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AS FILED WITH THE SEC ON SEPTEMBER 1, 1999
REGISTRATION NO.
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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COASTAL BANKING COMPANY, INC.
(Name of Small Business Issuer in Its Charter)
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SOUTH CAROLINA 6021 58-2455445
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification
Incorporation or Organization) Classification Code Number) No.)
</TABLE>
<TABLE>
<S> <C>
1001 BAY STREET, SUITE 202 36 WEST SEA ISLAND PARKWAY
BEAUFORT, SOUTH CAROLINA 29902 BEAUFORT, SOUTH CAROLINA 29902
(843) 522-1228 (843) 522-1228
ADDRESS AND TELEPHONE NUMBER ADDRESS AND TELEPHONE NUMBER
OF PRINCIPAL EXECUTIVE OFFICER OF INTENDED PRINCIPAL PLACE OF BUSINESS
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RANDOLPH C. KOHN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
1001 BAY STREET, SUITE 202
BEAUFORT, SOUTH CAROLINA 29902
(843) 522-1228
(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:
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NEIL E. GRAYSON, ESQ. WILLIAM L. FLOYD, ESQ.
C. RUSSELL PICKERING, ESQ. DAVID M. CALHOUN, ESQ.
J. BRENNAN RYAN, ESQ. LONG ALDRIDGE & NORMAN LLP
NELSON MULLINS RILEY & SCARBOROUGH, L.L.P. ONE PEACHTREE CENTER, SUITE 5300
999 PEACHTREE STREET, N.E., SUITE 1400 303 PEACHTREE STREET, N.E.
ATLANTA, GEORGIA 30309 ATLANTA, GEORGIA 30308
(404) 817-6000 (404) 527-4000
(404) 817-6225 (FAX) (404) 572-4198 (FAX)
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, check the following
box and list the Securities Act of 1933 registration statement number of the
earlier effective registration statement for the same offering. [ ]
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If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act of 1933 registration statement number of the earlier effective
registration statement for the same offering. [ ]
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If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act of 1933, check the following box and list the
Securities Act of 1933 registration statement number of the earlier effective
registration statement for the same offering. [ ]
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If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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PROPOSED
NO. OF SHARES MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF 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... 833,750 $10.00 $8,337,500 $2,318
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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. AUGUST , 1999
COASTAL BANKING COMPANY, INC.
A PROPOSED BANK HOLDING COMPANY FOR
[LOWCOUNTRY NATIONAL BANK'S LOGO APPEARS HERE]
725,000 SHARES OF COMMON STOCK
$10.00 PER SHARE
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We are offering shares of common stock of Coastal Banking Company, Inc. to
fund the start-up of Lowcountry National Bank, a proposed new community bank.
Coastal Banking Company, Inc. will be the holding company and sole owner of the
bank. The bank will be headquartered in Beaufort County, South Carolina, and we
expect to open the bank in 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 OTC Bulletin Board
under the symbol " ".
THIS IS A NEW BUSINESS. AS WITH ALL NEW BUSINESSES, AN INVESTMENT WILL
INVOLVE RISKS. IT IS NOT A DEPOSIT OR A BANK 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.
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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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PUBLIC OFFERING UNDERWRITER'S PROCEEDS TO COASTAL
PRICE DISCOUNT BANKING COMPANY
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Per Share................................. $10.00 $.70 $9.30
Total..................................... $7,250,000 $410,000 $6,840,000
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We will pay an underwriter's discount of $0.70 per share. We will not pay
the underwriter's discount for up to 275,000 shares of common stock sold to our
directors, executive officers, and certain other investors identified by our
directors and executive officers. The total underwriter's discount above assumes
the underwriter's discount will only be paid on 450,000 shares. In addition to
the discount, we will pay the underwriter a financial advisory fee of $95,000,
which is included in the total underwriter's discount above. Edgar M. Norris has
the right to purchase up to an additional 108,750 shares of common stock at
$10.00 per share, less the underwriter's discount of $0.70 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.
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EDGAR M. NORRIS & CO., INC.
, 1999
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COASTAL BANKING COMPANY, INC.
LOWCOUNTRY NATIONAL BANK
PROPOSED MARKET AREA
[MAP OF SOUTH CAROLINA AND BEAUFORT COUNTY SHOWING MARKET AREA APPEARS HERE]
<PAGE> 4
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.
COASTAL BANKING COMPANY AND LOWCOUNTRY NATIONAL BANK
We incorporated Coastal Banking Company, Inc. in June 1999 to organize and
serve as the holding company for Lowcountry National Bank, a new national bank
proposed to be located in Beaufort County, South Carolina. The bank will focus
on the local community, emphasizing personal service to individuals and
businesses in Beaufort County. Our primary service area includes a large portion
of Beaufort County, excluding Hilton Head. We have filed for regulatory approval
to open the new bank with the Office of the Comptroller of the Currency and for
deposit insurance for the bank with the FDIC. We also intend to file for
approval from the Federal Reserve Board to become a bank holding company and
acquire all of the stock of the new bank upon its formation. We expect to
receive all final regulatory approvals in the fourth quarter of 1999 and to open
for business in the first quarter of 2000 following the completion of the
renovation of our proposed headquarters building.
WHY WE ARE ORGANIZING A NEW BANK IN BEAUFORT COUNTY
Beaufort County is South Carolina's fastest growing county. Between 1990
and 1998, its population increased by an estimated 23.2% from 85,182 to 104,935.
In 1995, Beaufort County's median household income was $35,995, 19.7% above the
state average of $30,060. The population growth and high personal income have
contributed to average annual bank deposit growth of 11.7% in our primary
service area over the last four years from $350 million to almost $490 million.
We believe the need for banking services will increase as the community and the
economy continue to grow.
We believe that there is an opportunity in Beaufort County for a new,
locally managed bank focused on the community and personalized service to the
individual and local business. The current trend of consolidation in the banking
industry has led to the acquisition of all of the locally owned community banks
in our primary service area by large national, super-regional, regional, and
super-community banks. Recently, First National Bank of Orangeburg, a
multi-office bank headquartered in Orangeburg, South Carolina, announced its
intent to acquire FirstBank, N.A., the only community bank headquartered in the
City of Beaufort. We believe that our proposed bank, with local management, will
appeal to the citizens of Beaufort County in the current competitive market, and
will benefit from fewer financial institutions, positive deposit growth, and
good economic conditions.
Lowcountry National Bank will be the only independent bank organized and
headquartered in our primary service area, although it is possible that another
bank may be organized in our primary service area in the future. We will
emphasize our local ownership and management and our strong ties to the Beaufort
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.
OUR BOARD OF DIRECTORS
Coastal Banking Company was founded by the following thirteen business
leaders who live in the Beaufort County area, and who also will serve as our
initial directors:
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- - Marjorie Trask Gray, DMD - Randolph C. Kohn
- - Dennis O. Green, CPA - Ron Lewis
- - Mark B. Heles - Lila N. Meeks
- - J. Phillip Hodges, Jr. - Robert B. Pinkerton
- - James W. Holden, Jr., DVM - John M. Trask, III
- - Ladson F. Howell - Matt A. Trumps
- - James C. Key
</TABLE>
3
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Our directors are local business people, many of whom have lived in Beaufort for
numerous years and have strong ties to the community. They are also community
leaders and serve on numerous charitable and service organizations throughout
Beaufort County. We believe our directors' ties to the community and their
significant business experience will provide Lowcountry National Bank with the
ability to effectively assess and address the needs of our proposed market area.
MANAGEMENT
- Randolph C. (Randy) Kohn will serve as our president and chief executive
officer. He has more than 28 years of banking experience in both Georgia
and South Carolina. He most recently served as senior vice president and
senior credit officer for Clemson Bank & Trust from 1995 until his
resignation in March 1999 to join the organizational effort for our
proposed bank.
- Ladson Howell will serve as the chairman of our board of directors. He
has worked in Beaufort for over 30 years as an attorney with Howell,
Gibson & Hughes, PA.
- Charlie T. Lovering, Jr. will serve as our chief financial officer. He
has over 14 years of banking experience. He most recently served as
senior vice president and controller of AmeriBank, N.A. in Savannah,
Georgia from 1997 until his resignation in August 1999 to join our
organizational effort.
We are in the process of assembling the remainder of our management team.
We are looking for individuals who will reside in the Beaufort area and have
significant 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 employees who would be
interested in joining our community banking effort.
PRODUCTS AND SERVICES
We plan to offer many of the products and services offered by larger banks
coupled with personalized service. Our lending services will include consumer
loans, commercial and business loans, 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, NOW accounts, money market accounts, certificates of deposit,
commercial checking accounts, and IRAs. We also will provide cashier's checks,
safe deposit boxes, travelers checks, direct deposit, bank by mail, and U.S.
Savings Bonds. We intend to deliver our services though a variety of methods,
including ATMs, banking by mail, and drive-through banking.
THE OFFERING AND OWNERSHIP BY MANAGEMENT
We are offering 725,000 shares of our common stock for $10.00 per share. We
have granted the underwriter an over-allotment option to purchase an additional
108,750 shares for sale in the offering. Our organizers intend to purchase
202,000 shares, which represent 27.86% of the shares to be outstanding after the
offering. It is possible the organizers will purchase additional shares. To
compensate them for their financial risk and efforts in organizing the bank, our
organizers will receive warrants to purchase one share of common stock for
$10.00 per share for every share that they purchase in this offering, provided
that we will not grant warrants to purchase more than a total of 202,000 shares.
We hope to sell the majority of the remaining shares to individuals in Beaufort
County who share our desire to support a new, local community bank. After the
offering, we expect to adopt a stock option plan to grant options to our
officers, directors, and employees equal to 15% of the shares outstanding after
the offering, including the options to be granted to Randy Kohn equal to 5% of
the number of shares sold in this offering pursuant to his employment agreement
with us.
USE OF PROCEEDS
We will use a minimum of $6,000,000 of the proceeds of this offering to
capitalize Lowcountry National Bank. This is the amount of capital we believe
the banking regulators will require for us to open the bank. After paying the
expenses of this offering and of organizing the holding company and the bank, we
will invest 25% of the remaining net proceeds in the bank and retain the
remaining 75% to provide general working
4
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capital for the holding company. The bank will use the funds it receives from
Coastal Banking Company to pay expenses, to purchase, renovate, and furnish its
offices, and to 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 executive offices are currently located at:
1001 Bay Street, Suite 202
Beaufort, South Carolina 29902
(843) 522-1228
Our permanent office will be located at:
36 West Sea Island Parkway
Beaufort, South Carolina 29902
(843) 522-1228
Our permanent office will be in a 5,400 square foot building located on a
2.13 acre site on Ladys Island, just across the Beaufort river from downtown
Beaufort. We will renovate the existing building on the site and we hope to move
into our new office in the first quarter of 2000. We believe this facility will
adequately serve the bank's needs for at least its first year of operation. We
plan to open a branch office within the first three years of operation. See
"Offices and Facilities" on page 13.
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RISK FACTORS
The following is a summary of some of the risks which we will encounter in
starting and operating Lowcountry National 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.
WE ARE A NEW BUSINESS AND THERE IS A RISK THAT WE MAY NOT BE SUCCESSFUL.
Neither Coastal Banking Company nor Lowcountry National Bank has any
operating history. The operations of new businesses are always risky. Because
Lowcountry National Bank has not yet opened, we do not have historical financial
data and similar information which would be available for a financial
institution that has been operating for several years.
WE EXPECT TO INCUR LOSSES FOR MORE THAN 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 more than two
years, if at all. Our future profitability is dependent on numerous factors
including the continued success of the economy of the community and favorable
government regulation. While the economy in this area has been strong in recent
years, an economic downturn in the area would hurt our business. We are also a
highly regulated institution. Our ability to grow and achieve profitability may
be adversely affected by state and federal regulations that limit a bank's right
to make loans, purchase securities, and pay dividends. Although we expect to
become profitable in our third year, there is a risk that a deterioration of the
local economy or adverse government regulation could affect our plans. If this
happens, we may never become profitable and 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 THE REGULATORY AGENCIES.
We cannot begin operations until we receive all required regulatory
approvals. We will not receive these approvals until we satisfy all requirements
for new national banks imposed by state and federal regulatory agencies. We have
already filed applications with the FDIC and the Office of the Comptroller of
the Currency, and we will file an application with the Federal Reserve prior to
opening the bank. We expect to obtain all necessary final approvals by 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 LOWCOUNTRY NATIONAL BANK WILL RESULT IN ADDITIONAL LOSSES.
We intend to open the bank in 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.
WE WILL DEPEND HEAVILY ON RANDY KOHN, AND OUR BUSINESS WOULD SUFFER IF SOMETHING
WERE TO HAPPEN TO HIM OR IF HE WERE TO LEAVE.
Randy Kohn 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. Kohn and carry $500,000 of insurance on his
life payable to the bank. Nevertheless, if he were to leave, our business would
suffer.
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WE DETERMINED THE OFFERING PRICE OF $10.00 ARBITRARILY AND IT WILL FLUCTUATE IF
A PUBLIC MARKET DEVELOPS AND THE SHARES BECOME FREELY TRADED AFTER THE OFFERING.
Because we do not have any history of operations and there are only ten
shares already outstanding, 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 holding company and 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 OTC 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 illiquidity and the long-term nature of
an investment in our common stock.
WE WILL FACE STRONG COMPETITION FOR CUSTOMERS FROM LARGER AND MORE ESTABLISHED
BANKS, AS WELL AS OTHER DE NOVO COMMUNITY 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 Beaufort 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 BB&T, Bank of America,
First Union, 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. We also may have
competition in the future from other de novo community banks. See "Proposed
Business -- Marketing Opportunities -- Competition" on page 14 and "Supervision
and Regulation" starting on page 23.
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. Based on an initial capitalization of $6,000,000, less
estimated organizational expenses of $407,000, we expect that our initial legal
lending limit will be approximately $839,000 immediately following the offering.
We intend to impose an internal limit on the bank of 80% of this amount, or
approximately $671,000. These initial limits may be higher because we also
intend to capitalize the bank with 25% of the net proceeds we raise in the
offering in excess of $6,000,000. Until the bank is profitable, our capital, and
therefore, our lending limit will continue to decline. 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.
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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 Coastal Banking Company 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 Coastal Banking Company 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 35.
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.
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 Coastal Banking Company. Upon completion of the offering, we will issue
warrants to the organizers to purchase one share of common stock at $10.00 per
share for every share they purchase in the offering. We expect to issue 202,000
warrants to our organizers on purchases of 202,000 shares, but we will not grant
warrants to purchase more than a total of 202,000 shares. 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, including
options granted to Mr. Kohn equal to 5% of the total shares sold in this
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, or less
than $10.00 per share during the period ending 12 months after the date of this
offering.
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 good chance 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
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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
Coastal Banking Company and Lowcountry National 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.
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USE OF PROCEEDS
We estimate that we will receive net proceeds of $6,720,000 from the sale
of 725,000 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
$1,011,375 in additional proceeds. We have established a line of credit with a
third party bank in the amount of $500,000 at the prime rate minus 0.5% 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 COASTAL BANKING COMPANY
The following table shows the anticipated use of the proceeds by Coastal
Banking Company. As shown, we intend to use at least $6,000,000 to capitalize
the bank. After paying the expenses of this offering and of organizing the
holding company, we also will capitalize Lowcountry National Bank with 25% of
the remaining net proceeds. We describe the bank's anticipated use of proceeds
in the following section. The underwriter's compensation reflects an
underwriter's discount of $315,000, which reflects a discount of $0.70 on
450,000 shares and no discount on 275,000 shares. This discount assumes that the
directors, officers, and certain other individuals identified by our directors
and officers will purchase 275,000 shares in the offering. If these parties
purchase less than 275,000 shares in the offering, the underwriter's discount
may be higher. We also will pay the underwriter a $95,000 advisory fee. In the
event the underwriter exercises its over-allotment option in full, we will
receive additional net proceeds of $1,011,375, and we will invest approximately
$250,000 of these additional proceeds in the bank and keep the remainder in
Coastal Banking Company. We initially will invest the remaining proceeds,
including any additional proceeds that we may receive if the underwriter
exercises its over-allotment option, in United States government securities or
deposit them with Lowcountry National Bank, but we have not decided specifically
how to allocate these proceeds. 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.
<TABLE>
<CAPTION>
TOTAL
-----------
<S> <C>
Gross proceeds from offering................................ $ 7,250,000
Less:
Underwriter's discount...................................... (315,000)
Underwriter's advisory fee.................................. (95,000)
Offering expenses........................................... (120,000)
Investment in capital stock of the bank..................... (6,000,000)
-----------
Remaining proceeds.......................................... $ 720,000
===========
</TABLE>
USE OF PROCEEDS BY LOWCOUNTRY NATIONAL BANK
The following table shows the anticipated use of the proceeds by Lowcountry
National Bank. If the underwriter exercises its over-allotment option in full,
we will invest approximately $250,000 in additional proceeds in the bank. All
proceeds received by the bank will be in the form of an investment in the bank's
capital stock by Coastal Banking Company as described above. We have entered
into an agreement to purchase 2.13 acres of land with a 5,400 square foot
existing building. Our net cost on the property will be $855,000. We intend to
renovate the existing building at a cost of approximately $600,000 and to
improve the property at a cost of approximately $100,000. We expect to complete
the renovations and occupy the building in the first quarter of 2000. This
building will be our main office. Furniture, fixtures, and equipment will be
10
<PAGE> 12
capitalized and amortized over the estimated useful life of the asset. The bank
will use the remaining proceeds to make loans, purchase securities, fund
expansion activities, and otherwise conduct the business of the bank.
<TABLE>
<CAPTION>
TOTAL
----------
<S> <C>
Investment by Coastal Banking Company in the bank's capital
stock..................................................... $6,000,000
Organizational and pre-opening expenses of the bank......... (407,000)
Furniture, fixtures and equipment........................... (465,000)
Net cost of land and building............................... (855,000)
Improvements to land and building........................... (700,000)
----------
Remaining proceeds.......................................... $3,573,000
==========
</TABLE>
11
<PAGE> 13
CAPITALIZATION
The following table shows Coastal Banking Company's capitalization as of
June 30, 1999, and the pro forma consolidated capitalization of Coastal Banking
Company and the bank as adjusted to reflect the proceeds from the sale of
725,000 shares in this offering and after deducting the underwriter's discount
and advisory fee and the estimated expenses of the offering. Coastal Banking
Company's capitalization as of June 30, 1999 reflects the purchase of ten shares
by Randy Kohn for $10.00 per share. These shares will be redeemed after the
offering. The "As Adjusted" column reflects the estimated cost of organizing
Coastal Banking Company and organizing and preparing to open Lowcountry National
Bank through the expected opening date, which we expect to be in 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:
Paid-in capital, includes common stock, par value $.01 per
share; 10,000,000 shares authorized; 10 shares issued
and outstanding; 725,000 shares issued and outstanding
as adjusted............................................ $ 100 $6,720,000
Preferred Stock, par value $.01 per share; 10,000,000
shares authorized; no shares issued and outstanding.... 0 0
Deficit accumulated during the pre-opening stage.......... (144,763) (407,000)
--------- ----------
Total shareholders' equity (deficit).............. $(144,663) $6,313,000
========= ==========
Book value per share...................................... $ N/A $ 8.71
--------- ----------
</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 Lowcountry
National Bank's ability to pay dividends to Coastal Banking Company, 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
Coastal Banking Company was formed to organize and own all of the capital
stock of Lowcountry National Bank. In June 1999, the organizers filed
applications with the Office of the Comptroller of the Currency to charter the
bank as a national bank and with the FDIC to receive federal deposit insurance.
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 a specified minimum amount of capital which we believe will
be $6,000,000. Upon approval from the Office of the Comptroller of the Currency
and 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 regulatory approvals by the fourth
quarter of 1999 or the first quarter of 2000.
FINANCIAL RESULTS
As of June 30, 1999, Coastal Banking Company had total assets of $56,337,
consisting of cash $18,805 and premises and equipment $37,532. Coastal Banking
Company incurred a net loss of $144,763 for the period from its inception on
September 29, 1998 through June 30, 1999.
EXPENSES
On completion of the offering and opening of the bank, we expect we will
have incurred the following expenses:
- $410,000 in underwriter's commissions and advisory fees, $486,125 if the
underwriter exercises its over-allotment option in full, which will be
deducted from the proceeds of the offering.
- $120,000 in other expenses of the offering, which will be subtracted from
the proceeds of the offering.
- $407,000 in expenses to organize and prepare to open Lowcountry National
Bank, consisting principally of salaries, overhead and other operating
costs, which will be charged against the income of Lowcountry National
Bank.
Prior to the completion of this offering, we will fund all of our expenses
with a $500,000 line of credit at the prime rate minus 0.5% which we have
obtained from a third party bank. We will use the proceeds of this offering to
repay amounts due under this line of credit. We anticipate that the proceeds of
the offering will be sufficient to satisfy our financial needs at least for the
next twelve months.
OFFICES AND FACILITIES
Our main office will be located on a 2.13 acre site on West Sea Island
Parkway in Beaufort, South Carolina, located just across the Beaufort river from
downtown Beaufort on Ladys Island. The site is currently improved with a 5,400
square foot building, which we intend to renovate to serve as our main office.
We will purchase this site for a net purchase price of $855,000 and the
renovations are expected to cost up to an additional $700,000. We expect to
complete the renovations in the first quarter of 2000. We believe that the
headquarters facility will adequately serve the bank's needs for at least the
first year of operation, but we may pursue branching opportunities as they
arise.
We anticipate that we will open a branch office within three years of the
commencement of operations. In determining whether to open a branch and when, we
will consider a number of factors including the financial performance of the
bank, the impact of the branch on the bank, economic conditions in our market
area, advantages of expanding our market presence, convenience to our customers,
and the availability of an acceptable location in the target market area.
Depending on the above factors and other relevant circum-
13
<PAGE> 15
stances it is also possible that we may open more than one branch, or we may not
open a branch at all. We also will need to obtain regulatory approval before we
can open any branch.
LIQUIDITY AND INTEREST RATE SENSITIVITY
Lowcountry National Bank, like most banks, will depend on its net interest
income for its primary source of earnings. Net interest income is 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. Interest rates have historically varied widely, and we cannot
control or predict them. Despite the measures we plan to take to lessen the
impact of interest rate fluctuations, large moves in interest rates may decrease
or eliminate our profitability.
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.
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 many financial institutions, we will rely upon computers for the daily
conduct of our business and for information systems processing. There is concern
among industry experts that on January 1, 2000 some computers will be unable to
"read" the new year resulting in computer malfunctions.
We generally will be relying on software and hardware developed by
independent third parties for our information systems. We have not yet entered
into an agreement with a vendor to provide core data processing software and
services or with a vendor to provide ATM services. We plan to request and review
testing and results from each of our primary vendors demonstrating Year 2000
readiness and compliance. We plan to prepare a comprehensive Year 2000 Plan,
including a budget for Year 2000 testing and vendor monitoring. Our president
will implement the plan with oversight from our board of directors. The plan
involves investigation of each vendor, validation of each vendors testing
procedures and results, testing on our own systems if reasonable, and receiving
Year 2000 warranties from each of our selected vendors. We will seek to ensure
that our agreements with our primary vendors include warranties regarding Year
2000 compliance, although the remedies available under such agreements include
standard disclaimers of liability and specifically exclude special, incidental,
indirect, and consequential damages.
Our customers may also have Year 2000 issues. We may incur losses if these
issues affect our loan customers' ability to repay their loans or if they suffer
material harm to their businesses as a result. We intend to request
certification from each commercial borrower that their systems are Year 2000
compliant and that
14
<PAGE> 16
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 good chance 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 incorporated Coastal Banking Company as a South Carolina corporation on
June 8, 1999, primarily to function as a holding company to own and control all
of the capital stock of Lowcountry National 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 beneficial to the
company.
We filed an application with the Office of the Comptroller of the Currency
to organize the bank as a national bank under the laws of the United States. We
have also filed an application with the FDIC for deposit insurance. We intend to
file an application with the Federal Reserve for permission to form a bank
holding company. Subject to receiving regulatory approval from these agencies,
we plan to open the bank in the last quarter of 1999 or the first quarter of
2000 and will engage in a general commercial and consumer banking business as
described below. Final approvals will depend on compliance with regulatory
requirements, including our capitalization of the bank with the minimum amount
required by the regulators, which we believe will be $6,000,000, from the
proceeds of this offering.
MARKETING OPPORTUNITIES
Service Area. Our primary service area will consist of the portion of
Beaufort County within a 20 mile radius (specifically excluding Hilton Head
Island) of our main office. This area covers a large portion of Beaufort County,
including Beaufort, Bluffton, Burton, Callawassie Island, Coosaw, Dataw Island,
Harbor Island, Hunting Island, Fripp Island, Ladys Island, Port Royal, Spring
Island, St. Helena Island, and the rapidly growing Sun City, which is expected
to contain 8,900 homes upon completion, of which 1,400 are already sold. More
particularly, the service area for deposits for the bank is within a five mile
radius of our main office, with the 20 mile radius primarily utilized for loan
generation opportunities. Our expansion plans include the opening of a branch
facility in the service area within three years. We plan to leverage existing
contacts and relationships with individuals and companies in this area to more
effectively market the services of the bank.
Economic and Demographic Factors. Beaufort County is South Carolina's
fastest growing county, and it is strategically located in the southeast corner
of South Carolina, 45 miles northeast of Savannah, Georgia, and 65 miles
southwest of Charleston, South Carolina. The economy is aided by the network of
highways that pass through Beaufort County (U.S. 17, U.S. 21, U.S. 278, and S.C.
170), the CSX rail line, and a regional airport located west of Savannah,
Georgia. The local economy is driven primarily by area military installations,
tourism, and transportation services via the Ports Authority facility at Port
Royal (located in Beaufort County). The county enjoys an outstanding
relationship with the United States Marine Corps training facility at Parris
Island, the Marine Corps Air Station (MCAS), and the U.S. Naval Hospital located
in Beaufort County. The MCAS is expanding as evidenced by the recent
announcement that two additional squadrons are scheduled to be transferred to
the MCAS in the near future. Tourism centers primarily on Hilton Head and other
islands in Beaufort County, and the same mild coastal environment that supports
tourism in the area is also fostering a growing retirement community. In March
1999, the unemployment rate in the area was 1.6%, lower than the South Carolina
average of 3.7% and the national average of 4.2%. In 1995, Beaufort County's
median household income was $35,995, 19.7% above the state average of $30,060.
The population of Beaufort County continues to grow at the fastest rate of any
county in South Carolina. By 2003, the population of
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<PAGE> 18
Beaufort County is expected to increase by 7.7% over the 1998 population, to
almost 115,000 people. The population growth for the county was 23.2% for the
period from 1990 to 1998.
Competition. We believe our initial competition for consumer and small
business loans and deposits will be within a 20 mile area of our main office. In
this area, we will concentrate on serving the small business owner and
consumer-oriented businesses that have tended to be underserved by the larger
financial institutions. According to the FDIC, as of June 30, 1998 our primary
market area contained 19 bank branches, encompassing almost $490 million in
deposits.
The consolidation trend in the banking industry has led to the recent
announcement that First National Bank of Orangeburg, a multi-office bank
headquartered in Orangeburg, South Carolina intends to acquire FirstBank, N.A,
the last community bank headquartered in the City of Beaufort. Our competitors
include large national, super-regional, and regional institutions, including
Wachovia Bank, Regions Bank, Branch Bank & Trust, First Union National Bank, and
Bank of America, as well as super-community banks headquartered outside of our
primary service area, including First National Bank of Orangeburg, Palmetto
State Bank, First Citizens Bank, and Fort Sill National Bank. It is also
possible that another bank may organize in our primary service area in the near
future. According to the FDIC's 1998 bank asset data, the large regional and
super-regional banks control 43.5% of the deposit base in our primary service
area and the super-community banks control a 56.5% market share of deposits. We
believe the proposed bank, with local management, will prove appealing to the
citizens of Beaufort County in the current competitive market, and will benefit
from the continuing consolidation within the financial institution industry.
BUSINESS STRATEGY
Management Philosophy. Lowcountry National Bank will be the only locally
owned bank with a local shareholder base in Beaufort. As a locally owned bank,
we believe we can offer a unique banking alternative to the banking market by
offering a higher level of customer service and a management team that is more
focused on the needs of the community. We believe that this approach will be
enthusiastically supported by the community. While the bank will have the
ability to offer a broad range of products, we will emphasize the client
relationship. Many of the organizers are residents and business people in the
bank's primary market area and are familiar with the credit needs of the area
through personal experience and communications with their business colleagues.
We believe that the proposed community focus of the bank will succeed in this
market, and that the area will react favorably to the bank's emphasis on service
to small- to medium-sized businesses, individuals, and professional firms.
Operating Strategy. In order to achieve the level of prompt, responsive
service that we believe will be necessary to attract and retain customers and to
develop Lowcountry National Bank's image as a local bank with an individual
focus, we will employ the following operating strategies:
- Experienced Senior Management. We will retain an experienced management
team, led by a president and chief executive officer who has over 28
years of banking experience. Our management team currently consists of
the following individuals:
- Randy Kohn will lead the management team as the president and chief
executive officer for both Coastal Banking Company and Lowcountry
National Bank. He previously served as senior vice president and senior
credit officer for Clemson Bank & Trust, a community bank in Clemson,
South Carolina from 1995 until his resignation in March 1999 to join the
organizational team for our bank. From 1991 to 1995, Mr. Kohn served as
senior vice president and senior credit officer at Citizens Bank, a
community bank in Canton, Georgia.
- Ladson Howell will serve as the chairman of our board of directors. He
has worked in Beaufort for over 30 years as an attorney with Howell,
Gibson & Hughes, PA. Mr. Howell is the former president of the Beaufort
County Bar Association and an active member of the community.
- Charlie T. Lovering, Jr. will serve as our senior vice president and
chief financial officer. He has over 14 years of banking experience. He
most recently served as senior vice president and controller of
AmeriBank, N.A. in Savannah, Georgia from 1997 until his resignation in
August 1999 to join our
17
<PAGE> 19
organizational effort. Mr. Lovering was a senior auditor for SouthTrust
Corporation from 1990 through 1996, and an assistant vice president of
SouthTrust Bank in Charleston, South Carolina from 1996 through 1997.
- 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 28, our directors are residents and
business people in the Beaufort area, with significant community
involvement. They are a diverse group that we believe represent many
different interests of the local business community. These directors are
dedicated to the success of the bank, and they will play a key role in
marketing the new bank to the community.
- Individual Customer Focus. Lowcountry National Bank will approach the
market using a client-based philosophy. We will focus on the overall
relationship with each client as opposed to the general product sales
approach used by larger banks. Our 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 banking approach.
- Local Services and Decision Making. Clients will enjoy a professional
bank environment with access to their specific bank officer. The bank
will provide additional convenience through strategically placed ATMs. We
will emphasize local decision-making with experienced bankers, attention
to strong relationships with customers, and professional and responsive
service.
- Capitalize on Trend Toward Consolidation. The current trend of
consolidation in the banking industry has led to the recent acquisition
of the only locally owned community bank in the City of Beaufort,
continuing a larger trend of bank ownership by large super-regional,
regional, and super-community banks headquartered outside of Beaufort
County.
