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As filed with the SEC on March 3, 1999
Registration No. 333-70589
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 2
FORM SB-2
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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NEW COMMERCE BANCORP
(Exact name of registrant as specified in its charter)
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South Carolina 6021 58-2403844
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(State or other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
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P. O. Box 129
Mauldin, South Carolina 29662
(864) 239-0616
(Address and Telephone Number of Intended Principal Place of Business)
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James D. Stewart
Chief Executive Officer
1 Five Fork Plaza Court
Simpsonville, South Carolina 29681
(864) 288-3337
(Name, Address, and Telephone Number of Agent For Service)
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Copies of all communications, including copies
of all communications sent to agent for
service, should be sent to:
Neil E. Grayson, Esq.
C. Russell Pickering, Esq.
Nelson Mullins Riley & Scarborough, L.L.P.
999 Peachtree Street, N.E., Suite 1400
Atlanta, Georgia 30309
(404) 817-6000
(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 of 1933, check the following
box and list the Securities Act of 1933 registration statement number of the
earlier effective registration statement for the same offering. |_|
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If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act of 1933 registration statement number of the earlier effective
registration statement for the same offering. |_|
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If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act of 1933, check the following box and list the
Securities Act of 1933 registration statement number of the earlier effective
registration statement for the same offering. |_|
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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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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 FEE
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Common Stock, $.01 par value.... 800,000 $10.00 $8,000,000 $2,224*
* previously paid
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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.
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The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the SEC is
effective. This prospectus is not an offer to buy these securities in any state
where the offer or sale is not permitted.
THIS IS A PRELIMINARY PROSPECTUS AND IS NOT YET COMPLETE. MARCH 3, 1999
NEW COMMERCE BANCORP
[INSERT COMPANY LOGO HERE]
800,000 Shares of Common Stock
$10.00 per share
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We are offering shares of common stock of New Commerce BanCorp to fund
the start-up of a new bank named New Commerce Bank. We will be the sole owner of
New Commerce Bank, which will be headquartered in Greenville County, South
Carolina. We expect the bank to open in the second quarter of 1999. New Commerce
Bank will provide a full range of commercial and consumer banking services to
individuals and small- to medium-sized businesses. This is our first offering of
stock to the public and there is no public market for our shares. The shares
will not be listed on Nasdaq or any national exchange.
The shares will be sold primarily by our officers and directors and by
our exclusive sales agent, J.C. Bradford & Co. J.C. Bradford has agreed to use
its best efforts to sell at least 100,000 of the shares offered, and may sell up
to 400,000 shares. We will pay the sales agent $0.57 for each share it sells.
The minimum purchase requirement is 100 shares.
The offering is scheduled to end on June 30, 1999, but we may extend
the offering until February 1, 2000, at the latest. All of the money which we
receive will be placed with an independent escrow agent who will hold the money
until (1) we sell at least 550,000 shares and (2) we receive preliminary
approval from our bank regulatory agencies for the new bank. If we do not
succeed before the end of the offering period, we will return all funds received
to the subscribers promptly, without interest.
This table summarizes the offering and the amounts we expect to
receive. The commissions shown are the maximum we expect to pay to the sales
agent.
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Minimum Total Maximum Total
Per Share 550,000 Shares 800,000 Shares
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Public Offering Price............... $10.00 $5,500,000 $8,000,000
Sales Agency Commissions ........... 0.57 228,000 228,000
Proceeds to New Commerce ........... 9.43 5,272,000 7,772,000
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THIS IS A NEW BUSINESS. AS WITH ALL NEW BUSINESSES, AN INVESTMENT WILL
INVOLVE RISKS. IT IS NOT A DEPOSIT OR AN ACCOUNT AND IS NOT INSURED BY THE FDIC
OR ANY OTHER GOVERNMENT AGENCY. YOU SHOULD NOT INVEST IN THIS OFFERING UNLESS
YOU CAN AFFORD TO LOSE YOUR ENTIRE INVESTMENT. SOME OF THE RISKS OF THIS
INVESTMENT ARE DESCRIBED UNDER THE HEADING "RISK FACTORS" BEGINNING ON PAGE 6.
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR
DISAPPROVED THESE SECURITIES OR DETERMINED WHETHER THIS PROSPECTUS IS TRUTHFUL
OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
MARCH ____, 1999
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TABLE OF CONTENTS
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Page
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Summary .......................................................................... 3
Risk Factors...................................................................... 6
The Offering...................................................................... 10
Use of Proceeds .................................................................. 13
Capitalization.................................................................... 15
Dividend Policy .................................................................. 16
Plan of Operation................................................................. 16
Proposed Business................................................................. 18
Supervision and Regulation........................................................ 24
Management........................................................................ 31
Description of Capital Stock of New Commerce BanCorp.............................. 37
Legal Matters..................................................................... 40
Experts........................................................................... 40
Additional Information ........................................................... 40
Index to Financial Statements .................................................... F-1
Subscription Agreement............................................................ A-1
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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT. WE HAVE NOT
AUTHORIZED ANYONE TO GIVE ANY INFORMATION THAT IS DIFFERENT. THIS PROSPECTUS IS
NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY
THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. THE
INFORMATION IN THIS PROSPECTUS IS COMPLETE AND ACCURATE AS OF THE DATE ON THE
COVER, BUT THE INFORMATION MAY CHANGE IN THE FUTURE.
UNTIL ____________________, ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO
DELIVER A PROSPECTUS.
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SUMMARY
This summary highlights information contained elsewhere in this
prospectus. Because it is a summary, it may not contain all of the information
about the offering that is important to you. We encourage you to read the entire
prospectus carefully before investing.
New Commerce BanCorp is raising capital in this offering to open New
Commerce Bank. The bank will be a new locally owned and operated bank in the
"Golden Strip" area of Greenville County, South Carolina, which includes
Simpsonville, Mauldin, Fountain Inn and the unincorporated areas of Enoree and
Southside. Our initial offices will be in Simpsonville and Mauldin, South
Carolina. The bank will be a nationally chartered bank and member of the Federal
Reserve System with deposits insured by the FDIC. We expect the bank will
receive its final regulatory approvals and open for business in the second
quarter of 1999. Our principal executive offices are located at:
1 Five Fork Plaza Court
Simpsonville, South Carolina 29681
Telephone: (864) 288-3337
Fax: (864) 288-0032
REASONS FOR STARTING NEW COMMERCE BANK
The current trend of consolidation in the banking industry has led to
the acquisition of several locally owned banks in Greenville County and the
Golden Strip Area of South Carolina by regional and national banks. This
includes the recent purchase by large out-of-state banks of three of the
remaining local banks in the Greenville County area. As a result, we believe
this area will support a new local bank. We will emphasize our local ownership
and management and our strong ties to the Golden Strip and Greenville County
community. Our customers will consist primarily of individuals and small- to
medium-sized businesses. We intend to offer general commercial and consumer
banking services, with a focus on personalized service and local
decision-making.
BOARD OF DIRECTORS AND MANAGEMENT
New Commerce BanCorp was founded by the following twelve business
leaders who live in the Golden Strip area, and who, with the exception of Mr.
Few, will also serve as our initial board of directors:
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Richard W. Bailey Tommy D. Greer
Timothy A. Brett Bobby L. Johnson
Marshall J. Collins, Jr. Robert Thomas Kellett
Ralph S. Crawley Dennis O. Raines
Richard L. Few, Jr. Curran A. Smith
G. Mitchell Gault James D. Stewart
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Our experienced management team consists of the following individuals:
- James D. Stewart will lead the management teams for both New
Commerce BanCorp and New Commerce Bank as president and chief
executive officer. He has over 20 years of banking experience,
including more than five years in the Greenville County and
Golden Strip area. Until Mr. Stewart resigned to begin
preparations to open New Commerce Bank, he served as the
Greenville city executive for BB&T.
- Paula S. King will be a senior vice president and the chief
financial officer for both New Commerce BanCorp and New
Commerce Bank. She is a CPA and has over 15 years of
experience in the financial services industry and was most
recently the senior vice president and controller of
Greenville National Bank. She is a native of Greenville.
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- Bradley J. Schneider will be the senior vice president of
general banking for the bank. He has 14 years of experience in
the financial services industry, most recently as the vice
president for commercial lending with BB&T in the Golden Strip
and Greenville County area.
- David E. Burgess will be a vice president and senior credit
officer of the bank. He has 29 years of experience in banking
in lending and credit administration. He was most recently the
vice president of commercial lending for American Federal Bank
in the Golden Strip area and prior to that served as an
executive vice president and the chief credit officer for The
Palmetto Bank.
TOTAL FUNDS TO BE RAISED IN THE OFFERING
These twelve founding shareholders recently invested $2 million to help
start New Commerce. We believe that banking regulators will require us to have
at least $7 million in capital to open the bank. Therefore, we are seeking to
raise at least another $5.5 million in this offering. We will use $7 million to
fund the bank and the remaining funds to cover expenses and use as working
capital. We hope to raise these funds primarily from individuals and businesses
in Greenville County who share our desire to support a new local community bank
in the Golden Strip area.
THE OFFERING
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Common stock offered................ Minimum: 550,000 shares
Maximum: 800,000 shares
Common stock outstanding
prior to this offering......... 200,000 shares
Common stock to be outstanding
after the offering ............ Minimum: 750,000 shares
Maximum: 1,000,000 shares
Offering price per share............ $10.00
Use of proceeds..................... We will use the $2.0 million invested by our
founding shareholders plus $5.0 million of
the first $5.5 million we raise in this
offering to capitalize New Commerce Bank. We
will also use 50% of the remaining net
proceeds we raise in this offering as
additional capital for the bank. We will use
the remaining proceeds to pay expenses and
provide working capital.
New Commerce Bank will use the funds it
receives from New Commerce BanCorp to pay
expenses, to purchase the sites of its
initial offices, to build and furnish its
offices, and to provide working capital to
operate the bank. See "Use of Proceeds" on
page 13.
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FUNDS RECEIVED WILL BE PLACED IN ESCROW
Because we cannot open the bank without regulatory approvals, we will
place all the proceeds from outside investors in this offering with The Bankers
Bank acting as an independent escrow agent. The escrow agent will hold these
funds until we raise at least $5.5 million and obtain preliminary regulatory
approval to open the bank. We have already received the preliminary approval of
the Office of the Comptroller of the Currency, and have filed an application for
deposit insurance with the FDIC and an application with the Federal Reserve for
New Commerce BanCorp to own New Commerce Bank. We expect to receive all
preliminary regulatory
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approvals by the end of the second quarter of 1999 or sooner. We currently
intend to close the offering on June 30, 1999, but may extend the offering up to
February 1, 2000. If we fail to meet these conditions by the close of the
offering, we will refund your subscription in full and will use the investments
by our founding shareholders to pay expenses and liquidate the company.
SHARES WILL BE SOLD BY OFFICERS AND DIRECTORS AND A SALES AGENT
Our founding shareholders will handle the sale of most of the shares in
this offering. New Commerce will not pay them any fees or commissions for their
efforts. Additionally, we have engaged J.C. Bradford & Co. as our sales agent to
use its best efforts to sell a minimum of 100,000, and up to 400,000 shares. We
will pay J.C. Bradford a commission of $0.57 for each share it sells.
SHARE PRICE WILL BE $10.00
Investors in this offering will pay the same price per share for their
stock, $10.00, that our twelve founding shareholders paid. This price was
arbitrarily set at the time that the company was formed. However, in recognition
of our founders' efforts and the financial risks they are incurring to open the
bank, New Commerce will also grant to each founding shareholder a warrant to
purchase 7,500 additional shares of common stock at $10.00 per share,
exercisable for ten years after the completion of this offering.
WE DO NOT PLAN TO PAY DIVIDENDS
Because we are a new business, we will not pay dividends in the
foreseeable future. We intend to use all available earnings to fund the
continued operation and growth of the business and the bank.
LOCATION OF OFFICES
Our initial office is locate in a temporary facility at 1 Five-Fork
Plaza Court near the intersection of Batesville Road and Woodruff Road in
Simpsonville, South Carolina. We have already purchased this property at a total
cost of approximately $450,000. We plan to open this office in the second
quarter of 1999. We plan to build our permanent facility at Brookfield Parkway
and East Butler Road near I-385 in Mauldin, South Carolina. This will become our
main office when it opens, which we expect to be in the third quarter of 1999.
We then plan to build a permanent facility in Simpsonville on the same site as
our current temporary facility. This will become a branch of the main office in
Mauldin. We expect to complete the permanent Simpsonville facility in the fourth
quarter of 1999.
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RISK FACTORS
The following is a summary of some of the risks which we will encounter
in starting and operating the new bank. There may be other risks which we have
not listed or which we cannot predict. Please read the entire prospectus for a
more thorough discussion of these risks and others.
WE ARE A NEW BUSINESS AND CANNOT PREDICT WHETHER WE WILL BE SUCCESSFUL.
Neither New Commerce nor New Commerce Bank has any operating history.
The operations of new businesses are always risky. Because New Commerce Bank has
not yet opened, we do not have historical financial data and similar information
which would be available for a financial institution that has been operating for
several years.
WE EXPECT TO INCUR LOSSES FOR AT LEAST TWO YEARS AND CANNOT PREDICT WHETHER WE
WILL EVER BECOME PROFITABLE.
In order for us to become profitable, we will need to attract a large
number of customers to deposit and borrow money. This will take time. We expect
to incur large initial expenses and may not be profitable for several years.
Although we expect to become profitable in our second year, there is a risk that
we may never become profitable and that you will lose part or all of your
investment.
WE CANNOT OPEN THE BANK FOR BUSINESS UNTIL WE RECEIVE REGULATORY APPROVALS WHICH
ARE AT THE DISCRETION OF OUR REGULATORY AGENCIES.
We cannot begin operations until we receive all required regulatory
approvals. We will not receive these approvals until we satisfy certain rules
and requirements for new banks imposed by state and federal regulatory agencies.
We believe one requirement will be that we have at least $7 million to
capitalize the bank. We expect to satisfy these requirements and obtain all
necessary approvals by the second quarter of 1999, but it may take longer.
Because we cannot open the bank without regulatory approvals, to reduce the
risks to investors in this offering we will place all the proceeds from outside
investors in escrow as described in the summary.
WE WILL DEPEND HEAVILY ON MR. STEWART AND OUR BUSINESS WOULD SUFFER IF SOMETHING
WERE TO HAPPEN TO HIM OR IF HE WERE TO LEAVE.
James D. Stewart will be our president and chief executive officer. Mr.
Stewart will provide valuable services to us, and he would be difficult to
replace. We have an employment agreement with Mr. Stewart and carry $500,000 of
life insurance payable to the bank. Nevertheless, if he were to leave, our
business would suffer.
THE OFFERING PRICE OF $10.00 WAS DETERMINED ARBITRARILY AND IT WILL FLUCTUATE
ONCE THE SHARES BECOME FREELY TRADED AFTER THE OFFERING.
Because we are a start-up company and have no historical operations on
which to base the offering price, the market price of the stock after the
offering may be more susceptible to fluctuations than it otherwise might be. The
market price will be affected by our operating results, which could fluctuate
greatly. These fluctuations could result from expenses of operating and
expanding New Commerce Bank, trends in the banking industry, economic conditions
in our market area, and other factors which are beyond our control. If our
operating results are below expectations, the market price of the common stock
would probably fall.
WE WILL NOT HAVE A LARGE NUMBER OF SHAREHOLDERS OR A LARGE NUMBER OF SHARES
AVAILABLE AFTER THE OFFERING, WHICH MAY LIMIT YOUR ABILITY TO SELL OR TRADE THE
SHARES AFTER THE OFFERING.
There is currently no market for our common stock. After the offering,
we anticipate that at least two broker-dealers will match buy and sell orders
for our common stock on the Over-the-Counter Bulletin Board and that bid and ask
quotations on our stock will be displayed on the Electronic Pink Sheet System.
However, we do
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not expect a liquid market for our common stock to develop for several years, if
at all. A public market having depth and liquidity depends on having enough
buyers and sellers at any given time. Because this a relatively small offering,
we do not expect to have enough shareholders or outstanding shares to support an
active trading market.
WE WILL FACE STRONG COMPETITION FOR CUSTOMERS FROM LARGER AND MORE ESTABLISHED
BANKS WHICH COULD PREVENT US FROM OBTAINING CUSTOMERS AND MAY CAUSE US TO HAVE
TO PAY HIGHER INTEREST RATES TO ATTRACT CUSTOMERS.
We will encounter strong competition from existing banks and other
types of financial institutions operating in the Greenville County area and
elsewhere. Some of these competitors have been in business for a long time and
have already established their customer base and name recognition. Most are
larger than we will be and have greater financial and personal resources than we
will have. Some are affiliated with large regional and national banks, like
BB&T, and 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 not depository
institutions are generally not subject to the extensive regulations that will
apply to our bank. See "Proposed Business - Competition" on page 23 and
"Supervision and Regulation" starting on page 24.
A LOCAL OR NATIONAL ECONOMIC DOWNTURN COULD REDUCE OUR CUSTOMER BASE, OUR LEVEL
OF DEPOSITS, AND DEMAND FOR FINANCIAL PRODUCTS SUCH AS LOANS.
We will operate in Greenville County, South Carolina, and in particular
the Golden Strip area, which includes Simpsonville, Mauldin, Fountain Inn, and
the unincorporated areas of Enoree and Southside, South Carolina. While the
economy in this area has been strong in recent years, an economic downturn in
the area would hurt our business.
AS A BANK, OUR PROFITABILITY DEPENDS ON THE INTEREST RATES WHICH WE PAY ON
DEPOSITS AND COLLECT ON LOANS. INTEREST RATES HAVE HISTORICALLY VARIED GREATLY
AND WE CANNOT PREDICT OR CONTROL THEM.
