<PAGE> 1
As filed with the Securities and Exchange Commission on April 16, 1998.
Registration No. 333-41545
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------
AMENDMENT NO. 3 TO THE
FORM SB-2
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
----------------------------
SOUTHEAST COMMERCE HOLDING COMPANY
(Exact name of registrant as specified in its charter)
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Georgia 6021 58-2349097
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
100 Galleria Parkway, Suite 400
Atlanta, Georgia 30339
(770) 956-4034
(Address, including zip code, and telephone
number, including area code, of registrant's principal
executive office and place of business)
----------------------------
Richard A. Parlontieri
Chief Executive Officer
100 Galleria Parkway, Suite 400
Atlanta, Georgia 30339
(770) 956-4034
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
----------------------------
Copies of all communications, including copies of all communications
sent to agent for service, should be sent to:
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Neil E. Grayson, Esq. Andrew J. Federico, Esq.
Nelson Mullins Riley & Scarborough, L.L.P. Carlile Patchen & Murphy, LLP
999 Peachtree Street, N.E., Suite 1400 366 East Broad Street
Atlanta, Georgia 30309 Columbus, Ohio 43215
(404) 817-6000 (614) 228-6135
(404) 817-6225 (Fax) (614) 221-0216 (Fax)
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] 33-_________________
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. [ ] 33-_________________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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=================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PRICE PER SHARE AGGREGATE PRICE(1) REGISTRATION FEE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value 1,500,000 $ 10.00 $15,000,000 $4,425(2)
----------------------------------------------------------------------------------
Warrants .................... 1,500,000 $ 0 $ 0 $ 0
=================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(a) under the Securities Act of 1933. The registrant
hereby amends this Registration Statement on such date or dates as may be
necessary to delay its effective date until the registrant shall file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to such Section
8(a), may determine.
(2) Previously paid.
===============================================================================
<PAGE> 2
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 LAWS OF ANY SUCH STATE.
Subject to Completion, Dated April __, 1998
PROSPECTUS
SOUTHEAST COMMERCE HOLDING COMPANY
A Proposed Holding Company For
Commerce Bank
1,384,998 Shares Of Common Stock
and
115,002 Units, Each Consisting Of One Share Of Common Stock
And One Warrant To Purchase A Share Of Common Stock
-------------------------------
This Prospectus relates to the offer of a minimum of 600,000 and a
maximum of 1,500,000 shares of common stock, par value $.01 per share (the
"Common Stock"), to be issued by Southeast Commerce Holding Company, a Georgia
corporation (the "Company"), which has been organized to own all of the capital
stock of Commerce Bank (the "Bank"). For each $10 purchase in the offering, each
investor who is not an Organizer (as defined on page 4) of the Bank will receive
one share of Common Stock. However, in recognition of the financial risks they
have undertaken in organizing the Bank, for each $10 purchase each Organizer
will receive a unit consisting of one share of Common Stock and one warrant to
purchase an additional share of Common Stock (the "Units"). See "Management -
Stock Warrants." The Organizers intend to purchase at least 115,002 shares of
Common Stock in the offering. Therefore, the Company is offering up to 1,384,998
shares of Common Stock to non-Organizers and 115,002 Units to Organizers.
However, the Organizers have reserved the right to purchase additional shares in
the offering, including up to 100% of the shares offered hereunder if necessary
to complete the offering, and each share purchased by an Organizer will be
accompanied by a warrant for an additional share (subject to regulatory
approval).
Sale of the Common Stock will commence on or about ___________. This is
a "best efforts" offering by the Company, and it will be terminated by the
Organizers upon the sale of 1,500,000 shares or May 15, 1998, whichever occurs
first, unless the offering is extended, at the discretion of the Company, for
additional periods ending no later than March 31, 1999. However, the Organizers
reserve the right to terminate the offering at any time after the sale of the
minimum offering of 600,000 shares. Subscriptions are binding on subscribers and
may not be revoked by subscribers without the consent of the Company.
INVESTMENT IN THESE SECURITIES INVOLVES SIGNIFICANT RISK AND INVESTORS
SHOULD NOT INVEST ANY FUNDS IN THIS OFFERING UNLESS THEY CAN AFFORD TO LOSE
THEIR ENTIRE INVESTMENT. SEE "RISK FACTORS" BEGINNING ON PAGE 6 OF THIS
PROSPECTUS FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY
PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED HEREBY.
--------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT DEPOSITS OR SAVINGS
ACCOUNTS OR SAVINGS DEPOSITS AND ARE NOT INSURED OR GUARANTEED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
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========================================================================================================
Underwriting Discounts Proceeds to the
Price to Public(1) and Commissions (2) Company(3)
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<S> <C> <C> <C>
Per Share ........................ $ 10.00 $ 0.65 $ 9.35
- --------------------------------------------------------------------------------------------------------
Per Unit (4) ..................... $ 10.00 $ 0.00 $ 10.00
========================================================================================================
Total (Minimum) .................. $ 6,000,000 $315,249 $ 5,684,751
(Maximum) .................. $15,000,000 $900,249 $14,099,751
========================================================================================================
</TABLE>
(1) - (4) See footnotes on the inside front cover page.
-------------------------------
BANC STOCK FINANCIAL SERVICES, INC.
The date of this Prospectus is ___________, 1998.
<PAGE> 3
Footnotes to the cover page:
(1) The offering price has been arbitrarily established by the Company. See
"Risk Factors -- Offering Price."
(2) The offering will be made on a best-efforts basis by Banc Stock
Financial Services, Inc. as Sales Agent. The Sales Agent's commission
will be 5.5% with respect to shares sold in the offering to certain
investors identified by the Organizers and 6.5% with respect to other
shares sold in the offering, except that the Sales Agent will not
receive any commission on shares to be purchased in the offering by the
Organizers. The Organizers currently contemplate purchasing at least
115,002 shares in the offering. The commissions described above reflect
the payment of a 6.5% commission on all sales other than the 115,002
shares expected to be purchased by the Organizers. The Company has
agreed to indemnify the Sales Agent against certain civil liabilities,
including liabilities under the Securities Act of 1933. See "The
Offering."
(3) Before deducting expenses related to this offering, estimated to be
approximately $125,000. See "Use of Proceeds -- By the Company."
(4) In recognition of the financial risks they have undertaken in
organizing the Bank, for each $10 purchase in the offering each
Organizer will receive a Unit consisting of one share of Common Stock
and one warrant to purchase an additional share of Common Stock. The
Warrants will be represented by warrant agreements entered into with
each organizer. See "Management - Stock Warrants." The Organizers
intend to purchase at least 115,002 shares of Common Stock in the
offering.
Prospective investors should carefully review the Prospectus before
subscribing for shares. Subscribers must represent in the Subscription Agreement
that they have received a copy of this Prospectus. See "The Offering -- How to
Subscribe." The Company has established a minimum subscription of 100 shares and
a maximum subscription by any subscriber of 5% of the total number of shares
sold in the offering. However, the Organizers reserve the right to waive these
limits without notifying any subscriber. Proceeds of the offering will be
deposited in an escrow account at The Bankers Bank, as escrow agent, pending
receipt of subscriptions and subscription proceeds for a minimum of 600,000
shares and satisfaction of certain other conditions of the offering. Any
subscription proceeds accepted after satisfaction of the conditions set forth
above but before termination of this offering will not be deposited in escrow
but will be available for immediate use by the Company to fund offering and
organizational expenses and for working capital. See "The Offering -- Conditions
of the Offering and Release of Funds."
REPORTS TO SHAREHOLDERS
The Company is not a reporting company as defined by the Securities and
Exchange Commission (the "SEC"). The Company will furnish its shareholders with
annual reports containing audited financial information for each fiscal year and
will distribute quarterly reports for the first three quarters of each fiscal
year containing unaudited summary financial information. The Company's fiscal
year ends on December 31.
ADDITIONAL INFORMATION
The Company has filed with the SEC a Registration Statement under the
Securities Act of 1933 with respect to the Common Stock offered hereby. This
Prospectus does not contain all of the information set forth in the Registration
Statement. For further information with respect to the Company and the Common
Stock, please see the Registration Statement and the exhibits thereto. The
Registration Statement may be examined at, and copies of the Registration
Statement may be obtained at prescribed rates from, the Public Reference Section
of the Commission, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549.
The SEC also maintains a Web site (http://www.sec.gov) that contains reports,
proxy and information statements and other information regarding registrants,
such as the Company, that file electronically with the Commission.
The Company and the Organizers have filed or will file various
applications with the Office of Thrift Supervision. Prospective investors should
rely only on information contained in this Prospectus and in the Company's
related Registration Statement in making an investment decision. To the extent
that other available information not presented in this Prospectus, including
information available from the Company and information in public files and
records maintained by the Office of Thrift Supervision, is inconsistent with
information presented in this Prospectus, such other information is superseded
by the information presented in this Prospectus. Projections appearing in the
applications were based on assumptions that the Organizers believed were
reasonable, but as to which no assurances can be made. The Company specifically
disaffirms those projections for purposes of this Prospectus and cautions
prospective investors against placing reliance on them for purposes of making an
investment decision.
2
<PAGE> 4
SUMMARY
The following summary is qualified in its entirety by the more detailed
information contained elsewhere in this Prospectus.
- -------------------------------------------------------------------------------
THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT DEPOSITS OR SAVINGS ACCOUNTS
OR SAVINGS DEPOSITS AND ARE NOT INSURED OR GUARANTEED BY THE FDIC OR ANY OTHER
GOVERNMENTAL AGENCY.
- -------------------------------------------------------------------------------
OVERVIEW
Southeast Commerce Holding Company, a Georgia corporation (the
"Company"), was incorporated primarily to hold all of the capital stock of its
proposed federal savings bank subsidiary, Commerce Bank (the "Bank"). The
Company will initially engage only in the business of owning and managing the
Bank, and the Bank will focus its core business on first and second residential
mortgages, home equity loans, refinancing, consumer loans, commercial loans,
private banking and SBA lending. Neither the Company nor the Bank has any
history of operations, nor will they commence any business until after the
offering is completed. In addition, the Company may not acquire the capital
stock of the Bank without the prior approval of the Office of Thrift Supervision
(the "OTS").
The thrift charter will allow the Bank to operate in all fifty states
and to branch into any county in the state of Georgia. The thrift charter will
also give the Company more flexibility to pursue strategic opportunities to grow
its customer base and to create cross-selling opportunities to those same
customers. The Company intends eventually to build a multi-site financial
services institution that focuses its core business on community banking as it
relates to real estate and other related areas of commerce. These businesses may
include, but will not be limited to, a residential mortgage company, a wholesale
mortgage company, a small loan finance company, and a property/ casualty
insurance company.
The Company intends to use state-of-the-art technology to offer
electronic banking services and products and provide better service to its
customers. The Bank's operating strategies will be based on its philosophy of
Better People, Better Service, Better Bankingsm.
THE BANK
The Organizers (as defined below) filed an application with the OTS in
October 1997 to charter the Bank as a federal savings bank. The Organizers
expect to obtain preliminary approval of the Bank's application for a charter in
April 1998. The issuance of a charter will depend, among other things, upon
compliance with certain legal requirements that may be imposed by the OTS,
including capitalization of the Bank with at least a specified minimum amount of
capital, which the Organizers believe will be $5,250,000. Additionally, the
Company must obtain the approval of the OTS to become a unitary thrift holding
company before acquiring the capital stock of the Bank.
As a federally chartered savings association, the Bank will have
general authority to originate and purchase loans secured by real estate,
secured or unsecured loans for commercial, corporate, business, or agricultural
purposes, and loans for personal, family, or household purposes. The Bank will
initially emphasize retail banking, home mortgages, real estate development, and
consumer lending needs. The Bank will not be permitted to make non-real estate
commercial purpose loans that exceed 20% of its assets or non-real estate
consumer purpose loans that exceed 35% of its assets. The Bank expects initially
to limit its lending activities primarily to Cobb County, Georgia, and the
surrounding areas.
The principal executive offices of both the Company and the Bank will
initially be located at 100 Galleria Parkway, Suite 400, Atlanta, Georgia 30339.
The Company's telephone number is (770) 956-4034.
The Bank's initial office will be located at Paces Summit, located in
historic Vinings, Georgia. Richard A. Parlontieri will be the Chairman and Chief
Executive Officer of the Company, and Louis J. Douglass, III will
3
<PAGE> 5
be the President and Chief Executive Officer of the Bank. Mr. Douglass has over
30 years of banking experience, most of which was acquired with community banks
and regional banks serving the Atlanta and North Georgia markets. See
"Management." The Organizers presently are engaged in completing the tasks
necessary to open the Bank by the June 1998, although no assurances can be given
that the Bank will open for business or that the projected opening date can be
achieved.
THE ORGANIZERS
The organizers of the Company and the Bank (the "Organizers") are Gary
M. Bremer, Richard C. Carter, Louis J. Douglass, III, Terry L. Ferrero, Stephen
R. Gross, G. Webb Howell, Richard A. Parlontieri, Frank E. Perisino, and Donnie
Russell. Additional individuals may be added as Organizers, subject to
regulatory approval. All of the Organizers except Mr. Gross will serve as
directors of the Company and the Bank.
The Organizers (together with members of their immediate families)
intend to purchase an aggregate of at least 115,002 shares of the Common Stock
to be sold in this offering, equal to 19.2% of the minimum number of shares
offered hereby and 7.7% of the maximum number of shares offered hereby, at a
purchase price of $10 per share. In recognition of the financial risks they have
undertaken in organizing the Bank, for each share of Common Stock an Organizer
purchases in the offering (directly or indirectly, such as through an IRA
account or through a spouse's or a child's name), the Organizer will also
receive a warrant to purchase an additional share of Common Stock, subject to
regulatory approval. In other words, for each $10 purchase in the offering, an
Organizer will receive a Unit consisting of one share of Common Stock and a
warrant to purchase an additional share of Common Stock (in contrast, for each
$10 purchase in the offering, each investor who is not an Organizer will receive
one share of Common Stock).
The warrants, which will be represented by separate warrant agreements,
will become exercisable on the later of the date the Bank opens for business or
one year from the date of this prospectus and will be exercisable during the
ten-year period following that date, at an exercise price equal to $10.00 per
share. See "Management - Stock Warrants." The warrants and shares issued
pursuant to the exercise of such warrants will be transferable, subject to
compliance with applicable securities laws applicable to affiliates. See
"Capital Stock--Shares Eligible for Future Sale."
Although there is no formal agreement to do so, the Organizers intend
to purchase at least 115,002 shares of Common Stock in the offering. However,
the Organizers have reserved the right to purchase additional shares in the
offering, including up to 100% of the shares offered hereunder (subject to
obtaining regulatory approval) if necessary to complete the offering, and some
Organizers may decide to purchase additional shares even if the minimum
subscription amount has been achieved. Each share purchased by an Organizer will
be accompanied by a warrant for an additional share, subject to regulatory
approval. Any shares purchased by the Organizers in excess of their original
commitment will be purchased for investment and not with a view to the resale of
such shares.
Because purchases by the Organizers may be substantial, investors
should not place any reliance on the sale of a specified minimum offering amount
as an indication of the merits of this offering or that an Organizer's
investment decision is shared by unaffiliated investors. See "The Offering" and
"Management."
THE OFFERING
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Securities Offered....... 1,384,998 shares of Common Stock of the Company, par value $.01 per share
115,002 Units, consisting of one share of Common Stock and one Warrant to
purchase an additional share of Common Stock
Offering Price........... $10.00 per share to investors other than Organizers
$10.00 per Unit to Organizers
Use of Proceeds.......... The Company will use 75% of the net proceeds of the offering (subject to a
minimum of $5,250,000) to capitalize the Bank through the purchase of all of
</TABLE>
4
<PAGE> 6
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the capital stock of the Bank, subject to regulatory approval; to pay
organizational expenses of the Company and the expenses of this offering,
estimated to be approximately $200,000; and to provide working capital. The
Company plans to retain all remaining sums at the Company and initially invest
the sums in United States government securities or as a deposit at the Bank.
The Company may be required by the OTS to capitalize the Bank at a level in
excess of the minimum of $5,250,000, in which case the Company would have to
receive additional net proceeds in the offering or obtain additional capital
from another source. The Company has not sought any other source from which
to obtain this capital, and there can be no assurances the Company would be
able to do so.
IF THE CONDITIONS FOR RELEASING SUBSCRIPTION FUNDS FROM ESCROW ARE MET AND SUCH
FUNDS ARE RELEASED BUT FINAL REGULATORY APPROVAL TO COMMENCE BANKING OPERATIONS
IS NOT OBTAINED FROM THE OTS OR THE BANK DOES NOT OPEN FOR ANY OTHER REASON, IT
IS POSSIBLE THAT SUBSCRIBERS COULD BE RETURNED AN AMOUNT LESS THAN THEIR
ORIGINAL INVESTMENT. See "Risk Factors -- Return of Less Than Subscription
Amount." The Bank will use the $5,250,000 received from the sale of its stock
to the Company to pay organizational and pre-opening expenses of the Bank; to
renovate and furnish the Bank's offices; and to provide working capital to be
used for business purposes, including paying officers' and employees' salaries
and making loans and investments. See "Use of Proceeds."
Conditions to
Offering............... This offering will be terminated and all subscription funds (without interest,
except to residents of certain states, as described in "The Offering") will be
returned promptly to subscribers unless on or before May 15, 1998 (or such
later date if the offering is extended by the Company for additional periods
not to extend beyond March 31, 1999), (i) the Company has accepted
subscriptions and payment in full for a minimum of 600,000 shares (including
a minimum of 90,000 shares to be purchased by the Organizers): and (ii) the
Company has obtained preliminary approval of the OTS to acquire the capital
stock of the Bank and thereafter to become a unitary thrift holding company.
Subscription proceeds for shares subscribed for will be deposited promptly
in an escrow account with The Bankers Bank, as escrow agent (the "Escrow
Agent"), under the terms of an escrow agreement (the "Escrow Agreement"),
pending the satisfaction of the conditions set forth above or the termination
of the offering. Upon satisfaction of the conditions set forth above, all
subscription funds held in escrow, including any interest actually earned
thereon, shall be released to the Company for its immediate use. Any
subscription proceeds accepted after satisfaction of the conditions set forth
above but before termination of this offering will not be deposited in escrow
but will be available for immediate use by the Company to fund offering and
organizational expenses and for working capital. See "The Offering."
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5
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Plan of Distribution..... The Company has established a minimum investment by any subscriber (together
with his or her affiliates) of 100 shares and a maximum investment of 5% of
the total number of shares sold in the offering, unless the Company, in its
sole discretion, elects to waive these limits with respect to any subscriber.
