AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 27, 1999
REGISTRATION NO. 333-39203
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AMENDMENT NO. 3
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MARINE BANCSHARES, INC.
(Name of Small Business Issuer in its Charter)
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<TABLE>
<S> <C> <C>
FLORIDA 6712 65-0729764
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
VANDERBILT BEACH ROAD VANDERBILT BEACH ROAD
AND AIRPORT PULLING ROAD AND AIRPORT PULLING ROAD
NAPLES, FLORIDA 34109 NAPLES, FLORIDA 34109
(941) 434-0441
(Address and telephone number of (Address of principal place of business
principal executive offices) or intended principal place of business)
RICHARD E. HORNE
PRESIDENT AND CHIEF EXECUTIVE OFFICER
501 GOODLETTE ROAD NORTH, SUITE D-12
NAPLES, FLORIDA 34102
(941)434-0441
(Name, address and telephone number of agent for service)
-------------------------
COPIES TO:
ROBERT C. SCHWARTZ, ESQ. RICHARD A. DENMON, ESQ.
SMITH, GAMBRELL & RUSSELL, LLP CARLTON, FIELDS, WARD, EMMANUEL, SMITH &
PROMENADE II, SUITE 3100 CUTLER, P.A.
1230 PEACHTREE STREET, N.E. ONE HARBOUR PLACE
ATLANTA, GEORGIA 30309-3592 777 SOUTH HARBOUR ISLAND BOULEVARD
TAMPA, FLORIDA 33602
-------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_| ____________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_| ____________
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_| ____________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
-------------------------
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities law of any such State.
SUBJECT TO COMPLETION, DATED JANUARY 27, 1999
P R O S P E C T U S
1,150,000
[LOGO]
(A PROPOSED BANK HOLDING COMPANY FOR MARINE NATIONAL BANK OF NAPLES)
COMMON SHARES
All of the common shares, par value $.01 per share (the "Common
Shares"), are offered hereby by Marine Bancshares, Inc. (the "Company"), a
Florida corporation and proposed bank holding company organized primarily to own
and hold all of the common stock of Marine National Bank of Naples, a national
bank (in organization) to be located in Naples, Florida (the "Bank"). Neither
the Company nor the Bank has ever conducted any active business operations other
than matters related to their initial organization and the raising of capital.
The commencement of such operations is contingent upon receipt of various
regulatory approvals by federal agencies. See "Business." Prior to this offering
(the "Offering") there has been no public trading market for the Common Shares.
The offering price set forth below was determined by negotiations between the
Company and the Underwriter. See "Underwriting" for a discussion of the factors
considered in determining the initial public offering price. Ashtin Kelly & Co.
(the "Underwriter") has advised the Company that it anticipates making a market
in the Common Shares following completion of the Offering. The Company expects
that quotations for the Common Shares will be reported on the OTC Bulletin Board
under the symbol "MNBK." Unless otherwise waived by the Company, Common Shares
will be sold only in minimum lots of 250 shares ($2,500) and any one investor
(together with the investor's affiliates) will be permitted to purchase a
maximum of 57,500 Common Shares ($575,000).
THESE ARE SPECULATIVE SECURITIES. AN INVESTMENT IN THE COMMON SHARES
OFFERED BY THIS PROSPECTUS INVOLVES A HIGH DEGREE OF RISK. INVESTORS SHOULD NOT
INVEST ANY FUNDS IN THIS OFFERING UNLESS THEY CAN AFFORD TO LOSE THEIR ENTIRE
INVESTMENT. SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR A DISCUSSION OF CERTAIN
INFORMATION THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON
SHARES OFFERED HEREBY.
THE COMMON SHARES OFFERED HEREBY ARE NOT DEPOSITS, SAVINGS ACCOUNTS OR OTHER
OBLIGATIONS OF A DEPOSITORY INSTITUTION AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION,
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
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UNDERWRITING DISCOUNTS
PRICE TO PUBLIC AND COMMISSIONS(1)(2) PROCEEDS TO COMPANY(3)
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<S> <C> <C> <C>
Per Share.................................. $10.00 $0.28 $ 9.72
- ---------------------------------------------------------------------------------------------------------------------------
Total(4)................................... $11,500,000 $322,500 $11,177,500
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(1) The underwriting discounts and commissions shall be $0.39 per share for
500,000 Common Shares and $0.85 for each remaining share (however, no
underwriting discounts or commissions will be assessed with respect to
sales of 500,000 Common Shares to certain investors identified by the
Company to the Underwriter.) In addition, the Company has agreed to
pay a non-accountable expense allowance to the Underwriter of $45,000 (and,
to the extent that the over-allotment option is exercised, an additional 3%
of the gross proceeds received from the sale of Common Shares pursuant to
such exercise). See "Underwriting".
(2) The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(3) Before deducting a non-accountable expense allowance of $45,000 to be paid
to the Underwriter, and other offering expenses payable by the Company
estimated at $250,000, which amount does not include certain organization
and other operating expenses which were $776,608 as of September 30, 1998,
and which will continue to be incurred until the Bank commences operations.
(4) The Company has granted the Underwriter a 30-day option to purchase up to
172,500 additional Common Shares on the same terms and conditions set forth
above to cover over-allotments, if any. If such option is exercised in
full, the total Price to Public, Underwriting Discounts and Commissions,
and Proceeds to Company will be $13,225,000, $469,125 and $12,755,875,
respectively. See "Underwriting."
-------------------------
The Common Shares are offered by the Underwriter subject to prior sale,
when, as and if delivered to and accepted by the Underwriter. The Underwriter
reserves the right to withdraw, cancel, or modify this Offering without notice
and to reject any orders in whole or in part. It is expected that delivery of
the certificates representing the Common Shares will be made against payment
therefor on or about February __, 1999 through the Depository Trust Company or
at the offices of Ashtin Kelly & Co., Naples, Florida.
ASHTIN KELLY & CO.
THE DATE OF THIS PROSPECTUS IS JANUARY __, 1999.
<PAGE>
[INSERT MAP]
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CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON SHARES,
INCLUDING OVER-ALLOTTING COMMON SHARES, STABILIZING TRANSACTIONS, SYNDICATE
SHORT-COVERING TRANSACTIONS, AND PENALTY BIDS. SUCH TRANSACTIONS MAY BE EFFECTED
IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY
BE DISCONTINUED AT ANY TIME WITHOUT NOTICE. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."
-------------------------
AVAILABLE INFORMATION
The Company has filed a Registration Statement on Form SB-2 (together
with all amendments and exhibits thereto, the "Registration Statement") with the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933, as amended (the "Securities Act"), with respect to the Common Shares
offered hereby. This Prospectus, which is part of the Registration Statement,
does not contain all of the information set forth in the Registration Statement
and the exhibits and schedules thereto, certain portions of which have been
omitted as permitted by the rules and regulations of the Commission. For further
information pertaining to the Company and to the Common Shares offered hereby,
reference is made to the Registration Statement, including the exhibits filed as
a part thereof, copies of which may be inspected, without charge, at the Public
Reference Section of the Commission maintained by the Commission at its
principal office located at Judiciary Plaza, 450 Fifth Street, NW, Washington,
D.C. 20549, and at the Commission's following regional offices: New York
Regional Office, Seven World Trade Center, Suite 1300, New York, New York,
10048; and Chicago Regional Office, Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of all or any portion
of the Registration Statement may be obtained from the Public Reference Section
of the Commission at its Washington, D.C. address upon payment of prescribed
fees. In addition, the Company is required to file electronic versions of these
documents with the Commission through the Commission's Electronic Data
Gathering, Analysis and Retrieval (EDGAR) system. The Commission maintains a
World Wide Web site at http://www.sec.gov that contains reports, proxy and
information statements and other information regarding registrants, including
the Company, that file electronically with the Commission. Copies of the
Registration Statement and its exhibits and schedules are also available at the
Commission's World Wide Web site.
Statements made in this Prospectus as to the contents of any contract,
agreement or other document are not necessarily complete and represent summaries
of such documents. All material elements of such documents are disclosed in the
Prospectus. With respect to each such contract, agreement or other document
filed as an exhibit to the Registration Statement, reference is made to the
exhibit for a more complete description of the matter involved, and each
statement regarding such document shall be deemed qualified in its entirety by
such reference.
The Company intends to furnish its shareholders with annual reports
containing financial statements audited by independent public accountants and
with quarterly reports containing unaudited financial information for each of
the three quarters of each fiscal year. In addition, the Company will be
required, under Section 15(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), to file annual and quarterly reports to the Commission.
Copies of such reports will be made available to the Company's shareholders.
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS AND
NOTES THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS THE CONTEXT
REQUIRES OTHERWISE, REFERENCES IN THIS PROSPECTUS TO THE COMPANY INCLUDE THE
BANK. EXCEPT AS OTHERWISE INDICATED, ALL INFORMATION IN THIS PROSPECTUS ASSUMES
NO EXERCISE OF THE UNDERWRITER'S OVER-ALLOTMENT OPTION.
THE COMPANY AND THE BANK
Marine Bancshares, Inc. (the "Company") was incorporated under the laws
of the State of Florida on January 23, 1997, primarily to serve as a bank
holding company for Marine National Bank of Naples, a national bank (in
organization) (the "Bank"). Neither the Company nor the Bank has commenced any
active business operations, and neither will do so unless and until the
requisite regulatory approvals have been obtained. The Company intends to use
the net proceeds from the Offering to purchase all of the capital stock of the
Bank, to repay notes issued in connection with funds borrowed to finance
organizational expenses, and for other general corporate purposes. The Company
and the Bank have filed applications with all necessary bank regulatory
agencies. On December 16, 1998, the Office of the Comptroller of the Currency
(the "OCC") approved the Bank's charter application, subject to certain terms
and conditions specified in such approval (the "OCC Preliminary Approval").
Although no assurances can be given, the Company expects to satisfy all
conditions for organizing the Bank and to open the Bank for business during the
second quarter of 1999, or as soon thereafter as practicable. The Bank intends
to offer a full range of commercial and consumer banking services in the western
portion of Collier County, Florida (including the cities of Naples and Marco
Island). The Bank expects to incur a substantial loss in its initial years of
operations.
The Bank is being formed by local business persons who have identified
the need for a consumer-oriented independent community bank in Collier County,
Florida to serve its growing population and expanding business base. In recent
years, the banking industry in Collier County has experienced substantial
consolidation, and large bank holding companies, headquartered outside of
southwest Florida, have acquired a significant number of financial institutions
that were previously locally-owned and managed. As a result, the Company
believes that there has been a decline in the level of personal customer
service. It is the Company's belief that the large banking institutions located
in this area are inflexible, slow in their decision-making processes, and are
not currently meeting the banking needs of individuals and small- to
medium-sized businesses. The Company believes that, as a result of this industry
consolidation, there is an opportunity to build a profitable banking business
through the establishment of a local banking institution operated by local
business persons and by experienced banking personnel who are familiar with the
community and are dedicated to providing fast, efficient, and personalized
service to the market area. The Boards of Directors of the Company and Bank are
comprised of local business persons who will actively promote the Bank in the
community. The Bank will be one of only four locally-managed community banks
with its main office located in western Collier County.
The Bank will engage in a general commercial and retail banking
business and, as part of its regular business operations, anticipates offering a
full compliment of loans, including commercial, consumer, and real estate loans.
While the Bank anticipates that its lending activities will include residential
real estate and consumer loans, it expects to focus its efforts on lending
relationships with small to medium-sized businesses. The Company's primary
initial focus will be the development of the Bank's business from a single
office location. As warranted, the Company will consider diversifying its
activities over time to include additional services, banking locations, and
acquisitions. See "Risk Factors -- Lending Risks."
STRATEGY
The Bank's strategy is to attain market share by attracting customers
through a superior level of prompt and personalized banking service. The
consumer-oriented community banking focus of the Bank will provide customers
with locally-based decision makers who are familiar with their customers, their
business environment, and competitive demands, who are able to quickly evaluate
and respond to loan applications, and who have the ability to craft personalized
banking solutions to the customer's needs without extensive bureaucratic delays.
3
<PAGE>
Businesses will be solicited through the personal efforts of the Bank's
directors and officers. Management believes that a locally-based independent
bank is often perceived by the local business community as possessing a clearer
understanding of local commerce and its needs. Consequently, the Company expects
that the Bank will be able to make
prudent lending decisions quickly and more equitably than its competitors
without compromising asset quality or the Bank's profitability. In addition, in
order to broaden the Bank's deposit base, management intends to offer to
commercial customers certain amenities, including the use of a courier service
to provide pick-up and delivery for daily deposits and special banking service
packages for employees. The Bank also intends to offer senior citizens packages
on an affordable basis to the large number of retired persons in the Bank's PSA.
As a new financial institution, the Bank will employ current technology
in the conduct of its banking activities. The Bank intends to remain at the
forefront of technology, while minimizing the costs of its delivery, by using
third-party providers. The Bank's personal but high-tech approach is expected to
appeal to the business community and to younger customers seeking the
convenience of high tech and electronic banking. See "Business -- Business
Strategy."
PREMISES AND BANK MARKET AREA
The Company and the Bank currently maintain temporary offices located
at 501 Goodlette Road North, Suite D-12, Naples, Florida 34102, and their
telephone number at that address is (941) 434-0441. The Company has entered into
an agreement with a non-affiliated third party to lease a 7,500 square foot
office facility to be located at the northwest intersection of Vanderbilt Beach
Road and Airport Pulling Road in Naples, Florida. This facility, which is
expected to be available for occupancy during the second quarter of 1999, is
conveniently located for the majority of the residents of western Collier
County.
The Bank's proposed primary service area ("PSA") is western Collier
County (including Naples and Marco Island). This area has experienced
substantial growth during recent years. According to the Enterprise Florida,
Inc. Department of Research, between 1980 and 1990, the population of Collier
County almost doubled. The estimated year-round population of Collier County in
1998 is 203,000 and, by the year 2015, it is projected that the population will
be 315,900. The population of Collier County rises by approximately one-third
during the winter season (November - April) each year because of the return of
seasonal residents. Collier County's economic base is built primarily on
services, retail trade, agriculture, tourism, government and construction.
According to 1995 statistics, the median family income in Collier County was
$48,800 and the average household effective buying income was $55,928, the
highest in the State of Florida. In 1995, the median age in Collier County was
42.5 years. The Company believes that it will be situated to take advantage of
the expected economic and demographic growth in the Bank's PSA.
MANAGEMENT
In the opinion of the Company, the directors and officers of the
Company are (with the exception of Mr. Richard E. Horne, who relocated to Naples
in September, 1998) recognized and established individuals in the local
community. As a group, they believe that they have significant banking and
business experience with many close, long-term ties to the Naples area. Richard
E. Horne, the President and Chief Executive Officer of the Company and the
proposed President and Chief Executive Officer of the Bank, has a total of 24
years of experience in the financial services industry. Most recently, Mr. Horne
served as Executive Vice President and Chief Lending Officer with Trustmark
National Bank, of Jackson, Mississippi, which as of December 31, 1997, had total
assets of approximately $5.5 billion.
In the opinion of the Company, the directors of the Company represent a
wide range of business, banking, and investment knowledge in the Naples area.
William J. Ryan is the former President and Chief Executive Officer of Palmer
Wireless, Inc., a Fort Myers, Florida communications technology company, the
common stock of which is listed on Nasdaq. Mr. Ryan has 15 years of experience
as a bank director and has served in such capacity with C&S Bank, Fort Myers,
Florida, Norwest Bank, Des Moines, Iowa, and First National Bank, Naples,
Florida. Pierce
4
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T. Neese is the current Chairman and Chief Executive Officer of Etowah Bank in
Canton, Georgia, with over 40 years experience in community banking. Earl G.
Hodges is a licensed mortician and consultant to Hodges Funeral Chapel, a
company that he founded in Naples in 1962. Mr. Hodges has served as Chairman of
the Board of Marine Savings and Loan Association, Naples and as an Advisory
Board member of First Florida Bank, N.A., Collier County. William L. McDaniel,
Jr. is President of The Realty Company and a licensed real estate broker in
Naples. Donald W. Ketterhagen is a practicing physician in Naples.
The Company's directors believe that their long-standing ties to the
community, and their personal familiarity with potential customers in the Bank's
PSA will enable them to successfully pursue business opportunities for the Bank.
The directors likewise believe that their personal involvement in the business
and community affairs of the Naples area will be attractive to other individual
and business bank customers seeking to do business with a locally-owned and
managed bank.
The directors and members of management of the Company and the Bank
currently intend to purchase, in the aggregate, approximately 194,000 Common
Shares in the Offering. In addition, such individuals will receive warrants to
purchase additional Common Shares at a ratio of 0.65 warrant for each Common
Share purchased in the Offering. See "Description of Capital Stock --
Organizers' Warrants." Upon the closing of the Offering, the Company also
intends to repurchase from Mr. Horne the 100 Common Shares issued to him to
facilitate the organization of the Company at the aggregate issue price of $100.
FAILURE TO COMMENCE OPERATIONS
As a result of organizational expenses, the Company has an accumulated
deficit as of September 30, 1998 of $776,608. Subsequent to the Offering, events
may occur which could delay or prevent the Bank from commencing business,
resulting in an increase in the Company's accumulated deficit as operating
expenses continue to be incurred. The proceeds of the Offering may be subject to
claims of creditors of the Bank and the Company, including the holders of notes
relating to the Company's organizational loans. Since the Company may use such
proceeds to repay the organizational loans, if banking operations are not
commenced and a liquidation of the Company were to occur, investors would likely
realize substantially less than the $10 per share public offering price.
See "Risk Factors -- Failure to Commence Operations."
COMPETITION
The banking business in Collier County is highly competitive, and the
Bank expects to encounter strong competition both in making loans and attracting
deposits. Also, newly effective federal laws now permit nationwide banking and
branching, which may result in increased competition. Management proposes to
meet this competition by providing its customers with highly professional,
personalized attention, by responding in a timely manner to product and service
requests and by exhibiting an active interest in the customers' business and
personal financial needs. See "Risk Factors -- Competition" and "Business --
Competition."
5
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THE OFFERING
Securities Offered.................. 1,150,000 Common Shares, $.01 par value,
of the Company(1)
Minimum Purchase.................... 250 shares ($2,500)
Maximum Purchase.................... 57,500 shares ($575,000)
Common Shares to be outstanding
after the Offering.................. 1,150,000 shares(1)(2)
Estimated Net Proceeds.............. $11,177,500 (1)(3)
Use of Proceeds by Company.......... The Company will invest $9 million of
the estimated net proceeds in the Bank
to provide the Bank's initial
capitalization by purchasing all of the
Bank's capital stock. Additionally, a
total of approximately $1,020,500 of the
net proceeds of the Offering will be used
by the Company to repay (i) the principal
and accrued interest on a bank line of
credit, (ii) the principal, fees, and
accrued interest on certain
organizational loans, and (iii) certain
advances from directors of the Company.
The Company will use $100 of the
net proceeds to redeem the 100 Common
Shares issued to facilitate the Company's
organization. After satisfaction of
certain additional liabilities of the
Company, the remaining net proceeds of
approximately $828,500 will initially be
invested by the Company in investment
grade securities and held by the Company
as working capital for general corporate
purposes and to pay operating expenses.
These funds will also be available for
possible future capital contributions to
the Bank, to finance possible
acquisitions of other financial
institutions or to fund expansion into
other lines of business closely related
to banking. See "Use of Proceeds."
Use of Proceeds by Bank............... The Bank will use approximately $150,000
of the $9 million received from the sale
of its capital stock to the Company to
pay a portion of the cost to build-out
the leased premises, which will serve as
its main office, approximately $321,800
to purchase furniture, fixtures,
equipment, and other necessary assets for
the Bank's operations and approximately
$95,000 to repay money borrowed from the
Company for the Bank's organizing
expenses. It is currently anticipated
that the balance of the net proceeds
received by the Bank, expected to be
approximately $8,433,200, will be used to
fund loans and other investments and for
the payment of operating expenses.
Risk Factors.................... An investment in the Common Shares is
highly speculative, involves a high
degree of risk, and should be considered
only by those who can afford the loss of
their entire investment. Such factors
include, among other things, the need to
obtain regulatory approvals, the lack of
operating history, the inability to
continue as a going concern if regulatory
approvals are not received, and the
potential anti- takeover effect of
certain provisions of the Company's
Articles of Incorporation. Accordingly,
prior to making an investment decision,
prospective purchasers should consider
all of the information set forth in this
Prospectus and should evaluate the
statements set forth in "Risk Factors"
beginning on page 8.
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(1) Assumes no exercise of over-allotment option granted to Underwriter to
purchase up to 172,500 Common Shares at the initial public offering
price. See "Underwriting.
(2) Does not include 126,100 Common Shares subject to Warrants to be issued
to organizers upon completion of the Offering and 25,000 Common Shares
subject to options to be granted to Richard E. Horne after the
Offering.
(3) Before deducting a non-accountable expense allowance of $45,000 to be
paid to the Underwriter and other offering expenses payable by the
Company estimated at $250,000, which amount does not include certain
organization and other operating expenses which were $776,608 as of
September 30, 1998, and which will continue to be incurred until the
Bank commences operations.
6
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SUMMARY FINANCIAL DATA
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SEPTEMBER 30, 1998
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ACTUAL AS ADJUSTED(1)
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BALANCE SHEET DATA:
Cash and securities........................................... $ 2,799 $ 9,992,053
Total assets................................................... 182,765 $ 10,051,892
Total liabilities............................................... 959,273 0
Shareholders' equity (deficit)................................. $(776,508) $ 10,051,892
</TABLE>
_____________
(1) Adjusted to reflect the application of the estimated net proceeds from the
Offering. See "Use of Proceeds."
7
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RISK FACTORS
AN INVESTMENT IN THE COMMON SHARES OFFERED HEREBY IS HIGHLY
SPECULATIVE, INVOLVES A HIGH DEGREE OF RISK, AND SHOULD BE CONSIDERED ONLY BY
PERSONS WHO CAN AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT. THE FOLLOWING
CONSTITUTE SOME OF THE POTENTIAL RISKS OF AN INVESTMENT IN THE COMMON SHARES AND
SHOULD BE CAREFULLY CONSIDERED BY PROSPECTIVE INVESTORS PRIOR TO PURCHASING
COMMON SHARES. THE ORDER OF THE FOLLOWING IS NOT INTENDED TO BE INDICATIVE OF
THE RELATIVE IMPORTANCE OF ANY DESCRIBED RISK NOR IS THE FOLLOWING INTENDED TO
BE INCLUSIVE OF ALL RISKS OF INVESTMENT IN THE COMMON SHARES.
NEED TO OBTAIN REGULATORY APPROVALS
The Company filed applications on behalf of the Bank with the OCC and
with the Federal Deposit Insurance Corporation (the "FDIC") on July 27, 1998,
for authority to organize as a national bank, the deposits of which will be
federally insured to the extent permitted by law, and to conduct a commercial
banking business in Naples, Florida. Upon the receipt of the OCC Preliminary
Approval on December 16, 1998, the Company applied for approval from the Board
of Governors of the Federal Reserve System (the "Federal Reserve Board") to
become the holding company of the Bank.
The Bank will not be authorized to conduct its banking business until
it receives final approvals from the OCC and the FDIC. The grant of these
regulatory approvals will be subject to certain conditions, including the
requirement that the Bank is adequately capitalized. The Company proposes to
satisfy this requirement by using $9 million of the proceeds from the Offering
to purchase all of the capital stock of the Bank. See "Use of Proceeds". While
the Company currently anticipates receiving final OCC, FDIC, and Federal Reserve
Board approvals during the second quarter of 1999, no assurances can be given
that the required approvals will be granted in a timely manner, if at all. In
consequence of start-up expenditures, the Company has, as of September 30, 1998,
an accumulated deficit of $776,608. If such regulatory approvals are
substantially delayed, the Company's accumulated deficit will continue to
increase. If such regulatory approvals are not obtained, the Company would not
be able to commence its banking activities and would probably be liquidated and
dissolved. Upon liquidation, investors would likely realize a substantial loss
on their investment. See "-- Failure to Commence Operations".
NEED TO REPAY DEBT
In order to obtain funding for its start-up and organizational
expenses, during 1997 the Company issued to a total of twenty-nine individuals a
series of promissory notes in an aggregate principal amount of $900,000 (the
"Organizational Loans"). The proceeds of certain of these Organizational Loans
and a portion of the Line of Credit (defined below) were used to repay certain
prior Organizational Loans, and the remaining balance of $525,000 matures on
January 31, 1999. As of the date of this Prospectus, the Organizational Loans
have not matured. However, the Offering is not expected to close until the first
week in February 1999 and will be in technical default at that time. Since the
Organizational Loans will be repaid from the proceeds of the Offering, no legal
action for repayment or default is anticipated. In addition, the Company has
received non-interest bearing advances of funds from various of its directors in
an aggregate amount of $50,000 (the "Advances"), and has obtained two revolving
lines of credit in the maximum amounts of $100,000 and $300,000, respectively,
the "November Line of Credit" and the "December Line of Credit", and,
collectively, the "Line of Credit"), both from The Banker's Bank of Atlanta,
Georgia, under the terms of which $320,000 was outstanding as of December 31,
1998. The Company intends to use the proceeds of the Offering to repay the
Organizational Loans, the Advances and the Line of Credit (collectively, the
"Debt"). In the event that, subsequent to the Offering, the Company were to be
liquidated, to the extent the Debt is repaid with proceeds of the Offering,
investors in the Offering would likely realize substantially less than the $10
per share public offering price and would suffer a significant loss. See
"Management's Discussion and Analysis or Plan of Operation."
FAILURE TO COMMENCE OPERATIONS; GOING CONCERN
As of the date of this Prospectus, the Company's liabilities exceed its
assets. However, upon the closing of the Offering, the net proceeds will be used
to repay all of the outstanding liabilities. Upon application of the proceeds,
the Company's assets will exceed its liabilities and it will be able to operate
without a going concern qualification. However, subsequent to the sale of the
Common Shares of the Company, events may occur which
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could have the effect of delaying or preventing the Bank from commencing
business. Any delay in commencing operations will increase the Company's
pre-opening expenses and postpone realization by the Bank of potential revenues
and income. Absent the commencement of profitable operations, the Company's
accumulated deficit would continue to increase (and book value per share would
decrease) as operating expenses such as salaries and other administrative
expenses continue to be incurred. After the
Offering and prior to the time the Company and the Bank receive final approval
from the OCC, FDIC and Federal Reserve Board, the proceeds from the Offering
will be available for general operating expenses of the Company and the Bank,
including costs associated with opening the Bank's main facility. The Company
intends to use a total of approximately $1,020,500 of the net proceeds from the
Offering to repay (i) the principal and accrued interest on the Line of Credit,
(ii) the principal, fees and accrued interest on the Organizational Loans and
(iii) the Advances. As a result, if a liquidation of the Company were to occur,
investors in the Offering would likely realize substantially less than the $10
per share public offering price and would suffer a significant loss. The Company
expects to use approximately $246,528 of the proceeds of the Offering by the end
of the second quarter of 1999 for general operating expenses. See "--Need to
Repay Debt", "Use of Proceeds", and "Capitalization."
RISK OF DISSOLUTION IF REGULATORY APPROVALS ARE NOT OBTAINED
Although the Company and the Bank have applied for all regulatory
approvals required to commence operations, the Bank has received preliminary
approval from the OCC, and the Company anticipates receipt of all necessary
final approvals by the second quarter of 1999, final approvals may not be
granted in a timely manner, if at all. The closing of the Offering is not
conditioned upon the Company and the Bank receiving final approval to commence
business. If final approval for the Bank to commence banking operations is not
granted within 18 months after the receipt of preliminary approval or other
regulatory requirements are not satisfied, the Company will solicit shareholder
approval for the Company's dissolution and liquidation under Florida law. If the
Company is dissolved and liquidated, it will distribute to shareholders the
Company's net assets remaining after payment, or provision for payment, of all
claims against the Company. Shareholders will receive only a portion, if any, of
their original investment because the proceeds of the Offering will have been
used to pay the expenses and capital costs incurred by the Company. Such
expenses include the expenses of the Offering, the Debt and the other
organizational and pre-opening expenses of the Company and the Bank, and the
claims of creditors. See "--Need to Obtain Regulatory Approvals", "Need to Repay
Debt" and "Failure to Commence Operations".
LACK OF OPERATING HISTORY; SIGNIFICANT INITIAL LOSSES EXPECTED
The Bank, which initially will be the sole subsidiary of the Company,
is in organization and neither the Bank nor the Company have any operating
history on which to base any estimate of its future performance. Moreover, as of
September 30, 1998, the Company had an accumulated deficit of $776,608. Because
the Company is only recently formed and the Bank will not have obtained the
necessary regulatory approvals or commenced banking operations as of the date
hereof, prospective investors do not have access to all of the information that,
in assessing their proposed investment, would be available to the purchasers of
securities of a financial institution with a history of operations. The
Company's profitability will depend primarily upon the Bank's operations, and
there is no assurance that the Bank will ever operate profitably. The Bank's
proposed operations are subject to risks inherent in the establishment of a new
business and, specifically, a new bank. At the outset, all of the Bank's loans
will be unseasoned since they will be new loans to new borrowers. It will thus
take several years to determine the borrowers' payment histories, and the
quality of the Bank's loan portfolio cannot be determined until that time.
