<PAGE> 1
As filed with the Securities and Exchange Commission on January 29, 1999
Registration No. 333-70589
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 1
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
(State or other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification No.)
Incorporation or Organization) Classification Code Number)
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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)
----------------------------
James D. Stewart
Chief Executive Officer
712 N. Main Street
Greenville, South Carolina 29609
(864) 313-7601
(Name, Address, and Telephone Number of Agent For Service)
----------------------------
Copies of all communications, including copies of all communications
sent to agent for service, should be sent to:
Neil E. Grayson, Esq.
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. [_]
___________________
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. [_]___________________
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. [_] ___________________
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(1) FEE*
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Common Stock, $.01 par value........ 800,000 $10.00 $8,000,000 $2,224
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(a) under the Securities Act of 1933.
* 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.
<PAGE> 2
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
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION, DATED JANUARY ____, 1999
NEW COMMERCE BANCORP
[INSERT COMPANY LOGO HERE]
800,000 Shares of Common Stock
-------------------------------
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 be sold primarily by our officers and directors and by
our sales agent, J.C. Bradford & Co. 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 (i) we sell at least 550,000 shares and
(ii) 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.
THIS IS A RISKY INVESTMENT. IT IS NOT A DEPOSIT OR AN ACCOUNT AND IS
NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION 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.
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Per Share Minimum Total Maximum Total
--------- ------------- -------------
(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
</TABLE>
The sales agency commissions and the proceeds reflect commissions and fees to
be paid to our sales agent of $0.57 on each share sold, up to a maximum of
400,000 shares.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR
DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
PROSPECTUS DATED _________________
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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..................................................................................................17
Supervision and Regulation.........................................................................................21
Management.........................................................................................................27
Description of Capital Stock of New Commerce.......................................................................31
Legal Matters......................................................................................................34
Experts............................................................................................................34
Additional Information ............................................................................................34
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 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.
<PAGE> 4
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. Our initial offices
will be in Simpsonville and Mauldin, South Carolina. The bank is being as a
nationally chartered bank and member of the Federal Reserve System with
depository accounts to be insured by the FDIC. We expect the bank will receive
its final regulatory approvals and open for business in the second quarter of
1999.
REASONS FOR STARTING NEW COMMERCE BANK
The current trend of consolidation in the banking industry has led to
the acquisition of many locally owned banks in South Carolina by regional and
national banks, including the recent purchase by large out-of-state banks of
two of the remaining local banks in the Greenville 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 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.
MANAGEMENT
Our president will be James D. Stewart, who 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.
Our founding shareholders are the following twelve business leaders
who live in the Greenville area:
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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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TOTAL FUNDS TO BE RAISED IN THE OFFERING
These twelve founding shareholders recently invested $2,000,000 to
help start New Commerce. We believe that banking regulators will require us to
have at least $7,000,000 in capital to open the bank. Therefore, we are seeking
to raise at least another $5,500,000 in this offering. We will use $7,000,000
to capitalize 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. We do not intend to pay dividends to
the shareholders anytime in the foreseeable future.
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 an
independent escrow agent. The escrow agent will hold these funds until we raise
at least $5,500,000 and obtain preliminary regulatory approval to open the
bank. 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.
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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 sell up to 400,000 shares in the offering. J.C. Bradford will receive
commissions and fees of $0.57 for each share sold.
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. 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.
LOCATION OF OFFICES
Our initial office will be in a temporary facility at One Five Forks
Plaza Court near the intersection of Batesville Road and Woodruff Road in
Simpsonville, South Carolina. We plan to open this office in the second quarter
of 1999. We will also build a permanent facility located near Brookfield
Parkway and East Butler Road in Mauldin, South Carolina, which will become our
main office when it opens. We expect to open our Mauldin office in the third
quarter of 1999. We then plan to build a permanent facility in Simpsonville on
the same site as our temporary facility. We expect to open the permanent
Simpsonville facility in the fourth quarter of 1999.
Our principal executive offices are currently located at 712 North
Main Street, Greenville, South Carolina 29609 and the telephone number is (864)
313-7601.
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 net proceeds to pay expenses and provide working
capital.
New Commerce Bank will use the $7.0 million it receives from New Commerce 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."
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RISK FACTORS
There are risks involved in investing in New Commerce common stock.
Our stock is not a deposit or an account and is not insured by the FDIC or any
other government agency. You should not invest in the common stock unless you
can afford to lose your entire investment. Before investing, we encourage you
to read this entire prospectus, including the following risk factors.
WE ARE A NEW BUSINESS WITH NO OPERATING HISTORY
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 SIGNIFICANT LOSSES FOR AT LEAST TWO YEARS
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, if
ever. 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 MUST RECEIVE REGULATORY APPROVALS BEFORE WE MAY OPEN NEW COMMERCE BANK
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 $7,000,000
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 this offering with an independent escrow agent. The
escrow agent will hold these funds until we raise at least $5,500,000 (in
addition to the $2,000,000 invested by our founding shareholders) and obtain
preliminary regulatory approval to open the bank. 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. For a complete
description of these required approvals, please see "The Offering Conditions to
the Offering and Release of Funds" on page __.
WE WILL DEPEND HEAVILY ON MR. STEWART
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 may suffer.
THERE MAY BE FLUCTUATIONS IN THE PRICE OF OUR STOCK 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.
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WE EXPECT A VERY LIMITED TRADING MARKET
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 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.
THE BANKING BUSINESS IS HIGHLY COMPETITIVE AND HEAVILY REGULATED
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 __ and
"Supervision and Regulation" starting on page __.
A LOCAL ECONOMIC DOWNTURN WOULD HURT US
We will operate in Greenville County, South Carolina, and in
particular the Golden Strip area, which includes Simpsonville, Mauldin, and
Fountain Inn, South Carolina. While the economy in this area has been strong in
recent years, an economic downturn in the area would hurt our business.
OUR PROFITABILITY IS AFFECTED BY INTEREST RATES
Our profitability depends on our net interest income and net interest
spread. Net interest income is the difference between the income we earn on
assets and the interest we pay on deposits and other borrowings. Net interest
income is largely determined by our net interest spread, which is the
difference between the rates we receive on loans and investments and the rates
we pay for deposits and other borrowings. Our net interest income and net
interest spread will depend on many factors that we cannot control. These
factors include competition, government economic and monetary policies, and
national and local economic conditions. For example, in a growing economy,
interest rates we earn on loans may drop, while rates we pay on deposits may
remain stable, causing a decrease in our interest rate spread and our net
interest income. Although we will try to minimize our exposure to interest rate
risk, we cannot eliminate it.
