Proxy Statement Pursuant to Section 14(c)
of the Securities Exchange Act of 1934
(Amendment No. 2)
File by the Registrant [XX]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[XX] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 14a-12
WORLD SERVICES, INC.
----------------------------------------------
(Name of Registrant as Specified In Its Charter)
Ronne Tarrell, President
----------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate Box:)
[XX] $125 per Exchange Act Rules O-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(4) and O-11.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and O-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule O-11:1
(4) Proposed maximum aggregate value of transaction:
- - ----------
1 Set forth the amount on which the filing fee is calculated and state how it
was determined.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule O-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
World Services, Inc.
404 South Lincoln Avenue, P.O. Box 786
Aberdeen, S.D. 57402
-------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS To
Be Held on August 18, 1997
-------------------------------------------------------------------------
July 28, 1997
TO THE SHAREHOLDERS OF WORLD SERVICES, INC.:
The Annual Meeting of Shareholders of World Services, Inc., a Colorado
corporation, ("World Services" or the "Company") will be held at Holiday Inn and
Convention Center, 2727 S.E. 6th Avenue, Aberdeen, South Dakota 57401 on August
18, 1997 at 10:00 a.m. local time, to consider and take action on:
1. The election of five directors to serve until the next annual meeting of
shareholders and until their successors have been elected and qualified.
2. The sale or pro rata distribution by the Company of its entire interest
in First Savings and Loan Association.
3. An amendment to effect a 510-for-one reverse stock split.
4. Conditional upon the approval of Proposal 3, a one-for-300 forward stock
split.
Fractional shares resulting from the reverse stock split will be purchased by
the Company for a price of $127.50 per post-split share ($.25 per pre-split
share).
5. Such other business as may properly come before the meeting, or any
adjournments or postponements thereof.
The discussion of the proposals set forth above is intended only as a
summary, and is qualified in its entirety by the information contained in the
accompanying Proxy Statement.
Only holders of record of common stock at the close of business on June 15,
1997, will be entitled to notice of and to vote at this Annual Meeting, or any
postponements or adjournments thereof.
SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON AND THE
MANAGEMENT OF THE COMPANY HOPES THAT YOU WILL FIND IT CONVENIENT TO ATTEND.
<PAGE>
Shareholders, whether or not they expect to be present at the meeting, are
requested to sign and date the enclosed proxy and return it promptly in the
envelope enclosed for that purpose. Any person giving a proxy has the power to
revoke it at any time by following the instructions provided in the Proxy
Statement. By Order of the Board of Directors: Ronne Tarrell, President
PLEASE DATE, SIGN AND PROMPTLY RETURN YOUR PROXY SO THAT YOUR SHARES MAY BE
VOTED IN ACCORDANCE WITH YOUR WISHES. THE GIVING OF SUCH PROXY DOES NOT AFFECT
YOUR RIGHT TO VOTE IN PERSON IF YOU ATTEND THE MEETING.
YOUR VOTE IS IMPORTANT
<PAGE>
WORLD SERVICES, INC.
404 South Lincoln Avenue, P.O. Box 786
Aberdeen, S.D. 57402
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON August 18, 1997
July 25, 1997
This Proxy Statement is being furnished to shareholders of World Services,
Inc. ("World Services" or the "Company") in connection with the solicitation of
proxies by and on behalf of the Company's Board of Directors for use at the
Annual Meeting of shareholders of the Company (the "Annual Meeting") and at any
adjournments or postponements thereof. The Annual Meeting will be held at 10:00
a.m. local time, at Holiday Inn and Convention Center, 2727 S.E. 6th Avenue,
Aberdeen, S.D. 57401, on August 18, 1997. This Proxy Statement will be first
mailed to the shareholders on or about July 28, 1997.
VOTING SECURITIES
Holders of record of the Company's common stock (the "Common Stock") at the
close of business on May 15, 1997 (the "Record Date") will be entitled to vote
on all matters. On the Record Date, the Company had 5,229,907 shares of Common
Stock outstanding. The holders of shares of Common Stock are entitled to one
vote per share. The Company's only class of voting securities is the Common
Stock. A majority of the issued and outstanding shares of the Common Stock
entitled to vote, represented in person or by proxy, constitutes a quorum for
the transaction of business at the meeting. As described in more detail below,
if there is a quorum present the five nominees for the Board receiving the
greatest number of affirmative votes will be elected as directors (proposal 1);
a majority of the outstanding shares must vote in favor of proposals 2, 3 and 4
for their approval. Management may, in its discretion, seek an adjournment of
the meeting to a specific time and place if sufficient votes are not cast for
the approval of proposals 2, 3 or 4. Management may also recommend that the
meeting be adjourned if a quorum is not present. Management has not determined
whether to do so, however. The proxy holder will vote all proxies it receives
which have directed a vote FOR proposal 2 in favor of any adjournment for the
purpose of soliciting additional votes, the proxy holder will vote all proxies
received which voted against proposal 2 against any such adjournment; all
proxies which direct an abstention with respect to the vote on proposal 2 will
abstain from voting on any adjournment proposed for the purpose of soliciting
additional votes.
Abstentions will be treated as shares present or represented and entitled
to vote for purposes of determining the presence of a quorum, but will not be
considered as votes cast in determining whether a matter has been approved by
the shareholders. Any shares a broker indicates on its proxy that it does not
have the authority to vote on any particular matter because it has not received
direction from the beneficial owner thereof will not be counted as voting on a
particular matter.
A shareholder who gives his proxy pursuant to this solicitation may revoke
it at any time before it is voted either by giving notice of the revocation
thereof to the Secretary of the Company, by filing another proxy with the
Secretary or by attending the Annual Meeting and voting in person. All properly
executed and unrevoked proxies, if received in time, will be voted in accordance
with the instructions of the beneficial owners contained thereon.