Accordingly, the adequacy of the Bank's underwriting criteria, monitoring
procedures, and loan loss reserve policies will be difficult to measure and
evaluate during the initial years of operation, thereby increasing the risk of
potential loan losses and the lack of adequate reserves therefor. Typically,
most newly formed banking institutions incur substantial initial expenses and
are not profitable, if at all, until several years after commencing business
operations. Because profitability depends upon numerous factors, many of which
are beyond the control of management, there can be no assurance as to when, if
ever, the Company will operate profitably.
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DETERMINATION OF OFFERING PRICE
The initial offering price of $10.00 per share was arbitrarily
determined solely by negotiations between the Company and the Underwriter. This
price is not based upon earnings or any history of operations, does not
necessarily bear any relationship to the Company's net worth, book value,
revenues, or other established criteria of value, and should not be construed as
indicative of the actual present or anticipated future value of the Common
Shares. If a market should develop for the Common Shares of the Company, there
is no assurance that any of the Common Shares offered hereby could be resold for
the initial offering price or any other amount. See "Underwriting."
NO PRIOR PUBLIC MARKET; LIMITED TRADING MARKET EXPECTED
Prior to the Offering, there has been no public trading market for the
Common Shares. The Company expects that quotations for the Common Shares will be
reported on the OTC Bulletin Board under the symbol "MNBK." The Underwriter has
advised the Company that it presently intends to make a market in the Common
Shares after the commencement of trading, subject to applicable laws and
regulatory requirements, but no assurances can be made as to the liquidity of
the Common Shares or that an active and liquid trading market will develop or,
if developed, that it will be sustained. The Underwriter will have no obligation
to make a market in the Common Shares, however, and, if commenced, may cease
market-making activities at any time. Making a market in securities involves
maintaining bid and ask quotations and being able, as principal, to effect
transactions in reasonable quantities at those quoted prices, subject to various
securities laws and other regulatory requirements. The development of a public
trading market depends upon the existence of willing buyers and sellers, the
presence of which is not within the control of the Company, the Bank or any
market maker. Even with a market maker, factors such as the limited size of the
Offering, the lack of earnings history for the Company, and the absence of an
expectation of dividends in the near future mean that there can be no assurance
that an active and liquid market for the Common Shares will develop. If a
trading market for the Common Shares does not develop or is not maintained, an
investor may find it difficult to liquidate his investment in the Company. If a
market develops, there can be no assurance that a market will continue, or that
shareholders will be able to sell their shares at or above the public offering
price. Purchasers of Common Shares should carefully consider the potentially
illiquid and long-term nature of their investment in the shares offered hereby.
DEPENDENCE ON MANAGEMENT
The Company and the Bank are, and for the foreseeable future will be,
dependent upon the services of Richard E. Horne, as President and Chief
Executive Officer of both the Company and the Bank. The loss of the services of
Mr. Horne for any reason whatsoever could have a material adverse effect on the
operations of the Company and the Bank. The Company has attempted to secure Mr.
Horne's services by entering into an employment agreement with him. The terms of
the employment agreement are intended not only to retain his services for a
period of time, but also to encourage and promote his active involvement by
providing certain performance-based compensation incentives. The Company's
success also depends in part upon the Bank's ability to identify, attract,
develop, and retain qualified directors, officers, and other employees. It is
expected that the competition for such personnel will be intense, and there can
be no assurance that the Company will be able to identify, attract, develop, and
retain qualified directors, officers, or other employees. See "Management."
COMPETITION
The banking business is highly competitive. The Bank, as a financial
institution, will serve as a financial intermediary for its customers and, as
such, will compete with other commercial banks, savings and loan associations,
credit unions, finance companies, mutual funds, insurance companies and
brokerage and investment banking firms, asset-based nonbank lenders, and
governmental organizations that may offer subsidized financing at rates lower
than those that may be offered by the Bank, all of which may solicit business
from residents of western Collier County, Florida. Most of such entities have
greater resources than those that will be available to the Bank or the Company.
Some of the financial institutions and financial services organizations with
which the Bank will compete are not
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subject to the same degree of regulation as the Bank. As of June 30, 1998,
approximately 21 financial institutions with a total of 91 branches were located
in Collier County, Florida, which contains the Bank's proposed PSA. These
financial institutions aggressively compete for business in the Bank's proposed
PSA. Most of these competitors have been in business for many years, have
established customer bases, are larger, have substantially higher lending limits
than the Bank, and will be able to offer certain services, including trust
services, multiple branches, and international banking services, which the Bank
can offer only through correspondent banks or third party providers, if at all.
In addition, most of these entities have greater capital resources than the Bank
which, among other things, may allow them to price their services at levels more
favorable to the customer and to provide larger credit facilities than the Bank.
Additionally, recently passed federal and state legislation regarding interstate
branching and banking may act to increase competition in the future from larger
out-of-state banks. See "Business -- Competition."
LENDING RISKS
In originating loans, there is a substantial likelihood that credit
losses will be experienced. The risk of loss will vary with, among other things,
general economic conditions, the type of loan being made, the creditworthiness
of the borrower over the term of the loan and, in the case of a collateralized
loan, the quality of the collateral for the loan. Additionally, certain lending
activities involve greater risks. Historically, commercial loans have been more
risky than residential real estate mortgage loans. While the Bank intends to
make residential real estate and consumer credit loans, it will focus its
lending activities on small to medium-sized businesses. This lending focus may
result in the Bank having a large concentration of loans to such businesses and,
as a result, the Bank may assume greater lending risks than banks which do not
have a concentration of such loans. Commercial loans also carry additional risks
since they usually involve larger loan balances to single borrowers or a related
group of borrowers, resulting in a more concentrated loan portfolio, and their
repayment is usually dependent upon the successful operation of the borrower's
commercial enterprise. Accordingly, commercial loans also are affected more by
adverse conditions in the general economy than residential real estate loans.
Management will attempt to minimize the Bank's credit exposure by carefully
monitoring the concentration of its loans within specific industries and through
prudent loan application and approval procedures, but there can be no assurance
that such monitoring and procedures will reduce these lending risks. A
significant number of loan defaults and nonpayments would have a material
adverse effect on the Bank's, and in turn the Company's, earnings and overall
financial condition as well as on the value of the Common Shares.
IMPACT OF INTEREST RATES AND ECONOMIC CONDITIONS
The results of operations for financial institutions, including the
Bank, may be materially and adversely affected by changes in prevailing economic
conditions, including declines in real estate market values, rapid changes in
interest rates, and the monetary and fiscal policies of the federal government.
The Bank's profitability will, in part, be a function of the spread between the
interest rates earned on investments and loans and the interest rates paid on
deposits and other interest-bearing liabilities. In the early 1990s, many
banking organizations experienced historically high interest rate spreads. More
recently, interest rate spreads have generally narrowed due to changing market
conditions and competitive pricing pressures, and there can be no assurance that
such factors will not continue to exert such pressure or that high interest rate
spreads will return. Substantially all of the Bank's loans will be to businesses
and individuals in western Collier County, and any decline in the economy of
this area could have a material adverse impact on the Bank. Like most banking
institutions, the Bank's net interest margin will be affected by general
economic conditions and other factors that influence market interest rates and
the Bank's ability to respond to changes in such rates. At any given time, the
Bank's assets and liabilities will be such that they are affected differently by
a given change in interest rates. An increase or decrease in interest rates, the
length of loan terms or the mix of adjustable and fixed rate loans in the Bank's
portfolio could have a positive or negative effect on the Bank's net income,
capital, and liquidity. Fluctuations in interest rates are not predictable or
controllable. There can be no assurance that the positive trends or developments
discussed in this Prospectus will continue or that negative trends or
developments will not have a material adverse effect on the Bank and, in turn,
the Company.
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GOVERNMENT REGULATION AND MONETARY POLICY
Bank holding companies and banks operate in a highly regulated
environment and are subject to supervision and examination by bank regulatory
agencies. As a bank holding company, the Company will be subject to regulation
and supervision by the Federal Reserve Board. As a national bank, the deposits
of which will be federally-insured to the extent permitted by law, the Bank will
be subject to regulation and supervision primarily by the OCC and, to a lesser
extent, by the FDIC. Additionally, certain Florida state laws, primarily
pertaining to maximum rates of interest that may be charged on loans, will apply
to the Bank's operations. Laws and regulations govern, among other things,
certain debt obligations of a bank holding company, changes in the control of a
bank holding company, maintenance of adequate capital for the general business
operations and financial condition of a financial institution, permissible
types, amounts, and terms of loans and investments, restrictions on dividend
payments, establishment and closing of branch offices, entry into certain lines
of business and acquisition of other financial institutions. These regulations
are intended primarily for the protection of depositors, not for the benefit of
investors, and they restrict or limit the manner in which the Company and the
Bank may conduct business and obtain financing. The Company and the Bank are
also subject to changes in federal and state law, regulations, governmental
policies, income tax laws and accounting principles. The effects of any
potential changes cannot be predicted, but they could adversely affect the
future businesses and operations of the Company and the Bank. See --
"Supervision and Regulation."
NEED FOR CAPITAL; LIMITATION ON GROWTH
The Company believes that the net proceeds of the Offering will satisfy
its cash requirements for the twelve month period following the opening of the
Bank. Such amounts are expected to be sufficient to commence and conduct planned
business activities during that period. Capital in excess of that which will be
provided by the Offering and any amounts generated by the Bank's operations
would probably be necessary before the Company could undertake any significant
acquisitions or expand its operations beyond those presently planned. There can
be no assurance that the funds necessary to finance any future acquisitions or
expansion will be available on acceptable terms, or at all.
In its applications to the federal bank regulators for authority to
operate a national bank and form a bank holding company, the organizers have
represented that during the Bank's first three years of operations the Bank will
maintain a minimum ratio of Tier 1 capital (primarily shareholders' equity) to
total assets of not less than 8%. Compliance with this undertaking may limit the
Bank's ability to grow without additional capital. See "Supervision and
Regulation."
Under applicable federal bank regulations, based on a capitalization of
$9,000,000, less organizational expenses of $95,000, the Bank's initial general
lending limit to one borrower will be approximately $1,220,000 plus an
additional $810,000 for loans secured by readily marketable collateral. This
lending limit will be lower than the lending limit of most of the Bank's
competitors. This lower lending limit may affect the ability of the Bank to
develop relationships with the area's larger businesses, thereby limiting the
Bank's ability to grow. The Bank expects to accommodate loans in excess of its
lending limit through the sale of participations in these loans to other banks.
There can be no assurance, however, that the Bank will be successful in
attracting or maintaining customers seeking larger loans or that the Bank will
be able to arrange participations of such loans on terms favorable to the Bank.
YEAR 2000 COMPLIANCE
The Company's and the Bank's business is highly dependent on
communications and information systems, including systems which monitor deposit
and lending accounts. As the year 2000 ("Year 2000") approaches, an important
business issue has emerged regarding existing application software programs and
operating systems. Many existing application software products were designed to
accommodate a two-digit year. For example, "98" is stored on the system and
represents 1998 and "00" represents 1900. As a result, any of the Company's or
its vendors'
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computer programs or equipment that are date dependent may, for example,
recognize a date using "00" as the year 1900 rather than the year 2000. This
could result in a system failure or miscalculations causing disruption of
operations, a temporary inability to process transactions, send invoices, or
engage in similar normal business activity. The Bank will utilize a third-party
vendor to provide its primary banking applications, including core processing
systems. The Bank intends to choose a third party vendor that has modified or
upgraded its computer applications to ensure timely Year 2000 compliance. In
addition, the Company and the Bank intend to implement a Year 2000 compliance
program whereby the Bank will review the Year 2000 issue that may be faced by
its other third-party vendors and loan and deposit customers. Under such
program, the Company will examine the need for modifications or replacement of
all non-Year 2000 compliant pieces of software. The Company does not currently
expect that the cost of its and the Bank's Year 2000 compliance program will be
material to its financial condition and expects that it will satisfy such
compliance program without material disruption of its operations. Management of
the Company intends to evaluate the potential effect on its third party vendor's
data processing systems resulting from Year 2000 issues and to obtain a
representation from such vendor that it's core processing systems will be fully
Year 2000 compliant prior to the opening of the Bank for business. In the event
that the Company, the Bank, such vendor or its other significant vendors or loan
customers do not successfully and timely achieve Year 2000 compliance, the
Bank's business, future prospects, financial condition or results of operations
could be materially adversely affected. See "Management's Discussion and
Analysis or Plan of Operation."
NEED TO MAINTAIN TECHNOLOGY
The banking industry is undergoing rapid technological change with
frequent introductions of new technology-driven products and services, including
developments in telecommunications, data processing, computers, automation,
Internet-based banking, telebanking, debit cards, and so-called "smart cards".
In addition to allowing better service to customers, the effective use of
technology increases efficiency and enables financial institutions to reduce
costs. The Bank's future success will depend in part on its ability to address
the needs of its customers by using technology to provide products and services
that will satisfy customer demands for convenience as well as to create
additional efficiencies in the Bank's operations. Many of the Bank's competitors
have substantially greater resources to invest in technological improvements and
highly skilled technical personnel. To be and remain competitive, evolving
technology may require the Bank to expend significant amounts on computer
hardware and software and on compensation for knowledgeable and technically
skilled employees. There can be no assurance that the Bank will be able to
effectively implement new technology-driven products and services or be
successful in marketing these products and services to its customers.
NO CASH DIVIDENDS
It is anticipated that no cash dividends will be paid on the Common
Shares for the foreseeable future. It is likely that the Company will be largely
dependent upon cash dividends paid by the Bank for funds to pay cash dividends
on the Common Shares, if and when such cash dividends are declared. The Bank
does not anticipate paying dividends during the early years of its operations.
No assurance can be given that future earnings of the Bank, and resulting cash
dividends paid to the Company, together with any earnings from the Company's
other investments and activities, will be sufficient to permit the legal payment
of cash dividends to Company shareholders at any time in the future. Even if
earnings are available, the Bank's payment of dividends is restricted under
certain circumstances by OCC regulations. Further, even if the Company may
legally declare dividends, the amount and timing of such dividends will be at
the discretion of the Company's board of directors. The board may, in its sole
discretion, decide not to declare dividends. For a more detailed discussion of
other regulatory limitations on the payment of cash dividends by the Company,
see "Dividend Policy."
ANTI-TAKEOVER PROVISIONS
Under the Federal Change in Bank Control Act (the "Control Act"), a
notice must be submitted to the Federal Reserve Board if any natural person or,
generally, a group of natural persons acting in concert seeks to acquire 10% or
more of any class of outstanding voting securities of the Company, unless the
Federal Reserve Board
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determines that the acquisition will not result in a change of control of the
Company. Under the Control Act, the Federal Reserve Board has sixty days within
which to act on such notice, taking into consideration certain factors,
including the financial and managerial resources of the acquiror, the
convenience and needs of the community to be served by the bank holding company
and its subsidiary banks, and the antitrust effects of the acquisition. Under
the Bank Holding Company Act of 1956, as amended, (the "BHCA") a company is
generally required to obtain prior approval of the Federal Reserve Board before
it may obtain control of a bank holding company. Control is generally described
to mean the beneficial ownership of 25% or more of all outstanding voting
securities of a bank holding company, but may be as low as 5% under certain
circumstances. See "Supervision and Regulation."
Florida law and the charter documents of the Company contain provisions
that might have the effect of inhibiting a non-negotiated merger or other
business combination involving the Company. See "Description of Capital Stock."
Further, the Company has agreed, subject to the federal banking
agencies having no objection thereto, to enter into an employment agreement and
stock option agreement with Richard E. Horne, the President and Chief Executive
Officer of the Company and the Bank. The Company and the Bank will likely enter
into similar agreements with certain future senior executives of the Company or
the Bank. These agreements might render an acquisition of the Company more
costly and therefore less probable, by triggering provisions for accelerated
vesting of stock options and the payment of severance compensation following any
involuntary employment termination of these executives. See "Management."
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Second Amended and Restated Articles of Incorporation and
Amended and Restated Bylaws provide for the indemnification of its directors,
officers, employees and agents from liabilities incurred in connection with such
individuals' service in those capacities. In addition, as permitted by federal
law, the Bank's Articles of Association will provide for the indemnification of
the Bank's officers, directors, employees and agents to the fullest extent
permitted by the laws of Florida, subject only to the limits of the corporate
powers of a national bank. It is possible that the indemnification obligations
imposed under these provisions could result in a charge against the Company's or
the Bank's earnings and thereby, directly in the case of the Company and
indirectly in the case of the Bank, affect the availability of funds for payment
of dividends to the Company's shareholders.
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FORWARD-LOOKING STATEMENTS
This Prospectus contains certain "forward-looking statements", such as
statements relating to the financial condition and prospects, lending risks,
Year 2000 readiness, plans for future business development and marketing
activities, capital spending and financing sources, capital structure, the
effects of regulation and competition, and the prospective business of both the
Company and the Bank. Where used in this Prospectus, the words "anticipate,"
"believe," "estimate," "expect," "intend," and similar words and expressions, as
they relate to the Company or the Bank or their respective managements, identify
forward-looking statements. Such forward-looking statements reflect the current
views of the Company and are based on information currently available to the
management of the Company and the Bank and upon current expectations, estimates,
and projections about the Company and its industry, management's beliefs with
respect thereto, and certain assumptions made by management. These
forward-looking statements are not guarantees of future performance and are
subject to risks, uncertainties, and other factors which could cause actual
results to differ materially from those expressed or implied by such
forward-looking statements. Potential risks and uncertainties include, but are
not limited to: (i) significant increases in competitive pressure in the banking
and financial services industries; (ii) changes in the interest rate environment
which could reduce anticipated or actual margins; (iii) changes in political
conditions or the legislative or regulatory environment; (iv) general economic
conditions, either nationally or regionally (especially in southwest Florida),
becoming less favorable than expected resulting in, among other things, a
deterioration in credit quality; (v) changes occurring in business conditions
and inflation; (vi) changes in technology; (vii) changes in monetary and tax
policies; (viii) changes in the securities markets; and (ix) other risks and
uncertainties detailed from time to time in the filings of the Company with the
Commission. The most significant of such risks, uncertainties and other factors
are discussed under the heading "Risk Factors," beginning on page 8 of this
Prospectus, and prospective investors are urged to carefully consider such
factors.
RECENT DEVELOPMENTS
Prior to the Company's July 27, 1998 application currently pending, the
Company had on June 30, 1997 submitted a similar application to the OCC (the
"Initial Application"). The Initial Application was withdrawn by the Company
with the permission of the OCC on December 9, 1997. Prior to such withdrawal,
the Company had incurred organizational expenses associated with the Initial
Application (the "Prior Expenses"). Substantially all of the proceeds of the
Organizational Loans were used to fund such Prior Expenses. Assuming a repayment
date of January 31, 1999, the total of the aggregate principal amount, accrued
interest and fees with respect to the Organizational Loans is approximately
$655,312. Since the Company intends to pay such amount in full out of the net
proceeds from the Offering, approximately $655,312 of such net proceeds that
would otherwise be available for the working capital needs of the Company will
be used to fund the Prior Expenses. In order to lessen the effect of the Prior
Expenses on the Company and purchasers of Shares in the Offering, the OCC has
required the Company to effect savings in connection with the Offering in an
aggregate amount of approximately $550,000. The Company has effected such
savings by negotiating underwriting commission and fee concessions from
participants in the Offering and certain advisors to the Company. See "Risk
Factors - Need to Repay Debt" and "Use of Proceeds".
On December 26, 1997, the Company terminated a lease with Dooner Family
Equities, Ltd. with respect to real property located at 1010 Fifth Avenue South,
Naples, Florida, intended to be occupied by the Bank, thereby forfeiting a
non-refundable $20,000 deposit. See "Management's Discussion and Analysis or
Plan of Operation".
On July 15, 1998, the Company obtained a revolving line of credit from
The Banker's Bank, Atlanta, Georgia, in the maximum principal amount of $75,000.
On November 18, 1998, the Company obtained a new revolving line of credit from
the same lender in the maximum principal amount of $100,000 (the "November Line
of Credit"), part of the proceeds of which were used to repay in full the prior
line of credit. On December 31, 1998, the Company obtained a second new
revolving line of credit from the Banker's Bank in the maximum principal amount
of $300,000 (the "December Line of Credit", collectively with the November Line
of Credit the "Line of Credit") thereby increasing the maximum principal amount
of the Line of Credit to $400,000, borrowed an additional $225,000 thereunder,
and used approximately $218,690 of such borrowings to repay the principal
amount, accrued interest and fees with respect to certain of the Organizational
Loans. Each member of the Company's Board of Directors has guaranteed the
Company's obligation to repay the Line of Credit. As of December 31, 1998, the
principal amount outstanding under the Line of Credit was $320,000.
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As of September 30, 1998, the date of the Company's most recent audited
financial statements, the Company's accumulated deficit was $776,608. Since
September 30, 1998, the Company has continued to incur pre-opening expenses and
as of October 31, 1998, the accumulated deficit was $806,724. The additional
expenses incurred related principally to legal and professional advisory fees
incurred in the regulatory application process and in connection with the
Offering, employee salaries and benefits, office supplies and equipment rental.
As of November 2, 1998, the Company issued Amended and Restated
Promissory Notes to the lenders under the outstanding Organizational Loans for
the purpose of correcting certain technical imperfections in the documentation
relating to the Organizational Loans. As of December 31, 1998, 17 of the lenders
under the outstanding Organizational Loans executed an Amendment to Amended
and Restated Promissory Note for the purpose of extending the maturity date of
such Amended and Restated Promissory Notes to January 31, 1999.
USE OF PROCEEDS
Net proceeds to the Company from the sale of the 1,150,000 Common
Shares offered hereby are estimated to be $10,882,500 ($12,409,125 if the
Underwriter's over-allotment option is exercised in full), after deduction of
the underwriting discounts and commissions and estimated offering expenses.
USE BY COMPANY
The following table illustrates the intended use by the Company of the
net proceeds of the Offering:
Purchase capital stock of the Bank........................ $9,000,000
To redeem 100 outstanding Common Shares................... 100
Repay Line of Credit...................................... 321,000
Repay Organizational Loans................................ 655,312
Repay Advances............................................ 50,000
General corporate purposes (1)............................ 856,088
Total......................$10,882,500
===========
_____________
(1) The remaining proceeds of the Offering will also be available for
possible future capital contributions to the Bank, to finance possible
acquisitions of other financial institutions, or to fund the Company's
expansion into other lines of business closely related to banking.
The Company believes that the net proceeds of the Offering will satisfy
the Company's cash requirements for at least the twelve month period following
the opening of the Bank. Pending the use of proceeds for such purpose, the
Company expects to invest the proceeds of the Offering in short-term investment
grade securities. See "Management's Discussion and Analysis or Plan of
Operation."
The Line of Credit bears interest at a variable rate to be adjusted
based on the changes in a published "Prime Rate", and set initially at 8.0% per
annum. Payments of accrued interest on the November Line of Credit are to be
made quarterly beginning February 15, 1999. Payments of accrued interest on the
December Line of Credit are to be made quarterly beginning March 31, 1999. The
Line of Credit matures on July 15, 1999. The Organizational Loans bear interest
at the rate of 8% per annum from their respective dates of issuance to March 31,
1998, and at the rate of 13% per annum from April 1, 1998 until paid. The
Organizational Loans mature on January 31, 1999. The Advances do not bear
interest, and the letter agreements documenting the Advances do not provide for
a right of repayment on any date. For each month that the Organizational Loans
and the current balance on the Line of Credit remain outstanding thereafter,
aggregate interest will accrue at the rate of approximately $7,900 per month.
As the Organizational Loans mature on January 31, 1999, if the Offering
does not close by that date, the Organizational Loans will be in technical
default. However, the Organizers do not anticipate that the holders of the
Organizational Loans will take any legal action.
The proceeds of the Organizational Loans, Advances, and the Line of
Credit have been used by the Company to pay organizational and pre-opening
expenses of the Company and the Bank. These expenses include
(i) a loan referral fee equal to 10% of the aggregate principal amount of the
Organizational Loans paid to the
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Underwriter for its efforts in locating the lenders, (ii) attorney, accounting
and consulting fees, (iii) repayment of the principal, interest and funding fees
of five Organizational Loans, and (iv) office and equipment rental and purchase,
employee salaries and benefits, and government filing and application fees.
USE BY BANK
The $9,000,000 of the net proceeds of the Offering used by the Company
to purchase all of the capital stock of the Bank will provide the Bank's initial
capitalization. The following table illustrates the intended use by the Bank of
such amount:
<TABLE>
<S> <C>
Build out leased premises for Bank's offices.........................$ 150,000
Furniture, fixtures, equipment and other assets for Bank's offices... 321,800
Repay Company for Bank's organizational expenses..................... 95,000
Loans to customers, investments and other general purposes........... 8,433,200
Total.......................................$9,000,000
==========
</TABLE>
DIVIDEND POLICY
Holders of the Company's Common Shares are entitled to receive cash
dividends when and if declared by its Board of Directors out of funds legally
available therefor. Prior to the Offering, the Company has not paid any cash
dividends on its Common Shares. It is not anticipated that the Company will pay
any cash dividends on its Common Shares in the foreseeable future.
The source of dividends to the Company's shareholders, if any, in the
future will depend primarily upon the earnings of the Bank and its ability to
pay dividends to the Company, as to which there can be no assurance. The payment
of dividends by the Bank is subject to a determination by the Bank's Board of
Directors and will depend upon a number of factors, including capital
requirements, regulatory limitations, the Bank's results of operations and
financial condition, tax considerations, and general economic conditions.
The Bank is restricted in its ability to pay dividends under the
national banking laws and by regulations of the OCC. Pursuant to 12 U.S.C.
/section/ 56, a national bank may not pay dividends from its capital. In
addition, no dividends may be made in an amount greater than a national bank's
undivided profits, subject to other applicable provisions of law. Payments of
dividends out of undivided profits are further limited by 12 U.S.C. /section/
60(a), which prohibits a bank from declaring a dividend on its shares of common
stock until its surplus equals its common capital, unless there has been
transferred to surplus not less than one-tenth of the bank's net income of the
preceding two consecutive half year periods (in the case of an annual dividend).
Pursuant to 12 U.S.C. /section/ 60(b), the approval of the OCC is required if
the total of all dividends declared by the bank in any calendar year exceeds the
total of its net income for that year combined with its retained net income for
the preceding two years, less any required transfers to surplus or a fund for
the retirement of any preferred stock.
Under Federal law and Federal Reserve Board policy, a bank holding
company is required to serve as a source of financial strength to each of its
subsidiary banks and to commit resources to support each such bank. Consistent
with this requirement, the Federal Reserve has stated that, as a matter of
prudent banking, a bank holding company generally should not maintain a rate of
cash dividends unless the available net income of the bank holding company is
sufficient to fully fund the dividends, and the prospective rate of earnings
retention appears to be consistent with the company's capital needs, asset
quality, and overall financial condition. See "Risk Factors--Limited Operating
History."
The ability of the Bank and the Company to pay cash dividends in the
future could be further influenced by bank regulatory policies or agreements and
capital guidelines.
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CAPITALIZATION
The following table sets forth, as of September 30, 1998, the
capitalization of the Company, and as adjusted to give effect to the receipt of
the estimated net proceeds from the sale of the 1,150,000 Common Shares offered
hereby at a public offering price of $10.00 per share.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
--------------------------------------
ACTUAL AS ADJUSTED(1)(2)
--------- ------------------
<S> <C> <C>
Long term and short term debt........................................ $ 959,273 $ --
SHAREHOLDERS' EQUITY:
Common Shares, $.01 par value, 10,000,000 shares authorized,
100 shares issued and outstanding; as adjusted 1,150,000
shares issued ($10 each) and outstanding(3)........................ 1 11,500
Preferred Shares, $.01 par value, 2,000,000 shares authorized; no
shares issued or outstanding...................................... -- --
Additional paid-in capital........................................... 99 10,871,000
Accumulated deficit(4)............................................... (776,608) (892,000)
Total shareholders' equity........................................... $(776,508) $9,990,500
</TABLE>
_____________
(1) As adjusted to give effect to the Offering and receipt of the net
proceeds of the Offering.
(2) The amount reflected assumes that the Company receives the net proceeds
of the Offering on January 31, 1999 and that the over-allotment option
granted to the Underwriter is not exercised.
(3) Does not include (i) 100 shares of common stock issued to facilitate
organization of the Company to be redeemed at their original aggregate
cost of $100, (ii) 126,100 Common Shares issuable upon exercise of the
Organizer Warrants, (iii) 25,000 Common Shares issuable upon exercise
of options to be granted to Richard E. Horne under a stock option
agreement to be entered into by Mr. Horne and the Company. See
"Management -- Stock Option Agreement."
