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Filed Persuant to Rule 424(b)(3)
Registration Number 333-25179
PROSPECTUS
PEOPLE'S COMMUNITY CAPITAL CORPORATION
A PROPOSED HOLDING COMPANY FOR
PEOPLE'S COMMUNITY BANK OF SOUTH CAROLINA
1,200,000 SHARES OF COMMON STOCK
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This Prospectus relates to the offer of a minimum of 610,000 and a maximum
of 1,200,000 shares of common stock, par value $.01 per share (the "Common
Stock"), to be issued by People's Community Capital Corporation, a South
Carolina corporation (the "Company"), which has been organized to own all of the
capital stock of People's Community Bank of South Carolina (the "Bank").
Sale of the Common Stock will commence on or about May 23, 1997. This is a
"best efforts" offering by the Company, and it will be terminated by the
Organizers upon the sale of 1,200,000 shares or July 15, 1997, whichever occurs
first, unless the offering is extended, at the discretion of the Company, for
additional periods ending no later than December 31, 1998. However, the
Organizers reserve the right to terminate the offering at any time after the
sale of the minimum offering of 610,000 shares. Subscriptions are binding on
subscribers and may not be revoked by subscribers without the consent of the
Company.
Prospective investors should carefully review the Prospectus before
subscribing for shares. SUBSCRIBERS MUST WARRANT IN THE SUBSCRIPTION AGREEMENT
THAT THEY HAVE RECEIVED A COPY OF THIS PROSPECTUS. See "The Offering -- How to
Subscribe." The Company has established a minimum subscription of 100 shares and
a maximum subscription by any subscriber of 4.9% of the total number of shares
sold in the offering. However, the Organizers reserve the right to waive these
limits without notifying any subscriber. In addition, the Organizers reserve the
right to purchase up to 100% of the shares of stock being offered hereunder if
necessary to complete the offering. Proceeds of the offering will be deposited
in an escrow account at The Bankers Bank, as escrow agent, pending receipt of
subscriptions and subscription proceeds for a minimum of 610,000 shares and
satisfaction of certain other conditions of the offering. Any subscription
proceeds accepted after satisfaction of the conditions set forth above but
before termination of this offering will not be deposited in escrow but will be
available for immediate use by the Company to fund offering and organizational
expenses and for working capital. See "The Offering -- Conditions of the
Offering and Release of Funds."
INVESTMENT IN THESE SECURITIES INVOLVES SIGNIFICANT RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 6 OF THIS PROSPECTUS FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK
OFFERED HEREBY.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT DEPOSITS OR SAVINGS ACCOUNTS
OR SAVINGS DEPOSITS AND ARE NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
<TABLE>
<CAPTION>
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PRICE TO UNDERWRITING DISCOUNTS PROCEEDS TO THE
PUBLIC(1) AND COMMISSIONS(2) COMPANY(3)
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<S> <C> <C> <C>
Per Share.................................... $10.00 None $10.00
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Total (Minimum).............................. $ 6,100,000 None $6,100,000
(Maximum).............................. $12,000,000 None $12,000,000
=======================================================================================================================
</TABLE>
(1) The offering price has been arbitrarily established by the Company. See
"Risk Factors -- Offering Price."
(2) This offering is expected to be made on behalf of the Company primarily by
its directors and executive officers, to whom no commission or other
compensation will be paid on account of such activity, although they will be
reimbursed for reasonable expenses incurred in the offering. The Company
believes such officers and directors will not be deemed brokers under the
Securities Exchange Act of 1934 (the "Exchange Act") based on reliance on
Rule 3a4-1 of the Exchange Act. See "The Offering."
(3) Before deducting expenses related to this offering and the organization of
the Company, estimated to be approximately $75,000. See "Use of
Proceeds -- By the Company."
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The date of this Prospectus is May 23, 1997.
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REPORTS TO SHAREHOLDERS
The Company is not a reporting company as defined by the Securities and
Exchange Commission (the "SEC"). The Company will furnish its shareholders with
annual reports containing audited financial information for each fiscal year and
will distribute quarterly reports for the first three quarters of each fiscal
year containing unaudited summary financial information. The Company's fiscal
year ends on December 31.
ADDITIONAL INFORMATION
The Company has filed with the SEC a Registration Statement under the
Securities Act of 1933 with respect to the Common Stock offered hereby. This
Prospectus 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, please see 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 Federal Reserve Bank of Richmond and the South Carolina State Board of
Financial Institutions. 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 Federal
Reserve Bank of Richmond and the South Carolina State Board of Financial
Institutions, 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.
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SUMMARY
The following summary is qualified in its entirety by the more detailed
information contained elsewhere in this Prospectus.
THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT DEPOSITS OR SAVINGS ACCOUNTS
OR SAVINGS DEPOSITS AND ARE NOT INSURED OR GUARANTEED BY THE FDIC OR ANY OTHER
GOVERNMENTAL AGENCY.
THE COMPANY
People's Community Capital Corporation, a South Carolina corporation (the
"Company"), was incorporated primarily to hold all of the capital stock of its
proposed state banking subsidiary, People's Community Bank of South Carolina
(the "Bank"). The Company may not acquire the capital stock of the Bank without
the prior approval of the Federal Reserve Bank of Richmond (the "Federal
Reserve"), as delegate of the Board of Governors of the Federal Reserve System
(the "Federal Reserve Board"), and the South Carolina State Board of Financial
Institutions (the "South Carolina Bank Board"). The Company initially will
engage in no business other than owning and managing the Bank.
THE BANK
The Organizers (as defined below) filed an application with the South
Carolina Bank Board in March 1997 to charter the Bank as a state chartered bank.
The Organizers expect to obtain preliminary approval of the Bank's application
for a charter in July 1997. The issuance of a charter will depend, among other
things, upon compliance with certain legal requirements that may be imposed by
the South Carolina Bank Board, including capitalization of the Bank with at
least a specified minimum amount of capital, which the Organizers believe will
be $6,000,000. 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 will engage in a general commercial and retail banking business,
emphasizing the needs of small-to medium-sized businesses, professional
concerns, and individuals, primarily in Aiken and North Augusta, South Carolina
and the surrounding areas. The Bank will initially consist of a main office in
the City of Aiken and a branch office in North Augusta, South Carolina. Tommy B.
Wessinger, who will be the Chairman and Chief Executive Officer of the Company
and the Bank, and Alan J. George, who will be the President of the Company and
President and Chief Operating Officer of the Bank, together have over 50 years
of banking experience, most of which was acquired while serving the Aiken County
market. See "Management." The Organizers presently are engaged in completing the
tasks necessary to open the Bank by August 1997, although no assurances can be
given that the Bank will open for business or that the projected opening date
can be achieved.
The principal executive offices of both the Company and the Bank will
initially be located at 106-B Park Avenue, S.W., Aiken, South Carolina 29801.
The address of the Aiken branch office will be 1715 Whiskey Road, Aiken, South
Carolina 29803, and the address of the North Augusta branch office will be 518
Georgia Avenue, North Augusta, South Carolina. The Company's telephone number is
(803) 641-2265.
THE ORGANIZERS
The organizers of the Company and the Bank (the "Organizers") are Raymond
D. Brown, W. Cothran Campbell, Alan J. George, Margaret Holley-Taylor, Anthony
E. Jones, James D. McNair, Dr. Clark D. Moore, Russell D. Phelon, Donald W.
Thompson, Dr. John B. Tomarchio, and Tommy B. Wessinger. Additional individuals
may be added as Organizers, subject to regulatory approval. All of the
Organizers will serve as directors of the Company and the Bank.
The Organizers (together with members of their immediate families) intend
to purchase an aggregate of at least 185,000 shares of the Common Stock to be
sold in this offering at a purchase price of $10.00 per share. The
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Organizers may subscribe for up to 100% of the shares in the offering if
necessary to help the Company achieve the minimum subscription level necessary
to release subscription proceeds from escrow, and some Organizers may decide to
purchase additional shares even if the minimum subscription amount has been
achieved. Any shares purchased by the Organizers in excess of their original
commitment will be purchased for investment and not with a view to the resale of
such shares. Because purchases by the Organizers may be substantial and
Organizers may purchase additional shares if necessary to help the Company break
escrow, investors should not place any reliance on the sale of a specified
minimum offering amount as an indication of the merits of this offering or that
the reasons for an Organizer's decision to invest are shared by unaffiliated
investors. See "The Offering" and "Management."
THE OFFERING
Securities Offered......... Common Stock of the Company, par value $.01 per
share
Offering Price............. $10.00 per share
Number of Shares Offered... Minimum 610,000
Maximum 1,200,000
Use of Proceeds............ The Company will use the net proceeds of the
offering to capitalize the Bank at a minimum of
$6,000,000 and a maximum of $7,000,000 through the
purchase of all of the capital stock of the Bank,
subject to regulatory approval; to pay
organizational expenses of the Company and the
expenses of this offering, estimated to be
approximately $75,000; and to provide working
capital. The Company plans to retain sums in excess
of the minimum necessary to capitalize the Bank at
the Company and initially invest the sums in United
States government securities or as a deposit at the
Bank. The Company may be required by the South
Carolina Bank Board to capitalize the Bank at a
level in excess of the minimum of $6,000,000, in
which case the Company would have to receive
additional net proceeds in the offering or obtain
additional capital from another source.
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 SOUTH CAROLINA
BANK BOARD OR THE BANK DOES NOT OPEN FOR ANY OTHER
REASON, IT IS POSSIBLE THAT SUBSCRIBERS COULD BE
RETURNED AN AMOUNT LESS THAN THEIR ORIGINAL
INVESTMENT. See "Risk Factors -- Return of Less
Than Subscription Amount." The Bank will use the
$6,000,000 received from the sale of its stock to
the Company to pay organizational and pre-opening
expenses of the Bank; to purchase properties and
furnish the buildings for the Aiken and North
Augusta offices; and to provide working capital to
be used for business purposes, including paying
officers' and employees' salaries and making loans
and investments. See "Use of Proceeds."
Conditions to Offering..... This offering will be terminated and all
subscription funds (without interest) will be
returned promptly to subscribers unless on or
before July 15, 1997 (or such later date if the
offering is extended by the Company for additional
periods not to extend beyond December 31, 1998, if
(i) the Company has accepted subscriptions and
payment in full for a minimum of 610,000 shares;
and (ii) the Company has obtained approval of the
Federal Reserve and the South Carolina Bank Board
to acquire the capital stock of the Bank and
thereafter to become a bank holding company.