<PAGE>
The Company will bear the cost of the solicitation. In addition to
solicitation by mail, the Company will request banks, brokers and other
custodian nominees and fiduciaries to supply proxy materials to the beneficial
owners of the Company's Common Stock for whom they hold shares and will
reimburse them for their reasonable expenses in so doing.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of the Record Date as to the
beneficial ownership of shares of the Registrant's only outstanding class of
securities, its Common Stock, by each person who, to the knowledge of the
Registrant at that date, was a beneficial owner of 5% or more of the outstanding
shares of Common Stock as well as the beneficial ownership of World Services'
executive officers and directors. On the record date, there were approximately
3,600 shareholders of record of the Company's common stock. The table does not
include information regarding shares of Common Stock held in the names of any
nominee for brokers and individuals. No such broker or individual is believed to
hold greater than 5% of the Company's Common Stock.
Name and Address Shares
of Beneficial Beneficially Percent of
Owner Owned Class
-------------------- ------------ -----------
Ronne Tarrell (1)(3) 6,667 *
Delores Bower (1)(4) 163,505 3.1%
David Jorgenson (1) 2,900 *
Delbert Harty (1)(3) 14,834 *
Terry Heinz (1) 800 *
Officers and directors 188,706 3.5%
as a group (five persons)
Murray Woulfe (5) 379,834 shares(5) 7.4%
HCR 70 Box 2206
Lake George, MN 56458
- - ----------
* Less than one percent.
2
<PAGE>
(1) Ownership is direct.
(2) There are no warrants outstanding by which any officer, director, or other
person has the right to purchase shares of the Company's Common Stock.
(3) These shares are held in escrow at the First Bank, N.A., Aberdeen, South
Dakota (an unaffiliated banking institution) pursuant to an agreement with
the Director of Securities of South Dakota until, if ever, the Company
achieves net earnings per share of $0.06 for any three year period, two of
which must be consecutive.The named shareholder is entitled to vote all
shares held in escrow. The escrow agreement provides for proportional
adjustment of this earnings requirement should the Company complete a
forward or reverse stock split as is contemplated in Proposal 3. This
escrow was established in 1980 by the Company and its founding shareholders
to comply with a condition imposed by the South Dakota Division of
Securities at the time of the Company's initial public offering. Currently
there are a total of 730,020 shares held in escrow as noted in Note (5),
below, Mr. Woulfe has agreed to place an additional 150,000 shares into the
escrow, but he has not yet done so.
(4) 15,005 of these shares are held in escrow as described above in Note (3).
(5) Ownership is direct. 115,000 of these shares are held in escrow as
described above in Note (3). Mr. Woulfe has agreed to place an additional
150,000 shares into this escrow.
There was a change in control of the Registrant in 1990, at which time the
current members of the Board of Directors were appointed and the former members
resigned. There has been no change of control since that time.
PROPOSAL 1-
ELECTION OF DIRECTORS
The following persons are nominated as directors of the Company for a term
of one year and until the election and qualification of their successors: Ronne
Tarrell, Dee Bower, David Jorgenson, Terry Heinz, and Delbert Harty. These
directors will constitute the entire Board of Directors. The person named in the
proxy intends to vote for those nominees, each of whom has been recommended for
election by the Board of Directors of the Company, unless a shareholder
withholds authority to vote for any or all of the nominees. The five nominees
receiving the greatest number of affirmative votes will be elected as directors.
If any nominee is unable to serve or, for good cause, will not serve, the person
named in the proxy reserves the right to substitute another person of his choice
as nominee in his place. Each of the nominees has agreed to serve, if elected.
The following table sets forth the names and ages of the nominees and the
executive offices held by each such person. The Company has no other officers.
These officers serve at the pleasure of the Board of Directors.
3
<PAGE>
Identification of Directors and Executive Officers
The current officers and directors of the Company are:
Name Age Position
- - ---- --- --------
Ronne Tarrell 55 President, Director
Delores Bower 53 Vice President, Director
David Jorgenson 61 Secretary, Treasurer, Director
Delbert Harty 57 Director
Terry Heinz 39 Director
A brief summary of the business experience of each person who is currently
an officer or director of the Company, and such person's service with the
Company is as follows:
Ronne Tarrell has been president since 1993 and a director of the Company
since 1990. He is a licensed realtor in the State of South Dakota and has owned
and operated Tarrell Realty in Aberdeen, South Dakota, for more than the past
five years.
Delores Bower has been Vice President and a Director of the Registrant
since 1990. She has been financial director of Midwest Paint, a privately held
company in Aberdeen, South Dakota, for more than the past five years.
David Jorgenson has been Secretary and Treasurer since 1993, and a director
of the Registrant since 1990. Mr. Jorgenson is manager of a small business in
Aberdeen, South Dakota. For the five prior years, Mr. Jorgenson was a state
video lottery inspector for the State of South Dakota Lottery Commission. In
addition, Mr. Jorgenson manages his own investments.
Delbert Harty has been a director of the Registrant since 1993. He has been
retired for more than the last five years, and currently manages his personal
investments. Prior to retirement he was employed as a machinist.
Terry Heinz has been a director of the Registrant since 1993. Since October
1993, Mr. Heinz has been an account executive at Tel Serv, Inc., a direct
marketing firm in Aberdeen, South Dakota. From April 1984 until October 1993 he
was a sales representative for Dial-Net, a marketing firm in Sioux Falls, South
Dakota.
There are no family relationships among the directors or officers of the
Company.
Meetings of the Board and Committees
- - ------------------------------------
The Board of Directors held 11 formal meetings during the fiscal year ended
December 31, 1996. In addition, regular communications were maintained
throughout the year among all of the officers and directors of the Company. Each
director attended at least 75% of the meetings either in person or by telephone.
4
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's directors, and officers and persons who own more than ten
percent of the Company's equity securities to file reports of ownership and
changes in ownership with the Securities and Exchange Commission (the "SEC").
