<PAGE> 1
Filed Pursuant to Rule 424(b)(3)
PROSPECTUS Registration No. 333-45979
UNITY HOLDINGS, INC.
A proposed holding company for
Unity National Bank
860,000 SHARES OF COMMON STOCK
and
140,000 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 740,000 and a
maximum of 1,000,000 shares of common stock, par value $.01 per share (the
"Common Stock"), to be issued by Unity Holdings, Inc., a Georgia corporation
(the "Company"), which has been organized to own all of the capital stock of
Unity National Bank (the "Bank"). For each $10 purchase in the offering, each
investor who is not an Organizer (as defined on page 3) 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 140,000 shares of
Common Stock in the offering. Therefore, the Company is offering up to 860,000
shares of Common Stock to non-Organizers and 140,000 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.
Sale of the Common Stock will commence on or about April 27, 1998. This
is a "best efforts" offering by the Company, and it will be terminated upon the
sale of 1,000,000 shares or June 23, 1998, whichever occurs first, unless the
offering is extended, at the discretion of the Company, for additional periods
ending no later than August 31, 1999. However, the Organizers reserve the right
to terminate the offering at any time after the sale of the minimum offering of
740,000 shares. Subscriptions are binding on subscribers and may not be revoked
by subscribers without the consent of the Company. Proceeds of the offering will
be deposited in an escrow account at First Tennessee Bank, as escrow agent,
pending receipt of subscriptions and subscription proceeds for a minimum of
740,000 shares and satisfaction of certain other conditions of the offering. If
these conditions are not met prior to the end of the offering period, all
subscription proceeds held in escrow will be returned promptly to subscribers
without interest.
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. 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.
<TABLE>
<CAPTION>
Price to Underwriting Discounts Proceeds to the
Public(1) And Commissions (2) Company(3)
--------- ------------------- ----------
<S> <C> <C> <C>
Per Share............................ $ 10.00 $ 0.50 $ 9.50
Per Unit............................. $ 10.00 $ 0.00 $ 10.00
Total (Minimum).................. $ 7,400,000 $300,000 $7,100,000
(Maximum).................. $10,000,000 $508,000 $9,492,000
</TABLE>
(1-4) See footnotes on inside cover page.
ATTKISSON, CARTER & AKERS The date
of this Prospectus is April 27, 1998.
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(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 Attkisson, Carter &
Akers as Sales Agent. The Sales Agent's commission for the minimum
offering has been calculated at 5% with respect to all shares sold in the
offering other than shares to be purchased by the Organizers, for which
the Sales Agent will not receive any commission. The Organizers currently
contemplate purchasing at least 140,000 shares in the offering. The Sales
Agent will also receive a 5% commission for shares sold in excess of the
minimum offering (subject to a maximum aggregate commission of $300,000 on
the first 800,000 shares sold by the Sales Agent), except that at the
Company's request the Sales Agent may syndicate the remaining offering, in
which case the commission will be 8%. The commission for the maximum
offering described above reflects the payment of an 8% commission on sales
in excess of the minimum offering. 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 $65,000. 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
140,000 shares of Common Stock in the offering.
REPORTS TO SHAREHOLDERS
The Company is not a reporting company as defined by the Securities and
Exchange Commission. 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. The Company will also furnish such other reports as it may
determine appropriate or as otherwise may be required by law.
ADDITIONAL INFORMATION
The Company has filed with the Securities Exchange Commission ("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, reference is hereby made to
the Registration Statement and the exhibits thereto. The Registration Statement
may be examined at, and copies of the Registration Statement may be obtained at
prescribed rates from the Public Reference Section of the SEC, Room 1024, 450
Fifth Street, N.W., Washington, DC 20549. The SEC also maintains a Web site
(http://www.sec.gov) that contains reports, proxy and information statements and
other information regarding registrants, such as the Company, that file
electronically with the Commission.
The Company and the Organizers have filed or will file various
applications with the Federal Deposit Insurance Corporation, the Federal Reserve
Bank of Atlanta, and the OCC. Prospective investors should rely only on
information contained in this Prospectus and in the Company's related
Registration Statement in making an investment decision. To the extent that
other available information not presented in this Prospectus, including
information available from the Company and information in public files and
records maintained by the Federal Deposit Insurance Corporation, the Federal
Reserve Bank of Atlanta, and the OCC, is inconsistent with information presented
in this Prospectus or provides additional information, such other information is
superseded by the information presented in this Prospectus and should not be
relied on. Projections appearing in the applications were based on assumptions
that the Organizers believed were reasonable, but as to which no assurances can
be made. The Company specifically disaffirms those projections for purposes of
this Prospectus and cautions prospective investors against placing reliance on
them for purposes of making an investment decision.
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SUMMARY
The following summary is qualified in its entirety by the more detailed
information contained elsewhere in this Prospectus.
THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT DEPOSITS OR SAVINGS ACCOUNTS
OR SAVINGS DEPOSITS AND ARE NOT INSURED OR GUARANTEED BY THE FDIC OR ANY OTHER
GOVERNMENTAL AGENCY.
THE COMPANY
Unity Holdings, Inc. (the "Company") was incorporated under the laws of
the State of Georgia on October 8, 1997, primarily to hold all of the capital
stock of a proposed national bank, Unity National Bank (the "Bank"). The Company
may not acquire the stock of the Bank without the prior approval of the Board of
Governors of the Federal Reserve System (the "Federal Reserve Board"). Neither
the Company nor the Bank has any history of operations, nor will they commence
any business until after the offering is completed. The Company will file an
application for this approval once it has received preliminary approval from the
OCC to organize the Bank. The Company initially will engage in no business other
than owning and managing the Bank.
THE BANK
The Organizers filed an application with the OCC in October 1997 to
charter the Bank as a national bank. The Organizers have also filed an
application with the Federal Deposit Insurance Corporation (the "FDIC") for
deposit insurance. The Organizers have received preliminary approval of their
applications from both the OCC and the FDIC. The Bank may not conduct its
banking business until the OCC grants final approval of the Bank's application
and issues the Bank a charter and the FDIC grants deposit insurance to the Bank.
The issuance of a charter will depend, among other things, upon compliance with
certain legal requirements that may be imposed by the OCC, including
capitalization of the Bank with not less than $7,000,000. In order to receive
deposit insurance, the Bank must also comply with certain legal requirements
that may be imposed by the FDIC. Additionally, the Company must obtain the
approval of the Federal Reserve Board to become a bank holding company before
acquiring all the capital stock of the Bank. See "Risk Factors" and "Use of
Proceeds."
The Bank will initially consist of a main office in Cartersville and a
branch office in Adairsville, Georgia. The Bank will engage in a general
commercial and retail banking business, emphasizing the needs of small-to-medium
sized businesses, professional concerns and individuals, primarily in Bartow
County, Georgia as well as surrounding counties. Michael L. McPherson, the
proposed President of the Bank, has over 20 years experience in the commercial
banking industry in Bartow County. The Organizers believe that the combined
banking experience of the Bank's President and the extensive business experience
and contacts of the Organizers in the Bartow County area should create immediate
business opportunities for the Bank. The Organizers presently are engaged in
completing the tasks necessary to open the Bank during the third quarter of 1998
although no assurances can be given that the Bank will open for business or that
the projected opening date can be achieved. See "Proposed Business."
The principal executive offices of both the Company and the Bank will
be located at 950 Joe Frank Harris Parkway, SE, Cartersville, Georgia 30121. The
address of the Adairsville branch will be 7450 Adairsville Highway, NW (Highway
140), Adairsville, Georgia 30103. The Company's telephone number is (770)
606-0555.
THE ORGANIZERS
The organizers of the Company and the Bank are Kenneth R. Bishop, Jerry
W. Braden, Donald D. George, John S. Lewis, Sam R. McCleskey, Michael L.
McPherson, Stephen A. Taylor, and B. Don Temples (the "Organizers"). Additional
individuals may be added as Organizers, subject to regulatory approval. All of
the Organizers will serve as directors of the Company and the Bank.
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Although there is no formal agreement to do so, the Organizers
(together with members of their immediate families) intend to purchase an
aggregate of at least 140,000 shares of the Common Stock to be sold in this
offering, equal to 18.9% of the minimum number of shares offered hereby and
14.0% of the maximum number of shares offered at a purchase price of $10.00 per
share. In recognition of the financial risks incurred by the Organizers, the
Company intends to issue each Organizer a warrant to purchase an additional
share of Common Stock for each share he or she purchases (directly or
indirectly, such as through an IRA account or through the name of a spouse or
child) in the offering.
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." 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. Each share purchased by an
Organizer will be accompanied by a warrant for an additional share. 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
Securities Offered.... 860,000 shares of the Common Stock of the Company,
par value $.01 per share 140,000 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 individuals other than Organizers
$10.00 per Unit to Organizers
Use of Proceeds....... The Company will use the net proceeds of the
offering to capitalize the Bank at $7,000,000 through
the purchase of all of the capital stock of the Bank,
(subject to regulatory approval); to pay the
Company's organizational and pre-opening expenses,
currently estimated to total approximately $562,000;
and to provide working capital. If sufficient
proceeds are available, the Company may choose to
capitalize the Bank at a level in excess of
$7,000,000. If the Company raises in excess of the
minimum offering, the Company plans to retain the
excess sums at the holding company level and
initially invest the sums in United States government
securities or as a deposit at the Bank. The Company
may be required by the OCC or the FDIC to capitalize
the Bank at a level in excess of $7,000,000, in which
case the Company will have to receive net proceeds in
excess of the minimum 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 OCC 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 net proceeds received from the sale of
its stock to the Company to pay organizational and
pre-opening expenses of the Bank (currently estimated
to total approximately $150,000 and $350,000
respectively); install and lease a temporary
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facility for the main office (currently estimated to
total approximately $48,000 through year-end 1998);
construct and furnish buildings for the Bank's two
offices (which the Organizers currently estimate will
cost approximately $2,545,000); and 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 no shares will
be issued and no subscription proceeds will be
released to the Company unless on or before June 23,
1998 (unless extended by the Company for additional
periods not to extend beyond August 31, 1999): (i)
the Company has accepted subscriptions and payment in
full for a minimum of 740,000 shares; (ii) the
Company has obtained regulatory approval to acquire
the stock of the Bank and thereafter to become a bank
holding company; (iii) the Bank has received
preliminary approval of its application for a charter
from the OCC; and (iv) the FDIC has granted
preliminary approval of the Bank's application for
deposit insurance. Subscription proceeds for shares
subscribed will be deposited promptly in an interest
bearing escrow account with First Tennessee Bank and
such proceeds may from time to time be invested in
interest bearing savings accounts or short-term
certificates of deposit issued by a bank.
Subscriptions are binding on subscribers and are
irrevocable. Once the Company has met the conditions
for the offering, the Escrow Agreement with First
Tennessee Bank will be terminated and any
subscription proceeds accepted after satisfaction of
the conditions but before termination of this
offering will not be deposited in escrow but will be
available for immediate use by the Company to fund
offering and organizational expenses and for working
capital. See "The Offering."
Plan of Distribution... 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 First Tennessee Bank, as escrow agent,
pending receipt of subscriptions and subscription
proceeds for a minimum of 740,000 shares and
satisfaction of certain other conditions of the
offering. The Company has engaged Attkisson, Carter &
Akers as the Company's exclusive Sales Agent to sell
shares in the offering on a best-efforts basis. The
Sales Agent will receive a 5% commission with respect
to the first 740,000 shares it sells in the offering
(but not including any shares to be purchased by the
Organizers, for which the Sales Agent will not
receive any commission). The Organizers currently
contemplate purchasing at least 140,000 shares in the
offering. However, if the Sales Agent does not sell
at least 740,000 shares within 90 days after the
effective date of this Prospectus, then the Sales
Agent's commission with respect to such 740,000
shares will only be 4%. The Sales Agent will also
receive a 5% commission for shares sold in excess of
such 740,000 shares (subject to a maximum aggregate
commission of $300,000 on the first 800,000 shares
sold by the Sales Agent), except that at the
Company's request the Sales Agent may syndicate the
remaining offering, in which case the commission will
be 8%. The Company will also pay the Sales Agent's
expenses in the offering, up to a maximum of $25,000.