Proceeds of the offering will be deposited in an escrow account at The Bankers
Bank, as escrow agent, pending receipt of subscriptions and subscription
proceeds for a minimum of 600,000 shares (including a minimum of 90,000 shares
to be purchased by the Organizers) and satisfaction of certain other conditions
of the offering. The Company has engaged Banc Stock Financial Services, Inc.
as the Company's Sales Agent to sell shares in the offering on a best-efforts
basis. The Sales Agent will receive a 5.5% commission with respect to shares
sold in the offering to certain investors identified by the Organizers (up to
250,000 shares) and 6.5% with respect to other shares sold in the offering,
except that the Sales Agent will not receive any commission on shares to be
purchased in the offering by the Organizers. The Organizers currently
contemplate purchasing at least 115,002 shares in the offering. The Company
will also pay the Sales Agent's expenses in the offering, up to a maximum of
$65,000.
</TABLE>
RISK FACTORS
An investment in the shares offered hereby involves certain risks,
including, among others, lack of an operating history, dependence on key
employees of the Bank, significant control of the Company by the Organizers,
absence of an existing market for the Common Stock and lack of assurance that an
active trading market in the Common Stock will develop, no intention to pay
dividends in the foreseeable future, and competition from a number of other
financial institutions with substantially greater financial and other resources
than the Bank will have. See "Risk Factors."
6
<PAGE> 8
RISK FACTORS
An investment in the shares offered hereby involves certain risks. A
subscription for shares should be made only after careful consideration of the
risk factors set forth below and elsewhere in this Prospectus and should be
undertaken only by persons who can afford an investment involving such risks.
THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT DEPOSITS OR SAVINGS ACCOUNTS
OR SAVINGS DEPOSITS AND ARE NOT INSURED OR GUARANTEED BY THE FDIC OR ANY OTHER
GOVERNMENTAL AGENCY.
RETURN OF LESS THAN SUBSCRIPTION AMOUNT
The amounts paid by subscribers in this offering will be held in escrow
until (i) the Company has accepted subscriptions and payment in full for a
minimum of 600,000 shares; and (ii) the Company has obtained preliminary
approval of the OTS to acquire the capital stock of the Bank and thereafter to
become a unitary thrift holding company. If these conditions are not met by May
15, 1998, or by such subsequent date, not beyond March 31, 1999, to which the
offering may be extended by the Company, all subscriptions will be returned to
subscribers promptly in full, without interest except to residents of those
states the securities commissions of which require the payment of interest
(currently expected to be California, Michigan, Ohio and Pennsylvania). See "The
Offering - Conditions to the Offering and Release of Funds." All interest earned
thereon shall be used by the Company to fund organizational expenses, except
that the Company would include with any subscriptions returned to residents of
states in which interest must be returned the actual interest earned on such
amounts while the subscriptions were held in the escrow account. If these
conditions are satisfied, the subscription amounts held in escrow may be paid to
the Company and shares issued to subscribers, and all interest earned on the
subscription proceeds will be retained by the Company. Once the Company has met
the conditions for the offering, the Escrow Agreement will be terminated and any
subscription proceeds accepted after satisfaction of the conditions set forth
above but before termination of this offering will not be deposited in escrow
but will be available for immediate use by the Company to fund offering and
organizational expenses and for working capital. When subscription amounts are
received by the Company, the Company will use a portion of the proceeds to repay
the Organizers the amounts advanced by them for organizational and offering
expenses. The Company will then fund future expenses out of the subscription
amounts received.
Even after release of subscription funds from escrow, there can be no
assurance that the Bank will open for business. If the conditions for releasing
subscription funds from escrow are met and such funds are released but final
regulatory approval to commence banking operations is not obtained from the OTS
or the Bank does not open for any other reason, the Company's board of directors
intends to propose that the shareholders approve a plan to liquidate the
Company. Upon such a liquidation, the Company would be dissolved and the
Company's net assets (generally consisting of the amounts received in this
offering plus any interest earned thereon, less the amount of all costs and
expenses incurred by the Company and the Bank, including the salaries of
employees of the Bank and other pre-opening expenses) would be distributed to
the shareholders, provided that, in this event, no distributions would be made
to the Organizers until shareholders other than the Organizers have received an
amount equal to their initial investment in the Company.
NEW ENTERPRISE
The Company and the Bank currently are in the organizational stage, and
neither has any operating history. As a consequence, prospective purchasers of
the shares have limited information on which to base an investment decision. As
a holding company, the Company's profitability will depend upon the Bank's
operations. The Bank's proposed operations are subject to the risks inherent in
the establishment of any new business and, specifically, of a new bank. The
Company expects that the Bank will incur substantial initial expenses and may
not be profitable for several years after commencing business, if ever.
Shareholders are likely to experience dilution in the book value of the Common
Stock due to operating losses expected to be incurred during the initial years
of the Bank's operations.
7
<PAGE> 9
DEPENDENCE ON KEY EMPLOYEES
As a new enterprise, the Company and the Bank will be materially
dependent on the performances of Richard A. Parlontieri, who will be the
Chairman and Chief Executive Officer of the Company, and Louis J. Douglass, III,
who will be the President and Chief Executive Officer of the Bank. The loss of
the services of Mr. Parlontieri and Mr. Douglass or their failure to perform
their management functions in the manner anticipated by the Organizers could
have a material adverse effect on the Company and the Bank. The Company has
entered into a letter of employment with Mr. Douglass. See "Management --
Employment Agreements."
CONTROL OF THE COMPANY; PURCHASES BY ORGANIZERS
The Organizers, all of whom (other than Mr. Gross) will serve as
directors of the Company and the Bank, and members of their immediate families
intend to purchase an aggregate of at least 115,002 shares, equal to 19.2% of
the minimum number of shares offered hereby and 7.7% of the maximum number of
shares offered hereby, at a purchase price of $10.00 per share. In recognition
of the financial risks they have undertaken in organizing the Bank, for each
share of Common Stock an Organizer purchases (directly or indirectly) in the
offering, the Organizer will also receive a warrant to purchase an additional
share of Common Stock. In other words, for each $10 purchase in the offering, an
Organizer will receive a Unit consisting of one share of Common Stock and a
warrant to purchase an additional share of Common Stock (in contrast, for each
$10 purchase in the offering, each investor who is not an Organizer will receive
one share of Common Stock). Assuming that the Organizers purchase the indicated
number of shares in this offering, and assuming all warrants issued in
conjunction with shares purchased by the Organizers are exercised, the
Organizers would own, as a group, 32.2% of the Common Stock to be outstanding
upon the completion of this offering and exercise of the warrants if the minimum
number of shares is sold and 14.2% of the Common Stock if the maximum number of
shares is sold and the warrants exercised. Organizers may purchase additional
shares in the offering and additional persons may be named as Organizers,
subject to obtaining regulatory approval. The Organizers may subscribe for up to
100% of the shares in this offering if necessary to help the Company achieve the
minimum subscription level necessary to release subscription proceeds from
escrow, and some Organizers may decide to purchase additional shares even if the
minimum subscription amount has been achieved. See "The Offering" and
"Management." As a result of the anticipated stock ownership in the Company by
the Organizers, together with the influence which may be exerted by such persons
due to their positions as directors of the Company and the Bank, the Organizers
as a group will have substantial control of the Company and the Bank following
the offering. Because purchases by the Organizers may be substantial, investors
should not place any reliance on the sale of a specified minimum offering amount
as an indication of the merits of this offering or that an Organizer's
investment decision is shared by unaffiliated investors.
The warrants to be granted to the Organizers will be exercisable at a
price of $10.00 per share for a period of ten years after this offering is
terminated. As a result, the Organizers will have the opportunity to profit from
any rise in the market value of the Common Stock or any increase in the net
worth of the Company and can be expected to exercise the warrants, if at all, at
a time when such exercise would result in the dilution of the interests of other
investors purchasing shares in this offering. Furthermore, the exercise of a
substantial number of warrants by the Organizers could adversely impact the
market value of the shares. In addition, the terms on which the Company may be
able to obtain additional capital could be adversely affected, and the holders
of the warrants could possibly exercise the warrants at a time when the Company
could obtain any needed capital by a new offering of securities on terms more
favorable to the Company than those provided for by the warrants.
See "Management -- Stock Warrants."
OFFERING PRICE
Because the Company and the Bank are in organization, the offering
price of $10.00 per share was determined by the Organizers without reference to
traditional criteria for determining stock value such as book value or
historical or projected earnings since such criteria are not applicable to
companies with no history of operations. The price per share was set to enable
the Company to raise gross proceeds of between $6,000,000 and $15,000,000 in
this offering through the sale of a reasonable number of shares, and the price
per share is
8
<PAGE> 10
essentially equivalent to the initial book value per share prior to the payment
of the Company's and the Bank's organizational expenses. No assurance is or can
be given that any of the shares could be resold for the offering price or any
other amount.
ABSENCE OF TRADING MARKET
There currently is no market for the Common Stock. The Company has
filed a registration statement with the SEC to register the issuance of the
Common Stock in the offering under the Securities Act of 1933 and intends to
make arrangements with one or more market makers to trade the Common Stock on
the OTC Bulletin Board. The Company also intends to list the Common Stock on The
Nasdaq Stock Market National Market System ("Nasdaq/NMS") or another securities
exchange as soon as it meets the requirements for such exchange, but the Common
Stock will not initially be so listed and there can be no assurance that any
trading in the over-the-counter market or through brokers or market makers will
develop. Qualification requirements for the Nasdaq/NMS currently include: (i)
net tangible assets of $6,000,000, pre-tax income of $1,000,000, and 1,100,000
publicly-held shares with a market value of $8,000,000 held by 400 shareholders,
or (ii) net tangible assets of $18,000,000, two years of operating history, and
1,100,000 publicly-held shares with a market value of $18,000,000 held by 400
shareholders, or (iii) $75,000,000 of market capitalization and 1,100,000
publicly-held shares with a market value of $20,000,000 held by 400
shareholders. The Company does not expect to meet these listing requirements
within the first three years following the offering. There can be no assurance
that the Company will ever qualify for listing on Nasdaq/NMS or another
securities exchange. Additionally, even if qualified, future events may cause
the Company to elect not to seek listing on Nasdaq/NMS or another securities
exchange. As a result, an investment in the Common Stock may continue to be
relatively illiquid for the foreseeable future. Furthermore, the development of
any trading market for the shares may be adversely affected by purchases of
large amounts of shares in this offering by the Organizers because shares
purchased by the Organizers will generally not be freely tradable. As a result,
investors who may need or wish to dispose of all or part of their shares may be
unable to do so except in private, directly negotiated sales. In addition, sales
of substantial amounts of Common Stock after the offering, by the Organizers or
others, could adversely affect prevailing market prices. See "Description of
Capital Stock -- Shares Eligible for Future Sale."
COMPETITION
The banking business is highly competitive, and the Bank will encounter
strong competition from other savings institutions, as well as from commercial
banks, mortgage banking firms, consumer finance companies, securities brokerage
firms, insurance companies, money market mutual funds, and other financial
institutions operating in the Cobb County area and elsewhere. A number of these
competitors are well established in the Cobb County area. Most of them have
substantially greater resources and lending limits, as well as a lower cost of
funds, than the Bank and may offer certain services, such as extensive and
established branch networks and trust services, that the Bank either does not
expect to provide or will not provide initially. As a result of these
competitive factors, the Bank may have to pay higher rates of interest to
attract deposits. In addition, non-depository institution competitors are
generally not subject to the extensive regulations applicable to the Company and
the Bank. Recent federal legislation permits commercial banks to establish
operations nationwide, further increasing competition from out-of-state
financial institutions. See "Proposed Business -- Competition" and "Supervision
and Regulation." Although the Organizers believe that the Bank will be able to
compete effectively with these institutions, no assurances can be given in this
regard.
SUPERVISION AND REGULATION
The banking industry is heavily regulated. The success of the Company
and the Bank depends not only on competitive factors but also on state and
federal regulations affecting banks, thrifts, and their holding companies. These
regulations are primarily intended to protect depositors, not shareholders.
Regulation of the financial institutions industry is undergoing continued
changes, and the ultimate effect of such changes cannot be predicted. In
December 1991, the Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") was enacted, and FDICIA and the regulations thereunder have increased
the regulatory and supervisory requirements for financial institutions, which
has resulted and will continue to result in increased operating
9
<PAGE> 11
expenses. Legislation that would eliminate the charter for federal savings banks
and savings associations is under discussion. If such legislation is enacted,
the Bank would be required to convert its federal savings bank charter to either
a national bank charter or a state depository institution charter. Additional
statutes affecting financial institutions have been proposed and may be enacted.
Regulations now affecting the Company and the Bank may be modified at any time,
and there is no assurance that such modifications will not adversely affect the
business of the Company and the Bank. See "Supervision and Regulation."
ECONOMIC CONDITIONS
The success of the Company and the Bank will depend, to a certain
extent, upon economic and political conditions, both local and national, as well
as governmental monetary policies. Conditions such as inflation, recession,
unemployment, high interest rates, short money supply, and other factors beyond
the control of the Company and the Bank may adversely affect the Bank's deposit
levels and loan demand and, therefore, the earnings of the Bank and the Company.
Although the Organizers expect favorable economic development in the Bank's
market area, there is no assurance that favorable economic development will
occur or that the Bank's expectation of corresponding growth will be achieved.
See "Proposed Business."
DIVIDEND POLICY
The Company has no plans to pay any cash dividends to its shareholders
in the foreseeable future. Since the Company and the Bank are both start-up
operations and may incur initial losses, both the Company and the Bank intend to
retain any earnings for the period of time management believes necessary to
ensure the success of their operations. The Company will be dependent upon the
Bank for its earnings and funds to pay dividends on the Common Stock. The
payment of dividends by the Company and the Bank is also subject to legal and
regulatory restrictions. Any payment of dividends by the Company in the future
will depend on the Bank's earnings, capital requirements, financial condition,
and other factors considered relevant by the Board of Directors. See "Dividend
Policy," "Proposed Business," and "Supervision and Regulation."
LENDING LIMIT
The Bank is limited in the amount it can loan a single borrower
(including the borrower's related interests) by the amount of the Bank's
capital. These limits will increase and decrease as the Bank's capital increases
and decreases. Unless the Bank is able to sell participations in its loans to
other financial institutions, the Bank will not be able to meet all of the
lending needs of loan customers requiring aggregate extensions of credit above
these limits.
DILUTION
In recognition of the financial risks they have undertaken in
organizing the Bank, for each share of Common Stock an Organizer purchases
(directly or indirectly, such as through an IRA account or through a spouse's or
a child's name) in the offering, the Organizer will also receive a warrant to
purchase an additional share of Common Stock. In other words, for each $10
purchase in the offering, an Organizer will receive a Unit consisting of one
share of Common Stock and a warrant to purchase an additional share of Common
Stock (in contrast, for each $10 purchase in the offering, each investor who is
not an Organizer will receive one share of Common Stock). Assuming that the
Organizers purchase the indicated number of shares in this offering, and
assuming all warrants issued in conjunction with shares purchased by the
Organizers are exercised, the Organizers would own, as a group, 32.2% of the
Common Stock to be outstanding upon the completion of this offering and exercise
of the warrants if the minimum number of shares is sold and 14.2% of the Common
Stock if the maximum number of shares is sold and the warrants exercised.
After the offering, the Company expects to adopt a stock option plan
which will permit the Company to grant options to officers, directors, key
employees, advisors, and consultants of the Company. The plan will provide that
no stock options will be granted at an exercise price less than 85% of the
market value of the Common Stock on the date of the grant. The Company
anticipates that it will initially authorize the issuance of
10
<PAGE> 12
175,000 shares under the stock option plan. This plan would include the options
the Company will be obligated to issue to Mr. Douglass under the terms of his
letter of employment. Exercise of these options could have a dilutive effect on
the shareholders' interest in the Company's earnings and book value. In
addition, the Company may issue additional stock options or shares of Common
Stock or preferred stock in the future. Any such stock offering by its nature
could be dilutive to the holdings of purchasers in this offering. However, if
the number of shares issuable upon exercise of the warrants to be granted to
Organizers and the number of shares issuable upon exercise of the options to be
issued to Mr. Douglass exceed an amount equal to 15% of the number of shares
issued in the offering, then the Company will not issue any additional stock
options for a period of one year from the date of this prospectus.
ANTITAKEOVER EFFECTS
The Company has certain takeover defenses in place, including (i)
certain provisions relating to meetings of shareholders; (ii) the ability of the
Board of Directors to issue additional shares of common stock and preferred
stock authorized in the Articles of Incorporation without shareholder approval;
(iii) a staggered board of directors; and (iv) a provision in the Company's
bylaws providing that individuals affiliated with business competitors of the
Company may not qualify to serve on the Company's Board of Directors. Any of
these measures may impede the takeover of the Company without the approval of
the Company's Board of Directors. See "Description of Capital Stock - Certain
Antitakeover Effects."
RISKS ASSOCIATED WITH THE YEAR 2000
Like many financial institutions, the Company and the Bank will rely
upon computers for the daily conduct of their business and for information
systems processing. There is concern among industry experts that on January 1,
2000 computers will be unable to "read" the new year and there may be widespread
computer malfunctions. The Company and the Bank will generally rely on software
and hardware developed by independent third parties to provide the information
systems used by the Company and the Bank. The Company intends to seek assurances
about the Year 2000 compliance with respect to any third party hardware or
software system it intends to use. The Company has contracted with Phoenix
International Ltd., Inc. to use the Phoenix client-server core retail banking
system, and the Company has been advised that Phoenix believes this system is
Year 2000 compliant. The Company also believes that its other internal systems
and software and the network connections it will maintain will be adequately
programmed to address the Year 2000 issue. Based on information currently
available, management does not believe that the Company or the Bank will incur
significant costs in connection with the year 2000 issue. Nevertheless, there
can be no assurances that all hardware and software that either the Company or
the Bank uses will be Year 2000 compliant, and the Company cannot predict with
any certainty the costs the Company or the Bank will incur to respond to any
Year 2000 issues. Further, the business of many of the Bank's customers may be
negatively affected by the Year 2000 issue, and any financial difficulties
incurred by the Bank's customers in solving Year 2000 issues could negatively
affect such customer's ability to repay any loans which the Bank may have
extended. Therefore, even if the Company and the Bank do not incur significant
direct costs in connection with responding to the year 2000 issue, there can be
no assurance that the failure or delay of the Bank's customers or other third
parties in addressing the Year 2000 issue or the costs involved in such process
will not have a material adverse effect on the Bank's business, financial
condition and results of operations.
THE OFFERING
GENERAL
The Company is offering for sale a minimum of 600,000 shares and a
maximum of 1,500,000 shares of its Common Stock at a price of $10.00 per share
to raise gross proceeds of between $6,000,000 and $15,000,000 for the Company.
