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As filed with the Securities and Exchange Commission on January 14, 1999
Registration No. 333-______
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM SB-2
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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NEW COMMERCE BANCORP
(Exact name of registrant as specified in its charter)
South Carolina 6021 58-2403844
- ------------------------------- --------------------------- -------------------
(State or other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
P. O. Box 129
Mauldin, South Carolina 29662
(864) 239-0616
(Address and Telephone Number of Intended Principal Place of Business)
----------------------------
James D. Stewart
Chief Executive Officer
712 N. Main Street
Greenville, South Carolina 29609
(864) 313-7601
(Name, Address, and Telephone Number of Agent For Service)
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Copies of all communications, including copies of all communications
sent to agent for service, should be sent to:
Neil E. Grayson, Esq.
C. Russell Pickering, Esq.
Nelson Mullins Riley & Scarborough, L.L.P.
999 Peachtree Street, N.E., Suite 1400
Atlanta, Georgia 30309
(404) 817-6000
(404) 817-6225 (Fax)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after this Registration Statement becomes effective.
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering.
[ ] ___________________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.
[ ] ___________________
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.
[ ] ___________________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
=========================================================================================================
PROPOSED
MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE OFFERING AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER SHARE PRICE(1) FEE
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Common Stock, $.01 par value.... 800,000 $10.00 $8,000,000 $2,224
=========================================================================================================
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(a) under the Securities Act of 1933.
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The registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to such Section 8(a),
may determine.
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SUBJECT TO COMPLETION, DATED JANUARY ____, 1999
NEW COMMERCE BANCORP
[INSERT COMPANY LOGO HERE]
800,000 Shares of Common Stock
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This is an initial public offering of shares of common stock of New
Commerce BanCorp. New Commerce is offering a minimum of 550,000 shares and a
maximum of 800,000 shares at a price of $10.00 per share. The minimum purchase
amount will be 100 shares. There is currently no public market in the shares of
common stock. The market price of the shares after this offering may be higher
or lower than the initial public offering price.
New Commerce will use its best efforts to sell the securities offered.
The offering is scheduled to end on June 30, 1999, but the company may extend
the offering until February 1, 2000, at the latest. All money received will be
held in escrow until the minimum number of shares have been sold and New
Commerce has received preliminary regulatory approval for the bank it proposes
to create. If these criteria are not met prior to the end of the offering
period, all funds will be returned.
Purchases of the shares of common stock are not deposits into an
account of a bank and are not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other agency.
INVESTING IN THE COMMON STOCK INVOLVES CERTAIN RISKS. PLEASE REVIEW THE RISK
FACTORS BEGINNING ON PAGE 6.
Per Share Minimum Total Maximum Total
--------- ---------------- ----------------
(550,000 Shares) (800,000 Shares)
---------------- ----------------
Public Offering Price................................ $10.00 $5,500,000 $8,000,000
Sales Agency Commissions (1)......................... 0.57 228,000 228,000
Proceeds to New Commerce (1)......................... 9.43 5,272,000 7,772,000
(1) Reflects sales agent commissions and fees of 5.7% on a maximum of
400,000 shares.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR
DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
PROSPECTUS DATED _________________
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TABLE OF CONTENTS
Page
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Summary ..........................................................................3
Risk Factors......................................................................6
The Offering.....................................................................10
Use of Proceeds .................................................................13
Capitalization...................................................................15
Dividend Policy .................................................................16
Plan of Operation................................................................16
Proposed Business................................................................17
Supervision and Regulation.......................................................21
Management.......................................................................27
Description of Capital Stock of New Commerce.....................................31
Legal Matters....................................................................34
Experts..........................................................................34
Additional Information ..........................................................34
Index to Financial Statements ..................................................F-1
Subscription Agreement..........................................................A-1
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New Commerce's principal executive offices will be located at One Five Forks
Plaza Court near the southwest corner of the intersection of Batesville Road
and Woodruff Road, in Simpsonville, South Carolina.
As used in this Prospectus,
- - "New Commerce" or the "Company" means New Commerce BanCorp.
- - The "Bank" means New Commerce Bank, N.A., which will be owned by New
Commerce.
This prospectus contains certain "forward-looking statements" concerning New
Commerce and the Bank and their operations, performance, and financial
conditions, including future economic performance, plans and objectives, and
the likelihood of success in developing their business. These statements are
based upon a number of assumptions and estimates which are subject to
significant uncertainties, many of which are beyond the control of New Commerce
or the Bank. The words "may," "would," "could," "will," "expect," "anticipate,"
"believe," "intend," "plan," and "estimate," as well as similar expressions,
are meant to identify such forward-looking statements. Actual results may
differ materially from those expressed or implied by such forward-looking
statements. Factors that could cause actual results to differ materially
include, but are not limited to, those set forth in "Risk Factors."
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SUMMARY
This summary highlights information contained elsewhere in this
prospectus. It is not complete and may not contain all of the information you
should consider before investing in the common stock. You should read the
entire prospectus carefully, including the "Risk Factors" section and the
financial statements and the notes to those statements.
PURCHASES OF THE SHARES OF COMMON STOCK ARE NOT DEPOSITS INTO ACCOUNTS OF THE
BANK AND ARE NOT INSURED OR GUARANTEED BY THE FDIC OR ANY OTHER GOVERNMENTAL
AGENCY.
New Commerce is a South Carolina company formed in July 1998 by a
group of twelve business leaders who are organizing a new, or de novo,
community bank to be located in Greenville County, South Carolina. These
organizers believe there is a demand for a new locally owned and controlled
community bank in the south part of Greenville County locally known as the
"Golden Strip," especially since most of the banks currently operating in that
area are branches of large regional banks. New Commerce will be the holding
company for this de novo national bank, which will be called New Commerce Bank,
N.A.
The twelve organizers, each of whom, except Mr. Few, will also serve
as directors of both the holding Company and the Bank, are:
Richard W. Bailey Tommy D. Greer
Timothy A. Brett Bobby L. Johnson
Marshall J. Collins, Jr. Robert Thomas Kellett
Ralph S. Crawley Dennis O. Raines
Richard L. Few, Jr. Curran A. Smith
G. Mitchell Gault James D. Stewart
James D. Stewart, age 45, is the President and Chief Executive Officer
of New Commerce BanCorp and will be President and Chief Executive Officer of
the Bank. Mr. Stewart has over twenty years of banking experience with three
years at First Union, five years at Wachovia and twelve years at BB&T. His last
five years have been in Greenville as Upstate Regional Executive with Southern
National Bank and through a merger with BB&T, a city executive. He has
extensive experience in sales and leadership roles in consumer and commercial
banking. A resident of Simpsonville, he graduated from the University of North
Carolina at Chapel Hill and the Stonier Graduate School of Banking.
In order to open the Bank (which will be a national bank), the
organizers must obtain approval from the Office of the Comptroller of the
Currency (the "OCC") and the Federal Deposit Insurance Corporation (the
"FDIC"). The organizers have submitted applications to these agencies and
anticipate receiving conditional approvals by March 1, 1999. The organizers
anticipate that these approvals will require New Commerce to capitalize the
Bank with at least $7,000,000. New Commerce will use the proceeds of this stock
offering for this purpose. The organizers believe that the bank will open in
the second quarter of 1999.
The Bank will engage in a general commercial and retail banking
business characterized by personalized service and local decision-making, and
will emphasize the banking needs of individuals and small- to medium-sized
businesses. Initially, neither New Commerce nor the Bank will pursue any other
activities.
Our initial office will be in Simpsonville, South Carolina and will
operate out of a temporary facility pending completion of our permanent
offices. We plan to move the main office of the Bank to our permanent facility
to be constructed in Mauldin, which should be completed in the third quarter of
1999. We will continue to operate a branch out of the temporary facility in
Simpsonville, pending the completion of a permanent branch facility at that
site, which should be completed prior to the end of 1999.
The principal executive offices of New Commerce BanCorp are currently
located at 712 North Main Street, Greenville, South Carolina 29609 and the
telephone number is (864) 313-7601.
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Prior to this offering, the organizers purchased 200,000 shares of
common stock, at $10.00 per share, for a total purchase price of $2,000,000, to
provide the initial capitalization for New Commerce. Although the organizers do
not intend to purchase additional shares in the offering, their immediate
family members may purchase additional shares. Based on the current ownership
of common stock by the organizers, the organizers will own approximately 26.7%
of the outstanding common stock based on the minimum number of shares offered
(550,000), and 20.0% of the outstanding common stock based on the maximum
number of shares (800,000). Additionally, in recognition of the financial risks
incurred by the organizers, each organizer will be granted a warrant to
purchase up to 7,500 additional shares of common stock at a price of $10.00 per
share, exercisable for ten years after the completion of this offering. If the
organizers were to fully exercise such warrants, they would own approximately
34.5% of the outstanding stock based on the minimum number of shares offered
and 26.6% of the outstanding common stock based on the maximum number of shares
offered. Although they have not promised to do so, the organizers may purchase
additional shares in the offering, including up to 100% of the minimum offering
(subject to obtaining regulatory approval) if necessary to complete the
offering. All shares purchased by the organizers will be for investment and not
with a view to resell the shares. Because purchases by the organizers may be
substantial, investors in this offering should not assume that the sale of a
specified minimum offering amount indicates the merits of this offering or that
an organizer's investment decision is shared by public investors. See "Risk
Factors - Control of New Commerce; Purchases by Organizers," "The Offering,"
and "Management."
THE OFFERING
Common stock offered................ Minimum: 550,000 shares
Maximum: 800,000 shares
Common stock outstanding
prior to this offering......... 200,000 shares
Common stock to be outstanding
after the offering ............ Minimum: 750,000 shares
Maximum: 1,000,000 shares
Offering price per share............ $10.00
Use of proceeds..................... New Commerce will use $7.0 million of
the first $7.5 million in proceeds
received from the prior sale of stock
to the organizers and the net proceeds
of the offering to capitalize the Bank.
Fifty percent (50%) of the net proceeds
in excess of $7.5 million will also be
used to capitalize the Bank. The
remaining net proceeds will be used to
pay organizational expenses and
expenses of this offering and to
provide working capital.
The Bank intends to use the $7.0
million it receives from the sale of
its stock to New Commerce for
organizational and pre-opening expenses
of the Bank; for purchase of temporary
facilities for the Bank; for purchase
of the Bank's sites; for construction
and furnishing of the Bank's offices;
and for working capital needs
(including paying the salaries of
officers and employees and making loans
and investments). See "Use of
Proceeds."
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Terms of the offering............... The offering is scheduled to expire on
June 30, 1999, but the Company is
reserving the right to continue the
offering up to February 1, 2000.
Initially, we will place all
subscription proceeds we receive in the
offering in an escrow account handled
by an independent escrow agent. The
escrow agent will not release these
funds to the Company, and no shares
will be issued in the offering, unless
on or before the expiration date of the
offering:
- We have accepted subscriptions
and payment in full for a minimum
of 550,000 shares (which will
result in gross offering proceeds a
minimum of $5.5 million);
- We have obtained approval from the
Federal Reserve and the South
Carolina State Board of Financial
Institutions (the "South Carolina
Board") for the Company to acquire
the stock of the Bank;
- We have received preliminary
approval of the Bank's application
for a charter from the OCC; and
- We have received preliminary
approval of the Bank's application
for deposit insurance from the
FDIC.
Plan of Distribution................ The sale of shares offered hereunder
will be made primarily by officers and
directors of the Company, who will not
receive any fees or commissions for
such efforts. Additionally, we have
engaged J.C. Bradford & Co. ("J.C.
Bradford") as our sales agent to use
its best efforts to sell up to 400,000
shares in the offering. J.C. Bradford
will receive commissions and fees of
$0.57 for each share sold. See "The
Offering - Plan of Distribution."
RISK FACTORS
Investment in the common stock involves certain risks. Some of the
risks are lack of operating history; dependence on key employees; significant
control of New Commerce by its organizers; and absence of an existing market
for the common stock. See "Risk Factors" for a full discussion of significant
risks.
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RISK FACTORS
Investing in the shares of common stock involves certain risks.
Investments should be made only after careful consideration of the following
risk factors. You should purchase common stock only if you can afford these
risks. PURCHASES OF THE SHARES OF COMMON STOCK IN THIS OFFERING ARE NOT
DEPOSITS IN AN ACCOUNT OF THE BANK AND ARE NOT INSURED OR GUARANTEED BY THE
FDIC OR ANY OTHER GOVERNMENTAL AGENCY.
NO ASSURANCE OF REGULATORY APPROVALS FOR THE BANK
Before we may open the Bank, the OCC must approve our charter
application for the Bank and our application to allow the Company to own the
Bank, and the FDIC must approve our application for deposit insurance for the
Bank. Although we anticipate receiving preliminary approvals by January 31,
1999, there is a risk these approvals will not be granted. Final approvals will
not be granted by the OCC or the FDIC until the Bank is ready to open its
business to the public. We anticipate this will occur in the second quarter of
1999.
Because we cannot open the Bank without these approvals, to reduce the
risks to investors in this offering we will place the proceeds from this
offering in an escrow account. The independent escrow agent will not release
the proceeds of the offering from escrow until the following conditions are
met:
- We have accepted subscriptions and payment in full for a minimum of
550,000 shares;
- We have obtained approval from the Federal Reserve and the South
Carolina Board for the Company to acquire the stock of the Bank;
- We have received preliminary approval of the Bank's application for
a charter from the OCC; and
- We have received preliminary approval of the Bank's application for
deposit insurance from the FDIC.
If we terminate the offering prior to satisfaction of these conditions, all
subscription funds will be returned to subscribers (without interest). See "The
Offering - Conditions to the Offering and Release of Funds."
NEW ENTERPRISE
New Commerce has been recently organized, and the organization of the
Bank will not be final until it is ready to open in May of 1999. Neither has
any operating history. Prospective purchasers of the shares have limited
information on which to base an investment decision. As a holding company, the
Company will be profitable only if the Bank is profitable. The operations of
new businesses are always risky. We expect that the Bank will incur large
initial expenses and may not be profitable for several years after starting
business, if ever. Due to the operating losses we expect to incur during the
initial years of the Bank's operations, the value of the shares of common stock
may decrease.
DEPENDENCE ON KEY EMPLOYEES
We will depend heavily on one individual to lead management and
conduct business. James D. Stewart will be the President and Chief Executive
Officer of the Company and the Bank. If he becomes unable or unwilling to
continue in his present positions, New Commerce and the Bank could be
materially adversely affected. The Company has entered into an employment
agreement with Mr. Stewart and has obtained a key man life insurance policy
covering Mr. Stewart in the amount of $1 million.
CONTROL OF NEW COMMERCE AND THE BANK; PURCHASES BY ORGANIZERS
With the exception of Mr. Few, the organizers will also serve as the
initial directors of the Company and the Bank. We anticipate that the
organizers and members of their immediate families will own at least 200,000
shares after the offering, equal to 26.7% of the shares outstanding upon
completion of the offering based on the
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minimum offer and 20.0% of the shares outstanding upon completion of the
offering based on the maximum number of shares offered. Additionally, each of
the organizers will receive warrants to purchase an additional 7,500 shares of
common stock at $10.00 per share, exercisable for ten years after the
completion of the offering. If each organizer were to exercise his warrant in
full, the organizers' ownership of the Company as a group would increase to
34.5% based on the minimum offering and 26.6% based on the maximum offering. As
a result of the anticipated stock ownership by the organizers, together with
their positions as directors of the Company and the Bank, the organizers as a
group will have substantial influence on the operations and management of the
Company and the Bank following the offering.
As a result of the warrants to be granted to the organizers, the
organizers will have an opportunity to profit from any rise in the market value
of the common stock or any increase in the net worth of the Company. Such
exercise may also result in the dilution of the interests of other
shareholders. The exercise of a substantial number of warrants by the
organizers could adversely impact the market value of the shares, the terms on
which the Company may be able to obtain additional capital. Furthermore, the
holders of the warrants could exercise the warrants at a time when the Company
could obtain any needed capital by a new offering of securities at a price
better than those provided for by the warrants. See "Management - Stock
Warrants."
OFFERING PRICE ARBITRARILY DETERMINED
We set the initial public offering price of $10.00 per share without
reference to traditional criteria for determining stock value, since criteria
such as book value or earnings are not available to a company with no
operations. The public offering price may bear no relationship to the market
price of the common stock after the offering. The price per share is
approximately the initial book value per share, before payment of
organizational expenses of the Company and the Bank.