Subscription proceeds for shares subscribed for
will be deposited
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promptly in an escrow account with The Bankers
Bank, as escrow agent (the "Escrow Agent"), under
the terms of an escrow agreement (the "Escrow
Agreement"), pending the satisfaction of the
conditions set forth above or the termination of
the offering. Upon satisfaction of the conditions
set forth above, all subscription funds held in
escrow, including any interest actually earned
thereon, shall be released to the Company for its
immediate use. Any subscription proceeds accepted
after satisfaction of the conditions set forth
above but before termination of this offering will
not be deposited in escrow but will be available
for immediate use by the Company to fund offering
and organizational expenses and for working
capital. See "The Offering."
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. The Company may also use
brokers or dealers to sell shares on behalf of the
Company in certain states. Subscriptions are
binding on subscribers and may not be revoked by
subscribers except with the consent of the Company.
The Company may, in its sole discretion, allocate
shares among subscribers in the event of an
oversubscription for the shares. In determining
which subscriptions to accept, in whole or in part,
the Company may take into account any factors it
considers 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 the Company's desire to
have a broad distribution of stock ownership.
RISK FACTORS
An investment in the shares offered hereby involves certain risks,
including, among others, lack of an operating history, dependence on key
employees of the Bank, significant control of the Company by the Organizers,
absence of an existing market for the Common Stock and lack of assurance that an
active trading market in the Common Stock will develop, no intention to pay
dividends in the foreseeable future, and competition from a number of other
financial institutions with substantially greater financial and other resources
than the Bank will have. See "Risk Factors."
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RISK FACTORS
An investment in the shares offered hereby involves certain risks. A
subscription for shares should be made only after careful consideration of the
risk factors set forth below and elsewhere in this Prospectus and should be
undertaken only by persons who can afford an investment involving such risks.
THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT DEPOSITS OR SAVINGS ACCOUNTS
OR SAVINGS DEPOSITS AND ARE NOT INSURED OR GUARANTEED BY THE FDIC OR ANY OTHER
GOVERNMENTAL AGENCY.
RETURN OF LESS THAN SUBSCRIPTION AMOUNT
The amounts paid by subscribers in this offering will be held in escrow
until (i) the Company has accepted subscriptions and payment in full for a
minimum of 610,000 shares; and (ii) the Company has obtained approval of the
Federal Reserve and the South Carolina Bank Board to acquire the capital stock
of the Bank and thereafter to become a bank holding company. If these conditions
are not met by July 15, 1997, or by such subsequent date, not beyond December
31, 1998, to which the offering may be extended by the Company, all
subscriptions will be returned promptly in full, without interest. All interest
earned thereon shall be used by the Company to fund organizational expenses. If
these conditions are satisfied, the subscription amounts held in escrow may be
paid to the Company and shares issued to subscribers, and all interest earned on
the subscription proceeds will be retained by the Company. Once the Company has
met the conditions for the offering, the Escrow Agreement will be terminated and
any subscription proceeds accepted after satisfaction of the conditions set
forth above but before termination of this offering will not be deposited in
escrow but will be available for immediate use by the Company to fund offering
and organizational expenses and for working capital. When subscription amounts
are received by the Company, the Company will use a portion of the proceeds to
repay the Organizers the amounts advanced by them for organizational and
offering expenses. The Company will then fund future expenses out of the
subscription amounts received.
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 South Carolina Bank Board or the Bank does
not open for any other reason, the Company's 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
preopening expenses) would be distributed to the shareholders. In such event,
the Company will have incurred numerous expenses related to the organization of
the Company and the Bank, and the amount distributed to shareholders may be
substantially less than the subscription amount, and in an extreme case
shareholders may not be returned any amount.
LACK OF OPERATING HISTORY
The Company and the Bank currently are in the organizational stage, and
neither has any operating history. As a consequence, prospective purchasers of
the shares have limited information on which to base an investment decision. As
a bank holding company, the Company's profitability will depend upon the Bank's
operations. The Bank's proposed operations are subject to the risks inherent in
the establishment of any new business and, specifically, of a new bank. The
Company expects that the Bank will incur substantial initial expenses and may
not be profitable for several years after commencing business, if ever.
Shareholders are likely to experience dilution in the book value of the Common
Stock due to operating losses expected to be incurred during the initial years
of the Bank's operations.
DEPENDENCE ON KEY EMPLOYEES
As a new enterprise, the Company and the Bank will be materially dependent
on the performances of Tommy B. Wessinger, who will be the Chairman and Chief
Executive Officer of the Company and the Bank, and Alan J. George, who will be
the President of the Company and the President and Chief Operating Officer of
the Bank. The loss of the services of Mr. Wessinger and Mr. George or their
failure to perform their management functions in the manner anticipated by the
Organizers could have a material adverse effect on the Company and
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the Bank. The Company has entered into employment agreements dated as of March
3, 1997 with both Mr. Wessinger and Mr. George for five year terms. See
"Management -- Employment Agreements."
SIGNIFICANT CONTROL OF THE COMPANY BY INSIDERS
The Organizers, all of whom will serve as directors of the Company and the
Bank, and members of their immediate families intend to purchase an aggregate of
at least 185,000 shares, equal to 30.3% of the minimum number of shares offered
hereby and 15.4% of the maximum number of shares offered hereby, at a purchase
price of $10.00 per share. In addition, in connection with their employment
agreements, the Company has agreed to grant Mr. Wessinger and Mr. George options
to acquire up to an aggregate number of shares equal to 10% of the number of
shares sold in the offering (61,000 shares if the minimum number of shares is
sold and 120,000 shares if the maximum is sold), and the Company has agreed to
issue to Mr. Wessinger an additional 5,000 shares of Common Stock in January
1998. These additional shares, if vested, would increase the total amount
beneficially owned by the Organizers to 41.2% in the event of the minimum
offering and 25.8% in the event of the maximum offering. Organizers may purchase
additional shares in the offering and additional persons may be named as
Organizers, subject to regulatory approval. As a result of the anticipated stock
ownership in the Company by the Organizers, together with the influence which
may be exerted by such persons due to their positions as directors of the
Company and the Bank, the Organizers as a group will have substantial control of
the Company and the Bank following the offering. The Organizers may subscribe
for up to 100% of the shares in this offering if necessary to help the Company
achieve the minimum subscription level necessary to release subscription
proceeds from escrow, and some Organizers may decide to purchase additional
shares even if the minimum subscription amount has been achieved. See "The
Offering" and "Management." Any shares purchased by the Organizers in excess of
their original commitment will be purchased for investment and not with a view
to the resale of such shares. Because purchases by the Organizers may be
substantial and Organizers may purchase additional shares if necessary to help
the Company break escrow, investors should not place any reliance on the sale of
a specified minimum offering amount as an indication of the merits of this
offering or that the reasons for an Organizer's decision to invest are shared by
unaffiliated investors.
ARBITRARY OFFERING PRICE
Because the Company and the Bank are in organization, the offering price of
$10.00 per share was determined by the Organizers without reference to
traditional criteria for determining stock value such as book value or
historical or projected earnings since such criteria are not applicable to
companies with no history of operations. The price per share was set to enable
the Company to raise gross proceeds of between $6,100,000 and $12,000,000 in
this offering through the sale of a reasonable number of shares, and the price
per share is essentially equivalent to the initial book value per share prior to
the payment of the Company's and the Bank's organizational expenses. No
assurance is or can be given that any of the shares could be resold for the
offering price or any other amount.
ABSENCE OF TRADING MARKET
There currently is no market for the shares and, although the Company has
filed a registration statement with the Securities and Exchange Commission (the
"SEC") to register the issuance of the Common Stock in the offering under the
Securities Act of 1933 (the "Securities Act"), it is not likely that any trading
market will develop for the shares in the future. There are no present plans for
the Common Stock to be traded on any stock exchange or in the over-the-counter
market. Furthermore, the development of any trading market for the shares may be
adversely affected by purchases of large amounts of shares in this offering by
the Organizers since shares purchased by the Organizers will generally not be
freely tradable. As a result, investors who may need or wish to dispose of all
or part of their shares may be unable to do so except in private, directly
negotiated sales. In addition, sales of substantial amounts of Common Stock
after the offering, by the Organizers or others, could adversely affect
prevailing market prices. See "Description of Capital Stock -- Shares Eligible
for Future Sale."
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HIGHLY COMPETITIVE INDUSTRY
The banking business is highly competitive, and the Bank will encounter
strong competition from other commercial banks, as well as from savings
institutions, mortgage banking firms, consumer finance companies, securities
brokerage firms, insurance companies, money market mutual funds, and other
financial institutions operating in the Aiken County area and elsewhere. A
number of these competitors are well established in the Aiken County area. Most
of them have substantially greater resources and lending limits, as well as a
lower cost of funds, than the Bank and may 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. In addition, non-depository institution competitors are
generally not subject to the extensive regulations applicable to the Company and
the Bank. Recent federal legislation permits commercial banks to establish
operations nationwide, further increasing competition from out-of-state
financial institutions. See "Proposed Business -- Competition" and "Supervision
and Regulation." Although the Organizers believe that the Bank will be able to
compete effectively with these institutions, no assurances can be given in this
regard.
HEAVILY REGULATED INDUSTRY
The banking industry is heavily regulated. The success of the Company and
the Bank depends not only on competitive factors but also on state and federal
regulations affecting banks and bank holding companies. These regulations are
primarily intended to protect depositors, not shareholders. Regulation of the
financial institutions industry is undergoing continued changes, and the
ultimate effect of such changes cannot be predicted. In December 1991, the
Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA") was
enacted, and FDICIA and the regulations thereunder have increased the regulatory
and supervisory requirements for financial institutions, which has resulted and
will continue to result in increased operating expenses. Additional statutes
affecting financial institutions have been proposed and may be enacted.
Regulations now affecting the Company and the Bank may be modified at any time,
and there is no assurance that such modifications will not adversely affect the
business of the Company and the Bank. See "Supervision and Regulation."
SUCCESS DEPENDS ON ECONOMIC CONDITIONS
The success of the Company and the Bank will depend, to a certain extent,
upon economic and political conditions, both local and national, as well as
governmental monetary policies. Conditions such as inflation, recession,
unemployment, high interest rates, short money supply, and other factors beyond
the control of the Company and the Bank may adversely affect the Bank's deposit
levels and loan demand and, therefore, the earnings of the Bank and the Company.
Although the Organizers expect favorable economic development in the Bank's
market area, there is no assurance that favorable economic development will
occur or that the Bank's expectation of corresponding growth will be achieved.
See "Proposed Business."