Directors, officers and greater than ten-percent shareholders are required by
SEC regulation to furnish the Company with copies of all Section 16(a) reports
filed.
Based solely on its review of the copies of the reports it received from
persons required to file, the Company believes that during the 1996 fiscal year
and prior years, all of the directors failed to file reports required by Section
16(a) of the Exchange Act (including Forms 3, 4, and 5). Based on information
now available to the Company, each of the directors should have filed a Form 3
when they became a director of the Company in 1990. Subsequently each director
has filed the required reports and, as of May 31, 1997, the Company believes
that the reporting obligations under Section 16(a) have been met. The Company is
not aware of any other changes in ownership by persons whose transactions are
subject to reporting under section 16(a) of the Exchange Act.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information regarding compensation earned by
the Company's chief executive officer, being the only executive officer of the
Company included in the table. This includes all compensation paid to him by the
Company and any subsidiary, but does not include directors fees of $1,050 Mr.
Tarrell received as described below.
<TABLE>
<CAPTION>
====================================================================================================================================
Long Term Compensation
All Other
Annual Compensation Compensation
Name and Position Year
-----------------------------------------------------------------------------------
Awards Payout
Salary Bonus Other
--------------------------------------------
Restricted Options LTIP
Awards & SAR's Payout
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Ronne Tarrell 0 -0- -0- -0- -0- -0- -0-
President and 1996 0 -0- -0- -0- -0- -0- -0-
Chief Executive 1995 0 -0- -0- -0- -0- -0- -0-
Officer 1994
====================================================================================================================================
</TABLE>
The Company has no plans which result in the payment or accrual for payment
of any amounts to any executive officer in connection with his resignation,
retirement, or other termination, or change of control or change in the
executive officer's responsibilities.
The Company has not adopted a medical insurance, life insurance, or other
benefit plan for its employees. Officers and Director received $150 per
directors meeting attended during 1996. The Company will reimburse on an
accountable basis all of its officers, directors, and employees for expenses
incurred on behalf of the Company. Prior to 1996, no cash compensation was paid.
The Registrant has no stock option plan, stock bonus plan, other compensatory
plan or arrangement, or employee benefit plan for employees, consultants,
officers, or directors.
5
<PAGE>
No Employee Benefit Plans
- - -------------------------
During the year ending December 31, 1996, no options or stock appreciation
rights were granted to the executive officer named in the Summary Compensation.
No executive officer or director held or exercised any options or stock
appreciation rights during the 1996 fiscal year.
The Company has not adopted any long-term incentive plans or defined
benefit or actuarial plans.
Employment Contracts and Termination of Employment and Change-in-Control
Arrangements
- - --------------------------------------------------------------------------------
The Company has no plans which result in the payment or accrual for payment
of any amounts to any executive officer in connection with his resignation,
retirement, or other termination, or change of control or change in the
executive officer's responsibilities.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
A significant portion of the Company's funds are deposited with First
Savings and Loan Association, Inc. ("First Savings"). As of May 31, 1997, this
includes approximately $240,000 held in three certificates of deposit bearing
interest at 6%-6.5% per annum, and approximately $30,000 in the Company's
non-interest bearing checking account. All of the Company's banking
relationships are on First Savings' normal commercial terms and are at least as
favorable to the Company as could be obtained from an unaffiliated bank. Any
funds over $100,000 do not receive the benefit of FDIC insurance.
Directors and officers of the Company may pursue any other business
opportunities of interest to them, whether or not those activities may conflict
with, or compete with, the activities of the Company. Should any director or
officer offer the Company participation in any business opportunity, the offer
will be evaluated on behalf of the Company by disinterested directors. For this
purpose "disinterested directors" will be directors who are neither directly nor
indirectly involved in the proposed business opportunity except through their
interest in the Company.
PROPOSAL 2 - SALE OR PRO RATA DISTRIBUTION OF THE COMPANY'S INTEREST
IN FIRST SAVINGS & LOAN ASSOCIATION
The Board of Directors of the Company has determined that it is in the
Company's best interest to sell its entire interest in First Savings, a
subsidiary of which the Company owns approximately 22%. The Company has not
received any offers for the purchase of its interest in First Savings, and there
can be no assurance that World Services will receive any offer to purchase its
interest in First Savings at an acceptable price. Alternatively, because of
certain actions recently taken by the federal Office of Thrift Supervision (the
"OTS") described below, the Company may determine it is in the best interests of
the Company and its shareholders to distribute the First Savings stock to its
shareholders on a pro rata basis. If the Company does not receive an acceptable
offer for its First Savings shares by the date of the Shareholders' Meeting, the
Board has agreed to make a pro rata distribution of the First Savings shares. In
September 1996, the Company was contacted by the OTS which alleged that either
or both of the following actions resulted in a "change of control" and (in OTS's
opinion) a violation of OTS Reg. No. 575.4(a):
The 1990 change in the Board of Directors of the Company which resulted in
the prior directors resigning and being replaced by the current directors,
some of whom were, at that time, shareholders of First Savings in their own
name; and
An increase in the stock ownership by the individual Company directors as a
result of a private transaction in 1993 to acquire First Savings stock,
described in more detail below.
In the opinion of OTS (with which the Company disagrees), the Company and
First Savings should have notified and obtained approval from OTS before these
alleged 'change of control' transactions and the Company should have filed an
application to become a "savings institution holding company" pursuant to OTS
regulations. By letter dated April 21, 1997, OTS advised the Company that it
"will initiate enforcement proceedings unless a final resolution of this
[alleged] violation is completed no later than June 30, 1997." (The OTS has
extended this deadline until August 29, 1997.) To cure this violation, OTS has
required that the Company and its affiliates reduce their interest in First
Savings to below 9.99%. OTS had offered the Company certain other alternatives,
none of which were advisable or, in the Company's opinion, legally permissible.
