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As filed with the Securities and Exchange Commission on December 23, 1998
Registration No. 333-______
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------
FORM SB-2
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
----------------------------
FIRST CAPITAL BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
South Carolina 6021 57-1070990
- ------------------------------- --------------------------- ---------------
(State or other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
207 Highway 15/401 Bypass East
Bennettsville, South Carolina 29512
(843) 454-9337
(Address and Telephone Number of Principal Executive Offices and Intended
Principal Place of Business)
----------------------------
James Aubrey Crosland
Chief Executive Officer
207 Highway 15/401 Bypass East
Bennettsville, South Carolina 29512
(843) 454-9337
(Name, Address, and Telephone Number of Agent For Service)
----------------------------
Copies of all communications, including copies of all communications
sent to agent for service, should be sent to:
Neil E. Grayson, Esq. A. George Igler, Esq.
C. Russell Pickering, Esq. Igler & Dougherty, P.A.
Nelson Mullins Riley & Scarborough, L.L.P. 1501 Park Avenue East
999 Peachtree Street, N.E., Suite 1400 Tallahassee, Florida 32301
Atlanta, Georgia 30309 (850) 878-2411
(404) 817-6000 (850) 878-1230 (Fax)
(404) 817-6225 (Fax)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] ___________________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ___________________
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ___________________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
--------------------------------
CALCULATION OF REGISTRATION FEE
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<CAPTION>
=======================================================================================================
PROPOSED
MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE OFFERING AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER SHARE PRICE(1) FEE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value.... 720,000 $10.00 $7,200,000 $2,002
=======================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(a) under the Securities Act of 1933.
------------------------------
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to such Section 8(a),
may determine.
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED DECEMBER ____, 1998
FIRST CAPITAL BANCSHARES, INC.
(INSERT COMPANY LOGO HERE)
720,000 Shares of Common Stock
-------------------------------
This is an initial public offering of shares of common stock of First
Capital Bancshares, Inc. First Capital is offering a minimum of 500,000 shares
and a maximum of 720,000 shares at a price of $10.00 per share. The minimum
purchase amount will be 100 shares. There is currently no public market in the
shares of common stock. The market price of the shares after this offering may
be higher or lower than the initial public offering price.
The underwriter for the offering is required to use only its best
efforts to sell the securities offered; however, the underwriter must sell a
minimum of 500,000 shares if it sells any. The offering is scheduled to end on
March 31, 1999, but the company may extend the offering until September 30,
1999, at the latest. All money received will be held in escrow until the minimum
number of shares has been sold and First Capital has received preliminary
regulatory approval for the bank it proposes to create. If these criteria are
not met prior to the end of the offering period, all funds will be returned.
Purchases of the shares of common stock are not deposits into an
account of a bank and are not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other agency.
INVESTING IN THE COMMON STOCK INVOLVES CERTAIN RISKS. PLEASE REVIEW THE RISK
FACTORS BEGINNING ON PAGE 6.
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<CAPTION>
Per Share Minimum Total Maximum Total
--------- ---------------- ----------------
(500,000 Shares) (720,000 Shares)
---------------- ----------------
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Public Offering Price................................ $10.00 $5,000,000 $7,200,000
Sales Agency Commissions (1)......................... 0.70 315,160 469,160
Proceeds to First Capital (1)........................ 9.30 4,684,840 6,730,840
</TABLE>
(1) First Capital must pay a 2.5% commission on shares sold to the
organizers in the offering (anticipated to be 55,200 shares), 6.5% commission on
up to 200,000 shares sold to investors identified by the organizers, and a 7.0%
commission on shares sold to the public.
THE SECURITIES OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR SAVINGS
DEPOSITS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY
OTHER GOVERNMENTAL AGENCY AND ARE SUBJECT TO INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
(BANC STOCK LOGO HERE)
Prospectus dated _________
<PAGE> 3
FIRST CAPITAL BANCSHARES, INC.
[A map of South Carolina, highlighting the Bennettsville area, and a picture of
the organizers is included here.]
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
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Page
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<S> <C>
Summary ............................................................................................................3
Risk Factors........................................................................................................6
The Offering.......................................................................................................10
Use of Proceeds ...................................................................................................13
Capitalization.....................................................................................................15
Dividend Policy ...................................................................................................16
Plan of Operation..................................................................................................16
Proposed Business..................................................................................................17
Supervision and Regulation.........................................................................................20
Management.........................................................................................................27
Description of Capital Stock of First Capital......................................................................31
Legal Matters......................................................................................................33
Experts............................................................................................................33
Additional Information ............................................................................................33
Index to Financial Statements ....................................................................................F-1
</TABLE>
--------------------------
First Capital's principal executive offices are located at 207 Highway 15/401
Bypass East, Bennettsville, South Carolina 29512, and the telephone number is
(843) 454-9337.
As used in this Prospectus,
(1) "First Capital" or the "Company" means First Capital Bancshares, Inc..
(2) The "Bank" means First Capital Bank, which will be owned by First Capital.
This prospectus contains certain "forward-looking statements" concerning First
Capital and the Bank and their operations, performance, and financial
conditions, including future economic performance, plans and objectives, and the
likelihood of success in developing their business. These statements are based
upon a number of assumptions and estimates which are subject to significant
uncertainties, many of which are beyond the control of First Capital or the
Bank. The words "may," "would," "could," "will," "expect," "anticipate,"
"believe," "intend," "plan," and "estimate," as well as similar expressions, are
meant to identify such forward-looking statements. Actual results may differ
materially from those expressed or implied by such forward-looking statements.
Factors that could cause actual results to differ materially include, but are
not limited to, those set forth in "Risk Factors."
<PAGE> 5
SUMMARY
This summary highlights information contained in this prospectus. It is
not complete and may not contain all of the information you should consider
before investing in the common stock. You should read the entire prospectus
carefully, including the "Risk Factors" section and the financial statements and
the notes to those statements, before making an investment.
First Capital Bancshares is a South Carolina company formed in June
1998 by a group of eight Marlboro County business leaders who are organizing a
new, or de novo, community bank to be located in Marlboro County, South
Carolina. These organizers believe there is a demand for a new community bank in
Marlboro County that will be locally owned and controlled, especially since most
of the banks currently operating in Marlboro County are branches of large
regional banks. First Capital Bancshares will serve as the holding company for
this de novo federal savings bank, which will be called "First Capital Bank."
The organizers, each of whom will serve as a director of the holding
company and the bank, are:
<TABLE>
<S> <C>
Shoukath Ansari Lee Howell
Wylie Cartrette Paul Rush
J. Aubrey Crosland Lee C. Shortt
Glenn Dowdy Dale Hutchins
</TABLE>
Lee C. Shortt is the Chairman and James Aubrey Crosland is the Chief
Executive Officer of First Capital Bancshares. Mr. Shortt will be the Chairman
and Mr. Crosland will be the President and Chief Executive Officer of First
Capital Bank. Mr. Crosland was born and raised in Marlboro County and has over
20 years of banking experience, most of it obtained with community and regional
banks serving Marlboro County and other South Carolina markets.
In order to open the Bank, we must obtain approval from the Office of
Thrift Supervision (the "OTS") and the Federal Deposit Insurance Corporation
(the "FDIC"). We have submitted applications to both of these agencies and we
anticipate receiving conditional approvals in the first quarter of 1999. We
anticipate that one of the conditions to these approvals will be that First
Capital must capitalize the Bank with at least $4,500,000. Most of the proceeds
of this stock offering will be used to capitalize the Bank, with the remainder
to be used as the Company's working capital. We anticipate that the Bank will
open in the first quarter of 1999.
The Bank will engage in a general commercial and retail banking
business characterized by personalized service and local decision-making,
emphasizing the banking needs of individuals and small- to medium-sized
businesses. As a federal thrift, however, we will have the flexibility to offer
other services and products. Initially, we intend to limit our activities to
traditional banking products, although we may consider offering products such as
property and casualty insurance.
Our initial office will be in Bennettsville, South Carolina, which is
located approximately eight miles from the North Carolina state line. As a
federal thrift, the Bank will have the ability, with OTS approval, to open a
branch across the state line in North Carolina. We plan to open a branch in
McColl, South Carolina, after we establish our main office in Bennettsville, and
we will also consider opening a branch in the neighboring town of Laurinburg,
North Carolina.
The Company's principal executive offices are currently located at 207
Highway 15/401 Bypass East, Bennettsville, South Carolina 29512 and the
telephone number is (843) 454-9337.
3
<PAGE> 6
Prior to this offering, the organizers purchased 30,000 shares of
common stock, at $10.00 per share, to provide the initial capitalization for the
Company. The organizers (and their immediate families) intend to purchase at
least 55,200 additional shares of common stock in this offering, for a total
investment of 85,200 shares and $852,000. As a result, the organizers will own
approximately 16.1% of the outstanding common stock, based on the minimum number
of shares to be outstanding after the offering (530,000), and 11.4% of the
outstanding common stock, based on the maximum number of shares (750,000).
Although they have not promised to do so, the organizers or affiliates of the
sales agent may purchase additional shares in the offering, including up to 100%
of the minimum offering (subject to obtaining regulatory approval) if necessary
to complete the offering. All shares purchased by affiliates of First Capital or
the sales agent will be for investment and not with a view to resell the shares.
Because purchases by these individuals may be substantial, investors should not
assume that the sale of a specified minimum offering amount indicates the merits
of this offering or that an organizer's or other affiliate's investment decision
is shared by public investors. See "Risk Factors - Control of First Capital;
Purchases by Organizers," "The Offering," and "Management."
THE OFFERING
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<S> <C> <C>
Common stock offered................ Minimum: 500,000 shares
Maximum: 720,000 shares
Common stock outstanding
prior to this offering......... 30,000 shares
Common stock to be outstanding
after the offering ............ Minimum: 530,000 shares
Maximum: 750,000 shares
Offering price per share............ $10.00
</TABLE>
Use of proceeds..................... First Capital will use the first $4.5
million of the net proceeds of the
offering, and 25% of the net proceeds
in excess of this amount, to
capitalize First Capital Bank, and
will use the remaining net proceeds
to pay organizational expenses and
expenses of this offering and to
provide working capital.
First Capital Bank intends to use the
$4.5 million it receives from the
sale of its stock to First Capital
for organizational and pre-opening
expenses of the Bank; for renovation
and furnishing of the Bank's offices;
and for working capital needs
(including paying the salaries of
officers and employees and making
loans and investments). See "Use of
Proceeds."
Terms of the offering............... The offering is scheduled to expire
on March 31, 1999, but we reserve the
right to continue the offering up to
September 30, 1999. All subscription
proceeds received in the offering
will initially be placed in an escrow
account handled by an independent
escrow agent, The Bankers Bank in
Atlanta, Georgia. The escrow agent
will not release these funds to First
Capital, and no shares will be issued
in the offering, unless on or before
the expiration date of the offering
all of the following conditions have
been met:
- The Company has accepted
subscriptions and payment in full
for a minimum of 500,000 shares
(which will result in minimum gross
offering proceeds of $5 million);
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- The Company has obtained
preliminary approval from the OTS to
acquire the stock of the Bank;
- The Bank has received preliminary
approval of its application for a
charter from the OTS; and
- The Bank has received preliminary
approval of its application for
deposit insurance from the FDIC.
Plan of distribution................ First Capital has engaged Banc Stock
Financial Services Inc., a subsidiary
of The Banc Stock Group, Inc., as its
sales agent to use its best efforts
to sell shares in the offering. The
Company will pay the sales agent fees
and commissions of approximately
$315,000 on the minimum of 500,000
shares and $470,000 on the maximum of
720,000 shares. We have agreed to pay
the sales agent a 2.5% commission on
sales sold in the offering to the
organizers, 6.5% commission on shares
sold to investors which we have
identified (up to 200,000 shares) and
a 7.0% commission on shares sold to
the public and to reimburse the sales
agent for certain fees and expenses.
Additionally, we have agreed to
reimburse the sales agent for its
costs and expenses up to an
additional $60,000, and to indemnify
the sales agent against civil
liabilities, including liabilities
under the Securities Act of 1933. See
"The Offering - Plan of
Distribution."
RISK FACTORS
PURCHASES OF THE SHARES OF COMMON STOCK ARE NOT DEPOSITS INTO ACCOUNTS
OF THE BANK AND ARE NOT INSURED OR GUARANTEED BY THE FDIC OR ANY OTHER
GOVERNMENTAL AGENCY.
Investment in the common stock involves certain risks. Some of the
risks are lack of operating history; dependence on key employees; significant
influence of First Capital by its organizers; and absence of an existing market
for the common stock. See "Risk Factors" for a full discussion of significant
risks.
5
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RISK FACTORS
Investing in the shares of common stock involves certain risks.
Investments should be made only after careful consideration of the following
risk factors. You should purchase common stock only if you can afford such
risks. PURCHASES OF THE SHARES OF COMMON STOCK OF FIRST CAPITAL ARE NOT DEPOSITS
IN AN ACCOUNT OF THE BANK AND ARE NOT INSURED OR GUARANTEED BY THE FDIC OR ANY
OTHER GOVERNMENTAL AGENCY.
NO ASSURANCE OF REGULATORY APPROVALS FOR THE BANK
Before we can open the Bank, the OTS must approve the Bank's charter
application and the Company's application to own the Bank, and the FDIC must
approve the Bank's application for deposit insurance. While we expect to receive
these approvals by December 31, 1998, there is a risk these approvals may not be
granted.
Because we cannot open without these approvals, to reduce the risks to
investors in this offering the Company is placing the proceeds from this
offering in an escrow account. The independent escrow agent will not release the
proceeds of the offering from escrow until all of the following conditions are
met:
- The Company has accepted subscriptions and payment in full for
a minimum of 500,000 shares.
- The Company has obtained preliminary approval from the OTS to
acquire the stock of the Bank.
- The Bank has received preliminary approval of its application
for a charter from the OTS.
- The Bank has received preliminary approval of its application
for deposit insurance from the FDIC.
If the Company terminates the offering prior to satisfaction of these
conditions, all subscription funds will be returned to subscribers. See "The
Offering - Conditions to the Offering and Release of Funds."
NEW ENTERPRISE
First Capital and the Bank have been recently organized, and neither
has any operating history. Prospective purchasers of the shares have limited
information on which to base an investment decision. As a unitary thrift holding
company, First Capital's profitability will primarily be dependent on whether
the Bank is profitable. The operations of new businesses are always risky. We
expect that the Bank will incur large initial expenses and may not be profitable
for several years after starting business, if ever. Due to the operating losses
First Capital expects to incur during the initial years of the Bank's
operations, the value of the shares of common stock may decrease.
DEPENDENCE ON KEY EMPLOYEES
Our success will depend heavily on two individuals to lead management
and conduct business. James Aubrey Crosland will be the President and Chief
Executive Officer and John M. Digby will be the Chief Financial Officer. If
either of these officers becomes unable or unwilling to continue in their
present positions, our operations could be materially adversely affected. The
Company has entered into employment agreements with each of Mr. Crosland and Mr.
Digby and has obtained a key man life insurance policy covering Mr. Crosland in
the amount of $1 million.
CONTROL OF FIRST CAPITAL AND THE BANK; PURCHASES BY ORGANIZERS
The eight organizers will serve as the initial directors of First
Capital and the Bank. We anticipate that the organizers and members of their
immediate families will own at least 85,200 shares after the offering, equal to
16.1% of the outstanding shares based on the minimum offering, and 11.4% of the
outstanding shares based on the maximum offering. As a result of the anticipated
stock ownership by the organizers, together with their
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positions as directors of First Capital and the Bank, the organizers as a group
will have substantial influence over First Capital and the Bank following the
offering.
OFFERING PRICE ARBITRARILY DETERMINED
We set the initial public offering price of $10.00 per share without
reference to traditional criteria for determining stock value, since criteria
such as book value or earnings are not available to a company with no
operations. The public offering price may bear no relationship to the market
price of the common stock after this offering. The price per share is
approximately the initial book value per share, before payment of organizational
expenses.
ABSENCE OF TRADING MARKET
There is currently no market for the common stock. Upon completion of
the offering, we anticipate (based on discussion with our sales agent) that we
will be able to secure at least two broker-dealers to match buy and sell orders
for our common stock on the Over-the-Counter Bulletin Board and bid and ask
quotations will also be displayed on the Electronic Pink Sheet System. However,
a public market having depth and liquidity depends on the presence in the
marketplace of a sufficient number of buyers and sellers at any given time.
There can be no assurance that a liquid market for the common stock will
develop. If an active trading market does develop, there can be no assurance
that such a trading market will continue. Additionally, since the prices of
securities generally fluctuate, there can be no assurance that purchasers in
this offering will be able to sell the common stock at or above the subscription
price. See "Market for Common Stock."
FLUCTUATION IN EARNINGS AND VOLATILITY OF STOCK PRICES
The market price of the common stock will be affected by quarterly and
yearly operating results, which could fluctuate greatly. These fluctuations
could result from expenses of operating and expanding the Bank, trends in the
banking industry, economic conditions in our market area, and other factors
which are beyond our control. If operating results are below expectations, the
market price of our common stock would likely be materially adversely affected.
See "Plan of Operation."
COMPETITION
The banking business is highly competitive. Our competition will come
from other banks, thrifts, credit unions, mortgage lenders, consumer finance and
insurance companies, brokerage firms, mutual funds and other financial
institutions operating in the Marlboro County area and elsewhere. Some of these
competitors are well established in the Marlboro County area. Most of them have
greater resources and lending limits and a lower cost of funds than the Bank.
Some may offer services, such as extensive and established branch networks and
trust services, that we either do not expect to provide or will not provide for
some time. Due to this competition, we may have to pay higher rates of interest
to attract deposits. In addition, competitors that are non-depository
institutions are generally not subject to the extensive regulations applicable
to financial institutions. Recent federal legislation permits commercial banks
to establish operations nationwide. This will increase competition from
out-of-state financial institutions. There can be no assurances that we will be
able to compete successfully. See "Proposed Business - Competition" and
"Supervision and Regulation."
SUPERVISION AND REGULATION
The banking industry is heavily regulated. Our success depends not only
on competitive factors, but also on state and federal regulations affecting
banks, thrifts, and their holding companies. These regulations are designed to
protect depositors, not shareholders. Changes in the regulation of the financial
institutions industry continue to occur and the ultimate effect of these
regulatory changes cannot be predicted. In December 1991, Congress enacted the
Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"). FDICIA
and the regulations thereunder have increased the regulatory and supervisory
requirements for financial institutions. This has resulted in increased
operating expenses. In 1998, Congress considered legislation that
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would eliminate the charter for federal savings banks and savings associations.
Although this legislation was not enacted, we anticipate that similar
legislation will be proposed again in 1999. If such legislation is enacted, the
Bank would likely be required to convert its federal savings bank charter to
either a national bank charter or a state depository institution charter.
Additional statutes affecting financial institutions are proposed from time to
time and may be enacted. Regulations may be modified at any time. There is no
assurance that such modifications will not have an adverse effect on our
business. See "Supervision and Regulation."
ECONOMIC CONDITIONS
Our success will depend, to a certain extent, upon the economic and
political conditions and governmental policies, both local and national.
Inflation, recession, unemployment, high interest rates, short money supply, and
other factors beyond our control are conditions that may adversely affect our
deposit levels and loan demand, as well as our earnings. For these reasons,
there can be no assurance that favorable economic development will occur or that
expectations of corresponding growth will be achieved. See "Proposed Business."
DIVIDEND POLICY
We do not expect to pay cash dividends to our shareholders in the
foreseeable future. First Capital and the Bank are both start-up companies and
will likely incur initial losses. We intend to retain any earnings for the
period of time management believes necessary to ensure the success of their
operations. First Capital will be primarily dependent upon the Bank for its
earnings and funds to pay dividends on the common stock. Our ability to pay
dividends is also subject to legal and regulatory restrictions. Prior to the
payment of dividends, the Board of Directors will consider the Bank's earnings,
capital requirements, financial condition, and other relevant factors. See
"Dividend Policy," "Proposed Business," and "Supervision and Regulation."
CREDIT RISK; ADEQUACY OF ALLOWANCE FOR LOAN LOSSES.
There are risks inherent in making all loans, including risks with
respect to the period of time over which loans may be repaid, risks resulting
from changes in economic and industry conditions, risks inherent in dealing with
individual borrowers, and, in the case of a collateralized loan, risks resulting
from uncertainties about the future value of the collateral. The Company will
maintain an allowance for loan losses based on, among other things, an
evaluation of economic conditions, regular reviews of delinquencies and loan
portfolio quality, and, eventually, historical experience. Management's judgment
about the adequacy of the allowance will be based upon a number of assumptions
about future events which may not prove to be accurate, particularly given the
Company's lack of operating history and expected rapid growth. Thus, there is a
risk that charge-offs in any particular period could exceed the allowance for
loan losses that management has established. Additions to the allowance for loan
losses would result in a decrease of the Company's net income and, possibly, its
capital.
POTENTIAL IMPACT OF CHANGES IN INTEREST RATES.
The Company's profitability will be primarily dependent on its net
interest income, which is the difference between interest income on
interest-earning assets and interest expense on interest-bearing liabilities.
The Company, like most financial institution holding companies, will be affected
by changes in general interest rate levels and other economic factors beyond the
Company's control. Although the Company will structure its asset and liability
management strategies to mitigate the impact of changes in interest rates, there
will be a risk that these strategies will not be successful.
LENDING LIMIT
We are limited in the amount we can loan a single borrower (including
the borrower's related interests) by the amount of the Bank's capital. These
limits will increase and decrease as the Bank's capital increases and decreases.
If we are unable to sell participations in our loan portfolio to other financial
institutions, the Bank may not be able to meet all of the lending needs of some
of its loan customers.
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POTENTIAL DILUTION
After the offering, the Board of Directors intends to adopt a stock
option plan covering our officers, directors, and employees. Before implementing
such a plan, we would obtain shareholder approval for the plan. While the terms
of a stock option plan have not been finalized, we anticipate that the plan
would initially authorize a number of shares equal to 15% of the shares to be
outstanding after this offering. The plan would include the options we are
obligated to issue to Mr. Crosland under the terms of his employment agreement.
The plan would also provide that no options may be granted with an exercise
price of less than 100% of the common stock's fair market value on the date of
grant. Exercise of these options could dilute the shareholders' interest in the
earnings and book value of the Company. In addition, the Board of Directors has
the authority to issue additional stock options or shares of common stock or
preferred stock in the future without preference to existing shareholders.
ANTITAKEOVER EFFECTS
First Capital has certain takeover defenses in place. These defenses include:
- provisions relating to meetings of shareholders;
- the ability of the Board of Directors to issue additional
shares of authorized common stock and preferred stock without
shareholder approval;
- a staggered board of directors; and
- a bylaw provision that individuals affiliated with First
Capital's business competitors may not qualify to serve on the
Company's Board of Directors.
These measures may impede a change in control which is not supported by our
Board of Directors, even if the change in control would be beneficial to
shareholders. See "Description of Capital Stock - Certain Antitakeover Effects."
BROAD DISCRETION IN USE OF PROCEEDS
The first $4.5 million of net proceeds of this offering, and 25% of the
excess of this amount will be utilized to capitalize the Bank. The remainder
will be used for general corporate purposes and to support future growth.
Accordingly, we will have broad discretion as to the application of such
proceeds. An investor will not have the opportunity to evaluate the economic,
financial, and other relevant information which will be utilized by us in
determining the application of such proceeds. See "Use of Proceeds."
RISKS ASSOCIATED WITH THE YEAR 2000
Like many financial institutions, we will rely upon computers for the
daily conduct of our business and for information systems processing. There is
concern among industry experts that on January 1, 2000 computers will be unable
to "read" the new year and there may be widespread computer malfunctions. We
will be generally relying on software and hardware developed by independent
third parties for our information systems. We have entered into an agreement
with Fiserv Solutions, Inc. ("Fiserv") to provide our hardware and software, and
to perform all overnight processing and reconciliation of our daily transaction
data. We believe that the Fiserv system does not have any material Year 2000
issues, and our agreement with Fiserv includes a warranty that their system is
Year 2000 compliant in all respects. We will require all other vendors to also
provide similar warranties regarding the Year 2000 compliance of their hardware
and software systems. We believe that the information systems and software we
have agreed to acquire, and the network connections we will maintain, will be
programmed to comply with Year 2000 requirements. However, there is a risk that
they will not comply as they have been developed by others. Based on information
currently available, we believe that our direct expenses being incurred in
connection with the Year 2000 issue will not be significant.
The business of many of our intended customers may also be negatively
affected by the Year 2000 issue. Any financial difficulties incurred by our
customers in solving Year 2000 issues could negatively affect that
9
<PAGE> 12
customer's ability to repay loans that we may have extended. In addition, the
failure of our customers to adequately comply with Year 2000 requirements, and
the costs involved in correcting such a failure, could have a material adverse
effect on our business, financial condition, and results of operations.
THE OFFERING
GENERAL
The Company is offering for sale a minimum of 500,000 shares and a
maximum of 720,000 shares of its common stock at a price of $10.00 per share to
raise gross proceeds of between $5,000,000 and $7,200,000. The minimum purchase
for any investor (together with the investor's affiliates) is 100 shares and the
maximum purchase is 5% of the offering unless the Company, in its sole
discretion, accepts a subscription for a lesser or greater number of shares.
Prior to this offering, the organizers purchased 30,000 shares of
common stock, at $10.00 per share, to provide the Company's initial
capitalization. The organizers (and their immediate families) intend to purchase
at least 55,200 additional shares of common stock in this offering, for a total
investment of 85,200 shares and $852,000. As a result, the organizers will own
approximately 16.1% of the outstanding common stock based on the minimum number
of shares to be outstanding after the offering (530,000), and 11.4% of the
outstanding common stock based on the maximum number of shares (750,000).
Although they have not promised to do so, the organizers and affiliates of the
sales agent may purchase additional shares in the offering, including up to 100%
of the minimum offering (subject to obtaining regulatory approval) if necessary
to complete the offering. All shares purchased by these individuals will be for
investment and not with a view to resell the shares. Because purchases by these
individuals may be substantial, investors in this offering should not assume
that the sale of a specified minimum offering amount indicates the merits of
this offering or that an organizer's investment decision is shared by public
investors. See "Risk Factors - Control of First Capital; Purchases by
Organizers" and "Management."
Subscriptions to purchase shares will be received until midnight,
Eastern Standard time, on March 31, 1999, unless all of the shares are earlier
sold or the offering is earlier terminated or extended by the Company. See
"Conditions to the Offering and Release of Funds." The Company reserves the
right to terminate the offering at any time, or to extend the expiration date
for additional periods not to extend beyond September 30, 1999. 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 will use Banc Stock Financial Services, Inc. as its sales agent to sell
the shares. See "Plan of Distribution."
Following acceptance by the Company, subscriptions will be binding on
subscribers and may not be revoked by subscribers except with the consent of the
Company. In addition, the Company reserves the right to cancel accepted
subscriptions at any time and for any reason until the proceeds of this offering
are released from escrow (as discussed in greater detail in "Conditions to the
Offering and Release of Funds" below), and the Company reserves the right to
reject, in whole or in part and in its sole discretion, any subscription. The
Company may, in its sole discretion, allocate shares among subscribers in the
event of an oversubscription for the shares. In determining which subscriptions
to accept, in whole or in part, the Company may take into account any factors it
considers relevant, including the order in which subscriptions are received, a
subscriber's potential to do business with, or to direct customers to, the Bank,
and the Company's desire to have a broad distribution of stock ownership. If the
Company rejects any subscription, or accepts a subscription but in its
discretion subsequently elects to cancel all or part of such subscription, the
Company will refund promptly the amount remitted that corresponds to $10.00
multiplied by the number of shares as to which the subscription is rejected or
10
<PAGE> 13
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
The offering is scheduled to expire on March 31, 1999, but the Company
is reserving the right to continue the offering up to September 30, 1999.
Initially, First Capital will place all subscription proceeds it receives in the
offering in an escrow account handled by an independent escrow agent. The escrow
agent will not release these funds to First Capital, and no shares will be
issued in the offering, unless on or before the expiration date of the offering
all of the following conditions have been met:
- The Company has accepted subscriptions and payment in full for
a minimum of 500,000 shares (which will result in gross offering
proceeds in excess of $5.0 million).
- The Company has obtained preliminary approval from the OTS to
acquire the stock of the Bank.
- The Bank has received preliminary approval of its application
for a charter from the OTS.
- The Bank has received preliminary approval of its application
for deposit insurance from the FDIC.