Our profitability depends on the difference between the income we earn
on loans and other assets and the interest we pay on deposits and other
borrowings. This difference is largely determined by interest rates. Interest
rates have historically varied widely and we cannot control or predict them.
Large moves in interest rates may decrease or eliminate our profitability.
WE WOULD SUFFER LOSSES IF OUR BORROWERS DEFAULT ON THEIR LOANS.
There are risks inherent in making all loans, and the risks of loan
defaults by borrowers is unavoidable in the banking business. These risks
include:
- Risks caused by the length of the loan repayment period.
Longer repayment periods carry higher risk because of
increased uncertainty about the future.
- Risks caused by concentrations in types of loans. For
instance, a high percentage of home mortgage loans would be
susceptible to a risk of a drop in the value of real estate.
- Risks caused by changes in the local or national economy or a
downturn for particular industries.
- Risks of nonpayment by individual borrowers.
- Risks resulting from uncertainties about the future value of
collateral used to secure our loans.
Because we will be smaller than most of our competitors, our loan
portfolio will not be as diverse, and these risks will be greater. We will try
to limit our exposure to these risks through prudent lending practices and by
carefully monitoring the amount of loans we make within specific industries, but
we cannot eliminate these
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risks. Substantial credit losses would result in a decrease of our net income or
an increase in our net losses, and they could cause a reduction in the amount of
our bank's capital.
WE MAY NOT BE ABLE TO COMPETE WITH OUR LARGER COMPETITORS FOR LARGER CUSTOMERS
BECAUSE OUR LENDING LIMITS WILL BE LOWER THAN THEIRS.
We will be limited in the amount we can loan a single borrower by the
amount of New Commerce Bank's capital. The legal lending limit is 15% of the
bank's capital and surplus. We expect that our initial legal lending limit will
be approximately $1,000,000 immediately following the offering, but we intend to
impose an internal limit on the bank of 80% of this amount, or approximately
$800,000. Until the bank is profitable, we will lose money, which will decrease
our capital and therefore our lending limit. Our lending limit will be
significantly less than the limit for most of our competitors and may affect our
ability to seek relationships with larger businesses in our market area. We
intend to accommodate larger loans by selling participations in those loans to
other financial institutions.
WE HAVE IMPLEMENTED ANTI-TAKEOVER DEVICES WHICH COULD PREVENT ANOTHER COMPANY
FROM PURCHASING US, EVEN THOUGH SUCH A PURCHASE MAY INCREASE SHARE VALUE.
In many cases, shareholders receive a premium for their shares when a
company is purchased by another. However, state and federal law and our articles
of incorporation and bylaws make it difficult for anyone to purchase New
Commerce without approval of our board of directors. These provisions, which
could make it less likely that a change in control will occur, include:
- Provisions relating to meetings of shareholders which limit
who may call meetings and what matters will be voted upon.
- The ability of the board of directors to issue additional
shares of authorized common stock and preferred stock without
shareholder approval. This could dilute any potential acquirer
attempting to gain control by purchasing New Commerce stock.
- A staggered board of directors, which limits the ability to
change the members of the board.
- A bylaw provision that individuals affiliated with New
Commerce's business competitors may not qualify to serve on
New Commerce's board of directors.
In addition, under South Carolina law no other financial institution
may acquire control of New Commerce until New Commerce has been in existence for
at least five years. For a discussion of some of these provisions, please see
"Description of Capital Stock - Antitakeover Effects" on page 37.
IT IS POSSIBLE THAT OUR COMPUTER SYSTEMS OR THOSE OF OUR PROCESSING VENDORS OR
LOAN CUSTOMERS COULD FAIL TO OPERATE ON JANUARY 1, 2000.
Like many financial institutions, we will rely upon computers for
conducting our business and for information systems processing. There is concern
among industry experts that on January 1, 2000, computers will be unable to read
or interpret the new year and there may be widespread computer malfunctions. We
will generally rely on software and hardware developed by independent third
parties to provide our information systems. We will require warranties about
Year 2000 compliance from all third party hardware and software system providers
we use. To date, we have agreements with Jack Henry & Associates, Inc. to
provide our core data processing software and services, and with CommLink Corp.
to provide our ATM processing services. Our written agreements with each of
these vendors contain comprehensive warranties regarding their Year 2000
capability and compliance. We believe that our other internal systems and
software, including our network connections, will be programmed to comply with
Year 2000 requirements, although there is a risk they may not comply. Based on
information currently available, we have budgeted $12,000 to test our internal
and external systems and review vendor testing and compliance.
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The businesses of many of our customers may also be negatively affected
by the Year 2000 issue. We plan to include Year 2000 criteria in our loan
approval process. We will attempt to identify those business customers with Year
2000 risks and require certification of their Year 2000 compliance programs. It
will be difficult to identify all problems and any financial difficulties
incurred by our customers in solving Year 2000 issues could impair that
customer's ability to repay loans we may have extended.
MANY OF THE STATEMENTS IN THIS PROSPECTUS ARE ABOUT THE FUTURE, WHICH WE CANNOT
PREDICT WITH ANY CERTAINTY.
This prospectus contains certain "forward-looking statements"
concerning New Commerce BanCorp and New Commerce Bank and their operations,
performance, financial conditions, and likelihood of success. These statements
are based on many assumptions and estimates. Our actual results will depend on
many factors about which we are unsure, including those discussed above. Many of
these risks and factors are beyond our control. 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.
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THE OFFERING
GENERAL
We are offering a minimum of 550,000 shares and a maximum of 800,000
shares of our common stock at a price of $10.00 per share to raise between $5.5
million and $8 million. The minimum purchase for any investor is 100 shares and
the maximum purchase is 5% of the offering, although we may accept subscriptions
for more or less.
Prior to this offering, the organizers purchased $2 million worth of
common stock at $10.00 per share to provide initial operating capital. The
organizers do not intend to purchase additional stock in the offering, although
members of their immediate families may. As a result, the organizers will own
approximately 26.7% of the common stock outstanding upon completion of the
offering if we sell the minimum number of 550,000 shares, and 20.0% of the
common stock outstanding upon completion of the offering if we sell the maximum
number of 800,000 shares. Additionally, each of the organizers has received a
warrant to purchase an additional 7,500 shares of common stock at $10.00 per
share, exercisable for ten years after the completion of the offering. If each
organizer exercises his warrant in full, the organizers' ownership of New
Commerce BanCorp will increase to 34.5% based on the minimum offering and 26.6%
based on the maximum offering. Although they have not promised to do so, the
organizers may purchase additional shares in the offering, including up to 100%
of the minimum offering. All shares purchased by the organizers will be for
investment and not intended for resale. Because purchases by the organizers may
be substantial, you should not assume that the sale of a specified minimum
offering amount indicates the merits of this offering.
We must receive your subscription for shares before midnight, Eastern
Standard Time, on June 30, 1999, unless all of the shares are sold earlier or
the offering is terminated or extended. We reserve the right to terminate the
offering at any time or to extend the expiration date up to February 1, 2000.
Extension of the expiration date might cause an increase in our expenses. We do
not have to give you any prior written notice of an extension. If we extend the
offering, subscriptions we have already accepted will still be binding. We do,
however, intend to communicate quarterly with all subscribers and inform you of
any extensions of the offering. Once we are subject to the reporting
requirements of the Securities Exchange Act of 1934, we will file quarterly
reports on Form 10-Q and will make such reports available to shareholders who
request a copy.
Accepted subscriptions will be binding and may not be revoked except
with our consent. We reserve the right to cancel or reject any or all of any
subscription before or after acceptance until the proceeds of this offering are
released from escrow. We may also allocate shares among subscribers if the
offering is oversubscribed; however, we believe that we will not have to adjust
subscribers for the minimum number of shares. In deciding which subscriptions to
accept, we may take into account any factors, including:
- the order in which subscriptions are received,
- a subscriber's potential to do business with or to direct
customers to the bank, and
- our desire to have a broad distribution of stock ownership.
If we reject any subscription, or accept a subscription but subsequently elect
to cancel all or part of such subscription, we will refund the amount remitted
for shares for which a subscription is rejected or canceled. We will issue
certificates for shares which have been subscribed and paid for promptly after
we receive the funds out of escrow.
CONDITIONS TO THE OFFERING AND RELEASE OF FUNDS
We will place all subscription proceeds with an independent escrow
agent. The escrow agent will hold these funds, and no shares will be issued,
until:
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<PAGE> 12
- We have accepted subscriptions and payment in full for a
minimum of 550,000 shares at $10.00 per share;
- We have obtained approval from the Federal Reserve and the
South Carolina State Board of Financial Institutions for New
Commerce BanCorp to acquire the stock of the bank; and
- We have received preliminary approval of the bank's
application for deposit insurance from the FDIC.
If New Commerce BanCorp terminates the offering or if the offering period
expires before these conditions are satisfied, then:
- We will cancel accepted subscription agreements and
subscribers in the offering will not become shareholders;
- The funds held in the escrow account will not be subject to
the claims of any of our creditors or available to defray the
expenses of this offering;
- We will return the full amount of all subscription funds
promptly to subscribers, without interest; and
- We will retain any interest earned on subscriptions to repay
the expenses incurred in organizing the bank.
The escrow agent has not investigated the desirability, advisability,
or merits of a purchase of the shares. The escrow agent will invest escrowed
funds in interest-bearing savings accounts, short-term United States Treasury
securities, FDIC-insured bank deposits, or such other investments as we agree on
with the escrow agent. We 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 the funds are released but we do not receive final regulatory approval to
operate the bank, or if the bank does not open for any other reason, our board
of directors intends to propose that the shareholders approve a plan to
liquidate New Commerce BanCorp. New Commerce BanCorp would be dissolved and New
Commerce BanCorp's net assets, consisting primarily of the funds received in
this offering less the costs and expenses we have incurred, would be distributed
to the shareholders other than the organizers, who will not receive any
distribution until all other shareholders have received their initial
investments. If our expenses exceed $2 million, subscribers may not receive all
of their funds, although this is unlikely.
PLAN OF DISTRIBUTION
Offers and sales of the common stock will be made primarily by our
officers and directors, who will be reimbursed for their reasonable expenses but
will not receive commissions or other remuneration. New Commerce BanCorp
believes such officers and directors will not be deemed to be brokers and/or
dealers under the Securities Exchange Act of 1934 due to Rule 3a4-1.
We have also entered into an agreement with J.C. Bradford & Co. to sell
up to 400,000 of the shares offered. New Commerce BanCorp must reserve a minimum
of 100,000 shares for sale by the sales agent, who is required to use its best
efforts through the expiration date to sell the shares. The sales agent will
receive a commission of $0.57 on each share it sells. The sales agent did not
receive any commission on the shares purchased by the organizers prior to the
offering and will not receive commissions on sales made by the officers or
directors of New Commerce BanCorp.
The sales agency agreement provides for reciprocal indemnification
between New Commerce BanCorp and the sales agent against certain liabilities in
connection with this offering, including liabilities under the
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<PAGE> 13
Securities Act of 1933. The SEC has advised us that it believes such
indemnification is against public policy as expressed by the Securities Act of
1933 and is, therefore, unenforceable.
Prior to this offering there has been no public market for the shares.
We established the initial offering price of the shares based upon our
assessment of the capital needs of New Commerce BanCorp and the commercial
potential of the services to be offered by New Commerce Bank. We have discussed
the establishment and maintenance of a market for the shares after the offering
with the sales agent. Based upon such discussions, we expect that a secondary
market may eventually develop for the shares, although we can not be sure. In
general, if a secondary market develops, the shares other than those held by
affiliates will be freely transferable and assignable in such secondary market.
See "Description of the Capital Stock of New Commerce BanCorp - Shares Eligible
for Future Sale" on page 38. Once a secondary market is established, the market
makers may or may not continue to maintain the secondary market, based on
factors such as the degree to which the secondary market is active.
HOW TO SUBSCRIBE
If you desire to purchase shares of the common stock of New Commerce
BanCorp, you should:
1. Complete, date, and execute the subscription agreement which
you received with this prospectus;
2. Make a check, bank draft, or money order payable to "The
Bankers Bank, Escrow Account for New Commerce BanCorp," in the
amount of $10.00 times the number of shares you wish to
purchase; and
3. Deliver the completed subscription agreement and check to New
Commerce BanCorp or the sales agent at the following address:
<TABLE>
<S> <C>
Mr. James D. Stewart Mr. Carl V. Cline
New Commerce BanCorp or J. C. Bradford & Co.
P.O. Box 129 400 2nd Avenue, N.W.
Mauldin, South Carolina 29662 Post Office Box 3857
Hickory, North Carolina 28603
</TABLE>
If you have any questions about the offering or how to subscribe,
please call Mr. Stewart at (864) 288-3337 (or any of the other organizers) or
Mr. Cline at (704) 322-3410. If you subscribe, you should retain a copy of the
completed subscription agreement for your records. You must pay the subscription
price at the time you deliver the subscription agreement.
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<PAGE> 14
USE OF PROCEEDS
Below, we describe how we intend to use the funds received in this
offering based on our plans and estimates of our start-up expenses. Our actual
expenses may be different. Although we believe that the minimum proceeds of $5.5
million from the offering will satisfy our cash requirements for our first three
years of operation, we cannot be sure. Because we are a new enterprise, we
cannot predict the bank's ability to generate revenue to cover its expenses, and
therefore we cannot predict how we will actually use the proceeds.
The following table shows the expected proceeds from the offering. In
addition to these funds, we have also received $2 million from the sale of
shares to our organizers at the offering price of $10.00 per share. Based on our
assumptions, the gross proceeds, expenses, and net proceeds from the minimum and
maximum offering would be as follows:
<TABLE>
<CAPTION>
Minimum Total Maximum Total
Per Share (550,000 Shares) (800,000 Shares)
<S> <C> <C> <C>
Public Offering Price............ $10.00 $5,500,000 $8,000,000
Sales Agency Commissions......... 0.57 228,000 228,000
Proceeds to New Commerce......... 9.43 5,272,000 7,772,000
</TABLE>
USE OF PROCEEDS BY NEW COMMERCE BANCORP
The following table shows our anticipated use of the proceeds by New
Commerce BanCorp of the offering based on the sale of the minimum number and
maximum number of shares. The gross proceeds shown in the table include $2
million previously received from the organizers. As shown, a minimum of $7
million will be invested in New Commerce Bank. If the total offering proceeds
including the $2 million previously received from the organizers exceed $7.5
million, we will invest 50% of the excess in the bank. New Commerce BanCorp will
keep the proceeds which are not invested in the bank and initially invest them
in United States government securities or deposit them with New Commerce Bank.
In the long-term, we will use these funds for the operational expenses of New
Commerce BanCorp and New Commerce Bank and for other general corporate purposes,
including the provision of additional capital to the bank, if necessary. We may
also use such proceeds to expand, for example by opening additional branches or
acquiring other financial institutions. We do not currently have any definitive
plans for expansion. We have established a line of credit in the amount of
$425,000 at the prime rate with the Bank of Newberry County, although we do not
anticipate using this line of credit.
<TABLE>
<CAPTION>
Minimum Maximum
Offering Offering
550,000 shares 800,000 shares
-------------- --------------
<S> <C> <C>
Gross proceeds from offering.................................. $ 7,500,000 $ 10,000,000
Sales Agent's commission*..................................... (228,000) (228,000)
Expense of organizing New Commerce BanCorp.................... (28,000) (28,000)
Expense of offering........................................... (72,000) (72,000)
Investment in capital stock of the bank....................... $ (7,000,000) $ (8,250,000)
Remaining proceeds............................................ $ 172,000 $ 1,422,000
============== ==============
</TABLE>
* Maximum commission expected to be paid to the sales agent.
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<PAGE> 15
USE OF PROCEEDS BY NEW COMMERCE BANK
The following table shows the anticipated use of the proceeds by New
Commerce Bank. All proceeds received by the bank will be in the form of an
investment in the bank's capital stock by New Commerce BanCorp as described
above. Please note that we intend to enter into sale/leaseback arrangements for
our offices with an option to purchase, which should return a significant amount
of the purchase price for the bank's offices to the bank for use as operating
capital. Furniture, fixtures, and equipment will be capitalized and amortized
over the life of the lease or over the estimated useful life of the asset. These
numbers are estimates only. We cannot assure you that we will open on time or
ever. If the opening of the bank is delayed, our expenses will be substantially
higher.
<TABLE>
<CAPTION>
Minimum Maximum
Offering Offering
550,000 shares 800,000 shares
-------------- --------------
<S> <C> <C>
Investment by New Commerce BanCorp in the bank's
capital stock........................................ $ 7,000,000 $ 8,250,000
Organizational and pre-opening expenses of the bank..... (352,700) (352,700)
Furniture, fixtures and equipment....................... (382,700) (382,700)
Lease of temporary facilities*.......................... (31,000) (31,000)
Purchase of bank sites.................................. (1,141,000) (1,141,000)
Construction of bank offices............................ (1,820,000) (1,820,000)
Remaining proceeds...................................... $ 3,272,600 $ 4,522,600
============ ============
</TABLE>
* Reflects lease of temporary facilities for 10 months at a rate of
$3,100 per month.
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<PAGE> 16
CAPITALIZATION
The following table shows New Commerce BanCorp's capitalization as of
December 31, 1998 and the pro forma consolidated capitalization of New Commerce
BanCorp and the bank as adjusted to give effect to the sale of the minimum and
maximum number of shares. All numbers reflect the initial investment by the
organizers of $2 million. The additional paid in capital section shows capital
to be received in the offering for the minimum and maximum offerings, less the
sales agent commissions and expenses of the offering which are charged against
this account. The "As Adjusted" column reflects the estimated cost of organizing
New Commerce BanCorp and organizing and preparing to open New Commerce Bank
through the expected opening date, which should be in the second quarter of
1999. See "Use of Proceeds" above.
Please note that you will probably experience additional dilution due
to operating losses expected during the initial years of the our operations.