ABSENCE OF TRADING MARKET
There is currently no market for the common stock. Upon completion of
the offering, we anticipate (based on discussion with our sales agent) that we
will be able to secure at least two broker-dealers to match buy and sell orders
for our common stock on the Over-the-Counter Bulletin Board and bid and ask
quotations will also be displayed on the Electronic Pink Sheet System. However,
a public market having depth and liquidity depends on the presence in the
marketplace of a sufficient number of buyers and sellers at any given time.
There can be no assurance that a liquid market for the common stock will
develop. If an active trading market does develop, there can be no assurance
that such a trading market will continue. Additionally, since the prices of
securities generally fluctuate, there can be no assurance that purchasers in
this offering will be able to sell the common stock at or above the
subscription price. See "Market for Common Stock."
FLUCTUATION IN EARNINGS AND VOLATILITY OF STOCK PRICES
The market price of the common stock will be effected by quarterly and
yearly operating results, which could fluctuate greatly. These fluctuations
could result from expenses of operating and expanding the Bank, trends in the
banking industry, economic conditions in the Bank's market area, and other
factors which are beyond our control. If operating results are below
expectations, the market price of the common stock would likely be materially
adversely affected.
COMPETITION
The banking business is highly competitive. We will encounter strong
competition from other banks, thrifts, credit unions, mortgage lenders,
consumer finance and insurance companies, brokerage firms, mutual funds and
other financial institutions operating in the Greenville County area and
elsewhere. Some of these competitors are well established in the target area,
and most of them have greater resources and lending limits and a lower cost of
funds than we do. Some may offer services, such as extensive and established
branch networks and trust services, that we either do not expect to provide or
will not provide for some time. Due to this competition, we may have to pay
higher rates of interest to attract deposits. In addition, competitors that are
non-depository institutions are generally not subject to the extensive
regulations applicable to the Company and the
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Bank. Recent federal legislation permits commercial banks to establish
operations nationwide. This will increase competition from out-of-state
financial institutions. There can be no assurances that we will be able to
compete successfully. See "Proposed Business - Competition" and "Supervision
and Regulation."
SUPERVISION AND REGULATION
The banking industry is heavily regulated. Our success depends not
only on competitive factors but also on state and federal regulations affecting
banks, thrifts, and their holding companies. These regulations are designed to
protect depositors, not shareholders. Changes in the regulation of the
financial institutions industry continue to occur, and the ultimate effect of
these regulatory changes cannot be predicted. In December 1991, Congress
enacted the Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA"). FDICIA and the regulations thereunder have increased the regulatory
and supervisory requirements for financial institutions, resulting in increased
operating expenses. Additional statutes affecting financial institutions are
proposed and enacted from time to time. Regulations affecting the Company and
the Bank may be modified at any time, and such modifications could adversely
affect our business. See "Supervision and Regulation."
ECONOMIC CONDITIONS
Our success will also depend upon local and national economic and
political conditions and governmental policies. Inflation, recession,
unemployment, high interest rates, short money supply, and other factors beyond
our control may adversely affect the Bank's deposit levels and loan demand and
could affect our earnings. Economic development may not be favorable, and we
may not achieve expected growth. See "Proposed Business."
DIVIDEND POLICY
We do not plan to pay cash dividends to our shareholders in the
foreseeable future if at all. The Company and the Bank are start-up operations
that should incur initial losses. We intend to retain any earnings for the
period of time we believe necessary to ensure the success of our operations.
The Company will be dependent upon the Bank for its earnings and funds to pay
dividends on the common stock. The payment of dividends is also subject to
legal and regulatory restrictions. Prior to payment of dividends by New
Commerce, the Board of Directors will consider the Bank's earnings, capital
requirements, financial condition and other relevant factors. See "Dividend
Policy," "Proposed Business," and "Supervision and Regulation."
LENDING LIMIT
We will be limited in the amount we can loan a single borrower
(including the borrower's related interests) by the amount of the Bank's
capital. These limits will increase and decrease as the Bank's capital
increases and decreases. If we are unable to sell participations in our loan
portfolio to other financial institutions, we may not be able to meet all of
the lending needs of some of our loan customers.
DILUTION
After the offering, we intend to adopt a stock option plan covering
our officers, directors, and employees. We would obtain shareholder approval
for this plan and anticipate that it would initially authorize a number of
shares equal to 15% of the shares to be outstanding after this offering. This
plan would include the options the Company will be obligated to issue to Mr.
Stewart under the terms of his employment agreement. Exercise of these options
could dilute the shareholders' interest in New Commerce's earnings and book
value. In addition, we may issue additional stock options or shares of common
stock or preferred stock in the future. Any stock offering would likely dilute
the holdings of purchasers in this offering.
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ANTITAKEOVER EFFECTS
New Commerce has certain takeover defenses in place. These defenses include:
- provisions relating to meetings of shareholders;
- the ability of the Board of Directors to issue additional shares
of authorized common stock and preferred stock without
shareholder approval;
- a staggered board of directors; and
- a bylaw provision that individuals affiliated with New Commerce's
business competitors may not qualify to serve on New Commerce's
Board of Directors.
These measures may impede a change in control of the Company which is not
supported by our Board of Directors, even if the change in control would be
beneficial to shareholders. See "Description of Capital Stock - Certain
Antitakeover Effects."
RISKS ASSOCIATED WITH THE YEAR 2000
Like many financial institutions, we will rely upon computers for the
daily conduct of our business and for information systems processing. There is
concern among industry experts that on January 1, 2000, computers will be
unable to read or interpret the new year and there may be widespread computer
malfunctions. We will generally rely on software and hardware developed by
independent third parties to provide our information systems. We will seek
written assurances about the Year 2000 compliance from all third party hardware
and software system providers we intend to use. To date, we have entered into
an agreement with Jack Henry & Associates, Inc. to provide our core data
processing software and services, and with CommLink Corp. to provide our ATM
processing services. Our written agreements with each of these vendors contain
comprehensive warranties regarding their Year 2000 capability and compliance.
We believe that our other internal systems and software, including our network
connections, will be programmed to comply with Year 2000 requirements, although
there is a risk they may not comply. Based on information currently available,
we believe that we will not incur significant expenses in connection with the
Year 2000 issue.
The business of many of our customers may also be negatively affected
by the Year 2000 issue. Any financial difficulties incurred by our customers in
solving Year 2000 issues could impair that customer's ability to repay loans we
may have extended. In addition, the failure of our customers to adequately
comply with Year 2000 requirements, and the costs involved in correcting such a
failure, could have a material adverse effect on our business, financial
condition, and results of operations.
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THE OFFERING
GENERAL
The Company is offering for sale a minimum of 550,000 shares and a
maximum of 800,000 shares of its common stock at a price of $10.00 per share to
raise gross proceeds of between $5,500,000 and $8,000,000 for the Company. The
minimum purchase for any investor (together with the investor's affiliates) is
100 shares and the maximum purchase is 5% of the offering unless the Company,
in its sole discretion, accepts a subscription for a lesser or greater number
of shares.
Prior to this offering, the organizers purchased 200,000 shares of
common stock, at $10.00 per share for a total price of $2 million, to provide
the initial capitalization for the Company. The organizers do not intend to
purchase additional stock in the offering, although members of their immediate
families may purchase additional shares. As a result, the organizers will own
approximately 26.7% of the common stock outstanding upon completion of the
offering based on the minimum number of shares offered (550,000), and 20.0% of
the common stock outstanding upon completion of the offering based on the
maximum number of shares offered (800,000). Additionally, each of the
organizers will receive a warrant to purchase an additional 7,500 shares of
common stock at $10.00 per share, exercisable for ten years after the
completion of the offering. If each organizer were to exercise his warrant in
full, the organizers' ownership of the Company as a group would increase to
34.5% based on the minimum offering and 26.6% based on the maximum offering.
Although they have not promised to do so, the organizers may purchase
additional shares in the offering, including up to 100% of the minimum offering
(subject to obtaining regulatory approval) if necessary to complete the
offering. All shares purchased by the organizers will be for investment and not
with a view to resell the shares. Because purchases by the organizers may be
substantial, investors in this offering should not assume that the sale of a
specified minimum offering amount indicates the merits of this offering or that
an organizer's investment decision is shared by public investors. See "Risk
Factors - Control of New Commerce; Purchases by Organizers" and "Management."
Subscriptions to purchase shares will be received until midnight,
Eastern Standard Time, on June 30, 1999, unless all of the shares are earlier
sold or the offering is earlier terminated or extended by the Company. See
"Conditions to the Offering and Release of Funds." The Company reserves the
right to terminate the offering at any time or to extend the expiration date
for additional periods not to extend beyond February 1, 2000. No written notice
of an extension of the offering period need be given prior to any extension and
any such extension will not alter the binding nature of subscriptions already
accepted by the Company. Once the Company is subject to the reporting
requirements of the Securities Exchange Act of 1934 (the "Exchange Act"), it
will file quarterly reports on Form 10-Q and will make such documents available
to subscribers who request a copy. In addition, we intend to provide quarterly
communications to all subscribers which will include information concerning any
extensions of the offering. Extension of the expiration date might cause an
increase in our organizational and pre-opening expenses and in the expenses
incurred with this offering.
Following our acceptance, subscriptions will be binding on subscribers
and may not be revoked by subscribers except with our consent. In addition, we
reserve the right to cancel accepted subscriptions at any time and for any
reason until the proceeds of this offering are released from escrow (as
discussed in greater detail in "Conditions to the Offering and Release of
Funds" below), and we reserve the right to reject any subscription, in whole or
in part and in our sole discretion. We also have the discretion to allocate
shares among subscribers in the event of an oversubscription for the shares;
however, we anticipate that subscribers for the minimum number of shares will
not be adjusted. In determining which subscriptions to accept, in whole or in
part, we may take into account any factors we consider relevant, including the
order in which subscriptions are received, a subscriber's potential to do
business with or to direct customers to the Bank, and our desire to have a
broad distribution of stock ownership. If we reject any subscription, or accept
a subscription but in our discretion subsequently elect to cancel all or part
of such subscription, we will refund promptly the amount remitted that
corresponds to $10.00 multiplied by the number of shares as to which the
subscription is rejected or canceled. We will issue certificates representing
shares duly subscribed and paid for promptly after the offering conditions are
satisfied and we receive the escrowed funds.
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CONDITIONS TO THE OFFERING AND RELEASE OF FUNDS
The offering is scheduled to expire on June 30, 1999, but we reserve
the right to continue the offering up to February 1, 2000. Initially, we will
place all subscription proceeds we receive in the offering in an escrow account
handled by an independent escrow agent. The escrow agent will not release these
funds to us, and no shares will be issued in the offering, unless on or before
the expiration date of the offering:
- We have accepted subscriptions and payment in full for a minimum of
550,000 shares (which will result in gross offering proceeds in
excess of a minimum of $5.5 million);
- We have obtained approval from the Federal Reserve and the South
Carolina Board for the Company to acquire the stock of the Bank;
- We have received preliminary approval of the Bank's application for a
charter from the OCC; and
- We have received preliminary approval of the Bank's application for
deposit insurance from the FDIC.
If the Company terminates the offering prior to satisfaction of these
conditions, then:
- Accepted subscription agreements will be of no further force or effect
and subscribers in the offering will not become shareholders of New
Commerce;
- The funds held in the escrow account will not be subject to the claims
of any creditor of New Commerce or available to defray the expenses of
this offering; and
- The full amount of all subscription funds will be returned promptly to
subscribers, without interest. We will retain any interest earned on
subscriptions to repay the expenses incurred in organizing the Bank.
The escrow agent has not investigated the desirability or advisability
of an investment in the shares by prospective investors and has not approved,
endorsed, or passed upon the merits of an investment in the shares.
Subscription funds held in escrow will be invested in interest-bearing savings
accounts, short-term United States Treasury securities, FDIC-insured bank
deposits, or such other investments as the escrow agent and the Company shall
agree. The organizers do not intend to invest the subscription proceeds held in
escrow in instruments that would mature after the expiration date of the
offering.
If the conditions for releasing subscription funds from escrow are met
and such funds are released but final regulatory approval to commence banking
operations is not obtained from the OCC or the Bank does not open for any other
reason, the Board of Directors intends to propose that the shareholders approve
a plan to liquidate the Company. Upon such a liquidation, the Company would be
dissolved and the Company's net assets (generally consisting of the amounts
received in this offering plus any interest earned thereon, less the amount of
all costs and expenses incurred by the Company and the Bank, including the
salaries of employees of the Bank and other pre-opening expenses) would be
distributed to the shareholders; provided that, in this event, no distributions
would be made to the organizers until shareholders other than the organizers
have received an amount equal to their initial investment in the Company.
PLAN OF DISTRIBUTION
Offers and sales of the common stock will be made on behalf of the
Company primarily by certain of its officers and directors. The officers and
directors will receive no commissions or other remuneration in connection with
such activities, but they will be reimbursed for reasonable expenses incurred
in the offering. In reliance on Rule 3a4-1 of the Exchange Act, the Company
believes such officers and directors will not be deemed to be brokers and/or
dealers under the Exchange Act.
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We have also entered into a Sales Agency Agreement with J.C. Bradford
& Co. pursuant to which the sales agent has agreed to offer and sell to the
public as the Company's agent up to 400,000 shares of common stock on a "best
efforts" basis. The Company must reserve a minimum of 100,000 shares for sales
by the sales agent. The sales agent is required to use its best efforts through
the expiration date to sell the shares. The sales agent will receive fees and
commissions of 5.7% on shares it sells. The sales agent did not receive any
commission on the shares purchased by the organizers prior to the offering and
will not receive commissions on sales made by the officers or directors of the
Company.
The Sales Agency Agreement provides for reciprocal indemnification
between the Company and the sales agent against certain liabilities in
connection with this offering, including liabilities under the Securities Act.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted pursuant to the Sales Agency Agreement, the Company has been
advised that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed by the Securities Act and
is, therefore, unenforceable.
Prior to the date of the Prospectus, there has been no public market
for the shares. We established the initial offering price of the shares offered
hereby based upon our assessment of the capital needs of the Company and the
commercial potential of the services to be offered by the Company. We have had
discussions with the sales agent regarding the establishment and maintenance of
a market for the shares after the offering. Based upon such discussions, we
expect that a secondary market may eventually develop for the shares, although
we can make no assurances in this regard. In general, if a secondary market
develops, the shares will be freely transferable and assignable by the holder
thereof (except shares held by affiliates), and nonaffiliate shareholders may
sell any number of shares in such secondary market. See "Description of the
Capital Stock of the Company - Shares Available for Future Sale." In addition,
factors such as the degree to which the secondary market is active will
determine the willingness of the market makers, once a secondary market is
established, to continue to maintain the secondary market.
HOW TO SUBSCRIBE
Each prospective investor who desires to purchase shares of common
stock should:
1. Complete, date, and execute the subscription agreement which
has been delivered with this Prospectus;
2. Make a check, bank draft, or money order payable to The
Bankers Bank, Escrow Account for New Commerce BanCorp in the
amount of $10.00 times the number of shares subscribed for;
and
3. Deliver the completed subscription agreement and check to the
Company or the sales agent at the following address:
Mr. James D. Stewart Mr. Carl V. Cline
New Commerce BanCorp or J. C. Bradford & Co.
P.O. Box 129 400 2nd Avenue, N.W.
Mauldin, South Carolina 29662 Post Office Box 3857
Hickory, North Carolina 28603
If you have any questions about the offering or how to subscribe,
please call Mr. Stewart at (864) 313-7601 (or any of the other organizers) or
Mr. Cline at (704) 322-3410. Subscribers should retain a copy of the completed
subscription agreement for their records. The subscription price is due and
payable when the subscription agreement is delivered.
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USE OF PROCEEDS
Although the amounts set forth below provide an indication of the
proposed use of funds based on the plans and estimates of the organizers,
actual expenses may vary from the estimates. We believe that the minimum
proceeds of $5,500,000 from the offering will satisfy our cash requirements for
our first three years of operations, but there can be no assurance that this
will be the case. Because we are a new enterprise, we cannot predict the Bank's
ability to generate revenues from investments and loan originations, and,
therefore, we cannot predict what the actual application of proceeds will be.
