ANSON SAVINGS BANK, SSB
Post Office Box 249
211 South Greene Street
Wadesboro, North Carolina 28170
(704) 694-2122
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NOTICE OF SPECIAL MEETING OF MEMBERS
To be Held on ____________, 1998
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NOTICE IS HEREBY GIVEN, that a special meeting (the "Special Meeting") of
the members of Anson Savings Bank, SSB (the "Bank") will be held at the Bank's
headquarters office at 211 South Greene Street, Wadesboro, North Carolina on
____________, 1998 at ______ __.m., Eastern Time, to consider and vote upon:
1. The Plan of Holding Company Conversion (the "Plan of Conversion")
pursuant to which, among other things, (i) the Bank will convert from
a North Carolina-chartered savings bank organized in mutual form to a
North Carolina-chartered savings bank organized in stock form (the
"Conversion"), and in connection therewith will adopt an amended
Certificate of Incorporation and Bylaws, (ii) the Bank will sell its
capital stock to Anson Bancorp, Inc. (the "Company"), a North Carolina
corporation, and become the wholly-owned subsidiary of the Company,
and (iii) the Company will offer and sell shares of its common stock
in a Subscription Offering and, if necessary, in a Community Offering
and a Syndicated Community Offering, all as more specifically set
forth in the Plan of Conversion; and
2. Such other business as may relate to the purposes set forth in this
Notice of Special Meeting and properly come before the meeting and any
adjournment(s) thereof. Management is not aware of any such other
business.
The Board of Directors has fixed the close of ____________, 1998 as the
record date for the determination of members entitled to notice of and to vote
at the Special Meeting and at any adjournment(s) thereof. Members of the Bank
of record as of the close of business on that date who cease to be members prior
to the date of the Special Meeting will not be entitled to vote at the Special
Meeting. Approval of the Plan of Conversion requires the affirmative vote, cast
in person or by proxy, of a majority of the total outstanding votes entitled to
be cast by voting members at the Special Meeting. A copy of the Plan of
Conversion is attached to this Summary Proxy Statement as Attachment I.
BY ORDER OF THE BOARD OF DIRECTORS
VEDA H. EDWARDS
Secretary
Wadesboro, North Carolina
____________, 1998
PLEASE COMPLETE, DATE, SIGN AND RETURN THE ACCOMPANYING PROXY CARD(S) IN THE
ENCLOSED POSTAGE-PAID ENVELOPE AS SOON AS POSSIBLE, WHETHER OR NOT YOU PLAN TO
ATTEND THE SPECIAL MEETING. THIS WILL ASSURE YOUR REPRESENTATION AT THE SPECIAL
MEETING AND MAY AVOID THE COST OF ADDITIONAL COMMUNICATIONS. THIS WILL NOT
PREVENT YOU FROM VOTING IN PERSON IF YOU ATTEND THE SPECIAL MEETING. YOU MAY
REVOKE YOUR WRITTEN PROXY BY DELIVERING A WRITTEN INSTRUMENT TO SUCH EFFECT TO
THE SECRETARY OF THE BANK AT ANY TIME PRIOR TO OR AT THE SPECIAL MEETING OR BY
DELIVERING TO THE SECRETARY OF THE BANK PRIOR TO THE SPECIAL MEETING A DULY
EXECUTED PROXY BEARING A LATER DATE. PROPERLY COMPLETED PROXIES WILL BE VOTED
IN ACCORDANCE WITH THE INSTRUCTIONS INDICATED THEREON, OR IF NO INSTRUCTIONS ARE
INDICATED, FOR APPROVAL OF THE PLAN OF CONVERSION.
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YOUR PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE BANK. THE BANK
BOARD OF DIRECTORS RECOMMENDS THAT VOTING MEMBERS VOTE FOR APPROVAL OF THE PLAN
OF CONVERSION. FAILURE TO VOTE IN PERSON OR BY PROXY WILL HAVE THE SAME EFFECT
AS A VOTE AGAINST THE PLAN OF CONVERSION. VOTING IN FAVOR OF THE PLAN OF
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CONVERSION WILL NOT OBLIGATE ANY PERSON TO PURCHASE COMMON STOCK, AND VOTING
AGAINST THE PLAN OF CONVERSION OR A FAILURE TO VOTE WILL NOT PRECLUDE ANY SUCH
PURCHASE.
THE ENCLOSED PROXY IS SOLICITED FOR THIS SPECIAL MEETING ONLY, AND ANY
ADJOURNMENT(S) THEREOF, AND WILL NOT BE USED FOR ANY OTHER MEETING. NO
PREVIOUSLY PROVIDED GENERAL PROXIES WILL BE VOTED AT THE SPECIAL MEETING FOR
APPROVAL OF THE PLAN OF CONVERSION.
ii
ANSON SAVINGS BANK, SSB
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SUMMARY PROXY
STATEMENT
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SPECIAL MEETING OF MEMBERS TO BE HELD ON ____________, 1998
PURPOSE OF THE SPECIAL MEETING
This Summary Proxy Statement (the "Proxy Statement") is being furnished to
you in connection with the solicitation by the Board of Directors of Anson
Savings Bank, SSB (the "Bank") of proxies to be voted at a special meeting of
members (the "Special Meeting") to be held at the Bank's headquarters office at
211 South Greene Street, Wadesboro, North Carolina on ____________, 1998 at
______ __.m., Eastern Time.
The Special Meeting will be held for the purpose of considering and voting
upon the proposed Plan of Holding Company Conversion approved by the Board of
Directors of the Bank on December 11, 1997 (the "Plan of Conversion"), which
provides for the adoption by the Bank of an amended Certificate of Incorporation
and Bylaws. If the Plan of Conversion is approved by a majority of the total
votes eligible to be cast and if certain other conditions are satisfied, the
Bank will convert from a North Carolina-chartered mutual savings bank to a North
Carolina-chartered stock savings bank, and the Bank will become the wholly-owned
subsidiary of Anson Bancorp, Inc. (the "Company"), a North Carolina corporation
formed by the Bank to own all of the stock of the Bank issued pursuant to the
Plan of Conversion (the "Conversion"). The proposed Plan of Conversion,
including the proposed forms of the Bank's amended Certificate of Incorporation
and Bylaws, is attached to this Proxy Statement as Attachment I. For a
description of the Conversion, see "THE CONVERSION."
This Proxy Statement is dated ____________, 1998, and is first being mailed
to members of the Bank, together with the Prospectus dated ____________, 1998
(the "Prospectus"), on or about ____________, 1998.
The following information is not complete and is qualified in its entirety
by the Plan of Conversion, which is attached to this Proxy Statement, the
information contained in this Proxy Statement and the information and financial
statements and accompanying notes contained in the Prospectus which accompanies
this Proxy Statement.
Anson Bancorp, Inc.
The Company is a North Carolina corporation recently organized by the Board
of Directors of the Bank to acquire all of the capital stock that the Bank will
issue upon its Conversion from the mutual to stock form of ownership. The
Company has not as yet engaged in any business. Upon completion of the
Conversion, its business will initially consist solely of owning the Bank and
investing the proceeds of the Conversion that are retained by the Company. The
Company has received the approval of the Administrator, Savings Institutions
Division, North Carolina Department of Commerce (the "Administrator"), and the
Board of Governors of the Federal Reserve System (the "Federal Reserve") to
acquire the Bank.
The executive office of the Company is located at 211 South Greene Street,
Wadesboro, North Carolina, and its telephone number is (704) 694-2122.
Anson Savings Bank, SSB
The Bank is a North Carolina-chartered mutual savings bank and has been in
operation since _____. The Bank is a member of the Federal Home Loan Bank
("FHLB") system, and its deposits are federally insured by the Savings
Association Insurance Fund (the "SAIF") of the Federal Deposit Insurance
Corporation (the "FDIC") to the maximum amount permitted by law.
The Bank conducts business through one office in Wadesboro, North Carolina.
The Bank's primary market area consists of Anson County, North Carolina. Based
upon 199___ comparative data, the Bank had approximately ____% and ____% of the
deposits in Anson County. On December 31, 1997, the Bank had total assets of
$20.7 million, net loans of $_____ million, deposits of $16.7 million and equity
of $3.9 million.
The Bank is primarily engaged in the business of attracting deposits from
the general public and using such deposits to make mortgage loans secured by
one-to-four family residential real estate located in the Bank's primary market
area. The Bank also makes nonresidential real estate, construction and deposit
account secured loans. See "BUSINESS OF THE BANK" in the Prospectus. The Bank
has been and intends to continue to be a community-oriented financial
institution offering a variety of financial services to meet the needs of the
communities it serves.
INFORMATION RELATING TO VOTING AT THE SPECIAL MEETING
The Board of Directors of the Bank has fixed the close of business on
____________, 1998 (the "Voting Record Date") as the record date for determining
the members entitled to notice of and to vote at the Special Meeting. The
Bank's depositors (including beneficial owners of Individual Retirement Account
("IRA") accounts) and borrowers are members of the Bank entitled to vote under
its current Certificate of Incorporation and Bylaws.
At the Special Meeting, each deposit account holder entitled to vote may
cast one vote for each $100 or fraction thereof of the aggregate withdrawal
value of any deposit account in the Bank as of the Voting Record Date. Each
borrower member entitled to vote may cast one vote as a borrower in addition to
the number of votes to which such member may be entitled as an owner of a
deposit account. No member, however, may cast more than 1,000 votes. A deposit
account or loan creates a single membership for voting purposes, even though
more than one person has an interest in such deposit account or is obligated on
such loan.
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Beneficial owners of IRA accounts at the Bank will be considered voting
members entitled to vote on the Plan of Conversion. The legal owners of other
fiduciary accounts, rather than the beneficial owners, will be treated as the
member entitled to cast the votes for such account, unless the trust agreement
or any other agreement relating to the fiduciary's authority provides otherwise.
Twenty-five members present in person or by proxy at the Special Meeting
will constitute a quorum for the transaction of business. The affirmative vote
of at least a majority of the total outstanding votes of the Bank's' members
eligible to be cast at the Special Meeting is required for approval of the Plan
of Conversion. As of the Voting Record Date, the Bank's records disclose that
there were _________ votes entitled to be cast at the Special Meeting, of which
_________ votes would represent a majority.
Members may vote at the Special Meeting in person or by proxy. Each proxy
solicited hereby, if properly executed, duly returned by the date of the Special
Meeting, and not revoked prior to or at the Special Meeting, will be voted at
the Special Meeting in accordance with the member's instructions indicated
thereon. If no voting instructions are indicated on the proxy card, the proxy
will be voted FOR the Plan of Conversion. If any other matters are properly
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presented before the Special Meeting, the proxies solicited hereby will be voted
on such matters in accordance with the best judgment of the proxyholders named
therein. Management of the Bank is not aware of any other business to be
presented at the Special Meeting.