If the Company terminates the offering prior to satisfaction of these
conditions, then:
- Accepted subscription agreements will be of no further force or
effect and subscribers in the offering will not be shareholders
of First Capital.
- The funds held in the escrow account will not be subject to the
claims of any creditor of First Capital or available to defray
the expenses of this offering.
- The full amount of all subscription funds will be returned
promptly to subscribers plus any interest earned thereon.
The escrow agent has not investigated the desirability or advisability
of an investment in the shares by prospective investors and has not approved,
endorsed, or passed upon the merits of an investment in the shares. Subscription
funds held in escrow will be invested in interest-bearing savings accounts,
short-term United States Treasury securities, FDIC-insured bank deposits, or
such other investments as the escrow agent and the Company shall agree. The
organizers do not intend to invest the subscription proceeds held in escrow in
instruments that would mature after the expiration date of the offering.
If the conditions for releasing subscription funds from escrow are met
and such funds are released but final regulatory approval to commence banking
operations is not obtained from the OTS or the Bank does not open for any other
reason, the Board of Directors intends to propose that the shareholders approve
a plan to liquidate the Company. Upon such a liquidation, the Company would be
dissolved and the Company's net assets (generally consisting of the amounts
received in this offering plus any interest earned thereon, less the amount of
all costs and expenses incurred by the Company and the Bank, including the
salaries of employees of the Bank and other pre-opening expenses) would be
distributed to the shareholders; provided that, in this event, no distributions
would be made to the organizers until shareholders other than the organizers
have received an amount equal to their initial investment in the Company.
PLAN OF DISTRIBUTION
The Company has entered into an Sales Agency Agreement with Banc Stock
Financial Services, Inc., a subsidiary of The Banc Stock Group, Inc., pursuant
to which the sales agent has agreed, subject to the terms of the Sales Agency
Agreement, to offer and sell to the public as the Company's agent a minimum of
500,000 shares of common stock on a "best efforts, all or none" basis, and an
additional 220,000 shares of common stock on a "best efforts" basis at $10.00
per share. The sales agent is required to use its best efforts through the
expiration date to sell the shares. The sales agent will receive a 2.5%
commission on shares sold in the offering to the
11
<PAGE> 14
organizers, a 6.5% commission on shares sold in the offering to certain
investors identified by the organizers (up to 200,000 shares), and 7.0% on
other shares sold in the offering. The sales agent did not receive any
commission on the 30,000 shares purchased by the organizers prior to the
offering. First Capital will also pay the sales agent's expenses in the
offering, up to a maximum of $35,000, and legal fees of up to $25,000. The
sales agent may select other dealers who are members of the National
Association of Securities Dealers, Inc. to also sell shares.
The sales agent has the right to terminate the Sales Agency Agreement
under certain circumstances (for example, if conditions exist in the
over-the-counter market which cause the sales agent to believe that no favorable
public market exists for the sale of the shares). In such event, offers and
sales may be made on behalf of the Company by certain of its officers and
directors, or the Company may engage one or more other broker/dealers to make
sales on its behalf. The Company does not currently have any other arrangements
in place. As described above, until the minimum number of shares has been sold,
all funds received by the sales agent or the Company in connection with the sale
of shares will be promptly transmitted to the escrow agent.
The Sales Agency Agreement provides for reciprocal indemnification
between the Company and the sales agent against certain liabilities in
connection with this offering, including liabilities under the Securities Act.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted pursuant to the Sales Agency Agreement, the Company has been
advised that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed by the Securities Act and
is, therefore, unenforceable. The Company has also agreed to provide the sales
agent with a right of first refusal to serve as a managing underwriter on any
financing or to act as an adviser on any merger or similar transaction occurring
within one year of this offering, in each case for compensation that is
reasonable and customary within the industry.
HOW TO SUBSCRIBE
Each prospective investor who desires to purchase shares of common
stock should:
1. Complete, date, and execute the subscription agreement which has
been delivered with this Prospectus;
2. Make a check, bank draft, or money order payable to The Banker's
Bank, Escrow Account for First Capital Bancshares, Inc., in the
amount of $10.00 times the number of shares subscribed for; and
3. Deliver the completed subscription agreement and check to the
sales agent at the following address:
Banc Stock Financial Services, Inc.
1105 Schrock Road
Suite 437
Columbus, OH 43229
Attention: Mr. Edward E. Schmidt,
Executive Vice President
or to the Escrow Agent at the following address:
The Bankers Bank
2410 Paces Ferry Road
600 Paces Summit
Atlanta, GA 30339-4098
Attention: Mr. William R. Burkett,
Senior Vice President
If you have any questions about the offering or how to subscribe,
please call Mr. Crosland at (843) 454-9337 or Mr. Schmidt at Banc Stock
Financial Services, Inc. at (800) 733-2265. Subscribers should
12
<PAGE> 15
retain a copy of the completed subscription agreement for their records. The
subscription price is due and payable when the subscription agreement is
delivered.
MARKET FOR COMMON STOCK
Prior to the date of the Prospectus, there has been no public market
for the shares. Following the offering, the common stock will be quoted on the
OTC Bulletin Board under the trading symbol ["____."] The sales agent has also
advised the Company that upon completion of the offering it intends to act as a
"market maker" in the common stock. Nevertheless, the Company does not
anticipate that an active market will develop for the shares in the near term
following the offering. Making a market in securities involves maintaining bid
and ask quotations and being able, as principal, to effect transactions in
reasonable quantities at those quoted prices, subject to various securities laws
and other regulatory requirements. The development of a public trading market
depends, however, on the existence of willing buyers and sellers, the presence
of which is not within the control of the Company, the sales agent, or any
market maker. Based upon discussions the Company has had with the sales agent,
the Company expects that a secondary market may eventually develop for the
shares, although the Company can make no assurances in this regard. In general,
if a secondary market develops, the shares will be freely transferable and
assignable by the holder thereof (except shares held by affiliates), and
nonaffiliate shareholders may sell any number of shares in such secondary
market. See "Description of the Capital Stock of the Company - Shares Available
for Future Sale." In addition, factors such as the degree to which the secondary
market is active will determine the willingness of the market makers, once a
secondary market is established, to continue to maintain the secondary market.
The Company and its officers and directors have agreed with the sales
agent not to sell any shares for a period of six months after the date of this
Prospectus without the prior written consent of the sales agent. The sales agent
anticipates that its affiliates will purchase up to 9.9% of shares at the public
offering price for their own accounts.
USE OF PROCEEDS
Although the amounts set forth below provide an indication of the
proposed use of funds based on the plans and estimates of the organizers, actual
expenses may vary from the estimates. The organizers believe that the minimum
proceeds of $5,000,000 from the offering will satisfy the cash requirements of
the Company and the Bank for their respective first three years of operations,
but there can be no assurance that this will be the case. Because the Company
and Bank are new enterprises, the organizers cannot predict with any certainty
to what extent the Bank will generate revenues from investments and loan
originations. As a result, the Company cannot predict precisely what the actual
application of proceeds will be.
The gross proceeds to the Company from the sale of the minimum of
500,000 shares of common stock is estimated at $5,000,000 and from the maximum
of 720,000 shares is estimated at $7,200,000. In addition, prior to the
offering, the organizers of the Company purchased 30,000 shares of common stock
for an aggregate of $300,000. The Company's organizational and offering expenses
estimated at approximately $150,000 are to be paid from the proceeds of the
offering and the earlier offering to the organizers. The Bank's organizational
and pre-opening expenses are estimated at $300,000. On the basis of the
foregoing assumptions, gross proceeds, expenses, and net proceeds at the minimum
and maximum offering amount would be as follows:
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<PAGE> 16
BY THE COMPANY
The following table sets forth the anticipated use of proceeds by the
Company based on the sale of the minimum number and maximum number of shares in
this offering.
<TABLE>
<CAPTION>
Minimum Maximum
------- -------
Offering (1) Offering (2)
------------ ------------
<S> <C> <C>
Gross proceeds from offering.................................. $ 5,000,000 $ 7,200,000
Sales Agent's commission(3)................................... (315,160) (469,160)
Organizational and offering expenses.......................... (150,000) (150,000)
Investment in capital stock of the Bank....................... $ (4,500,000) $ (5,175,000) (4)
-------------- --------------
Remaining proceeds............................................ $ 34,840 $ 1,405,840
============== ==============
</TABLE>
(1) Assumes that 500,000 shares of common stock are sold in this offering.
(2) Assumes that 720,000 shares of common stock are sold in this offering.
(3) First Capital must pay a 2.5% commission on the 55,200 shares expected to
be purchased by the organizers in the offering, 6.5% commission on shares
sold to certain investors identified by the organizers (up to 200,000
shares), and a 7.0% commission on all other shares sold in the offering.
(4) If the stock offering net proceeds exceed $4,500,000 (after deduction for
the sales agent's commission and organizational and offering expenses),
the Company will contribute 25% of the net proceeds in excess of this
amount to the Bank. This sum is included here.
BY THE BANK
The following table depicts the anticipated use of proceeds by the
Bank. All proceeds received by the Bank will be in the form of an investment by
the Company in the Bank's capital stock.
<TABLE>
<CAPTION>
Minimum Maximum
Offering(1) Offering(2)
----------- -----------
<S> <C> <C>
Investment by the Company in the Bank's capital stock... $ 4,500,000 $ 5,175,000
Organizational and pre-opening expenses of the Bank..... (300,000) (300,000)
Furniture, Fixtures and Equipment....................... (344,000) (344,000)
Purchase of temporary facilities........................ (74,000) (74,000)
Purchase of Bank site and offices....................... (350,000) (350,000)
Renovation of Bank offices.............................. (475,000) (475,000)
----------- -----------
Remaining Proceeds...................................... $ 2,957,000 $ 3,632,000
=========== ===========
</TABLE>
- --------------------------------------
(1) Assumes that 500,000 shares of common stock are sold in this offering.
(2) Assumes that 720,000 shares of common stock are sold in this offering.
14
<PAGE> 17
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
November 30, 1998 and the pro forma consolidated capitalization of the Company
and the Bank, as adjusted to give effect to the sale of the minimum of 500,000
shares and a maximum of 720,000 shares in this offering. The Bank has
established March 15, 1999 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 that date.
<TABLE>
<CAPTION>
As Adjusted As Adjusted
for for
Minimum Maximum
November 30, 1998 Offering Offering
----------------- -------- --------
<S> <C> <C> <C>
SHAREHOLDERS EQUITY:
Common Stock, par value $.01 per share; 10,000,000
shares authorized; 30,000 shares issued and
outstanding(1); 530,000 shares issued and
outstanding as adjusted (minimum offering); 750,000
shares issued and outstanding (maximum offering)..... 300 5,300 7,500
Preferred Stock, par value $.01 per share; 10,000,000
shares authorized; no shares issued and outstanding..... 0 0 0
Additional paid-in capital(2)........................... 299,700 4,852,540 6,896,340
Deficit accumulated during the pre-opening stage(3)..... (147,567) (147,567) (147,567)
----------- ----------- -----------
Total shareholders' equity (4)....................... $ 152,433 $ 4,710,273 $ 6,756,273
=========== =========== ===========
</TABLE>
- ------------------------------------
(1) The organizers purchased 30,000 shares for a total of $300,000 prior to
the offering.
(2) The expenses of the offering will be charged against this account.
These expenses are estimated to be approximately $442,160 in the
minimum offering and $596,160 in the maximum offering and these
amounts have been used in the calculation of the amounts shown in the
"As Adjusted" columns. The offering expenses include commissions to
be paid to the underwriters of 2.5% on the 55,200 shares expected to
be purchased by the organizers in the offering and 7.0% on all other
shares sold in the offering. Under some circumstances commissions
paid on up to 200,000 shares sold to certain investors identified by
the organizers may be 6.5% rather than 7.0%.
(3) The deficit results from the expensing of pre-opening expenses and
organizational costs. As of November 30, 1998, the Company had incurred
approximately $147,567 of pre-opening expenses and organizational costs
and the Company's total accumulated shareholder's equity was $152,433.
The organizers estimate that a total of $23,000 in organizational
expenses for the Company, $300,000 in organizational and pre-opening
expenses for the Bank, and up to $344,000 of capitalizable property
costs for the purchase of furniture, fixtures, and equipment are
expected to be incurred by the Company and the Bank prior to the
commencement of operations (assumed to occur in March of 1999). However,
no assurances can be given that the Bank will open by this date or at
all, and the amount of pre-opening expenses and organizational costs
could ultimately be greater than currently estimated. Furniture,
fixtures, and equipment will be capitalized and amortized over the life
of the lease or over the estimated useful life of the asset.
(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.
15
<PAGE> 18
DIVIDEND POLICY
The Board of Directors expects initially to follow a policy of
retaining any earnings to provide funds to operate and expand the business.
Consequently, it is unlikely that any cash dividends will be paid in the near
future. The Company's ability to pay any cash dividends to its shareholders in
the future will depend primarily on the Bank's ability to pay dividends to the
Company. In order to pay dividends to the Company, the Bank must comply with the
requirements of all applicable laws and regulations. See "Supervision and
Regulation - The Bank - Dividends" and "Supervision and Regulation - The Bank -
Capital Requirements." In addition to the availability of funds from the Bank,
the future dividend policy of the Company is subject to the discretion of the
Board of Directors and will depend upon a number of factors, including future
earnings, financial condition, cash needs, and general business conditions.
PLAN OF OPERATION
First Capital was formed to organize and own all of the capital stock
of the Bank. The organizers filed an application with the OTS on August 4, 1998
to charter the Bank as a federal savings bank. The issuance of a charter will
depend, among other things, upon compliance with certain legal requirements that
may be imposed by the OTS, including capitalization of the Bank with at least a
specified minimum amount of capital, which the organizers believe will be
$4,500,000. Additionally, the Company must obtain the approval of the OTS to
become a unitary thrift holding company before acquiring the capital stock of
the Bank. The Bank has also filed an application with the FDIC for deposit
insurance. The organizers expect to receive all regulatory approvals by December
31, 1998.
As of November 30, 1998, the Company had total assets of $161,433,
consisting of $129,601 in cash, an option on real estate valued at $15,000, and
$16,832 in prepaid organizational costs. The Company incurred a net loss of
$147,567 for the period from inception December 19, 1997 through November 30,
1998.
Upon the completion of the sale of common stock and opening of the
Bank, the Company's pre-opening expenses, estimated to be $23,000, the Bank's
organization costs, estimated to be $155,000 (consisting principally of legal,
regulatory, consulting and incorporation fees), and the Bank's pre-opening
expenses, estimated to be $145,000 (consisting principally of salaries, overhead
and other operating costs), will be charged against the initial period's
operating results. Offering expenses, estimated to be $127,000 (consisting
principally of direct incremental costs of the stock offering), will be deducted
from the proceeds of the offering.
The Bank's initial office will be located at 207 Highway 15/401 Bypass
East, located in Bennettsville, South Carolina, at the site of a former Shoney's
restaurant. On April 20, 1998, the Company contracted for the purchase of the
property at its planned main office location. The Company intends to commence
building improvements in first quarter 1999 and anticipates that the office
space will be ready for the Bank to open by summer 1999 or third quarter. As a
federal thrift, the Bank will have the ability, with OTS approval, to open an
additional branch within South Carolina and across the state line in North
Carolina. We plan to open a branch in McColl, South Carolina after we establish
our main office in Bennettsville, and will also consider opening a branch in the
neighboring town of Laurinburg, North Carolina.
The Company intends to engage only in the business of owning and
managing the Bank, and the Bank will initially emphasize retail banking, home
mortgages, real estate development, and consumer lending needs. Through the
thrift charter, the Bank will be able to operate in all 50 states and to branch
into any county in the state of South Carolina. The thrift charter will also
give the Company more flexibility to pursue strategic opportunities to grow its
customer base and to create cross-selling opportunities to those same customers.
Like many financial institutions, we will rely upon computers for the
daily conduct of our business and for information systems processing. There is
concern among industry experts that on January 1, 2000 computers will be unable
to "read" the new year and there may be widespread computer malfunctions. We
will be generally relying on software and hardware developed by independent
third parties for our information systems. We have entered into an agreement
with Fiserv Solutions, Inc. ("Fiserv") to provide our hardware and software, and
to perform all overnight processing and reconciliation of our daily transaction
data. We believe that the Fiserv
16
<PAGE> 19
system does not have any material Year 2000 issues, and our agreement with
Fiserv includes a warranty that their system is Year 2000 compliant in all
respects. We will require all other vendors to also provide similar warranties
regarding the Year 2000 compliance of their hardware and software systems. We
believe that the information systems and software we have agreed to acquire,
and the network connections we will maintain, will be programmed to comply with
Year 2000 requirements. However, there is a risk that they will not comply as
they have been developed by others. Based on information currently available,
we believe that our direct expenses being incurred in connection with the Year
2000 issue will not be significant.
PROPOSED BUSINESS
GENERAL
The Company was incorporated as a South Carolina corporation in June
1998, primarily to own and control all of the capital stock of the Bank. The
Company initially will engage in no business other than owning and managing the
Bank. As a federally chartered savings association, the Bank will have general
authority to originate and purchase loans secured by real estate, secured or
unsecured loans for commercial, corporate, business, or agricultural purposes,
and loans for personal, family, or household purposes. The Bank will initially
emphasize retail banking, home mortgages, real estate, and consumer lending
needs. The Bank will not be permitted to make non-real estate commercial purpose
loans that exceed 20% of its assets or non-real estate consumer purpose loans
that exceed 35% of its assets. While not restricted by law, the Bank expects
initially to limit its lending activities primarily to Marlboro County and the
surrounding communities, including the neighboring towns of McColl, South
Carolina and Laurinburg, North Carolina.
The organizers have chosen a holding company structure under which the
Company will acquire all of the capital stock of the Bank. The organizers
believe the holding company structure provides flexibility that would not
otherwise be available to the Bank.
The thrift charter will allow the Bank to operate in all 50 states and
to branch into any county in the state of South Carolina without any additional
regulatory approval. The thrift charter will also give the Company more
flexibility to pursue strategic opportunities to grow its customer base and to
create cross-selling opportunities to those same customers.
MARKETING FOCUS
Most of the financial institutions in the Marlboro County area are now
local branches of large regional banks. Although size gives the larger banks
certain advantages in competing for business from large corporations, including
higher lending limits and the ability to offer services in other areas of South
Carolina and the Marlboro County area, the organizers believe that there is a
void in the community banking market in the Marlboro County area and believe
that the Bank can successfully fill this void. There are currently seven
branches of financial institutions operating in Marlboro County, none of which
are locally owned. As a result, the Company generally will not attempt to
compete for the banking relationships of large corporations, but will
concentrate its efforts on small- to medium-sized businesses and on individuals.
The Bank plans to advertise to emphasize the Company's local ownership,
community bank nature, and ability to provide more personalized service than its
competition. The organizers, as long-time residents and businessmen in the
Marlboro County area, have determined the credit needs of the area through
personal experience and communications with their business colleagues. The
organizers believe that the proposed community bank focus of the Bank is likely
to succeed in this market. The organizers believe that the area will react
favorably to the Bank's emphasis on service to small businesses, individuals,
and professional concerns.
17
<PAGE> 20
LOCATION AND SERVICE AREA
The Bank expects initially to draw virtually all of its business from
Marlboro County and the surrounding areas in South Carolina. The county's
population had a very slight drop in population from 29,361 in 1990 to 29,173 in
1997, making it the 32nd largest county in the state. Per capita income in the
county was $11,326 as of 1997.
The Company's executive offices are currently located at 207 Highway
15/401 Bypass East, Bennettsville, South Carolina 29512 in a temporary facility
pending construction of a permanent facility at the same address. The Company's
telephone number is (843) 454-9337. See "Facilities."
DEPOSITS
The Bank intends to offer a full range of deposit services that are
typically available in most banks and savings and loan associations, including
checking accounts, commercial accounts, savings accounts, and other time
deposits of various types, ranging from daily money market accounts to
longer-term certificates of deposit. The transaction accounts and time
certificates will be tailored to the Bank's principal market area at rates
competitive to those offered in the Marlboro County area. In addition, the Bank
intends to offer certain retirement account services, such as Individual
Retirement Accounts (IRAs). The Bank intends to solicit these accounts from
individuals, businesses, associations and organizations, and governmental
authorities.
LENDING ACTIVITIES
General. The Bank intends to emphasize a range of lending services,
including real estate, commercial and consumer loans, to individuals and small-
to medium-sized businesses and professional concerns that are located in or
conduct a substantial portion of their business in the Bank's market area. The
Bank will initially emphasize retail banking, home mortgages, real estate, and
consumer lending needs. The Bank will not be permitted to make non-real estate
commercial purpose loans that exceed 20% of its assets or non-real estate
consumer purpose loans that exceed 35% of its assets. Outside of the inherent
risk of the credit worthiness of the Bank's borrowers, other risks associated
with residential mortgage loans would be the inability to move foreclosed real
estate in a down market or economy, shifts in the demographics of a given market
from residential zonings to commercial, individual customers who have been
displaced due to corporate downsizing/loss of income, and an overall economic
downturn creating unemployment due to lack of product demand.
Real Estate Loans. The organizers expect that one of the primary
components of the Bank's loan portfolio will be loans secured by first or second
mortgages on real estate. These loans will generally consist of commercial real
estate loans, construction and development loans, and residential real estate
loans (but will exclude home equity loans, which are classified as consumer
loans). Loan terms generally will be limited to five years or less, although
payments may be structured on a longer amortization basis. Interest rates may be
fixed or adjustable, and will more likely be fixed in the case of shorter term
loans. The Bank will generally charge an origination fee. Management will
attempt to reduce credit risk in the commercial real estate portfolio by
emphasizing loans on owner-occupied office and retail buildings where the
loan-to-value ratio, established by independent appraisals, does not exceed 80%.
In addition, the Bank will typically require personal guarantees of the
principal owners of the property backed with a review by the Bank of the
personal financial statements of the principal owners. The principal economic
risk associated with each category of anticipated loans, including real estate
loans, is the creditworthiness of the Bank's borrowers. The risks associated
with real estate loans vary with many economic factors, including employment
levels and fluctuations in the value of real estate. The Bank will compete for
real estate loans with a number of bank competitors which are well established
in the Marlboro 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.
Under OTS regulations, the aggregate amount of commercial real estate loans that
a thrift can make cannot exceed 400% of its capital. In the Bank's case, we
anticipate that the amount would be approximately $500,000.
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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
Marlboro County area. The risks associated with commercial loans are generally
higher than the risks associated with residential or commercial real estate
loans. The well-established banks in the Marlboro County area will make
proportionately more loans to medium- to large-sized businesses than the Bank.
Many of the Bank's anticipated commercial loans will likely be made to small- to
medium-sized businesses which may be less able to withstand competitive,
economic, and financial conditions than larger borrowers.
Consumer Loans. The Bank will make a variety of loans to individuals
for personal and household purposes, including secured and unsecured installment
and term loans, home equity loans and lines of credit, and revolving lines of
credit such as credit cards. These loans typically will carry balances of less
than $25,000 and, in the case of non-revolving loans, will be amortized over a
period not exceeding 48 months or will be 90-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 Marlboro County area.
Loan Approval and Review. The Bank's loan approval policies will
provide for various levels of officer lending authority. When the amount of
aggregate loans to a single borrower exceeds that individual officer's lending
authority, the loan request will be considered and approved by an officer with a
higher lending limit or the officers' loan committee. We anticipate that the
lending limit of the Chairman and President of the Bank will initially be set at
$100,000. The Bank will establish an officers' loan committee that has lending
limits, and any loan in excess of this lending limit will be approved by the
directors' loan committee. The Bank will not make any loans to any director,
officer, or employee of the Bank unless the loan is approved by the board of
directors of the Bank and is made on terms not more favorable to such person
than would be available to a person not affiliated with the Bank.
Lending Limits. The Bank's lending activities will be subject to a
variety of lending limits imposed by federal law. While differing limits apply
in certain circumstances based on the type of loan or the nature of the borrower
(including the borrower's relationship to the Bank), in general the Bank will be
subject to a loan-to-one-borrower limit. Since the enactment of the Financial
Institution Reform Recovery and Enforcement Act ("FIRREA") in 1989, a savings
association generally may not make loans to one borrower and related entities in
an amount which exceeds 15% of its unimpaired capital and surplus, although
loans in an amount equal to an additional 10% of unimpaired capital and surplus
may be made to a borrower if the loans are fully secured by readily marketable
securities. Unless the Bank is able to sell participations in its loans to other
financial institutions, the Bank will not be able to meet all of the lending
needs of loan customers requiring aggregate extensions of credit above these
limits. It is not currently anticipated that the Bank will have an initial loan
loss reserve when it commences operations.
OTHER BANKING SERVICES
Other anticipated bank services include cash management services, safe
deposit boxes, travelers checks, direct deposit of payroll and social security
checks, and automatic drafts for various accounts. The Bank plans to become
associated with a shared network of automated teller machines that may be used
by Bank customers
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throughout Marlboro County and other regions. The organizers believe that by
being associated with a shared network of ATMs, the Bank will be better able to
serve its customers and will be able to attract customers who are accustomed to
the convenience of using ATMs, although the organizers do not believe that
maintaining this association will be critical to the Bank's success. The Bank
intends to begin offering these services shortly after it opens. The Bank also
plans to offer MasterCard and VISA credit card services through a correspondent
bank as its agent. The Bank does not plan to exercise trust powers during its
initial years of operation.
COMPETITION
The banking business is highly competitive. The Bank will compete as a
financial intermediary with other commercial banks, savings and loan
associations, credit unions, and money market mutual funds operating in the
Marlboro County area and elsewhere. In 1997, there were more than seven branches
of financial institutions operating in Marlboro County, holding over
$154,163,000 in deposits. A number of these competitors are well established in
the Marlboro County area. Most of them have substantially greater resources and
lending limits than the Bank and offer certain services, such as extensive and
established branch networks and trust services, that the Bank either does not
expect to provide or will not provide initially. As a result of these
competitive factors, the Bank may have to pay higher rates of interest to
attract deposits.
FACILITIES
The Bank's office will be initially located in a modular bank unit at
209 Highway 15/401 Bypass East, Bennettsville, South Carolina, while the main
office facility, a former Shoney's restaurant at the same location, is being
renovated. The Company has agreed to purchase the property for $350,000 and has
budgeted $475,000 for improvements to make the existing 5,200 square foot
building usable for banking operations. The Company intends to commence
construction in early 1999 and anticipates that the office space will be ready
by October, 1999. The Company has contracted with Spectrum Financial Systems,
Inc. for the purchase of the modular bank unit for approximately $100,000.
Following construction the temporary unit will be moved six miles to McColl,
South Carolina to become the Bank's first branch.
The Company believes that the facilities will adequately serve the
Bank's needs for its first several years of operation.
EMPLOYEES
The Company anticipates that, upon commencement of operations, the Bank
will have approximately 10 full-time employees in the modular unit, which will
be increased to 14 once the Bank moves into its permanent facilities. The
Company will not have any employees other than its officers.
LEGAL PROCEEDINGS
There are no material legal proceedings to which the Company or the
Bank or any of their properties are subject.
SUPERVISION AND REGULATION
The Company and the Bank are subject to state and federal banking laws
and regulations which impose specific requirements or restrictions on and
provide for general regulatory oversight with respect to virtually all aspects
of operations. These laws and regulations are generally intended to protect
depositors, not shareholders. To the extent that the following summary describes
statutory or regulatory provisions, it is qualified in its entirety by reference
to the particular statutory and regulatory provisions. Any change in applicable
laws or regulations may have a material effect on the business and prospects of
the Company. With the enactment of FIRREA in 1989 and FDICIA in 1991, numerous
additional regulatory requirements have been placed on the banking industry in
the past several years, and additional changes have been proposed. The 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
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legislative changes and the policies of various regulatory authorities. The
Company is unable to predict the nature or the extent of the effect on its
business and earnings that fiscal or monetary policies, economic control, or
new federal or state legislation may have in the future.
THE COMPANY
The Company will be a registered holding company under the Savings and
Loan Holding Company Act (the "SLHCA") set forth in Section 10 of the Home
Owners Loan Act of 1933 ("HOLA"). The Company will be regulated under such acts
by the OTS. As a savings and loan holding company, the Company will be required
to file with the OTS an annual report and such additional information as the OTS
may require pursuant to the SLHCA. The OTS will also conduct examinations of the
Company and each of its subsidiaries.