The gross proceeds to the Company from the sale of the minimum of
550,000 shares of common stock is estimated at $5,500,000 and from the maximum
of 800,000 shares is estimated at $8,000,000. Additionally, the Company has
received $2,000,000 from the sale of 200,000 shares to the organizers of the
Company. The Company's organizational and offering expenses estimated at
$100,000 are to be paid from the proceeds of the offering and sale of shares to
the organizers. The Bank's organizational and pre-opening expenses are
estimated not to exceed $352,700. We have established a line of credit in the
amount of $425,000 at the prime rate with the Bank of Newberry County, although
no amounts are outstanding under this line of credit and we do not anticipate
using such line of credit. All costs and expenses incurred to date have been
funded by the initial investment of the organizers. On the basis of the
foregoing assumptions, gross proceeds, expenses, and net proceeds at the
minimum and maximum offering amount would be as follows:
BY THE COMPANY
The following table sets forth the anticipated use of proceeds by the
Company based on the sale of the minimum number and maximum number of shares in
this offering. The Company will retain the balance of the proceeds and
initially invest the sums in United States government securities or as a
deposit with the Bank. In the long-term, the Company will use the sums for
working capital and other general corporate purposes, including payment of
expenses of the Company and the provision of additional capital for the Bank,
if necessary. The Company may also use such proceeds for potential expansion
opportunities, such as the establishment of additional branches or, the
acquisition of other financial institutions. The Company does not currently
have any definitive plans regarding any such expansion possibilities.
Minimum Maximum
----------- -----------
Offering(2) Offering(3)
----------- -----------
Gross proceeds from offering(1)............................... $ 7,500,000 $ 10,000,000
Sales Agent's commission(4)................................... (228,000) (228,000)
Organizational and offering expenses of the Company........... (100,000) (100,000)
Investment in capital stock of the Bank(5).................... $ (7,000,000) $ (8,250,000)
Remaining proceeds............................................ $ 172,000 $ 1,422,000
============== ==============
(1) Includes $2 million received from the organizers who purchased 200,000
shares of common stock prior to the offering at $10 per share.
(2) Assumes that 550,000 shares of common stock are sold in this offering.
(3) Assumes that 800,000 shares of common stock are sold in this offering.
(4) The commissions described in this table reflect the payment of a 5.7%
commission to the sales agent on a maximum of 400,000 shares.
(5) If the total offering proceeds (including the $2 million previously
received from the organizers) exceed $7.5 million, the Company will
contribute 50% of the net proceeds in excess of $7.5 million to the Bank.
This sum is included here.
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BY THE BANK
The following table depicts the anticipated use of proceeds by the
Bank. All proceeds received by the Bank will be in the form of an investment by
the Company in the Bank's capital stock.
Minimum Maximum
----------- -----------
Offering(2) Offering(3)
----------- -----------
Investment by the Company in the Bank's capital
stock(3)............................................. $ 7,000,000 $ 8,250,000
Organizational and pre-opening expenses of the Bank..... (352,700) (352,700)
Furniture, Fixtures and Equipment....................... (382,700) (382,700)
Lease of temporary facilities(4)........................ (37,200) (37,200)
Purchase of Bank sites(5)............................... (1,141,000) (1,141,000)
Construction of Bank offices(5)......................... (1,820,000) (1,820,000)
Remaining Proceeds...................................... $ 3,347,400 $ 4,597,400
============ =============
- ---------------------------------------
(1) Assumes that 550,000 shares of common stock are sold in this offering.
(2) Assumes that 800,000 shares of common stock are sold in this offering.
(3) If the total offering (including the $2 million previously received from
the organizers) exceeds $7,500,000 the Company will contribute 50% of the
net proceeds to the Bank. The sum is included here.
(4) Reflects lease of temporary facilities for a period of 1 year at a rate of
$3,100 per month.
(5) Upon completion of the Bank offices, the Bank intends to enter into sale
/leaseback arrangements for the offices with an option to purchase, which
should return a significant amount of the purchase price for the Bank's
offices to the Bank for use as operating capital.
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CAPITALIZATION
The following table sets forth the capitalization of the Company as of
December 31, 1998 and the pro forma consolidated capitalization of the Company
and the Bank, as adjusted to give effect to the sale of the minimum of 550,000
shares and a maximum of 800,000 shares in this offering. The Bank has
established the second quarter of 1999 as the target for opening the Bank;
accordingly, the "As Adjusted" column reflects estimated pre-opening expenses
of the Company and the Bank through that date.
As Adjusted As Adjusted
For for
December 31, Minimum Maximum
1998 Offering Offering
------------- ------------ -------------
SHAREHOLDERS EQUITY:
Common Stock, par value $.01 per share; 10,000,000
shares authorized; 200,000 issued and
outstanding(1); 750,000 shares issued and
outstanding as adjusted (minimum offering);
1,000,000 shares issued and outstanding (maximum
offering).......................................... 2,000 7,500 10,000
Preferred Stock, par value $.01 per share; 10,000,000
shares authorized; no shares issued and outstanding... 0 0 0
Additional paid-in capital(2)......................... 1,998,000 7,192,300 9,689,800
Deficit accumulated during the pre-opening stage(3)... (46,524) (46,524) (46,524)
------------- ------------ -------------
Total shareholders' equity (deficit)(4)............ $ 1,953,476 $ 7,145,776 $ 9,643,276
============= ============ =============
- ------------------------------------
(1) The organizers purchased 200,000 shares for a total of $2,000,000 prior to
the offering.
(2) The expenses of the offering will be charged against this account. These
expenses are estimated to be approximately $300,200 and these amounts have
been used in the calculation of the amounts shown in the "As Adjusted"
columns. The offering expenses include commissions and fees to be paid to
the sales agent of 5.7% on a maximum of 400,000 shares sold in the
offering.
(3) The deficit results from the expensing of estimated pre-opening expenses.
As of December 31, 1998, approximately $46,524 of pre-opening expenses and
organizational costs, and $143,427 in deferred offering costs had been
incurred on behalf of the Company and the Bank. Additionally, the Company
has purchased options for the purchase of land for its offices for a total
of $39,800 and furniture in the amount of approximately $8,200. The
Company's total accumulated shareholder's deficit was $46,524. The
organizers estimate that a total of $100,000 in organizational expenses
for the Company, $352,700 in organizational and pre-opening expenses for
the Bank, and up to $383,000 of capitalizable property costs for the
purchase of furniture, fixtures, and equipment are expected to be incurred
by the Company and the Bank prior to the commencement of operations
(assumed to occur in May of 1999). However, no assurances can be given
that the Bank will open by this date or at all, and the amount of
pre-opening expenses and organizational costs could ultimately be greater
than currently estimated. Furniture, fixtures, and equipment will be
capitalized and amortized over the life of the lease or over the estimated
useful life of the asset. The Company will retain any interest earned on
subscription payments held in escrow prior to conclusion of the offering.
Such interest will be used to help offset the deficit accumulated during
the pre-opening stage, but the figures shown above do not include any
estimate of the interest which may be earned.
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(4) The shareholders are likely to experience additional dilution due to
operating losses expected to be incurred during the initial years of the
Bank's operations.
(5) Upon completion of the Bank offices, the Bank intends to enter into
sale/leaseback arrangements for the offices with an option to purchase,
which should return a significant amount of the purchase price for the
Bank's offices to the Bank for use as operating capital.
DIVIDEND POLICY
The Board of Directors expects initially to follow a policy of
retaining any earnings to provide funds to operate and expand the business.
Consequently, it is unlikely that any cash dividends will be paid in the near
future. The Company's ability to pay any cash dividends to its shareholders in
the future will depend primarily on the Bank's ability to pay dividends to the
Company. In order to pay dividends to the Company, the Bank must comply with
the requirements of all applicable laws and regulations. See "Supervision and
Regulation The Bank - Dividends" and "Supervision and Regulation - The Bank -
Capital Requirements." In addition to the availability of funds from the Bank,
the future dividend policy of the Company is subject to the discretion of the
Board of Directors and will depend upon a number of factors, including future
earnings, financial condition, cash needs, and general business conditions.
PLAN OF OPERATION
New Commerce was formed to organize and own all of the capital stock
of the Bank. The organizers filed an application with the OCC on October 26,
1998 to charter the Bank as a national bank. The issuance of a charter will
depend, among other things, upon compliance with certain legal requirements
that may be imposed by the OCC, including capitalization of the Bank with at
least a specified minimum amount of capital, which the organizers believe will
be $7,000,000. Additionally, the Company must obtain the approval of the
Federal Reserve to become a bank holding company before acquiring the capital
stock of the Bank. The Bank has also filed an application with the FDIC for
deposit insurance. The organizers expect to receive all regulatory approvals by
May of 1999.
As of December 31, 1998, the Company had total assets of $1,953,476,
consisting of cash ($1,762,031), deferred organization costs ($143,427), real
estate options ($39,800) and fixed assets ($8,218). The Company incurred a net
loss of $46,524 for the period from inception July 17, 1998 to December 31,
1998.
Upon the completion of the sale of common stock and opening of the
Bank, organization costs, estimated to be $100,000 (consisting principally of
legal, regulatory, consulting and incorporation fees), will be charged against
the initial period of operating results. Offering expenses, estimated to be
$272,224 (consisting principally of direct incremental costs of the stock
offering), will be deducted from the proceeds of the offering, and pre-opening
expenses, estimated to be $352,700 (consisting principally of salaries,
overhead and other operating costs), which are charged against the initial
period's operating results.
The Bank's initial office will be located at One Five Forks Plaza
Court near the intersection of Batesville Road and Woodruff Road in
Simpsonville, South Carolina. The Bank will operate out of a temporary facility
at this location while its permanent facilities are under construction. The
Bank intends to complete a 3,000 square foot permanent branch facility at this
location at a projected cost of $427,000 and a 10,000 square foot permanent
main office in Mauldin, South Carolina near Brookfield Parkway and East Butler
Road at projected cost of $1.4 million. We hope to complete both facilities
prior to the end of 1999. The Company entered into an agreement in September of
1998 to purchase the Simpsonville property for $450,000 and an agreement in
January of 1999 to purchase the Mauldin property for $691,000. Upon completion
of the Bank offices, the Bank intends to enter into sale/leaseback arrangements
for the offices with an option to purchase, which should return to the Bank a
significant amount of the cash to purchase the Bank sites and construct its
offices for use as operating capital.
Like many financial institutions, we will rely upon computers for the
daily conduct of our business and for information systems processing. There is
concern among industry experts that on January 1, 2000, computers will be
unable to read or interpret the new year and there may be widespread computer
malfunctions. We will
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generally rely on software and hardware developed by independent third parties
to provide our information systems. We will seek written assurances about the
Year 2000 compliance from all third party hardware and software system
providers we intend to use. To date, we have entered into an agreement with
Jack Henry & Associates, Inc. to provide our core data processing software and
services, and with CommLink Corp. to provide our ATM processing services. Our
written agreements with each of these vendors contain comprehensive warranties
regarding their Year 2000 capability and compliance. We believe that our other
internal systems and software, including our network connections, will be
programmed to comply with Year 2000 requirements, although there is a risk they
may not comply. Based on information currently available, we believe that we
will not incur significant expenses in connection with the Year 2000 issue.
PROPOSED BUSINESS
GENERAL
The Company was incorporated as a South Carolina corporation in July
1998, primarily to own and control all of the capital stock of the Bank. The
Company initially will engage in no business other than owning and managing the
Bank.
The organizers have chosen a holding company structure under which the
Company will acquire all of the capital stock of the Bank because, in the
judgment of the organizers, the holding company structure provides flexibility
that would not otherwise be available. The holding company structure can assist
the Bank in maintaining its required capital ratios because, subject to
compliance with Federal Reserve Board debt guidelines, the Company may borrow
money and contribute the proceeds to the Bank as primary capital. Moreover, a
holding company may engage in certain non-banking activities that the Federal
Reserve Board has deemed to be closely related to banking. Although the Company
has no present intention of engaging in any of these activities, if
circumstances should lead the Company's management to believe that there is a
need for these services in the Bank's market area and that such activities
could be profitably conducted, management of the Company would have the
flexibility of commencing these activities upon filing a notice or application
therefor with the Federal Reserve Board.
We will initially depend heavily on one individual to lead management
and conduct business. James D. Stewart will be the President and Chief
Executive Officer of the Company and the Bank. Recognized is the need for a
strong management team. Prior to opening of the bank, we will hire a Chief
Financial Officer, a Chief Commercial lender and a Chief Commercial Real Estate
lender, all with greater than 10 years experience in the financial services
industry. This management team collectively will have strong ties and local
experience in the Primary Service Area (PSA) the bank will serve.
The Bank is being organized as a national bank under the laws of the
United States and, subject to regulatory approval, the Bank will engage in a
commercial and consumer banking business with deposits insured by the FDIC. The
Bank may not commence business until the OCC issues a charter for the Bank and
the FDIC grants deposit insurance to the Bank. There is no assurance that the
Bank will be successful in receiving regulatory approval and satisfying any
conditions that may be imposed upon the Bank by the OCC or the FDIC prior to
the commencement of its business.
LOCATION AND SERVICE AREA
The Bank expects initially to draw a large percentage of its business
from the cities of Simpsonville, Mauldin, Fountain Inn and the unincorporated
areas of Enoree and Southside, which are located in the southern portion of
Greenville County. This area is known locally as the "Golden Strip" and is
bounded by Interstate 85 to the north, Highway 75 to the west, Laurens County
to the south and Spartanburg County to the east.
This area's median household income, household growth, and population
growth trends have consistently out-paced Greenville County and the State of
South Carolina. This area will benefit from the location of the Southern
Connector, and it is the home for BI-LO, a grocery store chain, and Kemet
Electronics. The bank will
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also leverage existing contacts and relationships with individuals and
companies known to management outside of the Golden Strip, primarily in
Greenville.
The Company's current mailing address is P.O. Box 129, Mauldin, South
Carolina 29662. The Company's telephone number is (864) 313-7601. See
"Facilities."
MARKETING FOCUS
Most of the banks in the Greenville County area are now local branches
of large regional banks. Although size gives the larger banks certain
advantages in competing for business from large corporations, including higher
lending limits and the ability to offer services in other areas of South
Carolina and of Greenville County, the organizers believe that there is a void
in the community banking market in the Golden Strip and Greenville County area
and believe that the Bank can successfully fill this void. The Bank will not
compete for the primary banking relationships of large corporations, but will
compete for niches in this business and for the consumer business of their
employees. This focus will also be on small to medium businesses and their
employees. This includes retail, service, wholesale distribution, manufacturing
and international business.
The Bank plans to advertise to emphasize the Company's local
ownership, community bank nature, and ability to provide more personalized
service than its competition. The Bank will however have the ability to offer
large bank services. The organizers are generally long-time residents and
business people in the target area and have determined the credit needs of the
area through personal experience and communications with their business
colleagues. The organizers believe that the proposed community bank focus of
the Bank is likely to succeed in this market and that the area will react
favorably to the Bank's emphasis on service to small businesses, individuals,
and professional concerns. However, no assurances in this respect can be given.
A high percentage of the banks in the Golden Strip have headquarters
out of the county. This trend continues with the announcements in late 1997 and
1998 of three more local area banks agreeing to be purchased by out of state
banks. Despite the dominance of larger national and regional banks, community
banks in the Golden Strip have shown a higher 5-year average growth rate in
deposits and market share for all financial institutions according to the FDIC
deposit and market share results through June 1997.
While the Bank has no plans to do so at present, due to continued
consolidation trends driven by bank mergers, the Bank may take advantage of the
market place with additional branches in the Golden Strip or growth corridors
in or outside of Greenville County. The Bank will also attempt to attract
commercial business based outside of the Golden Strip by offering courier
service. The Bank intends to attract such businesses based on relationships and
contacts which the Bank's directors and management have in the marketplace.
Many of these competitors are well established in the Greenville County area.
Most of them have substantially greater resources and lending limits than the
Bank and offer certain services, such as extensive and established branch
networks and trust services, that the Bank either does not expect to provide or
will not provide initially. As a result of these competitive factors, the Bank
may have to pay higher rates of interest to attract deposits.
More than sixty percent of all subdivisions planned in Greenville
County on average in the four years through 1997 were constructed in the Golden
Strip. The Bank will be active in providing residential mortgages, acquisition
and development financing for subdivisions and construction and permanent
financing for commercial real estate, particularly owner occupied property.