RISK FACTORS
An investment in the shares offered hereby involves certain risks,
including, among others, lack of an operating history, dependence on key
employees of the Bank, significant control of the Company by the Organizers,
absence of an existing market for the Common Stock and lack of assurance that an
active trading market in the Common Stock will develop, no intention to pay
dividends in the foreseeable future, and competition from a number of other
financial institutions with substantially greater financial and other resources
than the Bank will have. See "Risk Factors."
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RISK FACTORS
An investment in the shares offered hereby involves significant 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 740,000 shares; (ii) the Company has obtained regulatory approval to
acquire the stock of the Bank and thereafter to become a bank holding company;
(iii) the Bank has received preliminary approval for its application for a
charter from the OCC; and (iv) the FDIC has granted preliminary approval of the
Bank's application for deposit insurance. If these conditions are not met by
June 23, 1998, or by such subsequent date, (but not later than August 31, 1999),
to which the offering may be extended by the Company, all subscriptions will be
returned without interest. If these 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 with First Tennessee Bank will be terminated and any
subscription proceeds accepted after satisfaction of the conditions 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 the subscription funds are released to
the Company, the Company will use a portion of the net proceeds to repay the
Organizers for amounts advanced by them for organizational and pre-opening
expenses and to repay a line of credit, guaranteed jointly and severally by the
Organizers, which the Company has obtained to fund organizational and
pre-opening expenses. If the offering is terminated prior to completion,
subscription payments will be promptly returned by the Company to the
subscribers without interest. Any expenses will be paid out of the interest
earned on the subscription funds, and to the extent that the interest earned on
the subscription funds is not sufficient to pay such expenses the same will be
paid by the Organizers.
Under the OCC's policies, a newly chartered national bank must open for
business within eighteen months of receipt of preliminary approval of its
application for charter. If the conditions for releasing subscription funds from
escrow are met and such funds are released but final regulatory approval to
commence banking operations is not obtained from the OCC or the Bank does not
open for any other reason, the Company's board of directors (the "Board of
Directors") intends to propose that the shareholders approve a plan to liquidate
the Company. Upon such a liquidation, the Company would be dissolved and the
Company's net assets (generally consisting of the amounts received in this
offering plus any interest earned thereon, less the amount of all costs and
expenses incurred by the Company and the Bank, including the salaries of
employees of the Bank and other pre-opening expenses) would be distributed to
the shareholders. In such event, the Company will have incurred numerous
expenses related to the organization of the Company and the Bank, and the amount
distributed to shareholders may be substantially less than the subscription
amount, and in an extreme case shareholders may not be returned any amount.
RISK OF DELAY IN COMPLETION OF THE OFFERING
The offering will be terminated upon the sale of 1,000,000 shares or on
June 23, 1998, whichever occurs first, unless the offering is extended, at the
discretion of the Company, for additional periods ending no later than August
31, 1999. The Company also reserves the right to terminate the offering at any
time after the sale of 740,000 shares. Subscriptions are binding on subscribers
and may not be revoked by subscribers without the consent of the Company. No
subscription proceeds will be returned to subscribers unless the offering
expires or is terminated by the Company before the issuance of shares and
release of subscription proceeds to the Company. Subscribers will not have the
right to receive interest on any subscription proceeds that are returned. As a
result of these terms of the offering, subscribers bear the risk that the
completion of the offering may be delayed until August 31, 1999, or that the
offering may not be completed and that subscription proceeds will be returned
without interest.
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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 bank holding company, the Company's profitability will depend upon the Bank's
operations. The Bank's proposed operations are subject to the risks inherent in
the establishment of any new business and those special issues which face banks.
New banks incur substantial initial expenses and may not be profitable for
several years after commencing business, if ever.
DEPENDENCE ON KEY EMPLOYEE
As a new enterprise, the Company and the Bank will be materially
dependent on the performance of Michael L. McPherson, who will be President and
Chief Executive Officer of the Company and the Bank. The loss of Mr. McPherson's
services or his failure to perform his management functions in the manner
anticipated by the Organizers could have a material adverse effect on the Bank
and the Company. See "Management." The Company has purchased key man life
insurance on Mr. McPherson, the proceeds of which would be payable to the
Company.
CONTROL OF THE COMPANY; PURCHASES BY ORGANIZERS
The Organizers, all of whom will serve as directors of the Company and
the Bank, and members of their immediate families, intend to purchase an
aggregate of 140,000 shares, equal to 18.9% of the minimum number of shares
offered hereby and 14.0% of the maximum number of shares offered hereby. 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). 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,
31.8% 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 24.6%
of the Common Stock if the maximum number of shares is sold and the warrants
exercised. Organizers may purchase additional shares in the offering in order to
meet the minimum sales required in the offering. Organizers reserve the right,
subject to regulatory approval, to purchase 100% of the shares of Common Stock
being offered hereunder if necessary to complete the offering. Any such
purchases will be for investment purposes and not for resale. As a result of the
anticipated stock ownership in the Company by the Organizers as described above,
together with the influence which may be exerted by such persons due to their
positions as directors and officers 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."
ARBITRARY OFFERING PRICE
Because the Company is 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
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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 $7,400,000 and $10,000,000 in this offering through the sale
of a reasonable number of shares, and the price per share is essentially
equivalent to the expected post-offering initial book value per share before
deducting the organizational costs and expenses. No assurance is or can be given
that any of the shares could be resold for the offering price or any other
amount.
ABSENCE OF TRADING MARKET
There currently is no market for the shares and, although the Company
has filed a Registration Statement with the SEC in order to register the
issuance of the shares under federal securities laws, it is not likely that any
trading market will develop for the shares in the near future. There are no
present plans for the Company's Common Stock to be traded on any stock exchange
or in the over-the-counter market. Furthermore, the development of any trading
market for the shares may be adversely impacted by purchases of large amounts of
shares in this offering by the Organizers since shares purchased by such persons
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 commercial banks, as well as from savings
institutions, mortgage banking firms, consumer finance companies, securities
brokerage firms, insurance companies, money market mutual funds, and other
financial institutions operating in the Bartow County area and elsewhere. A
number of these competitors are well established in the Bartow County area. Most
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 and bank holding companies. These
regulations are primarily intended to protect depositors, not shareholders.
Regulation of the financial institutions industry is undergoing continued
changes, and the ultimate effect of such changes cannot be predicted. In
December 1991, the Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") was enacted, and its effect is still being defined as regulations
mandated by it are adopted by the Company's and the Bank's regulators. FDICIA
and the regulations thereunder have increased the regulatory and supervisory
requirements for financial institutions, which has resulted and will continue to
result in increased operating expenses. Additional statutes affecting financial
institutions have been proposed and may be enacted. Regulations now affecting
the Company and the Bank may be modified at any time, and there is no assurance
that such modifications will not adversely affect the business of the Company
and the Bank. See "Supervision and Regulation."
ECONOMIC CONDITIONS BEYOND THE CONTROL OF THE COMPANY
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."
8
<PAGE> 9
NO DIVIDENDS FOR THE FORESEEABLE FUTURE
The Company has no plans to pay any cash dividends to its shareholders
in the foreseeable future. Since the Company and the Bank are both start-up
operations and may incur initial losses, both the Company and the Bank intend to
retain any earnings for the period of time management believes necessary to
ensure the success of their operations. The Company will be dependent upon the
Bank for its earnings and funds to pay dividends on the Common Stock. The
payment of dividends by the Company and the Bank is also subject to legal and
regulatory restrictions. Any payment of dividends by the Company in the future
will depend on the Bank's earnings, capital requirements, financial condition,
and other factors considered relevant by the Board of Directors. See "Dividend
Policy," "Proposed Business," and "Supervision and Regulation."
LENDING LIMIT
Under the National Bank Act, 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 their acceptance of the financial risks incurred in
connection with the organization of the Company and the Bank, the Organizers
will be granted, for nominal 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, 31.8% 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 24.6% of the Common Stock if the maximum number of shares is sold and the
warrants exercised. After the offering, the Company expects (subject to
shareholder approval or ratification) 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 up to 150,000 shares under the stock option
plan. This plan would include the options the Company will be obligated to issue
to Mr. McPherson under the terms of the Employment Agreement. 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
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.
ANTI-TAKEOVER MEASURES
The Company has certain anti-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; (v) the
Company's adoption of the Georgia "Fair Price" statute; (vi) certain nomination
requirements for directors; and (vii) the Company's adoption of the Georgia
"Business Combination" statute. Any of these measures may impede the takeover of
the Company without the approval of the Company's board of directors. See
"Description of Securities -- Certain Anti-Takeover 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 believes that its internal
systems and
9
<PAGE> 10
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 740,000 shares and a
maximum of 1,000,000 shares of its Common Stock at a price of $10.00 per share
to raise gross proceeds of between $7,400,000 and $10,000,000 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.
Although there is no formal agreement to do so, the Organizers
(together with members of their immediate families) intend to purchase an
aggregate of at least 140,000 shares of the Common Stock to be sold in this
offering. The Organizers may subscribe for up to 100% of the shares in the
offering if necessary to help the Company achieve the minimum subscription level
necessary to release subscription proceeds from escrow, and some Organizers may
decide to purchase additional shares even if the minimum subscription amount has
been achieved. Any shares purchased by the Organizers in excess of their
original commitment will be purchased for investment and not with a view to the
resale of such shares. See "Description of Capital Stock of the Company --
Shares Eligible for Future Sale." Because purchases by the Organizers may be
substantial, 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 June 23, 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 August 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 has engaged the
Sales Agent to effectuate the sales of these securities. 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
10
<PAGE> 11
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 740,000
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 740,000 shares;
and (ii) the Company has obtained approval of the Federal Reserve and the
Georgia Department of Banking and Finance to acquire the capital stock of the
Bank and thereafter to become a bank holding company. Any subscription proceeds
accepted after satisfaction of the conditions set forth above but before
termination of this offering will not be deposited in escrow but will be
available for immediate use by the Company to fund offering and organizational
expenses and for working capital.
If the above conditions are not satisfied by the Expiration Date or the
offering is otherwise earlier terminated, accepted subscription agreements will
be of no further force or effect and the full amount of all subscription funds
will be returned promptly to subscribers, without interest. The Company will
retain any interest earned thereon to repay the expenses incurred by the
Organizers in organizing the Company and the Bank. Any expenses not paid with
such interest will be paid by the Organizers.
The Escrow Agent has not investigated the desirability or advisability
of an investment in the shares by prospective investors and has not approved,
endorsed, or passed upon the merits of an investment in the shares. Subscription
funds held in escrow will be invested in interest-bearing savings accounts,
short-term United States Treasury securities, FDIC-insured bank deposits, or
such other investments as the Escrow Agent and the Company shall agree. The
Organizers do not intend to invest the subscription proceeds held in escrow in
instruments that would mature after the Expiration Date of the offering.
If the above conditions are satisfied, the subscription amounts held in
escrow may be paid to the Company and shares issued to subscribers. Once the
Company has met the conditions for the offering, the Escrow 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 OCC or the Bank does not open for any other
reason, the Board of Directors intends to propose that the shareholders approve
a plan to liquidate the Company. Upon such a liquidation, the Company would be
dissolved and the Company's net assets (generally consisting of the amounts
received in this offering plus any interest earned thereon, less the amount of
all costs and expenses incurred by the Company and the Bank, including the
salaries of employees of the Bank and other pre-opening expenses) would be
distributed to the shareholders. In such event, the Company will have incurred
numerous expenses related to the organization of the Company and the Bank, and
the amount distributed to shareholders may be substantially less than the
subscription amount, and in an extreme case shareholders may not be returned any
amount.
OFFERING PRICE OF SHARES AND EXERCISE PRICE OF WARRANTS
Because the Company is 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 $7,400,000 and $10,000,000 in this offering
through the sale of a reasonable number of shares, and the price per share is
essentially equivalent to the expected post-offering initial book value per
share before deducting the organizational costs and expenses. The exercise price
of $10.00 per share for the warrants to be
11
<PAGE> 12
granted to the Organizers was determined in order to compensate the Organizers
for the financial risks of advancing organizational and offering expenses by
allowing the Organizers to profit from any rise in the market value of the
Common Stock or in any increase in the net worth of the Company.