Thus the alternatives were rejected and the Company determined to pursue the
6
<PAGE>
sale or distribution alternatives described in this proxy statement. These other
alternatives included the filing by the Company of an application to be treated
as a bank holding company or for an exception to the requirement. The Company
did not believe it would be approved as a bank holding company since it owns
non-banking assets; based on its discussions with OTS, the Company does not
believe that any exception to the OTS requirements would be approved.
The Company and its counsel has had several additional conversations with
representatives of OTS and believe that, in light of this proxy solicitation,
OTS will not act as a result of the Company failing to meet the August 29, 1997,
deadline, but the Company has no such agreement in writing, and the OTS is not
precluded from bringing any action it believes appropriate. If OTS brings an
action against the Company, the Company will defend such action appropriately.
World Services believes that it has cooperated with and will continue to
cooperate with OTS in its investigation and expects to reach a resolution of
this matter. Nevertheless, because of the OTS challenge, the Board believes that
World Services should sell or distribute its interest in First Savings.
Under South Dakota law, because First Savings is such a significant asset
of World Services, shareholder approval is necessary.
First Savings
- - -------------
Interest Held by the Company and Affiliates (the "Bower Group"). In August
1996 OTS advised the Company that, because the "Bower Group" acquired control of
World Services in 1989 and subsequently increased its ownership in First
Savings, World Services should have filed an application to become a savings
institution holding company, or alternatively it should have filed an
application for an exception from those requirements. The following table sets
forth the current ownership of First Savings stock by the Company and the
members of the "Bower Group" as identified by the OTS:
The Company's Interest in First Savings:
----------------------------------------
Shareholder # of Shares Percent
----------- ----------- -------
World Savings 169,989 shares 21.95%
The Bower Group's Interest in First Savings
-------------------------------------------
Shareholder # of Shares Percentage
----------- ----------- ----------
Craig and Dee Bower* 6,250 0.807%
Midwest Paint Services 6,250 0.807%
Ronne Tarrell* 5,875 0.759%
Kirk Bower 4,250 0.549%
Delbert Harty* 800 0.103%
Terry Heinz* 250 0.032%
Dennis Maloney 358 0.046%
Lester Harty 300 0.039%
Darlene Kushman 125 0.016%
*Directors of World Services
Acquisition of The Company's Interest. In a series of cash purchases
totaling approximately $270,021, from February 1981 through March 1983, World
Services acquired approximately 22% of the outstanding capital stock of First
Savings, operating primarily in the city of Aberdeen, South Dakota. In May 1985,
World Services purchased an additional 4,250 shares of First Savings stock for
$2,000. World Services may be deemed a promoter of First Savings as such term is
defined under the Securities Exchange Act of 1934. First Savings is engaged in
the business of attracting funds in the form of savings deposits from the
general public and originating loans secured by residential, commercial and
other improved real estate, and operates under the rules of the OTS, the Federal
Deposit Insurance Corporation ("FDIC") and the State Banking Commission of South
Dakota. All of its accounts are FDIC insured up to a maximum of $100,000 per
account. First Savings' common stock has been registered pursuant to Section
12(g) of the Securities Exchange Act of 1934, although, to knowledge of the
Company, there is no public market for First Savings' common stock.
7
<PAGE>
Acquisition of Affiliate's Interest. Because there has been no public
market for shares of First Savings common stock, transactions among First
Savings shareholders have traditionally taken place privately. Each of the
Company's directors (except Mr. Jorgenson) has held First Savings stock for more
than ten years. In 1993, a significant First Savings shareholder (holding 75,000
shares), sought to sell his shares. Two directors of the Company purchased
approximately 10,000 First Savings shares at $1.30 per share.
At the time of the 1993 acquisition, the Company had no funds and,
therefore, the Board of Directors did not consider the investment to be an
appropriate investment for the Company.
Current Activities. First Savings has continued its operations as a savings
and loan association whose principal activities are accepting deposits from
customers and making loans to borrowers. World Services has no managerial
control over First Savings, and has no representatives on the First Savings
Board of Directors. During 1991 and 1992, World Services sold 3,524 shares of
First Savings Common Stock, which reduced its ownership from 22.4% to
approximately 22%. In 1996, World Services received dividend income from First
Savings of approximately $17,000, and in 1995, World Services received a
dividend of $34,000. These are the first dividends World Services has received
from First Savings in more than nine years. Management of World Services
believes that the market value of its First Savings shares equals or exceeds its
current cost basis which is, as of March 31, 1997, approximately $1.62 per
share.
Regulatory Requirements. Under South Dakota law, a savings and loan
association is subject to examination by the director of the Division of Banking
and Finance of the Department of Commerce. OTS regulations require a member
savings and loan association to maintain cash, certain time deposits, bankers'
acceptances and specific United States government and state or federal agency
obligations ("liquid assets") in an amount equal to or greater than a specific
percentage of the monthly average of its net withdraw-able savings deposits and
borrowings payable in one year or less ("short term borrowings"). The base
liquidity requirement may be changed from time to time by the OTS to amounts
within a certain specified range. Liquid assets must constitute a certain
percentage of the monthly average of net withdrawable savings plus short term
borrowings. Failure to meet these liquidity requirements may result in monetary
penalties. Based upon the First Savings financial statements World Services
believes that First Savings is currently in compliance with these liquidity
requirements.
The FDIC requires an annual audit by independent accountants and also
regularly conducts its own examination of insured institutions. It may revalue
assets of an institution, based upon its appraisals, and requires establishment
of specific reserves. The FDIC also requires an annual insurance premium payment
and can also assess additional premiums against each insured institution. First
Savings is required to maintain its net worth in excess of certain specified
minimum levels. If an insured savings and loan association fails to meet the
foregoing reserve or net worth requirements, the FDIC may require such
association to take corrective action. Sanctions for not complying with these
net worth requirements may include a reduction in the rate of interest that may
be paid on savings accounts, limitations on operational expenses, limitations on
the receipt of deposits to those made to existing accounts, or limitations on
lending. The FDIC has the authority to terminate the insurance of accounts
pursuant to procedures established for that purpose. If insurance of accounts is
terminated by the FDIC, the savings and loan association subject to termination
proceedings will continue to be insured by the FDIC for a period of two years
following the date of termination.