NO DIVIDENDS
The Company has no plans to pay any cash dividends to its shareholders in
the foreseeable future. Since the Company and the Bank are both start-up
operations and may incur initial losses, both the Company and the Bank intend to
retain any earnings for the period of time management believes necessary to
ensure the success of their 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 by the Company and the Bank is also subject to legal and
regulatory restrictions. Any payment of dividends by the Company in the future
will depend on the Bank's earnings, capital requirements, financial condition,
and other factors considered relevant by the Board of Directors. See "Dividend
Policy," "Proposed Business," and "Supervision and Regulation."
LENDING LIMIT
Under South Carolina law, the Bank is limited in the amount it 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. Unless the Bank is able to sell participations
in its loans to other financial
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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.
DILUTION
After the offering, the Company expects to adopt a stock option plan which
will permit the Company to grant options to officers, directors, key employees,
advisors, and consultants of the Company for up to 25% of the number of shares
of Common Stock outstanding at the time the plan is adopted (expected to be
152,500 shares if the minimum number of shares is sold in the offering and
300,000 if the maximum number is sold). This plan would include the options the
Company will be obligated to issue to Mr. Wessinger and Mr. George under the
terms of their employment agreements. Exercise of these options could have a
dilutive effect on the shareholders' interest in the Company's earnings and book
value. In addition, the Company may issue additional shares of Common Stock or
preferred stock in the future. Any such stock offering by its nature could be
dilutive to the holdings of purchasers in this offering.
DETERRENT EFFECT OF ANTITAKEOVER PROVISIONS
The Company has certain takeover defenses in place, including (i) certain
provisions relating to meetings of shareholders; (ii) the ability of the Board
of Directors to issue additional shares of common stock and preferred stock
authorized in the Articles of Incorporation without shareholder approval; (iii)
employment agreements with certain executive officers which provide for
additional management compensation to such officer if the officer's employment
is terminated after a change in control of the Company; (iv) a staggered board
of directors; (v) certain nomination requirements for directors; (vi) a
provision in the Articles of Incorporation granting the Board of Directors the
discretion, when considering whether a proposed merger or similar transaction is
in the best interests of the Company and its shareholders, to take into account
the effect of the transaction on the employees, customers, and suppliers of the
Company and upon the communities in which the offices of the Company are
located; and (vii) a provision in the Company's bylaws providing that
individuals affiliated with business competitors of the Company may not qualify
to serve on the Company's Board of Directors. Any of these measures may impede
the takeover of the Company without the approval of the Company's Board of
Directors. See "Description of Capital Stock -- Certain Antitakeover Effects."
THE OFFERING
GENERAL
The Company is offering for sale a minimum of 610,000 shares and a maximum
of 1,200,000 shares of its Common Stock at a price of $10.00 per share to raise
gross proceeds of between $6,100,000 and $12,000,000 for the Company. The
minimum purchase for any investor (together with the investor's affiliates) is
100 shares and the maximum purchase is 4.9% of the offering unless the Company,
in its sole discretion, accepts a subscription for a lesser or greater number of
shares.
The Organizers (together with members of their immediate families) intend
to purchase an aggregate of at least 185,000 shares of the Common Stock to be
sold in this offering. The Organizers may subscribe for up to 100% of the shares
in the offering if necessary to help the Company achieve the minimum
subscription level necessary to release subscription proceeds from escrow, and
some Organizers may decide to purchase additional shares even if the minimum
subscription amount has been achieved. Any shares purchased by the Organizers in
excess of their original commitment will be purchased for investment and not
with a view to the resale of such shares. See "Description of Capital Stock of
the Company -- Shares Eligible for Future Sale." Because purchases by the
Organizers may be substantial and Organizers may purchase additional shares if
necessary to help the Company break escrow, investors should not place any
reliance on the sale of a specified minimum offering amount as an indication of
the merits of this offering or that the reasons for an Organizer's decision to
invest are shared by unaffiliated investors. See "Management."
Subscriptions to purchase shares will be received until midnight, Aiken,
South Carolina time, on July 15, 1997, unless all of the shares are earlier sold
or the offering is earlier terminated or extended by the Company.
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<PAGE> 10
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 December 31, 1998. The date the offering
terminates is referred to herein as the "Expiration Date." 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, the Company intends 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 the Company's organizational and pre-opening expenses
and in the expenses incurred with this offering. The Company may use the
services of brokers or dealers to effectuate the sales of these securities in
certain jurisdictions. See "Plan of Distribution."
Following acceptance by the Company, subscriptions will be binding on
subscribers and may not be revoked by subscribers except with the consent of the
Company. In addition, the Company reserves 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 the Company reserves the right to
reject, in whole or in part and in its sole discretion, any subscription. The
Company may, in its sole discretion, allocate shares among subscribers in the
event of an oversubscription for the shares. In determining which subscriptions
to accept, in whole or in part, the Company may take into account any factors it
considers 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 the Company's desire to have a broad distribution of stock ownership. If the
Company rejects any subscription, or accepts a subscription but in its
discretion subsequently elects to cancel all or part of such subscription, the
Company 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. Certificates representing shares duly subscribed and paid for will be
issued by the Company promptly after the offering conditions are satisfied and
escrowed funds are delivered to the Company.
CONDITIONS TO THE OFFERING AND RELEASE OF FUNDS
Subscription proceeds accepted by the Company for the initial 610,000
shares subscribed for in this offering will be promptly deposited in an escrow
account with the Escrow Agent until the conditions to this offering have been
satisfied or the offering has been terminated. The offering will be terminated,
no shares will be issued, and no subscription proceeds will be released from
escrow to the Company, unless on or before the Expiration Date (i) the Company
has accepted subscriptions and payment in full for a minimum of 610,000 shares;
and (ii) the Company has obtained approval of the Federal Reserve and the South
Carolina Bank Board to acquire the capital stock of the Bank and thereafter to
become a bank holding company. Any subscription proceeds accepted after
satisfaction of the conditions set forth above but before termination of this
offering will not be deposited in escrow but will be available for immediate use
by the Company to fund offering and organizational expenses and for working
capital.
If the above conditions are not satisfied by the Expiration Date or the
offering is otherwise earlier terminated, accepted subscription agreements will
be of no further force or effect and the full amount of all subscription funds
will be returned promptly to subscribers, without interest. The Company will
retain any interest earned thereon to repay the expenses incurred by the
Organizers in organizing the Company and the Bank. Any expenses not paid with
such interest will be paid by the Organizers.
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 above conditions are satisfied, the subscription amounts held in
escrow may be paid to the Company and shares issued to subscribers. Once the
Company has met the conditions for the offering, the Escrow
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<PAGE> 11
Agreement will be terminated, and any subscription proceeds accepted after
satisfaction of the conditions before termination of this offering will not be
deposited in escrow but will be available for immediate use by the Company to
fund offering and organizational expenses and for working capital. When the
subscription funds are released to the Company, the Company will use a portion
of the proceeds to repay the Organizers the amounts advanced by them for
organizational and offering expenses.
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 South Carolina Bank Board 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. In such event,
the Company will have incurred numerous expenses related to the organization of
the Company and the Bank, and the amount distributed to shareholders may be
substantially less than the subscription amount, and in an extreme case
shareholders may not be returned any amount.
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.
The Company may find it necessary to use brokers and/or dealers in order to
effect the sale of the Common Stock in certain jurisdictions. The Company has no
present arrangements or agreements with any such brokers and/or dealers with
respect to this offering. The Company anticipates that all such arrangements, if
any, would be on a "best efforts" basis, with the Company paying to the broker
and/or dealer a commission based on the shares sold through its efforts. The
Company believes that the range of possible commissions to be paid to brokers
and/or dealers in such transactions would be $.50 to $.70 per share and that the
maximum average commission payable in the offering when all shares subject to
this offering are taken into account would be $0.10. The Company anticipates
that any sales of Common Stock requiring the use of brokers and/or dealers will
not comprise a major part of this offering. If broker/dealers are used, all such
funds will be promptly transmitted to the Escrow Agent under the terms of the
escrow agreement.
HOW TO SUBSCRIBE
Shares may be subscribed for by delivering the subscription agreement (the
"Subscription Agreement") attached hereto as Exhibit A, completed and executed,
to the Company, on or prior to the Expiration Date. 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. Payment
must be made in United States dollars by cash or by check, bank draft or money
order drawn to the order of The Bankers Bank, Escrow Account for People's
Community Capital Corporation in the amount of $10.00 multiplied by the number
of shares subscribed for.
USE OF PROCEEDS
BY THE COMPANY
Upon satisfaction of all of the conditions discussed in "The
Offering -- Conditions to the Offering and Release of Funds," all subscription
funds held in escrow will be released and will become capital of the Company.
The gross proceeds to the Company from the sale of the shares offered hereby
will be between $6,100,000 and $12,000,000. The Company will use a portion of
the offering proceeds to pay (or reimburse the organizers for) the
organizational and offering expenses of the Company and the organizational and
pre-opening
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<PAGE> 12
expenses of the Bank (which are described in the following section) through the
date of the release of funds held in escrow. The organizational and offering
expenses of the Company will consist primarily of legal, accounting, marketing,
and printing expenses, and the Company anticipates that they will not exceed
$75,000. The Company will use approximately $875,000 for the purchase of the
facilities for the Bank's offices. The Company has obtained an $875,000 loan
from Carolina First Bank to purchase these facilities and will use a portion of
the offering proceeds to repay this loan. The loan has a six month term, with a
single payment of all interest and principal due at that time. Interest accrues
at the prime rate as published in the Wall Street Journal.
After payment of these expenses, the Company will use a minimum of
$6,000,000 and a maximum of $7,000,000 of the gross proceeds to purchase all of
the capital stock of the Bank. The Company will retain the balance of the
proceeds and intends initially to invest them in United States government
securities or as a deposit with the Bank. In the long-term, the Company will use
these 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. Subject to regulatory approval, the Company may also use
such proceeds for potential expansion opportunities, such as the establishment
of additional branches, the acquisition of other financial institutions, or the
establishment of mortgage banking services. The Company does not currently have
any definitive plans regarding any such expansion possibilities.
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.
<TABLE>
<CAPTION>
MINIMUM MAXIMUM
OFFERING(1) OFFERING(2)
----------- -----------
<S> <C> <C>
Gross proceeds from offering................................ $ 6,100,000 $12,000,000
Expenses for organization and issuance and distribution of
Common Stock.............................................. (75,000) (75,000)
Purchase of Bank offices(3)................................. -- (915,000)
Investment in capital stock of the Bank..................... (6,000,000) (7,000,000)
----------- -----------
Remaining proceeds.......................................... $ 25,000 $ 4,010,000
=========== ===========
</TABLE>
- ---------------
(1) Assumes that 610,000 shares of Common Stock are sold in this offering.
(2) Assumes that 1,200,000 shares of Common Stock are sold in this offering.