(4) This amount reflects pre-opening expenses, incurred through September
30, 1998 (consisting primarily of salaries, employee benefits, legal
and consulting fees, interest, a loan funding fee, a loan referral fee
paid to the Underwriter, and office and equipment rental), as well as
additional start-up and pre-opening expenses through the end of the
offering period.
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<PAGE>
BUSINESS
GENERAL
The Company was incorporated under the laws of the State of Florida on
January 23, 1997, primarily to serve as a bank holding company for the Bank.
Neither the Company nor the Bank has commenced any active business operations,
and neither will do so unless and until the requisite regulatory approvals have
been obtained. The Company intends to use the net proceeds from the Offering to
purchase all of the capital stock of the Bank, to repay notes issued in
connection with funds borrowed to finance organizational expenses, and for other
general corporate purposes. The Company and the Bank have filed applications
with all necessary bank regulatory agencies. On December 16, 1998, the Office of
the Comptroller of the Currency (the "OCC") approved the Bank's charter
application, subject to certain terms and conditions specified in such approval
(the "OCC Preliminary Approval"). Although no assurances can be given, the
Company expects to satisfy all conditions for organizing the Bank and to open
the Bank for business during the second quarter of 1999, or as soon thereafter
as practicable.
The Bank is being formed by local business persons who have identified
the need for a consumer-oriented independent community bank in Collier County,
Florida to serve its growing population and expanding business base. In recent
years, the banking industry in Collier County has experienced substantial
consolidation, and large bank holding companies, headquartered outside of
southwest Florida, have acquired a significant number of financial institutions
that were previously locally-owned and managed. This consolidation has been
followed by numerous pricing changes, the dissolution of local boards of
directors, changes in management and branch personnel and, in the perception of
the Company, a decline in the level of personal customer service. It is the
Company's belief that the large banking institutions located in this area are
inflexible, slow in their decision-making process, and are not currently meeting
the banking needs of individuals and small-to-medium sized businesses. The
Company believes that, as a result of this industry consolidation, there is an
opportunity to build a profitable banking business through the establishment of
a local banking institution operated by local business persons and by
experienced banking personnel who are familiar with the community and are
dedicated to providing fast, efficient, and personalized service to the market
area. Consistent with this objective, the Bank has attracted and intends to seek
additional experienced bank personnel, most of whom are expected to reside in
the area, who will know the Bank's customers, and will be able to provide them
with personalized service. Further, the Boards of Directors of both the Company
and the Bank are comprised of local business persons who will actively promote
the Bank in the community. The Bank will be one of only four locally managed
community banks with its main office located in western Collier County.
The Bank intends to be a full service commercial bank. The business of
the Bank will consist of attracting deposits from the general public in the PSA
and using those deposits, together with funds derived from other sources, to
originate a variety of commercial, consumer, and residential real estate loans.
While the Bank anticipates that its lending activities will include residential
real estate and consumer loans, it expects to focus its efforts on lending
relationships with small to medium-sized businesses. The Bank focuses on the
smaller commercial customer because management believes that this segment offers
the greatest concentration of potential business. Also, the small to midsize
commercial market segment has historically shown a willingness to borrow and
carry larger balances. Finally, the Company believes that this market segment
tends to be more loyal in its banking relationships. The Bank intends to offer a
full range of deposit services that are typically available at most banking
institutions, including personal and business checking accounts, senior checking
accounts, interest-bearing checking 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 principal market area at rates competitive
to those offered in the area. In addition, retirement accounts such as
Individual Retirement Accounts (up to applicable limits) will be made available.
The Bank's deposits will be insured up to applicable limits by the FDIC. The
Bank also intends to offer commercial loans, consumer installment loans, real
estate loans, construction loans, second mortgage loans (including home equity
loans), and lines of credit. Commercial loans will include both secured and
unsecured loans for working capital (including inventory and receivables),
business expansion (including acquisition of real estate and improvements), and
purchase of machinery and equipment. Consumer loans will include secured and
unsecured loans for financing automobiles, boats, home improvements and personal
investments. Other services
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<PAGE>
the Bank is expected to offer will include ATM and debit cards with access to
local and state networks, official bank checks and money orders, travelers
checks, bank by mail, safe deposit boxes, wire transfers, direct deposit of
payroll and social security checks, automatic drafts for various accounts, VISA
and MasterCard credit cards, and U.S. Savings Bonds. The Bank does not
anticipate initially providing fiduciary services or Internet based services.
The need for such services, however, will be reviewed periodically for possible
future inclusion among the Bank's products and services.
The revenues of the Bank will be primarily derived from interest on,
and fees received in connection with, commercial, real estate, and other loans,
from the sales of loans, and from interest on and dividends from investment
securities and short-term investments. The principal sources of funds for the
Bank's lending activities will be its deposits, amortization and repayment of
loans, sales of loans, and the sale of investment securities. The principal
expenses of the Bank will be the interest paid on deposits and operating and
general administrative expenses.
The Company was organized to facilitate the Bank's ability to serve its
future customers' requirements for financial services. The holding company
structure is expected to provide flexibility for expansion of the Company's
banking business through the possible acquisition of other financial
institutions and the provision of additional banking and non-banking related
services, which the traditional commercial bank cannot provide under present
laws. Further, the Company may borrow funds, subject to capital adequacy
guidelines of the Federal Reserve Board, invest in capital instruments of the
Bank and otherwise raise capital in a manner which is unavailable to the Bank
under existing banking regulations. The net proceeds of the Offering remaining
after the Company capitalizes the Bank (including the net proceeds from any
exercise of the Underwriters' over-allotment option, and less the Company's
organizational expenses) will initially be invested by the Company in investment
grade securities, as permitted under federal banking law, and held by the
Company as working capital, for general corporate purposes, and to pay operating
expenses.
As is the case with banking institutions generally, the Bank's
operations will be materially and significantly influenced by general economic
conditions and by related monetary and fiscal policies of financial institution
regulatory agencies, including the Federal Reserve Board and the FDIC. Deposit
flows and cost of funds are influenced by interest rates on competing
investments and general market rates of interest. Lending activities are
affected by the demand for financing of real estate and other types of loans,
which in turn is affected by the interest rates at which such financing may be
offered and other factors affecting local demand and availability of funds.
The Company's primary initial focus will be the development of the
Bank's business from a single office location. As warranted, the Company will
consider diversifying its activities over time to include additional services
and banking locations. The Company has no present plans to acquire or establish
any operating subsidiaries other than the Bank. It is expected, however, that
the Company may make acquisitions in the future if the Company becomes
profitable and such acquisitions are deemed to be in the best interests of the
Company and its shareholders. Such acquisitions, if any, will be subject to
certain regulatory approvals and requirements. See "Supervision and Regulation."
BUSINESS STRATEGY
The Bank's strategy is to attain market share by attracting customers
through a superior level of prompt and personalized banking service. The goal of
management is to create a customer-driven financial institution that gives high
value to its customers by delivering customized, quality products and services.
The consumer-oriented community banking focus of the Bank will provide customers
with locally-based decision makers who are familiar with their customers, their
business environment, and competitive demands, who are able to quickly evaluate
and respond to loan applications, and who have the ability to craft personalized
banking solutions to the customer's needs without extensive bureaucratic delays.
Management believes that such a bank will appeal to customers who prefer to
conduct their banking business with a locally-managed financial institution that
demonstrates both a genuine interest in their financial affairs and an ability
to cater to their financial needs.
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<PAGE>
Businesses will be solicited through the personal efforts of the Bank's
directors and officers. Management believes that a locally-based independent
bank is often perceived by the local business community as possessing a clearer
understanding of local commerce and its needs. Consequently, the Company expects
that the Bank will be able to make prudent lending decisions quickly and more
equitably than its competitors without compromising asset quality or the Bank's
profitability.
The Bank intends to implement an active officer call program to promote
these efforts. The purpose of this call program will be to describe the
products, services, and strategies of the Bank to both existing and new business
prospects. Directors are expected to market the Bank actively through their
business and social contacts. All of the directors are active members of the
Naples community and their continued community involvement will provide an
opportunity to promote the Bank, its products, and services. Management of the
Bank intends to utilize advertising and selling efforts in order to build a
distinct institutional image for the Bank and to attract a customer base. In
addition, in order to broaden the Bank's deposit base, management intends to
offer to commercial customers certain amenities, including the use of a courier
service to provide pick-up and delivery for daily deposits and special banking
service packages for employees. The Bank also intends to offer senior citizens
packages on an affordable basis to the large number of retired persons in the
Bank's PSA.
As a new financial institution, the Bank will employ current technology
in the conduct of its banking activities. The Bank intends to remain at the
forefront of technology, while minimizing the costs of its delivery, by using
third-party providers. The Bank expects to enter into third-party arrangements
to provide its customers with convenient electronic access to their accounts and
to deliver other bank products such as credit cards, debit cards and home
banking services. This "high touch-high tech" delivery of bank services is
expected to draw customers now receiving depersonalized bank services from the
Bank's larger competitors. This approach is also expected to appeal to the
business community and to younger customers seeking the convenience of high tech
and electronic banking.
COMPETITION
Competition in the Bank's market area is intense, and market share is
fragmented among a number of financial institutions. According to statistics
compiled by the FDIC, as of June 30, 1998 approximately 21 financial
institutions with a total of 91 branches were located in Collier County. The
Bank will also encounter competition from finance companies, insurance
companies, mortgage companies, securities brokerage firms, money market and
mutual funds, loan production offices, and other providers of financial
services. Most of the Bank's competitors have been in business for many years,
have established customer bases, are substantially larger, have substantially
larger lending limits than the Bank and can offer certain services, including
multiple branches and international banking services, that the Bank will be able
to offer only through correspondent banks, if at all. In addition, most of these
entities have greater capital resources than the Bank that, among other things,
may allow them to price their services at levels more favorable to clients and
to provide larger credit facilities than the Bank. The Company anticipates that
the Bank's legal lending limit of approximately $1,220,000 will be adequate to
satisfy the credit needs of most of its customers and that the needs of its
clients in excess of this amount will be met through loan participation
arrangements with correspondent banks and others; however, there can be no
assurance that the Bank will be successful in arranging loan participations that
will be both competitive with the products offered by competitors of the Bank
and advantageous to the Bank.
The Company believes that its personal service strategy will enhance
the Bank's ability to compete favorably by attracting individuals and local
businesses. The Bank will delegate appropriate authority to its personnel to
deal effectively and in a timely fashion with customer service needs. The Bank
expects to compete for loans principally through the type of loans offered,
interest rates, loan fees, and the quality of the service it will provide. The
Bank will actively solicit deposit-related customers and will compete for
deposits by offering customers personal attention, professional services and
competitive interest rates.
PRIMARY SERVICE AREA
The Bank's proposed PSA will be the western portion of Collier County,
Florida, which is located on the southwest coast of Florida. Included in this
area are the cities of Naples and Marco Island. Naples serves as the
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county seat of Collier County and is located 35 miles south of Ft. Myers,
Florida and about 120 miles west of Miami, Florida. For a depiction of the
Bank's proposed PSA, see the map on the inside cover of this Prospectus.
BANK LOCATION AND FACILITIES
The proposed main office of the Bank is located in the northern sector
of Naples at the northwest corner of Airport Pulling Road and Vanderbilt Beach
Road. Based on 1997 traffic counts, the intersection ranks as the third busiest
in the county. This particular section of Collier County has been recognized as
a primary growth area for residential and commercial development and is expected
to be a hub of Naples within the next five years.
The Company is party to a lease (the "Lease") with Gulf Coast
Commercial Corporation, an unaffiliated third party real estate development
company that will construct a multi-story office building of which the Bank will
occupy approximately 7,500 square feet of space on two floors, consisting of a
lobby, executive and customer service offices, teller stations and vault
operations. The property will also contain a drive-through facility of four
lanes and adequate paved parking for customers and employees. The term of the
Lease will be ten years beginning on the earlier of (i) thirty days after the
lessor thereunder receives a certificate of occupancy for the building, and (ii)
the date the Bank opens for business. Under the Lease, the Company has two
options to renew the Lease term, each for a five year period. The annual base
rental amounts for the first and second years of the Lease term will be $159,000
and $189,000, respectively, with automatic increases for each year of the term
thereafter of between 3% and 6%, based upon increases in the Consumer Price
Index. Additional rental amounts will be due for the use of certain common areas
and other items. The Company expects that this facility will be completed and
available for the Bank's use in the second quarter of 1999.
Major construction projects are also underway within close proximity to
the Bank's proposed main office. Commercial sites are planned for the three
other corners of the Bank's intersection. In addition, North Collier Community
Hospital has opened a 100-bed facility 2.5 miles from the proposed Bank site.
The Cleveland Clinic, approximately 3 miles from the Bank, is constructing a
70-bed medical unit on the corner of I-75 and Pine Ridge Road. The Ritz Carlton
has publicly announced that it will begin construction next year on a second
resort property in Naples. The luxury hotel chain plans to establish a 295-room
golf lodge on the northeast corner of Airport Pulling Road and Vanderbilt Beach
Road Extension, across from the Bank site. Management believes that this $35
million project will add significantly to the prestige of the area, as well as
potential bank customers through increased employment levels and traffic
patterns.
Adjoining the proposed Bank site, Pelican Bay Development Inc. has
publicly disclosed its plans to build an upscale mall that will become a major
addition to Pelican Marsh Golf & C.C., a very high end residential community.
Within a five mile radius of the Bank are four major shopping centers that
occupy over 600,000 square feet of space and serve the surrounding affluent
communities.
ECONOMIC AND DEMOGRAPHIC FACTORS
Collier County, Florida had an estimated year round population for 1998
of 203,000 residents, the vast majority of whom live in the western portion of
the county. According to Enterprise Florida, Inc., Department of Research, the
county's population rises each year by approximately one-third during the winter
season (November through April). According to information published by the
Collier County Economic Development Council, 28.4 residential building permits
per 1,000 residents were issued in the Naples area during 1997, ranking the
Naples area first in the country in number of building permits issued per
capita. Based upon a study conducted by the University of Florida Bureau of
Economic and Business Research, the Southwest Florida region has been, and is
expected to continue to be, one of the fastest growing regions in the United
States.
Collier County has a diverse commercial and residential environment
with upscale resort areas, commercial office parks, residential developments,
shopping centers and entertainment areas. Collier County is located south of Lee
County and 30 minutes from the Southwest Florida International Airport, which
has a large number of daily
22
<PAGE>
domestic and international flights. The City of Naples is easily accessible from
the major cities of Florida through a modern, well-maintained federal and state
superhighway system. Tourism is a contributing factor to the growth of Collier
County. Located at the gateway to the Everglades, Naples is a popular eco-travel
destination. Young professionals and wealthy retirees are among the many
residents attracted to this area by its quality of life and mild climate.
Between 1980 and 1990, the population of Collier County almost doubled,
from 85,971 to 152,099, and, in the last seven years, the population has grown
by another 50,901 to the current estimate of 203,000, according to information
compiled by Enterprise Florida, Inc., Department of Research. It is projected by
Enterprise Florida, Inc. and the University of Florida Bureau of Economic and
Business Research that the population of Collier County will be 315,900 by the
year 2015. Also, according to the University of Florida, the median age in
Collier County in 1995 was 42.5 years.
According to statistics of the U.S. Department of Housing and Urban
Development, in 1995 the median family income in Collier County was $48,800 and,
according to data compiled by the Collier County Economic Development Council,
the 1995 average household effective buying income was $55,928, both figures
being the highest in the State of Florida. Based on data compiled by the Collier
County Economic Development Council, the 1996 median value of a single family
home in Collier County was $136,483.
Collier County's economic base is built on services, retail trade,
tourism, agriculture, government and construction. Historically, employment
within the county has been seasonal and associated with the seasonally based
tourist economy and the return of part-year residents during the winter months.
In 1997, the unemployment rate for Collier County was 6.0%, higher than the
national average of 5.4% and the Florida average of 5.1%. Growth in the county's
labor force from 1985 to 1995 was 68.6%, which was significantly higher than the
State of Florida's rate of 27.95%. The service industry is the largest
employment segment with 31%, followed by retail trade with 24%, agriculture with
14%, government with 10%, and construction with 9%.
PRODUCTS AND SERVICES
The Bank is being established to meet the local consumer and commercial
financing needs of the residents and businesses of the Bank's PSA. Consequently,
the Bank intends to aggressively seek creditworthy loans in this limited
geographic area. The Bank will make commercial loans to small- to medium-sized
businesses and professional concerns, consumer loans to individuals, primary and
secondary mortgage loans for the acquisition or improvement of personal
residences, and real estate related loans, including construction loans for
residential and commercial properties.
Although the Bank proposes to take a progressive and competitive
approach to lending, it intends to stress high quality in its loans. To promote
such quality lending, the Board of Directors of the Bank will adopt appropriate
lending policies and procedures. Under these policies, a maximum lending
authority will be established for each loan officer. Each loan request exceeding
a loan officer's authority will be approved by one or more senior officers. On a
monthly basis, the entire Board of Directors will review all loans made in the
preceding month. In addition, a loan committee of the Board of Directors of the
Bank will review larger loans for prior approval when the loan request exceeds
the established limits for the senior officers. Because of the Bank's local
focus, management believes that it can achieve quality control while still
providing prompt and personal service.
The Bank intends to maintain a continuous loan review process designed
to promote early identification of credit quality problems. The Bank's credit
review administrator will be responsible for conducting a continuous internal
review which tests compliance with loan policy and documentation of all loans.
Any past due loans and identified problem loans will be reviewed with the Board
of Directors on a monthly basis.
Under the regulations of the OCC, a national bank's total outstanding
loans and extensions of credit, both secured and unsecured, to one borrower may
not exceed 15% of the bank's capital and surplus, plus an additional
23
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10% of the bank's capital and surplus if the amount that exceeds the 15% general
limit is fully secured by readily marketable collateral, as defined in the
regulations. Under these regulations, the Bank's initial general lending limit
to one borrower will be approximately $1,220,000, plus an additional $810,000
for loans secured by readily marketable collateral. While the Bank expects
generally to employ more conservative lending limits, the Board of Directors
will have discretion to lend up to these legal limits.
COMMERCIAL LOANS. Commercial lending will be directed principally
toward small to mid-sized businesses, including commercial real estate
developers, whose demands for funds either fall within the legal lending limits
of the Bank or can be satisfied through loan participations arranged by the
Bank. The Bank intends to offer a variety of commercial loan services including
term loans, lines of credit, and equipment receivables financing. A broad range
of short-to-medium term commercial loans, both collateralized and
uncollateralized, will be made available to businesses for working capital
(including inventory and receivables), business expansion (including
acquisitions of real estate and improvements), and the purchase of machinery and
equipment. The purpose of a particular loan will determine its structure.
The Bank's commercial loans are expected to be underwritten primarily
on the basis of the borrower's ability to service such debt from income. As a
general practice, the Bank expects to take as collateral a security interest in
any available real estate, equipment, or other chattel, although such loans may
be made on an uncollateralized basis. Secured working capital loans are expected
to be primarily collateralized by short term assets, whereas term loans are
expected to be collateralized primarily by long term assets.
Unlike residential mortgage loans, which are generally made on the
basis of the borrower's ability to make repayment from his employment and other
income and which are collateralized by real property whose value tends to be
easily ascertainable, commercial loans are typically made on the basis of the
borrower's ability to make repayment from the cash flow of its business and are
generally collateralized by business assets, such as accounts receivable,
equipment and inventory. As a result, the availability of funds for the
repayment of commercial loans may be substantially dependent on the success of
the business itself. Further, the collateral securing the loans, which may
depreciate over time, occasionally cannot be appraised with as much precision as
residential real estate, and may fluctuate in value based on the success of the
business. Risks associated with these loans can be significant and include, but
are not limited to, fraud, bankruptcy, economic downturns, deteriorated or
non-existing collateral, customer financial problems, and changes in interest
rates.
RESIDENTIAL REAL ESTATE LOANS. The Bank will make real estate loans,
consisting primarily of one to four- unit family structures. The loans, which
will generally be long-term, will have either fixed or variable interest rates.
It will be the Bank's general policy to retain all variable interest rate
mortgage loans in the Bank's loan portfolio and to sell all fixed rate loans in
the secondary market. This policy will be subject to review by management and
the Bank's Board of Directors as a result of changing market and economic
conditions and other relevant factors.
Retention of variable interest rate loans in the Bank's loan portfolio
is expected to reduce the Bank's exposure to fluctuations in interest rates.
However, such loans generally pose credit risks different from the risks
inherent in fixed rate loans, primarily because as interest rates rise the
underlying payments from the borrowers rise, thereby increasing potential for
default.
Additionally, the Bank will make residential construction loans for one
to four-unit family structures. The Bank will require a first lien position on
the land associated with the construction project and will offer these loans to
homeowners and qualified builders. Loan disbursements will require on-site
inspections to assure the project is on budget and that the loan proceeds are
being used for the construction project and not diverted to another project. The
loan-to-value ratio for such loans will generally be 80% of the lower of
as-built appraised value or project cost, and will be a maximum of 90% if the
loan is amortized. To be eligible for a residential construction loan, a
borrower must be pre-qualified for permanent financing.
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CONSUMER LOANS. The Bank plans to make consumer loans, consisting
primarily of installment loans to individuals for personal, family and household
purposes, including loans for automobiles, home improvements, second mortgages,
home equity lines of credit, and investments. Consumer loans will be attractive
to the Bank because they typically have a shorter term and carry higher interest
rates than that charged on other types of loans. Consumer loans, however, do
pose additional risks of collectibility when compared to traditional types of
loans granted by commercial banks such as residential mortgage loans. In many
instances, the Bank will be required to rely on the borrower's ability to repay
since the collateral may be of reduced value at the time of collection.
Accordingly, the initial determination of the borrower's ability to repay is of
primary importance in the underwriting of consumer loans. Additional risks
associated with consumer loans include, but are not limited to, fraud,
deteriorated or non-existent collateral, general economic downturn, customer
financial problems, and changes in interest rates.
DEPOSITS. The Bank plans to attract deposits by offering a broad array
of competitively priced deposit services, including personal and business
checking accounts, senior checking accounts, interest-bearing checking accounts,
regular savings accounts, money market deposits (transaction and investment),
certificates of deposit, retirement accounts, and other deposit or fund transfer
services as permitted by law or regulation and required to remain competitive in
the Bank's market. The Bank intends to seek deposits through an aggressive
marketing plan in its overall service area, a broad product line, and
competitive services. The primary sources of deposits will be residents and
businesses located in the Bank's PSA, attracted through personal solicitation by
the Bank's officers and directors, direct mail solicitations, and advertisements
published in the local media.
OTHER BANK SERVICES. Management of the Bank intends to establish and
provide other bank services, such as loans in excess of the Bank's lending
limits, through relationships with correspondent banks and other third party
service providers. There can be no assurance, however, that the Bank will be
successful in establishing such relationships.
INVESTMENTS
Funds generated by the Bank as a result of increases in deposits,
decreases in loans, or otherwise which are not immediately used by the Bank will
be invested in securities to be held in the investment portfolio. Such
investments are expected to consist primarily of obligations of the United
States (or obligations guaranteed as to principal and interest by the United
States) and other investment grade securities, in compliance with the laws and
regulations applicable to national banks. The investment portfolio will be
structured so that it provides for an ongoing source of funds for meeting loan
and deposit demands and for reinvestment opportunities to take advantage of
changes in the interest rate environment.
ASSET AND LIABILITY MANAGEMENT
The Bank intends to manage its assets and liabilities to provide an
optimum and stable net interest margin, a profitable after-tax return on assets
and return on equity, and adequate liquidity. These management functions will be
conducted within the framework of written loan and investment policies, which
the Bank intends to adopt. The Bank will attempt to maintain a balanced position
between rate sensitive assets and rate sensitive liabilities.
DATA PROCESSING
Data processing services will be purchased on a contract basis,
reducing the number of persons otherwise required to handle the operational
functions of the Bank. The Bank is in the process of discussing arrangements
with potential data processing providers.
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<PAGE>
EMPLOYEES
Upon commencement of operations, the Bank is expected to have
approximately 19 full time-equivalent employees. The Company is not expected to
have any employees who are not also employees of the Bank. At present, the
Company's only full-time employees are Mr. Richard E. Horne and Mr. Sidney T.
Jackson.
The Bank intends to hire additional officers and employees prior to
commencement of the Bank's operations. The Bank plans to employ as officers and
employees primarily persons from the Naples area who have substantial experience
and proven records in banking. The Bank plans to pay competitive salaries to
attract and retain such officers and employees.
LEGAL PROCEEDINGS
Neither the Company nor the Bank is a party to any pending legal
proceeding. Management believes there is no litigation threatened in which the
Company or the Bank faces potential loss or exposure or which will materially
affect shareholders' equity or the Company's business or financial condition
upon completion of the Offering.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN
OF OPERATION
The Company is still in a developmental stage and will remain in that
stage until the Offering is completed and the Bank commences operations. The
Company's ability to commence operations is contingent upon obtaining adequate
financial resources through the Offering.
ORGANIZATIONAL LOANS, ADVANCES AND LINE OF CREDIT
In order to obtain funding for its start-up and organizational
expenses, during 1997 the Company issued to twenty-nine individuals a series of
promissory notes for the Organizational Loans in an aggregate principal amount
of $900,000. The proceeds of certain of these Organizational Loans were used to
repay prior Organizational Loans in an aggregate principal amount of $200,000.
On December 31, 1998, additional funds were advanced to the Company under the
Line of Credit which were used to repay a further $175,000 in aggregate
principal amount of the Organizational Loans. The remaining principal balance on
the Organizational Loans of $525,000 matures on January 31, 1999. The
Organizational Loans are currently evidenced by 24 separate promissory notes
ranging in principal amount from $25,000 to $100,000. The interest rate on the
Organizational Loans is 8% per annum from their respective dates of issuance to
March 31, 1998, and 13% per annum from March 31, 1998 until the date of payment,
and a funding fee equal to 8% of the principal is due each lender at maturity.
All of the notes may be prepaid without penalty. Assuming a repayment date of
January 31, 1999, approximately $655,312 of the net proceeds of the Offering
will be used to pay the principal, accrued interest and fees for these loans.
If the Offering does not close by January 31, 1999, the Organizational Loans
will be in technical default. However, the Organizers do not anticipate that
the holders of the Organizational Loans will take any legal action.
The Company has received the Advances from various of its directors in
an aggregate amount of $50,000. The Advances do not bear interest, and the
letter agreements documenting the Advances do not provide for a right of
repayment on any date.
The Company has obtained the Line of Credit in the aggregate maximum
amount of $400,000 from The Banker's Bank, of Atlanta, Georgia, under the terms
of which $320,000 was outstanding as of December 31, 1998. The Line of Credit
bears interest at a variable rate to be adjusted based on the changes in a
published "Prime Rate", set initially at 8.0% per annum for the November Line of
Credit and 7.75% per annum for the December Line of Credit. Payments of accrued
interest on the November Line of Credit are to be made quarterly beginning
February 15, 1999. Payments of accrued interest on the December Line of Credit
are to be made quarterly beginning March 31, 1999. The Line of Credit matures on
July 15, 1999.
Since September 30, 1998, the date of the Company's most recent audited
financial statements, the Company has continued to incur pre-operating expenses.
At September 30, 1998, the Company's accumulated deficit was $776,608. The
additional expenses incurred by the Company since such date related principally
to legal and professional fees incurred in the regulatory application process
and in connection with this offering, salaries and supplies.
LEASE AGREEMENTS
On July 30, 1997, the Company entered into a lease with Dooner Family
Equities, Ltd. (the "Dooner Lease") with respect to real property located at
1010 Fifth Avenue South, Naples, Florida, intended to be occupied by the Bank.
Pursuant to the terms of the Dooner Lease, the Company was required to make a
non-refundable $20,000 deposit to be credited towards the first month's rental
upon commencement of the lease term. The Dooner Lease was terminable by the
Company in the event that, among other things, the Company and the Bank did not
receive all required regulatory and administrative approvals for the opening of
the Bank and the commencement of its business by December 31, 1997. By letter
dated December 26, 1997, the Company terminated the Dooner Lease, thereby
forfeiting the above deposit.
Pursuant to the terms of the Lease for the Bank's current proposed site
at Airport Pulling Road and Vanderbilt Beach Road, the Company has made a
non-refundable $25,000 deposit, to be credited towards the first month's rental
upon commencement of the Lease term.
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<PAGE>
CASH REQUIREMENTS
The Company believes that the net proceeds of the Offering will satisfy
the Company's cash requirements for at least the twelve month period following
the opening of the Bank. Accordingly, the Company does not anticipate that it
will be necessary to raise additional funds for the operation of the Company and
the Bank over the next twelve months. For additional information regarding
material expenditures during such period, see "Use of Proceeds." For additional
information regarding the plan of operations for the Company and the Bank, see
"Business" and "Management."