Although size gives the larger banks certain advantages in competing for
business from large corporations, including higher lending limits and the
ability to offer services in other areas of South Carolina and Beaufort County,
we believe that there is an opportunity in the community banking market in the
Beaufort County area, and that we can successfully fill this role. We will not
compete with large institutions for the primary banking relationships of large
corporations, but will compete for niches in this business and for the consumer
business of their employees. We will also focus on small- to medium-sized
businesses and their employees. These businesses include retail, service, and
tourism. We intend to attract such businesses based on relationships and
contacts of the bank's directors and management.
The current bank consolidation trends may present other opportunities for
us as well. For example, a bank may choose to sell one or more branches
following the acquisition of another bank. While we have no immediate plans to
do so, we may take advantage of these opportunities to acquire additional
branches.
LENDING ACTIVITIES
General. We intend to emphasize a range of lending services, including
real estate, commercial, and consumer loans to individuals and small- to
medium-sized businesses and professional firms 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 Beaufort County
area and have greater resources and lending limits. As a result, we may have to
charge lower interest rates to attract 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 an individual officer's lending authority,
the loan request will be considered and approved by an officer with a higher
lending limit or the directors' loan committee. Loans in excess of the
directors' loan committee's limits must be approved by the full board of
directors. 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 currently
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<PAGE> 20
intends to sell its mortgage loans on the secondary market, but may choose to
hold them in the portfolio in the future.
Loan Distribution. We estimate that the initial percentage distribution of
our loans for the first year will be as follows:
<TABLE>
<S> <C>
Real Estate and Mortgage Loans.............................. 63%
Commercial Loans............................................ 24
Consumer Loans.............................................. 13
---
Total............................................. 100%
===
</TABLE>
These distribution percentages are estimates only. Our actual deposit and loan
distribution will depend on our customers and vary initially and over time. We
will maintain an allowance for loan losses, which we will establish through a
provision for loan losses charged against income. We will charge loans against
this allowance when we believe that the collectibility of the principal is
unlikely. The allowance will be an estimated amount that we believe will be
adequate to absorb losses inherent in the loan portfolio based on evaluations of
its collectibility. We anticipate that initially our loan loss reserve will
equal approximately 1% of the average outstanding balance of our loans. Over
time, we will base the allowance for loan losses on our evaluation of factors
such as changes in the nature and volume of the loan portfolio, overall
portfolio quality, specific problem loans and commitments, and current
anticipated economic conditions that may affect the borrower's ability to pay.
Lending Limits. The bank's lending activities will be subject to a variety
of lending limits imposed by federal law. In general, the bank will be subject
to a legal limit on loans to a single borrower equal to 15% of the bank's
capital and unimpaired surplus. Different limits may apply in certain
circumstances based on the type of 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. Based upon the capitalization of
the bank with $6,000,000, the bank will initially have a self-imposed loan limit
of $671,000, which represents 80% of our anticipated legal lending limit of
$839,000. These initial limits may be higher because we also intend to
capitalize the bank with 25% of the net remaining proceeds we raise in the
offering, but they will drop as we expect to incur losses, and therefore have
less capital, in first several years of operations. 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 tourism,
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 and Mortgage Loans. We estimate that loans secured by first or
second mortgages on real estate will make up 63% 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. Fluctuations
in the value of real estate, as well as other factors arising after a loan has
been made, could negatively affect a borrower's cash flow, creditworthiness, and
ability to repay the loan. On first and second mortgage loans we would typically
not advance more than 90% of the lesser of the cost or appraised value of the
property. In the event we advance more than 80% of the lesser of the cost or
appraised value of the property, we will typically require mortgage insurance.
We will require a valid mortgage lien on all real
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<PAGE> 21
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 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:
- 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 also may reduce risk by selling
participations in larger loans to other institutions when possible.
- Residential Real Estate Loans. Residential real estate loans generally
will have longer terms up to 30 years. We will offer fixed and adjustable
rate mortgages. We will have limited credit risk on these loans as most
will be sold to third parties soon after closing.
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 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. Asset based lending, leasing, and factoring will
be offered through third party vendors who can handle the paper work and
servicing and generally assume most of the credit risk. Trade letters of credit,
standby letters of credit, and foreign exchange will be handled through a
correspondent bank as agent for the bank.
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<PAGE> 22
We expect to offer small business loans utilizing government enhancements
such as the Small Business Administration's 7(a) program and SBA's 504 programs,
and our CEO has experience with these types of loans. These loans will typically
be partially guaranteed by the government, which may help to reduce the bank's
risk. Government guarantees of SBA loans will not exceed 80% of the loan value
and will generally be less.
The well established banks in the Beaufort County area will make
proportionately more loans to medium-to large-sized businesses than we will.
Many of the bank's anticipated commercial loans likely will be made to small-to
medium-sized businesses which may be less able to withstand competitive,
economic, and financial conditions than larger borrowers.
Consumer Loans. The bank will make a variety of loans to individuals for
personal and household purposes, including secured and unsecured installment
loans and revolving lines of credit. 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 primary market area at rates competitive to those offered in the
Beaufort County area. In addition, we intend to offer certain retirement account
services, such as IRAs. We intend to solicit these accounts from individuals,
businesses, associations, organizations, and governmental authorities.
Deposit Distribution. We estimate that the initial percentage distribution
of our deposits for the first year will be as follows:
<TABLE>
<S> <C>
Demand Deposit.............................................. 10%
Savings & Money Market...................................... 28
Public Funds (Time and Savings and Demand Deposits)......... 11
CDs under $100,000.......................................... 37
CDs over $100,000........................................... 14
---
Total............................................. 100%
===
</TABLE>
OTHER BANKING SERVICES
We anticipate that the bank will offer other bank services including drive
up ATMs, safe deposit boxes, traveler's checks, direct deposit, U.S. Savings
Bonds, and banking by mail. We plan for the bank to become associated with the
Honor and Cirrus ATM networks, which may be used by the bank's customers
throughout Beaufort County and other regions. We believe that by being
associated with a shared network of ATMs, we will be better able to serve our
customers and will be able to attract customers who are accustomed to the
convenience of using ATMs, although we do not believe that maintaining this
association will be critical to our success. We intend to begin offering these
services shortly after opening the bank. We do not expect the bank to exercise
trust powers during its first year of operation.
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<PAGE> 23
MARKET SHARE
As of June 30, 1998, total deposits in the bank's primary service area were
almost $490 million. The average annual growth rate in deposits in this area
over the last four years was 11.7%. Based on a more conservative growth rate of
7.2%, the average growth rate in Beaufort County over the last four years,
deposits in the primary service area will grow to over $740 million by 2004. Our
plan over the next five years is to reach a 7.6% market share with deposits of
$56 million. Of course, we cannot be sure that these deposit growth rates will
continue, or that we will accomplish this objective.
EMPLOYEES
We anticipate that, upon commencement of operations, the bank will have
approximately 13 full time employees. Within the first three years, we
anticipate that it will have approximately 20 full time employees operating out
of the bank's main facility and any branch facility. Coastal Banking Company, as
the holding company for the bank, will not have any employees other than its
officers for the foreseeable future.
LEGAL PROCEEDINGS
Neither Coastal Banking Company, Lowcountry National Bank, nor any of their
properties are subject to any legal proceedings.
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<PAGE> 24
SUPERVISION AND REGULATION
Both Coastal Banking Company and Lowcountry National 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 on our business and earnings in the future.
COASTAL BANKING COMPANY
Because it will own the outstanding capital stock of the bank, Coastal
Banking Company 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, Coastal
Banking Company 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 (i) Coastal Banking Company has registered securities
under Section 12 of the Securities Exchange Act of 1934 or (ii) no other person
owns a greater percentage of that class of voting securities immediately after
the transaction. We intend to 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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<PAGE> 25
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 Coastal
Banking Company under the Bank Holding Company Act, including a minimum leverage
ratio and a minimum ratio of "qualifying" capital to risk-weighted assets. These
requirements are described below under "Capital Regulations." Subject to its
capital requirements and certain other restrictions, Coastal Banking Company 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 Coastal Banking Company. Our
ability to pay dividends will be subject to regulatory restrictions as described
below in "The Bank -- Dividends." Coastal Banking Company 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, Coastal Banking Company 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 Coastal Banking Company might not otherwise do so. Under
the Bank Holding Company Act, the Federal Reserve Board may require a bank
holding company to terminate any activity or relinquish control of a nonbank
subsidiary, other than a nonbank subsidiary of a bank, upon the Federal Reserve
Board's determination that such activity or control constitutes a serious risk
to the financial soundness or stability of any subsidiary depository institution
of the bank holding company. Further, federal bank regulatory authorities have
additional discretion to require a bank holding company to divest itself of any
bank or nonbank subsidiary if the agency determines that divestiture may aid the
depository institution's financial condition.
Glass-Steagall Act. We will also be restricted by the provisions of the
Glass-Steagall Act, which prohibits Coastal Banking Company 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. We must receive the Board's approval prior
to engaging in the acquisition of banking or nonbanking institutions or assets,
and we must file periodic reports with respect to our financial condition and
operations, management, and intercompany relationships between Coastal Banking
Company 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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<PAGE> 26
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 their 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
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<PAGE> 27
the Currency or the Federal Reserve Board thirty days' prior notice of the
appointment of any senior executive officer or director. Within the thirty day
period, the Office of the Comptroller of the Currency or the Federal Reserve
Board, as the case may be, may approve or disapprove any such appointment.
Deposit Insurance. The FDIC establishes rates for the payment of premiums
by federally insured banks and thrifts for deposit insurance. A separate Bank
Insurance Fund and Savings Association Insurance Fund are maintained for
commercial banks and savings associations with insurance premiums from the
industry used to offset losses from insurance payouts when banks and thrifts
fail. In 1993, the FDIC adopted a rule which 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 the 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
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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.
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 Coastal Banking Company or Lowcountry National
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.
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<PAGE> 29
Under these guidelines, banks' and bank holding companies' assets are given
risk-weights of 0%, 20%, 50%, or 100%. In addition, certain off-balance sheet
items are given credit conversion factors to convert them to asset equivalent
amounts to which an appropriate risk-weight applies. These computations result
in the total risk-weighted assets. Most loans are assigned to the 100% risk
category, except for first mortgage loans fully secured by residential property
and, under certain circumstances, residential construction loans, both of which
carry a 50% rating. Most investment securities are assigned to the 20% category,
except for municipal or state revenue bonds, which have a 50% rating, and direct
obligations of or obligations guaranteed by the United States Treasury or United
States Government agencies, which have a 0% rating.
The federal bank regulatory authorities have also implemented a leverage
ratio, which is equal to Tier 1 capital as a percentage of average total assets
less intangibles, to be used as a supplement to the risk-based guidelines. The
principal objective of the leverage ratio is to place a constraint on the
maximum degree to which a bank holding company may leverage its equity capital
base. The minimum required leverage ratio for top-rated institutions is 3%, but
most institutions are required to maintain an additional cushion of at least 100
to 200 basis points.
The FDIC Improvement Act established a new capital-based regulatory scheme
designed to promote early intervention for troubled banks which requires the
FDIC to choose the least expensive resolution of bank failures. The new
capital-based regulatory framework contains five categories of compliance with
regulatory capital requirements, including "well capitalized," "adequately
capitalized," "undercapitalized," "significantly 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 at a
rapid pace, our capital may be depleted too quickly, and a capital infusion from
the holding company may be necessary 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
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<PAGE> 30
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 Report 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 violations. Criminal penalties for some financial
institution crimes have been increased to 20 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 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. For example,
the United States House of Representatives recently passed House Bill 10, the
Financial Services Act of 1999, which, if enacted into law, would make
substantial changes to the regulation of banks and other companies within the
United States 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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<PAGE> 31
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 directors and
executive officers after the completion of this offering. All of our directors
are organizers of the bank. The mailing addresses of our directors and executive
officers are the same as the address of the bank. Prior to the offering, Randy
Kohn 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 share 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. Other than Charlie T. Lovering, each person listed below is an
organizer of the bank.
<TABLE>
<CAPTION>
NAME OF BENEFICIAL OWNER NUMBER PERCENT
- ------------------------ ------- -------
<S> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS
Marjorie Trask Gray......................................... 15,000 2.07%
Dennis O. Green............................................. 21,500 2.97
Mark B. Heles............................................... 15,000 2.07
J. Phillip Hodges, Jr....................................... 17,000 2.34
James W. Holden, Jr......................................... 11,500 1.59
Ladson F. Howell............................................ 10,000 1.38
James C. Key................................................ 10,000 1.38
Randolph C. Kohn............................................ 15,000 2.07
Ron Lewis................................................... 13,000 1.79
Charlie T. Lovering......................................... 5,000 .69
Lila N. Meeks............................................... 14,000 1.93
Robert B. Pinkerton......................................... 20,000 2.76
John M. Trask, III.......................................... 25,000 3.45
Matt A. Trumps.............................................. 15,000 2.07
------- -----
All directors and executive officers as a group (14
persons).................................................. 207,000 28.55%
======= =====
</TABLE>
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<PAGE> 32
EXECUTIVE OFFICERS AND DIRECTORS OF COASTAL BANKING COMPANY
The following table sets forth certain information about our executive
officers and directors. The president and chief executive officer and the
directors of Coastal Banking Company will also hold these same positions with
Lowcountry National Bank. Coastal Banking Company's articles of incorporation
provide for a classified board of directors so that, as nearly as possible,
one-third of the directors are elected each year to serve three-year terms. The
terms of office of the classes of directors expire as follows: Class I at the
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.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH COASTAL BANKING COMPANY
- ---- --- --------------------------------------------------------
<S> <C> <C>
Marjorie Trask Gray, DMD.............. 29 Director, Class I
Dennis O. Green, CPA.................. 58 Director, Class I, Vice Chairman of the Board
Mark B. Heles......................... 49 Director, Class II
J. Phillip Hodges, Jr................. 52 Director, Class I, Secretary
James W. Holden, Jr., DVM............. 39 Director, Class III
Ladson F. Howell...................... 56 Director, Class I, Chairman of the Board
James C. Key.......................... 59 Director, Class III
Randolph C. Kohn...................... 51 Director, Class I, President and Chief Executive Officer
Ron Lewis............................. 58 Director, Class III
Lila N. Meeks......................... 59 Director, Class II
Robert B. Pinkerton................... 58 Director, Class II
John M. Trask, III.................... 36 Director, Class II
Matt A. Trumps........................ 29 Director, Class III
Charlie T. Lovering................... 32 Senior Vice President and Chief Financial Officer
</TABLE>
MARJORIE TRASK GRAY, DMD, Class I director, has been a dentist with a
general practice in Beaufort, South Carolina since 1997. She graduated from the
University of South Carolina in 1992, and from the Medical University of South
Carolina with a DMD in 1997. Dr. Gray is licensed to practice dentistry in the
state of South Carolina, and is a limited partner and shareholder of several
family owned businesses in Beaufort, South Carolina. She is a member of the
South Carolina Dental Association, the American Dental Association, the
Carterett United Methodist Church, the Beaufort County Open Land Trust, and the
Historic Beaufort Foundation. Dr. Gray also is secretary and treasurer of the
Beaufort Dental Study Club.
DENNIS O. GREEN, CPA, Class I director and vice chairman of the board,
served as Chief Auditor for Citicorp, and its principal banking subsidiary,
Citibank N.A. in New York, New York from 1990 to 1997. Mr. Green is president of
Keiretsu Investments, Inc., a private investment company. He currently serves as
Treasurer Designate for Coastal Heritage Community Development Federal Credit
Union (proposed) on St. Helena Island, South Carolina. He graduated in 1967 from
Wayne State University with a degree in Business Administration/Finance. Mr.
Green has been registered as a Certified Public Accountant in the State of
Michigan since 1969. He is a director and vice president of The Olive Tree
Foundation, a member of the Board of Trustees of Penn Center, Inc., and a
director of the Boys and Girls Clubs of Beaufort.
MARK B. HELES, Class II director, is the owner, president, and chief
executive officer of Tempo Personnel Services, Inc. which he founded in 1985. He
is also a partner in the Magnolia Bakery and Cafe. Mr. Heles received his
license as a Certified Personnel Consultant in 1990 from the National
Association of Personnel Consultants. He graduated from the University of South
Carolina in 1976 with a Bachelor of Science degree in Business
Administration/Finance. Mr. Heles was former president of the Hilton Head Island
Rotary Club, and a past director of the Beaufort Chamber of Commerce. He
currently is a member of the Beaufort and Hilton Head Homebuilders Associations.
J. PHILLIP HODGES, JR., Class I director and secretary, manages KSH
Properties and KSH Properties, LLC, two investment companies. From 1972 until
his retirement in 1998, Mr. Hodges worked as a stockbroker for The
Robinson-Humphrey Company, LLC, a subsidiary of Salomon Smith Barney, in Albany,
Georgia, most recently as first vice president of sales. He received his Master
of Business Administration in
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<PAGE> 33
1978 from Valdosta State College, and a degree in Finance/Economics from Auburn
University in 1974. While working for Robinson-Humphrey, Mr. Hodges held
licenses with the National Association of Security Dealers, New York Stock
Exchange, American Stock Exchange, and Commodities Futures Trading Corporation.
He currently is a member of the Rotary Club of Beaufort, St. Helena's Episcopal
Church, and the Beaufort Historic Foundation.
JAMES W. HOLDEN, JR., DVM, Class III director, is a licensed veterinarian
in South Carolina and Georgia, and has been the owner and director of Holly Hall
Animal Hospital in Beaufort, South Carolina since 1986. Dr. Holden is also a
general partner and owner of James W. Holden & Co., LLP., a real estate
development company. He received his DVM from the University of Georgia in 1983,
and a degree in Pre-Veterinary Medicine from Clemson University in 1979. He is a
member of the Rotary Club of Beaufort where he served as a director, president,
vice president, and secretary.
LADSON F. HOWELL, Class I director and chairman of the board of directors,
is licensed to practice law in South Carolina and has been an attorney with
Howell, Gibson & Hughes, PA, a law firm located in Beaufort, South Carolina,
since 1968. He received his law degree from the University of South Carolina Law
School in 1968 and a degree in Journalism from the University of South Carolina
in 1965. Mr. Howell was a former president of the Beaufort County Bar
Association. He currently is a member of the South Carolina State Bar
Association, the American Bar Association, and the Administrative Board of
Carterett United Methodist Church.
JAMES C. KEY, Class III director, has been a partner with the Shenandoah
Group, LLP, an audit and control solutions business, in Beaufort, South Carolina
since 1997. He is licensed as a Certified Internal Auditor. Mr. Key served as a
director of the Internal Audit Department of IBM Corporation in Armonk, New York
from 1962 until 1997. He attended Virginia Tech and Roanoke College, and he
graduated from Syracuse University in 1991 with a degree in Liberal Studies. Mr.
Key served on the Board of Governors of the Institute of Internal Auditors,
Coastal Georgia Chapter.
RANDOLPH C. KOHN, Class I director, will serve as the president and chief
executive officer of Coastal Banking Company and Lowcountry National Bank. He
previously served as senior vice president and senior credit officer for Clemson
Bank & Trust, a community bank located in Clemson, South Carolina, from 1995
until March 1999. From 1991 to 1995, Mr. Kohn served as senior vice president
and senior credit officer of Citizens Bank, a community bank located in Canton,
Georgia. He has more than 28 years of banking experience in both Georgia and
South Carolina. He graduated from the University of Georgia in 1970 with a
degree in Business Management. While residing in Clemson, Mr. Kohn was a
director of the Clemson Chamber of Commerce, a director of the City of Clemson
Police Advisory Board, and a member of the Clemson Rotary Club.
RON LEWIS, Class III director, has been owner and operator of two
McDonald's franchises in Beaufort, South Carolina since 1990. He graduated from
the State University of New York, New York in 1961 with a Bachelor of Science
degree in Business/Economics. He is a member of the Board of Directors of the
Marine Institute, the Beaufort County Economic Development Commission, the
Mayor's Committee for the Disabilities, and president of the Greenville Black
McDonalds Owners Association.
CHARLIE T. LOVERING, will serve as senior vice president and chief
financial officer of Coastal Banking Company and Lowcountry National Bank. He
previously served as senior vice president and controller for Ameribank, N.A.,
in Savannah, Georgia from 1997 until August 1999. From May 1996 until July 1997,
Mr. Lovering served as assistant vice president and state compliance and
Community Reinvestment Act officer for SouthTrust Bank of South Carolina in
Charleston. From 1990 until 1996 he served as a senior audit officer for
SouthTrust Corporation. He has more than 14 years of banking experience
throughout the Southeast. He graduated from Auburn University in 1990 with a
degree in business administration and accounting. While working in South
Carolina, Mr. Lovering served on the South Carolina Bankers Association
Compliance Committee.
LILA N. MEEKS, Class II director, has been the Dean of Academic Affairs for
the University of South Carolina in Beaufort, South Carolina since 1994. She
graduated from Auburn University in 1962, and received
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<PAGE> 34
a Masters degree in English from Auburn in 1966. Ms. Meeks is a member of the
Beaufort County Open Land Trust, the Arts Council, the Beaufort County
Historical Society, the Historic Beaufort Foundation, and St. Helena's Episcopal
Church.
ROBERT B. PINKERTON, Class II director, has been the president and chief
executive officer of Athena Corporation, a manufacturer and installer of cast
polymer products, since 1990. Mr. Pinkerton served on the Advisory Board for
First Citizens Bank in Beaufort, South Carolina in 1998. He is also involved
with several real estate development companies in Beaufort. He received a law
degree from Wayne State University in 1976, a masters degree from the Chrysler
Institute of Engineering in 1967, and a degree in mechanical engineering from
the Detroit Institute of Technology in 1965. Mr. Pinkerton is a member of the
Rotary Club of Beaufort, the Greater Beaufort Chamber of Commerce, the
Homebuilders Association of the Lowcountry, the South Carolina Chamber of
Commerce, the Beaufort Roundtable, and the United Way of Beaufort County
Director's Circle. In addition, Mr. Pinkerton was named Greater Beaufort Chamber
of Commerce Business Person of the Year in 1998.
JOHN M. TRASK, III, Class II director, has been an owner of Lowcountry Real
Estate, a local real estate company, since 1996. He formerly owned and managed
Pikes Peak of Memphis, a wholesale florist company from 1991 until 1996. Mr.
Trask is active in the Beaufort business community and he has additional
ownership interests in several local businesses. He graduated from Vanderbilt
University with a Bachelor of Arts degree in 1987. Mr. Trask is a licensed real
estate broker in South Carolina. He serves on the Board of Directors of the Boys
and Girls Clubs of Beaufort, the Beaufort Board of Realtors, and the
Homebuilders of the Lowcountry.
MATT A. TRUMPS, Class III director, has been the owner of Tideland Realty,
a local real estate brokerage company, since 1994. He is also a director of
Greenwave Biotech in Beaufort, South Carolina. He was the director of admissions
at Beaufort Academy in Beaufort from 1992 to 1994. Mr. Trumps received a degree
in Political Science from the College of Charleston in 1991. He is a member of
St. Peter's Catholic Church.
EMPLOYMENT AGREEMENTS
We have entered into an employment agreement with Randy Kohn for a
five-year term, pursuant to which he will serve as the president, the chief
executive officer, and a director of Coastal Banking Company and Lowcountry
National Bank. Mr. Kohn will be paid an initial salary of $96,000, 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.
Kohn'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. Kohn 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. Kohn 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. Kohn'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 a
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. Kohn 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 Coastal Banking Company as
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<PAGE> 35
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 do not intend to pay directors' fees until the bank is profitable.
However, we reserve the right to pay directors' fees.
STOCK OPTION PLAN
After the offering, we expect to adopt a stock option plan which will
permit Coastal Banking Company to grant options to its officers, directors,
consultants, 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, including options granted to Mr. Kohn
under his employment agreement. We do not intend to issue stock options at less
than the fair market value of the common stock on the date of grant, or less
than $10.00 per share during the period ending 12 months after the date of this
offering.
STOCK WARRANTS
The organizers have invested significant time and effort to form Coastal
Banking Company and Lowcountry National Bank, and they have individually
guaranteed a $500,000 line of credit to the bank to cover organizational
expenses. In recognition of the financial risk and efforts they have undertaken
in organizing the bank, each organizer will 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 share purchased by that organizer in the
offering, up to an aggregate maximum for all organizers of 202,000 shares. The
warrants, which will be represented by separate warrant agreements, will vest
over a three year period beginning one year from the date of this prospectus and
will be exercisable in whole or in part during the ten year period following
that date. The shares issued pursuant to the exercise of such warrants will be
transferable, subject to compliance with applicable securities laws. If the
Office of the Comptroller of the Currency issues a capital directive or other
order requiring the bank to obtain additional capital, the warrants will be
forfeited if not immediately exercised.
The organizers plan to purchase 202,000 shares of common stock for a total
investment of $2,020,000. As a result, in the event we sell 725,000 shares of
common stock, the organizers will own approximately 27.86% of the common stock
outstanding upon completion of the offering, and shall have, and shall have in
the aggregate warrants to purchase an additional 202,000 shares. If each
organizer exercises his warrants in full, the organizers' ownership of Coastal
Banking Company will increase to 43.58% of the outstanding common stock.
Although they have not promised to do so, the organizers may purchase additional
shares in the offering, including up to 100% of the offering, provided that we
will not grant warrants to purchase more than a total of 202,000 shares. 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
Coastal Banking Company's articles of incorporation contain a provision
which, subject to certain limited exceptions, limits the liability of a director
for any breach of duty as a director. There is no limitation of liability for:
- a breach of duty involving appropriation of a business opportunity;
- an act or omission which involves intentional misconduct or a knowing
violation of law;
- any transaction from which the director derives an improper personal
benefit; or
- as to any payments of a dividend or any other type of distribution that
is illegal under Section 33-8-330 of the South Carolina Business
Corporation Act of 1988.
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<PAGE> 36
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.
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 no more favorable 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 to the bank than could be obtained from an unaffiliated third
party and to be approved by a majority of our disinterested directors.
PURCHASE OF BANK SITE
Two of our directors, John Trask, III and Matt Trumps, are licensed real
estate brokers and were involved as buyer's brokers in securing the contract for
the purchase of the proposed main office facility for $900,000. The listing
agreement provided for a 10% commission to be paid by the seller and split
evenly between the listing broker and the buyer's brokers. Mr. Trask and Mr.
Trumps have agreed that the portion of the brokerage commission payable to the
buyer's brokers, $45,000, will be credited to Lowcountry National Bank at
closing, which will reduce the total capital outlay by the Bank to consummate
the purchase.
DESCRIPTION OF CAPITAL STOCK OF COASTAL BANKING COMPANY
GENERAL
The authorized capital stock of Coastal Banking Company 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 Coastal Banking Company's capital stock. For a
detailed description of the provisions summarized below please see the articles
of incorporation of Coastal Banking Company filed as an exhibit to the
Registration Statement of which this prospectus forms a part.
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 10. 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 do not have 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
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<PAGE> 37
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
Coastal Banking Company's articles of incorporation provide that the board
of directors may, without the approval of the shareholders, authorize and issue
preferred stock in one or more classes or series with designations, powers,
preferences, and relative, participating, optional and other rights,
qualifications, limitations, and restrictions as the directors may determine,
including the dividend rate, conversion rights, voting rights, redemption price,
and liquidation preference. Any preferred stock so issued may rank senior to the
common stock with respect to the payment of dividends or amounts upon
liquidation, dissolution or winding-up, or both. In addition, any such shares of
preferred stock may have class or series voting rights. Upon completion of this
offering, we will not have any shares of preferred stock outstanding. Issuances
of preferred stock, while providing the company with flexibility in connection
with general corporate purposes, may, among other things, have an adverse effect
on the rights of holders of common stock (for example, the issuance of any
preferred stock with voting or conversion rights may adversely affect the voting
power of the holders of common stock), and in certain circumstances such
issuances could have the effect of decreasing the market price of the common
stock. Currently, we do not plan to issue any shares of preferred stock.
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.
Restriction on Bank Acquisition. Sections 34-25-50 and 34-25-240 of the
Code of Laws of South Carolina prohibit a company from acquiring Coastal Banking
Company or Lowcountry National Bank until the bank has been in existence and
continuous operation for five years.
Control Share Act. Coastal Banking Company has specifically elected to opt
out of a provision of South Carolina law which may deter or frustrate
unsolicited attempts to acquire certain 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 certain 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 Coastal Banking Company by means of a proxy contest, tender
offer, merger or otherwise, and thereby protect the continuity of the company's
management.
Number of Directors. The bylaws provide that the number of directors shall
be fixed from time to time by resolution by at least a majority of the directors
then in office, but may not consist of fewer than five nor more than 25 members.
Initially, we will have thirteen 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
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<PAGE> 38
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 thirteen
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
certain nomination requirements for an individual to be elected as a director,
including that the nominating party provide (i) notice that such party intends
to nominate the proposed director; (ii) the name of and certain biographical
information on the nominee; and (iii) a statement that the nominee has consented
to the nomination. The chairman of any shareholders' meeting may, for good cause
shown, waive the operation of these provisions. These provisions could reduce
the likelihood that a third party would nominate and elect individuals to serve
on the board of directors.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, we will have 725,000 shares of common
stock outstanding, or 833,750 shares if the underwriter exercises its
over-allotment option in full. 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 Coastal Banking Company, 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 and executive officers
will 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 Coastal
Banking Company pursuant to Rule 144 difficult if no trading market develops in
the common stock. Rule 144 also requires persons holding restricted securities
to hold the shares for at least one year prior to sale.
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UNDERWRITING
Pursuant to the terms and conditions of the Underwriting Agreement, the
underwriter named below has agreed to purchase from the Company the number of
shares of common stock set forth below.
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
UNDERWRITER FIRM SHARES OVER-ALLOTMENT SHARES
- ----------- ----------- ---------------------
<S> <C> <C>
Edgar M. Norris & Co., Inc.................................. 725,000 108,750
</TABLE>
Pursuant to the Underwriting Agreement, Coastal Banking Company has the
right to direct the underwriter to offer and sell up to 275,000 shares of the
common stock to the organizers, directors, and executive officers of Coastal
Banking Company, and to other investors recommended by the organizers, directors
and executive officers. The underwriting discount has been calculated on the
basis of a commission rate of 7.0% provided that there will be no underwriting
discount in connection with the sale of common stock actually purchased by the
directors, executive officers, and recommended investors. Coastal Banking
Company will pay to the underwriter a financial advisory fee of $95,000. If the
number of shares of common stock purchased by directors, executive officers, and
recommended investors is less that 275,000 shares, the financial advisory fee
will be equal to the amount determined by multiplying 95,000 by a fraction the
numerator of which is the total number of shares of common stock purchased by
directors, executive officers, and recommended investors and the denominator of
which is 275,000.
Pursuant to the Underwriting Agreement, Coastal Banking Company has agreed
to reimburse the underwriter for certain expenses, including (i) the fees and
expenses incident to securing the required review by the NASD of the terms of
the sale of the common stock in the offering, (ii) the fees and expenses of
counsel for the underwriter in connection with such review, (iii) the other fees
and expenses of counsel to the underwriter up to an amount of $40,000, and (iv)
all miscellaneous and travel fees and expenses of the underwriter and all
expenses of any information meetings associated with the sale of the common
stock.