The minimum purchase for any investor (together with the investor's affiliates)
is 100 shares and the maximum purchase is 5% of the offering unless the Company,
in its sole discretion, accepts a subscription for a lesser or greater number of
shares.
11
<PAGE> 13
The Organizers (together with members of their immediate families)
intend to purchase an aggregate of at least 115,002 shares of the Common Stock
to be sold in this offering. The Organizers may subscribe for up to 100% of the
shares in the offering if necessary to help the Company achieve the minimum
subscription level necessary to release subscription proceeds from escrow, and
some Organizers may decide to purchase additional shares even if the minimum
subscription amount has been achieved. Any shares purchased by the Organizers in
excess of their original commitment will be purchased for investment and not
with a view to the resale of such shares. See "Description of Capital Stock of
the Company -- Shares Eligible for Future Sale." Because purchases by the
Organizers may be substantial, investors should not place any reliance on the
sale of a specified minimum offering amount as an indication of the merits of
this offering or that an Organizer's investment decision is shared by
unaffiliated investors. See "Management."
Subscriptions to purchase shares will be received until midnight,
Atlanta, Georgia time, on May 15, 1998, unless all of the shares are earlier
sold or the offering is earlier terminated or extended by the Company. See
"Conditions to the Offering and Release of Funds." The Company reserves the
right to terminate the offering at any time or to extend the expiration date for
additional periods not to extend beyond March 31, 1999. The date the offering
terminates is referred to herein as the "Expiration Date." No written notice of
an extension of the offering period need be given prior to any extension and any
such extension will not alter the binding nature of subscriptions already
accepted by the Company. Once the Company is subject to the reporting
requirements of the Securities Exchange Act of 1934 (the "Exchange Act"), it
will file quarterly reports on Form 10-Q and will make such documents available
to subscribers who request a copy. In addition, the Company intends to provide
quarterly communications to all subscribers which will include information
concerning any extensions of the offering. Extension of the Expiration Date
might cause an increase in the Company's organizational and pre-opening expenses
and in the expenses incurred with this offering. The Company intends to use a
sales agent to sell the shares. See "Plan of Distribution."
Following acceptance by the Company, subscriptions will be binding on
subscribers and may not be revoked by subscribers except with the consent of the
Company. In addition, the Company reserves the right to cancel accepted
subscriptions at any time and for any reason until the proceeds of this offering
are released from escrow (as discussed in greater detail in "Conditions to the
Offering and Release of Funds" below), and the Company reserves the right to
reject, in whole or in part and in its sole discretion, any subscription. The
Company may, in its sole discretion, allocate shares among subscribers in the
event of an oversubscription for the shares. In determining which subscriptions
to accept, in whole or in part, the Company may take into account any factors it
considers relevant, including the order in which subscriptions are received, a
subscriber's potential to do business with, or to direct customers to, the Bank,
and the Company's desire to have a broad distribution of stock ownership. If the
Company rejects any subscription, or accepts a subscription but in its
discretion subsequently elects to cancel all or part of such subscription, the
Company will refund promptly the amount remitted that corresponds to $10.00
multiplied by the number of shares as to which the subscription is rejected or
canceled. Certificates representing shares duly subscribed and paid for will be
issued by the Company promptly after the offering conditions are satisfied and
escrowed funds are delivered to the Company.
CONDITIONS TO THE OFFERING AND RELEASE OF FUNDS
Subscription proceeds accepted by the Company for the initial 600,000
shares subscribed for in this offering will be promptly deposited in an escrow
account with the Escrow Agent until the conditions to this offering have been
satisfied or the offering has been terminated. The offering will be terminated,
no shares will be issued, and no subscription proceeds will be released from
escrow to the Company, unless on or before the Expiration Date (i) the Company
has accepted subscriptions and payment in full for a minimum of 600,000 shares,
including fully-paid subscriptions from the Organizers for a minimum of 90,000
shares; and (ii) the Company has obtained approval of the OTS to acquire the
capital stock of the Bank and thereafter to become a unitary thrift holding
company. Any subscription proceeds accepted after satisfaction of the conditions
set forth above but before termination of this offering will not be deposited in
escrow but will be available for immediate use by the Company to fund offering
and organizational expenses and for working capital.
If the above conditions are not satisfied by the Expiration Date or the
offering is otherwise earlier
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<PAGE> 14
terminated, (i) accepted subscription agreements will be of no further force or
effect and subscribers in the offering will not be shareholders of the Company,
(ii) the funds held in the escrow account shall not be subject to the claims of
any creditor of the Company or available to defray the expenses of this
offering, and (iii) the full amount of all subscription funds will be returned
promptly to subscribers, without interest, except to residents of states the
securities commissions of which require the payment of interest (currently
expected to be California, Michigan, Ohio and Pennsylvania). The Company will
retain any interest earned thereon to repay the expenses incurred by the
Organizers in organizing the Company and the Bank, except that the Company would
include with any subscriptions returned to residents of states where interest is
required the actual interest earned on such amounts while the subscriptions were
held in the escrow account. Any expenses not paid with such interest will be
paid by the Organizers.
The Escrow Agent has not investigated the desirability or advisability
of an investment in the shares by prospective investors and has not approved,
endorsed, or passed upon the merits of an investment in the shares. Subscription
funds held in escrow will be invested in interest-bearing savings accounts,
short-term United States Treasury securities, FDIC-insured bank deposits, or
such other investments as the Escrow Agent and the Company shall agree. The
Organizers do not intend to invest the subscription proceeds held in escrow in
instruments that would mature after the Expiration Date of the offering.
If the above conditions are satisfied, the subscription amounts held in
escrow may be paid to the Company and shares issued to subscribers. Once the
Company has met the conditions for the offering, the Escrow Agreement will be
terminated, and any subscription proceeds accepted after satisfaction of the
conditions before termination of this offering will not be deposited in escrow
but will be available for immediate use by the Company to fund offering and
organizational expenses and for working capital. When the subscription funds are
released to the Company, the Company will use a portion of the proceeds to repay
the Organizers the amounts advanced by them for organizational and offering
expenses.
If the conditions for releasing subscription funds from escrow are met
and such funds are released but final regulatory approval to commence banking
operations is not obtained from the OTS or the Bank does not open for any other
reason, the Board of Directors intends to propose that the shareholders approve
a plan to liquidate the Company. Upon such a liquidation, the Company would be
dissolved and the Company's net assets (generally consisting of the amounts
received in this offering plus any interest earned thereon, less the amount of
all costs and expenses incurred by the Company and the Bank, including the
salaries of employees of the Bank and other pre-opening expenses) would be
distributed to the shareholders, provided that, in this event, no distributions
would be made to the Organizers until shareholders other than the Organizers
have received an amount equal to their initial investment in the Company.
PLAN OF DISTRIBUTION
The Company has entered into an Underwriting Agreement with Banc Stock
Financial Services, Inc. (the "Sales Agent"), pursuant to which the Sales Agent
has agreed, subject to the terms of the Underwriting Agreement, to offer and
sell to the public as the Company's agent a minimum of 600,000 shares of Common
Stock on a "best efforts, all or none" basis, and an additional 900,000 shares
of Common Stock on a "best efforts" basis at $10.00 per share. The Sales Agent
is required to use its best efforts through the Expiration Date to sell the
shares. The Sales Agent and the Company have agreed that: (i) with respect to
shares purchased by the Organizers (expected to aggregate 115,002 shares), no
commission will be payable by the Company to the Sales Agent, and (ii) with
respect to shares purchased by certain persons introduced to the Sales Agent by
the Company (up to 250,000 shares), the commission will be 5.5% of the aggregate
price of such shares. The Sales Agent's commission will be 6.5% on all other
shares it sells in the offering. The Sales Agent may select other dealers who
are members of the National Association of Securities Dealers, Inc. to sell
shares and who will receive a selling commission not to exceed 6.5% of the gross
offering proceeds. The Company will also pay the Sales Agent's expenses in the
offering, up to a maximum of $65,000.
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<PAGE> 15
The Sales Agent has the right to terminate the Underwriting Agreement
under certain circumstances (for example, if conditions exist in the
over-the-counter market which cause the Sales Agent to believe that no favorable
public market exists for the sale of the shares). In such event, offers and
sales may be made on behalf of the Company by certain of its officers and
directors, or the Company may engage one or more other broker/dealers to make
sales on its behalf. The Company does not currently have any other arrangements
in place. As described above, until the minimum number of shares has been sold,
all funds received by the Sales Agent or the Company in connection with the sale
of shares will be promptly transmitted to the Escrow Agent.
The Underwriting Agreement provides for reciprocal indemnification
between the Company and the Sales Agent against certain liabilities in
connection with this offering, including liabilities under the Securities Act.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted pursuant to the Underwriting Agreement, the Company has been
advised that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed by the Securities Act and
is, therefore, unenforceable. The Company has also agreed to provide the Sales
Agent with a right of first refusal to serve as a managing underwriter on any
financing or to act as an adviser on any merger or similar transaction occurring
within one year of this offering, in each case for compensation that is
reasonable and customary within the industry.
Prior to the date of the Prospectus, there has been no public market
for the shares. The initial offering price of the shares offered hereby has been
established by the Company based upon its assessment of the capital needs of the
Company and the commercial potential of the services to be offered by the
Company. The Company has had discussions with the Sales Agent regarding the
establishment and maintenance of a market for the shares after the offering.
Based upon such discussions, the Company expects that a secondary market may
eventually develop for the shares, although the Company can make no assurances
in this regard. In general, if a secondary market develops, the shares will be
freely transferable and assignable by the holder thereof(except shares held by
affiliates), and nonaffiliate shareholders may sell any number of shares in such
secondary market. See "Description of the Capital Stock of the Company - Shares
Available for Future Sale." In addition, factors such as the degree to which the
secondary market is active will determine the willingness of the market makers,
once a secondary market is established, to continue to maintain the secondary
market. The Company and its officers and directors have agreed with the Sales
Agent not to sell any shares for a period of six months after the date of this
Prospectus without the prior written consent of the Sales Agent. It is
anticipated that affiliates of the Sales Agent will purchase 10,000 shares at
the public offering price for their own accounts.
HOW TO SUBSCRIBE
Shares may be subscribed for by delivering the subscription agreement
(the "Subscription Agreement") attached hereto as Exhibit A, completed and
executed, to the Sales agent, on or prior to the Expiration Date. Subscribers
should retain a copy of the completed Subscription Agreement for their records.
The subscription price is due and payable when the Subscription Agreement is
delivered. Payment must be made in United States dollars by cash or by check,
bank draft or money order drawn to the order of The Bankers Bank, Escrow Account
for Southeast Commerce Holding Company in the amount of $10.00 multiplied by the
number of shares subscribed for.
USE OF PROCEEDS
BY THE COMPANY
Upon satisfaction of all of the conditions discussed in "The Offering -
Conditions to the Offering and Release of Funds," all subscription funds held in
escrow will be released and will become capital of the Company. The Company
expects to receive net proceeds from the sale of the shares offered hereby will
be between $5,684,751 and $14,099,751, after deducting the Sales Agent's
commission (which the Company anticipates will be $315,249 if the minimum number
of shares is sold in the offering and $900,249 if the maximum number of shares
is sold). The Company will use a portion of the offering proceeds to pay the
outstanding balance on a
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<PAGE> 16
$500,000 line of credit (the "Note") which the Company has established with The
Bankers Bank. The proceeds of the Note are being used to cover the
organizational and offering expenses of the Company and the organizational and
pre-opening expenses of the Bank (which are described in the following section)
through the date of the release of funds held in escrow. The organizational
expenses of the Company will consist primarily of legal, accounting, regulatory,
and consulting expenses, and the Company anticipates that they will not exceed
$75,000. The offering expenses of the Company will consist primarily of legal,
accounting, marketing, and printing expenses, and the Company anticipates that
they will not exceed $125,000. The Note is due on August 27, 1998 and bears
interest at adjustable prime rate, which was 8.5% as of December 31, 1997. As of
December 31, 1997, the Company had drawn $170,000 against the line of credit.
After payment of these expenses, the Company will use 75% of the net
proceeds of the offering (subject to a minimum of $5,250,000) to purchase all of
the capital stock of the Bank. The Company will retain the balance of the
proceeds and intends initially to invest them in United States government
securities or as a deposit with the Bank. The Company intends eventually to use
these sums to develop a multi-site financial services institution that focuses
its core business on community banking as it relates to real estate and other
related areas of commerce. These businesses may include a residential real
mortgage company, a wholesale mortgage company, a small loan finance company,
and a property/casualty insurance company. The Company may also use such
proceeds for potential expansion opportunities, such as the establishment of
additional branches or, the acquisition of other financial institutions. The
Company does not currently have any definitive plans regarding any such
expansion possibilities.
The following table sets forth the anticipated use of proceeds by the
Company based on the sale of the minimum number and maximum number of shares in
this offering.
<TABLE>
<CAPTION>
Minimum Maximum
------- -------
Offering (1) Offering (2)
------------ ------------
<S> <C> <C>
Gross proceeds from offering ..................... $ 6,000,000 $ 15,000,000
Sales Agent's commission(3) ...................... (315,249) (900,249)
Repayment of line of credit, reflecting payment of
organizational and offering expenses......... (200,000) (200,000)
Investment in capital stock of the Bank........... (5,250,000) (10,500,000)
----------- ------------
Remaining proceeds .......................... $ 234,751 $ 3,399,751
=========== ============
</TABLE>
(1) Assumes that 600,000 shares of Common Stock are sold in this offering.
(2) Assumes that 1,500,000 shares of Common Stock are sold in this
offering.
(3) The Sales Agent's commission will be 5.5% with respect to shares sold
in the offering to certain investors identified by the Organizers (up
to 250,000 shares) and 6.5% with respect to other shares sold in the
offering, except that the Sales Agent will not receive any commission
on shares to be purchased in the offering by the Organizers. The
Organizers currently contemplate purchasing at least 115,002 shares in
the offering. The commissions described in this table reflect the
payment of a 6.5% commission on all sales other than the 115,002 shares
expected to be purchased by the Organizers.
BY THE BANK
The Bank currently plans to use up to approximately $250,000 of the
proceeds it receives from the sale of its stock to the Company to repay amounts
drawn under the line of credit to pay organizational and pre-opening expenses of
the Bank. Organizational expenses of the Bank, estimated at $100,000, include
consulting fees, expenses for market analysis and feasibility studies, and legal
fees and expenses. Pre-opening expenses, estimated at $150,000, include
officers' and employees' salaries and benefits (assuming the Bank opens for
business on its target date of June 1, 1998). In addition, the Company
anticipates that approximately $100,000 will be used for renovation of the
Bank's offices. For furniture, fixtures, and equipment (including computer
equipment) for the offices, the Bank expects to spend approximately $150,000 in
1998. The balance of the proceeds to be received by the Bank and available for
use in the first year (estimated at $4,750,000 if the minimum number of shares
is
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<PAGE> 17
sold and $10,000,000 if the maximum number is sold) will be used for loans to
customers, investments, and other general corporate purposes.
The following table depicts the anticipated use of proceeds by the
Bank. All proceeds received by the Bank will be in the form of an investment by
the Company in the Bank's capital stock.
<TABLE>
<CAPTION>
Minimum Maximum
Offering(1) Offering(2)
----------- -----------
<S> <C> <C>
Investment by the Company in the Bank's capital stock $ 5,250,000 $ 10,500,000
Repayment of line of credit, reflecting payment of
organizational and pre-opening expenses of the Bank.. (250,000) (250,000)
Furniture, Fixtures and Equipment ................... (150,000) (150,000)
Renovation of Bank Offices .......................... (100,000) (100,000)
----------- ------------
Remaining Proceeds .................................. $ 4,750,000 $ 10,000,000
=========== ============
</TABLE>
- ------------
(1) Assumes that 600,000 shares of Common Stock are sold in this offering.
(2) Assumes that 1,500,000 shares of Common Stock are sold in this
offering.
Although the amounts set forth above provide an indication of the
proposed use of funds based on the Organizers' plans and estimates, actual
expenses may vary from the estimates. These estimates were based on assumptions
that the Organizers believed were reasonable, but as to which no assurances can
be given. The Organizers believe that the estimated minimum net proceeds of the
offering will satisfy the cash requirements of the Company and the Bank for
their respective first three years of operations and that neither the Company
nor the Bank will need to raise additional funds for operations during this
period, but there can be no assurance that this will be the case.
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<PAGE> 18
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
December 31, 1997, and the pro forma consolidated capitalization of the Company
and the Bank, as adjusted to give effect to the sale of the minimum of 600,000
shares and a maximum of 1,500,000 shares in this offering. The Bank has
established June 1, 1998 as the target date for opening the Bank; accordingly,
the "As Adjusted" column reflects estimated pre-opening expenses of the Company
and the Bank through June 1, 1998.
<TABLE>
<CAPTION>
As Adjusted As Adjusted
for for
December Minimum Maximum
31, 1997 Offering Offering
-------- ----------- ------------
<S> <C> <C> <C>
INDEBTEDNESS:
Note Payable .............................................. $170,000 $ 0 $ 0
SHAREHOLDERS EQUITY:
Common Stock, par value $.01 per share; 10,000,000
shares authorized; ten shares issued and
outstanding(1); 600,000 shares issued and
outstanding as adjusted (minimum offering);
1,500,000 shares issued and outstanding (maximum
offering) ............................................ 0 6,000 15,000
Preferred Stock, par value $.01 per share; 10,000,000
shares authorized; no shares issued and outstanding ....... 0 0 0
Additional paid-in capital(2) ............................. 100 5,553,751 13,959,751
Deficit accumulated during the pre-opening stage(3) ....... (74,760) (150,000) (150,000)
-------- ----------- ------------
Total shareholders' equity (deficit)(4) .............. $(74,660) $ 5,409,751 $ 13,824,751
======== =========== ============
Total capitalization ................................. $ 95,340 $ 5,409,751 $ 13,824,751
======== =========== ============
</TABLE>
(1) Richard A. Parlontieri was issued ten shares upon organization of the
Company which will be redeemed for $10.00 per share (the price at which
they were issued) upon the first issuance of shares offered hereby. The
stated capital for ten shares is $.10.
(2) The expenses of the offering will be charged against this account.
These expenses are estimated to be approximately $465,249 in the
minimum offering and $1,050,249 in the maximum offering and these
amounts have been used in the calculation of the amounts shown in the
"As Adjusted" columns. The commissions described in this table reflect
the payment of a 6.5% commission on all sales other than the 115,002
shares expected to be purchased by the Organizers.