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<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company and the Bank and
their ages and positions with the Company and the Bank are set forth below:
POSITION WITH
NAME AGE COMPANY AND BANK(1)(2)
- ---- --- ----------------------
Richard E. Horne.............................. 51 Director, President and
Chief Executive Officer
Sidney T. Jackson............................. 56 Senior Vice President of
the Bank
William J. Ryan............................... 66 Director
Pierce T. Neese............................... 58 Director
Earl G. Hodges................................ 71 Director
William L. McDaniel, Jr....................... 37 Director
Donald W. Ketterhagen, M.D.................... 49 Director, Secretary
_____________
(1) Each of these individuals serves the Company and the Bank in the same
capacities set forth above, except that Mr. Jackson is not an officer or
director of the Company.
(2) The Board of Directors of the Company is divided into three classes,
designated Class I, Class II and Class III. See "--Board of Directors."
Officers of the Company and the Bank are elected annually by their
respective Boards of Directors.
Set forth below is a description of the business experience during the
past five years or more and other biographical information for the directors and
executive officers identified above.
RICHARD E. HORNE, a director of the Company and the Bank, has been
elected by the Board of Directors to serve as the President and Chief Executive
Officer of the Company and the Bank. He is an executive level commercial banker
with 24 years experience in the marketing and management of a wide array of
financial services. Most recently, from August 1992 to February 1998, Mr. Horne
held the position of Executive Vice President and Chief Lending Officer at
Trustmark National Bank, the largest bank in Mississippi with assets of $5.5
billion. During his six years with Trustmark, Mr. Horne had statewide
responsibility for commercial, real estate and mortgage lending. Further, he was
a member of the Executive Management Committee and also served as the
chairperson of the Senior Loan Committee which was responsible for approval of
all credits in excess of $1 million. Mr. Horne was also instrumental in changing
the credit culture by establishing bankwide credit underwriting standards. From
1988-1992, Mr. Horne was a Senior Vice President with Citizens and Southern
National Bank of Florida, responsible for the retail banking group in Broward
County. This consisted of twenty-four branches, 300 employees, $750 million in
deposits and $125 million in small business and consumer loans. Between
1980-1988 as a Vice President, he managed C&S Bank's top performing commercial
lending unit in the Atlanta market targeting businesses with annual revenues of
less than $25 million. Prior to 1980, he held various marketing and credit
positions with Trust Company of Georgia. Mr. Horne completed service with the
U.S. Navy, attaining the rank of Lieutenant (jg). He received a B.S. degree from
Presbyterian College in 1969. Civic involvement has included Board Member Junior
Achievement, American Heart Association, Boys and Girls Clubs, and Chairman,
Metro Housing Partnership in Jackson, Mississippi.
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<PAGE>
SIDNEY T. JACKSON, an organizer of the Bank, will assume the title of
Senior Vice President of the Bank with direct responsibilities for operations
and administration. Mr. Jackson served as a Director and President of the
Company from April 1997 to April 1998. He has a total of thirty-three years of
banking experience, the past 22 years of which have been spent in senior
positions with banks in Naples. From May 1994 to April 1997, Mr. Jackson was
employed with Southwest Banks where he served as Senior Vice President and
Senior Operations Officer. From 1986 to 1994, he was employed with SunBanks
Naples, N.A. where he held the position of Executive Vice President and Chief
Administration Officer. Mr. Jackson served as the 1996 Chairman of United Way of
Collier County and is a Director with the Collier County 100 Club, Chamber of
Commerce and former President of the Bank Administration Institute. Mr. Jackson
attended the School of Banking of the South.
WILLIAM J. RYAN, a director of the Company and the Bank, is the former
President and Chief Executive Officer of Palmer Wireless, Inc., Fort Myers,
Florida, a cellular telephone service provider, in which positions he served
from 1982 to 1998. Palmer Wireless, which was recently sold by Mr. Ryan, is a
communications technology company, the shares of which were listed on Nasdaq.
Mr. Ryan moved to the Naples area in 1955 and has been involved in both banking
and community activities. He has fifteen years experience as a bank director and
had served in such capacity with C&S Bank, Fort Myers, Florida; Norwest Bank,
Des Moines, Iowa; and First National Bank, Naples, Florida. He is the Vice
Chairman of the Naples Philharmonic Center for the Arts and a Director and
Member of the Executive Committee of the Naples Community Hospital. His past
community involvement includes serving as Chairman-Economic Development Council
for Collier County, Chairman-Florida State Emergency Communications Committee,
President-Collier County Unit of American Cancer Society and President-Naples
Area Chamber of Commerce. Mr. Ryan is a graduate of the University of Notre
Dame.
PIERCE T. NEESE, a director of the Company and the Bank, has over 40
years experience in community banking and, since 1975, has served as the
Chairman and Chief Executive Officer of Etowah Bank, a $430 million commercial
bank in Canton, Georgia. The Board of Directors of Etowah Bank has recently
completed a merger with Regions Bank, Birmingham. Mr. Neese will continue as an
employee of Regions (Etowah) through the close of the merger and during an
overlap period that will extend into 1999. Mr. Neese has maintained a residence
in Naples for a number of years and will be spending a portion of his time as an
active Florida resident. Mr. Neese expects to impart his extensive banking
expertise to the Board and management with regard to lending decisions and near
term strategies. His civic and community interests in Georgia include, past
President of the Cherokee County Chamber of Commerce, past Chairman-Development
Authority of Cherokee County, Director-Georgia Chamber of Commerce, Member Board
of Trustees-Reinhardt College and past Chairman of the Cherokee County Board of
Education. His social interests have included past President-Canton Golf Club,
past President Cherokee High Band Booster Club and member of the Atlanta
National Golf Club. Mr. Neese intends to become actively involved in civic and
community affairs in Naples.
EARL G. HODGES, a director of the Company and the Bank, is a licensed
mortician and currently a consultant to Hodges Funeral Chapel, Naples, a company
that he started in Naples in 1962. Mr. Hodges sold his ownership in 1993 and
continues to serve as Funeral Director. He also serves as a consultant to Kraeer
Holdings, a funeral home in Pompano Beach. Mr. Hodges received his degree in
Mortuary Science in 1948 and has been in this industry for 50 years. In Naples,
Mr. Hodges also owns NVC, Inc., a rental property company and Preferred Travel
of Naples, Inc., a travel agency. From 1979-1988, he served as Chairman of the
Board of Marine Savings and Loan Association, Naples (now owned by AmSouth) and
from 1989-1992 was an advisory board member of First Florida Bank, N.A. Collier
County. Currently, Mr. Hodges is actively involved in many civic groups,
including: Director- Collier County 100 Club, President-Collier County Junior
Deputy League, Collier County Sheriff's Citizen Advisory Board and Collier
Athletic Club. Formerly, Mr. Hodges served as President-Naples Area Chamber of
Commerce, President-Collier County United Way, Chairman-American Red Cross and
Trustee-Edison Community College.
WILLIAM L. MCDANIEL, JR., a director of the Company and the Bank, is a
licensed real estate broker in Naples and has served as President of The Realty
Company since 1989. Mr. McDaniel has been involved in construction, land sales,
development, residential sales and commercial management and sales since
relocating to Naples in 1982.
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<PAGE>
He is very active in the Masonic organization, serving as President of the
Masters and Wardens Association and as a committeeman on the Grand Masters
Charity in 1995, and in 1996, as District Deputy Grand Master. Mr. McDaniel is
also a charter member of the East Naples Kiwanis Club and served as Treasurer
from 1984-87. In addition, he was elected president of the Naples High Twelve
Club in 1989. Mr. McDaniel continues to be involved in other civic endeavors
relating to his young family and Vanderbilt Presbyterian Church.
DONALD W. KETTERHAGEN, M.D., a director of the Company and the Bank and
the Secretary of the Company, is a practicing physician in Naples and has served
as President of Women's Health Consultants of S.W. Florida since 1990. He has
maintained a practice in Naples that spans twenty years, primarily in the
specialty of obstetrics and gynecology. In the mid-1980's Dr. Ketterhagen served
as President of the Collier County Medical Society. He also was a board member
of YouthHaven, an organization dedicated to helping children from troubled
situations. Most recently, Dr. Ketterhagen served on the Board of Directors of
the Catholic Social Services Agency. Dr. Ketterhagen received his undergraduate
degree from Notre Dame, completed his medical training at Marquette Medical
School and performed his internship at St. Joseph Hospital, Milwaukee. He is
licensed to practice medicine in Florida and Wisconsin.
Additionally, Mr. Horne intends to identify and propose to the Board of
Directors of the Bank a management team, consisting of a senior lending officer
knowledgeable in the Collier County market, a highly experienced chief financial
officer and a bank business development officer.
BOARD OF DIRECTORS
The number of directors of the Company is currently fixed at six. The
Articles of Incorporation provide for the Board of Directors to consist of not
less than two nor more than twenty-five persons, with the precise number to be
determined from time to time by the Board of Directors. The directors are
divided into three classes, designated Class I, Class II and Class III. Each
class will consist, as nearly as may be possible, of one-third of the total
number of directors constituting the entire Board of Directors. The term of the
Company's initial Class I directors (Richard E. Horne and Earl G. Hodges)
expires at the Company's annual meeting of shareholders in 1999; the term of the
Company's initial Class II directors (William J. Ryan and Donald W. Ketterhagen)
expires at the Company's annual meeting of shareholders in 2000; and the term of
the Company's initial Class III directors (Pierce T. Neese and William L.
McDaniel, Jr.) expires at the Company's annual meeting of shareholders in 2001.
At each annual meeting of shareholders, successors to the class of directors
whose term expires at the annual meeting will be selected for a three-year term.
If the number of directors is changed, an increase or decrease will be
apportioned among the classes so as to maintain the number of directors in each
class as nearly equal as possible. Any director elected to fill a vacancy will
have the same remaining term as that of his predecessor. In the case of the
removal of a director from office, the resulting vacancy on the Board of
Directors shall be filled by the vote of at least three-fourths (3/4) of the
outstanding Common Shares. Any other vacancy on the Board of Directors may be
filled by a majority vote of the remaining directors then in office or by action
of the shareholders. Any director may be removed, with or without cause, at any
regular or special meeting of shareholders called for that purpose.
The effect of the classified Board of Directors is to make it more
difficult for a person, entity or group to effect a change in control of the
Company through the acquisition of a large block of the Company's voting stock.
COMPENSATION OF DIRECTORS
The directors of the Company are not currently compensated for their
attendance at the Company's regularly scheduled or special meetings or for other
services. At such time as the Bank has become profitable, the Company may
consider the grant of appropriate compensation in accordance with applicable
laws and regulations. The directors of the Company will not be compensated for
services in their capacity as directors of the Bank.
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<PAGE>
COMMITTEES OF THE COMPANY AND THE BANK
Presently, the Company's Board of Directors has an Audit Committee, a
Compensation Committee and a Site Committee. The Company's Board of Directors
will establish an Investment Committee and the Bank's Board of Directors will
establish a Loan Committee. The Company's Audit Committee will review internal
audit procedures for the Company and the Bank, and it will coordinate and review
the Company's annual audit by its independent auditors. The Compensation
Committee will generally oversee the employment practices and employee benefits
of the Company and the Bank. The Site Committee will approve leased premises for
the Company's and Bank's offices. The Company's Investment Committee will adopt
Investment Policies for the Company and the Bank and ensure adherence to those
policies. The Investment Committee will also supervise the Company's and Bank's
purchase and sale of securities.
The Bank's Loan Committee will approve the Bank's Loan Policies and it
will review larger lending accommodations recommended by the Bank's loan
officers as well as monitor credit quality.
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid by the Company to
Sidney T. Jackson, the Company's past Chief Executive Officer and Richard E.
Horne, the Company's current Chief Executive Officer, during the Company's last
completed fiscal year, which ended December 31, 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITION(S)(1) YEAR SALARY
- --------------------------------- ----- ------
<S> <C> <C>
Sidney T. Jackson 1998 $23,100
Senior Vice President of Bank 1997 $59,937
Richard E. Horne 1998 $41,900
Chief Executive Officer
</TABLE>
_____________
(1) Mr. Jackson was the President and CEO of the Company from its inception
to March 31, 1998, at which time Mr. Horne assumed such positions.
EMPLOYMENT AGREEMENT
Prior to commencement of the Bank's operations, and provided that they
receive no objection thereto from federal bank regulatory agencies, the Company
and the Bank intend to enter into an employment agreement with Richard E. Horne
(the "Employment Agreement"). Under the terms of the Employment Agreement, Mr.
Horne will be employed by the Company and the Bank as their President and Chief
Executive Officer. The Employment Agreement will have a term of three years
commencing on the date the Bank opens for business. Under the terms of the
Employment Agreement, Mr. Horne will receive an annual base salary of $120,000
and a monthly automobile allowance of $600. Under the Employment Agreement,
beginning on the second anniversary of the date the Bank opens for business and
in the discretion of the Company's Board of Directors, Mr. Horne will also be
entitled to receive incentive compensation in the form of a cash bonus of up to
fifty percent (50%) of his annual base salary, upon the achievement of certain
performance goals. Mr. Horne will also be permitted to participate in life
insurance, hospitalization, health insurance, disability and any other employee
benefit plans of the Company that may be in effect from time to time to the
extent that he is eligible under the terms of those plans. In the event of a
change of control, as defined in the Employment Agreement, the Company and Bank
would be collectively required to make a cash payment to Mr. Horne equal to 200%
of the compensation, including any bonus, paid to Mr. Horne during the one-year
period preceding the date of the change of control. The Employment Agreement is
terminable at any time by either the Company or by Mr. Horne upon thirty days
prior written notice. The Employment Agreement
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<PAGE>
provides severance compensation in the event that Mr. Horne is terminated
without cause consisting of payment of his base salary for a period of six
months. In the event Mr. Horne voluntarily terminates his employment with the
Company and the Bank, Mr. Horne will be prohibited for a period of 12 months
thereafter from engaging, directly or indirectly, in any service to or
employment by a financial institution located in Collier or Lee Counties,
Florida.
In addition, the Employment Agreement requires the Company to enter
into a separate stock option agreement pursuant to which Mr. Horne will receive,
under the terms of the Marine Bancshares, Inc. 1998 Stock Option Plan, incentive
stock options to purchase 25,000 Common Shares of the Company. See "Stock Option
Agreement" and "Stock Option Plan" below.
The Company and the Bank also anticipate entering into similar
employment and stock option agreements with approximately three other members of
the senior management team who have not yet been identified by the Company.
STOCK OPTION AGREEMENT
The Company intends to enter into a stock option agreement with Mr.
Horne (the "Stock Option Agreement"). Under the Stock Option Agreement, Mr.
Horne will be granted incentive stock options (the "Option") to purchase 25,000
Common Shares for $10.00 per share, an amount equal to the public offering price
of the Common Shares. The number of shares subject to the Option and the Option
price are both subject to an anti-dilution adjustment.
Under the terms of the Stock Option Agreement, no portion of the Option
may be exercised, except as noted below, prior to the date that the Bank opens
for business (the "Commencement Date"). The Option vests as to, and becomes
exercisable in equal portions of up to a maximum of, 5,000 Common Shares on the
Commencement Date and on the first, second, third and fourth anniversaries of
the Commencement Date. In the event of a change of control of the Bank or
Company, as defined in the Stock Option Agreement, to the extent that any
portion of the Option has vested but has not been exercised, Mr. Horne may
immediately exercise the remaining portion of the Option. Furthermore, in the
event of a change in control of the Bank or Company occurring after the third
anniversary of the Commencement Date, to the extent that any portion of the
Option has not previously vested, Mr. Horne may immediately exercise such
portion of the Option only in accordance with notice, if any, received from the
Board of Directors. Finally, to the extent that any portion of the Option has
not been exercised, the Stock Option Agreement terminates and the Option expires
on the earliest of (a) ninety days after termination of Mr. Horne's employment
with the Company and the Bank for any reason except death, disability or
retirement, (b) twelve months after termination of Mr. Horne's employment with
the Company and the Bank because of his death, disability or retirement, or (c)
the seventh anniversary of the Commencement Date.
STOCK OPTION PLAN
On October 28, 1998, the Board of Directors of the Company adopted the
Marine Bancshares, Inc. 1998 Stock Option Plan (the "1998 Plan") to promote the
Company's growth and financial success. The 1998 Plan was approved by the
Company's sole shareholder on October 28, 1998 and amended on January 21, 1999.
Options may be granted under the 1998 Plan to the Company's directors, officers
and employees. The 1998 Plan contemplates the grant of non-qualified stock
options and incentive stock options as defined in Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"). The 1998 Plan is not qualified
under Section 401(a) of the Code and is not subject to the provisions of the
Employee Retirement Income Security Act of 1974, as amended. The 1998 Plan
provides for option grants to purchase up to an aggregate of 200,000 Common
Shares, subject to adjustment under certain circumstances (the "Option Shares").
The aggregate fair market value (determined at the time the option is granted)
of the Common Shares with respect to which incentive stock options are
exercisable for the first time by an optionee during a calendar year may not
exceed $100,000. This limitation does not apply to non-qualified stock options.
The 1998 Plan will expire upon the earlier to occur of: (i) the date on which
all Option Shares have been issued upon exercise of options under the 1998 Plan;
or (ii) the tenth anniversary of the 1998 Plan's effective date. The 1998 Plan
will be administered by the Board of Directors or by a Committee appointed by
the Board and consisting of at least two non-employee Board members. The
exercise price of options granted under the 1998 Plan will be determined by the
Board of Directors, but will in no event be less than 100% of the Market Price
(as defined in the 1998 Plan) of
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<PAGE>
one Common Share on the option grant date (110% in the case of a Ten Percent
Owner, as defined in the 1998 Plan). Vested options under the 1998 Plan may be
exercised in whole or in part, but in no event later than ten (10) years from
the grant date (five years in the case of an incentive stock option granted to a
Ten Percent Owner). If the optionee of an incentive stock option during his or
her lifetime ceases to be an employee of the Company or any subsidiary of the
Company for any reason other than his or her death or total disability, any
option or unexercised portion thereof which is exercisable on the date the
optionee ceases employment will expire three months following the date the
optionee ceases to be an employee of the Company or of a subsidiary of the
Company, but in no event after the term provided in the optionee's option
agreement. If an optionee dies or becomes totally disabled while he or she is an
employee of the Company or of a subsidiary of the Company, the option may be
exercised by a legatee or legatees of the optionee under his or her last will or
by his or her personal representative or representatives at any time within one
year following his or her death or total disability, but in no event after the
term provided in his or her option agreement. The foregoing limitations with
respect to termination of employment or death do not apply to optionees of
non-qualified stock options. Options granted under the 1998 Plan will only be
assignable or transferable by the optionee by will or the laws of descent and
distribution. During the optionee's lifetime, options are only exercisable by
him or her. The Board of Directors may at any time terminate, modify or amend
the 1998 Plan in any respect, except that without shareholder approval the Board
of Directors may not (i) increase the number of Option Shares or (ii) change the
class of 1998 Plan participants eligible for qualified incentive options. In no
event will the termination, modification or amendment of the 1998 Plan, without
the written consent of an optionee, affect his or her rights under an option or
right previously granted to him or her.
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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS WITH AFFILIATES
The Company and the Bank expect to have banking and other business
transactions in the ordinary course of business with directors and officers of
the Company and the Bank, including members of their families or corporations,
partnerships, or other organizations in which such directors and officers have a
controlling interest. If such transactions occur, they (i) will be made in the
ordinary course of business, (ii) will be made on substantially the same terms
(including price, or interest rate and collateral) as those prevailing at the
time for comparable transactions with unrelated parties, and (iii) in the
opinion of management, will not involve more than the normal risk of
collectibility or present other unfavorable features to the Company or the Bank.
Additionally, certain federal banking laws restrict transactions between a
national bank and an "affiliate", as defined in those laws, and the amount and
types of loans that a national bank may make to an executive officer of a
national bank. Certain laws of the State of Florida also restrict "affiliated
transactions" between the Company and an "interested shareholder" or any
"affiliate" or "associate" of an interested shareholder, as those terms are
defined in Florida law. See "Supervision and Regulation."
ORGANIZATIONAL LOANS
The Company has borrowed from certain individual lenders an aggregate
amount of $900,000 to pay organizational and pre-opening expenses for the
Company and the Bank, of which $525,000 in aggregate principal amount remains
outstanding. Sidney T. Jackson, Senior Vice President of the Bank, holds one of
these notes in the amount of $25,000. The principal, fees and accrued interest
of these Organizational Loans will be repaid from the proceeds of the Offering.
See "Use of Proceeds."
ADVANCES
The Company has received Advances in an aggregate amount of $50,000
from the following members of its Board of Directors: Earl G. Hodges, William L.
McDaniel, Jr., William J. Ryan, Donald W. Ketterhagen and Pierce T. Neese. The
Advances do not bear interest, and none of the letter agreements executed by the
Company and the above directors with respect to the Advances provide for a right
of repayment on any date. A portion of the proceeds from the Offering will be
used to repay the Advances.
ORGANIZERS' WARRANTS
In connection with the Offering, each member of the Company's Board of
Directors and the Company's organizers will be granted warrants to purchase 0.65
Common Share for each Common Share purchased by such director or other organizer
in the Offering. The exercise price for such warrants will be $10.00 per share,
the offering price of the Common Shares in the Offering. The warrants will vest
in equal annual increments over a three year period commencing on the first
anniversary of the closing date for the Offering and will terminate on the 10th
anniversary of such closing date. The Company has reserved 126,100 Common Shares
for issuance pursuant to exercise of the warrants.
For a one-year period following the Offering, the Company will not
grant to officers, directors, employees or 5% shareholders of the Company
warrants or options with respect to Common Shares constituting, in the
aggregate, more than 18.4% of the Common Shares outstanding.
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<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
Except for 100 shares issued and sold to Richard E. Horne for the sole
purpose of incorporating the Company, the Company currently has no Common Shares
outstanding. These organizational shares will be repurchased by the Company at
their original aggregate issue price of $100 concurrently with the closing of
the Offering.
The following table sets forth certain information regarding the
anticipated beneficial ownership of the Company's Common Shares by: (i) each
director and each executive officer of the Company and (ii) all directors and
executive officers of the Company as a group. No person is expected to be the
beneficial owner of more than 5% of the outstanding Common Shares following the
Offering. Except as otherwise indicated, the persons named in the table will
have sole voting and investment power with respect to all of the Common Shares
expected to be owned by them.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
--------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT
- ------------------------- OF SHARES (1) OF CLASS (2)
------------- ------------
<S> <C> <C>
Earl G. Hodges 50,000 4.4%
Richard E. Horne (3) 20,500 1.8%
Donald W. Ketterhagen 12,000 1.0%
William L. McDaniel, Jr. 20,000 1.7%
Sidney T. Jackson 20,000 1.7%
Pierce T. Neese 41,500 3.6%
William J. Ryan 35,000 3.0%
All directors and executive officers as a
group (7 persons)(3) 199,000 17.2%
</TABLE>
___________________
(1) In accordance with Rule 13d-3 promulgated pursuant to the Securities
Exchange Act of 1934, a person is deemed to be the beneficial owner of
a security for purposes of the rule if he or she has or shares voting
power or dispositive power with respect to such security or has the
right to acquire such ownership within sixty days. As used herein,
"voting power" is the power to vote or direct the voting of shares, and
"dispositive power" is the power to dispose or direct the disposition
of shares, irrespective of any economic interest therein.
(2) In calculating the percentage ownership for a given individual or
group, the number of common shares outstanding includes unissued shares
subject to options, warrants, rights or conversion privileges
exercisable within sixty days held by such individual or group, but are
not deemed outstanding by any other person or group. This information
assumes no exercise of the over-allotment option granted to the
Underwriter.
(3) Includes options to purchase 5,000 Common Shares granted pursuant to
the Stock Option Agreement, which options vest immediately upon
execution thereof. See "Management--Stock Option Agreement."
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<PAGE>
SUPERVISION AND REGULATION
GENERAL
The Company and the Bank will operate in a highly regulated
environment, and the business activities of the Company and the Bank will be
supervised by a number of federal regulatory agencies, including the Federal
Reserve Board, the OCC and the FDIC.
The following is a brief summary of certain statutes, rules and
regulations affecting the Company and the Bank. This summary is qualified in its
entirety by reference to the particular statutory and regulatory provisions
referred to and is not intended to be an exhaustive description of the statutes
or regulations applicable to the business of the Company and the Bank.
Supervision, regulation, and examination of the Company and the Bank by the bank
regulatory agencies are intended primarily for the protection of the Federal
Deposit Insurance Fund and the Bank's depositors rather than shareholders of the
Company. The Company plans to comply, and to cause the Bank to comply, with all
of the statutes and regulations described herein as may be applicable to them
from time to time.
The Company will be regulated by the Federal Reserve Board under the
federal Bank Holding Company Act of 1956 (the "BHCA"), which requires every bank
holding company to obtain the prior approval of the Federal Reserve Board before
acquiring more than 5% of the voting shares of any bank or all or substantially
all of the assets of a bank, or before merging or consolidating with another
bank holding company. The Federal Reserve Board (pursuant to regulation and
published policy statements) has maintained that a bank holding company must
serve as a source of financial strength to its subsidiary banks. In adhering to
the Federal Reserve Board policy, the Company may be required to provide
financial support to its subsidiary bank at a time when, absent such Federal
Reserve Board policy, the Company would not deem it advisable to provide such
assistance.
Under the Riegle-Neal Interstate Banking and Branching Efficiency Act
of 1994, which became effective in November 1994, the restrictions on interstate
acquisitions of banks by bank holding companies were repealed as of September
29, 1995, such that the Company and any other bank holding company located in
Florida is able to acquire a bank located in any other state, and a bank holding
company located outside Florida can acquire any Florida-based bank, in either
case subject to certain deposit percentage and other restrictions. Beginning on
June 1, 1997, the legislation provides that unless an individual state has
elected to prohibit out-of-state banks from operating interstate branches within
its territory, adequately capitalized and managed bank holding companies will be
able to consolidate their multi-state bank operations into a single bank
subsidiary and to branch on an interstate basis. De novo branching by an
out-of-state bank would be permitted only if it is expressly permitted by the
laws of the host state. Florida does not permit de novo branching by an
out-of-state bank. Therefore, the only method by which an out-of-state bank or
bank holding company may enter Florida is through an acquisition. The authority
of a bank to establish and operate branches within a state will continue to be
subject to applicable state branching laws.
A bank holding company is generally prohibited from acquiring control
of any company which is not a bank and from engaging in any business other than
the business of banking or managing and controlling banks. However, there are
certain activities which have been identified by the Federal Reserve Board to be
so closely related to banking as to be a proper incident thereto and thus
permissible for bank holding companies. Effective April 21, 1997, the Federal
Reserve Board revised and expanded the list of permissible non-banking
activities, which now includes the following: extending credit and servicing
loans; acting as investment or financial advisor to subsidiaries and certain
outside companies; leasing personal and real property or acting as a broker with
respect thereto; providing management and employee benefits consulting and
career counseling services to nonaffiliated banks and nonbank depository
institutions; operating certain nonbank depository institutions; performing
certain trust company functions; providing certain agency transactional
services, including securities brokerage services, riskless principal
transactions, private placement services, and acting as a futures commission
merchant; providing data processing and data transmission services; acting as an
insurance agent or underwriter with respect to certain limited types of
insurance; performing real estate appraisals; arranging commercial real estate
equity financing; providing check-guaranty, collection agency and credit bureau
services; engaging in asset management, servicing and collection activities;
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<PAGE>
providing real estate settlement services; acquiring certain debt which is in
default; underwriting and dealing in obligations of the United States, the
states and their political subdivisions; engaging as a principal in foreign
exchange trading and dealing in precious metals; providing other support
services such as courier services and the printing and selling of checks; and
investing in programs designed to promote community welfare.
In determining whether an activity is so closely related to banking as
to be permissible for bank holding companies, the Federal Reserve Board is
required to consider whether the performance of such activities by a bank
holding company or its subsidiaries can reasonably be expected to produce
benefits to the public such as greater convenience, increased competition and
gains in efficiency that outweigh the possible adverse effects such as undue
concentration of resources, decreased or unfair competition, conflicts of
interest and unsound banking practices. Generally, bank holding companies are
required to obtain the prior approval of the Federal Reserve Board to engage in
any new activity not previously approved by the Federal Reserve Board. The
Company has no current plans to engage in any business other than the business
of owning and controlling the Bank.
The Bank, as a subsidiary of the Company, is subject to restrictions
under federal law in dealing with the Company and other affiliates, if any.
These restrictions apply to extensions of credit to an affiliate, investments in
the securities of an affiliate and the purchase of assets from an affiliate.
Loans and extensions of credit by national banks are subject to legal
lending limitations. Under federal law, a national bank may grant unsecured
loans and extensions of credit in an amount up to 15% of its unimpaired capital
and surplus to any person if the loans and extensions of credit are not fully
secured by collateral having a market value at least equal to their face amount.
