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As filed with the SEC on September 23, 1999
Registration No. 333-83851
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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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GREENVILLE FIRST BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
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South Carolina 6021 58-2459561
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(State or other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
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1805 Laurens Road
Greenville, South Carolina 29607
(864) 241-7806
(Address and Telephone Number of Intended Principal Place of Business)
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R. Arthur Seaver, Jr.
Chief Executive Officer
1805 Laurens Road
Greenville, South Carolina 29607
(864) 241-7806
(Name, Address, and Telephone Number of Agent For Service)
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Copies of all communications, including copies of
all communications sent to agent for service,
should be sent to:
Neil E. Grayson, Esq. Boyd C. Campbell, Jr., Esq.
C. Russell Pickering, Esq. Smith Helms Mulliss & Moore, L.L.P.
J. Brennan Ryan, Esq. 201 North Tryon Street
Nelson Mullins Riley & Scarborough, L.L.P. 30th Floor
999 Peachtree Street, N.E., Suite 1400 Charlotte, North Carolina 28202
Atlanta, Georgia 30309 (704) 343-2000
(404) 817-6000 (704) 334-8467 (Fax)
(404) 817-6225 (Fax)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act 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 FEE
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Common Stock, $.01 par value.... 1,380,000 $10.00 $13,800,000 $3,836*
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* Previously paid
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The registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to such Section 8(a),
may determine.
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The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the SEC
is effective. This prospectus is not an offer to buy these securities in any
state where the offer or sale is not permitted.
THIS IS A PRELIMINARY PROSPECTUS AND IS NOT YET COMPLETE. SEPTEMBER 23, 1999
GREENVILLE FIRST BANCSHARES, INC.
A proposed bank holding company for
[BANK LOGO HERE]
GREENVILLE FIRST BANK, N.A. (IN ORGANIZATION)
1,200,000 Shares of Common Stock
$10.00 per share
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We are offering shares of common stock of Greenville First Bancshares,
Inc. to fund the start-up of a new community bank, Greenville First Bank, N.A.,
in organization. Greenville First Bancshares, Inc. will be the holding company
and sole owner of the bank. The bank will be headquartered in Greenville County,
South Carolina, and we expect to open the bank in the fourth quarter of 1999 or
the first quarter of 2000. This is our first offering of stock to the public,
and there is no public market for our shares. This is a firm commitment
underwriting. The maximum purchase is 5% of the offering, although we may at our
discretion accept subscriptions for more. We will request that quotations for
the common shares be reported on the Nasdaq OTC Bulletin Board under the symbol
"GVBK" or "GVFB".
THIS IS A NEW BUSINESS. AS WITH ALL NEW BUSINESSES, AN INVESTMENT WILL
INVOLVE RISKS. IT IS NOT A DEPOSIT OR AN ACCOUNT AND IS NOT INSURED BY THE FDIC
OR ANY OTHER GOVERNMENT AGENCY. YOU SHOULD NOT INVEST IN THIS OFFERING UNLESS
YOU CAN AFFORD TO LOSE SOME OR ALL OF YOUR INVESTMENT. SOME OF THE RISKS OF THIS
INVESTMENT ARE DESCRIBED UNDER THE HEADING "RISK FACTORS" BEGINNING ON PAGE 6.
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR
DISAPPROVED THESE SECURITIES OR DETERMINED WHETHER THIS PROSPECTUS IS TRUTHFUL
OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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PER SHARE TOTAL
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Public Offering Price............... $10.00 $12,000,000
Underwriter's Discount.............. $ .63 $ 756,000
Proceeds to Greenville First
Bancshares ......................... $ 9.37 $11,244,000
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We will pay an underwriter's discount of $.35 on shares sold to our
officers and directors and other investors which we have identified, up to 30%
of the offering, and $.75 on all other shares sold. The underwriter's discount
shown in the table reflects a blended rate based on the assumption that 30% of
the shares will have the lower discount. Wachovia Securities has the right to
purchase up to an additional 180,000 shares at $10.00 per share, less the
underwriter's discount of $.75 per share, within 30 days from the date of this
prospectus to cover over-allotments.
THE UNDERWRITER EXPECTS TO DELIVER THE SHARES OF COMMON STOCK ON
__________, 1999.
[WACHOVIA LOGO HERE]
___________ ____, 1999
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GREENVILLE FIRST BANCSHARES, INC.
GREENVILLE FIRST BANK, N.A. (IN ORGANIZATION)
PROPOSED MARKET AREA
[INSERT MAP OF SOUTH CAROLINA AND GREENVILLE COUNTY SHOWING MARKET AREA]
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SUMMARY
We encourage you to read the entire prospectus carefully before
investing. Unless otherwise stated, all information in this prospectus assumes
that the underwriter will not exercise its over-allotment option.
GREENVILLE FIRST BANCSHARES AND GREENVILLE FIRST BANK
We incorporated Greenville First Bancshares, Inc. in March of 1999 to
organize and serve as the holding company for Greenville First Bank, a new
national bank proposed to be located in Greenville County. The bank will focus
on the local community, emphasizing personal service to individuals and
businesses in Greenville County. On September 21, 1999, we received preliminary
approval from the Office of the Comptroller of the Currency to open the new
bank. Final approval is conditioned upon our raising the required minimum
capital, receipt of FDIC approval, and the implementation of proper bank
regulatory policies and procedures. We have also filed for deposit insurance for
the bank with the FDIC, and we will file for approval of the Federal Reserve
Board to become a bank holding company and acquire all of the stock of the new
bank. We expect to receive all final regulatory approvals and open the bank for
business in the fourth quarter of 1999 or the first quarter of 2000.
WHY WE ARE ORGANIZING A NEW BANK IN GREENVILLE COUNTY
Greenville County has a growing and dynamic economic environment that
we believe will support Greenville First Bank. It is South Carolina's most
populous county with over 340,000 residents, and its growth in median household
income and population have consistently outpaced that of the rest of South
Carolina. The county and surrounding area is home to several large manufacturing
and engineering concerns which provide a stable business foundation and a
skilled labor force. In February 1999, the unemployment rate was approximately
3%. One factor in this growth is Greenville County's strategic location on I-85
between Atlanta and Charlotte. Within 12 months, the Southern Connector toll
road should be completed. That road will connect I-85 and I-385 through the
bank's service area, which we expect to promote additional growth and commercial
development.
We believe that there is an opportunity in Greenville County for a new
locally managed bank focused on the community and personalized service to
individuals and local businesses. The county's bank and thrift deposits grew
over the last five years at an average annual rate of 6.8%, and should continue
to grow with the community and its economy. The current trend of consolidation
in the banking industry has led to the acquisition of several locally owned
community banks in the Greenville County area by large regional and
super-regional banks, and caused a decrease over the last two years in the
number of financial institutions in the area. Despite the consolidation trend
and growth of deposits in the area, excluding the effect of recent acquisitions,
deposits at the large banks actually fell from 1997 to 1998. We believe that
this indicates many residents in the area prefer the community bank experience
to that provided by the larger and more impersonal regional and super-regional
banks. We believe that the combination of fewer financial institutions, positive
deposit growth rate, good economic conditions, and the consolidation of existing
community banks into larger banks creates an excellent environment for a new
community oriented bank.
Taking advantage of this opportunity, Greenville First Bank will be the
first independent bank organized in the City of Greenville in over ten years. We
will emphasize personal service and the client relationship. We will foster
client relationships by establishing "relationship teams" composed of senior
officers who will work directly with individual clients to match specific loan
and deposit specialties with their needs. We will emphasize our local ownership
and management and our strong ties to the Greenville County community. Our
target market will be primarily individuals and small- to medium-sized
businesses who desire a consistent and professional relationship with a local
banker. We believe our client oriented approach will appeal to the individuals
and small businesses in Greenville County and will stand in contrast to the "one
size fits all" philosophies of our larger competitors.
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OUR BOARD OF DIRECTORS AND MANAGEMENT
Greenville First Bancshares was founded by ten local business leaders
who have lived in Greenville for many years. They are also community leaders and
serve on numerous charitable and service organizations throughout Greenville
County. We believe our directors' long-standing ties to the community and their
significant business experience will provide Greenville First Bank with the
ability to effectively assess and address the needs of our proposed market area.
Our Board of Directors consists of the following:
- Andrew B. Cajka, Jr. - Rudolph G. Johnstone, III
- Mark A. Cothran - Keith J. Marrero
- Leighton M. Cubbage - James B. Orders, III
- Fred Gilmer, Jr. - R. Arthur "Art" Seaver, Jr.
- Tecumseh Hooper, Jr. - William B. Sturgis
We have attracted a strong management team with many years of banking
experience and service to the Greenville area. Our management team currently
consists of the following individuals:
- Art Seaver will serve as the president and chief executive
officer for the holding company and the bank. He has over 13
years of banking experience in the Greenville area. Until he
began preparations to open Greenville First Bank, he served as
an executive officer at Greenville National Bank, which was
acquired by Regions Bank in 1998.
- Fred Gilmer, Jr. will serve as our senior vice president. Mr.
Gilmer has over 40 years of experience in the financial
services industry in the Greenville area. He was most recently
the executive officer in charge of client relations for
Greenville National Bank.
- Jim Austin will serve as our senior vice president and chief
financial officer. Mr. Austin has 20 years of experience in
the financial services industry in the Greenville area,
including 12 years as senior vice president and controller of
American Federal Bank.
We are in the process of assembling our management team. We are looking
for individuals who reside in the Greenville area and have significant local
banking experience and a history of service to the community. Because of the
recent merger and acquisition activity in the market, we believe there is an
abundance of local experienced banking executives who would be interested in
joining our community banking effort.
PRODUCTS AND SERVICES
We plan to offer most of the products and services offered by larger
banks by utilizing modern delivery systems coupled with personalized service.
Our lending services will include consumer loans and lines of credit, commercial
and business loans and lines of credit, residential and commercial real estate
loans, and construction loans. We will competitively price our deposit products
which will include checking accounts, savings accounts, money market accounts,
certificates of deposit, commercial checking accounts, and IRAs. We will also
provide cashier's checks, credit cards, cash management services, safe deposit
boxes, travelers checks, direct deposit, automatic drafts, and U.S. Savings
Bonds. We intend to deliver our services though a variety of methods, including
ATMs, banking by mail, telephone banking, internet banking, drive through
banking, and courier services for commercial customers throughout Greenville
County.
THE OFFERING AND OWNERSHIP BY MANAGEMENT
We are offering 1,200,000 shares of our common stock for $10.00 per
share. Our organizers and executive officers intend to purchase 238,500 shares,
which represents 19.9% of the shares outstanding after the offering. To
compensate them for their financial risk and efforts in organizing the bank, our
organizers will
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receive warrants to purchase one share of common stock for $10.00 per share for
every two shares they purchase in this offering. We hope to sell the remaining
shares to individuals and businesses in Greenville County who share our desire
to support a new local community bank. The number of shares of common stock
offered does not include the exercise of the underwriter's over-allotment option
to purchase up to 180,000 shares of our common stock.
USE OF PROCEEDS
We will use the first $8,500,000 we raise in this offering to
capitalize Greenville First Bank. This is the minimum amount of capital our
banking regulators will require for us to open the bank. We will use the
remaining net proceeds of the offering to pay our expenses of this offering and
of organizing the holding company and the bank, and to provide general working
capital for the holding company. The bank will use the funds it receives from
Greenville First Bancshares to pay expenses, lease and furnish its offices, and
provide working capital to operate the bank. For more detailed information see
"Use of Proceeds" on page 10.
WE DO NOT INITIALLY PLAN TO PAY DIVIDENDS
Because we are a new business, we will not pay dividends in the
foreseeable future. We intend to use all available earnings to fund the
continued operation and growth of the bank.
LOCATION OF OFFICES
Our temporary executive offices are located at 1805 Laurens Road,
Greenville, South Carolina 29607. Our telephone number is (864) 679-9000. Our
permanent office will be located at the corner of Haywood Road and Halton Road
in Greenville, South Carolina. During construction of our main office, we will
utilize a modular bank facility located on the same site. We plan to open for
business in this temporary modular office in the fourth quarter of 1999 or the
first quarter of 2000. Within the first four years of operation, we also plan to
open two "service centers" located strategically in our primary service area.
These service centers will perform limited bank functions including deposit and
ATM services. We believe these service centers will expand our market presence
and provide additional convenience to our customers. We will need to obtain
regulatory approval before we can open these centers. We believe that these
facilities will adequately serve the bank's needs for its first four years of
operation.
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RISK FACTORS
The following is a summary of some of the risks which we will encounter
in starting and operating the new bank. We may face other risks as well, which
we have not anticipated. An investment in our common stock involves a
significant degree of risk and you should not invest in the offering unless you
can afford to lose some or all of your investment. Please read the entire
prospectus for a more thorough discussion of the risks of an investment in our
common stock.
SOUTH CAROLINA STATE LAW AND ANTI-TAKEOVER DEVICES WE HAVE ADOPTED WILL
SIGNIFICANTLY LIMIT THE ABILITY OF OTHERS TO ACQUIRE US.
In many cases, shareholders receive a premium for their shares when a
company is purchased by another. However, under South Carolina law no other
financial institution may acquire control of Greenville First Bancshares until
we have been in existence for five years. In addition, state and federal law and
our articles of incorporation and bylaws make it difficult for anyone to
purchase Greenville First Bancshares without approval of our board of directors.
For a discussion of some of these provisions, please see "Description of Capital
Stock - Anti-takeover Effects" on page 36.
WE ARE A NEW BUSINESS AND CANNOT BE SURE WHETHER WE WILL BE SUCCESSFUL.
Neither Greenville First Bancshares nor Greenville First Bank has any
operating history. The operations of new businesses are always risky. Because
Greenville First Bank has not yet opened, we do not have historical financial
data and similar information which would be available for a financial
institution that has been operating for several years.
WE EXPECT TO INCUR CUMULATIVE LOSSES FOR AT LEAST TWO YEARS AND THERE IS A RISK
WE MAY NEVER BECOME PROFITABLE.
In order for us to become profitable, we will need to attract a large
number of customers to deposit and borrow money. This will take time. We expect
to incur large initial expenses and may not be profitable for several years.
Although we expect to become profitable in our second year, there is a risk that
we may never become profitable and that you will lose part or all of your
investment.
WE CANNOT OPEN THE BANK FOR BUSINESS UNTIL WE RECEIVE REGULATORY APPROVALS,
WHICH ARE AT THE DISCRETION OF OUR REGULATORY AGENCIES.
We cannot begin operations until we receive all required regulatory
approvals. Although we have received preliminary approval from the Office of the
Comptroller of the Currency to open the bank, and have filed an application with
the FDIC for deposit insurance, we will not receive all required final approvals
until we satisfy all requirements for new banks imposed by state and federal
regulatory agencies. We expect to receive final approvals by the fourth quarter
of 1999 or the first quarter of 2000, but it may take longer. If we ultimately
do not open, we anticipate that we will dissolve the company, and return to our
investors all funds remaining after paying the expenses incurred through such
time.
ANY DELAY IN OPENING GREENVILLE FIRST BANK WILL RESULT IN ADDITIONAL LOSSES.
We intend to open the bank in the fourth quarter of 1999 or the first
quarter of 2000. If we do not receive all necessary regulatory approvals as
planned, the bank's opening will be delayed or may not occur at all. If the
bank's opening is delayed, our organizational and pre-opening expenses will
increase. Because the bank would not be open and generating revenue, these
additional expenses would cause our accumulated losses to increase.
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WE WILL DEPEND HEAVILY ON ART SEAVER, AND OUR BUSINESS WOULD SUFFER IF SOMETHING
WERE TO HAPPEN TO HIM OR IF HE WERE TO LEAVE.
Art Seaver will be our president and chief executive officer. He will
provide valuable services to us, and he would be difficult to replace. We have
an employment agreement with Mr. Seaver and carry $600,000 of insurance on his
life payable to the bank. Nevertheless, if he were to leave, our business would
suffer.
THE OFFERING PRICE OF $10.00 WAS DETERMINED ARBITRARILY AND IT WILL FLUCTUATE
ONCE THE SHARES BECOME FREELY TRADED AFTER THE OFFERING.
Because we do not have any history of operations, we determined the
price arbitrarily. The offering price is essentially the book value of the
shares prior to deduction for expenses of the offering and the organization of
the bank. The offering price may not be indicative of the present or future
value of the common stock. As a result, 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 the bank, trends in the banking industry, economic conditions in our
market area, and other factors which are beyond our control. If our operating
results are below expectations, the market price of the common stock would
probably fall.
WE WILL NOT HAVE A LARGE NUMBER OF SHAREHOLDERS OR A LARGE NUMBER OF SHARES
OUTSTANDING AFTER THE OFFERING, WHICH MAY LIMIT YOUR ABILITY TO SELL OR TRADE
THE SHARES AFTER THE OFFERING.
Initially, there will be no established market for our common stock.
After the offering, we will encourage broker-dealers to match buy and sell
orders for our common stock on the Over-the-Counter Bulletin Board. However, the
trading markets on the OTC Bulletin Board lack the depth, liquidity, and
orderliness necessary to maintain a liquid market. 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. Accordingly, investors should consider the potential illiquid and
long-term nature of an investment in our common stock.
WE WILL FACE STRONG COMPETITION FOR CUSTOMERS FROM LARGER AND MORE ESTABLISHED
BANKS WHICH COULD PREVENT US FROM OBTAINING CUSTOMERS AND MAY CAUSE US TO HAVE
TO PAY HIGHER INTEREST RATES TO ATTRACT CUSTOMERS.
We will encounter strong competition from existing banks and other
types of financial institutions operating in the Greenville County area and
elsewhere. Some of these competitors have been in business for a long time and
have already established their customer base and name recognition. Most are
larger than we will be and have greater financial and personnel resources than
we will have. Some are large super-regional and regional banks, like First Union
Bank, BB&T, Carolina First, Bank of America, and Wachovia. These institutions
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 - Marketing Opportunities- Competition" on page 16
and "Supervision and Regulation" starting on page 23.
AN ECONOMIC DOWNTURN, ESPECIALLY ONE AFFECTING GREENVILLE COUNTY, SOUTH
CAROLINA, COULD REDUCE OUR CUSTOMER BASE, OUR LEVEL OF DEPOSITS, AND DEMAND FOR
FINANCIAL PRODUCTS SUCH AS LOANS.
As a holding company for a community bank, our ultimate success will be
dependent on the economy of the community. We will operate in Greenville County,
South Carolina, and in particular the central area of the county, which includes
the City of Greenville. While the economy in this area has been strong in recent
years, an economic downturn in the area would hurt our business.
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AS A BANK, OUR PROFITABILITY DEPENDS ON THE INTEREST RATES WHICH WE PAY ON
DEPOSITS AND COLLECT ON LOANS. INTEREST RATES HAVE HISTORICALLY VARIED GREATLY
AND WE CANNOT PREDICT OR CONTROL THEM.
Our profitability depends, in large part, on the difference between the
income we earn on loans and other assets and the interest we pay on deposits and
other borrowings. This difference is largely determined by interest rates.
Interest rates will be affected by the local, national, and international
economies and by the credit policies of monetary authorities, particularly the
Federal Reserve Board of Governors. Interest rates have historically varied
widely and we cannot control or predict them. Large moves in interest rates may
decrease or eliminate our profitability.
WE MAY NOT BE ABLE TO COMPETE WITH OUR LARGER COMPETITORS FOR LARGER CUSTOMERS
BECAUSE OUR LENDING LIMITS WILL BE LOWER THAN THEIRS.
We will be limited in the amount we can loan a single borrower by the
amount of the bank's capital. The legal lending limit is 15% of the bank's
capital and surplus. We expect that our initial legal lending limit will be
approximately $1,275,000 immediately following the offering, but we intend to
impose an internal limit on the bank of 80% of this amount, or approximately
$1,000,000. Until the bank is profitable, our capital will continue to decline
and therefore our lending limit. Our lending limit will be significantly less
than the limit for most of our competitors and may affect our ability to seek
relationships with larger businesses in our market area. We intend to
accommodate larger loans by selling participations in those loans to other
financial institutions.
WE ARE AUTHORIZED TO ISSUE PREFERRED STOCK WHICH, IF ISSUED, MAY ADVERSELY
AFFECT YOUR VOTING RIGHTS AND REDUCE THE MARKET PRICE OF OUR COMMON STOCK.
We are authorized by our articles of incorporation to issue shares of
preferred stock without the consent of our shareholders. Preferred stock, when
issued, may rank senior to common stock with respect to voting rights, payment
of dividends, and amounts received by shareholders upon liquidation,
dissolution, or winding up. The existence of rights which are senior to common
stock may reduce the price of our shares. We do not have any plans to issue any
shares of preferred stock at this time.
GOVERNMENT REGULATION MAY HAVE AN ADVERSE EFFECT ON OUR PROFITABILITY AND
GROWTH.
We will be subject to extensive federal and state government
supervision and regulation. Our ability to grow and achieve profitability may be
adversely affected by state and federal laws and regulations that limit a bank's
right to make loans, purchase securities, and pay dividends. These laws are
intended primarily to protect Greenville First Bank's depositors and are not for
the benefit of shareholders. In addition, the burdens and restrictions imposed
by federal and state banking regulations may place us at a competitive
disadvantage to competitors who are less regulated. Future legislation or
governmental policy could also adversely affect the banking industry and
Greenville First Bank's operations. See "Supervision and Regulation" on page 23.
THE EXERCISE OF WARRANTS AND STOCK OPTIONS WILL CAUSE STOCK DILUTION AND MAY
ADVERSELY AFFECT THE VALUE OF OUR COMMON STOCK.
The organizers and officers may exercise warrants and options to
purchase common stock, which would result in the dilution of your proportionate
interests in Greenville First Bancshares. Upon completion of the offering, we
will issue to the organizers warrants to purchase one share of common stock at
$10.00 per share for every two shares they purchase in the offering. If the
organizers purchase 238,500 shares in the offering, we will issue warrants to
purchase an additional 116,250 shares of common stock to them. In addition,
after the offering, we expect to adopt a stock option plan which will permit us
to grant options to our 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 do not
intend to issue stock options with an exercise price less than the fair market
value of the common stock on the date of grant.
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WE MAY NEED TO RAISE ADDITIONAL CAPITAL WHICH COULD DILUTE YOUR OWNERSHIP.
Although we do not believe we will need additional capital during the
next twelve months to start and maintain our planned business activities, we may
need additional capital in the future to support our business, expand our
operations, or maintain our minimum net capital requirements as set forth by our
applicable bank regulatory agencies. There is no assurance that we will be able
to sell additional shares to raise that capital. If we do sell additional shares
of common stock in the future to raise capital, the sale could significantly
dilute your ownership interest.
WE MAY NOT ALLOCATE ALL OF THE NET PROCEEDS IN THE MOST PROFITABLE MANNER.
After capitalizing Greenville First Bank with $8,500,000, we will have
broad discretion in allocating a total of approximately $2,600,000, or 22% of
the gross proceeds of the offering. Initially we plan to invest these proceeds
in United States government securities or deposit them with the bank, and in the
long term we intend to use them for general corporate purposes. We cannot
predict the extent we will allocate these funds to income-generating assets,
capital assets, or liquidity. Although we intend to utilize these funds to serve
Greenville First Bancshares' best interest, we cannot assure you that our
allocation will ultimately reflect the most profitable application of these
proceeds.
IT IS POSSIBLE THAT OUR COMPUTER SYSTEMS OR THOSE OF OUR PROCESSING VENDORS OR
LOAN CUSTOMERS COULD FAIL TO OPERATE ON JANUARY 1, 2000.
Like many financial institutions, we will rely upon computers for
conducting our business and for information systems processing. There is concern
among industry experts that on January 1, 2000, computers will be unable to read
or interpret the new year and there may be widespread computer malfunctions. We
will generally rely on software and hardware developed by independent third
parties to provide our information systems. We will request warranties about
Year 2000 compliance from the primary third party hardware and software system
providers we use. 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 Year 2000 issue may also negatively affect the business of our
customers. We intend to include Year 2000 readiness in our lending criteria to
minimize this risk. However, we cannot be certain that this will eliminate the
issue, and any financial difficulties our customers experience as a result of
Year 2000 issues could impair their ability to repay loans to the bank.
There is a possibility that we may not open the bank until after
January 1, 2000, at which time we believe that most of the uncertainty
surrounding the Year 2000 issue should be resolved. In this event, our risks
associated with computer malfunctions should be greatly reduced, but we will
still seek to ensure that our computer systems and our major vendors' and
clients' computer systems are in compliance and functioning properly.
For more information on Year 2000 issues, please refer to page 14.
FORWARD-LOOKING STATEMENTS
This prospectus contains certain "forward-looking statements"
concerning Greenville First Bancshares and Greenville First 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," and similar expressions identify such forward-looking
statements. The most significant of these risks, uncertainties, and other
factors are discussed under the heading "Risk Factors" beginning on page 6 of
this prospectus. We urge you to carefully consider these factors prior to making
an investment.
9
<PAGE> 11
USE OF PROCEEDS
We estimate that we will receive net proceeds of $11,113,000 from the
sale of 1,200,000 shares of common stock in the offering, after deducting
underwriting discounts and commissions and estimated organizational and offering
expenses. If the underwriter exercises its over-allotment option in full, we
will receive $1,665,000 in additional proceeds. We have established a line of
credit in the amount of $600,000 at the prime rate to pay pre-opening expenses
of the holding company and the bank prior to the completion of the offering. We
intend to pay off this line of credit with proceeds that we receive from this
offering. The following two paragraphs describe our proposed use of proceeds
based on our present plans and business conditions.