As a unitary savings and loan holding company owning only one savings
institution, the Company will generally be allowed to engage and invest in a
broad range of business activities not permitted to commercial bank holding
companies or multiple savings and loans holding companies, provided that the
Bank continues to qualify as a "qualified thrift lender." See "--The Bank -
Qualified Thrift Lender Requirements."
The SLHCA will prohibit the Company from acquiring control of another
savings association or another savings and loan holding company without prior
approval from the OTS. However, savings and loan holding companies are allowed
to acquire or to retain as much as 5% of the voting shares of a savings
institution or savings and loan holding company without regulatory approval.
The OTS may not approve an acquisition that would result in the
formation of certain types of interstate holding company networks. The OTS is
precluded from approving an acquisition that would result in the formation of a
multiple holding company controlling institutions in more than one state unless
the acquiring company or one of its savings institution subsidiaries is
authorized to acquire control of an institution or to operate an office in the
additional state pursuant to a supervisory acquisition authorized under Section
13(k) of the Federal Deposit Insurance Act or unless the statutes of the state
in which the institution to be acquired is located permits such an acquisition.
THE BANK
General. Subject to receipt of the necessary approvals of its pending
applications, the Bank will operate as a federal savings bank incorporated under
the laws of the United States and subject to examination by the OTS. The OTS
will regulate or monitor virtually all areas of the Bank's operations, including
security devices and procedures, adequacy of capitalization and loss reserves,
loans, investments, borrowings, deposits, mergers, issuances of securities,
payment of dividends, interest rates payable on deposits, interest rates or fees
chargeable on loans, establishment of branches, corporate reorganizations,
maintenance of books and records, and adequacy of staff training to carry on
safe lending and deposit gathering practices. The OTS will require the Bank to
maintain certain capital ratios and will impose limitations on the Bank's
aggregate investment in real estate, bank premises, and furniture and fixtures.
The Bank will be required by the OTS to prepare quarterly reports on the Bank's
financial condition and to conduct an annual audit of its financial affairs in
compliance with minimum standards and procedures prescribed by the OTS. OTS
Regulations generally provide that federal savings banks must be examined no
less frequently than every 18 months. The Bank also is subject to assessments by
the OTS to cover the costs of such examinations.
As a federally-chartered savings institution, the Bank generally will
not be subject to those provisions of South Carolina law governing state
chartered financial institutions or to the jurisdiction of the South Carolina
Board.
State usury laws are applicable to federally insured institutions with
regard to loans made within South Carolina. South Carolina law establishes a
ceiling of 6% on interest rates except in transactions involving written
agreements which may establish any interest rate.
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Subsidiary institutions of a savings and loan holding company, such as
the Bank, are subject to certain restrictions imposed by the Federal Reserve Act
on any extension of credit to the holding company or any of its subsidiaries, on
investment in the stock or other securities thereof, and on the taking of such
stock or securities as collateral for loans to any borrower. In addition, a
holding company and its subsidiaries are prohibited from engaging in certain
tying arrangements in connection with any extension of credit or provision of
any property or services.
Capital Requirements. OTS regulations require that federal savings
banks maintain (i) "tangible capital" in an amount of not less than 1.5% of
total assets, (ii) "core capital" in an amount not less than 3.0% of total
assets, and (iii) a level of risk-based capital equal to 8% of risk-weighted
assets. Under OTS regulations, the term "core capital" generally includes common
stockholders' equity, noncumulative perpetual preferred stock and related
surplus, and minority interests in the equity accounts of consolidated
subsidiaries less unidentifiable intangible assets (other than certain amounts
of supervisory goodwill) and certain investments in certain subsidiaries plus
90% of the fair market value of readily marketable purchased mortgage servicing
rights and purchased credit card relationships (subject to certain conditions).
"Tangible capital" generally is defined as core capital minus intangible assets
and investments in certain subsidiaries, except purchased mortgage servicing
rights.
In determining total risk-weighted assets for purposes of the
risk-based requirement, (i) each off-balance sheet asset must be converted to
its on-balance sheet credit equivalent amount by multiplying the face amount of
each such item by a credit conversion factor ranging from 0% to 100% (depending
upon the nature of the asset); (ii) the credit equivalent amount of each
off-balance sheet asset and each on-balance sheet asset must be multiplied by a
risk factor ranging from 0% to 200% (again depending upon the nature of the
asset); and (iii) the resulting amounts are added together and constitute total
risk-weighted assets. "Total capital" - risk-based capital requirement equals
the sum of core capital plus supplementary capital (which, as defined, includes
the sum of, among other items, perpetual preferred stock not counted as core
capital, limited life preferred stock, subordinated debt, and general loan and
lease loss allowances up to 1.25% of risk-weighted assets) less certain
deductions. The amount of supplementary capital that may be counted towards
satisfaction of the total capital requirement may not exceed 100% of core
capital, and OTS regulations require the maintenance of a minimum ratio of core
capital to total risk-weighted assets of 4%.
OTS regulations also include an interest-rate risk component in the
risk-based capital requirement. Under this regulation, an institution is
considered to have excess interest rate-risk if, based upon a 200-basis point
change in market interest rates, the market value of an institution's capital
changes by more than 2%. The OTS risk-based capital standards also provide for
concentration of credit risk, risk from nontraditional activities and actual
performance, and expected risk of loss on multi-family mortgages.
Capital requirements higher than the generally applicable minimum
requirement may be established for a particular savings association if the OTS
determines that the institution's capital was or may become inadequate in view
of its particular circumstances.
Deposit Insurance. Deposits at the Bank are insured to a maximum of
$100,000 for each insured depositor by the FDIC. The FDIC establishes rates for
the payment of premiums by federally insured commercial banks and savings banks,
or thrifts, for deposit insurance. A separate Bank Insurance Fund ("BIF") and
Savings Association Insurance Fund ("SAIF") are maintained for commercial banks
and thrifts, respectively, with insurance premiums from the industry used to
offset losses from insurance payouts when banks and thrifts fail. Since 1993,
insured depository institutions have paid for deposit insurance under a
risk-based premium system. Under this system, until mid-1995 depositor
institutions paid to BIF or SAIF from $0.23 to $0.31 per $100 of insured
deposits depending on its capital levels and risk profile, as determined by its
primary federal regulator on a semi-annual basis. Once the BIF reached its
legally mandated reserve ratio in mid-1995, the FDIC lowered premiums for
well-capitalized banks, eventually to $.00 per $100, with a minimum semiannual
assessment of $1,000. However, in 1996 Congress enacted the Deposit Insurance
Funds Act of 1996, which eliminated this minimum assessment. It also separated
the Financial Corporation (FICO) assessment to service the interest on its bond
obligations. The amount assessed on individual institutions by FICO is in
addition to the amount paid for deposit insurance according to the risk-related
assessment rate schedule. Increases in deposit insurance premiums or
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changes in risk classification will increase the Bank's cost of funds, and
there can be no assurance that such cost can be passed on the Bank's customers.
We estimate the Bank's FICO assessment for the first year to be [$________].
As an insurer, the FDIC issues regulations, conducts examinations and
generally supervises the operations of its insured institutions. Any insured
institution which does not operate in accordance with or conform to FDIC
regulations, policies and directives may be sanctioned for non-compliance. The
FDIC has the authority to suspend or terminate insurance of deposits upon the
finding that the institution has engaged in unsafe or unsound practices, is
operating in an unsafe or unsound condition, or has violated any applicable law,
regulation, rule, order, or condition imposed by the FDIC. If insurance of
accounts is terminated by the FDIC, the deposits in the institution will
continue to be insured by the FDIC for a period of two years following the date
of termination. The FDIC requires an annual audit by independent accountants and
also periodically makes its own examinations of insured institutions.
In addition to deposit insurance premiums, savings institutions also
must bear a portion of the administrative costs of the OTS through an assessment
based on the level of total assets of each insured institution and which
differentiates between troubled and nontroubled savings institutions.
Additionally, the OTS assesses fees for the processing of various applications.
Transactions With Affiliates and Insiders. The Bank is subject to the
provisions of Section 23A of the Federal Reserve Act, which place limits on the
amount of loans or extensions of credit to, or investments in, or certain other
transactions with, affiliates and on the amount of advances to third parties
collateralized by the securities or obligations of affiliates. The aggregate of
all covered transactions is limited in amount, as to any one affiliate, to 10%
of a bank's capital and surplus and, as to all affiliates combined, to 20% of a
bank's capital and surplus. Furthermore, within the foregoing limitations as to
amount, each covered transaction must meet specified collateral requirements.
Compliance is also required with certain provisions designed to avoid the taking
of low quality assets.
The Bank is also subject to the provisions of Section 23B of the
Federal Reserve Act which, among other things, prohibit an institution from
engaging in certain transactions with certain affiliates unless the transactions
are on terms substantially the same, or at least as favorable to such
institution or its subsidiaries, as those prevailing at the time for comparable
transactions with non-affiliated companies. The Bank is subject to certain
restrictions on extensions of credit to executive officers, directors, certain
principal shareholders, and their related interests. Such extensions of credit
(i) must be made on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
third parties and (ii) must not involve more than the normal risk of repayment
or present other unfavorable features.
Dividends. The Bank is subject to regulatory restrictions on the
payment of dividends, including a prohibition of payment of dividends from its
capital. All dividends must be paid out of the undivided profits then on hand,
after deducting expenses, including losses and bad debts. The Bank must notify
the OTS prior to the payment of any dividends to the Company. In addition, under
FDICIA, the Bank may not pay a dividend if, after paying the dividend, the Bank
would be undercapitalized.
Branching. As a federal savings bank, there are no regulatory
restrictions on the Bank's ability to branch within or outside the State of
South Carolina, except that the Bank must obtain OTS approval.
Community Reinvestment Act. The Community Reinvestment Act requires
that, in connection with examinations of financial institutions within their
respective jurisdictions, a financial institution's primary federal regulator
(this is the OTS for the Bank) shall evaluate the record of the financial
institutions in meeting the credit needs of their local communities, including
low and moderate income neighborhoods, consistent with the safe and sound
operation of those institutions. These factors are also considered in evaluating
mergers, acquisitions, and applications to open a branch or facility.
Liquidity. Under applicable federal regulations, savings associations
are required to maintain an average daily balance of liquid assets (including
cash, certain time deposits, certain bankers' acceptances, certain corporate
debt securities and highly rated commercial paper, securities of certain mutual
funds and specified
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United States government, state or federal agency obligations) equal to a
monthly average of not less than a specified percentage of the average daily
balance of the savings association's net withdrawable deposits plus short-term
borrowings. Under HOLA, this liquidity requirement may be changed from time to
time by the OTS to any amount within the range of 4% to 10% depending upon
economic conditions and the deposit flows of member institutions, and currently
is 5%. Savings institutions also are required to maintain an average daily
balance of short-term liquid assets at a specified percentage (currently 1%) of
the total of the average daily balance of its net withdrawable deposits and
short-term borrowings.
Equity Investments. The OTS has revised its risk-based capital
regulation to modify the treatment of certain equity investments and to clarify
the treatment of other equity investments. Equity investments that are
permissible for both savings banks and national banks will no longer be deducted
from savings associations' calculations of total capital over a five-year
period. Instead, permissible equity investments will be placed in the 100%
risk-weight category, mirroring the capital treatment prescribed for those
investments when made by national banks under the regulations of the OCC. Equity
investments held by savings associations that are not permissible for national
banks must still be deducted from assets and total capital.
Qualified Thrift Lender Requirement. A federal savings bank is deemed
to be a "qualified thrift lender" ("QTL") as long as its "qualified thrift
investments" equal or exceed 65% of its "portfolio assets" on a monthly average
basis in nine out of every 12 months. Qualified thrift investments generally
consist of (i) various housing related loans and investments (such as
residential construction and mortgage loans, home improvement loans, mobile home
loans, home equity loans and mortgage-backed securities), (ii) certain
obligations of the FDIC, and (iii) shares of stock issued by any FHLB, the FHLMC
or the FNMA. Qualified thrift investments also include certain other specified
investments, subject to a percentage of portfolio assets limitation. For
purposes of the QTL test, the term "portfolio assets" means the savings
institution's total assets minus goodwill and other intangible assets, the value
of property used by the savings institution to conduct its business, and liquid
assets held by the savings institution in an amount up to 20% of its total
assets.
OTS regulations provide that any savings association that fails to meet
the definition of a QTL must either convert to a national bank charter or limit
its future investments and activities (including branching and payments of
dividends) to those permitted for both savings associations and national banks.
Further, within one year of the loss of QTL status, a holding company of a
savings association that does not convert to a bank charter must register as a
bank holding company and will be subject to all statutes applicable to bank
holding companies. In order to exercise the powers granted to federally
chartered savings associations and maintain full access to FHLB advances, the
Bank must meet the definition of a QTL.
Loans to One Borrower Limitations. HOLA generally requires savings
associations to comply with the loans to one borrower limitations applicable to
national banks. National banks generally may make loans to a single borrower in
amounts up to 15% of their unimpaired capital and surplus, plus an additional
10% of capital and surplus for loans secured by readily marketable collateral.
HOLA provides exceptions under which a savings association may make loans to one
borrower in excess of the generally applicable national bank limits. A savings
association may make loans to one borrower in excess of such limits under one of
the following circumstances: (i) for any purpose, in any amount not to exceed
$500,000; or (ii) to develop domestic residential housing units, in an amount
not to exceed the lesser of $30 million or 30% of the savings association's
unimpaired capital and unimpaired surplus, provided other conditions are
satisfied. We anticipate that the Bank's lending limit would be approximately
$500,000.
Commercial Real Property Loans. HOLA limits the aggregate amount of
commercial real estate loans that a federal savings association may make to an
amount not in excess of 400% of the savings association's capital.
ELIMINATION OF FEDERAL SAVINGS ASSOCIATION CHARTER
In 1998, Congress considered legislation that would eliminate the
federal savings association charter. Although such legislation was not enacted,
we anticipate that similar legislation will be proposed again in 1999. If such
legislation is enacted, the Bank would be required to convert its federal
savings bank charter to either a
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national bank charter or to a state depository institution charter. Such
conversion could prevent the Bank from opening or operating any branches in
another state, including the branch planned for North Carolina. If the Bank
opens a branch in North Carolina prior to such legislation, it may or may not
be allowed to continue to operate in North Carolina, depending on the
provisions of such legislation. Various legislative proposals also may result
in the restructuring of federal regulatory oversight, including, for example,
consolidation of the OTS into another agency, or creation of a new Federal
banking agency to replace the various such agencies which presently exist. The
Bank is unable to predict whether such legislation will be enacted or, if
enacted, what the effect of such legislation will be.
Federal Home Loan Bank System. The FHLB System consists of 12 regional
FHLBs, each subject to supervision and regulation by the Federal Housing Finance
Board. The FHLBs provide a central credit facility for member savings
associations. The maximum amount that the FHLB of Atlanta will advance
fluctuates from time to time in accordance with changes in policies of the
Federal Home Finance Board and the FHLB of Atlanta, and the maximum amount
generally is reduced by borrowings from any other source. In addition, the
amount of FHLB advances that a savings association may obtain will be restricted
in the event the institution fails to constitute a QTL.
Federal Reserve System. The Federal Reserve Board has adopted
regulations that require savings associations to maintain nonearning reserves
against their transaction accounts (primarily NOW and regular checking
accounts). These reserves may be used to satisfy liquidity requirements imposed
by the OTS. Because required reserves must be maintained in the form of cash or
a non-interest-bearing account at a Federal Reserve Bank, the effect of this
reserve requirement is to reduce the amount of the Bank's interest-earning
assets.
Savings institutions also have the authority to borrow from the Federal
Reserve "discount window." Federal Reserve Board regulations, however, require
savings associations to exhaust all FHLB sources before borrowing from a Federal
Reserve bank.
Other Regulations. Interest and certain other charges collected or
contracted for by the Bank are subject to state usury laws and certain federal
laws concerning interest rates. The Bank's loan operations are also subject to
certain federal laws applicable to credit transactions, such as the federal
Truth-In-Lending Act, governing disclosures of credit terms to consumer
borrowers; the Home Mortgage Disclosure Act of 1975, requiring financial
institutions to provide information to enable the public and public officials to
determine whether a financial institution will be fulfilling its obligation to
help meet the housing needs of the community it serves; the Equal Credit
Opportunity Act, prohibiting discrimination on the basis of race, creed or other
prohibited factors in extending credit; the Fair Credit Reporting Act of 1978,
governing the use and provision of information to credit reporting agencies; the
Fair Debt Collection Act, governing the manner in which consumer debts may be
collected by collection agencies; and the rules and regulations of the various
federal agencies charged with the responsibility of implementing such federal
laws. The deposit operations of the Bank also are subject to the Right to
Financial Privacy Act, which imposes a duty to maintain confidentiality of
consumer financial records and prescribes procedures for complying with
administrative subpoenas of financial records, and the Electronic Funds Transfer
Act and Regulation E issued by the Federal Reserve Board to implement that act,
which governs automatic deposits to and withdrawals from deposit accounts and
customers' rights and liabilities arising from the use of automated teller
machines and other electronic banking services.
Enforcement Powers. FIRREA expanded and increased civil and criminal
penalties available for use by the federal regulatory agencies against
depository institutions and certain "institution-affiliated parties" (primarily
including management, employees, and agents of a financial institution, and
independent contractors such as attorneys and accountants and others who
participate in the conduct of the financial institution's affairs). These
practices can include the failure of an institution to timely file required
reports or the filing of false or misleading information or the submission of
inaccurate reports. Civil penalties may be as high as $1,000,000 a day for such
violations. Criminal penalties for some financial institution crimes have been
increased to twenty years. In addition, regulators are provided with greater
flexibility to commence enforcement actions against institutions and
institution-affiliated parties. Possible enforcement actions include the
termination of deposit insurance. Furthermore, FIRREA expanded the appropriate
banking agencies' power to issue cease-and-desist orders that may, among other
things, require affirmative action to correct any harm resulting from a
violation or practice,
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including restitution, reimbursement, indemnifications or guarantees against
loss. A financial institution may also be ordered to restrict its growth,
dispose of certain assets, rescind agreements or contracts, or take other
actions as determined by the ordering agency to be appropriate.
RECENT LEGISLATIVE DEVELOPMENTS
From time to time, various bills are introduced in the United States
Congress with respect to the regulation of financial institutions. Certain of
these proposals, if adopted, could significantly change the regulation of banks
and the financial services industry. The Company cannot predict whether any of
these proposals will be adopted or, if adopted, how these proposals would affect
the Company.
EFFECT OF GOVERNMENTAL MONETARY POLICIES
The earnings of the Bank will be affected by domestic economic
conditions and the monetary and fiscal policies of the United States government
and its agencies. The Federal Reserve Board's monetary policies have had, and
will likely continue to have, an important impact on the operating results of
commercial banks through its power to implement national monetary policy in
order, among other things, to curb inflation or combat a recession. The monetary
policies of the Federal Reserve Board have major effects upon the levels of bank
loans, investments and deposits through its open market operations in United
States government securities and through its regulation of the discount rate on
borrowings of member banks and the reserve requirements against member bank
deposits. It is not possible to predict the nature or impact of future changes
in monetary and fiscal policies.
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MANAGEMENT
GENERAL
The following table sets forth the number and percentage of outstanding
shares of common stock beneficially owned as of the date of this Prospectus by
the organizers of the Company. This table also reflects the anticipated
purchases by the organizers in the offering. All purchases by the organizers
prior to the offering were made at a price of $10.00 per share, the same price
at which shares are being offered to the public.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED SHARES ANTICIPATED TO BE OWNED FOLLOWING
PRIOR TO THE OFFERING THE OFFERING
------------------------- ----------------------------------------
PERCENTAGE PERCENTAGE
OF MINIMUM OF MAXIMUM
NAME OF BENEFICIAL OWNER NUMBER (1) PERCENTAGE NUMBER OFFERING OFFERING
- ------------------------ ---------- ---------- ------ -------- --------
<S> <C> <C> <C> <C> <C>
SHOUKATH ANSARI, M.D. 4,000 13.3% 12,500 2.36% 1.67%
WYLIE F. CARTRETTE 4,000 13.3% 10,000 1.89% 1.33%
JAMES AUBREY CROSLAND 4,000 13.3% 10,000 (2) 1.89% 1.33%
ROBERT G. DOWDY 1,600 5.3% 10,000 1.89% 1.33%
HARRY L. HOWELL, JR. 4,200 14.0% 12,700 2.40% 1.69%
LUTHER D. HUTCHINS 4,000 13.3% 10,000 1.89% 1.33%
PAUL F. RUSH, M.D. 4,200 14.0% 10,000 1.89% 1.33%
LEE C. SHORTT 4,000 13.3% 10,000 1.89% 1.33%
TOTAL 30,000 100% 85,200 16.10% 11.34%
</TABLE>
- ------------------
(1) Information relating to the beneficial ownership of common stock is
based upon "beneficial ownership" concepts set forth in rules of the
Securities and Exchange Commission under Section 13(d) of the Exchange
Act. Under these rules a person is deemed to be a "beneficial owner" of
a security if that person has or shares "voting power," which includes
the power to vote or direct the voting of each security, or "investment
power," which includes the power to dispose or to direct the
disposition of such security. A person is also deemed to be a
beneficial owner of any security of which that person has the right to
acquire beneficial ownership within 60 days, including, without
limitation, shares of common stock subject to currently exercisable
options. Under the rules, more than one person may be deemed to be a
beneficial owner of the same securities, and a person may be deemed to
be a beneficial owner of securities as to which he has no beneficial
interest. For instance, beneficial ownership includes spouses, minor
children, and other relatives residing in the same household, and
trusts, partnerships, corporations or deferred compensation plans which
are affiliated with the principal.
(2) Does not include options to purchase 8,000 shares of common stock to be
granted to Mr. Crosland pursuant to his employment agreement.
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<PAGE> 30
EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY
The following sets forth certain information regarding the Company's
executive officers and directors as of the date of this Prospectus. The
Company's Articles of Incorporation provide for a classified Board of Directors,
so that, as nearly as possible, one-third of the directors are elected each year
to serve three-year terms. The terms of office of the classes of directors
expire as follows: Class I at the 1999 annual meeting of shareholders, Class II
at the 2000 annual meeting of shareholders, and Class III at the 2001 annual
meeting of shareholders. Executive officers of the Company serve at the
discretion of the Company's Board of Directors.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- ---- --- -------------------------
<S> <C> <C>
Shoukath Ansari, M.D. 50 Director, Class I
Wylie F. Cartrette 45 Director, Class II
James Aubrey Crosland, Sr. 48 Director, Class III, Chief Executive Officer
Robert G. Dowdy 37 Director, Class I
John M. Digby 52 Chief Financial Officer
Harry L. Howell, Jr. 29 Director, Class II
Luther D. Hutchins 38 Director, Class III
Paul F. Rush, M.D. 43 Director, Class I
Lee C. Shortt 55 Director, Class II
</TABLE>
Shoukath Ansari, M.D., Class I director, has been the president and a
physician of Marlboro Gastroenterology Association, P.A. in Bennettsville, South
Carolina since 1983. He served as Chief of Staff of Marlboro Park Hospital. He
graduated in 1964 from SRI Parama Kalyani College in Alwarkurichi, Tamilnadu,
India and earned an M.D. degree from Tirunelveli Medical College in Tirunelveli,
Tamilnadu, India in 1971. He is a certified gastroenterologist and has practiced
gastroenterology for approximately 18 years, having opened his own practice in
1983. Dr. Ansari was born in 1948 in India and has been a resident and citizen
of the United States since 1981.
Wylie F. Cartrette, Class II director, is currently a resident in
McColl, South Carolina. Since 1986, he has been the owner and operator of Wylie
Enterprises in McColl, South Carolina, a laundry and coin operated machine
business, and he has also handled some real estate rentals. Mr. Cartrette is a
member of the Masonic lodge of McColl. Mr. Cartrette holds a South Carolina
constable's commission, and is a former member of the McColl City Council. He
was born in 1953 in Laurinburg, North Carolina.
James Aubrey Crosland, Sr., Class III director, is the Chief Executive
Officer of First Capital and will be the President and Chief Executive Officer
of the Bank. Mr. Crosland, a native of Bennettsville, South Carolina, received a
B.A. degree from Pembroke State University in 1972. He is also a graduate of
both the South Carolina Bankers School at the University of South Carolina and
Louisiana State University's Graduate School of Banking. From May 1997 until he
joined the Company in June 1998, Mr. Crosland served as the financial manager
for Marlboro Constructors, Inc. From August 1993 through May 1997, he served as
the Pee Dee Area Executive for Carolina First Bank, where he was responsible for
Carolina First branches located in Bennettsville, McColl, and Lake City, South
Carolina. From 1984 until 1988, Mr. Crosland was the City Executive of Carolina
Bank & Trust in Bennettsville, and from 1977 to 1984 he served as an operations
officer and commercial lender for First National Bank of South Carolina in
Bennettsville. Mr. Crosland began his banking career with Wachovia Bank, serving
as a credit manager in Wachovia's Laurinburg, North Carolina office from 1973 to
1977. Mr. Crosland is a member of Saint Paul's Episcopal Church in Bennettsville
and the Bennettsville Rotary Club. He is also the chairman of the Marlboro
County Department of Social Services and a board member of the Marlboro County
Chamber of Commerce. Mr. Crosland was born in 1950 in Bennettsville, South
Carolina.
John M. Digby will serve as the Chief Financial Officer for the Company
and the Bank. He graduated from Georgia College in Milledgeville, Georgia in
1970, and he received his certificates from the Georgia Banker's School in 1984
and from the Georgia Banker's Commercial Lending School in 1987. Mr. Digby has
ten
28
<PAGE> 31
years of experience as a CFO from his employment with a community bank in
Georgia. He also served as the CFO for Clemson Bank & Trust, a start-up de novo
bank, in Clemson, South Carolina, from 1995 to 1997. Mr. Digby recently served
as vice president for Community Capital Corporation in Greenwood, South
Carolina. Mr. Digby was born in 1946 in Hawkinsville, Georgia.
Robert G. Dowdy, Class I director, graduated with a Pre-Pharmacy degree
from Francis Marion University in 1982. He then graduated from the Medical
University of South Carolina with a B.S. in Pharmacy in 1985. Mr. Dowdy obtained
his license as a registered pharmacist in 1985 from the South Carolina Board of
Pharmacy. He served as the director of pharmacy at Marlboro Park Hospital from
1986 to December 1994 when he left to work as director of pharmacy for
Grim-Smith Hospital in Missouri from 1994 to April 1996. Mr. Dowdy moved back to
Marlboro Park Hospital in April 1996 and is currently director of pharmacy. He
was born in 1961 in Bennettsville, South Carolina.
Harry L. Howell, Jr., Class II director, graduated from Flora McDonald
Academy in North Carolina in 1987. He is majority owner and has served as
president of Scotland Motors, Inc. in Laurinburg, North Carolina since December
1984. Mr. Howell owns Scotland Leasing & Rental, Inc., an auto rental business
as well as Lee Howell, Inc., a real estate rental business in Laurinburg. Mr.
Howell is a member of the First Baptist Church in Laurinburg. He was born in
1969 in Laurinburg, North Carolina.
Luther D. Hutchins, Class III director, graduated from Bennettsville
High School in 1979 and attended Wake Forest University in North Carolina. Mr.
Hutchins has been the sole owner of Marlboro Appliance Center and Marlboro
Frame Shoppe. He also owns a farm and a farm implement services company. Mr.
Hutchins was born in 1960 in Winston-Salem, North Carolina.
Paul F. Rush, M.D., Class I director, graduated with a B.S. in
Biology from Presbyterian College in South Carolina in 1978. He received his
M.D. from the University of South Carolina School of Medicine in 1982 and
received his physician's license from the state of North Carolina in 1982 and
from the State of South Carolina in 1987. Dr. Rush has held the position of
senior physician at Scotland Orthopedic, P.A. in Laurinburg, South Carolina,
since August 1987. He has been a __% owner of Scotland Orthopedic, P.A. since
1987, as well as Scotland Orthopedic Properties since 1989. Dr. Rush served as
an advisory board member of BB&T in Laurinburg from 1989 to May 1998, is the
Chairman of the Scotland County Board of Education, serves on the Board of
Trustees of Scotland Memorial Hospital, and the Board of Trustees of Scotia
Village. Dr. Rush is also a Fellow of the American Academy of Orthopedic
Surgeons and a member of the First United Methodist Church in Laurinburg, North
Carolina. Dr. Rush was born in 1956 in Charleston, South Carolina.
Lee C. Shortt, Class II director, is the Chairman of First Capital.