In addition, a national bank may grant loans and extensions of credit to a
single person in an amount up to 10% of its unimpaired capital and surplus,
provided that the transactions are fully secured by readily marketable
collateral having a market value, determined by reliable and continuously
available price quotations, at least equal to the amount of funds outstanding.
This 10% limitation is separate from, and in addition to, the 15% limitation for
unsecured loans. Loans and extensions of credit may exceed the general lending
limit if they qualify under one of several exceptions. Such exceptions include
certain loans or extensions of credit arising from the discount of commercial or
business paper, the purchase of bankers' acceptances, loans secured by documents
of title, loans secured by U.S. obligations and loans to or guaranteed by the
federal government.
CAPITAL ADEQUACY REQUIREMENTS
Both the Company and the Bank are subject to regulatory capital
requirements imposed by the Federal Reserve Board and the OCC. The Federal
Reserve Board and the OCC have issued risk-based capital guidelines for bank
holding companies and banks which make regulatory capital requirements more
sensitive to differences in risk profiles of various banking organizations. The
capital adequacy guidelines issued by the Federal Reserve Board are applied to
bank holding companies on a consolidated basis. The OCC's risk capital
guidelines apply directly to national banks regardless of whether they are
subsidiaries of a bank holding company. Both agencies' requirements (which are
substantially similar), provide that banking organizations must have capital
equivalent to 8% of weighted risk assets. The risk weights assigned to assets
are based primarily on credit risks. Both the Federal Reserve Board and the OCC
have also implemented new minimum capital leverage ratios to be used in tandem
with the risk-based guidelines in assessing the overall capital adequacy of
banks and bank holding companies. Under these rules, banking institutions are
required to maintain a ratio of 3% "Tier 1" capital to total assets (net of
goodwill). Tier 1 capital includes common shareholders equity, noncumulative
perpetual preferred stock and minority interests in the equity accounts of
consolidated subsidiaries, less certain intangible assets.
The OCC's guidelines provide that intangible assets are generally
deducted from Tier 1 capital in calculating a bank's risk-based capital ratio.
However, certain intangible assets which meet specified criteria ("qualifying
intangibles"), such as mortgage servicing rights, are retained as a part of Tier
1 capital. The OCC currently maintains that only mortgage servicing rights and
purchased credit card relationships meet the criteria to be considered
qualifying intangibles. The OCC's guidelines formerly provided that the amount
of such qualifying intangibles that may be included in Tier 1 capital was
strictly limited to a maximum of 25% of total Tier 1 capital.
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<PAGE>
The OCC has amended its guidelines to increase the limitation on such qualifying
intangibles from 25% to 50% of Tier 1 capital and further to permit the
inclusion of purchased credit card relationships as a qualifying intangible
asset.
In addition, the OCC has adopted rules which clarify treatment of asset
sales with recourse not reported on a bank's balance sheet. Among assets
affected are mortgages sold with recourse under Federal National Mortgage
Association, Federal Home Loan Mortgage Corporation and Federal Farm Credit Bank
programs. The rules clarify that even though those transactions are treated as
asset sales for bank Call Report purposes, those assets will still be subject to
a capital charge under the risk-based capital guidelines.
Both the risk-based capital guidelines and the leverage ratio are
minimum requirements, applicable only to top-rated banking institutions.
Institutions operating at or near these levels are expected to have well
diversified risk, high asset quality, high liquidity, good earnings and in
general, have to be considered strong banking organizations rated composite 1
under the CAMEL rating system for banks. Institutions with lower ratings and
institutions with high levels of risk or experiencing or anticipating
significant growth would be expected to maintain ratios 100 to 200 basis points
above the stated minimums.
The OCC, the Federal Reserve Board and the FDIC have adopted
regulations revising their risk-based capital guidelines to ensure that the
guidelines take adequate account of interest rate risk. Interest rate risk is
the adverse effect that changes in market interest rates may have on a bank's
financial condition and is inherent to the business of banking. Under the new
regulations, when evaluating a bank's capital adequacy, the agency's capital
standards now explicitly include a bank's exposure to declines in the economic
value of its capital due to changes in interest rates. The exposure of a bank's
economic value generally represents the change in the present value of its
assets, less the change in the value of its liabilities, plus the change in the
value of its interest rate off-balance sheet contracts. Concurrently, the
agencies issued a joint policy statement, effective June 26, 1996, to provide
guidance on sound practices for managing interest rate risk. In the policy
statement, the agencies emphasize the necessity of adequate oversight by a
bank's Board of Directors and senior management and of a comprehensive risk
management process. The policy statement also describes the critical factors
affecting the agencies' evaluations of a bank's interest rate risk when making a
determination of capital adequacy. The agencies' risk assessment approach used
to evaluate a bank's capital adequacy for interest rate risk relies on a
combination of quantitative and qualitative factors. Banks that are found to
have high levels of exposure and/or weak management practices will be directed
by the agencies to take corrective action.
The Federal Reserve Board's regulations provide that the foregoing
capital requirements will generally be applied on a bank-only (rather than a
consolidated) basis in the case of a bank holding company with less than $150
million in total consolidated assets. Nonetheless, on a pro forma basis,
assuming the issuance and sale by the Company of 1,150,000 Common Shares at
$10.00 per share, the Company's risk-based capital ratio and leverage ratio, in
each case as calculated on a consolidated basis under the Federal Reserve
Board's capital guidelines, would exceed these requirements.
PROMPT CORRECTIVE ACTION
The Federal Deposit Insurance Corporation Improvement Act of 1991 (the
"FDICIA"), enacted on December 19, 1991, provides for the development of a
regulatory monitoring system requiring prompt corrective action on the part of
banking regulators with regard to certain classes of undercapitalized
institutions. While the FDICIA does not change any of the minimum capital
requirements, it directs each of the federal banking agencies to issue
regulations putting the monitoring plan into effect. The FDICIA creates five
"capital categories" ("well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized" and "critically
undercapitalized") which are defined in the FDICIA and which will be used to
determine the severity of corrective action the appropriate regulator may take
in the event an institution reaches a given level of undercapitalization. For
example, an institution which becomes "undercapitalized" must submit a capital
restoration plan to the appropriate regulator outlining the steps it will take
to become adequately capitalized. Upon approving the plan, the regulator will
monitor the
39
<PAGE>
institution's compliance. Before a capital restoration plan will be approved,
any entity controlling a bank (i.e., holding companies) must guarantee
compliance with the plan until the institution has been adequately capitalized
for four consecutive calendar quarters. The liability of the holding company is
limited to the lesser of five percent of the institution's total assets or the
amount which is necessary to bring the institution into compliance with all
capital standards. In addition, "undercapitalized" institutions will be
restricted from paying management fees, dividends and other capital
distributions, will be subject to certain asset growth restrictions and will be
required to obtain prior approval from the appropriate regulator to open new
branches or expand into new lines of business.
As an institution's capital levels decline, the extent of action to be
taken by the appropriate regulator increases, restricting the types of
transactions in which the institution may engage and ultimately providing for
the appointment of a receiver for certain institutions deemed to be critically
undercapitalized.
In order to comply with the FDICIA, the Federal Reserve Board, the OCC
and the FDIC have adopted regulations defining operational and managerial
standards relating to internal controls, loan documentation, credit underwriting
criteria, interest rate exposure, asset growth, and compensation, fees and
benefits.
In response to the directive issued under the FDICIA, the regulators
have established regulations which, among other things, prescribe the capital
thresholds for each of the five capital categories established by the FDICIA.
The following table reflects the capital thresholds:
<TABLE>
<CAPTION>
TOTAL RISK- TIER 1 RISK- TIER 1
BASED CAPITAL BASED CAPITAL LEVERAGE
RATIO RATIO RATIO
------------- -------------- -----------
<S> <C> >C> <C>
Well capitalized (1)............................. /greater/=10% /greater/=6% /greater/=5
Adequately Capitalized (1)....................... /greater/=8 /greater/=4 /greater =4(2)
Undercapitalized (4)............................. /less than/8 /less than/4 /less than/4(3)
Significantly Undercapitalized (4)............... /less than/6 /less than/3 /less than/3
Critically Undercapitalized...................... -- -- /less than/=2(5)
</TABLE>
____________
(1) An institution must meet all three minimums.
(2) 3% for composite 1-rated institutions, subject to appropriate federal
banking agency guidelines.
(3) less than 3% for composite 1-rated institutions, subject to appropriate
federal banking agency guidelines.
(4) An institution falls into this category if it is below the specified
capital level for any of the three capital measures.
(5) Ratio of tangible equity to total assets.
In addition, in its application to the OCC to obtain a national bank
charter and in its application to the FDIC to obtain federal deposit insurance,
the Bank represented that it intends to maintain a Tier 1 capital ratio of at
least 8% for the first three years of its operation. The Company intends to
comply with the FDICIA.
The scope of regulation and permissible activities of the Company and
the Bank is subject to change by future federal and state legislation. In
addition, regulators sometimes require higher capital levels on a case-by-case
basis based on such factors as the risk characteristics or management of a
particular institution. The Company and the Bank are not aware of any attributes
of their operating plan that would cause regulators to impose higher
requirements.
OTHER REGULATION
FDIC. The deposits of customers with the Bank will be insured by the
FDIC to the fullest extent provided by law. The major functions of the FDIC with
respect to insured banks include paying depositors in the event an insured bank
is closed because of its inability to meet the demands of depositors, acting as
a receiver of insured banks placed in receivership, and preventing the
continuance or development of unsafe and unsound banking
40
<PAGE>
practices. In addition, the FDIC is authorized to examine national banks
whenever it deems such examination necessary to determine the condition of the
institution for insurance purposes. The FDIC also approves conversions, mergers,
consolidations and assumption of deposit liability transactions between insured
banks and non-insured banks or institutions.
DIVIDENDS. The Bank will be restricted in its ability to pay cash
dividends to the Company under the national banking laws and by regulations of
the OCC. Pursuant to 12 U.S.C. Section 56, a national bank may not pay dividends
from its capital. All dividends must be paid out of undivided profits, subject
to other applicable provisions of law. Payments of dividends out of undivided
profits is further limited by 12 U.S.C. Section 60(a), which prohibits a bank
from declaring a dividend on its shares of common stock until its surplus equals
its stated capital, unless there has been transferred to surplus not less than
1/10 of the Bank's net income of the preceding two consecutive half-year periods
(in the case of an annual dividend). Pursuant to 12 U.S.C. Section 60(b), the
approval of the OCC is required if the total of all dividends declared by the
Bank in any calendar year exceeds the total of its net income for that year
combined with its retained net income for the preceding two years, less any
required transfers to surplus.
The OCC has enacted regulations concerning the level of allowable
dividend payments by national banks. The intended effect of these regulations is
to make the calculation of national banks' dividend-paying capacity consistent
with generally accepted accounting principles (GAAP). In this regard, the
allowance for loan and lease losses is not considered an element of either
"undivided profits then on hand" or "net profits." Further, a national bank may
be able to use a portion of its capital surplus account as "undivided profits
then on hand," depending on the composition of that account.
CRA AND FAIR LENDING. On April 19, 1995, the federal bank regulatory
agencies adopted revisions to the regulations promulgated pursuant to the
Community Reinvestment Act of 1977 (the "CRA"), which are intended to set
distinct assessment standards for financial institutions. The revised regulation
contains three evaluation tests: (a) a lending test which will compare the
institution's market share of loans in low to moderate-income areas to its
market share of loans in its entire service area, (b) a services test which will
evaluate the provision of services that promote the availability of credit to
low- and moderate-income areas, and (c) an investment test, which will evaluate
an institution's record of investments in organizations designed to foster
community development, small- and minority-owned businesses and affordable
housing lending, including state and local government housing or revenue bonds.
The regulation is designed to provide regulators, institutions and community
groups with an objective and predictable manner with which to evaluate the CRA
performance of financial institutions. The rule became effective on January 1,
1996, when evaluation under streamlined procedures began for institutions with
assets of less than $250 million that are owned by a holding company with total
assets of less than $1 billion.
Congress and the federal agencies responsible for implementing the
nation's fair lending laws, which include the Department of Housing and Urban
Development, the Federal Trade Commission, and the Department of Justice in
addition to the federal banking agencies, have been increasingly concerned that
prospective home buyers and other borrowers are experiencing discrimination in
their efforts to obtain loans. In recent years, the Department of Justice has
filed suit against financial institutions which it determined had engaged in
discriminatory lending, seeking fines and restitution for borrowers who
allegedly suffered from these practices. Most, if not all, of these suits have
been settled (some for substantial sums) without a full adjudication on the
merits.
On March 8, 1994, the federal agencies, in an effort to clarify what
constitutes lending discrimination and to specify the factors the agencies will
consider in determining if lending discrimination exists, announced a joint
policy statement detailing specific discriminatory practices prohibited under
the Equal Credit Opportunity Act of 1974 and the Fair Housing Act of 1968. In
the policy statement, three methods of proving lending discrimination were
identified: (a) overt evidence of discrimination, when a lender blatantly
discriminates on a prohibited basis, (b) evidence of disparate treatment, when a
lender treats applicants differently based on a prohibited factor even where
there is no showing that the treatment was motivated by prejudice or a conscious
intention to discriminate against a person, and (c) evidence of disparate
impact, when a lender applies a practice uniformly to all applicants, but the
41
<PAGE>
practice has a discriminatory effect, even where such practices are neutral on
their face and are applied equally, unless the practice can be justified on the
basis of business necessity.
FDIC INSURANCE ASSESSMENTS. The Bank will be subject to FDIC deposit
insurance assessments for the Bank Insurance Fund ("BIF"). The FDIC has
implemented a risk-based assessment system under which banks are assessed on a
sliding scale depending on their placement in nine separate supervisory
categories. Recent legislation provides that BIF insured institutions, such as
the Bank, will share the Financial Corporation ("FICO") bond service obligation.
Previously, only financial institutions (typically thrifts) insured under the
Savings Association Insurance Fund ("SAIF") were obligated to contribute to the
FICO bond service. As of the most recent BIF semiannual assessment period, June
30, 1998, BIF insured financial institutions paid federal deposit insurance
assessments ranging from zero cents ($0.0) per $100 of BIF insured deposits, the
rate for the healthiest and highest rated institutions, to twenty-seven cents
($0.27) per $100 of BIF insured deposits, the rate for the lowest rated
institutions. It is anticipated that initially the Bank will be in the highest
rated category and thus, based on the most recent assessment period, pay no
federal deposit insurance assessment. As of the most recent FICO assessment
adjustment date, June 30, 1998, BIF insured institutions were required to pay an
annual FICO assessment, payable in quarterly installments, of one and
twenty-sixth hundredths cents ($0.0126) per $100 of insured deposits.
FUTURE REQUIREMENTS. Statutes and regulations may be proposed
containing wide-ranging measures for altering the structures, regulations and
competitive relationships of the nation's financial institutions. It cannot be
predicted whether or in what form any proposed statutes or regulations will be
adopted or the extent to which the business of the Company and the Bank may be
affected by such statutes or regulations.
FLORIDA BUSINESS CORPORATION ACT
DIVIDENDS. The Company will be restricted in the payment of dividends
by the Florida Act, which prohibits a corporation from making a distribution to
its shareholders if, after giving effect to the distribution, the corporation
would be unable to pay its debts as they become due in the usual course of
business, or if the corporation's total assets would be less than the sum of its
total liabilities plus the amount that would be needed, if the corporation were
to be dissolved at the time of the distribution, to satisfy the preferential
rights upon dissolution of shareholders whose preferential rights are superior
to those receiving the distribution.
BANK HOLDING COMPANY PROVISIONS. Florida does not impose additional
statutory provisions on the Company because of the Company's status as a bank
holding company.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
GENERAL
The Company's Articles of Incorporation authorize the Company to issue
(i) up to 10,000,000 Common Shares, par value $.01 per share, of which 1,150,000
shares will be issued pursuant to the Offering, and (ii) up to 2,000,000
Preferred Shares, the par value and other rights of which may be determined by
the Board of Directors at the time it authorizes issuance thereof. No other
classes of capital stock are authorized. Other than the Organizer Warrants and
options to purchase 25,000 Common Shares to be granted to Richard E. Horne under
the Option Agreement, there are no outstanding options to purchase, warrants
for, or securities convertible into, the Common Shares. See "Management -- Stock
Options."
COMMON SHARES
All Common Shares of the Company will be entitled to share equally in
dividends from funds legally available therefor, when, as and if declared by the
Board of Directors, and, upon liquidation or dissolution of the Company, whether
voluntary or involuntary, to share equally in all assets of the Company
available for distribution to the shareholders. It is not anticipated that the
Company will pay any cash dividends on the Common Shares in the near future. See
"Dividend Policy." Each holder of Common Shares will be entitled to one vote for
each share on all matters submitted to the vote of the shareholders. There is no
right to cumulative voting. The Common Shares do not have any redemption
provisions and the holders thereof will not have any preemptive or conversion
rights. The outstanding Common Shares are, and all Common Shares issued in
accordance with the terms of the Offering as described in this Prospectus will
be, fully-paid and non-assessable.
PREFERRED SHARES
Under its Articles of Incorporation, the Company is authorized to issue
2,000,000 Preferred Shares. The Board of Directors of the Company is authorized
to issue Preferred Shares in series and to fix the particular designation of,
and the rights, preferences, privileges and restrictions granted to and imposed
upon, each series, all without further approval of the Company's shareholders.
(Such authorization includes the power to issue Preferred Shares which carry
voting or conversion rights that may adversely affect the voting power of the
holders of Common Shares.) The Company has no plans at this time to issue any of
the Preferred Shares. Any such issuance of Preferred Shares could have the
effect of delaying or preventing a change of control.
ORGANIZERS' WARRANTS
In connection with the Offering, each member of the Company's Board of
Directors and the Company's organizers will be granted warrants to purchase 0.65
Common Share for each Common Share purchased by such directors and other
organizers in the Offering (the "Organizers' Warrants"). The exercise price for
the Organizers' Warrants will be $10.00 per share, the offering price of the
Common Shares in the Offering. The Organizers' Warrants will vest in equal
annual increments over a three year period commencing on the first anniversary
of the closing date for the Offering and will terminate on the 10th anniversary
of such closing date. The Company has reserved 126,100 Common Shares for
issuance pursuant to exercise of the Organizers' Warrants.
SPECIAL SHAREHOLDERS' MEETING
Article II, Section 2 of the Company's Amended and Restated Bylaws
allows a special meeting of shareholders to be called only by: the Board of
Directors, the President, or the Secretary of the Company or, upon demand made
in conformance with Florida law, by the holder(s) of not less than 10% of all
the votes entitled to be cast on any issue to be considered at such meeting.
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<PAGE>
AMENDMENT OF PROVISIONS
Except as set forth below under "--Certain Provisions of the Articles
of Incorporation and By-Laws", any provision of the Company's Articles of
Incorporation may be amended or repealed in the manner prescribed by Florida
law. In general, any amendment to the Company's Articles of Incorporation must
be approved by a majority of the outstanding shares of Common Stock, with the
exception that certain amendments of an administrative nature may be adopted by
the Board of Directors of the Company without shareholder approval.
CERTAIN PROVISIONS OF THE ARTICLES OF INCORPORATION AND BY-LAWS
The Company's Articles of Incorporation contain provisions requiring
supermajority shareholder approval to effect certain extraordinary corporate
transactions which are not approved by three-fourths of the Board of Directors.
The Articles of Incorporation require, in addition to any other approval or
consent required under the laws of the State of Florida, the affirmative vote or
consent of the holders of at least two-thirds (2/3) of the shares of each class
of stock entitled to vote in elections of directors to approve any merger or
consolidation of the Company or any subsidiary of the Company with or into any
Interested Person (as defined), regardless of the identity of the surviving
corporation, any sale, lease or other disposition of all or any substantial part
(assets having an aggregate fair market value in excess of twenty-five percent
(25%) of the total assets of the Company) of the assets of the Company or any
subsidiary of the Company to any Interested Person for cash, real or personal
property, including securities, or any combination thereof, any issuance or
delivery of securities of the Company or a subsidiary of the Company to any
Interested Person in consideration for or in exchange of any securities or other
property (including cash), or the liquidation of the Company ("Covered
Transaction"), if any person who, as of the record date for the determination of
shareholders entitled to notice of any Covered Transaction and to vote thereon
or consent thereto, as of the date of such vote or consent, or immediately
before consummation of any Covered Transaction, owns beneficially five percent
or more of any voting stock of the Company entitled to vote in elections of
directors ("Interested Person") is a party to the transaction, unless
three-fourths (75%) of the entire Board of Directors has approved the
transaction, in which case the affirmative vote of a majority of each class of
stock entitled to vote in elections of directors is required. In addition, the
Articles of Incorporation require, in addition to any approval of the Board of
Directors or any shareholder vote or consent required under Florida law, any
other provision in the Articles of Incorporation or otherwise, the separate
approval by the holders of a majority of the shares of each class of stock of
the Company entitled to vote in elections of directors which are not
beneficially owned, directly or indirectly, by an Interested Person, of any
Covered Transaction other than a liquidation of the Company ("Business
Combination"), if an Interested Person is a party to such transaction; provided,
that such approval is not required if (a) the consideration to be received by
the holders of the stock of the Company meets certain minimal levels determined
by a formula under the Articles of Incorporation (generally the highest price
paid by the Interested Person for any shares which he has acquired), (b) there
has been no reduction in the average dividend rate from that which was obtained
prior to the time the Interested Person became such, and (c) the consideration
to be received by shareholders who are not Interested Persons shall be paid in
cash or in the same form as the Interested Person previously paid for shares of
such class of stock. These Articles of the Company's Articles of Incorporation,
as well as the Article establishing a classified Board of Directors, may be
amended, altered, or repealed only by the affirmative vote or consent of the
holders of at least three-fourths of the shares entitled to vote in elections of
directors.
The effect of these provisions is to make it more difficult for a
person, entity or group to effect a change in control of the Company through the
acquisition of a large block of the Company's voting stock.
The Company has elected to opt-out of the anti-takeover provisions set
forth in Sections 607.0901 (relating to affiliated transactions) and 607.0902
(relating to control share acquisitions) of the Florida Act.
44
<PAGE>
INDEMNIFICATION PROVISIONS
The Articles of Incorporation of the Company provide for the
indemnification of directors, officers, employees and agents of the Company to
the full extent permitted by Florida law. In addition, as permitted by federal
law, the Bank's Articles of Association provide for the indemnification of the
Bank's officers, directors, employees and agents to the fullest extent permitted
by the laws of Florida, subject only to the limits of the corporate powers of a
national bank. Under such provisions, any director, officer, employee, or agent
who, in his or her capacity as such, is made or threatened to be made a party to
any suit or proceeding shall be indemnified if such director or officer acted in
good faith and in a manner he or she reasonably believed to be in or not opposed
to the best interests of the Company or the Bank. The Company expects to
purchase directors' and officers' liability insurance. Such insurance may
provide protection whether or not the Company or the Bank would have had the
power to indemnify against such liability. The Company is not aware of any
pending or threatened action, suit or proceeding involving any of its directors,
officers, employees or agents for which indemnification from the Company or the
Bank may be sought. It is possible that the indemnification obligations imposed
under the Company's Articles of Incorporation and the Bank's Articles of
Association could result in a charge against the Company's or the Bank's
earnings and thereby, directly in the case of the Company and indirectly in the
case of the Bank, affect the availability of funds for payment of dividends to
the Company's shareholders.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions or otherwise, the Company has been
advised that in the opinion of the Commission, such indemnification is against
public policy as expressed in the Securities Act, and is therefore
unenforceable. In the event that a claim for indemnification against such
liabilities other than the payment by the Company of expenses incurred or paid
by a director, officer or controlling person of the Company in the successful
defense of any action, suit or proceeding is asserted by such director, officer
or controlling person in connection with the securities being registered in the
Offering, the Company will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
In general, federal banking laws and regulations prohibit an
institution the deposits of which are federally insured (and its parent holding
company) from indemnifying its officers, directors, employees, agents and other
persons affiliated with the institution for costs sustained in an administrative
or civil enforcement action commenced by a federal banking agency which results
in a final order or settlement pursuant to which the person is, under applicable
federal banking laws, assessed a civil money penalty, removed from office,
prohibited from participating in the affairs of an insured depository
institution or required to cease and desist from, or take, affirmative action.
REGISTRAR AND TRANSFER AGENT
The registrar and transfer agent for the Common Shares will be American
Stock Transfer & Trust Company.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company expects to have 1,150,000
of its Common Shares outstanding. The 1,150,000 Common Shares purchased in the
Offering (plus any additional shares sold upon exercise by the Underwriters of
their over-allotment option) have been registered with the Securities and
Exchange Commission (the "Commission") under the Securities Act of 1933 (the
"Securities Act") and may generally be resold without registration under the
Securities Act unless they are acquired by an "affiliate" of the Company, as
defined under Rule 144 promulgated under the Securities Act ("Rule 144").
Generally, any executive officer, director or control shareholder of the Company
or the Bank will be an affiliate of the Company under Rule 144. Affiliates of
the Company may only sell Common Shares pursuant to Rule 144 or another
exemption under the Securities Act.
45
<PAGE>
Generally, Rule 144 provides that an "affiliate" of the Company, as the
term "affiliate" is defined in Rule 144, is entitled to sell in "broker's
transactions" or in transactions directly with a "market maker," within any
three-month period, a number of shares that does not exceed the greater of (i)
one percent of the then outstanding Common Shares or (ii) the average weekly
trading volume of the Common Shares during the four calendar weeks preceding
such sale. Sales under Rule 144 are also subject to certain notice requirements
and the availability of current public information about the Company.
The Company, the directors and the executive and other significant
officers (who are expected to hold an aggregate of approximately 126,500 shares
after completion of the Offering) have agreed, or will agree, not to sell,
contract to sell or otherwise dispose of any Common Shares held by them for a
period of 180 days from the date of this Prospectus without the prior written
consent of the Underwriters. Prior to the Offering, there has been no public
trading market for the Common Shares, and no predictions can be made as to the
effect, if any, that sales of shares or the availability of shares for sale will
have on the prevailing market price of the Common Shares after completion of the
Offering.
UNDERWRITING
Under the terms and subject to the conditions set forth in the
underwriting agreement by and between the Underwriter and the Company (the
"Underwriting Agreement"), the Underwriter has agreed to purchase from the
Company, and the Company has agreed to sell to the Underwriter, 1,150,000 Common
Shares to be sold in the Offering.
The Underwriting Agreement provides that the obligation of the
Underwriter to pay for and accept delivery of the Common Shares is subject to
approval of certain matters by its counsel and to various other conditions
precedent. The Underwriter is obligated to purchase and pay for all Common
Shares offered hereby (other than those covered by the over-allotment option
described below), if any Common Shares are purchased.
The Underwriter has advised the Company that the Underwriter proposes
to offer the Common Shares directly to the public initially at the public
offering price set forth on the cover page of this Prospectus and to certain
selected dealers at such price, less a concession not to exceed $0.39 per share
for 500,000 Common Shares and $0.85 for each of the remaining Common Shares sold
pursuant to this Offering, including those sold pursuant to the over-allotment
option (however, no underwriting discounts or commissions will be assessed with
respect to sales of 500,000 Common Shares to certain investors identified by the
Company to the Underwriter). The Underwriter may allow, and such selected
dealers may reallow, a concession not in excess of $0.42 per share to certain
other dealers. After the initial public offering of the Common Shares, the
public offering price, concession, and reallowance to dealers may be changed by
the Underwriter. The Common Shares are offered subject to receipt and acceptance
by the Underwriter and to certain other conditions, including the right to
reject orders in whole or in part.
The Underwriter has advised the Company that it does not intend to
confirm sales of the Common Shares offered hereby to any account over which it
may exercise discretionary authority.
The Company has granted to the Underwriter an option, exercisable
during the 30-day period beginning on the date of this Prospectus, to purchase
up to 172,500 additional Common Shares solely to cover over-allotments, if any,
at the public offering price less the underwriting discounts and commissions of
8.5% as set forth on the cover page of this Prospectus.
The Company has agreed to pay the Underwriter a non-accountable expense
allowance of $45,000 upon completion of this Offering (and, to the extent that
the over-allotment option is exercised, an additional amount equal to three
percent of the gross proceeds of the Common Shares underwritten in connection
with such over-allotment exercise). The Underwriting Agreement also provides
that the Underwriter has a right of first refusal for a period of 3 years from
the effective date of the Registration Statement to serve as the Company's
underwriter in connection with any sale of securities by the Company or its
affiliates.
46
<PAGE>
Subject to certain limitations, the Company and the Underwriter have
agreed to indemnify each other against certain liabilities, including certain
civil liabilities, under the Securities Act, or to contribute to payments that
the Company or the Underwriter may be required to make in respect thereof.
At the Company's request, the Underwriter has agreed to reserve 500,000
Common Shares for sale at the public offering price to directors, employees, and
other persons having certain business relationships with the Company and the
Bank. Accordingly, the number of shares available for sale to the general public
will be reduced by the number of shares so reserved.