PLAN OF DISTRIBUTION
The Company has engaged Attkisson, Carter & Akers as the Company's
exclusive Sales Agent to sell shares in the offering on a best-efforts basis.
The Sales Agent will receive a 5% commission with respect to the first 740,000
shares it sells in the offering (but not including any shares to be purchased by
the Organizers, for which the Sales Agent will not receive any commission). The
Organizers currently contemplate purchasing at least 140,000 shares in the
offering. However, if the Sales Agent does not sell at least 740,000 shares
within 90 days after the effective date of this Prospectus, then the Sales
Agent's commission with respect to such 740,000 shares will only be 4%. The
Sales Agent will also receive a 5% commission for shares sold in excess of such
740,000 shares (subject to a maximum aggregate commission of $300,000 on the
first 800,000 shares sold by the Sales Agent), except that at the Company's
request the Sales Agent may syndicate the remaining offering, in which case the
commission will be 8%. The Company will also pay the Sales Agent's expenses in
the offering, up to a maximum of $25,000.
The Agency Agreement provides that the Company will indemnify the Sales
Agent and controlling persons against certain civil liabilities, including
liabilities under the Securities Act of 1933. The Company has the right to
terminate the Agency Agreement after 90 days after execution of the agreement.
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.
All subscribers' checks must be made payable to the Escrow Agent. See
"How to Subscribe." The Sales Agent will transmit all such checks directly to
the Escrow Agent by non of the next business day after receipt. The escrowed
funds will be invested only in investments permissible under SEC Rule 15c2-4.
The Company has engaged Banc Services Corporation (the "Consultant") as
an investment banking and marketing consultant for the offering. The Consultant
is an affiliate of the Sales Agent. The Consultant will receive a fee of
$20,000, which will be deducted from the gross commission due to the Sales Agent
at the closing of the offering. The Consultant will provide services including:
(i) creation of a marketing plan and supporting documentation such as a slide
presentation, tombstone advertisement and computer database on prospects and
(ii) market research on stock performance and acquisition activity.
In addition, the Consultant was engaged by an unrelated firm on a
subcontracting basis to assist in the preparation and filing of regulatory
applications in connection with the formation of the Bank and the Company. The
Consultant was paid an additional $30,000 for these services.
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 First Tennessee Bank, Escrow
Account for Unity Holdings, Inc. in the amount of $10.00 multiplied by the
number of shares subscribed for.
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<PAGE> 13
USE OF PROCEEDS
BY THE COMPANY
Upon satisfaction of all of the conditions discussed in "The Offering
- -- Conditions to the Offering and Release of Funds" all subscription funds held
in escrow will be released and will become capital of the Company. The gross
proceeds to the Company from the sale of the shares offered hereby will be
between $7,400,000 and $10,000,000. The Company has established a $500,000 line
of credit (the "Note") with First Tennessee Bank. The proceeds of the Note will
be used to defray pre-opening and organizational expenses. The Note is due on
August 15, 1998 and bears an interest rate at the lender's base rate (8.5% at
December 31, 1997). The Organizers have jointly and severally guaranteed the
Note. As of December 31, 1997, the Company had drawn $191,239 against the line
of credit. The money is being used for pre-opening expenses and organizational
and offering costs. Upon the successful completion of the offering, the Company
will use the proceeds to retire the debt. The Company will also use a portion of
the offering proceeds to pay the Sales Agent's commissions and to pay (or
reimburse the organizers for) 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 and offering expenses of the Company will
consist primarily of legal, accounting, marketing, and printing expenses, and
the Company anticipates that they will not exceed $65,000. The Sales Agent's
commission for the minimum offering has been calculated at 5% with respect to
all shares sold in the offering other than shares to be purchased by the
Organizers, for which the Sales Agent will not receive any commission. The
Organizers currently contemplate purchasing at least 140,000 shares in the
offering. The Sales Agent will also receive a 5% commission for shares sold in
excess of the minimum offering (subject to a maximum aggregate commission of
$300,000 on the first 800,000 shares sold by the Sales Agent), except that at
the Company's request the Sales Agent may syndicate the remaining offering, in
which case the commission will be 8%. The commission for the maximum offering
described below reflects the payment of an 8% commission on sales in excess of
the minimum offering. After payment of these expenses, the Company will use
$7,000,000 of the gross proceeds to purchase all of the capital stock of the
Bank. The Company will retain the balance of the proceeds and initially invest
the sums in United States government securities or as a deposit with the Bank.
In the long-term, the Company will use the sums for working capital and other
general corporate purposes, including payment of expenses of the Company and the
provision of additional capital for the Bank, if necessary. The Company may also
use such proceeds for potential expansion opportunities, such as the
establishment of additional branches or, the acquisition of other financial
institutions. The Company does not currently have any definitive plans regarding
any such expansion possibilities.
The following table sets forth the use of the net proceeds of this
offering by the Company if the minimum number of shares are sold in this
offering and if the maximum number of shares are sold in this offering.
<TABLE>
<CAPTION>
Minimum Maximum Offering
Offering (1) Offering (2)
------------ ------------
<S> <C> <C>
Gross proceeds from offering........................... $ 7,400,000 $ 10,000,000
Repayment of line of credit, reflecting payment of..... (65,000) (65,000)
organizational and offering expenses...................
Sales Agent's commission............................... (300,000) (508,000)
Investment in stock of the Bank........................ (7,000,000) (7,000,000)
Remaining proceeds..................................... $ 35,000 $ 2,427,000
============ ============
</TABLE>
(1) Assumes that 740,000 shares of Common Stock are sold in this offering.
(2) Assumes that 1,000,000 shares of Common Stock are sold in this
offering.
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<PAGE> 14
BY THE BANK
The Bank will use approximately $425,000 of the proceeds it receives
from the sale of its stock to the Company to reimburse the Company for amounts
advanced by the Company to pay organizational and pre-opening expenses of the
Bank, including amounts funded by the Company with advances from the Organizers,
which the Company will in turn repay to the Organizers. Organizational expenses
of the Bank, estimated at $95,000, include consulting fees, expenses for market
analysis and feasibility studies, and legal fees and expenses. Pre-opening
expenses, estimated at $330,000, include officers' and employees' salaries and
benefits estimated at $210,000 (assuming the Bank opens for business on its
target date of July 1, 1998). The Bank expects to use approximately $20,000 for
set-up and site work at its Cartersville temporary facility and $17,000 the
Adairsville temporary facility, plus approximately $3,800 per month to lease the
Cartersville temporary facility and $2,800 for the Adairsville temporary
facility, (or $52,800 over eight months for both offices). In addition, the Bank
will use approximately $845,000 for the purchase and initial preparation of the
site of the main facility and $300,000 for the branch facility, and
approximately $1,000,000 for construction of the Bank's permanent headquarters
and $400,000 for construction of the branch facility. The Bank will use
approximately $497,200 for furniture, fixtures, and equipment for the Bank's
facilities. The balance of the proceeds to be received by the Bank, estimated at
approximately $3,443,000, will be used for loans to customers, investments and
other general corporate purposes.
The following table depicts the 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 common stock. The initial amount of the Company's
investment will not vary based on the number of shares sold in this offering.
<TABLE>
<CAPTION>
<S> <C>
Investment by the Company in the Bank's common stock.................................... $ 7,000,000
Repayment of line of credit, reflecting payment of (425,000)
organizational and pre-opening expenses of the Bank................................
Installation and lease of the temporary facilities(1)................................... (89,800)
Furniture, fixtures and equipment....................................................... (497,200)
Purchase of Bank sites and initial site preparation..................................... (1,145,000)
Construction of Bank's permanent facilities............................................. (1,400,000)
-----------
Remaining proceeds(2)................................................................... $ 3,443,000
===========
</TABLE>
- ----------------------------
(1) This amount includes approximately $20,000 for set-up and site work for
the temporary facility, plus approximately $3,800 per month to lease the
Cartersville office temporary facility and $2,800 for the Adairsville
temporary facility (or an aggregate of $52,800 for both facilities from
May 1, 1998 to December 31, 1998).
(2) This amount is to be used by the Bank for loans to customers, investments
and other general corporate purposes.
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> 15
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 740,000
shares in this offering. The Bank has established July 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 such date.
<TABLE>
<CAPTION>
Shareholders' Equity December As
-------------------- 31, 1997 Adjusted
------------ -----------
<S> <C> <C>
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 -- 7,400
shares authorized; 10 shares issued and outstanding(1);
740,000 shares issued and outstanding as adjusted
(minimum offering)
Additional paid-in capital(2) 100 7,327,600
Deficit accumulated during the pre-opening stage(3) (38,767) (330,000)
------------ -----------
Total shareholders' equity (4) $ (38,667) $ 7,005,000
============ ===========
</TABLE>
- --------------------
(1) Michael L. McPherson, an Organizer of the Company, was issued ten shares
of Common Stock upon the 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.
Expenses are estimated to be $65,000 and this amount was used in the
calculation of the amount shown in the "As Adjusted" column.
(3) The deficit results from the expensing of estimated pre-opening expenses.
As of December 31, 1997, approximately $38,767 of pre-opening expenses and
$74,490 of capitalizable organizational costs had been incurred on behalf
of the Company and the Bank, and the Company's total accumulated
shareholder's deficit was $38,767. The Organizers estimate that a total of
$330,000 of pre-opening expenses, $95,000 of organizational costs, and up
to $497,200 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 July
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 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. This 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 of the Company 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
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<PAGE> 16
"Supervision and Regulation -- Capital Regulations." In addition to the
availability of funds from the Bank, the future dividend policy of the Company
is subject to the discretion of the Board of Directors and will depend upon a
number of factors, including future earnings, financial condition, cash needs,
and general business conditions.
PLAN OF OPERATION
The Company was formed to organize and own all of the capital stock of
Unity National Bank. The Company intends initially to engage only in the
business of owning and managing the Bank. The Bank will focus its core business
on conducting a general commercial banking business in its service area,
emphasizing the banking needs of small-to-medium sized businesses, professional
concerns and individuals. The Organizers filed an application with the OCC in
October 1997 to charter the Bank as a national bank. The OCC granted preliminary
approval of the Bank's charter in February 1998. The issuance of a charter will
depend, among other things, upon compliance with certain legal requirements that
may be imposed by the OCC, including capitalization of the Bank with at least
$7,000,000. Additionally, the Company must obtain the approval of the Federal
Reserve Board and the Georgia Department of Banking and Finance to become a bank
holding company before acquiring the capital stock of the Bank. The Bank has
also filed an application with the FDIC for deposit insurance. The FDIC has
granted preliminary approval of the deposit insurance application for the Bank.
As of December 31, 1997, the Company had total assets of $156,900,
consisting primarily of deferred organization costs ($74,490) and other assets
($78,439). The Company incurred a net loss of $38,767 for the period from
inception to December 31, 1997. At December 31, 1997, the Company was totally
funded by proceeds from a $500,000 line of credit, of which the balance as of
December 31, 1997 was $191,239. The line of credit was signed by the Organizers,
other than Mr. McPherson, on August 13, 1997, accrues interest at the lender's
base rate (8.50% at December 31, 1997) payable quarterly with a final maturity
date of August 15, 1998, and is guaranteed by those Organizers. Subsequent to
the execution of the Mr. McPherson's employment contract, he also guaranteed the
line of credit. Management believes that the current level of capitalization is
adequate to meet existing obligations and fund current operations, but obtaining
final regulatory approvals and commencing banking operations is dependent on
successfully completing the stock offering.
The Company has entered into a five year employment agreement with Mr.
McPherson to serve as its President and Chief Executive Officer with an
effective date of December 12, 1997. The agreement continues to December 31,
2002 and provides for an initial annual base salary of $90,700 during the
organization stage and an annual salary of $110,000 subsequent to the opening of
the Bank.