Consumers will enjoy extended branch operating hours, drive-up ATMs,
deposits made by 5:00 p.m. credited that day to customer accounts, and
convenient branch locations where road infrastructure is in place to make
access easier. Local decision-making with experienced bankers, and attention to
lower employee turnover, along with professional and responsive service, will
be targeted approaches by the Bank. We believe customers will be responsive to
a banking environment where they are encouraged with an approach of "what the
bank can do for you" versus an approach of "what the bank can't do for you."
This highlights the community bank approach New Commerce will earn in the
market place.
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DEPOSITS
The Bank intends to offer a full range of deposit services that are
typically available in most banks and savings and loan associations, including
checking accounts, commercial accounts, savings accounts, and other time
deposits of various types, ranging from daily money market accounts to
longer-term certificates of deposit. The transaction accounts and time
certificates will be tailored to the Bank's principal market area at rates
competitive to those offered in the Greenville County area. In addition, the
Bank intends to offer certain retirement account services, such as Individual
Retirement Accounts (IRAs). The Bank intends to solicit these accounts from
individuals, businesses, associations and organizations, and governmental
authorities.
LENDING ACTIVITIES
General. The Bank intends to emphasize a range of lending services,
including real estate, commercial and consumer loans, to individuals and small-
to medium-sized businesses and professional concerns that are located in or
conduct a substantial portion of their business in the Bank's market area.
Real Estate Loans. The organizers expect that one of the primary
components of the Bank's loan portfolio will be loans secured by first or
second mortgages on real estate. These loans will generally consist of
commercial real estate loans, construction and development loans, and
residential real estate loans (but will exclude home equity loans, which are
classified as consumer loans). Loan terms generally will be limited to five
years or less, although payments may be structured on a longer amortization
basis. Interest rates may be fixed or adjustable, and will more likely be fixed
in the case of shorter term loans. The Bank will generally charge an
origination fee. Management will attempt to reduce credit risk in the
commercial real estate portfolio by emphasizing loans on owner-occupied office
and retail buildings where the loan-to-value ratio, established by independent
appraisals, does not exceed 80% and debtor cash flow exceed 120% of monthly
debt service obligations. In addition, the Bank will typically require personal
guarantees of the principal owners of the property backed with a review by the
Bank of the personal financial statements of the principal owners. These
reviews generally reveal secondary sources of payment and liquidity that
support the loan request. The principal economic risk associated with each
category of anticipated loans, including real estate loans, is the
creditworthiness of the Bank's borrowers. The risks associated with real estate
loans vary with many economic factors, including employment levels, strength of
local and national economy and fluctuations in the value of real estate.
Outside of the inherent risk of the credit worthiness of the Bank's borrowers,
other risks associated with residential mortgage loans would be the inability
to move foreclosed real estate in a down market or economy, shifts in the
demographics of a given market from residential zonings to commercial,
individual customers who have been displaced due to corporate downsizing/loss
of income, and an overall economic downturn creating unemployment due to lack
of product demand. The Bank will compete for real estate loans with a number of
bank competitors which are well established in the Greenville County area. Most
of these competitors have substantially greater resources and lending limits
than the Bank. As a result, the Bank may have to charge lower interest rates to
attract borrowers. See "Competition" below. The Bank may also originate loans
for sale into the secondary market. The Bank intends to limit interest rate
risk and credit risk on these loans by locking the interest rate for each loan
with the secondary investor and receiving the investor's underwriting approval
prior to originating the loan.
Commercial Loans. The Bank will make loans for commercial purposes in
various lines of businesses. Equipment loans will typically be made for a term
of five years or less at fixed or variable rates, with the loan fully amortized
over the term and secured by the financed equipment and with a loan-to-value
ratio of 80% or less. Working capital loans will typically have terms not
exceeding one year and will usually be secured by accounts receivable,
inventory, or personal guarantees of the principals of the business. For loans
secured by accounts receivable or inventory, principal will typically be repaid
as the assets securing the loan are converted into cash, and in other cases
principal will typically be due at maturity. Asset based lending, leasing and
factoring will be offered through third party vendors who can handle the paper
work, servicing and generally assume most of the credit risk. Trade letters of
credit, standby letters of credit, and foreign exchange will be handled through
a correspondent bank as agent for the bank. The bank expects to offer small
business loans utilizing government enhancements such as the Small Business
Administration ("SBA"), 7(a) program, SBA's 504 program, and Appalachian
Development Council (ADC). The principal economic risk associated with each
category of
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anticipated loans, including commercial loans, is the creditworthiness of the
Bank's borrowers. The risks associated with commercial loans vary with many
economic factors, including the economy in the Greenville County area. The
well-established banks in the Greenville County area will make proportionately
more loans to medium-to large-sized businesses than the Bank. Many of the
Bank's anticipated commercial loans will likely be made to small-to
medium-sized businesses which may be less able to withstand competitive,
economic, and financial conditions than larger borrowers.
Consumer Loans. The Bank will make a variety of loans to individuals
for personal and household purposes, including secured and unsecured
installment and term loans, and revolving lines of credit such as credit cards.
These loans typically will carry balances of less than $25,000 and, in the case
of non-revolving loans, will be amortized over a period not exceeding 48 months
or will be ninety-day term loans, in each case bearing interest at a fixed
rate. The revolving loans will typically bear interest at a fixed rate and
require monthly payments of interest and a portion of the principal balance.
The Bank will also provide home equity loans and lines of credit. The
underwriting criteria for home equity loans and lines of credit will generally
be the same as applied by the Bank when making a first mortgage loan, as
described above, and home equity lines of credit will typically expire ten
years or less after origination. Home Equity loans will typically carry
balances less than $100,000. As with the other categories of loans, the
principal economic risk associated with consumer loans is the creditworthiness
of the Bank's borrowers, and the principal competitors for consumer loans will
be the established banks in the Greenville County area. Consumer loans are
generally considered to have greater risk than first or second mortgages on
real estate.
Loan Approval and Review. The Bank's loan approval policies will
provide for various levels of officer lending authority. When the amount of
aggregate loans to a single borrower exceeds that individual officer's lending
authority, the loan request will be considered and approved by an officer with
a higher lending limit or the officers' loan committee. The Bank will establish
an officers' loan committee that has lending limits, and any loan in excess of
this lending limit will be approved by the directors' loan committee. The Bank
will not make any loans to any director, officer, or employee of the Bank
unless the loan is approved by the board of directors of the Bank and is made
on terms not more favorable to such person than would be available to a person
not affiliated with the Bank. The Bank currently intends to adhere to Federal
National Mortgage Association ("FNMA") and Federal Home Loan Mortgage
Corporation ("FHLMC") guidelines in its mortgage loan review process, but may
choose to alter this policy in the future. The Bank does not currently intend
to sell its mortgage loans on the secondary market, but may choose to do so in
the future.
Lending Limits. The Bank's lending activities will be subject to a
variety of lending limits imposed by federal law. While differing limits apply
in certain circumstances based on the type of loan or the nature of the
borrower (including the borrower's relationship to the Bank), in general the
Bank will be subject to a loan-to-one-borrower limit. These limits will
increase or decrease as the Bank's capital increases or decreases. Unless the
Bank is able to sell participations in its loans to other financial
institutions, the Bank will not be able to meet all of the lending needs of
loan customers requiring aggregate extensions of credit above these limits. It
is not currently anticipated that the Bank will have an initial loan loss
reserve when it commences operations.
OTHER BANKING SERVICES
Other anticipated bank services include cash management services for
commercial businesses such as sweep to a line of credit and PC banking. The
Bank will offer an 800 number, 24-hour telephone voice response system, drive
up ATMs, safe deposit boxes, travelers checks, direct deposit of payroll and
social security checks, and automatic drafts for various accounts. The Bank
plans to become associated with a shared network of automated teller machines
that may be used by Bank customers throughout Greenville County and other
regions. The organizers believe that by being associated with a shared network
of ATMs, the Bank will be better able to serve its customers and will be able
to attract customers who are accustomed to the convenience of using ATMs,
although the organizers do not believe that maintaining this association will
be critical to the Bank's success. The Bank intends to begin offering these
services shortly after the Bank's opening. The Bank also plans to offer a debit
card and VISA credit card services through a correspondent bank as an agent for
the Bank. The Bank does not plan to exercise trust powers during its initial
years of operation.
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COMPETITION
The banking business is highly competitive. The Bank will compete as a
financial intermediary with other commercial banks, savings and loan
associations, credit unions, and money market mutual funds operating in the
Greenville County area and elsewhere. In 1997, there were more than 139 banking
offices representing 21 financial institutions operating in Greenville County,
holding over $4.9 billion in deposits, and more than 17 banking offices
representing 10 financial institutions operating in the Golden Strip, holding
$425 million in deposits, representing a 4.2 percent increase over the previous
year. Based on a conservative growth rate of 4.2 percent, the deposits in the
Golden Strip will grow to approximately $523 million by the year 2003. The
Bank's plan over the next five years is to reach a 19 percent market share with
deposits in excess of 100 million dollars.
FACILITIES
The Bank's initial office will be located at One Five Forks Plaza
Court near the intersection of Batesville Road and Woodruff Road in
Simpsonville, South Carolina. The Bank will operate out of a temporary facility
at this location while its permanent facilities are under construction. The
Bank intends to complete a 3,000 square foot permanent branch facility at this
location at a projected cost of $427,000 and a 10,000 square foot permanent
main office in Mauldin, South Carolina near Brookfield Parkway and East Butler
Road at projected cost of $1.4 million. We hope to complete both facilities
prior to the end of 1999. The Company entered into an agreement in September of
1998 to purchase the Simpsonville property for $450,000 and an agreement in
January of 1999 to purchase the Mauldin property for $691,000. Upon completion
of the Bank offices, the Bank intends to enter into sale/leaseback arrangements
for the offices with an option to purchase, which should return a significant
amount of the purchase price from the Bank site and offices to the Bank for use
as operating capital.
The Company believes that the facilities will adequately serve the
Bank's needs for its first several years of operation.
EMPLOYEES
The Company anticipates that, upon commencement of operations, the
Bank will have approximately 13 full time employees and 1 part time employee
operating out of its temporary facilities in Simpsonville. By the end of 1999,
the Bank anticipates that it will have 20 full time employees and 1 part time
employee operating out of its permanent facilities in Mauldin and Simpsonville.
The Company, as the holding company for the Bank, will not have any employees
other than its officers.
LEGAL PROCEEDINGS
There are no material legal proceedings to which the Company or the
Bank or any of their properties are subject.
SUPERVISION AND REGULATION
The Company and the Bank are subject to state and federal banking laws
and regulations which impose specific requirements or restrictions on and
provide for general regulatory oversight with respect to virtually all aspects
of operations. These laws and regulations are generally intended to protect
depositors, not shareholders. To the extent that the following summary
describes statutory or regulatory provisions, it is qualified in its entirety
by reference to the particular statutory and regulatory provisions. Any change
in applicable laws or regulations may have a material effect on the business
and prospects of the Company. Beginning with the enactment of FIRREA in 1989
and following the FDICIA in 1991, numerous additional regulatory requirements
have been placed on the banking industry in the past several years, and
additional changes have been proposed. The operations of the Company may be
affected by legislative changes and the policies of various regulatory
authorities. The Company is unable to predict the nature or the extent of the
effect on its business and earnings that fiscal or monetary policies, economic
control, or new federal or state legislation may have in the future.
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The Company. Because it will own the outstanding capital stock of the
Bank, the Company will be a bank holding company within the meaning of the
federal Bank Holding Company Act of 1956 (the "BHCA") and the South Carolina
Bank Holding Company Act (the "South Carolina Act"). The activities of the
Company are also governed by the Glass-Steagall Act of 1933 (the
"Glass-Steagall Act").
The BHCA. Under the BHCA, the Company will be subject to periodic
examination by the Federal Reserve and required to file periodic reports of its
operations and such additional information as the Federal Reserve may require.
The Company's and the Bank's activities will be limited to banking, managing,
or controlling banks; furnishing services to or performing services for its
subsidiaries; and engaging in other activities that the Federal Reserve
determines to be so closely related to banking, managing, or controlling banks
as to be a proper incident thereto.
Investments, Control, and Activities. With certain limited exceptions,
the BHCA requires every bank holding company to obtain the prior approval of
the Federal Reserve before (i) acquiring substantially all the assets of any
bank, (ii) acquiring direct or indirect ownership or control of any voting
shares of any bank if after such acquisition it would own or control more than
5% of the voting shares of such bank (unless it already owns or controls the
majority of such shares), or (iii) merging or consolidating with another bank
holding company.
In addition, and subject to certain exceptions, the BHCA and the
Change in Bank Control Act, together with regulations thereunder, require
Federal Reserve approval (or, depending on the circumstances, no notice of
disapproval) prior to any person or company acquiring "control" of a bank
holding company, such as the Company. Control is conclusively presumed to exist
if an individual or company acquires 25% or more of any class of voting
securities of the bank holding company. Control is rebuttably presumed to exist
if a person acquires 10% or more but less than 25% of any class of voting
securities and either the Company has registered securities under Section 12 of
the Securities Exchange Act of 1934 (the "Exchange Act") (which the Company
will likely be required to do with respect to the common stock once it has more
than 500 shareholders of record) or no other person owns a greater percentage
of that class of voting securities immediately after the transaction. The
regulations provide a procedure for challenge of the rebuttable control
presumption.
Under the BHCA, a bank holding company is generally prohibited from
engaging in, or acquiring direct or indirect control of more than 5% of the
voting shares of any company engaged in nonbanking activities unless the
Federal Reserve Board, by order or regulation, has found those activities to be
so closely related to banking or managing or controlling banks as to be a
proper incident thereto. Some of the activities that the Federal Reserve Board
has determined by regulation to be proper incidents to the business of a bank
holding company include making or servicing loans and certain types of leases,
engaging in certain insurance and discount brokerage activities, performing
certain data processing services, acting in certain circumstances as a
fiduciary or investment or financial adviser, owning savings associations, and
making investments in certain corporations or projects designed primarily to
promote community welfare.
The Federal Reserve Board imposes certain capital requirements on the
Company under the BHCA, including a minimum leverage ratio and a minimum ratio
of "qualifying" capital to risk-weighted assets. These requirements are
described below under "- Capital Regulations." Subject to its capital
requirements and certain other restrictions, the Company is able to borrow
money to make a capital contribution to the Bank, and such loans may be repaid
from dividends paid from the Bank to the Company (although the ability of the
Bank to pay dividends is subject to regulatory restrictions as described below
in "The Bank - Dividends"). The Company is also able to raise capital for
contribution to the Bank by issuing securities without having to receive
regulatory approval, subject to compliance with federal and state securities
laws.
Source of Strength; Cross-Guarantee. In accordance with Federal
Reserve Board policy, the Company will be expected to act as a source of
financial strength to the Bank and to commit resources to support the Bank in
circumstances in which the Company might not otherwise do so. Under the BHCA,
the Federal Reserve Board may require a bank holding company to terminate any
activity or relinquish control of a nonbank subsidiary (other than a nonbank
subsidiary of a bank) upon the Federal Reserve Board's determination that such
activity or control constitutes a serious risk to the financial soundness or
stability of any subsidiary depository institution of the Bank holding company.
Further, federal bank regulatory authorities have additional discretion to
require a bank
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holding company to divest itself of any bank or nonbank subsidiary if the
agency determines that divestiture may aid the depository institution's
financial condition.
Glass-Steagall Act. The Company will also be restricted in its
activities by the provisions of the Glass-Steagall Act, which prohibits the
Company from owning subsidiaries that are engaged principally in the issue,
flotation, underwriting, public sale, or distribution of securities. The
interpretation, scope, and application of the provisions of the Glass-Steagall
Act currently are being considered and reviewed by regulators and legislators,
and the interpretation and application of those provisions have been challenged
in the federal courts.
South Carolina Act. As a bank holding company registered under the
South Carolina Act, the Company will be subject to regulations by the South
Carolina Board. Consequently, the Company must receive the approval of the
South Carolina Board prior to engaging in the acquisition of banking or
nonbanking institutions or assets. The Company must also file with the South
Carolina Board periodic reports with respect to its financial condition and
operations, management, and intercompany relationships between the Company and
its subsidiaries.