The foregoing is a summary of the principal terms of the Underwriting
Agreement and does not purport to be complete. Reference is made to a copy of
the Underwriting Agreement which is on file as an exhibit to the Registration
Statement.
In connection with the offering of the Common Shares, the Underwriter
and selling group members and their respective affiliates may engage in
over-allotment transactions, stabilizing transactions, syndicate covering
transactions, and penalty bids effected in accordance with Rule 104 of the
Commission's Regulation M. Over- allotment transactions are those transactions
in which the Underwriter creates a short position for its own account by selling
more Common Shares than it is committed to purchase from the Company. In such
case, to cover all or part of a short position, the Underwriter may exercise the
over-allotment option described above or may purchase Common Shares in the open
market following completion of the offering. In stabilizing transactions, the
Underwriter may bid for, and purchase, Common Shares at a level above that which
might otherwise prevail on the open market for the purpose of preventing or
retarding a decline in the market price of the Common Shares. Syndicate covering
transactions involve purchases of Common Shares in the open market after a
distribution has been completed in order to cover syndicate short positions.
Penalty bids permit the Underwriter to reclaim selling concessions from a
syndicate member when the Common Shares originally sold by such syndicate member
are purchased in a syndicate covering transaction to cover syndicate short
positions. Any of the foregoing transactions may cause the price of the Common
Shares to be higher than it would otherwise be in the absence of such
transactions. The Underwriter is not required to engage in any of the foregoing
transactions, and if commenced, such transactions may be discontinued at any
time.
Each of the Company and the directors, executive officers, and existing
shareholders of the Company and the Bank have agreed that, without the prior
written consent of the Underwriter, they will not, for a period of 180 days from
the date of this Prospectus, subject to certain limited exceptions, directly or
indirectly offer, sell, announce an intention to sell, contract to sell, or
otherwise dispose of, any Common Shares or any securities convertible into or
exercisable or exchangeable for the Common Shares.
There has been no public trading market for the Common Shares prior to
this Offering. Consequently, the initial public offering price for the Common
Shares was determined by negotiations between the Company and the Underwriter.
This price is not based upon earnings or any history of operations and should
not be construed as indicative of the present or anticipated future value of the
Common Shares. In determining such price, consideration was given to several
factors, including among them the size of the offering, the market conditions
for initial public offerings, the desire that the security being offered be
attractive to individuals, the Underwriter's experience in dealing with initial
public offerings for financial institutions, and other relevant factors. The
Underwriter has advised the Company that it presently intends to make a market
in the Common Shares after the commencement of trading, but no assurances can be
made as to the liquidity of the Common Shares or that an active and liquid
trading market will develop or, if developed, that it will be sustained. The
Underwriter will have no obligation to continue to make a market in the Common
Shares, however, and it may cease market making activities, if commenced, at any
time.
Prior to this Offering, the Company arranged a series of loans from
certain individuals (the Organizational Loans, described elsewhere herein) in
the aggregate principal amount of $900,000 which have been used to pay
organizational and pre-opening expenses of the Company and the Bank. In
connection with such loans, the Company paid the Underwriter a fee equal to 10%
of the aggregate principal amount of the loans ($90,000) as compensation for
referring the individual lenders to the Company. Subsequently, W. Jonathan
Wride, President and Chief Executive Officer of the Underwriter, has purchased
from such lenders $100,000 in aggregate principal amount of the notes evidencing
such loans. On December 31, 1998, Mr. Wride sold the notes at par plus accrued
interest to an unaffiliated third party.
47
<PAGE>
LEGAL MATTERS
Certain legal matters in connection with the Offering will be passed
upon for the Company by Smith, Gambrell & Russell, LLP, Atlanta, Georgia,
counsel to the Company. Certain legal matters in connection with the Offering
will be passed upon for the Underwriter by Carlton, Fields, Ward, Emmanuel,
Smith & Cutler, P.A., Tampa, Florida, counsel to the Underwriter.
EXPERTS
The financial statements of the Company for the period from January 23,
1997 (inception) until September 30, 1998 set forth herein have been so included
in reliance on the report of Hill, Barth & King, Inc. independent certified
public accountants, given on the authority of that firm as experts in accounting
and auditing.
48
<PAGE>
FINANCIAL STATEMENTS
--------------------
MARINE BANCSHARES, INC.
(A DEVELOPMENT STAGE COMPANY)
SEPTEMBER 30, 1998
C O N T E N T S
PAGE
----
Independent Auditors' Report ........................................... F-2
Balance Sheet .......................................................... F-3
Statement of Operations ................................................ F-4
Statement of Shareholders Deficit ...................................... F-5
Statement of Cash Flows ................................................ F-6
Notes to Financial Statements ......................................... F-7-10
F-1
<PAGE>
Board of Directors
Marine Bancshares, Inc.
Naples, Florida
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying balance sheet of Marine Bancshares,
Inc. (the Company) as of September 30, 1998, and the related statements of
operations, shareholders deficit and cash flows for the period from January 23,
1997 (date of inception) to September 30, 1998. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Marine Bancshares,
Inc. as of September 30, 1998, and the results of its operations and its cash
flows for the period from January 23, 1997 (date of inception) to September 30,
1998 in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the
company will continue as a going concern. As discussed in Note H to the
financial statements, the company's ability to continue as a going concern is
dependent on approval from the Office of the Comptroller of the Currency for a
National Banking Charter and a successful public offering of the Company's
common stock. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
HILL, BARTH & KING, INC.
Certified Public Accountants
Naples, Florida
November 3, 1998, except for Note G,
as to which the date is
January 27, 1999
F-2
<PAGE>
MARINE BANCSHARES, INC.
(A Development Stage Company)
BALANCE SHEET
September 30, 1998
A S S E T S
Cash $ 2,799
TOTAL CASH 2,799
--------
Equipment - NOTE B 16,197
Deferred offering costs 120,127
Prepaid expenses 11,942
Other assets 31,700
--------
$182,765
========
LIABILITIES AND SHAREHOLDERS DEFICIT
Liabilities:
Loans payable -- NOTE C $740,000
Advances from organizers -- NOTE D 40,000
Accrued interest payable 89,677
Accrued expenses and other liabilities 89,596
-------
TOTAL LIABILITIES 959,273
Shareholders Deficit -- NOTE G
Preferred stock, par value $.01 per share,
2,000,000 shares authorized; no shares issued
and outstanding 0
Common stock, par value $.01 per share,
10,000,000 shares authorized; 100 shares issued
and outstanding 1
Additional paid-in capital 99
Deficit accumulated during the development stage (776,608)
--------
TOTAL SHAREHOLDERS DEFICIT (776,508)
--------
$182,765
========
See accompanying notes to financial statements
F-3
<PAGE>
MARINE BANCSHARES, INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS
Period from January 23, 1997 (date of inception) to September 30, 1998
INCOME
Interest income $ 13,321
EXPENSES
Salaries and employee benefits 173,900
Interest expense and loan fees 261,812
Professional fees 177,147
Other expenses 177,070
-----------
TOTAL EXPENSES 789,929
-----------
NET LOSS $ (776,608)
===========
See accompanying notes to financial statements
F-4
<PAGE>
MARINE BANCSHARES, INC.
(A Development Stage Company)
STATEMENT OF SHAREHOLDERS DEFICIT
Period from January 23, 1997 (date of inception) to September 30, 1998
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
ADDITIONAL DURING THE
COMMON PAID-IN DEVELOPMENT
STOCK CAPITAL STAGE TOTAL
---------- ----------- ------------ ---------
<S> <C> <C> <C> <C>
BALANCE
January 23, 1997 $ 0 $ 0 $ 0 $ 0
Proceeds from issuance
of common stock 1 999 0 1,000
Payment for the
retirement of
common stock (1) (999) 0 (1,000)
Proceeds from issuance
of common stock 1 99 0 100
Net loss 0 0 (776,608) (776,608)
---------- ----------- ------------ ---------
Balance (deficit)
September 30, 1998 $ 1 $ 99 $ (776,608) $(776,508)
========== =========== ============ =========
</TABLE>
See accompanying notes to financial statements
F-5
<PAGE>
MARINE BANCSHARES, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
Period from January 23, 1997 (date of inception) to September 30, 1998
<TABLE>
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C>
Net loss $(776,608)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 5,108
Increase in prepaid expenses (11,942)
Increase in other assets (151,827)
Increase in accounts payable 89,596
Increase in accrued interest payable 89,677
----------
NET CASH USED IN OPERATING ACTIVITIES (755,996)
----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment (21,305)
----------
NET CASH USED IN INVESTING ACTIVITIES (21,305)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock 1,100
Payments on retirement of common stock (1,000)
Proceeds from loans 940,000
Payments on loans (200,000)
Proceeds from organizer advances 40,000
----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 780,100
----------
NET INCREASE IN CASH 2,799
CASH
Beginning of period 0
End of period $ 2,799
==========
</TABLE>
See accompanying notes to financial statements
F-6
<PAGE>
MARINE BANCSHARES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
September 30, 1998
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization:
Marine Bancshares, Inc. formerly known as Coastal Bank Corporation (the
Company) was incorporated under the laws of the state of Florida on January 23,
1997. The Company's activities to date have been limited to the organization of
Marine National Bank (the Bank), as well as preparation for a $11,500,000 common
stock offering (the Offering). A substantial portion of the proceeds of the
Offering will be used by the Company to provide the initial capitalization of
the Bank. The start-up of the Bank is contingent upon receiving the approval of
various banking regulatory authorities and also a successful completion of the
Offering.
Nature of Business:
The Bank intends to offer a full range of commercial and consumer
banking services primarily within the Naples, Florida area.
Use of Estimates:
The preparation of financial statements, in conformity with generally
accepted accounting principles, requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Deferred Offering Costs:
Deferred offering costs consist primarily of legal and accounting fees
related to the initial public stock offering and will be offset against the
offering proceeds when received.
NOTE B - EQUIPMENT
Equipment at September 30, 1998 consists of the following:
Furniture, fixtures and equipment $ 7,155
EDP equipment and software 14,150
-------
21,305
Less accumulated depreciation 5,108
-------
TOTAL $16,197
=======
Depreciation is computed on the straight-line method over the estimated
useful lives of the depreciable assets. Depreciation expense was $5,108 for the
period ended September 30, 1998.
F-7
<PAGE>
MARINE BANCSHARES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1998
NOTE C - LOANS PAYABLE
In order to obtain funding for its start-up and organizational
expenses, during 1997 the Company issued to twenty-nine individuals a series of
promissory notes in an aggregate principal amount of $900,000. The proceeds of
certain of these loans were used to repay prior loans in an aggregate principal
amount of $200,000. In addition, the Company has obtained restated note
agreements from all of the individual lenders. Under such restated note
agreements, the remaining balance of $700,00 matures on December 31, 1998. The
restated loans currently bear interest at an annual rate of 13% and a loan fee
of 8% of the face amount of the loan becomes due upon maturity. The foregoing
loans and interest costs will be repaid from the offering proceeds.
The company has also obtained a $75,000 line of credit payable to a
bank, guaranteed by the organizers of the bank. As of September 30, 1998, the
company had borrowed $40,000 on the demand note under this agreement. The note
bears interest at the prime rate and varies as the prime varies and matures on
July 15, 1999.
NOTE D - ADVANCES FROM ORGANIZERS
The Company arranged a series of advances from certain individual
organizers in the aggregate amount of $40,000 to pay organizational and
pre-opening expenses for the Bank and the Company. The foregoing advances bear
no interest and will be repaid from proceeds of the offering. In the event that
the Bank's charter is denied, each organizer will receive back only their pro
rata share of monies remaining after all organizing expenses and expenses
related to closing down the organizational project are paid.
NOTE E - INCOME TAXES
Deferred taxes are recognized for temporary differences between the
basis of assets and liabilities for financial statement and income tax purposes.
The tax effect of the differences that gave rise to a deferred tax asset of
$271,813 and corresponding valuation allowance of ($271,813) at September 30,
1998 relate primarily to the capitalization of preoperating start-up costs which
are amortized over a five year term from the date operations commence for tax
purposes.
F-8
<PAGE>
MARINE BANCSHARES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1998
NOTE F - COMMITMENTS AND CONTINGENCIES
The Company has committed to lease one and one-half floors of a
multi-story building for its main office location and additional space for a
drive-in facility. The proposed lease has a term of 10 years with the option for
two 5-year renewals; to begin on the earlier of thirty days after the lessor
receives a certificate of occupancy for the building or the date the bank opens
for business. The base annual lease payment is $159,000 for the first year of
the lease, $189,000 for the second year of the lease and increases by the
greater of 3% or the Consumer Price Index (Revised) - All Urban Consumers (U.S.
City Average) in each succeeding year during the initial term or any renewal
period, such increase not to exceed 6% in any one year. The Company has also
entered into a short-term lease for office space to conduct its activities
during the development stage. The lease has a term of six months ending February
28, 1999 with the option to continue on a month-to-month basis.
NOTE G - STOCK OPTIONS AND WARRANTS
The Board of Directors of the Company have agreed to enter into a stock
option agreement with the President/Chief Executive Officer. Under the terms of
the agreement the President/CEO will be granted an option to purchase 25,000
shares of the Company's common stock for $10.00 per share. The option is
exercisable in equal portions of 5,000 shares on the date that the bank opens
for business (the "Commencement Date") and on the first, second, third and
fourth anniversaries of the Commencement Date.
The Board of Directors of the Company has adopted the Marine
Bancshares, Inc. 1998 Stock Option Plan. The plan provides for options to be
issued to directors, officers and employees, as well as to certain consultants
and advisers. The Company has reserved 200,000 Common Shares for issuance
thereunder.
As of January 27, 1999 the Board of Directors of the Company amended
the Stock Purchase Warrant Agreement which they had agreed to in consideration
of the Organizers' efforts in organizing the Company and the Bank. The Company
intends to issue warrants to purchase .65 shares of Common Stock for each share
of Common Stock purchased by each organizer from the Offering. The Warrants will
vest in equal increments over a three-year period commencing on the date of
grant and on each anniversary date thereafter until fully vested. Warrants may
be exercised in whole or in part for $10.00 per share beginning on the date of
grant and expiring 10 years after the grant date. The Company has reserved
126,100 Common Shares for issuance thereunder.
F-9
<PAGE>
MARINE BANCSHARES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1998
NOTE H - GOING CONCERN
As shown in the accompanying financial statements, the Company incurred
a net loss of $776,608 during the development stage, January 23, 1997 (date of
inception) to September 30, 1998, and as of that date, the Company's liabilities
exceeded its assets by $776,508. The ability of the Company to continue as a
going concern is dependent on approval from the Office of the Comptroller of the
Currency for a National Banking Charter and a successful public offering of the
Company's common stock. The financial statements do not include any adjustments
that might be necessary if the Company is unable to continue as a going concern.
F-10
<PAGE>
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
INFORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFER MADE IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY, THE BANK OR THE UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN
THE COMMON SHARES OFFERED BY THIS PROSPECTUS, NOR DOES IT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY THE COMMON SHARES BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH AN OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN
WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR
TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
_________________________
TABLE OF CONTENTS
PAGE
----
Available Information......................................................2
Prospectus Summary.........................................................3
Risk Factors...............................................................8
Forward-Looking Statements................................................15
Recent Developments.......................................................15
Use of Proceeds...........................................................16
Dividend Policy...........................................................16
Capitalization............................................................18
Business..................................................................19
Management's Discussion and Analysis
or Plan of Operation...................................................27
Management................................................................29
Certain Relationships and Related Transactions............................35
Security Ownership of Management and
Certain Beneficial Owners..............................................36
Supervision and Regulation................................................37
Description of Capital Stock..............................................43
Shares Eligible for Future Sale...........................................45
Underwriting..............................................................46
Legal Matters.............................................................48
Experts...................................................................48
Index to Financial Statements............................................F-1
_________________________
UNTIL APRIL __, 1999 (90 DAYS AFTER THE COMMENCEMENT OF THE
OFFERING), ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON SHARES, WHETHER OR
NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT 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.
1,150,000
[LOGO]
COMMON SHARES
___________________
P R O S P E C T U S
___________________
ASHTIN KELLY & CO.
JANUARY __, 1999
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. - INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 607.0850(1) of the Florida Business Corporation Act ("FBCA")
permits a Florida corporation to indemnify any person who may be a party to any
third party proceeding by reason of the fact that such person is or was a
director, officer, employee or agent of the corporation, against liability
incurred in connection with such proceeding (including any appeal thereof) if he
acted in good faith and in a manner he reasonably believed to be in, or not
opposed to, the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful.
Section 607.0850(2) of the FBCA permits a Florida corporation to
indemnify any person who may be a party to a derivative action if such person
acted in any of the capacities set forth in the preceding paragraph, against
expenses and amounts paid in settlement not exceeding, in the judgement of the
board of directors, the estimated expenses of litigating the proceeding to
conclusion, actually and reasonably incurred in connection with the defense or
settlement of such proceeding (including appeals), provided that the person
acted under the standards set forth in the preceding paragraph. However, no
indemnification shall be made for any claim, issue or matter for which such
person is found to be liable unless, and only to the extent that, the court.
determines that, despite the adjudication of liability, but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnification for such expenses which the court deems proper.
Section 607.0850(4) of the FBCA provides that any indemnification
made under the above provisions, unless pursuant to a court determination, may
be made only after a determination that the person to be indemnified has met the
standard of conduct described above. This determination is to be made by a
majority vote of a quorum consisting of the disinterested directors of the board
of directors, by duly selected independent legal counsel, or by a majority vote
of the disinterested shareholders. The board of directors also may designate a
special committee of disinterested directors to make this determination.
Section 607.0850(3), however, provides that a Florida corporation
must indemnify any director, or officer, employee or agent of a corporation who
has been successful in the defense of any proceeding referred to in Section
607.0850(1) or (2), or in the defense of any claim, issue or matter therein,
against expenses actually and reasonably incurred by him in connection
therewith.
Expenses incurred by a director or officer in defending a civil or
criminal proceeding may be paid by the corporation in advance of the final
disposition thereof upon receipt of an undertaking by or on behalf of such
director or officer to repay such amount if it is ultimately determined that
such director or officer is not entitled to indemnification under Section
607.0850. Expenses incurred by other employees or agents in such a proceeding
may be paid in advance of final disposition thereof upon such terms or
conditions that the board of directors deems appropriate.
The FBCA further provides that the indemnification and advancement of
payment provisions contained therein are not exclusive and it specifically
empowers a corporation to make any other further indemnification or advancement
of expenses under any bylaw, Agreement, vote of shareholders or disinterested
actions taken in other capacities while holding an office. However, a
corporation cannot indemnify or advance expenses if a judgment or other final
adjudication establishes that the actions of the director or officer were
material to the adjudicated cause of action and the director or officer (a)
violated criminal law, unless the director or officer had reasonable cause to
believe his conduct was unlawful, (b) derived an improper personal benefit from
a transaction, (c)was or is a director in a circumstance where the liability
under Section 607.0834 (relating to unlawful distributions) applies, or (d)
engages in willful misconduct or conscious disregard for the best interests of
the corporation in a proceeding by or in right of the corporation to procure a
judgment in its favor or in a proceeding by or in right of a shareholder.
Article XII of the Company's Articles of Incorporation provides that the Company
shall indemnify any person who was or is a party to any threatened, pending or
completed action, suit or other type of proceeding, whether civil,
II-1
<PAGE>
criminal, administrative or investigative, and whether formal or informal, by
reason of the fact that he is or was a director, officer, employee or agent of
the Company, or is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including attorney's fees),
judgments, fines, penalties and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding,
including any appeal thereof, to the maximum extent permitted by law.
Article IX, Section 1 of the Company's Bylaws provides that the
Company shall indemnify, to the fullest extent authorized by the FBCA, each
person who was or is made a party or is threatened to be made a party to, any
action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was a director or officer of
the Corporation or is or was serving at the request of the Corporation as a
director, officer, employee, or agent of another corporation , whether the basis
of such proceeding is alleged action in an official capacity or in any other
capacity while serving as a director, officer, employee or agent, against all
expenses, liability, and loss reasonably incurred by such indemnitee in
connection therewith (with certain limitations applicable to proceedings
initiated by such indemnitee).
Article IX, Section 2 of the Company's Bylaws provides that the
above right to indemnification shall include the right (with certain
limitations) to be paid by the Company the expenses (including attorney's fees)
incurred in defending any such proceeding in advance of its final disposition.
Article IX, Section 3 of the Company's Bylaws provides that if a
claim for indemnification is not paid in full by the Company within sixty (60)
days (or, in the case of a claim for an advancement of expenses, twenty (20)
days) after a written assertion thereof has been received by the Company, the
indemnitee may at any time thereafter bring suit against the Company to recover
the unpaid amount of the claim.
Article IX, Section 6 of the Company's Bylaws provides that the
Company may, to the extent authorized from time to time by the Board of
Directors, grant rights to indemnification and to the advancement of expenses to
any employee or agent of the Company to the fullest extent of the provisions of
Article IX of the Bylaws with respect to the indemnification and advancement of
expenses of directors and officers of the Company.
II-2
<PAGE>
ITEM 25. - OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the fees and expenses in connection
with the issuance and distribution of the securities being registered hereunder.
Securities and Exchange Commission registration fee.................. $ 5,228
NASD Filing Fee....................................................... 2,225
Printing and engraving expenses....................................... 40,000*
Accounting fees and expenses.......................................... 35,500*
Legal fees and expenses............................................... 120,000*
Blue Sky fees and expenses............................................ 35,000*
Transfer Agent........................................................ 3,500*
Miscellaneous......................................................... 8,547*
---------
Total 250,000*
=========
_____________
* Estimated.
ITEM 26. - RECENT SALES OF UNREGISTERED SECURITIES.
Pursuant to the exemption from registration provided by Section 4(2) of
the Securities Act of 1933, the Company issued to twenty-nine individuals a
series of promissory notes for the Organizational Loans in an aggregate
principal amount of $900,000. An aggregate of $375,000 principal amount of the
Organizational Loans has since been repaid and the remaining balance of $525,000
matures on January 31, 1999. The Organizational Loans are currently evidenced by
17 separate promissory notes ranging in principal amount from $25,000 to
$100,000. All of the notes evidencing the Organizational Loans have been
restated or amended at various times, and each of the lenders thereunder
executed an Amended and Restated Promissory Note with respect to his or her loan
as of November 2, 1998 and an Amendment to Amended and Restated Promissory Note
dated as of December 31, 1998. The interest rate on the Organizational Loans is
8% per annum from their respective dates of issuance to March 31, 1998, and 13%
per annum from March 31, 1998 until the date of payment, and a funding fee equal
to 8% of the principal amount is due each lender at maturity. All of the notes
may be prepaid without penalty. The principal, accrued interest, and fees due on
the Organizational Loans will be paid from the proceeds of the Offering. The
Underwriter has been paid a fee of 10% of the aggregate principal of all loans
made at any time (including loans, the proceeds of which were used to repay
prior loans), for a total fee of $90,000, for referring the lenders to the
Company.
The following describes each security issued in connection with the
Organizational Loans:
To the Dean A. Arnold Trust: A Promissory Note dated July 23, 1997 in
the principal amount of $25,000.00; a Restated Promissory Note dated October 15,
1997; an Amendment to Promissory Note dated April 1, 1998; an Amended and
Restated Promissory Note dated as of November 2, 1998; and an Amendment to
Amended and Restated Promissory Note dated as of December 31, 1998;
To the Donald L. Arnold Trust: A Promissory Note dated July 23, 1997 in
the principal amount of $25,000.00; a Restated Promissory Note dated October 15,
1997; an Amendment to Promissory Note dated April 1, 1998; an Amended and
Restated Promissory Note dated as of November 2, 1998; and an Amendment to
Amended and Restated Promissory Note dated as of December 31, 1998;
To the John L. Arnold Trust: A Promissory Note dated July 25, 1997 in
the principal amount of $25,000.00; a Restated Promissory Note dated October 15,
1997; an Amendment to Promissory Note dated April 1, 1998; an Amended and
Restated Promissory Note dated as of November 2, 1998; and an Amendment to
Amended and Restated Promissory Note dated as of December 31, 1998;
II-3
<PAGE>
To Robert M. Beckman: A Promissory Note dated August 15, 1997 in the
principal amount of $25,000.00; a Restated Promissory Note dated October 15,
1997; an Amendment to Promissory Note dated April 1, 1998; an Amended and
Restated Promissory Note dated as of November 2, 1998; and an Amendment to
Amended and Restated Promissory Note dated as of December 31, 1998;
To A. Michael Belanger: A Promissory Note dated March 25, 1997 in the
principal amount of $25,000.00; a Restated Promissory Note dated October 15,
1997; an Amendment to Promissory Note dated April 1, 1998; an Amended and
Restated Promissory Note dated as of November 2, 1998; and an Amendment to
Amended and Restated Promissory Note dated as of December 31, 1998, which was
paid in full as of December 31, 1998;
To Sharon C. Bennett: A Promissory Note dated April 28, 1997 in the
principal amount of $25,000.00; a Restated Promissory Note dated October 15,
1997; an Amendment to Promissory Note dated April 2, 1998; and an Amended and
Restated Promissory Note dated as of November 2, 1998, which was paid in full as
of December 31, 1998;
To Gilbert F. Campbell and Sally Campbell: A Promissory Note dated May
19, 1997 in the principal amount of $25,000.00; a Restated Promissory Note dated
October 15, 1997; an undated Amendment to Promissory Note; an Amended and
Restated Promissory Note dated as of November 2, 1998; and an Amendment to
Amended and Restated Promissory Note dated as of December 31, 1998;
To James E. Doane: A Promissory Note dated February 25, 1997 in the
principal amount of $25,000.00; a Restated Promissory Note dated October 15,
1997; an Amendment to Promissory Note dated April 8, 1998; an Amended and
Restated Promissory Note dated as of November 2, 1998; and an Amendment to
Amended and Restated Promissory Note dated as of December 31, 1998;
To James E. Doane, Jr.: A Promissory Note dated February 25, 1997 in
the principal amount of $25,000.00; a Restated Promissory Note dated October 15,
1997; an Amendment to Promissory Note dated April 3, 1998; an Amendment to
Promissory Note dated April 16, 1998; an Amended and Restated Promissory Note
dated as of November 2, 1998; and an Amendment to Amended and Restated
Promissory Note dated as of December 31, 1998;
To Jeannette L. Epstein, TTEE: A Promissory Note dated March 25, 1997
in the principal amount of $25,000.00; a Restated Promissory Note dated October
15, 1997; an Amendment to Promissory Note dated April 1, 1998; and an Amended
and Restated Promissory Note dated as of November 2, 1998, which was paid in
full as of December 31, 1998;
To Dr. Jack Freedman: A Promissory Note dated July 22, 1997 in the
principal amount of $25,000.00; and a Restated Promissory Note dated October 15,
1997, which was paid in full as of March 31, 1998;
To Laurie G. and Janet L. Henley: A Promissory Note dated May 12, 1997
in the principal amount of $25,000.00; a Restated Promissory Note dated October
15, 1997; an Amendment to Promissory Note dated April 1, 1998; an Amended and
Restated Promissory Note dated as of November 2, 1998; and an Amendment to
Amended and Restated Promissory Note dated as of December 31, 1998;
To Sidney T. Jackson: A Promissory Note dated May 30, 1997 in the
principal amount of $25,000.00; a Restated Promissory Note dated October 15,
1997; an undated Amendment to Promissory Note; an Amended and Restated
Promissory Note dated as of November 2, 1998; and an Amendment to Amended and
Restated Promissory Note dated as of December 31, 1998;
To Jimmie Lou Jacobs: A Promissory Note dated February 25, 1997 in the
principal amount of $25,000.00; a Restated Promissory Note dated October 15,
1997; an undated Amendment to Promissory Note; and an Amended and Restated
Promissory Note dated as of November 2, 1998, which was paid in full as of
December 31, 1998;
II-4
<PAGE>
To Karl F. Jentgen: A Promissory Note dated February 25, 1997 in the
principal amount of $25,000.00; a Restated Promissory Note dated October 15,
1997; an Amendment to Promissory Note dated April 1, 1998; an Amended and
Restated Promissory Note dated as of November 2, 1998; and an Amendment to
Amended and Restated Promissory Note dated as of December 31, 1998;
To Karen F. Juette: A Promissory Note dated July 28, 1997 in the
principal amount of $50,000.00; a Restated Promissory Note dated October 15,
1997; an Amended and Restated Promissory Note dated as of November 2, 1998; and
an Amendment to Amended and Restated Promissory Note dated as of December 31,
1998;
To J.T.H. Associates: A Promissory Note dated October 29, 1997 in the
principal amount of $100,000.00, which was assigned by J.T.H. Associates to W.