USE OF PROCEEDS BY GREENVILLE FIRST BANCSHARES
The following table shows the anticipated use of the proceeds by
Greenville First Bancshares. We describe the bank's anticipated use of proceeds
in the following section. As shown, we will use $8,500,000 to capitalize the
bank. We will initially invest the remaining proceeds in United States
government securities or deposit them with Greenville First Bank. In the
long-term, we will use these funds for operational expenses and other general
corporate purposes, including the provision of additional capital to the bank,
if necessary. We may also use the proceeds to expand, for example by opening
additional facilities or acquiring other financial institutions. We currently
plan to open two limited operation "service centers" in the Greenville area in
the next four years. We do not have any other definitive plans for expansion.
<TABLE>
<CAPTION>
Total
------------
<S> <C>
Gross proceeds from offering.................................. $ 12,000,000
Underwriter's discount........................................ $ 756,000
Expense of organizing Greenville First Bancshares............. $ 25,000
Expense of offering........................................... $ 106,000
Investment in capital stock of the bank....................... $ 8,500,000
------------
Remaining proceeds............................................ $ 2,613,000
============
</TABLE>
10
<PAGE> 12
USE OF PROCEEDS BY GREENVILLE FIRST BANK
The following table shows the anticipated use of the proceeds by
Greenville First Bank. All proceeds received by the bank will be in the form of
an investment in the bank's capital stock by Greenville First Bancshares as
described above. During the 10 month period between the opening of the bank and
the completion of our permanent facilities, we will conduct operations from a
modular facility. This facility will require an initial payment of $13,050, a
monthly lease payment for the modular unit of $5,880, and a monthly lease
payment for the land of $500. When completed, we will then move into our
permanent facility at an initial base rent payment of $16,667 per month. We
expect our main office to be completed by August 2000. The table shows the cost
of the temporary and permanent facilities for a period of twelve months from the
completion of the offering. Furniture, fixtures, and equipment will be
capitalized and amortized over the life of the lease or over the estimated
useful life of the asset. The bank will use the remaining proceeds to make
loans, purchase securities, and otherwise conduct the business of the bank.
<TABLE>
<CAPTION>
Total
-----------
<S> <C>
Investment by Greenville First Bancshares in the
bank's capital stock................................. $ 8,500,000
Organizational and pre-opening expenses of the bank..... $ 500,000
Furniture, fixtures and equipment....................... $ 247,000
Initial payment and lease of temporary facilities and $ 76,850
land (10 months)........................................
Lease of permanent facilities (2 months)................ $ 33,330
Construction of leasehold improvements.................. $ 65,000
-----------
Remaining proceeds...................................... $ 7,577,820
===========
</TABLE>
11
<PAGE> 13
CAPITALIZATION
The following table shows Greenville First Bancshares' capitalization
as of June 30, 1999, and the pro forma consolidated capitalization of Greenville
First Bancshares' and the bank as adjusted to give effect to the sale of
1,200,000 shares in this offering, after deducting the underwriter's discount
and expenses of the offering. Greenville First Bancshares' capitalization as of
June 30, 1999 reflects the purchase of ten shares by Art Seaver for $10.00 per
share. These shares will be redeemed after the offering. After the offering, we
will have 1,200,000 shares outstanding. The "As Adjusted" column reflects the
estimated cost of organizing Greenville First Bancshares and organizing and
preparing to open Greenville First Bank through the expected opening date, which
should be in the fourth quarter of 1999 or the first quarter of 2000. See "Use
of Proceeds" above.
<TABLE>
<CAPTION>
As Adjusted
For
June 30, 1999 The Offering
------------- ------------
<S> <C> <C>
SHAREHOLDERS' EQUITY:
Common Stock, par value $.01 per share; 10,000,000
shares authorized; 10 shares issued and
outstanding; 1,200,000 shares issued and
outstanding as adjusted ........................ $ 0.10 $ 12,000
Preferred Stock, par value $.01 per share; 10,000,000
shares authorized; no shares issued and outstanding 0 0
Additional paid-in capital .......................... $ 99.90 $ 11,101,000
Deficit accumulated during the pre-opening stage .... $(152,109) $ (500,000)
--------- ------------
Total shareholders' equity (deficit) ................ $(152,009) $ 10,613,000
============
Book value per share ................................ $ N/A $ 8.84
========= ============
</TABLE>
DIVIDEND POLICY
We expect initially to retain all earnings to operate and expand the
business. It is unlikely that we will pay any cash dividends in the near future.
Our ability to pay any cash dividends will depend primarily on Greenville First
Bank's ability to pay dividends to Greenville First Bancshares, which depends on
the profitability of the bank. In order to pay dividends, the bank must comply
with the requirements of all applicable laws and regulations. See "Supervision
and Regulation - The Bank - Dividends" on page 26 and "Supervision and
Regulation - The Bank - Capital Regulations" on page 27. 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.
12
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF
OPERATION
GENERAL
Greenville First Bancshares was formed to organize and own all of the
capital stock of Greenville First Bank. On September 21, 1999, we received
preliminary approval from the Office of the Comptroller of the Currency to open
the new bank. We have also filed for deposit insurance for the bank with the
FDIC. Whether the charter is issued and deposit insurance is granted will depend
upon, among other things, compliance with legal requirements imposed by the
Office of the Comptroller of the Currency and the FDIC, including capitalization
of the bank with at least $8,500,000 of capital. Upon preliminary approval
from the FDIC, we will file an application with the Federal Reserve to become a
bank holding company, which must be approved before we can acquire the capital
stock of the bank. We expect to receive all final regulatory approvals by the
fourth quarter of 1999 or the first quarter of 2000.
FINANCIAL RESULTS
As of June 30, 1999, Greenville First Bancshares had total assets of
$56,440, consisting primarily of cash and deferred organization and offering
costs. Greenville First Bancshares incurred a net loss of $152,109 for the
period from its inception in February of 1999 through June 30, 1999.
EXPENSES
On completion of the offering and opening of the bank, we expect we
will have incurred the following expenses:
- $756,000 in commissions to the underwriter, which will be
deducted from the proceeds of the offering.
- $106,000 in other expenses of the offering, which will be
subtracted from the proceeds of the offering.
- $25,000 in expenses of organizing Greenville First Bancshares,
which will be charged against the income of Greenville First
Bancshares.
- $500,000 in expenses to organize and prepare to open
Greenville First Bank, consisting principally of salaries,
overhead and other operating costs, which will be charged
against the income of Greenville First Bank.
Prior to our completion of this offering, these expenses will be funded
by a $600,000 line of credit at the prime rate. We will use the proceeds of this
offering to repay amounts due under our line of credit. We anticipate that the
proceeds of the offering will be sufficient to satisfy the corporation's
financial needs for at least the next 12 months.
OFFICES AND FACILITIES
Our main office will be located on a 1.3 acre site at the corner of
Haywood Road and Halton Road in Greenville, South Carolina. We intend to
construct a 14,000 square foot building there to serve as our main office.
Halton Properties, Inc., a company owned by one of the organizers and directors
of Greenville First Bancshares, will finance the purchase of the site and the
construction of the main building at a total expected cost of approximately
$1,623,000. Upon completion of the main office, which we expect to occur in the
third quarter of 2000, we will lease the land and building for 20 years at an
initial base rent of $16,667 per month. Prior to the completion of our main
office, we will utilize a temporary modular bank facility located on the same
site. During this period, we will lease the site from Halton Properties for $500
per month and the modular facility from a third party lessor for $5,880 per
month. We plan to open the temporary office in the fourth quarter of 1999 or the
first quarter of 2000. Within the first four years of operation, we also plan to
open two "service centers" located strategically in our primary service area.
These service centers will perform limited bank functions. They will
13
<PAGE> 15
expand our market presence and provide additional convenience to our customers.
We believe that these facilities will adequately serve the bank's needs for its
first four years of operation.
LIQUIDITY AND INTEREST RATE SENSITIVITY
Greenville First Bank, like most banks, will depend on its net interest
income for its primary source of earnings. Net interest income is roughly the
difference between the interest we charge on our loans and receive from our
investments our assets, and the interest we pay on deposits, our liabilities.
Movements in interest rates will cause our earnings to fluctuate. To lessen the
impact of these margin swings, we intend to structure our balance sheets so that
we can reprice the rates applicable to our assets and liabilities in roughly
equal amounts at approximately the same time. We will manage the bank's asset
mix by regularly evaluating the yield, credit quality, funding sources, and
liquidity of its assets. We will manage the bank's liability mix by expanding
our deposit base and converting assets to cash as necessary. If there is an
imbalance in our ability to reprice assets and liabilities at any point in time,
our earnings may increase or decrease with changes in the interest rate,
creating interest rate sensitivity.
Liquidity refers to our ability to provide steady sources of funds for
loan commitments and investment activities, as well as to maintain sufficient
funds to cover deposit withdrawals and payment of debt and operating
obligations. We will manage our liquidity by actively monitoring the bank's
sources and uses of funds to meet cash flow requirements and maximize profits.
Other than this offering, we know of no trends, demands, commitments,
events, or uncertainties that should result in, or are reasonably likely to
result in, Greenville First Bancshares' or the bank's liquidity increasing or
decreasing in any material way in the foreseeable future. However, if the bank
is open before January 1, 2000, we expect to increase our cash on hand because
consumer uncertainty about the Year 2000 may cause a higher than normal rate of
deposit withdrawal.
CAPITAL ADEQUACY
Capital adequacy for banks and bank holding companies is regulated by
the Office of the Comptroller of the Currency, the Federal Reserve Board of
Governors, and the FDIC. The primary measures of capital adequacy are (i)
risk-based capital guidelines and (ii) the leverage ratio. Changes in these
guidelines or in our levels of capital can affect our ability to expand and pay
dividends. Please see "Capital Regulations" on page 27 for a more detailed
discussion.
YEAR 2000 ISSUES
Like most financial institutions, we will rely upon computers for the
daily conduct of our business and for information systems processing. There is
concern among industry experts that on January 1, 2000 some computers will be
unable to "read" the new year resulting in computer malfunctions.
We will be generally relying on independent third parties for our
information processing needs. We have entered into an agreement with The
InterCept Group, Inc. to process our daily account and transactional data; to
provide our teller, accounting, and internet computer systems; and to provide
our ATM switching and processing services. We plan to request and review Year
2000 testing protocols and results from The InterCept Group and each of our
primary vendors. We plan to receive Year 2000 warranties from each vendor
confirming their Year 2000 compliance, although the remedies available under
such agreements generally include standard disclaimers of and limitations of
liability and specifically exclude special, incidental, indirect, and
consequential damages. The InterCept Group is an established provider of bank
processing and software services to more than 100 financial institutions. The
products and services we will receive from The InterCept Group will not
materially differ from the products and services provided to these other
institutions. Most of these other institutions have or are in the process of
investigating the Year 2000 compliance of The InterCept Group in accordance with
regulatory mandates. Because of this scrutiny, we do not believe that The
InterCept Group will have any material Year 2000 issues related to the products
or services we will receive from them.
14
<PAGE> 16
Our customers may also have Year 2000 issues. We may incur losses if
these issues affect our loan customer's ability to repay their loans or if they
suffer material harm to their businesses as a result. Prior to January 1, 2000,
we intend to request certification from each commercial borrower that their
systems are Year 2000 compliant and that they do not expect to be adversely
affected by the year change. Although these certifications will be helpful, it
would be very difficult for us to accurately assess the Year 2000 readiness of
any borrower.
There is a possibility that we may not open the bank until after
January 1, 2000, at which time we believe that most of the uncertainty
surrounding the Year 2000 issue should be clarified. In this event, our risks
associated with computer malfunctions should be greatly reduced, but we will
still seek to ensure that our computer systems and our major vendors' and
clients' computer systems are in compliance and functioning properly.
15
<PAGE> 17
PROPOSED BUSINESS
GENERAL
We initiated activity to form Greenville First Bank in February 1999
and incorporated Greenville First Bancshares as a South Carolina corporation on
March 29, 1999, to function as a holding company to own and control all of the
capital stock of Greenville First Bank. We initially will engage in no business
other than owning and managing the bank.
We have chosen this holding company structure because we believe it
will provide flexibility that would not otherwise be available. Subject to
Federal Reserve Board debt guidelines, the holding company structure can assist
the bank in maintaining its required capital ratios by borrowing money and
contributing the proceeds to the bank as primary capital. Additionally, a
holding company may engage in certain non-banking activities that the Federal
Reserve Board has deemed to be closely related to banking. Although we do not
presently intend to engage in other activities, we will be able to do so with a
proper notice or filing to the Federal Reserve if we believe that there is a
need for these services in our market area and that such activities could be
profitable.
On September 21, 1999, we received preliminary approval from the Office
of the Comptroller of the Currency to open the new bank. Final approval is
conditioned upon our raising the required minimum capital, receipt of FDIC
approval, and the implementation of proper bank regulatory policies and
procedures. We have also filed for deposit insurance for the bank with the FDIC,
and we will file for approval of the Federal Reserve Board to become a bank
holding company and acquire all of the stock of the new bank. Subject to
receiving final regulatory approvals from these agencies, we plan to open the
bank in the fourth quarter of 1999 or the first quarter of 2000, and will engage
in a general commercial and consumer banking business as described below.
MARKETING OPPORTUNITIES
Service Area. Our primary service area will consist of Greenville
County, South Carolina. We expect initially to draw a large percentage of our
business from the central portion of Greenville County, within a ten mile radius
of our main office. This principal service area is bounded by Rutherford Road to
the north, Poinsett Highway to the west, Mauldin Road and Butler Road to the
south, and Highway 14 and Batesville Road to the east. Included in this area is
the highest per capita income tract in the county. Our expansion plans include
the development of two "service centers" located along the periphery of our
service area. These service centers will extend the market reach of our bank,
and they will increase our personal service delivery capabilities to all of our
customers. This area will also benefit from the construction of the Southern
Connector, a toll road connecting I-85 and I-385 through southwestern Greenville
County, which is predicted to open within the next 12 months. Completion of this
road is expected to promote rapid commercial development along the corridor. We
plan to take advantage of existing contacts and relationships with individuals
and companies in this area to more effectively market the services of the bank.
Economic and Demographic Factors. Greenville County's median household
income, household growth, and population growth trends have consistently
outpaced growth trends in the rest of South Carolina. Greenville County is South
Carolina's most populous county. Between 2000 and 2010, Greenville County's
population is expected to increase by 10.2% to almost 400,000 people. The five
county metropolitan area, which includes Greenville, Spartanburg, Anderson,
Cherokee, and Pickens counties, is a business and high technology manufacturing
center, and it boasts a large engineering firm presence. Major employers in the
metropolitan area include: BMW, Michelin, Bi-Lo, Kemet Electronics, and Fluor
Daniel, one of the largest engineering firms in the world. Greenville County has
more engineers per capita than any other county in the United States. In
February 1999, the unemployment rate in the area was 3.04%.
Competition. The banking business is highly competitive. The bank will
compete as a financial intermediary with other commercial banks, savings and
loan associations, credit unions, finance companies, and money market mutual
funds operating in the Greenville County area and elsewhere. In 1998, there were
more than 130 banking offices, representing 18 financial institutions, operating
in Greenville County and holding over
16
<PAGE> 18
$5 billion in deposits. 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 have and many of these competitors offer
services, such as extensive and established branch networks and trust services,
that we either do not expect to provide or will not provide initially. Our
competitors include large super-regional financial institutions like First Union
Bank, Bank of America, BB&T, and Wachovia, large regional financial institutions
like Carolina First Bank, and local community banks like Summit National Bank,
First Savers Bank, Palmetto Bank, and New Commerce Bank, a new community bank
which recently opened an office in Simpsonville, South Carolina and plans to
open another office in Mauldin in the third quarter of 1999. We believe that the
opportunity created by recent mergers, our management team, and the economic and
demographic dynamics of our service area combined with our business strategy
will allow us to gain a meaningful share of the area's $5 billion in deposits.
BUSINESS STRATEGY
Management Philosophy. Greenville First Bank will be the first
independent bank organized in the city of Greenville in over ten years. Because
there are few locally owned banks left in Greenville, we believe we can offer a
unique banking alternative for the market by offering a higher level of customer
service and a management team more focused on the needs of the community than
most of our competitors. We believe that this approach will be enthusiastically
supported by the community. The bank will use the theme "Welcome to Hometown
Banking," and it will actively promote it in our target market. While the bank
will have the ability to offer a breadth of products similar to large banks, we
will emphasize the client relationship. We believe that the proposed community
focus of the bank will succeed in this market, and that the area will react
favorably to the bank's emphasis on service to small businesses, individuals,
and professional concerns.
Operating Strategy. In order to achieve the level of prompt, responsive
service that we believe will be necessary to attract customers and to develop
Greenville First Bank's image as a local bank with an individual focus, we will
employ the following operating strategies:
- Experienced Senior Management. We have retained senior
management with many years of experience in the financial
services industry within our primary market area. Our senior
management team currently consists of the following
individuals:
- Art Seaver will lead the management teams as the
president and chief executive officer for both
Greenville First Bancshares and Greenville First
Bank. He has lived in Greenville for over 25 years
and has over 13 years of banking experience in the
Greenville area. Mr. Seaver began his banking career
in 1986 with C&S National Bank and in 1992 joined
Greenville National Bank. As senior vice president
and executive officer, he was primarily responsible
for business development, deposit product offerings,
communication systems, and strategic planning. Mr.
Seaver left Greenville National Bank in February 1999
following its acquisition by Regions Bank.
- Fred Gilmer, Jr. will be a senior vice president for
both Greenville First Bancshares and Greenville First
Bank. Mr. Gilmer has over 40 years of experience in
the financial services industry in the Greenville
area. Mr. Gilmer was one of the original 13 employees
of Southern Bank and Trust Company in 1961. His
career also includes management positions with South
Carolina Federal and First Savings Bank. He was most
recently the executive officer in charge of client
relations for Greenville National Bank.
- Jim Austin will be chief financial officer and senior
vice president for both Greenville First Bancshares
and Greenville First Bank. He has lived in Greenville
for over 21 years and has over 20 years of experience
in the financial services industry in the Greenville
area. Mr. Austin was with KPMG Peat Marwick for 5
years specializing in bank audits, then for 12 years
with American Federal Bank as Senior Vice President
and Controller. His career also
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<PAGE> 19
includes management positions with Regional
Management Corporation and Homegold Financial, Inc.
- Other Executives. We are in the process of assembling a
management team with significant banking experience. We expect
these officers to be individuals who reside in the Greenville
area and have local banking experience and a history of
service to the community. Because of the recent merger and
acquisition activity in the market, we believe there is an
abundance of local experienced banking executives who would be
interested in joining our community banking effort.
- Community-Oriented Board of Directors. Our management team
will operate under the direction of our board of directors. As
described in the Management Section beginning on page 30, our
directors are long time residents and businessmen in the
Greenville area, with significant community involvement. These
directors are dedicated to the success of the bank, and will
play a key part in marketing the new bank in the community.
- Client Relationship Management. Greenville First Bank will use
a client-based philosophy. This philosophy is the basis of our
relationship management initiative. We will focus on the
overall relationship with each client as opposed to the
general product "push" approach used by larger banks. To
implement this strategy, we will establish "relationship
teams" consisting of a senior vice president team
leader/primary lender, and another senior officer who
specializes in matching deposit specialties with clients'
needs. With administrative assistance, our relationship teams
will be able to provide clients with specific and consistent
bankers who are responsible for managing their entire
relationship. Executive officers' performance will be measured
in part by their ability to maintain and cultivate client
relationships. We believe this structure will ensure effective
responsiveness to our clients' financial needs, a hallmark of
the community approach to banking.
- Convenience Oriented Service Centers and ATMs. Within the
first four years of operation, we plan to open two
non-traditional "service centers" located strategically in our
primary service area. These "service centers" will provide
limited bank functions, including deposit and ATM services.
Loan production services will remain concentrated in our main
office. We believe these "service centers" will expand our
market presence and provide additional convenience to our
customers. The bank will provide additional convenience
through strategically placed ATMs.
- Local Services and Decision Making. Clients will enjoy a
professional bank environment with access to their specific
bank officer and relationship team. We will emphasize local
decision-making with experienced bankers, attention to lower
employee turnover, and professional and responsive service.
- Capitalize on Need for Community Banks. The current trend of
consolidation in the banking industry has led to the recent
acquisition of three locally owned community banks in the
Greenville County area of South Carolina by large national and
regional banks headquartered outside of Greenville County. In
1998, over 90% of the total deposits were controlled by
financial institutions headquartered outside of the area.
Despite the market-share dominance of larger super-regional
and regional banks, excluding the acquisition of local banks
in the area, total deposits for these large banks actually
fell from 1997 to 1998, while total deposits during the same
period increased 3%. We believe these numbers reflect the
desire of the residents of this area for a community bank
relationship, and that they will support our new local bank as
a result.
- Focus on Under-Serviced Market Sector. Although size gives
larger banks 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
Greenville County, we believe that there is a void in the
community banking market in the Greenville County area and
that we can successfully fill this void. We will not compete
with large institutions for the primary banking relationships
of large corporations, but will compete for niches in this
business and for the consumer business of their
18
<PAGE> 20
employees. We will also focus on small- to medium-sized
businesses and their employees. This includes retail, service,
wholesale distribution, manufacturing, and international
businesses. We intend to attract such businesses based on
relationships and contacts which the bank's directors and
management have outside our core service area.
LENDING ACTIVITIES
General. We intend to emphasize a range of lending services, including
real estate, commercial, and equity-line 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. We
will compete for these loans with competitors who are well established in the
Greenville County area and have greater resources and lending limits. As a
result, we may have to charge lower interest rates to attract borrowers.
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.
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 expects to sell residential mortgage loans that it originates on the
secondary market.
Loan Distribution. We estimate that our initial percentage distribution
of our loans for the first year will be as follows:
<TABLE>
<S> <C>
Real Estate 50%
Commercial Loans 35%
Equity Line and Consumer Loans 15%
</TABLE>
These are estimates only. Our actual deposit and loan distribution will depend
on our customers and vary initially and over time.
Allowance for Loan Losses. We will maintain an allowance for loan
losses, which we will establish through a provision for loan losses charged
against income. We will charge loans against this allowance when we believe that
the collectibility of the principle is unlikely. The allowance will be an
estimated amount that we believe will be adequate to absorb losses inherent in
the loan portfolio based on evaluations of its collectibility. We anticipate
that initially our allowance for loan losses will equal approximately 1% of the
average outstanding balance of our loans. Over time, we will base the loan loss
reserves on our evaluation of factors such as changes in the nature and volume
of the loan portfolio, overall portfolio quality, specific problem loans and
commitments, and current anticipated economic conditions that may affect the
borrower's ability to pay.
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<PAGE> 21
Lending Limits. The bank's lending activities will be subject to a
variety of lending limits imposed by federal law. In general, the bank will be
subject to a legal limit on loans to a single borrower equal to 15% of the
bank's capital and unimpaired surplus. Different limits may apply in certain
circumstances based on the type of loan or the nature of the borrower, including
the borrower's relationship to the bank. These limits will increase or decrease
as the bank's capital increases or decreases. The bank will initially have a
self-imposed loan limit of $1,000,000, which represents approximately 80% of our
legal lending limit of $1,275,000. 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.
Credit Risk. The principal credit risk associated with each category of
loans is the creditworthiness of the borrower. Borrower creditworthiness is
affected by general economic conditions and the strength of the manufacturing,
services, and retail market segments. General economic factors affecting a
borrower's ability to repay include interest, inflation, and employment rates
and the strength of local and national economy, as well as other factors
affecting a borrower's customers, suppliers, and employees.
Real Estate Loans. We expect that loans secured by first or second
mortgages on real estate will make up 50% of the bank's loan portfolio. These
loans will generally fall into one of three categories: commercial real estate
loans, construction and development loans, or residential real estate loans.
Each of these categories is discussed in more detail below, including their
specific risks. Home equity loans are not included because they are classified
as consumer loans, which are discussed below. Interest rates for all categories
may be fixed or adjustable, and will more likely be fixed for shorter-term
loans. The bank will generally charge an origination fee for each loan.
Real estate loans are subject to the same general risks as other loans.
They are particularly sensitive to fluctuations in the value of real estate,
which is generally the underlying security for real estate loans. On first and
second mortgage loans we would typically not advance more than 80% of the lesser
of the cost or appraised value of the property. We will require a valid mortgage
lien on all real property loans along with a title lien policy which insures the
validity and priority of the lien. We will also require borrowers to obtain
hazard insurance policies and flood insurance if applicable.
We will have the ability to originate some real estate loans for sale
into the secondary market. We can limit our interest rate and credit risk on
these loans by locking the interest rate for each loan with the secondary
investor and receiving the investor's underwriting approval prior to originating
the loan.
- Commercial Real Estate Loans. Commercial real estate loans
will generally have terms of five years or less, although
payments may be structured on a longer amortization basis. We
will evaluate each borrower on an individual basis and attempt
to determine its business risks and credit profile. We will
attempt to reduce credit risk in the commercial real estate
portfolio by emphasizing loans on owner-occupied office and
retail buildings where the loan-to-value ratio, established by
independent appraisals, does not exceed 80%. We will also
generally require that debtor cash flow exceed 115% of monthly
debt service obligations. We will typically review all of the
personal financial statements of the principal owners and
require their personal guarantees. These reviews generally
reveal secondary sources of payment and liquidity to support a
loan request.