<TABLE>
<CAPTION>
As Adjusted As Adjusted
For for
December 31, Minimum Maximum
1998 Offering Offering
------------ ----------- ------------
<S> <C> <C> <C>
SHAREHOLDERS EQUITY:
Common Stock, par value $.01 per share; 10,000,000
shares authorized; 200,000 issued and
outstanding(1); 750,000 shares issued and
outstanding as adjusted (minimum offering);
1,000,000 shares issued and outstanding (maximum
offering)......................................... 2,000 7,500 10,000
Preferred Stock, par value $.01 per share; 10,000,000
shares authorized; no shares issued and outstanding... 0 0 0
Additional paid-in capital........................... 1,998,000 7,192,300 9,689,800
Deficit accumulated during the pre-opening stage..... (46,524) (450,000) (450,000)
------------ ------------- --------------
Total shareholders' equity (deficit).............. $ 1,953,476 $ 6,742,300 $ 9,239,800
=========== ============ =============
</TABLE>
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<PAGE> 17
DIVIDEND POLICY
We expect to initially retain all earnings to operate and expand the
business. It is unlikely that we will pay any cash dividends in the near future.
Our ability to pay any cash dividends will depend primarily on New Commerce
Bank's ability to pay dividends to New Commerce BanCorp, which depends on the
profitability of the bank. In order to pay dividends, the bank must comply with
the requirements of all applicable laws and regulations. See "Supervision and
Regulation - The Bank - Dividends" on page 25 and "Supervision and Regulation
The Bank - Capital Regulations" on page 26. In addition to the availability of
funds from the bank, our dividend policy is subject to the discretion of our
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
GENERAL
New Commerce BanCorp was formed to organize and own all of the capital
stock of New Commerce Bank. The organizers filed an application with the Office
of the Comptroller of the Currency on October 26, 1998 to charter the bank as a
national bank. Whether the charter is issued will depend, among other things,
upon compliance with legal requirements imposed by the Office of the Comptroller
of the Currency, including capitalization of the bank with at least a specified
minimum amount of capital which we believe will be $7 million. Additionally, we
must obtain the approval of the Federal Reserve to become a bank holding company
before acquiring the capital stock of the bank, and the approval of the FDIC to
receive federal deposit insurance. We expect to receive all regulatory approvals
in the second quarter of 1999.
EXPENSES
As of December 31, 1998, New Commerce BanCorp had total assets of
$1,953,476, consisting of cash ($1,762,031), deferred organization costs
($143,427), real estate options ($39,800) and fixed assets ($8,218). New
Commerce BanCorp incurred a net loss of $46,524 for the period from its
inception on July 17, 1998 through December 31, 1998.
On completion of the offering and opening of the bank, we expect we
will have incurred the following expenses:
- $228,000 in commissions to the sale agent, which will be
deducted from the proceeds of the offering.
- $72,000 in other expenses of the offering, which will be
subtracted from the proceeds of the offering.
- $28,000 in expenses of organizing New Commerce BanCorp, which
will be charged against the income of New Commerce BanCorp.
- $352,700 in expenses to organize and prepare to open New
Commerce Bank, consisting principally of salaries, overhead
and other operating costs, will be charged against the income
of New Commerce Bank.
- $450,000 for the purchase of property.
OFFICES AND FACILITIES
The bank's initial office will be located in a temporary facility at 1
Five Fork Plaza Court near the intersection of Batesville Road and Woodruff Road
in Simpsonville, South Carolina. We have already purchased this property at a
total cost of $450,000. We intend to complete a 3,000 square foot permanent
branch facility at this location at a projected cost of $427,000. We also
entered into an agreement in January of 1999 to purchase property in Mauldin,
South Carolina near the intersection of Brookfield Parkway and East Butler Road
for $691,000. We intend to build a 10,000 square foot permanent main office at
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<PAGE> 18
this location at a projected cost of $1.4 million. We hope to complete both
permanent facilities prior to the end of 1999. Upon completion of the bank's
offices, the bank intends to enter into sale/leaseback arrangements for the
offices with an option to purchase, which should return to the bank a
significant amount of the cash used to purchase the bank sites and construct its
offices for use as operating capital.
We believe that the facilities will adequately serve the bank's needs
for its first several years of operation.
YEAR 2000 ISSUES
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 Jack Henry & Associates, Inc. to
provide our core data processing software and services and with CommLink Corp.
to provide ATM services. We plan to request and review testing and results from
each of our vendors demonstrating Year 2000 readiness and compliance. We have
prepared a comprehensive Year 2000 Plan. We have budgeted $12,000 for Year 2000
testing and vendor monitoring. We have appointed our chief financial officer and
vice president of operations to implement the plan with oversight from our board
of directors. The plan involves investigation of each vendor, validation of each
vendors testing procedures and results, testing on our own systems if
reasonable, and receiving Year 2000 warranties from each of our selected
vendors. Based on our preliminary review of each vendor, we do not believe that
any of them have any significant Year 2000 problems. Our agreements with each
vendor include warranties regarding Year 2000 compliance, although the remedies
available under such agreements include standard disclaimers of liability and
specifically exclude special, incidental, indirect, and consequential damages.
Our customers may also have Year 2000 issues. We may incur losses if
such issues affect our loan customer's ability to repay their loans or if they
suffer material harm to their businesses as a result. We intend to require
certification from each commercial borrower that their systems are Year 2000
compliant and that they do not expect to be adversely affected by the year
change. Although these certifications will be helpful, it would be very
difficult for us to accurately assess the Year 2000 readiness of any borrower.
We may therefore suffer loan losses from customers who have significant Year
2000 problems.
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<PAGE> 19
PROPOSED BUSINESS
GENERAL
We incorporated New Commerce BanCorp as a South Carolina corporation in
July 1998, primarily to function as a holding company to own and control all of
the capital stock of New Commerce Bank. We initially will engage in no business
other than owning and managing the bank.
We have chosen this holding company structure because we believe it
will provide flexibility that would not otherwise be available. Subject to
Federal Reserve Board debt guidelines, the holding company structure can assist
the bank in maintaining its required capital ratios by borrowing money and
contributing the proceeds to the bank as primary capital. Additionally, a
holding company may engage in certain non-banking activities that the Federal
Reserve Board has deemed to be closely related to banking. Although we do not
presently intend to engage in other activities, we will be able to do so with a
proper notice or filing to the Federal Reserve if we believe that there is a
need for these services in our market area and that such activities could be
profitable.
We are organizing the bank as a national bank under the laws of the
United States and, subject to regulatory approval, will engage in a commercial
and consumer-banking business with deposits insured by the FDIC. The bank may
not commence business until the Office of the Comptroller of the Currency issues
a charter for the bank and the FDIC grants deposit insurance to the bank. We
cannot be sure that the bank will receive regulatory approval or satisfy any
conditions that may be imposed by the Office of the Comptroller of the Currency
or the FDIC to commence its business.
MANAGEMENT
We have retained an experienced management team with many years of
banking experience. Each officer has at least 10 years of experience in the
financial services industry and strong ties and local experience in the bank's
primary market area. Our management team consists of the following individuals:
- James D. Stewart will lead the management teams for both New
Commerce BanCorp and New Commerce Bank as their president and
chief executive officer. He has over 20 years of banking
experience, including more than five years in the Greenville
area. Until Mr. Stewart resigned to begin preparations to open
New Commerce Bank, he served as the Greenville city executive
for BB&T.
- Paula S. King will be a senior vice president and the chief
financial officer for both New Commerce BanCorp and New
Commerce Bank. She is a CPA and has over 15 years of
experience in the financial services industry and was most
recently the senior vice president and controller of
Greenville National Bank. She is a native of Greenville.
- Bradley J. Schneider will be the senior vice president of
general banking for the bank which includes consumer and
commercial banking. He has 14 years of experience in the
financial services industry, most recently as the vice
president for commercial lending with BB&T in Greenville.
- David E. Burgess will be a vice president and senior credit
officer of the bank. He has 29 years of experience in banking
in lending and credit administration. He was most recently the
senior vice president of commercial lending for American
Federal Bank in Greenville and prior to that served as an
executive vice president and the chief credit officer for The
Palmetto Bank.
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<PAGE> 20
SERVICE AREA
We expect initially to draw a large percentage of our business from the
cities of Simpsonville, Mauldin, Fountain Inn, and the unincorporated areas of
Enoree and Southside, which are located in the southern portion of Greenville
County. This area is known locally as the "Golden Strip" and is bound by
Interstate 85 to the north, Highway 25 to the west, Laurens County to the south,
and Spartanburg County to the east.
This area's median household income, household growth, and population
growth trends have consistently outpaced Greenville County and the State of
South Carolina. This area will benefit from the location of the Southern
Connector, and is the home for BI-LO, a grocery store chain, and Kemet
Electronics. We will also leverage existing contacts and relationships with
individuals and companies known to management outside of the Golden Strip,
primarily in Greenville.
MARKETING FOCUS
Most of the banks in the Greenville 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 of
Greenville County, we believe that there is a void in the community banking
market in the Golden Strip and Greenville County area and believe that the bank
can successfully fill this void. We will not compete with large institutions for
the primary banking relationships of large corporations, but will compete for
niches in this business and for the consumer business of their employees. We
will also focus on small to medium businesses and their employees. This includes
retail, service, and wholesale distribution, manufacturing, and international
businesses.
We plan to advertise to emphasize our local ownership, community focus,
and ability to provide more personalized service than our competition. We will
also have the ability to offer large bank services. The organizers are long-time
residents and business people in the target market area and have determined the
credit needs of the area through personal experience and communications with
their business colleagues. We believe that the proposed community focus of the
bank will succeed in this market and that the area will react favorably to the
bank's emphasis on service to small businesses, individuals, and professional
concerns.
A high percentage of the banks in the Golden Strip have headquarters
outside of the county. This trend has continued with the announcements in late
1997 and 1998 of three more local area banks agreeing to be purchased by out of
state banks. Despite the dominance of larger national and regional banks,
community banks in the Golden Strip have shown a higher 5-year average growth
rate in deposits and market share for all financial institutions according to
the FDIC deposit and market share results through June 1998.
While we have no immediate plans to do so, we may take advantage of the
opportunities created by the current bank consolidation trends with additional
branches in the Golden Strip or other growth corridors in or outside of
Greenville County. We will also attempt to attract commercial business based
outside of the Golden Strip by offering courier service. We intend to attract
such businesses based on relationships and contacts which the bank's directors
and management have outside our core service area.
More than sixty percent of all subdivisions planned in Greenville
County on average in the four years through 1997 were constructed in the Golden
Strip. The bank will be active in providing residential mortgages, acquisition
and development financing for subdivisions and construction and permanent
financing for commercial real estate, particularly owner occupied property.
Consumers will enjoy extended branch operating hours, drive-up ATMs,
same day credit for consumer deposits made by 5:00 p.m., and convenient branch
locations where road infrastructure is in place to make access easier. We will
emphasize local decision-making with experienced bankers, attention to lower
employee turnover, and professional and responsive service. We believe customers
will be responsive to a banking environment where they are encouraged with an
approach of "what the bank can do for you" versus an approach
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<PAGE> 21
of "what the bank can't do for you." This highlights the community bank approach
we will take in the market place.
DEPOSITS
We intend 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 our principal market area at rates competitive to those offered in
the Greenville County area. In addition, we intend to offer certain retirement
account services, such as Individual Retirement Accounts (IRAs). We intend to
solicit these accounts from individuals, businesses, associations,
organizations, and governmental authorities.
LENDING ACTIVITIES
General. We intend to emphasize a range of lending services, including
real estate, commercial, and consumer loans to individuals and small- to
medium-sized businesses and professional concerns that are located in or conduct
a substantial portion of their business in the bank's market area.
Real Estate Loans. We expect that loans secured by first or second
mortgages on real estate will make up 50 - 60% of the bank's loan portfolio.
These loans will generally fall into one of three categories: commercial real
estate loans, construction and development loans, or residential real estate
loans. Each of these categories is discussed in more detail below, including
their specific risks. Home equity loans are not included because they are
classified as consumer loans, which are discussed below. Interest rates for all
categories may be fixed or adjustable, and will more likely be fixed for
shorter-term loans. The bank will generally charge an origination fee for each
loan.
The principal economic risk associated with real estate loans is cash
flow capability and creditworthiness of the borrowers. Other risks associated
with real estate loans vary with many economic factors, including employment
levels, strength of local and national economy and fluctuations in the value of
real estate. Deterioration of any of these factors after a loan has been made
could negatively affect a borrower's cash flow, creditworthiness and ability to
repay the loan. On first and second mortgage loans we would typically not
advance more than 90% of the lessor of the cost or appraised value of the
property. We will require a valid mortgage lien on all real property loans along
with a title lien policy which insures the validity and priority of the lien. We
will also require borrowers to obtain hazard insurance policies and flood
insurance if applicable.
We will compete for these loans with competitors who are well
established in the Greenville County area and have greater resources and lending
limits. As a result, we may have to charge lower interest rates to attract
borrowers.
We will have the ability to originate real estate loans for sale into
the secondary market. We can limit our interest rate and credit risk on these
loans by locking the interest rate for each loan with the secondary investor and
receiving the investor's underwriting approval prior to originating the loan.
Commercial Real Estate Loans. Commercial real estate loans will
generally have terms of five years or less, although payments may be structured
on a longer amortization basis. Risks associated with commercial real estate
loans include the general risk of the failure of each commercial borrower, which
will be different for each type of business and commercial entity. We will
evaluate each business on an individual basis and attempt to determine its
business risks and credit profile. We may or may not be successful. We 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%.
We will also generally require that debtor cash flow exceed 115% of monthly debt
service obligations. We will typically review all of the personal financial
statements of the principal owners and require their personal guarantees. Such
reviews generally reveal secondary sources of payment and liquidity to support a
loan request.
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<PAGE> 22
Construction and Development Real Estate Loans. We will offer
adjustable and fixed rate residential and commercial construction loans to
builders and developers and to consumers who wish to build their own home. The
term of construction and development loans will generally be limited to eighteen
months, although payments may be structured on a longer amortization basis. Most
loans will mature and require payment in full upon the sale of the property.
Construction and development loans generally carry a higher degree of risk than
long term financing of existing properties. Repayment depends on the ultimate
completion of the project and usually on the sale of the property. Risks
include:
- cost overruns,
- mismanaged construction,
- inferior or improper construction techniques,
- economic changes or downturns during construction,
- a downturn in the real estate market,
- rising interest rates which may prevent sale of the property,
and
- failure to sell completed projects in a timely manner.
We will attempt to reduce risk by obtaining personal guarantees where possible,
and by keeping the loan to value ratio of the completed project below specified
percentages. We may also reduce risk by selling participations in larger loans
to other institutions when possible.
Residential Real Estate Loans. Residential real estate loans will
generally have longer terms up to 30 years. We will offer fixed and adjustable
rate mortgages. We will not have any risk on these loans as they will be
underwritten through a third party agent without any recourse against the bank.
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. Asset based lending, leasing and
factoring will be offered through third party vendors who can handle the paper
work, servicing and generally assume most of the credit risk. Trade letters of
credit, standby letters of credit, and foreign exchange will be handled through
a correspondent bank as agent for the bank.
We expect to also offer small business loans utilizing government
enhancements such as the Small Business Administration's 7(a) program and SBA's
504 programs, and Appalachian Development Council. These loans will typically be
partially guaranteed by the government which may help to reduce the bank's risk.
Government guarantees of SBA loans will not exceed 80% of the loan value, and
will generally be less.
The principal economic risk associated with each category of
anticipated loans, including commercial loans, is the cash flow capability and
creditworthiness of the borrowers. The risks associated with commercial loans
vary with many economic factors, including the economy in the Greenville County
area. Deterioration of the economy could impact our borrower's businesses and
therefore their cash flow and ability to repay their loans. The well-established
banks in the Greenville County area will make proportionately more loans to
medium-to large-sized businesses than we will. 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
loans and revolving lines of credit such as credit cards. Installment loans
typically will carry balances of less than $50,000 and be amortized over
periods up to 60
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months. Consumer loans may be offered on a single maturity basis where a
specific source of repayment is available. Revolving loan products will
typically require monthly payments of interest and a portion of the principal.
The principal economic risks associated with consumer loans are the
creditworthiness and cash flow of the bank's borrowers. The principal
competition for consumer loans will be the established banks in the Greenville
County area. Consumer loans are generally considered to have greater risk than
first or second mortgages on real estate.
We will also offer home equity loans. Our underwriting criteria for
and the risks associated with home equity loans and lines of credit will
generally be the same as those for first mortgage loans. Home equity lines of
credit will typically have terms of 15 years or less, will typically carry
balances less than $125,000, and may extend up to 100% of the available equity
of each property.
Loan Approval and Review. The bank's loan approval policies will
provide for various levels of officer lending authority. When the amount of
aggregate loans to a single borrower exceeds that individual officer's lending
authority, the loan request will be considered and approved by an officer with a
higher lending limit or the officers' loan committee. The bank will establish an
officers' loan committee that has lending limits, and any loan in excess of this
lending limit will be approved by the directors' loan committee. The bank will
not make any loans to any director, officer, or employee of the bank unless the
loan is approved by the board of directors of the bank and is made on terms not
more favorable to such person than would be available to a person not affiliated
with the bank. The bank currently intends to adhere to Federal National Mortgage
Association and Federal Home Loan Mortgage Corporation guidelines in its
mortgage loan review process, but may choose to alter this policy in the future.
The bank does not currently intend to sell its mortgage loans on the secondary
market, but may choose to do so in the future.