Mr. Shortt has been in the auction business since 1975 and has served as
president and owner of Shortt Auction and Realty Co., Inc. since 1976. Mr.
Shortt holds real estate brokers licenses and auctioneer licenses in each of
South Carolina, North Carolina, and Virginia. He is a member of the
Bennettsville Rotary Club. Mr. Shortt was born in 1943 in Pitsylvania County,
Virginia.
EMPLOYMENT AGREEMENTS
The Company has entered into an employment agreement with J. Aubrey
Crosland for a three-year term, pursuant to which Mr. Crosland will serve as the
President and Chief Executive Officer of the Bank. Mr. Crosland will be paid a
salary of $85,000, plus his yearly medical insurance premium. Mr. Crosland 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. Crosland will be granted an option to purchase 8,000 shares of common stock
at $10.00 per share. The options will vest over a six-year period and will have
a term of ten years. Additionally, Mr. Crosland will participate in the Bank's
retirement, welfare and other benefit programs and is entitled to a life
insurance policy and an accident liability policy and reimbursement for
automobile expenses, club dues, and travel and business expenses. The letter of
employment with Mr. Crosland also provides that following termination of his
employment with the Bank and for a period of twelve months thereafter, Mr.
Crosland may not (i) compete with the Company, Bank, or any of its
29
<PAGE> 32
affiliates by, directly or indirectly, forming, serving as an organizer,
director or officer of, or consultant to, or acquiring or maintaining more than
1% passive investment in, a depository financial institution or holding company
thereof if such depository institution or holding company has one or more
offices or branches in the territory, (ii) solicit major customers of the Bank
for the purpose of providing financial services, or (iii) solicit employees of
the Bank for employment. If Mr. Crosland's employment is terminated other than
for cause (as defined in the letter of employment), the Company will be
obligated to pay Mr. Crosland six months' severance plus bonus earned through
such date.
DIRECTOR COMPENSATION
The organizers do not intend for the Company or the Bank to pay
directors' fees until such time as the Bank is profitable. However, the Company
and the Bank reserve the right to pay directors' fees. In addition, after the
offering, the Company expects to adopt a stock option plan which will permit the
Company to grant options to officers, directors, and employees of the Company.
The Company anticipates that it will initially authorize the issuance of a
number of shares under the stock option plan equal to 15% of the shares
outstanding after the offering. The option plan will provide that the exercise
price for an option cannot be less than 100% of the common stock's fair market
value on the date of grant.
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.
The Bank's property was purchased through Shortt Auction and Realty.
The Chairman of the Company and the Bank is Mr. Lee C Shortt, the president and
owner of Shortt Auction and Realty. Mr. Shortt will receive a commission as the
listing agent to be paid by the seller of the property, and therefore removed
himself from the vote in the selection of the site. The purchase price for the
site and building was less than the most recent tax assessment for the property.
EXCULPATION AND INDEMNIFICATION
The Company's Articles of Incorporation contain a provision which,
subject to certain limited exceptions, limits the liability of a director to the
Company or its shareholders for any breach of duty as a director. There is no
limitation of liability for: a breach of duty involving appropriation of a
business opportunity of the Company; an act or omission which involves
intentional misconduct or a knowing violation of law; any transaction from which
the director derives an improper personal benefit; or as to any payments of a
dividend or any other type of distribution that is illegal under Section
33-8-330 of the South Carolina Business Corporation Act of 1988 (the
"Corporation Act"). In addition, if at any time the Corporation Act shall have
been amended to authorize further elimination or limitation of the liability of
director, then the liability of each director of the Company shall be eliminated
or limited to the fullest extent permitted by such provisions, as so amended,
without further action by the shareholders, unless the provisions of the
Corporation Act require such action. The provision does not limit the right of
the Company or its shareholders to seek injunctive or other equitable relief not
involving payments in the nature of monetary damages.
30
<PAGE> 33
The Company's Bylaws contain certain provisions which provide
indemnification to directors of the Company that is broader than the protection
expressly mandated in Sections 33-8-510 and 33-8-520 of the Corporation Act. To
the extent that a director or officer of the Company has been successful, on the
merits or otherwise, in the defense of any action or proceeding brought by
reason of the fact that such person was a director or officer of the Company,
Sections 33-8-510 and 33-8-520 of the Corporation Act would require the Company
to indemnify such persons against expenses (including attorney's fees) actually
and reasonably incurred in connection therewith. The Corporation Act expressly
allows the Company to provide for greater indemnification rights to its officers
and directors, subject to shareholder approval.
Insofar as indemnification for liabilities arising under the
Corporation Act may be permitted to directors, officers, and controlling persons
of the Company and the Bank pursuant to the Articles of Incorporation or Bylaws,
or otherwise, the Company and the Bank have been advised that in the opinion of
the SEC such indemnification is against public policy as expressed in the
Corporation Act and is, therefore, unenforceable.
The Board of Directors also has the authority to extend to officers,
employees, and agents the same indemnification rights held by directors, subject
to all of the accompanying conditions and obligations. The Board of Directors
intends to extend indemnification rights to all of its executive officers.
DESCRIPTION OF CAPITAL STOCK OF THE COMPANY
GENERAL
The authorized capital stock of the Company consists of 10,000,000
shares of common stock, par value $.01 per share, and 10,000,000 shares of
preferred stock, par value $.01 per share. The following summary describes the
material terms of the Company's capital stock. Reference is made to the Articles
of Incorporation ("Articles") of the Company, which is filed as an exhibit to
the Registration Statement of which this Prospectus forms a part, for a detailed
description of the provisions thereof summarized below.
COMMON STOCK
Holders of shares of the common stock are entitled to receive such
dividends as may from time to time be declared by the Board of Directors out of
funds legally available therefor. The Company does not plan to declare any
dividends in the immediate future. See "Dividend Policy." Holders of common
stock are entitled to one vote per share on all matters on which the holders of
common stock are entitled to vote and do not have any cumulative voting rights.
Shareholders have no preemptive, conversion, redemption or sinking fund rights.
In the event of a liquidation, dissolution or winding-up of the Company, holders
of common stock are entitled to share equally and ratably in the assets of the
Company, if any, remaining after the payment of all debts and liabilities of the
Company and the liquidation preference of any outstanding preferred stock. The
outstanding shares of common stock are, and the shares of common stock offered
by the Company hereby when issued will be, fully paid and nonassessable. The
rights, preferences and privileges of holders of common stock are subject to any
classes or series of preferred stock that the Company may issue in the future.
Prior to this offering there has been no market for the common stock.
Although the common stock will be quoted on the OTC Bulletin Board, there can be
no assurance regarding the liquidity of any markets that may develop for the
common stock, the ability of holders of common stock to sell their securities,
or the price at which holders would be able to sell their securities. The public
offering price of the common stock offered hereby has been determined solely by
negotiations between the Bank and Banc Stock Financial Services, Inc. and may
bear no relationship to the market price of the common stock after this
offering. See "The Offering - Plan of Distribution."
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,
31
<PAGE> 34
limitations, and restrictions thereof, including the dividend rate, conversion
rights, voting rights, redemption price, and liquidation preference, and to fix
the number of shares to be included in any such classes or series. Any
preferred stock so issued may rank senior to the common stock with respect to
the payment of dividends or amounts upon liquidation, dissolution or
winding-up, or both. In addition, any such shares of preferred stock may have
class or series voting rights. Upon completion of this offering, the Company
will not have any shares of preferred stock outstanding. Issuances of preferred
stock, while providing the Company with flexibility in connection with general
corporate purposes, may, among other things, have an adverse effect on the
rights of holders of common stock (for example, the issuance of any preferred
stock with voting or conversion rights may adversely affect the voting power of
the holders of common stock) and in certain circumstances such issuances could
have the effect of decreasing the market price of the common stock. The Company
has no present plan to issue any shares of preferred stock. The Company will
not issue preferred stock to organizers on terms more favorable than those on
which it issues preferred stock to shareholders other than organizers.
CERTAIN ANTITAKEOVER EFFECTS
The provisions of the Company's Articles, the Bylaws and South Carolina
law summarized in the following paragraphs may be deemed to have antitakeover
effects and may delay, defer, or prevent a tender offer or takeover attempt that
a shareholder might consider to be in such shareholder's best interest,
including those attempts that might result in a premium over the market price
for the shares held by shareholders, and may make removal of management more
difficult.
Authorized but Unissued Stock. The authorized but unissued shares of
common stock and preferred stock will be available for future issuance without
shareholder approval. These additional shares may be used for a variety of
corporate purposes, including future public offerings to raise additional
capital, corporate acquisitions, and employee benefit plans. The existence of
authorized but unissued and unreserved shares of common stock and preferred
stock may enable the Board of Directors to issue shares to persons friendly to
current management, which could render more difficult or discourage any attempt
to obtain control of the Company by means of a proxy contest, tender offer,
merger or otherwise, and thereby protect the continuity of the Company's
management.
Number of Directors. The Bylaws provide that the number of directors
shall be fixed from time to time by resolution by at least a majority of the
directors then in office, but may not consist of fewer than five nor more than
fifteen members. Individuals affiliated with competitors may not serve on the
Board.
Classified Board of Directors. The Articles and Bylaws divide the Board
of Directors into three classes of directors serving staggered three-year terms.
As a result, approximately one-third of the Board of Directors will be elected
at each annual meeting of shareholders. The classification of directors,
together with the provisions in the Articles and Bylaws described below that
limit the ability of shareholders to remove directors and that permit the
remaining directors to fill any vacancies on the Board of Directors, will have
the effect of making it more difficult for shareholders to change the
composition of the Board of Directors. As a result, at least two annual meetings
of shareholders may be required for the shareholders to change a majority of the
directors, whether or not a change in the Board of Directors would be beneficial
to the Company and its shareholders and whether or not a majority of the
Company's shareholders believes that such a change would be desirable.
Removal of Directors and Filling Vacancies. The Bylaws provide that all
vacancies on the Board of Directors, including those resulting from an increase
in the number of directors, may be filled by a majority of the remaining
directors, even if they do not constitute a quorum. When one or more directors
resign from the Board of Directors effective at a future date, a majority of
directors then in office, including the directors who are to resign, may vote on
filling the vacancy.
Advance Notice Requirements for Shareholder Proposals and Director
Nominations. The Bylaws establish advance notice procedures with regard to
shareholder proposals and the nomination, other than by or at the direction of
the Board of Directors or a committee thereof, of candidates for election as
directors. These procedures provide that the notice of shareholder proposals and
shareholder nominations for the election of
32
<PAGE> 35
directors at any meeting of shareholders must be in writing and be received by
each director not later than twenty-four hours prior to the meeting when
delivered personally or by telecopy or at least two days prior thereto when
delivered by mail. The Company may reject a shareholder proposal or nomination
that is not made in accordance with such procedures.
Certain Nomination Requirements. Pursuant to the Bylaws, the Company
has established certain nomination requirements for an individual to be elected
as a director of the Company at any annual or special meeting of the
shareholders, including that the nominating party provide the Company within a
specified time prior to the meeting: (i) notice that such party intends to
nominate the proposed director; (ii) the name of and certain biographical
information on the nominee; and (iii) a statement that the nominee has consented
to the nomination. The chairman of any shareholders' meeting may, for good cause
shown, waive the operation of these provisions. These provisions could reduce
the likelihood that a third party would nominate and elect individuals to serve
on the Board of Directors.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have a minimum of
530,000 and a maximum of 750,000 shares of common stock outstanding. The shares
sold in this offering will be freely tradable, without restriction or
registration under the Securities Act, except for shares purchased by
"affiliates" of the Company, which will be subject to resale restrictions under
the Securities Act. An affiliate of the issuer is defined in Rule 144 under the
Securities Act as a person that directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control with the
issuer. Rule 405 under the Securities Act defines the term "control" to mean the
possession, direct or indirect, of the power to direct or cause the direction of
the management and policies of the person whether through the ownership of
voting securities, by contract or otherwise. Directors of the Company and the
Bank are deemed to be affiliates. These securities held by affiliates may be
sold without registration in accordance with the provisions of Rule 144 or
another exemption from registration.
In general, under Rule 144, an affiliate of the Company or a person
holding restricted shares may sell, within any three-month period, a number of
shares no greater than 1% of the then outstanding shares of the common stock or
the average weekly trading volume of the common stock during the four calendar
weeks preceding the sale, whichever is greater. Rule 144 also requires that the
securities must be sold in "brokers' transactions," as defined in the Securities
Act, and the person selling the securities may not solicit orders or make any
payment in connection with the offer or sale of securities to any person other
than the broker who executes the order to sell the securities. This requirement
may make the sale of the common stock by affiliates of the Company pursuant to
Rule 144 difficult if no trading market develops in the common stock. Rule 144
also requires persons holding restricted securities to hold the shares for at
least one year prior to sale.
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for
the Company by Nelson Mullins Riley & Scarborough, L.L.P., Atlanta, Georgia.
Certain legal matters will be passed upon in connection with the offering by the
sales agent by Igler & Dougherty, P.A., Tallahassee, Florida.
EXPERTS
The financial statements of the Company dated November 30, 1998 and for
the period from December 17, 1997 (inception), until November 30, 1998 have been
audited by Tourville, Simpson & Henderson, L.L.P., as stated in their report
appearing elsewhere herein, and have been so included in reliance on the report
of such firm given upon their authority as an expert in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form SB-2 (together with all
amendments, exhibits, schedules and supplements thereto, the
33
<PAGE> 36
"Registration Statement"), under the Securities Act of 1933 and the rules and
regulations thereunder, for the registration of the common stock offered
hereby. This Prospectus, which forms a part of the Registration Statement, does
not contain all of the information set forth in the Registration Statement. For
further information with respect to the Company and the common stock, you
should refer to the Registration Statement and the exhibits thereto.
The Registration Statement may be examined at, and copies of the
Registration Statement may be obtained at prescribed rates from, the Public
Reference Section of the Commission, Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549. The SEC also maintains a Web site (http://www.sec.gov)
that contains reports, proxy and information statements and other information
regarding registrants, such as the Company, that file electronically with the
Commission.
The Company and the organizers have filed or will file various
applications with the Office of Thrift Supervision and the Federal Deposit
Insurance Corporation. Prospective investors should rely only on information
contained in this Prospectus and in the Company's related Registration Statement
in making an investment decision. To the extent that other available information
not presented in this Prospectus, including information available from the
Company and information in public files and records maintained by the Office of
Thrift Supervision and the Federal Deposit Insurance Corporation, is
inconsistent with information presented in this Prospectus, such other
information is superseded by the information presented in this Prospectus.
Projections appearing in the applications were based on assumptions that the
organizers believed were reasonable, but as to which no assurances can be made.
The Company specifically disaffirms those projections for purposes of this
Prospectus and cautions prospective investors against placing reliance on them
for purposes of making an investment decision. Statements contained in this
Prospectus as to the contents of any contract or other document referred to
herein are not necessarily complete. Where such contract or document is an
exhibit to the Registration Statement, each statement contained herein is
qualified in all respects by the provisions of such exhibit, to which reference
is hereby made.
As a result of this offering, the Company will become a reporting
company subject to the full informational requirements of the Exchange Act. The
Company will fulfill its obligations with respect to such requirements by filing
periodic reports and other information with the Commission. It 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.
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<PAGE> 37
FIRST CAPITAL BANCSHARES, INC.
(A Company in the Development Stage)
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Independent Accountants' Report F-2
Financial Statements:
Balance Sheet as of November 30, 1998 F-3
Statement of Operations and Accumulated Deficit For the Period
December 19, 1997 (Inception) to November 30, 1998 F-4
Statement of Changes in Stockholders' Equity For the Period
December 19, 1997 (Inception) to November 30, 1998 F-5
Statement of Cash Flows For the Period December 19, 1997
(Inception) to November 30, 1998 F-6
Notes to Financial Statements F-7 to F-9
</TABLE>
F-1
<PAGE> 38
INDEPENDENT ACCOUNTANTS' REPORT
To the Organizers
First Capital Bancshares, Inc.
We have audited the accompanying balance sheet of First Capital Bancshares, Inc.
(a Company in the development stage) as of November 30, 1998 and related
statements of operations and accumulated deficit, stockholders' equity and cash
flows for the period from December 19, 1997 (inception) to November 30, 1998.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of First Capital Bancshares, Inc.
(a Company in the development stage) as of November 30, 1998, and the results of
its operations and its cash flows for the period from December 19, 1997
(inception) to November 30, 1998 in conformity with generally accepted
accounting principles.
Tourville, Simpson & Henderson, CPA
Columbia, South Carolina
December 11, 1998
F-2
<PAGE> 39
FIRST CAPITAL BANCSHARES, INC.
(A Company in the Development Stage)
BALANCE SHEET
NOVEMBER 30, 1998
ASSETS
<TABLE>
<S> <C>
Cash $ 129,601
Option on real estate 15,000
Prepaid stock issuance costs 8,145
Other prepaid costs 8,687
-------------
Total assets $ 161,433
=============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES -
Accounts payable $ 9,000
-------------
STOCKHOLDERS' EQUITY--
Common stock, par value $.01 per share; 10,000,000 shares authorized;
30,000 shares issued and outstanding 300
Preferred stock - 10,000,000 shares authorized and unissued,
par value $.01 per share --
Paid-in-capital 299,700
Deficit accumulated in the development stage (147,567)
-------------
Total stockholders' equity 152,433
-------------
Total liabilities and stockholders' equity $ 161,433
=============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 40
FIRST CAPITAL BANCSHARES, INC.
(A Company in the Development Stage)
STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
FOR THE PERIOD DECEMBER 19, 1997 (INCEPTION) TO NOVEMBER 30, 1998
<TABLE>
<S> <C>
Income $ --
-------------
Expenses:
Management fees 56,500
Consultant fees 48,052
Legal 22,975
Other 20,040
-------------
Total expenses 147,567
-------------
Net loss and accumulated deficit $ (147,567)
=============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 41
FIRST CAPITAL BANCSHARES, INC.
(A Company in the Development Stage)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD DECEMBER 19, 1997 (INCEPTION) TO NOVEMBER 30, 1998
<TABLE>
<CAPTION>
Deficit
Common Stock Accumulated In
------------- Paid-In The Develop-
Shares Amount Capital ment Stage Total
----------- -------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Issuance of common stock 30,000 $ 300 $ 299,700 $ $ 300,000
Net loss for the period
December 19, 1997 (Inception)
to November 30, 1998 (147,567) (147,567)
----------- -------------- ------------- -------------- -------------
Balance, November 30, 1998 30,000 $ 300 $ 299,700 $ (147,567) $ 152,433
=========== ============== ============= ============== =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 42
FIRST CAPITAL BANCSHARES, INC.
(A Company in the Development Stage)
STATEMENT OF CASH FLOWS
FOR THE PERIOD DECEMBER 19, 1997 (INCEPTION) TO NOVEMBER 30, 1998
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES--
Net loss and accumulated deficit $ (147,567)
Adjustments to reconcile net loss and accumulated deficit to
cash provided by operating activities -
Increase in accounts payable 9,000
-------------
Cash used by operating activities (138,567)
CASH FLOWS FROM INVESTING ACTIVITIES--
Option on real estate (15,000)
Other prepaid costs (relating to purchase of real estate) (8,687)
-------------
Cash used by investing activities (23,687)
-------------
CASH FLOWS FROM FINANCING ACTIVITIES--
Prepaid stock issuance costs (8,145)
Issuance of common stock 300,000
-------------
Cash provided by financing activities 291,855
-------------
CASH BALANCE AT END OF PERIOD $ 129,601
=============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 43
FIRST CAPITAL BANCSHARES, INC.
(A Company in the Development Stage)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION
First Capital Bancshares, Inc. was formed to organize and own all of
the capital stock of First Capital Bank (in organization) (the Bank);
together they are herein referred to as "the Company." The organizers
of the Company filed an application to charter the Bank as a Capital
savings bank with the Office of Thrift Supervision. Provided the
necessary capital is raised and the necessary regulatory approvals are
received, it is expected that operations will commence in April of
1999.
The Company plans to raise a minimum of $5,000,000 through an offering
of its $.01 par value common stock. The organizers, directors, and
members of their immediate families expect to purchase a total of
85,200 shares (including 30,000 shares purchased prior to the
offering), at an aggregate purchase price of approximately $852,000.
Upon the completion of the sale of common stock and the opening of the
Bank, incurred organization and pre-opening costs, estimated to be
$323,000 ($300,000 for the Bank and $23,000 for the Company), will be
charged against the initial period's operating results. Offering
expenses, estimated to be approximately $442,160 (consisting
principally of direct incremental costs of the stock offering), will
be deducted from the proceeds of the offering.
NOTE 2 - LIQUIDITY
The Company incurred a net loss of $147,567 for the period from
inception (December 19, 1997) to November 30, 1998. Activities since
inception have consisted of organizational activities necessary to
obtain regulatory approvals and to otherwise prepare to commence
business as a financial institution.
At November 30, 1998, the Company had been totally funded by the
$300,000 received from the issuance of 30,000 shares of common stock
to the Company's organizers.
Management believes that the level of expenditures is well within the
financial capabilities of the organizers and is adequate to meet
existing obligations and fund current operations, but commencing
banking operations is dependent upon the Company successfully
completing the stock offering and obtaining regulatory approval.
To provide permanent funding for its option, the Company is currently
anticipating offering a minimum of 500,000 and a maximum of 720,000
shares of its common stock, $.01 par value, at $10 per share in an
initial public offering. Costs related to the organization and
registration of the Company's common stock will be paid from the gross
proceeds of the offering. Should subscriptions for the minimum
offering not be obtained, amounts paid by subscribers with their
subscriptions will be returned, net of expenses, and the offer will be
withdrawn.
F-7
<PAGE> 44
FIRST CAPITAL BANCSHARES, INC.
(A Company in the Development Stage)
NOTES TO FINANCIAL STATEMENTS
NOTE 3 - INCOME TAXES
As of November 30, 1998, the Company has a net operating loss carry
forward of $147,567.
There was no provision (benefit) for income taxes for the period from
inception (December 19, 1997) to November 30, 1998, since a 100%
valuation reserve is being maintained for the net operating loss
carryforward.
NOTE 4 - EMPLOYMENT CONTRACT AND STOCK OPTIONS
The Company has entered into a three-year employment contract with its
President beginning June 4, 1998. The contract provides that the
President will receive an initial annual salary of $60,000, which
shall be increased to not less than $85,000 per annum on the date the
Bank opens. This contract may be extended for additional time periods
by mutual agreement of the President and the Company.
On the date of the closing of the public stock offering or as soon
thereafter as an appropriate stock option plan is adopted by the
Board, the Company shall grant to the President an option to purchase
8,000 shares of common stock. The stock option agreement will provide
that the option will have a ten-year term and will vest over a
six-year period (1,000 shares on each of the first three anniversaries
of the opening date of the Company, 1,667 shares on the fourth and
fifth anniversaries, and 1,666 shares on the sixth anniversary,
provided that the President is still employed by the Company on each
anniversary and that certain performance goals for such year are met.)
Annually, the Board of Directors agrees to set performance goals for
the Company and may grant to the President a cash bonus at the end of
each fiscal year in which such performance goals are met. The amount
of any such bonus will be determined by the Board.
Beginning on the date the Company opens, the Company shall provide the
President with a leased automobile with a lease rate not to exceed
$400 per month.
NOTE 5 - OPTION ON REAL ESTATE
As of November 30, 1998, the Company had paid $15,000 for an option to
purchase real estate in Bennettsville, South Carolina for the purpose
of building its main banking office. The option provides for a
purchase price of $350,000 payable in cash and expires March 1, 1999.
F-8
<PAGE> 45
FIRST CAPITAL BANCSHARES, INC.
(A Company in the Development Stage)
NOTES TO FINANCIAL STATEMENTS
NOTE 6 - STOCKHOLDERS' EQUITY
COMMON STOCK - The Company has the authority to issue up to 10,000,000
shares of voting common stock, par value $.01 per share.
PREFERRED STOCK - The Company has the authority to issue up to
10,000,000 shares of preferred stock, par value $.01 per share. Also,
the Company has the right to establish and designate from time to time
any part or all of the shares by filing an amendment to the Company's
Articles of Incorporation, which is effective without shareholder
action, in such series and with such preferences, limitations, and
relative rights as may be determined by the Board of Directors. The
number of authorized shares of preferred stock may be increased or
decreased by the affirmative vote of the holders of the majority of
the shares of common stock, without a vote of the holders of the
shares of preferred stock.
CUMULATIVE VOTING RIGHTS - The Company has elected not to have
cumulative voting, and no shares issued by the Company may be
cumulatively voted.
PREEMPTIVE RIGHTS - The stockholders of the Company shall not have any
preemptive rights regarding any issuance of the Company's capital
stock.
NOTE 7 - DATA PROCESSING
As of November 30, 1998 the Company has entered into an agreement with
Fiserv Solutions, Inc. ("Fiserv") to electronically process the
Company's daily transactions. Upon receiving regulatory approval to
open the Bank, the Company will have to pay Fiserv approximately
$226,000 for computer hardware and software.
Like many financial institutions, the Company will rely upon computers
for the daily conduct of its business and for information 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. Generally, the Company will be
relying on software and hardware developed by independent third
parties for its information systems.
The agreement with Fiserv includes a warranty that their system is
Year 2000 compliant in all respects. While management believes that
the information systems they agreed to acquire, and the network
connections that will be maintained, will comply with the Year 2000
requirements, there is a risk that they will not comply as they have
been developed by others.
F-9
<PAGE> 46
===============================================================================
No dealer, salesperson or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus in connection with the offer made hereby. If given or made, such
information and representations must not be relied upon as having been
authorized by the Company. This Prospectus does not constitute an offer to sell
or solicitation of an offer to buy any of the securities offered hereby in any
jurisdiction to any person to whom it is unlawful to make such offer in such
jurisdiction. Neither the delivery of this Prospectus nor any sale made
hereunder at any time shall under any circumstances create any implication that
the information herein is correct at any time after the date hereof.
-------------------------
-------------------------
UNTIL ____________________, ALL DEALERS EFFECTING TRANSACTIONS IN THE
REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY
BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF
DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO
THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
===============================================================================
===============================================================================
720,000 SHARES
FIRST CAPITAL BANCSHARES,
INC.
A PROPOSED HOLDING COMPANY FOR
FIRST CAPITAL BANK
(PROPOSED)
(INSERT LOGO HERE)
COMMON STOCK
PROSPECTUS
(BANK STOCK LOGO HERE)
[DATE OF OFFER]
===============================================================================
<PAGE> 47
PART II
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Item 24. Indemnification of Directors and Officers
The Company's Articles of Incorporation contain a provision which,
subject to certain limited exceptions, limits the liability of a director to
the Company or its shareholders for any breach of duty as a director. There is
no limitation of liability for: a breach of duty involving appropriation of a
business opportunity of the Company; an act or omission which involves
intentional misconduct or a knowing violation of law; any transaction from
which the director derives an improper personal benefit; or as to any payments
of a dividend or any other type of distribution that is illegal under Section
33-8-330 of the South Carolina Business Corporation Act of 1988 (The
"Corporation Act"). In addition, if at any time the Corporation Act shall have
been amended to authorize further elimination or limitation of the liability of
director, then the liability of each director of the Company shall be
eliminated or limited to the fullest extent permitted by such provisions, as so
amended, without further action by the shareholders, unless the provisions of
the Corporation Act require such action. The provision does not limit the right
of the Company or its shareholders to seek injunctive or other equitable relief
not involving payments in the nature of monetary damages.
The Company's bylaws contain certain provisions which provide
indemnification to directors of the Company that is broader than the protection
expressly mandated in Sections 33-8-510 and 33-8-520 of the Corporation Act. To
the extent that a director or officer of the Company has been successful, on the
merits or otherwise, in the defense of any action or proceeding brought by
reason of the fact that such person was a director or officer of the Company,
Sections 33-8-510 and 33-8-520 of the Corporation Act would require the Company
to indemnify such persons against expenses (including attorney's fees) actually
and reasonably incurred in connection therewith. The Corporation Act expressly
allows the Company to provide for greater indemnification rights to its officers
and directors, subject to shareholder approval.
Insofar as indemnification for liabilities arising under the
Corporation Act may be permitted to directors, officers, and controlling persons
of the Company and the Bank pursuant to the Articles of Incorporation or Bylaws,
or otherwise, the Company and the Bank have been advised that in the opinion of
the SEC such indemnification is against public policy as expressed in the
Corporation Act and is, therefore, unenforceable.