(3) If sufficient proceeds from the offering are available, the Company will use
a portion of the proceeds from the offering to repay the loan described
above from Carolina First Bank.
BY THE BANK
The Bank currently plans to use up to approximately $250,000 of the
proceeds it receives from the sale of its stock to the Company to reimburse the
Company and the Organizers for amounts advanced by the Company and the
Organizers to pay organizational and pre-opening expenses of the Bank.
Organizational expenses of the Bank, estimated at $25,000, include consulting
fees, expenses for market analysis and feasibility studies, and legal fees and
expenses. Pre-opening expenses, estimated at $225,000, include officers' and
employees' salaries and benefits (assuming the Bank opens for business on its
target date of August 1997). In addition, the Company anticipates that
approximately $250,000 will be used for renovation of the Bank's offices. For
furniture, fixtures, and equipment (including computer equipment) for the
offices, the Bank expects to spend approximately $500,000 in 1997. If there are
not sufficient proceeds from the offering for the Company to repay the $875,000
loan (plus interest) from Carolina First Bank used to purchase the facilities,
then the properties will be assigned to the Bank and the Bank will repay the
loan. The balance of the proceeds to be received by the Bank and available for
use in the first year (estimated at $4,185,000 if the minimum number of shares
is sold and $6,000,000 if the maximum number is sold) will be used for loans to
customers, investments, and other general corporate purposes.
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<PAGE> 13
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.
<TABLE>
<CAPTION>
MINIMUM MAXIMUM
OFFERING(1) OFFERING(2)
----------- -----------
<S> <C> <C>
Investment by the Company in the Bank's capital stock....... $6,100,000 $7,000,000
Reimbursement to the Company and Organizers for amounts
advanced to the Bank for organizational and pre-opening
expenses of the Bank...................................... (250,000) (250,000)
Furniture, Fixtures and Equipment........................... (500,000) (500,000)
Purchase of Bank offices(3)................................. (915,000) --
Renovation of Bank offices.................................. (250,000) (250,000)
---------- ----------
Remaining Proceeds.......................................... $4,185,000 $6,000,000
========== ==========
</TABLE>
- ---------------
(1) Assumes that 610,000 shares of Common Stock are sold in this offering.
(2) Assumes that 1,200,000 shares of Common Stock are sold in this offering.
(3) If there are not sufficient proceeds from the offering for the Company to
repay the loan described above from Carolina First Bank, then the properties
will be assigned to the Bank and the Bank will repay the loan.
Although the amounts set forth above provide an indication of the proposed
use of funds based on the Organizers' plans and estimates, actual expenses may
vary from the estimates. These estimates were based on assumptions that the
Organizers believed were reasonable, but as to which no assurances can be given.
The Organizers believe that the estimated minimum net proceeds of the offering
will satisfy the cash requirements of the Company and the Bank for their
respective first five years of operations and that neither the Company nor the
Bank will need to raise additional funds for operations during this period, but
there can be no assurance that this will be the case.
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<PAGE> 14
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
March 31, 1997, and the pro forma consolidated capitalization of the Company and
the Bank, as adjusted to give effect to the sale of the minimum of 610,000
shares in this offering. The Bank has established August 1997 as the target date
for opening the Bank; accordingly, the "As Adjusted" column reflects estimated
pre-opening expenses of the Company and the Bank through July 31, 1997.
<TABLE>
<CAPTION>
SHAREHOLDERS' EQUITY MARCH 31, 1997 AS ADJUSTED
- -------------------- -------------- -----------
<S> <C> <C>
Common Stock, par value $.01 per share; 10,000,000 shares
authorized; ten shares issued and outstanding(1); 610,000
shares issued and outstanding as adjusted (minimum
offering)................................................. $ 0 $ 6,100
Preferred Stock, par value $.01 per share; 10,000,000 shares
authorized; no shares issued and outstanding.............. 0 0
Additional paid-in capital(2)............................... 50,100 6,068,900
Unearned compensation....................................... (45,000) (45,000)
Deficit accumulated during the pre-opening stage(3)......... (9,487) (195,000)
======= ==========
Total shareholders' equity (deficit)(4)........... $(4,387) $5,835,000
======= ==========
</TABLE>
- ---------------
(1) Tommy B. Wessinger was issued ten shares upon organization of the Company
which will be redeemed for $10.00 per share (the price at which they were
issued) upon the first issuance of shares offered hereby. The stated capital
for ten shares is $.10.
(2) The expenses of the offering will be charged against this account. These
expenses are estimated to be approximately $75,000 and this amount has been
used in the calculation of the amount shown in the "As Adjusted" column.
(3) The deficit results from the expensing of estimated pre-opening expenses. As
of March 31, 1997, approximately $4,709 of pre-opening expenses and $44,297
of capitalizable organizational and offering costs had been incurred on
behalf of the Company and the Bank, and the Company's total accumulated
shareholder's deficit was $4,387. The Organizers estimate that a total of
$225,000 of pre-opening expenses, $25,000 of organizational costs ($18,000
for the Bank and $7,000 for the Company), and up to $1,625,000 of
capitalizable property costs for acquisition of the Bank's offices and 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 August 1997). 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.
(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.
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<PAGE> 15
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 -- Capital
Regulations." 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.
PROPOSED BUSINESS
GENERAL
The Company was incorporated as a South Carolina corporation on February
26, 1997, 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. See "Supervision and Regulation." 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 with the Federal
Reserve.
The Bank is being organized as a state bank under the laws of the United
States and, subject to regulatory approval, will engage in a commercial banking
business from its office in the Aiken County area. By virtue of being a state
bank, the Bank may not commence business until the South Carolina Bank Board
issues a charter for 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 South Carolina Bank Board or the Federal
Reserve Bank prior to the commencement of its business.
MARKETING FOCUS
Most of the banks in the Aiken 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 the Aiken
County area, the Organizers believe that there is a void in the community
banking market in the Aiken County area and believe that the Bank can
successfully fill this void. As a result, the Company generally will not attempt
to compete for the banking relationships of large corporations, but will
concentrate its efforts on small- to medium-sized businesses and on individuals.
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 Organizers, as long-time residents and business people in the
Aiken County area, 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. The Organizers believe 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.
15
<PAGE> 16
LOCATION AND SERVICE AREA
The Bank will engage in a general commercial and retail banking business,
emphasizing the needs of small-to medium-sized businesses, professional
concerns, and individuals, primarily in Aiken and North Augusta, South Carolina
and the surrounding area. The Company's address is 106-B Park Avenue, S.W.,
Aiken, South Carolina 29801, the address of the Aiken branch office will be 1715
Whiskey Road, Aiken, South Carolina 29803, and the address of the North Augusta
branch will be 518 Georgia Avenue, North Augusta, South Carolina. The Company's
telephone number is (803) 641-2265. See "Facilities."
The primary service area of the Bank will be Aiken County, with primary
focus centering on the county's two largest cities, Aiken and North Augusta.
Aiken County is one of South Carolina's largest counties geographically. It is
located in the midwestern portion of the state with its western border being the
Savannah River. Aiken County is centered between the mountains to the north and
the coast to the south, approximately one hour from Columbia and three hours
from Atlanta.
According to the 1990 census, the population of the county of Aiken was
120,940, with an estimated increase through 1996 of 12.2% to 135,640. The
population is projected to increase another 6.9% to 144,952 by 2001, according
to National Decision Systems data. It is estimated that over 70% of the total
population of the county is concentrated in and surrounding the cities of North
Augusta and Aiken where the offices of the Bank will be located.
Over 70 different companies have manufacturing or industrial facilities in
Aiken County, including Savannah River Site, the largest employer in the county,
which is operated by Westinghouse Corporation for the Department of Energy. The
1996 estimated average household income in the county was $49,063, with 15.2% of
the households having income in excess of $50,000.
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, NOW 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 Aiken 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%.
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. 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 and fluctuations in the value of real estate. In addition, loans for
construction can present a high degree of risk to the lender, depending upon,
among other things,
16
<PAGE> 17
whether the builder can sell the home to a buyer, whether the buyer can obtain
permanent financing, whether the transaction produces income in the interim, and
the nature of changing economic conditions. The Bank will compete for real
estate loans with a number of bank competitors which are well established in the
Aiken 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. The principal economic risk
associated with each category of anticipated loans, including commercial loans,
is the creditworthiness of the Bank's borrowers. In addition, risks associated
with commercial loans can be significant and include, but are not limited to,
fraud, bankruptcy, economic downturn, deteriorated or non-existing collateral,
and changes in interest rates. The well-established banks in the Aiken 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, home equity loans and lines of credit, 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 nonrevolving 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 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. As with the other
categories of loans, the principal economic risk associated with consumer loans
is the creditworthiness of the Bank's borrowers. Other risks associated with
consumer loans include, but are not limited to, fraud, deteriorated or
non-existing collateral, general economic downturn, and customer financial
problems. The principal competitors for consumer loans will be the established
banks in the Aiken County area.
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.
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.
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<PAGE> 18
OTHER BANKING SERVICES
Other anticipated bank services include cash management services, 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 South Carolina and other regions. The Bank also
plans to offer MasterCard 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.
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
Aiken County area and elsewhere. As of March 31, 1997, there were four
commercial banks (none of which are headquartered in Aiken County), two savings
banks, and two credit unions operating in Aiken County. A number of these
competitors are well established in the Aiken 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.
FACILITIES
Aiken Office. The proposed Aiken branch office will be located at 1715
Whiskey Road, Aiken, South Carolina 29803. It is a 2,600 square foot facility
with 28 customer parking spaces, five teller stations, and five drive-through
banking stations. This property was formerly used by an unrelated financial
institution as a branch office. The Company will purchase this property and the
North Augusta property for an aggregate of $875,000 from this other financial
institution. The Bank intends to provide automated teller services to its
customers at this office.
North Augusta Office. The proposed North Augusta branch office will be
located at 518 Georgia Avenue in North Augusta, South Carolina, approximately 15
miles from Aiken, South Carolina, in the downtown business district of North
Augusta. It will be a 3,600 square foot facility with 22 customer parking
spaces, five teller stations, which may be expanded to 10 stations to
accommodate the location's needs for expansion, if necessary, and a 338 square
foot drive-through banking facility with four drive-through banking stations.
This property was formerly used by an unrelated financial institution as a
branch office. The Company will purchase this property and the Aiken property
for an aggregate of $875,000 from this other financial institution. The Bank
intends to offer automated teller services to its customers at this office.
Executive Office. The Company's main offices will be located at 106-B Park
Avenue, S.W., Aiken, South Carolina 29801. The Bank will make loans but not
accept deposits at this office, which has approximately 10,000 square feet and
will serve as the Company's headquarters.