- Construction and Development Real Estate Loans. We will offer
adjustable and fixed rate residential and commercial
construction loans to builders and developers and to consumers
who wish to build their own home. The term of construction and
development loans will generally be limited to eighteen
months, although payments may be structured on a longer
amortization basis. Most loans will mature and require payment
in full upon the sale of the property. Construction and
development loans generally carry a higher degree of risk than
long term financing of existing properties. Repayment depends
on the ultimate completion of the project and usually on the
sale of the property. Specific risks include:
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- cost overruns;
- mismanaged construction;
- inferior or improper construction techniques;
- economic changes or downturns during construction;
- a downturn in the real estate market;
- rising interest rates which may prevent sale of the
property; and
- failure to sell completed projects in a timely
manner.
We will attempt to reduce risk by obtaining personal guarantees where
possible, and by keeping the loan-to-value ratio of the completed
project below specified percentages. We may also reduce risk by selling
participations in larger loans to other institutions when possible.
- Residential Real Estate Loans. Residential real estate loans
will generally have longer terms up to 30 years. We will offer
fixed and adjustable rate mortgages, and we intend to sell
some or all of the residential real estate loans that we
generate in the secondary market. By selling these loans in
the secondary market, we can significantly reduce our exposure
to credit risk because the loans will be underwritten through
a third party agent without any recourse against the bank.
Commercial Loans. The bank will make loans for commercial purposes in
various lines of businesses. Equipment loans will typically be made for a term
of five years or less at fixed or variable rates, with the loan fully amortized
over the term and secured by the financed equipment and with a loan-to-value
ratio of 80% or less. We will focus our efforts on commercial loans of less than
$500,000. 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. Trade letters of credit, standby letters of
credit, and foreign exchange will be handled through a correspondent bank as
agent for the bank.
We expect to also offer small business loans utilizing government
enhancements such as the Small Business Administration's 7(a) program and SBA's
504 programs, and Appalachian Development Council. These loans will typically be
partially guaranteed by the government which may help to reduce the bank's risk.
Government guarantees of SBA loans will not exceed 80% of the loan value, and
will generally be less.
Consumer Loans. The bank will make a variety of loans to individuals
for personal and household purposes, including secured and unsecured installment
loans and revolving lines of credit such as credit cards. Installment loans
typically will carry balances of less than $50,000 and be amortized over periods
up to 60 months. Consumer loans may be offered on a single maturity basis where
a specific source of repayment is available. Revolving loan products will
typically require monthly payments of interest and a portion of the principal.
Consumer loans are generally considered to have greater risk than first or
second mortgages on real estate.
We will also offer home equity loans. Our underwriting criteria for
and the risks associated with home equity loans and lines of credit will
generally be the same as those for first mortgage loans. Home equity lines of
credit will typically have terms of 15 years or less, will typically carry
balances less than $125,000, and may extend up to 100% of the available equity
of each property.
DEPOSIT SERVICES
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 retirement account
services, such as IRAs. We intend to solicit these accounts from individuals,
businesses, and other organizations.
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Deposit Distribution. We estimate that our initial percentage
distribution of our deposits for the first year will be as follows:
Demand Deposit 12%
Savings & Money Market 32%
Time and Savings Deposits 5%
CD's under $100,000 34%
CD's over $100,000 17%
OTHER BANKING SERVICES
We anticipate that the bank will offer other bank services including
cash management services such as sweep accounts for commercial businesses. In
addition, lines of credit, 24-hour telephone banking and PC/ internet delivery
are being developed. We will offer drive up ATMs, safe deposit boxes, direct
deposit of payroll and social security checks, U.S. Savings Bonds, travelers
checks, and automatic drafts for various accounts. We plan for the bank to
become associated with the Honor and Cirrus ATM networks that may be used by the
bank's customers throughout the country. We believe that by being associated
with a shared network of ATMs, we will be better able to serve our clients and
will be able to attract clients who are accustomed to the convenience of using
ATMs, although we do not believe that maintaining this association will be
critical to our success. We intend to begin offering these services shortly
after opening the bank. We also plan to offer a debit card and VISA credit card
services through a correspondent bank as an agent for the bank. We do not expect
the bank to exercise trust powers during its initial years of operation.
MARKET SHARE
In 1998, deposits in Greenville County exceeded $5 billion. The average
annual growth rate in deposits in Greenville County over the last five years was
6.8%. Based on a growth rate of 4%, the deposits in Greenville County will grow
to approximately $6.2 billion by 2004. Our plan over the next five years is to
reach a 1.7% market share with deposits in excess of $100 million. Of course,
there can be no assurances that we will accomplish these objectives.
EMPLOYEES
We anticipate that, upon commencement of operations, the bank will have
approximately 14 full time employees and one part time employee. By the end of
2000, we anticipate that it will have approximately 22 full time employees and
one part time employee operating out of the bank's permanent facility.
Greenville First Bancshares, as the holding company for the bank, will not have
any employees other than its officers.
LEGAL PROCEEDINGS
Neither Greenville First Bancshares, Greenville First Bank, nor any of
their properties are subject to any material legal proceedings.
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SUPERVISION AND REGULATION
Both Greenville First Bancshares and Greenville First Bank are subject
to extensive state and federal banking laws and regulations which impose
specific requirements or restrictions on and provide for general regulatory
oversight of virtually all aspects of operations. These laws and regulations are
generally intended to protect depositors, not shareholders. The following
summary is qualified by reference to the statutory and regulatory provisions
discussed. Changes in applicable laws or regulations may have a material effect
on our business and prospects. Beginning with the enactment of the Financial
Institution Report Recovery and Enforcement Act in 1989 and following with the
FDIC Improvement Act in 1991, numerous additional regulatory requirements have
been placed on the banking industry in the past several years, and additional
changes have been proposed. Our operations may be affected by legislative
changes and the policies of various regulatory authorities. We cannot predict
the effect that fiscal or monetary policies, economic control, or new federal or
state legislation may have in the future on our business and earnings.
GREENVILLE FIRST BANCSHARES
Because it will own the outstanding capital stock of the bank,
Greenville First Bancshares will be a bank holding company under the federal
Bank Holding Company Act of 1956 and the South Carolina Banking and Branching
Efficiency 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,
Greenville First Bancshares will be subject to periodic examination by the
Federal Reserve and required to file periodic reports of its operations and any
additional information that the Federal Reserve may require. Our activities at
the bank and holding company level will be limited to:
- banking, and 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 and managing or
controlling banks as to be a proper incident thereto.
Investments, Control, and Activities. With certain limited exceptions,
the Bank Holding Company Act requires every bank holding company to obtain the
prior approval of the Federal Reserve before:
- acquiring substantially all the assets of any bank;
- acquiring direct or indirect ownership or control of any
voting shares of any bank if after such acquisition it would
own or control more than 5% of the voting shares of such bank
(unless it already owns or controls the majority of such
shares); or
- merging or consolidating with another bank holding company.
In addition, and subject to certain exceptions, the Bank Holding
Company Act and the Change in Bank Control Act, together with regulations
thereunder, require Federal Reserve approval prior to any person or company
acquiring "control" of a bank holding company. Control is conclusively presumed
to exist if an individual or company acquires 25% or more of any class of voting
securities of the bank holding company. Control is rebuttably presumed to exist
if a person acquires 10% or more, but less than 25%, of any class of voting
securities and either Greenville First Bancshares has registered securities
under Section 12 of the Securities Exchange Act of 1934 or no other person owns
a greater percentage of that class of voting securities immediately after the
transaction. We will register our common stock under the Securities Exchange Act
of 1934. 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
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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
Greenville First Bancshares 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 other restrictions,
Greenville First Bancshares is able to borrow money to make a capital
contribution to the bank, and these loans may be repaid from dividends paid from
the bank to Greenville First Bancshares. Our ability to pay dividends will be
subject to regulatory restrictions as described below in "The Bank - Dividends."
Greenville First Bancshares 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, Greenville First Bancshares 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 Greenville First Bancshares might not otherwise do so.
Under the Bank Holding Company Act, the Federal Reserve Board may require a bank
holding company to terminate any activity or relinquish control of a nonbank
subsidiary, other than a nonbank subsidiary of a bank, upon the Federal Reserve
Board's determination that such activity or control constitutes a serious risk
to the financial soundness or stability of any subsidiary depository institution
of the bank holding company. Further, federal bank regulatory authorities have
additional discretion to require a bank holding company to divest itself of any
bank or nonbank subsidiary if the agency determines that divestiture may aid the
depository institution's financial condition.
Glass-Steagall Act. We will also be restricted by the provisions of the
Glass-Steagall Act, which prohibit Greenville First Bancshares 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 State Regulation. As a bank holding company registered
under the South Carolina Banking and Branching Efficiency Act, we are subject to
limitations on sale or merger and to regulation by the South Carolina Board of
Financial Institutions. Prior to acquiring the capital stock of a national bank,
we are not required to obtain the approval of the Board, but we must notify them
at least 15 days prior to doing so. Prior to engaging in the acquisition of
nonbanking institutions or state chartered banks, we must receive the Board's
approval, and we must file periodic reports with respect to our financial
condition and operations, management, and intercompany relationships between
Greenville First Bancshares and its subsidiaries.
THE BANK
The bank will operate as a national banking association incorporated
under the laws of the United States and subject to examination by the Office of
the Comptroller of the Currency. Deposits in the bank will be insured by the
FDIC up to a maximum amount, which is generally $100,000 per depositor subject
to aggregation rules.
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The Office of the Comptroller of the Currency and the FDIC will
regulate or monitor virtually all areas of the bank's operations, including:
- security devices and procedures;
- adequacy of capitalization and loss reserves;
- loans;
- investments;
- borrowings;
- deposits;
- mergers;
- issuances of securities;
- payment of dividends;
- interest rates payable on deposits;
- interest rates or fees chargeable on loans;
- establishment of branches;
- corporate reorganizations;
- maintenance of books and records; and
- adequacy of staff training to carry on safe lending and
deposit gathering practices.
The Office of the Comptroller of the Currency requires the bank to
maintain specified capital ratios and imposes limitations on the bank's
aggregate investment in real estate, bank premises, and furniture and fixtures.
The Office of the Comptroller of the Currency will also require the bank to
prepare quarterly reports on the bank's financial condition and to conduct an
annual audit of its financial affairs in compliance with its minimum standards
and procedures.
Under the FDIC Improvement Act, all insured institutions must undergo
regular on site examinations by their appropriate banking agency. The cost of
examinations of insured depository institutions and any affiliates may be
assessed by the appropriate agency against each institution or affiliate as it
deems necessary or appropriate. Insured institutions are required to submit
annual reports to the FDIC, their federal regulatory agency, and state
supervisor when applicable. The FDIC Improvement Act directs the FDIC to develop
a method for insured depository institutions to provide supplemental disclosure
of the estimated fair market value of assets and liabilities, to the extent
feasible and practicable, in any balance sheet, financial statement, report of
condition or any other report of any insured depository institution. The FDIC
Improvement Act also requires the federal banking regulatory agencies to
prescribe, by regulation, standards for all insured depository institutions and
depository institution holding companies relating, among other things, to the
following:
- internal controls;
- information systems and audit systems;
- loan documentation;
- credit underwriting;
- interest rate risk exposure; and
- asset quality.
National banks and their holding companies which have been chartered or
registered or have undergone a change in control within the past two years or
which have been deemed by the Office of the Comptroller of the Currency or the
Federal Reserve Board to be troubled institutions must give the Office of the
Comptroller of the Currency or the Federal Reserve Board 30 days prior notice of
the appointment of any senior executive officer or director. Within the 30 day
period, the Office of the Comptroller of the Currency or the Federal Reserve
Board, as the case may be, may approve or disapprove any such appointment.
Deposit Insurance. The FDIC establishes rates for the payment of
premiums by federally insured banks and thrifts for deposit insurance. A
separate Bank Insurance Fund and Savings Association Insurance Fund are
maintained for commercial banks and savings associations with insurance premiums
from the industry used to
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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 eliminating premiums for well-capitalized
banks, with a minimum semiannual assessment of $1,000. However, in 1996 Congress
enacted the Deposit Insurance Funds Act of 1996, which eliminated even this
minimum assessment. It also separated the Financial Corporation assessment to
service the interest on its bond obligations. The amount assessed on individual
institutions, including the bank, by Financial Corporation assessment 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 we may not be
able to pass these costs on to our customers.
Transactions With Affiliates and Insiders. The bank will be subject to
the provisions of Section 23A of the Federal Reserve Act, which places limits on
the amount of loans or extensions of credit to, or investments in, or certain
other transactions with, affiliates and on the amount of advances to third
parties collateralized by the securities or obligations of affiliates. The
aggregate of all covered transactions is limited in amount, as to any one
affiliate, to 10% of the bank's capital and surplus and, as to all affiliates
combined, to 20% of the bank's capital and surplus. Furthermore, within the
foregoing limitations as to amount, each covered transaction must meet specified
collateral requirements. Compliance is also required with certain provisions
designed to avoid the taking of low quality assets.
The bank will also be subject to the provisions of Section 23B of the
Federal Reserve Act which, among other things, prohibits an institution from
engaging in certain transactions with certain affiliates unless the transactions
are on terms substantially the same, or at least as favorable to such
institution or its subsidiaries, as those prevailing at the time for comparable
transactions with nonaffiliated companies. The bank will be subject to certain
restrictions on extensions of credit to executive officers, directors, certain
principal shareholders, and their related interests. Such extensions of credit
(i) must be made on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
third parties and (ii) must not involve more than the normal risk of repayment
or present other unfavorable features.
Dividends. A national bank may not pay dividends from its capital. All
dividends must be paid out of undivided profits then on hand, after deducting
expenses, including reserves for losses and bad debts. In addition, a national
bank is prohibited from declaring a dividend on its shares of common stock until
its surplus equals its stated capital, unless there has been transferred to
surplus no less than one-tenth of the bank's net profits of the preceding two
consecutive half-year periods (in the case of an annual dividend). The approval
of the Office of the Comptroller of the Currency is required if the total of all
dividends declared by a national bank in any calendar year exceeds the total of
its net profits for that year combined with its retained net profits for the
preceding two years, less any required transfers to surplus.
Branching. National banks are required by the National Bank Act to
adhere to branch office banking laws applicable to state banks in the states in
which they are located. Under current South Carolina law, the bank may open
branch offices throughout South Carolina with the prior approval of the Office
of the Comptroller of the Currency. In addition, with prior regulatory approval,
the bank will be able to acquire existing banking operations in South Carolina.
Furthermore, federal legislation has recently been passed which permits
interstate branching. The new law permits out-of-state acquisitions by bank
holding companies, interstate branching by banks if allowed by state law, and
interstate merging by banks.
Community Reinvestment Act. The Community Reinvestment Act requires
that, in connection with examinations of financial institutions within their
respective jurisdictions, the Federal Reserve, the FDIC, or the Office of the
Comptroller of the Currency, shall evaluate the record of each financial
institution in meeting the credit needs of its local community, including low
and moderate income neighborhoods. These factors are also considered in
evaluating mergers, acquisitions, and applications to open a branch or facility.
Failure to adequately meet these criteria could impose additional requirements
and limitations on the bank.
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Other Regulations. Interest and other charges collected or contracted
for by the bank are subject to state usury laws and federal laws concerning
interest rates. The bank's loan operations are also subject to 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 Greenville First Bancshares or
Greenville First Bank is subject to higher capital requirements. The current
guidelines require all bank holding companies and federally-regulated banks to
maintain a minimum risk-based total capital ratio equal to 8%, of which at least
4% must be Tier 1 capital. Tier 1 capital includes common shareholders' equity,
qualifying perpetual preferred stock, and minority interests in equity accounts
of consolidated subsidiaries, but excludes goodwill and most other intangibles
and excludes the allowance for loan and lease losses. Tier 2 capital includes
the excess of any preferred stock not included in Tier 1 capital, mandatory
convertible securities, hybrid capital instruments, subordinated debt and
intermediate term-preferred stock, and general reserves for loan and lease
losses up to 1% of risk-weighted assets.
Under these guidelines, banks' and bank holding companies' assets are
given risk-weights of 0%, 20%, 50%, or 100%. In addition, certain off-balance
sheet items are given credit conversion factors to convert them to asset
equivalent amounts to which an appropriate risk-weight applies. These
computations result in the total risk-weighted assets. Most loans are assigned
to the 100% risk category, except for first mortgage loans fully secured by
residential property and, under certain circumstances, residential construction
loans, both of which carry a 50% rating. Most investment securities are assigned
to the 20% category, except for municipal or state revenue bonds, which have a
50% rating, and direct obligations of or obligations guaranteed by the United
States Treasury or United States Government agencies, which have a 0% rating.
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
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guidelines. The principal objective of the leverage ratio is to place a
constraint on the maximum degree to which a bank holding company may leverage
its equity capital base. The minimum required leverage ratio for top-rated
institutions is 3%, but most institutions are required to maintain an additional
cushion of at least 100 to 200 basis points.
The FDIC Improvement Act established a new capital-based regulatory
scheme designed to promote early intervention for troubled banks which requires
the FDIC to choose the least expensive resolution of bank failures. The new
capital-based regulatory framework contains five categories of compliance with
regulatory capital requirements, including "well capitalized," "adequately
capitalized," "undercapitalized," "significantly undercapitalized," and
"critically undercapitalized." To qualify as a "well capitalized" institution, a
bank must have a leverage ratio of no less than 5%, a Tier 1 risk-based ratio of
no less than 6%, and a total risk-based capital ratio of no less than 10%, and
the bank must not be under any order or directive from the appropriate
regulatory agency to meet and maintain a specific capital level. Initially, we
will qualify as "well capitalized."
Under the FDIC Improvement Act regulations, the applicable agency can
treat an institution as if it were in the next lower category if the agency
determines (after notice and an opportunity for hearing) that the institution is
in an unsafe or unsound condition or is engaging in an unsafe or unsound
practice. The degree of regulatory scrutiny of a financial institution
increases, and the permissible activities of the institution decreases, as it
moves downward through the capital categories. Institutions that fall into one
of the three undercapitalized categories may be required to do some or all of
the following:
- submit a capital restoration plan;
- raise additional capital;
- restrict their growth, deposit interest rates, and other
activities;
- improve their management;
- eliminate management fees; or
- divest themselves of all or a part of their operations.
Bank holding companies controlling financial institutions can be called upon to
boost the institutions' capital and to partially guarantee the institutions'
performance under their capital restoration plans.
These capital guidelines can affect us in several ways. If we grow the
bank's loan portfolio at a rapid pace, its capital may be depleted too quickly
and a capital infusion from the holding company may be required, which could
impact our ability to pay dividends. Our capital levels will initially be more
than adequate; however, rapid growth, poor loan portfolio performance, poor
earnings performance, or a combination of these factors could change our capital
position in a relatively short period of time.
The FDIC Improvement Act requires the federal banking regulators to
revise the risk-based capital standards to provide for explicit consideration of
interest-rate risk, concentration of credit risk, and the risks of untraditional
activities. We are uncertain what effect these regulations would have.
Failure to meet these capital requirements would mean that a bank would
be required to develop and file a plan with its primary federal banking
regulator describing the means and a schedule for achieving the minimum capital
requirements. In addition, such a bank would generally not receive regulatory
approval of any application that requires the consideration of capital adequacy,
such as a branch or merger application, unless the bank could demonstrate a
reasonable plan to meet the capital requirement within a reasonable period of
time.
Enforcement Powers. The Financial Institution Reform Recovery and
Enforcement Act expanded and increased civil and criminal penalties available
for use by the federal regulatory agencies against depository institutions and
certain "institution-affiliated parties." Institution-affiliated parties
primarily include management, employees, and agents of a financial institution,
as well as independent contractors and consultants such as 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
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violations. Criminal penalties for some financial institution crimes have been
increased to twenty years. In addition, regulators are provided with greater
flexibility to commence enforcement actions against institutions and
institution-affiliated parties. Possible enforcement actions include the
termination of deposit insurance. Furthermore, banking agencies' power to issue
cease-and-desist orders were expanded. Such orders may, among other things,
require affirmative action to correct any harm resulting from a violation or
practice, including restitution, reimbursement, indemnification's or guarantees
against loss. A financial institution may also be ordered to restrict its
growth, dispose of certain assets, rescind agreements or contracts, or take
other actions as determined by the ordering agency to be appropriate.
Recent Legislative Developments. From time to time, various bills are
introduced in the United States Congress with respect to the regulation of
financial institutions. Some of these proposals, if adopted, could significantly
change the regulation of banks and the financial services industry. We cannot
predict whether any of these proposals will be adopted or, if adopted, what
effect these would have.
Effect of Governmental Monetary Policies. Our earnings are affected by
domestic economic conditions and the monetary and fiscal policies of the United
States government and its agencies. The Federal Reserve Bank's monetary policies
have had, and are likely to continue to have, an important impact on the
operating results of commercial banks through its power to implement national
monetary policy in order, among other things, to curb inflation or combat a
recession. The monetary policies of the Federal Reserve Board have major effects
upon the levels of bank loans, investments and deposits through its open market
operations in United States government securities and through its regulation of
the discount rate on borrowings of member banks and the reserve requirements
against member bank deposits. It is not possible to predict the nature or impact
of future changes in monetary and fiscal policies.
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MANAGEMENT
GENERAL
The following table sets forth the number and percentage of outstanding
shares of common stock we expect to be beneficially owned by the organizers and
executive officers after the completion of this offering. All of our organizers
will serve as directors. The addresses of our organizers are the same as the
address of the bank. Prior to the offering, Art Seaver purchased ten shares of
common stock for $10.00 per share. We will redeem this stock after the offering.
This table includes shares based on the "beneficial ownership" concepts as
defined by the SEC. Beneficial ownership includes spouses, minor children, and
other relatives residing in the same household, and trusts, partnerships,
corporations or deferred compensation plans which are affiliated with the
principal. This table does not reflect warrants that will be granted to each
organizer to purchase one share of common stock for every two shares of common
stock purchased by the organizers during the offering because these warrants
will not be exercisable within 60 days of the date of this prospectus.
<TABLE>
<CAPTION>
SHARES ANTICIPATED TO BE OWNED
FOLLOWING THE OFFERING
--------------------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT
------------------------ ------ -------
<S> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS
James M. Austin, III 6,000 0.50%
Andrew B. Cajka, Jr. 10,000 0.83%
Mark A. Cothran 25,000 2.08%
Leighton M. Cubbage 60,000 5.00%
Fred Gilmer, Jr. 16,000 1.33%
Tecumseh Hooper, Jr. 15,000 1.25%
Rudolph G. Johnstone, III 10,500 0.88%
Keith J. Marrero 4,000 0.33%
James B. Orders, III 20,000 1.67%
R. Arthur Seaver, Jr. 12,000 1.00%
William B. Sturgis 60,000 5.00%
All directors and executive officers as a 238,500 19.88%
group (11 persons)
</TABLE>
EXECUTIVE OFFICERS AND DIRECTORS OF GREENVILLE FIRST BANCSHARES
The following table sets forth biographical information about our
executive officers and directors. The CEO and president, senior vice presidents,
chief financial officer, and directors of Greenville First Bancshares will also
hold these same positions with Greenville First Bank. Greenville First
Bancshares' 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 2000 annual meeting of shareholders,
Class II at the 2001 annual meeting of shareholders, and Class III at the 2002
annual meeting of shareholders. Executive officers serve at the discretion of
the board of directors.
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<PAGE> 32
<TABLE>
<CAPTION>
POSITION WITH
NAME AGE GREENVILLE FIRST BANCSHARES
---- --- ---------------------------
<S> <C> <C>
James M. Austin, III 42 Senior Vice President, CFO
Andrew B. Cajka, Jr. 40 Director
Mark A. Cothran 41 Director
Leighton M. Cubbage 46 Director
Fred Gilmer, Jr. 63 Director, Senior Vice President
Tecumseh Hooper, Jr. 52 Director
Rudolph G. Johnstone, III , M.D. 39 Director
Keith J. Marrero 39 Director
James B. Orders, III 46 Director, Chair
R. Arthur Seaver, Jr. 35 Director, CEO, President
William B. Sturgis 64 Director
</TABLE>
James "Jim" M. Austin, III will be the senior vice president and chief financial
officer of Greenville First Bank. He has over 20 years of experience in the
financial services industry. From 1978 to 1983, Mr. Austin was employed by KPMG
Peat Marwick specializing in bank audits. Mr. Austin was employed for 12 years
with American Federal Bank as controller and senior vice president responsible
for the financial accounting and budgeting. From 1995 until 1997, Mr. Austin was
the senior vice president and chief financial officer of Regional Management
Corporation, a 58-office consumer finance company where he was responsible for
the finance and operations area of the company. From 1997 until July 1999, he
was the director of corporate finance for Homegold Financial, a national
sub-prime financial service company that specializes in mortgage loan
originations. Mr. Austin is a 1978 graduate of the University of South Carolina
with degrees in accounting and finance. He is also a Certified Public Accountant
and graduate of the University of Georgia's Executive Management's Savings Bank
program. He is a graduate of Leadership Greenville and is active in the First
Presbyterian Church. He has served on the community boards of River Place
Festival, Junior Achievement, and Pendleton Place, and he is the past president
of the Financial Manager's Society of South Carolina and former board member of
the Young Manager's Division of the Community of Financial Institutions of South
Carolina.