The Board of Directors also has the authority to extend to officers,
employees and agents the same indemnification rights held by directors, subject
to all of the accompanying conditions and obligations. The Board of Directors
has extended or intends to extend indemnification rights to all of its executive
officers.
The Company has the power to purchase and maintain insurance on behalf
of any person who is or was a director, officer, employee or agent of the
Company against any liability asserted against him or incurred by him in any
such capacity, whether or not the Company would have the power to indemnify him
against such liability under the bylaws.
II-1
<PAGE> 48
Item 25. Other Expenses of Issuance and Distribution.
Estimated expenses (other than underwriting commissions) of the sale of
the shares of common stock are as follows:
<TABLE>
<S> <C>
Registration Fee $ 2,000
Printing and Engraving 15,000
Legal Fees and Expenses 30,000
Accounting Fees 5,000
Blue Sky Fees and Expenses 10,000
Underwriter's expenses and legal fees 60,000
Miscellaneous Disbursements 5,000
------------
TOTAL $ 127,000
============
</TABLE>
Item 26. Recent Sales of Unregistered Securities.
From inception, the Company has issued a total of 30,000 shares of its
common stock to its organizers. The price per share was $10.00 for a total
purchase price of $300,000. There were no underwriting discounts or commissions
paid with respect to these transactions. All sales were exempt under Section
4(2) of the Securities Act of 1933.
Item 27. Exhibits.
<TABLE>
<S> <C>
3.1. Articles of Incorporation and all amendments
3.2. Bylaws
4.1. See Exhibits 3.1 and 3.2 for provisions in the Company's Articles of
Incorporation and Bylaws defining the rights of holders of the common
stock
4.2. Form of certificate of common stock
5.1. Opinion Regarding Legality
10.1. Letter of Employment dated June 4, 1998, between the Company and J.
Aubrey Crosland
10.2. Letter of Employment dated November 2, 1998, between the Company and
John M. Digby
10.3. Purchase Agreement dated April 20, 1998, between the Company, as buyer,
and James B. Connelly, as seller
10.4. * Form of escrow agreement among the Company, Banc Stock Financial
Services, Inc. and The Banker's Bank
10.5. Sales Agency Agreement among the Company and Banc Stock Financial
Services, Inc.
10.6 * An agreement for software and account processing services dated
December 7, 1998 with Fiserv Solutions, Inc.
23.1. Consent of Independent Public Accountants
23.2. Consent of Nelson Mullins Riley & Scarborough, L.L.P. (appears in its
opinion filed as Exhibit 5.1)
24.1. Power of Attorney (part of signature page to this Registration
Statement)
27.1. * Financial Data Schedule (for electronic filing purposes)
</TABLE>
* To be filed by amendment.
II-2
<PAGE> 49
Item 28. Undertakings.
The undersigned Company will:
(a)(1) File, during any period in which it offers or sells
securities, a post-effective amendment to this registration
statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in
the information in the registration statement; and
(iii) Include any additional or changed material information on the
plan of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(3) File a post-effective amendment to remove from registration
any of the securities that remain unsold at the end of the offering.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of the Company pursuant to the provisions described in Item
24 above, or otherwise, the Company has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Company of expenses incurred or paid by a
director, officer or controlling person of the Company in the successful defense
of any action, suit, or proceeding) is asserted by such director, officer, or
controlling person in connection with the securities being registered, the
Company will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
II-3
<PAGE> 50
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the city of
Bennettsville, State of South Carolina, on December 18, 1998.
FIRST CAPITAL BANCSHARES, INC.
By: /s/ J. Aubrey Crosland
---------------------------------
J. Aubrey Crosland
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each of the undersigned officers
and directors of First Capital Bancshares, Inc. (the "Company"), a South
Carolina corporation, for himself and not for one another, does hereby
constitute and appoint J. Aubrey Crosland and Lee C. Shortt, and each of them, a
true and lawful attorney in his name, place and stead, in any and all
capacities, to sign his name to any and all amendments, including post-effective
amendments, to this registration statement, and to sign a registration statement
pursuant to Section 462(b) of the Securities Act of 1933, and to cause the same
(together with all Exhibits thereto) to be filed with the Securities and
Exchange Commission, granting unto said attorneys and each of them full power
and authority to do and perform any act and thing necessary and proper to be
done in the premises, as fully to all intents and purposes as the undersigned
could do if personally present, and each of the undersigned for himself hereby
ratifies and confirms all that said attorneys or any one of them shall lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Glenn Dowdy
- ------------------------------------
Glenn Dowdy Director December 18, 1998
/s/ Wylie Cartrette
- ------------------------------------
Wylie Cartrette Director December 18, 1998
/s/ Dale Hutchins
- ------------------------------------
Dale Hutchins Director December 18, 1998
/s/ Shoukath Ansari
- ------------------------------------
Shoukath Ansari Director December 18, 1998
/s/ Paul F. Rush
- ------------------------------------
Paul F. Rush Director December 18, 1998
</TABLE>
<PAGE> 51
SIGNATURES
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Lee Howell
- ------------------------------------
Lee Howell Director December 18, 1998
/s/ Lee C. Short
- ------------------------------------
Lee C. Shortt Director December 18, 1998
/s/ J. Aubrey Crosland
- ------------------------------------
J. Aubrey Crosland Director, Chief Executive December 18, 1998
Officer and President
/s/ John M. Digby
- ------------------------------------
John M. Digby Chief Financial Officer December 18, 1998
By: /s/ J. Aubrey Crosland
-------------------------------
J. Aubrey Crosland
Attorney-in-Fact
</TABLE>
<PAGE> 52
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
<S> <C>
Item 27. Exhibits.
3.1. Articles of Incorporation and all amendments
3.2. Bylaws
4.1. See Exhibits 3.1 and 3.2 for provisions in the Company's Articles of
Incorporation and Bylaws defining the rights of holders of the common
stock
4.2. Form of certificate of common stock
5.1. Opinion Regarding Legality
10.1. Letter of Employment dated June 4, 1998, between the Company and J.
Aubrey Crosland
10.2. Letter of Employment dated November 2, 1998, between the Company and
John M. Digby
10.3. Purchase Agreement dated April 20, 1998, between the Company, as
buyer, and James B. Connelly, as seller
10.4. * Escrow agreement among the Company, Banc Stock Financial Services,
Inc., and The Banker's Bank
10.5. Sales Agency Agreement among the Company and Banc Stock Financial
Services, Inc.
10.6 * An agreement for software and account processing services dated
December 7, 1998 with Fiserv Solutions, Inc.
23.1. Consent of Independent Public Accountants
23.2. Consent of Nelson Mullins Riley & Scarborough, L.L.P. (appears in its
opinion filed as Exhibit 5.1)
24.1. Power of Attorney (part of signature page to Registration Statement)
27.1. * Financial Data Schedule (for electronic filing purposes)
- -------------------
* To be filed by amendment.
</TABLE>
<PAGE> 1
EXHIBIT 3.1
ARTICLES OF INCORPORATION
OF
FIRST FEDERAL BANCSHARES CORPORATION
ARTICLE ONE
NAME
The name of the corporation is First Federal Bancshares Corporation
(the "Corporation").
ARTICLE TWO
ADDRESS AND REGISTERED AGENT
The street address of the initial registered office of the Corporation
shall be 209 Highway 15-401 Bypass East, Bennettsville, South Carolina 29512.
The name of the Corporation's initial registered agent at such address shall be
James Aubrey Crosland.
ARTICLE THREE
CAPITALIZATION
The Corporation shall have the authority, exercisable by its board of
directors (the "Board of Directors"), to issue up to 10,000,000 shares of
voting common stock, par value $.01 per share (the "Common Stock").
The Corporation shall have the authority, exercisable by its Board of
Directors, to issue up to 10,000,000 shares of preferred stock, par value $.01
per share (the "Preferred Stock"), any part or all of which shares of Preferred
Stock may be established and designated from time to time by the Board of
Directors by filing an amendment to these Articles of Incorporation (a
"Preferred Stock Designation"), which is effective without shareholder action,
in accordance with the appropriate provisions of the South Carolina Business
Corporation Act of 1988 (the "Act") in such series and with such preferences,
limitations, and relative rights as may be determined by the Board of
Directors. The number of authorized shares of Preferred Stock may be increased
or decreased (but not below the number of shares thereof then outstanding) by
the affirmative vote of the holders of the majority of the shares of Common
Stock, without a vote of the holders of the shares of Preferred Stock, or of
any series thereof, unless a vote of any such holders is required by law or
pursuant to the Preferred Stock Designation or Preferred Stock Designations
establishing the series of Preferred Stock.
ARTICLE FOUR
PREEMPTIVE RIGHTS
The shareholders shall not have any preemptive rights to acquire
additional stock in the Corporation.
<PAGE> 2
ARTICLE FIVE
NO CUMULATIVE VOTING RIGHTS
The Corporation elects not to have cumulative voting, and no shares
issued by this Corporation may be cumulatively voted for directors of the
Corporation (or for any other decision).
ARTICLE SIX
LIMITATION ON DIRECTOR LIABILITY
No director of the Corporation shall be personally liable to the
Corporation or its shareholders for monetary damages for breach of the duty of
care or any other duty as a director, except that such liability shall not be
eliminated for:
(i) any breach of the director's duty of loyalty to the
Corporation or its shareholders;
(ii) acts or omissions not in good faith or which involve
gross negligence, intentional misconduct, or a knowing violation of
law;
(iii) liability imposed under Section 33-8-330 (or any
successor provision or redesignation thereof) of the Act; and
(iv) any transaction from which the director derived an
improper personal benefit.
If at any time the Act shall have been amended to authorize the
further elimination or limitation of the liability of a director, then the
liability of each director of the Corporation shall be eliminated or limited to
the fullest extent permitted by the Act, as so amended, without further action
by the shareholders, unless the provisions of the Act, as amended, require
further action by the shareholders.
Any repeal or modification of the foregoing provisions of this Article
Six shall not adversely affect the elimination or limitation of liability or
alleged liability pursuant hereto of any director of the Corporation for or
with respect to any alleged act or omission of the director occurring prior to
such a repeal or modification.
ARTICLE SEVEN
CONTROL SHARE ACQUISITIONS
The provisions of Title 35, Chapter 2, Article 1 of the Code of Laws
of South Carolina shall not apply to control share acquisitions of shares of
the Corporation.
ARTICLE EIGHT
CONSIDERATION OF OTHER CONSTITUENCIES
In discharging the duties of their respective positions and in
determining what is in the best interests of the Corporation, the Board of
Directors, committees of the Board of Directors, and individual directors, in
addition to considering the effects of any actions on the Corporation and its
<PAGE> 3
shareholders, may consider the interests of the employees, customers,
suppliers, creditors, and other constituencies of the Corporation and its
subsidiaries, the communities and geographical areas in which the Corporation
and its subsidiaries operate or are located, and all other factors such
directors consider pertinent. This provision solely grants discretionary
authority to the directors and shall not be deemed to provide to any other
constituency any right to be considered.
ARTICLE NINE
NAME AND ADDRESS OF THE SOLE INCORPORATOR
The sole incorporator is Elizabeth R. Munnerlyn, whose address is 207
West Main Street, Bennettsville, South Carolina 29512.
IN WITNESS WHEREOF, the undersigned has executed these Articles of
Incorporation as of the date indicated below.
/s/ Elizabeth R. Munnerlyn
-----------------------------------
Elizabeth R. Munnerlyn
Sole Incorporator
Date: June 4, 1998.
-------------
<PAGE> 4
CERTIFICATION
I, Elizabeth R. Munnerlyn, an attorney licensed to practice in the
State of South Carolina, certify that the Corporation has complied with the
requirements of Chapter 2, Title 33 of the Code of Laws of South Carolina 1976,
relating to the Articles of Incorporation.
Date: June 4, 1998.
-------------
/s/ Elizabeth R. Munnerlyn
-------------------------------------
(Signature)
Rogers & Munnerlyn, P.A.
207 West Main Street
Post Office Box 1175
Bennettsville, South Carolina 29512
<PAGE> 5
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
FIRST FEDERAL BANCSHARES CORPORATION
I.
The name of the corporation is First Federal Bancshares Corporation
(the "Corporation").
II.
Effective the date hereof, Article One of the Articles of
Incorporation of First Federal Bancshares Corporation is amended to read as
follows:
"ARTICLE ONE"
"The name of the Corporation is First Capital Bancshares, Inc."
III.
This amendment was duly approved by unanimous written consent by both
the Board of Directors and the shareholders on December 18, 1998, in accordance
with Section 33-10-103 of the South Carolina Business Corporation Act.
IN WITNESS WHEREOF, the Corporation has caused these Articles of
Amendment to be executed by its duly authorized officer as of the 18th day of
December, 1998.
/s/ John M. Digby
---------------------------------
By: John M. Digby
Title: Chief Executive Officer
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EXHIBIT 3.2
BYLAWS
OF
FIRST CAPITAL BANCSHARES, INC.
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FIRST CAPITAL BANCSHARES, INC.
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE 1
OFFICES 1
Section 1: Registered Office and Agent............................................1
Section 2: Other Offices..........................................................1
ARTICLE 2
SHAREHOLDERS...............................................................................1
Section 1: Place of Meetings......................................................1
Section 2: Annual Meetings........................................................1
Section 3: Special Meetings.......................................................1
Section 4: Notice.................................................................2
Section 5: Quorum.................................................................2
Section 6: Majority Vote; Withdrawal of Quorum....................................3
Section 7: Method of Voting.......................................................3
Section 8: Record Date............................................................3
Section 9: Shareholder Proposals..................................................3
ARTICLE 3
DIRECTORS..................................................................................4
Section 1: Management.............................................................4
Section 2: Number, Classification and Terms of Office of Directors................5
Section 3: Qualifications of Directors............................................5
Section 4: Election of Directors..................................................6
Section 5: Nomination of Directors................................................6
Section 6: Retirement of Directors................................................6
Section 7: Emeritus Directors.....................................................6
Section 8: Vacancies..............................................................7
Section 9: Removal of Directors...................................................7
Section 10: Place of Meetings......................................................7
Section 11: Regular Meetings.......................................................8
Section 12: Special Meetings.......................................................8
Section 13: Telephone and Similar Meetings.........................................8
Section 14: Quorum; Majority Vote..................................................8
Section 15: Compensation...........................................................8
Section 16: Procedure..............................................................8
Section 17: Action Without Meeting.................................................8
ARTICLE 4
BOARD COMMITTEES...........................................................................9
Section 1: Designation............................................................9
Section 2: Meetings...............................................................9
Section 3: Quorum; Majority Vote..................................................9
Section 4: Procedure..............................................................9
Section 5: Action Without Meeting................................................10
Section 6: Telephone and Similar Meetings........................................10
</TABLE>
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<TABLE>
<S> <C> <C>
ARTICLE 5
OFFICERS1
Section 1: Offices................................................................10
Section 2: Term...................................................................10
Section 3: Vacancies..............................................................10
Section 4: Compensation...........................................................10
Section 5: Removal................................................................11
Section 6: Chairman of the Board..................................................11
Section 7: Chief Executive Officer................................................11
Section 8: President..............................................................11
Section 9: Vice Presidents........................................................11
Section 10: Secretary..............................................................11
Section 11: Assistant Secretary....................................................12
Section 12: Treasurer..............................................................12
ARTICLE 6
INDEMNIFICATION............................................................................12
Section 1: Indemnification of Directors...........................................12
Section 2: Advancement of Expenses................................................13
Section 3: Indemnification of Officers, Employees and Agents......................14
Section 4: Insurance..............................................................14
Section 5: Nonexclusivity of Rights; Agreements...................................14
Section 6: Continuing Benefits; Successors........................................15
Section 7: Interpretation; Construction...........................................15
Section 8: Amendment..............................................................15
Section 9: Severability...........................................................15
ARTICLE 7
CERTIFICATES AND SHAREHOLDERS..............................................................16
Section 1: Certificates...........................................................16
Section 2: Issuance of Shares.....................................................16
Section 3: Rights of Corporation with Respect to Registered Owners................16
Section 4: Transfers of Shares....................................................16
Section 5: Registration of Transfer...............................................17
Section 6: Lost, Stolen or Destroyed Certificates.................................17
Section 7: Restrictions on Shares.................................................17
Section 8: Control Share Acquisitions Statute.....................................17
Section 9: Voting of Stock Held...................................................18
ARTICLE 8
GENERAL PROVISIONS.........................................................................18
Section 1: Distributions..........................................................18
Section 2: Books and Records......................................................18
Section 3: Execution of Documents.................................................18
Section 4: Fiscal Year............................................................18
Section 5: Seal...................................................................18
Section 6: Resignation............................................................19
Section 7: Computation of Days....................................................19
Section 8: Amendment of Bylaws....................................................19
Section 9: Construction...........................................................19
Section 10: Headings...............................................................19
</TABLE>
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BYLAWS
OF
FIRST CAPITAL BANCSHARES, INC.
ARTICLE 1: OFFICES
Section 1: Registered Office and Agent. The registered office of the
Corporation shall be at 209 Highway 15-401 Bypass East. The registered agent
shall be James Aubrey Crosland.
Section 2: Other Offices. The Corporation may also have offices at
such other places within and without the State of South Carolina as the Board
of Directors may from time to time determine or the business of the Corporation
may require.
ARTICLE 2: SHAREHOLDERS
Section 1: Place of Meetings. Meetings of shareholders shall be held
at the time and place, within or without the State of South Carolina, stated in
the notice of the meeting or in a waiver of notice.
Section 2: Annual Meetings. An annual meeting of the shareholders
shall be held each year on a date and at a time to be set by the Board of
Directors in accordance with all applicable notice requirements. At the
meeting, the shareholders shall elect directors and transact such other
business as may properly be brought before the meeting.
Section 3: Special Meetings. (a) Special meetings of the shareholders,
for any purpose or purposes, unless otherwise required by the South Carolina
Business Corporation Act of 1988, as amended from time to time (the "Act"), the
Articles of Incorporation of the Corporation (the "Articles"), or these Bylaws,
may be called by the chief executive officer, the president, the chairman of
the Board of Directors or a majority of the Board of Directors.
(b) In addition to a special meeting called in
accordance with subsection 3(a) of this Article 2, the Corporation shall, if
and to the extent that it is required by applicable law, hold a special meeting
of shareholders if the holders of at least ten percent of all the votes
entitled to be cast on any issue proposed to be considered at such special
meeting sign, date and deliver to the secretary of the Corporation one or more
written demands for the meeting. Such written demands shall be delivered to the
secretary by certified mail, return receipt requested. Such written demands
sent to the secretary of the Corporation shall set forth as to each matter the
shareholder or shareholders propose to be presented at the special meeting (i)
a description of the purpose or purposes for which the meeting is to be held
(including the specific proposal(s) to be presented); (ii) the name and record
address of the shareholder or shareholders proposing such business; (iii) the
class and number of shares of the Corporation that are owned of
<PAGE> 5
record by the shareholder or shareholders as of a date within ten days of the
delivery of the demand; (iv) the class and number of shares of the Corporation
that are held beneficially, but not held of record, by the shareholder or
shareholders as of a date within ten days of the delivery of the demand; and
(v) any interest of the shareholder or shareholders in such business. Any such
special shareholders' meeting shall be held at a location designated by the
Board of Directors. The Board of Directors may set such rules for any such
meeting as it may deem appropriate, including when the meeting will be held
(subject to any requirements of the Act), the agenda for the meeting (which may
include any proposals made by the Board of Directors), who may attend the
meeting in addition to shareholders of record and other such matters.
(c) Business transacted at any special meeting shall be
confined to the specific purpose or purposes stated in the notice of the
meeting.
Section 4: Notice. (a) Written or printed notice stating the
place, day and hour of the meeting and, in the case of a special meeting, the
specific purpose or purposes for which the meeting is called, shall be
delivered by the Corporation not less than ten nor more than sixty days before
the date of the meeting, either personally or by mail, to each shareholder of
record entitled to vote at such meeting. If mailed, such notice shall be deemed
effective when deposited with postage prepaid in the United States mail,
addressed to the shareholder at the address appearing on the stock transfer
books of the Corporation. Except as may be expressly provided by law, no
failure or irregularity of notice of any regular meeting shall invalidate the
same or any proceeding thereat.
(b) The notice of each special shareholders meeting
shall include a description of the specific purpose or purposes for which the
meeting is called. Except as provided by law, the Articles or these Bylaws, the
notice of an annual shareholders meeting need not include a description of the
purpose or purposes for which the meeting is called.
Section 5: Quorum. The holders of a majority of the shares issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall be requisite and shall constitute a quorum at meetings of the
shareholders for the transaction of business except as otherwise provided by
statute, by the Articles or by these Bylaws. If a quorum is not present or
represented at a meeting of the shareholders, the shareholders entitled to
vote, present in person or represented by proxy, shall have the power to
adjourn the meeting from time to time, without notice other than announcement
at the meeting, until a quorum is present or represented. At an adjourned
meeting at which a quorum is present or represented, any business may be
transacted which might have been transacted at the meeting as originally
notified. Once a share is represented for any purpose at a meeting it is deemed
present for quorum purposes.
Section 6: Majority Vote; Withdrawal of Quorum. Except in regards to
the election of directors, when a quorum is present at a meeting, the vote of
the holders of a majority of the shares having voting power, present in person
or represented by proxy, shall decide any question brought before the meeting,
unless the question is one on which, by express provision of the statutes, the
Articles or these Bylaws, a higher vote is required in which case the express
provision shall govern. Directors shall be elected by a plurality vote of the
shareholders. The
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shareholders present at a duly constituted meeting may continue to transact
business until adjournment, despite the withdrawal of enough shareholders to
leave less than a quorum.
Section 7: Method of Voting. Each outstanding share of common stock
shall be entitled to one vote on each matter submitted to a vote at a meeting
of shareholders. Each outstanding share of other classes of stock, if any,
shall have such voting rights as may be prescribed by the Board of Directors.
Proxies delivered by facsimile to the Corporation, if otherwise in order, shall
be valid. Votes shall be taken by voice, by hand or in writing, as directed by
the chairman of the meeting. Voting for directors shall be in accordance with
Article 3, Section 3 of these Bylaws.
Section 8: Record Date. For the purpose of determining shareholders
entitled to notice of or to vote at any meeting of shareholders, including any
special meeting, or shareholders entitled to receive payment of dividends, or
in order to make a determination of shareholders for any other purpose, the
Board of Directors may fix in advance a date as the record date for any such
determination of shareholders, such date in any case to be not less than ten
nor more than seventy days prior to the date on which the particular action,
requiring such determination of shareholders, is to be taken. Except as
otherwise provided by law, if no record date is fixed for the determination of
shareholders entitled to notice of or to vote at a meeting of shareholders, or
of shareholders entitled to receive payment of dividends, the date on which
notice of the meeting is mailed, or the date on which the resolution of the
Board of Directors declaring such dividend is adopted, as the case may be,
shall be the record date.
Section 9: Shareholder Proposals. (a) To the extent required by
applicable law, a shareholder may bring a proposal before an annual meeting of
shareholders as set forth in this Section 9. To be properly brought before an
annual meeting of shareholders, business must be (i) specified in the notice of
meeting (or any supplement thereto) given by or at the direction of the Board
of Directors; (ii) otherwise properly brought before the meeting by or at the
direction of the Board of Directors; or (iii) otherwise properly brought before
the meeting by a shareholder. In addition to any other applicable requirements,
for business to be properly brought before an annual meeting by a shareholder,
the shareholder must have given timely notice thereof in writing to the
secretary of the Corporation. To be timely, a shareholder's notice must be
given, either by personal delivery or by United States mail, postage prepaid,
return receipt requested, to the secretary of the Corporation not later than
ninety days in advance of the annual meeting. A shareholder's notice to the
secretary of the Corporation shall set forth for each matter the shareholder
proposes to bring before the annual meeting (i) a description of the business
desired to be brought before the annual meeting (including the specific
proposal(s) to be presented) and the reasons for conducting such business at
the annual meeting; (ii) the name and record address of the shareholder
proposing such business; (iii) the class and number of shares of the
Corporation that are owned of record, and the class and number of shares of the
Corporation that are held beneficially, but not held of record, by the
shareholder as of the record date for the meeting, if such date has been made
publicly available, or as of a date within ten days of the effective date of
the notice by the shareholder if the record date has not been made publicly
available; and (iv) any interest of the shareholder in such business. In the
event that a shareholder attempts to bring business before an annual meeting
without complying with the provisions of this Section 9, the chairman of the
meeting shall declare to the meeting that the business was not properly brought
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before the meeting in accordance with the foregoing procedures, and such
business shall not be transacted. The chairman of any annual meeting, for good
cause shown and with proper regard for the orderly conduct of business at the
meeting, may waive in whole or in part the operation of this Section 9.
(b) If any shareholder of the Corporation notifies the
Corporation that such shareholder intends to present a proposal for action at a
forthcoming meeting of the Corporation's shareholders and requests that the
Corporation include the proposal in its proxy statement and such shareholder
complies with all the requirements of Rule 14a-8 promulgated under the
Securities Exchange Act of 1934, the Corporation shall consider inclusion of
such proposal in the proxy statement unless it determines that the proposal is
inappropriate for consideration by the shareholders at the meeting.
ARTICLE 3: DIRECTORS
Section 1: Management. The business and affairs of the Corporation
shall be managed by the Board of Directors who may exercise all such powers of
the Corporation and do all such lawful acts and things as are not by law, the
Articles or these Bylaws directed or required to be done or exercised by the
shareholders.
Section 2: Number, Classification and Terms of Office of Directors.
Unless otherwise provided in the Articles of Incorporation, the number of
directors of the Corporation shall be that number as may be fixed from time to
time by resolution of the Board of Directors, but in no event shall the number
be less than five or greater than twenty-five. The initial number of directors
shall be eight. The number of members of the Board of Directors can be
increased or decreased within the foregoing range at any time by the Board of
Directors. In addition, unless provided otherwise by resolution of the Board of
Directors, if, in any case after proxy materials for an annual meeting of
shareholders have been mailed to shareholders, any person named therein to be
nominated at the direction of the Board of Directors becomes unable or
unwilling to serve, the number of authorized directors shall be automatically
reduced by a number equal to the number of such persons. The members of the
Board of Directors need not be shareholders nor need they be residents of any
particular state. At any time that the Board has six or more members, unless
provided otherwise by the Articles of Incorporation, the terms of office of
directors will be staggered by dividing the total number of directors into
three classes, with each class accounting for one-third, as near as may be, of
the total. The terms of directors in the first class expire at the first annual
shareholders' meeting after their election, the terms of the second class
expire at the second annual shareholders' meeting after their election, and the
terms of the third class expire at the third annual shareholders' meeting after
their election. At each annual shareholders' meeting held thereafter, directors
shall be chosen for a term of three years to succeed those whose terms expire.
If the number of directors is changed, any increase or decrease shall be so
apportioned among the classes as to make all classes as nearly equal in number
as possible, and when the number of directors is increased and any newly
created directorships are filled by the board, the terms of the additional
directors shall expire at the next election of directors by the shareholders.
Each director, except in the case of his earlier death, written resignation,
retirement, disqualification or removal, shall serve for the duration of his
term, as staggered, and thereafter until his successor shall have been elected
and qualified.
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Section 3: Qualifications of Directors. No individual who is or
becomes a Business Competitor (as defined below) or who is or becomes
affiliated with, employed by or a representative of any individual,
corporation, association, partnership, firm, business enterprise or other
entity or organization which the Board of Directors, after having such matter
formally brought to its attention, determines to be in competition with the
Corporation or any of its subsidiaries (any such individual, corporation,
association, partnership, firm, business enterprise or other entity or
organization being hereinafter referred to as a "Business Competitor") shall be
eligible to serve as a director if the Board of Directors determines that it
would not be in the Corporation's best interests for such individual to serve
as a director of the Corporation. Such affiliation, employment or
representation may include, without limitation, service or status as an owner,
partner, shareholder, trustee, director, officer, consultant, employee, agent,
or counsel, or the existence of any relationship which results in the affected
person having an express or implied obligation to act on behalf of a Business
Competitor; provided, however, that passive ownership of a debt or equity
interest not exceeding 1% of the outstanding debt or equity, as the case may
be, in any Business Competitor shall not constitute such affiliation,
employment or representation. Any financial institution having branches or
affiliates in Marlboro County, South Carolina, shall be presumed to be a
Business Competitor unless the Board of Directors determines otherwise.
Section 4: Election of Directors. Directors shall be elected by a
plurality vote.