WE HAVE NO PLANS TO PAY DIVIDENDS
We do not plan to pay cash dividends to our shareholders in the
foreseeable future. We expect to incur large initial expenses and do not expect
to be profitable for several years. Even when we become profitable, we intend
to retain our earnings as long as we believe necessary to ensure our success.
In addition, at least initially, our only source of funds for paying dividends
will be dividends we receive from New Commerce Bank. New Commerce Bank's
ability to pay dividends to New Commerce will be limited by legal and
regulatory restrictions. For more information, see "Dividend Policy" on page __
and "Supervision and Regulation" starting on page __. You should not buy shares
in this offering if you need dividend income from this investment.
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WE FACE A RISK OF LOAN DEFAULTS BY OUR BORROWERS
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 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.
OUR LENDING LIMIT WILL BE SIGNIFICANTLY LOWER THAN MOST OF OUR COMPETITORS'
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 lending limit will be
approximately $1,050,000 immediately following the offering. Until the bank is
profitable, we will lose money, which will decrease our capital and therefore
our lending limits. 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,
but we may not be successful.
ANTITAKEOVER PROVISIONS COULD REDUCE THE CHANCES THAT ANOTHER COMPANY WILL
ACQUIRE NEW COMMERCE
In many cases, shareholders receive a premium for their shares when
the 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 - Certain Antitakeover Effects" on page __.
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WE FACE RISKS RELATING TO YEAR 2000 READINESS
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 believe that we
will not incur significant expenses in connection with the Year 2000 issue.
The business of many of our customers may also be negatively affected
by the Year 2000 issue. 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.
FORWARD LOOKING STATEMENTS
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
$5,500,000 and $8,000,000. The minimum purchase for any investor (together with
the investor's affiliates) is 100 shares and the maximum purchase is 5% of the
offering, although we can at our discretion accept a subscription for a 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 shares offered (550,000), and 20.0%
of the common stock outstanding upon completion of the offering if we sell the
maximum number of shares offered (800,000). 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 (subject to
obtaining regulatory approval). 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. See "Risk Factors -
Control of New Commerce; Purchases by Organizers" and "Management."
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. See "Conditions to the Offering and
Release of Funds." 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 and no extension will alter the
binding nature of subscriptions which have already been accepted. 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 part or all of
any subscription before or after acceptance until the proceeds of this offering
are released from escrow as described below. 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
The offering is scheduled to expire on June 30, 1999, but we may
extend the offering up to February 1, 2000. 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:
- We have accepted subscriptions and payment in full for a minimum of
550,000 shares (which will result in gross offering proceeds in excess
of a minimum of $5.5 million);
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- We have obtained approval from the Federal Reserve and the South
Carolina Board for New Commerce BanCorp to acquire the stock of the
bank;
- We have received preliminary approval of the bank's application for a
charter from the Office of the Comptroller of the Currency; 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:
- Accepted subscription agreements will be void 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; and
- The full amount of all subscription funds will be returned promptly to
subscribers, without interest. 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. Escrowed funds will be invested 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.
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 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 fees and commissions 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 Securities Act
of 1933. The Securities and Exchange Commission has advised us that it believes
such indemnification is against public policy as expressed by the Securities
Act of 1933 and is, therefore, unenforceable.
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<PAGE> 12
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
Available for Future Sale." Once a secondary market is established, the market
makers may and 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> <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) 313-7601 (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.
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
$5,500,000 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.
Our gross proceeds from the sale of the minimum of 550,000 shares of
common stock will be $5,500,000 and from the maximum of 800,000 shares will be
$8,000,000. Before the offering, we also received $2,000,000 from the sale of
200,000 shares to our organizers. Our estimated organizational and offering
expenses of $100,000 will be paid from the proceeds of the offering and the
sale of shares to the organizers. We estimate that the bank's organizational
and pre-opening expenses will not to exceed $352,700. 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 have not and do not anticipate using such line of
credit. All of our costs and expenses to date have been funded by the initial
investment of the organizers.
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<PAGE> 13
Based on our assumptions, the gross proceeds, expenses, and net proceeds from
the minimum and maximum offering would be as follows:
<TABLE>
<CAPTION>
Per Share Minimum Total Maximum Total
--------- ------------- -------------
(550,000 Shares) (800,000 Shares)
---------------- ----------------
<S> <C> <C> <C>
Public Offering Price................................ $10.00 $5,500,000 $8,000,000
Sales Agency Commissions (1)......................... 0.57 228,000 228,000
Proceeds to New Commerce (1)......................... 9.43 5,272,000 7,772,000
</TABLE>
USE OF PROCEEDS BY THE NEW COMMERCE BANCORP
The following table shows our anticipated use of the proceeds of the
offering based on the sale of the minimum number and maximum number of shares.
We will retain the balance of the proceeds and initially invest them in United
States government securities or deposit them with New Commerce Bank. In the
long-term, we will use the funds for the operational expenses of the company
and the bank and other general corporate purposes, including the provision of
additional capital for 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.
<TABLE>
<CAPTION>
Minimum Maximum
---------- ----------
Offering(2) Offering(3)
----------- -----------
<S> <C> <C>
Gross proceeds from offering(1)............................... $ 7,500,000 $ 10,000,000
Sales Agent's commission(4)................................... (228,000) (228,000)
Organizational and offering expenses of New Commerce BanCorp.. (100,000) (100,000)
Investment in capital stock of the bank(5).................... $ (7,000,000) $ (8,250,000)
Remaining proceeds............................................ $ 172,000 $ 1,422,000
============ ============
</TABLE>
(1) Includes $2 million received from the organizers who purchased 200,000
shares of common stock prior to the offering at $10 per share.
(2) Assumes that 550,000 shares of common stock are sold in this offering.
(3) Assumes that 800,000 shares of common stock are sold in this offering.
(4) The commissions described in this table reflect the payment of fees and
commissions to the sales agent of $0.57 per share on the maximum of
400,000 shares.