The Underwriting Agreement provides that obligations of the underwriter are
subject to approval of certain legal matters by counsel and to various other
conditions customary in a firm commitment underwritten public offering,
including the absence of any material change in Coastal Banking Company's
business and the receipt of certain certificates, opinions, and letters from
Coastal Banking Company and its counsel and independent public accountant. 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 underwriter proposes to offer the shares of common stock directly to
the public at the public offering price set forth on the cover page of this
prospectus 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.
Coastal Banking Company has granted the underwriter an option, exercisable
within 30 days after the date of this prospectus, to purchase up to 108,750
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 7.0%
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.
Coastal Banking Company has 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.
Coastal Banking Company, and each of its directors, executive officers, and
organizers have agreed with the underwriter that they will not offer, 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
38
<PAGE> 40
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 Lowcountry National Bank in the ordinary course of business.
Coastal Banking Company has also agreed to pay the underwriter a financial
advisory fee of 2% of the amount received from any transaction completed by
Coastal Banking Company prior to the completion of this offering in which
Coastal Banking Company or its shareholders sells or agrees to sell more than
25% of its outstanding stock or more than 25% of its assets.
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for
Coastal Banking Company by Nelson Mullins Riley & Scarborough, L.L.P., Atlanta,
Georgia. Certain legal matters related to this offering will be passed upon for
the underwriter by Long Aldridge & Norman LLP, Atlanta, Georgia.
EXPERTS
Coastal Banking Company's financial statements dated August 24, 1999 and
for the period from September 29, 1998 (inception), until June 30, 1999 have
been audited by Tourville, Simpson & Henderson, L.L.P., as stated in their
report appearing elsewhere herein, and have been so included in reliance on the
report of 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 Coastal Banking Company, Lowcountry National
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
Coastal Banking Company.
We have filed or will file various applications with the Office of the
Comptroller of the Currency and the FDIC. You should only rely only on
information in this prospectus and in our related Registration Statement in
making an investment decision. Other available information may be 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. This
prospectus supersedes all other available information. 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. Coastal Banking Company and Lowcountry National 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.
39
<PAGE> 41
As a result of this offering, Coastal Banking Company 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
COASTAL BANKING COMPANY, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Accountants' Report............................. F-2
Financial Statements:
Balance Sheet as of June 30, 1999......................... F-3
Statement of Operations and Accumulated Deficit For the
Period September 29, 1998 to June 30, 1999............. F-4
Statement of Changes in Stockholders' Equity (deficit) For
the Period September 29, 1998 to June 30, 1999......... F-5
Statement of Cash Flows For the Period September 29, 1998
to June 30, 1999....................................... F-6
Notes to Financial Statements............................... F-7
</TABLE>
F-1
<PAGE> 43
INDEPENDENT ACCOUNTANTS' REPORT
To the Organizers
Coastal Banking Company, Inc.
We have audited the accompanying balance sheet of Coastal Banking Company,
Inc., (a Company in the development stage) as of June 30, 1999 and related
statements of operations and accumulated deficit, stockholders' equity and cash
flows for the period from inception September 29, 1998 to 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 Coastal Banking Company,
Inc., (a Company in the development stage) as of June 30, 1999, and the results
of its operations and its cash flows for the period from inception September 29,
1998 to June 30, 1999 in conformity with generally accepted accounting
principles.
/s/ WILLIAM E. TOURVILLE
--------------------------------------
William E. Tourville
Tourville, Simpson & Henderson, L.L.P.
Columbia, South Carolina
August 24, 1999
F-2
<PAGE> 44
COASTAL BANKING COMPANY, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
BALANCE SHEET
JUNE 30, 1999
<TABLE>
<S> <C>
ASSETS
Cash........................................................ $ 18,805
Premises and equipment...................................... 37,532
---------
Total assets...................................... $ 56,337
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Borrowings.................................................. $ 201,000
---------
STOCKHOLDERS' EQUITY
Common stock, par value $.01 per share; 10,000,000 shares
authorized; 10 shares issued and outstanding.............. --
Preferred stock -- 10,000,000 shares authorized and
unissued, par value $.01 per share........................ --
Paid-in-capital............................................. 100
Deficit accumulated in the development stage................ (144,763)
---------
Total stockholders' equity (deficit).............. (144,663)
---------
Total liabilities and stockholders' equity........ $ 56,337
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 45
COASTAL BANKING COMPANY, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
FOR THE PERIOD SEPTEMBER 29, 1998 (INCEPTION) TO JUNE 30, 1999
<TABLE>
<S> <C>
INCOME...................................................... $ --
---------
EXPENSES
Interest.................................................. 3,066
Salaries and employee benefits............................ 31,620
Consultant fees........................................... 75,855
Professional fees......................................... 5,166
Application fee........................................... 17,400
Other..................................................... 11,656
---------
Total expenses.................................... 144,763
---------
Net loss and accumulated deficit.................. $(144,763)
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 46
COASTAL BANKING COMPANY, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD SEPTEMBER 29, 1998 (INCEPTION) TO JUNE 30, 1999
<TABLE>
<CAPTION>
DEFICIT
COMMON STOCK ACCUMULATED IN
--------------- PAID-IN THE DEVELOP-
SHARES AMOUNT CAPITAL MENT STAGE TOTAL
------ ------ ------- -------------- ---------
<S> <C> <C> <C> <C> <C>
ISSUANCE OF COMMON STOCK....................... 10 $ -- $100 $ $ 100
Net loss for the period September 29, 1998 to
June 30, 1999................................ (144,763) (144,763)
----- ------ ---- --------- ---------
BALANCE, JUNE 30, 1999......................... 10 $ -- $100 $(144,763) $(144,663)
===== ====== ==== ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 47
COASTAL BANKING COMPANY, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENT OF CASH FLOWS
FOR THE PERIOD SEPTEMBER 29, 1998 (INCEPTION) TO JUNE 30, 1999
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss and accumulated deficit....................... $(144,763)
---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of premises and equipment.................. (37,532)
---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings.................................. 201,000
Issuance of common stock.................................. 100
---------
Cash provided by financing activities..................... 201,100
---------
CASH BALANCE AT END OF PERIOD............................... $ 18,805
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 48
COASTAL BANKING COMPANY, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Coastal Banking Company, Inc. (the Company) was formed to organize and own
all of the capital stock of Lowcountry National Bank (the Bank), a proposed
national bank to be located in Beaufort County, South Carolina, by a group of
thirteen individuals (the Organizers). Upon receipt of required regulatory
approvals, the proposed bank will engage in general banking. The Organizers have
filed applications with the Office of The Comptroller of the Currency to obtain
a national bank charter and with the Federal Deposit Insurance Corporation
(FDIC) for deposit insurance. Provided the necessary capital is raised and the
necessary regulatory approvals are received, it is expected that operations will
commence in the fourth quarter of 1999 or the first quarter of 2000. All of the
Organizers will serve on the initial board of directors.
The Company plans to raise a minimum of $7,250,000 by offering for sale
725,000 shares of its common stock. The organizers, directors, and members of
their immediate families expect to purchase a total of 202,000 shares at an
aggregate purchase price of approximately $2,020,000.
Organizational and Pre-Opening Costs
Activities since inception have consisted of organizational activities
necessary to obtain regulatory approvals and preparation activities to commence
business as a commercial bank. Organizational costs are primarily legal fees,
consulting fees, and application fees related to the incorporation and initial
organization of the Bank. Pre-opening costs are primarily employees' salaries
and benefits, temporary occupancy expense and other operational expenses related
to the preparation for the Bank's opening. The organizational and pre-opening
costs will be charged against the Bank's initial period's operating results.
It is estimated the Bank will incur approximately $407,000 in
organizational and pre-opening costs.
Offering Expenses
Offering expenses, consisting principally of direct incremental costs of
the public stock offering, will be deducted from the proceeds of the offering.
These expenses are estimated to be approximately $530,000.
NOTE 2 PREMISES AND EQUIPMENT
The Company has entered into a contract to purchase its proposed main
office facility for $900,000. As of June 30, 1999, $30,000 of the purchase price
had been paid with the balance being due on the closing date, which cannot be
later than January 22, 2000.
Two of the Company's directors, John Trask, III and Matt Trumps, are
licensed real estate brokers and were the buyer's agents in securing the
contract for the purchase of the office facility. They are to receive a $45,000
commission from the seller which will be credited to the Bank on the closing
date. This will reduce the Bank's investment in the proposed office facility to
$855,000.
NOTE 3 BORROWINGS
As of June 30, 1999, borrowings consist of $201,000 drawn on a $500,000
unsecured line of credit obtained from The Bankers' Bank of Atlanta, Georgia.
The Organizers have individually guaranteed the line of credit. Interest is
payable monthly, at the prime rate minus 1/2 percent, with the principal being
due on April 1, 2000. The line of credit is being used to fund the Bank's
organizational and pre-opening costs.
F-7
<PAGE> 49
COASTAL BANKING COMPANY, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS
NOTE 4 STOCKHOLDERS' EQUITY
Common stock
Coastal Banking Company, Inc. has the authority to issue up to 10,000,000
shares of voting common stock, par value $.01 per share.
Preferred stock
Coastal Banking Company, Inc. has the authority to issue up to 10,000,000
shares of preferred stock, par value $.01 per share. Also, Coastal Banking
Company, Inc. has the right to establish and designate from time to time any
part or all of the shares by filing an amendment to Coastal Banking Company,
Inc.'s Articles of Incorporation, which is effective without shareholder action,
in such series and with such preferences, limitations, and relative rights as
may be determined by the Board of Directors. The number of authorized shares of
preferred stock may be increased or decreased by the affirmative vote of the
holders of the majority of the shares of common stock, without a vote of the
holders of the shares of preferred stock.
Cumulative voting rights
Coastal Banking Company, Inc. has elected not to have cumulative voting,
and no shares issued by Coastal Banking Company, Inc. may be cumulatively voted.
Preemptive rights
The stockholders of Coastal Banking Company, Inc. shall not have any
preemptive rights regarding any issuance of Coastal Banking Company, Inc.'s
capital stock.
Stock Offering
Upon receiving preliminary regulatory approvals, the Company, through its
underwriter, Edgar M. Norris & Co., Inc., plans to offer for sale to the general
public 725,000 shares of $.01 par value common stock at an offering price of
$10.00 per share. Edgar M. Norris has the right to exercise its over-allotment
option to purchase up to an additional 108,750 shares of common stock at $10.00
per share, less its discount of $.70 per share, and offer these shares to the
public. The total aggregate amount that is anticipated to be raised from the
public stock offering is $7,250,000, or $8,337,500 in the event the underwriter
exercises its over-allotment. The Organizers intend to purchase an aggregate of
202,000 shares of common stock to be sold in the offering which represent 27.86%
of the offering. The Organizers will receive one stock warrant for each share of
common stock purchased in the offering, provided that they may not receive more
than a total of 202,000 shares. The exercise price for the warrants will be
$10.00 per share and may be exercised over a ten (10) year period. The warrants
will be subject to certain conditions and limitations.
NOTE 5 STOCK OPTIONS
The Company has entered into an agreement with a consultant to assist with
the formation of the Bank. As part of the consultant's fee, he was granted
options to purchase 10,000 shares of the Company's common stock for $10 per
share. The options are for a ten year period beginning with the date of the
public stock offering referred to in Note 4 above.
F-8
<PAGE> 50
COASTAL BANKING COMPANY, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS
NOTE 6 INCOME TAXES
As of June 30, 1999, Coastal Banking Company, Inc. had a net operating loss
carryforward of $144,763.
There was no provision (benefit) for income taxes for the period from
September 29, 1998 to June 30, 1999, since a 100% valuation reserve is being
maintained for the net operating loss carryforward.
NOTE 7 EMPLOYMENT CONTRACT
Coastal Banking Company, Inc. has entered into a five-year employment
contract with its President beginning August 12, 1999. Subject to certain
conditions, at the end of each year of the contract, the contract shall be
extended for an additional year so that the remaining term of the contract shall
continue to be five years. The contract provides that the President will receive
an initial annual salary of $96,000, and shall receive a minimum annual increase
equal to the increase in the Consumer Price Index.
The contract provides that the President shall receive a $10,000 cash bonus
on the date the Bank opens for business and shall be eligible to receive an
annual cash bonus not to exceed 5% of the Bank's pretax income if the Bank
achieves certain performance levels established by the board of directors.
Additionally, the President will receive other benefits including being
eligible for the grant of stock options. Upon the adoption of a stock option
plan the President will be granted the option to purchase 5% of the Company's
common stock sold in the stock offering.
NOTE 8 DATA PROCESSING
Like many financial institutions, Coastal Banking Company, Inc. will rely
upon computers for the daily conduct of its business and for information
processing. There is concern among industry experts that on January 1, 2000
computers will be unable to "read" the new year and there may be widespread
computer malfunctions. Generally, Coastal Banking Company, Inc. will be relying
on software and hardware developed by independent third parties for its
information systems.
Presently, the Company is in the process of evaluating various options for
data processing and has not entered into any agreements for the purchase of
software or hardware. Management intends to take all necessary precautions to
ensure that the information systems it acquires will be Year 2000 compliant.
F-9
<PAGE> 51
- ------------------------------------------------------
- ------------------------------------------------------
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.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary............................... 3
Risk Factors.......................... 6
Use of Proceeds....................... 10
Capitalization........................ 12
Dividend Policy....................... 12
Management's Discussion and Analysis
of Financial Condition and Plan of
Operation........................... 13
Proposed Business..................... 16
Supervision and Regulation............ 23
Certain Relationships and Related
Transactions........................ 35
Description of Capital Stock.......... 35
Underwriting.......................... 38
Legal Matters......................... 39
Experts............................... 39
Additional Information................ 39
Index to Financial Statements......... F-1
</TABLE>
---------------------
UNTIL , ALL DEALERS THAT EFFECT TRANSACTION 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.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
725,000 SHARES
COASTAL BANKING
COMPANY, INC.
A PROPOSED BANK HOLDING
COMPANY FOR
LOWCOUNTRY NATIONAL BANK
(PROPOSED)
COMMON STOCK
--------------------
PROSPECTUS
--------------------
EDGAR M. NORRIS & CO., INC.
, 1999
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 52
PART II
INDEMNIFICATION OF DIRECTORS AND OFFICERS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Coastal Banking Company's articles of incorporation contain a provision
which, subject to certain limited exceptions, limits the liability of a director
to Coastal Banking Company or its shareholders for any breach of duty as a
director. There is no limitation of liability for: a breach of duty involving
appropriation of a business opportunity of Coastal Banking Company; an act or
omission which involves intentional misconduct or a knowing violation of law;
any transaction from which the director derives an improper personal benefit; or
as to any payments of a dividend or any other type of distribution that is
illegal under Section 33-8-330 of the South Carolina Business Corporation Act of
1988 (The "Corporation Act"). In addition, if at any time the Corporation Act
shall have been amended to authorize further elimination or limitation of the
liability of director, then the liability of each director of Coastal Banking
Company shall be eliminated or limited to the fullest extent permitted by such
provisions, as so amended, without further action by the shareholders, unless
the provisions of the Corporation Act require such action. The provision does
not limit the right of Coastal Banking Company or its shareholders to seek
injunctive or other equitable relief not involving payments in the nature of
monetary damages.
Coastal Banking Company's bylaws contain certain provisions which provide
that the company shall indemnify directors to the maximum extent provided by
South Carolina law. This protection is broader than the protection expressly
mandated in Sections 33-8-510 and 33-8-520 of the South Carolina Business
Corporation Act. These statutory sections provide that a company shall indemnify
a director or an officer only to the extent that he has been wholly successful,
on the merits or otherwise, in the defense of any action or proceeding brought
by reason of the fact that the person was a director or officer. This
requirement would include indemnifying directors against expenses, including
attorney's fees, actually and reasonably incurred in connection with the matter.
In addition to this mandatory indemnification right, our bylaws provide
additional mandatory protection that includes, but is not limited to, situations
where the director (a) conducted himself in good faith, (b) reasonably believed
that conduct in his official capacity with the corporation was either in the
corporation's best interest or was not opposed to the best interest of the
corporation; and (c) that he had no reasonable cause to believe his conduct was
unlawful.
Our board of directors also has the authority to extend to officers,
employees, and agents the same indemnification rights held by directors, subject
to all of the accompanying conditions and obligations. The board of directors
intends to extend indemnification rights to all of its executive officers.
The Securities and Exchange Commission has informed us that indemnification
for officers, directors, and controlling persons for liabilities arising under
the Securities Act of 1933 is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable.
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> 53
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Estimated expenses (other than underwriting commissions) of the sale of the
shares of common stock are as follows:
<TABLE>
<S> <C>
Registration Fee............................................ $ 2,318
NASD Filing Fee............................................. 1,334
Printing and Engraving...................................... 30,000
Legal Fees and Expenses..................................... 50,000
Accounting Fees............................................. 5,000
Blue Sky Fees and Expenses.................................. 15,000
Miscellaneous Disbursements................................. 16,348
--------
TOTAL............................................. $120,000
========
</TABLE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
From inception, Coastal Banking Company has issued a total of ten 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.
II-2
<PAGE> 54
ITEM 27. EXHIBITS.
<TABLE>
<C> <C> <S>
1.1 -- Form of underwriting Agreement between Coastal Banking
Company and Edgar M. Norris & Co., Inc.
3.1 -- Articles of Incorporation
3.2 -- Amended and Restated Articles of Incorporation
3.3 -- Bylaws
4.1 -- See Exhibits 3.1, 3.2 and 3.3 for provisions in Coastal
Banking Company's Articles of Incorporation and Bylaws
defining the rights of holders of the common stock
4.2 -- Form of certificate of common stock
5.1 -- Opinion Regarding Legality
10.1 -- Employment Agreement dated August 12, 1999 between Coastal
Banking Company and Randolph C. Kohn
10.2 -- Purchase and Sale Agreement dated February 2, 1999 between
Lowcountry National Bank and Sterling Graydon and Helene
Dowling.
10.3 -- Line of Credit Agreement with The Banker's Bank dated April
1, 1999.
10.4* -- Data Processing Services Agreement dated
, 1999 between Coastal Banking Company
and
10.5 -- Form of Stock Warrant Agreement
23.1 -- Consent of Independent Public Accountants
23.2 -- Consent of Nelson Mullins Riley & Scarborough, L.L.P.
(appears in its opinion filed as Exhibit 5.1)
24.1 -- Power of Attorney (filed as part of the signature page to
the Registration Statement)
27.1* -- Financial Data Schedule (for electronic filing purposes)
</TABLE>
- ---------------
* To be filed by Amendment
ITEM 28. UNDERTAKINGS.
The undersigned Company will:
(a)(1) File, during any period in which it offers or sells securities,
a post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement; and
(iii) Include any additional or changed material information on the
plan of distribution.
(2) For determining liability under the Securities Act of 1933, treat
each post-effective amendment as a new registration statement of the
securities offered, and the offering of the securities at that time to be
the initial bona fide offering.
(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers
and controlling persons of Coastal Banking Company pursuant to the
provisions described in Item 24 above, or otherwise, Coastal Banking
Company 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.
II-3
<PAGE> 55
If a claim for indemnification against such liabilities (other than the
payment by Coastal Banking Company of expenses incurred or paid by a director,
officer or controlling person of Coastal Banking Company in the successful
defense of any action, suit, or proceeding) is asserted by such director,
officer, or controlling person in connection with the securities being
registered, Coastal Banking Company will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
II-4
<PAGE> 56
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 Beaufort, State of South
Carolina, on August 30, 1999.
COASTAL BANKING COMPANY, INC.
By: /s/ RANDOLPH C. KOHN
------------------------------------
Randolph C. Kohn
President and Chief Executive
Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Randolph C. Kohn 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
--------- ----- ----
<C> <S> <C>
/s/ MARJORIE TRASK GRAY Director August 30, 1999
- -----------------------------------------------------
Marjorie Trask Gray, DMD
Director
- -----------------------------------------------------
Dennis O. Green, CPA
Director
- -----------------------------------------------------
Mark B. Heles
/s/ J. PHILLIP HODGES, JR. Director August 30, 1999
- -----------------------------------------------------
J. Phillip Hodges, Jr.
/s/ JAMES W. HOLDEN, JR., DVM Director August 30, 1999
- -----------------------------------------------------
James W. Holden, Jr., DVM
/s/ LADSON F. HOWELL Director, Chairman of the Board August 30, 1999
- -----------------------------------------------------
Ladson F. Howell
Director
- -----------------------------------------------------
James C. Key
</TABLE>
II-5
<PAGE> 57
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ RANDOLPH C. KOHN Director, President and Chief August 30, 1999
- ----------------------------------------------------- Executive Officer (principal
Randolph C. Kohn executive officer)
/s/ RON LEWIS Director August 30, 1999
- -----------------------------------------------------
Ron Lewis
/s/ CHARLIE T. LOVERING Chief Financial Officer August 30, 1999
- ----------------------------------------------------- (principal financial and
Charlie T. Lovering accounting officer)
Director
- -----------------------------------------------------
Lila N. Meeks
/s/ ROBERT B. PINKERTON Director August 30, 1999
- -----------------------------------------------------
Robert B. Pinkerton
Director
- -----------------------------------------------------
John M. Trask, III
Director
- -----------------------------------------------------
Matt A. Trumps
</TABLE>
II-6
<PAGE> 58
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ------- ----------- ----
<S> <C> <C> <C>
1.1 -- Form of underwriting agreement between Coastal Banking
Company and Edgar M. Norris & Co., Inc......................
3.1 -- Articles of Incorporation...................................
3.2 -- Amended and Restated Articles of Incorporation..............
3.3 -- Bylaws......................................................
4.1 -- See Exhibits 3.1, 3.2 and 3.3 for provisions in Coastal
Banking Company's Articles of Incorporation and Bylaws
defining the rights of holders of the common stock..........
4.2 -- Form of certificate of common stock.........................
5.1 -- Opinion Regarding Legality..................................
10.1 -- Employment Agreement dated August 12, 1999 between Coastal
Banking Company and Randolph C. Kohn........................
10.2 -- Purchase and Sale Agreement dated February 2, 1999 between
Lowcountry National Bank and Sterling Graydon and Helene
Dowling.....................................................
10.3 -- Line of Credit Agreement with The Banker's Bank dated April
1, 1999.....................................................
10.4* -- Data Processing Services Agreement dated ,
1999 between Coastal Banking Company and .....
10.5 -- Form of Stock Warrant Agreement.............................
23.1 -- Consent of Independent Public Accountants...................
23.2 -- Consent of Nelson Mullins Riley & Scarborough, L.L.P.
(appears in its opinion filed as Exhibit 5.1)...............
24.1 -- Power of Attorney (filed as part of the signature page to
the Registration Statement).................................
27.1* -- Financial Data Schedule (for electronic filing purposes)....
</TABLE>
- ---------------
* To be filed by Amendment
<PAGE> 1
EXHIBIT 1.1
725,000 SHARES
COASTAL BANKING COMPANY, INC.
COMMON STOCK
---------------------------
FORM OF
UNDERWRITING AGREEMENT
August ___, 1999
EDGAR M. NORRIS & CO., INC.
15 South Main Street, Suite 810
Post Office Box 247
Greenville, South Carolina 29602
Ladies and Gentlemen:
Coastal Banking Company, Inc., a South Carolina corporation (the
"Company"), proposes, subject to the terms and conditions stated herein, to
issue and sell to Edgar M. Norris & Co., Inc. (the "Underwriter") an aggregate
of 725,000 shares (the "Firm Shares") of Common Stock, par value $.01 per share,
of the Company (the "Common Stock"), and, at the election of the Underwriter, up
to 108,750 additional shares (the "Additional Shares") of Common Stock to cover
over-allotments. The Firm Shares and the Additional Shares which the Underwriter
elects to purchase pursuant to Section 1 hereof collectively are called the
"Shares."
1. Purchase and Sale of the Shares.
(a) Subject to the terms and conditions set forth herein
and on the basis of the representations, warranties, covenants and agreements
herein contained, the Company agrees to sell to the Underwriter, and the
Underwriter agrees to purchase from the Company the Firm Shares at a purchase
price per share of $9.30, which represents a gross underwriting discount of
seven percent (7.0%) of the offering price of the securities (the "Underwriting
Discount").
Subject to the terms and conditions set forth herein, the Company shall
have the right to direct the Underwriter, subject to the Underwriter's receipt
of approval from the National Association of Securities Dealers, Inc. (the
"NASD"), to offer and sell up to 275,000 of the Firm Shares (the "Directed
Shares") to the Directors and officers of the Company and Lowcountry National
Bank, a federally chartered national bank (in organization) and a proposed
wholly-owned subsidiary of the Company (the "Bank"), and to certain other
investors identified by the Directors and officers set forth in Schedule I
hereto (the "Named Investors"). Notwithstanding the first paragraph of this
Section 1(a) and subject to the terms and conditions set forth herein and on the
basis of the representations, warranties, covenants and agreements herein
contained, there shall be
1
<PAGE> 2
no Underwriting Discount in connection with the sale of Directed Shares actually
purchased by the Named Investors. As a result, the purchase price per share
payable by the Underwriter to the Company for the Directed Shares actually
purchased by the Named Investors shall be $10.00 per share. The Underwriting
Discount shall apply with respect to any Directed Shares that are not purchased
by a Named Investor such that the purchase price payable by the Underwriter to
the Company for such shares shall be $9.30. The Company shall pay to the
Underwriter a financial advisory fee of $95,000; provided, however, that if the
number of Directed Shares purchased by the Named Investors is less than 275,000
shares, the financial advisory fee will be equal to an amount determined by
multiplying $95,000 by a fraction the numerator of which is the total number of
Directed Shares purchased by Named Investors and the denominator of which is
275,000.
(b) Subject to the terms and conditions set forth herein
and on the basis of the representations, warranties, covenants and agreements
herein contained, the Company hereby grants to the Underwriter the right to
purchase, exercisable in whole or in part from time to time at the Underwriter's
election, up to 108,750 Additional Shares at the purchase price per share set
forth in the first paragraph of Section 1(a) above ($9.30 per share), for the
sole purpose of covering over-allotments in the sale of the Firm Shares. Any
such election to purchase Additional Shares may be exercised in whole or in part
at any time and from time to time by written notice from the Underwriter to the
Company given prior to 9:00 p.m., Greenville, South Carolina time, on the 30th
day after the date of the Prospectus (as defined in Section 4 herein) (or, if
such 30th day shall be a Saturday or Sunday or a holiday, on the next business
day thereafter when the New York Stock Exchange is open for trading) and setting
forth the aggregate number of Additional Shares to be purchased and the date on
which such Additional Shares are to be delivered, as determined by the
Underwriter but in no event earlier than the Closing Date (as hereinafter
defined) or, unless the Underwriter and the Company otherwise agree in writing,
earlier than two or later than five business days after the date of such notice.
The Underwriter shall have no obligation to purchase Additional Shares prior to
the exercise of such option to purchase.
2. Offering by the Underwriter. Upon the authorization by the
Underwriter of the release of the Firm Shares after the Registration Statement
(as hereinafter defined) becomes effective, the Underwriter proposes to offer
the Firm Shares and the Additional Shares, if any, for sale upon the terms and
conditions set forth in the Prospectus (as hereinafter defined).
3. Delivery of the Shares and Payment Therefor. Delivery to the
Underwriter of and payment for the Firm Shares shall be made at the office of
Long Aldridge & Norman LLP, 303 Peachtree Street, Suite 5300, Atlanta, Georgia,
at 10:00 A.M., Atlanta, Georgia time, on _________ ___, 1999 (the "Closing
Date"). The place of closing for the Firm Shares and the Closing Date may be
varied by agreement between the Underwriter and the Company.
Delivery to the Underwriter of and payment for any Additional Shares to
be purchased by the Underwriter shall be made at the aforementioned office of
Long Aldridge & Norman LLP at such time and on such date (the "Option Closing
Date"), which may be the same as the Closing Date but shall in no event be
earlier than the Closing Date nor earlier than two nor later than ten business
days after the giving of the notice hereinafter referred to, as shall be
specified in a written notice from the Underwriter to the Company of the
Underwriter's determination to purchase a number, specified in such notice, of
Additional Shares. The place of closing for any Additional Shares and the Option
Closing Date for such Shares may be varied by agreement between the Underwriter
and the Company.
-2-
<PAGE> 3
Certificates for the Firm Shares and for any Additional Shares to be
purchased hereunder shall be registered in such names and in such denominations
as the Underwriter shall request prior to 9:30 A.M., Greenville, South Carolina
time, on the second business day preceding the Closing Date or any Option
Closing Date, as the case may be. Such certificates shall be made available to
the Underwriter in Greenville, South Carolina for inspection and packaging not
later than 9:30 A.M., Greenville, South Carolina time, on the business day next
preceding the Closing Date or the Option Closing Date, as the case may be. The
certificates evidencing the Firm Shares and any Additional Shares to be
purchased hereunder shall be delivered to the Underwriter on the Closing Date or
the Option Closing Date, as the case may be, against payment of the purchase
price therefor by certified or official bank check or checks, payable to the
order of the Company in next day available funds or by wire transfer to the
account of the Company.
4. Representations and Warranties of the Company.
The Company represents and warrants to, and agrees with, the
Underwriter that:
(a)(i) The Company meets the requirements for use of Form
SB-2 under the Securities Act of 1933, as amended (the "Act"), and the rules and
regulations of the Securities and Exchange Commission (the "Commission")
promulgated under the Act (collectively referred to as the "Rules and
Regulations") and has prepared and filed with the Commission a registration
statement relating to the Shares on Form SB-2 (No. 333-[___________]), including
the related preliminary prospectus, and such amendments to the registration
statement as may have been required to the date of this Agreement for the
registration of the Shares under the Act. Such registration statement (including
all financial statements, schedules and exhibits and (A) all information
contained in the form of final Prospectus filed with the Commission pursuant to
Rule 424(b) of the Rules and Regulations and deemed by Rule 430A of the Rules
and Regulations to be part of the Registration Statement at the time it was
declared effective and (B) all documents incorporated by reference or deemed
incorporated by reference in the Prospectus contained in the Registration
Statement at the time such Registration Statement became effective), as amended
at the time it becomes effective and as thereafter amended by any post-effective
amendment, is referred to in this Agreement as the "Registration Statement." The
prospectus in the form included in the Registration Statement or, if the
prospectus included in the Registration Statement omits information in reliance
upon Rule 430A of the Rules and Regulations and such information is included in
a prospectus filed with the Commission pursuant to Rule 424(b) of the Rules and
Regulations or as part of a post-effective amendment to the Registration
Statement, the prospectus, as so filed, is referred to in this Agreement as the
"Prospectus." The term "Preliminary Prospectus" as used herein means a
preliminary prospectus as contemplated by Rule 430 or Rule 430A of the Rules and
Regulations included at any time as part of the Registration Statement.
(ii) If the Registration Statement has not become
effective, a further amendment to such Registration Statement, including a form
of final Prospectus, necessary to permit such Registration Statement to become
effective will be filed promptly by the Company with the Commission. If such
Registration Statement has become effective, a final Prospectus containing
information permitted to be omitted at the time of effectiveness by Rule 430A of
the Rules and Regulations will be filed promptly by the Company with the
Commission in accordance with Rule 424(b) of the Rules and Regulations. Copies
of each document with respect to such Registration Statement filed with the
Commission have been delivered to the Underwriter and no stop order suspending
the effectiveness of such Registration Statement has been issued and no
proceeding for that purpose has been instituted or threatened by the Commission.