Section 5: Nomination of Directors. (a) Nomination of persons to
serve as directors of the Corporation, other than those made by or on behalf of
the Board of Directors of the Corporation, shall be made in writing and shall
be delivered either by personal delivery or by United States mail, postage
prepaid, return receipt requested, to the secretary of the Corporation no later
than (i) with respect to an election to be held at an annual meeting of
shareholders, ninety days in advance of such meeting; and (ii) with respect to
an election to be held at a special meeting of shareholders for the election of
directors, the close of business on the seventh day following the date on which
notice of such meeting is first given to shareholders. Each notice shall set
forth: (i) the name and address of the shareholder who intends to make the
nomination and of the person or persons to be nominated; (ii) a representation
that the shareholder is a holder of record of stock of the Corporation entitled
to vote at such meeting and intends to appear in person or by proxy at the
meeting to nominate the person or persons specified in the notice; (iii) a
description of all arrangements or understandings between the shareholder and
each nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made by the
shareholder; (iv) such other information regarding each nominee proposed by
such shareholder as would be required to be included in a proxy statement filed
pursuant to the proxy rules of the Securities and Exchange Commission, had the
nominee been nominated, or intended to be nominated, by the Board of Directors;
and (v) the consent of each nominee to serve as a director of the Corporation
if so elected. The chairman of the meeting may refuse to acknowledge the
nomination of any person not made in compliance with the foregoing procedure.
The chairman of any such meeting, for good cause shown and with proper regard
for the orderly conduct of business at the meeting, may waive in whole or in
part the operation of this Section 4.
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(b) Notwithstanding subsection (a) of this
Section 4, if the Corporation or any banking subsidiary of the Corporation is
subject to the requirements of Section 914 of the Financial Institutions
Reform, Recovery, and Enforcement Act of 1989, then no person may be nominated
by a shareholder for election as a director at any meeting of shareholders
unless the shareholder furnishes the written notice required by subsection (a)
of this Section 4 to the secretary of the Corporation at least ninety days
prior to the date of the meeting and the nominee has received regulatory
approval to serve as a director prior to the date of the meeting.
Section 6: Retirement of Directors. No person shall be elected or
reelected a director of the Corporation after attaining the age of 75, provided
that this provision shall not apply to any initial director who shall have
attained the age of 68 prior to the date of the initial adoption of these
Bylaws.
Section 7: Emeritus Directors. The Board of Directors may, from time
to time, appoint individuals (including individuals who have retired from the
Board of Directors) to serve as members of the Emeritus Board of Directors of
the Corporation. Each member of the Emeritus Board of Directors of the
Corporation, except in the case of his earlier death, resignation, retirement,
disqualification or removal, shall serve until the next succeeding annual
meeting of the Board of Directors of the Corporation. Members of the Emeritus
Board of Directors may be removed without cause by a vote of the members of the
Board of Directors. Any individual appointed as a member of the Emeritus Board
of Directors of the Corporation may, but shall not be required to, attend
meetings of the Board of Directors of the Corporation and may participate in
any discussions at such meetings, but such individual may not vote or be
counted in determining a quorum at any meeting of the Board of Directors of the
Corporation. It shall be the duty of the members of the Emeritus Board of
Directors of the Corporation to serve as goodwill ambassadors of the
Corporation, but such individuals shall not have any responsibility or be
subject to any liability imposed upon a member of the Board of Directors of the
Corporation or in any manner otherwise be deemed to be a member of the Board of
Directors of the Corporation. Each member of the Emeritus Board of Directors of
the Corporation shall be paid such compensation as may be set from time to time
by the Chairman of the Board of Directors of the Corporation and shall remain
eligible to participate in any stock option plan in which directors are
eligible to participate which is maintained by, or participated in, from time
to time by the Corporation, according to the terms and conditions thereof.
Section 8: Vacancies. Except as otherwise provided by law, in the
Articles of Incorporation, or in these Bylaws (a) the office of a director
shall become vacant if he dies, resigns, or is removed from office, and (b) the
Board of Directors may declare vacant the office of a director if (i) he is
interdicted or adjudicated an incompetent, (ii) an action is filed by or
against him, or any entity of which he is employed as his principal business
activity, under the bankruptcy laws of the United States, (iii) in the sole
opinion of the Board of Directors he becomes incapacitated by illness or other
infirmity so that he is unable to perform his duties for a period of six months
or longer, or (iv) he ceases at any time to have the qualifications required by
law, the Articles of Incorporation or these Bylaws. The remaining directors
may, by a majority vote, fill any vacancy on the Board of Directors (including
any vacancy resulting from an increase in the authorized number of directors,
or from the failure of the shareholders to elect the full number of authorized
directors) for an unexpired term; provided that the shareholders shall have
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the right at any special meeting called for such purpose prior to action by the
Board of Directors to fill the vacancy.
Section 9: Removal of Directors. Unless provided otherwise by the
Articles of Incorporation, directors may be removed only for cause by the
affirmative vote of the holders of at least a majority of the shares entitled
to vote at an election of directors, such vote being taken at a meeting of the
shareholders called for that purpose at which a quorum is present.
Section 10: Place of Meetings. Meetings of the Board of Directors,
regular or special, may be held either within or without the State of South
Carolina.
Section 11: Regular Meetings. Regular meetings of the Board of
Directors may be held without notice at such time and place as shall from time
to time be determined by the Board of Directors.
Section 12: Special Meetings. Special meetings of the Board of
Directors may be called by the chairman, the chief executive officer, or the
president of the Corporation, on not less than twenty-four hours' notice.
Notice of a special meeting may be given by personal notice, telephone,
facsimile, electronic communication, overnight courier or United States mail to
each director. Any such special meeting shall be held at such time and place as
shall be stated in the notice of the meeting. The notice need not describe the
purpose or purposes of the special meeting.
Section 13: Telephone and Similar Meetings. Directors may participate
in and hold a meeting by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other. Participation in such a meeting shall constitute
presence in person at the meeting, except where a person participates in the
meeting for the express purpose of objecting to the holding of the meeting or
the transacting of any business at the meeting on the ground that the meeting
is not lawfully called or convened, and does not thereafter vote for or assent
to action taken at the meeting.
Section 14: Quorum; Majority Vote. At meetings of the Board of
Directors a majority of the number of directors then in office shall constitute
a quorum for the transaction of business. The act of a majority of the
directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors, except as otherwise specifically provided by law, the
Articles or these Bylaws. If a quorum is not present at a meeting of the Board
of Directors, the directors present may adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum is
present.
Section 15: Compensation. Each director shall be entitled to receive
such reasonable compensation as may be determined by resolution of the Board of
Directors. By resolution of the Board of Directors, the directors may be paid
their expenses, if any, of attendance at each meeting of the Board of Directors
and may be paid a fixed sum for attendance at each meeting of the Board of
Directors. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of
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committees may, by resolution of the Board of Directors, be allowed
compensation for attending committee meetings.
Section 16: Procedure. The Board of Directors shall keep regular
minutes of its proceedings. The minutes shall be placed in the minute book of
the Corporation.
Section 17: Action Without Meeting. Any action required or permitted
to be taken at a meeting of the Board of Directors may be taken without a
meeting if the action is assented to by all the members of the Board. Such
consent shall have the same force and effect as a meeting vote and may be
described as such in any document.
ARTICLE 4: BOARD COMMITTEES
Section 1: Designation. The Board of Directors may, by resolution
adopted by a majority of the full Board, designate one or more committees. Each
committee must have two or more members who serve at the pleasure of the Board
of Directors. To the extent specified by the Board of Directors, in the
Articles or in these Bylaws, each committee may exercise the authority of the
Board of Directors. So long as prohibited by law, however, a committee of the
Board may not (a) authorize distributions; (b) approve or propose to
shareholders action required by the Act to be approved by shareholders; (c)
fill vacancies on the Board of Directors or on any of its committees; (d) amend
the Articles; (e) adopt, amend or repeal these Bylaws; (f) approve a plan of
merger not requiring shareholder approval; (g) authorize or approve
reacquisition of shares, except according to a formula or method prescribed by
the Board of Directors; or (h) authorize or approve the issuance or sale or
contract for sale of shares, or determine the designation and relative rights,
preferences and limitations of a class or series of shares, except that the
Board of Directors may authorize a committee (or a senior executive officer of
the Corporation) to do so within limits specifically prescribed by the Board of
Directors. Any director may serve one or more committee. Any committee
appointed under this Section 1 shall perform such duties and assume such
responsibility as may from time to time be placed upon it by the Board of
Directors.
Section 2: Meetings. Time, place and notice of all committee meetings
shall be as called and specified by the chief executive officer, the committee
chairman or any two members of each committee.
Section 3: Quorum; Majority Vote. At meetings of committees, a
majority of the number of members designated by the Board of Directors shall
constitute a quorum for the transaction of business. The act of a majority of
the members present at any meeting at which a quorum is present shall be the
act of such committee, except as otherwise specifically provided by the Act,
the Articles or these Bylaws. If a quorum is not present at a meeting of the
committee, the members present may adjourn the meeting from time to time,
without notice other than an announcement at the meeting, until a quorum is
present.
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Section 4: Procedure. Committees shall keep regular minutes of their
proceedings and report the same to the Board of Directors at its next regular
meeting. The minutes of the proceedings of the committee shall be placed in the
minute book of the Corporation.
Section 5: Action Without Meeting. Any action required or permitted to
be taken at a meeting of any committee may be taken without a meeting if the
action is assented to by all the members of the committee. Such consent shall
have the same force and effect as a meeting vote and may be described as such
in any document.
Section 6: Telephone and Similar Meetings. Committee members may
participate in and hold a meeting by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other. Participation in such a meeting shall constitute
presence in person at the meeting, except where a person participates in the
meeting for the express purpose of objecting to the holding of the meeting or
the transacting of any business at the meeting on the ground that the meeting
is not lawfully called or convened, and does not thereafter vote for or assent
to action taken at the meeting.
ARTICLE 5: OFFICERS
OFFICERS
Section 1: Offices. The officers of the Corporation shall consist of a
chief executive officer, chief financial officer, president and a secretary,
each of whom shall be elected by the Board of Directors. The Board of Directors
may also create and establish the duties of other offices as it deems
appropriate. The Board of Directors shall also elect a chairman of the Board
and may elect a vice chairman of the Board from among its members. The Board of
Directors from time to time may appoint, or may authorize the president to
appoint or authorize specific officers to appoint, the persons who shall hold
such other offices as may be established by the Board of Directors, including
one or more vice presidents (including executive vice presidents, senior vice
presidents, assistant vice presidents), one or more assistant secretaries, and
one or more assistant treasurers. Any two or more offices may be held by the
same person.
Section 2: Term. Each officer shall serve at the pleasure of the Board
of Directors (or, if appointed pursuant to this Article, at the pleasure of the
Board of Directors, the president, or the officer authorized to have appointed
the officer) until his or her death, resignation, or removal, or until his or
her replacement is elected or appointed in accordance with this Article.
Section 3: Vacancies. Any vacancy occurring in any office of the
Corporation may be filled by the Board of Directors. Any vacancy in an office
which was filled by the president or another officer may also be filled by the
president or by any officer authorized to have filled the office vacant.
Section 4: Compensation. The compensation of all officers of the
Corporation shall be fixed by the Board of Directors or by a committee or
officer appointed by the Board of Directors. Officers may serve without
compensation.
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<PAGE> 13
Section 5: Removal. All officers (regardless of how elected or
appointed) may be removed, with or without cause, by the Board of Directors.
Any officer appointed by the president or another officer may also be removed,
with or without cause, by the president or by any officer authorized to have
appointed the officer to be removed. Removal will be without prejudice to the
contract rights, if any, of the person removed, but shall be effective
notwithstanding any damage claim that may result from infringement of such
contract rights.
Section 6: Chairman of the Board. The office of the chairman of the
board may be filled by the Board at its pleasure by the election of one of its
members to the office. The chairman shall preside at all meetings of the Board
and meetings of the shareholders and shall perform such other duties as may be
assigned to him by the Board of Directors.
Section 7: Chief Executive Officer. Unless specified otherwise by the
Board of Directors, the chairman of the board shall also serve as the chief
executive officer of the Corporation. If the Board chooses to have a chief
executive officer other than the chairman of the board, the position of chief
executive officer may be filled by the Board at its pleasure. The chief
executive officer shall be responsible for the general and active management of
the business and affairs of the Corporation, and shall see that all orders and
resolutions of the Board are carried into effect. He shall perform such other
duties and have such other authority and powers as the Board of Directors may
from time to time prescribe.
Section 8: President. The president shall be responsible for the
general and active management of the business and affairs of the Corporation,
and shall see that all orders and resolutions of the Board are carried into
effect. He shall perform such other duties and have such other authority and
powers as the Board of Directors may from time to time prescribe.
Section 9: Vice Presidents. The vice presidents (executive, senior, or
assistant), as such offices are appointed by the Board of Directors, in the
order of their seniority, unless otherwise determined by the Board of
Directors, shall, in the absence or disability of the president, perform the
duties and have the authority and exercise the powers of the president. They
shall perform such other duties and have such other authority and powers as the
Board of Directors may from time to time prescribe or as the president may from
time to time delegate.
Section 10: Secretary. (a) The secretary shall attend all meetings
of the Board of Directors and all meetings of the shareholders and record all
votes, actions and the minutes of all proceedings in a book to be kept for that
purpose and shall perform like duties for the executive and other committees
when required.
(b) The secretary shall give, or cause to be given,
notice of all meetings of the shareholders and special meetings of the Board of
Directors.
(c) The secretary shall keep in safe custody the seal of
the Corporation and, when authorized by the Board of Directors or the executive
committee, affix it to any instrument requiring it. When so affixed, it shall
be attested by the secretary's signature or by the signature of the treasurer
or an assistant secretary.
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<PAGE> 14
(d) The secretary shall be under the supervision of the
president and shall perform such other duties and have such other authority and
powers as the Board of Directors may from time to time prescribe or as the
president may from time to time delegate.
Section 11: Assistant Secretary. The assistant secretaries, as such
offices are created by the Board of Directors, in the order of their seniority,
unless otherwise determined by the Board of Directors, shall, in the absence or
disability of the secretary, perform the duties and have the authority and
exercise the powers of the secretary. They shall perform such other duties and
have such other powers as the Board of Directors may from time to time
prescribe or as the president may from time to time delegate.
Section 12: Treasurer. (a) The treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements of the Corporation and shall deposit all moneys and
other valuables in the name and to the credit of the Corporation in appropriate
depositories.
(b) The treasurer shall disburse the funds of the
Corporation ordered by the Board of Directors and prepare financial statements
as they direct.
(c) The treasurer shall perform such other duties and
have such other authority and powers as the Board of Directors may from time to
time prescribe or as the president may from time to time delegate.
(d) The treasurer's books and accounts shall be opened
at any time during business hours to the inspection of any directors of the
Corporation.
ARTICLE 6: INDEMNIFICATION
Section 1: Indemnification of Directors. (a) The Corporation shall
indemnify and hold harmless, to the fullest extent permitted by applicable law,
any person (an "Indemnified Person") who was or is a party or is threatened to
be made a party to or is otherwise involved in any threatened, pending or
completed action, suit or other proceeding, whether civil, criminal,
administrative or investigative and whether formal or informal, by reason of
the fact that he, or a person for whom he is a legal representative (or other
similar representative), is or was a director of the Corporation or is or was
serving at the Corporation's request as a director, officer, partner, trustee,
employee or agent of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise, against expenses (including
attorneys' fees), judgments, fines, amounts paid in settlement or other similar
costs actually and reasonably incurred in connection with such action, suit or
proceeding. For purposes of this Article 6, all terms used herein that are
defined in Section 33-8-500 of the Act or any successor provision or provisions
shall have the meanings so prescribed in such Section.
(b) Without limiting the provisions of Section 1(a) of
this Article 6, the Corporation shall indemnify a director who was wholly
successful, on the merits or otherwise, in the defense of any proceeding to
which he was a party because he is or was a director of the
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<PAGE> 15
Corporation against reasonable expenses incurred by him in connection with the
proceeding. In addition, the Corporation shall indemnify an individual made a
party to a proceeding because he is or was a director against liability
incurred in the proceeding if: (i) he conducted himself in good faith; (ii) he
reasonably believed: (A) in the case of conduct in his official capacity with
the Corporation, that his conduct was in its best interest; and (B) in all
other cases, that his conduct was at least not opposed to its best interest;
and (iii) in the case of any criminal proceeding, he had no reasonable cause to
believe his conduct was unlawful. The termination of a proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent is not, of itself, determinative that the director did not meet the
standard of conduct described in this subsection (b). The determination of
whether the director met the standard of conduct described in this subsection
(b) shall be made in accordance with Section 33-8-550 of the Act or any
successor provision or provisions.
Section 2: Advancement of Expenses. (a) With respect to any
proceeding to which an Indemnified Person is a party because he is or was a
director of the Corporation, the Corporation shall, to the fullest extent
permitted by applicable law, pay for or reimburse the Indemnified Person's
reasonable expenses (including, but not limited to, attorneys' fees and
disbursements, court costs, and expert witness fees) incurred by the
Indemnified Person in advance of final disposition of the proceeding.
(b) Without limiting the provisions of Section 2(a) of
this Article 6, the Corporation shall, to the fullest extent permitted by
applicable law, pay for or reimburse the reasonable expenses (including, but
not limited to, attorneys' fees and disbursements, court costs and expert
witness fees) incurred by a director who is a party to a proceeding in advance
of final disposition of the proceeding if: (a) the director furnishes the
Corporation a written affirmation of his good faith belief that he has met the
standard of conduct described in Section 1(b) of this Article 6; (b) the
director furnishes the Corporation a written undertaking, executed personally
or on his behalf, to repay the advance if it is ultimately determined that he
did not meet such standard of conduct; and (c) a determination is made that the
facts then known to those making the determination would not preclude
indemnification under this Article 6. The Corporation shall expeditiously pay
the amount of such expenses to the director following the director's delivery
to the Corporation of a written request for an advance pursuant to this Section
2 together with a reasonable accounting of such expenses. The undertaking
required by this Section 2 shall be an unlimited general obligation of the
director but need not be secured and may be accepted without reference to
financial ability to make repayment. Determinations and authorizations of
payments under this Section 2 shall be made in the manner specified in Section
33-8-550 of the Act or any successor provision or provisions.
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<PAGE> 16
Section 3: Indemnification of Officers, Employees and Agents. An
officer of the Corporation who is not a director is entitled to the same
indemnification rights which are provided to directors of the Corporation in
Section 1 of this Article 6 and the Corporation shall advance expenses to
officers of the Corporation who are not directors to the same extent and in the
same manner as to directors as provided in Section 2 of this Article 6. In
addition, the Board of Directors shall have the power to cause the Corporation
to indemnify, hold harmless and advance expenses to any officer, employee or
agent of the Corporation who is not a director to the fullest extent permitted
by public policy, by adopting a resolution to that effect identifying such
officers, employees or agents (by position and name) and specifying the
particular rights provided, which may be different for each of the persons
identified. Any officer entitled to indemnification pursuant to the first
sentence of this Section 3 and any officer, employee or agent granted
indemnification by the Board of Directors in accordance with the second
sentence of this Section 3 shall, to the extent specified herein or by the
Board of Directors, be an "Indemnified Party" for the purposes of the
provisions of this Article 6.
Section 4: Insurance. The Corporation may purchase and maintain
insurance on behalf of an individual who is or was a director, officer,
employee or agent of the Corporation, or who, while a director, officer,
employee or agent of the Corporation, is or was serving at the request of the
Corporation as a director, officer, partner, trustee, employee or agent of
another foreign or domestic corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise, against liability asserted against
or incurred by him in that capacity or arising from his status as a director,
officer, employee or agent, whether or not the Corporation would have the power
to indemnify him against the same liability under this Article 6.
Section 5: Nonexclusivity of Rights; Agreements. The rights conferred
on any person by this Article 6 shall neither limit nor be exclusive of any
other rights which such person may have or hereafter acquire under any statute,
agreement, provision of the Articles, these Bylaws, vote of shareholders or
otherwise. The provisions of this Article 6 shall be deemed to constitute an
agreement between the Corporation and each person entitled to indemnification
hereunder. In addition to the rights provided in this Article 6, the
Corporation shall have the power, upon authorization by the Board of Directors,
to enter into an agreement or agreements providing to any person who is or was
a director, officer, employee or agent of the Corporation certain
indemnification rights. Any such agreement between the Corporation and any
director, officer, employee or agent of the Corporation concerning
indemnification shall be given full force and effect, to the fullest extent
permitted by applicable law, even if it provides rights to such director,
officer, employee or agent more favorable than, or in addition to, those rights
provided under this Article 6.
Section 6: Continuing Benefits; Successors. The indemnification and
advancement of expenses provided by or granted pursuant to this Article 6
shall, unless otherwise provided when authorized or ratified, continue as to a
person who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the heirs, executors and administrators of such person.
For purposes of this Article 6, the term "Corporation" shall include any
corporation, joint venture, trust, partnership or unincorporated business
association that is the successor to all or substantially all of the business
or assets of this Corporation, as a result of merger, consolidation, sale,
liquidation or otherwise, and any such successor shall be liable to the
13
<PAGE> 17
persons indemnified under this Article 6 on the same terms and conditions and
to the same extent as this Corporation.
Section 7: Interpretation; Construction. This Article 6 is intended to
provide indemnification to the directors and permit indemnification to the
officers of the Corporation to the fullest extent permitted by applicable law
as it may presently exist or may hereafter be amended and shall be construed in
order to accomplish this result. To the extent that a provision herein prevents
a director or officer from receiving indemnification to the fullest extent
intended, such provision shall be of no effect in such situation. If at any
time the Act is amended so as to permit broader indemnification rights to the
directors and officers of this Corporation, then these Bylaws shall be deemed
to automatically incorporate these broader provisions so that the directors and
officers of the Corporation shall continue to receive the intended
indemnification to the fullest extent permitted by applicable law.
Section 8: Amendment. Any amendment to this Article 6 that limits or
otherwise adversely affects the right of indemnification, advancement of
expenses or other rights of any Indemnified Person hereunder shall, as to such
Indemnified Person, apply only to claims, actions, suits or proceedings based
on actions, events or omissions (collectively, "Post Amendment Events")
occurring after such amendment and after delivery of notice of such amendment
to the Indemnified Person so affected. Any Indemnified Person shall, as to any
claim, action, suit or proceeding based on actions, events or omissions
occurring prior to the date of receipt of such notice, be entitled to the right
of indemnification, advancement of expenses and other rights under this Article
6 to the same extent as if such provisions had continued as part of the Bylaws
of the Corporation without such amendment. This Section 8 cannot be altered,
amended or repealed in a manner effective as to any Indemnified Person (except
as to Post Amendment Events) without the prior written consent of such
Indemnified Person.
Section 9: Severability. Each of the Sections of this Article 6, and
each of the clauses set forth herein, shall be deemed separate and independent,
and should any part of any such Section or clause be declared invalid or
unenforceable by any court of competent jurisdiction, such invalidity or
unenforceability shall in no way render invalid or unenforceable any other part
thereof or any separate Section or clause of this Article 6 that is not
declared invalid or unenforceable.
ARTICLE 7: CERTIFICATES AND SHAREHOLDERS
Section 1: Certificates. Certificates in the form determined by the
Board of Directors shall be delivered representing all shares of which
shareholders are entitled. Certificates shall be consecutively numbered and
shall be entered in the books of the Corporation as they are issued. At a
minimum, each share certificate must state on its face: (a) the name of the
Corporation and that it is organized under the laws of South Carolina; (b) the
name of the person to whom the certificate is issued; and (c) the number and
class of shares and the designation of the series, if any, the certificate
represents. Each share certificate (a) must be signed (either manually or in
facsimile) by at least two officers, including the president, the secretary, or
such other officer or officers as the Board of Directors shall designate; and
(b) may
14
<PAGE> 18
bear the corporate seal or its facsimile. If the person who signed (either
manually or in facsimile) a share certificate no longer holds office when the
certificate is issued, the certificate is nevertheless valid.
Section 2: Issuance of Shares. The Board of Directors may authorize
shares to be issued for consideration consisting of any tangible or intangible
property or benefit to the Corporation, including cash, promissory notes,
services performed, written contracts for services to be performed or other
securities of the Corporation. Before the Corporation issues shares, the Board
of Directors must determine that the consideration received or to be received
for shares to be issued is adequate. That determination by the Board of
Directors is conclusive insofar as the adequacy of consideration for the
issuance of shares relates to whether the shares are validly issued, fully paid
and nonassessable. When the Corporation receives the consideration for which
the Board of Directors authorized the issuance of shares, the shares issued
therefor are fully paid and nonassessable.
Section 3: Rights of Corporation with Respect to Registered Owners.
Prior to due presentation for transfer of registration of its shares, the
Corporation may treat the registered owner of the shares as the person
exclusively entitled to vote the shares, to receive any dividend or other
distribution with respect to the shares, and for all other purposes; and the
Corporation shall not be bound to recognize any equitable or other claim to or
interest in the shares on the part of any other person, whether or not it has
express or other notice of such a claim or interest, except as otherwise
provided by law.
Section 4: Transfers of Shares. Transfers of shares shall be made upon
the books of the Corporation kept by the Corporation or by the transfer agent
designated to transfer the shares, only upon direction of the person named in
the certificate or by an attorney lawfully constituted in writing. Before a new
certificate is issued, the old certificate shall be surrendered for
cancellation or, in the case of a certificate alleged to have been lost, stolen
or destroyed, the provisions of these Bylaws shall have been complied with.
Section 5: Registration of Transfer. The Corporation shall register
the transfer of a certificate for shares presented to it for transfer if: (a)
the certificate is properly endorsed by the registered owner or by his duly
authorized attorney; (b) the signature of such person has been guaranteed by a
commercial bank or brokerage firm that is a member of the National Association
of Securities Dealers and reasonable assurance is given that such endorsements
are effective; (c) the Corporation has no notice of an adverse claim or has
discharged any duty to inquire into such a claim; (d) any applicable law
relating to the collection of taxes has been complied with; and (e) the
transfer is in compliance with applicable provisions of any transfer
restrictions of which the Corporation shall have notice.
Section 6: Lost, Stolen or Destroyed Certificates. The Corporation
shall issue a new certificate in place of any certificate for shares previously
issued if the registered owner of the certificate: (a) makes proof in affidavit
form that the certificate has been lost, destroyed or wrongfully taken; (b)
requests the issuance of a new certificate before the Corporation has notice
that the certificate has been acquired by a purchaser for value in good faith
and without notice of an adverse claim; (c) gives a bond in such form, and with
such surety or sureties, with fixed or
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<PAGE> 19
open penalty, as the Corporation may direct, to indemnify the Corporation (and
its transfer agent and registrar, if any) against any claim that may be made on
account of the alleged loss, destruction or theft of the certificate; and (d)
satisfies any other reasonable requirements imposed by the Corporation. When a
certificate has been lost, apparently destroyed or wrongfully taken, and the
holder of record fails to notify the Corporation within a reasonable time after
he has notice of it, and the Corporation registers a transfer of the shares
represented by the certificate before receiving such notification, the holder
of record is precluded from making any claim against the Corporation for the
transfer or for a new certificate.
Section 7: Restrictions on Shares. The Board of Directors, on behalf
of the Corporation, or the shareholders may impose restrictions on the transfer
of shares (including any security convertible into, or carrying a right to
subscribe for or acquire shares) to the maximum extent permitted by law. A
restriction does not affect shares issued before the restriction was adopted
unless the holders of the shares are parties to the restriction agreement or
voted in favor of the restriction. A restriction on the transfer of shares is
valid and enforceable against the holder or a transferee of the holder if the
restriction is authorized by this Section 7 and its existence is noted
conspicuously on the front or back of the certificate.
Section 8: Control Share Acquisitions Statute. The Corporation elects
not to be subject to or governed by the South Carolina Control Share
Acquisitions Statute contained in Sections 35-2-101 to 35-2-111 of the South
Carolina Code, or any successor provision or provisions.
Section 9: Voting of Stock Held. Unless otherwise provided by
resolution of the Board of Directors, the president or any executive vice
president shall from time to time appoint an attorney or attorneys or agent or
agents of this Corporation, in the name and on behalf of this Corporation, to
cast the vote which this Corporation may be entitled to cast as a shareholder
or otherwise in any other corporation, any of whose stock or securities may be
held by this Corporation, at meetings of the holders of the stock or other
securities of such other corporation, or to consent in writing to any action by
any of such other corporation, and shall instruct the person or persons so
appointed as to the manner of casting such votes or giving such consent and may
execute or cause to be executed on behalf of this Corporation and under its
corporate seal or otherwise, such written proxies, consents, waivers or other
instruments as may be necessary or proper; or, in lieu of such appointment, the
president or any executive vice president may attend in person any meetings of
the holders of stock or other securities of any such other corporation and
their vote or exercise any or all power of this Corporation as the holder of
such stock or other securities of such other corporation.