The Company believes that the facilities will adequately serve the Bank's
needs for its first several years of operation. See "Use of Proceeds -- By the
Bank."
EMPLOYEES
The Company anticipates that, upon commencement of operations, the Bank
will have approximately 20 full-time employees. The Company will not have any
employees other than its officers, none of whom will initially receive any
remuneration for their services to the Company.
LEGAL PROCEEDINGS
There are no material legal proceedings to which the Company or the Bank or
any of their properties are subject.
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<PAGE> 19
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 the Financial Institutions Reform,
Recovery and Enforcement Act of 1989 ("FIRREA") and following with FDICIA, which
was enacted 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 banking industry is also likely to change significantly
as a result of the passage of the Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994 (the "Interstate Banking Act"). The operations of the
Company and the Bank 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.
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 will also be 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 will be 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 are 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 Exchange Act (which the
Company would likely be required to do with respect to the Common Stock once it
has more than 500 shareholders of record) or no other person will own 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
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<PAGE> 20
or financial adviser, owning savings associations, and making investments in
certain corporations or projects designed primarily to promote community
welfare.
The Federal Reserve Board will impose 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 will be 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 will be subject to regulatory restrictions as described
below in "-- The Bank -- Dividends"). The Company will also be 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 is 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 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 will prohibit 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 is subject to regulation by the South Carolina Bank
Board. Consequently, the Company must receive the approval of the South Carolina
Bank Board prior to engaging in the acquisition of banking or nonbanking
institutions or assets. The Company must also file with the South Carolina Bank
Board periodic reports with respect to its financial condition and operations,
management, and intercompany relationships between the Company and its
subsidiaries.
THE BANK
General. Subject to receipt of the necessary approvals of its pending
applications, the Bank will operate as a state bank incorporated under the laws
of the United States and subject to examination by the South Carolina Bank
Board. The South Carolina Bank Board and the Federal Reserve 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 South Carolina Bank Board will require the Bank
to maintain certain capital ratios and will impose limitations on the Bank's
aggregate investment in real estate, bank premises, and furniture and fixtures.
The Bank will be required by the South Carolina Bank Board 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 South Carolina Bank Board.
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
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<PAGE> 21
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.
Holding companies which have been registered or have undergone a change in
control within the past two years or which have been deemed by the Federal
Reserve Board to be troubled institutions must give the Federal Reserve Board
thirty days prior notice of the appointment of any senior executive officer or
director. Within the thirty day period, the Federal Reserve Board may approve or
disapprove any such appointment. The Company will meet the criteria which
triggers this additional approval during the first two years after it is
registered.
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. Due to the high rate of failures in recent years, the
fees that commercial banks and thrifts pay to BIF and SAIF have increased. Since
1993, insured depository institutions like the Bank have paid for deposit
insurance under a risk-based premium system. Under this system, until mid-1995
depositor 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 semi-annual basis. Once the BIF reached
its legally mandated reserve ratio in mid-1995, the FDIC lowered 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 separates,
effective January 1, 1997, the Financial Corporation (FICO) assessment to
service the interest on its bond obligations. The amount assessed on individual
institutions, including the Bank, by FICO will be in addition to the amount paid
for deposit insurance according to the risk-related assessment rate schedule.
FICO assessment rates for the first semiannual period of 1997 were set at 1.30
basis points annually for BIF deposits. 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 the Bank's customers.
Transactions With Affiliates and Insiders. The Bank is 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 is also subject to the provisions of Section 23B of the Federal
Reserve Act which, among other things, prohibit 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 non-affiliated companies. The Bank is 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. The Bank is subject to regulatory restrictions on the payment
of dividends, including a prohibition of payment of dividends from its capital.
All dividends must be paid out of the undivided profits then on hand, after
deducting expenses, including losses and bad debts. The Bank must also obtain
approval from the South Carolina Bank Board prior to the payment of any
dividends to the Company. In addition, under FDICIA, the Bank may not pay a
dividend if, after paying the dividend, the Bank would be undercapitalized. See
"-- Capital Regulations" below.
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<PAGE> 22
Branching. Under current South Carolina law, the Bank may open branch
offices throughout South Carolina with the prior approval of the South Carolina
Bank Board. In addition, with prior regulatory approval, the Bank will be 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 banks if allowed by state
law. See "-- Recent Legislative Developments." The Organizers currently have no
plans or agreements whereby the Bank would acquire other banks or thrifts.
Community Reinvestment Act. The Community Reinvestment Act requires that,
in connection with examinations of financial institutions within their
respective jurisdictions, a financial institution's primary federal regulator
(this is the FDIC for the Bank) 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 financial
institutions to provide information to enable the public and public officials to
determine whether a financial institution will be 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 will be 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 will apply. 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
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<PAGE> 23
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 qualify 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 Organizers expect
the Bank to 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
unsafe or unsound condition or is engaging in an unsafe or unsound practice. The
degree of regulatory scrutiny of a financial institution will increase, and the
permissible activities of the institution will decrease, 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.
Effective January 1, 1997, the FDIC amended the risk-based capital
standards to incorporate a measure for market risk to cover all positions
located in a institution's trading account, and foreign exchange and commodity
positions wherever located. The effect of the rule is that it requires any bank
or bank holding company with significant exposure to market risk to measure the
risk and hold capital commensurate with that risk. Since the Bank does not have
any plans to engage in trading, foreign exchange or commodity position
activities, the rule is not expected to have an effect on the required Bank
capital levels.
These capital guidelines can affect the Company in several ways. After
completion of this offering, 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, making an
additional capital infusion necessary.
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
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<PAGE> 24
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,
indemnifications 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
In the 1994 legislative session, South Carolina amended its bank holding
act to allow nationwide interstate banking beginning in 1996. The Interstate
Banking Act, passed by Congress in 1994, which allows unrestricted interstate
bank mergers, unrestricted interstate acquisition of banks by bank holding
companies, and interstate de novo branching by banks. As a result of this
legislation, the number of competitors in the Company's market may increase.
However, the Company believes it can compete effectively in the market and that
the legislation will not have a material adverse impact on the Company or the
Bank. 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 Bank will be affected by domestic economic conditions
and the monetary and fiscal policies of the United States government and its
agencies. The Federal Reserve Board's monetary policies have had, and will
likely 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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<PAGE> 25
MANAGEMENT
GENERAL
The following table sets forth the respective names, positions with the
Company and the Bank, and anticipated subscriptions of the Organizers. The
Organizers may elect to purchase more than the shares indicated below.
<TABLE>
<CAPTION>
ANTICIPATED SUBSCRIPTION
-----------------------------------------
PERCENTAGE OF PERCENTAGE OF
NUMBER OF MINIMUM MAXIMUM
NAME POSITION WITH COMPANY/BANK(1) SHARES(2) OFFERING(3) OFFERING(4)
- ---- ----------------------------- --------- ------------- -------------
<S> <C> <C> <C> <C>
Raymond D. Brown..................... Class II Director; Organizer 15,000 2.50% 1.25%
W. Cothran Campbell.................. Class II Director; Organizer 15,000 2.50 1.25
Alan J. George....................... Class II Director; President;
Chief Operating Officer;
Organizer 15,000 2.50 1.25
Margaret Holley-Taylor............... Class I Director; Organizer 15,000 2.50 1.25
Anthony E. Jones..................... Class II Director; Organizer 20,000 3.28 1.67
James D. McNair...................... Class III Director; Organizer 15,000 2.50 1.25
Clark D. Moore, M.D.................. Class I Director; Organizer 15,000 2.50 1.25
Russell D. Phelon.................... Class III Director; Organizer 30,000 5.00 2.50
Donald W. Thompson................... Class I Director; Organizer 15,000 2.50 1.25
John B. Tomarchio, M.D............... Class I Director; Organizer 15,000 2.50 1.25
Tommy B. Wessinger................... Class III Director; Chairman;
Chief Executive Officer;
Organizer 15,000 2.50 1.25
------- ----- -----
Total...................... 185,000 30.33% 15.42%
======= ===== =====
</TABLE>
- ---------------
(1) The terms of the Class I Directors will expire in 1997; the terms of the
Class II Directors will expire in 1998; and the terms of the Class III
Directors will expire in 1999.
(2) All of such purchases will be at a price of $10.00 per share, the same price
at which shares are being offered to the public. No person is expected to
own more than 5% of the shares of the Common Stock immediately after the
offering. However, Organizers may purchase up to 100% of the shares in the
offering if necessary for the Company to achieve the minimum capital
requirement and also may decide to purchase additional shares in the
offering even if the minimum offering is fully subscribed. Any shares
purchased by the Organizers in excess of their original commitment will be
purchased for investment and not with a view to the resale of such shares.
Although each Organizer has agreed with the other Organizers that he will
subscribe for the number of shares indicated above, neither the Organizers
nor any other subscriber will be obligated to purchase shares except
pursuant to a valid subscription agreement executed after receipt of this
Prospectus. This table includes shares which are expected to be beneficially
owned by the Organizers upon completion of the offering.
(3) Assumes that the minimum number of 610,000 shares are sold in this offering.
(4) Assumes that the maximum number of 1,200,000 shares are sold in this
offering.
All of the Organizers will serve as directors of the Company and the Bank.
Biographical information concerning the Organizers is set forth below.
Raymond D. Brown, 52, is an Organizer and Director of the Company. He
resides in North Augusta, South Carolina and is a graduate of Auburn University
where he received a Bachelors Degree in Building Construction. He is currently
the President and Chief Executive Officer of R.D. Brown Contractors, Inc., a
general construction
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<PAGE> 26
company specializing in commercial and industrial construction. He has served on
the Chamber of Commerce Board and the NationsBank Advisory Board in North
Augusta, South Carolina.
W. Cothran Campbell, 69, is an Organizer and Director of the Company and is
a resident of Aiken, South Carolina. He served in the United States Navy in the
South Pacific during World War II and later attended the University of The South
in Sewanee, Tennessee. He is the President of Dogwood Stable, Inc. and the
founder and former Chairman of the Board of Burton-Campbell Advertising Agency
in Atlanta and New York. Mr. Campbell is also a trustee of the Thoroughbred
Owner's and Breeders Association, the National Museum of Racing and Hall of Fame
in Saratoga Springs, New York, and is the 1992 recipient of the John W.
Galbreath Award for entrepreneurial excellence and leadership in the horse
industry. He is currently a member of the Aiken Rotary Club, Piedmont Driving
Club in Atlanta, Woodside Plantation Country Club, Green Boundary Club, and the
Aiken Tennis Club, and is a former member of the Atlanta Rotary Club.