Jonathan Wride by an instrument dated as of June 18, 1998; an Amendment to
Promissory Note dated June 19, 1998; an Amended and Restated Promissory Note
dated as of November 2, 1998; and an Amendment to Amended and Restated
Promissory Note dated as of December 31, 1998;
To Audrey J. Karcagi: A Promissory Note dated August 15, 1997 in the
principal amount of $25,000.00; a Restated Promissory Note dated October 15,
1997; an Amendment to Promissory Note dated April 1, 1998; an Amended and
Restated Promissory Note dated as of November 2, 1998; and an Amendment to
Amended and Restated Promissory Note dated as of December 31, 1998;
To Albert H. LeShane and Dorothy M. LeShane: A Promissory Note dated
April 19, 1997 in the principal amount of $25,000.00; a Restated Promissory Note
dated October 15, 1997; an Amendment to Promissory Note dated March 31, 1998;
and an Amended and Restated Promissory Note dated as of November 2, 1998, which
was paid in full as of December 31, 1998;
To J. Kent Manley, Jr.: A Promissory Note dated March 21, 1997 in the
principal amount of $25,000.00 and paid in full per signature without date;
To Dolores D. Myers: A Promissory Note dated May 19, 1997 in the
principal amount of $25,000.00; a Restated Promissory Note dated October 15,
1997; an Amendment to Promissory Note dated April 1, 1998; and an Amended and
Restated Promissory Note dated as of November 2, 1998, which was paid in full as
of December 31, 1998;
To the Albert T. Robinson IRA: A Promissory Note dated March 27, 1997
in the principal amount of $100,000.00 and paid in full per signature without
date;
To Joyce L. Ross: A Promissory Note dated October 29, 1997 in the
principal amount of $25,000.00; an Amendment to Promissory Note dated March 31,
1998; and an Amended and Restated Promissory Note dated as of November 2, 1998,
which was paid in full as of December 31, 1998;
To William Robert Ross: A Promissory Note dated May 2, 1997 in the
principal amount of $25,000.00 and paid in full on October 29, 1997;
To Mary L. Sheffer and Harlan Sheffer: A Promissory Note dated April
19, 1997 in the principal amount of $25,000.00; a Restated Promissory Note dated
October 15, 1997; an Amendment to Promissory Note dated March 31, 1998; an
Amended and Restated Promissory Note dated as of November 2, 1998; and an
Amendment to Amended and Restated Promissory Note dated as of December 31, 1998;
To Adam Smith: A Promissory Note dated October 28, 1997 in the
principal amount of $25,000.00; an Amendment to Promissory Note dated April 20,
1998; an Amended and Restated Promissory Note dated as of November 2, 1998; and
an Amendment to Amended and Restated Promissory Note dated as of December 31,
1998;
II-5
<PAGE>
To Robert E. Stauffer, Jr.: A Promissory Note dated April 19, 1997 in
the principal amount of $25,000.00; a Restated Promissory Note dated October 15,
1997; an Amendment to Promissory Note dated April 1, 1998; an Amended and
Restated Promissory Note dated as of November 2, 1998; and an Amendment to
Amended and Restated Promissory Note dated as of December 31, 1998;
To John E. Stockton: A Promissory Note dated March 25, 1997 in the
principal amount of $25,000.00; a Restated Promissory Note dated October 15,
1997; an Amendment to Promissory Note dated June 8, 1998; and an Amended and
Restated Promissory Note dated as of November 2, 1998, which was paid in full as
of December 31, 1998;
To William D. Thompson: A Promissory Note dated May 9, 1997 in the
principal amount of $25,000.00; and a Restated Promissory Note dated October 15,
1997, paid in full by check dated April 2, 1998.
The Company has not previously issued any other securities, except that
the Company has issued 100 Common Shares at $1.00 per share solely for the
purpose of organizing the Company and electing its directors. Mr. Richard E.
Horne, President and Chief Executive Officer of the Company, currently holds
these shares, which will be repurchased at their $1.00 cost and canceled by the
Company concurrently with the closing of the Offering.
II-6
<PAGE>
ITEM 27. - EXHIBITS.
The following exhibits are filed herewith (except as otherwise
indicated):
EXHIBIT DESCRIPTION
- ------- -----------
1.1 Form of Underwriting Agreement between the Company and Ashtin
Kelly & Co.*
3.1 Second Amended and Restated Articles of Incorporation of the
Company*
3.2 Amended and Restated Bylaws*
4.1 See Exhibits 3.1 and 3.2 for provisions of the Second Amended
and Restated Articles of Incorporation and Amended and
Restated Bylaws of the Company defining rights of holders of
the Company's Common Shares*
4.2 Form of Common Share Certificate of the Company*
5.1 Opinion of Smith, Gambrell & Russell, LLP*
10.1 Lease, dated July 9, 1998, between the Company and Wridell
Development Corporation, Inc.; Assignment of Leases, dated
July 14, 1998, from Wridell Development Corporation, Inc. to
Gulf Coast Commercial Corporation*
10.2 Form of Employment Agreement to be executed by the Company,
the Bank, and Richard E. Horne*
10.3 Revised Form of Stock Option Agreement to be executed by the
Company and Richard E. Horne
10.4 Revised Marine Bancshares, Inc. 1998 Stock Option Plan
10.5 Revised Form of Marine Bancshares, Inc. Stock Purchase Warrant
21 Subsidiaries of the Company*
23.1 Consent of Smith, Gambrell & Russell, LLP (contained in its
opinion at Exhibit 5.1)*
23.2 Consent of Hill, Barth & King, Inc.
24 Power of Attorney (included in the signature page of the
Amendment No. 1 to the Registration Statement)*
27 Financial Data Schedule (for SEC use only)*
- -----------------
* Previously filed.
II-7
<PAGE>
ITEM 28. - UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the small business issuer pursuant to the foregoing provisions, or
otherwise, the small business issuer has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the small business issuer of expenses incurred or
paid by a director, officer or controlling person of the small business issuer
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the small business issuer will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned small business issuer will provide to the Underwriter
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriter to
permit prompt delivery to each purchaser.
II-8
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
the requirements for filing on Form SB-2 and has authorized this Amendment No. 3
to the Registration Statement to be signed on its behalf by the undersigned, in
the City of Naples, State of Florida, on January 27, 1999.
MARINE BANCSHARES, INC.
By: /s/ RICHARD E. HORNE
-------------------------------------
Richard E. Horne
President and Chief Executive Officer
In accordance with the requirements of the Securities Act of 1933, this
Amendment No. 3 to the Registration Statement has been signed by the following
persons in the capacities and on the dates stated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ RICHARD E. HORNE Director, President and January 27, 1999
- ------------------------------- Chief Executive Officer
Richard E. Horne (Principal Executive Officer,
Principal Financial Officer and
Principal Accounting Officer))
/s/ WILLIAM J. RYAN* Director January 27, 1999
- -------------------------------
William J. Ryan
/s/ PIERCE T. NEESE* Director January 27, 1999
- -------------------------------
Pierce T. Neese
/s/ EARL G. HODGES* Director January 27, 1999
- -------------------------------
Earl G. Hodges
/s/ WILLIAM L. MCDANIEL, JR.* Director January 27, 1999
- -------------------------------
William L. McDaniel, Jr.
/s/ DONALD W. KETTERHAGEN* Director January 27, 1999
- -------------------------------
Donald W. Ketterhagen
* BY: /s/ RICHARD E. HORNE
-------------------------
Richard E. Horne,
Attorney-in-Fact
</TABLE>
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
1.1 Form of Underwriting Agreement between the Company and Ashtin
Kelly & Co.*
3.1 Second Amended and Restated Articles of Incorporation of the
Company*
3.2 Amended and Restated Bylaws*
4.1 See Exhibits 3.1 and 3.2 for provisions of the Second Amended
and Restated Articles of Incorporation and Amended and
Restated Bylaws of the Company defining rights of holders of
the Company's Common Shares*
4.2 Form of Common Share Certificate of the Company*
5.1 Opinion of Smith, Gambrell & Russell, LLP*
10.1 Lease, dated July 9, 1998, between the Company and Wridell
Development Corporation, Inc.; Assignment of Leases, dated
July 14, 1998, from Wridell Development Corporation, Inc. to
Gulf Coast Commercial Corporation*
10.2 Form of Employment Agreement to be executed by the Company,
the Bank, and Richard E. Horne*
10.3 Revised Form of Stock Option Agreement to be executed by the
Company and Richard E. Horne
10.4 Revised Marine Bancshares, Inc. 1998 Stock Option Plan
10.5 Revised Form of Marine Bancshares, Inc. Stock Purchase Warrant
21 Subsidiaries of the Company*
23.1 Consent of Smith, Gambrell & Russell, LLP (contained in its
opinion at Exhibit 5.1)*
23.2 Consent of Hill, Barth & King, Inc.
24 Power of Attorney (included in the signature page of the
Amendment No. 1 to the Registration Statement)*
27 Financial Data Schedule (for SEC use only)*
- -----------------
* Previously filed.
EXHIBIT 10.3
STOCK OPTION AGREEMENT
THIS AGREEMENT, dated as of the ____ day of ____________, 1998
(the "Agreement"), by and between Marine Bancshares, Inc. (the "Company") and
Richard E. Horne (the "Executive").
WITNESSETH:
WHEREAS, the Board of Directors of the Company, as organizers of
Marine National Bank of Naples (in organization), a proposed national bank to be
organized under the laws of the United States (the "Bank"), are seeking approval
from the Office of the Comptroller of the Currency and the Federal Deposit
Insurance Corporation to charter a national bank, the deposits of which will be
federally insured, in Naples, Florida; and
WHEREAS, the Company will seek approval from the Federal Reserve
Bank of Atlanta and the Federal Reserve Board to acquire the Bank and to become
a bank holding company; and
WHEREAS, the Company and the Bank (collectively referred to
herein as the "Employer") have agreed to employ Executive as the President and
Chief Executive Officer of the Company and the President and Chief Executive
Officer of the Bank pursuant to an Employment Agreement dated as of
_______________, 1998 by and between Employer and Executive ("Employment
Agreement"); and
WHEREAS, the Board of Directors of the Company has adopted that
certain Marine Bancshares, Inc. 1998 Stock Option Plan, as amended (the "Plan"),
a copy of which is attached hereto as Exhibit "A" and incorporated herein by
reference; and
WHEREAS, pursuant to the terms of the Plan and in consideration
of the efforts of Employee on behalf of the Company, the Board of Directors has
selected Employee to participate in the Plan and desires to grant to Employee
certain incentive stock options to purchase shares of the Company's authorized
$.01 par value common stock (the "Stock"), subject to the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing and the
covenants contained herein, the parties hereto agree as follows:
1. INCORPORATION OF PLAN PROVISIONS
This Agreement is subject to and is to be construed in all
respects in a manner which is consistent with the terms of the Plan, the
provisions of which are hereby incorporated by reference into this Agreement.
Unless specifically provided otherwise, all terms used in this Agreement shall
have the same meaning as in the Plan.
<PAGE>
2. GRANT OF OPTIONS.
Subject to the terms and conditions set forth herein, the Company
hereby grants to Executive the right to purchase (the "Option") up to 25,000
shares of the Company's Stock, at a price of $10.00 per share, subject to
adjustment as provided in Section 5 hereof (the "Exercise Price"). This Option
is intended to be an Incentive Stock Option as provided in sectionsign 422 of
the Internal Revenue Code. The Board of Directors of the Company has determined,
in good faith and in its best judgment, that the fair market value per share of
the Stock as of the date this Option is granted is $10.00.
3. ADMINISTRATION.
3.1 COMPOSITION OF THE COMMITTEE. This Agreement shall be
administered by a committee (the "Committee") appointed by the Board of
Directors of the Company and composed of all of the Non-Employee Directors of
the Company, as defined in Rule 16b-3 promulgated under the Securities Exchange
Act of 1934 (the "Exchange Act").
3.2 POWERS OF THE COMMITTEE. The Committee shall have the
authority to administer, construe and interpret this Agreement and to make all
determinations necessary or advisable for the administration of this Agreement.
Any determination, decision or action of the Committee in connection with the
construction, interpretation, administration or application of this Agreement
shall be final, conclusive and binding upon the Executive and any person validly
claiming under or through the Executive, provided however that the Committee may
not exercise the powers provided by this Subsection 3.2 in an arbitrary and
capricious manner.
4. VESTING OF OPTION SHARES AND EXERCISE OF PURCHASE RIGHTS.
4.1 VESTING AND EXERCISABILITY. Purchase rights under the Option
shall vest and Executive may exercise the Option only as follows:
(i) beginning on the day that the Bank opens for business (the
"Commencement Date"), the Option shall vest as to, and may be exercised to a
maximum of, 5,000 of the shares of Stock subject to this Agreement;
(ii) beginning on the first anniversary of the Commencement Date,
the Option shall vest as to, and may be exercised up to, an additional 5,000 of
the shares of Stock subject to this Agreement;
(iii) beginning on the second anniversary of the Commencement
Date, the Option shall vest as to, and may be exercised up to, an additional
5,000 of the shares of Stock subject to this Agreement;
(iv) beginning on the third anniversary of the Commencement Date,
the Option
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shall vest as to, and may be exercised up to, an additional 5,000 of the shares
of Stock subject to this Agreement; and
(v) beginning on the fourth anniversary of the Commencement Date,
the Option shall vest as to, and may be exercised up to, an additional 5,000 of
the shares of Stock subject to this Agreement.
To the extent that any portion of the Option has vested but has
not already been exercised, Executive may immediately exercise the remaining
portion of the Option upon a change of control of the Company or the Bank. To
the extent that any portion of the Option has not already vested, Executive may
exercise such portion only in accordance with notice received, if any, from the
Board of Directors. As used in this Agreement, a "change of control of the
Company or the Bank" shall mean a change in control of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A promulgated under the Exchange Act, whether or not the Company or the Bank
in fact is required to comply with Regulation 14A; provided that, without
limitation, such a change in control shall be deemed to have occurred if any
"person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act
in effect on the date first written above), other than the Company or the Bank,
respectively, is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company or
the Bank representing 20% or more of the combined voting power of the Company's
or the Bank's then outstanding securities.
Notwithstanding the foregoing, to the extent that any portion of
the Option has not been exercised, this Agreement shall terminate and be of no
further force and effect, and the Option shall expire, on the earliest of (a)
ninety (90) days after termination of Executive's employment with the Employer
for any reason except death, disability or retirement, (b) twelve months after
termination of Executive's employment with the Employer by reason of his death,
disability or retirement, or (c) the seventh (7th) anniversary of the
Commencement Date.
4.2 EXERCISE OF OPTION. Until such time as the Option shall lapse
or expire pursuant to Section 4.1 hereof, the Option may be exercised, in whole
or in part, by delivery to the Company of written notice of such exercise,
accompanied by full payment of the Exercise Price with respect to that portion
of the Option being exercised. Until the Company notifies Executive to the
contrary, the form attached to this Agreement as Exhibit A shall be used to
exercise the Option. The aggregate Exercise Price for the shares of Stock to be
purchased shall be paid either:
(i) in cash (including by certified check),
(ii) by delivery to the Company of shares of Stock valued at the
Market Price on the date of exercise of the Option,
(iii) by surrender to the Company of that portion of the Option
having an aggregate Option Value Per Share equal to the portion
of the aggregate Exercise Price which
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will not be paid in cash or by delivery of shares of Stock pursuant to (i) or
(ii) above, or
(iv) by any combination of the methods described in (i), (ii) or
(iii) above.
Upon each exercise or partial exercise of the Option, the Company
shall deliver to Executive a certificate or certificates representing the number
of shares of Stock being issued to and purchased by Executive, free and clear of
encumbrances.
For purposes of this Section 4.2, "Option Value Per Share" shall
mean, with respect to one share of Stock purchasable pursuant to this Option,
the excess of (i) the Market Price of one share of Stock issuable upon exercise
hereof, as determined with respect to the date notice of exercise is given by
Executive, over (ii) the Exercise Price therefor.
For purposes of this Section 4.2, "Market Price" shall mean the
last trade/closing price of the Stock on the date in question, as quoted by the
National Association of Securities Dealers, Inc. SmallCap Market System (or
other over-the-counter nationally recognized quotation service). If the Stock is
not traded on the Nasdaq SmallCap Market but is registered on a national
securities exchange or on the Nasdaq National Market System, "Market Price"
shall mean the closing sales price of the Stock on such national securities
exchange or National Market System. If the Stock is not traded on a national
securities exchange or through any other nationally recognized quotation
service, then "Market Price" shall mean the fair market value of the Stock as
determined by the Board of Directors of the Company or the Committee, acting in
good faith, under any method consistent with the Code, or Treasury Regulations
thereunder, as the Board of Directors of the Company or the Committee shall in
its discretion select and apply. Subject to the foregoing, the Board of
Directors of the Company or the Committee, in fixing the Market Price, shall
have full authority and discretion and be fully protected in doing so.
4.3 RESTRICTION UPON SHARES OF STOCK ISSUED UPON EXERCISE.
Executive further agrees, for himself and his successors, that, upon the
issuance of any shares of Stock upon exercise of the Option, he will, upon
request of the Company, agree in writing that he is acquiring such shares for
investment only and not with a view to resale, and that he will not sell, pledge
or otherwise dispose of such shares unless and until (a) the Company is
furnished with an opinion of counsel reasonably acceptable to the Company to the
effect that registration of such shares pursuant to the Securities Act of 1933,
as amended, is not required by that Act and the rules and regulations
thereunder; (b) the staff of the Securities and Exchange Commission has issued a
"no action" letter with respect to such disposition; or (c) such registration or
notification as is required, in the opinion of counsel for the Company, for the
lawful disposition of such shares has been filed by the Company and has become
effective; PROVIDED, HOWEVER, that the Company is not obligated hereby to file
any such registration or notification. Executive further agrees that the Company
may place a legend embodying such restriction on the certificates evidencing
such shares.
5. ADJUSTMENT UPON CHANGES IN CAPITALIZATION.
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The type and number of shares of Stock subject to the Option and
the Exercise Price with respect thereto shall be adjusted by the Committee to
reflect such events as stock dividends, stock splits, recapitalizations,
mergers, consolidations or reorganizations of or by the Company, so as to
provide to Executive as nearly as possible the same economic effect as
contemplated by the Option prior to such stock dividend, stock split,
recapitalization, merger, consolidation or reorganization.
6. RIGHTS AS STOCKHOLDER.
Executive shall have no rights as a stockholder with respect to
any shares of Stock subject to the Option until and unless a certificate or
certificates representing such shares are issued to Executive pursuant to
Section 4.2 of this Agreement. Except as provided in Section 5, no adjustment
shall be made for dividends or other rights for which the record date is prior
to the issuance of such certificate or certificates.
7. NO RIGHT TO EMPLOYMENT.
Neither the granting of the Option evidenced by this Agreement
nor any term or provision of this Agreement shall constitute or be evidence of
any understanding, express or implied, on the part of the Company or the Bank to
employ Executive for any period of time.
8. NONTRANSFERABILITY.
The Option is not transferable by Executive other than by will or
by the laws of descent and distribution, and is exercisable, during Executive's
lifetime, only by Executive or, during his disability, by his legal
representative, or, after his death, by his estate.
9. MISCELLANEOUS.
9.1 HEADINGS. The headings in this Agreement are inserted for
convenience only and shall have no affect on the interpretation of this
Agreement.
9.2 ENTIRE AGREEMENT. This Agreement, the Employment Agreement,
and the documents referred to therein contain the entire agreement between the
parties with respect to the transactions contemplated hereby and supersede all
prior arrangements or understandings, written or oral, with respect thereto.
9.3 MODIFICATION. No modification or amendment of this Agreement
shall be valid unless it is in writing and signed by the Executive and by a duly
designated member of the Committee on behalf of the Employer.
9.4 SUCCESSORS. The terms and conditions of this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective heirs, personal representatives
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and successors.
9.5 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the state of Florida applicable to
agreements made and to be performed entirely within such jurisdiction except to
the extent that federal law may be applicable.
9.6 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement as of the day and year first above written.
MARINE BANCSHARES, INC. RICHARD E. HORNE
By:________________________ _____________________________
Name:
Title:
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EXHIBIT A
EXERCISE OF OPTION
To: The Board of Directors
Marine Bancshares, Inc.
Gentlemen:
The undersigned, as optionee under the Stock Option Agreement by
and between Marine Bancshares, Inc. (the "Company") and Richard E. Horne, dated
as of __________, 1998 (the "Agreement"), hereby irrevocably elects to exercise
the Option granted in the Agreement to purchase ______ shares of Common Stock of
the Company, par value $.01 per share, and herewith makes payment of
$___________.
Dated: _______________________ ________________________
Richard E. Horne
Date Received: ________________
Received by: __________________
Title: ________________________
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EXHIBIT 10.4
MARINE BANCSHARES, INC.
1998 STOCK OPTION PLAN
EFFECTIVE AS OF ____________, 1998
1. PURPOSE
The primary purpose of the Marine Bancshares, Inc. 1998 Stock Option
Plan (the "Plan") is to encourage and enable eligible directors, officers and
key employees of Marine Bancshares, Inc. (the "Company") and its subsidiaries to
acquire proprietary interests in the Company through the ownership of Common
Shares of the Company. The Company believes that directors, officers and key
employees who participate in the Plan will have a closer identification with the
Company by virtue of their ability as shareholders to participate in the
Company's growth and earnings. The Plan also is designed to provide motivation
for participating directors, officers and key employees to remain in the employ
of and to give greater effort on behalf of the Company. It is the intention of
the Company that the Plan provide for the award of "incentive stock options"
qualified under Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code") and the regulations promulgated thereunder, as well as the award of
non-qualified stock options. Accordingly, the provisions of the Plan related to
incentive stock options shall be construed so as to extend and limit
participation in a manner consistent with the requirements of Section 422 of the
Code.
2. DEFINITIONS
The following words or terms shall have the following meanings:
(a) "Agreement" shall mean a stock option agreement between the Company
and an Eligible Employee or Eligible Participant pursuant to the terms of this
Plan.
(b) "Board of Directors" shall mean the Board of Directors of the
Company.
(c) "Committee" shall mean the committee appointed by the Board of
Directors to administer the Plan, if any, as set forth in Section 5 of the Plan.
(d) "Company" shall mean Marine Bancshares, Inc., a Florida corporation
and a registered bank holding company under the Federal Bank Holding Company Act
of 1956, as amended, and the parent company of Marine National Bank of Naples, a
national banking association (the "Bank").
(e) "Eligible Employee(s)" shall mean key employees regularly employed
by the Company or a Subsidiary (including officers, whether or not they are
directors) as the Board of Directors or the Committee shall select from time to
time.
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(f) "Eligible Participant(s)" shall mean directors, officers, key
employees of the Company and its Subsidiaries, and other persons who may not
otherwise be eligible to receive qualified incentive options pursuant to Section
8 of the Plan.
(g) "Market Price" shall mean the closing price of the Company's Common
Shares on the date in question, as quoted by the Nasdaq National Market or the
Nasdaq SmallCap Market (or other nationally recognized quotation service). If
the Company's Common Stock is not traded on the Nasdaq Stock Market but is
registered on a national securities exchange, AMarket Price@ shall mean the
closing sales price of the Company's Common Shares on such national securities
exchange. If the Company's Common Shares are not traded on a national securities
exchange or through any other nationally recognized quotation service, then
"Market Price" shall mean the fair market value of the Company's Common Shares
as determined by the Board of Directors or the Committee, acting in good faith,
under any method consistent with the Code, or Treasury Regulations thereunder,
as the Board of Directors or the Committee shall in its discretion select and
apply at the time of the grant of the option concerned. Subject to the
foregoing, the Board of Directors or the Committee, in fixing the market price,
shall have full authority and discretion and be fully protected in doing so.
(h) "Optionee" shall mean an Eligible Employee or Eligible Participant
having a right to purchase Common Shares under an Agreement.
(i) "Option(s)" shall mean the right or rights granted to Eligible
Employees or Eligible Participants to purchase Common Shares under the Plan.
(j) "Plan" shall mean this Marine Bancshares, Inc. 1998 Stock Option
Plan.
(k) "Shares," or "Common Shares" shall mean shares of the $.01 par value
common stock of the Company.
(l) "Subsidiary" or "Subsidiaries" shall mean any corporation(s) if the
Company owns or controls, directly or indirectly, more than a majority of the
voting stock of such corporation(s).
(m) "Ten Percent Owner" shall mean an individual who, at the time an
Option is granted, owns directly or indirectly more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company or a
Subsidiary.
3. EFFECTIVE DATE
The effective date of the Plan (the "Effective Date") shall be the date
the Plan is adopted by the Board of Directors, or the date the Plan is approved
by the shareholders of the Company, whichever is earliest. The Plan must be
approved by the affirmative vote of not less than a majority of the shares
present and voting at a meeting at which a quorum is present, which shareholder
vote must be taken within twelve (12) months after the date the Plan is adopted
by the Board of Directors. Such shareholder vote shall not alter the Effective
Date. In the event shareholder approval of the
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adoption of the Plan is not obtained within the aforesaid twelve (12) month
period, then any Options granted in the intervening period shall be void.
4. SHARES RESERVED FOR PLAN
The Company's Common Shares to be sold to Eligible Employees and
Eligible Participants under the Plan may at the election of the Board of
Directors be either treasury shares or Shares originally issued for such
purpose. The maximum number of Shares which shall be reserved and made available
for sale under the Plan shall be two hundred thousand (200,000); provided,
however, that such Shares shall be subject to the adjustments provided in
Section 8(h). Any Shares subject to an Option which for any reason expires or is
terminated unexercised may again be subject to an Option under the Plan.
5. ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Board of Directors or the
Committee. The Committee shall be comprised of not less than two (2) members
appointed by the Board of Directors of the Company from among its members, each
of whom qualifies as a "Non-Employee Director" as such term is defined in Rule
16b-3 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), or any successor regulation.
Within the limitations described herein, the Board of Directors of the
Company or the Committee shall administer the Plan, select the Eligible
Employees and Eligible Participants to whom Options will be granted, determine
the number of shares to be optioned to each Eligible Employee and Eligible
Participant and interpret, construe and implement the provisions of the Plan.
The Board of Directors or the Committee shall also determine the price to be
paid for the Shares upon exercise of each Option, the period within which each
Option may be exercised, and the terms and conditions of each Option granted
pursuant to the Plan. The Board of Directors and Committee members shall be
reimbursed for out-of-pocket expenses reasonably incurred in the administration
of the Plan.
If the Plan is administered by the Board of Directors, a majority of the
members of the Board of Directors shall constitute a quorum, and the act of a
majority of the members of the Board of Directors present at any meeting at
which a quorum is present, or acts approved in writing by all members of the
Board of Directors, shall be the acts of the Board of Directors. If the Plan is
administered by the Committee, a majority of the members of the Committee shall
constitute a quorum, and the acts of a majority of the members present at any
meeting at which a quorum is present, or acts approved in writing by all of the
members of the Committee, shall be the acts of the Committee.
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6. ELIGIBILITY
Options granted pursuant to Section 8 shall be granted only to Eligible
Employees. Options granted pursuant to Section 9 may be granted to Eligible
Employees and to Eligible Participants.
7. DURATION OF THE PLAN
The Plan shall remain in effect until all Shares subject to or which may
become subject to the Plan shall have been purchased pursuant to Options granted
under the Plan; provided that Options under the Plan must be granted within ten
(10) years from the Effective Date. The Plan shall expire on the tenth
anniversary of the Effective Date.
8. QUALIFIED INCENTIVE OPTIONS
It is intended that Options granted under this Section 8 shall be
qualified incentive stock options under the provisions of Section 422 of the
Code and the regulations thereunder or corresponding provisions of subsequent
revenue laws and regulations in effect at the time such Options are granted.
Such Options shall be evidenced by stock option agreements in such form, not
inconsistent with this Plan, as the Committee or the Board of Directors shall
approve from time to time, which Agreements shall contain in substance the
following terms and conditions:
(a) PRICE. The purchase price for shares purchased upon exercise will be
equal to 100% of the Market Price on the day the Option is granted; provided
that the purchase price of stock deliverable upon the exercise of a qualified
incentive stock option granted to a Ten Percent Owner under this Section 8 shall
be not less than one hundred ten percent (110%) of the Market Price on the day
the Option is granted, as determined by the Board of Directors or the Committee,
but in no case less than the par value of such stock.
(b) NUMBER OF SHARES. The Agreement shall specify the number of Shares
which the Optionee may purchase under the Option, as determined by the Board of
Directors or the Committee.
(c) VESTING AND EXERCISE OF OPTIONS. The Shares subject to the Option
shall vest and may be purchased in whole or in part by the Optionee in
accordance with the terms of the Agreement from time to time after shareholder
approval of the Plan, as determined by the Board of Directors or the Committee,
but in no event later than ten (10) years from the date of grant of the Option.
Notwithstanding the foregoing, Shares subject to an Option which is a qualified
incentive stock option granted to a Ten Percent Owner under this Section 8 may
be purchased from time to time but in no event later than five (5) years from
the date of grant of the Option.