ARTICLE 8: GENERAL PROVISIONS
Section 1: Distributions. The Board of Directors may authorize, and
the Corporation may make, distributions (including dividends on its outstanding
shares) in the manner and upon the terms and conditions provided by applicable
law and the Articles.
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<PAGE> 20
Section 2: Books and Records. The Corporation shall keep correct and
complete books and records of account and shall keep minutes of the proceedings
of its shareholders and Board of Directors.
Section 3: Execution of Documents. The Board of Directors or these
Bylaws shall designate the officers, employees and agents of the Corporation
who shall have the power to execute and deliver deeds, contracts, mortgages,
bonds, debentures, checks and other documents for and in the name of the
Corporation, and may authorize such officers, employees and agents to delegate
such power (including authority to redelegate) to other officers, employees or
agents of the Corporation. Unless so designated or expressly authorized by
these Bylaws, no officer, employee or agent shall have any power or authority
to bind the Corporation by any contract or engagement or to pledge its credit
or to render it liable pecuniarily for any purpose or any amount.
Section 4: Fiscal Year. The fiscal year of the Corporation shall be
the same as the calendar year.
Section 5: Seal. The Corporation may provide a seal which contains the
name of the Corporation and the name of the state of incorporation. The seal
may be used by impressing it or reproducing a facsimile of it or otherwise.
Section 6: Resignation. A director may resign by delivering written
notice to the Board of Directors, the chairman or the Corporation. Such
resignation of a director is effective when the notice is delivered unless the
notice specifies a later effective date. An officer may resign at any time by
delivering notice to the Corporation. Such resignation of an officer is
effective when the notice is delivered unless the notice specifies a later
effective date. If a resignation of an officer is made effective at a later
date and the Corporation accepts the future effective date, the Board of
Directors may fill the pending vacancy before the effective date if the Board
of Directors provides that the successor does not take office until the
effective date.
Section 7: Computation of Days. In computing any period of days
prescribed hereunder the day of the act after which the designated period of
days begins to run is not to be included. The last day of the period so
computed is to be included.
Section 8: Amendment of Bylaws. (a) Except to the extent required
otherwise by law, these Bylaws, or the Articles of Incorporation, these Bylaws
may be altered, amended or repealed or new Bylaws may be adopted at any meeting
of the Board of Directors at which a quorum is present, by the affirmative vote
of a majority of the directors then in office, provided notice of the proposed
alteration, amendment or repeal is contained in the notice of the meeting.
(b) Except to the extent required otherwise by law,
these Bylaws, or the Articles of Incorporation, these Bylaws may also be
altered, amended or repealed or new Bylaws may be adopted at any meeting of the
shareholders at which a quorum is present or represented by proxy, by the
affirmative vote of the holders of a majority of each class of shares
17
<PAGE> 21
entitled to vote thereon, provided notice of the proposed alteration, amendment
or repeal is contained in the notice of the meeting.
(c) Upon adoption of any new bylaw by the shareholders,
the shareholders may provide expressly that the Board of Directors may not
adopt, amend or repeal that bylaw or any bylaw on that subject.
Section 9: Construction. If any portion of these Bylaws shall be
invalid or inoperative, then, so far as is reasonable and possible: (a) the
remainder of these Bylaws shall be considered valid and operative and (b)
effect shall be given to the intent manifested by the portion held invalid or
inoperative.
Section 10: Headings. The headings are for convenience of reference
only and shall not affect in any way the meaning or interpretation of these
Bylaws.
The undersigned, as President of the Corporation, hereby certifies
that the bylaws contained herein are the true and correct bylaws adopted by the
Corporation's board of directors in compliance with any procedural requirements
of the Corporation's Articles of Incorporation and the laws of the State of
South Carolina, and the rules and regulations promulgated thereunder.
/s/ James Aubrey Crosland
--------------------------------
James Aubrey Crosland
President
Date: December 21, 1998
--------------------------
18
<PAGE> 1
EXHIBIT 4.2
[FORM OF FACE OF CERTIFICATE]
FIRST CAPITAL BANCSHARES, INC.
INCORPORATED UNDER THE LAWS OF SOUTH CAROLINA
THE CORPORATION IS TO ISSUE 10,000,000 SHARES OF COMMON STOCK - PAR VALUE $.01
EACH
This certifies that _______________________________is the registered holder of
_______________________________ Shares of Common Stock which are fully paid and
non-assessable and transferable only on the books of the Corporation by the
holder hereof in person or by Attorney upon surrender of this Certificate
properly endorsed.
In Witness Whereof, the said Corporation has caused this Certificate to
be signed by its duly authorized officers and its Corporate Seal to be hereunto
affixed this ______________ day of _______________ A.D. 19____
- ----------------------------- ---------------------------------
SECRETARY PRESIDENT
[FORM OF BACK OF CERTIFICATE]
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
TEN COM --as tenants in common UNIF GIFT MIN ACT-- Custodian
TEN ENT --as tenants by the entireties ----
JT TEN --as joint tenants with right of (Cust) (Minor)
survivorship and not as tenants under Uniform Gifts to Minors
in common Act
---------------
(State)
Additional abbreviations may also be used though not in the above list.
For value received, _________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE
- -------------------------------------------------------------------------------
_________________________________________________________________________Shares
represented by the within Certificate, and do hereby irrevocably constitute and
appoint ____________________ Attorney to transfer the said shares on the books
of the within-named Corporation with full power of substitution in the premises.
Dated, _____________________
In presence of
- ----------------------------------------
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION
OR ENLARGEMENT, OR ANY CHANGE WHATEVER.
<PAGE> 1
EXHIBIT 5.1
negLAW OFFICES
Nelson Mullins Riley & Scarborough, L.L.P.
A REGISTERED LIMITED LIABILITY PARTNERSHIP
999 PEACHTREE STREET, N.E.
FIRST UNION PLAZA
SUITE 1400
ATLANTA, GEORGIA 30309
TELEPHONE (404) 817-6000
FACSIMILE (404) 817-6050
WWW.NMRS.COM
December 21, 1998
First Capital Bancshares, Inc.
207 Highway
15/401 Bypass East
Bennettsville, South Carolina 29512
Re: Registration Statement on Form SB-2
Ladies and Gentlemen:
We have acted as counsel to First Capital Bancshares, Inc. (the "Company") in
connection with the filing of a Registration Statement on Form SB-2 (the
"Registration Statement"), under the Securities Act of 1933, covering the
offering of up to 720,000 shares (the "Shares") of the Company's Common Stock,
par value $.01 per share. In connection therewith, we have examined such
corporate records, certificates of public officials, and other documents and
records as we have considered necessary or proper for the purpose of this
opinion.
The opinions set forth herein are limited to the laws of the State of
South Carolina and applicable federal laws.
Based on the foregoing, and having regard to legal considerations
which we deem relevant, we are of the opinion that the Shares, when issued and
delivered as subscribed in the Registration Statement, will be legally issued,
fully paid, and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption
"Legal Matters" in the Prospectus contained in the Registration Statement.
NELSON MULLINS RILEY & SCARBOROUGH
By: /s/ Neil E. Grayson
--------------------------------
Neil E. Grayson
<PAGE> 1
EXHIBIT 10.1
FIRST FEDERAL BANCSHARES, INC.
P.O. BOX 1353
BENNETTSVILLE, SOUTH CAROLINA
June 4, 1998
Mr. Aubrey Crosland
Bennettsville, South Carolina
Dear Aubrey:
We are pleased to propose this LETTER OF AGREEMENT (this "Agreement")
dated as of June 4, 1998, to be entered into among First Federal Bancshares,
Inc., a South Carolina corporation (the "Company"), First Federal Bank
(Proposed), a proposed thrift (the "Thrift" and, together with the Company, the
"Employer") and Aubrey Crosland, an individual resident of South Carolina (the
"Executive").
The Company is the proposed holding company for the Thrift and is in
the process of organizing the Thrift. The Executive has agreed to serve as
President and Chief Executive Officer of the Company and the Thrift. The
Employer recognizes that the Executive's contribution to the growth and success
of the Company and the Thrift during organization and the initial years of
operations will be a significant factor in the success of the Company and the
Thrift. The Employer desires to provide for the employment of the Executive in
a manner which will reinforce and encourage the dedication of the Executive to
the Company and the Thrift and promote the best interests of the Thrift and the
Company. The Executive is willing to serve the Employer on the terms and
conditions herein provided. Certain terms used in this Agreement are defined in
Section 14 hereof.
In consideration of the foregoing, the mutual covenants contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. Employment. The Employer shall employ the Executive, and the
Executive shall serve the Employer, as President and Chief Executive Officer of
the Company and the Thrift upon the terms and conditions set forth herein. The
Executive shall have such authority and responsibilities consistent with his
position as are set forth in the Company's and the Thrift's Bylaws or assigned
by the Company's and the Thrift's respective Boards of Directors (the "Boards")
from time to time. The Executive shall devote his full business time,
attention, skill and efforts to the performance of his duties hereunder, except
during periods of illness or periods of vacation and leaves of absence
consistent with Employer policy. The Executive may devote reasonable periods to
service as a director or advisor to other organizations, to charitable and
community activities, and to managing his personal investments, provided that
such activities do not materially interfere with the performance of his duties
hereunder and are not in conflict or competitive with, or adverse to, the
interests of the Company or the Thrift.
<PAGE> 2
2. Term. Unless earlier terminated as provided herein, the
Executive's employment under this Agreement shall commence on the date hereof
and be for a term (the "Term") of three years, with an annual review of
Executive's performance and written approval by the Boards for renewal, which
may be extended for additional time periods by mutual agreement of the
Executive and the Employer.
3. Compensation and Benefits.
(a) The Employer shall pay the Executive a salary at a rate of not
less than $60,000 per annum, which shall be increased to not less than $85,000
per annum on the date the Bank opens, in accordance with the salary payment
practices of the Employer.
(b) The Executive shall participate in any retirement, welfare,
deferred compensation, life and health insurance, and other benefit plans or
programs of the Employer now or hereafter applicable to the Executive or
applicable generally to employees of the Employer, provided that the Employer
shall pay 100% of the cost of health insurance benefits for the Executive and
his immediate family. The Employer shall provide to the Executive, at no cost
to the Executive, term life insurance in an amount equal to at least two times
the Executive's then-current base salary. If the Executive retires with the
consent of the Employer's board of directors before the age of 65, the Employer
shall continue to provide the health and life insurance benefits provided for
in this paragraph, at no cost to the Executive, at least until the Executive
reaches the age of 65.
(c) On the date of the closing of the stock offering for the initial
capitalization of the Thrift, or as soon thereafter as an appropriate stock
option plan is adopted by the Board, the Company shall grant to the Executive
an option to purchase 8,000 shares of Common Stock. The option will be
represented by a separate stock option agreement which will provide that the
option will have a ten-year term, will vest over a six-year period (1,000
shares on each of the first three anniversaries of the opening date of the
Bank, 1,667 shares on the fourth and fifth anniversaries, and 1,666 shares on
the sixth anniversary, so long as the Executive is still employed by the
Employer on each anniversary and provided that the performance goals for such
year described in Section 3(d) are achieved).
(d) The Board of Directors agrees to set performance goals for the
Company and the Thrift for each fiscal year, and the Board may, in its
discretion, grant to the Executive a cash bonus, in an amount to be determined
by the Board, at the end of each fiscal year in which the Company and the
Thrift achieve such performance goals.
(e) Beginning on the date the Bank opens, the Company shall provide
the Executive with a leased automobile of the Executive's choice, with a lease
rate not to exceed $400 per month, provided that the Executive shall be
responsible for all fuel costs and any maintenance costs that are not covered
by warranty. The Employer shall fully insure the automobile at no cost to the
Executive. In addition, the Employer shall pay the dues for the Executive's
membership in the Rotary Club and an area country club in an amount to be
agreed upon by the parties.
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<PAGE> 3
(f) Beginning on the date of this Agreement, the Employer shall
reimburse the Executive for reasonable travel and other expenses related to the
Executive's duties which are incurred and accounted for in accordance with the
normal practices of the Employer.
(g) The Employer shall provide the Executive with appropriate
directors' and officers' liability insurance coverage at no cost to the
Executive.
(h) The Executive shall be entitled to three weeks of paid vacation
per year.
4. Termination.
(a) Notwithstanding the Term of this Agreement, the Employer has the
right to terminate this Agreement at any time in accordance with this Section
4.
(b) If the Employer terminates the Executive's employment under this
Agreement prior to the end of the Term for any reason other than (i) Cause or
(ii) because the Bank fails to open, the Employer shall pay to the Executive
severance compensation in an amount equal to 100% of his then current monthly
base salary each month for six months from the date of termination, plus any
bonus earned or accrued through the date of termination, and shall also
continue providing the health insurance benefits for the Executive and his
immediate family described in Section 3(b). The Employer may terminate this
Agreement at any time, but any termination by the Employer other than
termination for Cause or because the Bank fails to open shall not prejudice the
Executive's right to severance compensation or other benefits under this
Agreement.
(c) If the Executive's employment is terminated because of the
Executive's death, the Executive's estate shall receive any sums due him as
base salary and reimbursement of expenses through the end of the month during
which death occurred, plus any bonus earned or accrued under the through the
date of death.
(d) If the Executive's employment is terminated for Cause or because
the Bank fails to open, or if the Executive resigns, the Executive shall
receive any sums due him as base salary and reimbursement of expenses through
the date of such termination. The Executive shall have no right to receive
severance compensation or other benefits for any period after termination for
Cause or if the Bank fails to open. For purposes of this Agreement, termination
for Cause shall include termination because of the Executive's personal
dishonesty, incompetence, willful misconduct, breach of fiduciary duty
involving personal profit, intentional failure to perform stated duties,
willful violation of any law, rule, or regulation (other than traffic
violations or similar offenses) or final cease-and-desist order, or material
uncured breach of any provision of this Agreement.
(e) If the Executive is suspended or temporarily prohibited from
participating in the conduct of the Employer's affairs by a notice served under
section 8(e)(3) or (g)(1) of Federal Deposit Insurance Act (12 U.S.C. 1818
(e)(3) and (g)(1)), the Employer's obligations under this Agreement shall be
suspended as of the date of service unless stayed by appropriate proceedings.
If the charges in the notice are dismissed, the Employer may in its discretion
(i)
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<PAGE> 4
pay the Executive all or part of the compensation withheld while the
obligations under this Agreement were suspended and (ii) reinstate (in whole or
in part) any of such obligations which were suspended.
(f) If the Executive is removed or permanently prohibited from
participating in the conduct of the Employer's affairs by an order issued under
section 8 (e)(4) or (g)(1) of the Federal Deposit Insurance Act (12 U.S.C. 1818
(e)(4) or (g)(1)), all obligations of the Executive under this Agreement shall
terminate as of the effective date of the order, but any vested rights of the
parties hereto shall not be affected.
(g) If the Employer is in default (as defined in section 3(x)(1) of
the Federal Deposit Insurance Act), all obligations under this Agreement shall
terminate as of the date of default, but this paragraph (4)(g) shall not affect
any vested rights of the parties hereto.
(h) All obligations under this Agreement shall be terminated, except
to the extent determined that continuation of this Agreement is necessary of
the continued operation of the Employer, in the following cases:
(i) By the Director of the Office of Thrift Supervision (the
"Director") or his or her designee, at the time the Federal Deposit
Insurance Corporation enters into an agreement to provide assistance
to or on behalf of the Employer under the authority contained in 13(c)
of the Federal Deposit Insurance Act; or
(ii) By the Director or his or her designee, at the time the
Director or his or her designee approves a supervisory merger to
resolve problems related to operation of the Employer or when the
Employer is determined by the Director to be in an unsafe or unsound
condition.
(i) With the exceptions of the provisions of this Section 4, and the
express terms of any benefit plan under which the Executive is a participant,
it is agreed that, upon termination of the Executive's employment, the Employer
shall have no obligation to the Executive for, and the Executive waives and
relinquishes, any further compensation or benefits (exclusive of COBRA
benefits). At the time of termination of employment, the Employer and the
Executive shall enter into a mutually satisfactory form of release
acknowledging such remaining obligations and discharging both parties, as well
as the Employer's officers, directors and employees with respect to their
actions for or on behalf of the Employer, from any other claims or obligations
arising out of or in connection with the Executive's employment by the
Employer, including the circumstances of such termination.
(j) In the event that the Executive's employment is terminated for any
reason, if requested by the Board the Executive shall (and does hereby) tender
his resignation as a director of the Company and the Thrift, effective as of
the date of termination.
(k) Any payments made to the Executive pursuant to this Agreement, or
otherwise, are subject to and conditioned upon their compliance with 12 U.S.C.
Section 1828(k) and any regulations promulgated thereunder.
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<PAGE> 5
5. Protection of Trade Secrets. The Executive agrees to maintain in
strict confidence and, except as necessary to perform his duties for the
Employer, the Executive agrees not to use or disclose any Trade Secrets of the
Employer during or at any time after his employment. As provided by South
Carolina statutes, "Trade Secret" means information, including a formula,
pattern, compilation, program, device, method, technique, process, drawing,
cost data or customer list, that: (i) derives economic value, actual or
potential, from not being generally known to, and not being readily
ascertainable by proper means by, other persons who can obtain economic value
from its disclosure or use; and (ii) is the subject of efforts that are
reasonable under the circumstances to maintain its secrecy.
6. Protection of Other Confidential Information. In addition, the
Executive agrees to maintain in strict confidence and, except as necessary to
perform his duties for the Employer, not to use or disclose any Confidential
Business Information of the Employer during his employment and for a period of
24 months following termination of the Executive's employment. "Confidential
Business Information" shall mean any internal, non-public information (other
than Trade Secrets already addressed above) concerning the Employer's financial
position and results of operations (including revenues, assets, net income,
etc.); annual and long-range business plans; product or service plans;
marketing plans and methods; training, educational and administrative manuals;
customer and supplier information and purchase histories; and employee lists.
The provisions of Sections 5 and 6 above shall also apply to protect Trade
Secrets and Confidential Business Information of third parties provided to the
Employer under an obligation of secrecy.
7. Return of Materials. The Executive shall surrender to the Employer,
promptly upon its request and in any event upon termination of the Executive's
employment, all media, documents, notebooks, computer programs, handbooks, data
files, models, samples, price lists, drawings, customer lists, prospect data,
or other material of any nature whatsoever (in tangible or electronic form) in
the Executive's possession or control, including all copies thereof, relating
to the Employer, its business, or its customers. Upon the request of the
Employer, employee shall certify in writing compliance with the foregoing
requirement.
8. Restrictive Covenants.
(a) No Solicitation of Customers. During the Executive's employment
with the Employer and for a period of 12 months thereafter, the Executive shall
not (except on behalf of or with the prior written consent of the Employer),
either directly or indirectly, on the Executive's own behalf or in the service
or on behalf of others, (A) solicit, divert, or appropriate to or for a
Competing Business, or (B) attempt to solicit, divert, or appropriate to or for
a Competing Business, any person or entity that was a customer of the Employer
or any of its Affiliates on the date of termination and is located in the
Territory and with whom the Executive has had material contact.
(b) No Recruitment of Personnel. During the Executive's employment
with the Employer and for a period of 12 months thereafter, the Executive shall
not, either directly or indirectly, on the Executive's own behalf or in the
service or on behalf of others, (A) solicit,
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<PAGE> 6
divert, or hire away, or (B) attempt to solicit, divert, or hire away, to any
Competing Business located in the Territory, any employee of or consultant to
the Employer or any of its Affiliates engaged or experienced in the Business,
regardless of whether the employee or consultant is full-time or temporary, the
employment or engagement is pursuant to written agreement, or the employment is
for a determined period or is at will.
(c) Non-Competition Agreement. During the Executive's employment with
the Employer and for a period of 12 months thereafter, the Executive shall not
(without the prior written consent of the Employer) compete with the Employer
or any of its Affiliates by, directly or indirectly, forming, serving as an
organizer, director or officer of, or consultant to, or acquiring or
maintaining more than a 1% passive investment in, a depository financial
institution or holding company therefor if such depository institution or
holding company has one or more offices or branches located in the Territory.
Notwithstanding the foregoing, the Executive may serve as an officer of or
consultant to a depository institution or holding company therefor even though
such institution operates one or more offices or branches in the Territory, if
the Executive's employment does not directly involve, in whole or in part, the
depository financial institution's or holding company's operations in the
Territory.
9. Independent Provisions. The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof. If
any provision or clause of this Agreement, or portion thereof, shall be held by
any court or other tribunal of competent jurisdiction to be illegal, void, or
unenforceable in such jurisdiction, the remainder of such provision shall not
be thereby affected and shall be given full effect, without regard to the
invalid portion. It is the intention of the parties that, if any court
construes any provision or clause of this Agreement, or any portion thereof, to
be illegal, void, or unenforceable because of the duration of such provision or
the area or matter covered thereby, such court shall reduce the duration, area,
or matter of such provision, and, in its reduced form, such provision shall
then be enforceable and shall be enforced. The Executive and the Employer
hereby agree that they will negotiate in good faith to amend this Agreement
from time to time to modify the terms of Sections 8(a), 8(b), and 8(c), the
definition of the term "Territory," and the definition of the term "Business,"
to reflect changes in the Employer's business and affairs so that the scope of
the limitations placed on the Executive's activities by Section 8 accomplishes
the parties' intent in relation to the then current facts and circumstances.
Any such amendment shall be effective only when completed in writing and signed
by the Executive and the Employer.
10. Successors; Binding Agreement. The rights and obligations of this
Agreement shall bind and inure to the benefit of the surviving corporation in
any merger or consolidation in which the Employer is a party, or any assignee
of all or substantially all of the Employer's business and properties. The
Executive's rights and obligations under this Agreement may not be assigned by
him, except that his right to receive accrued but unpaid compensation,
unreimbursed expenses and other rights, if any, provided under this Agreement
which survive termination of this Agreement shall pass after death to the
personal representatives of his estate.
11. Notice. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given
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when personally delivered or sent by certified mail, return receipt requested,
postage prepaid, addressed to the respective addresses last given by each party
to the other; provided, however, that all notices to the Employer shall be
directed to the attention of the Employer with a copy to the Secretary of the
Employer. All notices and communications shall be deemed to have been received
on the date of delivery thereof.
12. Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of South Carolina without
giving effect to the conflict of laws principles thereof. Any action brought by
any party to this Agreement shall be brought and maintained in a court of
competent jurisdiction in State of South Carolina.
13. Enforcement. The Executive agrees that in the event of any breach
or threatened breach by the Executive of any covenant contained in Section
8(a), 8(b), or 8(c) hereof, the resulting injuries to the Employer would be
difficult or impossible to estimate accurately, even though irreparable injury
or damages would certainly result. Accordingly, an award of legal damages, if
without other relief, would be inadequate to protect the Employer. The
Executive, therefore, agrees that in the event of any such breach, the Employer
shall be entitled to obtain from a court of competent jurisdiction an
injunction to restrain the breach or anticipated breach of any such covenant,
and to obtain any other available legal, equitable, statutory, or contractual
relief. Should the Employer have cause to seek such relief, no bond shall be
required from the Employer, and the Executive shall pay all attorney's fees and
court costs which the Employer may incur to the extent the Employer prevails in
its enforcement action.
14. Certain Definitions.
(a) "Affiliate" shall mean any business entity controlled by,
controlling or under common control with the Employer.
(b) "Business" shall mean the operation of a depository financial
institution, including, without limitation, the solicitation and acceptance of
deposits of money and commercial paper, the solicitation and funding of loans
and the provision of other banking services, and any other related business
engaged in by the Employer or any of its Affiliates as of the date of
termination.
(c) "Competing Business" shall mean any business that, in whole or in
part, is the same or substantially the same as the Business.
(d) "Territory" shall mean (a) during the Executive's employment with
the Employer and for a period of six months thereafter, a radius of (i) 50
miles from the main office of the Employer or (ii) 25 miles from any branch
office of the Employer, and (b) for a period commencing six months after
termination of the Executive's employment and continuing an additional six
months, Marlboro County, South Carolina.
15. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto and supersedes all prior agreements, if any,
understandings and arrangements, oral or written, between the parties hereto
with respect to the subject matter hereof. Failure of the Employer to enforce
any of the provisions of this Agreement or any rights with respect
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thereto shall in no way be considered to be a waiver of such provisions or
rights, or in any way affect the validity of this Agreement.
16. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
17. No Conflict with Laws. In the event there are any discrepancies
herein with any federal law or regulation, the federal law or regulation shall
control.
IN WITNESS WHEREOF, the Employer has caused this Agreement to be
executed and its seal to be affixed hereunto by its officers thereunto duly
authorized, and the Executive has signed and sealed this Agreement, effective
as of the date first above written.
ATTEST: FIRST FEDERAL BANCSHARES, INC.
/s/ Dale Hutchins /s/ Lee C. Shortt
- ------------------------------- -------------------------------------
Name: Dale Hutchins Name: Lee C. Shortt
Title: Organizer Title: Chairman
ATTEST: FIRST FEDERAL BANK (PROPOSED)
/s/ Glenn Dowdy /s/ Shoukath Ansari
- ------------------------------- -------------------------------------
Name: Glenn Dowdy Name: Shoukath Ansari
Title: Organizer Title: Secretary
(CORPORATE SEAL)
EXECUTIVE
/s/ Aubrey Crosland
-------------------------------------
Name: Aubrey Crosland
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<PAGE> 1
EXHIBIT 10.2
FIRST FEDERAL BANCSHARES, INC.
P.O. BOX 1353
BENNETTSVILLE, SOUTH CAROLINA
November 2, 1998
Mr. John M. Digby
Bennettsville, South Carolina
Dear John:
We are pleased to offer you the position of CFO of First Federal
Bancshares, Inc., a South Carolina corporation (the "Company"), and First
Federal Thrift (Proposed), a proposed thrift (the "Thrift" and, together with
the Company, the "Employer"), on the following terms and conditions:
1. Independent Contractor. Beginning on November 2, you agree to serve
the Company as an independent contractor at the rate of $4,000 per month until
such time as the Thrift has received all necessary approvals and receives its
charter. During such period you shall not receive any benefits, and no
employment taxes shall be withheld. You shall perform such duties as may be
requested by the President and Board of Directors of the Company, primarily
assisting in the formation of the Thrift.
2. Employment. Once the Thrift receives its charter, you shall be
employed as CFO of the Company and the Thrift upon the terms and conditions set
forth herein. You shall have such authority and responsibilities consistent
with your position as are set forth in the Thrift's Bylaws or assigned by the
Thrift's Board of Directors (the "Board") from time to time. You shall devote
your full business time, attention, skill and efforts to the performance of
your duties hereunder, except during periods of illness or periods of vacation
and leaves of absence consistent with the Thrift's policies. You may devote
reasonable periods to service as a director or advisor to other organizations,
to charitable and community activities, and to managing your personal
investments, provided that such activities do not materially interfere with the
performance of your duties hereunder and are not in conflict with, competitive
with, or adverse to, the interests of the Company or the Thrift.
3. Compensation and Benefits. Beginning on the date of your full-time
employment as set forth in Section 2.
(a) You shall participate in any retirement, welfare, deferred
compensation, life and health insurance, and other benefit plans or programs of
the Thrift available to its employees in general.
(b) Beginning on the date of this Agreement, the Employer shall
reimburse you for reasonable travel and other expenses related to your duties
which are incurred and accounted for in accordance with the normal practices of
the Employer.
<PAGE> 2
(c) The Employer shall provide you with appropriate officers'
liability insurance coverage at no cost to you.
(d) You shall be entitled to two weeks of paid vacation per year.
4. Protection of Trade Secrets. You agree to maintain in strict
confidence and, except as necessary to perform your duties for the Employer,
not to use or disclose any Trade Secrets of the Employer during or at any time
after your employment. As provided by South Carolina statutes, "Trade Secret"
means information, including, but not limited to, a formula, pattern,
compilation, program, device, method, technique, product, system, or process,
design, prototype, procedure, or code that: (i) derives independent economic
value, actual or potential, from not being generally known to, and not being
readily ascertainable by proper means by the public or any other person who can
obtain economic value from its disclosure or use; and (ii) is the subject of
efforts that are reasonable under the circumstances to maintain its secrecy.