Loan and Asset Distribution. We estimate that our initial percentage
distribution of our loans and deposits will be as follows:
<TABLE>
<CAPTION>
Loans Deposits
----- --------
<S> <C> <C> <C>
Real Estate 15% Regular Checking 6%
Commercial Loans 30% Interest Checking 8%
Equity Line and Consumer Loans 10% Business Checking 6%
Commercial Real Estate 45% Passbooks 11%
Money Market 12%
CD's under $100,000 38%
CD's over $100,000 15%
IRA & KEOUGH 2%
Other 2%
</TABLE>
These are estimates only. Our actual deposit and loan distribution will depend
on our customers and vary initially and over time. We will maintain an allowance
for loan losses, which we will establish through a provision for loan losses
charged against income. We will charge loans against this allowance when we
believe that the collectibility of the principal is unlikely. The allowance will
be an estimated amount that we believe will be adequate to absorb losses
inherent in the loan portfolio based on evaluations of its collectibility. We
anticipate that initially our loan loss reserve will equal approximately 1% of
the average outstanding balance of our loans. Over time, we will base the
allowance for loan losses on our evaluation of factors such as changes in the
nature and volume of the loan portfolio, overall portfolio quality, specific
problem loans and commitments, and current anticipated economic conditions that
may affect the borrower's ability to pay.
Lending Limits. The bank's lending activities will be subject to a
variety of lending limits imposed by federal law. In general the bank will be
subject to a legal limit on loans to a single borrower equal to 15% of the
bank's capital and unimpaired surplus. Different limits may apply in certain
circumstances based on the type of
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loan or the nature of the borrower, including the borrower's relationship to the
bank. These limits will increase or decrease as the bank's capital increases or
decreases. The bank will initially have a self-imposed loan limit of 80% of the
legal limit, or approximately $800,000. We expect the bank's initial legal limit
will be around $1,000,000 based on the minimum offering. 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.
OTHER BANKING SERVICES
Other anticipated bank services include cash management services for
commercial businesses such as sweep to a line of credit and PC banking. We will
offer an 800 number, 24-hour telephone voice response system, drive up ATMs,
safe deposit boxes, travelers checks, direct deposit of payroll and social
security checks, and automatic drafts for various accounts. We plan for the bank
to become associated with the Honor and Cirrus ATM networks that may be used by
the bank's customers throughout Greenville County and other regions. We believe
that by being associated with a shared network of ATMs, we will be better able
to serve our customers and will be able to attract customers who are accustomed
to the convenience of using ATMs, although we do not believe that maintaining
this association will be critical to our success. We intend to begin offering
these services shortly after opening the bank. We also plan to offer a debit
card and VISA credit card services through a correspondent bank as an agent for
the bank. We do not expect the bank 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, finance companies, and money market mutual funds
operating in the Greenville County area and elsewhere. In 1998, there were more
than 140 banking offices representing 20 financial institutions operating in
Greenville County holding over $4.9 billion in deposits. There were more than 17
banking offices representing 10 financial institutions operating in the Golden
Strip holding $425 million in deposits. This represented an approximate 4.2%
increase over the previous year. Many of these competitors are well established
in the Greenville County area. Most of them have substantially greater resources
and lending limits than the bank will and offer certain services, such as
extensive and established branch networks and trust services, that we either do
not expect to provide or will not provide initially. Our competitors include
BB&T, Carolina First Bank, First Union Bank, NationsBank, and Wachovia. As a
result of these competitive factors, the bank may have to pay higher rates of
interest to attract deposits. Based on a conservative growth rate of 4.2%, the
deposits in the Golden Strip will grow to approximately $523 million by the year
2003. Our plan over the next five years is to reach a 19% market share with
deposits in excess of $100 million. Of course, there can be no assurances that
we will accomplish these objectives.
EMPLOYEES
We anticipate that, upon commencement of operations, the bank will have
approximately 13 full time employees and 1 part time employee operating out of
its temporary facilities in Simpsonville. By the end of 1999, we anticipate that
it will have approximately 20 full time employees and 1 part time employee
operating out of its permanent facilities in Mauldin and Simpsonville. New
Commerce BanCorp, as the holding company for the bank, will not have any
employees other than its officers.
LEGAL PROCEEDINGS
Neither New Commerce BanCorp, New Commerce Bank, nor any of their
properties are subject to any material legal proceedings.
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SUPERVISION AND REGULATION
Both New Commerce BanCorp and New Commerce 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. The following summary is
qualified by reference to the statutory and regulatory provisions discussed.
Changes in applicable laws or regulations may have a material effect on our
business and prospects. Beginning with the enactment of the Financial
Institution Report Recovery and Enforcement Act in 1989 and following with the
FDIC Improvement Act in 1991, numerous additional regulatory requirements have
been placed on the banking industry in the past several years, and additional
changes have been proposed. Our operations may be affected by legislative
changes and the policies of various regulatory authorities. We cannot predict
the effect that fiscal or monetary policies, economic control, or new federal or
state legislation may have in the future on our business and earnings.
NEW COMMERCE BANCORP
Because it will own the outstanding capital stock of the bank, New
Commerce BanCorp will be a bank holding company within the meaning of the
federal Bank Holding Company Act of 1956 and the South Carolina Bank Holding
Company Act. Our activities will also be governed by the Glass-Steagall Act of
1933.
The Bank Holding Company Act. Under the Bank Holding Company Act, New
Commerce BanCorp will be subject to periodic examination by the Federal Reserve
and required to file periodic reports of its operations and such additional
information as the Federal Reserve may require. Our activities at the bank and
holding company level will be limited to:
- banking, managing, or controlling banks;
- furnishing services to or performing services for its
subsidiaries; and
- engaging in other activities that the Federal Reserve
determines to be so closely related to banking, managing, or
controlling banks as to be a proper incident thereto.
Investments, Control, and Activities. With certain limited exceptions,
the Bank Holding Company Act requires every bank holding company to obtain the
prior approval of the Federal Reserve before:
- acquiring substantially all the assets of any bank,
- acquiring direct or indirect ownership or control of any
voting shares of any bank if after such acquisition it would
own or control more than 5% of the voting shares of such bank
(unless it already owns or controls the majority of such
shares), or
- merging or consolidating with another bank holding company.
In addition, and subject to certain exceptions, the Bank Holding
Company Act and the Change in Bank Control Act, together with regulations
thereunder, require Federal Reserve approval prior to any person or company
acquiring "control" of a bank holding company. Control is conclusively presumed
to exist if an individual or company acquires 25% or more of any class of voting
securities of the bank holding company. Control is rebuttably presumed to exist
if a person acquires 10% or more but less than 25% of any class of voting
securities and either New Commerce BanCorp has registered securities under
Section 12 of the Securities Exchange Act of 1934 or no other person owns a
greater percentage of that class of voting securities immediately after the
transaction. We will most likely be required to register under the Securities
Exchange Act of 1934 once we have more than 500 shareholders of record. The
regulations provide a procedure for challenge of the rebuttable control
presumption.
Under the Bank Holding Company Act, a bank holding company is generally
prohibited from engaging in, or acquiring direct or indirect control of more
than 5% of the voting shares of any company engaged in
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<PAGE> 26
nonbanking activities unless the Federal Reserve Board, by order or regulation,
has found those activities to be so closely related to banking or managing or
controlling banks as to be a proper incident thereto. Some of the activities
that the Federal Reserve Board has determined by regulation to be proper
incidents to the business of a bank holding company include:
- making or servicing loans and certain types of leases,
- engaging in certain insurance and discount brokerage
activities,
- performing certain data processing services,
- acting in certain circumstances as a fiduciary or investment
or financial adviser,
- owning savings associations, and
- making investments in certain corporations or projects
designed primarily to promote community welfare.
The Federal Reserve Board imposes certain capital requirements on New
Commerce BanCorp under the Bank Holding Company Act, including a minimum
leverage ratio and a minimum ratio of "qualifying" capital to risk-weighted
assets. These requirements are described below under "- Capital Regulations."
Subject to its capital requirements and certain other restrictions, New Commerce
BanCorp is able to borrow money to make a capital contribution to the bank, and
such loans may be repaid from dividends paid from the bank to New Commerce
BanCorp. Our ability to pay dividends will be subject to regulatory restrictions
as described below in "The Bank - Dividends". New Commerce BanCorp is also able
to raise capital for contribution to the bank by issuing securities without
having to receive regulatory approval, subject to compliance with federal and
state securities laws.
Source of Strength; Cross-Guarantee. In accordance with Federal Reserve
Board policy, New Commerce BanCorp will be expected to act as a source of
financial strength to the bank and to commit resources to support the bank in
circumstances in which New Commerce BanCorp might not otherwise do so. Under the
Bank Holding Company Act, the Federal Reserve Board may require a bank holding
company to terminate any activity or relinquish control of a nonbank subsidiary,
other than a nonbank subsidiary of a bank, upon the Federal Reserve Board's
determination that such activity or control constitutes a serious risk to the
financial soundness or stability of any subsidiary depository institution of the
bank holding company. Further, federal bank regulatory authorities have
additional discretion to require a bank holding company to divest itself of any
bank or nonbank subsidiary if the agency determines that divestiture may aid the
depository institution's financial condition.
Glass-Steagall Act. We will also be restricted by the provisions of the
Glass-Steagall Act, which prohibits New Commerce BanCorp from owning
subsidiaries that are engaged principally in the issue, flotation, underwriting,
public sale, or distribution of securities. The interpretation, scope, and
application of the provisions of the Glass-Steagall Act currently are being
considered and reviewed by regulators and legislators, and the interpretation
and application of those provisions have been challenged in the federal courts.
South Carolina Act. As a bank holding company registered under the
South Carolina Bank Holding Company Act, we will be subject to regulations by
the South Carolina Board of Financial Institutions. Consequently, we must
receive their approval prior to engaging in the acquisition of banking or
nonbanking institutions or assets. We must also file periodic reports with
respect to our financial condition and operations, management, and intercompany
relationships between New Commerce BanCorp and its subsidiaries.
THE BANK
The bank will operate as a national banking association incorporated
under the laws of the United States and subject to examination by the Office of
the Comptroller of the Currency. Deposits in the bank will be insured by the
FDIC up to a maximum amount, which is generally $100,000 per depositor subject
to aggregation rules.
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The Office of the Comptroller of the Currency and the FDIC 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 Office of the Comptroller of the Currency will require the bank to maintain
certain capital ratios and imposes limitations on the bank's aggregate
investment in real estate, bank premises, and furniture and fixtures and to
prepare quarterly reports on the bank's financial condition and to conduct an
annual audit of its financial affairs in compliance with its minimum standards
and procedures.
Under the FDIC Improvement Act, all insured institutions must undergo
regular on site examinations by their appropriate banking agency. The cost of
examinations of insured depository institutions and any affiliates may be
assessed by the appropriate agency against each institution or affiliate as it
deems necessary or appropriate. Insured institutions are required to submit
annual reports to the FDIC, their federal regulatory agency, and state
supervisor when applicable. The FDIC Improvement Act directs the FDIC to develop
a method for insured depository institutions to provide supplemental disclosure
of the estimated fair market value of assets and liabilities, to the extent
feasible and practicable, in any balance sheet, financial statement, report of
condition or any other report of any insured depository institution. The FDIC
Improvement Act also requires the federal banking regulatory agencies to
prescribe, by regulation, standards for all insured depository institutions and
depository institution holding companies relating, among other things, to the
following:
- internal controls
- information systems and audit systems
- loan documentation
- credit underwriting
- interest rate risk exposure; and
- asset quality.
National banks and their holding companies which have been chartered or
registered or have undergone a change in control within the past two years or
which have been deemed by the Office of the Comptroller of the Currency or the
Federal Reserve Board to be troubled institutions must give the Office of the
Comptroller of the Currency or the Federal Reserve Board thirty days prior
notice of the appointment of any senior executive officer or director. Within
the thirty day period, the Office of the Comptroller of the Currency or the
Federal Reserve Board, as the case may be, may approve or disapprove any such
appointment.
Deposit Insurance. The FDIC establishes rates for the payment of
premiums by federally insured banks and thrifts for deposit insurance. A
separate Bank Insurance Fund and Savings Association Insurance Fund are
maintained for commercial banks and savings associations with insurance premiums
from the industry used to offset losses from insurance payouts when banks and
thrifts fail. In 1993, the FDIC adopted a rule which
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<PAGE> 28
establishes a risk-based deposit insurance premium system for all insured
depository institutions. Under this system, until mid-1995 depository
institutions paid to Bank Insurance Fund or Savings Association Insurance Fund
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 semiannual
basis. Once the Bank Insurance Fund 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 even
this minimum assessment. It also separated the Financial Corporation (FICO)
assessment to service the interest on its bond obligations. The amount assessed
on individual institutions, including the bank, by FICO is in addition to the
amount paid for deposit insurance according to the risk-related assessment rate
schedule. Increases in deposit insurance premiums or changes in risk
classification will increase the bank's cost of funds, and there can be no
assurance that such cost can be passed on to the bank's customers.
Transactions With Affiliates and Insiders. The bank will be subject to
the provisions of Section 23A of the Federal Reserve Act, which place limits on
the amount of loans or extensions of credit to, or investments in, or certain
other transactions with, affiliates and on the amount of advances to third
parties collateralized by the securities or obligations of affiliates. The
aggregate of all covered transactions is limited in amount, as to any one
affiliate, to 10% of the bank's capital and surplus and, as to all affiliates
combined, to 20% of the bank's capital and surplus. Furthermore, within the
foregoing limitations as to amount, each covered transaction must meet specified
collateral requirements. Compliance is also required with certain provisions
designed to avoid the taking of low quality assets.
The bank will also be subject to the provisions of Section 23B of the
Federal Reserve Act which, among other things, prohibits an institution from
engaging in certain transactions with certain affiliates unless the transactions
are on terms substantially the same, or at least as favorable to such
institution or its subsidiaries, as those prevailing at the time for comparable
transactions with nonaffiliated companies. The bank will be 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. A national bank may not pay dividends from its capital. All
dividends must be paid out of undivided profits then on hand, after deducting
expenses, including reserves for losses and bad debts. In addition, a national
bank is prohibited from declaring a dividend on its shares of common stock until
its surplus equals its stated capital, unless there has been transferred to
surplus no less than one-tenth of the bank's net profits of the preceding two
consecutive half-year periods (in the case of an annual dividend). The approval
of the Office of the Comptroller of the Currency is required if the total of all
dividends declared by a national bank in any calendar year exceeds the total of
its net profits for that year combined with its retained net profits for the
preceding two years, less any required transfers to surplus.
Branching. National banks are required by the National bank Act to
adhere to branch office banking laws applicable to state banks in the states in
which they are located. Under current South Carolina law, the bank may open
branch offices throughout South Carolina with the prior approval of the Office
of the Comptroller of the Currency. In addition, with prior regulatory approval,
the bank will be able to acquire existing banking operations in South Carolina.
Furthermore, federal legislation has recently been passed which permits
interstate branching. The new law permits out-of-state acquisitions by bank
holding companies, interstate branching by banks if allowed by state law, and
interstate merging by banks.
Community Reinvestment Act. The Community Reinvestment Act requires
that, in connection with examinations of financial institutions within their
respective jurisdictions, the Federal Reserve, the FDIC, or the Office of the
Comptroller of the Currency, shall evaluate the record of each financial
institution in meeting the credit needs of its local community, including low
and moderate income neighborhoods. These factors are also considered in
evaluating mergers, acquisitions, and applications to open a branch or facility.
Failure to adequately meet these criteria could impose additional requirements
and limitations on the bank.
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Other Regulations. Interest and certain other charges collected or
contracted for by the bank are subject to state usury laws and certain federal
laws concerning interest rates. The bank's loan operations are also subject to
certain federal laws applicable to credit transactions, such as:
- the federal Truth-In-Lending Act, governing disclosures of
credit terms to consumer borrowers;
- the Home Mortgage Disclosure Act of 1975, requiring financial
institutions to provide information to enable the public and
public officials to determine whether a financial institution
is fulfilling its obligation to help meet the housing needs of
the community it serves;
- the Equal Credit Opportunity Act, prohibiting discrimination
on the basis of race, creed or other prohibited factors in
extending credit;
- the Fair Credit Reporting Act of 1978, governing the use and
provision of information to credit reporting agencies;
- the Fair Debt Collection Act, governing the manner in which
consumer debts may be collected by collection agencies; and
- the rules and regulations of the various federal agencies
charged with the responsibility of implementing such federal
laws.
The deposit operations of the bank also are subject to:
- the Right to Financial Privacy Act, which imposes a duty to
maintain confidentiality of consumer financial records and
prescribes procedures for complying with administrative
subpoenas of financial records, and
- the Electronic Funds Transfer Act and Regulation E issued by
the Federal Reserve Board to implement that act, which governs
automatic deposits to and withdrawals from deposit accounts
and customers' rights and liabilities arising from the use of
automated teller machines and other electronic banking
services.
Capital Regulations. The federal bank regulatory authorities have
adopted risk-based capital guidelines for banks and bank holding companies that
are designed to make regulatory capital requirements more sensitive to
differences in risk profiles among banks and bank holding companies and account
for off-balance sheet items. The guidelines are minimums, and the federal
regulators have noted that banks and bank holding companies contemplating
significant expansion programs should not allow expansion to diminish their
capital ratios and should maintain ratios in excess of the minimums. We have not
received any notice indicating that either New Commerce BanCorp or New Commerce
Bank is subject to higher capital requirements. The current guidelines require
all bank holding companies and federally-regulated banks to maintain a minimum
risk-based total capital ratio equal to 8%, of which at least 4% must be Tier 1
capital. Tier 1 capital includes common shareholders' equity, qualifying
perpetual preferred stock, and minority interests in equity accounts of
consolidated subsidiaries, but excludes goodwill and most other intangibles and
excludes the allowance for loan and lease losses. Tier 2 capital includes the
excess of any preferred stock not included in Tier 1 capital, mandatory
convertible securities, hybrid capital instruments, subordinated debt and
intermediate term-preferred stock, and general reserves for loan and lease
losses up to 1% of risk-weighted assets.