(5) If the total offering proceeds (including the $2 million previously
received from the organizers) exceed $7.5 million, New Commerce BanCorp
will contribute 50% of the net proceeds in excess of $7.5 million to the
bank. This sum is included here.
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<PAGE> 14
USE OF PROCEEDS BY THE BANK
The following table shows the anticipated use of the proceeds by the
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.
<TABLE>
<CAPTION>
Minimum Maximum
Offering(1) Offering(2)
----------- -----------
<S> <C> <C>
Investment by New Commerce BanCorp in the bank's $ 7,000,000 $ 8,250,000
capital stock(3).....................................
Organizational and pre-opening expenses of the bank..... (352,700) (352,700)
Furniture, Fixtures and Equipment....................... (382,700) (382,700)
Lease of temporary facilities(4)........................ (37,200) (37,200)
Purchase of bank sites(5)............................... (1,141,000) (1,141,000)
Construction of bank offices(5)......................... (1,820,000) (1,820,000)
Remaining Proceeds...................................... $ 3,347,400 $ 4,597,400
=========== ===========
</TABLE>
- ---------------------------------------
(1) Assumes that 550,000 shares of common stock are sold in this offering.
(2) Assumes that 800,000 shares of common stock are sold in this offering.
(3) If the total offering (including the $2 million previously received
from the organizers) exceeds $7,500,000 New Commerce BanCorp will
contribute 50% of the net proceeds to the bank. The sum is included
here.
(4) Reflects lease of temporary facilities for a period of 1 year at a rate
of $3,100 per month.
(5) 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 a significant amount of the purchase
price for the bank's offices to the bank for use as operating capital.
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<PAGE> 15
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 of
550,000 shares and a maximum of 800,000 shares in this offering. The bank has
established the second quarter of 1999 as the target for opening the bank and
the "As Adjusted" column reflects estimated pre-opening expenses of New
Commerce BanCorp and the bank through that date.
<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 2,000 7,500 10,000
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).............................................
0 0
Preferred Stock, par value $.01 per share; 10,000,000
shares authorized; no shares issued and outstanding...... 0
1,998,000 7,192,300
Additional paid-in capital(2)............................ 9,689,800
(46,524) (46,524) (46,524)
---------- ---------- ----------
Deficit accumulated during the pre-opening stage(3)......
Total shareholders' equity (deficit)(4)............... $1,953,476 $7,145,776 $9,643,276
========== ========== ==========
</TABLE>
- ------------------------------------
(1) The organizers purchased 200,000 shares for a total of $2,000,000 prior
to the offering.
(2) The expenses of the offering will be charged against this account. We
estimate these expenses will be approximately $300,200 and these amounts
have been used in the calculation of the amounts shown in the "As
Adjusted" columns. The offering expenses include commissions and fees to
be paid to the sales agent of $0.57 per share on the maximum of 400,000
shares.
(3) The deficit results from the expensing of estimated pre-opening
expenses. As of December 31, 1998, we have incurred approximately
$46,524 of pre-opening expenses and organizational costs, and $143,427
in deferred offering costs on behalf of New Commerce BanCorp and the
bank. Additionally, we have purchased options to purchase land for its
offices for a total of $39,800 and furniture in the amount of
approximately $8,200. Our total accumulated shareholder's deficit was
$46,524. We estimate that we will incur a total of $100,000 in
organizational expenses for New Commerce BanCorp, $352,700 in
organizational and pre-opening expenses for the bank, and up to $383,000
of capitalizable property costs for the purchase of furniture, fixtures,
and equipment prior to the commencement of operations (assumed to occur
in May of 1999). However, we cannot be sure that the bank will open by
this date or at all, and the amount of pre-opening expenses and
organizational costs could be greater than our estimates. Furniture,
fixtures, and equipment will be capitalized and amortized over the life
of the lease or over the estimated useful life of the asset. We will
retain any interest earned on subscription payments held in escrow prior
to conclusion of the offering. Such interest will be used to help offset
the deficit accumulated during the pre-opening stage, but the figures
shown above do not include any estimate of the interest which may be
earned.
(4) The shareholders will probably experience additional dilution due to
operating losses expected during the initial years of the bank's
operations.
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<PAGE> 16
(5) Upon completion of the bank's offices, we intend to enter into
sale/leaseback arrangements for the 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.
DIVIDEND POLICY
We expect to initially retain all earnings to provide funds to operate
and expand the business. It is therefore unlikely that we will pay any cash
dividends in the near future. Our ability to pay any cash dividends in the
future 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"
and "Supervision and Regulation - The Bank - Capital Requirements." 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
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 $7,000,000.
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 by May of 1999.
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:
- Organization costs, which we estimate to be $100,000
consisting principally of legal, regulatory, consulting and
incorporation fees, will be charged against the initial period of
operating results.
- Pre-opening expenses, which we estimate to be $352,700
consisting principally of salaries, overhead and other operating
costs, will be charged against the initial period's operating results.
- Offering expenses, which we estimate to be $272,224
consisting principally of direct incremental costs of the stock
offering, will be deducted from the proceeds of the offering.
The bank's initial office will be located in a temporary facility at
One Five Forks Plaza Court near the intersection of Batesville Road and
Woodruff Road in Simpsonville, South Carolina. New Commerce BanCorp entered
into an agreement in September of 1998 to purchase the property for this
location for $450,000. We intend to complete a 3,000 square foot permanent
branch facility at this location at a projected cost of $427,000. New Commerce
BanCorp 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 this location at 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 to purchase the bank sites and construct its
offices for use as operating capital.
15
<PAGE> 17
Like many financial institutions, we will rely upon computers for the
daily conduct of our business and for information systems processing. Industry
experts are concerned 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 primarily rely on software and hardware provided by independent third
parties to provide our information systems. We will seek written assurances
about the Year 2000 compliance from all third party hardware and software
system providers we intend to use. To date, 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 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 believe
that we will not incur significant expenses in connection with the Year 2000
issue.
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 the 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 the
holding company structure 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 will initially depend heavily on one individual to lead management
and conduct business. James D. Stewart will be the President and Chief
Executive Officer of New Commerce BanCorp and the bank. Because we recognize
the need for a strong management team, we will hire a Chief Financial Officer,
a Chief Commercial lender and a Chief Commercial Real Estate lender prior to
opening the bank. We intend that each of these officers have at least 10 years
experience in the financial services industry. We will also intend to hire a
management team with strong ties and local experience in the bank's primary
market area described below.