Alan J. George, 47, is an Organizer and Director of the Company. He is a
resident of Aiken, South Carolina and a graduate of the University of South
Carolina, Columbia where he received a Bachelors Degree in English. He is also a
graduate of the Canon Trust School in Charlotte, North Carolina and the Stonier
Graduate School of Banking. He graduated from the University of South Carolina
School of Law in 1974. In 1975 he became Vice President and Trust Officer of F&M
Bank in Aiken, South Carolina. In 1983 he became Vice President and Business
Development Officer and served in this capacity until 1985 when he became Vice
President and Group Head for Citizens & Southern Bank. In 1987 Mr. George became
Senior Vice President and Regional Executive Officer and remained employed in
this position following the merger of Citizens & Southern Bank with NationsBank
until 1996. He is currently the President and Secretary of the Company and is
the proposed President and Chief Operating Officer of the Bank. Mr. George is
Chairman of the Aiken Housing Committee and Chairman and member of the Salvation
Army Boys & Girls Club Advisory Council. He is also a member of the South
Carolina Bar Association, the Aiken County Bar Association, and the Aiken Rotary
Club. He is a former member of the Board of the University of South Carolina
Education Foundation, the Investment Policy Committee, the University of South
Carolina Aiken Partnership Board and is past President and former member of the
executive committee of the Trust Division for the South Carolina Bankers
Association. Mr. George is also a member of the Corporation, Banking and
Securities Law Section of the South Carolina Bar Association.
Margaret Holley-Taylor, 62, is an Organizer and Director of the Company.
She is a resident of Aiken, South Carolina and the owner of Aiken Office Supply.
Ms. Holley-Taylor received the "Small Business Person of the Year" award in 1986
and was a recipient of the Finalist Award as the "Aiken County Small Business
Person of the Year" in 1991. She previously served on the NationsBank Advisory
Board and the Partnership Board of the University of South Carolina, Aiken, and
was on the Board of Directors for the Aiken Chamber of Commerce and the Aiken
United Way, where she also served as Treasurer for three years. She is a member
of the Woodside Plantation Country Club, the Houndslake Country Club, and the
National Business Products Industry Association.
Anthony E. Jones, 34, is an Organizer and Director of the Company and a
resident of Augusta, Georgia. Mr. Jones majored in Finance at the University of
Georgia, where he received a bachelor's degree in Business Administration. From
1985 to 1996 he was the General Manager and Treasurer of Gerald Jones VW Inc.
and, since 1996, has been the President and Chief Executive Officer of that
company. He is also President of Andy Jones Home Improvement Company and a
member of the Augusta Country Club.
James D. McNair, 79, is an Organizer and Director of the Company and Vice
Chairman of the Company and the proposed Bank. He resides in Aiken, South
Carolina and attended the University of South Carolina. He is a graduate of
Canon Trust School and the School of Banking of the South at Louisiana State
University. Mr. McNair was the President of Farmers and Merchants Bank of Aiken
from 1963 to 1983 and was Senior Executive Vice President of Citizens & Southern
National Bank from 1983 until 1984. He served as a member of the advisory board
of NationsBank until December 1996. Mr. McNair is a past president of the South
Carolina Association of Independent Bankers and the South Carolina Bankers
Association. He is also a past member of the South Carolina Board of Financial
Institutions and was elected Man of the Year in 1984 by the Greater Aiken
Chamber of Commerce. Mr. McNair is a charter member, organizer and director of
the Lower Savannah Council of Governments and President of the Lower Savannah
Council of Governments Development Corporation. He is
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<PAGE> 27
an honorary member of the Aiken Rotary Club and a member of the Friends of Aiken
County Museum. Mr. McNair was also an organizer and is a past president of
Friends of Hopelands, a charitable organization in Aiken.
Clark D. Moore, M.D., 52, is an Organizer and a Director of the Company and
is a resident of Aiken, South Carolina. Dr. Moore graduated from the University
of Illinois under a Western Golf Association Evans Scholarship, a National Merit
Scholarship and an Illinois State Scholarship. He received a Masters Degree from
Loyola University, graduated with Honors in Medicine from the St. Louis
University School of Medicine, and trained in general surgery and orthopedic
surgery at the Medical College of Virginia. In 1993 he was awarded the Order of
the Palmetto, the highest civilian award presented by the State of South
Carolina. He is a member of the American Association of Orthopedic Surgery, the
American Medical Association, the South Carolina Orthopedic Society, and the
Eastern Orthopedic Association. He is a member of the board of trustees of the
Aiken Regional Medical Centers Hospital and previously served on the Board of
Directors of the Hitchcock Rehabilitation Center. Dr. Moore is the founder and
senior partner of Carolina Orthopedic Associates P.A., founder and developer of
the Aiken Medical Center, and founder of Preferred Care, a physician hospital
organization. He is an active member of the Aiken Chamber of Commerce and a
former member of the advisory board for NationsBank in Aiken, South Carolina.
Russell D. Phelon, 55, is an Organizer and Director of the Company and a
resident of Aiken, South Carolina. He graduated from Rensselaer Polytechnic
Institute in 1963 with a Bachelors Degree in Mechanical Engineering and attended
Babson Institute in Wellesley, Massachusetts from 1963 until 1964. He is the
President and Chief Executive Officer of R.E. Phelon Company, Inc., which is
headquartered in Aiken, South Carolina, and Power Parts, Inc. and has served on
the Board of Directors of Springfield Wire Company in Springfield, Massachusetts
and the board of trustees of Western New England College.
Donald W. Thompson, 51, is an Organizer and Director of the Company and a
resident of North Augusta, South Carolina. He has been President of Windsor
Jewelers, Inc. since 1989 and has been active in the jewelry industry for 35
years. Mr. Thompson is a member of the Augusta Kiwanis.
John B. Tomarchio, M.D., 44, is an Organizer and Director of the Company
and a resident of Aiken, South Carolina. He graduated summa cum laude from
Central Florida University with a Bachelors Degree in Microbiology and is a
graduate of Louisiana State University Medical School. He also received
specialty training at Tulane University Medical Center and the Medical College
of Georgia and is board certified in Emergency Medicine. He is the founder and
former President and Chief Executive Officer of South Carolina Physicians Care,
a physicians multi-specialty group. Dr. Tomarchio currently serves as President
of the Aiken County Medical Society and was appointed to the Board of Directors
of the Aiken-Barnwell Mental Health Association by both South Carolina Governor
Campbell and Governor Beasley. He is a member of the Aiken Judicial-Public
Safety Commission, the City of Aiken Planning Commission, the Aiken County
Indigent Care Commission, and the Vice Chairman of the Aiken Emergency Services
Subcommittee. In addition to his private practice in general and family
medicine, he is also an active member of a number of professional associations
including the Aiken County Medical Society, the South Carolina Hospital Trustee
Association, the South Carolina Medical Association, the American Medical
Association, and the American College of Physicians.
Tommy B. Wessinger, 59, is an Organizer and Director of the Company and is
also the proposed Chairman and Chief Executive Officer of the Bank. He is a
resident of Aiken, South Carolina and attended Clemson University. He is also a
graduate of the University of North Carolina School of Banking, the Graduate
School of Banking of the South, L.S.U., and the Executive Management School at
Columbia University. Mr. Wessinger began his banking career in 1968 with Bankers
Trust of South Carolina, working in various positions and in various cities
throughout South Carolina. In 1982, Mr. Wessinger became a Regional Executive
for Bankers Trust where he was responsible for all branches throughout a ten
county region, including Aiken County. Mr. Wessinger continued to serve in this
role after NCNB acquired Bankers Trust from 1986 until 1992. Following the
merger of C&S Bank and NCNB, which resulted in the formation of NationsBank, Mr.
Wessinger was employed by NationsBank as a Senior Banking Executive and Senior
Commercial Area Executive for the Aiken County area from 1992 until his
retirement in 1995. Mr. Wessinger is a recipient of The Order of the Palmetto
and was named Man of the Year in 1994 by the Greater Aiken Chamber of Commerce.
He is the Vice
27
<PAGE> 28
President and a member of the Board of Directors of Hitchcock Rehabilitation
Center, former Chairman of the Economic Development Board of Aiken and Edgefield
Counties, and former Chairman of the Aiken Tech Foundation Board. He is also a
former member of the Governor's Council of Illiteracy and Workforce Excellence
and the Aiken County Human Relations Council, and he is a current member of the
Aiken Rotary Club.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with both Mr. Wessinger
and Mr. George for five year terms beginning March 3, 1997. At the end of each
term, upon adoption of a resolution by the Board of Directors of the Bank (the
"Board"), each term shall be extended for an additional year so that each
remaining term shall continue to be for five years unless either Mr. Wessinger
or Mr. George provide written notice to the Bank to fix their terms to finite
terms of five years commencing with the later date of March 3, 1997, or the date
of the latest Board resolution extending each term.
Tommy B. Wessinger and the Company entered into an Employment Agreement
pursuant to which Mr. Wessinger will serve as the Chairman and Chief Executive
Officer of the Company and the Bank. The Employment Agreement provides for a
starting salary of $1.00 per annum, plus medical insurance premiums, until
December 31, 1997. Thereafter, Mr. Wessinger will be paid a salary of $75,000
plus his yearly medical insurance premium. In addition, in lieu of salary in
1997, on January 2, 1998, the Company will issue 5,000 shares of common stock to
Mr. Wessinger for no additional consideration. Mr. Wessinger will be eligible 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. In addition, on the first anniversary of the opening
date of the Bank, he will be eligible to receive a cash bonus in an amount
determined by the Board of Directors (with Mr. Wessinger abstaining). The
agreement provides that the amount of the bonus will be based on such intangible
criteria as the Board shall establish. The Board anticipates that among the
factors it will consider will be Mr. Wessinger's efforts in connection with
obtaining approvals from the South Carolina Bank Board and the Federal Reserve,
and in connection with preparing generally for the Bank's opening. On each
anniversary of the opening date thereafter, Mr. Wessinger will be eligible to
receive a cash bonus equal to 5% of the net pre-tax income of the Bank
(determined in accordance with generally accepted accounting principles) if the
Bank achieves certain performance levels established by the Board of Directors
from time to time. Upon the closing of the offering (or as soon thereafter as an
appropriate stock option plan is adopted by the Company), Mr. Wessinger will be
granted an option to purchase an amount equal to 5% of the shares sold in the
offering (30,500 shares if the minimum number of shares is sold and 60,000
shares if the maximum number is sold) at $10.00 per share. The options will vest
at the rate of one-fifth per year for each of the first five anniversaries of
the opening date, subject to Mr. Wessinger being employed by the Company on such
date and meeting certain performance criteria. The options will have a term of
ten years. In addition, the Company will grant Mr. Wessinger an option to
purchase 10,000 shares of common stock which will vest as to 2,000 shares on
each of December 31, 1998, 1999, 2000, 2001, and 2002, but in each case only if
Mr. Wessinger remains employed by the Company on such date. Additionally, Mr.