5. Protection of Other Confidential Information. In addition, you
agree to maintain in strict confidence and, except as necessary to perform your
duties for the Employer, not to use or disclose any Confidential Business
Information of the Employer during your employment and for a period of 24
months following termination of your employment. "Confidential Business
Information" shall mean any internal, non-public information (other than Trade
Secrets already addressed above) concerning the Employer's financial position
and results of operations (including revenues, assets, net income, etc.);
annual and long-range business plans; product or service plans; marketing plans
and methods; training, educational and administrative manuals; customer and
supplier information and purchase histories; and employee lists. The provisions
of Sections 5 and 6 above shall also apply to protect Trade Secrets and
Confidential Business Information of customers and other third parties provided
to the Employer under an obligation of secrecy.
6. Return of Materials. You shall surrender to the Employer, promptly
upon its request and in any event upon termination of your employment, all
media, documents, notebooks, computer programs, handbooks, data files, models,
samples, price lists, drawings, customer lists, prospect data, or other
material of any nature whatsoever (in tangible or electronic form) in your
possession or control, including all copies thereof, relating to the Employer,
its business, or its customers. Upon the request of the Employer, you shall
certify in writing compliance with the foregoing requirement.
7. Restrictive Covenants.
(a) No Solicitation of Customers. During your employment with the
Employer and for a period of 12 months thereafter, you shall not (except on
behalf of or with the prior written consent of the Employer), either directly
or indirectly, on your own behalf or in the service or on behalf of others, (A)
solicit, divert, or appropriate to or for a Competing Business, or (B) attempt
to solicit, divert, or appropriate to or for a Competing Business any person or
entity that was a customer of the Employer or any of its Affiliates on the date
of termination and is located in the Territory and with whom you had material
contact.
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<PAGE> 3
(b) No Recruitment of Personnel. During your employment with the
Employer and for a period of 12 months thereafter, you shall not, either
directly or indirectly, on your own behalf or in the service or on behalf of
others, (A) solicit, divert, or hire away, or (B) attempt to solicit, divert,
or hire away any employee of or consultant to the Employer or any of its
Affiliates engaged or experienced in the Business, regardless of whether the
employee or consultant is full-time or temporary, the employment or engagement
is pursuant to written agreement, or the employment is for a determined period
or is at will.
(c) Non-Competition Agreement. During your employment with the
Employer and for a period of 12 months thereafter, you shall not (without the
prior written consent of the Employer) compete with the Employer or any of its
Affiliates by, directly or indirectly, forming, serving as an organizer,
director or officer of, or consultant to, or acquiring or maintaining more than
a 1% passive investment in, a depository financial institution or holding
company thereof if such depository institution or holding company has one or
more offices or branches located in the Territory. Notwithstanding the
foregoing, you may serve as an officer of or consultant to a depository
institution or holding company thereof even though such institution operates
one or more offices or branches in the Territory, if your employment does not
directly involve, in whole or in part, the depository financial institution's
or holding company's operations in the Territory.
8. Independent Provisions. The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof. If
any provision or clause of this Agreement, or portion thereof, shall be held by
any court or other tribunal of competent jurisdiction to be illegal, void, or
unenforceable in such jurisdiction, the remainder of such provision shall not
be thereby affected and shall be given full effect, without regard to the
invalid portion. It is the intention of the parties that, if any court
construes any provision or clause of this Agreement, or any portion thereof, to
be illegal, void, or unenforceable because of the duration of such provision or
the area or matter covered thereby, such court shall reduce the duration, area,
or matter of such provision, and, in its reduced form, such provision shall
then be enforceable and shall be enforced. You and the Employer hereby agree
that they will negotiate in good faith to amend this Agreement from time to
time to modify the terms of Sections 8(a), 8(b), and 8(c), the definition of
the term "Territory," and the definition of the term "Business," to reflect
changes in the Employer's business and affairs so that the scope of the
limitations placed on your activities by Section 8 accomplishes the parties'
intent in relation to the then current facts and circumstances. Any such
amendment shall be effective only when completed in writing and signed by you
and the Employer.
9. Successors; Binding Agreement. The rights and obligations of this
Agreement shall bind and inure to the benefit of the surviving corporation in
any merger or consolidation in which the Employer is a party, or any assignee
of all or substantially all of the Employer's business and properties. Your
rights and obligations under this Agreement may not be assigned by you, except
that your right to receive accrued but unpaid compensation, unreimbursed
expenses and other rights, if any, provided under this Agreement which survive
termination of this Agreement shall pass after death to the personal
representatives of your estate.
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10. Notice. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when personally delivered or sent by certified
mail, return receipt requested, postage prepaid, addressed to the respective
addresses last given by each party to the other; provided, however, that all
notices to the Employer shall be directed to the attention of the Employer with
a copy to the Secretary of the Employer. All notices and communications shall
be deemed to have been received on the date of delivery thereof.
11. Employment "At Will". Nothing in this Agreement shall be construed
to create an employment relationship for a fixed or renewable term. You
acknowledges that, unless otherwise provided in a written agreement signed by
you and approved by the Board of the Company, your employment shall be "at
will" and terminable by either party upon two weeks notice.
12. Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of South Carolina without
giving effect to the conflict of laws principles thereof. Any action brought by
any party to this Agreement shall be brought and maintained in a court of
competent jurisdiction in State of South Carolina.
13. Enforcement. You agree that in the event of any breach or
threatened breach by you of any covenant contained in Section 8(a), 8(b), or
8(c) hereof, the resulting injuries to the Employer would be difficult or
impossible to estimate accurately, even though irreparable injury or damages
would certainly result. Accordingly, an award of legal damages, if without
other relief, would be inadequate to protect the Employer. You, therefore,
agree that in the event of any such breach, the Employer shall be entitled to
obtain from a court of competent jurisdiction an injunction to restrain the
breach or anticipated breach of any such covenant, and to obtain any other
available legal, equitable, statutory, or contractual relief. Should the
Employer have cause to seek such relief, no bond shall be required from the
Employer, and you shall pay all attorney's fees and court costs which the
Employer may incur to the extent the Employer prevails in its enforcement
action.
14. Certain Definitions.
(a) "Affiliate" shall mean any business entity controlled by,
controlling or under common control with the Employer.
(b) "Business" shall mean the operation of a depository financial
institution, including, without limitation, the solicitation and acceptance of
deposits of money and commercial paper, the solicitation and funding of loans
and the provision of other banking services, and any other related business
engaged in by the Employer or any of its Affiliates as of the date of
termination.
(c) "Competing Business" shall mean any business that, in whole or in
part, is the same or substantially the same as the Business.
(d) "Territory" shall mean a radius of (i) 30 miles from the main
office of the Employer or (ii) 15 miles from any branch office of the Employer.
4
<PAGE> 5
15. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto and supersedes all prior agreements, if any,
understandings and arrangements, oral or written, between the parties hereto
with respect to the subject matter hereof. Failure of the Employer to enforce
any of the provisions of this Agreement or any rights with respect thereto
shall in no way be considered to be a waiver of such provisions or rights, or
in any way affect the validity of this Agreement.
16. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
17. No Conflict with Laws. In the event there are any discrepancies
herein with any federal law or regulation, the federal law or regulation shall
control.
If you agree with the foregoing, please countersign this letter below and
return a copy to me.
FIRST FEDERAL BANCSHARES, INC.
/s/ Aubrey Crosland
---------------------------------
Aubrey Crosland
President
FIRST FEDERAL BANK (PROPOSED)
/s/ J. Aubrey Crosland
---------------------------------
J. Aubrey Crosland
President
Agreed and accepted:
/s/ John M. Digby
- ------------------------------------
John M. Digby
5
<PAGE> 1
EXHIBIT 10.3
AGREEMENT TO SELL AND BUY
STATE OF SOUTH CAROLINA
COUNTY OF MARLBORO
April 20, 1998
Earnest Money Deposit:
FIVE THOUSAND & 00/100 DOLLARS ($5,000.00) To be delivered upon acceptance of
this offer:
From FIRST FEDERAL BANCSHARES as a deposit on account of the purchase price of
the following described property upon the terms and conditions as stated herein.
DESCRIPTION OF PROPERTY: That lot, piece, or parcel of land situated in Marlboro
County, South Carolina.
Property located at 209 Hwy 15-401 By Pass, Bennettsville, SC: consisting of lot
together with all improvements thereon. Property known as the former Shoney's
Restaurant property. This agreement is to cover all real and personal property.
Further description may be found in the Marlboro County Clerk of Courts office
in deed book 269 at page 0163.
PURCHASE PRICE: THREE HUNDRED FIFTY THOUSAND & 00/100 DOLLARS ($350,000.00).
TERMS AND CONDITIONS OF SALE:
1. All cash at closing.
2. This offer is subject to the following contingencies:
a. Approval by the purchasers architect.
b. Approval by all regulatory agencies.
In the event the above approvals are not received, at the purchasers option this
agreement may be canceled and the earnest money deposit refunded in full.
3. Purchaser to have the right to enter the property prior to the
closing for purposes of making plans for redesign or removal
of building.
4. DISCLOSURE: The listing and selling agent has a financial
interest in the entity proposing to purchase this property.
5. The closing date may be extended for an additional 120 days
with an additional earnest money deposit of $5,000.
Possession of said premises will be given purchaser on or before delivery of the
deed. Taxes and rents shall be prorated at the time of closing.
Buyer has examined and inspected above described property and agrees to
purchase property as is: Seller makes no warranty or guarantee of condition.
Seller agrees to assume
<PAGE> 2
risk of any and all damage to above described premises prior to closing of this
transaction or possession, whichever occurs first, ordinary wear and tear
excepted.
Said property is being sold and purchased subject to zoning ordinance
and regulations; building restrictions; and conditions, restrictions and
easements of Public Record.
Seller agrees to deliver a good and marketable or insurable owner's
title to the property above described and title is to be conveyed by a good and
sufficient warranty deed free and clear of all encumbrances except as herein set
forth. Seller shall pay for state and county documentary stamps and preparation
of deed. Purchaser agrees to notify seller in writing of any defects in title as
soon as possible and if title proves to be not good and marketable or insurable,
the seller is to make title good and marketable or insurable and shall have a
reasonable time from notification so to do.
This transaction shall be closed, the balance of the moneys due shall
be paid, and all documents signed by the parties hereto on or before 180 days
from acceptance to offer. The deposit is to be held in escrow by the undersigned
listing broker pending closing. It is expressly agreed that upon the event of
any default or failure on the part of the purchaser, to comply with the terms
and conditions of this contract, that one-half of said deposit is to be paid to
said broker not to exceed the commission due and the remaining portion of said
escrow shall, at the option of the seller, be paid to the seller as liquidated
damages.
The parties hereto further agree that this written contract expresses
the entire agreement between the parties and shall be enforceable by either by
specific performance, and that there is no other agreement, oral or otherwise,
modifying the terms hereunder.
This contract shall be binding on both parties, their principals,
heirs, personal representatives, or assigns. It is agreed that the listing
broker in this transaction is Lee C. Shortt, and the selling broker in this
transaction is Lee C. Shortt.
The undersigned jointly and severally agree to purchase the above described
property on the terms and conditions stated in the foregoing instrument.
WITNESSES: PURCHASERS:
MARLBORO BANK GROUP
/s/ John I. Rogers (First Federal Bancshares proposed) (SEAL)
- ------------------------------ ------------------------------------
/s/ Timothy E. Brown by: /s/ J. Aubrey Crosland, CEO (SEAL)
- ------------------------------ ------------------------------------
WITNESSES: SELLERS:
/s/ Patricia R. Robinson /s/ James B. Connelly (SEAL)
- ------------------------------ ------------------------------------
(SEAL)
- ------------------------------ ------------------------------------
(SEAL)
- ------------------------------ ------------------------------------
(SEAL)
- ------------------------------ ------------------------------------
Additional terms and conditions of sale, if any.
2
<PAGE> 1
EXHIBIT 10.5
[BANC STOCK FINANCIAL SERVICES, INC. LETTERHEAD]
A Subsidiary of the Bank Stock Group
August 28, 1998
Mr. J. Aubrey Crosland
President and Chief Executive Officer
First Capital Bancshares, Inc. (Proposed)
830 Highway 38 South
Bennettsville, South Carolina 29512
Re: Letter of Intent
Dear Mr. Crosland:
The following is to set forth the proposal of BSFS Financial Services,
Inc. the proposed offering of common stock ("The Offering") ("BSFS" or "Sales
Agent") to serve as the broker-dealer for First Capital Bancshares, Inc.
(Proposed) ("Company"). This letter agreement ("Agreement") hereby confirms the
interest of BSFS, a subsidiary of The Banc Stock Group, Inc., to serve as the
Company's exclusive underwriter/stock marketing agent in connection with the
Offering, which is contemplated to be a minimum offering of $5,000,000 million
and a maximum of $7,200,000 with a per share price of $10.00 per share. It is
understood that directors and executive officers of the Company contemplate
purchasing shares of the Company's common stock and that they may purchase all
or a portion of these shares prior to commencement of the Offering (at $10.00
per share), and that the amount of the Offering will be reduced by this amount.
For purposes of this Agreement, it is understood that employees of BSFS will be
actively involved in the Offering and that references to the Sales Agent shall
include employees and agents of BSFS. This Agreement sets forth selected terms
of our engagement.
1. OFFERING SERVICES. BSFS will act as lead manager in the
Offering to be conducted on a best efforts basis. BSFS may form a syndicate of
selected broker-dealers to assist in the sale of the common stock. The decision
to utilize selected broker-dealers will be made by BSFS upon consultation with
the Company.
As the Company's sales/stock marketing agent, BSFS will
provide the Company with a comprehensive program of services designed to
promote an orderly, efficient and cost-effective distribution. BSFS will
provide financial and logistical advice to the Company concerning the Offering
and related issues.
2. PREPARATION OF OFFERING DOCUMENTS. The Company and its
counsel will draft the Registration Statement and other materials to be used in
connection with the Offering. BSFS and its counsel will review these documents
and assist your counsel with their preparation. The
<PAGE> 2
First Capital Bancshares, Inc. (Proposed)
December 21, 1998
Page 2
Registration Statement will be in a form reasonably satisfactory to each of us
and our respective counsel.
3. DUE DILIGENCE REVIEW. Prior to the filing of the Form SB-2
Registration Statement ("Registration Statement") or any other documents naming
BSFS as the Company's underwriter/stock marketing agent, BSFS and its
representatives will undertake substantial investigations to learn about the
Company's proposed business and operations ("due diligence review") in order to
confirm information provided to us and to evaluate information to be contained
in the Company's Registration Statement. The Company agrees that it will make
available to BSFS all relevant information, whether or not publicly available,
which the BSFS reasonably requests. The Company acknowledges that BSFS will
rely upon the accuracy and completeness of all information received from the
Company or its officers, directors, employees, agents and representatives,
accountants and counsel.
BSFS shall furnish, as soon as practicable, to the Company
such information regarding BSFS as the Company may reasonably request in
writing and as shall be reasonably required in connection with any
registration, qualification or compliance with state and federal securities
laws.
4. REGULATORY FILINGS. Upon satisfactory completion of BSFS's
due diligence review, the Company will cause a Registration Statement with
respect to the Offering to be filed with the Securities and Exchange Commission
("SEC") and such state securities commissioners as may be determined by BSFS
and reasonably acceptable to the Company. No filings naming BSFS will be made
without the prior consent of BSFS.
5. AGENCY OR UNDERWRITING AGREEMENT. The specific terms of the
Offering and any broker-assisted sales services contemplated in this Agreement
shall be set forth in a Sales Agency Agreement ("Agency Agreement") between
BSFS and the Company to be executed prior to commencement of the Offering.
Sales of common stock in the Offering will be contingent upon, among other
things, the absence of material adverse developments prior to completion of the
Offering. The Agency Agreement and any Selected Dealer Agreement shall be
prepared by counsel for BSFS, and such counsel shall make all required filings
with the National Association of Securities Dealers, Inc. The Company and its
offers and directors will agree not to offer, sell, contract to sell or grant
any option to purchase or otherwise dispose of any common stock for at least
180 days after the Offering without first obtaining the Sales Agent's written
consent except that the Company may adopt a stock option plan and issue
options.
6. REPRESENTATIONS, WARRANTIES AND COVENANTS. The Agency
Agreement will provide for customary representations, warranties and covenants
by the Company, including, without limitation, with respect to indemnification
and contribution by the Company. This will be consistent
<PAGE> 3
First Capital Bancshares, Inc. (Proposed)
December 21, 1998
Page 3
with the indemnification set forth in paragraph 9 herein.
7. FEES. For the services hereunder, the Company shall pay the
following fees to BSFS at closing, unless stated otherwise:
(a) 2.5% of the purchase price of the stock sold to
proposed officers, directors and employees of the
Company in the offering and 0% of the price of
shares sold prior to the offering;
(b) 6.5% of the purchase price of the stock sold to
certain individuals and entities designated by the
board of directors, not to exceed $2,000,000/200,000
shares; and
(c) 7% of the purchase price of the securities sold to
persons other than those persons qualifying as
purchasers in Section 7(a) and 7(b) above. In the
event that a syndicate of selected broker-dealers is
used to assist in the Offering, BSFS will pass onto
such selected broker-dealers who assist in the
Offering an amount competitive with gross
underwriting discounts charged at such time for
comparable stock sold at a comparable price per
share in a similar market environment. Fees with
respect to purchases effected through selected
broker-dealers other than BSFS shall be transmitted
by BSFS to such selected broker-dealer. The decision
to utilize selected broker-dealers will be made by
BSFS upon consultation with the Company.
8. EXPENSES. The Company will bear those expenses of the
proposed offering customarily borne by issuers, including, without limitation,
SEC, "Blue Sky," and NASD filing and registration fees; the fees of the
Company's accountants, attorneys, transfer agent and registrar, printing,
mailing and marketing expenses associated with the Offering; BSFS's counsel's
legal fees which will be capped at $25,000; the fees set forth in Section 7.
The Company shall reimburse BSFS for its actual out-of-pocket expenses up to a
maximum of $35,000. Upon execution of this Agreement, the Company will advance
$5,000 to BSFS for expected out-of-pocket expenses. In the event the Company
terminates the Offering for any reason, except based on a breach of the Sales
Agent's obligations hereunder, the Company will reimburse BSFS for the fees and
expenses of its counsel. Should BSFS be required to retain the services of
other professionals for purposes of this Offering, the expenses of such
professionals shall be billed separately by the Company. The engagement of such
professionals shall require the consent of the parties hereto.
9. INDEMNIFICATION.
(a) In connection with this engagement (which engagement
may have commenced prior to the date hereof), the
Company agrees to indemnify and hold harmless BSFS
and its affiliates and the respective directors,
officers,
<PAGE> 4
First Capital Bancshares, Inc. (Proposed)
December 21, 1998
Page 4
employees, agents and partners of the Sales Agent
and its affiliates, and each other person
controlling BSFS or any of its affiliates within the
meaning of either Section 15 of the Securities Act
of 1933 or Section 20 of the Securities Exchange Act
of 1934 (collectively, "Sales Agent Indemnified
Parties") to the full extent lawful, from and
against all losses, claims, damages or liabilities
resulting from any legal action, investigation or
other proceeding to which any Indemnified Party may
become subject as a result of or arising out of this
engagement and will reimburse any Sales Agent
Indemnified Party for all reasonable expense
(including reasonable counsel fees) incurred by such
Sales Agent Indemnified Party in connection with
investigating, defending or settling any such matter
or enforcing any rights hereunder. Notwithstanding
the foregoing, the Company shall not be liable to a
Sales Agent Indemnified Party in respect of any
loss, claim, damage, liability or expense to the
extent the same is determined, in a final judgment
by a court of competent jurisdiction, to have
resulted from the gross negligence or bad faith of
BSFS or such Sales Agent Indemnified Party or from
information provided in writing by BSFS, for use in
the Registration Statement. The Company also agrees
that neither the Sales Agent, nor any of its
affiliates, nor any officer, director, employee or
agent of BSFS or any of its affiliates, nor any
person controlling the Sales Agent or any of its
affiliates, shall have any liability to the Company
for or in connection with such engagement except for
any such liability for losses, claims, damages,
liabilities or expenses incurred by the Company that
is finally judicially determined to have resulted
primarily from the Sales Agent's gross negligence or
bad faith or from information provided in writing by
BSFS for use in the Registration Statement.
Notwithstanding the foregoing, BSFS shall not be
required to indemnify or reimburse the Company for
expenses hereunder in an amount, in the aggregate,
in excess of any fees paid pursuant to Section 7
above. The foregoing shall be in addition to any
rights that BSFS or any Sales Agent Indemnified
Party may have at common law or otherwise.
(b) Upon receipt of notice of any claim or the
commencement of any such action with respect to
which indemnity is to be sought, the Sales Agent
Indemnified Party shall notify the indemnifying
party of such claim or the commencement of such
action. The Sales Agent Indemnified Party shall have
the right to employ counsel reasonably acceptable to
the Company to defend such claim or action.
(c) If for any reason the foregoing indemnification is
unavailable to any Sales Agent Indemnified Party or
insufficient to hold it harmless as contemplated
<PAGE> 5
First Capital Bancshares, Inc. (Proposed)
December 21, 1998
Page 5
herein then the Company shall contribute to the
amount payable by the Sales Agent Indemnified Party
as a result of such loss, claim, damage, liability
or expense in such proportion as is appropriate to
reflect not only the relative benefits received by
the Company and its affiliates, on the one hand, and
the Sales Agent and the Sales Agent Indemnified
Party, on the other hand, but also the relative
fault of the Company and its affiliates and the
Sales Agent or any Sales Agent Indemnified Party, as
the case may be, as well as any other relevant
equitable considerations; provided, however, that in
no event shall the Sales Agent be required to
contribute any amount in excess of any fees paid to
it pursuant to Section 7 above.
(d) The reimbursement, indemnity and contribution by the
Company or the Sales Agent hereunder shall be in
addition to any liability which any party may
otherwise have, and shall be binding upon and accrue
to the benefit of any successors, assigns, heirs and
personal representatives of the Company, and any
Sales Agent Indemnified Party. The foregoing
provisions relating to reimbursement,
indemnification and contribution shall survive any
termination of the Sales Agent's engagement under
this Agreement, but shall be superseded in their
entirety by the corresponding provisions of any
Agency Agreement signed by the Company and BSFS, and
the parties agree that the Agency Agreement will
contain mutual indemnification provisions customary
in securities offerings.
10. CONDITIONS. The Sales Agent's willingness and obligation to
proceed hereunder shall be subject to, among other things, satisfaction of the
following conditions in the Sales Agent's opinion, which opinion shall have
been formed in good faith by the Sales Agent after reasonable determination and
consideration of all relevant factors: (a) full and satisfactory disclosure of
all relevant material, financial and other information in the disclosure
documents; (b) no material adverse change in the condition of the Company
subsequent to the Sales Agent's due diligence review; (c) no market conditions
at the time of the Offering which in the Sales Agent's opinion makes the sale
of the common stock by the Company inadvisable; and (d) the execution of a
Sales Agency Agreement by the parties hereto.
11. BENEFIT. No party to this Agreement may assign its duties and
obligations hereunder without the prior written consent of the other party.
This Agreement shall inure to the benefit of the. parties hereto and their
respective successors and assigns and to the parties indemnified hereunder and
their successors and assigns, and the obligations and liabilities assumed
hereunder by the parties hereto shall be binding upon their respective
successors and assigns.
<PAGE> 6
First Capital Bancshares, Inc. (Proposed)
December 21, 1998
Page 6
12. TERMINATION. This Agreement may be terminated by either party
hereto with written notice, without any further obligation, other than for the
payment of any fees specifically set forth herein. If terminated, all fees paid
previously will be deemed to have been earned when paid, except that the $5,000
allowance under Section 8 will be reimbursed to the company to the extent that
BSFS has not actually incurred out of pocket expenses
13. GOVERNING LAW/VENUE/ARBITRATION. In case of a dispute under
this Agreement, it shall be governed by the laws of the State of Ohio. Any and
all disputes arising out of or in connection with this Agreement shall be
submitted to arbitration, and finally settled, under the Rules of the American
Arbitration Association ("AAA") by one arbitrator appointed in accordance with
such Rules. Any such arbitration shall be conducted in Columbus, Ohio. Each
party to this Agreement shall be bound by the result of such arbitration. Each
party shall bear its own expenses relating to such disputes or disagreements so
arbitrated, and the parties hereto shall share equally the fees and charges of
the arbitrator for conducting such arbitration. Such arbitration shall be
governed by the Federal Arbitration Act, 9 U.S.C. Section I et seq.: provided,
however, that the substantive law of the State of Ohio shall govern any and all
such disputes. The patties agree that any action to confirm an arbitration
award shall be brought in any competent court in Columbus, Ohio, and that such
court may enforce or compel compliance with such award.
The foregoing reflects BSFS's intention of proceeding to work
with the Company on its proposed Offering. It does not constitute an agreement
to underwrite securities or to serve as sales or marketing agent to the
Company, or to perform any other service, nor is it an agreement to enter into
any such agreement or a representation that market conditions will support an
offering of the Company's securities. Such obligations will be included and
specifically set forth in the Sales Agency Agreement which the parties hereto
intend to negotiate. It also does not constitute a commitment on the part of
the Company or BSFS, except as to the payment of certain fees as set forth in
Section 7, the assumption of expenses as set forth in Section 8, and
indemnification as set forth in Section 9, all of which shall constitute the
binding obligations of the parties hereto and which shall survive the
termination of this Agreement or the completion of the services furnished
hereunder and shall remain operative and in full force and effect. It is
further understood that any report or analysis rendered by BSFS pursuant to
this engagement is rendered for use solely by the management of the Company and
its agents in connection with the Offering. Accordingly, you agree that you
will not provide any such information to any other person without BSFS's prior
written consent. BSFS acknowledges that in offering the Company's securities,
no person will be authorized to give any information or to make any
representation not contained in the Prospectus and related offering materials
to be filed as part of the Registration Statement to be declared effective in
connection with the Offering. Accordingly, BSFS agrees that in connection with
the Offering, it will not give any unauthorized information or make any
unauthorized representation. We will be pleased to elaborate on any of the
matters discussed in this Agreement at your convenience.
<PAGE> 7
First Capital Bancshares, Inc. (Proposed)
December 21, 1998
Page 7
If the Company and/or the shareholders of the Company sell or agree to
sell (i) debt or equity securities to another corporation, person, or entity
representing (on an as converted basis, if applicable) more than 25% of the
Company's outstanding capital stock, or (ii) assets representing more than 25%
of the value of the Company's assets, in either case in one or a series of
transactions by means of an exchange or tender offer, purchase of assets,
merger, consolidation, or similar transaction, the Company shall retain BSFS
Financial Services, Inc. as financial advisors with respect to the transaction
pursuant to the terms of a customary agreement, including normal and customary
fees for such a transaction. The provisions of this Paragraph shall survive for
24 months following the earlier to occur of the closing of the proposed
offering and the date the Company notifies BSFS Financial Services, Inc. in
writing of its cancellation of the proposed offering.
If the foregoing correctly sets forth our mutual understanding, please
so indicate by signing and returning the original copy of this Agreement to the
undersigned with a check in the amount of $5,000 payable to BSFS Financial
Services, Inc.
Sincerely,
BANC STOCK FINANCIAL SERVICES, INC.
By: /s/ Michael E. Guirlinger
------------------------------------
Michael E. Guirlinger/Vice President
Agreed to:
FIRST CAPITAL BANCSHARES, INC. (PROPOSED)
By: /s/ J. Aubrey Crosland Date: December 22, 1998
------------------------------------------------ -----------------
J. Aubrey Crosland
Its: President and Chief Executive Officer
<PAGE> 1
EXHIBIT 23.1
TOURVILLE, SIMPSON & HENDERSON
CERTIFIED PUBLIC ACCOUNTANTS
1615 Pickens Street
Columbia, South Carolina 29202
(803) 252-3000
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
We hereby consent to the incorporation by reference of our report dated
November 30, 1998, relating to the financial statements of First Capital
Bancshares, Inc., in the Registration Statement on Form SB-2, filed by First
Capital Bancshares, Inc. on December 22, 1998, and to the reference to our firm
therein under the caption, "Experts."
TOURVILLE SIMPSON AND HENDERSON
By: /s/ William E. Tourville
------------------------------
William E. Tourville
Columbia, South Carolina
December 21, 1998