The Bank. The Bank will operate as a national banking association
incorporated under the laws of the United States and subject to examination by
the OCC. Deposits in the Bank will be insured by the FDIC up to a maximum
amount (generally $100,000 per depositor, subject to aggregation rules). The
OCC and the FDIC will regulate or monitor virtually all areas of the Bank's
operations, including security devices and procedures, adequacy of
capitalization and loss reserves, loans, investments, borrowings, deposits,
mergers, issuances of securities, payment of dividends, interest rates payable
on deposits, interest rates or fees chargeable on loans, establishment of
branches, corporate reorganizations, maintenance of books and records, and
adequacy of staff training to carry on safe lending and deposit gathering
practices. The OCC will require the Bank to maintain certain capital ratios and
imposes limitations on the Bank's aggregate investment in real estate, bank
premises, and furniture and fixtures. The Bank will be required by the OCC to
prepare quarterly reports on the Bank's financial condition and to conduct an
annual audit of its financial affairs in compliance with minimum standards and
procedures prescribed by the OCC.
Under FDICIA, all insured institutions must undergo regular on site
examinations by their appropriate banking agency. The cost of examinations of
insured depository institutions and any affiliates may be assessed by the
appropriate agency against each institution or affiliate as it deems necessary
or appropriate. Insured institutions are required to submit annual reports to
the FDIC and the appropriate agency (and state supervisor when applicable).
FDICIA also directs the FDIC to develop with other appropriate agencies a
method for insured depository institutions to provide supplemental disclosure
of the estimated fair market value of assets and liabilities, to the extent
feasible and practicable, in any balance sheet, financial statement, report of
condition or any other report of any insured depository institution. FDICIA
also requires the federal banking regulatory agencies to prescribe, by
regulation, standards for all insured depository institutions and depository
institution holding companies relating, among other things, to: (i) internal
controls, information systems, and audit systems; (ii) loan documentation;
(iii) credit underwriting; (iv) interest rate risk exposure; and (v) asset
quality.
National banks and their holding companies which have been chartered
or registered or have undergone a change in control within the past two years
or which have been deemed by the OCC or the Federal Reserve Board,
respectively, to be troubled institutions must give the OCC or the Federal
Reserve Board, respectively, thirty days prior notice of the appointment of any
senior executive officer or director. Within the thirty day period, the OCC or
the Federal Reserve Board, as the case may be, may approve or disapprove any
such appointment.
Deposit Insurance. The FDIC establishes rates for the payment of
premiums by federally insured banks and thrifts for deposit insurance. A
separate Bank Insurance Fund ("BIF") and Savings Association Insurance Fund
("SAIF") are maintained for commercial banks and thrifts, respectively, with
insurance premiums from the industry used to offset losses from insurance
payouts when banks and thrifts fail. In 1993, the FDIC adopted a rule which
establishes a risk-based deposit insurance premium system for all insured
depository institutions. Under this system, until mid-1995 depository
institutions paid to BIF or SAIF from $0.23 to $0.31 per $100 of insured
deposits depending on its capital levels and risk profile, as determined by its
primary federal regulator on a semiannual basis. Once the BIF reached its
legally mandated reserve ratio in mid-1995, the FDIC lowered
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premiums for well-capitalized banks, eventually to $00 per $100, with a minimum
semiannual assessment of $1,000. However, in 1996 Congress enacted the Deposit
Insurance Funds Act of 1996, which eliminated this minimum assessment. It also
separated the Financial Corporation (FICO) assessment to service the interest
on its bond obligations. The amount assessed on individual institutions,
including the Bank, by FICO is in addition to the amount paid for deposit
insurance according to the risk-related assessment rate schedule. Increases in
deposit insurance premiums or changes in risk classification will increase the
Bank's cost of funds, and there can be no assurance that such cost can be
passed on to the Bank's customers.
Transactions With Affiliates and Insiders. The Bank will be subject to
the provisions of Section 23A of the Federal Reserve Act, which place limits on
the amount of loans or extensions of credit to, or investments in, or certain
other transactions with, affiliates and on the amount of advances to third
parties collateralized by the securities or obligations of affiliates. The
aggregate of all covered transactions is limited in amount, as to any one
affiliate, to 10% of the bank's capital and surplus and, as to all affiliates
combined, to 20% of the bank's capital and surplus. Furthermore, within the
foregoing limitations as to amount, each covered transaction must meet
specified collateral requirements. Compliance is also required with certain
provisions designed to avoid the taking of low quality assets.
The Bank will also be subject to the provisions of Section 23B of the
Federal Reserve Act which, among other things, prohibits an institution from
engaging in certain transactions with certain affiliates unless the
transactions are on terms substantially the same, or at least as favorable to
such institution or its subsidiaries, as those prevailing at the time for
comparable transactions with nonaffiliated companies. The Bank will be subject
to certain restrictions on extensions of credit to executive officers,
directors, certain principal shareholders, and their related interests. Such
extensions of credit (i) must be made on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with third parties and (ii) must not involve more than
the normal risk of repayment or present other unfavorable features.
Dividends. A national bank may not pay dividends from its capital. All
dividends must be paid out of undivided profits then on hand, after deducting
expenses, including reserves for losses and bad debts. In addition, a national
bank is prohibited from declaring a dividend on its shares of common stock
until its surplus equals its stated capital, unless there has been transferred
to surplus no less than one-tenth of the bank's net profits of the preceding
two consecutive half-year periods (in the case of an annual dividend). The
approval of the OCC is required if the total of all dividends declared by a
national bank in any calendar year exceeds the total of its net profits for
that year combined with its retained net profits for the preceding two years,
less any required transfers to surplus.
Branching. National banks are required by the National Bank Act to
adhere to branch office banking laws applicable to state banks in the states in
which they are located. Under current South Carolina law, the Bank may open
branch offices throughout South Carolina with the prior approval of the OCC. In
addition, with prior regulatory approval, the Bank is able to acquire existing
banking operations in South Carolina. Furthermore, federal legislation has
recently been passed which permits interstate branching. The new law permits
out-of-state acquisitions by bank holding companies (subject to veto by new
state law), interstate branching by banks if allowed by state law, interstate
merging by banks, and de novo branching by national banks if allowed by state
law.
Community Reinvestment Act. The Community Reinvestment Act requires
that, in connection with examinations of financial institutions within their
respective jurisdictions, the Federal Reserve, the FDIC, the OCC, or the Office
of Thrift Supervision shall evaluate the record of the financial institutions
in meeting the credit needs of their local communities, including low and
moderate income neighborhoods, consistent with the safe and sound operation of
those institutions. These factors are also considered in evaluating mergers,
acquisitions, and applications to open a branch or facility.
Other Regulations. Interest and certain other charges collected or
contracted for by the Bank are subject to state usury laws and certain federal
laws concerning interest rates. The Bank's loan operations are also subject to
certain federal laws applicable to credit transactions, such as the federal
Truth-In-Lending Act, governing disclosures of credit terms to consumer
borrowers; the Home Mortgage Disclosure Act of 1975, requiring
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financial institutions to provide information to enable the public and public
officials to determine whether a financial institution is fulfilling its
obligation to help meet the housing needs of the community it serves; the Equal
Credit Opportunity Act, prohibiting discrimination on the basis of race, creed
or other prohibited factors in extending credit; the Fair Credit Reporting Act
of 1978, governing the use and provision of information to credit reporting
agencies; the Fair Debt Collection Act, governing the manner in which consumer
debts may be collected by collection agencies; and the rules and regulations of
the various federal agencies charged with the responsibility of implementing
such federal laws. The deposit operations of the Bank also are subject to the
Right to Financial Privacy Act, which imposes a duty to maintain
confidentiality of consumer financial records and prescribes procedures for
complying with administrative subpoenas of financial records, and the
Electronic Funds Transfer Act and Regulation E issued by the Federal Reserve
Board to implement that act, which governs automatic deposits to and
withdrawals from deposit accounts and customers' rights and liabilities arising
from the use of automated teller machines and other electronic banking
services.
Capital Regulations. The federal bank regulatory authorities have
adopted risk-based capital guidelines for banks and bank holding companies that
are designed to make regulatory capital requirements more sensitive to
differences in risk profiles among banks and bank holding companies and account
for off-balance sheet items. The guidelines are minimums, and the federal
regulators have noted that banks and bank holding companies contemplating
significant expansion programs should not allow expansion to diminish their
capital ratios and should maintain ratios in excess of the minimums. Neither
the Company nor the Bank has received any notice indicating that either entity
is subject to higher capital requirements. The current guidelines require all
bank holding companies and federally-regulated banks to maintain a minimum
risk-based total capital ratio equal to 8%, of which at least 4% must be Tier 1
capital. Tier 1 capital includes common shareholders' equity, qualifying
perpetual preferred stock, and minority interests in equity accounts of
consolidated subsidiaries, but excludes goodwill and most other intangibles and
excludes the allowance for loan and lease losses. Tier 2 capital includes the
excess of any preferred stock not included in Tier 1 capital, mandatory
convertible securities, hybrid capital instruments, subordinated debt and
intermediate term-preferred stock, and general reserves for loan and lease
losses up to 1.25% of risk-weighted assets.
Under these guidelines, banks' and bank holding companies' assets are
given risk-weights of 0%, 20%, 50%, or 100%. In addition, certain off-balance
sheet items are given credit conversion factors to convert them to asset
equivalent amounts to which an appropriate risk-weight applies. These
computations result in the total risk-weighted assets. Most loans are assigned
to the 100% risk category, except for first mortgage loans fully secured by
residential property and, under certain circumstances, residential construction
loans, both of which carry a 50% rating. Most investment securities are
assigned to the 20% category, except for municipal or state revenue bonds,
which have a 50% rating, and direct obligations of or obligations guaranteed by
the United States Treasury or United States Government agencies, which have a
0% rating.
The federal bank regulatory authorities have also implemented a
leverage ratio, which is equal to Tier 1 capital as a percentage of average
total assets less intangibles, to be used as a supplement to the risk-based
guidelines. The principal objective of the leverage ratio is to place a
constraint on the maximum degree to which a bank holding company may leverage
its equity capital base. The minimum required leverage ratio for top-rated
institutions is 3%, but most institutions are required to maintain an
additional cushion of at least 100 to 200 basis points.
FDICIA established a new capital-based regulatory scheme designed to
promote early intervention for troubled banks which requires the FDIC to choose
the least expensive resolution of bank failures. The new capital-based
regulatory framework contains five categories of compliance with regulatory
capital requirements, including "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized," and "critically
undercapitalized." To quality as a "well capitalized" institution, a bank must
have a leverage ratio of no less than 5%, a Tier 1 risk-based ratio of no less
than 6%, and a total risk-based capital ratio of no less than 10%, and the bank
must not be under any order or directive from the appropriate regulatory agency
to meet and maintain a specific capital level. Initially, the Company and the
Bank will qualify as "well capitalized."
Under the FDICIA regulations, the applicable agency can treat an
institution as if it were in the next lower category if the agency determines
(after notice and an opportunity for hearing) that the institution is in an
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unsafe or unsound condition or is engaging in an unsafe or unsound practice.
The degree of regulatory scrutiny of a financial institution increases, and the
permissible activities of the institution decreases, as it moves downward
through the capital categories. Institutions that fall into one of the three
undercapitalized categories may be required to (i) submit a capital restoration
plan; (ii) raise additional capital; (iii) restrict their growth, deposit
interest rates, and other activities; (iv) improve their management; (v)
eliminate management fees; or (vi) divest themselves of all or a part of their
operations. Bank holding companies controlling financial institutions can be
called upon to boost the institutions' capital and to partially guarantee the
institutions' performance under their capital restoration plans.
These capital guidelines can affect the Company in several ways. If
the Company grows at a rapid pace, a premature "squeeze" on capital could occur
making a capital infusion necessary. The requirements could impact the
Company's ability to pay dividends. The Company's capital levels will initially
be more than adequate; however, rapid growth, poor loan portfolio performance
or poor earnings performance or a combination of these factors could change the
Company's capital position in a relatively short period of time.
FDICIA requires the federal banking regulators to revise the
risk-based capital standards to provide for explicit consideration of
interest-rate risk, concentration of credit risk, and the risks of
untraditional activities. It is uncertain what effect these regulations, when
implemented, would have on the Company.
Failure to meet these capital requirements would mean that a bank
would be required to develop and file a plan with its primary federal banking
regulator describing the means and a schedule for achieving the minimum capital
requirements. In addition, such a bank would generally not receive regulatory
approval of any application that requires the consideration of capital
adequacy, such as a branch or merger application, unless the bank could
demonstrate a reasonable plan to meet the capital requirement within a
reasonable period of time.
Enforcement Powers. FIRREA expanded and increased civil and criminal
penalties available for use by the federal regulatory agencies against
depository institutions and certain "institution-affiliated parties" (primarily
including management, employees, and agents of a financial institution, and
independent contractors such as attorneys and accountants and others who
participate in the conduct of the financial institution's affairs). These
practices can include the failure of an institution to timely file required
reports or the filing of false or misleading information or the submission of
inaccurate reports. Civil penalties may be as high as $1,000,000 a day for such
violations. Criminal penalties for some financial institution crimes have been
increased to twenty years. In addition, regulators are provided with greater
flexibility to commence enforcement actions against institutions and
institution-affiliated parties. Possible enforcement actions include the
termination of deposit insurance. Furthermore, FIRREA expanded the appropriate
banking agencies' power to issue cease-and-desist orders that may, among other
things, require affirmative action to correct any harm resulting from a
violation or practice, including restitution, reimbursement, indemnification's
or guarantees against loss. A financial institution may also be ordered to
restrict its growth, dispose of certain assets, rescind agreements or
contracts, or take other actions as determined by the ordering agency to be
appropriate.
Recent Legislative Developments. From time to time, various bills are
introduced in the United States Congress with respect to the regulation of
financial institutions. Certain of these proposals, if adopted, could
significantly change the regulation of banks and the financial services
industry. The Company cannot predict whether any of these proposals will be
adopted or, if adopted, how these proposals would affect the Company.
Effect of Governmental Monetary Policies. The earnings of the Company
are affected by domestic economic conditions and the monetary and fiscal
policies of the United States government and its agencies. The Federal Reserve
Bank's monetary policies have had, and are likely to continue to have, an
important impact on the operating results of commercial banks through its power
to implement national monetary policy in order, among other things, to curb
inflation or combat a recession. The monetary policies of the Federal Reserve
Board have major effects upon the levels of bank loans, investments and
deposits through its open market operations in United States government
securities and through its regulation of the discount rate on borrowings of
member banks and the reserve requirements against member bank deposits. It is
not possible to predict the nature or impact of future changes in monetary and
fiscal policies.
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MANAGEMENT
GENERAL
The following table sets forth the number and percentage of
outstanding shares of common stock beneficially owned as of the date of this
Prospectus by the organizers of the Company. This table also reflects the
anticipated purchases by the organizers in the offering. All purchases by the
organizers prior to the offering were made at a price of $10.00 per share, the
same price at which shares are being offered to the public.
SHARES BENEFICIALLY OWNED SHARES ANTICIPATED TO BE OWNED FOLLOWING
PRIOR TO THE OFFERING THE OFFERING
----------------------------- -----------------------------------------
PERCENTAGE PERCENTAGE
OF MINIMUM OF MAXIMUM
NAME OF BENEFICIAL OWNER NUMBER( 1)(3) PERCENTAGE(2) NUMBER( 3) OFFERING OFFERING
- ------------------------ ------------- ------------- ---------- ----------- -----------
RICHARD W. BAILEY 20,000 10.0% 20,000 2.67% 2.00%
TIMOTHY A. BRETT 15,000 7.50 15,000 2.00 1.50
MARSHALL J. COLLINS, JR. 17,500 8.75 17,500 2.33 1.75
RALPH S. CRAWLEY 25,000 12.50 25,000 3.33 2.50
RICHARD L. FEW, JR. 7,500 3.75 7,500 1.00 0.75
G. MITCHELL GAULT 15,000 7.50 15,000 2.00 1.50
TOMMY D. GREER 25,000 12.50 25,000 3.33 2.50
BOBBY L. JOHNSON 15,000 7.50 15,000 2.00 1.50
ROBERT T. KELLETT 10,000 5.00 10,000 1.33 1.00
DENNIS O. RAINES 7,500 3.75 7,500 1.00 0.75
CURRAN A. SMITH 7,500 3.75 7,500 1.00 0.75
JAMES D. STEWART 35,000 17.50 35,000 4.67 3.50
TOTAL 200,000 100.00% 200,000 26.67% 20.00%
- -----------------------
(1) Information relating to the beneficial ownership of Common Stock is based
upon "beneficial ownership" concepts set forth in rules of the Securities
and Exchange Commission under Section 13(d) of the Securities Exchange Act
of 1934. Under these rules a person is deemed to be a "beneficial owner"
of a security if that person has or shares "voting power," which includes
the power to vote or direct the voting of each security, or "investment
power," which includes the power to dispose or to direct the disposition
of such security. A person is also deemed to be a beneficial owner of any
security of which that person has the right to acquire beneficial
ownership within 60 days, including, without limitation, shares of Common
Stock subject to currently exercisable options. Under the rules, more than
one person may be deemed to be a beneficial owner of the same securities,
and a person may be deemed to be a beneficial owner of securities as to
which he has no beneficial interest. For instance, beneficial ownership
includes spouses, minor children, and other relatives residing in the same
household, and trusts, partnerships, corporations or deferred compensation
plans which are affiliated with the principal.