Andrew B. Cajka , Class III Director, is the founder and president of Southern
Hospitality Group, LLC, a hotel management and development company in
Greenville, South Carolina. Prior to starting his own business, Mr. Cajka was a
managing member of Hyatt Hotels Corporation from 1986 until 1998. He is a
graduate of Bowling Green State University in 1982. Mr. Cajka is currently on
the board of directors for the Greenville Chamber of Commerce and past president
of the downtown area council. He is a member of the Greenville Hospital
Foundation Board, past chairman of the Children's Hospital, Board of Trustee
member and chairman of the Foundation at St. Joseph High School, past chairman
of the Greenville Tech Hospitality Board, board member of the Urban League, and
past chairman of the Greenville Convention and Visitors Bureau.
Mark A. Cothran, Class I Director, is the president and principal owner of
Cothran Company, Inc., a real estate construction and development company in
Greenville, South Carolina. He has been with Cothran Company, Inc. since 1986.
Mr. Cothran received his bachelors degree in finance and banking from the
University of South Carolina in 1980 and is a licensed real estate broker in the
State of South Carolina. He is currently on the board of directors of the
Greenville Chamber of Commerce and member of their economic development board.
He is past president of the state chapter of NAIOP and past member of the
Advisory Board of Greenville National Bank.
Leighton M. Cubbage, Class II Director, was the co-founder, president, and chief
operating officer of Corporate Telemanagement Group in Greenville, South
Carolina from 1989 until 1995, when the company was acquired by LCI
International. Since 1995, Mr. Cubbage has been a private investor maintaining
investment interests in a telecommunications company, a car dealership, and a
trucking company. He is a 1977 graduate of Clemson University with a bachelors
degree in political science. Mr. Cubbage is on the board of directors for the
Greenville United Way, a member of the Greenville Technical College Foundation
Board, and a member of the Clemson University Entrepreneurial Board.
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<PAGE> 33
Fred Gilmer, Jr, Class III Director, will be the senior vice president of
Greenville First Bancshares and Greenville First Bank. He is a seasoned banker
with over 40 years of experience in the financial industry. He was the
executive officer in charge of client relations for Greenville National Bank
from 1994 until April 1999, when he resigned to help organize Greenville First
Bank. Mr. Gilmer has held executive positions with three other banks in the
Greenville area between 1959 and 1995. He graduated from the University of
Georgia in 1958, and the LSU Graduate School of Banking of the South in Baton
Rouge, Louisiana in 1970. Mr. Gilmer is very active in the Greenville
community. He is a graduate of Leadership Greenville and presently serves
numerous organizations, including the Greenville Rotary Club, Greenville
Chamber of Commerce, YMCA, and the First Presbyterian Church. He is a past
board member of Family Children Service, Goodwill Industries, Downtown Area
Council, Greenville Little Theater, Greenville Cancer Society, South Carolina
Arthritis Foundation, Freedom Weekend Aloft, and the Greenville Chamber of
Commerce.
Tecumseh "Tee" Hooper, Jr., Class III Director, is the president of IKON Office
Solutions in Greenville, South Carolina. He is also a director of Homegold,
Inc., a sub-prime mortgage lender and a director of Peregrine Energy, Inc., an
energy management company. From 1994 until 1997, he served as a director of
Carolina Investors, a savings and loan institution. Mr. Hooper graduated from
The Citadel in 1969 with a degree in business administration, and he received a
Masters in Business Administration from the University of South Carolina in
1971. Mr. Hooper has served the community as a member of the Greenville County
Development Board, the Greenville Chamber of Commerce, and the board of
directors for Camp Greenville, as well as the vice chairman of communications
for the United Way. Mr. Hooper also serves on the board of directors for
Leadership Greenville, Leadership South Carolina, and the YMCA Metropolitan.
Rudolph "Trip" G. Johnstone, III, M.D., Class I Director, is a physician
practicing with the Cross Creek Asthma, Allergy and Immunology medical clinic.
He graduated from Washington & Lee University in 1982 with a degree in biology
and from the Medical University of South Carolina in 1986. Mr. Johnstone is
active with the Greenville Art Museum and served on the consulting board to
Greenville National Bank from 1995 until 1998, when it was acquired by Regions
Bank.
Keith J. Marrero, Class I Director, is the principal and owner of AMI
Architects, an architectural firm located in Greenville, South Carolina that was
founded in 1988. He is a registered architect with the South Carolina and
Louisiana Boards of Architectural Examiners and the National Council of
Architectural Registration Boards. Mr. Marrero is a previous advisory board
member of BB&T. He graduated from the University of Notre Dame with a bachelors
degree in Architecture in 1983. Mr. Marrero was appointed by former Governor
David Beasley to the board of directors of the South Carolina Legacy Trust Fund.
He is also an executive committee member of the Greenville Chamber of Commerce,
serving as vice chairman of Minority Business. Mr. Marrero is also an advisory
board member of the Bi-Lo Center and serves on the Historic Architecture Review
Board for the City of Greenville.
James B. Orders, III, Class II Director, is the Chairman of the Board for
Greenville First Bancshares. He is the president of Park Place Corporation, a
company engaged in the manufacture and sale of bedding and other furniture to
the wholesale market. Mr. Orders is chairman of Comfortaire Corporation and a
director of Orders Realty Co., Inc., a real estate development and management
company that is a wholly owned subsidiary of Park Place Corporation. He attended
Clemson University from 1970 until 1974. Mr. Orders is the past president of the
Downtown Rotary Club, a past member of the advisory board of Greenville National
Bank, and a past member of the advisory board of Carolina First Bank. In
addition, he is a member of the Lay Christian Association Board and the Downtown
Soccer Association Board.
R. Arthur "Art" Seaver, Jr., Class I Director, will be the president and chief
executive officer of Greenville First Bank. He has over 13 years of banking
experience. From 1986 until 1992, Mr. Seaver held various positions with The
Citizens & Southern National Bank of South Carolina, including assistant vice
president of corporate banking. From 1992 until February 1999, he was with
Greenville National Bank, which was acquired by Regions Bank in 1998. He was the
senior vice president in charge of Greenville National Bank's liability portion
of the balance sheet prior to leaving to form the proposed Greenville First
Bank. Mr. Seaver is a 1986 graduate of Clemson University with a bachelors
degree in Finance and a 1999 graduate of the BAI Graduate School of Community
Bank Management. He is very active in the Greenville community, where he works
with numerous
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<PAGE> 34
organizations, including Leadership Greenville, the South Carolina
Network of Business and Education Partnership, Junior Achievement, the
Greenville Convention and Visitors Bureau, the United Way, and the First
Presbyterian Church.
William B. Sturgis, Class II Director, held various executive positions with
W.R. Grace & Co. from 1984 until his retirement in 1997, including executive
vice president of W.R. Grace's worldwide packaging operations and president of
its North American Cryovac Division. Mr. Sturgis graduated from Clemson
University in 1957 with a degree in chemical engineering and is a graduate of
the Advanced Management Program at Harvard. He is active with Clemson
University, serving on the Foundation Board, the President's Advisory Council,
and the Engineering Advisory Board. He is also an advisory board member of the
Peace Center and a member of the Downtown Rotary Club and Presbyterian Community
Foundation.
Family Relationships. Dr. Johnstone is Mr. Gilmer's stepson. No other director
has a family relationship with any other director or executive officer of
Greenville First Bancshares.
EMPLOYMENT AGREEMENTS
We have entered into an employment agreement with Art Seaver for a
three-year term, pursuant to which he will serve as the president, the chief
executive officer, and a director of Greenville First Bancshares and Greenville
First Bank. Mr. Seaver will be paid an initial salary of $123,000, plus his
yearly medical insurance premium. He shall receive an annual increase in his
salary equal to the previous year's salary times the increase in the Consumer
Price Index during the previous year. The board of directors may increase Mr.
Seaver's salary above this level, but not below it. He is entitled to receive a
bonus of $10,000 upon the opening of the bank and will be eligible to receive an
annual bonus of up to 5% of the net pre-tax income of the bank, if the bank
meets performance goals set by the board. He 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. Seaver 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. These options will vest over a
five-year period and will have a term of ten years. Additionally, Mr. Seaver
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. Seaver's employment agreement also provides that following
termination of his employment and for a period of twelve months thereafter, he
may not (a) compete with the company, the bank, or any of its affiliates by,
directly or indirectly, forming, serving as an organizer, director or officer
of, or consultant to, or acquiring or maintaining more than 1% passive
investment in, a depository financial institution or holding company thereof if
such depository institution or holding company has one or more offices or
branches within radius of thirty miles from the main office of the company or
any branch office of the company, (b) solicit major customers of the bank for
the purpose of providing financial services, or (c) solicit employees of the
bank for employment. If Mr. Seaver terminates his employment for good cause as
that term is defined in the employment agreement or if he is terminated
following a change in control of Greenville First Bancshares as defined in the
agreement, he will be entitled to severance compensation of his then current
monthly salary for a period of 12 months, plus accrued bonus, and all
outstanding options and incentives shall vest immediately.
DIRECTOR COMPENSATION
We intend to pay each of our ten directors $200 for each meeting they
attend and $50 for each committee meeting they attend. During the first year we
expect to have 12 directors meetings. We expect nine directors to attend each
meeting for total directors' fees for the year of $21,600. We also expect to
hold 64 committee meetings during the first year. We expect four directors to
attend each committee meeting for total fees for the year of $12,800.
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<PAGE> 35
STOCK OPTION PLAN
After the offering, we expect to adopt a stock option plan which will
permit Greenville First Bancshares 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 do not intend to issue stock options at less
than the fair market value of the common stock on the date of grant.
STOCK WARRANTS
The organizers have invested significant time and effort to form
Greenville First Bancshares and Greenville First Bank, and they have
individually guaranteed a $600,000 line of credit to Greenville First Bancshares
to cover organizational expenses. In recognition of the financial risk and
efforts they have undertaken in organizing the bank, each organizer will also
receive, for no additional consideration, a warrant to purchase one share of
common stock at a purchase price of $10.00 per share for every two shares
purchased by that organizer in the offering. Executive officers who are not
organizers will not receive warrants. The warrants, which will be represented by
separate warrant agreements, will vest over a three year period beginning one
year from the date of the completion of the offering 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 not be
transferable and are subject to compliance with applicable securities laws. If
the Office of the Comptroller of the Currency or the FDIC issues a capital
directive or other order requiring the bank to obtain additional capital, the
warrants will be forfeited if not immediately exercised.
The organizers plan to purchase approximately 238,500 shares of common
stock for a total investment of $2,385,000. As a result, the organizers will own
approximately 19.9% of the common stock outstanding upon completion of the
offering. If each organizer exercises his warrant in full, the organizers'
ownership of Greenville First Bancshares will increase to 27.0% of the
outstanding common stock.
ADDITIONAL ORGANIZER PURCHASES
Although they have not promised to do so, the organizers may purchase
additional shares in the offering, including up to 100% of the offering. All
shares purchased by the organizers will be for investment and not intended for
resale. Because purchases by the organizers may be substantial, you should not
assume that the sale of a specified offering amount indicates the merits of this
offering.
EXCULPATION AND INDEMNIFICATION
Greenville First Bancshares's articles of incorporation contain a
provision which, subject to 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.
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<PAGE> 36
Greenville First Bancshares's bylaws contain 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 would require Greenville First Bancshares to indemnify
these persons against expenses, including attorney's fees, actually and
reasonably incurred in connection with the matter. The South Carolina Business
Corporation Act expressly allows Greenville First Bancshares 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.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
Greenville First Bancshares pursuant to the foregoing provisions, or otherwise,
Greenville First Bancshares has been informed that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act of 1933 and is, therefore, unenforceable.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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. These transactions are also restricted by
our regulatory agencies, including the Federal Reserve Board. For a discussion
of the Federal Reserve Board regulations, please see "Transactions with
Affiliates and Insiders" on page 26. These 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, regulatory restrictions, 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.
LEASE AND CONSTRUCTION OF MAIN OFFICE
We expect to lease our bank's main facility from Halton Properties, LLC
for a term of 20 years at an initial rental rate of $16,667 per month. Mark A.
Cothran, one of our directors, is a 50% owner of Halton Properties, LLC. One of
our other directors, Keith J. Marrero, is an architect and is designing the
facility. Mr. Marrero will be paid approximately $70,000 for his architectural
services. Halton Properties, LLC is purchasing the land and building the bank
facility on the land to our specifications. We expect to complete construction
of our main facility by August 2000, at which time we will begin to pay rent in
the amount of $16,667 per month. Prior to completion of the permanent bank
facility, we will lease a modular bank facility on a month to month basis for an
initial payment of $13,050 and a monthly lease rate of $5,880. The modular
facility will be located on the same site as out future main office, and we will
pay $500 per month in rent to Halton Properties, LLC for the use of this site
prior to completion of the main office. We have conducted two separate
appraisals of the lease and the property, which includes Mr. Marrero's
architectural services, to ensure that the terms of the proposed lease are on
substantially the same terms as those prevailing at the time for comparable
transactions with unrelated parties.
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LOAN GUARANTEE
Each of the directors has guaranteed the $600,000 line of credit used
to pay organizing expenses for the bank and holding company.
DESCRIPTION OF CAPITAL STOCK OF GREENVILLE FIRST BANCSHARES
GENERAL
The authorized capital stock of Greenville First Bancshares 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 Greenville First Bancshares's capital stock.
Reference is made to the articles of incorporation of Greenville First
Bancshares which is filed as an exhibit to the Registration Statement of which
this prospectus forms a part, for a detailed description of the provisions
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 for distribution. We do not plan to declare any
dividends in the immediate future. See "Dividend Policy" on page 12. 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
Greenville First Bancshares' 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 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.
ANTI-TAKEOVER EFFECTS
The provisions of the articles, the bylaws, and South Carolina law
summarized in the following paragraphs may have anti-takeover 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.
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Restriction on Acquisition. Sections 34-25-50 and 34-25-240 of the Code
of Laws of South Carolina prohibit a company from "acquiring" Greenville First
Bancshares or Greenville First Bank until the bank has been in existence and
continuous operation for five years.
Control Share Act. Greenville First Bancshares has specifically elected
to opt out of a provision of South Carolina law which may deter or frustrate
unsolicited attempts to acquire South Carolina corporations. This statute,
commonly referred to as the "Control Share Act" applies to public corporations
organized in South Carolina, unless the corporation specifically elects to opt
out. The Control Share Act generally provides that shares of a public
corporation acquired in excess of specific thresholds will not possess any
voting rights unless such voting rights are approved by a majority vote of the
corporation's disinterested shareholders.
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 Greenville First Bancshares by means of a proxy contest,
tender offer, merger or otherwise, and thereby protect the continuity of the
company's management.
Number of Directors. The bylaws provide that the number of directors
shall be fixed from time to time by resolution by at least a majority of the
directors then in office, but may not consist of fewer than five nor more than
25 members. Initially we will have ten directors.
Classified Board of Directors. Our 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.
Number, Term, and Removal of Directors. We currently have ten
directors, but our bylaws authorize this number to be increased or decreased by
our board of directors. Our directors are elected to three year terms by a
plurality vote of our shareholders. Our bylaws provide that our shareholders, by
a majority vote of those entitled to vote in an election of directors, or our
board of directors, by a unanimous vote, excluding the director in question, may
remove a director with or without cause. Our bylaws provide that all vacancies
on our board may be filled by a majority of the remaining directors for the
unexpired term.
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
must be in writing and delivered to the secretary of the company no earlier than
30 days and no later than 60 days in advance of the annual meeting. Shareholder
nominations for the election of directors must be made in writing and delivered
to the secretary of the company no later than 90 days prior to the annual
meeting, and in the case of election to be held at a special meeting of
shareholders for the election of directors, the close of business on the seventh
day following the date on which notice of the meeting is first given to
shareholders. We may reject a shareholder proposal or nomination that is not
made in accordance with such procedures.
Nomination Requirements. Pursuant to the bylaws, we have established
nomination requirements for an individual to be elected as a director, including
that the nominating party provide (i) notice that such party intends
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to nominate the proposed director; (ii) the name of and 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.
TRANSFER AGENT
The transfer agent and registrar for the common stock will be SunTrust
Bank.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, we will have 1,200,000 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 Greenville First Bancshares,
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' 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 Greenville
First Bancshares 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.
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement among
us and the underwriter named below, the underwriter has agreed to purchase from
us, and we have agreed to sell to the underwriter, the number of shares of
common stock listed opposite the underwriter's name below.
<TABLE>
<CAPTION>
Number of Firm Number of Over-
Underwriter Shares Allotment Shares
----------- ------ ----------------
<S> <C> <C>
Wachovia Securities, Inc................................... 1,200,000 180,000
</TABLE>
The underwriting agreement provides that the underwriter's obligations
are subject to approval of certain legal matters by counsel and to various other
conditions customary in a firm commitment underwritten public offering. The
underwriter is required to purchase and pay for the shares offered by this
prospectus other than those covered by the over-allotment option described
below.
The underwriting discount that will apply to shares not purchased by
our directors and executive officers in this offering will equal 7.5% of the
public offering price listed on the cover page of this prospectus, or $.75 per
share. The underwriting discount that will apply to shares purchased in this
offering by our directors and executive officers and certain other investors
recommended by our directors and executive officers, up to 30% of the offering,
will equal 3.5% of the public offering price, or $.35 per share.
38
<PAGE> 40
The underwriter proposes to offer the common stock directly to the
public at the public offering price of $10.00 per share and to certain
securities dealers at the price less a concession not in excess of $____ per
share. The underwriter may allow, and the selected dealers may reallow, a
concession not in excess of $___ per share to certain other broker and dealers.
We expect that the shares of common stock will be ready for delivery on or about
________, 1999. After the offering, the offering price and other selling terms
may change.
The public offering price was determined by negotiations between us and
the underwriter based on several factors. These factors included prevailing
market conditions, the price to earnings and price to book value multiples of
comparable publicity traded companies and Greenville First Bank's growth
potential and cash flow and earnings prospects.
We have granted the underwriter an option, exercisable within 30 days
after the date of this prospectus, to purchase up to 180,000 additional shares
of common stock to cover over-allotments, if any, at the public offering price
listed on the cover page of this prospectus, less the 7.5% underwriting
discount. The underwriter may purchase these shares only to cover
over-allotments made in connection with this offering.
The underwriter does not intend to sell shares of common stock to any
account over which it exercises discretionary authority.
We, and our directors and executive officers, have each agreed with the
underwriter that we will not sell, contract to sell, or otherwise dispose of any
shares of common stock or any securities that can be converted into or exchanged
for shares of common stock for a period of 180 days from the date of this
prospectus without the underwriter's prior written consent, except in limited
circumstances. The underwriter may on occasion be a customer of, engage in
transactions with, and perform services for us and Greenville First Bank in the
ordinary course of business.
We have agreed to indemnify the underwriter against certain
liabilities, including liabilities under the Securities Act of 1933, as
currently in effect, or to contribute to payments that the underwriter may be
required to make in connection with these liabilities.
In connection with this offering, the underwriter may purchase and sell
common stock in the open market. These transactions may include over-allotment
and stabilizing transactions, and purchases to cover syndicate short positions
created in connection with this offering. Stabilizing transactions consist of
certain bids or purchases for the purpose of preventing or retarding a decline
in the market price of the common stock, and syndicate short positions involve
the underwriter's sale of a greater number of shares of common stock than it is
required to purchase from us in the offering. These activities may stabilize,
maintain or otherwise affect the market price of the common stock, which may be
higher than the price that might otherwise prevail in the open market. The
underwriter may effect these transactions on the Nasdaq OTC Bulletin Board or
otherwise and may discontinue them at any time.
39
<PAGE> 41
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for
Greenville First Bancshares by Nelson Mullins Riley & Scarborough, L.L.P.,
Atlanta, Georgia and Greenville, South Carolina. Legal matters related to the
shares of common stock offered by this prospectus will be passed upon for
Wachovia Securities by Smith Helms Mulliss & Moore, L.L.P., Charlotte, North
Carolina.
EXPERTS
Greenville First Bancshares's financial statements dated June 30, 1999
and for the period from February 1999 (inception), until June 30, 1999 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 this
firm given upon their authority as an expert in accounting and auditing.
ADDITIONAL INFORMATION
We have filed with the SEC 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 Greenville First Bancshares, Greenville
First 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 SEC, Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549. You may obtain information on the operation of the
Public Reference Room by calling the SEC at 1-800-SEC-0330. 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 SEC using the EDGAR filing system, including
Greenville First Bancshares.
We have filed or will file various applications with the Office of the
Comptroller of the Currency and the FDIC. You should only rely 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. Greenville First Bancshares and
Greenville First 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.
As a result of this offering, Greenville First Bancshares will become a
reporting company subject to the full informational requirements of the
Securities Exchange Act of 1934. We will fulfill our obligations with respect to
such requirements by filing periodic reports and other information with the SEC.
We will furnish our shareholders with annual reports containing audited
financial statements and with quarterly reports for the first three quarters of
each fiscal year containing unaudited summary financial information. Our fiscal
year ends on December 31.
40
<PAGE> 42
GREENVILLE FIRST BANCSHARES, INC
(A DEVELOPMENT STAGE ENTERPRISE)
GREENVILLE, SOUTH CAROLINA
CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT 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
</TABLE>
F-1
<PAGE> 43
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Directors
GREENVILLE FIRST BANCSHARES, INC.
Greenville, South Carolina
We have audited the accompanying balance sheet of GREENVILLE FIRST
BANCSHARES, INC. (a development stage enterprise) as of June 30, 1999 and the
related statements of operations, changes in organizers' deficit and cash flows
for the period from February 22, 1999 (date of inception) through June 30, 1999.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of GREENVILLE FIRST
BANCSHARES, INC. (a development stage enterprise) as of June 30, 1999 and the
results of its operations and its cash flows for the period from February 22,
1999 through June 30, 1999 in conformity with generally accepted accounting
principles.
/s/ Elliot, Davis & Company, LLP
- --------------------------------
Greenville, South Carolina
July 8, 1999
F-2
<PAGE> 44
GREENVILLE FIRST BANCSHARES, INC
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEET
JUNE 30, 1999
<TABLE>
<S> <C>
ASSETS
Cash and cash equivalents $ 31,625
Computer equipment 1,855
Deferred stock offering costs 22,960
---------
Total assets $ 56,440
=========
LIABILITIES AND ORGANIZERS' DEFICIT
LIABILITIES
Line of credit $ 200,000
Interest payable 3,249
Salaries payable 5,200
---------
208,449
COMMITMENTS AND CONTINGENCIES - Notes 2 and 3
ORGANIZERS' DEFICIT
Preferred stock, par value $.01 per share, 10,000,000 shares
authorized, no shares issued
Common stock, par value $.01 per share, 20,000,000 shares
authorized
Additional paid-in capital 100
Retained deficit accumulated during the development stage (152,109)
Total liabilities and organizers' deficit $ 56,440
=========
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-3
<PAGE> 45
GREENVILLE FIRST BANCSHARES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM FEBRUARY 22, 1999 (DATE OF INCEPTION)
THROUGH JUNE 30, 1999
<TABLE>
<S> <C>
EXPENSES
Salaries and payroll taxes $ 68,966
Professional fees 38,000
Marketing 24,523
Insurance 4,721
Rent 2,400
Telephone and supplies 4,174
Interest 3,248
Other 6,077
---------
Loss before provision for income taxes (152,109)
PROVISION FOR INCOME TAXES --
---------
Net loss $(152,109)
=========
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-4
<PAGE> 46
GREENVILLE FIRST BANCSHARES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF CHANGES IN ORGANIZERS' DEFICIT
FOR THE PERIOD FROM FEBRUARY 22, 1999 (DATE OF INCEPTION)
THROUGH JUNE 30, 1999
<TABLE>
<CAPTION>
RETAINED
DEFICIT
ACCUMULATED
ADDITIONAL DURING THE
COMMON STOCK PAID-IN DEVELOPMENT
SHARES AMOUNT CAPITAL STAGE TOTAL
------ ------ ------- --------------- --------------
<S> <C> <C> <C> <C> <C>
PROCEEDS FROM THE SALE OF
STOCK TO ORGANIZERS 100 $ -- $ 100 $ -- $ 100
NET LOSS -- -- -- $ (152,109) $ (152,109)
----- ----------- ---- --------------- --------------
BALANCE, JUNE 30, 1999 100 $ -- $100 $ (152,109) $ (152,009)
===== =========== ==== =============== ==============
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-5
<PAGE> 47
GREENVILLE FIRST BANCSHARES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM FEBRUARY 22,1999 (DATE OF INCEPTION)
THROUGH JUNE 30, 1999
NET CASH USED FOR PRE-OPERATING ACTIVITIES
<TABLE>
<S> <C>
Net loss $ (152,109)
Deferred stock offering costs (22,960)
Interest payable 3,249
Salaries payable 5,200
---------------
Net cash used for pre-operating activities (166,620)
---------------
INVESTING ACTIVITIES
Purchase of computer equipment (1,855)
---------------
FINANCING ACTIVITIES
Proceeds from borrowings on line of credit 200,000
Proceeds from issuance of stock to organizer 100
---------------
Net cash provided by financing activities 200,100
---------------
Net increase in cash 31,625
CASH AND CASH EQUIVALENTS, FEBRUARY 22, 1999
(DATE OF INCEPTION) --
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 31,625
===============
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-6
<PAGE> 48
GREENVILLE FIRST BANCSHARES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACTIVITIES
GREENVILLE FIRST BANCSHARES, INC. (the "Company") is a South Carolina
corporation organized for the purpose of owning and controlling all of the
capital stock of GREENVILLE FIRST BANK (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 bank to be located in Greenville County, South
Carolina. The Company has filed a charter application with the OCC and an
application for deposit insurance with the FDIC. Provided that the applications
are timely approved and the necessary capital is raised, it is expected that
banking operations will commence in January 2000.