-3-
<PAGE> 4
(b) No order preventing or suspending the use of any
Preliminary Prospectus has been issued by the Commission or any other state or
federal governmental agency, and each Preliminary Prospectus, at the time of
filing thereof, conformed in all material respects to the requirements of the
Act and the Rules and Regulations, and did not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, 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 the Underwriter expressly for use therein. The Company acknowledges
that the statements relating to the Underwriter and the underwriting
arrangements set forth under the heading "Underwriting" in the Prospectus
constitute the only information relating to the Underwriter furnished in writing
to the Company by the Underwriter expressly for inclusion in the Registration
Statement (herein referred to as "Underwriter Information").
(c) On the date when the Registration Statement shall
become or became, as the case may be, effective (the "Effective Date"), when the
Prospectus is first filed pursuant to Rule 424(b) of the Rules and Regulations,
when any amendment to the Registration Statement becomes effective, when any
supplement to the Prospectus is filed with the Commission and at each of the
Closing Date and the Option Closing Date, (A) the Registration Statement, the
Prospectus and any amendments thereof and supplements thereto, including the
financial statements and schedules included or incorporated by reference in the
Prospectus or the Registration Statement, did or will conform in all material
respects to the requirements of the Act and the Rules and Regulations and to the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
and regulations of the Commission under the Exchange Act (the "Exchange Act
Rules and Regulations") and (B) neither the Registration Statement nor the
Prospectus or any amendment thereof or supplement thereto, including the
financial statements and schedules included or incorporated by reference in the
Prospectus or the Registration Statement, did or will contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, 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 Underwriter Information.
All contracts and other documents required to be described in the Registration
Statement or the Prospectus or to be filed as exhibits to the Registration
Statement have been described in the Registration Statement or the Prospectus or
filed as exhibits to, or incorporated by reference in, the Registration
Statement, as required by the Act or the Rules and Regulations.
(d) Each document incorporated or deemed incorporated by
reference into the Prospectus or the Registration Statement, at the time it or
any amendment thereto was or hereafter is filed with the Commission, complied or
will comply, as the case may be, with the requirements of the Act or the
Exchange Act, as applicable, and the Rules and Regulations and the Exchange Act
Rules and Regulations, and when read together with the other information in the
Prospectus at each time the Registration Statement and each time any
post-effective amendment to the Registration Statement was or hereafter is
declared effective, during the time a Prospectus is required to be delivered by
the Act and at the Closing Date and Option Closing Date, did not or will not, as
the case may be, contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(e) Neither the Company nor the Bank has sustained,
directly or indirectly, since the date of its latest financial statements
included or incorporated by reference in the Registration Statement, any
material loss or interference with its business from fire, explosion, flood,
hurricane, accident or other
-4-
<PAGE> 5
calamity, whether or not covered by insurance, or from any labor dispute or
arbitrators' or court or governmental or regulatory action, order or decree,
otherwise than as set forth or contemplated in the Prospectus. Since the
respective dates as of which information is given in the Registration Statement
and the Prospectus, there has not been, and prior to the Closing Date and Option
Closing Date there will not be, any change in the capital stock or long-term
debt or short-term debt of the Company or the Bank, or any material adverse
change, or any development involving a prospective material adverse change, in
or affecting the general affairs, management, financial position, shareholders'
equity, assets or results of operations of the Company or the Bank, otherwise
than as set forth or contemplated in the Prospectus, whether or not arising in
the ordinary course of business. Except as disclosed in or contemplated by the
Prospectus, neither the Company nor the Bank has incurred or undertaken, and
prior to the Closing Date and Option Closing Date will not incur or undertake,
any liability or obligation, direct, indirect or contingent, not disclosed in
the Registration Statement or Prospectus which is material to the business or
condition (financial or other) of the Company or the Bank, except for
liabilities or obligations incurred in the ordinary course of business; and,
except as disclosed in or contemplated by the Registration Statement or the
Prospectus, the Company has not declared or paid, and prior to the Closing Date
and Option Closing Date will not declare or pay, any dividend on its capital
stock.
(f) The audited and unaudited financial statements and
schedules (including the related notes) of the Company and the Bank included or
incorporated by reference in the Registration Statement or the Prospectus
present fairly the consolidated financial condition of the Company and the Bank
as of the dates indicated and the consolidated results of their respective
operations, changes in shareholders' equity and cash flows for the periods
specified. Such financial statements, schedules and related notes have been
prepared in conformity with generally accepted accounting principles applied on
a consistent basis throughout the periods involved. The supporting schedules
included or incorporated by reference in the Registration Statement and the
summary and selected financial data and other financial and statistical
information set forth or incorporated by reference in the Prospectus present
fairly the information shown therein and have been derived from, and are
consistent with, the audited and unaudited consolidated financial statements
included or incorporated by reference in the Registration Statement and the
Prospectus. The financial statements and schedules (including the related notes)
included or incorporated by reference in the Registration Statement or the
Prospectus, conform to the requirements of Regulation S-X of the Commission
applicable thereto and present fairly the information shown therein for the
periods reflected. The statistical information required by Securities Act
Industry Guides, Guide 3 (Statistical Disclosure by Bank Holding Companies) of
the Commission to be included or incorporated by reference in the Registration
Statement and the Prospectus present fairly the information set forth therein,
are in compliance with the Act, the Rules and Regulations and such Industry
Guide 3, and are consistent with the respective financial statements of the
Company and the Bank set forth or incorporated by reference in the Registration
Statement and the Prospectus.
(g) Each of the Company and the Bank has good and
marketable title in fee simple to all real property and good and marketable
title to all personal property owned by it, in each case free and clear of all
liens, encumbrances, claims, security interests, restrictions and defects except
such as are described in the Prospectus or such as do not materially affect the
operations of the Company or the Bank, as the case may be, or do not materially
affect the value of such property or materially interfere with the use made and
purpose of such property. 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 not material and do not interfere with the use made
and proposed to be made of such property and buildings, and no default has
occurred or is continuing under such leases that might result in any material
adverse change in the condition (financial or otherwise), business, properties,
net worth, results of operations, prospects or management of the Company
-5-
<PAGE> 6
or the Bank. The only subsidiary (as defined in the Rules and Regulations) of
the Company is the Bank. The Company owns directly all of the outstanding
capital stock of the Bank; and except for the capital stock of the Bank and as
disclosed in the financial statements of the Company included in the
Registration Statement, the Company does not own, directly or indirectly, any
shares of stock or any other equity or long-term debt securities of any
corporation or have any equity interest in any firm or other entity.
(h) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of South
Carolina, with full power and authority (corporate and other) to own or lease
its properties and assets, and conduct its business as described in the
Prospectus, and has been duly qualified as a foreign corporation for the
transaction of business and is in good standing as a foreign corporation under
the laws of each other jurisdiction in which it owns or leases properties, or
conducts any business, so as to require such qualification, except where the
failure to so qualify would not have a material adverse effect on the condition
(financial or otherwise), business, properties, net worth, results of
operations, prospects or management of the Company. The Company is duly
registered as a "bank holding company" under the Bank Holding Company Act of
1956, as amended (the "BHC Act"), and is in good standing and in full compliance
with the BHC Act and the rules and regulations thereunder. The Bank (i) is duly
incorporated, duly organized, validly existing and in good standing as a
national bank under the laws of the United States, (ii) is a member in good
standing of the Federal Reserve System and the Bank Insurance Fund of the
Federal Deposit Insurance Corporation ("FDIC"), (iii) is duly authorized and has
full power and authority to conduct a general banking business in accordance
with its Charter and as described or incorporated by reference in the
Registration Statement, subject to supervision by appropriate federal and state
regulatory agencies, (iv) has full power and authority to own, lease and operate
its properties and assets and conduct its business as described or incorporated
by reference in the Prospectus and (v) is not required to be licensed or
qualified to do business as a foreign corporation in any jurisdiction. Complete
and correct copies of the Articles of Incorporation, Charter and bylaws of the
Company and the Bank, and all amendments thereto have been delivered to the
Underwriter.
(i) The Company has an authorized, issued and outstanding
capitalization as set forth in the Prospectus, and all the issued shares of
capital stock of the Company have been duly authorized and validly issued, are
fully paid and non-assessable, are not subject to any preemptive or similar
rights and conform to the description of the capital stock contained in the
Prospectus. None of the issued shares of the capital stock of the Company has
been issued in violation of any preemptive or similar rights (contractual or
other). All shares of capital stock of the Company that are subject to
outstanding options or warrants, if any, have been duly authorized and, when
issued in accordance with the terms of the applicable option or warrant, will be
validly issued, fully paid and non-assessable and will not be issued in
violation of any preemptive or similar rights (contractual or other). There is
no outstanding option, warrant or other right calling for the issuance of, and
no commitment, plan or arrangement to issue, any shares of capital stock of the
Company or any security convertible into or exchangeable for capital stock of
the Company, except as disclosed in the Registration Statement and the
Prospectus.
(j) The Shares have been duly authorized and, when issued
and delivered against payment therefor as provided herein, will be validly
issued, fully paid and non-assessable and free of preemptive or similar rights
and will conform to the description of the Common Stock contained in the
Prospectus. The Underwriter will receive good and marketable title to the Shares
to be issued and delivered by the Company hereunder, free and clear of all
liens, encumbrances, claims, security interests, restrictions, preemptive
rights, shareholders' agreements and voting trusts other than those that may be
or might have been created by the Underwriter.
-6-
<PAGE> 7
(k) All offers and sales of the Company's capital stock
or other securities prior to the date hereof were at all relevant times duly
registered under the Act and all applicable state securities or "Blue Sky" laws
or were the subject of an available exemption from the registration requirements
of the Act and all applicable state securities or "Blue Sky" laws.
(l) Neither the Company nor the Bank is, nor with the
giving of notice of passage of time or both would be, (i) in violation of any
provision of its respective Articles of Incorporation or Charter, as the case
may be, or its bylaws or any law, administrative rule or regulation or
arbitrators' or administrative or court decree, judgment or order, (ii) in
violation or default (there being no existing state of facts which with notice
or lapse of time or both would constitute a default) in the performance or
observance of any obligation, agreement, covenant or condition contained in any
contract, indenture, deed of trust, mortgage, loan agreement, note, lease,
agreement or other instrument or franchise or permit to which the Company or the
Bank is a party or by which the Company or the Bank or any of their properties
or assets is or may be bound, (iii) in violation of any judgment, ruling,
decree, order, franchise, license or permit or any statute, rule or regulation
of any court or other governmental authority applicable to the business or
properties of the Company or the Bank, including, without limitation, all
statutes, rules and regulations relating to environmental protection, and the
statutes, rules and regulations of any state or other jurisdiction in which the
Company or the Bank does business, in each case together with the rules and
regulations promulgated thereunder and related thereto, other than any
violations or defaults which, in the aggregate, will not have a material adverse
effect upon the condition (financial or otherwise), business, properties, net
worth, results of operations, prospects or management of the Company or the
Bank. The execution and delivery of this Agreement, the issue and sale of the
Shares and the consummation of the transactions contemplated hereby will not
conflict with or constitute a breach of, or default under, or result in the
creation or imposition of any lien, charge or encumbrance upon any property or
assets of the Company or the Bank pursuant to any contract, indenture, mortgage,
deed of trust, loan agreement, note, lease, agreement or other instrument to
which the Company or the Bank is a party or by which the Company or the Bank may
be bound or to which any of the property or assets of the Company or the Bank is
subject, nor will such action result in any violation of the provisions of the
Articles of Incorporation or Charter, as the case may be, or bylaws of the
Company or the Bank or any law, administrative rule or regulation or
arbitrators' or administrative or court decree, judgment or order or franchise
or permit. The Company has full power and authority (corporate and other), and,
except as required by the Act and state securities or "Blue Sky" laws, all
authorizations, approvals, orders, licenses, certificates and permits to enter
into, deliver and perform this Agreement and to consummate the transactions
contemplated hereby, including the issuance, sale and delivery by it of the
Shares to be issued, sold and delivered by it hereunder.
(m) The Company and the Bank are (or upon organization
will be), in the case of the Bank, and after the issuance of the Shares will
continue to be, in compliance with the capital adequacy guidelines adopted by
the Board of Governors of the Federal Reserve System, the Office of the
Comptroller of the Currency (the "OCC") or applicable federal or state
regulatory authorities. The Company and the Bank are in compliance with all
applicable directives of and agreements with the OCC, the Federal Reserve
System, the FDIC and the state banking regulatory authorities of the State of
South Carolina. From and after the date the Bank opens for business, the
depository accounts of the Bank will be insured by the FDIC to the maximum
extent allowed by the Federal Deposit Insurance Act, as amended. The Bank has
received preliminary approval from the OCC and the FDIC to become a national
bank with final approval subject only to customary and reasonable conditions.
The Company has filed all requisite state and federal applications for approval
to become a bank holding company.
-7-
<PAGE> 8
(n) Except as disclosed in the Registration Statement and
the Prospectus, there is no legal or governmental proceeding or other action,
suit, proceeding or investigation, before any court or before or by any public,
regulatory or governmental body or board or arbitrator pending to which the
Company or the Bank or any of their officers or directors is a party, or of
which the properties or business of the Company or the Bank is the subject. To
the knowledge of the Company, its officers and directors, no such proceedings
are threatened or contemplated. No labor dispute by the employees of the Company
or the Bank exists, or is imminent or likely, which could have a material
adverse effect on their respective conditions (financial or otherwise),
business, properties, net worth, results of operations, prospects or management.
(o) The accounting firm of Tourville, Simpson &
Henderson, L.L.P., which has certified certain financial statements of the
Company, is, and was during the periods covered in its reports included in the
Registration Statement or Prospectus, independent certified public accountants
for the Company and the Bank as required by the Act, the Rules and Regulations,
the Exchange Act Rules and Regulations and Regulation S-X of the Commission.
(p) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; and (iii) assets are properly accounted for
and safeguarded against errors or loss from unauthorized use.
(q) The Company and the Bank operate and have operated
their business in conformity with applicable laws, regulations, ordinances,
rules and regulations except where such nonconformance will not result in a
material adverse affect on the earnings, assets, business, operations,
properties or condition (financial or other) of the Company or the Bank. The
Company and the Bank have such permits, licenses, franchises and authorizations
of governmental or regulatory authorities (collectively, "Permits") as are
necessary to own or lease their properties and conduct their business in the
manner described or incorporated by reference in the Prospectus, subject to such
qualifications as may be set forth in the Prospectus, except where the failure
to have any such Permit would not have a material adverse effect on their
respective conditions (financial or otherwise), business, properties, net worth,
results of operations, prospects or management. The Company and the Bank have
fulfilled and performed all of their obligations with respect to such Permits,
and no event has occurred which allows, or after notice or lapse of time would
allow, revocation or termination thereof or result in any other material
impairment of the rights of the holder of any such Permit, subject in each case
to such qualifications as may be set forth in the Prospectus. Except as
described in the Prospectus, such Permits contain no restrictions that are
materially burdensome to the Company or the Bank.
(r) The Company and the Bank have filed all federal,
state and local income and franchise tax returns required to be filed through
the date hereof and have paid all taxes of whatever nature due thereon, and no
tax deficiency has been, or is likely to be, asserted against the Company or the
Bank, which if determined adversely could materially and adversely affect their
respective conditions (financial or otherwise), business, properties, net worth,
results of operations, prospects or management. The Company and the Bank have
prepared or filed all tax information reports and currency transaction reports
and secured all IRS W-9 forms or begun backup withholding as required by law,
except where the failure to so file, secure or withhold would not have a
material adverse effect on their respective conditions (financial or otherwise),
business, properties, net worth, results of operations, prospects or management.
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<PAGE> 9
(s) This Agreement has been duly and validly authorized,
executed and delivered by the Company and, upon its due authorization, execution
and delivery by the Underwriter, will be a valid and binding obligation of the
Company enforceable against the Company in accordance with its terms, subject,
as to enforcement, to bankruptcy, insolvency, reorganization and other laws of
general applicability relating to or affecting creditors' rights, to general
equity principles.
(t) The Company and the Bank own, or possess adequate
rights to use, all trademarks, service marks, copyrights, patents, software and
design licenses, trade secrets and other rights (collectively, "Intangibles")
necessary for, or currently used in, the conduct of their respective business as
referred to in the Prospectus and, except as may be disclosed in the Prospectus,
neither the Company nor the Bank has received notice of infringement of or
conflict with the asserted intangibles of others (and there is no basis known to
the Company therefor) which, if adversely resolved, could materially and
adversely affect the earnings, assets, business or condition (financial or
other) of the Company or the Bank.
(u) Neither the Company, the Bank nor any of their
respective directors, officers or controlling persons (as defined in Section 15
of the Act) (i) has or will take, directly or indirectly, any action to cause or
result in, or which has constituted, or 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, or (ii) since
the filing of the Registration Statement, except for the marketing of the Shares
and the payment to the Underwriter of the compensation contemplated by Section 1
of this Agreement, (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 securities of the
Company.
(v) The Company, the Bank and their respective officers,
directors and employees have complied and will comply with Section 5 of the Act
and no person has been authorized to give any information or to make any
representation or warranties other than those contained in the Prospectus.
(w) Neither the Company nor the Bank, nor any director,
officer, agent or employee of the Company nor the Bank nor any other person
associated with or acting on behalf of the Company or the Bank has, directly or
indirectly, (i) used any corporate funds for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to political activities, (ii)
made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns from
corporate funds, (iii) violated any provision of the Foreign Corrupt Practices
Act of 1977, as amended, (iv) made or received any bribe, rebate, payoff,
influence payment, kickback or other unlawful payment, or (v) made any payment
of funds of the Company or the Bank prohibited by law or set aside any such
funds to be used for any payment prohibited by law.
(x) Except as set forth or contemplated in the
Prospectus, no holder of securities of the Company has any right to require the
registration of any securities of the Company, whether or not in connection with
the issuance and sale of the Shares.
(y) 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 an "affiliated person" of, or "promoter" or "principal
underwriter" for, or a company "controlled" by, an "investment company," as such
terms are defined in the Investment Company Act of 1940, as amended.
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<PAGE> 10
(z) Except as set forth in the Prospectus, neither the
Company nor anyone acting on behalf of the Company has incurred or caused to be
incurred any liability on the part of the Company for any fee or commission in
the nature of a finder's, originator's or broker's fee in connection with any of
the transactions contemplated by this Agreement.
(aa) The Preliminary Prospectus and the Prospectus contain
or incorporate by reference, if and to the extent required, appropriate
disclosure of the material effects that compliance with federal, state and local
laws and regulations regulating the discharge of materials into the environment
or otherwise relating to the protection of the environment, may have upon
capital expenditures, earnings and competitive position of the Company and the
Bank, consistent with the Rules and Regulations and with all published
interpretations by the Commission of such Rules and Regulations.
(bb) The Company and the Bank carry, or are covered by,
insurance in such amounts and covering such risks as the Company believes are
adequate for the conduct of their respective businesses and the value of their
respective properties.
(cc) The Company is in compliance in all material respects
with all presently applicable provisions of the Employee Retirement Income
Security Act of 1974, as amended, including the regulations and published
interpretations thereunder ("ERISA"); no "reportable event" (as defined in
ERISA) has occurred with respect to any "pension plan" (as defined in ERISA) for
which the Company would have any liability; the Company has not incurred and
does not expect to incur liability under (i) Title IV of ERISA with respect to
termination of, or withdrawal from, any "pension plan" or (ii) Sections 412 or
4971 of the Internal Revenue Code of 1986, as amended, including the regulations
and published interpretations thereunder (the "Code"); and each "pension plan"
for which the Company would have any liability that is intended to be qualified
under Section 401(a) of the Code is so qualified, and nothing has occurred,
whether by action or by failure to act, which would cause the loss of such
qualification.
(dd) Any certificate signed by an officer of the Company
and delivered to the Underwriter or to counsel for the Underwriter shall be
deemed a representation and warranty by the Company to the Underwriter as to the
matters covered thereby.
5. Agreements of the Company. The Company covenants and agrees
with the Underwriter:
(a) To use its best efforts to cause the Registration
Statement to become effective if, at the time this Agreement is executed, the
Registration Statement has not yet been declared effective by the Commission; to
file such Prospectus pursuant to Rule 424(b) under the Act not later than the
close of business on the second business day following the execution and
delivery of this Agreement, or if applicable, such earlier times as may be
required by Rule 430A(a)(3) under the Act; to make no further amendment or any
supplement to the Registration Statement or Prospectus prior to the Closing Date
or the Option Closing Date, as the case may be, which shall not previously have
been submitted to the Underwriter a reasonable time prior to the proposed filing
or which shall be disapproved by the Underwriter promptly after reasonable
notice by the Company of its proposed filing or which is not in compliance with
the Act and the Rules and Regulations; to advise the Underwriter, promptly after
it receives notice thereof, of the time when the Registration Statement, or any
amendment thereto, has been filed or becomes effective, or any supplement to the
Prospectus or any amended Prospectus has been filed, and to furnish the
Underwriter copies thereof; to advise the Underwriter, promptly after it
receives notice thereof, of the issuance by the Commission of any stop order or
of any order preventing or suspending the use of any Preliminary Prospectus or
Prospectus, of the
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<PAGE> 11
suspension of the qualification of the Shares for offering or sale in any
jurisdiction, or the initiation or threatening of any proceeding for any such
purpose, or any request by the Commission for the amending or supplementing of
the Registration Statement, or Prospectus or for additional information; and, in
the event of the issuance of any stop order or of any order preventing or
suspending the use of any Preliminary Prospectus or Prospectus or suspending any
such qualification, to use promptly its best efforts to obtain the withdrawal of
such order at the earliest possible time;
(b) Promptly from time to time to take such action as the
Underwriter reasonably may request to qualify the Shares for offering and sale
under the state securities or "Blue Sky" laws of such jurisdictions as the
Underwriter may request and to comply with such laws so as to permit the
continuance of sales and dealings therein in such jurisdictions for as long as
may be necessary to complete the distribution and for a period of not less than
one year after the Effective Date, 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 which it is not
currently so subject;
(c) Promptly to furnish to the Underwriter, without
charge, two signed copies of the Registration Statement and any post-effective
amendment thereto, including financial statements and schedules, and all
exhibits thereto (including any document filed under the Exchange Act and deemed
to be incorporated by reference in the Registration Statement);
(d) To furnish the Underwriter with copies of the
Prospectus or any amendment or supplement thereto in such quantities as the
Underwriter may from time to time request. The Company consents to the use of
the Prospectus or any amendment or supplement thereto by the Underwriter and by
all dealers to whom the Shares may be sold, both in connection with the offering
or sale of the Shares and for any period of time thereafter during which the
Prospectus is required by law to be delivered in connection therewith. If the
delivery of the Prospectus is required at any time prior to the expiration of
nine months after the time of issue of the Prospectus in connection with the
offering or sale of the Shares and if at such time any event shall occur which
in the judgment of the Company or counsel to the Company should be set forth in
the Prospectus in order to make any statement therein, in light of the
circumstances under which it was made, not misleading, or if it is necessary to
supplement or amend the Prospectus to comply with law, the Company shall
immediately prepare and duly file with the Commission an appropriate supplement
or amendment thereto, and will deliver to the Underwriter, without charge, such
number of copies thereof as may be reasonably requested. In case the Underwriter
is required to deliver a prospectus in connection with sales of any of the
Shares at any time nine months or more after the time of issue of the
Prospectus, upon the Underwriter's request but at the expense of the Underwriter
the Company will prepare and deliver to the Underwriter as many copies as the
Underwriter may request of an amended or supplemented Prospectus complying with
Section 10(a)(3) of the Act;
(e) To make generally available to its security holders a
consolidated earnings statement of the Company covering a 12 month period
commencing after the effective date of the Registration Statement and ending not
later than 15 months thereafter as soon as practicable after the end of such
period, which consolidated earnings statement shall satisfy the provisions of
Section 11(a) of the Act and the Rules and Regulations (including Rule 158 of
the Rules and Regulations);
(f) To furnish to its shareholders as soon as practicable
after the end of each fiscal year an annual report (including balance sheets and
statements of earnings, shareholders' equity and cash flows of the Company and
audited by independent certified public accountants) and, as soon as practicable
after the end of each of the first three quarters of each fiscal year (beginning
with the fiscal quarter ending after the
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<PAGE> 12
Effective Date), summary financial information of the Company and its
subsidiaries for such quarter in reasonable detail;
(g) During a period of five years from the Effective
Date, to furnish to the Underwriter copies of all reports or other
communications (financial or other) furnished to shareholders of the Company,
and deliver to the Underwriter (i) as soon as they are available, copies of any
reports and financial statements furnished to or filed with the Commission, the
NASD or any national securities exchange on which any class of securities of the
Company is listed (such financial statements to be on a consolidated basis to
the extent the accounts of the Company and its subsidiaries are consolidated in
reports furnished to its shareholders generally or to the Commission); and (ii)
such additional information concerning the business and financial condition of
the Company as the Underwriter may from time to time reasonably request;
(h) To apply, and to cause the Bank to apply, the net
proceeds from the Offering in the manner set forth under the caption "Use of
Proceeds" in the Prospectus;
(i) To comply with the provisions of its undertakings
contained in the Registration Statement;
(j) That the Company will not at any time, directly or
indirectly, take any action designed, or which might reasonably be expected, to
cause or result in, or which will constitute, stabilization of the price of the
shares of any of its securities to facilitate the sale or resale of any of the
Shares;
(k) The Company will use its reasonable best efforts to
cause the Shares to be listed for trading on the American Stock Exchange or The
Nasdaq Stock Market as soon as practicable after the Shares are eligible to be
listed thereon. The Company will use its best efforts and take all actions
reasonably necessary to cause the Common Stock to continue to be listed on the
OTC Bulletin Board or, if the Company satisfies the criteria for listing the
Shares thereon, on the American Stock Exchange or The Nasdaq Stock Market for at
least five years after the date hereof.
(l) That the Company will, and will cause each of its
directors and officers to enter into agreements with the Underwriter
substantially in the form attached as Annex I hereto to the effect that they
will not, for a period of 180 days after the commencement of the offering of the
Shares, without the Underwriter's prior written consent, offer for sale, sell,
contract to sell, grant any rights in, or otherwise dispose of, directly or
indirectly, any shares of Common Stock (or any securities convertible into or
exchangeable for any shares of Common Stock), or file a registration statement
under the Act with respect to any such stock or rights to acquire such stock,
except as contemplated in the Prospectus.
(m) That any options or warrants to purchase capital
stock issued by the Company during the first 12 months following the Closing
Date shall be issued with an exercise price no less than the greater of (a) $10
per share and (b) the closing market price per share for the capital stock (as
quoted on the OTC Bulletin Board or other quotation service, medium or exchange,
as applicable) on the date of grant of the option or warrant.
(n) That the aggregate total of warrants to purchase
shares of common stock issued to the Named Investors will not exceed 202,000.
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<PAGE> 13
6. Expenses.
(a) The Company covenants and agrees with the Underwriter
that, whether or not the transactions contemplated herein are consummated or
this Agreement is terminated, the Company will pay or cause to be paid (directly
or by reimbursement) the following: (i) all expenses related to due diligence
and investigation of the business and financial condition of the Company; (ii)
the fees, disbursements and expenses of the Company's and the Bank's counsel and
accountants in connection with the registration of the Shares under the Act and
all other expenses in connection with the preparation, printing and filing of
the Registration Statement, any Preliminary Prospectus and the Prospectus and
amendments and supplements thereto and the mailing and delivering of copies
thereof to the Underwriter and dealers; (iii) the cost of preparing, printing or
producing this Agreement, the Selected Dealer Agreement, the Blue Sky Memoranda
and all other documents in connection with the offering, purchase, sale and
delivery of the Shares; (iv) all fees and expenses in connection with the
qualification of the Shares for offering and sale under state securities laws as
provided in Section 5(b) hereof, including the reasonable fees and disbursements
of counsel for the Underwriter in connection with such qualification and in
connection with the preparation and distribution of Blue Sky Memoranda; (v) the
fees and expenses incident to securing any required review by the NASD of the
terms of the sale of the Shares, including fees and expenses of counsel for the
Underwriter in connection with such review; (vi) all stock transfer taxes, if
any, incident to the sale and delivery of the Shares; (vii) the cost of
preparing stock certificates; (viii) the cost and charges of any transfer agent
or registrar; (ix) all stock taxes, if any, incident to the sale and delivery of
the Shares to the Underwriter; (x) the travel and lodging expenses of employees
of the Company who participate in the advertising and marketing of the Shares;
(xi) all listing fees for listing the Common Stock on an exchange, Nasdaq or the
OTC Bulletin Board; (xii) all miscellaneous expenses referred to in Item 25 of
Part II of the Registration Statement; (xiii) the fees and expenses of
Underwriter's counsel, up to an amount of $40,000 (exclusive of expenses and
fees payable by the Company pursuant to clause (iv) above); (xiv) all
miscellaneous and travel fees and expenses of the Underwriter not to exceed
$5,000, the costs of facilities and telephones within Beaufort County, South
Carolina for marketing purposes, and all expenses of any informational meetings
associated with the sale of the Shares; and (xv) all other costs and expenses
incident to the performance of the Company's obligations hereunder (including
the costs incurred in connection with the closing of the sale of the Additional
Shares, if any) that are not otherwise specifically provided for in this
Section. The Company, upon the Underwriter's request, will provide funds in
advance for filing fees in connection with "Blue Sky" qualifications. It is
understood, however, that except as provided in this Section, Section 8 and
Section 11 hereof, the Underwriter will pay all of its own costs and expenses
and any advertising expenses connected with any offers it may make.
(b) If this Agreement shall be terminated by the Company
pursuant to any of the provisions hereof or if for any reason the Company shall
be unable to perform its obligations hereunder, the Company will reimburse the
Underwriter for all out-of-pocket expenses (including the fees, disbursements
and other charges of the Underwriter's counsel) reasonably incurred in
connection herewith without regard to any limitations imposed by Section 6(a)
hereof.
7. Conditions to the Underwriter's Obligations. The obligations
of the Underwriter hereunder, as to the Shares to be delivered at the Closing
Date and the Option Closing Date, shall be subject, in the discretion of the
Underwriter, to the condition that all representations and warranties and other
statements of the Company herein are, at and as of each of such Closing Date and
Option Closing Date, true and correct, the condition that the Company shall have
performed all of its obligations theretofore to be performed, and the following
additional conditions:
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<PAGE> 14
(a) The Registration Statement shall have been declared
effective, and the Underwriter shall have received notice thereof, not later
than 5:00 p.m., Atlanta time, on the date of this Agreement, or at such other
time and date as the Underwriter may agree; all filings required by Rules 424(b)
and 430A of the Rules and Regulations shall have been timely made; no stop order
suspending the effectiveness of the Registration Statement shall have been
issued and no proceeding for that purpose shall have been initiated or
threatened or, to the knowledge of the Company, contemplated by the staff of the
Commission; all requests for additional information on the part of the
Commission shall have been complied with to the reasonable satisfaction of the
Underwriter; and the NASD, upon review of the terms of the public offering of
the Shares, shall not have objected to such offering, such terms or the
Underwriter's participation in the same.
(b) The Underwriter shall not have advised the Company
that the Registration Statement or the Prospectus, or any amendment or any
supplement thereto, contains an untrue statement of fact which, in its judgment,
is material or omits to state a fact which, in its judgment, is material and is
required to be stated therein or necessary to make the statements therein not
misleading.