In addition, the Federal Home Loan Bank requires savings and loan
associations to maintain reserves against their transaction accounts, primarily
NOW and super NOW accounts and nonpersonal time deposits. The Federal Home Loan
Bank regulations generally require that reserves must be maintained at certain
level against transaction accounts. Savings and loan associations have the
authority to borrow from a Federal Home Loan Bank's "discount window," but the
Federal Home Loan Bank's regulations require a savings and loan to exhaust all
OTS sources before borrowing from a Federal Home Loan Bank.
First Savings is subject to various consumer protection laws such as the
Federal Truth-In-Lending Act, the Equal Credit Opportunity Act, and the
Financial Privacy Acts. Each of these laws and related regulations provide
significant penalties in the event of noncompliance with the statutes. First
8
<PAGE>
Savings structures its lending programs to improve and stabilize its operational
results and to make its loan portfolio interest-rate-sensitive by offering
short-term or adjustable real estate loans and short-term consumer and
commercial loans. First Savings also invests such funds in mortgage backed
securities and investment and money market securities. First Savings' earnings
are largely dependent on the difference between the income it receives from its
loans and securities investment portfolios and its cost of funds. First Savings'
operations, and the operations of savings and loan associations generally, are
significantly influenced by general economic conditions, by the monetary and
fiscal policies of the federal government and by the regulatory policies of
various federal regulatory authorities. Savings deposits and costs of funds are
influenced by interest rates on competing investments and general market rates
of interest. Lending activities are affected by the demand for mortgage
financing and for consumer and other types of loans which is in turn affected by
the interest rates at which such financing may be offered and other factors
affecting the supply of housing and the availability of funds.
No Specific Transaction Proposed
- - --------------------------------
The Company has not received any offer to purchase its interest in First
Savings, and there can be no assurance that the Company will receive any
acceptable offer. Because of the OTS challenge described above, the Company will
use its best efforts to solicit and obtain appropriate offers to purchase its
interests in First Savings.
Because any such transaction will involve the offer and sale of securities
by the Company, the Company will only be able to sell its interest in First
Savings in compliance with federal and state securities laws. Furthermore, any
purchaser will have to be acceptable to the OTS. These additional regulatory
requirements will likely make it more difficult for the Company to find an
acceptable offer.
If the Company does not receive an acceptable offer for the purchase of its
interest in First Savings after a reasonable period of time, the Company will
distribute the shares of First Savings stock to its shareholders. For the
reasons stated below, this is not a preferred alternative but, based on
non-binding, oral advice from OTS, the Company believes this will comply with
the OTS requirements. The Company has not defined an "acceptable offer" or a
"reasonable period of time." The time period will likely be governed by pressure
imposed by OTS to complete a transaction quickly. The Company has received no
offers for its interest in First Savings to date, and there can be no assurance
that the Company will receive any offers. The Board of Directors will review any
offer received in light of all relevant facts and circumstances and will, in the
exercise of its business judgment, determine whether any such offer is
"acceptable." The Board believes that the fair market value of the Company's
interest in First Savings is in excess of the Company's cost and the Board will
not consider any offer which does not exceed the Company's cost of the Firt
Savings shares.
Another reason that a pro rata distribution is less attractive to the
Company is because the impact of such a distribution on the provisions of the
South Dakota share escrow is uncertain. As noted above, the escrow was
established at the time of the Company's initial public offering to ensure that
subsequent investors benefitted from the Company's operations before the initial
investors benefitted. In order to determine the impact of a distribution of
First Savings stock on the escrow, management of the Company would have to
engage in negotiations with the Director of the South Dakota Division of
Securities.
Alternatives Considered
- - -----------------------
The Board has considered various other alternatives to the sale of its
interest in First Savings. The best alternative would be for the Company to
retain its interest in First Savings. This, however, may not be possible because
of the pressure to sell its interest in First Savings placed on the Company by
OTS.
Another alternative the Board considered is the possible distribution of
World Services' interest in First Savings pro rata to all of the shareholders of
World Services. This, however, would result in a significant administrative
burden to First Savings, in that it would then have more than 3,000 shareholders
(as compared to its current 600 shareholders). Management of First Savings has
advised the Company that a distribution of the shares by World Services to its
shareholders would significantly increase First Savings' administrative burden
in communicating with its shareholders and in holding shareholders' meetings.
While the increased administrative burden to First Savings should the Company
distribute its investment in First Savings pro rata to its shareholders is not a
direct cost to the Company, management believes that the large shareholder base
which would result from such a distribution may adversely influence the
underlying value of First Savings. On the other hand, it is possible that the
increased number of shareholders may encourage a market for First Savings common
stock to develop.
9
<PAGE>
World Services believes that the offer and sale of its interest in First
Savings to qualified, sophisticated, and accredited investors is the most
preferable resolution to the Company's current situation with OTS. As noted
above, if the Company has not received an acceptable offer for its First Savings
stock within a reasonable period of time, the Company will likely be forced by
OTS to distribute the First Savings shares on a pro rata basis to its
shareholders. Although this distribution might technically require shareholder
approval under South Dakota law, OTS can, through court or administrative
action, cause such a distribution to take place with or without shareholder
approval. Any First Savings shares distributed in respect of the escrowed shares
would themselves be placed into escrow pursuant to the escrow agreement with the
South Dakota Division of Securities discussed above.
If Shareholder Approval Is Not Obtained
If World Services is not able to obtain shareholder approval of the sale of
First Savings, World Services will continue its efforts to deal with the OTS.