Wessinger will participate in the Bank's retirement, welfare and other benefit
programs and is entitled to reimbursement for automobile expenses, club dues,
and travel and business expenses.
Alan J. George and the Company entered into an Employment Agreement
pursuant to which Mr. George will serve as the President and Chief Operating
Officer of the Company and the Bank. The Employment Agreement provides for a
starting salary of $75,000 per annum, plus medical insurance premiums, until the
Company has met the minimum conditions for the offering and released
subscription proceeds from escrow. Thereafter, Mr. George will be paid a salary
of $90,000 plus his yearly medical insurance premium. Mr. George will be
eligible 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. In addition, on the first anniversary of
the opening date of the Bank, he will be eligible to receive a cash bonus in an
amount determined by the Board of Directors (with Mr. George abstaining). The
agreement provides that the amount of the bonus will be based on such intangible
criteria as the Board shall establish. The Board anticipates that among the
factors it will consider will be Mr. George's efforts in connection with
obtaining approvals from the South Carolina Bank Board and the Federal Reserve,
and in connection with preparing generally for the Bank's opening. On each
28
<PAGE> 29
anniversary of the opening date thereafter, Mr. George will be eligible to
receive a cash bonus equal to 5% of the net pre-tax income of the Bank
(determined in accordance with generally accepted accounting principles) if the
Bank achieves certain performance levels established by the Board of Directors
from time to time. Upon the closing of the offering (or as soon thereafter as an
appropriate stock option plan is adopted by the Company), Mr. George will be
granted an incentive-based stock option identical to the incentive-based option
described above for Mr. Wessinger. Additionally, Mr. George 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 Company
will maintain a term life insurance policy on Mr. George providing for death
benefits in the amount of $1,000,000 payable to the Organizers and $1,000,000
payable to Mr. George's family.
If the Company terminates either Mr. Wessinger's or Mr. George's employment
without cause or if Mr. Wessinger's or Mr. George's employment is terminated due
to a sale, merger or dissolution of the Company or the Bank, the Company will be
obligated to continue their salaries and bonuses for the first twelve months
thereafter plus one-half of their salaries and bonuses for the second twelve
months thereafter. Furthermore, the Company must remove any restrictions on
outstanding incentive awards so that all such awards vest immediately and the
Company must continue to provide medical benefits to Mr. Wessinger and Mr.
George until they reach the age of 65.
In addition, each employment agreement provides that following termination
of their employment with the Bank and for a period of twelve months thereafter,
neither Mr. Wessinger, nor Mr. George, may (i) be employed in the banking
business as a director, officer at the vice-president level or higher, or
organizer or promoter of, or provide executive management services to, any
financial institution within Aiken County, (ii) solicit major customers of the
Bank for the purpose of providing financial services, or (iii) solicit employees
of the Bank for employment.
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.
INTERESTS OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
The Company has entered into an agreement to lease the Executive Office
property with Margaret Holley-Taylor. The Company believes that this agreement
was entered into on terms no less favorable to the Company than could be
obtained from an unaffiliated third party. 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 Company and the Bank. The Bank is subject to a limit
on the aggregate amount it could lend to its and the Company's directors and
officers as a group equal to its unimpaired capital and surplus (or, under a
regulatory exemption available to banks with less than $100 million in deposits,
twice that amount). 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.
EXCULPATION AND INDEMNIFICATION
The Articles of Incorporation of the Company contain a provision which
eliminates the liability of a director to the Company or its shareholders for
monetary damages for breach of the duty of care or any other duty as a
29
<PAGE> 30
director. This provision does not eliminate such liability to the extent the
director engaged in willful misconduct or a knowing violation of criminal law or
of any federal or state securities law, including, without limitation, laws
proscribing insider trading or manipulation of the market for any security.
The Bylaws of the Company require the Company to indemnify any person who
was, is, or is threatened to be made a defendant or respondent in any
threatened, pending, or completed action, suit, or proceeding, whether civil,
criminal, administrative, or investigative, by reason of service by such person
as a director of the Company or the Bank or any other corporation which he
served as such at the request of the Company. Except as noted in the next
paragraph, directors are entitled to be indemnified against judgments,
penalties, fines, settlements, and reasonable expenses actually incurred by the
director in connection with the proceeding. Directors are also entitled to have
the Company advance any such expenses prior to final disposition of the
proceeding, upon delivery of a written affirmation by the director of his good
faith belief that the standard of conduct necessary for indemnification has been
met and a written undertaking to repay the amounts advanced if it is ultimately
determined that the standard of conduct has not been met.
Under the Bylaws, indemnification will be disallowed if it is established
that the director (i) appropriated, in violation of his duties, any business
opportunity of the Company, (ii) engaged in willful misconduct or a knowing
violation of law, (iii) permitted any unlawful distribution, or (iv) derived an
improper personal benefit. In addition to the Bylaws of the Company, Section
33-8-520 of the South Carolina Business Corporation Act of 1988 (the
"Corporation Act") requires that "a corporation indemnify a director who was
wholly successful, on the merits or otherwise, in the defense of any proceeding
to which he was a party because he is or was a director of the corporation
against reasonable expenses incurred by him in connection with the proceeding."
The Corporation Act also provides that upon application of a director a court
may order indemnification if it determines that the director is entitled to such
indemnification under the applicable standard of the Corporation Act.
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.
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 $.01 per share, and 10,000,000 shares of preferred
stock, par value $.01 per share (the "Preferred Stock"). 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.
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.
There currently is no market for the shares and, although the Company has
filed a registration statement with the SEC to register the issuance of the
Common Stock in the offering under the Securities Act of 1933, it is not
30
<PAGE> 31
likely that any trading market will develop for the shares in the future. There
are no present plans for the Common Stock to be traded on any stock exchange or
in the over-the-counter market.
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, 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.
CERTAIN ANTITAKEOVER EFFECTS
The provisions of the Articles, the Bylaws and the South Carolina
corporation 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 twenty-five
members.
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 other provisions described below, may make 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 Articles of Incorporation
provide that shareholders may remove a director without cause only by the vote
of the holders of at least a majority of the Company's outstanding voting
securities. The Bylaws also 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.
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<PAGE> 32
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 at any meeting of shareholders. Notice of such shareholder proposals
and shareholder nominations must be in writing and be received by the Secretary
of the Company not later than ninety days prior to the meeting. The Company may
reject a shareholder proposal or nomination that is not made in accordance with
such procedures.
Limitations on Shareholders' Action by Written Consent. The Corporation
Act permits shareholder action by written consent in lieu of a meeting only if
such consent is unanimous.
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 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. These provisions
could reduce the likelihood that a third party would nominate and elect
individuals to serve on the Board of Directors. The Bylaws also contain a
provision stating that individuals affiliated with competitors of the Company
may not qualify to serve on the Company's Board of Directors.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have a minimum of
610,000 and a maximum of 1,200,000 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 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 April 4, 1997, and for the
period from December 3, 1996 (inception), until March 31, 1997, 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.
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<PAGE> 33
PEOPLE'S COMMUNITY CAPITAL CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
REPORT ON FINANCIAL STATEMENTS
FOR THE PERIOD FROM DECEMBER 3, 1996
(DATE OF INCEPTION), TO MARCH 31, 1997
<PAGE> 34
PEOPLE'S COMMUNITY CAPITAL CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
AIKEN, SOUTH CAROLINA
CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS.......... F-2
FINANCIAL STATEMENTS
Balance sheet............................................. F-3
Statement of income....................................... F-4
Statement of changes in stockholder's equity.............. F-5
Statement of cash flows................................... F-6
NOTES TO FINANCIAL STATEMENTS............................... F-7
</TABLE>
F-1
<PAGE> 35
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
People's Community Capital Corporation
Aiken, South Carolina
We have audited the accompanying balance sheet of People's Community
Capital Corporation (a development stage enterprise) as of March 31, 1997 and
the related statements of income, changes in stockholder's equity, and cash
flows for the period from December 3, 1996 (date of inception), to March 31,
1997. 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 People's Community Capital
Corporation (a development stage enterprise) as of March 31, 1997 and the
results of its operations and its cash flows for the period from December 3,
1996 (date of inception), to March 31, 1997, in conformity with generally
accepted accounting principles.
Elliott, Davis & Company, L.L.P.
Greenwood, South Carolina
April 4, 1997
(except for Note 2, as to which the date
is May 19, 1997)
F-2
<PAGE> 36
PEOPLE'S COMMUNITY CAPITAL CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEET
MARCH 31, 1997
<TABLE>
<S> <C>
ASSETS
Cash and cash equivalents................................... $181,280
Organization costs.......................................... 13,289
Deferred registration costs................................. 31,008
Purchase option............................................. 7,500
Deposits.................................................... 7,500
--------
Total assets...................................... $240,577
========
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES
Accounts payable.......................................... $ 13,260
Accrued interest.......................................... 1,740
Due to organizers......................................... 230,000
--------
Total liabilities................................. $244,964
--------
STOCKHOLDER'S EQUITY
Common stock, $.01 par value, 10,000,000 shares
authorized, 10 shares issued and outstanding........... --
Additional paid-in-capital................................ 50,100
--------
Unearned compensation..................................... (45,000)
Deficit accumulated during the development stage.......... (9,487)
--------
Total stockholder's equity........................ (4,387)
--------
Total liabilities and stockholder's equity........ $240,577
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 37
PEOPLE'S COMMUNITY CAPITAL CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF INCOME
FOR THE PERIOD FROM DECEMBER 3, 1996 (DATE OF INCEPTION), TO MARCH 31, 1997
<TABLE>
<S> <C>
REVENUES
Interest income........................................... $ 220
-------
Total revenues.................................... 220
-------
EXPENSES
Compensation.............................................. 5,000
Office rent............................................... 2,000
Office expenses........................................... 1,003
Interest.................................................. 1,704
-------
Total expenses.................................... 9,707
-------
Loss before income tax provision............................ (9,487)
PROVISION FOR INCOME TAXES.................................. --
-------
NET LOSS.................................................... $(9,487)
=======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 38
PEOPLE'S COMMUNITY CAPITAL CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
FOR THE PERIOD FROM DECEMBER 3, 1996 (DATE OF INCEPTION), TO MARCH 31, 1997
<TABLE>
<CAPTION>
ADDITIONAL (DEFICIT) ACCUMULATED
PAID-IN UNEARNED DURING THE
COMMON STOCK CAPITAL COMPENSATION DEVELOPMENT STAGE TOTAL
------------ ---------- ------------ --------------------- -------
<S> <C> <C> <C> <C> <C>
Balances -- December 3, 1996
(date of inception)............ $ -- $ -- $ -- $ -- $ --
Issuance of common stock (10
shares)........................ -- 100 -- -- 100
Deferred compensation
agreement...................... -- 50,000 (45,000) -- 5,000
Net loss......................... -- -- -- (9,487) $(9,387)
-------- ------- -------- -------- -------
Balances -- March 31, 1997....... $ -- $50,100 $(45,000) $(9,487) $(4,387)
======== ======= ======== ======== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 39
PEOPLE'S COMMUNITY CAPITAL CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM DECEMBER 3, 1996 (DATE OF INCEPTION), TO MARCH 31, 1997
<TABLE>
<S> <C>
NET CASH USED FOR PRE-OPERATING ACTIVITIES
Net Loss.................................................. $ (9,487)
Adjustments to reconcile net income to net cash used by
pre-operating activities...............................
