========
Purchase Price as a multiple of pro forma
net income per share................................ 21.51x 23.81x 26.18x 28.17x
========== ========== ========== ==========
(footnotes on following page)
29
- ------------------------------
(1) Gives effect to the sale of an additional 297,562 Conversion Shares in the
Conversion and Reorganization, which may be issued to cover an increase in
the pro forma market value of the MHC and the Savings Bank, as converted,
without the resolicitation of subscribers or any right of cancellation. The
issuance of such additional shares will be conditioned on a determination by
RP Financial that such issuance is compatible with its determination of the
estimated pro forma market value of the MHC and the Savings Bank, as
converted. See "THE CONVERSION AND REORGANIZATION -- Stock Pricing,
Exchange Ratio and Number of Shares to be Issued."
(2) No effect has been given to withdrawals from savings accounts for the
purpose of purchasing Conversion Shares. Since funds on deposit at the
Savings Bank may be withdrawn to purchase shares of Common Stock (which will
reduce deposits by the amount of such purchases), the net amount of funds
available to the Savings Bank for investment following receipt of the net
proceeds of the Conversion Offerings will be reduced by the amount of such
withdrawals.
(3) In calculating the pro forma effect of the 1996 MRP, the table reflects the
effect of completed open market purchases of all remaining 1996 MRP shares
subsequent to September 30, 1997. Pro forma net income adjustments reflect
additional expenses required for a full-year amortization above the actual
expense (equal to $79,000 on a pre-tax basis) recorded for the year ended
September 30, 1997. Pro forma stockholders' equity adjustments take into
account 1996 MRP stock purchases as of September 30, 1997 and open market
purchases of all remaining shares completed subsequent to September 30,
1997. As all shares for the 1996 MRP have, subsequent to September 30,
1997, have been purchased in open market transactions, no assumptions have
been made for the effects of issuing authorized but unissued shares. The
total additional estimated pre-tax 1996 MRP expenses not already reflected
in net income was equal to $129,000 at each of the minimum, midpoint,
maximum and 15% above the maximum of the Estimated Valuation Range for the
year ended September 30, 1997. No effect has been given to the shares
reserved for issuance under the 1996 Stock Option Plan. See footnote 4 for
an analysis of the combined effects of the 1996 and 1998 Stock Option Plans.
(4) In calculating the pro forma effect of the 1998 MRP, it is assumed that the
required stockholder approval has been received, that the shares were
acquired by the 1998 MRP at the beginning of the period presented in open
market purchases at the Purchase Price, that 20% of the amount contributed
was an amortized expense during such period, and that the combined federal
and state income tax rate is 35.0%. The issuance of authorized but unissued
shares of the Common Stock instead of open market purchases would dilute the
voting interests of existing stockholders by approximately 2.08% and pro
forma net income per share would be $0.92, $0.83, $0.77 and $0.71 at the
minimum, midpoint, maximum and 15% above the maximum of the Estimated
Valuation Range for the year ended September 30, 1997, respectively, and pro
forma stockholders' equity per share would be $20.66, $19.09, $17.94 and
$16.93 at the minimum, midpoint, maximum and 15% above the maximum of the
Estimated Valuation Range at September 30, 1997, respectively. Shares
issued under the 1998 MRP vest 20% per year and, for purposes of this table,
compensation expense is recognized on a straight-line basis over each
vesting period. In the event the fair market value per share is greater
than $20.00 per share on the date shares are awarded under the 1998 MRP,
total 1998 MRP expense would increase. The total estimated 1998 MRP expense
was multiplied by 20% (the total percent of shares for which expense is
recognized in the first year) resulting in pre-tax 1998 MRP expense of
$235,000, $276,000, $317,000 and $365,000 at the minimum, midpoint, maximum
and 15% above the maximum of the Estimated Valuation Range for the year
ended September 30, 1997, respectively. No effect has been given to the
shares reserved for issuance under the 1996 Stock Option Plan (previously
approved by stockholders) or the proposed 1998 Stock Option Plan. Under the
1996 Stock Option Plan, 58,500 shares were reserved for issuance and options
have been granted thereunder at an exercise price of $25.25 per share. If
stockholders approve the 1998 Stock Option Plan following the Conversion and
Reorganization, the Holding Company will have reserved for issuance under
the 1998 Stock Option Plan authorized but unissued shares of Common Stock
representing an amount of shares equal to 10% of the Conversion Shares sold
in the Conversion Offerings. If all of the options were to be exercised
utilizing these authorized but unissued shares rather than treasury shares
which could be acquired (for both the 1996 and 1998 Stock Option Plans), the
voting interests of existing stockholders would be diluted by approximately
8.25%. Assuming stockholder approval of the 1998 Stock Option Plan, and
that all options under the 1996 and 1998 Stock Option Plans were exercised
at September 30, 1997 at an exercise price of $25.25 (to be
30
adjusted pursuant to the final Exchange Ratio) and $20.00 per share,
respectively, pro forma net earnings per share would be $0.90, $0.81, $0.75
and $0.70, respectively, for the year ended September 30, 1997, and pro
forma stockholders' equity per share would be $20.38, $18.87, $17.76 and
$16.79, respectively, for the year ended September 30, 1997 at the minimum,
midpoint, maximum and 15% above the maximum of the Estimated Valuation
Range.
(5) Per share amounts are based upon shares outstanding of 2,695,343, 3,170,992,
3,646,640 and 4,193,637 at the minimum, midpoint, maximum and 15% above the
maximum of the Estimated Valuation Range for the year ended September 30,
1997, respectively, which includes the Conversion Shares sold in the
Conversion and Reorganization, less the number of shares assumed to be held
by the ESOP not committed to be released within the first year following the
Conversion and Reorganization.
(6) Historical per share amounts have been computed as if the Conversion Shares
expected to be issued in the Conversion and Reorganization had been
outstanding at the beginning of the period or on the date shown, but without
any adjustment of historical net income or historical retained earnings to
reflect the investment of the estimated net proceeds of the sale of shares
in the Conversion and Reorganization, the ongoing ESOP expense, or the
proposed 1998 MRP expense described above.
(7) "Book value" represents the difference between the stated amounts of the
Savings Bank's assets and liabilities. The amounts shown do not reflect the
liquidation account which will be established for the benefit of Eligible
Account Holders and Supplemental Eligible Account Holders in the Conversion
and Reorganization, or the federal income tax consequences of the
restoration to income of the Savings Bank's special bad debt reserves for
income tax purposes which would be required in the unlikely event of
liquidation. See "THE CONVERSION AND REORGANIZATION -- Effects of
Conversion and Reorganization on Depositors and Borrowers of the Savings
Bank." The amounts shown for book value do not represent fair market values
or amounts distributable to stockholders in the unlikely event of
liquidation.
(8) Per share amounts are based upon shares outstanding of 2,764,821, 3,252,731,
3,740,640 and 4,301,736 at the minimum, midpoint, maximum and 15% above the
maximum of the Estimated Valuation Range, respectively.
(9) Does not represent possible future price appreciation or depreciation of the
Common Stock.
(10) Assets of the MHC (other than investment in the Savings Bank) consist
solely of $47,000 of cash on deposit at the Savings Bank, which amount is
eliminated in consolidation.
31
CAPITALIZATION
The following table presents the historical capitalization of the Savings
Bank at September 30, 1997, and the pro forma consolidated capitalization of the
Holding Company after giving effect to the assumptions set forth under "PRO
FORMA DATA," based on the sale of the number of Conversion Shares at the
minimum, midpoint, maximum and maximum, as adjusted, of the Estimated Valuation
Range. The Conversion Shares that would be issued at the maximum, as adjusted,
of the Estimated Valuation Range would be subject to receipt of OTS approval of
an updated appraisal confirming such valuation. A CHANGE IN THE NUMBER OF
CONVERSION SHARES TO BE ISSUED IN THE CONVERSION AND REORGANIZATION WOULD
MATERIALLY AFFECT PRO FORMA CONSOLIDATED CAPITALIZATION.
Holding Company Pro Forma Consolidated Capitalization
Based Upon the Sale of
Savings ----------------------------------------------------
Bank 1,466,250 1,725,000 1,983,750 2,281,312
Capitalization Shares at Shares at Shares at Shares at
at $20.00 $20.00 $20.00 $20.00
September 30, 1997 Per Share(1) Per Share(1) Per Share(1) Per Share(2)
------------------ ------------ ------------- ------------ ------------
(In thousands)
Deposits(3).......................... $201,002 $ 201,002 $ 201,002 $ 201,002 $ 201,002
FHLB advances........................ 15,000 15,000 15,000 15,000 15,000
ESOP debt(4)......................... 804 804 804 804 804
-------- ---------- ---------- ---------- ----------
Total deposits and borrowed funds.... $216,806 $ 216,806 $ 216,806 $ 216,806 $ 216,806
======== ========== ========== ========== ==========
Stockholders' equity:
Preferred stock:
250,000 shares, $.01 par
value per share, authorized;
none issued or outstanding...... -- -- -- -- --
Common Stock:
7,500,000 shares, $.01 par
value per share, authorized;
specified number of shares
assumed to be issued and
outstanding(5).................. 1,509 14 17 20 23
Additional paid-in capital........ 11,652 41,482 46,574 51,665 57,525
Retained earnings(6).............. 18,382 18,382 18,382 18,382 18,382
Unrealized loss on securities
available-for-sale, net of tax... 188 188 188 188 188
Less:
Savings Bank Common Stock
acquired by ESOP in MHC
Reorganization and
Additional Offering............ (804) (804) (804) (804) (804)
Common Stock to be acquired
by 1996 MRP(7)................. (325) (938) (938) (938) (938)
Common Stock to be acquired
by 1998 MRP(8)................. -- (1,173) (1,380) (1,587) (1,825)
-------- ---------- ---------- ---------- ----------
Total stockholders' equity........... $ 30,602 $ 57,151 $ 62,039 $ 66,927 $ 72,551
======== ========== ========== ========== ==========
(footnotes on following page)
32
- -----------------------------
(1) Does not reflect the possible increase in the Estimated Valuation Range to
reflect material changes in the financial condition or results of operations
of the Savings Bank or changes in market conditions or general financial,
economic and regulatory conditions, or the issuance of additional shares
under the 1998 Stock Option Plan.
(2) This column represents the pro forma capitalization of the Holding Company
if the aggregate number of Conversion Shares issued in the Conversion and
Reorganization is 15% above the maximum of the Estimated Valuation Range.
See "PRO FORMA DATA" and Footnote 1 thereto.
(3) Withdrawals from deposit accounts for the purchase of Conversion Shares are
not reflected. Such withdrawals will reduce pro forma deposits by the
amounts thereof.
(4) Represents outstanding balance on third party loan used by ESOP to acquire
shares of Savings Bank Common Stock in the MHC Reorganization and the
Additional Offering.
(5) The Savings Bank's authorized capital will consist solely of 1,000 shares of
common stock, par value $1.00 per share, 1,000 shares of which will be
issued to the Holding Company, and 9,000 shares of preferred stock, no par
value per share, none of which will be issued in connection with the
Conversion and Reorganization.
(6) Retained earnings are substantially restricted by applicable regulatory
capital requirements. Additionally, the Savings Bank will be prohibited
from paying any dividend that would reduce its regulatory capital below the
amount in the liquidation account, which will be established for the benefit
of Eligible Account Holders and Supplemental Eligible Account Holders at the
consummation of the Conversion and Reorganization and adjusted downward
thereafter as such account holders reduce their balances or cease to be
depositors. See "THE CONVERSION AND REORGANIZATION -- Effects of Conversion
and Reorganization on Depositors and Borrowers of the Savings Bank --
Liquidation Account."
(7) Pro forma consolidated capitalization reflects funding of remaining shares
authorized for awards under the 1996 MRP through open market purchases of
Common Stock.
(8) Assumes the purchase in the open market at the Purchase Price, pursuant to
the proposed 1998 MRP, of a number of shares equal to 4% of the shares of
Conversion Shares issued in the Conversion and Reorganization at the
minimum, midpoint, maximum and 15% above the maximum of the Estimated
Valuation Range. The issuance of such additional Conversion Shares from
authorized but unissued shares of Common Stock would dilute the ownership
interest of stockholders by 2.08%. The shares are reflected as a reduction
of stockholders' equity. See "PRO FORMA DATA." The 1998 MRP is subject to
stockholder approval, which is expected to be sought at a meeting to be held
no earlier than six months following consummation of the Conversion and
Reorganization.
MARKET FOR COMMON STOCK
The Holding Company has never issued capital stock and, consequently, there
is no existing market for the Common Stock. Although the Holding Company has
received preliminary approval to list the Common Stock on the Nasdaq National
Market System under the symbol "PERT," there can be no assurance that the
Holding Company will meet Nasdaq National Market System listing requirements,
which include a minimum market capitalization, at least three market makers and
a minimum number of record holders. Sandler O'Neill has agreed to make a market
for the Common Stock following consummation of the Conversion and Reorganization
and will assist the Holding Company in seeking to encourage at least two
additional market makers to establish and maintain a market in the Common Stock.
Making a market involves maintaining bid and ask quotations and being able, as
principal, to effect transactions in reasonable quantities at those quoted
prices, subject to various securities laws and other regulatory requirements.
Based on the level of market making in the Public Savings Bank Shares, the
Holding Company anticipates that prior to the completion of the Conversion and
Reorganization it will be able to obtain the commitment from at least two
additional broker-dealers to act as market maker for the Common Stock.
Additionally, 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 the Holding Company, the Savings Bank or any market maker. There can be no
assurance that an active and liquid trading market for the Common Stock will
develop or that, if developed, it will continue. The number of active buyers
and sellers of the Common Stock at any particular time may be limited.
33
Under such circumstances, investors in the Common Stock could have difficulty
disposing of their shares on short notice and should not view the Common Stock
as a short-term investment. Furthermore, there can be no assurance that
purchasers will be able to sell their shares at or above the Purchase Price or
that quotations will be available on the Nasdaq National Market System as
contemplated.