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.
LOCATION AND 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
bounded by Interstate 85 to the north, Highway 75 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 out-paced 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
16
<PAGE> 18
leverage existing contacts and relationships with individuals and companies
known to management outside of the Golden Strip, primarily in Greenville.
Our current mailing address is P.O. Box 129, Mauldin, South Carolina
29662. New Commerce BanCorp's telephone number is (864) 313-7601. See
"Facilities."
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 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, wholesale distribution, manufacturing and
international business.
We plan to advertise to emphasize our local ownership, community bank
nature, and ability to provide more personalized service than our competition.
We will, however, have the ability to offer large bank services. The organizers
are generally 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 bank 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 1997.
While we have no plans to do so, due to continued consolidation trends
driven by bank mergers, we may take advantage of the market with additional
branches in the Golden Strip or 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 in the marketplace. 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. As a
result of these competitive factors, the bank may have to pay higher rates of
interest to attract deposits.
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 of "what
the bank can't do for you." This highlights the community bank approach we will
take in the market place.
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<PAGE> 19
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 and
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 one of the primary components of the
bank's loan portfolio will be loans secured by first or second mortgages on
real estate. These loans will generally consist of commercial real estate
loans, construction and development loans, and residential real estate loans
(but will exclude home equity loans, which are classified as consumer loans).
Loan terms generally will be limited to five years or less, although payments
may be structured on a longer amortization basis. Interest rates may be fixed
or adjustable, and will more likely be fixed in the case of shorter term loans.
The bank will generally charge an origination fee for loans. Management will
attempt to reduce credit risk in the commercial real estate portfolio by
emphasizing loans on owner-occupied office and retail buildings where the
loan-to-value ratio, established by independent appraisals, does not exceed 80%
and debtor cash flow exceed 120% of monthly debt service obligations. In
addition, the bank will typically require personal guarantees of the principal
owners of the property backed with a review by the bank of the personal
financial statements of the principal owners. These reviews generally reveal
secondary sources of payment and liquidity that support the loan request. The
principal economic risk associated with each category of anticipated loans,
including real estate loans, is the creditworthiness of the bank's borrowers.
The risks associated with real estate loans vary with many economic factors,
including employment levels, strength of local and national economy and
fluctuations in the value of real estate. Outside of the inherent risk of the
credit worthiness of the bank's borrowers, other risks associated with
residential mortgage loans would be the inability to move foreclosed real
estate in a down market or economy, shifts in the demographics of a given
market from residential zonings to commercial, individual customers who have
been displaced due to corporate downsizing/loss of income, and an overall
economic downturn creating unemployment due to lack of product demand. The bank
will compete for real estate loans with a number of bank competitors which are
well established in the Greenville County area. Most of these competitors have
substantially greater resources and lending limits than the bank. As a result,
we may have to charge lower interest rates to attract borrowers. See
"Competition" below. The bank may also originate loans for sale into the
secondary market. We intend to limit interest rate risk and credit risk on
these loans by locking the interest rate for each loan with the secondary
investor and receiving the investor's underwriting approval prior to
originating the loan.
Commercial Loans. The bank will make loans for commercial purposes in
various lines of businesses. Equipment loans will typically be made for a term
of five years or less at fixed or variable rates, with the loan fully amortized
over the term and secured by the financed equipment and with a loan-to-value
ratio of 80% or less. Working capital loans will typically have terms not
exceeding one year and will usually be secured by accounts receivable,
inventory, or personal guarantees of the principals of the business. For loans
secured by accounts receivable or inventory, principal will typically be repaid
as the assets securing the loan are converted into cash, and in other cases
principal will typically be due at maturity. 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. The bank expects to offer small
business loans utilizing government enhancements such as the Small Business
Administration, 7(a) program, SBA's 504 program, and Appalachian Development
Council. The principal economic risk associated with each category of
anticipated loans, including commercial loans, is the creditworthiness of the
borrowers. The risks associated with commercial loans vary with
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<PAGE> 20
many economic factors, including the economy in the Greenville County area. 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 and term loans, and revolving lines of credit such as credit cards.
These loans typically will carry balances of less than $25,000 and, in the case
of non-revolving loans, will be amortized over a period not exceeding 48 months
or will be ninety-day term loans, in each case bearing interest at a fixed
rate. Revolving loans will typically bear interest at a fixed rate and require
monthly payments of interest and a portion of the principal balance. The bank
will also provide home equity loans and lines of credit. Underwriting criteria
for home equity loans and lines of credit will generally be the same as applied
by the bank when making a first mortgage loan, as described above, and home
equity lines of credit will typically expire ten years or less after
origination. Home Equity loans will typically carry balances less than
$100,000. As with the other categories of loans, the principal economic risk
associated with consumer loans is the creditworthiness of the bank's borrowers,
and the principal competitors for consumer loans will be the established banks
in the Greenville County area. Consumer loans are generally considered to have
greater risk than first or second mortgages on real estate.
Loan Approval and Review. The bank's loan approval policies will
provide for various levels of officer lending authority. When the amount of
aggregate loans to a single borrower exceeds that individual officer's lending
authority, the loan request will be considered and approved by an officer with
a higher lending limit or the officers' loan committee. The bank will establish
an officers' loan committee that has lending limits, and any loan in excess of
this lending limit will be approved by the directors' loan committee. The bank
will not make any loans to any director, officer, or employee of the bank
unless the loan is approved by the board of directors of the bank and is made
on terms not more favorable to such person than would be available to a person
not affiliated with the bank. The bank currently intends to adhere to Federal
National Mortgage Association 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.
Lending Limits. The bank's lending activities will be subject to a
variety of lending limits imposed by federal law. While differing limits apply
in certain circumstances based on the type of loan or the nature of the
borrower (including the borrower's relationship to the bank), in general the
bank will be subject to a loan-to-one-borrower limit. These limits will
increase or decrease as the bank's capital increases or decreases. Unless the
bank is able to sell participations in its loans to other financial
institutions, the bank will not be able to meet all of the lending needs of
loan customers requiring aggregate extensions of credit above these limits. It
is not currently anticipated that the bank will have an initial loan loss
reserve when it commences operations.