The Company is a development stage enterprise as defined by Statement
of Financial Accounting Standard No. 7, "Accounting and Reporting by Development
Stage Enterprises", as it devotes substantially all its efforts to establishing
a new business. The Company's planned principal operations have not commenced
and revenue has not been recognized from the planned principal operations.
The Company intends to sell 1,200,000 shares of its common stock at $10
per share. The offering will raise $11,113,000 net of estimated underwriting
discounts and commissions and offering expenses. The directors and executive
officers of the Company plan to purchase 238,500 shares of common stock at $10
per share, for a total of $2,385,000. Upon purchase of these shares, the Company
will issue stock warrants to the organizers to purchase up to an additional
116,250 shares of common stock. Additionally, the underwriter may exercise the
over-allotment option and purchase up to 180,000 additional shares of common
stock. The remaining shares will be sold through a public offering. The Company
will use $8.5 million of the proceeds to capitalize the proposed Bank.
YEAR-END
The Company has adopted a fiscal year ending on December 31, effective for
the period ending December 31, 1999. A minimal amount of transactions
occurred prior to the Company's incorporation have been combined in these
financial statements for ease of presentation.
ESTIMATES
The financial statements include estimates and assumptions that effect the
Company's financial position and results of operations and disclosure of
contingent assets and liabilities. Actual results could differ from these
estimates.
CASH EQUIVALENTS
The Company considers all highly liquid investments with original maturities
of three months or less to be cash equivalents. The Company places its
temporary cash investments with high credit quality financial institutions.
At times such investments may be in excess of the FDIC insurance limits.
DEFERRED STOCK OFFERING COSTS
Deferred stock offering costs are expenses incurred by the Company in
connection with the offering and issuance of its stock. The deferred stock
offering costs will be deducted from the Company's additional paid-in capital
after the stock offering. If the stock offering is deemed unsuccessful, all
deferred stock offering costs will be charged to operations during the period
in which the offering is deemed unsuccessful.
ORGANIZATION COSTS
Organization costs include incorporation, legal and consulting fees incurred
in connection with establishing the Company. In accordance with Statement of
Position (SOP) 98-5, "Reporting on the Costs of Start-Up Activities,"
organization costs are expensed when incurred.
F-7
<PAGE> 49
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACTIVITIES, CONTINUED
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 June 30, 1999, no taxable income has
been generated and therefore, no tax provision has been included in these
financial statements.
NOTE 2 - LINE OF CREDIT
The Company has established a $600,000 line of credit with an
individual to fund operating expenses of the Company during the development
stage. The line is uncollateralized and is guaranteed by the organizers. The
line bears interest at the prime rate and expires February 28, 2000. As of June
30, 1999, $200,000 is outstanding on this line of credit.
NOTE 3 - COMMITMENTS AND CONTINGENCIES
The Company has engaged a law firm to assist in preparing and filing
all organizational, incorporation, and bank applications and to assist in
preparing stock offering documents and consummating the Company's initial
offering. The aggregate cost of the services is expected to approximate $40,000.
The Company leases temporary office space under a month-to-month
operating lease requiring monthly payments of $800. Additionally, the Company
has entered into a 12-month operating lease for a modular unit to temporarily
serve as its first commercial bank office. The lease requires monthly payments
of approximately $5,880.
The Company has also entered into an operating lease for the property
of its first commercial bank office for $500 a month. Future plans are to
construct its main building on this site and to lease the building and property
for $16,667 per month for 20 years.
The Company has engaged a bank consultant to assist in establishing the
Bank and bank holding company. The aggregate cost of the services is expected to
approximate $45,000.
The Company has entered into an employment agreement with its president
and chief executive officer that includes a three year compensation term, annual
bonus, incentive program, stock option plan and a one-year non-compete agreement
upon early termination.
The Company has entered into an agreement with a data processor to
provide ATM services, item processing and general ledger processing. Components
of this contract include minimum charges based on volume and include initial
setup costs of approximately $56,200.
NOTE 4 - RELATED PARTY TRANSACTIONS
One of the organizers of the Company owns the land where the Company
will lease the land and building for use as its main office (Note 3).
F-8
<PAGE> 50
===============================================================================
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Summary ..........................................3
Risk Factors......................................6
Forward Looking Statements........................9
Use of Proceeds .................................10
Capitalization...................................12
Dividend Policy .................................12
Plan of Operation................................13
Proposed Business................................16
Supervision and Regulation.......................23
Management.......................................30
Certain Relationships and Related Transactions...35
Description of Capital Stock.....................36
Underwriting.....................................38
Legal Matters....................................40
Experts..........................................40
Additional Information ..........................40
Index to Financial Statements ..................F-1
</TABLE>
--------------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT. WE
HAVE NOT AUTHORIZED ANYONE TO GIVE ANY INFORMATION THAT IS DIFFERENT. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED. THE INFORMATION IN THIS PROSPECTUS IS COMPLETE AND ACCURATE AS OF THE
DATE ON THE COVER, BUT THE INFORMATION MAY CHANGE IN THE FUTURE.
UNTIL ____________________, ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE DEALER'S OBLIGATION TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITER, AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
1,200,000 SHARES
COMMON STOCK
GREENVILLE FIRST BANCSHARES, INC.
A PROPOSED BANK HOLDING COMPANY FOR
[BANK LOGO HERE]
GREENVILLE FIRST BANK, N.A. (IN ORGANIZATION)
-----------
PROSPECTUS
-----------
[WACHOVIA LOGO HERE]
___, 1999
================================================================================
<PAGE> 51
PART II
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Item 24. Indemnification of Directors and Officers
Greenville First Bancshares' articles of incorporation contain a
provision which, subject to certain limited exceptions, limits the liability of
a director to Greenville First Bancshares 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 Greenville First
Bancshares; 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 Greenville First Bancshares 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 Greenville First
Bancshares or its shareholders to seek injunctive or other equitable relief not
involving payments in the nature of monetary damages.
Greenville First Bancshares' 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 Greenville First Bancshares to indemnify
those persons against expenses (including attorney's fees) actually and
reasonably incurred in connection with that action or proceeding. The
Corporation Act expressly allows Greenville First Bancshares 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
in the articles of incorporation or bylaws, or otherwise, we have been advised
that in the opinion of the SEC for matters under the securities laws, 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> 52
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 $ 3,836
NASD Filing Fee 1,880
Printing and Engraving 25,000
Legal Fees and Expenses 40,000
Accounting Fees 5,000
Blue Sky Fees and Expenses 15,000
Miscellaneous Disbursements 15,284
-----------
TOTAL $ 106,000
===========
</TABLE>
Item 26. Recent Sales of Unregistered Securities.
From inception, Greenville First Bancshares has issued a total of 10
shares of its common stock to one of its organizers. The price per share was
$10.00 for a total purchase price of $100.00. There were no underwriting
discounts or commissions paid with respect to these transactions. These shares
will be redeemed at $10.00 per share after the offering. All sales were exempt
under Section 4(2) of the Securities Act of 1933.
Item 27. Exhibits.
1. Form of Underwriting Agreement between Greenville First Bancshares and
Wachovia Securities
3.1. Articles of Incorporation, as amended**
3.2. Bylaws**
4.1. See Exhibits 3.1 and 3.2 for provisions in Greenville First
Bancshares'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 July 27, 1999 between Greenville First
Bancshares and Art Seaver
10.2. Lease Agreement dated ________, 1999 between Greenville First Bank and
Halton Properties, LLC*
10.3 Data Processing Services Agreement dated June 28, 1999 between
Greenville First Bancshares and the Intercept Group**
10.4 Form of Stock Warrant Agreement**
10.5 Promissory Note dated February 22, 1999 from Greenville First
Bancshares, Inc. in favor of John J. Meindl, Jr.**
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)
* To be filed by Amendment
** Previously filed
II-2
<PAGE> 53
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 Greenville First Bancshares pursuant to the provisions
described in Item 24 above, or otherwise, Greenville First Bancshares has been
advised that in the opinion of the SEC for matters under the securities laws,
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 Greenville First Bancshares of expenses incurred or paid by a
director, officer or controlling person of Greenville First Bancshares 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, Greenville First Bancshares 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> 54
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 September 22, 1999.
GREENVILLE FIRST BANCSHARES, INC.
By: /s/ R. Arthur Seaver, Jr.
---------------------------------
R. Arthur Seaver, Jr.
Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints R. Arthur Seaver, Jr. and he is the true
and lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments to this Registration Statement, and
to file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto such
attorney-in-fact and agent, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the premises,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that such attorney-in-fact and agent, or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
*
- -----------------------------------
Andrew B. Cajka Director September 22, 1999
*
- -----------------------------------
Mark A. Cothran Director September 22, 1999
*
- -----------------------------------
Leighton M. Cubbage Director September 22, 1999
*
- -----------------------------------
Tecumseh Hooper, Jr. Director September 22, 1999
*
- -----------------------------------
Rudolph G. Johnstone, III, M.D. Director September 22, 1999
*
- -----------------------------------
Keith J. Marrero Director September 22, 1999
</TABLE>
<PAGE> 55
<TABLE>
<S> <C> <C>
*
- -----------------------------------
James B. Orders, III Director, Chairman September 22, 1999
*
- -----------------------------------
William B. Sturgis Director September 22, 1999
/s/ R. Arthur Seaver, Jr.
- -----------------------------------
R. Arthur Seaver, Jr. Director, Chief Executive September 22, 1999
Officer and President
(principal executive officer)
(principal financial
and accounting officer)
*
- -----------------------------------
Fred Gilmer, Jr. Director, Senior Vice President September 22, 1999
/s/ R. Arthur Seaver, Jr.
- -----------------------------------
* As Attorney-in Fact
</TABLE>
<PAGE> 56
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
<S> <C>
1. Form of Underwriting Agreement between Greenville First Bancshares and
Wachovia Securities
3.1. Articles of Incorporation, as amended**
3.2. Bylaws**
4.1. See Exhibits 3.1 and 3.2 for provisions in Greenville First
Bancshares'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 July 27, 1999 between Greenville First
Bancshares and Art Seaver
10.2. Lease Agreement dated ________, 1999 between Greenville First Bank and
Halton Properties, LLC*
10.3 Data Processing Services Agreement dated June 28, 1999 between
Greenville First Bancshares and the Intercept Group**
10.4 Form of Stock Warrant Agreement**
10.5 Promissory Note dated February 22, 1999 from Greenville First
Bancshares, Inc. in favor of John J. Meindl, Jr.**
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>
* To be filed by Amendment
** Previously filed
<PAGE> 1
Exhibit 1
GREENVILLE FIRST BANCSHARES, INC.
COMMON STOCK
UNDERWRITING AGREEMENT
_________________, 1999
WACHOVIA SECURITIES, INC.
As representative of the several
Underwriters named in Schedule I hereto,
c/o Wachovia Securities, Inc.
IJL Financial Center
201 North Tryon Street
Charlotte, North Carolina 28202
Ladies and Gentlemen:
Greenville First Bancshares, Inc., a South Carolina corporation (the
"Company") and proposed holding company for Greenville First Bank, N.A., a
national banking association (the "Bank"), proposes, subject to the terms and
conditions stated herein, to issue and sell to the underwriters named in
Schedule I hereto (the "Underwriters") an aggregate of 1,200,000 shares of
common stock, par value $.01 per share (the "Common Stock"), of the Company
(the "Firm Shares"), and, at the election of the Underwriters, subject to the
terms and conditions stated herein, to sell to the Underwriters up to 180,000
additional shares of Common Stock (the "Optional Shares") solely to cover
overallotments, if any (the Firm Shares and the Optional Shares that the
Underwriters elect to purchase pursuant to Section 2 hereof are collectively
called the "Shares").
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to, and agrees with each of the Underwriters that:
(a) A registration statement on Form SB-2 (File No.
333-_____) with respect to the Shares, has been filed by the Company
with the Securities and Exchange Commission (the "Commission") under
the Securities Act of 1933, as amended (the "Securities Act"). Copies
of the registration statement and any amendments thereto, including
any post-effective amendments, have been delivered by the Company to
you, and have been declared effective by the Commission in such form.
No other document with respect to the registration statement or any
post effective amendment thereto has been filed with the Commission;
and no stop order suspending the effectiveness of the registration
statement has been issued and no proceeding for that purpose has been
instituted or threatened by the Commission. Any preliminary prospectus
included in the registration statement or filed with the Commission
pursuant to Rule 424 of the Rules and Regulations of the Commission
under the Securities Act (the "Rules and Regulations"), is
1
<PAGE> 2
herein called a "Preliminary Prospectus." The various parts of such
registration statement, including the prospectus, Part II, all
financial schedules and exhibits thereto, and including the
information contained in the form of final prospectus filed with the
Commission pursuant to Rule 424(b) under the Securities Act, and
deemed by virtue of Rule 430A under the Securities Act to be part of
the registration statement at the time it was declared effective, as
amended at the time such part became effective, are herein called
collectively the "Registration Statement," and the final prospectus,
in the form first filed pursuant to Rule 424(b), is herein called the
"Prospectus."
(b) No order preventing or suspending the use of any
Prospectus, including any Preliminary Prospectus, has been issued and
no proceeding for that purpose has been instituted or threatened by
the Commission or the securities authority of any state or other
jurisdiction. No stop order suspending the effectiveness of the
Registration Statement or any part thereof has been issued and no
proceeding for that purpose has been instituted or threatened or, to
the best knowledge of the Company, contemplated by the Commission or
the securities authority of any state or other jurisdiction.
(c) Each Prospectus filed as part of the Registration
Statement as originally filed or as part of any amendment thereto
complied when so filed in all material respects with the requirements
applicable to it under the Securities Act and the Rules and
Regulations and none of such documents contained an untrue statement
of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading; and any further amendment or supplement thereto, when such
documents become effective or are filed with the Commission, as the
case may be, will conform in all material respects to the requirements
of the Securities Act, and the Rules and Regulations and will not
contain an untrue statement of material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that this
representation and warranty shall not apply to any statements or
omissions made in reliance upon and in conformity with information
furnished in writing to the Company by an Underwriter through Wachovia
Securities, Inc. (the "Representative") expressly for use therein.
When the Registration Statement or any amendment thereto was declared
effective, and at each Time of Delivery (as hereinafter defined), it
(i) contained all statements required to be stated therein in
accordance with, and complied or will comply in all material respects
with the requirements of the Securities Act and the Rules and
Regulations and (ii) did not include any untrue statement of a
material fact or omit to state any material fact necessary in order to
make the statements therein not misleading. When the Prospectus or any
amendment or supplement thereto is filed with the Commission pursuant
to Rule 424(b) (or, if the Prospectus or such amendment or supplement
is not required to be so filed, when the Registration Statement or the
amendment thereto containing such amendment or supplement to the
Prospectus was or is declared effective) and at each Time of Delivery,
the Prospectus, as amended or supplemented at any such time (i)
contained or will contain all statements required to be stated therein
in accordance with, and complied or will comply in all material
respects with the requirements of, the Securities Act and the Rules
and Regulations and (ii) did not or will not include any untrue
statement of a material fact or omit to state any material fact
2
<PAGE> 3
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(d) The descriptions in the Registration Statement and
the Prospectus of statutes, rules, regulations, legal and governmental
proceedings or contracts and other documents that are required to be
so described are accurate and fairly present the information required
to be shown; and there are no statutes, rules, regulations or legal or
governmental proceedings required to be described in the Registration
Statement or the Prospectus that are not described as required and no
contracts or documents of a character that are required to be
described in the Registration Statement or the Prospectus or to be
filed as exhibits to the Registration Statement that are not described
and filed as required.
(e) The Company has been duly incorporated, is validly
existing as a corporation under the laws of the State of South
Carolina and has full power and authority to own or lease its
properties and conduct its business as described in the Prospectus.
The Bank is a national banking association in organization under the
laws of the United States of America and, upon the issuance of a
charter by the Office of the Comptroller of the Currency ("OCC"), will
have full power and authority to own or lease its properties and
conduct its business as described in the Prospectus. The Company has
full power and authority to enter into this Agreement and to perform
its obligations hereunder. Neither the Company nor the Bank is
required to be qualified to transact business as a foreign corporation
under the laws of any other jurisdiction.
(f) The capitalization of the Company is as disclosed
under the caption "Capitalization" in the Prospectus. All of the
issued shares of capital stock of the Company have been duly
authorized and validly issued, are fully paid and nonassessable and
conform to the description of the capital stock under the caption
"Description of Capital Stock of the Company" contained in the
Prospectus. None of the issued shares of capital stock of the Company
has been issued or is owned or held in violation of any preemptive or
similar rights, and no person or entity (including any holder of
outstanding shares of capital stock of the Company or its subsidiary)
has any preemptive or other rights to subscribe for any of the Shares.
None of the shares of capital stock of the Bank has been issued.
(g) Upon the issuance of a charter by the OCC and the
payment for the capital stock of the Bank, all of the issued shares of
the Bank will be duly authorized and validly issued, fully paid, and,
except as may be applicable under the National Bank Act, nonassessable
and will be owned beneficially by the Company free and clear of all
liens, security interests, pledges, charges, encumbrances, defects,
shareholders' agreements, voting trusts, equities or claims of any
nature whatsoever. The Company has made application
(i) to the Board of Governors of the Federal
Reserve System to become a bank holding company;
3
<PAGE> 4
(ii) to the OCC, to charter a national bank; and
(iii) to the Federal Deposit Insurance
Corporation for Federal Deposit Insurance for Bank deposits
(collectively, the "Regulatory Approvals").
The Company and the Bank have obtained or have filed for all other
material licenses, consents and approvals, and have satisfied or have taken all
action required at this time to satisfy all material eligibility and other
similar requirements imposed by federal and state regulatory bodies,
administrative agencies or other governmental bodies, agencies or officials, in
each case applicable to the conduct of the business in which they are engaged
or are contemplated to be engaged as described in the Registration Statement.
With respect to the Regulatory Approvals, as well as all other material
licenses, consents and approvals, and any other similar requirements that the
Company or the Bank does not have at this time, (i) all applications therefor
are complete, accurate, and have been filed with the appropriate regulatory
authorities, (ii) the Company has received preliminary notice that each
application for Regulatory Approval will be approved, and (iii) the Company
knows of no reason why the same will not be received or satisfied prior to the
time the same are required. Other than the Bank, the Company does not own,
directly or indirectly, any capital stock or other equity securities of any
corporation or any ownership interest in any partnership, joint venture or
other association.
(h) Except as disclosed in the Prospectus, there are no
outstanding (i) securities or obligations of the Company or the Bank
convertible into or exchangeable for any capital stock of the Company
or the Bank, (ii) warrants, rights or options to subscribe for or
purchase from the Company or the Bank any such capital stock or any
such convertible or exchangeable securities or obligations, or (iii)
obligations of the Company or the Bank to issue any shares of capital
stock, any such convertible or exchangeable securities or obligations,
or any such warrants, rights or options.
(i) Since the date as of which information is given in
the Prospectus, neither the Company nor the Bank has sustained any
material loss or interference with its business from fire, explosion,
flood or other calamity, whether or not covered by insurance, or from
any labor dispute or court or governmental action, order or decree,
otherwise than as disclosed in or contemplated by the Prospectus.
(j) Since the date as of which information is given in
the Prospectus, (i) neither the Company nor the Bank has incurred any
liabilities or obligations, direct or contingent, or entered into any
transactions, not in the ordinary course of business, that are
material to the Company and the Bank, (ii) the Company has not
purchased any of its outstanding capital stock or declared, paid or
otherwise made any dividend or distribution of any kind on its capital
stock, (iii) there has not been any change in the capital stock,
long-term debt or short-term debt of the Company or the Bank (except
with respect to such changes in the balance due under the Company's
line of credit described in the Prospectus), and (iv) there has not
been any material adverse change, or any development involving a
prospective material adverse change, in or affecting the financial
position, general affairs, management, business or prospects of the
Company and the Bank, in each case other than as disclosed in or
contemplated by the Prospectus.
4
<PAGE> 5
(k) The consolidated financial statements of the
Company, together with related notes and schedules as set forth in the
Registration Statement, conform to the requirements of the Securities
Act and the Rules and Regulations. Such financial statements fairly
present the consolidated financial position of the Company at the
respective dates indicated in accordance with generally accepted
accounting principles applied on a consistent basis for the periods
indicated. The Company and the Bank have no material contingent
obligations which are not disclosed in the Company's financial
statements which are included in the Registration Statement. Elliott,
Davis & Company, L.L.P. whose report is included in the Registration
Statement, are independent accountants as required by the Securities
Act and the Rules and Regulations.
(l) The Shares to be sold by the Company hereunder have
been duly authorized and, when issued and delivered against payment
therefor as provided therein, will be validly issued and fully paid
and nonassessable and will conform to the description of the Common
Stock contained in the Prospectus; and all corporate action required
to be taken for the authorization, issuance and sale of the Shares has
been validly taken. The Underwriters will receive good and marketable
title to the Shares to be issued and delivered hereunder, free and
clear of all liens, encumbrances, claims, security interests,
restrictions, shareholders' agreements and voting trusts whatsoever.
The certificates evidencing the Shares will be in due and proper form
and will comply with all applicable legal requirements.
(m) There are no contracts, agreements or understandings
between the Company and any person granting such person the right to
require the Company to file a registration statement under the
Securities Act with respect to any securities of the Company owned or
to be owned by such person or to require the Company to include such
securities in the securities registered pursuant to the Registration
Statement or any securities being registered pursuant to any other
registration statement filed by the Company under the Securities Act.
(n) Neither the Company nor the Bank is, or (with or
without the giving of notice or passage of time or both) would be: (i)
in violation of its Articles of Incorporation, Articles of
Association, Bylaws or other governing instruments; or (ii) in default
under any indenture, mortgage, deed of trust, loan agreement, lease or
other agreement or instrument to which the Company or the Bank is a
party or to which any of their respective properties or assets are
subject, except, in the case of clause (ii) above, where such default
would not have a material adverse effect on either the Company or the
Bank.
(o) The issue and sale of the Shares and the performance
of this Agreement and the consummation of the transactions herein
contemplated will not conflict with, or (with or without the giving of
notice or the passage of time or both) result in a breach or violation
of any of the terms or provisions of, or constitute a default under,
any indenture, mortgage, deed of trust, loan agreement, lease or other
agreement or instrument to which the Company or the Bank is a party or
to which any of their respective properties or
5
<PAGE> 6
assets is subject, nor will such action conflict with or violate any
provision of the Articles of Incorporation, Articles of Association,
Bylaws or other governing instruments of the Company or the Bank, or
any statute, rule or regulation or any order, judgment or decree of
any court or governmental agency or body having jurisdiction over the
Company or the Bank or any of their respective properties or assets.
(p) The Company and the Bank have good and marketable
title in fee simple to all real property, if any, and good title to
all personal property owned by them, in each case free and clear of
all liens, security interests, pledges, charges, encumbrances,
mortgages and defects, except such as are disclosed in the Prospectus
or such as do not materially and adversely interfere with the
operations of the Company and the Bank; and any real property and
buildings held under lease by the Company or the Bank are held under
valid, subsisting and enforceable leases, with such exceptions as are
disclosed in the Prospectus or are not material and do not interfere
with the operations of the Company or the Bank.
(q) No consent, approval, authorization, order or
declaration of or from, or registration, qualification or filing with,
any court or governmental agency or body or third party is required
for the issue and sale of the Shares or the consummation of the
transactions contemplated by this Agreement, except (i) the
registration of the Shares under the Securities Act and such as may be
required by the National Association of Securities Dealers, Inc. (the
"NASD") and under state securities or blue sky laws in connection with
the offer, sale and distribution of the Shares by the Underwriters,
and (ii) as required in connection with the Regulatory Approvals.
(r) Other than as disclosed in the Prospectus, there is
no litigation, arbitration, claim, proceeding (formal or informal) or
investigation pending or, to the knowledge of any director or
executive officer of the Company, threatened (or any reasonable basis
therefor) in which the Company or the Bank is a party or of which any
of their respective properties or assets are the subject which, if
determined adversely to the Company or the Bank, would individually or
in the aggregate have a material adverse effect on the financial
position, general affairs, management, business or prospects of the
Company and the Bank.
(s) This Agreement has been duly authorized, executed
and delivered by the Company and constitutes the valid and binding
agreement of the Company enforceable against the Company in accordance
with its terms subject, as to enforcement, to applicable bankruptcy,
insolvency, reorganization and moratorium laws and other laws relating
to or affecting the enforcement of creditors' rights generally and to
general equitable principles, and except as the enforceability of
rights to indemnity and contribution under this Agreement may be
limited under applicable securities laws or the public policy
underlying such laws.