Since September 30, 1996 (the consummation date of the Additional Offering),
the Public Savings Bank Shares have been listed on the Nasdaq SmallCap Market
under the symbol "PERT." Before that date, the Public Savings Bank Shares were
unlisted and traded in privately negotiated transactions. At September 30,
1997, there were 294 record holders of the Public Savings Bank Shares (not
including holders in nominee or "street name") and four market makers in the
Public Savings Bank Shares as reported by the Nasdaq Stock Market. The
following table sets forth the high and low trading prices, as reported by
Nasdaq, and cash dividends paid for each quarter during the fiscal 1997. Market
price data for fiscal 1996 is not presented because the Public Savings Bank
Shares traded in private transactions for which comparable data is unavailable.
The Savings Bank paid a quarterly cash dividend of $0.30 on the outstanding
Public Savings Bank Shares during fiscal 1996.
Cash Dividend
Fiscal 1997 High Low Declared
- ----------- ---- --- --------
Quarter Ended December 31, 1996.... $24.25 $20.25 $0.30
Quarter Ended March 31, 1997....... 26.50 22.50 0.35
Quarter Ended June 30, 1997........ 29.75 24.00 0.35
Quarter Ended September 30, 1997... 57.00 30.25 0.35
RESTRICTIONS ON ACQUISITION OF THE HOLDING COMPANY
The following discussion is a summary of certain provisions of federal law
and regulations and Delaware corporate law relating to stock ownership and
transfers, the Board of Directors and business combinations, all of which may be
deemed to have "anti-takeover" effects. The description of these provisions is
necessarily general and reference should be made to the actual law and
regulations.
CONVERSION REGULATIONS
OTS regulations prohibit any person from making an offer, announcing an
intent to make an offer or participating in any other arrangement to purchase
stock or acquiring stock or subscription rights in a converting institution (or
its holding company) from another person prior to completion of its conversion.
Further, without the prior written approval of the OTS, no person may make such
an offer or announcement of an offer to purchase shares or actually acquire
shares in the converting institution (or its holding company) for a period of
three years from the date of the completion of the conversion if, upon the
completion of such offer, announcement or acquisition, that person would become
the beneficial owner of more than 10% of the outstanding stock of the
institution (or its holding company). The OTS has defined "person" to include
any individual, group acting in concert, corporation, partnership, association,
joint stock company, trust, unincorporated organization or similar company, a
syndicate or any other group formed for the purpose of acquiring, holding or
disposing of securities of an insured institution. However, offers made
exclusively to an association (or its holding company) or an underwriter or
member of a selling group acting on the converting institution's (or its holding
company's) behalf for resale to the general public are excepted. The regulation
also provides civil penalties for willful violation or assistance in any such
violation of the regulation by any person connected with the management of the
converting institution (or its holding company) or who controls more than 10% of
the outstanding shares or voting rights of a converting or converted institution
(or its holding company).
As permitted by OTS regulations, the Savings Bank's Federal Stock Charter
contains a provision whereby the acquisition or offer to acquire ownership of
more than 10% of the issued and outstanding shares of any class of equity
securities of the Savings Bank by any person, either directly or through an
affiliate of such person, will be
34
prohibited for a period of five years following the date of consummation of the
Conversion and Reorganization. Any stock in excess of 10% acquired in violation
of the Federal Stock Charter provision will not be counted as outstanding for
voting purposes. Furthermore, for five years from the consummation date of the
MHC Reorganization, stockholders of the Savings Bank will not be permitted to
call a special meeting of stockholders relating to a change of control of the
Savings Bank or a charter amendment and will not be permitted to cumulate their
votes in the election of directors.
CHANGE OF CONTROL REGULATIONS
Under the Change in Bank Control Act, no person may acquire control of an
insured federal savings and loan association or its parent holding company
unless the OTS has been given 60 days' prior written notice and has not issued a
notice disapproving the proposed acquisition. In addition, OTS regulations
provide that no company may acquire control of a savings association without the
prior approval of the OTS. Any company that acquires such control becomes a
"savings and loan holding company" subject to registration, examination and
regulation by the OTS.
Control, as defined under federal law, means ownership, control of or holding
irrevocable proxies representing more than 25% of any class of voting stock,
control in any manner of the election of a majority of the savings association's
directors, or a determination by the OTS that the acquiror has the power to
direct, or directly or indirectly to exercise a controlling influence over, the
management or policies of the institution. Acquisition of more than 10% of any
class of a savings association's voting stock, if the acquiror also is subject
to any one of eight "control factors," constitutes a rebuttable determination of
control under the regulations. Such control factors include the acquiror being
one of the two largest stockholders. The determination of control may be
rebutted by submission to the OTS, prior to the acquisition of stock or the
occurrence of any other circumstances giving rise to such determination, of a
statement setting forth facts and circumstances which would support a finding
that no control relationship will exist and containing certain undertakings.
The regulations provide that persons or companies which acquire beneficial
ownership exceeding 10% or more of any class of a savings association's stock
must file with the OTS a certification form that the holder is not in control of
such institution, is not subject to a rebuttable determination of control and
will take no action which would result in a determination or rebuttable
determination of control without prior notice to or approval of the OTS, as
applicable. There are also rebuttable presumptions in the regulations
concerning whether a group "acting in concert" exists, including presumed action
in concert among members of an "immediate family."
The OTS may prohibit an acquisition of control if it finds, among other
things, that (i) the acquisition would result in a monopoly or substantially
lessen competition, (ii) the financial condition of the acquiring person might
jeopardize the financial stability of the institution, or (iii) the competence,
experience or integrity of the acquiring person indicates that it would not be
in the interest of the depositors or the public to permit the acquisition of
control by such person.
DESCRIPTION OF CAPITAL STOCK OF THE HOLDING COMPANY
GENERAL
The Holding Company is authorized to issue 7,500,000 shares of Common Stock
having a par value of $.01 per share and 250,000 shares of preferred stock
having a par value of $.01 per share. The Holding Company currently expects to
issue up to 3,741,533 shares of Common Stock (subject to adjustment up to
4,301,736 shares) and no shares of preferred stock in the Conversion and
Reorganization. Each share of the Holding Company'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 such stock will be duly
authorized, fully paid and nonassessable.
35
THE COMMON STOCK OF THE HOLDING COMPANY WILL REPRESENT NONWITHDRAWABLE
CAPITAL, WILL NOT BE AN ACCOUNT OF ANY TYPE, AND WILL NOT BE INSURED BY THE FDIC
OR ANY OTHER GOVERNMENT AGENCY.
COMMON STOCK
DIVIDENDS. The Holding Company can pay dividends out of statutory surplus or
from certain net profits if, as and when declared by its Board of Directors.
The payment of dividends by the Holding Company is subject to limitations which
are imposed by law and applicable regulation. The holders of Common Stock of
the Holding Company will be entitled to receive and share equally in such
dividends as may be declared by the Board of Directors of the Holding Company
out of funds legally available therefor. If the Holding Company issues
preferred stock, the holders thereof may have a priority over the holders of the
Common Stock with respect to dividends.
STOCK REPURCHASES. The Plan of Conversion and OTS regulations place certain
limitations on the repurchase of the Holding Company's capital stock. See "THE
CONVERSION AND REORGANIZATION -- Restrictions on Repurchase of Stock."
VOTING RIGHTS. Upon Conversion and Reorganization, the holders of Common
Stock of the Holding Company will possess exclusive voting rights in the Holding
Company. They will elect the Holding Company's Board of Directors and act on
such other matters as are required to be presented to them under Federal law or
as are otherwise presented to them by the Board of Directors. Except as
discussed in "RESTRICTIONS ON ACQUISITION OF THE HOLDING COMPANY," 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. If the Holding Company
issues preferred stock, holders of the Holding Company preferred stock may also
possess voting rights. Certain matters require a vote of 80% of the outstanding
shares entitled to vote thereon. See "RESTRICTIONS ON ACQUISITION OF THE
HOLDING COMPANY."
As a federal stock savings bank, corporate powers and control of the Savings
Bank are vested in the Board of Directors, who elect the officers of the Savings
Bank and who fill any vacancies on the Board of Directors as it exists upon
Conversion and Reorganization. Subsequent to Conversion and Reorganization,
voting rights will be vested exclusively in the owners of the shares of capital
stock of the Savings Bank, all of which will be owned by the Holding Company,
and voted at the direction of the Holding Company's Board of Directors.
Consequently, the holders of the Common Stock will not have direct control of
the Savings Bank.
LIQUIDATION. In the event of any liquidation, dissolution or winding up of
the Savings Bank, the Holding Company, as holder of the Savings Bank's capital
stock would be entitled to receive, after payment or provision for payment of
all debts and liabilities of the Savings Bank (including all deposit accounts
and accrued interest thereon) and after distribution of the balance in the
special liquidation account to Eligible Account Holders and Supplemental
Eligible Account Holders (see "THE CONVERSION AND REORGANIZATION"), all assets
of the Savings Bank available for distribution. In the event of liquidation,
dissolution or winding up of the Holding Company, 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 the Holding Company
available for distribution. If Holding Company 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.
PREEMPTIVE RIGHTS. Holders of the Common Stock of the Holding Company will
not be entitled to preemptive rights with respect to any shares that may be
issued. The Common Stock is not subject to redemption.
PREFERRED STOCK
None of the shares of the authorized Holding Company preferred stock will be
issued in the Conversion and Reorganization and there are no plans to issue the
preferred stock. Such stock may be issued with such designations, powers,
preferences and rights as the Board of Directors may from time to time
determine. The Board of Directors
36
can, without stockholder approval, issue preferred stock with voting, dividend,
liquidation and conversion rights that 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.
RESTRICTIONS ON ACQUISITION
Acquisitions of the Holding Company are restricted by provisions in its
Certificate of Incorporation and Bylaws and by the rules and regulations of
various regulatory agencies. See "RESTRICTIONS ON ACQUISITION OF THE HOLDING
COMPANY."
EFFECT OF RECEIVERSHIP ON THE COMMON STOCK
In the event of the receivership of the Savings Bank, the FDIC, as receiver,
shall, by operation of law, succeed to, among other things, all the rights,
titles, powers and privileges of the Savings Bank and its stockholder, the
Holding Company. As provided by the procedures and priorities applicable to
receiverships of savings institutions, the holders of the Common Stock would be
entitled to receive any funds remaining after all depositors, creditors, other
claimants (other than holders of stock ranking junior to or on a parity with the
Common Stock) and administrative expenses are paid.
TRANSFER AGENT AND REGISTRAR
ChaseMellon Securities is the transfer agent and registrar for shares of the
Common Stock.
REVIEW OF OTS ACTION
Any person aggrieved by a final action of the OTS which approves, with or
without conditions, or disapproves a plan of conversion pursuant to 12 C.F.R.
Part 563b may obtain review of such action by filing in the court of appeals of
the United States 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, a written petition praying that the final action of the
OTS be modified, terminated or set aside. Such petition must be filed within 30
days after the publication of notice of such final action in the Federal
Register, or 30 days after the mailing by the applicant of the notice to members
as provided for in 12 C.F.R. (S)563b.6(c), whichever is later. The further
procedure for review is as follows: A copy of the petition is forthwith
transmitted to the OTS by the clerk of the court and thereupon the OTS files in
the court the record in the proceeding, as provided in Section 2112 of Title 28
of the United States Code. Upon the filing of the petition, the court has
jurisdiction, which upon the filing of the record is exclusive, to affirm,
modify, terminate, or set aside in whole or in part, the final action of the
OTS. Review of such proceedings is as provided in Chapter 7 of Title 5 of the
United States Code. The judgment and decree of the court is final, except that
they are subject to review by the United States Supreme Court upon certiorari as
provided in Section 1254 of Title 28 of the United States Code.
REGISTRATION REQUIREMENTS
The Holding Company will register the Common Stock with the SEC pursuant to
Section 12(g) of the Exchange Act upon the completion of the Conversion and
Reorganization and will not deregister its Common Stock for a period of at least
three years following the completion of the Conversion and Reorganization. Upon
such registration, the proxy solicitation and tender offer rules, insider
trading reporting and restrictions, annual and periodic reporting and other
requirements of the Exchange Act will apply.
37
LEGAL AND TAX OPINIONS
The legality of the Common Stock has been passed upon for the Holding Company
by Breyer & Aguggia, Washington, D.C. The federal tax consequences of the
Conversion and Reorganization have been opined upon by Breyer & Aguggia and the
South Carolina tax consequences of the Conversion and Reorganization have been
opined upon by Evans, Carter, Kunes & Bennett, P.A., Charleston, South Carolina.
Breyer & Aguggia and Evans, Carter, Kunes & Bennett, P.A. have consented to the
references herein to their opinions. Certain legal matters will be passed upon
for Sandler O'Neill by Muldoon, Murphy & Faucette, Washington, D.C.
EXPERTS
The consolidated financial statements of the Savings Bank as of September 30,
1997 and 1996 and for each of the years in the three-year period ended September
30, 1997, have been included herein and in the Registration Statement in
reliance upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, appearing elsewhere herein, and upon the authority of said firm as
experts in accounting and auditing.
RP Financial has consented to the publication herein of the summary of its
report to the Savings Bank setting forth its opinion as to the estimated pro
forma market value of the MHC and the Savings Bank, as converted, and its letter
with respect to subscription rights and to the use of its name and statements
with respect to it appearing herein.
ADDITIONAL INFORMATION
The Holding Company has filed with the SEC a Registration Statement on Form
S-1 (File No. 333-_____) under the Securities Act with respect to the Common
Stock offered in the Conversion and Reorganization. The Prospectus does not
contain all the information set forth in the Registration Statement, certain
parts of which are omitted in accordance with the rules and regulations of the
SEC. Such information may be inspected at the public reference facilities
maintained by the SEC at 450 Fifth Street, N.W., Room 1024, Washington, D.C.
20549 and at its regional offices at 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661; and 7 World Trade Center, Suite 1300, New York, New
York 10048. Copies may be obtained at prescribed rates from the Public
Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549.