(c) Prior to the execution and delivery of this
Agreement, on the effective date of any post-effective amendments to the
Registration Statement and also at each of the Closing Date and the Option
Closing Date, the accounting firm of Tourville, Simpson & Henderson, L.L.P.
shall have furnished to the Underwriter a letter or letters, dated the date of
this Agreement, the effective date of any post-effective amendment to the
Registration Statement and each of the Closing Date and the Option Closing Date,
respectively, in form and substance satisfactory to the Underwriter, to the
effect set forth in Annex II hereto.
(d) The Underwriter shall have received the opinion of
Nelson Mullins Riley & Scarborough LLP, counsel for the Company, dated each of
the Closing Date and the Option Closing Date, addressed to the Underwriter and
in form and substance satisfactory to the Underwriter's counsel, with reproduced
copies of signed counterparts thereof for the Underwriter, substantially to the
effect set forth at Annex III hereto.
(e) On or prior to the Closing Date, the Underwriter
shall have received an agreement substantially in the form attached as Annex I
hereto executed by each officer and director of the Company pursuant to which
each such person or entity agrees not to offer for sale, sell, distribute or
otherwise dispose of any shares of the Company's Common Stock (or any securities
convertible into or exchangeable for any shares of Common Stock) during the 180
days following the commencement of the offering of the Shares, except with the
Underwriter's prior written consent;
(f) (i) Neither the Company nor the Bank shall have
sustained since the date of the last audited financial statements included in
the Prospectus 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 set forth or contemplated in the Prospectus, and (ii) since the
respective dates as of which information is given in the Prospectus, there shall
not have been any change in the capital stock, long-term debt or short-term debt
of the Company or the Bank or any change or any development involving a
prospective change in or affecting the general affairs, management, financial
position, shareholders' equity or results of operations of the Company or the
Bank, otherwise than as set forth or contemplated in the Prospectus, the effect
of which, in any such case described in clause (i) or (ii), would in the
Underwriter's judgment materially adversely affect the market for the Shares.
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<PAGE> 15
(g) On or after the date hereof there shall not have
occurred any of the following: (i) a moratorium on banking activities in South
Carolina, or any state in which the Company or the Bank conducts its business
declared by either federal or state authorities, as the case may be; (ii) any
material adverse change in the financial or securities markets in the United
States or in the political, financial or economic conditions in the United
States or the outbreak or escalation of hostilities in which the United States
is involved, or any declaration, on or after the date hereof, of a national
emergency or war or any other substantial national or international calamity or
emergency, if the effect of any such event specified in this clause or (iii) in
the Underwriter's reasonable judgment makes it impracticable or inadvisable to
proceed with the public offering or the delivery of the Shares on the terms and
in manner contemplated in the Prospectus.
(h) The Company shall have furnished or caused to be
furnished to the Underwriter at each of the Closing Date and the Option Closing
Date certificates of officers of the Company satisfactory to the Underwriter as
to the accuracy of the representations and warranties of the Company herein at
and as of each of the Closing Date and the Option Closing Date, as to the
performance by the Company of all of its obligations hereunder to be performed
at or prior to each of the Closing Date and the Option Closing Date, and as to
such other matters as the Underwriter may reasonably request.
(i) The Underwriter shall have received evidence that is
reasonably satisfactory to the Underwriter that, except as disclosed in the
Prospectus, all offers and sales of the Company's capital stock or other
securities prior to the date hereof were at all relevant times duly registered
under, or exempt from the registration requirements of, the Act and were duly
registered or the subject of an available exemption from the registration
requirements of the applicable state securities or Blue Sky laws, or the
relevant statutes of limitation have expired, or civil liability therefor has
been eliminated by an offer to rescind, except for such transactions which are
in the aggregate immaterial to the Company.
(j) At each of the Closing Date and the Option Closing
Date, counsel for the Underwriter shall have been furnished with such documents
and opinions as they may have requested, prior to each of the Closing Date and
the Option Closing Date, in order to evidence the accuracy of any of the
representations or warranties, or the fulfillment of any of the conditions
hereof; and, all proceedings taken by the Company in connection with the
issuance and sale of the Shares as herein contemplated shall be satisfactory in
form and substance to the Underwriter and counsel for the Underwriter.
(k) The Common Stock, including the Shares, shall have
been approved for quotation on the OTC Bulletin Board subject only to notice of
issuance of the Shares.
8. Indemnification and Contribution.
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<PAGE> 16
(a) The Company agrees to indemnify and hold harmless the
Underwriter and each person who controls the Underwriter within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act (i) from and against
any losses, claims, damages, liabilities or expenses (including reasonable costs
of investigation), as incurred and whether joint or several, to which the
Underwriter or controlling person may become subject under the Act or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions or
proceedings in respect thereof) arise out of or are based upon an untrue
statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus, the Registration Statement or the Prospectus, or any
amendment or supplement thereto (including any information incorporated therein
by reference or deemed to be part of the Registration Statement pursuant to Rule
430A(b), if applicable), 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, (ii) against any and
all loss, liability, claim, damage or expense whatsoever, as incurred and
whether joint or several, to the extent of the aggregate amount paid in
settlement of any litigation or claim, or any investigation or proceeding by any
governmental, regulatory or arbitration agency, body or authority, commenced or
threatened, or of any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission, if such settlement
is effected with the written consent of the Company, and (iii) against any and
all reasonable expenses whatsoever, as incurred and whether joint or several
(including the fees and reasonable expenses of counsel chosen by the
Underwriter), reasonably incurred in investigating, preparing for, providing
evidence in, or defending against any claim, litigation, action, investigation
or proceeding by any governmental, regulatory or arbitration agency, body or
authority, commenced or threatened, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or omission,
to the extent that any such expense is not paid under subsections (a)(i) or
(a)(ii) above; and will reimburse the Underwriter for any legal or other
expenses reasonably incurred by the Underwriter in connection with investigating
or defending any such action or claim; provided, however, that the Company shall
not be liable in any such case to the extent that any such loss, claim, damage,
liability or expense arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in any Preliminary
Prospectus, the Registration Statement or the Prospectus or any such amendment
or supplement in reliance upon and in conformity with Underwriter Information;
and provided further, that the foregoing indemnity agreement is subject to the
conditions that, insofar as it relates to any untrue statement, omission, or
alleged omission made in any Preliminary Prospectus but eliminated or remedied
in the Prospectus, such indemnity agreement shall not inure to the benefit of
the Underwriter from whom the person asserting any loss, claim, damage, or
liability purchased any Shares that are the subject thereof (or to the benefit
of any person who controls the Underwriter), if a copy of the Prospectus was not
sent or given to such person within the time required by the Act and the Rules
and Regulations and the Prospectus would have cured the defect giving rise to
such loss, claim, damage, or liability.
(b) The Underwriter will indemnify and hold harmless the
Company against any losses, claims, damages, liabilities or expenses, as
incurred, to which the Company may become subject, under the Act or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions or
proceedings in respect thereof) arise out of or are based upon an untrue
statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus, the Registration Statement or the Prospectus, or any
amendment or supplement thereto, 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 the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made in any Preliminary
Prospectus, the Registration Statement or the Prospectus or any such amendment
or supplement thereto in reliance upon and in conformity with the Underwriter
Information; and will reimburse the Company for any legal or other expenses
reasonably incurred by the
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<PAGE> 17
Company in connection with investigating or defending any such action or claim.
(c) Promptly after receipt by an indemnified party under
subsections (a) or (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 except to the extent
it is prejudiced thereby. 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), and, after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party shall not be liable to such
indemnified party under such subsection for any legal expenses of other counsel
or any other expenses, in each case subsequently incurred by such indemnified
party, in connection with the defense thereof other than reasonable costs of
investigation. In no event shall the indemnifying parties be liable for fees and
expenses of more than one counsel (in addition to local counsel, if any)
separate from their own counsel for all indemnified parties in connection with
any action or separate, but similar or related, actions arising out of the same
general allegations or circumstances.
(d) If the indemnification provided for in this Section 8
is unavailable to or insufficient to hold harmless an indemnified party under
subsections (a) or (b) above in respect of any losses, claims, damages,
liabilities or expenses (or actions or proceedings in respect thereof), referred
to therein and with respect to which such party would otherwise be entitled to
indemnity by virtue thereof, then each indemnifying party shall contribute the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages, liabilities or expenses (or actions or proceedings 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 allocation provided by the
immediately preceding sentence is not permitted by applicable law or if the
indemnified party failed to give notice required under subsection (c) above,
then each indemnifying party shall contribute 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 which resulted in such losses, claims, damages, liabilities or
expenses (or actions or proceedings 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, in each case as set forth in the table
on the cover page of the Prospectus. 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
Underwriter Information on the other hand and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Underwriter agree that it would not
be just and equitable if contributions pursuant to this subsection (d) were
determined by pro rata allocation or by any other method of allocation which
does not take into account 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, liabilities or expenses (or actions or
proceedings in respect thereof) referred to above in this subsection (d) shall
be deemed to include any legal or other
-17-
<PAGE> 18
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 the Underwriter has otherwise
been required to pay by reason of such untrue statement or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 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 director, officer,
partner or person, if any, who controls the Underwriter within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act; and the obligations
of the Underwriter under this Section 8 shall be in addition to any liability
which the Underwriter may otherwise have and shall extend, upon the same terms
and conditions, to each officer and director of the Company who signed the
Registration Statement and to each person, if any, who controls the Company
within the meaning of Section 15 of the Act or Section 20(a) of the Exchange
Act.
9. Default of Underwriter.
If the Underwriter shall default in its obligation to purchase
the Shares which it has agreed to purchase hereunder at a Closing Date, the
Underwriter may in its discretion arrange for another party or other parties to
purchase such Shares on the terms contained herein. If within 36 hours after
such default by the Underwriter, the Underwriter does not arrange for the
purchase of such Shares, then the Company shall be entitled to a further period
of 36 hours within which to procure another party or other parties satisfactory
to the Underwriter to purchase such Shares on such terms. In the event that,
within the respective prescribed periods, the Underwriter notifies the Company
that the Underwriter has so arranged for the purchase of such Shares, or the
Company notifies the Underwriter that it has so arranged for the purchase of
such Shares, the Underwriter or the Company shall have the right to postpone the
Closing Date or the Option Closing Date for a period of not more than seven
days, in order to effect whatever changes may thereby be made necessary 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 which in the Underwriter's opinion may
thereby be made necessary. The term "Underwriter" as used in this Agreement
shall include any person substituted under this Section with like effect as if
such person had originally been a party to this Agreement with respect to such
Shares. The 36-hour periods referred to in this subsection (a) shall not include
any hours between (i) 5:00 p.m., Greenville, South Carolina time, on any Friday
through 9:00 a.m., Greenville, South Carolina time, the following Monday or (ii)
5:00 p.m., Greenville, South Carolina time, on the eve of any day on which the
New York Stock Exchange is closed for trading ("holiday"), and 9:00 a.m.,
Greenville, South Carolina time on the day following that holiday.
10. Financial Advisor Services. In the event that the Company or
the shareholders of the Company engage in a transaction prior to the
consummation of the sale of the Shares and for a period ending July 27, 2000, in
connection with which more than 25%, directly or indirectly, of the Company's
outstanding capital stock, or assets representing 25% or more of the value of
the Company's total assets are sold or agreed to be sold, the Company shall
engage Edgar M. Norris & Co., Inc. to serve as a financial advisor in connection
with such transaction based upon the terms of the customary agreement of Edgar
M. Norris & Co., Inc. in connection with such transactions, and shall pay a
financial advisory fee in the amount of 2% of the
-18-
<PAGE> 19
total consideration in connection with the transaction (including payments made
to shareholders of the Company, the face amount of any debt assumed and the
current value of any employment or noncompetition agreements involved in the
transaction). The financial advisory fee will be payable upon the consummation
of the transaction.
11. Survival. The respective indemnities, agreements,
representations, warranties and other statements of the Company 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 of the
Underwriter, or the Company or any officer or director or controlling person of
the Company, and shall survive delivery of and payment for the Shares.
12. Effective Date of Agreement. This Agreement shall become
effective: (i) upon the execution and delivery hereof by the parties hereto; or
(ii) if, at the time this Agreement is executed and delivered, it is necessary
for the registration statement or a post-effective amendment thereto to be
declared effective before the offering of the Shares may commence, when
notification of the effectiveness of the registration statement or such
post-effective amendment has been released by the Commission. Until such time as
this Agreement shall have become effective, it may be terminated by the Company,
by notifying the Underwriter, or by the Underwriter, by notifying the Company;
provided, however, that the provisions of this Section and of Sections 6, 8 and
10 hereof shall at all times be effective.
If this Agreement shall be terminated pursuant to Section 9
hereof, or if this Agreement, by election of the Underwriter, shall not become
effective pursuant to the provisions of this Section, the Company shall then be
under no liability to the Underwriter except as provided in Section 6 and
Section 8 hereof; but, if for any other reason any Shares are not delivered by
or on behalf of Company as provided herein, the Company will reimburse the
Underwriter for all out-of-pocket expenses approved in writing by the
Underwriter, including fees and disbursements of counsel, reasonably incurred by
the Underwriter in making preparations for the purchase, sale and delivery of
the Shares not so delivered, but the Company shall be under no further liability
to the Underwriter except as provided in Sections 6, 8 and 10 hereof.
13. Notices. All statements, requests, notices and agreements
hereunder shall be in writing or by telegram if promptly confirmed in writing,
and if to the Underwriter shall be sufficient in all respects if delivered or
sent by registered mail to Edgar M. Norris & Co., Inc., 15 South Main Street,
Suite 810, Post Office Box 247, Greenville, South Carolina, 29602 (and a copy
thereof shall be sent in the same manner to Long Aldridge & Norman LLP, 303
Peachtree Street, Suite 5300, Atlanta, Georgia, 30308, Attention: William L.
Floyd, Esq.); and if to the Company shall be sufficient in all respects if
delivered or sent by registered mail to the address of the Company set forth in
the Registration Statement, Attention: Mr. Randolph C. Kohn (and a copy thereof
shall be sent in the same manner to Nelson Mullins Riley & Scarborough LLP, 999
Peachtree Street, N.E., Suite 1400, Atlanta, Georgia, 30309, Attention: Neil E.
Grayson, Esq.
14. Miscellaneous.
(a) This Agreement shall be binding upon, and inure solely to the
benefit of, the Underwriter and the Company and, to the extent provided in
Sections 8 and 10 hereof, the officers and directors of the Company and each
person who controls the Company or the Underwriter, 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 Underwriter shall be
-19-
<PAGE> 20
deemed a successor or assign by reason merely of such purchase.
(b) Time shall be of the essence of this Agreement.
(c) This Agreement shall be governed by and construed in
accordance with the laws of the State of South Carolina, without giving effect
to the choice of law or conflicts of law principles thereof.
(d) 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.
If the foregoing is in accordance with the Underwriter's
understanding, please sign and return to us counterparts hereof, and upon the
acceptance hereof by the Underwriter, this letter and such acceptance hereof
shall constitute a binding agreement between the Underwriter and the Company.
Very truly yours,
COASTAL BANKING COMPANY, INC.
By:
-------------------------------
Randolph C. Kohn, President and
Chief Executive Officer
Accepted as of the date hereof at Greenville, South Carolina.
EDGAR M. NORRIS & CO., INC.
By:
-------------------------------------
Glenn R. Oxner, Chairman
-20-
<PAGE> 1
EXHIBIT 3.1
ARTICLES OF INCORPORATION
OF
COASTAL BANKING COMPANY, INC.
ARTICLE ONE
NAME
The name of the corporation is Coastal Banking Company, Inc. (the
"Corporation").
ARTICLE TWO
ADDRESS AND REGISTERED AGENT
The street address of the initial registered office of the Corporation
shall be 1330 Lady Street, Third Floor, Keenan Building, Columbia, South
Carolina 29201. The name of the Corporation's initial registered agent at such
address shall be Brett W. Weathersbee.
/s/ Brett W. Weathersbee
------------------------
Brett W. Weathersbee
Registered Agent
ARTICLE THREE
CAPITALIZATION
The Corporation shall have the authority, exercisable by its board of
directors, to issue up to 10,000,000 shares of voting common stock, par value
$.01 per share, and to issue up to 10,000,000 shares of preferred stock, par
value $.01 per share. The board of directors shall have the authority to specify
the preferences, limitations and relative rights of each class of preferred
stock.
ARTICLE FOUR
PREEMPTIVE RIGHTS
The shareholders shall not have any preemptive rights to acquire
additional stock in the Corporation.
ARTICLE FIVE
NO CUMULATIVE VOTING RIGHTS
The Corporation elects not to have cumulative voting, and no shares
issued by this Corporation may be cumulatively voted for directors of the
Corporation (or for any other decision).
<PAGE> 2
ARTICLE SIX
LIMITATION ON DIRECTOR LIABILITY
No director of the Corporation shall be personally liable to the
Corporation or its shareholders for monetary damages for breach of the duty of
care or any other duty as a director, except that such liability shall not be
eliminated for:
(i) any breach of the director's duty of loyalty to the
Corporation or its shareholders;
(ii) acts or omissions not in good faith or which involve
gross negligence, intentional misconduct, or a knowing violation of
law;
(iii) liability imposed under Section 33-8-330 (or any
successor provision or redesignation thereof) of the Act; and
(iv) any transaction from which the director derived an
improper personal benefit.
If at any time the Act shall have been amended to authorize the further
elimination or limitation of the liability of a director, then the liability of
each director of the Corporation shall be eliminated or limited to the fullest
extent permitted by the Act, as so amended, without further action by the
shareholders, unless the provisions of the Act, as amended, require further
action by the shareholders.
Any repeal or modification of the foregoing provisions of this Article
Six shall not adversely affect the elimination or limitation of liability or
alleged liability pursuant hereto of any director of the Corporation for or with
respect to any alleged act or omission of the director occurring prior to such a
repeal or modification.
ARTICLE SEVEN
CONTROL SHARE ACQUISITIONS
The provisions of Title 35, Chapter 2, Article 1 of the Code of Laws of
South Carolina shall not apply to control share acquisitions of shares of the
Corporation.
ARTICLE EIGHT
CONSIDERATION OF OTHER CONSTITUENCIES
In discharging the duties of their respective positions and in
determining what is in the best interests of the Corporation, the board of
directors, committees of the board of directors, and individual directors, in
addition to considering the effects of any actions on the Corporation and its
shareholders, may consider the interests of the employees, customers, suppliers,
creditors, and other constituencies of the Corporation and its subsidiaries, the
communities and geographical areas in which the Corporation and its subsidiaries
operate or are located, and all other factors
2
<PAGE> 3
such directors consider pertinent. This provision solely grants discretionary
authority to the board of directors and shall not be deemed to provide to any
other constituency any right to be considered.
ARTICLE NINE
NAME AND ADDRESS OF THE SOLE INCORPORATOR
The sole incorporator is Brett W. Weathersbee, whose address is 1330
Lady Street, Third Floor, Keenan Building, Columbia, South Carolina 29201.
IN WITNESS WHEREOF, the undersigned has executed these Articles of
Incorporation as of the date indicated below.
/s/ Brett W. Weathersbee
--------------------------
Brett W. Weathersbee
Sole Incorporator
Date: June 8, 1999
3
<PAGE> 4
CERTIFICATION
I, Brett W. Weathersbee, an attorney licensed to practice in the State
of South Carolina, certify that the Corporation has complied with the
requirements of Chapter 2, Title 33 of the Code of Laws of South Carolina 1976,
relating to the Articles of Incorporation.
Date: June 8, 1999
/s/ Brett W. Weathersbee
---------------------------------
(Signature)
Brett W. Weathersbee
1330 Lady Street, Third Floor
Keenan Building
Columbia, South Carolina 29201
4
<PAGE> 1
EXHIBIT 3.2
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
TO THE
ARTICLES OF INCORPORATION
OF
COASTAL BANKING COMPANY, INC.
FILED JUNE 8, 1999
ARTICLE ONE
NAME
The name of the corporation is Coastal Banking Company, Inc. (the
"Corporation").
ARTICLE TWO
ADDRESS AND REGISTERED AGENT
The street address of the initial registered office of the Corporation
shall be 36 West Sea Island Parkway, Beaufort, South Carolina 29902. The name of
the Corporation's initial registered agent at such address shall be Randolph C.
Kohn.
Date: August 5, 1999 Signed: /s/ Randolph C. Kohn
--------------------- --------------------------
Randolph C. Kohn
as Registered Agent
ARTICLE THREE
CAPITALIZATION
The Corporation shall have the authority, exercisable by its board of
directors, to issue up to 10,000,000 shares of voting common stock, par value
$.01 per share, and to issue up to 10,000,000 shares of preferred stock, par
value $.01 per share. The board of directors shall have the authority to specify
the preferences, limitations and relative rights of each class of preferred
stock.
ARTICLE FOUR
PREEMPTIVE RIGHTS
The shareholders shall not have any preemptive rights to acquire
additional stock in the Corporation.
<PAGE> 2
ARTICLE FIVE
NO CUMULATIVE VOTING RIGHTS
The Corporation elects not to have cumulative voting, and no shares
issued by this Corporation may be cumulatively voted for directors of the
Corporation (or for any other decision).
ARTICLE SIX
LIMITATION ON DIRECTOR LIABILITY
No director of the Corporation shall be personally liable to the
Corporation or its shareholders for monetary damages for breach of the duty of
care or any other duty as a director, except that such liability shall not be
eliminated for:
(i) any breach of the director's duty of loyalty to the
Corporation or its shareholders;
(ii) acts or omissions not in good faith or which involve
gross negligence, intentional misconduct, or a knowing violation of
law;
(iii) liability imposed under Section 33-8-330 (or any
successor provision or redesignation thereof) of the Act; and
(iv) any transaction from which the director derived an
improper personal benefit.
If at any time the Act shall have been amended to authorize the further
elimination or limitation of the liability of a director, then the liability of
each director of the Corporation shall be eliminated or limited to the fullest
extent permitted by the Act, as so amended, without further action by the
shareholders, unless the provisions of the Act, as amended, require further
action by the shareholders.
Any repeal or modification of the foregoing provisions of this Article
Six shall not adversely affect the elimination or limitation of liability or
alleged liability pursuant hereto of any director of the Corporation for or with
respect to any alleged act or omission of the director occurring prior to such a
repeal or modification.
ARTICLE SEVEN
CONTROL SHARE ACQUISITIONS
The provisions of Title 35, Chapter 2, Article 1 of the Code of Laws of
South Carolina shall not apply to control share acquisitions of shares of the
Corporation.
2
<PAGE> 3
ARTICLE EIGHT
CLASSIFIED BOARD OF DIRECTORS
At any time that the Board has six or more members the terms of office
of directors will be staggered by dividing the total number of directors into
three classes, with each class accounting for one-third, as near as may be, of
the total. The terms of directors in the first class expire at the first annual
shareholders' meeting after their election, the terms of the second class expire
at the second annual shareholders' meeting after their election, and the terms
of the third class expire at the third annual shareholders' meeting after their
election. At each annual shareholders' meeting held thereafter, directors shall
be chosen for a term of three years to succeed those whose terms expire. If the
number of directors is changed, any increase or decrease shall be so apportioned
among the classes as to make all classes as nearly equal in number as possible,
and when the number of directors is increased and any newly created
directorships are filled by the board, the terms of the additional directors
shall expire at the next election of directors by the shareholders. Each
director, except in the case of his earlier death, written resignation,
retirement, disqualification or removal, shall serve for the duration of his
term, as staggered, and thereafter until his successor shall have been elected
and qualified.
ARTICLE NINE
CONSIDERATION OF OTHER CONSTITUENCIES
In discharging the duties of their respective positions and in
determining what is in the best interests of the Corporation, the board of
directors, committees of the board of directors, and individual directors, in
addition to considering the effects of any actions on the Corporation and its
shareholders, may consider the interests of the employees, customers, suppliers,
creditors, and other constituencies of the Corporation and its subsidiaries, the
communities and geographical areas in which the Corporation and its subsidiaries
operate or are located, and all other factors such directors consider pertinent.
This provision solely grants discretionary authority to the board of directors
and shall not be deemed to provide to any other constituency any right to be
considered.
ARTICLE TEN
NAME AND ADDRESS OF THE SOLE INCORPORATOR
The sole incorporator is Randolph C. Kohn, whose address is 36 West Sea
Island Parkway, Beaufort, South Carolina 29902.
IN WITNESS WHEREOF, the undersigned has executed these Articles of
Incorporation as of the date indicated below.
Date: August 5, 1999 /s/ Randolph C. Kohn
--------------------- --------------------------------
Randolph C. Kohn
Chief Executive Officer
3
<PAGE> 4
CERTIFICATE ACCOMPANYING THE AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
COASTAL BANKING COMPANY, INC.
Check either A or B, whichever is applicable; and if B applies, complete the
additional information requested:
A. [ ] The attached restated articles of incorporation do not contain
any amendments to the corporation's articles of incorporation and have been duly
approved by the corporation's board of directors as authorized by
ss.33-10-107(a).
B. [x] The attached restated articles of incorporation contain one or
more amendments to the corporation's articles of incorporation. Pursuant to
Section 33-10-107(d)(2), the following information concerning the amendment(s)
is hereby submitted:
1. On August 5, 1999, the corporation adopted the following amendments(s)
to its articles of incorporation: (Type or Attach the Complete Text of
Each Amendment):
At any time that the Board has six or more members, unless provided
otherwise by the Articles of Incorporation, the terms of office of
directors will be staggered by dividing the total number of directors
into three classes, with each class accounting for one-third, as near
as may be, of the total. The terms of directors in the first class
expire at the first annual shareholders' meeting after their election,
the terms of the second class expire at the second annual shareholders'
meeting after their election, and the terms of the third class expire
at the third annual shareholders' meeting after their election. At each
annual shareholders' meeting held thereafter, directors shall be chosen
for a term of three years to succeed those whose terms expire. If the
number of directors is changed, any increase or decrease shall be so
apportioned among the classes as to make all classes as nearly equal in
number as possible, and when the number of directors is increased and
any newly created directorships are filled by the board, the terms of
the additional directors shall expire at the next election of directors
by the shareholders. Each director, except in the case of his earlier
death, written resignation, retirement, disqualification or removal,
shall serve for the duration of his term, as staggered, and thereafter
until his successor shall have been elected and qualified.
The Restated Articles of Incorporation, the form of which are attached
in this Consent, are hereby adopted as the Articles of Incorporation of
the Corporation, with all amendments to the original Articles of
Incorporation of the Corporation reflected therein.
4
<PAGE> 5
2. The manner, if not set forth in the amendment, in which any exchange,
reclassification, or cancellation of issued shares provided for in the
Amendment shall be effected, is as follows: (if not applicable, insert
"not applicable" or "NA"). Not Applicable
3. Complete either a or b, whichever is applicable.
a. [x] Amendment(s) adopted by shareholder action.
At the date of adoption of the Amendment, the number of outstanding
shares of each voting group entitled to vote separately on the
Amendment, and vote of such shares was:
<TABLE>
<CAPTION>
Number of Number of Number of Votes Number of Undisputed*
Voting Outstanding Votes Represented Shares Voted
Group Shares Entitled to be at the meeting For Against
- ----- ------ Cast -------------- --- -------
----
<S> <C> <C> <C> <C> <C>
Common 10 10 10 10 -0-
</TABLE>
b. [ ] The amendment(s) was duly adopted by the Incorporators or
board of directors without shareholder approval pursuant to
ss.33-6-102(d), 33-10-102 and 33-10-105 of the 1976 South
Carolina Code as amended, and shareholder action was not
required.
Date: August 5, 1999 Coastal Banking Company, Inc.
-----------------
By: /s/ Randolph C. Kohn
----------------------------------
Randolph C. Kohn
Chief Executive Officer
*NOTE: Pursuant to Section 33-10-106(6)(i), the corporation can
alternatively State the total number of undisputed shares cast
for the amendment by each voting group together with a
statement that the number of cast for the amendment by each
voting group was sufficient for approval by that voting group.
5
<PAGE> 1
EXHIBIT 3.3
BYLAWS
OF
COASTAL BANKING COMPANY, INC.
ACCEPTED AND APPROVED ON JUNE 1, 1999
<PAGE> 2
COASTAL BANKING COMPANY, INC.
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE 1
OFFICES..................................................................1
Section 1: Registered Office and Agent..............................1
Section 2: Other Offices............................................1
ARTICLE 2
SHAREHOLDERS.............................................................1
Section 1: Place of Meetings........................................1
Section 2: Annual Meetings..........................................1
Section 3: Special Meetings.........................................1
Section 4: Notice...................................................2
Section 5: Quorum...................................................2
Section 6: Majority Vote; Withdrawal of Quorum......................3
Section 7: Method of Voting.........................................3
Section 8: Record Date..............................................3
Section 9: Shareholder Proposals....................................3
ARTICLE 3
DIRECTORS................................................................4
Section 1: Management...............................................4
Section 2: Number, Classification and Terms of Office
of Directors.............................................4
Section 3: Qualifications of Directors..............................5
Section 4: Election of Directors....................................5
Section 5: Nomination of Directors..................................5
Section 6: Retirement of Directors..................................6
Section 7: Emeritus Directors.......................................6
Section 8: Vacancies................................................7
Section 9: Removal of Directors.....................................7
Section 10: Place of Meetings........................................7
Section 11: Regular Meetings.........................................7
Section 12: Special Meetings.........................................7
Section 13: Telephone and Similar Meetings...........................7
Section 14: Quorum; Majority Vote....................................8
Section 15: Compensation.............................................8
Section 16: Procedure................................................8
Section 17: Action Without Meeting...................................8
ARTICLE 4
BOARD COMMITTEES.........................................................8
Section 1: Designation..............................................8
Section 2: Meetings.................................................9
Section 3: Quorum; Majority Vote....................................9
Section 4: Procedure................................................9
Section 5: Action Without Meeting...................................9
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
Section 6: Telephone and Similar Meetings...........................9
ARTICLE 5
OFFICERS.................................................................9
Section 1: Offices..................................................9
Section 2: Term....................................................10
Section 3: Vacancies...............................................10
Section 4: Compensation............................................10
Section 5: Removal.................................................10
Section 6: Chairman of the Board...................................10
Section 7: Chief Executive Officer.................................10
Section 8: President...............................................10
Section 9: Vice Presidents.........................................10
Section 10: Secretary...............................................11
Section 11: Assistant Secretary.....................................11
Section 12: Treasurer...............................................11
ARTICLE 6
INDEMNIFICATION.........................................................12
Section 1: Indemnification of Directors............................12
Section 2: Advancement of Expenses.................................12
Section 3: Indemnification of Officers, Employees and Agents.......13
Section 4: Insurance...............................................13
Section 5: Nonexclusivity of Rights; Agreements....................13
Section 6: Continuing Benefits; Successors.........................14
Section 7: Interpretation; Construction............................14
Section 8: Amendment...............................................14
Section 9: Severability............................................14
ARTICLE 7
CERTIFICATES AND SHAREHOLDERS...........................................15
Section 1: Certificates............................................15
Section 2: Issuance of Shares......................................15
Section 3: Rights of Corporation with Respect to
Registered Owners.......................................15
Section 4: Transfers of Shares.....................................15
Section 5: Registration of Transfer................................16
Section 6: Lost, Stolen or Destroyed Certificates..................16
Section 7: Restrictions on Shares..................................16
Section 8: Control Share Acquisitions Statute......................16
Section 9: Voting of Stock Held....................................16
ARTICLE 8
GENERAL PROVISIONS......................................................17
Section 1: Distributions...........................................17
Section 2: Books and Records.......................................17
Section 3: Execution of Documents..................................17
Section 4: Fiscal Year.............................................17
Section 5: Seal....................................................17
Section 6: Resignation.............................................17
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
Section 7: Computation of Days.....................................18
Section 8: Amendment of Bylaws.....................................18
Section 9: Construction............................................18
Section 10: Headings................................................18
</TABLE>
<PAGE> 5
BYLAWS
OF
COASTAL BANKING COMPANY, INC.