(t) Neither the Company nor any of its officers,
directors or affiliates has (i) taken, directly or indirectly, any
action designed to cause or result in, or that has constituted or
might reasonably be expected to constitute, the stabilization or
6
<PAGE> 7
manipulation of the price of any security of the Company to facilitate
the sale or resale of the Shares or (ii) since the filing of the
Registration Statement (A) sold, bid for, purchased or paid anyone any
compensation for soliciting purchases of, the Shares or (B) paid or
agreed to pay to any person any compensation for soliciting another to
purchase any other securities of the Company.
(u) None of the Company, the Bank, nor, to the knowledge
of the Company, any director or executive officer, agent, employee or
other person acting on behalf of the Company or the Bank has (i) used
or authorized the use of, any corporate or other funds for unlawful
payments, or contributions, (ii) made unlawful expenditures relating
to political activity to government officials, or (iii) established or
maintained any unlawful or unrecorded funds in violation of any
federal, state, or local law or regulation, including Section 30A of
the Exchange Act. None of the Company, the Bank, nor, to the knowledge
of the Company, any director or executive officer of the Company or
the Bank has accepted or received any unlawful contributions or
payments.
(v) The Company has obtained for the benefit of the
Company and the Underwriters from each of its directors and executive
officers a written agreement (the "Lockup Agreements") that for a
period of 180 days from the date of the Prospectus such director or
officer will not, without your prior written consent, offer, pledge,
sell, contract to sell, grant any option for the sale of, or otherwise
dispose of (or announce any offer, pledge, sale, grant of an option to
purchase or other disposition), directly or indirectly, any shares of
Common Stock or securities convertible into, or exercisable or
exchangeable for, shares of Common Stock.
(w) The Bank, upon the issuance of a charter by the OCC,
will not be prohibited, directly or indirectly, from paying any
dividends to the Company, from making any other distributions on the
Bank's capital stock, from repaying to the Company any loans or
advances to the Bank or from transferring the Bank's property or
assets to the Company, except under federal regulations as disclosed
in the Prospectus.
(x) The Company and the Bank have filed all material
foreign, federal, state and local tax returns that are required to be
filed by them and have paid all taxes shown as due on such returns as
well as all other taxes, assessments and government charges that are
due and payable; and no deficiency with respect to any such return has
been assessed or proposed in any material respects. All tax
liabilities have been adequately provided for in the financial
statements of the Company.
(y) The Company is not, nor will it become as a result
of transactions contemplated hereby, and does not intend to conduct
its business in a manner that would cause it to become an "investment
company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940.
2. PURCHASE AND SALE OF SHARES. Subject to the terms and
conditions herein set forth, (a) the Company agrees to issue and sell to each
of the Underwriters, and each of the Underwriters agree, severally and not
jointly, to purchase from the Company the number of
7
<PAGE> 8
Firm Shares set opposite the name of such Underwriter in Schedule 1 hereto, at
the following purchase prices: (i) with respect to the Firm Shares not
purchased by the Company's directors, executive officers and certain other
investors identified in writing by the Company, as described in (ii) below, at
a purchase price of $9.25 per share, and (ii) with respect to the Firm Shares
purchased by the Company's directors, executive officers and certain other
investors identified in writing by the Company, but only up to a maximum of
360,000 Firm Shares, at a purchase price of $9.65 per share, (b) in the event
and to the extent that the Underwriters shall exercise the election to purchase
Optional Shares as provided below, the Company agrees to issue and to sell to
each of the Underwriters, and each of the Underwriters agree, severally and not
jointly, to purchase from the Company, at a purchase price of $9.25 per share,
that portion of the number of Optional Shares as to which such election shall
have been exercised (to be adjusted by you so as to eliminate fractional
shares) determined by multiplying such number of Optional Shares by a fraction,
the numerator of which is the maximum number of Optional Shares that such
Underwriter is entitled to purchase as set forth opposite the name of such
Underwriter in Schedule I hereto and the denominator of which is the maximum
number of the Optional Shares that all of the Underwriters are entitled to
purchase hereunder.
The Company hereby grants to the Underwriters the right to purchase at
its election in whole or in part from time to time up to 180,000 Optional
Shares, at the purchase price of $9.25 per share for the sole purpose of
covering over-allotments in the sale of Firm Shares. Any such election to
purchase Optional Shares may be exercised by written notice from you to the
Company, given from time to time within a period of 30 calendar days after the
date of this Agreement and setting forth the aggregate number of Optional
Shares to be purchased and the date on which the Optional Shares are to be
delivered, as determined by you but in no event earlier than the First Time of
Delivery (as hereinafter defined) or, unless you and the Company otherwise
agree in writing earlier than two or later than ten business days after the
date of such notice. In the event you elect to purchase all or a portion of the
Optional Shares, the Company agrees to furnish or cause to be furnished to you
the certificates, letters and opinions, and to satisfy all conditions set forth
in Section 7 hereof at each Subsequent Time of Delivery (as hereinafter
defined).
3. OFFERING BY THE UNDERWRITERS. Upon the authorization by you
of the release of the Shares, the several Underwriters propose to offer the
Shares for sale upon the terms and conditions disclosed in the Prospectus.
4. DELIVERY OF SHARES; CLOSING. Certificates in definitive form
for the Shares to be purchased by each Underwriter hereunder, and in such
denominations and registered in such names as the Representative may request
upon at least 48 hours prior notice to the Company shall be delivered by or on
behalf of the Company to you for your account against payment by you of the
purchase price therefor by official bank check or checks (payable in next day
funds unless closing is on a Friday in which case it shall be payable in same
day funds), payable to the order of the Company. The closing of the sale and
purchase of the Shares shall be held at the offices of Smith Helms Mulliss &
Moore, LLP, Charlotte, North Carolina. The time and date of such delivery and
payment shall be, with respect to the Firm Shares, at 10:00 a.m., Charlotte,
North Carolina time, on the 3rd (or if the Firm Shares are priced, as
contemplated by Rule 15c6-1(c) under the Exchange Act, after 4:30 p.m.,
Washington, D.C.
8
<PAGE> 9
time, the 4th) full business day after the execution of this Agreement or at
such other legally permissible time and date as you and the Company may agree
upon in writing, and, with respect to the Optional Shares, at 10:00 a.m.,
Charlotte, North Carolina time, on the date specified by you in the written
notice given by you of the Underwriters' election to purchase all or part of
such optional shares, or at such other time and date as you and the Company may
agree upon in writing. Such time and date for delivery of the Firm Shares is
herein called the "First Time of Delivery," such time and date for delivery of
the Optional Shares, if not the First Time of Delivery, is herein called a
"Subsequent Time of Delivery," and each such time and date for delivery is
herein called a "Time of Delivery." The Company will make such certificates
available for checking and packaging at least 24 hours prior to each Time of
Delivery at your office at the address set forth above or such other location
designated by you to the Company. If the Representative so elects, delivery of
the Firm Shares and the Optional Shares, if any, may be made by credit through
full fast transfer to the accounts at the Depositary Trust Company designated
by the Representative.
5. COVENANTS OF THE COMPANY. The Company covenants and agrees
with the Underwriters:
(a) The Company shall comply with the provisions of and
make all requisite filings with the Commission pursuant to and in
accordance with Rule 430A and subparagraph (1) (or, if applicable and
if consented to by you, subparagraph (4)) of Rule 424(b) not later
than the earlier of (i) the second business day following the
execution and delivery of this Agreeme__ or (ii) the date on which the
Prospectus is first used after the Registration Statement is declared
effective. The Company will advise you promptly of any such filing
pursuant to Rules 430A or 424(b).
(b) The Company will not file with the Commission the
Prospectus or any amendment or supplement to the Prospectus or any
amendment to the Registration Statement unless you have received a
reasonable period of time to review any such proposed amendment or
supplement and consented to the filing thereof and will use its best
efforts to cause any such amendment to the Registration Statement to
be declared effective as promptly as possible. Upon the request of the
Representative or counsel for the Representative, the Company will
promptly prepare and file with the Commission, in accordance with the
Rules and Regulations, any amendments to the Registration Statement or
amendments or supplements to the Prospectus that may be necessary or
advisable in connection with the distribution of the Shares by the
Underwriters and will use its best efforts to cause any such amendment
to the Registration Statement to be declared effective as promptly as
possible. If required, the Company will file any amendment or
supplement to the Prospectus with the Commission in the manner and
within the time period required by Rule 424(b) under the Securities
Act. The Company will advise the Representative, promptly after
receiving notice thereof, of the time when the Registration Statement
or any amendment thereto has been filed or declared effective or the
Prospectus or any amendment or supplement thereto has been filed and
will provide evidence to the Representative of each such filing or
effectiveness.
9
<PAGE> 10
(c) The Company will advise you promptly after receiving
notice or obtaining knowledge of (i) the issuance by the Commission of
any stop order suspending the effectiveness of the Registration
Statement or any part thereof or any order preventing or suspending
the use of any Preliminary Prospectus or the Prospectus or any
amendment or supplement thereto, (ii) the suspension of the
qualification of the Shares for offer or sale in any jurisdiction or
of the initiation or threatening of any proceeding for any such
purpose, or (iii) any request made by the Commission or any securities
authority of any other jurisdiction for amending the Registration
Statement, for amending or supplementing the Prospectus or for
additional information. The Company will use its best efforts to
prevent the issuance of any such stop order and, if any such stop
order is issued, to obtain the withdrawal thereof as promptly as
possible.
(d) If during the period in which a prospectus is
required by law to be delivered by an Underwriter or dealer, any
events shall have occurred as a result of which, in the judgment of
the Company or the opinion of the Underwriters, the Prospectus as then
amended or supplemented would include an untrue statement of a
material fact or omit to state any material fact necessary in order to
make the statements therein, in light of the circumstances under which
they were made, not misleading, or if for any reason it is necessary
during such same period to amend or supplement the Prospectus to
comply with the Securities Act or the Rules and Regulations or any
law, the Company will promptly notify you and upon your request (but
at the Company's expense) prepare and file with the Commission and any
state or other governmental securities commissions in jurisdictions
where the Shares have been sold by the Underwriters, an amendment or
supplement to the Prospectus that corrects such statement or omission
or effects such compliance and will furnish without charge to each
Underwriter and to any dealer in securities, as many copies of such
amended or supplemented Prospectus as you may from time to time
reasonably request. Neither your consent to, nor the Underwriter's
delivery of, any such amendment or supplement shall constitute a
waiver of any of the conditions set forth in Section 7.
(e) The Company promptly from time to time will take
such action as you may reasonably request to qualify the Shares for
offering and sale under the securities or blue sky laws of such
jurisdictions as you may request and will continue such qualifications
in effect for as long as may be necessary to complete the distribution
of the Shares, provided that in connection therewith the Company shall
not be required to qualify as a foreign corporation or to file a
general consent to service of process in any jurisdiction. In the
event that the qualification of the Shares in any jurisdiction is
suspended, the Company shall so advise the Representative promptly in
writing.
(f) The Company will deliver to, or upon the order of,
the Representative, from time to time, as many copies of the
Preliminary Prospectus as the Representative may reasonably request.
The Company will deliver to, or upon the order of, the Representative,
during the period when delivery of a Prospectus is required under the
Securities Act, as many copies of the Prospectus in final form, or as
thereafter amended or supplemented, as the Representative may
reasonably request. The Company will deliver to the Representative at
or before the Time of Delivery, four signed copies of the
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<PAGE> 11
Registration Statement and all amendments thereto including all
exhibits filed therewith, and will deliver to the Representative such
number of copies of the Registration Statement (including such number
of copies of the exhibits filed therewith that may be reasonably
requested), and of all amendments thereto, as the Representative may
reasonably request.
(g) The Company will, from time to time, after the
effective date of the Registration Statement file with the Commission
such reports as are required by the Securities Act, the Exchange Act
and the Rules and Regulations, and shall also file with foreign, state
and other governmental securities commissions in jurisdictions where
the Shares have been sold by the Underwriters such reports as are
required to be filed by the securities acts and the regulations of
those jurisdictions.
(h) As soon as practicable, but in any event not later
than the last day of the thirteenth month after the effective date of
the Registration Statement, the Company will make generally available
to its security holders an earnings statement (which need not be
audited) in reasonable detail covering a period of at least 12
consecutive months beginning after the effective date of the
Registration Statement, complying with Section 11(a) of the Securities
Act and the Rules and Regulations and will advise you in writing when
such statement has been so made available.
(i) The Company will, for a period of five years from
the Time of Delivery, deliver to the Representative copies of annual
reports and copies of all other documents, reports and information
furnished by the Company to its shareholders or filed with the NASD or
any securities exchange pursuant to the requirements of such exchange
or with the Commission pursuant to the Securities Act or the Exchange
Act. The Company will deliver to the Representative similar reports
with respect to significant subsidiaries, as that term is defined in
the Rules and Regulations, which are not consolidated in the Company's
financial statements.
(j) During the period beginning from the date hereof and
continuing to and including the date 180 days after the date of the
Prospectus, the Company will not, without your prior written consent,
offer, pledge, issue, sell, contract to sell, grant any option for the
sale of, or otherwise dispose of (or announce any offer, pledge, sale,
grant of an option to purchase or other disposition), directly or
indirectly, any shares of Common Stock or securities convertible into,
exercisable or exchangeable for, shares of Common Stock, except as
provided in Section 2 and except as described in the Prospectus.
(k) Neither the Company nor any of its officers,
directors or affiliates will (i) take, directly or indirectly, prior
to the closing of the purchase and sale of the Shares, any action
designed to cause or to result in, or that might reasonably be
expected to constitute, the stabilization or manipulation of the price
of any security of the Company to facilitate the sale or resale of any
of the Shares, (ii) sell, bid for, purchase or pay anyone any
compensation for soliciting purchases of, the Shares or (iii) pay or
agree to
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<PAGE> 12
pay to any person any compensation for soliciting another to purchase any other
securities of the Company.
(l) The Company will apply the net proceeds from the
offering in the manner set forth under the heading "Use of Proceeds"
in the Prospectus, including the capitalization of the Bank, and will
timely report such use of proceeds pursuant to Item 701 of Regulation
S-B and S-K in its periodic reports filed pursuant to Section 13(a)
and 15(d) of the Exchange Act in accordance with Rule 463 of the
Securities Act or any successor provision.
(m) If at any time during the 60-day period after the
Registration Statement becomes effective, any rumor, publication or
event relating to or affecting the Company shall occur as a result of
which in your reasonable opinion the market price of the Common Stock
has been or is likely to be materially affected (regardless of whether
such rumor, publication or event necessitates a supplement to or
amendment of the Prospectus) and after written notice from you
advising the Company to the effect set forth above, the Company agrees
to forthwith prepare, consult with you concerning the substance of,
and disseminate a press release or other public statement, reasonably
satisfactory to you, responding to or commenting on such rumor,
publication or event.
(n) The Company will cause the Shares to be quoted on
the Nasdaq OTC Bulletin Board at each Time of Delivery and for at
least one year from the date hereof.
6. EXPENSES. The Company will pay all costs and expenses
incident to the performance of its obligations under this Agreement, whether or
not the transactions contemplated hereby are consummated or this Agreement is
terminated pursuant to Section 10 hereof, including without limitation all
costs and expenses incident to (i) the fees, disbursements and expenses of the
Company's counsel and accountants in connection with the registration of the
Shares under the Securities Act and all other expenses in connection with the
preparation, printing and filing of the Registration Statement (including all
amendments thereto), any Preliminary Prospectus, the Prospectus and any
amendments and supplements thereto, this Agreement and any blue sky memoranda;
(ii) the delivery of copies of the foregoing documents to the Underwriters;
(iii) the filing fees of the Commission and the National Association of
Securities Dealers, Inc. relating to the Shares; (iv) the preparation, issuance
and delivery to the Underwriters of any certificates evidencing the Shares,
including transfer agent's and registrar's fees; (v) the qualification of the
Shares for offering and sale under state securities and blue sky laws,
including filing fees and fees and disbursements of counsel for the
Underwriters relating thereto; (vi) any expenses of listing the Shares on the
Nasdaq OTC Bulletin Board; (vii) any expenses for travel, lodging and meals
incurred by the Company and any of its officers, directors and employees in
connection with any meetings with prospective investors in the Shares. It is
understood, however, that, except as provided in this Section, Section 8 and
Section 10 hereof, the Underwriters will pay all of their own costs and
expenses, including the fees of their counsel (other than those related to
qualification of the Shares under state securities or blue sky laws), stock
transfer taxes on resale of any of the Shares by them, and any advertising
expenses relating to the offer and sale of the Shares.
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<PAGE> 13
7. CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS. The obligations
of the Underwriters hereunder to purchase and pay for the Shares to be
delivered at each Time of Delivery shall be subject, in their discretion, to
the accuracy of the representations and warranties of the Company contained
herein as of the date hereof and as of such Time of Delivery, to the accuracy
of the statements of Company officers made pursuant to the provisions hereof,
to the performance by the Company of its covenants and agreements hereunder,
and to the following additional conditions precedent:
(a) The Registration Statement as amended to date shall
have become effective prior to the execution of this Agreement or at
such later date and/or time as shall have been consented to by you in
writing. The Prospectus and any amendment or supplement thereto shall
have been filed with the Commission pursuant to Rule 424(b) within the
applicable time period prescribed for such filing and in accordance
with Section 5(a) of this Agreement; no stop order suspending the
effectiveness of the Registration Statement or any part thereof shall
have been issued and no proceedings for that purpose shall have been
instituted, threatened or, to the knowledge of the Company and the
Representative, contemplated by the Commission; and all requests for
additional information on the part of the Commission shall have been
complied with to your satisfaction.
(b) Smith Helms Mulliss & Moore, L.L.P., counsel for the
Underwriters, shall have furnished to you such opinion or opinions,
dated such Time of Delivery, with respect to the incorporation of the
Company, the validity of the Shares being delivered at such Time of
Delivery, the Registration Statement, the Prospectus, and other
related matters as you may reasonably request and which are customary,
and the Company shall have furnished to such counsel such documents as
they request for the purpose of enabling them to pass upon such
matters.
(c) You shall have received an opinion, dated such Time
of Delivery, of Nelson Mullins Riley & Scarborough, L.L.P., counsel
for the Company in form and substance satisfactory to you and your
counsel, to the effect that:
(i) The Company has been duly incorporated and
is validly existing as a corporation under the laws of the
State of South Carolina and has the corporate power and
authority to own or lease its properties and conduct its
business as described in the Registration Statement and the
Prospectus and to enter into this Agreement and perform its
obligations hereunder. The Company is duly qualified to
transact business as a foreign corporation in states where
required and where failure to so qualify would have a
material adverse effect on the Company.
(ii) The Company has received evidence of the
receipt of each of the Regulatory Approvals.
(iii) The Bank is a national banking association
in organization under the laws of the United States of
America and, upon the issuance of a charter by the OCC, will
have the corporate power and authority to own or lease its
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<PAGE> 14
properties and conduct its business as described in the
Registration Statement and the Prospectus.
(iv) The Company's authorized, issued and
outstanding capital stock is as disclosed under the caption
"Capitalization" in the Prospectus. None of the issued shares
have been issued in violation of or subject to any preemptive
rights provided for by law, agreement or the Company's
Articles of Incorporation or Bylaws.
(v) Upon the issuance of a charter by the OCC,
all of the shares of capital stock of the Bank will be issued
to the Company free and clear of any liens, claims or
encumbrances of any kind, and the Bank will become a wholly
owned subsidiary of the Company.
(vi) The Shares to be sold by the Company have
been duly authorized and, when issued and delivered against
payment therefor as provided herein, will be validly issued
and fully paid and nonassessable and will conform to the
description of the Common Stock contained in the Prospectus.
The Underwriters will receive valid title to the Shares to be
issued and delivered by the Company pursuant to this
Agreement, free and clear of all liens, encumbrances, claims,
security interests, restrictions, shareholders' agreements
and voting trusts whatsoever.
(vii) To the knowledge of such counsel, the
Company does not have outstanding any options to purchase, or
any rights or warrants to subscribe for, or any securities or
obligations convertible into, or any contracts or commitments
to issue or sell any capital stock, and there are no
preemptive rights or other rights to subscribe for or
purchase any capital stock of the Company, or any restriction
upon the transfer of, the Shares pursuant to the Company's
Articles of Incorporation or Bylaws or any agreement or other
instrument to which the Company is a party or by which it may
be bound, except as described in the Prospectus. To the
knowledge of such counsel, neither the filing of the
Registration Statement nor the offer or sale of the Shares as
contemplated by this Agreement gives rise to any rights for
or relating to the registration of any Common Stock or any
other securities of the Company.
(viii) The issue and sale of the Shares being
issued at such Time of Delivery and the performance of this
Agreement and the consummation of the transactions herein
contemplated will not conflict with, or (with or without the
giving of notice or the passage of time or both) result in a
breach or violation of any of the terms or provisions of, or
constitute a default under any document or agreement which is
an Exhibit to the Registration Statement, or violate any
provision of the Articles of Incorporation, Articles of
Association, Bylaws or other governing instruments of the
Company or the Bank or any statute, rule or regulation or, to
such counsel's knowledge after diligent inquiry, any order,
judgment or decree of any court or governmental agency or
body having
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<PAGE> 15
jurisdiction over the Company or the Bank or any of their
respective properties or assets.
(ix) No consent, approval, authorization or
order from, or registration, qualification or filing with,
any governmental agency or body or third party is required
for the issue and sale of the Shares or the consummation of
the transactions contemplated by this Agreement, except (a)
the registration of the Shares under the Securities Act and
such as may be required by the NASD and under state
securities or blue sky laws in connection with the offer,
sale and distribution of the Shares by the Underwriters, and
(b) as required in connection with the Regulatory Approvals.
(x) This Agreement has been duly authorized,
executed and delivered by the Company and constitutes the
valid and binding agreement of the Company enforceable
against the Company in accordance with its terms subject, as
to enforcement, to applicable bankruptcy, insolvency,
reorganization and moratorium laws and other laws relating to
or affecting the enforcement of creditors' rights generally
and to general equitable principles, and except as the
enforceability of rights to indemnity and contribution under
this Agreement may be limited under applicable securities
laws or the public policy underlying such laws.
(xi) The Company and the Bank have obtained or
have filed for all licenses, consents and approvals, and have
satisfied or have taken all action required at this time to
satisfy all eligibility and other similar requirements
imposed by federal and state regulatory bodies,
administrative agencies or other governmental bodies,
agencies or officials, in each case necessary for the conduct
of the business in which they are engaged or are contemplated
to be engaged as described in the Prospectus (except where
the failure to have any such licenses, consents, and
approvals, or to have satisfied or taken such action to
satisfy the requirements, individually or in the aggregate,
would not have a material adverse effect on the business,
properties, operations, or financial condition of the Company
or its subsidiaries, taken as a whole). With respect to any
necessary licenses, consents and approvals, and any necessary
eligibility and other similar requirements that the Company
or the Bank does not have at this time, (i) all applications
therefor are, to such counsel's knowledge, complete and
accurate, and have been filed with the appropriate regulatory
authorities, and (ii) counsel knows of no reason why the same
will not be received or satisfied prior to the time the same
are required to conduct business as described in the
Prospectus.
(xii) To such counsel's knowledge after diligent
inquiry, there is not pending or threatened any action, suit,
proceeding, inquiry or investigation, to which the Company or
the Bank is a party, or to which property of the Company or
the Bank is subject, before or brought by any court or
governmental agency or body.
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<PAGE> 16
(xiii) To the knowledge of such counsel, neither
the Company nor the Bank is in violation of any law,
ordinance, administrative or governmental rule or regulation
applicable to the Company or the Bank, or any decree of any
court or governmental agency or body having jurisdiction over
the Company or the Bank, except where such violation does not
and will not have a material adverse effect on the Company
and the Bank as a whole.
(xiv) The Registration Statement and the
Prospectus and each amendment or supplement thereto (other
than the financial statements and schedules and other
financial information included therein, as to which such
counsel need express no opinion), as of their respective
effective or issue dates, complied as to form in all material
respects with the requirements of the Securities Act and the
Rules and Regulations. The descriptions in the Registration
Statement and the Prospectus of statutes, rules and
regulations are accurate and fairly present the information
required to be shown; and such counsel does not know of any
statutes, rules, regulations or legal or governmental
proceedings required to be described in the Registration
Statement or Prospectus that are not described as required or
of any contracts or documents of a character required to be
described in the Registration Statement or Prospectus or to
be filed as exhibits to the Registration Statement which are
not described and filed as required.
(xv) The Registration Statement and all
post-effective amendments thereto have become effective under
the Securities Act; any required filing of the Prospectus
pursuant to Rule 430A and Rule 424(b) has been made in the
manner and within the time period required by such rules; and
to such counsel's knowledge no stop order suspending the
effectiveness of the Registration Statement or any part
thereof has been issued and, to such counsel's knowledge, no
proceedings for that purpose have been instituted or
threatened or are contemplated by the Commission.
(i) The Company is not, and will not be as a result of
the consummation of the transactions contemplated by this
Agreement, an "investment company," or a company "controlled"
by an "investment company," within the meaning of the
Investment Company Act of 1940.