The Registration Statement also is available through the SEC's World Wide Web
site on the Internet (http://www.sec.gov).
The MHC has filed with the OTS an Application for Approval of Conversion,
which includes proxy materials for the Special Members' Meeting and the
Stockholders' Meeting and certain other information. The Prospectus omits
certain information contained in such Application. The Application, including
the proxy materials, exhibits and certain other information that are a part
thereof, may be inspected, without charge, at the offices of the OTS, 1700 G
Street, N.W., Washington, D.C. 20552 and at the office of the Regional Director
of the OTS at the OTS Southeast Regional Office, 1475 Peachtree Street, N.E.,
Atlanta, Georgia 30309.
Copies of the Holding Company's Certificate of Incorporation and Bylaws may
be obtained by written request to the Savings Bank.
BY ORDER OF THE BOARD OF DIRECTORS
SYLVIA B. REED
SECRETARY
Anderson, South Carolina
February __, 1998
38
YOUR BOARD OF DIRECTORS URGES YOU TO CONSIDER CAREFULLY THE INFORMATION
CONTAINED IN THIS PROXY STATEMENT AND THE PROSPECTUS AND, WHETHER OR NOT YOU
PLAN TO BE PRESENT IN PERSON AT THE SPECIAL MEETING, TO FILL IN, DATE, SIGN AND
RETURN THE ENCLOSED PROXY CARD(S) AS SOON AS POSSIBLE TO ASSURE THAT YOUR VOTES
WILL BE COUNTED. THIS WILL NOT PREVENT YOU FROM VOTING IN PERSON IF YOU ATTEND
THE SPECIAL MEETING. YOU MAY REVOKE YOUR PROXY BY WRITTEN INSTRUMENT DELIVERED
TO THE SECRETARY OF THE SAVINGS BANK AT ANY TIME PRIOR TO OR AT THE SPECIAL
MEETING OR BY ATTENDING THE SPECIAL MEETING AND VOTING IN PERSON.
-------------------------------------
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 IN THOSE
JURISDICTIONS IN WHICH IT IS LAWFUL TO MAKE SUCH OFFER.
39
EXHIBIT A
SOUTHBANC SHARES, M.H.C.
PERPETUAL BANK, A FEDERAL SAVINGS BANK
ANDERSON, SOUTH CAROLINA
AMENDED PLAN OF CONVERSION FROM MUTUAL HOLDING COMPANY TO STOCK
HOLDING COMPANY AND AGREEMENT AND PLAN OF REORGANIZATION
I. General
-------
For purposes of this section, all capitalized terms have the meanings
ascribed to them in Section II unless otherwise defined herein.
SouthBanc Shares, M.H.C., Anderson, South Carolina ("MHC") was formed on
October 26, 1993 to act as the federally chartered mutual holding company for
Perpetual Bank, A Federal Savings Bank, Anderson, South Carolina ("Savings
Bank"), a federally chartered capital stock savings bank. As of the date
hereof, the MHC beneficially and of record owns 800,000 shares of common stock,
par value $1.00 per share, of the Savings Bank ("Savings Bank Common Stock"),
representing approximately 53.02% of the outstanding voting stock of the Savings
Bank and the remaining 708,873 shares of Savings Bank Common Stock, or 46.98%,
are owned by persons other than the MHC ("Public Stockholders").
This Plan of Conversion from Mutual Holding Company to Stock Holding
Company and Agreement and Plan of Reorganization ("Plan") provides for the
conversion of the MHC to the stock form of organization and the reorganization
of the Savings Bank as a wholly owned subsidiary of a newly formed stock holding
company (collectively, "Conversion and Reorganization"). The Boards of
Directors of the MHC and the Savings Bank believe that the Conversion and
Reorganization is in the best interests of the MHC, the members of the MHC, the
Savings Bank and its stockholders. As a result of the Conversion and
Reorganization, the Savings Bank will be wholly owned by a stock holding
company, which is a more common structure and form of ownership than a mutual
holding company. The Board of Directors determined that the Plan equitably
provides for the interests of Members through the granting of subscription
rights and the establishment of a liquidation account and that consummation of
the Conversion and Reorganization would not adversely impact the stockholders'
equity of the Savings Bank.
The Conversion and Reorganization will provide the Savings Bank with a
larger capital base which will enhance its ability to pursue lending and
investment opportunities, as well as opportunities for growth and expansion. The
Conversion and Reorganization also will provide a more flexible operating
structure, which will enable the Savings Bank to compete more effectively with
other financial institutions. In addition, the Conversion and Reorganization
will raise additional equity capital for the Savings Bank. Finally, the
Conversion and Reorganization has been structured to reunite the accumulated
earnings and profits retained by the MHC with the retained earnings of the
Savings Bank through a tax-free reorganization.
Pursuant to the Plan, the Savings Bank will form a new first-tier
subsidiary which will be incorporated under state law as a stock corporation
("Holding Company"). The Holding Company will then form an interim federal
stock savings bank ("Interim B") as a wholly owned subsidiary. As described in
greater detail herein, simultaneously with the conversion of the MHC to an
interim federal stock savings bank ("Interim A"), the Savings Bank, MHC and
Holding Company will undergo a reorganization in which Interim A will merge with
and into the Savings Bank, Interim B will merge with and into the Savings Bank,
the Holding Company will become the parent company of the Savings Bank, and the
Holding Company will issue and sell its Conversion Stock pursuant to this Plan.
On September 22, 1997, after careful study and consideration, the Boards of
Directors of the MHC and the Savings Bank adopted, and on December 22, 1997,
subsequently amended, this Plan. The Plan must be approved by the affirmative
vote of a majority of the total number of votes eligible to be cast by Members
of the MHC at a special meeting to be called for that purpose and by the holders
of at least two-thirds of the shares of outstanding Savings Bank Common Stock
eligible to vote at an annual meeting of the Savings Bank Stockholders, or at a
special meeting
of the Savings Bank Stockholders called for the purpose of submitting the Plan
for approval. Prior to the submission of the Plan to the Members and the Public
Stockholders for consideration, the Plan must be approved by the Office of
Thrift Supervision ("OTS").
II. Definitions
-----------
For the purposes of this Plan, the following terms have the following
meanings:
A. Acting in Concert: (i) Knowing participation in a joint activity or
-----------------
interdependent conscious parallel action towards a common goal whether or not
pursuant to an express agreement; or (ii) 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 (as defined herein) who acts in concert
with another Person ("other party") shall also be deemed to be acting in concert
with any Person who is also acting in concert with that other party, except that
any Tax-Qualified Employee Stock Benefit Plan will not be deemed to be acting in
concert with its trustee 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
the Tax-Qualified Employee Benefit Plan will be aggregated.
B. Associate: When used to indicate a relationship with any Person,
---------
means (i) any corporation or organization (other than the Primary Parties or a
majority-owned subsidiary of either thereof) 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, except that it does not
include a Tax-Qualified Employee Stock Benefit Plan 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 any of the MHC, Savings Bank or
Holding Company or any of their subsidiaries.
C. Capital Stock: Any and all authorized capital stock of the Savings
-------------
Bank.
D. Common Stock: Collectively, Conversion Stock and Exchange Stock.
------------
E. Conversion and Reorganization: Collectively, (i) the conversion of the
-----------------------------
MHC into an interim federal stock savings bank ("Interim A") and the
simultaneous merger of Interim A with and into the Savings Bank, with the
Savings Bank being the surviving institution; (ii) the merger of an interim
federal stock savings bank subsidiary of the Holding Company ("Interim B") with
and into the Savings Bank, with the Savings Bank being the surviving institution
and becoming a wholly owned subsidiary of the Holding Company; (iii) the
exchange of shares of Savings Bank Common Stock (other than those held by the
MHC which shall be canceled) for shares of Holding Company Common Stock; and
(iv) the issuance of Conversion Stock by the Holding Company as provided for in
this Plan.
F. Conversion Stock: Holding Company Common Stock offered and issued by
----------------
the Holding Company in the Offerings pursuant to this Plan.
G. Direct Community Offering: The offering of Conversion Stock for sale
-------------------------
to the public.
H. Eligibility Record Date: June 30, 1996.
-----------------------
I. Eligible Account Holder: Holder of a Qualifying Deposit on the
-----------------------
Eligibility Record Date.
J. Exchange Ratio: The ratio at which shares of Holding Company Common
--------------
Stock will be exchanged for shares of Savings Bank Common Stock held by the
Public Stockholders upon consummation of the Conversion and Reorganization. The
exact rate shall be determined by the MHC and the Savings Bank at the time the
Purchase Price (as defined in Section XI.B.) is determined and shall equal the
rate that will result in the Public Stockholders
A-2
owning in the aggregate approximately the same percentage of shares of common
stock of the Holding Company to be outstanding upon completion of the Conversion
and Reorganization as the percentage of Savings Bank Common Stock owned by them
in the aggregate immediately prior to consummation of the Conversion and
Reorganization, before giving effect to (i) the payment of cash in lieu of
issuing fractional shares of Holding Company Common Stock, and (ii) any shares
of Conversion Stock purchased by Public Stockholders or any Tax-Qualified
Employee Stock Benefit Plans.
K. Exchange Stock: Holding Company Common Stock issued to the Public
--------------
Stockholders in exchange for Savings Bank Common Stock.
L. FDIC: Federal Deposit Insurance Corporation.
----
M. Form AC Application: The application submitted by the MHC to the OTS
-------------------
on OTS Form AC for approval of the Conversion and Reorganization.
N. H-(e)1 Application: The application submitted to the OTS on OTS Form
------------------
H-(e)1 or, if applicable, OTS Form H-(e)1-S, for approval of the Holding Company
acquisition of all of the Capital Stock.
O. Holding Company: The corporation to be formed by the Savings Bank
---------------
under state law initially as a first tier, wholly owned subsidiary of the
Savings Bank. Upon completion of the Conversion, the Holding Company shall hold
all of the outstanding capital stock of the Savings Bank.
P. Holding Company Common Stock: The common stock, $0.01 par value per
----------------------------
share, of the Holding Company.
Q. Interim A: "Perpetual Interim "A" Bank, A Federal Savings Bank," which
---------
will be the interim federal stock savings bank resulting from the conversion of
the MHC to stock form immediately prior to the merger of Interim B into the
Savings Bank.
R. Interim B: "Perpetual Interim "B" Bank, A Federal Savings Bank," which
---------
will be formed as a wholly owned interim federal stock savings bank subsidiary
of the Holding Company, which will merge with and into the Savings Bank
immediately after the merger of Interim A into the Savings Bank.
S. Local Community: Anderson and Oconee Counties of the State of South
---------------
Carolina.
T. 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 furnishes bona fide competitive bid and offer quotations on request
and (ii) is ready, willing and able to effect transactions in reasonable
quantities at its quoted prices with other brokers or dealers.
U. Member: Any Person qualifying as a member of the MHC pursuant to its
------
charter and bylaws.
V. MHC: SouthBanc Shares, M.H.C., Anderson, South Carolina.
---
W. Offerings: Collectively, the Subscription Offering, Direct Community
---------
Offering and Syndicated Community Offering.
X. Officer: An executive officer of any or all of the Primary Parties,
-------
which includes the Chief Executive Officer, President, Executive Vice President,
Senior Vice Presidents, Vice Presidents in charge of principal
A-3
business functions, Secretary, Controller, and any Person performing functions
similar to those performed by the foregoing persons.
Y. Order Form(s): Form(s) to be used to purchase Conversion Stock sent to
-------------
Eligible Account Holders and other parties eligible to purchase Conversion Stock
in the Subscription Offering.
Z. Other Member: A Member (other than an Eligible Account Holder or
------------
Supplemental Eligible Account Holder) at the close of business on the Voting
Record Date.
AA. Person: An individual, a corporation, a partnership, an association, a
------
joint-stock company, a trust (including Individual Retirement Accounts and KEOGH
Accounts), any unincorporated organization, a government or political
subdivision thereof or any other entity.
BB. Plan: This Plan of Conversion from Mutual Holding Company to Stock
----
Holding Company and Agreement and Plan of Reorganization, as originally adopted
by the Boards of Directors of the MHC and the Savings Bank, or as amended in
accordance with its terms.
CC. Primary Parties: Collectively, the MHC, the Savings Bank and the
---------------
Holding Company.
DD. Public Stockholder: Any Person who owns Savings Bank Common Stock,
------------------
other than the MHC, as of the Voting Record Date.
EE. Qualifying Deposit: The deposit balance in any Savings Account as of
------------------
the close of business on the Eligibility Record Date or the Supplemental
Eligibility Record Date, as applicable; provided, however, that no Savings
Account with a deposit balance of less than $50.00 shall constitute a Qualifying
Deposit.
FF. Registration Statement: The registration statement on SEC Form S-1,
----------------------
or similar form, filed by the Holding Company with the SEC for the purpose of
registering the Conversion Stock under the Securities Act of 1933, as amended.
GG. Savings Account(s): Withdrawable deposit(s) in the Savings Bank,
------------------
including certificates of deposit, demand deposit accounts and non-interest-
bearing deposit accounts.
HH. Savings Bank: Perpetual Bank, A Federal Savings Bank, Anderson, South
------------
Carolina.
II. Savings Bank Common Stock: The common stock of the Savings Bank, par
-------------------------
value $1.00 per share.
JJ. SEC: Securities and Exchange Commission.
---
KK. Special Meeting of Members: The special meeting of the Members, and
--------------------------
any adjournments thereof, held to consider and vote upon the Plan.
LL. Meeting of Stockholders: The meeting of the stockholders of the
-----------------------
Savings Bank, and any adjournments thereof, to be called and held for the
purpose of submitting the Plan for their approval. Such meeting may either be
an annual or special meeting.
MM. Subscription Offering: The offering of Conversion Stock to Eligible
---------------------
Account Holders, Supplemental Eligible Account Holders and Other Members under
the Plan.
NN. Subscription Rights: Nontransferable, non-negotiable, personal rights
-------------------
of Eligible Account Holders, Supplemental Eligible Account Holders and Other
Members to purchase Conversion Stock.