ARTICLE 1: OFFICES
Section 1: Registered Office and Agent. The registered office of the
Corporation shall be at 1330 Lady Street, Third Floor, Columbia, South Carolina
29201. The registered agent shall be Brett W. Weathersbee.
Section 2: Other Offices. The Corporation may also have offices at such
other places within and without the State of South Carolina as the Board of
Directors may from time to time determine or the business of the Corporation may
require.
ARTICLE 2: SHAREHOLDERS
Section 1: Place of Meetings. Meetings of shareholders shall be held at
the time and place, within or without the State of South Carolina, stated in the
notice of the meeting or in a waiver of notice.
Section 2: Annual Meetings. An annual meeting of the shareholders shall
be held each year on the third Thursday of April, if not a legal holiday, but if
a legal holiday, then on the next Thursday not a legal holiday, or on such other
date and at a time to be set by the Board of Directors in accordance with all
applicable notice requirements. At the meeting, the shareholders shall elect
directors and transact such other business as may properly be brought before the
meeting.
Section 3: Special Meetings.
(a) Special meetings of the shareholders, for any purpose
or purposes, unless otherwise required by the South Carolina Business
Corporation Act of 1988, as amended from time to time (the "Act"), the Articles
of Incorporation of the Corporation (the "Articles"), or these Bylaws, may be
called by the chief executive officer, the president, the chairman of the Board
of Directors or a majority of the Board of Directors.
(b) In addition to a special meeting called in accordance
with subsection 3(a) of this Article 2, the Corporation shall, if and to the
extent that it is required by applicable law, hold a special meeting of
shareholders if the holders of at least ten percent of all the votes entitled to
be cast on any issue proposed to be considered at such special meeting sign,
date and deliver to the secretary of the Corporation one or more written demands
for the meeting. Such written demands shall be delivered to the secretary by
certified mail, return receipt
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requested. Such written demands sent to the secretary of the Corporation shall
set forth as to each matter the shareholder or shareholders propose to be
presented at the special meeting (i) a description of the purpose or purposes
for which the meeting is to be held (including the specific proposal(s) to be
presented); (ii) the name and record address of the shareholder or shareholders
proposing such business; (iii) the class and number of shares of the Corporation
that are owned of record by the shareholder or shareholders as of a date within
ten days of the delivery of the demand; (iv) the class and number of shares of
the Corporation that are held beneficially, but not held of record, by the
shareholder or shareholders as of a date within ten days of the delivery of the
demand; and (v) any interest of the shareholder or shareholders in such
business. Any such special shareholders' meeting shall be held at a location
designated by the Board of Directors. The Board of Directors may set such rules
for any such meeting as it may deem appropriate, including when the meeting will
be held (subject to any requirements of the Act), the agenda for the meeting
(which may include any proposals made by the Board of Directors), who may attend
the meeting in addition to shareholders of record and other such matters.
(c) Business transacted at any special meeting shall be
confined to the specific purpose or purposes stated in the notice of the
meeting.
Section 4: Notice.
(a) Written or printed notice stating the place, day and
hour of the meeting and, in the case of a special meeting, the specific purpose
or purposes for which the meeting is called, shall be delivered by the
Corporation not less than ten nor more than sixty days before the date of the
meeting, either personally or by mail, to each shareholder of record entitled to
vote at such meeting. If mailed, such notice shall be deemed effective when
deposited with postage prepaid in the United States mail, addressed to the
shareholder at the address appearing on the stock transfer books of the
Corporation. Except as may be expressly provided by law, no failure or
irregularity of notice of any regular meeting shall invalidate the same or any
proceeding thereat.
(b) The notice of each special shareholders meeting shall
include a description of the specific purpose or purposes for which the meeting
is called. Except as provided by law, the Articles or these Bylaws, the notice
of an annual shareholders meeting need not include a description of the purpose
or purposes for which the meeting is called.
Section 5: Quorum. The holders of a majority of the shares issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall be requisite and shall constitute a quorum at meetings of the
shareholders for the transaction of business except as otherwise provided by
statute, by the Articles or by these Bylaws. If a quorum is not present or
represented at a meeting of the shareholders, the shareholders entitled to vote,
present in person or represented by proxy, shall have the power to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum is present or represented. At an adjourned meeting at
which a quorum is present or represented, any business may be transacted which
might have been transacted at the meeting as originally notified. Once a share
is represented for any purpose at a meeting it is deemed present for quorum
purposes.
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Section 6: Majority Vote; Withdrawal of Quorum. Except in regards to
the election of directors, when a quorum is present at a meeting, the vote of
the holders of a majority of the shares having voting power, present in person
or represented by proxy, shall decide any question brought before the meeting,
unless the question is one on which, by express provision of the statutes, the
Articles or these Bylaws, a higher vote is required in which case the express
provision shall govern. Directors shall be elected by a plurality vote of the
shareholders. The shareholders present at a duly constituted meeting may
continue to transact business until adjournment, despite the withdrawal of
enough shareholders to leave less than a quorum.
Section 7: Method of Voting. Each outstanding share of common stock
shall be entitled to one vote on each matter submitted to a vote at a meeting of
shareholders. Each outstanding share of other classes of stock, if any, shall
have such voting rights as may be prescribed by the Board of Directors. Proxies
delivered by facsimile to the Corporation, if otherwise in order, shall be
valid. Votes shall be taken by voice, by hand or in writing, as directed by the
chairman of the meeting. Voting for directors shall be in accordance with
Article 3, Section 3 of these Bylaws.
Section 8: Record Date. For the purpose of determining shareholders
entitled to notice of or to vote at any meeting of shareholders, including any
special meeting, or shareholders entitled to receive payment of dividends, or in
order to make a determination of shareholders for any other purpose, the Board
of Directors may fix in advance a date as the record date for any such
determination of shareholders, such date in any case to be not less than ten nor
more than seventy days prior to the date on which the particular action,
requiring such determination of shareholders, is to be taken. Except as
otherwise provided by law, if no record date is fixed for the determination of
shareholders entitled to notice of or to vote at a meeting of shareholders, or
of shareholders entitled to receive payment of dividends, the date on which
notice of the meeting is mailed, or the date on which the resolution of the
Board of Directors declaring such dividend is adopted, as the case may be, shall
be the record date.
Section 9: Shareholder Proposals.
(a) To the extent required by applicable law, a
shareholder may bring a proposal before an annual meeting of shareholders as set
forth in this Section 9. To be properly brought before an annual meeting of
shareholders, business must be (i) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors; (ii)
otherwise properly brought before the meeting by or at the direction of the
Board of Directors; or (iii) otherwise properly brought before the meeting by a
shareholder. In addition to any other applicable requirements, for business to
be properly brought before an annual meeting by a shareholder, the shareholder
must have given timely notice thereof in writing to the secretary of the
Corporation. To be timely, a shareholder's notice must be given, either by
personal delivery or by United States mail, postage prepaid, return receipt
requested, to the secretary of the Corporation not less than 30 nor more than 60
days in advance of the annual meeting (provided, however, that if less than 31
days' notice of the meeting is given to shareholders, such written notice shall
be delivered or mailed, as prescribed, to the Secretary of Corporation not later
than the close of the tenth day following the day on which notice of the meeting
was mailed to shareholders). A shareholder's notice to the secretary of the
Corporation shall set forth for each
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matter the shareholder proposes to bring before the annual meeting (i) a
description of the business desired to be brought before the annual meeting
(including the specific proposal(s) to be presented) and the reasons for
conducting such business at the annual meeting; (ii) the name and record address
of the shareholder proposing such business; (iii) the class and number of shares
of the Corporation that are owned of record, and the class and number of shares
of the Corporation that are held beneficially, but not held of record, by the
shareholder as of the record date for the meeting, if such date has been made
publicly available, or as of a date within ten days of the effective date of the
notice by the shareholder if the record date has not been made publicly
available; and (iv) any interest of the shareholder in such business. In the
event that a shareholder attempts to bring business before an annual meeting
without complying with the provisions of this Section 9, the chairman of the
meeting shall declare to the meeting that the business was not properly brought
before the meeting in accordance with the foregoing procedures, and such
business shall not be transacted. The chairman of any annual meeting, for good
cause shown and with proper regard for the orderly conduct of business at the
meeting, may waive in whole or in part the operation of this Section 9.
(b) If any shareholder of the Corporation notifies the
Corporation that such shareholder intends to present a proposal for action at a
forthcoming meeting of the Corporation's shareholders and requests that the
Corporation include the proposal in its proxy statement and such shareholder
complies with all the requirements of Rule 14a-8 promulgated under the
Securities Exchange Act of 1934, the Corporation shall consider inclusion of
such proposal in the proxy statement unless it determines that the proposal is
inappropriate for consideration by the shareholders at the meeting.
ARTICLE 3: DIRECTORS
Section 1: Management. The business and affairs of the Corporation
shall be managed by the Board of Directors who may exercise all such powers of
the Corporation and do all such lawful acts and things as are not by law, the
Articles or these Bylaws directed or required to be done or exercised by the
shareholders.
Section 2: Number, Classification and Terms of Office of Directors.
Unless otherwise provided in the Articles of Incorporation, the number of
directors of the Corporation shall be that number as may be fixed from time to
time by resolution of the Board of Directors, but in no event shall the number
be less than five or greater than 25. The initial number of directors shall be
13. The number of members of the Board of Directors can be increased or
decreased within the foregoing range at any time by the Board of Directors. In
addition, unless provided otherwise by resolution of the Board of Directors, if,
in any case after proxy materials for an annual meeting of shareholders have
been mailed to shareholders, any person named therein to be nominated at the
direction of the Board of Directors becomes unable or unwilling to serve, the
number of authorized directors shall be automatically reduced by a number equal
to the number of such persons. The members of the Board of Directors need not be
shareholders nor need they be residents of any particular state. At any time
that the Board has six or more members, unless provided otherwise by the
Articles of Incorporation, the terms of office of
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directors will be staggered by dividing the total number of directors into three
classes, with each class accounting for one-third, as near as may be, of the
total. The terms of directors in the first class expire at the first annual
shareholders' meeting after their election, the terms of the second class expire
at the second annual shareholders' meeting after their election, and the terms
of the third class expire at the third annual shareholders' meeting after their
election. At each annual shareholders' meeting held thereafter, directors shall
be chosen for a term of three years to succeed those whose terms expire. If the
number of directors is changed, any increase or decrease shall be so apportioned
among the classes as to make all classes as nearly equal in number as possible,
and when the number of directors is increased and any newly created
directorships are filled by the board, the terms of the additional directors
shall expire at the next election of directors by the shareholders. Each
director, except in the case of his earlier death, written resignation,
retirement, disqualification or removal, shall serve for the duration of his
term, as staggered, and thereafter until his successor shall have been elected
and qualified.}
Section 3: Qualifications of Directors. No individual who is or becomes
a Business Competitor (as defined below) or who is or becomes affiliated with,
employed by or a representative of any individual, corporation, association,
partnership, firm, business enterprise or other entity or organization which the
Board of Directors, after having such matter formally brought to its attention,
determines to be in competition with the Corporation or any of its subsidiaries
(any such individual, corporation, association, partnership, firm, business
enterprise or other entity or organization being hereinafter referred to as a
"Business Competitor") shall be eligible to serve as a director if the Board of
Directors determines that it would not be in the Corporation's best interests
for such individual to serve as a director of the Corporation. Such affiliation,
employment or representation may include, without limitation, service or status
as an owner, partner, shareholder, trustee, director, officer, consultant,
employee, agent, or counsel, or the existence of any relationship which results
in the affected person having an express or implied obligation to act on behalf
of a Business Competitor; provided, however, that passive ownership of a debt or
equity interest not exceeding 1% of the outstanding debt or equity, as the case
may be, in any Business Competitor shall not constitute such affiliation,
employment or representation. Any financial institution having branches or
affiliates in Beaufort County, South Carolina, shall be presumed to be a
Business Competitor unless the Board of Directors determines otherwise.
Section 4: Election of Directors. Directors shall be elected by a
plurality vote.
Section 5: Nomination of Directors.
(a) Nomination of persons to serve as directors of the
Corporation, other than those made by or on behalf of the Board of Directors of
the Corporation, shall be made in writing and shall be delivered either by
personal delivery or by United States mail, postage prepaid, return receipt
requested, to the secretary of the Corporation no later than (i) with respect to
an election to be held at an annual meeting of shareholders, ninety days in
advance of such meeting; and (ii) with respect to an election to be held at a
special meeting of shareholders for the election of directors, the close of
business on the seventh day following the date on which notice of such meeting
is first given to shareholders. Each notice shall set forth: (i) the name and
address of the shareholder who intends to make the nomination and of the person
or persons to be
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nominated; (ii) a representation that the shareholder is a holder of record of
stock of the Corporation entitled to vote at such meeting and intends to appear
in person or by proxy at the meeting to nominate the person or persons specified
in the notice; (iii) a description of all arrangements or understandings between
the shareholder and each nominee and any other person or persons (naming such
person or persons) pursuant to which the nomination or nominations are to be
made by the shareholder; (iv) such other information regarding each nominee
proposed by such shareholder as would be required to be included in a proxy
statement filed pursuant to the proxy rules of the Securities and Exchange
Commission, had the nominee been nominated, or intended to be nominated, by the
Board of Directors; and (v) the consent of each nominee to serve as a director
of the Corporation if so elected. The chairman of the meeting may refuse to
acknowledge the nomination of any person not made in compliance with the
foregoing procedure. The chairman of any such meeting, for good cause shown and
with proper regard for the orderly conduct of business at the meeting, may waive
in whole or in part the operation of this Section 4.
(b) Notwithstanding subsection (a) of this Section 4, if
the Corporation or any banking subsidiary of the Corporation is subject to the
requirements of Title 12, Section 1831(i) of the United States Code, then no
person may be nominated by a shareholder for election as a director at any
meeting of shareholders unless the shareholder furnishes the written notice
required by subsection (a) of this Section 4 to the secretary of the Corporation
at least ninety days prior to the date of the meeting and the nominee has
received regulatory approval to serve as a director prior to the date of the
meeting.
Section 6: Retirement of Directors. No person shall be elected or
reelected a director of the Corporation after attaining the age of 75, provided
that this provision shall not apply to any initial director who shall have
attained the age of 75 prior to the date of the initial adoption of these
Bylaws.
Section 7: Emeritus Directors. The Board of Directors may, from time to
time, appoint individuals (including individuals who have retired from the Board
of Directors) to serve as members of the Emeritus Board of Directors of the
Corporation. Each member of the Emeritus Board of Directors of the Corporation,
except in the case of his earlier death, resignation, retirement,
disqualification or removal, shall serve until the next succeeding annual
meeting of the Board of Directors of the Corporation. Members of the Emeritus
Board of Directors may be removed without cause by a vote of the members of the
Board of Directors. Any individual appointed as a member of the Emeritus Board
of Directors of the Corporation may, but shall not be required to, attend
meetings of the Board of Directors of the Corporation and may participate in any
discussions at such meetings, but such individual may not vote or be counted in
determining a quorum at any meeting of the Board of Directors of the
Corporation. It shall be the duty of the members of the Emeritus Board of
Directors of the Corporation to serve as goodwill ambassadors of the
Corporation, but such individuals shall not have any responsibility or be
subject to any liability imposed upon a member of the Board of Directors of the
Corporation or in any manner otherwise be deemed to be a member of the Board of
Directors of the Corporation. Each member of the Emeritus Board of Directors of
the Corporation shall be paid such compensation as may be set from time to time
by the Chairman of the Board of Directors of the Corporation and shall remain
eligible to participate in any stock option plan in which directors
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are eligible to participate which is maintained by, or participated in, from
time to time by the Corporation, according to the terms and conditions thereof.
Section 8: Vacancies. Except as otherwise provided by law, in the
Articles of Incorporation, or in these Bylaws (a) the office of a director shall
become vacant if he dies, resigns, or is removed from office, and (b) the Board
of Directors may declare vacant the office of a director if (i) he is
interdicted or adjudicated an incompetent, (ii) an action is filed by or against
him, or any entity of which he is employed as his principal business activity,
under the bankruptcy laws of the United States, (iii) in the sole opinion of the
Board of Directors he becomes incapacitated by illness or other infirmity so
that he is unable to perform his duties for a period of six months or longer, or
(iv) he ceases at any time to have the qualifications required by law, the
Articles of Incorporation or these Bylaws. The remaining directors may, by a
majority vote, fill any vacancy on the Board of Directors (including any vacancy
resulting from an increase in the authorized number of directors, or from the
failure of the shareholders to elect the full number of authorized directors)
for an unexpired term; provided that the shareholders shall have the right at
any special meeting called for such purpose prior to action by the Board of
Directors to fill the vacancy.
Section 9: Removal of Directors. Unless provided otherwise by the
Articles of Incorporation, directors may be removed with or without cause by
unanimous vote of the Board of Directors (with the abstention of any director
who is the subject of such vote) or the affirmative vote of the holders of at
least a majority of the shares entitled to vote at an election of directors,
such vote being taken at a meeting of the shareholders called for that purpose
at which a quorum is present.
Section 10: Place of Meetings. Meetings of the Board of Directors,
regular or special, may be held either within or without the State of South
Carolina.
Section 11: Regular Meetings. Regular meetings of the Board of
Directors may be held without notice at such time and place as shall from time
to time be determined by the Board of Directors.
Section 12: Special Meetings. Special meetings of the Board of
Directors may be called by the chairman, the chief executive officer, or the
president of the Corporation, on not less than twenty-four hours' notice. Notice
of a special meeting may be given by personal notice, telephone, facsimile,
electronic communication, overnight courier or United States mail to each
director. Any such special meeting shall be held at such time and place as shall
be stated in the notice of the meeting. The notice need not describe the purpose
or purposes of the special meeting.
Section 13: Telephone and Similar Meetings. Directors may participate
in and hold a meeting by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other. Participation in such a meeting shall constitute presence in person
at the meeting, except where a person participates in the meeting for the
express purpose of objecting to the holding of the meeting or the transacting of
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any business at the meeting on the ground that the meeting is not lawfully
called or convened, and does not thereafter vote for or assent to action taken
at the meeting.
Section 14: Quorum; Majority Vote. At meetings of the Board of
Directors a majority of the number of directors then in office shall constitute
a quorum for the transaction of business. The act of a majority of the directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors, except as otherwise specifically provided by law, the Articles or
these Bylaws. If a quorum is not present at a meeting of the Board of Directors,
the directors present may adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum is present.
Section 15: Compensation. Each director shall be entitled to receive
such reasonable compensation as may be determined by resolution of the Board of
Directors. By resolution of the Board of Directors, the directors may be paid
their expenses, if any, of attendance at each meeting of the Board of Directors
and may be paid a fixed sum for attendance at each meeting of the Board of
Directors. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of committees may, by resolution of the Board of Directors, be allowed
compensation for attending committee meetings.
Section 16: Procedure. The Board of Directors shall keep regular
minutes of its proceedings. The minutes shall be placed in the minute book of
the Corporation.
Section 17: Action Without Meeting. Any action required or permitted to
be taken at a meeting of the Board of Directors may be taken without a meeting
if the action is assented to by all the members of the Board. Such consent shall
have the same force and effect as a meeting vote and may be described as such in
any document.
ARTICLE 4: BOARD COMMITTEES
Section 1: Designation. The Board of Directors may, by resolution
adopted by a majority of the full Board, designate one or more committees. Each
committee must have two or more members who serve at the pleasure of the Board
of Directors. To the extent specified by the Board of Directors, in the Articles
or in these Bylaws, each committee may exercise the authority of the Board of
Directors. So long as prohibited by law, however, a committee of the Board may
not (a) authorize distributions; (b) approve or propose to shareholders action
required by the Act to be approved by shareholders; (c) fill vacancies on the
Board of Directors or on any of its committees; (d) amend the Articles; (e)
adopt, amend or repeal these Bylaws; (f) approve a plan of merger not requiring
shareholder approval; (g) authorize or approve reacquisition of shares, except
according to a formula or method prescribed by the Board of Directors; or (h)
authorize or approve the issuance or sale or contract for sale of shares, or
determine the designation and relative rights, preferences and limitations of a
class or series of shares, except that the Board of Directors may authorize a
committee (or a senior executive officer of the Corporation) to do so within
limits specifically prescribed by the Board of Directors. Any
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director may serve one or more committee. Any committee appointed under this
Section 1 shall perform such duties and assume such responsibility as may from
time to time be placed upon it by the Board of Directors.
Section 2: Meetings. Time, place and notice of all committee meetings
shall be as called and specified by the chief executive officer, the committee
chairman or any two members of each committee.
Section 3: Quorum; Majority Vote. At meetings of committees, a majority
of the number of members designated by the Board of Directors shall constitute a
quorum for the transaction of business. The act of a majority of the members
present at any meeting at which a quorum is present shall be the act of such
committee, except as otherwise specifically provided by the Act, the Articles or
these Bylaws. If a quorum is not present at a meeting of the committee, the
members present may adjourn the meeting from time to time, without notice other
than an announcement at the meeting, until a quorum is present.
Section 4: Procedure. Committees shall keep regular minutes of their
proceedings and report the same to the Board of Directors at its next regular
meeting. The minutes of the proceedings of the committee shall be placed in the
minute book of the Corporation.
Section 5: Action Without Meeting. Any action required or permitted to
be taken at a meeting of any committee may be taken without a meeting if the
action is assented to by all the members of the committee. Such consent shall
have the same force and effect as a meeting vote and may be described as such in
any document.
Section 6: Telephone and Similar Meetings. Committee members may
participate in and hold a meeting by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other. Participation in such a meeting shall constitute
presence in person at the meeting, except where a person participates in the
meeting for the express purpose of objecting to the holding of the meeting or
the transacting of any business at the meeting on the ground that the meeting is
not lawfully called or convened, and does not thereafter vote for or assent to
action taken at the meeting.
ARTICLE 5: OFFICERS
OFFICERS
Section 1: Offices. The officers of the Corporation shall consist of a
chief executive officer, president and secretary, each of whom shall be elected
by the Board of Directors. The Board of Directors may also create and establish
the duties of other offices as it deems appropriate. The Board of Directors
shall also elect a chairman of the Board and may elect a vice chairman of the
Board from among its members. The Board of Directors from time to time may
appoint, or may authorize the president to appoint or authorize specific
officers to appoint, the persons who shall hold such other offices as may be
established by the Board of Directors, including one or more vice presidents
(including executive vice presidents, senior vice
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presidents, assistant vice presidents), one or more assistant secretaries, and
one or more assistant treasurers. Any two or more offices may be held by the
same person.
Section 2: Term. Each officer shall serve at the pleasure of the Board
of Directors (or, if appointed pursuant to this Article, at the pleasure of the
Board of Directors, the president, or the officer authorized to have appointed
the officer) until his or her death, resignation, or removal, or until his or
her replacement is elected or appointed in accordance with this Article.
Section 3: Vacancies. Any vacancy occurring in any office of the
Corporation may be filled by the Board of Directors. Any vacancy in an office
which was filled by the president or another officer may also be filled by the
president or by any officer authorized to have filled the office vacant.
Section 4: Compensation. The compensation of all officers of the
Corporation shall be fixed by the Board of Directors or by a committee or
officer appointed by the Board of Directors. Officers may serve without
compensation.
Section 5: Removal. All officers (regardless of how elected or
appointed) may be removed, with or without cause, by the Board of Directors. Any
officer appointed by the president or another officer may also be removed, with
or without cause, by the president or by any officer authorized to have
appointed the officer to be removed. Removal will be without prejudice to the
contract rights, if any, of the person removed, but shall be effective
notwithstanding any damage claim that may result from infringement of such
contract rights.
Section 6: Chairman of the Board. The office of the chairman of the
board may be filled by the Board at its pleasure by the election of one of its
members to the office. The chairman shall preside at all meetings of the Board
and meetings of the shareholders and shall perform such other duties as may be
assigned to him by the Board of Directors.
Section 7: Chief Executive Officer. The chief executive officer shall
be responsible for the general and active management of the business and affairs
of the Corporation, and shall see that all orders and resolutions of the Board
are carried into effect. He shall perform such other duties and have such other
authority and powers as the Board of Directors may from time to time prescribe.
Section 8: President. The president shall be responsible for the
general and active management of the business and affairs of the Corporation,
and shall see that all orders and resolutions of the Board are carried into
effect. He shall perform such other duties and have such other authority and
powers as the Board of Directors may from time to time prescribe. The president
shall preside as chairman of the Board of Directors during the absence of the
Board chairman.
Section 9: Vice Presidents. The vice presidents (executive, senior, or
assistant), as such offices are appointed by the Board of Directors, in the
order of their seniority, unless otherwise determined by the Board of Directors,
shall, in the absence or disability of the
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president, perform the duties and have the authority and exercise the powers of
the president. They shall perform such other duties and have such other
authority and powers as the Board of Directors may from time to time prescribe
or as the president may from time to time delegate.
Section 10: Secretary.
(a) The secretary shall attend all meetings of the Board
of Directors and all meetings of the shareholders and record all votes, actions
and the minutes of all proceedings in a book to be kept for that purpose and
shall perform like duties for the executive and other committees when required.
(b) The secretary shall give, or cause to be given,
notice of all meetings of the shareholders and special meetings of the Board of
Directors.
(c) The secretary shall keep in safe custody the seal of
the Corporation and, when authorized by the Board of Directors or the executive
committee, affix it to any instrument requiring it. When so affixed, it shall be
attested by the secretary's signature or by the signature of the treasurer or an
assistant secretary.
(d) The secretary shall be under the supervision of the
president and shall perform such other duties and have such other authority and
powers as the Board of Directors may from time to time prescribe or as the
president may from time to time delegate.
Section 11: Assistant Secretary. The assistant secretaries, as such
offices are created by the Board of Directors, in the order of their seniority,
unless otherwise determined by the Board of Directors, shall, in the absence or
disability of the secretary, perform the duties and have the authority and
exercise the powers of the secretary. They shall perform such other duties and
have such other powers as the Board of Directors may from time to time prescribe
or as the president may from time to time delegate.
Section 12: Treasurer.
(a) The treasurer shall have the custody of the corporate
funds and securities and shall keep full and accurate accounts of receipts and
disbursements of the Corporation and shall deposit all moneys and other
valuables in the name and to the credit of the Corporation in appropriate
depositories.
(b) The treasurer shall disburse the funds of the
Corporation ordered by the Board of Directors and prepare financial statements
as they direct.
(c) The treasurer shall perform such other duties and
have such other authority and powers as the Board of Directors may from time to
time prescribe or as the president may from time to time delegate.
(d) The treasurer's books and accounts shall be opened at
any time during business hours to the inspection of any directors of the
Corporation.
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<PAGE> 16
ARTICLE 6: INDEMNIFICATION
Section 1: Indemnification of Directors.
(a) The Corporation shall indemnify and hold harmless, to
the fullest extent permitted by applicable law, any person (an "Indemnified
Person") who was or is a party or is threatened to be made a party to or is
otherwise involved in any threatened, pending or completed action, suit or other
proceeding, whether civil, criminal, administrative or investigative and whether
formal or informal, by reason of the fact that he, or a person for whom he is a
legal representative (or other similar representative), is or was a director of
the Corporation or is or was serving at the Corporation's request as a director,
officer, partner, trustee, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise,
against expenses (including attorneys' fees), judgments, fines, amounts paid in
settlement or other similar costs actually and reasonably incurred in connection
with such action, suit or proceeding. For purposes of this Article 6, all terms
used herein that are defined in Section 33-8-500 of the Act or any successor
provision or provisions shall have the meanings so prescribed in such Section.
(b) Without limiting the provisions of Section 1(a) of
this Article 6, the Corporation shall indemnify a director who was wholly
successful, on the merits or otherwise, in the defense of any proceeding to
which he was a party because he is or was a director of the Corporation against
reasonable expenses incurred by him in connection with the proceeding. In
addition, the Corporation shall indemnify an individual made a party to a
proceeding because he is or was a director against liability incurred in the
proceeding if: (i) he conducted himself in good faith; (ii) he reasonably
believed: (A) in the case of conduct in his official capacity with the
Corporation, that his conduct was in its best interest; and (B) in all other
cases, that his conduct was at least not opposed to its best interest; and (iii)
in the case of any criminal proceeding, he had no reasonable cause to believe
his conduct was unlawful. The termination of a proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent is
not, of itself, determinative that the director did not meet the standard of
conduct described in this subsection (b). The determination of whether the
director met the standard of conduct described in this subsection (b) shall be
made in accordance with Section 33-8-550 of the Act or any successor provision
or provisions.
Section 2: Advancement of Expenses.
(a) With respect to any proceeding to which an
Indemnified Person is a party because he is or was a director of the
Corporation, the Corporation shall, to the fullest extent permitted by
applicable law, pay for or reimburse the Indemnified Person's reasonable
expenses (including, but not limited to, attorneys' fees and disbursements,
court costs, and expert witness fees) incurred by the Indemnified Person in
advance of final disposition of the proceeding.
(b) Without limiting the provisions of Section 2(a) of
this Article 6, the Corporation shall, to the fullest extent permitted by
applicable law, pay for or reimburse the
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<PAGE> 17
reasonable expenses (including, but not limited to, attorneys' fees and
disbursements, court costs and expert witness fees) incurred by a director who
is a party to a proceeding in advance of final disposition of the proceeding if:
(a) the director furnishes the Corporation a written affirmation of his good
faith belief that he has met the standard of conduct described in Section 1(b)
of this Article 6; (b) the director furnishes the Corporation a written
undertaking, executed personally or on his behalf, to repay the advance if it is
ultimately determined that he did not meet such standard of conduct; and (c) a
determination is made that the facts then known to those making the
determination would not preclude indemnification under this Article 6. The
Corporation shall expeditiously pay the amount of such expenses to the director
following the director's delivery to the Corporation of a written request for an
advance pursuant to this Section 2 together with a reasonable accounting of such
expenses. The undertaking required by this Section 2 shall be an unlimited
general obligation of the director but need not be secured and may be accepted
without reference to financial ability to make repayment. Determinations and
authorizations of payments under this Section 2 shall be made in the manner
specified in Section 33-8-550 of the Act or any successor provision or
provisions.