Under these guidelines, banks' and bank holding companies' assets are
given risk-weights of 0%, 20%, 50%, or 100%. In addition, certain off-balance
sheet items are given credit conversion factors to convert them to asset
equivalent amounts to which an appropriate risk-weight applies. These
computations result in the total risk-weighted assets. Most loans are assigned
to the 100% risk category, except for first mortgage loans fully secured by
residential property and, under certain circumstances, residential construction
loans, both of which carry a 50% rating. Most investment securities are assigned
to the 20% category, except for municipal or state revenue bonds, which have a
50% rating, and direct obligations of or obligations guaranteed by the United
States Treasury or United States Government agencies, which have a 0% rating.
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The federal bank regulatory authorities have also implemented a
leverage ratio, which is equal to Tier 1 capital as a percentage of average
total assets less intangibles, to be used as a supplement to the risk-based
guidelines. The principal objective of the leverage ratio is to place a
constraint on the maximum degree to which a bank holding company may leverage
its equity capital base. The minimum required leverage ratio for top-rated
institutions is 3%, but most institutions are required to maintain an additional
cushion of at least 100 to 200 basis points.
The FDIC Improvement Act established a new capital-based regulatory
scheme designed to promote early intervention for troubled banks which requires
the FDIC to choose the least expensive resolution of bank failures. The new
capital-based regulatory framework contains five categories of compliance with
regulatory capital requirements, including "well capitalized," "adequately
capitalized," "undercapitalized," "significantly undercapitalized," and
"critically undercapitalized." To quality as a "well capitalized" institution, a
bank must have a leverage ratio of no less than 5%, a Tier 1 risk-based ratio of
no less than 6%, and a total risk-based capital ratio of no less than 10%, and
the bank must not be under any order or directive from the appropriate
regulatory agency to meet and maintain a specific capital level.
Initially, we will qualify as "well capitalized."
Under the FDIC Improvement Act regulations, the applicable agency can
treat an institution as if it were in the next lower category if the agency
determines (after notice and an opportunity for hearing) that the institution is
in an unsafe or unsound condition or is engaging in an unsafe or unsound
practice. The degree of regulatory scrutiny of a financial institution
increases, and the permissible activities of the institution decreases, as it
moves downward through the capital categories. Institutions that fall into one
of the three undercapitalized categories may be required to do some or all of
the following:
- submit a capital restoration plan
- raise additional capital
- restrict their growth, deposit interest rates, and other
activities
- improve their management
- eliminate management fees; or
- divest themselves of all or a part of their operations.
Bank holding companies controlling financial institutions can be called upon to
boost the institutions' capital and to partially guarantee the institutions'
performance under their capital restoration plans.
These capital guidelines can affect us in several ways. If we grow at a
rapid pace, a premature "squeeze" on capital could occur making a capital
infusion necessary. The requirements could impact our ability to pay dividends.
Our capital levels will initially be more than adequate; however, rapid growth,
poor loan portfolio performance or poor earnings performance or a combination of
these factors could change our capital position in a relatively short period of
time.
The FDIC Improvement Act requires the federal banking regulators to
revise the risk-based capital standards to provide for explicit consideration of
interest-rate risk, concentration of credit risk, and the risks of untraditional
activities. We are uncertain what effect these regulations would have.
Failure to meet these capital requirements would mean that a bank would
be required to develop and file a plan with its primary federal banking
regulator describing the means and a schedule for achieving the minimum capital
requirements. In addition, such a bank would generally not receive regulatory
approval of any application that requires the consideration of capital adequacy,
such as a branch or merger application, unless the bank could demonstrate a
reasonable plan to meet the capital requirement within a reasonable period of
time.
Enforcement Powers. The Financial Institution Reform Recovery and
Enforcement Act expanded and increased civil and criminal penalties available
for use by the federal regulatory agencies against depository institutions and
certain "institution-affiliated parties." Institution-affiliated parties
primarily include management, employees, and agents of a financial institution,
as well as independent contractors and consultants such as
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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, banking
agencies' power to issue cease-and-desist orders were expanded. Such orders may,
among other things, require affirmative action to correct any harm resulting
from a violation or practice, including restitution, reimbursement,
indemnification's 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. Some of these proposals, if adopted, could significantly
change the regulation of banks and the financial services industry. We cannot
predict whether any of these proposals will be adopted or, if adopted, what
effect these would have.
Effect of Governmental Monetary Policies. Our earnings are affected by
domestic economic conditions and the monetary and fiscal policies of the United
States government and its agencies. The Federal Reserve Bank's monetary policies
have had, and are likely to 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. 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. Information relating to the beneficial ownership of Common Stock
is based upon "beneficial ownership" concepts set forth in rules of the SEC
under Section 13(d) of the Securities Exchange Act of 1934. 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. This table does not reflect warrants to purchase 7,500
shares of Common Stock to be granted to each organizer.
<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 PERCENTAGE NUMBER OFFERING OFFERING
- ------------------------ ------ ------------ --------- ---------- -----------
<S> <C> <C> <C> <C> <C>
RICHARD W. BAILEY 20,000 10.0% 20,000 2.67% 2.00%
TIMOTHY A. BRETT 15,000 7.50 15,000 2.00 1.50
MARSHALL J. COLLINS, JR. 17,500 8.75 17,500 2.33 1.75
RALPH S. CRAWLEY 25,000 12.50 25,000 3.33 2.50
RICHARD L. FEW, JR. 7,500 3.75 7,500 1.00 0.75
G. MITCHELL GAULT 15,000 7.50 15,000 2.00 1.50
TOMMY D. GREER 25,000 12.50 25,000 3.33 2.50
BOBBY L. JOHNSON 15,000 7.50 15,000 2.00 1.50
ROBERT T. KELLETT 10,000 5.00 10,000 1.33 1.00
DENNIS O. RAINES 7,500 3.75 7,500 1.00 0.75
CURRAN A. SMITH 7,500 3.75 7,500 1.00 0.75
JAMES D. STEWART 35,000 17.50 35,000 4.67 3.50
TOTAL 200,000 100.00% 200,000 26.67% 20.00%
</TABLE>
31
<PAGE> 33
EXECUTIVE OFFICERS AND DIRECTORS OF NEW COMMERCE BANCORP
The following sets forth certain information about executive officers
and directors. New Commerce BanCorp'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
serve at the discretion of the board of directors.
<TABLE>
<CAPTION>
POSITION WITH
NAME AGE NEW COMMERCE BANCORP
---- --- --------------------
<S> <C> <C>
Richard W. Bailey 65 Director
Timothy A. Brett 45 Director
David E. Burgess 53 Senior Credit Officer
Marshall J. Collins, Jr. 57 Director
Ralph S. Crawley 63 Director
G. Mitchell Gault 43 Director
Tommy D. Greer 66 Director
Bobby L. Johnson 64 Director
Robert T. Kellett 56 Director
Paula S. King 38 Senior Vice President, Chief
Financial Officer
Dennis O. Raines 46 Director
Bradley J. Schneider 36 Senior Vice President, General Banking
Curran A. Smith 54 Director
James D. Stewart 45 Director, Chief Executive Officer
</TABLE>
Richard W. Bailey, Class III director, is involved in commercial real
estate and development and has been affiliated with Caine Company for the past
twelve years. In 1985, he sold his majority interest in a food brokerage company
with offices in Greenville, Columbia, and Charleston. He is a past member of the
Golden Strip and Greenville advisory boards for BB&T.
Timothy A. Brett, Class III director, is president of Brett Public
Relations, Inc., a full service public relations company with offices in
Greenville and Columbia, South Carolina. Mr. Brett previously served as director
of Governmental Affairs and Community Relations for Michelin North America for
almost seven years. He was also a member of the South Carolina House of
Representatives. After leaving the House of Representatives, he served in
various positions under former Governor Carroll A. Campbell, Jr. Mr. Brett is a
1974 graduate of Newberry College. He serves his community through his
involvement in a number of charitable organizations, including the Salvation
Army, the YMCA, and the Blue Ridge Council Boy Scouts. He presently serves as
chairman of the Newberry College Foundation Board.
David E. Burgess will be the vice president and senior credit officer
of New Commerce Bank. Mr. Burgess has 29 years of banking experience in lending
and credit administration. He began his career with South Carolina National Bank
in 1970 and has subsequently working in lending and credit management with
Southern Bank & Trust Company from 1980 to 1982, The Palmetto Bank from
1982-1997, and American Federal Bank from 1997-1998. Mr. Burgess received a B.A.
degree in 1970 from the University of North Carolina and is a graduate of the
School of Banking of the South (LSU). Mr. Burgess currently serves on the board
of the Golden Strip Rotary Club and the board of the Simpsonville Chamber of
Commerce.
Marshall J. Collins, Jr., Class I director, is chairman of BI-LO, Inc.
and president and chief executive officer of Ahold USA Support Services in
Mauldin, South Carolina. BI-LO, Inc. is a multi state grocery store
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<PAGE> 34
chain and is one of the largest employers in Greenville County, South Carolina.
Mr. Collins was born and raised in Chicago, Illinois and is a graduate of St.
Mary's College in Winona, Minnesota and the Advanced Management Program at
Harvard Business School.
Ralph S. Crawley, Class II director, is co-founder and president of
Carter and Crawley, Inc., a custom automated control systems supplier to
industrial and utility clients since 1967. He previously was manager of control
system manufacturing for Metal Products Corporation. Mr. Crawley graduated from
Ruby High School in 1953 and attended Pierce College in Reseda, California. He
has held several positions with RCA and TRW involving manufacturing and sales.
Mr. Crawley is a member of the Mauldin Rotary Club, and past president and
member of the Rotary Foundation Scholarship Committee. Mr. Crawley is a member
of the Mauldin Library Committee and chairman of The Building and Grounds
Committee of the new Greenville County branch library; past member of the
Chamber of Commerce organizing board; past member of the NCNB (n/k/a
NationsBank), and a member of the Mauldin-Simpsonville advisory board.
G. Mitchell Gault, Class III director, is the president of Kent-Gault
Manufactured Homes, a retailer of manufactured homes a second generation
retailer serving the "Upstate" of South Carolina since 1959. Mr. Gault currently
operates two sales centers in the "Golden Strip" area of Greenville County,
South Carolina. Mr. Gault is also involved in the development of manufactured
housing subdivisions, as well as owning and operating several manufactured
housing rental communities in the Upstate. Mr. Gault graduated from the
University of South Carolina in l977. He is a past president of the Fountain Inn
Rotary Club. He has served on the board of Manufactured Housing Institute of
South Carolina for ten years, including two terms as chairman of that
association. Mr. Gault currently serves on the board of the Mauldin Chamber of
Commerce. He is a volunteer for Meals on Wheels and is a life-long member of
Trinity United Methodist Church of Fountain Inn.
Tommy D. Greer, Class I director, is chairman emeritus of the Board of
Catalina Marketing. He has also served as president and chief executive officer
of Catalina. Mr. Greer has 41 years of experience as one of the country's
leading product marketers. Prior to joining Catalina, he took Texize Chemicals
Company, a cleaning products manufacturer, from a small regional company to a
nationally known marketer of such category leaders as Fantastic Spray Cleaner,
Spray'n Wash, and Glass+Plus. Mr. Greer is a graduate of the Advanced Management
Program at the Harvard School of Business.
Bobby L. Johnson, Class II director, develops light industrial, office,
and warehouse properties. In 1989, he sold Carolina Material Handling, a
business he operated for twenty years in the Golden Strip. Mr. Johnson is a
member of Edwards Road Baptist Church in Greenville and is a volunteer with
Meals on Wheels. He previously served on the advisory board of Summit National
Bank.
Robert T. Kellett, Class II director, owns and operates several
business in the Golden Strip, including Tommy's Snack Bar, Kellett Fuel Oil,
Kellett's Korner, Inc., and Kellett's Garbage, Inc. He is a native of Greenville
County and he graduated from Hillcrest High School.
Paula S. King, CPA, is the senior vice president and chief financial
officer of New Commerce BanCorp and New Commerce Bank. Ms. King has over 15
years experience in the financial services industry and was most recently
employed as senior vice president and controller of Greenville National Bank in
Greenville, South Carolina beginning in 1992. Ms. King received her B.A. degree
in accounting and business administration from Furman University in 1978. She is
a Greenville native and serves on the board of directors of Junior Achievement
of Greenville and the Greenville United Way Allocations Panel.
Dennis O. Raines, Class II director, is the chief financial officer for
Brett Public Relations, a full-service public relations company. An honor
graduate of Limestone College, Raines holds a degree in business management. He
was employed at Kemet Electronics for 26 years, serving in various management
positions including manufacturing manager, human relations manager, and most
recently business services manager. Mr. Raines serves as a member of the Mauldin
City Council, where he is on the Recreation & Economic Development and the
Finance & Policy committees. He is also a member of the Mauldin Library Task
Force and on the board of the Golden Strip Human Resources Center and Meals on
Wheels of Greenville, Inc.
33
<PAGE> 35
Bradley J. Schneider will be the senior vice president of general
banking for New Commerce Bank. He has 14 years of experience in the financial
services industry. He began his career with Wachovia Bank and Trust Company, and
has had increasing sales and leadership positions in commercial and consumer
banking. For six years he has served as a vice president for commercial lending
in Mauldin and Greenville, with BB&T from 1996 until he joined New Commerce, and
with Carolina First from 1990 to 1996. Mr. Schneider has a B.A. in Economics and
Business Administration from Furman University and is a graduate of the
Louisiana State University Graduate School of banking. He serves in a volunteer
capacity with the United Way of Greenville County and the Appalachian Council of
Governments.
Curran A. Smith, Class I director, has owned and operated three Max
Saver convenience stores since 1992. He formerly was employed with Union
Carbide, and subsequently through merger with Kemet Electronics for 25 years.
Mr. Smith has lived in Fountain Inn for 27 years and is a graduate of Hillcrest
High School.
James D. Stewart, Class III director, is the chief executive officer
and president of New Commerce and of the bank. He has a 20 year banking career
in sales and leadership positions in commercial and consumer banking. He began
his career with Wachovia in 1978 and has had increasing levels of leadership and
sales responsibility in consumer and commercial business banking with First
Union, Southern National Bank, and BB&T. His last position was senior vice
president and city executive for BB&T in Greenville, South Carolina. Mr. Stewart
received a B.A. degree in Journalism in 1976 from the University of North
Carolina and is a graduate of the Stonier Graduate School of Banking. Mr.
Stewart has served on the boards of directors of the Phyllis Wheatley Center,
Greenville Chamber of Commerce, Greenville United Way, Urban League, and Blue
Ridge Council Boy Scouts.
EMPLOYMENT AGREEMENTS
James D. Stewart. We have entered into an employment agreement with
James D. Stewart for a three-year term, pursuant to which Mr. Stewart will serve
as the president, the chief executive officer, and a director of New Commerce
BanCorp and New Commerce Bank. Mr. Stewart will be paid a salary of $96,000,
plus his yearly medical insurance premium. Mr. Stewart is entitled to receive a
bonus of $10,000 upon the opening of the bank and will be eligible to receive a
bonus of up to 36% of his salary for meeting performance goals set by the board.
Mr. Stewart 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. Stewart will be granted options to purchase a number of
shares of common stock equal to 5% of the number of shares sold in this
offering. The options will vest over a five-year period and will have a term of
ten years. Additionally, Mr. Stewart 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.
Mr. Stewart's employment agreement also provides that following
termination of his employment and for a period of twelve months thereafter, Mr.
Stewart may not (a) compete with the company, the bank, 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 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, (b) solicit major customers of the bank for the
purpose of providing financial services, or (c) solicit employees of the bank
for employment. If Mr. Stewart terminates his employment for good cause as that
term is defined in the employment agreement or if Mr. Stewart is terminated
following a change in control of New Commerce BanCorp as defined in the
agreement, he will be entitled to severance of his then current monthly salary
for a period of 24 months, plus accrued bonus, and all outstanding options and
incentives shall vest immediately. If Mr. Stewart's employment is terminated for
any reason other than for cause, he will be entitled to 12 months' severance.
34
<PAGE> 36
Paula S. King. We have also entered into an employment agreement with
Paula S. King, a senior vice president and our chief financial officer for both
New Commerce Bancshares and New Commerce Bank. The term of the agreement is for
three years, although either party may reduce the term to two years at any time.
Ms. King will be paid a salary of $85,000 and will be eligible for a yearly
bonus of up to 25% for meeting specified goals to be agreed each year. Ms. King
will also receive incentive stock options to purchase 10,000 shares of common
stock of New Commerce BanCorp under its incentive stock option plan when
adopted. Such options will vest over a period of five years or immediately upon
a change in control, and will be exercisable for ten years. Additionally, Ms.
King will participate in the bank's retirement, welfare, and other benefit
programs and is entitled to reimbursement for her business travel expenses. The
bank has also agreed to pay for all costs and expenses of maintaining her CPA
designated professional memberships and continuing education associated with her
CPA status.
Ms. King's employment agreement also provides that following
termination of his employment and for a period of six months thereafter, Ms.
King may not (a) compete with the company, the bank, 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 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, (b) solicit customers of the bank for the purpose of
providing financial services, or (c) solicit employees of the bank for
employment. These provisions to do not apply after a change in control as that
term is defined in the agreement. If Ms. King terminates her employment for good
reason as that term is defined in the employment agreement or if Ms. King is
terminated within one year following a change in control as defined in the
agreement, she will be entitled a severance payment equal to her then current
monthly salary multiplied by 12, plus her prior year's bonus and any unpaid
accrued bonus, and all outstanding options and incentives shall vest
immediately. If Ms. King's employment is terminated for any reason other than
for cause, she will be entitled to 12 months' severance.
DIRECTOR COMPENSATION
We do not intend to pay directors' fees until the bank is profitable.