A-4
OO. Supplemental Eligibility Record Date: The last day of the calendar
------------------------------------
quarter preceding the approval of the Plan by the OTS.
PP. Supplemental Eligible Account Holder: Holder of a Qualifying Deposit
------------------------------------
in the Savings Bank (other than an Officer or director of the Savings Bank or
their Associates) on the Supplemental Eligibility Record Date.
QQ. Syndicated Community Offering: The offering for sale by a syndicate
-----------------------------
of broker-dealers to the general public of shares of Conversion Stock not
purchased in the Subscription Offering and the Direct Community Offering.
RR. Tax-Qualified Employee Stock Benefit Plan: Any defined benefit plan or
-----------------------------------------
defined contribution plan of the Savings Bank or Holding Company, such as an
employee stock ownership plan, 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. A "non-tax-qualified employee stock
benefit plan" is any defined benefit plan or defined contribution plan that is
not so qualified.
SS. Voting Record Date(s): The date(s) fixed by the Boards of Directors
---------------------
of the MHC and the Savings Bank according to OTS regulations for determining
eligibility to vote at the Special Meeting of Members and at the Meeting of
Stockholders.
III. General Procedure for Conversion and Reorganization
---------------------------------------------------
A. Conversion of MHC to an Interim Federal Stock Savings Bank and Merger
---------------------------------------------------------------------
of Such Interim Into the Savings Bank. The MHC will convert into Perpetual
- -------------------------------------
Interim "A" Bank, a Federal Savings Bank (i.e. "Interim A") and Interim A will
simultaneously merge with and into the Savings Bank, with the Savings Bank as
the surviving entity ("MHC Merger"). As a result of the MHC Merger, the Savings
Bank Common Stock held by the MHC will be canceled and Eligible Account Holders
and Supplemental Eligible Account Holders will be granted ratable interests in a
liquidation account, to be established in accordance with the procedures set
forth in Section XIV hereof.
B. Merger of a Second Interim Federal Stock Savings Bank into Savings
------------------------------------------------------------------
Bank and Exchange of Shares. Immediately after the MHC Merger, Perpetual Interim
- ---------------------------
"B" Bank, A Federal Savings Bank (i.e., Interim B) will merge with and into the
Savings Bank, and the separate existence of Interim B will cease ("Savings Bank
Merger"). The shares of the Holding Company Common Stock held by the Bank will
be canceled. The shares of common stock of Interim B held by the Holding Company
will be converted, on a one-to-one basis, into shares of Savings Bank Common
Stock, which will result in the Savings Bank becoming a wholly-owned subsidiary
of the Holding Company. The Public Stockholders will exchange their shares of
Savings Bank Common Stock for shares of Holding Company Common Stock based upon
the Exchange Ratio. In addition, all options to purchase shares of Savings Bank
Common Stock which are outstanding immediately prior to consummation of the
Conversion and Reorganization shall be converted to options to purchase shares
of Holding Company Common Stock, with the number of shares subject to the option
and the exercise price per share to be adjusted based upon the Exchange Ratio so
that the aggregate exercise price remains unchanged, and with the duration of
the option remaining unchanged. Upon consummation of the Conversion and
Reorganization, all of the Savings Bank Common Stock will be owned by the
Holding Company and the Public Stockholders will own the same percentage of the
Holding Company Common Stock as the percentage of the Savings Bank Common Stock
owned by them prior to the Conversion and Reorganization, before giving effect
to cash paid in lieu of any fractional interests of Savings Bank Common Stock
and any shares of Conversion Stock purchased by the Public Stockholders in the
Offering or by the Tax-Qualified Employee Stock Benefit Plans thereafter. The
Holding Company will then sell the Conversion Stock in the Offerings in
accordance with this Plan.
Following consummation of the Conversion and Reorganization, voting rights
with respect to the Savings Bank shall be held and exercised exclusively by the
Holding Company as holder of the outstanding Savings Bank Common Stock. Voting
rights with respect to the Holding Company shall be held and exercised
exclusively by
A-5
holders of the Holding Company Common Stock. As a result of the MHC Merger, the
separate existence of the MHC and the voting rights of Members will cease.
IV. Steps Prior to Submission of the Plan to the Members and the Savings Bank
-------------------------------------------------------------------------
Stockholders for Approval
- -------------------------
Prior to submission of the Plan to the Members and to the stockholders of
the Savings Bank for approval, the Plan must be approved by the OTS. Prior to
such regulatory approval:
A. The Boards of Directors of the MHC and the Savings Bank each shall
adopt the Plan by a vote of not less than two-thirds of their entire membership.
B. The MHC shall publish legal notice of the adoption of the Plan in a
newspaper having a general circulation in each community in which the MHC and
the Savings Bank maintains an office.
C. A press release relating to the proposed Conversion and Reorganization
may be submitted to the local media.
D. Copies of the Plan as adopted by the Boards of Directors of the MHC
and the Savings Bank shall be made available for inspection at each office of
the MHC and the Savings Bank.
E. The Savings Bank shall cause the Holding Company to be incorporated
under state law and the Board of Directors of the Holding Company shall concur
in the Plan by at least a two-thirds vote.
F. As soon as practicable following the adoption of this Plan, the MHC
shall file the Form AC Application, and the Holding Company shall file the
Registration Statement and the H-(e)1 Application. In addition, an application
to merge the MHC (following its conversion into an interim federal stock savings
bank) and the Savings Bank and an application to merge Interim B and the Savings
Bank shall both be filed with the OTS, either as exhibits to the H-(e)1
Application, or separately. Upon filing the Form AC Application, the MHC shall
publish legal notice thereof in a newspaper having a general circulation in each
community in which the MHC and the Savings Bank maintains an office and/or by
mailing a letter to each Member, and also shall publish such other notices of
the Conversion and Reorganization as may be required in connection with the H-
(e)1 Application and by the regulations and policies of the OTS.
G. The MHC and the Savings Bank shall obtain an opinion of their tax
advisors or a favorable ruling from the U.S. Internal Revenue Service which
shall state that the Conversion and Reorganization shall not result in any gain
or loss for federal income tax purposes to the Primary Parties or to Eligible
Account Holders, Supplemental Eligible Account Holders and Other Members.
Receipt of a favorable opinion or ruling is a condition precedent to completion
of the Conversion and Reorganization.
V. Special Meeting of Members
--------------------------
Subsequent to the approval of the Plan by the OTS, the Special Meeting
shall be scheduled in accordance with the MHC's Bylaws. Promptly after receipt
of approval and at least 20 days but not more than 45 days prior to the Special
Meeting, the MHC shall distribute proxy solicitation materials to all Members
and beneficial owners of accounts held in fiduciary capacities where the
beneficial owners possess voting rights, as of the Voting Record Date. The
proxy solicitation materials shall include a copy of the proxy statement to be
used in connection with such solicitation and other documents authorized for use
by the regulatory authorities and may also include a copy of the Plan and/or a
prospectus ("Prospectus") as provided in Section VIII below. The MHC shall also
advise each Eligible Account Holder and Supplemental Eligible Account Holder not
entitled to vote at the Special Meeting of the proposed Conversion and
Reorganization and the scheduled Special Meeting, and provide a postage prepaid
card on which to indicate whether he wishes to receive a Prospectus, if the
Subscription Offering is not held concurrently with the proxy solicitation.
A-6
Pursuant to OTS regulations, an affirmative vote of not less than a
majority of the total outstanding votes of the Members is required for approval
of the Plan. Voting may be in person or by proxy at the Special Meeting of
Members. The OTS shall be notified promptly of the actions of the Members at
the Special Meeting of Members.
VI. Meeting of Stockholders
-----------------------
Subsequent to the approval of the Plan by the OTS, the Meeting of
Stockholders shall be scheduled in accordance with the Savings Bank's Bylaws at
which the Plan will be considered for approval. Promptly after receipt of
approval and at least 20 days but not more than 45 days prior to such meeting,
the Savings Bank shall distribute proxy solicitation materials to Savings Bank
stockholders and beneficial owners of Savings Bank Common Stock held in
fiduciary capacities where the beneficial owners possess voting rights, as of
the Voting Record Date. The proxy solicitation materials shall include a copy
of the proxy statement to be used in connection with such solicitation and other
documents authorized for use by the regulatory authorities and may also include
a copy of the Plan and/or a Prospectus as provided in Paragraph VIII below. The
Savings Bank shall also advise each holder of Savings Bank Common Stock entitled
to vote at the meeting of the proposed Conversion and Reorganization and the
scheduled meeting, and provide a postage prepaid card on which to indicate
whether he wishes to receive the Prospectus, if the Subscription Offering is not
held concurrently with the proxy solicitation.
Pursuant to OTS regulations, an affirmative vote of not less than two-
thirds of the total outstanding votes of the stockholders of the Savings Bank is
required for approval of the Plan. Furthermore, pursuant to OTS policy, the
affirmative vote of not less than a majority of the total outstanding votes of
the stockholders of the Savings Bank (except the MHC) present in person or by
proxy is required for approval of the Plan. Voting may be in person or by proxy
at the Meeting of Stockholders. The OTS shall be notified promptly of the
actions of the stockholders of the Savings Bank at the Meeting of Stockholders.
VII. Summary Proxy Statements
------------------------
The Proxy Statements furnished to Members and to stockholders of the
Savings Bank may be in summary form; provided that a statement is made in bold-
face type that a more detailed description of the proposed transaction may be
obtained by returning an enclosed postage prepaid card or other written
communication requesting supplemental information. Without prior approval of
the OTS, the Special Meeting and the meeting of the stockholders of the Savings
Bank shall not be held less than 20 days after the last day on which the
supplemental information statement is mailed to requesting Members or requesting
stockholder of the Savings Bank. The supplemental information statement may be
combined with the Prospectus if the Subscription Offering is commenced
concurrently with or during the proxy solicitation of Members for the Special
Meeting or of the stockholders of the Savings Bank for the Meeting of
Stockholders.
VIII. Offering Documents
------------------
The Holding Company may commence the Subscription Offering and, provided
that the Subscription Offering has commenced, may commence the Direct Community
Offering concurrently with or during the proxy solicitation relating to the
Special Meeting of Members and the Meeting of Stockholders. The Holding Company
may close the Subscription Offering before such meetings, provided that the
offer and sale of the Conversion Stock shall be conditioned upon approval of the
Plan by the Members at the Special Meeting and by the stockholders of the
Savings Bank at the Meeting of Stockholders. The MHC's and the Savings Bank's
proxy solicitation materials may require Eligible Account Holders, Supplemental
Eligible Account Holders, Other Members and the Savings Bank Stockholder to
return to the Savings Bank by a reasonable certain date a postage prepaid card
or other written communication requesting receipt of a Prospectus with respect
to the Subscription Offering, provided that if the Prospectus is not mailed
concurrently with the proxy solicitation materials, the Subscription Offering
shall not be closed until the expiration of 30 days after the mailing of the
proxy solicitation materials. If the Subscription Offering is not commenced
within 45 days after the Special Meeting, the Savings Bank may transmit, not
more than 30 days prior to the commencement of the Subscription Offering, to
each Eligible Account Holder, Supplemental
A-7
Eligible Account Holder and other eligible subscribers who had been furnished
with proxy solicitation materials a notice which shall state that the Savings
Bank is not required to furnish a Prospectus to them unless they return by a
reasonable date certain a postage prepaid card or other written communication
requesting the receipt of the Prospectus.
Prior to commencement of the Subscription Offering, the Direct Community
Offering and the Syndicated Community Offering, the Holding Company shall file
the Registration Statement. The Holding Company shall not distribute the final
Prospectus until the Registration Statement containing same has been declared
effective by the SEC and the Prospectus has been declared effective by the OTS.
IX. Combined Subscription and Direct Community Offering
---------------------------------------------------
Instead of a separate Subscription Offering, all Subscription Rights may be
exercised by delivery of properly completed and executed Order Forms to the
Savings Bank or selling group utilized in connection with the Direct Community
Offering and the Syndicated Community Offering. If a separate Subscription
Offering is not held, orders for Conversion Stock in the Direct Community
Offering shall first be filled pursuant to the priorities and limitations stated
in Paragraph XI.C. below.
X. Consummation of the Conversion and Reorganization
-------------------------------------------------
The effective date of the Conversion and Reorganization shall be the date
upon which the last of the following actions occurs: (i) the filing of Articles
of Combination with the OTS with respect to the MHC Merger, (ii) the filing of
Articles of Combination with the OTS with respect to the Savings Bank Merger and
(iii) the closing of the issuance of the shares of Conversion Stock in the
Offerings. The filing of Articles of Combination relating to the MHC Merger and
the Savings Bank Merger and the closing of the issuance of shares of Conversion
Stock in the Offerings shall not occur until all requisite regulatory, Member
approval and approval of the stockholders of the Savings Bank have been
obtained, all applicable waiting periods have expired and sufficient
subscriptions and orders for the Conversion Stock have been received. It is
intended that the closing of the MHC Merger, the Savings Bank Merger and the
sale of shares of Conversion Stock in the Offerings shall occur consecutively
and substantially simultaneously.
After the Conversion and Reorganization, the Savings Bank will succeed to
all the rights, interests, duties and obligations of the Savings Bank before the
Conversion and Reorganization, including but not limited to all rights and
interests of the Savings Bank in and to its assets and properties, whether real,
personal or mixed. The Savings Bank will continue to be a member of the Federal
Home Loan Bank System and all its insured savings deposits will continue to be
insured by the FDIC to the extent provided by applicable law.
XI. Conversion Stock Offering
-------------------------
A. Number of Shares
----------------
The number of shares of Conversion Stock to be offered pursuant to the Plan
shall be determined initially by the Boards of Directors of the Primary Parties
in conjunction with the determination of the Purchase Price (as defined in
Section XI.B. below). The number of shares to be offered may be subsequently
adjusted by the Board of Directors prior to completion of the Offerings.