Any member giving a proxy may revoke it at any time before it is voted by
delivering to the Secretary of the Bank before or at the Special Meeting either
a written revocation of the proxy or by delivering to the Secretary of the Bank
prior to the Special Meeting a duly executed proxy bearing a later date, or by
attending the Special Meeting and voting in person. Proxies are being solicited
only for use at the Special Meeting and any and all adjournments thereof and
will not be used for any other meeting. No previously provided general proxies
will be voted at the Special Meeting for approval of the Plan of Conversion.
The Board of Directors' solicitation of proxies for the Special Meeting is
being made by means of this Proxy Statement. It may be followed by further
letters and personal calls to members by employees or agents of the Bank. All
costs of this proxy solicitation will be paid by the Bank.
The directors and executive officers of the Bank were entitled to cast
_______ votes as of the Voting Record Date for the Special Meeting.
RECOMMENDATION OF MANAGEMENT
THE BOARD OF DIRECTORS OF THE BANK RECOMMENDS THAT YOU VOTE FOR THE PLAN OF
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CONVERSION.
FAILURE TO VOTE IN FAVOR OF THE PLAN OF CONVERSION, IN PERSON OR BY PROXY,
WILL HAVE THE SAME EFFECT AS A VOTE AGAINST THE PLAN OF CONVERSION. VOTING IN
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FAVOR OF THE PLAN OF CONVERSION WILL NOT OBLIGATE ANY PERSON TO SUBSCRIBE FOR
THE PURCHASE OF ANY STOCK, AND VOTING AGAINST THE PLAN OR FAILING TO VOTE WILL
NOT PRECLUDE ANY SUCH PURCHASE.
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THE DIRECTORS AND CERTAIN OFFICERS OF THE BANK HAVE A PERSONAL INTEREST IN
THE APPROVAL OF THE CONVERSION TO THE EXTENT THAT THEY WILL RECEIVE CERTAIN
BENEFITS AS A RESULT OF THE CONVERSION. SEE "MANAGEMENT OF THE BANK" IN THE
PROSPECTUS.
THE BOARD OF DIRECTORS OF FIRST SAVINGS HAS ADOPTED AND THE ADMINISTRATOR
HAS APPROVED COMPLETION OF THE TRANSACTIONS DESCRIBED IN THE PLAN OF CONVERSION
SUBJECT TO APPROVAL BY THE MEMBERS OF THE BANK AND TO SATISFACTION OF CERTAIN
OTHER CONDITIONS. APPROVAL BY THE ADMINISTRATOR DOES NOT CONSTITUTE A
RECOMMENDATION OR ENDORSEMENT OF THE PLAN OF CONVERSION BY THE ADMINISTRATOR.
THE CONVERSION
General
The Bank was organized and has operated as a traditional savings and loan
association. It recognizes that the banking and financial services industries
are in the process of fundamental changes, reflecting changes in the local,
national and international economies, technological changes and changes in state
and federal laws. As a result, for several years the Bank has been studying the
environment in which it operates and its strategic options.
As a result of its study of its strategic options, the Bank adopted the
Plan. The Bank believes that converting the bank from the mutual to stock form
and organizing the Company will provide increased flexibility for the Bank and
the Company to react to changes in their operating environment, regardless of
the strategies ultimately chosen.
The existing management of the Bank and the Company believes that it will
be in the best interests of the Bank, the Company and the stockholders of the
Company for the Company to remain an independent financial institution.
Assuming the consummation of the Conversion, the Company and the Bank intend to
pursue the business strategy described in this Prospectus with the goal of
enhancing shareholder value over the long term. Neither the Company nor the
Bank has any existing plan to consider any business combination, and neither
company has any agreement or understanding with respect to any possible business
combination.
The Board of Director's adoption of the Plan is subject to approval by the
members of the Bank and receipt of required regulatory approvals. Pursuant to
the Plan, the Bank will be converted from a North Carolina-chartered mutual
savings bank to a North Carolina-chartered stock savings bank and will become a
wholly-owned subsidiary of the Company. The Company will issue the Common Stock
to be sold in the Conversion and will use that portion of the net proceeds
thereof which it does not retain to purchase the capital stock of the Bank. By
letter dated ____________, 1998, the Administrator approved the Plan, subject to
approval by the members of the Bank and satisfaction of certain other
conditions. The Special Meeting will be held on ____________, 1998 for the
purpose of considering approval of the Plan.
Consummation of the Conversion is contingent also upon receipt of the
approvals of the Federal Reserve and the Administrator for the Company to
acquire the Bank. Those approvals have been received. The Conversion cannot be
consummated until the expiration of the Bank Merger Act of 1956 waiting period
which began to run upon approval by the Federal Reserve of the Company's
application and expires ____________, 1998. Finally, consummation of the
Conversion is contingent upon receipt
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from the FDIC of a final non-objection letter with respect to the transaction.
The FDIC has issued a conditional notification that it does not intend to object
to the Conversion.
The following is a summary of all material provisions of the Plan. It is
qualified in its entirety by the provisions of the Plan, which contains a more
detailed description of the terms of the Conversion. The Plan is attached as
Attachment I to the Bank's Proxy Statement for the Special Meeting which has
been delivered to all members of the Bank. The Plan can also be obtained by
written request from the Bank. See "ADDITIONAL INFORMATION" in the Prospectus.
Purposes of Conversion
The Bank, as a mutual savings bank, now has no stockholders and no
authority to issue capital stock. By converting to the stock form of
organization, the Bank will be structured in the form used by most commercial
banks, other business entities and a substantial number of savings institutions.
Conversion to a North Carolina-chartered capital stock savings bank and the
formation of a Company offers a number of advantages which may be important to
the future and performance of the Bank, including (i) a larger capital base for
the Bank's operations, (ii) an enhanced future access to capital markets and
(iii) an opportunity for depositors of the Bank to become stockholders of the
Company.
After completion of the Conversion, the unissued common and preferred stock
authorized by the Company's Articles of Incorporation will permit the Company,
subject to market conditions, to raise additional equity capital through further
sales of securities. Following the Conversion, the Company will also be able to
use stock-related incentive programs to attract, retain and provide incentives
for qualified directors and executive and other personnel of the Company and the
Bank. See "MANAGEMENT OF THE BANK -- Proposed Management Recognition Plan" and
"-- Proposed Option Plan" in the Prospectus.
Formation of the Company will provide greater flexibility than the Bank
would otherwise have to expand and diversify its business activities through
existing or newly formed subsidiaries, or through acquisitions of, or mergers
with, both mutual and stock institutions, as well as other companies. However,
there are no current plans, arrangements, understandings or agreements regarding
any such business combinations.
Effects of Conversion
General. Each person with a deposit account in the Bank has pro rata
rights, based upon the balance in his or her account, in the net worth of the
Bank upon liquidation. However, this right is tied to the depositor's account
and has no tangible market value separate from such deposit account. Further,
the Bank's depositors can realize value with respect to their interests only in
the unlikely event that the Bank is liquidated and has a positive net worth. In
such an event, the depositors of record at that time, as owners, would share pro
rata in any residual surplus after other claims, including those with respect to
the deposit accounts of depositors, are paid.
Upon the Bank's conversion to stock form, its Certificate of Incorporation
will be amended to authorize the issuance of permanent nonwithdrawable capital
stock to represent the ownership of the Bank, including its net worth. The
capital stock will be separate and apart from deposit accounts and will not be
insured by the FDIC or any other governmental entity. Certificates will be
issued to evidence ownership of the capital stock. All of the outstanding
capital stock of the Bank will be acquired by the Company, which in turn will
issue its Common Stock to purchasers in the Conversion. The stock certificates
issued by the Company will be transferable and, therefore, subject to applicable
law, the stock
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could be sold or traded if a purchaser is available with no effect on any
deposit account the seller may hold at the Bank.
Voting Rights. Under the Bank's current Certificate of Incorporation and
Bylaws, deposit account holders and borrowers have voting rights with respect to
certain matters relating to the Bank, including the election of directors.
After the Conversion, (i) neither deposit account holders nor borrowers will
have voting rights with respect to the Bank and will therefore not be able to
elect directors of the Bank or control its affairs; (ii) voting rights with
respect to the Bank will be vested in the Company as the sole stockholder of the
Bank; and (iii) voting rights with respect to the Company will be vested in the
Company's stockholders. Each purchaser of Common Stock will be entitled to vote
on any matters to be considered by the Company's stockholders. For a
description of the voting rights of the holders of Common Stock, see
"DESCRIPTION OF CAPITAL STOCK" in the Prospectus.
Deposit Accounts and Loans. The account balances, interest rates and other
terms of deposit accounts at the Bank and the existing deposit insurance
coverage of such accounts will not be affected by the Conversion (except to the
extent that a depositor directs the Bank to withdraw funds to pay for his or her
Common Stock). Furthermore, the Conversion will not affect any loan account,
the balances, interest rates, maturities or other terms of these accounts, or
the obligations of borrowers under their individual contractual arrangements
with the Bank.
Continuity. The Bank will continue without interruption, during and after
completion of the Conversion, to provide its services to depositors and
borrowers pursuant to existing policies and will maintain its office operated by
the existing management and employees of the Bank.
Liquidation Rights. In the unlikely event of a complete liquidation of the
Bank, either before or after Conversion, account holders would have claims for
the amount of their deposit accounts, including accrued interest, and would
receive the protection of deposit insurance up to applicable limits. In addition
to deposit insurance coverage, depositor liquidation rights before and after
Conversion would be as follows:
Liquidation Rights Prior to the Conversion. Prior to the Conversion, in
the event of a complete liquidation of the Bank, each holder of a deposit
account in the Bank would receive such holder's pro rata share of any assets of
the Bank remaining after payment of claims of all creditors (including the
claims of all depositors to the withdrawal value of their accounts, including
accrued interest). Such holder's pro rata share of such remaining assets, if
any, would be in the same proportion of such assets as the value of such
holder's deposit account was to the total value of all deposit accounts in the
Bank at the time of liquidation.
Liquidation Rights After the Conversion. As required by North Carolina
conversion regulations, the Plan provides that, upon completion of the
Conversion, a memorandum account called a "Liquidation Account" will be
established for the benefit of Eligible Account Holders and Supplemental
Eligible Account Holders. The amount of the Liquidation Account will be equal
to the net worth of the Bank as of the date of its latest statement of financial
condition contained in the final prospectus relating to the sale of shares of
Common Stock in the Conversion. Under applicable regulations, the Bank will not
be permitted to pay dividends on, or repurchase any of, its capital stock if its
net worth would thereby be reduced below the aggregate amount then required for
the Liquidation Account. See "DIVIDEND POLICY" and SUPERVISION AND REGULATION -
- - Regulation of the Bank -- Restrictions on Dividends and Other Capital
Distributions" in the Prospectus. After the Conversion, Eligible Account
Holders and Supplemental Eligible Account Holders will be entitled, in the
event of a liquidation of the Bank, to receive liquidating distributions of any
assets remaining after payment of all creditors' claims (including the claims of
all depositors to the withdrawal values of their deposit accounts, including
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accrued interest), before any distributions are made on the Bank's capital
stock, equal to their proportionate interests at that time in the Liquidation
Account.