(d) MEDIUM AND TIME OF PAYMENT. Stock purchased pursuant to an Agreement
shall be paid for in full at the time of purchase. Payment of the purchase price
shall be in cash or, in lieu of payment of all or part of the purchase price in
cash, the Optionee may surrender to the Company Shares valued at the Market
Price on the date of exercise of the Option in accordance with the terms
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of the Agreement. Upon receipt of payment, the Company shall, without transfer
or issue tax, deliver to the Optionee (or other person entitled to exercise the
Option) a certificate or certificates for such Shares.
(e) RIGHTS AS A SHAREHOLDER. An Optionee shall have no rights as a
shareholder with respect to any Shares covered by an Option until the date of
issuance of the stock certificate to the Optionee for such Shares. Except as
otherwise expressly provided in the Plan, no adjustments shall be made for
dividends (ordinary or extraordinary, whether in cash, securities or other
property) or distributions or other rights for which the record date is prior to
the date such stock certificate is issued.
(f) NONASSIGNABILITY OF OPTION. No Option shall be assignable or
transferable by the Optionee except by will or by the laws of descent and
distribution. During the lifetime of the Optionee, the Option shall be
exercisable only by him or her.
(g) EFFECT OF TERMINATION OF EMPLOYMENT OR DEATH. In the event that an
Optionee during his or her lifetime ceases to be an employee of the Company or
of any Subsidiary of the Company for any reason (including retirement) other
than death or permanent and total disability, any Option or unexercised portion
thereof which was otherwise exercisable on the date of termination of employment
shall expire unless exercised within a period of three (3) months from the date
on which the Optionee ceased to be an employee, but in no event after the term
provided in the Optionee=s Agreement. In the event that an Optionee ceases to be
an employee of the Company or of any Subsidiary of the Company for any reason
(including retirement) other than death or permanent and total disability prior
to the time that an Option or portion thereof becomes exercisable, such Option
or portion thereof which is not then exercisable shall terminate and be null and
void. Whether authorized leave of absence for military or government service
shall constitute termination of employment for the purpose of this Plan shall be
determined by the Board of Directors or the Committee, which determination shall
be final and conclusive.
In the event that an Optionee during his or her lifetime ceases to be an
employee of the Company or any Subsidiary of the Company by reason of death or
permanent and total disability, any Option or unexercised portion thereof which
was otherwise exercisable on the date such Optionee ceased employment shall
expire unless exercised within a period of one (1) year from the date on which
the Optionee ceased to be an employee, but in no event after the term provided
in the Optionee's Agreement. In the event that an Optionee during his or her
lifetime ceases to be an employee of the Company or any Subsidiary of the
Company by reason of death or permanent and total disability, any Option or
portion thereof which was not exercisable on the date such Optionee ceased
employment may, in the discretion of the Board of Directors or the Committee, be
accelerated and become immediately exercisable for a period of one (1) year from
the date on which the Optionee ceased to be an employee, but in no event shall
the exercise period extend past the term provided in the Optionee's Agreement.
"Permanent and total disability" as used in this Plan shall be as
defined in Section 22(e)(3) of the Code.
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In the event of the death of an Optionee, the Option shall be
exercisable by his or her personal representatives, heirs or legatees, as
provided herein.
(h) RECAPITALIZATION. In the event that dividends are payable in Shares
of the Company or in the event there are splits, subdivisions or combinations of
Shares of the Company, the number of Shares available under the Plan shall be
increased or decreased proportionately, as the case may be, and the number and
Option exercise price of Shares deliverable upon the exercise thereafter of any
Option theretofore granted shall be increased or decreased proportionately, as
the case may be, as determined to be proper and appropriate by the Board of
Directors or the Committee.
(i) REORGANIZATION. In case the Company is merged or consolidated with
another corporation and the Company is not the surviving corporation, or in case
the property or stock of the Company is acquired by another corporation, or in
case of a separation, reorganization, recapitalization or liquidation of the
Company, the Board of Directors of the Company, or the Board of Directors of any
corporation assuming the obligations of the Company hereunder, shall either (i)
make appropriate provision for the protection of any outstanding Options by the
substitution on an equitable basis of appropriate stock of the Company, or of
the merged, consolidated or otherwise reorganized corporation which will be
issuable in respect to the Shares of the Company, provided only that the excess
of the aggregate fair market value of the Shares subject to option immediately
after such substitution over the purchase price thereof is not more than the
excess of the aggregate fair market value of the Shares subject to option
immediately before such substitution over the purchase price thereof, or (ii)
upon written notice to the Optionee provide that the Option (including after
three (3) years from the date of grant of any Option, in the discretion of the
Board of Directors, any portion of such Option which is not then exercisable)
must be exercised within sixty (60) days of the date of such notice or it will
be terminated. If any adjustment under this Section 8(i) would create a
fractional Share or a right to acquire a fractional Share, such shall be
disregarded and the number of Shares available under the Plan and the number of
Shares covered under any Options previously granted pursuant to the Plan shall
be the next lower number of Shares, rounding all fractions downward. An
adjustment made under this Section 8(i) by the Board of Directors shall be
conclusive and binding on all affected persons.
Except as otherwise expressly provided in this Plan, the Optionee shall
have no rights by reason of any subdivision or consolidation of shares of stock
of any class, or the payment of any stock dividend or any other increase or
decrease in the number of shares of stock of any class, or by reason of any
dissolution, liquidation, merger, or consolidation or spin-off of assets or
stock of another corporation; and any issuance by the Company of shares of stock
of any class, or securities convertible into shares of stock of any class, shall
not affect, and no adjustment by reason thereof shall be made with respect to,
the number or prices of Shares subject to an Option.
The grant of an Option pursuant to the Plan shall not affect in any way
the right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure or to merge or
to consolidate or to dissolve, liquidate or sell, or transfer all or any part of
its business or assets.
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(j) ANNUAL LIMITATION. The aggregate fair market value (determined at
the time the Option is granted) of the Shares with respect to which incentive
stock options are exercisable for the first time by an Optionee during any
calendar year (under all incentive stock option plans of the Company and its
Subsidiaries) shall not exceed $100,000. Any excess over such amount shall be
deemed to be related to and part of a non-qualified stock option granted
pursuant to Section 9.
(k) GENERAL RESTRICTION. Each Option shall be subject to the requirement
that if at any time the Board of Directors shall determine, in its reasonable
discretion, that the listing, registration or qualification of the Shares
subject to such Option upon any securities exchange or under any state or
federal law, or the consent or approval of any government regulatory body, is
necessary or desirable as a condition of, or in connection with, the granting of
such Option or the issuance or purchase of Shares thereunder, such Option may
not be exercised in whole or in part unless such listing, registration,
qualification, consent or approval shall have been effected or obtained free of
any conditions not acceptable to the Board of Directors. Alternatively, such
Options shall be issued and exercisable only upon such terms and conditions and
with such restrictions as shall be necessary or appropriate to effect exemption
from such listing, registration, or other qualification requirement.
9. NON-QUALIFIED OPTIONS
The Board of Directors or the Committee may grant to Eligible Employees
or Eligible Participants Options under the Plan which are not qualified
incentive stock options under the provisions of Section 422 of the Code. Such
non-qualified options shall be evidenced by Agreements in such form and not
inconsistent with this Plan as the Board of Directors or the Committee shall
approve from time to time, which Agreements shall contain in substance the same
terms and conditions as set forth in Section 8 hereof with respect to qualified
incentive stock options; provided, however, that:
(i) the limitations set forth in Sections 8(a) and 8(c) with
respect to Ten Percent Owners shall not be applicable to non-qualified options
granted to any Ten Percent Owner;
(ii) the limitations set forth in Section 8(g) with respect to
termination of employment or death shall not be applicable to non-qualified
option grants, and any such limitations shall be determined on a case by case
basis by the Board of Directors or the Committee at the time of the
non-qualified option grant; and
(iii) the limitation set forth in Section 8(j) with respect to
the annual limitation of incentive stock options shall not be applicable to
non-qualified option grants.
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10. AMENDMENT OF THE PLAN
This Plan may at any time or from time to time be terminated, modified
or amended by the affirmative vote of not less than a majority of the Shares
present and voting thereon by the Company=s shareholders at a meeting of the
shareholders at which a quorum is present. The Board of Directors may at any
time and from time to time modify or amend the Plan in any respect, except that
without shareholder approval the Board of Directors may not (1) increase the
maximum number of Shares for which Options may be granted under the Plan (other
than increases due to changes in capitalization as referred to in Section 8(h)
hereof), or (2) change the class of persons eligible for qualified incentive
options. The termination or any modification or amendment of the Plan shall not,
without the written consent of an Optionee, affect his or her rights under an
Option or right previously granted to him or her. With the written consent of
the Optionee affected, the Board of Directors or the Committee may amend
outstanding option agreements in a manner not inconsistent with the Plan.
Without employee consent, the Board of Directors may at any time and from time
to time modify or amend outstanding Agreements in such respects as it shall deem
necessary in order that incentive options granted hereunder shall comply with
the appropriate provisions of the Code and regulations thereunder which are in
effect from time to time respecting "Qualified Incentive Options." The Company's
Board of Directors may also suspend the granting of Options pursuant to the Plan
at any time and may terminate the Plan at any time; provided, however, no such
suspension or termination shall modify or amend any Option granted before such
suspension or termination unless (1) the affected participant consents in
writing to such modification or amendment or (2) there is a dissolution or
liquidation of the Company.
11. FORFEITURE
If at any time while an Option is outstanding, the Board of Governors of
the Federal Reserve System makes a formal capital call upon the Company or the
Comptroller of the Currency makes a formal capital call upon the Bank, the
Optionee will exercise the Option in whole or in part as may be needed for
additional required capital, or the Option shall be forfeited. The number of
Shares as to which the Option shall be exercised by each Optionee to meet the
capital call will be calculated pro rata on the basis of the number of Shares
subject to an Option held by each Optionee. The purchase price for Shares
purchased upon exercise will be equal to the greater of the purchase price
otherwise determined pursuant to Section 8 or Section 9 hereof (whichever is
applicable) and the then-current book value per Share of the Company. Any
portion of an Option not required to be exercised under the terms of any such
capital call may be exercised under the original terms of the Option.
12. BINDING EFFECT
All decisions of the Board of Directors or the Committee involving the
implementation, administration or operation of the Plan or any offering under
the Plan shall be binding on the Company and on all persons eligible or who
become eligible to participate in the Plan.
8
<PAGE>
13. APPLICATION OF FUNDS
The proceeds received by the Company from the sale of Shares pursuant to
Options exercised hereunder will be used for general corporate purposes.
9
EXHIBIT 10.5
NEITHER THIS WARRANT, NOR THE SHARES OF COMMON STOCK FOR WHICH IT IS
EXERCISABLE, HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND NO
TRANSFER OR ASSIGNMENT OF THIS WARRANT OR THE SHARES ISSUABLE UPON ITS EXERCISE
MAY BE MADE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT
OR THE AVAILABILITY OF AN EXEMPTION FROM THE REGISTRATION PROVISIONS OF SUCH ACT
IN RESPECT OF SUCH TRANSFER OR ASSIGNMENT.
DATED: ___________, 1999
No ___ _____ Shares
MARINE BANCSHARES, INC.
STOCK PURCHASE WARRANT
TO PURCHASE SHARES OF COMMON STOCK, $.01 PAR VALUE
This is to certify that, for value received, _________________
("Holder"), or its or his successors, is entitled, upon the due exercise hereof
at any time during the period commencing on the closing date for the Initial
Public Offering (as hereinafter defined) of Marine Bancshares, Inc., a Florida
corporation (the "Commencement Date") and terminating at 5:00 p.m., Atlanta,
Georgia local time, on the tenth anniversary of the Commencement Date, unless
earlier terminated as provided in Section 2 hereunder (the "Termination Date"),
to purchase _____ shares (subject to adjustment as provided herein) of the $.01
par value Common Stock of Marine Bancshares, Inc. at a price per share as
specified in Section 2 of this Warrant and to exercise the other rights, powers
and privileges hereinafter provided, all on the terms and subject to the
conditions specified herein.
Section 1. CERTAIN DEFINITIONS. Unless the context otherwise requires,
the following terms as used in this Warrant shall have the following meanings:
(a) "AVERAGE MARKET VALUE" shall mean the average of the
Closing Prices for the Common Stock for the five trading
days immediately preceding the date of determination.
(b) "BANK" shall mean Marine National Bank of Naples, a
national banking association (in organization) and a
wholly-owned subsidiary of the Company.
(c) "CLOSING PRICE" shall mean:
(i) if the primary market for the Common Stock is a national
securities exchange, the NASDAQ Stock Market, or other
market or quotation system in which last sale transactions
are reported on a contemporaneous basis, the last reported
sales price, regular way, of such security on such
exchange or in such quotation system for such trading day,
or, if there shall not have been a sale on such exchange
or reported through such system on such trading day, the
closing or last bid quotations therefor on such exchange
or quotation system on such trading day;
<PAGE>
MARINE BANCSHARES, INC.
STOCK PURCHASE WARRANT
DATED ___________, 1999
Page 2
(ii) if the primary market for the Common Stock is not a
national securities exchange or quotation system in which
last sale transactions are contemporaneously reported, the
last bid quotation in the over-the-counter market on such
trading day as reported by the National Association of
Securities Dealers through NASDAQ, its automated system
for reporting quotations, or its successor, or such other
generally accepted source of publicly reported bid
quotations as the Company may reasonably designate; or
(iii) if the Closing Price cannot be ascertained by any of the
methods set forth in the immediately preceding paragraphs
(i) and (ii), such Closing Price shall be deemed to be the
amount equal to a quotient determined by dividing the Fair
Market Value by the number of shares (including any
fractional shares) of Common Stock then outstanding.
(d) "COMMENCEMENT DATE" shall mean the day that the Bank opens for
business.
(e) "COMMON STOCK" shall mean the Company's $.01 par value common
stock, any security into which such common stock shall have been
changed or any security resulting from reclassification of such
common stock.
(f) "COMPANY" shall mean Marine Bancshares, Inc., a Florida
corporation, and its successors and assigns.
(g) "EXERCISE DATE" shall mean the date on which the Company shall
have received from the Holder all deliveries required by Section
3 of this Warrant.
(h) "FAIR MARKET VALUE" shall mean the price, as determined by a
written appraisal prepared by an appraiser acceptable to the
Company, that would be paid by the most likely hypothetical
buyer in a single transaction, for 100% of the equity capital of
the Company on a going-concern basis. The Company shall pay for
the cost of any such appraisal.
(i) "INITIAL PUBLIC OFFERING" shall mean the initial public offering
of Common Stock by the Company, pursuant to an effective
registration statement on Form SB-2 filed with the United States
Securities and Exchange Commission under the Securities Act of
1933, as amended, which initial public offering is anticipated
to occur and close no later than December 31, 1998.
Section 2. EXERCISE PRICE; TERMINATION. Subject to the adjustments
provided for herein, the exercise price per share of Common Stock issuable
pursuant to this Warrant (the "Exercise Price") shall be equal to $10.00. In the
event that the Company does not close the Initial Public Offering on or before
5:00 p.m., Atlanta, Georgia local time, on December 31, 1998, then this Warrant
and all rights hereunder shall immediately terminate, shall become null and void
and shall be of no further force or effect.
2
<PAGE>
MARINE BANCSHARES, INC.
STOCK PURCHASE WARRANT
DATED ___________, 1999
Page 3
Section 3. EXERCISE OF WARRANT. The Holder of this Warrant may, at any
time on or after the Commencement Date but prior to the Termination Date,
exercise this Warrant in whole at any time or in part from time to time for the
number of shares which such Holder is then entitled to purchase hereunder.
The Holder may exercise its rights under this Warrant only as follows:
(i) no part of the Warrant may be exercised prior to the
Commencement Date;
(ii) beginning on the first anniversary of the Commencement Date, the
Warrant may be exercised with respect to a maximum of _______ of
the shares of Common Stock subject to this Warrant;
(iii) beginning on the second anniversary of the Commencement Date,
this Warrant may be exercised with respect to an additional
______ of the shares of Common Stock subject to this Warrant;
and
(iv) beginning on the third anniversary of the Commencement Date,
this Warrant may be exercised with respect to an additional
______ of the shares of Common Stock subject to this Warrant.
The Holder may exercise this Warrant, in whole or in part, by
delivering to the Company at its offices maintained pursuant to Section 4 for
such purpose (i) a written notice of such Holder's election to exercise this
Warrant, which notice shall specify the number of shares to be purchased, (ii)
this Warrant, and (iii) a sum equal to the Exercise Price therefor in cash (U.S.
dollars) or by certified or cashier's check.
Such notice shall be substantially in the form of, and shall be subject
to the requirements set forth in, the Election to Subscribe attached as Exhibit
A hereto. Upon delivery thereof, the Company shall, as promptly as practicable
and in any event within ten (10) business days thereafter, cause to be executed
and sent to such Holder a certificate or certificates representing the aggregate
number of shares of Common Stock issuable upon such exercise.
The certificate or certificates for shares of Common Stock so delivered
shall be in such denominations as may be specified in said notice and shall be
registered in the name of such Holder or such other name or names as shall be
designated in said notice. Such certificate or certificates shall be deemed to
have been issued and the person designated to be named in such certificate shall
be deemed to have become a holder of record of such shares, and to have become
entitled, to the extent permitted by law, to the right to vote such shares or to
consent or receive notice as a stockholder, as of the Exercise Date. If this
Warrant shall have been exercised only in part, the Company shall, at the time
of delivery of said certificate or certificates, deliver to such Holder a new
warrant dated the date it is issued, evidencing the rights of such Holder to
purchase the remaining shares of Common Stock issuable pursuant to this Warrant,
which new warrant shall in all other respects be identical with this Warrant,
or, at the request of such Holder, appropriate notation may be made on this
Warrant and the Warrant returned to such Holder.
3
<PAGE>
MARINE BANCSHARES, INC.
STOCK PURCHASE WARRANT
DATED ___________, 1999
Page 4
The Company shall pay all expenses, transfer taxes and other charges
payable in connection with the preparation, issuance and delivery of stock
certificates under this Section 3, except that, in the event such stock
certificates are to be registered in a name or names other than the name of the
Holder, funds sufficient to pay all stock transfer and any other applicable
taxes payable upon the issuance of such certificates shall be paid by the Holder
not later than the Exercise Date.
Section 4. WARRANT REGISTRATION. At all times while any portion of this
Warrant remains outstanding and exercisable the Company shall keep and maintain
at its principal offices a register in which the ownership and any exchange of
this Warrant shall be recorded. The Company shall not at any time, except upon
the dissolution, liquidation or winding up of the Company, close such register
so as to result in the prevention or delay of the proper exercise of this
Warrant.
Section 5. TRANSFERABILITY. This Warrant and all rights hereunder shall
not be transferable by the Holder except by operation of law. The Company may
deem and treat the registered Holder as the absolute owner of this Warrant for
all purposes and shall not be affected by any notice to the contrary.
Section 6. EXCHANGE. This Warrant is exchangeable, upon the surrender
hereof by the Holder at the offices of the Company, for a new warrant or
warrants, in such denominations as Holder shall designate at the time of
surrender for exchange, of like tenor and date, representing in the aggregate
the right to subscribe for and purchase the number of shares which may be
subscribed for and purchased hereunder, each of such new warrants to represent
the right to subscribe for and purchase not less than _____ shares of Common
Stock (except to the extent necessary to reflect the balance of the number of
shares purchasable hereunder).
Section 7. REPRESENTATIONS AND COVENANTS OF ISSUER.
(a) The Company hereby represents to the Holder as follows:
(i) The Company is a corporation duly organized and validly
existing and in good standing under the laws of the State
of Florida.
(ii) The Company has the corporate power and authority to
execute and deliver this Warrant and to perform the terms
hereof, including the issuance of shares of Common Stock
issuable upon exercise hereof. The Company has taken all
action necessary to authorize the execution, delivery and
performance of this Warrant and the issuance of the shares
of Common Stock issuable upon exercise hereof. This
Warrant has been duly authorized and executed by the
Company and constitutes the legal, valid and binding
obligation of the Company, enforceable against the Company
in accordance with its terms, except as such enforcement
may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws or equitable principles
relating to or limiting creditors' rights generally.
4
<PAGE>
MARINE BANCSHARES, INC.
STOCK PURCHASE WARRANT
DATED ___________, 1999
Page 5
(b) The Company covenants and agrees that all shares of Common Stock
which may be issued upon the exercise of this Warrant will, upon
issuance, be fully paid and nonassessable and free from all
taxes, liens and charges (other than taxes in respect of any
transfer occurring contemporaneously with such issuance).
Section 8. ADJUSTMENTS TO EXERCISE PRICE AND NUMBER OF SHARES
PURCHASABLE. The Exercise Price and number of shares of Common Stock purchasable
pursuant to this Warrant shall be subject to adjustment from time to time as
follows:
(a) In the event the Company shall at any time exchange, as a whole,
by subdivision or combination in any manner or by the making of
a stock dividend, the number of shares of Common Stock then
outstanding into a different number of shares, with or without
par value, then thereafter the number of shares of Common Stock
which the Holder shall be entitled to purchase pursuant to this
Warrant (calculated immediately prior to such change), shall be
increased or decreased, as the case may be, in direct proportion
to the increase or decrease in the number of shares of
outstanding Common Stock of the Company by reason of such
change, and the Exercise Price after such change shall, in the
event of an increase in the number of shares of Common Stock
outstanding, be proportionately reduced, and, in the event of a
decrease in the number of shares of Common Stock outstanding, be
proportionately increased.
(b) In the event of any reclassification or change of outstanding
shares of Common Stock (other than a change in par value, or
from par value to no par value, or from no par value to par
value, or as a result of a subdivision, combination or stock
dividend as provided for in Section 8(a)), or in the event of
any consolidation of the Company with, or merger of the Company
into, another corporation, or in the event of any sale of all or
substantially all of the property, assets, business and goodwill
of the Company, the Company, or such successor or purchasing
corporation, as the case may be, shall provide that the Holder
of this Warrant shall thereafter be entitled to purchase, by
exercise of this Warrant, the kind and amount of shares of stock
and other securities and property receivable upon such
reclassification, change, consolidation, merger or sale by a
holder of the number of shares of Common Stock which this
Warrant entitles the Holder to purchase immediately prior to
such reclassification, change, consolidation, merger or sale.
Any such successor corporation thereafter shall be substituted
for the Company for purposes of this Warrant.
5
<PAGE>
MARINE BANCSHARES, INC.
STOCK PURCHASE WARRANT
DATED ___________, 1999
Page 6
Section 9. HOLDER'S RIGHTS. Except as otherwise expressly set forth
herein, this Warrant shall not entitle the Holder to any rights of a stockholder
of the Company, except that if the Company, during the period in which this
Warrant is exercisable, declares a dividend upon the Common Stock payable
otherwise than in cash out of earnings or earned surplus (computed in accordance
with generally accepted accounting principles) or otherwise than in Common Stock
or securities convertible into Common Stock, then the Holder, upon exercise of
this Warrant, shall receive the number of shares of Common Stock purchasable
upon such exercise and, in addition and without further payment, the cash, stock
or other securities or property which the Holder would have received by way of
dividends or other distribution if, continuously since the date hereof, such
Holder (a) had been the record holder of the number of shares of Common Stock
then being purchased, and (b) had retained all such cash, stock and other
securities (other than Common Stock or securities convertible into Common Stock)
and/or other property payable in respect of such Common Stock or in respect of
any stock or securities paid as dividends and originating directly or indirectly
from such Common Stock.
Section 10. NOTICES. If there shall be any adjustment as provided in
Section 8 hereof, or if securities or property other than shares of Common Stock
of the Company shall become purchasable in lieu of shares of Common Stock upon
exercise of this Warrant, the Company shall forthwith cause written notice
thereof to be sent by registered mail, postage prepaid, to the registered Holder
of this Warrant at the address of such Holder shown on the books of the Company,
which notice shall be accompanied by an explanation setting forth in reasonable
detail the basis for the Holder=s becoming entitled to purchase such shares and
the number of shares which may be purchased and the exercise price thereof, or
the facts requiring any such adjustment and the exercise price and number of
shares purchasable subsequent to such adjustment, or the kind and amount of any
such securities or property so purchasable upon the exercise of this Warrant, as
the case may be. At the request of the Holder and upon surrender of this
Warrant, the Company shall reissue this Warrant in a form conforming to such
adjustments.
Section 11. CASH IN LIEU OF FRACTIONAL SHARES. The Company shall not be
required to issue fractional shares upon the exercise of this Warrant. If, by
reason of any change made pursuant to Sections 8 or 9 hereof, the Holder of this
Warrant would be entitled, upon the exercise of any rights evidenced hereby, to
receive a fractional share, the Company shall, upon such exercise, pay to the
Holder an amount in cash equal to the Average Market Value of such fractional
interest, determined as of the Exercise Date.
Section 12. FORFEITURE. If at any time while this Warrant is
outstanding, the Board of Governors of the Federal Reserve System makes a formal
capital call upon the Company or the Comptroller of the Currency makes a formal
capital call upon the Bank, the Holder will exercise this Warrant in whole or in
part as may be needed for additional required capital, or the Warrant shall be
forfeited. The number of shares of Common Stock as to which the Warrant shall be
exercised by each Holder to meet the capital call will be calculated pro rata on
the basis of the number of shares of Common Stock subject to a Warrant held by
each Holder. The exercise price for shares of Common Stock purchased upon such
exercise will be equal to the greater of the Exercise Price determined pursuant
to Section 2 hereof and the then-current book value per share of Common Stock of
the Company. Any portion of this Warrant not required to be exercised under the
terms of any such capital call may be exercised under the original terms of this
Warrant.
6
<PAGE>
MARINE BANCSHARES, INC.
STOCK PURCHASE WARRANT
DATED ___________, 1999
Page 7
Section 13. LOST, STOLEN, MUTILATED, OR DESTROYED WARRANTS. If this
Warrant shall become lost, stolen, mutilated, or destroyed, the Company shall,
on such terms as to indemnity or otherwise as it may in its reasonable
discretion impose upon the registered Holder hereof (as shown on the register of
Warrants maintained by the Company), issue a new warrant of like denomination,
tenor, and date as the Warrant so lost, stolen, mutilated, or destroyed.
Section 14. LIMITATION OF LIABILITY. No provision hereof, in the
absence of affirmative action by the Holder hereof to purchase shares of Common
Stock, and no enumeration herein of the rights or privileges of the Holder,
shall give rise to any liability of such Holder for the purchase price of the
shares or as a stockholder of the Company, whether such liability is asserted by
the Company or by creditors of the Company.
Section 15. APPLICABLE LAW. The validity, interpretation, and
performance of this Warrant shall be governed by the laws of the State of
Florida.
Section 16. SUCCESSORS AND ASSIGNS. This Warrant and the rights
evidenced hereby shall inure to the benefit of and be binding upon the
successors and permitted assigns of the Company and the Holder hereof.
Section 17. HEADINGS. Headings of the paragraphs in this Warrant
are for convenience of reference only and shall not, for any purpose, be deemed
a part of this Warrant.
7
<PAGE>
MARINE BANCSHARES, INC.
STOCK PURCHASE WARRANT
DATED ___________, 1999
Page 8
IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed this ___ day of ________, 1999, by its duly authorized officers.
MARINE BANCSHARES, INC.
By:
----------------------------------
Name:
Title:
ATTEST:
- --------------------------
Name:
Title:
8
<PAGE>
EXHIBIT A
[Subscription Form to Be Executed Upon Exercise of Warrant]
ELECTION TO SUBSCRIBE
The undersigned registered holder or permitted assignee of such
registered holder of the within Warrant hereby (1) subscribes for ______ Shares
which the undersigned is entitled to purchase under the terms of the within
Warrant, (2) makes the full cash payment therefor called for by the within
Warrant, and (3) directs that the shares issuable upon exercise of said Warrant
be issued as follows:
--------------------------------
(Name)
--------------------------------
(Address)
Signature
----------------------
Dated
-----------------------
NOTICE: The signature on this subscription form must correspond with the name as
written upon the face of the within Warrant in every particular, without
alteration or enlargement, or any change whatsoever, and must be guaranteed by a
bank, other than a savings bank or trust company, or by a firm having membership
on a registered national securities exchange.
EXHIBIT 23.2
CONSENT OF HILL, BARTH & KING, INC., INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
the Registration Statement on Amendment No. 3 to Form SB-2 and related
Prospectus of Marine Bancshares, Inc., formerly known as Coastal Bank
Corporation, for the registration of 1,150,000 shares of its common stock and to
the incorporation therein of our report dated November 3, 1998, except for Note
G, as to which the date is January 27, 1999 relating to the financial statements
of Marine Bancshares, Inc. as of September 30, 1998 and for the period from
January 23, 1997 (date of inception) to September 30, 1998.
/s/ HILL, BARTH & KING, INC.
Certified Public Accountants
Naples, Florida
January 27, 1999