The Company has entered into a sales contract for land upon which the
Bank's office will be constructed. The contract required earnest money to be
paid at the effective date of the contract in the amount of $50,000, which will
be applied to the $841,000 purchase price of the land. The contract allows the
Company to extend the initial closing date from November 10, 1997 through July
10, 1998 by purchasing an option on the 10th of each month for $5,000. As of
December 31, 1997 the company had paid $50,000 of earnest money and $10,000 in
purchase options. In addition, the Company has purchased options in the amount
of $10,000 and $4,000 for the purchase of land in the amount of $225,000 and
$70,000, respectively.
Upon the completion of the sale of common stock and opening of the
Bank, incurred organization costs, estimated to be $150,000 (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 $65,000 (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 $350,000 (consisting
principally of salaries, overhead and other operating costs), will be charged
against the initial period's operating results.
The Bank's main office will be located in Cartersville at 950 Joe
Frank Harris Parkway, at the corner of Joe Frank Harris Parkway and Market Place
Boulevard. The Bank will initially operate out of a temporary facility at this
location while its permanent facility is under construction. The Bank will also
provide automated teller services to its customers at the Cartersville office.
The Bank also intends to open a branch office in Adairsville at 7450 Adairsville
Highway, NW (Highway 140), Adairsville, Georgia 30103. The Bank expects to open
the Adairsville office in a temporary facility in the summer of 1998, moving
into a permanent facility in early 1999. The Bank will also provide automated
teller services to its customers at the Adairsville office.
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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 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.
PROPOSED BUSINESS
GENERAL
The Company was incorporated under the laws of Georgia on October 8,
1997, primarily to own and control all of the capital stock of the Bank. The
Company initially will engage in no business other than owning and managing the
Bank. The Organizers have chosen a holding company structure under which the
Company will acquire all of the stock of the Bank because, in the Organizers'
judgment, the holding company structure provides flexibility that would not
otherwise be available.
The holding company structure can assist the Bank in maintaining its
required capital ratios because, subject to compliance with Federal Reserve
Board debt guidelines, the Company may borrow money and contribute the proceeds
to the Bank as primary capital. Moreover, a holding company may engage in
certain non-banking activities that the Federal Reserve Board has deemed to be
closely related to banking. Although the Company has no present intention of
engaging in any of these activities, if circumstances should lead the Company's
management to believe that there is a need for these services in the Bank's
market area and that such activities could be profitably conducted, management
of the Company would have the flexibility of commencing these activities upon
filing a notice or application therefor with the Federal Reserve Board.
The Bank is being organized as a national bank under the laws of the
United States and, subject to regulatory approval, the Bank will engage in a
commercial banking business with deposits insured by the FDIC. The Bank may not
commence business until the OCC issues a charter for the Bank and the FDIC
grants deposit insurance to the Bank. There is no assurance that the Bank will
be successful in receiving regulatory approval and satisfying any conditions
that may be imposed upon the Bank by the OCC or the FDIC prior to the
commencement of its business.
LOCATION AND SERVICE AREA
The Bank plans to conduct a general commercial banking business in its
service area, emphasizing the banking needs of small-to-medium sized businesses,
professional concerns and individuals. The Bank proposes to operate from a main
office in Cartersville, Georgia that will be located at the corner of Joe Frank
Harris Parkway and Market Place Boulevard, S.E. in Cartersville, Georgia and a
branch office to be located at 7450 Adairsville Highway, NW, Adairsville,
Georgia 30103. See "Facilities" below. The Organizers expect that the Bank will
draw most of its customer deposits and conduct most of its lending transactions
from within a primary service area of Bartow County, Georgia, with a secondary
market which includes the cities of Canton, Calhoun, and Rome.
Bartow County is located in northwest Georgia, approximately 40 miles
from the city of Atlanta. Bartow County, which had a population of 64,000 in
1996 and a median effective buying income per household of $32,358, includes the
cities of Cartersville, Adairsville, Emerson, Kingston, Stilesboro, Taylorville
and White. Bartow County is generally rectangular in shape and the main office
of the Bank will be located in Cartersville, which is close to the southeast
corner of the county. To the east and south of Cartersville is Lake Allatoona,
which is a natural barrier to the remainder of that part of the county and to a
portion of adjacent counties. The primary thrust of the new Bank will be the
Cities of Cartersville
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and Adairsville which are located in the northern and southern parts of Bartow
County and will provide access for residents of the entire county.
According to data provided by the Georgia Department of Labor, which
was compiled in 1995, there are 1,241 businesses in Bartow County subject to
unemployment insurance laws. Bartow County, like many small communities, has
many small businesses that are not subject to unemployment insurance laws and
are not reflected in this data. There are 109 manufacturing companies, 149
construction companies, 285 retail companies, 114 wholesale companies, 74
transportation and public utility companies and 355 service companies in Bartow
County. The largest employers in the county include Shaw Industries, Inc.
(carpet manufacturer) 1,933; Bartow County Board of Education, 1,400; First
Brands Corporation (plastic extruding company), 630; Bartow County Government,
600; Goodyear Tire and Rubber Co. (tire manufacturer), 569; Wal-Mart Stores
(retail sales), 529; and nine other businesses with between 110 employees and
493 employees in industries such as beer manufacturing, steel manufacturing,
medical facility, public utility, and carpet manufacturing.
DEPOSITS
The Bank intends to offer a full range of deposit services that are
typically available in most banks and savings and loan associations, including
checking accounts, commercial accounts, NOW accounts, savings accounts, and
other time deposits of various types, ranging from daily money market accounts
to longer-term certificates of deposit. The transaction accounts and time
certificates will be tailored to the Bank's principal market area at rates
competitive to those offered in the Bartow County area. In addition, the Bank
intends to offer certain retirement account services, such as Individual
Retirement Accounts (IRAs). The Bank intends to solicit these accounts from
individuals, businesses, associations and organizations, and governmental
authorities.
LENDING ACTIVITIES
General. The Bank intends to emphasize a range of lending services,
including real estate, commercial and consumer loans, to individuals and small-
to medium-sized businesses and professional concerns that are located in or
conduct a substantial portion of their business in the Bank's market area.
Real Estate Loans. The Organizers expect that one of the primary
components of the Bank's loan portfolio will be loans secured by first or second
mortgages on real estate. These loans will generally consist of commercial real
estate loans, construction and development loans, and residential real estate
loans (but will exclude home equity loans, which are classified as consumer
loans). Loan terms generally will be limited to five years or less, although
payments may be structured on a longer amortization basis. Interest rates may be
fixed or adjustable, and will more likely be fixed in the case of shorter term
loans. The Bank will generally charge an origination fee. Management will
attempt to reduce credit risk in the commercial real estate portfolio by
emphasizing loans on owner-occupied office and retail buildings where the
loan-to-value ratio, established by independent appraisals, does not exceed 80%.
In addition, the Bank will typically require personal guarantees of the
principal owners of the property backed with a review by the Bank of the
personal financial statements of the principal owners. The principal economic
risk associated with each category of anticipated loans, including real estate
loans, is the creditworthiness of the Bank's borrowers. The risks associated
with real estate loans vary with many economic factors, including employment
levels and fluctuations in the value of real estate. The Bank will compete for
real estate loans with a number of bank competitors which are well established
in the Bartow 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
Bartow
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County area. The well-established banks in the Bartow County area will make
proportionately more loans to medium- to large-sized businesses than the Bank.
Many of the Bank's anticipated commercial loans will likely be made to small- to
medium-sized businesses which may be less able to withstand competitive,
economic, and financial conditions than larger borrowers. Commercial loans are
generally considered to have greater risk than first or second mortgages on real
estate.
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 60 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 Bartow County area.
Consumer loans are generally considered to have greater risk than first or
second mortgages on real estate.
Loan Approval and Review. The Bank's loan approval policies will
provide for various levels of officer lending authority. When the amount of
aggregate loans to a single borrower exceeds that individual officer's lending
authority, the loan request will be considered and approved by an officer with a
higher lending limit or the officers' loan committee. The Bank will establish an
officers' loan committee that has lending limits, and any loan in excess of this
lending limit will be approved by the directors' loan committee. The Bank will
not make any loans to any director, officer, or employee of the Bank unless the
loan is approved by the board of directors of the Bank and is made on terms not
more favorable to such person than would be available to a person not affiliated
with the Bank. The Bank currently intends to adhere to Federal National Mortgage
Association ("FNMA") and Federal Home Loan Mortgage Corporation ("FHLMC")
guidelines in its mortgage loan review process, but may choose to alter this
policy in the future. The Bank does not currently intend to sell its mortgage
loans on the secondary market, but may choose to do so in the future.
Lending Limits. The Bank's lending activities will be subject to a
variety of lending limits imposed by federal law. While differing limits apply
in certain circumstances based on the type of loan or the nature of the borrower
(including the borrower's relationship to the Bank), in general the Bank will be
subject to a loan-to-one-borrower limit. These limits will increase or decrease
as the Bank's capital increases or decreases. Unless the Bank is able to sell
participations in its loans to other financial institutions, the Bank will not
be able to meet all of the lending needs of loan customers requiring aggregate
extensions of credit above these limits. It is not currently anticipated that
the Bank will have an initial loan loss reserve when it commences operations.
OTHER BANKING SERVICES
Other anticipated bank services include cash management services, 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 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 Bartow
County and elsewhere. There are currently eight commercial banks operating in
Bartow County, holding approximately $500 million in deposits. There are also
four credit unions in the county. A number of these competitors are well
established in the Bartow County area. Most of them have substantially greater
resources and lending limits and may have a lower cost of funds than the Bank.
These banks 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 in order to attract deposits. The
Organizers believe that the Bank will be able to compete effectively with these
institutions, but no assurances can be given in this regard.
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FACILITIES
Cartersville Office. The Bank's main office will be located in
Cartersville at 950 Joe Frank Harris Parkway, at the corner of Joe Frank Harris
Parkway and Market Place Boulevard. The Bank will initially operate out of a
temporary facility at this location while its permanent facility is under
construction. The Bank will also provide automated teller services to its
customers at the Cartersville office.
Adairsville Office. The Bank also intends to open a branch office in
Adairsville at 7450 Adairsville Highway, NW (Highway 140), Adairsville, Georgia
30103. The Bank expects to open the Adairsville office in a temporary facility
in the summer of 1998, moving into a permanent facility in early 1999. The Bank
will also provide automated teller services to its customers at the Adairsville
office.
The Company believes that the facilities will adequately serve the
Bank's needs for its first several years of operation. See "Use of Proceeds --
By the Bank."
EMPLOYEES
The Company anticipates that, upon commencement of operations, the Bank
will have 15 full-time employees and one part-time employee. The Company will
not have any employees other than its officers, none whom will initially receive
any remuneration for their services to the Company. Michael L. McPherson, the
proposed President of the Bank, is currently employed by the Company to head the
organizational effort for the Bank.
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 the Federal
Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"), numerous
additional regulatory requirements have been placed on the banking industry in
the past five years, and additional changes have been proposed. The banking
industry is also likely to change significantly as a result of the passage of
the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the
"Interstate Banking Act"). The operations of the Company and the Bank may be
affected by legislative changes and the policies of various regulatory
authorities. The Company is unable to predict the nature or the extent of the
effect on its business and earnings that fiscal or monetary policies, economic
control or new federal or state legislation may have in the future.
THE COMPANY
Because it owns the outstanding common stock of the Bank, the Company
is a bank holding company within the meaning of the federal Bank Holding Company
Act of 1956 (the "BHCA"). Under the BHCA, the Company is subject to periodic
examination by the Federal Reserve and is required to file periodic reports of
its operations and such additional information as the Federal Reserve may
require. The Company's and the Bank's activities are limited to banking,
managing or controlling banks, furnishing services to or performing services for
its subsidiaries or engaging in any other activity that the Federal Reserve
determines to be so closely related to banking or managing or controlling banks
as to be a proper incident thereto.
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Investments, Control and Activities. With certain limited exceptions,
the BHCA requires every bank holding company to obtain the prior approval of the
Federal Reserve before (i) acquiring substantially all the assets of any bank,
(ii) acquiring direct or indirect ownership or control of any voting shares of
any bank if after such acquisition it would own or control more than 5% of the
voting shares of such bank (unless it already owns or controls the majority of
such shares), or (iii) merging or consolidating with another bank holding
company.