Each Eligible Account Holder and Supplemental Eligible Account Holder will
have an initial interest ("subaccount balance") in the Liquidation Account for
each deposit account held as of September 30, 1996 (the Eligibility Record Date)
or as of March 31, 1998 (the Supplemental Eligibility Record Date),
respectively. Each initial subaccount balance will be the amount determined by
multiplying the total opening balance in the Liquidation Account by the
Qualifying Deposit (a deposit of at least $50 as of the Eligibility Record Date
or Supplemental Eligibility Record Date, as applicable) of such deposit account
divided by the total of all Qualifying Deposits on that date. If the amount in
the deposit account on any subsequent annual closing date of the Bank is less
than the balance in such deposit account on any other annual closing date or the
balance in such an account on the Eligibility Record Date or Supplemental
Eligibility Record Date, as the case may be, this interest in the Liquidation
Account will be reduced by an amount proportionate to any such reduction, and
will not thereafter be increased despite any subsequent increase in the related
deposit account. An Eligible Account Holder's or Supplemental Eligible Account
Holder's interest in the Liquidation Account will cease to exist if the deposit
account is closed. The Liquidation Account will never increase and will be
correspondingly reduced as the interests in the Liquidation Account are reduced
or cease to exist. In the event of a liquidation, any assets remaining after
the above liquidation rights of Eligible Account Holders and Supplemental
Eligible Account Holders are satisfied would be distributed to the Company, as
sole stockholder of the Bank.
A merger, consolidation, sale of bulk assets or similar combination or
transaction with another FDIC-insured depository institution, whether or not the
Bank is the surviving institution, would not be viewed as a complete liquidation
for purposes of distribution of the Liquidation Account. In any such
transaction, the Liquidation Account would be assumed by the surviving
institution to the full extent authorized by regulations of the Administrator as
then in effect.
Offering of Common Stock
As part of the Conversion, the Company is making the Subscription Offering
of Common Stock in the priorities and to the persons described below under "--
Subscription Offering." In addition, any shares which remain unsubscribed for
in the Subscription Offering will be offered in the Community Offering to
members of the general public, with priority being given to natural persons and
trusts of natural persons residing or located in the Local Community, including
IRAs, Keogh accounts and similar retirement accounts established for the benefit
of natural persons who are residents of the Local Community. See "-- Community
Offering." If necessary, all shares of Common Stock not purchased in the
Subscription Offering and Community Offering, if any, may be offered for sale to
the general public through a syndicate of registered broker-dealers as selected
dealers to be managed by Trident Securities. See "-- Syndicated Community
Offering." The Plan requires that the aggregate dollar amount of the Common
Stock sold equal not less than the minimum nor more than the maximum of the
Estimated Valuation Range which is established in connection with the
Conversion; provided, however, with the consent of the Administrator and the
FDIC the aggregate dollar amount of the Common Stock sold may be increased to as
much as 15% above the maximum of the Estimated Valuation Range, without a
resolicitation of subscribers or any right to cancel subscriptions, in order to
reflect changes in market and financial conditions following commencement of the
Subscription Offering. See "-- Purchase Price of Common Stock and Number of
Shares Offered." If the Syndicated Community Offering is not feasible or
successful and Common Stock having an aggregate value of at least the minimum of
the Estimated Valuation Range is not subscribed for in the Subscription and
Community Offering, the Company will consult with the Administrator to
determine an appropriate alternative method of selling all shares of Common
Stock offered in the Conversion and not subscribed for in the Offering. The
same per share price ($10.00) will be paid by purchasers in the Subscription,
Community and Syndicated Community Offering.
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The Subscription Offering will expire at the Expiration Time, which is
12:00 noon, Eastern Time, on ___________________, 1998, unless, with the
approval of the Administrator, the offering period is extended by the Company
and the Bank. The Community Offering, if any, may begin at any time after the
Subscription Offering begins and will terminate at the Expiration Time or at any
time thereafter, but not later than ________________, 1998, unless extended with
the approval of the Administrator. The Syndicated Community Offering, if any,
or other sale of all shares not subscribed for in the Subscription and Community
Offering, will be made as soon as practicable following the Expiration Time.
The sale of the Common Stock must, under the North Carolina conversion
regulations, be completed within 45 days after the Expiration Time unless such
period is extended with the approval of the Administrator. In the event such an
extension is approved, subscribers would be resolicited and would be given the
opportunity to increase (subject to maximum purchase limitations), decrease
(subject to minimum purchase limitations) or rescind their subscriptions. If a
subscriber fails to respond to the resolicitation by the end of the
resolicitation period, the subscription of such subscriber will be canceled,
funds submitted with the subscription will be refunded promptly with interest at
the Bank's passbook savings rate, and holds on accounts from which withdrawals
were designated will be released. Any such solicitation will be by means of an
amended prospectus filed with the SEC. In such event, substantial additional
printing, legal and accounting expenses may be incurred in completing the
Conversion.
The commencement and completion of any required Community or Syndicated
Community Offering will be subject to market conditions and other factors beyond
the Company's control. Accordingly, no assurance can be given that any required
Community or Syndicated Community Offering or other sale of Common Stock will be
commenced at any particular time or as to the length of time that will be
required to complete the sale of all shares of Common Stock offered, and
significant changes may occur in the estimated pro forma market value of the
Common Stock, together with corresponding changes in the offering price, the
number of shares being offered, and the net proceeds realized from the sale of
the Common Stock. The Plan requires that the Conversion be completed within 24
months after the date of approval of the Plan by the Bank's members.
Subscription Offering
In accordance with North Carolina conversion regulations, non-transferable
Subscription Rights have been granted under the Plan to the following persons in
the following order of priority: (i) the Bank's Eligible Account Holders, who
are depositors as of September 30, 1996 who had aggregate deposits at the close
of business on such date of at least $50.00 ("Qualifying Deposits"); (ii) the
Bank's Supplemental Eligible Account Holders, who are depositors as of December
31, 1997 who had Qualifying Deposits on such date; (iii) the Bank's Other
Members, who are depositor and borrower members as of ______________, 1998, the
voting record date for the Special Meeting, who are not Eligible Account Holders
or Supplemental Eligible Account Holders; and (iv) directors, officers and
employees of the Bank who are not Eligible Account Holders, Supplemental
Eligible Account Holders or Other Members, in the priorities and subject to the
limitations described herein. All subscriptions received will be subject to the
availability of Common Stock after satisfaction of subscriptions of all persons
having prior rights in the Subscription Offering, and to the maximum purchase
limitations and other terms and conditions set forth in the Plan and described
below.
In order to ensure proper identification of Subscription Rights, it is the
responsibility of subscribers in the Subscription Offering to provide correct
account verification information on the Order Forms.
Eligible Account Holders. Each Eligible Account Holder has been granted,
without payment therefor, non-transferable Subscription Rights to purchase
Common Stock up to the maximum purchase limitation described in "--Minimum and
Maximum Purchase Limitations." If Eligible Account Holders subscribe for more
shares of Common Stock than are available for purchase, the shares offered will
first
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be allocated among the subscribing Eligible Account Holders so as to enable each
subscribing Eligible Account Holder to the extent possible, to purchase the
number of shares necessary to make his or her total allocation of Common Stock
equal to the lesser of 100 shares of Common Stock or the number of shares
subscribed for by such Eligible Account Holder. Any shares remaining after such
allocation will be allocated among the subscribing Eligible Account Holders
whose subscriptions remain unsatisfied in the proportion that each such Eligible
Account Holder's Qualifying Deposits bears to the total of the Qualifying
Deposits of all such Eligible Account Holders.
Supplemental Eligible Account Holders. To the extent that shares remain
available for purchase after satisfaction of subscriptions of Eligible Account
Holders, each Supplemental Eligible Account Holder has been granted, without
payment therefor, non-transferable Subscription Rights to purchase Common Stock
up to the maximum purchase limitation described in "-- Minimum and Maximum
Purchase Limitations." If Supplemental Eligible Account Holders subscribe for
more shares of Common Stock than are available for purchase, the shares offered
will first be allocated among the subscribing Supplemental Eligible Account
Holders so as to enable each subscribing Supplemental Eligible Account Holder to
the extent possible, to purchase the number of shares necessary to make his or
her total allocation of Common Stock equal to the lesser of 100 shares of Common
Stock or the number of shares subscribed for by such Supplemental Eligible
Account Holder. Any shares remaining after such allocation will be allocated
among the subscribing Supplemental Eligible Account Holders whose subscriptions
remain unsatisfied in the proportion that each such Supplemental Eligible
Account Holder's Qualifying Deposits bears to the total of the Qualifying
Deposits of all such Supplemental Eligible Account Holders.
Other Members. To the extent that shares remain available for purchase
after satisfaction of subscriptions of Eligible Account Holders and Supplemental
Eligible Account Holders, members of the Bank as of ________________, 1998 (the
voting record date for the Special Meeting), other than Eligible Account Holders
and Supplemental Eligible Account Holders (Other Members) have each been
granted, without payment therefor, non-transferable Subscription Rights to
purchase Common Stock up to the maximum purchase limitation described in "--
Minimum and Maximum Purchase Limitations." If Other Members subscribe for more
shares of Common Stock than remain available for purchase by Other Members,
shares will be allocated among the subscribing Other Members in the proportion
that the number of votes eligible to be cast by each Other Member bears to the
total number of votes eligible to be cast at the Special Meeting by all Other
Members whose subscriptions remain unsatisfied.
Employees, Officers, and Directors. To the extent that shares remain
available for purchase after satisfaction of subscriptions of Eligible Account
Holders, Supplemental Eligible Account Holders and Other Members, the Bank's
employees, officers and directors who are not Eligible Account Holders,
Supplemental Eligible Account Holders or Other Members have each been granted,
without payment therefor, non-transferable Subscription Rights to purchase
Common Stock up to the maximum purchase limitation described in "-- Minimum and
Maximum Purchase Limitations." If more shares are subscribed for by such
employees, officers and directors than are available for purchase by them, the
available shares will be allocated among subscribing employees, officers and
directors pro rata on the basis of the amount of their respective subscriptions.
Community Offering
Any shares of Common Stock which remain unsubscribed for in the
Subscription Offering may be offered by the Company to members of the general
public in the Community Offering, which may commence at any time after
commencement of the Subscription Offering, with priority given to natural
persons and trusts of natural persons residing or located in Anson County in
North Carolina (the Local Community), including IRA accounts, Keogh accounts and
similar retirement accounts established for the benefit of natural persons who
are residents of, the Local Community. The Community Offering may
11
terminate at the Expiration Time or at any time thereafter, but no later than
________________, 1998, unless further extended with the consent of the
Administrator. The opportunity to subscribe for shares of Common Stock in the
Community Offering is subject to the right of the Bank and the Company, in their
sole discretion, to accept or reject any such orders, in whole or in part,
either at the time of receipt of an order or as soon as practicable following
the termination of the Community Offering. In the event the Bank and the Company
reject any such orders after receipt, subscribers will be promptly notified and
all funds submitted with subscriptions will be returned with interest at the
Bank's passbook savings rate.