OTHER BANKING SERVICES
Other anticipated bank services include cash management services 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 a shared network of automated teller machines
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. The bank does not plan to exercise
trust powers during its initial years of operation.
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<PAGE> 21
COMPETITION
The banking business is highly competitive. The bank will compete as a
financial intermediary with other commercial banks, savings and loan
associations, credit unions, and money market mutual funds operating in the
Greenville County area and elsewhere. In 1997, there were more than 139 banking
offices representing 21 financial institutions operating in Greenville County,
holding over $4.9 billion in deposits, and more than 17 banking offices
representing 10 financial institutions operating in the Golden Strip, holding
$425 million in deposits, representing a 4.2 percent increase over the previous
year. Based on a conservative growth rate of 4.2 percent, 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 percent market share with deposits in
excess of 100 million dollars.
FACILITIES
The bank's initial office will be located in a temporary facility at
One Five Forks Plaza Court near the intersection of Batesville Road and
Woodruff Road in Simpsonville, South Carolina. New Commerce BanCorp entered
into an agreement in September of 1998 to purchase the property for this
location for $450,000. We intend to complete a 3,000 square foot permanent
branch facility at this location at a projected cost of $427,000. New Commerce
BanCorp 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 this location at 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 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.
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 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, or any of their
properties are subject to any material legal proceedings.
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
Federal Deposit Insurance Corporation 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.
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<PAGE> 22
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 (i) acquiring substantially all
the assets of any bank, (ii) acquiring direct or indirect ownership or control
of any voting shares of any bank if after such acquisition it would own or
control more than 5% of the voting shares of such bank (unless it already owns
or controls the majority of such shares), or (iii) merging or consolidating
with another bank holding company.
In addition, and subject to certain exceptions, the Bank Holding
Company Act and the Change in Bank Control Act, together with regulations
thereunder, require Federal Reserve approval (or, depending on the
circumstances, no notice of disapproval) prior to any person or company
acquiring "control" of a bank holding company. 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 (which we will likely
be required to do with respect to the common stock once we have more than 500
shareholders of record) or no other person owns a greater percentage of that
class of voting securities immediately after the transaction. The regulations
provide a procedure for challenge of the rebuttable control presumption.
Under the 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 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 (although the ability of the bank to pay dividends is 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
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<PAGE> 23
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 (generally $100,000 per depositor,
subject to aggregation rules). 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.
The bank will be required by the Office of the Comptroller of the Currency 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 Federal Deposit Insurance Corporation 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 and the
appropriate agency (and state supervisor when applicable). The FDIC Improvement
Act directs the FDIC to develop with other appropriate agencies a method for
insured depository institutions to provide supplemental disclosure of the
estimated fair market value of assets and liabilities, to the extent feasible
and practicable, in any balance sheet, financial statement, report of condition
or 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: (i) internal
controls, information systems, and audit systems; (ii) loan documentation;
(iii) credit underwriting; (iv) interest rate risk exposure; and (v) 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, respectively, to be troubled institutions must give
the Office of the Comptroller of the Currency or the Federal Reserve Board,
respectively, 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
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maintained for commercial banks and thrifts, respectively, with insurance
premiums from the industry used to offset losses from insurance payouts when
banks and thrifts fail. In 1993, the FDIC adopted a rule which 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 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 is 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 (subject to veto by new state law), interstate branching
by banks if allowed by state law, interstate merging by banks, and de novo
branching by national banks if allowed by state law.
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, the Office of the
Comptroller of the Currency, or the Office of Thrift Supervision shall evaluate
the record of the financial institutions in meeting the credit needs of their
local communities, including low and moderate income
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neighborhoods, consistent with the safe and sound operation of those
institutions. These factors are also considered in evaluating mergers,
acquisitions, and applications to open a branch or facility.
Other Regulations. Interest and certain other charges collected or
contracted for by the bank are subject to state usury laws and certain federal
laws concerning interest rates. The bank's loan operations are also subject to
certain federal laws applicable to credit transactions, such as the federal
Truth-In-Lending Act, governing disclosures of credit terms to consumer
borrowers; the Home Mortgage Disclosure Act of 1975, requiring financial
institutions to provide information to enable the public and public officials
to determine whether a financial institution is fulfilling its obligation to
help meet the housing needs of the community it serves; the Equal Credit
Opportunity Act, prohibiting discrimination on the basis of race, creed or
other prohibited factors in extending credit; the Fair Credit Reporting Act of
1978, governing the use and provision of information to credit reporting
agencies; the Fair Debt Collection Act, governing the manner in which consumer
debts may be collected by collection agencies; and the rules and regulations of
the various federal agencies charged with the responsibility of implementing
such federal laws. The deposit operations of the bank also are subject to the
Right to Financial Privacy Act, which imposes a duty to maintain
confidentiality of consumer financial records and prescribes procedures for
complying with administrative subpoenas of financial records, and the
Electronic Funds Transfer Act and Regulation E issued by the Federal Reserve
Board to implement that act, which governs automatic deposits to and
withdrawals from deposit accounts and customers' rights and liabilities arising
from the use of automated teller machines and other electronic banking
services.
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 1.25% 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.
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
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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 (i) submit a
capital restoration plan; (ii) raise additional capital; (iii) restrict their
growth, deposit interest rates, and other activities; (iv) improve their
management; (v) eliminate management fees; or (vi) divest themselves of all or
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. 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" (primarily including management,
employees, and agents of a financial institution, and independent contractors
such as attorneys and accountants and others who participate in the conduct of
the financial institution's affairs). These practices can include the failure
of an institution to timely file required reports or the filing of false or
misleading information or the submission of inaccurate reports. Civil penalties
may be as high as $1,000,000 a day for such violations. Criminal penalties for
some financial institution crimes have been increased to twenty years. In
addition, regulators are provided with greater flexibility to commence
enforcement actions against institutions and institution-affiliated parties.
Possible enforcement actions include the termination of deposit insurance.
Furthermore, 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
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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.