In addition, and subject to certain exceptions, the BHCA and the Change
in Bank Control Act, together with regulations thereunder, require Federal
Reserve approval (or, depending on the circumstances, no notice of disapproval)
prior to any person or company acquiring "control" of a bank holding company,
such as the Company. Control is conclusively presumed to exist if an individual
or company acquires 25% or more of any class of voting securities of the bank
holding company. Control is rebuttably presumed to exist if a person acquires
10% or more but less than 25% of any class of voting securities and either the
Company has registered securities under Section 12 of the Exchange Act (which
the Company would likely be required to do with respect to the Common Stock once
it has more than 500 shareholders of record) or no other person will own a
greater percentage of that class of voting securities immediately after the
transaction. The regulations provide a procedure for challenge of the rebuttable
control presumption.
Under the BHCA, the Company is generally prohibited from engaging in,
or acquiring direct or indirect control of more than 5% of the voting shares of
any company engaged in, nonbanking activities, unless the Federal Reserve, by
order or regulation, has found those activities to be so closely related to
banking or managing or controlling banks as to be a proper incident thereto.
Some of the activities that the Federal Reserve has determined by regulation to
be proper incidents to the business of banking include making or servicing loans
and certain types of leases, engaging in certain insurance and discount
brokerage activities, performing certain data processing services, acting in
certain circumstances as a fiduciary or investment or financial advisor, owning
savings associations and making investments in certain corporations or projects
designed primarily to promote community welfare.
Source of Strength; Cross-Guarantee. In accordance with Federal Reserve
policy, the Company is expected to act as a source of financial strength to the
Bank and to commit resources to support the Bank in circumstances in which the
Company might not otherwise do so. Under the BHCA, the Federal Reserve may
require a bank holding company to terminate any activity or relinquish control
of a nonbank subsidiary (other than a nonbank subsidiary of a bank) upon the
Federal Reserve's determination that such activity or control constitutes a
serious risk to the financial soundness or stability of any subsidiary
depository institution of the bank holding company. Further, federal bank
regulatory authorities have additional discretion to require a bank holding
company to divest itself of any bank or nonbank subsidiary if the agency
determines that divestiture may aid the depository institution's financial
condition. The Bank may be required to indemnify, or cross-guarantee, the FDIC
against losses it incurs with respect to any other Bank controlled by the
Company, which in effect makes the Company's equity investments in healthy bank
subsidiaries available to the FDIC to assist any failing or failed bank
subsidiary of the Company.
THE BANK
General. The Bank operates as a national banking association
incorporated under the laws of the United States and is subject to examination
by the Office of the Comptroller of the Currency (the "OCC"). Deposits in the
Bank are insured by the Federal Deposit Insurance Corporation (the "FDIC") up to
a maximum amount (generally $100,000 per depositor, subject to aggregation
rules). The OCC and the FDIC regulate or monitor all areas of the Bank's
operations, including security devices and procedures, adequacy of
capitalization and loss reserves, loans, investments, borrowings, deposits,
mergers, issuances of securities, payment of dividends, interest rates payable
on deposits, interest rates or fees chargeable on loans, establishment of
branches, corporate reorganizations, maintenance of books and records and
adequacy of staff training to carry on safe lending and deposit gathering
practices. The OCC requires the Bank to maintain certain capital ratios and
imposes limitations on the Bank's aggregate investment in real estate, bank
premises and furniture and fixtures. The Bank is currently required by the OCC
to prepare quarterly reports on the Bank's financial condition and to conduct an
annual audit of its financial affairs in compliance with minimum standards and
procedures prescribed by the OCC.
Under FDICIA, all insured institutions must undergo periodic on-site
examination by their appropriate banking agency. The cost of examinations of
insured depository institutions and any affiliates may be assessed by the
appropriate agency against each institution or affiliate as it deems necessary
or appropriate. Insured institutions are required to submit annual reports to
the FDIC and the appropriate agency (and state supervisor when applicable).
FDICIA also directs the
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FDIC to develop with other appropriate agencies a method for insured depository
institutions to provide supplemental disclosure of the estimated fair market
value of assets and liabilities, to the extent feasible and practicable, in any
balance sheet, financial statement, report of condition or other report of any
insured depository institution. FDICIA also requires the federal banking
regulatory agencies to prescribe, by regulation, standards for all insured
depository institutions and depository institution holding companies relating,
among other things, to: (i) internal controls, information systems and audit
systems; (ii) loan documentation; (iii) credit underwriting; (iv) interest rate
risk exposure; and (v) asset quality.
Transactions With Affiliates and Insiders. The Bank is subject to
Section 23A of the Federal Reserve Act, which places 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. In addition, most
of these loans and certain other transactions must be secured in prescribed
amounts. The Bank is also subject to Section 23B of the Federal Reserve Act
which, among other things, prohibits an institution from engaging in certain
transactions with certain affiliates unless the transactions are on terms
substantially the same, or at least as favorable to such institution or its
subsidiaries, as those prevailing at the time for comparable transactions with
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.
Community Reinvestment Act. The Community Reinvestment Act requires
that each insured depository institution shall be evaluated by its primary
federal regulator with respect to its record in meeting the credit needs of its
local community, including low and moderate income neighborhoods, consistent
with the safe and sound operation of those institutions. These factors are also
considered in evaluating mergers, acquisitions and applications to open a branch
or facility.
Other Regulations. Interest and certain other charges collected or
contracted for by the Bank are subject to state usury laws and certain federal
laws concerning interest rates. The Bank's loan operations are also subject to
certain federal laws applicable to credit transactions, such as the federal
Truth-In-Lending Act governing disclosures of credit terms to consumer
borrowers, the Home Mortgage Disclosure Act of 1975 requiring financial
institutions to provide information to enable the public and public officials to
determine whether a financial institution is fulfilling its obligation to help
meet the housing needs of the community it serves, the Equal Credit Opportunity
Act prohibiting discrimination on the basis of race, creed or other prohibited
factors in extending credit, the Fair Credit Reporting Act of 1978 governing the
use and provision of information to credit reporting agencies, the Fair Debt
Collection Act governing the manner in which consumer debts may be collected by
collection agencies, and the rules and regulations of the various federal
agencies charged with the responsibility of implementing such federal laws. The
deposit operations of the Bank also are subject to the Right to Financial
Privacy Act, which imposes a duty to maintain confidentiality of consumer
financial records and prescribes procedures for complying with administrative
subpoenas of financial records, and the Electronic Funds Transfer Act and
Regulation E issued by the Federal Reserve Board to implement that act, which
governs automatic deposits to and withdrawals from deposit accounts and
customers' rights and liabilities arising from the use of automated teller
machines and other electronic banking services.
DEPOSIT INSURANCE
The deposits of the Bank are currently insured to a maximum of $100,000
per depositor, subject to certain aggregation rules. The FDIC establishes rates
for the payment of premiums by federally insured banks and thrifts for deposit
insurance. Separate insurance funds (BIF and SAIF) are maintained for commercial
banks and thrifts, with insurance premiums from the industry used to offset
losses from insurance payouts when banks and thrifts fail. Due to the high rate
of failures in the late 1980's and early 1990's, the fees that commercial banks
and thrifts pay to BIF and SAIF increased. Since 1993, insured depository
institutions like the Bank have paid for deposit insurance under a risk-based
premium system. Under this system, until mid-1995 depository institutions paid
to BIF or SAIF from $0.23 to $0.31 per $100 of insured deposits depending on its
capital levels and risk profile, as determined by its primary federal regulator
on a semi-annual basis. Once the BIF reached its legally mandated reserve ratio
in mid-1995, the FDIC lowered premiums for well capitalized banks to $0.04 per
$100. Subsequently, the FDIC revised the range of premiums from $.00 to $0.31
per $100, subject to a statutory minimum assessment of $2,000 per year. However,
the Deposit Insurance Funds Act of 1996
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eliminated the minimum assessment required by statute. It also separated,
effective January 1, 1997, the Financial Corporation (FICO) assessment to
service the interest on its bond obligations. The amount assessed on individual
institutions, including the Bank, by FICO will be in addition to the amount paid
for deposit insurance according to the risk-related assessment rate schedule.
Initially, FICO semiannual assessment rates were set at 1.30 basis points
annually for BIF deposits. Increases in deposit insurance premiums or changes in
risk classification will increase the Bank's cost of funds, and there can be no
assurance that such cost can be passed on the Bank's customers.
Increases in deposit insurance premiums or changes in risk
classification will increase the Bank's cost of funds, and there can be no
assurance that such cost can be passed on the Bank's customers.
DIVIDENDS
The principal source of the Company's cash revenues comes from
dividends and interest income on its investments. In addition, the Company may
receive cash revenues from dividends paid by the Bank. The amount of dividends
that may be paid by the Bank to the Company depends on the Bank's earnings and
capital position and is limited by federal and state law, regulations and
policies. In addition, the Board of Governors has stated that bank holding
companies should refrain from or limit dividend increases or reduce or eliminate
dividends under circumstances in which the bank holding company fails to meet
minimum capital requirements or in which its earnings are impaired.
As a national bank, the Bank may not pay dividends from its
paid-in-capital. All dividends must be paid out of undivided profits then on
hand, after deducting expenses, including reserves for losses and bad debts. In
addition, a national bank is prohibited from declaring a dividend on its shares
of common stock until its surplus equals its stated capital, unless there has
been transferred to surplus no less than one-tenth of the bank's net profits of
the preceding two consecutive half-year periods (in the case of an annual
dividend). The approval of the OCC is required if the total of all dividends
declared by a national bank in any calendar year exceeds the total of its net
profits for that year combined with its retained net profits for the preceding
two years, less any required transfers to surplus. Under FDICIA, the Bank may
not pay a dividend if, after paying the dividend, the Bank would be
undercapitalized. See "Capital Regulations" below.
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. If dividends
should be declared in the future, the amount of such dividends presently cannot
be estimated and it cannot be known whether such dividends would continue for
future periods.
CAPITAL REGULATIONS
The federal bank regulatory authorities have adopted risk-based capital
guidelines for banks and bank holding companies that are designed to make
regulatory capital requirements more sensitive to differences in risk profile
among banks and bank holding companies, account for off-balance sheet exposure
and minimize disincentives for holding liquid assets. The resulting capital
ratios represent qualifying capital as a percentage of total risk-weighted
assets and off-balance sheet items. The guidelines are minimums, and the federal
regulators have noted that banks and bank holding companies contemplating
significant expansion programs should not allow expansion to diminish their
capital ratios and should maintain ratios well in excess of the minimums. The
current guidelines require all bank holding companies and federally-regulated
banks to maintain a minimum risk-based total capital ratio equal to 8%, of which
at least 4% must be Tier 1 capital. Tier 1 capital includes common shareholders'
equity, qualifying perpetual preferred stock and minority interests in equity
accounts of consolidated subsidiaries, but excludes goodwill and most other
intangibles and excludes the allowance for loan and lease losses. Tier 2 capital
includes the excess of any preferred stock not included in Tier 1 capital,
mandatory convertible securities, hybrid capital instruments, subordinated debt
and intermediate term-preferred stock and general reserves for loan and lease
losses up to 1.25% of risk-weighted assets.
Under the guidelines, banks' and bank holding companies' assets are
given risk-weights of 0%, 20%, 50% and 100%. In addition, certain off-balance
sheet items are given credit conversion factors to convert them to asset
equivalent amounts to which an appropriate risk-weight will apply. These
computations result in the total risk-weighted assets. Most loans are assigned
to the 100% risk category, except for first mortgage loans fully secured by
residential property and, under certain circumstances, residential construction
loans, both of which carry a 50% rating. Most investment securities are
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<PAGE> 24
assigned to the 20% category, except for municipal or state revenue bonds, which
have a 50% rating, and direct obligations of or obligations guaranteed by the
United States Treasury or United States Government agencies, which have a 0%
rating.
The federal bank regulatory authorities have also implemented a
leverage ratio, which is Tier 1 capital as a percentage of average total assets
less intangibles, to be used as a supplement to the risk-based guidelines. The
principal objective of the leverage ratio is to place a constraint on the
maximum degree to which a bank holding company may leverage its equity capital
base. The minimum required leverage ratio for top-rated institutions is 3%, but
most institutions are required to maintain an additional cushion of at least 100
to 200 basis points.