Such counsel shall also state that no facts have
come to their attention which lead them to believe that, as
of its effective date, the Registration Statement or any
further amendment thereto made by the Company prior to the
date hereof (other than the financial statements and related
schedules therein or other
16
<PAGE> 17
financial data derived from accounting records, as to which
they need express no opinion) contained an untrue statement
of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the
statements therein not misleading or that, as of its date,
the Prospectus or any further amendment or supplement thereto
made by the Company prior to the date hereof (other than the
financial statements and related schedules therein or other
financial data derived from accounting records, as to which
they need express no opinion) contained an untrue statement
of a material fact or omitted to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading or
that, as of the date hereof, either the Registration
Statement or the Prospectus or any further amendment or
supplement thereto made by the Company prior to the date
hereof (other than the financial statements and related
schedules therein or other financial data derived from
accounting records, as to which they need express no opinion)
contains an untrue statement of a material fact or omits to
state a material fact necessary to make the statements
therein, in the light of the circumstances under which they
were made, not misleading.
In rendering any such opinion, such counsel may
rely, as to matters of fact, to the extent such counsel deem
proper, on certificates of responsible officers of the
Company and public officials.
(d) You shall have received from Elliott, Davis &
Company, L.L.P., letters dated, respectively, the date of this
Agreement and the effective date of the most recently filed
post-effective amendment to the Registration Statement and also at
each Time of Delivery, in form and substance satisfactory to you,
containing statements and information of the type ordinarily included
in accountants' "comfort letters" to underwriters with respect to the
financial statements and certain financial information contained in
the Registration Statement and the Prospectus.
(e) You shall have received on each Time of Delivery a
certificate or certificates of the Chief Executive Officer and the
President of the Company to the effect that:
(i) the representations and warranties of the
Company in Section 1 of this Agreement are true and correct,
as if made at and as of the First Time of Delivery or the
Subsequent Time of Delivery, as the case may be, and the
Company has complied with all the agreements and satisfied
all the conditions on its part to be performed or satisfied
at or prior to the Time of Delivery and as to such other
matters as you may reasonably request;
(ii) no stop order suspending the effectiveness
of the Registration Statement has been issued, and no
proceedings for that purpose have been initiated or are
pending, or to their knowledge, contemplated under the
Securities Act;
(iii) all filings required by Rule 424 and Rule
430A of the Rules and Regulations have been made;
(iv) they have carefully examined the
Registration Statement and the Prospectus, and any amendments
or supplements thereto, and in his or her opinion, such
documents do not include any untrue statement of a material
fact or
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<PAGE> 18
omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading in
light of the circumstances under which they were made; and
(v) since the effective date of the
Registration Statement, there has occurred no event required
to be set forth in an amendment or supplement to the
Registration Statement or the Prospectus which has not been
so set forth.
(f) Since the date of the latest audited financial
statements included in the Prospectus, neither the Company nor the
Bank shall have sustained (i) any loss or interference with their
respective businesses from fire, explosion, flood, hurricane or other
calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, otherwise
than as disclosed in or contemplated by the Prospectus, or (ii) any
change, or any development involving a prospective change (including
without limitation a change in management or control of the Company),
in or affecting the position (financial or otherwise), results of
operations, net worth or business prospects of the Company and the
Bank, otherwise than as disclosed in or contemplated by the Prospectus
(including any amendment), the effect of which, in either such case,
is in your judgment so material and adverse as to make it
unpracticable or inadvisable to proceed with the purchase, sale and
delivery of the Shares being delivered at such Time of Delivery as
contemplated by the Registration Statement, as amended as of the date
hereof.
(g) Subsequent to the date hereof there shall not have
occurred any of the following: (i) any suspension or limitation in
trading in securities generally on the New York Stock Exchange or the
over-the-counter market (other than normal market breaks or cooling
periods), or any setting of minimum prices for trading on such
exchange, or if trading in any securities of the Company has been
suspended by the Commission, or limitations on prices for trading
(other than limitations on hours or numbers of days of trading) have
been fixed, or maximum ranges for prices for securities have been
required, by the Nasdaq OTC Bulletin Board or the NASD or by order of
the Commission or any other governmental authority; (ii) a moratorium
on commercial banking activities in New York declared by either
federal or state authorities; (iii) any major outbreak or major
escalation of hostilities involving the United States, declaration by
the United States of a national emergency (other than with respect to
natural disasters) or war or any other national or international
calamity or emergency or any material adverse change in general
economic, political or financial conditions if the effect of any such
event specified in this clause (iii) in your judgment makes it
impracticable or inadvisable to proceed with the purchase, sale and
delivery of the Shares being delivered at such Time of Delivery as
contemplated by the Registration Statement.
(h) The Shares shall be approved for quotation on the
Nasdaq OTC Bulletin Board when issued.
(i) The Company shall have furnished the Representative
with evidence of its receipt of each of the Regulatory Approvals.
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<PAGE> 19
(j) The Representative shall have received the Lockup
Agreements as described in Section 1(v).
8. INDEMNIFICATION AND CONTRIBUTION. (a) The Company agrees to
indemnify and hold harmless each Underwriter against any losses, claims,
damages or liabilities, joint or several, to which such Underwriter may become
subject, under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon: (i) any untrue statement or alleged untrue statement made by the
Company in Section 1 of this Agreement; (ii) any untrue statement or alleged
untrue statement of any material fact contained in (A) the Registration
Statement or any amendment thereto, any Preliminary Prospectus or the
Prospectus or any amendment or supplement thereto, or (B) any application or
other document, or any amendment or supplement thereto, executed by the Company
or based upon written information furnished by or on behalf of the Company
filed in any jurisdiction in order to qualify the Shares under the securities
or blue sky laws thereof or filed with the Commission or any securities
association or securities exchange (each an "Application"); or (iii) the
omission or alleged omission to state in the Registration Statement or any
amendment thereto, any Preliminary Prospectus, the Prospectus or any amendment
or supplement thereto, or any Application, material fact required to be stated
therein or necessary to make the statements therein not misleading, and will
reimburse each Underwriter for any legal or other expenses reasonably incurred
by such Underwriter in connection with investigating, defending against or
appearing as a third-party witness in connection with any such loss, claim,
damage, liability or action; provided, however, that the Company shall not be
liable in any such case to the extent that any such loss, claim, damage,
liability or action arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in the
Registration Statement or any amendment thereto, any Preliminary Prospectus,
the Prospectus or any amendment or supplement thereto or any Application in
reliance upon and in conformity with written information furnished to the
Company by any Underwriter. The Company will not, without the prior written
consent of each Underwriter, settle or compromise or consent to the entry of
any judgment in any pending or threatened claim, action, suit or proceeding (or
related cause of action or portion thereof) in respect of which indemnification
may be sought hereunder (whether or not such Underwriter is a party to such
claim, action, suit or proceeding), unless such settlement, compromise or
consent includes an unconditional release of such Underwriter from all
liability arising out of such claim, action, suit or proceeding or related
cause of action or portion thereof.
(b) Each Underwriter agrees to indemnify and hold harmless the
Company and its officers, directors, agents, representatives and affiliates
against any losses, claims, damages or liabilities to which the Company or its
officers, directors, agents, representatives and affiliates may become subject
under the Securities Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact contained
in the Registration Statement or any amendment thereto, any Preliminary
Prospectus, the Prospectus or any amendment or supplement thereto or any
Application or arise out of or are based upon the omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, in each case to the extent, but
only to
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<PAGE> 20
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in reliance upon and in conformity with written
information furnished to the Company by the Underwriter through the
Representative expressly for use therein; and will reimburse the Company for
any legal or other expenses reasonably incurred by the Company in connection
with investigating or defending any such loss, claim, damage, liability or
action.
(c) Promptly after receipt by an indemnified party under
subsection (a) and (b) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against
the indemnifying party under such subsection, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under such subsection. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party (who shall not,
except with the consent of the indemnified party, be counsel to the
indemnifying party); provided, however, that if the defendants in any such
action included the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be one or more
legal defenses available to it or other indemnified parties which are different
from or additional to those available to the indemnifying party, the
indemnifying party shall not have the right to assume the defense of such
action on behalf of such indemnified party and such indemnified party shall
have the right to select separate counsel to defend such action on behalf of
such indemnified party. After such notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof and approval
by such indemnified party of counsel appointed to defend such action, the
indemnifying party will not be liable to such indemnified party under this
Section 8 for any legal or other expenses, other than reasonable costs of
investigation, subsequently incurred by such indemnified party in connection
with the defense thereof, unless (i) the indemnified party shall have employed
separate counsel in accordance with the proviso to the next preceding sentence
(it being understood, however, that in connection with such action the
indemnifying party shall not be liable for the expenses of more than one
separate counsel (in addition to local counsel) in any one action or separate
but substantially similar actions in the same jurisdiction arising out of the
same general allegations or circumstances, which separate counsel shall be
designated by the Representative in the case of indemnity arising under
paragraph (a) of this Section 8) or (ii) the indemnifying party has authorized
the employment of counsel for the indemnified party at the expense of the
indemnifying party. Nothing in this Section 8(c) shall preclude an indemnified
party from participating at its own expense in the defense of any such action
so assumed by the indemnifying party.
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities
(or actions in respect thereof) in such proportion as is appropriate to reflect
the relative benefits received by the Company on the one hand and the
Underwriter on the other from the offering of the Shares. If, however, the
20
<PAGE> 21
allocation provided by the immediately preceding sentence is not permitted by
applicable law or if the indemnified party failed to give the notice required
under subsection (c) above, then each indemnifying party shall contribute to
such amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company on the one hand and the Underwriter on the other in
connection with the statements or omissions that resulted in such losses,
claims, damages or liabilities (or actions in respect thereof), as well as any
other relevant equitable considerations. The relative benefits received by the
Company on the one hand and the Underwriter on the other shall be deemed to be
in the same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company bear to the total underwriting
discounts, and commissions received by the Underwriters. The relative fault
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company on the
one hand or the Underwriters on the other and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Underwriters agree that it would not
be just and equitable if contributions pursuant to this subsection (d) were
determined by pro rata allocation (even if the Underwriters were treated as one
for such purpose) or by any other method of allocation which does not take
account of the equitable considerations referred to above in this subsection
(d). The amount paid or payable by an indemnified party as a result of the
losses, claims, damages or liabilities (or actions in respect thereof) referred
to above in this subsection (d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (d), the Underwriter shall not be required to
contribute any amount in excess of the amount by which the total price at which
the Shares underwritten by it and distributed to the public were offered to the
public exceeds the amount of any damages which such Underwriter has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled
to contribution from any person who was not guilty of such fraudulent
misrepresentation.
(e) The obligations of the Company under this Section 8 shall be
in addition to any liability which the Company may otherwise have and shall
extend, upon the same terms and conditions, to each person, if any, who
controls any Underwriter within the meaning of the Securities Act; and the
obligations of the Underwriters under this Section 8 shall be in addition to
any liability which the Underwriters may otherwise have and shall extend, upon
the same terms and conditions, to each officer and director of the Company and
to each person, if any, who controls the Company within the meaning of The
Securities Act.
9. DEFAULT OF UNDERWRITERS. (a) If any Underwriter defaults in
its obligation to purchase Shares at a Time of Delivery, you may in your
discretion arrange for you or another party, or other parties to purchase such
shares on the terms contained herein. If within 36 hours after such default by
any Underwriter you do not arrange for the purchase of such Shares, the Company
shall be entitled to a further period of 36 hours within which to procure
another party or other parties satisfactory to you to purchase such Shares on
such terms. In the event that, within the respective prescribed periods, you
notify the Company that you have so
21
<PAGE> 22
arranged for the purchase of such Shares, or the Company notifies you that it
has so arranged for the purchase of such Shares, you or the Company shall have
the right to postpone a Time of Delivery for a period of not more than 7 days
in order to effect whatever change is made necessary thereby in the
Registration Statement or the Prospectus, or in any other documents or
arrangements, and the Company agrees to file promptly any amendments to the
Registration Statement or the Prospectus that in your opinion may thereby be
made necessary. The cost of preparing, printing and filing any such amendments
shall be paid for by the Underwriters. The term "Underwriter" as used in this
Agreement shall include any person substituted under this Section with effect
as if such person had originally been a party to this Agreement with respect to
such Shares.
(b) If, after giving effect to any arrangements for the purchase
of the Shares of a defaulting Underwriter or Underwriters by you and the
Company as provided in subsection (a) above, the aggregate number of such
Shares which remains unpurchased does not exceed one-eleventh of the aggregate
number of Shares to be purchased at such Time of Delivery, then the Company
shall have the right to require each non-defaulting Underwriter to purchase the
number of Shares which such Underwriter agreed to purchase hereunder at such
Time of Delivery and, in addition, to require each non-defaulting Underwriter
to purchase its pro rata share (based on the number of Shares which such
Underwriter agreed to purchase hereunder) of the Shares of such defaulting
Underwriter or Underwriters for which such arrangements have not been made, but
nothing herein shall relieve a defaulting Underwriter from liability for its
default.
10. TERMINATION. (a) This Agreement may be terminated with
respect to the Shares or any Optional Shares in the sole discretion of the
Representative by notice to the Company given prior to the First Time of
Delivery or any Subsequent Time of Delivery, respectively, in the event that
(i) any condition to the obligations of the Underwriters set forth in Section 7
hereof has not been satisfied, or (ii) the Company shall have failed, refused
or been unable to deliver the Shares or to perform all obligations and satisfy
all conditions on its part to be performed or satisfied hereunder at or prior
to such Time of Delivery, in either case other than by reason of a default by
any of the Underwriters. If this Agreement is terminated pursuant to this
Section 10(a), the Company will reimburse the Underwriters upon demand for all
out-of-pocket expenses (including counsel fees and disbursements) that shall
have been incurred by it in connection with the proposed purchase and sale of
the Shares.
(b) If, after giving effect to any arrangements for the purchase
of the Shares of a defaulting Underwriter or Underwriters by you and the
Company as provided in Section 10(a), the aggregate number of such Shares which
remain unpurchased exceeds one-eleventh of the aggregate number of Shares to be
purchased at such Time of Delivery, or if the Company shall not exercise the
right described in Section 9(b) to require non-defaulting Underwriters to
purchase Shares of a defaulting Underwriter or Underwriters, then this
Agreement (or, with respect to a Subsequent Time of Delivery, the obligations
of the Underwriters to purchase and of the Company to sell the Optional Shares)
thereupon will terminate, without liability on the part of any nonfaulting
Underwriter or the Company, except for the expenses to be borne by the Company
and the Underwriters as provided in Section 6 hereof and the indemnity and
contribution agreements in Section 8 hereof; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
22
<PAGE> 23
11. SURVIVAL. The respective indemnities, agreements,
representations, warranties and other statements of the Company, its officers
and the Underwriter, as set forth in this Agreement or made by or on behalf of
them, respectively, pursuant to this Agreement, shall remain in full force and
effect, regardless of any investigation (or any statement as to the results
thereof) made by or on behalf of the Underwriter or any controlling person
referred to in Section 8(e) or the Company, or any officer or director or
controlling person of the Company referred to in Section 8(e), and shall
survive delivery of and payment for the Shares. The respective agreements,
covenants, indemnities and other statements set forth in Sections 6, 8 and 13
hereof shall remain in full force and effect, regardless of any termination or
cancellation of this Agreement.
12. NOTICES. All communications hereunder shall be in writing
and, if sent to the Underwriter, shall be mailed, delivered or telegraphed and
confirmed in writing to Wachovia Securities, Inc., IJL Financial Center, 201
North Tryon Street, Charlotte, North Carolina 28202, Attention: Corporate
Finance Department (with a copy to Ronald W. Goff at Wachovia Securities, Inc.,
Resurgens Plaza, 945 E. Paces Ferry Road, Atlanta, Georgia 30326, and Boyd C.
Campbell, Jr. at Smith Helms Mulliss & Moore L.L.P., 201 North Tryon Street,
Charlotte, North Carolina 28202), and if sent to the Company, shall be mailed,
delivered or telegraphed and confirmed in writing to the Company at 1805
Laurens Road, Greenville, South Carolina 29607, Attention: President and Chief
Executive Officer (with a copy to C. Russell Pickering, Esq., Nelson Mullins
Riley & Scarborough, L.L.P., 999 Peachtree Street, N.E., Suite 1400, Atlanta,
Georgia 30309).
13. RIGHT OF FIRST REFUSAL. The Company grants to the
Representative an unconditional right of first refusal to serve as exclusive or
lead advisor to the Company on all corporate finance transactions undertaken or
considered by the Company for three years from the effective date of the
Prospectus. The Representative shall not be entitled to more than one payment
or fee in exchange for the waiver or termination of this right of first
refusal, and any payment or fee to waive or terminate the right of first
refusal shall be paid in cash and will not exceed the greater of (a) one
percent (1%) of the aggregate purchase price of the Shares purchased pursuant
to this Agreement, and (b) five percent (5%) of the underwriting discount or
commission paid in connection with the future financing (including any
overallotment option that my be exercised).
14. REPRESENTATIVE. You will act for the several Underwriters in
connection with the transactions contemplated by this Agreement, and any action
under this Agreement taken by you will be binding upon all the Underwriters.
15. BINDING EFFECT. This Agreement shall be binding upon, and
inure solely to the benefit of, each Underwriter and the Company and to the
extent provided in Sections 8 and 10 hereof, the officers and directors and
controlling persons referred to therein and their respective heirs, executors,
administrators, successors and assigns, and no other person shall acquire or
have any right under or by virtue of this Agreement. No purchaser of any of the
Shares from the Underwriters shall be deemed a successor or assign by reason
merely of such purchase.
23
<PAGE> 24
16. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of North Carolina without
giving effect to any provisions regarding conflicts of laws.
17. COUNTERPARTS. This Agreement may be executed by any one or
more of the parties hereto in any number of counterparts, each of which shall
be deemed to be an original, but all such counterparts shall together
constitute one and the same instrument.
18. If the foregoing is in accordance with your understanding of
our agreement, please sign and return to us one of the counterparts hereof, and
upon the acceptance hereof by Wachovia Securities, Inc., this letter will
constitute a binding agreement among the Underwriters and the Company.
Very truly yours,
GREENVILLE FIRST BANCSHARES, INC.
By:
----------------------------------------
Name: R. Arthur Seaver, Jr.
Title: Chief Executive Officer and President
WACHOVIA SECURITIES, INC.
By:
--------------------------------------
Name:
------------------------------
Title:
------------------------------
24
<PAGE> 25
SCHEDULE I
GREENVILLE FIRST BANCSHARES, INC.
1,200,000 SHARES
COMMON STOCK
<TABLE>
<CAPTION>
NUMBER OF
OPTIONAL SHARES
TOTAL NUMBER OF TO BE PURCHASED
FIRM SHARES TO IF MAXIMUM
UNDERWRITER BE PURCHASED OPTION EXERCISED
- ----------- ------------ ----------------
<S> <C> <C>
Wachovia Securities, Inc.
</TABLE>
Total
25
<PAGE> 1
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") dated as of July 27,
1999, is made by and between Greenville First Bancshares, Inc., a South
Carolina corporation (the "Employer" or the "Company") which is the proposed
bank holding company for Greenville First Bank (Proposed), a proposed national
bank (the "Bank"), and R. Arthur Seaver, Jr., an individual resident of South
Carolina (the "Executive").
The Employer is in the process of organizing the Bank, and the
Executive has agreed to serve as President and Chief Executive Officer of the
Bank and the Company. Upon organization of the Bank, the Employer and the
Executive contemplate that this Agreement will be assigned by the Employer to
the Bank and that the Bank will assume the duties of the Company hereunder
(except pursuant to Section 3). Following any such assignment, the term
"Employer" as used herein from time to time shall refer to the Bank.
The Employer recognizes that the Executive's contribution to the
growth and success of the Bank during its organization and initial years of
operations will be a significant factor in the success of the Bank. The
Employer desires to provide for the employment of the Executive in a manner
which will reinforce and encourage the dedication of the Executive to the Bank
and promote the best interests of the Bank and its shareholders. The Executive
is willing to serve the Employer on the terms and conditions herein provided.
Certain terms used in this Agreement are defined in Section 17 hereof.
In consideration of the foregoing, the mutual covenants contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. Employment. The Employer shall employ the Executive, and the
Executive shall serve the Employer, as President and Chief Executive Officer of
the Bank and the Company upon the terms and conditions set forth herein. The
Executive shall also serve on the Board of Directors of the Company and the
Bank. The Executive shall have such authority and responsibilities consistent
with his position as are set forth in the Company's or the Bank's Bylaws or
assigned by the Company's or the Bank's Board of Directors (the "Board") from
time to time. The Executive shall devote his full business time, attention,
skill and efforts to the performance of his duties hereunder, except during
periods of illness or periods of vacation and leaves of absence consistent with
Bank policy. The Executive may devote reasonable periods to service as a
director or advisor to other organizations, to charitable and community
activities, and to managing his personal investments, provided that such
activities do not materially interfere with the performance of his duties
hereunder and are not in conflict or competitive with, or adverse to, the
interests of the Company or the Bank.
2. Term. Unless earlier terminated as provided herein, the
Executive's employment under this Agreement shall commence on the date hereof
and be for a term (the "Term") of three years. At the end of each year of the
Term, the Term shall be extended for an additional year so that the remaining
term shall continue to be three years; provided that the Executive or the Bank
may at any time, by written notice, fix the Term to a finite term of three
years commencing with the year of the notice. Notwithstanding the foregoing,
the Term of employment hereunder will end on the date that the Executive
attains the retirement age, if any, specified in the Bylaws of the Bank for
directors of the Bank.
3. Compensation and Benefits.
(a) Starting February 15, 1999, the Employer shall pay the
Executive an initial annual base salary of $123,000, plus his yearly medical
insurance premium. Executive shall receive a minimum annual increase in his
base salary equal to the previous year's base salary times the increase in the
Consumer Price Index during the previous year as stated in a nationally
recognized financial news source such as the Wall Street Journal (the
"Mandatory Annual Increase"). The Board (or an appropriate committee of the
Board) shall review the Executive's performance and salary at least annually
and may increase the Executive's base salary above the Mandatory Annual
Increase if it determines in its sole discretion that an additional increase is
appropriate.
<PAGE> 2
(b) The Executive shall receive a cash bonus in the amount of
$10,000 on the date that the Bank opens for business (the "Opening Date"). For
each anniversary of the Opening Date thereafter, the Executive shall be
eligible to receive a cash bonus equaling up to 5% of the net pretax
consolidated income of the Company (determined in accordance with generally
accepted accounting principals) if the Bank achieves certain performance levels
established by the board of directors from time to time (the "Bonus Plan").
(c) The Executive shall participate in the Bank's long-term
equity incentive program and be eligible for the grant of stock options,
restricted stock, and other awards thereunder or under any similar plan adopted
by the Company. As soon as an appropriate stock option plan is adopted by the
Board, the Company shall grant to the Executive an option to purchase a number
of shares of Common Stock equal to 5% of the number of shares sold in the
offering. The award agreement for the stock option shall provide that one-fifth
of the shares subject to the option will vest on each of the first five
anniversaries of the Opening Date, but only if the Executive remains employed
by the Company on such date, and shall contain other customary terms and
conditions. Nothing herein shall be deemed to preclude the granting to the
Executive of warrants or options under a director option plan in addition to
the options granted hereunder.
(d) The Executive shall participate in all retirement, welfare
and other benefit plans or programs of the Employer now or hereafter applicable
generally to employees of the Employer or to a class of employees that includes
senior executives of the Employer.
(e) The Employer shall provide the Executive with a term life
insurance policy providing for death benefits totaling $300,000 payable to the
Executive's spouse and heirs (and may provide for additional death benefits of
up to $700,000 payable to the Employer), and the Executive shall cooperate with
the Employer in the securing and maintenance of such policy. The Employer shall
also pay for an accident liability policy on the Executive totaling $1,000,000
to protect the Employer from damages or lawsuits resulting from injuries to
third parties caused by the Executive.
(f) The Employer shall provide the Executive with an automobile
either owned or leased by the Company of a make and model appropriate to the
Executive's status. The total cost of this automobile, including lease
payments, if any, insurance, taxes and other expenses associated with the
automobile, shall not exceed $700 per month.
(g) In addition, commencing on the Opening Date, the Employer
shall obtain a membership in and pay the initiation fee (not to exceed $10,000)
for and the dues pertaining to an area country club and shall designate the
Executive as the authorized user of such membership for so long as the
Executive remains the President and CEO of the Employer and this Agreement
remains in force.
(h) The Employer shall reimburse the Executive for reasonable
travel and other expenses related to the Executive's duties which are incurred
and accounted for in accordance with the normal practices of the Employer.
4. Termination.
(a) The Executive's employment under this Agreement may be
terminated prior to the end of the Term only as follows:
(i) upon the death of the Executive;
(ii) upon the disability of the Executive for a
period of 180 days which, in the opinion of the Board of
Directors, renders him unable to perform the essential
functions of his job and for which reasonable accommodation
is unavailable. For purposes of this Agreement, a "disability"
is defined as a physical or mental impairment that
substantially limits one or
2
<PAGE> 3
more major life activities, and a "reasonable accommodation" is one
that does not impose an undue hardship on the Employer;
(iii) by the Employer for Cause upon delivery of a Notice
of Termination to the Executive;
(iv) by the Executive for Good Reason upon delivery of a
Notice of Termination to the Employer within a 90-day period beginning
on the 30th day after the occurrence of a Change in Control or within
a 90-day period beginning on the one year anniversary of the
occurrence of a Change in Control;
(v) by the Employer if its effort to organize the Bank
is abandoned; and
(vi) by the Executive effective upon the 30th day after
delivery of a Notice of Termination.