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.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED SHARES ANTICIPATED TO BE OWNED FOLLOWING
PRIOR TO THE OFFERING OFFERING THE
------------------------- -----------------------------------------
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>
(1) Information relating to the beneficial ownership of Common Stock is
based upon "beneficial ownership" concepts set forth in rules of the Securities
and Exchange Commission under Section 13(d) of the 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,
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minor children, and other relatives residing in the same household, and trusts,
partnerships, corporations or deferred compensation plans which are affiliated
with the principal.
(2) Percent is calculated by treating shares subject to options held by the
named individual which are exercisable within the next 60 days as if
outstanding, but treating shares subject to options not exercisable within 60
days as not outstanding.
(3) Does not include warrants to purchase 7,500 shares of Common Stock to
be granted to each organizer.
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>
NAME AGE POSITION WITH NEW COMMERCE BANCORP
- ---- --- ----------------------------------
<S> <C> <C>
Richard W. Bailey 65 Director III
Timothy A. Brett 45 Director III
Marshall J. Collins, Jr. 57 Director I
Ralph S. Crawley 63 Director II
G. Mitchell Gault 43 Director III
Tommy D. Greer 66 Director I
Bobby L. Johnson 64 Director II
Robert T. Kellett 56 Director II
Dennis O. Raines 46 Director II
Curran A. Smith 54 Director I
James D. Stewart 45 Director III, 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.
Marshall J. Collins, Jr., Class I director, is Chairman of BI-LO, Inc.
and President and CEO of Ahold USA Support Services in Mauldin, South Carolina.
BI-LO, Inc. is a multi state grocery store 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
27
<PAGE> 29
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. New Commerce
BanCorp 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 CEO 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.
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.
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.
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<PAGE> 30
EMPLOYMENT AGREEMENTS
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,
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 (i) 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, (ii) solicit major customers of the bank
for the purpose of providing financial services, or (iii) solicit employees of
the bank for employment. If Mr. 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.
We anticipate that New Commerce BanCorp and New Commerce Bank will
enter into similar employment arrangements with other key employees as they are
hired.
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 that 85% of 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. See "--Shares Eligible for Future Sale." 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 then exercised.
29
<PAGE> 31
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 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.
We have granted Byron Richardson, a banking consultant with Bank
Resources, Inc., warrants to purchase 2,500 shares of the common stock of the
company in connection with services provided related to the formation of the
bank, including assistance in the preparation of the bank's application for its
charter with the Office of the Comptroller of the Currency and its application
for federal deposit insurance with the FDIC. Mr. Richardson's warrants were
granted on the same terms as those warrants received by the organizers prior to
the offering.
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.
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
30
<PAGE> 32
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.
CERTAIN 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 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.
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<PAGE> 33
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.
Certain 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 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'
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<PAGE> 34
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.
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 Securities and Exchange Commission (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.
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<PAGE> 35
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 and F-8
</TABLE>
F-1
<PAGE> 36
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 New Commerce BanCorp'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.
Greenville, South Carolina
December 31, 1998
F-2
<PAGE> 37
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> 38
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> 39
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> 40
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> 41
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. New Commerce BanCorp has filed a charter application with the
Office of the Comptroller of the Currency 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 May of 1999.
New Commerce BanCorp 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. New Commerce BanCorp's planned principal
operations have not commenced and revenue has not been recognized from the
planned principal operations.
New Commerce BanCorp 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 New Commerce BanCorp have purchased 200,000 shares
of common stock at $10 per share, for a total of $2,000,000. The remaining
shares will be sold through a public offering. New Commerce BanCorp will use a
maximum of $8,250,000 and minimum of $7,000,000 of the proceeds to capitalize
the proposed bank.
YEAR-END
New Commerce BanCorp 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 New
Commerce BanCorp's financial position and results of operations and
disclosure of contingent assets and liabilities. Actual results could
differ from these estimates.
CASH EQUIVALENTS
New Commerce BanCorp considers all highly liquid investments with original
maturities of three months or less to be cash equivalents. New Commerce
BanCorp 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 New Commerce BanCorp
in connection with the offering and issuance of its stock. The deferred
stock offering costs will be deducted from New Commerce BanCorp'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
New Commerce BanCorp begins planned operations. Organization costs include
incorporation, legal and consulting fees incurred in connection with
establishing New Commerce
F-7
<PAGE> 42
BanCorp. In accordance 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. New Commerce BanCorp 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
New Commerce BanCorp 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 New Commerce BanCorp's initial offering. The aggregate cost of the
services is expected to approximate $40,000.
New Commerce BanCorp 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.
New Commerce BanCorp has entered into an agreement to purchase
approximately $40,000 of office furniture and equipment for its proposed branch
office.
New Commerce BanCorp 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, New Commerce
BanCorp 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. New Commerce BanCorp plans to construct a
permanent building by the conclusion of the lease term.
New Commerce BanCorp 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.
New Commerce BanCorp 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 New Commerce BanCorp 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 New Commerce
BanCorp to purchase 2 acres for $691,000. The third option for $5,000 is to
purchase 1.04 acres for $440,000 to be used as the site for the branch office.
This transaction closed on January 7, 1999.
New Commerce BanCorp 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> 43
NOTE 3 - RELATED PARTY TRANSACTIONS
One of the organizers of New Commerce BanCorp owns the building from
which New Commerce BanCorp leases its temporary office space.
F-9
<PAGE> 44
NEW COMMERCE BANCORP
STOCK ORDER FORM/SUBSCRIPTION AGREEMENT
TO: New Commerce BanCorp
712 N. Main Street
Greenville, South Carolina 29609
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> 45
Please indicate in the space provided below the exact name or names
and address in which the stock certificate representing shares subscribed for
hereunder should be registered.
<TABLE>
<S> <C>
- ------------------------------------- ----------------------------------------------------------
Number of Shares Subscribed Name or Names of Subscribers (Please Print)
for (minimum 100 shares)
$
------------------------------------ ----------------------------------------------------------
Total Subscription Price at Please indicate form of ownership desired (individual
$10.00 per share (funds 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
Street (Residence) Address:
----------------------------------------
----------------------------------------
----------------------------------------
City, State and Zip Code
</TABLE>
When signing as attorney, trustee, administrator, or guardian, please
give your full title as such. If a corporation, please sign in full corporate
name by president or other authorized officer. In the case of joint tenants or
tenants in common, each owner must sign.