FDICIA established a new capital-based regulatory scheme designed to
promote early intervention for troubled banks and requires the FDIC to choose
the least expensive resolution of bank failures. The new capital-based
regulatory framework contains five categories of compliance with regulatory
capital requirements, including "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized," and "critically
undercapitalized." To qualify as a "well capitalized" institution, a bank must
have a leverage ratio of no less than 5%, a Tier 1 risk-based ratio of no less
than 6%, and a total risk-based capital ratio of no less than 10%, and the bank
must not be under any order or directive from the appropriate regulatory agency
to meet and maintain a specific capital level. The Company and the Bank expect
initially to be qualified as "well capitalized."
Under the FDICIA regulations, the applicable agency can treat an
institution as if it were in the next lower category if the agency determines
(after notice and an opportunity for hearing) that the institution is in an
unsafe or unsound condition or is engaging in an unsafe or unsound practice. The
degree of regulatory scrutiny of a financial institution will increase, and the
permissible activities of the institution will decrease, as it moves downward
through the capital categories. Institutions that fall into one of the three
undercapitalized categories may be required to (i) submit a capital restoration
plan; (ii) raise additional capital; (iii) restrict their growth, deposit
interest rates and other activities; (iv) improve their management; (v)
eliminate management fees; or (vi) divest themselves of all or part of their
operations. Bank holding companies controlling financial institutions can be
called upon to boost the institutions' capital and to partially guarantee the
institutions' performance under their capital restoration plans.
These capital guidelines can affect the Company in several ways. If the
Bank begins to grow at a rapid pace, a premature "squeeze" on capital could
occur making a capital infusion necessary. The requirements could impact the
Company's ability to pay dividends. The Company's capital levels will initially
be more than adequate; however, rapid growth, poor loan portfolio performance or
poor earnings performance or a combination of these factors could change the
Bank's capital position in a relatively short period of time.
INTERSTATE BANKING AND BRANCHING RESTRICTIONS
On September 29, 1994, the federal government enacted the Riegle-Neal
Interstate Banking and Branching Efficiency Act of 1994 (the "Interstate Banking
Act"). This Act became effective on September 29, 1995, and permits eligible
bank holding companies in any state, with regulatory approval, to acquire
banking organizations in any other state. Effective June 1, 1997, the Interstate
Banking Act allows banks with different home states to merge, unless a
particular state opts out of the statute. Consistent with the Interstate Banking
Act, Georgia adopted legislation in 1996 which has permitted interstate bank
mergers since June 1, 1997.
In addition, beginning June 1, 1997, the Interstate Banking Act has
permitted national and state banks to establish de novo branches in another
state if there is a law in that state which applies equally to all banks and
expressly permits all out-of-state banks to establish de novo branches. However,
in 1996, Georgia adopted legislation which opts out of this provision. The
Georgia legislation provides that, with the prior approval of the Department of
Banking and Finance, after July 1, 1996, a bank may establish three new or
additional de novo branch banks anywhere in Georgia and, beginning July 1, 1998,
a bank may establish new or additional branch banks anywhere in the state with
prior regulatory approval.
RECENT LEGISLATIVE DEVELOPMENTS
From time to time, various bills are introduced in the United States
Congress and at the state legislative level with respect to the regulation of
financial institutions. Certain of these proposals, if adopted, could
significantly change the
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<PAGE> 25
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.
MANAGEMENT
GENERAL
The following table sets forth the respective names, ages, positions
with the Company and 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
will be granted, for nominal 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
Percentage of Percentage of
Position With Number of Minimum Maximum
Name (Age) Company/Bank(1) Shares (2) Offering (3) Offering (4)
- ---------- --------------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Kenneth R. Bishop(34) Director 17,500 2.37% 1.75%
Jerry W. Braden(53) Director 17,500 2.37% 1.75%
Donald D. George(57) Director 17,500 2.37% 1.75%
John S. Lewis(54) Director 17,500 2.37% 1.75%
Sam R. McCleskey(57) Director 17,500 2.37% 1.75%
Michael L. Director, President and 17,500 2.37% 1.75%
McPherson(48) Chief Executive Officer
Stephen A. Taylor(42) Director 17,500 2.37% 1.75%
B. Don Temples(46) Director 17,500 2.37% 1.75%
TOTALS 140,000 18.92% 14.0%
======= ====== =====
</TABLE>
- -------------------
(1) All of the Organizers will serve as directors of the Company and the Bank.
The directors of the Company are divided into three classes. The directors
will serve staggered three year terms. Class I, whose initial terms expire
at the 1998 annual meeting of shareholders (which may be held before the
completion of this offering), consists of Donald George, John Lewis and
Michael McPherson. Class II, whose initial terms expire at the 1999 annual
meeting of shareholders, consists of Sam McCleskey, Stephen Taylor and Don
Temples. Class III, whose initial terms expire at the 2000 annual meeting
of shareholders, consists of Kenneth Bishop and Jerry Braden.
(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 will be granted, for nominal 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, 31.8% 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
24.6% 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 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
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<PAGE> 26
after receipt of this Prospectus. This table includes shares which are
expected to be beneficially owned by the Organizers upon completion of the
offering.
(3) Assumes that the minimum number of 740,000 shares are sold in this
offering.
(4) Assumes that the maximum number of 1,000,000 shares are sold in this
offering.
Biographical information concerning the Officers and Directors is set
forth below.
Kenneth R. Bishop was born in Jacksonville, Florida on August 31, 1963.
He received a Bachelors Degree in Business Administration - Marketing from the
University of Georgia. Mr. Bishop is the owner of Daddy Pam's Coffeehouse which
he opened in March 1997. Mr. Bishop was previously employed as a Vice President
of Southern Color & Chemical Co., Inc. He has been an active member and
supporter of the Sam Jones Methodist Church for many years. In addition, he has
been active in a number of local charities, both financially and in service.
Jerry W. Braden was born in Rome, Georgia on November 6, 1944. He
received a Bachelor of Science Degree and a Masters Degree in Agricultural
Economics from the University of Georgia. He is owner of a real estate
management and development company styled The Braden Group. The Braden Group is
a trade name used to develop real estate, to sell real estate, and to own and
manage rental houses and apartment complexes. He has owned and operated The
Braden Group since 1981. Mr. Braden has been actively involved in many civic
endeavors in Bartow County, including past Chairman of the Market Analysis
Research Committee for the Washington based Council for Affordable and Rural
Housing; Board of Directors, Bartow County Habitat for Humanity; Board of
Directors, Bartow County Home Builders Association; Board Member of Trustees,
Sam Jones Historic Home and Museum; Member of Board of Directors of the
Cartersville-Bartow County Opera; and Chairman of the Finance Committee of
Trinity United Methodist Church.
Donald D. George was born in Wardtown, Virginia on April 9, 1940. He
attended several colleges including Virginia State University, ICBO Business
School of Manhattan, and St. Francis of Xavier College of Labor Relations. Mr.
George has been in the transportation industry for the past 32 years. In 1990,
Mr. George formed his own company, Free Enterprise of Atlanta, Inc. d/b/a
George's Motor Coach, which provides trip and shuttle services through the
Atlanta area as well as out of state charter trips. He was also President of the
223rd Street Block Association and Scout Master of Boy Scout Troop 676. Mr.
George is a member of the Cobb County Chamber of Commerce, the City of Atlanta
Chamber of Commerce, the Atlanta Business League, the City of Conyers Chamber of
Commerce and the Board of Directors of National Key Women of America.
John S. Lewis was born in Cartersville, Georgia on August 10, 1943. He
received a Bachelor of Business Administration from the University of Georgia.
He received a LLB in Law from Mercer University. Mr. Lewis is in the property
management business and manages jointly and independently owned income-producing
real estate and farm land. He has been in the real estate sales and management
business since 1986. He was a practicing attorney in Cartersville from 1970 to
1985.
Sam R. McCleskey was born in Woodstock, Georgia on May 1, 1940. Since
1979, Mr. McCleskey has been a supervisor in the tool and die area of Lockheed
Martin Corporation and also the owner of McCleskey Builders, Inc., a residential
home builder.
Michael L. McPherson, was born in Cartersville, Georgia on June 29,
1949. He received a Bachelors Degree in Business Administration, Cum Laude, from
Brenau College, Gainesville, Georgia. He graduated from several American Bankers
association schools on credit and lending. He received the professional
designation of Certified Lender-Business Banking (CLBB) from the Institute of
Certified Bankers. He graduated from the Georgia Bankers School at the
University of Georgia. Mr. McPherson has been a banker since 1977, when he began
his career at Bartow County Bank, Cartersville, Georgia. He worked in all phases
of banking from bookkeeping to Senior Vice President in charge of lending. He
was employed by Bartow County Bank from 1977 to 1990. In 1990, Mr. McPherson
moved to First Community Bank & Trust, Cartersville, Georgia as Executive Vice
President and Chief Lending Officer. He remained with First Community Bank &
Trust until September 1997, at which time he resigned to lead the formation of
the proposed bank. Mr. McPherson is a past Director of the Alumni Board of
Governors of Reinhardt College; past Director of the Georgia Chapter of bank
Administration Institute; past President of Young Bankers Section of Community
Bankers Association; past Member of the
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<PAGE> 27
Board of Directors of Bartow County Advocates for Children; a member of Center
Baptist Church, Cartersville; and he is active in various local charitable and
civic organizations.
Stephen A. Taylor was born in Fairmount, Georgia on October 26, 1955.
Mr. Taylor is the owner of Taylor Farm Supply, Cartersville, Georgia. This is a
forty-eight year old company and Mr. Taylor bought out a partner and became sole
owner on December 31, 1996. Mr. Taylor has attended Reinhardt College and Floyd
College and is a supporter of both these institutions. He is a past member of
the Purina Corporation Advisory Board. Mr. Taylor also coached several years in
the Bartow County Recreation Department.
B. Don Temples was born in Cartersville, Georgia on December 6, 1951.
Mr. Temples received an Associate of Arts from Reinhardt College and a Bachelor
of Business Administration from the University of Georgia. He is a licensed real
estate broker in the State of Georgia and co-owner of Temple's Construction, a
residential real estate development and construction company.
LEGAL PROCEEDINGS
There are no material legal proceedings to which any of the directors
or officers are subject.
EMPLOYMENT AGREEMENTS
The Company has entered into an employment agreement with Mr. McPherson
for a five year term pursuant to which Mr. McPherson will serve as the President
and Chief Executive Officer of the Bank. Mr. McPherson will be paid an annual
salary of $90,700 until the Bank opens and $110,000 thereafter, plus his yearly
medical insurance premium. Mr. McPherson 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. McPherson will be
granted an option to purchase 5% of the shares of Common Stock (less any
warrants received) at $10.00 per share. The options will vest over a five-year
period and will have a term of ten years. Additionally, Mr. McPherson will
participate in the Bank's retirement, welfare and other benefit programs and is
entitled to a life insurance policy and an accident liability policy and
reimbursement for automobile expenses, club dues, and travel and business
expenses. The employment agreement with Mr. McPherson also provides that
following termination of his employment with the Bank and for a period of twelve
months thereafter, Mr. McPherson, 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.
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 150,000 shares.
STOCK WARRANTS
In recognition of the financial risk 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 the name of a spouse or
child) the Organizer will also receive, for no additional consideration, a
warrant to purchase one 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 that 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
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<PAGE> 28
warrants will be transferable, subject to compliance with applicable securities
laws. See "--Shares Eligible for Future Sale." If the OCC issues a capital
directive or other order requiring the Bank to obtain additional capital, the
warrants will be forfeited if not then exercised.
INTERESTS OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
The Company and the Bank expect to have banking and other transactions
in the ordinary course of business with Organizers, directors, and officers of
the Company and the Bank and their affiliates, including members of their
families or corporations, partnerships, or other organizations in which such
Organizers, officers, or directors have a controlling interest, on substantially
the same terms (including price, or interest rates and collateral) as those
prevailing at the time for comparable transactions with unrelated parties. Such
transactions are not expected to involve more than the normal risk of
collectibility nor present other unfavorable features to the 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 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 Securities
Act of 1933 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.