(3) The deficit results from the expensing of estimated pre-opening
expenses. As of December 31, 1997, approximately $74,760 of pre-opening
expenses, $84,926 of capitalizable organizational costs, and no
deferred offering costs had been incurred on behalf of the Company and
the Bank, and the Company's total accumulated shareholder's deficit was
$74,660. The Organizers estimate that a total of $150,000 of
pre-opening expenses, $175,000 of organizational costs ($100,000 for
the Bank and $75,000 for the Company), and up to $150,000 of
capitalizable property costs for the purchase of furniture, fixtures,
and equipment are expected to be incurred by the Company and the Bank
prior to the commencement of operations (assumed to occur in June
1998). However, no assurances can be given that the Bank will open by
this date or at all, and the amount of pre-opening expenses and
organizational costs could ultimately be greater than currently
estimated. Furniture, fixtures, and equipment will be capitalized and
17
<PAGE> 19
amortized over the life of the lease or over the estimated useful life
of the asset. The Company will retain any interest earned on
subscription payments held in escrow prior to conclusion of the
offering. Such interest will be used to help offset the deficit
accumulated during the pre-opening stage, but the figures shown above
do not include any estimate of the interest which may be earned.
(4) The shareholders are likely to experience additional dilution due to
operating losses expected to be incurred during the initial years of
the Bank's operations.
DIVIDEND POLICY
The Board of Directors expects initially to follow a policy of
retaining any earnings to provide funds to operate and expand the business.
Consequently, it is unlikely that any cash dividends will be paid in the near
future. The Company's ability to pay any cash dividends to its shareholders in
the future will depend primarily on the Bank's ability to pay dividends to the
Company. In order to pay dividends to the Company, the Bank must comply with the
requirements of all applicable laws and regulations. See "Supervision and
Regulation The Bank - Dividends" and "Supervision and Regulation - The Bank -
Capital Requirements." In addition to the availability of funds from the Bank,
the future dividend policy of the Company is subject to the discretion of the
Board of Directors and will depend upon a number of factors, including future
earnings, financial condition, cash needs, and general business conditions.
PLAN OF OPERATION
Southeast Commerce Holding Company was formed to organize and own all
of the capital stock of Commerce Bank. The Organizers filed an application with
the OTS in October 1997 to charter the Bank as a federal savings bank. The
issuance of a charter will depend, among other things, upon compliance with
certain legal requirements that may be imposed by the OTS, including
capitalization of the Bank with at least a specified minimum amount of capital,
which the Organizers believe will be $5,250,000. Additionally, the Company must
obtain the approval of the OTS to become a unitary thrift holding company before
acquiring the capital stock of the Bank. The Bank has also filed an application
with the FDIC for deposit insurance, and the Company has filed an application
with the Georgia Department of Banking and Finance for authorization to become a
holding company of the Bank. The Organizers expect to receive all regulatory
approvals by April or May 1998.
As of December 31, 1997, the Company had total assets of $160,501,
consisting primarily of deferred organization costs ($84,926) and fixed assets
($50,000). The Company incurred a net loss of $74,760 for the period from
inception (August 22, 1997) to December 31, 1997. The Company has arranged a
$500,000 line of credit with The Bankers Bank at adjustable prime rate, which
was 8.5% as of December 31, 1997. The line of credit is unsecured and requires
interest only payments on a quarterly basis with total principal plus interest
due at maturity on August 27, 1998. The line of credit is guaranteed by the
Organizers. This line of credit has been used to repay (without interest) the
organizers' initial funding of the Company and to provide additional operating
funds until permanent funding is obtained. As of December 31, 1997,
approximately $170,000 had been drawn against this line of credit. Management
believes that the current level of expenditures is within the financial
capabilities of the Organizers and is adequate to meet existing obligations and
fund current operations. On December 30, 1997, the Company entered into a
software license agreement for the data processing applications and
implementation of the Company's electronic data processing system. The agreement
provides for a total of $313,500 plus related expenses and is to be fully paid
in 1998. As of December 31, 1997, the Company had made a deposit of $50,000
under this agreement.
Upon the completion of the sale of common stock and opening of the
Bank, incurred organization costs, estimated to be $175,000 (consisting
principally of legal, regulatory, consulting and incorporation fees), will be
deferred and amortized over the Company's initial 60 months of operations.
Offering expenses, estimated to be $125,000 (consisting principally of direct
incremental costs of the stock offering), will be deducted from the proceeds of
the offering, and pre-opening expenses, estimated to be $150,000 (consisting
principally of salaries, overhead and other operating costs), will be charged
against the initial period's operating results.
18
<PAGE> 20
The Bank's initial office will be located at Paces Summit, located in
historic Vinings, Georgia, at 100 Galleria Parkway, Suite 400, Atlanta, Georgia
30339. On October 14, 1997, the Company entered into a ten-year lease agreement
for 5,000 square feet of office space at its planned main office location. The
Company intends to commence leasehold improvements in April 1998 and anticipates
that the office space will be ready for the Bank to open by June 1, 1998.
The Company intends initially to engage only in the business of owning
and managing the Bank, and the Bank will focus its core business on first and
second residential mortgages, home equity loans, refinancing, consumer loans,
commercial loans, private banking and SBA lending. Through the thrift charter,
the Bank will be able to operate in all fifty states and to branch into any
county in the state of Georgia. The thrift charter will also give the Company
more flexibility to pursue strategic opportunities to grow its customer base and
to create cross-selling opportunities to those same customers. The Company
intends eventually to build a multi-site financial services institution that
focuses its core business on community banking as it relates to real estate and
other related areas of commerce. These businesses may include, but will not be
limited to, a residential mortgage company, a wholesale mortgage company, a
small loan finance company, and a property/ casualty insurance company.
Like many financial institutions, the Company and the Bank will rely
upon computers for the daily conduct of their business and for information
systems processing. There is concern among industry experts that on January 1,
2000 computers will be unable to "read" the new year and there may be widespread
computer malfunctions. The Company and the Bank will generally rely on software
and hardware developed by independent third parties to provide the information
systems used by the Company and the Bank. The Company intends to seek assurances
about the Year 2000 compliance with respect to any third party hardware or
software system it intends to use. The Company has contracted with Phoenix
International Ltd., Inc. to use the Phoenix client-server core retail banking
system, and the Company has been advised that Phoenix believes this system is
Year 2000 compliant. The Company also believes that its other internal systems
and software and the network connections it will maintain will be adequately
programmed to address the Year 2000 issue. Based on information currently
available, management does not believe that either the Company or the Bank will
incur significant costs in connection with the year 2000 issue. Nevertheless,
there can be no assurances that all hardware and software that the Company or
the Bank uses will be Year 2000 compliant, and the Company cannot predict with
any certainty the costs the Company and the Bank will incur to respond to any
Year 2000 issues.
The Company intends to use state-of-the-art technology to offer
electronic banking services and products and provide better service to its
customers. The Bank's operating strategies will be based on its philosophy of
Better People, Better Service, Better Bankingsm.
PROPOSED BUSINESS
GENERAL
The Company was incorporated as a Georgia corporation on August 22,
1997, primarily to own and control all of the capital stock of the Bank. The
Company initially will engage in no business other than owning and managing the
Bank. As a federally chartered savings association, the Bank will have general
authority to originate and purchase loans secured by real estate, secured or
unsecured loans for commercial, corporate, business, or agricultural purposes,
and loans for personal, family, or household purposes. The Bank will initially
emphasize retail banking, home mortgages, real estate development, and consumer
lending needs. The Bank will not be permitted to make non-real estate commercial
purpose loans that exceed 20% of its assets or non-real estate consumer purpose
loans that exceed 35% of its assets. While not restricted by law, the Bank
expects initially to limit its lending activities primarily to Cobb County,
Georgia, and the surrounding areas.
The Organizers have chosen a holding company structure under which the
Company will acquire all of the capital stock of the Bank because, in the
judgment of the Organizers, the holding company structure provides flexibility
that would not otherwise be available. The Company will initially engage only in
the business of owning and managing the Bank, and the Bank will focus its core
business on first and second residential mortgages, home equity loans,
refinancing, consumer loans, commercial loans, private banking and SBA lending.
19
<PAGE> 21
The thrift charter will allow the Bank to operate in all fifty states
and to branch into any county in the state of Georgia without any additional
regulatory approval. The thrift charter will also give the Company more
flexibility to pursue strategic opportunities to grow its customer base and to
create cross-selling opportunities to those same customers. The Company intends
eventually to build a multi-site financial services institution that focuses its
core business on community banking as it relates to real estate and other
related areas of commerce. These businesses may include, but will not be limited
to, a residential mortgage company, a wholesale mortgage company, a small loan
finance company, and a property/ casualty insurance company.
The Company intends to use a state-of-the-art technology, fully
integrated, client-server core retail banking system which the Bank believes
will permit it to offer better service to its customers. The Company has entered
into an agreement with Phoenix International Ltd., Inc. to license the Phoenix
Retail Banking System (the "Phoenix System"). The Organizers believe that the
Phoenix System, through its client/server technology, addresses many of the
deficiencies of the mainframe- and minicomputer-based legacy systems on which
most banks currently operate because it will allow the Bank to integrate data
into a comprehensive management information network. The Organizers believe that
the Phoenix System will support the core areas of bank data processing,
including system administration, account processing, nightly processing, teller
functions, holding company accounting, and budgeting. Because the Phoenix System
is a fully integrated system, the Organizers believe that it will provide
significant advantages to the Bank in three critical areas: (i) customer
relationship management; (ii) management decision support; and (iii) bank
product creation and support. The Organizers believe that it is unusual for
smaller financial institutions, such as community banks, to have client/server
technology such as the Phoenix System because the cost for an existing financial
institution to convert from its existing computer platform to such a
client/server technology would be too great for many smaller financial
institutions to justify. The Bank's operating strategies will be based on its
philosophy of Better People, Better Service, Better Bankingsm.
MARKETING FOCUS
Most of the banks in the Cobb County area are now local branches of
large regional banks. Although size gives the larger banks certain advantages in
competing for business from large corporations, including higher lending limits
and the ability to offer services in other areas of Georgia and the Cobb County
area, the Organizers believe that there is a void in the community banking
market in the Cobb County area and believe that the Bank can successfully fill
this void. As a result, the Company generally will not attempt to compete for
the banking relationships of large corporations, but will concentrate its
efforts on small- to medium-sized businesses and on individuals.
The Bank plans to advertise to emphasize the Company's local ownership,
community bank nature, and ability to provide more personalized service than its
competition. The Organizers, as long-time residents and business people in the
Cobb County area, have determined the credit needs of the area through personal
experience and communications with their business colleagues. The Organizers
believe that the proposed community bank focus of the Bank is likely to succeed
in this market. The Organizers believe that the area will react favorably to the
Bank's emphasis on service to small businesses, individuals, and professional
concerns. However, no assurances in this respect can be given.
LOCATION AND SERVICE AREA
While not restricted by law, the Bank expects initially to draw 75% of
its business from Cobb County, Georgia, and the surrounding areas. Cobb County,
which will be the Bank's primary service area, has been one of the fastest
growing regions in Georgia over the last several years. The county's population
has grown from 447,745 in 1990 to 538,832 in 1996, and per capita income in the
county was $30,000 as of 1996 making it the second largest county in the state.
The Company's address is 100 Galleria Parkway, Suite 400, Atlanta,
Georgia 30339. The Company's telephone number is (770) 956-4034. See
"Facilities."
20
<PAGE> 22
DEPOSITS
The Bank intends to offer a full range of deposit services that are
typically available in most banks and savings and loan associations, including
checking accounts, commercial accounts, savings accounts, and other time
deposits of various types, ranging from daily money market accounts to
longer-term certificates of deposit. The transaction accounts and time
certificates will be tailored to the Bank's principal market area at rates
competitive to those offered in the Cobb County area. In addition, the Bank
intends to offer certain retirement account services, such as Individual
Retirement Accounts (IRAs). The Bank intends to solicit these accounts from
individuals, businesses, associations and organizations, and governmental
authorities.
LENDING ACTIVITIES
General. The Bank intends to emphasize a range of lending services,
including real estate, commercial and consumer loans, to individuals and small-
to medium-sized businesses and professional concerns that are located in or
conduct a substantial portion of their business in the Bank's market area. The
Bank will initially emphasize retail banking, home mortgages, real estate
development, and consumer lending needs. The Bank will not be permitted to make
non-real estate commercial purpose loans that exceed 20% of its assets or
non-real estate consumer purpose loans that exceed 35% of its assets. Outside of
the inherent risk of the credit worthiness of the Bank's borrowers, other risks
associated with residential mortgage loans would be the inability to move
foreclosed real estate in a down market or economy, shifts in the demographics
of a given market from residential zonings to commercial, individual customers
who have been displaced due to corporate downsizing/loss of income, and an
overall economic downturn creating unemployment due to lack of product demand.
Real Estate Loans. The Organizers expect that one of the primary
components of the Bank's loan portfolio will be loans secured by first or second
mortgages on real estate. These loans will generally consist of commercial real
estate loans, construction and development loans, and residential real estate
loans (but will exclude home equity loans, which are classified as consumer
loans). Loan terms generally will be limited to five years or less, although
payments may be structured on a longer amortization basis. Interest rates may be
fixed or adjustable, and will more likely be fixed in the case of shorter term
loans. The Bank will generally charge an origination fee. Management will
attempt to reduce credit risk in the commercial real estate portfolio by
emphasizing loans on owner-occupied office and retail buildings where the
loan-to-value ratio, established by independent appraisals, does not exceed 80%.
In addition, the Bank will typically require personal guarantees of the
principal owners of the property backed with a review by the Bank of the
personal financial statements of the principal owners. The principal economic
risk associated with each category of anticipated loans, including real estate
loans, is the creditworthiness of the Bank's borrowers. The risks associated
with real estate loans vary with many economic factors, including employment
levels and fluctuations in the value of real estate. The Bank will compete for
real estate loans with a number of bank competitors which are well established
in the Cobb County area. Most of these competitors have substantially greater
resources and lending limits than the Bank. As a result, the Bank may have to
charge lower interest rates to attract borrowers. See "Competition" below. The
Bank may also originate loans for sale into the secondary market. The Bank
intends to limit interest rate risk and credit risk on these loans by locking
the interest rate for each loan with the secondary investor and receiving the
investor's underwriting approval prior to originating the loan.
Commercial Loans. The Bank will make loans for commercial purposes in
various lines of businesses. Equipment loans will typically be made for a term
of five years or less at fixed or variable rates, with the loan fully amortized
over the term and secured by the financed equipment and with a loan-to-value
ratio of 80% or less. Working capital loans will typically have terms not
exceeding one year and will usually be secured by accounts receivable,
inventory, or personal guarantees of the principals of the business. For loans
secured by accounts receivable or inventory, principal will typically be repaid
as the assets securing the loan are converted into cash, and in other cases
principal will typically be due at maturity. The principal economic risk
associated with each category of anticipated loans, including commercial loans,
is the creditworthiness of the Bank's borrowers. The risks associated with
commercial loans vary with many economic factors, including the economy in the
Cobb County area. The well-established banks in the Cobb County area will make
proportionately more
21
<PAGE> 23
loans to medium- to large-sized businesses than the Bank. Many of the Bank's
anticipated commercial loans will likely be made to small- to medium-sized
businesses which may be less able to withstand competitive, economic, and
financial conditions than larger borrowers.
Consumer Loans. The Bank will make a variety of loans to individuals
for personal and household purposes, including secured and unsecured installment
and term loans, home equity loans and lines of credit, and revolving lines of
credit such as credit cards. These loans typically will carry balances of less
than $25,000 and, in the case of non-revolving loans, will be amortized over a
period not exceeding 48 months or will be ninety-day term loans, in each case
bearing interest at a fixed rate. The revolving loans will typically bear
interest at a fixed rate and require monthly payments of interest and a portion
of the principal balance. The underwriting criteria for home equity loans and
lines of credit will generally be the same as applied by the Bank when making a
first mortgage loan, as described above, and home equity lines of credit will
typically expire ten years or less after origination. As with the other
categories of loans, the principal economic risk associated with consumer loans
is the creditworthiness of the Bank's borrowers, and the principal competitors
for consumer loans will be the established banks in the Cobb County area.
Loan Approval and Review. The Bank's loan approval policies will
provide for various levels of officer lending authority. When the amount of
aggregate loans to a single borrower exceeds that individual officer's lending
authority, the loan request will be considered and approved by an officer with a
higher lending limit or the officers' loan committee. The Bank will establish an
officers' loan committee that has lending limits, and any loan in excess of this
lending limit will be approved by the directors' loan committee. The Bank will
not make any loans to any director, officer, or employee of the Bank unless the
loan is approved by the board of directors of the Bank and is made on terms not
more favorable to such person than would be available to a person not affiliated
with the Bank.
Lending Limits. The Bank's lending activities will be subject to a
variety of lending limits imposed by federal law. While differing limits apply
in certain circumstances based on the type of loan or the nature of the borrower
(including the borrower's relationship to the Bank), in general the Bank will be
subject to a loan-to-one-borrower limit. Since the enactment of FIRREA in 1989,
a savings association generally may not make loans to one borrower and related
entities in an amount which exceeds 15% of its unimpaired capital and surplus,
although loans in an amount equal to an additional 10% of unimpaired capital and
surplus may be made to a borrower if the loans are fully secured by readily
marketable securities. Unless the Bank is able to sell participations in its
loans to other financial institutions, the Bank will not be able to meet all of
the lending needs of loan customers requiring aggregate extensions of credit
above these limits. It is not currently anticipated that the Bank will have an
initial loan loss reserve when it commences operations.
OTHER BANKING SERVICES
Other anticipated bank services include cash management services, safe
deposit boxes, travelers checks, direct deposit of payroll and social security
checks, and automatic drafts for various accounts. The Bank plans to become
associated with a shared network of automated teller machines that may be used
by Bank customers throughout Georgia and other regions. The Organizers believe
that by being associated with a shared network of ATMs, the Bank will be better
able to serve its customers and will be able to attract customers who are
accustomed to the convenience of using ATMs, although the Organizers do not
believe that maintaining this association will be critical to the Bank's
success. The Bank intends to begin offering these services shortly after the
Bank's opening. The Bank also plans to offer MasterCard and VISA credit card
services through a correspondent bank as an agent for the Bank. The Bank does
not plan to exercise trust powers during its initial years of operation.
COMPETITION
The banking business is highly competitive. The Bank will compete as a
financial intermediary with other commercial banks, savings and loan
associations, credit unions, and money market mutual funds operating in the Cobb
County area and elsewhere. In 1996, there were more than 160 branches of
financial institutions operating in Cobb County, holding over $4.5 billion in
deposits. A number of these competitors are well
22
<PAGE> 24
established in the Cobb County area. Most of them have substantially greater
resources and lending limits than the Bank and offer certain services, such as
extensive and established branch networks and trust services, that the Bank
either does not expect to provide or will not provide initially. As a result of
these competitive factors, the Bank may have to pay higher rates of interest to
attract deposits.