TO BE COMPLETED BY NEW COMMERCE BANCORP:
Accepted as of_________________, 199__, as to_______shares.
NEW COMMERCE BANCORP
--------------------------------------
By:
Title:
A-2
<PAGE> 46
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> 47
750,000 SHARES
[INSERT LOGO HERE]
<PAGE> 48
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> 49
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 $2,000,000. There were no underwriting discounts
or commissions paid with respect to these transactions. All sales were exempt
under Section 4(2) of the Securities Act of 1933.
<TABLE>
<CAPTION>
Item 27. Exhibits.
<S> <C>
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 Company, 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
23.1. Consent of Independent Public Accountants
</TABLE>
II-2
<PAGE> 50
<TABLE>
<S> <C>
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
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 Securities and Exchange Commission 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> 51
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 January 29, 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.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
*
- -----------------------------------
Richard W. Bailey Director
*
- -----------------------------------
Timothy A. Brett Director
*
- -----------------------------------
Marshall J. Collins, Jr. Director
*
- -----------------------------------
Ralph S. Crawley Director
</TABLE>
<PAGE> 52
SIGNATURES
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
*
- -----------------------------------
G. Mitchell Gault Director
*
- -----------------------------------
Tommy D. Greer Director
*
- -----------------------------------
Bobby L. Johnson Director
*
- -----------------------------------
Robert T. Kellett Director
*
- -----------------------------------
Dennis O. Raines Director
*
- -----------------------------------
Curran A. Smith Director
/s/ James D. Stewart
- -----------------------------------
James D. Stewart Director, Chief Executive January 29, 1999
Officer and President
/s/ James D. Stewart
- -----------------------------------
* As Attorney-in-Fact
</TABLE>
<PAGE> 53
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
Item 27. Exhibits.
<S> <C>
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 Company, 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 the Company and
Jack Henry & Associates, Inc.
10.8 *Form of Stock Warrant Agreement
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 10.2
AGREEMENT TO BUY AND SELL
1. PARTIES. This legally binding contract entered into on this 22nd day of
January, 1999, between THE BESS G. KIRKLAND Trust, (hereinafter the "Seller")
and NEW COMMERCE BANCORP (hereinafter the "Buyer").
2. PROPERTY TO BE SOLD. Subject to terms and conditions herein, Seller
agrees to sell and Buyer agrees to buy, approximately 2 acres, plus or minus,
subject to survey, of property identified on Greenville County Tax Maps as being
out of Tax Map Number 546.1-1-5 and 546.1-1-5.1, as shown on the attached
EXHIBIT A and EXHIBIT A-1.
3. PURCHASE PRICE. The Purchase Price shall be $8.00 per square foot to be
adjusted upon final survey net of any highway right of way.
4. EFFECTIVE DATE. The Effective Date of this Agreement will be the date
of the last signature of the parties. Should the Inspection Period or any
Extension fall on a weekend or holiday, the following business day shall be the
date of expiration.
5. METHOD OF PAYMENT. Within three (3) days of execution of this
Agreement, the Buyer shall pay as earnest money the sum of Fifteen Thousand and
00/100 ($15,000.00) Dollars to Earle Furman & Associates, Inc., Greenville,
South Carolina as escrow agent. Seller shall grant Buyer an Inspection Period as
defined in Paragraph 16. Following the Inspection Period, Buyer may deposit in
escrow an additional Ten Thousand and 00/100 ($10,000.00) Dollars to extend this
Agreement an additional sixty (60) days. However, if Buyer elects to extend the
Inspection Period,Buyer herein agrees that the only contingencies remaining
shall be satisfactory title and the contingencies outlined in Paragraph 15
herein. In the event Buyer does not notify Seller of its intention to exercise
the extension period at the expiration of the Inspection Period, this Agreement
will terminate, and Seller will refund earnest money to Buyer. At closing, the
balance of the Purchase Price shall be paid in cash. The amounts paid by Buyer
as earnest money under this Paragraph 5 shall be applied as a credit against the
Purchase Price.
6. CLOSING COSTS. Closing Costs, including the costs of obtaining any
financing shall be paid as follows:
(a) Seller shall provide or pay for preparation of deed, cost of deed
stamps, all deed recording fees pursuant to Title 12, Chapter 24, S.C. Code of
Laws, and/or any other documentary stamps or transfer taxes which are now or may
hereafter be applicable to real estate transfers, and any cost necessary to
provide a marketable title, including recording of any satisfactions, property
taxes to the day of closing, and any other cost agreed to herein.
(b) Unless otherwise agreed herein, Buyer shall pay the costs of the
title examinations, all recording fees (except for deed recording fees pursuant
to Title 12, Chapter 24, S.C. Code of Laws, which shall be Seller's obligation),
and, if applicable, any loan costs, the costs of any appraisal, and the
preparation of other closing documents.
7. REAL ESTATE COMMISSION. Seller shall be responsible for the payment of
the real estate sales commission which is ten percent (10%) of the purchase
price cash out up front to be divided equally between Earle Furman & Associates,
Inc., Seller's Agent, and Caine Company, Inc., Buyer's Agent, arising out of
their services in
1
<PAGE> 2
connection with the closing of this transaction. Buyer and Seller warrant to
each other that each respectively, has not dealt with any other broker or third
party in connection with this transaction.
8. CLOSING DATE. The Closing Date shall be no later than thirty (30) days
following the expirations of the Inspection Period and all extensions provided
in this Agreement.
9. POSSESSION. Seller shall give possession to the Buyer at closing,
provided title has passed.
10. AUTHORITY. Seller represents to Buyer that it either owns the subject
property or has full authority to enter into an agreement to sell such property
on behalf of the owners.
11. ENTIRE AGREEMENT. This written instrument expresses the Entire
Agreement and all promises, covenants, and warranties between the Buyer and
Seller. It can only be changed by a subsequent written instrument (Addendum)
signed by both parties.
12. REAL PROPERTY. The Real Property to be sold, unless otherwise agreed by
the parties,includes all improvements of any kind, which are attached to or
planted on the premises. Seller represents and warrants that there are no
persons who have any outstanding agreements to acquire any interest in the
property and no outstanding liens affecting the property and that there is no
pending litigation affecting the property. Seller will maintain property with
all applicable laws and regulations.