B. Independent Evaluation and Purchase Price of Conversion Stock
-------------------------------------------------------------
All shares of Conversion Stock sold in the Conversion and Reorganization,
including shares sold in any Direct Community Offering, shall be sold at a
uniform price per share, and referred to herein as the "Purchase Price." The
Purchase Price shall be determined by the Board of Directors of the Primary
Parties immediately prior to the simultaneous completion of all such sales
contemplated by this Plan on the basis of the estimated pro forma market
A-8
value of the MHC, as converted, and the Savings Bank at such time. Such
estimated pro forma market value shall be determined for such purpose by an
independent appraiser on the basis of such appropriate factors not inconsistent
with the regulations of the OTS. Immediately prior to the Subscription
Offering, a subscription price range shall be established which shall vary from
15% above to 15% below the average of the minimum and maximum of the estimated
price range. The maximum subscription price (i.e., the per share amount to be
----
remitted when subscribing for shares of Conversion Stock) shall then be
determined within the subscription price range by the Board of Directors of the
Primary Parties. The subscription price range and the number of shares to be
offered may be revised after the completion of the Subscription Offering with
OTS approval without a resolicitation of proxies or Order Forms or both.
C. Method of Offering Shares
-------------------------
Subscription Rights shall be issued at no cost to Eligible Account Holders,
Supplemental Eligible Account Holders and Other Members pursuant to priorities
established by this Plan and the regulations of the OTS. In order to effect the
Conversion and Reorganization, all shares of Conversion Stock proposed to be
issued in connection with the Conversion and Reorganization must be sold and, to
the extent that shares are available, no subscriber shall be allowed to purchase
less than 25 shares; provided, however, that if the purchase price is greater
than $20.00 per share, the minimum number of shares which must be subscribed for
shall be adjusted so that the aggregate actual purchase price required to be
paid for such minimum number of shares does not exceed $500.00. The priorities
established for the purchase of shares are as follows:
1. Category 1: Eligible Account Holders
-------------------------------------
a. Each Eligible Account Holder shall receive, without payment,
Subscription Rights entitling such Eligible Account Holder to purchase
that number of shares of Conversion Stock which is equal to the
greater of the maximum purchase limitation established for the Direct
Community Offering, one-tenth of one percent of the total offering or
15 times the product (round ed down to the next whole number) obtained
by multiplying the total number of shares of Conversion 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. If the allocation made in this paragraph results in an
oversubscription, shares of Conversion Stock shall be allocated among
subscribing Eligible Account Holders so as to permit each such
account holder, to the extent possible, to purchase a number of shares
of Conversion Stock sufficient to make his total allocation equal to
100 shares of Conversion Stock or the total amount of his
subscription, whichever is less. Any shares of Conversion Stock not
so allocated shall be allocated among the subscribing Eligible Account
Holders on an equitable basis, related to the amounts of their
respective Qualifying Deposits as compared to the total Qualifying
Deposits of all Eligible Account Holders.
b. Subscription Rights received by Officers and directors of the
Primary Parties and their Associates, as Eligible Account Holders,
based on their increased deposits in the Savings Bank in the one-year
period preceding the Eligibility Record Date shall be subordinated to
all other subscriptions involving the exercise of Subscription Rights
pursuant to this Category.
2. Category 2: Supplemental Eligible Account Holders
--------------------------------------------------
a. In the event that the Eligibility Record Date is more than 15
months prior to the date of the latest amendment to the Form AC
Application filed prior to OTS approval, then, and only in that event,
each Supplemental Eligible Account Holder shall receive, without
payment, Subscription Rights entitling such Supplemental Eligible
Account Holder to purchase that number of shares of Conversion Stock
which is equal to the greater of the maximum purchase limitation
established for the Direct Community Offering, one-tenth of one
percent of the total offering or
A-9
15 times the product (rounded down to the next whole number) obtained
by multiplying the total number of shares of Conversion 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 the Qualifying Deposits of all
Supplemental Eligible Account Holders.
b. Subscription Rights received pursuant to this category shall
be subordinated to Subscription Rights granted to Eligible Account
Holders.
c. Any Subscription Rights to purchase shares of Conversion Stock
received by an Eligible Account Holder in accordance with Category 1
shall reduce to the extent thereof the Subscription Rights to be
distributed pursuant to this Category.
d. In the event of an oversubscription for shares of Conversion
Stock pursuant to this Category, shares of Conversion Stock shall be
allocated among the subscribing Supplemental Eligible Account Holders
as follows:
(1) Shares of Conversion Stock shall be allocated so as to
permit each such Supplemental Eligible Account Holder, to the
extent possible, to purchase a number of shares of Conversion
Stock sufficient to make his total allocation (including the
number of shares of Conversion Stock, if any, allocated in
accordance with Category Number 1) equal to 100 shares of
Conversion Stock or the total amount of his or her subscription,
whichever is less.
(2) Any shares of Conversion Stock not allocated in
accordance with subparagraph (1) above shall be allocated among
the subscribing Supplemental Eligible Account Holders on an
equitable basis, related to the amounts of their respective
Qualifying Deposits as compared to the total Qualifying Deposits
of all subscribing Supplemental Eligible Account Holders.
3. Category 3: Other Members
--------------------------
a. Other Members shall receive, without payment, Subscription
Rights to purchase shares of Conversion Stock, after satisfying the
subscriptions of Eligible Account Holders and Supplemental Eligible
Account Holders pursuant to Category Nos. l and 2 above, subject to
the following conditions:
(1) Each such Other Member shall be entitled to subscribe
for the greater of the maximum purchase limitation established
for the Direct Community Offering or one-tenth of one percent of
the total offering.
(2) In the event of an oversubscription for shares of
Conversion Stock pursuant to Category 4, the shares of Conversion
Stock available shall be allocated among the subscribing Other
Members pro rata on the basis of the amounts of their respective
subscriptions.
D. Direct Community Offering and Syndicated Community Offering
-----------------------------------------------------------
1. Any shares of Conversion Stock not purchased through the exercise
of Subscription Rights set forth in Category Nos. 1 through 4 above may be
sold by the Holding Company to Persons under such terms and conditions as
may be established by the Savings Bank's Board of Directors with the
concurrence of the OTS. The Direct Community Offering may commence
concurrently with or as soon as possible after
A-10
the completion of the Subscription Offering and must be completed within 45
days after completion of the Subscription Offering, unless extended with
the approval of the OTS. No Person may purchase in the Direct Community
Offering more than 50,000 shares of Conversion Stock issued in the
Conversion and Reorganization. The right to purchase shares of Conversion
Stock under this Category is subject to the right of the Savings Bank or
the Holding Company to accept or reject such orders in whole or in part.
In the event of an oversubscription for shares in this Category, the shares
available shall be allocated among prospective purchasers pro rata on the
basis of the amounts of their respective orders. The offering price for
which such shares are sold to the general public in the Direct Community
Offering shall be the Purchase Price.
2. Orders received in the Direct Community Offering first shall be
filled up to a maximum of 2% of the Conversion Stock and thereafter
remaining shares shall be allocated on an equal number of shares basis per
order until all orders have been filled.
3. The Conversion Stock offered in the Direct Community Offering
shall be offered and sold in a manner that will achieve the widest
distribution thereof. Preference shall be given in the Direct Community
Offering first to the Public Stockholders (who are not Eligible Account
Holders, Supplemental Eligible Account Holders or Other Members) and then
to natural Persons and trusts of natural Persons residing in the Local
Community.
4. Subject to such terms, conditions and procedures as may be
determined by the Savings Bank and the Holding Company, all shares of
Conversion Stock not subscribed for in the Subscription Offering or ordered
in the Direct Community Offering may be sold by a syndicate of broker-
dealers to the general public in a Syndicated Community Offering. No
Person may purchase in the Syndicated Community Offering more 50,000
shares of Conversion Stock issued in the Conversion and Reorganization.
Each order for Conversion Stock in the Syndicated Community Offering shall
be subject to the absolute right of the Savings Bank and the Holding
Company to accept or reject any such order in whole or in part either at
the time of receipt of an order or as soon as practicable after completion
of the Syndicated Community Offering. The Savings Bank and the Holding
Company may commence the Syndicated Community Offering concurrently with,
at any time during, or as soon as practicable after the end of the
Subscription Offering and/or Direct Community Offering, provided that the
Syndicated Community Offering must be completed within 45 days after the
completion of the Subscription Offering, unless extended by the Savings
Bank and the Holding Company with the approval of the OTS.
5. If for any reason a Syndicated Community Offering of shares of
Conversion Stock not sold in the Subscription Offering and the Direct
Community Offering cannot be effected, or in the event that any
insignificant residue of shares of Conversion Stock is not sold in the
Subscription Offering, Direct Community Offering or Syndicated Community
Offering, the Savings Bank and the Holding Company shall use their best
efforts to obtain other purchasers for such shares in such manner and upon
such conditions as may be satisfactory to the OTS.
6. In the event a Direct Community Offering or Syndicated Community
Offering do not appear feasible, the Savings Bank will immediately consult
with the OTS to determine the most viable alternative available to effect
the completion of the Conversion. Should no viable alternative exist, the
Savings Bank may terminate the Conversion with the concurrence of the OTS.
E. Limitations Upon Purchases
--------------------------
The following additional limitations and exceptions shall be imposed upon
purchases of shares of Conversion Stock:
A-11
1. The maximum number of shares of Conversion Stock which may be
subscribed for or purchased in all categories in the Conversion and
Reorganization by any Person, when combined with any Exchange Stock
received, shall not exceed 50,000 shares of Common Stock issued in the
Conversion and Reorganization.
2. The maximum number of shares of Conversion Stock which may be
subscribed for or purchased in all categories in the Conversion and
Reorganization by any Person together with any Associate or any group or
Persons Acting in Concert, when combined with any Exchange Stock received,
shall not exceed 50,000 shares of Common Stock issued in the Conversion
and Reorganization.
3. Officers and directors of the Primary Parties and Associates
thereof may not purchase in the aggregate more than 31% of the shares
issued in the Conversion and Reorganization, including any Exchange Stock
received.
4. The Boards of Directors of the Primary Parties will not be deemed
to be Associates or a group of Persons Acting in Concert with other
directors or trustees solely as a result of membership on the Board of
Directors.
5. The Boards of Directors of the Primary Parties, with the approval
of the OTS and without further approval of Members or stockholders of the
Savings Bank, may, as a result of market conditions and other factors,
increase or decrease the purchase limitation described herein or the number
of shares of Conversion Stock to be sold in the Conversion and
Reorganization. If the Primary Parties increases the maximum purchase
limitations or the number of shares of Conversion Stock to be sold in the
Conversion and Reorganization, the Primary Parties are only required to
resolicit Persons who subscribed for the maximum purchase amount and may,
in the sole discretion of the Primary Parties, resolicit certain other
large subscribers. If the Primary Parties decrease the maximum purchase
limitations or the number of shares of Conversion Stock to be sold in the
Conversion and Reorganization, the orders of any Person who subscribed for
the maximum purchase amount shall be decreased by the minimum amount
necessary so that such Person shall be in compliance with the then maximum
number of shares permitted to be subscribed for by such Person.
Notwithstanding anything to the contrary contained in this Plan, and except
as may be required by the OTS, Public Stockholders will not be required to sell
or divest any Holding Company Common Stock or be limited in receiving Exchange
Stock even if their percentage ownership of the Savings Bank Common Stock when
converted into Exchange Stock would exceed an applicable purchase limitation.
Each Person purchasing Conversion Stock in the Conversion and
Reorganization shall be deemed to confirm that such purchase does not conflict
with the purchase limitations under the Plan or otherwise imposed by law, rule
or regulation. In the event that such purchase limitations are violated by any
Person (including any Associate or group of Persons affiliated or otherwise
Acting in Concert with such Person), the Holding Company shall have the right to
purchase from such Person at the actual Purchase Price per share all shares
acquired by such Person in excess of such purchase limitations or, if such
excess shares have been sold by such Person, to receive from such Person the
difference between the actual Purchase Price per share paid for such excess
shares and the price at which such excess shares were sold by such Person. This
right of the Holding Company to purchase such excess shares shall be assignable
by the Holding Company.
F. Restrictions On and Other Characteristics of the Conversion Stock
-----------------------------------------------------------------
1. Transferability. Conversion Stock purchased by Officers and
---------------
directors of the Primary Parties shall not be sold or otherwise disposed of
for value for a period of one year from the effective date of Conversion
and Reorganization, except for any disposition (i) following the death of
the original
A-12
purchaser or (ii) resulting from an exchange of securities in a merger or
acquisition approved by the regulatory authorities having jurisdiction.
The Conversion Stock issued by the Holding Company to such Officers
and directors shall bear a legend giving appropriate notice of the one-year
holding period restriction. Said legend shall state as follows:
"The shares evidenced by this certificate are restricted as to
transfer for a period of one year from the date of this certificate
pursuant to Part 563b of the Rules and Regulations of the Office of
Thrift Supervision. These shares may not be transferred prior thereto
without a legal opinion of counsel that said transfer is permissible
under the provisions of applicable laws and regulations."
In addition, the Holding Company shall give appropriate instructions
to the transfer agent of the Holding Company Common Stock with respect to
the foregoing restrictions. Any shares of Holding Company Common Stock
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 such Persons as may be then applicable to such
restricted stock.
2. Subsequent Purchases by Officers and Directors. Without prior
----------------------------------------------
approval of the OTS, if applicable, Officers and directors of the Savings
Bank and officers and directors of the Holding Company, and their
Associates, shall be prohibited for a period of three years following
completion of the Conversion and Reorganization from purchasing outstanding
shares of Holding Company Common Stock, except from a broker or dealer
registered with the SEC. Notwithstanding this restriction, purchases
involving more than 1% of the total outstanding shares of Holding Company
Stock and purchases made and shares held by a Tax-Qualified or non-Tax-
Qualified Employee Stock Benefit Plan which may be attributable to such
directors and Officers may be made in negotiated transactions without OTS
permission or the use of a broker or dealer.