FACILITIES
The Bank's initial office will be located in Paces Summit in historic
Vinings. The Bank's address is 100 Galleria Parkway, Suite 400, Atlanta, Georgia
30339. The Bank will be located on the first floor of the Paces Summit office
complex and will operate a 5,000 square foot facility. The Company has budgeted
$200,000 for leasehold improvements to make the leased space usable for banking
operations. The Company intends to commence leasehold improvements in April 1998
and anticipates that the office space will be ready for the Bank to open by June
1, 1998.
The Company believes that the facilities will adequately serve the
Bank's needs for its first several years of operation.
EMPLOYEES
The Company anticipates that, upon commencement of operations, the Bank
will have approximately 12 full-time employees. The Company will not have any
employees other than its officers.
LEGAL PROCEEDINGS
There are no material legal proceedings to which the Company or the
Bank or any of their properties are subject.
SUPERVISION AND REGULATION
The Company and the Bank are subject to state and federal banking laws
and regulations which impose specific requirements or restrictions on and
provide for general regulatory oversight with respect to virtually all aspects
of operations. These laws and regulations are generally intended to protect
depositors, not shareholders. To the extent that the following summary describes
statutory or regulatory provisions, it is qualified in its entirety by reference
to the particular statutory and regulatory provisions. Any change in applicable
laws or regulations may have a material effect on the business and prospects of
the Company. Beginning with the enactment of the Financial Institutions Reform,
Recovery and Enforcement Act of 1989 ("FIRREA") and following with FDICIA, which
was enacted in 1991, numerous additional regulatory requirements have been
placed on the banking industry in the past several years, and additional changes
have been proposed. The banking industry is also likely to change significantly
as a result of the passage of the Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994 (the "Interstate Banking Act") The operations of the
Company and the Bank may be affected by legislative changes and the policies of
various regulatory authorities. The Company is unable to predict the nature or
the extent of the effect on its business and earnings that fiscal or monetary
policies, economic control, or new federal or state legislation may have in the
future.
THE COMPANY
The Company will be a registered holding company under both the Savings
and Loan Holding Company Act (the "SLHCA") set forth in Section 10 of the Home
Owners Loan Act ("HOLA") and the Financial Institutions Code of Georgia. The
Company will be regulated under such acts by the OTS and by the Department of
Banking and Finance (the "DBF"), respectively. As a savings and loan holding
company, the Company will be required to file with the OTS an annual report and
such additional information as the OTS may require pursuant to the SLHCA. The
OTS will also conduct examinations of the Company and each of its subsidiaries.
23
<PAGE> 25
As a unitary savings and loan holding company owning only one savings
institution, the Company will generally be allowed to engage and invest in a
broad range of business activities not permitted to commercial bank holding
companies or multiple savings and loans holding companies, provided that the
Bank continues to qualify as a "qualified thrift lender." See "--The Bank -
Qualified Thrift Lender Requirements."
The SLHCA and the Financial Institutions Code of Georgia will prohibit
the Company from acquiring control of another savings association or another
savings and loan holding company without prior approval from the OTS and the
DBF, respectively. However, savings and loan holding companies are allowed to
acquire or to retain as much as 5% of the voting shares of a savings institution
or savings and loan holding company without regulatory approval.
The OTS may not approve an acquisition that would result in the
formation of certain types of interstate holding company networks. The OTS is
precluded from approving an acquisition that would result in the formation of a
multiple holding company controlling institutions in more than one state unless
the acquiring company or one of its savings institution subsidiaries is
authorized to acquire control of an institution or to operate an office in the
additional state pursuant to a supervisory acquisition authorized under Section
13(k) of the Federal Deposit Insurance Act or unless the statutes of the state
in which the institution to be acquired is located permits such an acquisition.
THE BANK
General. Subject to receipt of the necessary approvals of its pending
applications, the Bank will operate as a federal savings bank incorporated under
the laws of the United States and subject to examination by the OTS. The OTS
will regulate or monitor virtually all areas of the Bank's operations, including
security devices and procedures, adequacy of capitalization and loss reserves,
loans, investments, borrowings, deposits, mergers, issuances of securities,
payment of dividends, interest rates payable on deposits, interest rates or fees
chargeable on loans, establishment of branches, corporate reorganizations,
maintenance of books and records, and adequacy of staff training to carry on
safe lending and deposit gathering practices. The OTS will require the Bank to
maintain certain capital ratios and will impose limitations on the Bank's
aggregate investment in real estate, bank premises, and furniture and fixtures.
The Bank will be required by the OTS to prepare quarterly reports on the Bank's
financial condition and to conduct an annual audit of its financial affairs in
compliance with minimum standards and procedures prescribed by the OTS. OTS
Regulations generally provide that federal savings banks must be examined no
less frequently than every 18 months. The Bank also is subject to assessments by
the OTS to cover the costs of such examinations.
As a federally chartered savings institution, the Bank generally will
not be subject to those provisions of Georgia law governing state chartered
financial institutions or to the jurisdiction of the DBF. However, the DBF
interprets the Financial Institutions Code of Georgia to require the prior
approval of the DBF for any acquisition of control of any savings institution
(whether chartered by state or federal authority) located in Georgia.
The DBF also interprets the Financial Institutions Code of Georgia to
include savings and loan holding companies as "bank holding companies," thus
giving the DBF the authority to make examinations of the Company and any
subsidiaries and to require periodic and other reports. Existing DBF regulations
do not restrict the business activities or investments of the Company or the
Bank.
State usury laws are applicable to federally insured institutions with
regard to loans made within Georgia. Generally speaking, Georgia law does not
establish ceilings on interest rates although certain specialized types of
lending, in which the Bank engages, such as making loans of $3,000 or less, are
subject to interest rate limitations.
Subsidiary institutions of a savings and loan holding company, such as
the Bank, are subject to certain restrictions imposed by the Federal Reserve Act
on any extension of credit to the holding company or any of its subsidiaries, on
investment in the stock or other securities thereof, and on the taking of such
stock or securities as collateral for loans to any borrower. In addition, a
holding company and its subsidiaries are prohibited from
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<PAGE> 26
engaging in certain tying arrangements in connection with any extension of
credit or provision of any property or services.
Capital Requirements. OTS regulations require that federal savings
banks maintain (i) "tangible capital" in an amount of not less than 1.5% of
total assets, (ii) "core capital" in an amount not less than 3.0% of total
assets, and (iii) a level of risk-based capital equal to 8% of risk-weighted
assets. Under OTS regulations, the term "core capital" generally includes common
stockholders' equity, noncumulative perpetual preferred stock and related
surplus, and minority interests in the equity accounts of consolidated
subsidiaries less unidentifiable intangible assets (other than certain amounts
of supervisory goodwill) and certain investments in certain subsidiaries plus
90% of the fair market value of readily marketable purchased mortgage servicing
rights and purchased credit card relationships (subject to certain conditions).
"Tangible capital" generally is defined as core capital minus intangible assets
and investments in certain subsidiaries, except purchased mortgage servicing
rights.
In determining total risk-weighted assets for purposes of the
risk-based requirement, (i) each off-balance sheet asset must be converted to
its on-balance sheet credit equivalent amount by multiplying the face amount of
each such item by a credit conversion factor ranging from 0% to 100% (depending
upon the nature of the asset), (ii) the credit equivalent amount of each
off-balance sheet asset and each on-balance sheet asset must be multiplied by a
risk factor ranging from 0% to 200% (again depending upon the nature of the
asset) and (iii) the resulting amounts are added together and constitute total
risk-weighted assets. "Total capital"-risk-based capital requirement equals the
sum of core capital plus supplementary capital (which, as defined, includes the
sum of, among other items, perpetual preferred stock not counted as core
capital, limited life preferred stock, subordinated debt, and general loan and
lease loss allowances up to 1.25 % of risk-weighted assets) less certain
deductions. The amount of supplementary capital that may be counted towards
satisfaction of the total capital requirement may not exceed 100% of core
capital, and OTS regulations require the maintenance of a minimum ratio of core
capital to total risk-weighted assets of 4%.
OTS regulations also include an interest-rate risk component in the
risk-based capital requirement. Under this regulation, an institution is
considered to have excess interest rate-risk if, based upon a 200-basis point
change in market interest rates, the market value of an institution's capital
changes by more than 2%. The OTS risk-based capital standards also provide for
concentration of credit risk, risk from nontraditional activities and actual
performance, and expected risk of loss on multi-family mortgages.
Capital requirements higher than the generally applicable minimum
requirement may be established for a particular savings association if the OTS
determines that the institution's capital was or may become inadequate in view
of its particular circumstances.
Additionally, the DBF requires that savings and loan holding companies,
such as the Company, must maintain a 5% Tier 1 leverage ratio on a consolidated
basis.
Deposit Insurance. Deposits at the Bank are insured to a maximum of
$100,000 for each insured depositor by the FDIC. The FDIC establishes rates for
the payment of premiums by federally insured commercial banks and savings banks,
or thrifts, for deposit insurance. A separate Bank Insurance Fund ("BIF") and
Savings Association Insurance Fund ("SAIF") are maintained for commercial banks
and thrifts, respectively, with insurance premiums from the industry used to
offset losses from insurance payouts when banks and thrifts fail. Since 1993,
insured depository institutions like the Bank have paid for deposit insurance
under a risk-based premium system. Under this system, until mid-1995 depositor
institutions paid to BIF or SAIF from $0.23 to $0.31 per $100 of insured
deposits depending on its capital levels and risk profile, as determined by its
primary federal regulator on a semi-annual basis. Once the BIF reached its
legally mandated reserve ratio in mid-1995, the FDIC lowered premiums for
well-capitalized banks, eventually to $.00 per $100, with a minimum semiannual
assessment of $1,000. However, in 1996 Congress enacted the Deposit Insurance
Funds Act of 1996, which eliminated this minimum assessment. It also separated
the Financial Corporation (FICO) assessment to service the interest on its bond
obligations. The amount assessed on individual institutions, including the Bank,
by FICO is in addition to the amount paid for deposit insurance according to the
risk-related assessment rate schedule. Increases in
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<PAGE> 27
deposit insurance premiums or changes in risk classification will increase the
Bank's cost of funds, and there can be no assurance that such cost can be passed
on the Bank's customers.
As an insurer, the FDIC issues regulations, conducts examinations and
generally supervises the operations of its insured institutions. Any insured
institution which does not operate in accordance with or conform to FDIC
regulations, policies and directives may be sanctioned for non-compliance. The
FDIC has the authority to suspend or terminate insurance of deposits upon the
finding that the institution has engaged in unsafe or unsound practices, is
operating in an unsafe or unsound condition, or has violated any applicable law,
regulation, rule, order, or condition imposed by the FDIC. If insurance of
accounts is terminated by the FDIC, the deposits in the institution will
continue to be insured by the FDIC for a period of two years following the date
of termination. The FDIC requires an annual audit by independent accountants and
also periodically makes its own examinations of insured institutions.
In addition to deposit insurance premiums, savings institutions also
must bear a portion of the administrative costs of the OTS through an assessment
based on the level of total assets of each insured institution and which
differentiates between troubled and nontroubled savings institutions.
Additionally, the OTS assesses fees for the processing of various applications.
Transactions With Affiliates and Insiders. The Bank is subject to the
provisions of Section 23A of the Federal Reserve Act, which place limits on the
amount of loans or extensions of credit to, or investments in, or certain other
transactions with, affiliates and on the amount of advances to third parties
collateralized by the securities or obligations of affiliates. The aggregate of
all covered transactions is limited in amount, as to any one affiliate, to 10%
of the bank's capital and surplus and, as to all affiliates combined, to 20% of
the bank's capital and surplus. Furthermore, within the foregoing limitations as
to amount, each covered transaction must meet specified collateral requirements.
Compliance is also required with certain provisions designed to avoid the taking
of low quality assets.
The Bank is also subject to the provisions of Section 23B of the
Federal Reserve Act which, among other things, prohibit an institution from
engaging in certain transactions with certain affiliates unless the transactions
are on terms substantially the same, or at least as favorable to such
institution or its subsidiaries, as those prevailing at the time for comparable
transactions with non-affiliated companies. The Bank is subject to certain
restrictions on extensions of credit to executive officers, directors, certain
principal shareholders, and their related interests. Such extensions of credit
(i) must be made on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
third parties and (ii) must not involve more than the normal risk of repayment
or present other unfavorable features.
Dividends. The Bank is subject to regulatory restrictions on the
payment of dividends, including a prohibition of payment of dividends from its
capital. All dividends must be paid out of the undivided profits then on hand,
after deducting expenses, including losses and bad debts. The Bank must also
obtain approval from the OTS prior to the payment of any dividends to the
Company. In addition, under FDICIA, the Bank may not pay a dividend if, after
paying the dividend, the Bank would be undercapitalized.
Branching. As a federal savings bank, there are no regulatory
restrictions on the Bank's ability to branch within or without the state of
Georgia.
Community Reinvestment Act. The Community Reinvestment Act requires
that, in connection with examinations of financial institutions within their
respective jurisdictions, a financial institution's primary federal regulator
(this is the OTS for the Bank) shall evaluate the record of the financial
institutions in meeting the credit needs of their local communities, including
low and moderate income neighborhoods, consistent with the safe and sound
operation of those institutions. These factors are also considered in evaluating
mergers, acquisitions, and applications to open a branch or facility.
Liquidity. Under applicable federal regulations, savings associations
are required to maintain an average daily balance of liquid assets (including
cash, certain time deposits, certain bankers' acceptances, certain
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<PAGE> 28
corporate debt securities and highly rated commercial paper, securities of
certain mutual funds and specified United States government, state or federal
agency obligations) equal to a monthly average of not less than a specified
percentage of the average daily balance of the savings association's net
withdrawable deposits plus short-term borrowings. Under HOLA, this liquidity
requirement may be changed from time to time by the OTS to any amount within the
range of 4% to 10% depending upon economic conditions and the deposit flows of
member institutions, and currently is 5%. Savings institutions also are required
to maintain an average daily balance of short-term liquid assets at a specified
percentage (currently 1%) of the total of the average daily balance of its net
withdrawable deposits and short-term borrowings.
Equity Investments. The OTS has revised its risk-based capital
regulation to modify the treatment of certain equity investments and to clarify
the treatment of other equity investments. Equity investments that are
permissible for both savings banks and national banks will no longer be deducted
from savings associations' calculations of total capital over a five-year
period. Instead, permissible equity investments will be placed in the 100%
risk-weight category, mirroring the capital treatment prescribed for those
investments when made by national banks under the regulations of the OCC. Equity
investments held by savings associations that are not permissible for national
banks must still be deducted from assets and total capital.
Qualified Thrift Lender Requirement. A federal savings bank is deemed
to be a "qualified thrift lender" ("QTL") as long as its "qualified thrift
investments" equal or exceed 65% of its "portfolio assets" on a monthly average
basis in nine out of every 12 months. Qualified thrift investments generally
consist of (i) various housing related loans and investments (such as
residential construction and mortgage loans, home improvement loans, mobile home
loans, home equity loans and mortgage-backed securities), (ii) certain
obligations of the FDIC, and (iii) shares of stock issued by any FHLB, the FHLMC
or the FNMA. Qualified thrift investments also include certain other specified
investments, subject to a percentage of portfolio assets limitation. For
purposes of the QTL test, the term "portfolio assets" means the savings
institution's total assets minus goodwill and other intangible assets, the value
of property used by the savings institution to conduct its business, and liquid
assets held by the savings institution in an amount up to 20% of its total
assets.
OTS regulations provide that any savings association that fails to meet
the definition of a QTL must either convert to a national bank charter or limit
its future investments and activities (including branching and payments of
dividends) to those permitted for both savings associations and national banks.
Further, within one year of the loss of QTL status, a holding company of a
savings association that does not convert to a bank charter must register as a
bank holding company and will be subject to all statutes applicable to bank
holding companies. In order to exercise the powers granted to federally
chartered savings associations and maintain full access to FHLB advances, the
Bank must meet the definition of a QTL.
Loans to One Borrower Limitations. HOLA generally requires savings
associations to comply with the loans to one borrower limitations applicable to
national banks. National banks generally may make loans to a single borrower in
amounts up to 15% of their unimpaired capital and surplus, plus an additional
10% of capital and surplus for loans secured by readily marketable collateral.
HOLA provides exceptions under which a savings association may make loans to one
borrower in excess of the generally applicable national bank limits. A savings
association may make loans to one borrower in excess of such limits under one of
the following circumstances: (i) for any purpose, in any amount not to exceed
$500,000; or (ii) to develop domestic residential housing units, in an amount
not to exceed the lesser of $30 million or 30% of the savings association's
unimpaired capital and unimpaired surplus, provided other conditions are
satisfied.
Commercial Real Property Loans. HOLA limits the aggregate amount of
commercial real estate loans that a federal savings association may make to an
amount not in excess of 400% of the savings association's capital.
ELIMINATION OF FEDERAL SAVINGS ASSOCIATION CHARTER
Legislation that would eliminate the federal savings association
charter is under discussion. If such legislation is enacted, the Bank would be
required to convert its federal savings bank charter to either a national
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<PAGE> 29
bank charter or to a state depository institution charter. Various legislative
proposals also may result in the restructuring of federal regulatory oversight,
including, for example, consolidation of the OTS into another agency, or
creation of a new Federal banking agency to replace the various such agencies
which presently exist. The Bank is unable to predict whether such legislation
will be enacted or, if enacted, what the effect of such legislation will be.
Federal Home Loan Bank System. The FHLB System consists of 12 regional
FHLBs, each subject to supervision and regulation by the Federal Housing Finance
Board. The FHLBs provide a central credit facility for member savings
associations. The maximum amount that the FHLB of Atlanta will advance
fluctuates from time to time in accordance with changes in policies of the
Federal Home Finance Board and the FHLB of Atlanta, and the maximum amount
generally is reduced by borrowings from any other source. In addition, the
amount of FHLB advances that a savings association may obtain will be restricted
in the event the institution fails to constitute a QTL.
Federal Reserve System. The Federal Reserve Board has adopted
regulations that require savings associations to maintain nonearning reserves
against their transaction accounts (primarily NOW and regular checking
accounts). These reserves may be used to satisfy liquidity requirements imposed
by the OTS. Because required reserves must be maintained in the form of cash or
a non-interest-bearing account at a Federal Reserve Bank, the effect of this
reserve requirement is to reduce the amount of the Bank's interest-earning
assets.