In the event that subscriptions by subscribers in the Community Offering
whose orders would otherwise be accepted exceed the shares available for
purchase in the Community Offering, then subscriptions of natural persons and
trusts of natural persons residing in the Local Community, including IRAs, Keogh
accounts and similar retirement accounts established for the benefit of natural
persons who are residents of the Local Community ("First Priority Community
Subscribers") will be filled in full up to applicable purchase limitations (to
the extent such subscriptions are not rejected by the Bank and the Company)
prior to any allocation to other subscribers in the Community Offering.
In the event of an oversubscription by First Priority Community Subscribers
whose orders would otherwise be accepted, shares of Common Stock will be
allocated first to each First Priority Community Subscriber whose order is
accepted in full or in part by the Bank and the Company in the entire amount of
such order up to a number of shares no greater than 7,500 shares, which number
shall be determined by the Board of Directors of the Bank prior to the time the
Conversion is consummated with the intent to provide for a wide distribution of
shares among such subscribers. Any shares remaining after such allocation will
be allocated to each First Priority Community Subscriber whose order is accepted
in full or in part on an equal number of shares basis until all orders are
filled. Such allocation shall also be applied to subscriptions by other
subscribers in the Community Offering, in the event shares are available for
such subscribers but there is an oversubscription by them.
In order to ensure proper allocation of shares in the event of an
oversubscription, it is the responsibility of subscribers in the Community
Offering to provide correct addresses of residence on the Order Forms.
Syndicated Community Offering
The Plan provides that, if necessary, all shares of Common Stock not
purchased in the Subscription and Community Offering, if any, may be offered for
sale to the general public in a Syndicated Community Offering through a
syndicate of registered broker-dealers as selected dealers ("Selected Dealers")
to be formed and managed by Trident Securities acting as agent of the Company in
the sale of the Common Stock. The Company and the Bank have the right to reject
orders, in whole or in part, in their sole discretion in the Syndicated
Community Offering. Neither Trident Securities 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, Trident Securities has agreed to use
its best efforts in the sale of shares in the Syndicated Community Offering.
Common Stock sold in the Syndicated Community Offering will be sold at the
purchase price of $10.00 per share which is the same price as all other shares
being offered in the Conversion.
It is estimated that the Selected Dealers will receive a negotiated
commission based on the amount of Common Stock sold by the Selected Dealer,
payable by the Company. During the Syndicated Community Offering, Selected
Dealers may only solicit indications of interest from their customers to place
orders with the Company as of a certain date (the "Order Date") for the purchase
of shares of Common Stock. When and if Trident Securities and the Company
believe that enough indications and orders have
12
been received in the Offering to consummate the Conversion, Trident Securities
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 of the orders to such
customers on the next business day after the Order Date. Selected Dealers will
debit the accounts of their customers on a date which will be three business
days from the Order Date ("Debit 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 Debit Date. On the next business
day following the Debit Date, Selected Dealers will remit funds to the account
that the Company established for each Selected Dealer. After payment has been
received by the Company from Selected Dealers, funds will earn interest at the
Bank's passbook savings rate until the consummation of the Conversion. In the
event the Conversion 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 close at any time after the
Expiration Time at the discretion of the Bank and the Company, but in no case
later than ____________________, 1998.
Fractional Shares
In making allocations in the event of oversubscriptions, all computations
will be rounded down to the nearest whole share; no fractional shares will be
issued. Excess and other amounts sent by subscribers which are not used to
satisfy subscriptions will be refunded with interest at the Bank's passbook
savings rate, and amounts designated for withdrawal from deposit accounts will
be released.
Purchase Price of Common Stock and Number of Shares Offered
The purchase price of shares of Common Stock sold in the Offering will be
$10.00 per share. The purchase price was determined by the Boards of Directors
of the Company and the Bank in consultation with the Bank's financial advisor
and sales agent, Trident Securities. The North Carolina regulations governing
conversions of North Carolina-chartered mutual savings banks to stock form
require that the aggregate purchase price of the shares of Common Stock of the
Company sold in connection with the Conversion be equal to not less than the
minimum, nor more than the maximum, of the Estimated Valuation Range which is
established by an independent appraisal in the Conversion and is described
below; provided, however, that with the consent of the Administrator and the
FDIC the aggregate purchase price of the Common Stock sold may be increased to
up to 15% above the maximum of the Estimated Valuation Range, without a
resolicitation of subscribers or any right to cancel, rescind or change
subscription orders, to reflect changes in market and financial conditions
following commencement of the Subscription Offering.
FDIC rules with respect to appraisals require that the independent
appraisal must include a complete and detailed description of the elements of
the appraisal report, justification for the methodology employed and sufficient
support for the conclusions reached. The appraisal report must include a full
discussion of each peer group member and documented analytical evidence
supporting variances from peer group statistics. The appraisal report must also
include a complete analysis of the converting institution's pro forma earnings,
which should include the institution's full potential once it fully deploys the
capital from the Conversion pursuant to its business plan.
The Bank has retained Ferguson, an independent appraisal firm experienced
in the valuation and appraisal of savings institutions and their holding
companies, to prepare an appraisal of the pro forma market value of the Bank and
the Company and to assist the Bank in preparing a business plan. For its
services in determining such valuation and assisting with the business plan,
Ferguson will receive an aggregate fee of $25,000 and will be reimbursed for its
out-of-pocket expenses.
13
Ferguson has informed the Bank that its appraisal has been made in reliance
upon the information contained in this Prospectus, including the financial
statements of the Bank. Ferguson has further informed the Bank that it also
considered the following factors, among others, in making the appraisal: (i) the
present and projected operating results and financial condition of the Company
and the Bank; (ii) the economic and demographic conditions in the Bank's
existing market area; (iii) certain historical, financial and other information
relating to the Bank; (iv) the proposed dividend policy of the Company; (v) a
comparative evaluation of the operating and financial statistics of the Bank
with those of other savings institutions; (vi) the aggregate size of the
offering of the Common Stock; and (vii) the trading market for the securities of
institutions Ferguson believes to be comparable in relevant respects to the
Company and the Bank and general conditions in the markets for such securities.
In addition, Ferguson has advised the Bank that it has considered the effect of
the Conversion on the net worth and earnings potential of the Company and the
Bank.
On the basis of its consideration of the above factors, Ferguson has
advised the Bank that, in its opinion, at February 27, 1998, the Estimated
Valuation Range of the Bank and the Company was from a minimum of $5,610,000 to
a maximum of $7,590,000, with a midpoint of $6,600,000. Based upon such
valuation and a purchase price for shares offered in the Conversion of $10.00
per share, the number of shares to be offered ranges from a minimum of 561,000
shares to a maximum of 759,000 shares, with a midpoint of 660,000 shares.
The Board of Directors of the Bank has reviewed the methodology and
assumptions used by Ferguson in preparing the appraisal and has determined that
the Estimated Valuation Range, as well as the methodology and assumptions used,
were reasonable and appropriate.
Upon completion of the Offering, Ferguson will confirm or update its
valuation of the estimated aggregate pro forma market value of the Bank and the
Company. Based on the confirmed or updated appraisal, a determination will be
made of the total number of shares of Common Stock which shall be offered and
sold in the Conversion.
With the consent of the Administrator and the FDIC, the aggregate price of
the shares sold in the Conversion may be increased by up to 15% above the
maximum of the Estimated Valuation Range, or to $8,728,500 (872,850 shares),
without a resolicitation of subscribers and without any right to cancel, rescind
or change subscription orders, to reflect changes in market and financial
conditions following commencement of the Subscription Offering.
No sale of shares of Common Stock may be consummated unless, after the
expiration of the offering period, Ferguson confirms to the Bank, the Company,
the Administrator and the FDIC, that, to the best of its knowledge, nothing of a
material nature has occurred which, taking into account all relevant factors,
would cause Ferguson to conclude that the aggregate purchase price of the Common
Stock sold in the Conversion is incompatible with its estimate of the aggregate
pro forma market value of the Bank and the Company at the conclusion of the
Offering. If the aggregate pro forma market value of the Bank and the Company
as of such date is within the Estimated Valuation Range (or, with the consent of
the Administrator and FDIC, not more than 15% above the maximum of the Estimated
Valuation Range), then such pro forma market value will determine the number of
shares of Common Stock to be sold in the Conversion. If there has occurred a
change in the aggregate pro forma market value of the Bank and the Company so
that the aggregate pro forma market value is below the minimum of the Estimated
Valuation Range or more than 15% above the maximum of the Estimated Valuation
Range, a resolicitation of subscribers may be made based upon a new Estimated
Valuation Range, the Plan may be terminated or such other actions as the
Administrator and the FDIC may permit may be taken.
14
In the event of a resolicitation, subscribers would be given a specified
time period within which to respond to the resolicitation. If a subscriber
fails to respond to the resolicitation by the end of such period, the
subscription of such subscriber will be canceled, funds submitted with the
subscription will be refunded promptly with interest at the Bank's passbook
savings rate, and holds on accounts from which withdrawals were designated will
be released. Any such resolicitation will be by means of an amended prospectus
filed with the SEC. A resolicitation may delay completion of the Conversion.
If the Plan is terminated, all funds will be returned promptly with interest at
the Bank's passbook savings rate from the date payment was deemed received, and
holds on funds authorized for withdrawal from deposit accounts will be released.
See "-- Exercise of Subscription Rights and Purchases in the Community
Offering."
The valuation by Ferguson is not intended, and must not be construed, as a
recommendation of any kind as to the advisability of purchasing Common Stock.
Ferguson did not independently verify the financial statements and other
information provided by the Bank, nor did Ferguson value independently the
assets or liabilities of the Bank. The valuation considers the Bank as a going
concern and should not be considered as an indication of the liquidation value
of the Bank or the Company. 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 such shares in the Conversion will thereafter be able to sell shares
at prices in the range of the foregoing valuation of the pro forma market value
thereof.
A copy of the complete appraisal by Ferguson is on file and available for
inspection at the office of the Savings Institutions Division of the North
Carolina Department of Commerce, Tower Building, Suite 301, 1110 Navaho Drive,
Raleigh, North Carolina 27609. A copy is also available for inspection at the
Stock Information Center, 211 South Greene Street, Wadesboro, North Carolina
28170. A copy of the appraisal has also been filed as an exhibit to the
Registration Statement filed with the SEC with respect to the Common Stock
offered hereby. See "ADDITIONAL INFORMATION" in the Prospectus.