Section 3: Indemnification of Officers, Employees and Agents. An
officer of the Corporation who is not a director is entitled to the same
indemnification rights which are provided to directors of the Corporation in
Section 1 of this Article 6 and the Corporation shall advance expenses to
officers of the Corporation who are not directors to the same extent and in the
same manner as to directors as provided in Section 2 of this Article 6. In
addition, the Board of Directors shall have the power to cause the Corporation
to indemnify, hold harmless and advance expenses to any officer, employee or
agent of the Corporation who is not a director to the fullest extent permitted
by public policy, by adopting a resolution to that effect identifying such
officers, employees or agents (by position and name) and specifying the
particular rights provided, which may be different for each of the persons
identified. Any officer entitled to indemnification pursuant to the first
sentence of this Section 3 and any officer, employee or agent granted
indemnification by the Board of Directors in accordance with the second sentence
of this Section 3 shall, to the extent specified herein or by the Board of
Directors, be an "Indemnified Party" for the purposes of the provisions of this
Article 6.
Section 4: Insurance. The Corporation may purchase and maintain
insurance on behalf of an individual who is or was a director, officer, employee
or agent of the Corporation, or who, while a director, officer, employee or
agent of the Corporation, is or was serving at the request of the Corporation as
a director, officer, partner, trustee, employee or agent of another foreign or
domestic corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise, against liability asserted against or incurred by him in
that capacity or arising from his status as a director, officer, employee or
agent, whether or not the Corporation would have the power to indemnify him
against the same liability under this Article 6.
Section 5: Nonexclusivity of Rights; Agreements. The rights conferred
on any person by this Article 6 shall neither limit nor be exclusive of any
other rights which such person may have or hereafter acquire under any statute,
agreement, provision of the Articles, these Bylaws, vote of shareholders or
otherwise. The provisions of this Article 6 shall be deemed to constitute an
agreement between the Corporation and each person entitled to indemnification
hereunder. In addition to the rights provided in this Article 6, the Corporation
shall have the
13
<PAGE> 18
power, upon authorization by the Board of Directors, to enter into an agreement
or agreements providing to any person who is or was a director, officer,
employee or agent of the Corporation certain indemnification rights. Any such
agreement between the Corporation and any director, officer, employee or agent
of the Corporation concerning indemnification shall be given full force and
effect, to the fullest extent permitted by applicable law, even if it provides
rights to such director, officer, employee or agent more favorable than, or in
addition to, those rights provided under this Article 6.
Section 6: Continuing Benefits; Successors. The indemnification and
advancement of expenses provided by or granted pursuant to this Article 6 shall,
unless otherwise provided when authorized or ratified, continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such person. For
purposes of this Article 6, the term "Corporation" shall include any
corporation, joint venture, trust, partnership or unincorporated business
association that is the successor to all or substantially all of the business or
assets of this Corporation, as a result of merger, consolidation, sale,
liquidation or otherwise, and any such successor shall be liable to the persons
indemnified under this Article 6 on the same terms and conditions and to the
same extent as this Corporation.
Section 7: Interpretation; Construction. This Article 6 is intended to
provide indemnification to the directors and permit indemnification to the
officers of the Corporation to the fullest extent permitted by applicable law as
it may presently exist or may hereafter be amended and shall be construed in
order to accomplish this result. To the extent that a provision herein prevents
a director or officer from receiving indemnification to the fullest extent
intended, such provision shall be of no effect in such situation. If at any time
the Act is amended so as to permit broader indemnification rights to the
directors and officers of this Corporation, then these Bylaws shall be deemed to
automatically incorporate these broader provisions so that the directors and
officers of the Corporation shall continue to receive the intended
indemnification to the fullest extent permitted by applicable law.
Section 8: Amendment. Any amendment to this Article 6 that limits or
otherwise adversely affects the right of indemnification, advancement of
expenses or other rights of any Indemnified Person hereunder shall, as to such
Indemnified Person, apply only to claims, actions, suits or proceedings based on
actions, events or omissions (collectively, "Post Amendment Events") occurring
after such amendment and after delivery of notice of such amendment to the
Indemnified Person so affected. Any Indemnified Person shall, as to any claim,
action, suit or proceeding based on actions, events or omissions occurring prior
to the date of receipt of such notice, be entitled to the right of
indemnification, advancement of expenses and other rights under this Article 6
to the same extent as if such provisions had continued as part of the Bylaws of
the Corporation without such amendment. This Section 8 cannot be altered,
amended or repealed in a manner effective as to any Indemnified Person (except
as to Post Amendment Events) without the prior written consent of such
Indemnified Person.
Section 9: Severability. Each of the Sections of this Article 6, and
each of the clauses set forth herein, shall be deemed separate and independent,
and should any part of any such Section or clause be declared invalid or
unenforceable by any court of competent
14
<PAGE> 19
jurisdiction, such invalidity or unenforceability shall in no way render invalid
or unenforceable any other part thereof or any separate Section or clause of
this Article 6 that is not declared invalid or unenforceable.
ARTICLE 7: CERTIFICATES AND SHAREHOLDERS
Section 1: Certificates. Certificates in the form determined by the
Board of Directors shall be delivered representing all shares of which
shareholders are entitled. Certificates shall be consecutively numbered and
shall be entered in the books of the Corporation as they are issued. At a
minimum, each share certificate must state on its face: (a) the name of the
Corporation and that it is organized under the laws of South Carolina; (b) the
name of the person to whom the certificate is issued; and (c) the number and
class of shares and the designation of the series, if any, the certificate
represents. Each share certificate (a) must be signed (either manually or in
facsimile) by at least two officers, including the president, the secretary, or
such other officer or officers as the Board of Directors shall designate; and
(b) may bear the corporate seal or its facsimile. If the person who signed
(either manually or in facsimile) a share certificate no longer holds office
when the certificate is issued, the certificate is nevertheless valid.
Section 2: Issuance of Shares. The Board of Directors may authorize
shares to be issued for consideration consisting of any tangible or intangible
property or benefit to the Corporation, including cash, promissory notes,
services performed, written contracts for services to be performed or other
securities of the Corporation. Before the Corporation issues shares, the Board
of Directors must determine that the consideration received or to be received
for shares to be issued is adequate. That determination by the Board of
Directors is conclusive insofar as the adequacy of consideration for the
issuance of shares relates to whether the shares are validly issued, fully paid
and nonassessable. When the Corporation receives the consideration for which the
Board of Directors authorized the issuance of shares, the shares issued therefor
are fully paid and nonassessable.
Section 3: Rights of Corporation with Respect to Registered Owners.
Prior to due presentation for transfer of registration of its shares, the
Corporation may treat the registered owner of the shares as the person
exclusively entitled to vote the shares, to receive any dividend or other
distribution with respect to the shares, and for all other purposes; and the
Corporation shall not be bound to recognize any equitable or other claim to or
interest in the shares on the part of any other person, whether or not it has
express or other notice of such a claim or interest, except as otherwise
provided by law.
Section 4: Transfers of Shares. Transfers of shares shall be made upon
the books of the Corporation kept by the Corporation or by the transfer agent
designated to transfer the shares, only upon direction of the person named in
the certificate or by an attorney lawfully constituted in writing. Before a new
certificate is issued, the old certificate shall be surrendered for cancellation
or, in the case of a certificate alleged to have been lost, stolen or destroyed,
the provisions of these Bylaws shall have been complied with.
15
<PAGE> 20
Section 5: Registration of Transfer. The Corporation shall register the
transfer of a certificate for shares presented to it for transfer if: (a) the
certificate is properly endorsed by the registered owner or by his duly
authorized attorney; (b) the signature of such person has been guaranteed by a
commercial bank or brokerage firm that is a member of the National Association
of Securities Dealers and reasonable assurance is given that such endorsements
are effective; (c) the Corporation has no notice of an adverse claim or has
discharged any duty to inquire into such a claim; (d) any applicable law
relating to the collection of taxes has been complied with; and (e) the transfer
is in compliance with applicable provisions of any transfer restrictions of
which the Corporation shall have notice.
Section 6: Lost, Stolen or Destroyed Certificates. The Corporation
shall issue a new certificate in place of any certificate for shares previously
issued if the registered owner of the certificate: (a) makes proof in affidavit
form that the certificate has been lost, destroyed or wrongfully taken; (b)
requests the issuance of a new certificate before the Corporation has notice
that the certificate has been acquired by a purchaser for value in good faith
and without notice of an adverse claim; (c) gives a bond in such form, and with
such surety or sureties, with fixed or open penalty, as the Corporation may
direct, to indemnify the Corporation (and its transfer agent and registrar, if
any) against any claim that may be made on account of the alleged loss,
destruction or theft of the certificate; and (d) satisfies any other reasonable
requirements imposed by the Corporation. When a certificate has been lost,
apparently destroyed or wrongfully taken, and the holder of record fails to
notify the Corporation within a reasonable time after he has notice of it, and
the Corporation registers a transfer of the shares represented by the
certificate before receiving such notification, the holder of record is
precluded from making any claim against the Corporation for the transfer or for
a new certificate.
Section 7: Restrictions on Shares. The Board of Directors, on behalf of
the Corporation, or the shareholders may impose restrictions on the transfer of
shares (including any security convertible into, or carrying a right to
subscribe for or acquire shares) to the maximum extent permitted by law. A
restriction does not affect shares issued before the restriction was adopted
unless the holders of the shares are parties to the restriction agreement or
voted in favor of the restriction. A restriction on the transfer of shares is
valid and enforceable against the holder or a transferee of the holder if the
restriction is authorized by this Section 7 and its existence is noted
conspicuously on the front or back of the certificate.
Section 8: Control Share Acquisitions Statute. The Corporation elects
not to be subject to or governed by the South Carolina Control Share
Acquisitions Statute contained in Sections 35-2-101 to 35-2-111 of the South
Carolina Code, or any successor provision or provisions.
Section 9: Voting of Stock Held. Unless otherwise provided by
resolution of the Board of Directors, the president or any executive vice
president shall from time to time appoint an attorney or attorneys or agent or
agents of this Corporation, in the name and on behalf of this Corporation, to
cast the vote which this Corporation may be entitled to cast as a shareholder or
otherwise in any other corporation, any of whose stock or securities may be held
by this Corporation, at meetings of the holders of the stock or other securities
of such other corporation,
16
<PAGE> 21
or to consent in writing to any action by any of such other corporation, and
shall instruct the person or persons so appointed as to the manner of casting
such votes or giving such consent and may execute or cause to be executed on
behalf of this Corporation and under its corporate seal or otherwise, such
written proxies, consents, waivers or other instruments as may be necessary or
proper; or, in lieu of such appointment, the president or any executive vice
president may attend in person any meetings of the holders of stock or other
securities of any such other corporation and their vote or exercise any or all
power of this Corporation as the holder of such stock or other securities of
such other corporation.
ARTICLE 8: GENERAL PROVISIONS
Section 1: Distributions. The Board of Directors may authorize, and the
Corporation may make, distributions (including dividends on its outstanding
shares) in the manner and upon the terms and conditions provided by applicable
law and the Articles.
Section 2: Books and Records. The Corporation shall keep correct and
complete books and records of account and shall keep minutes of the proceedings
of its shareholders and Board of Directors.
Section 3: Execution of Documents. The Board of Directors or these
Bylaws shall designate the officers, employees and agents of the Corporation who
shall have the power to execute and deliver deeds, contracts, mortgages, bonds,
debentures, checks and other documents for and in the name of the Corporation,
and may authorize such officers, employees and agents to delegate such power
(including authority to redelegate) to other officers, employees or agents of
the Corporation. Unless so designated or expressly authorized by these Bylaws,
no officer, employee or agent shall have any power or authority to bind the
Corporation by any contract or engagement or to pledge its credit or to render
it liable pecuniarily for any purpose or any amount.
Section 4: Fiscal Year. The fiscal year of the Corporation shall be the
same as the calendar year.
Section 5: Seal. The Corporation may provide a seal which contains the
name of the Corporation and the name of the state of incorporation. The seal may
be used by impressing it or reproducing a facsimile of it or otherwise.
Section 6: Resignation. A director may resign by delivering written
notice to the Board of Directors, the chairman or the Corporation. Such
resignation of a director is effective when the notice is delivered unless the
notice specifies a later effective date. An officer may resign at any time by
delivering notice to the Corporation. Such resignation of an officer is
effective when the notice is delivered unless the notice specifies a later
effective date. If a resignation of an officer is made effective at a later date
and the Corporation accepts the future effective date, the Board of Directors
may fill the pending vacancy before the effective date if the Board of Directors
provides that the successor does not take office until the effective date.
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<PAGE> 22
Section 7: Computation of Days. In computing any period of days
prescribed hereunder the day of the act after which the designated period of
days begins to run is not to be included. The last day of the period so computed
is to be included.
Section 8: Amendment of Bylaws.
(a) Except to the extent required otherwise by law, these
Bylaws, or the Articles of Incorporation, these Bylaws may be altered, amended
or repealed or new Bylaws may be adopted at any meeting of the Board of
Directors at which a quorum is present, by the affirmative vote of a majority of
the directors then in office, provided notice of the proposed alteration,
amendment or repeal is contained in the notice of the meeting.
(b) Except to the extent required otherwise by law, these
Bylaws, or the Articles of Incorporation, these Bylaws may also be altered,
amended or repealed or new Bylaws may be adopted at any meeting of the
shareholders at which a quorum is present or represented by proxy, by the
affirmative vote of the holders of a majority of each class of shares entitled
to vote thereon, provided notice of the proposed alteration, amendment or repeal
is contained in the notice of the meeting.
(c) Upon adoption of any new bylaw by the shareholders,
the shareholders may provide expressly that the Board of Directors may not
adopt, amend or repeal that bylaw or any bylaw on that subject.
Section 9: Construction. If any portion of these Bylaws shall be
invalid or inoperative, then, so far as is reasonable and possible: (a) the
remainder of these Bylaws shall be considered valid and operative and (b) effect
shall be given to the intent manifested by the portion held invalid or
inoperative.
Section 10: Headings. The headings are for convenience of reference
only and shall not affect in any way the meaning or interpretation of these
Bylaws.
18
<PAGE> 23
The undersigned, as President of the Corporation, hereby
certifies that the bylaws contained herein are the true and correct bylaws
adopted by the Corporation's board of directors in compliance with any
procedural requirements of the Corporation's Articles of Incorporation and the
laws of the State of South Carolina, and the rules and regulations promulgated
thereunder.
/s/ RANDOLPH C. KOHN
------------------------------
Randolph C. Kohn
President
Date: June 1, 1999
-------------------------
19
<PAGE> 1
EXHIBIT 4.2
[FORM OF FACE OF CERTIFICATE]
COASTAL BANKING COMPANY, INC.
INCORPORATED UNDER THE LAWS OF SOUTH CAROLINA
THE CORPORATION IS TO ISSUE 10,000,000 SHARES OF COMMON STOCK - PAR VALUE $.01
EACH
This certifies that _______________________________is the registered holder of
_______________________________ Shares of Common Stock which are fully paid and
non-assessable and transferable only on the books of the Corporation by the
holder hereof in person or by Attorney upon surrender of this Certificate
properly endorsed.
In Witness Whereof, the said Corporation has caused this Certificate to
be signed by its duly authorized officers and its Corporate Seal to be hereunto
affixed this ______________ day of _______________ A.D. 19____
- ------------------------------- ----------------------------------
SECRETARY PRESIDENT
<PAGE> 2
[FORM OF BACK OF CERTIFICATE]
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
TEN COM --as tenants in common UNIF GIFT MIN ACT-- ____Custodian
TEN ENT --as tenants by the entireties (Cust) (Minor)
JT TEN --as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act_________________
in common (State)
Additional abbreviations may also be used though not in the above list.
For value received, _________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE
- --------------------------------------------------------------------------------
Shares
- --------------------------------------------------------------------------
represented by the within Certificate, and do hereby irrevocably constitute and
appoint ____________________ Attorney to transfer the said shares on the books
of the within-named Corporation with full power of substitution in the premises.
Dated,
----------------------
In presence of
- ----------------------------------------
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION
OR ENLARGEMENT, OR ANY CHANGE WHATEVER.
<PAGE> 1
EXHIBIT 5.1
NEGLAW OFFICES
NELSON MULLINS RILEY & SCARBOROUGH, L.L.P.
A REGISTERED LIMITED LIABILITY PARTNERSHIP
999 PEACHTREE STREET, N.E.
FIRST UNION PLAZA
SUITE 1400
ATLANTA, GEORGIA 30309
TELEPHONE (404) 817-6000
FACSIMILE (404) 817-6050
WWW.NMRS.COM
August 27, 1999
Coastal Banking Company, Inc.
1330 Lady Street, Third Floor
Columbia, South Carolina 29201
Re: Registration Statement on Form SB-2
Ladies and Gentlemen:
We have acted as counsel to Coastal Banking Company, Inc (the
"Company") in connection with the filing of a Registration Statement on Form
SB-2 (the "Registration Statement"), under the Securities Act of 1933, covering
the offering of up to 1,000,000 shares (the "Shares") of the Company's Common
Stock, par value $.01 per share. In connection therewith, we have examined such
corporate records, certificates of public officials, and other documents and
records as we have considered necessary or proper for the purpose of this
opinion.
The opinions set forth herein are limited to the laws of the State of
South Carolina and applicable federal laws.
Based on the foregoing, and having regard to legal considerations which
we deem relevant, we are of the opinion that the Shares, when issued and
delivered as subscribed in the Registration Statement, will be legally issued,
fully paid, and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption "Legal
Matters" in the Prospectus contained in the Registration Statement.
NELSON MULLINS RILEY & SCARBOROUGH
By: /s/ J. Brennan Ryan
----------------------------
J. Brennan Ryan
<PAGE> 1
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") dated as of August 12,
1999, is made by and between Coastal Banking Company, a South Carolina
corporation (the "Employer" or the "Company") which is the proposed bank holding
company for Lowcountry National Bank (Proposed), a proposed national bank (the
"Bank"), and Randy C. Kohn, 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 five 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 five years; provided that the Executive or the Bank
may at any time, by written notice, fix the Term to a finite term of five 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 on the date the bank opens for business, the
Employer shall pay the Executive an initial annual base salary of $96,000, 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 or
as published by the Department of Labor (the "Mandatory Annual Increase"). The
Board (or an appropriate committee of the Board) shall review the Executive's
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 income
of the Bank (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) Prior to the Opening Date, the Employer shall provide
the Executive with a reasonable allowance each month for an automobile.
Beginning upon the Opening Date, the Company shall provide the Executive with
either an automobile (at a cost not to exceed $30,000) owned or leased by the
Company of a make and model appropriate to the Executive's status, or a monthly
automobile allowance not to exceed $700 per month. The Company shall provide for
reasonable expenses associated with the automobile, including, but not limited
to insurance, taxes, etc.
(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
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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
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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.
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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
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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
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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
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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
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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
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.
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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.
COASTAL BANKING COMPANY
ATTEST:
By: /s/ Mark B. Heles By: /s/ Ladson F. Howell
------------------------------- -------------------------------
Name: Mark B. Heles Title: Chairman
-----------------------------
EXECUTIVE
/s/ Randy C. Kohn
----------------------------------
Randy C. Kohn
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EXHIBIT 10.2
PURCHASE AND SALES AGREEMENT
CASH SALE
THIS PURCHASE AND SALES AGREEMENT entered into the date hereinafter set forth by
BBG and/or Assigns Purchaser(s), and
Sterling Graydon and Helene Dowling Seller (s).
PREMISES DESCRIPTION. Purchaser agrees to purchase, and Seller agrees to sell,
the real property, with the buildings and improvements thereon, if any, situated
in Beaufort County, State of South Carolina, and described as follows:
___ll Street Address: 145-A SEA ISLAND PARKWAY - 2.3 +/- ACRES
DISTRICT/MAP/PARCEL (TAX NUMBER) -- 200-15-145A
PERSONAL PROPERTY: The premises includes all improvements thereto, all installed
fixtures and appurtenances, and also the following personal property (but to
which no portion of the purchase has been allocated) 900,000.00 /s/ HBD Feb 4,
1999 /s/ SLG
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PURCHASE PRICE: The purchase price is $755,000.00, payable as follows:
A) $5,000.00 earnest money shall be paid upon the written acceptance of this
contract and applied toward the purchase price at closing.
B) The balance of the purchase price shall be paid in cash, certified bank funds
or the equivalent at closing.
EARNEST MONEY. Cash or certified funds tendered as earnest money will be
deposited in the listing Broker's escrow account within forty eight (48) hours
after receipt, and personal checks will be deposited in the listing Broker's
escrow account forty eight (48) hours after written acceptance of this Contract.
Refund of earnest money paid by check will not be made prior to fifteen (15)
days after deposit is made. No interest shall be paid on earnest money unless
otherwise stipulated in a separate written document. The listing Broker does not
guarantee payment of check (s) accepted as earnest money. If Purchaser and
Seller disagree as to the disposition of earnest money, then the listing Broker
is obligated by law to hold it in its escrow account until such time Purchaser
and Seller agree in writing, or a court of competent jurisdiction issues a
ruling as to its disposition.
If the appraisal of the premises made by the appraiser for Purchaser's lender
does not stipulate a market value of at least Sales Price, the parties shall
have the option, but not the obligation, of adjusting the purchase price. If the
Parties do not agree on an adjustment of the purchase price, then Purchaser may
rescind this Contract and receive a refund of earnest money deposit or purchase
the premises for the original purchase price.
CLOSING COST. Purchaser to pay all closing costs including but not limited to
attorneys' fees, document preparation, documentary stamps and all other costs or
expenses associated with closing, excluding commissions.
Purchaser Initial /s/MAT Purchaser Initial /s/JMT Seller Initial /s/ HBD Seller
Initial /s/ SLG
<PAGE> 2
Page 2 OF 5
PRORATION. Taxes, rents, homeowners association fees, and other assessments
shall be prorated as of the date of the closing.
CONVEYANCE AND CONDITION OF TITLE. Seller agrees to convey a good and marketable
title to the Premises by General Warranty Deed, with Deed Recording Fee paid,
subject only to applicable zoning ordinances, covenants and restrictions of
record, and utility easement. Title is good and marketable if insurable by an
ALTA title insurance company licensed in south Carolina.
CLOSING. The transaction shall be closed on SEE OTHER TERMS and possession of
the premised will be given to Purchaser at that time. Time is of the essence,
however, a party, for reasonable cause specifically set forth in a written
notice delivered to the other prior to the scheduled closing date, may extend
the closing for up to fourteen (14) days. Thereafter, the closing date can be
extended only if both parties sign an Extension Agreement.
FIRE OR CASUALTY. If the premises is destroyed wholly or partially by fire or
other casualty prior to closing, then Purchaser shall have the right to
terminate this Contract and receive a refund of the earnest money deposit.
DEFAULT. Upon default by Purchaser, Seller shall have the option of suing for
damages or specific performance, or of rescinding this Contract and retaining
Seller's portion of the earnest money as liquidated damages. Upon default by
seller, Purchaser shall have the option of suing for damages or specific
performance, or of rescinding this Contract and recovering from Seller all costs
and obligations incurred in anticipation of closing, including, without
limitation, the earnest money and the costs of the credit, appraisal, survey,
title examination and attorney's fees. The prevailing party in any litigation
shall be entitled to recover from the other the costs of prosecution, including
a reasonable sum for attorney's fees. The defaulting party shall also pay Broker
(s) an amount equal to the commission which would have been due and owing Broker
(s) had the purchase closed.
CONDITION OF PROPERTY.
A) ESSENTIAL PROPERTY CONDITIONS. Except to the extent hereinafter set forth,
Seller represents that to the best of Seller's knowledge, the building (s) and
other permanent improvements on the premises are in structurally sound
condition; that all mechanical, plumbing and heating/cooling systems are in
working order; that all appliances and fixtures are in operating condition.
These conditions are referred to herein "Essential Property Conditions."
EXCEPTIONS: Notwithstanding the above provision, Purchaser agrees to accept the
building(s) and other permanent improvements on the premises with the following
defects in the Essential Property conditions:
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Purchaser Initial /s/MAT Purchaser Initial /s/JMT Seller Initial /s/ HBD Seller
Initial /s/ SLG
<PAGE> 3
Page 3 OF 5
Purchaser shall have the right, and should exercise that right, to inspect the
building (s) and other permanent improvements on the premises, in person, by a
licensed home inspector, or otherwise, at Purchaser's expense, within fourteen
(14) calendar days after written acceptance of this Contract and to advise
Seller within such time, in writing, of any defects in the Essential Property
Conditions. Upon Purchaser's request, Seller shall cause all utilities to be
turned on so as to allow a proper inspection. If Purchaser timely notifies
Seller in writing of any defects in the Essential Property Conditions, then
Seller shall either: 1) remedy the defects at Seller's cost within a reasonable
amount of time after receiving written notice of the defects, but in any event
prior to closing; or 2) rescind this Contract AND PAY TO PURCHASER ALL COSTS AND
OBLIGATIONS INCURRED BY PURCHASER in anticipation of closing. If Seller elects
to rescind this Contract, Seller shall notify Purchaser of such election, in
writing, with seven (7) calendar days after receipt of the notice of defects,
however, if Seller elects to rescind this Contract rather than effect the
repairs, Purchaser shall have the option of accepting the premises in `as is"
condition.
A) IF PURCHASER FAILS TO ADVISE SELLER IN WRITING OF DEFECTS IN THE ESSENTIAL
PROPERTY CONDITIONS WITHIN THE FOURTEEN (14) CALENDAR DAY PERIOD, THEN PURCHASER
SHALL BE OBLIGATED TO ACCEPT THE BUILDING(S) ON THE PREMISES IN "AS IS"
CONDITION, EXCEPT FOR ESSENTIAL PROPERTY CONDITIONS NOTED ON A TIMELY-DELIVERED
WOOD INFESTATION REPORT (SEE SUBPARAGRAPH C BELOW), AND PURCHASER SHALL BE
OBLIGATED TO REPAIR AT PURCHASER'S COST ANY DEFECTS WHICH ARE UNACCEPTABLE TO
THE LENDING INSTITUTION.
B) NON-ESSENTIAL PROPERTY CONDITIONS. Purchaser recognizes that if the premises
is a resale property (i.e., not new construction), then normal wear and tear is
to be expected (for example, cracks in tile and countertops, stained carpeting,
etc.). Seller shall have no obligation to address and makes no representation in
regard to the conditions of the building (s) or other permanent improvements on
the premises which are not Essential Property Conditions.
C) CL-100 WOOD INFESTATION REPORT. This report shall be ordered upon formal loan
approval, but not earlier than 10 days prior to closing, (or such other date
which has been mutually agreed to by Purchaser and Seller). Purchaser shall at
Purchaser's expense, have the building (s) on the premises inspected by and
obtain a CL-100 Wood Infestation Report from a licensed and bonded pest control
specialist, and deliver said report to Seller and the closing attorney. If any
infestation or structural damage, or any excessive moisture conditions which
pose a threat of future structural damage, are noted on the report and such
report is timely-delivered, then seller shall have the noted condition (s)
corrected, treated and/or repaired prior to closing at Seller's expense.
IF PURCHASER FAILS TO DELIVER THE CL-100 WOOD INFESTATION REPORT TO SELLER AND
THE CLOSING ATTORNEY AT LEAST ______ CALENDAR DAYS PRIOR TO THE CLOSING DATE,
THEN PURCHASER SHALL HAVE WAIVED THE RIGHT TO COMPEL SELLER TO REMEDY ANY
INFESTATION, STRUCTURAL DAMAGE OR EXCESSIVE MOISTURE CONDITIONS AND MUST ACCEPT
THE BUILDING (S) ON THE PREMISES IN "AS IS " CONDITION, AND PURCHASER SHALL BE
OBLIGATED TO REPAIR AT PURCHASER'S COST ANY DEFECTS WHICH ARE UNACCEPTABLE TO
THE LENDING INSTITUTION.
D) FINAL WALK THROUGH. Until possession is delivered, Seller shall maintain
the premises in the same condition it was in as of the written acceptance
of this Contract. Purchaser shall have a reasonable opportunity prior to
the closing to reinspect the premises for the limited purpose of insuring
that it is in the same condition as it was when this Contract was accepted
and determining whether required repairs have been effected.
Purchaser Initial /s/MAT Purchaser Initial /s/JMT Seller Initial /s/ HBD Seller
Initial /s/ SLG
<PAGE> 4
Page 4 of 5
OTHER TERMS. There are no other contingencies or conditions, or modifications of
the Parties' obligations pursuant to this Contract, except as follows: PURCHASER
TO HAVE 45 DAYS FROM ACCEPTANCE OF OFFER IN ORDER TO CONDUCT NECESSARY DUE
DILIGENCE. DUE DILIGENCE INCLUDING BUT NOT LIMITED TO WATER/SEWER AVAILABILITY,
PERMITTING WITH JURISDICTIONAL ENTITIES, BUILDING INSPECTIONS, ENVIRONMENTAL
AUDIT AND/OR PHASE 1 IF REQUIRED BY LENDER, APPRAISAL, TOPOGRAPHICAL STUDIES,
ETC. SELLER TO ALLOW ACCESS TO PROPERTY AS NEEDED FOR DUE DILIGENCE. UPON
COMPLETION OF DUE DILIGENCE, PURCHASER MAY RESCIND OFFER AND RECEIVE INITIAL
$5000.00 EARNEST DEPOSIT WITHIN FORTY-EIGHT HOURS FROM SELLER'S AGENT OR SHALL
DEPOSIT ADDITIONAL $20,000.00 EARNEST MONEY, ALL EARNEST MONEY BECOMING
NON-REFUNDABLE AT THAT TIME. CLOSING TO TAKE PLACE ON JULY 31, 1999. PURCHASER
MAY HOWEVER, PURCHASE AN ADDITIONAL SIX MONTH EXTENSION WITH $25,000.00
ADDITIONAL NON-REFUNDABLE EARNEST MONEY. ALL EARNEST MONEY APPLIED TO SALES
PRICE AT CLOSING & SELLER WILL HAVE USE OF BUILDING & GROUNDS. /s/ HBD
BROKER DISCLOSURES, DISCLAIMERS AND RECOMMENDATIONS:
A) NONRESIDENT TAX: If Seller is not a resident of South Carolina, then Seller
may be required to prepay at closing any South Carolina tax due on realized
gain.
HOME WARRANTY COVERAGE. A ____________________ Home Warranty will/will not
(circle one) be issued at closing. The warranty premium in the amount of
$_________________ will be paid by the __________________.
B) AIRPORT OVERLAY DISTRICT: The premises is located in the ____________________
airport noise zone and/or ____________________ airport accident potential zone
as such is delineated on the Beaufort County maps showing the Airport Overlay
Districts and the disclosure form required by the Beaufort County Development
Standards Ordinance Section 4.17.10.1 shall be a part of this Contract.
(Alternatively, Purchaser and Seller have initialed here to acknowledge that
premises is not affected by the Airport Overlay District:_________,)
C) ABSENCE OF BROKER WARRANTY. Broker(s) make no warranty Purchaser, express or
implied, as to the condition of the premises (or the improvements thereon,
including without limitation, the HVAC systems, appliances, fixtures, sewer
systems, and size of the buildings), the quality of title (including, without
limitation, matters which would be revealed by a current survey), or its
merchantability or fitness for a particular purpose.
D) ENVIRONMENTAL ISSUES. Purchaser, at Purchaser's expense, shall have the
privilege and responsibility of inspecting the premises to determine whether
there are any environmental concerns, including but not limited to contamination
above or below ground by hazardous wastes or chemicals, asbestos, lead, radon
gas, chemical storage tanks, or any portions of premises considered wetlands.