Savings institutions also have the authority to borrow from the Federal
Reserve "discount window." Federal Reserve Board regulations, however, require
savings associations to exhaust all FHLB sources before borrowing from a Federal
Reserve bank.
Other Regulations. Interest and certain other charges collected or
contracted for by the Bank are subject to state usury laws and certain federal
laws concerning interest rates. The Bank's loan operations are also subject to
certain federal laws applicable to credit transactions, such as the federal
Truth-In-Lending Act, governing disclosures of credit terms to consumer
borrowers; the Home Mortgage Disclosure Act of 1975, requiring financial
institutions to provide information to enable the public and public officials to
determine whether a financial institution will be fulfilling its obligation to
help meet the housing needs of the community it serves; the Equal Credit
Opportunity Act, prohibiting discrimination on the basis of race, creed or other
prohibited factors in extending credit; the Fair Credit Reporting Act of 1978,
governing the use and provision of information to credit reporting agencies; the
Fair Debt Collection Act, governing the manner in which consumer debts may be
collected by collection agencies; and the rules and regulations of the various
federal agencies charged with the responsibility of implementing such federal
laws. The deposit operations of the Bank also are subject to the Right to
Financial Privacy Act, which imposes a duty to maintain confidentiality of
consumer financial records and prescribes procedures for complying with
administrative subpoenas of financial records, and the Electronic Funds Transfer
Act and Regulation E issued by the Federal Reserve Board to implement that act,
which governs automatic deposits to and withdrawals from deposit accounts and
customers' rights and liabilities arising from the use of automated teller
machines and other electronic banking services.
ENFORCEMENT POWERS
FIRREA expanded and increased civil and criminal penalties available
for use by the federal regulatory agencies against depository institutions and
certain "institution-affiliated parties" (primarily including management,
employees, and agents of a financial institution, and independent contractors
such as attorneys and accountants and others who participate in the conduct of
the financial institution's affairs). These practices can include the failure of
an institution to timely file required reports or the filing of false or
misleading information or the submission of inaccurate reports. Civil penalties
may be as high as $1,000,000 a day for such violations. Criminal penalties for
some financial institution crimes have been increased to twenty years. In
addition, regulators are provided with greater flexibility to commence
enforcement actions against institutions and institution-affiliated parties.
Possible enforcement actions include the termination of deposit insurance.
Furthermore, FIRREA expanded the appropriate banking agencies' power to issue
cease-and-desist orders that may, among other things, require affirmative action
to correct any harm resulting from a violation or practice,
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including restitution, reimbursement, indemnifications or guarantees against
loss. A financial institution may also be ordered to restrict its growth,
dispose of certain assets, rescind agreements or contracts, or take other
actions as determined by the ordering agency to be appropriate.
RECENT LEGISLATIVE DEVELOPMENTS
From time to time, various bills are introduced in the United States
Congress with respect to the regulation of financial institutions. Certain of
these proposals, if adopted, could significantly change the regulation of banks
and the financial services industry. The Company cannot predict whether any of
these proposals will be adopted or, if adopted, how these proposals would affect
the Company.
EFFECT OF GOVERNMENTAL MONETARY POLICIES
The earnings of the Bank will be affected by domestic economic
conditions and the monetary and fiscal policies of the United States government
and its agencies. The Federal Reserve Board's monetary policies have had, and
will likely continue to have, an important impact on the operating results of
commercial banks through its power to implement national monetary policy in
order, among other things, to curb inflation or combat a recession. The monetary
policies of the Federal Reserve Board have major effects upon the levels of bank
loans, investments and deposits through its open market operations in United
States government securities and through its regulation of the discount rate on
borrowings of member banks and the reserve requirements against member bank
deposits. It is not possible to predict the nature or impact of future changes
in monetary and fiscal policies.
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<PAGE> 31
MANAGEMENT
GENERAL
The following table sets forth the respective names, positions with the
Company and the Bank, and anticipated subscriptions of the Organizers. The
Organizers may elect to purchase more than the shares indicated below.
Additionally, in recognition of their acceptance of the financial risks incurred
in connection with the organization of the Company and the Bank, the Organizers
are being granted, for no additional consideration, warrants to purchase one
share of Common Stock for each share purchased by them in this offering. See
"Management - Stock Warrants."
<TABLE>
<CAPTION>
ANTICIPATED SUBSCRIPTION
---------------------------------------------
NUMBER PERCENTAGE OF PERCENTAGE OF
POSITION WITH OF MINIMUM MAXIMUM
NAME COMPANY/BANK(1) SHARES(2) OFFERING(3) OFFERING(4)
---- --------------- --------- ------------- --------------
<S> <C> <C> <C> <C>
Gary M. Bremer Class II Director; 12,778 2.13% 0.85%
Organizer
Richard C. Carter Class II Director; 12,778 2.13% 0.85%
Organizer
Louis J. Douglass, III Class II Director; 12,778 2.13% 0.85%
President; Chief Executive
Officer of the Bank;
Organizer
Terry L. Ferrero Class I Director; 12,778 2.13% 0.85%
Organizer
Stephen R. Gross Organizer 12,778 2.13% 0.85%
G. Webb Howell Class I Director; 12,778 2.13% 0.85%
Organizer
Frank E. Perisino Class III Director; 12,778 2.13% 0.85%
Organizer
Richard A. Parlontieri Class III Director; 12,778 2.13% 0.85%
Chairman; Chief Executive
Officer of the Company;
Organizer
Donnie Russell Class I Director; 12,778 2.13% 0.85%
Organizer
TOTAL 115,002 19.17% 7.67%
======= ===== ====
</TABLE>
- ------------------------------
(1) The terms of the Class I Directors will expire in 1998; the terms of
the Class II Directors will expire in 1999; and the terms of the Class
III Directors will expire in 2000.
(2) All of such purchases will be at a price of $10.00 per share, the same
price at which shares are being offered to the public. Additionally, in
recognition of their acceptance of the financial risks incurred in
connection with the organization of the Company and the Bank, the
Organizers are being granted, for no additional consideration, warrants
to purchase one share of Common Stock for each share purchased by them
in this offering. See "Management -- Stock Warrants." Assuming that the
Organizers purchase the indicated number of shares in this offering,
and assuming all warrants issued in conjunction with shares purchased
by the Organizers are exercised, the Organizers would own, as a group,
32.2% of the Common Stock to be outstanding upon the completion of this
offering and exercise of the warrants if the minimum number of shares
is sold and 14.2% of the Common Stock if the maximum number of shares
is sold and the warrants exercised. No person is expected to own more
than 5% of the shares of the Common Stock immediately after the
offering. However, Organizers may purchase up to 100% of the shares in
the offering if necessary for the Company to achieve the minimum
capital requirement and also may decide to purchase additional shares
in the offering even if the minimum offering is fully subscribed. Any
shares purchased by the Organizers in
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<PAGE> 32
excess of their original commitment will be purchased for investment
and not with a view to the resale of such shares. Although each
Organizer has agreed with the other Organizers that he will subscribe
for the number of shares indicated above, neither the Organizers nor
any other subscriber will be obligated to purchase shares except
pursuant to a valid subscription agreement executed after receipt of
this Prospectus. There is no formal written agreement among the
Organizers regarding the number of shares they intend to purchase. This
table includes shares which are expected to be beneficially owned by
the Organizers upon completion of the offering.
(3) Assumes that the minimum number of 600,000 shares are sold in this
offering.
(4) Assumes that the maximum number of 1,500,000 shares are sold in this
offering.
All of the Organizers (other than Mr. Gross) will serve as directors of
the Company and the Bank.
BIOGRAPHICAL INFORMATION
GARY M. BREMER, age 58, is founder and Chairman of Simione Central
Holdings, Inc., a publicly traded Information Systems and Management Services
Company in the home health industry. He is founder and former Chairman/CEO of
Central Health Services. He is currently a Director and Treasurer of NAHC
(National Association of Home Care), co-founder and Director for the Foundation
for Medically Fragile Children, Member of the Board for the Caring Institute,
Member of the Board for the Foundation for Hospice and Home Care, and co-founder
for the HUG Center (a non-profit organization which provides day care services
to chronically ill children). He is currently a director of Fayette County Bank.
Mr. Bremer has also served on Speaker Newt Gingrich's Medicare Advisory Council.
RICHARD C. CARTER, age 48, is Vice President of Marketing with Life of
the South Insurance Company. He is a graduate of Troy State University, Troy,
Alabama, where he majored in Business Management. He has over twenty years
experience in marketing and management of health and financial services
insurance products. Carter is a charter member of the Association of Health
Insurance Agents and is a member of the National Association of Life
Underwriters, Atlanta South Association. He holds the designation of Certified
Health Consultant.
LOUIS J. DOUGLASS, III, age 53, has been the proposed President and
Chief Executive Officer of the Bank since December 1, 1997. From 1993 until he
joined the Bank, he served as a director and an executive vice president of
Regions Bank, Forsyth County, Georgia (formerly Peoples Bank of Forsyth, an
affiliate of First National Bank of Gainesville), where he was responsible for
branch managers, commercial lenders, construction lending department, loan
operations, and day to day activities of managing the bank. Prior to his
community bank experience, Mr. Douglass was with Citizens and Southern National
Bank for over 20 years. While at C&S he was responsible for both the commercial
and retail sides of the bank in several districts which ranged in size from 16
to 24 branches throughout greater Atlanta. From 1994 to 1996, Mr. Douglass
served as Treasurer of the Forsyth Rotary Club. He was also on the Construction
Committee (1995-1996), Nominating Committee (1996-1997) and Yacht Club Committee
(1997) for the Atlanta Athletic Club. From 1993 to 1996 he served as the
director for Sawnee Community Center. Mr. Douglass has also served as a director
for the Northeast Chapter- Robert Morris Associates and the Forsyth Chamber of
Commerce Economic Development Committee. From 1995 to 1996 Mr. Douglass was
involved in the Sheshunoff Affiliation Program. He has also actively
participated in the Marist Booster Club and the Georgia Bankers Association.
TERRY L. FERRERO, age 46, is President and Chief Executive Officer of
American Wholesale Building Supply Company, a wholesale distributor of building
supplies in Georgia, Alabama, Florida, South Carolina and Tennessee. Prior to
founding American Wholesale, Mr. Ferrero was a Sales Executive with Building
Products Division of United States Steel Corporation for over 15 years. Mr.
Ferrero serves on numerous Advisory Boards for the building supply industry. He
is active with several charities, including Habitat for Humanity, United
Cerebral Palsy and Scottish Rite Hospital.
STEPHEN R. GROSS, age 50, is a founding member of Gross, Collins &
Cress, P.C. He was Regional Managing Partner, National Director of Business
Consulting, and a member of the Executive Committee of the predecessor national
accounting firm. Gross, a native of Atlanta, graduated from Duke University with
a focus in
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<PAGE> 33
corporate finance and attended Georgia State University graduate school majoring
in accounting and tax. He has taught business planning, real estate services and
computer consulting to CPAs throughout Georgia and has been a national speaker
and trainer on these subjects.
G. WEBB HOWELL, age 44, is an Agent Field Consultant for State Farm
Insurance in Marietta, Georgia. Howell has been in the State Farm organization
since 1974. He is a Chartered Life Underwriter and a Chartered Financial
Consultant and a member of the Atlanta chapter of both of these organizations,
as well as a member of the National Association of Life Underwriters. Howell
attended Clayton College and National Louis University. He was an organizer of
First Community Bank Services, Inc., the holding company for Fayette County
Bank, and he is currently a director of Fayette County Bank.
RICHARD A. PARLONTIERI, age 51, is President/CEO of Habersham Resource
Management, a consulting firm with over 16 years experience in the financial
services industry. He was an organizer of First Community Bank Services, Inc.,
the holding company for Fayette County Bank, and he is currently a director of
Fayette County Bank. His community involvement includes currently serving as
Chairman, U.S. Selective Service Board, past City Councilman, Peachtree City,
Georgia; Chairman, Association of Fayette County Governments; Chairman,
Peachtree City Planning Commission; President, Fayette County American Heart
Association and Organizer/Director, Fayette Family YMCA.
FRANK E. PERISINO, age 53, is owner/operator of FMK Enterprises, Inc.,
which operates X-Press Car Rental and Leasing in Atlanta, Georgia, and the
National Car Rental Franchise for Albany, Georgia. Mr. Perisino also owns
X-Press Car Rental, Inc., a Florida corporation. He has held management
positions with Hertz and Budget Rent-A-Car, and has worked as a consultant to
car rental companies throughout the East Coast. He received an Associates Degree
in Business from Robert Morris College in Pennsylvania, and a Bachelor of
Science Degree from West Liberty State College in West Virginia.
DONNIE RUSSELL, age 54, is Chairman/CEO of Buddy's Homes, a 30 year old
manufactured housing sales and marketing company. He is President/CEO of Buddy's
Financial Group, Founder/Director of Chandeleur Homes, a manufactured housing
company, Director of American Heart Association of Fayette County, and Director
of GMHA. He was an organizer of First Community Bank Services, Inc., the holding
company for Fayette County Bank, and he is currently a director of Fayette
County Bank. He has a B.S. degree from Auburn University.
EMPLOYMENT AGREEMENTS
The Company has entered into a letter of employment with Mr. Douglass
for a three year term pursuant to which Mr. Douglass will serve as the President
and Chief Executive Officer of the Bank. Mr. Douglass will be paid a salary of
$110,000, plus his yearly medical insurance premium. Mr. Douglass will be
eligible to participate in any management incentive program of the Bank or any
long-term equity incentive program and will be eligible for grants of stock
options and other awards thereunder. Upon the closing of the offering (or as
soon thereafter as an appropriate stock option plan is adopted by the Company),
Mr. Douglass will be granted an option to purchase 10,000 shares of Common Stock
at $10.00 per share. The options will vest over a three-year period and will
have a term of ten years. Additionally, Mr. Douglass will participate in the
Bank's retirement, welfare and other benefit programs and is entitled to a life
insurance policy and an accident liability policy and reimbursement for
automobile expenses, club dues, and travel and business expenses. The letter of
employment with Mr. Douglass also provides that following termination of his
employment with the Bank and for a period of twelve months thereafter, Mr.
Douglass, may not (i) be employed in the banking business as a director, officer
at the vice-president level or higher, or organizer or promoter of, or provide
executive management services to, any financial institution within a ten-mile
radius of the Bank's offices, (ii) solicit major customers of the Bank for the
purpose of providing financial services, or (iii) solicit employees of the Bank
for employment. The amount of compensation paid in 1997 to Mr. Douglass was
$9,166.67.
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<PAGE> 34
DIRECTOR COMPENSATION
The Organizers do not intend for the Company or the Bank to pay
directors' fees until such time as the Bank is cumulatively profitable. However,
the Company and the Bank reserve the right to pay directors' fees. In addition,
after the offering, the Company expects to adopt a stock option plan which will
permit the Company to grant options to officers, directors, key employees,
advisors, and consultants of the Company. The Company anticipates that it will
initially authorize the issuance of 175,000 shares under the stock option plan
and intends to reserve approximately 75,000 shares of these shares for issuance
to directors over a three year period. However, if the number of shares issuable
upon exercise of the warrants to be granted to Organizers and the number of
shares issuable upon exercise of the options to be issued to Mr. Douglass exceed
an amount equal to 15% of the number of shares issued in the offering, then the
Company will not issue any additional stock options for a period of one year
from the date of this prospectus.
STOCK WARRANTS
In recognition of the financial risks they have undertaken in
organizing the Bank, for each share of Common Stock an Organizer purchases
(directly or indirectly, such as through an IRA account or through a spouse's or
a child's name) in the offering, the Organizer will also receive a warrant to
purchase an additional share of Common Stock. In other words, for each $10
purchase in the offering, an Organizer will receive a Unit consisting of one
share of Common Stock and a warrant to purchase an additional share of Common
Stock (in contrast, for each $10 purchase in the offering, each investor who is
not an Organizer will receive one share of Common Stock). The warrants, which
will be represented by separate warrant agreements, will become exercisable on
the later of the date the Bank opens for business and one year from the date of
this prospectus and will be exercisable in whole or in part at any time during
the ten-year period following that date, at an exercise price equal to $10.00
per share. The warrants and shares issued pursuant to the exercise of such
warrants will be transferable, subject to compliance with applicable securities
laws applicable to affiliates. See "--Shares Eligible for Future Sale." If the
OTS issues a capital directive or other order requiring the Bank to obtain
additional capital, the warrants will be forfeited if not then exercised.
INTERESTS OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
The Company and the Bank expect to have banking and other transactions
in the ordinary course of business with Organizers, directors, and officers of
the Company and the Bank and their affiliates, including members of their
families or corporations, partnerships, or other organizations in which such
Organizers, officers, or directors have a controlling interest, on substantially
the same terms (including price, or interest rates and collateral) as those
prevailing at the time for comparable transactions with unrelated parties. Such
transactions are not expected to involve more than the normal risk of
collectibility nor present other unfavorable features to the Company and the
Bank. Loans to individual directors and officers must also comply with the
Bank's lending policies and statutory lending limits, and directors with a
personal interest in any loan application will be excluded from the
consideration of such loan application. The Company intends for all of its
transactions with Organizers or other affiliates of the Company or the Bank to
be on terms no less favorable to the Company than could be obtained from an
unaffiliated third party and to be approved by a majority of the Company's
disinterested directors.
EXCULPATION AND INDEMNIFICATION
The Company's Articles of Incorporation contain a provision which,
subject to certain limited exceptions, limits the liability of a director to the
Company or its shareholders for any breach of duty as a director. There is no
limitation of liability for: a breach of duty involving appropriation of a
business opportunity of the Company; an act or omission which involves
intentional misconduct or a knowing violation of law; any transaction from which
the director derives an improper personal benefit; or as to any payments of a
dividend or any other type of distribution that is illegal under Section
14-2-832 of the Georgia Business Corporation Code (the "Code"). In addition, if
at any time the Code shall have been amended to authorize further elimination or
limitation of the liability of director, then the liability of each director of
the Company shall be eliminated or
33
<PAGE> 35
limited to the fullest extent permitted by such provisions, as so amended,
without further action by the shareholders, unless the provisions of the Code
require such action. The provision does not limit the right of the Company or
its shareholders to seek injunctive or other equitable relief not involving
payments in the nature of monetary damages.