OTS may require that World Services sell its interest in First Savings without
shareholder approval, or may impose sanctions and monetary penalties on World
Services should OTS find that the alleged violation by World Services merit such
punishment. As discussed above, the Company may be forced to distribute the
First Savings shares even if the shareholders do not approve Proposal No. 2.
If Shareholder Approval Is Timely Obtained
If World Services is able to obtain shareholder approval of the sale or
distribution of First Savings, the Board will seek one or a limited number of
purchasers of its interest in First Savings. Any effort to identify possible
purchasers of the First Savings stock held by the Company will be accomplished
in accordance with all applicable federal and state securities laws. These laws
generally require that any offer or sale of a security be registered, unless the
transaction is exempt from registration. These laws also require that the
purchaser be fully informed with respect to the security being purchased,
including the financial condition, business, operations, and management of, and
risks associated with, the ownership of an interest in First Savings.
Furthermore, these laws prohibit general advertising or public solicitation of
purchasers except in connection with a registration statement and certain other
limited exemptions. Generally the Board expects only to deal with persons who
are "accredited investors" as that term is defined under the federal securities
laws.
The Board will negotiate the best terms that it is able with respect to any
such transaction. However, the Board has not established any minimum price or
terms, and there can be no assurance that the Company will receive any specific
price. Shareholder's will not be asked to approve the transaction when a sale of
World Services' interest in First Savings is identified; such a sale will be
completed based only on approval of the Board of Directors. As discussed in more
detail above, if the Company does not receive an acceptable offer for the sale
of its interest in First Savings within a reasonable period of time, it will
distribute the First Savings shares on a pro rata basis to its shareholders,
subject to compliance with the provisions of the escrow agreement with South
Dakota Division of Securities.
Use of Proceeds from Sale
If the Company is able to sell its interest in First Savings to a purchaser
for a cash price, the company will have a significant amount of cash available
for reinvestment or distribution to its shareholders. Because the Company has
neither received nor accepted any offers, the Company is unable to estimate the
amount of cash it may have available. The precise amount will depend on the
sales price and any seller-financing the Company offers as a means of
encouraging the sale of its First Savings stock. To the extent the Company
receives any proceeds from the sale of its First Savings stock, it will invest
the proceeds in government securities or deposit them in financial institutions
pending their use or distribution to shareholders.
The Board of Directors has considered making a significant distribution of
any cash to the shareholders, although the Board has made no decision with
regard to any distribution. To the extent the Board approves any distribution,
it will reduce the cash available to the Company for working capital purposes or
for the investment in a new business opportunity.
Accounting and Tax Treatment
Sale of First Savings Stock. Based on advice from its accountants, any
sale of all or any portion of the Company's interest in First Savings will
constitute the sale or exchange of a capital asset on World Services's financial
statements. At March 31, 1997, World Services had a basis in its investment in
First Savings equal to approximately $276,954. Any amount in cash, securities,
or other consideration which World Services would receive in excess of that
amount (plus costs of sale) would be considered to be capital gain to World
10
<PAGE>
Services. It is expected that World Services's net operating loss carry-forward
exceeds that amount and, therefore, any sale of its interest in First Savings
will not result in any taxable gain other than possibly alternative minimum
taxation.
Shareholders of World Services will recognize no gain or loss as a result
of World Services completing any sale of its interest in First Savings.
Possible Distribution. The tax impact of any pro rata distribution of First
Savings stock or cash to the Company's shareholders will be different for each
shareholder and will depend on a number of factors, including whether the
Company has any current or accumulated earnings and profits at the time of the
distribution, the shareholder's tax basis in his or her shares, the length of
time the shareholder has held the shares, the shareholder's income tax bracket,
and whether Congress adopts a rate reduction for capital gains. Any such
distribution will be considered income to the recipient shareholders to the
extent of current and accumulated Company earnings and profits; any distribution
in excess of earnings and profits will be treated as a non-taxable return of
capital to the shareholder to the extent of his or her basis in the shares and
then, to the extent of basis, a distribution will be as gain from the sale or
exchange of property.
If First Savings common stock is distributed to the Company's shareholders,
the First Savings shares will be considered distributed at fair market value to
the Company's shareholders, not at the cost basis to the Company.
The Company will recognize no income, gain, or expense to the extent it
makes any distribution to its shareholders.
Financial Data
Because there are no terms of the sale or other divestiture of the First
Savings stock, pro forma financial statements cannot be prepared.
Stock Price
There is no active market for the Company's stock or the First Savings
stock. As noted above, there are approximately 3,600 holders of the Company's
common stock and approximately 600 holders of First Savings common stock.
Required Vote
The Board of Directors has voted unanimously to approve the efforts by
World Services to sell its interest in First Savings. As required by the South
Dakota Business Corporation Act, the shareholders must approve the sale by a
majority vote of the outstanding shares entitled to vote.
11
<PAGE>
PROPOSALS 3 and 4
3- 510:1 REVERSE STOCK SPLIT; and
4- 1:300 FORWARD STOCK SPLIT
The Board of Directors has approved and recommends that the shareholders
approve a two-step recapitalization which will result in persons currently
holding fewer than 510 shares to be redeemed by the Company for cash.
The first step of the recapitalization will include a reverse stock
split (the "Reverse Stock Split") by which each 510 shares will
automatically, and without any action by the shareholder, become a
single share. Any person who owns fewer than 510 pre-split shares will
have a fractional share which will be redeemed by the Company for
$127.50 per post-split share ($.25 per pre-split share). Fractional
shares in excess of one will not be redeemed. The Company will use its
existing working capital to redeem fractional shares.
The second step of the recapitalization will include a forward stock
split (the "Forward Stock Split") by which each share of World
Services common stock resulting after the Reverse Stock Split will
automatically become 300 shares. Any fractional shares remaining after
the Forward Stock Split will be rounded up to one.
Shareholders should note that the Forward Stock Split will only be
completed if the Reverse Stock Split is also approved. The Company will complete
the Reverse Stock Split whether or not the Forward Stock Split is approved.