(2) Percent is calculated by treating shares subject to options held by the
named individual which are exercisable within the next 60 days as if
outstanding, but treating shares subject to options not exercisable within
60 days as not outstanding.
(3) Does not include warrants to purchase 7,500 shares of Common Stock to be
granted to each organizer.
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EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY
The following sets forth certain information regarding the Company's
executive officers and directors as of the date of this Prospectus. The
Company's Articles of Incorporation provide for a classified Board of
Directors, so that, as nearly as possible, one-third of the directors are
elected each year to serve three-year terms. The terms of office of the classes
of directors expire as follows: Class I at the 1999 annual meeting of
shareholders, Class II at the 2000 annual meeting of shareholders, and Class
III at the 2001 annual meeting of shareholders. Executive officers of the
Company serve at the discretion of the Company's Board of Directors.
NAME AGE POSITION WITH THE COMPANY
- ---- --- -------------------------
Richard W. Bailey 65 Director III
Timothy A. Brett 45 Director III
Marshall J. Collins, Jr 57 Director I
Ralph S. Crawley 63 Director II
G. Mitchell Gault 43 Director III
Tommy D. Greer 66 Director I
Bobby L. Johnson 64 Director II
Robert T. Kellett 56 Director II
Dennis O. Raines 46 Director II
Curran A. Smith 54 Director I
James D. Stewart 45 Director III, Chief Executive Officer
Richard W. Bailey, Class III director, is involved in commercial real
estate and development and has been affiliated with Caine Company for the past
twelve years. In 1985, he sold his majority interest in a food brokerage
company with offices in Greenville, Columbia, and Charleston. He is a past
member of the Golden Strip and Greenville advisory boards for BB&T.
Timothy A. Brett, Class III director, is President of Brett Public
Relations, Inc., a full service public relations company with offices in
Greenville and Columbia, South Carolina. Mr. Brett previously served as
Director of Governmental Affairs and Community Relations for Michelin North
America for almost seven years. He was also a member of the South Carolina
House of Representatives. After leaving the House of Representatives, he served
in various positions under former Governor Carroll A. Campbell, Jr. Mr. Brett
is a 1974 graduate of Newberry College. He serves his community through his
involvement in a number of charitable organizations, including the Salvation
Army, the YMCA, and the Blue Ridge Council Boy Scouts. He presently serves as
Chairman of the Newberry College Foundation Board.
Marshall J. Collins, Jr., Class I director, is Chairman of BI-LO,
Inc. and President and CEO of Ahold USA Support Services in Mauldin, South
Carolina. BI-LO, Inc. is a multi state grocery store chain and is one of the
largest employers in Greenville County, South Carolina. Mr. Collins was born
and raised in Chicago, Illinois and is a graduate of St. Mary's College in
Winona, Minnesota and the Advanced Management Program at Harvard Business
School.
Ralph S. Crawley, Class II director, is Co-Founder and President of
Carter and Crawley, Inc., a custom automated control systems supplier to
industrial and utility clients since 1967. He previously was Manager of Control
System Manufacturing for Metal Products Corporation. Mr. Crawley graduated from
Ruby High School in 1953 and attended Pierce College in Reseda, California. He
has held several positions with RCA and TRW involving manufacturing and sales.
Mr. Crawley is a member of the Mauldin Rotary Club, and past president and
member of the Rotary Foundation Scholarship Committee. Mr. Crawley is a member
of the Mauldin Library Committee and Chairman of The Building and Grounds
Committee of the new Greenville County branch library; past member of the
Chamber of Commerce organizing board; past member of the NCNB (n/k/a
NationsBank), and a member of the Mauldin-Simpsonville advisory board.
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G. Mitchell Gault, Class III director, is the President of Kent-Gault
Manufactured Homes, a retailer of manufactured homes a second generation
retailer serving the "Upstate" of South Carolina since 1959. The company
currently operates two sales centers in the "Golden Strip" area of Greenville
County, South Carolina. Mr. Gault is also involved in the development of
manufactured housing subdivisions, as well as owning and operating several
manufactured housing rental communities in the Upstate. Mr. Gault graduated
from the University of South Carolina in l977. He is a past President of the
Fountain Inn Rotary Club. He has served on the Board of Manufactured Housing
Institute of South Carolina for ten years, including two terms as chairman of
that association. Mr. Gault currently serves on the Board of the Mauldin
Chamber of Commerce. He is a volunteer for Meals on Wheels and is a life-long
member of Trinity United Methodist Church of Fountain Inn.
Tommy D. Greer, Class I director, is Chairman Emeritus of the Board of
Catalina Marketing. He has also served as President and CEO of Catalina. Mr.
Greer has 41 years of experience as one of the country's leading product
marketers. Prior to joining Catalina, he took Texize Chemicals Company, a
cleaning products manufacturer, from a small regional company to a nationally
known marketer of such category leaders as Fantastic Spray Cleaner, Spray'n
Wash, and Glass+Plus. Mr. Greer is a graduate of the Advanced Management
Program at the Harvard School of Business.
Bobby L. Johnson, Class II director, develops light industrial,
office, and warehouse properties. In 1989, he sold Carolina Material Handling,
a business he operated for twenty years in the Golden Strip. Mr. Johnson is a
member of Edwards Road Baptist Church in Greenville and is a volunteer with
Meals on Wheels. He previously served on the advisory board of Summit National
Bank.
Robert T. Kellett, Class II director, owns and operates several
business in the Golden Strip, including Tommy's Snack Bar, Kellett Fuel Oil,
Kellett's Korner, Inc., and Kellett's Garbage, Inc. He is a native of
Greenville County and he graduated from Hillcrest High School.
Dennis O. Raines, Class II director, is the Chief Financial Officer
for Brett Public Relations, a full-service public relations company. An honor
graduate of Limestone College, Raines holds a degree in business management. He
was employed at Kemet Electronics for 26 years, serving in various management
positions including manufacturing manager, human relations manager, and most
recently business services manager. Mr. Raines serves as a member of the
Mauldin City Council, where he is on the Recreation & Economic Development and
the Finance & Policy committees. He is also a member of the Mauldin Library
Task Force and on the board of the Golden Strip Human Resources Center and
Meals on Wheels of Greenville, Inc.
Curran A. Smith, Class I director, has owned and operated three Max
Saver convenience stores since 1992. He formerly was employed with Union
Carbide, and subsequently through merger with Kemet Electronics for 25 years.
Mr. Smith has lived in Fountain Inn for 27 years and is a graduate of Hillcrest
High School.
James D. Stewart, Class III director, is the Chief Executive Officer
and President of New Commerce and of the Bank. He has a 20 year banking career
in sales and leadership positions in commercial and consumer banking. He began
his career with Wachovia in 1978 and has had increasing levels of leadership
and sales responsibility in consumer and commercial business banking with First
Union, Southern National Bank, and BB&T. His last position was Senior Vice
President and City Executive for BB&T in Greenville, South Carolina. Mr.
Stewart received a B.A. degree in Journalism in 1976 from the University of
North Carolina and is a graduate of the Stonier Graduate School of Banking. Mr.
Stewart has served on the boards of directors of the Phyllis Wheatley Center,
Greenville Chamber of Commerce, Greenville United Way, Urban League, and Blue
Ridge Council Boy Scouts.
EMPLOYMENT AGREEMENTS
The Company has entered into an employment agreement with James D.
Stewart for a three-year term, pursuant to which Mr. Stewart will serve as the
President, Chief Executive Officer and a director of the Company and the Bank.
Mr. Stewart will be paid a salary of $96,000, plus his yearly medical insurance
premium. Mr. Stewart is entitled to receive a bonus of $10,000 upon the opening
of the Bank and will be eligible to receive a bonus of up to 36% of his salary
for meeting performance goals set by the board. Mr. Stewart will be eligible
29
31
to participate in any management incentive program of the Bank or any long-term
equity incentive program and will be eligible for grants of stock options and
other awards thereunder. Upon the closing of the offering (or as soon
thereafter as an appropriate stock option plan is adopted by the Company), Mr.
Stewart will be granted options to purchase a number of shares of common stock
equal to 5% of the number of shares sold in this offering. The options will
vest over a five-year period and will have a term of ten years. Additionally,
Mr. Stewart will participate in the Bank's retirement, welfare, and other
benefit programs and is entitled to a life insurance policy and an accident
liability policy and reimbursement for automobile expenses, club dues, and
travel and business expenses.
The employment agreement with Mr. Stewart also provides that following
termination of his employment with the Bank and for a period of twelve months
thereafter, Mr. Stewart may not (i) compete with the Company, Bank, or any of
its affiliates by, directly or indirectly, forming, serving as an organizer,
director or officer of, or consultant to, or acquiring or maintaining more than
1% passive investment in, a depository financial institution or holding company
thereof if such depository institution or holding company has one or more
offices or branches in the territory, (ii) solicit major customers of the Bank
for the purpose of providing financial services, or (iii) solicit employees of
the Bank for employment. If Mr. Stewart terminates his employment for good
cause as that term is defined in the employment agreement or if Mr. Stewart is
terminated following a change in control of the Company as defined in the
agreement, he will be entitled to severance of his then current monthly salary
for a period of 24 months, plus accrued bonus, and all outstanding options and
incentives shall vest immediately. If Mr. Stewart's employment is terminated
for any reason other than for cause, he will be entitled to 12 months'
severance.
The Company and the Bank anticipate that they will enter into similar
employment arrangements with other key employees as they are hired.
DIRECTOR COMPENSATION
The organizers do not intend for the Company or the Bank to pay
directors' fees until such time as the Bank is cumulatively profitable.
However, the Company and the Bank reserve the right to pay directors' fees. In
addition, after the offering, the Company expects to adopt a stock option plan
which will permit the Company to grant options to officers, directors, and
employees of the Company. The Company anticipates that it will initially
authorize the issuance of a number of shares under the stock option plan equal
to 15% of the shares outstanding after the offering. The Company will not issue
stock options at less that 85% of the fair market value of the common stock on
the date of grant.
STOCK WARRANTS
In recognition of the financial risk and organizational risk they have
undertaken in organizing the Bank, each organizer will also receive, for no
additional consideration, a warrant to purchase 7,500 additional shares of
Common Stock at a purchase price of $10.00 per share. The warrants, which will
be represented by separate warrant agreements, will become exercisable on the
later of the date that the Bank opens for business and one year from the date
of this Prospectus and will be exercisable in whole or in part during the ten
year period following that date. The warrants and shares issued pursuant to the
exercise of such warrants will be transferable, subject to compliance with
applicable securities laws. See "--Shares Eligible for Future Sale." If the OCC
issues a capital directive or other order requiring the Bank to obtain
additional capital, the warrants will be forfeited if not then exercised.
INTERESTS OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
The Company and the Bank expect to have banking and other transactions
in the ordinary course of business with organizers, directors, and officers of
the Company and the Bank and their affiliates, including members of their
families or corporations, partnerships, or other organizations in which such
organizers, officers, or directors have a controlling interest, on
substantially the same terms (including price, or interest rates and
collateral) as those prevailing at the time for comparable transactions with
unrelated parties. Such transactions are not expected to involve more than the
normal risk of collectibility nor present other unfavorable features to the
30
32
Company and the Bank. Loans to individual directors and officers must also
comply with the Bank's lending policies and statutory lending limits, and
directors with a personal interest in any loan application will be excluded
from the consideration of such loan application. The Company intends for all of
its transactions with organizers or other affiliates of the Company or the Bank
to be on terms no less favorable to the Company than could be obtained from an
unaffiliated third party and to be approved by a majority of the Company's
disinterested directors.
Byron Richardson, a banking consultant with Bank Resources, Inc., was
granted warrants to purchase 2,500 shares of the common stock of the Company in
connection with services provided related to the formation of the Bank,
including assistance in the preparation of the Bank's application for its
charter with the OCC and its application for federal deposit insurance with the
FDIC. Mr. Richardson's warrants were granted on the same terms as those
warrants received by the organizers prior to the offering.
EXCULPATION AND INDEMNIFICATION
The Company's Articles of Incorporation contain a provision which,
subject to certain limited exceptions, limits the liability of a director to
the Company or its shareholders for any breach of duty as a director. There is
no limitation of liability for: a breach of duty involving appropriation of a
business opportunity of the Company; an act or omission which involves
intentional misconduct or a knowing violation of law; any transaction from
which the director derives an improper personal benefit; or as to any payments
of a dividend or any other type of distribution that is illegal under Section
33-8-330 of the South Carolina Business Corporation Act of 1988 (the
"Corporation Act"). In addition, if at any time the Corporation Act shall have
been amended to authorize further elimination or limitation of the liability of
director, then the liability of each director of the Company shall be
eliminated or limited to the fullest extent permitted by such provisions, as so
amended, without further action by the shareholders, unless the provisions of
the Corporation Act require such action. The provision does not limit the right
of the Company or its shareholders to seek injunctive or other equitable relief
not involving payments in the nature of monetary damages.
The Company's bylaws contain certain provisions which provide
indemnification to directors of the Company that is broader than the protection
expressly mandated in Sections 33-8-510 and 33-8-520 of the Corporation Act. To
the extent that a director or officer of the Company has been successful, on
the merits or otherwise, in the defense of any action or proceeding brought by
reason of the fact that such person was a director or officer of the Company,
Sections 33-8-510 and 33-8-520 of the Corporation Act would require the Company
to indemnify such persons against expenses (including attorney's fees) actually
and reasonably incurred in connection therewith. The Corporation Act expressly
allows the Company to provide for greater indemnification rights to its
officers and directors, subject to shareholder approval.
Insofar as indemnification for liabilities arising under the
Corporation Act may be permitted to directors, officers, and controlling
persons of the Company and the Bank pursuant to the Articles of Incorporation
or Bylaws, or otherwise, the Company and the Bank have been advised that in the
opinion of the SEC such indemnification is against public policy as expressed
in the Corporation Act and is, therefore, unenforceable.
The Board of Directors also has the authority to extend to officers,
employees, and agents the same indemnification rights held by directors,
subject to all of the accompanying conditions and obligations. The Board of
Directors intends to extend indemnification rights to all of its executive
officers.
DESCRIPTION OF CAPITAL STOCK OF THE COMPANY
GENERAL
The authorized capital stock of the Company consists of 10,000,000
shares of common stock, par value $0.01 per share, and 10,000,000 shares of
preferred stock, par value $0.01 per share. The following summary describes the
material terms of the Company's capital stock. Reference is made to the
Articles of Incorporation of the Company, which is filed as an exhibit to the
Registration Statement of which this Prospectus forms a part, for a detailed
description of the provisions thereof summarized below.
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33
COMMON STOCK
Holders of shares of the common stock are entitled to receive such
dividends as may from time to time be declared by the Board of Directors out of
funds legally available therefor. The Company does not plan to declare any
dividends in the immediate future. See "Dividend Policy." Holders of common
stock are entitled to one vote per share on all matters on which the holders of
common stock are entitled to vote and do not have any cumulative voting rights.
Shareholders have no preemptive, conversion, redemption or sinking fund rights.
In the event of a liquidation, dissolution or winding-up of the Company,
holders of common stock are entitled to share equally and ratably in the assets
of the Company, if any, remaining after the payment of all debts and
liabilities of the Company and the liquidation preference of any outstanding
preferred stock. The outstanding shares of common stock are, and the shares of
common stock offered by the Company hereby when issued will be, fully paid and
nonassessable. The rights, preferences and privileges of holders of common
stock are subject to any classes or series of preferred stock that the Company
may issue in the future.