The Company's bylaws contain certain provisions which provide
indemnification to directors of the Company that is broader than the protection
expressly mandated in Sections 14-2-852 and 14-2-857 of the Code. To the extent
that a director or officer of the Company has been successful, on the merits or
otherwise, in the defense of any action or proceeding brought by reason of the
fact that such person was a director or officer of the Company, Sections
14-2-852 and 14-2-857 of the Code would require the Company to indemnify such
persons against expenses (including attorney's fees) actually and reasonably
incurred in connection therewith. The Code expressly allows the Company to
provide for greater indemnification rights to its officers and directors,
subject to shareholder approval.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers, and controlling persons of the Company and the
Bank pursuant to the Articles of Incorporation or Bylaws, or otherwise, the
Company and the Bank have been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
The Board of Directors also has the authority to extend to officers,
employees, and agents the same indemnification rights held by directors, subject
to all of the accompanying conditions and obligations. The Board of Directors
intends to extend indemnification rights to all of its executive officers.
DESCRIPTION OF CAPITAL STOCK OF THE COMPANY
GENERAL
The authorized capital stock of the Company consists of 10,000,000
shares of common stock, par value $.01 per share, and 10,000,000 shares of
preferred stock, par value $.01 per share (the "Preferred Stock"). The following
summary describes the material terms of the Company's capital stock. Reference
is made to the Articles of Incorporation of the Company, which is filed as an
exhibit to the Registration Statement of which this Prospectus forms a part, for
a detailed description of the provisions thereof summarized below.
COMMON STOCK
Holders of shares of the Common Stock are entitled to receive such
dividends as may from time to time be declared by the Board of Directors out of
funds legally available therefor. The Company does not plan to declare any
dividends in the immediate future. See "Dividend Policy." Holders of Common
Stock are entitled to one vote per share on all matters on which the holders of
Common Stock are entitled to vote and do not have any cumulative voting rights.
Shareholders have no preemptive, conversion, redemption or sinking fund rights.
In the event of a liquidation, dissolution or winding-up of the Company, holders
of Common Stock are entitled to share equally and ratably in the assets of the
Company, if any, remaining after the payment of all debts and liabilities of the
Company and the liquidation preference of any outstanding Preferred Stock. The
outstanding shares of Common Stock are, and the shares of Common Stock offered
by the Company hereby when issued will be, fully paid and nonassessable. The
rights, preferences and privileges of holders of Common Stock are subject to any
classes or series of Preferred Stock that the Company may issue in the future.
There currently is no market for the shares. The Company has filed a
registration statement with the SEC to register the issuance of the Common Stock
in the offering under the Securities Act, and the Company intends to apply to
list the Common Stock on the Nasdaq Stock Market as soon as it qualifies to do
so. However, the Company does not expect to meet the Nasdaq Stock Market listing
requirements until the Bank has been in operation for at least one year, and
there can be no assurance that the Company will meet the listing requirements at
any time or that any trading market will develop for the shares.
34
<PAGE> 36
PREFERRED STOCK
The Articles provide that the Board of Directors is authorized, without
further action by the holders of the Common Stock, to provide for the issuance
of shares of Preferred Stock in one or more classes or series and to fix the
designations, powers, preferences, and relative, participating, optional and
other rights, qualifications, limitations, and restrictions thereof, including
the dividend rate, conversion rights, voting rights, redemption price, and
liquidation preference, and to fix the number of shares to be included in any
such classes or series. Any Preferred Stock so issued may rank senior to the
Common Stock with respect to the payment of dividends or amounts upon
liquidation, dissolution or winding-up, or both. In addition, any such shares of
Preferred Stock may have class or series voting rights. Upon completion of this
offering, the Company will not have any shares of Preferred Stock outstanding.
Issuances of Preferred Stock, while providing the Company with flexibility in
connection with general corporate purposes, may, among other things, have an
adverse effect on the rights of holders of Common Stock (for example, the
issuance of any Preferred Stock with voting or conversion rights may adversely
affect the voting power of the holders of Common Stock), and in certain
circumstances such issuances could have the effect of decreasing the market
price of the Common Stock. The Company has no present plan to issue any shares
of Preferred Stock. The Company will not issue Preferred Stock to Organizers on
terms more favorable than those on which it issues Preferred Stock to
shareholders other than Organizers.
STOCK WARRANTS
In recognition of the financial risks they have undertaken in
organizing the Bank, for each share of Common Stock an Organizer purchases
(directly or indirectly, such as through an IRA account or through a spouse's or
a child's name) in the offering, the Organizer will also receive a warrant to
purchase an additional share of Common Stock. In other words, for each $10
purchase in the offering, an Organizer will receive a Unit consisting of one
share of Common Stock and a warrant to purchase an additional share of Common
Stock (in contrast, for each $10 purchase in the offering, each investor who is
not an Organizer will receive one share of Common Stock). The warrants, which
will be represented by separate warrant agreements, will become exercisable on
the later of the date the Bank opens for business or one year from the date of
this prospectus and will be exercisable during the ten-year period following
that date, at an exercise price equal to $10.00 per share. The warrants and
shares issued pursuant to the exercise of such warrants will be transferable,
subject to compliance with applicable securities laws. If the OTS issues a
capital directive or other order requiring the Bank to obtain additional
capital, the warrants will be forfeited if not then exercised.
CERTAIN ANTITAKEOVER EFFECTS
The provisions of the Articles, the Bylaws and the Georgia corporation
law summarized in the following paragraphs may be deemed to have antitakeover
effects and may delay, defer, or prevent a tender offer or takeover attempt that
a shareholder might consider to be in such shareholder's best interest,
including those attempts that might result in a premium over the market price
for the shares held by shareholders, and may make removal of management more
difficult.
Authorized but Unissued Stock. The authorized but unissued shares of
Common Stock and Preferred Stock will be available for future issuance without
shareholder approval. These additional shares may be used for a variety of
corporate purposes, including future public offerings to raise additional
capital, corporate acquisitions, and employee benefit plans. The existence of
authorized but unissued and unreserved shares of Common Stock and Preferred
Stock may enable the Board of Directors to issue shares to persons friendly to
current management, which could render more difficult or discourage any attempt
to obtain control of the Company by means of a proxy contest, tender offer,
merger or otherwise, and thereby protect the continuity of the Company's
management.
Number of Directors. The Bylaws provide that the number of directors
shall be fixed from time to time by resolution by at least a majority of the
directors then in office, but may not consist of fewer than five nor more than
twenty-five members.
35
<PAGE> 37
Classified Board of Directors. The Articles and Bylaws divide the Board
of Directors into three classes of directors serving staggered three-year terms.
As a result, approximately one-third of the Board of Directors will be elected
at each annual meeting of shareholders. The classification of directors,
together with the provisions in the Articles and Bylaws described below that
limit the ability of shareholders to remove directors and that permit the
remaining directors to fill any vacancies on the Board of Directors, will have
the effect of making it more difficult for shareholders to change the
composition of the Board of Directors. As a result, at least two annual meetings
of shareholders may be required for the shareholders to change a majority of the
directors, whether or not a change in the Board of Directors would be beneficial
to the Company and its shareholders and whether or not a majority of the
Company's shareholders believes that such a change would be desirable.
Removal of Directors and Filling Vacancies. The Articles of
Incorporation provide that shareholders may not remove a director without cause.
The Bylaws also provide that all vacancies on the Board of Directors, including
those resulting from an increase in the number of directors, may be filled by a
majority of the remaining directors, even if they do not constitute a quorum.
When one or more directors resign from the Board of Directors effective at a
future date, a majority of directors then in office, including the directors who
are to resign, may vote on filling the vacancy.
Advance Notice Requirements for Shareholder Proposals and Director
Nominations. The Bylaws establish advance notice procedures with regard to
shareholder proposals and the nomination, other than by or at the direction of
the Board of Directors or a committee thereof, of candidates for election as
directors. These procedures provide that the notice of shareholder proposals and
shareholder nominations for the election of directors at any meeting of
shareholders must be in writing and be received by the Secretary of the Company
not later than ninety days prior to the meeting. The Company may reject a
shareholder proposal or nomination that is not made in accordance with such
procedures.
Certain Nomination Requirements. Pursuant to the Bylaws, the Company
has established certain nomination requirements for an individual to be elected
as a director of the Company at any annual or special meeting of the
shareholders, including that the nominating party provide the Company within a
specified time prior to the meeting (i) notice that such party intends to
nominate the proposed director; (ii) the name of and certain biographical
information on the nominee; and (iii) a statement that the nominee has consented
to the nomination. The chairman of any shareholders' meeting may, for good cause
shown, waive the operation of these provisions. These provisions could reduce
the likelihood that a third party would nominate and elect individuals to serve
on the Board of Directors.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have a minimum of
600,000 and a maximum of 1,500,000 shares of Common Stock outstanding. The
shares sold in this offering will be freely tradable, without restriction or
registration under the Securities Act, except for shares purchased by
"affiliates" of the Company, which will be subject to resale restrictions under
the Securities Act. An affiliate of the issuer is defined in Rule 144 under the
Securities Act as a person that directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control with the
issuer. Rule 405 under the Securities Act defines the term "control" to mean the
possession, direct or indirect, of the power to direct or cause the direction of
the management and policies of the person whether through the ownership of
voting securities, by contract or otherwise. Directors of the Company and the
Bank will likely be deemed to be affiliates. These securities held by affiliates
may be sold without registration in accordance with the provisions of Rule 144
or another exemption from registration.
In general, under Rule 144, an affiliate of the Company or a person
holding restricted shares may sell, within any three-month period, a number of
shares no greater than 1% of the then outstanding shares of the Common Stock or
the average weekly trading volume of the Common Stock during the four calendar
weeks preceding the sale, whichever is greater. Rule 144 also requires that the
securities must be sold in "brokers'
36
<PAGE> 38
transactions," as defined in the Securities Act, and the person selling the
securities may not solicit orders or make any payment in connection with the
offer or sale of securities to any person other than the broker who executes the
order to sell the securities. This requirement may make the sale of the Common
Stock by affiliates of the Company pursuant to Rule 144 difficult if no trading
market develops in the Common Stock. Rule 144 also requires persons holding
restricted securities to hold the shares for at least one year prior to sale.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for
the Company by Nelson Mullins Riley & Scarborough, L.L.P., Atlanta, Georgia.
Certain legal matters will be passed upon in connection with the offering by the
Sales Agent by Carlile Patchen & Murphy LLP, Columbus, Ohio.
EXPERTS
The financial statements of the Company dated December 31, 1997, and
for the period from August 22, 1997 (inception), until December 31, 1997, have
been audited by Bricker & Melton, P.A., as stated in their report appearing
elsewhere herein, and have been so included in reliance on the report of such
firm given upon their authority as an expert in accounting and auditing.
37
<PAGE> 39
===============================================================================
SOUTHEAST COMMERCE HOLDING COMPANY
(A DEVELOPMENT STAGE CORPORATION)
FINANCIAL STATEMENTS
DECEMBER 31, 1997
===============================================================================
<PAGE> 40
C O N T E N T S
===============================================================================
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report...........................................................................F-1
Balance Sheet - December 31, 1997......................................................................F-2
Statement of Operations for the Period from Inception (August 22, 1997)
to December 31, 1997................................................................................F-3
Statement of Changes in Stockholders' Equity for the Period from
Inception (August 22, 1997) to December 31, 1997....................................................F-4
Statement of Cash Flows for the Period from Inception (August 22, 1997)
to December 31, 1997................................................................................F-5
Notes to Financial Statements as of and for the Period from Inception
(August 22, 1997) to December 31, 1997..............................................................F-6
</TABLE>
<PAGE> 41
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Southeast Commerce Holding Company
(A Development Stage Corporation)
Atlanta, Georgia
We have audited the accompanying balance sheet of Southeast Commerce Holding
Company (a development stage corporation), as of December 31, 1997, and the
related statements of operations, changes in stockholders' equity and cash flows
for the period from inception (August 22, 1997) to December 31, 1997. These
financial statements are the responsibility of Southeast Commerce Holding
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 Southeast Commerce Holding
Company as of December 31, 1997, and the results of its operations, changes in
stockholders' equity and cash flows for the period from inception (August 22,
1997) to December 31, 1997, in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that
Southeast Commerce Holding Company will continue as a going concern. As
discussed in Note 1 to the financial statements, Southeast Commerce Holding
Company is in the organization stage and has not commenced operations. Also, as
discussed in Note 2, Southeast Commerce Holding Company's future operations are
dependent on obtaining capital through an initial stock offering and obtaining
the necessary final regulatory approvals to operate under a federal savings bank
charter. These factors and the expense associated with the development of a new
banking institution raise substantial doubt about Southeast Commerce Holding
Company's ability to continue as a going concern. Management's plans in regard
to these matters are described in Note 2. The financial statements do not
include any adjustments relating to the recoverability of reported asset amounts
or the amount of liabilities that might result from the outcome of this
uncertainty.
Bricker & Melton, P.A.
February 28, 1998
Duluth, Georgia
F-1
<PAGE> 42
SOUTHEAST COMMERCE HOLDING COMPANY
(A DEVELOPMENT STAGE CORPORATION)
BALANCE SHEET
DECEMBER 31, 1997
===============================================================================
ASSETS
<TABLE>
<S> <C>
Current assets:
Cash $ --
-----------
Total current assets --
-----------
Fixed assets (Note 4) 50,000
Deferred organizational costs 84,926
Prepaid expenses 7,228
Other assets 18,347
-----------
TOTAL ASSETS $ 160,501
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Current liabilities:
Accounts payable $ 65,161
Note payable (Note 2) 170,000
-----------
TOTAL LIABILITIES 235,161
-----------
STOCKHOLDERS' EQUITY
Preferred stock, par value $.01 per share; 10,000,000 shares authorized,
no shares issued and outstanding --
Common stock, par value $.01 per share; 10,000,000 shares authorized,
10 shares issued and outstanding --
Additional paid-in capital 100
Deficit accumulated during the development stage (74,760)
-----------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (74,660)
-----------
Commitments and contingencies (Note 4) --
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 160,501
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE> 43
SOUTHEAST COMMERCE HOLDING COMPANY
(A DEVELOPMENT STAGE CORPORATION)
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM INCEPTION (AUGUST 22, 1997) TO DECEMBER 31, 1997
===============================================================================
<TABLE>
<CAPTION>
EXPENSES
<S> <C>
Interest expense $ 2,909
Salaries and employee benefits 51,780
Rent expense 8,351
Other operating 11,720
-----------
Total Expenses 74,760
-----------
Income tax expense (benefit) (Note 3) --
-----------
NET LOSS $ 74,760
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 44
SOUTHEAST COMMERCE HOLDING COMPANY
(A DEVELOPMENT STAGE CORPORATION)
STATEMENT OF CHANGES IN STOCKHOLDERS'
FOR THE PERIOD FROM INCEPTION (AUGUST 22, 1997) TO DECEMBER 31, 1997
===============================================================================
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During the
Common Paid-in Development
Stock Capital Stage Total
------ --------- ------------ -----
<S> <C> <C> <C> <C>
Proceeds from the sale of 10
organization shares $ -- $100 $ -- $ 100
Net Loss -- -- (74,760) (74,760)
----- ---- -------- --------
BALANCE, DECEMBER 31, 1997 $ -- $100 $(74,760) $(74,660)
===== ==== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 45
SOUTHEAST COMMERCE HOLDING COMPANY
(A DEVELOPMENT STAGE CORPORATION)
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION (AUGUST 22, 1997) TO DECEMBER 31, 1997
===============================================================================
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (74,760)
Adjustments to reconcile net loss to net cash used by operating activities:
Increase in prepaid and other assets (25,575)
Increase in accounts payable 65,161
---------
NET CASH USED BY OPERATING ACTIVITIES (35,174)
---------
CASH FLOWS FROM INVESTING ACTIVITIES
Deferred organizational costs (84,926)
Purchase of fixed assets (50,000)
---------
NET CASH USED BY INVESTING ACTIVITIES (134,926)
---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the sale of organization shares 100
Proceeds from loan by organizers 8,000
Repayment of loan by organizers (8,000)
Proceeds from note payable 170,000
---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 170,100
---------
NET INCREASE IN CASH AND CASH EQUIVALENTS --
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
--
---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ --
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 46
SOUTHEAST COMMERCE HOLDING COMPANY
(A DEVELOPMENT STAGE CORPORATION)
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM INCEPTION (AUGUST 22, 1997) TO DECEMBER 31, 1997
===============================================================================
NOTE 1--ORGANIZATION
Southeast Commerce Holding Company was formed to organize and own all of the
capital stock of Commerce Bank (the Bank); together they are herein referred to
as "the Company." The organizers of the Company filed an application to charter
the Bank as a federal savings bank with the Office of Thrift Supervision.
Provided the necessary capital is raised and the necessary regulatory approvals
are received, it is expected that operations will commence in the second quarter
of 1998.
The accounting and reporting policies of the Company conform to generally
accepted accounting principles and to general practices within the banking
industry.
The Company plans to raise a minimum of $6,000,000 through an offering of its
$.01 par value common stock. The organizers, directors and members of their
immediate families expect to purchase a total of 115,002 Units, which consist of
one share of Common Stock and one warrant to purchase an additional share of
Common Stock at $10 per share, at an aggregate purchase price of approximately
$1,150,020.
Upon the completion of the sale of common stock and the opening of the Bank,
incurred organization costs, estimated to be $175,000 ($100,000 for the Bank and
$75,000 for the Company, consisting principally of legal, regulatory, consulting
and incorporation fees) will be deferred and amortized over the Bank's and the
Company's initial 60 months of operations. Offering expenses, estimated to be
$125,000 (consisting principally of direct incremental costs of the stock
offering) will be deducted from the proceeds of the offering, and pre-opening
expenses, estimated to be $150,000, (consisting principally of salaries,
overhead and other operating costs) will be charged against the initial period's
operating results.
For purposes of reporting cash flows, cash and cash equivalents include cash
on hand and amounts due from banks.
NOTE 2--LIQUIDITY AND GOING CONCERN CONSIDERATIONS
The Company incurred a net loss of $74,760 for the period from inception
(August 22, 1997) to December 31, 1997. Operations through December 31, 1997,
relate primarily to expenditures for incorporating and organizing the Company.
At August 22, 1997, the Company had been totally funded by an $8,000 loan
from the organizers. On August 27, 1997, the organizers established a line of
credit to pay back the organizers (without interest) and provide operating funds
until permanent funding was obtained.
F-6
<PAGE> 47
SOUTHEAST COMMERCE HOLDING COMPANY
(A DEVELOPMENT STAGE CORPORATION)
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM INCEPTION (AUGUST 22, 1997) TO DECEMBER 31, 1997
===============================================================================
NOTE 2--LIQUIDITY AND GOING CONCERN CONSIDERATIONS, (Continued)
At December 31, 1997, the Company is totally funded by a $500,000 line of
credit with a bank at adjustable prime rate, currently 8.5 percent. The line of
credit is unsecured and requires interest only payments on a quarterly basis
with total principal plus interest due at maturity on August 27, 1998. Personal
guarantees of the organizers, up to $83,333 each, were required by the lender.