A reverse stock split and a forward stock split require an amendment to the
Company's Articles of Incorporation (the "Articles"). The following table sets
forth information describing the potential impact of the reverse stock split and
forward stock split being proposed hereby:
- - --------------------------------------------------------------------------------
Current Status After Reverse After Forward
Stock Split Stock Split
- - --------------------------------------------------------------------------------
Number of
Shares 50,000,000 98,039 29,411,764
Authorized
- - --------------------------------------------------------------------------------
Estimated
fractional shares 809,417 1,587 NA
to be redeemed
- - --------------------------------------------------------------------------------
Estimated
number of 5,229,907 10,254 2,600,288
shares to be
outstanding
- - --------------------------------------------------------------------------------
Estimated
number of 3,600 1,732
shareholders
- - --------------------------------------------------------------------------------
12
<PAGE>
Purpose of the Recapitalization
The Board of Directors believes that the Reverse Stock Split, the purchase
by the Company of any resulting fractional shares held by all shareholders, and
the subsequent Forward Stock Split, is advisable and in the best interests of
the Company and its shareholders.
Primarily, there are a large number of shareholders of the Company who have
very small interests and a small shareholder value per share.
Communications with shareholders and the conduct of a shareholders meeting
is, consequently, very expensive.
In discussions between the Company's executive officers and members of the
financial community, the Company has been advised that the Company would be
a more attractive target with fewer shareholders with a greater per-share
value.
As described in the Company's annual report to shareholders which
accompanies this proxy statement, one of the options the Board is considering
for future operations is to seek business opportunities and consider various
possibilities of reorganization with the intention of allowing World Services to
engage in active business operations. The Board believes that, with fewer
shareholders, fewer shares outstanding, and a greater per-share value, World
Services will be a more attractive partner in any future business combination.
The purpose of the Reverse Stock Split is to reduce the number of shareholders
of the Company by providing a cash payment to holders of fewer than 510 shares;
the purpose of the Forward Stock Split (which may not be approved even if the
Reverse Stock Split is approved), is to increase the number of shares resulting
from the Reverse Stock Split to a total number management believes is more
reasonable. As a result of the Reverse Stock Split and the Forward Stock Split,
a shareholder who previously owned 510 shares will own 300 shares.
There can be no assurance that the recapitalization will not adversely
impact the value of the Common Stock or that the Company will, in fact, be able
to complete any business combination, or that the Reverse Stock Split will have
any of the effects described herein. The Company has not been seeking any
potential business combination and management has held no discussions with any
business interested in acquiring the Company or being acquired by the Company.
There can, therefore, be no assurance that even if the Reverse Stock Split and
the Forward Stock Split are approved (of which there can be no assurance), any
business combination will be completed.
Certificates and Fractional Shares
The certificates currently representing issued and outstanding shares of
Common Stock will be deemed to represent the number of shares of Common Stock
after the effective date of the Reverse Stock Split. Any person owning only a
fractional share of common stock following the Reverse Stock Split will only
have a right to submit his or her shares to the Company in exchange for a cash
payment of $127.50 per post-split share ($.25 per pre-split share). The
Company's Board of Directors believes that this value equates approximately to
the fair market value of the Company's common stock. In reaching this
determination, the Board considered the amount of cash held by the Company, the
value of the Company's assets, the litigation threats from the federal OTS, and
other factors the members of the Board deemed relevant. To the knowledge of the
Board, there have been only a few isolated transactions in the Company's common
stock. These transactions have been directly between shareholders, and have been
at prices believed to be from $.20 to $.25 per share. Shareholders holding
fractional shares following the Reverse Stock Split will have no right to
participate in the subsequent Forward Stock Split.
Following the Forward Stock Split, the Company will issue certificates
representing the shares of new (post-recapitalization) Common Stock. Any
shareholder (except those holding only a fractional share following the Reverse
Stock Split) will be entitled to submit his or her certificates representing
pre-recapitalization Common Stock and receive certificates for
13
<PAGE>
post-recapitalization Common Stock. Fractional shares resulting from the Forward
Stock Split (not including fractional shares to be redeemed as a result of the
Reverse Stock Split) will be rounded up to the next whole share of Common Stock
at no additional cost. If the Forward Stock Split is not approved but the
Reverse Stock Split is completed, any resulting fractional shares will not be
rounded.
Shareholders are not required to exchange their certificate(s) of
pre-recapitalization Common Stock for new certificates. Shareholders may,
however, exchange their certificates for shares of post-recapitalization Common
Stock by surrendering their old certificates to the Company (which acts as its
own transfer agent and registrar) and payment of a fee of $10.00 per new
certificate. The holder will receive a share certificate representing the
appropriate number of shares of post-recapitalization Common Stock. The
following two examples are instructive:
A person holding 510 pre-split shares will own one share following the
Reverse Stock Split, and 300 shares following the Forward Stock Split.
A person holding 500 pre-split shares will have a fractional share (0.98)
following the Reverse Stock Split and be entitled to receive $125 (0.98 x
$127.50).
A person holding 550 pre-split shares will own 1.07843 shares following the
Reverse Stock Split and 324 shares following the Forward Stock Split
(323.529 shares, rounded up to the next whole number share).
Effective Date of the Recapitalization
The recapitalization will become effective on the effective date of the
Amendment to the Articles describing the recapitalization, which is expected to
be filed as soon as practicable after the annual shareholders' meeting (the
"Effective Date"). The Reverse Stock Split will occur first, followed
immediately by the Forward Stock Split.
Federal Income Tax Consequences of the Recapitalization and Buy-Back of
Fractional Shares
Reverse Stock Split and Forward Stock Split. The Reverse Stock Split and
the Forward Stock Split will not result in the recognition of any taxable gain
or loss for federal income tax purposes to any remaining shareholders of World
Services. Each shareholder will be required to allocate his or her basis in the
pre-recapitalization shares owned by each shareholder among the number of shares
owned following the recapitalization. The tax basis of the Common Stock received
by shareholders as a result of the recapitalization will be equal, in the
aggregate, to the basis of the shares exchanged for the Common Stock. For tax
purposes, the holding period of the shares immediately prior to the effective
date of the recapitalization will be included in the holding period of the
Common Stock received as a result of the recapitalization.