3. Repurchase and Dividend Rights. For a period of three years
------------------------------
following the consummation of the Conversion and Reorganization, any
repurchases of Holding Company Stock by the Holding Company from any Person
shall be subject to the then applicable rules and regulations and policies
of the OTS. The Savings Bank may not declare or pay a cash dividend on or
repurchase any of its Capital Stock if the result thereof would be to
reduce the regulatory capital of the Savings Bank below the amount required
for the liquidation account described in Paragraph XIV. Further, any
dividend declared or paid on the Capital Stock shall comply with the then
applicable rules and regulations of the OTS.
4. Voting Rights. After the Conversion and Reorganization, holders
-------------
of Savings Accounts in and obligors on loans of the Savings Bank will not
have voting rights in the Savings Bank. Exclusive voting rights with
respect to the Holding Company shall be vested in the holders of Holding
Company Stock; holders of Savings Accounts in and obligors on loans of the
Savings Bank will not have any voting rights in the Holding Company except
and to the extent that such Persons become stockholders of the Holding
Company, and the Holding Company will have exclusive voting rights with
respect to the Savings Bank's Capital Stock.
G. Mailing of Offering Materials and Collation of Subscriptions
------------------------------------------------------------
The sale of all shares of Conversion Stock offered pursuant to the Plan
must be completed within 24 months after approval of the Plan at the Special
Meeting. After approval of the Plan by the OTS and the declaration of the
effectiveness of the Prospectus, the Holding Company shall distribute
Prospectuses and Order Forms for the purchase of shares of Conversion Stock in
accordance with the terms of the Plan.
A-13
The recipient of an Order Form shall be provided not less than 20 days nor
more than 45 days from the date of mailing, unless extended, properly to
complete, execute and return the Order Form to the Holding Company or the
Savings Bank. Self-addressed, postage prepaid, return envelopes shall accompany
all Order Forms when they are mailed. Failure of any eligible subscriber to
return a properly completed and executed Order Form within the prescribed time
limits shall be deemed a waiver and a release by such eligible subscriber of any
rights to purchase shares of Conversion Stock under the Plan.
The sale of all shares of Conversion Stock proposed to be issued in
connection with the Conversion and Reorganization must be completed within 45
days after the last day of the Subscription Offering, unless extended by the
Holding Company with the approval of the OTS.
H. Method of Payment
-----------------
Payment for all shares of Conversion Stock may be made in cash, by check or
by money order, or if a subscriber has a Savings Account(s), such subscriber may
authorize the Savings Bank to charge the subscriber's Savings Account(s). The
Savings Bank shall pay interest at not less than the passbook rate on all
amounts paid in cash or by check or money order to purchase shares of Conversion
Stock in the Subscription Offering from the date payment is received until the
Conversion and Reorganization is completed or terminated. The Savings Bank is
not permitted knowingly to loan funds or otherwise extend any credit to any
Person for the purpose of purchasing Conversion Stock.
If a subscriber authorizes the Savings Bank to charge the subscriber's
Savings Account(s), the funds shall remain in the subscriber's Savings
Account(s) and shall continue to earn interest, but may not be used by such
subscriber until the Conversion and Reorganization is completed or terminated,
whichever is earlier. The withdrawal shall be given effect only concurrently
with the sale of all shares of Conversion Stock proposed to be sold in the
Conversion and Reorganization and only to the extent necessary to satisfy the
subscription at a price equal to the aggregate Purchase Price. The Savings Bank
shall allow subscribers to purchase shares of Conversion Stock by withdrawing
funds from certificate accounts held with the Savings Bank without the
assessment of early withdrawal penalties. 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 that event, the remaining balance shall earn
interest at the passbook rate.
I. Undelivered, Defective or Late Order Forms; Insufficient Payment
----------------------------------------------------------------
If an Order Form (i) is not delivered and is returned to the Holding
Company or the Savings Bank by the United States Postal Service (or the Holding
Company or Savings Bank is unable to locate the addressee); (ii) is not returned
to the Holding Company or Savings Bank, or is returned to the Holding Company or
Savings Bank after expiration of the date specified thereon; (iii) is
defectively completed or executed; or (iv) is not accompanied by the total
required payment for the shares of Conversion Stock subscribed for (including
cases in which the subscribers' Savings Accounts are insufficient to cover the
authorized withdrawal for the required payment), the Subscription Rights of the
Person to whom such rights have been granted shall not be honored and shall be
treated as though such Person failed to return the completed Order Form within
the time period specified therein. Alternatively, the Holding Company or
Savings Bank may, but shall not be required to, waive any irregularity relating
to any Order Form or require the submission of a corrected Order Form or the
remittance of full payment for the shares of Conversion Stock subscribed for by
such date as the Holding Company or Savings Bank may specify. Subscription
orders, once tendered, shall not be revocable. The Holding Company's and
Savings Bank's interpretation of the terms and conditions of the Plan and of the
Order Forms shall be final.
A-14
J. Members in Non-Qualified States or in Foreign Countries
-------------------------------------------------------
The Primary Parties 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 reside. However, the Primary Parties
are 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 (i) a small number of persons otherwise eligible to subscribe
for shares of Common Stock reside in such state; or (ii) the Primary Parties
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
request or requirement that the Primary Parties or their officers, directors or
trustees register as a broker, dealer, salesman or selling agent, under the
securities laws of such state, or a request or requirement to register or
otherwise qualify the Subscription Rights or Common Stock for sale or submit any
filing with respect thereto in such state. Where the number of persons eligible
to subscribe for shares in one state is small relative to other states, the
Primary Parties will base their decision as to whether or not to offer the
Common Stock in such state on a number of factors, including the size of
accounts held by account holders in the state, the cost of reviewing the
registration and qualification requirements of the state (and of actually
registering or qualifying the shares) or the need to register the Holding
Company, its officers, directors or employees as brokers, dealers or salesmen.
XII. Post Conversion and Reorganization Filing and Market Making
-----------------------------------------------------------
In connection with the Conversion and Reorganization, the Holding Company
shall register the Common Stock with the SEC pursuant to the Securities Exchange
Act of 1934, as amended, and shall undertake not to deregister such Conversion
Stock for a period of three years thereafter.
The Holding Company shall use its best efforts to encourage and assist
Market Makers to establish and maintain a market for the shares of its stock.
The Holding Company shall also use its best efforts to list its stock on The
Nasdaq Stock Market or on a national or regional securities exchange.
XIII. Status of Savings Accounts and Loans Subsequent to Conversion and
-----------------------------------------------------------------
Reorganization
- --------------
All Savings Accounts shall retain the same status after Conversion and
Reorganization as these accounts had prior to Conversion and Reorganization.
Each Savings Account holder shall retain, without payment, a withdrawable
Savings Account(s) after the Conversion and Reorganization, equal in amount to
the withdrawable value of such holder's Savings Account(s) prior to Conversion
and Reorganization. All Savings Accounts will continue to be insured by the
Savings Association Insurance Fund of the FDIC up to the applicable limits of
insurance coverage. All loans granted by the Savings Bank shall retain the same
status after the Conversion and Reorganization as they had prior to the
Conversion and Reorganization. See Paragraph III.B. with respect to the
termination of voting rights of Members.
XIV. Liquidation Account
-------------------
After the Conversion and Reorganization, holders of Savings Accounts shall
not be entitled to share in any residual assets in the event of liquidation of
the Savings Bank. However, the Savings Bank shall, at the time of the
Conversion and Reorganization, establish a liquidation account in an amount
equal to the amount of dividends with respect to the Savings Bank Common Stock
waived by the MHC plus the greater of (i) the Savings Bank's total retained
earnings as of the date of the latest statement of financial condition contained
in the final offering circular used in connection with the Savings Bank's
reorganization as a majority owned subsidiary of the MHC, or (ii) 53.02% of the
Savings Bank's total stockholders' equity as of the date of the latest statement
of financial condition contained in the final Prospectus used in connection with
the Conversion and Reorganization. The function of the liquidation account
shall be to establish a priority on liquidation and, except as provided in
Section XI.F.3. above, the existence of the liquidation account shall not
operate to restrict the use or application of any of the net worth accounts of
the Savings Bank.
A-15
The liquidation account shall be maintained by the Savings Bank subsequent
to the Conversion and reorganization for the benefit of Eligible Account Holders
and Supplemental Eligible Account Holders who retain their Savings Accounts in
the Savings Bank. Each Eligible Account Holder and Supplemental Eligible
Account Holder shall, with respect to each Savings Account held, have a related
inchoate interest in a portion of the liquidation account balance
("subaccount").
The initial subaccount balance for a Savings Account held by an Eligible
Account Holder and/or a 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 such holder's Qualifying Deposit in the
Savings Account and the denominator is the total amount of the Qualifying
Deposits of all Eligible Account Holders and Supplemental Eligible Account
Holders. 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 Savings Account of an Eligible Account Holder
or Supplemental Eligible Account Holder at the close of business on any annual
closing date subsequent to the Eligibility Record Date is less than the lesser
of (i) the deposit balance in such Savings 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 Qualifying
Deposit in such Savings Account on the Eligibility Record Date or the
Supplemental Eligibility Record Date, then the subaccount balance for such
Savings Account shall be adjusted by reducing such subaccount balance in an
amount proportionate to the reduction in such deposit balance. In the event of
a downward adjustment, such subaccount balance shall not be subsequently
increased, notwithstanding any increase in the deposit balance of the related
Savings Account. If any such Savings Account is closed, the related subaccount
balance shall be reduced to zero.
In the event of a complete liquidation of the Savings Bank, 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 balance(s) for Savings Account(s) then held
by such holder before any liquidation distribution may be made to stockholders.
No merger, consolidation, bulk purchase of assets with assumptions of Savings
Accounts and other liabilities or similar transactions with another Federally-
insured institution in which the Savings Bank is not the surviving institution
shall be considered to be a complete liquidation. In any such transaction, the
liquidation account shall be assumed by the surviving institution.
XV. Regulatory Restrictions on Acquisition of Holding Company
---------------------------------------------------------
A. OTS regulations provide that for a period of three years following
completion of the Conversion and Reorganization, no Person (i.e, individual, a
group Acting in Concert, a corporation, a partnership, an association, a joint
stock company, a trust, or any unincorporated organization or similar company, a
syndicate or any other group formed for the purpose of acquiring, holding or
disposing of securities of an insured institution or its holding company) shall
directly, or indirectly, offer to purchase or actually acquire the beneficial
ownership of more than 10% of any class of equity security of the Holding
Company without the prior approval of the OTS. However, approval is not
required for purchases directly from the Holding Company or the underwriters or
selling group acting on its behalf with a view towards public resale, or for
purchases not exceeding 1% per annum of the shares outstanding. Civil penalties
may be imposed by the OTS for willful violation or assistance of any violation.
Where any Person, directly or indirectly, acquires beneficial ownership of more
than 10% of any class of equity security of the Holding Company within such
three-year period, without the prior approval of the OTS, stock of the Holding
Company beneficially owned by such Person in excess of 10% 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 stockholders for a
vote. The provisions of this regulation shall not apply to the acquisition of
securities by Tax-Qualified Employee Stock Benefit Plans provided that such
plans do not have beneficial ownership of more than 25% of any class of equity
security of the Holding Company.
A-16
B. The Holding Company may provide in its articles of incorporation, or
similar document, a provision that, for a specified period of up to five years
following the date of the completion of the Conversion and Reorganization, no
Person shall directly or indirectly offer to acquire or actually acquire the
beneficial ownership of more than 10% of any class of equity security of the
Holding Company. Such provisions would not apply to acquisition of securities
by Tax-Qualified Employee Stock Benefit Plans provided that such plans do not
have beneficial ownership of more than 25% of any class of equity security of
the Holding Company. The Holding Company may provide in its articles of
incorporation, or similar document, for such other provisions affecting the
acquisition of its stock as shall be determined by its Board of Directors.
XVI. Directors and Officers of the Savings Bank
------------------------------------------
The Conversion and Reorganization is not intended to result in any change
in the directors or Officers of the Savings Bank. Each Person serving as a
director of the Savings Bank at the time of Conversion and Reorganization shall
continue to serve as a member of the Savings Bank's Board of Directors, subject
to the Savings Bank's Federal Stock Charter and Bylaws. The Persons serving as
Officers immediately prior to the Conversion and Reorganization will continue to
serve at the discretion of the Board of Directors in their respective capacities
as Officers of the Savings Bank. In connection with the Conversion and
Reorganization, the Savings Bank and the Holding Company may enter into
employment agreements on such terms and with such officers as shall be
determined by the Boards of Directors of the Savings Bank and the Holding
Company.
XVII. Executive Compensation
----------------------
The Savings Bank and the Holding Company may adopt, subject to any required
approvals, executive compensation or other benefit programs, including but not
limited to compensation plans involving stock options, stock appreciation
rights, restricted stock grants, employee recognition programs and the like.
XVIII. Amendment or Termination of Plan
--------------------------------
If necessary or desirable, the Plan may be amended by a two-thirds vote of
the Savings Bank's Board of Directors or the MHC's Board of Directors, at any
time prior to the Special Meeting of Members and the Meeting of Stockholders.
At any time thereafter, the Plan may be amended by a two-thirds vote of the
respective Boards of Directors only with the concurrence of the OTS. The Plan
may be terminated by a two-thirds vote of the Board of Directors at any time
prior to the Special Meeting of Members or the Meeting of Stockholders, and at
any time following such meetings with the concurrence of the OTS. In its
discretion, the Boards of Directors of the MHC and the Savings Bank may modify
or terminate the Plan upon the order of the regulatory authorities without a
resolicitation of proxies or another Special Meeting of Members or Meeting of
Stockholders.
In the event that mandatory new regulations pertaining to conversions are
adopted by the OTS prior to the completion of the Conversion and Reorganization,
the Plan shall be amended to conform to the new mandatory regulations without a
resolicitation of proxies or another Special Meeting of Members or another
Meeting of Stockholders. In the event that new conversion regulations adopted
by the OTS prior to completion of the Conversion and Reorganization contain
optional provisions, the Plan may be amended to utilize such optional provisions
at the discretion of the Board of Directors without a resolicitation of proxies
or another Special Meeting of Members or another Meeting of Stockholders.