However, we reserve the right to pay directors' fees. In addition, after the
offering, we expect to adopt a stock option plan which will permit New Commerce
BanCorp to grant options to its officers, directors, and employees. We
anticipate that we 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. We will not issue stock options at less than the fair market value of
the common stock on the date of grant.
STOCK WARRANTS
In recognition of the financial risk and organizational risk they have
undertaken in organizing the bank, each organizer will also receive, for no
additional consideration, a warrant to purchase 7,500 additional shares of
Common Stock at a purchase price of $10.00 per share. The warrants, which will
be represented by separate warrant agreements, will become exercisable on the
later of the date that the bank opens for business and one year from the date of
this prospectus and will be exercisable in whole or in part during the ten year
period following that date. The warrants and shares issued pursuant to the
exercise of such warrants will be transferable, subject to compliance with
applicable securities laws. If the Office of the Comptroller of the Currency
issues a capital directive or other order requiring the bank to obtain
additional capital, the warrants will be forfeited if not immediately exercised.
INTERESTS OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
We expect to have banking and other transactions in the ordinary course
of business with the organizers, directors, and officers 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
35
<PAGE> 37
collectibility nor present other unfavorable features. 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. We
intend for all of our transactions with organizers or other affiliates to be on
terms no less favorable than could be obtained from an unaffiliated third party
and to be approved by a majority of our disinterested directors.
EXCULPATION AND INDEMNIFICATION
New Commerce BanCorp's articles of incorporation contain a provision
which, subject to certain limited exceptions, limits the liability of a director
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;
- 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.
In addition, if such act is amended to authorize further elimination or
limitation of the liability of director, then the liability of each director
shall be eliminated or limited to the fullest extent permitted by such
provisions, as so amended, without further action by the shareholders, unless
the law requires 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.
New Commerce BanCorp's bylaws contain certain provisions which provide
indemnification to directors that is broader than the protection expressly
mandated in Sections 33-8-510 and 33-8-520 of the South Carolina Business
Corporation Act. To the extent that a director or officer 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, Sections
33-8-510 and 33-8-520 of such act would require New Commerce BanCorp to
indemnify such persons against expenses, including attorney's fees, actually and
reasonably incurred in connection therewith. The South Carolina Business
Corporation Act expressly allows New Commerce BanCorp to provide for greater
indemnification rights to its officers and directors, subject to shareholder
approval.
Our 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. The
SEC has advised us that it believes such indemnification of directors and
officers is against public policy and therefore unenforceable.
36
<PAGE> 38
DESCRIPTION OF CAPITAL STOCK OF NEW COMMERCE BANCORP
GENERAL
The authorized capital stock of New Commerce BanCorp consists of
10,000,000 shares of common stock, par value $0.01 per share, and 10,000,000
shares of preferred stock, par value $0.01 per share. The following summary
describes the material terms of New Commerce BanCorp's capital stock. Reference
is made to the articles of incorporation of New Commerce BanCorp, 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. We do 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.
PREFERRED STOCK
New Commerce BanCorp's articles of incorporation provide that the board
of directors is authorized, without further action by the holders of the common
stock, to provide for the issuance of shares of preferred stock in one or more
classes or series and to fix the designations, powers, preferences, and
relative, participating, optional and other rights, qualifications, limitations,
and restrictions thereof, including the dividend rate, conversion rights, voting
rights, redemption price, and liquidation preference, and to fix the number of
shares to be included in any such classes or series. Any preferred stock so
issued may rank senior to the common stock with respect to the payment of
dividends or amounts upon liquidation, dissolution or winding-up, or both. In
addition, any such shares of preferred stock may have class or series voting
rights. Upon completion of this offering, we 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. We do not plan to issue any
shares of preferred stock, and will not issue preferred stock to organizers on
terms more favorable than those on which it issues preferred stock to
shareholders other than organizers.
ANTITAKEOVER EFFECTS
The provisions of the Articles, the bylaws and South Carolina law
summarized in the following paragraphs may 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
37
<PAGE> 39
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 New Commerce BanCorp 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.
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
and whether or not a majority of shareholders believe 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 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. We may reject a
shareholder proposal or nomination that is not made in accordance with such
procedures.
Nomination Requirements. Pursuant to the bylaws, we have established
certain nomination requirements for an individual to be elected as a director,
including that the nominating party provide (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, we will have a minimum of 750,000 and
a maximum of 1,000,000 shares of common stock outstanding. The shares sold in
this offering will be freely tradable, without restriction or registration under
the Securities Act of 1933, except for shares purchased by "affiliates" of New
Commerce BanCorp, which will be subject to resale restrictions under the
Securities Act of 1933. An affiliate of the issuer is defined in Rule 144 under
the Securities Act of 1933 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 of 1933 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 will
likely be deemed to be affiliates. These securities held by
38
<PAGE> 40
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 of 1933, 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 New Commerce
BanCorp 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.
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<PAGE> 41
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon by
Nelson Mullins Riley & Scarborough, L.L.P., Atlanta, Georgia.
EXPERTS
New Commerce BanCorp's financial statements dated December 31, 1998 and
for the period from July 17, 1998 (inception), until December 31, 1998 have been
audited by Elliott Davis & Company, L.L.P., as stated in their report appearing
elsewhere herein, and have been so included in reliance on the report of such
firm given upon their authority as an expert in accounting and auditing.
ADDITIONAL INFORMATION
We have filed with the SEC (the "Commission") a registration statement
on Form SB-2 (together with all amendments, exhibits, schedules and supplements
thereto, the "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 New Commerce BanCorp, New
Commerce Bank, and the common stock, you should refer to the Registration
Statement and the exhibits thereto.
You can examine and obtain copies of the Registration Statement at 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 at http://www.sec.gov
that contains all of the reports, proxy and information statements and other
information regarding registrants that file electronically with the Commission
using the EDGAR filing system, including New Commerce BanCorp.
We have filed or will file various applications with the Office of the
Comptroller of the Currency and the FDIC. You should only rely only on
information in this prospectus and in our related Registration Statement in
making an investment decision. If other available information is inconsistent
with information in this prospectus, including information in public files or
provided by the Office of the Comptroller of the Currency and the FDIC, such
other information is superseded by the information in this prospectus.
Projections appearing in the applications to such agencies were based on
assumptions that the organizers believed were reasonable at the time, but which
may have changed or otherwise be wrong. New Commerce BanCorp and New Commerce
Bank specifically disclaim all projections for purposes of this prospectus and
caution prospective investors against placing reliance on them for purposes of
making an investment decision. Statements contained in this prospectus regarding
the contents of any contract or other document referred to are not necessarily
complete. If such contract or document is an exhibit to the Registration
Statement, you may obtain and read such document or contract for more
information.
40
<PAGE> 42
NEW COMMERCE BANCORP (IN ORGANIZATION)
(A DEVELOPMENT STAGE ENTERPRISE)
GREENVILLE, SOUTH CAROLINA
CONTENTS
<TABLE>
<CAPTION>
PAGE
------------
<S> <C>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS F-2
FINANCIAL STATEMENTS
Balance sheet F-3
Statement of operations F-4
Statement of changes in owners' equity F-5
Statement of cash flows F-6
NOTES TO FINANCIAL STATEMENTS F-7 through F-9
</TABLE>
F-1
<PAGE> 43
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Directors
NEW COMMERCE BANCORP (in organization)
Greenville, South Carolina
We have audited the accompanying balance sheet of NEW COMMERCE
BANCORP (in organization) (a development stage enterprise) as of December 31,
1998 and the related statements of operations, changes in owners' equity and
cash flows for the period from July 17, 1998 (date of inception) to December 31,
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 NEW COMMERCE BANCORP
(in organization) (a development stage enterprise) as of December 31, 1998 and
the results of its operations and its cash flows for the period from July 17,
1998 (date of inception), to December 31, 1998, in conformity with generally
accepted accounting principles.
/s/ Elliot, Davis & Company, L.L.P.
Greenville, South Carolina
December 31, 1998, except for Note 4, as to
which the date is March 3, 1999
F-2
<PAGE> 44
NEW COMMERCE BANCORP (IN ORGANIZATION)
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEET
DECEMBER 31, 1998
<TABLE>
ASSETS
<S> <C>
Cash and cash equivalents $ 1,762,031
Real estate options 39,800
Deferred stock offering costs 143,427
Office furniture 8,218
-----------
Total assets $ 1,953,476
===========
LIABILITIES AND OWNERS' EQUITY
LIABILITIES $ -
COMMITMENTS AND CONTINGENCIES - Note 2
OWNERS' EQUITY
Preferred stock, $.01 par value per share; 10,000,000 shares
authorized, no shares issued -
Common stock, $.01 par value per share, 10,000,000 shares
authorized; 200,000 shares issued 2,000
Additional paid-in capital 1,998,000
Retained deficit accumulated during the development stage (46,524)
-----------
Total liabilities and owners' equity $ 1,953,476
===========
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-3
<PAGE> 45
================================================================================
NEW COMMERCE BANCORP (IN ORGANIZATION)
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM JULY 17, 1998 (DATE OF INCEPTION)
TO DECEMBER 31, 1998
<TABLE>
<S> <C>
EXPENSES
Stock sale promotion $ 16,300
Rent 11,650
Telephone and supplies 944
Travel and meals 6,444
Printing and copying 4,338
Other 6,848
--------
Loss before provision for income taxes (46,524)
PROVISION FOR INCOME TAXES --------
Net loss $(46,524)
========
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-4
<PAGE> 46
================================================================================
NEW COMMERCE BANCORP (IN ORGANIZATION)
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF CHANGES IN OWNERS' EQUITY
FOR THE PERIOD FROM JULY 17,1998 (DATE OF INCEPTION)
TO DECEMBER 31, 1998
<TABLE>
<CAPTION>
RETAINED
DEFICIT
ACCUMULATED
COMMON STOCK ADDITIONAL DURING THE
----------------------- PAID-IN DEVELOPMENT
SHARES AMOUNT CAPITAL STAGE TOTAL
------ ------ ------- ----- -----
<S> <C> <C> <C> <C> <C>
PROCEEDS FROM THE SALE OF
STOCK TO ORGANIZERS 200,000 $2,000 $1,998,000 $ -- $ 2,000,000
NET LOSS -- -- -- (46,524) (46,524)
------- ------ ---------- -------- -----------
BALANCE, DECEMBER 31, 1998 200,000 $2,000 $1,998,000 $(46,524) $ 1,953,476
======= ====== ========== ======== ===========
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-5
<PAGE> 47
================================================================================
NEW COMMERCE BANCORP (IN ORGANIZATION)
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM JULY 17, 1998 (DATE OF INCEPTION)
TO DECEMBER 31, 1998
<TABLE>
<S> <C>
NET CASH USED FOR PRE-OPERATING ACTIVITIES
Net loss $ (46,524)
Deferred stock offering costs (143,427)
-----------
Net cash used for pre-operating activities (189,951)
-----------
INVESTING ACTIVITIES
Purchase of office furniture (8,218)
Purchase of real estate options (39,800)
-----------
Net cash used for investing activities (48,018)
-----------
FINANCING ACTIVITIES
Proceeds from sale of stock 2,000,000
-----------
Net cash provided by financing activities 2,000,000
-----------
Net increase in cash 1,762,031
CASH AND CASH EQUIVALENTS, JULY 17, 1998
(DATE OF INCEPTION) --
-----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,762,031
===========
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-6
<PAGE> 48
================================================================================
NEW COMMERCE BANCORP (IN ORGANIZATION)
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACTIVITIES
NEW COMMERCE BANCORP (the "Company") is a South Carolina corporation
organized for the purpose of owning and controlling all of the capital stock of
NEW COMMERCE BANK, N.A. (IN ORGANIZATION) (the "Bank"). The Bank is being
organized as a national bank under the laws of the United States with the
purpose of becoming a new community bank to be located in Greenville County,
South Carolina. The Company has filed a charter application with the OCC and an
application for deposit insurance with the FDIC. Provided that the applications
are timely approved and the necessary capital is raised, it is expected that
banking operations will commence in the second quarter of 1999.
The Company is a development stage enterprise as defined by Statement
of Financial Accounting Standard No. 7, "Accounting and Reporting by Development
Stage Enterprises", as it devotes substantially all its efforts to establishing
a new business. The Company's planned principal operations have not commenced
and revenue has not been recognized from the planned principal operations.
The Company intends to sell a maximum of 1,000,000 and a minimum of
750,000 shares of its common stock at $10 per share. The maximum offering will
raise $9,700,000 and minimum offering will raise $7,200,000, each net of
$200,000 estimated sales agent commissions and $100,000 offering expenses. The
organizers of the Company have purchased 200,000 shares of common stock at $10
per share, for a total of $2 million. The remaining shares will be sold through
a public offering. The Company will use a maximum of $8,250,000 and minimum of
$7 million of the proceeds to capitalize the proposed Bank.
The Company intends to sell a maximum of 1,000,000 and a minimum of
750,000 shares of its common stock at $10 per share. The maximum offering will
raise $9,700,000 and minimum offering will raise The
YEAR-END
The Company has adopted a fiscal year ending on December 31, effective for
the period ending December 31, 1998.
ESTIMATES
The financial statements include estimates and assumptions that effect the
Company's financial position and results of operations and disclosure of
contingent assets and liabilities. Actual results could differ from these
estimates.
CASH EQUIVALENTS
The Company considers all highly liquid investments with original maturities
of three months or less to be cash equivalents. The Company places its
temporary cash investments with high credit quality financial institutions.
At times such investments may be in excess of the FDIC insurance limits.
DEFERRED STOCK OFFERING COSTS
Deferred stock offering costs are costs incurred by the Company in connection
with the offering and issuance of its stock. The deferred stock offering
costs will be deducted from the Company's additional paid-in capital after
the stock offering. If the stock offering is deemed unsuccessful, all
deferred stock offering costs will be charged to operations during the period
in which the offering is deemed unsuccessful.
ORGANIZATION COSTS
Organization costs are costs that have been incurred in the expectation that
they will generate future revenues or otherwise benefit periods after the
Company begins planned operations. Organization costs include incorporation,
legal and consulting fees incurred in connection with establishing the
Company. In accordance
F-7
<PAGE> 49
================================================================================
with SOP 98-5, "Reporting on the Costs of Start-Up Activities," organization
costs are expensed when incurred.
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACTIVITIES, CONTINUED
This SOP is effective for fiscal periods beginning after December 15, 1998.
The Company has elected early adoption of this pronouncement and accordingly,
has charged all organization costs to operations.
INCOME TAXES
Income taxes are provided for the tax effects of transactions reported in the
financial statements and consist of taxes currently due plus deferred taxes
related primarily to differences between the financial reporting and income
tax bases of assets and liabilities. At December 31, 1998, no taxable income
has been generated and therefore, no tax provision has been included in these
financial statements.
NOTE 2 - COMMITMENTS AND CONTINGENCIES
The Company has entered into an agreement with a law firm to assist in
preparing and filing all organizational, incorporation, and bank applications
and to assist in preparing stock offering documents and consummating the
Company's initial offering. The aggregate cost of the services is expected to
approximate $40,000.
The Company has entered into an agreement with a bank consultant to
assist in establishing the Bank. The aggregate cost of the services is expected
to approximate $48,000.
The Company has entered into an agreement to purchase approximately
$40,000 of office furniture and equipment for its proposed branch office.
The Company leases temporary office space under a month-to-month
operating lease. The lease requires monthly payments of $600 and includes
secretarial services on an as needed basis.
Additionally, the Company has entered into a 12-month operating lease
for a modular unit to temporarily serve as its first branch office. The lease
requires monthly payments of approximately $3,100. The Company plans to
construct a permanent building by the conclusion of the lease term.
The Company has established a $425,000 line of credit with a bank. This
line is uncollateralized and is guaranteed by the organizers, jointly and
severally. The line bears interest at prime rate. No amounts are outstanding on
this line of credit as of December 31, 1998.
The Company has paid $35,000 for refundable options on three pieces of
real estate and plans to purchase the properties to build main and branch
offices. The first option (expires on January 26, 1999) for $15,000 entitles the
company to purchase 1.7 acres to be used as the main office for $584,000. The
second option (expires on March 30, 1999) for $15,000 is for an alternate
location for the main office and entitles the Company to purchase 2 acres for
$691,000. The third option for $5,000 is to purchase 1.04 acres for $450,000 to
be used as the site for a branch office.
The Company entered into an employment agreement with its president and
chief executive officer that includes a three-year compensation term, bonus
plan, incentive program, and term life insurance. The agreement contains various
termination clauses including abandonment of the effort to organize the Bank.
F-8
<PAGE> 50
================================================================================
NOTE 3 - RELATED PARTY TRANSACTIONS
One of the organizers of the Company owns the building from which the
Company leases its temporary office space.
NOTE 4 - SUBSEQUENT EVENT
On January 7, 1999, the Company exercised a purchase option on 1.04
acres of real estate (Note 2). The site was purchased for $450,000 and is to be
used as the future site of a branch office. The Bank's initial office will be
located in a temporary facility operated on this property.
The Company allowed to expire on January 26, 1999 an option to purchase
1.7 acres of land for $584,000. The $15,000 option cost was refunded to the
Company.
F-9
<PAGE> 51
NEW COMMERCE BANCORP
STOCK ORDER FORM/SUBSCRIPTION AGREEMENT
TO: New Commerce BanCorp
P. O. Drawer 129
Mauldin, South Carolina 29662
Ladies and Gentlemen:
You have informed me that New Commerce BanCorp, a South Carolina
corporation (the "Company"), is offering up to 800,000 shares of its common
stock, at a price of $10.00 per share payable as provided herein and as
described in and offered pursuant to the prospectus furnished with this
Subscription Agreement to the undersigned (the "prospectus").