This line of credit has been used to repay (without interest) the organizers'
$8,000 initial funding of the Company and to provide additional operating funds
until permanent funding was obtained. As of December 31, 1997, approximately
$170,000 has been drawn against this line of credit. Management believes that
the current level of expenditures is well within the financial capabilities of
the organizers and is adequate to meet existing obligations and fund current
operations, but commencing banking operations is dependent upon the Company
successfully completing the stock offering and obtaining regulatory approval.
To provide permanent funding for its operation, the Company is currently
anticipating offering a minimum of 600,000 and a maximum of 1,500,000 shares of
its common stock, $.01 par value, at $10 per share in an initial public
offering. Costs related to the organization and registration of the Company's
common stock will be paid from the gross proceeds of the offering. Should
subscriptions for the minimum offering not be obtained, amounts paid by
subscribers with their subscriptions will be returned, net of expenses, and the
offer will be withdrawn.
NOTE 3--INCOME TAXES
There was no provision (benefit) for income taxes for the period from
inception (August 22, 1997) to December 31, 1997, due to the Company's net
operating loss and its valuation reserve against deferred tax assets.
The following difference gives rise to deferred income taxes as of December
31, 1997:
<TABLE>
<S> <C>
Net operating loss carryforward $ 25,418
Valuation reserve (25,418)
--------
Net deferred tax asset $ --
========
</TABLE>
As of December 31, 1997, the Company has a net operating loss carryforward of
approximately $74,760.
F-7
<PAGE> 48
SOUTHEAST COMMERCE HOLDING COMPANY
(A DEVELOPMENT STAGE CORPORATION)
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM INCEPTION (AUGUST 22, 1997) TO DECEMBER 31, 1997
===============================================================================
NOTE 4--COMMITMENTS
The Company entered into a letter of employment with the President and Chief
Executive Officer of the Bank. The letter of employment continues for three
years and provides for an annual base salary of $110,000 per year, plus an
annual medical insurance premium and such other benefits as hospitalization,
disability and life insurance, which are generally made available to other
senior executives of the Company and the Bank.
On October 14, 1997, the Company entered into a lease agreement for office
space at its planned main office location, subject to the following conditions
(i) preliminary and final charter approval is received from the Office of Thrift
Supervision, (ii) the Federal Deposit Insurance Corporation (FDIC) approves said
chartered association for FDIC-provided insurance, and (iii) the Company raises
not less than $5,250,000 in capital. The anticipated commencement date of the
lease is April 1, 1998, with a ten-year term. The Company has deposited
$18,347.50 as of December 31, 1997, which includes a security deposit of
$9,173.25 and the initial payment of $9,173.25. The monthly base rent will be
$9,173.25 per month through March 31, 2000, $10,419.00 per month through March
31, 2003 and $11,325.00 per month through March 31, 2008.
On December 30, 1997, the Company entered into a software license agreement for
the data processing applications and implementation of the company's electronic
data processing system. The agreement provides for a total of $313,500 plus
related expenses and is to be full paid in 1998. As of December 31, 1997, a
deposit of $50,000 has been made.
F-8
<PAGE> 49
SOUTHEAST COMMERCE HOLDING COMPANY
STOCK ORDER FORM/SUBSCRIPTION AGREEMENT
TO: Southeast Commerce Holding Company
100 Galleria Parkway, Suite 400
Atlanta, Georgia 30339
Gentlemen:
You have informed me that Southeast Commerce Holding Company, a Georgia
corporation (the "Company"), is offering up to 1,500,000 shares of its Common
Stock, par value $.01 per share (the "Common Stock"), at a price of $10.00 per
share payable as provided herein and as described in and offered pursuant to the
Prospectus furnished with this Subscription Agreement to the undersigned (the
"Prospectus").
1. SUBSCRIPTION. Subject to the terms and conditions hereof, the
undersigned hereby tenders this subscription, together with payment in United
States currency by check, bank draft, or money order payable to "The Bankers
Bank as Escrow Agent for Southeast Commerce Holding Company" the amount
indicated below (the "Funds"), representing the payment of $10.00 per share for
the number of shares of Common Stock indicated below. The total subscription
price must be paid at the time the Subscription Agreement is executed.
2. ACCEPTANCE OF SUBSCRIPTION. It is understood and agreed that the
Company shall have the right to accept or reject this subscription in whole or
in part, for any reason whatsoever. The Company may reduce the number of shares
for which the undersigned has subscribed, indicating acceptance of less than all
of the shares subscribed on its written form of acceptance.
3. ACKNOWLEDGMENTS. The undersigned hereby acknowledges that he or she
has received a copy of the Prospectus. This Subscription Agreement creates a
legally binding obligation and the undersigned agrees to be bound by the terms
of this Agreement.
4. REVOCATION. The undersigned agrees that once this Subscription
Agreement is tendered to the Company, it may not be withdrawn and that this
Agreement shall survive the death or disability of the undersigned.
BY EXECUTING THIS AGREEMENT, THE SUBSCRIBER IS NOT WAIVING ANY RIGHTS HE OR SHE
MAY HAVE UNDER FEDERAL SECURITIES LAWS, INCLUDING THE SECURITIES ACT OF 1933 AND
THE SECURITIES EXCHANGE ACT OF 1934.
THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR SAVINGS
DEPOSITS ACCOUNTS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
A-1
<PAGE> 50
Please indicate in the space provided below the exact name or names and
address in which the stock certificate representing shares subscribed for
hereunder should be registered.
<TABLE>
<S> <C>
- -------------------------------------------------- ------------------------------------------------------
Number of Shares Subscribed Name or Names of Subscribers (Please Print)
for (minimum 100 shares)
$
- -------------------------------------------------- ------------------------------------------------------
Total Subscription Price at Please indicate form of ownership desired (individual,
$10.00 per share (funds must be joint tenants with right of survivorship, tenants in
enclosed) common, trust corporation, partnership, custodian, etc.)
Date: (L.S.)
--------------------------------------------- -------------------------------------------------
Signature of Subscriber(s)*
(L.S.)
- -------------------------------------------------- -------------------------------------------------
Social Security Number or Federal Signature of Subscriber(s)*
Taxpayer Identification Number
</TABLE>
Street (Residence) Address:
---------------------------------------
---------------------------------------
---------------------------------------
City, State and Zip Code
*When signing as attorney, trustee, administrator, or guardian, please
give your full title as such. If a corporation, please sign in full corporate
name by president or other authorized officer. In the case of joint tenants or
tenants in common, each owner must sign.
TO BE COMPLETED BY THE COMPANY:
Accepted as of ______________________, 199__, as to ________ shares.
SOUTHEAST COMMERCE HOLDING COMPANY
----------------------------------------
By:
Title:
A-2
<PAGE> 51
FEDERAL INCOME TAX BACKUP WITHHOLDING
In order to prevent the application of federal income tax backup
withholding, each subscriber must provide the Escrow Agent with a correct
Taxpayer Identification Number ("TIN"). An individual's social security number
is his or her TIN. The TIN should be provided in the space provided in the
Substitute Form W-9, which is set forth below.
Under federal income tax law, any person who is required to furnish his
or her correct TIN to another person, and who fails to comply with such
requirements, may be subject to a $50 penalty imposed by the IRS.
Backup withholding is not an additional tax. Rather, the tax liability
of persons subject to backup withholding will be reduced by the amount of tax
withheld. If backup withholding results in an overpayment of taxes, a refund may
be obtained from the IRS. Certain taxpayers, including all corporations, are not
subject to these backup withholding and reporting requirements.
If the shareholder has not been issued a TIN and has applied for a TIN
or intends to apply for a TIN in the near future, "Applied For" should be
written in the space provided for the TIN on the Substitute Form W-9.
SUBSTITUTE FORM W-9
Under penalties of perjury, I certify that: (i) The number shown on
this form is my correct Taxpayer Identification Number (or I am waiting for a
Taxpayer Identification Number to be issued to me), and (ii) I am not subject to
backup withholding because: (a) I am exempt from backup withholding; or (b) I
have not been notified by the Internal Revenue Service ("IRS") that I am subject
to backup withholding as a result of a failure to report all interest or
dividends; or (c) the IRS has notified me that I am no longer subject to backup
withholding.
You must cross out item (ii) above if you have been notified by the IRS
that you are subject to backup withholding because of underreporting interest or
dividends on your tax return. However, if after being notified by the IRS that
you were subject to backup withholding you received another notification from
the IRS that you are not longer subject to backup withholding, do not cross out
item (ii).
Each subscriber should complete this section.
- ---------------------------------- -----------------------------------
Signature of Subscriber Signature of Subscriber
- ---------------------------------- -----------------------------------
Printed Name Printed Name
- ---------------------------------- -----------------------------------
Social Security or Employer Social Security or Employer
Identification No. Identification No.
A-3
<PAGE> 52
===============================================================================
No dealer, salesperson or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus in connection with the offer made hereby. If given or made, such
information and representations must not be relied upon as having been
authorized by the Company. This Prospectus does not constitute an offer to sell
or solicitation of an offer to buy any of the securities offered hereby in any
jurisdiction to any person to whom it is unlawful to make such offer in such
jurisdiction. Neither the delivery of this Prospectus nor any sale made
hereunder at any time shall under any circumstances create any implication that
the information herein is correct at any time after the date hereof.
-------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Reports to Shareholders.....................Inside Cover
Additional Information......................Inside Cover
Summary ...............................................3
Risk Factors...........................................6
The Offering..........................................10
Use of Proceeds.......................................13
Capitalization........................................15
Dividend Policy ......................................16
Plan of Operation.....................................16
Proposed Business.....................................17
Supervision and Regulation............................21
Management............................................28
Description of Capital Stock of the Company...........32
Legal Matters.........................................34
Experts...............................................35
Financial Statements ................................F-1
Subscription Agreement...............................A-1
</TABLE>
-------------------------
UNTIL __________, 1998, ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
1,500,000 SHARES
SOUTHEAST COMMERCE
HOLDING COMPANY, INC.
A PROPOSED HOLDING COMPANY FOR
COMMERCE BANK
(PROPOSED)
COMMON STOCK
- -------------------------------------------------------------------------------
PROSPECTUS
- -------------------------------------------------------------------------------
BANK STOCK FINANCIAL SERVICES, INC.
____________, 1998
===============================================================================p
<PAGE> 53
PART II
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Item 24. Indemnification of Directors and Officers
The Company's Articles of Incorporation contain a provision which,
subject to certain limited exceptions, limits the liability of a director to the
Company or its shareholders for any breach of duty as a director. There is no
limitation of liability for: a breach of duty involving appropriation of a
business opportunity of the Company; an act or omission which involves
intentional misconduct or a knowing violation of law; any transaction from which
the director derives an improper personal benefit; or as to any payments of a
dividend or any other type of distribution that is illegal under Section
14-2-832 of the Georgia Business Corporation Code (the "Code"). In addition, if
at any time the Code shall have been amended to authorize further elimination or
limitation of the liability of director, then the liability of each director of
the Company shall be eliminated or limited to the fullest extent permitted by
such provisions, as so amended, without further action by the shareholders,
unless the provisions of the Code require such action. The provision does not
limit the right of the Company or its shareholders to seek injunctive or other
equitable relief not involving payments in the nature of monetary damages.
The Company's bylaws contain certain provisions which provide
indemnification to directors of the Company that is broader than the protection
expressly mandated in Sections 14-2-852 and 14-2-857 of the Code. To the extent
that a director or officer of the Company has been successful, on the merits or
otherwise, in the defense of any action or proceeding brought by reason of the
fact that such person was a director or officer of the Company, Sections
14-2-852 and 14-2-857 of the Code would require the Company to indemnify such
persons against expenses (including attorney's fees) actually and reasonably
incurred in connection therewith. The Code expressly allows the Company to
provide for greater indemnification rights to its officers and directors,
subject to shareholder approval.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers, and controlling persons of the Company and the
Bank pursuant to the Articles of Incorporation or Bylaws, or otherwise, the
Company and the Bank have been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
The Board of Directors also has the authority to extend to officers,
employees and agents the same indemnification rights held by directors, subject
to all of the accompanying conditions and obligations. The Board of Directors
has extended or intends to extend indemnification rights to all of its executive
officers.
The Company has the power to purchase and maintain insurance on behalf of
any person who is or was a director, officer, employee or agent of the Company
against any liability asserted against him or incurred by him in any such
capacity, whether or not the Company would have the power to indemnify him
against such liability under the bylaws.
Item 25. Other Expenses of Issuance and Distribution.
Estimated expenses (other than underwriting commissions) of the sale of
the shares of Common Stock are as follows:
<TABLE>
<S> <C>
Registration Fee $ 4,545
Printing and Engraving 12,000
Legal Fees and Expenses 80,000
Accounting Fees 15,000
Blue Sky Fees and Expenses 10,000
Miscellaneous Disbursements 3,455
--------
TOTAL $125,000
========
</TABLE>
<PAGE> 54
Item 26. Recent Sales of Unregistered Securities.
On August 23, 1997, the Company issued ten shares of its Common Stock
to one of its Organizers, Mr. Richard A. Parlontieri, in order to complete the
Company's organization. The price per share was $10.00 for a total purchase
price of $100.00. There were no underwriting discounts or commissions paid with
respect to this transaction. The Company has the right to redeem Mr.
Parlontieri's stock at the original purchase price of $100.00 and intends to do
so upon completion of this offering. The sale was exempt under Section 4(2) of
the Securities Act of 1933.
Item 27. Exhibits.
3.1. Articles of Incorporation*
3.2. Bylaws*
4.1. See Exhibits 3.1 and 3.2 for provisions in the Company's Articles of
Incorporation and Bylaws defining the rights of holders of the Common
Stock*
4.2. Form of Certificate of Common Stock*
5.1. Opinion Regarding Legality*
10.1. Letter of Employment dated November 18, 1997, between the Company and
Louis J. Douglass, III*
10.2. Line of Credit Agreement dated August 27, 1997, between The Company and
The Bankers Bank*
10.3. Lease Agreement dated October 14, 1997, between the Company, as lessee,
and Regent Paces Ferry Office I, Inc., as lessor*
10.4. Form of Escrow Agreement among the Company, Banc Stock Financial
Services, Inc., and The Bankers Bank*
10.5. Phoenix International Ltd., Inc. Software License Agreement*
10.6. Letter of Intent dated February 20, 1998 between the Company and Banc
Stock Financial Services, Inc.*
10.7. Form of Underwriting Agreement among the Company and Banc Stock
Financial Services, Inc.*
23.1. Consent of Independent Public Accountants
23.2. Consent of Nelson Mullins Riley & Scarborough, L.L.P. (appears in its
opinion filed as Exhibit 5.1)*
24.1. Power of Attorney*
27.1. Financial Data Schedule (for electronic filing purposes)*
- ------------------------
* Previously filed
II-2
<PAGE> 55
Item 28. Undertakings.
The undersigned Company will:
(a)(1) File, during any period in which it offers or sells
securities, a post-effective amendment to this registration
statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in
the information in the registration statement; and
(iii) Include any additional or changed material information on the
plan of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(3) File a post-effective amendment to remove from registration
any of the securities that remain unsold at the end of the offering.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of the Company pursuant to the provisions described in Item
24 above, or otherwise, the Company has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Company of expenses incurred or paid by a
director, officer or controlling person of the Company in the successful defense
of any action, suit, or proceeding) is asserted by such director, officer, or
controlling person in connection with the securities being registered, the
Company will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
II-3
<PAGE> 56
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the city of Atlanta,
State of Georgia, on April 15, 1998.
SOUTHEAST COMMERCE HOLDING COMPANY
By: /s/ Richard A. Parlontieri
-------------------------------
Richard A. Parlontieri
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
* Director April 15, 1998
- ---------------------------------------
Gary M. Bremer
* Director April 15, 1998
- ---------------------------------------
Richard C. Carter
/s/ Louis J. Douglass, III Director April 15, 1998
- ---------------------------------------
Louis J. Douglass, III
* Director April 15, 1998
- ---------------------------------------
Terry L. Ferrero
* Director April 15, 1998
- ---------------------------------------
G. Webb Howell
</TABLE>
(Signatures continued on following page)
<PAGE> 57
SIGNATURES
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Richard A. Parlontieri President; April 15, 1998
- --------------------------------------- Chief Executive Officer
Richard A. Parlontieri of the Company;
Principal Accounting
and Financial Officer;
Director
* Director April 15, 1998
- ---------------------------------------
Frank E. Perisino
* Director April 15, 1998
- ---------------------------------------
Donnie Russell
</TABLE>
*By: /s/ Richard A. Parlontieri
-----------------------------------
Richard A. Parlontieri,
as attorney-in-fact
<PAGE> 58
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
<S> <C>
3.1. Articles of Incorporation*
3.2. Bylaws*
4.1. See Exhibits 3.1 and 3.2 for provisions in the Company's
Articles of Incorporation and Bylaws defining the rights of
holders of the Common Stock*
4.2. Form of Certificate of Common Stock*
5.1. Opinion Regarding Legality*
10.1. Letter of Employment dated November 18, 1997, between the
Company and Louis J. Douglass, III*
10.2. Line of Credit Agreement dated August 27, 1997, between The
Company and The Bankers Bank*
10.3. Lease Agreement dated October 14, 1997, between the Company,
as lessee, and Regent Paces Ferry Office I, Inc., as lessor*
10.4. Escrow Agreement among the Company, Banc Stock Financial
Services, Inc., and The Bankers Bank*
10.5. Phoenix International Ltd., Inc. Software License Agreement*
10.6. Letter of Intent dated February 20, 1998 between the Company
and Banc Stock Financial Services, Inc.*
10.7. Form of Underwriting Agreement among the Company and Banc
Stock Financial Services, Inc.*
23.1. Consent of Independent Public Accountants
23.2. Consent of Nelson Mullins Riley & Scarborough, L.L.P. (appears
in its opinion filed as Exhibit 5.1)*
24.1. Power of Attorney*
27.1. Financial Data Schedule (for electronic filing purposes)*
</TABLE>
- -----------------------------
* Previously filed
<PAGE> 1
EXHIBIT 23.1
B&M
--------------------------------------
BRICKER & MELTON, P.A.
--------------------------------------
CERTIFIED PUBLIC ACCOUNTANTS
3700 CRESTWOOD PARKWAY
SUITE 590
DULUTH, GEORGIA 30136
(770) 717-1175
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
We hereby consent to the incorporation by reference of our report dated February
28, 1998, relating to the financial statements of Southeast Commerce Holding
Company, in the Registration Statement on Form SB-2 and Prospectus, and to the
reference to our firm therein under the caption "Experts."
BRICKER & MELTON, P.A.
Duluth, Georgia
April 14, 1998