By adoption of the Plan, the Members and the Savings Bank stockholders
authorize the Boards of Directors of the MHC and the Savings Bank to amend
and/or terminate the Plan under the circumstances set forth above.
XIX. Expenses of the Conversion and Reorganization
---------------------------------------------
The Primary Parties shall use their best efforts to assure that expenses
incurred in connection with the Conversion and Reorganization are reasonable.
A-17
XX. Contributions to Tax-Qualified Plans
------------------------------------
The Holding Company and/or the Savings Bank may make discretionary
contributions to the Tax-Qualified Employee Stock Benefit Plans, provided such
contributions do not cause the Savings Bank to fail to meet its regulatory
capital requirements.
* * *
A-18
ANNEX A
-------
PLAN OF MERGER
This Plan of Merger, dated as of __________ ___, 1998, is made by and
between SouthBanc Shares, M.H.C. ("MHC"), a federally chartered mutual holding
company, and Perpetual Bank, A Federal Savings Bank ("Savings Bank" or
"Surviving Corporation"), a federally chartered savings bank (collectively, the
"Constituent Corporations").
WITNESSETH:
WHEREAS, the MHC and the Savings Bank have adopted a Plan of Conversion
from Mutual Holding Company to Stock Holding Company and Agreement and Plan of
Reorganization ("Plan of Conversion") pursuant to which (i) the MHC will convert
to a federally-chartered interim stock savings bank and simultaneously merge
with and into the Savings Bank, with the Savings Bank as the surviving entity
("MHC Merger"), (ii) the Savings Bank and a newly-formed interim federal savings
bank will merge, pursuant to which the Savings Bank will become a wholly-owned
subsidiary of a newly formed stock corporation ("Holding Company") ("Savings
Bank Merger"), and (iii) the Holding Company will offer shares of its common
stock in the manner set forth in the Plan of Conversion (collectively, the
"Conversion and Reorganization"); and
WHEREAS, the MHC and the Savings Bank desire to provide for the terms and
conditions of the MHC Merger;
NOW, THEREFORE, the MHC and the Savings Bank hereby agree as follows:
1. EFFECTIVE DATE. The MHC Merger shall become effective on the date
specified in the endorsement of the Articles of Combination relating to the MHC
Merger by the Secretary of the Office of Thrift Supervision ("OTS") pursuant to
12 C.F.R. 552.13(k), or any successor thereto ("Effective Date").
2. THE MHC MERGER AND EFFECT THEREOF. Subject to the terms and conditions
set forth herein and the prior approval of the OTS of the Conversion and
Reorganization, as defined in the Plan of Conversion, and the expiration of all
applicable waiting periods, the MHC shall convert from the mutual form to a
federal interim stock savings bank and simultaneously merge with and into the
Savings Bank, which shall be the Surviving Corporation. Upon consummation of
the MHC Merger, the Surviving Corporation shall be considered the same business
and corporate entity as each of the Constituent Corporations and the Surviving
Corporation shall be subject to and be deemed to have assumed all of the
property, rights, privileges, powers, franchises, debts, liabilities,
obligations, duties and relationships of each of the Constituent Corporations
and shall have succeeded to all of each of their relationships, fiduciary or
otherwise, as fully and to the same extent as if such property, rights,
privileges, powers, franchises, debts, obligations, duties and relationships had
been originally acquired, incurred or entered into by the Surviving Corporation.
In addition, any reference to either of the Constituent Corporations in any
contract or document, whether executed or taking effect before or after the
Effective Date, shall be considered a reference to the Surviving Corporation if
not inconsistent with the other provisions of the contract or document; and any
pending action or other judicial proceeding to which either of the Constituent
Corporations is a party shall not be deemed to have abated or to have been
discontinued by reason of the MHC Merger, but may be prosecuted to final
judgment, order or decree in the same manner as if the MHC Merger had not
occurred or the Surviving Corporation may be substituted as a party to such
action or proceeding, and any judgment, order or decree may be rendered for or
against it that might have been rendered for or against either of the
Constituent Corporations if the MHC Merger had not occurred.
1
3. CANCELLATION OF SAVINGS BANK COMMON STOCK HELD BY THE MUTUAL HOLDING
COMPANY AND MEMBER INTERESTS; LIQUIDATION ACCOUNT.
(a) On the Effective Date: (i) each share of common stock, $1.00 par value
per share, of the Savings Bank ("Savings Bank Common Stock") issued and
outstanding immediately prior to the Effective Date and held by the MHC shall,
by virtue of the MHC Merger and without any action on the part of the holder
thereof, be canceled, (ii) the interests in the MHC of any person, firm or
entity who or which qualified as a member of the MHC in accordance with its
mutual charter and bylaws and the laws of the United States prior to the MHC's
conversion from mutual to stock form ("Members") shall, by virtue of the MHC
Merger and without any action on the part of any Member, be canceled, and (iii)
the Savings Bank shall establish a liquidation account on behalf of each
depositor member of the MHC as provided for in the Plan of Conversion.
(b) At or after the Effective Date and prior to the Savings Bank Merger,
each certificate or certificates theretofore, evidencing issued and outstanding
shares of Savings Bank Common Stock, other than any such certificate or
certificates held by the MHC, which shall be canceled, shall continue to
represent issued and outstanding shares of Savings Bank Common Stock.
4. RIGHTS OF DISSENT AND APPRAISAL ABSENT. No holder of Savings Bank
Common Stock shall have any dissenter or appraisal rights in connection with the
MHC Merger.
5. NAME OF SURVIVING CORPORATION. The name of the Surviving Corporation
shall be "Perpetual Bank, A Federal Savings Bank."
6. DIRECTORS OF THE SURVIVING CORPORATION. Upon and after the Effective
Date, until changed in accordance with the Charter and Bylaws of the Surviving
Corporation and applicable law, the number of directors of the Surviving
Corporation shall be nine. The names of those persons who, upon and after the
Effective Date, shall be directors of the Surviving Corporation are set forth
below. Each such director shall serve for the term which expires at the annual
meeting of stockholders of the Surviving Corporation in the year set forth after
his respective name, and until a successor is elected and qualified.
Name Term Expires
---- ------------
Harold A. "Drew" Pickens 1998
Robert W. "Lujack" Orr 1997
Martha S. Clamp 1997
Jack F. McIntosh 1999
Charles W. Fant, Jr. 1999
Cordes G. Seabrook, Jr. 1999
Jim Gray Watson 1998
Richard C. Ballenger 1997
F. Stevon Kay 1998
The address of each director is 907 N. Main Street, Anderson, South
Carolina 29621.
7. OFFICERS OF THE SURVIVING CORPORATION. Upon and after the Effective
Date, until changed in accordance with the Federal Stock Charter and Bylaws of
the Surviving Corporation and applicable law, the officers of the Savings Bank
immediately prior to the Effective Date shall be the officers of the Surviving
Corporation.
8. OFFICES. Upon the Effective Date, all offices of the Savings Bank
shall be offices of the Surviving Corporation. As of the Effective Date, the
home office of the Surviving Corporation shall remain at 907 N. Main Street,
Anderson, South Carolina, and the locations of the branch offices of the
Surviving Corporation shall
2
be 104 Whitehall Road, Anderson, South Carolina; 2821 South Main Street,
Anderson, South Carolina; Windsor Place Winn Dixie, S.C. Highway 81, Anderson,
South Carolina; 3898 Liberty Highway, Anderson, South Carolina; and 1007 Bypass
123, Seneca, South Carolina.
9. CHARTER AND BYLAWS. On and after the Effective Date, the Charter of
the Savings Bank as in effect immediately prior to the Effective Date shall be
the Federal Stock Charter of the Surviving Corporation until amended in
accordance with the terms thereof and applicable law, except that the Federal
Stock Charter shall be amended to provide for the establishment of a liquidation
account in accordance with applicable the Plan of Conversion. On and after the
Effective Date, the Bylaws of the Savings Bank as in effect immediately prior to
the Effective Date shall be the Bylaws of the Surviving Corporation until
amended in accordance with the terms thereof and applicable law.
10. STOCKHOLDER AND MEMBER APPROVALS. The affirmative votes of the holders
of Savings Bank Common Stock and of the Members as set forth in the Plan of
Conversion shall be required to approve the Plan of Conversion, of which this
Plan of Merger is a part, on behalf of the Savings Bank and the MHC,
respectively.
11. ABANDONMENT OF PLAN. This Plan of Merger may be abandoned by either
the MHC or the Savings Bank at any time before the Effective Date in the manner
set forth in the Plan of Conversion.
12. AMENDMENTS. This Plan of Merger may be amended in the manner set
forth in the Plan of Conversion by a subsequent writing signed by the parties
hereto upon the approval of the Boards of Directors of the Constituent
Corporations.
13. SUCCESSORS. This Agreement shall be binding on the successors of the
Constituent Corporations.
14. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of South Carolina, except to the extent
superseded by the laws of the United States.
IN WITNESS WHEREOF, the MHC and the Savings Bank have caused this Plan of
Merger to be executed by their duly authorized officers as of the day and year
first above written.
Attest: SOUTHBANC SHARES, M.H.C.
By:
- ------------------------- ------------------------------------
Sylvia B. Reed Robert W. "Lujack" Orr
Corporate Secretary President and Chief Executive Officer
Attest: PERPETUAL BANK, A FEDERAL SAVINGS BANK
By:
- ------------------------- ------------------------------------
Sylvia B. Reed Robert W. "Lujack" Orr
Corporate Secretary President and Chief Executive Officer
3
ANNEX B
-------
PLAN OF REORGANIZATION
This Plan of Reorganization, dated as of _____________ ___, 1998, is made
by and among Perpetual Bank, A Federal Savings Bank ("Savings Bank" or the
"Surviving Corporation"), a federally chartered savings bank and majority owned
subsidiary of SouthBanc Shares, M.H.C. ("MHC"), a federally chartered mutual
holding company; ________________ ("Holding Company"), a ____________
corporation organized by the Savings Bank; and Perpetual Interim "B" Bank, A
Federal Savings Bank ("Interim B"); a to-be formed interim federal stock savings
bank.
WITNESSETH:
WHEREAS, the Savings Bank has organized the Holding Company as a first-
tier, wholly owned subsidiary for the purpose of becoming the stock holding
company of the Savings Bank upon completion of the Conversion and Reorganization
as defined in the Plan of Conversion from Mutual Holding Company to Stock
Holding Company and Agreement and Plan of Reorganization ("Plan of Conversion")
adopted by the Boards of Directors of the MHC and the Savings Bank; and
WHEREAS, the MHC owns as of the date hereof _____% of the outstanding
common stock of the Savings Bank, par value $1.00 per share ("Savings Bank
Common Stock), will convert to a federally-chartered interim stock savings bank
and simultaneously merge with and into the Savings Bank pursuant to the Plan of
Conversion and the Plan of Merger included as Annex A thereto ("MHC Merger"),
pursuant to which all shares of Savings Bank Common Stock held by the MHC will
be canceled; and
WHEREAS, the formation of a stock holding company by the Savings Bank will
be facilitated by causing the Holding Company to become the sole stockholder of
a newly-formed interim stock savings bank ("Interim B") and then merge Interim B
with and into the Savings Bank, pursuant to which the Savings Bank will
reorganize as a wholly-owned subsidiary of the Holding Company
("Reorganization") and, in connection therewith, all outstanding shares of
Savings Bank Common Stock will be converted automatically into and become shares
of common stock of the Holding Company, par value $____ per share ("Holding
Company Common Stock"); and
WHEREAS, Interim B is being organized by the officers of the Savings Bank
as an interim Federal stock savings bank with the Holding Company as its sole
stockholder in order to effect the Reorganization; and
WHEREAS, the Savings Bank and Interim B ("Constituent Corporations") and
the Holding Company desire to provide for the terms and conditions of the
Reorganization.
NOW, THEREFORE, the Savings Bank, Interim B and the Holding Company hereby
agree as follows:
1. EFFECTIVE DATE. The Reorganization shall become effective on the date
specified in the endorsement of the articles of combination relating to the
Reorganization by the Office of Thrift Supervision ("OTS") pursuant to 12 C.F.R.
(S)552.13(k), or any successor thereto ("Effective Date").
2. THE MERGER AND EFFECT THEREOF. Subject to the terms and conditions
set forth herein and the prior approval of the OTS of the Conversion and the
Reorganization, as defined in the Plan of Conversion, and the expiration of all
applicable waiting periods, Interim B shall merge with and into the Savings
Bank, with the Savings Bank as the Surviving Corporation. Upon consummation of
the Reorganization, the Surviving Corporation shall be considered the same
business and corporate entity as each of the Constituent Corporations and
thereupon and thereafter all the property, rights, powers and franchises of each
of the Constituent Corporations shall vest in the Surviving Corporation and the
Surviving Corporation shall be subject to and be deemed to have assumed all of
the property, rights, privileges, powers, franchises, debts, liabilities,
obligations and duties of each of the Constituent
1
Corporations and shall have succeeded to all of each of their relationships,
fiduciary or otherwise, fully and to the same extent as if such property,
rights, privileges, powers, franchises, debts, obligations, duties and
relationships had been (originally acquired, incurred or entered into by the
Surviving Corporation. In addition any reference to either of the Constituent
Corporations in any contract or document, whether executed or taking effect
before or after the Effective Date, shall be considered a reference to the
Savings Bank if not inconsistent with the other provisions of the contract or
document; and any pending action or other judicial proceeding of which either of
the Constituent Corporations is a party shall not be deemed to have abated or to
have been discontinued by reason of the Reorganization, but may be prosecuted to
final judgment, order or decree in the same manner as if the Reorganization had
not occurred or the Surviving Corporation may be substituted as a party to such
action or proceeding, and any judgment, order or decree may be rendered for or
against it that might have been rendered for or against either of the
Constituent Corporations if the Reorganization had not occurred.