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<PAGE> 29
DESCRIPTION OF SECURITIES
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 are filed as an
exhibit to the Registration Statement of which this Prospectus forms a part, for
a detailed description of the provisions thereof summarized below.
COMMON STOCK
Holders of shares of the Common Stock are entitled to receive such
dividends as may from time to time be declared by the Board of Directors out of
funds legally available therefor. The Company does not plan to declare any
dividends in the immediate future. See "Dividend Policy." Holders of Common
Stock are entitled to one vote per share on all matters on which the holders of
Common Stock are entitled to vote and do not have any cumulative voting rights.
Shareholders have no preemptive, conversion, redemption or sinking fund rights.
In the event of a liquidation, dissolution or winding-up of the Company, holders
of Common Stock are entitled to share equally and ratably in the assets of the
Company, if any, remaining after the payment of all debts and liabilities of the
Company and the liquidation preference of any outstanding Preferred Stock. The
outstanding shares of Common Stock are, and the shares of Common Stock offered
by the Company hereby when issued will be, fully paid and nonassessable. The
rights, preferences and privileges of holders of Common Stock are subject to any
classes or series of Preferred Stock that the Company may issue in the future.
There currently is no market for the shares and, although the Company
has filed a registration statement with the SEC to register the issuance of the
Common Stock in the offering under the Securities Act of 1933, it is not likely
that any trading market will develop for the shares in the future. There are no
present plans for the Common Stock to be traded on any stock exchange or in the
over-the-counter market.
PREFERRED STOCK
The Articles provide that the Board of Directors is authorized, without
further action by the holders of the Common Stock, to provide for the issuance
of shares of Preferred Stock in one or more classes or series and to fix the
designations, powers, preferences, and relative, participating, optional and
other rights, qualifications, limitations, and restrictions thereof, including
the dividend rate, conversion rights, voting rights, redemption price, and
liquidation preference, and to fix the number of shares to be included in any
such classes or series. Any Preferred Stock so issued may rank senior to the
Common Stock with respect to the payment of dividends or amounts upon
liquidation, dissolution or winding-up, or both. In addition, any such shares of
Preferred Stock may have class or series voting rights. Upon completion of this
offering, the Company will not have any shares of Preferred Stock outstanding.
Issuances of Preferred Stock, while providing the Company with flexibility in
connection with general corporate purposes, may, among other things, have an
adverse effect on the rights of holders of Common Stock, and in certain
circumstances such issuances could have the effect of decreasing the market
price of the Common Stock. The Company has no present plan to issue any shares
of Preferred Stock.
STOCK WARRANTS
In recognition of the financial risk 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 the name of a spouse or
child) the Organizer will also receive, for no additional consideration, a
warrant to purchase one 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 that 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
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<PAGE> 30
warrants will be transferable, subject to compliance with applicable securities
laws. See "--Shares Eligible for Future Sale." If the OCC issues a capital
directive or other order requiring the Bank to obtain additional capital, the
warrants will be forfeited if not then exercised.
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.
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.
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<PAGE> 31
"Fair Price" Statute. The Company has elected to adopt Georgia's "Fair
Price" statute as set forth in sections 14-2-1110 through 14-2-1113 of the
Georgia Business Corporation Code. Subject to certain exclusions summarized
below, Section 14-2-1111 of the Georgia Business Corporation Code ("Section
14-2-1111") requires that a" Business Combination" with an "Interested
Shareholder" shall be (a) unanimously approved by the continuing directors who
must constitute at least three members of the board of directors at the time of
such approval, or (b) recommended by at least two-thirds of the continuing
directors and approved by a majority of the shareholders excluding the
Interested Shareholder.
"Interested Shareholder" generally includes: (a)(i) any person who is
the beneficial owner of 10% or more of the voting power of the outstanding
voting shares of the corporation; or (ii) any person who is an affiliate of the
corporation and who was the beneficial owner of 10% or more of the voting power
of the outstanding shares of the corporation at any time within two years before
the date on which such person's status as an Interested Shareholder is
determined; and (b) the affiliates of such person. For the purpose of
determining whether a person is an Interested Shareholder, the number of voting
shares deemed to be outstanding shall not include any unissued voting shares
which may be issuable pursuant to any agreement, arrangement, or understanding,
or upon exercise of conversion rights, warrants, options, or otherwise. Subject
to certain exceptions, a "Business Combination" includes: (i) any merger or
consolidation of the corporation or a subsidiary of the corporation; (ii) any
share exchange; (iii) any sale, lease, transfer, or other disposition of assets
of the corporation or its subsidiary occurring within a 12 month period and
having an aggregate book value equal to 10% or more of the net assets of the
corporation; (iv) any transaction that results in the issuance or transfer by
the corporation or a subsidiary of the corporation of any stock of the
corporation or the subsidiary representing 5% or more of the total market value
of the outstanding stock of the corporation to any Interested Shareholder within
a 12 month period, except pursuant to a transaction that effects a pro rata
distribution to all shareholders of the corporation; (v) the adoption of any
plan or proposal for the liquidation or dissolution of the corporation in which
anything other than cash will be received by an Interested Shareholder; and (vi)
any transaction occurring within a 12 month period involving the corporation or
a subsidiary of the corporation that has the effect of increasing by 5% or more
the proportionate share of the stock of any class or series of the corporation
or the subsidiary that is directly or beneficially owned by the Interested
Shareholder. A "Continuing Director" includes any director who is not an
affiliate or associate of an Interested Shareholder or any board approved
successor of such a director who is not an affiliate or associate of an
Interested Shareholder.
Section 14-2-1111 will not apply to a Business Combination if: (a) the
aggregate amount of the cash, and fair market value five days before the
consummation date if payment is to be made in other than cash, to be received
per share by the shareholders is at least equal to the highest of: (i) the
highest per share price, including brokerage commissions, transfer taxes, and
soliciting dealers' fees, paid by the Interested Shareholder for any shares of
the same class or series acquired by it within two years preceding the
announcement date or in the transaction in which it became an Interested
Shareholder; (ii) the higher of the fair market value per share as determined on
the announcement date or the determination date; or (iii) in the case of shares
other than common shares, the highest amount per share to which preferred
shareholders are entitled in the event of liquidation, dissolution, or winding
up of the corporation, provided that subparagraph (iii) shall only be applicable
if the Interested Shareholder acquired the shares within the two years period
immediately preceding the announcement date; and (b) shareholders receive cash
or the form of consideration used in the past by the Interested Shareholder to
purchase the largest number of shares of such class or series. Further, subject
to exceptions, prior to the time the Business Combination with the Interested
Shareholder takes place, without the approval of the board of directors, there
shall have been: (i) no failure to declare and pay full dividends on the
corporation's outstanding preferred shares; (ii) no reduction in the annual rate
of dividends paid on common shares except as to reflect any subdivision of the
shares; (iii) an increase in the annual rate of dividends to reflect any
reclassification of shares; and (iv) not more than a 1% increase in the
Interested Shareholder's ownership of any of the corporation's stock in any 12
month period. An Interested Shareholder may not receive a direct or indirect
benefit, except proportionately as a shareholder, of any loans, advances,
guarantees, pledges, or other financial assistance or any tax credits or other
tax advantages provided by the corporation or its subsidiaries, either in
anticipation of or in connection with such Business Combination or otherwise.
"Business Combination" Statute. The Company has elected to adopt
Georgia's "Business Combination" statute as set forth in sections 14-2-1131
through 14-2-1133 of the Georgia Business Corporation Code. Subject to certain
exclusions summarized below, Section 14-2-1132 of the Georgia Business
Corporation Code ("Section 14-2-1132") prohibits any "Interested Shareholder"
from engaging in a "Business Combination" with a Georgia corporation for five
years following the date such person became an Interested Shareholder.
"Interested Shareholder" generally includes: (a)(i) any person who is the
beneficial owner of 10% or more of the voting power of the outstanding voting
shares of the corporation; or (ii) any person who is an affiliate of the
corporation and who was the beneficial owner of 10% or more of the voting power
of the
31
<PAGE> 32
outstanding shares of the corporation at any time within two years before the
date on which such person's status as an Interested Shareholder is determined;
and (b) the affiliates of such person. For the purpose of determining whether a
person is an Interested Shareholder, the number of voting shares deemed to be
outstanding shall not include any unissued voting shares which may be issuable
pursuant to any agreement, arrangement, or understanding, or upon exercise of
conversion rights, warrants, or options, or otherwise. Subject to certain
exceptions, a "Business Combination" includes: (i) any merger or consolidation
of the corporation or a subsidiary of the corporation; (ii) any sale, lease,
transfer, or other disposition of assets of the corporation or its subsidiary
having an aggregate book value equal to 10% or more of the net assets of the
corporation; (iii) any transaction that results in the issuance or transfer by
the corporation or a subsidiary of the corporation of any stock of the
corporation or the subsidiary representing 5% or more of the total market value
of the outstanding stock of the corporation to any Interested Shareholder,
except pursuant to a transaction that effects a pro rata distribution to all
shareholders of the corporation; (iv) the adoption of any plan or proposal for
the liquidation or dissolution of the corporation; (v) any transaction involving
the corporation or a subsidiary of the corporation that has the effect of
increasing by 5% or more the proportionate share of the stock of any class or
series of the corporation or the subsidiary that is directly or beneficially
owned by the Interested Shareholder; (vi) any receipt by the Interested
Shareholder of the benefit (except proportionately as a shareholder) of any
loans, advances, guarantees, pledges or other financial benefits or assistance
or any tax credits or other tax advantages provided by or through the
corporation or a subsidiary of the corporation; and (vii) any share exchange.
Section 14-2-1132 does not apply to a Business Combination if: (i)
before a person became an Interested Shareholder, the board of directors of the
corporation approved either the transaction in which the Interested Shareholder
became an Interested Shareholder or the Business Combination; (ii) upon
consummation of the transaction that resulted in the person becoming an
Interested Shareholder, the Interested Shareholder owned at least 90% of the
voting stock of the corporation outstanding at the time the transaction
commenced (other than certain excluded shares); or (iii) following a transaction
in which the person became an Interested Shareholder, the Business Combination
is approved by the holders of a majority of the voting stock of the corporation
not owned by the Interested Shareholder and other excluded shares.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have a minimum of
740,000 and a maximum of 1,000,000 shares of Common Stock outstanding. The
shares sold in this offering will be freely tradable, without restriction or
registration under the Securities Act of 1933 (the "Act"), except for shares
purchased by "affiliates" of the Company, which will be subject to resale
restrictions under the Act. An affiliate of the issuer is defined in Rule 144
under the 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 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 in all probability will be deemed to be affiliates. These securities held
by affiliates may be eligible for sale in the open market without registration
in accordance with the provisions of Rule 144.
In general, under Rule 144 an affiliate of the Company may sell, within
any three-month period, a number of restricted shares no greater than 1% of the
then outstanding shares of the Company's Common Stock or the average weekly
trading volume of the Common Stock during the four calendar weeks preceding the
sale, whichever is greater. Rule 144 also requires that the securities must be
sold in "brokers' transactions," as defined in the 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.
32
<PAGE> 33
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for
the Company by Nelson Mullins Riley & Scarborough, L.L.P., Atlanta, Georgia.
EXPERTS
The financial statements of the Company at December 31, 1997, and for
the period from October 8, 1997 (inception) until December 31, 1997, set forth
herein have been so included in reliance on the report of Mauldin & Jenkins,
LLC, independent certified public accountants, given on the authority of that
firm as experts in accounting and auditing.
33
<PAGE> 34
Unity Holdings, Inc.