Exercise of Subscription Rights and Purchases in Community Offering
In order for Subscription Rights to be effectively exercised in the
Subscription Offering and in order to purchase in the Subscription Offering, the
original signed Order Forms (including an original signed form of certification)
and the required payment for the aggregate dollar amount of Common Stock desired
or appropriate instructions authorizing withdrawal from one or more the Bank
deposit accounts (other than negotiable order of withdrawal accounts or other
demand deposit accounts), must be received by the Bank by the Expiration Time,
which is 12:00 noon, Eastern Time, on ________________, 1998. Subscription
Rights (i) for which the Bank does not receive original signed Order Forms by
the Expiration Time (unless such time is extended), or (ii) for which Order
Forms are executed defectively or are not accompanied by full payment (or
appropriate withdrawal instructions) for subscribed shares, will expire whether
or not the Bank has been able to locate the persons entitled to such rights. In
order to purchase in the Community Offering, the Order Forms, accompanied by the
required payment for the aggregate dollar amount of Common Stock desired or
appropriate instructions authorizing withdrawal from one or more of the Bank's
deposit accounts (other than negotiable order of withdrawal accounts or other
demand deposit accounts), must be received by the Bank prior to the time the
Community Offering terminates, which could be at any time at or subsequent to
the Expiration Time. No orders will be accepted from persons who do not have
Subscription Rights in the Subscription Offering unless a Community Offering is
commenced.
In the event that an Order Form is not delivered and is returned to the
Bank by the United States Postal Service (or the Bank is unable to locate the
addressee), is not received or is received after the Expiration Time, is
defectively completed or executed, or is not accompanied by full payment for the
shares subscribed for (including instances where a savings account or
certificate balance from which withdrawal is authorized is insufficient to fund
the amount of such required payment), the subscription rights for the
15
person to whom such rights have been granted will lapse as though that person
failed to return the completed Order Form within the time period specified. The
Bank may, but will not be required to, waive any irregularity on any Order Form
or require the submission of corrected Order Forms or the remittance of full
payment for subscribed shares by such date as the Bank specify. The waiver of an
irregularity on an order form in no way obligates the Bank to waive any other
irregularity on that, or any irregularity on any other Order Form. Waivers will
be considered on a case-by-case basis. Photocopies of Order Forms, including
copies sent by facsimile, payments from private third parties, payments made by
wire transfer or electronic transfers of funds will not be accepted. The Bank's
interpretation of the terms and conditions of the Plan and of the acceptability
of the Order Forms will be final. The Bank has the right to investigate any
irregularity on any Order Form.
Executed Order Forms once received by the Bank, may not be modified,
amended or rescinded without the consent of the Bank. The Bank has the right to
extend the subscription period subject to applicable regulations, unless
otherwise ordered by the Administrator, or to waive or permit correction of
incomplete or improperly executed Order Forms, but does not represent that it
will do so.
The amount to be remitted with the Order Forms shall be the aggregate
dollar amount that a subscriber or purchaser desires to invest in the
Subscription and Community Offering. Complete payment must accompany all
completed Order Forms submitted in the Subscription and Community Offering in
order for subscriptions to be valid. See "-- Purchase Price of Common Stock and
Number of Shares Offered" in the Prospectus.
Payment for shares will be permitted to be made by any of the following
means: (i) in cash, if delivered in person to either office of the Bank; (ii) by
check, bank draft, negotiable order of withdrawal or money order, provided that
the foregoing will only be accepted subject to collection and payment; or (iii)
by appropriate authorization of withdrawal from any deposit account in the Bank
(other than a negotiable order of withdrawal account or other demand deposit
account). Order Forms directing that payment for shares be made by
authorization of withdrawal will be accepted only if, at the time the Order
Forms are received, there exists sufficient funds in the account from which
withdrawal is authorized to pay the full purchase price for the number of shares
ordered. In order to ensure proper identification of Subscription Rights and
proper allocations in the event of an oversubscription, it is the responsibility
of subscribers to provide correct account verification information on the Order
Forms. Order Forms submitted by unauthorized purchasers or in amounts exceeding
purchase limitations will not be honored.
For purposes of determining the withdrawal balance of deposit accounts from
which withdrawals have been authorized, such withdrawals will be deemed to have
been made upon receipt of appropriate authorization therefor, but interest will
be paid by the Bank on the amount deemed to have been withdrawn at the
contractual rate of interest paid on such accounts until the date on which the
Conversion is completed or terminated.
Interest will be paid by the Bank on payments for Common Stock made in cash
or by check, bank draft, negotiable order of withdrawal or money order at the
Bank's passbook savings rate. Such interest shall be paid from the date the
order is accepted for processing and payment in good funds is received by the
Bank until consummation or termination of the Conversion. The Bank shall be
entitled to invest all amounts paid on subscriptions for Common Stock for its
own account until completion or termination of the Conversion. The Bank may not
knowingly lend funds or otherwise extend credit to any person to purchase Common
Stock. After amounts submitted for payment are applied to the purchase price
for shares sold, they will no longer earn interest, and they will not be insured
by the FDIC or any other government agency or other entity.
16
The Order Forms contain appropriate means by which authorization of
withdrawals from deposit accounts may be made to pay for subscribed shares.
Once such a withdrawal has been authorized, none of the designated withdrawal
amount may be withdrawn (except by the Bank as payment for Common Stock) until
the Conversion is completed or terminated. Savings accounts will be permitted
to be established for the purpose of making payment for subscribed shares of
Common Stock. Funds authorized for withdrawal will continue to earn interest at
the applicable contract interest rate until completion or termination of the
Conversion or, in the case of an order submitted in the Community Offering,
until it is determined that such order cannot or will not be accepted.
Notwithstanding any regulatory provision regarding penalties for early
withdrawal from certificate accounts, payment for subscribed shares of Common
Stock will be permitted through authorization of withdrawals from such accounts
without the assessment of such penalties. However, if after such withdrawal the
applicable minimum balance requirement ceases to be satisfied, such certificate
account will be canceled and the remaining balance thereof will earn interest at
the Bank's passbook savings rate.
Upon completion or termination of the Conversion, the Bank will return to
subscribers all amounts paid with subscriptions which are not applied to the
purchase price for shares, plus interest at its passbook savings rate from the
date good funds are received until the consummation or termination of the
Conversion, and the Bank will release deposit account withdrawal orders given in
connection with the subscriptions to the extent funds are not withdrawn and
applied toward the purchase of shares.
Delivery of Stock Certificates
Certificates representing Common Stock issued in the Conversion will be
mailed by the Company's transfer agent to persons entitled thereto at the
address of such persons appearing on the Order Forms as soon as practicable
following consummation of the Conversion. Any certificates returned as
undeliverable will be held by the Company until claimed by persons legally
entitled thereto or otherwise disposed of in accordance with applicable law.
Until certificates for Common Stock are available and delivered to subscribers,
subscribers may not be able to sell the shares of Common Stock for which they
have subscribed, even though trading of the Common Stock may have commenced.
Shares sold prior to receipt of a stock certificate are the responsibility of
the purchaser. Allocations of Common Stock will be deemed final only upon
stockholder receipt of the certificate representing the Common Stock.
Persons in Non-Qualified or Foreign Jurisdictions
The Company will make reasonable efforts to comply with the securities laws
of all states of the United States in which Eligible Account Holders,
Supplemental Eligible Account Holders, or Other Members entitled to subscribe
for shares of Common Stock reside. However, no shares of Common Stock or
Subscription Rights under the Plan will be offered or sold in a foreign country,
or in a state in the United States (i) where a small number of persons otherwise
eligible to subscribe for shares under the Plan reside or (ii) if the Company
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
requirement that the Company, the Bank or any employee or representative thereof
register as a broker, dealer, agent or salesperson or register or otherwise
qualify the Subscription Rights or Common Stock for sale in such state. No
payments will be made in lieu of the granting of Subscription Rights to persons
residing in such jurisdictions.
Marketing Arrangements
The Bank has retained Trident Securities to consult with and advise the
Bank and the Company and to assist the Company, on a best-efforts basis, in the
marketing of shares in the Offering. Trident Securities is a broker-dealer
registered with the SEC and a member of the NASD. Trident Securities is
headquartered in Raleigh, North Carolina, and its telephone number is (919) 781-
8900. Trident Securities
17
will assist the Bank and the Company in the Conversion as follows: (i) it will
act as marketing advisor with respect to the Subscription Offering and will
assist the Company on a best-efforts basis in the marketing of the Common Stock
in the Community Offering and Syndicated Community Offering; (ii) members of its
staff will conduct training sessions to educate directors, officers and
employees of the Bank regarding the Conversion process; and (iii) it will
provide assistance in the establishment and supervision of the Stock Information
Center, including training staff to record and tabulate orders for the purchase
of Common Stock and to respond to customer inquiries.
For rendering its services, the Bank has agreed to pay Trident Securities a
commission equal to 2.5% of the aggregate dollar amount of Common Stock sold in
the Subscription and Community Offering, excluding shares purchased by
directors, executive officers and their "associates" (as defined in the Plan).
The Bank has also agreed to pay to Selected Dealers, if any, negotiated
commissions.
The Bank has agreed to reimburse Trident Securities for its reasonable out-
of-pocket expenses, including but not limited to travel, communications, legal
fees and postage, and to indemnify Trident Securities against certain claims or
liabilities, including certain liabilities under the Securities Act. Trident
has agreed that the Bank is not required to pay its legal fees to the extent
they exceed $27,500 or its other out of pocket expenses to the extent they
exceed $10,000. Total fees and commissions to Trident Securities are expected
to be between $126,855 and $204,788 at the minimum and 15% above the maximum,
respectively, of the Estimated Valuation Range. See "PRO FORMA DATA" in the
Prospectus for the assumptions used to determine these estimates.
Sales of Common Stock will be made primarily through registered
representatives affiliated with Trident Securities or by the broker-dealers
managed by Trident Securities. In addition, subject to applicable law,
executive officers of the Company and the Bank may participate in the
solicitation of offers to purchase Common Stock. Other employees of the Bank
may participate in the Offering in clerical capacities, providing administrative
support in effecting sales transactions and answering questions of a mechanical
nature relating to the proper execution of the Order Forms. Other questions of
prospective purchasers, including questions as to the advisability or nature of
the investment, will be directed to registered representatives. Such other
employees have been instructed not to solicit offers to purchase Common Stock or
provide advice regarding the purchase of Common Stock. A Stock Information
Center will be established in the Bank's office, in an area separate from the
Bank's banking operations. Employees will inform prospective purchasers that
their questions should be directed to the Stock Information Center and will
provide such persons with the telephone number of the Stock Information Center.
Stock orders will be accepted at the Bank's office and will be promptly
forwarded to the Stock Information Center for processing. Sales of Common Stock
by registered representatives will be made from the Stock Information Center.
In addition, the Bank may hire one or more temporary clerical persons to assist
in typing, opening mail, answering the phone, and with other clerical duties.
An employee of the Bank will also be present at the Stock Information Center to
process funds and answer questions regarding payment for stock, including
verification of account numbers in the case of payment by withdrawal
authorization and similar matters. Subject to applicable state law, the Company
will rely on Rule 3a4-1 under the Exchange Act, and sales of Common Stock will
be conducted within the requirements of Rule 3a4-1, so as to permit officers and
current full and part-time the Bank employees to participate in the sale of
Common Stock. No officer, director or employee of the Company or the Bank will
be compensated in connection with his or her participation by the payment of
commissions or other remuneration based either directly or indirectly on the
transactions in the Common Stock.