ANY KNOWN PRESENCE OF THESE ISSUES HAS BEEN DISCLOSED BY SELLER AND/OR BROKER,
BUT NO INVESTIGATION OF THESE ISSUES HAS BEEN MADE BY EITHER.
E) LEAD-BASE PAINT HAZARD. The building on the premises was/was not (circle one)
built prior to 1978. If built prior to 1978, Purchaser and Seller shall sign the
HUD addendum entitled "Disclosure of Information and Acknowledgment; Lead-Based
Paint and/or Lead Based Paint Hazards", and such will be part of this Contract.
Purchaser Initial /s/MAT Purchaser Initial /s/JMT Seller Initial /s/ HBD Seller
Initial /s/ SLG
<PAGE> 5
Page 5 of 5
MISCELLANEOUS. This Contract shall be binding on both parties, their principals,
heirs, personal representatives and assigns, and expresses the entire agreement
between the parties, and there is no other agreement, oral or otherwise,
modifying the terms hereunder. Negotiations may be conducted using a facsimile
machine and will be considered binding on the parties. A facsimile offer shall
be deemed delivered as of the moment it transmitted. If any portion of this
Contract is not understood, the party should seek competent advice. Any altered
terms must be initialed and dated.
EXPIRATION OF OFFER. This offer will expire at 5 o'clock February 9, 19_99 /s/
HBD_____, unless withdrawn earlier by Purchaser.
SIGNATURES BELOW SIGNIFY ACCEPTANCE OF ALL TERMS AND CONDITIONS STATED HEREIN AS
OF THE DATE SIGNED.
SIGNED, SEALED AND DELIVERED IN THE PRESENCE OF:
2/2/99 /s/ Helene B. Dowling
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Witness to Seller Date Seller SS#
2/2/99 /s/ Sterling L. Graydon
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Witness to Seller Date Seller SS#
2/2/99 /s/ Matt A. Trump
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Witness to Purchaser Date Purchaser SS#
2/2/99 /s/ John Trask III
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Witness to Purchaser Date Purchaser SS#
BEAUFORT REALTY COMPANY - HENRY CHAMBERS 525-0028
Listing Agent's Name/Firm Phone #'s
TIDELAND REALTY, INC. - MATT TRUMPS 525-6131
& LOWCOUNTRY REAL ESTATE - JOHN M. TRASK, III 521-4200
Selling Agent's Name/Firm Phone #'s
*Bar, Fridge, Stove, Washer, Dryer & all fixtures are excluded!
/s/ Helene B. Dowling
Feb.2, 1999
<PAGE> 6
ACKNOWLEDGMENT OF AGENCY DISCLOSURE
Brokerage Company Tideland Realty, Inc. / Lowcountry Real Estate
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(Print or type)
Licensee Matt Trumps / John M. Trask, III
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(Print or type)
Seller or Buyer BBG
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(Print or type)
Prior to discussing with a seller or buyer any details of a real estate
transaction, the aforementioned licensee/company must explain agency
representation as described below and the advantages and disadvantages of each
type of representation, and must advise seller or buyer that he or she has the
right to choose to be the client of and have licensee/company act as his or her
agent, or to choose no representation by licensee/company. A prospective buyer
who, after a meaningful explanation of agency representation, chooses no
representation by licensee/company but wishes to use the services of
licensee/company is considered to be a CUSTOMER (Section 40-57-137(O) of the
South Carolina Real Estate License Law) and shall receive an explanation of
scope of services to be provided by licensee/company as well as fairness,
honesty, and accurate information in all dealings.
SELLER AGENCY: The brokerage company (BIC) becomes the seller's agent by
entering into a written listing agreement with the seller. Seller becomes the
client of the company. Licensees associated with the company also represent the
seller/client as agents. A subagent is a designated broker and all associated
licensees engaged by a broker of another company. A subagent owes the same
duties and responsibilities to the client as the client's primary broker. A
brokerage company may or may not offer or accept subagency. A seller's agent has
the following fiduciary duties to the seller: reasonable care, undivided
loyalty, confidentiality, full disclosure, diligence, obedience, accounting in
all dealings, and specific duties as defined in Section 40-57-137(C) of the
South Carolina Real Estate License Law. In dealings with a buyer, seller's agent
should: exercise reasonable skill and care, deal honestly and in good faith, and
disclose all facts known by agent related to the physical condition of a
property.
BUYER AGENCY: The brokerage company (BIC) becomes the buyer's agent by entering
into a written agreement with the buyer to represent the buyer. Buyer becomes
the client of the company. Licensees associated with the company also represent
the buyer/client as agents. A buyer's agent has the following fiduciary duties
to the buyer: reasonable care, undivided loyalty, confidentiality, full
disclosure, diligence, obedience, accounting in all dealings, and specific
duties as defined in Section 40-57-137(H) of the South Carolina Real Estate
License Law. In dealings with a seller, buyer's agent should exercise reasonable
skill and care and deal honestly.
SELLER AND BUYER AGENCY (DUAL AGENT): As defined in Section 40-57-137(M) of the
South Carolina Real Estate License Law, a licensee/company may act as a dual
agent representing both seller and buyer in the same transaction only with the
prior written disclosure to and the informed consent of both the seller and the
buyer. A seller's and buyer's consent to dual agency is valid only as to the
specific transaction for which each has granted his or her consent. A dual agent
is required to treat both the seller and the buyer honestly and impartially so
as not to favor one or work to the disadvantage of the other. Unless written
permission from the seller or the buyer is obtained, the dual agent is prohibit
from disclosing: (1) that the seller will accept a price less than the asking
price; (2) that the buyer will pay a prior greater than the price submitted in a
written offer; (3) any confidential information; or (4) any other information a
party specifically instructs the dual agent in writing not to disclose, unless
disclosure is required by law. Therefore, the agent's duties and the
representation seller/buyer receives are more limited if he or she represents
both parties; and (5) the licensee/company cannot give advice, counsel, or use
their negotiating sills to the advantage of one party over another while serving
as a dual agent.
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[ ] BUYER CHOOSES NOT TO BE REPRESENTED BY LICENSEE/COMPANY, BUYER WILL RECEIVE
SERVICES AS A CUSTOMER OF LICENSEE/COMPANY. ____________(Initials)
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<PAGE> 7
DISCLOSURE OF AGENCY: LICENSEE/COMPANY NAMED ABOVE WILL:
[ ] ACT AS AGENT/SUBAGENT FOR SELLER/CLIENT FOR PROPERTY
LOCATED AT
--------------------------------------------------
XX ACT AS AGENT FOR BUYER/CLIENT
================================================================================
[ ] SELLER/CLIENT OR BUYER/CLIENT AGREES THAT LICENSEE/COMPANY MAY REQUEST
PERMISSION TO BECOME A DUAL AGENT AS PREVIOUSLY EXPLAINED WHEN OFFERING
ITS COMPANY LISTINGS. SUCH REQUEST MAY BE DENIED. IF THE REQUIRED
CONSENT IS OBTAINED FROM BOTH SELLER/CLIENT AND BUYER/CLIENT, A
SEPARATE ACKNOWLEDGEMENT MUST BE OBTAINED USING THE REAL ESTATE
COMMISSION APPROVED "DISCLOSURE AND CONSENT TO DUAL AGENCY" FORM
PURSUANT TO SECTION 40-57-137(M) OF THE SOUTH CAROLINA REAL ESTATE
LICENSE LAW.
(Initials)
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================================================================================
By signing below, I BBG acknowledge that:
-------------------------------------------
(Seller or Buyer)
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(1) This form is a disclosure indicating my choice of representation by
licensee/company and is not a substitute for a written agency agreement when I
am being represented by and a client of licensee/company.
(2) I understand that I am not relieved of my responsibility to protect my own
interest, which may include, at my discretion, seeking legal, accounting or
other profession advice.
(3) Licensee/company has explained the above information to me and I understand
it. I have received a signed copy of this form.
SIGNATURES:
2/2/99 /s/ Matt A. Trump for BBG
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(Date) (Seller or Buyer)
2/2/99 /s/ John Trask III for BBG
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(Date) (Seller or Buyer)
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(Date) (Licensee)
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This form is promulgated by the South Carolina Department of Labor, Licensing
and Regulation Real Estate Commission for mandatory use by real estate
licensees. It may be reproduced but may not be modified or altered in any way.
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<PAGE> 1
EXHIBIT 10.3
PROMISSORY NOTE
<TABLE>
<CAPTION>
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PRINCIPAL LOAN DATE MATURITY LOAN NO CALL COLLATERAL ACCOUNT OFFICER INITIALS
$500,000.00 04-01-1999 04-01-2000 JKG
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<S> <C> <C> <C> <C> <C> <C> <C> <C>
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
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BORROWER: Lowcountry National Bank (in Organization) LENDER: THE BANKERS BANK
1001 Bay Street, Suite 202 2410 PACES FERRY ROAD
Beaufort, SC 29901 600 PACES SUMMIT
ATLANTA, GA 30339
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PRINCIPAL AMOUNT: $500,000.00 INITIAL RATE: 7.250% DATE OF NOTE: APRIL 1, 1999
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</TABLE>
PROMISE TO PAY. LOWCOUNTRY NATIONAL BANK (IN ORGANIZATION) ("BORROWER") PROMISES
TO PAY TO THE BANKERS BANK ("LENDER"), OR ORDER, IN LAWFUL MONEY OF THE UNITED
STATES OF AMERICA, THE PRINCIPAL AMOUNT OF FIVE HUNDRED THOUSAND & 00/100
DOLLARS ($500,000.00) OR SO MUCH AS MAN BE OUTSTANDING, TOGETHER WITH INTEREST
ON THE UNPAID OUTSTANDING PRINCIPAL BALANCE OF EACH ADVANCE. INTEREST SHALL BE
CALCULATED FROM THE DATE OF EACH ADVANCE UNTIL REPAYMENT OF EACH ADVANCE.
PAYMENT. BORROWER WILL PAY THIS LOAN IN ONE PAYMENT OF ALL OUTSTANDING PRINCIPAL
PLUS ALL ACCRUED UNPAID INTEREST ON APRIL 1, 2000. IN ADDITION, BORROWER WILL
PAY REGULAR MONTHLY PAYMENTS OF ACCRUED UNPAID INTEREST BEGINNING MAY 1, 1999,
AND ALL SUBSEQUENT INTEREST PAYMENTS ARE DUE ON THE SAME DAY OF EACH MONTH AFTER
THAT. Borrower will pay Lender at Lender's address shown above or at such other
place as Lender may designate in writing. Unless otherwise agreed or required by
applicable law, payments will be applied first to accrued unpaid interest, then
to principal, and any remaining amount to any unpaid collection costs and late
charges.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from
time to time based on changes in an index which is the Prime rate as published
in the Money Rates section of the Wall Street Journal (the "Index"). If two or
more rates exist, then the highest rate will prevail. Lender will tell Borrower
the current index rate upon Borrower's request. Borrower understand that Lender
may make loans based on other rates as well. The interest rate change will not
occur more often than each day. THE INDEX CURRENTLY IS 7.750% PER ANNUM. THE
INTEREST RATE TO BE APPLIED TO THE UNPAID PRINCIPAL BALANCE OF THIS NOTE WILL BE
AT A RATE OF 0.500 PERCENTAGE POINTS UNDER THE INDEX, RESULTING IN AN INITIAL
ANNUAL RATE OF SIMPLE INTEREST OF 7.250%. NOTICE: Under no circumstances will
the interest rate on this Note be more than the maximum rate allowed by
applicable law.
PREPAYMENT. Borrower may pay without penalty all or a portion of the amount owed
earlier than it is due. Early payments will not, unless agreed to by Lender in
writing, relieve Borrower of Borrower's obligations to continue to make payments
of accrued unpaid interest. Rather, they will reduce the principal balance due.
LATE CHARGE. If a payment is 15 DAYS OR MORE LATE, Borrower will be charged
$100.00.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform when
due any other term, obligation, covenant, or condition contained in this Note or
any agreement related to this Note, or in any other agreement or loan Borrower
has with Lender. (c) Any representation or statement made or furnished to Lender
by Borrower or on Borrower's behalf is false or misleading in any material
respect either now or at the time made or furnished. (d) Borrower becomes
insolvent, a receiver is appointed for any part of Borrower's property, Borrower
makes an assignment for the benefit of creditors, or any proceeding is commenced
either by Borrower or against Borrower under any bankruptcy or insolvency laws.
(e) Any creditor tries to take any of Borrower's property on or in which Lender
has a lien or security interest. This includes a garnishment of any of
Borrower's accounts with Lender. (f) Any guarantor dies or any of the other
events described in this default section occurs with respect to any guarantor of
this Note. (g) A material adverse change occurs in Borrower's financial
condition, or Lender believes the prospect of payment or performance of the
Indebtedness is impaired. (h) Lender in good faith deems itself insecure.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, without
notice, and then Borrower will pay that amount. Upon default, including failure
to pay upon final maturity, Lender, at its option, may also, if permitted under
applicable law, increase the variable interest rate on this Note 3,000
percentage points. The interest rate will not exceed the maximum rate permitted
by applicable law. Lender may hire or pay someone else to help collect this Note
if Borrower does not pay. Borrower also will pay Lender that amount. This
includes, subject to any limits under applicable law, Lender's, costs of
collection, including court costs and fifteen percent (15%) of the principal
plus accrued interest as attorneys' fees, if any sums owing under this Note are
collected by or through an attorney-at-law, whether or not there is a lawsuit,
and legal expense for bankruptcy proceedings (including efforts to modify or
vacate any automatic stay or injunction), appeals, and any anticipated
post-judgment collection services. If not prohibited by applicable law, Borrower
also will pay any court costs, in addition to all other sums provided by law.
THIS NOTE HAS BEEN DELIVERED TO LENDER AND ACCEPTED BY LENDER IN THE STATE OF
GEORGIA. SUBJECT TO THE PROVISIONS ON ARBITRATION, THIS NOTE SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF GEORGIA.
DISHONORED ITEM FEE. Borrower will pay a fee to Lender of twenty dollars
($20.00) or five percent (5%) of the face amount of the check, whichever is
greater, if Borrower makes a payment on Borrower's loan and the check or
preauthorized charge with which Borrower pays is later dishonored.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA and Keogh accounts,
and all trust accounts for which the grant of a security interest would be
prohibited by law. Borrower authorizes Lender, to the extent permitted by
applicable law, to charge or setoff all sums owing on this Note against any and
all such accounts.
LINE OF CREDIT. This Note evidences a revolving line of credit. Advances under
this Note, as well as directions for payment from Borrower's accounts, may be
requested orally or in writing by Borrower or by an authorized person. Lender
may, but need not, require that all oral requests be confirmed in writing. The
following party or parties are authorized to request advances under the line of
credit until Lender receives from Borrower at Lender's address shown above
written notice of revocation of their authority: RANDOLPH C. KOHN, PRESIDENT.
Borrower agrees to be liable for all sums either: (a) advanced in accordance
with the instructions of an authorized person or (b) credited to any of
Borrower's accounts with Lender. The unpaid principal balance owing on this Note
at any time may be evidenced by endorsements on this Note or by Lender's
internal records, including daily computer print-outs. Lenders will have no
obligation to advance funds under this Note if: (a) Borrower or any guarantor is
in default under the terms of this Note or any agreement that Borrower or any
guarantor has with Lender, including any agreement made in connection with the
signing of this Note; (b) Borrower or any guarantor ceases doing business or is
insolvent; (c) any guarantor seeks, claims or otherwise attempts to limit,
modify or revoke such guarantor's guarantee of this Note or any other loan with
Lender; (d) Borrower has applied funds provided pursuant to this Note for
purposes other than those authorized by Lender; or (e) Lender in good faith
deems itself insecure under this Note or any other agreement between Lender and
Borrower.
ARBITRATION. LENDER AND BORROWER AGREE THAT ALL DISPUTES, CLAIMS AND
CONTROVERSIES BETWEEN THEM, WHETHER INDIVIDUAL, JOINT, OR CLASS IN NATURE,
ARISING FROM THIS NOTE OR OTHERWISE, INCLUDING WITHOUT LIMITATION CONTRACT AND
FORT DISPUTES, SHALL BE ARBITRATED PURSUANT TO THE RULES OF THE AMERICAN
ARBITRATION ASSOCIATION, UPON REQUEST OF EITHER PARTY. No act to take or dispose
of any collateral securing this Note shall constitute a waiver of this
arbitration agreement or be prohibited by this arbitration agreement. This
includes, without limitation, obtaining injunctive relief or a temporary
restraining order; invoking a power of sale under any deed of trust or mortgage;
obtaining a writ of attachment or imposition of a receiver; or exercising any
rights relating to personal property, including taking or disposing of such
property with or without judicial process pursuant to Article 9 of the Uniform
Commercial Code. Any disputes, claims, or controversies concerning the
lawfulness or reasonableness or any act, or exercise of any right, concerning
any collateral securing this Note, including any claim to rescind, reform, or
otherwise modify any agreement relating to the collateral securing this Note,
shall also be arbitrated, provided however that no arbitrator shall have the
right or the power to enjoin or restrain any act of any party. Judgement upon
any award rendered by any arbitrator may be entered in any court having
jurisdiction. Nothing in this Note shall preclude any party from seeking
equitable relief from a court of competent jurisdiction. The statute of
limitations, estoppel, waiver, laches, and similar doctrines which would
otherwise be applicable in an action brought by a party shall be applicable in
any arbitration proceeding, and the commencement of an arbitration proceeding
shall be deemed the commencement of an action for these purposes. The Federal
Arbitration Act shall apply to the construction, interpretation, and enforcement
of this arbitration provision.
ACCRUAL METHOD. Interest will be calculated on an Actual/360 basis.
<PAGE> 2
04-01-1999 PROMISSORY NOTE PAGE 2
LOAN NO (CONTINUED)
GENERAL PROVISIONS. Lender may delay or forego enforcing any of its rights or
remedies under this Note without losing them. Borrower and any other person who
signs, guarantees or endorses this Note, to the extent allowed by law, waive
presentment, demand for payment, protest and notice of dishonor. Upon any change
in the terms of this Note, and unless otherwise expressly stated in writing, no
party who signs this Note, whether as maker, guarantor, accommodation maker or
endorser, shall be released from liability. All such parties waive any right to
require Lender to take action against any other party who signs this Note as
provided in O.C.G.A. Section 10-7-24 and agree that Lender may renew or extend
(repeatedly and for any length of time) this loan, or release any party or
guarantor or collateral; or impair, fail to realize upon or perfect Lender's
security interest in the collateral; and take any other action deemed necessary
by Lender without the consent of or notice to anyone. All such parties also
agree that Lender may modify this loan without the consent of or notice of
anyone other than the party with whom the modification is made.
IN WITNESS WHEREOF, THIS NOTE HAS BEEN SIGNED AND SEALED BY THE UNDERSIGNED, WHO
ACKNOWLEDGES A COMPLETED COPY HEREOF.
BORROWER:
LOWCOUNTRY NATIONAL BANK (IN ORGANIZATION)
By /s/ Randolph C. Kohn (Seal)
------------------------------------------
Randolph C. Kohn, President
LENDER:
THE BANKERS BANK
By /s/ Jack Gardner
------------------------------------------
Authorized Officer
================================================================================
Variable Rate, Line of Credit. LASER PRO, Reg. U.S. Pat. & T.M. Off. ,
Ver 3.24a(c) 1988 CFI ProServices, Inc. All rights reserved. [GA-D20 E3.24
LOWCOUNTRY C1,OVL]
<PAGE> 1
EXHIBIT 10.5
THE WARRANTS EVIDENCED BY THIS CERTIFICATE HAVE BEEN ISSUED OR SOLD IN RELIANCE
ON EXEMPTIONS FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933 AND APPLICABLE
STATE SECURITIES LAWS AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN A
TRANSACTION WHICH IS EXEMPT UNDER SUCH ACT AND STATE LAWS OR PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND STATE LAWS.
COASTAL BANKING COMPANY, INC.
STOCK WARRANT AGREEMENT
__________, 1999 __________ Shares
Warrants (the "Warrants") to purchase one share of common stock of
Coastal Banking Company, Inc., (the "Company") a South Carolina corporation and
the holding company for Lowcountry National Bank (proposed), (the "Bank"), for
each share of common stock purchased in the offering by __________________ (the
"Warrant Holder"), are hereby granted to the Warrant Holder in consideration of
the financial risk associated with Warrant Holder's investment in the Company
during its organizational stage and the time, expertise, and continuing
involvement of the Warrant Holder in the management of the Bank. Such Warrants
are granted on the following terms and conditions:
1. EXERCISE OF WARRANTS. One-third of the shares (the "Shares")
subject to the Warrants granted in this Agreement shall vest on each of the
first three anniversaries of the date of the Company's incorporation (the
"Incorporation Date"). Exercise of the Warrants is subject to the following:
(a) EXERCISE PRICE. The exercise price (the "Exercise Price")
shall be $10.00 per Share, subject to adjustment pursuant to
Section 2 below.
(b) EXPIRATION OF WARRANT TERM. The Warrants will expire at 5:00
p.m. Eastern Standard Time on the tenth anniversary of the
Incorporation Date, and may not be exercised thereafter (the
"Expiration Date").
(c) PAYMENT. The purchase price for Shares as to which the
Warrants are being exercised shall be paid in cash, by wire
transfer, by certified or bank cashier's check, or by
personal check drawn on funds on deposit with the Bank.
(d) METHOD OF EXERCISE. The Warrants shall be exercisable by a
written notice delivered to the President or Secretary of the
Company which shall:
(i) State the owner's election to exercise the Warrants,
the number of Shares with respect to which it is
being exercised, the person in whose name the stock
certificate for such Shares is to be registered, and
such person's address and tax identification number
(or, if more than one, the names, addresses and tax
identification numbers of such persons);
<PAGE> 2
(ii) Be signed by the person or persons entitled to
exercise the Warrants and, if the Warrants are being
exercised by any person or persons other than the
original holder thereof, be accompanied by proof
satisfactory to counsel for the Bank of the right of
such person or persons to exercise the Warrants; and
(iii) Be accompanied by the originally executed copy of
this Stock Warrant Agreement.
(e) PARTIAL EXERCISE. In the event of a partial exercise of the
Warrants, the Company shall either issue a new agreement for
the balance of the Shares subject to this Stock Warrant
Agreement after such partial exercise, or it shall
conspicuously note hereon the date and number of Shares
purchased pursuant to such exercise and the number of Shares
remaining covered by this Stock Warrant Agreement.
(f) RESTRICTIONS ON EXERCISE. The Warrants may not be exercised
(i) if the issuance of the Shares upon such exercise would
constitute a violation of any applicable federal or state
securities or banking laws or other law or regulation or (ii)
unless the Bank or the holder hereof, as applicable, obtains
any approval or other clearance which the Bank determines to
be necessary or advisable from the Federal Reserve Board, the
Office of the Comptroller of the Currency, the Federal
Deposit Insurance Corporation or any other state or federal
banking regulatory agency with regulatory authority over the
operation of Company or the Bank (collectively the
"Regulatory Agencies"). The Company may require
representations and warranties from the Warranty Holder as
required to comply with applicable laws or regulations,
including the Securities Act of 1933 and state securities
laws.
2. ANTI-DILUTION; MERGER. If, prior to the exercise of Warrants
hereunder, the Company (i) declares, makes or issues, or fixes a record date
for the determination of holders of common stock entitled to receive, a
dividend or other distribution payable on the Shares in shares of its capital
stock, (ii) subdivides the outstanding Shares, (iii) combines the outstanding
Shares, (iv) issues any shares of its capital stock by reclassification of the
Shares, capital reorganization or otherwise (including any such
reclassification or reorganization in connection with a consolidation or merger
or and sale of all or substantially all of the Company's assets to any person),
then the Exercise Price, and the number and kind of shares receivable upon
exercise, in effect at the time of the record date for such dividend or of the
effective date of such subdivision, combination or reclassification shall be
proportionately adjusted so that the holder of any Warrant exercised after such
time shall be entitled to receive the aggregate number and kind of shares
which, if such Warrant had been exercised immediately prior to such time, he
would have owned upon such exercise and been entitled to receive by virtue of
such dividend, distribution, subdivision, combination, reclassification,
reorganization, consideration, merger or sale.
3. VALID ISSUANCE OF COMMON STOCK. The Company possesses the full
authority and legal right to issue, sell, transfer, and assign this Warrant and
the Shares issuable pursuant to this Warrant. The issuance of this Warrant
vests in the holder the entire legal and beneficial interests in this Warrant,
free and clear of any liens, claims, and encumbrances and subject to no legal
or equitable restrictions of any kind except as described herein. The Shares
that are
-2-
<PAGE> 3
issuable upon exercise of this Warrant, when issued, sold and delivered in
accordance with the terms of this Agreement for the consideration expressed
herein, will be duly and validly issued, fully paid, and non-assessable, and
will be free of restrictions on transfer other than restrictions under
applicable state and federal securities.
4. COMPLIANCE WITH SECURITIES LAWS. This Agreement and the Warrants
represented hereby were issued in reliance on an exemption from registration
under the Securities Act of 1933 (the "Act") for financial institutions, and
other applicable exemptions under state securities laws. The Company's reliance
on such exemption is predicated in part on the Warrant Holder's representations
set forth herein. Warrant Holder understands that the Warrants and the Shares
issuable upon exercise of the Warrants may not be sold, transferred or
otherwise disposed of without registration under the Securities Act of 1933, or
an exemption therefrom, and that in the absence of an effective registration
statement covering such shares or an available exemption from registration
under the Securities Act, such Shares must be held indefinitely.
1. RESTRICTIONS ON TRANSFERABILITY. This the Agreement and the
Warrants may not be assigned, transferred (except as provided above), pledged,
or hypothecated in any way (whether by operation of law or otherwise) and shall
not be subject to execution, attachment, or similar process. Any attempted
assignment, transfer, pledge, hypothecation, or other disposition of these
Warrants contrary to the provisions hereof shall be without legal effect. The
Shares issuable on exercise of the Warrants may not be assigned or transferred
by the Warrant Holder without the Company's prior written consent and, if so
requested by the Company, the delivery by the Warrant Holder to the Company of
an opinion of counsel in form and substance satisfactory to the Company stating
that such transfer or assignment is in compliance with the Securities Act of
1933 and applicable state securities laws.
6. RESTRICTIVE LEGEND. Each certificate for Shares issued upon
exercise of the Warrant shall bear a legend stating that they have not been
registered under the Securities Act of 1933 or any state securities laws and
referring to the restrictions on transferability and sale herein.
7. MANDATORY EXERCISE; TERMINATION.
(a) Warrant Holder shall exercise all of Warrant Holder's then
exercisable Warrants within 120 days of the date that Warrant
Holder ceases to serve the Company as an executive officer,
employee, or director. Warrant Holder agrees to exercise any
Warrants that are not exercisable on the date in which
Warrant Holder ceases to serve the Company within 120 days of
the date that those Warrants become exercisable.
(b) The Company may be required to increase its capital to meet
capital requirements imposed by statute, rule, regulation, or
guideline. In order to achieve such capital increase, the
Regulatory Agencies may direct the Company to require the
Warrant Holders to either (i) exercise all part of their
Warrants or (ii) allow the Warrants to be terminated. If the
Regulatory Agencies so direct the Company, then the Warrant
Holder must exercise or forfeit the Warrants as set forth
below.
(c) When the Company is required to increase its capital as
described in subsection (a) above, the Company shall send a
notice (the "Notice") to the Warrant Holder
-3-
<PAGE> 4
(i) specifying the number of Shares relating to the Warrants
for which the Warrants must be exercised (the "Number") (if
less than all shares relating to warrants held by all holders
of warrants of the Company under agreements substantially
similar to this one are required by the Company to be
exercised or cancelled, the Number for the Warrant Holder
shall reflect a proportionate allocation based on the number
of Shares subject to this Agreement as compared to the total
number of shares subject to warrants held by all such warrant
holders as a group); (ii) specifying the date prior to which
the Warrants must be totally or partially exercised, as the
case may be (the "Deadline"); (iii) specifying the Exercise
Price for the Shares to be purchased pursuant to the Warrants
(such Exercise Price not to be less than current book value
per share); and (iv) stating that the failure of the Warrant
holder to exercise the Warrants shall result in their
automatic termination.
(d) If the Warrant holder does not exercise the Warrants pursuant
to the terms of the Notice, this Agreement shall be
automatically terminated on the Deadline, without further act
or action by the Warrant Holder or the Company, and the
Warrant Holder shall deliver this Agreement to the Company
for cancellation. If the Number is less than the total number
of Shares that are then subject to exercise under this
Agreement, the Company shall issue a new Stock Warrant
Agreement in compliance with Section 1(e) hereof.
8. COVENANTS OF THE COMPANY. During the term of the Warrants, the
Company shall:
(a) at all times authorize, reserve and keep available, solely
for issuance upon exercise of this Warrant, sufficient shares
of common stock from time to time issuable upon exercise of
this Warrant;
(b) on receipt of evidence reasonably satisfactory to the Company
of the loss, theft, destruction or mutilation of this Warrant
and, in the case of loss, theft, or destruction, on delivery
of any indemnity agreement or bond reasonably satisfactory in
form and amount to the Company or, in the case of mutilation,
on surrender and cancellation of this Warrant, at its expense
execute and deliver, in lieu of this Warrant, a new Warrant
of like tenor; and
(c) on surrender for exchange of this Warrant or any Warrant
substituted therefor pursuant hereto, properly endorsed, to
the Company, at its expense, issue and deliver to or on the
order of the holder thereof a new Warrant or Warrants of like
tenor, in the name of such holder or as such holder (on
payment by such holder of any applicable transfer taxes) may
direct, calling in the aggregate on the face or faces thereof
for the issuances of the number of shares of common stock
issuable pursuant to the terms of the Warrant or Warrants so
surrendered.
9. NO DILUTION OR IMPAIRMENT. The Company shall not amend its
Certificate of Incorporation or participate in any reorganization, transfer of
assets, consolidation, merger, dissolution, issuance or sale of securities or
any other voluntary action for the purpose of avoiding or seeking to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Company, but will at all times in good faith assist in
carrying out all
-4-
<PAGE> 5
such action as may be reasonably necessary in order to protect the exercise
rights of the holder against improper dilution or other impairment.
10. AMENDMENT. Neither this Agreement nor the rights granted hereunder
may be amended, changed or waived except in writing signed by each party
hereto.
IN WITNESS WHEREOF, the Company has executed and the holder has
accepted this Stock Warrant Agreement as of the date and year first above
written.
COASTAL BANKING COMPANY, INC.
By:
------------------------------------
President
(CORPORATE SEAL)
Attest:
--------------------------------
Secretary
WARRANT HOLDER:
By:
------------------------------------
Signature
---------------------------------------
Print Name
-5-
<PAGE> 1
EXHIBIT 23.1
TOURVILLE, SIMPSON & HENDERSON, L.L.P.
CERTIFIED PUBLIC ACCOUNTANTS
Columbia, South Carolina
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the inclusion of our report dated August 24, 1999 on
the financial statements of Coastal Banking Company, Inc., at June 30, 1999 and
for the period then ended in the Form SB-2 Registration Statement as filed by
Coastal Banking Company, Inc., under the Securities Act of 1933 and the
reference to us under the caption "Experts" in the same Form SB-2 Registration
Statement.
/s/ William E. Tourville
Tourville, Simpson & Henderson, L.L.P.
Columbia, South Carolina
August 30, 1999