3. CONVERSION OF STOCK.
(a) On the Effective Date, (i) each share of Savings Bank Common Stock
issued and outstanding immediately prior to the Effective Date shall, by virtue
of the Reorganization and without any action on the part of the holder thereof,
be converted into the right to receive Holding Company Common Stock based on the
Exchange Ratio, as defined in the Plan of Conversion, plus the right to receive
cash in lieu of any fractional share interest, as determined in accordance with
Section 3(c) hereof, (ii) each share of common stock, par value $1.00 per share,
of Interim B ("Interim B Common Stock") issued and outstanding immediately prior
to the Effective Date shall, by virtue of the Reorganization and without any
action on the part of the holder thereof, be converted into one share of Savings
Bank Common Stock, and (ii) each share of Holding Company Common Stock issued
and outstanding immediately prior to the Effective Date shall, by virtue of the
Reorganization and without any action on the part of the holder thereof, be
canceled. By voting in favor of this Plan of Reorganization, the Holding
Company, as the sole stockholder of Interim B, shall have agreed (i) to issue
shares of Holding Company Common Stock in accordance with the terms hereof and
(ii) to cancel all previously issued and outstanding shares of Holding Company
Common Stock upon the effectiveness of the Reorganization.
(b) On and after the Effective Date, there shall be no registrations of
transfers on the stock transfer books of Interim B or the Savings Bank of shares
of Interim B Common Stock or Savings Bank Common Stock which were outstanding
immediately prior to the Effective Date.
(c) Notwithstanding any other provision hereof, no fractional shares of
Holding Company Common Stock shall be issued to holders of Savings Bank Common
Stock. In lieu thereof, the holder of shares of Savings Bank Common Stock
entitled to a fraction of a share of Holding Company Common Stock shall, at the
time of surrender of the certificate or certificates representing such holder
shares, receive an amount of cash equal to the product arrived at by multiplying
such fraction of a share of Holding Company Common Stock by the Purchase Price,
as defined in the Plan of Conversion. No such holder shall be entitled to
dividends, voting rights or any other rights in respect of any fractional share.
4. EXCHANGE OF SHARES.
(a) At or after the Effective Date, each holder of a certificate or
certificates theretofore evidencing issued and outstanding shares of Savings
Bank Common Stock, upon surrender of the same to an agent, duly appointed by the
Holding Company ("Exchange Agent"), shall be entitled to receive in exchange
therefor certificate(s) representing the number full shares of Holding Company
Common Stock for which the shares of Savings Bank Common Stock theretofore
represented by the certificate or certificates so surrendered shall have been
converted as provided in Section 3(a) hereof. The Exchange Agent shall mail to
each holder of record of an outstanding certificate which immediately prior to
the Effective Date evidenced shares of Savings Bank Common Stock, and which is
to be exchanged for Holding Company Common Stock as provided in Section 3(a)
hereof, a form of letter of transmittal which shall specify that delivery shall
be effected, and risk of loss and title to such certificate shall pass, only
upon delivery of such certificate to the Exchange Agent advising such holder of
the terms of the exchange effected by the
2
Reorganization and of the procedure for surrendering to the Exchange Agent such
certificate in exchange for certificate or certificates evidencing Holding
Company Common Stock.
(b) No holder of a certificate theretofore represent shares of Savings Bank
Common Stock shall be entitled to receive any dividends in respect of the
Holding Company Common Stock into which such shares shall have been converted by
virtue of the Bank Merger until the certificate representing such shares of
Savings Bank Common Stock is surrendered in exchange for certificates
representing shares of Holding Company Common Stock. In the event that dividends
are declared and paid by the Holding Company in respect of Holding Company
Common Stock after the Effective Date but prior to surrender of certificates
representing shares of Savings Bank Common Stock, dividends payable in respect
of shares of Holding Company Common Stock not then issued shall accrue (without
interest). Any such dividends shall be paid (without interest) upon surrender of
the certificates representing such shares of Savings Bank Common Stock. The
Holding Company shall be entitled, after the Effective Date, to treat
certificates representing shares of Savings Bank Common Stock as evidencing
ownership of the number of full shares of Holding Company Common Stock into
which the shares of Savings Bank Common Stock represented by such certificates
shall have been converted, notwithstanding the failure on the part of the holder
thereof to surrender such certificates.
(c) The Holding Company shall not be obligated to deliver a certificate or
certificates representing shares of Holding Company Common Stock to which a
holder of Savings Bank Common Stock would otherwise be entitled as a result of
the Reorganization until such holder surrenders the certificate or certificates
representing the shares of Savings Bank Common Stock for exchange as provided in
this Section 4, or, in default thereof, an appropriate Affidavit of Loss and
Indemnification Agreement and/or an indemnity bond as may be required in each
case by the Holding Company. If any certificate evidencing shares of Holding
Company Common Stock is to be issued in a name other than that in which the
Certificate evidencing Savings Bank Common Stock surrendered in exchanged
therefor is registered, it shall be a condition of the issuance thereof that the
certificate so surrendered shall be properly endorsed and otherwise in proper
form for transfer and that the person requesting such exchange pay to the
Exchange Agent any transfer or other tax required by reason of the issuance of a
certificate for shares of Holding Company Common Stock in any name other than
that of the registered holder of the certificate surrendered or otherwise
establish to the satisfaction of the Exchange Agent that such tax has been paid
or is not payable.
(d) If, between the date hereof and the Effective Date, the shares of
Savings Bank Common Stock shall be changed into a different number or class of
shares by reason of any reclassification, recapitalization, split-up,
combination, exchange of shares or readjustment or a stock dividend thereon
shall be declared with a record date within said period, the Exchange Ratio
specified in Section 3(a) hereof shall be adjusted accordingly.
5. RIGHTS OF DISSENT AND APPRAISAL ABSENT. No holders of Savings Bank
Common Stock shall have any dissenter or appraisal rights in connection with the
Reorganization.
6. NAME OF SURVIVING CORPORATION. The name of the Surviving Corporation
shall be "Perpetual Bank, A Federal Savings Bank."
7. DIRECTORS OF THE SURVIVING CORPORATION. Upon and after the Effective
Date, until changed in accordance with the Charter and Bylaws of the Surviving
Corporation and applicable law, the number of directors of the Surviving
Corporation shall be nine. The names of those persons who, upon and after the
Effective Date, shall be directors of the Surviving Corporation are set forth
below. Each such director shall serve for the term which expires at the annual
meeting of stockholders of the Surviving Corporation in the year set forth after
his respective name, and until a successor is elected and qualified.
3
Name Term Expires
---- ------------
Harold A. "Drew" Pickens 1998
Robert W. "Lujack" Orr 1997
Martha S. Clamp 1997
Jack F. McIntosh 1999
Charles W. Fant, Jr. 1999
Cordes G. Seabrook, Jr. 1999
Jim Gray Watson 1998
Richard C. Ballenger 1997
F. Stevon Kay 1998
The address of each director is 907 N. Main Street, Anderson, South
Carolina 29521.
8. OFFICERS OF THE SURVIVING CORPORATION. Upon and after the Effective
Date, until changed in accordance with the Charter and Bylaws of the Surviving
Corporation and applicable law, the officers of the Savings Bank immediately
prior to the Effective Date shall be the officers of the Surviving Corporation.
9. OFFICES. Upon the Effective Date, all offices of the Savings Bank
shall be offices of the Surviving Corporation. As of the Effective Date, the
home office of the Surviving Corporation shall remain at 907 N. Main Street,
Anderson, South Carolina, and the locations of the branch offices of the
Surviving Corporation shall be 104 Whitehall Road, Anderson, South Carolina;
2821 South Main Street, Anderson, South Carolina; Windsor Place Winn Dixie, S.C.
Highway 81, Anderson, South Carolina; and 3898 Liberty Highway, Anderson, South
Carolina.
10. CHARTER AND BYLAWS. On and after the Effective Date, the Charter and
Bylaws of the Savings Bank as in effect immediately prior to the Effective Date
shall be the Charter and Bylaws of the Surviving Corporation until amended in
accordance with the terms thereof and applicable law.
11. SAVINGS ACCOUNTS. Upon the Effective Date, any savings accounts of
Interim, without reissue, shall be and become savings accounts of the Surviving
Corporation without change in their respective terms, including, without
limitation, maturity minimum required balances or withdrawal value.
12. STOCK COMPENSATION PLANS. By voting in favor of this Agreement, the
Holding Company shall have approved adoption of the Savings Bank's 1993 Stock
Option Plan, 1996 Stock Option Plan, 1993 Management Development and Recognition
Plan and 1996 Management Development and Recognition Plan (collectively, the
"Plans") as plans of the Holding Company and shall have agreed to issue Holding
Company Common Stock in lieu of Savings Bank Common Stock pursuant to the terms
of such Plans. As of the Effective Date, rights outstanding under the Plans
shall be assumed by the Holding Company and thereafter shall be rights only for
shares of Holding Company Common Stock, with each such right being for a number
of shares of Holding Company Common Stock equal to the number of shares of
Savings Bank Common Stack that were available thereunder immediately prior to
the Effective Date times the Exchange Ratio, as defined in the plan of
conversion, and the price of each such right shall be adjusted to reflect the
Exchange Ratio and so that the aggregate purchase price of the right is
unaffected, but with no change in any other term or condition of such right. The
Holding Company shall make appropriate amendments to the Plans to reflect the
adoption of the Plans by the Holding Company without adverse effect upon the
rights outstanding thereunder.
13. STOCKHOLDER APPROVAL. The affirmative votes of the holders of Savings
Bank Common Stock set forth in the Plan of Conversion shall be required to
approve the Plan of Conversion and Agreement and Plan of Reorganization, of
which this Plan of Reorganization is a part, on behalf of the Savings Bank. The
approval of the Holding Company, as the sole holder of the Interim B Common
Stock, shall be required to approve the Plan of Conversion, of which this Plan
of Reorganization is a part, on behalf of Interim B.
4
14. REGISTRATION; OTHER APPROVALS. In addition to the approvals set forth
in Sections 1 and 13 hereof and in the Plan of Conversion, the obligations of
the parties hereto to consummate the Reorganization shall be subject to the
Holding Company Common Stock to be issued hereunder in exchange for Savings Bank
Common Stock being registered under the Securities Act of 1933, as amended, and
registered or qualified under applicable state securities laws, as well as the
receipt of all other approvals, consents or waivers as the parties may deem
necessary or advisable.
15. ABANDONMENT OF PLAN. This Plan of Reorganization may be abandoned by
either the Savings Bank or Interim B at any time before the Effective Date in
the manner set forth in the Plan of Conversion.
16. AMENDMENTS. This Plan of Reorganization may be amended in the manner
set forth in the Plan of Conversion by a subsequent writing signed by the
parties hereto upon the approval of the Board of Directors of each of the
parties hereto.
17. SUCCESSORS. This Plan of Reorganization shall be binding on the
successors of the parties hereto.
18. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of South Carolina, except to the extent
superseded by the laws of the United States.
IN WITNESS WHEREOF, the Parties hereto have cause this Plan of
Reorganization to be duly executed on its behalf by its officers thereunto duly
authorized, all as of the date first above written.
Attest: SOUTHBANC SHARES, M.H.C.
By:
- ---------------------------- ---------------------------------
Sylvia B. Reed Robert W. "Lujack" Orr
Corporate Secretary President
Attest: _________________
By:
- ---------------------------- ---------------------------------
Sylvia B. Reed Robert W. "Lujack" Orr
Corporate Secretary President
Attest: PERPETUAL INTERIM "B" BANK, A FEDERAL
SAVINGS BANK
By:
- ---------------------------- ---------------------------------
Sylvia B. Reed Robert W. "Lujack" Orr
Corporate Secretary President
5
REVOCABLE PROXY
SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS
OF
SOUTHBANC SHARES, M.H.C.
FOR THE SPECIAL MEETING OF MEMBERS
TO BE HELD ON MARCH __, 1998
The undersigned member of SouthBanc Shares, M.H.C. ("MHC") hereby appoints
the Board of Directors, with full powers of substitution, as attorneys-in-fact
and agents for and in the name of the undersigned, to vote such shares as the
undersigned may be entitled to cast at the Special Meeting of Members
("Meeting") of the MHC, to be held at the main office of Perpetual Bank, A
Federal Savings Bank, 907 N. Main Street, Anderson, South Carolina, on the date
and time indicated on the Notice of Special Meeting of Members, and at any
adjournment thereof. They are authorized to cast all votes to which the
undersigned is entitled, as follows:
FOR AGAINST
(1) To approve an Amended Plan of Conversion and Agreement and Plan of
Reorganization adopted by the Board of Directors on September 22, 1997, to
convert the MHC from a federally chartered mutual holding company to a stock
holding company, to be known as "SouthBanc Shares, Inc.," and the
reorganization of Perpetual Bank, A Federal Savings Bank as wholly-owned
subsidiary thereof, including the adoption of Certificate of Incorporation
and Bylaws for the stock holding company, pursuant to the laws of the United
States and the rules and regulations of the Office of Thrift Supervision.
[ ] [ ]
NOTE: The Board of Directors is not aware of any other matter that may come
before the Meeting.
THIS PROXY WILL BE VOTED FOR THE PROPOSITIONS
STATED IF NO CHOICE IS MADE HEREIN
Should the undersigned be present and elect to vote at said Meeting or at
any adjournment thereof and, after notification to the Secretary of the MHC at
said Meeting of the member's decision to terminate this Proxy, then the power of
said attorney-in-fact or agents shall be deemed terminated and of no further
force and effect.
The undersigned acknowledges receipt of a Notice of Special Meeting of
Members of the MHC called on the date and time indicated on the Notice of
Special Meeting, and a Proxy Statement relating to said Meeting from the MHC,
prior to the execution of this Proxy.
- ------------------------------------------
Date
- ------------------------------------------
Signature
- ------------------------------------------
Signature
Note: Only one signature is required in the case of a joint account. If
signing as a trustee, executor, administrator or in some other fiduciary
capacity, so indicate.