The engagement of Trident Securities and the work performed by Trident
Securities pursuant to its engagement should not be construed by purchasers of
Common Stock as constituting an endorsement or recommendation relating to such
investment or a verification of the accuracy or completeness of information
contained in this Prospectus.
18
Minimum and Maximum Purchase Limitations
Each person subscribing for Common Stock in the Conversion must subscribe
for at least fifty shares of the Common Stock to be offered in the Conversion.
In addition, the maximum number of shares of Common Stock which may be purchased
in the Conversion by (i) any person or entity, (ii) persons or entities
exercising Subscription Rights through a single account or (iii) group of
persons or entities otherwise acting in concert, is 10,000 shares. In addition,
no person or entity, or group of persons or entities acting in concert, together
with any associate (as defined in the Plan), may subscribe for more than 15,000
shares of Common Stock sold in the Conversion. The Board of Directors of the
Bank may in its absolute discretion (i) reduce the above-described 10,000 and
15,000 share maximum purchase limitations to an amount not less than 1% of the
number of shares offered and sold in the Conversion or (ii) increase such 10,000
and 15,000 share maximum purchase limitations to an amount of up to 5% of the
shares of Common Stock offered and sold. Any reduction or increase in the
maximum purchase limitation by the Bank's Board of Directors may occur at any
time prior to consummation of the Conversion, either before or after the Special
Meeting on ________________, 1998. In the event the 10,000 or 15,000 share
maximum purchase limitation is increased, any subscriber or group of subscribers
in the Subscription, Community or Syndicated Community Offering who has
subscribed for the maximum amount which is increased, and certain other large
subscribers in the discretion of the Company, shall be given the opportunity to
increase their subscriptions up to the then applicable maximum purchase
limitation.
The Plan further provides that for purposes of the foregoing limitations
the term "associate" is used to indicate any of the following relationships with
a person:
(i) any relative or spouse of such person, or any relative of such
spouse, who has the same home as such person or who is a director or
officer of the Bank, the Company or any subsidiary of the Bank or of
the Company;
(ii) any corporation or organization (other than the Bank, the Company or
a majority-owned subsidiary of the Bank or the Company) of which the
person is an officer or partner or is, directly or indirectly, the
beneficial owner of 10% or more of any class of equity security; and
(iii) any trust or other estate in which such person has a substantial
beneficial interest or as to which such person serves as a trustee
or in a similar fiduciary capacity, except for any tax-qualified
employee stock benefit plan or any charitable trust which is exempt
from federal taxation pursuant to Section 501(c)(3) of the Code.
For purposes of the foregoing limitations, directors and officers of the
Bank or the Company shall not be deemed to be associates or a group of persons
acting in concert solely as a result of their serving in such capacities.
For purposes of the foregoing limitations, persons will be deemed to be
"acting in concert" if they are (i) knowingly participating in a joint activity
or interdependent conscious parallel action towards a common goal (whether or
not pursuant to an express agreement), with respect to the purchase, ownership,
voting or sale of Common Stock or (ii) engaged in a combination or pooling of
voting or other interests in the securities of the Company for a common purpose
pursuant to any contract, understanding, relationship, agreement or other
arrangement, whether written or otherwise. The Company and the Bank will
presume that certain persons are acting in concert based upon, among other
things, joint account relationships, accounts with the same address registration
and the fact that such persons have filed joint Schedules 13D with the SEC with
respect to other companies.
19
Approval, Interpretation, Amendment and Termination
Under the Plan, the Administrator's approval thereof, and applicable North
Carolina conversion regulations, consummation of the Conversion is subject to
satisfaction of certain conditions, including the following: (i) approval of the
Plan by the affirmative vote of a majority of the votes eligible to be cast by
members of the Bank at the Special Meeting; (ii) sale of shares of Common Stock
for an aggregate purchase price equal to not less than the minimum or more than
the maximum of the Estimated Valuation Range unless the aggregate purchase price
is increased to as much as 15% above the maximum with the consent of the
Administrator and FDIC, and (iii) receipt by the Company and the Bank of
favorable opinions of counsel or other tax advisor as to the federal and state
tax consequences of the Conversion. See "-- Income Tax Consequences."
If all conditions for consummation of the Conversion are not satisfied, no
Common Stock will be issued, the Bank will continue to operate as a North
Carolina-chartered mutual savings bank, all subscription funds will be promptly
returned with interest at the Bank's passbook savings rate, and all deposit
withdrawal authorizations (and holds placed on such accounts) will be canceled.
In such an event, the Company would not acquire control of the Bank.
All interpretations by the Bank and the Company of the Plan and of the
Order Forms and related materials for the Subscription and Community Offering
will be final, subject to the authority of the Administrator. The Bank and the
Company may reject Order Forms that are not properly completed. However, the
Company and the Bank retain the right, but will not be required, to waive
irregularities in submitted Order Forms or to require the submission of
corrected Order Forms or the remittance of full payment for all shares
subscribed for by such dates as they may specify. In addition, the Plan may be
substantively amended by a two-thirds vote of the Bank's Board of Directors at
any time prior to the Special Meeting, and at any time thereafter by a two-
thirds vote of the Bank's Board of Directors with the concurrence of the
Administrator and the FDIC. If the Bank determines upon the advice of counsel
and after consultation with the Administrator that any such amendment is
material, subscribers would be given the opportunity to increase, decrease or
cancel their subscriptions. Also, as required by the regulations of the
Administrator, the Plan provides that the transactions contemplated thereby may
be terminated by a two-thirds vote of the Bank's Board of Directors at any time
prior to the Special Meeting and may be terminated by a two-thirds vote of the
Bank's Board of Directors at any time thereafter but prior to the completion of
the Conversion with the concurrence of the Administrator, notwithstanding
approval of the Plan by the Members at the Special Meeting.
Certain Restrictions on Transfer of Subscription Rights; False or Misleading
Order Forms
The Subscription Rights granted under the Plan are non-transferable.
Subscription Rights may be exercised only by the person to whom they are issued
and only for his or her own account. Persons exercising Subscription Rights are
required to certify that they are purchasing shares for their own accounts
within the purchase limitations set forth in the Plan and that they have no
agreement or understanding for the sale or transfer of such shares.
The Bank reserves the right to make an independent investigation of any
facts or circumstances brought to its attention that indicate or tend to
indicate that one or more persons acting independently or as a group acting in
concert may be attempting to violate or circumvent the regulatory prohibition on
transferability of Subscription Rights. The nature and extent of such
investigation will be at the Bank's sole discretion and the Bank may require a
holder of Subscription Rights to provide certified affidavits and other
documentation to satisfy the Bank that its Plan and North Carolina and federal
conversion regulations regarding nontransferability are not being subverted by
actions of holders of Subscription Rights. In extreme cases the Bank reserves
the right to seek legal advice from the General Counsel for the
20
Administrator as to compliance with all regulations governing the Conversion,
including the nontransferability of Subscription Rights.
The Plan provides that, if the Bank's Board of Directors determines that a
subscriber (i) has submitted a false or misleading information on his or her
Order Forms or otherwise in connection with the attempted purchase of shares,
(ii) has attempted to purchase shares of Common Stock in violation of provisions
of the Plan or (iii) fails to cooperate with attempts by the Bank or the Company
or their employees or agents to verify information with respect to purchase
rights, the Board of Directors may reject the order of such subscriber.
Income Tax Consequences
The Bank has received an opinion from its special counsel, Brooks, Pierce,
McLendon, Humphrey & Leonard, L.L.P., of Greensboro, North Carolina, to the
effect that for federal income tax purposes: (i) the Conversion will constitute
a tax free reorganization with respect to the Bank and no gain or loss will be
recognized by the Bank either in its mutual or stock form; (ii) no gain or loss
will be recognized by the Bank upon the purchase of the Bank's stock by the
Company or upon the sale by the Company of its Common Stock; (iii) no gain or
loss will be recognized by the Bank's depositors with respect to their deposit
accounts at the Bank as a consequence of the Conversion; (iv) the tax basis of
depositors' deposit accounts at the Bank will not be changed as a result of the
Conversion; (v) assuming the Subscription Rights have no value, no gain or loss
will be recognized by Eligible Account Holders, Supplemental Eligible Account
Holders, Other Members, or directors, officers and employees of the Bank upon
either the issuance to them of the Subscription Rights or the exercise or lapse
thereof; (vi) no gain or loss will be recognized by Eligible Account Holders or
Supplemental Eligible Account Holders upon the distribution to them of interests
in the Liquidation Account; (vii) assuming the Subscription Rights have no
value, the tax basis for Common Stock purchased in the Conversion will be the
amount paid therefor; and (viii) the tax basis of interests in the Liquidation
Account will be zero. The Bank has been further advised by its special counsel,
Brooks, Pierce, McLendon, Humphrey & Leonard, L.L.P., that the tax effects of
the Conversion under North Carolina tax laws will be consistent with the federal
income tax consequences.
Several of the foregoing legal opinions are premised on the assumption that
the Subscription Rights will have no value. The Bank has been advised by
Ferguson that, in its opinion, the Subscription Rights will not have any
ascertainable value, based on the fact that such rights are acquired by the
recipients without cost, are non-transferable, are of short duration and afford
the recipients the right only to purchase Common Stock at a price equal to its
estimated fair market value as of the date such rights are issued, which will be
the same price paid by all purchasers in the Conversion. The opinion of
Ferguson is not binding on the IRS and if the Subscription Rights were
ultimately determined to have ascertainable value, recipients of Subscription
Rights would have to include in gross income an amount equal to the value of the
Subscription Rights received by them. The basis of the Common Stock purchased
pursuant to Subscription Rights would be increased by the amount of income
realized with respect to the receipt or exercise of the Subscription Rights.
Moreover, recipients of Subscription Rights could then have to report the
transaction to the IRS. Each Eligible Account Holder, Supplemental Eligible
Account Holder, Other Member or other recipient of Subscription Rights is
encouraged to consult with his, her or its own tax advisor as to the tax
consequences in the event the Subscription Rights are deemed to have
ascertainable value.
No legal opinion has been or will be received with respect to any tax
consequences of the Conversion not specifically described above, including the
tax consequences to Eligible Account Holders, Supplemental Eligible Account
Holders, Other Members, other recipients of Subscription Rights or purchasers of
Common Stock under the laws of any other state, local or foreign taxing
jurisdiction to which they may be subject. Special counsel expresses no opinion
regarding the value of the Subscription Rights.
21
STOCK PURCHASES BY DIRECTORS AND EXECUTIVE OFFICERS
Directors, officers and employees of the Bank will be entitled to subscribe
for shares of Common Stock in the Subscription Offering in their capacities as
such and to the extent they qualify as Eligible Account Holders, Supplemental
Eligible Account Holders and Other Members. Shares purchased by such persons
will be purchased at the same price per share--$10.00--that will be paid by
other purchasers in the Offering. They may also purchase Common Stock in the
Community Offering or in the Syndicated Community Offering, if any, subject to
the maximum purchase limitations applicable to all purchasers of shares in the
Conversion.