13. PRORATIONS. Property taxes and rent, as well as other expenses and
income of the property, if applicable, shall be apportioned to the date of
closing. Annual expenses or income shall be apportioned using 365 days. Monthly
property expenses or income shall be apportioned by the number of days in the
month of closing. The amount of the property taxes shall be estimated by closing
attorney or agent using information available. Prorations at closing shall be
final.
14. ENCUMBRANCES AND RESTRICTIONS. Seller shall convey marketable title to
the property to Buyer in fee simple free from all liens, except restrictions of
record and those Buyer has agreed to assume.
If Seller is unable to convey marketable title without a court action
or incurring any unusual expenses or within thirty (30) days after herein
specified closing date, Buyer has the option of terminating this Agreement by
giving written notice to the Seller.
15. CONTINGENCIES. Purchase of the property is contingent on:
(a) Buyer obtaining approval from the Office of the Comptroller of the
Currency (OCC) of its charter as a national bank or bank holding company by May
1, 1999;
(b) Buyer completing successfully an offering of its stock by April 1,
1999 as a result of which not less that $7,500,000 in capital is raised by the
Buyer.
(c) Property being properly zoned for use as a banking institution.
(d) Approval of the subdivision plat by the City of Mauldin.
2
<PAGE> 3
(e) Approval of the appropriate curb cuts by SCDOT.
In the event that the herein listed contingencies are not resolved to
Buyer's satisfaction, Buyer may terminate this Agreement, all earnest money
deposits paid by Buyer under Paragraph 5 hereof will be refunded, and all
obligations of each party shall cease to exist.
16. INSPECTION PERIOD. For a period of ninety (90) days from the date of
execution of this Agreement, Seller grants Buyer and its agents the right to
enter the property during an Inspection Period for conducting soil test, market
studies, borings, engineering studies, environmental tests, or other such
exploratory measures as Buyer deems prudent. In the event Buyer,at its sole
discretion, determines that property is unsuitable, Buyer may terminate
Agreement, earnest money deposits shall be refunded to Buyer, and all
obligations of each party to the other shall cease to exist.
17. ENVIRONMENTAL HAZARDS. Seller represents and warrants that Seller has
received no notices from any federal or state agency advising Seller of any
potential environmental hazards or contamination on this parcel or any adjoining
parcel, and further, the Seller has no knowledge of any chemical, petroleum, or
other hazardous material storage or burial on the subject property or that any
other environmental hazards exist. In the event that any environmental audit or
assessment requires further evaluation, the Inspection period as outlined in
Paragraph 16 will be extended until thirty (30) days following the reporting of
the results of such additional tests or evaluations. Additionally, Seller agrees
to refund all earnest money deposits in the event that an environmental finding
exceeds acceptable state or federal guidelines. Buyer shall be obligated to
initiate any environmental studies within ten (10) days of the Effective Date of
this Agreement.
18. RISK OF LOSS OF DAMAGE. Any loss or damage to the property by fire or
other casualty until the day of closing shall be the responsibility of Seller.
In such case, Seller shall have the option of restoring property to its present
condition within thirty (30) days after herein specified closing date, with date
of closing and possession to be extended accordingly. If property is not
restored within said period, Buyer shall have the right to terminate this
Agreement by written notice to Seller. In such case, both parties shall execute
a written release of the other from this Agreement.
19. DEFAULT. If Buyer elects to terminate this Agreement (after Inspection
Period), Seller shall retain all earnest money deposits as full liquidated
damages, and obligations of each party to the other shall cease. If termination
is because of default by Seller, Buyer shall seek all remedies of specified
performance including damages.
20. PERSONS BOUND. The benefits and obligations of this Agreement shall
inure to and bind heirs, assigns, successors, executors or administrators.
Whenever used, singular shall include plural, and use of any gender shall
include all. This is a legally binding Agreement.
21. TELECOPY. Buyer and Seller both agree that receipt of a signed
Agreement by telecopy (FAX) will be the same as receipt of an original signed
Agreement.
22. STREET NAMING RIGHTS. Seller agrees to name the proposed street
adjacent to the subject property "New Commerce Court".
23. BUYERS INTENT. It is the Buyers intent to commence construction of an
approximate 10,000 square foot main office for New Commerce Bank for occupancy
before 12-31-99.
3
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24. STORMWATER MANAGEMENT POND EASEMENT AND MAINTENANCE. Prior to or at
Closing, Buyer and Seller mutually agree to execute a Stormwater Management Pond
Easement and Management Agreement that establishes an easement for Buyer's use
of a joint retention pond and an agreement for joint maintenance of the
retention pond.
25. STORMWATER EASEMENT. Prior to or at Closing, Seller shall provide Buyer
with an easement across Seller's adjoining property for stormwater drainage to
the joint retention pond.
26. LIMITATIONS ON ASSIGNMENT. Buyer understands that the specific use of
the subject property has a significant impact on the development of the
remainder of Seller's adjoining property. Consequently, Buyer herein agrees that
this Contract may not be assigned to a non bank user without the prior written
permission of the Seller.
27. EXPIRATION. This offer will expire and become null and void if not
executed by Seller and returned by Buyer by January 30, 1999.
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties.
<TABLE>
<S> <C>
SELLER: THE BESS G. KIRKLAND TRUST
/s/ Morine C. Klebeck By: /s/ Fletcher L. Kirkland, Jr. 01-22-99
- ------------------------------- -------------------------------------------------------
Witness Fletcher L. Kirkland, Jr. Date
- ------------------------------- Title: Trustee
Witness
BUYER: NEW COMMERCE BANCORP
/s/ Gwen Britt By: /s/ James D. Stewart 01-22-99
- ------------------------------- -------------------------------------------------------
Witness James D. Stewart Date
/s/ Dennis Raines Title: President and CEO
- -------------------------------
Witness
</TABLE>
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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 ACCOUNTANT
We hereby consent to the incorporation by reference of our report
dated December 31, 1998, relating to the financial statements of New Commerce
BanCorp, in the Registration Statement on Form SB-2 and Prospectus, and to the
reference to our firm therein under the caption, "Experts."
ELLIOTT, DAVIS & COMPANY, L.L.P.
By: /s/ Elliott, Davis & Company, L.L.P.
------------------------------------------
Greenville, South Carolina
January 29, 1999