PREFERRED STOCK
The Articles provide that the Board of Directors is authorized,
without further action by the holders of the common stock, to provide for the
issuance of shares of preferred stock in one or more classes or series and to
fix the designations, powers, preferences, and relative, participating,
optional and other rights, qualifications, limitations, and restrictions
thereof, including the dividend rate, conversion rights, voting rights,
redemption price, and liquidation preference, and to fix the number of shares
to be included in any such classes or series. Any preferred stock so issued may
rank senior to the common stock with respect to the payment of dividends or
amounts upon liquidation, dissolution or winding-up, or both. In addition, any
such shares of preferred stock may have class or series voting rights. Upon
completion of this offering, the Company will not have any shares of preferred
stock outstanding. Issuances of preferred stock, while providing the Company
with flexibility in connection with general corporate purposes, may, among
other things, have an adverse effect on the rights of holders of common stock
(for example, the issuance of any preferred stock with voting or conversion
rights may adversely affect the voting power of the holders of common stock),
and in certain circumstances such issuances could have the effect of decreasing
the market price of the common stock. The Company has no present plan to issue
any shares of preferred stock. The Company will not issue preferred stock to
organizers on terms more favorable than those on which it issues preferred
stock to shareholders other than organizers.
CERTAIN ANTITAKEOVER EFFECTS
The provisions of the Articles, the Bylaws and South Carolina law
summarized in the following paragraphs may be deemed to have antitakeover
effects and may delay, defer, or prevent a tender offer or takeover attempt
that a shareholder might consider to be in such shareholder's best interest,
including those attempts that might result in a premium over the market price
for the shares held by shareholders, and may make removal of management more
difficult.
Authorized but Unissued Stock. The authorized but unissued shares of
common stock and preferred stock will be available for future issuance without
shareholder approval. These additional shares may be used for a variety of
corporate purposes, including future public offerings to raise additional
capital, corporate acquisitions, and employee benefit plans. The existence of
authorized but unissued and unreserved shares of common stock and preferred
stock may enable the Board of Directors to issue shares to persons friendly to
current management, which could render more difficult or discourage any attempt
to obtain control of the Company by means of a proxy contest, tender offer,
merger or otherwise, and thereby protect the continuity of the Company's
management.
Number of Directors. The Bylaws provide that the number of directors
shall be fixed from time to time by resolution by at least a majority of the
directors then in office, but may not consist of fewer than five nor more than
fifteen members.
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34
Classified Board of Directors. The Articles and Bylaws divide the
Board of Directors into three classes of directors serving staggered three-year
terms. As a result, approximately one-third of the Board of Directors will be
elected at each annual meeting of shareholders. The classification of
directors, together with the provisions in the Articles and Bylaws described
below that limit the ability of shareholders to remove directors and that
permit the remaining directors to fill any vacancies on the Board of Directors,
will have the effect of making it more difficult for shareholders to change the
composition of the Board of Directors. As a result, at least two annual
meetings of shareholders may be required for the shareholders to change a
majority of the directors, whether or not a change in the Board of Directors
would be beneficial to the Company and its shareholders and whether or not a
majority of the Company's shareholders believes that such a change would be
desirable.
Removal of Directors and Filling Vacancies. The Bylaws provide that
all vacancies on the Board of Directors, including those resulting from an
increase in the number of directors, may be filled by a majority of the
remaining directors, even if they do not constitute a quorum. When one or more
directors resign from the Board of Directors effective at a future date, a
majority of directors then in office, including the directors who are to
resign, may vote on filling the vacancy.
Advance Notice Requirements for Shareholder Proposals and Director
Nominations. The Bylaws establish advance notice procedures with regard to
shareholder proposals and the nomination, other than by or at the direction of
the Board of Directors or a committee thereof, of candidates for election as
directors. These procedures provide that the notice of shareholder proposals
and shareholder nominations for the election of directors at any meeting of
shareholders must be in writing and be received by each director not later than
twenty-four hours prior to the meeting when delivered personally or by telecopy
or at least two days prior thereto when delivered by mail. The Company may
reject a shareholder proposal or nomination that is not made in accordance with
such procedures.
Certain Nomination Requirements. Pursuant to the Bylaws, the Company
has established certain nomination requirements for an individual to be elected
as a director of the Company at any annual or special meeting of the
shareholders, including that the nominating party provide the Company within a
specified time prior to the meeting (i) notice that such party intends to
nominate the proposed director; (ii) the name of and certain biographical
information on the nominee; and (iii) a statement that the nominee has
consented to the nomination. The chairman of any shareholders' meeting may, for
good cause shown, waive the operation of these provisions. These provisions
could reduce the likelihood that a third party would nominate and elect
individuals to serve on the Board of Directors.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have a minimum of
750,000 and a maximum of 1,000,000 shares of common stock outstanding. The
shares sold in this offering will be freely tradable, without restriction or
registration under the Securities Act, except for shares purchased by
"affiliates" of the Company, which will be subject to resale restrictions under
the Securities Act. An affiliate of the issuer is defined in Rule 144 under the
Securities Act as a person that directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control with the
issuer. Rule 405 under the Securities Act defines the term "control" to mean
the possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of the person whether through the
ownership of voting securities, by contract or otherwise. Directors of the
Company and the Bank will likely be deemed to be affiliates. These securities
held by affiliates may be sold without registration in accordance with the
provisions of Rule 144 or another exemption from registration.
In general, under Rule 144, an affiliate of the Company or a person
holding restricted shares may sell, within any three-month period, a number of
shares no greater than 1% of the then outstanding shares of the common stock or
the average weekly trading volume of the common stock during the four calendar
weeks preceding the sale, whichever is greater. Rule 144 also requires that the
securities must be sold in "brokers' transactions," as defined in the
Securities Act, and the person selling the securities may not solicit orders or
make any payment in connection with the offer or sale of securities to any
person other than the broker who executes
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35
the order to sell the securities. This requirement may make the sale of the
common stock by affiliates of the Company pursuant to Rule 144 difficult if no
trading market develops in the common stock. Rule 144 also requires persons
holding restricted securities to hold the shares for at least one year prior to
sale.
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon
for the Company by Nelson Mullins Riley & Scarborough, L.L.P., Atlanta,
Georgia.
EXPERTS
The financial statements of the Company dated December 31, 1998 and
for the period from July 17, 1998 (inception), until December 31, 1998 have
been audited by Elliott Davis & Company, L.L.P., as stated in their report
appearing elsewhere herein, and have been so included in reliance on the report
of such firm given upon their authority as an expert in accounting and
auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form SB-2 (together with all
amendments, exhibits, schedules and supplements thereto, the "Registration
Statement"), under the Securities Act of 1933 and the rules and regulations
thereunder, for the registration of the common stock offered hereby. This
Prospectus, which forms a part of the Registration Statement, does not contain
all of the information set forth in the Registration Statement. For further
information with respect to the Company and the common stock, you should refer
to the Registration Statement and the exhibits thereto.
The Registration Statement may be examined at, and copies of the
Registration Statement may be obtained at prescribed rates from, the Public
Reference Section of the Commission, Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549. The SEC also maintains a Web site (http://www.sec.gov)
that contains reports, proxy and information statements and other information
regarding registrants, such as the Company, that file electronically with the
Commission.
The Company and the organizers have filed or will file various
applications with the OCC and the FDIC. Prospective investors should rely only
on information contained in this Prospectus and in the Company's related
Registration Statement in making an investment decision. To the extent that
other available information not presented in this Prospectus, including
information available from the Company and information in public files and
records maintained by the OCC and the FDIC, is inconsistent with information
presented in this Prospectus, such other information is superseded by the
information presented in this Prospectus. Projections appearing in the
applications were based on assumptions that the organizers believed were
reasonable, but as to which no assurances can be made. The Company specifically
disaffirms those projections for purposes of this Prospectus and cautions
prospective investors against placing reliance on them for purposes of making
an investment decision. Statements contained in this Prospectus regarding the
contents of any contract or other document referred to herein are not
necessarily complete. Where such contract or document is an exhibit to the
Registration Statement, each statement contained herein is qualified in all
respects by the provisions of such exhibit, to which reference is hereby made.
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36
NEW COMMERCE BANCORP (IN ORGANIZATION)
(A DEVELOPMENT STAGE ENTERPRISE)
GREENVILLE, SOUTH CAROLINA
CONTENTS
PAGE
----
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS F-2
FINANCIAL STATEMENTS
Balance sheet F-3
Statement of operations F-4
Statement of changes in owners' equity F-5
Statement of cash flows F-6
NOTES TO FINANCIAL STATEMENTS F-7 and F-8
F-1
37
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Directors
NEW COMMERCE BANCORP (in organization)
Greenville, South Carolina
We have audited the accompanying balance sheet of NEW COMMERCE BANCORP (in
organization) (a development stage enterprise) as of December 31, 1998 and the
related statements of operations, changes in owners' equity and cash flows for
the period from July 17, 1998 (date of inception) to December 31, 1998. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of NEW COMMERCE BANCORP (in
organization) (a development stage enterprise) as of December 31, 1998 and the
results of its operations and its cash flows for the period from July 17, 1998
(date of inception), to December 31, 1998, in conformity with generally
accepted accounting principles.
Greenville, South Carolina
December 31, 1998
F-2
38
NEW COMMERCE BANCORP (IN ORGANIZATION)
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEET
DECEMBER 31, 1998
ASSETS
Cash and cash equivalents $ 1,762,031
Real estate options 39,800
Deferred stock offering costs 143,427
Office furniture 8,218
---------------
Total assets $ 1,953,476
===============
LIABILITIES AND OWNERS' EQUITY
LIABILITIES $ --
COMMITMENTS AND CONTINGENCIES - Note 2
OWNERS' EQUITY
Preferred stock, $.01 par value per share; 10,000,000 shares
authorized, no shares issued --
Common stock, $.01 par value per share, 10,000,000 shares
authorized; 200,000 shares issued 2,000
Additional paid-in capital 1,998,000
Retained deficit accumulated during the development stage (46,524)
---------------
Total liabilities and owners' equity $ 1,953,476
===============
The accompanying notes are an integral part of this financial statement.
F-3
39
NEW COMMERCE BANCORP (IN ORGANIZATION)
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM JULY 17, 1998 (DATE OF INCEPTION)
TO DECEMBER 31, 1998
EXPENSES
Stock sale promotion $ 16,300
Rent 11,650
Telephone and supplies 944
Travel and meals 6,444
Printing and copying 4,338
Other 6,848
---------------
Loss before provision for income taxes (46,524)
PROVISION FOR INCOME TAXES --
Net loss $ (46,524)
===============
The accompanying notes are an integral part of this financial statement.
F-4
40
NEW COMMERCE BANCORP (IN ORGANIZATION)
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF CHANGES IN OWNERS' EQUITY
FOR THE PERIOD FROM JULY 17,1998 (DATE OF INCEPTION)
TO DECEMBER 31, 1998
RETAINED
DEFICIT
ACCUMULATED
COMMON STOCK ADDITIONAL DURING THE
------------------------- PAID-IN DEVELOPMENT
SHARES AMOUNT CAPITAL STAGE TOTAL
----------- ----------- -------------- ----------------- ------------
PROCEEDS FROM THE SALE OF
STOCK TO ORGANIZERS 200,000 $ 2,000 $ 1,998,000 $ -- $ 2,000,000
NET LOSS -- -- -- (46,524) (46,524)
----------- ----------- -------------- ----------------- -------------
BALANCE, DECEMBER 31, 1998 200,000 $ 2,000 $ 1,998,000 $ (46,524) $ 1,953,476
=========== =========== ============== ================= =============
The accompanying notes are an integral part of this financial statement.
F-5
41
NEW COMMERCE BANCORP (IN ORGANIZATION)
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM JULY 17,1998 (DATE OF INCEPTION)
TO DECEMBER 31, 1998
NET CASH USED FOR PRE-OPERATING ACTIVITIES
Net loss $ (46,524)
Deferred stock offering costs (143,427)
---------------
Net cash used for pre-operating activities (189,951)
---------------
INVESTING ACTIVITIES
Purchase of office furniture (8,218)
Purchase of real estate options (39,800)
---------------
Net cash used for investing activities (48,018)
---------------
FINANCING ACTIVITIES
Proceeds from sale of stock 2,000,000
---------------
Net cash provided by financing activities 2,000,000
---------------
Net increase in cash 1,762,031
CASH AND CASH EQUIVALENTS, JULY 17, 1998
(DATE OF INCEPTION) --
---------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,762,031
===============
The accompanying notes are an integral part of this financial statement.
F-6
42
NEW COMMERCE BANCORP (IN ORGANIZATION)
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND
ACTIVITIES
NEW COMMERCE BANCORP (the "Company") is a South Carolina corporation
organized for the purpose of owning and controlling all of the capital stock of
NEW COMMERCE BANK, N.A. (IN ORGANIZATION) (the "Bank"). The Bank is being
organized as a national bank under the laws of the United States with the
purpose of becoming a new community bank to be located in Greenville County,
South Carolina. The Company has filed a charter application with the OCC and an
application for deposit insurance with the FDIC. Provided that the applications
are timely approved and the necessary capital is raised, it is expected that
banking operations will commence in May of 1999.
The Company is a development stage enterprise as defined by Statement
of Financial Accounting Standard No. 7, "Accounting and Reporting by
Development Stage Enterprises", as it devotes substantially all its efforts to
establishing a new business. The Company's planned principal operations have
not commenced and revenue has not been recognized from the planned principal
operations.
The Company intends to sell a maximum of 1,000,000 and a minimum of
750,000 shares of its common stock at $10 per share. The maximum offering will
raise $9,700,000 and minimum offering will raise $7,200,000, each net of
$200,000 estimated sales agent commissions and $100,000 offering expenses. The
organizers of the Company have purchased 200,000 shares of common stock at $10
per share, for a total of $2,000,000. The remaining shares will be sold through
a public offering. The Company will use a maximum of $8,250,000 and minimum of
$7,000,000 of the proceeds to capitalize the proposed Bank.
YEAR-END
The Company has adopted a fiscal year ending on December 31, effective for
the period ending December 31, 1998.
ESTIMATES
The financial statements include estimates and assumptions that effect the
Company's financial position and results of operations and disclosure of
contingent assets and liabilities. Actual results could differ from these
estimates.
CASH EQUIVALENTS
The Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents. The Company
places its temporary cash investments with high credit quality financial
institutions. At times such investments may be in excess of the FDIC
insurance limits.
DEFERRED STOCK OFFERING COSTS
Deferred stock offering costs are costs incurred by the Company in
connection with the offering and issuance of its stock. The deferred stock
offering costs will be deducted from the Company's additional paid-in
capital after the stock offering. If the stock offering is deemed
unsuccessful, all deferred stock offering costs will be charged to
operations during the period in which the offering is deemed unsuccessful.
ORGANIZATION COSTS
Organization costs are costs that have been incurred in the expectation
that they will generate future revenues or otherwise benefit periods after
the Company begins planned operations. Organization costs include
incorporation, legal and consulting fees incurred in connection with
establishing the Company. In accordance with SOP 98-5, "Reporting on the
Costs of Start-Up Activities," organization costs are expensed when
incurred.
F-7
43
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACTIVITIES, CONTINUED
This SOP is effective for fiscal periods beginning after December 15,
1998. The Company has elected early adoption of this pronouncement and
accordingly, has charged all organization costs to operations.
INCOME TAXES
Income taxes are provided for the tax effects of transactions reported in
the financial statements and consist of taxes currently due plus deferred
taxes related primarily to differences between the financial reporting and
income tax bases of assets and liabilities. At December 31, 1998, no
taxable income has been generated and therefore, no tax provision has been
included in these financial statements.
NOTE 2 - COMMITMENTS AND CONTINGENCIES
The Company has entered into an agreement with a law firm to assist in
preparing and filing all organizational, incorporation, and bank applications
and to assist in preparing stock offering documents and consummating the
Company's initial offering. The aggregate cost of the services is expected to
approximate $40,000.
The Company has entered into an agreement with a bank consultant to
assist in establishing the Bank. The aggregate cost of the services is expected
to approximate $48,000.
The Company has entered into an agreement to purchase approximately
$40,000 of office furniture and equipment for its proposed branch office.
The Company leases temporary office space under a month-to-month
operating lease. The lease requires monthly payments of $600 and includes
secretarial services on an as needed basis. Additionally, the Company has
entered into a 12-month operating lease for a modular unit to temporarily serve
as its first branch office. The lease requires monthly payments of
approximately $3,100. The Company plans to construct a permanent building by
the conclusion of the lease term.