The following table sets forth for the named executive officer and each of
the directors of the Bank who intends to purchase Common Stock, and for all
executive officers and directors as a group (including in each case, except as
otherwise noted, all associates of such persons) the aggregate dollar amount of
Common Stock for which such director or executive officer has informed the Bank
he intends to subscribe. The amounts reflected in the table are estimates only
and the actual shares of Common Stock actually subscribed for by the listed
individuals may differ from the amounts reflected in the table. The following
table assumes that sufficient shares will be available to satisfy the
subscriptions of the Bank's executive officers and directors.
Anticipated
Anticipated Number
Amount of Shares As a Percent
to be Paid to be of Shares
Name for Shares Purchased/(1)/ Issued/(2)/
- ---- ----------- -------------- -------------
Preston A. Burns, Chairman $100,000 10,000 1.52%
John J. Crawford, Director 100,000 10,000 1.52%
W. Kenneth Huntley, Director 50,000 5,000 0.76%
Emmett S. Patterson, Director 10,000 1,000 0.15%
John R. Potter, Director 25,000 2,500 0.38%
H. Patrick Taylor, Jr., Director 150,000 15,000 2.27%
Eugene M. Ward, Director, President 100,000 10,000 1.52%
and Chief Executive Officer
All executive officers and directors $537,000 53,700 8.14%
as a group (9 persons) -------- ------ -----
- ---------------------
(1) Grants under the proposed MRP and shares subject to option under the Option
Plan, if approved by the stockholders of the Company at a meeting of
stockholders following the Conversion, are not aggregated with shares of
Common Stock purchased by the executive officers and directors listed
above. Under the proposed MRP, if approved by the stockholders of the
Company, a
22
number of shares equal to 4% of the shares issued in the Conversion are
expected to be issued to directors and certain employees of the Bank. Such
shares could be purchased in the open market at any time following approval
of the MRP by the Company's stockholders or could be issued out of
authorized but unissued shares. Recipients of shares under the MRP will
have voting control over such shares regardless of whether such shares have
vested. See "MANAGEMENT OF THE BANK -- Proposed Management Recognition
Plan" in the Prospectus.
(2) Based upon the issuance of 660,000 shares of Common Stock which is the
number of shares to be issued at the midpoint of the Estimated Valuation
Range. The same individuals would subscribe for 9.57% of the shares issued
based upon the issuance of 561,000 shares of Common Stock which is the
number of shares to be issued at the minimum of the Estimated Valuation
Range.
Without the prior written consent of the Administrator, shares of Common
Stock purchased by directors or executive officers of the Bank in the Conversion
cannot be sold during a period of one year following the Conversion, except upon
death of the director or executive officer. Such restriction also applies to
any shares issued to such person as a stock dividend, stock split or otherwise
with respect to any of such originally restricted stock.
In addition, the North Carolina conversion regulations provide that
directors and executive officers and their associates are prohibited from
purchasing outstanding shares of Common Stock for a period of three years
following the Conversion, except from or through a broker or dealer registered
with the SEC or Secretary of State of North Carolina, unless the prior written
approval of the Administrator is obtained. This provision does not apply to
negotiated transactions involving more than 1% of the Company's outstanding
Common Stock or to purchases of stock made by or held by one or more tax-
qualified or non-tax-qualified employee stock benefit plans of the Bank or the
Company which may be attributable to individual executive officers or directors.
Purchases and sales of Common Stock by officers and directors will also be
subject to the short-swing trading prohibitions contained in Section 16(b) of
the Exchange Act, and the short-swing trading and other rules promulgated
pursuant to the Exchange Act.
BENEFITS TO DIRECTORS AND EMPLOYEES
In connection with the Conversion, certain benefits will be provided to
directors, officers and employees of the Bank.
Employment Agreement. In connection with the Conversion, the Bank expects
to enter into an employment agreement with Eugene M. Ward, President and Chief
Executive Officer. The employment agreement provides for an initial annual
salary of $________. See "MANAGEMENT OF THE BANK --Employment Agreement" in the
Prospectus. Mr. Ward, along with all other employees, is also eligible to
receive bonuses as declared by the Bank's Board of Directors. See "MANAGEMENT
OF THE BANK -- Bonus Compensation" in the Prospectus.
Severance Plan. In connection with the Conversion, the Bank plans to adopt
a Severance Plan for the benefit of its full-time employees, who at the time of
a "change in control" (as defined in the Severance Plan) have not entered into
an employment agreement with the Company or the Bank. The Severance Plan
provides that in the event there is a change in control and (i) the employment
of any eligible employee of the Bank is terminated in connection with, or within
24 months after the change in control, other than for cause, or (ii) an eligible
employee terminates his or her employment following a
23
decrease in the level of such employee's annual base salary rate or a transfer
of such employee to a location more than 40 miles distant from the employee's
primary work station within 24 months after a change in control, the employee
shall be entitled to a severance benefit equal to the following: (a) employee
has been employed with the Bank less than 20 years, the employee shall receive a
severance benefit equal to the greater of (1) an amount equal to two weeks'
salary at the employee's existing salary rate multiplied times the employee's
years of service or (2) the amount of one month's salary at the employee's
salary rate at the time of termination; or the employee has been employed by the
Bank at least 20 years, the employee shall receive a severance benefit equal to
the greater (1) (1) an amount equal to two weeks' salary at the employee's
existing salary rate multiplied times the employee's years of service or (2) the
amount of two years salary at the employee's salary rate at the time of
termination. See "MANAGEMENT OF THE BANK -- Severance Plan" in the Prospectus.
MRP. Pursuant to the MRP, which is expected to be adopted by the Boards of
Directors of the Company and the Bank, directors and certain employees of the
Bank could receive restricted stock grants of a number of shares of Common Stock
equal to 4% of the shares issued in the Conversion (between 17,340 and 30,360
shares, assuming the issuance of between 561,000 and 759,000 shares). Assuming
that the shares issued pursuant to the MRP had a value of $10.00 per share, such
shares would have a value of between $170,340 and $303,600. Recipients of
restricted stock under the MRP will not have to pay for their restricted shares.
Under applicable regulations, if the proposed MRP is submitted to and
approved by the stockholders of the Company within one year after consummation
of the Conversion, (i) no employee of the Bank (including Mr. Ward) could
receive more than 25% of the shares issued under the MRP, or 7,590 shares,
assuming the issuance of 759,000 shares in the Conversion, (ii) the six non-
employee directors of the Bank could receive restricted stock grants for an
aggregate of not more than 25% of the shares issued under the MRP, or 7,590
shares, assuming the issuance of 759,000 shares in the Conversion and (iii) none
of the six non-employee directors of the Bank could receive individually more
than 5% of the shares issued under the MRP, or 1,518 shares, assuming the
issuance of 759,000 shares in the Conversion. Assuming the MRP shares had a
value of $10.00 per share, 7,590 shares would have a value of $75,900 and 1,518
shares would have a value of $15,180. If the MRP is submitted to and approved
by the Company's stockholders more than one year after consummation of the
Conversion, the regulatory percentage limitations set forth above would not
apply.
The MRP will only be implemented if approved by the stockholders of the
Company at a meeting of stockholders to be held no sooner than six months
following the Conversion. Recipients of restricted stock under the MRP will not
have to pay for their restricted shares. See "MANAGEMENT OF THE BANK" --
Proposed Management Recognition Plan" in the Prospectus.
Stock Options. Pursuant to the Stock Option Plan which is expected to be
adopted by the Boards of Directors of the Company and the Bank, directors and
certain employees of the Bank could receive options to purchase a number of
shares of Common Stock equal to 10% of the shares issued in the Conversion
(between 56,100 and 75,900 shares, assuming the issuance of between 561,000 and
759,000 shares).
Under applicable regulations, if the proposed Stock Option Plan is
submitted to and approved by the stockholders of the Company within one year
after consummation of the Conversion, (i) no employee of the Bank (including Mr.
Ward) could receive more than 25% of the options issued under the Stock Option
Plan, or options to purchase 18,975 shares, assuming the issuance of 759,000
shares in the Conversion, (ii) the six non-employee directors of the Bank could
not receive in the aggregate more than 25% of the options issued under the Stock
Option Plan, or options to purchase 18,975 shares, assuming the issuance of
759,000 shares in the Conversion, and (iii) none of the six non-employee
directors of the
24
Bank could receive individually more than 5% of the options issued under the
Stock Option Plan, or options to purchase 3,795 shares, assuming the issuance of
759,000 shares in the Conversion. If the Stock Option Plan is submitted to and
approved by the Company's stockholders more than one year after consummation of
the Conversion, the regulatory percentage limitations set forth above would not
apply.
The Stock Option Plan will only be implemented if approved by the
stockholders of the Company at a meeting of stockholders to be held no sooner
than six months following the Conversion. The exercise price of the options
will be the fair market value of the Common Stock at the time the options are
granted (which will be after the Stock Option Plan is approved by the Company's
stockholders), and the options will have terms of ten years or less. Recipients
of options under the Stock Option Plan will not have to pay for the options
issued to them. See "MANAGEMENT OF THE BANK" -- Proposed Option Plan" in the
Prospectus.
USE OF PROCEEDS
Although the actual net proceeds from the sale of the Common Stock cannot
be determined until the Conversion is completed, it is presently estimated that
such net proceeds will be between $5.12 million and $7.05 million, based on the
current Estimated Valuation Range. If the gross proceeds of the shares sold are
increased to 15% above the maximum of the Estimated Valuation Range, it is
estimated that net proceeds will equal $8.16 million. See "PRO FORMA DATA" in
the Prospectus for the assumptions used to arrive at these amounts. The actual
net proceeds may vary materially from the estimated amounts described herein.
The Company expects to retain 50% of the proceeds of the Offering and will use
the balance to purchase the capital stock of the Bank to be issued in the
Conversion.
The Company expects to use the portion of the net proceeds it retains for
working capital and investment purposes. The Company does not expect to have
significant operating expenses and anticipates that initially it will invest the
net proceeds it retains primarily in interest-earning deposits, U.S. government,
federal agency and other marketable securities and mortgage-backed securities.
The types and amounts of such investments will vary from time to time based upon
the interest rate environment, asset/liability mix considerations and other
factors.
Net proceeds paid to the Bank initially will become part of the Bank's
general funds and will be invested primarily in mortgage and other loans, and
investments consisting primarily of interest-earning deposit balances, U.S.
government and federal agency obligations and other marketable securities in
accordance with the Bank's lending and investment policies. The relative
amounts to be invested in each of these types of investments will depend upon
loan demand, rates of return and asset/liability matching considerations at the
time the investments are to be made. Management is not able to predict the
yields which will be produced by the investment of the proceeds of the Offering
because such yields will be significantly influenced by general economic
conditions and the interest rate environment existing at the time the
investments are made. Remaining net proceeds paid to the Bank will be used for
general corporate purposes.