Deferred compensation expense............................. 5,000
Changes in deferred and accrued amounts
Organization costs..................................... (13,289)
Deferred registration costs............................ (31,008)
Deposits............................................... (7,500)
Accounts payable....................................... 13,260
Accrued interest....................................... 1,704
--------
Net cash used by pre-operating activities......... (41,320)
--------
INVESTING ACTIVITIES
Deposit on real estate option............................. (7,500)
--------
Net cash used for investing activities............ (7,500)
--------
FINANCING ACTIVITIES
Issuance of common stock.................................. 100
Borrowings from organizers................................ 230,000
--------
Net cash provided by financing activities......... 230,100
--------
Net increase in cash.............................. 181,280
CASH AND CASH EQUIVALENTS, DECEMBER 3, 1996 (date of
inception)................................................ --
--------
CASH AND CASH EQUIVALENTS, MARCH 31, 1997................... $181,280
--------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 40
PEOPLE'S COMMUNITY CAPITAL CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACTIVITIES
BUSINESS ACTIVITY AND ORGANIZATION
People's Community Capital Corporation (the Company), was incorporated on
February 26, 1997, under the laws of the State of South Carolina for the purpose
of operating as a bank holding company pursuant to the federal Bank Holding
Company Act of 1956, as amended. The group of organizers initiated several
financial transactions on behalf of the Company prior to the date of
incorporation and as early as December 3, 1996, the date of inception.
The Company is development stage enterprise as defined by Statement of
Financial Accounting Standards 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 authorized the issuance of 10,000,000 shares of common stock,
$.01 par value per share. In addition to the above common stock, the Company
also has the authority, exercisable by its Board of Directors, to issue up to
10,000,000 shares of preferred stock, $.01 par value per share.
The Company intends to file a Registration Statement with the Securities
and Exchange Commission to sell a maximum of 1,200,000 shares of its common
stock at $10 per share, through a public offering. The Company will use a
minimum of $6,000,000 and a maximum of $7,000,000 of the net proceeds of the
offering to capitalize its proposed state banking subsidiary, People's Community
Bank of South Carolina (the "Bank"). The Company will retain the balance of the
proceeds and intends initially to invest it in United States government
securities or as a deposit with the Bank. In the long-term, the Company will use
these sums for working capital and other general corporate purposes, including
payments of expenses of the Company and the provision of additional capital for
the Bank, if necessary.
YEAR-END
The Company has adopted a fiscal year ending on December 31, effective for
the period ending December 31, 1997.
ESTIMATES
The financial statements include estimates and assumptions that affect the
Company's financial position and results of operations and disclosure of
contingent assets and liabilities. Actual results could differ from these
estimates.
CASH AND 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.
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.
Organization costs are capitalized when incurred, and are amortized over a
period of sixty months beginning in the period in which the Company commences
its planned operations.
F-7
<PAGE> 41
PEOPLE'S COMMUNITY CAPITAL CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DEFERRED REGISTRATION COSTS
Deferred registration costs are costs incurred by the Company in connection
with the offering and issuance of its stock. The deferred registration 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
registration costs will be charged to operations during the period in which the
offering is deemed unsuccessful.
STOCK-BASED COMPENSATION AND STOCK OPTIONS
SFAS 123, "Accounting for Stock-Based Compensation", issued in October
1995, allows a company to either adopt the fair value method of valuation or
continue using the intrinsic valuation method presented under Accounting
Principles Board ("APB") Opinion 25 to account for stock-based compensation. The
fair value method recommended in SFAS 123 requires a company to recognize
compensation expense based on the fair value of the option on the grant date.
The intrinsic value method measures compensation expense as the difference
between the quoted market price of the stock and the exercise price of the
option on the date of grant. The Company has elected to use APB Opinion 25 and
the intrinsic value method. Stock options are granted at the estimated fair
market value on the grant date.
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 and are adjusted for changes in tax laws and tax
rates when those changes are enacted. Deferred tax assets and liabilities
represent the future tax consequences of those differences, which will either be
taxable or deductible when the assets and liabilities are recovered or settled.
Deferred taxes may also be recognized for operating losses that are available to
offset future taxable income. Valuation allowances are established when
necessary to reduce deferred tax assets to the amount expected to be realized.
At March 31, 1997, no taxable income had been generated and, therefore, no
tax provision has been included in these financial statements.
NOTE 2 -- PURCHASE OPTION
On March 20, the Company entered into an Option Agreement with an unrelated
party to acquire certain real property for a total purchase price of $875,000.
The property is comprised of two former bank locations in Aiken and North
Augusta, South Carolina, and will be used as the Company's primary banking
locations. A deposit of $7,500 allowed the Company 30 days to consummate the
purchase of the property. Subsequent to April 4, 1997 an additional
non-refundable deposit of $10,000 was made in order to extend the purchase
period an additional 45 days. All deposits are applied against the purchase
price of the property.
NOTE 3 -- DUE TO ORGANIZERS
The group of ten organizers has advanced to the Company a total of $230,000
as of March 31, 1997, in order to fund all of the Company's organizational and
pre-opening activities. The organizers will be reimbursed for these advances out
of the proceeds of the initial capitalization of the bank. Interest has been
accrued on the advances based on a 8.25% interest rate from the date of the
advances to March 31, 1997.
NOTE 4 -- COMMITMENTS
The Company has entered into three Agreements with a bank consulting firm,
a law firm and a bank to assist it in preparing and filing all organizational,
incorporation, and bank holding company applications and to assist in
F-8
<PAGE> 42
PEOPLE'S COMMUNITY CAPITAL CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
preparing a registration statement and consummating the Company's initial
offering. The aggregate cost of the services is expected to be approximately
$75,000.
The Company also leases office space under a non-cancelable operating lease
which expires in August, 1997. The lease requires monthly lease payments of
$2,000 and includes three options for consecutive six-month extensions. The
minimum future lease payments required under this lease are $10,000.
NOTE 5 -- STOCK BASED COMPENSATION
The Company has employment agreements with two officers, the Chief
Executive Officer and the Chief Operating Officer. Under terms of the
agreements, the Company will grant options to acquire additional shares of
common stock. Upon the closing of the offering (or as soon thereafter as an
appropriate stock option plan is adopted by the Company), the officers will be
granted options to purchase an amount equal to 5% of the shares sold in the
initial offering (minimum of 30,500 shares and maximum of 60,000 shares) at
$10.00 per share. The options will vest at the rate of one-fifth per year for
each of the first five anniversaries of the opening date, subject to the
officers being employed by the Company on such dates and meeting certain
performance criteria.
Upon the closing of the initial offering, the Company will also grant
additional options to the Chief Executive Officer for the future purchase of
10,000 shares of common stock at $10.00 per share. The options will vest at the
rate of 2,000 shares on each December 31 beginning in 1998 and ending in 2002.
In addition, in lieu of salary in 1997, on January 2, 1998, the Company
will issue 5,000 shares of common stock to the Chief Executive Officer for no
additional consideration. Compensation expense will be recognized ratably from
the date of the employment agreement, March 3, 1997, through the date of grant,
January 2, 1998, based on an estimated fair market value of common stock of
$10.00 per share. Compensation expense of $5,000 has been recognized for the
period ended March 31, 1997.
No pro-forma information in accordance with SFAS 123 has been presented
because the stock option plan has not yet been adopted by the Board of
Directors.
F-9
<PAGE> 43
PEOPLE'S COMMUNITY CAPITAL CORPORATION
TO: People's Community Capital Corporation
P.O. Box 313
Aiken, South Carolina 29802
Gentlemen:
You have informed me that People's Community Capital Corporation, a South
Carolina corporation (the "Company"), is offering up to 1,200,000 shares of its
Common Stock, par value $.01 per share (the "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 People's Community Capital Corporation"
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. Acknowledgements. 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
<PAGE> 44
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.
<TABLE>
<S> <C>
- ------------------------------------ ----------------------------------------------------------------------
Number of Shares Subscribed Name or Names of Subscribers (Please Print)
for (minimum 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)*
(L.S.)
- ------------------------------------ ---------------------------------------------------------------
Social Security Number or Federal Signature of Subscriber(s)*
Taxpayer Identification Number
Street (Residence) Address:
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
City, State and Zip Code
</TABLE>
*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.
PEOPLE'S COMMUNITY CAPITAL CORPORATION
--------------------------------------
By:
Title:
A-2
<PAGE> 45
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.
<TABLE>
<S> <C>
- -------------------------------------------- --------------------------------------------
Signature of Subscriber Signature of Subscriber
- -------------------------------------------- --------------------------------------------
Printed Name Printed Name
- -------------------------------------------- --------------------------------------------
Social Security or Employer Social Security or Employer
Identification No. Identification No.
</TABLE>
A-3
<PAGE> 46
======================================================
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.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Reports to Shareholders............... 2
Additional Information................ 2
Summary............................... 3
Risk Factors.......................... 6
The Offering.......................... 9
Use of Proceeds....................... 11
Capitalization........................ 14
Dividend Policy....................... 15
Proposed Business..................... 15
Supervision and Regulation............ 19
Management............................ 25
Description of Capital Stock of the
Company............................. 30
Legal Matters......................... 32
Experts............................... 32
Financial Statements.................. F-1
Subscription Agreement................ A-1
</TABLE>
---------------------
UNTIL AUGUST 21, 1997, 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.
======================================================
======================================================
1,200,000 SHARES
PEOPLE'S COMMUNITY
CAPITAL CORPORATION
A PROPOSED HOLDING COMPANY FOR
PEOPLE'S COMMUNITY BANK
OF SOUTH CAROLINA
(PROPOSED)
COMMON STOCK
-------------------
PROSPECTUS
-------------------
May 23, 1997
======================================================