Fractional Share Purchase. Holders of fewer than 510 shares before the
Reverse Stock Split will own a fractional share following the Reverse Stock
Split. At that time, each such shareholder will be obligated to surrender the
fractional share for $127.50 per post-split share ($.25 per pre-split share). To
the extent that amount exceeds the holder's basis in his or her shares, the
holder will recognize gain; to the extent such amount is less than the holder's
basis, the holder will be entitled to recognize a loss.
14
<PAGE>
Votes Required and Recommended
Approval of the proposal for the Company to amend the Articles to effect
the Reverse Stock Split and the Forward Stock Split requires the affirmative
vote of a majority of the outstanding shares of the Company's Common Stock. Each
of these matters will be voted on separately. The Board of Directors of the
Company recommends that shareholders vote FOR the proposal for the Company to
amend the Articles to effect the Reverse Stock Split and the Forward Stock
Split. Unless otherwise specified, the enclosed proxy will be voted "FOR" the
approval of the amendment.
DISSENTER'S RIGHTS
The Shareholders of the Company have no appraisal, dissenter's or similar
rights under South Dakota law with respect to the proposed Reverse Stock Split
and Forward Stock Split. Shareholders do not have appraisal rights under South
Dakota law with respect to the proposed sale of the Company's interest in First
Savings.
INDEPENDENT AUDITORS
The independent accounting firm of Hein & Associates was selected by the
Board of Directors with respect to audit of the consolidated financial
statements of the Company for the fiscal year ended December 31, 1997, as well
as many prior fiscal years. A representative of Hein & Associates is not
expected to be present at the annual meeting.
PROPOSALS FROM SHAREHOLDERS
Proposals from shareholders intended to be present at the next Annual
Meeting of shareholders should be addressed to the Company at World Services,
Inc., Attention: Corporate Secretary, 404 South Lincoln Avenue, P.O. Box 786,
Aberdeen, South Dakota 57402 and must be received by the Company by February 1,
1998. Upon receipt of any such proposal, the Company shall determine whether or
not to include any such proposal in the Proxy Statement and proxy in accordance
with applicable law. It is suggested that such proposals be forwarded by
Certified Mail-Return Receipt Requested.
ANNUAL REPORT TO SHAREHOLDERS
This proxy statement is being accompanied by the Company's annual report to
shareholders which consists of the Company's Form 10-KSB for the year ended
December 31, 1997 (not including part III information regarding management,
principal shareholders, and related party transactions which is contained
herein, exhibits, or the financial statements of the Company's subsidiaries).
The annual report to shareholders does include the audited financial statements
for the Company. This proxy statement is also accompanied by the Company's
quarterly report on Form 10-QSB for the quarter ended March 31, 1997 and
unaudited financial statements for First Savings for the period ended March 31,
1997.
ANNUAL REPORT ON FORM 10-KSB AND QUARTERLY REPORT ON FORM 10-QSB
The Company's Annual Report on Form 10-KSB for the year ended December 31,
1996 and its Quarterly Report on Form 10-QSB for the period ended March 31,
1997, are available to any shareholder at no cost upon request to Ronne Tarrell,
404 South Lincoln, P.O. Box 786, Aberdeen, South Dakota 57402, or by telephone:
(605) 225-4131.
15
<PAGE>
OTHER MATTERS
Management does not know of any other matters to be brought before the
meeting. Should any other matter requiring a vote of shareholders arise at the
meeting, the persons named in the proxy will vote the proxies in accordance with
their best judgment.
By Order of the Board of Directors:
WORLD SERVICES, INC.
Ronne Tarrell, President
16
<PAGE>
World Services, Inc.
404 South Lincoln Avenue, P.O. Box 786
Aberdeen, S.D. 57402
PROXY This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints David Jorgenson, as Proxy, with the power
to appoint his substitute, and hereby authorizes them to vote, as designated
below, all of the shares Common Stock of World Services, Inc. held of record by
the undersigned on June 15, 1997, at the Special Meeting of Shareholders to be
held on August 18, 1997 or at any adjournments or postponements thereof.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1. ELECTION OF DIRECTORS FOR all nominees listed below WITHHOLD AUTHORITY
(except as marked to the contrary below) [ ] to vote for all nominees listed below [ ]
(INSTRUCTION) To withhold authority to vote for any individual nominee mark the box next to the nominee's name below.)
[ ] Ronne Tarrell [ ] Delores Bower [ ]David Jorgenson [ ]Terry Heinz [ ]Delbert Harty
</TABLE>
2. FOR approval of the sale of the Company's interest in First Savings & Loan
Association on terms to be negotiated, subject to the approval of the Board
of Directors of the Company.
[ ]Yes [ ] No [ ]Abstain
3. FOR approval of the proposed 510:1 reverse stock split and redemption of
resulting fractional shares when fewer than one share is held. The proposed
reverse stock split may, in the discretion of the Board of Directors, be
completed even if the forward stock split is not approved.
[ ]Yes [ ]No [ ]Abstain
4. FOR approval of the proposed 1:300 forward stock split. The proposed
forward stock split will not be completed unless the reverse stock split is
approved by the shareholders and completed.
[ ]Yes [ ]No [ ]Abstain
5. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
(over)
This proxy, when properly executed, will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, this proxy will
be voted for the election as directors of all nominees and will abstain from
voting on all other matters.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, as executor, administrator,
trustee, or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THE
PROXY CARD PROMPTLY IN THE ENCLOSED
ENVELOPE
---------------------------------
Signature
--------------------------------
Signature if held jointly
Date: , 1997
---------------------