The Company has established a $425,000 line of credit with a bank.
This line is uncollateralized and is guaranteed by the organizers, jointly and
severally. The line bears interest at prime rate. No amounts are outstanding on
this line of credit as of December 31, 1998.
The Company has paid $35,000 for refundable options on three pieces of
real estate and plans to purchase the properties to build main and branch
offices. The first option (expires on January 26, 1999) for $15,000 entitles
the company to purchase 1.7 acres to be used as the main office for $584,000.
The second option (expires on March 30, 1999) for $15,000 is for an alternate
location for the main office and entitles the Company to purchase 2 acres for
$691,000. The third option for $5,000 is to purchase 1.04 acres for $440,000 to
be used as the site for the branch office. This transaction closed on January
7, 1999.
The Company entered into an employment agreement with its President
and Chief Executive Officer that includes a three-year compensation term, bonus
plan, incentive program, and term life insurance. The agreement contains
various termination clauses including abandonment of the effort to organize the
Bank.
NOTE 3 - RELATED PARTY TRANSACTIONS
One of the organizers of the Company owns the building from which the
Company leases its temporary office space.
F-8
44
NEW COMMERCE BANCORP
STOCK ORDER FORM/SUBSCRIPTION AGREEMENT
TO: New Commerce BanCorp
712 N. Main Street
Greenville, South Carolina 29609
Ladies and Gentlemen:
You have informed me that New Commerce BanCorp, a South Carolina
corporation (the "Company"), is offering up to 800,000 shares of its common
stock, at a price of $10.00 per share payable as provided herein and as
described in and offered pursuant to the Prospectus furnished with this
Subscription Agreement to the undersigned (the "Prospectus").
1. SUBSCRIPTION. Subject to the terms and conditions hereof, the
undersigned hereby tenders this subscription, together with payment in United
States currency by check, bank draft, or money order payable to "The Bankers
Bank as escrow agent for New Commerce BanCorp" the amount indicated below (the
"Funds"), representing the payment of $10.00 per share for the number of shares
of common stock indicated below. The total subscription price must be paid at
the time the Subscription Agreement is executed.
2. ACCEPTANCE OF SUBSCRIPTION. It is understood and agreed that the
Company shall have the right to accept or reject this subscription in whole or
in part, for any reason whatsoever. The Company may reduce the number of shares
for which the undersigned has subscribed, indicating acceptance of less than
all of the shares subscribed on its written form of acceptance.
3. ACKNOWLEDGMENTS. The undersigned hereby acknowledges that he or she
has received a copy of the Prospectus. This Subscription Agreement creates a
legally binding obligation and the undersigned agrees to be bound by the terms
of this Agreement.
4. REVOCATION. The undersigned agrees that once this Subscription
Agreement is tendered to the Company, it may not be withdrawn and that this
Agreement shall survive the death or disability of the undersigned.
BY EXECUTING THIS AGREEMENT, THE SUBSCRIBER IS NOT WAIVING ANY RIGHTS HE OR SHE
MAY HAVE UNDER FEDERAL SECURITIES LAWS, INCLUDING THE SECURITIES ACT OF 1933
AND THE SECURITIES EXCHANGE ACT OF 1934.
THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR SAVINGS
DEPOSITS ACCOUNTS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
A-1
45
Please indicate in the space provided below the exact name or names
and address in which the stock certificate representing shares subscribed for
hereunder should be registered.
- ---------------------------------------------- --------------------------------------------------------
Number of Shares Subscribed Name or Names of Subscribers (Please Print)
for (minimum 100 shares)
$
- ---------------------------------------------- --------------------------------------------------------
Total Subscription Price at Please indicate form of ownership desired (individual,
$10.00 per share (funds must be joint tenants with right of survivorship, tenants in
enclosed) common, trust corporation, partnership, custodian, etc.)
Date: (L.S.)
---------------------------------------- --------------------------------------------------
Signature of Subscriber(s)
- ---------------------------------------------- --------------------------------------------------
Social Security Number or Federal Signature of Subscriber(s) (L.S.)
Taxpayer Identification Number
Street (Residence) Address:
------------------------------------------
------------------------------------------
------------------------------------------
City, State and Zip Code
When signing as attorney, trustee, administrator, or guardian, please
give your full title as such. If a corporation, please sign in full corporate
name by president or other authorized officer. In the case of joint tenants or
tenants in common, each owner must sign.
TO BE COMPLETED BY THE COMPANY:
Accepted as of , 199 , as to shares.
------------------ -- -------------
NEW COMMERCE BANCORP
--------------------------------------------
By:
Title:
A-2
46
FEDERAL INCOME TAX BACKUP WITHHOLDING
In order to prevent the application of federal income tax backup
withholding, each subscriber must provide the escrow agent with a correct
Taxpayer Identification Number ("TIN"). An individual's social security number
is his or her TIN. The TIN should be provided in the space provided in the
Substitute Form W-9, which is set forth below.
Under federal income tax law, any person who is required to furnish
his or her correct TIN to another person, and who fails to comply with such
requirements, may be subject to a $50 penalty imposed by the IRS.
Backup withholding is not an additional tax. Rather, the tax liability
of persons subject to backup withholding will be reduced by the amount of tax
withheld. If backup withholding results in an overpayment of taxes, a refund
may be obtained from the IRS. Certain taxpayers, including all corporations,
are not subject to these backup withholding and reporting requirements.
If the shareholder has not been issued a TIN and has applied for a TIN
or intends to apply for a TIN in the near future, "Applied For" should be
written in the space provided for the TIN on the Substitute Form W-9.
SUBSTITUTE FORM W-9
Under penalties of perjury, I certify that: (i) The number shown on
this form is my correct Taxpayer Identification Number (or I am waiting for a
Taxpayer Identification Number to be issued to me), and (ii) I am not subject
to backup withholding because: (a) I am exempt from backup withholding; or (b)
I have not been notified by the Internal Revenue Service ("IRS") that I am
subject to backup withholding as a result of a failure to report all interest
or dividends; or (c) the IRS has notified me that I am no longer subject to
backup withholding.
You must cross out item (ii) above if you have been notified by the
IRS that you are subject to backup withholding because of underreporting
interest or dividends on your tax return. However, if after being notified by
the IRS that you were subject to backup withholding you received another
notification from the IRS that you are not longer subject to backup
withholding, do not cross out item (ii).
Each subscriber should complete this section.
- ------------------------------------------------------- ----------------------------------------------------
Signature of Subscriber Signature of Subscriber
- ------------------------------------------------------- ----------------------------------------------------
Printed Name Printed Name
- ------------------------------------------------------- ----------------------------------------------------
Social Security or Employer Social Security or Employer
Identification No. Identification No.
A-3
47
=================================================================
No dealer, salesperson or other person has been authorized to
give any information or to make any representations other than
those contained in this Prospectus in connection with the offer
made hereby. If given or made, such information and
representations must not be relied upon as having been authorized
by the Company. This Prospectus does not constitute an offer to
sell or solicitation of an offer to buy any of the securities
offered hereby in any jurisdiction to any person to whom it is
unlawful to make such offer in such jurisdiction. Neither the
delivery of this Prospectus nor any sale made hereunder at any
time shall under any circumstances create any implication that
the information herein is correct at any time after the date
hereof.
_________________________
_________________________
UNTIL ____________________, ALL DEALERS EFFECTING TRANSACTIONS IN
THE REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
=================================================================
=================================================================
750,000 SHARES
NEW COMMERCE BANCORP
A PROPOSED HOLDING COMPANY FOR
NEW COMMERCE BANK, N.A.
(PROPOSED)
[INSERT LOGO HERE]
COMMON STOCK
PROSPECTUS
[DATE OF OFFER]
=================================================================
48
PART II
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Item 24. Indemnification of Directors and Officers
The Company's Articles of Incorporation contain a provision which,
subject to certain limited exceptions, limits the liability of a director to
the Company or its shareholders for any breach of duty as a director. There is
no limitation of liability for: a breach of duty involving appropriation of a
business opportunity of the Company; an act or omission which involves
intentional misconduct or a knowing violation of law; any transaction from
which the director derives an improper personal benefit; or as to any payments
of a dividend or any other type of distribution that is illegal under Section
33-8-330 of the South Carolina Business Corporation Act of 1988 (The
"Corporation Act"). In addition, if at any time the Corporation Act shall have
been amended to authorize further elimination or limitation of the liability of
director, then the liability of each director of the Company shall be
eliminated or limited to the fullest extent permitted by such provisions, as so
amended, without further action by the shareholders, unless the provisions of
the Corporation Act require such action. The provision does not limit the right
of the Company or its shareholders to seek injunctive or other equitable relief
not involving payments in the nature of monetary damages.
The Company's bylaws contain certain provisions which provide
indemnification to directors of the Company that is broader than the protection
expressly mandated in Sections 33-8-510 and 33-8-520 of the Corporation Act. To
the extent that a director or officer of the Company has been successful, on
the merits or otherwise, in the defense of any action or proceeding brought by
reason of the fact that such person was a director or officer of the Company,
Sections 33-8-510 and 33-8-520 of the Corporation Act would require the Company
to indemnify such persons against expenses (including attorney's fees) actually
and reasonably incurred in connection therewith. The Corporation Act expressly
allows the Company to provide for greater indemnification rights to its
officers and directors, subject to shareholder approval.
Insofar as indemnification for liabilities arising under the
Corporation Act may be permitted to directors, officers, and controlling
persons of the Company and the Bank pursuant to the Articles of Incorporation
or Bylaws, or otherwise, the Company and the Bank have been advised that in the
opinion of the SEC such indemnification is against public policy as expressed
in the Corporation Act and is, therefore, unenforceable.
The Board of Directors also has the authority to extend to officers,
employees and agents the same indemnification rights held by directors, subject
to all of the accompanying conditions and obligations. The Board of Directors
has extended or intends to extend indemnification rights to all of its
executive officers.
The Company has the power to purchase and maintain insurance on behalf
of any person who is or was a director, officer, employee or agent of the
Company against any liability asserted against him or incurred by him in any
such capacity, whether or not the Company would have the power to indemnify him
against such liability under the bylaws.
II-1
49
Item 25. Other Expenses of Issuance and Distribution.
Estimated expenses (other than underwriting commissions) of the
sale of the shares of common stock are as follows:
Registration Fee $ 2,224
Printing and Engraving 20,000
Legal Fees and Expenses 30,000
Accounting Fees 5,000
Blue Sky Fees and Expenses 10,000
Miscellaneous Disbursements 5,000
------------
TOTAL $ 72,224
============
Item 26. Recent Sales of Unregistered Securities.
From inception, the Company has issued a total of 200,000 shares of
its common stock to its organizers. The price per share was $10.00 for a total
purchase price of $2,000,000. There were no underwriting discounts or
commissions paid with respect to these transactions. All sales were exempt
under Section 4(2) of the Securities Act of 1933.
Item 27. Exhibits.
3.1. Articles of Incorporation, as amended
3.2. Bylaws
4.1. See Exhibits 3.1 and 3.2 for provisions in the Company's Articles of
Incorporation and Bylaws defining the rights of holders of the common
stock
4.2. Form of certificate of common stock
5.1. Opinion Regarding Legality
10.1. Employment Agreement dated August 1, 1998 between the Company and
James D. Stewart
10.2. *Agreement to Buy and Sell dated January 4, 1999, between the Company,
as buyer, and The Bess G. Kirkland Trust, as seller
10.3. Agreement to Buy and Sell dated September 30, 1998 between the Company,
as buyer, and Stephen M. Young and Lewis P. Young, Trustees of
Wilbert Burial Vault, Inc., Profit Sharing Plan, as seller
10.4 Agreement to Buy and Sell dated October 26, 1998, between Company, as
buyer, and Hawkins Development Corporation, as seller
10.5 Sales Agency Agreement dated December 11, 1998 between the Company and
J.C. Bradford & Co.
10.6 Escrow Agreement dated October 27, 1998 between the Company and The
Bankers Bank
10.7 Data Processing Services Agreement and Contract Modification dated
December 1, 1998 between the Company and Jack Henry & Associates,
Inc.
10.8 Form of Stock Warrant Agreement
23.1. Consent of Independent Public Accountants
23.2. Consent of Nelson Mullins Riley & Scarborough, L.L.P. (appears in its
opinion filed as Exhibit 5.1)
II-2
50
24.1. Power of Attorney (filed as part of the signature page to the
Registration Statement)
27.1. *Financial Data Schedule (for electronic filing purposes)
* To be filed by Amendment
Item 28. Undertakings.
The undersigned Company will:
(a)(1) File, during any period in which it offers or sells
securities, a post-effective amendment to this registration
statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in
the information in the registration statement; and
(iii) Include any additional or changed material information on the
plan of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(3) File a post-effective amendment to remove from registration
any of the securities that remain unsold at the end of the offering.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of the Company pursuant to the provisions described in Item
24 above, or otherwise, the Company has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Company of expenses incurred or paid by a
director, officer or controlling person of the Company in the successful
defense of any action, suit, or proceeding) is asserted by such director,
officer, or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-3
51
SIGNATURES
Signature Title Date
- --------- ----- ----
/s/ G. Mitchell Gault
- ------------------------------------
G. Mitchell Gault Director January 14, 1999
/s/ Tommy D. Greer
- ------------------------------------
Tommy D. Greer Director January 14, 1999
/s/ Bobby L. Johnson
- ------------------------------------
Bobby L. Johnson Director January 14, 1999
/s/ Robert T. Kellett
- ------------------------------------
Robert T. Kellett Director January 14, 1999
/s/ Dennis O. Raines
- ------------------------------------
Dennis O. Raines Director January 14, 1999
/s/ Curran A. Smith
- ------------------------------------
Curran A. Smith Director January 14, 1999
/s/ James D. Stewart
- ------------------------------------
James D. Stewart Director, Chief Executive January 14, 1999
Officer and President
52
SIGNATURES
Signature Title Date
- --------- ----- ----
/s/ G. Mitchell Gault
- ------------------------------------
G. Mitchell Gault Director January 14, 1999
/s/ Tommy D. Greer
- ------------------------------------
Tommy D. Greer Director January 14, 1999
/s/ Bobby L. Johnson
- ------------------------------------
Bobby L. Johnson Director January 14, 1999
/s/ Robert T. Kellett
- ------------------------------------
Robert T. Kellett Director January 14, 1999
/s/ Dennis O. Raines
- ------------------------------------
Dennis O. Raines Director January 14, 1999
/s/ Curran A. Smith
- ------------------------------------
Curran A. Smith Director January 14, 1999
/s/ James D. Stewart
- ------------------------------------
James D. Stewart Director, Chief Executive January 14, 1999
Officer and President
53
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
Item 27. Exhibits.
3.1. Articles of Incorporation, as amended
3.2. Bylaws
4.1. See Exhibits 3.1 and 3.2 for provisions in the Company's Articles of
Incorporation and Bylaws defining the rights of holders of the common
stock
4.2. Form of certificate of common stock
5.1. Opinion Regarding Legality
10.1. Employment Agreement dated August 1, 1998 between the Company and James
D. Stewart
10.2 *Agreement to Buy and Sell dated January 4, 1999, between the Company,
as buyer, and The Bess G. Kirkland Trust, as seller
10.3 Agreement to Buy and Sell dated September 30, 1998 between the Company,
as buyer, and Stephen M. Young and Lewis P. Young, Trustees of
Wilbert Burial Vault, Inc., Profit Sharing Plan, as seller
10.4 Agreement to Buy and Sell dated October 26, 1998, between Company, as
buyer, and Hawkins Development Corporation, as seller
10.5 Sales Agency Agreement dated December 11, 1998 between the Company
and J.C. Bradford & Co.
10.6 Escrow agreement dated October 27, 1998 between the Company and The
Bankers Bank
10.7 Data Processing Services Agreement and Contract Modification dated
December 1, 1998 between the Company and Jack Henry & Associates,
Inc.
10.8 Form of Stock Warrant Agreement
23.1. Consent of Independent Public Accountants
23.2. Consent of Nelson Mullins Riley & Scarborough, L.L.P. (appears in its
opinion filed as Exhibit 5.1)
24.1. Power of Attorney (filed as part of the signature page to the
Registration Statement)
27.1. *Financial Data Schedule (for electronic filing purposes)
* To be filed by Amendment