1. SUBSCRIPTION. Subject to the terms and conditions hereof, the
undersigned hereby tenders this subscription, together with payment in United
States currency by check, bank draft, or money order payable to "The Bankers
Bank as escrow agent for New Commerce BanCorp" the amount indicated below (the
"Funds"), representing the payment of $10.00 per share for the number of shares
of common stock indicated below. The total subscription price must be paid at
the time the Subscription Agreement is executed.
2. ACCEPTANCE OF SUBSCRIPTION. It is understood and agreed that
New Commerce BanCorp shall have the right to accept or reject this subscription
in whole or in part, for any reason whatsoever. New Commerce BanCorp may reduce
the number of shares for which the undersigned has subscribed, indicating
acceptance of less than all of the shares subscribed on its written form of
acceptance.
3. ACKNOWLEDGMENTS. The undersigned hereby acknowledges that he
or she has received a copy of the prospectus. This Subscription Agreement
creates a legally binding obligation and the undersigned agrees to be bound by
the terms of this Agreement.
4. REVOCATION. The undersigned agrees that once this Subscription
Agreement is tendered to New Commerce BanCorp, it may not be withdrawn and that
this Agreement shall survive the death or disability of the undersigned.
BY EXECUTING THIS AGREEMENT, THE SUBSCRIBER IS NOT WAIVING ANY RIGHTS HE OR SHE
MAY HAVE UNDER FEDERAL SECURITIES LAWS, INCLUDING THE SECURITIES ACT OF 1933 AND
THE SECURITIES EXCHANGE ACT OF 1934.
THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR SAVINGS
DEPOSITS ACCOUNTS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
A-1
<PAGE> 52
Please indicate in the space provided below the exact name or names and
address in which the stock certificate representing shares subscribed for
hereunder should be registered.
<TABLE>
<S> <C>
- -------------------------------------- -------------------------------------------------------
Number of Shares Subscribed Name or Names of Subscribers (Please Print)
for (minimum 100 shares)
$
- -------------------------------------- -------------------------------------------------------
Total Subscription Price at Please indicate form of ownership desired (individual,
$10.00 per share (funds must be joint tenants with right of survivorship, tenants in
enclosed) common, trust corporation, partnership, custodian, etc.)
Date: (L.S.)
--------------------------------- --------------------------------------------------
Signature of Subscriber(s)
(L.S.)
- -------------------------------------- --------------------------------------------------
Social Security Number or Federal Signature of Subscriber(s)
Taxpayer Identification Number
</TABLE>
Street (Residence) Address:
------------------------------
------------------------------
------------------------------
City, State and Zip Code
When signing as attorney, trustee, administrator, or guardian, please
give your full title as such. If a corporation, please sign in full corporate
name by president or other authorized officer. In the case of joint tenants or
tenants in common, each owner must sign.
TO BE COMPLETED BY NEW COMMERCE BANCORP:
Accepted as of , 199 , as to shares.
------------------- -- ------------
NEW COMMERCE BANCORP
----------------------------------
By:
Title:
A-2
<PAGE> 53
FEDERAL INCOME TAX BACKUP WITHHOLDING
In order to prevent the application of federal income tax backup
withholding, each subscriber must provide the escrow agent with a correct
Taxpayer Identification Number ("TIN"). An individual's social security number
is his or her TIN. The TIN should be provided in the space provided in the
Substitute Form W-9, which is set forth below.
Under federal income tax law, any person who is required to furnish his
or her correct TIN to another person, and who fails to comply with such
requirements, may be subject to a $50 penalty imposed by the IRS.
Backup withholding is not an additional tax. Rather, the tax liability
of persons subject to backup withholding will be reduced by the amount of tax
withheld. If backup withholding results in an overpayment of taxes, a refund may
be obtained from the IRS. Certain taxpayers, including all corporations, are not
subject to these backup withholding and reporting requirements.
If the shareholder has not been issued a TIN and has applied for a TIN
or intends to apply for a TIN in the near future, "Applied For" should be
written in the space provided for the TIN on the Substitute Form W-9.
SUBSTITUTE FORM W-9
Under penalties of perjury, I certify that: (i) The number shown on
this form is my correct Taxpayer Identification Number (or I am waiting for a
Taxpayer Identification Number to be issued to me), and (ii) I am not subject to
backup withholding because: (a) I am exempt from backup withholding; or (b) I
have not been notified by the Internal Revenue Service ("IRS") that I am subject
to backup withholding as a result of a failure to report all interest or
dividends; or (c) the IRS has notified me that I am no longer subject to backup
withholding.
You must cross out item (ii) above if you have been notified by the IRS
that you are subject to backup withholding because of underreporting interest or
dividends on your tax return. However, if after being notified by the IRS that
you were subject to backup withholding you received another notification from
the IRS that you are not longer subject to backup withholding, do not cross out
item (ii).
Each subscriber should complete this section.
- -------------------------------- ------------------------------------------
Signature of Subscriber Signature of Subscriber
- -------------------------------- ------------------------------------------
Printed Name Printed Name
- -------------------------------- ------------------------------------------
Social Security or Employer Social Security or Employer
Identification No. Identification No.
A-3
<PAGE> 54
================================================================================
750,000 SHARES
[INSERT LOGO HERE]
================================================================================
<PAGE> 55
PART II
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Item 24. Indemnification of Directors and Officers
New Commerce BanCorp's articles of incorporation contain a provision
which, subject to certain limited exceptions, limits the liability of a director
to New Commerce BanCorp 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 New Commerce BanCorp; 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 New Commerce
BanCorp 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 New Commerce BanCorp or its shareholders to seek
injunctive or other equitable relief not involving payments in the nature of
monetary damages.
New Commerce BanCorp's bylaws contain certain provisions which provide
indemnification to directors 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 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, Sections 33-8-510 and 33-8-520 of the
Corporation Act would require New Commerce BanCorp to indemnify such persons
against expenses (including attorney's fees) actually and reasonably incurred in
connection therewith. The Corporation Act expressly allows New Commerce BanCorp
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
to the articles of incorporation or bylaws, or otherwise, we 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.
We have the power to purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent against any
liability asserted against him or incurred by him in any such capacity, whether
or not we would have the power to indemnify him against such liability under the
bylaws.
II-1
<PAGE> 56
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 $ 2,224
Printing and Engraving 20,000
Legal Fees and Expenses 30,000
Accounting Fees 5,000
Blue Sky Fees and Expenses 10,000
Miscellaneous Disbursements 5,000
------------
TOTAL $ 72,224
============
</TABLE>
Item 26. Recent Sales of Unregistered Securities.
From inception, New Commerce BanCorp has issued a total of 200,000
shares of its common stock to its organizers. The price per share was $10.00 for
a total purchase price of $2 million. 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.
3.1. *Articles of Incorporation, as amended
3.2. *Bylaws
4.1. See Exhibits 3.1 and 3.2 for provisions in New Commerce BanCorp'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. *Employment Agreement dated August 1, 1998 between New Commerce BanCorp
and James D. Stewart
10.2. *Agreement to Buy and Sell dated January 4, 1999, between New Commerce
BanCorp, as buyer, and The Bess G. Kirkland Trust, as seller
10.3. *Agreement to Buy and Sell dated September 30, 1998 between New
Commerce BanCorp, as buyer, and Stephen M. Young and Lewis P. Young,
Trustees of Wilbert Burial Vault, Inc., Profit Sharing Plan, as seller
10.4 *Agreement to Buy and Sell dated October 26, 1998, between New Commerce
BanCorp, as buyer, and Hawkins Development Corporation, as seller
10.5 *Sales Agency Agreement dated December 11, 1998 between New Commerce
BanCorp and J.C. Bradford & Co.
10.6 *Escrow Agreement dated October 27, 1998 between New Commerce BanCorp
and The Bankers Bank
10.7 *Data Processing Services Agreement and Contract Modification dated
December 1, 1998 between New Commerce BanCorp and Jack Henry &
Associates, Inc.
10.8 *Form of Stock Warrant Agreement
10.9 Employment Agreement dated January 29,1999 between New Commerce BanCorp
and Paula S. King.
II-2
<PAGE> 57
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 (filed as part of the signature page to the
Registration Statement)
27.1. **Financial Data Schedule (for electronic filing purposes)
* Previously filed with initial Registration Statement
** To be filed by Amendment
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 of 1933;
(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 of 1933,
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 New Commerce BanCorp pursuant to the provisions described
in Item 24 above, or otherwise, New Commerce BanCorp has been advised that in
the opinion of the SEC such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable.
If a claim for indemnification against such liabilities (other than the
payment by New Commerce BanCorp of expenses incurred or paid by a director,
officer or controlling person of New Commerce BanCorp 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, New
Commerce BanCorp 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 of 1933 and will be governed by the final
adjudication of such issue.
II-3
<PAGE> 58
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 Greenville,
State of South Carolina, on March 3, 1999.
NEW COMMERCE BANCORP
By: /s/ James D. Stewart
-------------------------------------
James D. Stewart
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following in the capacities and on
the dates indicated.
Signature Title Date
- --------- ----- ----
*/s/ Richard W. Bailey
- ------------------------------
Richard W. Bailey Director March 3, 1999
*/s/ Timothy A. Brett
- ------------------------------
Timothy A. Brett Director March 3, 1999
*/s/ Marshall J. Collins, Jr.
- ------------------------------
Marshall J. Collins, Jr. Director March 3, 1999
*/s/ Ralph S. Crawley
- ------------------------------
Ralph S. Crawley Director March 3, 1999
*/s/ G. Mitchell Gault
- ------------------------------
G. Mitchell Gault Director March 3, 1999
*/s/ Tommy D. Greer
- ------------------------------
Tommy D. Greer Director March 3, 1999
*/s/ Bobby L. Johnson
- ------------------------------
Bobby L. Johnson Director March 3, 1999
*/s/ Robert T. Kellett
- ------------------------------
Robert T. Kellett Director March 3, 1999
<PAGE> 59
Signature Title Date
- --------- ----- ----
*/s/ Dennis O. Raines
- ------------------------
Dennis O. Raines Director March 3, 1999
*/s/ Curran A. Smith
- ------------------------
Curran A. Smith Director March 3, 1999
/s/ James D. Stewart
- ------------------------
James D. Stewart Director, Chief Executive March 3, 1999
Officer and President
(principal executive officer)
/s/ Paula S. King
- ------------------------
Paula S. King Senior Vice President and March 3, 1999
Chief Financial Officer
(principal financial and
accounting officer)
/s/ James D. Stewart
- ------------------------
* As Attorney-in-Fact
<PAGE> 60
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
<S> <C>
Item 27. Exhibits.
3.1. *Articles of Incorporation, as amended
3.2. *Bylaws
4.1. See Exhibits 3.1 and 3.2 for provisions in New Commerce BanCorp'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 *Employment Agreement dated August 1, 1998 between New Commerce BanCorp
and James D. Stewart
10.2 *Agreement to Buy and Sell dated January 4, 1999, between New Commerce
BanCorp, as buyer, and The Bess G. Kirkland Trust, as seller
10.3 *Agreement to Buy and Sell dated September 30, 1998 between New
Commerce BanCorp, as buyer, and Stephen M. Young and Lewis P. Young,
Trustees of Wilbert Burial Vault, Inc., Profit Sharing Plan, as seller
10.4 *Agreement to Buy and Sell dated October 26, 1998, between New Commerce
BanCorp, as buyer, and Hawkins Development Corporation, as seller
10.5 *Sales Agency Agreement dated December 11, 1998 between New Commerce
BanCorp and J.C. Bradford & Co.
10.6 *Escrow Agreement dated October 27, 1998 between New Commerce BanCorp
and The Bankers Bank
10.7 *Data Processing Services Agreement and Contract Modification dated
December 1, 1998 between New Commerce BanCorp and Jack Henry &
Associates, Inc.
10.8 *Form of Stock Warrant Agreement
10.9 Employment Agreement dated January 29,1999 between New Commerce BanCorp
and Paula S. King.
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 (filed as part of the signature page to the
Registration Statement)
27.1. **Financial Data Schedule (for electronic filing purposes)
</TABLE>
* Previously filed with initial Registration Statement
** To be filed by Amendment
<PAGE> 1
EXHIBIT 10.9
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") dated as of January 29,
1999, is made by and between New Commerce BanCorp, a South Carolina corporation
(the "Employer" or the "Company") which is the proposed bank holding company for
a proposed national bank (the "Bank"), and Paula S. King, an individual resident
of South Carolina (the "Executive").
The Employer is in the process of organizing the Bank, and the
Executive has agreed to serve as Senior Vice President and Chief Financial
Officer of the Bank and the Company. Upon organization of the Bank, the Employer
and the Executive contemplate that this Agreement will be assigned by the
Employer to the Bank and that the Bank will assume the duties of the Company
hereunder (except pursuant to Section 3). In addition, if the organizers of the
Company elect to form a separate corporation to serve as the holding company of
the Bank, the Agreement will be assigned to that corporation and the Executive
will serve as Senior Vice President and Chief Financial Officer of that
corporation. Following any such assignment, the term "Employer" as used herein
from time to time shall refer to the Bank.
The Employer recognizes that the Executive's contribution to the growth
and success of the Bank during its organization and initial years of operations
will be a significant factor in the success of the Bank. 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 Bank and promote the best
interests of the Bank and its shareholders. 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 17 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 Senior Vice President and Chief Financial
Officer of the Bank and the Company upon the terms and conditions set forth
herein. The Executive shall have such authority and responsibilities consistent
with her position as are set forth in the Company's or the Bank's Bylaws or
assigned by the Company's or the Bank's Board of Directors (the "Board") from
time to time. The Executive shall devote her full business time, attention,
skill and efforts to the performance of her duties hereunder, except during
periods of illness or periods of vacation and leaves of absence consistent with
Bank policy. The Executive may devote reasonable periods to service as a
director or advisor to other organizations and to charitable and community
activities provided that such activities do not materially interfere with the
performance of her duties hereunder and are not in conflict or competitive with,
or adverse to, the interests of the Company or the Bank.
2. Term. Unless earlier terminated as provided herein, the
Executive's employment under this Agreement shall commence on February 22, 1999,
and be for a term (the "Term") of three years; provided that the Executive or
the Bank may at any time, by written notice, fix the Term
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to a finite term of two years commencing with the date of the notice.
Notwithstanding the foregoing, the Term of employment hereunder will end on the
date that the Executive attains the retirement age, if any, specified in the
Bylaws of the Bank.
3. Compensation and Benefits.
(a) Starting February 22, 1999, the Employer shall pay the
Executive an annual salary of $85,000. The President and Chief Executive Officer
and the Board shall review the Executive's salary at least annually and may
increase (but not decrease) the Executive's base salary if it determines in its
sole discretion that an increase is appropriate.
(b) For each calendar year beginning the year that the Bank opens,
the Executive shall be eligible to receive a cash bonus equaling up to
Twenty-Five Percent (25%) of her salary if the Bank achieves certain performance
levels or other specified goals and criteria agreed to by the Employer and the
Executive (the "Bonus Plan"), with such bonus to be paid no later than March
31st of the following calendar year.
(c) The Executive shall participate in the Bank's long-term equity
incentive program and be eligible for the grant of stock options, restricted
stock, and other awards thereunder or under any similar plan adopted by the
Company. On the date of the closing of the stock offering for the initial
capitalization of the Bank, 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 Ten Thousand (10,000) shares of Common Stock. The award agreement
for the stock option shall provide that one-fifth (1/5) of the shares subject to
the option will vest on each of the first five (5) anniversaries of the Opening
Date, but only if the Executive remains employed by the Company on such date. In
addition, the award agreement will provide that the Executive's option shall be
qualified as an incentive stock option under the Internal Revenue Code of 1986,
as amended (the "Code"); all options shall be exercisable at any time during the
ten (10) years following the date of grant at a price per share equal to the
public offering price in the offering (subject to standard antidilution
adjustments in the event of stock splits, dividends or combinations), which the
parties agree is the fair market value of the Common Stock as of the date of
grant; and all options shall be nontransferable and nonassignable by the
Executive or by any other person entitled hereunder to exercise any such rights;
provided, however, that upon the death of the Executive any rights granted
hereunder shall be transferable by the Executive's will or by the applicable
laws of descent and distribution. In the event of a Change in Control, the
restrictions on any outstanding incentive awards (including restricted stock)
granted to the Executive under any incentive plan or arrangement shall lapse and
such incentive award shall become fully (100%) vested and all stock options,
performance units, and stock appreciation rights granted to the Executive shall
become immediately exercisable and shall become fully (100%) vested.
(d) The Executive shall participate in all retirement, welfare and
other benefit plans or programs of the Employer now or hereafter applicable
generally to employees of the Employer or to a class of employees that includes
senior executives of the Employer. The Employer shall pay 100% of the
Executive's portion of any premium for such plans or programs.
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<PAGE> 3
(e) The Employer shall pay the annual dues of the Executive's
membership in the American Institute of Certified Public Accountants and the
South Carolina Association of Certified Public Accountants. The Employer shall
reimburse the Executive for reasonable costs incurred to attend Forty (40) hours
of continuing professional education annually or as otherwise needed in order to
maintain her CPA designation. Costs to be reimbursed shall include seminar fees,
travel, and accommodations, provided the Executive obtains prior approval from
the President and Chief Executive Officer for out of town seminars.
(6) 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.
4. Termination.
(a) The Executive's employment under this Agreement may be
terminated prior to the end of the Term only as follows:
(i) upon the death of the Executive;
(ii) upon the disability of the Executive for a period of
One Hundred Eighty (180) days which, in the opinion
of the Board of Directors, renders her unable to
perform the essential functions of her job and for
which reasonable accommodation is unavailable. For
purposes of this Agreement, a "disability" is defined
as a physical or mental impairment that substantially
limits one or more major life activities, and a
"reasonable accommodation" is one that does not
impose an undue hardship on the Employer;
(iii) by the Employer for Cause upon delivery of a Notice
of Termination to the Executive;
(iv) by the Executive for Good Reason upon delivery of a
Notice of Termination to the Employer within a Ninety
(90) day period beginning on the Thirtieth (30th) day
after the occurrence of a Change in Control or within
a Ninety (90) day period beginning on the one year
anniversary of the occurrence of a Change in Control;
(v) by the Employer if its effort to organize the Bank is
abandoned; or
(vi) by the Executive effective upon the Fifteenth (15th)
day after delivery of a Notice of Termination.