(a) If the Executive's employment is terminated because of the
Executive's death, the Executive's estate shall receive any sums due him as
base salary and/or reimbursement of expenses through the end of the month
during which death occurred, plus any bonus earned or accrued under the Bonus
Plan through the date of death (including any amounts awarded for previous
years but which were not yet vested) and a pro rata share of any bonus with
respect to the current fiscal year which had been earned as of the date of the
Executive's death.
(b) During the period of any incapacity leading up to the
termination of the Executive's employment as a result of disability, the
Employer shall continue to pay the Executive his full base salary at the rate
then in effect and all perquisites and other benefits (other than any bonus)
until the Executive becomes eligible for benefits under any long-term
disability plan or insurance program maintained by the Employer, provided that
the amount of any such payments to the Executive shall be reduced by the sum of
the amounts, if any, payable to the Executive for the same period under any
disability benefit or pension plan of the Employer or any of its subsidiaries.
Furthermore, the Executive shall receive any bonus earned or accrued under the
Bonus Plan through the date of incapacity (including any amounts awarded for
previous years but which were not yet vested) and a pro rata share of any bonus
with respect to the current fiscal year which had been earned as of the date of
the Executive's incapacity.
(c) If the Executive's employment is terminated for Cause as
provided above, or if the Executive resigns (except for a termination of
employment pursuant to Section 4(e)), the Executive shall receive any sums due
him as base salary and/or reimbursement of expenses through the date of such
termination.
(d) If the Executive's employment is terminated by the Executive
pursuant to clause (iv) of Section 4(a), in addition to other rights and
remedies available in law or equity, the Executive shall be entitled to the
following:
(i) the Employer shall pay the Executive in cash
within fifteen days of the Termination Date severance
compensation in an amount equal to 100% of his then current
monthly base salary each month for twelve months from the
Termination Date, plus any bonus earned or accrued under the
Bonus Plan through the Termination Date (including any amounts
awarded for previous years but which were not yet vested) and a
pro rata share of any bonus with respect to the current fiscal
year which had been earned as of the Termination Date.
(ii) for the period from the Termination Date
through the date that the Executive attains the age of 65 (the
"Continuation Period"), the Employer shall at its expense
continue on behalf of the Executive and his dependents and
beneficiaries the life insurance, disability, medical, dental,
and hospitalization benefits provided (x) to the Executive at
any time during the 90-day period prior to the Change in
Control or at any time thereafter or (y) to other similarly
situated executives who continue in the employ of the Employer
during the Continuation Period. Such
3
<PAGE> 4
coverage and benefits (including deductibles and costs) shall
be no less favorable to the Executive and his dependents and
beneficiaries than the most favorable of such coverages and
benefits during any of the periods referred to above. The
Employer's obligation hereunder with respect to the foregoing
benefits shall be limited to the extent that the Executive
obtains any such benefits pursuant to a subsequent employer's
benefit plans, in which case the Employer may reduce the
coverage of any benefits it is required to provide the
Executive hereunder as long as the aggregate coverages and
benefits of the combined benefit plans is no less favorable
to the Executive than the coverages and benefits required to
be provided hereunder. This subsection (ii) shall not be
interpreted so as to limit any benefits to which the
Executive or his dependents or beneficiaries may be entitled
under any of the Employer's employee benefit plans, programs,
or practices following the Executive's termination of
employment, including, without limitation, retiree medical
and life insurance benefits; and
(iii) the restrictions on any outstanding incentive
awards (including restricted stock) granted to the Executive
under the Company's or the Bank's long-term equity incentive
program or any other incentive plan or arrangement shall
lapse and become 100% vested, all stock options and stock
appreciation rights granted to the Executive shall become
immediately exercisable and shall become 100% vested, all
performance units granted to the Executive shall become 100%
vested, and the restrictive covenants contained in Section 9
shall not apply to the Executive.
(e) If the Executive's employment is terminated pursuant to
clause (v) of Section 4(a), the Employer shall pay to the Executive severance
compensation in an amount equal to 100% of his then current monthly base salary
each month for six months from the date of termination.
(f) If the Employer terminates the Executive's employment
other than pursuant to clauses (i), (ii), (iii) or (v) of Section 4(a), the
Employer shall pay to the Executive severance compensation in an amount equal
to 100% of his then current monthly base salary each month for twelve months
from the date of termination, plus any bonus earned or accrued under the Bonus
Plan through the date of termination (including any amounts awarded for
previous years but which were not yet vested) and a pro rata share of any bonus
with respect to the current fiscal year which had been earned as of the date of
the Executive's termination.
(g) With the exceptions of the provisions of this Section 4,
and the express terms of any benefit plan under which the Executive is a
participant, it is agreed that, upon termination of the Executive's employment,
the Employer shall have no obligation to the Executive for, and the Executive
waives and relinquishes, any further compensation or benefits (exclusive of
COBRA benefits). At the time of termination of employment, the Employer and the
Executive shall enter into a mutually satisfactory form of release
acknowledging such remaining obligations and discharging both parties, as well
as the Employer's officers, directors and employees with respect to their
actions for or on behalf of the Employer, from any other claims or obligations
arising out of or in connection with the Executive's employment by the
Employer, including the circumstances of such termination.
(h) In the event that the Executive's employment is
terminated for any reason, the Executive shall (and does hereby) tender his
resignation as a director of the Employer and effective as of the date of
termination.
(j) The parties intend that the severance payments and other
compensation provided for herein are reasonable compensation for the
Executive's services to the Employer and shall not constitute "excess parachute
payments" within the meaning of Section 280G of the Internal Revenue Code of
1986 and any regulations thereunder. In the event that the Employer's
independent accountants acting as auditors for the Employer on the date of a
Change in Control determine that the payments provided for herein constitute
"excess parachute payments," then the compensation payable hereunder shall be
increased, on a tax gross-up basis, so as to reimburse the Executive for the
tax payable by the Executive, pursuant to Section 4999 of the Internal Revenue
Code, on such "excess parachute payments," taking into account all taxes
payable by the Executive with respect to such tax gross-up payments hereunder,
so that the Executive shall be, after payment of all taxes, in the same
financial position as if no taxes under Section 4999 had been imposed upon him.
4
<PAGE> 5
5. Ownership of Work Product. The Employer shall own all Work
Product arising during the course of the Executive's employment (prior, present
or future). For purposes hereof, "Work Product" shall mean all intellectual
property rights, including all Trade Secrets, U.S. and international
copyrights, patentable inventions, and other intellectual property rights in
any programming, documentation, technology or other work product that relates
to the Employer, its business or its customers and that employee conceives,
develops, or delivers to the Employer at any time during his employment, during
or outside normal working hours, in or away from the facilities of the
Employer, and whether or not requested by the Employer. If the Work Product
contains any materials, programming or intellectual property rights that the
Executive conceived or developed prior to, and independent of, the Executive's
work for the Employer, the Executive agrees to point out the pre-existing items
to the Employer and the Executive grants the Employer a worldwide,
unrestricted, royalty-free right, including the right to sublicense such items.
The Executive agrees to take such actions and execute such further
acknowledgments and assignments as the Employer may reasonably request to give
effect to this provision.
6. Protection of Trade Secrets. The Executive agrees to maintain
in strict confidence and, except as necessary to perform his duties for the
Employer, the Executive agrees not to use or disclose any Trade Secrets of the
Employer during or after his employment. "Trade Secret" means information,
including a formula, pattern, compilation, program, device, method, technique,
process, drawing, cost data or customer list, that: (i) derives economic value,
actual or potential, from not being generally known to, and not being readily
ascertainable by proper means by, other persons who can obtain economic value
from its disclosure or use; and (ii) is the subject of efforts that are
reasonable under the circumstances to maintain its secrecy.
7. Protection of Other Confidential Information. In addition,
the Executive agrees to maintain in strict confidence and, except as necessary
to perform his duties for the Employer, not to use or disclose any Confidential
Business Information of the Employer during his employment and for a period of
24 months following termination of the Executive's employment. "Confidential
Business Information" shall mean any internal, non-public information (other
than Trade Secrets already addressed above) concerning the Employer's financial
position and results of operations (including revenues, assets, net income,
etc.); annual and long-range business plans; product or service plans;
marketing plans and methods; training, educational and administrative manuals;
customer and supplier information and purchase histories; and employee lists.
The provisions of Sections 6 and 7 above shall also apply to protect Trade
Secrets and Confidential Business Information of third parties provided to the
Employer under an obligation of secrecy.
8. Return of Materials. The Executive shall surrender to the
Employer, promptly upon its request and in any event upon termination of the
Executive's employment, all media, documents, notebooks, computer programs,
handbooks, data files, models, samples, price lists, drawings, customer lists,
prospect data, or other material of any nature whatsoever (in tangible or
electronic form) in the Executive's possession or control, including all copies
thereof, relating to the Employer, its business, or its customers. Upon the
request of the Employer, employee shall certify in writing compliance with the
foregoing requirement.
9. Restrictive Covenants.
(a) No Solicitation of Customers. During the Executive's
employment with the Employer and for a period of 12 months thereafter, the
Executive shall not (except on behalf of or with the prior written consent of
the Employer), either directly or indirectly, on the Executive's own behalf or
in the service or on behalf of others, (A) solicit, divert, or appropriate to
or for a Competing Business, or (B) attempt to solicit, divert, or appropriate
to or for a Competing Business, any person or entity that is or was a customer
of the Employer or any of its Affiliates on the date of termination and is
located in the Territory and with whom the Executive has had material contact.
This restriction does not apply after a Change in Control.
(b) No Recruitment of Personnel. During the Executive's
employment with the Employer and for a period of 12 months thereafter, the
Executive shall not, either directly or indirectly, on the Executive's own
behalf or in the service or on behalf of others, (A) solicit, divert, or hire
away, or (B) attempt to solicit, divert, or hire away, to any Competing
Business located in the Territory, any employee of or consultant to the
Employer or any of its Affiliates engaged or experienced in the Business,
regardless of whether the employee or consultant is full-time
5
<PAGE> 6
or temporary, the employment or engagement is pursuant to written agreement, or
the employment is for a determined period or is at will. This restriction does
not apply after a Change in Control.
(c) Non-Competition Agreement. During the Executive's
employment with the Employer and for a period of 12 months thereafter, the
Executive shall not (without the prior written consent of the Employer) compete
with the Employer or any of its Affiliates by, directly or indirectly, forming,
serving as an organizer, director or officer of, or consultant to, or acquiring
or maintaining more than a 1% passive investment in, a depository financial
institution or holding company therefor if such depository institution or
holding company has one or more offices or branches located in the Territory.
Notwithstanding the foregoing, the Executive may serve as an officer of or
consultant to a depository institution or holding company therefor even though
such institution operates one or more offices or branches in the Territory, if
the Executive's employment does not directly involve, in whole or in part, the
depository financial institution's or holding company's operations in the
Territory. This restriction does not apply after a Change in Control.
10. Independent Provisions. The provisions in each of the above
Sections 9(a), 9(b), and 9(c) are independent, and the unenforceability of any
one provision shall not affect the enforceability of any other provision.
11. Successors; Binding Agreement. The rights and obligations of
this Agreement shall bind and inure to the benefit of the surviving corporation
in any merger or consolidation in which the Employer is a party, or any
assignee of all or substantially all of the Employer's business and properties.
The Executive's rights and obligations under this Agreement may not be assigned
by him, except that his right to receive accrued but unpaid compensation,
unreimbursed expenses and other rights, if any, provided under this Agreement
which survive termination of this Agreement shall pass after death to the
personal representatives of his estate.
12. Notice. For the purposes of this Agreement, notices and all
other communications provided for in the Agreement shall be in writing and
shall be deemed to have been duly given when personally delivered or sent by
certified mail, return receipt requested, postage prepaid, addressed to the
respective addresses last given by each party to the other; provided, however,
that all notices to the Employer shall be directed to the attention of the
Employer with a copy to the Secretary of the Employer. All notices and
communications shall be deemed to have been received on the date of delivery
thereof.
13. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of South
Carolina without giving effect to the conflict of laws principles thereof. Any
action brought by any party to this Agreement shall be brought and maintained
in a court of competent jurisdiction in State of South Carolina.
14. Non-Waiver. Failure of the Employer to enforce any of the
provisions of this Agreement or any rights with respect thereto shall in no way
be considered to be a waiver of such provisions or rights, or in any way affect
the validity of this Agreement.
15. Enforcement. The Executive agrees that in the event of any
breach or threatened breach by the Executive of any covenant contained in
Section 9(a), 9(b), or 9(c) hereof, the resulting injuries to the Employer
would be difficult or impossible to estimate accurately, even though
irreparable injury or damages would certainly result. Accordingly, an award of
legal damages, if without other relief, would be inadequate to protect the
Employer. The Executive, therefore, agrees that in the event of any such
breach, the Employer shall be entitled to obtain from a court of competent
jurisdiction an injunction to restrain the breach or anticipated breach of any
such covenant, and to obtain any other available legal, equitable, statutory,
or contractual relief. Should the Employer have cause to seek such relief, no
bond shall be required from the Employer, and the Executive shall pay all
attorney's fees and court costs which the Employer may incur to the extent the
Employer prevails in its enforcement action.
16. Saving Clause. The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof. If
any provision or clause of this Agreement, or portion thereof, shall be held by
any court or other tribunal of
6
<PAGE> 7
competent jurisdiction to be illegal, void, or unenforceable in such
jurisdiction, the remainder of such provision shall not be thereby affected and
shall be given full effect, without regard to the invalid portion. It is the
intention of the parties that, if any court construes any provision or clause
of this Agreement, or any portion thereof, to be illegal, void, or
unenforceable because of the duration of such provision or the area or matter
covered thereby, such court shall reduce the duration, area, or matter of such
provision, and, in its reduced form, such provision shall then be enforceable
and shall be enforced. The Executive and the Employer hereby agree that they
will negotiate in good faith to amend this Agreement from time to time to
modify the terms of Sections 9(a), 9(b), and 9(c), the definition of the term
"Territory," and the definition of the term "Business," to reflect changes in
the Employer's business and affairs so that the scope of the limitations placed
on the Executive's activities by Section 9 accomplishes the parties' intent in
relation to the then current facts and circumstances. Any such amendment shall
be effective only when completed in writing and signed by the Executive and the
Employer.
17. Certain Definitions.
(a) "Affiliate" shall mean any business entity
controlled by, controlling or under common control with the Employer.
(b) "Business" shall mean the operation of a depository
financial institution, including, without limitation, the solicitation and
acceptance of deposits of money and commercial paper, the solicitation and
funding of loans and the provision of other banking services, and any other
related business engaged in by the Employer or any of its Affiliates as of the
date of termination.
(c) "Cause" shall consist of any of (A) the commission
by the Executive of a willful act (including, without limitation, a dishonest
or fraudulent act) or a grossly negligent act, or the willful or grossly
negligent omission to act by the Executive, which is intended to cause, causes
or is reasonably likely to cause material harm to the Employer (including harm
to its business reputation), (B) the indictment of the Executive for the
commission or perpetration by the Executive of any felony or any crime
involving dishonesty, moral turpitude or fraud, (C) the material breach by the
Executive of this Agreement that, if susceptible of cure, remains uncured ten
days following written notice to the Executive of such breach, (D) the receipt
of any form of notice, written or otherwise, that any regulatory agency having
jurisdiction over the Employer intends to institute any form of formal or
informal (e.g., a memorandum of understanding which relates to the Executive's
performance) regulatory action against the Executive or the Employer or the
Employer (provided that the Board of Directors determines in good faith, with
the Executive abstaining from participating in the consideration of and vote on
the matter, that the subject matter of such action involves acts or omissions
by or under the supervision of the Executive or that termination of the
Executive would materially advance the Employer's compliance with the purpose
of the action or would materially assist the Employer in avoiding or reducing
the restrictions or adverse effects to the Employer related to the regulatory
action); (E) the exhibition by the Executive of a standard of behavior within
the scope of his employment that is materially disruptive to the orderly
conduct of the Employer's business operations (including, without limitation,
substance abuse or sexual misconduct) to a level which, in the Board of
Directors' good faith and reasonable judgment, with the Executive abstaining
from participating in the consideration of and vote on the matter, is
materially detrimental to the Employer's best interest, that, if susceptible of
cure remains uncured ten days following written notice to the Executive of such
specific inappropriate behavior; or (F) the failure of the Executive to devote
his full business time and attention to his employment as provided under this
Agreement that, if susceptible of cure, remains uncured 30 days following
written notice to the Executive of such failure.
(d) "Change in Control" shall mean the occurrence during
the Term of any of the following events, unless such event is a result of a
Non-Control Transaction:
(i) The individuals who, as of the date of this
Agreement, are members of the Board of Directors of the
Employer (the "Incumbent Board") cease for any reason to
constitute at least fifty percent of the Board of Directors
of the Employer; provided, however, that if the election, or
nomination for election by the Employer's shareholders, of
any new director was approved in advance by a vote of at
least fifty percent of the Incumbent Board, such new director
shall, for purposes of this Agreement, be considered as a
member of the Incumbent Board; provided, further, that no
individual shall be considered a member of the Incumbent
Board if such individual initially
7
<PAGE> 8
assumed office as a result of either an actual or threatened
"Election Contest" (as described in Rule 14a-11 promulgated
under the Securities Exchange Act of 1934 (the "Exchange
Act"), or other actual or threatened solicitation of proxies
or consents by or on behalf of any person other than the
Board of Directors of the Employer (a "Proxy Contest"),
including by reason of any agreement intended to avoid or
settle any Election Contest or Proxy Contest.
(ii) An acquisition (other than directly from
the Employer) of any voting securities of the Employer (the
"Voting Securities") by any "Person" (as the term "person" is
used for purposes of Section 13(d) or 14(d) of the Exchange
Act) immediately after which such Person has "Beneficial
Ownership" (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 20% or more of the combined voting
power of the Employer's then outstanding Voting Securities;
provided, however, that in determining whether a Change in
Control has occurred, Voting Securities which are acquired in
a Non-Control Acquisition shall not constitute an acquisition
which would cause a Change in Control.
(iii) Approval by the shareholders of the
Employer of: (i) a merger, consolidation, or reorganization
involving the Employer; (ii) a complete liquidation or
dissolution of the Employer; or (iii) an agreement for the
sale or other disposition of all or substantially all of the
assets of the Employer to any Person (other than a transfer
to a Subsidiary).
(iv) A notice of an application is filed with
the Office of Comptroller of the Currency (the "OCC") or the
Federal Reserve Board or any other bank or thrift regulatory
approval (or notice of no disapproval) is granted by the
Federal Reserve, the OCC, the Federal Deposit Insurance
Corporation, or any other regulatory authority for permission
to acquire control of the Employer or any of its banking
subsidiaries.
(e) "Competing Business" shall mean any business that,
in whole or in part, is the same or substantially the same as the Business.
(f) "Good Reason" shall mean the occurrence after a
Change in Control of any of the events or conditions described in subsections
(i) through (viii) hereof:
(i) a change in the Executive's status, title,
position or responsibilities (including reporting
responsibilities) which, in the Executive's reasonable
judgment, represents an adverse change from his status,
title, position or responsibilities as in effect at any time
within ninety days preceding the date of a Change in Control
or at any time thereafter; the assignment to the Executive of
any duties or responsibilities which, in the Executive's
reasonable judgment, are inconsistent with his status, title,
position or responsibilities as in effect at any time within
ninety days preceding the date of a Change in Control or at
any time thereafter; any removal of the Executive from or
failure to reappoint or reelect him to any of such offices or
positions, except in connection with the termination of his
employment for Disability or Cause, as a result of his death,
or by the Executive other than for Good Reason, or any other
change in condition or circumstances that in the Executive's
reasonable judgment makes it materially more difficult for
the Executive to carry out the duties and responsibilities of
his office than existed at any time within ninety days
preceding the date of Change in Control or at any time
thereafter;
(ii) a reduction in the Executive's base salary
or any failure to pay the Executive any compensation or
benefits to which he is entitled within five days of the date
due;
(iii) the Employer's requiring the Executive to
be based at any place outside a 30-mile radius from the
executive offices occupied by the Executive immediately prior
to the Change in Control, except for reasonably required
travel on the Employer's business which is not materially
greater than such travel requirements prior to the Change in
Control;
(iv) the failure by the Employer to (A) continue
in effect (without reduction in
8
<PAGE> 9
benefit level and/or reward opportunities) any material
compensation or employee benefit plan in which the Executive
was participating at any time within ninety days preceding
the date of a Change in Control or at any time thereafter,
unless such plan is replaced with a plan that provides
substantially equivalent compensation or benefits to the
Executive, or (B) provide the Executive with compensation and
benefits, in the aggregate, at least equal (in terms of
benefit levels and/or reward opportunities) to those provided
for under each other employee benefit plan, program and
practice in which the Executive was participating at any time
within ninety days preceding the date of a Change in Control
or at any time thereafter;
(v) the insolvency or the filing (by any party,
including the Employer) of a petition for bankruptcy of the
Employer, which petition is not dismissed within sixty days;
(vi) any material breach by the Employer of any
material provision of this Agreement;
(vii) any purported termination of the
Executive's employment for Cause by the Employer which does
not comply with the terms of this Agreement; or
(viii) the failure of the Employer to obtain an
agreement, satisfactory to the Executive, from any successor
or assign to assume and agree to perform this Agreement, as
contemplated in Section 11 hereof.
Any event or condition described in clause (i) through (viii) above
which occurs prior to a Change in Control but which the Executive reasonably
demonstrates (A) was at the request of a third party, or (B) otherwise arose in
connection with, or in anticipation of, a Change in Control which actually
occurs, shall constitute Good Reason for purposes of this Agreement,
notwithstanding that it occurred prior to the Change in Control. The
Executive's right to terminate his employment for Good Reason shall not be
affected by his incapacity due to physical or mental illness.
(g) "Non-Control Transaction" shall mean a transaction
described below:
(i) the shareholders of the Employer,
immediately before such merger, consolidation or
reorganization, own, directly or indirectly, immediately
following such merger, consolidation or reorganization, at
least 50% of the combined voting power of the outstanding
voting securities of the corporation resulting from such
merger, consolidation or reorganization (the "Surviving
Corporation") in substantially the same proportion as their
ownership of the Voting Securities immediately before such
merger, consolidation or reorganization; and
(ii) immediately following such merger,
consolidation or reorganization, the number of directors on
the board of directors of the Surviving Corporation who were
members of the Incumbent Board shall at least equal the
number of directors who were affiliated with or appointed by
the other party to the merger, consolidation or
reorganization.
(h) "Territory" shall mean a radius of thirty miles from
(i) the main office of the Employer or (ii) any branch office of the Employer.
(i) "Notice of Termination" shall mean a written notice
of termination from the Employer of the Executive which specifies an effective
date of termination, indicates the specific termination provision in this
Agreement relied upon, and sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated.
18. Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto and supersedes all prior agreements, if
any, understandings and arrangements, oral or written, between the parties
hereto with respect to the subject matter hereof.
9
<PAGE> 10
19. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Employer has caused this Agreement to be
executed and its seal to be affixed hereunto by its officers thereunto duly
authorized, and the Executive has signed and sealed this Agreement, effective
as of the date first above written.
GREENVILLE FIRST BANCSHARES, INC.
ATTEST:
By: /s/ E. B. Kish By: /s/ James B. Orders III
------------------------ -------------------------------
Name: Ellen B. Kish Title: Chairman
-----------------------
EXECUTIVE
/s/ R. Arthur Seaver, Jr.
-----------------------------------
R. Arthur Seaver, Jr.
10
<PAGE> 1
EXHIBIT 23.1
ELLIOTT, DAVIS & COMPANY, L.L.C.
Certified Public Accountants
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference of our report dated
July 8, 1999, relating to the financial statements of Greenville First
Bancshares, Inc. in Amendment No. 1 to the Registration statement of Form SB-2
and Prospectus, and to the reference to our firm therein under the caption
"Experts."
/s/ Elliott, Davis & Company, L.L.P.
------------------------------------
ELLIOTT, DAVIS & COMPANY, L.L.P.
Greenville, South Carolina
September 22, 1999
INTERNATIONALLY - MOORE STEPHENS ELLIOTT DAVIS, LLC
870 S. PLEASANTBURG DRIVE POST OFFICE BOX 6258
GREENVILLE, SOUTH CAROLINA 29606-6286
TELEPHONE (864) 242-3370 TELEFAX (864) 232-7161
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS OF GREENVILLE FIRST BANCSHARES, INC. BY ELLIOT, DAVIS & COMPANY, LLP
DATED JULY 8, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
REGISTRATION STATEMENT ON FORM SB-2 ORIGINALLY FILED ON JUNE 27, 1999, FILE NO.
333-8385
</LEGEND>
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> FEB-02-1999
<PERIOD-END> JUN-30-1999
<CASH> 31,625
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 0
<ALLOWANCE> 0
<TOTAL-ASSETS> 56,440
<DEPOSITS> 0
<SHORT-TERM> 0
<LIABILITIES-OTHER> 208,449
<LONG-TERM> 0
0
0
<COMMON> 100
<OTHER-SE> 0
<TOTAL-LIABILITIES-AND-EQUITY> 56,440
<INTEREST-LOAN> 0
<INTEREST-INVEST> 0
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 0
<INTEREST-DEPOSIT> 0
<INTEREST-EXPENSE> 3,249
<INTEREST-INCOME-NET> 0
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 0
<INCOME-PRETAX> (152,109)
<INCOME-PRE-EXTRAORDINARY> (152,109)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (152,109)
<EPS-BASIC> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
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<ALLOWANCE-OPEN> 0
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</TABLE>