(A Development Stage Enterprise)
Index to Financial Statements
<TABLE>
<CAPTION>
<S> <C>
Independent Auditor's Report....................................................................................F-2
Financial Statements:
Balance Sheet as of December 31, 1997...........................................................................F-3
Statement of Operations for the Period from October 8, 1997 (inception) to
December 31, 1997......................................................................................F-4
Statement of Changes in Stockholder's Deficit for the Period from October 8, 1997
(inception) to December 31, 1997................................................................................F-5
Statement of Cash Flows for the Period from October 8, 1997 (inception) to
December 31, 1997...............................................................................................F-6
Notes to Financial Statements...................................................................................F-7
</TABLE>
F-1
<PAGE> 35
INDEPENDENT AUDITOR'S REPORT
- --------------------------------------------------------------------------------
TO THE BOARD OF DIRECTORS
UNITY HOLDINGS, INC.
CARTERSVILLE, GEORGIA
We have audited the accompanying balance sheet of UNITY
HOLDINGS, INC., a development stage company, as of December 31, 1997, and the
related statements of loss, stockholders' deficit and cash flows for the period
from October 8, 1997, date of inception, to December 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position of Unity
Holdings, Inc. as of December 31, 1997, and the results of its operations and
its cash flows for the period from October 8, 1997, date of inception, to
December 31, 1997, in conformity with generally accepted accounting principles.
/s/ Mauldin & Jenkins, LLC
Mauldin & Jenkins, LLC
Atlanta, Georgia
January 30, 1998
F-2
<PAGE> 36
UNITY HOLDINGS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Cash $ 186
Office equipment 3,785
Other assets 78,439
Deferred organization costs 74,490
---------
$ 156,900
=========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Note payable $ 191,239
Accrued expenses 4,328
---------
195,567
---------
COMMITMENTS
STOCKHOLDERS' DEFICIT
Preferred Stock, $.01 par value; 10,000,000 shares authorized none issued --
Common stock, $.01 par value; 10,000,000 shares authorized; 10 shares --
issued and outstanding
Capital surplus 100
Deficit accumulated during the development stage (38,767)
---------
(38,667)
---------
$ 156,900
=========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
F-3
<PAGE> 37
UNITY HOLDINGS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF LOSS
PERIOD FROM OCTOBER 8, 1997, DATE OF INCEPTION,
TO DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
EXPENSES
Salaries and employee benefits 28,557
Other expenses 10,210
--------
38,767
--------
Net loss $(38,767)
========
Losses per common share $ (3,877)
========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
F-4
<PAGE> 38
UNITY HOLDINGS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' DEFICIT
PERIOD FROM OCTOBER 8, 1997, DATE OF INCEPTION,
TO DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
PREFERRED STOCK COMMON STOCK DURING THE TOTAL
-------------------- --------------------- CAPITAL DEVELOPMENT STOCKHOLDERS'
SHARES PAR VALUE SHARES PAR VALUE SURPLUS STAGE DEFICIT
------ --------- ------ --------- ------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, OCTOBER 8, 1997 -- $ -- -- $ -- $ -- $ -- $ --
(DATE OF INCEPTION)
Common stock Subscription -- -- 10 -- 100 -- 100
Net loss -- -- -- -- -- (38,767) (37,767)
------ --------- ------ --------- ------- ----------- --------------
BALANCE, DECEMBER 31, 1997 -- $ -- 10 $ -- $ 100 $ (38,767) $ (38,667)
====== ========= ====== ========= ======= =========== ==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
F-5
<PAGE> 39
UNITY HOLDINGS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
PERIOD FROM OCTOBER 8, 1997, DATE OF INCEPTION,
TO DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
OPERATING ACTIVITIES
<S> <C>
Net loss $ (38,767)
Adjustment to reconcile net loss to net cash used in
operating activities:
Increasing in other assets (78,339)
Increase in accrued expenses 4,328
----------
Net cash used in operating activities (112,778)
----------
INVESTING ACTIVITIES
Increase in deferred organization costs (74,490)
Purchase of office equipment (3,785)
----------
Net cash used in investing activities (78,275)
----------
FINANCING ACTIVITIES
Proceeds from note payable 191,239
----------
Net cash provided by financing activities 191,239
----------
Net Increase in cash 186
Cash at beginning of period --
----------
$ 186
==========
NONCASH TRANSACTIONS
Common stock subscriptions $ 100
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
F-6
<PAGE> 40
UNITY HOLDINGS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Unity Holdings, Inc. (the "Company") was incorporated to operate as
a bank holding company pursuant to the Federal Bank Holding Company
Act of 1956, as amended, and the Georgia Bank Holding Company Act,
and to purchase 100% of the issued and outstanding capital stock of
Unity National Bank (the "Bank"), an association to be organized
under the laws of the United States, which will conduct a general
banking business in Cartersville, Georgia. The Organizers have filed
a joint application with the Office of the Comptroller of the
Currency (the "OCC") and the Federal Deposit Insurance Corporation
(the "FDIC") to charter the proposed Bank and for FDIC insurance of
the Bank's deposits. The Company has received preliminary approval
from the OCC, and is in process of filing an application to become a
bank holding company with the Federal Reserve Board (the "FRB") and
the Georgia Department of Banking and Finance (the "DBF"). Upon
obtaining regulatory approval, the Company will be a registered bank
holding company subject to regulation by the FRB and the DBF.
Activities since inception have consisted of the Company's and the
Bank's organizers engaging in organizational and preopening
activities necessary to obtain regulatory approvals and to prepare
to commence business as a financial institution.
SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The financial statements have been prepared on the accrual basis in
accordance with generally accepted accounting principles.
Office Equipment
Office equipment is carried at cost less accumulated depreciation
computed by the straight-line method over a period of five years.
F-7
<PAGE> 41
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Deferred Organization and Stock Offering Costs
Deferred organization costs will be amortized in accordance with
applicable regulations and accounting policies over a period not to
exceed five years from the commencement of operations. Stock
offering costs will be charged to capital surplus upon completion of
the stock offering. Additional costs are expected to be incurred for
organization costs and stock offering costs.
Following is a summary of these costs:
<TABLE>
<CAPTION>
STOCK
ORGANIZATION OFFERING
COSTS COSTS TOTAL
------------ ---------- -------
<S> <C> <C> <C>
Consulting $40,000 $ -- $40,000
Legal 6,390 -- 6,390
Filing Fees 18,100 -- 18,100
Other 10,000 -- 10,000
------- ---------- -------
$74,490 $ -- $74,490
======= ========== =======
</TABLE>
INCOME TAXES
The Company will be subject to Federal and state income taxes when
taxable income is generated. No income taxes have been accrued
because of operating losses incurred during the preopening period.
LOSSES PER COMMON SHARE
Losses per common share are computed by dividing net loss by the
weighted average number of common shares outstanding. The weighted
average shares outstanding for the period from inception to December
31, 1997 was ten.
FISCAL YEAR
The Company will adopt a calendar year for both financial reporting
and tax reporting purposes.
F-8
<PAGE> 42
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 2. Liquidity and Going Concern Considerations
The Company incurred a net loss of $38,767 for the period from
inception (October 8, 1997) to December 31, 1997.
At December 31, 1997, the Company is totally funded by proceeds from
a $500,000 line of credit, of which the balance as of December 31,
1997 was $191,239. The line of credit was signed by the organizers,
other than the President, on August 13, 1997, accrues interest at
the lenders base rate (8.50% at December 31 1997) payable quarterly
with a final maturity date of August 15, 1998 and is guaranteed by
those organizers. Subsequent to the execution of the President's
employment contract, the President also guaranteed the line of
credit. Management believes that the current level of capitalization
is adequate to meet existing obligations and fund current
operations, but obtaining final regulatory approvals and commencing
banking operations is dependent on 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 740,000 and a maximum
of 1,000,000 shares of its common stock, $0.01 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 will be returned and the offer withdrawn. At December
31, 1997, outstanding stock subscriptions receivable were $100 which
was subsequently received by the Company on February 3, 1998. The
stock subscriptions have been reported as outstanding stock and
included in other assets in the balance sheet at December 31, 1997.
NOTE 3. COMMITMENTS
The Company has entered into a five year employment agreement with
its President and Chief Executive Officer with an effective date of
December 12, 1997. The agreement continues to December 31, 2002 and
provides for an initial annual base salary of $90,700 during the
organization stage and a beginning annual salary of $110,000
subsequent to the opening of the Bank.
F-9
<PAGE> 43
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 3. COMMITMENTS (CONTINUED)
The Company has entered into a sales contract for land upon which
the Bank's office will be constructed. The contract required earnest
money to be paid at the effective date of the contract in the amount
of $50,000, which will be applied to the purchase price of the land
in the amount of $841,000. The contract allows the Company to extend
the initial closing date from November 10, 1997 through June 10,
1998 by purchasing an option on the 10th of each month for $5,000.
As of December 31, 1997 the company had paid $50,000 of earnest
money and $10,000 in purchase options. In addition, the Company has
purchased options in the amount of $10,000 and $4,000 for the
purchase of land in the amount of $225,000 and $70,000,
respectively.
F-10
<PAGE> 44
UNITY HOLDINGS, INC. SUBSCRIPTION AGREEMENT
TO: Unity Holdings, Inc.
P.O. Box 200308
Cartersville, Georgia 30120-9006
(770) 606-0555
Ladies and Gentlemen:
You have informed me that Unity Holdings, Inc., a Georgia corporation
(the "Company"), is offering up to 1,000,000 shares of its $.01 par value per
share Common Stock (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 to the undersigned herewith (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 "First Tennessee
Bank as Escrow Agent for Unity Holdings, Inc." (the "Funds") indicated below,
representing the payment of $10.00 per share for the number of shares of the
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 authority 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 by him 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 DEPOSITS
ACCOUNTS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY
OTHER GOVERNMENTAL AGENCY.
A-1
<PAGE> 45
Please indicate in the space provided below the exact name or names and
address in which the stock certificate representing shares subscribed for
hereunder should be registered.
<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 enclosed) joint tenants with right of survivorship, tenants in common,
trust corporation, partnership, custodian, etc.)
Date:
----------------------------------- -------------------------------------------------------------
Signature of Subscriber(s)*
- ---------------------------------------- -------------------------------------------------------------
Social Security Number or Federal Signature of Subscriber(s)*
Taxpayer Identification Number
Street (Residence) Address:
-------------------------------------------------------------
-------------------------------------------------------------
-------------------------------------------------------------
City, State and Zip Code
</TABLE>
*When signing as attorney, trustee, administrator or guardian, please
give your full title as such. If a corporation, please sign in full corporate
name by president or other authorized officer. In the case of joint tenants or
tenants in common, each owner must sign.
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.
A-2
<PAGE> 46
SUBSTITUTE FORM W-9
Under penalties of perjury, I certify that: (1) 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 (2) 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 (2) 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 no longer subject to backup withholding, do not cross out
item (2).
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.
TO BE COMPLETED BY THE COMPANY:
Accepted as of , 199 , as to shares.
------------------- -- -------------
UNITY HOLDINGS, INC.
BY:
---------------------------
A-3
<PAGE> 47
================================================================================
No dealer, salesperson or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus in connection with the offer made hereby. If given or made, such
information and representations must not be relied upon as having been
authorized by the Company. This Prospectus does not constitute an offer to sell
or solicitation of an offer to buy any of the securities offered hereby in any
jurisdiction to any person to whom it is unlawful to make such offer in such
jurisdiction. Neither the delivery of this Prospectus nor any sale made
hereunder at any time shall under any circumstances create any implication that
the information herein is correct at any time after the date hereof.
- -------------------------
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
Reports to Shareholders................................2
Additional Information.................................2
Summary ...............................................3
Risk Factors...........................................6
The Offering..........................................10
Use of Proceeds.......................................13
Capitalization........................................15
Dividend Policy ......................................15
Plan of Operation.....................................16
Proposed Business.....................................17
Supervision and Regulation............................20
Management............................................25
Description of Securities.............................29
Legal Matters.........................................33
Experts...............................................33
Financial Statements ................................F-1
Subscription Agreement...............................A-1
</TABLE>
- -------------------------
UNTIL JULY 27, 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.
================================================================================
1,000,000 SHARES
UNITY HOLDINGS, INC.
A PROPOSED HOLDING COMPANY FOR
UNITY NATIONAL BANK
(PROPOSED)
COMMON STOCK
------------------------
PROSPECTUS
-------------------------
ATTKISSON, CARTER & AKERS
APRIL 27, 1998
================================================================================