The proceeds of the Offering will result in an increase in the Bank's net
worth and regulatory capital and may enhance the potential for growth through
increased lending and investment activities, branch expansion, ATMs or
otherwise. The net proceeds retained by the Company could be used to support
the future expansion of operations of the Company through the opening of a
branch office in or adjacent to the Bank's primary market area. The Company has
no current plans to open any additional office. Payments for shares of Common
Stock of the Company made through the withdrawal of existing deposit accounts at
the Bank will not result in the receipt of new funds for investment by the Bank.
25
Upon completion of the Conversion, the Board of Directors will have the
authority to adopt stock repurchase plans, subject to statutory and regulatory
requirements. Based upon facts and circumstances which may arise following the
Conversion, the Board of Directors may determine to repurchase stock in the
future. Such facts and circumstances may include but are not limited to (i)
market and economic factors such as the price at which the Common Stock is
trading, the volume of trading, the attractiveness of other investment
alternatives in terms of the rates of return and risks involved in the
investments, (ii) the ability to increase the book value and earnings per share
of the remaining outstanding shares, and improve the Company's return on equity;
(iii) the reduction of dilution to stockholders caused by having to issue
additional shares to cover the exercise of stock options or to fund employee
stock benefit plans; and (iv) any other circumstances in which repurchases would
be in the best interests of the Company and its stockholders.
Any stock repurchases will be subject to the determination of the Board of
Directors that both the Company and the Bank will be capitalized in excess of
applicable regulatory requirements after any such repurchases and that capital
will be adequate taking into account, among other things, the level of
nonperforming assets and other risks, the Company's and the Bank's current and
projected results of operations and asset/liability structure, the economic
environment and tax and other regulatory considerations. Federal regulations
require that, subject to certain exceptions, the Company must obtain approval of
the Federal Reserve prior to repurchasing Common Stock in excess of 10% of its
net worth during any twelve-month period. See "SUPERVISION AND REGULATION --
Regulation of the Company -- Dividend and Repurchase Limitations" in the
Prospectus.
The Company and the Bank have no present intention to file consolidated tax
returns which will preserve for the Company the ability to use a portion of the
proceeds to make a return of capital in the future. However, the Company has
not made any decision to pay such a return of capital. The Company and the Bank
have agreed to notify the FDIC before making a return of capital during the
first three years following the Conversion. See "DIVIDEND POLICY."
At any time following approval of the MRP by the Company's stockholders, it
is expected that the MRP may acquire a number of shares of Common Stock equal to
4% of the number of shares issued in the Conversion. See "MANAGEMENT OF THE
BANK -- Proposed Management Recognition Plan" in the Prospectus. Such shares
may be acquired in the open market or acquired through the Company's issuance of
authorized but unissued shares. In the event shares are acquired in the open
market, the funds for such purchase may be provided by the Bank from the
proceeds of the Conversion. It is estimated that between 20,400 and 30,360
shares may be acquired by the MRP Trust, assuming the issuance of between
561,000 and 759,000 shares, respectively, in the Conversion. If all such shares
were acquired by the MRP in the open market, and if such shares were acquired at
a price of $10.00 per share, the Bank would contribute between $204,000 and
$276,000, respectively, to the MRP for this purpose.
DIVIDEND POLICY
Upon Conversion, the Board of Directors of the Company will have the
authority to declare semiannual dividends on the Common Stock, subject to
statutory and regulatory requirements. The Company expects to pay annual
dividends on the Common Stock at a rate of $0.30 per share which is equal to 3%
of the offering price for the Common Stock in the Conversion. The payment of
dividends is expected to begin as soon as practicable after completion of the
Conversion. In addition, the Board of Directors may determine from time to time
that it is prudent to pay special nonrecurring cash dividends. Special cash
dividends, if paid, may be in addition to, or in lieu of, regular cash
dividends. The Company's Board of Directors will periodically review its policy
concerning dividends. Declarations of dividends, if any, by the Board of
Directors will depend upon a number of factors, including
26
investment opportunities available to the Company and the Bank, capital
requirements, regulatory limitations, the Company's and the Bank's results of
operations and financial condition, tax considerations and general economic
conditions. Upon review of such considerations, the Board of Directors of the
Company may authorize dividends to be paid in the future if it deems such
payment appropriate and in compliance with applicable law and regulation. No
assurances can be given that any dividends will in fact be paid on the Common
Stock or, if dividends are paid, that they will not be reduced or discontinued
in the future.
In connection with the Conversion, the Bank has agreed with the FDIC that,
within the first three years after completion of the Conversion, neither the
Company nor the Bank will pay any taxable dividend or make any taxable
distribution in excess of their current and retained earnings. The Company and
the Bank have agreed to notify the FDIC before making a return of capital during
the first three years following the Conversion.
The sources of income to the Company initially will consist of earnings on
the capital retained by the Company and dividends paid by the Bank to the
Company, if any. Consequently, future declarations of cash dividends by the
Company may depend upon dividend payments by the Bank to the Company, which
payments are subject to various restrictions. Under current North Carolina
regulations, the Bank could not declare or pay a cash dividend if the effect
thereof would be to reduce its net worth to an amount which is less than the
minimum required by the FDIC and the Administrator. In addition, for a period
of five years after the consummation of the Conversion, the Bank will be
required, under existing regulations, to obtain the prior written approval of
the Administrator before it can declare and pay a cash dividend on its capital
stock in an amount in excess of one-half of the greater of (i) its net income
for the most recent fiscal year, or (ii) the average of its net income after
dividends for the most recent fiscal year and not more than two of the
immediately preceding fiscal years, if applicable. See "SUPERVISION AND
REGULATION -- Regulation of the Bank -- Restrictions on Dividends and Other
Capital Distributions" in the Prospectus. As a result of this limitation, if
the Bank had been a stock institution at the end of fiscal 1997 and for the two
preceding fiscal years, it could not have paid a dividend in excess of $_______
without the approval of the Administrator.
As a converted institution, the Bank also will be subject to the regulatory
restriction that it will not be permitted to declare or pay a dividend on or
repurchase any of its capital stock if the effect thereof would be to cause its
regulatory capital to be reduced below the amount required for the liquidation
account established in connection with the Conversion. See "THE CONVERSION --
Effects of Conversion -- Liquidation Rights." Also, see "TAXATION -- Federal
Income Taxation" in the Prospectus for a discussion of federal income tax
provisions that may limit the ability of the Bank to pay dividends to the
Company without incurring a recapture tax.
MARKET FOR COMMON STOCK
The Company, as a newly organized company, has never issued capital stock,
and consequently, there is no established market for the Common Stock at this
time. Following the completion of the Offering, it is anticipated that the
Common Stock will be traded on the over-the-counter market with quotations
available through the OTC Electronic Bulletin Board. Trident Securities is
expected to make a market in the Common Stock, by developing and maintaining
historical stock trading records, soliciting potential buyers and sellers of
shares and attempting to match buy and sell orders. In connection with its
market making activities, Trident may buy or sell shares from time to time for
its own account. However, Trident Securities will not be subject to any
obligation with respect to such efforts.
27
An active and liquid public trading market for the securities of any
issuer, including the Common Stock, depends upon the presence in the marketplace
of both willing buyers and willing sellers of the securities at any given time.
Due to the size of the Company's offering (660,000 shares at the midpoint of the
Estimated Valuation Range), it is unlikely that a stockholder base large enough
to create an active trading market will develop and be maintained. Further,
even if a market develops, there can be no assurance that the shares of Common
Stock offered in the Conversion can be resold at or above the purchase price
after completion of the Conversion. Purchasers of Common Stock should consider
the potentially illiquid and long-term nature of their investment in the shares
being offered hereby. The aggregate price of the Common Stock is based upon an
independent appraisal of the pro forma market value of the Common Stock.
However, there can be no assurance that an investor will be able to sell the
Common Stock purchased in the Conversion at or above the $10.00 purchase price.
REGISTRATION REQUIREMENTS
The Company will register its Common Stock with the SEC pursuant to Section
12 of the Exchange Act in connection with the Conversion and will not deregister
the Common Stock for a period of three years following the completion of the
Conversion. Upon such registration, the proxy and tender offer rules, insider
trading reporting requirements and restrictions, annual and periodic reporting
and other requirements of the Exchange Act will be applicable to the Company.
LEGAL OPINIONS
The validity of the issuance of the Common Stock in the Conversion has been
passed upon for the Company by its special counsel, Brooks, Pierce, McLendon,
Humphrey & Leonard, L.L.P., Greensboro, North Carolina, which firm has also
rendered its opinion to the Bank concerning certain federal and North Carolina
income tax aspects of the Conversion as described herein under "THE CONVERSION -
- - Income Tax Consequences." Certain legal matters will be passed upon for
Trident Securities by Thacher Proffitt & Wood, Washington, D.C.
EXPERTS
The Financial Statements of the Bank as of June 30, 1997 and 1996 and for
each of the years in the two-year period ended June 30, 1997 have been included
herein in reliance upon the report of Faulkner and Thompson, P.A., independent
certified public accountants, appearing elsewhere herein, and upon the authority
of said firm as experts in accounting and auditing.
Ferguson has consented to being named as an expert herein and to the
summary herein of its appraisal report as to the estimated pro forma market
value of the Bank and the Company and its opinion with respect to Subscription
Rights.
ADDITIONAL INFORMATION AND ORDER FORMS
The Prospectus contains the following: audited consolidated financial
statements of the Bank for the two fiscal years ended June 30, 1997 and 1996;
unaudited consolidated financial statements of the Bank for the six-month
periods ended December 31, 1997 and 1996; capitalization of the Company and the
Bank; Management's Discussion and Analysis of Financial Condition and Results of
Operations; a description of the Bank's lending and savings and investment
activities; information concerning compensation and other benefits of directors
and officers; a description of the Common Stock; anti-
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takeover provisions of the Company and the Bank; and additional information
about the business and financial condition of the Bank. The Prospectus also
contains forms (the "Stock Order Forms") for subscribing or submitting an order
for the Common Stock. A copy of the Prospectus accompanies this Proxy Statement.
Requests for an additional copy of the Prospectus and any questions about the
Conversion or the Special Meeting, including questions about proxy voting
procedures, should be directed to the Bank's Stock Information Center at (704)
694-2122, 211 South Greene Street, Wadesboro, North Carolina 28170.
Copies of the Company's Articles of Incorporation and Bylaws are also
available. Requests for copies of those documents should be directed to the
Bank's Stock Information Center at (704) 694-2122.
The Subscription Offering will commence on ____________, 1998, and end on
_____________, 1998. Stock Order Forms for purchases of Common Stock in the
Subscription Offering must be received by the Bank on or before 12:00 noon,
Eastern Time, on ____________, 1998.
THIS PROXY STATEMENT IS NOT AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO
BUY THE COMMON STOCK. SUCH OFFERS ARE MADE ONLY BY THE PROSPECTUS.
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