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(b) If the Executive's employment is terminated because
of the Executive's death, the Executive's estate shall receive any sums due her
as base salary and/or reimbursement of expenses through the end of the month
during which death occurred, plus any bonus earned or accrued under the Bonus
Plan through the date of death (including any amounts awarded for previous years
but which were not yet vested) and a pro rata share of any bonus with respect to
the current fiscal year which had been earned as of the date of the Executive's
death.
(c) During the period of any incapacity leading up to the
termination of the Executive's employment as a result of disability, the
Employer shall continue to pay the Executive her full base salary at the rate
then in effect and all perquisites and other benefits (other than any bonus)
until the Executive becomes eligible for benefits under any long-term disability
plan or insurance program maintained by the Employer, provided that the amount
of any such payments to the Executive shall be reduced by the sum of the
amounts, if any, paid to the Executive for the same period under any disability
benefit or pension plan of the Employer or any of its subsidiaries. Furthermore,
the Executive shall receive any bonus earned or accrued under the Bonus Plan
through the date of incapacity (including any amounts awarded for previous years
but which were not yet vested) and a pro rata share of any bonus with respect to
the current fiscal year which had been earned as of the date of the Executive's
incapacity.
(d) If the Executive's employment is terminated for Cause
as provided above, or if the Executive resigns (except for a termination of
employment pursuant to Section 4(e), the Executive shall receive any sums due
her as base salary and/or reimbursement of expenses through the date of such
termination.
(e) If the Executive's employment is terminated by the
Executive pursuant to clause (iv) of Section 4(a) or by the Employer for any
reason within a one-year period after a Change in Control, in addition to other
rights and remedies available in law or equity, the Executive shall be entitled
to the following:
(i) the Employer shall pay the Executive in cash
within Fifteen (15) days of the date of
termination severance compensation in an
amount equal to her current monthly base
salary annualized, plus an amount equal to
her prior year's bonus paid, plus any unpaid
bonus earned or accrued under the Bonus Plan
through the date of termination (including
any amounts awarded for previous years but
which were not yet vested) and a pro rata
share of any bonus with respect to the
current fiscal year which had been earned as
of the date of termination.
(ii) the restrictions on any outstanding
incentive awards (including restricted
stock) granted to the Executive under the
Company's or the Bank's long-term equity
incentive program or any other incentive
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<PAGE> 5
plan or arrangement shall lapse and become
fully (100%) vested, all stock options and
stock appreciation rights granted to the
Executive shall become immediately
exercisable and shall become fully (100%)
vested, and all performance units granted to
the Executive shall become fully (100%)
vested.
(f) If the Executive's employment is terminated
pursuant to clause (v) of Section 4(a), the Executive shall receive any sums due
her as base salary and/or reimbursement of expenses through the date of such
termination.
(g) If the Employer terminated the Executive's
employment other than pursuant to clauses (i), (ii), (iii), or (v) of Section
4(a), the Employer shall pay to the Executive severance compensation in an
amount equal to her current monthly base salary each month for Twelve (12)
months from the date of termination, plus any bonus earned or accrued under the
Bonus Plan through the date of termination (including any amounts awarded for
previous years but which were not yet vested) and a pro rata share of any bonus
with respect to the current fiscal year which had been earned as of the date of
the Executive's termination.
(h) 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.
(i) The parties intend that the severance
payments and other compensation provided for herein are reasonable compensation
for the Executive's services to the Employer and shall not constitute "excess
parachute payments" within the meaning of Section 280G of the Internal Revenue
Code of 1986 and any regulations thereunder. In the event that the Employer's
independent accountants acting as auditors for the Employer on the date of a
Change in Control determine that the payments provided for herein constitute
"excess parachute payments," then the compensation payable hereunder shall be
increased, on a tax gross-up basis, so as to reimburse the Executive for the tax
payable by the Executive, pursuant to Section 4999 of the Internal Revenue Code,
on such "excess parachute payments," taking into account all taxes payable by
the Executive with respect to such tax gross-up payments hereunder, so that the
Executive shall be, after payment of all taxes, in the same financial position
as if no taxes under Section 4999 had been imposed upon her.
5. Ownership of Work Product. The Employer shall own all Work
Product arising during the course of the Executive's employment (prior, present
or future). For purposes hereof,
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"Work Product" shall mean all intellectual property rights, including all Trade
Secrets, in any programming, documentation, technology or other work product
that relates to the Employer, its business or its customers and that employee
conceives, develops, or delivers to the Employer at any time during her
employment, during or outside normal working hours, in or away from the
facilities of the Employer, and whether or not requested by the Employer. If the
Work Product contains any materials, programming or intellectual property rights
that the Executive conceived or developed prior to, and independent of, the
Executive's work for the Employer, the Executive agrees to point out the
pre-existing items to the Employer and the Executive grants the Employer a
worldwide, unrestricted, royalty-free right, including the right to sublicense
such items. The Executive agrees to take such actions and execute such further
acknowledgments and assignments as the Employer may reasonably request to give
effect to this provision.
6. Protection of Trade Secrets. The Executive agrees to maintain
in strict confidence and, except as necessary to perform her duties for the
Employer, the Executive agrees not to use or disclose any Trade Secrets of the
Employer during or after her employment. "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.
7. Protection of Other Confidential Information. In addition, the
Executive agrees to maintain in strict confidence and, except as necessary to
perform her duties for the Employer, not to use or disclose any Confidential
Business Information of the Employer during her employment and for a period of
Twelve (12) 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 6 and 7 above shall
also apply to protect Trade Secrets and Confidential Business Information of
third parties provided to the Employer under an obligation of secrecy.
8. 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 from) 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, Executive shall certify in writing compliance with the
foregoing requirement.
9. Restrictive Covenants.
(a). No Solicitation of Customers. During the Executive's
employment with the Employer and for a period of six (6) months thereafter, the
Executive shall not (except on behalf of
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<PAGE> 7
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.
This restriction does not apply after a Change in Control.
(b). No Recruitment of Personnel. During the Executive's
employment with the Employer and for a period of six (6) 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, 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 a written agreement, or the employment is for a
determined period or is at will. The restriction does not apply after a Change
in Control.
(c). Non-Competition Agreement. During the Executive's
employment with the Employer and for a period of six (6) 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 or director of 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. This restriction does not apply
after a Change in Control.
10. Independent Provisions. The provisions in each of the above
sections 9(a), 9(b), and 9(c) are independent, and the unenforceability of any
one provision shall not affect the enforceability of any other provision.
11. 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
her, except that her 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 her estate.
12. 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.
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13. 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 the State of South Carolina.
14. Non-Waiver. Failure of either party 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.
15. Enforcement. The Executive agrees that in the event of any
breach or threatened breach by the Executive of any covenant contained in
Section 9(a), 9(b), or 9(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.
16. Saving Clause. 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 9(a), 9(b), and 9(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 9 accomplishes the parties' intent in
relation to the then current facts and circumstances. Any amendments to this
Agreement shall be effective only when completed in writing and signed by the
Executive and the Employer.
17. Certain Definitions.
(a) "Affiliate" shall mean any business entity controlled
by, controlling or under common control with the Employer.
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(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) "Cause" shall consist of any of (A) the commission by
the Executive of a willful act (including, without limitation, a dishonest or
fraudulent act) or a grossly negligent act, or the willful or grossly negligent
omission to act by the Executive, which is intended to cause, causes or is
reasonably likely to cause material harm to the Employer (including harm to its
business reputation), (B) the indictment of the Executive for the commission or
perpetration by the Executive of any felony or any crime involving dishonesty,
moral turpitude or fraud, (C) the material breach by the Executive of this
Agreement that, if susceptible of cure, remains uncured Ten (10) days following
written notice to the Executive of such breach, (D) the receipt of any form of
notice, written or otherwise, that any regulatory agency having jurisdiction
over the Employer intends to institute any form of formal or informal (e.g., a
memorandum of understanding which related to the Executive's performance)
regulatory action against the Executive or the Employer (provided that the Board
of Directors determines in good faith, with the Executive abstaining from
participating in the consideration of and vote on the matter, that the subject
matter of such action involves acts or omissions by or under the supervision of
the Executive or that termination of the Executive would materially advance the
Employer's compliance with the purpose of the action or would materially assist
the Employer in avoiding or reducing the restrictions or adverse effects to the
Employer related to the regulatory action); (E) the exhibition by the Executive
of a standard of behavior within the scope of her employment that is materially
disruptive to the orderly conduct of the Employer's business operations
(including, without limitation, substance abuse or sexual misconduct ) to a
level which, in the Board of Directors' good faith and reasonable judgment, with
the Executive abstaining from participating in the consideration of and vote on
the matter, is materially detrimental to the Employer's best interest, that, if
susceptible of cure remains uncured Ten (10) days following written notice to
the Executive of such specific inappropriate behavior; (F) the failure of the
Executive to devote her full business time and attention to her employment as
provided under this Agreement that, if susceptible of cure, remains uncured
Thirty (30) days following written notice to the Executive of such failure; or
(G) the consistent failure by the Executive to achieve or maintain the
performance goals established by Bank management and approved by the Board of
Directors from time to time for the Executive and the Company.
(d) "Change in Control" shall mean the occurrence during
the Term of any of the following events, unless such event is a result of a
Non-Control Transaction:
(i) The individuals who, as of the date of this
Agreement, are members of the Board of
Directors of the Employer (the "Incumbent
Board") cease for any reason to constitute
at least a majority of the Board of
Directors of the Employer; provided,
however, that if the election, or nomination
for election by the Employer's shareholders,
of any new
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director was approved in advance by a vote
of at least a majority of the Incumbent
Board, such new director shall, for purposes
of this Agreement, be considered as a member
of the Incumbent Board; provided, further,
that no individual shall be considered a
member of the Incumbent Board if such
individual initially assumed office as a
result of either an actual or threatened
"Election Contest" (as described in Rule
14a-11 promulgated under the Securities
Exchange Act of 1934 (the "Exchange Act"),
or other actual or threatened solicitation
of proxies or consents by or on behalf of
any person other than the Board of Directors
of the Employer (a "Proxy Contest"),
including by reason of any agreement
intended to avoid or settle any Election
Contest or Proxy Contest.
(ii) An acquisition (other than directly from the
Employer) of any voting securities of the
Employer (the "Voting Securities") by any
"Person" (as the term "person" is used for
purposes of Section 13(d) or 14(d) of the
Exchange Act) immediately after which such
Person has "Beneficial ownership" (within
the meaning of Rule 13d-3 promulgated under
the Exchange Act) of Twenty Percent (20%) or
more of the combined voting power of the
Employer's then outstanding Voting
Securities; provided, however, that in
determining whether a Change in Control has
occurred, Voting Securities which are
acquired in a Non-Control Acquisition shall
not constitute an acquisition which would
cause a Change in Control.
(iii) Approval by the shareholders of the Employer
of: (i) a merger, consolidation, or
reorganization involving the Employer; (ii)
a complete liquidation or dissolution of the
Employer; or (iii) an agreement for the sale
or other disposition of all or substantially
all of the assets of the Employer to any
Person (other than a transfer to a
Subsidiary).
(iv) A notice of an application is filed with the
Office of Comptroller of the Currency (the
"OCC") or the Federal Reserve Board or any
other bank or thrift regulatory approval (or
notice of no disapproval) is granted by the
Federal Reserve, the OCC, the Federal
Deposit Insurance Corporation, or any other
regulatory authority for permission to
acquire control of the Employer or any of
its banking subsidiaries.
(e) "Competing Business" shall mean any business that, in
whole or in part, is the same or substantially the same as the Business.
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(f) "Good Reason" shall mean the occurrence after a Change in
Control of any of the events or conditions described in subsections (i) through
(viii) hereof:
(i) a change in the Executive's status, title, position
or responsibilities (including reporting
responsibilities) which, in the Executive's
reasonable judgment, represents a material adverse
change from her status, title, position or
responsibilities as in effect at any time within
Ninety (90) days preceding the date of the Change in
Control or at any time thereafter; the assignment to
the Executive of any duties or responsibilities
which, in the Executive's reasonable judgment, are
inconsistent with her status, title, position or
responsibilities as in effect at any time within
Ninety (90) days preceding the date of the Change in
Control or any time thereafter; any removal of the
Executive from or failure to reappoint to reelect her
to any of such offices or positions, except in
connection with the termination of her employment for
Disability or Cause, as a result of her death, or by
the Executive other than for Good Reason, or any
other change in condition or circumstances that in
the Executive's reasonable judgment makes it
materially more difficult for the Executive to carry
out the duties and responsibilities of her office
than existed at any time within Ninety (90) days
preceding the date of Change in Control or at any
time thereafter;
(ii) a material reduction in the Executive's base salary
or any failure to pay the Executive any compensation
or benefits to which she is entitled within Five (5)
days of the date due;
(iii) the Employer's requiring the Executive to be based at
any place outside a Thirty (30) mile radius from the
executive offices occupied by the Executive
immediately prior to the Change in Control, except
for reasonably required travel on the Employer's
business which is not materially greater than such
travel requirements prior to the Change in Control;
(iv) the failure by the Employer to (A) continue in effect
(without material reduction in benefit level and/or
reward opportunities) any material compensation or
employee benefit plan in which the Executive was
participating at any time within Ninety (90) days
preceding the date of a Change in Control or at any
time thereafter, unless such plan is replaced with a
plan that provides substantially equivalent
compensation or benefits to the Executive, or (B)
provide the Executive with compensation and benefits,
in the aggregate, substantially equivalent (in terms
of benefit levels and/or reward
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opportunities) to those provided for under each other
employee benefit plan, program and practice in which
the Executive was participating at any time within
Ninety (90) days preceding the date of a Change in
Control or at any time thereafter;
(v) the insolvency or the filing (by any party, including
the Employer) of a petition for bankruptcy of the
Employer, which petition is not dismissed within
Sixty (60) days;
(vi) any material breach by the Employer of any material
provision of this Agreement;
(vii) any purported termination of the Executive's
employment for Cause by the Employer which does not
comply with the terms of this Agreement; or
(viii) the failure of the Employer to obtain an agreement,
satisfactory to the Executive, from any successor or
assign to assume and agree to perform this Agreement,
as contemplated in Section 11 hereof.
Any event or condition described in clause (i) through (viii) above
which occurs prior to a Change in Control but which the Executive reasonably
demonstrates (A) was at the request of a third party, or (B) otherwise arose in
connection with, or in anticipation of, a Change in Control which actually
occurs, shall constitute Good Reason for purposes of this Agreement,
notwithstanding that it occurred prior to the Change in Control. The Executive's
right to terminate her employment for Good Reason shall not be affected by her
incapacity due to physical or mental illness.
(g) "Non-Control Transaction" shall mean a transaction
described below:
(i) the shareholders of the Employer,
immediately before such merger,
consolidation or reorganization, own,
directly or indirectly, immediately
following such merger, consolidation or
reorganization, at least Fifty Percent (50%)
of the combined voting power of the
outstanding voting securities of the
corporation resulting from such merger,
consolidation or reorganization (the
"Surviving Corporation") in substantially
the same proportion as their ownership of
the Voting Securities immediately before
such merger, consolidation or
reorganization; and
(ii) immediately following such merger,
consolidation or reorganization, the number
of directors on the board of directors of
the Surviving Corporation who were members
of the Incumbent Board shall at least
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equal the number of directors who were
affiliated with or appointed by the other
party to the merger, consolidation or
reorganization.
(h). "Territory" shall mean a radius of ten miles from (i)
the main office of the Employer or (ii) any branch office of the Employer.
(i). "Notice of Termination" shall mean a written notice
of termination from the Employer or the Executive which specifies an effective
date of termination, indicates the specific termination provision in this
Agreement relied upon, and sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated.
18. Expenses. The Employer shall pay all legal fees and related
expenses (including the costs of experts, evidence, and counsel) incurred by the
Executive as they become due as a result of (a) the preparation of this
Agreement, (b) the Executive's termination of employment (including all such
fees and expenses, if any, incurred in contesting or disputing any such
termination of employment), and (c) the Executive seeking to obtain or enforce
any right or benefit provided by this Agreement. However, the party against
which any final judgement is obtained in any litigation resulting from the
circumstances described in clauses (b) or (c) shall pay or reimburse the
successful party for all legal fees and related expenses incurred by such
successful party in such litigation.
19. 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.
20. 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.
(The remainder of this page intentionally left blank.)
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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.
NEW COMMERCE BANCORP:
By: /s/ James D. Stewart
----------------------------------------
Its: President & CEO
----------------------------------------
EXECUTIVE:
/s/ Paula S. King
--------------------------------------------
Paula S. King
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EXHIBIT 23.1
ELLIOTT, DAVIS & COMPANY, L.L.P.
CERTIFIED PUBLIC ACCOUNTANTS
870 South Pleasantburg Drive
Greenville, South Carolina 29607
(864) 242-3370
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference of our report dated
December 31, 1998, except for Note 4, as to which the date is March 3, 1999,
relating to the financial statements of New Commerce BanCorp, in Amendment No. 2
to the Registration Statement of Form SB-2 (file no. 333-70589) and Prospectus,
and to the reference to our firm therein under the caption, "Experts."
/s/ ELLIOTT, DAVIS & COMPANY, L.L.P.
----------------------------------------
ELLIOTT, DAVIS & COMPANY, L.L.P.
Greenville, South Carolina
March 3, 1999
